SERAFIN MODINA, petitioner, vs.

COURT OF APPEALS AND ERNESTO HONTARCIEGO, PAUL FIGUEROA, TEODORO HIPALLA AND RAMON CHIANG, MERLINDA CHIANG, respondents.

Held: The sale in question is null and void, but plaintiff is barred from taking the present action under the principle
of pari delicto. Ruling:

Facts: Merlinda Plana Chiang (hereinafter referred to as MERLINDA), sold a parcel of land to Ramon
Chiang (hereinafter referred to as CHIANG) covered by TCT Nos. T-86912, T-86913, and T-86914. and were subsequently sold by CHIANG to the petitioner Serafin Modina (MODINA), as shown by the Deeds of Sale. MERLINDA presented a Complaint-in-intervention, seeking the declaration of nullity of the Deed of Sale between her husband and MODINA on the ground that the titles of the parcels of land in dispute were never legally transferred to her husband. Trial Court decided in favor of MERLINDA. Lower Court ruled declaring as void and inexistent the sale of Lots 10063, 10088, 10085 and 10089 of the Cadastral Survey of Sta. Barbara by Merlinda Plana in favor of Ramon Chiang as evidenced by the deed of definite sale. Court of Appeals affirmed the aforesaid decision in toto. Issues: (1) whether the sale of subject lots should be nullified, (2) whether petitioner was not a purchaser in good faith, (3) whether or not only three-fourths of subject lots should be returned to the private respondent. Held: Petition is DENIED and the decision of the Court of Appeals, dated September 30, 1992, in CA-G.R. CV No. 26051 AFFIRMED. Ruling: (1) Since one of the characteristics of a void or inexistent contract is that it does not produce any effect, MERLINDA can recover the property from petitioner who never acquired title thereover. (2) Petitioner cannot claim that the sale between him and MODINA falls under the exception provided for by law. As a general rule, in a sale under the Torrens system, a void title cannot give rise to a valid title. The exception is when the sale of a person with a void title is to a third person who purchased it for value and in good faith. (3) The issue of whether only three-fourths of subject property will be returned was never an issue before the lower court and therefore, the petitioner cannot do it now. A final word. In a Petition for Review, only questions of law may be raised. DIONISIO RELLOSA, PETITIONER, VS. GAW CHEE HUN, RESPONDENT. Facts: On February 2, 1944, Dionisio Rellosa sold to Gaw Chee Hun a parcel of land, together with the house erected thereon, situated in the City of Manila, Philippines, for the sum of P25,000. The sale was executed subject to the condition that the vendee, being a Chinese citizen, would obtain the approval of the Japanese Military Administration in accordance with (seirei) No. 6 issued on April 2, 1943, by the Japanese authorities, and said approval has not been obtained, and that, even if said requirement were met, the sale would at all events be void under article XIII, Section 5, of our Constitution, Vendor filed an action for annulment of the sale. And said duplicate title be returned before said property be disposed by vendee. Defendant denied allegations and contended that said sale is absolute and unconditional. The trial court declared both the sale and the lease valid and binding and dismissed the complaint. Court of Appeals affirmed in toto.

(1) Constitution, in its article VIII, section 5, provides that "no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines", which provisions are similar to those contained in our present Constitution. (2) In Pari Delicto - The proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation. This doctrine is subject to one important limitation, namely, "whenever public policy is considered as advanced by allowing either party to sue for relief against the transaction"The cases in which this limitation may apply only "include the class of contracts which are intrinsically contrary to public policy,contracts in which the illegality itself consists in their opposition to public policy, and any other species of illegal contracts in which, from their particular circumstances, incidental and collateral motives of public policy require relief." The contract in question does not come under this exception because it is not intrinsically contrary to public policy, nor one where the illegality itself consists in its opposition to public policy. It is illegal not because it is against public policy but because it is against the Constitution. Nor may it be contended that to apply the doctrine of pari delicto would be tantamount to contravening the fundamental policy embodied in the constitutional prohibition in that it would allow an alien to remain in the illegal possession of the land, because in this case the remedy is lodged elsewhere. (2) Remedies: There are at present two ways by which this situation may be remedied, to wit, (1) action for reversion, and (2) escheat to the state. An action for reversion is slightly different from escheat proceeding, but in its effects they are the same. They only differ in procedure. Escheat proceedings may be instituted as a consequence of a violation of article XIII, section 5 of our Constitution, which prohibits transfers of private agricultural lands to aliens, whereas an action for reversion is expressly authorized by the Public Land Act (sections 122, 123 and 124 of Commonwealth Act No. 141).

PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINA SANTOS Y CANON FAUSTINO, deceased, plaintiff-appellant, vs. LUI SHE in her own behalf and as administratrix of the intestate estate of Wong Heng, deceased, defendant-appellant. Facts: Justina Santos y Canon Faustino and her sister Lorenzo were the owners in common of a piece of land in Manila. Her sister Lorenzo died. At 90 years old, blind, crippled and an invalid, she was left with no other relative to live with. Her only companions in the house were her 17 dogs and 8 maids. Wong Heng, a Chinese, lived with his family in the restaurant. Wong had been a long-time lessee of a portion of the property, paying a monthly rental of P2,620. Wong himself was the trusted man to whom she delivered various amounts for safekeeping, including rentals from her property at the corner of Ongpin and Salazar streets and the rentals which Wong himself paid as lessee of a part of the Rizal Avenue property. Wong also took care of the payment; in her behalf, of taxes, lawyers' fees, funeral expenses, masses, salaries of maids and security guard, and her household expenses. Justina Santos executed on November 15, 1957 a contract of lease (Plff Exh. 3) in favor of Wong, covering the portion then already leased to him and another portion fronting Florentino Torres street. The lease was for 50 years, although the lessee was given the right to withdraw at any time from the agreement; the monthly rental was P3,120. She executed another contract (Plff Exh. 7) giving Wong the option to buy the leased premises for P120,000, payable within ten years at a monthly installment of P1,000. The option, written in Tagalog, imposed on him the obligation to pay for the food of the dogs and the salaries of the maids in her household, the charge not to exceed P1,800 a month. The option was conditioned on his obtaining Philippine citizenship, a petition for which was then pending in the Court of First Instance of Rizal. She executed two other contracts, one (Plff Exh. 5) extending the term of the lease to 99 years, and another (Plff Exh. 6) fixing the term of the option of 50 years. Both contracts are written in Tagalog. In two wills executed on August 24 and 29, 1959 (Def Exhs. 285 & 279), she bade her legatees to respect the contracts she had entered into with Wong, But later, she had a change of heart and directed her executor to secure the annulment of the contracts. Lower court rendered judgment declaring all contract null and void except for the contract of lease.

