compensatory damages plus the sum of P5,000.
00, for and as attorneys fees, with costs in favor
SERAFIN MODINA, petitioner vs. COURT OF APPEALS AND ERNESTO HONTARCIEGO,
PAUL FIGUEROA, TEODORO HIPALLA AND RAMON CHIANG,
MERLINDA CHIANG, respondents.
DECISION
PURISIMA, J.:
At bar is a Petition for Review on Certiorari assailing the decision of the Court of Appeals in
CA - G.R. CV No. 26051 affirming the decision of the trial court in the case, entitled Serafin Modina
vs Ernesto Hontarciego, Paulino Figueroa and Ramon Chiang vs Merlinda Plana Chiang,
intervenors, which declared as void and inexistent the deed of definite sale dated December 17,
1975 as well as the Certificates of Title Nos. T-86912, T-86913, T-86914 in the name of Ramon
Chiang.
The facts that matter are as follows:
The parcels of land in question are those under the name of Ramon Chiang (hereinafter
referred to as CHIANG ) covered by TCT Nos. T-86912, T-86913, and T-86914. He theorized that
subject properties were sold to him by his wife, Merlinda Plana Chiang (hereinafter referred to as
MERLINDA), as evidenced by a Deed of Absolute Sale dated December 17, 1975,[1] and were
subsequently sold by CHIANG to the petitioner Serafin Modina (MODINA), as shown by the Deeds
of Sale, dated August 3, 1979 and August 24, 1979, respectively.
MODINA brought a Complaint for Recovery of Possession with Damages against the private
respondents, Ernesto Hontarciego, Paul Figueroa and Teodoro Hipalla, docketed as Civil Case
No. 13935 before the Regional Trial Court of Iloilo City.
Upon learning the institution of the said case, MERLINDA presented a Complaint-in-
intervention, seeking the declaration of nullity of the Deed of Sale between her husband and
MODINA on the ground that the titles of the parcels of land in dispute were never legally
transferred to her husband. Fraudulent acts were allegedly employed by him to obtain a Torrens
Title in his favor.However, she confirmed the validity of the lease contracts with the other private
respondents.
MERLINDA also admitted that the said parcels of land were those ordered sold by Branch
2 of the then Court of First Instance of Iloilo in Special Proceeding No. 2469 in Intestate Estate of
Nelson Plana where she was appointed as the administratix, being the widow of the deceased,
her first husband. An Authority to Sell was issued by the said Probate Court for the sale of the
same properties.[2]
After due hearing, the Trial Court decided in favor of MERLINDA, disposing thus:
WHEREFORE, judgment is hereby rendered (1) declaring as void and inexistent the sale of Lots
10063, 10088, 10085 and 10089 of the Cadastral Survey of Sta. Barbara by Merlinda Plana in
favor of Ramon Chiang as evidenced by the deed of definite sale dated December 17, 1975
(Exhibits H; 3-Chiang; 9 Intervenor) as well as the Certificates of Title Nos. T-86912, T-86913, T-
86914 and T-86915 in the name of Ramon Chiang; (2) declaring as void and inexistent the sale
of the same properties by Ramon Chiang in favor of Serafin Modina as evidenced by the deeds
of sale (Exhibits A, B, 6 Chiang and 7 Chiang) dated August 3, and 24, 1979, as well
as. Certificates of Title Nos. T-102631, 102630, 102632 and 102890 in the name of Serafin
Modina; (3) ordering the Register of Deeds of Iloilo to cancel said certificates of title in the
names of Ramon Chiang and Serafin Modina and to reinstate the Certificates of Title Nos. T-
57960, T-57962, T-57963 and T-57864 in the name of Nelson Plana; (4) ordering Serafin
Modina to vacate and restore possession of the lots in question to Merlinda Plana Chiang; (5)
ordering Ramon Chiang to restitute and pay to Serafin Modina the sum of P145,800.00 and; (6)
ordering Serafin Modina to pay Ernesto Hontarciego the sum of P44,500.00 as actual and
of said defendants against the plaintiff.
On appeal, the Court of Appeals affirmed the aforesaid decision in toto.
Dissatisfied therewith, petitioner found his way to this Court via the present Petition for
Review under Rule 45 seeking to set aside the assailed decision of the Court of Appeals.
Raised for resolution here are: (1) whether the sale of subject lots should be nullified, (2)
whether petitioner was not a purchaser in good faith, (3) whether the decision of the trial court was
tainted with excess of jurisdiction; and (4) whether or not only three-fourths of subject lots should
be returned to the private respondent.
Anent the first issue, petitioner theorizes that the sale in question is null and void for being
violative of Article 1490[3] of the New Civil Code prohibiting sales between spouses. Consequently,
what is applicable is Article 1412[4] supra on the principle of in pari delicto, which leaves both guilty
parties where they are, and keeps undisturbed the rights of third persons to whom the lots involved
were sold; petitioner stressed.
Petitioner anchors his submission on the following statements of the Trial Court which the
Court of Appeals upheld, to wit:
Furthermore, under Art. 1490, husband and wife are prohibited to sell properties to each
other. And where, as in this case, the sale is inexistent for lack of consideration, the
principle of in pari delicto non oritur actio does not apply. (Vasquez vs Porta, 98 Phil
490). (Emphasis ours) Thus, Art. 1490 provides:
Art. 1490. The husband and the wife cannot sell property to each other, except:
(1) when a separation of property was agreed upon in the marriage settlements; or
(2) when there has been a judicial separation of property under Art. 191.
The exception to the rule laid down in Art. 1490 of the New Civil Code not having existed with
respect to the property relations of Ramon Chiang and Merlinda Plana Chiang, the sale by the
latter in favor of the former of the properties in question is invalid for being prohibited by law. Not
being the owner of subject properties, Ramon Chiang could not have validly sold the same to
plaintiff Serafin Modina. The sale by Ramon Chiang in favor of Serafin Modina is, likewise, void
and inexistent.
xxx xxx xxx[5]
The Court of Appeals, on the other hand, adopted the following findings a quo: that there is
no sufficient evidence establishing fault on the part of MERLINDA, and therefore, the principle
of in pari delicto is inapplicable and the sale was void for want of consideration. In effect,
MERLINDA can recover the lots sold by her husband to petitioner MODINA. However, the Court
of Appeals ruled that the sale was void for violating Article 1490 of the Civil Code, which prohibits
sales between spouses.
The principle of in pari delicto non oritur actio[6] denies all recovery to the guilty parties inter
se. It applies to cases where the nullity arises from the illegality of the consideration or the purpose
of the contract.[7] When two persons are equally at fault, the law does not relieve them. The
exception to this general rule is when the principle is invoked with respect to inexistent contracts.[8]
In the petition under consideration, the Trial Court found that subject Deed of Sale was a
nullity for lack of any consideration.[9] This finding duly supported by evidence was affirmed by the
Court of Appeals. Well-settled is the rule that this Court will not disturb such finding absent any
evidence to the contrary.[10]
 Under Article 1409[11] of the New Civil Code, enumerating void contracts, a contract without
consideration is one such void contract. One of the characteristics of a void or inexistent contract
is that it produces no effect. So also, inexistent contracts can be invoked by any person whenever
juridical effects founded thereon are asserted against him. A transferor can recover the object of
such contract by accion reivindicatoria and any possessor may refuse to deliver it to the
transferee, who cannot enforce the transfer.[12]
Thus, petitioners insistence that MERLINDA cannot attack subject contract of sale as she
was a guilty party thereto is equally unavailing.
But the pivot of inquiry here is whether MERLINDA is barred by the principle of in pari
delicto from questioning subject Deed of Sale.
It bears emphasizing that as the contracts under controversy are inexistent contracts within
legal contemplation, Articles 1411 and 1412 of the New Civil Code are inapplicable. In pari
delicto doctrine applies only to contracts with illegal consideration or subject matter, whether the
attendant facts constitute an offense or misdemeanor or whether the consideration involved is
merely rendered illegal.[13]
The statement below that it is likewise null and void for being violative of Article 1490 should
just be treated as a surplusage or an obiter dictum on the part of the Trial Court as the issue of
whether the parcels of land in dispute are conjugal in nature or they fall under the exceptions
provided for by law, was neither raised nor litigated upon before the lower Court. Whether the said
lots were ganancial properties was never brought to the fore by the parties and it is too late to do
so now.
Futhermore, if this line of argument be followed, the Trial Court could not have declared
subject contract as null and void because only the heirs and the creditors can question its nullity
and not the spouses themselves who executed the contract with full knowledge of the
prohibition.[14]
Records show that in the complaint-in-intervention of MERLINDA, she did not aver the same
as a ground to nullify subject Deed of Sale. In fact, she denied the existence of the Deed of Sale
in favor of her husband. In the said Complaint, her allegations referred to the want of consideration
of such Deed of Sale. She did not put up the defense under Article 1490, to nullify her sale to her
husband CHIANG because such a defense would be inconsistent with her claim that the same
sale was inexistent.
The Trial Court debunked petitioners theory that MERLINDA intentionally gave away the
bulk of her and her late husbands estate to defendant CHIANG as his exclusive property, for want
of evidentiary anchor. They insist on the Deed of Sale wherein MERLINDA made the
misrepresentation that she was a widow and CHIANG was single, when at the time of execution
thereof, they were in fact already married. Petitioner insists that this document conclusively
established bad faith on the part of MERLINDA and therefore, the principle of in pari delicto should
have been applied.
These issues are factual in nature and it is not for this Court to appreciate and evaluate the
pieces of evidence introduced below. An appellate court defers to the factual findings of the Trial
Court, unless petitioner can show a glaring mistake in the appreciation of relevant evidence.
Since one of the characteristics of a void or inexistent contract is that it does not produce
any effect, MERLINDA can recover the property from petitioner who never acquired title thereover.
As to the second issue, petitioner stresses that his title should have been respected since
he is a purchaser in good faith and for value. The Court of Appeals, however, opined that he
(petitioner) is not a purchaser in good faith. It found that there were circumstances known to
MODINA which rendered their transaction fraudulent under the attendant circumstances.
As a general rule, in a sale under the Torrens system, a void title cannot give rise to a valid
title. The exception is when the sale of a person with a void title is to a third person who purchased
it for value and in good faith.
A purchaser in good faith is one who buys the property of another without notice that some
other person has a right to or interest in such property and pays a full and fair price at the time of
the purchase or before he has notice of the claim or interest of some other person in the property.
In the case under scrutiny, petitioner cannot claim that he was a purchaser in good
faith. There are circumstances which are indicia of bad faith on his part, to wit: (1) He asked his
nephew, Placido Matta, to investigate the origin of the property and the latter learned that the
same formed part of the properties of MERLINDAs first husband; (2) that the said sale was
between the spouses; (3) that when the property was inspected, MODINA met all the lessees who
informed that subject lands belong to MERLINDA and they had no knowledge that the same lots
were sold to the husband.
It is a well-settled rule that a purchaser cannot close his eyes to facts which would put a
reasonable man upon his guard to make the necessary inquiries, and then claim that he acted in
good faith. His mere refusal to believe that such defect exists, or his wilful closing of his eyes to
the possibility of the existence of a defect in his vendors title, will not make him an innocent
purchaser for value, if it afterwards develops that the title was in fact defective, and it appears that
he had such notice of the defect as would have led to its discovery had he acted with that measure
of precaution which may reasonably be required of a prudent man in a like situation. [15]
Thus, petitioner cannot claim that the sale between him and MODINA falls under the
exception provided for by law.
With regard to the third issue posed by petitioner - whether the Trial Courts decision allowing
recovery on the part of Merlinda Chiang of subject properties was void - petitioners contention is
untennable. It is theorized that as the sale by MERLINDA was by virtue of an Order to Sell issued
in the Intestate Estate Proceedings of her late husband, Nelson Plana - to allow recovery will
defeat the said order of the Probate Court. Petitioner equated the aforesaid Order to Sell as a
judgment, which another court in a regular proceeding has no jurisdiction to reverse.
Petitioner is under the mistaken impression that as the Order to Sell had become a judgment
in itself as to the validity of the sale of the properties involved, any question as to its nullity should
have been brought before the Court of Appeals on appeal when the said Order was issued.
It is a well-settled rule that a Court of First Instance (now Regional Trial Court) has
jurisdiction over a case brought to rescind a sale made upon prior authority of a Probate
Court. This does not constitute an interference or review of the order of a co-equal Court since the
Probate Court has no jurisdiction over the question of title to subject properties. Consequently, a
separate action may be brought to determine the question of ownership. [16]
Lastly, on the issue of whether only three-fourths of the property in question should have
been returned to MERLINDA, petitioners stance is equally unsustainable. It is a settled doctrine
that an issue which was neither averred in the Complaint nor raised during the trial before the
lower court cannot be raised for the first time on appeal, as such a recourse would be offensive to
the basic rules of fair play, justice, and due process.[17]
The issue of whether only three-fourths of subject property will be returned was never an
issue before the lower court and therefore, the petitioner cannot do it now. A final word. In a
Petition for Review, only questions of law may be raised. It is perceived by the Court that what
petitioner is trying to, albeit subtly, is for the Court to examine the probative value or evidentiary
weight of the evidence presented below[18] The Court cannot do that unless the appreciation of the
pieces of evidence on hand is glaringly erroneous. But this is where petitioner utterly failed.
WHEREFORE, the Petition is DENIED and the decision of the Court of Appeals, dated
September 30, 1992, in CA-G.R. CV No. 26051 AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Melo, (Chairman), and Gonzaga Reyes, JJ., concur.
Vitug, and Panganiban, JJ., in the result.
MARIQUITA MACAPAGAL, petitioner, vs. CATALINA O. REMORIN, CORAZON CALUZA-
BAMRUNGCHEEP, and LAURELIA CALUZA-VALENCIANO, respondents.
DECISION
PUNO, J.:
Assailed in this petition for review is the Decision dated March 8, 2002 [1] of the Court of
Appeals in CA-G.R. CV No. 44814[2] which reversed and set aside the Decision of the Regional
Trial Court (RTC), Branch 88, of Quezon City in Civil Case No. Q-90-5384, as well as its Resolution
dated May 7, 2003[3] which denied petitioners motion for reconsideration.
Involved in the present controversy is a 105-square meter parcel of land located at No. 7,
Serrano Laktaw Street, Galas, Quezon City, known as Lot 5. Lot 5, together with an adjacent 52.5-
square meter lot known as Lot 4, forms part of the consolidated Lots 24 and 25, Block 12, of
subdivision plan Psd-12586, LRC Record No. 16117.
Lots 24 and 25 were registered in the name of Candido Caluza under Transfer Certificate
of Title (TCT) No. 160544. Purificacion Arce-Caluza (Purificacion) is his second wife. Corazon
Caluza-Bamrungcheep (Corazon) is his legally adopted daughter during his first marriage. After
Candido died in 1981, Corazon and Purificacion executed a Deed of Extrajudicial Settlement dated
November 21, 1981[4] adjudicating between themselves the properties of Candido, as the latters
surviving heirs. Lots 24 and 25, together with Lot 23 which was registered in Candidos name under
TCT No. 160543, were adjudicated to Corazon. Purificacion got Candidos land in Bulacan.
However, administration of Lots 23, 24 and 25 were entrusted to Purificacion by Corazon as she
had to leave for Thailand after her marriage to a Thai.
Unknown to Corazon and while she was in Thailand, the 74-year old Purificacion executed
an Affidavit of Loss dated December 31, 1983 alleging that TCT Nos. 160543 and 160544 were
lost and could no longer be found. She filed a petition with the RTC of Quezon City for the issuance
of new owners duplicates of title alleging that she was her deceased husbands sole heir. The
petition was granted and TCT Nos. 326633 and 326634 were issued in Purificacions name. In
July 1986, Purificacion sold the lots to Catalina Remorin (Catalina) who was issued TCT Nos.
346876 and 347859. Catalina mortgaged Lots 24 and 25 to L & R Lending Corporation for two
hundred thousand (P200,000.00) pesos.
After she learned of the foregoing, Corazon, through her attorney-in-fact Ramon Remorin,
filed a complaint on December 29, 1986 for reconveyance and damages against Purificacion and
Catalina before the RTC of Quezon City, docketed as Civil Case No. Q-49661. Plaintiff alleged
