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[1] name. Three other portions, namely lots Nos.

535-B, 535-C and 535-D, were


EN BANC likewise sold to other persons, the original owner, Eulogio Atilano I, retaining
for himself only the remaining portion of the land, presumably covered by the
G.R. No. L-22487 May 21, 1969 title to lot No. 535-A. Upon his death the title to this lot passed to Ladislao
Atilano, defendant in this case, in whose name the corresponding certificate
ASUNCION ATILANO, CRISTINA ATILANO, ROSARIO ATILANO, (No. T-5056) was issued.
assisted by their respective husbands, HILARIO ROMANO, FELIPE
BERNARDO, and MAXIMO LACANDALO, ISABEL ATILANO and On December 6, 1952, Eulogio Atilano II having become a widower upon the
GREGORIO ATILANO,plaintiffs-appellees, death of his wife Luisa Bautista, he and his children obtained transfer
vs. certificate of title No. 4889 over lot No. 535-E in their names as co-owners.
LADISLAO ATILANO and GREGORIO M. ATILANO, defendants- Then, on July 16, 1959, desiring to put an end to the co-ownership, they had
appellants. the land resurveyed so that it could properly be subdivided; and it was then
discovered that the land they were actually occupying on the strength of the
Civil law; Contracts; Reformation of instruments; Remedy where there is simple deed of sale executed in 1920 was lot No. 535-A and not lot 535-E, as referred
mistake in the drafting of the document.—The remedy where there is simple mistake to in the deed, while the land which remained in the possession of the vendor,
in the drafting of the document of sale in designating the land object of the sale, is Eulogio Atilano I, and which passed to his successor, defendant Ladislao
reformation of the instrument, there being a meeting of the minds of the parties to a Atilano, was lot No. 535-E and not lot No. 535-A.
contract.
On January 25, 1960, the heirs of Eulogio Atilano II, who was by then also
Same; Same; Mistake; When not a ground for annulment of contract of sale.— deceased, filed the present action in the Court of First Instance of Zamboanga,
Where the real intention of the parties is the sale of a piece of land but there is a mistake alleging, inter alia, that they had offered to surrender to the defendants the
in designating the particular lot to be sold in the document, the mistake does not vitiate possession of lot No. 535-A and demanded in return the possession of lot No.
the consent of the parties, or affect the validity and binding effect of the contract. 535-E, but that the defendants had refused to accept the exchange. The
plaintiffs' insistence is quite understandable, since lot No. 535-E has an area
Same; Same; Same; Same; Reason.—The reason is that when one sells or buys of 2,612 square meters, as compared to the 1,808 square-meter area of lot
real property—a piece of land, for example—one sells or buys the property as he sees No. 535-A.
it, in its actual setting and by its physical metes and bounds, and not by the mere lot
number assigned to it in the certif icate of title. In their answer to the complaint the defendants alleged that the reference to
lot No. 535-E in the deed of sale of May 18, 1920 was an involuntary error;
Same; Same; When reconveyance, not reformation of instrument, is proper.—In that the intention of the parties to that sale was to convey the lot correctly
this case, the deed of sale need not be reformed. The parties have retained possession identified as lot No. 535-A; that since 1916, when he acquired the entirety of
of their respective properties conformably to the real intention of the parties to that lot No. 535, and up to the time of his death, Eulogio Atilano I had been
sale, and all they should do is to execute mutual deeds of conveyance. possessing and had his house on the portion designated as lot No. 535-E, after
which he was succeeded in such possession by the defendants herein; and
APPEAL from a judgment of the Court of First Instance of Zamboanga City. that as a matter of fact Eulogio Atilano I even increased the area under his
Montejo, J. possession when on June 11, 1920 he bought a portion of an adjoining lot, No.
536, from its owner Fruto del Carpio. On the basis of the foregoing allegations
MAKALINTAL, J.: the defendants interposed a counterclaim, praying that the plaintiffs be ordered
to execute in their favor the corresponding deed of transfer with respect to lot
In 1916 Eulogio Atilano I acquired, by purchase from one Gerardo Villanueva, No. 535-E.
lot No. 535 of the then municipality of Zamboanga cadastre. The vendee
thereafter obtained transfer certificate of title No. 1134 in his name. In 1920 he The trial court rendered judgment for the plaintiffs on the sole ground that since
had the land subdivided into five parts, identified as lots Nos. 535-A, 535-B, the property was registered under the Land Registration Act the defendants
535-C, 535-D and 535-E, respectively. On May 18 of the same year, after the could not acquire it through prescription. There can be, of course, no dispute
subdivision had been effected, Eulogio Atilano I, for the sum of P150.00, as to the correctness of this legal proposition; but the defendants, aside from
executed a deed of sale covering lot No. 535-E in favor of his brother Eulogio alleging adverse possession in their answer and counterclaim, also alleged
Atilano II, who thereupon obtained transfer certificate of title No. 3129 in his error in the deed of sale of May 18, 1920, thus: "Eulogio Atilano 1.o, por

Sales – Assignment No. 3 Page 1 of 37


equivocacion o error involuntario, cedio y traspaso a su hermano Eulogio
Atilano 2.do el lote No. 535-E en vez del Lote No. 535-A."lawphi1.ñet

The logic and common sense of the situation lean heavily in favor of the
defendants' contention. When one sells or buys real property — a piece of
land, for example — one sells or buys the property as he sees it, in its actual
setting and by its physical metes and bounds, and not by the mere lot number
assigned to it in the certificate of title. In the particular case before us, the
portion correctly referred to as lot No. 535-A was already in the possession of
the vendee, Eulogio Atilano II, who had constructed his residence therein,
even before the sale in his favor even before the subdivision of the entire lot
No. 535 at the instance of its owner, Eulogio Atillano I. In like manner the latter
had his house on the portion correctly identified, after the subdivision, as lot
No. 535-E, even adding to the area thereof by purchasing a portion of an
adjoining property belonging to a different owner. The two brothers continued
in possession of the respective portions the rest of their lives, obviously
ignorant of the initial mistake in the designation of the lot subject of the 1920
until 1959, when the mistake was discovered for the first time.

The real issue here is not adverse possession, but the real intention of the
parties to that sale. From all the facts and circumstances we are convinced
that the object thereof, as intended and understood by the parties, was that
specific portion where the vendee was then already residing, where he
reconstructed his house at the end of the war, and where his heirs, the plaintiffs
herein, continued to reside thereafter: namely, lot No. 535-A; and that its
designation as lot No. 535-E in the deed of sale was simple mistake in the
drafting of the document.1âwphi1.ñet The mistake did not vitiate the consent
of the parties, or affect the validity and binding effect of the contract between
them. The new Civil Code provides a remedy for such a situation by means of
reformation of the instrument. This remedy is available when, there having
been a meeting of the funds of the parties to a contract, their true intention is
not expressed in the instrument purporting to embody the agreement by
reason of mistake, fraud, inequitable conduct on accident (Art. 1359, et seq.)
In this case, the deed of sale executed in 1920 need no longer reformed. The
parties have retained possession of their respective properties conformably to
the real intention of the parties to that sale, and all they should do is to execute
mutual deeds of conveyance.

WHEREFORE, the judgment appealed from is reversed. The plaintiffs are


ordered to execute a deed of conveyance of lot No. 535-E in favor of the
defendants, and the latter in turn, are ordered to execute a similar document,
covering lot No. 595-A, in favor of the plaintiffs. Costs against the latter.

Sales – Assignment No. 3 Page 2 of 37


[2] On November 15, 1932 Juliana Melliza executed an instrument without any
EN BANC caption containing the following:

G.R. No. L-24732 April 30, 1968 Que en consideracion a la suma total de SEIS MIL CUATRO
CIENTOS VEINTIDOS PESOS (P6,422.00), moneda filipina que por
PIO SIAN MELLIZA, petitioner, la presente declaro haber recibido a mi entera satisfaccion del
vs. Gobierno Municipal de Iloilo, cedo y traspaso en venta real y difinitiva
CITY OF ILOILO, UNIVERSITY OF THE PHILIPPINES and THE COURT a dicho Gobierno Municipal de Iloilo los lotes y porciones de los
APPEALS, respondents. mismos que a continuacion se especifican a saber: el lote No. 5 en
toda su extension; una porcion de 7669 metros cuadrados del lote No.
Contracts; Interpretation of contracts involves question of law.—The appeal 2, cuya porcion esta designada como sub-lotes Nos. 2-B y 2-C del
before the Supreme Court calls for the interpretation of a contract, a public instrument piano de subdivision de dichos lotes preparado por la Certeza
dated November 15, 1932. Interpretation of such contract involves a question of law Surveying Co., Inc., y una porcion de 10,788 metros cuadrados del
since the contract is in the nature of law as between the parties and their successors- lote No. 1214 — cuya porcion esta designada como sub-lotes Nos.
in-interest. 1214-B-2 y 1214-B-3 del mismo plano de subdivision.

