Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-57499 June 22, 1984

MERCEDES CALIMLIM- CANULLAS, petitioner,

vs.
HON. WILLELMO FORTUN, Judge, Court of First instance of Pangasinan, Branch I, and
CORAZON DAGUINES, respondents.

Fernandez Law Offices for petitioner.

Francisco Pulido for respondents.

MELENCIO-HERRERA, J.:

Petition for Review on certiorari assailing the Decision, dated October 6, 1980, and the Resolution
on the Motion for Reconsideration, dated November 27, 1980, of the then Court of First Instance of
Pangasinan, Branch I, in Civil Case No. 15620 entitled "Corazon DAGUINES vs. MERCEDES
Calimlim-Canullas," upholding the sale of a parcel of land in favor of DAGUINES but not of the
conjugal house thereon'

The background facts may be summarized as follows: Petitioner MERCEDES Calimlim-Canullas

and FERNANDO Canullas were married on December 19, 1962. They begot five children. They
lived in a small house on the residential land in question with an area of approximately 891 square
meters, located at Bacabac, Bugallon, Pangasinan. After FERNANDO's father died in 1965,
FERNANDO inherited the land.

In 1978, FERNANDO abandoned his family and was living with private respondent Corazon
DAGUINES. During the pendency of this appeal, they were convicted of concubinage in a judgment
rendered on October 27, 1981 by the then Court of First Instance of Pangasinan, Branch II, which
judgment has become final.

On April 15, 1980, FERNANDO sold the subject property with the house thereon to DAGUINES for
the sum of P2,000.00. In the document of sale, FERNANDO described the house as "also inherited
by me from my deceased parents."

Unable to take possession of the lot and house, DAGUINES initiated a complaint on June 19, 1980
for quieting of title and damages against MERCEDES. The latter resisted and claimed that the house
in dispute where she and her children were residing, including the coconut trees on the land, were
built and planted with conjugal funds and through her industry; that the sale of the land together with
the house and improvements to DAGUINES was null and void because they are conjugal properties
and she had not given her consent to the sale,
In its original judgment, respondent Court principally declared DAGUINES "as the lawful owner of
the land in question as well as the one-half () of the house erected on said land." Upon
reconsideration prayed for by MERCEDES, however, respondent Court resolved:

WHEREFORE, the dispositive portion of the Decision of this Court, promulgated on

October 6, 1980, is hereby amended to read as follows:

(1) Declaring plaintiff as the true and lawful owner of the land in question and the 10
coconut trees;

(2) Declaring as null and void the sale of the conjugal house to plaintiff on April 15,
1980 (Exhibit A) including the 3 coconut trees and other crops planted during the
conjugal relation between Fernando Canullas (vendor) and his legitimate wife, herein
defendant Mercedes Calimlim- Canullas;

xxx xxx xxx

The issues posed for resolution are (1) whether or not the construction of a conjugal house on the
exclusive property of the husband ipso facto gave the land the character of conjugal property; and
(2) whether or not the sale of the lot together with the house and improvements thereon was valid
under the circumstances surrounding the transaction.

The determination of the first issue revolves around the interpretation to be given to the second
paragraph of Article 158 of the Civil Code, which reads:

xxx xxx xxx

Buildings constructed at the expense of the partnership during the marriage on land
belonging to one of the spouses also pertain to the partnership, but the value of the
land shall be reimbursed to the spouse who owns the same.

We hold that pursuant to the foregoing provision both the land and the building belong to the
conjugal partnership but the conjugal partnership is indebted to the husband for the value of the
land. The spouse owning the lot becomes a creditor of the conjugal partnership for the value of the
lot, 1 which value would be reimbursed at the liquidation of the conjugal partnership. 2

In his commentary on the corresponding provision in the Spanish Civil Code (Art. 1404), Manresa
stated:

El articulo cambia la doctrine; los edificios construidos durante el matrimonio en

suelo propio de uno de los conjuges son gananciales, abonandose el valor del suelo
al conj uge a quien pertenezca.

It is true that in the case of Maramba vs. Lozano, 3 relied upon by respondent Judge, it was held that
the land belonging to one of the spouses, upon which the spouses have built a house, becomes
conjugal property only when the conjugal partnership is liquidated and indemnity paid to the owner of
the land. We believe that the better rule is that enunciated by Mr. Justice J.B.L. Reyes in Padilla vs.
Paterno, 3 SCRA 678, 691 (1961), where the following was explained:

As to the above properties, their conversion from paraphernal to conjugal assets

should be deemed to retroact to the time the conjugal buildings were first constructed
 thereon or at the very latest, to the time immediately before the death of Narciso A.
Padilla that ended the conjugal partnership. They can not be considered to have
become conjugal property only as of the time their values were paid to the estate of
the widow Concepcion Paterno because by that time the conjugal partnership no
longer existed and it could not acquire the ownership of said properties. The
acquisition by the partnership of these properties was, under the 1943 decision,
subject to the suspensive condition that their values would be reimbursed to the
widow at the liquidation of the conjugal partnership; once paid, the effects of the
fulfillment of the condition should be deemed to retroact to the date the obligation
was constituted (Art. 1187, New Civil Code) ...

The foregoing premises considered, it follows that FERNANDO could not have alienated the house
and lot to DAGUINES since MERCEDES had not given her consent to said sale. 4

Anent the second issue, we find that the contract of sale was null and void for being contrary to
morals and public policy. The sale was made by a husband in favor of a concubine after he had
abandoned his family and left the conjugal home where his wife and children lived and from whence
they derived their support. That sale was subversive of the stability of the family, a basic social
institution which public policy cherishes and protects. 5

Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purpose is
contrary to law, morals, good customs, public order, or public policy are void and inexistent from the
very beginning.

Article 1352 also provides that: "Contracts without cause, or with unlawful cause, produce no effect
whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order, or
public policy."

Additionally, the law emphatically prohibits the spouses from selling property to each other subject to
certain exceptions.6 Similarly, donations between spouses during marriage are prohibited. 7 And this
is so because if transfers or con conveyances between spouses were allowed during marriage, that
would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to
prevent the exercise of undue influence by one spouse over the other,8 as well as to protect the
institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple
living as husband and wife without benefit of marriage, otherwise, "the condition of those who
incurred guilt would turn out to be better than those in legal union." Those provisions are dictated by
public interest and their criterion must be imposed upon the wig of the parties. That was the ruling
in Buenaventura vs. Bautista, also penned by Justice JBL Reyes (CA) 50 O.G. 3679, and cited
in Matabuena vs. Cervantes. 9 We quote hereunder the pertinent dissertation on this point:

We reach a different conclusion. While Art. 133 of the Civil Code considers as void a
donation between the spouses during the marriage, policy considerations of the most
exigent character as wen as the dictates of morality require that the same prohibition
should apply to a common-law relationship.

As announced in the outset of this opinion, a 1954 Court of Appeals decision,

Buenaventura vs. Bautista, 50 OG 3679, interpreting a similar provision of the old
Civil Code speaks unequivocally. If the policy of the law is, in the language of the
opinion of the then Justice J.B.L. Reyes of that Court, 'to prohibit donations in favor
of the other consort and his descendants because of fear of undue influence
and improper pressure upon the donor, a prejudice deeply rooted in our ancient law,
..., then there is every reason to apply the same prohibitive policy to persons living
 together as husband and wife without benefit of nuptials. For it is not to be doubted
that assent to such irregular connection for thirty years bespeaks greater influence of
one party over the other, so that the danger that the law seeks to avoid is
correspondingly increased'. Moreover, as pointed out by Ulpian (in his lib 32 ad
Sabinum, fr. 1), "It would not be just that such donations — should subsist, lest the
conditions of those who incurred guilt should turn out to be better." So long as
marriage remains the cornerstone of our family law, reason and morality alike
demand that the disabilities attached to marriage should likewise attach
to concubinage (Emphasis supplied),

WHEREFORE, the Decision of respondent Judge, dated October 6, 1980, and his Resolution of
November 27, 1980 on petitioner's Motion for Reconsideration, are hereby set aside and the sale of
the lot, house and improvements in question, is hereby declared null and void. No costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-15113 January 28, 1961

ANTONIO MEDINA, petitioner,

vs.
COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX APPEALS respondents.

Eusebio D. Morales for petitioner.

Office of the Solicitor General for respondents.

REYES, J.B.L. J.:

Petition to review a decision of the Court of Tax Appeals upholding a tax assessment of the Collector
of Internal Revenue except with respect to the imposition of so-called compromise penalties, which
were set aside.

The records show that on or about May 20, 1944, petitioning taxpayer Antonio Medina married
Antonia Rodriguez. Before 1946, the spouses had neither property nor business of their own. Later,
however, petitioner acquired forest, concessions in the municipalities of San Mariano and Palanan in
the Province of Isabela. From 1946 to 1948, the logs cut and removed by the petitioner from his
concessions were sold to different persons in Manila through his agent, Mariano Osorio.

Some time in 1949, Antonia R. Medina, petitioner's wife, started to engage in business as a lumber
dealer, and up to around 1952, petitioner sold to her almost all the logs produced in his San
Mariano, concession. Mrs. Medina, In turn, sold in Manila the logs bought from her husband through
the same agent, Mariano Osorio. The proceeds were, upon instructions from petitioner, either
received by Osorio for petitioner or deposited by said agent in petitioner's current account with the
Philippine National Bank.
On the thesis that the sales made by petitioner to his wife were null and void pursuant to the
provisions of Article 1490 of the Civil Code of the Philippines (formerly, Art. 1458, Civil Code of
1889), the Collector considered the sales made by Mrs. Medina as the petitioner's original sales
taxable under Section 186 of the National Internal Revenue Code and, therefore, imposed a tax
assessment on petitioner, calling for the payment of P4,553.54 as deficiency sales taxes and
surcharges from 1949 to 1952. This same assessment of September 26, 1953 sought also the
collection of another sum of P643.94 as deficiency sales tax and surcharge based on petitioner's
quarterly returns from 1946 to 1952.

On November 30, 1953, petitioner protested the assessment; however, respondent Collector
insisted on his demand. On July 9, 1954, petitioner filed a petition for reconsideration revealing for
the first time the existence of an alleged premarital agreement of complete separation of properties
between him and his wife, and contending that the assessment for the years 1946 to 1952 had
already prescribed. After one hearing, the Conference Staff of the Bureau of Internal Revenue
eliminated the 50% fraud penalty and held that the taxes assessed against him before 1948 had
already prescribed. Based on these findings, the Collector issued a modified assessment,
demanding the payment of only P3,325.68, computed as follows:

5% tax due on P7,209.83 -1949 P 360.49

5% tax due on 16,945.55 - 1950 847.28
5% tax due on 16,874.52 - 1951 843.75
5% tax due on 11,009.94 - 1952 550.50
TOTAL sales tax due P2,602.0
25% Surcharge thereon 650.51
Short taxes per quarterly returns, 3rd 58.52
quarter, 1950
25% Surcharge thereon 14.63
TOTAL AMOUNT due & collectible P3,325.68

Petitioner again requested for reconsideration, but respondent Collector, in his letter of April 4, 1955,
denied the same.

Petitioner appealed to the Court of Tax Appeals, which rendered judgment as aforesaid. The Court's
decision was based on two main findings, namely, (a) that there was no premarital agreement of
absolute separation of property between the Medina spouse; and (b) assuming that there was such
an agreement, the sales in question made by petitioner to his wife were fictitious, simulated, and
not bona fide.

In his petition for review to this Court, petitioner raises several assignments of error revolving around
the central issue of whether or not the sales made by the petitioner to his wife could be considered
as his original taxable sales under the provisions of Section 186 of the National Internal Revenue
Code.

Relying mainly on testimonial evidence that before their marriage, he and his wife executed and
recorded a prenuptial agreement for a regime of complete separation of property, and that all trace
of the document was lost on account of the war, petitioner imputes lack of basis for the tax court's
factual finding that no agreement of complete separation of property was ever executed by and
between the spouses before their marriage. We do not think so. Aside from the material
inconsistencies in the testimony of petitioner's witnesses pointed out by the trial court, the
circumstantial evidence is against petitioner's claim. Thus, it appears that at the time of the marriage
between petitioner and his wife, they neither had any property nor business of their own, as to have
really urged them to enter into the supposed property agreement. Secondly, the testimony that the
separation of property agreement was recorded in the Registry of Property three months before the
marriage, is patently absurd, since such a prenuptial agreement could not be effective before
marriage is celebrated, and would automatically be cancelled if the union was called off. How then
could it be accepted for recording prior to the marriage? In the third place, despite their insistence on
the existence of the ante nuptial contract, the couple, strangely enough, did not act in accordance
with its alleged covenants. Quite the contrary, it was proved that even during their taxable years, the
ownership, usufruct, and administration of their properties and business were in the husband. And
even when the wife was engaged in lumber dealing, and she and her husband contracted sales with
each other as aforestated, the proceeds she derived from her alleged subsequent disposition of the
logs — incidentally, by and through the same agent of her husband, Mariano Osorio — were either
received by Osorio for the petitioner or deposited by said agent in petitioner's current account with
the Philippine National Bank. Fourth, although petitioner, a lawyer by profession, already knew, after
he was informed by the Collector on or about September of 1953, that the primary reason why the
sales of logs to his wife could not be considered as the original taxable sales was because of the
express prohibition found in Article 1490 of the Civil Code of sales between spouses married under a
community system; yet it was not until July of 1954 that he alleged, for the first time, the existence of
the supposed property separation agreement. Finally, the Day Book of the Register of Deeds on
which the agreement would have been entered, had it really been registered as petitioner insists,
and which book was among those saved from the ravages of the war, did not show that the
document in question was among those recorded therein.

We have already ruled that when the credibility of witnesses is the one at issue, the trial court's
judgment as to their degree of credence deserves serious consideration by this Court (Collector vs.
Bautista, et al., G.R. Nos. L-12250 & L-12259, May 27, 1959). This is all the more true in this case
because not every copy of the supposed agreement, particularly the one that was said to have been
filed with the Clerk of Court of Isabela, was accounted for as lost; so that, applying the "best
evidence rule", the court did right in giving little or no credence to the secondary evidence to prove
the due execution and contents of the alleged document (see Comments on the Rules of Court,
Moran, 1957 Ed., Vol. 3, pp. 10.12).

The foregoing findings notwithstanding, the petitioner argues that the prohibition to sell expressed
under Article 1490 of the Civil Code has no application to the sales made by said petitioner to his
wife, because said transactions are contemplated and allowed by the provisions of Articles 7 and 10
of the Code of Commerce. But said provisions merely state, under certain conditions, a presumption
that the wife is authorized to engage in business and for the incidents that flow therefrom when she
so engages therein. But the transactions permitted are those entered into with strangers, and do not
constitute exceptions to the prohibitory provisions of Article 1490 against sales between spouses.

Petitioner's contention that the respondent Collector can not assail the questioned sales, he being a
stranger to said transactions, is likewise untenable. The government, as correctly pointed out by the
Tax Court, is always an interested party to all matters involving taxable transactions and, needless to
say, qualified to question their validity or legitimacy whenever necessary to block tax evasion.

Contracts violative of the provisions of Article 1490 of the Civil Code are null and void (Uy Sui Pin vs.
Cantollas, 70 Phil. 55; Uy Coque vs. Sioca 45 Phil. 43). Being void transactions, the sales made by
the petitioner to his wife were correctly disregarded by the Collector in his tax assessments that
considered as the taxable sales those made by the wife through the spouses' common agent,
Mariano Osorio. In upholding that stand, the Court below committed no error.
It is also the petitioner's contention that the lower court erred in using illegally seized documentary
evidence against him. But even assuming arguendo the truth of petitioner's charge regarding the
seizure, it is now settled in this jurisdiction that illegally obtained documents and papers are
admissible in evidence, if they are found to be competent and relevant to the case (see Wong & Lee
vs. Collector of Internal Revenue, G.R. No. L-10155, August 30, 1958). In fairness to the Collector,
however, it should be stated that petitioner's imputation is vehemently denied by him, and relying on
Sections 3, 9, 337 and 338 of the Tax Code and the pertinent portions of Revenue Regulations No.
V-1 and citing this Court's ruling in U.S. vs. Aviado, 38 Phil. 10, the Collector maintains that he and
other internal revenue officers and agents could require the production of books of accounts and
other records from a taxpayer. Having arrived at the foregoing conclusion, it becomes unnecessary
to discuss the other issues raised, which are but premised on the assumption that a premarital
agreement of total separation of property existed between the petitioner and his wife.

WHEREFORE, the decision appealed from is affirmed, with costs against the petitioner.

