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San Juan Structural and Steel Fabricators vs Court of Appleals

Effect of Unauthorized Acts of Corporate Officer


Facts: San Juan Structural and Steel Fabricators entered into an agreement with
Motorich Sales Corporation through Nenita Gruenberg, corporate treasurer of
Motorich, for the transfer to the former a parcel of land upon a P100,000 earnest
money, balance to be payable within March 2, 1989. Upon payment of the earnest
money, and on March 1, 1989, San Juan allegedly asked to be submitted a
computation of the balance due to Motorich. The latter, despite repeated demands,
refused to execute the Deed of Assignment of the land. San Juan discovered that
Motorich entered into a Deed of Absolute Sale of the land to ACL Development
Corporation. Hence, San Juan filed a complaint with the RTC.
On the other hand, Motorich contends that since Nenita Gruenberg was only the
treasurer of said corporation, and that its president, Reynaldo Gruenberg, did not
sign the agreement entered into by San Juan and Motorich, the treasurers signature
was inadequate to bind Motorich to the agreement. Furthermore, Nenita contended
that since San Juan was not able to pay within the stipulated period, no deed of
assignment could be made. The deed was agreed to be executed only after receipt
of the cash payment, and since according to Nenita, no cash payment was made on
the due date, no deed could have been executed.
RTC dismissed the case holding that Nenita Gruenberg was not authorized by
Motorich to enter into said contract with San Juan, and that a majority vote of the
BoD was necessary to sell assets of the corporation in accordance with Sec. 40 of
the Corporation Code. CA affirmed this decision. Hence, this petition with SC.
Issues: Whether or not there was a valid contract existing between San Juan and
Motorich.
Held: No. The contract entered into between Nenita and San Juan cannot bind
Motorich, because the latter never authorized nor ratified such sale. A corporation
is a juridical person separate and distinct from its stockholders or members.
Accordingly, the property of the corporation is not the property of its stockholders
and may not be sold by them without express authorization from the corporations
BoD. This is in accordance with Sec. 23 of the Corporation Code.
Indubitably, a corporation can only act through its BoD or, when authorized either
by its by laws or by its board resolution, through its officers or agents in the normal
course of business. The general principles of agency govern the relation between
the corporation and its officers or agents, subject to the AoI, by laws, or relevant
provisions of law. A corporate officer or agent may represent and bind the
corporation in transactions with 3rd persons to the extent that the authority to do so
has been conferred upon him, and this includes powers which have been
intentionally conferred, and also such powers as, in the usual course of the

particular business, are incidental to, or may be implied from, the powers
intentionally conferred, powers added by custom and usage, as usually pertaining to
the particular officer or agent, and such apparent powers as the corporation has
caused persons dealing with the officer or agent to believe that it has conferred.
Furthermore, persons dealing with an assumed agent, whether the assumed agency
be a general or special one, are bound at their peril, if they would hold the principal
liable, to ascertain not only the fact of agency but also the nature and extent of
authority, and in case either is controverted, the burden of proof is upon them to
establish it. Unless duly authorized, a treasurer, whose powers are limited, cannot
bind the corporation in a sale of its assets.
In the case at bar, San Juan had the responsibility of ascertaining the extent of
Nenitas authority to represent the corporation. Selling is obviously foreign to a
corporate treasurers function. Neither was real estate sale shown to be a normal
business activity of Motorich. The primary purpose of said corporation is marketing,
distribution, import and export relating to a general merchandising business.
Unmistakably, its treasurer is not cloaked with actual or apparent authority to buy or
sell real property, an activity which falls way beyond the scope of her general
authority.
Acts of corporate officers within the scope of their authority are binding on the
corporation. But when these officers exceed their authority, their actions cannot
bind the corporation, unless it has ratified such acts or is estopped from disclaiming
them.
ERNESTO C. DAWSON, LOUIS P. DAWSON, JR., BENJAMIN C. DAWSON,
JOSEPHINE DAWSON SOLIVEN, RALPH D. CUDILLA, ELIZA C. ISIP and LARRY
D. ISIP, petitioners, vs. REGISTER OF DEEDS OF QUEZON CITY and JUDGE
OF REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH 85, respondents.
Facts:
During his lifetime, Louis Dawson offered to buy on installment from the SISKA
DEVELOPMENT CORPORATION, per contract to sell, a parcel of land in Quezon City.
Upon his death, the petitioners assumed the rights and obligations of deceased
Louis P. Dawson in the contract to sell. Upon full payment, vendor SISKA
DEVELOPMENT CORPORATION executed a deed of absolute sale in favor of deceased
Louis P. Dawson who had died seven (7) years earlier, instead of in favor of the
petitioners who assumed and to whom [were] transferred the rights and obligations
of deceased Louis P. Dawson upon the latters death; Because of the obvious error,
Transfer Certificate of Title No. RT-58706 (248057) was issued in the name of
deceased Louis P. Dawson instead of those of petitioners -- hence, the petition for
the cancellation and correction of TCT.
Issue: Applicability of Section 108, PD 1529

Held: Louis P. Dawson and Siska Development Corporation executed a contract to


sell. It is undisputed that Louis P. Dawson died in June 1971, without having
completed the installments on the property. His heirs, herein petitioners, then took
over the contract to sell, assumed his obligations by paying the selling price of the
lot from their own funds, and completed the payment in 1978. Accordingly, the
ownership of the lot had not been vested in Louis P. Dawson during his lifetime.
Indeed, on March 16, 1978, Siska Development Corporation could not have
transferred the title over the lot, through a Deed of Absolute Sale, to Louis P.
Dawson, who had died seven years earlier in 1971. In 1978, the deceased had no
more civil personality or juridical capacity.[11] His juridical capacity, which is the
fitness to be the subject of legal relations, was lost through death.[12]
In other words, the said property did not become part of the estate of Louis P.
Dawson. Necessarily, partition is not the remedy to determine ownership thereof
and to consolidate title in herein petitioners.
Petitioners necessarily became the lawful owners of the said lot in whose favor the
deed of absolute sale should have been executed by vendor Siska Development
Corporation.. Accordingly, petitioners may avail of the remedy provided under
Section 108 of PD 1529.

BRAGANZA v VILLA ABRILLE


FACTS:
Rosario Braganza and her sons loaned from De Villa Abrille P70,000 in Japanese war
notes and in consideration thereof, promised in writing to pay him P10,00 + 2% per
annum in legal currency of the Philippines 2 years after the cessation of the war.
Because they have not paid, Abrille sued them in March 1949. The Manila court of
first instance and CA held the family solidarily liable to pay according to the contract
they signed. The family petitioned to review the decision of the CA whereby they
were ordered to solidarily pay De Villa Abrille P10,000 + 2% interest, praying for
consideration of the minority of the Braganza sons when they signed the contract.
ISSUE:
Whether the boys, who were 16 and 18 respectively, are to be bound by the
contract of loan they have signed.
HELD:

The SC found that Rosario will still be liable to pay her share in the contract because
the minority of her sons does not release her from liability. She is ordered to pay 1/3
of P10,000 + 2% interest.
However with her sons, the SC reversed the decision of the CA which found them
similarly liable due to their failure to disclose their minority. The SC sustained
previous sources in Jurisprudence in order to hold the infant liable, the fraud must
be actual and not constructive. It has been held that his mere silence when making
a contract as to his age does not constitute a fraud which can be made the basis of
an action of deceit.
The boys, though not bound by the provisions of the contract, are still liable to pay
the actual amount they have profited from the loan. Art. 1340 states that even if the
written contract is unenforceable because of their non-age, they shall make
restitution to the extent that they may have profited by the money received. In this
case, 2/3 of P70,00, which is P46,666.66, which when converted to Philippine money
is equivalent to P1,166.67.

