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Lloyd Enterprises and Credit Corp v Dolleton

GR 171373
Facts: Herein respondents spouses Dolleton were the registered owners of a parcel of land in Brgy Putatan,
Muntinlupa City and an apartment was erected therein. On August 1990, herein respondents entered into a
contract of mortgage to Joseph Patrick Santos over the said property to secure a loan in the amount of 100,000.
On August 15 1994, the loan was paid in full hence Santos executed a release and cancellation of the mortgage.
However, on September 1994, the TCT supposed to be issued in the name of herein respondents was canceled,
and a new TCT was issued in the name of Gagan on the basis of a Deed of Absolute Sale which was purportedly
executed by herein respondents in favor of Gagan on August 1994. Four days after the issuance of the new TCT, a
contract of loan secured by a real estate mortgage over the said property was executed by herein petitioner
company to Gagan with the sum of 391,512. After payment of the load and the cancellation of the first mortgage,
Gagan entered into another contract of lease secured by real estate mortgage over the said property to herein
petitioner company, with a bigger sum of 542,928. However, Gagan failed to pay the second loan upon its maturity
hence, upon the filing of the petitioner of an extrajudicial foreclosure proceedings, the said property was made
subject to a public auction, the petitioner being the highest bidder with the amount of 645,000. Gagan failed to
redeem the said property after one year, hence the petitioner acquired ownership of the said property.
Herein respondents filed a complaint in the RTC praying for the nullification of the purported deed of sale between
them and Gagan, and the real estate mortgages entered by the latter with the petitioner , and the foreclosure
proceedings, and lastly, recover ownership of the said property. Herein respondents aver that the contract they
entered into with Gagan was a mere contract to sell the property for 900,000 on installment basis in order for
them to be able to pay the loan they entered into with Joseph Santos. That after Gagan initially paid them 200,000,
the herein respondents entrusted the original TCT to him. However, aside from the 185,000 paid by Gagan, the
latter failed to pay the remaining balance and he undertook the cancellation of the mortgage between the
respondents and joseph Santos, and that Gagan fraudulently caused the cancellation of the original TCT, and a new
TCT to be issued in his name. Respondents also impugn negligence over herein petitioner for failing to conduct
necessary inquiries regarding the said property considering all the suspicious circumstances which were present at
the time Gagan requested for a loan to the petitioner.

Issue: Whether or not the petitioner is a mortgagee-purchaser in good faith

Held: NO. Based on the factual findings of the RTC, which were further confirmed by the Court of Appeals, herein
petitioner was negligent. The petitioner, being a company engaged in a business of extending credits to the public
is obligated to exercise a higher degree of diligence on their part as compared to ordinary buyers, in order to
prevent causing injuries to prior and future innocent buyers. It was ruled in other cases decided by the Court that
such degree of diligence is indeed required of them. The contention of the petitioner that they are not required to
look further than what appears on the face of the title is bereft of merit. The petitioner is required to conduct
adequate inquiries over said properties, being the subject of transaction and a registered lands, when there is a
sufficient reason for them to doubt their validity. In this case, the Court avers that if the petitioner investigated the

property with due diligence, it would have noticed that the said property is currently being leased hence should
have raised sufficient doubt over its validity. Furthermore, the fact that immediately after acquiring the new TCT
issued in Gagan's name, the latter offered such as a security for the loan, and regarding the amount that Gagan
paid which is 120,000 to herein respondents for the purported sale is unconscionably low compared to its
prospective value which 900,000. These cirmcumstances should have prompted herein petitioners to conduct an
inquiry over the said property.

Heirs of Mascunana v CA
Facts: Jesus Mascunana purchased a parcel of land located at San Carlos City, Negros Occidental Cadastre from a
certain Gertrudis. Jesus Mascuana entered into a contract to sell the said properties to Diosdado Sumulhig. The
said property was sold at a price of 4,690.00 to the latter, and Jesus Mascuana accepted the downpayment of
3,690.00 paid by Diosdado Sumilhig. and a condition present stating that the remaining balance shall be paid by
the buyer as soon as all papers pertinent and necessary to the issuance of a separatie Certificate of Title in the
name of the Vendee shall have been prepared.
On the other hand, a survey was conducted on the said lot for the sake of the co-owners. The subdivision plan of
the said lot was approved by the Director of Lands.
After the death of Mascuana on April 1965, her heirs survived her.
On April 1968, Sumilhig sold the said property to spouses Layumas, where the latter allowed a chapel to be
erected on a portion of the property, and permitted Aquilino Barte to stay on a portion of the property together
with his kin, and constructed a house therein.
After some time, spouses Layumas received a letter from the counsel of Mascuana, offering to buy their share of
the property for $1,000.00, but the spouses refused to accept, and rather they wrote to Pepito Mascuana a letter
offering to pay the amount of 1,000.00 for the balance of the purchase of Jesus Mascuana and Sumilhig. However,
the addressee refused to receive the mail matter. Without the knowledge of spouses Layumas, a new TCT was
issued over the same lot in the name of Jesus Mascuana. Jesus Mascuana claims ownership over the said property
due to successional rights. The petitioners even insist that there was no contract of sale in existence between Jesus
Mascuana and Sumilhig but rather a simple contract to sell, because it was subject to a suspensive condition
hence there was no sale due to failure to comply with the said condition by Sumilhig.
Issue: Whether or not there was a contract of sale between Jesus Mascuana and Diosdado Sumilhig
Held: YES. The Court affirmed the decision of the RTC and the Court of Appeals ruling in affirmative of the said
issue. There was indeed a contract of sale between Jesus Mascuana and Sumilhig , and the contention of the
petitioners that the failure to comply by Sumilhig with the condition of the contract regarding the payment of
1,000.00 rendered the contract void is not correct. The said suspensive condition only pertains with the remaining
balance regarding the sale, and it was proven that based from the ccontract executed by Jesus Mascuana, she
indeed transfer ownership of the said properties to Diosdado Sumilhig. A contract is perfected by the meeting of
the minds, it being a consensual. It is not necessary that the object of the contract be delivered first before there

can be an existing contract. As long as the 3 requisites for a valid contract are present, it is deemed perfected.
Sanchez v Rigos
Ponente: Concepcion

Sanchez and Rigos executed an instrument entitled Option to Purchase, where Rigos would
commit to sell to Sanchez for the sum of P1,510.00, a parcel of land in Abar and Sibot, San Jose,
Nueva Ecija
Sanchez accepted and made several tenders of payment of the P1,510 but were rejected by
Rigos. Sanchez deposited the amount with the CFI of Nueva Ecija
Rigos claim that the contract was an option to buy and sell and not a contract to buy and sell.
The option was unenforceable, having no consideration received for the option to purchase.
Sanchez raise that even granting that the offer was not supported by any consideration, the
option became binding on Rigos, when Sanchez gave notice of Sanchezs acceptance, and that
having accepted it within the period of option, the offer can no longer be withdrawn, raising art.
o "ART. 1324. When the offerer has allowed the offeree a certain period to accept, the
offer may be withdrawn any time before acceptance by communicating such
withdrawal, except when the option is founded upon consideration as something paid
or promised."

Can an accepted promise to sell without consideration be considered a sale? Can it be withdrawn
No, an accepted promise to sell is considered too as an offer to sell and once accepted.
In other words, since there may be no valid contract without a cause or consideration, the promisor is not bound
by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes,
however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale.
This view reconciles arts. 1324 (general principles of contracts) and 1479 (on sales)

this Court itself, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, decided later that Southwestern Sugar &
Molasses Co. v. Atlantic Gulf & Pacific Co., saw no distinction between Articles 1324 and 1479 of the Civil Code
and applied the former where a unilateral promise to sell similar to the one sued upon here was involved, treating
such promise as an option which, although not binding as a contract in itself for lack of a separate consideration,
nevertheless generated a bilateral contract of purchase and sale upon acceptance
Furthermore, an option is unilateral: a promise to sell at the price fixed whenever the offeree should decide to
exercise his option within the specified time. After accepting the promise and before he exercises his option, the
holder of the option is not bound to buy. He is free either to buy or not to buy later. In this case, however, upon

accepting herein petitioner's offer a bilateral promise to sell and to buy ensued, and the respondent ipso
facto assumed the obligation of a purchaser. He did not just get the right subsequently to buy or not to buy. It was
not a mere option then; it was a bilateral contract of sale.
"If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until
accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even
though the option was not supported by a sufficient consideration. ... . (77 Corpus Juris Secundum, p. 652. See
also 27 Ruling Case Law 339 and cases cited.)

