Serra vs.

Court of Appeals, and RCBC

229 SCRA 60

January 1994

A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An
accepted unilateral promise to buy and sell a determinate thing for a price certain is binding
upon the promisor if the promise is supported by a consideration distinct from the price.
(Article 1479, New Civil Code) The first is the mutual promise and each has the right to demand
from the other the fulfillment of the obligation. While the second is merely an offer of one to
another, which if accepted, would create an obligation to the offeror to make good his promise,
provided the acceptance is supported by a consideration distinct from the price.

Disputed in the present case is the efficacy of a "Contract of Lease with Option to Buy", entered
into between petitioner Federico Serra and private respondent Rizal Commercial Banking
Corporation. (RCBC).

Petitioner is the owner of a 374 square meter parcel of land located at Quezon St., Masbate,
Masbate. Sometime in 1975, respondent bank, in its desire to put up a branch in Masbate,
Masbate, negotiated with petitioner for the purchase of the then unregistered property. On
May 20, 1975, a contract of LEASE WITH OPTION TO BUY was instead forged by the parties, the
pertinent portion of which reads:

1. The LESSOR leases unto the LESSEE, an the LESSEE hereby accepts in lease, the
parcel of land described in the first WHEREAS clause, to have and to hold the
same for a period of twenty-five (25) years commencing from June 1, 1975 to
June 1, 2000. The LESSEE, however, shall have the option to purchase said parcel
of land within a period of ten (10) years from the date of the signing of this
Contract at a price not greater than TWO HUNDRED TEN PESOS (P210.00) per
square meter. For this purpose, the LESSOR undertakes, within such ten-year
period, to register said parcel of land under the TORRENS SYSTEM and all
expenses appurtenant thereto shall be for his sole account.

If, for any reason, said parcel of land is not registered under the TORRENS
SYSTEM within the aforementioned ten-year period, the LESSEE shall have the
right, upon termination of the lease to be paid by the LESSOR the market value
of the building and improvements constructed on said parcel of land.

The LESSEE is hereby appointed attorney-in-fact for the LESSOR to register said
parcel of land under the TORRENS SYSTEM in case the LESSOR, for any reason,
fails to comply with his obligation to effect said registration within reasonable
time after the signing of this Agreement, and all expenses appurtenant to such
 registration shall be charged by the LESSEE against the rentals due to the
LESSOR.

2. During the period of the lease, the LESSEE covenants to pay the LESSOR, at the
latter's residence, a monthly rental of SEVEN HUNDRED PESOS (P700.00),
Philippine Currency, payable in advance on or before the fifth (5th) day of every
calendar month, provided that the rentals for the first four (4) months shall be
paid by the LESSEE in advance upon the signing of this Contract.

3. The LESSEE is hereby authorized to construct as its sole expense a building and
such other improvements on said parcel of land, which it may need in pursuance
of its business and/or operations; provided, that if for any reason the LESSEE
shall fail to exercise its option mentioned in paragraph (1) above in case the
parcel of land is registered under the TORRENS SYSTEM within the ten-year
period mentioned therein, said building and/or improvements, shall become the
property of the LESSOR after the expiration of the 25-year lease period without
the right of reimbursement on the part of the LESSEE. The authority herein
granted does not, however, extend to the making or allowing any unlawful,
improper or offensive used of the leased premises, or any use thereof, other
than banking and office purposes. The maintenance and upkeep of such building,
structure and improvements shall likewise be for the sole account of the
LESSEE. 1

The foregoing agreement was subscribed before Notary Public Romeo F. Natividad.

Pursuant to said contract, a building and other improvements were constructed on the land
which housed the branch office of RCBC in Masbate, Masbate. Within three years from the
signing of the contract, petitioner complied with his part of the agreement by having the
property registered and
placed under the TORRENS SYSTEM, for which Original Certificate of Title No. 0-232 was issued
by the Register of Deeds of the Province of Masbate.

Petitioner alleges that as soon as he had the property registered, he kept on pursuing the
manager of the branch to effect the sale of the lot as per their agreement. It was not until
September 4, 1984, however, when the respondent bank decided to exercise its option and
informed petitioner, through a letter, 2 of its intention to buy the property at the agreed price
of not greater than P210.00 per square meter or a total of P78,430.00. But much to the surprise
of the respondent, petitioner replied that he is no longer selling the property. 3

Hence, on March 14, 1985, a complaint for specific performance and damages were filed by
respondent against petitioner. In the complaint, respondent alleged that during the
negotiations it made clear to petitioner that it intends to stay permanently on property once its
branch office is opened unless the exigencies of the business requires otherwise. Aside from its
prayer for specific performance, it likewise asked for an award of P50,000.00 for attorney's fees
P100,000.00 as exemplary damages and the cost of the suit.4

A special and affirmative defenses, petitioner contended:

1. That the contract having been prepared and drawn by RCBC, it took undue
advantage on him when it set in lopsided terms.

2. That the option was not supported by any consideration distinct from the
price and hence not binding upon him.

3. That as a condition for the validity and/or efficacy of the option, it should have
been exercised within the reasonable time after the registration of the land
under the Torrens System; that its delayed action on the option have forfeited
whatever its claim to the same.

4. That extraordinary inflation supervened resulting in the unusual decrease in

the purchasing power of the currency that could not reasonably be forseen or
was manifestly beyond the contemplation of the parties at the time of the
establishment of the obligation, thus, rendering the terms of the contract
unenforceable, inequitable and to the undue enrichment of RCBC. 5

and as counterclaim petitioner alleged that:

1. The rental of P700.00 has become unrealistic and unreasonable, that justice
and equity will require its adjustment.

2. By the institution of the complaint he suffered moral damages which may be

assessed at P100,000.00 and award of attorney's fee of P25,000.00 and
exemplary damages at P100,000.00.6

Initially, after trial on the merits, the court dismissed the complaint. Although it found the
contract to be valid, the court nonetheless ruled that the option to buy in unenforceable
because it lacked a consideration distinct from the price and RCBC did not exercise its option
within reasonable time. The prayer for readjustment of rental was denied, as well as that for
moral and exemplary damages.7

Nevertheless, upon motion for reconsideration of respondent, the court in the order of January
9, 1989, reversed itself, the dispositive portion reads:

WHEREFORE, the Court reconsiders its decision dated June 6, 1988, and hereby
renders judgment as follows:
 1. The defendant is hereby ordered to execute and deliver the proper deed of
sale in favor of plaintiff selling, transferring and
conveying the property covered by and described in the Original Certificate of
Title 0-232 of the Registry of Deeds of Masbate for the sum of Seventy Eight
Thousand Five Hundred Forty Pesos (P78,540,00), Philippine Currency;

2. Defendant is ordered to pay plaintiff the sum of Five Thousand (P5,000.00)

Pesos as attorney's fees;

3. The counter claim of defendant is hereby dismissed; and

4. Defendants shall pay the costs of suit.8

In a decision promulgated on September 19, 1991,9 the Court of Appeals affirmed the findings
of the trial court that:

1. The contract is valid and that the parties perfectly understood the contents
thereof;

2. The option is supported by a distinct and separate consideration as embodied

in the agreement;

3. There is no basis in granting an adjustment in rental.

Assailing the judgment of the appellate court, petitioner would like us to consider mainly the
following:

1. The disputed contract is a contract of adhesion.

2. There was no consideration to support the option, distinct from the price,
hence the option cannot be exercised.

3. Respondent court gravely abused its discretion in not granting currency

adjustment on the already eroded value of the stipulated rentals for twenty-five
years.

The petition is devoid of merit.

There is no dispute that the contract is valid and existing between the parties, as found by both
the trial court and the appellate court. Neither do we find the terms of the contract unfairly
lopsided to have it ignored.

A contract of adhesion is one wherein a party, usually a corporation, prepares the stipulations
in the contract, while the other party merely affixes his signature or his "adhesion" thereto.
These types of contracts are as binding as ordinary contracts. Because in reality, the party who
adheres to the contract is free to reject it entirely. Although, this Court will not hesitate to rule
out blind adherence to terms where facts and circumstances will show that it is basically one-
sided. 10

We do not find the situation in the present case to be inequitable. Petitioner is a highly
educated man, who, at the time of the trial was already a CPA-Lawyer, and when he entered
into the contract, was already a CPA, holding a respectable position with the Metropolitan
Manila Commission. It is evident that a man of his stature should have been more cautious in
transactions he enters into, particularly where it concerns valuable properties. He is amply
equipped to drive a hard bargain if he would be so minded to.

Petitioner contends that the doctrines laid down in the cases of

Atkins Kroll v. Cua Hian Tek, 11 Sanchez v. Rigos, 12 and Vda. de Quirino v. Palarca 13 were
misapplied in the present case, because 1) the option given to the respondent bank was not
supported by a consideration distinct from the price; and 2) that the stipulated price of "not
greater than P210.00 per square meter" is not certain or definite.

Article 1324 of the Civil Code provides that when an offeror has allowed the offeree a certain
period to accept, the offer maybe withdrawn at anytime before acceptance by communicating
such withdrawal, except when the option is founded upon consideration, as something paid or
promised. On the other hand, Article 1479 of the Code provides that an accepted unilateral
promise to buy and sell a determinate thing for a price certain is binding upon the promisor if
the promise is supported by a consideration distinct from the price.

In a unilateral promise to sell, where the debtor fails to withdraw the promise before the
acceptance by the creditor, the transaction becomes a bilateral contract to sell and to buy,
because upon acceptance by the creditor of the offer to sell by the debtor, there is already a
meeting of the minds of the parties as to the thing which is determinate and the price which is
certain. 14 In which case, the parties may then reciprocally demand performance.

Jurisprudence has taught us that an optional contract is a privilege existing only in one party —
the buyer. For a separate consideration paid, he is given the right to decide to purchase or not,
a certain merchandise or property, at any time within the agreed period, at a fixed price. This
being his prerogative, he may not be compelled to exercise the option to buy before the time
expires. 15

On the other hand, what may be regarded as a consideration separate from the price is
discussed in the case of Vda. de Quirino v. Palarca 16 wherein the facts are almost on all fours
with the case at bar. The said case also involved a lease contract with option to buy where we
had occasion to say that "the consideration for the lessor's obligation to sell the leased
premises to the lessee, should he choose to exercise his option to purchase the same, is the
obligation of the lessee to sell to the lessor the building and/or improvements constructed
and/or made by the former, if he fails to exercise his option to buy leased premises." 17
In the present case, the consideration is even more onerous on the part of the lessee since it
entails transferring of the building and/or improvements on the property to petitioner, should
respondent bank fail to exercise its option within the period stipulated. 18

The bugging question then is whether the price "not greater than TWO HUNDRED PESOS" is
certain or definite. A price is considered certain if it is so with reference to another thing certain
or when the determination thereof is left to the judgment of a specified person or
persons. 19 And generally, gross inadequacy of price does not affect a contract of sale. 20

Contracts are to be construed according to the sense and meaning of the terms which the
parties themselves have used. In the present dispute, there is evidence to show that the
intention of the parties is to peg the price at P210 per square meter. This was confirmed by
petitioner himself in his testimony, as follows:

Q. Will you please tell this Court what was the offer?

A. It was an offer to buy the property that I have in Quezon City

(sic).

Q. And did they give you a specific amount?

xxx xxx xxx

A. Well, there was an offer to buy the property at P210 per square
meters (sic).

Q. And that was in what year?

A . 1975, sir.

Q. And did you accept the offer?

A. Yes, sir. 21

Moreover, by his subsequent acts of having the land titled under the Torrens System, and in
pursuing the bank manager to effect the sale immediately, means that he understood perfectly
the terms of the contract. He even had the same property mortgaged to the respondent bank
sometime in 1979, without the slightest hint of wanting to abandon his offer to sell the
property at the agreed price of P210 per square meter. 22

Finally, we agree with the courts a quo that there is no basis, legal or factual, in adjusting the
amount of the rent. The contract is the law between the parties and if there is indeed reason to
adjust the rent, the parties could by themselves negotiate for the amendment of the contract.
Neither could we consider the decline of the purchasing power of the Philippine peso from
1983 to the time of the commencement of the present case in 1985, to be so great as to result
in an extraordinary inflation. Extraordinary inflation exists when there in an unimaginable
increase or decrease of the purchasing power of the Philippine currency, or fluctuation in the
value of pesos manifestly beyond the contemplation of the parties at the time of the
establishment of the obligation. 23

Premises considered, we find that the contract of "LEASE WITH OPTION TO BUY" between
petitioner and respondent bank is valid, effective and enforceable, the price being certain and
that there was consideration distinct from the price to support the option given to the lessee.

WHEREFORE, this petition is hereby DISMISSED, and the decision of the appellate court is
hereby AFFIRMED.

SO ORDERED.

CASE DIGEST

FACTS:

Petitioner Federico Serra, who is the owner of a 374 square meter parcel of land located at
Masbate, Masbate, and private respondent Rizal Commercial Banking Corporation (RCBC)
entered into a "Contract of Lease with Option to Buy" in May 25, 1975 which provided that
Serra will lease the subject land to RCBC for a period of 25 years from June 1, 1975 to June 1,
2000, that the RCBC has the option to purchase the same at P210.00 per square meter within a
period of 10 years from May 25, 1975, the date of the signing of the Contract, and that Serra
will have to register said land under the Torrens System to the Register of Deeds of Province of
Masbate within the same 10-year option period. Pursuant to said contract, RCBC constructed
improvements on the subject land to house its branch office, while the petitioner had the
property, within 3 years from 1975, duly registered with OCT No. 0-232 under the Torrens
System. Later, petitioner alleged that as soon as he had the property registered, he kept on
pursuing the branch manager for the sale of the lot as per their agreement, but it was not until
September 4, 1984, that RCBC decided to exercise the option.

RCBC informed petitioner, through a letter, of its intention to buy the property at the agreed
price of not greater than P210.00 per square meter or a total of P78,430.00, but petitioner
replied that he is no longer selling the property. RCBC then filed an action for specific
performance and damages against Serra in March 1985 alleging that during the negotiations it
made clear to petitioner that it intends to stay permanently on property once its branch office
is opened unless the exigencies of the business requires otherwise.

Although finding that the contract was valid, the lower court ruled that the option to buy is
unenforceable because it lacked a consideration distinct from the price and RCBC did not
exercise its option within the reasonable time. Upon motion for reconsideration, however, the
lower court reversed itself on the 2nd issue, declared the contract as valid, and ordered Serra
to deliver the proper deed of sale to RCBC. The Court of Appeals likewise affirmed said decision.

ISSUE:

Was there a valid contract of lease with option to buy between the parties? Was there a
consideration distinct from the price to support the option given to RCBC?

COURT RULING:

The Supreme Court affirmed the appellate court’s decision. A contract of adhesion is one
wherein a party, usually a corporation, prepares the stipulations in the contract, while the other
party merely affixes his signature or his "adhesion" thereto. These types of contracts are as
binding as ordinary contracts because in reality, the party who adheres to the contract is free to
reject it entirely.

In the case at bar, the Supreme Court did not find the situation to be inequitable because
petitioner is a highly educated man, who, at the time of the trial was already a CPA-Lawyer, and
when he entered into the contract, was already a CPA, holding a respectable position with the
Metropolitan Manila Commission. It is evident that a man of his stature should have been more
cautious in transactions he enters into, particularly where it concerns valuable properties. Also,
in the present case, the consideration is even more onerous on the part of the lessee since it
entails transferring of the building and/or improvements on the property to petitioner, should
respondent bank fail to exercise its option within the period stipulated.
 G.R. No. 135929 April 20, 2001

LOURDES ONG LIMSON, petitioner,

vs.

COURT OF APPEALS, SPOUSES LORENZO DE VERA and

ASUNCION SANTOS-DE VERA, TOMAS CUENCA, JR. and
SUNVAR REALTY DEVELOPMENT CORPORATION

Filed under Rule 45 of the Rules of Court this Petition for Review on Certiorari seeks to review,
reverse and set aside the Decision1 of the Court of Appeals dated 18 May 1998 reversing that
of the Regional Trial Court dated 30 June 1993. The petitioner likewise assails the Resolution2
of the appellate court of 19 October 1998 denying petitioner’s Motion for Reconsideration.

Petitioner Lourdes Ong Limson, in her 14 may 1979 Complaint filed before the trial court,3
alleged that in July 1978 respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera,
through their agent Marcosa Sanchez, offered to sell to petitioner a parcel of land consisting of
48, 260 square meters, more or less, situated in Barrio San Dionisio, Parañaque, Metro Manila;
that respondent spouses informed her that they were the owners of the subject property; that
on 31 July 1978 she agreed to buy the property at the price of P34.00 per square meter and
gave the sum of P20,000.00 to respondent spouses as "earnest money;" that respondent
spouses signed a receipt therefor and gave her a 10-day option period to purchase the
property; that respondent Lorenzo de Vera then informed her that the subject property was
mortgaged to Emilio Ramos and Isidro Ramos; that respondent Lorenzo de Vera asked her to
pay the balance of the purchase price to enable him and his wife to settle their obligation with
the Ramoses.1âwphi1.nêt

Petitioner also averred that she agreed to meet respondent spouses and the Ramoses on 5
August 1978 at the Office of the Registry of deeds of Makati, Metro Manila, to consummate the
transaction but due to the failure of respondent Asuncion Santos-de Vera and the Ramoses to
appear, no transaction was formalized. In a second meeting scheduled on 11 August 1978 she
claimed that she was willing and ready to pay the balance of the purchase price but the
transaction again did not materialize as respondent spouses failed to pay the back taxes of
subject property. Subsequently, on 23 August 1978 petitioner allegedly gave respondent
Lorenzo de Vera three (3) checks in the total amount of P36, 170.00 for the settlement of the
back taxes of the property and for the payment of the quitclaims of the three (3) tenants of
subject land. The amount was purportedly considered part of purchase price and respondent
Lorenzo de Vera signed the receipts therefor.

Petitioner alleged that on 5 September 1978 she was surprised to learn from the agent of
respondent spouses that the property was the subject of a negotiation for the sale to
respondent Sunvar Realty Development Corporation (SUNVAR) represented by respondent
Tomas Cuenca, Jr. On 15 September 1978 petitioner discovered that although respondent
spouses purchased the property from the Ramoses on 20 March 1970 it was only on 15
September 1978 that TCT No. S-72946 covering the property was issued to respondent spouses.
As a consequence, she file on the same day an affidavit of Adverse Claim with the Office of the
Registry of Deeds of Makati, Metro, which was annotated on TCT No. S-72946. She also claimed
that on the same day she informed respondent Cuenca of her "contract" to purchase the
property.

The Deed of Sale between respondent spouses and respondent SUNVAR was executed on 15
September 1978 and TCT N0. S-72377 was issued in favor of the latter on 26 September 1978
with the adverse Claim of petitioner annotated thereon. Petitioner claimed that when
respondent spouses sold the property in dispute to SUNVAR, her valid and legal right to
purchase it was ignored if not violated. Moreover, she maintained that SUNVAR was in bad
faith, as it knew of her "contract" to purchase the subject property fro respondent spouse.

Finally, for the alleged unlawful and unjust acts of respondent spouses, which caused her
damage, prejudice and injury, petitioner claimed that the Deed of Sale, should be annuled and
TCT No. S-72377 in the name of respondent SUNVAR canceled and TCT No. S-72946 restored.
She also insisted that a Deed of Sale between her an respondent spouses be now executed
upon her payment of the balance of the purchase price agreed upon, plus damages and
attorney’s fees.

In their Answer4 respondent spouses maintained that petitioner had no sufficient cause of
action against them; that she was not the real party in interest; that the option to buy the
property had long expired; that there was no perfected contract to sell between them; and,
that petitioner had no legal capacity to sue. Additionally, respondent spouses claimed actual,
moral and exemplary damages, and attorney’s fees against petitioner.

On the other hand, respondents SUNVAR and Cuenca, in their Answer5 alleged that petitioner
was not the proper party in interest and/or had no cause of action against them. But, even
assuming that petitioner was the proper party in interest, they claimed that she could only be
entitled to the return of any amount received by respondent spouses. In the alternative, they
argued that petitioner had lost her option to buy the property for failure to comply with the
terms and conditions of the agreement as embodied in the receipt issued therefor. Moreover,
they contended that at the time of the execution of the Deed of Sale and the payment of
consideration to respondent spouses, they "did not know nor was informed" of petitioner’s
interest or claim over the subject property. They claimed furthermore that it was only after the
signing of the Deed of Sale and the payment of the corresponding amounts to respondent
spouses that they came to know of the claim of petitioner as it was only then that they were
furnished copy to the title to the properly where the Adverse Claim of petitioner was
annotated. Consequently, they also instituted a Cross-Claim against respondent spouses for bad
faith in encouraging the negotiations between them without telling them of the claim of
petitioner. The same respondents maintained that had they known of the claim of petitioner,
they would not have initiated negotiations with respondent spouses for the purchase of the
property. Thus, they prayed for reimbursement of all amounts and monies received from them
by respondent spouses, attorney’s fees and expenses for litigation in the event that the trial
court should annul the Deed of Sale and deprive them of their ownership and possessio of the
subject land.

In their Answer to the Cross-Claim6 of respondents SUNVAR and Cuenca, respondent spouses
insisted that they negotiated with the former only after expiration of the option period given to
petitioner and her failure with her commitments thereunder. Respondent spouses contended
that they acted legally and validly, in all honesty and good faith. According to them, respondent
SUNVAR made a verification of the title with the office of the register of Deeds of Metro Manila
District IV before the execution of the Deed of Absolute Sale. Also, they claimed that the Cross-
Claim was written executed by respondent SUNVAR in their favor. Thus, respondent spouses
prayed for actual damages for the unjustified filling of the Cross-Claim, moral damages for the
mental anguish and similar injuries they suffered by reason thereof, exemplary damages "to
prevent others from emulation the bad example" of respondents SUNVAR and Cuenca, plus
attorney’s fees.
After a protracted trial and reconstitution of the court records due to the fire that razed the
Pasay City Hall on 18 January 1992, the Regional Trial Court rendered its 30 June 1993 Decision7
in favor of petitioner. It ordered (a) the annulment and rescission of the Deed of Absolute Sale
executed on 15 September 1978 by respondent spouses in favor of respondent SUNVAR; (b) the
cancellation and revocation of TCT No. S-75377 of the Registry of Deeds, Makati, Metro Manila,
issued in the name of respondent Sunvar Realty Development Corporation, and the restoration
or reinstatement of TCT No. S-72946 of the same Registry issued in the name of respondent
spouses; (c) respondent spouses to execute a deed of sale conveying ownership of the property
covered by TCT No. S-72946 in favor of petitioner upon her payment of the balance of the
purchase price agreed upon; and, (d) respondent spouses to pay petitioner P50,000.00 as and
for attorney’s fees, and to pay the costs.

On appeal, the Court of Appeals completely reversed the decision of the trial court. It ordered
(a) the Register of Deeds of Makati City to lift the Adverse Claim and such other encumbrances
petitioner might have filed or caused to be annotated on TCT No. S-75377; and, (b) petitioner to
pay (1) respondent SUNVAR P50,000.00 as nominal damages, P30,000.00 as exemplary
damages and P20,000 as attorney’s fees; (2) respondent spouses, P15,000.00 as nominal
damages, P10,000.00 as exemplary damages and P10,000.00 as attorney’s fees; and, (3) the
costs.

Petitioner timely filed a Motion for Reconsideration which was denied by the Court of Appeals
on 19 October 1998. Hence, this petition.

At issue for resolution by the Court is the nature of the contract entered into between
petitioner Lourdes Ong Limson on one hand, and respondent spouses Lorenzo de Vera and
Asuncion Santos-de Vera on the other.

The main argument of petitioner is that there was a perfected contract to sell between her and
respondent spouses. On the other hand, respondent spouses and respondents SUNVAR and
Cuenca argue that what was perfected between petitioner and respondent spouses was a mere
option.
A scrutiny of the facts as well as the evidence of the parties overwhelmingly leads to the
conclusion that the agreement between the parties was a contract of option and not a contract
to sell.

An option, as used in the law of sales, is a continuing offer or contract by which the owner
sitpulates with another that the latter shall have the right to buy the property at a fixed price
within a time certain, or under, or in compliance with, certain terms and conditions, or which
gives to the owner of the property the right to sell or demand a sale. It is also sometimes called
an "unaccepted offer." An option is not itself a purchase, but merely secures the privilege to
buy.8 It is not a sale of property but a sale of right to purchase.9 It is simply a contract by which
the owner of property agrees with another person that he shall have the right to buy his
property at a fixed price within a certain time. He does not sell his land; he does not then agree
to sell it; but he does not sell something, i.e., the right or privilege to buy at the election or
option of the other party.10 Its distinguishing characteristic is that it imposes no binding
obligation on the person holding the option, aside from the consideration for the offer. Until
acceptance, it is not, properly speaking, a contract, and does not vest, transfer, or agree to
transfer, any title to, or any interest or right in the subject matter, but is merely a contract by
which the owner of the property gives the optionee the right or privilege of accepting the offer
and buying the property on certain terms.11

On the other hand, a contract, like a contract to sell, involves the meeting of minds between
two persons whereby one binds himself, with respect to the other, to give something or to
render some service.12 Contracts, in general, are perfected by mere consent,13 which is
manifested by the meeting of the offer and the acceptance upon the thing and the cause which
are to constitute the contract. The offer must be certain and the acceptance absolute.14

The Receipt15 that contains the contract between petitioner and respondent spouses provides
–

Received from Lourdes Limson the sum of Twenty Thousand Peso (P20,000.00) under Check
No. 22391 dated July 31, 1978 as earnest money with option to purchase a parcel of land
owned by Lorenzo de Vera located at Barrio San Dionisio, Municipality of Parañaque, Province
of Rizal with an area of forty eight thousand two hundred sixty square meters more or less at
the price of Thirty Four Pesos (34.00)16 cash subject to the condition and stipulation that have
been agreed upon by the buyer and me which will form part of the receipt. Should the
transaction of the property not materialize not on the fault of the buyer, I obligate myself to
return the full amount of P20,000.00 earnest money with option to buy or forfeit on the fault of
the buyer. I guarantee to notify the buyer Lourdes Limson or her representative and get her
conformity should I sell or encumber this property to a third person. This option to buy is good
within ten (10) days until the absolute deed of sale is finally signed by the parties or the failure
of the buyer to comply with the terms of the option to buy as herein attached.

In the interpretation of contracts, the ascertainment of the intention of the contracting parties
is to be discharged by looking to the words they used to project that intention in their
contracts, all the words standing alone.17 The above Receipt readily shows that respondent
spouses and petitioner only entered into a contract of option; a contract by which respondent
spouses agreed with petitioner that the latter shall have the right to buy the former's property
at a fixed price of P34.00 per square meter within ten (10) days from 31 July 1978. Respondent
spouses did not sell their property; they did not also agree to sell it; but they sold something,
i.e., the privilege to buy at the election or option of petitioner. The agreement imposed no
binding obligation on petitioner, aside from the consideration for the offer.

The consideration of P20,000.00 paid by petitioner to respondent spouses was referred to as

"earnest money." However, a careful examination of the words used indicated that the money
is not earnest money but option money. "Earnest money" and "option money" are not the
same but distinguished thus; (a) earnest money is part of the purchase price, while option
money is the money given as a distinct consideration for an option contract; (b) earnest money
given only where there is already a sale, while option money applies to a sale not yet perfected;
and, (c) when earnest money is given, the buyer is bound to pay the balance, while when the
would-be buyer gives option money, he is not required to buy,18 but may even forfeit it
depending on the terms of the option.

There is nothing in the Receipt which indicates that the P20,000.00 was part of the purchase
price. Moreover, it was not shown that there was a perfected sale between the parties where
earnest money was given. Finally, when petitioner gave the "earnest money" the Receipt did
not reveal that she was bound to pay the balance of the purchase price. In fact, she could even
forfeit the money given if the terms of the option were not met. Thus, the P20,000.00 could
only be money given as consideration for the option contract. That the contract between the
parties is one of option is buttressed by the provision therein that should the transaction of the
provision therein that should the transaction of the property not materialize without fault of
petitioner as buyer, respondent Lorenzo de Vera obligates himself to return the full amount of
P20,000.00 "earnest money" with option to buy or forfeit the same on the fault of petitioner. It
is further bolstered by the provision therein that guarantees petitioner that she or her
representative would be notified in case the subject property was sold or encumbered to a
third person. Finally, the Receipt provided for a period within which the option to buy was to be
exercised, i.e., "within ten (10) days" from 31 July 1978.

Doubtless, the agreement between respondent spouses and petitioner was an "option
contract" or what is sometimes called an "unaccepted offer." During the option period the
agreement was not converted into a bilateral promise to sell and to buy where both
respondent spouses and petitioner were then reciprocally bound to comply with their
respective undertakings as petitioner did not timely, affirmatively and clearly accept the offer
of respondent spouses.

The rule is that except where a formal acceptance is not required, although the acceptance
must be affirmatively and clearly made and evidenced by some acts or conduct communicated
to the offeror, it may be made either in a formal or an informal manner, and may be shown by
acts, conduct or words by the accepting party that clearly manifest a present intention or
determination to accept the offer to buy the property of respondent spouses within the 10-day
option period. The only occasion within the option period when petitioner could have
demonstrated her acceptance was on 5 August 1978 when, according to her, she agreed to
meet respondent spouses and the Ramoses at the Office of the Registrar of Deeds of Makati.
Petitioner’s agreement to meet with respondent spouses presupposes an invitation from the
latter, which only emphasizes their persistence in offering the property to the former. But
whether that showed acceptance by petitioner of the offer is hazy and dubious.

On or before 10 August 1978, the last day of the option period, no affirmative or clear
manifestation was made by petitioner to accept the offer. Certainly, there was no concurrence
of private respondent spouses’ offer and petitioner’s acceptance thereof within the option
period. Consequently, there was no perfected contract to sell between the parties.
On 11 August 1978 the option period expired and the exclusive right of petitioner to buy the
property of respondent spouses ceased. The subsequent meetings and negotiations, specifically
on 11 and 23 August 1978, between the parties only showed the desire of respondent spouses
to sell their property to petitioner. Also, on 14 September 1978 when respondent spouses sent
a telegram to petitioner demanding full payment of the purchase price on even date simply
demonstrated an inclination to give her preference to buy subject property. Collectively, these
instances did not indicate that petitioner still had the exclusive right to purchase subject
property. Verily, the commencement of negotiations between respondent spouses and
respondent SUNVAR clearly manifested that their offer to sell subject property to petitioner
was no longer exclusive to her.

We cannot subscribe to the argument of petitioner that respondent spouses extended the
option period when they extended the authority of their until 31 August 1978. The extension of
the contract of agency could not operate to extend the option period between the parties in
the instant case. The extension must not be implied but categorical and must show the clear
intention of the parties.1âwphi1.nêt

As to whether respondent spouses were at fault for the non-consummation of their contract
with petitioner, we agree with the appellate court that they were not to be blammed. First,
within the option period, or on 4 August 1978, it was respondent spouses and not petitioner
who initiated the meeting at the Office of The Register of Deeds of Makati. Second, that the
Ramoses filed to appear on 4 August 1978 was beyond the control of respondent spouses.
Third, the succeeding meetings that transpired to consummate the contract were all beyond
the option period and, as declared by the Court of Appeals, the question of who was at fault
was already immaterial. Fourth, even assuming that the meetings were within the option
period, the presence of petitioner was not enough as she was not even prepared to pay the
purchase price in cash as agreed upon. Finally, even without the presence of the Ramoses,
petitioner could have easily made the necessary payment in cash as the price of the property
was already set at P34.00 per square meter and payment of the mortgage could every well be
left to respondent spouses.

Petitioner further claims that when respondent spouses sent her a telegram demanding full
payment of the purchase price on 14 September 1978 it was an acknowledgment of their
contract to sell, thus denying them the right to claim otherwise.
We do not agree. As explained above, there was no contract to sell between petitioner and
respondent spouses to speak of. Verily, the telegram could not operate to estop them from
claiming that there was such contract between them and petitioner. Neither could it mean that
respondent spouses extended the option period. The telegram only showed that respondent
spouses were willing to give petitioner a chance to buy subject property even if it no longer
exclusive.

The option period having expired and acceptance was not effectively made by petitioner, the
purchase of subject property by respondent SUNVAR was perfectly valid and entered into in
good faith. Petitioner claims that in August 1978 Hermigildo Sanchez, the son of respondent
spouses’ agent, Marcosa Snachez, informed Marixi Prieto, a member of the Board of Directors
of respondent SUNVAR, that the property was already sold to petitioner. Also, petitioner
maintains that on 5 September 1978 respondent Cuenca met with her and offered to buy the
property from her at P45.00 per square meter. Petitioner contends that these incidents,
including the annotation of her Adverse Claim on the title of subject property on 15 September
1978 show that respondent SUNVAR was aware of the perfected sale between her and
respondent spouses, thus making respondent SUNVAR a buyer in bad faith.

Petitioner is not correct. The dates mentioned, at least 5 and 15 September 1978, are
immaterial as they were beyond the option period given to petitioner. On the other hand, the
referral to sometime in August 1978 in the testimony of Hermigildo Sanchez as emphasized by
petitioner in her petition is very vague. It could be within or beyond the option period. Clearly
then, even assuming that the meeting with Marixi Prieto actually transpired, it could not
necessarily mean that she knew of the agreement between petitioner and respondent spouses
for the purchase of subject property as the meeting could have occurred beyond the option
period. In which case, no bad faith could be attributed to respondent SUNVAR. If, on the other
hand, the meeting was within the option period, petitioner was remiss in her duty to prove so.
Necessarily, we are left with the conclusion that respondent SUNVAR bought subject property
from respondent spouses in good faith, for value and without knowledge of any flaw or defect
in its title.

The appellate court awarded nominal and exemplary damages plus attorney’s fees to
respondent spouses and respondent SUNVAR. But nominal damages are adjudicated to
vindicate or recognize the right of the plaintiff that has been violated or invaded by the
defendant.19 In the instant case, the Court recognizes the rights of all the parties and finds no
violation or invasion of the rights of respondents by petitioner. Petitioner, in filing her
complaint, only seeks relief, in good faith, for what she believes she was entitled to and should
not be awarded to respondents as they are imposed only by way of example or correction for
the public good and only in addition to the moral, temperate, liquidated or compensatory
damages.20 No such kinds of damages were awarded by the Court of Appeals, only nominal,
which was not justified in this case. Finally, attorney’s fees could not also be recovered as the
Court does not deem it just and equitable under the circumtances.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals ordering the Register
of Deeds of Makati City to lift the adverse claim and such other encumbrances petitioners
Lourdes Ong Limson may have filed or caused to be annotated on TCT No. S-75377 is
AFFIRMED, with the MODIFICATION that the award of nominal and exemplary damages as well
as attorney’s fees is DELETED.

SO ORDERED.
 Southern Motors Inc vs. Moscoso

2 SCRA 168

May 1961

The case was submitted on agreed statement of facts.

On June 6, 1957, plaintiff-appellee Southern Motors, Inc. sold to defendant-appellant Angel

Moscoso one Chevrolet truck, on installment basis, for P6,445.00. Upon making a down
payment, the defendant executed a promissory note for the sum of P4,915.00, representing the
unpaid balance of the purchase price (Annex A, complaint), to secure the payment of which, a
chattel mortgage was constituted on the truck in favor of the plaintiff (Annex B). Of said
account of P4,915.00, the defendant had paid a total of P550.00, of which P110.00 was applied
to the interest up to August 15, 1957, and P400.00 to the principal, thus leaving an unpaid
balance of P4,475.00. The defendant failed to pay 3 installments on the balance of the purchase
price.

