Topic: Art. 1393. Ratification may be effected expressly or tacitly.

It is understood that there is a tacit ratification if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. Title: Metropolitan Waterworks and Sewerage System (MWSS) vs CA, Hon. Lopez, Ayala Corporation and Ayala Land, Inc. Facts: - 1965, MWSS (formerly known as NAWASA) leased around 128 hectares of its land to CHGCCI (formerly the International Sports Development Corporation) for 25 years, renewable for 15 years or until 2005, with a stipulation allowing CHGCCI a right of first refusal should the property be made open for sale, the terms and conditions of the sale to be subject to presidential approval. - 1976, Letter of Instruction (LOI) No. 440 was issued by the President Marcos directing MWSS to negotiate the cancellation of the said lease agreement for its disposition. Oscar Illustre, then General Manager of MWSS, informed CHGCCI, through its president Pablo Roman Jr., of its preferential right to buy the property. January 1981, Asian Appraisal Co., the appraisal company of MWSS' choice, pegged a fair market value of P40 per square meter or a total of P53,800,000.00 for the whole property. December 20, 1982, MWSS and CHGCCI agreed in principle on the purchase of the property and President Marcos expressed his approval of the sale. - The Board of Trustees of MWSS passed Resolution 36-83 approving the sale of the subject property to Silhouette Trading Co., as assignee of CHGCCI. The sales agreement pushed through, P 25M to be paid upon approval of Marcos of the contract and the balance to be paid within one year from the transfer of the title to Silhouette with 12% interest per annum. The balance was secured by an irrevocable letter of credit. A supplemental Agreement was made between MWSS and Silhouette to accurately identify the property. - Silhouette, under a deed of sale, sold to AYALA about 67 hectares of the property at P110 per square meter, for a total of P 74M. P 25M was to be paid by AYALA directly to MWSS for Silhouette's account and P 2M directly to Silhouette. P 11.6M was to be paid upon issuance of title in favor of AYALA, and the remaining balance payable within one year with 12% interest per annum. - AYALA developed the land into a prime residential area (Ayala Heights Subdivision). - March 26, 1993, MWSS filed an action seeking for the declaration of nullity if the MWSS-Silhouette sales agreement and all subsequent conveyances, and recovery of damages. AYALA filed its answer pleading the defenses of prescription, laches, waiver/estoppel/ratification, no cause of action, non-joinder of indispensable parties, and non-jurisdiction. - RTC dismissed the case: prescription, laches, estoppel and non-joinder of indispensable parties. MWSS' Motion for Reconsideration was also denied. CA affirmed the decision of RTC. Issue: Whether the sale of the property is valid Held: SC dismissed the case. The sale was valid due to both express and implied ratification by the Board of Trustees of MWSS. Ratio: - MWSS claims that the sale is invalid because Mr. Illustre was not given the authority by the Board of Trustees to enter into the agreement. However, this issue can be cured be ratification. Ratification can be made expressly or impliedly. In this case, there was both. There was express ratification when the Board passed Resolution 36-83 approving the sale. There was implied ratification from the acts of MWSS in sending three demand letters for the payment of the purchase price, for accepting the down payment of P 25M, and for accepting the letter of credit for balance. Neither did MWSS return the amounts paid to them. MWSS' acceptance and retention of the benefits from the sale is another form of implied ratification. Other issues: *Prescription: - MWSS consented to the sale, although they may have been unduly influenced by President Marcos. The vitiation of consent did not make the contract void, but merely voidable. The prescriptive period for voidable contracts under the New Civil Code is four years from the time the defect of the consent ceases. If Pres Marcos unduly influenced the sale, the prescriptive period would have begun on Feb 26, 1986 when Marcos was deposed, and prescribed by Feb 26, 1990, more than three years before the filing of the complaint. - However, if the consent was vitiated by fraud, the prescriptive period begins upon discovery; either from the date of execution of the sale documents wherein the period would have begun in 1983 as MWSS knew of the sale, or from the date of registration of the deeds (as registration is constructive notice to the world) wherein the period would have begun in 1984. At the latest, the action would have prescribed in 1988, five years before the filing of the complaint. *Laches and Non-Joinder of Indispensable Parties: - Laches is distinguished from prescription, wherein prescription is concerned with the fact of delay and laches is concerned with the effect of delay. Laches is a question of inequity of permitting a claim to be enforced. Laches is not statutory. The elements of laches: conduct on the part of the defendant giving rise to the situation that led to the complaint, delay in asserting the complainant's rights, lack of knowledge or notice of the defendant that the complaint would assert the right on which he bases his suit, and injury or prejudice to the defendant in the event relief is accorded to the complainant. All elements were present in this case. - The lot owners of the residential area are indispensable parties in the case, without whom no relief is available and without whom the court can render no valid judgment. The absence of the parties renders all subsequent actions of the trial court null and void, and warrants the dismissal of the case. Fontana vs. Tan Facts: >Sps. Tan bought from RN Development Corporation (RNDC) two class D shares of stock for Fontana Resort and Country Club (FRCCI), worth P387,300.00, enticed by the promises of RNDCs sales agents promises that FRCCI would construct a park with firstclass leisure facilities called Fontana Leisure Park (FLP).

