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SALES CASE DIGESTS

Bloc 2A SY 2017-2018
Saint Louis University
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TABLE OF CONTENTS
CASES PAGE NUMBER
1. OLIVARES v. CASTILLO 2
2. CORDERO v. FS MNGT N/A-KORINA
3. AYALA LIFE ASSURANCE v. RAY BURTON 4
4. RAYOS v. CA 6
5. CORONEL v. CA N/A-KORINA
6. CEBU v. HEIRS OF RUBI 8
7. SACOBIA v. TY 9
8. AKANG v. ISULAN 11
9. LIMKETKAI v. CA 13
10. TALOSIG v. VDA. DE NIEBA N/A-MARDY
11. ABRENICA v. GONDA 14
12. MEDINA v. CIR 15
13. CHING v. GOYANKO 17
14. CALIMLIM v. FORTUN 18
15. DE LEON v. DE LEON 19
16. FUENTES v. ROCA 21
17. SARSOSA v. CUENCO 23
18. WOLFSON v. MARTINEZ 25
19. RUBIAS v. BATILLER 27
20. MANANQUIL v. VILLEGAS 28
21. GREGORIO v. CA 29
22. DISTAJO v. CA PICTURE SA GROUP SENT by GRANDELYN
23. MAHARLIKA v. TAGLE PICTURE SA GROUP - SENT by TOFFY
24. LAIG v. CA 31
25. VALENCIA v. CABANTING 33
26. ORDONIO v. EDUARTE 35
27. RAMOS v. NGASEO 36
28. MACARIOLA v. ASUNCION 37
29. FORNILDA v. RTC 39
30. DAROY v. ABECIA 41
31. GODINEZ v. FONG PAK LUEN 43
32. REPUBLIC v. ROD of ROXAS CITY 44
33. PARAGAS v. HEIRS OF BALACANO 46
34. DOMINGO v. CA 47
35. FRANCISCO v. HERRERA 48
36. TORRES v. LAPINID 49
37. INTAC v. CA 51
38. DR. FORMARAN v. DR. ONG 53
39. CLEMENTE v. CA 54
40. HEIRS OF BALIE v. LIM 56
41. VALERIO v. MARIANO 58
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OLIVAREZ REALTY CORPORATION v. CASTILLO

GR No. 196251
July 9, 2014

Contract to Sell v. Conditional Sale v. Absolute Sale

FACTS:

Benjamin Castillo was the registered owner of a 346,918-squaremeter parcel of land located in Laurel,
Batangas. The Philippine Tourism Authority allegedly claimed ownership of the same parcel of land. On
April 5, 2000, Castillo and Olivarez Realty Corporation, represented by Dr. Pablo R. Olivarez, entered into
a contract of conditional sale over the property. Under the deed of conditional sale, Castillo agreed to sell
his property to Olivarez Realty Corporation for 19,080,490.00. Olivarez Realty Corporation agreed to a
down payment of 5,000,000.00. As to the balance of 14,080,490.00, Olivarez Realty Corporation agreed
to pay in 30 equal monthly installments every eighth day of the month beginning in the month that the
parties would receive a decision voiding the Philippine Tourism Authoritys title to the property. Under
the deed of conditional sale, Olivarez Realty Corporation shall file the action against the Philippine
Tourism Authority with the full assistance of Castillo. Should the action against the Philippine Tourism
Authority be denied, Castillo agreed to reimburse all the amounts paid by Olivarez Realty Corporation. As
to the "legitimate tenants" occupying the property, Olivarez Realty Corporation undertook to pay them
"disturbance compensation," while Castillo undertook to clear the land of the tenants within six months
from the signing of the deed of conditional sale. Should Castillo fail to clear the land within six months,
Olivarez Realty Corporation may suspend its monthly down payment until the tenants vacate the
property.

After the parties had signed the deed of conditional sale, Olivarez Realty Corporation immediately took
possession of the property. However, the corporation only paid 2,500,000.00 of the purchase price.
Contrary to the agreement, the corporation did not file any action against the Philippine Tourism
Authority to void the latters title to the property. The corporation neither cleared the land of the tenants
nor paid them disturbance compensation. Despite demand, Olivarez Realty Corporation refused to fully
pay the purchase price. Arguing that Olivarez Realty Corporation committed substantial breach of the
contract of conditional sale and that the deed of conditional sale was a contract of adhesion, Castillo
prayed for rescission of contract. Castillo also contended that there was no genuine issue requiring trial
of the case. Olivarez Realty Corporation and Dr. Olivarez argued that certain provisions of the deed of
conditional sale were ambiguous and that the complaint prayed for irreconcilable reliefs.

The trial court ruled that Olivarez Realty Corporation breached the contract of conditional sale. Upon
appeal, the Court of Appeals affirmed in toto the trial courts decision. Hence, this petition for review on
certiorari.

ISSUE:

Whether or not Castillo is entitled to cancel the contract of conditional sale

HELD:
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Since Olivarez Realty Corporation illegally withheld payments of the purchase price, Castillo is entitled to
cancel his contract with petitioner-corporation. However, the Court properly characterizes the parties
contract as a contract to sell, not a contract of conditional sale.

In both contracts to sell and contracts of conditional sale, title to the property remains with the seller
until the buyer fully pays the purchase price. Both contracts are subject to the positive suspensive
condition of the buyers full payment of the purchase price.

In a contract of conditional sale, the buyer automatically acquires title to the property upon full payment
of the purchase price. This transfer of title is "by operation of law without any further act having to be
performed by the seller." In a contract to sell, transfer of title to the prospective buyer is not automatic.
"The prospective seller [must] convey title to the property [through] a deed of conditional sale."
The distinction is important to determine the applicable laws and remedies in case a party does not fulfill
his or her obligations under the contract. In contracts of conditional sale, our laws on sales under the Civil
Code of the Philippines apply. On the other hand, contracts to sell are not governed by our law on sales
but by the Civil Code provisions on conditional obligations. Failure to fully pay the purchase price in
contracts to sell is not the breach of contract under Article 1191. Failure to fully pay the purchase price is
"merely an event which prevents the [sellers] obligation to convey title from acquiring binding force."
This is because "there can be no rescission of an obligation that is still nonexistent, the suspensive
condition not having [happened]."

In this case, Castillo reserved his title to the property and undertook to execute a deed of absolute sale
upon Olivarez Realty Corporations full payment of the purchase price. Since Castillo still has to execute a
deed of absolute sale to Olivarez Realty Corporation upon full payment of the purchase price, the transfer
of title is not automatic. The contract in this case is a contract to sell. As this case involves a contract to
sell, Article 1191 of the Civil Code of the Philippines does not apply. The contract to sell is instead
cancelled, and the parties shall stand as if the obligation to sell never existed. Olivarez Realty Corporation
shall return the possession of the property to Castillo. Any improvement that Olivarez Realty Corporation
may have introduced on the property shall be forfeited in favor of Castillo. The Supreme Court generally
orders the reimbursement of the installments paid for the property when setting aside contracts to sell.
This is true especially if the propertys possession has not been delivered to the prospective buyer prior
to the transfer of title. In this case, however, Castillo delivered the possession of the property to Olivarez
Realty Corporation prior to the transfer of title. We cannot order the reimbursement of the installments
paid.
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DARREL CORDERO, et. al., v. F.S. MANAGEMENT & DEVELOPMENT CORPORATION

G.R. No. 167213
October 31, 2006

FACTS:

On October 27, 1994, Belen Cordero, in her own behalf and as attorney-in-fact of her co-
petitioners Darrel Cordero, Egmedio Bautista, Rosemay Bautista, Marion Bautista, Danny Boy Cordero
and Ladylyn Cordero, entered into a contract to sell with F.S. Management and Development Corporation
over 5 parcels of land located in Nasugbu, Batangas. In the contract, the parties agreed that the total price
of the 50 ha. land will be P12,500,000.00; that the respondents will pay P500,000. 00 as earnest money to
entitle them to enter the property and relocate the same; and, that respondent would pay P3,500, 000.00
on or before April 30, 1995 and the remaining balance will be paid within 18 months from the date of
payment of P3.5 Million pesos in 6 equal quarterly payments or P1,411,000.00 every quarter. Pursuant to
these terms, respondent paid the earnest money on October 27, 1994; paid P1,000,000 on June 30, 1995
and another P1,000,000 on July
6, 1995. No further payments were made thereafter.
Petitioners sent respondent a demand informing her that they were revoking/canceling the
contract to sell and were treating the payments already made as payment for damages suffered as a
result of the breach of contract, and demanding the payment of the amount of P10 Million Pesos for
actual damages suffered due to loss of income by reason thereof. Respondent ignored the demand. Hence,
Belen filed before the RTC of Paraaque a complaint for rescission of contract with damages for
respondents failure to comply with its obligations under the contract to sell. Respondent defended that
the petitioners had prevented them from entering the property after payment of P2.5 million, therefore,
the petitionerswere thr first to breach the contract.
RTc resciended the contract and ordered the respondents to pay damages. The CA however, set
aside the contract to sell without payment of damages and ordered the petitioners to return the amounts
they received from respondents.

ISSUE:

Is the contract to sell subject to rescission under Art. 1191 of the Civil Code?

RULING:

NO. Under a contract to sell, the seller retains title to the thing to be sold until the purchaser fully
pays the agreed purchase price. The full payment is a positive suspensive condition, the non-fulfillment of
which is not a breach of contract but merely an event that prevents the seller from conveying title to the
purchaser. The non-payment of the purchase price renders the contract to sell ineffective and without
force and effect. Since the obligation of petitioners did not arise because of the failure of respondent to
fully pay the purchase price, Article 1191 of the Civil Code would have no application. The subject
contract to sell clearly states that "title will be transferred by the owner (petitioners) to the buyer
(respondent) upon complete payment of the agreed purchase price." Since respondent failed to fully pay
the purchase price, petitioners obligation to convey title to the properties did not arise. While rescission
does not apply in this case, petitioners may nevertheless cancel the contract to sell, their obligation not
having arisen, under RA 6552. Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales
of all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the contract
upon nonpayment of an installment by the buyer, which is simply an event that prevents the obligation of
the vendor to convey title from acquiring binding force.
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The properties subject of the contract having been intended for commercial, and not for
residential, purposes, petitioners are entitled to retain the payments already made by respondent. RA
6552 expressly recognizes the vendors right to cancel contracts to sell on installment basis industrial
and commercial properties with full retention of previous payments. But even assuming that the
properties were not intended for commercial or industrial purpose, since respondent paid less than two
years of installments, it is not entitled to any refund.
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AYALA INC v RAY BURTON CORP

GR No. 163075
January 23, 2006

Contract to Sell v. Conditional Sale v. Absolute Sale

FACTS:

On December 22, 1995, Ayala Inc. and Ray Burton Corp. entered into a contract denominated as a
Contract to Sell, with a Side Agreement of even date. In these contracts, petitioner agreed to sell to
respondent a parcel of land situated at Muntinlupa City. The purchase price of the land is payable as
follows:

On contract date: 26%, inclusive of option money

Not later than 1-6-96: 4%

In consecutive quarterly installments for a period of 5 years: 70%

Respondent paid thirty (30%) down payment and the quarterly amortization. However in 1998,
respondent notified petitioner in writing that it will no longer continue to pay due to the adverse effects
of the economic crisis to its business. Respondent then asked for the immediate cancellation of the
contract and for a refund of its previous payments as provided in the contract.

Petitioner refused to cancel the contract to sell. Instead, it filed with the RTC Makati City, a complaint for
specific performance against respondent, demanding from the latter the payment of the remaining
unpaid quarterly installments inclusive of interest and penalties.

Respondent, in its answer, denied any further obligation to petitioner, asserting that it (respondent)
notified the latter of its inability to pay the remaining installments.

The trial court rendered a Decision in favor of Ayala and holding that respondent transgressed the law in
obvious bad faith. On appeal, the CA rendered a Decision reversing the trial courts Decision. Hence, the
instant petition for review on certiorari.

ISSUE:

Is the contract between the parties a contract to sell?

Considering that it is a contract to sell, can petitioner, as seller, demand specific performance of buyer
(respondent)?

RULING:

Yes. The real nature of a contract may be determined from the express terms of the written agreement
and from the contemporaneous and subsequent acts of the contracting parties. Here, the questioned
agreement clearly indicates that it is a contract to sell, not a contract of sale.
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Under a contract to sell, the title of the thing to be sold is retained by the seller until the purchaser makes
full payment of the agreed purchase price. Such payment is a positive suspensive condition, the non-
fulfillment of which is not a breach of contract but merely an event that prevents the seller from
conveying title to the purchaser. The non-payment of the purchase price renders the contract to sell
ineffective and without force and effect. Thus, a cause of action for specific performance does not arise.
Here, the provisions of the contract to sell categorically indicate that respondents default in the payment
of the purchase price is considered merely as an event, the happening of which gives rise to the
respective obligations of the parties mentioned therein.
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RAYOS v. COURT OF APPEALS

GR No. 135528
July 14, 2004

Contract to Sell v. Conditional Sale v. Absolute Sale

FACTS:

Orlando Rayos, a practicing lawyer, and his wife, petitioner Mercedes, secured a short-term loan from the
Philippine Savings Bank (PSB) payable within a period of one year in quarterly installments of Php. 29,
190.28. The first quarterly payment to start on March 24, 1986. The loan was evidenced by a promissory
note. To secure the payment of the loan, the petitioners-spouses executed, on the same date, a Real Estate
Mortgage over their property in Las Pinas.