that the two defendants connived with each other in transferring the three lots in their names
through simulated sales. Corazon likewise filed a criminal complaint for falsification and perjury
against the two before the Office of the City Fiscal of Quezon City, docketed as I.S. No. 87-07726.
On May 4, 1987, Catalina executed a Deed of Transfer, signed by Purificacion as witness,
admitting the wrong they did in illegally transferring the lots in their names and acknowledging
Corazon to be the rightful owner under the Deed of Extrajudicial Settlement dated November 21,
1981. The document was presented by Corazon in a motion to dismiss Civil Case No. Q-49661
but the motion was withdrawn when counsel for Catalina and Purificacion objected on the ground
that the Deed of Transfer was executed without his legal assistance. The Deed of Transfer,
however, was presented by Corazon before the Register of Deeds of Quezon City. Catalinas TCT
No. 347859 over Lots 24 and 25 was cancelled and TCT No. 375605 was issued in Corazons
name. Prior thereto, however, Catalina mortgaged Lots 24 and 25 to respondent Laurelia Caluza-
Valenciano (Laurelia) for two hundred ninety-five thousand (P295,000.00) pesos to pay off her
mortgage indebtedness to L & R Lending Corporation. The inscription of the mortgage in favor of
Laurelia was carried over to Corazons TCT No. 375605.
On March 21, 1988, Corazon, Purificacion, Catalina, and Laurelia executed a Memorandum
of Agreement[5] to settle Civil Case No. Q-49661 and Criminal Charge No. I.S. 87-07726. The
Agreement read -
This memorandum of agreement, made and executed by and among -
CORAZON CALUZA-BAMRUNGCHEEP, of legal age, married, citizen of Thailand by marriage
but Filipino by birth, resident of Bangkok, Thailand, represented by her attorney-in-fact,
CONSUELO R. CARUBIO;
PURIFICACION ARCE-CALUZA and CATALINA OGOY-REMORIN, of legal ages, widow[s],
Filipino citizens and residents at (sic) No. 7 Serrano Laktaw St., Quezon City; and
LAURELIA VALENCIANO, of legal age, married, Filipino citizen, and resident of No. 98 Bayani
St., Santol, Quezon City;
witnesseth, that -
Whereas, the above-named parties are involved in Civil Case No. Q-49661 of the Regional Trial
Court of Quezon City and in Criminal Charge No. I.S. 87-07726 of the City Fiscals Office of
Quezon City;
Whereas, said parties have decided to mutually resolve their differences out-of-court voluntarily
and without any duress or undue influence on both (sic) of them;
Now, therefore, for and in consideration of the foregoing premises, the above parties hereby
agree and stipulate as follows:
That the first party, Corazon Caluza-Bamrungcheep, hereby cedes and grants unto and in favor
of Purificacion Arce-Caluza full ownership and other real rights over the southernmost apartment
(garage) as well as the portion of the lot occupied thereby, described as Lot 25, Block 12 of the
subdn. plan Psd-12586 covered by Transfer Certificate of Title No. 375605 of the Registry of
Deeds for Quezon City; subject to the condition that said Purificacion Arce-Caluza shall assume
satisfaction of the mortgage debt contracted by Catalina Ogoy-Remorin in favor of Mrs. Laurelia
C. Valenciano annotated at the back of the title thereof; and shall cause transfer of said
annotation to the title to be issued in her (Purificacions) name; and furthermore that any and all
expenses for segregation survey, re-titling and annotation of said mortgage shall be shouldered
by said Purificacion Arce-Caluza;
That the parties agree that they shall execute such formal requisites for the implementation of
this agreement, and that henceforth they waive and renounce whatever conflicting claims they
may have over the intestate estate of Candido Caluza, deceased.
Before the agreement could be implemented, however, Purificacion died on July 28, 1988.
Consequently, another compromise agreement[6] was executed on September 9, 1988, viz.:
PLAINTIFF AND DEFENDANTS (sic) respectfully submit for the kind consideration and approval
of the Honorable Court this Compromise Agreement, which provides, thus:
1. That they agreed, as they hereby agree, to dismiss the complaint of the plaintiff as well as the
counterclaim of the defendants (sic);
2. That they bind themselves not to bring any further action, suit or complaint against each other
in connection with this case and/or the property in question or the subject-matter hereof;
3. That pursuant to the parties Memorandum of Agreement of March 21, 1986 (sic), a copy of
which is attached as Annex A hereof, and with the death of defendant Purificacion Arce Caluza
on July 28, 1988, in Quezon City, without an heir, plaintiff Corazon Caluza Bamrungcheep and
defendant Catalina O. Remorin agreed, as they hereby agree, that title to the southernmost
apartment (garage) as well as the portion of the lot occupied thereby, described as Lot 25, Block
12 of the subdivision plan Psd-12586 covered by Transfer Certificate of Title No. 375605 of the
Registry of Deeds for Quezon City shall be transferred direct to its interested buyer with
defendant Catalina O. Remorin assuming and paying (from the proceeds of the sale) her
mortgage obligation with Mrs. Laurelia C. Valenciano annotated at the back of the title thereof;
any and all expenses for segregation survey, re-titling, capital gains taxes and those connected
with the annotation and/or release of said mortgage should now be shouldered by defendant
Catalina O. Remorin; said defendant further agrees to execute such other documents or papers
as are necessary to implement the aforementioned Memorandum of Agreement of March 21,
1986 (sic).
The Agreement was approved by Judge Benigno T. Dayaw in his Decision dated September
16, 1988.[7]
On May 24, 1989, Corazon sold the subject Lot 5 to Laurelia by virtue of a deed entitled
Sale of Unsegregated Portion of Land. Controversy erupted anew when Catalina sold the same
lot to herein petitioner Mariquita Macapagal on August 24, 1989 claiming to be authorized under
the Compromise Agreement. Laurelia demanded that petitioner and her family vacate the
premises, to no avail. On November 28, 1989, Laurelia filed an ejectment suit against petitioner
before the Metropolitan Trial Court (MeTC) of Quezon City, docketed as Civil Case No. 2244. In
turn, petitioner filed a complaint for nullification of contract and damages with prayer for a
temporary restraining order and/or writ of preliminary prohibitory injunction against Catalina,
Corazon and Laurelia before the RTC of Quezon City, docketed as Civil Case No. Q-90-5384,
root of the present petition. Petitioner sought to nullify the sale executed by Corazon in favor of
Laurelia and to declare valid the one executed by Catalina in her favor. Plaintiff likewise asked
that the MeTC of Quezon City be ordered to desist from hearing the ejectment suit.
On October 15, 1993, the RTC of Quezon City rendered judgment in favor of
petitioner.[8] Corazon and Laurelia appealed to the Court of Appeals which reversed the decision
of the trial court.[9] Hence, this petition for review.
Petitioner contends that the sale executed by Catalina in her favor should prevail over the
one executed by Corazon in favor of Laurelia, as Catalina was the one authorized to sell the
disputed property under the Compromise Agreement dated September 9, 1988.
Respondents, on the other hand, contend that Corazon, the registered owner of the disputed
property, did not give Catalina authority to sell the lot considering Catalinas connivance with
Purificacion in illegally transferring the lots in their names, in the first place. It was provided in the
Agreement that Catalina shall pay off her mortgage obligation and incidental expenses from the
proceeds of the sale only to reassure Catalina that her obligation would be paid in the event that
Corazon sells the property.
We rule in favor of respondents.
As correctly pointed out by the appellate court, Corazon was the registered owner of the
disputed Lot 5 at the time the two sales were executed. As owner, she had the right to enjoy and
dispose of Lot 5 as well as to exclude any person from such enjoyment and disposal.[10] A waiver
may not be casually attributed when the terms thereof do not explicitly and clearly prove an intent
to abandon the right.[11]
In the case at bar, the Compromise Agreement dated September 9, 1988 cannot be taken
as a waiver of Corazons authority to sell and grant thereof to Catalina considering that the
Agreement merely provided that Catalina pay off her mortgage obligation and incidental expenses
from the proceeds of the sale. Although it was imperative, as part of the compromise, that the
money come from the proceeds of the sale, it was not expressly stated, nor did it necessarily
mean, that Catalina herself be the one to directly sell the property. The money may merely be
handed over to her for such payment. The rule is that any reasonable doubt that the language
used conveys authority to sell will yield a construction that no such authority has been
given.[12] Authority to sell must be couched in clear and unmistakable language.[13]
Moreover, intent to give Catalina authority to sell may not be easily attributed to Corazon
considering that the latter had to file the reconveyance case as a result of Purificacions and
Catalinas acts of transferring the disputed lot in their names notwithstanding the clear terms of the
Deed of Extrajudicial Settlement dated November 21, 1981. In contract interpretation, analysis is
not to be limited to the words used in the contract, as they may not accurately reflect the parties
true intent.[14] Ambiguities are construed against the drafter only when justified by the operative
facts and surrounding circumstances.[15] It is for this reason that the interpreter must look at the
reason behind and the circumstances under which the contract was executed. [16] If the words of
the contract appear to be contrary to the evident intention as revealed by the circumstances, the
latter shall prevail over the former.[17]
Even assuming arguendo that the parties intended to confer upon Catalina authority to sell
the disputed property, they clearly did not intend the Agreement to be the document itself
considering that they agreed to execute such other documents or papers as are necessary to
implement the agreement,[18] which they never did. Under Article 1878, paragraph 5 of the Civil
Code, a special power of attorney is necessary for an agent to enter into any contract by which
the ownership of an immovable property is transmitted or acquired either gratuitously or for a
valuable consideration. Catalina admittedly did not have such a document in her favor.
Neither can petitioner demand enforcement of the Compromise Agreement on the ground
that she was the interested buyer referred to therein to whom title to the disputed property shall
be directly transferred. Being a stranger to the Agreement, petitioner cannot demand its
enforcement for it is settled that a compromise agreement determines the rights and obligations
only of the parties to it.[19] It cannot favor or prejudice a third person[20] even if he was aware of the
contract and has acted with knowledge of it.[21] Moreover, if petitioner was indeed the interested
buyer referred to in the Agreement and there was already a closed deal between her, Corazon
and Catalina, even before the execution of the Compromise Agreement,[22] it is strange that
petitioner was not identified outright as the buyer and that the Deed of Sale in her favor was
executed only some twelve (12) months after or on August 24, 1989.
Petitioner cannot be considered a buyer in good faith considering that she did not buy the
disputed lot from its registered owner. One who buys from a person who is not the registered
owner is not a buyer in good faith.[23] Moreover, in double sales of real property, ownership passes
to the vendee who, in good faith, first recorded it in the Registry of Property. [24] TCT No. 43235
was issued in Laurelias name on July 21, 1989 by virtue of the Sale of Unsegregated Portion of
Land executed in her favor by Corazon.
The fact that the deed of sale between respondents Corazon and Laurelia did not accurately
reflect the true consideration thereof is not cause for declaration of its nullity. When the parties
intended to be bound by the contract except that it did not reflect the actual purchase price of the
property, there is only a relative simulation of the contract which remains valid and
enforceable.[25] It cannot be declared null and void since it does not fall under the category of an
absolutely simulated or fictitious contract.[26] The contract of sale is valid but subject to
reformation.[27]
IN VIEW WHEREOF, the petition is DENIED. The assailed Decision of the Court of Appeals,
dated March 8, 2002, as well as its Resolution dated May 7, 2003 in CA-G.R. CV No. 44814 is
AFFIRMED.
SO ORDERED.
Austria-Martinez, Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.
HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE; Namely, ANTONIO T.
BALITE, FLOR T. BALITE-ZAMAR, VISITACION T. BALITE-DIFUNTORUM, PEDRO
T. BALITE, PABLO T. BALITE, GASPAR T. BALITE, CRISTETA T. BALITE and
AURELIO T. BALITE JR., All Represented by GASPAR T. BALITE, petitioners, vs.
RODRIGO N. LIM, respondent.
DECISION
PANGANIBAN, J.:
A deed of sale that allegedly states a price lower than the true consideration is nonetheless
binding between the parties and their successors in interest. Furthermore, a deed of sale in which
the parties clearly intended to transfer ownership of the property cannot be presumed to be an
equitable mortgage under Article 1602 of the Civil Code. Finally, an agreement that purports to
sell in metes and bounds a specific portion of an unpartitioned co-owned property is not void; it
shall effectively transfer the sellers ideal share in the co-ownership.
The Case
[1]
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the
February 11, 2002 Decision[2] of the Court of Appeals (CA) in CA-GR CV No. 65395. The decretal
portion of the Decision reads as follows:
IN THE LIGHT OF ALL THE FOREGOING, the Decision of the Court a quo subject of the
appeal is hereby SET ASIDE AND REVERSED and another Decision is hereby rendered as
follows:
1. The Deed of Absolute Sale (Exhibit A) is valid only insofar as the pro indiviso share of
Esperanza Balite over the property covered by Original Certificate of Title No. 10824 is
concerned;
2. The Register of Deeds is hereby ordered to cancel Transfer Certificate of Title No. 6683 and
to issue another over the entirety of the property covered by Original Certificate of Title No.
10824, upon the payment of the capital gains tax due, as provided for by law, (based on the
purchase price of the property in the amount of P1,000,000.00), with the following as co-owners,
over the property described therein:
a) Each of the [petitioners] over an undivided portion of 975 square meters;
b) The [respondent], with an undivided portion of 9,751 square meters.
3. The [respondent] is hereby ordered to pay to the [petitioners] the amount of P120,000.00,
within a period of five (5) months from the finality of the Decision of this Court;
4. In the event that the [respondent] refuses or fails to remit the said amount to the [petitioner]
within the period therefor, the rights and obligations of the parties shall be governed by Republic
6552 (Maceda Law).[3]
The Facts
The CA summarized the facts in this manner:
The spouses Aurelio x x x and Esperanza Balite were the owners of a parcel of land, located [at]
Poblacion (Barangay Molave), Catarman, Northern Samar, with an area of seventeen thousand
five hundred fifty-one (17,551) square meters, [and] covered by Original Certificate of Title [OCT]
No. 10824. When Aurelio died intestate [in 1985, his wife], Esperanza Balite, and their children,
x x x [petitioners] Antonio Balite, Flor Balite-Zamar, Visitacion Balite-Difuntorum, Pedro Balite,
Pablo Balite, Gaspar Balite, Cristeta (Tita) Balite and Aurelio Balite, Jr., inherited the [subject]
property and became co-owners thereof, with Esperanza x x x inheriting an undivided [share] of
[9,751] square meters.
In the meantime, Esperanza x x x [became] ill and was in dire need of money for her hospital
expenses x x x. She, through her daughter, Cristeta, offered to sell to Rodrigo Lim, [her]
undivided share x x x for the price of P1,000,000.00. x x x Esperanza x x x and Rodrigo x x x
agreed that, under the Deed of Absolute Sale, to be executed by Esperanza x x x over the
property, it will be made to appear that the purchase price of the property would be P150,000.00,
although the actual price agreed upon by them for the property was P1,000,000.00.
On April 16, 1996, Esperanza x x x executed a Deed of Absolute Sale in favor of Rodrigo N. Lim
over a portion of the property, covered by [OCT] No. 10824, with an area of 10,000 square
meters, for the price of P150,000.00 x x x.
[They] also executed, on the same day, a Joint Affidavit under which they declared that the real
price of the property was P1,000,000.00, payable to Esperanza x x x, by installments, as follows:
1. P30,000.00 upon signing today of the document of sale.
2. P170,000.00 payable upon completion of the actual relocation survey of the land
sold by a Geodetic Engineer.
3. P200,000.00 payable on or before May 15, 1996.
4. P200,000.00 payable on or before July 15, 1996.
5. P200,000.00 payable on or before September 15, 1996.
6. P200,000.00 payable on or before December 15, 1996.
Only Esperanza and two of her children, namely, Antonio x x x and Cristeta x x x, knew about
the said transaction. x x x Geodetic Engineer Bonifacio G. Tasic conducted a subdivision survey
of the property and prepared a Sketch Plan showing a portion of the property, identified as Lot
243 with an area of 10,000 square meters, under the name Rodrigo N. Lim.
The Sketch Plan was signed by Rodrigo x x x and Esperanza. Thereafter, Rodrigo x x x took
actual possession of the property and introduced improvements thereon. He remitted to
Esperanza x x x and Cristeta x x x sums of money in partial payments of the x x x property for
which he signed Receipts.
Gaspar, Visitacion, Flor, Pedro and Aurelio, Jr. x x x learned of the sale, and on August 21,