ISIDRO BAMBALAN Y PRADO vs. GERMAN MARAMBA and GENOVEVA


MUERONG,
Facts:
What is deduced from the record is, that his mother Paula Prado and the latter's
second husband Vicente Lagera, having received a certain sum of money by way of
a loan from Genoveva Muerong and the latter having learned that the land within
which had a Torrens title caused the plaintiff to sign a conveyance of the land. The
plaintiff asserts that while it is true that he signed said document, yet he did so by
intimidation made upon his mother Paula Prado by the defendant Genoveva
Muerong, who threatened the former with imprisonment.

Issue: whether or not the plaintiff have the capacity to sell the land in question to
the defendants.

this document, however, is vitiated to the extent of being void as regards the said
plaintiff, for the reason that the latter, at the time he signed it, was a minor, which
is clearly shown by the record and it does not appear that it was his real intention to
sell the land in question.
At any rate, even supposing that the document in question embodies all of the
requisites prescribed by law for its efficacy, yet it does not, according to the

provisions of section 50 of Act No. 496, bind the land and would only be a valid
contract between the parties and as evidence of authority to the register of deeds
to make the proper registration, inasmuch as it is the registration that gives validity
to the transfer. Therefore, the defendants, by virtue of the document Exhibit 1
alone, did not acquire any right to the property sold as much less, if it is taken into
consideration, the vendor Isidro Bambalan y Prado, the herein plaintiff, was a minor.

As regards this minority, the doctrine laid down in the case of Mercado and Mercado
vs. Espiritu (37 Phil., 215), wherein the minor was held to be estopped from
contesting the contract executed by him pretending to be age, is not applicable
herein. In the case now before us the plaintiff did not pretend to be of age; his
minority was well known to the purchaser, the defendant, who was the one who
purchased the plaintiff's first cedula used in the acknowledgment of the document.
GUIANG SPOUSES vs. CA AND CORPUZ
Facts:
Sometime in 1990, Harriet Corpuz learned that her father intended to sell one-half
portion including their house, of their homelot to defendants Guiangs. She wrote a
letter to her mother informing her. She [Gilda Corpuz] replied that she was objecting
to the sale. Harriet, however, did not inform her father about this; but instead gave
the letter to Mrs. Luzviminda Guiang so that she [Guiang] would advise her father

However, in the absence of his wife Gilda defendant Judie pushed through the sale
of the remaining one-half portion. He sold to defendant Luzviminda Guiang thru a
document known as Deed of Transfer of Rights the remaining one-half portion of
their lot and the house standing .Transferor Judie Corpuzs children Junie and Harriet
signed the document as witness.
Obviously to cure whatever defect in defendant Judie title over the lot transferred,
defendant Luzviminda Guiang as vendee executed another agreement over the lot ,
this time with Manuela Jimenez Callejo, a widow of the original registered owner
from whom the Corpuz spouses originally bought the lot , who signed as vendor .
Judie signed as a witness to the sale. The new sale described the lot differently but
it is obvious from the mass of evidence that the correct lot is the very lot earlier sold
to the corpus spouses.
Private Respondent Gilda Corpuz filed an Amended Complainant against her
husband Judie and Petitioner-Spouses Guiang. The said Complaint sought the
declaration of a certain deed of sale, which involved the conjugal property of private
respondent and her husband, null and void.

ISSUE: Whether the assailed Deed of Transfer of Rights was a void or a voidable
contract
WON the execution of the amicable settlement can validly rectify the defect in the
assailed Deed of Transfer of Rights
HELD: 1. VOID CONTRACT.
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.
Furthermore, it must be noted that the fraud and the intimidation referred to by
petitioners were perpetrated in the execution of the document embodying the
amicable settlement. Gilda Corpuz alleged during trial that barangay authorities
made her sign said document through misrepresentation andcoercion. In any event,
its execution does not alter the void character of the deed of sale between the
husband and the petitioners-spouses, as will be discussed later. The fact remains
that such contract was entered into without the wifes consent.

2. NO. Insisting that the contract of sale was merely voidable, petitioners aver that
it was duly ratified by the contending parties through the amicable settlement
they executed. Art. 1422. A contract which is the direct result of a previous illegal
contract, is also void and inexistent. (Civil Code of the Philippines). Doctrinally and
clearly, a void contract cannot be ratified.

ANTONIO MEDINA vs. COLLECTOR OF INTERNAL REVENUE and THE COURT


OF TAX APPEALS
Facts:
Antonia R. Medina, petitioner's wife, engaged in business as a lumber dealer, and
sold to her almost all the logs produced in his San Mariano, concession. Mrs.
Medina, In turn, sold in Manila the logs bought from her husband through the same
agent, Mariano Osorio. The proceeds were, upon instructions from petitioner, either
received by Osorio for petitioner or deposited by said agent in petitioner's current
account with the Philippine National Bank.

On the thesis that the sales made by petitioner to his wife were null and void
pursuant to the provisions of Article 1490 of the Civil Code of the Philippines
(formerly, Art. 1458, Civil Code of 1889), the Collector considered the sales made by
Mrs. Medina as the petitioner's original sales taxable under Section 186 of the
National Internal Revenue Code and, therefore, imposed a tax assessment on
petitioner, calling for the payment of P4,553.54 as deficiency sales taxes and
surcharges from 1949 to 1952.
Issue: whether or not the sales made by the petitioner to his wife could be
considered as his original taxable sales under the provisions of Section 186 of the
National Internal Revenue Code.
Held:
The sales of logs to his wife could not be considered as the original taxable sales
was because of the express prohibition found in Article 1490 of the Civil Code of
sales between spouses married under a community system; yet it was not until July
of 1954 that he alleged, for the first time, the existence of the supposed property
separation agreement.
Petitioner's contention that the respondent Collector can not assail the questioned
sales, he being a stranger to said transactions, is likewise untenable. The
government, as correctly pointed out by the Tax Court, is always an interested party
to all matters involving taxable transactions and, needless to say, qualified to
question their validity or legitimacy whenever necessary to block tax evasion.

Contracts violative of the provisions of Article 1490 of the Civil Code are null and
void (Uy Sui Pin vs. Cantollas, 70 Phil. 55; Uy Coque vs. Sioca 45 Phil. 43). Being
void transactions, the sales made by the petitioner to his wife were correctly
disregarded by the Collector in his tax assessments that considered as the taxable
sales those made by the wife through the spouses' common agent, Mariano Osorio.
In upholding that stand, the Court below committed no error.

CHING vs GOYANKO Case Digest


In line with the policy of the State, the law emphatically prohibits the sale of
properties between spouses.
FACTS: Respondents Joseph Goyanko et al. filed with the Regional Trial Court of Cebu
City a complaint for recovery of property and damages against Maria Ching, praying
for the nullification of the deed of sale and of transfer certificate and the issuance of
a new one. Goyanko et al. aver that they are the real owners of the property
involved. They further contend that it was after their fathers death that they found

out that a contract of sale involving the same property has been executed by their
father and common-law wife Ching. However, Ching claimed that she is the actual
owner of the property as it was she who provided its purchase price.
ISSUES: Whether or not the contract of sale and TCT No. 138405, in favor of the
Maria Ching, was null and void for being contrary to morals and public policy
HELD: The subject property having been acquired during the existence of a valid
marriage between Joseph Sr. and Epifania dela Cruz-Goyanko, is presumed to
belong to the conjugal partnership. Moreover, while this presumption in favor of
conjugality is rebuttable with clear and convincing proof to the contrary, the court
find no evidence on record to conclude otherwise. The record shows that while
Joseph Sr. and his wife Epifania have been estranged for years and that he and
defendant-appellant Maria Ching, have in fact been living together as common-law
husband and wife, there has never been a judicial decree declaring the dissolution
of his marriage to Epifania nor their conjugal partnership. It is therefore undeniable
that the property located at Cebu City belongs to the conjugal partnership.
Assuming that the subject property was not conjugal, still the court cannot sustain
the validity of the sale of the property by Joseph, Sr. to defendant-appellant Maria
Ching, there being overwhelming evidence on records that they have been living
together as common-law husband and wife.

