SUI MAN HUI CHAN and GONZALO CO, petitioners, vs. HON. COURT OF APPEALS and OSCAR D.

MEDALLA, respondents. DECISION QUISUMBING, J.: For review on certiorari is the Decision dated May 3, 2001, of the [2] Court of Appeals in CA-G.R. SP No. 61889, affirming the Order dated January 11, 2000, of the Regional Trial Court (RTC) of Mandaluyong City, Branch 213, in Civil Case No. MC99-666, which had denied petitioners Motion to Dismiss the complaint filed by private respondent. The facts, as culled from records, are as follows: On March 30, 1999, private respondent Oscar Medalla filed a complaint before the RTC of Mandaluyong City, docketed as Civil Case No. MC99-666, for collection of a sum of money arising from breach of a contract of lease and damages, against petitioners Sui Man Hui Chan and Gonzalo Co. The complaint alleged that on November 14, 1988, Napoleon C. Medalla as lessor and Ramon Chan as lessee entered into a Lease [3] Contract over a hotel building located at No. 29 Abanao Street, Baguio City. Chan would use the leased premises as a restaurant named Cypress Inn. Pertinently, the parties agreed on the following: 1. The period of lease shall be for ten (10) years or from 15 July 1988 to 15 July 1998. 2. The payment of the realty taxes due to the government on the leased premises shall be for the account of the Lessee. 3. The agreement is binding upon the heirs and/or successors-ininterest of the Lessor and the Lessee. Petitioner Gonzalo Co was employed by Ramon Chan as the general manager of Cypress Inn and acted as his agent in all his dealings with Napoleon Medalla. On August 5, 1989, Ramon Chan died. He was survived by his wife, petitioner Sui Man Hui Chan, who continued to operate the restaurant. On July 17, 1996, Napoleon Medalla died. Among his heirs is private respondent Oscar Medalla, who succeeded him as owner and lessor of the leased premises. The contract was neither amended nor terminated after
[1]

the death of the original parties but was continued by their respective successors-in-interest pursuant to the terms thereof. Petitioners Chan and Co, the latter, in his capacity as agent and general manager, continued to deal with private respondent Medalla in all transactions pertaining to the contract. On various occasions, petitioners failed to pay the monthly rentals due on the leased premises. Despite several Statements of Accounts sent by Medalla, petitioners failed to pay the rentals due but, nonetheless, continued to use and occupy the leased premises. On February 26, 1997, Medalla sent a letter addressed to Ramon Chan, indicating that (1) the contract of lease would expire on July 15, 1998, and (2) he was not amenable to a renewal of said contract after its expiration. Medalla then sent demand letters to petitioners, but the latter still failed to pay the unpaid rentals. He also found out that petitioners had not paid the realty taxes due on the leased premises since 1991, amounting to P610,019.11. Medalla then asked petitioners to settle the unpaid rentals, pay the unpaid real estate taxes, and vacate the leased premises. On January 1999, petitioners vacated the premises but without paying their unpaid rentals and realty taxes. Aggrieved by petitioners refusal to pay the amounts owing, which had reachedP4,147,901.80 by March 1999, private respondent Medalla instituted Civil Case No. MC99-666. In their Answer to the Complaint, petitioners denied owing private respondent the amounts claimed by the latter. They alleged that the late Ramon Chan had paid all the rentals due up to March 15, 1998. Moreover, they need not pay any balance owing on the rentals as they were required to pay two (2) months advance rentals upon signing of the contract and make a guarantee deposit amounting to P220,000. On the matter of unpaid realty taxes, petitioners alleged that private respondent was responsible therefor as the owner of the leased premises, notwithstanding any contrary stipulations in the contract. On July 19, 1999, petitioners filed a Supplemental Answer with Motion to Dismiss alleging that they were neither parties nor privies to the Contract of Lease, hence they are not the real parties-in-interest. Private respondent filed a Reply and Opposition to petitioners Supplemental Answer with Motion to Dismiss dated August 2, 1999, praying for the denial of the Motion to Dismiss for having been belatedly filed in direct contravention of Section 1, Rule 16, of the 1997 Rules of Civil [4] Procedure. He further alleged that petitioner Chan, as the owner of the business and petitioner Co as the agent of petitioner Chan, are clearly real

parties-in-interest in the case. Private respondent pointed to their continuous dealings with him in all transactions relating to the contract after the death of Ramon Chan and even after the expiration of the Contract of Lease. On January 11, 2000, the RTC denied petitioners Motion to Dismiss, thus: WHEREFORE, in view of the foregoing, the motion to dismiss dated July 19, 1999 filed by defendant through counsel against plaintiff is hereby DENIED for lack of merit. SO ORDERED.
[5]

WHETHER OR NOT RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN LAW IN AFFIRMING THE RTC ORDERS DENYING PETITIONERS MOTION TO DISMISS AND THE SUBSEQUENT MOTION [8] FOR RECONSIDERATION. Petitioners argue that the Court of Appeals erred in affirming the RTCs Orders because they are not the real parties-in-interest and hence, were improperly impleaded in the complaint as defendants. Petitioners insist that they were neither parties nor were they privy to the Contract of Lease between the late Ramon Chan and Napoleon Medalla. They vigorously assert that any claim for unpaid rentals should be made against the estate of Ramon Chan pursuant to Section 5, Rule 86 of the Revised Rules of Court. We find for private respondent. Prefatorily, it bears stressing that petitioners Motion to Dismiss was filed after an Answer had already been filed. This alone warranted an outright dismissal of the motion for having been filed in contravention of the clear and explicit mandate of Section 1, Rule 16, of the Revised Rules of Civil Procedure. Under this section, a motion to dismiss shall be filed within the time for but before filing the answer [9] to the complaint or pleading asserting a claim. Here, petitioners filed their Supplemental Answer with Motion to Dismiss almost two months after filing their Answer, in clear contravention of the aforecited rule. The Court of Appeals stated that the grant or denial of a Motion to Dismiss is an interlocutory order, and it cannot be the proper subject of a special civil action for certiorari. The proper remedy in such a case is to appeal after a decision has been rendered, the CA said. A writ of certiorari is not intended to correct every controversial interlocutory ruling; it is resorted to only to correct a grave abuse of discretion or a whimsical exercise of judgment equivalent to lack or excess of jurisdiction. The function of a petition for certiorari is limited to keeping an inferior court within the bounds of its jurisdiction and to relieve persons from arbitrary acts, acts which courts or judges have no power or authority in law to perform. Certiorari is not designed to correct erroneous findings and [10] conclusions made by the court. On this score, we are in agreement with the appellate court. At any rate, we find no merit to petitioners contention that they are not real parties-in-interest since they are not parties nor signatories to the contract and hence should not have been impleaded as defendants. It is undeniable that petitioner Chan is an heir of Ramon Chan and, together with petitioner Co, was a successor-in-interest to the restaurant business of the late Ramon Chan. Both continued to operate the business after the death of Ramon. Thus, they are real parties-in-interest in the case filed by private

The trial court pointed out that petitioners continued to transact business with private respondent after the death of Ramon Chan as shown by the communications between the parties. It also declared that private respondents acquiescence to petitioners continued occupation and enjoyment of the leased premises and the latters recognition of the formers ownership of said premises reflected an oral agreement between the parties to continue the Lease Contract. Petitioners moved for reconsideration on the ground that any claim should be filed against the estate of Ramon Chan in an estate proceeding [6] pursuant to Section 5, Rule 86, of the Revised Rules of Court since Ramon Chans estate is the real party-in-interest. The court denied said motion and declared that Section 5, Rule 86 is inapplicable in the case. It pointed out that the unpaid rentals being claimed were those for the period April 1993 to December 1998. These were incurred by petitioners and not by the late Ramon Chan, who died on August 5, 1989. Dissatisfied, petitioners elevated the matter to the Court of Appeals through a special civil action of certiorari, docketed as CA-G.R. SP No. 61889. The Court of Appeals, however, affirmed the RTC Orders, as follows: WHEREFORE, foregoing premises considered, the petition having no merit in fact and in law is hereby DENIED DUE COURSE and ACCORDINGLY ORDERED DISMISSED. The assailed Orders are resultantly AFFIRMED WITH COSTS TO PETITIONERS. SO ORDERED.
[7]

Hence, the instant petition submitting as sole issue for our resolution:

respondent, notwithstanding that they are not signatories to the Contract of Lease. A lease contract is not essentially personal in character. Thus, the [11] rights and obligations therein are transmissible to the heirs. The general rule, therefore, is that heirs are bound by contracts entered into by their predecessors-in-interest except when the rights and obligations arising therefrom are not transmissible by (1) their nature, (2) stipulation or (3) [12] provision of law. In the subject Contract of Lease, not only were there no stipulations prohibiting any transmission of rights, but its very terms and conditions explicitly provided for the transmission of the rights of the lessor and of the lessee to their respective heirs and successors. The contract is the law between the parties. The death of a party does not excuse nonperformance of a contract, which involves a property right, and the rights and obligations thereunder pass to the successors or representatives of the deceased. Similarly, nonperformance is not excused by the death of the party when the other party has a property interest in the subject matter of the [13] contract. Finally, as to petitioners contention that any claim should have been filed before the estate proceeding of Ramon Chan pursuant to Section 5 of Rule 86, the trial court found that the unpaid rentals sought to be claimed were for the period April 1993 to December 1998. Note that Ramon Chan, the original lessee, died on August 5, 1989. In other words, as the unpaid rentals did not accrue during the lifetime of Ramon Chan, but well after his death, his estate might not be held liable for them. Hence, there is no indubitable basis to apply Section 5, Rule 86, of the Revised Rules of Court as petitioners urge respondents to do. WHEREFORE, the instant petition is DENIED and the Decision of the Court of Appeals in CA-G.R. SP. No. 61889 is AFFIRMED. Costs against petitioners. SO ORDERED. Callejo, Sr., and Tinga, JJ., concur. Puno, J., (Chairman), on leave. Austria-Martinez, J., no part.

