Gaite v.

Fonacier (Sale is onerous)

FACTS:
Fonacier issued a Deed of Assignment appointing Gaite as his true and lawful attorney-in-fact for the
exploration and development of his mining claims (11 ode mineral claims known as Dawahan group in
Camarines Norte).
Gaite executed a general assignment conveying the right to develop and exploit the mining claim to
Larap Mines which was owned by him. He then made improvements for the development of the mine.
Approximately 24,000 metric tons of iron ore was extracted.
Fonacier decided to revokethe authority he gave to Gaite. Gaite agreed. A Revocation of Power of
Attorney and Contract was executed where Gaite transferred:
His rights and interests on all the constructions made on the mine, use of the business name
Larap Iron Mines and its goodwill, and all records and documents concerning the mines for the
consideration of P20,000 and 10% of the royalties which Fonacier would receive from the
mining claims.
His rights and interests over the 24,000 metric tons of iron ore in consideration of P75,000.
P10,000 was paid upon the signing of the agreement.
To secure payment of the remaining balance (P65,000), Fonacier delivered a surety bond dated Dec. 8,
1954 with himself as principal and Larap Mines and its stockholders as sureties. Gaite refused to sign
the Revocation of Power of Attorney and Contract which was sent along with the surety bond unless
Fonacier put up another bond.
A second bond was executed with Far Eastern Surety and Insurance Co. as additional surety. It was
provided that the liability of these sureties would only attach when there had been an actual sale of iron
ore by Larap Mines amounting to P65,000. The liability also automatically expires on Dec. 8, 1955.
Fonacier transferred to Larap Mines all rights and interests Gaite transferred to him in consideration for
the signing by the company and its stockholders of the surety bonds.
Up to Dec. 8, 1955 or the time the second bond expired, no sale of the 24,000 tons of iron ore had
been made nor has the balance of P65,000 been paid. Fonacier and his sureties failed to pay even
when Gaite demanded payment.
Gaite filed a complaint in CFI Manila for the payment of the remaining balance with consequential
damages and attorneys fees. Defendants set up the defense that the obligation to pay the remaining
balance is subject to the condition that it will be derived from the sale of the iron ore. Up to the time of
filing of the complaint, no sale had been made, therefore, the obligation was not yet due and
demandable.
CFI ruled against Fonacier and said that after the expiration of the bond on Dec. 8, 1955 and without
another bond replacing it, the obligation to pay the remaining balance became due and demandable.
Case was elevated to the Court.

ISSUE:
Whether the obligation is one with suspensive term and not one with a suspensive condition.

HELD:
It is one with a suspensive term.
The shipment or sale of the ore is not a condition precedent or suspensive to the payment of the
remaining balance, it is only a suspensive period or term.
There is no uncertainty that payment will be made, only its maturity or demandability is deferred.
A contract of sale is normally commutative and onerous. Not only does each one of the parties assume
a correlative obligation, both of them also anticipate performance by the other from the very start.
 Although in a sale, an obligation of a party can be subordinated to an uncertain event where the other
understands that he assumes the risk of getting nothing for what he gives, it is not in the usual course
of business to do so.
There is nothing in the record to evidence that Gaite desired or assumed to run the risk of losing
his right over the ore without getting paid for it, or that Fonacier understood that Gaite assumed
any risk, proven by the fact that Gaite insisted for two bonds.
That Fonacier put up with the bonds indicates that they admit the definite existence of their
obligation to pay the balance.
To say that the shipment or sale of ore is a condition precedent would be tantamount to leaving the
payment at the discretion of the debtor, for the same would not happen unless Fonacier took steps to
sell the ore.
Rules of interpretation incline the sales in favor of greater reciprocity of interests because sale is
onerous.
Fonacier forfeited his right to take advantage of the period granted to them when he failed to renew the
bond of Far Eastern Surety or replace it with an equivalent guarantee.

Buenaventura v. CA
FACTS:
Defendant parent spouses Leonardo Joaquin and Felicina Landitro are parents of plaintiff brother and
sisters Consolacion, Nora, Emma and Natividad as well as defendant brothers and sisters Fidel,
Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino.
Plaintiff brother and sisters assail the sale of deeds of sale of real property executed by the parents to
the co-defendants, that there was no actual or valid consideration present. If a consideration exists, it is
only a measly amount compared to the price of the land.
The trial court ordered the dismissal of the case against the defendants, finding that they were all
executed for a valuable consideration. The Court of Appeals affirmed the decision of the trial court.
CA: Although plaintiff brothers and sisters are compulsory heirs, the defendant parent spouses
are still free to dispose their properties, provided that such will not be made in fraud of creditors.
Plaintiff brothers and sisters are not parties to the deeds of sale so they cannot be considered
as real parties in interest to assail the validity of those deeds.