The court therefore finds the contract of sale in favor of the defendant-appellant
Maria Ching null and void for being contrary to morals and public policy.

Philippine Trust Co. v. Roldan


Facts:
Mariano Bernardo, a minor, inherited 17 parcels of land from his deceased father.
Respondent, Marianos step-mother, was appointed his guardian. As guardian, she
sold the 17 parcels to Dr. Ramos, her brother-in-law, for P14,700. After a week, Dr.
Ramos sold the lands to her for P15,000. Subsequently, she sold 4 out of 17 parcels
to Emilio Cruz. Petitioner replaced Roldan as guardian, and two months thereafter,
this litigation sought to declare as null and void the sale to Dr. Ramos, and the sale
to Emilio Cruz.

Issue:

Whether the sale of the land by the guardian is null and void for being violative of
the prohibition for a guardian to purchase either in person or through the mediation
of another the property of her ward

Held:
Remembering the general doctrine that guardianship is a trust of the highest order,
and the trustee cannot be allowed to have any inducement to neglect his wards
interest, and in line with the courts suspicion whenever the guardian acquires
wards property we have no hesitation to declare that in this case, in the eyes of the
law, Socorro Roldan took by purchase her wards parcels thru Dr. Ramos, and that
Article 1459 of the Civil Code applies.
RICARDO DISTAJO, ERNESTO DISTAJO, RAUL DISTAJO, FEDERICO DISTAJO, ZACARIAS
A. DISTAJO, EDUARDO DISTAJO, and PILAR DISTAJO TAPAR, petitioners, vs. COURT OF
APPEALS and LAGRIMAS SORIANO DISTAJO, respondents.
DECISION
PARDO, J.:

The case under consideration is a petition for review on certiorari of a decision of


the Court of Appeals[1], which modified the ruling of the Regional Trial Court, Roxas
City regarding seven parcels of land located in Barangay Hipona, Pontevedra, Capiz.
[2]

During the lifetime of Iluminada Abiertas, she designated one of her sons, Rufo
Distajo, to be the administrator of her parcels of land denoted as Lot Nos. 1018,
1046, 1047, and 1057 situated in Barangay Hipona, Pontevedra, Capiz.

On May 21, 1954, Iluminada Abiertas sold a portion of Lot No. 1018 (1018-A) to her
other children, namely, Raul Distajo, Ricardo Distajo, Ernesto Distajo, Federico
Distajo, and Eduardo Distajo.[3]

On May 29, 1963, Iluminada Abiertas certified to the sale of Lot Nos. 1046 and 1047
in favor of Rufo Distajo.[4]

On June 4, 1969, Iluminada Abiertas sold Lot No. 1057 to Rhodora Distajo, the
daughter of Rufo Distajo.[5]

On July 12, 1969, Iluminada Abiertas sold Lot No. 1018 to Rufo Distajo.[6]

Meanwhile, Justo Abiertas, Jr., the brother of Iluminada Abiertas, died leaving behind
his children, Teresita, Alicia, Josefa and Luis Abiertas. Teresita paid for the real
estate taxes of the following properties, which she inherited from her father: Lot
Nos. 1001, 1048, 1049, and a portion of Lot No. 1047, all located in Capiz. On May
26, 1954, Teresita Abiertas sold Lot No. 1001 in favor of Rufo Distajo.[7] On June 2,
1965, Teresita Abiertas, for herself and representing her sisters and brother, sold Lot
Nos. 1048, 1049, and a portion of Lot No. 1047 to Rufo Distajo.[8]

After purchasing the above-mentioned parcels of land, Rufo Distajo took possession
of the property and paid the corresponding real estate taxes thereon. Rhodora
Distajo likewise paid for the real estate taxes of Lot No. 1057.

When Iluminada Abiertas died in 1971, Zacarias Distajo, Pilar Distajo-Tapar, and
Rizaldo Distajo,[9] demanded possession of the seven parcels of land from Lagrimas
S. Distajo, and her husband, Rufo Distajo. The latter refused.

Consequently, on June 5, 1986, Ricardo Distajo, with the other heirs of Iluminada
Abiertas, namely, Ernesto Distajo, Raul Distajo, Federico Distajo, Zacarias Distajo,
Eduardo Distajo, and Pilar Distajo, filed with the Regional Trial Court, Roxas City a
complaint for recovery of possession and ownership of Lot No. 1018, partition of Lot
Nos. 1001, 1018-B, 1046, 1047, 1048, 1049, 1057, and damages.

On September 4, 1986, private respondent Lagrimas Distajo[10] filed an answer


with counterclaim.

On April 9, 1990, the trial court dismissed the complaint for lack of cause of action,
laches and prescription. The counterclaim was likewise dismissed. The parties
appealed to the Court of Appeals.[11]

On August 21, 1992, the Court of Appeals rendered its decision,[12] the dispositive
portion of which states as follows:

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

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

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

SO ORDERED.

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


December 9, 1993, the Court of Appeals denied the motion.[14]

Hence, this petition.[15]

Petitioner alleges that Iluminada Abiertas exclusively owns the seven parcels of land
delineated as Lot Nos. 1001, 1018, 1046, 1047, 1048, 1049, and 1057, all of which
should be partitioned among all her heirs. Furthermore, Rufo Distajo cannot acquire
the subject parcels of land owned by Iluminada Abiertas because the Civil Code
prohibits the administrator from acquiring properties under his administration.[16]
Rufo Distajo merely employed fraudulent machinations in order to obtain the

consent of his mother to the sale, and may have even forged her signature on the
deeds of sale of the parcels of land.

In her comment dated May 13, 1994, private respondent Lagrimas S. Distajo
contends that Rufo Distajo rightfully owns the subject parcels of land because of
various deeds of sale executed by Iluminada Abiertas selling Lot Nos. 1018-B, 1047
and 1046 in favor of Rufo Distajo and Lot No. 1057 in favor of Rhodora Distajo.
Private respondent also avers that petitioner cannot claim any right over Lot Nos.
1001, 1048 and 1049, considering that such lands belong to the brother of
Iluminada Abiertas, namely, Justo Abiertas, Jr., whose heirs sold said parcels of land
to Rufo Distajo.

The petition lacks merit.

Factual findings of the trial court will not be disturbed on appeal unless the court
has overlooked or ignored some fact or circumstance of sufficient weight or
significance, which, if considered, would alter the result of the case.[17] When there
is no conflict between the findings of the trial and appellate courts, a review of the
facts found by the appellate court is unnecessary.[18]

Since the trial court and the Court of Appeals agree that Iluminada Abiertas owned
Lot Nos. 1046, 1057 and a portion of Lot No. 1047, and that Justo Abiertas Jr. owned
Lot Nos. 1001, 1048, and 1049, such findings are binding on this Court, which is not
a trier of facts.[19] However, the record shows that Lot No. 1018 should be divided
into Lot No. 1018-A and 1018-B, the delineation of which the Court of Appeals
clarified in its decision.