Sale; Object of sale must be determinate- or capable of being determinate.— Asimismo nago constar que la cesion y traspaso que ariba se
The requirement of the law is that a sale must have for its object a determinate thing mencionan es de venta difinitiva, y que para la mejor identificacion de
and this requirement is fulfilled as long as, at the time the contract is entered into, the los lotes y porciones de los mismos que son objeto de la presente,
object of the sale is capable of being made determinate without the necessity of a new hago constar que dichos lotes y porciones son los que necesita el
or further agreement between the parties (Art. 1273, old Civil Code; Art. 1460, new Gobierno Municipal de Iloilo para la construccion de avenidas,
Civil Code). parques y City Hall site del Municipal Government Center de iloilo,
segun el plano Arellano.
APPEAL from a decision of the Court of Appeals.
On January 14, 1938 Juliana Melliza sold her remaining interest in Lot 1214 to
BENGZON, J.P., J.: Remedios Sian Villanueva who thereafter obtained her own registered title
thereto, under Transfer Certificate of Title No. 18178. Remedios in turn on
November 4, 1946 transferred her rights to said portion of land to Pio Sian
Juliana Melliza during her lifetime owned, among other properties, three
Melliza, who obtained Transfer Certificate of Title No. 2492 thereover in his
parcels of residential land in Iloilo City registered in her name under Original
name. Annotated at the back of Pio Sian Melliza's title certificate was the
Certificate of Title No. 3462. Said parcels of land were known as Lots Nos. 2,
following:
5 and 1214. The total area of Lot No. 1214 was 29,073 square meters.
... (a) that a portion of 10,788 square meters of Lot 1214 now
On November 27, 1931 she donated to the then Municipality of Iloilo, 9,000
designated as Lots Nos. 1214-B-2 and 1214-B-3 of the subdivision
square meters of Lot 1214, to serve as site for the municipal hall. 1 The
plan belongs to the Municipality of Iloilo as per instrument dated
donation was however revoked by the parties for the reason that the area
November 15, 1932....
donated was found inadequate to meet the requirements of the development
plan of the municipality, the so-called "Arellano Plan". 2
On August 24, 1949 the City of Iloilo, which succeeded to the Municipality of
Iloilo, donated the city hall site together with the building thereon, to the
Subsequently, Lot No. 1214 was divided by Certeza Surveying Co., Inc. into
University of the Philippines (Iloilo branch). The site donated consisted of Lots
Lots 1214-A and 1214-B. And still later, Lot 1214-B was further divided into
Nos. 1214-B, 1214-C and 1214-D, with a total area of 15,350 square meters,
Lots 1214-B-1, Lot 1214-B-2 and Lot 1214-B-3. As approved by the Bureau of
more or less.
Lands, Lot 1214-B-1 with 4,562 square meters, became known as Lot 1214-
B; Lot 1214-B-2, with 6,653 square meters, was designated as Lot 1214-C;
and Lot 1214-B-13, with 4,135 square meters, became Lot 1214-D. Sometime in 1952, the University of the Philippines enclosed the site donated
with a wire fence. Pio Sian Melliza thereupon made representations, thru his
lawyer, with the city authorities for payment of the value of the lot (Lot 1214-
Sales – Assignment No. 3 Page 3 of 37
B). No recovery was obtained, because as alleged by plaintiff, the City did not the Court of Appeals and the Court of First Instance would render the contract
have funds (p. 9, Appellant's Brief.) invalid because the law requires as an essential element of sale, a
"determinate" object (Art. 1445, now 1448, Civil Code).
The University of the Philippines, meanwhile, obtained Transfer Certificate of
Title No. 7152 covering the three lots, Nos. 1214-B, 1214-C and 1214-D. Appellees, on the other hand, contend that the present appeal improperly
raises only questions of fact. And, further, they argue that the parties to the
On December 10, 1955 Pio Sian Melliza filed an action in the Court of First document in question really intended to include Lot 1214-B therein, as shown
Instance of Iloilo against Iloilo City and the University of the Philippines for by the silence of the vendor after Iloilo City exercised ownership thereover;
recovery of Lot 1214-B or of its value. that not to include it would have been absurd, because said lot is contiguous
to the others admittedly included in the conveyance, lying directly in front of
the city hall, separating that building from Lots 1214-C and 1214-D, which were
The defendants answered, contending that Lot 1214-B was included in the
included therein. And, finally, appellees argue that the sale's object was
public instrument executed by Juliana Melliza in favor of Iloilo municipality in
1932. After stipulation of facts and trial, the Court of First Instance rendered its determinate, because it could be ascertained, at the time of the execution of
decision on August 15, 1957, dismissing the complaint. Said court ruled that the contract, what lots were needed by Iloilo municipality for avenues, parks
and city hall site "according to the Arellano Plan", since the Arellano plan was
the instrument executed by Juliana Melliza in favor of Iloilo municipality
then already in existence.
included in the conveyance Lot 1214-B. In support of this conclusion, it referred
to the portion of the instrument stating:
The appeal before Us calls for the interpretation of the public instrument dated
Asimismo hago constar que la cesion y traspaso que arriba se November 15, 1932. And interpretation of such contract involves a question of
law, since the contract is in the nature of law as between the parties and their
mencionan es de venta difinitiva, y que para la major identificacion de
successors-in-interest.
los lotes y porciones de los mismos que son objeto de la presente,
hago constar que dichos lotes y porciones son los que necesita el
Gobierno municipal de Iloilo para la construccion de avenidas, At the outset, it is well to mark that the issue is whether or not the conveyance
parques y City Hall site del Municipal Government Center de Iloilo, by Juliana Melliza to Iloilo municipality included that portion of Lot 1214 known
segun el plano Arellano. as Lot 1214-B. If not, then the same was included, in the instrument
subsequently executed by Juliana Melliza of her remaining interest in Lot 1214
to Remedios Sian Villanueva, who in turn sold what she thereunder had
and ruled that this meant that Juliana Melliza not only sold Lots 1214-C and
1214-D but also such other portions of lots as were necessary for the municipal acquired, to Pio Sian Melliza. It should be stressed, also, that the sale to
hall site, such as Lot 1214-B. And thus it held that Iloilo City had the right to Remedios Sian Villanueva — from which Pio Sian Melliza derived title — did
not specifically designate Lot 1214-B, but only such portions of Lot 1214 as
donate Lot 1214-B to the U.P.
were not included in the previous sale to Iloilo municipality (Stipulation of
Facts, par. 5, Record on Appeal, p. 23). And thus, if said Lot 1214-B had been
Pio Sian Melliza appealed to the Court of Appeals. In its decision on May 19, included in the prior conveyance to Iloilo municipality, then it was excluded
1965, the Court of Appeals affirmed the interpretation of the Court of First from the sale to Remedios Sian Villanueva and, later, to Pio Sian Melliza.
Instance, that the portion of Lot 1214 sold by Juliana Melliza was not limited to
the 10,788 square meters specifically mentioned but included whatever was
The point at issue here is then the true intention of the parties as to the object
needed for the construction of avenues, parks and the city hall site.
of the public instrument Exhibit "D". Said issue revolves on the paragraph of
Nonetheless, it ordered the remand of the case for reception of evidence to
the public instrument aforequoted and its purpose, i.e., whether it was intended
determine the area actually taken by Iloilo City for the construction of avenues,
parks and for city hall site. merely to further describe the lots already specifically mentioned, or whether
it was intended to cover other lots not yet specifically mentioned.
The present appeal therefrom was then taken to Us by Pio Sian Melliza.
First of all, there is no question that the paramount intention of the parties was
Appellant maintains that the public instrument is clear that only Lots Nos. 1214-
to provide Iloilo municipality with lots sufficient or adequate in area for the
C and 1214-D with a total area of 10,788 square meters were the portions of
Lot 1214 included in the sale; that the purpose of the second paragraph, relied construction of the Iloilo City hall site, with its avenues and parks. For this
upon for a contrary interpretation, was only to better identify the lots sold and matter, a previous donation for this purpose between the same parties was
revoked by them, because of inadequacy of the area of the lot donated.
none other; and that to follow the interpretation accorded the deed of sale by
Sales – Assignment No. 3 Page 4 of 37
Secondly, reading the public instrument in toto, with special reference to the And, moreover, there is no question either that Lot 1214-B is contiguous to
paragraphs describing the lots included in the sale, shows that said instrument Lots 1214-C and 1214-D, admittedly covered by the public instrument. It is
describes four parcels of land by their lot numbers and area; and then it goes stipulated that, after execution of the contract Exhibit "D", the Municipality of
on to further describe, not only those lots already mentioned, but the Iloilo possessed it together with the other lots sold. It sits practically in the heart
lots object of the sale, by stating that said lots are the ones needed for the of the city hall site. Furthermore, Pio Sian Melliza, from the stipulation of facts,
construction of the city hall site, avenues and parks according to the Arellano was the notary public of the public instrument. As such, he was aware of its
plan. If the parties intended merely to cover the specified lots — Lots 2, 5, terms. Said instrument was also registered with the Register of Deeds and
1214-C and 1214-D, there would scarcely have been any need for the next such registration was annotated at the back of the corresponding title
paragraph, since these lots are already plainly and very clearly described by certificate of Juliana Melliza. From these stipulated facts, it can be inferred that
their respective lot number and area. Said next paragraph does not really add Pio Sian Melliza knew of the aforesaid terms of the instrument or is chargeable
to the clear description that was already given to them in the previous one. with knowledge of them; that knowing so, he should have examined the
Arellano plan in relation to the public instrument Exhibit "D"; that, furthermore,
It is therefore the more reasonable interpretation, to view it as describing those he should have taken notice of the possession first by the Municipality of Iloilo,
other portions of land contiguous to the lots aforementioned that, by reference then by the City of Iloilo and later by the University of the Philippines of Lot
to the Arellano plan, will be found needed for the purpose at hand, the 1214-B as part of the city hall site conveyed under that public instrument, and
construction of the city hall site. raised proper objections thereto if it was his position that the same was not
included in the same. The fact remains that, instead, for twenty long years, Pio
Sian Melliza and his predecessors-in-interest, did not object to said
Appellant however challenges this view on the ground that the description of
possession, nor exercise any act of possession over Lot 1214-B. Applying,
said other lots in the aforequoted second paragraph of the public instrument
would thereby be legally insufficient, because the object would allegedly not therefore, principles of civil law, as well as laches, estoppel, and equity, said
be determinate as required by law. lot must necessarily be deemed included in the conveyance in favor of Iloilo
municipality, now Iloilo City.
Such contention fails on several counts. The requirement of the law that a sale
WHEREFORE, the decision appealed from is affirmed insofar as it affirms that
must have for its object a determinate thing, is fulfilled as long as, at the time
the contract is entered into, the object of the sale is capable of being made of the Court of First Instance, and the complaint in this case is dismissed. No
costs. So ordered.
determinate without the necessity of a new or further agreement between the
parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific
mention of some of the lots plus the statement that the lots object of the sale
are the ones needed for city hall site, avenues and parks, according to the
Arellano plan, sufficiently provides a basis, as of the time of the execution of
the contract, for rendering determinate said lots without the need of a new and
further agreement of the parties.