1996, they wrote a letter to the Register of Deeds [RD] of Northern Samar, [saying] that they
[were] not x x x informed of the sale of a portion of the said property by their mother x x x nor did
they give their consent thereto, and requested the [RD] to:
x x x hold in abeyance any processal or approval of any application for registration of title of
ownership in the name of the buyer of said lot, which has not yet been partitioned judicially or
extrajudicially, until the issue of the legality/validity of the above sale has been cleared.
On August 24, 1996, Antonio x x x received from Rodrigo x x x, the amount of P30,000.00 in
partial payment of [the] property and signed a Receipt for the said amount, declaring therein
that the remaining balance of P350,000.00 shall personally and directly be released to my
mother, Esperanza Balite, only. However, Rodrigo x x x drew and issued RCBC Check No.
309171, dated August 26, 1996, [payable] to the order of Antonio Balite in the amount
of P30,000.00 in partial payment of the property.
On October 1, 1996, Esperanza x x x executed a Special Power of Attorney appointing her son,
Antonio, to collect and receive, from Rodrigo, the balance of the purchase price of the x x x
property and to sign the appropriate documents therefor.
On October 23, 1996, Esperanza signed a letter addressed to Rodrigo informing the latter that
her children did not agree to the sale of the property to him and that she was withdrawing all her
commitments until the validity of the sale is finally resolved:
xxxxxxxxx
On October 31, 1996, Esperanza died intestate and was survived by her aforenamed children.
[Meanwhile], Rodrigo caused to be published, in the Samar Reporter, on November 14, 21 and
28, 1996, the aforesaid Deed of Absolute Sale. Earlier, on November 21, 1996, Antonio received
the amount of P10,000.00 from Rodrigo for the payment of the estate tax due from the estate of
Esperanza.
Also, the capital gains tax, in the amount of P14,506.25, based on the purchase price
of P150,000.00 appearing on the Deed of Absolute Sale, was paid to the Bureau of Internal
Revenue which issued a Certification of said payments, on March 5, 1997, authorizing the
registration of the Deed of Absolute Sale x x x. However, the [RD] refused to issue a title over
the property to and under the name of Rodrigo unless and until the owners duplicate of OCT No.
10824 was presented to [it]. Rodrigo filed a Petition for Mandamus against the RD with the
Regional Trial Court of Northern Samar (Rodrigo Lim versus Fernando Abella, Special Civil
Case No. 48). x x x. On June 13, 1997, the court issued an Order to the RD to cancel OCT No.
10824 and to issue a certificate of title over Lot 243 under the name of Rodrigo.
On June 27, 1997, [petitioners] filed a complaint against Rodrigo with the Regional Trial Court of
Northern Samar, entitled and docketed as Heirs of the Spouses Aurelio Balite, et al. versus
Rodrigo Lim, Civil Case No. 920, for Annulment of Sale, Quieting of Title, Injunction and
Damages x x x, [the origin of the instant case.]
xxxxxxxxx
The [petitioners] had a Notice of Lis Pendens, dated June 23, 1997, annotated, on June 27,
1997, at the dorsal portion of OCT No. 10824.
In the meantime, the RD cancelled, on July 10, 1997, OCT No. 10824 and issued Transfer
Certificate of Title [TCT] No. 6683 to and under the name of Rodrigo over Lot 243. The Notice of
Lis Pendens x x x was carried over in TCT No. 6683.
Subsequently, Rodrigo secured a loan from the Rizal Commercial Banking Corporation in the
amount of P2,000,000.00 and executed a Real Estate Mortgage over the [subject] property as
security therefor.
On motion of the [petitioners], they were granted x x x leave to file an Amended Complaint
impleading the bank as [additional] party-defendant. On November 26, 1997, [petitioners] filed
their "Amended Complaint.
The [respondent] opposed the Amended Complaint x x x contending that it was improper for
[petitioners] to join, in their complaint, an ordinary civil action for the nullification of the Real
Estate Mortgage executed by the respondent in favor of the Bank as the action of the petitioners
before the court was a special civil action.
On March 30, 1998, the court issued an Order rejecting the Amended Complaint of the
petitioners on the grounds that: (a) the Bank cannot be impleaded as party-defendant under
Rule 63, Section 1 of the 1997 Rules of Civil Procedure; (b) the Amended Complaint constituted
a collateral attack on TCT No. 6683. The [petitioners] did not file any motion for the
reconsideration of the order of the court.[4]
The trial court dismissed the Complaint and ordered the cancellation of the lis
pendens annotated at the back of TCT No. 6683. It held that, pursuant to Article 493 of the Civil
Code, a co-owner has the right to sell his/her undivided share. The sale made by a co-owner is
not invalidated by the absence of the consent of the other co-owners. Hence, the sale by
Esperanza of the 10,000-square-meter portion of the property was valid; the excess from her
undivided share should be taken from the undivided shares of Cristeta and Antonio, who expressly
agreed to and benefited from the sale.
Ruling of the Court of Appeals
The CA held that the sale was valid and binding insofar as Esperanza Balites undivided
share of the property was concerned. It affirmed the trial courts ruling that the lack of consent of
the co-owners did not nullify the sale. The buyer, respondent herein, became a co-owner of the
property to the extent of the pro indiviso share of the vendor, subject to the portion that may be
allotted to him upon the termination of the co-ownership. The appellate court disagreed with the
averment of petitioners that the registration of the sale and the issuance of TCT No. 6683 was
ineffective and that they became the owners of the share of Esperanza upon the latters death.
The CA likewise rejected petitioners claim that the sale was void allegedly because the
actual purchase price of the property was not stated in the Deed of Absolute Sale. It found that
the true and correct consideration for the sale was P1,000,000 as declared by Esperanza and
respondent in their Joint Affidavit. Applying Article 1353[5] of the Civil Code, it held that the falsity
of the price or consideration stated in the Deed did not render it void. The CA pointed out, however,
that the State retained the right to recover the capital gains tax based on the true price
of P1,000,000.
The appellate court rejected petitioners contention that, because of the allegedly
unconscionably low and inadequate consideration involved, the transaction covered by the Deed
was an equitable mortgage under Article 1602 of the Civil Code. Observing that the argument had
never been raised in the court a quo, it ruled that petitioners were proscribed from making this
claim, for the first time, on appeal.
The CA further held that the remaining liability of respondent was P120,000. It relied on the
Receipt dated August 24, 1996, which stated that his outstanding balance for the consideration
was P350,000. It deducted therefrom the amounts of P30,000 received by Antonio on August 27,
1996; and P200,000, which was the amount of the check dated September 15, 1996, issued by
respondent payable to Esperanza.
 Finally, the appellate court noted that the mortgage over the property had been executed
after the filing of the Complaint. What petitioners should have filed was a supplemental complaint
instead of an amended complaint. Contrary to respondents argument, it also held that the bank
was not an indispensable party to the case; but was merely a proper party. Thus, there is
no necessity to implead it as party-defendant, although the court a quo had the option to do so.
And even if it were not impleaded, the appellate court ruled that the bank would still have been
bound by the outcome of the case, as the latter was a mortgagee pendente lite over real estate
that was covered by a certificate of title with an annotated lis pendens.
Hence, this Petition.[6]
Issues
In their Memorandum, petitioners present the following issues:
A Petitioners contend that the Deed of Absolute Sale is null and void, because the
Whether or not the [CA] seriously erred in not deciding that the Deed of Absolute Sale dated
April 16, 1996 is null and void on the grounds that it is falsified; it has an unlawful cause; and it is
contrary to law and/or public policy.
B
Whether or not the [CA] gravely erred in not finding that the amount paid by [respondent] is only
three hundred twenty thousand (P320,000.00) pesos and that respondents claim that he has
paid one million pesos except P44,000.00 as balance, is fraudulent and false.
C the parties real agreement binds them.[9]
Whether or not the [CA] seriously erred in not deciding that at the time the Deed of Sale was
registered x x x on May 30, 1997, said Deed of Sale can no longer bind the property covered by
OCT No. 10824 because said land had already become the property of all the petitioners upon
the death of their mother on October 31, 1996 and therefore such registration is functus
of[f]icio involving a null and void document.
D prompted Esperanza to unilaterally withdraw from the transaction.
Whether or not the [CA] seriously erred in not ruling that petitioners amended complaint dated
November 27, 1997 was proper and admissible and deemed admitted to conform to evidence
presented.
E The juridical nature of the Contract remained the same. What was concealed was merely
Whether or not the [CA] seriously erred in not declaring that TCT No. T-6683 in the name of
Respondent Rodrigo N. Lim is null and void and all dealings involving the same are likewise null
and void and/or subject to the decision of the case at bar in view of the notice of lis pendens
annotated therein.
F
Even assuming but without admitting that the Deed of Sale is enforceable, the respondent court
seriously erred in not deciding that the consideration is unconscionably low and inadequate and
therefore the transaction between the executing parties constitutes an equitable mortgage.
G price of the sale -- in the present case, the reduction of capital gains tax liability -- should not be
The [CA] greatly erred in not rendering judgment awarding damages and attorneys fee[s] in
favor of petitioners among others.[7]
In sum, the issues raised by petitioners center on the following: 1) whether the Deed of
Absolute Sale is valid, and 2) whether there is still any sum for which respondent is liable.
The Courts Ruling
The Petition has no merit.
First Issue:
Validity of the Sale
undervalued consideration indicated therein was intended for an unlawful purpose -- to avoid the
payment of higher capital gains taxes on the transaction. According to them, the appellate courts
reliance on Article 1353 of the Civil Code was erroneous. They further contend that the Joint
Affidavit is not proof of a true and lawful cause, but an integral part of a scheme to evade paying
lawful taxes and registration fees to the government.
We have before us an example of a simulated contract. Article 1345 of the Civil Code
provides that the simulation of a contract may either be absolute or relative. In absolute simulation,
there is a colorable contract but without any substance, because the parties have no intention to
be bound by it. An absolutely simulated contract is void, and the parties may recover from each
other what they may have given under the contract.[8] On the other hand, if the parties state a false
cause in the contract to conceal their real agreement, such a contract is relatively simulated. Here,
In the present case, the parties intended to be bound by the Contract, even if it did not reflect
the actual purchase price of the property. That the parties intended the agreement to produce
legal effect is revealed by the letter of Esperanza Balite to respondent dated October 23,
1996[10] and petitioners admission that there was a partial payment of P320,000 made on the basis
of the Deed of Absolute Sale. There was an intention to transfer the ownership of over 10,000
square meters of the property . Clear from the letter is the fact that the objections of her children
Since the Deed of Absolute Sale was merely relatively simulated, it remains valid and
enforceable. All the essential requisites prescribed by law for the validity and perfection of
contracts are present. However, the parties shall be bound by their real agreement for a
consideration of P1,000,000 as reflected in their Joint Affidavit.[11]
the actual price. Where the essential requisites are present and the simulation refers only to the
content or terms of the contract, the agreement is absolutely binding and enforceable[12] between
the parties and their successors in interest.
Petitioners cannot be permitted to unmake the Contract voluntarily entered into by their
predecessor, even if the stated consideration was included therein for an unlawful purpose. The
binding force of a contract must be recognized as far as it is legally possible to do so.[13] However,
as properly held by the appellate court, the government has the right to collect the proper taxes
based on the correct purchase price.
Being onerous, the Contract had for its cause or consideration the price of P1,000,000. Both
this consideration as well as the subject matter of the contract -- Esperanzas share in the property
covered by OCT No. 10824 -- are lawful. The motives of the contracting parties for lowering the
confused with the consideration.[14] Although illegal, the motives neither determine nor take the
place of the consideration. [15]
Deed of Sale not an
Equitable Mortgage
Petitioner further posits that even assuming that the deed of sale is valid it should only be
deemed an equitable mortgage pursuant to Articles 1602 and 1604 of the Civil Code, because the
price was clearly inadequate. They add that the presence of only one of the circumstances
enumerated under Article 1602 would be sufficient to consider the Contract an equitable mortgage.
We disagree.
For Articles 1602 and 1604 to apply, two requisites must concur: one, the parties entered
into a contract denominated as a contract of sale; and, two, their intention was to secure an
existing debt by way of mortgage.[16]
Indeed, the existence of any of the circumstances enumerated in Article 1602, not a
concurrence or an overwhelming number thereof, suffices to give rise to the presumption that a
contract purporting to be an absolute sale is actually an equitable mortgage. [17] In the present
case, however, the Contract does not merely purport to be an absolute sale. The records and the
documentary evidence introduced by the parties indubitably show that the Contract is, indeed, one
of absolute sale. There is no clear and convincing evidence that the parties agreed upon a
mortgage of the subject property.
Furthermore, the voluntary, written and unconditional acceptance of contractual
commitments negates the theory of equitable mortgage. There is nothing doubtful about the terms
of, or the circumstances surrounding, the Deed of Sale that would call for the application of Article
1602. The Joint Affidavit indisputably confirmed that the transaction between the parties was a
sale.
When the words of a contract are clear and readily understandable, there is no room for
construction. Contracts are to be interpreted according to their literal meaning and should not be
interpreted beyond their obvious intendment.[18] The contract is the law between the parties.
Notably, petitioners never raised as an issue before the trial court the fact that the document
did not express the true intent and agreement of the contracting parties. They raised mere
suppositions on the inadequacy of the price, in support of their argument that the Contract should
be considered as an equitable mortgage.
We find no basis to conclude that the purchase price of the property was grossly inadequate.
Petitioners did not present any witness to testify as to the market values of real estate in the
subjects locale. They made their claim on the basis alone of the P2,000,000 loan that respondent
had been able to obtain from the Rizal Commercial Banking Corporation. This move did not
sufficiently show the alleged inadequacy of the purchase price. A mortgage is a mere security for
a loan. There was no showing that the property was the only security relied upon by the bank; or
that the borrowers had no credit worthiness, other than the property offered as collateral.
Co-Ownership
The appellate court was correct in affirming the validity of the sale of the property insofar as
the pro indiviso share of Esperanza Balite was concerned.
Article 493 of the Civil Code[19] gives the owner of an undivided interest in the property the
right to freely sell and dispose of such interest. The co-owner, however, has no right to sell or
alienate a specific or determinate part of the thing owned in common, because such right over the
thing is represented by an aliquot or ideal portion without any physical division. Nonetheless, the
mere fact that the deed purports to transfer a concrete portion does not per se render the sale
void.[20] The sale is valid, but only with respect to the aliquot share of the selling co-owner.
Furthermore, the sale is subject to the results of the partition upon the termination of the co-
ownership.
Hence, the transaction between Esperanza Balite and respondent could be legally
recognized only in respect to the formers pro indiviso share in the co-ownership. As a matter of
fact, the Deed of Absolute Sale executed between the parties expressly referred to the 10,000-
square-meter portion of the land sold to respondent as the share of Esperanza in the conjugal
property. Her clear intention was to sell merely her ideal or undivided share in it. No valid objection
can be made against that intent. Clearly then, the sale can be given effect to the extent of 9,751
square meters, her ideal share in the property as found by both the trial and the appellate courts.
Transfer of Property
During her lifetime, Esperanza had already sold to respondent her share in the subject
parcel; hence her heirs could no longer inherit it. The property she had transferred or conveyed