On December, the petitioners, as vendors, and the respondents, Spouses Miranda, as vendees, executed a
Deed of Sale with Assumption of Mortgage over the subject property for the price of Php. 214,000.

However, the petitioners-spouses, likewise, executed a Contract to Sell the said property in favor of the
respondents for Php. 250,000. The petitioners obliged themselves to execute a deed of absolute sale over
the property in favor of the respondents upon the full payment of the purchase price thereof.

Respondent Rogelio Miranda filed an application with the PSB to secure the approval of his assumption of
the petitioners obligation on the loan. The PSB disapproved his application. Nevertheless, respondent
Rogelio Miranda paid the three quarterly installments.

Petitioner Orlando Rayos received from PSB a letter reminding him that his loan with the bank would
mature on December 24, 1986 and that it expected him to pay his loan on or before the said date. Fearing
that the respondents would not be able to pay the amount due, petitioner Orlando Rayos paid and
advised the PSB to turn over to the respondents the owners duplicate of the title over the subject
property even if the latter paid the last quarterly installment on the loan, as they had not assumed the
payment of the same.

Respondent paid the last installment with PSB. He informed the bank that the petitioners had executed a
deed of sale with assumption of mortgage in their favor and that he was paying the balance of the loan,
conformably to said deed. On the other hand, the bank informed the respondent that it was not bound to
said deed and that the petitioners had earlier paid the amount of Php. 27,981.41 on the loan. The bank
refused respondent's offer to pay the loan.

Respondent filed a complaint alleging that the petitioners and the PSB conspired to prevent him from
paying the last quarterly payment of the petitioners loan with the bank despite the existence of the deed
of sale with assumption of mortgage executed by him and the petitioners.

The trial court ordered the plaintiff to refund to spouses Orlando and Mercedes Rayos the total sum of
Php. 29,069.45 and spouses Rayos to deliver to Rogelio TCT and possession of the parcel of land
described in the said title. The CA affirmed.

The petitioners assert that the CA erred in not finding that the respondents first committed a breach of
their contract to sell upon their failure to pay the amount due for the last quarterly installment of their
loan from the PSB.
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ISSUES:

WON the parties executed a contract to sell instead of a contract of sale.

RULING:

Yes. Construing the contracts together, it is evident that the parties executed a contract to sell and not a
contract of sale. The petitioners retained ownership without further remedies by the respondents until
the payment of the purchase price of the property in full. Such payment is a positive suspensive
condition, failure of which is not really a breach, serious or otherwise, but an event that prevents the
obligation of the petitioners to convey title from arising, in accordance with Article 1184 of the Civil Code.

The non-fulfillment by the respondent of his obligation to pay, which is a suspensive condition to the
obligation of the petitioners to sell and deliver the title to the property, rendered the contract to sell
ineffective and without force and effect.49 The parties stand as if the conditional obligation had never
existed. Article 1191 of the New Civil Code will not apply because it presupposes an obligation already
extant. There can be no rescission of an obligation that is still non-existing, the suspensive condition not
having happened.

However, the respondents may reinstate the contract to sell by paying the P29,223.67, and the
petitioners may agree thereto and accept the respondents' late payment.
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ROMULO A. CORONEL, et. al., v. THE COURT OF APPEALS, et. al.

G.R. No. 103577
October 7, 1996

FACTS:

On January 19, 1985, Romulo Coronel, et. al. executed a document entitled Receipt of Down
Payment in favor of Ramona Patricia Alcaraz for payment of P50,000.00 over a house and lot in a deed of
absolute sale. The down payment was made by Corazon Alcaraz, Ramonas mother. It was agreed prior to
sale that the total purchase price is P1,240,000.00; that upon payment of the down payment, the Coronels
will cause the transfer in their names of the title of the property registered in the name of their deceased
father and after which, the Coronels will execute the deed of absolute sale in favor of Ramona and the
latter will pay the former the whole balance of P1,190,000.00. However, upon transfer of title, the
Coronels sold the property to intervenor Catalina B. Mabanag for P1,580,000.00 after the latter has paid
P300,000.00. For this reason, Coronels canceled and rescinded the contract with Ramona by depositing
the down payment in the bank in trust for Ramona Patricia Alcaraz.
Concepcion, et. al., filed a complaint for a specific performance against the Coronels and caused the
annotation of a notice of lis pendens at the back of TCT No. 327403. RTC rendered in favor of Alcaraz
ordering the Coronels to execute a deed of absolute sale covering the parcel of land embraced in and
covered by TCT No. 327403 (now TCT No. 331582) in favor of Alcaraz. CA affirmed the decision.

ISSUE:

What is the legal significance of the document entitled Receipt of Down Payment which was
offered in evidence by both parties?

RULING:

The Receipt of Down Payment is a manifest of a contract of sale. 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. 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 petitioners 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
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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.
When the said Receipt of Down Payment was prepared and signed by petitioners Romulo 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. This suspensive condition was fulfilled on February 6, 1985. 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.
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CITY OF CEBU v. HEIRS OF CANDIDO RUBI

GR No. 128579
April 29, 1999

FACTS:

Candido Rubi and the Province of Cebu entered into lease agreement over a parcel of land. After a few
years, the Province conveyed to the City of Cebu by way of donation several parcels of land, including the
land leased by Candido. The City put the said parcels of land up for public auction; one of the conditions
for the auction is that if a parcel of land is under lease, the lessor has the option to match the highest bid
placed over the parcel of land.

During the bidding period, Candido exercised his right to match the highest bid, giving notice of his offer
to the City Administrator; then the Administrator gave notice of acceptance of the offer of Candido to
match the bid. In 1965, a day after the bid was finalized, the Province, in a civil case, enjoined the City
from conveying the parcel of land donated to it. In 1974, a compromise agreement was made in the Civil
Case and Candidos parcel of land was adjudicated in the Citys favour.

From 1976, onwards, Candido made his initial payments and asked for extensions of his deadline, which
were approved by the City. At this juncture, Candido dies and was succeeded by his compulsory heirs. In
1989, the Heirs of Rubi initiated an action for specific performance and consigned the outstanding
balance of Candidos payment. The City averred that the contract was a mere Contract to Sell; the City
reserved its ownership until full payment is made and such is a positive suspensive condition to give rise
to an obligation. The trial court ruled in favour of the City. The Court of Appeals reversed the decision,
averring that there is a perfected contract of sale.

ISSUE:

1. Is there a reservation of ownership by the City over the parcel of land?

2. Is there a contract of sale?

RULING:

The Supreme Court agreed with the Court of Appeals, there is a perfected contract of sale. First, there was
no express reservation of ownership stipulated. Second, the requisites of a contract of sale are present.
The price of the land and the object parcel is determined. The perfection was borne out of the acceptance
of the City of the bid of Candido during the auction. The obligation to deliver or to convey to the highest
bidder the parcel of land and the bidder to pay the bid price is already in effect.

Thus, the Supreme Court affirmed the ruling of the Court of Appeals, granting the action for specific
performance in favour of the Heirs of Candido Rubi.
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SACOBIA HILLS DEVELOPMENT v. TY

G.R. No. 165889
September 20, 2005

Contract to Sell

FACTS:

Petitioner Sacobia Hills Development (Sacobia) is the developer of True North Golf and Country Club.
They had an on-going project construction of amenities that include a golf course, clubhouse, sports
complex and several vacation villa

Respondent Ty wanted to acquire one class a share of True North. So he paid the reservation fee of
P180,000. Sacobia approved the purchase application and membership of respondent for P600,000. The
terms and conditions provide that, Approval of an application to purchase golf/country club shares is
subjected to the full payment of the total purchase price.

On January 12, 1998, respondent Ty wanted to rescind the contract with Sacobia and sought the refund
of his payments already made on the ground that Sacobia has delayed in the project. Ty already stopped
payment on the five post-dated checks he made. Sacobia refused to refund the said payments. The trial
court held in favor of Sacobia. The trial court found that the contract between the parties did not warrant
that the golf course and clubhouse would be completed within a certain period of time to entitle
respondent to rescind. The Court of Appeals reversed the trial courts decision. It held that Sacobia was in
delay in the performance of its obligation to respondent. As such, Ty could properly rescind the contract,
or demand specific performance with damages, or demand for damages alone.

ISSUE:

Whether or not the contract entered into by the parties may be validly rescinded under Article 1191 of
the Civil Code

HELD:

No, it cannot be rescinded.

The contract entered into by the parties is a contract to sell, which can be inferred in the terms and
conditions of the contract. To wit: Approval of an application to purchase golf/country club shares is
subjected to the full payment of the total purchase price.

Clearly, the approval of the application hinged on the full payment of the total purchase price. In fact,
Sacobia explicitly reserved the right to retain title over the share pending full satisfaction of the purchase
price

In a contract to sell, the prospective seller does not consent to transfer ownership of the property to the
buyer until the happening of an event, which for present purposes, is the full payment of the purchase
price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property
when the entire amount of the purchase price is delivered to him. Upon the fulfillment of the suspensive
condition, ownership will not automatically transfer to the buyer although the property may have been
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previously delivered to him. The prospective seller still has to convey title to the prospective buyer by
entering into a contract of absolute sale.

As shown, Ty did not pay the full purchase price which is his obligation under the contract to sell,
therefore, it cannot be said that Sacobia breached its obligation. No obligations arose on its part because
respondents non-fulfillment of the suspensive condition rendered the contract to sell ineffective and
unperfected. Indeed, there can be no rescission under Article 1191 of the Civil Code because until the
happening of the condition, i.e. full payment of the contract price, Sacobias obligation to deliver the title
and object of the sale is not yet extant. A non-existent obligation cannot be subject of rescission. Article
1191 speaks of obligations already existing, which may be rescinded in case one of the obligors fails to
comply with what is incumbent upon him.
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ALI AKANG v. MUNICIPALITY OF ISULAN

G.R. No. 186014
June 26, 2013

Contract to Sell vs. Contract of Sale

FACTS:

Ali Akang (petitioner) is a member of the national and cultural community belonging to the
Maguindanaon tribe of Isulan, Province of Sultan Kudarat and the registered owner of a lot. Sometime in
1962, a two-hectare portion of the property was sold by the petitioner in the amount of Php3,000 to the
Municipality of Isulan, Province of Sultan Kudarat (respondent) through then Isulan Mayor Datu
Ampatuan under a Deed of Sale executed on July 18, 1962. The respondent immediately took possession
of the property and began construction of the municipal building.

Thirty-nine (39) years later or on October 26, 2001, the petitioner, together with his wife, Patao
Talipasan, filed a civil action for Recovery of Possession of Subject Property and/or Quieting of Title
thereon and Damages against the respondent, represented by its Municipal Mayor, et al. In his complaint,
the petitioner alleged, among others, that the agreement was one to sell, which was not consummated as
the purchase price was not paid.

In its answer, the respondent denied the petitioners allegations, claiming, among others: that the
petitioners cause of action was already barred by laches; that the Deed of Sale was valid; and that it has
been in open, continuous and exclusive possession of the property for forty (40) years.

After trial, the RTC rendered judgment in favor of the petitioner. The RTC construed the Deed of Sale as a
contract to sell, based on the wording of the contract, which allegedly showed that the consideration was
still to be paid and delivered on some future date a characteristic of a contract to sell. As regards the
payment of the purchase price, the RTC found the same to have not been made by the respondent.
According to the RTC, the Municipal Voucher is not a competent documentary proof of payment but is
merely evidence of admission by the respondent that on the date of the execution of the Deed of Sale, the
consideration stipulated therein had not yet been paid.

The CA reversed the ruling of the RTC and upheld the validity of the sale. The CA sustained the
respondents arguments and ruled that the petitioner is not entitled to recover ownership and possession
of the property as the Deed of Sale already transferred ownership thereof to the respondent. The CA
ruled that the Deed of Sale is not a mere contract to sell but a perfected contract of sale. There was no
express reservation of ownership of title by the petitioner and the fact that there was yet no payment at
the time of the sale does not affect the validity or prevent the perfection of the sale. As regards the issue
of whether payment of the price was made, the CA ruled that there was actual payment, as evidenced by
the Municipal Voucher, which the petitioner himself prepared and signed despite the lack of approval of
the Municipal Treasurer. Even if he was not paid the consideration, it does not affect the validity of the
contract of sale for it is not the fact of payment of the price that determines its validity.

ISSUE:

Whether or not the Deed of Sale is a contract to sell or a contract of sale.

HELD:
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The Deed of Sale is a valid contract of Sale.

A contract of sale is defined under Article 1458 of the Civil Code:

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 therefore a price certain in money or its equivalent.

The elements of a contract of sale are: (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.

A contract to sell, on the other hand, is defined by Article 1479 of the Civil Code:

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.