Issues: Whether or not the sale in question is valid and, even if it were invalid, plaintiff cannot maintain the action under the principle of pari delicto?

Issue: Whether contracts executed are null and void? Held: The contracts in question are annulled and set aside; the land subject-matter of the contracts is ordered returned to the estate of Justina Santos as represented by the Philippine Banking Corporation; Wong Heng (as substituted by the defendant-appellant Lui She) is ordered to pay the Philippine Banking Corporation the sum of P56,564.35, with legal

interest from the date of the filing of the amended complaint; and the amounts consigned in court by Wong Heng shall be applied to the payment of rental from November 15, 1959 until the premises shall have been vacated by his heirs. Ruling: ecause the parties are in pari delicto they will be left where they are, without relief. For one thing, the original parties who were guilty of a violation of the fundamental charter have died and have since been substituted by their administrators to whom it would be unjust to impute their guilt. Article 1416 of the Civil Code provides, as an exception to the rule on pari delicto, that "When the agreement is not illegal per se but is merely prohibited, and the prohibition by law is designed for the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he has paid or delivered." The Constitutional provision that "Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines"24 is an expression of public policy to conserve lands for the Filipinos. As this Court said in Krivenko: It is well to note at this juncture that in the present case we have no choice. We are construing the Constitution as it is and not as we may desire it to be. Perhaps the effect of our construction is to preclude aliens admitted freely into the Philippines from owning sites where they may build their homes. But if this is the solemn mandate of the Constitution, we will not attempt to compromise it even in the name of amity or equity . . . . For all the foregoing, we hold that under the Constitution aliens may not acquire private or public agricultural lands, including residential lands, and, accordingly, judgment is affirmed, without costs.

Alfred and Ederlinas relationship started deteriorating. Ederlina had not been able to secure a divorce from Klaus. The latter could charge her for bigamy and could even involve Alfred, who himself was still married. He demanded the return of all the amounts that Ederlina and her family had stolen and turn over all the properties acquired by him and Ederlina during their coverture. And that all real and personal properties be returned to him. Trial court ruled favoring Ederlina. CA rendered a decision affirming in toto the decision of the RTC. Issue: Whether or not Frenzel contention is correct? Held: Petition bereft with merit. The sales in question were entered into by him as the real vendee, the said transactions are in violation of the Constitution; hence, are null and void ab initio. Ruling: Section 14, Article XIV of the 1973 Constitution provides, as follows: Save in cases of hereditary succession, no private land shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands in the public domain. A contract that violates the Constitution and the law, is null and void and vests no rights and creates no obligations. It produces no legal effect at all.The petitioner, being a party to an illegal contract, cannot come into a court of law and ask to have his illegal objective carried out. One who loses his money or property by knowingly engaging in a contract or transaction which involves his own moral turpitude may not maintain an action for his losses. To him who moves in deliberation and premeditation, the law is unyielding.The law will not aid either party to an illegal contract or agreement; it leaves the parties where it finds them.Under Article 1412 of the New Civil Code, the petitioner cannot have the subject properties deeded to him or allow him to recover the money he had spent for the purchase thereof.