no longer formed part of her estate to which her heirs may lay claim at the time of her death. The
transfer took effect on April 16, 1996 (the date the Deed of Absolute Sale was executed), and not
on May 30, 1997, when the Deed of Absolute Sale was registered. Thus, petitioners claim that the
property became theirs upon the death of their mother is untenable.
Second Issue:
Respondents Liability
Petitioners insist that the appellate court erred in holding that respondents outstanding
liability on the Deed of Sale was P120,000, when the Receipts on record show payments in the
total amount of P320,000 only. They argue that the August 24, 1996 Receipt, on which the
appellate court based its conclusion, was unreliable.
To begin with, this Court is not a trier of facts. [21] It is not its function to examine and
determine the weight of the evidence. Well-entrenched is the doctrine that only errors of
law,[22] and not of facts, are reviewable by this Court in a petition for review on certiorari under
Rule 45 of the Revised Rules of Court. Philippine Airlines, Inc. v. Court of Appeals[23]has held that
factual findings of the Court of Appeals are binding and conclusive upon the Supreme Court.
These findings may be reviewed[24] only under exceptional circumstances such as, among others,
when the inference is manifestly mistaken;[25] the judgment is based on a misapprehension of
facts;[26] findings of the trial court contradict those of the CA; [27] or the CA manifestly overlooked
certain relevant and undisputed facts that, if properly considered, would justify a different
conclusion.[28]
Although the factual findings of the two lower courts were not identical, we hold that in the
present case, the findings of the CA are in accord with the documents on record. The trial court
admitted in evidence the August 24, 1996 Receipt signed by Antonio Balite. Interestingly, he was
never presented in the lower court to dispute the veracity of the contents of that Receipt,
particularly the second paragraph that had categorically stated the outstanding balance of
respondent as of August 24, 1996, to be P350,000. Furthermore, the evidence shows that
subsequent payments of P30,000 and P200,000 were made by the latter. Thus, we affirm the CAs
Decision holding that the remaining unpaid balance of the price was P120,000.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs
against the petitioners.
SO ORDERED.
Sandoval-Gutierrez, Carpio-Morales, and Garcia, JJ., concur.
 Corona, J., on leave.
[G.R. No. 119777. October 23, 1997]
THE HEIRS OF PEDRO ESCANLAR, FRANCISCO HOLGADO and the SPOUSES DR. EDWIN
A. JAYME and ELISA TAN-JAYME, petitioners, vs. THE HON. COURT OF
APPEALS, GENEROSA MARTINEZ, CARMEN CARI-AN, RODOLFO CARI-AN,
NELLY CHUA CARI-AN, for herself and as guardian ad litem of her minor son,
LEONELL C. CARI-AN, FREDISMINDA CARI-AN, the SPOUSES PAQUITO CHUA
and NEY SARROSA-CHUA and THE REGISTER OF DEEDS OF NEGROS
OCCIDENTAL, respondents.
[G.R. No. 120690. October 23, 1997]
FRANCISCO HOLGADO and HRS. OF PEDRO ESCANLAR, namely BERNARDO, FELY,
SONIA, LILY, DYESEBEL and NOEMI all surnamed ESCANLAR, petitioners,
vs. HON. COURT OF APPEALS, GENEROSA MARTINEZ, CARMEN CARI-AN,
RODOLFO CARI-AN, NELLY CHUA CARI-AN, for herself and as guardian ad
litem of her minor son, LEONELL C. CARI-AN and FREDISMINDA CARI-AN, and
SP. PAQUITO CHUA and NEY SARROSA CHUA and REGISTER OF DEEDS OF
NEGROS OCCIDENTAL, respondents.
D E C I S I ON
ROMERO, J.:
Before us are consolidated petitions for review of the decision of the Court of Appeals in
CA-G.R. CV No. 39975 which affirmed the trial courts pronouncement that the deed of sale of
rights, interests and participation in favor of petitioners is null and void.
The case arose from the following facts:
Spouses Guillermo Nombre and Victoriana Cari-an died without issue in 1924 and 1938,
respectively. Nombres heirs include his nephews and grandnephews. Victoriana Cari-an was
succeeded by her late brothers son, Gregorio Cari-an. The latter was declared as Victorianas
heir in the estate proceedings for Nombre and his wife (Special Proceeding No 7-7279).[1] After
Gregorio died in 1971, his wife, Generosa Martinez, and children, Rodolfo, Carmen, Leonardo
and Fredisminda, all surnamed Cari-an, were also adjudged as heirs by representation to
Victorianas estate.[2] Leonardo Cari-an passed away, leaving his widow, Nelly Chua vda.
de Cari-an and minor son Leonell, as his heirs.
Two parcels of land, denominated as Lot No. 1616 and 1617 of the Kabankalan Cadastre with
an area of 29,350 square meters and 460,948 square meters, respectively, formed part of the
estate of Nombre and Cari-an.
On September 15, 1978, Gregorio Cari-ans heirs, herein collectively referred to as private
respondents Cari-an, executed the Deed of Sale of Rights, Interests and Participation worded as
follows:
NOW, THEREFORE, for and in consideration of the sum of TWO HUNDRED SEVENTY-FIVE
THOUSAND (P275,000.00) Pesos, Philippine Currency, to be paid by the VENDEES to the
VENDORS, except the share of the minor child of Leonardo Cari-an, which should be deposited
with the Municipal Treasurer of Himamaylan, Province of Negros Occidental, by the order of the
Court of First Instance of Negros Occidental, Branch VI, Himamaylan, by those presents, do
hereby SELL, CEDE, TRANSFER and CONVEY by way of ABSOLUTE SALE, all the RIGHTS,
INTERESTS and PARTICIPATION of the Vendors as to the one-half (1/2) portion pro-indiviso of
Lots Nos. 1616 and 1617 (Fishpond), of the Kabankalan Cadastre, pertaining to the one-half
(1/2) portion pro-indiviso of the late Victoriana Cari-an unto and in favor of the Vendees, their
heirs, successors and assigns;
xxxxxxxxx
That this Contract of Sale of rights, interests and participations shall become effective only upon
the approval by the Honorable Court of First Instance of Negros Occidental, Branch VI-
Himamaylan. (Underscoring supplied.)
Pedro Escanlar and Francisco Holgado, the vendees, were concurrently the lessees of the
lots referred to above.[3] They stipulated that the balance of the purchase price (P225,000.00) shall
be paid on or before May 1979 in a Deed of Agreement executed by the parties on the same day:
WHEREAS, at the time of the signing of the Contract, VENDEES has (sic) only FIFTY
THOUSAND (P50,000.00) Pesos available thereof, and was not able to secure the entire
amount;
WHEREAS, the Vendors and one of the Vendees by the name of Pedro Escanlar are relatives,
and absolute faith and trust exist between them, wherein during economic crisis, has not failed
to give monetary succor to the Vendors;
WHEREAS, Vendors herein understood the present scarcity of securing available each (sic) in
the amount stated in the contract;
NOW THEREFORE, for and in consideration of the sum of FIFTY THOUSAND (P50,000.00)
Pesos, Philippine Currency, the balance of TWO HUNDRED TWENTY FIVE THOUSAND
(P225,000.00) Pesos to be paid by the Vendees on or before May, 1979, the Vendors herein, by
these Presents, do hereby CONFIRM and AFFIRM the Deed of Sale of the Rights, Interests and
Participation dated September 15, 1978, over Lots Nos. 1616 and 1617 (fishpond) of the
Kabankalan Cadastre in favor of the VENDEES, their heirs and assigns.
That pending the complete payment thereof, Vendees shall not assign, sell, lease, nor mortgage
the rights, interests and participation thereof;
That in the event the Vendees fail and/ or omit to pay the balance of said purchase price on May
31, 1979 and the cancellation of said Contract of Sale is made thereby, the sum of FIFTY
THOUSAND (P50,000.00) Pesos shall be deemed as damages thereof to Vendors.
(Underscoring supplied)[4]
Petitioners were unable to pay the Cari-an heirs individual shares, amounting to P55,000.00
each, by the due date. However, said heirs received at least 12 installments from petitioners after
May 1979.[5] Rodolfo Cari-an was fully paid by June 21, 1979. Generosa Martinez, Carmen Cari-
an and Fredisminda Cari-an were likewise fully compensated for their individual shares, per
receipts given in evidence.[6] The minor Leonells share was deposited with the Regional Trial Court
on September 7, 1982.[7]
Being former lessees, petitioners continued in possession of Lot Nos. 1616 and
1617. Interestingly, they continued to pay rent based on their lease contract. On September 10,
1981, petitioners moved to intervene in the probate proceedings of Nombre and Cari-an as the
buyers of private respondent Cari-ans share in Lot Nos. 1616 and 1617. Petitioners motion for
approval of the September 15, 1978 sale before the same court, filed on November 10, 1981, was
opposed by private respondents Cari-an on January 5, 1982.[8]
On September 16, 1982, the probate court approved a motion filed by the heirs of Cari-an
and Nombre to sell their respective shares in the estate. On September 21, 1982, private
respondents Cari-an, in addition to some heirs of Guillermo Nombre,[9] sold their shares in eight
parcels of land including Lot Nos. 1616 and 1617 to the spouses Ney Sarrosa Chua and Paquito
Chua for P1,850,000.00. One week later, the vendor-heirs, including private respondents Cari-an,
filed a motion for approval of sale of hereditary rights, i.e. the sale made on September 21, 1982
to the Chuas.
Private respondents Cari-an instituted this case for cancellation of sale against petitioners
(Escanlar and Holgado) on November 3, 1982.[10] They complained of petitioners failure to pay the
balance of the purchase price by May 31, 1979 and alleged that they only received a total
of P132,551.00 in cash and goods. Petitioners replied that the Cari-ans, having been paid, had no
right to resell the subject lots; that the Chuas were purchasers in bad faith; and that the court
approval of the sale to the Chuas was subject to their existing claim over said properties.
On April 20, 1983, petitioners also sold their rights and interests in the subject parcels of
land (Lot Nos. 1616 and 1617) to Edwin Jayme for P735,000.00[11] and turned over possession of
both lots to the latter. The Jaymes in turn, were included in the civil case as fourth-party
defendants.
On December 3, 1984, the probate court approved the September 21, 1982 sale without
prejudice to whatever rights, claims and interests over any of those properties of the estate which
cannot be properly and legally ventilated and resolved by the court in the same intestate
proceedings.[12] The certificates of title over the eight lots sold by the heirs of Nombre and Cari-an
were later issued in the name of respondents Ney Sarrosa Chua and Paquito Chua.
The trial court allowed a third-party complaint against the third-party defendants Paquito
and Ney Chua on January 7, 1986 where Escanlar and Holgado alleged that the Cari-ans
conspired with the Chuas when they executed the second sale on September 21, 1982 and that
the latter sale is illegal and of no effect. Respondents Chua countered that they did not know of
the earlier sale of one-half portion of the subject lots to Escanlar and Holgado. Both parties
claimed damages.[13]
On April 28, 1988, the trial court approved the Chuas motion to file a fourth-party complaint
against the spouses Jayme. Respondents Chua alleged that the Jaymes refused to vacate said
lots despite repeated demands; and that by reason of the illegal occupation of Lot Nos. 1616 and
1617 by the Jaymes, they suffered materially from uncollected rentals.
Meanwhile, the Regional Trial Court of Himamaylan which took cognizance of Special
Proceeding No. 7-7279 (Intestate Estate of Guillermo Nombre and Victoriana Cari-an) had
rendered its decision on October 30, 1987.[14] The probate court concluded that since all the
properties of the estate were disposed of or sold by the declared heirs of both spouses, the case
is considered terminated and the intestate estate of Guillermo Nombre and Victoriana Cari-an is
closed. The court held:
As regards the various incidents of this case, the Court finds no cogent reason to resolve them
since the very object of the various incidents in this case is no longer in existence, that is to say,
the properties of the estate of Guillermo Nombre and Victoriana Cari-an had long been disposed
of by the rightful heirs of Guillermo Nombre and Victoriana Cari-an. In this respect, there is no
need to resolve the Motion for Subrogation of Movants Pedro Escanlar and Francisco Holgado
to be subrogated to the rights of the heirs of Victoriana Cari-an since all the properties of the
estate had been transferred and titled to in the name of spouses Ney S. Chua and Dr. Paquito
Chua. Since the nature of the proceedings in this case is summary, this Court, being a Probate
Court, has no jurisdiction to pass upon the validity or invalidity of the sale of rights of the
declared heirs of Guillermo Nombre and Victoriana Cari-an to third parties. This issue must be
raised in another action where it can be properly ventilated and resolved. x x x Having
determined, after exhausted (sic) and lengthy hearings, the rightful heirs of Guillermo Nombre
and Victoriana Cari-an, the Court found out that the second issue has become moot and
academic considering that there are no more properties left to be partitioned among the declared
heirs as that had long ago been disposed of by the declared heirs x x x. (Underscoring supplied)
The seminal case at bar was resolved by the trial court on December 18, 1991 in favor of
cancellation of the September 15, 1978 sale. Said transaction was nullified because it was not
approved by the probate court as required by the contested deed of sale of rights, interests and
participation and because the Cari-ans were not fully paid. Consequently, the Deed of Sale
executed by the heirs of Nombre and Cari-an in favor of Paquito and Ney Chua, which was
approved by the probate court, was upheld. The dispositive portion of the lower courts decision
reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1) Declaring the following contracts null and void and of no effect:
a) The Deed of Sale, dated Sept. 15, 1978, executed by the plaintiffs in favor of the
defendants Pedro Escanlar and Francisco Holgado (Exh. A, Plaintiffs)
b) The Deed of Agreement, dated Sept. 15, 1978, executed by the plaintiffs in favor
of the defendants, Pedro Escanlar and Francisco Holgado (Exh. B, Plaintiffs)
c) The Deed of Sale, dated April 20, 1983, executed by the defendants in favor of
the fourth-party defendants, Dr. Edwin Jayme and Elisa Tan Jayme
d) The sale of leasehold rights executed by the defendants in favor of the fourth-
party defendants
2) Declaring the amount of Fifty Thousand Pesos (P50,000.00) paid by the defendants to the
plaintiffs in connection with the Sept. 15, 1978 deed of sale, as forfeited in favor of the plaintiffs,
but ordering the plaintiffs to return to the defendants whatever amounts they have received from
the latter after May 31, 1979 and the amount of Thirty Five Thousand Two Hundred Eighteen &
75/100 (P35,218.75)[15] deposited with the Treasurer of Himamaylan, Negros Occidental, for the
minor Leonell C. Cari-an -
3) Declaring the deed of sale, dated September 23, 1982, executed by Lasaro Nombre, Victorio
Madalag, Domingo Campillanos, Sofronio Campillanos, Generosa Vda. de Martinez, Carmen
Cari-an, Rodolfo Cari-an, Nelly Chua Vda. de Cari-an, for herself and as guardian ad litem of the
minor Leonell C. Cari-an, and Fredisminda Cari-an in favor of the third-party defendants and
fourth-party plaintiffs, spouses Dr. Paquito Chua and Ney Sarrosa Chua (Exh. 2-Chua) as legal,
valid and enforceable provided that the properties covered by the said deed of sale are subject
of the burdens of the estate, if the same have not been paid yet.
4) Ordering the defendants Francisco Holgado and Pedro Escanlar and the fourth-party
defendants, spouses Dr. Edwin Jayme and Elisa Tan Jayme, to pay jointly and severally the
amount of One Hundred Thousand Pesos (P100,000.00 as moral damages and the further sum
of Thirty Thousand Pesos (P30,000.00) as attorneys fees to the third-party defendant spouses,
Dr. Paquito Chua and Ney Sarrosa-Chua.
5) Ordering the fourth-party defendant spouses, Dr. Edwin Jayme and Elisa Tan Jayme, to pay
to the third-party defendants and fourth-party plaintiffs, spouses Dr. Paquito Chua and Ney
Sarrosa-Chua, the sum of One Hundred Fifty Seven Thousand Pesos (P157,000.00) as rentals
for the riceland and Three Million Two Hundred Thousand Pesos (P3,200,000.00) as rentals for
the fishpond from October, 1985 to July 24, 1989 plus the rentals from the latter date until the
property shall have been delivered to the spouses Dr. Paquito Chua and Ney Sarrosa-Chua;
6) Ordering the defendants and the fourth-party defendants to immediately vacate Lots Nos.
1616 and 1617, Kabankalan Cadastre;
7) Ordering the defendants and the fourth-party defendants to pay costs.
SO ORDERED.[16]
Petitioners raised the case to the Court of Appeals. [17] Respondent court affirmed the
decision of the trial court on February 17, 1995 and held that the questioned deed of sale of rights,
interests and participation is a contract to sell because it shall become effective only upon approval
by the probate court and upon full payment of the purchase price. [18]
Petitioners motion for reconsideration was denied by respondent court on April 3,
1995.[19] Hence, these petitions.[20]
1. We disagree with the Court of Appeals conclusion that the September 15, 1978 Deed of
Sale of Rights, Interests and Participation is a contract to sell and not one of sale.
The distinction between contracts of sale and contracts to sell with reserved title has been
recognized by this Court in repeated decisions, according to Justice J.B.L. Reyes in Luzon
Brokerage Co. Inc. v. Maritime Building Co., Inc.,[21] upholding the power of promisors under
contracts to sell in case of failure of the other party to complete payment, to extrajudicially
terminate the operation of the contract, refuse the conveyance, and retain the sums of installments
already received where such rights are expressly provided for.
In contracts to sell, ownership is retained by the seller and is not to pass until the full payment
of the price. Such payment is a positive suspensive condition, the failure of which is not a breach