Uy v. CA Facts: Petitioners William Uy and Rodel Roxas are agents authorized to sell 8 parcels of land. Petitioners offered to sell the land to NHA for a housing project. On February 14, 1989, NHA passed a resolution approving the acquisition of said lands, and pursuant to this the parties executed Deeds of Absolute Sale. However, only 5 out of 8 lands were paid for by NHA because of a report from DENR that the remaining area is located at an active landslide area and are therefore not conducive for housing. On November 22, 1991, NHA issued a resolution canceling the sale of the remaining lands and offered P1.225 million to the landowners as daos perjuicios. On March 9, 1992, petitioners filed a complaint for damages against NHA and its general manager Robert Balao. The RTC declared the cancellation to be justified, but awarded the amount offered by NHA. The Court of Appeals affirmed the decision, but deleted the award. Issues: (1) Whether the petitioners are real parties in interest (2) Whether the cancellation is justified Held: (1) Petitioners claim that they lodged the complaint not in behalf of their principals but in their own name as agents directly damaged by the termination of the contract. Petitioners in this case purportedly brought the action for damages in their own name and in their own behalf. An action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced. Petitioners are not parties to the contract of sale between their principals and NHA. They are mere agents of the owners of the land subject of the sale. As agents, they only render some service or do something in representation or on behalf of their principals. The rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter. Since a contract may be violated only by the parties thereto as against each other, the real parties-in-interest, either as plaintiff or defendant, in an action upon that contract must, generally, either be parties to said contract. Petitioners have not shown that they are

assignees of their principals to the subject contracts. While they alleged that they made advances and that they suffered loss of commissions, they have not established any agreement granting them "the right to receive payment and out of the proceeds to reimburse [themselves] for advances and commissions before turning the balance over to the principal[s]." (2) The cancellation was not a rescission under Article 1191. Rather, the cancellation was based on the negation of the cause arising from the realization that the lands, which were the object of the sale, were not suitable for housing. Cause is the essential reason which moves the contracting parties to enter into it. In other words, the cause is the immediate, direct and proximate reason which justifies the creation of an obligation through the will of the contracting parties. Cause, which is the essential reason for the contract, should be distinguished from motive, which is the particular reason of a contracting party which does not affect the other party. Ordinarily, a party's motives for entering into the contract do not affect the contract. However, when the motive predetermines the cause, the motive may be regarded as the cause. In this case, it is clear, and petitioners do not dispute, that NHA would not have entered into the contract were the lands not suitable for housing. In other words, the quality of the land was an implied condition for the NHA to enter into the contract. On the part of the NHA, therefore, the motive was the cause for its being a party to the sale. We hold that the NHA was justified in canceling the contract. The realization of the mistake as regards the quality of the land resulted in the negation of the motive/cause thus rendering the contract inexistent.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-2277 December 29, 1950 MONICO CONCEPCION, plaintiff-appellant, vs. PACIENCIA STA. ANA, defendant-appellee. Yap and Garcia for appellant. Tomas Yumol for appellee. FERIA, J.: An action was instituted by Monico Concepcion vs. Paciencia Sta. Ana to annul the sale made by the late Perpetua Concepcion, sister of the plaintiff, of three parcels of land with the improvements thereon to the defendant. The complaint alleges, among others, that the plaintiff is the only surviving legitimate brother of Perpetua Concepcion, who died on or about January 28, 1948, without issue and without leaving any will; that in her life time or on about June 29, 1945, said Perpetua Concepcion, in connivance with the defendant and with intent to defraud the plaintiff, sold and conveyed three parcels of land for a false and fictitious consideration to the defendant, who secured transfer certificates of title of said lands issued under her name; and that the defendant has been in possession of the properties sold since the death of Perpetua Concepcion, thereby causing damages to the plaintiff in the amount of not less than two hundred (P200) pesos. Defendant filed a motion to dismiss the complaint on the ground that it does not state a cause of action, because the deceased being the owner of the properties sold had the right to enjoy and dispose of them without further limitation than those established by law. The Court of First Instance of Manila granted the motion to dismiss and dismissed the complaint on the ground that "the plaintiff is not a party to the deed of sale executed by Perpetua Concepcion in favor of the defendant. Even in the assumption that the consideration of the contract is fictitious, the plaintiff has no right of action against the defendant. Under article 1302 of the Civil Code, "the action to annul a contract may be brought by any person

principally or subsidiarily bound thereby." The plaintiff is not bound by the deed of sale executed by the deceased in favor of the defendant. He has no obligation under the deed." Plaintiff appealed from the order of the court dismissing his complaint, and now assigns as erroneous the order appealed from on the following grounds: (1) that a simulated or fictitious sale for a fictitious or false consideration is null and void per se or non-existence, hence it cannot transfer ownership; and (2) that according to article 1302 of the same code, "the action to annul a contract may be brought by a person principally or subsidiarily bound thereby," and as under article 1257 of the Civil Code "contracts shall be binding only upon the parties who make them and their heirs," the plaintiff as heir of the deceased contracting party can bring action to annul the contract of sale under consideration. (1) The plaintiff's contention that a simulated or fictitious contract of sale with a false consideration is null and voidper se, or is a contrato inexistente, not merely a contrato nulo, is not correct. Article 1276 of the Civil Code 1expressly provides that "the statement of a false consideration in contract shall be ground for annulment," and article 1301 of the same code provided for the limitation of actions for annulment of a contract. In support of his contention that the contract of sale under consideration being a fictitious contract or contract with a false consideration is null per se or non-existent, plaintiff quotes Manresa's comment on article 1274 to 1277, Vol. 8, p. 623, which says: "Recognizing this analogy, it was held by the Supreme Court of Spain that a fictitious contract, or contract entered into with false consideration does not confer any right or produce any legal effect, citing the judgments of the Supreme Court of Spain of October 31, 1865, of March 21, 1884, and of November 23, 1877." Appellant's conclusion is not correct. By stating that contracts with false consideration confer no right and produce no legal effect, Manresa does not mean to say that they are null and void per se or non-existent as contradistinguished from annullable, for the effects of both non-existent and annullable contracts that have been annulled are the same: they confer no right and produce no legal effect. What Manresa says on page 700 of the same volume, commenting on article 1301, is the following: "The expression of a false cause or consideration in the contract does not make it non-existent, and it shall only be a ground for an action for nullity as provided by article 1276 and confirmed by article 1301 of the Civil Code. There are some who consider this somewhat confused under the Code; for us it is very clear, for the code repeatedly provides that the effect of a false consideration is limited to making the contract voidable, and we have already pointed out that in this particular, our Civil Code has deviated deliberately from the French Code,

which includes indistinctly in one and the same provision contracts without consideration and contracts in which the consideration is illicit or false." In the case of De Belen vs. Collector of Customs and Sheriff of Manila (46 Phil. 241), this court, through Mr. Justice Street, said that "The distinction between entire absence of contract (inexistencia) and the situation requiring an action of rescission or nullity is fully expounded by Manresa in his comment on article 1300 of the Civil Code (q.v.)." (2) As to the appellant's second and last contention, under the law action to annul a contract entered into with all the requisites mentioned in article 1261 whenever they are tainted with the vice which invalidate them in accordance with law, may be brought, not only by any person principally bound or who made them, but also by his heir to whom the right and obligation arising from the contract are transmitted. Hence if no such rights, actions or obligations have been transmitted to the heir, the latter can not bring an action to annul the contract in representation of the contracting party who made it. In Wolfson vs. Estate of Martinez, 20 Phil., 340, this Supreme Court quoted with approval the judgment of the Supreme Court of Spain of April 18, 1901, in which it was held that "he who is not a party to a contract, or an assignee thereunder, or does not represent those who took part therein, has under articles 1257 and 1302 of the Civil Code no legal capacity to challenge the validity of such contract." And in Irlanda vs. Pitargue (22 Phil. 383) we held that "the testamentary or legal heir continues in law as the juridical personality of his predecessor in interest, who transmit to him from the moment of his death such of his rights, actions and obligations as are not extinguished thereby."lawphil.net The question to be resolved is, therefore, whether the deceased Perpetua Concepcion has transmitted to the plaintiff any right arising from the contract under consideration in order that he can bring an action to annul the sale voluntarily made by her to the defendant with a false consideration. We are of the opinion and so hold, that the late Perpetua Concepcion has not transmitted to the plaintiff any right arising from the contract of conveyance or sale of her lands to the defendant, and therefore the plaintiff cannot file an action to annul such contract as representative of the deceased. According to the complaint, the deceased, in connivance with the defendant and with intent to defraud the plaintiff, (that is, in order not to leave the properties above mentioned upon her death to the plaintiff) sold and conveyed them to the latter, for a false and fictitious consideration. It is,