ALFRED FRITZ FRENZEL, petitioner, vs. EDERLINA P. CATITO, respondent. Facts: Petitioner Alfred Fritz Frenzel is an Australian citizen of German descent and was a pilot. He was married to Teresita Santos, a Filipina. Later, the couple separated without benefit of divorce. Alfred Fritz later met Ederlina Catito, a Filipina and a native of Bajada, Davao City, who was then a masseuse in the Kings Cross nightclub. Unknown to the German, Ederlina was also married to Klaus Miller, a German national. The two developed a relationship where Alfred asked Ederlina to come back with him in the Philippines and be engaged instead in business. Ederlina found a building at No. 444 M.H. del Pilar corner Arquiza Street, Ermita, Manila, owned by one Atty. Jose Hidalgo who offered to convey his rights over the property for P18,000.00. Alfred and Ederlina accepted the offer. Ederlina put up a beauty parlor on the property under the business name Edorial Beauty Salon, and had it registered with the Department of Trade and Industry under her name. Alfred paid Atty. Hidalgo P20,000.00 for his right over the property and gave P300,000.00 to Ederlina for the purchase of equipment and furnitures for the parlor. As Ederlina was going to Germany, she executed a special power of attorney on December 13, 1983[5] appointing her brother, Aser Catito, as her attorney-in-fact in managing the beauty parlor business. She stated in the said deed that she was married to Klaus Muller. Alfred went back to Papua New Guinea to resume his work as a pilot. When Alfred returned to the Philippines, he visited Ederlina in her Manila residence and found it unsuitable for her. He decided to purchase a house and lot owned by Victoria Binuya Steckel in San Francisco del Monte, Quezon City, covered by Transfer Certificate of Title No. 218429 for US$20,000.00. On January 23, 1984, a Contract to Sell was entered into between Victoria Binuya Steckel as the vendor and Ederlina as the sole vendee. Alfred signed therein as a witness. Alfred later learned of Ederlina's marriage through Klaus Muller. He confronted the latter and admitted everything. Ederlina mentioned that she will dirvorced said Kalus. lfred purchased another parcel of land from one Atty. Mardoecheo Camporedondo, located in Moncado, Babak, Davao, covered by TCT No. 35251. Alfred once more agreed for the name of Ederlina to appear as the sole vendee in the deed of sale. On December 31, 1984, Atty. Camporedondo executed a deed of sale over the property for P65,000.00 in favor of Ederlina as the sole vendee.[21] Alfred, through Ederlina, paid the lot at the cost of P33,682.00 and US$7,000.00, respectively, for which the vendor signed receipts.[22] On August 14, 1985, TCT No. 47246 was issued to Ederlina as the sole owner of the said property The couple decided to put up a beach resort on a four-hectare land in Camudmud, Babak, Davao, owned by spouses Enrique and Rosela Serrano. Alfred purchased the property from the spouses for P90,000.00, and the latter issued a receipt therefor. In the meantime, Ederlinas petition for divorce was denied because Klaus opposed the same. A s econd petition filed by her met the same fate. Klaus wanted half of all the properties owned by Ederlina in the Philippines before he would agree to a divorce. Worse, Klaus threatened to file a bigamy case against Ederlina. Alfred proposed the creation of a partnership to Ederlina, or as an alternative, the establishment of a corporation, with Ederlina owning 30% of the equity thereof. She initially agreed to put up a corporation and contacted Atty. Armando Dominguez to prepare the necessary documents. Ederlina changed her mind at the last minute when she was advised to insist on claiming ownership over the properties acquired by them during their coverture.

DOMINGO D. RUBIAS, plaintiff-appellant, vs. ISAIAS BATILLER, defendant-appellee.

Facts: Francisco Militante claimed ownership of a parcel of land located in the Barrio of General Luna,

municipality of Barotac Viejo province of Iloilo covering an area of 171:3561 hectares. Before the war with Japan, Francisco Militante application for the registration of the title of the land opposed by the Director of Lands, the Director of Forestry and other oppositors. 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. Trial court dismissed the application for registration. Pending appeal, Francisco disposed said land to Domingo Rubias, his son-in-law. CA dismissed application for registration. Domingo Rubias paid taxes to said land and later filed forcible Entry and Detainer case against Isaias Batiller. Lower Court and appellate court decided in favor of Batiller. Issue: 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 Held: Contract of Sale is null and void. Ruling: 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; 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.

Issue: Who are entitled to the land under litigation? Held: (1) the deed of sale is null and void of the homestead under litigation to petitioners Potenciano Menil and wife, Crispina Nayve (2) Re-issue Original Certificate of Title No. 220 in the name of private respondent Agueda Garan (3) petitioners are liable for the payment of the agricultural loan obtained by them from the Bank for which the land was mortgaged by them as security. Ruling: It cannot be claimed that there are two contracts: one which is undisputably null and void, and another, having been executed after the lapse of the 5-year prohibitory period, which is valid. The second contract of sale executed on March 3, 1964 is admittedly a confirmatory deed of sale. Even the petitioners concede this point. Inasmuch as the contract of sale executed on May 7, 1960 is void for it is expressly prohibited or declared void by law [CA- 141, Section 118], it therefore cannot be confirmed nor ratified. Article 1409 of the New Civil Code states: Art. 1409. The following contracts are inexistent and void from the beginning: (1) Those whose cause, object, or purpose is contrary to law, morals, good customs, public order or public policy; (2) Those which are absolutely simulated or fictitious; (3) Those whose cause or object did not exist at the time of the transaction; (4) Those whose object is outside the commerce of men; (5) Those which contemplate an impossible service; (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; (7) Those expressly prohibited or declared void by law.

BENEDICTO M. JAVIER, as administrator of the Estate of Eusebio Cruz, petitioner, vs. DOMINGA VDA. DE CRUZ, and LEONILA, ROMAN, ELISEO, LIBERATA, and MELECIO, all surnamed CRUZ,respondents.
Facts: Benedicto M. Javier, as administrator of the Estate of Eusebio Cruz, instituted against Dominga

Vda. de Cruz and her children Civil Case No. 5996 to declare null and void a deed of sale of a part of a parcel of land located in Barrio San Isidro, Taytay, Rizal. The complaint stated that Eusebio Cruz, who died on February 2, 1941 at the age of 100 years without leaving any will nor compulsory heirs, was the absolute and exclusive owner of a parcel of mountainous and unimproved land situated in sitio Matogalo, Taytay, Rizal. Delfin Cruz, by means of deceit and in collusion with persons among them his father Gregorio Cruz made Eusebio Cruz, who could read and write, stamp his thumbmark on a deed of sale of a portion of the land described in the complaint consisting of 26,577 square meters for the sum of P700.00 in favor of said Delfin Cruz. Lower court ruled favoring defendants. CA certified case to SC. Issue: Whether or not deed of sale executed in favor of defendants is null and void? Held: The questioned contempt orders and fines imposed therein are annulled and set aside. Ruling: Under the circumstances and considering that petitioner was only discharging his duty according to his best lights, and could not be said to have in any way acted arbitrarily or in bad faith in filing the informations with the Circuit Criminal Court, his apology could have been graciously accepted by respondent judge with an admonition to exercise greater care in the future, in lieu of the unwarranted imposition of punitive fines in the total sum of P 1,000.00.