ISSUE:
1. Whether or not there is a valid consideration
2. If there is a consideration, whether the deeds are void for being grossly inadequate

RULING:
First, plaintiff brother and sisters have no legal interest over the properties subject of the deeds. Even if they
are compulsory heirs, their parents are still able to dispose their properties.

Yes.
A contract of sale is not a real contract, but a consensual contract. It becomes binding and valid
upon the meeting of the minds as to price. If there is a meeting of the minds as to the price, the
contract of sale is valid despite the manner of payment or even when there is a breach of that
manner of payment. If the real price is not stated, it is valid but subject to reformation. If there is
no meeting of the minds as to the price because it is simulated, the contract is void.
It is not the payment of the price that determines the validity of the contract of sale. It relates to
the performance of the contract and not its perfection.
Plaintiff brothers and sisters failed to show that the prices were absolutely simulated. They did
not even know the financial capacity of their siblings to buy the questioned lots. While the
 defendant brothers and sisters were able to show the cost of each lot and were able to pay the
price in full.

2. No.
Plaintiff brothers and sisters failed to prove that the deeds are void because of the price.
There is no requirement that the price be equal to the exact value of the subject matter of sale,
and all defendants believed they received the commutative value of what they gave.
The factual findings of the appellate court are conclusive on the parties and carry greater weight
when they coincide with the factual findings of the trial court. The trial court found that the lots
were sold for a valid consideration, and the defendant brothers and sisters paid the purchase
price,

Celestino and Co v Collector (Contract of Sale and not Contract for Labor or Piece of Work)
FACTS:
Celestino and Co is a duly registered general co-partnership doing business under the trade name
Oriental Sash Factory.
It used to pay percentage taxes of 7% on the gross receipts of its sash, door, and window factory in
accordance with Sec. 186 of the National Internal Revenue Code imposing taxes on sale of
manufactured articles.
Later on, the company began to claim liability only 3%, a rate applicable only to contractors under Sec.
191 of the same code.
Both the Bureau of Internal Revenue and the Court of Tax Appeals were not convinced that the
company is a contractor, and ruled that Sec. 186 must apply to it. The CTA discussed:
Oriental Sash has the word Factory in its trade name which means it is set to do business on a
big scale.
Sash factories receive orders for doors and windows of special design only in particular cases.
The bulk of their sales is from ready-made doors and windows of standard sizes for the average
home.
The six figure amount Oriental Sash earns cannot come entirely from few customers who made
special orders.
Even if the company claims it does not manufacture ready-made sash, doors, and windows for
the public, it is still not a road, building, navigation, artesian well, water workers and other
construction work contractor contemplated in Sec. 191.
Those who alter or repair buildings, structures, streets, highways, sewers, street railways
railroads logging roads, electric lines or power lines, and includes any other work for the
construction, altering or repairing for which machinery driven by mechanical power is
used.
An appeal was filed to this Court.

ISSUE:
Whether or not Celestino Co is a contractor

RULING:
No. It is a manufacturer.
Any builder or homeowner may order windows or doors of the kind manufactured by the company. It is
not true that it serves special customers only or confines its services to them alone.
Oriental Sash does nothing more than sell the goods it mass produces or habitually makes.
 No extraordinary or additional equipment or the doing of services not generally performed by Oriental
Sash are present in manufacturing the materials. There is no contract for a piece of work.

CIR v. Engineering Equipment and Supply Company

GR No. L-27044

The distinction between a contract of sale and one for work, labor and materials is tested by the
inquiry whether the thing transferred is one not in existence and which never would have existed but
for the order of the party desiring to acquire it, OR a thing which would have existed and has been the
subject of sale to some other persons even if the order had not been given