of contract but simply an event that prevented the obligation of the vendor to convey title from
acquiring binding force.[22] To illustrate, although a deed of conditional sale is denominated as
such, absent a proviso that title to the property sold is reserved in the vendor until full payment of
the purchase price nor a stipulation giving the vendor the right to unilaterally rescind the contract
the moment the vendee fails to pay within a fixed period, by its nature, it shall be declared a deed
of absolute sale.[23]
The September 15, 1978 sale of rights, interests and participation as to 1/2 portion pro
indiviso of the two subject lots is a contract of sale for the following reasons: First, private
respondents as sellers did not reserve unto themselves the ownership of the property until full
payment of the unpaid balance of P225,000.00. Second, there is no stipulation giving the sellers
the right to unilaterally rescind the contract the moment the buyer fails to pay within the fixed
period.[24] Prior to the sale, petitioners were in possession of the subject property as lessees. Upon
sale to them of the rights, interests and participation as to the 1/2 portion pro indiviso, they
remained in possession, not in concept of lessees anymore but as owners now through symbolic
delivery known as traditio brevi manu.[25] Under Article 1477 of the Civil Code, the ownership of
the thing sold is acquired by the vendee upon actual or constructive delivery thereof.[26]
In a contract of sale, the non-payment of the price is a resolutory condition which
extinguishes the transaction that, for a time, existed and discharges the obligations created
thereunder. The remedy of an unpaid seller in a contract of sale is to seek either specific
performance or rescission.[27]
2. Next to be discussed is the stipulation in the disputed September 15, 1978 Deed of Sale
of Rights, Interests and Participation which reads: (t)his Contract of Sale of rights, interests and
participations shall become effective only upon the approval by the Honorable Court of First
Instance of Negros Occidental, Branch VI-Himamaylan. Notably, the trial court and the Court of
Appeals both held that the deed of sale is null and void for not having been approved by the
probate court.
There has arisen here a confusion in the concepts of validity and the efficacy of a
contract. Under Art. 1318 of the Civil Code, the essential requisites of a contract are: consent of
the contracting parties; object certain which is the subject matter of the contract and cause of the
obligation which is established. Absent one of the above, no contract can arise.Conversely, where
all are present, the result is a valid contract. However, some parties introduce various kinds of
restrictions or modalities, the lack of which will not, however, affect the validity of the contract.
In the instant case, the Deed of Sale, complying as it does with the essential requisites, is
a valid one. However, it did not bear the stamp of approval of the court. This notwithstanding, the
contracts validity was not affected for in the words of the stipulation, . . . this Contract of Sale of
rights, interests and participations shall become effective only upon the approval by the Honorable
Court . . . In other words, only the effectivity and not the validity of the contract is affected.
Then, too, petitioners are correct in saying that the need for approval by the probate court
exists only where specific properties of the estate are sold and not when only ideal and indivisible
shares of an heir are disposed of.
In the case of Dillena v. Court of Appeals,[28] the Court declared that it is within the
jurisdiction of the probate court to approve the sale of properties of a deceased person by his
prospective heirs before final adjudication.[29] It is settled that court approval is necessary for the
validity of any disposition of the decedents estate. However, reference to judicial approval cannot
adversely affect the substantive rights of the heirs to dispose of their ideal share in the co-heirship
and/or co-ownership among the heirs.[30] It must be recalled that during the period of indivision of
a decedents estate, each heir, being a co-owner, has full ownership of his part and may therefore
alienate it.[31] But the effect of the alienation with respect to the co-owners shall be limited to the
portion which may be allotted to him in the division upon the termination of the co-ownership.[32]
From the foregoing, it is clear that hereditary rights in an estate can be validly sold without
need of court approval and that when private respondents Cari-an sold their rights, interests and
participation in Lot Nos. 1616 and 1617, they could legally sell the same without the approval of
the probate court.
As a general rule, the pertinent contractual stipulation (requiring court approval) should be
considered as the law between the parties. However, the presence of two factors militate against
this conclusion. First, the evident intention of the parties appears to be contrary to the mandatory
character of said stipulation.[33] Whoever crafted the document of conveyance, must have been of
the belief that the controversial stipulation was a legal requirement for the validity of the sale. But
the contemporaneous and subsequent acts of the parties reveal that the original objective of the
parties was to give effect to the deed of sale even without court approval. [34] Receipt and
acceptance of the numerous installments on the balance of the purchase price by the Cari-ans
and leaving petitioners in possession of Lot Nos. 1616 and 1617 reveal their intention to effect the
mutual transmission of rights and obligations. It was only after private respondents Cari-an sold
their shares in the subject lots again to the spouses Chua, in September 1982, that these same
heirs filed the case at bar for the cancellation of the September 1978 conveyance. Worth
considering too is the fact that although the period to pay the balance of the purchase price expired
in May 1979, the heirs continued to accept payments until late 1979 and did not seek judicial relief
until late 1982 or three years later.
Second, we hold that the requisite approval was virtually rendered impossible by the Cari-
ans because they opposed the motion for approval of the sale filed by petitioners[35]and sued the
latter for the cancellation of that sale. The probate court explained:
(e) While it is true that Escanlar and Holgado filed a similar motion for the approval of Deed of
Sale executed by some of the heirs in their favor concerning the one-half (1/2) portions of Lots
1616 and 1617 as early as November 10, 1981, yet the Court could not have favorably acted
upon it, because there exists a pending case for the rescission of that contract, instituted by the
vendors therein against Pedro Escanlar and Francisco Holgado and filed before another branch
of this Court. Until now, this case, which attacks the very source of whatever rights or interests
Holgado and Escanlar may have acquired over one-half (1/2) portions of Lots Nos. 1616 and
1617, is pending resolution by another court. Otherwise, if this Court meddles on these issues
raised in that ordinary civil action seeking for the rescission of an existing contract, then, the act
of this Court would be totally ineffective, as the same would be in excess of its jurisdiction.[36]
Having provided the obstacle and the justification for the stipulated approval not to be
granted, private respondents Cari-an should not be allowed to cancel their first transaction with
petitioners because of lack of approval by the probate court, which lack is of their own making.
3. With respect to rescission of a sale of real property, Article 1592 of the Civil Code governs:
In the sale of immovable property, even though it may have been stipulated that upon failure to
pay the price at the time agreed upon the rescission of the contract shall of right take place, the
vendee may pay, even after the expiration of the period, as long as no demand for rescission of
the contract has been made upon him either judicially or by a notarial act. After the demand, the
court may not grant him a new term. (Underscoring added)
In the instant case, the sellers gave the buyers until May 1979 to pay the balance of the
purchase price. After the latter failed to pay installments due, the former made no judicial demand
for rescission of the contract nor did they execute any notarial act demanding the same, as
required under Article 1592. Consequently, the buyers could lawfully make payments even after
the May 1979 deadline, as in fact they paid several installments to the sellers which the latter
accepted. Thus, upon the expiration of the period to pay, the sellers made no move to rescind but
continued accepting late payments, an act which cannot but be construed as a waiver of the right
to rescind. When the sellers, instead of availing of their right to rescind, accepted and received
delayed payments of installments beyond the period stipulated, and the buyers were in arrears,
the sellers in effect waived and are now estopped from exercising said right to rescind.[37]
4. The matter of full payment is another issue taken up by petitioners. An exhaustive review
of the records of this case impels us to arrive at a conclusion at variance with that of both the trial
and the appellate courts.
The sole witness in the cancellation of sale case was private respondent herein Fredisminda
Cari-an Bustamante. She initially testified that after several installments, she signed a receipt for
the full payment of her share in December 1979 but denied having actually received the P5,000.00
intended to complete her share. She claims that Escanlar and Holgado made her sign the receipt
late in the afternoon and promised to give the money to her the following morning when the banks
opened. She also claimed that while her brother Rodolfo Cari-ans share had already been fully
paid, her mother Generosa Martinez only received P28,334.00 and her sister-in-law Nelly Chua
vda. de Cari-an received only P11,334.00. Fredisminda also summed up all the installments and
came up with the total of P132,551.00 from the long list on a sheet of a calendar which was
transferred from a small brown notebook. She later admitted that her list may not have been
complete for she gave the receipts for installments to petitioners Escanlar and Holgado. She thus
claimed that they were defrauded because petitioners are wealthy and private respondents are
poor.
However, despite all her claims, Fredismindas testimony fails to convince this Court that
they were not fully compensated by petitioners. Fredisminda admits that her mother and her sister
signed their individual receipts of full payment on their own and not in her presence. [38] The receipts
presented in evidence show that Generosa Martinez was paid P45,625.00; Carmen Cari-
an, P45,625.00; Rodolfo Cari-an, P47,500.00 on June 21, 1979; Nelly Chua vda. de Cari-
an, P11,334.00 and the sum of P34,218.00 was consigned in court for the minor Leonell Cari-
an.[39] Fredisminda insists that she signed a receipt for full payment without receiving the money
therefor and admits that she did not object to the computation. We find it incredible that a mature
woman like Fredisminda Cari-an, would sign a receipt for money she did not receive. Furthermore,
her claims regarding the actual amount of the installments paid to her and her kin are quite vague
and unsupported by competent evidence. She even admits that all the receipts were taken by
petitioner Escanlar.[40] Worth noting too is the absence of supporting testimony from her co-heirs
and siblings Carmen Cari-an, Rodolfo Cari-an and Nelly Chua vda. de Cari-an.
The trial court reasoned out that petitioners, in continuing to pay the rent for the parcels of
land they allegedly bought, admit not having fully paid the Cari-ans. Petitioners response, that
they paid rent until 1986 in compliance with their lease contract, only proves that they respected
this contract and did not take undue advantage of the heirs of Nombre and Cari-an who benefited
from the lease. Moreover, it is to be stressed that petitioners purchased the hereditary shares
solely of the Cari-ans and not the entire lot.
The foregoing discussion ineluctably leads us to conclude that the Cari-ans were indeed
paid the balance of the purchase price, despite having accepted installments therefor
belatedly. There is thus no ground to rescind the contract of sale because of non-payment.
5. Recapitulating, we have held that the September 15, 1978 deed of sale of rights, interests
and participations is valid and that the sellers-private respondents Cari-an were fully paid the
contract price. However, it must be emphasized that what was sold was only the Cari-ans
hereditary shares in Lot Nos. 1616 and 1617 being held pro indiviso by them and is thus a valid
conveyance only of said ideal shares. Specific or designated portions of land were not involved.
Consequently, the subsequent sale of 8 parcels of land, including Lot Nos. 1616 and 1617,
to the spouses Chua is valid except to the extent of what was sold to petitioners in the September
15, 1978 conveyance. It must be noted however, that the probate court in Special Proceeding No.
7-7279 desisted from awarding the individual shares of each heir because all the properties
belonging to the estate had already been sold.[41] Thus it is not certain how much private
respondents Cari-an were entitled to with respect to the two lots, or if they were even going to be
awarded shares in said lots.
The proceedings surrounding the estate of Nombre and Cari-an having attained finality for
nearly a decade now, the same cannot be re-opened. The protracted proceedings which have
undoubtedly left the property under a cloud and the parties involved in a state of uncertainty
compels us to resolve it definitively.
The decision of the probate court declares private respondents Cari-an as the sole heirs by
representation of Victoriana Cari-an who was indisputably entitled to half of the estate.[42] There
being no exact apportionment of the shares of each heir and no competent proof that the heirs
received unequal shares in the disposition of the estate, it can be assumed that the heirs of
Victoriana Cari-an collectively are entitled to half of each property in the estate. More particularly,
private respondents Cari-an are entitled to half of Lot Nos. 1616 and 1617, i.e. 14,675 square
meters of Lot No. 1616 and 230,474 square meters of Lot No. 1617. Consequently, petitioners,
as their successors-in-interest, own said half of the subject lots and ought to deliver the possession
of the other half, as well as pay rents thereon, to the private respondents Ney Sarrosa Chua and
Paquito Chua but only if the former (petitioners) remained in possession thereof.
The rate of rental payments to be made were given in evidence by Ney Sarrosa Chua in her
unrebutted testimony on July 24, 1989: For the fishpond (Lot No. 1617) - From 1982 up to 1986,
rental payment of P3,000.00 per hectare; from 1986-1989 (and succeeding years), rental payment
of P10,000.00 per hectare. For the riceland (Lot No. 1616) - 15 cavans per hectare per year; from
1982 to 1986, P125.00 per cavan; 1987-1988, P175.00 per cavan; and 1989 and succeeding
years, P200.00 per cavan.[43]
WHEREFORE, the petitions are hereby GRANTED. The decision of the Court of Appeals
under review is hereby REVERSED AND SET ASIDE. The case is REMANDED to the Regional
Trial Court of Negros Occidental, Branch 61 for petitioners and private respondents Cari-an or
their successors-in-interest to determine exactly which 1/2 portion of Lot Nos. 1616 and 1617 will
be owned by each party, at the option of petitioners. The trial court is DIRECTED to order the
issuance of the corresponding certificates of title in the name of the respective parties and to
resolve the matter of rental payments of the land not delivered to the Chua spouses subject to the
rates specified above with legal interest from date of demand.
 SO ORDERED.
Melo, Francisco, and Panganiban, JJ., concur.
Narvasa, C.J., (Chairman), on leave.
GAMALIEL C. VILLANUEVA and IRENE C. VILLANUEVA, petitioners, vs. COURT OF
APPEALS, SPOUSES JOSE and LEONILA DELA CRUZ, and SPOUSES GUIDO and
FELICITAS PILE, respondents.
DECISION
PANGANIBAN, J.:
The main issue here is whether a contract of sale has been perfected under the attendant
facts and circumstances.
The petition filed on December 18, 1992 assails the Decision [1] of respondent Court of
Appeals promulgated on October 23, 1992 in CA-G.R. CV No. 30741 rendered by the Eleventh
Division [2] dismissing the appeal of petitioners and affirming the decision in Civil Case No. Q-
50844 dated December 28, 1990 of the Regional Trial Court, Branch 83 of Quezon City, presided
by Judge Estrella T. Estrada. The dispositive portion of the affirmed decision of the RTC reads: [3]
"WHEREFORE, judgment is hereby rendered dismissing plaintiff's instant action for specific
performance. However, defendant Jose de la Cruz is hereby ordered to refund or reimburse the
amount of Ten Thousand Pesos (P10,000.00) to plaintiff Irene Villanueva.
The parties' other claims for damages and attorney's fees are also hereby dismissed for being
necessary consequences of litigation.
No pronouncement as to costs."
The Facts
The factual antecedents of this case as found by the trial court were reproduced in the
assailed Decision, [4] as follows: [5]
"x x x plaintiff (and now petitioner) Gamaliel Villanueva has been a tenant-occupant of a unit in
the 3-door apartment building erected on a parcel of land owned by defendants-spouses (now
private respondents) Jose Dela Cruz and Leonila dela Cruz, with an area of 403 square meters,
more or less, located at Short Horn, Project 8, Quezon City (Exhibit 'L'), having succeeded in the
occupancy of said unit from the previous tenant Lolita Santos sometime in 1985. About February
of 1986, defendant Jose dela Cruz offered said parcel of land with the 3-door apartment building
for sale and plaintiffs, son and mother, showed interest in the property. As an initial step,
defendant Jose dela Cruz gave plaintiff Irene Villanueva a letter of authority dated February 12,