These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

POTENCIANO MENIL and wife CRISPINA NAYVE, petitioners, vs. COURT OF APPEALS, AGUEDA GARAN, FRANCISCO CALANIAS, MIGUEL NAYVE, JR., and DEVELOPMENT BANK OF THE PHILIPPINES, respondents. Facts: On November 3, 1955, Agueda Garan obtained a homestead patent over the land in question. Original Certificate of Title No. 220 was issued by the Register of Deeds of Surigao in her name pursuant to the homestead patent. On May 7, 1960, within the prohibitive 5-year period, Agueda Garan sold the land to movant Patenciano Manil for P415.00, as evidenced by a deed of sale bearing the same date. Said sale was not registered in Registry of Deeds in Surigao. August 30, 1964, respondent sold again said land to Potenciano Menil, and for the same price P415.00. the second deed of sale in the Registry of Deeds in Surigao. Original Certificate of Title No. 220 was cancelled, and Transfer Certificate of Title No. T-60, in lieu thereof, was issued in the name of Potenciano Menil. A year after, said land was mortgaged to DBP by Menil to secure an agricultural loan. Petitioners were in possession of the land in question until sometime in 1967 when private respondents Agueda Garan, Francisco Calanias, Miguel Nayve, Jr., Rufo Nayve, and Lucio Calanias forcibly took possession of the said land, and filed against petitioners Civil Case No. 1692 for "Quieting of Title" before Branch 11 of the Court of First Instance of Surigao del Norte. The said court dismissed the complaint, awarded damages to the petitioners, and granted the writ of execution prayed for by the latter. Civil Case No. 1692 clearly stated that the spouses Menil were legally entitled to the possession of the land, ordering private respondents to restore possession of the land in litigation to petitioners, and dismissing Civil Case No. 1816 for insufficiency of evidence. Dismissed Civil Case No. 1816 insofar as the Development Bank of the Philippines was concerned. CA affirmed said decisions.

THE DIRECTOR OF LANDS, petitioner, vs. SILVERETRA ABABA, ET AL., claimants, JUAN LARRAZABAL, MARTA C. DE LARRAZABAL, MAXIMO ABAROQUEZ and ANASTACIA CABIGAS, petitioners-appellants, ALBERTO FERNANDEZ, adverse claimant-appellee. Facts: Maximo Abarquez, availed the services of the Atty. Alberto B. Fernandez and promised to pay the latter's services on contigent basis one-half (1/2) of whatever he might recover from Lots 5600 and 5602 should the appeal prosper. . Maximo filed for annulment of a contract of sale with right of repurchase and for the recovery of the land against Agripina Abarquez, elder sister. Agripina Abarquez contended the share of her brother stating that the latter executed an instrument of pacto de retro prior to the partition conveying to her any or all rights in the estate of their parents. Petitioner discovered later that the claim of his sister over his share was based on an instrument he was believe all along to be a mere acknowledgment of the receipt of P700.00 which his sister gave to him as a consideration for the care of their father during the latter's illness and never an instrument of pacto de retro. Lower Court ruled against petitioner. CA reversed decision favoring Maximo. Fernandez waited that his services be compensated based on the contingent agreement. Instead, sell the whole parcels of land covered by TCT No. 31841 to petitioner-spouses Juan Larrazabal and Marta C. de Larrazabal. Fernandez moved to protect his rights over 1/2 parcel of the land by virtue of the petition of mid affidavit the adverse claim for one-half () of the lots covered by the June 10, 1961 document was annotated on TCT No. 31841. Despite said annotation of adverse claim, Maximo Abarquez and Anastacia Cabigas conveyed by deed of absolute sale on July 29, 1965 two-thirds (2/3) of the lands covered by TCT No. 31841 to petitioner-spouses Juan Larrazabal and Marta C. de Larrazabal. Vendees moved that adverse claim be cancelled which was opposed by Atty. Alberto B. Fernandez. Lower Court denied cancellation of adverse claim. The records of the case were forwarded to this Court through the Land Registration Commission of Manila. Issue: (1) Whether or not there is validity or nullity of the registration of the adverse claim of Atty.

Fernandez (2) Whether or not the contract for a contingent fee, basis of the interest of Atty. Fernandez, is prohibited by the Article 1491 of the New Civil Code and Canon 13 of the Canons of Professional Ethics. Held: (1) Yes. Having purchased the property with the knowledge of the adverse claim, they are therefore in bad faith. Consequently, they are estopped from questioning the validity of the adverse claim. (2) No. Ruling: (1) The one-half () interest of Atty. Fernandez in the lots in question should therefore be respected. Indeed, he has a better right than petitioner-spouses, Juan Larrazabal and Marta C. de Larrazabal. They purchased their two-thirds (2/3) interest in the lots in question with the knowledge of the adverse claim of Atty. Fernandez. The adverse claim was annotated on the old transfer certificate of title and was later annotated on the new transfer certificate of title issued to them. As held by this Court: The annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property where the registration of such interest or right is not otherwise provided for by the Land Registration Act, and serves as a notice and warning to third parties dealing with said property that someone is claiming an interest on the same or a better right than the registered owner thereof (Sanchez, Jr. vs. Court of Appeals, 69 SCRA 332 [1976]; Paz Ty Sin Tei vs. Jose Le Dy Piao supra). (2) Article 1491 prohibits only the sale or assignment between the lawyer and his client, of property which is the subject of litigation. The contract for a contingent fee is not covered by Article 1491. the payment of the attorney's fees, that is, the transfer or assignment of one-half (1/2) of the property in litigation will take place only if the appeal prospers. Therefore, the tranfer actually takes effect after the finality of a favorable judgment rendered on appeal and not during the pendency of the litigation involving the property in question. For while Canon 10 prohibits a lawyer from purchasing ...any interest in the subject matter of the litigation which he is conducting", Canon 13, on the other hand, allowed a reasonable contingent fee contract, thus: "A contract for a contingent fee where sanctioned by law, should be reasonable under all the circumstances of the ca including the risk and uncertainty of the compensation, but should always be subject to the supervision of a court, as to its reasonableness." Canon 13 specifically permits the lawyer to contract for a con tangent fee which of itself, negatives the thought that the Canons preclude the lawyer's having a stake in his litigation.