Facts:
Engineering and Supply Co (Engineering) is a domestic corporation engaged in the design and
installation of central type air conditioning system, pumping plants and steel fabrications
A certain Juan de la Cruz wrote the Commissioner of Internal Revenue denouncing Engineering for tax
evasion by misdeclaring its imported articles and failing to pay the correct percentage taxes due
thereon in connivance with its foreign suppliers
A raid and search was then conducted by a joint team of Central Bank, the NBI and the BIR, on which
occasion records of the firm were seized and confiscated
The revenue examiners recommended to the Commissioner that Engineering be assessed for a P480k
deficiency of its ADVANCED SALES TAX on the theory that it misdeclared its importation of air
conditioning units and part and accessories thereof which are subject to the said tax under Sec. 185 of
the Tax Code
o The assessment was revised and was increased to P916k representing deficiency ADVANCED
SALES TAX AND MANUFACTURERS SALES TAX, inclusive of the 25% and 50% surcharges
Engineering contested the tax assessment and requested that it be furnished wit the details and
particulars of the Commissioners assessment. Engineering, thereafter, appealed to the Court of Tax
Appeals (CTA)
The CTA ruled that petitioner is a CONTRACTOR and is declared exempt from the deficiency
manufacturers sales tax
o HOWEVER, Engineering was ordered to pay P174K as compensating tax
The Commissioner filed the present petition
o Engineering likewise filed a petition contesting the CTAs decision
Commissioners argument:
o CTA erred in holding that Engineering is a contractor and not a manufacturer
o CTA erred in holding that Engineering is liable to the 3% contractors tax imposed by Sec. 191
of the Tax Code instead of the 30% sales tax prescribed in Sec. 185 of the same Code

Issue: Whether the CTA erred in holding that Engineering is a CONTRACTORNo

Held:
The distinction between a contract of sale and one for work, labor and materials is tested by the
inquiry whether the thing transferred is one not in existence and which never would have
existed but for the order of the party desiring to acquire it, OR a thing which would have existed
and has been the subject of sale to some other persons even if the order had not been given
Art. 1467 of the NCC:
o A contract for the delivery at a price certain of an article which the vendor in the ordinary
course of his business manufactures or procures for the general market, whether the
same is on hand at the time or not, is a contract of sale, but if the goods are to be
manufactured specially for the customer and upon his special order and not for the
general market, it is a contract for a piece of work
 Contractora person who, in the pursuit of the independent business, undertakes to do a specific job
or piece of work for other persons, using his own means and methods without submitting himself to
the control as to the petty details
o A contractor renders service in the course of an independent occupation, representing the will of
his employer only as to the result of his work, and not as to the means by which it is
accomplished
IN THE CASE AT BAR:
o Engineering did not manufacture air conditioning units for sale to the general public, but
imported some items which were used in executing contracts entered into by it
o Engineering undertook negotiation and execution of INDIVIDUAL contracts for the
design, supply and installation of AC units of the CENTRAL TYPE
Basically, Engineering considered different factors in the installation of central
type AC system to ensure that it was TAILOR-FITTED to the needs of its different
clients
Engineer designed and engineered each particular plant AND THAT NO TWO
PLANTS WERE IDENTICAL BUT EACH HAD TO BE ENGINEERED SEPARATELY
o The central type AC system is an engineering job that requires PLANNING AND METICOLOUS
LAYOUT due to the fact that usually architects assign definite space and usually the spaces
they assign are very small and of various sizes
o ENGINEERING DEFINITELY DID NOT AND WAS NOT ENGAGED IN THE MANUFACTURE
OF AC UNITS BUT HAD ITS SERVICES CONTRACTED FOR THE INSTALLATION OF A
CENTRAL SYSTEM
Engineering advertised itself as Contractors and they paid contractors tax on all the
contracts for the design and construction of the central system
Engineering DID NOT HAVE ready-made AC units for sale

Puyat v. Arco Amusement Company (Teatro Arco)

GR L-47538

Facts:
Teatro Arco was engaged in the business of operating cinematographs. In the 1930s, its name was
changed to Arco Amusement Company
At about the same time, Gonzalo Puyat & Sons (Puyat) was another corporation in the Philippines.
Puyat acted as exclusive agents in the Philippines for the Starr Piano Company, which was based in
the US
o Starr was a company that dealt in cinematographer equipment and machinery
Arco desired to equip its cinematograph with sound reproducing devices, approached Puyat
After some negotiations, it was agreed between the parties that an order of sound reproducing devices
shall be placed by Puyat for Arco, and that Arco shall Puyat, in addition to the price of the equipment, a
10% commission, plus all expenses
Puyat, at the expense of Arco, sent a cable to Starr inquiring about the equipment
o Starr replied with the price, evidently the list price of $1,700
o Puyat did not show Arco the cable of inquiry nor the reply of Starr, but merely informed
Arco that the price of the device was $1,700. Thereafter, Arco agreed to this price. The
device was delivered, Arco paid the balance plus the 10% commission
The following year, Arco desired again to buy from Starr equipment on the same terms as the 1st order
o This time the listed price sent by Starr amounted to $1,600 which Arco again paid with the 10%
commission
3 years later, the officials of Arco discovered that the price quoted to them by Puyat with regard their 2
orders was not the net price but rather the list price, and that Puyat had obtained a discount from Star
o Officials of Arco were convinced that the prices charged them by Puyat were too high. They
sough a reduction from Puyat or rather a reimbursement
The trial court rendered a decision saying that the contract between the petitioner and respondent was
one of outright PURCHASE AND SALE , and absolved Puyat from the complaint
 CA however rendered that the contract was that of an AGENCYthe petitioner acting aas agent of the
respondent in the purchase of the equipment, and sentenced Puyat to pay Arco the alleged
overpayments