The Arellano plan was in existence as early as 1928. As stated, the previous
donation of land for city hall site on November 27, 1931 was revoked on March
6, 1932 for being inadequate in area under said Arellano plan. Appellant claims
that although said plan existed, its metes and bounds were not fixed until 1935,
and thus it could not be a basis for determining the lots sold on November 15,
1932. Appellant however fails to consider that the area needed under that plan
for city hall site was then already known; that the specific mention of some of
the lots covered by the sale in effect fixed the corresponding location of the
city hall site under the plan; that, therefore, considering the said lots specifically
mentioned in the public instrument Exhibit "D", and the projected city hall site,
with its area, as then shown in the Arellano plan (Exhibit 2), it could be
determined which, and how much of the portions of land contiguous to those
specifically named, were needed for the construction of the city hall site.

Sales – Assignment No. 3 Page 5 of 37


[3] PETITION for review from the decision of the then Intermediate Appellate Court.
THIRD DIVISION
MEDIALDEA, J.:
G.R. No. 74470 March 8, 1989
This is a petition for review of the decision (pp. 9-21, Rollo) of the Intermediate
NATIONAL GRAINS AUTHORITY and WILLLAM CABAL, petitioners Appellate Court (now Court of Appeals) dated December 23, 1985 in A.C. G.R.
vs. CV No. 03812 entitled, "Leon Soriano, Plaintiff- Appellee versus National
THE INTERMEDIATE APPELLATE COURT and LEON Grains Authority and William Cabal, Defendants Appellants", which affirmed
SORIANO, respondents. the decision of the Court of First Instance of Cagayan, in Civil Case No. 2754
and its resolution (p. 28, Rollo) dated April 17, 1986 which denied the Motion
Civil Law; Sale; Contract; Definitions; Requisites of Contract.—Article 1458 for Reconsideration filed therein.
of the Civil Code of the Philippines defines sale as a contract whereby one of the
contracting parties obligates himself to transfer the ownership of and to deliver a The antecedent facts of the instant case are as follows:
determinate thing, and the other party to pay therefore a price certain in money or its
equivalent. A contract, on the other hand, is a meeting of minds between two (2) Petitioner National Grains Authority (now National Food Authority, NFA for
persons whereby one binds himself, with respect to the other, to give something or to short) is a government agency created under Presidential Decree No. 4. One
render some service (Art. 1305, Civil Code of the Philippines). The essential requisites of its incidental functions is the buying of palay grains from qualified farmers.
of contracts are: (1) consent of the contracting parties, (2) object certain which is the
subject matter of the contract, and (3) cause of the obligation which is established.
On August 23, 1979, private respondent Leon Soriano offered to sell palay
grains to the NFA, through William Cabal, the Provincial Manager of NFA
Same; Same; Same; When the offer of Soriano was accepted by the NFA, there stationed at Tuguegarao, Cagayan. He submitted the documents required by
was already a meeting of the minds between the parties.—In case at bar, Soriano the NFA for pre-qualifying as a seller, namely: (1) Farmer's Information Sheet
initially offered to sell palay grains produced in his farmland to NFA. When the latter accomplished by Soriano and certified by a Bureau of Agricultural Extension
accepted the offer by noting in Soriano’s Farmer’s Information Sheet a quota of 2,640 (BAEX) technician, Napoleon Callangan, (2) Xerox copies of four (4) tax
cavans, there was already a meeting of the minds between the parties. The object of declarations of the riceland leased to him and copies of the lease contract
the contract, being the palay grains produced in Soriano’s farmland and the NFA was between him and Judge Concepcion Salud, and (3) his Residence Tax
to pay the same depending upon its quality. The fact that the exact number of cavans Certificate. Private respondent Soriano's documents were processed and
of palay to be delivered has not been determined does not affect the perfection of the accordingly, he was given a quota of 2,640 cavans of palay. The quota noted
contract. in the Farmer's Information Sheet represented the maximum number of
cavans of palay that Soriano may sell to the NFA.
Same; Same; Same; Contention that there was no contract of sale because of the
absence of consent not correct; acceptance referred to is the acceptance of the offer
and not of the goods delivered.—The above contention of petitioner is not correct. Sale In the afternoon of August 23, 1979 and on the following day, August 24, 1979,
is a consensual contract, “x x x, there is perfection when there is consent upon the Soriano delivered 630 cavans of palay. The palay delivered during these two
subject matter and price, even if neither is delivered.” (Obana vs. C.A., L-36249, days were not rebagged, classified and weighed. when Soriano demanded
March 29, 1985, 135 SCRA 557, 560). This is provided by Article 1475 of the Civil payment of the 630 cavans of palay, he was informed that its payment will be
Code which states: “Art. 1475. The contract of sale is perfected at the moment there is held in abeyance since Mr. Cabal was still investigating on an information he
a meeting of minds upon the thing which is the object of the contract and upon the received that Soriano was not a bona tide farmer and the palay delivered by
price. “x x x.” The acceptance referred to which determines consent is the acceptance him was not produced from his farmland but was taken from the warehouse of
of the offer of one party by the other and not of the goods delivered as contended by a rice trader, Ben de Guzman. On August 28, 1979, Cabal wrote Soriano
petitioners. advising him to withdraw from the NFA warehouse the 630 cavans Soriano
delivered stating that NFA cannot legally accept the said delivery on the basis
of the subsequent certification of the BAEX technician, Napoleon Callangan
Same; Same; Same; Once the contract is perfected, the parties are bound to
that Soriano is not a bona fide farmer.
comply with their mutual obligations.—From the moment the contract of sale is
perfected, it is incumbent upon the parties to comply with their mutual obligations or
“the parties may reciprocally demand performance” thereof. Instead of withdrawing the 630 cavans of palay, private respondent Soriano
insisted that the palay grains delivered be paid. He then filed a complaint for
Sales – Assignment No. 3 Page 6 of 37
specific performance and/or collection of money with damages on November payment of the price of P 47,250.00 and TWELVE PERCENT (12%)
2, 1979, against the National Food Authority and Mr. William Cabal, Provincial legal interest to the plaintiff,
Manager of NFA with the Court of First Instance of Tuguegarao, and docketed
as Civil Case No. 2754. 4. That the counterclaim of the defendants is hereby dismissed;

Meanwhile, by agreement of the parties and upon order of the trial court, the 5. That there is no pronouncement as to the award of moral and
630 cavans of palay in question were withdrawn from the warehouse of NFA. exemplary damages and attorney's fees; and
An inventory was made by the sheriff as representative of the Court, a
representative of Soriano and a representative of NFA (p. 13, Rollo).
6. That there is no pronouncement as to costs.