In a contract of sale, the title to the property passes to the buyer upon the delivery of the thing sold,
whereas in a contract to sell, the ownership is, by agreement, retained by the seller and is not to pass to
the vendee until full payment of the purchase price.

The Deed of Sale executed by the petitioner and the respondent is a perfected contract of sale, all its
elements being present. There was mutual agreement between them to enter into the sale, as shown by
their free and voluntary signing of the contract. There was also an absolute transfer of ownership of the
property by the petitioner to the respondent as shown in the stipulation: "x x x I petitioner hereby sell,
transfer, cede, convey and assign as by these presents do have sold, transferred, ceded, conveyed and
assigned, x x x." There was also a determinate subject matter, that is, the two-hectare parcel of land as
described in the Deed of Sale. Lastly, the price or consideration is at 3,000.00, which was to be paid after
the execution of the contract. The fact that no express reservation of ownership or title to the property
can be found in the Deed of Sale bolsters the absence of such intent, and the contract, therefore, could not
be one to sell.
 17

LIMKETKAI SONS MILLING v. CA AND BPI

G.R. No. 118509
December 1, 1995

FACTS:

Philippine Remnants was the owner of a piece of land which it then entrusted to BPI. Pedro Revilla was
authorized by BPI to sell the lot for PHP1000/sqm. Revilla contacted Alfonso Lim who agreed to buy the
land. Alfonso Lim and Albino Limketkai went to BPI and were entertained by VP Albano and Asst. VP
Aromin. BPI set the price at 1,100 while Limketkai haggled to 900. They subsequently agreed on
Php1,000 on cash basis. Alfonso Lim asked if it was possible to pay on terms and BPI officials said there
was no harm in trying to ask for payment in terms but if disapproved, the price would have to be paid in
cash. Limketkai paid the initial 10% with the remaining 90% to follow. Two or three days later, Alfonso
Lim found out that their offer had been frozen and then went to BPI to tender full payment of 33M to
Albano but was refused by both Albano & Bona.

ISSUE:

Was there a perfected contract of sale?

RULING:

Yes. In the present case, the position and title of Aromin alone, not to mention the testimony and
documentary evidence about his work, leave no doubt that he had full authority to act for BPI in the
questioned transaction. There is no allegation of fraud, nor is there the least indication that Aromin was
acting for his own ultimate benefit.

The negotiation or preparation stage started with the authority given by Philippine Remnants to BPI to
sell the lot, followed by (a) the authority given by BPI and confirmed by Philippine Remnants to broker
Revilla to sell the property, (b) the offer to sell to Limketkai, (c) the inspection of the property and finally
(d) the negotiations with Aromin and Albano at the BPI offices.

The perfection of the contract took place when Aromin and Albano, acting for BPI, agreed to sell and
Alfonso Lim with Albino Limketkai, acting for petitioner Limketkai, agreed to buy the disputed lot at
P1,000.00 per square meter. Aside from this there was the earlier agreement between petitioner and the
authorized broker. There was a concurrence of offer and acceptance, on the object, and on the cause
thereof. The fact that the deed of sale still had to be signed and notarized does not mean that no contract
had already been perfected.
 18

TALOSIG V. VDA. NIEBA

GR No. L-29557
February 29, 1972

Law on Sale in relation to Statute of Frauds

FACTS:

Juliana Pulanco Vda. de Nieba alleged that she was the grantee, in a contract to sell, of Lots 11 and 13,
Block No. 5, Quezon City, executed in her favor by the owner, Magdalena Estates, Inc. She entered into a
"good understanding with defendant Talosig for the transfer to him of her rights over Lot 11 "with the
assurance and promise" of Talosig to reimburse to her the down and installment payments she had
already made to Magdalena Estates, Inc., upon approval their deed of assignment and transfer by
Magdalena Estates, Inc., and for Talosig to assume payment of the balance of the consideration for the
contract to sell. Nieba and Talosig executed a deed of assignment and transfer over Lot 11 on 6 December
1952, which was approve by Magdalena Estates, Inc. on the same day.
Talosig denied having entered into the "good understanding" alleged by Nieba and denied having
promised to reimburse the down and installment payments. Talosig also denied having agreed to pay the
house and coconut trees for P2,400.00 or to assume payment of the mortgage on the house.
Talosig further alleged that the agreements alleged by Nieba in her complaint are not enforceable under
the Statute of Frauds. Nieba only presented parol evidence as opposed to the Deed of Sale which Talosig
presented.

ISSUE:

Should the Deed of Sale be given more weight than the parol evidence provided by Nieba?

HELD:

NO. The issue was not raised before the Court of Appeals hence, it is deemed waived. The premises of the
argument involve appreciation of evidence, which is within the domain of the Court of Appeals, for its
findings of fact are not reviewable by the Supreme Court.
It is contended that the deed of sale, copy of which was annexed to Talosig's answer to the complaint, is
an actionable document that, not having been denied under oath by Nieba, is deemed admitted, under
Section 8, Rule 8, of the Rules of Court.
The contention is untenable, not only because Talosig failed to object to the parol evidence introduced by
Nieba, and such failure constituted a waiver to the admissibility of said parol evidence, but also because
Nieba's payments for the land to the Magdalena Estates were evidenced by receipts, as stated by the
Court of Appeals in its decision.

Supplementary Discussion from Limketkai Sons Milling Inc., v. Court of Appeals, et al., GR No. 118509,
March 29, 1996
The Talosig v. Vda. de Nieba ruled to the effect that an objection against the admission of any evidence
must be made at the proper time, i.e., "x x x at the time question is asked," and that if not so made it will
be understood to have been waived.
 19

ABRENICA v. GONDA
GR No. L-10100
August 15, 1916

Law on Sale in relation to Statue of Frauds

FACTS:

This case was brought by the plaintiff to compel the defendants to return the two parcels of land
described in the complaint which he claimed were sold to the defendants under the right of repurchase
for seven years and for the sum of 75Php. Further, the plaintiff alleged that the defendant refused to
deliver the same when, upon the expiration of the period, mentioned, he is entitled to redeem the subject
parcels of land upon the payment of the amount agreed upon.

However, the plaintiff stated that the agreement for the sale with right of repurchase was done verbally
between him and Gonda (one of the defendants). When he was placed on the stand as a witness, he
testified at length and answered all the questions asked by his lawyer regarding the said
agreement/contract, including its details, the persons who witnessed it, the place it was made, and the
various other circumstances connected with its execution. The defendants counsel failed to raise an
objection to the examination. The defendants lawyer also challenged one of the questions as leading and
claimed another question was irrelevant. Moreover, he only moved to strike out all of the testimony and
statements given by the plaintiff when the examination was already terminated on the ground that the
period for the fulfillment of the contract exceeded one year and that it could not be proven except by
means of a written instrument. The lawyer also did a cross examination and asked several questions
relative to the plaintiffs ownership of the parcels of land.

ISSUE:

Whether said two parcels of land were sold under right of repurchase by the plaintiff to the defendant for
the period of seven years, for the sum of P75, or whether they were conveyed to the defendant in
absolute sale by the plaintiff's parents.

HELD:

Yes. As the plaintiff made use of his right to recover the property within the period stipulated by the
contract and which did not exceed ten years, and as he deposited with the clerk of the court the sum of
P75, the price of the purchase, in due time, the defendant is not entitled to oppose the recovery, and the
said parcels of land must be delivered to the plaintiff, even though they be in the possession of the other
defendant, Marcelino de Garcia, to whom they were sold by his codefendant Gonda, for the latter could
not sell them to De Gracia except under the condition that they could be repurchased by the plaintiff
within the said period of seven years.

The two parcels of land were sold under the right of repurchase by the plaintiff to the defendant with the
seven year term for 75 php. This agreement, though verbally made is ratified by the failure of the
defendants party to object to the presentation of oral evidence to prove the same as expressed on Article
1405 of the New Civil Code.
 20

MEDINA v. COLLECTOR OF INTERNAL REVENUE

GR. No. L-15113
January 28, 1961

Disqualifications under Art. 1490 and 1491

FACTS:

On 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, 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 the other hand, the petitioner argued 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

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. The Collector issued a modified
assessment, demanding the payment of only P3,325.68.

Petitioner appealed to the Court of Tax Appeals. 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.

ISSUE:

Whether or not the sales made by petitioner to his wife were null and void pursuant to Article
1490 of the NCC.
 21

HELD:

The sales were null and void.

Said provisions of Articles 7 and 10 of the Code of Commerce 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.

Contracts violative of the provisions of Article 1490 of the Civil Code are null and void. 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.
 22

CHING v. GOYANKO
Gr. No. 165879
Nov. 10 2006

FACTS:

Respondents claim that in 1961, their parents acquired a 661 square meter property located at 29 F.
Cabahug St., Cebu City but that as they (the parents) were Chinese citizens at the time, the property was
registered in the name of their aunt, Sulpicia Ventura (Sulpicia).

On May 1, 1993, Sulpicia executed a deed of sale over the property in favor of respondents father
Goyanko. In turn, Goyanko executed on October 12, 1993 a deed of sale over the property in favor of his
common-law-wife-herein petitioner Maria B. Ching.

After Goyankos death on March 11, 1996, respondents discovered that ownership of the property had
already been transferred in the name of petitioner. Respondents thereupon had the purported signature
of their father in the deed of sale verified by the Philippine National Police Crime Laboratory which found
the same to be a forgery.

ISSUE:

Is the sale between Goyanko and his common-law-wife valid?

RULING:

No. The SC held that the proscription against sale of property between spouses applies even to common
law relationships. The Court 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. The sale was subversive of the stability of the family, a basic social institution which public
policy cherishes and protects.
The law emphatically prohibits the spouses from selling property to each other subject to certain
exceptions. Similarly, donations between spouses during marriage are prohibited. And this is so because
if transfers or 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, 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."
 23

CALIMLIM-CANULLAS v. FORTUN
GR No. L-57499
June 22, 1984

Disqualification under Art. 1490 and 1491

FACTS:

Mercedes and Fernando were married ans had 5 children. They were living in a small house erected in a
parcel of land owned by Fernandos parents. After his parents died, he inherited the land. In 1978,
Fernando abandonee his family and was living with Daguines. They were subsequently charged and was
later on convicted with concubinage. On April 15, 1980, Fernando sold the land he inherited to Daguines.
Daguines files to quiet the title and damages since Mercedes refused to leave stating that she and her
children were living in the subject property. Judge Fortun of Branch 2 of the CFI of Pangasinan ruled in
favor of Daguines.

ISSUE:

Is Daguines the lawful owner? Was the sale valid?

RULING:

No. Daguines is not the lawful owner since the sale is invalid. The land and the improvements were part
of the conjugal partnership. Without the consent of one spouse, sale of the property is void. Further, the
sale is void for being contrary to law, morals, good customs, public order and public policy. Additionally,
the spouses cannot sell to each other since it will destroy the system of conjugal partnerships and this
rule applies to couples without the benefit of marriage.
 24

DE LEON v. DE LEON
G.R. No. 185063
July 23, 2009

Sale By Spouse Of Conjugal/Communal Property Without Consent By Other Spouse

FACTS:

On July 20, 1965, Bonifacio De Leon, then single, and the Peoples Homesite and Housing Corporation
(PHHC) entered into a Conditional Contract to Sell for the purchase on installment of a lot situated in
Quezon City. On April 24, 1968, Bonifacio married Anita de Leon. They had two children, Danilo and
Vilma. On June 22, 1970, PHHC executed a Final Deed of Sale in favor of Bonifacio upon full payment of
the price of the lot. TCT was issued on February 24, 1972 in the name of Bonifacio, single. On January
12, 1974, Bonifacio sold the lot to his sister, Lita, and her husband, Felix Tarrosa. The Deed of Sale did not
bear the written consent and signature of Anita. On February 29, 1996, Bonifacio died.

Three months later, Tarrosa spouses registered the Deed of Sale. Anita, Danilo, and Vilma filed a
reconveyance suit allegeing that Bonifacio was still the owner of the lands. Tarrosa spouses averred that
the lot Bonifacio sold to them was his exclusive property because he was still single when he acquired it
from PHHC. They further alleged that they were not aware of the marriage between Bonifacio and Anita
at the time of the execution of the Deed of Sale.

The RTC, on the finding that the lot in question was the conjugal property of Bonifacio and Anita,
rendered judgment in favor of Anita and her children stating that the lot in question was the conjugal
property of Bonifacio and Anita. The CA affirmed the decision of the RTC.

ISSUES:

1. Is the subject property a conjugal property of Bonifacio and Anita?

2. Was the Deed of Sale executed between Bonifacio and the Tarrosas covering the PHHC valid?

HELD:

1. Yes. Article 160 of the 1950 Civil Code, the governing provision in effect at the time Bonifacio and Anita
contracted marriage, provides that all property of the marriage is presumed to belong to the conjugal
partnership unless it is proved that it pertains exclusively to the husband or the wife.

The conditional contract to sell executed by and between Bonifacio and PHHC on July 20, 1965 provided
that ownership over and title to the property will vest on Bonifacio only upon execution of the final deed
of sale which, in turn, will be effected upon payment of the full purchase price. Title to the property in
question only passed to Bonifacio after he had fully paid the purchase price on June 22, 1970. This full
payment, to stress, was made more than two (2) years after his marriage to Anita on April 24, 1968. In
net effect, the property was acquired during the existence of the marriage; as such, ownership to the
property is, by law, presumed to belong to the conjugal partnership.