Guzman, Bocaling & Co. vs Raoul Bonnevie

Ponente: Cruz



REYNOSO owned land with two buildings constructed thereon. Said property was leased to Raoul
and Christopher BONNEVIE. The contract of lease contains a stipulation that should the LESSOR
(Reynoso) decide to sell the lease property, the LESSEES (Bonnevie) shall be given a first priority
to purchase the same, all things and considerations equal.
Reynoso notified Bonnevie that she was selling the leased premises for P600,000 less a mortgage
loan of P100,000, and was giving them a 30 day period to exercise their right of first priority and
should Bonnevie not exercise such, Reynoso expects them to vacate the property.
Later on Reynoso sent another letter to Bonnevie that since they did not exercise the right of first
priority, Reynoso already sold the property.
Lessees replied stating that the first letter wasnt received, that they advised Reynosos agent to
inform them officially should Reynoso decide to sell the property, and that they were
constrained to refuse the request for the termination of lease.
The leased premises were formally sold to Guzman, Bocailing & Co. Contract of sale provided for
immediate payment of P137,500 and P262,500 only when the premises were vacated (P400,000
Reynoso demanded they vacate premises for failure to pay rent for 4 months, and when they
refused, Reynoso filed a complaint for ejectment against them.
The parties submitted a Compromise Agreement, which provided that Bonnevie shall vacate the
Agreement was approved by the City Court and became the basis of its decisions, but
respondents didnt comply and Reynoso filed a motion for execution of the judgment by
compromise, which was granted.
Bonnevie filed a motion to set aside decision of City Court as well as the Compromise Agreement
(Civil Case No. 131461)
Sole Ground = Reynoso had not delivered to him the records of payments and receopts
of all rentals by or for the account of the defendant.
Motion was DENIED then was elevated to CFI


CFI remanded the case to City Court of Manila for trial on the merits that both
parties had set aside the Compromise Agreement (Wala na atang value ung
compromise agreement, minention ko lang)
While ejectment case was pending, respondents filed an action for annulment of the sale
between Reynoso and petitioners (Bocaling et. al.) and the cancellation of the transfer certificate
from the sale. They also asked that Reynoso be required to sell the property to them under the
same terms and conditions agreed upn in the Contract of Sale in favor of the petitioners.
City Court decided the ejectment case in favor of petitioners. Such waws appealed to CFI
CFI modifies decision ordering Bonnevie to vacate the premises and pay the unpaid rent to
Reynoso. However, as to Civil Case No. 131461, the court rendered judgment in favor of
Bonnevie against Reynoso and Bocaling et. al, declaring the sale by Reynoso to Bocaling NULL
AND VOID, ordering Reynoso to sell to Bonnevie a deed of sale with purchase price of P400,000
(terms of sale to Bocaling et. al.) plus damages and attorneys fees.
Both Reynoso and Bocaling appealed but RESPONDENT COURT (Court of Appeals) substantially
affirmed the conclusions of the lower court but reduced the award of damages.
the respondent court erred in ruling that the grant of first priority to purchase
the subject properties by the judicial administratrix needed no authority from
the probate court
holding that the Contract of Sale was not voidable but rescissible;
considering the petitioner as a buyer in bad faith
ordering Reynoso to execute the deed of sale in favor of the Bonnevie; and
not passing upon the counterclaim. Reynoso has not appealed.

Issues (Consolidated)

Did REYNOSO violate the lease contract?

Did the respondent court erred in ruling that the grant of first priority to purchase the subject
property needed no authority from the probate court?
Is the sale between REYNOSO and BOCALING et. al., not voidable but rescissible?
Is Bocaling et. al. a buyer in bad faith?




Yes, the evidence REYNOSO presented of the first letter being received was not enough to prove such.
Only a photocopy of the front of the letter was presented with no indication of the receiving signature nor
the time of receipt. Even if such a letter was properly receipt, the fact that the sale to BOCALING et. al.
had different terms from the initial offer to BONNEVIE shows that no valid right of first priority was
.No, robate court approval was not necessary because it did not involve an alienation of real property of
the estate nor did the tem of the lease exceed one year to make it fall under 1879 (special powers of
It is rescissible, falling under 1380 to 1381 (3). The BONNEVIES could be considered as creditors for they
had substantial interests that were prejudiced by the sale to BOCALING et. al. without recognizing their
right of first priority.


Yes, Bocaling et. al. cannot be considered to be in good faith since when they bought the land, they knew
of the lease by the Bonnevies who were actually occupying the same at the time of purchase. Despite the
contract of lease not being annotated on the transfer certificate, the petitioner cannot deny actual
knowledge of the lease and should have required as to the status and conditions of the lease.

Riviera Filipina vs CA
G.R. No. 117355. April 5, 2002
Facts: Respondent Juan L. Reyes executed a 10-year renewable Contract of Lease with Riviera Filipina Inc. involving
a 1,018 square meter parcel of land located along Edsa, Quezon City. The said parcel of land became a subject of a
Real Estate Mortgage in favor of Prudential Bank. The loan remained unpaid upon maturity so the said bank
extrajudicially foreclosed the mortgage thereon. At the public auction sale, the mortgagee bank emerged as the
highest bidder. Reyes decided to sell the property when he realized that he could not possibly raise in time the
money needed to redeem it.
Reyes offered to sell the subject property to Riviera, through its President Vicente C. Angeles but they did not
agree on the price of the land. Seven (7) months later, or sometime in October 1988, Angeles communicated with
Reyes Rivieras offer to purchase the subject property. However, Reyes did not accept the offer and increased its
price since the value of the property in the area had appreciated in view of the plans of Araneta to develop the
Atty. Irineo S. Juan, acting as counsel for Reyes, informed Riviera through a letter that Reyes was selling the
subject property for P6,000.00 per square meter. He further stated that petitioners can exercise their right of first
refusal in the sale of said property by purchasing it within 10 days after the receipt hereof under the terms and
conditions provided. Failing to purchase the said property within that period is deemed to be a waiver of such right
and Reyes can sell it to interested buyers. Angeles confirmed Rivieras intent to purchase the subject property for
the fixed and final price of P5,000.00 per square meter. Nonetheless, Reyes did not accede to their price.
Meanwhile Reyes confided to Rolando P. Traballo his predicament about the nearing expiry date of the
redemption period of the foreclosed mortgaged and the latter expressed interest in buying the said property but
bargained for P5,300.00 per square meter. Reyes accepted his offer. But since Traballo did not have the amount
with which to pay Reyes, he told the latter that he will look for a partner for that purpose.
Because of the impending expiration of the redemption period of the foreclosed mortgaged property with
Prudential Bank and the deal between Reyes and Traballo was not yet formally concluded, Reyes decided to
approach anew Riviera. He requested Atty. Estanislao Alinea, to approach Angeles and find out if the latter was still
interested in buying the subject property and ask him to raise his offer for the purchase of the said property a little
higher but Angeles said that his offer is still P5, 000.00 per square meter. Reyes did not agree.
Cypress and its partner in the venture, Cornhill Trading Corporation, were able to come up with the amount
sufficient to cover the redemption money, with which Reyes paid to the Prudential Bank to redeem the subject
property. Reyes executed a Deed of Absolute Sale covering the subject property in favor of Cypress and Cornhill for
the consideration P5,395,400.00. On the same date, Cypress and Cornhill mortgaged the subject property to Urban
Development Bank for P3,000,000.00.
Thereafter, Riviera sought from Reyes, Cypress and Cornhill a resale of the subject property to it claiming that
its right of first refusal under the lease contract was violated. After several unsuccessful attempts, Riviera filed
the suit to compel Reyes, Cypress, Cornhill and Urban Development Bank to transfer the disputed title to the land
in favor of Riviera upon its payment of the price paid by Cypress and Cornhill.
Issue: Was the Riviera deprived by Reyes of the right of first refusal?
Held: No.

The Court held that in order to have full compliance with the contractual right granting petitioner the first
option to purchase, the sale of the properties for the price for which they were finally sold to a third person should
have likewise been first offered to the former. Further, there should be identity of terms and conditions to be
offered to the buyer holding a right of first refusal if such right is not to be rendered illusory. Lastly, the basis of the
right of first refusal must be the current offer to sell of the seller or offer to purchase of any prospective buyer.
Thus, the prevailing doctrine is that a right of first refusal means identity of terms and conditions to be
offered to the lessee and all other prospective buyers and a contract of sale entered into in violation of a right of
first refusal of another person, while valid, is rescissible.
An examination of the attendant particulars of the case does not persuade us to uphold Rivieras view. As
clearly shown by the records and transcripts of the case, the actions of the parties to the contract of lease, Reyes
and Riviera, shaped their understanding and interpretation of the lease provision right of first refusal to mean
simply that should the lessor Reyes decide to sell the leased property during the term of the lease, such sale
should first be offered to the lessee Riviera. And that is what exactly ensued between Reyes and Riviera, a series of
negotiations on the price per square meter of the subject property with neither party, especially Riviera, unwilling
to budge from his offer.
It can clearly be discerned from Rivieras letters that Riviera was so intractable in its position and took
obvious advantage of the knowledge of the time element in its negotiations with Reyes as the redemption period
of the subject foreclosed property drew near. Riviera strongly exhibited a take-it or leave-it attitude in its
negotiations with Reyes. It quoted its fixed and final price as Five Thousand Pesos (P5,000.00) and not any peso
more. It voiced out that it had other properties to consider so Reyes should decide and make known its decision
within fifteen days. Riviera even downgraded its offer when Reyes offered anew the property to it, such that
whatever amount Reyes initially receives from Riviera would absolutely be insufficient to pay off the redemption
price of the subject property. Naturally, Reyes had to disagree with Rivieras highly disadvantageous offer.
Nary a howl of protest or shout of defiance spewed forth from Rivieras lips, as it were, but a seemingly
whimper of acceptance when the counsel of Reyes strongly expressed in a letter dated December 5, 1989 that
Riviera had lost its right of first refusal. Riviera cannot now be heard that had it been informed of the offer of Five
Thousand Three Hundred Pesos (P5,300.00) of Cypress and Cornhill it would have matched said price. Its stubborn
approach in its negotiations with Reyes showed crystal-clear that there was never any need to disclose such
information and doing so would be just a futile effort on the part of Reyes. Reyes was under no obligation to
disclose the same. Pursuant to Article 1339 of the New Civil Code, silence or concealment, by itself, does not
constitute fraud, unless there is a special duty to disclose certain facts, or unless according to good faith and the
usages of commerce the communication should be made. We apply the general rule in the case at bar since
Riviera failed to convincingly show that either of the exceptions are relevant to the case at bar.