On September 30, 1982, the trial court rendered judgment ordering petitioner
SO ORDERED (pp. 9-10, Rollo)
National Food Authority, its officers and agents to pay respondent Soriano (as
plaintiff in Civil Case No. 2754) the amount of P 47,250.00 representing the
unpaid price of the 630 cavans of palay plus legal interest thereof (p. 1-2, CA Petitioners' motion for reconsideration of the decision was denied on
Decision). The dispositive portion reads as follows: December 6, 1982.

WHEREFORE, the Court renders judgment in favor of the plaintiff and Petitioners' appealed the trial court's decision to the Intermediate Appellate
against the defendants National Grains Authority, and William Cabal Court. In a decision promulgated on December 23, 1986 (pp. 9-21, Rollo) the
and hereby orders: then Intermediate Appellate Court upheld the findings of the trial court and
affirmed the decision ordering NFA and its officers to pay Soriano the price of
the 630 cavans of rice plus interest. Petitioners' motion for reconsideration of
1. The National Grains Authority, now the National Food Authority, its
the appellate court's decision was denied in a resolution dated April 17, 1986
officers and agents, and Mr. William Cabal, the Provincial Manager of (p. 28, Rollo).
the National Grains Authority at the time of the filing of this case,
assigned at Tuguegarao, Cagayan, whomsoever is his successors, to
pay to the plaintiff Leon T. Soriano, the amount of P47,250.00, Hence, this petition for review filed by the National Food Authority and Mr.
representing the unpaid price of the palay deliveries made by the William Cabal on May 15, 1986 assailing the decision of the Intermediate
plaintiff to the defendants consisting of 630 cavans at the rate Pl.50 Appellate Court on the sole issue of whether or not there was a contract of sale
per kilo of 50 kilos per cavan of palay; in the case at bar.

2. That the defendants National Grains Authority, now National Food Petitioners contend that the 630 cavans of palay delivered by Soriano on
Authority, its officer and/or agents, and Mr. William Cabal, the August 23, 1979 was made only for purposes of having it offered for sale.
Provincial Manager of the National Grains Authority, at the time of the Further, petitioners stated that the procedure then prevailing in matters of
filing of this case assigned at Tuguegarao, Cagayan or whomsoever palay procurement from qualified farmers were: firstly, there is a rebagging
is his successors, are likewise ordered to pay the plaintiff Leon T. wherein the palay is transferred from a private sack of a farmer to the NFA
Soriano, the legal interest at the rate of TWELVE (12%) percent per sack; secondly, after the rebagging has been undertaken, classification of the
annum, of the amount of P 47,250.00 from the filing of the complaint palay is made to determine its variety; thirdly, after the determination of its
on November 20, 1979, up to the final payment of the price of P variety and convinced that it passed the quality standard, the same will be
47,250.00; weighed to determine the number of kilos; and finally, it will be piled inside the
warehouse after the preparation of the Warehouse Stock Receipt (WSP)
indicating therein the number of kilos, the variety and the number of bags.
3. That the defendants National Grains Authority, now National Food
Under this procedure, rebagging is the initial operative act signifying
Authority, or their agents and duly authorized representatives can now
acceptance, and acceptance will be considered complete only after the
withdraw the total number of bags (630 bags with an excess of 13
preparation of the Warehouse Stock Receipt (WSR). When the 630 cavans of
bags) now on deposit in the bonded warehouse of Eng. Ben de palay were brought by Soriano to the Carig warehouse of NFA they were only
Guzman at Tuguegarao, Cagayan pursuant to the order of this court, offered for sale. Since the same were not rebagged, classified and weighed in
and as appearing in the written inventory dated October 10, 1980,
accordance with the palay procurement program of NFA, there was no
(Exhibit F for the plaintiff and Exhibit 20 for the defendants) upon
Sales – Assignment No. 3 Page 7 of 37
acceptance of the offer which, to petitioners' mind is a clear case of solicitation Art. 1475. The contract of sale is perfected at the moment there is a
or an unaccepted offer to sell. meeting of minds upon the thing which is the object of the contract and
upon the price.
The petition is not impressed with merit.
xxx
Article 1458 of the Civil Code of the Philippines defines sale as a contract
whereby one of the contracting parties obligates himself to transfer the The acceptance referred to which determines consent is the acceptance of the
ownership of and to deliver a determinate thing, and the other party to pay offer of one party by the other and not of the goods delivered as contended by
therefore a price certain in money or its equivalent. A contract, on the other petitioners.
hand, is a meeting of minds between two (2) persons whereby one binds
himself, with respect to the other, to give something or to render some service From the moment the contract of sale is perfected, it is incumbent upon the
(Art. 1305, Civil Code of the Philippines). The essential requisites of contracts parties to comply with their mutual obligations or "the parties may reciprocally
are: (1) consent of the contracting parties, (2) object certain which is the demand performance" thereof. (Article 1475, Civil Code, 2nd par.).
subject matter of the contract, and (3) cause of the obligation which is
established (Art. 1318, Civil Code of the Philippines.
The reason why NFA initially refused acceptance of the 630 cavans of palay
delivered by Soriano is that it (NFA) cannot legally accept the said delivery
In the case at bar, Soriano initially offered to sell palay grains produced in his because Soriano is allegedly not a bona fide farmer. The trial court and the
farmland to NFA. When the latter accepted the offer by noting in Soriano's appellate court found that Soriano was a bona fide farmer and therefore, he
Farmer's Information Sheet a quota of 2,640 cavans, there was already a was qualified to sell palay grains to NFA.
meeting of the minds between the parties. The object of the contract, being the
palay grains produced in Soriano's farmland and the NFA was to pay the same
Both courts likewise agree that NFA's refusal to accept was without just cause.
depending upon its quality. The fact that the exact number of cavans of palay
The above factual findings which are supported by the record should not be
to be delivered has not been determined does not affect the perfection of the disturbed on appeal.
contract. Article 1349 of the New Civil Code provides: ". . .. The fact that the
quantity is not determinate shall not be an obstacle to the existence of the
contract, provided it is possible to determine the same, without the need of a ACCORDINGLY, the instant petition for review is DISMISSED. The assailed
new contract between the parties." In this case, there was no need for NFA decision of the then Intermediate Appellate Court (now Court of Appeals) is
and Soriano to enter into a new contract to determine the exact number of affirmed. No costs.
cavans of palay to be sold. Soriano can deliver so much of his produce as long
as it does not exceed 2,640 cavans. SO ORDERED.

In its memorandum (pp. 66-71, Rollo) dated December 4, 1986, petitioners


further contend that there was no contract of sale because of the absence of
an essential requisite in contracts, namely, consent. It cited Section 1319 of
the Civil Code which states: "Consent is manifested by the meeting of the offer
and the acceptance of the thing and the cause which are to constitute the
contract. ... " Following this line, petitioners contend that there was no consent
because there was no acceptance of the 630 cavans of palay in question.