The issues in this case, therefore, are limited to those properties which were owned
by Iluminada Abiertas, ascendant of petitioner, consisting of Lot Nos. 1018-A, 1046,
1057, and a portion of 1047.

In his petition, Ricardo Distajo assails the genuineness of the signatures of


Iluminada Abiertas in the deeds of sale of the parcels of land, and claims that Rufo
Distajo forged the signature of Iluminada Abiertas. However, no handwriting expert
was presented to corroborate the claim of forgery. Petitioner even failed to present
a witness who was familiar with the signature of Iluminada Abiertas. Forgery should

be proved by clear and convincing evidence, and whoever alleges it has the burden
of proving the same.[20]

Petitioner likewise contends that the sale transactions are void for having been
entered into by the administrator of the properties. We disagree. The pertinent
Civil Code provision provides:

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

(1) The guardian, the property of the person or persons who may be under
guardianship;

(2) Agents, the property whose administration or sale may have been entrusted to
them, unless the consent of the principal has been given;

(3) Executors and administrators, the property of the estate under administration;
xxx

Under paragraph (2) of the above article, the prohibition against agents purchasing
property in their hands for sale or management is not absolute. It does not apply if
the principal consents to the sale of the property in the hands of the agent or
administrator. In this case, the deeds of sale signed by Iluminada Abiertas shows
that she gave consent to the sale of the properties in favor of her son, Rufo, who
was the administrator of the properties. Thus, the consent of the principal
Iluminada Abiertas removes the transaction out of the prohibition contained in
Article 1491(2).

Petitioner also alleges that Rufo Distajo employed fraudulent machinations to obtain
the consent of Iluminada Abiertas to the sale of the parcels of land. However,
petitioner failed to adduce convincing evidence to substantiate his allegations.

In the absence of any showing of lack of basis for the conclusions made by the
Court of Appeals, this Court finds no cogent reason to reverse the ruling of the
appellate court.

WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the Court
of Appeals in CA-G.R. CV No. 30063.

SO ORDERED.
MAHARLIKA PUBLISHING CORPORATION, ANGELA CALICA, ADOLFO CALICA and the
HEIRS OF THE LATE PIO CALICA, petitioners,
vs.
SPOUSES LUZ R. TAGLE and EDILBERTO TAGLE and the GOVERNMENT SERVICE
INSURANCE SYSTEM and the HONORABLE INTERMEDIATE APPELLATE COURT,
respondents.

GUTIERREZ, JR., J.:

The Government Service Insurance System (GSIS) was the registered owner of a
parcel of land consisting of 1,373 square meters situated in the district of Paco and
covered by Transfer Certificate of Title No. 5986 of the Registry of Deeds of Manila.

On June 4, 1963, the GSIS entered into a conditional contract to sell the parcel of
land to petitioner Maharlika Publishing Corporation (Maharlika for short) together
with the building thereon as well as the printing machinery and equipment therein.
Among the conditions of the sale are that the petitioner shall pay to the GSIS
monthly installments of P969.94 until the total purchase price shall have been fully
paid and that upon the failure of petitioner to pay any monthly installment within
ninety (90) days from due date, the contract shall be deemed automatically
cancelled.

After Maharlika failed to pay the installments for several months, the GSIS, on June
7, 1966, notified Maharlika in writing of its arrearages and warned Maharlika that
the conditions of the contract would be enforced should Maharlika fail to settle its
account within fifteen (15) days from notice. Because of Maharlika's failure to settle
the unpaid accounts, the GSIS notified Maharlika in writing on June 26, 1967 that
the conditional contract of sale was annulled and cancelled and required Maharlika
to sign a lease contract. Maharlika refused to vacate the premises and to sign the
lease contract.

Sometime later, the GSIS published an invitation to bid several acquired properties,
among which was the property in question, to be held at the Office of the General
Manager, second floor, GSIS Building, Arroceros Street, Manila, from 9:00 a.m. to
3:00 p.m. on February 12, 1971.

Meanwhile, on February 11, 1971, or one day before the scheduled public bidding,
Maharlika represented by its president Adolfo Calica addressed to GSIS a letterproposal to repurchase their foreclosed properties proposing that they be allowed to
pay P11,000.00 representing ten percent (10%) of their total account; that they be
allowed to pay P18,300.00 as balance to complete the twenty-five percent (25%) of
their total arrearages( P117,175.00) not later than February 28, 1971 and the
remaining seventy-five percent (75%) to be paid in twenty four (24) months.

This letter-proposal was discussed by Adolfo Calica with GSIS Board Vice-Chairman
Leonilo Ocampo, who wrote a note to the General Manager Roman Cruz, Jr., the last
paragraph of which reads as follows:

It sounds fair and reasonable subject to your wise judgment, as usual. (Exhibit 4,
Maharlika)

Said letter-proposal and Ocampo's note were taken by Calica to General Manager
Cruz, Jr., who, in turn, wrote on the face of Exhibit 4-Maharlika a note to one Mr.
Ibaez which reads: "Hold Bidding. Discuss with me." The letter-proposal together
with two (2) checks amounting to P11,000.00 were submitted to the office of
General Manager Cruz, Jr. and were received by his Secretary.

On February 12, 1971, however, the public bidding of this particular property was
held as scheduled prompting Adolfo Calica to submit his bid to the Bidding
Committee with a deposit of P11,000.00 represented by the same two checks
submitted to General Manager Cruz, Jr., together with his letter-proposal. His bid
proposal reads: "I bid to match the highest bidder."

The bidding committee rejected Maharlika's bid as an imperfect bid and


recommended acceptance of private respondent Luz Tagle's bid of P130,000.00 with
a ten percent (10%) deposit of P13,000.00.

On February 19, 1971, the GSIS addressed a letter to Adolfo Calica informing him of
the non-acceptance of his bid and returning his two checks.

After approval and confirmation of the sale of the subject property to Luz Tagle on
April 20, 1971, the GSIS executed a Deed of Conditional Sale in favor of the Tagles
on June 8, 1971.

Due to the refusal of petitioners to surrender the possession of the property in


question, respondent spouses Luz R. Tagle and Edilberto Tagle filed a case for
Recovery of Possession with Damages with the Court of First Instance of Manila
which rendered the following decision on May 15, 1974:"

IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment:

(a) declaring the letter-proposal (Exh.. 3-Maharlika) ineffective and without any
binding effect, being imperfect to create any contractual relation between GSIS and
defendants Maharlika and Adolfo Calica;

(b)
declaring plaintiffs and (sic) entitled to the possession of the properties in
question and directing, therefore, defendants Maharlika and Adolfo Calica, or any
person or persons holding or possessing the properties in their behalf, to forthwith
vacate the properties in question and to surrender the same to the plaintiffs;"

(c)
dismissing the complaint as against defendants 'Heirs of the deceased Pio
Calica' (except Angela Calica) it appearing that they were not properly summoned
and represented in the instant suit:"

(d)
directing the defendants Maharlika, Adolfo Calica and Angela Calica, to pay
jointly and severally the plaintiffs a monthly rental of the properties in question in
the sum of P976.00 a month commencing 12 February 1971, until the said
properties are vacated by said defendants, with legal interest of all sums due from
12 Feb. 1971 up to the rendition of this judgment in this instant suit, such interest to
commence from the filing of the complaint until the same is fully paid; and that
such monthly rentals commencing from the date of this judgment, shall also earn
interest at the legal rate unless paid within the first ten days of the current month
for the rental of the preceding month;"

(e) dismissing the counterclaim of defendants Maharlika and the Calicas against
plaintiffs;

(f) dismissing the cross-claim of defendants Maharlika and the Calicos against
defendant GSIS;"

(g)
and

dismissing all other claims which the parties may have against each other;

(h)
directing defendants Maharlika, Adolfo Calica and Angela Calica to pay the
costs of this suit.