therefore obvious, that the conveyance or sale of said properties to the defendant was voluntarily made by the deceased to said defendant. As the deceased had no forced heir, she was free to dispose of all her properties as absolute owner thereof, without further limitation than those established by law, and the right to dispose of a thing involves the right to give or to convey it to another without any consideration. The only limitation established by law on her right to convey said properties to the defendant without any consideration is, that she could not dispose of or transfer her property to another in fraud of her creditors. And this court, in Solis vs. Chua Pua Hermanos (50 Phil. 636), through Mr. Justice Street, held that "a voluntary conveyance, without any consideration whatever, is prima facie good as between the parties, and such an instrument can not be declared fraudulent as against creditors in the absence of proof, that there was at the time of the execution of the conveyance a creditor who could be defrauded by the conveyance, 27 C. J., 470." Even a forced heir of the deceased Perpetua Concepcion would have no right to institute as representative of the decedent, an action of nullity of a contract made by the decedent to defraud his creditors, because such a contract being considered illicit under article 1306 of the Civil Code, Perpetua Concepcion herself had no right of action to annul it and recover the properties she had conveyed to the defendant. But the forced heir could in such case bring an action to rescind the contract under article 1291 (3) of the Civil Code. Manresa in his comments on articles 1305 and 1306 of the Civil Code (4th edition, volume 8, pp. 717, 718), says: "As to heirs, it is interesting that the judgment of May 6, 1902, of the Supreme Court of Spain which denied a forced heir the right to institute an action to annul contracts considered a illicit, for having been entered into by his predecessor in interest for the purpose of depriving the forced heir of his legitime. The judgment purported to hold that the proper action would have been an action to rescind conformity with what we indicated in commenting on article 1291, and declared that 'even forced heirs who accept an inheritance under the benefit of inventory are within the rule 2 of article 1806, that denies to the guilty party the right to recover anything he may have given, or to enforce the performance of any undertaking in his favor, when the other party has nothing to do with the illicit consideration; a doctrine laid down in the judgment of July 4, 1896.'" The reason why a forced heir has the right to institute an action of rescission is that the right to the legitime is similar to a credit of a creditor. As the same Spanish author correctly states in commenting on article 1291 of the Civil Code: "The rights of a forced heir to the legitime are undoubtedly similar to a credit of a creditor in so far as the rights to the legitime may be defeated by fraudulent contracts, and are superior to the will of those bound to respect

them. In its judgment of October 28, 1897, the Supreme Court of Spain held that the forced heirs instituted as such by their father to the latter's testament have the undeniable right to institute an action to annul contracts entered into by the father to their prejudice. As it is seen the action is called action of nullity, but it is rather an action of rescission taking into account the purpose for which it is instituted and the confusion of ideas that has prevailed in this matter. The doctrine we shall expound in commenting on articles 1302 and 1306 will confirm what we have just stated." (Manresa Codigo Civil, 4th edition, Vol. 8, pp. 667 and 668.) Therefore, as the plaintiff in the present case, not being a forced heir of the late Perpetua Concepcion, can not institute an action to annul under article 1300 or to rescind under article 1291 (3) of the Civil Code the contract under consideration entered into by the deceased with the defendant. In view of the foregoing, the judgment of the lower court is affirmed with costs against the appellant. So ordered.

HEIRS OF WILLIAM SEVILLA, NAMELY: WILFREDO SEVILLA, WILSON SEVILLA, WILMA SEVILLA, WILLINGTON SEVILLA, AND WILLIAM SEVILLA, JR., HEIRS OF MARIA SEVILLA, NAMELY: AMADOR SEVILLA, JENO CORTES, VICTOR CORTES, * MARICEL CORTES, ALELEI CORTES AND ** ANJEI CORTES, petitioners, vs. LEOPOLDO SEVILLA, PETER SEVILLA, AND LUZVILLA SEVILLA, respondents. DECISION YNARES-SANTIAGO, J.:

Transfer Certificate of Title No. T-6672 and assessed at P5,890 according to Tax Dec. No. 009-761; PARCEL III: A parcel of land known as Lot No. 837-1/4 situated at Magsaysay Street, Dipolog City, with an area of about 880 square meters more or less, duly covered by Original Certificate of Title No. 0-6064 and assessed at P12,870.00 according to Tax Dec. No. 020-1078; PARCEL IV:

One who alleges defect or lack of valid consent to a contract by reason of fraud or undue influence must establish by full, clear and convincing evidence such specific acts that vitiated a partys consent, otherwise, the [1] latters presumed consent to the contract prevails. The instant petition for review seeks to set aside the September 26, [2] 2000 Decision of the Court of Appeals in CA-G.R. CV No. 48956, [3] affirming in toto the Decision of the Regional Trial Court of Dipolog City, Branch 6, in Civil Case No. 4240 which declared, inter alia, the questioned Deed of Donation Inter Vivos valid and binding on the parties. The undisputed facts reveal that on December 10, 1973, Filomena Almirol de Sevilla died intestate leaving 8 children, namely: William, Peter, Leopoldo, Felipe, Rosa, Maria, Luzvilla, and Jimmy, all surnamed Sevilla. William, Jimmy and Maria are now deceased and are survived by [4] their respective spouses and children. Filomena Almirol de Sevilla left the following properties: PARCEL I: A parcel of land known as Lot No. 653 situated at General Luna St., Dipolog City, with an area of about 804 square meters, more or less, duly covered by Transfer Certificate of Title No. (T-6671)-1448 [in the name of Filomena Almirol de Sevilla, Honorata Almirol and Felisa Almirol] and assessed at P31,360.00 according to Tax Dec. No. 018-947; PARCEL II: A parcel of land known as Lot No. 3805-B situated at Olingan, Dipolog City, with an area of about 18,934 square meters, more or less, duly covered by

A parcel of residential land known as Lot No. 1106-B-3 situated at Sta. Filomena, Dipolog City, with an area of 300 square meters, more or less, assessed at P3,150.00 according to Tax Dec. No. 006-317; Commercial building erected on Parcel I above-described; and residential building erected just at the back of the commercial building above-described [5] and erected on Parcel I above-described; Parcel I, Lot No. 653, is the paraphernal property of Filomena Almirol de Sevilla which she co-owned with her sisters, Honorata Almirol and Felisa [6] Almirol, who were both single and without issue. Parcels II, II and IV are conjugal properties of Filomena Almirol de Sevilla and her late husband [7] Andres Sevilla. When Honorata died in 1982, her 1/3 undivided share in Lot No. 653 was transmitted to her heirs, Felisa Almirol and the heirs of Filomena Almirol de Sevilla, who thereby acquired the property in the proportion of one-half share each. During the lifetime of Felisa and Honorata Almirol, they lived in the house of Filomena Almirol de Sevilla, together with their nephew, respondent Leopoldo Sevilla and his family. Leopoldo attended to the needs [8] of his mother, Filomena, and his two aunts, Honorata and Felisa. Felisa died on July 6, 1988. Previous thereto, on November 25, 1985, she executed a last will and testament devising her 1/2 share in Lot No. 653 [10] to the spouses Leopoldo Sevilla and Belen Leyson. On August 8, 1986, Felisa executed another document denominated as Donation Inter Vivos ceding to Leopoldo Sevilla her 1/2 undivided share in Lot No. 653, which [11] was accepted by Leopoldo in the same document. On September 3, 1986, Felisa Almirol and Peter Sevilla, in his own behalf and in behalf of the heirs of Filomena Almirol de Sevilla, executed a Deed of Extra-judicial Partition, identifying and adjudicating the 1/3 share of
[9]

