4 TH Exam Obli

ROSENCOR
V. INQQUING
FACTS:
Plaintiff Inquing, Guillermo and Bantugan were lessees of the 2 storey residential apartment owned by the spouses
Faustino and Tiangco. The lessees alleged that they were given the right of first refusal in case the lessors wanted to
sell the property. The spouses lessors died and the property was adjudicated to their heirs. The same right of first
refusal was extended by the heirs since they knew that the right was given by the spouses. On June 1990, De Leon,
the representative of the heirs offered to the lesees the property for 2,000,000 pesos. The lesees offered to buy for
1,000,000 pesos. De Leon told them that she will first inform the heirs. Since then, no answer was given by De Leon.
On November 1990, Rene Joaquin, vice president of Rosencor, came and introduced himself as the new owner. The
plaintiffs asked for a copy of the deed of sale. On the deed, they found out that the sale took place before the
property was offered to them and the selling price was for 726,000 pesos only. The plaintiffs filed a case for the
rescission of the sale against Rosencor, Rene Joaquin and De Leon. The trial court dismissed the case on the ground
that the same falls under the Statute of Frauds and is therefore unenforceable because the right of first refusal was
not written. The Court of Appeals reversed the ruling on the ground that the defense of Statute of Frauds was
waived for failure to object in the presentation of the evidence.

ISSUE:
1. Is the right of first refusal covered by the provisions of Statute of Frauds?
2. Whether rescission is the proper remedy?

HELD:
1. A right of first refusal is not among those listed under the Statute of Frauds under Art. 1403, par. 2 of the NCC.
The application of the article presupposes the existence of a perfected contract of sale. A right of first refusal is not
by any means a perfected contract of sale of real property. It is a contractual grant, not of the sale of the real
property, but of the right of first refusal over the property sought to be sold. As such, it need not be written to be
enforceable and may be proven by oral evidence.

2. In the cases of Guzman vs. Bonnevie (206 SCRA 668), ERDI vs. Mayfair Theater (264 SCRA 483), and Lintonjua vs.
L&R Corp. (320 SCRA 405) the Court held that a sale made in violation of a right of first refusal is
rescissible. However, in those cases, the Court ordered the rescission of the sale because the vendees therein could
not have acted in good faith. Under Art. 1381, par. 3 of the NCC, a valid contract may be rescinded if it is
undertaken in fraud of the creditors. In Art. 1385, rescission shall not take place when the object of the contract are
legally in the possession of third person who did not act in bad faith. Good faith is always presumed unless there is a
clear and convincing proof to the contrary. The plaintiffs failed to prove that there was bad faith on the part of
Rosencor when it bought the property. As such, the rescission should not take place.
The remedy of the plaintiff is an action for damages for unjustified violation of their right of first refusal.
Decision of CA reversed. Decision of RTC reinstated insofar as the dismissed the action for rescission.

KHE HONG CHENG VS. COURT OF APPEALS
FACTS:
Khe Hong Cheng is the owner of Butuan Shipping Lines. On Oct. 4 1985, Phil. Agricultural Trading Corp shipped
onboard a vessel owned by Khe Hong Cheng, 3400 bags of copra from Masbate to Zamboanga. The said shipment of
copra was covered by a marine insurance American Home Insurance (Philam). However, somewhere in Negros, the
4th Exam Case Digest OBLICON 2014-2015 1

Compiled by: Maria Ayra Celina Batacan
ship sank resulting to total loss of the shipment. Because of the loss, American Home Insurance paid the amount of
354,000 to the consignee- Phil Agriculture Trading Corp.

Later, American Home, having been subrogated into the rights of the consignee, filed in the RTC of Makati an action
for recovery of money against Khe Hong Cheng. Pending the case, or on Dec. 20, 1989, Khe Hong Cheng executed a
deed of donations of parcels of land in favor of his children and new TCTs were issued in their names.

On Dec. 29. 1993, the trial court rendered a favourable judgement to Philam and ordered Cheng to pay the amount
of 354k representing the amount paid by Philam to Phil Agrl.. After the decision became final, a writ of execution
was issued and despite earnest efforts of the sheriff he could not find any property under the name of Butuan
Shipping Lines or Cheng.

Jan. 17, 1997-Sheriff with Philams counsel went to Butuan and thereon discovered that Cheng had no more
property left and that he had conveyed the subject properties to his children.
Feb. 25, 1997- Philam filed for a rescission of the deeds of donation and for the nullification of the tcts in the name
of petitioners kids.

Petitioner contend that Philams action already prescribed and that the registration of the tcts on dec. 1989 in the
name of his children constituted a constructive notice to philam and that the action of the latter was filed only on
feb 1997, way beyond 4 years.

ISSUE: WON the action for rescission has prescribed. When did the 4 year prescriptive period to file an action
commenced to run?

HELD:
As Art. 1389 provides, an action of rescission must be commenced w/in 4 years.
Since the provision is silent as to when the prescriptive period shall commence, Art. 1150 is instructive : Art. 1150.
The time for prescription for all kinds of actions, when there is no special provision which ordains otherwise, shall
be counted from the day they may be brought. This Court enunciated the principle that it is the legal possibility of
bringing the action which determines the starting point for the computation of the prescriptive period for the
action.
An action to rescind or an accion pauliana must be of last resort, availed of only after all other legal remedies have
been exhausted and have been proven futile. For an accion pauliana to accrue, the following requisites must
concur:
1) That the plaintiff asking for rescission has a credit prior to, the alienation, although demandable later;
2) That the debtor has made a subsequent contract conveying a patrimonial benefit to a third person;
3) That the creditor has no other legal remedy to satisfy his claim, but would benefit by rescission of the
conveyance to the third person;


4) That the act being impugned is fraudulent;
5) That the third person who received the property conveyed, if by onerous title, has been an
accomplice in the fraud.
Petitioners contention that the cause of action of respondent Philam against them for the rescission of the deeds of
donation accrued as early as December 27, 1989, when petitioner Khe Hong Cheng registered the subject
conveyances with the Register of Deeds was unmeritorious.
Court ruled that even if respondent Philam was aware, as of December 27, 1989, that petitioner Khe Hong Cheng
had executed the deeds of donation in favor of his children, the complaint against Butuan Shipping Lines and/or
petitioner Khe Hong Cheng was still pending before the trial court. Respondent Philam had no inkling, at the time,
that the trial courts judgment would be in its favor and further, that such judgment would not be satisfied due to
the deeds of donation executed by petitioner Khe Hong Cheng during the pendency of the case. Had respondent
Philam filed his complaint on December 27, 1989, such complaint would have been dismissed for being premature.
Not only were all other legal remedies for the enforcement of respondent Philam's claims not yet exhausted at the
time the needs of donation were executed and registered. Respondent Philam would also not have been able to
prove then that petitioner Khe Hong Cheng had no more property other than those covered by the subject deeds to
satisfy a favorable judgment by the trial court.
As mentioned earlier, respondent Philam only learned about the unlawful conveyances made by petitioner Khe
Hong Cheng in January 1997 when its counsel accompanied the sheriff to Butuan City to attach the properties of
petitioner Khe Hong Cheng. There they found that he no longer had any properties in his name. It was only then
that respondent Philam's action for rescission of the deeds of donation accrued because then it could be said that
respondent Philam had exhausted all legal means to satisfy the trial court's judgment in its favor. Since respondent
Philam filed its complaint for accion pauliana against petitioners on February 25, 1997, barely a month from its
discovery that petitioner Khe Hong Cheng had no other property to satisfy the judgment award against him, its
action for rescission of the subject deeds clearly had not yet prescribed.
UNION BANK VS ONG
FACTS:
Spouses Alfredo and Susana Ong, respondents in this case, are majority stockholders of Baliwag mahogany
Corporation (BMC). On 10 October 2012, spouses Ong executed a Continuing Surety Agreement in favor of Union
Bank (UB), the purpose of which is to secure a credit line facility made available by the bank to BMC in the amount
of Php 40,000,000.00. The surety agreement expressly stipulated a solidary liability undertaking.

About a year after, spouses Go sold a 974 sqm property consisting of a house and lot and all the improvements
standing thereon, located at Greenhills, San Juan, Metro Manila to Jackson Kee, a co-respondent in this case, for the
amount of Php 12,500,000.00. The day after, Lee registered the sale and was issued a Transfer Certificate Title (TCT)
in his name. It should be noted that during this time, BMC has already availed of the credit line facility and in fact
had already issued a total of 22 promissory notes in favor of Union Bank.

A month after the sale of the Greenhills property, BMC filed a Petition for Rehabilitation and for Declaration of
Suspension of Payments with the Securities and Exchange Commission (SEC).

To protect its interest, UB lost no time and filed for an action for rescission of the sale between spouses Ong and
Lee for purportedly being in fraud of creditors, before the Pasig regional Trial Court.
UB assailed the validity of the sale. It alleged that spouses Ong and Lee only entered into the transaction with the
sole purpose of fraudulently removing the property from the reach of Union Bank and other creditors. And this
allegation is supported by the prersence of the following circumstances:

1. Insufficiency of Consideration - as per UB, the 12.5M purchase price is below the fair market value at that time.
2. Lack of Financial Capacity of Lee to bu the property - at that time his gross annual income is only 300K as per the
credit investigation conducted by the bank.
3. Lee did not assert absolute ownership- he allowed the spouses Ong to retain possession of the property under a
purported Contract of Lease.

The respondents, as defendants amintained in their answer that:
- both the contract of sale as well as the contract of lease are founded with good and valid consideration
- both contracts were executed in good faith

The RTC ruled in favor of Union Bank which was later reversed and set aside by the Court of Appeals, hence we have
again the petition of Union Bank before the Supreme Court.

ISSUE:
Whether or not, the Ong-Lee Contract of Sale partakes of a conveyance to defraud the creditor UB.

RULING:
To settle the issue, the Court first addressed how the petitioner anchored its case on Art 1381 of the Civil Code
which lists as among the rescissible contracts " those undertaken in fraud of creditors when the latter cannot in any
other manner collect the claim due them."

1. Contracts in fraud of creditors are those executed with the intention to prejudice the rights of the creditors.It
should not be confused with contracts entered into wthout such mal-intent even though as a direct consequence,
the creditor may suffer some damages.

In determining whether a contract is fraudulent, the first question that should come to mind is whether the
conveyance was a bona fide transaction, a trick or a contrivance to defeat creditor. The burden of proof lies on the
creditor seking rescission. Creditor has to prove with competent evidence that such fraudulent intent exists on the
part of the debtor.

In the case at bar, spouses Ong had sufficiently established the validity and legitimacy of the sale. They were able to
present a deed of sale that is duly notarized, which carries with it the presumption of validity and regularity. The
sale was also duly recorded and annotated on the title. Lee also caused the transfer of title to his name.

2. The Court also said that there can be no quibbling about the transaction being supported by a valid and sufficient
consideration. Lee's account on the witness stand regarding the sale was categorical and straightforward. His
testimony readily proves that money indeed changed hands in connection with the sale in question. Lee as buyer
was able to pay the contract price to the seller, spouses Ong. There were receipts presenteds as evidence of
payment so any suggestion negating payment or consideration, or to say that the transaction is fictitious, must be
rejected.

Regarding the issue on badges of fraud, petitioner raises the issue of inadequate consideration, alleging that only
12.5M was paid for the property while the fair market value is supposed to be 14.5M at that time.

The Court does not agree. The existence of fraud or the intent to defarud a creditor cannot plausibly be presumed
from the fact that the price paid for a piece of real estate is perceived to be slightly lower than its market value. The
Court said that it is only logical and it should be expected that parties to a contract of sale will negotiate its terms
and considerations, and price of course is one of the items to be negotiated. So, a scenario where the agreed
contract price is lower than the original asking price of the seller, or the contract price is slightly lower than the
market value is not out of the ordinary. This is not an unusual business phenomenon let alone indicative of
fraudulent intention.

3. The Court also does not want to overlook that the disparity between the price appearing in the deed versus the
price perceived by the petitioner to be the real value of the property is NOT as GROSS so as to support a conclusion
of fraud.

Mr. Oliver Morales, a licensed real estate appraiser and broker for 27 years, after going over the Deed of Absolute
Sale and Offer to Purchase, declared that there exists no gross disparity between the market value and the price
mentioned in the deed.

Hence, with the consideration deemed to be fair and reasonable, it would justify the conclusion that the sale is
without doubt, true and genuine.

4. The Court also stressed that, when the validity of a sales contract is in issue, there are 2 veritable presumptions
that are relevant:
- that there was sufficient consideration in the contract;
- that it was the result of a fair and regular private transaction

If show to hold, these presumptions infer prima facie that the transaction is valid, except that it must yield to the
evidences presented by the party disputing the validity, to him rests the onus of proof.

In this case, UB failed to discharge this burden. It just made a bare allegation that the sale was executed to defraud
the creditor and that the sale was without sufficient consideration. This bare allegation cannot prevail over the
evidences presented by respondents Ong and Lee, which more than sufficiently supported the conclusion as to the
legitimacy of the sale and good faith of the parties.

5. Also, the Court said that the rescissory action to set aside contracts in fraud of creditors is accion pauliana.


This is essentially only a subsidiary remedy as per Art. 1383 of the Civil Code. The party suffering can only avail of
this when he has no other legal means to obtain reparation.

In this case, it is true that spouses Ong, as surewty for BMC, binded themselves to settle BMC's debt. But for the
bank to collect what is due them, it is necessary for UB to show that it had exhausted all the properties of the
spouses Ong, to recover what BMC owed them. But it does not appear that UB sought after the other properties of
Ong except for the one in Greenhills. Absent proof that the Ong's had no toher property except their Greenhills
home, the sale to Lee cannot be simplistically considered as one in fraud of creditors. No evidence was shown by UB
that the sale peremptorily deprived them of means to collect from the Ongs.

Hence, when a creditor fails to show that he has no other legal recourse to obtain satisfaction for his claim, then he
is not entitled to the rescission asked.

6. Another aspect is, for a contract to be rescinded for being in fraud of creditors, both contracting parties must be
shown to have acted maliciously so as to prejudice creditors who were prevented from collecting their claims.
Again, in this case, there were no evidence to prove that the spouses Ong and Lee were conniving cheats. In fact,
UB did not even attempt to prove the existence of a personal, business or professional ties between the
respondednts so as to cast doubts on their real intentions in executing the sale.

7. It cannot be overemphasized that rescission is unavailing when as per Art 1385 , the thing which is also the object
of the contract are legally in possession of the third party who did not act in bad faith.

The third party is protected by law against a suit for rescission by the registration of the transfer to him in the
registry. The evidence of his possession is no less than the TCT issued to him by the Registry of Deeds of San Juan,
Metro Manila. His good faith can also be dedeuced from his conduct and outward acts before the sale. In his
testimony and as noted by the CA, Lee undertook due diligence by checking the Ong's title for possible defects
before proceeding with the sale.

And so, with UB failing to to prove that the sale was in fraud of creditors and that it was without sufficient
consideration, petition for rescissionn was denied by the Court.

HEIRS OF SOFIA QUIRONG V. DBP
FACTS:
This case is about the prescriptive period of an action for rescission of a contract of sale where the buyer is evicted
from the thing sold by a subsequent judicial order in favor of a third party.

When the late Emilio Dalope died, he left a 589-square meter untitled lot in Sta. Barbara, Pangasinan, to his wife,
Felisa and their nine children, one of whom was Rosa Funcion. To enable Rosa and her husband, herein The
Funcions, to get a loan from respondent DBP, Felisa sold the whole lot to the Funcions so that they can mortgage
it. However, after the Funcions failed to pay their loan, the DBP foreclosed the mortgage on the lot. Four years later
or on September 20, 1983 the DBP conditionally sold the lot to Sofia Quirong for the price of P78,000.00. In their
contract of sale, Sofia Quirong waived any warranty against eviction. The contract provided that the DBP did not

guarantee possession of the property and that it would not be liable for any lien or encumbrance on the
same. Quirong gave a down payment ofP14,000.00. This prompted Felisa and her eight children to file an action for
partition and declaration of nullity of documents with damages against the DBP and the Funcions before the RTC of
Dagupan in Civil Case D-7159.

On December 16, 1992 the RTC rendered a decision, declaring the DBPs sale to Sofia Quirong valid only with
respect to the shares of Felisa and Rosa Funcion in the property and that the rest of the property are void insofar as
they prejudiced the shares of the eight other children of Emilio and Felisa who were each entitled to a tenth share
in the subject lot. The DBP received a copy of the decision on January 13, 1993 but failed to appeal. Eventually, they
were prompted to seek recourse by special civil action of certiorari, which was also denied for failure of the DBP to
pay the prescribed fees. This resolution became final and executory on January 17, 1995.

On June 10, 1998 the Quirong heirs filed the present action against the DBP before the RTC of Dagupan City, Branch
44, in Civil Case CV-98-02399-D for rescission of the contract of sale between Sofia Quirong, their predecessor, and
the DBP and praying for the reimbursement of the price ofP78,000.00 that she paid the bank plus damages.

The heirs alleged that they were entitled to the rescission of the sale because the decision in Civil Case D-7159
stripped them of more than 80% of the lot that Sofia Quirong, their predecessor, bought from the DBP. The DBP
filed a motion to dismiss the action on ground of prescription and res judicata but the RTC denied their motion. On
June 14, 2004, the RTC rendered a decision, rescinding the sale between Sofia Quirong and the DBP and ordering
the latter to return to the Quirong heirs the P78,000.00 Sofia Quirong paid the bank.

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

Hence, the appeal by the Quirong heirs.

ISSUES:
1. Whether or not the Quirong heirs action for rescission of respondent DBPs sale of the subject property to
Sofia Quirong was already barred by prescription; YES.
2. In the negative, whether or not the heirs of Quirong were entitled to the rescission of the DBPs sale of the
subject lot to the late Sofia Quirong as a consequence of her heirs having been evicted from it. NO.

HELD:
Petitioner heirs claim that the prescriptive period should be reckoned from January 17, 1995, the date this Courts
resolution became final and executory in declaring void the sale between DBP and Quirong with respect to almost
80% of the subject property. They further claim that the period for prescription should be 10 years since the action
was based on a written contract and not four years.

With regard to the prescriptive period, the Supreme Court found that the period should commence on January 28,
1993 when the DBP failed to appeal the decision of the RTC within the time to set for such appeal. The reason for
this is that the incident in the resolution of January 17, 1995 did not affect the finality of the decision in Civil

Case D-7159 that initially ruled on the rescission because, in the action where it was based, the DBP only
contested the dispositive portion of the decision which failed to specify details that were needed for its
implementation, more specifically which lots were to be allotted to Quirong and which must be returned to the
Dalope heirs.

With regard to the contention of petitioner heirs that the applicable period of prescription should be 10 years as
provided under Article 1144 which states that actions upon a written contract must be brought within 10 years
from the date the right of action accrues. The Court also resolved that the action of the Quirong heirs was actually
for rescission and not upon a written contract.

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

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

With the loss of 80% of the subject lot to the Dalopes by reason of the judgment of the RTC in Civil Case D-7159, the
Quirong heirs had the right to file an action for rescission against the DBP pursuant to the provision of Article 1556
of the Civil Code regarding losing rights to a property by means of eviction.

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

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

ADA v. BALYON
FACTS:
The petitioners, who were estate of the Spouses Baylon alleged that the Spouses Baylon acquired 43 parcels of land
during their lifetime. The petitioners alleged that after their death, Rita took possession of the said parcels of land
and appropriated for herself the income from the same. Using the income, Rita allegedly purchased two parcels of
land Lot No, 4709 and half of Lot No. 4706. During the pendency of the case, Rita through a Deed of Donation date
July 6, 1997, passed on Lot No. 4709 and half of Lot No. 4706 to Florante Rita died intestate and without any issue

and the petitioner filed a supplemental pleading dated 2 that the said donation be rescinded.

ISSUE
Whether the CA erred in ruling that the donation inter vivos of Lot No. 4709 and half of Lot No. 4706 in favor of
Florante may only be rescinded if there is already a judicial determination that the same actually belonged to the
estate of Spouses Baylon.

RULING OF SC
Contracts which refer to things subject of litigation is rescissible pursuant to Article 1381(4) of the Civil Code
Rescission under Article 1381(4) of the Civil Code is not preconditioned upon the judicial determination as to the
ownership of the thing subject of litigation

Even if the donation inter vivos is validly rescinded, a determination as to the ownership of Lot No. 4709 and half of
Lot No. 4706 is still necessary.

ANCHOR SAVINGS BANK (FORMERLY ANCHOR FINANCE AND INVESTMENT
CORPORATION) vs. HENRY H. FURIGAY, GELINDA C. FURIGAY, HERRIETTE C. FURIGAY and HEGEM C. FURIGAY

FACTS:
ASB filed a verified complaint for sum of money and damages with application for replevin against Ciudad Transport
Services, Inc. (CTS), its president, respondent Henry H. Furigay; his wife,
respondent Gelinda C. Furigay; and a John Doe.

While that case was pending, respondent spouses donated their registered properties to their minor children,
respondents Hegem G. Furigay and Herriette C. Furigay. Claiming that the donation of these properties was made in
fraud of creditors, ASB filed a Complaint for Rescission of Deed of Donation, Title and Damages against the
respondent spouses and their children.

The RTC ruled that the action for rescission had already prescribed. The CA found that the action of ASB had not yet
prescribed, but was premature and dismissed the case.

ISSUE: Is the action of ASB to file a complaint for rescission of Deed of Donation premature that warrant dismissal?

RULING: Yes.

The remedy of rescission is subsidiary in nature; it cannot be instituted except when the party suffering damage has
no other legal means to obtain reparation for the same.

Consequently, following the subsidiary nature of the remedy of rescission, a creditor would have a cause of action
to bring an action for rescission, if it is alleged that the following successive measures have already been taken: (1)
exhaust the properties of the debtor through levying by attachment and execution upon all the property of the
debtor, except such as are exempt by law from execution; (2) exercise all the rights and actions of the debtor, save

those personal to him (accion subrogatoria); and (3) seek rescission of the contracts executed by the debtor in fraud
of their rights (accion pauliana).

A cursory reading of the allegations of ASBs complaint would show that it failed to allege the ultimate facts
constituting its cause of action and the prerequisites that must be complied before the same may be instituted.
ASB, without availing of the first and second remedies, that is, exhausting the properties of CTS, Henry H. Furigay
and Genilda C. Furigay or their transmissible rights and actions, simply undertook the third measure and filed an
action for annulment of the donation. This cannot be done.

While, the four-year prescriptive period for action of rescission commences to run neither from the date of the
registration of the deed sought to be rescinded nor from the date the trial court rendered its decision but from the
day it has become clear that there are no other legal remedies by which the creditor can satisfy his claims. In this
case, the action is premature.

SAMONTE VS CA
FACTS:
There was a parcel of land (lot No. 216) which was a subject of dispute situated in Agusan del Norte covered by
original certificate of title RO 238 (555) issued in the name of Apolonia Abao and the daughter Irenea Tolero pro
indiviso.

Two cases were separately filed in RTC. The first case was an action for quieting of title and recovery of possession
of a parcel of land formed the entire property. On the other hand, the second case had similar action except that a
portion of land was involve in the entire lot 216. Both cases were filed by the heirs of Abao and Tolero.

Complaint sought the annulment of several CTC covering portion of lot 216 and the reinstatement of OCT No. RO
238 (555). The defendants in the second case were Jadol spouses, Jacobo Tagorda, and Aurelio Rotor as herein
petitioners.

The litigation that stems out the second cases started when the OCT No. RO 238 (555) issued in 1927 in the name of
Apolonia Abao and Irenea Tolero in equal undivided shares was administratively reconstituted on August 8, 1957
based on an Affidavit of Extrajudicial Settlement and Confirmation of Sale.

That OCT No. RO 238 was cancelled in lieu thereof TCT No. RT 476 issued in the name of Irenea Tolero and Nicholas
Jadol and that each of them has half of the shares of the property. On Feb. 13, 1959 based on subdivision plan
subdividing the lots, the Register of Deeds cancelled the TCT No. RT 476 and issued RT 553 in the name of Tiburcio
Samonte as to lot 216-A and TCT No. RT- 554. For lot 216-B, it was then cancelled to issue TCT No. RT 555 issued in
the name of Jacobo Tagorda and TCT No. 556 in the name of Irenea Tolero.