2. No. Anitas conformity to the sale of the disputed lot to petitioners was never obtained or at least not
formally expressed in the conveying deed. The parties admitted as much in their Joint Stipulation of Facts
with Motion earlier reproduced. Not lost on the Court of course is the fact that petitioners went to the
process of registering the deed after Bonifacios death in 1996, some 22 years after its execution. In the
 25

interim, petitioners could have had workbut did nottowards securing Anitas marital consent to the
sale.

It cannot be over-emphasized that the 1950 Civil Code is very explicit on the consequence of the husband
alienating or encumbering any real property of the conjugal partnership without the wifes consent. To a
specific point, the sale of a conjugal piece of land by the husband, as administrator, must, as a rule, be
with the wifes consent. Else, the sale is not valid
 26

FUENTES v. ROCA
G.R. No. 178902
April 21 2010

Sale By Spouse Of Conjugal/Communal Property Without Consent By Other Spouse

FACTS:

On, Oct 11, 1982, Tarciano Roca bought a 358-square meter lot in Zambales from his mother. Six years
later in 1988, Tarciano offered to sell the lot to the petitioners Fuentes spouses through the help of Atty.
Plagata who would prepare the documents and requirements to complete the sale. In the agreement
between Tarciano and Fuentes spouses there will be a Php 60,000 down payment and Php 140,000 will
be paid upon the removal of Tarciano of certain structures on the land and after the consent of the
estranged wife of Tarciano, Rosario, would be attained. Atty. Plagata thus went about to complete such
tasks and claimed that he went to Manila to get the signature of Rosario but notarized the document at
Zamboanga . The deed of sale was executed January 11, 1989. As time passed, Tarciano and Rosario died
while the Fuentes spouses and possession and control over the lot. Eight years later in 1997, the children
of Tarciano and Rosario filed a case to annul the sale and reconvey the property on the ground that the
sale was void since the consent of Rosario was not attained and that Rosarios signature was a mere
forgery. The Fuentes spouses claim that the action has prescribed since an action to annul a sale on the
ground of fraud is 4 years from discovery.

The RTC ruled in favor of the Fuentes spouses ruling that there was no forgery, that the testimony of Atty.
Plagata who witnessed the signing of Rosario must be given weight, and that the action has already
prescribed.

On the other hand, the CA reversed the ruling of the CA stating that the action has not prescribed since
the applicable law is the 1950 Civil Code which provided that the sale of Conjugal Property without the
consent of the other spouse is voidable and the action must be brought within 10 years. Given that the
transaction was in 1989 and the action was brought in 1997 hence it was well within the prescriptive
period.

ISSUE:

Was Rosarios signature on the document of consent to her husband Tarcianos sale of their conjugal land
to the Fuentes spouses forged?

HELD:

Yes. The SC ruled that there was forgery due to the difference in the signatures of Rosario in the
document giving consent and another document executed at the same time period. The Fuentes spouses
presented no evidence that Rosario suffered from any illness or disease that accounted for the variance in
her signature when she signed the affidavit of consent.

What is more, Atty. Plagata admittedly falsified the jurat of the affidavit of consent. While a defective
notarization will merely strip the document of its public character and reduce it to a private instrument,
that falsified jurat, taken together with the marks of forgery in the signature, dooms such document as
 27

proof of Rosarios consent to the sale of the land. That the Fuentes spouses honestly relied on the
notarized affidavit as proof of Rosarios consent does not matter. The sale is void without an authentic
consent.
 28

SARSOSA v. CUENCO
G.R. No. L-33048
April 16, 1982

Article 1491

FACTS:

The lot in controversy is a one-half portion of two adjoining parcels of coconut land located at Camiguin,
Misamis Oriental. 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. Ong King Po took
actual possession and enjoyed the fruits of the property. He then sold the litigated property to Victoriano
Cuenco (respondent herein), a naturalized Filipino who immediately took actual possession and
harvested the fruits.

Epifania "usurped" the controverted property and later sold a one-half portion of the land in question to
Pacita Vallar. Epifania claimed that it was not her intention to sell the land to Ong King Po and that she
signed the document of sale merely to evidence her indebtedness to the latter. Epifania has been in
possession ever since except for the portion sold to the other petitioner Pacita.

Cuenco filed a Forcible Entry case against Epifania before the Municipal Trial Court which was then
dismissed for lack of jurisdiction since, as the laws then stood, the question of possession could not be
properly determined without first settling that of ownership.
Cuenco instituted before the Court of First Instance (CFI) a Complaint for recovery of possession and
ownership of the litigated land.

In their Answer, petitioners insisted that they were the owners and possessors of the litigated land; that
its sale to Ong King Po, a Chinese, was inexistent and/or void ab initio; and that the deed of sale between
them was only an evidence of Epifania's indebtedness to Ong King Po.
The CFI ruled in favor of Epifania and Vallar. The Court of Appeals however reversed the decision of the
CFI and deemed Cuenco as the owner.

ISSUE:

Who is the rightful owner of the property?

RULING:

Cuenco is the rightful owner of the property.

There should be no question that the sale of the land in question by Epifania to Ong King Po was
inexistent and void from the beginning 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. Had this been a suit between Epifania and Ong King Po, she could have been declared entitled to
the litigated land.
 29

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. Cuenco, 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.

While, strictly speaking, Ong King Po, private respondent's vendor, had no rights of ownership to
transmit, it is likewise inescapable that petitioner Epifania had slept on her rights for 26 years from 1936
to 1962. By her long inaction or inexcusable neglect, she should be held barred from asserting her claim
to the litigated property.

Respondent, therefore, must be declared to be the rightful owner of the property.

 30

WOLFSON v. ESTATE OF MARTINEZ

G.R. No. L-5970
October 13, 1911

Article 1491

FACTS:

A judgment was entered in this court by Hon. John Sweeney in favor of Mariano Yap-Tuangco against the
deceased Francisco Martinez for the sum of twelve thousand pesos.

There was a contract agreement between Yap-Tuangco in that judgment and Joseph Wolfson and one
Basilio Regalado y Mapa should have as their fees for prosecuting the case fifty per cent of whatever
amount might be obtained. Subsequently said Mapa assigned his interest in said contract to the said
Wolfson.

Yap-Tuangco, for value received, sold and transferred and delivered to said Wolfson all his right, title and
interest in and the judgment.

ISSUE:

Whether or not under the provisions of article 1459 of the Civil Code, Wolfson, was prohibited from
purchasing the judgment of his client in such manner and to such extent that the contract of which such
purchase was a part was absolutely null and void and could be attacked by a person not a party to the
transaction.

RULING:

The article in question reads as follows:

ART. 1459. The following persons cannot acquire by purchase, even at public or judicial auction, neither
in person nor by an agent:

1. The guardian or protutor, the property of the person or persons who may be under their guardianship.

2. Agents, the property the administration or sale of which may have been entrusted to them.

3. Executors, the property entrusted to their care.

4. Public officials, the property of the State, municipalities, towns, and of public institutions, the
administration of which has been entrusted to them. This provision shall apply to judges and experts
who, in any manner whatsoever, take part in the sale.

5. Associate justices, judges, members of the department of public prosecution, clerks of superior and
inferior courts, and officials of justice, the property and rights in litigation before the court in the
jurisdiction or territory over which they exercise their respective duties, this prohibition including the
act of acquiring by assignment.
 31

From this rule shall be excepted the cases in which hereditary actions among coheirs are involved, or
assignments in payment of debts, or security for the goods they may possess.

The prohibition contained in this number shall include the lawyers and solicitors about the property and
rights, which may be the object of the litigation, in which they may take part by their profession and
office.

On this appeal, we do not discuss or decide the question whether the judgment in question actually falls
within the prohibition of the article, it being the disposition of a majority of the court to place the decision
wholly upon the proposition that, even if it be conceded that the purchase of the judgment in question
was within the prohibition of the article quoted, nevertheless, the contract of purchase and sale is not
void but voidable at the election of the vendor. This being so, its voidability cannot be asserted by one not
a party to the transaction, or his representative.

Article 1302 of the Civil Code reads:

The action for nullity of contracts may be brought by those who are principally or subsidiarily obligated
by virtue thereof. Persons with capacity cannot, however, allege the incapacity of those with whom they
contracted; neither those who cased the intimidation or violence, or employed deceit, or caused the error,
can base their acting on these defects of the contract.

Manresa, commenting on the latter article, says:

Two different requisites are required to confer the necessary capacity for the exercise of such action.
With each of the said requisites the two paragraphs of this section deal separately. The first requisite is
that the plaintiff must have an interest in the contract. The second is that the victim and not the party
responsible for the defect is the person who must assert the same. (Manresa, Spanish Civil Code, vol. 8, p.
737.)

It was declared in a judgment of the 18th of April 1901, in accordance with the rule hereinbefore stated,
that he who is not a party to a contract, or an assignee thereunder, or does not represent those who took
part therein, has, under articles 1257 and 1302 of the Civil Code, no legal capacity to challenge the
validity of such contract. (Manresa, Spanish Civil Code, vol. 8, p. 738.)

Hence, even if the sale of the judgment in question is found comprehended within the prohibition of
article 1459, a question which we do not now decide, still the defendant is not entitled to invoke the
terms of said article since such prohibition is personal to the parties to the contract, being available only
to them or their representatives.
 32

RUBIAS v. BATILLER
G.R. No. L-35702
May 29, 1973

Article 1491

FACTS:

Before the war with Japan, Francisco Militante filed an application for registration of the parcel of land in
Iloilo. After the war, the petition was heard and denied. Pending appeal, Militante sold the land to
petitioner Rubias, his counsel and son-in-law. Rubias Rubias filed an action for forcible entry against
Batiller, the present occupant. He claims the complaint of the plaintiff does not state a cause of action
alleging that plaintiff could not have acquired any interest in the property in dispute as the contract he
had with Militante was inexistent and void, thus, he prayed for a dismissal. The lower court granted and
dismissed the case.

ISSUE:

Was the sale between Rubias and Militante void?

RULING:

Yes. Article 1491 of our 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; (5) judicial officers and employees,
prosecuting attorneys, and lawyers; and (6) others especially disqualified by law.

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.

Hence, the sale between a client and his lawyer is void by reason of relation of trust.
 33

MANANQUIL v. VILLEGAS
A.M. No. 2430
August 30, 1990

Article 1491

FACTS:

Villegas was counsel of record of Felix Leong, the administrator for the testate estate of Felomina Zerna.
In 1963, LEONG, as administrator of Zernas estate, entered into a lease contract with the partnership of
Hijos de Villegas over several lots included in Zernas estate. The said lease contract was renewed several
times henceforth. Villegas was then both the counsel of LEONG and a partner in the partnership of Hijos
de Villegas.

When Leong died, this disbarment suit was filed by Mananquil, the appointed administrator for Leongs
estate. Mananquil alleged that the lease contracts were made under iniquitous terms and conditions.
Also, Mananquil alleged that Villegas should have first notified and secured the approval of the probate
court in Zernas estate before the contracts were renewed, Villegas being counsel of that estates
administrator.

ISSUES:

1. Whether or not Villegas is allowed to enter the lease contract

2. Whether or not Villegas should be disbarred.

RULING:

1. NO. Pursuant to Section 3 of Rule 84 of the Revised Rules of Court, a judicial executor or administrator
has the right to the possession and management of the real as well as the personal estate of the deceased
so long as it is necessary for the payment of the debts and the expenses of administration. Leong may,
therefore, exercise acts of administration without special authority from the court having jurisdiction of
the estate. For instance, it has long been settled that an administrator has the power to enter into lease
contracts involving the properties of the estate even without prior judicial authority and approval.
Thus, considering that administrator Leong was not required under the law and prevailing jurisprudence
to seek prior authority from the probate court in order to validly lease real properties of the estate,
Villegas, as counsel of Leong cannot be taken to task for failing to notify the probate court of the various
lease contracts involved herein and to secure its judicial approval thereto.

2. NO. There is no evidence to warrant disbarment, although Villegas should be suspended from practice
of law because he participated in the renewals of the lease contracts involving properties of Zernas
estate in favor of the partnership of Hijos de Villegas. Under Art. 1646 of the Civil Code, The persons
disqualified to buy referred to in Articles 1490 and 1491, are also disqualified to become lessees of the
things mentioned therein. 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 are prohibited from leasing, either
in person or through the mediation of another, the properties or things mentioned. Such act constituted
gross misconduct, hence, suspension for four months.
 34

GREGORIO ARANETA v. TUASON DE PATERNO

GR No. L-2886
August 22, 1952

Article 1491

FACTS:

Defendant Paz Tuason de Paterno was the registered owner of several parcels of land in Sta. Mesa,
Manila. The lots were subdivided and were occupied by tenants who had lease contracts. It was
stipulated that in the event the owner and lessor should decide to sell the property, the lessees were to be
given priority over other buyers if they should desire to buy their leaseholds, all things being equal.