After a motion to set aside judgment and grant a new trial was denied by the trial
court for lack of merit, the case was brought on appeal to the former Court of
Appeals on April 8, 1976. On March 2, 1983, the Intermediate Appellate Court
affirmed the decision of the trial court, stating as follows:

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The mere offer to repurchase of the subject property and the deposit of the amount
of P11,000.00 by the defendants on February 11, 1971, does not have the effect of
reviving the conditional deed of sale (Exhibit 4-GSIS, Ibid, p. 29) executed by the
GSIS and the defendants. To revive the said contract, and for the defendants to be
deemed to have repurchased the subject property, there should have been payment
in favor of the GSIS of all the installments due and interests thereon in the total
amount of P117,175.00 as of February 11, 1971

But the defendants insist that the notations of Leonilo M. Ocampo, Vice-Chairman of
the GSIS Board of Trustees, to GSIS General Manager Roman Cruz, Jr. (Exhibits 4-A
and 4-B Maharlika, Ibid, p. 76) as well as the notation of GSIS General Manager
Roman Cruz, Jr.' to hold bidding. Discuss with me' (Exhibit 4-C Maharlika, Ibid, p. 76)
means that the GSIS had accepted defendants' offer and had revived the
conditional contract of sale dated June 4, 1963.

This interpretation is far-fetched. The notations referred to by the defendants do not


show acceptance of defendants' offer to repurchase the subject property. In fact, the
defendants themselves were aware that their offer was not accepted at all because
they submitted to and participated in the bidding of the subject property on
February 12,1971 (Exhibits K, K-1, 6, 6-A, Ibid, pp. 16-34), using its letter- proposal
as deposit for its bid. But defendants' bid was rejected because it was imperfect and
not accompanied with a deposit of 10% of the highest bid (Exhibits B-1, 7 GSIS, 7-A
Maharlika, Ibid, pp. 5, 35), and that defendants' bid did not contain a specific bid
price proposal (Exhibit 7 GSIS, Ibid, p. 35).

The consequent auction sale of the property on February 12, 1971 and execution of
the conditional deed of sale in favor of the plaintiffs (Exhibit A, Ibid, p. 1) is valid.
The plaintiffs are entitled to the possession of the subject property.

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A motion for reconsideration and/or new trial was filed by petitioners. The motion
was denied by the respondent Appellate Court.

Hence, this petition for review on certiorari filed on December 16,1983.

On January 9, 1984, we resolved to deny in a minute resolution, the petition for lack
of merit. A timely motion for reconsideration was filed by the petitioners which
contained the following reasons to warrant review of the case:

It is apparent that petitioners will suffer serious injustice, consisting in the loss of
the subject property, by reason of the failure of respondent Court to decide
questions of substance involved herein in a way not in accord with law and the
applicable decisions of this Honorable Court, such questions being the following:

(1)
Whether or not respondent Edilberto Tagle's being a GSIS officer at the time
of the sale by the GSIS of the subject property to his wife should be allowed to be
introduced as newly discovered evidence or at any rate received in the interest of
justice;"

(2)
Whether or not respondent Court acted with grave abuse of discretion in
ignoring the irregular appearance of respondent Luz Tagle's bid and the inference of
fraud flowing therefrom in the context of surrounding circumstances;

(3)
Whether or not the auction sale in question is void for having been conducted
despite the directive of the GSIS General Manager to suspend the same in virtue of
petitioners' offer to repurchase the subject property and their payment of
P11,000.00 in checks as earnest money which he accepted.

Significantly, on September 21, 1984, the GSIS filed a Supplemental Memorandum


submitting for resolution of this Court the matter of whether the respondent
spouses Luz and Edilberto Tagle can still enforce their claim as winning bidders
considering the fact that they have so far made only two payments to the GSIS
amounting to P32,500.00 in violation of the terms and conditions of the conditional
sale executed in their favor and which provides for its automatic cancellation in
such case, or whether the petitioners can still repurchase the property in question
as original owners thereof.

We find the petitioners' motion for reconsideration impressed with merit.

The certification secured by the petitioners from GSIS on April 28, 1983 shows that
Edilberto Tagle was Chief, Retirement Division, GSIS, from 1970 to 1978. He worked
for the GSIS since 1952. Strictly speaking, the evidence of Mr. Tagle's being a GSIS
official when his wife bid for the disputed property is not newly discovered evidence.
However, we cannot simply ignore the fact that on February 12, 1971 when Adolfo
Calica was desperately trying to retrieve the property foreclosed against him, after
receiving assurances from the highest GSIS officials that his letter- proposal would
be accepted and after the sale at public auction of the property was, in fact, ordered
to be stopped, the wife of a GSIS official would be allowed to bid for that property
and would actually win in the bidding.

As stated by the petitioners, this important factor implicit in good government,


should have been considered in the interest of justice. It was incumbent under the
law for GSIS to have rejected the bid of the wife of a GSIS official and to have
refused to enter into the deed of conditional sale with the respondents Tagle.

The petitioners bank on the allegation that the indirect participation of Edilberto
Tagle in the public bidding creates a "conflict of interests situation" which
invalidates the aforesaid transaction under the precept laid down in Article 1409
paragraph (1) of the Civil Code making his participation void for being contrary to
morals, good customs, and public policy.

The Supreme Court has ample authority to go beyond the pleadings when in the
interest of justice and the promotion of public policy there is a need to make its own
finding to support its conclusions. In this particular case, there is absolutely no
doubt that Mr. Edilberto Tagle was a GSIS Division Chief when his wife bid for the
property being sold by GSIS. The only issue is whether or not to consider this fact
because it surfaced only after trial proper.

We declare it to be a policy of the law that public officers who hold positions of trust
may not bid directly or indirectly to acquire prop properties foreclosed by their
offices and sold at public auction.

Article XIII, Section 1 of our Constitution states that:

Public office is a public trust. Public officers and employees shall serve with the
highest degree of responsibility, integrity, loyalty and efficiency, and shall remain
accountable to the people.

We stated in Ancheta vs. Hilario (96 SCRA 62);

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...A public servant must exhibit at all times the highest sense of honesty and
integrity. ...

Under Article 1491 of the Civil Code the following persons cannot acquire by
purchase, even at a public or judicial auction, either in person or through the
mediation of another:

(1) The guardian, the property of the person or persons who may be under his
guardianship;

(2) Agents, the property whose administration or sale may have been intrusted to
them, unless the consent of the principal has been given;

(3) Executors and administrators, the property of the estate under administration;

(4)
Public officers and employees, the property of the State or of any subdivisions
thereof, or of any government owned or controlled corporation, or institution, the
administration of which has been intrusted to them; this provision shall apply to
judges and government experts who, in any manner whatsoever, take part in the
sale;

(5) Justices, judges, prosecuting attorneys, clerk of superior and inferior courts, and
other officers and employees connected with the administration of justice, the

property and rights in litigation or levied upon an execution before the court within
whose jurisdiction or territory they exercise their respective functions; this
prohibition includes the act of acquiring by assignment and shall apply to lawyers,
with respect to the property and rights which may be the object of any litigation in
which they may take part by virtue of their profession;

(6) Any others specially disqualified by law.

