POTENCIANO RAMIREZ, Petitioner, vs. MA. CECILIA RAMIREZ, Respondent. G.R. No.

165088 March 17, 2006 FACTS: A Deed of Donation and Waiver of Possessory Rights were allegedly executed by petitioner and his wife, Dolores Ramirez, in 1993 and 1995 respectively in favor of respondent Ma. Cecilia Ramirez. However, the death certificate presented showed that Dolores died in 1991 and, consequently, could not have executed the assailed documents. Later on, petitioner filed a complaint against respondent for annulment of the Deed of Donation, Waiver of Possessory Rights and the title issued under the name of respondent. Petitioner claimed that respondent caused the execution of the Deed of Donation and Waiver of Possessory Rights to acquire ownership over the land and improvements. As a result, the certificate of title was issued under her name and the tax declarations were also transferred in her name. In her Answer, respondent alleged that it was her fathers idea to cause the preparation of the Deed of Donation and Waiver of Possessory Rights to save on expenses for publication and inheritance taxes. After trial, the RTC declared both parties in pari delicto, as participants to the forgery, and ruled that they must bear the consequences of their acts without cause of action against each other in accordance with Article 1412 of the Civil Code. The RTC further held that the signature of Dolores on the Deed of Donation was a forgery while her signature on the Waiver of Possessory Rights was genuine. On appeal, the Court of Appeals held that Dolores signature on the Deed of Donation as well as her alleged signature appearing in the Waiver of Possessory Rights were forgeries and likewise held that both parties are in pari delicto. ISSUE: Whether or not petitioner and respondent are in pari delicto. HELD: Yes. As one of the modes of acquiring ownership, donations are governed by Title 3, Book III, of the Civil Code. Donations inter vivos are additionally governed by the general provisions on obligations and contracts in all that is not determined by the title governing donations. Hence, the rule on pari delicto under the general provisions of contracts is applicable to the present case. The Supreme Court affirmed that both parties are in pari delicto since respondent did not deny petitioners allegation that the signatures of the latters wife are a forgery. But Article 1412 is not applicable as the lower courts ruled. It is because said article applies only when the cause of the contract is unlawful or forbidden but does not constitute a violation of the criminal laws. Instead, Article 1411 applies. Under Article 1411, it must be shown that the nullity of the contract proceeds from an illegal cause or object, and the act of executing said contract constitutes a criminal offense. On the first element, petitioner claims that the illegality stems from the act of forgery which pertains to consent and not to the object or cause. The Court, however, held that petitioner wrongly asserts that the donated real properties are both the object and cause of the donation. In fact, the donated properties pertain only to the object. The cause which moved the parties to execute the Deed of Donation and the Waiver of Possessory Rights, the motive behind the forgery, is the desire to evade the payment of publication expenses and inheritance taxes, which became due upon the death of Dolores. Undeniably, the Deed of Donation and the Waiver of Possessory Rights were executed for an illegal cause. The second requirement is also present as the act of forging corresponds to the felony of falsification under Section 4, Title IV of the Revised Penal Code. Hence, neither of the parties may expect positive relief from the courts from their illegal acts and transactions.