In 1943, Tuason obtained additional loans amounting to P50,000 upon the same security. The mortgage
contracts were renewed. Tuason later decided to sell her property to plaintiff Gregorio Araneta, Inc.

They executed an agreement to buy and sell (Exhibit 1). This contract provided that subject to the
preferred right of the lessees and that of Jose Vidal as mortgagee, Paz Tuason would sell to Gregorio
Araneta, Inc. and the latter would buy for the said amount of P400,000 the entire estate.

Some of the lessees exercised their right to purchase their respective leaseholds. An absolute deed of sale
was then executed by the parties over the remaining lots (Exhibit A). The total amount to be paid was
P190k, broken down as follows:
P13,476.62 Paz Tuason;
P3,373.38 City Treasurer of Manila
P30,000 Jose Vidal
P143,150 Jose Vidal

The deed of sale contained a stipulation that should the vendor lose the checks issued, the vendee shall
not be held liable for such loss.

The day after the consummation of the sale, Tuason tendered payment to Vidal by offering the check
drawn by Araneta, Inc. Vidal refused to accept the payment, alleging that according to the Agreement,
payment of the mortgage was not to be effected totally or partially before the end of four years from
April, 1943. Thus, Tuason, with the help of her attorney Ponce Enrile, commenced an action against Vidal
to compel the latter to accept payment. The checks were deposited with the clerk of court. The action was
never tried and all the records, including the checks, were lost during the war.

After the war, the value of the property increased tremendously. Tuason is now repudiating Exhibits 1
and A. Araneta, Inc. filed the present action to compel Tuason to deliver clear title to the lots subject of
the sale free from all liens and encumbrances. It also seeks the cancellation of the mortgage to Vidal. The
latter filed a cross-claim against Tuason to foreclose the mortgage.

ISSUES:

1. Whether or not the contract of sale for Exhibit A is valid

2. Whether or not there was a conflict of interest as the attorneys who represented the sale
negotiations were the Attys. Araneta
 35

RULING:

1. YES. The contract of sale Exhibit A was valid and enforceable, but the loss of the checks for P143,150
and P12,932.61 and invalidation of the corresponding deposit is to be borne by the buyer. Gregorio
Araneta, Inc. the value of these checks as well as the several payments made by Paz Tuason to Gregorio
Araneta, Inc. shall be deducted from the sum of P190,000 which the buyer advanced to the seller on the
execution of Exhibit 1. It was the Corporation (Araneta, Inc.) and not the person (Jose Araneta) who
purchased the property, thus it does not come within the prohibition of the old Civil Code. Araneta, Inc.
had long been engaged in the real estate business. Clearly, it was not constituted merely to circumvent
the prohibition of the Old Civil Code.The principle invoked by defendant is applicable only as a measure
of protection against deceit and not to open the door to deceit.The corporate theory aside, granting that
the two entities are in fact identical, the relation between Tuason and Araneta still did not fall within the
prohibition found in Art. 1459 of the Old Civil Code. Par. 2 connotes the idea of trust and confidence;
where the relationship does not involve considerations of good faith and integrity, the prohibition should
not apply. Using the test of trust and confidence, it can be seen that Jose Araneta was nothing more than a
middleman between the defendant and purchaser. He was not to sell and did not sell the property. He
was not authorized to enter into a contract on behalf of Tuason.

2. NO. Ponce Enrile was already representing her in the case against Vidal so it would be reasonable to
assume that it was also he who assisted her in negotiating the sale. Assuming arguendo that they were in
fact lawyers of Tuason, such fact would not bar them from purchasing her property. What is prohibited is
the sale of property under litigation, and in this case the sale was effected even before the present action.
 36

ROSARIO VDA. DE LAIG ET AL. v. COURT OF APPEALS

G.R. No. L-26882
April 5, 1978 and November 21, 1978

Article 1491

FACTS:

Petre Galero obtained a parcel of land through a homestead patent from the Bureau of Lands. Galero sold
the land to Mario Escuta who, in turn, sold it to Florencio Caramoan. Through proper court action with
Atty. Benito K. Laig as counsel, Galero recovered the land, the court having been convinced that the sale
contravenes the Public Land Acts prohibition on alienation of a homestead within the prohibitory period.

On June 1, 1948, Galero sold one-half the subject land to Atty. Laig, the deed of sale being executed in the
house of Carmen Verzo. The other half was given to Atty. Laig by virtue of their agreement on a
contingent fee.

Meanwhile, Galero, sought in court the issuance of a second owner's duplicate copy of OCT No. 1097,
claiming that his first duplicate of said OCT was lost during World War II. A second owner's duplicate
copy was issued by respondent in favor of Galero. And right on that same day, Galero executed in favor of
respondent Carmen Verzo a deed of sale of the subject land. Carmen registered the subject land.

The heirs of Atty. Laig filed their respective action and the Supreme Court ruled in their favor, stating
Carmen Verzo was not in good faith in registering the property.

A motion for reconsideration was filed by Carmen, contending that the first sale of the property in
question made by Petre Galero in favor of Atty. Benito Laig was void ab initio for being in violation of
Article 1491, paragraph 5, of the New Civil Code.

ISSUE:

Is the sale between Galero and Atty. Laig void due to the object of the sale being an object of a litigation in
which Atty. Laig took part?

HELD:

No, the sale is valid. Under paragraph 5 of Article 1491, 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 cannot acquire by purchase, even at a
public or judicial action, either in person or through the mediation of another.
This prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to
the property and right which may be the object of any litigation in which they may take part by virtue of
their profession.

When the one-half portion of the property in question was sold by Petre Galero to Atty. Laig on June 1,
1948, the decision in Civil Case No. 164-R-14 was already final. Hence, the property in question was no
longer subject of litigation. Hence Atty. Laig was no longer prohibited from buying the property in
 37

question because attorneys are only prohibited from buying their clients'property which is the subject of
litigation.

Consequently, the sale having taken place after the finality of the favorable judgment in the said civil case
and not during the pendency of the litigation, there was no violation of Article 1491, paragraph 5. Hence,
the first sale to Atty. Laig of the property in question is valid.

With respect to the other one-half (1/2) of the property in question, which was given to Atty. Laig as his
attorney's fees on a contingent basis, the court find nothing wrong in this for the reason that contingent
fees are recognized in this jurisdiction.
 38

VALENCIA v. CABANTING
A.M. Nos. 1302, 1391, 1543
26 April 1991

FACTS:

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

A conference was held in the house of Atty. Eduardo Jovellanos to settle the land dispute between Serapia
and 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

Assisted by Atty. Cabanting, Serapia filed a complaint for recovery of possession with damages. The
Valencias engaged the services of Atty. Antiniw who 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.

On January 22, 1973, the Court of First Instance of Pangasinan, Branch V, rendered a decision in favor of
plaintiff, Serapia Raymundo.

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 executor.

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. Paulino filed a
disbarment proceeding against Atty. Cabanting for allegedly violating Article 1491 of the New Civil Code.

ISSUE:

Is the purchase of property by Atty. Cabanting a violation of Art. 1491 of the New Civil Code.

HELD:

Yes. Art. 1491, prohibiting the sale to the counsel concerned, applies only while the litigation is pending.
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.

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
 39

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.
 40

ORDONIO v. EDUARTE
A.M. No. 3216
March 16, 1992

Article 1491

FACTS:

In 1983, Antonia Ulibari filed with the RTC, for annulment of a document (known as Affidavit of
Adjudication of the Estate of Felicisimo Velasco and Quitclaim) against her children. The case was
handled by Atty. Henedino Eduarte, herein respondent's husband, until his appointment as RTC judge.
His wife, Atty. Josephine Palogan-Eduarte, took over. In 1985, the case was rendered in favor of Antonia
Ulibari. Except for Dominga Velasco-Ordonio, one of the children of Antonia Ulibari and complainant in
the instant case, the rest of the defendants did not appeal. In 1987, while Civil Case No. 391 was pending
appeal, Antonia Ulibari conveyed some parcels of her land to her children in the form of deeds of absolute
sale, prepared and notarized by Atty. Josephine Eduarte. On the same day, Antonia Ulibari also conveyed
20 hectares of land to Atty. Josephine Eduarte and her husband as their Attorney's fees for legal services
rendered. All the titles of the lands subject of the deeds of absolute sale and the deed of conveyance
however remained in the name of Antonia Ulibari. In 1988, Dominga Velasco-Ordonio filed this complaint
for disbarment against Atty. Josephine Eduarte on the basis of an affidavit executed by her mother
Antonia Ulibari in 1988 stating that affiant never conveyed the subject parcel of land to respondent as her
attorney's fees and that the deeds of absolute sale executed in favor of her children were not known to
her (and that she received no consideration therefor).

ISSUE:

Did Atty. Josephine Eduarte violated Article 1491 of the Civil Code.

RULING:

Yes the said lawyer has violated Art. 1491 of the Civil Code which prohibits lawyers from "acquiring by
assignment property and rights which may be the object of any litigation in which they may take part by
virtue of their profession." In the case at bar, the property (which includes the more than 20 hectares of
land) was already in actual litigation first in the lower court and then in the Court of Appeals. Whether
the deed of conveyance was executed at the instance of the client driven by financial necessity or of the
lawyers is of no moment. "In either case, an attorney occupies advantage position to press upon or dictate
his terms to a harrased client, in breach of the rule so amply protective of the confidential relations,
which must necessarily exist between attorney and client, and of the rights of both." The act constitutes
malpractice, even if the lawyer had purchased the property in litigation. The prohibition applies when the
lawyer has not paid money for it and the property was merely assigned to him in consideration of legal
services rendered at a time when the property is still the subject of a pending case. For having improperly
acquired the subject property, under the foregoing circumstances, the said lawyer has violated Art. 1491
of the Civil Code.
 41

RAMOS v. NGASEO
A.C. No. 6210
December 9, 2004

Article 1491

FACTS:

In 1998, Ramos went to Atty. Patricio Ngaseos Makati office to engage his services as counsel in a case
involving a piece of land in San Carlos, Pangasinan. Ngaseo agreed to handle the case for an acceptance
fee of P20,000.00, appearance fee of P1,000.00 per hearing and the cost of meals, transportation and
other incidental expenses. Ramos claims that he did not promise to pay Ngaseo 1,000 sq. m. of land as
appearance fee. In 1999, Ngaseo informed Ramos that the decision was adverse to them but he assured
him that they could still appeal the adverse judgment and asked for the additional amount of P3,850.00
and another P2,000.00 in 2000 as allowance for research. Although an appeal was filed, Ramos charged
Ngaseo for purposely failing to submit a copy of the summons and copy of the assailed decision. In 2003,
Ramos received a demand-letter from Ngaseo asking for the delivery of the 1,000 sq. m. piece of land
which he allegedly promised as payment for Ngaseo's appearance fee. Ngaseo claims that after the trial
court dismissed Civil Case No. SCC 2128, he filed a timely notice of appeal and thereafter moved to be
discharged as counsel because he had colon cancer. Ramos now assisted by one Johnny Ramos, implored
respondent to continue handling the case, with an offer to double the 1,000 sq. m. piece of land earlier
promised and the remaining balance of P20,000.00 acceptance fee. On July 18, 2001, the Court of Appeals
rendered a favorable decision ordering the return of the disputed 2-hectare land to Ramos.

ISSUE:

Did Atty. Ngaseo violated Article 1491 (5) of the Civil Code for demanding the delivery of 1,000 sq. m.
parcel of land which was the subject of litigation.

RULING:

No. Atty. Ngaseo did not violate Article 1491 (5) of the Civil Code. Under the said article, lawyers are
prohibited from acquiring either by purchase or assignment the property or rights involved which are
the object of the litigation in which they intervene by virtue of their profession. The prohibition on
purchase is all embracing to include not only sales to private individuals but also public or judicial sales.
However, the said prohibition applies only if the sale or assignment of the property takes place during the
pendency of the litigation involving the clients property. Consequently, where the property is acquired
after the termination of the case, no violation of paragraph 5, Article 1491 of the Civil Code attaches. The
illegal transaction is consummated with the actual transfer of the litigated property either by purchase or
assignment in favor of the prohibited individual. In the instant case, there was no actual acquisition of the
property in litigation since the Atty. Ngaseo only made a written demand for its delivery which Ramos
refused to comply. Mere demand for delivery of the litigated property does not cause the transfer of
ownership, hence, not a prohibited transaction within the contemplation of Article 1491. Even assuming
arguendo that such demand for delivery is unethical, respondents act does not fall within the purview of
Article 1491. The letter of demand dated January 29, 2003 was made long after the judgment in Civil Case
No. SCC-2128 became final and executory on January 18, 2002.
 42

MACARIOLA v. ASUNCION
A.M. No. 133-J
May 31, 1982

Article 1491

FACTS:

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.

On June 8, 1963, a decision was rendered by respondent Judge Asuncion in Civil Case 3010.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. 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.

Lot 1184-D was conveyed to Enriqueta D. Anota, a stenographer in Judge Asuncion's court while Lot
1184-E was sold on July 31, 1964 to Dr. Arcadio Galapon who was issued transfer certificate.
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).