Plaintiff claim ownership of the entire lot as of the area 12, 753 sq.m was registered in the name of their Mother
Irenea Tolero and half to their grandmother Apolonia Abao. They also questioned the series of cancellation of
certification of titles starting from the original title and the Deed of Extra Judicial Settlement and Confirmation of
Sale executed by Ignacio Atupan who claim to be the sole son of Apolonia Abao and that the predecessors in
interest have not signed any document agreeing as to the manner how lot 216 was to be divided, nor have they

consented to the partition of the same.

Defendant Samonte claim that he bought portions of the lot 216 in good faith. As he was made to believe that all
papers in possession of his vendors were all papers in possession of his vendors were all in order.

Defendant Jadol spouses claim that they became owners of portion of lot 216 by purchase from Ignacio Atupan
and Apolonia Abao signed by Irenea Tolero.

Petitioner contends that respondents action in the court a quo had already presented. Generally, action for
reconveyance of real property based on fraud may be barred by Statute of limitations which requires that action
must be commenced within 4 years from the discovery of Fraud and in case of registered land; such discovery is
deemed to have taken place from the date of reg. of title. Also, respondents action for reconveyance had long
prescribed. Since 18 years, had already lapsed from the issuance of TCT RT 476 until the time when respondents
filed action in Court.

The trial Court ruled in favour of the respondents. Ignacio Atupan caused the fraudulent cancellation of OCT and
adjudicated unto himself of lot 216 by misrepresenting himself as the sole heir of Apolonia Abao.

Atupans Affidavit is tainted with fraud because he falsely claimed that he was the sole heir of Abao. Despite this
knowledge Jadol Spouses still presented the affidavit of Atupan when the cause the cancellation of OCT. Thus, this
further pointed out that Jadol spouses only sought the registration of these transactions 18 years after they took
place or 12 years after Abao died.

Petitioners contention is untenable in the defense of prescription. The discovery of Fraud is deemed to have taken
place upon the registration of real property because it is considered a constructive notice to all persons does not
apply in this case.

CA affirmed the trial courts decision that the consequent issuance of TCT of the Jadol Spouses were through
fraudulent means. Citing the case of Adille vs CA where petitioner executed a deed of extrajudicial partition
misrepresenting himself to be the sole heir of his Mother.

As a consequence, petitioner was able to secure the land title in his name alone. His siblings then filed a case for
partition on the ground that said petitioner was only a trustee on an implied trust of the property. The court
resolved on the issue of prescription. Said petitioner, registered the property in 1955 and the claim of private
respondents was presented in 1974.

Right of private respondents commenced from the time they actually discovered petitioners act of defraudation.
Based on Article 1456, the civil code indicates implied and constructive trust.

This law provides that If the property is acquired through mistake or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.

It can be said that the Jadol Spouses were trustees on behalf of the heirs of Abao. An action based on implied or
constructive trust prescribes in 10 years from the time of its creation or upon the alleged fraudulent registration of

the property. Hence, prescription is not a bar.

ISSUE: Whether or not the petitioner is a buyer in good faith.

RULING:

The SC ruled in the negative. Petitioner cannot pretend to be a purchaser in good faith. It is axiomatic that one who
buys from a person who is not a registered owner is not a purchaser in good faith.

Respondents were the only surviving heirs of Irenea Tolero. Despite this knowledge, petitioner still bought a portion
of the subject lot from the Jadol Spouses on July 20. 1957when the same was still registered under OCT No. RO 238
(555) in the name of Abao and Tolero.

The general rule is that a person dealing with registered land has a right to rely on the Torrens Certificate of Title
and to dispense with the need of making further inquiries. This rule, however admits of exceptions when the party
has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry
or when the purchaser has knowledge of a defect or the lack of title of the property in litigation. One who falls
within the exception can neither be denominated an innocent purchaser for value nor a purchaser in good faith.

Petitioner cannot claim that he already acquired a valid title to the property. The inscription in the registry to be
effective must be made in good faith.

A holder in bad faith of a certificate of title is not entitled to the protection of the laws. For the law cannot be used
as a shield for frauds.

MENDEZONA VS. OZAMIZ
FACTS:
It appears that on January 1991, the respondents instituted the petition for guardianship with the RTC of Oroquieta
City, alleging therein that Carmen Ozamiz, then 86 years old, after an illness in July 1987, had become disoriented
and could not recognize most of her friends; that she could no longer take care of herself nor manage her
properties by reason of her failing health, weak mind and absent-mindedness. Mario Mendezona and Luis
Mendezona, herein petitioners who are nephews of Carmen Ozamiz, and Pilar Mendezona, a sister of Carmen
Ozamiz, filed an opposition to the guardianship petition.
In the course of the guardianship proceeding, the petitioners and the oppositors thereto agreed that Carmen
Ozamiz needed a guardian over her person and her properties, and thus respondent Paz O. Montalvan was
designated as guardian over the person of Carmen Ozamiz while petitioner Mario J. Mendezona, respondents
Roberto J. Montalvan and Julio H. Ozamiz were designated as joint guardians over the properties of the said ward.
As guardians, respondents Roberto J. Montalvan and Julio H. Ozamiz filed on August 6, 1991 with the guardianship
court their inventories and Accounts,[10] listing therein Carmen Ozamizs properties, cash, shares of stock,
vehicles and fixed assets, including a 10,396 square meter property known as the Lahug property. Said Lahug
property is the same property covered by the Deed of Absolute Sale dated April 28, 1989 executed by Carmen


Ozamiz in favor of the petitioners. Respondents Roberto J. Montalvan and Julio H. Ozamiz caused the inscription on
the titles of petitioners a notice of lis pendens,[11] regarding Special Proceeding No. 1250, thus giving rise to the
suit for quieting of title, Civil Case No. CEB-10766, filed by herein petitioners.
In their Answer[12] in Civil Case No. CEB-10766 the respondents opposed the petitioners claim of ownership of the
Lahug property and alleged that the titles issued in the petitioners names are defective and illegal, and the
ownership of the said property was acquired in bad faith and without value inasmuch as the consideration for the
sale is grossly inadequate and unconscionable. Respondents further alleged that at the time of the sale on April 28,
1989 Carmen Ozamiz was already ailing and not in full possession of her mental faculties; and that her properties
having been placed in administration, she was in effect incapacitated to contract with petitioners.
The issues for resolution were delimited in the pre-trial to: (a) the propriety of recourse to quieting of title; (b) the
validity or nullity of the Deed of Absolute Sale dated April 28, 1989 executed by Carmen Ozamiz in favor of herein
petitioners; (c) whether the titles over the subject parcel of land in plaintiffs names be maintained or should they
be cancelled and the subject parcels of land reconveyed; and (d) damages and attorneys fees.
Trial on the merits ensued with the parties presenting evidence to prove their respective allegations. Petitioners
Mario Mendezona, Teresita Adad Vda. de Mendezona and Luis Mendezona, as plaintiffs therein, testified on the
circumstances surrounding the sale. Carmencita Cedeno and Martin Yungco, instrumental witnesses to the Deed of
Absolute Sale dated April 28, 1989, and, Atty. Asuncion Bernades, the notary public who notarized the said
document, testified that on the day of execution of the said contract that Carmen Ozamiz was of sound mind and
that she voluntarily and knowingly executed the said deed of sale.
For the defendants, the testimonies of respondent Paz O. Montalvan, a sister of Carmen Ozamiz; Concepcion Agac-
ac, an assistant of Carmen Ozamiz; respondent Julio Ozamiz; Carolina Lagura, a househelper of Carmen Ozamiz;
Joselito Gunio, an appraiser of land; Nelfa Perdido, a part-time bookkeeper of Carmen Ozamiz, and the deposition
of Dr. Faith Go, physician of Carmen Ozamiz, were offered in evidence.
The petitioners presented as rebuttal witnesses petitioners Mario Mendezona and Luis Mendezona, to rebut the
testimony of respondent Julio H. Ozamiz; and, Dr. William Buot, a doctor of neurology to rebut aspects of the
deposition of Dr. Faith Go on the mental capacity of Carmen Ozamiz at the time of the sale.
RTC ruled in favor of the petitioners. The CA reversed the factual findings of the RTC and ruled that the deed of
Absolute sale was a simulated contract thus null and void.

ISSUE: Whether or not the CA erred in ruling that Carmen Ozamizs mental faculties were seriously impaired
when she executed the deed of absolute sale?

RULING: YES

Furthermore, the appellate court erred in ruling that at the time of the execution of the Deed of Absolute Sale on
April 28, 1989 the mental faculties of Carmen Ozamiz were already seriously impaired. It placed too much reliance
upon the testimonies of the respondents witnesses. However, after a thorough scrutiny of the transcripts of the
testimonies of the witnesses, we find that the respondents core witnesses all made sweeping statements which
failed to show the true state of mind of Carmen Ozamiz at the time of the execution of the disputed document. The
testimonies of the respondents witnesses on the mental capacity of Carmen Ozamiz are far from being clear and
convincing, to say the least.
Carolina Lagura, a househelper of Carmen Ozamiz, testified that when Carmen Ozamiz was confronted by Paz O.
Montalvan in January 1989 with the sale of the Lahug property, Carmen Ozamiz denied the same. She testified that
Carmen Ozamiz understood the question then. However, this declaration is inconsistent with her (Carolinas)
statement that since 1988 Carmen Ozamiz could not fully understand the things around her, that she was physically
fit but mentally could not carry a conversation or recognize persons who visited her. Furthermore, the disputed sale
occurred on April 28, 1989 or three (3) months after this alleged confrontation in January 1989. This inconsistency
was not explained by the respondents.
The revelation of Dr. Faith Go did not also shed light on the mental capacity of Carmen Ozamiz on the relevant day -
April 28, 1989 when the Deed of Absolute Sale was executed and notarized. At best, she merely revealed that
Carmen Ozamiz was suffering from certain infirmities in her body and at times, she was forgetful, but there was no
categorical statement that CarmenOzamiz succumbed to what the respondents suggest as her alleged second
childhood as early as 1987. The petitioners rebuttal witness, Dr. William Buot, a doctor of neurology, testified that
no conclusion of mental incapacity at the time the said deed was executed can be inferred from Dr. Faith Gos
clinical notes nor can such fact be deduced from the mere prescription of a medication for episodic memory loss.
It has been held that a person is not incapacitated to contract merely because of advanced years or by reason of
physical infirmities. Only when such age or infirmities impair her mental faculties to such extent as to prevent her
from properly, intelligently, and fairly protecting her property rights, is she considered incapacitated. The
respondents utterly failed to show adequate proof that at the time of the sale on April 28, 1989 Carmen Ozamiz had
allegedly lost control of her mental faculties.
We note that the respondents sought to impugn only one document, namely, the Deed of Absolute Sale dated April
28, 1989, executed by Carmen Ozamiz. However, there are nine (9) other important documents that were, signed
by Carmen Ozamiz either before or after April 28, 1989 which were not assailed by the respondents. Such is
contrary to their assertion of complete incapacity of Carmen Ozamiz to handle her affairs since 1987. We agree with
the trial courts assessment that it is unfair for the [respondents] to claim soundness of mind of Carmen Ozamiz
when it benefits them and otherwise when it disadvantages them. A person is presumed to be of sound mind at
any particular time and the condition is presumed to continue to exist, in the absence of proof to the contrary.
Competency and freedom from undue influence, shown to have existed in the other acts done or contracts
executed, are presumed to continue until the contrary is shown.



ROBERTO G. FAMANILA vs THE COURT OF APPEALS (Spc. Fmr. Seventh Division) and BARBERSHIP
MANAGEMENT LIMITED and NFD INTERNATIONAL MANNING AGENTS, INC.
FACTS:
Petitioner Roberto Famanila was hired by the respondent NFD International Manning Agents, Inc. as a Messman for
Hansa Riga, a vessel registered and owned by its principal, respondent barbership Management Limited. He was
repatriated by the principal because of his permanently disability. With this, he signed a Receipt and Release dated
February 28, 1991 and settled his claim by accepting the amount of US$13,200 from respondents. Petitioner filed a
complaint praying for an award of disability benefits, share in the insurance proceeds, moral damage and attorneys
fees. The Labor Arbiter dismissed the complaint due to prescription, which was affirmed by the NLRC and the CA.
Petitioner contends that he did not sign the Receipt and Release voluntarily or freely because of his disability. He
argued that such disability as well as financial constraints vitiated his consent, making the Receipt and Release void
and unenforceable.

ISSUE:

Whether the Receipt and Release is valid and enforceable.

RULING:
The petition is DENIED. The Receipt and Release signed by petitioner is valid, absent of vitiated consent.

Disability is not a factor that may vitiate consent. A vitiated consent does not make a contract void and
unenforceable. A vitiated consent only gives rise to a voidable agreement. Under the Civil Code, the vices of consent
are mistake, violence, intimidation, undue influence or fraud. If consent is given through any of the aforementioned
vices of consent, the contract is voidable. A voidable contract is binding unless annulled by a proper action in court
Petitioner contends that his permanent and total disability vitiated his consent to the Receipt and Release thereby
rendering it void and unenforceable. However, disability is not among the factors that may vitiate consent. Besides,
save for petitioners self-serving allegations, there is no proof on record that his consent was vitiated on account of
his disability. In the absence of such proof of vitiated consent, the validity of the Receipt and Release must be
upheld.

Dire necessity is not a ground for annulling the Receipt and Release. it is elementary that a contract is perfected by
mere consent and from that moment 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. Further, dire necessity is not an acceptable ground for annulling the Receipt and Release since it has
not been shown that petitioner was forced to sign it.

CATALAN VS. BASA
FACTS:
Oct. 20, 1948 Feliciano Catalan was discharged from the military service due to his schizophrenic condition. After
almost a year (Sept. 28, 1949), he married Corazon Cerezo.
June 16, 1951 Feliciano donated a parcel of land in Barangay Basing, Pangasinan to his sister Mercedes Catalan.
(One half of his real property)
Dec. 22, 1953 Bank of the Philippine Islands (BPI) filed in the court of First Instance of Pangasinan declaring
Feliciano incompetent. After 11 days (Dec. 22, 1953), it was approved by the said court. The following day, the court
ordered BPI as Felicianos guardian.
1979 Mercedes Catalan sold the property in issue in favour of her children Delia and Jesus Basa. (Deed of Absolute
Sale)
April 1, 1997 BPI, as Felicianos guardian, filed for Declaration of Nullity of Documents, Recovery of Possession and
Ownership. BPI alleged that the Deed of Absolute Donation by Feliciano to Mercedes was void ab initio because he
was of not sound mind and was incapable of giving consent. BPI presented to the court two evidences:
The Certificate of Disability for the Discharge of Feliciano Catalan issued on Oct. 20, 1948 by the Board of Medical
Officers of Department of Veteran Affairs.

On December 22, 1953, Feliciano was judged an incompetent by the court of First Instance of Pangasinan..

Based on those two pieces of evidence, petitioners conclude that Feliciano had been suffering from a mental
condition since 1948 which incapacitated him from entering into any contract thereafter, until his death on Aug. 14,
1997.
Aug. 14, 1997 Feliciano died. The original complaint was amended to substitute his heirs in lieu of BPI as
complaints.
The donation to Mercedes is void so the Deed of Absolute Sale to Delia and Jesus Basa should likewise be nullified
because Mercedes had no right to sell the property to anyone.
ISSUES:
1. Whether or not Felicianos Deed of Donation to Mercedes is valid.
2. Whether or not Felicianos schizophrenic condition constitutes incapacity to give consent to contract.

HELD:
1. Yes. In order for donation of property to be valid, what is crucial is the donors capacity to give consent at the
time of the donation. Certainly, there lies no doubt in the fact that insanity impinges on consent freely given.
However, the burden of proving such incapacity rests upon the person who alleges it; if no sufficient proof to this
effect is presented, capacity will be presumed.
In the case at bar, the evidence presented by the petitioners was insufficient to overcome the presumption that
Feliciano was competent when he donated the property in question to Mercedes. They make much ado of the fact
that as early as 1948, Feliciano had been found to be suffering from Schizophrenia by the Board of Medical Officers
of the Department of Veteran Affairs. By itself, this allegation cannot prove the incompetence of Feliciano.


2. No. A series of studies of schizophrenia will show that Feliciano could still be presumed capable of attending to
his property rights. Schizophrenia can result to dimenting illness however; the illness will wax and wane over many
years, with only very slow deterioration of intellect. Thus, these scientific studies can be deduced that a person
suffering from schizophrenia does NOT necessarily lose his competence to intelligently dispose his property.

By merely alleging the existence of schizophrenia, petitioners failed to show substantial proof that at the date of the
donation, June 16, 1951, Feliciano Catalan had lost total control of his mental faculties.

VILLANUEVA VS. CHIONG
FACTS:
Respondents Florentino and Elisera Chiong were married sometime in January 1960 but have been separated in fact
since 1975. During their marriage, they acquired Lot No. 997-D-1 situated at Poblacion, Dipolog City and covered by
Transfer Certificate of Title (TCT) No. (T-19393)-2325, issued by the Registry of Deeds of Zamboanga del Norte.

Sometime in 1985, Florentino sold the one-half western portion of the lot to petitioners (Villanueva spouses) for
P8,000, payable in installments. Thereafter, Florentino allowed petitioners to occupy the lot and build a store, a
shop, and a house thereon. Shortly after their last installment payment on December 13, 1986, petitioners
demanded from respondents the execution of a deed of sale in their favor. Elisera, however, refused to sign a deed
of sale.

On July 5, 1991, Elisera filed with the RTC a Complaint for Quieting of Title with Damages, docketed as Civil Case No.
4383. On February 12, 1992, petitioners filed with the RTC a Complaint for Specific Performance with Damages,
docketed as Civil Case No. 4460. Upon proper motion, the RTC consolidated these two cases.

On May 13, 1992, Florentino executed the questioned Deed of Absolute Sale in favor of petitioners.
On July 19, 2000, the RTC, in its Joint Decision, annulled the deed of absolute sale dated May 13, 1992, and ordered
petitioners to vacate the lot and remove all improvements therein.
The Court of Appeals affirmed the RTC's decision.

ISSUES:
(1) Is the subject lot an exclusive property of Florentino or a conjugal property of respondents?
(2) Was the sale void or merely voidable?

RULING:
Anent the first issue, petitioners' contention that the lot belongs exclusively to Florentino because of his separation
in fact from his wife, Elisera, at the time of sale dissolved their property relations, is bereft of merit. Respondents'
separation in fact neither affected the conjugal nature of the lot nor prejudiced Elisera's interest over it. Under
Article 178 of the Civil Code, the separation in fact between husband and wife without judicial approval shall not
affect the conjugal partnership. The lot retains its conjugal nature.

Likewise, under Article 160 of the Civil Code, all property acquired by the spouses during the marriage is presumed
to belong to the conjugal partnership of gains, unless it is proved that it pertains exclusivelyto the husband or to the
wife. Petitioners' mere insistence as to the lot'ssupposed exclusive nature is insufficient to overcome such
presumption when taken against all the evidence for respondents.

On the basis alone of the certificate of title, it cannot be presumed that the lot was acquired during the marriage
and that it is conjugal property since it was registered "in the name of Florentino Chiong, Filipino, of legal age,
married to Elisera Chiong ." But Elisera also presented a real property tax declaration acknowledging her and
Florentino as owners of the lot. In addition, Florentino and Elisera categorically declared in the Memorandum of
Agreement they executed that the lot is a conjugal property. Moreover, the conjugal nature of the lot was admitted
by Florentino in the Deed of Absolute Sale dated May 13, 1992, where he declared his capacity to sell as a co-owner
of the subject lot.

Anent the second issue, the sale by Florentino without Elisera's consent is not, however, void ab initio. In Vda. de
Ramones v. Agbayani, citing Villaranda v. Villaranda, we held that without the wife's consent, the husband's
alienation or encumbrance of conjugalproperty prior to the effectivity of the Family Code on August 3, 1988 is not
void, but merely voidable. Articles 166 and 173 of the Civil Code provide:
ART. 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil interdiction or is
confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal partnership
without the wife's consent

This article shall not apply to property acquired by the conjugal partnership before the effective date of this Code.
ART. 173. The wife may, during the marriage, and within ten years from the transaction questioned, ask the courts
for the annulment of any contract of the husband entered into without her consent, when such consent is required,
or any act or contract of the husband which tends todefraud her or impair her interest in the conjugal partnership
property. Should the wife fail to exercise this right, she or her heirs, after the dissolution of the marriage, may
demand the value of property fraudulently alienated by the husband. (Emphasis supplied.)

Applying Article 166, the consent of both Elisera and Florentino is necessary for the sale of a conjugal property to be
valid. In this case, the requisite consent of Elisera was not obtained when Florentino verbally sold the lot in 1985
and executed the Deed of Absolute Sale on May 13,1992. Accordingly, the contract entered by Florentino is
annullable atElisera's instance, during the marriage and within ten years from thetransaction questioned,
conformably with Article 173. Fortunately, Eliseratimely questioned the sale when she filed Civil Case No. 4383 on
July 5, 1991, perfectly within ten years from the date of sale and execution of the deed.

Petitioners finally contend that, assuming arguendo the property is still conjugal, thetransaction should not be
entirely voided as Florentino had one-half share over the lot. Petitioners' stance lacks merit. In Heirs of Ignacia
Aguilar-Reyes v. Mijares citing Bucoy v. Paulino, et al., a case involving the annulment of sale executed by the
husband without the consent of the wife, it was held that the alienation must be annulled in its entirety and not
only insofar as the share of the wife in the conjugal property is concerned.

AYSON VS SPOUSES PARAGAS

FACTS:
The controversy commenced with the filing of an ejectment complaint by petitioner Ayson against respondent-
spouses Paragas on the basis that petitioner is the registered owner of the property being occupied by the
respondent-spouses who, according to petitioner, are just occupying the said land through the latters tolerance
without rent. MTCC decided in favor of petitioner. RTC affirmed the MTCC Decision. During the pendency of the
appeal with the RTC, respondent-spouses filed against petitioner a complaint for declaration of nullity of Deed of
Sale, in effect questioning OWNERSHIP. Respondent Felix Paragas (husband) alleged that Aysons father made him
sign a Deed of Absolute Sale over Maximas (wife) property under threat that Felix will be incarcerated. RTC
rendered its decision in favor of respondent-spouses declaring the Deed of Absolute Sale as an equitable mortgage.

ISSUE 1
WON the decision of the court in the ejectment case where ownership was raised as defense by the Spouses
Paragas, is conclusive on the issue of ownerhip such that the complaint for declaration of nullity of Deed of Sale by
the respondent-spouses is barred.

DECISION 1
No. Action by the respondent-spouse is not barred.

RATIO 1
It must be remembered that in ejectment suits the issue to be resolved is merely the physical possession over the
property, i.e., possession de facto and not possession de jure, independent of any claim of ownership set forth by
the party-litigants. Should the defendant in an ejectment case raise the defense of ownership in his pleadings and
the question of possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall
be resolved only to determine the issue of possession. The judgment rendered in such an action shall be conclusive
only with respect to physical possession and shall in no wise bind the title to the realty or constitute a binding and
conclusive adjudication of the merits on the issue of ownership. Therefore, such judgment shall not bar an action
between the same parties respecting the title or ownership over the property, which action was precisely resorted
to by respondent-spouses in this case.

ISSUE 2
WON the Deed of Absolute Sale is an equitable mortgage.

DECISION 2
Yes. It is an equitable mortgage; hence, the property is still under the ownership of the spouses.

RATIO 2
The Civil Code enumerates the cases in which a contract, purporting to be a sale, is considered only as a contract of
loan secured by a mortgage as per Article 1604 in relation Article 1602. In this case, the evidence before the RTC
had established that the possession of the subject property remained with respondent-spouses despite the
execution of the Deed of Absolute Sale.


ISSUE 3
WON the Deed of Absolute Sale was executed through fraud, making the said contract merely voidable, and the
action to annul voidable contracts based on fraud prescribed in four (4) years from the discovery of fraud.

DECISION 3 AND RATIO 3
An equitable mortgage is a voidable contract. As such, it may be annulled within four (4) years from the time the
cause of action accrues. This case, however, not only involves a contract resulting from fraud, but covers a
transaction ridden with threat, intimidation, and continuing undue influence which started when petitioners father
Thus, the four-year period should start from the time the defect in the consent ceases.