1986 (Exhibit 'A') for her to inspect the subject property. Because said property was in arrears in
the payment of the realty taxes, defendant Jose dela Cruz approached plaintiff Irene Villanueva
and asked for a certain amount to pay for the taxes so that the property would be cleared of any
incumbrance (sic). Plaintiff Irene Villanueva gave P10,000.00 on two occasions P5,000.00 on
July 15, 1986 (Exhibit 'F') and another P5,000.00 on October 17, 1986 (Exhibit 'D'). It was
agreed by them that said P10,000.00 would form part of the sale price of P550,000.00.
Sometime thereafter, defendant Jose dela Cruz went to plaintiff Irene Villanueva bringing with
him Mr. Ben Sabio, a tenant of one of the units in the 3-door apartment building located on the
subject property, and requested her and her son to allow said Ben Sabio to purchase one-half
(1/2) of the property where the unit occupied by him pertained to which the plaintiffs consented,
so that they would just purchase the other half portion and would be paying only P265,000.00,
they having already given an amount of P10,000.00 used for paying the realty taxes in arrears.
Accordingly the property was subdivided and two (2) separate titles were secured by defendants
Dela Cruz. Mr. Ben Sabio immediately made payments by installments.
Sometime in March, 1987 or more specifically on March 6, 1987, defendants Dela Cruz
executed in favor of their co-defendants, the spouses Guido Pili (sic) and Felicitas Pili (sic), a
Deed of Assignment of the other one-half portion of the parcel of land wherein plaintiff Gamaliel
Villanueva's apartment unit is situated, designated as Lot 3-A of the Subdivision Plan (LRC)
Psd-337290, Block 24, Pcs-4865, with an area of 201.50 square meters, more or less, and
covered by Transfer Certificate of Title 332445, purportedly as full payment and satisfaction of
an indebtedness (sic) obtained from defendants Pili (sic) (Exhibit 'G'; Exhibit '3'). Consequently,
Transfer Certificate of Title No. 356040 was issued in the name of defendants Pili (sic) also on
March 6, 1987. Immediately thereafter, the plaintiffs came to know of such assignment and
transfer and issuance of a new certificate of title in favor of defendants Pili (sic) so that plaintiff
Gamaliel Villanueva complained to the barangay captain of Bahay Turo, Quezon City, on the
ground that there was already an agreement between defendants Dela Cruz and themselves
that said portion of the parcel of land owned by defendants Dela Cruz would be sold to him. As
there was no settlement arrived at, the plaintiffs elevated their complaint to this Court through
the instant action."
The trial court rendered its decision in favor of private respondents. An appeal was duly
brought to public respondent which as earlier stated affirmed the said decision. Hence, this petition
for review on certiorari under Rule 45 of the Rules of Court.
The Issues
[6]
The following errors are alleged to have been committed by public respondent:
"I
The Court of Appeals erred in failing to find that there is a perfected contract of sale of subject
property between petitioners and respondents spouses Dela Cruz
II
The Court of Appeals erred in applying the Statute of Frauds in this case when it is a contract of
sale that was partly executed
III
The Court of Appeals erred in not finding that this being a case of double sale of immovable
property, although respondents spouses Pili (sic) recorded the deed of assignment to them in
the Registry of Deeds they were not in good faith while (sic) petitioners as purchasers thereof
were in prior possession in good faith of the property.
IV
The Court of Appeals erred in failing to reverse and set aside the appealed judgment of the trial
court and rendering a judgment for petitioners"
In the opinion of this Court, these four issues may be summed up in a single question: Under
the factual circumstances of this case, was there a perfected contract of sale?
Petitioners contend that the adopted findings of facts of public respondent are contradicted
by its ruling that there is no agreement as to the price of the apartments. They argue that on the
basis of the facts found by public respondent, "the conclusion is ineluctable that there was a
perfected contract of sale of the subject property." [7] According to petitioners, private respondents
had to secure their consent to enable "Sabio to buy the one-half portion of the property where the
unit Sabio was renting pertains so that petitioners will pay only the balance of P265,000.00 for the
purchase of the other half after deducting the P10,000.00 petitioners advanced." [8] Public
respondent's conclusion that the P10,000.00 paid to petitioners was not intended as part of the
purchase price allegedly "collides" with its quoted findings, as follows: [9]
"It was agreed by them that said P10,000.00 would form part of the sale price of P550,000.00. x
x x defendant Jose de la Cruz .x x x requested her and her son to allow said Ben Sabio to
purchase one-half (1/2) of the property where the unit occupied by him pertained to which
plaintiffs consented, so they would purchase the other half portion and would be paying
only P265,000.00 they having already given an amount of P10,000,00 used for paying the realty
taxes in arrears.x x x" (Underscoring in the petition).
The Court's Ruling
The arguments of petitioners do not persuade us. While it is true that respondent Court
adopted the recitation of facts of the trial court, it nonetheless later corrected the relevant portions
thereof as it found that no perfected contract of sale was agreed upon. Thus, public respondent
explained: [10]
"Appellants' theory of earnest money cannot be sustained in view of the catena of circumstance
showing that the P10,000.00 given to appellees was not intended to form part of the purchase
price. As the great commentator Manresa observes that the delivery of part of the purchase
price should not be understood as constituting earnest money unless it be shown that such was
the intention of the parties (Manresa Commentaries on the Civil Code, 2d ed., Vol. 10, p. 85).
Moreover, as can be gleaned from the records there was no concrete agreement to the price
and manner of payment:
'Q Will you tell us why your transaction with plaintiffs (petitioners herein)
did not materialize?
A Because I have been returning to Mrs. Villanueva and in fact we have
executed a Deed of Sale which was in fact not signed.
Q Why did you not sign the Deed of Sale you mentioned?
A The Villanuevas told me to prepare the documents involved in this
transaction because according to her (sic) she (sic) was only
waiting for the money to come but because I was then being
pressed by Felicitas Pile for the payment of my loan. I was
constrained to assign the property to her.
Q What are your other reasons?
A Aside from that we were still huggling (sic) for the purchase price then
and since I was being pressed by my creditor, I was forced to
make the assignment.'"
The most that public respondent can be faulted with is its failure to expressly state that
although its conclusion of law was correct, the trial court erred in its statement of the facts.
Was There a Perfected Contract of Sale?
Petitioners contend that private respondents' counsel admitted that "P10,000 is partial or
advance payment of the property (TSN, June 14 [should be 15], 4 (sic) 1990, pages 6 to 7)."
Necessarily then, there must have been an agreement as to price. They cite Article 1482 of the
Civil Code which provides that "(w)henever earnest money is given in a contract of sale, it shall
be considered as part of the price and as proof of the perfection of the contract." [11]
Private respondents contradict this claim with the argument that "(w)hat was clearly agreed
(upon) between petitioners and respondents Dela Cruz was that the P10,000.00 primarily
intended as payment for realty tax was going to form part of the consideration of the sale if and
when the transaction would finally be consummated." [12] Private respondents insist that there "was
no clear agreement as to the true amount of consideration." [13]
Generally, the findings of fact of the lower courts are entitled to great weight and not
disturbed except for cogent reasons. [14] Indeed, they should not be changed on appeal in the
absence of a clear showing that the trial court overlooked, disregarded, or misinterpreted some
facts of weight and significance, which if considered would have altered the result of the
case. [15] In this case, and subject to the above clarification made by the appellate court, petitioners
have failed to convince us to alter such findings.
In fact, a review of the evidence merely strengthens the conclusions of public respondent.
We scoured the transcripts but we found that respondent dela Cruz never testified that he (or his
spouse Leonila) had agreed to a definite price for the subject property. In fact, his testimony during
the cross-examination firmly negated any price agreement with petitioners because he and his
wife quoted the price of P575,000.00 and did not agree to reduce it to P550,000.00 as claimed by
petitioner: [16]
"Q And despite the fact that the property was mortgaged with Development Bank of
Rizal you still contrated (sic) Sandiego (sic) for the purpose of selling the
property?
A Yes, sir.
Q And did Sandiego (sic) agree as agent in selling the property despite the fact that
it was mortgaged with the Development Bank of Rizal?
A Yes, sir.
Q Can you recall the condition you offered to Sandiego (sic) to act as your agent in
selling the same?
A He will get certain commission for the same.
Q Will you state the price and conditions set forth in selling the property?
A P575 thousand, sir.
Q That is the same offer that was given to you by plaintiff Mrs. Villanueva?
A I can not recall, I think so.
Q And you will agree with me that 1/2 of P575 thousand is how much (sic)?
ATTY. MANZO:
There (is) nothing to agree with you counsel.
ATTY. GUPIT:
And the offer to you, the agreed price between you and Mrs. Villanueva is P275
thousand as stated in the agreement that was prepared?
ATTY. MANZO:
 Counsel is again assuming that there was an agreement made already.
(ATTY. GUPIT:)
He answered there is a document between Villanueva and Dela Cruz.
ATTY. (MANZO):
Let the witness be confronted by the document."
We are not unmindful of petitioner Irene Villanueva's claim that the parties agreed on the
sum of P550,000.00, as follows: [17]
"ATTY. GUPIT
What was the result of the negotiations?
WITNESS (Irene Villanueva):
We agreed that he would sell the land to us for the sum of, the amount of P550,000.00
xxx xxx xxx
WITNESS
After the Deed of Sale relative to the purchase of the property was prepared, Mr. dela
Cruz (private respondent Jose) came to me and told me that he talked with one
of the tenants and he offered to buy the portion he was occupying if I will agree
and I will cause the partition of the property between us.
ATTY. GUPIT
Did you agree with the proposal of Mr. dela Cruz that the portion of the property will
be sold to one of the tenants?
WITNESS
Yes(,) sir. I agreed because we are (sic) both tenants.
ATTY. GUPIT
How about the price? How much are (sic) you supposed to pay in order to complete
your payments?
WITNESS
We are (sic) supposed to divide the amount of P550,000.00."
To settle the above conflicting claims of the parties, petitioners could have presented the
contract of sale allegedly prepared by private respondent Jose dela Cruz. Unfortunately, the
contract was not presented in evidence. However, petitioners aver that even if the unsigned deed
of sale was not produced, private respondent Jose dela Cruz "admitted preparing (said) deed in
accordance with their agreement." [18] This judicial admission" is allegedly the "best proof of its
existence." [19] Further it was "impossible" for petitioners to produce the same "since it was and
remained in the possession" of private respondent Jose dela Cruz. [20]
We do not agree with petitioners. Assuming arguendo that such draft deed existed, it does
not necessarily follow that there was already a definite agreement as to the price. If there was,
why then did private respondent Jose de la Cruz not sign it? If indeed the draft deed of sale was
that important to petitioners' cause, they should have shown some effort to procure it. They could
have secured it through a subpoena duces tecum or thru the use of one of the modes of discovery.
But petitioners made no such effort. And even if produced, it would not have commanded any
probative value as it was not signed.
As has been said in an old case, the price of the leased land not having been fixed, the
essential elements which give life to the contract were lacking. It follows that the lessee cannot
compel the lessor to sell the leased land to him. [21] The price must be certain, it must be real, not
fictitious. [22] It is not necessary that the certainty of the price be actual or determined at the time
of executing the contract. The fact that the exact amount to be paid therefor is not precisely fixed,
is no bar to an action to recover such compensation, provided the contract, by its terms, furnishes
a basis or measure for ascertaining the amount agreed upon. [23] The price could be made certain
by the application of known factors; where, in a sale of coal, a basic price was fixed, but subject
to modification "in proportion to variations in calories and ash content, and not otherwise," the
price was held certain. [24]A contract of sale is not void for uncertainty when the price, though not
directly stated in terms of pesos and centavos, can be made certain by reference to existing
invoices identified in the agreement. In this respect, the contract of sale is perfected. [25] The price
must be certain, otherwise there is no true consent between the parties. [26] There can be no sale
without a price. [27] In the instant case, however, what is dramatically clear from the evidence is
that there was no meeting of mind as to the price, expressly or impliedly, directly or indirectly.
Sale is a consensual contract. He who alleges it must show its existence by competent
proof. Here, the very essential element of price has not been proven.
Lastly, petitioners' claim that they are ready to pay private respondents [28] is immaterial and
irrelevant as the latter cannot be forced to accept such payment, there being no perfected contract
of sale in the first place.
Applicability of Statute of Frauds and the Law on Double Sale
Petitioners contend that the statute of frauds does not apply because such statute applies
only to executory contracts whereas in this case the contract of sale had already been partly
executed. [29] Further, petitioners, citing Article 1544 of the Civil Code asseverate that being in
possession of the property in good faith therefore they should be deemed the lawful owners
thereof. [30] On the other hand, private respondents counter that the contract in this case is a "mere
executory contract and not a completed or executed contract." [31]
Both contentions are inaccurate. True, the statute of frauds applies only to executory
contracts and not to partially or completely executed ones. [32] However, there is no perfected
contract in this case, therefore there is no basis for the application of the statute of frauds. The
application of such statute presupposes the existence of a perfected contract and requires only
that a note or memorandum be executed in order to compel judicial enforcement thereof. Also,
the civil law rule on double sale finds no application because there was no sale at all to begin with.
At bottom, what took place was only a prolonged negotiation to buy and to sell, and at most,
an offer and a counter-offer but no definite agreement was reached by the parties. Hence, the
rules on perfected contract of sale, statute of frauds and double sale find no relevance nor
application.
WHEREFORE, the Petition is DENIED and the assailed Decision is AFFIRMED. Costs
against petitioners.
SO ORDERED.
Narvasa (Chairman), CJ., Davide, Jr., Melo and Francisco, JJ., concur.
 RA 8291
Introduction
Are elective officials still covered after their term of office expires?
1987 Constitution has given constitutional recognition to the obligation of the state to
retirees by providing that the state shall from time to time review to upgrade the
pensions and other benefits due to retirees of both government and private sector (Art.
XVI, Sec. 8)
Another feature of 1987 Constitution is to the effect that pensions or gratuities are not
considered as additional, double or indirect compensation (Art. IX, B, The Civil Service
Commission, Sec. 8, par. 2).
As a consequence, a retiree who is reappointed to a government position shall receive
the compensation for the position without violating the constitutional prohibition
Who are not covered?
imposed on elective or appointive public officers or employees against receiving
additional, double or indirect compensation (id., par. 1).
Objectives and scope:
Revised the 20-year old charter of GSIS (PD 1146)
Aims to expand and increase the coverage and benefits of GSIS;
Introduce institutional reforms for GSIS to have more flexibility and thus perform its
mission of providing social security protection more effectively.
Upon the employees assumption to duty pursuant to a valid appointment or election
and oath of office.
Compulsory coverage shall cease upon expiration of term.
They have the option to continue with life insurance so long as they will pay both the
employee and employer shares.
On social security coverage, said official shall continue to be a member and shall be
entitled to benefits that provide for contingencies (death, disability or separation)
subject to satisfaction of eligibility conditions.
Employees who have separate retirement schemes under special laws and
are therefore covered by their respective retirement laws, such as the
members of the Judiciary, Constitutional Commissions, and other similarly
situated government officials;
Uniformed members of AFP & PNP including BJMP;
Those who are not receiving basic pay or salary
Contractuals who have no employer and employee relationship with the
agencies they serve