Paranaque King Enterprises Inc vs CA

G.R. No. 111538. February 26, 1997
Facts: Defendant Catalina L. Santos is the owner of eight (8) parcels of land located at (sic) Paranaque, Metro
Manila. On November 28, 1977, a certain Frederick Chua leased the above-described property from
defendant. Frederick Chua assigned all his rights and interest and participation in the leased property to Lee Ching
Bing who later assigned all his rights and interest in the leased property to Paranaque Kings Enterprises,
On September 21, 1988, defendant Santos sold the eight parcels of land subject of the lease to defendant
David Raymundo for a consideration of FIVE MILLION PESOS. The said sale was in contravention of the contract of
lease, for the first option or priority to buy was not offered by Santos to the plaintiff. Upon learning of sale,
plaintiffs requested Santos to rectify the error. She had it reconveyed to her for the same consideration of FIVE
MILLION PESOS. Santos subsequently offered the property for sale to the plaintiff for the sum of FIFTEEN MILLION
PESOS. Plaintiffs, through their counsel offered to buy the properties for FIVE MILLION PESOS. Before they replied
to the offer to purchase, another deed of sale was executed by defendant Santos (in favor of) defendant
Raymundo for a consideration of NINE MILLION PESOS.
From the preceding facts it is clear that the sale was simulated and that there was a collusion between the
defendants in the sales of the leased properties, on the ground that when plaintiff wrote a letter to defendant
Santos to rectify the error, she immediately have (sic) the property reconveyed it (sic) to her in a matter of twelve
(12) days. Defendants have the same counsel who represented both of them in their exchange of communication
with plaintiffs counsel, a fact that led to the conclusion that a collusion exist (sic) between the defendants. When
the property was still registered in the name of defendant Santos, her collector of the rental of the leased
properties was her brother-in-law David Santos and when it was transferred to defendant Raymundo the collector
was still David Santos up to the month of June, 1990. The purpose of this unholy alliance between defendants
Santos and Raymundo is to mislead the plaintiff and make it appear that the price of the leased property is much
higher than its actual value of FIVE MILLION (P5,000,000.00) PESOS, so that plaintiff would purchase the properties
at a higher price.
Plaintiff has made considerable investments in the said leased property by erecting a two (2) storey, six (6) doors
commercial building amounting to THREE MILLION (P3,000,000.00) PESOS. This considerable improvement was
made on the belief that eventually the said premises shall be sold to the plaintiff.As a consequence of this unlawful
act of the defendants, plaintiff will incurr (sic) total loss of THREE MILLION (P3,000,000.00) PESOS as the actual cost
of the building and as such defendants should be charged of the same amount for actual damages.
Plaintiff demanded from the defendants to rectify their unlawful acts that they committed, but
defendants refused and failed to comply with plaintiffs just and valid and (sic) demands. Despite repeated
demands, defendants failed and refused without justifiable cause to satisfy plaintiffs claim, and was constrained to
engaged (sic) the services of undersigned counsel to institute this action at a contract fee of P200,000.00, as and
for attorneys fees, exclusive of cost and expenses of litigation. Plaintiffs prayed for the annulment the deed of sale
between defendants and the leased properties be sold to the plaintiff for P5,000,000.00.
Instead of filing their respective answers, respondents filed motions to dismiss anchored on the grounds of
lack of cause of action, estoppel and laches.
The trial court issued the order dismissing the complaint for lack of a valid cause of action. It ruled that the
defendant Santos had verily complied with paragraph 9 of the Lease Agreement by twice offering the properties

for sale to the plaintiff for P15 M. The said offers, however, were plainly rejected by the plaintiff which scorned the
said offer as RIDICULOUS. There was therefore a definite refusal on the part of the plaintiff to accept the offer of
defendant Santos.
Petitioners appealed to the Court of Appeals which affirmed in toto the ruling of the trial court. Petitioner
moved for reconsideration but was denied.
Issue: Was the petitioner denied of his right of first refusal?
Held: Yes. A careful examination of the complaint reveals that it sufficiently alleges an actionable contractual
breach on the part of private respondents. Under paragraph 9 of the contract of lease between respondent Santos
and petitioner, the latter was granted the first option or priority to purchase the leased properties in case Santos
decided to sell. If Santos never decided to sell at all, there can never be a breach, much less an enforcement of
such right. But on September 21, 1988, Santos sold said properties to Respondent Raymundo without first offering
these to petitioner. Santos indeed realized her error, since she repurchased the properties after petitioner
complained. Thereafter, she offered to sell the properties to petitioner for P15 million, which petitioner, however,
rejected because of the ridiculous price. But Santos again appeared to have violated the same provision of the
lease contract when she finally resold the properties to respondent Raymundo for only P9 million without first
offering them to petitioner at such price. Whether there was actual breach which entitled petitioner to damages
and/or other just or equitable relief, is a question which can better be resolved after trial on the merits where each
party can present evidence to prove their respective allegations and defenses.
The trial and appellate courts based their decision to sustain respondents motion to dismiss on the
allegations of Paranaque Kings Enterprises that Santos had actually offered the subject properties for sale to it
prior to the final sale in favor of Raymundo, but that the offer was rejected. According to said courts, with such
offer, Santos had verily complied with her obligation to grant the right of first refusal to petitioner.
We hold, however, that in order to have full compliance with the contractual right granting petitioner the
first option to purchase, the sale of the properties for the amount of P9 million, the price for which they were
finally sold to respondent Raymundo, should have likewise been first offered to petitioner.
From the foregoing, the basis of the right of the first refusal must be the current offer to sell of the seller or
offer to purchase of any prospective buyer. Only after the grantee fails to exercise its right of first priority under
the same terms and within the period contemplated, could the owner validly offer to sell the property to a third
person, again, under the same terms as offered to the grantee.

Lao vs Genato
G.R. No. L-56451 June 19, 1985
Facts: Petitioner spouses were promisees in a Mutual Agreement of Promise to Sell executed between them and
private respondent Sotero B. Dionisio III, son of respondent Sotero A. Dionisio, Jr., heir and administrator of the
intestate estate of the deceased, whereby the promisor bound himself to sell the subject property to petitioners,
Private respondents, except Sotero Dionisio III and William Go, are the children and only compulsory heirs of the
On June 25, 1980, respondent administrator Sotero Dionisio, Jr., with due notice to all his co-heirs, filed a Motion
for Authority to Sell certain properties of the deceased to settle the outstanding obligations of the estate. After
hearing, the lower court issued an Order authorizing the administrator to sell the therein described properties of
the estate and such other properties under his administration at the best price obtainable, and directing him to
submit to the court for approval the transaction made by him
Respondent-administrator sold to his son Sotero Dionisio III the subject property for P75,000.00 per deed of sale.
On the same date, Sotero Dionisio III executed a deed of sale of the same property in favor of respondent William
Go for a consideration of P80.000.00. Title was transferred to respondent Go.
Respondent-heir Florida Nuqui, filed a Motion for Annulment/Revocation of the Deeds of Absolute Sale for the
reasons that the sale and subsequent transfer of title of the property were made in violation of the court's
orderand that the consideration of the two sales were grossly inadequate.
The respondent-administrator filed an opposition to said motion of co-heir Nuqui alleging that the actual
consideration of the sale made by him is P200,000.00 and that it is the agreement of the heirs that if any of the
heirs or close relatives is interested in buying the property, preference will be given to him or her in order to keep
the property within the family of the deceased.
Respondent Nuqui filed a Reply to said Opposition, stating that the two sales were but a single transaction
simultaneously hatched and consummated in one occasion; that the sales were in reality a single deal between the
administrator and William Go, because Sotero Dionisio III is without means or income and so has no capacity to
buy the property; and that the transaction is an evidence of the administrator's intent to defraud the estate and
his co-heirs, for had it not been for the Motion for Annulment, he would not have disclosed the true and actual
consideration of the sale.
All the co-heirs of respondent-administrator filed a Manifestation to Adopt the Motion for Annulment/Revocation
of Deeds of Absolute Sale. They allege that the Court order merely authorized the sale of the subject property but
did not approve the same.
Respondent Go filed a Motion for Leave to Intervene to protect his rights, manifesting that he paid Sotero Dionisio
III the actual consideration of P225,000.00 and being a purchaser in good faith and for value, his title to the
property is indefeasible pursuant to law.
Petitioner spouses filed a "Manifestation In Intervention of Interest to Purchase Property Authorized by the Court
to be Sold", wherein they alleged that respondent-administrator, without revealing that the property had already
been sold to William Go, entered into a Mutual Agreement of Promise to Sell to herein petitioners, among other
things. At the hearing of the said incident involving the questioned sales, petitioners submitted a copy of the
Contract of mortgage executed by respondent-administrator in favor of Juan Lao, one of the petitioners, whereby
the former mortgaged "all his undivided interest in the estate of his deceased mother, Rosenda Abuton Vda. de