DESTREZA V. RIOZA PLAZO AND ALARAS
FACTS:
Pedro L. Rioza died on November 16, 1989 leaving several heirs, which included respondents Ma. Gracia Plazo and
Ma. Fe Alaras. In the course of settling Riozas estate, respondent Plazo wrote a letter to the Registry of Deeds of
Nasugbu, Batangas requesting for certified true copies of all titles in the name of Rioza , including a sugarland
located at Barangay Utod, Nasugbu, Batangas covered by TCT 40353. Register of Deeds furnished Plazo with
certified true copies of the titles, except that of TCT 40353 which was missing.
In an effort to find TCT 40353, respondent Plazo found at the Assessors Office a new title TCT 55396,, entered on
July 18, 1989, in the name of petitioner Gregorio M. Destreza and his wife Bernarda Butiong, covering the same
Utod sugarland.
Plazo and Alaras filed a complaint against the spouses Destreza and the Register of Deeds before the RTC of
Nasugbu, claiming serious irregularities in the issuance of TCT 55396 to petitioner Destreza. They asked that TCT
55396 be nullified, and TCT 40353 be restored, and that the Destrezas be ordered to reconvey the land to the
Rioza estate.
Atty. Bonuan of Register of Deeds,, in his anwer, explained that the new title had not yet been released to the
spouses Destreza because they were yet to submit certain required documents. Bonuan claimed that the late
Rioza asked him for a photocopy of TCT 55396 and as a courtesy to the ex-mayor, Bonuan gave him a copy.
On the part of the spouses Destreza, petitioner Destreza testified that on June 16, 1989 he bought the Utod
sugarland from Rioza through Toribio Ogerio, a common kumpadre. And that he paid P100, 000.00 but he did
not get a copy of the deed of sale nor a receipt for the payment but Rioza accompanied him to the Register of
Deeds. On July 15, 1989, Destreza returned to the Register of Deeds and got a copy of TCT 55396 in his name.
After the sale, petitioner Destreza immediately took possession of the land, plowing and planting on it even until
the case was filed. No communication or demand letter from respondents Plazo and Alaras disturbed his
occupation until he received the summons for suit.

The RTC found that TCT 55396 was yet inexistent on July 15, 1989 when petitioner Destreza claims he already
received a copy from the Register of Deeds. It declared that the deed of sale between Rioza and Destreza, is not
a public document for the failure of the notary public to submit his report to the RTC notarial section. The RTC
nullified the Deed of Sale and TCT 55396 and ordered the Register of Deeds of Nasugbu, Batangas to restore TCT
40353 in the name of the late Rioza.
Upon appeal, CA affirmed the RTC decision with the modification that Riozas estate did not have to pay any
amount to the Destrezas.
ISSUES: Whether or not sufficient evidence warranted the nullification of the deed of sale executed by the late
Rioza in favor of the Destrezas. NO.
RULING:
On the supposed irregularity in the release of a copy of the title to the Destrezas even before it had been entered
into the books of the Register of Deeds, the court held that the premature release of a copy of the registered title
cannot affect the validity of the contract of sale between Rioza and the Destrezas.
Registration only serves as the operative act to convey or affect the land insofar as third persons are concerned. It
does not add anything to the efficacy of the contract of sale between the buyer and the seller. In fact, if a deed is
not registered, the deed will continue to operate as a contract between the parties.

Furthermore, the declaration of Bonuan that he furnished ex-mayor Rioza with a copy of TCT 55396 strengthens
the case of the Destrezas. It shows that Rioza knew of and gave consent to the sale of his Utod sugarland to
them considering that he even helped facilitate the registration of the deed of sale. This negates any possible
suggestion that the Destrezas merely fabricated the sale of the Utod sugarland on the evidence that the Notary
Public failed to submit his notarial report. Whatever irregularity in registration may have been incurred, it did not
affect the validity of the sale.

The notarized deed of sale should be admitted as evidence despite the failure of the Notary Public in submitting his
notarial report to the notarial section of the RTC Manila. It is the swearing of a person before the Notary Public and
the latters act of signing and affixing his seal on the deed that is material and not the submission of the notarial
report.

Parties who appear before a notary public to have their documents notarized should not be expected to follow up
on the submission of the notarial reports. They should not be made to suffer the consequences of the negligence of
the Notary Public in following the procedures prescribed by the Notarial Law. Thus, the notarized deed of sale
executed by Rioza is admissible as evidence of the sale of the Utod sugarland to the Destrezas. Furthermore, it will
be shown later that the Destrezas did not fabricate the sale of the Utod sugarland as may be suggested by the
failure of the Notary Public to submit his notarial report because there are evidence which show that Rioza really
consented to the sale.


On the issue of the figure or amount appearing in the deed of sale, where Plazo and Alaras also question the
testimony of Gregorio Destreza that he paid P100,000.00 to Rioza when the figure appearing on the deed of sale
was only P60,000.00. The court held that it is not a sufficient ground to nullify such deed. The fact remains that
Rioza sold his land to the Destrezas under that document and they paid for it. The explanation for the difference
in the prices can be explained only by Rioza and Gregorio Destreza. Unfortunately, Rioza had died. On the
other hand, Plazo and Alaras chose not to confront Destreza regarding that difference when the latter took the
witness stand.

In sum, the Court finds the notarized deed of sale that the late Pedro Rioza executed in favor of the Destrezas
valid and binding upon them and their successors-in-interest. It served as authority to the Register of Deeds to
register the conveyance of the property and issue a new title in favor of the Destrezas. That the Destrezas occupied
and cultivated the land openly for seven years before and after Riozas death negates any scheme to steal the
land.

KINGS PROPERTIES CORP., VS. CANUTO A. GALIDO
FACTS:
This case involves an action for cancellation of certificates of title, registration of deed of sale and issuance of
certificates of title filed by Canuto A. Galido (respondent) before RTC of Antipolo City. On 18 April 1966, the heirs of
Domingo Eniceo, namely Rufina Eniceo and Maria Eniceo, were awarded with Homestead Patent consisting of four
parcels of land located in San Isidro, Antipolo, Rizal. The Antipolo property with a total area of 14.8882 hectares was
registered under Original Certificate of Title (OCT) No. 535.

The issuance of the homestead patent was subject to the following conditions:

To have and to hold the said tract of land, with the appurtenances thereunto of right belonging unto the said Heirs
of Domingo Eniceo and to his heir or heirs and assigns forever, subject to the provisions of sections 118, 121, 122
and 124 of Commonwealth Act No. 141, as amended, which provide that except in favor of the Government or any
of its branches, units or institutions, the land hereby acquired shall be inalienable and shall not be subject to
incumbrance for a period of five (5) years next following the date of this patent, and shall not be liable for the
satisfaction of any debt contracted prior to the expiration of that period; that it shall not be alienated, transferred
or conveyed after five (5) years and before twenty-five (25) years next following the issuance of title, without the
approval of the Secretary of Agriculture and Natural Resources; that it shall not be incumbered, alienated, or
transferred to any person, corporation, association, or partnership not qualified to acquire public lands under the
said Act and its amendments; x x x

On September 1973, a deed of sale covering the Antipolo property was executed between Rufina Eniceo and Maria
Eniceo as vendors and respondent as vendee.

Rufina Eniceo and Maria Eniceo sold the Antipolo property to respondent for P250,000. A certain Carmen Aldana
delivered the owners duplicate copy of OCT No. 535 to respondent.

On 1988, the Eniceo heirs registered with the (Registry of Deeds) a Notice of Loss of the owners copy of OCT No.
535.

RTC rendered a decision finding that the certified true copy of OCT No. 535 contained no annotation in favor of any
person, corporation or entity. The RTC ordered the Registry of Deeds to issue a second owners copy of OCT No. 535
in favor of the Eniceo heirs and declared the original owners copy of OCT NO. 535 cancelled and considered of no
further value.

Petitioner states that as early as 1991, respondent knew of the RTC decision because respondent filed a criminal
case against Rufina Eniceo and Leonila Bolinas (Bolinas) for giving false testimony upon a material fact during the
trial. They alleged that sometime in 1995, Bolinas came to the office of Alberto Tronio Jr. (Tronio), petitioners
general manager, and offered to sell the Antipolo property. During an on-site inspection, Tronio saw a house and
ascertained that the occupants were Bolinas relatives. Tronio also went to the Registry of Deeds to verify the
records on file and ascertained that OCT No. 535 was clean and had no lien and encumbrances. After the necessary
verification, petitioner decided to buy the Antipolo property.

On 20 March 1995, the Eniceo heirs executed a deed of absolute sale in favor of petitioner covering lots 3 and 4 of
the Antipolo property for P500,000.

On 17 August 1995, the Secretary of the Department of Environment and Natural Resources (DENR Secretary)
approved the deed of sale between the Eniceo heirs and respondent. On January 1996, respondent filed a civil
complaint with the trial court against the Eniceo heirs and petitioner praying for the cancellation of the certificates
of title issued in favor of petitioner, and the registration of the deed of sale and issuance of a new transfer
certificate of title in favor of respondent.

The trial court rendered its decision dismissing the case for lack of legal and factual basis. However, the CA
reversed the trial courts decision. Hence this petition.
ISSUE:
WON the deed of sale should be annulled on the ground that the DENR Secretary gave his approval after 21 years
from the date the deed of sale in favor of respondent was executed. NO! it cannot be annulled.

HELD:
First. The contract between the Eniceo heirs and respondent executed on 10 September 1973 was a perfected
contract of sale. A contract is perfected once there is consent of the contracting parties on the object certain and on
the cause of the obligation. In the present case, the object of the sale is the Antipolo property and the price certain
is P250,000.

The contract of sale has also been consummated because the vendors and vendee have performed their respective
obligations under the contract. In a contract of sale, the seller obligates himself to transfer the ownership of the
determinate thing sold, and to deliver the same to the buyer, who obligates himself to pay a price certain to the
seller.[40] The execution of the notarized deed of sale and the delivery of the owners duplicate copy of OCT No.
535 to respondent is tantamount to a constructive delivery of the object of the sale.

Petitioner invokes THE BELATED APPROVAL BY THE DENR SECRETARY, made within 25 years from the issuance of
the homestead, to nullify the sale of the Antipolo property.

SC = The sale of the Antipolo property cannot be annulled on the ground that the DENR Secretary gave his approval
after 21 years from the date the deed of sale in favor of respondent was executed. Section 118 of Commonwealth
Act No. 141 or the Public Land Act (CA 141), as amended by Commonwealth Act No. 456, reads:

SEC. 118. EXCEPT IN FAVOR OF THE GOVERNMENT OR ANY OF ITS BRANCHES, UNITS, OR INSTITUTIONS, OR
LEGALLY CONSTITUTED BANKING CORPORATIONS, LANDS ACQUIRED UNDER FREE PATENT OR HOMESTEAD
PROVISIONS SHALL NOT BE SUBJECT TO ENCUMBRANCE OR ALIENATION FROM THE DATE OF THE APPROVAL OF
THE APPLICATION AND FOR A TERM OF FIVE YEARS FROM AND AFTER THE DATE OF THE ISSUANCE OF THE
PATENT OR GRANT X X X?

No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years after the
issuance of title shall be valid without the approval of the Secretary of Agriculture and Natural Resources, which
approval shall not be denied except on constitutional and legal grounds.

FORGERY = Petitioner alleges that the deed of sale is a forgery. However, as correctly held by the CA, forgery
can never be presumed. The party alleging forgery is mandated to prove it with clear and convincing
evidence. Whoever alleges forgery has the burden of proving it. In this case, petitioner and the Eniceo heirs failed to
discharge this burden.

Other issues : Equitable Mortgage

Petitioner contends that the deed of sale in favor of respondent is an equitable mortgage because the Eniceo heirs
remained in possession of the Antipolo property despite the execution of the deed of sale.

An equitable mortgage is one which although lacking in some formality, or form or words, or other requisites
demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a
debt, and contains nothing impossible or contrary to law.[47] The essential requisites of an equitable mortgage
are:

1. The parties entered into a contract denominated as a contract of sale; and
2. Their intention was to secure existing debt by way of a mortgage.

The presumption of equitable mortgage under Article 1602 of the Civil Code is not conclusive. It may be rebutted by
competent and satisfactory proof of the contrary. Apart from the fact that the Eniceo heirs remained in possession
of the Antipolo property, petitioner has failed to substantiate its claim that the contract of sale was intended to
secure an existing debt by way of mortgage. In fact, mere tolerated possession is not enough to prove that the
transaction was an equitable mortgage.

Furthermore, petitioner has not shown any proof that the Eniceo heirs were indebted to respondent. On the
contrary, the deed of sale executed in favor of respondent was drafted clearly to convey that the Eniceo heirs sold
and transferred the Antipolo property to respondent. The deed of sale even inserted a provision about defrayment
of registration expenses to effect the transfer of title to respondent.

The Court notes that the Eniceo heirs have not appealed the CAs decision, hence, as to the Eniceo heirs, the CAs
decision that the contract was a sale and not an equitable mortgage is now final. Since petitioner merely assumed
the rights of the Eniceo heirs, petitioner is now estopped from questioning the deed of sale dated 10 September
1973.

Petitioner is not a buyer in good faith

Petitioner maintains that the subsequent sale must be upheld because petitioner is a buyer in good faith, having
exercised due diligence by inspecting the property and the title sometime in February 1995.

In Agricultural and Home Extension Development Group v. Court of Appeals,[58] a buyer in good faith is defined as
one who buys the property of another without notice that some other person has a right to or interest in such
property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim
or interest of some other person in the property.

Petitioner purchased the Antipolo property only on March 1995 and 5 April 1995 as shown by the dates in the
deeds of sale. On the same dates, the registry of deeds issued new tcts in favor of petitioner with the annotated
adverse claim. Consequently, the adverse claim registered prior to the second sale charged petitioner with
constructive notice of the defect in the title of Eniceo heirs. Therefore, petitioner cannot be deemed as a purchaser
in good faith when they bought and registered the Antipolo property.

Laches

PETITIONER CONTENDS THAT RESPONDENT IS GUILTY OF LACHES BECAUSE HE SLEPT ON HIS RIGHTS BY FAILING TO
REGISTER THE SALE OF THE ANTIPOLO PROPERTY AT THE EARLIEST POSSIBLE TIME. PETITIONER CLAIMS THAT
DESPITE RESPONDENTS KNOWLEDGE OF THE SUBSEQUENT SALE IN 1991, RESPONDENT STILL FAILED TO HAVE THE
DEED OF SALE REGISTERED WITH THE REGISTRY OF DEEDS.

The essence of laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that
which, through due diligence, could have been done earlier, thus giving rise to a presumption that the party entitled
to assert it had either abandoned or declined to assert it.

Respondent discovered in 1991 that a new owners copy of OCT No. 535 was issued to the Eniceo heirs.
Respondent filed a criminal case against the Eniceo heirs for false testimony. When respondent learned that the
Eniceo heirs were planning to sell the Antipolo property, respondent caused the annotation of an adverse claim. On
16 January 1996, when respondent learned that OCT No. 535 was cancelled and new TCTs were issued, respondent
filed a civil complaint with the trial court against the Eniceo heirs and petitioner. Respondents actions negate
petitioners argument that respondent is guilty of laches.

True, unrecorded sales of land brought under Presidential Decree No. 1529 or the Property Registration Decree
(PD 1529) are effective between and binding only upon the immediate parties. The registration required in Section
51 of PD 1529 is intended to protect innocent third persons, that is, persons who, without knowledge of the sale
and in good faith, acquire rights to the property. Petitioner, however, is not an innocent purchaser for value.

VILORIA v. CONTINENTAL AIRLINES
FACTS:
In 1997, while the spouses Viloria were in the United States, they approached Holiday Travel, a travel agency
working for Continental Airlines, to purchase tickets from Newark to San Diego. The travel agent, Margaret Mager,
advised the couple that they cannot travel by train because it is fully booked; that they must purchase plane tickets
for Continental Airlines; that if they wont purchase plane tickets; theyll never reach their destination in time. The
couple believed Magers representations and so they purchased two plane tickets worth $800.00.

Later however, the spouses found out that the train trip isnt fully booked and so they purchased train tickets and
went to their destination by train instead. Then they called up Mager to request for a refund for the plane tickets.
Mager referred the couple to Continental Airlines. As the couple are now in the Philippines, they filed their request
with Continental Airlines office in Ayala. The spouses Viloria alleged that Mager misled them into believing that the
only way to travel was by plane and so they were fooled into buying expensive tickets.

Continental Airlines refused to refund the amount of the ticket and so the spouses sued the airline company. In its
defense, Continental Airlines claimed that the ticket sold to them by Mager is non-refundable; that, if any, they are
not bound by the misrepresentations of Mager because theres no agency existing between Continental Airlines and
Mager.
The trial court ruled in favor of spouses Viloria but the Court of Appeals reversed the ruling of the RTC.

ISSUE: Whether or not a contract of agency exists between Continental Airlines and Mager.

HELD: Yes. All the elements of agency are present, to wit:
1
there is consent, express or implied of the parties to establish the relationship;
2
the object is the execution of a juridical act in relation to a third person;
3
the agent acts as a representative and not for himself, and
4
the agent acts within the scope of his authority.

The first and second elements are present as Continental Airlines does not deny that it concluded an agreement
with Holiday Travel to which Mager is part of, whereby Holiday Travel would enter into contracts of carriage with
third persons on the airlines behalf. The third element is also present as it is undisputed that Holiday Travel merely
acted in a representative capacity and it is Continental Airlines and not Holiday Travel who is bound by the contracts
of carriage entered into by Holiday Travel on its behalf. The fourth element is also present considering that
Continental Airlines has not made any allegation that Holiday Travel exceeded the authority that was granted to it.

Continental Airlines also never questioned the validity of the transaction between Mager and the spouses.
Continental Airlines is therefore in estoppels. Continental Airlines cannot be allowed to take an altogether different
position and deny that Holiday Travel is its agent without condoning or giving imprimatur to whatever damage or
prejudice that may result from such denial or retraction to Spouses Viloria, who relied on good faith on Continental
Airlines acts in recognition of Holiday Travels authority. Estoppel is primarily based on the doctrine of good faith
and the avoidance of harm that will befall an innocent party due to its injurious reliance, the failure to apply it in
this case would result in gross travesty of justice.

REGAL FILMS INC. VERSUS GABRIEL CONCEPCION
FACTS:
In 1991, Gabriel "Gabby" Concepcion who is TV artist and movie actor through his manager Lolita Solis entered into
a contract with petitioner. The respondent will render service to the different motion pictures of Regal Films.
Petitioner will give Concepcion 2 parcels of land one in Marikina and one in Cavite on top pf the talent fees it had
agreed to pay.

In 1994, Solis and Concepcion filed an action to rescind the contract with damages and Concepcion will be released
from further commitment to work exclusively with Regal Films. Instead of filing an answer to the complaint,
petitioner filed a motion to dismiss on the allegation they had settled their differences amicably. Regal Films
averred they both executed an agreement to operate as addendum. The said addendum was signed by one of the
representative of the petitioner and Solis in behalf of Concepcion.

Respondent himself opposed the motion to dismiss, contending that the addendum is grossly disadvantageous to
him and was executed without his knowledge and consent. He reiterated that Solis ceased to be his manager and
had no authority to sign the addendum.

During the preliminary conference Regal Films express its willingness to release Concepcion from the contract
rather than pursue the addendum. However, respondent file a motion with the trial court that he is willing to honor
the addendum and have it considered as a compromise agreement. RTC and CA ruled in favor of respondent, hence
this petition.

ISSUE: WON the subject addendum can be a basis of compromise judgment and be enforced.

RULING: NO.
A compromise agreement is an agreement between two or more persons who for by preventing or putting an end
to a lawsuit adjust their respective positions by mutual consent in the way they feel.

Consent is manifested by the meeting of the offer and acceptance upon the thing. The offer must be certain and the
acceptance must be seasonable and absolute. The outright rejection of the addendum made known to the other
party ended the offer. When he later filed his manifestation that respondent was willing to accept the offer, there
still nothing to accept.

A contract entered into the name of another who had no real authority or legal representation would be
unenforceable, but it is susceptible ratification which is to be done before it is made to revoke by the other
contracting party.

In this case, respondent's adamant refusal of the addendum during the preliminary conference constrained the
petitioner, but his subsequent acts of ratifying the addendum had already came too much late for then the
addendum was already revoked by regal films, hence it is unenforceable.


LITONJUA VS FERNANDEZ
FACTS:
Sometime in September 1995, Mrs. Lourdes Alimario and Agapito Fisico who worked as brokers, offered to sell to
the petitioners, Antonio K. Litonjua and Aurelio K. Litonjua, Jr. The petitioners were shown a locator plan and copies
of the titles showing that the owners of the properties were represented by Mary Mediatrix Fernandez and
Gregorio T. Eleosida, respectively. The brokers told the petitioners that they were authorized by respondent
Fernandez to offer the property for sale. The petitioners, thereafter, made two ocular inspections of the property,
in the course of which they saw some people gathering coconuts.
In the afternoon of November 27, 1995, the petitioners met with respondent Fernandez and the two brokers at the
petitioners office in Mandaluyong City. The petitioners and respondent Fernandez agreed that the petitioners
would buy the property consisting of 36,742 square meters, for the price of P150 per square meter, or the total sum
of P5,098,500. They also agreed that the owners would shoulder the capital gains tax, transfer tax and the expenses
for the documentation of the sale. The petitioners and respondent Fernandez also agreed to meet on December 8,
1995 to finalize the sale. It was also agreed upon that on the said date, respondent Fernandez would present a
special power of attorney executed by the owners of the property, authorizing her to sell the property for and in
their behalf, and to execute a deed of absolute sale thereon. The petitioners would also remit the purchase price to
the owners, through respondent Fernandez. However, only Agapito Fisico attended the meeting. He informed the
petitioners that respondent Fernandez was encountering some problems with the tenants and was trying to work
out a settlement with them. After a few weeks of waiting, the petitioners wrote respondent Fernandez on January
5, 1995, demanding that their transaction be finalized by January 30, 1996.

When the petitioners received no response from respondent Fernandez, the petitioners sent her another Letter
dated February 1, 1996, asking that the Deed of Absolute Sale covering the property be executed in accordance
with their verbal agreement dated November 27, 1995. The petitioners also demanded the turnover of the subject
properties to them within fifteen days from receipt of the said letter; otherwise, they would have no option but to
protect their interest through legal means.
Upon receipt of the above letter, respondent Fernandez wrote the petitioners in February 1996 and clarified her
stand on the matter. Appended thereto was a copy of respondent Fernandez letter to the petitioners dated
January 16, 1996, in response to the latters January 5, 1996 letter.
ISSUE: WON the contract falls under the coverage of statute of frauds.
RULING:
The Letter of respondent Fernandez dated January 16, 1996 is hardly the note or memorandum contemplated
under Article 1403(2)(e) of the New Civil Code, which reads:Art. 1403. The following contracts are unenforceable,
unless they are ratified:(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the
following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or
memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of
the agreement cannot be received without the writing, or secondary evidence of its contents:(e) An agreement for
the leasing for a longer period than one year, or for the sale of real property or of an interest therein.

In the case at bar, the letter dated January 16, 1996 of defendant-appellant can hardly be said to constitute the
note or memorandum evidencing the agreement of the parties to enter into a contract of sale as it is very clear that
defendant-appellant as seller did not accept the condition that she will be the one to pay the registration fees and
miscellaneous expenses and therein also categorically denied she had already committed to execute the deed of
sale as claimed by the plaintiffs-appellees. The letter, in fact, stated the reasons beyond the control of the
defendant-appellant, why the sale could no longer push through because of the problem with tenants. The trial
court zeroed in on the statement of the defendant-appellant that she and her cousin changed their minds, thereby
concluding that defendant-appellant had unilaterally cancelled the sale or backed out of her previous commitment.

However, the tenor of the letter actually reveals a consistent denial that there was any such commitment on the
part of defendant-appellant to sell the subject lands to plaintiffs-appellees. When defendant-appellant used the
words "changed our mind," she was clearly referring to the decision to sell the property at all (not necessarily to
plaintiffs-appellees) and not in selling the property to herein plaintiffs-appellees as defendant-appellant had not yet
made the final decision to sell the property to said plaintiffs-appellees. This conclusion is buttressed by the last
paragraph of the subject letter stating that "we are no longer selling the property until all problems are fully
settled." To read a definite previous agreement for the sale of the property in favor of plaintiffs-appellees into the
contents of this letter is to unduly restrict the freedom of the contracting parties to negotiate and prejudice the
right of every property owner to secure the best possible offer and terms in such sale transactions.