Complainant Bernardita R. Macariola filed a complaint 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.

ISSUE:

When does Article 1491 applies to Judges?

RULING:

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].
 43

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.

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. 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 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.

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."
 44

FORNILDA v. RTC
GR No. 72306
October 6, 1988
GR No. L-72306
January 24, 1989

Article 1491

FACTS:

The facts disclose that the deceased, Julio M. Catolos, formerly owned six (6) parcels of land located in
Tanay, Rizal, which are the controverted properties in the present litigation. His estate was the subject of
settlement. Francisca Catolos, Agues Catolos, Alfonso I. Fornilda and Asuncion M. Pasamba were some of
the legal heirs and were represented in the case by Atty. Sergio Amonoy (hereinafter referred to as
Respondent Amonoy). A Project of Partition was filed in the Intestate Court whereby the Controverted
Parcels were adjudicated to Alfonso I. Fornilda and Asuncion M. Pasamba.||| the Court approved the
Project of Partition. It was not until 6 August 1969, however, that the estate was declared closed and
terminated after estate and inheritance taxes had been paid, the claims against the estate settled and all
properties adjudicated. Alfonso I. Fornilda and Asuncion M. Pasamba executed a Contract of Mortgage
wherein they mortgaged the Controverted Parcels to Respondent Amonoy as security for the payment of
his attorney's fees for services rendered in the aforementioned intestate proceedings. Since the mortgage
indebtedness was not paid, Respondent Amonoy instituted foreclosure proceedings. The Controverted
Parcels were foreclosed. To satisfy the deficiency, another execution sale was conducted with
Respondent Amonoy. On the basis of an Affidavit of Consolidation of Ownership by Respondent Amonoy,
the corresponding tax declarations covering the Controverted Parcels were consolidated in his name. A
year after the judgment in the Foreclosure Case, an action for Annulment of Judgment entitled "Maria
Penano, et al. vs. Sergio Amonoy, et al. The instant Petition is the contention that the mortgage and the
Sheriff's sales were null and void as contrary to the positive statutory injunction in Article 1491 (5) of the
Civil Code, which prohibits attorneys from purchasing, even at a public or judicial auction, properties and
rights in litigation.
the Trial Court 2 dismissed the Annulment Case holding that the particular disqualification in Article
1491 of the Civil Code is not of general application nor of universal effect but must be reconciled with the
rule that permits judgment creditors to be bidders at sheriffs sales, so that Respondent Amonoy was
"clearly not prohibited from bidding his judgment and his acquisitions therefore are sanctioned by law.
The Court of Appeals affirmed the judgment.

ISSUE:

Is the mortgage constituted on the Controverted Parcels in favor of Respondent Amonoy comes within
the scope of the prohibition in Article 1491 of the Civil Code?

RULING:

According to "Art. 1491. The following persons cannot acquire by purchase even at a public or judicial or
auction, either in person or through the mediation of another: (5) Justices, judges, prosecuting attorneys, .
. . the property and rights in litigation or levied upon on 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." Under the
 45

aforequoted provision, a lawyer is prohibited from acquiring either by purchase or assignment the
property or rights involved which are the object of the litigation in which they intervene by virtue of their
profession. The prohibition on purchase is all embracing to include not only sales to private individuals
but also public or judicial sales. The rationale advanced for the prohibition is that public policy disallows
the transactions in view of the fiduciary relationship involved i.e., the relation of trust and confidence and
the peculiar control exercised by these persons. At the time the mortgage was executed, therefore, the
relationship of lawyer and client still existed, the very relation of trust and confidence sought to be
protected by the prohibition, when a lawyer occupies a vantage position to press upon or dictate terms to
a harassed client. What is more, the mortgage was executed only eight (8) days after approval of the
Project of Partition thereby evincing a clear intention on Respondent Amonoy's part to protect his own
interests and ride roughshod over that of his clients. From the time of the execution of the mortgage in
his favor, Respondent Amonoy had already asserted a title adverse to his clients' interests at a time when
the relationship of lawyer and client had not yet been severed. Respondent asserts further that Article
1491[5] does not apply to judgment creditors of which, he claims, he was one. Under ordinary
circumstances, the argument of respondent could be considered plausible. Unfortunately, however, as
heretofore explained, the mortgage was executed in violation of Article 1491[5] so that this Article has a
direct bearing on this case and respondent cannot escape its provision. Having violated the same, he
cannot be considered in the general run of a judgment creditor.

Considering that the mortgage contract, entered into in contravention of Article 1491 of the Civil Code, is
expressly prohibited by law, the same must be held inexistent and void ab initio. "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; (7) those expressly prohibited or
declared void by law. These contracts cannot be ratified. Neither can the right to set up the defense of
illegality be waived." (Civil Code). Being a void contract, the action or defense for the declaration of its
inexistence is imprescriptible (Article 1410, Civil Code). The defect of a void or inexistent contract is
permanent. Mere lapse of time cannot give it efficacy. Neither can the right to set up the defense of
illegality be waived (Article 1409, Civil Code). The Controverted Parcels could not have been the object of
any mortgage contract in favor of Respondent Amonoy and consequently neither of a foreclosure sale. By
analogy, the illegality must be held to extend to whatsoever results directly from the illegal source
(Article 1422, Civil Code).
 46

DAROY v. ABECIA
A.C. No. 3046
October 26, 1998

FACTS:

Respondent Abecia was counsel of complainant Daroy in a case for forcible entry. Judgment was rendered
in favor of complainant as plaintiff in the ejectment case, ordering the defendants to pay damages,
attorneys fees, and the costs of the suit. To satisfy the judgment, the sheriff sold at public auction. A
parcel of land belonging to one of the defendants to complainant Daroy as highest bidder. Complainant
Daroy claimed that respondent Abecia forged his signature in a deed of absolute sale, transferring the
subject parcel of land to Jose Gangay. It was made to appear that Gangay in turn conveyed the land to
Nena Abecia wife of respondent Abecia. Complainant alleged that he entrusted the title to the land to
Abecia as his counsel and allowed him to take possession of the land upon the latter's request. By means
of the forged deed of sale, Abecia was able to obtain new transfer certificates of title, first in the name of
Gangay and then in that of Mrs. Abecia, from the Registry of Deeds of Misamis Oriental. Daroy claimed he
discovered the fraud only in 1984. Daroy submitted in evidence a report of the National Bureau of
Investigation, which had examined the deed of sale in favor of Jose Gangay, showing that Daroy's
signature in the deed of sale had been written by a different hand. Commissioner Plaridel C. Jose
rendered a report finding respondent Abecia guilty of malpractice and recommending his disbarment.

ISSUE:

Is Esteban Abecia guilty of malpractice under Section 1491 of the Civil Code?

RULING:

What appears to have happened in this case is that the parties thought that because the land had been
acquired by complainant at a public sale held in order to satisfy a judgment in his favor in a case in which
respondent was complainant's counsel, the latter could not acquire the land. The parties apparently had
in mind Art. 1491 of the Civil Code which provides, in pertinent parts, as follows: ART. 1491. The
following persons cannot acquire by purchase, even at a public or judicial auction, either in person or
through the mediation of another: (5) Justices, judges, prosecuting attorneys, clerks of superior and
inferior courts, and other officers and employees connected with the administration of justice, 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." Of course, the parties were
mistaken in thinking that respondent could not validly acquire the land. In Guevara v. Calalang, on facts
similar to those in this case, we held that the prohibition in Art. 1491 does not apply to the sale of a parcel
of land, acquired by a client to satisfy a judgment in his favor, to his attorney as long as the property was
not the subject of the litigation. For indeed, while judges, prosecuting attorneys, and others connected
with the administration of justice are prohibited from acquiring "property or rights in litigation or levied
upon in execution," the prohibition with respect to attorneys in the case extends only to "property and
rights which may be the object of any litigation in which they may take part by virtue of their profession."

It is true that the NBI found the signature of Regalado Daroy on the deed of sale made in favor of Jose
Gangay to have been forged. But Erasmo Damasing, the notary public who notarized the deed, affirmed
that Daroy and his wife appeared before him and, in his presence, signed the document in question Daroy
 47

never denied these claims of the notary public and a witness to the execution of the deed of sale. Nor was
the NBI writing expert ever called to testify on his finding that the signature of Daroy in the deed of sale
appeared to have been signed by a different hand. The finding that the deed of sale was forged was
simply implied from the report of the NBI writing expert. As complainant, Daroy had the burden of
proving that contrary to the recital in the jurat he and his wife never appeared before the notary public
and acknowledged the deed to be their voluntary act.
 48

GODINEZ v. FONG PAK LUEN

G.R. No. L-36731
January 27, 1983

FACTS:

On September 30, 1966, the plaintiffs filed a case in the Court of First Instance of Sulu to recover a parcel
of land sold by their father Jose Godinez to defendant Fong Pak Luen, a Chinese citizen. Said defendant
executed a power of attorney in favor of his co-defendant Kwan Pun Ming, who conveyed and sold the
above described parcel of land to co-defendant Trinidad S. Navata. The latter 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; that Fong Pak Luen has not acquired any title or
interest in said parcel of land as purported contract of sale executed by Jose Godinez alone was contrary
to law and considered non-existent.

The defendant filed her answer that the complaint does not state a cause of action since it appears from
the allegation that the property is registered in the name of Jose Godinez so that as his sole property he
may dispose of the same; that the cause of action has been barred by the statute of limitations as the
alleged document of sale executed by Jose Godinez on November 27, 1941, conveyed the property to
defendant Fong Pak Luen as a result of which a title was issued to said defendant; that under Article
1144(1) of the Civil Code, an action based upon a written contract must be brought within 10 years from
the time the right of action accrues; that the right of action accrued on November 27, 1941 but the
complaint was filed only on September 30, 1966, beyond the10-year period provided by law.

ISSUE:

Can the heirs of a person who sold a parcel of land to an alien in violation of a constitutional prohibition
recover the property if it had, in the meantime, been conveyed to a Filipino citizen qualified to own and
possess it?

RULING:

No, the Court finds 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 prohibited. It
is enough to stress that insofar as the vendee is concerned, prescription is unavailing. But neither can the
vendor nor his heirs can rely on an argument based on imprescriptibility because the land sold in 1941 is
now in the hands of a Filipino citizen against whom the constitutional prescription was never intended to
apply. As earlier mentioned, Fong Pak Luen, the disqualified alien vendee later sold the same property to
Navata, a Filipino citizen qualified to acquire real property. Navata, as a naturalized citizen, was
constitutionally qualified to own the subject property
 49

REPUBLIC v. REGISTER OF DEEDS OF ROXAS CITY

GR. No. 158230
July 16, 2008

FACTS:

Lee Liong, a chinese citizen, bought a lot from Vicente Arenas, Carmen Ramon, Mercedes, Concepcion,
Mariano, Jose, and Manuel, all surnamed Dinglasan. Lee liong died intestate and was survived by his
widow Ang Chia, and his sons Lee Bing Hoo and Lee Bun Ting. The surviving heirs extrajudicially settled
the estate of the deceased and partitioned among themselves. When Lee Bing Hoo and Lee Bun Ting died,
the lot was transferred by succession to their respective wives, Elizabeth Lee and Pacita Yu- Lee.

In the 1956 case of Dinglasan v. Lee Bun Ting, involving the subject lot, the Court held that even of the
property was null and void for violating the constitutional prohibition on the sale of land to an alien; still
the doctrine of in pari delicto barred the sellers from recovering the title to the property. Eleven years
later the Court ordered the trial court to dismiss the complaint of Dinglasans for the recovery of the lot,
applying the Doctrine of res judicata.

Private Respondents (Elizabeth and Pacita) filed a petition for reconstitution of title of the lot because the
records of the Register of Deeds of Roxas City were burned during the war. The Court held that the trial
courts ordered reconstitution was void and lack of factual support because it was based merely on the
plan and technical description approved by the Land Registration Authority.

Meanwhile, petitioner Republic of the Philippines, through the Solicitor General, filed with the RTC of
Roxas City a complaint for reversion of Title against private respondents and the Register of
Deeds,praying that 1.) the sale of the lot to Lee Liong be set aside for being null and void; and 2.) Lot be
reverted to the public domain for the states disposal in accordance with the law.

In their answer, private respondents invoked affirmative defenses: 1. Prescription, 2.) private ownership
of lot, 3.) Lee Liong being a buyer in good faith for value and 4.) Private respondents claimed as Filipino
citizens. Therefore, they can acquire the said lot.

ISSUE:

Whether or Not the Private Respondents the absolute and lawful owners and possessors of the lot
considering that Lee Liong, who is an alien, and thus constitutionally prohibited to own real property in
the Philippines, acquired no right or title over the lot which could have transmitted by succession to
them.

HELD:

Yes. In this case, subsequent circumstances militate against escheat proceedings because the land is now
in the hands of Filipinos. The original vendee, Lee Liong, has since died and the land has been inherited
by his heirs and subsequently their heirs, petitioners herein [Elizabeth Lee and Pacita Yu Lee]. Petitioners
are Filipino citizens, a fact the Solicitor General does not dispute.