The above contention of petitioner is not correct Sale is a consensual contract,


" ... , there is perfection when there is consent upon the subject matter and
price, even if neither is delivered." (Obana vs. C.A., L-36249, March 29, 1985,
135 SCRA 557, 560) This is provided by Article 1475 of the Civil Code which
states:

Sales – Assignment No. 3 Page 8 of 37


[4] Sometime in 1981, defendant 2 established contact with
THIRD DIVISION plaintiff 3 through the Philippine Consulate General in Hamburg, West
Germany, because he wanted to purchase MAN bus spare parts from
G.R. No. 105387 November 11, 1993 Germany. Plaintiff communicated with its trading partner. Johannes
Schuback and Sohne Handelsgesellschaft m.b.n. & Co. (Schuback
JOHANNES SCHUBACK & SONS PHILIPPINE TRADING Hamburg) regarding the spare parts defendant wanted to order.
CORPORATION, petitioner,
vs. On October 16, 1981, defendant submitted to plaintiff a list of the parts
THE HON. COURT OF APPEALS, RAMON SAN JOSE, JR., doing (Exhibit B) he wanted to purchase with specific part numbers and
business under the name and style "PHILIPPINE SJ INDUSTRIAL description. Plaintiff referred the list to Schuback Hamburg for
TRADING," respondents. quotations. Upon receipt of the quotations, plaintiff sent to defendant
a letter dated 25 November, 1981 (Exh. C) enclosing its offer on the
Civil Law; Obligations and Contracts; When contract of sale is perfected; A items listed by defendant.
contract of sale is perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price.—We reverse the decision of the On December 4, 1981, defendant informed plaintiff that he preferred
Court of Appeals and reinstate the decision of the trial court. It bears emphasizing that genuine to replacement parts, and requested that he be given 15% on
a “contract of sale is perfected at the moment there is a meeting of minds upon the all items (Exh. D).
thing which is the object of the contract and upon the price x x x.”
On December 17, 1981, plaintiff submitted its formal offer (Exh. E)
Same; Same; Same; Letter of Credit; The opening of a letter of credit in favor of containing the item number, quantity, part number, description, unit
a vendor is only a mode of payment; It is not among the essential requirements of a price and total to defendant. On December, 24, 1981, defendant
contract of sale enumerated in Arts. 1305 and 1474 of the Civil Code and therefore informed plaintiff of his desire to avail of the prices of the parts at that
does not prevent the perfection of the contract between the parties.—On the part of time and enclosed Purchase Order No. 0101 dated 14 December
the buyer, the situation reveals that private respondent failed to open an irrevocable 1981 (Exh. F to F-4). Said Purchase Order contained the item number,
letter of credit without recourse in favor of Johannes Schuback of Hamburg, Germany. part number and description. Defendant promised to submit the
This omission, however, does not prevent the perfection of the contract between the quantity per unit he wanted to order on December 28 or 29 (Exh. F).
parties, for the opening of a letter of credit is not to be deemed a suspensive condition.
The facts herein do not show that petitioner reserved title to the goods until private On December 29, 1981, defendant personally submitted the quantities
respondent had opened a letter of credit. Petitioner, in the course of its dealings with he wanted to Mr. Dieter Reichert, General Manager of plaintiff, at the
private respondent, did not incorporate any provision declaring their contract of sale latter's residence (t.s.n., 13 December, 1984, p. 36). The quantities
without effect until after the fulfillment of the act of opening a letter of credit. The were written in ink by defendant in the same Purchase Order
opening of a letter of credit in favor of a vendor is only a mode of payment. It is not previously submitted. At the bottom of said Purchase Order, defendant
among the essential requirements of a contract of sale enumerated in Articles 1305 and wrote in ink above his signature: "NOTE: Above P.O. will include a 3%
1474 of the Civil Code, the absence of any of which will prevent the perfection of the discount. The above will serve as our initial P.O." (Exhs. G to G-3-a).
contract from taking place.
Plaintiff immediately ordered the items needed by defendant from
PETITION for review on certiorari of a decision of the Court of Appeals. Schuback Hamburg to enable defendant to avail of the old prices.
Schuback Hamburg in turn ordered (Order No. 12204) the items from
ROMERO, J.: NDK, a supplier of MAN spare parts in West Germany. On January 4,
1982, Schuback Hamburg sent plaintiff a proforma invoice (Exhs. N-1
In this petition for review on certiorari, petitioner questions the reversal by the to N-3) to be used by defendant in applying for a letter of credit. Said
Court of Appeals 1 of the trial court's ruling that a contract of sale had been invoice required that the letter of credit be opened in favor of Schuback
perfected between petitioner and private respondent over bus spare parts. Hamburg. Defendant acknowledged receipt of the invoice (t.s.n., 19
December 1984, p. 40).
The facts as quoted from the decision of the Court of Appeals are as follows:

Sales – Assignment No. 3 Page 9 of 37


An order confirmation (Exhs. I, I-1) was later sent by Schuback perfection of contract since there was no meeting of the minds as to the price
Hamburg to plaintiff which was forwarded to and received by between the last week of December 1981 and the first week of January 1982.
defendant on February 3, 1981 (t.s.n., 13 Dec. 1984, p. 42).
The issue posed for resolution is whether or not a contract of sale has been
On February 16, 1982, plaintiff reminded defendant to open the letter perfected between the parties.
of credit to avoid delay in shipment and payment of interest (Exh. J).
Defendant replied, mentioning, among others, the difficulty he was We reverse the decision of the Court of Appeals and reinstate the decision of
encountering in securing: the required dollar allocations and applying the trial court. It bears emphasizing that a "contract of sale is perfected at the
for the letter of credit, procuring a loan and looking for a partner- moment there is a meeting of minds upon the thing which is the object of the
financier, and of finding ways 'to proceed with our orders" (Exh. K). contract and upon the price. . . . " 5

In the meantime, Schuback Hamburg received invoices from, NDK for Article 1319 of the Civil Code states: "Consent is manifested by the meeting of
partial deliveries on Order No.12204 (Direct Interrogatories., 07 Oct, the offer and acceptance upon the thing and the cause which are to constitute
1985, p. 3). Schuback Hamburg paid NDK. The latter confirmed the contract. The offer must be certain and the acceptance absolute. A
receipt of payments made on February 16, 1984 (Exh.C-Deposition). qualified acceptance constitutes a counter offer." The facts presented to us
indicate that consent on both sides has been manifested.
On October 18, 1982, Plaintiff again reminded defendant of his order
and advised that the case may be endorsed to its lawyers (Exh. L). The offer by petitioner was manifested on December 17, 1981 when petitioner
Defendant replied that he did not make any valid Purchase Order and submitted its proposal containing the item number, quantity, part number,
that there was no definite contract between him and plaintiff (Exh. M). description, the unit price and total to private respondent. On December 24,
Plaintiff sent a rejoinder explaining that there is a valid Purchase Order 1981, private respondent informed petitioner of his desire to avail of the prices
and suggesting that defendant either proceed with the order and open of the parts at that time and simultaneously enclosed its Purchase Order No.
a letter of credit or cancel the order and pay the cancellation fee of 0l01 dated December 14, 1981. At this stage, a meeting of the minds between
30% of F.O.B. value, or plaintiff will endorse the case to its lawyers vendor and vendee has occurred, the object of the contract: being the spare
(Exh. N). parts and the consideration, the price stated in petitioner's offer dated
December 17, 1981 and accepted by the respondent on December 24,1981.
Schuback Hamburg issued a Statement of Account (Exh. P) to plaintiff
enclosing therewith Debit Note (Exh. O) charging plaintiff 30% Although said purchase order did not contain the quantity he wanted to order,
cancellation fee, storage and interest charges in the total amount of private respondent made good, his promise to communicate the same on
DM 51,917.81. Said amount was deducted from plaintiff's account with December 29, 1981. At this juncture, it should be pointed out that private
Schuback Hamburg (Direct Interrogatories, 07 October, 1985). respondent was already in the process of executing the agreement previously
reached between the parties.
Demand letters sent to defendant by plaintiff's counsel dated March
22, 1983 and June 9, 1983 were to no avail (Exhs R and S). Below Exh. G-3, marked as Exhibit G-3-A, there appears this statement made
by private respondent: "Note. above P.O. will include a 3% discount. The
Consequently, petitioner filed a complaint for recovery of actual or above will serve as our initial P.O." This notation on the purchase order was
compensatory damages, unearned profits, interest, attorney's fees and costs another indication of acceptance on the part of the vendee, for by requesting
against private respondent. a 3% discount, he implicitly accepted the price as first offered by the vendor.
The immediate acceptance by the vendee of the offer was impelled by the fact
In its decision dated June 13, 1988, the trial court4 ruled in favor of petitioner that on January 1, 1982, prices would go up, as in fact, the petitioner informed
by ordering private respondent to pay petitioner, among others, actual him that there would be a 7% increase, effective January 1982. On the other
compensatory damages in the amount of DM 51,917.81, unearned profits in hand, concurrence by the vendor with the said discount requested by the
the amount of DM 14,061.07, or their peso equivalent. vendee was manifested when petitioner immediately ordered the items needed
by private respondent from Schuback Hamburg which in turn ordered from
Thereafter, private respondent elevated his case before the Court of Appeals. NDK, a supplier of MAN spare parts in West Germany.
On February 18, 1992, the appellate court reversed the decision of the trial
court and dismissed the complaint of petitioner. It ruled that there was no
Sales – Assignment No. 3 Page 10 of 37
When petitioner forwarded its purchase order to NDK, the price was still
pegged at the old one. Thus, the pronouncement of the Court Appeals that
there as no confirmed price on or about the last week of December 1981 and/or
the first week of January 1982 was erroneous.

While we agree with the trial court's conclusion that indeed a perfection of
contract was reached between the parties, we differ as to the exact date when
it occurred, for perfection took place, not on December 29, 1981. Although the
quantity to be ordered was made determinate only on December 29, 1981,
quantity is immaterial in the perfection of a sales contract. What is of
importance is the meeting of the minds as to the object and cause, which from
the facts disclosed, show that as of December 24, 1981, these essential
elements had already occurred.