The SC believed, therefore, that the trial court committed a reversible error in the finding that there was a
perfected contract of sale or contract to sell under foregoing circumstances. Hence, the respondent may not be

held liable. As been held in the case of Rosencor Development Corporation vs. Court of Appeals, the term "statute of
frauds" is descriptive of statutes which require certain classes of contracts to be in writing. The statute does not
deprive the parties of the right to contract with respect to the matters therein involved, but merely regulates the
formalities of the contract necessary to render it enforceable. The purpose of the statute is to prevent fraud and
perjury in the enforcement of obligations, depending for their existence on the unassisted memory of witnesses, by
requiring certain enumerated contracts and transactions to be evidenced by a writing signed by the party to be
charged. The statute is satisfied or, as it is often stated, a contract or bargain is taken within the statute by making

and executing a note or memorandum of the contract which is sufficient to state the requirements of the statute.
The application of such statute presupposes the existence of a perfected contract. However, for a note or
memorandum to satisfy the statute, it must be complete in itself and cannot rest partly in writing and partly in
parol. The note or memorandum must contain the names of the parties, the terms and conditions of the contract

and a description of the property sufficient to render it capable of identification. Such note or memorandum must
contain the essential elements of the contract expressed with certainty that may be ascertained from the note or
memorandum itself, or some other writing to which it refers or within which it is connected, without resorting to

parol evidence. To be binding on the persons to be charged, such note or memorandum must be signed by the said
party or by his agent duly authorized in writing.

GOZUN v. MERCADO
FACTS:
Gozun (petitioner), owner of JMG Publishing House, submitted to Mercado (respondent) a draft samples and price
quotation of campaign materials upon the request of the respondent who is running for the gubernatorial post in
the local elections of 1995.

Petitioner claim that respondents wife had told him that respondent had already approved his price quotation and
he could start printing. Given the urgency and limited time to do the job order, petitioner availed the services of
other printing shop owned by his mother and daughter.

Meanwhile, on March 31, 1995, respondents sister-in-law, Lilian Soriano obtained a cash advance of P253,000.00
allegedly for the allowances of poll watchers who were attending a seminar and for other related expenses.

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, wherein on August 11, 1995, respondents wife partially paid
P1,000,000 to petitioner who issued a receipt therefor.

However, Despite repeated demands and respondents promise to pay, respondent failed to settle the balance of
his account to petitioner.Petitioner thus filed with a complaint against respondent to collect the remaining amount
of P1,177,906 plus . 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. Petitioner also claimed 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.

Respondent alleged that the petitioner was in fact his over-all coordinator in charge of the seminar, and it was a
certain Cabalu was the one whom he authorized to approve details with regards to printing materials, and his wife
was not authorized to enter a contract with the petitioner as she knew her limitations. Upon seeing the receipt
issued by the petitioner to respondents wife with regards to the printed materials, the respondent claimed that it
was his first time to see the receipt which surprised him as he fully knew well that such were donations.

ISSUE: Whether or not respondent is liable to pay for the cash advance obtained by Soriano. (NO)

HELD: NO. The contract is unenforceable as Soriano being unauthorized by respondent.

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 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 and are declared unenforceable, unless they are ratified.

Generally, the agency may be oral, unless the law requires a specific 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 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.

Upon the face of the receipt, nowhere in the note can it be inferred that defendant-appellant was connected with
the said. 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. Petitioner even failed to proof that there is an agency through oral
agreement.

It is a general rule in the law of agency that 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 of the principal. Therefore, Soriano acted on her personal
capacity and not authorized by the respondent, hence the contract is unenforceable.

On the amount due him and the other two printing presses, 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. In light thereof, petitioner is the real party
in interest in this case.Respondent cannot claim that the materials were donations as the COMELEC ordered that
ddonated metrials mas be stated on its face, acknowledged that nothing was writted on all materials made by the
petitioner.

In sum, respondent has the obligation to pay ONLY 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, and not the P253,000.00
cash advance made by Soriano for it being unenforceable for lack of authorization.

CABALES, ET. AL vs COURT OF APPEALS
FACTS:
Saturnina and her children Bonifacio, Albino, Francisco, Leonara, Alberto and petitioner Rito inherited a parcel of
land. They sold such property to Dr. Cayetano Corrompido with a right to repurchase within 8 years. Alberto
secured a note from Dr. Corrompido in the amount of Php 300.00. Alberto died leaving a wife and son, petitioner
Nelson.

Within the 8-year redemption period, Bonifacio and Albino tendered their payment to Dr. Corrompido. But Dr.
Corrompido only released the document of sale with pacto de retro after Saturnina paid the share of her deceased
son, Alberto, plus the note.

Saturnina and her children executed an affidavit to the effect that petitioner Nelson would only receive the amount
of Php 176.34 from respondents-spouses when he reaches the age if 21 considering that Saturnina paid Dr.
Corrompido Php 966.66 for the obligation of petitioner Nelsons late father Alberto.

ISSUE:

Whether or not the slae entered into is valid and binding.

RULING:
The legal guardian only has the plenary power of administration of the minors property. It does not include the
power to alienation which needs judicial authority. Thus when Saturnina, as legal guardian of petitioner Rito, sold
the latters pro indiviso share in subject land, she did not have the legal authority to do so. The contarct of sale as to
the pro indiviso share of Petitioner Rito was unenforceable. However when he acknowledged receipt of the

proceeds of the sale on July24, 1986, petitioner Rito effectively ratified it. This act of ratification rendered the sale
valid and binding as to him.

LINA PEALBER VS. RAMOS, LETICIA PEALBER, AND BARTEX INC
FACTS:
Petitioner is the mother and mother-in-law of the private respondent spouses. Respondent Bartex, Inc., on the
other hand, is a domestic corporation which bought from respondent spouses Ramos one of the two properties
involved in the first cause of action.

First Cause of Action (side issue)
Firstly, petitioner alleged in her Complaint that she was the owner of a parcel of land and alleged that her signature
on the said Deed of Donation of this property was a forgery as she did not donate any property to respondent
spouses Ramos. Petitioner allegedly found out that the respondent spouses Ramos were selling the properties to
respondent Bartex, Inc. Petitioner prayed for the declaration of nullity of the Deed of Donation.

RTC found that the testimony of the petitioner is insufficient to support the said cause of action. A notarial
document is, by law, entitled to full faith and credit upon its face and a high degree of proof is needed to overthrow
the presumption of truth in the recitals contained in a public document executed with all legal formalities. Hence, in
order to contradict the facts contained in a notarial document and the presumption of regularity in its favor, there
must be evidence that is clear, convincing and more than merely preponderant. She should have had her allegedly
falsified signature on the deed of donation examined by qualified handwriting experts to prove that, indeed, she did
not execute the same. Her failure to do so results in the failure of her cause. Petitioner did not appeal this decision
thus it is deemed final and executory.

Second Cause of Action
Secondly, petitioner owned a hardware which stood on a rented commercial lot.
In 1982, petitioner allowed respondent spouses Ramos to manage the hardware store. Before this, the petitioner
made a beginning inventory of the stocks which amounts to P216,000.00. In 1984, Mendoza put the Bonifacio
property up for sale. As petitioner did not have available cash to buy the property, she allegedly entered into a
verbal agreement with respondent spouses Ramos with the following terms:
[1.] The lot would be bought by the respondents for and in her behalf;
[2.] The consideration of P80,000.00 for said lot would be paid from the accumulated earnings of the store;
[3.] Since the respondents have the better credit standing, they would be made to appear in the Deed of Sale as the
vendees so that the title to be issued in their names could be used by them to secure a loan with which to build a
bigger building and expand the business;
The respondent spouses bought the property. They returned the management of the hardware to the petitioner.
Then the petitioner made a second inventory of stocks which amounted to P110,000. The petitioner contends that
the difference of P116,000 was used by the petitioner to buy the property and demanded reconveyance of the title
of the property to her. The respondents refused. Thus this case.
RTC granted the petitioners pleas stating that there was an express verbal trust agreement. It is supported by the
fact that petitioner did not ever ask for an accounting of said proceeds, despite the fact that she already knew that
her stocks left by her in was already sold by the spouses and that there was a difference of P116,000.00 plus which
was due to her.


Respondent filed a motion for reconsideration on the ground that the alleged express trust created between them
and petitioner involving the Bonifacio property could not be proven by parol evidence as provided in Art 1443 of the
Civil Code. RTC denied the motion stating that respondent spouses Ramos were deemed to have waived such
objections, which cannot be raised anymore in their Motion for Reconsideration. CA reversed the decision of the
RTC.

ISSUE:
(1) whether the existence of a trust agreement between her and respondent spouses Ramos enforceable
and existing.

With regard to the ENFORCEABILITY of the parol evidence presented in the RTC:
In accordance with Article 1443 of the Civil Code, when an express trust concerns an immovable property or any
interest therein, the same may not be proved by parol or oral evidence.
Trusts are either express or implied. Express trusts are those which are created by the direct and positive acts of the
parties, by some writing or deed, or will, or by words either expressly or impliedly evincing an intention to create a
trust. No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly
intended.

However, the spouses were deemed to have waived their objection to the parol evidence as they failed to timely
object when petitioner testified on the said verbal agreement. The requirement in Article 1443 that the express
trust concerning an immovable or an interest therein be in writing is merely for purposes of proof, not for the
validity of the trust agreement. Therefore, the said article is in the nature of a statute of frauds. The term statute of
frauds is descriptive of statutes which require certain classes of contracts to be in writing. The statute does not
deprive the parties of the right to contract with respect to the matters therein involved, but merely regulates the
formalities of the contract necessary to render it enforceable. The effect of non-compliance is simply that no action
can be proved unless the requirement is complied with. Oral evidence of the contract will be excluded upon timely
objection. But if the parties to the action, during the trial, make no objection to the admissibility of the oral
evidence to support the contract covered by the statute, and thereby permit such contract to be proved orally, it
will be just as binding upon the parties as if it had been reduced to writing.

A careful perusal of the records of the case reveals that respondent spouses Ramos did indeed fail to interpose their
objections regarding the admissibility of the afore-mentioned testimonies when the same were offered to prove the
alleged verbal trust agreement between them and petitioner. Consequently, these testimonies were rendered
admissible in evidence.

As regards the EXISTENCE of the express verbal trust agreement:
The SC said,

While the admissibility of evidence is an affair of logic and law, determined as it is by its relevance and
competence, the weight to be given to such evidence, once admitted, still depends on judicial evaluation. Thus,
despite the admissibility of the said testimonies, the Court holds that the same carried little weight in proving the
alleged verbal trust agreement between petitioner and respondent spouses.

The resulting difference of P116,000 in the beginning inventory of the stocks of the hardware store (before
management was transferred to respondent spouses Ramos) and the second inventory thereof (after management
was returned to petitioner), by itself, is not conclusive proof that the said amount was used to pay the purchase
price of the property, such as would make it the property of petitioner held merely in trust by respondent spouses
Ramos. Such a conclusion adopted by the RTC is purely speculative and non sequitur. The resulting difference in the
two inventories might have been caused by other factors and the same is capable of other interpretations (e. g.,
that the amount thereof may have been written off as business losses due to a bad economic condition, or that the
stocks of the store might have been damaged or otherwise their purchase prices have increased dramatically, etc.),
the exclusion of which rested upon the shoulders of petitioner alone who has the burden of proof in the instant
case. This petitioner miserably failed to do. The fact that respondent spouses Ramos never denied the P116,000
difference, or that they failed to present proof that they indeed used the said amount to pay the other obligations
and liabilities of petitioner is not sufficient to discharge petitioners burden to prove the existence of the alleged
express trust agreement.

GONZALES V PEREZ
FACTS:
Pedro Gonzales acquired two parcels of lots, A & C, through a bidding conducted by the Marikina government. The
deeds for the lots were executed in favor of Pedro Gonzales. However, the governor failed to act upon the approval
of the deeds.

After some time, Pedro Gonzales sold to Marco Perez lot C. The contract was embodied in a deed of sale, but it was,
however, not notarized. Subsequently, Pedro Gonzales and Marco Perez died.

Several years later, the government of Marikina executed a deed of absolute transfer of real property, as well as a
transfer certificate of title, in favor of the estate of Gonzales.
Subsequently, the heirs of Gonzales executed an extra-judicial partition of lot c and subdivided it into three parts.

Knowing of the partition, the heirs of Perez sent a demand letter asking for the reconveyance of lot C. However, the
heirs of Gonzales refused to accede to the heirs of Perezs demands, and so the latter instituted an action for
annulment and/or rescission of absolute transfer of real property and for reconveyance with damages.

Trials ensued and eventually, the case reached the Supreme Court.
The heirs of Gonzales contend that the Deed of Sale between Pedro Gonzales and Marco Perez were void and has
no effect as it was not notarized. They also averred that Pedro Gonzales could not have lawfully transferred/sold
the property to Marco Perez as Pedro Gonzales was not yet the owner of the property at the time of the sale
between him and Marco Perez.

ISSUE/S:
1.
Whether or not the deed of sale is void and has no effect without it having been notarized.
2.
Whether Pedro Gonzales was already the owner of the property during his sale with Marcos Perez.
RULING:

First Issue. NO. The court cited articles 1358 and 1403. Under 1358, the court specifically cited the provision which
states that acts and contract which have for their object the creation, transmission, modification, or extinguishment
of real rights over immovable property must appear in a public document, while sale of real property or interest
therein is governed by articles 1403 and 1405. Under 1403, the court specifically cited the provision which states
that for the sale of real property or of an interest therein, shall be unenforceable by court action, unless the same,
or some note or memorandum thereof, be in writing, and subscribed by the party charged or by his agent.

Under 1403, the sale of real property should be in writing and subscribed by the party charged for it to be
enforceable. In the case, the deed of sale was in writing and was signed by Pedro Gonzales and his wife, Francisca,
thus, the deed of sale was enforceable.

However, not having been subscribed and sworn to before a notary public, the deed of sale is not a public
document and therefore does not comply with article 1358.

Nonetheless, it is a settled ruled that the failure to observe the proper form prescribed by article 1358 does not
render the acts or contracts enumerated therein to be invalid. The rule under the said article is not essential to the
validity or enforceability of the transaction but merely for convenience. The sale of real property though not
consigned in public instrument or through a formal writing is nevertheless valid and binding among the parties, for
the time-honored rule is that even a verbal contract of sale of real estate produces legal effects between the
parties. Thus, a conveyance of land not made in a public document does not affect the validity of such conveyance.

Second Issue. As to the second allegation, the court disagreed with the grounds, citing section 2196 of the Revised
Administrative Code, as well as several jurisprudence.

From those, the court held that where the contract lacks the approval and disapproval of the governor, such is
merely voidable. In the case, the contract/deed of sale shall be considered voidable. Voidable or annullable
contracts, before they are set aside, are existent, valid, and binding, and are effective and obligatory between the
parties.

In the case, since the deed of sale was never annulled or set aside, it had the effect of transferring ownership of the
subject property to Pedro Gonzales. Having lawfully acquired ownership of the lots, Pedro Gonzales then had the
capacity to transfer ownership of lots A & C.
The court also cited articles 1496 and 1497 stating that ownership of the thing sold is acquired by the vendee from
the moment it is delivered to him, and the thing sold shall be understood as delivered when it is placed in the
control and possession of the vendee.

In the case, there is no dispute that Pedro Gonzales took control and possession of the subject lots immediately
after his bid was accepted by the Marikina government. Besides, Pedro Gonzales and Marco Perez were already
occupying the subject property even before the same was sold to Pedro, and after buying the lot, Pedro allowed
Marcos Perez and his heirs to stay on the land.

Lastly, at this juncture, the deed of absolute transfer of property is no longer subject to the governors
approval/disapproval because Marikina already became part of Manila, and has now become a chartered city.


BUCTON VS. RURAL BANK OF EL SALVADOR
FACTS:
Nicanora Bucton (Bucton) is the owner of a parcel of land covered by CTC No. T-3838. On June 6, 1982, Conception
borrowed the title on the pretext that she was going to show it to the interested buyer but she used it as a security
for a loan from the respondent bank (Rural Bank of El Salvador) for P30,000.
Concepcion was not able to pay the loan. House and lot were foreclosed by the respondent sheriff. Auctioned. Sold
to the respondent bank.
Petitioner filed a complaint for annulment of mortgage, foreclosure and SPA.
Respondent Bank answered. Defence is lack of cause of action. It denied the allegation of petitioner that the SPA
was forged. Petitioner went to the bank and promised to settle the loan of concepcion. The foreclosure proceedings
are free from irregularities.
However, since summons could not be served upon Concepcion, petitioner moved to drop her as a defendant,
which the RTC granted in its Order dated October 19, 1990.21
This prompted respondent bank to file a ThirdParty Complaint against spouses Concepcion and Agnes Bucton
Lugod (Lugod), the daughter of petitioner. Respondent bank claimed that it would not have granted the loan and
accepted the mortgage were it not for the assurance of Concepcion and Lugod that the SPA was valid.
During the trial , petitioner testified that a representative of the bank went to her house to inform that the loan
secured by her house and lot was long overdue. She went to the bank and inquire about the matter. It was then she
discover that her house and lot were mortgage by virtue of a forge SPA her & her husband signature were forged.
(ever since she got married, she no longer used her maiden name, Nicanora Gabar, in signing the documents.
Denied appearing before the notary public.)
(the property referred to in the SPA is a vacant lot and that the house was covered by a different title.)
Witness Emma Nagac: she was at Concepcions boutique she was asked to signed as witness to the SPA that when
she signed the SPA the signature of Bucton and her husband has been affixed. Lugod instructed her not to tell the
petitioner.
Respondent Bank witness, Employees and sheriff. Concepcvion applied for a loan for her coconut production
business 40k, only 30k was approved.
Edwin Igloria, bank appraiser: Concepcion executed a REM over 2 properties one in the name of the Pet the other
under Milagros Flores. He inspected the petitioners property there were several houses in the compound but the
house offered as collateral was located in the property covered by the title but could not explain why the house was
covered in another title.

RTC favoured the Petitioner. CA reversed.

ISSUE:
WON the REM entered into by Concepcion is binding upon Bucton

HELD:
No. The REM was entered into by Concepcion in her own personal capacity.
In one case SC already ruled that in order to bind the principal by a deed executed by an agent, the deed must
upon its face purport to be made, signed and sealed in the name of the principal. In other words, the mere fact
that the agent was authorized to mortgage the property is not sufficient to bind the principal, unless the deed was
executed and signed by the agent for and on behalf of his principal.

In Rural Bank of Bombon, the agent contracted a loan from the bank and executed a real estate mortgage.
However, he did not indicate that he was acting on behalf of his principal.

In Far East Bank and Trust Company, the mother executed an SPA authorizing her daughter to contract a loan from
the bank and to mortgage her properties. The mortgage, however, was signed by the daughter and her husband as
mortgagors in their individual capacities, without stating that the daughter was executing the mortgage for and on
behalf of her mother.

In this case, the authorized agent (Concepcion) failed to indicate in the mortgage that she was acting for and on
behalf of her principal. The Real Estate Mortgage, explicitly shows on its face, that it was signed by Concepcion in
her own name and in her own personal capacity. In fact, there is nothing in the document to show that she was
acting or signing as an agent of petitioner. Thus, consistent with the law on agency and established jurisprudence,
petitioner cannot be bound by the acts of Concepcion.

Even if the SPA was valid, the Real Estate Mortgage would still not bind petitioner as it was signed by Concepcion in
her personal capacity and not as an agent of petitioner. Simply put, the Real Estate Mortgage is void and
unenforceable against petitioner.

Respondent bank was negligent.

At this point, we find it significant to mention that respondent bank has no one to blame but itself. Not only did it
act with undue haste when it granted and released the loan in less than three days, it also acted negligently in
preparing the Real Estate Mortgage as it failed to indicate that Concepcion was signing it for and on behalf of
petitioner. We need not belabor that the words as attorneyinfact of, as agent of, or for and on behalf of,
are vital in order for the principal to be bound by the acts of his agent. Without these words, any mortgage,
although signed by the agent, cannot bind the principal as it is considered to have been signed by the agent in his
personal capacity.

Respondent bank is liable to pay petitioner attorneys fees, and the costs of the suit.
Concepcion is liable to pay respondent bank her unpaid obligation and reimburse it for all damages, attorneys fees
and costs of suit.

MODINA VS. CA
FACTS:
The parcels of land in question are those under the name of Ramon Chiang (hereinafter referred to as CHIANG ). He
theorized that subject properties were sold to him by his wife, Merlinda Plana Chiang (hereinafter referred to as
MERLINDA), as evidenced by a Deed of Absolute Sale dated December 17, 1975, and were subsequently sold by
CHIANG to the petitioner Serafin Modina (MODINA), as shown by the Deeds of Sale, dated August 3, 1979 and
August 24, 1979, respectively.

MODINA brought a Complaint for Recovery of Possession with Damages against the private respondents, Ernesto
Hontarciego, Paul Figueroa and Teodoro Hipalla, docketed as Civil Case No. 13935 before the Regional Trial Court of
Iloilo City.

Upon learning the institution of the said case, MERLINDA presented a Complaint-in-intervention, seeking the
declaration of nullity of the Deed of Sale between her husband and MODINA on the ground that the titles of the
parcels of land in dispute were never legally transferred to her husband. Fraudulent acts were allegedly employed
by him to obtain a Torrens Title in his favor. However, she confirmed the validity of the lease contracts with the
other private respondents.
MERLINDA also admitted that the said parcels of land were those ordered sold by Branch 2 of the then Court of First
Instance of Iloilo in Special Proceeding No. 2469 in Intestate Estate of Nelson Plana where she was appointed as
the administratix, being the widow of the deceased, her first husband. An Authority to Sell was issued by the said
Probate Court for the sale of the same properties.
After due hearing, the Trial Court decided in favor of MERLINDA.

On appeal, the Court of Appeals affirmed the aforesaid decision in toto.

Dissatisfied therewith, petitioner found his way to this Court via the present Petition for Review under Rule 45
seeking to set aside the assailed decision of the Court of Appeals.

Issues:
(1) whether the sale of subject lots should be nullified;
(2) whether petitioner was not a purchaser in good faith

Ruling of the Court:
Anent the first issue, petitioner theorizes that the sale in question is null and void for being violative of Article 1490
of the New Civil Code prohibiting sales between spouses. Consequently, what is applicable is Article 1412 supra on
the principle of in pari delicto, which leaves both guilty parties where they are, and keeps undisturbed the rights of
third persons to whom the lots involved were sold; petitioner stressed.

Petitioner anchors his submission on the following statements of the Trial Court which the Court of Appeals upheld,
to wit:

Furthermore, under Art. 1490, husband and wife are prohibited to sell properties to each other. And where, as
in this case, the sale is inexistent for lack of consideration, the principle of in pari delicto non oritur actio does not
apply. (Vasquez vs Porta, 98 Phil 490). (Emphasis ours) Thus, Art. 1490 provides:

Art. 1490. The husband and the wife cannot sell property to each other, except:
(1) when a separation of property was agreed upon in the marriage settlements; or
(2) when there has been a judicial separation of property under Art. 191.
The exception to the rule laid down in Art. 1490 of the New Civil Code not having existed with respect to the
property relations of Ramon Chiang and Merlinda Plana Chiang, the sale by the latter in favor of the former of the
properties in question is invalid for being prohibited by law. Not being the owner of subject properties, Ramon
Chiang could not have validly sold the same to plaintiff Serafin Modina. The sale by Ramon Chiang in favor of
Serafin Modina is, likewise, void and inexistent.

xxx xxx xxx

The Court of Appeals, on the other hand, adopted the following findings a quo: that there is no sufficient evidence
establishing fault on the part of MERLINDA, and therefore, the principle of in pari delicto is inapplicable and the sale
was void for want of consideration. In effect, MERLINDA can recover the lots sold by her husband to petitioner
MODINA. However, the Court of Appeals ruled that the sale was void for violating Article 1490 of the Civil Code,
which prohibits sales between spouses.

The principle of in pari delicto non oritur actio denies all recovery to the guilty parties inter se. It applies to cases
where the nullity arises from the illegality of the consideration or the purpose of the contract. When two persons
are equally at fault, the law does not relieve them. The exception to this general rule is when the principle is
invoked with respect to inexistent contracts.