On November 4, 1957, the plaintiff filed a complaint against the defendant, to recover the
unpaid balance of the promissory note. Upon plaintiff's petition, embodied in the complaint, a
writ of attachment was issued by the lower court on the properties Of the defendant. Pursuant
thereto, the said Chevrolet truck, and a house and lot belonging to defendant, were attached
by the Sheriff of San Jose, Antique, where defendant was residing on November 25, 1957, and
said truck was brought to the plaintiff's compound in Iloilo City, for safe keeping.

After attachment and before the trial of the case on the merits, acting upon the plaintiff's
motion dated December 23, 1957, for the immediate sale of the mortgaged truck, the
Provincial Sheriff of Iloilo on January 2, 1958, sold the truck at public auction in which plaintiff
itself was the only bidder for P1,000.00. The case had not been set for hearing, then.
The trial court on March 27, 1958, condemned the defendant to pay the plaintiff the amount of
P4,475.00 with interest at the rate of 12% per annum from August 16, 1957, until fully paid,
plus 10% thereof as attorneys fees and costs against which defendant interposed the present
appeal, contending that the trial court erred —

(1) In not finding that the attachment caused to be levied on the truck and its immediate sale at
public auction, was tantamount to the foreclosure of the chattel mortgage on said truck; and

(2) In rendering judgment in favor of the plaintiff-appellee.

Both parties agreed that the case is governed by Article 1484 of the new Civil Case, which
provides: —

ART. 1484. In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay; .

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
vendee's failure to pay cover two or more installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of the price. Any agreement to the
contrary shall be void.

While the appellee claims that in filing the complaint, demanding payment of the unpaid
balance of the purchase price, it has availed of the first remedy provided in said article i.e. to
exact fulfillment of the obligation (specific performance); the appellant, on the other hand,
contends that appellee had availed itself of the third remedy viz, the foreclosure of the chattel
mortgage on the truck.

The appellant argues that considering history of the law, the circumstances leading to its
enactment, the evil that the law was intended to correct and the remedy afforded (Art. 1454-A
of the old Civil Code; Act No. 4122; Bachrach Motor Co. vs. Reyes, 62 Phil. 461, 466-469); that
the appellee did not content itself by waiting for the judgment on the complaint and then
executed the judgment which might be rendered in its favor, against the properties of the
appellant; that the appellee obtained a preliminary attachment on the subject of the chattel
mortgage itself and caused said truck to be sold at public auction petition, in which he was
bidder for P1,000.00; the result of which, was similar to what would have happened, had it
foreclosed the mortgage pursuant to the provisions of Sec. 14 of Act No. 1508 (Chattel
Mortgage Law) the said appellee had availed itself of the third remedy aforequoted. In other
words, appellant submits that the matter should be looked at, not by the allegations in the
complaint, but by the very effect and result of the procedural steps taken and that appellee
tried to camouflage its acts by filing a complaint purportedly to exact the fulfillment of an
obligation petition, in an attempt to circumvent the provisions of Article 1484 of the new Civil
Code. Appellant concludes that under his theory, a deficiency judgment would be without legal
basis.

We do not share the views of the appellant on this matter. Manifestly, the appellee had chosen
the first remedy. The complaint is an ordinary civil action for recovery of the remaining unpaid
balance due on the promissory note. The plaintiff had not adopted the procedure or methods
outlined by Sec. 14 of the Chattel Mortgage Law but those prescribed for ordinary civil actions,
under the Rules of Court. Had appellee elected the foreclosure, it would not have instituted this
case in court; it would not have caused the chattel to be attached under Rule 59, and had it sold
at public auction, in the manner prescribed by Rule 39. That the herein appellee did not intend
to foreclose the mortgage truck, is further evinced by the fact that it had also attached the
house and lot of the appellant at San Jose, Antique. In the case of Southern Motors, Inc. vs.
Magbanua, G.R. No. L-8578, Oct. 29, 1956, we held:

By praying that the defendant be ordered to pay it the sum of P4,690.00 together with the
stipulated interest of 12% per annum from 17 March 1954 until fully paid, plus 10% of the total
amount due as attorney's fees and cost of collection, the plaintiff elected to exact the
fulfillment of the obligation, and not to foreclose the mortgage on the truck. Otherwise, it
would not have gone to court to collect the amount as prayed for in the complaint. Had it
elected to foreclose the mortgage on the truck, all the plaintiff had to do was to cause the truck
to be sold at public auction pursuant to section 14 of the Chattel Mortgage Law. The fact that
aside from the mortgaged truck, another Chevrolet truck and two parcels of land belonging to
the defendant were attached, shows that the plaintiff did not intend to foreclose the mortgage.

As the plaintiff has chosen to exact the fulfillment of the defendant's obligation, the former
may enforce execution of the judgment rendered in its favor on the personal and real property
of the latter not exempt from execution sufficient to satisfy the judgment. That part of the
judgment against the properties of the defendant except the mortgaged truck and discharging
the writ of attachment on his other properties is erroneous.

We perceive nothing unlawful or irregular in appellee's act of attaching the mortgaged truck
itself. Since herein appellee has chosen to exact the fulfillment of the appellant's obligation, it
may enforce execution of the judgment that may be favorably rendered hereon, on all personal
and real properties of the latter not exempt from execution sufficient to satisfy such judgment.
It should be noted that a house and lot at San Jose, Antique were also attached. No one can
successfully contest that the attachment was merely an incident to an ordinary civil action.
(Sections 1 & 11, Rule 59; Sec. 16, Rule 39). The mortgage creditor may recover judgment on
the mortgage debt and cause an execution on the mortgaged property and may cause an
attachment to be issued and levied on such property, upon beginning his civil action (Tizon vs.
Valdez, 48 Phil. 910-911).

IN VIEW HEREOF, the judgment appealed from hereby is affirmed, with costs against the
defendant-appellant.

CASE DIGEST

FACTS:

In June 1957, plaintiff-appellee, Southern Motors, Inc. (Southern Motors) sold to defendant-
appellant Angel Moscoso one Chevrolet truck, on installment basis, for P6,445.00. Upon making
a down payment, the defendant executed a promisory note for the sum of P4,915,00,
representing the unpaid balance of the purchase price to secure the payment of which, a
chattel mortgage was constituted on the truck in favor of Southern Motors. Of the P4,915,00,
defendant was only able to pay a total of P550.00, which P110.00 was applied to the interest up
to August 15, and P400.00 to the principal, thus leaving an unpaid balance of P4,475.00. The
defendant failed to pay 3 more installments on the balance of the purchase price.

In November 1957, the Southern Motors filed a complaint against the Moscoso to recover the
unpaid balance of the promissory note, and the lower court issued a writ of attachment on
Moscoso’s properties. The Sheriff of San Jose, Antique, attach the Chevrolet truck, as well as a
house and lot belonging to Moscoso, and said truck was brought to the Southern Motors’
compound in Iloilo City for safe keeping. The Provincial Sheriff of Iloilo sold the said truck on
January 2, 1958 at a public auction in which Southern Motors itself was the only bidder for
P1,000.00. In March 1958, the trial court condemned the defendant Moscoso to pay the
plaintiff Southern Motors the unpaid balance of P4,475.00 with interest at the rate of 12% per
annum from August 16, 1957, until fully paid. While Southern Motors claims that in filing the
complaint, demanding payment of the unpaid balance of the purchase price, it has availed of
the first remedy provided in Article 1484 of the new Civil Code i.e. to exact fulfillment of the
obligation (specific performance), Mosocoso, on the other hand, contends that Southern
Motors had availed itself of the third remedy viz, the foreclosure of the chattel mortgage on the
truck.

ISSUE:

Which remedy under the Civil Code did the vendor Southern Motors avail?

COURT RULING:

The Supreme Court, in affirming the decision of the lower court, found that there is nothing
unlawful or irregular in appellee Southern Motors's act of attaching the mortgaged truck itself.

Since it has chosen to exact the fulfillment of the appellant Moscoso's obligation, Southern
Motors may enforce execution of the judgment that may be favorable to it, on all personal and
real properties of the latter not exempt from execution sufficient to satisfy such judgment. No
one can successfully contest that the attachment of a house and lot at San Jose, Antique was
merelly an incident to all ordinary civil action. (Sections 1 & 11, Rule 59; sec. 16 Rule 39.) The
mortgage creditor may recover judgment on the mortgage debt and cause an execution on the
mortgaged property and may cause an attachment to be issued and levied on such property,
upon beginning his civil action.
 Sia Suan and Gaw Chiao
vs.
Ramon Alcantara, March 4, 1950

On August 3, 1931, a deed of sale was executed by Rufino Alcantara and his sons Damaso
Alcantara and Ramon Alcantara conveying to Sia Suan five parcels of land. Ramon Alcantara
was then 17 years, 10 months and 22 days old. On August 27, 1931, Gaw Chiao (husband of Sia
Suan) received a letter from Francisco Alfonso, attorney of Ramon Alcantara, informing Gaw
Chiao that Ramon Alcantara was a minor and accordingly disavowing the contract. After being
contacted by Gaw Chiao, however, Ramon Alcantara executed an affidavit in the office of Jose
Gomez, attorney of Gaw Chiao, wherein Ramon Alcantara ratified the deed of sale. On said
occasion Ramon Alcantara received from Gaw Chiao the sum of P500. In the meantime, Sia
Suan sold one of the lots to Nicolas Azores from whom Antonio Azores inherited the same.

On August 8, 1940, an action was instituted by Ramon Alcantara in the Court of First Instance of
Laguna for the annulment of the deed of sale as regards his undivided share in the two parcels
of land covered by certificates of title Nos. 751 and 752 of Laguna. Said action was against Sia
Suan and her husband Gaw Chiao, Antonio, Azores, Damaso Alcantara and Rufino Alcantara
(the latter two being, respectively, the brother and father of Ramon Alcantara appealed to the
Court of Appealed which reversed the decision of the trial court, on the ground that the deed of
sale is not binding against Ramon Alcantara in view of his minority on the date of its execution,
and accordingly sentenced Sia Suan to pay to Ramon Alcantara the sum of P1,750, with legal
interest from December 17, 1931, in lieu of his share in the lot sold to Antonio Azores (who was
absolved from the complaint), and to reconvey to Ramon Alcantara an undivided one-fourth
interest in the lot originally covered by certificate of title NO. 752 of Laguna plus the cost of the
suit. From this judgment Sia Suan and Gaw Chiao have come to us on appeal by certiorari.

It is undeniable that the deed of sale signed by the appellee, Ramon Alcantara, On August 3,
1931, showed that he, like his co-signers (father and brother), was then of legal age. It is not
pretend and there is nothing to indicate that the appellants did not believe and rely on such
recital of fact. This conclusion is decisive and very obvious in the decision of the Court of
Appeals It is true that in the resolution on the for reconsideration, the Court of Appeals
remarked that "The fact that when informed of appellant's minority, the appellees too no steps
for nine years to protect their interest beyond requiring the appellant to execute a ratification
of the sale while still a minor, strongly indicates that the appellees knew of his minority when
the deed of sale was executed." But the feeble insinuation is sufficiently negative by the
following positive pronouncements of the Court of Appeals as well in said resolution as in the
decision.

As to the complaint that the defendant is guilty of laches, suffice it to say that the appellees
were informed of his minority within one (1) month after the transaction was completed.
(Resolution.)
Finally, the appellees were equally negligent in not taking any action to protect their interest
form and after August 27, 1931, when they were notified in writing of appellant's minority.
(Resolution.)

. . . The fact remains that the appellees were advised within the month that appellant was a
minor, through the letter of Attorney Alfonso (Exhibit 1) informing appellees of his client's
desire to disaffirm the contract . . . (Decision.)

The purchaser having been apprised of incapacity of his vendor shortly after the contract was
made, the delay in bringing the action of annulment will not serve to bar it unless the period
fixed by the statute of limitations expired before the filing of the complaint. . . . (Decision.)

In support of the contend that the deed of sale is binding on the appellee, counsel for the
appellants invokes the decision in Mercado and Mercado vs. Espiritu (37 Phil., 215), wherein
this court held:

The courts, in their interpretation of the law, have laid down the rule that the sale of real
estate, made by minors who pretend to be of legal age, when it fact they are not, is valid, and
they will not be permitted to excuse themselves from the fulfillment of the obligations
contracted by them, or to have them annulled in pursuance of the provisions of Law 6 title 19,
of the 6th Partida; and the judgment that holds such a sale to valid and absolves the purchaser
from the complaint filed against him does not violate the laws relative to the sale of minors'
property, nor the juridical rules established in consonance therewith. (Decisions of the Supreme
Court of Spain, of April 27, 1840, July 11, 1868, and March 1, 1875.)

The Court of Appeals has refused to apply this doctrine on the ground that the appellants did
not actually pay any amount in cash to the appellee and therefore did not suffer any detriment
by reason of the deed of sale, it being stipulated that the consideration therefore was a pre-
existing indebtedness of appellee's father, Rufino Alcantara. We are of the opinion that the
Court of Appeals erred. In the first place, in the case cited, the consideration for sale consisted
in greater part of pre-existing obligation. In the second place, under the doctrine, to bind a
minor who represents himself to be of legal age, it is not necessary for his vendee to actually
part with cash, as long as the contract is supported by a valid consideration. Since appellee's
conveyance to the appellants was admittedly for and in virtue of a pre-existing indebtedness
(unquestionably a valid consideration), it should produce its full force and effect in the absence
of any other vice that may legally invalidate the same. It is not here claimed that the deed of
sale is null and void on any ground other than the appellee's minority. Appellee's contract has
become fully efficacious as a contract executed by parties with full legal capacity.

The circumstance that, about one month after the date of the conveyance, the appellee
informed the appellants of his minority, is of no moment, because appellee's previous
misrepresentation had already estopped him from disavowing the contract. Said belated
information merely leads to the inference that the appellants in fact did not know that the
appellee was a minor on the date of the contract, and somewhat emphasizes appellee's had
faith, when it is borne in mind that no sooner had he given said information than he ratified his
deed of sale upon receiving from the appellants the sum of P500.

Counsel for the appellees argues that the appellants could not have been misled as to the real
age of the appellee because they were free to make the necessary investigation. The
suggestion, while perhaps practicable, is conspicuously unbusinesslike and beside the point,
because the findings of the Court of Appeals do not show that the appellants knew or could
suspected appellee's minority.

The Court of Appeals seems to be of the opinion that the letter written by the appellee
informing the appellants of his minority constituted an effective disaffirmance of the sale, and
that although the choice to disaffirm will not by itself avoid the contract until the courts
adjudge the agreement to be invalid, said notice shielded the appellee from laches and
consequent estoppel. This position is untenable since the effect of estoppel in proper cases is
unaffected by the promptness with which a notice to disaffirm is made.

The appealed decision of the Court of Appeals is hereby reversed and the appellants absolved
from the complaint, with costs against the appellee, Ramon Alcantara. So ordered.

Ozaeta, Tuason, Montemayor and Torres, JJ., concur.

Separate Opinions

PADILLA, J., concurring:

I concur in the result not upon the grounds stated in the majority opinion but for the following
reasons: The deed of sale executed by Ramon Alcantara on 3 August 1931 conveying to Sia
Suan five parcels of land is null and void insofar as the interest, share, or participation of Ramon
Alcantara in two parcels of land is concerned, because on the date of sale he was 17 years, 10
months and 22 days old only. Consent being one of the essential requisites for the execution of
a valid contract, a minor, such as Ramon Alcantara was, could not give his consent thereof. The
only misrepresentation as to his age, if any, was the statement appearing in the instrument that
he was of age. On 27 August 1931, or 24 days after the deed was executed, Gaw Chiao, the
husband of the vendee Sia Suan, was advised by Atty. Francisco Alfonso of the fact that his
client Ramon Alcantara was a minor. The fact that the latter, for and in consideration of P500,
executed an affidavit, whereby he ratified the deed of sale, is of no moment. He was still minor.
The majority opinion invokes the rule laid down in the case of Mercado et al. vs. Espiritu, 37
Phil., 215. The rule laid down by this Court in that case is based on three judgments rendered
by the Supreme Court of Spain on 27 April 1960, 11 July 1868, and 1 March 1875. In these
decisions the Supreme Court of Spain applied Law 6, Title 19, of the 6th Partida which expressly
provides:
"Diziendo o ortogando el que fuese menor, que era mayor de XXV años, si ouiesse persona que
paresciesse de tal tiempo, si lo faze enganosamente, valdria el pleyto que assi fuere fecho con
el e non deue ser desatado despues, como quier que non era de edad quando lo fizo: esto es,
porque las leyes ayudan a los enganados, e non a los enganadores. . . ." (Alcubilla, Codigos
Antigous de España, p. 613.)

The contract of sale involved in the case of Mercado vs. Espiritu, supra, was executed by the
minors on 17 May 1910. The Law in force on this last-mentioned date was not Las Siete
Partidas, 1 which was the in force at the time the cases decided by the Supreme Court of Spain
referred to, but the Civil Code which took effect in the Philippines on 8 December 1889. As
already stated, the Civil Code requires the consent of both parties for the valid execution of a
contract (art. 1261, Civil Code). As a minor cannot give his consent, the contract made or
executed by him has no validity and legal effect. There is no provision in the Civil Code similar to
that of Law 6, Title 19, of the 6th Partida which is equivalent to the common law principle of
estoppel. If there be an express provision in the Civil Code similar law 6, Title 19, of the 6th
Partida, I would agree to the reasoning of the majority. The absence of such provision in the
Civil Code is fatal to the validity of the contract executed by a minor. It would be illogical to
uphold the validity of a contract on the ground of estoppel, because if the contract executed by
a minor is null and void for lack of consent and produces no legal effect, how could such a
minor be bound by misrepresentation about his age? If he could not be bound by a direct act,
such as the execution of a deed of sale, how could he be bound by an indirect act, such as
misrepresentation as to his age? The rule laid down in Young vs. Tecson, 39 O. G. 953, in my
opinion, is the correct one.

Nevertheless, as the action in this case was brought on 8 August 1940, the same was barred,
because it was not brought within four (4) years after the minor had become of age, pursuant
to article 1301 of the Civil Code. Ramon Alcantara became of age sometime in September 1934.

CASE DIGEST

Facts:

· On August 3, 1931, a deed of sale was executed by Rufino Alcantara and his sons Damaso
Alcantara and Ramon Alcantara conveying to Sia Suan five parcels of land to petitioner Sia Suan
· On August 27, 1931, Gaw Chiao (husband of Sia Suan) received a letter from Francisco
Alfonso, attorney of Ramon Alcantara, informing him that Ramon Alcantara was a minor and
accordingly disavowing the contract.
· After Gaw Chiao responded to the letter, Ramon Alcantara went to the office of Gaw
Chiao’s counsel ratifying the sale.
· Ramon Alcantara received from Gaw Chiao the sum of P500 as payment for the sold
parcels of land.
· On August 8, 1940, an action was instituted by Ramon Alcantara in the Court of First
Instance of Laguna for the annulment of the deed of sale on the ground of his minority at the
time of sale. Action was denied and Sia Suan, Gaw Chiao, Ramon’s father and brother, Nicolas
and Antonio Azores were absolved
· Ramon brought the case to CA; CFI decision reversed.
· Sia Suan and Gaw Chiao filed a petition for certiorari to the Supreme Court.

Issue:

· Whether or not Ramon Alcantara’s execution of the deed of sale is valid despite being a
minor at the time of its execution.

Held:

Ramon Alcantara in his minority may not be allowed to execute the deed of sale but his act of
ratification, the contract was given a binding effect.
 Mercado

v.

Espiritu, 37 Phil 215

This is an appeal by bill of exceptions, filed by the counsel for the plaintiffs from the judgment
of September 22, 1914, in which the judge of the Seventh Judicial District dismissed the
complaint filed by the plaintiffs and ordered them to keep perpetual silence in regard to the
litigated land, and to pay the costs of the suit.

By a complaint dated April 9, 1913, counsel for Domingo and Josefa Mercado brought suit in
the Court of First Instance of Bulacan, against Luis Espiritu, but, as the latter died soon
thereafter, the complaint was amended by being directed against Jose Espiritu in his capacity of
his administrator of the estate of the deceased Luis Espiritu. The plaintiffs alleged that they and
their sisters Concepcion and Paz, all surnamed Mercado, were the children and sole heirs of
Margarita Espiritu, a sister of the deceased Luis Espiritu; that Margarita Espiritu died in 1897,
leaving as her paraphernal property a tract of land of 48 hectares in area situated in the barrio
of Panducot, municipality of Calumpit, Bulacan, and bounded as described in paragraph 4 of the
amended complaint, which hereditary portion had since then been held by the plaintiffs and
their sisters, through their father Wenceslao Mercado, husband of Margarita Espiritu; that,
about the year 1910, said Luis Espiritu, by means of cajolery, induced, and fraudulently
succeeded in getting the plaintiffs Domingo and Josefa Mercado to sign a deed of sale of the
land left by their mother, for the sum of P400, which amount was divided among the two
plaintiffs and their sisters Concepcion and Paz, notwithstanding the fact that said land,
according to its assessment, was valued at P3,795; that one-half of the land in question
belonged to Margarita Espiritu, and one-half of this share, that is, one-fourth of said land , to
the plaintiffs, and the other one-fourth, to their two sisters Concepcion and Paz; that the part
of the land belonging to the two plaintiffs could produce 180 cavanes of rice per annum, at
P2.50 per cavan, was equivalent to P450 per annum; and that Luis Espiritu had received said
products from 1901 until the time of his death. Said counsel therefore asked that judgment be
rendered in plaintiffs' favor by holding to be null and void the sale they made of their respective
shares of their land, to Luis Espiritu, and that the defendant be ordered to deliver and restore
to the plaintiffs the shares of the land that fell to the latter in the partition of the estate of their
deceased mother Margarita Espiritu, together with the products thereof, uncollected since
1901, or their equivalent, to wit, P450 per annum, and to pay the costs of the suit.

In due season the defendant administrator answered the aforementioned complaint, denying
each and all of the allegations therein contained, and in special defense alleged that the land,
the subject-matter of the complaint, had an area of only 21 cavanes of seed rice; that, on May
25, 1894, its owner, the deceased Margarita Espiritu y Yutoc, the plaintiffs' mother, with the
due authorization of her husband Wenceslao Mercado y Arnedo Cruz sold to Luis Espiritu for
the sum of P2,000 a portion of said land, to wit, an area such as is usually required for fifteen
cavanes of seed; that subsequently, on May 14, 1901, Wenceslao Mercado y Arnedo Cruz, the
plaintiffs' father, in his capacity as administrator of the property of his children sold under pacto
de retro to the same Luis Espiritu at the price of P375 the remainder of the said land, to wit, an
area covered by six cavanes of seed to meet the expenses of the maintenance of his
(Wenceslao's) children, and this amount being still insufficient the successively borrowed from
said Luis Espiritu other sums of money aggregating a total of P600; but that later, on May
17,1910, the plaintiffs, alleging themselves to be of legal age, executed, with their sisters Maria
del Consejo and Maria dela Paz, the notarial instrument inserted integrally in the 5th paragraph
of the answer, by which instrument, ratifying said sale under pacto de retro of the land that had
belonged to their mother Margarita Espiritu, effected by their father Wenceslao Mercado in
favor of Luis Espiritu for the sum of P2,600, they sold absolutely and perpetually to said Luis
Espiritu, in consideration of P400, the property that had belonged to their deceased mother
and which they acknowledged having received from the aforementioned purchaser. In this
cross-complaint the defendant alleged that the complaint filed by the plaintiffs was unfounded
and malicious, and that thereby losses and damages in the sum of P1,000 had been caused to
the intestate estate of the said Luis Espiritu. He therefore asked that judgment be rendered by
ordering the plaintiffs to keep perpetual silence with respect to the land in litigation and,
besides, to pay said intestate estate P1,000 for losses and damages, and that the costs of the
trial be charged against them.

In reply to the cross-complaint, the plaintiffs denied each and all of the facts therein set forth,
and in special defense alleged that at the time of the execution of the deed of sale inserted in
the cross-complaint the plaintiffs were still minors, and that since they reached their majority
the four years fixed by law for the annulment of said contract had not yet elapsed. They
therefore asked that they be absolved from the defendant's cross-complaint.
After trial and the introduction of evidence by both parties, the court rendered the judgment
aforementioned, to which the plaintiffs excepted and in writing moved for a reopening of the
case and a new trial. This motion was overruled, exception was taken by the petitioners, and
the proper bill of exceptions having been presented, the same was approved and transmitted
to the clerk of this court.

As the plaintiffs assailed the validity of the deed of sale, Exhibit 3, executed by them on May 17,
1910, on the ground that they were minors when they executed it, the questions submitted to
the decision of this court consist in determining whether it is true that the plaintiffs were then
minors and therefore incapable of selling their property on the date borne by the instrument
Exhibit 3; and in case they then were such, whether a person who is really and truly a minor
and, notwithstanding, attests that he is of legal age, can, after the execution of the deed and
within legal period, ask for the annulment of the instrument executed by him, because of some
defect that invalidates the contract, in accordance with the law (Civ. Code, arts. 1263 and
1300), so that he may obtain the restitution of the land sold.

The records shows it to have been fully proven that in 1891 Lucas Espiritu obtained title by
composition with the State, to three parcels of land, adjoining each other, in the sitio of
Panducot of the pueblo of Calumpit, Bulacan, containing altogether an area of 75 hectares, 25
ares, and 59 centares, which facts appear in the title Exhibit D; that, upon Luis Espiritu's death,
his said lands passed by inheritance to his four children named Victoria, Ines, Margarita, and
Luis; and that, in the partition of said decedent's estate, the parcel of land described in the
complaint as containing forty-seven and odd hectares was allotted to the brother and sister Luis
and Margarita, in equal shares. Margarita Espiritu, married to Wenceslao Mercado y Ardeno
Cruz, had by this husband five children, Maria Consejo, Maria de la Paz, Domingo, Josefa, and
Amalia, all surnamed Mercado y Espiritu, who, at the death of their mother in 1896 inherited,
by operation of law, one-half of the land described in the complaint.

The plaintiffs' petition for annulment of the sale and the consequent restitution to them of two-
fourths of the land left by their mother, that is, of one-fourth of all the land described in the
complaint, and which, they stated, amounts to 11 hectares, 86 ares and 37 centares. To this
claim the defendant excepted, alleging that the land in question comprised only an area such as
is customarily covered by 21 cavanes of seed.
It was also duly proven that, by a notarial instrument of May 25, 1894, the plaintiffs' mother
conveyed by actual and absolute sale for the sum of P2,000, to her brother Luis Espiritu a
portion of the land now on litigation, or an area such as is usually covered by about 15 cavanes
of seed; and that, on account of the loss of the original of said instrument, which was on the
possession of the purchaser Luis Espiritu, and furthermore because, during the revolution, the
protocols or registers of public documents of the Province of Bulacan were burned, Wenceslao
Mercado y Arnedo Cruz, the widower of the vendor and father of the plaintiffs, executed, at the
instance of the interested party Luis Espiritu, the notarial instrument Exhibit 1, of the date of
May 20, 1901, in his own name and those of his minor children Maria Consejo, Maria de la Paz,
Domingo, Josefa, and Amalia, and therein set forth that it was true that the sale of said portion
of land had been made by his aforementioned wife, then deceased, to Luis Espiritu in 1894.

However, even prior to said date, to wit, on May 14th of the same year, 1901, the widower
Wenceslao Mercado, according to the private document Exhibit 2, pledged or mortgaged to the
same man, Luis Espiritu, for P375, a part, or an area covered by six cavanes of seed, of the land
that had belonged to this vendor's deceased wife, to the said Luis Espiritu and which now forms
a part of the land in question — a transaction which Mercado was obliged to make in order to
obtain funds with which "to cover his children's needs." Wenceslao Mercado, the plaintiffs'
father, having died, about the year 1904, the plaintiffs Domingo and Josefa Mercado, together
with their sisters Consejo and Paz, declaring themselves to be of legal age and in possession of
the required legal status to contract, executed and subscribed before a notary the document
Exhibit 3, on May 17, 1910, in which referring to the previous sale of the land, effected by their
deceased mother for the sum of P2,600 and with her husband's permission and authorization,
they sold absolutely and in perpetuity to Luis Espiritu, for the sum of P400 "as an increase" of
the previous purchase price, the land described in said instrument and situated in Panducot,
pueblo of Calumpit, Bulacan, of an area equal to that usually sown with 21 cavanes of seed
bounded on the north by the lands of Flaviano Abreu and the heirs of Pedro Espiritu, on the
east by those of Victoria Espiritu and Ines Espiritu, on the south by those of Luis Espiritu, and on
the west by those of Hermogenes Tan-Toco and by the Sapang-Maitu stream.

In this status of the case the plaintiffs seek the annulment of the deed Exhibit 3, on the ground
that on the date of its execution they were minors without legal capacity to contract, and for
the further reason that the deceased purchaser Luis Espiritu availed himself of deceit and fraud
in obtaining their consent for the execution of said deed.
As it was proven by the testimony of the clerk of the parochial church of Apalit (plaintiffs were
born in Apalit) that the baptismal register books of that parish pertaining to the years 1890-
1891, were lost or burned, the witness Maria Consejo Mercado recognized and identified the
book Exhibit A, which she testified had been kept and taken care of by her deceased father
Wenceslao Mercado, pages 396 and 397 of which bear the attestation that the plaintiff
Domingo Mercado was born on August 4, 1890, and Josefa Mercado, on July 14, 1891.
Furthermore, this witness corroborated the averment of the plaintiffs' minority, by the personal
registration certificate of said Domingo Mercado, of the year 1914, Exhibit C, by which it
appears that in 1910 he was only 23 years old, whereby it would also be appear that Josefa
Mercado was 22 years of age in 1910, and therefore, on May 17,1910, when the instrument of
purchase and sale, Exhibit 3, was executed, the plaintiffs must have been, respectively, 19 and
18 years of age.

The witness Maria Consejo Mercado also testified that after her father's death her brother and
sisters removed to Manila to live there, although her brother Domingo used to reside with his
uncle Luis Espiritu, who took charge of the administration of the property left by his
predecessors in interest; that it was her uncle Luis who got for her brother Domingo the other
cedula, Exhibit B, pertaining to the year 1910, where in it appears that the latter was then
already 23 years of age; that she did not know why her uncle did so; that she and her brother
and sisters merely signed the deed of May 17, 1910; and that her father Wenceslao Mercado,
prior to his death had pledged the land to her uncle Luis Espiritu.

The witness Ines Espiritu testified that after the death of the plaintiffs' father, it was Luis
Espiritu who directed the cultivation of the land in litigation. This testimony was corroborated
by her sister Victoria Espiritu, who added that her nephew, the plaintiff Domingo, had lived for
some time, she did not know just how long, under the control of Luis Espiritu.

Roque Galang, married to a sister of Luis Espiritu, stated that the land that fell to his wife and to
his sister-in-law Victoria, and which had an area of about 8 hectares less than that of the land
allotted to the aforementioned Luis and Margarita produced for his wife and his sister-in-law
Victoria a net and minimum yield of 507 cavanes in 1907, in spite of its being high land and of
inferior quality, as compared with the land in dispute, and that its yield was still larger in 1914,
when the said two sisters' share was 764 cavanes.
Patricio Tanjucto, the notary before whom the deed Exhibit 3 was ratified, was a witness for the
defendant. He testified that this deed was drawn up by him at the request of the plaintiff Josefa
Mercado; that the grantors of the instrument assured him that they were all of legal age; that
said document was signed by the plaintiffs and the other contracting parties, after it had been
read to them and had been translated into the Pampangan dialect for those of them who did
not understand Spanish. On cross-examination, witness added that ever since he was 18 years
of age and began to court, he had known the plaintiff Josefa Mercado, who was then a young
maiden, although she had not yet commenced to attend social gatherings, and that all this took
place about the year 1898, for witness said that he was then [at the time of his testimony,
1914,] 34 years of age.

Antonio Espiritu, 60 years of age, who knew Lucas Espiritu and the properties owned by the
latter, testified that Espiritu's land contained an area of 84 cavanes, and after its owner's death,
was under witness' administration during to harvest two harvest seasons; that the products
yielded by a portion of this land, to wit, an area such as is sown by about 15 cavanes of seed,
had been, since 1894, utilized by Luis Espiritu, by reason of his having acquired the land; and
that, after Margarita Espiritu's death, her husband Wenceslao Mercado took possession of
another portion of the land, containing an area of six cavanes of seed and which had been left
by this deceased, and that he held same until 1901, when he conveyed it to Luis Espiritu.
lawphi1.net

The defendant-administrator, Jose Espiritu, son of the deceased Luis Espiritu, testified that the
plaintiff Domingo Mercado used to live off and on in the house of his deceased father, about
the year 1909 or 1910, and used to go back and forth between his father's house and those of
his other relatives. He denied that his father had at any time administered the property
belonging to the Mercado brother and sisters.

In rebuttal, Antonio Mercado, a cousin of Wenceslao, father of the plaintiffs, testified that he
mediate in several transactions in connection with a piece of land belonging to Margarita
Espiritu. When shown the deed of purchase and sale Exhibit 1, he stated that he was not
acquainted with its contents. This same witness also testified that he mediated in a transaction
had between Wenceslao Mercado and Luis Espiritu (he did not remember the year), in which
the former sold to the latter a parcel of land situated in Panducot. He stated that as he was a
witness of the deed of sale he could identify this instrument were it exhibited to him; but he did
not do so, for no instrument whatever was presented to him for identification. The transaction
mentioned must have concerned either the ratification of the sale of the land of 15 cavanes, in
1901, attested in Exhibit 1, or the mortgage or pledge of the other parcel of 6 cavanes, given on
May 14, 1901, by Wenceslao Mercado to Luis Espiritu, as may be seen by the private document
Exhibit 2. In rebuttal, the plaintiff Josefa Mercado denied having gone to the house of the
notary Tanjutco for the purpose of requesting him to draw up any document whatever. She
stated that she saw the document Exhibit 3 for the first time in the house of her uncle Luis
Espiritu on the day she signed it, on which occasion and while said document was being signed
said notary was not present, nor were the witnesses thereto whose names appear therein; and
that she went to her said uncle's house, because he had sent for her, as well as her brother and
sisters, sending a carromata to fetch them. Victoria Espiritu denied ever having been in the
house of her brother. Luis Espiritu in company with the plaintiffs, for the purpose of giving her
consent to the execution of any deed in behalf of her brother.

The evidence adduced at the trial does not show, even circumstantially, that the purchaser Luis
Espiritu employed fraud, deceit, violence, or intimidation, in order to effect the sale mentioned
in the document Exhibit 3, executed on May 17, 1910. In this document the vendors, the
brother and the sisters Domingo, Maria del Consejo, Paz and, Josefa surnamed Mercado y
Espiritu, attested the certainty of the previous sale which their mother, during her lifetime, had
made in behalf of said purchaser Luis Espiritu, her brother with the consent of her husband
Wenceslao Mercado, father of the vendors of the portion of land situated in the barrio of
Panducot, pueblo of Calumpit, Bulacan; and in consideration of the fact that the said vendor
Luis Espiritu paid them, as an increase, the sum of P400, by virtue of the contract made with
him, they declare having sold to him absolutely and in perpetuity said parcel of the land, waive
and thenceforth any and all rights they may have, inasmuch as said sum constitutes the just
price of the property.