The Court has ruled consistently that where a Filipino citizen sells land to an alien who later sells the land
to a Filipino, the invalidity of the first transfer is corrected by the subsequent sale to a citizen. Similarly,
where the alien who buys the land subsequently acquires Philippine citizenship, the sale was validated
 50

since the purpose of the constitutional ban to limit land ownership to Filipinos has been achieved. In
short, the law disregards the constitutional disqualification of the buyer to hold land if the land is
subsequently transferred to a qualified party, or the buyer himself becomes a qualified party.

Clearly, since the lot has already been transferred to private respondents who are Filipino citizens, the
prior invalid sale to Lee Liong can no longer be assailed. Hence, reversion proceedings will no longer
prosper since the land is now in the hands of Filipino citizens.
 51

PARAGAS v. HEIRS OF BALACANO

G.R. No. 168220
August 31, 2005

FACTS:

Balancano, married to Lorenza, owned 2 parcels of land. He was already 81 years old, very weak, could
barely talk, and had been battling with liver disease for over a month. On his deathbed, barely a week
before he died, he allegedly signed a Deed of Absolute Sale over the lots in favor of Paragas Spouses,
accompanied by Atty. De Guzman who proceeded to notarize the same, alleging that it was a mere
confirmation of a previous sale and that Gregorio had already paid P50,000 as deposit. The Paragas
driver was also there to take a picture of Gregorio signing said deed with a ballpen in his hand. There was
nothing to show that the contents of the deed were explained to Balacano. Paragas then sold a portion of
the disputed lot to Catalino. The grandson of Gregorio, Domingo, sought to annul the sale and the
partition. There was no sufficient evidence to support any prior agreement or its partial execution.

ISSUE:

WON Balacano is incapacitated to enter into a contract of sale

HELD:

YES. A person is not rendered incompetent merely because of old age; however, when such age has
impaired the mental faculties as to prevent a person from protecting his rights, then he is undeniably
incapacitated. He is clearly at a disadvantage, and the courts must be vigilant for his protection. In this
case, Balacanos consent was clearly absenthence the sale was null and void. The circumstances raise
serious doubts on his capacity to render consent. Considering that the Paragas spouses are not owners of
the said properties, it only follows that the subsequent sale to Catalinowho was not in good faithis
likewise void.

Gregorios death was neither sudden nor immediate; he fought at least a month-long battle against the
disease until he succumbed to death. Given that Gregorio purportedly executed a deed during the last
stages of his battle against his disease, we seriously doubt whether Gregorio could have read, or fully
understood, the contents of the documents he signed or of the consequences of his act. We note in this
regard that Gregorio was brought to the Veterans Hospital at Quezon City because his condition had
worsened on or about the time the deed was allegedly signed. This transfer and fact of death not long
after speak volumes about Gregorios condition at that time. We likewise see no conclusive evidence that
the contents of the deed were sufficiently explained to Gregorio before he affixed his signature.

The evidence the defendants-appellants offered to prove Gregorios consent to the sale consists of the
testimonies of Atty. de Guzman and Antonio. As discussed above, we do not find Atty. de Guzman a
credible witness. Thus, we fully concur with the heretofore-quoted lower courts evaluation of the
testimonies given by Atty. de Guzman and Antonio because this is an evaluation that the lower court was
in a better position to make.

Furthermore, the lots pertained to the conjugal partnershiphaving been inherited by Balacano during
his marriage to Lorenza. Thus, it cannot be sold without the latters consent.
 52

DOMINGO v. CA

FACTS:

Paulina owned 3 parcels of land with improvements located at Batac and Espiritu, Ilocos Norte. The land
was allegedly sold to private respondents, spouses Rigonon for Php 850.00. The petitioners allegedly
took the property by stealth, force and intimidation and refused to vacate, prompting private
respondents to file a complaint for reinvindicatoria. Private respondents said they were the owners of the
land by virtue of the deed of sale executed by Paulina but petitioners contested the claim. Private
respondents presented Franco who stated that he is a witness to the execution of the deed of sale but
retracted the statement when shown the document. Attorney Tagatag testified that he personally saw
Paulina affixing her thumb print and that he notarized the deed. Petitioners presented Ruben Blanco,
then acting Register of Deeds. He stated that only a carbon copy was filed in his office. The RTC ruled in
favor of the Petitioners declaring the sale void but the CA reversed the decision, thus the petition.

ISSUE:

Was the Deed of Sale valid?

RULING:

No. The sale is void. First, the carbon copy or duplicate original contained filled in blanks and alterations.
There was no positive testimony to prove the execution of the deed. There were discrepancies since only
the carbon copy was registered before the Register of Deeds and no original was found. Furthermore,
Paulina was never asked to vacate. Under jurisprudence, immediate possession and occupation was
corroborative of the truthfulness and authenticity of the sale. Continued possession of the vendor puts a
serious doubt on the Deed of Sale. Additionally, the price allegedly paid for the lots with a house and a
warehouse was a megear price of Php 850.00. Something which was grossly inadequate for someone like
Paulina who was financially capable. It was also shown that Paulina was already of advanced age and
senile and died an octagenarian. While advanced age does not generally make a person incompetent to
enter into contracts, Paulina was already playing with her waste and urinating in bed. Given that fact, she
was already physically and mentally incapacitated. This gives a reason that Paulina did not consent to the
sale. Thus, the sale is void.
 53

JULIAN FRANCISCO v. PASTOR HERRERA

FACTS:

Eligio Herrera, Sr., the father of respondent, was the owner of two parcels of land. On January 3, 1991,
petitioner bought from said landowner the first parcel. or the price of P1,000,000, paid in installments
from November 30, 1990 to August 10, 1991. On March 12, 1991, petitioner bought the second parcel
for P750,000.

Contending that the contract price for the two parcels of land was grossly inadequate, the children of
Eligio, Sr., namely, Josefina Cavestany, Eligio Herrera, Jr., and respondent Pastor Herrera, tried to
negotiate with petitioner to increase the purchase price. When petitioner refused, herein respondent
then filed a complaint for annulment of sale, with the RTC In his complaint, respondent claimed
ownership over the second parcel alleging that respondent also alleged that the sale of the two lots was
null and void on the ground that at the time of sale, Eligio, Sr. was already incapacitated to give consent to
a contract because he was already afflicted with senile dementia, characterized by deteriorating mental
and physical condition including loss of memory.

ISSUE:

Are the assailed contracts of sale void or merely voidable and hence capable of being ratified?

HELD:

The contracts are considered Voidable. In the present case, it was established that the vendor Eligio, Sr.
entered into an agreement with petitioner, but that the formers capacity to consent was vitiated by
senile dementia. Hence, we must rule that the assailed contracts are not void or inexistent per se; rather,
these are contracts that are valid and binding unless annulled through a proper action filed in court
seasonably.

We note that both the trial court and the Court of Appeals found that Eligio, Sr. was already suffering
from senile dementia at the time he sold the lots in question. In other words, he was already mentally
incapacitated when he entered into the contracts of sale. Settled is the rule that findings of fact of the trial
court, when affirmed by the appellate court, are binding and conclusive upon the Supreme Court.

Coming now to the pivotal issue in this controversy. A void or inexistent contract is one which has no
force and effect from the very beginning. Hence, it is as if it has never been entered into and cannot be
validated either by the passage of time or by ratification. There are two types of void contracts: (1) those
where one of the essential requisites of a valid contract as provided for by Article 1318 of the Civil Code is
totally wanting; and (2) those declared to be so under Article 140911 of the Civil Code. By contrast, a
voidable or annullable contract is one in which the essential requisites for validity under Article 1318 are
present, but vitiated by want of capacity, error, violence, intimidation, undue influence, or deceit
 54

TORRES v. LAPINID

FACTS:

Vicente Torres et al. filed a Complaint before RTC Cebu City praying for the nullification of the sale of real
property by respondent Jesus Velez in favor of Lapinid; the recovery of possession and ownership of the
property; and the payment of damages. Petitioners alleged in their complaint that they, including Jesus,
are co-owners of several parcels of land located at Cogon, Carcar, Cebu. Sometime in 1993, Jesus filed an
action for partition of the parcels of land against the petitioners and other co-owners.

On 13 August 2001, a judgment was rendered based on a compromise agreement signed by the parties
wherein they agreed that Jesus, Mariano and Vicente were jointly authorized to sell the said properties
and receive the proceeds thereof and distribute them to all the co-owners. However, the agreement was
later amended to exclude Jesus as an authorized seller. Pursuant to their mandate, the petitioners
inspected the property and discovered that Lapinid was occupying a specific portion of the 3000 square
meters by virtue of a deed of sale executed by Jesus in favor of Lapinid. It was pointed out by petitioner
that as a consequence of what they discovered, a forcible entry case was filed against Lapinid. The
petitioners prayed that the deed of sale be declared null and void arguing that the sale of a definite
portion of a co-owned property without notice to the other co-owners is without force and effect. Jesus
insisted that as early as November 1997, a motion was signed by the co-owners (including the
petitioners) wherein the disputed lot was agreed to be adjudicated to the co-owners belonging to the
group of Jesus and the other lots be divided to the other co-owners belonging to the group of Torres. On
his part, Lapinid admitted that a deed of sale was entered into between him and Jesus pertaining to a
parcel of land with an area of 3000 square meters. However, he insisted on the validity of sale since Jesus
showed him several deeds of sale making him a majority owner.

The trial court dismissed the complaint of petitioners. The Court of Appeals affirmed the decision of the
trial court. It validated the sale and ruled that the compromise agreement did not affect the validity of the
sale previously executed by Jesus and Lapinid. Hence, this appeal.

ISSUE:

Whether or not Jesus, as a co-owner, can validly sell a portion of the property he co-owns in favor of
another person

HELD:

Yes. A co-owner has an absolute ownership of his undivided and pro indiviso share in the co-owned
property. He has the right to alienate, assign and mortgage it, even to the extent of substituting a third
person in its enjoyment provided that no personal rights will be affected. A co-owner is an owner of the
whole and over the whole he exercises the right of dominion, but he is at the same time the owner of a
portion which is truly abstract. Hence, his co-owners have no right to enjoin a co-owner who intends to
alienate or substitute his abstract portion or substitute a third person in its enjoyment.

In this case, Jesus can validly alienate his co-owned property in favor of Lapinid, free from any opposition
from the co-owners. Lapinid, as a transferee, validly obtained the same rights of Jesus from the date of the
execution of a valid sale. Absent any proof that the sale was not perfected, the validity of sale subsists. In
essence, Lapinid steps into the shoes of Jesus as co-owner of an ideal and proportionate share in the
 55

property held in common. Thus, from the perfection of contract on November 9, 1997, Lapinid eventually
became a co-owner of the property. The Supreme Court had repeatedly held that no individual can claim
title to a definite or concrete portion before partition of co-owned property. Each co-owner only
possesses a right to sell or alienate his ideal share after partition. However, in case he disposes his share
before partition, such disposition does not make the sale or alienation null and void. What will be affected
on the sale is only his proportionate share, subject to the results of the partition. The co-owners who did
not give their consent to the sale stand to be unaffected by the alienation.

Consequently, whether the disposition involves an abstract or concrete portion of the co-owned
property, the sale remains validly executed. The validity of sale being settled, it follows that the
subsequent compromise agreement between the other co-owners did not affect the rights of Lapinid as a
co-owner.
 56

HEIRS OF DR. MARIO INTAC v. CA

GR No. 173211
October 11, 2012

FACTS:

Ireneo Mendoza married to Salvacion Fermin was the owner of the subject property located at Bagong
Pag-asa, Quezon City. Ireneo had two children, Josefina and Martina, Salvacion being their stepmother.
They also took care of Angelina, Ireneos niece. On October 25, 1977, Ireneo, with the consent of his wife
executed a deed of absolute sale of the subject property in favor of Angelina and her husband, Mario
Intac. They are referred to as spouses Intac. Ireneo and his family continued staying in the premises and
paying taxes thereon. Ireneo died, intestate in 1982. After Salvacion died, Josefina and Martina still
possessed the subject land, paying taxes thereon, leasing portions of it and collecting rentals. The
controversy arose when Ireneos children sought the cancellation of the title issued in the name of
Angelina as result of the sale made on October 25, 1977. They filed a case for cancellation of title and
reconveyance. They argue that the sale was only made to accommodate Angelina and her husband who
borrowed the title of the property so that they can use it as collateral for a loan. Further, that during
Ireneos lifetime and in a conference, he informed them that he wished for the property to be equally
divided among his heirs after his death. The spouses Intac was present at this conference and never
objected thereto. They found out that a new title over the land was obtained in the name of spouses Intac
after the death of Salvacion, rumors spread in their neighborhood of such fact. Upon verification with the
Registry of Deeds, it proved true. Spouses Intac argue that the sale was valid and it was for a valuable
consideration. Further, they contend that the action has already prescribed and that they tolerated the
occupation of Ireneos family thereon because they did not need it at that time.

ISSUE:

What is the status of the sale?

HELD:

The sale was void ab intio. Consideration and consent are essential elements in a contract of sale. Where
a partys consent to a contract of sale is vitiated or where there is lack of consideration due to a simulated
price, the contract is null and void.