In the petition under consideration, the Trial Court found that subject Deed of Sale was a nullity for lack of any
consideration. This finding duly supported by evidence was affirmed by the Court of Appeals. Well-settled is the
rule that this Court will not disturb such finding absent any evidence to the contrary.

Under Article 1409 of the New Civil Code, enumerating void contracts, a contract without consideration is one such
void contract. One of the characteristics of a void or inexistent contract is that it produces no effect. So also,
inexistent contracts can be invoked by any person whenever juridical effects founded thereon are asserted against
him. A transferor can recover the object of such contract by accion reivindicatoria and any possessor may refuse to
deliver it to the transferee, who cannot enforce the transfer.
Thus, petitioners insistence that MERLINDA cannot attack subject contract of sale as she was a guilty party thereto
is equally unavailing.

But the pivot of inquiry here is whether MERLINDA is barred by the principle of in pari delicto from questioning
subject Deed of Sale.

It bears emphasizing that as the contracts under controversy are inexistent contracts within legal contemplation,
Articles 1411 and 1412 of the New Civil Code are inapplicable. In pari delicto doctrine applies only to contracts with
illegal consideration or subject matter, whether the attendant facts constitute an offense or misdemeanor or
whether the consideration involved is merely rendered illegal.

The statement below that it is likewise null and void for being violative of Article 1490 should just be treated as a
surplusage or an obiter dictum on the part of the Trial Court as the issue of whether the parcels of land in dispute
are conjugal in nature or they fall under the exceptions provided for by law, was neither raised nor litigated upon
before the lower Court. Whether the said lots were ganancial properties was never brought to the fore by the
parties and it is too late to do so now.

Futhermore, if this line of argument be followed, the Trial Court could not have declared subject contract as null
and void because only the heirs and the creditors can question its nullity and not the spouses themselves who
executed the contract with full knowledge of the prohibition.

Records show that in the complaint-in-intervention of MERLINDA, she did not aver the same as a ground to nullify
subject Deed of Sale. In fact, she denied the existence of the Deed of Sale in favor of her husband. In the said
Complaint, her allegations referred to the want of consideration of such Deed of Sale. She did not put up the

defense under Article 1490, to nullify her sale to her husband CHIANG because such a defense would be
inconsistent with her claim that the same sale was inexistent.

The Trial Court debunked petitioners theory that MERLINDA intentionally gave away the bulk of her and her late
husbands estate to defendant CHIANG as his exclusive property, for want of evidentiary anchor. They insist on the
Deed of Sale wherein MERLINDA made the misrepresentation that she was a widow and CHIANG was single, when
at the time of execution thereof, they were in fact already married. Petitioner insists that this document
conclusively established bad faith on the part of MERLINDA and therefore, the principle of in pari delicto should
have been applied.

These issues are factual in nature and it is not for this Court to appreciate and evaluate the pieces of evidence
introduced below. An appellate court defers to the factual findings of the Trial Court, unless petitioner can show a
glaring mistake in the appreciation of relevant evidence.
Since one of the characteristics of a void or inexistent contract is that it does not produce any effect, MERLINDA can
recover the property from petitioner who never acquired title thereover.

As to the second issue, petitioner stresses that his title should have been respected since he is a purchaser in good
faith and for value. The Court of Appeals, however, opined that he (petitioner) is not a purchaser in good faith. It
found that there were circumstances known to MODINA which rendered their transaction fraudulent under the
attendant circumstances.
As a general rule, in a sale under the Torrens system, a void title cannot give rise to a valid title. The exception is
when the sale of a person with a void title is to a third person who purchased it for value and in good faith.

A purchaser in good faith is one who buys the property of another without notice that some other person has a
right to or interest in such property and pays a full and fair price at the time of the purchase or before he has notice
of the claim or interest of some other person in the property.

In the case under scrutiny, petitioner cannot claim that he was a purchaser in good faith. There are circumstances
which are indicia of bad faith on his part, to wit: (1) He asked his nephew, Placido Matta, to investigate the origin
of the property and the latter learned that the same formed part of the properties of MERLINDAs first husband;
(2) that the said sale was between the spouses; (3) that when the property was inspected, MODINA met all the
lessees who informed that subject lands belong to MERLINDA and they had no knowledge that the same lots were
sold to the husband.

It is a well-settled rule that a purchaser cannot close his eyes to facts which would put a reasonable man upon his
guard to make the necessary inquiries, and then claim that he acted in good faith. His mere refusal to believe that
such defect exists, or his wilful closing of his eyes to the possibility of the existence of a defect in his vendors title,
will not make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and
it appears that he had such notice of the defect as would have led to its discovery had he acted with that measure
of precaution which may reasonably be required of a prudent man in a like situation.

Thus, petitioner cannot claim that the sale between him and MODINA falls under the exception provided for by law.



EUGENIO DOMINGO VS. COURT OF APPEALS
FACTS:
Paulina Rigonan owned three parcels of land including the house and warehouse on one parcel. She allegedly sold
them to private respondents, the spouses Felipe and Concepcion Rigonan, who claim to be her relatives. The
purchase price amounted to P850.00. The petitioners Eugenio Domingo, Crispin Mangabat and Samuel Capalungan,
who claim to be her closest surviving relatives, allegedly took possession of the properties by means of stealth,
force
and
intimidation,
and
refused to vacate the same. The respondent filed a complaint for reinvindicacion against petitioners. Rigonan
alleged that they owned the lots through the Deed of Absolute Sale executed by Paulina and that they had been in
continuous possession of the property and had introduced permanent improvements therin.

The petitioners, Domingo and 2 others, stated that the sale was void for being spurious and lacking consideration.
They argued that Paulina did not sell the lot to anyone and that they inherited the lots, being the nearest kin of
Paulina when Paulina died in 1966.

The respondents showed a carbon copy of the deed of sale not bearing the signature of Paulina but only the alleged
thumb mark of the latter and the deed was tainted with alterations, defects and irregularities.

The petitioners presented the owner of the adjacent lot, Jose Flores, who testified that he did not receive any
notice of the sale of the lots, contrary to what is stipulated in the DOS that the vendor notified all adjacent owners
of the sale. It was also presented that only the carbon copy of the DOS was filed.

The trial court found the deed fake and rendered judgment in favor of the petitioners. The appellate court,
however, reversed the decision and declared the respondents the owner of the properties.

ISSUE:
Whether or not respondents sufficiently established the existence and due execution of the Deed of Sale as to
render it valid and binding upon them

RULING:
NO. DOS null and void ab initio.

FIRST. The private respondents did not prove the due execution of the deed of sale. When the Register of Deeds
was ordered to produce the deed, no original typewritten but only a carbon copy was presented to the trial court.
Although the Court of Appeals calls it a "duplicate original," the deed contained filled in blanks and alterations.
None of the witnesses directly testified to prove positively and convincingly Paulina's execution of the original deed
of sale. The carbon copy did not bear her signature, but only her alleged thumbprint.
Secondly, there were irregularities as to the execution and registration of the DOS. Atty. Tagatay in his testimony
said that he himself registered the original deed of sale but the original was nowhere to be found. The other copies
also bore different entry dates and entry numbers.
Thirdly, It also appears that Paulina was never asked to vacate the premises she had purportedly sold. The
continued possession of Paulina throws an inverse implication, a serious doubt on the due execution of the DOS.
Lastly, the SC took notice the consideration wherein the price allegedly paid by the respondents for the 9 parcels,
including the 3 parcels in dispute, the house and the warehouse was only P850. The SC held it to be grossly and
shockingly inadequate.
There is a serious doubt that the seller consented to the sale of and the price for her parcels of land. At the time of
the execution of the alleged contract, Paulina Rigonan was already of advanced age and senile. She died an
octogenarian (person who is 80-89 years old) barely over a year when the deed was allegedly executed but before
copies of the deed were entered in the registry.

The
general
rule
is
that
a
person
is
not
incompetent
to
contract
merely because of advanced years or by reason of physical infirmities. However, when such age or infirmities have
impaired the mental faculties so as to prevent the person from properly, intelligently, and firmly protecting her
property rights then she is undeniably incapacitated. The unrebutted testimony of Zosima Domingo shows that at
the time of the alleged execution of the deed, Paulina was already incapacitated physically and mentally. She
narrated that Paulina played with her waste and urinated in bed.

Given these circumstances, there is in our view sufficient reason to seriously doubt that she consented to the sale of
and the price for her parcels of land.
BAUTISTA v SILVA
FACTS:
Spouses Berlina Silva and Pedro Silva were the owners of a parcel of land with a Transfer Certificate of Title No B-
37189, which was registered on August 14, 1980 in their names. On March 3, 1988, Pedro , for himself and as
attorney-in-fact of his wife Berlina, thru a Special Power of Attorney purportedly executed by Berlina in his favor,
executed a Deed of Absolute Sale over the said parcel of land in favor of defendants-spouses Claro Bautista and
Nida Bautista. As a consequence, TCT No B-37189 was cancelled and in lieu thereof, TCT No. V-2765 was issued in
the names of Spouses Claro Bautista and Nida Bautista on March 4, 1988.

Based on the evidence presented, the signature appearing on the SPA as that of Berlina is a forgery and
consequently the Deed of Absolute Sale Executed by Pedro in favor os Spouses Bautista is not authorized by Berlina.
Thus the RTC declared the Deed of Absolute Sale dated March 3, 1988 executed by Pedro M. Silva, for himself and
as attorney-in-fact of Berlina F. Silva, in favor of defendants-spouses Claro Bautista and Nida Bautista over the
parcel of land as null and void.

ISSUE:
Whether or Not petitioners are considered as purchasers in good faith and for value having relied upon a
SPA which appears legal, valid, and genuine on its face;

Whether the nullity of the deed of sale includes the one half share of the husband gratia argumenti that
the special power of attorney is a forgery and the deed of sale executed by the husband is null and void


HELD: There is no merit to petitioners' claim that they are purchasers in good faith.
There was positive and convincing evidence that respondent did not sign the SPA, and on the uncontroverted
Certification of Dorado that respondent was in Germany working as a nurse when the SPA was purportedly
executed in 1987. The SPA being a forgery, it did not vest in Pedro any authority to alienate the subject property
without the consent of respondent. Absent such marital consent, the deed of sale was a nullity.
The petitioners are not buyers in good faith. A buyer for value in good faith is one who buys property of another,
without notice that some other person has a right to, or interest in, such property and pays full and fair price for the
same, at the time of such purchase, or before he has notice of the claim or interest of some other persons in the
property. He buys the property with the well-founded belief that the person from whom he receives the thing
had title to the property and capacity to convey it.
To prove good faith, a buyer of registered and titled land need only show that he relied on the face of the title to
the property. He need not prove that he made further inquiry for he is not obliged to explore beyond the four
corners of the title. Such degree of proof of good faith, however, is sufficient only when the following conditions
concur: first, the seller is the registered owner of the land; second, the latter is in possession thereof; and third, at
the time of the sale, the buyer was not aware of any claim or interest of some other person in the property, or of
any defect or restriction in the title of the seller or in his capacity to convey title to the property.
Absent one or two of the foregoing conditions, then the law itself puts the buyer on notice and obliges the latter to
exercise a higher degree of diligence by scrutinizing the certificate of title and examining all factual circumstances in
order to determine the seller's title and capacity to transfer any interest in the property. Failure to exercise such
degree of precaution makes him a buyer in bad faith. To prove good faith then, petitioners must show that they
inquired not only into the title of Pedro but also into his capacity to sell.
A test has to be done whether the buyer had a choice between knowing the forgery and finding it out, or he had no
such choice at all.
A person dealing with a seller who has possession and title to the property but whose capacity to sell is restricted,
qualifies as a buyer in good faith if he proves that he inquired into the title of the seller as well as into the latter's
capacity to sell; and that in his inquiry, he relied on the notarial acknowledgment found in the seller's duly notarized
special power of attorney. He need not prove anything more for it is already the function of the notarial
acknowledgment to establish the appearance of the parties to the document, its due execution and authenticity.
Said rule should not apply when there is an apparent flaw afflicting the notarial acknowledgment of the special
power of attorney as would cast doubt on the due execution and authenticity of the document; or when the buyer
has actual notice of circumstances outside the document that would render suspect its genuineness.
In the present case, petitioners knew that Berlina was in Germany at the time they were buying the property and
the SPA relied upon by petitioners has a defective notarial acknowledgment. The SPA was a mere photocopy and
we are not convinced that there ever was an original copy of said SPA as it was only this photocopy that was
testified to by petitioner Nida Bautista and offered into evidence by her counsel. But then said photocopy of the
SPA contains no notarial seal. There being no notarial seal, the signature of the notary public on the notarial
certificate was therefore incomplete. It was a mere private document which petitioners cannot foist as a banner of
good faith.
All told, it was not sufficient evidence of good faith that petitioners merely relied on the photocopy of the SPA as
this turned out to be a mere private document. They verified with Atty. Lucero whether the SPA was authentic but
then the latter was not the notary public who prepared the document. Worse, they purposely failed to inquire who
was the notary public who prepared the SPA. Finally, petitioners conducted the transaction in haste. It took them all
but three days or from March 2 to 4, 1988 to enter into the deed of sale, notwithstanding the restriction on the
capacity to sell of Pedro. In no way then may petitioners qualify as buyers for value in good faith.
That said, we come to the third issue on whether petitioners may retain the portion of Pedro Silva in the subject
property. Certainly not. It is well-settled that the nullity of the sale of conjugal property contracted by the husband
without the marital consent of the wife affects the entire property, not just the share of the wife

POTENCIANO RAMIREZ VS. MA. CECILIA RAMIREZ
FACTS:
On October 1996, Petitioner Potenciano Ramirez filed a complaint against respondent Ma. Cecilia Ramirez for
annulment of: 1) a Deed of Donation; 2) Waiver of Possessory Rights; and 3) Transfer Certificates of Title (TCT) Nos.
T-5618 and T-5617. Petitioner claimed that respondent caused the execution of the Deed of Donation and Waiver
of Possessory Rights to acquire ownership over the land and improvements then covered by TCT Nos. T-4575 and T-
4576. Using the Deed of Donation, respondent allegedly succeeded in having cancelled and issued in her name

The Deed of Donation and Waiver of Possessory Rights here allegedly executed by petitioner and his wife, Dolores
Ramirez, on January 25, 1993 and October 24, 1995, respectively. However, the death certificate presented showed
that Dolores died on April 5, 1991 and, consequently, could not have executed the assailed documents. Petitioner
repudiated the other signatures appearing on the two documents that were purportedly his and insisted that he did
not intend to transfer the properties to respondent.

In her Answer, respondent alleged that her father, petitioner, could not have fled the case were it not for the fact
that he remarried despite his age of 84 years. She further claimed that it was her fathers idea to cause the
preparation of the Deed of Donation and Waiver of Possessory Rights to sale on expenses for publication and
inheritance taxes.

The RTC ruled that the signature of Dolores on the Deed of Donation was a forgery while her signature on the
Waiver of Possessory Rights was genuine. It also found petitioners signatures on both documents to be genuine. It
then held that petitioner and respondent in pari delicto as participants to the forgery. The RTC dismissed the
complaint.



ISSUES:
WON, petitioner and respondent are in pari delicto

RULING:
The Supreme Court Ruled in affirmative that petitioner and respondent are in pari delicto and the petition is denied.
Art. 1411 of the New Civil Code state that, When the nullity proceeds from the illegality of the cause or object of the
contract, and the act constitutes a criminal offense, both parties being in pari delicto, they shall have no action
against each other, and both shall be prosecuted. Moreover, the provisions of the Penal Code relative to the
disposal of effects or instruments of a crime shall be applicable to the things or the price of the contract.

Petitioner alleged that the signatures of Dolores on the Deed of Donation and on the Waiver of Possessory Rights
are a forgery. Respondent does not deny this allegation. Forging a persons signature corresponds to the felony of
falsification under Section 4, Title IV of the Revised Penal Code. Hence, the act of forging Doloress signature
constitutes a criminal offense under the terms of Article 1411 of the Civil Code.

Petitioner claims that the object or cause of the Deed of Donation and of the Waiver of Possessory Rights is the
transferred real properties and that there is nothing illegal about them. He maintains that the illegality stems from
the act of forgery which pertains to consent, which is not material to the application of Article 1411. The argument
is untenable. Object and cause are two separate elements of a donation and the illegality of either element gives
rise to the application of the doctrine of pari delicto. Object is the subject matter of the donation, while cause is the
essential reason which moves the parties to enter into the transaction. Petitioner wrongly asserts that the donated
real properties are both the object and cause of the donation. In fact, the donated properties pertain only to the
object. Therefore, while he is correct in stating that the object of the donation is legal, his argument misses the
point insofar as the cause is concerned. The cause which moved the parties to execute the Deed of Donation and
the Waiver of Possessory Rights, the motive behind the forgery, is the desire to evade the payment of publication
expenses and inheritance taxes, which became due upon the death of Dolores. Undeniably, the Deed of Donation
and the Waiver of Possessory Rights were executed for an illegal cause, thus completing all the requisites for the
application of Article 1411.

Both petitioner and respondent are, therefore, in pari delicto. Neither one may expect positive relief from the
courts from their illegal acts and transactions. Consequently, they will be left as they were at the time the case was
filed.

TEOFILO BAUTISTA vs BAUTISTA
FACTS:
During her lifetime, Teodora Rosario was the owner of a 211.80-square meter parcel of land (the property) in
Poblacion, San Carlos City, Pangasinan, covered by Transfer Certificate of Title (TCT) No. 12951. She died intestate
on January 19, 1970, leaving behind her spouse Isidro Bautista (Isidro) and five children, namely: Teofilo Bautista
(Teofilo), Alegria Bautista (Alegria), Angelica Bautista (Angelica), Pacita Bautista (Pacita) and Gil Bautista (Gil).
On April 21, 1981, Isidro and four of his five children Pacita, Gil, Alegria, and Angelica executed a Deed of Extra-
1
Judicial Partition of the property in which Isidro waived his share in favor of his said four children. Teofilo was
excluded from the partition.
Alegria and Angelica, who, under the Deed of Extra-Judicial Partition, acquired of the property, sold the same, by
Deed of Absolute Sale dated May 14, 1981, to their sibling Pacita and her common-law husband Pedro Tandoc
2
(Pedro).
3
Pacita and Pedro soon obtained tax declarations and TCT No. 18777 in their names over 209.85 square meters of
the property including the shares they purchased from Angelica and Alegria.
5
Pacita, with Pedros conformity, later conveyed via Deed of Absolute Sale dated April 13, 1993 of the property in
favor of Cesar Tamondong, Pedros nephew.
On January 24, 1994, herein petitioner Teofilo, represented by his attorney-in-fact Francisco Muoz, filed a
6
Complaint against his siblings Alegria and Angelica, along with Pedro (the common-law husband of his already
deceased sister Pacita), Priscilla Bautista (wife of his already deceased brother Gil), Pricillas children Gilbert, Jim,
Glenda, Guen, and Gelacio and Cesar Tamondong before the Regional Trial Court (RTC) of San Carlos City, for
annulment of documents, partition, recovery of ownership, possession and damages.
In his complaint, petitioner claimed that his co-heirs defrauded him of his rightful share of the property and that the
deed of sale executed by Pacita in favor of Cesar Tamondong was fictitious as it was impossible for her to have
7
executed the same in Manila, she being already seriously ill at the time.
8
In their Answer, the defendants-herein respondents sisters Alegria and Angelica, who were joined therein by their
co-defendants-respondents Priscilla, Gilbert, Jim, Glenda, Guen, Gelacio, and Gracia, claimed that it was Pacita who
caused the execution of the Deed of Extra-Judicial Partition and because they trusted Pacita, they signed the
document without scrutinizing it; and that they learned about the contents of the partition only upon Teofilos filing
of the Complaint.
9
By way of cross-claim against Pedro and Cesar Tamondong, the answering defendants-respondents claimed that a
few weeks after the partition, Pacita approached Angelica and Alegria to borrow their share in the property on her
representation that it would be used as security for a business loan; and that agreeing to accommodate Pacita,
Angelica and Alegria signed a document which Pacita prepared which turned out to be the deed of absolute sale in
Pacitas favor.
10
11
In their Answer with Counterclaim, Pedro and Cesar Tamondong claimed that they were buyers in good faith. In
any event, they contended that prescription had set in, and that the complaint was a mere rehash of a previous
12
complaint for falsification of public document which had been dismissed by the prosecutors office.

21
RTC rendered judgment in favor of Teofilo.
The extra-judicial partition executed by Teofilos co-heirs was invalid, however. So Segura v. Segura instructs:
On appeal by Pedro and Cesar Tamondong, the Court of Appeals reversed and set aside the trial courts decision
and dismissed Teofilos complaint on the ground of prescription.
x x x The partition in the present case was invalid because it excluded six of the nine heirs who were entitled to
equal shares in the partitioned property. Under the rule, "no extra-judicial settlement shall be binding upon any
person who has not participated therein or had no notice thereof." As the partition was a total nullity and did not
affect the excluded heirs, it was not correct for the trial court to hold that their right to challenge the partition had
22
prescribed after two years x x x (Underscoring supplied)
ISSUE: WON prescription had set in.

HELD: The petition is impressed with merit. The Court of Appeals, in holding that prescription had set in, reasoned:
Unquestionably, the Deed of Extra-judicial Partition is invalid insofar as it affects the legitimate share pertaining to
the defendant-appellee in the property in question.1avvphi1 There can be no question that the Deed of Extra-
judicial Partition was fraudulently obtained. Hence, an action to set it aside on the ground of fraud could be
instituted. Such action for the annulment of the said partition, however, must be brought within four years from the
discovery of the fraud. Significantly, it cannot be denied, either, that by its registration in the manner provided by
law, a transaction may be known actually or constructively.
In the present case, defendant-appellee is deemed to have been constructively notified of the extra-judicial
settlement by reason of its registration and annotation in the certificate of title over the subject lot on December
21, 1981. From the time of its registration, defendant-appellee had four (4) years or until 21 December 1985, within
which to file his objections or to demand the appropriate settlement of the estate. Unfortunately, defendant-
appellee failed to institute the present civil action within said period, having filed the same only on 17 January 1994
or more than twelve (12) years from the registration of the deed of extra-judicial partition. Hence, defendant-
appellees right to question the deed of extra-judicial partition has prescribed.
Even on the extreme assumption that defendant-appellees complaint in Civil Case No. SC-1797 is an action for
reconveyance of a portion of the property which rightfully belongs to him based upon an implied trust resulting
from fraud, said remedy is already barred by prescription. An action of reconveyance of land based upon an implied
or constructive trust prescribes after ten years from the registration of the deed or from the issuance of the title.
x x x x
The complaint of defendant-appellee was filed only on 17 January 1994, while the deed of extra-judicial partition
was registered and inscribed on Transfer Certificate of Title 12951, on 21 December 1981. Clearly, the complaint
was filed twelve (12) years and twenty-seven (27) days after the inscription of the deed of extra-judicial partition on
TCT 12951. Hence, even if We consider defendant-appellees complaint as an action for reconveyance against
plaintiff-appellants on the basis of implied trust, we find and so hold that his remedy for reconveyance has also
20
prescribed. (Underscoring supplied)
As gathered from the above-quoted portion of its decision, the Court of Appeals applied the prescriptive periods for
annulment on the ground of fraud and for reconveyance of property under a constructive trust.
The deed of extra-judicial partition in the case at bar being invalid, the action to have it annulled does not
23
prescribe.
24
Since the deed of extra-judicial partition is invalid, it transmitted no rights to Teofilos co-heirs. Consequently, the
subsequent transfer by Angelica and Alegria of of the property to Pacita and her husband Pedro, as well as the
transfer of of the property to Cesar Tamondong is invalid, hence, conferring no rights upon the transferees under
the principle of nemo dat quod non habet.

JACOBUS BERNHARD HULST VS PR BUILDERS, INC.
FACTS:
Jacobus Bernhard Hulst and his spouse Ida Johanna Hulst-Van Ijzeren (Ida), Dutch nationals, entered into a Contract
to Sell with PR Builders, Inc. for the purchase of a 210-sq m residential unit in PR Builders townhouse project in
Batangas.

When PR Builders failed to comply with its verbal promise to complete the project by June 1995, the spouses Hulst
filed before the Housing and Land Use Regulatory Board (HLURB) a complaint for rescission of contract with
interest, damages and attorney's fees.

The HLURB rendered a Decision in favor of Spouses Hulst ordering among others, that PR Builders reimburse Sps.
Hulst the sum of P3,187,500.00, representing the purchase price.