Nuqui, subject matter of this intestate Estate No. 842, now pending before the Court of First Instance of Oroquieta
City, Branch I."
Respondent heir Florida A. Nuqui filed an Opposition to William Go's Motion to Intervene averring therein that the
deed of sale executed by Sotero Dionisio, Jr. in favor of Sotero Dionisio III created no legal force and effect, since
the validity of the sale absolutely depended on its approval by the court; that it therefore follows that the
succeeding sale to Go and consequent issuance of the title to him are also null and void from their inception and
that the admission by William Go of the actual and true consideration of the sale at his stage, hardly bespeaks of
"innocence" or "good faith".
After several days of hearing, respondent Judge allowed all the interested parties to bid for the property at the
highest obtainable price pursuant to his Order of July 8, 1980.
Respondent Go offered to buy the property in the amount of P280,000.00. Petitioners counter-offered at
P282,000.00, spot cash. On that same day, all the heirs, except the administrator, filed a Motion Ex Parte stating
among other things, that the offer of William Go appears the highest obtainable price and that the offer of
petitioners is not well taken as the same has not been made within a reasonable period of five (5) days from
February 11, 1981.
On February 17, 1981, all the parties, with the exception of the Lao spouses and Sotero Dionisio III, submitted for
approval an Amicable Settlement. Petitioners filed an opposition to the approval of the Amicable Settlement on
the ground that the Deed of Absolute Sale executed by the administrator in favor of his son is without
consideration, therefore, it is fictitious and simulated hence it cannot be confirmed or ratified pursuant to Article
1409 of the New Civil Code
Issue: Was there a valid sale?
Held: No. Sotero Dionisio, Jr. is the Administrator of the estate of his deceased mother Rosenda Abuton. As such
Administrator, he occupies a position of the highest trust and confidence, He is required to exercise reasonable
diligence and act in entire good faith in the performance of that trust, Although he is not a guarantor or insurer of
the safety of the estate nor is he expected to be infallible yet the same degree of prudence, care and judgment
which a person of a fair average capacity and ability exercises in similar transactions of his own, serves as the
standard by which his conduct is to be judged.
In the discharge of his functions, the administrator should act with utmost circumspection in order to preserve
the estate and guard against its dissipation so as not to prejudice its editors and the heirs of the decedents who
are entitled to the net residue thereof. In the case at bar, the sale was made necessary "in order to settle other
existing obligations of the estate. This purpose is clearly manifested in the Motion for to Sell filed by Dionisio, Jr.
The subsisting obligation referred to, although not specified, must be those due and owing to the creditors of the
estate and also the taxes due the government. In order to guarantee faithful compliance with the authority
granted respondent Judge, through the aforesaid Order made it an emphatic duty on the part of the administrator
Dionisio." . . . to submit to this Court for approval the transactions made by him."
The sale was made. But of all people, to his very son Sotero Dionisio III and for the grossly low price of only
P75,000,00, That sale was indubitably shown to be fictitious, it clearly appearing that Dionisio III has no income
whatsoever. In fact, he is still a dependent of his father, administrator Dionisio, Jr. On top of that, not a single
centavo, of the P75,000.00 stated consideration was ever accounted for nor reported by Dionisio, Jr. to the
probate court. Neither did he submit said transaction as mandated by the order authorizing him to sell, to the
probate court for its approval and just so its validity and fairness may be passed upon and resolved. It was only
upon the filing by one of the heirs, Florida A. Nuqui, of the "Motion for Annulment/Revocation of Deeds of
Absolute Sale" questioning the genuineness aid validity of the transactions, that Dionisio, Jr. was compelled to

admit that the actual consideration for the sale made by him was P200,000.00. This sale is one of the illegal and
irregular transactions that was confirmed and legalized by His HONOR's approval of the assailed Amicable
Settlement. No doubt, respondent Judge's questioned approval violates Article 1409 of the New Civil Code and
cannot work to confirm nor serve to ratify a fictitious contract which is non-existent and void from the very
beginning. The fact that practically all the heirs are parties-signatories to the said Compromise Agreement is of
no moment. Their assent to such an illegal scheme does not legalize the same nor does it impose any obligation
upon respondent Judge to approve the same to the prejudice not only of the creditors of the estate, and the
government by the non-payment of the correct amount of taxes legally due from the estate.
The offer by the petitioner of P300,000.00 for the purchase of the property in question does not appear seriously
disputed on record. As against the price stated in the assailed Compromise Agreement the former amount is
decidedly more beneficial and advantageous not only to the estate, the heirs of the descendants, but more
importantly to its creditors, for whose account and benefit the sale was made. No satisfactory and convincing
reason appeared given for the rejection and/or non-acceptance of said offer thus giving rise to a well-grounded
suspicion that a collusion of some sort exists between the administrator and the heirs to defraud the creditors and
the government.
RTC, 4JR Tanay, Rizal and ATTY. SERGIO I. AMONOY respondents.
Facts: The facts disclose that the Controverted Parcels were part of the estate of the late Julio M. Catolos subject
of intestate estate proceedings, wherein Respondent Amonoy acted as counsel for some of the heirs, namely
Alfonso Fornilda and Asuncion M. Pasamba. The subject properties were adjudicated to Alfonso Fornilda and
Asuncion M. Pasamba in the Project of Partition approved by the Court on 12 January 1965. On 20 January 1965,
or only eight (8) days thereafter, and while he was still intervening in the case as counsel, these properties were
mortgaged by petitioners' predecessor-in-interest, Alfonso Fornilda and Asuncion Pasamba, to Respondent
Amonoy to secure payment of the latter's attorney's fees in the amount of P27,600.00;
In 1969 Alfonso 1. Fornilda and Asuncion M. Pasamba both passed
That since the mortgage indebtedness was not paid, Respondent Amonoy instituted an action for judicial
foreclosure of mortgage on 21 January 1970 before the Court of First Instance of Rizal, at Pasig;
Trial Court rendered judgement in the Foreclosure Case ordering the Pasamba and Fornilda heirs to pay
Respondent Amonoy, within ninety (90).days from receipt of the decision, the failing of which, the Controverted
Parcels would be sold at public auction. The mortgage was subsequently ordered foreclosed and auction sale
followed where Respondent Amonoy was the sole bidder for P23,600.00;
On 19 December 1973, or a year after the judgment in the Foreclosure Case, an action for Annulment of
Judgment was filed before the then Court of First Instance of Rizal. Of particular relevance to the instant Petition
is the contention that the mortgage and the Sheriffs 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 dismissed the Annulment Case. On appeal, the Court of Appeals affirmed the aforesaid judgment

On 27 September 1985, petitioners came to this Court in a pleading entitled "Petisiyung Makapagpasuri Taglay ang
Pagpapapigil ng Utos" translated as one for certiorari with Preliminary Injunction. On 11 November 1985, we
dismissed the petition for non-payment of docket and other fees. However, upon payment thereof, the Order of
dismissal was set aside and respondents were directed to submit their Comment.
Issue: whether or not 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

Held: Yes. Telling is the fact that the transaction involved falls squarely within the prohibition against any
acquisition by a lawyer of properties belonging to parties they represent which are still in suit. For, while the
Project of Partition was approved on 12 January 1965, it was not until 6 August 1969 that the estate was declared
closed and terminated (Record on Appeal, Civil Case No. 3103, p. 44). 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 an
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
The fact that the properties were first mortgaged and only subsequently acquired in an auction sale long after the
termination of the intestate proceedings will not remove it from the scope of the prohibition. To rule otherwise
would be to countenance indirectly what cannot be done directly.
The adverse claimant, Atty. Alberto B. Fernandez was retained as counsel, Maximo Abarquez, the petitioner in Civil
Case No. R-6573 of the Court of First Instance of Cebu, Litigating as a pauper in the lower court and engaging the
services of his lawyer on a contingent basis, Abarquez, liable to compensate his lawyer whom he also retained for
his appeal executed a document whereby he obliged himself to give to his lawyer one-half (1/2) of whatever he
might recover from Lots 5600 and 5602 should the appeal prosper
The real Property sought to be recovered in Civil Case No. R6573 was actually the share of the petitioner in Lots
5600 and 5602, which were part of the estate of his deceased parents and which were partitioned the heirs which
included petitioner Maximo Abarquez and his elder sister Agripina Abarquez, the defendant in said civil case.
The Court of First Instance of Cebu rendered a decision

against Abarquez and so he appealed to the Court of

The Court of Appeals reversed the decision of the lower court

Subsequently, Transfer Certificate of Title No. 31841 was issued on May 19,1965 in the name of Maximo
Abarquez, over his adjudged share in Lots Nos. 5600 and 5602. These parcels of land later by the subject matter
of the adverse claim filed by the claimant.