Effectivity When does a contractual have e-e relationship with his employer?

June 24, 1997, 15 days after it was published on June 9, 1997. It was approved on Person was selected and engaged by the employer
May 30, 1997 Employer pays the salary
Employer has the power of dismissal
Employer has the power to control the means and the result of the work to
Repeal of retirement laws
be done

PD 1146
Compensation
RA 660
RA 1616
Is the basic pay or salary received by an employee pursuant to this
election/appointment.
Who are covered?
Does not include per diems, bonuses, overtime pay, honoraria, allowances and any
other emoluments received in addition to basic pay (RA 8291, Sec. 1)
Compulsory for all employees:
Appointive or elective
Contributions
Whether temporary, casual, permanent or contractual w/ e-e relationship

Member Employer
(so those under job orders are not covered)

First P10,000 9% 12%

Who are receiving basic pay or salary but not per diems, honoraria or
allowances; and
Who have not reached the compulsory retirement age of 65 yrs. In excess of P10,000 2% 12%

Who is responsible for remittance of contributions?

When coverage takes effect? employer

 Date of remittance? Petitioner would want SC to reverse CA ruling rejecting his assertion that his
services rendered in the MECO, MMSU, PHIVIDEC and as OIC Vice-Governor of Ilocos Norte
should be credited in the computation of his retirement benefits .
First ten days of calendar month following the month to which contributions apply.

Valdez v. GSIS
Effect of non-remittance?

All loan privileges of member shall be suspended
Determination of eligibility to and computation of benefits will be made
subject to deduction of contribution arrearages and service loans accounts
plus surcharges from proceeds of claim
SC:
Aside from having been rendered part-time in said agencies, the said
positions were without compensation as defined in Section 2 (i) of R.A. No. 8291.

Penalties on delayed remittances? Benefits

Aside from penal provisions, interest of not less than 2% per month. Contingencies compensable?

Penal Provisions? Retirement

Separation (NOT BENEFITS IN SSS)
Unemployment (not in SSS)
Official or employee who fails to include in annual budget the amount corresponding to
Disability
e-e contributions or who fails by more than 30 days to remit the amount from the time
Survivorship
such amount becomes due
Death (Life Insurance and Funeral)
Employee, who after deducting, fails to remit to GSIS within 30 days from date they
should be remitted
New benefits?
Penal provisions?
Unemployment benefit
Separation benefit
Heads of offices of national government, etc. who shall fail, refuse or delay the
payment, turn-over, remittance or delivery of such amounts to GSIS
Improvement of existing benefits?
Membership in GSIS
Increase in Average Monthly Compensation (AMC) Limit: from AMC limit of P3,000 to
P10,000
Enjoyment of life insurance, retirement and other social security protection such as
disability, survivorship, separation and unemployment benefits
Members of judiciary and constitutional commissions are covered by GSIS with life Improvement of existing benefits?
insurance only; retirement laws are governed by special laws
Increase in the Revalued Average Monthly Compensation (RAMC): from P140 to P700
Is part time service included in the computation of total service rendered? Full enjoyment of 5-year lump sum benefit (no more discounted per PD 1146 where
retiree receives only 52.17 months while it is full 60 months at present)
Liberalization of eligibility requirements
As a rule, all full-time service with compensation from date of original
Allocation of at least 40% of the Social Insurance Fund (SIF) to member Loans
appointment or election shall be computed for purpose of determining
Benefits
retirement benefits.
service shall mean full-time service w/ compensation. Part time service
w/ compensation shall be converted to full time equivalent. Retirement
Part-time shall be converted using a 40-hour per week and 52-week per
year as basis.
Conditions:

rendered at least 15 yrs. of service

at least 60 year old at time of retirement
Valdez v. GSIS not receiving monthly pension from permanent total disability
 Options:

- lump sum payment of basic monthly pension multiplied by 60 plus basic monthly pension Separation: Who are eligible?
for life upon expiration of 5 years period
Types:
- cash payment of 18 times the basic monthly pension plus basic monthly pension for life
payable immediately upon retirement but without 5-year guaranteed period.
- rendered at least 3years but less than 15 years

Retirement
(cash payment equivalent to 100% of Average Monthly Compensation for every year of
service payable upon reaching 60 or upon separation whichever comes later if not receiving
If rendered at least 15 years service but is less than 60 years at time of monthly pension from permanent total disability)
separation or resignation, member will be entitled to cash payment equivalent to 18 times his
basic monthly pension payable at the time of separation or resignation and upon reaching the
age of 60 years, he will be entitled to basic monthly pension payable monthly for life.