filed against the driver Emeterio Martin, while a civil case for damages was instituted by Rosita Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc., as registered owner of the taxicab. Decision having become final, a writ of execution was issued. One of the vehicles of respondent spouses with Engine No. 2R-914472 was levied upon and sold at public auction for 12,150.00 to one Sonnie Cortez, the highest bidder. Nicasio Ocampo decided to register his taxicabs in his name. He requested the manager of petitioner Lita Enterprises, Inc. to turn over the registration papers to him, but the latter allegedly refused. Hence, he and his wife filed a complaint against Lita Enterprises, Inc., Rosita Sebastian Vda. de Galvez, Visayan Surety & Insurance Co. and the Sheriff of Manila for reconveyance of motor vehicles with damages. Lower court ruled favoring Nicasio Ocampo. CA modified decision ordering petitoner to pay the fair market value of the vehicles. Issue: Whether or not contract "kabit system" is null and void? Held: Yes. Ruling: The parties herein operated under an arrangement, comonly known as the "kabit system", whereby a person who has been granted a certificate of convenience allows another person who owns motors vehicles to operate under such franchise for a fee. Article 1409 of the Civil Code, It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave them both where it finds them. The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification or by prescription. As this Court said in Eugenio v. Perdido, 2 "the mere lapse of time cannot give efficacy to contracts that are null void."

MANOTOK REALTY, INC., petitioner, vs. THE HON. COURT OF APPEALS and FELIPE MADLANGAWA, respondents. Facts: Respondent Felipe Madlangawa claims that he has been occupying a parcel of land in the Clara de Tambunting de Legarda Subdivision since 1949 upon permission being obtained from Andres Ladores, then an overseer of the subdivision, with the understanding that the respondent would eventually buy the lot. Clara Tambunting,owner of lot, died and her entire estate, including her paraphernal properties which covered the lot occupied by the private respondent were placed under custodia legis. Don Vicente Legarda was appointed as a special administrator of the estate. Meanwhile the private respondent remained in possession of the lot in question. Petitioner became the successful bidder and vendee of the Tambunting de Legarda Subdivision consisting of 44 parcels of land spread out in the districts of Tondo and Sta. Cruz, Manila, pursuant to the deeds of sale executed in its favor by the Philippine Trust Company on March 13 and 20, 1959, as administrator of the Testate Estate of Clara Tambunting de Legarda, in Special Proceeding No. 10809 of the Manila probate court. The lot in dispute was one of those covered by the sale. Respondent was one of the many occupants who refused to vacate the lots they were occupying, so that on April 26, 1968, the petitioner filed the action below to recover the said lot. Trial court dismissed petition. CA ruled the sale by Don Vicente Legarda in favor of the private respondent is valid, binding, and enforceable against the petitioner. Issue: Whether or not sale of land is valid? Held: The private respondent is ordered to SURRENDER the material and physical possession of Lot No. 277, Block I to the petitioner and to pay the latter the rentals as stated above from May, 1950 until he surrenders the said lot. Ruling: Don Vicente Legarda, therefore, could not have validly disposed of the lot in dispute as a continuing administrator of the paraphernal properties of Dona Clara Tambunting. There is nothing in the records that wig show that Don Vicente Legarda was the administrator of the paraphernal properties of Dona Clara Tambunting during the lifetime of the latter. Thus, it cannot be said that the sale which was entered into by the private respondent and Don Vicente Legarda had its inception before the death of Dona Clara Tambunting and was entered into by the former for and on

FRANCISCO A. TONGOY, for himself and as Judicial Administrator of the Estate of the Late Luis D. Tongoy and Ma. Rosario Araneta Vda. de Tongoy, petitioners, vs. THE HONORABLE COURT OF APPEALS, MERCEDES T. SONORA, JUAN T. SONORA, JESUS T. SONORA, TRINIDAD T. SONORA, RICARDO P. TONGOY, CRESENCIANO P. TONGOY, AMADO P. TONGOY, and NORBERTO P. TONGOY, respondents. Facts: Issue: Held: Ruling:

LITA ENTERPRISES, INC., petitioner, vs. SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and FRANCISCA P. GARCIA, respondents. Facts: Spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents, purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to be used as taxicabs. Since they had no franchise to operate taxicabs, they contracted with petitioner Lita Enterprises, Inc., through its representative, Manuel Concordia, for the use of the latter's certificate of public convenience in consideration of an initial payment of P1,000.00 and a monthly rental of P200.00 per taxicab unit. One of said taxicabs driven by their employee, Emeterio Martin, collided with a motorcycle whose driver, one Florante Galvez, died from the head injuries sustained therefrom. A criminal case was eventually

behalf of the latter, but was only consummated after her death. Sale between Don Vicente Legarda and the private respondent is void ab initio, the former being neither an owner nor administrator of the subject property. Such being the case, the sale cannot be the subject of the ratification by the Philippine Trust Company or the probate court. After the appointment of Don Vicente Legarda as administrator of the estate of Dona Clara Tambunting, he should have applied before the probate court for authority to sell the disputed property in favor of the private respondent. If the probate court approved the request, then Don Vicente Legarda would have been able to execute a valid deed of sale in favor of the respondent. Unfortunately, there was no effort on the part of the administrator to comply with the above-quoted rule of procedure nor on that of the respondent to protect his interests or to pay the balance of the installments to the court appointed administrator.