Padilla, Bautista Angelo, Labrador, Barrera, Gutierrez David and Dizon, JJ., concur.

Separate Opinions

CONCEPCION, J., concurring:

I concur in the result. I do not share the view that documents and papers illegally obtained are
admissible in evidence, if competent and relevant to the case. In this connection, I believe in the
soundness of the following observations of the Supreme Court of the United States in Weeks v.
United States (232 US 383, 58 L. ed. 652, 34 S. Ct. 341):1

The effect of the Fourth Amendment is to put the courts of the United States and Federal
officials, in the exercise of their power and authority, under limitations and restraints as to the
exercise of such power and authority, an to forever secure the people, their persons, houses,
papers, and effects against all unreasonable searches and seizures under the guise of law.
This protection reaches all alike, whether accused of crime or not, and the duty of giving to it
force and effect is obligatory upon all entrusted under our Federal system with the
enforcement of the laws. The tendency of those who execute the criminal laws of the country
to obtain conviction by means of unlawful seizures and enforced confessions, the latter often
obtained after subjecting accused persons to unwarranted practices destructive of rights
secured by the Federal Constitution, should find no sanction in the judgments of the courts
which are charged at all times with the support of the Constitution and to which people of all
conditions have a right to appeal for the maintenance of such fundamental rights.

xxx xxx xxx

If letters and private documents can thus be seized and held and used in evidence, against a
citizen accused of an offense, the protection of the Fourth. Amendment declaring his right to
be secured against such searches and seizures is of no value, and, so far as those thus
placed are concerned well be stricken from the Constitution. The efforts of the courts and
their officials to bring the guilty to punishment, praiseworthy as they are, are not to be aided
by the sacrifice of those great principles established by years of endeavor and suffering
which have resulted in their embodiment in the fundamental law of the land." as applied and
amplified in Elkins v. United States (June 27, 1960), 4 L. ed. 1669.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. 133-J May 31, 1982

BERNARDITA R. MACARIOLA, complainant,

vs.
HONORABLE ELIAS B. ASUNCION, Judge of the Court of First Instance of Leyte, respondent.

MAKASIAR, J:

In a verified complaint dated August 6, 1968 Bernardita R. Macariola charged respondent Judge
Elias B. Asuncion of the Court of First Instance of Leyte, now Associate Justice of the Court of
Appeals, with "acts unbecoming a judge."

The factual setting of the case is stated in the report dated May 27, 1971 of then Associate Justice
Cecilia Muñoz Palma of the Court of Appeals now retired Associate Justice of the Supreme Court, to
whom this case was referred on October 28, 1968 for investigation, thus:

Civil Case No. 3010 of the Court of First Instance of Leyte was a complaint for
partition filed by Sinforosa R. Bales, Luz R. Bakunawa, Anacorita Reyes, Ruperto
Reyes, Adela Reyes, and Priscilla Reyes, plaintiffs, against Bernardita R. Macariola,
defendant, concerning the properties left by the deceased Francisco Reyes, the
common father of the plaintiff and defendant.

In her defenses to the complaint for partition, Mrs. Macariola alleged among other
things that; a) plaintiff Sinforosa R. Bales was not a daughter of the deceased
Francisco Reyes; b) the only legal heirs of the deceased were defendant Macariola,
she being the only offspring of the first marriage of Francisco Reyes with Felisa
Espiras, and the remaining plaintiffs who were the children of the deceased by his
second marriage with Irene Ondez; c) the properties left by the deceased were all the
conjugal properties of the latter and his first wife, Felisa Espiras, and no properties
were acquired by the deceased during his second marriage; d) if there was any
partition to be made, those conjugal properties should first be partitioned into two
parts, and one part is to be adjudicated solely to defendant it being the share of the
latter's deceased mother, Felisa Espiras, and the other half which is the share of the
deceased Francisco Reyes was to be divided equally among his children by his two
marriages.

On June 8, 1963, a decision was rendered by respondent Judge Asuncion in Civil

Case 3010, the dispositive portion of which reads:

IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court,

upon a preponderance of evidence, finds and so holds, and hereby
 renders judgment (1) Declaring the plaintiffs Luz R. Bakunawa,
Anacorita Reyes, Ruperto Reyes, Adela Reyes and Priscilla Reyes
as the only children legitimated by the subsequent marriage of
Francisco Reyes Diaz to Irene Ondez; (2) Declaring the plaintiff
Sinforosa R. Bales to have been an illegitimate child of Francisco
Reyes Diaz; (3) Declaring Lots Nos. 4474, 4475, 4892, 5265, 4803,
4581, 4506 and 1/4 of Lot 1145 as belonging to the conjugal
partnership of the spouses Francisco Reyes Diaz and Felisa Espiras;
(4) Declaring Lot No. 2304 and 1/4 of Lot No. 3416 as belonging to
the spouses Francisco Reyes Diaz and Irene Ondez in common
partnership; (5) Declaring that 1/2 of Lot No. 1184 as belonging
exclusively to the deceased Francisco Reyes Diaz; (6) Declaring the
defendant Bernardita R. Macariola, being the only legal and forced
heir of her mother Felisa Espiras, as the exclusive owner of one-half
of each of Lots Nos. 4474, 4475, 4892, 5265, 4803, 4581, 4506; and
the remaining one-half (1/2) of each of said Lots Nos. 4474, 4475,
4892, 5265, 4803, 4581, 4506 and one-half (1/2) of one-fourth (1/4)
of Lot No. 1154 as belonging to the estate of Francisco Reyes Diaz;
(7) Declaring Irene Ondez to be the exclusive owner of one-half (1/2)
of Lot No. 2304 and one-half (1/2) of one-fourth (1/4) of Lot No. 3416;
the remaining one-half (1/2) of Lot 2304 and the remaining one-half
(1/2) of one-fourth (1/4) of Lot No. 3416 as belonging to the estate of
Francisco Reyes Diaz; (8) Directing the division or partition of the
estate of Francisco Reyes Diaz in such a manner as to give or grant
to Irene Ondez, as surviving widow of Francisco Reyes Diaz, a
hereditary share of. one-twelfth (1/12) of the whole estate of
Francisco Reyes Diaz (Art. 996 in relation to Art. 892, par 2, New
Civil Code), and the remaining portion of the estate to be divided
among the plaintiffs Sinforosa R. Bales, Luz R. Bakunawa, Anacorita
Reyes, Ruperto Reyes, Adela Reyes, Priscilla Reyes and defendant
Bernardita R. Macariola, in such a way that the extent of the total
share of plaintiff Sinforosa R. Bales in the hereditary estate shall not
exceed the equivalent of two-fifth (2/5) of the total share of any or
each of the other plaintiffs and the defendant (Art. 983, New Civil
Code), each of the latter to receive equal shares from the hereditary
estate, (Ramirez vs. Bautista, 14 Phil. 528; Diancin vs. Bishop of
Jaro, O.G. [3rd Ed.] p. 33); (9) Directing the parties, within thirty days
after this judgment shall have become final to submit to this court, for
approval a project of partition of the hereditary estate in the
proportion above indicated, and in such manner as the parties may,
by agreement, deemed convenient and equitable to them taking into
consideration the location, kind, quality, nature and value of the
properties involved; (10) Directing the plaintiff Sinforosa R. Bales and
defendant Bernardita R. Macariola to pay the costs of this suit, in the
proportion of one-third (1/3) by the first named and two-thirds (2/3) by
the second named; and (I 1) Dismissing all other claims of the parties
[pp 27-29 of Exh. C].

The decision in civil case 3010 became final for lack of an appeal, and on October
16, 1963, a project of partition was submitted to Judge Asuncion which is marked
Exh. A. Notwithstanding the fact that the project of partition was not signed by the
parties themselves but only by the respective counsel of plaintiffs and defendant,
Judge Asuncion approved it in his Order dated October 23, 1963, which for
convenience is quoted hereunder in full:

The parties, through their respective counsels, presented to this

Court for approval the following project of partition:

COMES NOW, the plaintiffs and the defendant in the above-entitled

case, to this Honorable Court respectfully submit the following Project
of Partition:

l. The whole of Lots Nos. 1154, 2304 and 4506 shall belong
exclusively to Bernardita Reyes Macariola;

2. A portion of Lot No. 3416 consisting of 2,373.49 square meters

along the eastern part of the lot shall be awarded likewise to
Bernardita R. Macariola;

3. Lots Nos. 4803, 4892 and 5265 shall be awarded to Sinforosa

Reyes Bales;

4. A portion of Lot No. 3416 consisting of 1,834.55 square meters

along the western part of the lot shall likewise be awarded to
Sinforosa Reyes-Bales;

5. Lots Nos. 4474 and 4475 shall be divided equally among Luz
Reyes Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes
and Priscilla Reyes in equal shares;

6. Lot No. 1184 and the remaining portion of Lot No. 3416 after taking
the portions awarded under item (2) and (4) above shall be awarded
to Luz Reyes Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela
Reyes and Priscilla Reyes in equal shares, provided, however that
the remaining portion of Lot No. 3416 shall belong exclusively to
Priscilla Reyes.

WHEREFORE, it is respectfully prayed that the Project of Partition

indicated above which is made in accordance with the decision of the
Honorable Court be approved.

Tacloban City, October 16, 1963.

(SGD) BONIFACIO RAMO Atty. for the Defendant Tacloban City

(SGD) ZOTICO A. TOLETE Atty. for the Plaintiff Tacloban City

While the Court thought it more desirable for all the parties to have
signed this Project of Partition, nevertheless, upon assurance of both
counsels of the respective parties to this Court that the Project of
Partition, as above- quoted, had been made after a conference and
agreement of the plaintiffs and the defendant approving the above
Project of Partition, and that both lawyers had represented to the
 Court that they are given full authority to sign by themselves the
Project of Partition, the Court, therefore, finding the above-quoted
Project of Partition to be in accordance with law, hereby approves the
same. The parties, therefore, are directed to execute such papers,
documents or instrument sufficient in form and substance for the
vesting of the rights, interests and participations which were
adjudicated to the respective parties, as outlined in the Project of
Partition and the delivery of the respective properties adjudicated to
each one in view of said Project of Partition, and to perform such
other acts as are legal and necessary to effectuate the said Project of
Partition.

SO ORDERED.

Given in Tacloban City, this 23rd day of October, 1963.

(SGD) ELIAS B. ASUNCION Judge

EXH. B.

The above Order of October 23, 1963, was amended on November 11, 1963, only
for the purpose of giving authority to the Register of Deeds of the Province of Leyte
to issue the corresponding transfer certificates of title to the respective adjudicatees
in conformity with the project of partition (see Exh. U).

One of the properties mentioned in the project of partition was Lot 1184 or rather
one-half thereof with an area of 15,162.5 sq. meters. This lot, which according to the
decision was the exclusive property of the deceased Francisco Reyes, was
adjudicated in said project of partition to the plaintiffs Luz, Anacorita Ruperto, Adela,
and Priscilla all surnamed Reyes in equal shares, and when the project of partition
was approved by the trial court the adjudicatees caused Lot 1184 to be subdivided
into five lots denominated as Lot 1184-A to 1184-E inclusive (Exh. V).

Lot 1184-D was conveyed to Enriqueta D. Anota, a stenographer in Judge

Asuncion's court (Exhs. F, F-1 and V-1), while Lot 1184-E which had an area of
2,172.5556 sq. meters was sold on July 31, 1964 to Dr. Arcadio Galapon (Exh. 2)
who was issued transfer certificate of title No. 2338 of the Register of Deeds of the
city of Tacloban (Exh. 12).

On March 6, 1965, Dr. Arcadio Galapon and his wife Sold a portion of Lot 1184-E
with an area of around 1,306 sq. meters to Judge Asuncion and his wife, Victoria S.
Asuncion (Exh. 11), which particular portion was declared by the latter for taxation
purposes (Exh. F).

On August 31, 1966, spouses Asuncion and spouses Galapon conveyed their
respective shares and interest in Lot 1184-E to "The Traders Manufacturing and
Fishing Industries Inc." (Exit 15 & 16). At the time of said sale the stockholders of the
corporation were Dominador Arigpa Tan, Humilia Jalandoni Tan, Jaime Arigpa Tan,
Judge Asuncion, and the latter's wife, Victoria S. Asuncion, with Judge Asuncion as
the President and Mrs. Asuncion as the secretary (Exhs. E-4 to E-7). The Articles of
Incorporation of "The Traders Manufacturing and Fishing Industries, Inc." which we
 shall henceforth refer to as "TRADERS" were registered with the Securities and
Exchange Commission only on January 9, 1967 (Exh. E) [pp. 378-385, rec.].

Complainant Bernardita R. Macariola filed on August 9, 1968 the instant complaint dated August 6,
1968 alleging four causes of action, to wit: [1] that respondent Judge Asuncion violated Article 1491,
paragraph 5, of the New Civil Code in acquiring by purchase a portion of Lot No. 1184-E which was
one of those properties involved in Civil Case No. 3010 decided by him; [2] that he likewise violated
Article 14, paragraphs I and 5 of the Code of Commerce, Section 3, paragraph H, of R.A. 3019,
otherwise known as the Anti-Graft and Corrupt Practices Act, Section 12, Rule XVIII of the Civil
Service Rules, and Canon 25 of the Canons of Judicial Ethics, by associating himself with the
Traders Manufacturing and Fishing Industries, Inc., as a stockholder and a ranking officer while he
was a judge of the Court of First Instance of Leyte; [3] that respondent was guilty of coddling an
impostor and acted in disregard of judicial decorum by closely fraternizing with a certain Dominador
Arigpa Tan who openly and publicly advertised himself as a practising attorney when in truth and in
fact his name does not appear in the Rolls of Attorneys and is not a member of the Philippine Bar;
and [4] that there was a culpable defiance of the law and utter disregard for ethics by respondent
Judge (pp. 1-7, rec.).

Respondent Judge Asuncion filed on September 24, 1968 his answer to which a reply was filed on
October 16, 1968 by herein complainant. In Our resolution of October 28, 1968, We referred this
case to then Justice Cecilia Muñoz Palma of the Court of Appeals, for investigation, report and
recommendation. After hearing, the said Investigating Justice submitted her report dated May 27,
1971 recommending that respondent Judge should be reprimanded or warned in connection with the
first cause of action alleged in the complaint, and for the second cause of action, respondent should
be warned in case of a finding that he is prohibited under the law to engage in business. On the third
and fourth causes of action, Justice Palma recommended that respondent Judge be exonerated.

The records also reveal that on or about November 9 or 11, 1968 (pp. 481, 477, rec.), complainant
herein instituted an action before the Court of First Instance of Leyte, entitled "Bernardita R.
Macariola, plaintiff, versus Sinforosa R. Bales, et al., defendants," which was docketed as Civil Case
No. 4235, seeking the annulment of the project of partition made pursuant to the decision in Civil
Case No. 3010 and the two orders issued by respondent Judge approving the same, as well as the
partition of the estate and the subsequent conveyances with damages. It appears, however, that
some defendants were dropped from the civil case. For one, the case against Dr. Arcadio Galapon
was dismissed because he was no longer a real party in interest when Civil Case No. 4234 was
filed, having already conveyed on March 6, 1965 a portion of lot 1184-E to respondent Judge and on
August 31, 1966 the remainder was sold to the Traders Manufacturing and Fishing Industries, Inc.
Similarly, the case against defendant Victoria Asuncion was dismissed on the ground that she was
no longer a real party in interest at the time the aforesaid Civil Case No. 4234 was filed as the
portion of Lot 1184 acquired by her and respondent Judge from Dr. Arcadio Galapon was already
sold on August 31, 1966 to the Traders Manufacturing and Fishing industries, Inc. Likewise, the
cases against defendants Serafin P. Ramento, Catalina Cabus, Ben Barraza Go, Jesus Perez,
Traders Manufacturing and Fishing Industries, Inc., Alfredo R. Celestial and Pilar P. Celestial,
Leopoldo Petilla and Remedios Petilla, Salvador Anota and Enriqueta Anota and Atty. Zotico A.
Tolete were dismissed with the conformity of complainant herein, plaintiff therein, and her counsel.