- rendered at least 15 years & who is below 60 at time of resignation/separation

This is denominated as separation benefit but in reality a combination of
separation and retirement benefits.
(cash payment equivalent to 15 times the basic Monthly Pension payable upon
separation plus monthly pension starting 60)
Retirement

Separation
Entitlement to retirement is premised on service of at least 15 years.
Member who is 60 years old upon retirement but with less than 15 years of service is
not entitled to retirement. What he gets is a separation benefit consisting of cash IRR, Rule II, Sec. 2.5:
benefit equivalent to 100% of his average monthly compensation for each year of
service he paid contributions but not less than P12,000 provided he has at least 3 years
Member separated for cause
but less than 15 years of service.

Retirement automatically forfeit

Unless terms of resignation or separation provide otherwise

Member who has at least 15 years of service may retire at 60 or may continue in the
service until 65 (compulsory retirement age) Member separated not for cause
If he has less than 15 years, he may be allowed to continue in the service in accordance
with existing civil service rules and regulations. Extension of service is no longer shall continue to be member & entitled subject to qualification &
mandatory in contrast to PD 1146. other prescription

Notice by employer

It shall be the duty of the Employer to notify its Employee at least Ninety (90) days in Unemployment
advance of the date of his/her compulsory retirement.

Separation
The benefit is paid when a permanent employee is involuntarily separated
Separation benefit from the service as a result of the abolition of his office or position usually resulting from
reorganization.
A cash payment of 18 times the Basic Monthly Pension at time of separation and
a life pension to start at the age of 60 will be given to those who separate from the Who is eligible?
service with at least 15 years service and are below 60 years of age.
Under PD 1146, separated member will have to wait until he is 60 years of age to
receive any separation benefit.

Permanent employee who has paid 12 monthly contributions.

 Duration of benefit depends on length of service A member who becomes permanently and partially disabled when
ranges from 2 mos. to a maximum of 6 mos.
Equivalent of benefit 50% of the average monthly
- when he is in the service at time of disability; or
compensation
Options Those who have more than 15 years service
may either avail of retirement or separation benefits as - separated from service and has paid 36 monthly contributions within the
the case may be. last 5 years immediately preceding the disability or has paid a total of at least 180monthly
contributions.
Disability
Permanent Partial?
Any loss or impairment of the normal functions of the physical or mental faculties of a
member, which reduces or eliminates his capacity to continue with his current gainful occupation Any finger
or engage in any other gainful occupation (IRR, Sec. 1.18) Any toe
One arm
One hand
Disability
One foot or leg
One or both ears
Evaluation of disability as a contingency is vested solely in GSIS ( IRR, Sec. 9.3.1) Hearing of one or both ears
General condition for entitlement is that the disability was not due to misconduct , Sight of one eye
notorious negligence, habitual intoxication or willful intention to kill himself or Other cases as may be determined
another (IRR, Sec. 9.3.2)
Temporary Total Disability
Disability
Accrues or arises when there is complete but temporary incapacity to
Permanent Total Disability continue with a member's present employment or engage in any gainful occupation due to the
loss or impairment of the normal function of the physical and/or mental faculties of the member.
In effect, this loss or impairment can be reversed to the point where the member can continue
A member who becomes permanently and totally disabled when he/she is in the
with his previous employment or engage in another gainful occupation
service and has paid at least 180 monthly contributions (monthly income benefit for life
equivalent to basic monthly pension plus cash payment equivalent to 18 times his
basic monthly pension effective on date of disability) Gainful employment

Permanent Total Disability Any productive activity that provides the member with income at least equal to the
minimum compensation of government employees (IRR, Sec. 1.17)
A member who becomes permanently and totally disabled are eligible when (a) he is
in the service at time of disability or (b) separated from the service and has paid at Temporary Total Disability
least 36 monthly contributions within the last 5 years immediately preceding the
disability or has paid a total of at least 180 monthly contributions (monthly income
A member who suffers temporary total disability for reasons not due to grave
benefit for life equivalent to the basic monthly pension)
misconduct, notorious negligence, habitual intoxication or willful intention to kill himself
A member who becomes permanently and totally disabled when he is separated from
or another may be entitled if:
service with at least 3 years of service but has not paid 36 monthly contributions within
the last 5 years is still eligible (cash payment equivalent to 100% of the AMC) for
every year of service but not less than P12,000) - he is in service at time of disability and has exhausted sick leave credits;
or
Disabilities considered permanent total?
- if separated, has rendered at least 3 years of service and has paid at least
6 monthly contributions in the twelve month period immediately preceding his disability.
Complete loss of sight in both eyes
Loss of two limbs at or above ankle or wrist
Permanent complete paralysis of 2 limbs Disability
Brain injury resulting in incurable imbecility or insanity
Other cases as may be determined by GSIS
A written notice of sickness or injury shall be given by a member or anybody in his/her
behalf within five (5) working days from the date of the occurrence of the contingency.
Permanent Partial Disability
 An application for disability benefits must be filed with the GSIS within Four (4) years Secondary Beneficiaries
from the date of the occurrence of the contingency, fully supported by required papers
and documents.
(a) the dependent parents; and

Disability - forfeiture of disability benefits if member refuses or deliberately fails to:

(b) the legitimate descendants

(a) have himself/herself medically treated by a physician when required by the GSIS; or
Who are dependents?

(b) take the prescribed medication; or

(a) the legitimate spouse dependent for support;

(c) have himself/herself confined in a hospital without justifiable reason, when such
(b) any legitimate, legitimated and/or legally adopted child, including any illegitimate child,
confinement is required by the GSIS; or
who is unmarried, not gainfully employed, who has not attained the age of majority, or being at
the age of majority but incapacitated and incapable of self-support due to a mental or physical
(d) avail himself/herself of such rehabilitation facilities as may be duly recommended by defect acquired prior to age of majority; and
the GSIS and made available for him/her; or
(c) the parents dependent upon the member for support.
(e) observe such precautionary and/or preventive measures as prescribed by a physician
or expressly required of him/her to prevent the aggravation or continuance of his/her disability.
GSIS v. Montesclaros

(f) report on his/her re-employment.

Facts:

Survivorship
Those granted to surviving and qualified beneficiaries of the deceased
member or pensioner to cushion them against the adverse economic, psychological and
emotional loss resulting from the death of a wage earner or pensioner.
Survivorship
Who are eligible?
If at time of death, a member was in the service and has rendered at least 3 years of
service (primary beneficiaries to receive survivorship pension plus cash payment;
secondary beneficiaries or legal heirs entitled to cash payment)
Survivorship
If at time of death, a member was in the service with less than 3 years service or was
separated from the service with at least 3 years of service and has paid 36 monthly
contributions within the 5-year period immediately preceding his death or has paid a
total of at least 180 monthly contributions prior to death (primary beneficiaries to
receive survivorship pension plus cash payment; secondary beneficiaries or legal
heirs entitled to cash payment)
Survivorship
Primary Beneficiaries
SB member Nicolas Montesclaros married Milagros Orbiso. Nicolas was a 72-year old
widower when he married Milagros who was then 43 years old. Nicolas died. Milagros then filed
with the GSIS a claim for survivorship pension under PD 1146. The GSIS denied the claim
because under Section 18 of PD 1146, the surviving spouse has no right to survivorship pension
if the surviving spouse contracted the marriage with the pensioner within three years before the
pensioner qualified for the pension.
SC:
Section 18 of Presidential Decree No. 1146 void for being violative of the constitutional
guarantees of due process and equal protection of the law. The proviso is unduly oppressive in
outrightly denying a dependent spouse's claim for survivorship pension if the dependent spouse
contracted marriage to the pensioner within the three-year prohibited period. There is outright
confiscation of benefits due the surviving spouse without giving the surviving spouse an
opportunity to be heard. The proviso also violated the equal protection clause because it
discriminates the dependent spouse who contracts marriage to the pensioner within three years
before the pensioner qualified for the pension.
Funeral
Shall be paid upon the death of:
(a) an active member; or
(b) a member who has been separated from the service, but who is entitled to future
separation or retirement benefit; or

(c) a member who is a pensioner (excluding survivorship pensioners); or

The legitimate spouse, until he/she remarries, and the dependent children.
 (d) a retiree who at the time of his/her retirement is at least 60 years old but opts to retire
under RA 1616; or
(e) a member who retired under RA 1616 prior to the effectivity of RA 8282 with at 20 years
service regardless of age.
Funeral
Amount is initially P12,000 but shall be increased to at least P18,000 after five years.
Life Insurance Benefits
Cash Surrender Value (CSV). After his/her insurance shall have been in force for one
(1) year, a member separated from the service prior to the maturity of the insurance may be paid
the cash value less any indebtedness thereon unless the terms of his/her separation provide
otherwise;
Insurance Loans. Upon application, a member who has been insured for at least one
(1) year may be granted an insurance loan in an amount not exceeding Fifty Percent (50%) of
the cash value of his/her insurance at the time of application.

Funeral
Life Insurance Benefits

The funeral benefit shall be paid to one of the following in the order in which they appear
Dividends. An annual dividend may be granted to all members of the GSIS whose life
herein below:
insurance is in force for at least one (1) year, based on records submitted by the employer. A
Dividend Allocation Formula shall be determined and circularized by the GSIS for this purpose.
(a) the surviving spouse;
Adjudication of Claims
(b) the legitimate child who spent for the funeral services; or
GSIS has original & exclusive jurisdiction to settle any dispute arising under
(c) any other person who can show incontrovertible proofs of having borne the funeral RA 8291 w/ respect to:
expenses.
- coverage
Compulsory Life Insurance
- entitlement to benefits
All employees, including the members of the Judiciary and the Constitutional
Commissioners, but excluding the uniformed members of the Armed Forces of the Philippines
- collection & payment of contributions
(AFP), the Philippine National Police and the Bureau of Fire Protection (BFP) and Bureau of Jail
Management and Penology.
- any other matter related to the any or all of the foregoing which is
necessary for their determination
Life Insurance Benefits

Which body of GSIS vested with Quasi-Judicial Functions? Board of

Maturity Benefit. Upon maturity of the life insurance, the face amount less any
Trustees
indebtedness against the policy, shall be paid to the member;
Prescriptive Period ?

Death Benefit. When a member dies prior to the maturity of his/her insurance and
- 4 years from date of contingency except life & retirement which do not prescribe.
during its continuance, the GSIS shall pay to the designated Beneficiaries or to his/her legal
heirs, as the case may be, the face amount less any indebtedness thereon.
Tax Exemption
Life Insurance Benefits
RUBIA V. GSIS
Accidental Death Benefit When the death of the member is accidental in accordance
with Section 10.9.2 of IRR, the GSIS shall pay the designated beneficiaries or the legal heirs, as - exemption of GSIS from execution does not cover refund of amortization payment
the case may be, an additional amount equivalent to the face amount of his/her compulsory
insurance;
CITY OF DAVAO V. RTC

Waiver of Premiums. When a member is separated due to total and permanent

- on real property taxes, GSIS tax- exempt status in previous law was withdrawn
disability, the contributions that may become due and payable during the period of disability shall
under RA 7160 but restored under Sec. 39 RA 8291
be deemed waived and considered paid.

Legal Fees
 A.M. No. 08-2-01-0, February 11, 2010 Totalization refers to the process of adding up the periods of creditable services or
contributions in each of the Systems for purposes of eligibility and computation of benefits, For
purposes of totalization, overlapping periods of membership shall be considered once only (Sec.
Facts:
3)

GSIS seeks exemption from the payment of legal fees imposed on government-owned or
Overlapping period refers to the period during which a worker contributes
controlled corporations under Section 22, Rule 141 (Legal Fees) of the Rules of Court. GSIS
simultaneously to GSIS and SSS.
anchors its petition on Section 39 of its charter, RA 8291.

Issue:

May the legislature exempt GSIS from legal fees imposed by the Court on
government-owned and controlled corporations and local government units?

SC:

Since the payment of legal fees is a vital component of the rules promulgated by this Court
concerning pleading, practice and procedure, it cannot be validly annulled, changed or modified
by Congress. As one of the safeguards of this Court's institutional independence, the power to
promulgate rules of pleading, practice and procedure is now the Court's exclusive domain. That
power is no longer shared by this Court with Congress, much less with the Executive.

SC:

Congress could not have carved out an exemption for the GSIS from the payment of legal
fees without transgressing another equally important institutional safeguard of the Court's
independence fiscal autonomy. Any exemption from the payment of legal fees granted by
Congress to government-owned or controlled corporations and local government units will
necessarily reduce the JDF and the SAJF. Undoubtedly, such situation is constitutionally infirm
for it impairs the Court's guaranteed fiscal autonomy and erodes its independence.

What is the effect of re-employment?

A member who is re-employed is considered a new entrant if he was paid separation

or retirement benefits corresponding to his previous services.

Portability of benefits

( Portability law RA 7699)

A member of GSIS who does not qualify for old age and other benefits by reason of
non-fulfillment of the required period of service may be able to qualify for such benefits
by making use of the period during which he rendered services to a private employer
and for which contributions were paid to SSS. This is allowed under RA 7699
(approved May 1, 1994)
The Act instituted a limited portability scheme in the GSIS and SSS by totalizing the
workers creditable services or contributions in each of the Systems.

Portability refers to transfer of funds for the benefit and account of a worker who
transfers from one system to the other (RA 7699, Sec. 2 [b]).