Honorata Almirol to the heirs of Filomena Almirol de Sevilla and to Felisa [12] Almirol. Thereafter, respondents Leopoldo, Peter and Luzvilla Sevilla obtained the cancellation of Transfer Certificate of Title No. (T-6671)-1448, over Lot No. 653, and the issuance of the corresponding titles to Felisa Almirol and the heirs of Filomena Almirol de Sevilla. However, the requested titles for Lot Nos. 653-A and 653-B, were left unsigned by the Register of Deeds of Dipolog City, pending submission by Peter Sevilla of a Special Power of Attorney authorizing him to represent the other heirs of Filomena Almirol de [13] Sevilla. On June 21, 1990, Felipe Sevilla, Rosa Sevilla, and the heirs of William, Jimmy and Maria, all surnamed Sevilla, filed the instant case against respondents Leopoldo Sevilla, Peter Sevilla and Luzvilla Sevilla, for annulment of the Deed of Donation and the Deed of Extrajudicial Partition, Accounting, Damages, with prayer for Receivership and for Partition of the [14] properties of the late Filomena Almirol de Sevilla. They alleged that the Deed of Donation is tainted with fraud because Felisa Almirol, who was then 81 years of age, was seriously ill and of unsound mind at the time of the execution thereof; and that the Deed of Extra-judicial Partition is void [15] because it was executed without their knowledge and consent. In their answer, respondents denied that there was fraud or undue pressure in the execution of the questioned documents. They alleged that Felisa was of sound mind at the time of the execution of the assailed deeds and that she freely and voluntarily ceded her undivided share in Lot No. 653 in consideration of Leopoldos and his familys love, affection, and services rendered in the past. Respondents further prayed that Parcels II, III, and IV be partitioned among the heirs of Filomena Almirol de Sevilla in accordance with the law on intestate succession. On December 16, 1994, a decision was rendered by the Regional Trial Court of Dipolog City, Zamboanga del Norte, Branch 6, upholding the validity of the Deed of Donation and declaring the Deed of Extra-judicial Partition unenforceable. The dispositive portion thereof, reads: WHEREFORE, IN VIEW OF THE FOREGOING, summing up the evidence for both the plaintiffs and the defendants, the Court hereby renders judgment: 1) Declaring the questioned Deed of Donation Inter Vivos valid and binding, and, therefore, has the full force and effect of law;
[16]

2) Declaring the questioned Deed of Extra-Judicial Partition as unenforceable as yet as against the other heirs, as it lacks the legal requisites of Special Power of Attorney or any other appropriate instrument to be executed by the other heirs who were not made parties thereto; 3) Finding the parties herein entitled to the partition of Parcel II, III, IV as designated in the Complaint, in equal shares, and, as to Lot No. 653 designated as Parcel I, it shall be divided equally into two, between defendant Leopoldo Sevilla on one hand, and, collectively, the Heirs of William Sevilla, Heirs of Jimmy Sevilla, Heirs of Maria Sevilla, Felipe Sevilla, Leopoldo Sevilla, Peter Sevilla, Luzvilla Sevilla-Tan, on the other hand, as well as the two buildings thereon in proportionate values; 4) Directing the parties, if they can agree, to submit herewith a project of partition, which shall designate the share which pertains to the heirs entitled thereto, that is, the particular and specific portions of the properties subject of the partition; 5) Directing defendant Peter Sevilla to pay and/or collect from the parties the amounts corresponding to each one entitled or liable thereto, as recorded in the Statement of Accounts, except for defendant Leopoldo Sevilla who is found by the Court to have incurred only an overdraft of P5,742.98 and not P33,204.33 as earlier computed therein. 6) Dismissing the plaintiffs claim for damages, which is not proved with sufficient evidence, and defendants counterclaim, on the same ground. 7) With costs de oficio.
[17]

IT IS SO ORDERED.

Both parties appealed to the Court of Appeals. Petitioners contended that the Deed of Donation should be declared void and that Lot No. 653 should be divided equally among them. Respondents, on the other hand, posited that the trial court erred in declaring the Deed of Extra-judicial Partition unenforceable against the other heirs of Filomena Almirol de Sevilla who were not parties to said Deed. On September 26, 2000, the Court of Appeals affirmed in toto the [18] assailed decision of the trial court. Petitioners filed a motion for [19] reconsideration but the same was denied on August 30, 2001. Hence, the instant petition based on the following assignment of errors:

THAT THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING AS VOID AB INITIO THE DEED OF DONATION EXCUTED BY FELISA ALMIROL IN FAVOR OF RESPONDENT LEOPOLDO SEVILLA CEDING TO HIM ONE HALF PORTION OF LOT 653, DIPOLOG CADASTRE, IT HAVING BEEN EXECUTED WITH FRAUD, UNDUE PRESSURE AND INFLUENCE; THAT THE APPELLATE COURT GREATLY ERRED IN NOT ORDERING THE PARTITION OF LOT 653, DIPOLOG CADASTRE EQUALLY AMONG THE EIGHT (8) HEIRS OF FILOMENA, HONORATA AND FELISA, ALL [20] SURNAMED ALMIROL. To resolve the issue raised in the instant petition for review, the validity of the donation inter vivos executed by Felisa Almirol in favor of Leopoldo Sevilla must first be determined. Donation is an act of liberality whereby a person disposes gratuitously [21] of a thing or right in favor of another who accepts it. Under Article 737 of the Civil Code, the donors capacity shall be determined as of the time of the making of the donation. Like any other contract, an agreement of the parties [22] is essential, and the attendance of a vice of consent renders the donation [23] voidable. In the case at bar, there is no question that at the time Felisa Almirol executed the deed of donation she was already the owner of 1/2 undivided portion of Lot No. 653. Her 1/3 undivided share therein was increased by 1/2 when she and Filomena inherited the 1/3 share of their sister Honorata after the latters death. Hence, the 1/2 undivided share of Felisa in Lot No. 653 is considered a present property which she can validly dispose of at the [24] time of the execution of the deed of donation. Petitioners, however, insist that respondent Leopoldo Sevilla employed fraud and undue influence on the person of the donor. This argument [25] involves appreciation of the evidence. The settled rule is that factual findings of the trial court, if affirmed by the Court of Appeals, are entitled to [26] great respect. There are exceptional circumstances when findings of fact [27] of lower courts may be set aside but none is present in the case at bar. Indeed, neither fraud nor undue influence can be inferred from the following circumstance alleged by the petitioners, to wit A. That Felisa Almirol lived with respondent Leopoldo Sevilla in the residential house owned by petitioners and respondents;

B. That the old woman Felisa Almirol was being supported out of the rentals derived from the building constructed on the land which was a common fund. C. That when Felisa Almirol was already 82 years old, he [Leopoldo Sevilla] accompanied her in the Office of Atty. Vic T. Lacaya, Sr., for the purpose of executing her last will and testament D. That in the last will and testament executed by Felisa Almirol, she had devised in favor of respondent Leopoldo Sevilla one-half of the land in question; E. That respondent Leopoldo Sevilla not contented with the execution by Felisa Almirol of her last will and testament, had consulted a lawyer as to how he will be able to own the land immediately; F. That upon the advice of Atty. Helen Angeles, Clerk of Court of the Regional Trial Court of Zamboanga del Norte, Dipolog City, Felisa Almirol executed a Deed of Donation, hence, the questioned Deed of Donation executed in his favor; G. That the subject matter of the Deed of Donation was the one-half portion of Lot 653, Dipolog Cadastre, which was willed by Felisa Almirol, in favor of respondent Leopoldo Sevilla in her last will and testament; H. That at the time of the execution of the Deed of Donation, Lot No. 653, Dipolog Cadastre, was not yet partitioned between petitioners and respondents they being heirs of the late Filomena and Honorata, all surnamed Almirol; I. That after the execution of the Deed of Donation, respondent Peter Sevilla and the late Felisa Almirol were the only ones who executed the Deed of Extra-judicial Partition over Lot 653, Dipolog Cadastre, the petitioners were not made parties in the said Deed of Extrajudicial Partition; J. That on the basis of the Deed of Extrajudicial Partition and Deed of Donation, respondent Leopoldo Sevilla caused the subdivision survey of Lot 653, Dipolog Cadastre, dividing the same into two (2) lots, adjudicating onehalf of the lot in his favor and the other half in favor of respondents peter Sevilla and Luzvilla Sevilla, and to respondent Leopoldo Sevilla himself;

K. That only two persons knew the actual survey of the land, petitioner Felipe Sevilla and respondent Leopoldo Sevilla himself, the rest of the coowners were not even notified; L. That on the basis of the Extrajudicial Partition, Deed of Donation, the approved subdivision plan, respondent Leopoldo Sevilla filed a petition for issuance of the corresponding titles for the two lots, but the Register of Deeds of Dipolog City refused to issue the corresponding titles for the two lots to respondent Leopoldo Sevilla so that up to this moment the two tiles [28] were left unsigned by the Register of Deeds. There is fraud when, through the insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract [29] which, without them, he would not have agreed to. There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. The following circumstances shall be considered: the confidential, family, spiritual and other relations between the parties, or the fact that the person alleged to have been unduly influenced was suffering from mental weakness, or was [30] ignorant or in financial distress. Ei incumbit probatio qui dicit, non qui negat. He who asserts, not he who denies, must prove. We have consistently applied the ancient rule that if the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a satisfactory manner facts on which he bases his claim, the [31] defendant is under no obligation to prove his exception or defense. In the instant case, the self-serving testimony of the petitioners are vague on what acts of Leopoldo Sevilla constituted fraud and undue influence and on how these acts vitiated the consent of Felisa Almirol. Fraud and undue influence that vitiated a partys consent must be established by full, clear and convincing evidence, otherwise, the latters presumed consent to the [32] contract prevails. Neither does the fact that the donation preceded the partition constitute fraud. It is not necessary that partition should first be had because what was donated to Leopoldo was the 1/2 undivided share of Felisa in Lot No. 653. Moreover, petitioners failed to show proof why Felisa should be held incapable of exercising sufficient judgment in ceding her share to respondent [33] Leopoldo. As testified by the notary public who notarized the Deed of Donation, Felisa confirmed to him her intention to donate her share in Lot No. 653 to Leopoldo. He stressed that though the donor was old, she was of sound mind and could talk sensibly. Significantly, there is nothing in the record that discloses even an attempt by petitioners to rebut said declaration of the notary public.