In so providing, the Code tends to prevent fraud, or more precisely, tends not to
give occasion for fraud, which is what can and must be done (Francisco, Sales, p.
111). We, therefore, reject the contention of respondents that the fact that Edilberto
Tagle was, at the time of the public bidding, a GSIS official, will not alter or change
the outcome of the case.

A Division Chief of the GSIS is not an ordinary employee without influence or


authority. The mere fact that he exercises ample authority with respect to a
particular activity, i.e., retirement, shows that his influence cannot be lightly
regarded.

The point is that he is a public officer and his wife acts for and in his name in any
transaction with the GSIS. If he is allowed to participate in the public bidding of
properties foreclosed or confiscated by the GSIS, there will always be the suspicion
among other bidders and the general public that the insider official had access to
information and connections with his fellow GSIS officials as to allow him to
eventually acquire the property. It is precisely the need to forestall such suspicions
and to restore confidence in the public service that the Civil Code now declares such
transactions to be void from the beginning and not merely voidable (Rubias vs.
Batiller, 51 SCRA 120). The reasons are grounded on public order and public policy.
We do not comment on the motives of the private respondents or the officers
supervising the bidding when they entered into the contract of sale. Suffice it to say
that it fags under the prohibited transactions under Article 1491 of the Civil Code
and, therefore, void under Article 1409.

In the case of Garciano vs. Oyao (102 SCRA 195), this Court held:

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...We need not exaggerate the importance of being absolutely free from any
suspicion which may unnecessarily erode the faith and confidence of the People in
their government. As the Constitution categorically declared: 'Public office is a
public trust. Public officers and employees shall serve with the highest degree of
responsibility, integrity, loyalty and efficiency, and shall remain accountable to the
people' (Art. XIII, Sec. 1, Constitution).

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Respondent Wilfredo Oyao, should avoid so far as reasonably possible a situation


which would normally tend to arouse any reasonable suspicion that he is utilizing his
official position for personal gain or advantage to the prejudice of party litigants or
the public in general. In the language of then Justice, now Chief Justice Enrique M.
Fernando in the case of Pineda vs. Claudio (28 SCRA 34, 54): 'There may be
occasion then where the needs of the collectivity that is the government may collide
with his private interest as an individual.

In Mclain vs. Miller County (23 SW 2d. 2-4; 255) the Court ruled that:

As the efficiency of the public service is a matter of vital concern to the public, it is
not surprising that agreements tending to injure such service should be regarded as
being contrary to public policy. It is not necessary that actual fraud should be
shown, for a contract which tends to the injury of the public service is void, although
the parties entered into it honestly, and proceeded under it in good faith. The courts
do not inquire into the motives of the parties in the particular case to ascertain
whether they were corrupt or not, but stop when it is ascertained that the contract
is one which is opposed to public policy. Nor is it necessary to show that any evil
was in fact, done by or through the contract. The purpose of the rule is to prevent
persons from assuming a position where selfish motives may impel them to sacrifice
the public good to private benefit.

There is no need, therefore, to pass upon the issue of irregularity in the appearance
of the private respondents' bid and the alleged inference of fraud flowing therefrom.

We reiterate that assuming the transaction to be fair and not tainted with
irregularity, it is still looked upon with disfavor because it places the officer in a
position which might become antagonistic to his public duty.

There are other grounds which contain us to grant this petition.

We now come to the issue whether or not there was a repurchase of the property in
question from the GSIS effected by the petitioners the day before the public bidding.

In Article 1475 of the Civil Code, we find that "the contract of sale is perfected at
the moment there is a meeting of minds upon the thing which is the object of the
contract and upon the price. From that moment, the parties may reciprocally
demand performance, subject to the law governing the form of contracts. "

This Court in the case of Central Bank of the Philippines vs. Court of Appeals (63
SCRA 431) ruled on the perfection of government contracts in the following manner:

We are not persuaded that petitioner's posture conforms with law and equity.
According to Paragraph IB 114.1 of the Instructions to Bidders, Ablaza was 'required
to appear in the office of the Owner (the Bank) in person, or, if a firm or corporation,
a duly authorized representative (thereof )and to execute the contract within five (5)
days after notice that the contract has been awarded to him. Failure or neglect to do
so shall constitute a breach of agreement effected by the acceptance of the
Proposal. There can be no other meaning of this provision than that the Bank's
acceptance of the bid of respondent Ablaza effected an actionable agreement
between them. We cannot read it in the unilateral sense suggested by petitioner
that it bound only the contractor, without any corresponding responsibility or
obligation at all on the part of the Bank. An agreement presupposed a meeting of
minds and when that point is reached in the negotiations between two parties
intending to enter into a contract, the purported contract is deemed perfected and
none of them may thereafter disengage himself therefrom without being liable to
the other in an action for specific performance. "

In American Jurisprudence, 2d., Section 73 (pp. 186-187), we read:

The principle is fundamental that a party cannot be held to have contracted if there
was no assent, and this is so both as to express contracts and contracts implied in
fact. There must be mutual assent or a meeting of minds in all essential elements or
terms in order to form a binding contract. However, ordinarily no more is meant by
this than an expression or manifestation of mutual assent, as an objective thing, is
necessary, and that is generally deemed sufficient in the formation of a contract ...
In other words, appropriate conduct by the parties may be sufficient to establish an
agreement, and there may be instances where interchanged correspondence does
not disclose the exact point at which the deal was closed, but the actions of the
parties may indicate that a binding obligation has been undertaken.

It is undisputed that when the letter-proposal of petitioners was presented to GSIS


General Manager Roman Cruz, Jr., he wrote on the face of such letter the words
"Hold Bidding. Discuss with me." These instructions were addressed to one Mr.
Ibaez who was in-charge of public bidding. Thereafter, a deposit of P11,000.00 in
checks was accepted by the Secretary of Mr. Roman Cruz, Jr. In the light of these
circumstances an inference may be made that General Manager Cruz, Jr. had
already accepted the petitioners' offer of repurchase or at the very least had led
them to understand that he had arrived at a decision to accept it.

It should also be noted that there is no serious denial as to General Manager Cruz,
Jr.'s capacity to enter into binding contractual obligations for GSIS without the prior
approval of the Board of Trustees.

On the other hand, the letter of endorsement made by the GSIS Board ViceChairman Leonilo Ocampo which states ...subject to your wise judgment, as usual
leads one to conclude that it has been the practice of GSIS to permit the General
Manager to do acts within the scope of his apparent authority.

In the case of Francisco vs. Government Service Insurance System (7 SCRA 577), we
held that:

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... Corporate transactions would speedily come to a standstill were every person
dealing with a corporation held duty-bound to disbelieve every act of its responsible

officers, no matter how regular they should appear on their face. This Court has
observed in Ramirez vs. Orientalist Co., 38 Phil. 634, 654-655, that

In passing upon the liability of a corporation in cases of this kind it is always well to
keep in mind the situation as it presents itself to the third party with whom the
contract is made. Naturally he can have little or no information as to what occurs in
corporate meetings; and he must necessarily rely upon the external manifestation
of corporate consent. The integrity of commercial transactions can only be
maintained by holding the corporation strictly to the liability fixed upon it by its
agents in accordance with law; and we would be sorry to announce a doctrine which
would permit the property of a man in the city of Paris to be whisked out of his
hands and carried into a remote quarter of the earth without recourse against the
corporation whose name and authority had been used in the manner disclosed in
this case. As already observed, it is familiar doctrine that if a corporation knowingly
permits one of its officers, or any other agent, to do acts within the scope of an
apparent authority, and thus holds him out to the public as possessing power to do
those acts, the corporation will, as against any one who has in good faith dealt with
the corporation through such agent, be estopped from denying his authority; and
where it is said if the corporation permits' this means the same as 'if the thing is
permitted by the directing power of the corporation.