The case having been resolved and title having been issued to petitioner, adverse claimant waited for petitioner
to comply with ha obligation under the document executed by him to deliver the one-half () portion of the said
parcels of land.
Petitioner refused to comply with his obligation and instead offered to sell the whole parcels of land covered by
TCT No. 31841 to petitioner-spouses Juan Larrazabal and Marta C. de Larrazabal. Upon being informed of the
intention of the petitioner, adverse t claimant immediately took steps to protect his interest by filling an affidavit
of adverse claim on July 19, 1965 with the Register of Deeds of Cebu . the adverse claim was subsequently
annonated on the transfer certificate of title .
Notwithstanding the annotation of the adverse claim, petitioner-spouse Maximo Abarquez and Anastacia Cabigas
conveyed by deed of absolute sale on July 29, 1965 two-thirds (2/3) of the lands covered by TCT No. 31841 to
petitioner-spouses Juan Larrazabal and Marta C. de Larrazabal. When the new transfer certificate of title No.
32996 was issued, the annotation of adverse claim on TCT No. 31841 necessarily had to appear on the new
transfer certificate of title.
This adverse claim on TCT No. 32996 became the subject of cancellation proceedings filed by herein petitionerspouses on March 7, 1966 with the Court of First Instance of Cebu.
The trial court resolved that the petition to cancel the adverse claim should be denied. The admission by the
petitioners that the lawyers (Attys. Fernandez and Batiguin) are entitled to only one-third of the lot described in
Transfer Certificate of Title No. 32966 is the best proof of the authority to maintain said adverse claim .
Petitioner-spouses decided to appeal the order of dismissal to this Court
Petitioners contend that a contract for a contingent fee violates Article 1491
Issue: whether or not the contract for a contingent fee, basis of the interest of Atty. Fernandez, is prohibited by
the Article 1491
Held:No. This contention is without merit. Article 1491 prohibits only the sale or assignment between the lawyer
and his client, of property which is the subject of litigation. In other words, for the prohibition to operate, the
sale or transfer of the property must take place during the pendency of the litigation involving the property
A contract for a contingent fee is not covered by Article 1491 because the tranfer or assignment of the property in
litigation takes effect only after the finality of a favorable judgment. In the instant case, the attorney's fees of Atty.
Fernandez, consisting of one-half (1/2) of whatever Maximo Abarquez might recover from his share in the lots in
question, is contingent upon the success of the appeal. Hence, the payment of the attorney's fees, that is, the
transfer or assignment of one-half (1/2) of the property in litigation will take place only if the appeal prospers.
Therefore, the tranfer actually takes effect after the finality of a favorable judgment rendered on appeal and not
during the pendency of the litigation involving the property in question. Consequently, the contract for a
contingent fee is not covered by Article 1491.
Petitioner-spouses having purchased the property with the knowledge of the adverse claim, they are therefore in
bad faith. Consequently, they are estopped from questioning the validity of the adverse claim







Facts: Leocadia Balisado was the original owner of the coconut land in controversy. He sold it to the spouses
Patricio Barsobia (now deceased) and Epifania Sarsosa, one of the petitioners herein. On September 5, 1936,
Epifania Sarsosa then a widow, sold the land in controversy to a Chinese, Ong King Po. Ong King Po then sold the
litigated property to Victoriano T. Cuenco (respondent herein), a naturalized Filipino
On March 6, 1962, Epifania "usurped" the controverted property and sold a one-half (1/2) portion of the land in
question to Pacita W. 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.
On December 27, 1966, respondent instituted before the Court of First Instance of Misamis Oriental a Complaint
for recovery of possession and ownership of the litigated land, against petitioners. Petitioners insisted that the
sale to Ong King Po, a Chinese, was inexistent and/or void ab initio. The Trial Court dismissed the complaint
On appeal, the CA reversed the aforementioned Decision and decreed instead that respondent was the owner of
the litigated property, following the denial of their Motion for Reconsideration, petitioners filed the instant
Petition for Review on certiorari
Issue: is respondent, Victoriano T. Cuenco, the rightful owner of the property?
Held: Yes. There should be no question that the sale of the land in question in 1936 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, regarding the disqualification of aliens to hold lands of the public domain.
But the factual set-up has changed. The litigated property is now in the hands of a naturalized Filipino. It is no
longer owned by a disqualified vendee. Respondent, as a naturalized citizen, was constitutionally qualified to own
the subject property. There would be no more public policy to be served in allowing petitioner Epifania to recover
the land as it is already in the hands of a qualified person.
Herrera vs. Guan
G.R. No. L-17043

January 31, 1961

Re: Sale of an Agent/ Sale by an alien to a Filipino

Plaintiff Natividad Herrera is the legitimate daughter of Luis Herrera, now deceased and who died in China (1931 or
1932). The said Luis Herrera in his lifetime was the owner of 3 parcels of land and their improvements. Each and
every of these 3 lots are sufficiently described in the complaint filed by the plaintiffs. Lots 1740, 4465 and 4467.
Before leaving for China, Luis Herrera executed on December 1, 1931, a deed of General Power of Attorney, which
authorized and empowered the defendant Kim Guan, among others, to administer and sell the properties of said
Luis Herrera.
Lot 1740 was originally covered by OCT 8601 registered in the name of Luis Herrera, married to GO Bang. This lot
was sold by the defendant Luy Kim in his capacity as attorney-in-fact of the deceased Luis Her to Luy Chay on
September 11, 1939, corresponding deed of sale. TCT 3162 was issued to Luy Chay by virtue of deed of sale.
On August 28, 1941, to secure a loan of P2,00 a deed of mortgage to the Zamboanga Mutual Building and
Association was executed by Luy Chay.

On January 31, 1947, the said Luy Chay executed a deed of sale, in favor of Lino Bangayan. Transfer Certificate of
Title T-2567 was issued to Lino Bangayan on June 24, 1949.
Lots 4465 and 4467 were originally registered in the of Luis Herrera, married to Go Bang, OCT No. 0-14360. On
December 1, 1931, Luis Herrera sold one-half () undivided share and to Herrera and Go Bang, the other half ()
On July 23, 1937, Luis Herrera thru his attorney-in-fact Luy Kim Guan sold to Nicomedes Salazar his one half ()
participation in these two (2) lots. The corresponding deed of sale for P3,000.00 Transfer Certificate of Title No. T494-(T-13045) was issued to Nicomedes Salazar and to the defendant Luy Kim Guan.
On August 4, 1937, the defendant Luy Kim Guan and Nicomedes Salazar executed a deed of mortgage in favor of
BPI to secure a loan of P3,500.00.
On August 17, 1937, the defendant Luy Kim Guan and Nicomedes Salazar sold Lot 4465 to Carlos Eijansantos for
the sum of P100.00 , the corresponding deed of sale, and TCT No. T-2653 was issued on September 7, 1939 to
Carlos Eijansantos.
Nicomedes Salazar sold his one half () interest on Lot 4467 to the defendant Lino Bangayan for P3,000.00 on
February 22, 1949, and the corresponding TCT T-2654 was issued to Lino Bangayan and to Luy Kim Guan, both are
co-owners in equal shares. Opinion of the City Attorney and an affidavit of Atty. Jose T. Atilano, state that Lino
Bangayan is a Filipino citizen.

As admitted by both parties (plaintiffs and defendants), Luis Herrera is now deceased, but as to the specific and
precise date of his death the evidence of both parties failed to show.

According to plaintiff:
All the transactions mentioned in the preceding quoted portion of the decision were fraudulent and were
executed after the death of Luis Herrera and, consequently, when the power of attorney was no longer operative
Defendants Lino Bangayan and Luy Kim Guan who now claim to be the owners of Lots Nos. 1740 and
4467 are Chinese by nationality, hence are disqualified to acquire real properties.
She questions the supposed deed of sale executed by Luis Herrera on December 1, 1931 in favor of Luy
Kim Guan, conveying one-half interest on the two lots, Nos. 4465 and 4467, asserting that what was actually
executed on that date, jointly with the general power of attorney, was a lease contract over the same properties
for a period of 20 years for which Luy Kim Guan paid the sum of P2,000.00.
Issue: Whether or not all these conveyances are void.
(RE: Death of Principal)
On the other hand, we have the testimony of the witness Chung Lian to the effect that when he was in Amoy the
year 1940, Luis Herrera visited him and had a conversation with him, showing that the latter was still alive at the

time. Also, there was no proof that agent was aware of death of the principal; death of the principal does not
render the act of an agent unenforceable, where the agent had no knowledge of such extinguishment of the
(RE: Citizenship of Defendant Luy Kim Guan)
With respect to Luy Kim Guan, while it is true that he is a Chinese citizen, nevertheless, inasmuch as he acquired
his one-half share in Lot No. 4467 in 1931, long before the Constitution was adopted, his ownership cannot be
attacked on account of his citizenship.
Also no evidence was presented to support the claim. Also, in TCT 3462, it was stated that Luy Chay was a Filipino
Citizen. And even if he is a Chinese citizen, the sale of land between Luy Chay and Lino Bangayan cannot be
impugned, because such sale cannot be impugned as it is not violative of the Constitutional prohibition regarding
alien acquiring lands.