> Two years later, Sps. Tan filed a case in SEC, seeking refund since according to the Sps. Tan, they were deceived into buying FRCCI shares because of fraudulent misrepresentations. FLP turned out still unfinished. >Sps. Tan narrated that they were able to book and avail themselves of free accommodations. However, whenever they reserved again th for their daughters 18 birthday, they were told that they already consumed their free stay (since they only have 5 free weekdays, 1 free Saturday and 1 free Sunday). >Sps. Tan again tried to reserve. This time, they were confirmed. However, FLP called them, saying that their reservation was cancelled. >The SEC hearing officer ruled in favor of Sps. Tan. However, the Court of Appeals ruled that Fontana should refund Sps. Tan upon returning their certificates of shares for incurring delay (in the construction of the facilities). Issue: Whether or NOT the Sps. Tan are entitled to refund from Fontana? Ruling: The Supreme Court ruled in the NEGATIVE. Based on the allegations in Sps. Tans Complaint, they state a cause of action for the annulment of a voidable contract of sale based on fraud under Article 1390 in relation to Article 1398 of the Civil Code and Article 1191 in relation to Article 1385 of the same code. However, Sps. Tan miserably failed to prove how Fontana employed fraud to induce them to buy FRCCI shares. Hence, there being no fraud, the contract is NOT voidable. The Supreme Court granted Fontanas petition. In effect, there is nothing to restore by the parties (Article 1398) since the contract is VALID.

Supercars Management vs. Flores Art. 1398 An obligation having been annulled, the contracting parties shall restore to each other the things which have been the subject matter of the contract, with their fruits, and the price with its interest, except in cases provided by law. In Obligations to render service, the value thereof shall be the basis for damages. Filemon Flores bought from Supercars Management through salesperson Pablito Marques, an Isuzu Carter Crew Cab for P212K, payable monthly, with downpayment of P63,600 plus premium for vehicles comprehensive insurance, and balance to be paid by RCBC. Upon delivery of vehicle to defendant, vehicle was secured by a chattel mortgage for RCBCs payment of remaining balance. A day after delivery, defendant used vehicle for a family trip to Bauang, La Union. While travelling on the national highway, the fan belt snapped, brakes hardened and did not function anymore, heater plug broke, engine could not start and fuel consumption increased. Defendant returned the car to petitioner and complained. Marquez had the vehicle fixed and returned on the same day and assured that it was fixed. After a few days, same defects arose which prompted defendant to send a letter to petitioner to rescind the contract of sale. Petitioner directed Marquez to have the car fixed, which upon return of the vehicle to defendant, after a few days, the same defects arose. Defendant sent another letter to petitioner restating that he was rescinding the contract of sale and demanded refund of down payment, plus the premium he paid. Petitioner did not respond. Defendant stopped paying the monthly amortizations, which RCBC reminded but received a letter from defendant stating that the car has been returned to petitioner for the reason of rescinding the contract of sale. RCBC filed a Petition for Extrajudicial Foreclosure of Chattel Mortgage with the RTC. Upon learning of the petition, Defendant filed a motion to postpone the auction until payment by petitioner was made and that any proceeds from the auction must be reimbursed to him for amount he paid for the vehicle. Auction proceeded which RCBC won and sold it to Mr. Lim. Defendant filed a complaint for recision of contract and damages against petitioner and RCBC. Petitioner denied for committing any breach of contract for the vehicle had only minor and inconsequential defects and was satisfactorily repaired by petitioner pursuant to its warranty. RCBC claimed that it has no liability for it was merely enforcing its right under the chattel mortgage law. RTC: Petitioner is held liable, RCBC absolved. Petitioner appeals that defendant has no right to rescind the contract of sale because the motor vehicle was already in possession of a third party. Issue: 1. 2.

WoN the respondent has the right to rescind the contract of sale? YES WoN rescission can no longer be availed of as the vehicle was already in the hands of an innocent buyer? YES

Ratio: 1. Defendants complaint filed with the RTC seeks to recover the money he paid for in case of a breach of his warranty against hidden defects, wherein the car after numerous breakdowns and repairs still malfunctioned. Obviously, the vehicle has hidden defects which is defined as one which is unknown or could not have been known to the vendee. Rescission is proper if one of the parties commits a substantial breach of its provisions. It creates an obligation to return to the object of the contract. It can be carried out only when the one who demands rescission can return whatever he may be obliged to restore. Rescission abrogates the contract from its inception and requires a mutual restitution of the benefits recovered. Therefore, petitioner is required to return the money upon the return of the car. This was apparent in the facts when defendant returned the car to petitioner, which the latter accepted without any objection. (Tarcelo)

2.

Title: Vasquez vs De Borja Topic: Art 1403 Facts: 1.