So that said document Exhibit 3 is virtually an acknowledgment of the contract of sale of the
parcel or portion of land that would contain 15 cavanes of seed rice made by the vendors'
mother in favor of the purchaser Luis Espiritu, their uncle, and likewise an acknowledgment of
the contract of pledge or mortgage of the remainder of said land, an area of six cavanes, made
with the same purchaser, at an increase of P400 over the price of P2,600, making an aggregate
sum of P3,000, decomposed as follows: P2,000, collected during her lifetime, by the vendors'
father; and the said increase of P400, collected by the plaintiffs.
In the aforementioned sale, according to the deed of May 25, 1894, Margarita Espiritu
conveyed to her brother Luis the parcel of 15 cavanes of seed, Exhibit 1, and after her death the
plaintiffs' widowed father mortgaged or pledged the remaining parcel or portion of 6 cavanes
of seed to her brother-in-law, Luis Espiritu, in May, 1901 (Exhibit 2). So it is that the notarial
instrument Exhibit 3, which was assailed by the plaintiffs, recognized the validity of the previous
contracts, and the totality of the land, consisting of an area containing 21 cavanes of seed rice,
was sold absolutely and in perpetuity, the vendors receiving in exchange P400 more; and there
is no conclusive proof in the record that this last document was false and simulated on account
of the employment of any violence, intimidation, fraud, or deceit, in the procuring of the
consent of the vendors who executed it.

Considering the relation that exists between the document Exhibit 3 and those of previous
dates, Exhibits 1 and 2, and taking into the account the relationship between the contracting
parties, and also the general custom that prevails in many provinces of these Islands for the
vendor or debtor to obtain an increase in the price of the sale or of the pledge, or an increase in
the amount loaned, without proof to the contrary, it would be improper and illegal to hold, in
view of the facts hereinabove set forth, that the purchaser Luis Espiritu, now deceased, had any
need to forge or simulate the document Exhibit 3 inasmuch as, since May, 1894, he has held in
the capacity of owner by virtue of a prior acquisition, the parcel of land of 15 cavanes of seed,
and likewise, since May, 1901, according to the contract of mortgage or pledge, the parcel of 6
cavanes, or the remainder of the total area of 21 cavanes.

So that Luis Espiritu was, during his lifetime, and now, after his death, his testate or intestate
estate is in lawful possession of the parcel of land situated in Panducot that contains 21 cavanes
of seed, by virtue of the title of conveyance of ownership of the land measuring 15 cavanes,
and, in consequence of the contract of pledge or mortgage in security for the sum of P600, is
likewise in lawful possession of the remainder of the land, or an area containing 6 cavanes of
seed.

The plaintiffs have absolutely no right whatever to recover said first parcel of land, as its
ownership was conveyed to the purchaser by means of a singular title of purchase and sale; and
as to the other portion of 6 cavanes of seed, they could have redeemed it before May 17, 1910,
upon the payment or the return of the sum which their deceased father Wenceslao Mercado
had, during his lifetime, received as a loan under security of the pledged property; but, after the
execution of the document Exhibit 3, the creditor Luis Espiritu definitely acquired the
ownership of said parcel of 6 cavanes. It is therefore a rash venture to attempt to recover this
latter parcel by means of the contract of final and absolute sale, set forth in the deed Exhibit 3.

Moreover, the notarial document Exhibit 1, are regards the statements made therein, is of the
nature of a public document and is evidence of the fact which gave rise to its execution and of
the date of the latter, even against a third person and his predecessors in interest such as are
the plaintiffs. (Civ. Code, art. 1218.)

The plaintiffs' father, Wenceslao Mercado, recognizing it to be perfectly true that his wife
Margarita Espiritu sold said parcel of land which she inherited from her father, of an area of
about "15 cavanes of seed," to her brother Luis Espiritu, by means of an instrument executed
by her on May 25,1894 — an instrument that disappeared or was burned — and likewise
recognizing that the protocols and register books belonging to the Province of Bulacan were
destroyed as a result of the past revolution, at the request of his brother-in-law Luis Espiritu he
had no objection to give the testimony recorded in said notarial instrument, as it was the truth
regarding what had occurred, and in so doing he acted as the plaintiffs' legitimate father in the
exercise of his parental authority, inasmuch as he had personal knowledge of said sale, he
himself being the husband who authorized said conveyance, notwithstanding that his testimony
affected his children's interest and prejudiced his own, as the owner of any fruits that might be
produced by said real property.

The signature and handwriting of the document Exhibit 2 were identified as authentic by one of
the plaintiffs, Consejo Mercado, and as the record shows no evidence whatever that this
document is false, and it does not appear to have been assailed as such, and as it was signed by
the plaintiffs' father, there is no legal ground or well-founded reason why it should be rejected.
It was therefore properly admitted as evidence of the certainty of the facts therein set forth.

The principal defect attributed by the plaintiffs to the document Exhibit 3 consists in that, on
the date of May 17, 1910, when it was executed that they signed it, they were minors, that is,
they had not yet attained the age of 21 years fixed by Act No. 1891, though no evidence
appears in the record that the plaintiffs Josefa and Domingo Mercado were in fact minors, for
no certified copies were presented of their baptismal certificates, nor did the plaintiffs adduce
any supplemental evidence whatever to prove that Domingo was actually 19 and Josefa 18
years of age when they signed the document Exhibit 3, on May 17, 1910, inasmuch as the
copybook, Exhibit A, notwithstanding the testimony of the plaintiff Consejo Mercado, does not
constitute sufficient proof of the dates of births of the said Domingo and Josefa.

However, even in the doubt whether they certainly were of legal age on the date referred to, it
cannot be gainsaid that in the document Exhibit 3 they stated that they were of legal age at the
time they executed and signed it, and on that account the sale mentioned in said notarial deed
Exhibit 3 is perfectly valid — a sale that is considered as limited solely to the parcel of land of 6
cavanes of seed, pledged by the deceased father of the plaintiffs in security for P600 received
by him as a loan from his brother-in-law Luis Espiritu, for the reason that the parcel of 15
cavanes had been lawfully sold by its original owner, the plaintiffs' mother.

The courts, in their interpretation of the law, have laid down the rule that the sale of real
estate, made by minors who pretend to be of legal age, when in fact they are not, is valid, and
they will not be permitted to excuse themselves from the fulfillment of the obligations
contracted by them, or to have them annulled in pursuance of the provisions of Law 6, title 19,
of the 6th Partida; and the judgment that holds such a sale to be valid and absolves the
purchaser from the complaint filed against him does not violate the laws relative to the sale of
minors' property, nor the juridical rules established in consonance therewith. (Decisions of the
supreme court of Spain, of April 27, 1860, July 11, 1868, and March 1, 1875.) itc@alf

With respect to the true age of the plaintiffs, no proof was adduced of the fact that it was Luis
Espiritu who took out Domingo Mercado's personal registration certificate on April 13, 1910,
causing the age of 23 years to be entered therein in order to corroborate the date of the
notarial instrument of May 17th of the same year; and the supposition that he did, would also
allow it to be supposed, in order to show the propriety of the claim, that the cedula Exhibit C
was taken out on February 14, 1914, where in it is recorded that Domingo Mercado was on that
date 23 years of age, for both these facts are not proved; neither was any proof adduced
against the statement made by the plaintiffs Domingo and Josefa in the notarial instrument
Exhibit 3, that, on the date when they executed it, they were already of legal age, and, besides
the annotation contained in the copybook Exhibit A, no supplemental proof of their true ages
was introduced.
Aside from the foregoing, from a careful examination of the record in this case, it cannot be
concluded that the plaintiffs, who claim to have minors when they executed the notarial
instrument Exhibit 3, have suffered positive and actual losses and damages in their rights and
interests as a result of the execution of said document, inasmuch as the sale effected by the
plaintiffs' mother, Margarita Espiritu, in May, 1894, of the greater part of the land of 21 cavanes
of seed, did not occasion any damage or prejudice to the plaintiffs, inasmuch as their father
stated in the document Exhibit 2 that he was obliged to mortgage or pledge said remaining
portion of the land in order to secure the loan of the P375 furnished by Luis Espiritu and which
was subsequently increased to P600 so as to provide for certain engagements or perhaps to
meet the needs of his children, the plaintiff; and therefore, to judge from the statements made
by their father himself, they received through him, in exchange for the land of 6 cavanes of
seed, which passed into the possession of the creditor Luis Espiritu, the benefit which must
have accrued to them from the sums of money received as loans; and, finally, on the execution
of the impugned document Exhibit 3, the plaintiffs received and divided between themselves
the sum of P400, which sum, added to that P2,000 received by Margarita Espiritu, and to that of
the P600 collected by Wenceslao Mercado, widower of the latter and father of the plaintiffs,
makes all together the sum of P3,000, the amount paid by the purchaser as the price of all the
land containing 21 cavanes of seed, and is the just price of the property, was not impugned,
and, consequently, should be considered as equivalent to, and compensatory for, the true value
of said land.

For the foregoing reasons, whereby the errors assigned to the judgment appealed from have
been refuted, and deeming said judgment to be in accordance with law and the evidence of
record, we should, and do hereby, affirm the same, with costs against the appellants. So
ordered.

Arellano, C. J., Johnson, Street, and Malcolm, JJ., concur.

Separate Opinions

CARSON, J., concurring:

I concur.

But in order to avoid misunderstanding, I think it well to indicate that the general statement, in
the prevailing opinion to the effect that the making of false representations as to his age by an
infant executing a contract will preclude him from disaffirming the contract or setting up the
defense of infancy, must be understood as limited to cases wherein, on account of the minor's
representations as to his majority, and because of his near approach thereto, the other party
had good reason to believe, and did in fact believe the minor capable of contracting.

The doctrine set forth in the Partidas, relied upon by the supreme court of Spain in the cases
cited in the prevailing opinion, is substantially similar to the doctrine of estoppel as applied in
like instances by many of the courts in the United States.

For the purposes of convenient comparison, I here insert some citations of authority, Spanish
and American, recognizing the limitations upon the general doctrine to which I am inviting
attention at this time; and in this connection it is worthy of note that the courts of the United
States look with rather less favor than the supreme court of Spain upon the application of the
doctrine, doubtless because the cases wherein it may properly be applied, are much less likely
to occur in a jurisdiction where majority is reached at the age of 21 than a jurisdiction wherein
majority is not ordinarily attained until the infant reaches the age of 25.
Ley 6, tit. 19, Partida 6. is, in part, as follows:

If he who is minor (1) deceitfully says or sets forth in an instrument that he is over twenty-five
years of age, and this assertion is believed by another person who takes him to be of about that
age, (2) in an action at law he should be deemed to be of the age he asserted, and should no (3)
afterwards be released from liability on the plea that he was not of said age when he assumed
the obligation. The reason for this is that the law helps the deceived and not the deceivers.

In the glossary to these provisions of the Partidas by Gregorio Lopez, I find the following:

(1) De tal tiempo. Nota bene hoc verbum, nam si appareret ex aspectu eum esse minorem,
tunc adversarius non potest dicere se deceptum; imo tam ipse, quam minor videntur esse in
dolo, quo casu competit minori restitutio, quia facta doli compensatione, perinde ast ac si
nullus fuiset in dolo, et ideo datur restitutio; et quia scienti dolus non infertur, l. 1. D. de act.
empt. secundum Cyn. Alberic et Salic. in l. 3. C. si minor se major. dixer. adde Albericum
tenentem, quabndo per aspectum a liter constaret, in authent. sacramenta puberum, col. 3. C.
si advers vendit.

(2) Engoñosamente. Adde 1. 2. et 3. C. si minor se major. dixer. Et adverte nam per istam
legem Partitarum, que non distinguit, an adultus, vel pupillus talem assertionem faciat, videtur
comprobari dictum Guillielm. de Cun. de quo per Paul. de Castr. in 1. qui jurasse. in princ. D. de
jurejur. quod si pupillus proximus pubertari juret, cum contrahit, se esse puberem, et postea
etiam juret, quod non veniet contra contractum quod habebit locum dispositio authenticae
sacramenta puberum, sicut si esset pubes: et cum isto dicto transit ibi Paul. de Cast. multum
commendans, dicens, se alibi non legisse; si tamen teneamus illam opinionem, quod etiam
pupillus doli capax obligatur ex juramento, non esset ita miranda dicat, decissio; vide per
Alexand. in dict. 1. qui jurasse, in princ. Item lex ista Partitarum expresse sentit de adulto, non
de pupillo, cum superius dixit, que paresciere de tal tiempo: Doctores etiam intelligunt de
adulto 11. dict. tit. C. si minor. se major. dixer. et patet ex 11. illius tituli. Quid autem dicemus in
dubio, cum non constat de dolo minoris? Azon. in summa illius tit. in fin. Cynus tamen, et alli,
tenent oppositum, quia dolus non praesumitur, nisi probetur, 1. quotiens, s., qui dolo, D. de
probat. Et hoc etiam vult ista lex Partitarum, cum dicit, si lo faze engoñosamente: et ita tenent
Alberic. et Salicet. in dict. 1. 3. ubi etiam Bart. in fin. Si autem minor sui facilitate asserat se
mojorem, et ita juret, tunc distingue, ut habetur dict. 1. 3 quia aut juravit verbo tenus, et tunc
non restituitur, nisi per instrumentum seu scripturam probet se minorem; et si juravit
corporaliter, nullo modo restituitur, ut ibi; et per quae instrumenta probentur, cum verbo tenus
juravit, vide per Specul. tit. de restit, in integr. s. quis autem, col. 4. vers. sed cujusmodi erit
scriptura, ubi etiam vide per Speculatorem aliquas notabiles quaestiones in ista materia, in col.
5. videlicet, an praejudicet sibi minor ex tali juramento in aliis contractibus, et tenet, quod non;
et tenet glossa finalis in 1. de aetate, D. de minor. in fin. gloss. vide ibi per Speculat. ubi etiam
de aliis in ista materia.

In the decision of the supreme court of Spain dated the 27th of April, 1860, I find an excellent
illustration of the conditions under which that court applied the doctrine, as appears from the
following resolution therein set forth.

Sales of real estate made by minors are valid when the latter pretend to be twenty-five years of
age and, due to the circumstances that they are nearly of that age, are married, or have
administration of their property, or on account of other special circumstances affecting them,
the other parties to the contract believe them to be of legal age.

With these citations compare the general doctrine in the United States as set forth in 22 Cyc. (p.
610), supported by numerous citations of authority.

Estoppel to disaffirm — (I) In General. — The doctrine of estoppel not being as a general rule
applicable to infants, the court will not readily hold that his acts during infancy have created an
estoppel against him to disaffirm his contracts. Certainly the infant cannot be estopped by the
acts or admissions of other persons.

(II) False representations as to age. — According to some authorities the fact that an infant
at the time of entering into a contract falsely represented to the person with whom he dealt
that he had attained the age of majority does not give any validity to the contract or estop the
infant from disaffirming the same or setting up the defense of infancy against the enforcement
of any rights thereunder; but there is also authority for the view that such false representations
will create an estoppel against the infant, and under the statutes of some states no contract
can be disaffirmed where, on account of the minor's representations as to his majority, the
other party had good reason to believe the minor capable of contracting. Where the infant has
made no representations whatever as to his age, the mere fact that the person with whom he
dealt believed him to be of age, even though his belief was warranted by the infant's
appearance and the surrounding circumstances, and the infant knew of such belief, will not
render the contract valid or estop the infant to disaffirm.

CASE DIGEST

FACTS:

Margarita Espiritu died leaving a 48-hectare land. The plaintiffs alleged that they are the
children and heirs of Margarita and that defendant Luis Espiritu, brother of Margarita, induced
and fraudulently succeeded in getting the plaintiffs to sell their land for a sum of P400 as
opposed to its original value. Hence, the plaintiffs sought to annul the deed of sale and asserted
that 2 of the 4 parties were minors. These two minors presented themselves to be of legal age
upon signing it and made a manifestation in front of notary public.

ISSUE:

W/N the deed of sale is valid when the minors presented themselves to be of legal age

HELD:

The contract is valid. They will not be permitted to excuse themselves from the fulfillment if
the obligations contracted by them.
 Matabuena
v.
Cervantes
G.R. No. L-28771 (March 31, 1971)

SYLLABUS

1. CIVIL LAW; PROPERTY RELATIONS BETWEEN HUSBAND AND WIFE; DONATIONS BY REASON
OF MARRIAGE; PROHIBITION AGAINST DONATION BETWEEN SPOUSES DURING MARRIAGE;
APPLICABLE TO COMMON LAW RELATIONSHIP. — While Art. 133 of the Civil Code considers as
void a "donation between the spouses during the marriage", policy considerations of the most
exigent character as well as the dictates of morality require that the same prohibition should
apply to a common-law relationship. A 1954 Court of Appeals decision Buenaventura v.
Bautista, (50 O.G. 3679) interpreting a similar provision of the old Civil Code speaks
unequivocally. If the policy of the law is, in the language of the opinion of the then Justice J.B.L.
Reyes of that Court, "to prohibit donations in favor of the other consort and his descendants
because of fear of undue and improper pressure and influence upon the donor, a prejudice
deeply rooted in our ancient law; ‘porque no se engañen despojandose el uno al otro por amor
que han de consuno,’ [according to] the Partidas (Part. IV, Tit. Xl, LAW IV), reiterating the
rationale ‘Ne mutuato amore invicem spoliarentur’ of the Pandects (Bk 24, Tit. I, De donat, inter
virum et uxorem); then there is every reason to apply the same prohibitive policy to persons
living together as husband and wife without benefit of nuptials. For it is not to be doubted that
assent to such irregular connection for thirty years bespeaks greater influence of one party over
the other, so that the danger that the law seeks to avoid is correspondingly increased.
Moreover, as already pointed out by Ulpian (in his lib. 32 ad Sabinum, fr. 1), it would not be just
that such donations should subsist lest the condition of those who incurred guilt should turn
out to be better. So long as marriage remains the cornerstone of our family law, reason and
morality alike demand that the disabilities attached to marriage should likewise attach to
concubinage.

2. ID.; SUCCESSION; INTESTATE SUCCESSION; SURVIVING SPOUSE; RULE WHERE A SISTER

SURVIVES WITH THE WIDOW. — The lack of validity of the donation made b~ the deceased to
defendant Petronila Cervantes does not necessarily result in plaintiff having exclusive right to
the disputed property. Prior to the death of Felix Matabuena, the relationship between him and
the defendant was legitimated by their marriage on March 28. 1962. She is therefore his
widow. As provided in the Civil Code, she is entitled to one-half of the inheritance and the
plaintiff, as the surviving sister to the other half.

DECISION
A question of first impression is before this Court in this litigation. We are called upon to decide
whether the ban on a donation between the spouses during a marriage applies to a common-
law relationship. 1 The plaintiff, now appellant Cornelia Matabuena, a sister to the deceased
Felix Matabuena, maintains that a donation made while he was living maritally without benefit
of marriage to defendant, now appellee Petronila Cervantes, was void. Defendant would
uphold its validity. The lower court, after noting that it was made at a time before defendant
was married to the donor, sustained the latter’s stand. Hence this appeal. The question, as
noted, is novel in character, this Court not having had as yet the opportunity of ruling on it. A
1954 decision of the Court of Appeals, Buenaventura v. Bautista, 2 by the then Justice J. B. L.
Reyes, who was appointed to this Court later that year, is indicative of the appropriate
response that should be given. The conclusion reached therein is that a donation between
common-law spouses falls within the prohibition and is "null and void as contrary to public
policy." 3 Such a view merits fully the acceptance of this Court. The decision must be reversed.

In the decision of November 23, 1965, the lower court, after stating that in plaintiff’s complaint
alleging absolute ownership of the parcel of land in question, she specifically raised the
question that the donation made by Felix Matabuena to defendant Petronila Cervantes was null
and void under the aforesaid article of the Civil Code and that defendant on the other hand did
assert ownership precisely because such a donation was made in 1956 and her marriage to the
deceased did not take place until 1962, noted that when the case was called for trial on
November 19, 1965, there was stipulation of facts which it quoted. 4 Thus: "The plaintiff and
the defendant assisted by their respective counsels, jointly agree and stipulate: (1) That the
deceased Felix Matabuena owned the property in question; (2) That said Felix Matabuena
executed a Deed of Donation inter vivos in favor of Defendant, Petronila Cervantes over the
parcel of land in question on February 20, 1956, which same donation was accepted by
defendant; (3) That the donation of the land to the defendant which took effect immediately
was made during the common law relationship as husband and wife between the defendant-
done and the now deceased donor and later said donor and done were married on March 28,
1962; (4) That the deceased Felix Matabuena died intestate on September 13, 1962; (5) That
the plaintiff claims the property by reason of being the only sister and nearest collateral relative
of the deceased by virtue of an affidavit of self-adjudication executed by her in 1962 and had
the land declared in her name and paid the estate and inheritance taxes thereon’" 5

The judgment of the lower court on the above facts was adverse to plaintiff. It reasoned out
thus: "A donation under the terms of Article 133 of the Civil Code is void if made between the
spouses during the marriage. When the donation was made by Felix Matabuena in favor of the
defendant on February 20, 1956, Petronila Cervantes and Felix Matabuena were not yet
married. At that time they were not spouses. They became spouses only when they married on
March 28, 1962, six years after the deed of donation had been executed." 6

We reach a different conclusion. While Art. 133 of the Civil Code considers as void a "donation
between the spouses during the marriage," policy considerations of the most exigent character
as well as the dictates of morality require that the same prohibition should apply to a common-
law relationship. We reverse.

1. As announced at the outset of this opinion, a 1954 Court of Appeals decision, Buenaventura
v. Bautista, 7 interpreting a similar provision of the old Civil Code 8 speaks unequivocally. If the
policy of the law is, in the language of the opinion of the then Justice J.B.L. Reyes of that Court,
"to prohibit donations in favor of the other consort and his descendants because of fear of
undue and improper pressure and influence upon the donor, a prejudice deeply rooted in our
ancient law; ‘porque no se engañen despojandose el uno al otro por amor que han de consuno
[according to] the Partidas (Part IV, Tit. XI, LAW IV), reiterating the rationale ‘Ne mutuato amore
invicem spoliarentur’ of the Pandects (Bk. 24, Tit. 1, De donat, inter virum et uxorem); then
there is every reason to apply the same prohibitive policy to persons living together as husband
and wife without the benefit of nuptials. For it is not to be doubted that assent to such irregular
connection for thirty years bespeaks greater influence of one party over the other, so that the
danger that the law seeks to avoid is correspondingly increased. Moreover, as already pointed
out by Ulpian (in his lib. 32 ad Sabinum, fr. 1), ‘it would not be just that such donations should
subsist, lest the condition of those who incurred guilt should turn out to be better.’ So long as
marriage remains the cornerstone of our family law, reason and morality alike demand that the
disabilities attached to marriage should likewise attach to concubinage." 9

2. It is hardly necessary to add that even in the absence of the above pronouncement, any
other conclusion cannot stand the test of scrutiny. It would be to indict the framers of the Civil
Code for a failure to apply a laudable rule to a situation which in its essentials cannot be
distinguished. Moreover, if it is at all to be differentiated, the policy of the law which embodies
a deeply-rooted notion of what is just and what is right would be nullified if such irregular
relationship instead of being visited with disabilities would be attended with benefits. Certainly
a legal norm should not be susceptible to such a reproach. If there is ever any occasion where
the principle of statutory construction that what is within the spirit of the law is as much a part
of it as what is written, this is it. Otherwise the basic purpose discernible in such codal provision
would not be attained. Whatever omission may be apparent in an interpretation purely literal
of the language used must be remedied by an adherence to its avowed objective. In the
language of Justice Pablo: "El espiritu que informa la ley debe ser la luz que ha de guiar a los
tribunales en la aplicación de sus disposiciones.’’ 10

3. The lack of validity of the donation made by the deceased to defendant Petronila Cervantes
does not necessarily result in plaintiff having exclusive right to the disputed property. Prior to
the death of Felix Matabuena, the relationship between him and the defendant was legitimated
by their marriage on March 28, 1962. She is therefore his widow. As provided for in the Civil
Code, she is entitled to one-half of the inheritance and the plaintiff, as the surviving sister, to
the other half. 11

WHEREFORE, the lower court decision of November 23, 1965 dismissing the complaint with
costs is reversed. The questioned donation is declared void, with the rights of plaintiff and
defendant as pro indiviso heirs to the property in question recognized. The case is remanded to
the lower court for its appropriate disposition in accordance with the above opinion. Without
pronouncement as to costs.

CASE DIGEST

Facts :

Matabuena cohabitated with Respondent. During this period, Felix Matabuena donated to
Respondent a parcel of land. Later the two were married. After the death of Felix Matabuena,
his sister, Petitioner, sought the nullification of the donation citing Art.133 of the Civil Code
“Every donation between the spouses during the marriage shall be void.”
The trial court ruled that this case was not covered by the prohibition because the donation
was made at the time the deceased and Respondent were not yet married and were simply
cohabitating.

ISSUE:

W/N the prohibition applies to donations between live-in partners.

HELD:

Yes. It is a fundamental principle in statutory construction that what is within the spirit of the
law is as much a part of the law as what is written. Since the reason
for the ban on donations between spouses during the marriage is to prevent the possibilit
y of undue influence and improper pressure being exerted by one spouse on the other, there is
no reason why this prohibition shall not apply also to common-
law relationships.The court, however, said that the lack of the donation made by the dec
eased to Respondent does not necessarily mean that the Petitioner will have exclusive rights
to the disputed property because the relationship between Felix and Respondent were
legitimated by marriage.
 MARIA B. CHING

vs.

JOSEPH C. GOYANKO, JR., et al.

506 SCRA 735 (2006)

On December 30, 1947, Joseph Goyanko (Goyanko) and Epifania dela Cruz (Epifania) were
married.1 Out of the union were born respondents Joseph, Jr., Evelyn, Jerry, Imelda, Julius,
Mary Ellen and Jess, all surnamed Goyanko.

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

On May 1, 1993, Sulpicia executed a deed of sale2 over the property in favor of respondents’
father Goyanko. In turn, Goyanko executed on October 12, 1993 a deed of sale3 over the
property in favor of his common-law-wife-herein petitioner Maria B. Ching. Transfer Certificate
of Title (TCT) No. 138405 was thus issued in petitioner’s name.

After Goyanko’s death on March 11, 1996, respondents discovered that ownership of the
property had already been transferred in the name of petitioner. Respondents thereupon had
the purported signature of their father in the deed of sale verified by the Philippine National
Police Crime Laboratory which found the same to be a forgery.4

Respondents thus filed with the Regional Trial Court of Cebu City a complaint for recovery of
property and damages against petitioner, praying for the nullification of the deed of sale and of
TCT No. 138405 and the issuance of a new one in favor of their father Goyanko.
In defense, petitioner claimed that she is the actual owner of the property as it was she who
provided its purchase price. To disprove that Goyanko’s signature in the questioned deed of
sale is a forgery, she presented as witness the notary public who testified that Goyanko
appeared and signed the document in his presence.

By Decision of October 16, 1998,5 the trial court dismissed the complaint against petitioner, the
pertinent portions of which decision read:

There is no valid and sufficient ground to declare the sale as null and void, fictitious and
simulated. The signature on the questioned Deed of Sale is genuine. The testimony of Atty.
Salvador Barrameda who declared in court that Joseph Goyanko, Sr. and Maria Ching together
with their witnesses appeared before him for notarization of Deed of Sale in question is more
reliable than the conflicting testimonies of the two document examiners. Defendant Maria
Ching asserted that the Deed of Sale executed by Joseph Goyanko, Sr. in her favor is valid and
genuine. The signature of Joseph Goyanko, Sr. in the questioned Deed of Absolute Sale is
genuine as it was duly executed and signed by Joseph Goyanko, Sr. himself.

The parcel of lands known as Lot No. 6 which is sought to be recovered in this case could never
be considered as the conjugal property of the original Spouses Joseph C. Goyanko and Epifania
dela Cruz or the exclusive capital property of the husband. The acquisition of the said property
by defendant Maria Ching is well-elicited from the aforementioned testimonial and
documentary evidence presented by the defendant. Although for a time being the property
passed through Joseph Goyanko, Sr. as a buyer yet his ownership was only temporary and
transitory for the reason that it was subsequently sold to herein defendant Maria Ching. Maria
Ching claimed that it was even her money which was used by Joseph Goyanko, Sr. in the
purchase of the land and so it was eventually sold to her. In her testimony, defendant Ching
justified her financial capability to buy the land for herself. The transaction undertaken was
from the original owner Sulpicia Ventura to Joseph Goyanko, Sr. and then from Joesph
Goyanko, Sr. to herein defendant Maria Ching.

The land subject of the litigation is already registered in the name of defendant Maria Ching
under TCT No. 138405. By virtue of the Deed of Sale executed in favor of Maria Ching, Transfer
Certificate of Title No. 138405 was issued in her favor. In recognition of the proverbial virtuality
of a Torrens title, it has been repeatedly held that, unless bad faith can be established on the
part of the person appearing as owner on the certificate of title, there is no other owner than
that in whose favor it has been issued. A Torrens title is not subject to collateral attack. It is a
well-known doctrine that a Torrens title, as a rule, is irrevocable and indefeasible, and the duty
of the court is to see to it that this title is maintained and respected unless challenged in a
direct proceedings [sic].6 (Citations omitted; underscoring supplied)

Before the Court of Appeals where respondents appealed, they argued that the trial court
erred:

1. . . . when it dismissed the complaint a quo . . . , in effect, sustaining the sale of the subject
property between Joseph, Sr. and the defendant-appellee, despite the proliferation in the
records and admissions by both parties that defendant-appellee was the "mistress" or
"common-law wife" of Joseph, Sr..

2. . . . when it dismissed the complaint a quo . . . , in effect, sustaining the sale of the subject
property between Joseph, Sr. and the defendant-appellee, despite the fact that the marriage of
Joseph, Sr. and Epifania was then still subsisting thereby rendering the subject property as
conjugal property of Joseph, Sr. and Epifania.

3. . . . in dismissing the complaint a quo . . . , in effect, sustaining the validity of the sale of the
subject property between Joseph, Sr. and the defendant-appellee, despite the clear findings of
forgery and the non-credible testimony of notary public.7

By Decision dated October 21, 2003,8 the appellate court reversed that of the trial court and
declared null and void the questioned deed of sale and TCT No. 138405. Held the appellate
court:

. . . The subject property having been acquired during the existence of a valid marriage between
Joseph Sr. and Epifania dela Cruz-Goyanko, is presumed to belong to the conjugal partnership.
Moreover, while this presumption in favor of conjugality is rebuttable with clear and convincing
proof to the contrary, we find no evidence on record to conclude otherwise. The record shows
that while Joseph Sr. and his wife Epifania have been estranged for years and that he and
defendant-appellant Maria Ching, have in fact been living together as common-law husband
and wife, there has never been a judicial decree declaring the dissolution of his marriage to
Epifania nor their conjugal partnership. It is therefore undeniable that the 661-square meter
property located at No. 29 F. Cabahug Street, Cebu City belongs to the conjugal partnership.

Even if we were to assume that the subject property was not conjugal, still we cannot sustain
the validity of the sale of the property by Joseph, Sr. to defendant-appellant Maria Ching, there
being overwhelming evidence on records that they have been living together as common-law
husband and wife. On this score, Art. 1352 of the Civil Code provides:

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

We therefore find that the contract of sale in favor of the defendant-appellant Maria Ching was
null and void for being contrary to morals and public policy. The purported sale, having been
made by Joseph Sr. in favor of his concubine, undermines the stability of the family, a basic
social institution which public policy vigilantly protects. Furthermore, the law emphatically
prohibits spouses from selling property to each other, subject to certain exceptions. And this is
so because transfers or conveyances between spouses, if allowed during the marriage would
destroy the system of conjugal partnership, a basic policy in civil law. The prohibition was
designed to prevent the exercise of undue influence by one spouse over the other and is
likewise applicable even to common-law relationships otherwise, "the condition of those who
incurred guilt would turn out to be better than those in legal union.9 (Underscoring supplied)

Hence, the present petition, petitioners arguing that the appellate court gravely erred in:

I.

. . . APPLYING THE STATE POLICY ON PROHIBITION AGAINST CONVEYANCES AND TRANSFERS OF

PROPERTIES BETWEEN LEGITIMATE AND COMMON LAW SPOUSES ON THE SUBJECT PROPERTY,
THE SAME BEING FOUND BY THE COURT A QUO, AS THE EXCLUSIVE PROPERTY OF PETITIONER,
AND THAT THE SAME WAS NEVER PART OF THE CONJUGAL PROPERTY OF THE MARRIAGE
BETWEEN RESPONDENTS’ MOTHER EPIFANIA GOYANKO AND PETITIONER’S COMMON LAW
HUSBAND, JOSEPH GOYANKO, SR., NOR THE EXCLUSIVE OR CAPITAL PROPERTY OF THE LATTER
AT ANYTIME BEFORE THE SAME WAS VALIDLY ACQUIRED BY PETITIONER.

II.

. . . NOT FINDING THAT A JURIDICAL RELATION OF TRUST AS PROVIDED FOR UNDER ARTICLES
1448 AND 1450 OF THE NEW CIVIL CODE CAN VALIDLY EXIST BETWEEN COMMON LAW
SPOUSES.

III.

. . . NOT FINDING THAT A CONVEYANCE OVER A PROPERTY MADE BY A TRUSTEE, WHO BECAME
AS SUCH IN CONTEMPLATION OF LAW, AND WHO HAPPENS TO BE A COMMON LAW HUSBAND
OF THE BENEFICIARY, IS NOT A VIOLATION OF A STATE POLICY ON PROHIBITION AGAINST
CONVEYANCES AND TRANSFERS OF PROPERTIES BETWEEN LEGITIMATE AND COMMON LAW
SPOUSES.

IV.

. . . ALLOWING RESPONDENTS TO ABANDON THEIR ORIGINAL THEORY OF THEIR CASE DURING

APPEAL.10

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

ART. 1352. Contracts without cause, or with unlawful cause, produce no effect whatever. The
cause is unlawful if it is contrary to law, morals, good customs, public order or public policy.
ART. 1409. The following contracts are inexistent and void from the beginning:

(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order
or public policy;

(2) Those which are absolutely simulated or fictitious;

(3) Those whose cause or object did not exist at the time of the transaction;

(4) Those whose object is outside the commerce of men;

(5) Those which contemplate an impossible service;

(6) Those where the intention of the parties relative to the principal object of the contract
cannot be ascertained;

(7) Those expressly prohibited or declared void by law.

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

ARTICLE 1490. The husband and wife cannot sell property to each other, except:

(1) When a separation of property was agreed upon in the marriage settlements; or
(2) When there has been a judicial separation of property under Article 191. (Underscoring
supplied)

The proscription against sale of property between spouses applies even to common law
relationships. So this Court ruled in Calimlim-Canullas v. Hon. Fortun, etc., et al.:11

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

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

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

Additionally, the law emphatically prohibits the spouses from selling property to each other
subject to certain exceptions.1âwphi1 Similarly, donations between spouses during marriage
are prohibited. And this is so because if transfers or conveyances between spouses were
allowed during marriage, that would destroy the system of conjugal partnership, a basic policy
in civil law. It was also designed to prevent the exercise of undue influence by one spouse over
the other, as well as to protect the institution of marriage, which is the cornerstone of family
law. The prohibitions apply to a couple living as husband and wife without benefit of marriage,
otherwise, "the condition of those who incurred guilt would turn out to be better than those in
legal union." Those provisions are dictated by public interest and their criterion must be
imposed upon the will of the parties. . . .12 (Italics in the original; emphasis and underscoring
supplied)
As the conveyance in question was made by Goyangko in favor of his common- law-wife-herein
petitioner, it was null and void.

Petitioner’s argument that a trust relationship was created between Goyanko as trustee and
her as beneficiary as provided in Articles 1448 and 1450 of the Civil Code which read:

ARTICLE 1448. There is an implied trust when property is sold, and the legal estate is granted to
one party but the price is paid by another for the purpose of having the beneficial interest of
the property. The former is the trustee, while the latter is the beneficiary. However, if the
person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the
price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in
favor of the child.

ARTICLE 1450. If the price of a sale of property is loaned or paid by one person for the benefit
of another and the conveyance is made to the lender or payor to secure the payment of the
debt, a trust arises by operation of law in favor of the person to whom the money is loaned or
for whom it is paid. The latter may redeem the property and compel a conveyance thereof to
him.

does not persuade.