Issue: Whether the CA erred in holding that the contract in question is one of agencyYes

Held:
The contract is the law between the parties and should include all the things they are supposed
to have agreed upon. What does not appear on the face of the contract should be regarded
merely as dealers or traders talk which CAN NOT bind either party
o In the case at bar:
The letters/cables received by which Arco accepted the prices of $1.7k and $1.6k for the
equipment are clear in their terms and admit not other interpretation
Arco admitted in its complain that Puyat agreed to sell to it the 1st sound producing
equipment and machinery
Whatever unforeseen events that might have taken place unfavorable to Puyat, such as change
in price, mistake in their quotation, loss of the goods not covered by the insurance or failure of
Starr Piano Company to fill the orders as per specifications, Arco might still legally hold Puyat
to the prices fixed at $1.7k and $1.6k
o This is INCOMPATIBLE with the concept of agency
o In agency, the agent is exempted from all liability in the discharge of his commission
provided he acts in accordance with the instructions received from his principal, and the
principal must indemnify the agent for all the damages which the latter may incur in
carrying out the agency without fault or imprudence on his part

Quiroga v. Parsons
GR No. L-11491

Facts:
A contract was entered into by Quiroga and Parsons wherein Parsons agreed to sell the beds
manufactured by Quiroga in the Visayan Islands subject to certain conditions
o Don Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J. Parsons
under the following conditions: (EXAMPLES)
Quiroga shall furnish beds of his manufacture to Parsons and invoice them at the same
price as he had fixed for sales
There shall be an allowable discount of 25% in the invoices
Mr. Parsons shall order the beds by dozen, whether of the same or of different styles
Mr. Parsons binds himself to pay for the beds received
Quiroga avers that Parsons violated the following obligations:
o Not to sell the beds at higher prices than those of the invoices
o To have an open establishment in Iloilo; itself to conduct the agency
o To keep the beds open on public exhibition
o And to pay for the advertisement expenses
o And to order the beds by the dozen
None of the obligations imputed to Parsons in the causes of action are expressly set forth in the
contract
o However, Quiroga alleged that Parsons was his AGENT for the sale of his beds in Iloilo,
and that the said obligations IMPLIED in a contract of commercial agency

Issue: Whether the contract in question is a contract of agencyNo

Held:
In order to classify a contract, due regard must be given to its essential clauses
 o In the case at bar, the following are the essential clauses of the contract:
What was essential is that Quiroga was to furnish Parsons with the beds, which the latter
might order, at the price stipulated, and that Parsons was to pay in the manner
stipulated.
The price agreed upon was the one determined by Quiroga for the sale of these beds in
Manila, with a discount of 20-25% according to their class
Payment was to be made at the end of 60 days, or before, at Quirogas request, or in
case, if Parsons so preferred
These essential features are found in a contract of purchase and sale
o There was an obligation on the part of Parsons to pay their price
o These features exclude the legal conception of an agency or order to sell whereby the
mandatory or agent received the thing to sell it and does not pay its price, but delivers to
the principal the price he obtains from the sale of the thing to a third person, and if he
does not succeed in selling it, he returns it
o In the case at bar:
Parsons, on receiving the beds, was NECESSARILY OBLIGED TO PAY THEIR PRICE,
within the term fixed, without any consideration and regardless as to whether he had or
had not sold the beds
Not a single one of the clauses in the contract conveys an idea of an agency:
o Commission- nothing else than a mere discount on the invoice price
o Agency only expresses that Parsons was the only one that could sell Quirogas beds
A contract is what the law defines it to be, and not what it is called by the contracting parties
Quiroga then argues that Parsons had returned beds that it could not sell, that the former forwarded
beds the latter wanted, and that Parsons received commission for the beds sold
o At most this only shows MUTUAL TOLERANCE in the performance of the contract in
disregards of its terms
o Only the acts of the contracting parties, subsequent to, and in connection with, the
execution of the contract must be considered for the purpose of interpreting the
contract, when such interpretation is necessary, BUT NOT WHEN, AS IN THE INSTANT
CASE, ITS ESSENTIAL AGREEMENTS ARE CLEARLY SET FORTH AND PLAINLY SHOW
THAT THE CONTRACT BELONGS TO A CERTAIN KIND AND NOT TO ANOTHER

