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1. The parcels of land in question are those under the name of Ramon Chiang
2. He claims that subject properties were sold to him by his wife, Merlinda as evidenced by a Deed of Absolute
Sale dated December 17, 1975,
3. However, CHIANG subsequently sold the land to petitioner Serafin Modina (MODINA),
4. MODINA brought a Complaint for Recovery of Possession with Damages against the private respondents,
Ernesto Hontarciego, Paul Figueroa and Teodoro Hipalla
5. Upon learning of the said sale, MERLINDA sought 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 were never legally transferred to her
husband.
6. She claims that fraudulent acts were employed by him to obtain a Torrens Title in his favor. However, she
confirmed the validity of the lease contracts with the other private respondents.
7. These parcels of lands were those ordered sold by CFI Iloilo and these formed part of the Intestate Estate of
Nelson Plana her first husband.
8. RTC: decided in favor of MERLINDA. Declaring as void and inexistent the sale by Merlinda to as well as the
subsequent sale of CHIANG to MODINA
9. CA: affirmed
ISSUE:
1) whether the sale of subject lots should be nullified-- YES
(2) whether petitioner was not a purchaser in good faith-- YES
(4) whether or not only three-fourths of subject lots should be returned to the private respondent.
RATIO 1:
Art. 1490. The husband and the wife cannot sell property to each other, except:
(1) when a separation of property was agreed upon in the marriage settlements; or
(2) when there has been a judicial separation of property under Art. 191.
The exceptions laid down did not exist with respect to the property relations of Chiang and Merlinda. Therefore, the
sale in question is invalid for being prohibited by law. Not being the owner of subject properties, Ramon Chiang could
not have validly sold the same to plaintiff Serafin Modina. The sale by Ramon Chiang in favor of Serafin Modina is,
likewise, void and inexistent.
Furthermore, the court found no sufficient evidence declaring there was fault on the part of MERLINDA, therefore, the
principle of in pari delicto is inapplicable and the sale was void for want of consideration. In effect, MERLINDA can
recover the lots sold by her husband to petitioner MODINA.
----The principle of in pari delicto denies all recovery to the guilty parties inter se. It applies to cases where the nullity
arises from the illegality of the consideration or the purpose of the contract. When two persons are equally at fault,
the law does not relieve them. The exception to this general rule is when the principle is invoked with respect to
inexistent contracts.---The Court debunked petitioners theory that MERLINDA intentionally gave away the bulk of her and her late husbands
estate to defendant CHIANG. Because Records show that when Merlinda filed a complaint-in-intervention, she did not
put up Article 1490 as a defense because that would be inconsistent to her claim that the sale was inexistent. Instead
she denied the existence of the Deed of Sale in favor of her husband and claimed no consideration in that deed of sale.
RATIO 2:
As a general rule, in a sale under the Torrens system, a void title cannot give rise to a valid title. The exception is when
the sale of a person with a void title is to a third person who purchased it for value and in good faith.
A purchaser in good faith is one who buys the property of another without notice that some other person has a right to
or interest in such property and pays a full and fair price at the time of the purchase or before he has notice of the claim
or interest of some other person in the property.
1. Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits 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.
2. In the 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
3. 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.
4. 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.
5. The causes of nullity which have ceased to exist cannot impair the validity of the new contract.
6. 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."
7. 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:
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.
LEGAL EFFECT IF FALLING UNDER ART 1491: NULL AND VOID.CANNOT BE RATIFIED.
Manresa considered such prohibited acquisitions (which fell under the Spanish Civil Code)as merely voidable because
the Spanish Code did not recognize nullity. But our Civil Code does recognize the absolute nullity of contracts whose
cause, object or purpose is contract to law, morals, good customs, public order or public policy or which are expressly
prohibited or declared void by law and declares such contracts inexistent and void from the beginning. 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 this 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(under Art 1491).