For petitioner’s testimony that it was she who provided the purchase price is uncorroborated.
That she may have been considered the breadwinner of the family and that there was proof
that she earned a living do not conclusively clinch her claim.

As to the change of theory by respondents from forgery of their father’s signature in the deed
of sale to sale contrary to public policy, it too does not persuade. Generally, a party in a
litigation is not permitted to freely and substantially change the theory of his case so as not to
put the other party to undue disadvantage by not accurately and timely apprising him of what
he is up against,13 and to ensure that the latter is given the opportunity during trial to refute all
allegations against him by presenting evidence to the contrary. In the present case, petitioner
cannot be said to have been put to undue disadvantage and to have been denied the chance to
refute all the allegations against her. For the nullification of the sale is anchored on its illegality
per se, it being violative of the above-cited Articles 1352, 1409 and 1490 of the Civil Code.

WHEREFORE, the petition is DENIED for lack of merit.

Costs against petitioner.

SO ORDERED

CASE DIGEST

Facts:

In line with the policy of the State, the law emphatically prohibits the sale of properties between
spouses.

Respondents Joseph Goyanko et al. filed with the Regional Trial Court of Cebu City a complaint
for recovery of property and damages against Maria Ching, praying for the nullification of
the deed of sale and of transfer certificate and the issuance of a new one. Goyanko et
al. aver that they are the real owners of the property involved. They further contend that it was
after their father‘s death that they found out that a contract of sale involving the same property
has been executed by their father and common-law wife Ching. However, Ching claimed that
she is the actual owner of the property as it was she who provided its purchase price. The RTC
dismissed the complaint against Ching, declaring that there is no valid and sufficient ground to
declare the sale as null and void, fictitious and simulated.

On appeal, the Court of Appeals reversed the decision of the trial court and declared null and
void the questioned deed of sale and TCT No. 138405.

ISSUES:

Whether or not the contract of sale and TCT No. 138405, in favor of the Maria Ching, was null
and void for being contrary to morals and public policy
HELD:

The subject property having been acquired during the existence of a valid marriage between
Joseph Sr. and Epifania dela Cruz-Goyanko, is presumed to belong to the conjugal partnership.
Moreover, while this presumption in favor of conjugality is rebuttable with clear and convincing
proof to the contrary, the court find no evidence on record to conclude otherwise. The record
shows that while Joseph Sr. and his wife Epifania have been estranged for years and that he and
defendant-appellant Maria Ching, have in fact been living together as common-law husband
and wife, there has never been a judicial decree declaring the dissolution of his marriage to
Epifania nor their conjugal partnership. It is therefore undeniable that the property located
at Cebu City belongs to the conjugal partnership. Assuming that the subject property was
not conjugal, still the court cannot sustain the validity of the sale of the property by Joseph, Sr.
to defendant-appellant Maria Ching, there being overwhelming evidence on records that they
have been living together as common-law husband and wife.

The court therefore finds the contract of sale in favor of the defendant-appellant Maria Ching
null and void for being contrary to morals and public policy. The purported sale, having been
made by Joseph Sr. in favor of his concubine, undermines the stability of the family, a basic
social institution which public policy vigilantly protects.
 Rubias
v.
Batiller

In this appeal certified by the Court of Appeals to this Court as involving purely legal questions,
we affirm the dismissal order rendered by the Iloilo court of first instance after pre-trial and
submittal of the pertinent documentary exhibits.

Such dismissal was proper, plaintiff having no cause of action, since it was duly established in
the record that the application for registration of the land in question filed by Francisco
Militante, plaintiff's vendor and predecessor interest, had been dismissed by decision of 1952
of the land registration court as affirmed by final judgment in 1958 of the Court of Appeals and
hence, there was no title or right to the land that could be transmitted by the purported sale to
plaintiff.

As late as 1964, the Iloilo court of first instance had in another case of ejectment likewise
upheld by final judgment defendant's "better right to possess the land in question . having been
in the actual possession thereof under a claim of title many years before Francisco Militante
sold the land to the plaintiff."

Furthermore, even assuming that Militante had anything to sell, the deed of sale executed in
1956 by him in favor of plaintiff at a time when plaintiff was concededly his counsel of record in
the land registration case involving the very land in dispute (ultimately decided adversely
against Militante by the Court of Appeals' 1958 judgment affirming the lower court's dismissal
of Militante's application for registration) was properly declared inexistent and void by the
lower court, as decreed by Article 1409 in relation to Article 1491 of the Civil Code.

The appellate court, in its resolution of certification of 25 July 1972, gave the following
backgrounder of the appeal at bar:

On August 31, 1964, plaintiff Domingo D. Rubias, a lawyer, filed a suit to recover the ownership
and possession of certain portions of lot under Psu-99791 located in Barrio General Luna,
Barotac Viejo, Iloilo which he bought from his father-in-law, Francisco Militante in 1956 against
its present occupant defendant, Isaias Batiller, who illegally entered said portions of the lot on
two occasions — in 1945 and in 1959. Plaintiff prayed also for damages and attorneys fees. (pp.
1-7, Record on Appeal). In his answer with counter-claim defendant claims the complaint of the
plaintiff does not state a cause of action, the truth of the matter being that he and his
predecessors-in-interest have always been in actual, open and continuous possession since
time immemorial under claim of ownership of the portions of the lot in question and for the
alleged malicious institution of the complaint he claims he has suffered moral damages in the
amount of P 2,000.00, as well as the sum of P500.00 for attorney's fees. ...
On December 9, 1964, the trial court issued a pre-trial order, after a pre-trial conference
between the parties and their counsel which order reads as follows..

'When this case was called for a pre-trial conference today, the plaintiff appeared assisted by
himself and Atty. Gregorio M. Rubias. The defendant also appeared, assisted by his counsel
Atty. Vicente R. Acsay.

A. During the pre-trial conference, the parties have agreed that the following facts are
attendant in this case and that they will no longer introduced any evidence, testimonial or
documentary to prove them:

1. That Francisco Militante claimed ownership of a parcel of land located in the Barrio of
General Luna, municipality of Barotac Viejo province of Iloilo, which he caused to be surveyed
on July 18-31, 1934, whereby he was issued a plan Psu-99791 (Exhibit "B"). (The land claimed
contained an area of 171:3561 hectares.)

2. Before the war with Japan, Francisco Militante filed with the Court of First Instance of
Iloilo an application for the registration of the title of the land technically described in psu-
99791 (Exh. "B") opposed by the Director of Lands, the Director of Forestry and other
oppositors. However, 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. The Court of First Instance heard the land
registration case on November 14, 1952, and after the trial this court dismissed the application
for registration. The appellant, Francisco Militante, appealed from the decision of this Court to
the Court of Appeals where the case was docketed as CA-GR No. 13497-R..

3. Pending the disposal of the appeal in CA-GR No. 13497-R and more particularly on June
18, 1956, Francisco Militante sold to the plaintiff, Domingo Rubias the land technically
described in psu-99791 (Exh. "A"). The sale was duly recorded in the Office of the Register of
Deeds for the province of Iloilo as Entry No. 13609 on July 11, 1960 (Exh. "A-1").

(NOTE: As per deed of sale, Exh. A, what Militante purportedly sold to plaintiff-appellant, his
son-in-law, for the sum of P2,000.00 was "a parcel of untitled land having an area Of 144.9072
hectares ... surveyed under Psu 99791 ... (and) subject to the exclusions made by me, under
(case) CA-i3497, Land Registration Case No. R-695, G.L.R.O. No. 54852, Court of First Instance of
the province of Iloilo. These exclusions referred to portions of the original area of over 171
hectares originally claimed by Militante as applicant, but which he expressly recognized during
the trial to pertain to some oppositors, such as the Bureau of Public Works and Bureau of
Forestry and several other individual occupants and accordingly withdrew his application over
the same. This is expressly made of record in Exh. A, which is the Court of Appeals' decision of
22 September 1958 confirming the land registration court's dismissal of Militante's application
for registration.)
4. On September 22,1958 the Court of appeals in CA-G.R. No. 13497-R promulgated its
judgment confirming the decision of this Court in Land Case No. R-695, GLRO Rec. No. 54852
which dismissed the application for Registration filed by Francisco Militante (Exh. "I").

5. Domingo Rubias declared the land described in Exh. 'B' for taxation purposes under Tax
Dec. No. 8585 (Exh. "C") for 1957; Tax Dec. Nos. 9533 (Exh. "C-1") and 10019 (Exh. "C-3")for the
year 1961; Tax Dec. No. 9868 (Exh. "C-2") for the year 1964, paying the land taxes under Tax
Dec. No. 8585 and 9533 (Exh. "D", "D-1", "G-6").

6. Francisco Militante immediate predecessor-in-interest of the plaintiff, has also declared

the land for taxation purposes under Tax Dec. No. 5172 in 1940 (Exh. "E") for 1945; under Tax
Dec. No. T-86 (Exh. "E-1") for 1948; under Tax Dec. No. 7122 (Exh. "2"), and paid the land taxes
for 1940 (Exhs. "G" and "G-7"), for 1945 46 (Exh. "G-1") for 1947 (Exh. "G-2"), for 1947 & 1948
(Exh. "G-3"), for 1948 (Exh. "G-4"), and for 1948 and 1949 (Exh. "G-5").

7. Tax Declaration No. 2434 in the name of Liberato Demontaño for the land described
therein (Exh. "F") was cancelled by Tax. Dec. No. 5172 of Francisco Militante (Exh. "E"). Liberato
Demontaño paid the land tax under Tax Dec. No. 2434 on Dec. 20, 1939 for the years 1938
(50%) and 1959 (Exh. "H").

8. The defendant had declared for taxation purposes Lot No. 2 of the Psu-155241 under
Tax Dec. Not. 8583 for 1957 and a portion of Lot No. 2, Psu-155241, for 1945 under Tax Dec.
No. 8584 (Exh. "2-A" Tax No. 8583 (Exh. "2") was revised by Tax Dec. No. 9498 in the name of
the defendant (Exh. "2-B") and Tax Dec. No. 8584 (Exh. "2-A") was cancelled by Tax Dec. No.
9584 also in the name of the defendant (Exh. "2-C"). The defendant paid the land taxes for Lot
2, Psu-155241, on Nov. 9, 1960 for the years 1945 and 1946, for the year 1950, and for the year
1960 as shown by the certificate of the treasurer (Exh. "3"). The defendant may present to the
Court other land taxes receipts for the payment of taxes for this lot.

9. The land claimed by the defendant as his own was surveyed on June 6 and 7,1956, and a
plan approved by Director of Land on November 15, 1956 was issued, identified as Psu 155241
(Exh. "5").

10. On April 22, 1960, the plaintiff filed forcible Entry and Detainer case against Isaias
Batiller in the Justice of the Peace Court of Barotac Viejo Province of Iloilo (Exh. "4") to which
the defendant Isaias Batiller riled his answer on August 29, 1960 (Exh. "4-A"). The Municipal
Court of Barotac Viejo after trial, decided the case on May 10, 1961 in favor of the defendant
and against the plaintiff (Exh. "4-B"). The plaintiff appealed from the decision of the Municipal
Court of Barotac Viejo which was docketed in this Court as Civil Case No. 5750 on June 3, 1961,
to which the defendant, Isaias Batiller, on June 13, 1961 filed his answer (Exh. "4-C"). And this
Court after the trial. decided the case on November 26, 1964, in favor of the defendant, Isaias
Batiller and against the plaintiff (Exh. "4-D").
(NOTE: As per Exh. 4-B, which is the Iloilo court of first instance decision of 26 November 1964
dismissing plaintiff's therein complaint for ejectment against defendant, the iloilo court
expressly found "that plaintiff's complaint is unjustified, intended to harass the defendant" and
"that the defendant, Isaias Batiller, has a better right to possess the land in question described
in Psu 155241 (Exh. "3"), Isaias Batiller having been in the actual physical possession thereof
under a claim of title many years before Francisco Militante sold the land to the plaintiff-hereby
dismissing plaintiff's complaint and ordering the plaintiff to pay the defendant attorney's fees
....")

B. During the trial of this case on the merit, the plaintiff will prove by competent evidence
the following:

1. That the land he purchased from Francisco Militante under Exh. "A" was formerly
owned and possessed by Liberato Demontaño but that on September 6, 1919 the land was
sold at public auction by virtue of a judgment in a Civil Case entitled "Edw J. Pflieder plaintiff vs.
Liberato Demontaño Francisco Balladeros and Gregorio Yulo, defendants", of which Yap Pongco
was the purchaser (Exh. "1-3"). The sale was registered in the Office of the Register of Deeds of
Iloilo on August 4, 1920, under Primary Entry No. 69 (Exh. "1"), and a definite Deed of Sale was
executed by Constantino A. Canto, provincial Sheriff of Iloilo, on Jan. 19, 1934 in favor of Yap
Pongco (Exh. "I"), the sale having been registered in the Office of the Register of Deeds of Iloilo
on February 10, 1934 (Exh. "1- 1").

2. On September 22, 1934, Yap Pongco sold this land to Francisco Militante as evidenced
by a notarial deed (Exh. "J") which was registered in the Registry of Deeds on May 13, 1940
(Exh. "J-1").

3. That plaintiff suffered damages alleged in his complaint.

C. Defendants, on the other hand will prove by competent evidence during the trial of this
case the following facts:

1. That lot No. 2 of the Psu-1552 it (Exh. '5') was originally owned and possessed by Felipe
Batiller, grandfather of the defendant Basilio Batiller, on the death of the former in 1920, as his
sole heir. Isaias Batiller succeeded his father , Basilio Batiller, in the ownership and possession
of the land in the year 1930, and since then up to the present, the land remains in the
possession of the defendant, his possession being actual, open, public, peaceful and continuous
in the concept of an owner, exclusive of any other rights and adverse to all other claimants.

2. That the alleged predecessors in interest of the plaintiff have never been in the actual
possession of the land and that they never had any title thereto.

3. That Lot No. 2, Psu 155241, the subject of Free Patent application of the defendant has
been approved.
4. The damages suffered by the defendant, as alleged in his counterclaim."'1

The appellate court further related the developments of the case, as follows:

On August 17, 1965, defendant's counsel manifested in open court that before any trial on the
merit of the case could proceed he would file a motion to dismiss plaintiff's complaint which he
did, alleging that plaintiff does not have cause of action against him because the property in
dispute which he (plaintiff) allegedly bought from his father-in-law, Francisco Militante was the
subject matter of LRC No. 695 filed in the CFI of Iloilo, which case was brought on appeal to this
Court and docketed as CA-G.R. No. 13497-R in which aforesaid case plaintiff was the counsel on
record of his father-in-law, Francisco Militante. Invoking Arts. 1409 and 1491 of the Civil Code
which reads:

'Art. 1409. The following contracts are inexistent and void from the beginning:

xxx xxx xxx

(7) Those expressly prohibited by law.

'ART. 1491. The following persons cannot acquire any purchase, even at a public auction,
either in person of through the mediation of another: .

xxx xxx xxx

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other
officers and employees connected with the administration of justice, the property and rights of
in litigation or levied upon an execution before the court within whose jurisdiction or territory
they exercise their respective functions; this prohibition includes the act of acquiring an
assignment and shall apply to lawyers, with respect to the property and rights which may be
the object of any litigation in which they may take part by virtue of their profession.'

defendant claims that plaintiff could not have acquired any interest in the property in dispute
as the contract he (plaintiff) had with Francisco Militante was inexistent and void. (See pp. 22-
31, Record on Appeal). Plaintiff strongly opposed defendant's motion to dismiss claiming that
defendant can not invoke Articles 1409 and 1491 of the Civil Code as Article 1422 of the same
Code provides that 'The defense of illegality of contracts is not available to third persons whose
interests are not directly affected' (See pp. 32-35 Record on Appeal).

On October 18, 1965, the lower court issued an order disclaiming plaintiffs complaint (pp. 42-
49, Record on Appeal.) In the aforesaid order of dismissal the lower court practically agreed
with defendant's contention that the contract (Exh. A) between plaintiff and Francism Militante
was null and void. In due season plaintiff filed a motion for reconsideration (pp. 50-56 Record
on Appeal) which was denied by the lower court on January 14, 1966 (p. 57, Record on Appeal).
Hence, this appeal by plaintiff from the orders of October 18, 1965 and January 14, 1966.

Plaintiff-appellant imputes to the lower court the following errors:

'1. The lower court erred in holding that the contract of sale between the plaintiff-
appellant and his father-in-law, Francisco Militante, Sr., now deceased, of the property covered
by Plan Psu-99791, (Exh. "A") was void, not voidable because it was made when plaintiff-
appellant was the counsel of the latter in the Land Registration case.

'2. The lower court erred in holding that the defendant-appellee is an interested person to
question the validity of the contract of sale between plaintiff-appellant and the deceased,
Francisco Militante, Sr.

'3. The lower court erred in entertaining the motion to dismiss of the defendant-appellee
after he had already filed his answer, and after the termination of the pre-trial, when the said
motion to dismiss raised a collateral question.

'4. The lower court erred in dismissing the complaint of the plaintiff-appellant.'

The appellate court concluded that plaintiffs "assignment of errors gives rise to two (2) legal
posers — (1) 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; and (2) whether or not the lower court was correct in entertaining
defendant-appellee's motion to dismiss after the latter had already filed his answer and after
he (defendant) and plaintiff-appellant had agreed on some matters in a pre-trial conference.
Hence, its elevation of the appeal to this Court as involving pure questions of law.

It is at once evident from the foregoing narration that the pre-trial conference held by the trial
court at which the parties with their counsel agreed and stipulated on the material and relevant
facts and submitted their respective documentary exhibits as referred to in the pre-trial order,
supra,2 practically amounted to a fulldress trial which placed on record all the facts and exhibits
necessary for adjudication of the case.

The three points on which plaintiff reserved the presentation of evidence at the-trial dealing
with the source of the alleged right and title of Francisco Militante's predecessors, supra,3
actually are already made of record in the stipulated facts and admitted exhibits. The chain of
Militante's alleged title and right to the land as supposedly traced back to Liberato Demontaño
was actually asserted by Militante (and his vendee, lawyer and son-in-law, herein plaintiff) in
the land registration case and rejected by the Iloilo land registration court which dismissed
Militante's application for registration of the land. Such dismissal, as already stated, was
affirmed by the final judgment in 1958 of the Court of Appeals.4
The four points on which defendant on his part reserved the presentation of evidence at the
trial dealing with his and his ancestors' continuous, open, public and peaceful possession in the
concept of owner of the land and the Director of Lands' approval of his survey plan thereof,
supra,5 are likewise already duly established facts of record, in the land registration case as well
as in the ejectment case wherein the Iloilo court of first instance recognized the superiority of
defendant's right to the land as against plaintiff.

No error was therefore committed by the lower court in dismissing plaintiff's complaint upon
defendant's motion after the pre-trial.

1. The stipulated facts and exhibits of record indisputably established plaintiff's lack of
cause of action and justified the outright dismissal of the complaint. Plaintiff's claim of
ownership to the land in question was predicated on the sale thereof for P2,000.00 made in
1956 by his father-in- law, Francisco Militante, in his favor, at a time when Militante's
application for registration thereof had already been dismissed by the Iloilo land registration
court and was pending appeal in the Court of Appeals.

With the Court of Appeals' 1958 final judgment affirming the dismissal of Militante's application
for registration, the lack of any rightful claim or title of Militante to the land was conclusively
and decisively judicially determined. Hence, there was no right or title to the land that could be
transferred or sold by Militante's purported sale in 1956 in favor of plaintiff.

Manifestly, then plaintiff's complaint against defendant, to be declared absolute owner of the
land and to be restored to possession thereof with damages was bereft of any factual or legal
basis.

2. No error could be attributed either to the lower court's holding that the purchase by a
lawyer of the property in litigation from his client is categorically prohibited by Article 1491,
paragraph (5) of the Philippine Civil Code, reproduced supra;6 and that consequently, plaintiff's
purchase of the property in litigation from his client (assuming that his client could sell the
same since as already shown above, his client's claim to the property was defeated and
rejected) was void and could produce no legal effect, by virtue of Article 1409, paragraph (7) of
our Civil Code which provides that contracts "expressly prohibited or declared void by law' are
"inexistent and that "(T)hese contracts cannot be ratified. Neither can the right to set up the
defense of illegality be waived."

The 1911 case of Wolfson vs. Estate of Martinez7 relied upon by plaintiff as holding that a sale
of property in litigation to the party litigant's lawyer "is not void but voidable at the election of
the vendor" was correctly held by the lower court to have been superseded by the later 1929
case of Director of Lands vs. Abagat.8 In this later case of Abagat, the Court expressly cited two
antecedent cases involving the same transaction of purchase of property in litigation by the
lawyer which was expressly declared invalid under Article 1459 of the Civil Code of Spain (of
which Article 1491 of our Civil Code of the Philippines is the counterpart) upon challenge
thereof not by the vendor-client but by the adverse parties against whom the lawyer was to
enforce his rights as vendee thus acquired.

These two antecedent cases thus cited in Abagat clearly superseded (without so expressly
stating the previous ruling in Wolfson:

The spouses, Juan Soriano and Vicente Macaraeg, were the owners of twelve parcels of land.
Vicenta Macaraeg died in November, 1909, leaving a large number of collateral heirs but no
descendants. Litigation between the surviving husband, Juan Soriano, and the heirs of Vicenta
immediately arose, and the herein appellant Sisenando Palarca acted as Soriano's lawyer. On
May 2, 1918, Soriano executed a deed for the aforesaid twelve parcels of land in favor of
Sisenando Palarca and on the following day, May 3, 1918, Palarca filed an application for the
registration of the land in the deed. After hearing, the Court of First Instance declared that the
deed was invalid by virtue of the provisions of article 1459 of the Civil Code, which prohibits
lawyers and solicitors from purchasing property rights involved in any litigation in which they
take part by virtue of their profession. The application for registration was consequently
denied, and upon appeal by Palarca to the Supreme Court, the judgement of the lower court
was affirmed by a decision promulgated November 16,1925. (G.R. No. 24329, Palarca vs.
Director of Lands, not reported.)

In the meantime cadastral case No. 30 of the Province of Tarlac was instituted, and on August
21, 1923, Eleuteria Macaraeg, as administratrix of the estate of Vicente Macaraeg, filed claims
for the parcels in question. Buenaventura Lavitoria administrator of the estate of Juan Soriano,
did likewise and so did Sisenando Palarca. In a decision dated June 21, 1927, the Court of First
Instance, Judge Carballo presiding, rendered judgment in favor of Palarea and ordered the
registration of the land in his name. Upon appeal to this court by the administration of the
estates of Juan Soriano and Vicente Macaraeg, the judgment of the court below was reversed
and the land adjudicated to the two estates as conjugal property of the deceased spouses. (G.R.
No. 28226, Director of Lands vs. Abagat, promulgated May 21, 1928, not reported.)9

In the very case of Abagat itself, the Court, again affirming the invalidity and nullity of the
lawyer's purchase of the land in litigation from his client, ordered the issuance of a writ of
possession for the return of the land by the lawyer to the adverse parties without
reimbursement of the price paid by him and other expenses, and ruled that "the appellant
Palarca is a lawyer and is presumed to know the law. He must, therefore, from the beginning,
have been well aware of the defect in his title and is, consequently, a possessor in bad faith."

As already stated, Wolfson and Abagat were decided with relation to Article 1459 of the Civil
Code of Spain then adopted here, until it was superseded on August 30, 1950 by the Civil Code
of the Philippines whose counterpart provision is Article 1491.

Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six
paragraphs certain persons, by reason of the relation of trust or their peculiar control over the
property, from acquiring such property in their trust or control either directly or indirectly and
"even at a public or judicial auction," as follows: (1) guardians; (2) agents; (3) administrators; (4)
public officers and employees; judicial officers and employees, prosecuting attorneys, and
lawyers; and (6) others especially disqualified by law.

In Wolfson which involved the sale and assignment of a money judgment by the client to the
lawyer, Wolfson, whose right to so purchase the judgment was being challenged by the
judgment debtor, the Court, through Justice Moreland, then expressly reserved decision on
"whether or not the judgment in question actually falls within the prohibition of the article" and
held only that the sale's "voidability can not be asserted by one not a party to the transaction or
his representative," citing from Manresa 10 that "(C)onsidering the question from the point of
view of the civil law, the view taken by the code, we must limit ourselves to classifying as void
all acts done contrary to the express prohibition of the statute. Now then: As the code does not
recognize such nullity by the mere operation of law, the nullity of the acts hereinbefore
referred to must be asserted by the person having the necessary legal capacity to do so and
decreed by a competent
court." 11

The reason thus given by Manresa in considering such prohibited acquisitions under Article
1459 of the Spanish Civil Code as merely voidable at the instance and option of the vendor and
not void — "that the Code does not recognize such nullity de pleno derecho" — is no longer
true and applicable to our own Philippine Civil Code which does recognize the absolute nullity
of contracts "whose cause, object, or purpose is contrary to law, morals, good customs, public
order or public policy" or which are "expressly prohibited or declared void by law" and declares
such contracts "inexistent and void from the beginning." 12

The Supreme Court of Spain and modern authors have likewise veered from Manresa's view of
the Spanish codal provision itself. In its sentencia of 11 June 1966, the Supreme Court of Spain
ruled that the prohibition of Article 1459 of the Spanish Civil Code is based on public policy, that
violation of the prohibition contract cannot be validated by confirmation or ratification, holding
that:

... la prohibicion que el articulo 1459 del C.C. establece respecto a los administradores y
apoderados, la cual tiene conforme a la doctrina de esta Sala, contendia entre otras, en S. de
27-5-1959, un fundamento de orden moral lugar la violacion de esta a la nulidad de pleno
derecho del acto o negocio celebrado, ... y prohibicion legal, afectante orden publico, no cabe
con efecto alguno la aludida retification ... 13

The criterion of nullity of such prohibited contracts under Article 1459 of the Spanish Civil Code
(Article 1491 of our Civil Code) as a matter of public order and policy as applied by the Supreme
Court of Spain to administrators and agents in its above cited decision should certainly apply
with greater reason to judges, judicial officers, fiscals and lawyers under paragraph 5 of the
codal article.
Citing the same decisions of the Supreme Court of Spain, Gullon Ballesteros, his "Curso de
Derecho Civil, (Contratos Especiales)" (Madrid, 1968) p. 18, affirms that, with respect to Article
1459, Spanish Civil Code:.

Que caracter tendra la compra que se realice por estas personas? Porsupuesto no cabe duda de
que el caso (art.) 1459, 40 y 50, la nulidad esabsoluta porque el motivo de la prohibicion es de
orden publico. 14

Perez Gonzales in such view, stating that "Dado el caracter prohibitivo delprecepto, la
consequencia de la infraccion es la nulidad radical y ex lege." 15

Castan, quoting Manresa's own observation that.

"El fundamento do esta prohibicion es clarisimo. No sa trata con este precepto tan solo de
guitar la ocasion al fraude; persiguese, ademasel proposito de rodear a las personas que
intervienen en la administrcionde justicia de todos los retigios que necesitan pora ejercer su
ministerio librandolos de toda suspecha, que aunque fuere in fundada, redundura endescredito
de la institucion." 16 arrives at the contrary and now accepted view that "Puede considerace en
nuestro derecho inexistente 'o radicalmente nulo el contrato en los siguentes cases: a) ...; b)
cuando el contrato se ha celebrado en violacion de una prescripcion 'o prohibicion legal,
fundada sobre motivos de orden publico (hipotesis del art. 4 del codigo) ..." 17

It is noteworthy that Caltan's rationale for his conclusion that fundamental consideration of
public policy render void and inexistent such expressly prohibited purchase (e.g. by public
officers and employees of government property intrusted to them and by justices, judges,
fiscals and lawyers of property and rights in litigation and submitted to or handled by them,
under Article 1491, paragraphs (4) and (5) of our Civil Code) has been adopted in a new article
of our Civil Code, viz, Article 1409 declaring such prohibited contracts as "inexistent and void
from the beginning." 18

Indeed, the nullity of such prohibited contracts is definite and permanent and cannot be cured
by ratification. The public interest and public policy remain paramount and do not permit of
compromise or ratification. In his aspect, the permanent disqualification of public and judicial
officers and lawyers grounded on public policy differs from the first three cases of guardians,
agents and administrators (Article 1491, Civil Code), as to whose transactions it had been
opined that they may be "ratified" by means of and in "the form of a new contact, in which
cases its validity shall be determined only by the circumstances at the time the execution of
such new contract. The causes of nullity which have ceased to exist cannot impair the validity of
the new contract. Thus, the object which was illegal at the time of the first contract, may have
already become lawful at the time of the ratification or second contract; or the service which
was impossible may have become possible; or the intention which could not be ascertained
may have been clarified by the parties. The ratification or second contract would then be valid
from its execution; however, it does not retroact to the date of the first contract." 19
As applied to the case at bar, the lower court therefore properly acted upon defendant-
appellant's motion to dismiss on the ground of nullity of plaintiff's alleged purchase of the land,
since its juridical effects and plaintiff's alleged cause of action founded thereon were being
asserted against defendant-appellant. 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, as follows:

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.

If the void contract is still fully executory, no party need bring an action to declare its nullity;
but if any party should bring an action to enforce it, the other party can simply set up the nullity
as a defense. 20

ACCORDINGLY, the order of dismissal appealed from is hereby affirmed, with costs in all
instances against plaintiff-appellant. So ordered.

CASE DIGEST

Facts:

Before the war with Japan, Francisco Militante filed an application for registration of the parcel
of land in question. After the war, the petition was heard and denied. Pending appeal, Militante
sold the land to petitioner, his son-in-law. Plaintiff filed an action for forcible entry against
respondent. Defendant claims the complaint of the plaintiff does not state a cause of action,
the truth of the matter being that he and his predecessors-in-interest have always been in
actual, open and continuous possession since time immemorial under claim of ownership of the
portions of the lot in question.

Issue:
Whether or not the contract of sale between appellant and his father-in-law 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:

The stipulated facts and exhibits of record indisputably established plaintiff's lack of cause of
action and justified the outright dismissal of the complaint. Plaintiff's claim of ownership to the
land in question was predicated on the sale thereof made by his father-in- law in his favor, at a
time when Militante's application for registration thereof had already been dismissed by the
Iloilo land registration court and was pending appeal in the Court of Appeals.

Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six
paragraphs certain persons, by reason of the relation of trust or their peculiar control over the
property, from acquiring such property in their trust or control either directly or indirectly and
"even at a public or judicial auction," as follows: (1) guardians; (2) agents; (3) administrators; (4)
public officers and employees; judicial officers and employees, prosecuting attorneys, and
lawyers; and (6) others especially disqualified by law.

Fundamental consideration of public policy render void and inexistent such expressly
prohibited purchase (e.g. by public officers and employees of government property intrusted to
them and by justices, judges, fiscals and lawyers of property and rights in litigation and
submitted to or handled by them, under Article 1491, paragraphs (4) and (5) of our Civil Code)
has been adopted in a new article of our Civil Code, viz, Article 1409 declaring such prohibited
contracts as "inexistent and void from the beginning."

Indeed, the nullity of such prohibited contracts is definite and permanent and cannot be cured
by ratification. The public interest and public policy remain paramount and do not permit of
compromise or ratification. In his aspect, the permanent disqualification of public and judicial
officers and lawyers grounded on public policy differs from the first three cases of guardians,
agents and administrators (Article 1491, Civil Code), as to whose transactions it had been
opined that they may be "ratified" by means of and in "the form of a new contact, in which
cases its validity shall be determined only by the circumstances at the time the execution of
such new contract. The causes of nullity which have ceased to exist cannot impair the validity of
the new contract. Thus, the object which was illegal at the time of the first contract, may have
already become lawful at the time of the ratification or second contract; or the service which
was impossible may have become possible; or the intention which could not be ascertained
may have been clarified by the parties. The ratification or second contract would then be valid
from its execution; however, it does not retroact to the date of the first contract."
 RICARDO DISTAJO, ERNESTO DISTAJO, RAUL DISTAJO,
FEDERICO DISTAJO, ZACARIAS A. DISTAJO, EDUARDO
DISTAJO, and PILAR DISTAJO TAPAR, petitioners,
vs. COURT OF APPEALS and LAGRIMAS SORIANO
DISTAJO, respondents.

DECISION
The case under consideration is a petition for review on certiorari of a decision of the Court
of Appeals[1], which modified the ruling of the Regional Trial Court, Roxas City regarding seven
parcels of land located in Barangay Hipona, Pontevedra, Capiz.[2]
During the lifetime of Iluminada Abiertas, she designated one of her sons, Rufo Distajo, to
be the administrator of her parcels of land denoted as Lot Nos. 1018, 1046, 1047, and 1057
situated in Barangay Hipona, Pontevedra, Capiz.
On May 21, 1954, Iluminada Abiertas sold a portion of Lot No. 1018 (1018-A) to her other
children, namely, Raul Distajo, Ricardo Distajo, Ernesto Distajo, Federico Distajo, and Eduardo
Distajo.[3]
On May 29, 1963, Iluminada Abiertas certified to the sale of Lot Nos. 1046 and 1047 in
favor of Rufo Distajo.[4]
On June 4, 1969, Iluminada Abiertas sold Lot No. 1057 to Rhodora Distajo, the daughter of
Rufo Distajo.[5]
On July 12, 1969, Iluminada Abiertas sold Lot No. 1018 to Rufo Distajo.[6]
Meanwhile, Justo Abiertas, Jr., the brother of Iluminada Abiertas, died leaving behind his
children, Teresita, Alicia, Josefa and Luis Abiertas. Teresita paid for the real estate taxes of the
following properties, which she inherited from her father: Lot Nos. 1001, 1048, 1049, and a
portion of Lot No. 1047, all located in Capiz. On May 26, 1954, Teresita Abiertas sold Lot No.
1001 in favor of Rufo Distajo.[7] On June 2, 1965, Teresita Abiertas, for herself and representing
her sisters and brother, sold Lot Nos. 1048, 1049, and a portion of Lot No. 1047 to Rufo
Distajo.[8]
After purchasing the above-mentioned parcels of land, Rufo Distajo took possession of the
property and paid the corresponding real estate taxes thereon. Rhodora Distajo likewise paid
for the real estate taxes of Lot No. 1057.
When Iluminada Abiertas died in 1971, Zacarias Distajo, Pilar Distajo-Tapar, and Rizaldo
Distajo,[9] demanded possession of the seven parcels of land from Lagrimas S. Distajo, and her
husband, Rufo Distajo. The latter refused.
Consequently, on June 5, 1986, Ricardo Distajo, with the other heirs of Iluminada Abiertas,
namely, Ernesto Distajo, Raul Distajo, Federico Distajo, Zacarias Distajo, Eduardo Distajo, and
Pilar Distajo, filed with the Regional Trial Court, Roxas City a complaint for recovery of
possession and ownership of Lot No. 1018, partition of Lot Nos. 1001, 1018-B, 1046, 1047,
1048, 1049, 1057, and damages.
On September 4, 1986, private respondent Lagrimas Distajo[10] filed an answer with
counterclaim.
On April 9, 1990, the trial court dismissed the complaint for lack of cause of action, laches
and prescription. The counterclaim was likewise dismissed. The parties appealed to the Court of
Appeals.[11]
On August 21, 1992, the Court of Appeals rendered its decision,[12] the dispositive portion
of which states as follows:

PREMISES CONSIDERED, the decision appealed from is hereby SET ASIDE and a new judgment
rendered, as follows:

WHEREFORE, the Court decides the case in favor of the defendant and dismisses the plaintiffs
complaint for lack of cause of action except with regard to the plaintiffs claim over a 238 sq. m.
portion of Lot No. 1018 (the portion adjoining the market site and measuring seventeen meters
and that adjoining the property of E. Rodriguez measuring 14 meters). The Court hereby Orders
the partition of Lot No. 1018 to conform to the following: 238 sq. m. as above specified to
belong to the plaintiffs as prayed for by them while the rest is declared property of the
defendant.