On the part of the buyer, the situation reveals that private respondent failed to
open an irrevocable letter of credit without recourse in favor of Johannes
Schuback of Hamburg, Germany. This omission, however. does not prevent
the perfection of the contract between the parties, for the opening of the letter
of credit is not to be deemed a suspensive condition. The facts herein do not
show that petitioner reserved title to the goods until private respondent had
opened a letter of credit. Petitioner, in the course of its dealings with private
respondent, did not incorporate any provision declaring their contract of sale
without effect until after the fulfillment of the act of opening a letter of credit.

The opening of a etter of credit in favor of a vendor is only a mode of payment.


It is not among the essential requirements of a contract of sale enumerated in
Article 1305 and 1474 of the Civil Code, the absence of any of which will
prevent the perfection of the contract from taking place.

To adopt the Court of Appeals' ruling that the contract of sale was dependent
on the opening of a letter of credit would be untenable from a pragmatic point
of view because private respondent would not be able to avail of the old prices
which were open to him only for a limited period of time. This explains why
private respondent immediately placed the order with petitioner which, in turn
promptly contacted its trading partner in Germany. As succinctly stated by
petitioner, "it would have been impossible for respondent to avail of the said
old prices since the perfection of the contract would arise much later, or after
the end of the year 1981, or when he finally opens the letter of credit." 6

WHEREFORE, the petition is GRANTED and the decision of the trial court
dated June 13, 1988 is REINSTATED with modification.

SO ORDERED.

Sales – Assignment No. 3 Page 11 of 37


[5] contract of sale between the same parties. Undisputedly, private respondents acquired
THIRD DIVISION title to the property from DBP, and not from petitioners.

[G.R. No. 116635. July 24, 1997] Same; Same; Same; Options; An accepted unilateral promise to buy or sell a
determinate thing for a price certain is binding upon the promissor if the promise is
CONCHITA NOOL and GAUDENCIO ALMOJERA, petitioner, supported by a consideration distinct from the price.—Assuming arguendo that
vs. Exhibit D is separate and distinct from Exhibit C and is not affected by the nullity of
COURT OF APPEALS, ANACLETO NOOL and EMILIA the latter, still petitioners do not thereby acquire a right to repurchase the property. In
NEBRE, respondents. that scenario, Exhibit D ceases to be a “right to repurchase” ancillary and incidental to
the contract of sale; rather, it becomes an accepted unilateral promise to sell. Article
DECISION 1479 of the Civil Code, however, provides that “an accepted unilateral promise to buy
or sell a determinate thing for a price certain is binding upon the promissor if the
Contracts; Sales; Void Contracts; Article 1370 of the Civil Code is applicable promise is supported by a consideration distinct from the price.” In the present case,
only to valid and enforceable contracts.—We cannot sustain petitioners’ view. Article the alleged written contract of repurchase contained in Exhibit D is bereft of any
1370 of the Civil Code is applicable only to valid and enforceable contracts. The consideration distinct from the price. Accordingly, as an independent contract, it
Regional Trial Court and the Court of Appeals ruled that the principal contract of sale cannot bind private respondents. The ruling in Diamante vs. CA supports this.
contained in Exhibit C and the auxiliary contract of repurchase in Exhibit D are both
void. This conclusion of the two lower courts appears to find support in Dignos vs. Same; Same; Same; Estoppel; One is not estopped in impugning the validity of
Court of Appeals, where the Court held: “Be that as it may, it is evident that when void contracts; It is a well-settled doctrine that “as between parties to a contract,
petitioners sold said land to the Cabigas spouses, they were no longer owners of the validity cannot be given to it by estoppel if it is prohibited by law or it is against public
same and the sale is null and void.” policy.”—Petitioners argue that “when Anacleto Nool took the possession of the two
hectares, more or less, and let the other two hectares to be occupied and cultivated by
Same; Same; Same; A void contract cannot give rise to a valid one.—In the plaintiffs-appellants, Anacleto Nool cannot later on disclaim the terms or contions (sic)
present case, it is clear that the sellers no longer had any title to the parcels of land at agreed upon and his actuation is within the ambit of estoppel x x x.” We disagree. The
the time of sale. Since Exhibit D, the alleged contract of repurchase, was dependent private respondents cannot be estopped from raising the defense of nullity of contract,
on the validity of Exhibit C, it is itself void. A void contract cannot give rise to a valid specially in this case where they acted in good faith, believing that indeed petitioners
one. Verily, Article 1422 of the Civil Code provides that “(a) contract which is the could sell the two parcels of land in question. Article 1410 of the Civil Code mandates
direct result of a previous illegal contract, is also void and inexistent.” that “(t)he action or defense for the declaration of the inexistence of a contract does
not prescribe.” It is a well-settled doctrine that “as between parties to a contract,
Same; Same; Same; Where the sellers can no longer deliver the object of the validity cannot be given to it by estoppel if it is prohibited by law or it is against public
sale to the buyers, as the buyers themselves have already acquired title and delivery policy (19 Am. Jur. 802). It is not within the competence of any citizen to barter away
thereof from the rightful owner, such contract may be deemed to be inoperative and what public policy by law seeks to preserve.” Thus, it is immaterial that private
may thus fall, by analogy, under item No. 5 of Article 1409 of the Civil Code—“Those respondents initially acted to implement the contract of sale, believing in good faith
which contemplate an impossible service.”—In the present case however, it is likewise that the same was valid. We stress that a contract void at inception cannot be validated
clear that the sellers can no longer deliver the object of the sale to the buyers, as the by ratification or prescription and certainly cannot be binding on or enforceable against
buyers themselves have already acquired title and delivery thereof from the rightful private respondents.
owner, the DBP. Thus, such contract may be deemed to be inoperative and may thus
fall, by analogy, under item No. 5 of Article 1409 of the Civil Code: “Those which Same; Same; Same; If a void contract has already been performed, the
contemplate an impossible service.” Article 1459 of the Civil Code provides that “the restoration of what has been given is in order, and, corollarily, interest thereon will
vendor must have a right to transfer the ownership thereof [object of the sale] at the run only from the time of the aggrieved party’s demand for the return of this amount.—
time it is delivered.” Here, delivery of ownership is no longer possible. It has become We are not persuaded. Based on the previous discussion, the balance of P14,000.00
impossible. under the void contract of sale may not be enforced. Petitioners are the ones who have
an obligation to return what they unduly and improperly received by reason of the
Same; Same; Same; Pacto de Retro; The right to repurchase presupposes a invalid contract of sale. Since they cannot legally give title to what they “sold,” they
valid contract of sale between the same parties.—One “repurchases” only what one cannot keep the money paid for the object of the sale. It is basic that “(e)very person
has previously sold. In other words, the right to repurchase presupposes a valid 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,

Sales – Assignment No. 3 Page 12 of 37


shall return the same.” Thus, if a void contract has already “been performed, the hectares shall have been delivered to the
restoration of what has been given is in order.” Corollarily and as aptly ordered by defendants; and
respondent appellate court, interest thereon will run only from the time of private
respondents’ demand for the return of this amount in their counterclaim. In the same 5. To pay the costs.
vein, petitioners’ possession and cultivation of the two hectares are anchored on
private respondents’ tolerance. Clearly, the latter’s tolerance ceased upon their SO ORDERED.
counterclaim and demand on the former to vacate. Hence, their right to possess and
cultivate the land ipso facto ceased. The Antecedent Facts