Puyat v. Arco Amusement Company (Teatro Arco)

GR L-47538

Facts:
Teatro Arco was engaged in the business of operating cinematographs. In the 1930s, its name was
changed to Arco Amusement Company
At about the same time, Gonzalo Puyat & Sons (Puyat) was another corporation in the Philippines.
Puyat acted as exclusive agents in the Philippines for the Starr Piano Company, which was based in
the US
o Starr was a company that dealt in cinematographer equipment and machinery
Arco desired to equip its cinematograph with sound reproducing devices, approached Puyat
After some negotiations, it was agreed between the parties that an order of sound reproducing devices
shall be placed by Puyat for Arco, and that Arco shall Puyat, in addition to the price of the equipment, a
10% commission, plus all expenses
Puyat, at the expense of Arco, sent a cable to Starr inquiring about the equipment
o Starr replied with the price, evidently the list price of $1,700
o Puyat did not show Arco the cable of inquiry nor the reply of Starr, but merely informed
Arco that the price of the device was $1,700. Thereafter, Arco agreed to this price. The
device was delivered, Arco paid the balance plus the 10% commission
The following year, Arco desired again to buy from Starr equipment on the same terms as the 1st order
o This time the listed price sent by Starr amounted to $1,600 which Arco again paid with the 10%
commission
 3 years later, the officials of Arco discovered that the price quoted to them by Puyat with regard their 2
orders was not the net price but rather the list price, and that Puyat had obtained a discount from Star
o Officials of Arco were convinced that the prices charged them by Puyat were too high. They
sough a reduction from Puyat or rather a reimbursement
The trial court rendered a decision saying that the contract between the petitioner and respondent was
one of outright PURCHASE AND SALE , and absolved Puyat from the complaint
CA however rendered that the contract was that of an AGENCYthe petitioner acting aas agent of the
respondent in the purchase of the equipment, and sentenced Puyat to pay Arco the alleged
overpayments

Issue: Whether the CA erred in holding that the contract in question is one of agencyYes

Held:
The contract is the law between the parties and should include all the things they are supposed
to have agreed upon. What does not appear on the face of the contract should be regarded
merely as dealers or traders talk which CAN NOT bind either party
o In the case at bar:
The letters/cables received by which Arco accepted the prices of $1.7k and $1.6k for the
equipment are clear in their terms and admit not other interpretation
Arco admitted in its complain that Puyat agreed to sell to it the 1st sound producing
equipment and machinery
Whatever unforeseen events that might have taken place unfavorable to Puyat, such as change
in price, mistake in their quotation, loss of the goods not covered by the insurance or failure of
Starr Piano Company to fill the orders as per specifications, Arco might still legally hold Puyat
to the prices fixed at $1.7k and $1.6k
o This is INCOMPATIBLE with the concept of agency
o In agency, the agent is exempted from all liability in the discharge of his commission
provided he acts in accordance with the instructions received from his principal, and the
principal must indemnify the agent for all the damages which the latter may incur in
carrying out the agency without fault or imprudence on his part

Lo v. KJS Eco-Formwork System Phil

Facts:
Sonny Lo, a building contractor doing business under Sans enterprises, ordered scaffolding equipment
worth P540,425.80 from KJS ECO-FORMWORK System Phil Inc. (KJS).
o He paid a downpayment of P150,000, while the balance was made payable in ten monthly
installments.
Lo was only able to pay the first two monthly installments.
Lo executed a Deed of Assignment whereby he assigned to respondent his receivables from the
Jomero Realty Corporation (JRC).
Upon attempt to collect from JRC, the latter refused to honor the Deed of Assignment because it
claimed that Lo was also indebted to it.
KJS demanded payment from Lo but he refused, alleging that his obligation is already extinguished
when they executed the Deed of Assignment.
KJS filed an action for recovery of a sum of money in RTC Makati.
o RTC Makati dismissed the case, stating that Los obligation was extinguished.
On appeal, CA reversed RTC decision and said obligation is NOT extinguished.