On November 2, 1970, Judge Jose D. Nepomuceno of the Court of First Instance of Leyte, who was
directed and authorized on June 2, 1969 by the then Secretary (now Minister) of Justice and now
Minister of National Defense Juan Ponce Enrile to hear and decide Civil Case No. 4234, rendered a
decision, the dispositive portion of which reads as follows:

A. IN THE CASE AGAINST JUDGE ELIAS B. ASUNCION

 (1) declaring that only Branch IV of the Court of First Instance of Leyte has
jurisdiction to take cognizance of the issue of the legality and validity of the Project of
Partition [Exhibit "B"] and the two Orders [Exhibits "C" and "C- 3"] approving the
partition;

(2) dismissing the complaint against Judge Elias B. Asuncion;

(3) adjudging the plaintiff, Mrs. Bernardita R. Macariola to pay defendant Judge Elias
B. Asuncion,

(a) the sum of FOUR HUNDRED THOUSAND PESOS [P400,000.00]

for moral damages;

(b) the sum of TWO HUNDRED THOUSAND PESOS [P200,000.001

for exemplary damages;

(c) the sum of FIFTY THOUSAND PESOS [P50,000.00] for nominal

damages; and

(d) he sum of TEN THOUSAND PESOS [PI0,000.00] for Attorney's

Fees.

B. IN THE CASE AGAINST THE DEFENDANT MARIQUITA

VILLASIN, FOR HERSELF AND FOR THE HEIRS OF THE
DECEASED GERARDO VILLASIN —

(1) Dismissing the complaint against the defendants Mariquita Villasin and the heirs
of the deceased Gerardo Villasin;

(2) Directing the plaintiff to pay the defendants Mariquita Villasin and the heirs of
Gerardo Villasin the cost of the suit.

C. IN THE CASE AGAINST THE DEFENDANT SINFOROSA R.

BALES, ET AL., WHO WERE PLAINTIFFS IN CIVIL CASE NO. 3010
—

(1) Dismissing the complaint against defendants Sinforosa R. Bales, Adela R. Herrer,
Priscilla R. Solis, Luz R. Bakunawa, Anacorita R. Eng and Ruperto O. Reyes.

D. IN THE CASE AGAINST DEFENDANT BONIFACIO RAMO —

(1) Dismissing the complaint against Bonifacio Ramo;

(2) Directing the plaintiff to pay the defendant Bonifacio Ramo the cost of the suit.

SO ORDERED [pp. 531-533, rec.]

It is further disclosed by the record that the aforesaid decision was elevated to the Court of Appeals
upon perfection of the appeal on February 22, 1971.
I

WE find that there is no merit in the contention of complainant Bernardita R. Macariola, under her
first cause of action, that respondent Judge Elias B. Asuncion violated Article 1491, paragraph 5, of
the New Civil Code in acquiring by purchase a portion of Lot No. 1184-E which was one of those
properties involved in Civil Case No. 3010. 'That Article provides:

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

xxx xxx xxx

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and
other officers and employees connected with the administration of justice, the
property and rights in litigation or levied upon an execution before the court within
whose jurisdiction or territory they exercise their respective functions; this prohibition
includes the act of acquiring by assignment and shall apply to lawyers, with respect
to the property and rights which may be the object of any litigation in which they may
take part by virtue of their profession [emphasis supplied].

The prohibition in the aforesaid Article applies only to the sale or assignment of the property which is
the subject of litigation to the persons disqualified therein. WE have already ruled that "... for the
prohibition to operate, the sale or assignment of the property must take place during the pendency of
the litigation involving the property" (The Director of Lands vs. Ababa et al., 88 SCRA 513, 519
[1979], Rosario vda. de Laig vs. Court of Appeals, 86 SCRA 641, 646 [1978]).

In the case at bar, when the respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E,
the decision in Civil Case No. 3010 which he rendered on June 8, 1963 was already final because
none of the parties therein filed an appeal within the reglementary period; hence, the lot in question
was no longer subject of the litigation. Moreover, at the time of the sale on March 6, 1965,
respondent's order dated October 23, 1963 and the amended order dated November 11,
1963 approving the October 16, 1963 project of partition made pursuant to the June 8, 1963
decision, had long become final for there was no appeal from said orders.

Furthermore, respondent Judge did not buy the lot in question on March 6, 1965 directly from the
plaintiffs in Civil Case No. 3010 but from Dr. Arcadio Galapon who earlier purchased on July 31,
1964 Lot 1184-E from three of the plaintiffs, namely, Priscilla Reyes, Adela Reyes, and Luz R.
Bakunawa after the finality of the decision in Civil Case No. 3010. It may be recalled that Lot 1184 or
more specifically one-half thereof was adjudicated in equal shares to Priscilla Reyes, Adela Reyes,
Luz Bakunawa, Ruperto Reyes and Anacorita Reyes in the project of partition, and the same was
subdivided into five lots denominated as Lot 1184-A to 1184-E. As aforestated, Lot 1184-E was sold
on July 31, 1964 to Dr. Galapon for which he was issued TCT No. 2338 by the Register of Deeds of
Tacloban City, and on March 6, 1965 he sold a portion of said lot to respondent Judge and his wife
who declared the same for taxation purposes only. The subsequent sale on August 31, 1966 by
spouses Asuncion and spouses Galapon of their respective shares and interest in said Lot 1184-E to
the Traders Manufacturing and Fishing Industries, Inc., in which respondent was the president and
his wife was the secretary, took place long after the finality of the decision in Civil Case No. 3010
and of the subsequent two aforesaid orders therein approving the project of partition.

While it appears that complainant herein filed on or about November 9 or 11, 1968 an action before
the Court of First Instance of Leyte docketed as Civil Case No. 4234, seeking to annul the project of
partition and the two orders approving the same, as well as the partition of the estate and the
subsequent conveyances, the same, however, is of no moment.

The fact remains that respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E from
Dr. Arcadio Galapon; hence, after the finality of the decision which he rendered on June 8, 1963 in
Civil Case No. 3010 and his two questioned orders dated October 23, 1963 and November 11, 1963.
Therefore, the property was no longer subject of litigation.

The subsequent filing on November 9, or 11, 1968 of Civil Case No. 4234 can no longer alter,
change or affect the aforesaid facts — that the questioned sale to respondent Judge, now Court of
Appeals Justice, was effected and consummated long after the finality of the aforesaid decision or
orders.

Consequently, the sale of a portion of Lot 1184-E to respondent Judge having taken place over one
year after the finality of the decision in Civil Case No. 3010 as well as the two orders approving the
project of partition, and not during the pendency of the litigation, there was no violation of paragraph
5, Article 1491 of the New Civil Code.

It is also argued by complainant herein that the sale on July 31, 1964 of Lot 1184-E to Dr. Arcadio
Galapon by Priscilla Reyes, Adela Reyes and Luz R. Bakunawa was only a mere scheme to conceal
the illegal and unethical transfer of said lot to respondent Judge as a consideration for the approval
of the project of partition. In this connection, We agree with the findings of the Investigating Justice
thus:

And so we are now confronted with this all-important question whether or not the
acquisition by respondent of a portion of Lot 1184-E and the subsequent transfer of
the whole lot to "TRADERS" of which respondent was the President and his wife the
Secretary, was intimately related to the Order of respondent approving the project of
partition, Exh. A.

Respondent vehemently denies any interest or participation in the transactions

between the Reyeses and the Galapons concerning Lot 1184-E, and he insists that
there is no evidence whatsoever to show that Dr. Galapon had acted, in the
purchase of Lot 1184-E, in mediation for him and his wife. (See p. 14 of
Respondent's Memorandum).

xxx xxx xxx

On this point, I agree with respondent that there is no evidence in the record showing
that Dr. Arcadio Galapon acted as a mere "dummy" of respondent in acquiring Lot
1184-E from the Reyeses. Dr. Galapon appeared to this investigator as a
respectable citizen, credible and sincere, and I believe him when he testified that he
bought Lot 1184-E in good faith and for valuable consideration from the Reyeses
without any intervention of, or previous understanding with Judge Asuncion (pp. 391-
394, rec.).

On the contention of complainant herein that respondent Judge acted illegally in approving the
project of partition although it was not signed by the parties, We quote with approval the findings of
the Investigating Justice, as follows:

1. I agree with complainant that respondent should have required the signature of the
parties more particularly that of Mrs. Macariola on the project of partition submitted to
him for approval; however, whatever error was committed by respondent in that
respect was done in good faith as according to Judge Asuncion he was assured by
Atty. Bonifacio Ramo, the counsel of record of Mrs. Macariola, That he was
authorized by his client to submit said project of partition, (See Exh. B and tsn p. 24,
January 20, 1969). While it is true that such written authority if there was any, was
not presented by respondent in evidence, nor did Atty. Ramo appear to corroborate
the statement of respondent, his affidavit being the only one that was presented as
respondent's Exh. 10, certain actuations of Mrs. Macariola lead this investigator to
believe that she knew the contents of the project of partition, Exh. A, and that she
gave her conformity thereto. I refer to the following documents:

1) Exh. 9 — Certified true copy of OCT No. 19520 covering Lot 1154 of the Tacloban
Cadastral Survey in which the deceased Francisco Reyes holds a "1/4 share" (Exh.
9-a). On tills certificate of title the Order dated November 11, 1963, (Exh. U)
approving the project of partition was duly entered and registered on November 26,
1963 (Exh. 9-D);

2) Exh. 7 — Certified copy of a deed of absolute sale executed by Bernardita Reyes

Macariola on October 22, 1963, conveying to Dr. Hector Decena the one-fourth
share of the late Francisco Reyes-Diaz in Lot 1154. In this deed of sale the vendee
stated that she was the absolute owner of said one-fourth share, the same having
been adjudicated to her as her share in the estate of her father Francisco Reyes Diaz
as per decision of the Court of First Instance of Leyte under case No. 3010 (Exh. 7-
A). The deed of sale was duly registered and annotated at the back of OCT 19520 on
December 3, 1963 (see Exh. 9-e).

In connection with the abovementioned documents it is to be noted that in the project

of partition dated October 16, 1963, which was approved by respondent on October
23, 1963, followed by an amending Order on November 11, 1963, Lot 1154 or rather
1/4 thereof was adjudicated to Mrs. Macariola. It is this 1/4 share in Lot 1154 which
complainant sold to Dr. Decena on October 22, 1963, several days after the
preparation of the project of partition.

Counsel for complainant stresses the view, however, that the latter sold her one-
fourth share in Lot 1154 by virtue of the decision in Civil Case 3010 and not because
of the project of partition, Exh. A. Such contention is absurd because from the
decision, Exh. C, it is clear that one-half of one- fourth of Lot 1154 belonged to the
estate of Francisco Reyes Diaz while the other half of said one-fourth was the share
of complainant's mother, Felisa Espiras; in other words, the decision did not
adjudicate the whole of the one-fourth of Lot 1154 to the herein complainant (see
Exhs. C-3 & C-4). Complainant became the owner of the entire one-fourth of Lot
1154 only by means of the project of partition, Exh. A. Therefore, if Mrs. Macariola
sold Lot 1154 on October 22, 1963, it was for no other reason than that she was wen
aware of the distribution of the properties of her deceased father as per Exhs. A and
B. It is also significant at this point to state that Mrs. Macariola admitted during the
cross-examination that she went to Tacloban City in connection with the sale of Lot
1154 to Dr. Decena (tsn p. 92, November 28, 1968) from which we can deduce that
she could not have been kept ignorant of the proceedings in civil case 3010 relative
to the project of partition.

Complainant also assails the project of partition because according to her the
properties adjudicated to her were insignificant lots and the least valuable.
 Complainant, however, did not present any direct and positive evidence to prove the
alleged gross inequalities in the choice and distribution of the real properties when
she could have easily done so by presenting evidence on the area, location, kind, the
assessed and market value of said properties. Without such evidence there is
nothing in the record to show that there were inequalities in the distribution of the
properties of complainant's father (pp. 386389, rec.).

Finally, while it is. true that respondent Judge did not violate paragraph 5, Article 1491 of the New
Civil Code in acquiring by purchase a portion of Lot 1184-E which was in litigation in his court, it was,
however, improper for him to have acquired the same. He should be reminded of Canon 3 of the
Canons of Judicial Ethics which requires that: "A judge's official conduct should be free from the
appearance of impropriety, and his personal behavior, not only upon the bench and in the
performance of judicial duties, but also in his everyday life, should be beyond reproach." And as
aptly observed by the Investigating Justice: "... it was unwise and indiscreet on the part of
respondent to have purchased or acquired a portion of a piece of property that was or had been in
litigation in his court and caused it to be transferred to a corporation of which he and his wife were
ranking officers at the time of such transfer. One who occupies an exalted position in the judiciary
has the duty and responsibility of maintaining the faith and trust of the citizenry in the courts of
justice, so that not only must he be truly honest and just, but his actuations must be such as not give
cause for doubt and mistrust in the uprightness of his administration of justice. In this particular case
of respondent, he cannot deny that the transactions over Lot 1184-E are damaging and render his
actuations open to suspicion and distrust. Even if respondent honestly believed that Lot 1184-E was
no longer in litigation in his court and that he was purchasing it from a third person and not from the
parties to the litigation, he should nonetheless have refrained from buying it for himself and
transferring it to a corporation in which he and his wife were financially involved, to avoid possible
suspicion that his acquisition was related in one way or another to his official actuations in civil case
3010. The conduct of respondent gave cause for the litigants in civil case 3010, the lawyers
practising in his court, and the public in general to doubt the honesty and fairness of his actuations
and the integrity of our courts of justice" (pp. 395396, rec.).

II

With respect to the second cause of action, the complainant alleged that respondent Judge violated
paragraphs 1 and 5, Article 14 of the Code of Commerce when he associated himself with the
Traders Manufacturing and Fishing Industries, Inc. as a stockholder and a ranking officer, said
corporation having been organized to engage in business. Said Article provides that:

Article 14 — The following cannot engage in commerce, either in person or by proxy,

nor can they hold any office or have any direct, administrative, or financial
intervention in commercial or industrial companies within the limits of the districts,
provinces, or towns in which they discharge their duties:

1. Justices of the Supreme Court, judges and officials of the department of public
prosecution in active service. This provision shall not be applicable to mayors,
municipal judges, and municipal prosecuting attorneys nor to those who by chance
are temporarily discharging the functions of judge or prosecuting attorney.

xxx xxx xxx

5. Those who by virtue of laws or special provisions may not engage in commerce in
a determinate territory.
It is Our considered view that although the aforestated provision is incorporated in the Code of
Commerce which is part of the commercial laws of the Philippines, it, however, partakes of the
nature of a political law as it regulates the relationship between the government and certain public
officers and employees, like justices and judges.

Political Law has been defined as that branch of public law which deals with the organization and
operation of the governmental organs of the State and define the relations of the state with the
inhabitants of its territory (People vs. Perfecto, 43 Phil. 887, 897 [1922]). It may be recalled that
political law embraces constitutional law, law of public corporations, administrative law including the
law on public officers and elections. Specifically, Article 14 of the Code of Commerce partakes more
of the nature of an administrative law because it regulates the conduct of certain public officers and
employees with respect to engaging in business: hence, political in essence.

It is significant to note that the present Code of Commerce is the Spanish Code of Commerce of
1885, with some modifications made by the "Commission de Codificacion de las Provincias de
Ultramar," which was extended to the Philippines by the Royal Decree of August 6, 1888, and took
effect as law in this jurisdiction on December 1, 1888.

Upon the transfer of sovereignty from Spain to the United States and later on from the United States
to the Republic of the Philippines, Article 14 of this Code of Commerce must be deemed to have
been abrogated because where there is change of sovereignty, the political laws of the former
sovereign, whether compatible or not with those of the new sovereign, are automatically abrogated,
unless they are expressly re-enacted by affirmative act of the new sovereign.

Thus, We held in Roa vs. Collector of Customs (23 Phil. 315, 330, 311 [1912]) that:

By well-settled public law, upon the cession of territory by one nation to another,
either following a conquest or otherwise, ... those laws which are political in their
nature and pertain to the prerogatives of the former government immediately cease
upon the transfer of sovereignty. (Opinion, Atty. Gen., July 10, 1899).