the land to Pacifico Chica. Pacifico Chica mortgaged the land to DBP to secure a loan of P6,000.00. However, he defaulted in the payment of the loan, hence DBP caused the extrajudicial foreclosure of the mortgage. In the auction sale held on September 9, 1970, DBP acquired the property as the highest bidder and was issued a certificate of sale on September 17, 1970 by the sheriff. The certificate of sale was entered in the Book of Unregistered Property on September 23, 1970. Pacifico Chica failed to redeem the property, and DBP consolidated its ownership over the same. Said document contained a waiver of the seller's warranty against eviction. Respondent spouses applied for an industrial tree planting loan with DBP which was approved despite the aforesaid certification of the bureau, on the understanding of the parties that DBP would work for the release of the land by the former Ministry of Natural Resources. The land was used as security. Said land was declared by Ministry of Natural Resources to be timberland and, therefore, is in law an inalienable part of the public domain. Respondents filed for annulment of said deed of sale. Lower court favored respondents. MR was filed by DBP in CA but was denied. Issue: Whether said sale is void ab inito? Held: Yes. Respondent spouses Celebrada and Abner Mangubat to pay petitioner Development Bank of the Philippines the amount of P118,540.00, representing the total amount of the loan released to them, with interest of 15% per annum plus charges and other expenses in accordance with their mortgage contract. Ruling: The rule that if both parties have no fault or are not guilty, the restoration of what was given by each of them to the other is consequently in order. This is because the declaration of nullity of a contract which is void ab initio operates to restore things to the state and condition in which they were found before the execution thereof. A contract which the law denounces as void is necessarily no contract whatever, and the acts of the parties in an effort to create one can in no wise bring about a change of their legal status. The parties and the subject matter of the contract remain in all particulars just as they did before any act was performed in relation thereto. The contract of loan executed between the parties is entirely different and discrete from the deed of sale they entered into. The annulment of the sale will not have an effect on the existence and demandability of the loan. One who has received money as a loan is bound to pay to the creditor an equal amount of the same kind and quality. Under the foregoing circumstances, what is lost is only the right to foreclose the mortgage as a special remedy for satisfying or settling the indebtedness which is the principal obligation. In case of nullity, the mortgage deed remains as evidence or proof of a personal obligation of the debtor, and the amount due to the creditor may be enforced in an ordinary personal action.

CORNELIA CLANOR VDA. DE PORTUGAL, FRANCISCO C. PORTUGAL, PETRONA C. PORTUGAL, CLARITA PORTUGAL, LETICIA PORTUGAL, and BENEDICTO PORTUGAL, JR., petitioners, vs. INTERMEDIATE APPELLATE COURT and HUGO C. PORTUGAL, respondents. Facts: Cornelia Clanor and her late husband Pascual Portugal, during the lifetime of the latter, were able to accumulate several parcels of real property. Hugo Portugal, a son of the spouses, borrowed from his mother, Cornelia, the certificates of title to the above-mentioned parcels of land on the pretext that he had to use them in securing a loan that he was negotiating. Cornelia asked the private respondent for the return of the two titles she previously loaned, Hugo manifested that the said titles no longer exist. Hugo showed the petitioners Transfer Certificate of Title T.C.T. No. 23539 registered in his and his brother Emiliano Portugal's names, and which new T.C.T. cancelled the two previous ones. This falsification was triggered by a deed of sale by which the spouses Pascual Portugal and Cornelia Clanor purportedly sold for P8,000.00 the two parcels of land adverted to earlier to their two sons, Hugo and Emiliano. Confronted by his mother of this fraud, Emiliano denied any participation. And to show his good faith, Emiliano caused the reconveyance of Lot No. 2337 previously covered by TCT No. RT-9356 and which was conveyed to him in the void deed of sale. Hugo, on the other hand, refused to make the necessary restitution thus compelling the petitioners, his mother and his other brothers and sisters, to institute an action for the annulment of the controversial deed of sale and the reconveyance of the title over Lot No. 3201 (the residential land). Trial Court declared deed of sale is inoperative. Ca reversed said decision. Issue: Whether deed of sale is valid? Held: No. Deed of sale is void ab inito. Ruling: Applying the provisions of Articles 1350, 1352, and 1409 of the new Civil Code in relation to the indispensable requisite of a valid cause or consideration in any contract, and what constitutes a void or inexistent contract, we rule that the disputed deed of sale is void ab initio or inexistent, not merely voidable. And it is provided in Article 1410 of the Civil Code, that '(T)he action or defense for the declaration of the inexistence of a contract does not prescribe. Deed of sale in controversy is not simply fraudulent but void ab initio or inexistent our ruling on this third issue would not have any material bearing on the overall outcome of this petition. The petitioner's action remains to be seasonably instituted.

EPIFANIA SARSOSA VDA. DE BARSOBIA and PACITA W. VALLAR, petitioners, vs. VICTORIANO T. CUENCO, respondent. Facts: Two adjoining parcels of coconut land located at Barrio Mancapagao, Sagay, Camiguin, Misamis Oriental (now Camiguin province), with an area of 29,150 square.The entire land was owned previously by a certain Leocadia Balisado, who had sold it to the spouses Patricio Barsobia (now deceased) and Epifania Sarsosa, one of the petitioners herein. They are Filipino citizens. Epifania Sarsosa then a widow, sold the land in controversy to a Chinese, Ong King Po, for the sum of P1,050.00. Ong King Po took actual possession and enjoyed the fruits thereof. On August 5, 1961, Ong King Po sold the litigated property to Victoriano T. Cuenco (respondent herein), a naturalized Filipino, for the sum of P5,000.00. Epifania "usurped" the controverted property, and on July 26, 1962, Epifania (through her only daughter and child, Emeteria Barsobia), sold a one-half (1/2) portion of the land in question to Pacita W. Vallar, the other petitioner. Respondent instituted before the Court of First Instance of Misamis Oriental a Complaint for recovery of possession and ownership of the litigated land, against Epifania and Pacita Vallar. Lower court dismissed complaint and declared Pacita W. Vallar as lawful owner. CA reversed decision declaring Vicotriano T. Cuenco as absolute owner.