HLURB issued a Writ of Execution which the Sheriff later levied on PR Builders 15 parcels of land and set the date
for the public auction.

2 days before the scheduled auction, PR Builders challenged the Writ of Levy on the ground that THE Sheriff made
an overlevy on the properties. While this was pending, the Sheriff proceeded with the public auction and the sum of
P5,313,040 was turned over to Sps. Hulst.

4 months later, the HLURB issued an order setting aside the Sheriffs levy on the properties.
As observed by the Court, a matter of public importance which completely escaped the attention of the HLURB and
CA should be addressed: Sps. Hulst are foreign nationals who are disqualified under the Constitution from owning
real property in their names.

ISSUE/S:

W/N the Contract to Sell between Hulst and PR Builders is valid. NO.
W/N Hulst can claim recovery of what he has given under the Contract. YES.

HELD:
Section 7 of Article XII of the 1987 Constitution provides:
Sec. 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to
individuals, corporations, or associations qualified to acquire or hold lands of the public domain.

The capacity to acquire private land is made dependent upon the capacity to acquire or hold lands of the public
domain. Private land may be transferred or conveyed only to individuals or entities "qualified to acquire lands of the
public domain." The 1987 Constitution reserved the right to participate in the disposition, exploitation,
development and utilization of lands of the public domain for Filipino citizens or corporations at least 60 percent of
the capital of which is owned by Filipinos. Aliens, whether individuals or corporations, have been disqualified from
acquiring public lands; hence, they have also been disqualified from acquiring private lands.

Since Sps. Hulst, being Dutch nationals, are proscribed under the Constitution from acquiring and owning real
property, it is unequivocal that the Contract to Sell entered into by Sps. Hulst and PR Builders is void.
Under Article 1409 (1) and (7) of the Civil Code, all contracts whose cause, object or purpose is contrary to law or
public policy and those expressly prohibited or declared void by law are inexistent and void from the beginning.
Article 1410 also provides that the action or defense for the declaration of the inexistence of a contract does not
prescribe. A void contract is equivalent to nothing; it produces no civil effect. It does not create, modify or
extinguish a juridical relation.

Generally, parties to a void agreement cannot expect the aid of the law; the courts leave them as they are, because
they are deemed in pari delicto or "in equal fault." The rule however is subject to exceptions that permit the return
of that which may have been given under a void contract, one of which is Art. 1414 of the Civil Code: The party
repudiating the void contract before the illegal purpose is accomplished or before damage is caused to a third
person and if public interest is subserved by allowing recovery.

It is significant to note that the agreement executed by the parties in this case is a Contract to Sell and not a
contract of sale. A distinction between the two is material in the determination of when ownership is deemed to
have been transferred to the buyer or vendee and, ultimately, the resolution of the question on whether the
constitutional proscription has been breached.

In a contract of sale, the title passes to the buyer upon the delivery of the thing sold. The vendor has lost and
cannot recover the ownership of the property until and unless the contract of sale is itself resolved and set aside.
On the other hand, in a contract to sell, the prospective seller agrees to transfer ownership of the property to the
buyer upon the happening of an event, which normally is the full payment of the purchase price. But even upon the

fulfillment of the suspensive condition, ownership does not automatically transfer to the buyer. The prospective
seller still has to convey title to the prospective buyer by executing a contract of absolute sale.

Since the contract involved here is a Contract to Sell, ownership has not yet transferred to the petitioner when he
filed the suit for rescission. While the intent to circumvent the constitutional proscription on aliens owning real
property was evident by virtue of the execution of the Contract to Sell, such violation of the law did not materialize
because petitioner caused the rescission of the contract before the execution of the final deed transferring
ownership.

Thus, exception (c) finds application in this case. Under Article 1414, one who repudiates the agreement and
demands his money before the illegal act has taken place is entitled to recover. Petitioner is therefore entitled to
recover what he has paid, although the basis of his claim for rescission, which was granted by the HLURB, was not
the fact that he is not allowed to acquire private land under the Philippine Constitution. But petitioner is entitled to
the recovery only of the amount of P3,187,500.00, representing the purchase price paid to respondent.

QUIMPO V. ABAD
FACTS:
Eustaquia Perfecto-Abad died intestate in 1948 leaving these parcels of land to her grandchild and great
grandchildren, namely, Joaquin Quimpo and respondents Consuelo, Ireneo, Danilo, Marites, Anita and Helen, all
surnamed Abad. The properties are herein designated as Parcels I,II,III,IV
In 1966, Joaquin and respondents undertook an oral partition of parcels III and IV. Half of the properties was given
to Joaquin and the other half to the respondents. No document of partition was executed. Consuelo and Ireneo
occupied their respective shares in the San Jose property (Parcel III), and installed several tenants over their share in
parcel IV. Joaquin, on the other hand, became the administrator of the remaining undivided properties and of the
shares of respondents Danilo, Marites, Anita and Helen, who were still minors at that time.

In 1989, Danilo, Marites, Anita and Helen wanted to take possession of the portions allotted to them, but Joaquin
prevented and refused to heed respondents demand for partition of parcels I and II, prompting them to file a
complaint for judicial partition and/or recovery of possession with accounting and damages with the RTC.

Joaquin asserted absolute ownership over parcels III and IV, claiming that he purchased these lands from Eustaquia
in 1946. He, likewise alleged that Consuelos occupation of the portion of the San Jose property was by mere
tolerance. During the pendency of the case, Joaquin died. Accordingly, he was substituted by his heirs.

RTC ruled in favor of the respondents and CA affirmed the decision.

ISSUES:
1) WON the petitioners did acquire ownership over the subject parcels of land by way of deeds of absolute sale
executed in their favor (No)
2) WON co-ownership exists among petitioners and respondents over the subject parcels of land (Yes)
4) WON laches has timebarred the respondents from assailing the absolute ownership of petitioners over the
subject parcels of land (No)

HELD:
The stated consideration for the sale are P5,000.00 and P6,000.00, respectively, an amount which was so difficult to
raise in the year 1946. At the time of the purported sale Joaquin Quimpo was not gainfully employed. He was
studying in Manila and Eustaquia was the one supporting him; that when Eustaquia died two (2) years later, Joaquin
was not able to continue his studies. No testimonial or documentary evidence was offered to prove that Joaquin
was duly employed and had the financial capacity to buy the subject properties in 1946.

A deed of sale, in which the stated consideration has not been, in fact, paid is a false contract; that it is void ab
initio. Furthermore, a contract of purchase and sale is null and void and produces no effect whatsoever where it
appears that the same is without cause or consideration . Likewise, both the trial court and the CA found that
Eustaquia was 91 years old, weak and senile, at the time the deeds of sale were executed. In other words, she was
already mentally incapacitated by then, and could no longer be expected to give her consent to the sale.

For forty-three (43) years, Consuelo and Ireneo occupied their portions of the San Jose property and significantly,
Joaquin never disturbed their possession. They also installed tenants in parcel IV, and Joaquin did not prevent them
from doing so, nor did he assert his ownership over the same. These unerringly point to the fact that there was
indeed an oral partition of parcels III and IV.

The respondents are co-owners of the subject four (4) parcels of land, having inherited the same from a common
ancestor Eustaquia Perfecto-Abad. As such, respondents can rightfully ask for the confirmation of the oral
partition over parcels III and IV, and the partition of parcels I and II. Jurisprudence is replete with rulings that any co-
owner may demand at any time the partition of the common property unless a co-owner has repudiated the co-
ownership. This action for partition does not prescribe and is not subject to laches.

ALINAS VS. ALINAS
FACTS:
Spouses Onesiforo and Rosario Alinas (petitioners) separated sometime in 1982, with Rosario moving to Pagadian
City and Onesiforo moving to Manila. They left behind two lots identified as Lot 896-B-9-A with a bodega standing
on it and Lot 896-B-9-B with petitioners' house. These two lots are the subject of the present petition.

Petitioner Onesiforo Alinas (Onesiforo) and respondent Victor Alinas (Victor) are brothers. Petitioners allege that
they entrusted their properties to Victor and Elena Alinas (respondent spouses) with the agreement that any
income from rentals of the properties should be remitted to the Social Security System (SSS) and to the Rural Bank
of Oroquieta City (RBO), as such rentals were believed sufficient to pay off petitioners' loans with said
institutions. Lot 896-B-9-A with the bodega was mortgaged as security for the loan obtained from the RBO, while
Lot 896-B-9-B with the house was mortgaged to the SSS. Onesiforo alleges that he left blank papers with his
signature on them to facilitate the administration of said properties.

Sometime in 1993, petitioners discovered that their two lots were already titled in the name of respondent spouses.
Records show that after Lot 896-B-9-A was extra-judicially foreclosed, Transfer Certificate of Title (TCT) No. T-11853
covering said property was issued in the name of mortgagee RBO on November 13, 1987. On May 2, 1988, the duly

authorized representative of RBO executed a Deed of Installment Sale of Bank's Acquired Assets conveying Lot 896-
B-9-A to respondent spouses. RBO's TCT over Lot 896-B-9-A was then cancelled and on February 22, 1989, TCT No.
T-12664 covering said lot was issued in the name of respondent spouses.
Lot 896-B-9-B was also foreclosed by the SSS and on November 17, 1986, the Ex-Oficio City Sheriff of Ozamis City
issued a Certificate of Sale over said property in favor of the SSS. However, pursuant to a Special Power of Attorney
signed by Onesiforo in favor of Victor, dated March 10, 1989, the latter was able to redeem, on the same date, Lot
896-B-9-B from the SSS for the sum of P111,110.09. On June 19, 1989, a Certificate of Redemption was issued by
the SSS.
Onesiforo's signature also appears in an Absolute Deed of Sale likewise dated March 10, 1989, selling Lot 896-B-9-B
to respondent spouses. The records also show a notarized document dated March 10, 1989 and captioned
Agreement whereby petitioner Onesiforo acknowledged that his brother Victor used his own money to redeem Lot
896-B-9-B from the SSS and, thus, Victor became the owner of said lot. In the same Agreeement, petitioner
Onesiforo waived whatever rights, claims, and interests he or his heirs, successors and assigns have or may have
over the subject property. On March 15, 1993, by virtue of said documents, TCT No. 17394 covering Lot 896-B-9-B
was issued in the name of respondent spouses.
On June 25, 1993, petitioners filed with the Regional Trial Court (RTC) of Ozamis City a complaint for recovery of
possession and ownership of their conjugal properties with damages against respondent spouses.
The RTC ruled that there was a valid acquisition of Lot 896-B-9-A but the sale of Lot 896-B-9-B by Onesiforo is null
and void for the sale was without the consent of the wife. On appeal, The CA affirmed the validity of acquisition
with regard to Lot 896-B-9-A but modified RTCs ruling with the Lot 896-B-9-B. The CA ruled that the sale of
Onesiforo's one-half share in the subject property to respondent spouses is valid.

ISSUE: WON the sale of Lot 896-B-9-B made by Onesiforo alone to respondent spouses is valid. NO! The sale is null
and void for it was made by Onesiforo without the consent of his wife.

HELD:
The Court finds it patently erroneous for the CA to have applied the principle of equity in sustaining the validity of
the sale of Onesiforo's one-half share in the subject property to respondent spouses. Although petitioners were
married before the enactment of the Family Code on August 3, 1988, the sale in question occurred in 1989. Thus,
their property relations are governed by Chapter IV on Conjugal Partnership of Gains of the Family Code.
The CA ruling completely deviated from the clear dictate of Article 124 of the Family Code which provides:
Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses
jointly.


In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the
conjugal properties, the other spouse may assume sole powers of administration. These powers do not include the
powers of disposition or encumbrance which must have the authority of the court or the written consent of the
other spouse. In the absence of such authority or consent the disposition or encumbrance shall be void. x x
x (Underscoring and emphasis supplied)
In Homeowners Savings & Loan Bank v. Dailo, the Court categorically stated thus:
In Guiang v. Court of Appeals, it was held that the sale of a conjugal property requires the consent of both the
husband and wife. In applying Article 124 of the Family Code, this Court declared that the absence of the consent of
one renders the entire sale null and void, including the portion of the conjugal property pertaining to the
husband who contracted the sale. x x x
x x x By express provision of Article 124 of the Family Code, in the absence of (court) authority or written consent of
the other spouse, any disposition or encumbrance of the conjugal property shall be void.
Thus, pursuant to Article 124 of the Family Code and jurisprudence, the sale of petitioners' conjugal property made
by petitioner Onesiforo alone is void in its entirety.
It is true that in a number of cases, this Court abstained from applying the literal import of a particular provision of
law if doing so would lead to unjust, unfair and absurd results.
In the present case, the Court does not see how applying Article 124 of the Family Code would lead to injustice or
absurdity. It should be noted that respondent spouses were well aware that Lot 896-B-9-B is a conjugal property of
petitioners. They also knew that the disposition being made by Onesiforo is without the consent of his wife, as they
knew that petitioners had separated, and, the sale documents do not bear the signature of petitioner Rosario. The
fact that Onesiforo had to execute two documents, namely: the Absolute Deed of Sale dated March 10, 1989 and a
notarized Agreement likewise dated March 10, 1989, reveals that they had full knowledge of the severe infirmities
of the sale. As held in Heirs of Aguilar-Reyes v. Spouses Mijares, "a purchaser cannot close his eyes to facts which
should put a reasonable man on his guard and still claim he acted in good faith." Such being the case, no injustice is
being foisted on respondent spouses as they risked transacting with Onesiforo alone despite their knowledge that
the subject property is a conjugal property.
Verily, the sale of Lot 896-B-9-B to respondent spouses is entirely null and void.
CAMPOS v. PASTRANA
FACTS:
This case happen when a creditor of the securing a judgment against a debtor, fids that the debtor had transferred
all his properties to satisfy the obligations to the creditor.
This is the 3rd case between the same parties.

1st Case: (Agrarian Case)
The first case arose from the refusal of CARLITO CAMPOS(father of the petitioners) to surrender the possession of a
fish pond he leased from SALVASION BUENVENIDA (respondents Mother) despite the expiration of the contract of
lease in 1980. Carlito alleged that he was an agricultural lessee. RTC of Roxas City found that Carlito was not an
agricultural tenant. He then appealed to the CA but was unsuccessful.

2Nd Case (Possession case)
While the appeal in the agrarian case was pendig before the CA, the herein respondents filed he second case
against Carlito for RECOVERY OF POSSESSION AND DAMAGES WITH PRELIMINARY MANDATORY INJUNCTION
involving the same fish pond. RTC rendered a decision in favor of the Buenvenidas. The decision became final and
executory and a writ of execution was issued on Feb 7, 1995. Subsequently on September 09, 1995 an allias writ of
execution was also issued. BOTH were returned unsatisfied.

During the pendency of the Agrarian Case, as well as prior to the filing of the possession Case CArlito was the
registered owner of the 2 Properties: (1) The residential Lots; (2) An Agricultural Lot.

But when the respondent were about to levy these properties to satisfy the judgment in the possession case, they
were discovered that the spouses Carlito and Margarita transferred these lots to their children Rosemarie and
Jesus. Herein by virtue of Deed of Absolute Sale dated October 18, 1985 and November 2, 1988

3rd Case: (Nullity of Sale case)
On February 18, 1997, respondents instituted the 3rd case. The respondents alleged that the contracts of sale
between the spouse Campos and petitioners were SIMULATED for the sole purpose of evading the levy in
satisfaction of a money judgment that might be rendered in ht possession Case. In their answer with counterclaim,
spouses Campos and petitioners averred that Rosemarie and Jesus acquired the lots in question in good faith and
for the value because they were sold to them befre they had any notice of the claims or interest of other persons
there over.

Upon review of the evidence presented, the CA found that:
The conveyances were made in 1990, and not in 1985 or 1988, or just before their actual registration with the
Registry of Deeds, evidently to avoid the properties from being attached or levied upon by the
respondents. Likewise noted that the zonal value of the subject properties were much higher than the value for
which they were actually sold. Despite the sales, spouses Campos retained possession of the properties in question.
The writ of execution and alias writ issued in the Possession Case remained unsatisfied as the lower court could not
find any other property owned by the spouses Campos that could be levied upon to satisfy its judgment, except the
parcels of land subject of the assailed transactions.

On these bases, the CA ruled that the assailed contracts of sale were indeed absolutely simulated transactions and
declared the same to be void ab initio.

The CA ordered to cancel Transfer Certificates of Title Nos. T-26092 and T-26093 in the name of Rosemarie Campos,
and Transfer Certificates of Title Nos. T-23248 and 23249 in the name of Jesus Campos and restore said titles in the

name of the previous owner, Carlito Campos.

ISSUE:
1.) The CA committed an error of law in applying article 409, civil Code, Instead of article 1381 (3), Civil Code, and in
speculating that a cause of action supposed sale in Fraud of Creditors exists despite non exhaustion of remedies to
enforce the judgment in civil case no. V-5417.
2.) The CA committed an error of law overlooking the cause of action had prescribed , the complaint having been
filed after & years or only on 14 OCTOBER 1997, from the time the titles were issued in 1990.
3.) The CA erroneously anchored its impugned judgment on misapprehension of the facts that the sales were
antedated, hence SIMULATED despite glaring absence of evidence in support thereof.
4.) The CA committed a grave abuse of discretion in casting aside ovelwhelming evidence duly appreciated by the
trial court tht petitioners are buyers in good faith and for the value, who exercised Dominion over the subject lots,
which if properly considered, shall warrant the singular conckusion that the sale and transfer of titiles are valid.

HELD:
The petition lacks merit. Well-settled is the rule that this Court is not a trier of facts. When supported by substantial
evidence, the findings of fact of the CA are conclusive and binding, and are not reviewable by this Court, unless the
case falls under any of the following recognized exceptions: (1)When the conclusion is a finding grounded entirely
on speculation, surmises and conjectures;(2)When the inference made is manifestly mistaken, absurd or
impossible;(3)Where there is a grave abuse of discretion;(4)When the judgment is based on a misappreciation of
facts;(5)When the findings of fact are conflicting;(6)When the CA in making its findings, went beyond the issues of
the case and the same is contrary to the admissions of both appellant and appellee;(7)When the findings are
contrary to those of the trial court;(8)When the findings of fact are conclusions without citation of specific evidence
on which they are based;(9)When the facts set forth in the petition as well as in the petitioners main and reply
briefs are not disputed by the respondents; and (10) When the findings of fact of the CA are premised on the
supposed absence of evidence and contradicted by the evidence on record. None of these exceptions is present in
this case. We find that the Decision of the CA is supported by the required quantum of evidence.

The subject Deeds of Absolute Sale executed by the Spouses Campos to their children (herein petitioners) are
absolutely simulated and fictitious. Indeed, the Deeds of Absolute Sale were executed for the purpose of putting
the lots in question beyond the reach of creditors. First, the Deeds of Absolute Sale were registered exactly one
month apart from each other and about another one month from the time of the promulgation of the judgment in
the Possession Case. The Deeds of Absolute Sale were antedated and that the same were executed when the
Possession Case was already pending.

Second, there was a wide disparity in the alleged consideration specified in the Deeds of Absolute Sale and the
actual zonal valuation of the subject properties as per the BIR Certification, as follows:

Consideration specified in Deed of Absolute Sale
Market Value as per Tax Declaration
Computed Zonal Valuation (BIR Certification)
Residential Lots: From Spouses Campos to daughter, Rosemarie Campos

P 7,000.00

P 83,580.00[27]

P 417,900.00[28]
Agricultural Lots: From Spouses Campos to son,
Jesus Campos

P 5,600.00

P 25,000.19[29]

P 39,860.00[30]

As correctly noted by the CA, the appraised value of the properties subject of this controversy may be lower at the
time of the sale in 1990 but it could not go lower than P7,000.00 and P5,600.00. We likewise find the considerations
involved in the assailed contracts of sale to be inadequate considering the market values presented in the tax
declaration and in the BIR zonal valuation.

Third, we cannot believe that the buyer of the 1,393-square meter[31] residential land could not recall the exact
area of the two lots she purchased. (During her cross-examination)

Fourth, it appears on record that the money judgment in the Possession Case has not been discharged with. Per
Sheriffs Service Return dated November 14, 1995, the Alias Writ of Execution and Sheriffs Demand for Payment
dated September 19, 1995 remain unsatisfied.

Finally, spouses Campos continue to be in actual possession of the properties in question. Respondents have
established through the unrebutted testimony of Rolando Azoro that spouses Campos have their house within Lot
3715-A and Lot 3715-B-2 and that they reside there together with their daughter Rosemarie. In addition, spouses
Campos continued to cultivate the rice lands which they purportedly sold to their son Jesus. Meantime, Jesus, the
supposed new owner of said rice lands, has relocated to Bulacanwhere he worked as a security guard. In other
words, despite the transfer of the said properties to their children, the latter have not exercised complete dominion
over the same. Neither have the petitioners shown if their parents are paying rent for the use of the properties
which they already sold to their children.

The fact that petitioners were able to secure titles in their names did not operate to vest upon them ownership over
the subject properties. That act has never been recognized as a mode of acquiring ownership. The Torrens system
does not create or vest title. It only confirms and records title already existing and vested. It does not protect a
usurper from the true owner. It cannot be a shield for the commission of fraud.

The action for the declaration of the inexistence of the assailed Deeds of Absolute Sale does not prescribe.
Petitioners argue that respondents cause of action had prescribed when they filed the Nullity of the Sale Case on
October 14, 1997, or seven years after the registration of the questioned sales in 1990. We cannot agree. As
discussed above, the sale of subject properties to herein petitioners are null and void. And under Article 1410 of the
Civil Code, an action or defense for the declaration of the inexistence of a contract is imprescriptible. Hence,

petitioners contention that respondents cause of action is already barred by prescription is without legal basis.

Since the assailed Deeds of Absolute Sale are null and void, the Civil Code provisions on rescission have no
application in the instant case. Petitioners argument that the applicable law in this case is Article 1381(3) of the
Civil Code on rescissible contracts and not Article 1409 on void contracts is not a question of first impression. This
issue had already been settled several decades ago when we held that an action to rescind is founded upon and
presupposes the existence of a contract( Onglengco vs Ozaeta). A contract which is null and void is no contract at
all and hence could not be the subject of rescission ( Perez vs Ca)

In the instant case, we have declared the Deeds of Absolute Sale to be fictitious and inexistent for being absolutely
simulated contracts. It is true that the CA cited instances that may constitute badges of fraud under Article 1387 of
the Civil Code on rescissible contracts. But there is nothing else in the appealed decision to indicate that rescission
was contemplated under the said provision of the Civil Code. The aforementioned badges must have been
considered merely as grounds for holding that the sale is fictitious. Consequently, we find that the CA properly
applied the governing law over the matter under consideration which is Article 1409 of the Civil Code on void or
inexistent contracts.

TECSON v FAUSTO
FACTS:
Sometime in 1945, Atty. Agustin Fausto acquired in co-ownership with his sister, Waldetrudes Fausto-Nadela, Lot
2189a 1,015 sq. ms. parcel of land situated in Pagadian City, Zamboanga Del Sur. In 1953, Atty. Fausto
constructed his house on a portion of the said lot. In 1970, Atty. Fausto and Waldetrudes were recognized as co-
owners of Lot 2189. The Original Certificate of Title covering Lot 2189 was issued in their names. Not long after,
Atty. Fausto and Waldetrudes decided to partition Lot 2189. Lot 2189 was divided into two (2) lots, i.e., Lot 2189-A
with an area of 507 sq. ms., and Lot 2189-B with an area of 508 sq. ms. This was all formalized through an
Agreement of Partition, where Waldetrudes was to be given ownership over Lot 2189-A, while Atty. Fausto, Lot
2189-B. The First Partition Agreement, however, was never registered with the Register of Deeds.

On 14 March 1975, Atty. Fausto died. He was survived by herein respondents, who are his wife and children.
Meanwhile, Waldetrudes subsequently entered into a Contract to Sell with petitioner Aurora L. Tecson.

On 28 July 1977, a second subdivision plan was prepared for Lot 2189 and Waldetrudes Lot 2189-A with an area of
507 square meters under the First Plan was now Lot 2189-B with an increased area of 964 square meters, while
Atty. Faustos Lot 2189-B with an area of 508 sq. ms. under the First Plan was now Lot 2189-A with a decreased area
of 51 sq. ms. The approved Second Plan became the basis for the Second Partition Agreement executed between
the respondents and Waldetrudes.