While municipal laws of the newly acquired territory not in conflict with the, laws of
the new sovereign continue in force without the express assent or affirmative act of
the conqueror, the political laws do not. (Halleck's Int. Law, chap. 34, par. 14).
However, such political laws of the prior sovereignty as are not in conflict with the
constitution or institutions of the new sovereign, may be continued in force if the
conqueror shall so declare by affirmative act of the commander-in-chief during the
war, or by Congress in time of peace. (Ely's Administrator vs. United States, 171 U.S.
220, 43 L. Ed. 142). In the case of American and Ocean Ins. Cos. vs. 356 Bales of
Cotton (1 Pet. [26 U.S.] 511, 542, 7 L. Ed. 242), Chief Justice Marshall said:

On such transfer (by cession) of territory, it has never been held that
the relations of the inhabitants with each other undergo any change.
Their relations with their former sovereign are dissolved, and new
relations are created between them and the government which has
acquired their territory. The same act which transfers their country,
transfers the allegiance of those who remain in it; and the law which
may be denominated political, is necessarily changed, although that
which regulates the intercourse and general conduct of individuals,
remains in force, until altered by the newly- created power of the
State.
Likewise, in People vs. Perfecto (43 Phil. 887, 897 [1922]), this Court stated that: "It is a general
principle of the public law that on acquisition of territory the previous political relations of the ceded
region are totally abrogated. "

There appears no enabling or affirmative act that continued the effectivity of the aforestated
provision of the Code of Commerce after the change of sovereignty from Spain to the United States
and then to the Republic of the Philippines. Consequently, Article 14 of the Code of Commerce has
no legal and binding effect and cannot apply to the respondent, then Judge of the Court of First
Instance, now Associate Justice of the Court of Appeals.

It is also argued by complainant herein that respondent Judge violated paragraph H, Section 3 of
Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, which provides
that:

Sec. 3. Corrupt practices of public officers. — In addition to acts or omissions of

public officers already penalized by existing law, the following shall constitute corrupt
practices of any public officer and are hereby declared to be unlawful:

xxx xxx xxx

(h) Directly or indirectly having financial or pecuniary interest in any

business, contract or transaction in connection with which he
intervenes or takes part in his official capacity, or in which he is
prohibited by the Constitution or by any Iaw from having any interest.

Respondent Judge cannot be held liable under the aforestated paragraph because there is no
showing that respondent participated or intervened in his official capacity in the business or
transactions of the Traders Manufacturing and Fishing Industries, Inc. In the case at bar, the
business of the corporation in which respondent participated has obviously no relation or connection
with his judicial office. The business of said corporation is not that kind where respondent intervenes
or takes part in his capacity as Judge of the Court of First Instance. As was held in one case
involving the application of Article 216 of the Revised Penal Code which has a similar prohibition on
public officers against directly or indirectly becoming interested in any contract or business in which
it is his official duty to intervene, "(I)t is not enough to be a public official to be subject to this crime; it
is necessary that by reason of his office, he has to intervene in said contracts or transactions; and,
hence, the official who intervenes in contracts or transactions which have no relation to his office
cannot commit this crime.' (People vs. Meneses, C.A. 40 O.G. 11th Supp. 134, cited by Justice
Ramon C. Aquino; Revised Penal Code, p. 1174, Vol. 11 [1976]).

It does not appear also from the records that the aforesaid corporation gained any undue advantage
in its business operations by reason of respondent's financial involvement in it, or that the
corporation benefited in one way or another in any case filed by or against it in court. It is undisputed
that there was no case filed in the different branches of the Court of First Instance of Leyte in which
the corporation was either party plaintiff or defendant except Civil Case No. 4234 entitled "Bernardita
R. Macariola, plaintiff, versus Sinforosa O. Bales, et al.," wherein the complainant herein sought to
recover Lot 1184-E from the aforesaid corporation. It must be noted, however, that Civil Case No.
4234 was filed only on November 9 or 11, 1968 and decided on November 2, 1970 by CFI Judge
Jose D. Nepomuceno when respondent Judge was no longer connected with the corporation, having
disposed of his interest therein on January 31, 1967.
Furthermore, respondent is not liable under the same paragraph because there is no provision in
both the 1935 and 1973 Constitutions of the Philippines, nor is there an existing law expressly
prohibiting members of the Judiciary from engaging or having interest in any lawful business.

It may be pointed out that Republic Act No. 296, as amended, also known as the Judiciary Act of
1948, does not contain any prohibition to that effect. As a matter of fact, under Section 77 of said
law, municipal judges may engage in teaching or other vocation not involving the practice of law
after office hours but with the permission of the district judge concerned.

Likewise, Article 14 of the Code of Commerce which prohibits judges from engaging in commerce is,
as heretofore stated, deemed abrogated automatically upon the transfer of sovereignty from Spain to
America, because it is political in nature.

Moreover, the prohibition in paragraph 5, Article 1491 of the New Civil Code against the purchase by
judges of a property in litigation before the court within whose jurisdiction they perform their duties,
cannot apply to respondent Judge because the sale of the lot in question to him took place after the
finality of his decision in Civil Case No. 3010 as well as his two orders approving the project of
partition; hence, the property was no longer subject of litigation.

In addition, although Section 12, Rule XVIII of the Civil Service Rules made pursuant to the Civil
Service Act of 1959 prohibits an officer or employee in the civil service from engaging in any private
business, vocation, or profession or be connected with any commercial, credit, agricultural or
industrial undertaking without a written permission from the head of department, the same, however,
may not fall within the purview of paragraph h, Section 3 of the Anti-Graft and Corrupt Practices Act
because the last portion of said paragraph speaks of a prohibition by the Constitution or law on any
public officer from having any interest in any business and not by a mere administrative rule or
regulation. Thus, a violation of the aforesaid rule by any officer or employee in the civil service, that
is, engaging in private business without a written permission from the Department Head may not
constitute graft and corrupt practice as defined by law.

On the contention of complainant that respondent Judge violated Section 12, Rule XVIII of the Civil
Service Rules, We hold that the Civil Service Act of 1959 (R.A. No. 2260) and the Civil Service
Rules promulgated thereunder, particularly Section 12 of Rule XVIII, do not apply to the members of
the Judiciary. Under said Section 12: "No officer or employee shall engage directly in any private
business, vocation, or profession or be connected with any commercial, credit, agricultural or
industrial undertaking without a written permission from the Head of Department ..."

It must be emphasized at the outset that respondent, being a member of the Judiciary, is covered by
Republic Act No. 296, as amended, otherwise known as the Judiciary Act of 1948 and by Section 7,
Article X, 1973 Constitution.

Under Section 67 of said law, the power to remove or dismiss judges was then vested in the
President of the Philippines, not in the Commissioner of Civil Service, and only on two grounds,
namely, serious misconduct and inefficiency, and upon the recommendation of the Supreme Court,
which alone is authorized, upon its own motion, or upon information of the Secretary (now Minister)
of Justice to conduct the corresponding investigation. Clearly, the aforesaid section defines the
grounds and prescribes the special procedure for the discipline of judges.

And under Sections 5, 6 and 7, Article X of the 1973 Constitution, only the Supreme Court can
discipline judges of inferior courts as well as other personnel of the Judiciary.
It is true that under Section 33 of the Civil Service Act of 1959: "The Commissioner may, for ...
violation of the existing Civil Service Law and rules or of reasonable office regulations, or in the
interest of the service, remove any subordinate officer or employee from the service, demote him in
rank, suspend him for not more than one year without pay or fine him in an amount not exceeding
six months' salary." Thus, a violation of Section 12 of Rule XVIII is a ground for disciplinary action
against civil service officers and employees.

However, judges cannot be considered as subordinate civil service officers or employees subject to
the disciplinary authority of the Commissioner of Civil Service; for, certainly, the Commissioner is not
the head of the Judicial Department to which they belong. The Revised Administrative Code (Section
89) and the Civil Service Law itself state that the Chief Justice is the department head of the
Supreme Court (Sec. 20, R.A. No. 2260) [1959]); and under the 1973 Constitution, the Judiciary is
the only other or second branch of the government (Sec. 1, Art. X, 1973 Constitution). Besides, a
violation of Section 12, Rule XVIII cannot be considered as a ground for disciplinary action against
judges because to recognize the same as applicable to them, would be adding another ground for
the discipline of judges and, as aforestated, Section 67 of the Judiciary Act recognizes only two
grounds for their removal, namely, serious misconduct and inefficiency.

Moreover, under Section 16(i) of the Civil Service Act of 1959, it is the Commissioner of Civil Service
who has original and exclusive jurisdiction "(T)o decide, within one hundred twenty days, after
submission to it, all administrative cases against permanent officers and employees in the
competitive service, and, except as provided by law, to have final authority to pass upon their
removal, separation, and suspension and upon all matters relating to the conduct, discipline, and
efficiency of such officers and employees; and prescribe standards, guidelines and regulations
governing the administration of discipline" (emphasis supplied). There is no question that a judge
belong to the non-competitive or unclassified service of the government as a Presidential appointee
and is therefore not covered by the aforesaid provision. WE have already ruled that "... in interpreting
Section 16(i) of Republic Act No. 2260, we emphasized that only permanent officers and employees
who belong to the classified service come under the exclusive jurisdiction of the Commissioner of
Civil Service" (Villaluz vs. Zaldivar, 15 SCRA 710,713 [1965], Ang-Angco vs. Castillo, 9 SCRA 619
[1963]).

Although the actuation of respondent Judge in engaging in private business by joining the Traders
Manufacturing and Fishing Industries, Inc. as a stockholder and a ranking officer, is not violative of
the provissions of Article 14 of the Code of Commerce and Section 3(h) of the Anti-Graft and Corrupt
Practices Act as well as Section 12, Rule XVIII of the Civil Service Rules promulgated pursuant to
the Civil Service Act of 1959, the impropriety of the same is clearly unquestionable because Canon
25 of the Canons of Judicial Ethics expressly declares that:

A judge should abstain from making personal investments in enterprises which are
apt to be involved in litigation in his court; and, after his accession to the bench, he
should not retain such investments previously made, longer than a period sufficient
to enable him to dispose of them without serious loss. It is desirable that he should,
so far as reasonably possible, refrain from all relations which would normally tend to
arouse the suspicion that such relations warp or bias his judgment, or prevent his
impartial attitude of mind in the administration of his judicial duties. ...

WE are not, however, unmindful of the fact that respondent Judge and his wife had withdrawn on
January 31, 1967 from the aforesaid corporation and sold their respective shares to third parties,
and it appears also that the aforesaid corporation did not in anyway benefit in any case filed by or
against it in court as there was no case filed in the different branches of the Court of First Instance of
Leyte from the time of the drafting of the Articles of Incorporation of the corporation on March 12,
1966, up to its incorporation on January 9, 1967, and the eventual withdrawal of respondent on
January 31, 1967 from said corporation. Such disposal or sale by respondent and his wife of their
shares in the corporation only 22 days after the incorporation of the corporation, indicates that
respondent realized that early that their interest in the corporation contravenes the aforesaid Canon
25. Respondent Judge and his wife therefore deserve the commendation for their immediate
withdrawal from the firm after its incorporation and before it became involved in any court litigation

III

With respect to the third and fourth causes of action, complainant alleged that respondent was guilty
of coddling an impostor and acted in disregard of judicial decorum, and that there was culpable
defiance of the law and utter disregard for ethics. WE agree, however, with the recommendation of
the Investigating Justice that respondent Judge be exonerated because the aforesaid causes of
action are groundless, and WE quote the pertinent portion of her report which reads as follows:

The basis for complainant's third cause of action is the claim that respondent
associated and closely fraternized with Dominador Arigpa Tan who openly and
publicly advertised himself as a practising attorney (see Exhs. I, I-1 and J) when in
truth and in fact said Dominador Arigpa Tan does not appear in the Roll of Attorneys
and is not a member of the Philippine Bar as certified to in Exh. K.

The "respondent denies knowing that Dominador Arigpa Tan was an "impostor" and
claims that all the time he believed that the latter was a bona fide member of the bar.
I see no reason for disbelieving this assertion of respondent. It has been shown by
complainant that Dominador Arigpa Tan represented himself publicly as an attorney-
at-law to the extent of putting up a signboard with his name and the words "Attorney-
at Law" (Exh. I and 1- 1) to indicate his office, and it was but natural for respondent
and any person for that matter to have accepted that statement on its face value.
"Now with respect to the allegation of complainant that respondent is guilty of
fraternizing with Dominador Arigpa Tan to the extent of permitting his wife to be a
godmother of Mr. Tan's child at baptism (Exh. M & M-1), that fact even if true did not
render respondent guilty of violating any canon of judicial ethics as long as his
friendly relations with Dominador A. Tan and family did not influence his official
actuations as a judge where said persons were concerned. There is no tangible
convincing proof that herein respondent gave any undue privileges in his court to
Dominador Arigpa Tan or that the latter benefitted in his practice of law from his
personal relations with respondent, or that he used his influence, if he had any, on
the Judges of the other branches of the Court to favor said Dominador Tan.

Of course it is highly desirable for a member of the judiciary to refrain as much as

possible from maintaining close friendly relations with practising attorneys and
litigants in his court so as to avoid suspicion 'that his social or business relations or
friendship constitute an element in determining his judicial course" (par. 30, Canons
of Judicial Ethics), but if a Judge does have social relations, that in itself would not
constitute a ground for disciplinary action unless it be clearly shown that his social
relations be clouded his official actuations with bias and partiality in favor of his
friends (pp. 403-405, rec.).

In conclusion, while respondent Judge Asuncion, now Associate Justice of the Court of Appeals, did
not violate any law in acquiring by purchase a parcel of land which was in litigation in his court and in
engaging in business by joining a private corporation during his incumbency as judge of the Court of
First Instance of Leyte, he should be reminded to be more discreet in his private and business
activities, because his conduct as a member of the Judiciary must not only be characterized with
propriety but must always be above suspicion.

WHEREFORE, THE RESPONDENT ASSOCIATE JUSTICE OF THE COURT OF APPEALS IS

HEREBY REMINDED TO BE MORE DISCREET IN HIS PRIVATE AND BUSINESS ACTIVITIES.

SO ORDERED.

Teehankee, Guerrero, De Castro, Melencio-Herrera, Plana, Vasquez, Relova and Gutierrez, JJ.,
concur.

Concepcion Jr., J., is on leave.

Fernando, C.J., Abad Santos and Esolin JJ., took no part.

Separate Opinions

AQUINO, J., concurring and dissenting:

I vote for respondent's unqualified exoneration.

BARREDO, J., concurring and dissenting:

I vote with Justice Aquino.

Separate Opinions

AQUINO, J., concurring and dissenting:

I vote for respondent's unqualified exoneration.

BARREDO, J., concurring and dissenting:

I vote with Justice Aquino.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC
G.R. No. L-35702 May 29, 1973

DOMINGO D. RUBIAS, plaintiff-appellant,

vs.
ISAIAS BATILLER, defendant-appellee.

Gregorio M. Rubias for plaintiff-appellant.

Vicente R. Acsay for defendant-appellee.

TEEHANKEE, J.:

In this appeal certified by the Court of Appeals to this Court as involving purely legal questions, we
affirm the dismissal order rendered by the Iloilo court of first instance after pre-trial and submittal of
the pertinent documentary exhibits.

Such dismissal was proper, plaintiff having no cause of action, since it was duly established in the
record that the application for registration of the land in question filed by Francisco Militante,
plaintiff's vendor and predecessor interest, had been dismissed by decision of 1952 of the land
registration court as affirmed by final judgment in 1958 of the Court of Appeals and hence, there was
no title or right to the land that could be transmitted by the purported sale to plaintiff.

As late as 1964, the Iloilo court of first instance had in another case of ejectment likewise upheld by
final judgment defendant's "better right to possess the land in question . having been in the actual
possession thereof under a claim of title many years before Francisco Militante sold the land to the
plaintiff."

Furthermore, even assuming that Militante had anything to sell, the deed of sale executed in 1956 by
him in favor of plaintiff at a time when plaintiff was concededly his counsel of record in the land
registration case involving the very land in dispute (ultimately decided adversely against Militante by
the Court of Appeals' 1958 judgment affirming the lower court's dismissal of Militante's application for
registration) was properly declared inexistent and void by the lower court, as decreed by Article 1409
in relation to Article 1491 of the Civil Code.

The appellate court, in its resolution of certification of 25 July 1972, gave the following backgrounder
of the appeal at bar:

On August 31, 1964, plaintiff Domingo D. Rubias, a lawyer, filed a suit to recover the
ownership and possession of certain portions of lot under Psu-99791 located in
Barrio General Luna, Barotac Viejo, Iloilo which he bought from his father-in-law,
Francisco Militante in 1956 against its present occupant defendant, Isaias Batiller,
who illegally entered said portions of the lot on two occasions — in 1945 and in 1959.
Plaintiff prayed also for damages and attorneys fees. (pp. 1-7, Record on Appeal). In
his answer with counter-claim defendant claims the complaint of the plaintiff does not
state a cause of action, the truth of the matter being that he and his predecessors-in-
interest have always been in actual, open and continuous possession since time
immemorial under claim of ownership of the portions of the lot in question and for the
alleged malicious institution of the complaint he claims he has suffered moral
damages in the amount of P 2,000.00, as well as the sum of P500.00 for attorney's
fees. ...