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS, CELEBRADA MANGUBAT and ABNER MANGUBAT, respondents. Facts:Development Bank of the Philippines (DBP) executed a "Deed of Absolute Sale" in favor of respondent spouses Celebrada and Abner Mangubat over a parcel of unregistered land identified as Lot 1, PSU-142380, situated in the Barrio of Toytoy, Municipality of Garchitorena, Province of Camarines Sur, containing an area of 55.5057 hectares, more or less. Land was originally owned by Presentacion Cordovez which he donated to Luciano Sarmiento who sold

Issue: Whether or not sale to Ong King Po, a Chinese, was inexistent and/or void ab initio? Held: Yes. Subsequent sale after said first sale is valid. Respondent, therefore, must be declared to be the rightful owner of the property.Pacita Vallar, should not be held also liable for actual damages to respondent. In the absence of contrary proof, she, too, must be considered as a vendee in good faith of petitioner Epifania. Ruling: The sale of the land in question in 1936 by Epifania to Ong King Po was inexistent and void from the beginning (Art. 1409 Civil Code) because it was a contract executed against the mandatory provision of the 1935 Constitution, which is an expression of public policy to conserve lands for the Filipinos. The litigated property is now in the hands of a naturalized Filipino. It is no longer owned by a disqualified vendee. Respondent, as a naturalized citizen, was constitutionally qualified to own the subject property. There would be no more public policy to be served in allowing petitioner Epifania to recover the land as it is already in the hands of a qualified person. CONCHITA LIGUEZ, petitioner, vs. THE HONORABLE COURT OF APPEALS, MARIA NGO VDA. DE LOPEZ, ET AL., respondents. Facts: Petitioner-appellant filed complaint against the widow and heirs of the late Salvador P. Lopez to recover a parcel of 51.84 hectares of land, situated in barrio Bogac-Linot, of the municipality of Mati, Province of Davao. Plaintiff averred to be its legal owner, pursuant to a deed of donation of said land, executed in her favor by the late owner, Salvador P. Lopez, on 18 May 1943. The defense interposed was that the donation was null and void for having an illicit causa or consideration, which was the plaintiff's entering into marital relations with Salvador P. Lopez, a married man; and that the property had been adjudicated to the appellees as heirs of Lopez by the court of First Instance, since 1949. CA ruled against plaintiff and found that property donated was conjugal in nature. And said deed of donation was never registered. Issue: Whether or not deed of donation executed is null and void? VICENTE GODINEZ, ET AL., plaintiffs-appellants, vs. FONG PAK LUEN ET AL., defendants, TRINIDAD S. NAVATA, defendant-appellee. Facts: Jose Godinez who was married to Martina Alvarez for valuable consideration, sold the aforesaid parcel of land to the defendant Fong Pak Luen, a Chinese citizen. Defendant Fong Pak Luen executed a power of attorney in favor of his co-defendant Kwan Pun Ming, also an alien, who conveyed and sold the above described parcel of land to co-defendant Trinidad S. Navata, who is aware of and with full knowledge that Fong Pak Luen is a Chinese citizen as well as Kwan Pun Ming, who under the law are prohibited and disqualified to acquire real property in this jurisdiction. The heirs of the spouses are now contending the validity of the sale. Lower court ruled dismissed the case. Issue: Whether or not the heirs of a person who sold a parcel of land to an alien in violation of a constitutional prohibition may recover the property if it had, in the meantime, been conveyed to a Filipino citizen qualified to own and possess it. Held: Respondent Navata, the titled owner of the property is declared the rightful owner. Ruling: There can be no dispute that the sale in 1941 by Jose Godinez of his residential lot acquired from the Bureau of Lands as part of the Jolo townsite to Fong Pak Luen, a Chinese citizen residing in Hongkong, was violative of Section 5, Article XIII of the 1935 Constitution which provided: Sec. 5. Save in cases of hereditary succession, no private agricultural land will be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines. The meaning of the above provision was fully discussed in Krivenko v. Register of Deeds of Manila (79 Phil. 461) which also detailed the evolution of the provision in the public land laws, Act No. 2874 and Commonwealth Act No. 141. The Krivenko ruling that "under the Constitution aliens may not acquire private or agricultural lands, including residential lands" is a declaration of an imperative constitutional policy. However, we see no necessity from the facts of this case to pass upon the nature of the contract of sale executed by Jose Godinez and Fong Pak Luen whether void ab initio,illegal per se or merely pro-exhibited.** Sarsosa vda. de Barsobia v. Cuenco (113 SCRA 547) we had occasion to pass upon a factual situation substantially similar to the one in the instant case. We ruled: But the factual set-up has changed. The litigated property is now in the hands of a naturalized Filipino. It is no longer owned by a disqualified vendee. Respondent, as a naturalized citizen, was constitutionally qualified to own the subject property. There would be no more public policy to be served in allowing petitioner Epifania to recover the land as it is already in the hands of a qualified person. Applying by analogy the ruling of this Court in Vasquez vs. Giap & Sons: (.96 Phil. 447 [1955]) Held: No. Ruling: The situation of the children and forced heirs of Lopez approximates that of the widow. As privies of their parent, they are barred from invoking the illegality of the donation. But their right to a legitime out of his estate is not thereby affected, since the legitime is granted them by the law itself, over and above the wishes of the deceased. Hence, the forced heirs are entitled to have the donation set aside in so far as in officious: i.e., in excess of the portion of free disposal (Civil Code of 1889, Articles 636, 654) computed as provided in Articles 818 and 819, and bearing in mind that "collationable gifts" under Article 818 should include gifts made not only in favor of the forced heirs, but even those made in favor of strangers, as decided by the Supreme Court of Spain in its decisions of 4 May 1899 and 16 June 1902. So that in computing the legitimes, the value of the property to herein appellant, Conchita Liguez, should be considered part of the donor's estate. Once again, only the court of origin has the requisite date to determine whether the donation is inofficious or not. Lopez could not donate the entirety of the property in litigation, to the prejudice of his wife Maria Ngo, because said property was conjugal in character and the right of the husband to donate community property is strictly limited by law (Civil Code of 1889, Arts. 1409, 1415, 1413; Baello vs. Villanueva, 54 Phil. 213). ART. 1409. The conjugal partnership shall also be chargeable with anything which may have been given or promised by the husband alone to the children born of the marriage in order to obtain employment for them or give then, a profession or by both spouses by common consent, should they not have stipulated that such expenditures should be borne in whole or in part by the separate property of one of them.". ART. 1415. The husband may dispose of the property of the conjugal partnership for the purposes mentioned in Article 1409.) ART. 1413. In addition to his powers as manager the husband may for a valuable consideration alienate and In the present case, it is scarcely disputable that Lopez would not have conveyed the property in question had he known that appellant would refuse to cohabit with him; so that the cohabitation was an implied condition to the donation, and being unlawful, necessarily tainted the donation itself. Conchita Liguez declared entitled to so much of the donated property as may be found, upon proper liquidation, not to prejudice the share of the widow Maria Ngo in the conjugal partnership with Salvador P. Lopez or the legitimes of the forced heirs of the latter.