On 8 May 1978, Waldetrudes sold Lot 2189-B to Aurora, and on 19 February 1980, the Second Partition Agreement
was registered with the Register of Deeds. The sale of Lot 2189-B in favor of Aurora was likewise registered with the
Register of Deeds. Aurora then executed a Deed of Absolute Sale, conveying Lot 2189-B to her brother, herein
petitioner Atty. Jose L. Tecson; on the same day, the deed was registered.


7 years after, the respondents filed a Complaint for the Declaration of Nullity of Documents, Titles, Reconveyance
and Damages against Waldetrudes and the petitioners before the RTC of Pagadian City. The respondents seek the
recovery of 457 square meters of land, which they believe was unlawfully taken from the lawful share of their
predecessor-in-interest, Atty. Fausto. The respondents allege that Atty. Fausto and Waldetrudes are, in actual fact,
co-owners in equal share of Lot 2189, and that the First Partition Agreement is the only true, correct and binding
division of said lot. Accordingly then, they averred that Waldetrudes could not have sold more than her rightful
share, thus, the respondents ask for the nullification of the sale of Lot 2189-B to the petitioners, at least with
respect to the excess amounting to 457 sq. ms.

In the same vein, the respondents impugn the validity and binding effect of the Second Plan and the ensuing Second
Partition Agreement. They claim that Atty. Tecson, who solely prepared the Second Partition Agreement, deceived
them into signing the same. The Second Partition Agreement did not specify the exact areas allotted for each
component lot, and that they were never furnished with copies of the Second Plan, and that such was prepared
without the respondents knowledge or consent. For which reason, the Second Plan could not be binding upon
them.

Waldetrudes, who was originally sued by the respondents as a defendant in the RTC, executed an affidavit
expressing her intent to join the respondents in their cause. In the affidavit, Waldetrudes confirmed the allegations
of the respondents . She confirmed that due to financial problem she thought of selling her portion which is Lot
2189-B in favor of Jose L. Tecson, and that she did not know how Jose L. Tecson maneuvered to have the parcel of
land re-surveyed reducing the area of her brothers land to only 51 square meters, when in truth the portion has an
area of 508 square meters. Further she stated that when she sold her portion of Lot 2189-B, she had no intention to
sell more than the 507 sq. ms. area.

On 18 August 1992, the trial court ordered Waldetrudes to be dropped as a party-defendant from the case
and, instead, be impleaded therein as a party-plaintiff. During the trial, Waldetrudes and respondents Romualdo,
Minerva, and Isabel were able to testify. The RTC dismissed the complaint. The CA reversed the ruling of the trial
court on appeal. Hence, the present appeal by the petitioners.

ISSUE:
WON the Second Partition and Second Agreement is null and voild.

RULING: YES.

Waldetrudes and Atty. Fausto are Co-owners in Equal Share.
a.
The mother title of Lot 2189, OCT No. 734, stated in no unclear terms that Waldetrudes and Atty. Fausto
were co-owners of the subject lot. The inscription in the original title for Lot 2189 carries more than
sufficient weight to prove the existence of a co-ownership between Waldetrudes and Atty. Fausto.
b. There is absolutely no proof on record that Waldetrudes was the sole beneficial owner of Lot 2189. Tax
Declaration cannot prevail over the Original Certificate Title as conclusive evidence of the true ownership
of Lot 2189.
c.
During the cadastral proceeding involving Lot 2189, Waldetrudes herself stated that Atty. Fausto was a
co-owner of the subject lot.
d. The equality in terms of share in Lot 2189, was affirmed by Waldetrudes when she testified in open
court.


e.
There was likewise no evidence behind the petitioners allegation that the registered co-ownership
between Waldetrudes and Atty. Fausto was based on their actual occupancy of Lot 2189. The
conspicuous silence of OCT No. 734 as to the definite extent of the respective shares of Atty. Fausto and
Waldetrudes in Lot 2189 gives rise to a presumption that they are in equal measure. Article 485
provides that: The portions belonging to the co-owners in the co-ownership shall be presumed equal,
unless the contrary is proved.

Clearly, the evidence preponderates in favor of the position that Waldetrudes and Atty. Fausto were co-
owners in equal share of Lot 2189.

Second Plan and Second Partition Agreement is Invalid
The SC agreed with the CA that Atty. Tecson was behind the execution of the Second Partition Agreement which
he misled Waldetrudes and the respondents into signing without giving them notice of the existence of a Second
Plan. As a consequence, Waldetrudes and the respondents were misinformed as to the true nature of the Second
Partition Agreement. These factual findings were adequately supported by the positive testimonies of respondents.
The lack of a plausible explanation why a co-owner would gratuitously cede a very substantial portion of his rightful
share to another co-owner in partition rendered the respondents testimonies more credible as against the plain
general denial of Atty. Tecson.

The established facts have several legal consequences:

a. The Second Plan, having been prepared without the knowledge and consent of any of the co-owners of Lot 2189,
have no binding effect on them.

b. The Second Partition Agreement is null and void as an absolute simulation, albeit induced by a third party. It must
be emphasized that Waldetrudes and the respondents never had any intention of entering into a new partition
distinct from the First Partition Agreement. Waldetrudes and the respondents assented to the Second Partition
Agreement because Atty. Tecson told them that the instrument was merely required to expedite the sale of
Waldetrudes share. The deceit employed by Atty. Tecson goes into the very nature of the Second Partition
Agreement and not merely to its object or principal condition. Evidently, there is an absence of a genuine intent on
the part of the co-owners to be bound under a new partition. The apparent consent of Waldetrudes and the
respondents to the Second Partition Agreement is, in reality, totally wanting. For that reason, the Second Partition
Agreement is null and void.

c. The Second Partition Agreement being a complete nullity, it cannot be ratified either by the lapse of time or by its
approval by the guardianship court.

d. The First Plan and the First Partition Agreement remain as the valid and binding division of Lot 2189.

e. Inevitably, Waldetrudes can only sell her lawful share of five hundred seven (507) square meters. The sales in
favor of Aurora and, subsequently, Atty. Tecson, are thereby null and void insofar as it exceeded the 507 square
meter share of Waldetrudes in Lot 2189. Nemo dat quod non habet.

Atty. Tecson is not an innocent purchaser for value
The SC held that Atty. Tecson knew or, at the very least, should have known that Atty. Fausto and Waldetrudes
were co-owners in equal share of Lot 2189 based on the following circumstances:

1.
Atty. Tecson was a long-time friend and neighbor of the Faustos. Atty. Tecson himself testified that he
would sometimes visit the latter in his house to play mahjong. By this, Atty. Tecson knew that Atty.
Fausto has an actual interest in Lot 2189;
2.
Atty. Tecson was the one who presented the Second Partition Agreement to Waldetrudes and the
respondents;
3.
Waldetrudes and the respondents were not involved in the preparation of the Second Partition
Agreement and, at the time they signed the said agreement, had no knowledge of the existence of the
Second Plan; and
4.
The Second Partition Agreement failed to state the specific areas allotted for each component of Lot
2189 and made no mention of the division proposed by the Second Plan.

Being the one behind the execution of the Second Partition Agreement, there is no doubt that Atty. Tecson knew
that Lot 2189 was owned in common by Waldetrudes and Atty. Fausto. This, taken together with the instruments
silence as to the definite area allotted for each component lot, reveals a deliberate attempt on the part of Atty.
Tecson to conceal from Waldetrudes and the respondents of the unequal division. The necessity to conceal can
only be explained by Atty. Tecsons prior knowledge that such a partition is inherently defective for being contrary
to the actual sharing between Waldetrudes and Atty. Fausto. Atty. Tecson is clearly in bad faith, therefore the
respondents may recover the excess area of 457 sq. ms of Lot 2189-B. Petition was DENIED.
LAND BANK v. POBLETE
FACTS:
1997, Poblete obtained a loan from Kapantay Multi-Purpose Cooperative amounting to P300,000. To secure the
loan, she mortgage her lot, referred as lot #29. Kapantay thereafter obtained a loan from land bank and mortgage
the same property.

On 1998, Poblete decided to sell her property for her to able to pay the loan. She instructed her son in law, Balen,
to look for a buyer. Balen later on referred Maniego as a buyer. Maniego and Poblete agreed to the purchase price
of P900,000, but Maniego suggested that it be written in the deed of sale the amount of P300,000 for them to
reduce the tax, Poblete agreed. Thereafter, Poblete instructed her Balen to deliver the deed of sale dated
November 9,1997 to maniego. Balen testified that he was not able to receive the purchase price of P900,000
because Maniego was still in the United States and promised to pay upon return.

On June 2000, Maniego paid the loan of Poblete to Kapantay amounting to P448,000. Maniego thereafter applied
for a loan with Land Bank. Land bank allege that the title should be first be transferred in the name of maniego
before it will approve the loan.
On August 14,2000, the registry of deeds issued a TCT in favor of Maniego pursuant to deed of sale dated August
11,2000. Land bank upon reliance to the TCT, approved the loan of Maniego amounting to P1,000,000.
Unfortunately, Maniego was not able to pay the loan. So, land bank executed an extrajudicial foreclosure of the
mortgage property.

In 2002, Poblete filed a petition for declaration of nullity of deed of sale on the following grounds:
-that she was not able to receive the purchase price of 900,000

-that Maniego obtained lot #29 without her consent
-that the deed of sale dated August 11,2000 is fraudulent because her signature and the signature of her husband,
who is already, was forged. The forgery was proven to be such by the NBI.

Land bank as a defense allege that it is a mortgagee in good faith because it exercises due diligence in verifying the
ownership of Maniego. Maniego on the other hand alleged that it was Poblete who forged the signature.

ISSUE:
WON the deed of sale is void.
WON land bank is a mortgagee in good faith.

RULING:
The Deed of sale is void.

As a fact, it was already proven by the lower courts that there was a forgery. Hence, the deed of sale is void. As a
rule a fraudulent deed of sale is a nullity and renders no effect. Therefore, the TCT is void and the mortgage of
Maniego to Land bank is also void.

In addition, when the deed of sale states that the purchase price was already paid where in fact it was not, the deed
of sale is void on the ground of lack of consideration. In the case at bar, it was proven that Poblete was not able to
receive the purchase price.

Land bank is not a morgagee in good faith.
As a rule, when the mortgagor is not the owner of the thing mortgaged, the mortgage is void. But being a
mortgagee in good faith is an exception, it is where the mortgage is given effect even if the mortgagor is not the
owner of the thing mortgaged on the ground of public policy. But this doctrine is not applicable to banks which is
expected to exercise a higher standard of diligence. Applying this principle, land bank therefor is not a mortgagee in
good faith.

In addition, land bank ignored the fact that the lot was already used as mortgage by Kapantay multi-purpose
cooperative. That should have been a red flag to land bank with regards to the ownership of the lot. It was also
proven, as testified by one of the customer assistant of landbank, that the loan was already completely processed
awaiting the transfer of the title. Also, the appraisal conducted by landbank is not considered as an exercise of due
diligence because appraisal is more focus on the valuation of the property and not on the query of ownership and
possession.

The court ruled that the injunction be rendered permanent and since the lot was not yet in the possession of third
person in good faith, the ownership remains with Poblete.


JOSELITO C. BORROMEO vs JUAN T. MINA
FACTS:
Subject of this case is a 1.1057 hectare parcel of agriculture land, situated in Barangay Magsaysay, Naguilian, Isabela
registered in the name of respondent. The TCT that respondents title over the said property is based on
Emancipation Patent No. 393178 issued by the Department of Agrarian Reform (DAR). Petitioner Borromeo filed
Petitions before the Provincial Agrarian Reform Office (PARO) of Isabela, which identically prayed for the exemption
of his landholding from the coverage of the governments Operation Land Transfer (OLT) program as well as the
cancellation of respondent Minas title over the property subject of the said landholding.

Petitioner alleged that he purchased the said property from its previous owner, Serafin M. Garcia (Garcia), as
evidenced by a deed of sale notarized on February 19, 1982. For various reasons, however, he was not able to effect
the transfer of title in his name.

Subsequently, to his surprise, he learned that an emancipation patent was issued in respondents favor without any
notice to him.

Petitioner claimed that the subject landholding should have been excluded from the coverage of the governments
OLT program because his total agricultural landholdings was only 3.3635 hectares and thus, within the landowner's
retention limits under both PD 27 and Republic Act No. 6647, otherwise known as the "Comprehensive Agrarian
Reform Law of 1988."
After due investigation, the Municipal Agrarian Reform Officer (MARO) Joey Rolando M. Unblas issued a Report
finding hat the subject property was never owned by Cipriano Borromeo as its true owner was Garcia notably, a
perennial PD 27 landowner who later sold the same to petitioner.
Based on these findings, the MARO recommended that: (a) the subject landholding be exempted from the coverage
of the OLT; and (b) petitioner be allowed to withdraw any amortizations deposited by respondent with the Land
Bank of the Philippines (LBP) to serve as rental payments for the latters use of the subject property.
PAROs Decision: PARO adopted the recommendation of the MARO.

DAR Regional Directors Decision: DAR Regional Director Renato R. Navata issued an Order, finding that petitioner,
being the true owner of the subject property, had the right to impugn its coverage from the governments OLT
program.

DAR Secretarys Decision: DAR Secretary Nasser C. Pagandaman issued DARCO Order No. EXC-0709-333, series of
2007, affirming in toto the DAR Regional Directors ruling


CAs Ruling: CA reversed and set aside the DAR Secretary's ruling. In any case, the CA found the said sale to be null
and void for being a prohibited transaction under PD 27 which forbids the transfers or alienation of covered
agricultural lands after October 21, 1972 except to the tenant-beneficiaries thereof, of which petitioner was not.
Hence, notwithstanding the erroneous identification of the subject landholding by the MARO as owned by Cipriano
Borromeo, the fact remains that petitioner had no right to file a petition for landholding exemption since the sale of
the said property to him by Garcia in 1982 is null and void.
ISSUE: W/N the sale of the subject property should be null and void for being a prohibited transaction under PD 27.
Proceeding from this, the finding that petitioners total agricultural landholdings is way below the retention limits
set forth by law thus, becomes irrelevant to his claim for landholding exemption precisely because he has no right
over the aforementioned landholding.
RULING: Validity of the sale of the subject property to petitioner:

PD 27 prohibits the transfer of ownership over tenanted rice and/or corn lands after October 21, 1972 except only
in favor of the actual tenanttillers thereon.
As held in the case of Sta. Monica Industrial and Development Corporation v. DAR Regional Director for Region
36
37
III, citing Heirs of Batongbacal v. CA:
x x x P.D. No. 27, as amended, forbids the transfer or alienation of covered agricultural lands after October 21, 1972
except to the tenant-beneficiary. x x x.
In Heirs of Batongbacal v. Court of Appeals, involving the similar issue of sale of a covered agricultural land under
P.D. No. 27, this Court held:
Transfer of ownership over tenanted rice and/or corn lands after October 21, 1972 is allowed only in favor of the
actual tenant-tillers thereon. Hence, the sale executed by Philbanking on January 11, 1985 in favor of petitioner was
in violation of the aforequoted provision of P.D. 27 and its implementing guidelines, and must thus be declared null
and void.
Records reveal that the subject landholding fell under the coverage of PD 27 on October 21, 1972 and as such, could
have been subsequently sold only to the tenant thereof, i.e., the respondent. Notably, the status of respondent as
tenant is now beyond dispute considering petitioners admission of such fact.
Likewise, as earlier discussed, petitioner is tied down to his initial theory that his claim of ownership over the
subject property was based on the 1982 deed of sale. Therefore, as Garcia sold the property in 1982 to the
petitioner who is evidently not the tenant-beneficiary of the same, the said transaction is null and void for being
contrary to law.
In consequence, petitioner cannot assert any right over the subject landholding, such as his present claim for
landholding exemption, because his title springs from a null and void source.
A void contract is equivalent to nothing; it produces no civil effect; and it does not create, modify or extinguish a
juridical relation.
In view of the foregoing disquisition, the Court sees no reason to delve on the issue regarding the cancellation of
respondents emancipation patent, without prejudice to petitioners right to raise his other claims and objections
thereto through the appropriate action filed before the proper forum.

DOMINGO GONZALO vs. JOHN TARNATE, JR.

FACTS:

DPWH awarded the contract for the improvement of the Sadsadan-Maba-ay Section of the Mountain Province-
Benguet Road in the amount of 7mil to petitioner Gonzalo's company, Gonzalo Construction. Gonzalo subcontracted
to respondent Tarnate the supply of materials and labor for the project under the latter s business known as JNT
Aggregates. Their agreement stipulated that Tarnate would pay to Gonzalo 8% and 4% of the contract price,
respectively, upon Tarnate's first and second billing in the project.

Gonzalo executed a deed of assignment whereby he assigned to Tarnate 10% of the total collection for the project.
This 10% retention fee (equivalent to P233,526.13) was the rent for Tarnates equipment utilized in the project.
Gonzalo further authorized Tarnate to use the official receipt of Gonzalo Construction in the processing of the
documents relative to the collection of the retention fee. During the processing of the documents, Tarnate learned
that Gonzalo had unilaterally rescinded the deed of assignment and that the retention fee was released to him.

Tarnate demanded the payment of the retention fee from Gonzalo, but to no avail. Thus, he brought a suit against
Gonzalo to recover the retention fee.

In his answer, Gonzalo admitted the authority given to Tarnate, but averred that the project had not been fully
implemented because of its cancellation by the DPWH. He insisted that the assignment could not stand
independently since it was a product of the subcontract; and that Tarnate, having been fully aware of the illegality
and ineffectuality of the deed of assignment from the time of its execution, could not go to court with unclean
hands to invoke any right based on the invalid deed of assignment.

Ruling of the RTC- deed of assignment was a valid and binding contract, and that Gonzalo must comply with his
obligations under the deed of assignment.

Ruling of the CA- Subcontract was an illegal agreement due to its object being prohibited by Section 6 of PD 1594
and that the deed of assignment, being a product of and dependent on the subcontract, was also illegal and

unenforceable. CA did not apply the doctrine of in pari delicto, explaining that the doctrine applied only if the fault
of one party was more or less equivalent to the fault of the other party. It found Gonzalo to be more guilty than
Tarnate, whose guilt had been limited to the execution of the two illegal contracts while Gonzalo had gone to the
extent of violating the deed of assignment. It also declared that Gonzalo was unjustly enriched and should
reimburse Tarnate because the latters equipment had been utilized in the project.

ISSUES
Whether or not both parties were in pari delicto;
Whether or not the deed of assignment was void

RULING: The deed of assignment was void and the parties are in pari delicto.

Pursuant to Section 6 of PD 1594, every contractor is prohibited from subcontracting with another person any
contract or project that he has with the DPWH unless the DPWH Secretary has approved the subcontracting or
assignment.

The parties' subcontract was illegal, because it did not bear the approval of the DPWH Secretary. Necessarily, the
deed of assignment was also illegal, because it sprung from the subcontract. The illegality of the Sub-Contract
Agreement necessarily affects the Deed of Assignment because the rule is that an illegal agreement cannot give
birth to a valid contract.

Under Article 1409 (1) of the Civil Code, a contract whose cause, object or purpose contrary to law is a void or
inexistent contract. To the same effect is Article 1422 of the Civil Code, which declares that "a contract, which is the
direct result of a previous illegal contract, is also void and inexistent."

SC did not concur with the CAs finding that the guilt of Tarnate was lesser than that of Gonzalo, for Tarnate had
voluntarily entered into the agreements with Gonzalo and he also admitted that he did not participate in the bidding
for the project because he knew that he was not authorized to contract with the DPWH. Tarnate is presumed to be
aware of the illegality of his agreements with Gonzalo. For these reasons, Tarnate was not less guilty than Gonzalo.

Article 1412 of the Civil Code states that the guilty parties to an illegal contract cannot recover from one another
and are not entitled to an affirmative relief because they are in pari delicto or in equal fault. Nonetheless, the
application of the doctrine of in pari delicto is not always rigid. An accepted exception arises when its application
contravenes well-established public policy, which, in the case at bar, is the prevention of unjust enrichment under
Article 22 of the Civil Code.

Considering Tarnate's equipment had been utilized in the project, Gonzalo would be unjustly enriched at the
expense of Tarnate if the latter was to be barred from recovering because of the rigid application of the doctrine of
in pari delicto.


JEFFERSON LIM v. QUEENSLAND TOKYO COMMODITIES, INC.
FACTS:
Private respondent Queensland Tokyo Commodities, Incorporated (Queensland, for brevity) is a duly licensed
broker engaged in the trading of commodities futures with full membership and with a floor trading right at the
Manila Futures Exchange, Inc..
Sometime in 1992, Benjamin Shia, a market analyst and trader of Queensland, was introduced to petitioner
Jefferson Lim by Marissa Bontia, one of his employees. Marissas father was a former employee of Lims father.

Shia suggested that Lim invest in the Foreign Exchange Market, trading U.S. dollar against the Japanese yen, British
pound, Deutsche Mark and Swiss Franc.

Before investing, Lim requested Shia for proof that the foreign exchange was really lucrative. They conducted mock
tradings without money involved. As the mock trading showed profitability, Lim decided to invest with a marginal
deposit of US$5,000 in managers check. The marginal deposit represented the advance capital for his future
tradings. It was made to apply to any authorized future transactions, and answered for any trading account against
which the deposit was made, for any loss of whatever nature, and for all obligations, which the investor would incur
with the broker.

Because respondent Queensland dealt in pesos only, it had to convert US$5,000 in managers check to pesos,
amounting to P125,000 since the exchange rate at that time was P25 to US$1.00. To accommodate petitioners
request to trade right away, it advanced the P125,000 from its own funds while waiting for the managers check to
clear. Thereafter, a deposit notice in the amount of P125,000 was issued to Queensland. This was sent to Lim who
received it as indicated by his signature. Then, Lim signed the Customers Agreement, marked as Exhibit "F," which
provides as follows:

25. Upon signing of this Agreement, I shall deposit an initial margin either by personal check, managers check or
cash. In the case of the first, I shall not be permitted to trade until the check has been cleared by my bank and
credited to your account. In respect of margin calls or additional deposits required, I shall likewise pay them either
by personal check, managers check or cash. In the event my personal check is dishonored, the company has the
right without call or notice to settle/close my trading account against which the deposit was made. In such event,
any loss of whatever nature shall be borne by me and I shall settle such loss upon demand together with interest
and reasonable cost of collection. However, in the event such liquidation gives rise to a profit then such amount
shall be credited to the Company. The above notwithstanding, I am not relieved of any legal responsibility as a
result of my check being dishonored by my bank.

Petitioner Lim was then allowed to trade with respondent company which was coursed through Shia by virtue of
the blank order forms all signed by Lim. Respondent furnished Lim with the daily market report and statements of
transactions as evidenced by the receiving forms some of which were received by Lim.

During the first day of trading or on October 22, 1992, Lim made a net profit of P6,845.57. Shia went to the office of
Lim and informed him about it. He was elated. He agreed to continue trading. During the second day of trading or
on October 23, 1992, they lost P44,465.

Meanwhile, on October 22, 1992, respondent learned that it would take seventeen (17) days to clear the managers
check given by petitioner. Hence, on October 23, 1992, at about 11:00 A.M., upon managements request, Shia
returned the check to petitioner who informed Shia that petitioner would rather replace the managers check with
a travelers check.

On October 26, 1992, Shia informed petitioner that they incurred a floating loss of P44,695 on October 23, 1992. He
told petitioner that they could still recover their losses. He could unlock the floating loss on Friday. By unlocking the
floating loss, the loss on a particular day is minimized.

On October 27, 1992, Citibank informed respondent that the travelers check could not be cleared unless it was duly
signed by Lim, the original purchaser of the travelers check. A Miss Arajo, from the accounting staff of Queensland,
returned the check to Lim for his signature, but the latter, aware of his P44,465 loss, demanded for a liquidation of
his account and said he would get back what was left of his investment.16 Meanwhile, Lim signed only one portion
of the travelers check, leaving the other half blank. He then kept it.17 Arajo went back to the office without it.

Respondent asked Shia to talk to petitioner for a settlement of his account but petitioner refused to talk with Shia.
Shia made follow-ups for more than a week beginning October 27, 1992. Because petitioner disregarded this
request, respondent was compelled to engage the services of a lawyer, who sent a demand letter to petitioner. This
letter went unheeded. Thus, respondent filed a complaint against petitioner for collection of a sum of money.