Godinez v. Fong Pak Luen

VICENTE GODINEZ, ET AL., plaintiffs-appellants,
FONG PAK LUEN ET AL., defendants, TRINIDAD S. NAVATA, defendant-appellee.
On September 30, 1966, the plaintiffs filed a complaint in the CFI of Sulu.
They allege, among others, that:
they are the heirs of Jose Godinez who was married to Martina Alvarez Godinez sometime in 1910;
that during the marriage of their parents the said parents acquired a parcel of land lot No. 94 of Jolo townsite as
evidenced by Original Certificate of Title No. 179 in the name of Jose Godinez; that their mother died sometime in
1938 leaving the plaintiffs as their sole surviving heirs;
that on November 27, 1941, without the knowledge of the plaintiffs, the said Jose Godinez, for valuable
consideration, sold the aforesaid parcel of land to the defendant Fong Pak Luen, a Chinese citizen, which
transaction is contrary to law and in violation of the Civil Code because the latter being an alien who is inhibited by
law to purchase real property;
that Transfer Certificate Title No. 884 was then issued by the Register of Deeds to the said defendant, which is null
and void ab initio since the transaction constituted a non-existent contract;
that on January 11, 1963, said defendant Fong Pak Luen executed a power of attorney in favor of his co-defendant
Kwan Pun Ming, also an alien, who conveyed and sold the above described parcel of land to co-defendant Trinidad
S. Navata, who is aware of and with full knowledge that Fong Pak Luen is a Chinese citizen as well as Kwan Pun
Ming, who under the law are prohibited and disqualified to acquire real property in this jurisdiction;

that defendant Fong Pak Luen has not acquired any title or interest in said parcel of land as the purported contract
of sale executed by Jose Godinez alone was contrary to law and considered non- existent, so much so that the
alleged attorney-in-fact, defendant Kwan Pun Ming had not conveyed any title or interest over said property and
defendant Navata had not acquired anything from said grantor and as a consequence Transfer Certificate of Title
No. 1322, which was issued by the Register of Deeds in favor of the latter is null and void ab initio,- that since onehalf of the said property is conjugal property inherited by the plaintiffs from their mother, Jose Godinez could -not
have legally conveyed the entire property; that notwithstanding repeated demands on said defendant to surrender
to plaintiffs the said property she refused and still refuses to do so to the great damage and prejudice of the
The plaintiffs thus pray that they be adjudged as the owners of the parcel of land in question and that Transfer
Certificate of Title RT-90 issued in the name of defendant Fong Pak Luen be declared null and void ab initio; and
that the power of attorney issued in the name of Kwan Pun Ming, as well as Transfer Certificate of Title No. 'L322
issued in the name of defendant Navata be likewise declared null and void.
On August 18, 1966, the defendant Register of Deeds filed an answer claiming that he was not yet the register of
deeds then; that it was only the ministerial duty of his office to issue the title in favor of the defendant Navata
once he was determined the registerability of the documents presented to his office.
Navata filed her answer claiming 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; and 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 the 10 year period provided for by law.
RTC dismissed the case on the ground of prescription, in applying Art. 1144 (1).
Whether or not the heirs of a person who sold a parcel of land to an alien is violative of a constitutional
prohibition, may recover the property if it has been conveyed to a naturalized Filipino citizen qualified to own it.
Sale in 1941 by Godinez to Fong Pak Luen is violative of the Constitutional prohibition. Because according to Article
XIII Section 5 of the 1935 Constitution, the only way an alien can acquire public agricultural lands is through
hereditary succession. Prescription may not be used to defend a contract which the Constitution prohibits.
In this case, the disqualified alien vendee Fong Pak Luen, sold the same property to Navata, a Filipino citizen. The
Supereme Court said that if an alien sold a land to a Filipino, such sale cannot be impugned. Hence, Navata is the
rightful owner of the land.

Jacob Bernhard Hulst vs PR Builders

Jacobus Bernhard Hulst (petitioner) and his spouse Ida Johanna Hulst-Van Ijzeren (Ida), Dutch nationals, entered
into a Contract to Sell with PR Builders, Inc. (respondent), for the purchase of a 210-sq m residential unit in
respondent's townhouse project in Barangay Niyugan, Laurel, Batangas.
When respondent failed to comply with its verbal promise to complete the project by June 1995, the spouses Hulst
filed before the Housing and Land Use Regulatory Board (HLURB) a complaint for rescission of contract with
interest, damages and attorney's fees, docketed as HLRB Case No. IV6-071196-0618. HLURB Arbiter Ma. Perpetua
Y. Aquino (HLURB Arbiter) rendered a Decision in favor of spouses Hulst.

Meanwhile, spouses Hulst divorced. Ida assigned her rights over the purchased property to petitioner. From then
on, petitioner alone pursued the case.
The HLURB Arbiter issued a Writ of Execution addressed to the Ex-Officio Sheriff of the Regional Trial Court of
Tanauan, Batangas directing the latter to execute its judgment. The Ex-Officio Sheriff proceeded to implement the
writ however, upon complaint of respondent with the CA on a Petition for Certiorari and Prohibition, the levy
made by the Sheriff was set aside, requiring the Sheriff to levy first on respondent's personal properties.
Upon petitioners motion, the HLURB Arbiter issued an Alias Writ of Execution. The Sheriff levied on respondent's
15 parcels of land covered by 13 Transfer Certificates of Title.
In a Notice of Sale dated March 27, 2000, the Sheriff set the public auction of the levied properties on April 28,
2000 at 10:00 a.m..
Two days before the scheduled public auction, respondent filed an Urgent Motion to Quash Writ of Levy with the
HLURB on the ground that the Sheriff made an overlevy since the aggregate appraised value of the levied
properties at P6,500.00 per sq m is P83,616,000.00, based on the Appraisal Report of Henry Hunter Bayne Co., Inc.
dated December 11, 1996, which is over and above the judgment award.
On the day of auction, respondent's counsel objected to the conduct of the public auction on the ground that
respondent's Urgent Motion to Quash Writ of Levy was pending resolution. Absent any restraining order from the
HLURB, the Sheriff proceeded to sell the 15 parcels of land. Holly Properties Realty Corporation was the winning
bidder for all 15 parcels of land for the total amount ofP5,450,653.33. The sum of P5,313,040.00 was turned over
to the petitioner in satisfaction of the judgment award after deducting the legal fees.
The sheriff latter received the Order dated April 28, 2000 issued by the HLURB Arbiter to suspend the proceedings
on the matter.
Four months later, the HLURB Arbiter and HLURB Director issued an Order setting aside the sheriff's levy on
respondent's real properties. They did not agree that the aggregate value of the 12,864.00-square meter levied
properties is only around PhP6,000,000.00. Furthermore, they stated that the Sheriff had to consider the fair
market value of the properties levied upon to determine whether they are sufficient to satisfy the judgment.
A motion for reconsideration being a prohibited pleading under Section 1(h), Rule IV of the 1996 HLURB Rules and
Procedure, petitioner filed a Petition for Certiorari and Prohibition with the CA on September 27, 2000.

CA rendered herein assailed Decision dismissing the petition. The CA held that petitioner's insistence
that Barrozo v. Macaraeg does not apply since said case stated that "when there is a right to redeem inadequacy
of price should not be material" holds no water as what is obtaining in this case is not "mere inadequacy," but an
inadequacy that shocks the senses; that Buan v. Court of Appeals properly applies since the questioned levy
covered 15 parcels of land posited to have an aggregate value of P83,616,000.00 which shockingly exceeded the
judgment debt of only around P6,000,000.00.