Clearly, therefore, the courts below did not err in sustaining the validity of the deed of donation. Anent the Deed of Extra-judicial Partition, we find that the same is void ab initio and not merely unenforceable. In Delos Reyes v. Court of [34] Appeals, which is a case involving the sale of a lot by a person who is neither the owner nor the legal representative, we declared the contract void ab initio. It was held that one of the requisites of a valid contract under Article 1318 of the Civil Code is the consent and the capacity to give consent of the parties to the contract. The legal capacity of the parties is an essential element for the existence of the contract because it is an indispensable condition for the existence of consent. There is no effective consent in law without the capacity to give such consent. In other words, legal consent presupposes capacity. Thus, there is said to be no consent, and consequently, no contract when the agreement is entered into by one in behalf of another who has never given him authorization therefor unless he [35] has by law a right to represent the latter. In the case at bar, at the time Felisa executed the deed of extra-judicial partition dividing the share of her deceased sister Honarata between her and the heirs of Filomena Almirol de Sevilla, she was no longer the owner of the 1/2 undivided portion of Lot No. 653, having previously donated the same to respondent Leopoldo Sevilla who accepted the donation in the same deed. A donation inter vivos, as in the instant case, is immediately operative [36] and final. As a mode of acquiring ownership, it results in an effective transfer of title over the property from the donor to the donee and the donation is perfected from the moment the donor knows of the acceptance by the donee. And once a donation is accepted, the donee becomes the absolute owner of the property donated. Evidently, Felisa did not possess the capacity to give consent to or execute the deed of partition inasmuch as she was neither the owner nor the authorized representative of respondent Leopoldo to whom she previously transmitted ownership of her undivided share in Lot No. 653. Considering that she had no legal capacity to give consent to the deed of partition, it follows that there is no consent given to the execution of the deed, and therefore, there is no contract to speak of. As such, the deed of partition is void ab initio, hence, not susceptible of ratification. Nevertheless, the nullity of the deed of extra-judicial partition will not affect the validity of the donation inter vivos ceding to respondent Leopoldo Sevilla the 1/2 undivided share of Felisa Almirol in Lot No. 653. Said lot should therefore be divided as follows: 1/2 shall go to respondent Leopoldo Sevilla by virtue of the deed of donation, while the other half shall be divided equally among the heirs of Filomena Almirol de Sevilla including Leopoldo Sevilla, following the rules on intestate succession.

Finally, we note that the name of Rosa Sevilla, daughter of Filomena Almirol de Sevilla, and one of the plaintiffs herein, was omitted in the [37] dispositive portion of the trial courts decision. Her name should therefore be included in the dispositive portion as one of the heirs entitled to share in the properties of the late Filomena Almirol de Sevilla. WHEREFORE, in view of all the foregoing, the Decision of the Court of Appeals in CA-G.R. CV No. 48956, affirming in toto the Decision of the Regional Trial Court of Dipolog City, Branch 6, in Civil Case No. 4240, is AFFIRMED with MODIFICATION. The Deed of Extra-judicial Partition dated September 3, 1986 is declared void, and the name of Rosa Sevilla is ordered included in the dispositive portion of the trial courts judgment.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 137162 January 24, 2007

covering his share on the two lots; that with respect to the heirs of Luz Baloloy, they also refused and still refuse to perform the delivery of the two certificates of title covering their share in the disputed lots; that respondent was and is ready and willing to pay Ignacio Rubio and the heirs of Luz Baloloy upon presentation of their individual certificates of title, free from whatever lien and encumbrance; As to petitioner Corazon Escueta, in spite of her knowledge that the disputed lots have already been sold by Ignacio Rubio to respondent, it is alleged that a simulated deed of sale involving said lots was effected by Ignacio Rubio in her favor; and that the simulated deed of sale by Rubio to Escueta has raised doubts and clouds over respondents title. In their separate amended answers, petitioners denied the material allegations of the complaint and alleged inter alia the following: For the heirs of Luz Baloloy (Baloloys for brevity):

CORAZON L. ESCUETA, assisted by her husband EDGAR ESCUETA, IGNACIO E. RUBIO, THE HEIRS OF LUZ R. BALOLOY, namely, ALEJANDRINO R. BALOLOY and BAYANI R. BALOLOY, Petitioners, vs. RUFINA LIM, Respondent. DECISION AZCUNA, J.: This is an appeal by certiorari to annul and set aside the Decision and Resolution of the Court of Appeals (CA) dated October 26, 1998 and January 11, 1999, respectively, in CA-G.R. CV No. 48282, entitled "Rufina Lim v. Corazon L. Escueta, etc., et. al." The facts appear as follows: Respondent Rufina Lim filed an action to remove cloud on, or quiet title to, real property, with preliminary injunction and issuance of [a hold-departure order] from the Philippines against Ignacio E. Rubio. Respondent amended her complaint to include specific performance and damages. In her amended complaint, respondent averred inter alia that she bought the hereditary shares (consisting of 10 lots) of Ignacio Rubio [and] the heirs of Luz Baloloy, namely: Alejandrino, Bayani, and other co-heirs; that said vendors executed a contract of sale dated April 10, 1990 in her favor; that Ignacio Rubio and the heirs of Luz Baloloy received [a down payment] or earnest money in the amount of P102,169.86 and P450,000, respectively; that it was agreed in the contract of sale that the vendors would secure certificates of title covering their respective hereditary shares; that the balance of the purchase price would be paid to each heir upon presentation of their individual certificate[s] of [title]; that Ignacio Rubio refused to receive the other half of the down payment which isP[100,000]; that Ignacio Rubio refused and still refuses to deliver to [respondent] the certificates of title
2 1

Respondent has no cause of action, because the subject contract of sale has no more force and effect as far as the Baloloys are concerned, since they have withdrawn their offer to sell for the reason that respondent failed to pay the balance of the purchase price as orally promised on or before May 1, 1990. For petitioners Ignacio Rubio (Rubio for brevity) and Corazon Escueta (Escueta for brevity): Respondent has no cause of action, because Rubio has not entered into a contract of sale with her; that he has appointed his daughter Patricia Llamas to be his attorney-in-fact and not in favor of Virginia Rubio Laygo Lim (Lim for brevity) who was the one who represented him in the sale of the disputed lots in favor of respondent; that theP100,000 respondent claimed he received as down payment for the lots is a simple transaction by way of a loan with Lim. The Baloloys failed to appear at the pre-trial. Upon motion of respondent, the trial court declared the Baloloys in default. They then filed a motion to lift the order declaring them in default, which was denied by the trial court in an order dated November 27, 1991. Consequently, respondent was allowed to adduce evidence ex parte. Thereafter, the trial court rendered a partial decision dated July 23, 1993 against the Baloloys, the dispositive portion of which reads as follows:

IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of [respondent] and against [petitioners, heirs] of Luz R. Balolo[y], namely: Alejandrino Baloloy and Bayani Baloloy. The [petitioners] Alejandrino Baloloy and Bayani Baloloy are ordered to immediately execute an [Absolute] Deed of Sale over their hereditary share in the properties covered by TCT No. 74392 and TCT No. 74394, after payment to them by [respondent] the amount of P[1,050,000] or consignation of said amount in Court. [For] failure of [petitioners] Alejandrino Baloloy and Bayani Baloloy to execute the Absolute Deed of Sale over their hereditary share in the property covered by TCT No. T-74392 and TCT No. T-74394 in favor of [respondent], the Clerk of Court is ordered to execute the necessary Absolute Deed of Sale in behalf of the Baloloys in favor of [respondent,] with a consideration ofP[1,500,000]. Further[,] [petitioners] Alejandrino Baloloy and Bayani Baloloy are ordered to jointly and severally pay [respondent] moral damages in the amount of P[50,000] and P[20,000] for attorneys fees. The adverse claim annotat ed at the back of TCT No. T-74392 and TCT No. T-74394[,] insofar as the shares of Alejandrino Baloloy and Bayani Baloloy are concerned[,] [is] ordered cancelled. With costs against [petitioners] Alejandrino Baloloy and Bayani Baloloy. SO ORDERED.
3