The trial court dismissed the petition without pronouncement as to cost whereas the Court of Appeals reversed the
trial courts decision.

ISSUE: (3 ISSUES ARE ILLUSTRATED IN THE CASE, BUT I WILL FOCUS ON THE TOPIC ON ESTOPPEL) Whether or not
the appellate court erred in holding that petitioner is estopped from questioning the validity of the Customers
Agreement that he signed.

HELD: Yes, petitioner is stopped from questioning the validity of the Customers Agreement which he signed.

REASONING: The essential elements of estoppel are: (1) conduct of a party amounting to false representation or
concealment of material facts or at least calculated to convey the impression that the facts are otherwise than, and
inconsistent with, those which the party subsequently attempts to assert; (2) intent, or at least expectation, that
this conduct shall be acted upon by, or at least influence, the other party; and (3) knowledge, actual or constructive,
of the real facts.

Here, it is uncontested that petitioner had in fact signed the Customers Agreement in the morning of October 22,
1992, knowing fully well the nature of the contract he was entering into. The Customers Agreement was duly
notarized and as a public document it is evidence of the fact, which gave rise to its execution and of the date of the
latter. Next, petitioner paid his investment deposit to respondent in the form of a managers check in the amount of
US$5,000 as evidenced by PCI Bank Managers Check No. 69007, dated October 22, 1992. All these are indicia that
petitioner treated the Customers Agreement as a valid and binding contract.

Moreover, we agree that, on petitioners part, there was misrepresentation of facts. He replaced the managers
check with an unendorsed travelers check, instead of cash, while assuring Shia that respondent Queensland could

sign the indorsee portion thereof. As it turned out, Citibank informed respondent that only the original purchaser
(i.e. the petitioner) could sign said check. When the check was returned to petitioner for his signature, he refused to
sign. Then, as petitioner himself admitted in his Memorandum, he used the travelers check for his travel expenses.

More significantly, petitioner already availed himself of the benefits of the Customers Agreement whose validity he
now impugns. As found by the CA, even before petitioners initial marginal deposit (in the form of the PCI managers
check dated October 22, 1992) was converted into cash, he already started trading on October 22, 1992, thereby
making a net profit of P6,845.57. On October 23, he continued availing of said agreement, although this time he
incurred a "floating loss" of P44,645. While he claimed he had not authorized respondent to trade on those dates,
this claim is belied by his signature affixed in the order forms, marked as Exhibits "G", "G-1" to "G-13".

Clearly, by his own acts, petitioner is estopped from impugning the validity of the Customers Agreement. For a
party to a contract cannot deny the validity thereof after enjoying its benefits without outrage to ones sense of
justice and fairness.

It appears that petitioners reason to back out of the agreement is that he began sustaining losses from the trade.
However, this alone is insufficient to nullify the contract or disregard its legal effects. By its very nature it is already
a perfected, if not a consummated, contract. Courts have no power to relieve parties from obligations voluntarily
assumed, simply because their contracts turned out to be disastrous or unwise investments. Notably, in the
Customers Agreement, petitioner has been forewarned of the high risk involved in the foreign currency investment
as stated in the "Risk Disclosure Statement," located in the same box where petitioner signed.

REPUBLIC VS. CA
FACTS:
Defendant St. Jude Enterprises, Inc. is the registered owner of a parcel of land known as lot 865- B-1 of the
subdivision plan being a portion of lot 865-B located in Caloocan city containing an area of 40, 623 sq.m . For lot
865-B1 defendant St. Jude Enterprises, Inc. was issued TCT No. 22660 on July 25, 1966.

Sometime in March 1966 defendant St. Jude Enterprises, Inc. subdivided lot No. 865-B-1 under subdivision plan and
as a result thereof, the Register of Deeds of Caloocan city cancelled TCT No. 22660 and in lieu thereof issued
certificates of titles nos. 23967 up to 24068 all in the name of defendant St. Jude Enterprise, Inc. The subdivision of
lot 865-B-1 was later found to have expanded and enlarged from its original area with an increase of 1421 sq m.
which was confirmed by the Land Registration Commission.

Subsequently, defendant St. Jude Enterprise, Inc. sold the lots covered to defendant Sps. Santos, Sps. Calaguian,
Fuente and Madaya. Accordingly, these titles were cancelled and said defendants were issued series of new titles.

On Jan. 29, 1985, then Solicitor General filed an action seeking annulment and cancellation of the TCTs issued in the
name of St. Jude's Enterprises, and TCT's issued the name of the defendants principally on the ground that said
Certificates of Titles were issued on the strength of null and void subdivision plan which expanded the original area.

Defendant Sps. Calaguian and Santos interposed averred that they acquired the lots in good faith from St. Jude's
Enterprises and for value, and that the titles issued to the said defendants were incontrovertible, conclusive and
indefeasible after 1 year from the date of issuance of titles.

Defendant St. Jude also contended that the cause of action of plaintiff is barred by prior judgment since the
subdivision plan submitted was approved by LRC. Therefore, the government is now in estoppel to question the
approved subdivision plan.

ISSUE: Whether or not the government is estopped from questioning the approved subdivision plan which
expanded the areas covered by Transfer Certificate of title in question.

RULING: Yes. The general rule is that the State cannot be put in estoppel by the mistakes or errors of its officials or
agents. However, like all general rules it is a subject for exceptions. Estoppel against the public are little favored and
they should not be invoked except in rare and unusual circumstances. It should be applied only in those special
cases where the interests of justice clearly require it.

Citing the case, Republic vs. Sandiganbayan, the government in its effort to recover ill-gotten wealth, tried to skirt
the application of estoppel against it by invoking a specific constitutional provision. The Court countered that the
state is immune from estoppel, but this concept is understood to refer to acts and mistakes of its officials especially
those which are irregular. Although, the states right of action to recover ill-gotten wealth is not vulnerable to
estoppel.

In the case at bar, for nearly 20 years (starting from the issuance of St. Jude titles in 1966 up to filing the complaint
in 1985), petitioner failed to correct and recover the alleged increase in the land area of St. Jude. It prolonged
inaction and strongly militates against its cause, as it is tantamount to laches which means failure or neglect, for an
unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have
been done earlier. It is negligence or omission to assert a right within a reasonable time, warranting a presumption
that the party entitled to assert it either has abandoned it or declined to assert it.

Significantly, the other private respondents- spouses Santos Calaguian, Dela fuente, and Madaya bought such
expanded lots in good faith relying on the clean certificates of St. Jude. It is only fair and reasonable to apply the
equitable principle of estoppel by laches against the government to avoid an injustice to the innocent purchasers
for value.

It is a well settled doctrine where innocent third persons, relying on the correctness of the certificate of title,
acquire rights over the property, courts cannot disregard such rights and order the cancellation of the certificate.

Petitioner never presented proof that the private respondents were buyers in bad faith. Consequently, their claim
of good faith prevails. Furthermore, it should be stressed that the total area of 40623 sq m indicated in St. Jude's
original title was not an exact area since such figure was followed by the phrase "more or less" indicating an
approximation.


As a general rule, the principle of equitable estoppel states that where one of two innocent persons must suffer a
loss, he who by his conduct made the possible loss must bear it. Hence, the government is estopped from
questioning private respondents titles to the subdivision lots.

HEIRS OF SALVADOR HERMOSILLA VS. SPOUSES REMOQUILLO
FACTS:
The subject property is a 65 sq.m. lot located in the San Pedro Tunasan Homesite. This Homesite was acquired by
the Republic of the Philippines in 1931. Apolinario Hermosilla (Apolinario) was occupying a lot in such homesite
until his death in 1964. He caused the subdivision of the lots into two, Lot 12 and Lot 19, with the same area of 341
sq. m. The 65 sq.m. subject of this controversy forms part of Lot 19.

In 1962, Apolinario made a deed of assignment transferring possession of Lot 19 in favor of his grandson, Jaime
Remoquillo. The Land Tenure Administration later found that Lot 19 is still available for qualified applicants. Jaime,
being its occupant filed an application in 1963.

On that same year, Apolinario conveyed Lot 12 to his son Salvador. He filed for an application to purchase the said
lot, which the LTA granted in 1971.

In 1972, Jaime and Salvador made a Kasunduan whereby Jaime transferred ownership of the 65 sq.m. in Lot 19 in
favor of Salvador. In 1986, the NHA (then LTA) awarded Lot 19 to Jaime, for which he and his wife were issued a
title.

The petitioners filed for the annulment of the title on the ground of fraud because by the virtue of the Kasunduan,
the 65 sq.m. in Lot 19 were already conveyed to Salvador.

The trial court held that the petitioners were co-owners of the subject property and allowed for the action for
specific performance. The CA reversed the trial courts decision, rendering the Kasunduan void because at the time
of its execution (1972), the lot was still owned by the Republic of the Philippines. Hence, no right was transferred to
Jaime, who was awarded the lot in 1986 and no right was transferred by Salvador to the petitioners. Also, the CA
held that the action had prescribed, it having been filed in 1992, more than four years from the issuance of the title
to the spouses Remoquillo.

Hence, this petition.

ISSUE:
(1) Whether or not the property was acquired by the spouses Remoquillo through fraud which by force of law,
considered them trustees of an implied trusts
(2) Whether or not the prescriptive period to recover the property obtained by fraud is applicable in the case at
bar
(3) WON article 1434 Of the Civil Code would apply in this case.

HELD:
1.
NO. The property was previously a public land, petitioners have no personality to impute fraud or
misrepresentation against the State or violation of the law. If the title was in fact fraudulently obtained, it is
the State which should file the suit to recover the property through the Office of the Solicitor General. The
title originated from a grant by the government, hence, its cancellation is a matter between the grantor and
the grantee.
At all events, for an action for reconveyance based on fraud to prosper, the petitioners must prove by clear and
convincing evidence not only his title to the property but also the fact of fraud. Fraud is never presumed.
Intentional acts to deceive and deprive another of his right, or in some manner injure him must be specifically
alleged and proved by the petitioners by clear and convincing evidence. Petitioners failed to discharge this burden,
however.

2. NO. From the allegations of the Complaint, petitioners seek the reconveyance of the property based on implied
trust. The prescriptive period for the reconveyance of fraudulently registered real property is 10 years, reckoned
from the date of the issuance of the certificate of title, if the plaintiff is not in possession, but imprescriptible if he is
in possession of the property.

It is undisputed that petitioners houses occupy the questioned property and that respondents have not been in
possession thereof. Since there was no actual need to reconvey the property as petitioners remained in possession
thereof, the action took the nature of a suit for quieting of title, it having been filed to enforce an alleged implied
trust after Jaime refused to segregate title over Lot 19.One who is in actual possession of a piece of land claiming
to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to
vindicate his right. From the body of the complaint, this type of action denotes imprescriptibility.

3. NO. Petitioners reliance on Article 1434 of the Civil Code does not lie.
The principles of estoppel apply insofar as they are not in conflict with the provisions of the Civil Code, the Code of
Commerce, the rules of court and special laws.
Land Authority Administrative Order No. 4 (1967) Rules and Regulations governing Disposition of the Laguna
Settlement Project in San Pedro, Laguna. Proscribes the conveyance of the privilege or preference to purchase a
land from the San Pedro Tunasan project before it is awarded to a tenant or bonafide occupant.
Sec. 6. Privilege of Preference to Purchase Intransferable; Waiver of Forfeiture Thereof- From the date of
acquisition of the estate by the Government and before issuance of the Order of Award, no tenant or bona fide
occupant in whose favor the land may be sold shall transfer or encumber the privilege or preference to purcahse
the land, and any transfer or encumbrance made in violation hereof shall be null and void.
Petitioners insistence on any right to the property under the Kasunduan thus fails.

The transfer became one in violation of law and therefore void ab initio.
Estoppel as postulated by the petitioner will not apply for it cannot be predicted on an illegal act. It is generally
considered that as between the parties to a contract, validity cannot be given to it by estoppel if it is prohibited by
law or is against public policy.
ACCESSORIES SPECIALIST, INC. V. ERLINDA ALABANZA
FACTS:
On Sept. 27, 2002, Erlinda B. Alabanza, representing her late husband Jones, filed a complaint against petitioner ASI
th
for non-payment of salaries, separation pay, and 13 month pay. She alleged that in Oct. 17, 1997, her husband was
compelled by ASI to file an involuntary resignation on the ground that ASI suffered losses and incurred several debts
due to the state of the market at that time. At the time of Jones resignation, he still had 18 months worth of
th
unpaid salaries (Php 396K and $38,880), separation pay (Php 462K and $45,360) and 13 month pay (Php 33K) to be
given to him by ASI. Jones was promised payment by ASI after the money claims of its rank-and-file employees are
settled. Knowing the situation of the company at that time, Jones acquiesced. Jones held on to this promise until his
death in Aug. 5, 2002.

In their defense, ASI contended that Erlindas cause of action is already barred by prescription under Article 291 of
the Labor Code (which lays down a 3-year prescription period for money claims such as this.), since the present
complaint was only filed 5 years after the time of Jones resignation. The Labor Arbiter decided in favor of Erlinda.
The said judgment became final and executory upon ASIs failure to file the appropriate amount of the appeal bond.
In this present petition, ASI reiterates its contention as to Erlindas cause of action regarding her husbands money
claims.

ISSUE: Whether Erlindas cause of action is already barred by prescription.

HELD: NO. Based on the Labor Arbiters findings, it was ASI which was responsible for the delay of the institution of
the complaint. Upon Jones resignation, he demanded the payment of his benefits. However, ASI merely promised
him payment upon the settlement of the money claims of the rank-and-file employees. This promise was relied
upon by Jones, but the same remained unfulfilled even in his death. The facts established is an instance of
promissory estoppel, which is an exception to the rule laid down in Article 291 of the Labor Code.

The principle of promissory estoppel arises when a party gives a certain promise to another which is expected to be
relied upon by the latter, which was actually relied on, and that the non-fulfillment of this promise, as an effect, will
prejudice the party who relied on such. It presupposes the existence of a promise on the part of one against the
other whom estoppel is claimed. In order to make out a claim of promissory estoppel, a party bears the burden of
proving the following elements, to wit:

1.
A promise was reasonably expected to induce action or forbearance;
2.
Such promise did, in fact, induce such action or forbearance; and
3.
The party suffered detriment as a result.

All the elements are present in the case at bar. Jones relied upon the promise given to him by ASI. If it were not for
this, there is no reason that he would delay in filing his claim. Thus, the Court finds ample justification not to follow
the prescriptive period under Article 291 of the Labor Code. Furthermore, it would be unjust if such claim be
brushed aside on a mere technicality, especially when it is petitioners own action that prevented respondent from
interposing the claims within the required period.

PAULINO S. ASILO, JR. vs. THE PEOPLE OF THE PHILIPPINES and Spouses VISITACION AND CESAR C. BOMBASI

FACTS:
On 15 March 1978, Private Respondent Visitacions late mother Marciana and the Municipality of Nagcarlan, Laguna
(represented by the then Municipal Mayor Crisostomo P. Manalang) entered into a lease contract whereby the
Municipality allowed the use and enjoyment of property comprising of a lot and a store located at the corner of
Coronado and E. Fernandez Sts. at Poblacion, Nagcarlan, Laguna, in favor of the respondents mother for a period of
twenty (20) years. The lease contract provided that the late Marciana Vda. De Coronado could build a firewall on
her rented property which must be at least as high as the store; and in case of modification of the public market,
she or her heir/s would be given preferential rights.

Visitacion took over the store when her mother died sometime in 1984. From then on up to January 1993,
Visitacion secured the yearly Mayors permits.

On 1 September 1993, Visitacion received a letter from Mayor Comendador directing her to demolish her store
within five (5) days from notice. Attached to the letter were copies of Sangguniang Bayan Resolution and a
Memorandum. Authorizing Hon. Demetrio T. Comendador to enforce and order the demolition of the building
constructed to give way for the construction of a new municipal market building.
On 3 September 1993, Visitacion wrote a reply letter to Mayor Comendador saying that: (1) the lease contract was
still existing and legally binding; (2) she was willing to vacate the store as long as same place and area would be
given to her in the new public market; and (3) in case her proposals are not acceptable to Mayor Comendador, for
the latter to just file an unlawful detainer case against her pursuant to Sangguniang Bayan Resolution.

On 15 October 1993, Mayor Comendador relying on the strength of Sangguniang Bayan Resolution authorized the
demolition of the store with Asilo and Angeles supervising the work.

On 19 August 1994, Visitacion, together with her husband Cesar Bombasi (Spouses Bombasi) filed with the Regional
Trial Court of San Pablo City, Laguna a Civil Case for damages with preliminary injunction against the Municipality of
Nagcarlan, Laguna, Mayor Demetrio T. Comendador, Paulino S. Asilo, Jr., and Alberto S. Angeles.

Spouses Bombasi, thereafter, filed a criminal complaint against Mayor Comendador, Asilo and Angeles for violation
of Sec. 3(e) of Republic Act No. 3019 otherwise known as the "Anti-Graft and Corrupt Practices Act" before the
Office of the Ombudsman.

On 4 March 1997, the Sandiganbayan promulgated a Resolution ordering the consolidation of Civil Case and
Criminal pending before the Third Division. During the pendency of the case, Alberto S. Angeles died on 16

November 1997. Hereby DISMISSED from the case. The death of Mayor Comendador followed on 17 September
2002.

On 28 April 2003, the Sandiganbayan rendered a decision: In Criminal Case, the court finds accused Demetrio T.
Comendador and Paulino S. Asilo, Jr. guilty beyond reasonable doubt of violation of Sec. 3(e) of Republic Act. No.
3019.

In Civil Case, defendants Municipality of Nagcarlan, Laguna, Demetrio T. Comendador and Paulino S. Asilo, Jr. are
hereby ordered jointly and severally to pay plaintiff P437,900.00 as actual damages for the destruction of the store;
P100,000.00 as moral damages; P30,000.00 as attorneys fees.
Petitioner Asilo argues that he and his co-accused acted in good faith in the demolition of the market and, thereby,
no liability was incurred.

ISSUE: WON The Municipality of Nagcarlan Laguna can be placed in Estoppel.

HELD: Yes.
SC sustain the Sandiganbayan in its finding of criminal and civil liabilities against petitioner Asilo and petitioner
Mayor Comendador as here represented by his widow Victoria Bueta.
The Municipality of Nagcarlan, Laguna, as represented by the then Mayor Comendador, was placed in estoppel
after it granted yearly business permits in favor of the Spouses Bombasi.

In pursuant to Article 1431 of the New Civil Code which provides that, through estoppel, an admission or
representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the
person relying thereon.

The representation made by the municipality that the Spouses Bombasi had the right to continuously operate its
store binds the municipality. It is utterly unjust for the Municipality to receive the benefits of the store operation
and later on claim the illegality of the business.

WHEREFORE, the instant appeal is DENIED. Accordingly, the Decision of the Sandiganbayan dated 28 April 2003 is
hereby AFFIRMED WITH MODIFICATION. The Court affirms the decision finding the accused Paulino S. Asilo, Jr. and
Demetrio T. Comendador guilty of violating Section 3(e) of Republic Act No. 3019. We declare the finality of the
dismissal of both the criminal and civil cases against Alberto S. Angeles as the same was not appealed. In view of the
death of Demetrio T. Comendador pending trial, his criminal liability is extinguished; but his civil liability survives.
The Municipality of Nagcarlan, Paulino Asilo and Demetrio T. Comendador, as substituted by Victoria Bueta Vda. De
Comendador, are hereby declared solidarily liable to the Spouses Bombasi for temperate damages in the amount of
P200,000.00 and moral damages in the amount of P100,000.00. Costs against the petitioners-appellants. SO
ORDERED.

SPOUSES RUBIN AND PORTIA HOJAS, V PHILIPPINE AMANAH BANK AND RAMON KUE
FACTS:
On April 11, 1980, Sps. Hojas secured a loan from respondent Philippine Amanah Bank (PAB) in the amount
of P450,000.00, which was secured by a mortgage. For failure to pay the loan, PAB applied for the extrajudicial
foreclosure of the mortgaged real properties of petitioners and acquired said real property.

On March 9, 1988, Carpizo, the OIC President of PAB, wrote Roberto Hojas, petitioners son, informing him that
although the one-year redemption period would expire on April 21, 1988, by virtue of the banks incentive scheme,
the redemption period was extended until December 31, 1988.

Despite said letter from the OIC-President, the OIC of the Project Development Department of PAB wrote Rubin
Hojas that the real properties acquired by PAB would be sold in a public bidding before the end of August, 1988.
On November 4, 1988, a public bidding was conducted and eventually was awarded to Ramon Kue. Because of this
development, on May 7, 1991, petitioners filed an action for "Determination of True Balance of Mortgage Debt,
Annulment/Setting Aside of Extrajudicial Foreclosure of Mortgage and Damages, with Prayer for Preliminary
Injunction" against PAB.

On May 27, 1996, the RTC dismissed petitioners complaint. Aggrieved, petitioners filed an appeal asserting that the
they had relied on Carpizos representation in the letter that extended the redemption period from April 21 to
December 31, 1988 having conducted the public sale on November 4, 1988, therefore, PAB violated the principle
of estoppel.

ISSUE: WHETHER OR NOT THE PAB VIOLATED THE PRINCIPLE OF ESTOPPEL WHEN THE LATTER CONDUCTED THE
NOVEMBER 4, 1988 PUBLIC SALE. NO.

Through estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot
16
be denied or disproved as against the person relying on it. This doctrine is based on the grounds of public policy,
fair dealing, good faith, and justice and its purpose is to forbid one to speak against his own act, representations
17
or commitments to the injury of one to whom they were directed and who reasonably relied on it. Thus, in
order for this doctrine to operate, a representation must have been made to the detriment of another who relied
on it. In other words, estoppel would not lie against one who, in the first place, did not make any representation.

As correctly held by the RTC and upheld by the CA, the date "December 31, 1988" refers to the last day when
owners of foreclosed properties, like petitioners, could submit their payment proposals to the bank. The letter was
very clear. It was about the availment of the liberalized payment scheme of the bank. On the last day for
redemption, the letter was also clear. It was April 21, 1988. It was never extended. The letter of Carpizo was an
invitation to the petitioners to come to the bank with their proposal. It appears that the petitioners could not come
up with a proposal acceptable to the bank.

Here, there is no estoppel to speak of. The letter does not show that the Bank had unqualifiedly represented to the
Hojases that it had extended the redemption period to December 31, 1988. Thus, the Hojases have no basis in
positing that the public sale conducted on November 4, 1988 was null and void for having been prematurely
conducted.


Moreover, petitioners allegation that they had signified their intention to avail of the incentive scheme (which they
have equated to their intention to redeem the property), did not amount to an exercise of redemption precluding
the bank from making the public sale. The general rule in redemption is that it is not sufficient that a person
offering to redeem manifests his desire to do so. The statement of intention must be accompanied by an actual and
simultaneous tender of payment. This constitutes the exercise of the right to repurchase. The right to repurchase
can only be properly exercised if there was reasonable and valid tender of payment for the full amount of the
repurchase price. Otherwise, the offer to redeem is ineffectual.

Respondents' repeated requests for information as regards the amount of loan availed from the credit line and the
amount of redemption, and petitioner's failure to accede to said requests do not invalidate the foreclosure.
Respondents can find other ways to know the redemption price. For one, they can examine the Certificate of Sale
registered with the Register of Deeds to verify the purchase price, or upon the filing of their complaint, they could
have moved for a computation of the redemption price and consigned the same to the court. At any rate, whether
or not respondents '"were diligent in asserting their willingness to pay is irrelevant. Redemption within the
period allowed by law is not a matter of intent but a question of payment or valid tender of the full redemption
price within said period.

Even the complaint instituted by respondents cannot aid their plight because the institution of an action to annul
a foreclosure sale does not suspend the running of the redemption period.

In the case at bench, the record is bereft of concrete evidence that would show that, aside from the fact that
petitioners manifested their intention to avail of the scheme, they were also ready to pay the redemption price.
Hence, as they failed to exercise their right of redemption and failed to take advantage of the liberalized incentive
scheme, PAB was well within its right to sell its property in a public sale.

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RTC rendered judgment in favor of Teofilo.

ISSUE: WON prescription had set in.

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This is the 3rd case between the same parties.

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RULING: Validity of the sale of the subject property to petitioner:

DOMINGO GONZALO vs. JOHN TARNATE, JR.

Whether or not both parties were in pari delicto;

Whether or not the deed of assignment was void

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