On December 9, 1964, the trial court issued a pre-trial order, after a pre-trial
conference between the parties and their counsel which order reads as follows..

'When this case was called for a pre-trial conference today, the
plaintiff appeared assisted by himself and Atty. Gregorio M. Rubias.
The defendant also appeared, assisted by his counsel Atty. Vicente
R. Acsay.

A. During the pre-trial conference, the parties have agreed that

the following facts are attendant in this case and that they will no
longer introduced any evidence, testimonial or documentary to prove
them:

1. That Francisco Militante claimed ownership of a parcel of land located in the Barrio
of General Luna, municipality of Barotac Viejo province of Iloilo, which he caused to
be surveyed on July 18-31, 1934, whereby he was issued a plan Psu-99791 (Exhibit
"B"). (The land claimed contained an area of 171:3561 hectares.)

2. Before the war with Japan, Francisco Militante filed with the Court of First Instance
of Iloilo an application for the registration of the title of the land technically described
in psu-99791 (Exh. "B") opposed by the Director of Lands, the Director of Forestry
and other oppositors. However, during the war with Japan, the record of the case
was lost before it was heard, so after the war Francisco Militante petitioned this court
to reconstitute the record of the case. The record was reconstituted on the Court of
the First Instance of Iloilo and docketed as Land Case No. R-695, GLRO Rec. No.
54852. The Court of First Instance heard the land registration case on November 14,
1952, and after the trial this court dismissed the application for registration. The
appellant, Francisco Militante, appealed from the decision of this Court to the Court
of Appeals where the case was docketed as CA-GR No. 13497-R..

3. Pending the disposal of the appeal in CA-GR No. 13497-R and more particularly
on June 18, 1956, Francisco Militante sold to the plaintiff, Domingo Rubias the
land technically described in psu-99791 (Exh. "A"). The sale was duly recorded in the
Office of the Register of Deeds for the province of Iloilo as Entry No. 13609 on July
11, 1960 (Exh. "A-1").

(NOTE: As per deed of sale, Exh. A, what Militante purportedly sold to plaintiff-
appellant, his son-in-law,for the sum of P2,000.00 was "a parcel of untitled land
having an area Of 144.9072 hectares ... surveyed under Psu 99791 ... (and) subject
to the exclusions made by me, under (case) CA-i3497, Land Registration Case No.
R-695, G.L.R.O. No. 54852, Court of First Instance of the province of Iloilo. These
exclusions referred to portions of the original area of over 171 hectares originally
claimed by Militante as applicant, but which he expressly recognized during the trial
to pertain to some oppositors, such as the Bureau of Public Works and Bureau of
Forestry and several other individual occupants and accordingly withdrew his
application over the same. This is expressly made of record in Exh. A, which is
the Court of Appeals' decision of 22 September 1958 confirming the land registration
court's dismissal of Militante's application for registration.)
4. On September 22,1958 the Court of appeals in CA-G.R. No. 13497-R promulgated
its judgment confirming the decision of this Court in Land Case No. R-695, GLRO
Rec. No. 54852 which dismissed the application for Registration filed by Francisco
Militante (Exh. "I").

5. Domingo Rubias declared the land described in Exh. 'B' for taxation purposes
under Tax Dec. No. 8585 (Exh. "C") for 1957; Tax Dec. Nos. 9533 (Exh. "C-1") and
10019 (Exh. "C-3")for the year 1961; Tax Dec. No. 9868 (Exh. "C-2") for the year
1964, paying the land taxes under Tax Dec. No. 8585 and 9533 (Exh. "D", "D-1", "G-
6").

6. Francisco Militante immediate predecessor-in-interest of the plaintiff, has also

declared the land for taxation purposes under Tax Dec. No. 5172 in 1940 (Exh. "E")
for 1945; under Tax Dec. No. T-86 (Exh. "E-1") for 1948; under Tax Dec. No. 7122
(Exh. "2"), and paid the land taxes for 1940 (Exhs. "G" and "G-7"), for 1945 46 (Exh.
"G-1") for 1947 (Exh. "G-2"), for 1947 & 1948 (Exh. "G-3"), for 1948 (Exh. "G-4"), and
for 1948 and 1949 (Exh. "G-5").

7. Tax Declaration No. 2434 in the name of Liberato Demontaño for the land
described therein (Exh. "F") was cancelled by Tax. Dec. No. 5172 of Francisco
Militante (Exh. "E"). Liberato Demontaño paid the land tax under Tax Dec. No. 2434
on Dec. 20, 1939 for the years 1938 (50%) and 1959 (Exh. "H").

8. The defendant had declared for taxation purposes Lot No. 2 of the Psu-155241
under Tax Dec. Not. 8583 for 1957 and a portion of Lot No. 2, Psu-155241, for 1945
under Tax Dec. No. 8584 (Exh. "2-A" Tax No. 8583 (Exh. "2") was revised by Tax
Dec. No. 9498 in the name of the defendant (Exh. "2-B") and Tax Dec. No. 8584
(Exh. "2-A") was cancelled by Tax Dec. No. 9584 also in the name of the defendant
(Exh. "2-C"). The defendant paid the land taxes for Lot 2, Psu-155241, on Nov. 9,
1960 for the years 1945 and 1946, for the year 1950, and for the year 1960 as shown
by the certificate of the treasurer (Exh. "3"). The defendant may present to the Court
other land taxes receipts for the payment of taxes for this lot.

9. The land claimed by the defendant as his own was surveyed on June 6 and
7,1956, and a plan approved by Director of Land on November 15, 1956 was issued,
identified as Psu 155241 (Exh. "5").

10. On April 22, 1960, the plaintiff filed forcible Entry and Detainer case against
Isaias Batiller in the Justice of the Peace Court of Barotac Viejo Province of Iloilo
(Exh. "4") to which the defendant Isaias Batiller riled his answer on August 29, 1960
(Exh. "4-A"). The Municipal Court of Barotac Viejo after trial, decided the case on
May 10, 1961 in favor of the defendant and against the plaintiff (Exh. "4-B"). The
plaintiff appealed from the decision of the Municipal Court of Barotac Viejo which was
docketed in this Court as Civil Case No. 5750 on June 3, 1961, to which the
defendant, Isaias Batiller, on June 13, 1961 filed his answer (Exh. "4-C"). And this
Court after the trial. decided the case on November 26, 1964, in favor of the
defendant, Isaias Batiller and against the plaintiff (Exh. "4-D").

(NOTE: As per Exh. 4-B, which is the Iloilo court of first instance decision of 26
November 1964 dismissing plaintiff's therein complaint for ejectment against
defendant, the iloilo court expressly found "that plaintiff's complaint is unjustified,
intended to harass the defendant" and "that the defendant, Isaias Batiller, has a
 better right to possess the land in question described in Psu 155241 (Exh. "3"),
Isaias Batiller having been in the actual physical possession thereof under a claim of
title many years before Francisco Militante sold the land to the plaintiff-hereby
dismissing plaintiff's complaint and ordering the plaintiff to pay the defendant
attorney's fees ....")

B. During the trial of this case on the merit, the plaintiff will prove by competent evidence the
following:

1. That the land he purchased from Francisco Militante under Exh. "A" was formerly
owned and possessed by Liberato Demontaño but that on September 6, 1919 the
land was sold at public auction by virtue of a judgment in a Civil Case entitled "Edw
J. Pflieder plaintiff vs. Liberato Demontaño Francisco Balladeros and Gregorio Yulo,
defendants", of which Yap Pongco was the purchaser (Exh. "1-3"). The sale was
registered in the Office of the Register of Deeds of Iloilo on August 4, 1920, under
Primary Entry No. 69 (Exh. "1"), and a definite Deed of Sale was executed by
Constantino A. Canto, provincial Sheriff of Iloilo, on Jan. 19, 1934 in favor of Yap
Pongco (Exh. "I"), the sale having been registered in the Office of the Register of
Deeds of Iloilo on February 10, 1934 (Exh. "1-1").

2. On September 22, 1934, Yap Pongco sold this land to Francisco Militante as
evidenced by a notarial deed (Exh. "J") which was registered in the Registry of
Deeds on May 13, 1940 (Exh. "J-1").

3. That plaintiff suffered damages alleged in his complaint.

C. Defendants, on the other hand will prove by competent evidence during the trial of this case the
following facts:

1. That lot No. 2 of the Psu-1552 it (Exh. '5') was originally owned and possessed by
Felipe Batiller, grandfather of the defendant Basilio Batiller, on the death of the
former in 1920, as his sole heir. Isaias Batiller succeeded his father , Basilio Batiller,
in the ownership and possession of the land in the year 1930, and since then up to
the present, the land remains in the possession of the defendant, his possession
being actual, open, public, peaceful and continuous in the concept of an owner,
exclusive of any other rights and adverse to all other claimants.

2. That the alleged predecessors in interest of the plaintiff have never been in the
actual possession of the land and that they never had any title thereto.

3. That Lot No. 2, Psu 155241, the subject of Free Patent application of the
defendant has been approved.

4. The damages suffered by the defendant, as alleged in his counterclaim."'1

The appellate court further related the developments of the case, as follows:

On August 17, 1965, defendant's counsel manifested in open court that before any
trial on the merit of the case could proceed he would file a motion to dismiss plaintiff's
complaint which he did, alleging thatplaintiff does not have cause of action against
him because the property in dispute which he (plaintiff) allegedly bought from his
father-in-law, Francisco Militante was the subject matter of LRC No. 695 filed in the
CFI of Iloilo, which case was brought on appeal to this Court and docketed as CA-
G.R. No. 13497-R in which aforesaid case plaintiff was the counsel on record of
his father-in-law, Francisco Militante. Invoking Arts. 1409 and 1491 of the Civil Code
which reads:

'Art. 1409. The following contracts are inexistent and void from the
beginning:

xxx xxx xxx

(7) Those expressly prohibited by law.

'ART. 1491. The following persons cannot acquire any purchase,

even at a public auction, either in person of through the mediation of
another: .

xxx xxx xxx

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and
other officers and employees connected with the administration of justice, the
property and rights of in litigation or levied upon an execution before the court within
whose jurisdiction or territory they exercise their respective functions; this prohibition
includes the act of acquiring an assignment and shall apply to lawyers, with respect
to the property and rights which may be the object of any litigation in which they may
take part by virtue of their profession.'

defendant claims that plaintiff could not have acquired any interest in the property in
dispute as the contract he (plaintiff) had with Francisco Militante was inexistent and
void. (See pp. 22-31, Record on Appeal). Plaintiff strongly opposed defendant's
motion to dismiss claiming that defendant can not invoke Articles 1409 and 1491 of
the Civil Code as Article 1422 of the same Code provides that 'The defense of
illegality of contracts is not available to third persons whose interests are not directly
affected' (See pp. 32-35 Record on Appeal).

On October 18, 1965, the lower court issued an order disclaiming plaintiffs
complaint (pp. 42-49, Record on Appeal.) In the aforesaid order of dismissal the
lower court practically agreed with defendant's contention that the contract (Exh. A)
between plaintiff and Francism Militante was null and void. In due season plaintiff
filed a motion for reconsideration (pp. 50-56 Record on Appeal) which was denied by
the lower court on January 14, 1966 (p. 57, Record on Appeal).

Hence, this appeal by plaintiff from the orders of October 18, 1965 and January 14,
1966.

Plaintiff-appellant imputes to the lower court the following errors:

'1. The lower court erred in holding that the contract of sale between
the plaintiff-appellant and his father-in-law, Francisco Militante, Sr.,
now deceased, of the property covered by Plan Psu-99791, (Exh.
 "A") was void, not voidable because it was made when plaintiff-
appellant was the counsel of the latter in the Land Registration case.

'2. The lower court erred in holding that the defendant-appellee is an

interested person to question the validity of the contract of sale
between plaintiff-appellant and the deceased, Francisco Militante, Sr.

'3. The lower court erred in entertaining the motion to dismiss of the
defendant-appellee after he had already filed his answer, and after
the termination of the pre-trial, when the said motion to dismiss raised
a collateral question.

'4. The lower court erred in dismissing the complaint of the plaintiff-
appellant.'

The appellate court concluded that plaintiffs "assignment of errors gives rise to two (2) legal posers
— (1) whether or not the contract of sale between appellant and his father-in-law, the late Francisco
Militante over the property subject of Plan Psu-99791 was void because it was made when plaintiff
was counsel of his father-in-law in a land registration case involving the property in dispute; and (2)
whether or not the lower court was correct in entertaining defendant-appellee's motion to dismiss
after the latter had already filed his answer and after he (defendant) and plaintiff-appellant had
agreed on some matters in a pre-trial conference. Hence, its elevation of the appeal to this Court as
involving pure questions of law.

It is at once evident from the foregoing narration that the pre-trial conference held by the trial court at
which the parties with their counsel agreed and stipulated on the material and relevant facts and
submitted their respective documentary exhibits as referred to in the pre-trial
order, supra,2 practically amounted to a fulldress trial which placed on record all the facts and
exhibits necessary for adjudication of the case.

The three points on which plaintiff reserved the presentation of evidence at the-trial dealing with the
source of the alleged right and title of Francisco Militante's predecessors, supra,3 actually are already
made of record in the stipulated facts and admitted exhibits. The chain of Militante's alleged title and
right to the land as supposedly traced back to Liberato Demontaño was actually asserted by
Militante (and his vendee, lawyer and son-in-law, herein plaintiff) in the land registration case
and rejected by the Iloilo land registration court which dismissed Militante's application for
registration of the land. Such dismissal, as already stated, was affirmed by the final judgment in
1958 of the Court of Appeals.4

The four points on which defendant on his part reserved the presentation of evidence at the trial
dealing with his and his ancestors' continuous, open, public and peaceful possession in the concept
of owner of the land and the Director of Lands' approval of his survey plan thereof, supra,5 are
likewise already duly established facts of record, in the land registration case as well as in the
ejectment case wherein the Iloilo court of first instance recognized the superiority of defendant's right
to the land as against plaintiff.

No error was therefore committed by the lower court in dismissing plaintiff's complaint upon
defendant's motion after the pre-trial.

1. The stipulated facts and exhibits of record indisputably established plaintiff's lack of cause of
action and justified the outright dismissal of the complaint. Plaintiff's claim of ownership to the land in
question was predicated on the sale thereof for P2,000.00 made in 1956 by his father-in- law,
Francisco Militante, in his favor, at a time when Militante's application for registration thereof had
already been dismissed by the Iloilo land registration court and was pending appeal in the Court of
Appeals.

With the Court of Appeals' 1958 final judgment affirming the dismissal of Militante's application for
registration, the lack of any rightful claim or title of Militante to the land was conclusively and
decisively judicially determined. Hence, there was no right or title to the land that could be
transferred or sold by Militante's purported sale in 1956 in favor of plaintiff.

Manifestly, then plaintiff's complaint against defendant, to be declared absolute owner of the land
and to be restored to possession thereof with damages was bereft of any factual or legal basis.

2. No error could be attributed either to the lower court's holding that the purchase by a lawyer of the
property in litigation from his client is categorically prohibited by Article 1491, paragraph (5) of the
Philippine Civil Code, reproduced supra;6 and that consequently, plaintiff's purchase of the property
in litigation from his client (assuming that his client could sell the same since as already shown
above, his client's claim to the property was defeated and rejected) was void and could produce no
legal effect, by virtue of Article 1409, paragraph (7) of our Civil Code which provides that contracts
"expressly prohibited or declared void by law' are "inexistent and that "(T)hese contracts cannot be
ratified. Neither can the right to set up the defense of illegality be waived."

The 1911 case of Wolfson vs. Estate of Martinez7 relied upon by plaintiff as holding that a sale of
property in litigation to the party litigant's lawyer "is not void but voidable at the election of the
vendor" was correctly held by the lower court to have been superseded by the later 1929 case
of Director of Lands vs. Abagat.8 In this later case of Abagat, the Court expressly cited two
antecedent cases involving the same transaction of purchase of property in litigation by the lawyer
which was expressly declared invalid under Article 1459 of the Civil Code of Spain (of which Article
1491 of our Civil Code of the Philippines is the counterpart) upon challenge thereof not by the
vendor-client but by the adverse parties against whom the lawyer was to enforce his rights as
vendee thus acquired.