Without filing a motion for reconsideration, petitioner took the present recourse on the sole ground that:
Before resolving the question whether the CA erred in affirming the Order of the HLURB setting aside the levy
made by the sheriff, it behooves this Court to address a matter of public and national importance which
completely escaped the attention of the HLURB Arbiter and the CA: petitioner and his wife are foreign nationals
who are disqualified under the Constitution from owning real property in their names.
Section 7 of Article XII of the 1987 Constitution provides:
Sec. 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to
individuals, corporations, or associations qualified to acquire or hold lands of the public domain.
(Emphasis supplied).
The capacity to acquire private land is made dependent upon the capacity to acquire or hold lands of the public
domain. Private land may be transferred or conveyed only to individuals or entities "qualified to acquire lands of
the public domain." The 1987 Constitution reserved the right to participate in the disposition, exploitation,
development and utilization of lands of the public domain for Filipino citizens or corporations at least 60 percent
of the capital of which is owned by Filipinos. Aliens, whether individuals or corporations, have been disqualified
from acquiring public lands; hence, they have also been disqualified from acquiring private lands.
Since petitioner and his wife, being Dutch nationals, are proscribed under the Constitution from acquiring and
owning real property, it is unequivocal that the Contract to Sell entered into by petitioner together with his wife
and respondent is void. Under Article 1409 (1) and (7) of the Civil Code, all contracts whose cause, object or
purpose is contrary to law or public policy and those expressly prohibited or declared void by law are inexistent
and void from the beginning. Article 1410 of the same Code provides that the action or defense for the declaration
of the inexistence of a contract does not prescribe. A void contract is equivalent to nothing; it produces no civil
effect. It does not create, modify or extinguish a juridical relation.
Generally, parties to a void agreement cannot expect the aid of the law; the courts leave them as they are,
because they are deemed in pari delicto or "in equal fault." In pari delicto is "a universal doctrine which holds
that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific
performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or
damages for its violation; and where the parties are in pari delicto, no affirmative relief of any kind will be given to
one against the other."

This rule, however, is subject to exceptions that permit the return of that which may have been given under a
void contract to: (a) the innocent party (Arts. 1411-1412, Civil Code); (b) the debtor who pays usurious interest
(Art. 1413, Civil Code); (c) the party repudiating the void contract before the illegal purpose is accomplished or
before damage is caused to a third person and if public interest is subserved by allowing recovery (Art. 1414,
Civil Code); (d) the incapacitated party if the interest of justice so demands (Art. 1415, Civil Code); (e) the party
for whose protection the prohibition by law is intended if the agreement is not illegal per se but merely prohibited
and if public policy would be enhanced by permitting recovery (Art. 1416, Civil Code); and (f) the party for whose
benefit the law has been intended such as in price ceiling laws (Art. 1417, Civil Code) and labor laws (Arts. 141839
1419, Civil Code).
It is significant to note that the agreement executed by the parties in this case is a Contract to Sell and not a
contract of sale. A distinction between the two is material in the determination of when ownership is deemed to

have been transferred to the buyer or vendee and, ultimately, the resolution of the question on whether the
constitutional proscription has been breached.
Since the contract involved here is a Contract to Sell, ownership has not yet transferred to the petitioner when he
filed the suit for rescission. While the intent to circumvent the constitutional proscription on aliens owning real
property was evident by virtue of the execution of the Contract to Sell, such violation of the law did not materialize
because petitioner caused the rescission of the contract before the execution of the final deed transferring
Thus, exception (c) finds application in this case. Under Article 1414, one who repudiates the agreement and
demands his money before the illegal act has taken place is entitled to recover. Petitioner is therefore entitled to
recover what he has paid, although the basis of his claim for rescission, which was granted by the HLURB, was not
the fact that he is not allowed to acquire private land under the Philippine Constitution. But petitioner is entitled
to the recovery only of the amount of P3,187,500.00, representing the purchase price paid to respondent. No
damages may be recovered on the basis of a void contract; being nonexistent, the agreement produces no juridical
tie between the parties involved. Further, petitioner is not entitled to actual as well as interests thereon, moral
and exemplary damages and attorney's fees.
The Court takes into consideration the fact that the HLURB Decision dated April 22, 1997 has long been final and
executory. Nothing is more settled in the law than that a decision that has acquired finality becomes immutable
and unalterable and may no longer be modified in any respect even if the modification is meant to correct
erroneous conclusions of fact or law and whether it was made by the court that rendered it or by the highest court
of the land. The only recognized exceptions to the general rule are the correction of clerical errors, the socalled nunc pro tunc entries which cause no prejudice to any party, void judgments, and whenever circumstances
transpire after the finality of the decision rendering its execution unjust and inequitable. None of the exceptions
is present in this case. The HLURB decision cannot be considered a void judgment, as it was rendered by a tribunal
with jurisdiction over the subject matter of the complaint.
Ineluctably, the HLURB Decision resulted in the unjust enrichment of petitioner at the expense of respondent.
Petitioner received more than what he is entitled to recover under the circumstances.
Article 22 of the Civil Code which embodies the maxim, nemo ex alterius incommode debet lecupletari (no man
ought to be made rich out of another's injury), states:
Art. 22. Every person who through an act of performance by another, or any other means, acquires or
comes into possession of something at the expense of the latter without just or legal ground, shall return
the same to him.
The above-quoted article is part of the chapter of the Civil Code on Human Relations, the provisions of which were
formulated as basic principles to be observed for the rightful relationship between human beings and for the
stability of the social order; designed to indicate certain norms that spring from the fountain of good conscience;
guides for human conduct that should run as golden threads through society to the end that law may approach its
supreme ideal which is the sway and dominance of justice. There is unjust enrichment when a person unjustly
retains a benefit at the loss of another, or when a person retains money or property of another against the
fundamental principles of justice, equity and good conscience.
A sense of justice and fairness demands that petitioner should not be allowed to benefit from his act of entering
into a contract to sell that violates the constitutional proscription.
This is not a case of equity overruling or supplanting a positive provision of law or judicial rule. Rather, equity is
exercised in this case "as the complement of legal jurisdiction [that] seeks to reach and to complete justice where

courts of law, through the inflexibility of their rules and want of power to adapt their judgments to the special
circumstances of cases, are incompetent to do so."
The purpose of the exercise of equity jurisdiction in this case is to prevent unjust enrichment and to ensure
restitution. Equity jurisdiction aims to do complete justice in cases where a court of law is unable to adapt its
judgments to the special circumstances of a case because of the inflexibility of its statutory or legal jurisdiction.
The sheriff delivered to petitioner the amount of P5,313,040.00 representing the net proceeds (bidded amount
isP5,450,653.33) of the auction sale after deducting the legal fees in the amount of P137,613.33. Petitioner is
only entitled to P3,187,500.00, the amount of the purchase price of the real property paid by petitioner to
respondent under the Contract to Sell. Thus, the Court in the exercise of its equity jurisdiction may validly order
petitioner to return the excess amount of P2,125,540.00.
The Court shall now proceed to resolve the single issue raised in the present petition: whether the CA seriously
erred in affirming the HLURB Order setting aside the levy made by the Sheriff on the subject properties.
Petitioner avers that the HLURB Arbiter and Director had no factual basis for pegging the fair market value of the
levied properties at P6,500.00 per sq m or P83,616,000.00; that reliance on the appraisal report was misplaced
since the appraisal was based on the value of land in neighboring developed subdivisions and on the assumption
that the residential unit appraised had already been built; that the Sheriff need not determine the fair market
value of the subject properties before levying on the same since what is material is the amount for which the
properties were bidded and sold during the public auction; that the pendency of any motion is not a valid ground
for the Sheriff to suspend the execution proceedings and, by itself, does not have the effect of restraining the
Sheriff from proceeding with the execution.
Respondent, on the other hand, contends that while it is true that the HLURB Arbiter and Director did not
categorically state the exact value of the levied properties, said properties cannot just amount to P6,000,000.00;
that the HLURB Arbiter and Director correctly held that the value indicated in the tax declaration is not the sole
determinant of the value of the property.
The petition is impressed with merit.
If the judgment is for money, the sheriff or other authorized officer must execute the same pursuant to the
provisions of Section 9, Rule 39 of the Revised Rules of Court, viz:
Sec. 9. Execution of judgments for money, how enforced.
(a) Immediate payment on demand. - The officer shall enforce an execution of a judgment for money by
demanding from the judgment obligor the immediate payment of the full amount stated in the writ of
execution and all lawful fees. x x x
(b) Satisfaction by levy. - If the judgment obligor cannot pay all or part of the obligation in cash, certified
bank check or other mode of payment acceptable to the judgment obligee, the officer shall levy upon the
properties of the judgment obligor of every kind and nature whatsoever which may be disposed of for
value and not otherwise exempt from execution, giving the latter the option to immediately choose
which property or part thereof may be levied upon, sufficient to satisfy the judgment. If the judgment
obligor does not exercise the option, the officer shall first levy on the personal properties, if any, and then
on the real properties if the personal properties are insufficient to answer for the judgment.
The sheriff shall sell only a sufficient portion of the personal or real property of the judgment obligor
which has been levied upon.