On appeal, the CA affirmed the trial courts order and partial decision, but reversed the later decision. The dispositive portion of its assailed Decision reads: WHEREFORE, upon all the foregoing premises considered, this Court rules: 1. the appeal of the Baloloys from the Order denying the Petition for Relief from Judgment and Orders dated July 4, 1994 and Supplemental Petition dated July 7, 1994 is DISMISSED. The Order appealed from is AFFIRMED. 2. the Decision dismissing [respondents] complaint is REVERSED and SET ASIDE and a new one is entered. Accordingly, a. the validity of the subject contract of sale in favor of [respondent] is upheld. b. Rubio is directed to execute a Deed of Absolute Sale conditioned upon the payment of the balance of the purchase price by [respondent] within 30 days from the receipt of the entry of judgment of this Decision. c. the contracts of sale between Rubio and Escueta involving Rubios share in the disputed properties is declared NULL and VOID. d. Rubio and Escueta are ordered to pay jointly and severally the [respondent] the amount ofP[20,000] as moral damages and P[20,000] as attorneys fees. 3. the appeal of Rubio and Escueta on the denial of their counterclaim is DISMISSED. SO ORDERED.
5

The Baloloys filed a petition for relief from judgment and order dated July 4, 1994 and supplemental petition dated July 7, 1994. This was denied by the trial court in an order dated September 16, 1994. Hence, appeal to the Court of Appeals was taken challenging the order denying the petition for relief. Trial on the merits ensued between respondent and Rubio and Escueta. After trial, the trial court rendered its assailed Decision, as follows: IN VIEW OF THE FOREGOING, the complaint [and] amended complaint are dismissed against [petitioners] Corazon L. Escueta, Ignacio E. Rubio[,] and the Register of Deeds. The counterclaim of [petitioners] [is] also dismissed. However, [petitioner] Ignacio E. Rubio is ordered to return to the [respondent], Rufina Lim[,] the amount of P102,169.80[,] with interest at the rate of six percent (6%) per annum from April 10, [1990] until the same is fully paid. Without pronouncement as to costs. SO ORDERED.
4

Petitioners Motion for Reconsideration of the CA Decision was denied. Hence, this petition. The issues are:

I THE HONORABLE COURT OF APPEALS ERRED IN DENYING THE PETITION FOR RELIEF FROM JUDGMENT FILED BY THE BALOLOYS. II THE HONORABLE COURT OF APPEALS ERRED IN REINSTATING THE COMPLAINT AND IN AWARDING MORAL DAMAGES AND ATTORNEYS FEES IN FAVOR OF RESPONDENT RUFINA L. LIM CONSIDERING THAT: A. IGNACIO E. RUBIO IS NOT BOUND BY THE CONTRACT OF SALE BETWEEN VIRGINIA LAYGO-LIM AND RUFINA LIM. B. THE CONTRACT ENTERED INTO BETWEEN RUFINA LIM AND VIRGINIA LAYGO-LIM IS A CONTRACT TO SELL AND NOT A CONTRACT OF SALE. C. RUFINA LIM FAILED TO FAITHFULLY COMPLY WITH HER OBLIGATIONS UNDER THE CONTRACT TO SELL THEREBY WARRANTING THE CANCELLATION THEREOF. D. CORAZON L. ESCUETA ACTED IN UTMOST GOOD FAITH IN ENTERING INTO THE CONTRACT OF SALE WITH IGNACIO E. RUBIO. III THE CONTRACT OF SALE EXECUTED BETWEEN IGNACIO E. RUBIO AND CORAZON L. ESCUETA IS VALID. IV THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING PETITIONERS COUNTERCLAIMS. Briefly, the issue is whether the contract of sale between petitioners and respondent is valid.

Petitioners argue, as follows: First, the CA did not consider the circumstances surrounding pet itioners failure to appear at the pre-trial and to file the petition for relief on time. As to the failure to appear at the pre-trial, there was fraud, accident and/or excusable neglect, because petitioner Bayani was in the United States. There was no service of the notice of pre-trial or order. Neither did the former counsel of record inform him. Consequently, the order declaring him in default is void, and all subsequent proceedings, orders, or decision are void. Furthermore, petitioner Alejandrino was not clothed with a power of attorney to appear on behalf of Bayani at the pre-trial conference. Second, the sale by Virginia to respondent is not binding. Petitioner Rubio did not authorize Virginia to transact business in his behalf pertaining to the property. The Special Power of Attorney was constituted in favor of Llamas, and the latter was not empowered to designate a substitute attorney-in-fact. Llamas even disowned her signature appearing on the "Joint Special Power of Attorney," which constituted Virginia as her true and lawful attorney-in-fact in selling Rubios properties. Dealing with an assumed agent, respondent should ascertain not only the fact of agency, but also the nature and extent of the formers authority. Besides, Virginia exceeded the authority for failing to comply with her obligations under the "Joint Special Power of Attorney." The amount encashed by Rubio represented not the down payment, but the payment of respondents debt. His acceptance and encashment of the check was not a ratification of the contract of sale. Third, the contract between respondent and Virginia is a contract to sell, not a contract of sale. The real character of the contract is not the title given, but the intention of the parties. They intended to reserve ownership of the property to petitioners pending full payment of the purchase price. Together with taxes and other fees due on the properties, these are conditions precedent for the perfection of the sale. Even assuming that the contract is ambiguous, the same must be resolved against respondent, the party who caused the same.

Fourth, Respondent failed to faithfully fulfill her part of the obligation. Thus, Rubio had the right to sell his properties to Escueta who exercised due diligence in ascertaining ownership of the properties sold to her. Besides, a purchaser need not inquire beyond what appears in a Torrens title. The petition lacks merit. The contract of sale between petitioners and respondent is valid.lawphil.net Bayani Baloloy was represented by his attorney-in-fact, Alejandrino Baloloy. In the Baloloys answer to the original complaint and amended complaint, the allegations relating to the personal circumstances of the Baloloys are clearly admitted. "An admission, verbal or written, made by a party in the course of the 6 proceedings in the same case, does not require proof." The "factual admission in the pleadings on record [dispenses] with the need x x x to 7 present evidence to prove the admitted fact." It cannot, therefore, "be 8 controverted by the party making such admission, and [is] conclusive" as to them. All proofs submitted by them "contrary thereto or inconsistent therewith should be ignored whether objection is interposed by a party or 9 not." Besides, there is no showing that a palpable mistake has been committed in their admission or that no admission has been made by them. Pre-trial is mandatory. The notices of pre-trial had been sent to both the Baloloys and their former counsel of record. Being served with notice, he is 11 "charged with the duty of notifying the party represented by him." He must "see to it that his client receives such notice and attends the pre12 trial." What the Baloloys and their former counsel have alleged instead in their Motion to Lift Order of As In Default dated December 11, 1991 is the belated receipt of Bayani Baloloys special power of attorney in favor of their former counsel, not that they have not received the notice or been informed of the scheduled pre-trial. Not having raised the ground of lack of a special power of attorney in their motion, they are now deemed to have waived it. Certainly, they cannot raise it at this late stage of the proceedings. For lack of representation, Bayani Baloloy was properly declared in default. Section 3 of Rule 38 of the Rules of Court states: SEC. 3. Time for filing petition; contents and verification. A petition provided for in either of the preceding sections of this Rule must be verified, filed within sixty (60) days after the petitioner learns of the judgment, final order, or other proceeding to be set aside, and not more than six (6) months after such judgment or final order was entered, or such proceeding was
10