These two antecedent cases thus cited in Abagat clearly superseded (without so expressly stating
the previous ruling in Wolfson:

The spouses, Juan Soriano and Vicente Macaraeg, were the owners of twelve
parcels of land. Vicenta Macaraeg died in November, 1909, leaving a large number
of collateral heirs but no descendants. Litigation between the surviving husband,
Juan Soriano, and the heirs of Vicenta immediately arose, and the herein appellant
Sisenando Palarca acted as Soriano's lawyer. On May 2, 1918, Soriano executed a
deed for the aforesaid twelve parcels of land in favor of Sisenando Palarca and on
the following day, May 3, 1918, Palarca filed an application for the registration of the
land in the deed. After hearing, the Court of First Instance declared that the deed
was invalid by virtue of the provisions of article 1459 of the Civil Code, which
prohibits lawyers and solicitors from purchasing property rights involved in any
litigation in which they take part by virtue of their profession. The application for
registration was consequently denied, and upon appeal by Palarca to the Supreme
Court, the judgement of the lower court was affirmed by a decision promulgated
November 16,1925. (G.R. No. 24329, Palarca vs. Director of Lands, not reported.)

In the meantime cadastral case No. 30 of the Province of Tarlac was instituted, and
on August 21, 1923, Eleuteria Macaraeg, as administratrix of the estate of Vicente
Macaraeg, filed claims for the parcels in question. Buenaventura Lavitoria
 administrator of the estate of Juan Soriano, did likewise and so did Sisenando
Palarca. In a decision dated June 21, 1927, the Court of First Instance, Judge
Carballo presiding, rendered judgment in favor of Palarea and ordered the
registration of the land in his name. Upon appeal to this court by the administration of
the estates of Juan Soriano and Vicente Macaraeg, the judgment of the court below
was reversed and the land adjudicated to the two estates as conjugal property of the
deceased spouses. (G.R. No. 28226, Director of Lands vs. Abagat, promulgated May
21, 1928, not reported.)9

In the very case of Abagat itself, the Court, again affirming the invalidity and nullity of the lawyer's
purchase of the land in litigation from his client, ordered the issuance of a writ of possession for the
return of the land by the lawyer to the adverse parties without reimbursement of the price paid by
him and other expenses, and ruled that "the appellant Palarca is a lawyer and is presumed to know
the law. He must, therefore, from the beginning, have been well aware of the defect in his title and is,
consequently, a possessor in bad faith."

As already stated, Wolfson and Abagat were decided with relation to Article 1459 of the Civil Code of
Spain then adopted here, until it was superseded on August 30, 1950 by the Civil Code of the
Philippines whose counterpart provision is Article 1491.

Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six
paragraphs certain persons, by reason of the relation of trust or their peculiar control over the
property, from acquiring such property in their trust or control either directly or indirectly and "even at
a public or judicial auction," as follows: (1) guardians; (2) agents; (3) administrators; (4) public
officers and employees; judicial officers and employees, prosecuting attorneys, and lawyers; and (6)
others especially disqualified by law.

In Wolfson which involved the sale and assignment of a money judgment by the client to the lawyer,
Wolfson, whose right to so purchase the judgment was being challenged by the judgment debtor, the
Court, through Justice Moreland, then expressly reserved decision on "whether or not the judgment
in question actually falls within the prohibition of the article" and held only that the sale's "voidability
can not be asserted by one not a party to the transaction or his representative," citing from
Manresa 10 that "(C)onsidering the question from the point of view of the civil law, the view taken by
the code, we must limit ourselves to classifying as void all acts done contrary to the express
prohibition of the statute. Now then: As the code does not recognize such nullity by the mere
operation of law, the nullity of the acts hereinbefore referred to must be asserted by the person
having the necessary legal capacity to do so and decreed by a competent
court." 11

The reason thus given by Manresa in considering such prohibited acquisitions under Article 1459 of
the Spanish Civil Code as merely voidable at the instance and option of the vendor and not void —
"that the Code does not recognize such nullity de pleno derecho" — is no longer true and applicable
to our own Philippine Civil Code which does recognize the absolute nullity of contracts "whose
cause, object, or purpose is contrary to law, morals, good customs, public order or public policy" or
which are "expressly prohibited or declared void by law" and declares such contracts "inexistent and
void from the beginning." 12

The Supreme Court of Spain and modern authors have likewise veered from Manresa's view of the
Spanish codal provision itself. In its sentencia of 11 June 1966, the Supreme Court of Spain ruled
that the prohibition of Article 1459 of the Spanish Civil Code is based on public policy, that violation
of the prohibition contract cannot be validated by confirmation or ratification, holding that:
 ... la prohibicion que el articulo 1459 del C.C. establece respecto a los
administradores y apoderados, la cual tiene conforme a la doctrina de esta Sala,
contendia entre otras, en S. de 27-5-1959, un fundamento de orden moral lugar la
violacion de esta a la nulidad de pleno derecho del acto o negocio celebrado, ... y
prohibicion legal, afectante orden publico, no cabe con efecto alguno la
aludida retification ... 13

The criterion of nullity of such prohibited contracts under Article 1459 of the Spanish Civil Code
(Article 1491 of our Civil Code) as a matter of public order and policy as applied by the Supreme
Court of Spain to administrators and agents in its above cited decision should certainly apply with
greater reason to judges, judicial officers, fiscals and lawyers under paragraph 5 of the codal article.

Citing the same decisions of the Supreme Court of Spain, Gullon Ballesteros, his "Curso de Derecho
Civil, (Contratos Especiales)" (Madrid, 1968) p. 18, affirms that, with respect to Article 1459, Spanish
Civil Code:.

Que caracter tendra la compra que se realice por estas personas? Porsupuesto no
cabe duda de que el caso (art.) 1459, 40 y 50, la nulidad esabsoluta porque el
motivo de la prohibicion es de orden publico. 14

Perez Gonzales in such view, stating that "Dado el caracter prohibitivo delprecepto, la consequencia
de la infraccion es la nulidad radical y ex lege." 15

Castan, quoting Manresa's own observation that.

"El fundamento do esta prohibicion es clarisimo. No sa trata con este precepto tan solo de guitar la
ocasion al fraude; persiguese, ademasel proposito de rodear a las personas que intervienen en la
administrcionde justicia de todos los retigios que necesitan pora ejercer su ministerio librandolos de
toda suspecha, que aunque fuere in fundada, redundura endescredito de la institucion." 16 arrives at
the contrary and now accepted view that "Puede considerace en nuestro derecho inexistente 'o
radicalmente nulo el contrato en los siguentes cases: a) ...; b) cuando el contrato se ha celebrado en
violacion de una prescripcion 'o prohibicion legal, fundada sobre motivos de orden publico (hipotesis
del art. 4 del codigo) ..." 17

It is noteworthy that Caltan's rationale for his conclusion that fundamental consideration of public
policy render void and inexistent such expressly prohibited purchase (e.g. by public officers and
employees of government property intrusted to them and by justices, judges, fiscals and lawyers of
property and rights in litigation and submitted to or handled by them, under Article 1491, paragraphs
(4) and (5) of our Civil Code) has been adopted in a new article of our Civil Code, viz, Article 1409
declaring such prohibited contracts as "inexistent and void from the beginning." 18

Indeed, the nullity of such prohibited contracts is definite and permanent and cannot be cured by
ratification. The public interest and public policy remain paramount and do not permit of compromise
or ratification. In his aspect, the permanent disqualification of public and judicial officers and lawyers
grounded on public policy differs from the first three cases of guardians, agents and administrators
(Article 1491, Civil Code), as to whose transactions it had been opined that they may be "ratified" by
means of and in "the form of a new contact, in which cases its validity shall be determined only by
the circumstances at the time the execution of such new contract. The causes of nullity which have
ceased to exist cannot impair the validity of the new contract. Thus, the object which was illegal at
the time of the first contract, may have already become lawful at the time of the ratification or second
contract; or the service which was impossible may have become possible; or the intention which
could not be ascertained may have been clarified by the parties. The ratification or second contract
would then be valid from its execution; however, it does not retroact to the date of the first
contract." 19

As applied to the case at bar, the lower court therefore properly acted upon defendant-appellant's
motion to dismiss on the ground of nullity of plaintiff's alleged purchase of the land, since its juridical
effects and plaintiff's alleged cause of action founded thereon were being asserted against
defendant-appellant. The principles governing the nullity of such prohibited contracts and judicial
declaration of their nullity have been well restated by Tolentino in his treatise on our Civil Code, as
follows:

Parties Affected. — Any person may invoke the in existence of the contract
whenever juridical effects founded thereon are asserted against him. Thus, if there
has been a void transfer of property, the transferor can recover it by the accion
reinvindicatoria; and any prossessor may refuse to deliver it to the transferee, who
cannot enforce the contract. Creditors may attach property of the debtor which has
been alienated by the latter under a void contract; a mortgagee can allege the
inexistence of a prior encumbrance; a debtor can assert the nullity of an assignment
of credit as a defense to an action by the assignee.

Action On Contract. — Even when the contract is void or inexistent, an action is

necessary to declare its inexistence, when it has already been fulfilled. Nobody can
take the law into his own hands; hence, the intervention of the competent court is
necessary to declare the absolute nullity of the contract and to decree the restitution
of what has been given under it. The judgment, however, will retroact to the very day
when the contract was entered into.

If the void contract is still fully executory, no party need bring an action to declare its
nullity; but if any party should bring an action to enforce it, the other party can simply
set up the nullity as a defense. 20

ACCORDINGLY, the order of dismissal appealed from is hereby affirmed, with costs in all instances
against plaintiff-appellant. So ordered.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

A.M. Nos. 1302, 1391 and 1543 April 26, 1991

PAULINO VALENCIA, complainant,

vs.
ATTY. ARSENIO FER CABANTING, respondent.
CONSTANCIA L. VALENCIA, complainant,
vs.
ATTY. DIONISIO C. ANTINIW, ATTY. EDUARDO U. JOVELLANOS and ATTY. ARSENIO FER.
CABANTING,respondents.

LYDIA BERNAL, complainant,

vs.
ATTY. DIONISIO C. ANTINIW, respondent.

PER CURIAM:

These consolidated administrative cases seek to disbar respondents Dionisio Antiniw, Arsenio Fer.
Cabanting and Eduardo Jovellanos (the last named, now an MCTC Judge) for grave malpractice
and misconduct in the exercise of their legal profession committed in the following manner:

1. Administrative Cases No. 1302 and 1391.

In 1933, complainant Paulino Valencia (Paulino in short) and his wife Romana allegedly bought a
parcel of land, where they built their residential house, from a certain Serapia Raymundo, an heir of
Pedro Raymundo the original owner. However, they failed to register the sale or secure a transfer
certificate of title in their names.

Sometime in December, 1968, a conference was held in the house of Atty. Eduardo Jovellanos to
settle the land dispute between Serapia Raymundo (Serapia in short) another heir of Pedro
Raymundo, and the Valencia spouses since both were relatives and distant kin of Atty. Jovellanos.
Serapia was willing to relinquish ownership if the Valencias could show documents evidencing
ownership. Paulino exhibited a deed of sale written in the Ilocano dialect. However, Serapia claimed
that the deed covered a different property. Paulino and Serapia were not able to settle their
differences. (Report of Investigating Judge Catalino Castaneda, Jr., pp. 21-22).

On December 15, 1969 Serapia, assisted by Atty. Arsenio Fer. Cabanting, filed a complaint against
Paulino for the recovery of possession with damages. The case was docketed as Civil Case No. V-
2170, entitled "Serapia Raymundo, Plaintiff, versus Paulino Valencia, Defendant." (Report, p. 11).

Summoned to plead in Civil Case No. V-2170, the Valencias engaged the services of Atty. Dionisio
Antiniw. Atty. Antiniw advised them to present a notarized deed of sale in lieu of the private
document written in Ilocano. For this purpose, Paulino gave Atty. Antiniw an amount of P200.00 to
pay the person who would falsify the signature of the alleged vendor (Complaint, p. 2; Rollo, p. 7). A
"Compraventa Definitiva" (Exh. B) was executed purporting to be a sale of the questioned lot.

On January 22, 1973, the Court of First Instance of Pangasinan, Branch V, rendered a decision in
favor of plaintiff, Serapia Raymundo. The lower court expressed the belief that the said document is
not authentic. (Report, p. 14)

Paulino, thereafter, filed a Petition for Certiorari, under Rule 65, with Preliminary Injunction before
the Court of Appeals alleging that the trial court failed to provide a workable solution concerning his
house. While the petition was pending, the trial court, on March 9, 1973, issued an order of
execution stating that "the decision in this case has already become final and executory" (Exhibits 3
and 3-A). On March 14, 1973, a writ of execution was issued.

On March 20, 1973, Serapia sold 40 square meters of the litigated lot to Atty. Jovellanos and the
remaining portion she sold to her counsel, Atty. Arsenio Fer. Cabanting, on April 25, 1973. (Annex
"A" of Administrative Case No. 1302).

On March 4, 1974, Paulino filed a disbarment proceeding (docketed as Administrative Case No.
1302) against Atty. Cabanting on the ground that said counsel allegedly violated Article 1491 of the
New Civil Code as well as Article II of the Canons of Professional Ethics, prohibiting the purchase of
property under litigation by a counsel.

On March 21, 1974 the appellate court dismissed the petition of Paulino.

On October 14, 1974, Constancia Valencia, daughter of Paulino, filed a disbarment proceeding
(docketed as Administrative Case No. 1391) against Atty. Dionisio Antiniw for his participation in the
forgery of "Compraventa Definitiva" and its subsequent introduction as evidence for his client; and
also, against Attys. Eduardo Jovellanos and Arsenio Cabanting for purchasing a litigated property
allegedly in violation of Article 1491 of the New Civil Code; and against the three lawyers, for
allegedly rigging Civil Case No. V-2170 against her parents. On August 17, 1975, Constancia
Valencia filed additional charges against Atty. Antiniw and Atty. Jovellanos as follows:

1. AGAINST ATTY. DIONISIO ANTINIW:

In the year 1973 Atty. Dionisio Antiniw fraudulently and in confabulation with one Lydia
Bernal had a deed of sale, fabricated, executed and ratified before him as Notary Public by
one Santiago Bernal in favor of Lydia Bernal when as a matter of fact said Santiago Bernal
had died already about eight years before in the year 1965.

2. AGAINST ATTY. EDUARDO JOVELLANOS:

In the year 1954 Atty. Eduardo Jovellanos, fraudulently and in bad faith, in confabulation with
Rosa de los Santos as vendee had, as Notary Public, executed and ratified before him, two
(2) deeds of sale in favor of said Rosa de los Santos when as a matter of fact the said deeds
were not in fact executed by the supposed vendor Rufino Rincoraya and so Rufino
Rincoraya had filed a Civil Case in Court to annul and declare void the said sales (p. 7,
Report)

2. Administrative Case No. 1543.

A deed of donation propter nuptias involving the transfer of a piece of land by the grandparents of
Lydia Bernal (complainant,) in favor of her parents, was lost during the last world war. For this
reason, her grandmother (the living donor) executed a deed of confirmation of the donation propter
nuptias with renunciation of her rights over the property. (Complaint, p. 1). Notwithstanding the deed,
her grandmother still offered to sell the same property in favor of the complainant, ostensibly to
strengthen the deed of donation (to prevent others from claim-ing the property).

On consultation, Atty., Antiniw advised them to execute a deed of sale. Atty. Antiniw allegedly
prepared and notarized the deed of sale in the name of her grandfather (deceased at the time of
signing) with her grandmother's approval.
Felicidad Bernal-Duzon, her aunt who had a claim over the property filed a complaint against her
(Lydia Bernal) and her counsel, Atty. Antiniw for falsification of a public document. (Complaint, pp. 1-
2) The fiscal exonerated the counsel for lack of evidence, while a case was filed in court against
Lydia Bernal.

On October 3, 1975, Lydia Bernal filed a disbarment proceeding (docketed as Administrative Case
No.1543) against Atty. Antiniw for illegal acts and bad advice.

Pursuant to the resolution of the First Division of this Court dated December 9, 1974, the resolution
of the Second Division dated March 3, 1975 and the two resolutions of the Second Division both
dated December 3, 1975, Administrative Cases Nos. 1302, 1391 and 1543 were referred to the
Office of the Solicitor General for investigation, report and recommendation.

Upon formal request of Constancia L. Valencia and Lydia Bernal dated March 3, 1976, all of these
cases were ordered consolidated by Solicitor General Estelito P. Mendoza per his handwritten
directive of March 9, 1976.

On April 12, 1988, We referred the investigation of these cases to the Integrated Bar of the
Philippines. When Atty. Jovellanos was appointed as Municipal Circuit Trial Court Judge of Alcala-
1âwphi 1

Bautista, Pangasinan, We referred the investigation of these cases to Acting Presiding Judge Cesar
Mindaro, Regional Trial Court, Branch 50, Villasis, Pangasinan, for further investigation.