PETITION for review on certiorari of a decision of the Court of Appeals. The facts, which appear undisputed by the parties, are narrated by the
Court of Appeals as follows:
PANGANIBAN, J.:
Two (2) parcels of land are in dispute and litigated upon here. The
A contract of repurchase arising out of a contract of sale where the seller first has an area of 1 hectare . It was formerly owned by Victorino
did not have any title to the property sold is not valid. Since nothing was sold, Nool and covered by Transfer Certificate of Title No. T-74950. With
then there is also nothing to repurchase. an area of 3.0880 hectares, the other parcel was previously owned
by Francisco Nool under Transfer Certificate of Title No. T-
Statement of the Case 100945. Both parcels are situated in San Manuel, Isabela. The
plaintiff spouses, Conchita Nool and Gaudencio Almojera, now the
This postulate is explained by this Court as it resolves this petition for appellants, seek recovery of the aforementioned parcels of land from
review on certiorari assailing the January 20, 1993 Decision [1] of Respondent the defendants, Anacleto Nool, a younger brother of Conchita, and
Court of Appeals[2] in CA-G.R. CV No. 36473, affirming the decision[3] of the Emilia Nebre, now the appellees.
trial court[4] which disposed as follows:[5]
In their complaint, plaintiff-appellants alleged inter alia that they are the owners
WHEREFORE, judgment is hereby rendered dismissing the of subject parcels of land, and they bought the same from Conchitas other
complaint for no cause of action, and hereby: brothers, Victorino Nool and Francisco Nool; that as plaintiffs were in dire need
of money, they obtained a loan from the Iligan Branch of the Development
1. Declaring the private writing, Exhibit C, to be an Bank of the Philippines, in Ilagan, Isabela, secured by a real estate mortgage
option to sell, not binding and considered validly on said parcels of land, which were still registered in the names of Victorino
withdrawn by the defendants for want of Nool and Francisco Nool, at the time, and for the failure of plaintiffs to pay the
consideration; said loan, including interest and surcharges, totaling P56,000.00, the
mortgage was foreclosed; that within the period of redemption, plaintiffs
2. Ordering the plaintiffs to return to the defendants the contacted defendant Anacleto Nool for the latter to redeem the foreclosed
sum of P30,000.00 plus interest thereon at the legal properties from DBP, which the latter did; and as a result, the titles of the two
rate, from the time of filing of defendants (2) parcels of land in question were transferred to Anacleto Nool; that as part
counterclaim until the same is fully paid; of their arrangement or understanding, Anacleto Nool agreed to buy from the
plaintiff Conchita Nool the two (2) parcels of land under controversy, for a total
3. Ordering the plaintiffs to deliver peaceful possession price of P100,000.00, P30,000.00 of which price was paid to Conchita, and
of the two hectares mentioned in paragraph 7 of the upon payment of the balance of P14,000.00, plaintiffs were to regain
complaint and in paragraph 31 of defendants possession of the two (2) hectares of land, which amounts defendants failed
answer (counterclaim); to pay, and the same day the said arrangement[6]was made; another
covenant[7] was entered into by the parties, whereby defendants agreed to
4. Ordering the plaintiffs to pay reasonable rents on return to plaintiffs the lands in question, at anytime the latter have the
said two hectares at P5,000.00 per annum or necessary amount; that plaintiffs asked the defendants to return the same but
at P2,500.00 per cropping from the time of judicial despite the intervention of the Barangay Captain of their place, defendants
demand mentioned in paragraph 2 of the refused to return the said parcels of land to plaintiffs; thereby impelling them
dispositive portion of this decision, until the said two (plaintiffs) to come to court for relief.
Sales – Assignment No. 3 Page 13 of 37
In their answer defendants-appellees theorized that they acquired The Issues
the lands in question from the Development Bank of the Philippines,
through negotiated sale, and were misled by plaintiffs when Petitioners impute to Respondent Court the following alleged errors:
defendant Anacleto Nool signed the private writing agreeing to return
subject lands when plaintiffs have the money to redeem the same; 1. The Honorable Court of Appeals, Second Division has
defendant Anacleto having been made to believe, then, that his misapplied the legal import or meaning of Exhibit C in a way
sister, Conchita, still had the right to redeem the said properties. contrary to law and existing jurisprudence in stating that it has
no binding effect between the parties and considered validly
The pivot of inquiry here, as aptly observed below, is the nature and withdrawn by defendants-appellees for want of consideration.
significance of the private document, marked Exhibit D for plaintiffs,
which document has not been denied by the defendants, as 2. The Honorable Court of Appeals, Second Division has
defendants even averred in their Answer that they gave an advance miserably failed to give legal significance to the actual
payment of P30,000.00 therefor, and acknowledged that they had a possession and cultivation and appropriating exclusively the
balance of P14,000.00 to complete their payment. On this crucial palay harvest of the two (2) hectares land pending the payment
issue, the lower court adjudged the said private writing (Exhibit D) as of the remaining balance of fourteen thousand pesos
an option to sell not binding upon and considered the same validly (P14,000.00) by defendants-appellees as indicated in Exhibit C.
withdrawn by defendants for want of consideration; and decided the
case in the manner abovementioned. 3. The Honorable Court of Appeals has seriously erred in affirming
the decision of the lower court by awarding the payment of rents per
There is no quibble over the fact that the two (2) parcels of land in dispute were annum and the return of P30,000.00 and not allowing the plaintiffs-
mortgaged to the Development Bank of the Philippines, to secure a loan appellants to re-acquire the four (4) hectares, more or less upon
obtained by plaintiffs from DBP (Ilagan Branch), Ilagan, Isabela. For the non- payment of one hundred thousand pesos (P100,000.00) as shown
payment of said loan, the mortgage was foreclosed and in the process, in Exhibit D.[14]
ownership of the mortgaged lands was consolidated in DBP (Exhibits 3 and 4
for defendants). After DBP became the absolute owner of the two parcels of The Courts Ruling
land, defendants negotiated with DBP and succeeded in buying the same. By
virtue of such sale by DBP in favor of defendants, the titles of DBP were The petition is bereft of merit.
cancelled and corresponding Transfer Certificates of Title (Annexes C and D
to the complaint) issued to the dependants.[8] First Issue: Are Exhibits C and D Valid and Enforceable?

It should be stressed that Manuel S. Mallorca, authorized officer of DBP, The petitioner-spouses plead for the enforcement of their agreement with
certified that the one-year redemption period was from March 16, 1982 up to private respondents as contained in Exhibits C and D, and seek damages for
March 15, 1983 and that the Mortgagors right of redemption was not exercised the latters alleged breach thereof. In Exhibit C, which was a private
within this period.[9] Hence, DBP became the absolute owner of said parcels handwritten document labeled by the parties as Resibo ti Katulagan or Receipt
of land for which it was issued new certificates of title, both entered on May 23, of Agreement, the petitioners appear to have sold to private respondents the
1983 by the Registry of Deeds for the Province of Isabela.[10] About two years parcels of land in controversy covered by TCT No. T-74950 and TCT No. T-
thereafter, on April 1, 1985, DBP entered into a Deed of Conditional 100945. On the other hand, Exhibit D, which was also a private handwritten
Sale[11] involving the same parcels of land with Private Respondent Anacleto document in Ilocano and labeled as Kasuratan, private respondents agreed
Nool as vendee. Subsequently, the latter was issued new certificates of title that Conchita Nool can acquire back or repurchase later on said land when
on February 8, 1988.[12] she has the money.[15]

The Court of Appeals ruled:[13] In seeking to enforce her alleged right to repurchase the parcels of land,
Conchita (joined by her co-petitioner-husband) invokes Article 1370 of the Civil
WHEREFORE, finding no reversible error infirming it, the appealed Code which mandates that (i)f the terms of a contract are clear and leave no
Judgment is hereby AFFIRMED in toto. No pronouncement as to doubt upon the intention of the contracting parties, the literal meaning of its
costs. stipulation shall control. Hence, petitioners contend that the Court of Appeals

Sales – Assignment No. 3 Page 14 of 37


erred in affirming the trial courts finding and conclusion that said Exhibits C person can sell only what he owns or is authorized to sell; the buyer can as a
and D were not merely voidable but utterly void and inexistent. consequence acquire no more than what the seller can legally transfer. [21] No
one can give what he does not have neno dat quod non habet. On the other
We cannot sustain petitioners view. Article 1370 of the Civil Code is hand, Exhibit D presupposes that petitioners could repurchase the property
applicable only to valid and enforceable contracts. The Regional Trial Court that they sold to private respondents. As petitioners sold nothing, it follows that
and the Court of Appeals ruled that the principal contract of sale contained in they can also repurchase nothing. Nothing sold, nothing to repurchase. In this
Exhibit C and the auxilliary contract of repurchase in Exhibit D are both light, the contract of repurchase is also inoperative and by the same analogy,
void. This conclusion of the two lower courts appears to find support in Dignos void.
vs. Court of Appeals,[16] where the Court held:
Contract of Repurchase
Be that as it may, it is evident that when petitioners sold said land to
the Cabigas spouses, they were no longer owners of the same and Dependent on Validity of Sale
the sale is null and void.
As borne out by the evidence on record, the private respondents bought
In the present case, it is clear that the sellers no longer had any title to the two parcels of land directly from DBP on April 1, 1985 after discovering that
the parcels of land at the time of sale. Since Exhibit D, the alleged contract of petitioners did not own said property, the subject of Exhibits C and D executed
repurchase, was dependent on the validity of Exhibit C, it is itself void. A void on November 30, 1984. Petitioners, however, claim that they can exercise their
contract cannot give rise to a valid one.[17] Verily, Article 1422 of the Civil Code alleged right to repurchase the property, after private respondents had
provides that (a) contract which is the direct result of a previous illegal contract, acquired the same from DBP.[22] We cannot accede to this, for it clearly
is also void and inexistent. contravenes the intention of the parties and the nature of their
agreement. Exhibit D reads:
We should however add that Dignos did not cite its basis for ruling that a
sale is null and void where the sellers were no longer the owners of the WRITING
property. Such a situation (where the sellers were no longer owners) does not
appear to be one of the void contracts enumerated in Article 1409 of the Civil Nov. 30, 1984
Code.[18] Moreover, the Civil Code[19] itself recognizes a sale where the goods
are to be acquired x x x by the seller after the perfection of the contract of sale, That I, Anacleto Nool have bought from my sister Conchita Nool a
clearly implying that a sale is possible even if the seller was not the owner at land an area of four hectares (4 has.) in the value of One Hundred
the time of sale, provided he acquires title to the property later on. Thousand (100,000.00) Pesos. It is our agreement as brother and
sister that she can acquire back or repurchase later on said land
In the present case however, it is likewise clear that the sellers can no when she has the money. [Underscoring supplied]
longer deliver the object of the sale to the buyers, as the buyers themselves
have already acquired title and delivery thereof from the rightful owner, the As proof of this agreement we sign as brother and sister this written
DBP. Thus, such contract may be deemed to be inoperative [20] and may thus document this day of Nov. 30, 1984, at District 4, San Manuel,
fall, by analogy, under item no. 5 of Article 1409 of the Civil Code:Those which Isabela.
contemplate an impossible service. Article 1459 of the Civil Code provides that
the vendor must have a right to transfer the ownership thereof [object of the Sgd ANACLETO NOOL
sale] at the time it is delivered. Here, delivery of ownership is no longer
possible. It has become impossible. Anacleto Nool