2.

3. 4. 5. Issue: 1. Held: 1.

De Borja alleges: a. Jan 1932: Antonio Vazquez and Fernando Busuego jointly and severally obligated themselves to sell to Francisco Borja 4000 cavans of palay at 2.10php per cavan to be delivered on Feb. b. Vasquez and Busuego delivered to Borja (on Feb, Mar, and Apr 1932) only 2488 cavans of palay of the value of 5224.80php and refused to deliver the balance of 1512 cavans of the value of 3175.20php despite repeated demands. c. Because of the refusal to deliver, De Borja suffered 1000php worth of damages. Vazquez contends: a. Denying having entered into the contract in his own individual and personal capacity either solely or together with his codefendant Fernando Busuego and alleging that the agreement for the purchase of 4000 cavans of palay and payment of the price were made by the plaintiff with and to the Natividad-Vasquez Sabani Development Co., Inc. Antonio Vasquez was the acting manager at the time the transaction took place. TC ruling: a. Vasquez: to pay the De Borja 3175.20 plus 377.50php with legal interest and absolving Busuego. On appeal, CA modified: reduced amount.

W/N Vasquez should be liable

No a. Vasquez: a. not a party to the contract. b. Was acting on behalf of Natividad-Vasquez Sabani Development Co b. Natividad-Vasquez Sabani Development Co: contracted with De Borja. c. Corporation: a. an artificial being invested by law with a personality of its own, separate and distinct from that of its stockholders and from that of its officers who manage and run its affairs. b. Although its personality is a legal fiction and necessarily has to act thru its agents does not make the latter personally liable on a contract duly entered into, or for an act lawfully performed by them for and its behalf. d. The fact that the corporation, acting thru Vasquez as its manager, was guilty of negligence in the fulfillment of the contract did not make Vasquez principally or even subsidiarily liable for such negligence. e. Since it was the corporations contract, its non-fulfillment, whether due to negligence or fault or to any other cause, made the corporation, and not its agent liable.

Paras, Dissenting: the corporation of which the defendant was acting president and manager was, at the time he made the sale of the plaintiff, known to him to be insolvent. As a matter of fact, said corporation was soon thereafter dissolved. There is admitted damage on the part of the plaintiff, proven to have been inflicted by reason of the fault or negligence of the defendant. In the interest of simple justice and to avoid multiplicity of suits the present action as one based on fault or negligence and to sentence the defendant accordingly. Oth erwise, he would be allowed to profit by his own wrong under the protective cover of the corporate existence of the company he represented. It cannot be pretended that any advantage under the sale inured to the benefit of Natividad-Vazquez Sabani Development Co., Inc. and not of the defendant personally, since the latter undoubtedly owned a considerable part of its capital.

Carbonnel vs. Poncio Facts: Rosario Carbonnel purchased from defendant Jose Poncio a parcel of land in San Juan del Monte, Rizal. Carbonnel paid Poncio and assumed his obligation with the Republic Savings Bank, understanding that the balance would be payable upon execution of the corresponding deed of conveyance. One of the conditions of the sale was that Poncio would continue staying in said land for one year, as stated in a document signed by him. Poncio refused to execute the corresponding deed of sale, despite repeated demands. Rosario thereby suffered damages in the sum of P5, 000, aside from attorney's fees amounting to P1, 000. Meanwhile Poncio conveyed the same property to defendants Sps. Ramon Infante who knew, of the first sale to Carbonnel. Carbonnel prayed that she be declared owner of the land in question, that the sale to the Infantes be annulled, that Poncio be required to execute the corresponding deed of conveyance in her favor, that the Register of Deeds of Rizal be directed to issue the corresponding title in plaintiff's name, and that defendants be sentenced to pay damages. Defendants moved to dismiss said complaint upon the ground that plaintiff's claim is unenforceable under the Statute of Frauds, and that said pleading does not state facts sufficient to constitute a cause of action. Motion was denied. Thereafter, the Infantes filed an answer denying, most of the allegations of said complaint and alleged, by way of special defense, that they purchased the land in question in good faith, for value, and without knowledge of the alleged sale to plaintiff and that plaintiff's claim is unenforceable under the Statute of Frauds. They, likewise, set up counterclaims for damages. Poncio denied the allegations of said complaint and alleged that he had no knowledge sufficient to form a belief as to the truth of the claims. By way of special defenses, he alleged that he had consistently turned down several offers, made by Carbonnel, 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 Carbonnel 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 is probable, 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 that defendant decided to sell the property to the plaintiff at P20 a square meter. 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; that Poncio has not lost "his mind," to sell his property, worth at least P4,000, for the paltry sum of P1,177.48, the amount of his obligation to the Republic Savings Bank; and that plaintiff's action is barred by the Statute of Frauds. Poncio similarly set up a counterclaim for damages.