Upon partition of Lot No. 1018 in accordance with this Courts Order, the City Assessor of Roxas
City is hereby Ordered to cancel Tax Declaration 2813 in the name of Rufo Distajo (or any
subsequent tax declaration/s issued relative to the above-cited Tax Declaration No. 2813) and
forthwith to issue the corresponding tax declarations in the names of the respective parties
herein.

SO ORDERED.

On September 10, 1992, Ricardo Distajo filed a motion for reconsideration.[13] On

December 9, 1993, the Court of Appeals denied the motion.[14]
Hence, this petition.[15]
Petitioner alleges that Iluminada Abiertas exclusively owns the seven parcels of land
delineated as Lot Nos. 1001, 1018, 1046, 1047, 1048, 1049, and 1057, all of which should be
partitioned among all her heirs. Furthermore, Rufo Distajo cannot acquire the subject parcels of
land owned by Iluminada Abiertas because the Civil Code prohibits the administrator from
acquiring properties under his administration.[16] Rufo Distajo merely employed fraudulent
machinations in order to obtain the consent of his mother to the sale, and may have even
forged her signature on the deeds of sale of the parcels of land.
In her comment dated May 13, 1994, private respondent Lagrimas S. Distajo contends that
Rufo Distajo rightfully owns the subject parcels of land because of various deeds of sale
executed by Iluminada Abiertas selling Lot Nos. 1018-B, 1047 and 1046 in favor of Rufo Distajo
and Lot No. 1057 in favor of Rhodora Distajo. Private respondent also avers that petitioner
cannot claim any right over Lot Nos. 1001, 1048 and 1049, considering that such lands belong
to the brother of Iluminada Abiertas, namely, Justo Abiertas, Jr., whose heirs sold said parcels
of land to Rufo Distajo.
The petition lacks merit.
Factual findings of the trial court will not be disturbed on appeal unless the court has
overlooked or ignored some fact or circumstance of sufficient weight or significance, which, if
considered, would alter the result of the case.[17] When there is no conflict between the
findings of the trial and appellate courts, a review of the facts found by the appellate court is
unnecessary.[18]
Since the trial court and the Court of Appeals agree that Iluminada Abiertas owned Lot Nos.
1046, 1057 and a portion of Lot No. 1047, and that Justo Abiertas Jr. owned Lot Nos. 1001,
1048, and 1049, such findings are binding on this Court, which is not a trier of
facts.[19] However, the record shows that Lot No. 1018 should be divided into Lot No. 1018-A
and 1018-B, the delineation of which the Court of Appeals clarified in its decision.
The issues in this case, therefore, are limited to those properties which were owned by
Iluminada Abiertas, ascendant of petitioner, consisting of Lot Nos. 1018-A, 1046, 1057, and a
portion of 1047.
In his petition, Ricardo Distajo assails the genuineness of the signatures of Iluminada
Abiertas in the deeds of sale of the parcels of land, and claims that Rufo Distajo forged the
signature of Iluminada Abiertas. However, no handwriting expert was presented to corroborate
the claim of forgery. Petitioner even failed to present a witness who was familiar with the
signature of Iluminada Abiertas. Forgery should be proved by clear and convincing evidence,
and whoever alleges it has the burden of proving the same.[20]
Petitioner likewise contends that the sale transactions are void for having been entered
into by the administrator of the properties. We disagree. The pertinent Civil Code provision
provides:

Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial
auction, either in person or through the mediation of another:

(1) The guardian, the property of the person or persons who may be under
guardianship;
(2) Agents, the property whose administration or sale may have been entrusted to
them, unless the consent of the principal has been given;
(3) Executors and administrators, the property of the estate under administration; x x x
Under paragraph (2) of the above article, the prohibition against agents purchasing
property in their hands for sale or management is not absolute. It does not apply if the principal
consents to the sale of the property in the hands of the agent or administrator. In this case, the
deeds of sale signed by Iluminada Abiertas shows that she gave consent to the sale of the
properties in favor of her son, Rufo, who was the administrator of the properties. Thus, the
consent of the principal Iluminada Abiertas removes the transaction out of the prohibition
contained in Article 1491(2).
Petitioner also alleges that Rufo Distajo employed fraudulent machinations to obtain the
consent of Iluminada Abiertas to the sale of the parcels of land. However, petitioner failed to
adduce convincing evidence to substantiate his allegations.
In the absence of any showing of lack of basis for the conclusions made by the Court of
Appeals, this Court finds no cogent reason to reverse the ruling of the appellate court.
WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the Court of
Appeals in CA-G.R. CV No. 30063.
SO ORDERED.
 PAULINO VALENCIA

v.

ATTY. ARSENIO FER. CABANTING

DECISION

PER CURIAM:
These consolidated administrative cases seek to disbar respondents Dionisio Antiniw, Arsenio
Fer Cabanting and Eduardo Jovellanos (the last named, now an MCTC Judge) for grave
malpractice and misconduct in the exercise of their legal profession committed in the following
manner:

1. Administrative Cases Nos. 1302 and 1391

In 1933, complainant Paulino Valencia (Paulino in short) and his wife Romana allegedly bought
a parcel of land, where they built their residential house, from a certain Serapio Raymundo, an
heir of Pedro Raymundo the original owner. However, they failed to register the sale or secure
a transfer certificate of title in their names.

Sometime in December, 1968, a conference was held in the house of Atty. Eduardo Jovellanos
to settle the land dispute between Serapia Raymundo (Serapia in short) another heir of Pedro
Raymundo, and the Valencia spouses since both were relatives and distant kin of Atty.
Jovellanos. Serapia was willing to relinquish ownership if the Valencias could show documents
evidencing ownership. Paulino exhibited a deed of sale written in the Ilocano
dialect. However, Serapia claimed that the deed covered a different property. Paulino and
Serapia were not able to settle their differences. (Report of Investigating Judge Catalino
Castaneda, Jr., pp. 21-22).

On December 15, 1969 Serapia, assisted by Atty. Arsenio Fer Cabanting, filed a complaint
against Paulino for the recovery of possession with damages. The case was docketed as Civil
Case No. V-2170, entitled "Serapia Raymundo, Plaintiff, versus Paulino Valencia, Defendant."
(Report, p. 11).

Summoned to plead in Civil Case No. V-2170, the Valencias engaged the services of Atty.
Dionisio Antiniw. Atty. Antiniw advised them to present a notarized deed of sale in lieu of the
private document written in Ilocano. For this purpose, Paulino gave Atty. Antiniw an amount of
P200.00 to pay the person who would falsify the signature of the alleged vendor (Complaint, p.
2; Rollo, p. 7). A "Compraventa Definitiva" (Exh. B) was executed purporting to be a sale of the
questioned lot.

On January 22, 1973, the Court of First Instance of Pangasinan, Branch V, rendered a decision in
favor of plaintiff, Serapia Raymundo. The lower court expressed the belief that the said
document is not authentic. (Report, p. 14)

Paulino, thereafter, filed a Petition for Certiorari, under Rule 65, with Preliminary Injunction
before the Court of Appeals alleging that the trial court failed to provide a workable solution
concerning his house. While the petition was pending, the trial court, on March 9, 1973, issued
an order of execution stating that "the decision in this case has already become final and
executory" (Exhibits 3 and 3-A). On March 14, 1973, a writ of execution was issued.

On March 20, 1973, Serapia sold 40 square meters of the litigated lot to Atty. Jovellanos and
the remaining portion she sold to her counsel, Atty. Arsenio Fer Cabanting, on April 25,
1973. (Annex "A" of Administrative Case No. 1302).

On March 4, 1974, Paulino filed a disbarment proceeding (docketed as Administrative Case No.
1302) against Atty. Cabanting on the ground that said counsel allegedly violated Article 1491 of
the New Civil Code as well as Article II of the Canons of Professional Ethics, prohibiting the
purchase of property under litigation by a counsel.

On March 21, 1974 the appellate court dismissed the petition of Paulino.

On October 14, 1974, Constancia Valencia, daughter of Paulino, filed a disbarment proceeding
(docketed as Administrative Case No. 1391) against Atty. Dionisio Antiniw for his participation
in the forgery of "Compraventa Definitiva" and its subsequent introduction as evidence for his
client; and also, against Attys. Eduardo Jovellanos and Arsenio Cabanting for purchasing a
litigated property allegedly in violation of Article 1491 of the New Civil Code; and against the
three lawyers, for allegedly rigging Civil Case No. V-2170 against her parents.

On August 17, 1975, Constancia Valencia filed additional charges against Atty. Antiniw and Atty.
Jovellanos as follows:

"1. AGAINST ATTY. DIONISIO ANTINIW:

"In the year 1973 Atty. Dionisio Antiniw fraudulently and in confabulation with one Lydia Bernal
had a deed of sale, fabricated, executed and ratified before him as Notary Public by one
Santiago Bernal in favor of Lydia Bernal when as a matter of fact said Santiago Bernal had died
already about eight years before in the year 1965.

"2. AGAINST ATTY. EDUARDO JOVELLANOS:

"In the year 1954 Atty. Eduardo Jovellanos, fraudulently and in bad faith, in confabulation with
Rosa de los Santos as vendee had, as Notary Public, executed and ratified before him, two (2)
deeds of sale in favor of said Rosa de los Santos when as a matter of fact the said deeds were
not in fact executed by the supposed vendor Rufino Rincoraya and so said Rufino Rincoraya had
filed a Civil Case in Court to annul and declare void the said sales." (p. 7, Report)
2. Administrative Case No. 1543.

A deed of donation propter nuptias, involving the transfer of a piece of land by the
grandparents of Lydia Bernal (complainant) in favor of her parents, was lost during the last
world war. For this reason, her grandmother (the living donor) executed a deed of
confirmation of the donation propter nuptias with renunciation of her rights over the
property. (Complaint, p. 1). Notwithstanding the deed, her grandmother still offered to sell the
same property in favor of the complainant, ostensibly to strengthen the deed of donation (to
prevent others from claiming the property).

On consultation, Atty. Antiniw advised them to execute a deed of sale. Atty. Antiniw allegedly
prepared and notarized the deed of sale in the name of her grandfather (deceased at the time
of signing) with her grandmother's approval.

Felicidad Bernal-Duzon, her aunt who had a claim over the property, filed a complaint against
her (Lydia Bernal) and her counsel, Atty. Antiniw for falsification of a public
document. (Complaint, pp. 1-2) The fiscal exonerated the counsel for lack of evidence, while a
case was filed in court against Lydia Bernal.

On October 3, 1975, Lydia Bernal filed a disbarment proceeding (docketed as Administrative

Case No. 1543) against Atty. Antiniw for illegal acts and bad advice.

Pursuant to the resolution of the First Division of this Court dated December 9, 1974, the
resolution of the Second Division dated March 3, 1975 and the two resolutions of the Second
Division both dated December 3, 1975, Administrative Cases Nos. 1302, 1391 and 1543 were
referred to the Office of the Solicitor General for investigation, report and recommendation.

Upon formal request of Constancia L. Valencia and Lydia Bernal dated March 3, 1976, all of
these cases were ordered consolidated by Solicitor General Estelito P. Mendoza per his
handwritten directive of March 9, 1976.

On April 12, 1988, We referred the investigation of these cases to the Integrated Bar of the
Philippines. When Atty. Jovellanos was appointed as Municipal Circuit Trial Court Judge of
Alcala-Bautista, Pangasinan, We referred the investigation of these cases to Acting Presiding
Judge Cesar Mindaro, Regional Trial Court, Branch 50, Villasis, Pangasinan, for further
investigation.

In view of the seriousness of the charge against the respondents and the alleged threats against
the person of complainant Constancia L. Valencia, We directed the transfer of investigation to
the Regional Trial Court of Manila.

The three administrative cases were raffled to Branch XVII of the Regional Trial Court of Manila,
under the sala of Judge Catalino Castaneda, Jr.

After investigation, Judge Catalino Castaneda, Jr., recommended the dismissal of cases against
Atty. Jovellanos and Atty. Arsenio Fer Cabanting; dismissal of Administrative Case No. 1543 and
the additional charges in Administrative Case No. 1391 against Antiniw and Judge Jovellanos;
however, he recommended the suspension of Atty. Antiniw from the practice of law for six
months finding him guilty of malpractice in falsifying the "Compraventa Definitiva."

The simplified issues of these consolidated cases are:

I. Whether or not Atty. Cabanting purchased the subject property in violation of Art. 1491 of
the New Civil Code.

II. Whether or not Attys. Antiniw and Jovellanos are guilty of malpractice in falsifying notarial
documents.

III. Whether or not the three lawyers connived in rigging Civil Case No. V-2170.
I

Under Article 1491 of the New Civil Code:

"The following persons cannot acquire by purchase, even at a public or judicial auction, either
in person or through the mediation of another:

xxx xxx xxx

(5) xxx this prohibition includes the act of acquiring by assignment and shall apply to lawyers,
with respect to the property and rights which may be the object of any litigation in which they
may take part by virtue of their profession."
Public policy prohibits the transactions in view of the fiduciary relationship involved. It is
intended to curtail any undue influence of the lawyer upon his client. Greed may get the better
of the sentiments of loyalty and disinterestedness. Any violation of this prohibition would
constitute malpractice (In re Attorney Melchor Ruste, 40 O.G. p. 78) and is a ground for
suspension. (Beltran vs. Fernandez, 70 Phil. 248)

Art. 1491, prohibiting the sale to the counsel concerned, applies only while the litigation is
pending. (Director of Lands vs. Adaba, 88 SCRA 513; Hernandez vs. Villanueva, 40 Phil. 775).

In the case at bar, while it is true that Atty. Arsenio Fer Cabanting purchased the lot
after finality of judgment, there was still a pending certiorari proceeding. A thing is said to be in
litigation not only if there is some contest or litigation over it in court, but also from the
moment that it becomes subject to the judicial action of the judge. (Gan Tingco vs. Pabinguit,
35 Phil. 81). Logic dictates, in certiorariproceedings, that the appellate court may either grant
or dismiss the petition. Hence, it is not safe to conclude, for purposes under Art. 1491 that the
litigation has terminated when the judgment of the trial court become final while
a certiorari connected therewith is still in progress. Thus, purchase of the property by Atty.
Cabanting in this case constitutes malpractice in violation of Art. 1491 and the Canons of
Professional Ethics. Clearly, this malpractice is a ground for suspension.

The sale in favor of Atty. Jovellanos does not constitute malpractice. There was no attorney-
client relationship between Serapia and Atty. Jovellanos, considering that the latter did not take
part as counsel in Civil Case No. V-2170. The transaction is not covered by Art. 1491 nor by the
Canons adverted to.

II

It is asserted by Paulino that Atty. Antiniw asked for and received the sum of P200.00 in
consideration of his executing the document "Compraventa Definitiva" which would show that
Paulino bought the property. This charge, Atty. Antiniw simply denied. It is settled
jurisprudence that affirmative testimony is given greater weight than negative testimony
(Bayasen vs. CA, L-25785, Feb. 26, 1981; Vda. de Ramos vs. CA, et al., L-40804, Jan. 31,
1978). When an individual's integrity is challenged by evidence, it is not enough that he deny
the charges against him; he must meet the issue and overcome the evidence for the relator and
show proofs that he still maintains the highest degree of morality and integrity which at all time
is expected of him. (De los Reyes vs. Aznar, Adm. Case No. 1334, Nov. 28, 1989).

Although Paulino was a common farmer who finished only Grade IV, his testimony, even if not
corroborated by another witness, deserves credence and can be relied upon. His declaration
dwelt on a subject which was so delicate and confidential that it would be difficult to believe
that he fabricated his evidence.

There is a clear preponderant evidence that Atty. Antiniw committed falsification of a deed of
sale, and its subsequent introduction in court prejudices his prime duty in the administration of
justice as an officer of the court.

A lawyer owes entire devotion to the interest of his client (Santos vs. Dichoso, 84 SCRA 622),
but not at the expense of truth. (Cosmos Foundry Shopworkers Union vs. La Bu, 63 SCRA
313). The first duty of a lawyer is not to his client but to the administration of justice. (Lubiano
vs. Gordalla, 115 SCRA 459) To that end, his client's success is wholly subordinate. His conduct
ought to and must always be scrupulously observant of law and ethics. While a lawyer must
advocate his client's cause in utmost earnestness and with the maximum skill he can marshal,
he is not at liberty to resort to illegal means for his client's interest. It is the duty of an attorney
to employ, for the purpose of maintaining the causes confided to him, such means as are
consistent with truth and honor. (Pangan vs. Ramos, 93 SCRA 87).
Membership in the Bar is a privilege burdened with conditions. By far, the most important of
them is mindfulness that a lawyer is an officer of the court. (In re: Ivan T. Publico, 102 SCRA
722). This Court may suspend or disbar a lawyer whose acts show his unfitness to continue as a
member of the Bar. (Halili vs. CIR, 136 SCRA 112). Disbarment, therefore, is not meant as a
punishment depriving him of a source of livelihood but is rather intended to protect the
administration of justice by requiring that those who exercise this function should be
competent, honorable and reliable in order that courts and the public may rightly repose
confidence in them. (Noriega vs. Sison, 125 SCRA 293). Atty. Antiniw failed to live up to the
high standards of the law profession.

The other charges of malpractice against Atty. Antiniw and Atty. Jovellanos should be dismissed
for lack of evidence.

During the proceedings in Administrative Case No. 1543, Lydia Bernal testified in full on direct
examination, but she never submitted herself for cross-examination. Several subpoenas for
cross-examination were unheeded. She eventually requested the withdrawal of her complaint.

Procedural due process demands that respondent lawyer should be given an opportunity to
cross-examine the witnesses against him. He enjoys the legal presumption that he is innocent
of the charges against him until the contrary is proved. (Santos vs. Dichoso, 84 SCRA 622). The
case must be established by clear, convincing and satisfactory proof. (Camus vs. Diaz, Adm.
Case No. 1616, February 9, 1989). Since Atty. Antiniw was not accorded this procedural due
process, it is but proper that the direct testimony of Lydia Bernal be stricken out.

In view also of the affidavit of desistance executed by the complainant, Administrative Case No.
1543 should be dismissed. Although the filing of an affidavit of desistance by complainant for
lack of interest does not ipso facto result in the termination of a case for suspension or
disbarment of an erring lawyer (Munar vs. Flores, 122 SCRA 448), We are constrained in the
case at bar, to dismiss the same because there was no evidence to substantiate the charges.

The additional charge against Atty. Antiniw in Administrative Case No. 1391 is predicated on the
information furnished by Lydia Bernal. It was not based on the personal knowledge of
Constancia L. Valencia: hence, hearsay. "Any evidence, whether oral or documentary, is
hearsay if its probative value is not based on the personal knowledge of the witness but on the
knowledge of some other person not on the witness stand." (Regalado, Remedial Law
Compendium, 6th ed., vol. 2, 1989, p. 486). Being hearsay, the evidence presented is
inadmissible.

The additional charge filed by Constancia L. Valencia against Atty. Jovellanos in Administrative
Case No. 1391 was not proved at all. Complainant failed to prove her additional charges.

III
There is no evidence on record that the three lawyers involved in these administrative cases
conspired in executing the falsified "Compraventa Definitiva" and rigged the Civil Case No. V-
2170.

Atty. Jovellanos is a distant kin of the Raymundos and Valencias. In fact, he and the Valencias
are neighbors and only two meters separate their houses. It would not be believable that Atty.
Jovellanos, a practicing lawyer, would hold a meeting with the heirs of Pedro Raymundo in his
house with the intention of inducing them to sue the Valencias. Atty. Jovellanos even tried to
settle the differences between the parties in a meeting held in his house. He appeared in Civil
Case No. V-2170 as an involuntary witness to attest to the holding of the conference.

Besides, the camaraderie among lawyers is not proof of conspiracy, but a sign of brotherhood
among them. One of the four-fold duties of a lawyer is his duty to the Bar. A lawyer should
treat the opposing counsel, and his brethren in the law profession, with courtesy, dignity and
civility. They may "do as adversaries do in law: strive mightily but (they) eat and drink as
friends." This friendship does not connote conspiracy.

WHEREFORE, judgment is hereby rendered declaring: 1. Dionisio Antiniw DISBARRED from the
practice of law, and his name is ordered stricken off from the roll of attorneys; 2. Arsenio Fer
Cabanting SUSPENDED from the practice of law for six months from finality of this judgment;
and 3. Administrative Case No. 1391 against Attorney Eduardo Jovellanos and additional
charges therein, and Administrative Case No. 1543 DISMISSED.

SO ORDERED.
 [A.C. No. 6210. December 9, 2004]

FEDERICO N. RAMOS, complainant,

vs.

ATTY. PATRICIO A. NGASEO, respondent.

DECISION
This is a complaint for suspension of respondent Atty. Patricio A. Ngaseo for violation of
the Code of Professional Responsibility and Article 1491 of the Civil Code by demanding from
his client, complainant Federico N. Ramos, the delivery of 1,000 square meters of land, a
litigated property, as payment for his appearance fees.
The facts as narrated by the complainant are as follows:
Sometime in 1998, complainant Federico Ramos went to respondent Atty. Patricio Ngaseos
Makati office to engage his services as counsel in a case[1] involving a piece of land in San Carlos,
Pangasinan. Respondent agreed to handle the case for an acceptance fee of P20,000.00,
appearance fee of P1,000.00 per hearing and the cost of meals, transportation and other
incidental expenses. Complainant alleges that he did not promise to pay the respondent 1,000
sq. m. of land as appearance fees.[2]
On September 16, 1999, complainant went to the respondents office to inquire about the
status of the case. Respondent informed him that the decision was adverse to them because a
congressman exerted pressure upon the trial judge. Respondent however assured him that they
could still appeal the adverse judgment and asked for the additional amount of P3,850.00 and
another P2,000.00 on September 26, 2000 as allowance for research made.[3]
Although an appeal was filed, complainant however charges the respondent of purposely
failing to submit a copy of the summons and copy of the assailed decision. Subsequently,
complainant learned that the respondent filed the notice of appeal 3 days after the lapse of the
reglementary period.
On January 29, 2003, complainant received a demand-letter from the respondent asking
for the delivery of the 1,000 sq. m. piece of land which he allegedly promised as payment for
respondents appearance fee. In the same letter, respondent also threatened to file a case in
court if the complainant would not confer with him and settle the matter within 30 days.
Respondent alleged that sometime in the late 1997, a former client, Federico Ramos and
his brother, Dionisio, went to his Makati office to engage his professional services in connection
with a 2-hectare parcel of land situated in San Carlos, Pangasinan which the complainants
family lost 7 years earlier through an execution sale in favor of one Alfredo T. Castro.
Complainant, who was deaf and could only speak conversational Tagalog haltingly, was assisted
by his brother Dionisio. They came all the way from Pangasinan because no lawyer in San Carlos
City was willing to handle the case. Complainant, through Dionisio, avers that he has consulted
2 local lawyers but did not engage their services because they were demanding exorbitant fees.
One local lawyer was willing to handle the case for at least one-half of the land involved as his
attorneys fee, plus cash expenses, while the other asked for of the land in addition to a large
sum of money. Respondent agreed to handle the case for an acceptance fee of P60,000.00 plus
an appearance fee of P3,000.00 per hearing. Complainant told him that he would consult his
siblings on the matter.
Six months later, i.e., in April 1998, complainant, assisted by one Jose Castillo, went to
respondents office to discuss the legal fees. Complainant, through Castillo, told respondent that
he was willing to pay an acceptance fee of P40,000.00, P20,000.00 of which shall be paid upon
engagement and the remaining P20,000.00 to be paid after their treasure hunt operations in
Nueva Viscaya were terminated. Further, complainant offered, in lieu of P3,000.00 per
appearance, 1,000 sq. m. of land from the land subject matter of the case, if they win, or from
another piece of property, if they lose. In addition, complainant also offered to defray the
expenses for transportation, meals and other incidental expenses. Respondent accepted the
complainants offer.
Respondent claims that after the trial court dismissed Civil Case No. SCC 2128, he filed a
timely notice of appeal and thereafter moved to be discharged as counsel because he had colon
cancer. Complainant, now assisted by one Johnny Ramos, implored respondent to continue
handling the case, with an offer to double the 1,000 sq. m. piece of land earlier promised and
the remaining balance of P20,000.00 acceptance fee. Johnny Ramos made a written
commitment and gave respondents secretary P2,000.00 of the P3,850.00 expenses for the
preparation of the appellants brief.
On July 18, 2001, the Court of Appeals rendered a favorable decision ordering the return of
the disputed 2-hectare land to the complainant and his siblings. The said decision became final
and executory on January 18, 2002. Since then complainant allegedly failed to contact
respondent, which compelled him to send a demand letter on January 29, 2003.
On February 14, 2003, complainant filed a complaint before the IBP charging his former
counsel, respondent Atty. Ngaseo, of violation of the Code of Professional Responsibility for
demanding the delivery of 1,000 sq. m. parcel of land which was the subject of litigation.
In a report dated July 18, 2003, IBP Commissioner Rebecca Villanueva-Maala found the
respondent guilty of grave misconduct and conduct unbecoming of a lawyer in violation of the
Code of Professional Responsibility and recommended that he be suspended from the practice
of law for 1 year.[4]
On August 30, 2003, the IBP Board of Governors passed Resolution No. XVI-2003-47 the full
text of which reads:[5]

RESOLVED to ADOPT and APPROVE, as it is hereby ADOPTED and APPROVED, the Report and
Recommendation of the Investigating Commissioner of the above-entitled case, herein made
part of this Resolution/Decision as Annex A; and, finding the recommendation fully supported
by the evidence on record and the applicable laws and rules, with modification, and considering
that respondent have violated the Code of Professional Responsibility for grave misconduct and
conduct unbecoming of a lawyer Atty. Patricio A. Ngaseo is hereby SUSPENDED from the
practice of law for six (6) months.

On December 11, 2003, respondent filed a petition for review assailing IBP Resolution No.
XVI-2003-47 for having been issued without or in excess of jurisdiction.[6]
Respondent argues that he did not violate Article 1491 of the Civil Code because when he
demanded the delivery of the 1,000 sq. m. of land which was offered and promised to him in
lieu of the appearance fees, the case has been terminated, when the appellate court ordered
the return of the 2-hectare parcel of land to the family of the complainant.
Respondent further contends that he can collect the unpaid appearance fee even without a
written contract on the basis of the principle of quantum meruit. He claims that his acceptance
and appearance fees are reasonable because a Makati based legal practitioner, would not
handle a case for an acceptance fee of only P20,000.00 and P1,000.00 per court appearance.
Under Article 1491(5) of the Civil Code, lawyers are prohibited from acquiring either by
purchase or assignment the property or rights involved which are the object of the litigation in
which they intervene by virtue of their profession.[7] The prohibition on purchase is all
embracing to include not only sales to private individuals but also public or judicial sales. The
rationale advanced for the prohibition is that public policy disallows the transactions in view of
the fiduciary relationship involved, i.e., the relation of trust and confidence and the peculiar
control exercised by these persons.[8] It is founded on public policy because, by virtue of his
office, an attorney may easily take advantage of the credulity and ignorance of his client and
unduly enrich himself at the expense of his client.[9] However, the said prohibition applies only
if the sale or assignment of the property takes place during the pendency of the litigation
involving the clients property. Consequently, where the property is acquired after the
termination of the case, no violation of paragraph 5, Article 1491 of the Civil Code attaches.
Invariably, in all cases where Article 1491 was violated, the illegal transaction was
consummated with the actual transfer of the litigated property either by purchase or
assignment in favor of the prohibited individual. In Biascan v. Lopez, respondent was found
guilty of serious misconduct and suspended for 6 months from the practice of law when he
registered a deed of assignment in his favor and caused the transfer of title over the part of the
estate despite pendency of Special Proceedings No. 98037 involving the subject property. [10] In
the consolidated administrative cases of Valencia v. Cabanting,[11] the Court suspended
respondent Atty. Arsenio Fer Cabanting for six (6) months from the practice of law when he
purchased his client's property which was still the subject of a pending certiorari proceeding.
In the instant case, there was no actual acquisition of the property in litigation since the
respondent only made a written demand for its delivery which the complainant refused to
comply. Mere demand for delivery of the litigated property does not cause the transfer of
ownership, hence, not a prohibited transaction within the contemplation of Article 1491. Even
assuming arguendo that such demand for delivery is unethical, respondents act does not fall
within the purview of Article 1491. The letter of demand dated January 29, 2003 was made long
after the judgment in Civil Case No. SCC-2128 became final and executory on January 18, 2002.
We note that the report of the IBP Commissioner, as adopted by the IBP Board of
Governors in its Resolution No. XVI-2003-47, does not clearly specify which acts of the
respondent constitute gross misconduct or what provisions of the Code of Professional
Responsibility have been violated. We find the recommended penalty of suspension for 6
months too harsh and not proportionate to the offense committed by the respondent. The
power to disbar or suspend must be exercised with great caution. Only in a clear case of
misconduct that seriously affects the standing and character of the lawyer as an officer of the
Court and member of the bar will disbarment or suspension be imposed as a penalty.[12] All
considered, a reprimand is deemed sufficient and reasonable.
WHEREFORE, in view of the foregoing, respondent Atty. Patricio A. Ngaseo is found guilty
of conduct unbecoming a member of the legal profession in violation of Rule 20.04 of Canon 20
of the Code of Professional Responsibility. He is REPRIMANDED with a warning that repetition
of the same act will be dealt with more severely.
SO ORDERED.

CASE DIGEST

FACTS
Ramos went to Atty. Ngaseo to engage his services ascounsel in a case involving a
piece of land. After the Courtof Appeals rendered a favorable judgment ordering
theland to be returned to Ramos and his siblings (suchdecision having been final
and executor), Atty. Ngaseosent a demand letter to Ramos as!ing for the delivery
of apiece of land which the complainant allegedly promised aspayment for
respondent"s appearance fee. As a result, Ramos filed before the IBP
a complaintcharging Atty. Ngaseo of violation of the CPR for demanding the delivery of a
parcel of land , which was thesubject of litigation. The IBP found Atty. Ngaseo guilty. Atty.
Ngaseo argues that he did not violate Article 1491 CC because when he
demanded the delivery of the piece of land, the case has been terminated, when
the appellatecourt ordered the return of the land to the family of Ramos.

ISSUE:

Whether or not Atty. Ngaseo violated Art. 1491 CC.

HELD:

NO.
Under Par. 5 of Art. 1491 of the Civil Code, lawyers are prohibited from acquiring either
by purchase or assignment the property or rights involved which are the object of
litigation in which they intervene by virtue of their public or judicial sales. The
article provides :

Article 1491. The following persons cannot acquire by purchase, even at a public
or judicial action either inperson or through the mediation of another.

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts,
and other officers and employees connected with the administration of justice,
the property and rights in litigation or levied upon anexecution before the court
within whose jurisdiction orterritory they exercise their respective functions: this
prohibition includes the act of acquiring by assignment andshall apply to lawyers,
with respect to the property andrights which may be the object of any litigation in
whichthey may take part by virtue of their profession.

The prohibition in the aforesaid Article applies only to thesale or assignment of

the property which is the subject oflitigation to the persons disqualified therein.
We have already ruled that “…for the prohibition to operate, the sale or
assignment of the property must take place during the pendency of the litigation
involving the property.’’

Since such prohibition applies only if the sale orassignment of the property takes
place during thependency of the litigation involving the client’s property.
Consequently, where the property is acquired after the termination of the case,
as in the instant case, no violation of paragraph 5 , article 1491 of Civil Code
attatches.
In the instant case, there was no actual acquisition of the property in litigation
since the respondent only made a written demand for its delivery, which the complainant
refused to comply. Mere demand for delivery of the litigated property does not
cause the transfer of ownership, hence, not a prohibited transaction within the
contemplation of Article 1491.
 DAVID P. FORNILDA, JUAN P. FORNILDA, EMILIA P.
FORNILDA OLILI, LEOCADIA P. FORNILDA LABAYEN and
ANGELA P. FORNILDA GUTIERREZ, petitioners,

vs.

THE BRANCH 164, REGIONAL TRIAL COURT IVTH JUDICIAL

REGION, PASIG, JOAQUIN C. ANTONIA Deputy Sheriff, RTC,
4JR Tanay, Rizal and ATTY. SERGIO AMONOY, respondents.

RESOLUTION

On 5 October 1988, this Court rendered a Decision, the dispositive portion of which reads:

WHEREFORE, certiorari is granted; the Order of respondent Trial Court, dated 25 July 1985,
granting a Writ of Possession, as well as its orders, dated 25 April 1986 and 16 May 1986,
directing and authorizing respondent Sheriff to demolish the houses of petitioners Angela and
Leocadia Fornilda are hereby set aside, and the Temporary Restraining Order heretofore issued,
is made permanent. The six (6) parcels of land herein controverted are hereby ordered
returned to petitioner unless some of them have been conveyed to innocent third persons.

With respect to petitioners' prayer for disbarment by reason of malpractice of Respondent

Amonoy embodied in their pleading entitled "Mahigpit na Musiyun para Papanagutin Kaugnay
ng Paglalapastangan" and "Masasamang Gawain (Mal-Practices)" and "Paninindigan
(Memorandum)" both filed on 16 June 1988, Respondent Sergio 1. Amonoy is hereby required,
within fifteen (15) days from notice hereof, to submit an answer thereto. After receipt of the
same, a new docket number will be assigned to the case.

Costs against respondent, Sergio I. Amonoy. (pp. 497-498, Rollo)

The case for disbarment is dealt with in a separate Resolution of even date in AC No. 3277.

On 25 October 1988 respondent Amonoy filed his Motion for Reconsideration, followed by his
"Supplemental Arguments in Support of Motion for Reconsideration" dated 8 November 1988.
In essence, he advances the following points:

1) The transaction involved herein being a mortgage, Article 1491[51 of the Civil Code does
not apply. Consequently, the mortgage contract executed in favor of respondent Amonoy is
valid;

2) Article 1491[5] does not apply to foreclosure sales in favor of judgment creditors;

3) The instant petition is barred by res judicata;

4) The jurisdiction of the foreclosing court does not depend on the alleged invalidity of the
mortgage being foreclosed. Thus, the lower court had jurisdiction over the foreclosure case, the
alleged invalidity of the contract merely serving as a ground for the dismissal of the petition due
to lack of cause of action;

5) Under BP 129, only the Court of Appeals has original and exclusive jurisdiction over actions
for annulment of judgment.

We find the foregoing submissions without merit.

Respondent Amonoy avers that at the time of the execution of the mortgage on 20 January
1965, subject properties were no longer "properties in litigation" since the Project of Partition
(as signed by the intestate heirs) covering said properties was approved by the lower Court as
early as 12 January 1965.
This argument must fail for the reason that while the Project of Partition was approved on 12
January 1965, it was only on 6 August 1969, and after all charges against the estate had been
paid, that the estate was declared closed and terminated. In fact, by his own admission, he had
acted as counsel from 1959 until 1968 (Comment, p. 145, Rollo). Thus, at the time of the
execution of the mortgage contract, the Controverted Parcels were still in litigation and a
fiduciary relationship of lawyer and client, which Article 1491[5] precisely seeks to protect, still
existed between the parties. To state that mortgages are not included within the prohibition is
to open the door to an indirect circumvention of that statutory injunction, acquisition of the
property being merely postponed till eventual foreclosure.

Respondent asserts further that Article 1491[5] does not apply to judgment creditors of which,
he claims, he was one. Under ordinary circumstances, the argument of respondent could be
considered plausible. Unfortunately, however, as heretofore explained, the mortgage was
executed in violation of Article 1491[5] so that this Article has a direct bearing on this case and
respondent can not escape its provision. Having violated the same, he cannot be considered in
the general run of a judgment creditor.