We note that the petitioners are not complete strangers entering into a contract
with respondent GSIS for the first time. There was an earlier contract to sell the
same properties to the petitioners. That contract was perfected and there had been
partial compliance with its terms. The transaction now under question in this case
merely referred to the curing of certain defects which led to the cancellation of the
earlier contract by GSIS. Under the peculiar circumstances of this case, therefore,
the acceptance of the petitioners' letter-proposal by Mr. Roman Cruz, Jr., the person
with authority to do so, and his order to his subordinates to stop the bidding so that
they could first discuss the matter with him, created an agreement of binding
nature with the petitioners.

WHEREFORE, the decision and resolution of the Intermediate Appellate Court


subject of the instant petition for review on certiorari are hereby SET ASIDE. The
conditional sale entered into between public respondent GSIS and private
respondents Luz and Edilberto Tagle is declared NULL and VOID for being contrary to
public policy. The prayer of petitioners for the repurchase of the subject property in
an amount equal to the amount offered by private respondents and to retain
ownership and possession of the disputed property is GRANTED.

SO ORDERED.

Rubias vs Batiller (1973)


Facts:
Francisco Militante claimed that he owned aparcel of land located in Iloilo. He filed
with theCFI of Iloilo an application for the registrationof title of the land. This was
opposed by theDirector of Lands, the Director of Forestry, andother oppositors. The
case was docked as aland case, and after trial the court dismissedthe application for
registration. Militanteappealed to the Court of Appeals.
Pending that appeal, he sold to Rubias (hisson-in-law and a lawyer) the land.
The CA rendered a decision, dismissing theapplication for registration.
Rubias filed a Forcible Entry and Detainer caseagainst Batiller.
In that case, the court held that Rubias has nocause of action because the property
in disputewhich Rubias allegedly bought from Militantewas the subject matter of a
land case, in whichcase Rubias was the counsel on record of Militante himself. It
thus falls under Article1491 of the Civil Code. (Hence, this appeal.)
Issue: Whether the sale of the land is prohibitedunder Article 1491.Held: YES
. Ar
ticle 1491 says that The following
persons cannot acquire any purchase, even at a publicor judicial auction, either in
person or through the
mediation of another. (5) Justices, judges,
prosecuting attorneys, clerks of superior and inferiorcourts, and other officers and
employees connectedwith the administration of justice, the property andrights in

litigation or levied upon an execution beforethe court within whose jurisdiction or


territory theyexercise their respective functions; this prohibitionincludes the act of
acquiring by assignment and shallapply to lawyesr, with respect to the property
andrights which may be the object of any litigation inwhich they may take part by
virtue of their
profession. The present case clearly falls under this,
especially since the case was still pending appeal whenthe sale was made.
Issue: Legal effect of a sale falling under Article1491?Held: NULL AND VOID.CANNOT
BE RATIFIED.
Manresa considered such prohibitedacquisitions (which fell under the Spanish Civil
Code)as merely voidable because the Spanish Code did notrecognize nullity. But our
Civil Code does recognize the
absolute nullity of contracts whose cause, object or
purpose is contract to law, morals, good customs,
public order or public policy or which are expresslyprohibited or declared void by
law and declares suchcontracts inexistent and void from the beginning. The
nullity of such prohibited contracts is definite andpermanent, and cannot be cured
by ratification.The public interest and public policy remainparamount and do not
permit of compromise orratification. In this aspect, the permanentdisqualification of
public and judicial officers andlawyers grounded on
public policy
differs from the firstthree cases of guardians agents and administrators(under Art
1491). As to their transactions, it has been
opined that they may be ratified by means of and in the form of a new contract,
in which case its validity
shall be determined only by the circumstances at thetime of execution of s
uch new contract. In those
cases, the object which was illegal at the time of thefirst contract may have already
become lawful at thetime of the ratification or second contract, or theintent, or the
service which was impossible. Theratification or second contract would then be valid
fromits execution; however, it does not retroact to the dateof the first
contract.Decision affirmed.

Macariola vs Asuncion
A.M. No. 133-J
114 SCRA 77
May 31, 1982

Petitioner: Bernardita R. Mecariola


Respondent: Hon. Elias B. Asuncion,
in his capacity as Judge of Court of First Instance (CFI) Leyte

FACTS: Respondent judge rendered a final decision in Civil Case No. 2012 for lack of
an appeal. A project of partition was submitted to him, which he later approved.
Among the parties thereto was petitioner Macariola.

One of the properties mentioned in the project of partition was Lot 1184. This lot
was adjudicated t the plaintiffs Reyes in equal shares subdividing Lot 1184 into five
(5) lots denominated as Lot 1184-A to 1184-E.

The fifth lot, Lot 1184-E, was sold to a Dr. Arcadio Galapon who later sold a portion
of the lot to respondent Judge Asuncion and his wife Victoria. Spouses Asuncion and
Galapon conveyed their respective shares and interests in Lot 1184-E to Traders
Manufacturing and Fishing Industries, Inc, owned and managed by Judge Asuncion.

Macariola then filed an instant complaint in the CFI of Leyte against Judge Asuncion
charging him with "Acts Unbecoming of a Judge" invoking Art 1491, par. 5 of the
New Civil Code, pars.1 and 5 of the Code of Commerce, Sec. 3 par. H of RA No.
3019, Section 12 Rule XVIII of the Civil Service Rules and Canon 25 of the Canons of
Judicial Ethics. A certain Judge Nepomuceno however dismissed such complaints.
Hence, the case at bar.

ISSUE: Whether or not Judge Asuncion's act does not violate the above-mentioned
provisions.

HELD: The Court held that respondent Judge Asuncion's acts did not constitute an
"Act Unbecoming of a Judge" but he was reminded to be more discreet in his private
and business activities for next time.

Article 1491, par. 5 of the New Civil Code applies only to the sale or assignment of
the property which is the subject of litigation to the persons disqualified therein.
Respondent judge purchased the said lot after the decision rendered was already
final because no party filed for an appeal within the reglementary period which
makes the lot in question no longer the subject to litigation. Furthermore, Judge
Asuncion did not buy the lot in question directly from plaintiffs, rather from a Dr.
Arcadio Galapon.

Petition is hereby DENIED.

G.R. No. L-9428

December 21, 1956

DOMINGO R. ACASIO, petitioner,


vs.
CORPORACION DE LOS PP. DOMINICOS DE FILIPINAS, respondent.

M. A. T. Caparras for petitioner.


Aviado and Aranda for respondent.

BENGZON, J.:

Review of the Court of Appeals decision requiring Domingo R. Acasio to vacate


certain premises belonging to the Corporacion de los PP. Dominicos de Filipinas.