Carbonnel introduced the testimony of one Constancio Meonada, who said that he was a janitor of the Sto. Domingo Church, a high school graduate, as well as an auto-mechanic graduate, that he has been and still is a paying boarder in Carbonnels house, that Poncio was his townmate, both being from Mahatao, Batanes, that after making a rough draft based upon data furnished by Carbonnel, he typed the contract which was, in the Batanes dialect and thereafter Poncio came to Carbonnels house, where he was shown the contract and that after the witness had read its contents to Poncio and given him a copy thereof, Poncio signed it and so did Cabonnel and that Meonada likewise signed at the bottom of the contract, as an attesting witness and that it was translated freely into English.

From this date, January 27, Jose Poncio may stay in this lot that I bought from him until one year without payment. After that one year and he cannot find any place where to transfer his house, he can also stay in this lot and he will pay according to the agreement. Taking the witness stand, Carbonnel testified that she had known Poncio since childhood, he being related to her mother; that Poncio's lot adjoins her lot, in San Juan, Rizal; that one day Poncio told her that he wanted to sell his property; that, after both had agreed on its price, Poncio told Carbonnel that his lot was mortgaged to the Republic Savings Bank; and that same day came back to Carbonnel stating that both of them go to the bank and pay the balance in arrears." At this juncture, defense counsel moved to strike out the statement of the witness invoking in support of the motion, relating to the Statute of Frauds. The lower court issued an order dismissing plaintiff's complaint without costs upon the ground that her cause of action was unenforceable under the Statute of Frauds. The counterclaims were, also, dismissed. Plaintiff appealed.

Issue: W/O the Statute of Frauds is applicable in this case. Held:

No, the Statute of Frauds do not apply in this case. Ratio: The opinion of this court is that the appeal was well taken and so holds. It is well settled that the Statute of Frauds is only applicable to executory contracts (Facturan vs. Sabanal, 81 Phil., 512) and not to contracts that are totally or partially performed. (Almirol, et al., vs. Monserrat, 48 Phil., 67, 70; Robles vs. Lizarraga Hermanos, 50 Phil., 387; Diana vs. Macalibo, 74 Phil., 70). It is the accepted view that part performance of a parol contract for the sale of real estate has the effect, subject to certain conditions concerning the nature and extent of the acts constituting performance and the right to equitable relief generally, of taking such contract from the operation of the statute of frauds, so that chancery may decree its specific performance or grant other equitable relief. It is well settled in Great Britain and in this country, with the exception of a few states, that a sufficient part performance by the purchaser under a parol contract for the sale of real estate removes the contract from the operation of the statute of frauds. (49 Am. Jur. 722-723.) In the words of former Chief Justice Moran: "The reason is simple. In executory contracts there is a wide field for fraud because unless they be in writing there is no palpable evidence of the intention of the contracting parties. The statute has precisely been enacted to prevent fraud." (Comments on the Rules of Court, by Moran, Vol. III [1957 ed.], p. 178.) However, if a contract has been totally or partially performed, the exclusion of parol evidence would promote fraud or bad faith, for it would enable the defendant to keep the benefits already denied by him from the transaction in litigation, and, at the same time, evade the obligations, responsibilities or liabilities assumed or contracted by him thereby. For obvious reasons, it is not enough for a party to allege partial performance in order to hold that there has been such performance and to render a decision declaring that the Statute of Frauds is inapplicable. But neither is such party required to establish such partial performance by documentary proof before he could have the opportunity to introduce oral testimony on the transaction. Indeed, such oral testimony would usually be unnecessary if there were documents proving partial performance. Thus, the rejection of any and all testimonial evidence on partial performance, would nullify the rule that the Statute of Frauds is inapplicable to contracts, which have been partly executed, and lead to the very evils that the statute seeks to prevent. When the party concerned has pleaded partial performance, such party is entitled to a reasonable chance to; establish by parol evidence the truth of this allegation, as well as the contract itself. "The recognition of the exceptional effect of part performance in taking an oral contract out of the statute of frauds involves the principle that oral evidence is admissible in such cases to prove both the contract and the part performance of the contract" (49 Am. Jur., 927). 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 the contract, as 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. The contract 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 in said lot under such terms as may be agreed upon. Incidentally, the allegation in Poncio's answer to the effect that he signed the contract 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 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 the contract 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 the contract 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 the contract to him and given him a copy thereof, before he signed thereon, according to Meonada's uncontradicted testimony. The order appealed from is was set aside, and was emanded to the lower court for further proceedings not inconsistent with the decision.

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner, vs. SPOUSES JESUS and ANACORITA DOYON, Respondents. Topic Art.1409 G.R. No. 167238 March 25, 2009

FACTS:

1.

Spouses Jesus and Anacorita Doyon obtained several loans amounting to P10 million from petitioner Development Bank of the Philippines (DBP). As security for the loans, respondents mortgaged their real estate properties as well as the motor vehicles of JD Bus Lines.

2.