Respondent likewise stresses that res judicata should apply herein since it was a little more
than four (4) years from the 22 July 1981 Decision of the Court of Appeals in the Annulment
Case (CA-G.R. No. 63214-R) when this Petition was filed. Consequently, he contends that this
Petition should be dismissed since it merely raises the same issues brought up and already
resolved in the earlier case.

The question of res judicata and jurisdiction of the lower Court over the subject matter of the
Foreclosure Case had been amply discussed in the Decision sought to be reconsidered, citing
the case of Municipality of Antipolo vs. Zapanta (133 SCRA 822 [1984]), and we find no need to
dwell on them again.

Neither of the cases cited by respondent to support his contention that the lower Court had
jurisdiction over the Foreclosure Case notwithstanding the invalidity of the mortgage contract,
viz., Florentino vs. Galera (5 SCRA 500 [1962] and Talosig vs. Vda. de Nieba (43 SCRA 472
[1972]), refers to a void subject matter over which the Courts involved could not acquire
jurisdiction.

Finally, respondent movant submits that only the Court of Appeals has original and exclusive
jurisdiction over actions for annulment of judgments of the lower Court under BP Blg. 129 so
that the Supreme Court should not take cognizance of the instant case. The focal issue raised
herein, however, i.e., whether or not the acquisition by respondent of the property in litigation
is valid or not, is a pure question of law. As such, this Court is vested with jurisdiction to take
cognizance of this case.

ACCORDINGLY, private respondent's Motion for Reconsideration is hereby DENIED and this
denial is FINAL.

SO ORDERED

CASE DIGEST

FACTS:

The Controverted Parcels were part of the estate of the late Julio M. Catolossubject of
intestate estate proceedings, wherein Respondent Amonoy actedas counsel for some of the
heirs from 1959 until 1968 by his own admission. These properties were adjudicated to Alfonso
Fornilda and Asuncion M. Pasamba in the Project of Partition approved by the Court on 12
January 1965 On 20 January 1965, or only eight (8) days thereafter, and while he was
stillintervening in the case as counsel, these properties were mortgaged by petitioners'
predecessor-in-interest to Respondent Amonoy to secure payment of the latter's attorney's
fees in the amount of P27,600.00, Since the mortgage indebtedness was not paid, Respondent
Amonoy instituted an action for judicial foreclosure of mortgage on 21 January 1970, The
mortgage was subsequently ordered foreclosed and auction sale followed where Respondent
Amonoy was the sole bidder for P23,600.00, Being short of the mortgage indebtedness, he
applied for and further obtained a deficiency judgment.

ISSUE:
Whether or not the mortgage constituted on the Controverted Parcels in favor of Respondent
Amonoy comes within the scope of the prohibition in Article 1491 of theCivil Code.

HELD:

YES, The pertinent portions of the said Articles read:

Art. 1491. The following persons cannot acquire by purchase even at a public or judicial or
auction, either in person or through the mediation of another:

xxx xxx xxx

(5) Justices, judges, prosecuting attorneys, ... the property and rights in litigation or levied upon
on execution before the court within whose junction or territory they exercise their respective
functions; this prohibition includes the act of acquitting by assignment and shall apply to
lawyers with respect to the property and rights which may be the object of any litigation in
which they may take part by virtue of their profession. (Emphasis supplied) ,

Under the aforequoted provision, a lawyer is prohibited from acquiring either by purchase or
assignment the property or rights involved which are the object of the litigation in which they
intervene by virtue of their profession. The prohibition on purchase is all embracing to
includenot only sales to private individuals but also public or judicial sales ,

At the time the mortgage was executed, therefore, the relationship of lawyerand client still
existed, the very relation of trust and confidence sought to beprotected by the prohibition,
when a lawyer occupies a vantage position topress upon or dictate terms to a harassed client.
From the time of theexecution of the mortgage in his favor, Respondent Amonoy had
alreadyasserted a title adverse to his clients' interests at a time when
therelationship of lawyer and client had not yet been severed.

Considering that the mortgage contract, entered into in contravention of Article 1491 of the
Civil Code is expressly prohibited by law, the same mustbe held inexistent and void ab initio.
 Carbonell
Vs.
CA

Petitioner seeks a review of the resolution of the Court of Appeals (Special Division of Five)
dated October 30, 1968, reversing its decision of November 2, 1967 (Fifth Division), and its
resolution of December 6, 1968 denying petitioner's motion for reconsideration.

The dispositive part of the challenged resolution reads:

Wherefore, the motion for reconsideration filed on behalf of appellee Emma Infante, is hereby
granted and the decision of November 2, 1967, is hereby annulled and set aside. Another
judgement shall be entered affirming in toto that of the court a quo, dated January 20, 1965,
which dismisses the plaintiff's complaint and defendant's counterclaim.

Without costs.

The facts of the case as follows:

Prior to January 27, 1955, respondent Jose Poncio, a native of the Batanes Islands, was the
owner of the parcel of land herein involve with improvements situated at 179 V. Agan St., San
Juan, Rizal, having an area of some one hundred ninety-five (195) square meters, more or less,
covered by TCT No. 5040 and subject to mortgage in favor of the Republic Savings Bank for the
sum of P1,500.00. Petitioner Rosario Carbonell, a cousin and adjacent neighbor of respondent
Poncio, and also from the Batanes Islands, lived in the adjoining lot at 177 V. Agan Street.

Both petitioners Rosario Carbonell and respondent Emma Infante offered to buy the said lot
from Poncio (Poncio's Answer, p. 38, rec. on appeal).
Respondent Poncio, unable to keep up with the installments due on the mortgage, approached
petitioner one day and offered to sell to the latter the said lot, excluding the house wherein
respondent lived. Petitioner accepted the offer and proposed the price of P9.50 per square
meter. Respondent Poncio, after having secured the consent of his wife and parents, accepted
the price proposed by petitioner, on the condition that from the purchase price would come
the money to be paid to the bank.

Petitioner and respondent Jose Poncio then went to the Republic Savings Bank and secured the
consent of the President thereof for her to pay the arrears on the mortgage and to continue the
payment of the installments as they fall due. The amount in arrears reached a total sum of
P247.26. But because respondent Poncio had previously told her that the money, needed was
only P200.00, only the latter amount was brought by petitioner constraining respondent Jose
Poncio to withdraw the sum of P47.00 from his bank deposit with Republic Savings Bank. But
the next day, petitioner refunded to Poncio the sum of P47.00.

On January 27, 1955, petitioner and respondent Poncio, in the presence of a witness, made and
executed a document in the Batanes dialect, which, translated into English, reads:

CONTRACT FOR ONE HALF LOT WHICH I BOUGHT FROM

JOSE PONCIO

Beginning today January 27, 1955, Jose Poncio can start living on the lot sold by him to me,
Rosario Carbonell, until after one year during which time he will not pa anything. Then if after
said one can he could not find an place where to move his house, he could still continue
occupying the site but he should pay a rent that man, be agreed.

(Sgd) JOSE PONCIO

(Sgd.) ROSARIO CARBONELL

(Sgd) CONSTANCIO MEONADA

Witness

(Pp. 6-7 rec. on appeal).

Thereafter, petitioner asked Atty. Salvador Reyes, also from the Batanes Islands, to prepare the
formal deed of sale, which she brought to respondent Poncio together with the amount of
some P400.00, the balance she still had to pay in addition to her assuming the mortgaged
obligation to Republic Savings Bank.

Upon arriving at respondent Jose Poncio's house, however, the latter told petitioner that he
could not proceed any more with the sale, because he had already given the lot to respondent
Emma Infants; and that he could not withdraw from his deal with respondent Mrs. Infante,
even if he were to go to jail. Petitioner then sought to contact respondent Mrs. Infante but the
latter refused to see her.

On February 5, 1955, petitioner saw Emma Infante erecting a all around the lot with a gate.

Petitioner then consulted Atty. Jose Garcia, who advised her to present an adverse claim over
the land in question with the Office of the Register of Deeds of Rizal. Atty. Garcia actually sent a
letter of inquiry to the Register of Deeds and demand letters to private respondents Jose
Poncio and Emma Infante.

In his answer to the complaint Poncio admitted "that on January 30, 1955, Mrs. Infante
improved her offer and he agreed to sell the land and its improvements to her for P3,535.00"
(pp. 38-40, ROA).

In a private memorandum agreement dated January 31, 1955, respondent Poncio indeed
bound himself to sell to his corespondent Emma Infante, the property for the sum of P2,357.52,
with respondent Emma Infante still assuming the existing mortgage debt in favor of Republic
Savings Bank in the amount of P1,177.48. Emma Infante lives just behind the houses of Poncio
and Rosario Carbonell.

On February 2, 1955, respondent Jose Poncio executed the formal deed of sale in favor of
respondent Mrs. Infante in the total sum of P3,554.00 and on the same date, the latter paid
Republic Savings Bank the mortgage indebtedness of P1,500.00. The mortgage on the lot was
eventually discharged.

Informed that the sale in favor of respondent Emma Infante had not yet been registered, Atty.
Garcia prepared an adverse claim for petitioner, who signed and swore to an registered the
same on February 8, 1955.

The deed of sale in favor of respondent Mrs. Infante was registered only on February 12, 1955.
As a consequence thereof, a Transfer Certificate of Title was issued to her but with the
annotation of the adverse claim of petitioner Rosario Carbonell.

Respondent Emma Infante took immediate possession of the lot involved, covered the same
with 500 cubic meters of garden soil and built therein a wall and gate, spending the sum of
P1,500.00. She further contracted the services of an architect to build a house; but the
construction of the same started only in 1959 — years after the litigation actually began and
during its pendency. Respondent Mrs. Infante spent for the house the total amount of
P11,929.00.

On June 1, 1955, petitioner Rosario Carbonell, thru counsel, filed a second amended complaint
against private respondents, praying that she be declared the lawful owner of the questioned
parcel of land; that the subsequent sale to respondents Ramon R. Infante and Emma L. Infante
be declared null and void, and that respondent Jose Poncio be ordered to execute the
corresponding deed of conveyance of said land in her favor and for damages and attorney's
fees (pp. 1-7, rec. on appeal in the C.A.).
Respondents first moved to dismiss the complaint on the ground, among others, that
petitioner's claim is unenforceable under the Statute of Frauds, the alleged sale in her favor not
being evidenced by a written document (pp. 7-13, rec. on appeal in the C.A.); and when said
motion was denied without prejudice to passing on the question raised therein when the case
would be tried on the merits (p. 17, ROA in the C.A.), respondents filed separate answers,
reiterating the grounds of their motion to dismiss (pp. 18-23, ROA in the C.A.).

During the trial, when petitioner started presenting evidence of the sale of the land in question
to her by respondent Poncio, part of which evidence was the agreement written in the Batanes
dialect aforementioned, respondent Infantes objected to the presentation by petitioner of
parole evidence to prove the alleged sale between her and respondent Poncio. In its order of
April 26, 1966, the trial court sustained the objection and dismissed the complaint on the
ground that the memorandum presented by petitioner to prove said sale does not satisfy the
requirements of the law (pp. 31-35, ROA in the C.A.).

From the above order of dismissal, petitioner appealed to the Supreme Court (G.R. No. L-
11231) which ruled in a decision dated May 12, 1958, that the Statute of Frauds, being
applicable only to executory contracts, does not apply to the alleged sale between petitioner
and respondent Poncio, which petitioner claimed to have been partially performed, so that
petitioner is entitled to establish by parole evidence "the truth of this allegation, as well as the
contract itself." The order appealed from was thus reversed, and the case remanded to the
court a quo for further proceedings (pp. 26-49, ROA in the C.A.).

After trial in the court a quo; a decision was, rendered on December 5, 1962, declaring the
second sale by respondent Jose Poncio to his co-respondents Ramon Infante and Emma Infante
of the land in question null and void and ordering respondent Poncio to execute the proper
deed of conveyance of said land in favor of petitioner after compliance by the latter of her
covenants under her agreement with respondent Poncio (pp. 5056, ROA in the C.A.).

On January 23, 1963, respondent Infantes, through another counsel, filed a motion for re-trial
to adduce evidence for the proper implementation of the court's decision in case it would be
affirmed on appeal (pp. 56-60, ROA in the C.A.), which motion was opposed by petitioner for
being premature (pp. 61-64, ROA in the C.A.). Before their motion for re-trial could be resolved,
respondent Infantes, this time through their former counsel, filed another motion for new trial,
claiming that the decision of the trial court is contrary to the evidence and the law (pp. 64-78,
ROA in the C.A.), which motion was also opposed by petitioner (pp. 78-89, ROA in the C.A.).

The trial court granted a new trial (pp. 89-90, ROA in the C.A.), at which re-hearing only the
respondents introduced additional evidence consisting principally of the cost of improvements
they introduced on the land in question (p. 9, ROA in the C.A.).

After the re-hearing, the trial court rendered a decision, reversing its decision of December 5,
1962 on the ground that the claim of the respondents was superior to the claim of petitioner,
and dismissing the complaint (pp. 91-95, ROA in the C.A.), From this decision, petitioner Rosario
Carbonell appealed to the respondent Court of Appeals (p. 96, ROA in the C.A.).

On November 2, 1967, the Court of Appeals (Fifth Division composed of Justices Magno
Gatmaitan, Salvador V. Esguerra and Angle H. Mojica, speaking through Justice Magno
Gatmaitan), rendered judgment reversing the decision of the trial court, declaring petitioner
therein, to have a superior right to the land in question, and condemning the defendant
Infantes to reconvey to petitioner after her reimbursement to them of the sum of P3,000.00
plus legal interest, the land in question and all its improvements (Appendix "A" of Petition).

Respondent Infantes sought reconsideration of said decision and acting on the motion for
reconsideration, the Appellate Court, three Justices (Villamor, Esguerra and Nolasco) of Special
Division of Five, granted said motion, annulled and set aside its decision of November 2, 1967,
and entered another judgment affirming in toto the decision of the court a quo, with Justices
Gatmaitan and Rodriguez dissenting (Appendix "B" of Petition).

Petitioner Rosario Carbonell moved to reconsider the Resolution of the Special Division of Five,
which motion was denied by Minute Resolution of December 6, 1968 (but with Justices
Rodriguez and Gatmaitan voting for reconsideration) [Appendix "C" of Petition].

Hence, this appeal by certiorari.

Article 1544, New Civil Code, which is decisive of this case, recites:

If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should
movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in the possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith (emphasis supplied).

It is essential that the buyer of realty must act in good faith in registering his deed of sale to
merit the protection of the second paragraph of said Article 1544.

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 paragraph, good faith must
characterize the act of anterior registration (DBP vs. Mangawang, et al., 11 SCRA 405; Soriano,
et al. vs. Magale, et al., 8 SCRA 489).

If there is no inscription, what is decisive is prior possession in good faith. If there is inscription,
as in the case at bar, prior registration in good faith is a pre-condition to superior title.

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 of Infante as there was no such sale to Infante then. Hence, Carbonell's prior purchase of
the land was made in good faith. Her good faith subsisted and continued to exist when she
recorded her adverse claim four (4) days prior to the registration of Infantes's deed of sale.
Carbonell's good faith did not cease after Poncio told her on January 31, 1955 of his second sale
of the same lot to Infante. Because of that information, Carbonell wanted an audience with
Infante, which desire underscores Carbonell's good faith. With an aristocratic disdain unworthy
of the good breeding of a good Christian and good neighbor, Infante snubbed Carbonell like a
leper and refused to see her. So Carbonell did the next best thing to protect her right — she
registered her adversed claim on February 8, 1955. Under the circumstances, this recording of
her adverse claim should be deemed to have been done in good faith and should emphasize
Infante's bad faith when she registered her deed of sale four (4) days later on February 12,
1955.

Bad faith arising from previous knowledge by Infante of the prior sale to Carbonell is shown by
the following facts, the vital significance and evidenciary effect of which the respondent Court
of Appeals either overlooked of failed to appreciate:

(1) Mrs. Infante refused to see Carbonell, who wanted to see Infante after she was
informed by Poncio that he sold the lot to Infante but several days before Infante registered her
deed of sale. This indicates that Infante knew — from Poncio and from the bank — of the prior
sale of the lot by Poncio to Carbonell. Ordinarily, one will not refuse to see a neighbor. Infante
lives just behind the house of Carbonell. Her refusal to talk to Carbonell could only mean that
she did not want to listen to Carbonell's story that she (Carbonell) had previously bought the lot
from Poncio.

(2) Carbonell was already in possession of the mortgage passbook [not Poncio's saving
deposit passbook — Exhibit "1" — Infantes] and Poncio's copy of the mortgage contract, when
Poncio sold the lot Carbonell who, after paying the arrearages of Poncio, assumed the balance
of his mortgaged indebtedness to the bank, which in the normal course of business must have
necessarily informed Infante about the said assumption by Carbonell of the mortgage
indebtedness of Poncio. Before or upon paying in full the mortgage indebtedness of Poncio to
the Bank. Infante naturally must have demanded from Poncio the delivery to her of his
mortgage passbook as well as Poncio's mortgage contract so that the fact of full payment of his
bank mortgage will be entered therein; and Poncio, as well as the bank, must have inevitably
informed her that said mortgage passbook could not be given to her because it was already
delivered to Carbonell.

If Poncio was still in possession of the mortgage passbook and his copy of the mortgage
contract at the time he executed a deed of sale in favor of the Infantes and when the Infantes
redeemed his mortgage indebtedness from the bank, Poncio would have surrendered his
mortgage passbook and his copy of the mortgage contract to the Infantes, who could have
presented the same as exhibits during the trial, in much the same way that the Infantes were
able to present as evidence Exhibit "1" — Infantes, Poncio's savings deposit passbook, of which
Poncio necessarily remained in possession as the said deposit passbook was never involved in
the contract of sale with assumption of mortgage. Said savings deposit passbook merely proves
that Poncio had to withdraw P47.26, which amount was tided to the sum of P200.00 paid by
Carbonell for Poncio's amortization arrearages in favor of the bank on January 27, 1955;
because Carbonell on that day brought with her only P200.00, as Poncio told her that was the
amount of his arrearages to the bank. But the next day Carbonell refunded to Poncio the sum of
P47.26.

(3) The fact that Poncio was no longer in possession of his mortgage passbook and that the
said mortgage passbook was already in possession of Carbonell, should have compelled Infante
to inquire from Poncio why he was no longer in possession of the mortgage passbook and from
Carbonell why she was in possession of the same (Paglago, et. al vs. Jara et al 22 SCRA 1247,
1252-1253). The only plausible and logical reason why Infante did not bother anymore to make
such injury , w because in the ordinary course of business the bank must have told her that
Poncio already sold the lot to Carbonell who thereby assumed the mortgage indebtedness of
Poncio and to whom Poncio delivered his mortgage passbook. Hoping to give a semblance of
truth to her pretended good faith, Infante snubbed Carbonell's request to talk to her about the
prior sale to her b Poncio of the lot. As aforestated, this is not the attitude expected of a good
neighbor imbued with Christian charity and good will as well as a clear conscience.

(4) Carbonell registered on February 8, 1955 her adverse claim, which was accordingly
annotated on Poncio's title, four [4] days before Infante registered on February 12, 1955 her
deed of sale executed on February 2, 1955. Here she was again on notice of the prior sale to
Carbonell. Such registration of adverse claim is valid and effective (Jovellanos vs. Dimalanta, L-
11736-37, Jan. 30, 1959, 105 Phil. 1250-51).
(5) In his answer to the complaint filed by Poncio, as defendant in the Court of First
Instance, he alleged that both Mrs. Infante and Mrs. Carbonell offered to buy the lot at P15.00
per square meter, which offers he rejected as he believed that his lot is worth at least P20.00
per square meter. It is therefore logical to presume that Infante was told by Poncio and
consequently knew of the offer of Carbonell which fact likewise should have put her on her
guard and should have compelled her to inquire from Poncio whether or not he had already
sold the property to Carbonell.

As recounted by Chief Justice Roberto Concepcion, then Associate Justice, in the preceding case
of Rosario Carbonell vs. Jose Poncio, Ramon Infante and Emma Infante (1-11231, May 12,
1958), Poncio alleged in his answer:

... that he had consistently turned down several offers, made by plaintiff, to buy the land in
question, at P15 a square meter, for he believes that it is worth not less than P20 a square
meter; that Mrs. Infante, likewise, tried to buy the land at P15 a square meter; that, on or about
January 27, 1955, Poncio was advised by plaintiff that should she decide to buy the property at
P20 a square meter, she would allow him to remain in the property for one year; that plaintiff
then induced Poncio to sign a document, copy of which if probably the one appended to the
second amended complaint; that Poncio signed it 'relying upon the statement of the plaintiff
that the document was a permit for him to remain in the premises in the event defendant
decided to sell the property to the plaintiff at P20.00 a square meter'; that on January 30, 1955,
Mrs. Infante improved her offer and agreed to sell the land and its improvement to her for
P3,535.00; that Poncio has not lost 'his mind,' to sell his property, worth at least P4,000, for the
paltry sum P1,177.48, the amount of his obligation to the Republic Saving s Bank; and that
plaintiff's action is barred by the Statute of Frauds. ... (pp. 38-40, ROA, emphasis supplied).

II

EXISTENCE OF THE PRIOR SALE TO CARBONELL

DULY ESTABLISHED
(1) In his order dated April 26, 1956 dismissing the complaint on the ground that the private
document Exhibit "A" executed by Poncio and Carbonell and witnessed by Constancio Meonada
captioned "Contract for One-half Lot which I Bought from Jose Poncio," was not such a
memorandum in writing within the purview of the Statute of Frauds, the trial judge himself
recognized the fact of the prior sale to Carbonell when he stated that "the memorandum in
question merely states that Poncio is allowed to stay in the property which he had sold to the
plaintiff. There is no mention of the reconsideration, a description of the property and such
other essential elements of the contract of sale. There is nothing in the memorandum which
would tend to show even in the slightest manner that it was intended to be an evidence of
contract sale. On the contrary, from the terms of the memorandum, it tends to show that the
sale of the property in favor of the plaintiff is already an accomplished act. By the very contents
of the memorandum itself, it cannot therefore, be considered to be the memorandum which
would show that a sale has been made by Poncio in favor of the plaintiff" (p. 33, ROA, emphasis
supplied). As found by the trial court, to repeat the said memorandum states "that Poncio is
allowed to stay in the property which he had sold to the plaintiff ..., it tends to show that the
sale of the property in favor of the plaintiff is already an accomplished act..."

(2) When the said order was appealed to the Supreme Court by Carbonell in the previous
case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and Emma Infante

(L-11231, supra), Chief Justice Roberto Concepcion, then Associate Justice, speaking for a
unanimous Court, reversed the aforesaid order of the trial court dismissing the complaint,
holding that because the complaint alleges and the plaintiff claims that the contract of sale was
partly performed, the same is removed from the application of the Statute of Frauds and
Carbonell should be allowed to establish by parol evidence the truth of her allegation of partial
performance of the contract of sale, and further stated:

Apart from the foregoing, there are in the case at bar several circumstances indicating that
plaintiff's claim might not be entirely devoid of factual basis. Thus, for instance, Poncio
admitted in his answer that plaintiff had offered several times to purchase his land.

Again, there is Exhibit A, a document signed by the defendant. It is in the Batanes dialect,
which, according to plaintiff's uncontradicted evidence, is the one spoken by Poncio, he being a
native of said region. Exhibit A states that Poncio would stay in the land sold by him to plaintiff
for one year, from January 27, 1955, free of charge, and that, if he cannot find a place where to
transfer his house thereon, he may remain upon. Incidentally, the allegation in Poncio's answer
to the effect that he signed Exhibit A under the belief that it "was a permit for him to remain in
the premises in the" that "he decided to sell the property" to the plaintiff at P20 a sq. m." is, on
its face, somewhat difficult to believe. Indeed, if he had not decided as yet to sell the land to
plaintiff, who had never increased her offer of P15 a square meter, there was no reason for
Poncio to get said permit from her. Upon the other hand, if plaintiff intended to mislead Poncio,
she would have caused Exhibit A to be drafted, probably, in English , instead of taking the
trouble of seeing to it that it was written precisely in his native dialect, the Batanes. Moreover,
Poncio's signature on Exhibit A suggests that he is neither illiterate nor so ignorant as to sign
document without reading its contents, apart from the fact that Meonada had read Exhibit A to
him and given him a copy thereof, before he signed thereon, according to Meonada's
uncontradicted testimony.

Then, also, defendants say in their brief:

The only allegation in plaintiff's complaint that bears any relation to her claim that there has
been partial performance of the supposed contract of sale, is the notation of the sum of
P247.26 in the bank book of defendant Jose Poncio. The noting or jotting down of the sum of
P247.26 in the bank book of Jose Poncio does not prove the fact that the said amount was the
purchase price of the property in question. For all we knew, the sum of P247.26 which plaintiff
claims to have paid to the Republic Savings Bank for the account of the defendant, assuming
that the money paid to the Republic Savings Bank came from the plaintiff, was the result of
some usurious loan or accomodation, rather than earnest money or part payment of the land.
Neither is it competent or satisfactory evidence to prove the conveyance of the land in question
the fact that the bank book account of Jose Poncio happens to be in the possession of the
plaintiff. (Defendants-Appellees' brief, pp. 25-26).

How shall We know why Poncio's bank deposit book is in plaintiffs possession, or whether there
is any relation between the P247.26 entry therein and the partial payment of P247.26 allegedly
made by plaintiff to Poncio on account of the price of his land, if we do not allow the plaintiff to
explain it on the witness stand? Without expressing any opinion on the merits of plaintiff's
claim, it is clear, therefore, that she is entitled , legally as well as from the viewpoint of equity,
to an opportunity to introduce parol evidence in support of the allegations of her second
amended complaint. (pp. 46-49, ROA, emphasis supplied).
(3) In his first decision of December 5, 1962 declaring null and void the sale in favor of the
Infantes and ordering Poncio to execute a deed of conveyance in favor of Carbonell, the trial
judge found:

... A careful consideration of the contents of Exh. 'A' show to the satisfaction of the court that
the sale of the parcel of land in question by the defendant Poncio in favor of the plaintiff was
covered therein and that the said Exh. "a' was also executed to allow the defendant to continue
staying in the premises for the stated period. It will be noted that Exh. 'A' refers to a lot 'sold by
him to me' and having been written originally in a dialect well understood by the defendant
Poncio, he signed the said Exh. 'A' with a full knowledge and consciousness of the terms and
consequences thereof. This therefore, corroborates the testimony of the plaintiff Carbonell that
the sale of the land was made by Poncio. It is further pointed out that there was a partial
performance of the verbal sale executed by Poncio in favor of the plaintiff, when the latter paid
P247.26 to the Republic Savings Bank on account of Poncio's mortgage indebtedness. Finally,
the possession by the plaintiff of the defendant Poncio's passbook of the Republic Savings Bank
also adds credibility to her testimony. The defendant contends on the other hand that the
testimony of the plaintiff, as well as her witnesses, regarding the sale of the land made by
Poncio in favor of the plaintiff is inadmissible under the provision of the Statute of Fraud based
on the argument that the note Exh. "A" is not the note or memorandum referred to in the to in
the Statute of Fraud. The defendants argue that Exh. "A" fails to comply with the requirements
of the Statute of Fraud to qualify it as the note or memorandum referred to therein and open
the way for the presentation of parole evidence to prove the fact contained in the note or
memorandum. The defendant argues that there is even no description of the lot referred to in
the note, especially when the note refers to only one half lot. With respect to the latter
argument of the Exhibit 'A', the court has arrived at the conclusion that there is a sufficient
description of the lot referred to in Exh. 'A' as none other than the parcel of land occupied by
the defendant Poncio and where he has his improvements erected. The Identity of the parcel of
land involved herein is sufficiently established by the contents of the note Exh. "A". For a while,
this court had that similar impression but after a more and thorough consideration of the
context in Exh. 'A' and for the reasons stated above, the Court has arrived at the conclusion
stated earlier (pp. 52-54, ROA, emphasis supplied).

(4) After re-trial on motion of the Infantes, the trial Judge rendered on January 20, 1965
another decision dismissing the complaint, although he found
1. That on January 27, 1955, the plaintiff purchased from the defendant Poncio a parcel of
land with an area of 195 square meters, more or less, covered by TCT No. 5040 of the Province
of Rizal, located at San Juan del Monte, Rizal, for the price of P6.50 per square meter;

2. That the purchase made by the plaintiff was not reduced to writing except for a short
note or memorandum Exh. A, which also recited that the defendant Poncio would be allowed
to continue his stay in the premises, among other things, ... (pp. 91-92, ROA, emphasis
supplied).

From such factual findings, the trial Judge confirms the due execution of Exhibit "A", only that
his legal conclusion is that it is not sufficient to transfer ownership (pp. 93-94, ROA).

(5) In the first decision of November 2, 1967 of the Fifth Division of the Court of Appeals
composed of Justices Esguerra (now Associate Justice of the Supreme Court), Gatmaitan and
Mojica, penned by Justice Gatmaitan, the Court of Appeals found that:

... the testimony of Rosario Carbonell not having at all been attempted to be disproved by
defendants, particularly Jose Poncio, and corroborated as it is by the private document in
Batanes dialect, Exhibit A, the testimony being to the effect that between herself and Jose
there had been celebrated a sale of the property excluding the house for the price of P9.50 per
square meter, so much so that on faith of that, Rosario had advanced the sum of P247.26 and
binding herself to pay unto Jose the balance of the purchase price after deducting the
indebtedness to the Bank and since the wording of Exhibit A, the private document goes so far
as to describe their transaction as one of sale, already consummated between them, note the
part tense used in the phrase, "the lot sold by him to me" and going so far even as to state that
from that day onwards, vendor would continue to live therein, for one year, 'during which time
he will not pay anything' this can only mean that between Rosario and Jose, there had been a
true contract of sale, consummated by delivery constitutum possession, Art. 1500, New Civil
Code; vendor's possession having become converted from then on, as a mere tenant of vendee,
with the special privilege of not paying rental for one year, — it is true that the sale by Jose
Poncio to Rosario Carbonell corroborated documentarily only by Exhibit A could not have been
registered at all, but it was a valid contract nonetheless, since under our law, a contract sale is
consensual, perfected by mere consent, Couto v. Cortes, 8 Phil 459, so much so that under the
New Civil Code, while a sale of an immovable is ordered to be reduced to a public document,
Art. 1358, that mandate does not render an oral sale of realty invalid, but merely incapable of
proof, where still executory and action is brought and resisted for its performance, 1403, par. 2,
3; but where already wholly or partly executed or where even if not yet, it is evidenced by a
memorandum, in any case where evidence to further demonstrate is presented and admitted
as the case was here, then the oral sale becomes perfectly good, and becomes a good cause of
action not only to reduce it to the form of a public document, but even to enforce the contract
in its entirety, Art. 1357; and thus it is that what we now have is a case wherein on the one
hand Rosario Carbonell has proved that she had an anterior sale, celebrated in her favor on 27
January, 1955, Exhibit A, annotated as an adverse claim on 8 February, 1955, and on other, a
sale is due form in favor of Emma L. Infante on 2 February, 1955, Exhibit 3-Infante, and
registered in due form with title unto her issued on 12 February, 1955; the vital question must
now come on which of these two sales should prevail; ... (pp. 74-76, rec., emphasis supplied).

(6) In the resolution dated October 30, 1968 penned by then Court of Appeals Justice
Esguerra (now a member of this Court), concurred in by Justices Villamor and Nolasco,
constituting the majority of a Special Division of Five, the Court of Appeals, upon motion of the
Infantes, while reversing the decision of November 2, 1967 and affirming the decision of the
trial court of January 20, 1965 dismissing plaintiff's complaint, admitted the existence and
genuineness of Exhibit "A", the private memorandum dated January 27, 1955, although it did
not consider the same as satisfying "the essential elements of a contract of sale," because it
"neither specifically describes the property and its boundaries, nor mention its certificate of
title number, nor states the price certain to be paid, or contrary to the express mandate of
Articles 1458 and 1475 of the Civil Code.

(7) In his dissent concurred in by Justice Rodriguez, Justice Gatmaitan maintains his decision
of November 2, 1967 as well as his findings of facts therein, and reiterated that the private
memorandum Exhibit "A", is a perfected sale, as a sale is consensual and consummated by
mere consent, and is binding on and effective between the parties. This statement of the
principle is correct [pp. 89-92, rec.].

III
ADEQUATE CONSIDERATION OR PRICE FOR THE SALE

IN FAVOR OF CARBONELL

It should be emphasized that the mortgage on the lot was about to be foreclosed by the bank
for failure on the part of Poncio to pay the amortizations thereon. To forestall the foreclosure
and at the same time to realize some money from his mortgaged lot, Poncio agreed to sell the
same to Carbonell at P9.50 per square meter, on condition that Carbonell [1] should pay (a) the
amount of P400.00 to Poncio and 9b) the arrears in the amount of P247.26 to the bank; and [2]
should assume his mortgage indebtedness. The bank president agreed to the said sale with
assumption of mortgage in favor of Carbonell an Carbonell accordingly paid the arrears of
P247.26. On January 27, 1955, she paid the amount of P200.00 to the bank because that was
the amount that Poncio told her as his arrearages and Poncio advanced the sum of P47.26,
which amount was refunded to him by Carbonell the following day. This conveyance was
confirmed that same day, January 27, 1955, by the private document, Exhibit "A", which was
prepared in the Batanes dialect by the witness Constancio Meonada, who is also from Batanes
like Poncio and Carbonell.

The sale did not include Poncio's house on the lot. And Poncio was given the right to continue
staying on the land without paying any rental for one year, after which he should pay rent if he
could not still find a place to transfer his house. All these terms are part of the consideration of
the sale to Carbonell.

It is evident therefore that there was ample consideration, and not merely the sum of P200.00,
for the sale of Poncio to Carbonell of the lot in question.

But Poncio, induced by the higher price offered to him by Infante, reneged on his commitment
to Carbonell and told Carbonell, who confronted him about it, that he would not withdraw from
his deal with Infante even if he is sent to jail The victim, therefore, "of injustice and outrage is
the widow Carbonell and not the Infantes, who without moral compunction exploited the greed
and treacherous nature of Poncio, who, for love of money and without remorse of conscience,
dishonored his own plighted word to Carbonell, his own cousin.
Inevitably evident therefore from the foregoing discussion, is the bad faith of Emma Infante
from the time she enticed Poncio to dishonor his contract with Carbonell, and instead to sell
the lot to her (Infante) by offering Poncio a much higher price than the price for which he sold
the same to Carbonell. Being guilty of bad faith, both in taking physical possession of the lot and
in recording their deed of sale, the Infantes cannot recover the value of the improvements they
introduced in the lot. And after the filing by Carbonell of the complaint in June, 1955, the
Infantes had less justification to erect a building thereon since their title to said lot is seriously
disputed by Carbonell on the basis of a prior sale to her.

With respect to the claim of Poncio that he signed the document Exhibit "A" under the belief
that it was a permit for him to remain in the premises in ease he decides to sell the property to
Carbonell at P20.00 per square meter, the observation of the Supreme Court through Mr. Chief
Justice Concepcion in G.R. No. L-11231, supra, bears repeating:

... Incidentally, the allegation in Poncio's answer to the effect that he signed Exhibit A under the
belief that it 'was a permit for him to remain in the premises in the event that 'he decided to
sell the property' to the plaintiff at P20.00 a sq. m is, on its face, somewhat difficult to believe.
Indeed, if he had not decided as yet to sell that land to plaintiff, who had never increased her
offer of P15 a square meter, there as no reason for Poncio to get said permit from her. Upon
the they if plaintiff intended to mislead Poncio, she would have Exhibit A to be drafted,
probably, in English, instead of taking the trouble of seeing to it that it was written precisely in
his native dialect, the Batanes. Moreover, Poncio's signature on Exhibit A suggests that he is
neither illiterate nor so ignorant as to sign a document without reading its contents, apart from
the fact that Meonada had read Exhibit A to him-and given him a copy thereof, before he
signed thereon, according to Meonada's uncontradicted testimony. (pp. 46-47, ROA).