When there is more property of the judgment obligor than is sufficient to satisfy the judgment and
lawful fees, he must sell only so much of the personal or real property as is sufficient to satisfy the
judgment and lawful fees.
Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or
personal property, may be levied upon in like manner and with like effect as under a writ of
attachment (Emphasis supplied).
Thus, under Rule 39, in executing a money judgment against the property of the judgment debtor, the sheriff shall
levy on all property belonging to the judgment debtor as is amply sufficient to satisfy the judgment and costs, and
sell the same paying to the judgment creditor so much of the proceeds as will satisfy the amount of the judgment
debt and costs. Any excess in the proceeds shall be delivered to the judgment debtor unless otherwise directed by
the judgment or order of the court.
Clearly, there are two stages in the execution of money judgments. First, the levy and then the execution sale.
Levy has been defined as the act or acts by which an officer sets apart or appropriates a part or the whole of a
judgment debtor's property for the purpose of satisfying the command of the writ of execution. The object of a
levy is to take property into the custody of the law, and thereby render it liable to the lien of the execution, and
put it out of the power of the judgment debtor to divert it to any other use or purpose.
On the other hand, an execution sale is a sale by a sheriff or other ministerial officer under the authority of a writ
of execution of the levied property of the debtor.
In the present case, the HLURB Arbiter and Director gravely abused their discretion in setting aside the levy
conducted by the Sheriff for the reason that the auction sale conducted by the sheriff rendered moot and
academic the motion to quash the levy. The HLURB Arbiter lost jurisdiction to act on the motion to quash the levy
by virtue of the consummation of the auction sale. Absent any order from the HLURB suspending the auction sale,
the sheriff rightfully proceeded with the auction sale. The winning bidder had already paid the winning bid. The
legal fees had already been remitted to the HLURB. The judgment award had already been turned over to the
judgment creditor. What was left to be done was only the issuance of the corresponding certificates of sale to the
winning bidder. In fact, only the signature of the HLURB Director for that purpose was needed a purely
ministerial act.
A purely ministerial act or duty is one which an officer or tribunal performs in a given state of facts, in a prescribed
manner, in obedience to the mandate of a legal authority, without regard for or the exercise of his own judgment
upon the propriety or impropriety of the act done. If the law imposes a duty upon a public officer and gives him
the right to decide how or when the duty shall be performed, such duty is discretionary and not ministerial. The
duty is ministerial only when the discharge of the same requires neither the exercise of official discretion nor
judgment. In the present case, all the requirements of auction sale under the Rules have been fully complied with
to warrant the issuance of the corresponding certificates of sale.
And even if the Court should go into the merits of the assailed Order, the petition is meritorious on the following

Firstly, the reliance of the HLURB Arbiter and Director, as well as the CA, on Barrozo v. Macaraeg and Buan v.
Court of Appeals is misplaced.
The HLURB and the CA misconstrued the Court's pronouncements in Barrozo. Barrozo involved a judgment debtor
who wanted to repurchase properties sold at execution beyond the one-year redemption period. The statement of
the Court in Barrozo, that "only where such inadequacy shocks the conscience the courts will intervene," is at best

a mere obiter dictum. This declaration should be taken in the context of the other declarations of the Court
in Barrozo, to wit:
Another point raised by appellant is that the price paid at the auction sale was so inadequate as to shock
the conscience of the court. Supposing that this issue is open even after the one-year period has expired
and after the properties have passed into the hands of third persons who may have paid a price higher
than the auction sale money, the first thing to consider is that the stipulation contains no statement of
the reasonable value of the properties; and although defendant' answer avers that the assessed value
wasP3,960 it also avers that their real market value was P2,000 only. Anyway, mere inadequacy of price
which was the complaint' allegation is not sufficient ground to annul the sale. It is only where such
inadequacy shocks the conscience that the courts will intervene. x x x Another consideration is that the
assessed value being P3,960 and the purchase price being in effect P1,864 (P464 sale price plusP1,400
mortgage lien which had to be discharged) the conscience is not shocked upon examining the prices paid
in the sales in National Bank v. Gonzales, 45 Phil., 693 and Guerrero v. Guerrero, 57 Phil., 445, sales which
were left undisturbed by this Court.
Furthermore, where there is the right to redeem as in this case inadequacy of price should not be
material because the judgment debtor may re-acquire the property or else sell his right to redeem and
thus recover any loss he claims to have suffered by reason of the price obtained at the execution sale.
x x x x (Emphasis supplied).


In other words, gross inadequacy of price does not nullify an execution sale. In an ordinary sale, for reason of
equity, a transaction may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks
one's conscience as to justify the courts to interfere; such does not follow when the law gives the owner the right
to redeem as when a sale is made at public auction, upon the theory that the lesser the price, the easier it is for
the owner to effect redemption. When there is a right to redeem, inadequacy of price should not be material
because the judgment debtor may re-acquire the property or else sell his right to redeem and thus recover any
loss he claims to have suffered by reason of the price obtained at the execution sale. Thus, respondent stood to
gain rather than be harmed by the low sale value of the auctioned properties because it possesses the right of
redemption. More importantly, the subject matter in Barrozo is the auction sale, not the levy made by the Sheriff.
The Court does not sanction the piecemeal interpretation of a decision. To get the true intent and meaning of a
decision, no specific portion thereof should be isolated and resorted to, but the decision must be considered in its
As regards Buan, it is cast under an entirely different factual milieu. It involved the levy on two parcels of land
owned by the judgment debtor; and the sale at public auction of one was sufficient to fully satisfy the judgment,
such that the levy and attempted execution of the second parcel of land was declared void for being in excess of
and beyond the original judgment award granted in favor of the judgment creditor.
In the present case, the Sheriff complied with the mandate of Section 9, Rule 39 of the Revised Rules of Court, to
"sell only a sufficient portion" of the levied properties "as is sufficient to satisfy the judgment and the lawful fees."
Each of the 15 levied properties was successively bidded upon and sold, one after the other until the judgment
debt and the lawful fees were fully satisfied. Holly Properties Realty Corporation successively bidded upon and
bought each of the levied properties for the total amount of P5,450,653.33 in full satisfaction of the judgment
award and legal fees.
Secondly, the Rules of Court do not require that the value of the property levied be exactly the same as the
judgment debt; it can be less or more than the amount of debt. This is the contingency addressed by Section 9,
Rule 39 of the Rules of Court. In the levy of property, the Sheriff does not determine the exact valuation of the

levied property. Under Section 9, Rule 39, in conjunction with Section 7, Rule 57 of the Rules of Court, the sheriff is
required to do only two specific things to effect a levy upon a realty: (a) file with the register of deeds a copy of the
order of execution, together with the description of the levied property and notice of execution; and (b) leave with
the occupant of the property copy of the same order, description and notice. Records do not show that
respondent alleged non-compliance by the Sheriff of said requisites.
Thirdly, in determining what amount of property is sufficient out of which to secure satisfaction of the execution,
the Sheriff is left to his own judgment. He may exercise a reasonable discretion, and must exercise the care which
a reasonably prudent person would exercise under like conditions and circumstances, endeavoring on the one
hand to obtain sufficient property to satisfy the purposes of the writ, and on the other hand not to make an
unreasonable and unnecessary levy. Because it is impossible to know the precise quantity of land or other
property necessary to satisfy an execution, the Sheriff should be allowed a reasonable margin between the value
of the property levied upon and the amount of the execution; the fact that the Sheriff levies upon a little more
than is necessary to satisfy the execution does not render his actions improper. Section 9, Rule 39, provides
adequate safeguards against excessive levying. The Sheriff is mandated to sell so much only of such real property
as is sufficient to satisfy the judgment and lawful fees.
In the absence of a restraining order, no error, much less abuse of discretion, can be imputed to the Sheriff in
proceeding with the auction sale despite the pending motion to quash the levy filed by the respondents with the
HLURB. It is elementary that sheriffs, as officers charged with the delicate task of the enforcement and/or
implementation of judgments, must, in the absence of a restraining order, act with considerable dispatch so as not
to unduly delay the administration of justice; otherwise, the decisions, orders, or other processes of the courts of
justice and the like would be futile. It is not within the jurisdiction of the Sheriff to consider, much less resolve,
respondent's objection to the continuation of the conduct of the auction sale. The Sheriff has no authority, on his
own, to suspend the auction sale. His duty being ministerial, he has no discretion to postpone the conduct of the
auction sale.

Finally, one who attacks a levy on the ground of excessiveness carries the burden of sustaining that contention. In
the determination of whether a levy of execution is excessive, it is proper to take into consideration encumbrances
upon the property, as well as the fact that a forced sale usually results in a sacrifice; that is, the price demanded for
the property upon a private sale is not the standard for determining the excessiveness of the levy.
Here, the HLURB Arbiter and Director had no sufficient factual basis to determine the value of the levied property.
Respondent only submitted an Appraisal Report, based merely on surmises. The Report was based on the
projected value of the townhouse project after it shall have been fully developed, that is, on the assumption that
the residential units appraised had already been built. The Appraiser in fact made this qualification in its Appraisal
Report: "[t]he property subject of this appraisal has not been constructed. The basis of the appraiser is on the
existing model units." Since it is undisputed that the townhouse project did not push through, the projected
value did not become a reality. Thus, the appraisal value cannot be equated with the fair market value. The
Appraisal Report is not the best proof to accurately show the value of the levied properties as it is clearly selfserving.
Therefore, the Order dated August 28, 2000 of HLURB Arbiter Aquino and Director Ceniza in HLRB Case No. IV6071196-0618 which set aside the sheriff's levy on respondent's real properties, was clearly issued with grave abuse
of discretion. The CA erred in affirming said Order.