The deed of absolute sale between the parties was absolutely simulated for lack of consideration, cause,
and intent to sell, therefore, void. The Civil Code provides under Art. 1345 Simulation of a contract may
be absolute or relative. The former takes place when the parties do not intend to be bound at all; the
latter, when the parties conceal their true agreement. Under art. 1346; An absolutely simulated or
fictitious contract is void. A relative simulation, when it does not prejudice a third person and is not
intended for any purpose contrary to law, morals, good customs, public order or public policy binds the
parties to their real agreement.

If the parties state a false cause in the contract to conceal their real agreement, the contract is only
relatively simulated and the parties are still bound by their real agreement. Hence, where the essential
requisites of a contract are present and the simulation refers only to the content or terms of the contract,
the agreement is absolutely binding and enforceable between the parties and their successors in interest.
In absolute simulation, there is a colorable contract but it has no substance as the parties have no
intention to be bound by it. The main characteristic of an absolute simulation is that the apparent
 57

contract is not really desired or intended to produce legal effect or in any way alter the juridical situation
of the parties. As a result, an absolutely simulated or fictitious contract is void, and the parties may
recover from each other what they may have given under the contract.

Aside from their plain denial, petitioners failed to present any concrete evidence. They claimed that they
actually paid P150,000.00 for the subject property. They, however, failed to adduce proof, even by
circumstantial evidence, that they did, in fact, pay it. Even for the consideration of P60,000.00 as stated in
the contract, petitioners could not show any tangible evidence of any payment therefor.

The primary consideration in determining the true nature of a contract is the intention of the parties. If
the words of a contract appear to contravene the evident intention of the parties, the latter shall prevail.
Such intention is determined not only from the express terms of their agreement, but also from the
contemporaneous and subsequent acts of the parties.
 58

DR. FORMARAN v. DR. ONG

GR. No. 186264
July 8, 2013

FACTS:

Plaintff owns a parcel of land which donated to her by her uncle and aunt. Defendant and her father, came
to her residence asking for help that they were borrowing half of her land so that the defendant could
obtain a loan form the bank to buy a dental chair, Plaintiff signed a deed of sale, covering the land in
question without money or consideration involved.

Plaintiff inquired from her uncle if they have obtained the loan. The latter informed her that they did not
push through with the loan because the banks interest was high. Her uncle informed her that they
already crampled the Deed of Sale.

Plaintiff did not bother anymore about the document, she transferred residence. Defendant filed a case of
unlawful detainer against her. She learned for the first time that the Deed of Sale was registered and
declared for taxation purposes in the name of the defendant.

Plaintiff consequently suffered anxiety, sleepless nights and besmirched reputation; and that to protect
her rights and interest over the land in question, she was constrained to file the instant case.

ISSUE:

Whether or not the subject Deed of Sale is simulated.

HELD:

Yes. The Court believes and so holds that the subject Deed of Sale is indeed simulated as it is totally
devoid of consideration.

The amplitude of foregoing undisputed facts and circumstances clearly shows that the sale of the land in
question was purely simulated. It is void from the very beginning (Article 1346, New Civil Code). If the
sale was legitimate, defendant Glenda should have immediately taken possession of the land, declared in
her name for taxation purposes, registered the sale, paid realty taxes, introduced improvements therein
and should not have allowed plaintiff to mortgage the land. These omissions properly militated against
defendant Glendas submission that the sale was legitimate and the consideration was paid. These are
facts and circumstances which may be considered badges of bad faith that tip the balance in favor of
petitioner.
While the Deed of Absolute Sale was notarized, it cannot justify the conclusion that the sale is a true
conveyance to which the parties are irrevocably and undeniably bound. Although the notarization of
Deed of Absolute Sale, vests in its favor the presumption of regularity, it does not validate nor make
binding an instrument never intended, in the first place, to have any binding legal effect upon the parties
thereto.
 59

CLEMENTE v. CA
G.R. No. 175483
October 14, 2015

Simulated Sale

FACTS:

Adela owned lands and a big house over such. Adela allowed her children and her grandchildren, the use
and possession of such.

In 1985 and 1987, Adela simulated the transfer of lots to her two grandsons. In 1989, prior to her
departure to US with Clemente, she and her grandsons executed a reconveyance. Adela sold the lots and
their improvements to Clemente.

Adela died and was succeeded by her four children. Clemente sought to eject the children on the said
properties, but the latter filed a complaint for reconveyance. They alleged that Adela only wanted to help
Clemente travel to the US, by making it appear that the petitioner has ownership of the properties similar
to the previous simulated transfers to the grandchildren, and no actual consideration was given.

The trial court and CA declared the sale void on the ground of being simulated.

ISSUE:

Was the sale between Adela and Clement simulated, thus void and inexistent?

RULING:

Yes. The issue is a question of fact which is not within the province of a petition for review. It is a rule that
only questions of law must be filed to the Supreme Court. Nevertheless, the Court erased any doubt on
the correctness of the assailed ruling. Moreover, petitioner has not been able to show that the lower
courts committed error in appreciating the evidence of record.

A valid contract must contain a valid consent, object and a cause of the obligation. Here, there was no
valid contract of sale between petitioner and Adela because their consent was absent. The contract of sale
was a mere simulation. Simulation takes place when the parties do not really want the contract they have
executed to produce the legal effects expressed by its wordings. Article 1345 of the Civil Code provides
that the simulation of a contract may either be absolute or relative.

In absolute simulation there appears to be a valid contract but there is actually none because the element
of consent is lacking. This is so because the parties do not actually intend to be bound by the terms of the
contract. Hence, the contract is void.

To prove such, the following circumstances took place:

1. There was no intention for Adela to alienate her place;

2. Adela continued exercising acts of dominion and control even after the execution of the Sale
between the,;
 60

3. The previous simulated sales strongly shows that Adela only granted Clemente the same favor
she had granted to her grandsons.

Hence, the contract is void for absence of a valid consent by reason of an absolute simulation made by
Clement and Adela.
 61

HEIRS OF BALITE v. LIM

G.R. No. 152168
December 10, 2004

Relatively simulated sale

FACTS:

The spouses Aurelio and Esperanza Balite were the owners of a parcel of land. When Aurelio died
intestate, Esperanza Balite, and their children, inherited the [subject] property and became co-owners
thereof, with Esperanza inheriting an undivided [share] of [9,751] square meters.

In the meantime, Esperanza became ill and was in dire need of money for her hospital expenses. She,
through her daughter, Cristeta, offered to sell to Rodrigo Lim, her undivided share for the price of
P1,000,000.00. Esperanza and Rodrigo agreed that, under the Deed of Absolute Sale, to be executed by
Esperanza over the property, it will be made to appear that the purchase price of the property would be
P150,000.00, although the actual price agreed upon by them for the property was P1,000,000.00. They
also executed a Joint Affidavit under which they declared that the real price of the property was
P1,000,000.00, payable to Esperanza by instalments.

The other siblings found out about the sale and wanted to have it declared void on the ground that they
did not consent to the said sale and that the actual purchase price of the property was not stated in the
Deed of Absolute Sale

The petitioners filed a complaint against Rodrigo. The trial court held that, the sale made by a co-owner is
not invalidated by the absence of the consent of the other co-owners. CA affirmed and rejected
petitioners claim that the sale was void allegedly because the actual purchase price of the property was
not stated in the Deed of Absolute Sale.

ISSUE:

Whether or not the sale is valid

HELD:

Yes, it is valid.

We have before us an example of a simulated contract. Article 1345 of the Civil Code provides that the
simulation of a contract may either be absolute or relative. In absolute simulation, there is a colorable
contract but without any substance, because the parties have no intention to be bound by it. An
absolutely simulated contract is void, and the parties may recover from each other what they may have
given under the contract.[8] On the other hand, if the parties state a false cause in the contract to conceal
their real agreement, such a contract is relatively simulated. Here, the parties real agreement binds them.

In the present case, the parties intended to be bound by the Contract, even if it did not reflect the actual
purchase price of the property. The parties intended the agreement to produce legal effect. There was an
intention to transfer the ownership of over 10,000 square meters of the property.
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Since the Deed of Absolute Sale was merely relatively simulated, it remains valid and enforceable. All the
essential requisites prescribed by law for the validity and perfection of contracts are present. However,
the parties shall be bound by their real agreement for a consideration of P1,000,000 as reflected in their
Joint Affidavit.

The juridical nature of the Contract remained the same. What was concealed was merely the actual price.
Where the essential requisites are present and the simulation refers only to the content or terms of the
contract, the agreement is absolutely binding and enforceable between the parties and their successors in
interest.

The motives of the contracting parties for lowering the price of the sale -- in the present case, the
reduction of capital gains tax liability -- should not be confused with the consideration. Although illegal,
the motives neither determine nor take the place of the consideration.
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VALERIO v. MARIANO
Gr. 163687
March 28, 2006

FACTS:

As early as 1963, spouses Alejandro and Vicenta Refresca started cultivating the 6.5-hectare land as
tenants. In 1968, Narciso Valerio acquired ownership over the land. The tenancy relations between the
Valerios and Refrescas were established and their harmonious relations continued uninterrupted. In
1974, the Valerios entered into a leasehold contract with tenant Alejandro Refresca whereby the latter
was allowed to continue tilling the 6.5-hectare land in exchange for fixed rentals.

On February 10, 1975, Narciso Valerio, with the consent of his wife Nieves, executed a Deed of Sale
whereby he sold his 6.5-hectare landholding to his heirs, all surnamed Valerio. Narciso likewise conveyed
511 sq. m. of his landholding in favor of his tenant Alejandro Refresca in recognition of his long service
and cultivation of the subject land. On February 15, 1975, Narciso Valerio died.

On December 13, 1982, the parties to the Deed of Sale, as co-owners, subdivided the 6.5-hectare land and
executed a Deed of Agreement of Subdivision. The same 511 sq. m. of land was granted to tenant
Alejandro Refresca. Individual titles over the apportioned areas were subsequently issued to the vendees.

Nieves Valerio, widow of Narciso, entered into another leasehold agreement with the Refrescas over the
6.5-hectare landholding for the period 1984-1985 in exchange for the latters payment of rentals.

On March 4, 1987, petitioners mother, Nieves Valerio, died. After tenant Alejandros demise in 1994, his
widow, respondent Vicenta Refresca, succeeded him by operation of law in tilling the land.

Thereafter, petitioners demanded that the respondents vacate the land. They alleged that the 511 sq. m.
lot was given to the respondents on the condition that they will surrender their tenancy rights over the
entire land but respondents failed to do so. In 1995, the Department of Agrarian Reform (DAR), Legal
Division, in Sta. Cruz, Laguna, issued a Resolution recognizing the right of respondent Vicenta Refresca,
widow of tenant Alejandro, to continue her peaceful possession and cultivation of the 6.5-hectare land.

Despite the DAR ruling, petitioners sent a demand letter to respondents to vacate the land. Respondents
refused. Petitioners filed a complaint before the Regional Trial Court (RTC) of Calamba, Laguna, against
for the annulment of documents of transfer and title of Alejandro.

ISSUE:

Is the contract of sale valid?

RULING:

Yes. Article 1345 of the Civil Code provides that the simulation of a contract may either be absolute or
relative. In absolute simulation, there is a colorable contract but it has no substance as the parties have
no intention to be bound by it. The main characteristic of an absolute simulation is that the apparent
contract is not really desired or intended to produce legal effect or in any way alter the juridical situation
of the parties. As a result, an absolutely simulated or fictitious contract is void, and the parties may
recover from each other what they may have given under the contract. However, if the parties state a
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false cause in the contract to conceal their real agreement, the contract is relatively simulated and the
parties are still bound by their real agreement. Hence, where the essential requisites of a contract are
present and the simulation refers only to the content or terms of the contract, the agreement is absolutely
binding and enforceable between the parties and their successors in interest.

In the case at bar, the records reveal that the clear intent of Narciso Valerio in executing the 1975 Deed of
Sale was to transfer ownership of the apportioned areas of his 6.5-hectare land to petitioners as his heirs
and to his tenant Alejandro. Although no monetary consideration was received by landowner Narciso
from any of the vendees, it cannot be said that the contract was not supported by a cause or
consideration or that Narciso never intended to transfer ownership thereof.

Indeed, the primary consideration in determining the true nature of a contract is the intention of the
parties. If the words of a contract appear to contravene the evident intention of the parties, the latter
shall prevail. Such intention is determined not only from the express terms of their agreement, but also
from the contemporaneous and subsequent acts of the parties. In the case at bar, the circumstances
reveal that when landowner Narciso executed the 1975 Deed of Sale, he intended to transfer ownership
of his entire 6.5-hectare landholding and apportion the area among Alejandro and the petitioners.
Neither he nor his wife, during their lifetime, exerted effort to evict respondents when the latter allegedly
failed to comply with the condition to surrender their tenancy rights after the sale. That petitioners and
tenant Alejandro then took possession of their respective portions of the land additionally shows that
Narciso divested himself of his title and control over the property. Truly, one of the most striking badges
of absolute simulation is the complete absence of any attempt on the part of a vendee to assert his right of
dominion over the property. In the case at bar, petitioners and respondents were not amiss in claiming
their right over their respective lots.