Due to their inability to fully pay their obligations upon maturity, respondents requested petitioner to restructure their past due loans. Petitioner agreed. Hence, respondents signed three promissory notes on June 29, 1994. Nonetheless, respondents still failed to pay the quarterly installments on the promissory notes. Thus, petitioner demanded the payment of the total value of their loans from respondents. Respondents, however, ignored petitioner and adamantly refused to pay their loans. Petitioner filed an application for extrajudicial foreclosure of real estate mortgages in the RTC Ormoc. Petitioner moved to dismiss the case upon the claim of the respondents that they have paid amount of their loans (or P10 million) to petitioner. By agreement of the two parties the case was dismissed. BUT(greedy bank!) weeks later, petitioner demanded from respondents the payment of their outstanding obligations which had by then ballooned to more than P20 million. Again, respondents ignored petitioner. Petitioner filed an application for extrajudicial foreclosure of respondents real and chattel mortgages with the DBP special sheriff in Makati and subsequently took constructive possession of the foreclosed properties. It posted guards at the perimeter of respondents property in Barangay Cabulihan, Ormoc City (Cabulihan property) where the foreclosed motor vehicles of JD Bus Lines were parked. Subsequently, the DBP special sheriff issued notices of sale at public auction of the foreclosed properties. Meanwhile, respondents filed a complaint for damages against petitioner and the DBP special sheriff in the RTC of Ormoc City. RTC found for the respondents. The RTC held by withdrawing the application for extrajudicial foreclosure and moving for the dismissal of the prior Civil Case, petitioner led respondents to believe that their loans had been extinguished. Thus, petitioner acted in bad faith when it foreclosed on the real and chattel mortgages anew. On appeal to the CA it affirmed in total the decision of the RTC. Hence, this appeal by the DBP.

3.

4.

5.

6.

ISSUE:

WON the contract was valid , when the mortgagee too actual or constructive possession of the property upon its forclosure? It is VALID.

HELD:

A stipulation allowing the mortgagee to take actual or constructive possession of a mortgaged property upon foreclosure is valid. In Agricultural and Industrial Bank v. Tambunting, the Supreme Court explained: A stipulation authorizing the mortgagee, for the purpose stated therein specified, to take possession of the mortgaged premises upon the foreclosure of a mortgage is not repugnant [to either Article 2088 or Article 2137]. On the contrary, such a stipulation is in consonance or analogous to the provisions of Article [2132], et seq. of the Civil Code regarding antichresis and the provision of the Rules of Court regarding the appointment of a receiver as a convenient and feasible means of preserving and administering the property in litigation.

Article 1409 Heirs of Ureta v. Heirs of Ureta Facts 1. Alfonso Ureta has 14 children, Policronio, Liberato, Narciso, Prudencia, Vicente, Francisco, Inocensio, Roque, Adela, Wenefreda, Merlinda, Benedicto, Jorge, and Andres. a. Alfonso owned several fishpens, a fishpond, a sari-sari store, a passenger jeep, and was engaged in the buying and selling of copra. 2. Children of Policronio opposed to the rest of Alfonos heirs. a. Policronio is the only child that didnt finish school instead works on his fathers lands. 3. Alfonso executed 4 deeds of sale to his children, Policronio, Liberato, Prudencia, and to his common law wife, ValerianaDela Cruz to reduce the inheritance taxes as suggested by his son Francisco. a. The Deed of Sale executed on October 25, 1969, in favor of Policronio, covered 6 parcels of land, which are the properties in dispute in this case. b. Alfonso continued to own, possess and enjoy the lands and their produce since the sales were only made for taxation purposes 4. Alfonso died October 11, 1972: Liberato acted as the administrator of his fathers estate. Succeeded by Prudencia then her daughter, Camencita.

5. 6.

7.

8.

9. ISSUES (1) Whether the Deed of Sale is valid? NO. (2) Whether the Deed of Extra-Judicial Partition is valid? YES. RULING Validity of the Deed of Sale: Where a person, in order to place his property beyond the reach of his creditors, simulates a transfer of it to another, he does not really intend to divest himself of his title and control of the property; hence, the deed of transfer is but a sham. In this case, Alfonso simulated a transfer to Policronio purely for taxation purposes, without intending to transfer ownership over the subject lands. Thus it does not produce any legal effect and that it is void for being absolutely simulated pursuant to Article 1409 (2) of the Civil Code. Validity of the Deed of Extra-Judicial Partition The Heirs of Alfonso argued that the CA was mistaken in annulling the Deed of Extra-Judicial Partition due to the incapacity of Conrado to give the consent of his co-heirs for lack of a special power of attorney. They contended that what was involved was not the capacity to give consent in behalf of the co-heirs but the authority to represent them. The Court agrees in part with the Heirs of Alfonso.