In view of the seriousness of the charge against the respondents and the alleged threats against the
person of complainant Constancia L. Valencia, We directed the transfer of investigation to the
Regional Trial Court of Manila.

The three administrative cases were raffled to Branch XVII of the Regional Trial Court of Manila,
under the sala of Judge Catalino Castaneda, Jr.

After investigation, Judge Catalino Castañeda, Jr., recommended the dismissal of cases against
Atty. Jovellanos and Atty. Arsenio Fer. Cabanting; dismissal of Administrative Case No. 1543 and
the additional charges in Administrative Case No. 1391 against Antiniw and Judge Jovellanos;
however, he recommended the suspension of Atty. Antiniw from the practice of law for six months
finding him guilty of malpractice in falsifying the "Compraventa Definitiva."

The simplified issues of these consolidated cases are:

I. Whether or not Atty. Cabanting purchased the subject property in violation of Art. 1491 of
the New Civil Code.

II. Whether or not Attys. Antiniw and Jovellanos are guilty of malpractice in falsifying notarial
documents.

III. Whether or not the three lawyers connived in rigging Civil Case No. V-2170.

Under Article 1491 of the New Civil Code:

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

(5) . . . this prohibition includes the act of acquiring by assignment and shall apply to lawyers,
with respect to the property and rights which may be the object of any litigation in which they
make take part by virtue of their profession.

Public policy prohibits the transactions in view of the fiduciary relationship involved. It is intended to
curtail any undue influence of the lawyer upon his client. Greed may get the better of the sentiments
of loyalty and disinterestedness. Any violation of this prohibition would constitute malpractice (In re:
Attorney Melchor Ruste, 40 O.G. p. 78) and is a ground for suspension. (Beltran vs. Fernandez, 70
Phil. 248).

Art. 1491, prohibiting the sale to the counsel concerned, applies only while the litigation is pending.
(Director of Lands vs. Adaba, 88 SCRA 513; Hernandez vs. Villanueva, 40 Phil. 775).

In the case at bar, while it is true that Atty. Arsenio Fer. Cabanting purchased the lot after finality of
judgment, there was still a pending certiorari proceeding. A thing is said to be in litigation not only if
there is some contest or litigation over it in court, but also from the moment that it becomes subject
to the judicial action of the judge. (Gan Tingco vs. Pabinguit, 35 Phil. 81). Logic indicates,
in certiorari proceedings, that the appellate court may either grant or dismiss the petition. Hence, it is
not safe to conclude, for purposes under Art. 1491 that the litigation has terminated when the
judgment of the trial court become final while a certiorari connected therewith is still in progress.
Thus, purchase of the property by Atty. Cabanting in this case constitutes malpractice in violation of
Art. 1491 and the Canons of Professional Ethics. Clearly, this malpractice is a ground for
suspension.

The sale in favor of Atty. Jovellanos does not constitute malpractice. There was no attorney-client
relationship between Serapia and Atty. Jovellanos, considering that the latter did not take part as
counsel in Civil Case No. V-2170. The transaction is not covered by Art. 1491 nor by the Canons
adverted to.

II

It is asserted by Paulino that Atty. Antiniw asked for and received the sum of P200.00 in
consideration of his executing the document "Compraventa Definitiva" which would show that
Paulino bought the property. This charge, Atty. Antiniw simply denied. It is settled jurisprudence that
affirmative testimony is given greater weight than negative testimony (Bayasen vs. CA, L-25785,
Feb. 26, 1981; Vda. de Ramos vs. CA, et al., L40804, Jan. 31, 1978). When an individual's integrity
is challenged by evidence, it is not enough that he deny the charges against him; he must meet the
issue and overcome the evidence for the relator and show proofs that he still maintains the highest
degree of morality and integrity which at all time is expected of him. (De los Reyes vs. Aznar, Adm.
Case No. 1334, Nov. 28, 1989).

Although Paulino was a common farmer who finished only Grade IV, his testimony, even if not
corroborated by another witness, deserves credence and can be relied upon. His declaration dwelt
on a subject which was so delicate and confidential that it would be difficult to believe the he
fabricated his evidence.

There is a clear preponderant evidence that Atty. Antiniw committed falsification of a deed of sale,
and its subsequent introduction in court prejudices his prime duty in the administration of justice as
an officer of the court.
A lawyer owes entire devotion to the interest of his client (Santos vs. Dichoso, 84 SCRA 622), but
not at the expense of truth. (Cosmos Foundry Shopworkers Union vs. La Bu, 63 SCRA 313). The
first duty of a lawyer is not to his client but to the administration of justice. (Lubiano vs. Gordalla, 115
SCRA 459) To that end, his client's success is wholly subordinate. His conduct ought to and must
always be scrupulously observant of law and ethics. While a lawyer must advocate his client's cause
in utmost earnestness and with the maximum skill he can marshal, he is not at liberty to resort to
illegal means for his client's interest. It is the duty of an attorney to employ, for the purpose of
maintaining the causes confided to him, such means as are consistent with truth and honor. (Pangan
vs. Ramos, 93 SCRA 87).

Membership in the Bar is a privilege burdened with conditions. By far, the most important of them is
mindfulness that a lawyer is an officer of the court. (In re: Ivan T. Publico, 102 SCRA 722). This
Court may suspend or disbar a lawyer whose acts show his unfitness to continue as a member of
the Bar. (Halili vs. CIR, 136 SCRA 112). Disbarment, therefore, is not meant as a punishment
depriving him of a source of livelihood but is rather intended to protect the administration of justice
by requiring that those who exercise this function should be competent, honorable and reliable in
order that courts and the public may rightly repose confidence in them. (Noriega vs. Sison, 125
SCRA 293). Atty. Antiniw failed to live up to the high standards of the law profession.

The other charges of malpractice against Atty. Antiniw and Atty. Jovellanos should be dismissed for
lack of evidence.

During the proceedings in Administrative Case No. 1543, Lydia Bernal testified in full on direct
examination, but she never submitted herself for cross-examination. Several subpoenas for cross-
examination were unheeded. She eventually requested the withdrawal of her complaint.

Procedural due process demands that respondent lawyer should be given an opportunity to cross-
examine the witnesses against him. He enjoys the legal presumption that he is innocent of the
1âwphi 1

charges against him until the contrary is proved. (Santos vs. Dichoso, 84 SCRA 622). The case must
be established by clear, convincing and satisfactory proof. (Camus vs. Diaz, Adm. Case No. 1616,
February 9, 1989), Since Atty. Antiniw was not accorded this procedural due process, it is but proper
that the direct testimony of Lydia Bernal be stricken out.

In view also of the affidavit of desistance executed by the complainant, Administrative Case No.
1543 should be dismissed. Although the filing of an affidavit of desistance by complainant for lack of
interest does not ipso factoresult in the termination of a case for suspension or disbarment of an
erring lawyer (Munar vs. Flores, 122 SCRA 448), We are constrained in the case at bar, to dismiss
the same because there was no evidence to substantiate the charges.

The additional charge against Atty. Antiniw in Administrative Case No. 1391 is predicated on the
information furnished by Lydia Bernal. It was not based on the personal knowledge of Constancia L.
Valencia: hence, hearsay. "Any evidence, whether oral or documentary, is hearsay if its probative
value is not based on the personal knowledge of the witness but on the knowledge of some other
person not on the witness stand." (Regalado, Remedial Law Compendium, 6th ed., vol. 2, 1989, p.
486). Being hearsay, the evidence presented is inadmissible.

The additional charge filed by Constancia L. Valencia against Atty. Jovellanos in Administrative
Case No. 1391 was not proved at all. Complainant failed to prove her additional charges.

III
There is no evidence on record that the three lawyers involved in these administrative cases
conspired in executing the falsified "Compraventa Definitiva" and rigged the Civil Case No. V-2170.

Atty. Jovellanos is a distant kin of the Raymundos and Valencias. In fact, he and the Valencias are
neighbors and only two meters separate their houses. It would not be believable that Atty.
Jovellanos, a practicing lawyer, would hold a meeting with the heirs of Pedro Raymundo in his house
with the intention of inducing them to sue the Valencias. Atty. Jovellanos even tried to settle the
differences between the parties in a meeting held in his house. He appeared in Civil Case No. V-
2170 as an involuntary witness to attest to the holding of the conference.

Besides, the camaraderie among lawyers is not proof of conspiracy, but a sign of brotherhood
among them. One of the fourfold duties of a lawyer is his duty to the Bar. A lawyer should treat the
opposing counsel, and his brethren in the law profession, with courtesy, dignity and civility. They
may "do as adversaries do in law: strive mightily but (they) eat and drink as friends." This friendship
does not connote conspiracy.

WHEREFORE, judgment is hereby rendered declaring: 1. Dionisio Antiniw DISBARRED from the
practice of law, and his name is ordered stricken off from the roll of attorneys; 2. Arsenio Fer.
Cabanting SUSPENDED from the practice of law for six months from finality of this judgment; and 3.
Administrative Case No. 1391 against Attorney Eduardo Jovellanos and additional charges therein,
and Administrative Case No. 1543 DISMISSED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 103577 October 7, 1996

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C.

GONZALES (for herself and on behalf of Florida C. Tupper, as attorney-in-fact), CIELITO A.
CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS MABANAG, petitioners,
vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and RAMONA PATRICIA ALCARAZ,
assisted by GLORIA F. NOEL as attorney-in-fact, respondents.

MELO, J.:p

The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the last named, Catalina
Balais Mabanag) to consummate the sale of a parcel of land with its improvements located along Roosevelt Avenue in Quezon City entered
into by the parties sometime in January 1985 for the price of P1,240,000.00.

The undisputed facts of the case were summarized by respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter
referred to as Coronels) executed a document entitled "Receipt of Down Payment"
(Exh. "A") in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as
Ramona) which is reproduced hereunder:

RECEIPT OF DOWN PAYMENT

P1,240,000.00 — Total amount

50,000 — Down payment

———————————
P1,190,000.00 — Balance

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of
Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT
No. 119627 of the Registry of Deeds of Quezon City, in the total amount of
P1,240,000.00.

We bind ourselves to effect the transfer in our names from our deceased father,
Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the
down payment above-stated.

On our presentation of the TCT already in or name, We will immediately execute the
deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall
immediately pay the balance of the P1,190,000.00.

Clearly, the conditions appurtenant to the sale are the following:

1. Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos upon
execution of the document aforestated;

2. The Coronels will cause the transfer in their names of the title of the property
registered in the name of their deceased father upon receipt of the Fifty Thousand
(P50,000.00) Pesos down payment;

3. Upon the transfer in their names of the subject property, the Coronels will execute
the deed of absolute sale in favor of Ramona and the latter will pay the former the
whole balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos.

On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz

(hereinafter referred to as Concepcion), mother of Ramona, paid the down payment
of Fifty Thousand (P50,000.00) Pesos (Exh. "B", Exh. "2").

On February 6, 1985, the property originally registered in the name of the Coronels'
father was transferred in their names under TCT
No. 327043 (Exh. "D"; Exh. "4")

On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to
intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for
One Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter
has paid Three Hundred Thousand (P300,000.00) Pesos (Exhs. "F-3"; Exh. "6-C")
 For this reason, Coronels canceled and rescinded the contract (Exh. "A") with
Ramona by depositing the down payment paid by Concepcion in the bank in trust for
Ramona Patricia Alcaraz.

On February 22, 1985, Concepcion, et al., filed a complaint for specific performance
against the Coronels and caused the annotation of a notice of lis pendens at the
back of TCT No. 327403 (Exh. "E"; Exh. "5").

On April 2, 1985, Catalina caused the annotation of a notice of adverse claim

covering the same property with the Registry of Deeds of Quezon City (Exh. "F";
Exh. "6").

On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject
property in favor of Catalina (Exh. "G"; Exh. "7").

On June 5, 1985, a new title over the subject property was issued in the name of
Catalina under TCT No. 351582 (Exh. "H"; Exh. "8").

(Rollo, pp. 134-136)

In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties
agreed to submit the case for decision solely on the basis of documentary exhibits. Thus, plaintiffs
therein (now private respondents) proffered their documentary evidence accordingly marked as
Exhibits "A" through "J", inclusive of their corresponding submarkings. Adopting these same exhibits
as their own, then defendants (now petitioners) accordingly offered and marked them as Exhibits "1"
through "10", likewise inclusive of their corresponding submarkings. Upon motion of the parties, the
trial court gave them thirty (30) days within which to simultaneously submit their respective
memoranda, and an additional 15 days within which to submit their corresponding comment or reply
thereof, after which, the case would be deemed submitted for resolution.

On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was
then temporarily detailed to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989,
judgment was handed down by Judge Roura from his regular bench at Macabebe, Pampanga for
the Quezon City branch, disposing as follows:

WHEREFORE, judgment for specific performance is hereby rendered ordering

defendant to execute in favor of plaintiffs a deed of absolute sale covering that parcel
of land embraced in and covered by Transfer Certificate of Title No. 327403 (now
TCT No. 331582) of the Registry of Deeds for Quezon City, together with all the
improvements existing thereon free from all liens and encumbrances, and once
accomplished, to immediately deliver the said document of sale to plaintiffs and upon
receipt thereof, the said document of sale to plaintiffs and upon receipt thereof, the
plaintiffs are ordered to pay defendants the whole balance of the purchase price
amounting to P1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the
Registry of Deeds for Quezon City in the name of intervenor is hereby canceled and
declared to be without force and effect. Defendants and intervenor and all other
persons claiming under them are hereby ordered to vacate the subject property and
deliver possession thereof to plaintiffs. Plaintiffs' claim for damages and attorney's
fees, as well as the counterclaims of defendants and intervenors are hereby
dismissed.

No pronouncement as to costs.
 So Ordered.

Macabebe, Pampanga for Quezon City, March 1, 1989.

(Rollo, p. 106)

A motion for reconsideration was filed by petitioner before the new presiding judge of the Quezon
City RTC but the same was denied by Judge Estrella T. Estrada, thusly:

The prayer contained in the instant motion, i.e., to annul the decision and to render
anew decision by the undersigned Presiding Judge should be denied for the
following reasons: (1) The instant case became submitted for decision as of April 14,
1988 when the parties terminated the presentation of their respective documentary
evidence and when the Presiding Judge at that time was Judge Reynaldo Roura.
The fact that they were allowed to file memoranda at some future date did not
change the fact that the hearing of the case was terminated before Judge Roura and
therefore the same should be submitted to him for decision; (2) When the defendants
and intervenor did not object to the authority of Judge Reynaldo Roura to decide the
case prior to the rendition of the decision, when they met for the first time before the
undersigned Presiding Judge at the hearing of a pending incident in Civil Case No.
Q-46145 on November 11, 1988, they were deemed to have acquiesced thereto and
they are now estopped from questioning said authority of Judge Roura after they
received the decision in question which happens to be adverse to them; (3) While it
is true that Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the
Court, he was in all respects the Presiding Judge with full authority to act on any
pending incident submitted before this Court during his incumbency. When he
returned to his Official Station at Macabebe, Pampanga, he did not lose his authority
to decide or resolve such cases submitted to him for decision or resolution because
he continued as Judge of the Regional Trial Court and is of co-equal rank with the
undersigned Presiding Judge. The standing rule and supported by jurisprudence is
that a Judge to whom a case is submitted for decision has the authority to decide the
case notwithstanding his transfer to another branch or region of the same court (Sec.
9, Rule 135, Rule of Court).

Coming now to the twin prayer for reconsideration of the Decision dated March 1,
1989 rendered in the instant case, resolution of which now pertains to the
undersigned Presiding Judge, after a meticulous examination of the documentary
evidence presented by the parties, she is convinced that the Decision of March 1,
1989 is supported by evidence and, therefore, should not be disturbed.

IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to Annul

Decision and Render Anew Decision by the Incumbent Presiding Judge" dated
March 20, 1989 is hereby DENIED.

SO ORDERED.

Quezon City, Philippines, July 12, 1989.

(Rollo, pp. 108-109)

Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals
(Buena, Gonzaga-Reyes, Abad Santos (P), JJ.) rendered its decision fully agreeing with the trial
court.

Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents'
Reply Memorandum, was filed on September 15, 1993. The case was, however, re-raffled to
undersigned ponente only on August 28, 1996, due to the voluntary inhibition of the Justice to whom
the case was last assigned.

While we deem it necessary to introduce certain refinements in the disquisition of respondent court
in the affirmance of the trial court's decision, we definitely find the instant petition bereft of merit.