taken; and must be accompanied with affidavits showing the fraud, accident, mistake, or excusable negligence relied upon, and the facts constituting the petitioners good and substantial cause of action or defense, as the case may be. There is no reason for the Baloloys to ignore the effects of the above-cited rule. "The 60-day period is reckoned from the time the party acquired knowledge of the order, judgment or proceedings and not from the date he 13 actually read the same." As aptly put by the appellate court: The evidence on record as far as this issue is concerned shows that Atty. Arsenio Villalon, Jr., the former counsel of record of the Baloloys received a copy of the partial decision dated June 23, 1993 on April 5, 1994. At that time, said former counsel is still their counsel of record. The reckoning of the 60 day period therefore is the date when the said counsel of record received a copy of the partial decision which was on April 5, 1994. The petition for relief was filed by the new counsel on July 4, 1994 which means that 90 days have already lapsed or 30 days beyond the 60 day period. Moreover, the records further show that the Baloloys received the partial decision on September 13, 1993 as evidenced by Registry return cards which bear the numbers 02597 and 02598 signed by Mr. Alejandrino Baloloy. The Baloloys[,] apparently in an attempt to cure the lapse of the aforesaid reglementary period to file a petition for relief from judgment[,] included in its petition the two Orders dated May 6, 1994 and June 29, 1994. The first Order denied Baloloys motion to fix the period within which plain tiffsappellants pay the balance of the purchase price. The second Order refers to the grant of partial execution, i.e. on the aspect of damages. These Orders are only consequences of the partial decision subject of the petition for relief, and thus, cannot be considered in the determination of the reglementary period within which to file the said petition for relief. Furthermore, no fraud, accident, mistake, or excusable negligence exists in 14 order that the petition for relief may be granted. There is no proof of extrinsic fraud that "prevents a party from having a trial x x x or from 15 presenting all of his case to the court" or an "accident x x x which ordinary prudence could not have guarded against, and by reason of which the party 16 applying has probably been impaired in his rights." There is also no proof 17 of either a "mistake x x x of law" or an excusable negligence "caused by failure to receive notice of x x x the trial x x x that it would not be necessary for him to take an active part in the case x x x by relying on another person to attend to the case for him, when such other person x x x was chargeable

with that duty x x x, or by other circumstances not involving fault of the 18 moving party." Article 1892 of the Civil Code provides: Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be responsible for the acts of the substitute: (1) When he was not given the power to appoint one x x x. Applying the above-quoted provision to the special power of attorney executed by Ignacio Rubio in favor of his daughter Patricia Llamas, it is clear that she is not prohibited from appointing a substitute. By authorizing Virginia Lim to sell the subject properties, Patricia merely acted within the limits of the authority given by her father, but she will have to be "responsible for the 19 acts of the sub-agent," among which is precisely the sale of the subject properties in favor of respondent. Even assuming that Virginia Lim has no authority to sell the subject properties, the contract she executed in favor of respondent is not void, but simply unenforceable, under the second paragraph of Article 1317 of the Civil Code which reads: Art. 1317. x x x A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party. Ignacio Rubio merely denies the contract of sale. He claims, without substantiation, that what he received was a loan, not the down payment for the sale of the subject properties. His acceptance and encashment of the check, however, constitute ratification of the contract of sale and "produce 20 the effects of an express power of agency." "[H]is action necessarily implies that he waived his right of action to avoid the contract, and, consequently, it also implies the tacit, if not express, confirmation of the said sale effected" by Virginia Lim in favor of respondent.

Similarly, the Baloloys have ratified the contract of sale when they accepted and enjoyed its benefits. "The doctrine of estoppel applicable to petitioners here is not only that which prohibits a party from assuming inconsistent positions, based on the principle of election, but that which precludes him from repudiating an obligation voluntarily assumed after having accepted benefits therefrom. To countenance such repudiation would be contrary to 21 equity, and would put a premium on fraud or misrepresentation." Indeed, Virginia Lim and respondent have entered into a contract of sale. Not only has the title to the subject properties passed to the latter upon delivery of the thing sold, but there is also no stipulation in the contract that states the ownership is to be reserved in or "retained by the vendor until full 22 payment of the price." Applying Article 1544 of the Civil Code, a second buyer of the property who may have had actual or constructive knowledge of such defect in the sellers title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyers title. In case a title is issued to the second buyer, the first buyer 23 may seek reconveyance of the property subject of the sale. Even the argument that a purchaser need not inquire beyond what appears in a Torrens title does not hold water. A perusal of the certificates of title alone will reveal that the subject properties are registered in common, not in the individual names of the heirs. Nothing in the contract "prevents the obligation of the vendor to convey title 24 from becoming effective" or gives "the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed 25 period." Petitioners themselves have failed to deliver their individual certificates of title, for which reason it is obvious that respondent cannot be expected to pay the stipulated taxes, fees, and expenses. "[A]ll the elements of a valid contract of sale under Article 1458 of the Civil Code are present, such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its 26 equivalent." Ignacio Rubio, the Baloloys, and their co-heirs sold their hereditary shares for a price certain to which respondent agreed to buy and pay for the subject properties. "The offer and the acceptance are concurrent, since the minds of the contracting parties meet in the terms of the 27 agreement." In fact, earnest money has been given by respondent. "[I]t shall be considered as part of the price and as proof of the perfection of the

contract. 29 price."

28

It constitutes an advance payment to "be deducted from the total

Article 1477 of the same Code also states that "[t]he ownership of the thing sold shall be transferred to the vendee upon actual or constructive delivery 30 thereof." In the present case, there is actual delivery as manifested by acts simultaneous with and subsequent to the contract of sale when respondent not only took possession of the subject properties but also allowed their use as parking terminal for jeepneys and buses. Moreover, the execution itself of the contract of sale is constructive delivery. Consequently, Ignacio Rubio could no longer sell the subject properties to Corazon Escueta, after having sold them to respondent. "[I]n a contract of sale, the vendor loses ownership over the property and cannot recover it 31 until and unless the contract is resolved or rescinded x x x." The records do not show that Ignacio Rubio asked for a rescission of the contract. What he adduced was a belated revocation of the special power of attorney he executed in favor of Patricia Llamas. "In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either 32 judicially or by a notarial act." WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 48282, dated October 26, 1998 and January 11, 1999, respectively, are hereby AFFIRMED. Costs against petitioners. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 167812 December 19, 2006

Given the urgency and limited time to do the job order, petitioner availed of the services and facilities of Metro Angeles Printing and of St. Joseph Printing Press, owned by his daughter Jennifer Gozun and mother Epifania 7 Macalino Gozun, respectively. Petitioner delivered the campaign materials to respondents headquarters 8 along Gapan-Olongapo Road in San Fernando, Pampanga. Meanwhile, on March 31, 1995, respondents sister-in-law, Lilian Soriano (Lilian) obtained from petitioner "cash advance" of P253,000 allegedly for the allowances of poll watchers who were attending a seminar and for other 9 related expenses. Lilian acknowledged on petitioners 1995 diary receipt of 10 the amount. Petitioner later sent respondent a Statement of Account in the total amount of P2,177,906 itemized as follows:P640,310 for JMG Publishing House; P837,696 for Metro Angeles Printing; P446,900 for St. Joseph Printing Press; and P253,000, the "cash advance" obtained by Lilian. On August 11, 1995, respondents wife partially paid P1,000,000 to 12 petitioner who issued a receipt therefor.
11

JESUS M. GOZUN, petitioner, vs. JOSE TEOFILO T. MERCADO a.k.a. DON PEPITO MERCADO, respondent.

DECISION

CARPIO MORALES, J.: On challenge via petition for review on certiorari is the Court of Appeals Decision of December 8, 2004 and Resolution of April 14, 2005 in CA-G.R. 1 2 CV No. 76309 reversing the trial courts decision against Jose Teofilo T. Mercado a.k.a. Don Pepito Mercado (respondent) and accordingly dismissing the complaint of Jesus M. Gozun (petitioner). In the local elections of 1995, respondent vied for the gubernatorial post in Pampanga. Upon respondents request, petitioner, owner of JMG Publishing House, a printing shop located in San Fernando, Pampanga, submitted to respondent draft samples and price quotation of campaign materials. By petitioners claim, respondents wife had told him that respondent alread y approved his price quotation and that he could start printing the campaign materials, hence, he did print campaign materials like posters bearing 3 respondents photograph, leaflets containing the slate of party 4 5 6 candidates, sample ballots, poll watcher identification cards, and stickers.

Despite repeated demands and respondents promise to pay, respondent failed to settle the balance of his account to petitioner. Petitioner and respondent being compadres, they having been principal sponsors at the weddings of their respective daughters, waited for more than three (3) years for respondent to honor his promise but to no avail, compelling petitioner to endorse the matter to his counsel who sent 13 respondent a demand letter. Respondent, however, failed to heed the 14 demand. Petitioner thus filed with the Regional Trial Court of Angeles City on 15 November 25, 1998 a complaint against respondent to collect the remaining amount of P1,177,906 plus "inflationary adjustment" and attorneys fees. In his Answer with Compulsory Counterclaim, respondent denied having transacted with petitioner or entering into any contract for the printing of campaign materials. He alleged that the various campaign materials delivered to him were represented as donations from his family, friends and political supporters. He added that all contracts involving his personal
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expenses were coursed through and signed by him to ensure compliance with pertinent election laws. On petitioners claim that Lilian, on his (respondents) behalf, had obtained from him a cash advance of P253,000, respondent denied having given her authority to do so and having received the same. At the witness stand, respondent, reiterating his allegations in his Answer, claimed that petitioner was his over-all coordinator in charge of the conduct of seminars for volunteers and the monitoring of other matters bearing on his candidacy; and that while his campaign manager, Juanito "Johnny" Cabalu (Cabalu), who was authorized to approve details with regard to printing materials, presented him some campaign materials, those were partly 17 donated. When confronted with the official receipt issued to his wife acknowledging her payment to JMG Publishing House of the amount of P1,000,000, respondent claimed that it was his first time to see the receipt, albeit he belatedly came to know from his wife and Cabalu that the P1,000,000 represented "compensation [to petitioner] who helped a lot in the campaign 18 as a gesture of goodwill." Acknowledging that petitioner is engaged in the printing business, respondent explained that he sometimes discussed with petitioner strategies relating to his candidacy, he (petitioner) having actively volunteered to help in his campaign; that his wife was not authorized to enter into a contract with petitioner regarding campaign materials as she knew her limitations; that he no longer questioned the P1,000,000 his wife gave petitioner as he thought that it was just proper to compensate him for a job well done; and that he came to know about petitioners claim against him only after receiving a copy of the complaint, which surprised him because he knew fully well that the 19 campaign materials were donations. Upon questioning by the trial court, respondent could not, however, confirm if it was his understanding that the campaign materials delivered by 20 petitioner were donations from third parties. Finally, respondent, disclaiming knowledge of the Comelec rule that if a campaign material is donated, it must be so stated on its face, acknowledged that nothing of that sort was written on all the materials made 21 by petitioner.