Issue:
Whether Los obligation is extinguished.
Held:
No.
Lo failed to comply with his warranty under the Deed.
The object of the deed did not exist at the time of the transaction, rendering it void pursuant to Art 1409.
Lo violated the terms of the Deed of Assignment when he failed to execute and do all acts and deeds
as shall be necessary to effectually enable the respondent to recover the collectibles
assignment sale; dation sale
It may well be that the assignment of credit, which is in the nature of a sale of personal property,
produced the effects of a dation in payment which may extinguish the obligation. However, as in any
other contract of sale, the vendor or assignor is bound by certain warranties.
Art 1628: The vendor in good faith shall be responsible for the existence and legality of the credit at the
time of the sale, unless it should have been sold as doubtful; but not for the solvency of the debtor,
UNLESS it has been so expressly stipulated or unless the insolvency was prior to the sale and of
common knowledge.
Lo, as vendor or assignor, is bound to warrant the existence and legality of the credit at the time of the
sale or assignment. He should make good his warranty.

By warranting the existence of the credit, Lo should be deemed to have ensured the performance
thereof in case the sale is later found to be inexistent. He should be held liable to pay to KJS the
amount of his indebtedness

Paragas v. Heirs of Dominador Balcano

Facts:
Gregorio Balancano, married to Lorenza Sumigcay, owned 2 parcels of land. They had three children.
Gregorio was admitted at the Veterans hospital in 1996. He was already 81 years old, very weak, could
barely talk, and had been battling with liver disease for over a month.
o On his deathbed, barely a week before he died, he allegedly signed a Deed of Absolute Sale
over the lots in favor of Paragas Spouses, accompanied by Atty. De Guzman who proceeded to
notarize the same, alleging that it was a mere confirmation of a previous sale and that Gregorio
had already paid P50,000 as deposit.
o The Paragas driver was also there to take a picture of Gregorio signing said deed with a
ballpen in his hand.
o There was nothing to show that the contents of the deed were explained to Balacano.
Paragas then sold a portion of the disputed lot to Catalino.
The grandsons of Gregorio, sought to annul the sale and the partition, alleging that:
o their grandfather Gregorio could not have appeared before the notary public on July 22, 1996 at
Santiago City because he was then confined at the Veterans Memorial Hospital in Quezon City;
o at the time of the alleged execution of the deed of sale, Gregorio was seriously ill, in fact dying
at that time, which vitiated his consent to the disposal of the property; and
o Catalino manipulated the execution of the deed and prevailed upon the dying Gregorio to sign
his name on a paper the contents of which he never understood because of his serious
condition.
Paragas denied the material allegations of the complaint.
o As witness, he brought Atty. De Guzman who notarized the deed. Atty. De Guzman declared
that the Deed of Sale was valid.
Lower court declared the deed of sale null and void.

Issue:
Whether Gregorio Balacano is incapacitated to enter into a contract of sale.

Held:
YES.
A person is not rendered incompetent merely because of old age; however, when such age has
impaired the mental faculties as to prevent a person from protecting his rights, then he is undeniably
 incapacitated.
He is clearly at a disadvantage, and the courts must be vigilant for his protection.
In this case, Balacanos consent was clearly absenthence the sale was null and void.
The circumstances raise serious doubts on his capacity to render consent. Considering that the
Paragas spouses are not owners of the said properties, it only follows that the subsequent sale to
Catalinowho was not in good faithis likewise void.
Furthermore, the lots pertained to the conjugal partnershiphaving been inherited by Balacano during
his marriage to Lorenza. Thus, it cannot be sold without the latters consent.

Matabuena v. Cervantes
Facts:
Felix Matabuena, while living maritally with Petronila Cervantes without benefit of marriage (common-
law relationship), donated a parcel of land.
They later got married.
Upon death of Felix, his sister Cornelia assails the subject donation, maintaining that a donation in a
common-law relationship was void.
o Cornelia claims the said property by reason of being the only sister and nearest collateral
relative of the deceased.
The lower court of Sorsogon declared that the donation was valid inasmuch as it was made at the time
when Felix and Petronila were not yet spouses, rendering Article 133 of the Civil Code inapplicable.
Hence this petition.

Issue:
Whether the ban on donation between spouses during a marriage also applies to a common-law relationship.