As stressed by Justice Gatmaitan in his first decision of November 2, 1965, which he reiterated
in his dissent from the resolution of the majority of the Special Division. of Five on October 30,
1968, Exhibit A, the private document in the Batanes dialect, is a valid contract of sale between
the parties, since sale is a consensual contract and is perfected by mere consent (Couto vs.
Cortes, 8 Phil. 459). Even an oral contract of realty is all between the parties and accords to the
vendee the right to compel the vendor to execute the proper public document As a matter of
fact, Exhibit A, while merely a private document, can be fully or partially performed, to it from
the operation of the statute of frauds. Being a all consensual contract, Exhibit A effectively
transferred the possession of the lot to the vendee Carbonell by constitutum possessorium
(Article 1500, New Civil Code); because thereunder the vendor Poncio continued to retain
physical possession of the lot as tenant of the vendee and no longer as knew thereof. More
than just the signing of Exhibit A by Poncio and Carbonell with Constancio Meonada as witness
to fact the contract of sale, the transition was further confirmed when Poncio agreed to the
actual payment by at Carbonell of his mortgage arrearages to the bank on January 27, 1955 and
by his consequent delivery of his own mortgage passbook to Carbonell. If he remained owner
and mortgagor, Poncio would not have surrendered his mortgage passbook to' Carbonell.

IV

IDENTIFICATION AND DESCRIPTION OF THE DISPUTED LOT IN THE MEMORANDUM EXHIBIT "A"

The claim that the memorandum Exhibit "A" does not sufficiently describe the disputed lot as
the subject matter of the sale, was correctly disposed of in the first decision of the trial court of
December 5, 1962, thus: "The defendant argues that there is even no description of the lot
referred to in the note (or memorandum), especially when the note refers to only one-half lot.
With respect to the latter argument of the defendant, plaintiff points out that one- half lot was
mentioned in Exhibit 'A' because the original description carried in the title states that it was
formerly part of a bigger lot and only segregated later. The explanation is tenable, in (sic)
considering the time value of the contents of Exh. 'A', the court has arrived at the conclusion
that there is sufficient description of the lot referred to in Exh. As none other than the parcel of
lot occupied by the defendant Poncio and where he has his improvements erected. The Identity
of the parcel of land involved herein is sufficiently established by the contents of the note Exh.
'A'. For a while, this court had that similar impression but after a more and through
consideration of the context in Exh. 'A' and for the reasons stated above, the court has arrived
to (sic) the conclusion stated earlier" (pp. 53-54, ROA).

Moreover, it is not shown that Poncio owns another parcel with the same area, adjacent to the
lot of his cousin Carbonell and likewise mortgaged by him to the Republic Savings Bank. The
transaction therefore between Poncio and Carbonell can only refer and does refer to the lot
involved herein. If Poncio had another lot to remove his house, Exhibit A would not have
stipulated to allow him to stay in the sold lot without paying any rent for one year and
thereafter to pay rental in case he cannot find another place to transfer his house.
While petitioner Carbonell has the superior title to the lot, she must however refund to
respondents Infantes the amount of P1,500.00, which the Infantes paid to the Republic Savings
Bank to redeem the mortgage.

It appearing that the Infantes are possessors in bad faith, their rights to the improvements they
introduced op the disputed lot are governed by Articles 546 and 547 of the New Civil Code.
Their expenses consisting of P1,500.00 for draining the property, filling it with 500 cubic meters
of garden soil, building a wall around it and installing a gate and P11,929.00 for erecting a b '
bungalow thereon, are useful expenditures, for they add to the value of the property (Aringo
vs. Arenas, 14 Phil. 263; Alburo vs. Villanueva, 7 Phil. 277; Valencia vs. Ayala de Roxas, 13 Phil.
45).

Under the second paragraph of Article 546, the possessor in good faith can retain the useful
improvements unless the person who defeated him in his possession refunds him the amount
of such useful expenses or pay him the increased value the land may have acquired by reason
thereof. Under Article 547, the possessor in good faith has also the right to remove the useful
improvements if such removal can be done without damage to the land, unless the person with
the superior right elects to pay for the useful improvements or reimburse the expenses therefor
under paragraph 2 of Article 546. These provisions seem to imply that the possessor in bad faith
has neither the right of retention of useful improvements nor the right to a refund for useful
expenses.

But, if the lawful possessor can retain the improvements introduced by the possessor in bad
faith for pure luxury or mere pleasure only by paying the value thereof at the time he enters
into possession (Article 549 NCC), as a matter of equity, the Infantes, although possessors in
bad faith, should be allowed to remove the aforesaid improvements, unless petitioner
Carbonell chooses to pay for their value at the time the Infantes introduced said useful
improvements in 1955 and 1959. The Infantes cannot claim reimbursement for the current
value of the said useful improvements; because they have been enjoying such improvements
for about two decades without paying any rent on the land and during which period herein
petitioner Carbonell was deprived of its possession and use.
WHEREFORE, THE DECISION OF THE SPECIAL DIVISION OF FIVE OF THE COURT OF APPEALS OF
OCTOBER 30, 1968 IS HEREBY REVERSED; PETITIONER ROSARIO CARBONELL IS HEREBY
DECLARED TO HAVE THE SUPERIOR RIGHT TO THE LAND IN QUESTION AND IS HEREBY
DIRECTED TO REIMBURSE TO PRIVATE RESPONDENTS INFANTES THE SUM OF ONE THOUSAND
FIVE HUNDRED PESOS (P1,500.00) WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS
DECISION; AND THE REGISTER OF DEEDS OF RIZAL IS HEREBY DIRECTED TO CANCEL TRANSFER
CERTIFICATE OF TITLE NO. 37842 ISSUED IN FAVOR OF PRIVATE RESPONDENTS INFANTES
COVERING THE DISPUTED LOT, WHICH CANCELLED TRANSFER CERTIFICATE OF TITLE NO. 5040
IN THE NAME OF JOSE PONCIO, AND TO ISSUE A NEW TRANSFER CERTIFICATE OF TITLE IN
FAVOR OF PETITIONER ROSARIO CARBONELL UPON PRESENTATION OF PROOF OF PAYMENT BY
HER TO THE INFANTES OF THE AFORESAID AMOUNT OF ONE THOUSAND FIVE HUNDRED PESOS
(P1,500.00).

PRIVATE RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED USEFUL

IMPROVEMENTS FROM THE LOT WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS
DECISION, UNLESS THE PETITIONER ROSARIO CARBONELL ELECTS TO ACQUIRE THE SAME AND
PAYS THE INFANTES THE AMOUNT OF THIRTEEN THOUSAND FOUR HUNDRED TWENTY-NINE
PESOS (P13,429.00) WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION.
SHOULD PETITIONER CARBONELL FAIL TO PAY THE SAID AMOUNT WITHIN THE AFORESTATED
PERIOD OF THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION, THE PERIOD OF THREE
(3) MONTHS WITHIN WHICH THE RESPONDENTS INFANTES MAY REMOVE THEIR
AFOREMENTIONED USEFUL IMPROVEMENTS SHALL COMMENCE FROM THE EXPIRATION OF
THE THREE (3) MONTHS GIVEN PETITIONER CARBONELL TO PAY FOR THE SAID USEFUL
IMPROVEMENTS.

WITH COSTS AGAINST PRIVATE RESPONDENTS.

Castro, C.J, Aquino and Martin, JJ., concur.

Separate Opinions
TEEHANKEE, J., concurring:

I concur. My concurrence proceeds from the same premise as the dissenting opinion of Justice
Munoz Palma that both the conflicting buyers of the real property in question, namely,
petitioner Rosario Carbonell as the first buyer may be deemed purchasers in good faith at the
respective dates of their purchase.

The answer to the question of who between the two buyers in good faith should prevail is
provided in the second paragraph of Article 1544 of the Civil Code 1 (formerly Article 1473 of
the old Civil Code) which ordains that "the ownership of the immovable property shall belong
to the person acquiring it who in good faith first recorded it in the Registry of Property."

In the case at bar, the seller executed on January 27, 1955 the private memorandum of sale of
the property in favor of the first buyer Carbonell, However, six days later on February 2, 1955,
the seller sold the property for a second time for an improved price, this time executing a
formal registrable deed of sale in favor of the second buyer Infante.

So it was that when the first buyer Carbonell saw the seller a few days afterwards bringing the
formal deed of sale for the seller's signature and the balance of the agreed cash payment, the
seller told her that he could not proceed anymore with formalizing the first sale because he had
already formalized the second sale in favor of the second buyer Infante.

Since Carbonell (the first buyer) did not have a formal registrable deed of sale, she did the next
best thing to protect her legal rights and registered on February 8, 1955 with the Rizal Register
of Deeds her adverse claim as first buyer entitled to the property. The second buyer Infante
registered the deed of sale in her favor with the Rizal Register of Deeds only on February 12,
1955 (notwithstanding its having been executed ten days earlier on February 2, 1955), and
therefore the transfer certificate of title issued in her favor carried the duly annotated adverse
claim of Carbonell as the first buyer.
Both these registrations were in good faith and hence, as provided by the cited code article, the
first buyer Carbonell as also the first registrant is legally entitled to the property.

The fact that Carbonell registered only an adverse claim as she had no registrable deed of sale
is of no moment. The facts of record amply show that she had a written memorandum of sale,
which was partially executed with the advance payment made by her for the seller's mortgage
account with the bank, and which was perfected and binding in law by their accord on the
subject matter and price. Carbonell could in law enforce in court her rights as first buyer under
the memorandum agreement and compel the seller to execute in her favor a formal registrable
deed of sale which would relate back to the date of the original memorandum agreement.

And under the cited code provision, Carbonell had to duly register such adverse claim as first
buyer, as otherwise the subsequent registration of the second buyer's deed of sale would have
obliterated her legal rights and enable the seller to achieve his fraudulent act of selling the
property a second time for a better price in derogation of her prior right thereto.

The fact that the seller refused to execute the formal deed of sale in Carbonell's favor and (as
was only to be expected) informed her that he could not proceed anymore with the sale
because he had sold it for a second time for a better price did not convert her prior registration
of her adverse claim into one of bad faith.

The fraudulent seller's act of informing the first buyer that he has wrongfully sold his property
for a second time cannot work out to his own advantage and to the detriment of the innocent
first buyer (by being considered as an "automatic registration" of the second sale) and defeat
the first buyer's right of priority, in time in right and in registration.

The governing principle here is prius tempore, portior jure 2 (first in time, stronger in right).
Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's rights
except only as provided by the Civil Code and that is where the second buyer first registers in
good faith the second sale ahead of the first. Such knowledge of the first buyer does not bar her
from availing of her rights under the law, among them, to register first her purchase as against
the second buyer. But in other so knowledge gained by the second buyer of the first sale
defeats his rights even if he is first to register the second sale, since such knowledge taints his
prior registration with bad faith.

This is the price exacted by Article 1544 of the Civil Code for the second buyer being able to
displace the first buyer: that before the second buyer can obtain priority over the first, he must
show that he acted in good faith throughout (i.e. in ignorance of the first sale and of the first
buyer's rights) — from the time of acquisition until the title is transferred to him by registration
or failing registration, by delivery of possession. The second buyer must show continuing good
faith and innocence or lack of knowledge of the first sale until his contract ripens into full
ownership through prior registration as provided by law.

The above principles were aptly restated in a 1948 Court of Appeals decision in the case of
Gallardo, vs. Gallardo penned by Justice J.B.L. Reyes, then a member of the appellate court. 3
The facts of that case and the case at bar are virtually Identical, except that the earlier case was
decided under the old Civil Code (Article 1473 thereof now reproduced as Article 1544 of the
present Civil Code), and the ratio decidendi thereof, mutatis mutandis, is fully applicable, as
follows:

Analysis of article 1473 of the Civil Code shows that before a second vendee can obtain priority
over the first, it is indispensable that he should have acted in good faith, (that is to say, in
ignorance of the rights of the first vendee's rights) until the title is transferred to him by actual
or constructive delivery of the thing sold. This is the price exacted by law for his being able to
displace the first vendee; and the mere fact that the second contract of sale was perfected in
good faith is not sufficient if, before the title passes, the second vendee acquires knowledge of
the first transaction. That the second buyer innocently agreed to purchase the land may protect
him against responsibility of conspiring with his vendor to defraud the established rights of the
first purchaser; but to defeat the latter's priority in time (based on the old principle "prius
tempore, potior jure," first in time, better in right) the good faith or innocence of the posterior
vendee must needs continue until his contract ripens into ownership by tradition or recording
(Palanca vs. Director of lands, 43 Phil. 141, 154).
That the formal deed of conveyance to Gabino Gallardo was executed after that of Caoagas is
of no moment, the contract of sale being perfected and binding by mere accord on the subject
matter and the price, even if neither is delivered (Article 1450, Civil Code), the deed of
conveyance will relate back to the date of the original agreement. 4

Finally, in the present case, the first buyer's registration (February 8, 1955) concededly
preceded the second buyer's registration (February 12, 1955) by four days, and therefore, as
provided by the Civil Code, the first buyer thereby duly preserved her right of priority and is
entitled to the property.

MUÑOZ PALMA, J., dissenting:

Strongly convinced as I am that the decision of the Court of Appeals under review should be
affirmed, this dissenting opinion is being written.

We are here confronted with a double sale made by Jose Poncio of his 195-square meter lot
located at V. Again St., San Juan, Rizal, covered by Transfer Certificate of Title No. 5040, the
solution to which is found in Art. 1544 of the Civil Code, more particularly the second paragraph
thereof which provides that should the thing sold be immovable property, the ownership shall
belong to the person acquiring it who in good with first recorded it in the Registry of property.

1. The two purchasers, namely, petitioner Rosario Carbonell and respondent Emma
Infante, are both purchasers in good faith.

That Rosario Carbonell is a buyer in good faith cannot be disputed for at the time negotiations
for the purchase of the lot were being made between her and the vendor, Jose Poncio, as of
January 27, 1955, there was no indication at all from the latter that another sale was being
contemplated.
That Emma Infante is likewise a buyer in good faith is supported by: (a) an express finding of the
trial court in its decision of January 20, 1965, to the effect that when the vendor and purchaser.
Infante consummated the sale on or about January 29, 1955, an examination of the original of
T.C.T. 5040 on file with the Register of Deeds of Rizal as well as the owner's duplicate revealed
no annotation of any encumbrance or lien other than the mortgage in favor of the Republic
Savings Bank (p. 92, Record on Appeal); (b) the findings of fact of the Court of Appeals given in
the decision penned by then Justice Salvador V. Esguerra as well as in the first decision written
by Justice Magno Gatmaitan which subsequently became the basis of the dissenting opinion to
the majority, and from which I quote:

2. CONSIDERING: That as basis for discussion of this issue, it must have to be remembered
that the first vendee, Rosario Carbonell, certainly was an innocent purchaser ... but also must it
be remembered that Emma L. Infante, when she bought the property on 2 February, 1955,
under Exhibit 3-Infante, neither had she before then been, preliminary informed of the first
sate to Rosario ...; indeed as Emma has testified on this detail, it is easy to accept her
declaration:

Q. When Mr. Jose Poncio offered you this land in question, did he tell you that the land
was sold or otherwise promised to Mrs. Carbonell?

A. Of course not, otherwise will never buy.

(tsn. II:27)

in other words, at the respective dates of their purchase, both vendees, Rosario and Emma,
were innocent and had acted in the best of good faith ... (pp. 9-10 of Justice Gatmaitan's
decision found on pp. 76-77, rollo; see also p. 7 of his dissenting opinion found on p. 95, rollo).

Departing from a well-entrenched rule set down in a long array of decisions of this Court that
factual findings of the trial court and of the Court -of Appeals are generally binding and
conclusive, 1 and that on appeal by certiorari, questions of fact are not to be determined nor
reviewed by Us 2 the Majority Opinion of my colleagues however undertakes a fact-finding
process of its own, and draws the conclusion that Emma Infante was a buyer in bad faith
because, among other things: (a) Emma allegedly refused to talk to Rosario Carbonell when the
latter went to see her about the sale of the lot, which "is not the attitude expected of a good
neighbor imbued with Christian charity and goodwill as well as a clean conscience" (p. 10,
Majority Opinion); (b) "(B)efore or upon paying in full the mortgage indebtedness of Poncio to
the bank. Infante naturally must have demanded from Poncio the delivery to her of his
mortgage passbook as well as Poncio's mortgage contract. . and Poncio as well as the bank,
must have inevitably informed here that said mortgage passbook could not be given to her
because it was already delivered to Carbonell" (p. 9, Ibid); and (c) "... (T)he victim, therefore, 'of
injustice and outrage is the widow Carbonell and not the Infantes, who without moral
compunction exploited the greed and treacherous nature of Poncio, who, for love of money
and without remorse of conscience, dishonored his own plighted word to Carbonell, his own
cousin. ... Inevitably evident therefore from the foregoing discussion, is the bad faith of Emma
Infante from the time she enticed Poncio to dishonor his contract with Carbonell, and instead
to sell the lot to her (Infante) by offering Poncio a much higher price than the price for which he
sold the same to Carbonell ..." (p. 20, Majority Opinion; all italicized portions supplied) — all of
which are unsupported by the evidence and diametrically contrary to the findings of the court a
quo and the appellate court sustaining the good faith of Emma Infante.

2. Inasmuch as the two purchasers are undoubtedly in good faith, the next question to be
resolved is who of the two first registered her purchase or title in good faith.

In applying Art. 1544 of the Civil Code, it is not enough that the buyer bought the property in
good faith, but that the registration of her title must also be accomplished in good faith. This
requirement of good faith is not only applicable to the second or subsequent purchaser but to
the first as well. 3

Construing and applying the second paragraph of Art. 1473 of the Spanish Civil Code which has
been adopted verbatim in Art. 1544 of the Civil Code of the Philippines, this Court in Leung Lee
vs. FL Strong Machinery Co., et al 37 Phil. 644, declared:
It has been suggested that since the provisions of article 1473 of the Civil Code require "good
faith," in express terms, in relation to "possession" and title but contain no express requirement
as to 'good faith' in relation to the "inscription" of the property in the registry, it must he
presumed that good faith is not an essential requisite of registration in order that it may have
the effect contemplated in this article. We cannot agree with this contention. It could not have
been the intention of the legislator to base the preferential right secured under this article of
the code upon an inscription of title in bad faith. Such an interpretation placed upon the
language of this section would open wide the door to fraud and collusion. The public records
cannot be converted into instruments of fraud and oppression by one who secures an
inscription therein in bad faith. The force and effect given by law to an inscription in a public
record presupposes the good faith of him who enters such inscription; and rights created by
statute, which are predicated upon an inscription in a public registry, do not and cannot accrue
under an inscription "in bad faith," to the benefit of the person who thus makes the inscription.
(pp. 648-649, supra)

Good faith means "freedom from knowledge and circumstances which ought to put a person on
inquiry"; 3 * it consists of an honest intention to abstain from taking any conscientious
advantage of another. 4

On this point it is my view that Rosario Carbonell cannot be held to have a title superior to that
of Emma Infante for even if We were to concede that the notation of her adverse claim on
February 8, 1955, was in the nature of registration of title as required in Art. 1544 of the Civil
Code, 5 the same was not accomplished in good faith. This is obvious from occurrences
narrated in the Majority Opinion, thus: that on January 27, 1955, Carbonell and Jose Poncio
made and executed the memorandum of sale, Exhibit A; that thereafter Carbonell asked Atty.
Salvador Reyes to prepare the formal deed of sale which she brought to Poncio together with
the amount of some P400.00, the balance she had to pay in addition to her assuming the
mortgage obligation to Republic Savings Bank; that upon arriving at Poncio's house the latter
told Carbonell that he could not proceed anymore with the sale because he had already given
the lot to Emma Infants; that on February 5, 1955, Carbonell saw Emma Infante erecting a wall
around the lot with a gate; that Carbonell consulted Atty. Jose Garcia who advised her to
present an adverse claim with the office of the Register of Deeds, and that being informed that
the sale in favor of Emma Infante had not yet been registered, Atty. Garcia prepared the notice
of adverse claim which was signed and sworn to by Rosario Carbonell and registered on
February 8, 1955. (see pp. 34, Decision)
At the time petitioner herein caused the annotation of her adverse claim she was, therefore,
cognizant of facts which impaired her title to the property in question, and taking advantage of
the situation that the second purchaser had not as yet registered her deed of sale, she went
ahead of the second buyer and annotated what was only in the nature of an adverse claim
inasmuch as she had no registrable document of sale at the time. That annotation of
Carbonell's adverse claim did not produce any legal effects as to place her in a preferential
situation to that of Infante, the second purchaser, for the simple reason that a registration
made in bad faith is equivalent to no registration at all. It is a settled rule that the inscription in
the registry, to be effective, must be made in good faith. (Pena, supra, p. 164)

3. One last point to be considered is the theory advanced by the dissenting opinion of
Justice Gatmaitan that while Carbonell's registration of her adverse claim may indeed be
considered in bad faith, nonetheless that of Infante was likewise in bad faith because at the
time of the registration of the latter's deed of sale there was already inscribed on the original of
the title on file with the Register of Deeds the adverse claim of Rosario Carbonell.

With due respect to the foregoing conclusion of highly respected Colleague, I hold the view that
the act of the registration of Infante's deed of sale on February 12, 1955, was but a formality in
the sense that it simply formalized what had already been accomplished earlier, that is, the
registration of Infantes purchase as against Carbonell when the latter inquired knowledge of
the second sale on or about January 27, 1955, when she brought the memorandum of sale, Exh.
A, to Jose Poncio and was informed by the latter that he could not go through with the sale
because he had already sold it to Emma Infante, which information was bolstered by the fact
that Carbonell saw Infante erecting a wall around the lot on February 5.

We have long accepted the rule that knowledge is equivalent to registration. What would be
the purpose of registration other than to give notice to interested parties and to the whole
world of the existence of rights or liens against the property under question?

What has been clearly and succinctly postulated in T. de Winkleman and Winkleman vs. Veluz
1922, 43 Phil. 604, 609, is applicable to the case before Us, and We quote therefrom:
. . . The purpose of registering an instrument relating to land, annuities, mortgages, liens or any
other class of real rights is to give notice to persons interested of the existence of these various
liens against the property. If the parties interested have actual notice of the existence of such
liens then the necessity for registration does not exist. Neither can one who has actual notice of
existing liens acquire any rights in such property free from such liens by the mere fact that such
liens have not been proven recorded. (citing Obras Pias vs. Devera Ignacio, 17 Phil. 45, 47).

We cannot overlook the fact that while it may be true that the vendor Poncio had signed the
memorandum, Exh. A, from which it may be implied that he sold a lot to Carbonell, there were
other things to be accomplished for purposes of binding third parties, the lot in question being
registered land, such as the execution of a formal deed of sale. Such a document of sale was
never signed by Poncio for according to petitioner Carbonell, when she presented to Poncio the
corresponding document together with the sum of P400.00 which according to her was the
balance of the purchase price after she had assumed the mortgage with the Republic Bank, she
was informed by the vendor that the property had been sold to another. That sale was
confirmed when Carbonell saw Infante erecting a wall around the lot on February 5, 1955. As of
that moment when Carbonell had notice or actual knowledge of the second sale in favor of
Emma Infante a valid registration of the latter's deed of sale was constituted as against
Carbonell. Accordingly, Infante has a preferential right to the property, the registration of her
sale having been effected in the foregoing manner, prior to the annotation of Carbonell's
adverse claim on February 8, 1955.

The circumstances of the present case are strikingly similar to the hypothetical problem posed
in Commentator Edgardo Paras' Book on the Civil Code of the Philippines and I wholeheartedly
concur with his solution of the problem which is based on law. From him I quote:6

A sold a parcel of land with a torrens title to B on January 5. A week later, A sold the same land
to C. Neither sale was registered. As soon as B learned of the sale in favor of C, he (B) registered
an adverse claim stating that he was making the claim because the second sale was in fraud of
his rights as first buyer. Later, C registered the deed of sale that had been made in his favor.
Who is now the owner B or C?
Ans. C is clearly the owner, although he was the second buyer. This is so, not because of the
registration of the sale itself but because of the AUTOMATIC registration in his favor caused by
Bs knowledge of the first sale (actual knowledge being equivalent to registration). The purpose
of registration is to notify. This notification was done because of Bs knowledge. It is wrong to
assert that B was only trying to protect his right-for there was no more right to be protected.
He should have registered the sale BEFORE knowledge came to him. It is now too late. It is clear
from this that with respect to the principle "actual knowledge is equivalent to registration of
the sale about which knowledge has been obtained' — the knowledge may be that-of either the
FIRST or the SECOND buyer. (pp. 142-143, Vol. V, 1972 Ed.)

Aside from the fact that the sale to Infante was considered registered prior to the registration
of Carbonell's notice of adverse claim, Infante also took immediate physical possession of the
property by erecting a fence with a gate around the lot on February 5, at least tree days prior to
Carbonell Is registration on February 8, 1955.

On top of all these, equity is on the side of Emma Infante. Under the Majority Opinion, Emma
Infante stands to lose the lot she bought in good faith which was fully paid for plus the building
she erected thereon for which she spent the total sun of a little less than P14,000.00, or
equivalent to about P40,000.00 at the time the case was decided by the Appellate Court,
considering that Rosario Carbonell is being given the option either to order the removal of the
house or to acquire it at P13,429.00. On this point I agree with the following statement of
Justice Esguerra who penned the decision of the Appellate Court, thus:

It is indeed inequitable and re revolting to one's sense of justice and fairness that Rosario
Carbonell who paid out of her own money the sum of only P200.00 to the Republic Savings
Bank for the account of Jose Poncio, which was the motivation for the execution of the private
instrument, Exhibit A, should have a superior right to the land involved. The property has been
improved at a great expense and a building of strong materials has been constructed thereon
Emma Infants ho spent for her lot and building the total sum of P13,429.00 made, up of
P11,929.00 for cost of land and improvements and the building and P1,500.00 to discharge the
mortgage in favor of the Republic Savings Bank. with the present purchasing power of the peso
this aft i more than 13 years, would be not equivalent to about P40,000.00. Courts should not
lend a hand to the perpetration of such kind of injustice and outrage (see page 88, rollo)
I close paraphrasing the Supreme Court of Oklahoma in Phelps vs. Theime, et al., 217 p. 376;
377, that "equity is a right wiseneth that considerate all of the particular circumstances of the
case and is also tempered with the sweetness of mercy." (quoting from St. Germain) In this case
now before Us there is no need to invoke mercy, for all that is required is a wise consideration
of the particular circumstances narrated above which warrant a judgment in favor of
respondents Infants.

With all the foregoing, I vote for the affirmance of the decision under review.

CASE DIGEST

Facts:

 Respondent Jose Poncio was the owner of the parcel of land located in Rizal. (Area – more
or less 195 sq. m.)
 The said lot was subject to mortgage in favor of the Republic Savings Bank for the sum of
P1,500.00.
 Carbonell and respondent Emma Infante offered to buy the said lot from Poncio.
 Poncio offered to sell his lot to Carbonell excluding the house on which he and his family
stayed. Carbonell accepted the offer and proposed the price of P9.50/sq. m..
 Poncio accepted the price on the condition that from the purchase price would come the
money to be paid to the bank.
 January 27, 1995: The parties executed a document in the Batanes dialect which is
translated as: CONTRACT FOR ONE HALF LOT WHICH I (Poncio) BOUGHT FROM.
 Carbonell asked a lawyer to prepare the deed of sale and delivered the document,
together with the balance of P400, to Jose Poncio. (Note: Carbonell already paid P200 for
the mortgage debt of Poncio + obligated herself to pay the remaining installments.)
 However, when she went to Poncio, the latter informed her that he could no longer
proceed with the sale as the lot was already sold to Emma Infante and that he could not
withdraw with the sale.
  Poncio admitted that on January 30, 1995, Mrs. Infante improved her offer and he agreed
to sell the land and its improvements to her for P3,535.00.
 In a private memorandum agreement, Poncio bound to sell to Infante the lot for the sum
of P2,357.52, with Infante still assuming the mortgage debt of P1,177.48. (Note: The full
amount of mortgage debt was already paid by the Infantes)
 February 2, 1995: A deed of sale was executed between Poncio and Infante.
 February 8, 1995: Knowing that the sale to Infante has not been registered, Carbonell filed
an adverse claim.
 February 12, 1995: The deed of sale was registered but it has an annotation of the adverse
claim of Carbonell.
 Thereafter, Emma Infante took possession of the lot, built a house and introduced some
improvements.
 In June 1995, Carbonell filed a complaint praying that she be declared the lawful owner of
the land, that the subsequent sale to spouses Infante be declared null and void, and that
Jose Poncio be ordered to execute the corresponding deed of conveyance of said land in
her favor
 RTC ruled that the sale to spouses Infante was null and void. After re-trial, it reversed its
ruling. CA ruled in favor of Carbonell but after a MfR, it reversed its ruling and ruled in
favor of the Infantes.

Issue:
WON Carbonell has a superior right over Emma Infante. YES

Held:
Article 1544 provides that for double sale of an immovable property, the ownership shall
belong to the person who first acquired it in good faith and recorded it in the Registry of
Property

Article 1544, New Civil Code, which is decisive of this case, recites:

If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should
movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in the possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith
 IGNACIO CARDENTE and ANASTACIA T. CARDENTE
vs.
THE INTERMEDIATE APPELLATE COURT andSPOUSES
RUPERTO RUBIN and PRIMITIVA C. RUBIN G.R. No. 73651
November 27 1987

This is a simple case of a double sale of an immovable property. The trial court decided 1 in favor of the first
vendee although the sale was by a private document. The then Intermediate Appellate Court reversed and set
aside the decision 2 of the lower court. The public respondent appellate court ruled in favor of the second
buyers, who registered their deed of sale. Hence, the present petition for review by certiorari.

The facts of the case are as simple as the central issue.

Sometime in 1956, francisca Cardente, for and on behalf of her grandson, petitioner Ignacio Cardente, who was
then a minor, and now married to his co-petitioner, purchased from Isidro Olanay one hectare of land.The
property purchase is a part of a 9.2656-hectare parcel of land covered by Original Certificate of Title (O.C.T., for
short) No. P-1380 in Palanay's name. Immediately after the purchase, the Cardentes took possession of the land
and planted various crops and trees thereon. They have been in continouos possession ever since, adverse to
the whole world. Unfortunately, however, the private document evidencing the sale of the one-hectare lot to
petitioner Ignacio Cardente was lost and never found despite diligent efforts exerted to locate the same.

Some four years later, on August 18, 1960, Isidro Palanay sold the entire property covered by O.C.T. No. P-1380,
including the one-hectare portion already sold to Cardente, this time to the private respondents, Ruperto Rubin
and his wife. The deed of sale was registered and a new title, Transfer Certificate of Title (T.C.T., for short) No.
1173, was issued in favor of the Rubin spouses. Notwithstanding the second sale, or because of it, Isidro Palanay,
with the written conforme of his wife, Josepha de Palanay, on December 9, 1972, executed a public document in
favor of petitioner Ignacio Cardente conforming the sale to him (Cardente) in 1956 of the one hectare portion.
The deed of confirmation likewise states that the subsequent vendee, respondent Ruperto Rubin, was informed
by Palanay of the first sale of the one-hectare portion to Cardente.

On February 18, 1977, the house of the petitioners was burned. As a consequence thereof, they lodged a
complaint for arson with the P.C. — Integrated National Police at Malaybalay, Bukidnon, against Ruperto Rubin,
whom they suspected of having committed the crime. Apparently, in retaliation, on March 31, 1977, seventeen
long years after their purchase, the private respondents filed a complaint with the then Court of First Instance of
Bukidnon for quieting of title with damages, against the petitioners, claiming ownership over the whole property
previously covered by O.C.T. No., P-1380, now registered in their names under T.C.T. No. 1173.

On July 9, 1979, the trial court dismissed the complaint of the Rubins and ordered them to "reconvey the one
hectare in question to defendant (Cardente) at the expense of the latter. 3

The Rubin spouses appealed to the respondent court, which rendered the decision under review. The assailed
decision decreed:
 xxx xxx xxx

WHEREFORE, the decision appealed from is hereby set aside and judgment is rendered (1) declaring plaintiffs the
absolute owners of subject property covered by Transfer Certificate of Title No. 1173; (2) ordering the
defendants to vacate the one-hectare portion in controversy, and to restore plaintiffs in possession thereof; (3)
quieting the title of plaintiffs over the one (1) hectare portion of land in controversy; and (4) ordering the
defendants to pay the costs.

SO ORDERED. 4

xxx xxx xxx

Now before us, the petitioners impute bad faith on the private respondents when the latter purchased the
entire property and when they subsequently registered their title thereto. By reason of such bad faith, the
petitioners' claim that insofar as the controverted one-hectare parcel of land is concerned the private
respondents' title thereto is null and void. 5

We agree with the petitioners. We grant the petition.

Admittedly, this case involves a double sale. While the private respondents allegedly bought from Isidro Palanay
on August 18, 1960 the entire property comprising 9.2656 hectares and covered by O.C.T. No. P-1380 the
petitioners, on the other hand, lay claim to one hectare thereof which they undeniably purchased from the same
vendor earlier, in 1956. The conflict, therefore, falls under, and can be resolved by, Article 1544 of the Civil Code
which sets the rules on double sales.

ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should be movable
property,

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.

It is undisputed that the private respondents, the second vendees, registered the sale in their favor whereas the
petitioners, the first buyers, did not. But mere registration of the sale is not enough. Good faith must concur with
the registration. Bad faith renders the registration nothing but an exercise in futility. The law and jurisprudence
are very clear on this score.6

The heart of the problem is whether or not the private respondents acted in good faith when they registered the
deed of sale dated August 18, 1960 more than six months later, on March 7, 1961. Inextricably, the inquiry must
be directed on the knowledge, or lack of it, of the previous sale of the one-hectare portion on the part of the
second buyers at the time of registration. The trial court found that the second vendees had such knowledge.

It is true that good faith is always presumed while bad faith must be proven by the party alleging it. 7 In this case,
however, viewed in the light of the circumstances obtaining, we have no doubt that the private respondents'
presumed good faith has been sufficiently overcome and their bad faith amply established.