TEJA MARKETING AND/OR ANGEL JAUCIAN, petitioner, vs. HONORABLE INTERMEDIATE APPELLATE COURT * AND PEDRO N. NALE, respondents. Facts: Defendant bought from the plaintiff a motorcycle with complete accessories and a sidecar in the total consideration of P8,000.00. Out of the total purchase price the defendant gave a downpayment of P1,700.00 with a promise that he would pay plaintiff the balance within sixty days. He failed to pay

wherein the latter demanded payments. The records of the LTC show that the motorcycle sold to the defendant was first mortgaged to the Teja Marketing by Angel Jaucian though the Teja Marketing and Angel Jaucian are one and the same, because it was made to appear that way only as the defendant had no franchise of his own and he attached the unit to the plaintiff's MCH Line. The agreement also of the parties here was for the plaintiff to undertake the yearly registration of the motorcycle with the Land Transportation Commission. The plaintiff, however failed to register the motorcycle on that year on the ground that the defendant failed to comply with some requirements such as the payment of the insurance premiums and the bringing of the motorcycle to the LTC for stenciling, the plaintiff saying that the defendant was hiding the motorcycle from him. Petitioner Teja Marketing and/or Angel Jaucian filed an action for "Sum of Money with Damages" against private respondent Pedro N. Nale. Lower court favored petitioner. CA affirmed decision. Issue: Whether or not respondent court erred in applying the doctrine of "pari delicto."? Held: No. The defect of in existence of a contract is permanent and cannot be cured by ratification or by prescription. The mere lapse of time cannot give efficacy to contracts that are null and void. Ruling: Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as being contrary to public policy and, therefore, void and in existent under Article 1409 of the Civil Code. It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave both where it finds then. Upon this premise it would be error to accord the parties relief from their predicament. Article 1412 of the Civil Code denies them such aid. It provides: Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: 1. When the fault is on the part of both contracting parties, neither may recover that he has given by virtue of the contract, or demand, the performance of the other's undertaking.

prestation to pay the stipulated interest; hence, being separable, the latter only should be deemed void, since it is the only one that is illegal.

AURELIO G. BRIONES, plaintiff-appellee, vs. PRIMITIVO P. CAMMAYO, ET AL., defendants-appellants. Facts: Aurelio G. Briones filed an action against Primitivo, Nicasio, Pedro, Hilario and Artemio, all surnamed Cammayo, to recover from them, jointly and severally. Defendants executed the real estate mortgage as security for the loan of P1,200.00 given to defendant Primitivo P. Cammayo upon the usurious agreement that defendant pays to the plaintiff and that the plaintiff reserve and secure. Defendants replead all their allegations, that plaintiff, by taking and receiving interest in excess of that allowed by law, with full intention to violate the law. Lower court ruled that defendants pay the claimed amount. Issue: Whether the creditor is entitled to collect from the debtor the amount representing the principal obligation; secondly, in the affirmative, if he is entitled to collect interests thereon, and if so, at what rate. Held: Appellee may recover from appellant the principal of the loan (P1,180.00) only, with interest thereon at the legal rate of 6% per annum from the date of the filing of the complaint. Ruling: True, as stated in Article 1411 of the New Civil Code, the rule of pari delicto applies where a contract's nullity proceeds from illegality of the cause or object of said contract. However, appellants fail to consider that a contract of loan with usurious interest consists of principal and accessory stipulations; the principal one is to pay the debt; the accessory stipulation is to pay interest thereon. The question therefore to resolve is whether the illegal terms as to payment of interest likewise renders a nullity the legal terms as to payments of the principal debt. Article 1420 of the New Civil Code provides in this regard: "In case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter may be enforced." In simple loan with stipulation of usurious interest, the prestation of the debtor to pay the principal debt, which is the cause of the contract (Article 1350, Civil Code), is not illegal. The illegality lies only as to the