Held:
YES.
While Article 133 of the Civil Code considers as void a donation between the spouses during marriage,
policy consideration of the most exigent character as well as the dictates of morality requires that the
same prohibition should apply to a common-law relationship.
As stated in Buenaventura v. Bautista (50 OG 3679, 1954), if the policy of the law is to prohibit
donations in favor of the other consort and his descendants because of fear of undue and improper
pressure and influence upon the donor, then there is every reason to apply the same prohibitive policy
to persons living together as husband and wife without the benefit of nuptials.
The lack of validity of the donation by the deceased to appellee does not necessarily result in appellant
having exclusive right to the disputed property. As a widow, Cervantes is entitled to one-half of the
inheritance, and the surviving sister Cornelia the other half.
o Article 1001, Civil Code: Should brothers and sisters or their children survive with the widow or
widower, the latter shall be entitled to one-half of the inheritance and the brothers and sisters or
their children to the other half.

Domingo Rubias v Isaias Batiller

Doctrine: Contracts entered into in violation of Article 1491 of the Civil Code are not merely voidable, but null
and void; prohibition against attorneys

Facts:
 Rubias, a lawyer, filed a suit to recover the ownership and possession of certain portions of lot located
in Barrio General Luna, Barotac Viejo, Iloilo, which he bought from his father-in-law, Francisco Militante,
against its present occupant, Batiller, who illegally entered said portions of the lot on two occasions.
o Batiller counterclaimed that Rubias does not state a cause of action, the truth of the matter
being that he and his predecessors-in-interest have always been in actual, open and continuous
possession since time immemorial under claim of ownership of the lot in question.
During the pre-trial conference, the following facts were agreed upon:
o Francisco Militante claimed ownership of a parcel of land located in General Luna, Barotac
Viejo, Iloilo.
o Before the war with Japan, Militante filed with CFI Iloilo an application for the registration of the
title of the land, opposed by the Director of Lands, Director of Forestry, and others. However,
during the war with Japan, the record of the case was lost before it was heard, so after the war,
Militante petitioned the court to reconstitute the record of the case.
CFI Iloilo dismissed the application for registration, to which Militante appealed.
o Pending the appeal, Militante sold to Rubias, his son-in-law and lawyer, the subject land, which
was duly recorded.
o Meanwhile, the appeal regarding the application for registration was denied.
o Rubias then filed a Forcible Entry and Detainer case against Isaias Batiller in the Justice of the
Peace Court of Barotac Viejo, Iloilo, which ruled against Rubias; Rubias appealed to the
Municipal Court of Barotac Viejo, which affirmed the trial court decision.
Rubias appealed to CA, which also ruled against him.
o CA ruled that the contract between Militante and Rubias was void under Articles 1409 and
1491(5) of the Civil Code:
1409: the following contracts are inexistent and void from the beginning:
1491: the following persons cannot acquire any purchase, even at a public auction,
either in person or through the mediation of another:
5: justices, judges, prosecuting attorneys, clerks of superior and inferior courts,
and other officers and employees connected with the administration of justice x x
x
Hence, the present appeal.

Issue:
W/N the contract of sale between Rubias and his father-in-law, the late Francisco Militante was void

H/R:
Yes.
o No error could be attributed to the CA, which held that the purchase by a lawyer of the property
in litigation from his client is categorically prohibited by Article 1491(5) of the Civil Code, and
that consequently, Rubias purchase of the property in litigation from his client was void and
could produce no legal effect, by virtue of Article 1409(7) of the Civil Code, which provides that
contracts expressly prohibited or declared void by law are inexistent and that these contracts
cannot be ratified. Neither can the right to set up the defense of illegality be waived.
o The nullity of such prohibited contracts is definite and permanent and cannot be cured by
ratification. The public interest and public policy remain paramount and do not permit of
compromise or ratification.

Ruling:
Petition denied.

Philippine Trust Company v Socorro Roldan

Doctrine: Prohibition against Guardians, Administrators and Agents

Facts:
 The subject 17 parcels of land in Guiguinto, Bulacan, were part of the properties inherited by Mariano
Bernardo from his father, Marcelo Bernardo, deceased.
o In view of his minority, guardianship proceedings were instituted, wherein Socorro Roldan was
appointed his guardian. She was the surviving spouse of Marcelo Bernardo, and the stepmother
of Mariano Bernardo.
Roldan filed in said guardianship proceedings, a motion asking for authority to sell as guardian the 17
parcels of land to Dr. Fidel Ramos, the purpose of the sale being allegedly to invest the money in a
residential house, which the minor desired to have on Tindalo Street, Manila.
o Such motion was granted.
Roldan, as guardian, executed the proper deed of sale in favor or her brother-in-law, Dr. Fidel Ramos
and obtained judicial confirmation of the sale.
o Dr. Ramos then executed in favor of Roldan, personally, a deed of conveyance covering the
same 17 parcels, and later on, Roldan sold 4 parcels out of the 17 to Emilio Cruz, reserving for
herself the right to repurchase.
Philippine Trust Company replaced Roldan as guardian, and the former filed for the nullity of the sale of
the properties of the latters former ward, since it is violative of Article 1459 of the Civil Code, prohibiting
the guardian from purchasing either in person or through the mediation of another, the property of her
ward.
o CFI Manila ruled against petitioner, holding that there was no proof that Fidel Ramos was a
mere intermediary or that the latter had previously agreed with Roldan to buy the parcels for her
benefit.
o CFI basically held that the contracts were valid, but allowed the ward to repurchase all the
parcels within one year.
CA affirmed the judgment, adding that the minor knew the particulars of, and approved the transaction,
and that only clear and positive evidence of fraud or bad faith, and not mere insinuations will overcome
the presumption that a sale was concluded in all good faith for value.
Hence, the present appeal.