Except for a portion of parcel 5, the rest of the parcels transferred to Policronio were tenanted by the Fernandez Family. These tenants never turned over the produce of the lands to Policronio or any of his heirs, but to Alfonso and, later, to the administrators of his estate. Policronio died November 22, 1974: Except for the said portion of parcel 5, neither Policronio nor his heirs ever took possession of the subject lands. Alfonsos heirs executed a Deed of Extra-Judicial Partition,which included all the lands that were covered by the 4 deeds of sale that were previously executed by Alfonso for taxation purposes. a. Conrado, Policronios eldest son, representing the Heirs of Policronio, signed the Deed of Extra-Judicial Partition in behalf of his co-heirs. After their fathers death, the Heirs of Policronio found tax declarations in his name covering the 6 parcels of land. a. On June 15, 1995, they obtained a copy of the Deed of Sale executed on October 25, 1969 by Alfonso in favor of Policronio. b. Heirs of Policronio allegedly learned about the Deed of Extra-Judicial Partition involving Alfonsos estate when it was published in the July 19, 1995 issue of the Aklan Reporter. Believing that the six parcels of land belonged to their late father, and as such, excluded from the Deed of Extra-Judicial Partition, the Heirs of Policronio sought to amicably settle the matter with the Heirs of Alfonso. =FAILED. a. Heirs of Policronio filed a Complaint for Declaration of Ownership, Recovery of Possession, Annulment of Documents, Partition, and Damages against the Heirs of Alfonso. b. RTC Ruling: dismissed the Complaint of the Heirs of Policronio found that the Heirs of Alfonso clearly established that the Deed of Sale was null and void. It held that the Heirs of Policronio failed to rebut the evidence of the Heirs of Alfonso. c. CA affirmed with regard to the Deed of Sale but the Deed of Extra-Judicial Partition, dated 19 April 1989, is ANNULLED due to the incapacity of one of the parties to give his consent to the contract (Conradofaild to obtain a special power of attorney as required under Article 1878 (5) and (15) of the Civil Code.) d. Case remanded to lower court for the proper partition of Alfonsos Uretas Estate. Hence the present Petitions for Review on Certiorari.

a.

This Court finds that Article 1878 (5) and (15) is inapplicable to the case at bench. It is merely a designation and segregation of that part which belongs to each heir. The Deed of Extra-Judicial Partition cannot, therefore, be considered as an act of strict dominion. Hence, a special power of attorney is not necessary. With regard to Condrado (Heirs of Policronio): Conrados failure to obtain authority from his co-heirs to sign the Deed of Extra-Judicial Partition in their behalf did not result in his incapacity to give consent so as to render the contract voidable, but rather, it rendered the contract valid but unenforceable against Conrados co-heirs for having been entered into without their authority.

By: Tin Borbe GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS) vs. THE PROVINCE OF TARLAC G.R. No. 157860 December 1, 2003 FACTS: 1. The Sangguniang Panlalawigan of Tarlac passed Resolution No. 068-96, which authorized and approved the conversion of Urquico Memorial Athletic Field into a Government Center, as well as the segregation and donation of portions of said land to different government agencies for the purpose of constructing or relocating their office buildings.

2. After receiving two letters of invitation regarding the project, the Government Service Insurance System (GSIS) decided to put up an office at the site.Thus, Tarlac Governor Margarita Cojuangco issued a Notice of Construction for the building of the GSIS office on the designated lot. 3. The Province of Tarlac and the GSIS then executed a Memorandum of Agreement (MOA) whereby the Province of Tarlac donated the said lot to the GSIS subject to the conditions and executed a Deed of Donation over the subject lot in favor of the GSIS, which was duly accepted by the latter. As stipulated in the MOA, the GSIS donated P2,000,000.00 to the Province of Tarlac as financial assistance. 4. Subsequently, Gov. Jose Yap was elected as the new chief executive of Tarlac. He wrote a letter to the GSIS, inviting the latter to reevaluate their respective positions with respect to the MOA. Gov. Yap was of the opinion that the provisions of the Deed of Donation were unfair to the Province. Later, the Provincial Administrator wrote the GSIS, demanding the payment of P33,590,000.00 representing the balance of the value of the lot donated, which the GSIS refused to pay. 5. Province of Tarlac then filed a Complaint against the GSIS for declaration of nullity of donation and memorandum of agreement. The trial court rendered its decision in favor of the validity of the donation to the GSIS. 6. Respondent Province of Tarlac appealed to the Court of Appeals, which reversed the decision of the RTC. ISSUE: WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT THE DEED OF DONATION AND MEMORANDUM OF AGREEMENT ARE NULL AND VOID. HELD: YES RATIO: Considering that the assailed donation is clearly onerous, the rules on contracts will apply. Pertinently, the Civil Code expressly defines the different kinds of void and inexistent contracts, to wit: 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. A transfer of real property by a local government unit to an instrumentality of government without first securing an appraised valuation from the local committee on awards does not appear to be one of the void contracts enumerated in Article 1409 of the Civil Code. Neither does Section 381 of the Local Government Code expressly prohibit or declare void such transfers if an appraised valuation from the local committee on awards is not first obtained. There being a perfected contract, the Province of Tarlac, through Gov. Yap, cannot revoke or renounce the same without the consent of the other party. From the moment of perfection, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage, and law. The contract has the force of law between the parties and they are expected to abide in good faith by their respective contractual commitments. Just as nobody can be forced to enter into a contract, in the same manner, once a contract is entered into, no party can renounce it unilaterally or without the consent of the other. It is a general principle of law that no one may be permitted to change his mind or disavow and go back upon his own acts, or to proceed contrary thereto, to the prejudice of the other party.