The heart of the controversy which is the ultimate key in the resolution of the other issues in the case
at bar is the precise determination of the legal significance of the document entitled "Receipt of
Down Payment" which was offered in evidence by both parties. There is no dispute as to the fact
that said document embodied the binding contract between Ramona Patricia Alcaraz on the one
hand, and the heirs of Constancio P. Coronel on the other, pertaining to a particular house and lot
covered by TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which
reads as follows:

Art. 1305. A contract is a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service.

While, it is the position of private respondents that the "Receipt of Down Payment" embodied a
perfected contract of sale, which perforce, they seek to enforce by means of an action for specific
performance, petitioners on their part insist that what the document signified was a mere executory
contract to sell, subject to certain suspensive conditions, and because of the absence of Ramona P.
Alcaraz, who left for the United States of America, said contract could not possibly ripen into a
contract absolute sale.

Plainly, such variance in the contending parties' contentions is brought about by the way each
interprets the terms and/or conditions set forth in said private instrument. Withal, based on whatever
relevant and admissible evidence may be available on record, this, Court, as were the courts below,
is now called upon to adjudge what the real intent of the parties was at the time the said document
was executed.

The Civil Code defines a contract of sale, thus:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.

Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The
essential elements of a contract of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in

exchange for the price;

b) Determinate subject matter; and

c) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the
first essential element is lacking. In a contract to sell, the prospective seller explicity reserves the
transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or
consent to transfer ownership of the property subject of the contract to sell until the happening of an
event, which for present purposes we shall take as the full payment of the purchase price. What the
seller agrees or obliges himself to do is to fulfill is promise to sell the subject property when the
entire amount of the purchase price is delivered to him. In other words the full payment of the
purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the
obligation to sell from arising and thus, ownership is retained by the prospective seller without further
remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had
occasion to rule:

Hence, We hold that the contract between the petitioner and the respondent was a
contract to sell where the ownership or title is retained by the seller and is not to pass
until the full payment of the price, such payment being a positive suspensive
condition and failure of which is not a breach, casual or serious, but simply an event
that prevented the obligation of the vendor to convey title from acquiring binding
force.

Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, the prospective seller's obligation to sell the subject property by entering into a
contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the
Civil Code which states:

Art. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain
is binding upon the promissor if the promise is supported by a consideration distinct
from the price.

A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property despite delivery thereof to the prospective
buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of
the condition agreed upon, that is, full payment of the purchase price.

A contract to sell as defined hereinabove, may not even be considered as a conditional contract of
sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment
of a suspensive condition, because in a conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a contingent event which may or may not
occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely
abated (cf. Homesite and housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if
the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had
already been previous delivery of the property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without any further act having to be
performed by the seller.

In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, ownership will not automatically transfer to the buyer although the property may
have been previously delivered to him. The prospective seller still has to convey title to the
prospective buyer by entering into a contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional contract of sale specially in
cases where the subject property is sold by the owner not to the party the seller contracted with, but
to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the
property, a third person buying such property despite the fulfillment of the suspensive condition such
as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and
the prospective buyer cannot seek the relief of reconveyance of the property. There is no double
sale in such case. Title to the property will transfer to the buyer after registration because there is no
defect in the owner-seller's title per se, but the latter, of course, may be used for damages by the
intending buyer.

In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale
becomes absolute and this will definitely affect the seller's title thereto. In fact, if there had been
previous delivery of the subject property, the seller's ownership or title to the property is
automatically transferred to the buyer such that, the seller will no longer have any title to transfer to
any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who
may have had actual or constructive knowledge of such defect in the seller's title, or at least was
charged with the obligation to discover such defect, cannot be a registrant in good faith. Such
second buyer cannot defeat the first buyer's title. In case a title is issued to the second buyer, the
first buyer may seek reconveyance of the property subject of the sale.

With the above postulates as guidelines, we now proceed to the task of deciphering the real nature
of the contract entered into by petitioners and private respondents.

It is a canon in the interpretation of contracts that the words used therein should be given their
natural and ordinary meaning unless a technical meaning was intended (Tan vs. Court of
Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the said "Receipt of Down
Payment" that they —

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of
Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT
No. 1199627 of the Registry of Deeds of Quezon City, in the total amount of
P1,240,000.00.

without any reservation of title until full payment of the entire purchase price, the natural and
ordinary idea conveyed is that they sold their property.

When the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that
there was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer
certificate of title was still in the name of petitioner's father, they could not fully effect such transfer
although the buyer was then willing and able to immediately pay the purchase price. Therefore,
petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P.
Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father,
after which, they promised to present said title, now in their names, to the latter and to execute the
deed of absolute sale whereupon, the latter shall, in turn, pay the entire balance of the purchase
price.

The agreement could not have been a contract to sell because the sellers herein made no express
reservation of ownership or title to the subject parcel of land. Furthermore, the circumstance which
prevented the parties from entering into an absolute contract of sale pertained to the sellers
themselves (the certificate of title was not in their names) and not the full payment of the purchase
price. Under the established facts and circumstances of the case, the Court may safely presume
that, had the certificate of title been in the names of petitioners-sellers at that time, there would have
been no reason why an absolute contract of sale could not have been executed and consummated
right there and then.

Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the
properly to private respondent upon the fulfillment of the suspensive condition. On the contrary,
having already agreed to sell the subject property, they undertook to have the certificate of title
changed to their names and immediately thereafter, to execute the written deed of absolute sale.

Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by
the buyer with certain terms and conditions, promised to sell the property to the latter. What may be
perceived from the respective undertakings of the parties to the contract is that petitioners had
already agreed to sell the house and lot they inherited from their father, completely willing to transfer
full ownership of the subject house and lot to the buyer if the documents were then in order. It just
happened, however, that the transfer certificate of title was then still in the name of their father. It
was more expedient to first effect the change in the certificate of title so as to bear their names. That
is why they undertook to cause the issuance of a new transfer of the certificate of title in their names
upon receipt of the down payment in the amount of P50,000.00. As soon as the new certificate of
title is issued in their names, petitioners were committed to immediately execute the deed of
absolute sale. Only then will the obligation of the buyer to pay the remainder of the purchase price
arise.

There is no doubt that unlike in a contract to sell which is most commonly entered into so as to
protect the seller against a buyer who intends to buy the property in installment by withholding
ownership over the property until the buyer effects full payment therefor, in the contract entered into
in the case at bar, the sellers were the one who were unable to enter into a contract of absolute sale
by reason of the fact that the certificate of title to the property was still in the name of their father. It
was the sellers in this case who, as it were, had the impediment which prevented, so to speak, the
execution of an contract of absolute sale.

What is clearly established by the plain language of the subject document is that when the said
"Receipt of Down Payment" was prepared and signed by petitioners Romeo A. Coronel, et al., the
parties had agreed to a conditional contract of sale, consummation of which is subject only to the
successful transfer of the certificate of title from the name of petitioners' father, Constancio P.
Coronel, to their names.

The Court significantly notes this suspensive condition was, in fact, fulfilled on February 6, 1985
(Exh. "D"; Exh. "4"). Thus, on said date, the conditional contract of sale between petitioners and
private respondent Ramona P. Alcaraz became obligatory, the only act required for the
consummation thereof being the delivery of the property by means of the execution of the deed of
absolute sale in a public instrument, which petitioners unequivocally committed themselves to do as
evidenced by the "Receipt of Down Payment."

Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at
bench. Thus,

Art. 1475. The contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price.

From the moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.
 Art. 1181. In conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend upon the happening
of the event which constitutes the condition.

Since the condition contemplated by the parties which is the issuance of a certificate of title in
petitioners' names was fulfilled on February 6, 1985, the respective obligations of the parties under
the contract of sale became mutually demandable, that is, petitioners, as sellers, were obliged to
present the transfer certificate of title already in their names to private respondent Ramona P.
Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the buyer on her
part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00.

It is also significant to note that in the first paragraph in page 9 of their petition, petitioners
conclusively admitted that:

3. The petitioners-sellers Coronel bound themselves "to effect the transfer in our
names from our deceased father Constancio P. Coronel, the transfer certificate of
title immediately upon receipt of the downpayment above-stated". The sale was still
subject to this suspensive condition. (Emphasis supplied.)

(Rollo, p. 16)

Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive
condition. Only, they contend, continuing in the same paragraph, that:

. . . Had petitioners-sellers not complied with this condition of first transferring the title
to the property under their names, there could be no perfected contract of sale.
(Emphasis supplied.)

(Ibid.)

not aware that they set their own trap for themselves, for Article 1186 of the Civil Code
expressly provides that:

Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily
prevents its fulfillment.

Besides, it should be stressed and emphasized that what is more controlling than these mere
hypothetical arguments is the fact that the condition herein referred to was actually and indisputably
fulfilled on February 6, 1985, when a new title was issued in the names of petitioners as evidenced
by TCT No. 327403 (Exh. "D"; Exh. "4").

The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated
as "Receipt of Down Payment" (Exh. "A"; Exh. "1"), the parties entered into a contract of sale subject
only to the suspensive condition that the sellers shall effect the issuance of new certificate title from
that of their father's name to their names and that, on February 6, 1985, this condition was fulfilled
(Exh. "D"; Exh. "4").

We, therefore, hold that, in accordance with Article 1187 which pertinently provides —

Art. 1187. The effects of conditional obligation to give, once the condition has been
fulfilled, shall retroact to the day of the constitution of the obligation . . .
 In obligation to do or not to do, the courts shall determine, in each case, the
retroactive effect of the condition that has been complied with.

the rights and obligations of the parties with respect to the perfected contract of sale became
mutually due and demandable as of the time of fulfillment or occurrence of the suspensive
condition on February 6, 1985. As of that point in time, reciprocal obligations of both seller
and buyer arose.

Petitioners also argue there could been no perfected contract on January 19, 1985 because they
were then not yet the absolute owners of the inherited property.

We cannot sustain this argument.

Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:

Art. 774. Succession is a mode of acquisition by virtue of which the property, rights
and obligations to be extent and value of the inheritance of a person are transmitted
through his death to another or others by his will or by operation of law.

Petitioners-sellers in the case at bar being the sons and daughters of the decedent
Constancio P. Coronel are compulsory heirs who were called to succession by operation of
law. Thus, at the point their father drew his last breath, petitioners stepped into his shoes
insofar as the subject property is concerned, such that any rights or obligations pertaining
thereto became binding and enforceable upon them. It is expressly provided that rights to the
succession are transmitted from the moment of death of the decedent (Article 777, Civil
Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).

Be it also noted that petitioners' claim that succession may not be declared unless the creditors have
been paid is rendered moot by the fact that they were able to effect the transfer of the title to the
property from the decedent's name to their names on February 6, 1985.

Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into
an agreement at that time and they cannot be allowed to now take a posture contrary to that which
they took when they entered into the agreement with private respondent Ramona P. Alcaraz. The
Civil Code expressly states that:

Art. 1431. Through estoppel an admission or representation is rendered conclusive

upon the person making it, and cannot be denied or disproved as against the person
relying thereon.

Having represented themselves as the true owners of the subject property at the time of
sale, petitioners cannot claim now that they were not yet the absolute owners thereof at that
time.

Petitioners also contend that although there was in fact a perfected contract of sale between them
and Ramona P. Alcaraz, the latter breached her reciprocal obligation when she rendered impossible
the consummation thereof by going to the United States of America, without leaving her address,
telephone number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory
Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners
conclude, they were correct in unilaterally rescinding rescinding the contract of sale.
We do not agree with petitioners that there was a valid rescission of the contract of sale in the
instant case. We note that these supposed grounds for petitioners' rescission, are mere allegations
found only in their responsive pleadings, which by express provision of the rules, are deemed
controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The
records are absolutely bereft of any supporting evidence to substantiate petitioners' allegations. We
have stressed time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs.
Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]. Mere allegation is not an
evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).

Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February
6, 1985, we cannot justify petitioner-sellers' act of unilaterally and extradicially rescinding the
contract of sale, there being no express stipulation authorizing the sellers to extarjudicially rescind
the contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA
722 [1984])

Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because
although the evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the
buyer, the sellers had been dealing with Concepcion D. Alcaraz, Ramona's mother, who had acted
for and in behalf of her daughter, if not also in her own behalf. Indeed, the down payment was made
by Concepcion D. Alcaraz with her own personal check (Exh. "B"; Exh. "2") for and in behalf of
Ramona P. Alcaraz. There is no evidence showing that petitioners ever questioned Concepcion's
authority to represent Ramona P. Alcaraz when they accepted her personal check. Neither did they
raise any objection as regards payment being effected by a third person. Accordingly, as far as
petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the
contract of sale.

Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to
pay the full purchase price is concerned. Petitioners who are precluded from setting up the defense
of the physical absence of Ramona P. Alcaraz as above-explained offered no proof whatsoever to
show that they actually presented the new transfer certificate of title in their names and signified their
willingness and readiness to execute the deed of absolute sale in accordance with their agreement.
Ramona's corresponding obligation to pay the balance of the purchase price in the amount of
P1,190,000.00 (as buyer) never became due and demandable and, therefore, she cannot be
deemed to have been in default.

Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may
be considered in default, to wit:

Art. 1169. Those obliged to deliver or to do something, incur in delay from the time
the obligee judicially or extrajudicially demands from them the fulfillment of their
obligation.

xxx xxx xxx

In reciprocal obligations, neither party incurs in delay if the other does not comply or
is not ready to comply in a proper manner with what is incumbent upon him. From
the moment one of the parties fulfill his obligation, delay by the other begins.
(Emphasis supplied.)

There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and
respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a
case of double sale where Article 1544 of the Civil Code will apply, to wit:

Art. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken possession
thereof in good faith, if it should be movable property.

Should if be immovable property, the ownership shall belong to the person acquiring
it who in good faith first recorded it in Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in the possession; and, in the absence thereof to the person who
presents the oldest title, provided there is good faith.

The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the
second contract of sale was registered with the Registry of Deeds of Quezon City giving rise to the
issuance of a new certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the
second paragraph of Article 1544 shall apply.

The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the
exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the first
buyer, and (b) should there be no inscription by either of the two buyers, when the second buyer, in
good faith, acquires possession of the property ahead of the first buyer. Unless, the second buyer
satisfies these requirements, title or ownership will not transfer to him to the prejudice of the first
buyer.

In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished
member of the Court, Justice Jose C. Vitug, explains:

The governing principle is prius tempore, potior jure (first in time, stronger in right).
Knowledge by the first buyer of the second sale cannot defeat the first buyer's rights
except when the second buyer first registers in good faith the second sale (Olivares
vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of
the first sale defeats his rights even if he is first to register, since knowledge taints his
registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26
December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA
656), it has held that it is essential, to merit the protection of Art. 1544, second
paragraph, that the second realty buyer must act in good faith in registering his deed
of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R.
No. 95843, 02 September 1992).
(J. Vitug Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).

Petitioner point out that the notice of lis pendens in the case at bar was annoted on the title of the
subject property only on February 22, 1985, whereas, the second sale between petitioners Coronels
and petitioner Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea
conveyed is that at the time petitioner Mabanag, the second buyer, bought the property under a
clean title, she was unaware of any adverse claim or previous sale, for which reason she is buyer in
good faith.

We are not persuaded by such argument.

In a case of double sale, what finds relevance and materiality is not whether or not the second buyer
was a buyer in good faith but whether or not said second buyer registers such second sale in good
faith, that is, without knowledge of any defect in the title of the property sold.

As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith,
registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a
notice of lis pendens had been annotated on the transfer certificate of title in the names of
petitioners, whereas petitioner Mabanag registered the said sale sometime in April, 1985. At the time
of registration, therefore, petitioner Mabanag knew that the same property had already been
previously sold to private respondents, or, at least, she was charged with knowledge that a previous
buyer is claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect
in petitioners' title to the property at the time of the registration of the property.

This Court had occasions to rule that:

If a vendee in a double sale registers that sale after he has acquired knowledge that
there was a previous sale of the same property to a third party or that another person
claims said property in a pervious sale, the registration will constitute a registration in
bad faith and will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349
[1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43
Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)

Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected
on February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18,
1985, was correctly upheld by both the courts below.

Although there may be ample indications that there was in fact an agency between Ramona as
principal and Concepcion, her mother, as agent insofar as the subject contract of sale is concerned,
the issue of whether or not Concepcion was also acting in her own behalf as a co-buyer is not
squarely raised in the instant petition, nor in such assumption disputed between mother and
daughter. Thus, We will not touch this issue and no longer disturb the lower courts' ruling on this
point.

WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed
judgment AFFIRMED.

SO ORDERED.