Issue:
W/N the sale of the land by a guardian is null and void

H/R:
Yes.
o Even without proof that she had connived with Dr. Ramos, the general doctrine that
guardianship is a trust of the highest order should be remembered. As such, 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 the wards property, the court has no hesitation to
declare that void in the eyes of the law, Roldan took by purchase her wards parcels of land thru
Dr. Ramos, and that Article 1459 of the Civil Code applies.
o SC also held that the sale to Emilio Cruz cannot be sustained.

Ruling:
Petition granted.

Florencio Fabillo v IAC

Doctrine:

Facts:
 In her last will and testament, Justina Fabillo bequeathed to her brother, Florencio, a house and lot in
San Salvador Street, Palo, Leyte, and to her husband, Gregorio Brioso, a piece of land in Pugahanay,
Palo, Leyte.
o After Justinas death, Florencio filed a petition for the probate1 of the said will.
Probate court approved the project of partition, with the reservation that the ownership of
the land and the house erected thereon be litigated and determined in a separate
proceeding.
Two years later, Florencio sought the assistance of Atty. Alfredo Murillo in recovering the San Salvador
property.
o Atty. Murillo wrote Florencio that the latter will give 40% of the money value of the house and lot
as a contingent, in case it is a success, considering that the present action is a revival of a lost
case.
Then, Florencio and Murillo entered in a contract in which it reiterated that 40% of the sum equivalent of
whatever benefit that would be received by the former would be given to the latter.
When they won the case and had Florencio declared lawful owner of not only the San Salvador
property, but also the Pugahanay parcel of land, Atty. Murillo proceeded to implement the contract of
services by taking possession and exercising rights of ownership over 40% of said properties.
o He installed a tenant in the Pugahanay property.
Florencio claimed exclusive right over the two properties and refused to give Murillo his share of their
produce.
o Inasmuch as his demands for his share of the produce of the Pugahanay property were
unheeded, Murillo filed with CFI Leyte for ownership of a parcel of land, damages, and
appointment of a receiver against Florencio Fabillo, his wife, and their children.
The Fabillo spouses contended that their consent to the contract of services was vitiated
by old age and ailment, and that Murillo misled them into believing that the special
proceeding on the probate of Justinas will was already terminated, when it was still
pending resolution.
CFI also ruled that the contract of services did not violate Article 1491 of the Civil Code, as the contract
stipulated a contingent fee, and the court upheld Murillos claim for contingent attorneys fees of 40% of
the value of the recoverable properties. At the same time, it declared Murillo to be the lawful owner of
40% of both the San Salvador and Pugahanay properties and the improvements thereon.
In view of the death of Florencio and Justina Fabillo during the pendency of the case, their children,
who substituted them as parties to the case, appealed the decision to the IAC, which affirmed in toto
the decision of CFI.
Hence, the present petition before the SC.

Issue:
W/N the contract of services is violative of Article 1491 of the Civil Code

H/R:
No.
o Article 1491 of the Civil Code, specifically paragraph 5 thereof, prohibits lawyers from acquiring
by purchase even at a public auction, properties and rights which are the objects of litigation in
which they may take part by virtue of their profession.
The said prohibition, however, applies only if the sale or assignment of the property
takes place during the pendency of the litigation involving the clients property.
o Hence, a contract between a lawyer and his client stipulating a contingent fee is not covered by
said prohibition under Article 1491(5) of the Civil Code, because the payment of said fee is not
made during the pendency of the litigation but only after judgment has been rendered in the
case handled by the lawyer.
In fact, under the 1988 Code of Professional Responsibility, a lawyer may have a lien
over funds and property of his client and may apply so much thereof as may be
necessary to satisfy his lawful fees and disbursements.

1
the official proving of a will