The facts found by said Court, are the following:

"The plaintiff corporation is the owner of a house situated at No. 651-A Invernes,
Sta. Ana, Manila, which was leased to a certain Esteban Garcia for a monthly rent of
P75. Two of the rooms in the said house were in turn sub-leased by the lessee to the
spouse Domingo R. Acasio and Vicente Tengco Acasio, who were paying there-for a
monthly rent of P25. In 1950 Esteban Garcia gave notice to the sublessees to vacate
the premises and upon their refusal to do so filed an action for illegal detainer
against them (Civil Case No. 11813, Court of First Instance of Manila). By reason of
certain equitable facts and circumstances which the court found to have been
established in that case, it dismissed the complaint for illegal detainer in its decision
dated January 9, 1952 (Exhibit 6). Esteban Garcia left the premises at the end of
that month and on the following February 5 Mrs. Acasio went to the office of Jose A.
Francisco, Trust Officer of the Bank of the Philippine Islands, which was
administering the properties of the plaintiff corporation, and asked that the house in
question be leased to her. Informed that the rent would be increased to P100, she
asked that she given a few days within which to consult with her husband; but when
Francisco said that unless the terms were immediately accepted the house might be
given to somebody else, she paid the increased rent for February, although with a
certain degree of reluctance (Exhibit C).lawphil.net

"Evidently the husband was not satisfied with the arrangement, for on the same
day, February 5, 1952, he wrote a letter to the President of the Bank of the
Philippines Islands, as administrator of the plaintiff's properties, protesting against
the increase from P75 to P100 (Exhibit 3). The letter was received on February 11
and on February 19 a reply was sent to Mrs. Acasio, stating that the rent could not
be reduced in view of the increase in the assessed value of the property and of the
improvements which had been made thereon. Because of the subsequent refusal of
the lessees to pay P100 and their insistence on paying only P75, the present action
for ejectment was filed against Domingo R. Acasio in the Municipal Court of Manila
on September 18, 1952 and later on appealed to the Court of First Instance, which
rendered judgment on March 21, 1953, the dispositive portion of which is as follows:

IN VIEW WHEREFORE, the Court renders judgment declaring that defendant shall
have the right to continue the possession of the premises up to July 31, 1953,
paying the rental of P75 each month; ordering the defendant to pay that amount of
P75 each month to plaintiff; and authorizing plaintiff to collect the deposits made by
defendant of the respective amounts previously due; condemning defendant further

to pay P100 a month from July 31, 1953, and should defendant fail to do so,
ordering him to leave the premises. The counter claim is dismissed. There shall be
no pronouncement as to costs.

On appeal to it, the Court of Appeals held that Acasio's refusal to pay the rent of
P100 violated the terms of the lease, and gave the corporation the right to eject.
Wherefore it ordered him to vacate the premises and pay P100 monthly from March
1, 1952.

The court of first instance, it appears, found defendant and his wife to be "the
occupants ever since the Japanese times of the property, and continued to be so up
to 1952, and remained as such up to the present". And on that ground it allowed
them to continue leasing the premises for more time, at a monthly rent of P75 in
accordance with Article 1687 of the New Civil Code which provides.

If the period of the lease has not been fixed, it is understood to be from year to
year, if the rent agreed upon is annual; from month to month, if it is monthly; from
week to week, if the rent is weekly; and from day to day, if the rent is to be paid
daily. However, even though a monthly rent is paid, and no period for the lease has
been set, the courts may fixed a longer term for the lease after the lessee has
occupied the premises for over one year. . . . (Emphasis ours.)

However the Court of Appeals declared that even if the spouses had been the
lessees before April 4, 1945, they ceased to be so on that date, when they were
taken for detention by the Counter Intelligence Corps of the United States Army.
"Since then," said the Court "it was Esteban Garcia who became the lessee and who
paid the monthly rents until the end of January, 1952 (Exhibit E); and after the
herein defendant and his wife were released from detention in October 1945 they
became mere sub-lessees of two rooms in the house, paying a rental to the sublessor of P25 a month."

This request for revision was entertained partly because Acasio insisted he was the
lessee despite his detention in 1945, and partly because the controversy involved
the innotation introduced by the New Civil Code in its article 1687 herein before
quoted.

However, after full consideration of the matter upon the record and the briefs, we
found no way to uphold petitioner's insistence on being the lessee, not only because
the appellate court specially declared that beginning April 1945 the lessee was
Esteban Garcia, and that Acasio became the sub-lessee who subsequently paid
rents as such to said Garcia, 1but also because if Acasio had been really the lessee,
his wife would not have repaired to the office of the corporation, on February 5,
1952, to ask "that the house in question be leased to her".

We notice in this regard that Acasio does not question his wife's authority to bind
him by her acts. He only argues that her payment of P100 as found by the Court of
Appeals did not constitute an agreement (of lease) "for it was made under
circumstances that certainly negated consent" referring, obviously, to her paying
"with a certain degree of reluctance". Nevertheless, as pointed out in appellee's
brief, such reluctance did not have the legal effect of preventing the formation of a
contract.

There must, them, be a distinction to be made between a case where a person


gives his consent reluctantly and even against his good sense and judgment, and
where he, in reality, gives no consent at all, as where he executes a contract or
performs an act against his will under a pressure which he cannot resist. It is clear
that one acts as voluntarily and independently in the eye of the law when he acts
reluctantly and with hesitation as when he acts spontaneously and joyously. Legally
speaking he acts as voluntarily and freely when he acts wholly against his better
sense and judgment as when he acts in conformity with them. Between the two acts
there is no difference in law. (Vales vs. Villa, 35 Phil. 789.)

Her conformity gave rise to a new contract of lease between the corporation and
the Acasios not a renewal of a previous lease. The latter, therefore, could not,
after one month as lessees ask for a "longer term".

Appellant, enlarged on the proposition that his capacity as "occupant" since


1945 if not as lessee entitled him to the benefits of article 1687, inasmuch as
the purpose of said article is to protect the occupants "from loss of shelter" by the
owner's arbitrary action. As we see it, the article refers to "lessee", i. e., one who
has a contract of lease with the owner; it does not contemplate sub-lessees having
no contractual relations with such owner, much less a mere occupant. Otherwise
even "squatters" or deforciants may stand on the privilege of "extention", which

obviously may not be granted, because there was never a term to be extended, and
because the law should not be presumed to encourage bad faith.

In this connection, it should be observed that under section 1687 the power of the
courts to "fix a longer term for the lease" is protestative or discretionary, "may" is
the word to be exercised or not in accordance with the particular circumstances
of the case; longer term to be granted where equities come into play demanding
extension, to be denied where none appear, always with due deference to the
parties' freedom to contract. Now, then, supposing, for the sake of argument, the
petitioner to be a "lessee" from 1945 to 1952, the Court of Appeals' decision
amounted to a denial of extension. Was there abuse of discretion? No particulars are
shown requiring or justifying extension, except the alleged unreasonableness of the
increased rental charges, from P75 to P100. However, it appearing that the monthly
rent of P75 had been paid since 1948 we do not think the owner could be criticized
for demanding a higher compensation, bearing in mind the downward trend of the
value of the local currency with consequent rising prices and the "increase in the
assessed value of the property and of the improvements which had been made
thereon". 2 lawphil.net

One final, and conclusive viewpoint. If petitioner's theory be followed that he was
the lessee all the time from 1945 to 1952, his lease would then be a contract
entered into before the passage of the New Civil Code, when the right to extension
of the lease did not exist. Hence petitioner may not plead it at this time so as to
affect obligations previously contracted. Articles 2252 and 2255 of the same New
Civil Code clearly so provide.

ART. 2252. Changes made and new provisions and rules laid down by this Code
which may prejudice or impair vested or acquired rights in accordance with the old
legislation shall have no retroactive effect. . . .

ART. 2255. The former laws shall regulate acts and contracts with a condition or
period, which were executed or entered into before the effectivity of this Code, even
though the condition or period may still be pending at the time this body of laws
goes into effect.

Wherefore, the decision under review is affirmed with costs against petitioner. So
ordered.

Paras, C.J., Padilla, Montemayor, Bautista Angelo, Reyes, J.B.L. and Endencia, JJ.,
concur.