Lintonjua vs L & R Corporations (GR 130722, 27-Mar 2000) Background of the Case: (GR 130722, 9-Dec 1999)

Facts: The controversy stems from loans obtained by the spouses Litonjua from L & R Corporation in the aggregate sum of P400,000.00; P200,000.00 of which was obtained on August 6, 1974 and the remaining P200,000.00 obtained on March 27, 1978. The loans were secured by a mortgage constituted by the spouses upon their two parcels of land and the improvements thereon located in Cubao, Quezon City covered by Transfer Certificates of Title No. 197232 and 197233, with an area of 599 and 1,436 square meters, respectively. The mortgage was duly registered with the Register of Deeds of Quezon City. On July 14, 1979, the spouses Litonjua sold to Philippine White House Auto Supply, Inc. (PWHAS) the parcels of land they had previously mortgaged to L & R Corporation for the sum of P430,000.00. The sale was annotated at the back of the respective certificates of title of the properties. Meanwhile, with the spouses Litonjua having defaulted in the payment of their loans, L & R Corporation initiated extrajudicial foreclosure proceedings with the Ex-Oficio Sheriff of Quezon City. On July 23, 1980, the mortgaged properties were sold at public auction to L & R Corporation as the only bidder for the amount of P221,624.58. When L & R Corporation presented its corresponding Certificate of Sale issued by Deputy Sheriff Roberto B. Garcia, to the Quezon City Register of Deeds for registration on August 15, 1980, it learned for the first time of the prior sale of the properties made by the spouses Litonjua to PWHAS upon seeing the inscription at the back of the certificates of title. Thus, on August 20, 1980, it wrote a letter to the Register of Deeds of Quezon City requesting for the cancellation of the annotation regarding the sale to PWHAS. On March 10, 1981, or seven months after the foreclosure sale, PWHAS, for the account of the spouses Litonjua, tendered payment of the full redemption price to L & R Corporation in the form of China Bank Managers Check No. HOF-M O12623 in the amount of P238,468.04. See Exhibits G & 2, Letter of PWHAS to L & R Corporation, id.6 L & R Corporation, however, refused to accept the payment, hence, PWHAS was compelled to redeem the mortgaged properties through the Ex-Oficio Sheriff of Quezon City. On March 31, 1981, it tendered payment of the redemption price to the Deputy Sheriff through China Bank Managers Check No. HOF-O14750 in the amount of P240,798.94. The check was deposited with the Branch Clerk of Court who issued Receipt No. 7522484 for the full redemption price of the mortgaged properties. Accordingly, the Deputy Sheriff issued a Certificate of Redemption in favor of the spouses Litonjua dated March 31, 1981. In a letter of the same date, the Deputy Sheriff informed L & R Corporation of the payment by PWHAS of the full redemption price and advised it that it can claim the payment upon surrender of its owners duplicate certificates of title. On April 2, 1981, the spouses Litonjua presented for registration the Certificate of Redemption issued in their favor to the Register of Deeds of Quezon City. The Certificate also informed L & R Corporation of the fact of redemption and directed the latter to surrender the owners duplicate certificates of title within five days. A complaint for Quieting of Title, Annulment of Title and Damages with preliminary injunction was filed by the spouses Litonjua and PWHAS against herein respondents before the then Court of First Instance of Quezon City, Branch 9, docketed as Civil Case No. Q-33362. On February 10, 1987, the lower court rendered its Decision dismissing the Complaint upon its finding that the sale between the spouses Litonjua and PWHAS was null and void and unenforceable against L & R Corporation and that the redemption made was also null and void. On appeal, the decision of the trial court was set aside by the Court of Appeals in its Decision dated June 22, 1994, on the ground that the sale made to PWHAS as well as the redemption effected by the spouses Litonjua were valid. However, the same was subsequently reconsidered and set aside in an Amended Decision dated September 11, 1997.