As adverted to earlier, the trial court rendered judgment in favor of petitioner, the dispositive portion of which reads: WHEREFORE, the plaintiff having proven its (sic) cause of action by preponderance of evidence, the Court hereby renders a decision in favor of the plaintiff ordering the defendant as follows: 1. To pay the plaintiff the sum of P1,177,906.00 plus 12% interest per annum from the filing of this complaint until fully paid; 2. To pay the sum of P50,000.00 as attorneys fees and the costs of suit. SO ORDERED.
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Also as earlier adverted to, the Court of Appeals reversed the trial courts decision and dismissed the complaint for lack of cause of action. In reversing the trial courts decision, the Court of Appeals held that other than petitioners testimony, there was no evidence to support his claim that Lilian was authorized by respondent to borrow money on his behalf. It noted 23 that the acknowledgment receipt signed by Lilian did not specify in what 24 capacity she received the money. Thus, applying Article 1317 of the Civil Code, it held that petitioners claim for P253,000 is unenforceable. On the accounts claimed to be due JMG Publishing House P640,310, Metro Angeles Printing P837,696, and St. Joseph Printing Press P446,900, the appellate court, noting that since the owners of the last two printing presses were not impleaded as parties to the case and it was not shown that petitioner was authorized to prosecute the same in their behalf, held that petitioner could not collect the amounts due them. Finally, the appellate court, noting that respondents wife had paid P1,000,000 to petitioner, the latters claim ofP640,310 (after excluding the P253,000) had already been settled. Hence, the present petition, faulting the appellate court to have erred: 1. . . . when it dismissed the complaint on the ground that there is no evidence, other than petitioners own testimony, to prove that

Lilian R. Soriano was authorized by the respondent to receive the cash advance from the petitioner in the amount of P253,000.00. xxxx 2. . . . when it dismissed the complaint, with respect to the amounts due to the Metro Angeles Press and St. Joseph Printing Press on the ground that the complaint was not brought by the real party in interest. xxxx
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evidence other than the self-serving assertion of counsel himself 31 that such authority was verbally given him." (Emphasis and underscoring supplied) Petitioner submits that his following testimony suffices to establish that respondent had authorized Lilian to obtain a loan from him, viz: Q : Another caption appearing on Exhibit "A" is cash advance, it states given on 3-31-95 received by Mrs. Lilian Soriano in behalf of Mrs. Annie Mercado, amount P253,000.00, will you kindly tell the Court and explain what does that caption means? A : It is the amount representing the money borrowed from me by the defendant when one morning they came very early and talked to me and told me that they were not able to go to the bank to get money for the allowances of Poll Watchers who were having a seminar at the headquarters plus other election related expenses during that day, sir. Q : Considering that this is a substantial amount which according to you was taken by Lilian Soriano, did you happen to make her acknowledge the amount at that time? A : Yes, sir.
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By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent 26 or authority of the latter. Contracts entered into in the name of another person by one who has been given no authority or legal representation or who has acted beyond his powers are classified as unauthorized contracts 27 and are declared unenforceable, unless they are ratified. Generally, the agency may be oral, unless the law requires a specific 28 form. However, a special power of attorney is necessary for an agent to, as in this case, borrow money, unless it be urgent and indispensable for the 29 preservation of the things which are under administration. Since nothing in this case involves the preservation of things under administration, a determination of whether Soriano had the special authority to borrow money on behalf of respondent is in order. Lim Pin v. Liao Tian, et al. held that the requirement of a special power of attorney refers to the nature of the authorization and not to its form. . . . The requirements are met if there is a clear mandate from the principal specifically authorizing the performance of the act. As early as 1906, this Court in Strong v. Gutierrez-Repide (6 Phil. 680) stated that such a mandate may be either oral or written. The one thing vital being that it shall be express. And more recently, We stated that, if the special authority is not written, then it must be duly established by evidence: "the Rules require, for attorneys to compromise the litigation of their clients, a special authority. And while the same does not state that the special authority be in writing the Court has every reason to expect that, if not in writing, the same be duly established by
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(Emphasis supplied)

Petitioners testimony failed to categorically state, however, whether the loan was made on behalf of respondent or of his wife. While petitioner claims that Lilian was authorized by respondent, the statement of account marked as Exhibit "A" states that the amount was received by Lilian "in behalf of Mrs. Annie Mercado." Invoking Article 1873 of the Civil Code, petitioner submits that respondent informed him that he had authorized Lilian to obtain the loan, hence, 34 following Macke v. Camps which holds that one who clothes another with apparent authority as his agent, and holds him out to the public as such, respondent cannot be permitted to deny the authority. Petitioners submission does not persuade. As the appellate court observed: . . . Exhibit "B" [the receipt issued by petitioner] presented by plaintiff-appellee to support his claim unfortunately only indicates the Two Hundred Fifty Three Thousand Pesos (P253,0000.00)
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was received by one Lilian R. Soriano on 31 March 1995, but without specifying for what reason the said amount was delivered and in what capacity did Lilian R. Soriano received [sic] the money. The note reads: "3-31-95 261,120 ADVANCE MONEY FOR TRAINEE RECEIVED BY RECEIVED FROM JMG THE AMOUNT OF 253,000 TWO HUNDRED FIFTY THREE THOUSAND PESOS (SIGNED) LILIAN R. SORIANO 3-31-95" Nowhere in the note can it be inferred that defendant-appellant was connected with the said transaction. Under Article 1317 of the New Civil Code, a person cannot be bound by contracts he did not 35 authorize to be entered into his behalf. (Underscoring supplied) It bears noting that Lilian signed in the receipt in her name alone, without indicating therein that she was acting for and in behalf of respondent. She thus bound herself in her personal capacity and not as an agent of respondent or anyone for that matter. It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real property executed by an agent, it must upon its face purport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent only. It is not enough merely that the agent was in fact authorized to make the mortgage, if he has not acted in the name 36 of the principal. x x x (Emphasis and underscoring supplied) On the amount due him and the other two printing presses, petitioner explains that he was the one who personally and directly contracted with respondent and he merely sub-contracted the two printing establishments in order to deliver on time the campaign materials ordered by respondent.

Respondent counters that the claim of sub-contracting is a change in petitioners theory of the case which is not allowed on appeal. In Oco v. Limbaring,
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this Court ruled:

The parties to a contract are the real parties in interest in an action upon it, as consistently held by the Court. Only the contracting parties are bound by the stipulations in the contract; they are the ones who would benefit from and could violate it. Thus, one who is not a party to a contract, and for whose benefit it was not expressly made, cannot maintain an action on it. One cannot do so, even if the contract performed by the contracting parties would incidentally 38 inure to one's benefit. (Underscoring supplied) In light thereof, petitioner is the real party in interest in this case. The trial 39 courts findings on the matter were affirmed by the appellate court. It erred, however, in not declaring petitioner as a real party in interest insofar as recovery of the cost of campaign materials made by petitioners mother and sister are concerned, upon the wrong notion that they should have been, but were not, impleaded as plaintiffs. In sum, respondent has the obligation to pay the total cost of printing his campaign materials delivered by petitioner in the total of P1,924,906, less the partial payment of P1,000,000, or P924,906. WHEREFORE, the petition is GRANTED. The Decision dated December 8, 2004 and the Resolution dated April 14, 2005 of the Court of Appeals are hereby REVERSED and SET ASIDE. The April 10, 2002 Decision of the Regional Trial Court of Angeles City, Branch 57, is REINSTATED mutatis mutandis, in light of the foregoing discussions. The trial courts decision is modified in that the amount payable by respondent to petitioner is reduced to P924,906.