The "Confirmation Of A Deed Of Absolute Sale of A Portion Of A Registered Agricultural Land" executed by the
late Ignacio Palanay on December 9, 1972 and which was exhibited in the trial court below, admitted the sale of
the one hectare portion to the petitioners sometime in 1956. The same deed likewise explicitly stated that the
"fact of the previous sale, was well known and acknowledged by Mr. Ruperto Rubin (the private respondent)." 8
These recitals were further buttressed by Concepcion Salubo, a daughter of Isidro Palanay, who testified that she
knew of the previous sale of the one-hectare portion to petitioner Ignacio Cardente and that private respondent
Ruperto Rubin was properly informed of the said sale. 9 On this regard, no ill-motive had been attributed to the
vendor Isidro Palanay and to his daughter Concepcion Salubo for testifying the way they did against the private
respondents. They were disinterested persons who stood to gain nothing except, perhaps, the satisfaction of
setting the record straight, or, in the words of the seller, "for the purpose of giving efficacy to the Deed of Sale I
made to Ignacio Cardente which was made in a private document ... ." 10

Further, the notorious and continuous possession and full enjoyment by petitioners of the disputed one-hectare
property long (four years) before the private respondents purchased the same from Palanay bolsters the
petitioners' position. That possession would have been enough to arouse the suspicion of the private
respondents as to the ownership of the entire area which they were about to purchase. Their failure to inquire
and to investigate the basis of the petitioners' actual occupation of the land forming a substantial part of what
they were buying militates against their deposited lack of knowledge of the first sale, "A purchaser cannot close
his eyes to facts which should put a reasonable man upon his guard and then claim that he acted in good faith
under the belief that there was no defect in The title of the vendor." 11 We have warned time and again that a
buyer of real property which is in the possession of persons other than the seller must be wary and should
investigate the rights of those in possession. Otherwise, without such inquiry, the buyer can hardly be regarded
as a buyer, in good faith. 12

The private respondents' avowals that they had never Known of the Prior sale until the issues were joined at the
trial court, for. before that, they merely tolerated the continued presence of the original occupants, Francisca and
Eugenia Cardente, and Ignacio, in the premises, out of simple pity for the two old women, 13 is too pat to be
believed. For if these were so, the reason why the private respondents continued to tolerate the occupation by
the petitioners of the contested property even after the demise of the two old women escapes us. Rubin's
allegation that this was because they were still in good terms with the petitioners 14 is too lame an excuse to
deserve even a scant consideration, The private respondents' total lack of action against the actual occupants of
a good portion of the land described in their torrens title can only be construed as acceptance on their part of the
existence of the prior sale and then resignation to the fact that they did not own the one-hectare portion
occupied by the petitioners. Present these facts, the foisted ignorance of the respondents as to the first sale is an
empty pretense. Their seventeen years of inaction and silence eloquently depict a realization of lack of right.
WHEREFORE, the Decision dated November 19, 1985 and the Resolution dated January 10, 1986 of the former
In intermediate Appellate Court are hereby REVERSED and SET ASIDE and the Decision dated July 9, 1979 of the
Court of First Instance of Bukidnon in Civil Case No. 860, is hereby REINSTATED. Costs against the private
respondents,

SO ORDERED.

CASE DIGEST

FACTS :

This is a simple case of a double sale of an immovable property. The trial court decided in favor
of the first vendee although the sale was by a private document. The then Intermediate
Appellate Court reversed and set aside the decision of the lower court. The public respondent
appellate court ruled in favor of the second buyers, who registered their deed of sale. Hence ,
the present petition for review by certiorari.

Sometime in 1956, Francisca Cardente, for and on behalf of her grandson, petitioner Ignacio
Cardente, who was then a minor, and now married to his co-petitioner, purchased from Isidro
Palanay one hectare of land. Immediately after the purchase, the Cardentes took possession of
the land and planted various crops and trees thereon. They have been in continuous possession
ever since, adverse to the whole world. Unfortunately, however, the private document
evidencing the sale of the one-hectare lot to petitioner Ignacio Cardente was lost and never
found despite diligent efforts exerted to locate the same.

Some four years later, on August 18, 1960, Isidro Palanay sold the entire property, including the
one-hectare portion already sold to Cardente, to the private respondents, Ruperto Rubin and
his wife. The deed of sale was registered and a new title was issued in favor of the Rubin
spouses. Notwithstanding the second sale, or because of it, Isidro Palanay, with the written
conforme of his wife, Josepha de Palanay, on December 9, 1972, executed a public document in
favor of petitioner Ignacio Cardente conforming the sale to him (Cardente) in 1956 of the one
hectare portion. The deed of confirmation likewise states that the subsequent vendee,
respondent Ruperto Rubin, was informed by Palanay of the first sale of the one-hectare portion
to Cardente.
ISSUES

Whether the private respondents, Sps. Rubin, acted in good faith when they registered the
deed of sale.

Whether the private respondents, Sps. Rubin, have the better right over the property.
HELD:

On the first issue: No, the Sps. Rubin did not act in good faith when they registered thedeed of
sale.

That possession (by the petitioners) would have been enough to arouse the suspicion of the
private respondents as to the ownership of the entire area which they were about to purchase.
Their failure to inquire and to investigate the basis of the petitioners' actual occupation of the
land forming a substantial part of what they were buying militates against their deposited lack
of knowledge of the first sale, "A purchaser cannot close his eyes to facts which should put a
reasonable man upon his guard and then claim that he acted in good faith under the belief that
there was no defect in the title of the vendor." We have warned time and again that a buyer
of real property which is in the possession of persons other than the seller must be wary and
should investigate the rights of those in possession. Otherwise, without such inquiry, the buyer
can hardly be regarded as a buyer, in good faith.

On the second issue:

The petitioners, Cardentes, have the better right over the property.

The private respondents' avowals that they had never Known of the Prior sale until the issues were joined at
the trial court, for. before that, they merely tolerated the continued presence of the original
occupants, Francisca and Eugenia Cardente, and Ignacio, in the premises, out of simple pity for
the two old women, is too pat to be believed. For if these were so, the reason why the private
respondents continued to tolerate the occupation by the petitioners of the contested property
even after the demise of the two old women escapes us. Rubin's allegation that this was
because they were still in good terms with the petitioners is too lame an excuse to deserve even a scant
consideration, The private respondents' total lack of action against the actual occupants of a good
portion of the land described in their torrens title can only be construed as acceptance on their
part of the existence of the prior sale and then resignation to the fact that they did not own the
one-hectare portion occupied by the petitioners. Present these facts, the foisted ignorance of
the respondents as to the first sale is an empty pretense. Their seventeen years of inaction and
silence eloquently depict a realization of lack of right.
 G.R. No. 106042 February 28, 1994

RUFINA BAUTISTA, ALFREDO JR., LUZVIMINDA, MARIZA,

JOSEPHINE, ALEJANDRO and AMELITA, all surnamed
VALDEZ, petitioners,

vs.

HON. COURT OF APPEALS, HON. MARINA L. BUZON,

SPOUSES DONALD SALVADOR and CRESENCIA SALVADOR,
respondents.

Ricardo C. Valmonte for petitioners.

Felix R. Solomon for private respondents.

This is a petition for review of a decision of the Court of Appeals in the case entitled "Spouses
Alfredo Valdez and Rufina Bautista v. Spouses Donald Salvador and Cresencia Salvador," (CA-
G.R. CV No. 31620).1

The background facts of the case as follows:

On August 10, 1983, spouses Alfredo Valdez and Rufina Bautista, herein petitioners,2 purchased
a parcel of land with an area of three hundred twenty six (326) square meters located in Barrio
Maysilo (now Santolan), Malabon originally registered in the name of Dionisio Santiago.3
Petitioners Valdez bought the subject property from Maria de la Cruz vda. de Santiago. The sale
was effected in a deed of extrajudicial settlement with absolute sale executed in their favor.4 In
this instrument, vendors Maria dela Cruz and Jose Santiago, claiming to be the widow and son
respectively of Dionisio Santiago, adjudicated unto themselves, as the only heirs of the
deceased,5 the latter's one half interest on the property covered by Transfer Certificate of Title
No. 343919, which together with the one half share thereon of Maria dela Cruz vda. de
Santiago, was sold to spouses Alfredo Valdez and Rufina Bautista for a consideration of
P55,420.00. Consequently, Transfer Certificate of Title (TCT) No. 343919 was cancelled, and in
lieu thereof, TCT No. 105231 was issued in the name of spouses Alfredo Valdez and Rufina
Bautista.6

In a letter sent by their counsel dated February 27, 1984, petitioners demanded that herein
private respondents-spouses Donald and Cresencia Salvador show proof of their right to occupy
the subject premises and to vacate the same.7 After respondents failed to vacate the premises
despite intervention by the barangay officials of the locality,8 petitioners filed a complaint
before the Regional Trial Court of Malabon for recovery of possession of property on July 1,
1988.9

The actual possessors of the land in question, herein private respondents, represented by their
attorney-in-fact Philip Salvador, claim ownership over the property after having bought the
same on installments from the registered owner Dionisio Santiago. They allege that half of the
property (163 sq. m.) was sold to them on December 20, 1974 for P16,300.00. 10 Payment
thereon was completed on October 15, 1981.11 On October 20, 1979 the other half of the land
was bought for P20,000.00, payment of which was received by Benjamina Magalong, 12
Dionisio Santiago's wife, allegedly because the latter was already too weak and sickly.

On February 28, 1991 the trial court rendered judgment dismissing the complaint for lack of
merit and ordering the plaintiffs spouses Alfredo Valdez to pay defendants Salvador P5,000.00
for attorney's fees and to pay the costs of the suit. 13

The trial court found that there was a double sale of the immovable in question. Applying
Article 1544 of the New Civil Code, the court a quo held that as to half of the property in
question, private respondents (Salvador spouses) had a preferential right as against (Valdez
spouses) who were purchasers in bad faith.14 The petitioners were taken to task for failing to
make inquiry concerning the rights of private respondents who were in possession of the
property.

In his testimony, plaintiff Alfredo Valdez stated that before he bought the property, he inquired
from Maria dela Cruz about the house erected thereon and he was informed by the latter that
she had allowed her relatives to build said house, with the understanding that they would
vacate said property and remove their house should she need the property, and that he did not
inquire from the defendants themselves why they have their house on the property nor inform
them that he was buying said property (tsn, May 11, 1989, pp. 14-15). He likewise admitted
that the property in question is only about one half kilometer away from his residence; that the
defendants have their house on said property since 1970 and that Dionisio Santiago likewise
had a house on said property where he lived with his common-law wife, Benjamina Magalong,
while his legal wife, Maria dela Cruz, lives in another place in the same neighborhood, and that
he did not talk to Benjamina Magalong (Ibid, pp. 7 and 10). In other words, plaintiffs merely
relied on the statement of Maria dela Cruz that defendants were her relatives whom she had
allowed to build a house on the property which she was offering to sell to them until such time
that she needed the same, although they knew that Maria dela Cruz did not live on said
property with her husband Dionisio Santiago, who resided thereon with his common-law wife
Benjamina Magalong. Thus, had plaintiffs inquired from defendants themselves or from
Benjamina Magalong by what right did defendants have a house on the property in question,
before they bought the entire property, they could have been informed of the deed of sale
executed by Dionisio Santiago in defendants' favor. As held in De Guzman, Jr. v. Court of
Appeals, 156 SCRA 701, 710:

The failure of appellees to take the ordinary precautions which a prudent man would have
taken under the circumstances, specially in buying a piece of land in the actual, visible and
public possession of another person, other than the vendor, constitutes gross negligence
amounting to bad faith.

In this connection, it has been held that where, as in this case, the land sold is in the possession
of a person other than the vendor, the purchaser is required to go beyond the certificate of title
and mae (sic) inquiries concerning the rights of the actual possessor. Failure to do so would
make him a purchaser in bad faith. (Incala vs. Mendoza, CA-G.R. No. 13677-R, November 9,
1965, De Jesus vs. Revilla, CA-G.R. No. 13562-R, October 5, 1965; Marcelino vs. Manikan, CA-
G.R. No. 32792-R, June 22, 1956).

xxx xxx xxx

One who purchases real property which is in actual possession of another should, at least make
some inquiry concerning the right of those in possession. The actual possession by other than
the vendor should, at least put the purchaser upon inquiry. He can scarely (sic), in the absence
of such inquiry, be regarded as a bona fide purchaser as against such possessors. (Conspecto vs.
Fruto, 31 Phil. 144). 15

With respect to the other half of the property (163 sq. m.) the trial court ruled that petitioners
had preferential right over the land. The sale made on December 20, 1979 by Benjamina
Magalong in favor of private respondents had no force and effect.

. . . Not being the registered owner nor authorized by the registered owner, Benjamin
Magalong had no right to sell the other half portion of the property covered by TCT No. 343919.
Consequently, upon the demise of Dionisio Santiago on November 26, 1982, the latter's right
over the one half portion of the property covered by TCT No. 343919 passed on to his legal heir,
i.e., his wife Maria dela Cruz as appearing on the face of said certificate of title, as the other half
was already sold by him to Donald Salvador, by virtue of the Deed of Absolute Sale dated
December 20, 1974

(Exh. "14").16

On appeal, 17 appellants-spouses Valdez challenged the trial court's decision to award one half
of the property to private respondents and claimed that they should have left the parties where
they are pursuant to the doctrine of in pari delicto.18
The Court of Appeals held that these points were already raised and resolved by the court a
quo. Nevertheless, the court proceeded to examine the case. Relief prayed for by appellants
was denied and the decision appealed from was affirmed in toto by respondent court.19

Hence the instant petition, where the following issues are elevated:

PUBLIC RESPONDENTS MISAPPLIED ARTICLE 1544 OF THE NEW CIVIL CODE. THEIR HOLDING
THAT PETITIONERS ARE IN BAD FAITH AND PRIVATE RESPONDENTS HAVE BETTER RIGHT OVER
THE QUESTIONED PROPERTY IS AGAINST THE EVIDENCE AND ESTABLISHED PRINCIPLES OF LAW.

II

ASSUMING THAT PETITIONERS ARE IN BAD FAITH, PUBLIC RESPONDENTS ERRED WHEN THEY
DID NOT LEAVE THE PARTIES WHERE THEY ARE CONSIDERING THAT PRIVATE RESPONDENTS
SLEPT ON THEIR RIGHT FOR UNREASONABLE LENGTH OF TIME BY NOT REGISTERING THEIR
ALLEGED DEED OF SALE. 20

The trial court already adjudged petitioners as having preferential right over one half of the
subject property. 21 Hence the present controversy covers only the remaining one half of the
land which the trial court adjudicated in favor of private respondents.

Petitioners theorize that public respondents (the Trial Court and the Court of Appeals) erred
when they held the spouses Valdez to be purchasers in bad faith. They claim to have satisfied
the legal requirement that "in order (for) a purchaser of land with a Torrens Title (to) be
considered a purchaser in good faith, it is enough that he examines the latest certificate of title
. . ." 22 Further, they maintain that they inquired from the vendors Maria dela Cruz vda. de
Santiago and Jose Santiago, concerning the rights of private respondents who were in
possession of the property. 23
The trial court held that plaintiffs spouses Valdez (herein petitioners) should have inquired from
defendants spouses Salvador themselves or from Benjamina Magalong. 24 This requirement,
petitioners argue, is unreasonable and pointless.

Firstly, because it exacts more than what the law requires from a buyer of land covered by a
Torrens Title. Secondly, although the private respondents were given the opportunities to
present their claim or ownership, the latter repeatedly failed to support their claim of over the
property. 25 Thirdly, to inquire from Benjamina Magalong would be futile for she had no right
to stay on the property, proof of which is her subsequent eviction.26

We are not persuaded.

Before us is a case registered land which had been sold to two different persons.

The first sale was made by the registered owner Dionisio Santiago in favor of private
respondents (spouses Salvador) on December 20, 1974. 27 It was never registered although
private respondents have been in uniterrupted possession since 1970 up to the present, first as
lessees and later on as owners.

The second sale was made by Dionisio Santiago's heirs, Maria dela Cruz vda. de Santiago and
Jose Santiago, in favor of petitioners on August 10, 1983, nearly a year after the former's death.
It was recorded and TCT No. 106251 was issued in the name of petitioners.

Article 1544 of the New Civil Code provides:

If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should
be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in possession; and in the absence thereof, to the person who presents the oldest title,
provided there is good faith.

Where the thing sold twice is an immovable, the one who acquires it and first records it in the
Registry of Property, both made in good faith, 28 shall be deemed the owner. The requirement
of the law then, is two-fold: acquisition in good faith and registration in good faith. Mere
registration of title is not enough, good faith must concur with the registration.29 To be
entitled to priority, the second purchaser must not only establish prior recording of his deed
but must have acted in good faith, without knowledge of the existence of another alienation by
the vendor to another. 30

Who then is a purchaser in good faith?

In the early case of Leung Yee v. F.L. Strong Machinery Co. and Williamson, 31 we explained the
matter in this wise:

One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot
claim that he has acquired title thereto in good faith as against the true owner of the land or of
an interest therein; and the same rule must be applied to one has knowledge of facts which
should have put him upon such inquiry and investigation as might be necessary to acquaint him
with the defects in title of his vendor. . . . Good faith, or the lack of it, is in its last analysis a
question of intention; but in ascertaining the intention by which one is actuated in a given
occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by
which alone the inward motive may, with safety be determined. So it is that "honesty of
intention," "the honest lawful intent," which constitutes good faith implies a "freedom from
knowledge and circumstances which ought to put a person on inquiry." and so it is that proof of
such knowledge overcomes the presumption of good faith in which the courts always indulge in
the absence of proof to the contrary. "Good faith, or the want of it, is not a visible, tangible fact
that can be seen or touched, but rather a state or condition of mind which can only be judged
of by actual or fancied tokens or signs. (Wilder vs. Gilman, 55 Vt., 505; Cf. Cardenas vs. Miller,
108 Cal., 250 Breaux-Renoudet, Cypress Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098;
Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8 10, 17.)

And more succintly in Cui and Joven v. Henson 32, we said:

A purchaser in good faith is one who buys 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 for the same, at
the time of such purchase, or before he has notice of the claim or interest of some other person
in the property. Good faith consists in an honest intention to abstain from taking any
unconscientious advantage of another. Good faith is an opposite of fraud and of bad faith, and
its non existence must be established by competent proof.

Being a question of intention, good faith or the lack of it can only be ascertained from the
circumstances surrounding the purchases of the land. We shall now analyze whether or not
petitioners bought the land in good faith.

According to the trial court, petitioners should have inquired from the actual possessors,
including private respondents, "by what right did they have for having a house on the property,
before purchasing the entire property" and not merely from the vendors. 33

They claim that such a requirement is unreasonable and that their inquiry with the vendors is
sufficient to make them buyers in good faith.

It is true that petitioners examined the certificate of title of Dionisio Santiago before they
bought the lot and found it clean and without annotation of any encumbrance. And it is equally
true that a person dealing with the owner of registered land is not bound to go beyond the
certificate of title as he is charged with notice of burdens on the property which are noted on
the face of the register or on the certificate of title. 34
However, it is important to note that petitioners did not buy the land from the registered
owner, Dionisio Santiago. They bought it from his heirs, Maria dela Cruz and Jose Santiago.

Where a purchaser buys from one who is not the registered owner himself, the law requires a
higher degree of prudence even if the land object of the transaction is registered. One who
buys from one who is not the registered owner is expected to examine not only the certificate
of title but all factual circumstances necessary for him to determine if there are any flaws in the
title of the transferor, or in his capacity to transfer the land. 35

The trial court correctly cited our pronouncement that "(o)ne who purchases real property
which is in the actual possession of others should at least, make some inquiry concerning the
rights of those in possession. The actual possession by others (sic) than the vendor should, at
least, put the purchaser upon inquiry. He can scarcely, in the absence of such inquiry, be
regarded as a bona fide purchaser as against such possessors." 36

In order to fulfill of good faith, it is imperative for a purchaser of land which is possessed by
persons not the vendor to inquire and investigate into the rights or title of those in possession.
The absence of such inquiry will remove them from the realm of bona fide acquisition.

Although petitioners made inquiry regarding the rights of private respondents to possess the
subject property, this case involves certain peculiarities which lead us to affirm the respondent
trial and appellate courts finding that petitioners are not purchasers in good faith.

While petitioners claim to have so inquired, they did so from the vendors who were not the
registered owner. As we have seen from jurisprudence previously cited, buying land from one
not the registered owner should have put the buyer on guard concerning facts which would
acquaint him with defects in the title or capacity to transfer of the vendor. 37
In addition, petitioners admit that they reside only half a kilometer away from the property in
question. This fact greatly facilitates such inquiry from the actual possessors and not only from
the vendors. Furthermore, petitioner's husband Alfredo Valdez (plaintiff in the lower court)
knew that private respondents have a house on the property in question which they have been
occupying since 1970. 38 At the very least, they would have been apprised of the reputation of
private respondents' possession since they are neighbors residing in the same locale.

As aptly put by the respondent: 39

As records bear it out, appellant had knowledge of circumstances which ought to have put
them on an inquiry but they did not. Such failure to exercise ordinary care expected of real
estate buyers necessarily means bearing the consequences of their own acts. . . . .

Regarding private respondents' failure to present evidence of their claim of title despite several
opportunities to do so, the trial court adequately accounted for the same. If found that private
respondent Cresencia Salvador was not a proper party in the barangay conciliation proceedings
and that Donald Salvador was abroad at the time. Hence, her failure to present such evidence
does not militate against private respondents' inculpability.40

Next, petitioners argue that the land in question has not been properly identified and described
in evidence for private respondents [viz. Exhibits 14 & 14-A (Deed of Sale dated December 20,
1974) do not describe which portion of land they refer; receipts of payment executed by
Dionisio Santiago vary with respect to their subject lots; the deed of sale was executed
December 1974 when payment was only completed on October 15, 1981; private respondents'
evidence does not show that the land has been fully paid for because a number of Exhibits (16-
A; 16-E; 16-M; 16-DD; 16-EE; and 16-GG) are no evidence of payments. They are incompetent
and hearsay for not being properly

identified.]41

We are satisfied with the analysis and decision of the trial court regarding this matter Apart
from petitioners' tenuous allegations, the identity of the subject property cannot be seriously
doubted. It held:
The circumstances that the Deed of Absolute Sale dated December 20, 1974, covering one half
portion of the property stated that the consideration of P16,300.00 was received by Dionisio
Santiago from defendant Donald Salvador (Exh. "14"), whereas said amount was actually paid in
installment for a period of almost seven (7) years, as shown by the receipts therefor (Exhs. "16";
and "16-A", to "16-TT"), does not affect the validity of the transaction. As explained by Philip
Salvador, after the deed of sale was executed, Dionisio Santiago wanted a full payment of the
consideration but since he and Donald Salvador did not have money, they agreed to have the
consideration paid in installment and that the copy of said deed of sale was given to him and
Donald Salvador by Dionisio Santiago only upon full payment of the consideration of P16,300.00
(tsn September 21, 1990, pp. 6-7). Moreover, defendant Donald Salvador started paying the
realty taxes on the property owned by Dionisio Santiago beginning with the year 1975-76 (Exhs.
"8", "9", "11", "12" and "13").

In their Memorandum, plaintiffs pointed out the property allegedly sold by Dionisio Santiago to
defendant Donald Salvador was not properly identified as the deed of sale refers to one half
portion of Lot 14-B situated at Maysilo St., Municipality of Malabon, whereas TCT No. 343919
covering said property states that it is situated in Barrio Maysilo, Municipality of Malabon and
there is a wide difference between street and barrio. No significance can be attributed to such
circumstances. The deed of sale expressly mentioned that the one half portion of the property
(Lot 14-B) sold to Donald Salvador by Dionisio Santiago is covered by TCT No. 343919. In fact
plaintiffs (herein petitioners) tax declaration covering the property in question, attached as
Annex "B" to their Complaint, also states that the property is located at Maysilo Street. And as
alleged in paragraph 3 of the Complaint, Barangay Maysilo is now called Santulan. 42

Lastly, petitioners advance the theory that, even assuming petitioners to be purchasers in bad
faith, public respondents should have left the parties where they are since both are at fault.
Private respondents are equally to blame for failing to register the alleged sale from the time
they possessed the Deed of Absolute Sale (October 15, 1981) to the time petitioners purchased
the property (August 10, 1983), an unreasonable period of one year and ten months. It is
because of this omission that the present controversy arose, hence private respondents should
be held responsible and the parties held to be in

pari delicto. 43
The circumstances between the parties cannot qualify as being in pari delicto for they are not
similarly situated.

The trial court already held worthy of credence private respondents' testimony that they were
not able to register said deed of sale after they had paid the last installment to Dionisio
Santiago because the latter could no longer locate his copy of the transfer certificate of title. 44
We respect the findings of the trial court on this factual matter, it being a better judge of the
witness's demeanor at the time he is called to the stand.

We also do not find private respondents equally blameworthy for failing to register during the
period of time cited above by petitioners. The uninterrupted possession of the property may
have fostered complacency but their omission to register within this period cannot constitute a
situation of in pari delicto.

WHEREFORE, the instant petition is DISMISSED.

SO ORDERED.
 HEIRS OF SOFIA QUIRONG, G.R. No. 173441

Represented by ROMEO P.
QUIRONG,
Petitioners, Present:
Carpio , J., Chairperson,
- versus - Leonardo-De Castro, Brion, Peralta,* and Abad, JJ.
DEVELOPMENT BANK OF
THE PHILIPPINES,
Promulgated:
Respondent.
December 3, 2009

DECISION

This case is about the prescriptive period of an action for rescission of a contract of sale
where the buyer is evicted from the thing sold by a subsequent judicial order in favor of a third
party.

The Facts and the Case

The facts are not disputed. When the late Emilio Dalope died, he left a 589-square
meter untitled lot[1] in Sta. Barbara, Pangasinan, to his wife, Felisa Dalope (Felisa) and their nine
children, one of whom was Rosa Dalope-Funcion.[2] To enable Rosa and her husband Antonio
Funcion (the Funcions) get a loan from respondent Development Bank of the Philippines (DBP),
Felisa sold the whole lot to the Funcions. With the deed of sale in their favor and the tax
declaration transferred in their names, the Funcions mortgaged the lot with the DBP.

On February 12, 1979, after the Funcions failed to pay their loan, the DBP foreclosed the
mortgage on the lot and consolidated ownership in its name on June 17, 1981. [3]
 Four years later or on September 20, 1983 the DBP conditionally sold the lot to Sofia
Quirong[4] for the price of P78,000.00. In their contract of sale, Sofia Quirong waived any
warranty against eviction. The contract provided that the DBP did not guarantee possession of
the property and that it would not be liable for any lien or encumbrance on the same. Quirong
gave a down payment of P14,000.00.

Two months after that sale or on November 28, 1983 Felisa and her eight children
(collectively, the Dalopes)[5] filed an action for partition and declaration of nullity of documents
with damages against the DBP and the Funcions before the Regional Trial Court (RTC) of
Dagupan City, Branch 42, in Civil Case D-7159.

On December 27, 1984, notwithstanding the suit, the DBP executed a deed of absolute
sale of the subject lot in Sofia Quirongs favor. The deed of sale carried substantially the same
waiver of warranty against eviction and of any adverse lien or encumbrance.

On May 11, 1985, Sofia Quirong having since died, her heirs (petitioner Quirong heirs)
filed an answer in intervention[6] in Civil Case D-7159 in which they asked the RTC to award the
lot to them and, should it instead be given to the Dalopes, to allow the Quirong heirs to recover
the lots value from the DBP. But, because the heirs failed to file a formal offer of evidence, the
trial court did not rule on the merits of their claim to the lot and, alternatively, to relief from
the DBP.[7]

On December 16, 1992 the RTC rendered a decision, declaring the DBPs sale to Sofia Quirong
valid only with respect to the shares of Felisa and Rosa Funcion in the property. It declared
Felisas sale to the Funcions, the latters mortgage to the DBP, and the latters sale to Sofia
Quirong void insofar as they prejudiced the shares of the eight other children of Emilio and
Felisa who were each entitled to a tenth share in the subject lot.

The DBP received a copy of the decision on January 13, 1993 and, therefore, it had until
January 28, 1993 within which to file a motion for its reconsideration or a notice of appeal from
it. But the DBP failed to appeal supposedly because of excusable negligence and the withdrawal
of its previous counsel of record.[8]

When the RTC judgment became final and the court issued a writ of execution, the DBP
resisted the writ by motion to quash, claiming that the decision could not be enforced because
it failed to state by metes and bounds the particular portions of the lot that would be assigned
to the different parties in the case. The RTC denied the DBPs motion, prompting the latter to
seek recourse by special civil action of certiorari directly with this Court in G.R.
116575, Development Bank of the Philippines v. Fontanilla. On September 7, 1994 the Court
issued a resolution, denying the petition for failure of the DBP to pay the prescribed fees. This
resolution became final and executory on January 17, 1995.[9]

On June 10, 1998 the Quirong heirs filed the present action [10] against the DBP before the RTC
of Dagupan City, Branch 44, in Civil Case CV-98-02399-D for rescission of the contract of sale
between Sofia Quirong, their predecessor, and the DBP and praying for the reimbursement of
the price of P78,000.00 that she paid the bank plus damages. The heirs alleged that they were
entitled to the rescission of the sale because the decision in Civil Case D-7159 stripped them of
nearly the whole of the lot that Sofia Quirong, their predecessor, bought from the DBP. The
DBP filed a motion to dismiss the action on ground of prescription and res judicata but the RTC
denied their motion.

On June 14, 2004, after hearing the case, the RTC rendered a decision,[11] rescinding the sale
between Sofia Quirong and the DBP and ordering the latter to return to the Quirong heirs
the P78,000.00 Sofia Quirong paid the bank.[12] On appeal by the DBP, the Court of Appeals (CA)
reversed the RTC decision and dismissed the heirs action on the ground of prescription. The CA
concluded that, reckoned from the finality of the December 16, 1992 decision in Civil Case D-
7159, the complaint filed on June 10, 1998 was already barred by the four-year prescriptive
period under Article 1389 of the Civil Code.[13] The Quirong heirs filed a motion for
reconsideration of the decision but the appellate court denied it,[14] thus, this petition.

The Issues Presented

The issues presented in this case are:

 1. Whether or not the Quirong heirs action for rescission of respondent
DBPs sale of the subject property to Sofia Quirong was already barred by
prescription; and

2. In the negative, whether or not the heirs of Quirong were entitled to

the rescission of the DBPs sale of the subject lot to the late Sofia Quirong as a
consequence of her heirs having been evicted from it.

The Courts Rulings

The CA held that the Quirong heirs action for rescission of the sale between DBP and
their predecessor, Sofia Quirong, is barred by prescription reckoned from the date of finality of
the December 16, 1992 RTC decision in Civil Case D-7159 and applying the prescriptive period
of four years set by Article 1389 of the Civil Code.

Unfortunately, the CA did not state in its decision the date when the RTC decision in Civil
Case D-7159 became final and executory, which decision resulted in the Quirong heirs loss of
80% of the lot that the DBP sold to Sofia Quirong. Petitioner heirs claim that the prescriptive
period should be reckoned from January 17, 1995, the date this Courts resolution in G.R.
116575 became final and executory.[15]

But the incident before this Court in G.R. 116575 did not deal with the merit of the RTC
decision in Civil Case D-7159. That decision became final and executory on January 28, 1993
when the DBP failed to appeal from it within the time set for such appeal. The incident before
this Court in G.R. 116575 involved the issuance of the writ of execution in that case. The DBP
contested such issuance supposedly because the dispositive portion of the decision failed to
specify details that were needed for its implementation. Since this incident did not affect the
finality of the decision in Civil Case D-7159, the prescriptive period remained to be reckoned
from January 28, 1993, the date of such finality.
 The next question that needs to be resolved is the applicable period of prescription. The
DBP claims that it should be four years as provided under Article 1389 of the Civil
Code.[16] Article 1389 provides that the action to claim rescission must be commenced within
four years. The Quirong heirs, on the other hand, claim that it should be 10 years as provided
under Article 1144 which states that actions upon a written contract must be brought within 10
years from the date the right of action accrues.

Now, was the action of the Quirong heirs for rescission or upon a written
contract? There is no question that their action was for rescission, since their complaint in Civil
Case CV-98-02399-D asked for the rescission of the contract of sale between Sofia Quirong,
their predecessor, and the DBP and the reimbursement of the price of P78,000.00 that Sofia
Quirong paid the bank plus damages. The prescriptive period for rescission is four years.

But it is not that simple. The remedy of rescission is not confined to the rescissible
contracts enumerated under Article 1381.[17] Article 1191 of the Civil Code gives the injured
party in reciprocal obligations, such as what contracts are about, the option to choose between
fulfillment and rescission. Arturo M. Tolentino, a well-known authority in civil law, is quick to
note, however, that the equivalent of Article 1191 in the old code actually uses the term
resolution rather than the present rescission.[18] The calibrated meanings of these terms are
distinct.

Rescission is a subsidiary action based on injury to the plaintiffs economic interests as

described in Articles 1380 and 1381. Resolution, the action referred to in Article 1191, on the
other hand, is based on the defendants breach of faith, a violation of the reciprocity between
the parties. As an action based on the binding force of a written contract, therefore, rescission
(resolution) under Article 1191 prescribes in 10 years. Ten years is the period of prescription of
actions based on a written contract under Article 1144.

The distinction makes sense. Article 1191 gives the injured party an option to choose
between, first, fulfillment of the contract and, second, its rescission. An action to enforce a
written contract (fulfillment) is definitely an action upon a written contract, which prescribes in
10 years (Article 1144). It will not be logical to make the remedy of fulfillment prescribe in 10
years while the alternative remedy of rescission (or resolution) is made to prescribe after only
four years as provided in Article 1389 when the injury from which the two kinds of actions
derive is the same.
 Here, the Quirong heirs alleged in their complaint that they were entitled to the
rescission of the contract of sale of the lot between the DBP and Sofia Quirong because the
decision in Civil Case D-7159 deprived her heirs of nearly the whole of that lot. But what was
the status of that contract at the time of the filing of the action for rescission?Apparently, that
contract of sale had already been fully performed when Sofia Quirong paid the full price for the
lot and when, in exchange, the DBP executed the deed of absolute sale in her favor. There was
a turnover of control of the property from DBP to Sofia Quirong since she assumed under their
contract, the ejectment of squatters and/or occupants on the lot, at her own expense.[19]

Actually, the cause of action of the Quirong heirs stems from their having been ousted
by final judgment from the ownership of the lot that the DBP sold to Sofia Quirong, their
predecessor, in violation of the warranty against eviction that comes with every sale of
property or thing. Article 1548 of the Civil Code provides:

Article 1548. Eviction shall take place whenever by a final judgment

based on a right prior to the sale or an act imputable to the vendor, the vendee
is deprived of the whole or of a part of thing purchased.

xxxx

With the loss of 80% of the subject lot to the Dalopes by reason of the judgment of the
RTC in Civil Case D-7159, the Quirong heirs had the right to file an action for rescission against
the DBP pursuant to the provision of Article 1556 of the Civil Code which provides:

Article 1556. Should the vendee lose, by reason of the eviction, a part of
the thing sold of such importance, in relation to the whole, that he would not
have bought it without said part, he may demand the rescission of the contract;
but with the obligation to return the thing without other encumbrances than
those which it had when he acquired it. x x x

And that action for rescission, which is based on a subsequent economic loss suffered by
the buyer, was precisely the action that the Quirong heirs took against the DBP.Consequently, it
prescribed as Article 1389 provides in four years from the time the action accrued. Since it
accrued on January 28, 1993 when the decision in Civil Case D-7159 became final and executory
and ousted the heirs from a substantial portion of the lot, the latter had only until January 28,
1997 within which to file their action for rescission.Given that they filed their action on June 10,
1998, they did so beyond the four-year period.

With the conclusion that the Court has reached respecting the first issue presented in
this case, it would serve no useful purpose for it to further consider the issue of whether or not
the heirs of Quirong would have been entitled to the rescission of the DBPs sale of the subject
lot to Sofia Quirong as a consequence of her heirs having been evicted from it. As the Court has
ruled above, their action was barred by prescription. The CA acted correctly in reversing the
RTC decision and dismissing their action.

Parenthetically, the Quirong heirs were allowed by the RTC to intervene in the original
action for annulment of sale in Civil Case D-7159 that the Dalopes filed against the DBP and the
Funcions. Not only did the heirs intervene in defense of the sale, they likewise filed a cross
claim against the DBP. And they were apparently heard on their defense and cross claim but the
RTC did not adjudicate their claim for the reason that they failed to make a formal offer of their
documentary exhibits. Yet, they did not appeal from this omission or from the judgment of the
RTC, annulling the DBPs sale of the subject lot to Sofia Quirong. This point is of course entirely
academic but it shows that the Quirong heirs have themselves to blame for the loss of
whatever right they may have in the case.

WHEREFORE, the Court DENIES the petition and AFFIRMS the November 30, 2005
decision of the Court of Appeals in CA-G.R. CV 83897.

SO ORDERED