1 Issue: Held: There is no question that the spouses Litonjua violated both the aforesaid provisions, selling the mortgaged properties to PWHAS without the prior written consent of L & R Corporation and without giving the latter notice of such sale nor priority over PWHAS. Whether paragraphs 8 and 9 of the Real Estate Mortgage are valid and enforceable.

st

Ratio: what is delimited is not the mortgagors jus dispodendi, as an attribute of ownership, but merely the rights conferred by such act of disposal which may correspondingly be restricted, actually refers to the fact that the only rights which a mortgagor can legally transfer, cede and convey after the foreclosure of his properties are the right to redeem the land, and the possession use and enjoyment of the same during the period of redemption. It has no connection or reference to the right of a mortgagor to sell his mortgaged property without the required consent of the mortgagee. rationalize that since paragraph 8 of the subject Deed of Real Estate Mortgage contains no absolute prohibition against the sale of the property mortgaged but only requires the mortgagor to obtain the prior written consent of the mortgagee before any such sale, Article 2130 is not violated thereby.

the provision does not absolutely prohibit the mortgagor from selling his mortgaged property; but what it does not outrightly prohibit, it nevertheless achieves. For all intents and purposes, the stipulation practically gives the mortgagee the sole prerogative to prevent any sale of the mortgaged property to a third party. The mortgagee can simply withhold its consent and thereby, prevent the mortgagor from selling the property. This creates an unconscionable advantage for the mortgagee and amounts to a virtual prohibition on the owner to sell his mortgaged property. In other words, stipulations like those covered by paragraph 8 of the subject Deed of Real Estate Mortgage circumvent the law, specifically, Article 2130 of the New Civil Code. Being contrary to law, paragraph 8 of the subject Deed of Real Estate Mortgage is not binding upon the parties. Accordingly, the sale made by the spouses Litonjua to PWHAS, notwithstanding the lack of prior written consent of L & R Corporation, is valid.

nd

Issue: Whether the redemption offered by PWHAS on account of the spouses Litonjua is valid, we rule in the affirmative. T

Held: The sale by the spouses Litonjua of the mortgaged properties to PWHAS is valid. Therefore, PWHAS stepped into the shoes of the spouses Litonjua on account of such sale and was in effect, their successor-in-interest. As such, it had the right to redeem the property foreclosed by L & R Corporation. The right of PWHAS to redeem the subject properties finds support in Section 6 of Act 3135 itself which gives not only the mortgagor-debtor the right to redeem, but also his successors-in-interest. As vendee of the subject properties, PWHAS qualifies as such a successor-in-interest of the spouses Litonjua. It is clear from the records that PWHAS offered to redeem the subject properties seven (7) months after the date of registration of the foreclosure sale, well within the one year period of redemption.

3 Issue: Held: While the spouses Litonjua had every right to sell their mortgaged property to PWHAS without securing the prior written consent of L & R Corporation, it had the obligation under paragraph 9, which is a perfectly valid provision, to notify the latter of their intention to sell the property and give it priority over other buyers. It is only upon failure of L & R Corporation to exercise its right of first refusal could the spouses Litonjua validly sell the subject properties to others, under the same terms and conditions offered to L & R Corporation. It was then held that the Contract of Sale there, which violated the right of first refusal, was rescissible. In the case at bar, PWHAS cannot claim ignorance of the right of first refusal granted to L & R Corporation over the subject properties since the Deed of Real Estate Mortgage containing such a provision was duly registered with the Register of Deeds. As such, PWHAS is presumed to have been notified thereof by registration, which equates to notice to the whole world. We note that L & R Corporation had always expressed its willingness to buy the mortgaged properties on equal terms as PWHAS. Indeed, in its Answer to the Complaint filed, L & R Corporation expressed that it was ready, willing and able to purchase the subject properties at the same purchase price of P430,000.00, and was agreeable to pay the difference between such purchase price and the redemption price of P249,918.77, computed as of August 13, 1981, the expiration of the one-year period to redeem. That it did not duly exercised its right of first refusal at the opportune time cannot be taken against it, precisely because it was not notified by the spouses Litonjua of their intention to sell the subject property and thereby, to give it priority over other buyers. Whether the stipulation granting the mortgagee the right of first refusal valid and enforceable.

rd

To recapitulate: the sale between the spouses Litonjua and PWHAS is valid, notwithstanding the absence of L & R Corporations prior written consent thereto. Inasmuch as the sale to PWHAS was valid, its offer to redeem and its tender of the redemption price, as successor-in-interest of the spouses Litonjua, within the one-year period should have been accepted as valid by L & R Corporation. However, while the sale is, indeed, valid, the same is rescissible because it ignored L & R Corporations right of first refusal. Topic: Article 1420 Issue: Held: Whether the provision of paragraph no. 9 of the subject mortgage contract is null and void ab initio..

Movants first theorize that paragraphs 8 (limiting the right of the mortgagor to sell the property, which we held as void) and 9 (on the right of first refusal of respondent Corporation) should be "regarded as a tandem designed to subvert the sound public policy prohibiting pactum commissarium"; that both paragraphs "constitute a package". In particular, petitioners argue that "Paragraph 9 being intended to support paragraph 8, it is therefore coupled thereto and is thus similarly mired in its invalidity". paragraphs 8 and 9 are separate provisions of the subject contract and the invalidity of one does not automatically render the other invalid. Indeed, Article 1420 of the New Civil Code holds that "In case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter may be enforced." Contrary to the suppositions of petitioners, the invalid stipulation is independent from the rest of the terms of the agreement and can easily be separated therefrom without doing violence to the manifest intention of the parties. This being so, the legal terms of the contract, including paragraph 9, can be enforced.