Furthermore, Article 1505 of the Civil Code provides that where goods Sgd Emilio Paron
are sold by a person who is not the owner thereof, and who does not sell them
under authority or with consent of the owner, the buyer acquires no better title Witness
to the goods than the seller had, unless the owner of the goods is by his
conduct precluded from denying the sellers authority to sell. Here, there is no Sgd Conchita Nool
allegation at all that petitioners were authorized by DBP to sell the property to
the private respondents. Jurisprudence, on the other hand, teaches us that a Conchita Nool[23]
Sales – Assignment No. 3 Page 15 of 37
One repurchases only what one has previously sold. In other words, the to repurchase, it is a new contract entered into by the
right to repurchase presupposes a valid contract of sale between purchaser, as absolute owner already of the object. In that
the same parties. Undisputedly, private respondents acquired title to the case the vendor has nor reserved to himself the right to
property from DBP, and not from the petitioners. repurchase.

Assuming arguendo that Exhibit D is separate and distinct from Exhibit C In Vda. De Cruzo, et al. vs. Carriaga, et al. this Court found
and is not affected by the nullity of the latter, still petitioners do not thereby another occasion to apply the foregoing principle.
acquire a right to repurchase the property. In that scenario, Exhibit D ceases
to be a right to repurchase ancillary and incidental to the contract of sale; Hence, the Option to Repurchase executed by private respondent in
rather, it becomes an accepted unilateral promise to sell. Article 1479 of the the present case, was merely a promise to sell, which must be
Civil Code, however, provides that an accepted unilateral promise to buy or governed by Article 1479 of the Civil Code which reads as follows:
sell a determinate thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price. In the present Art. 1479. A promise to buy and sell a determinate thing for
case, the alleged written contract of repurchase contained in Exhibit D is bereft a price certain is reciprocally demandable.
of any consideration distinct from the price. Accordingly, as an independent
contract, it cannot bind private respondents. The ruling in Diamante vs. An accepted unilateral promise to buy or to sell a
CA[24] supports this. In that case, the Court through Mr. Justice Hilario G. determinate thing for a price certain is binding upon the
Davide, Jr. explained: promissor if the promise is supported by a consideration
distinct from the price.
Article 1601 of the Civil Code provides:
Right to Repurchase Based on Homestead or Trust Non-Existent
Conventional redemption shall take place when the vendor
reserves the right to repurchase the thing sold, with the Petitioners also base their alleged right to repurchase on (1) Sec. 119 of
obligation to comply with the provisions of article 1616 and the Public Land Act[25] and (2) an implied trust relation as brother and sister.[26]
other stipulations which may have been agreed upon.
The Court notes that Victorino Nool and Francisco Nool mortgaged the
In Villarica, et al. Vs. Court of Appeals, et al., decided on 29 land to DBP. The brothers, together with Conchita Nool and Anacleto Nool,
November 1968, or barely seven (7) days before the were all siblings and heirs qualified to repurchase the two parcels of land under
respondent Court promulgated its decisions in this case, Sec. 119 of the Public Land Act which provides that (e)very conveyance of
this Court, interpreting the above Article, held: land acquired under the free patent or homestead provisions, when proper,
shall be subject to repurchase by the applicant, his widow or legal heirs, within
The right of repurchase is not a right granted the vendor by a period of five years from the date of conveyance. Assuming the applicability
the vendee in a subsequent instrument, but is a right of this statutory provision to the case at bar, it is indisputable that Private
reserved by the vendor in the same instrument of sale as Respondent Anacleto Nool already repurchased from DBP the contested
one of the stipulations of the contract. Once the instrument properties. Hence, there was no more right of repurchase that his sister
of absolute sale is executed, the vendor can not longer Conchita or brothers Victorino and Francisco could exercise. The properties
reserve the right to repurchase, and any right thereafter were already owned by an heir of the homestead grantee and the rationale of
granted the vendor by the vendee in a separate instrument the of the provision to keep homestead lands within the family of the grantee
cannot be a right of repurchase but some other right like the was thus fulfilled.[27]
option to buy in the instant case. x x x.
The claim of a trust relation is likewise without merit. The records show
In the earlier case of Ramos, et al. vs. Icasiano, et al., that private respondents did not purchase the contested properties from DBP
decided in 1927, this Court had already ruled that an in trust for petitioners. The former, as previously mentioned, in fact bought the
agreement to repurchase becomes a promise to sell when land from DBP upon realization that the latter could not validly sell the
made after the sale, because when the sale is made without same. Obviously, petitioners bought it for themselves. There is no evidence at
such an agreement, the purchaser acquires the thing sold all in the records that they bought the land in trust for private respondents. The
absolutely, and if he afterwards grants the vendor the right fact that Anacleto Nool was the younger brother of Conchita Nool and that they
Sales – Assignment No. 3 Page 16 of 37
signed a contract of repurchase, which as discussed earlier was void, does not WHEREFORE, the petition is DENIED and the assailed Decision of the
prove the existence of an implied trust in favor of petitioners. Court of Appeals affirming that of the trial court is hereby AFFIRMED.

Second Issue: No Estoppel in Impugning the Validity of Void Contracts SO ORDERED.

Petitioners argue that when Anacleto Nool took the possession of the two
hectares, more or less, and let the other two hectares to be occupied and
cultivated by plaintiffs-appellants, Anacleto Nool cannot later on disclaim the
terms or contions (sic) agreed upon and his actuation is within the ambit of
estoppel x x x.[28] We disagree. The private respondents cannot be estopped
from raising the defense of nullity of contract, specially in this case where they
acted in good faith, believing that indeed petitioners could sell the two parcels
of land in question.Article 1410 of the Civil Code mandates that (t)he action or
defense for the declaration of the inexistence of a contract does not
prescribe. It is well-settled doctrine that as between parties to a contract,
validity cannot be given to it by estoppel if it is prohibited by law or it is against
public policy (19 Am. Jur. 802). It is not within the competence of any citizen
to barter away what public policy by law seeks to preserve. [29] Thus, it is
immaterial that private respondents initially acted to implement the contract of
sale, believing in good faith that the same was valid.We stress that a contract
void at inception cannot be validated by ratification or prescription and certainly
cannot be binding on or enforceable against private respondents. [30]

Third Issue: Return of P30,000.00 with Interest and Payment of Rent

Petitioners further argue that it would be a miscarriage of justice to order


them (1) to return the sum of P30,000.00 to private respondents when
allegedly it was Private Respondent Anacleto Nool who owed the former a
balance of P14,000.00 and (2) to order petitioners to pay rent when they were
allowed to cultivate the said two hectares.[31]

We are not persuaded. Based on the previous discussion, the balance


of P14,000.00 under the void contract of sale may not be enforced. Petitioners
are the ones who have an obligation to return what they unduly and improperly
received by reason of the invalid contract of sale. Since they cannot legally
give title to what they sold, they cannot keep the money paid for the object of
the sale. It is basic that (e)very 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.[32] Thus, if a void contract has already been performed, the restoration
of what has been given is in order.[33] Corollarily and as aptly ordered by
respondent appellate court, interest thereon will run only from the time of
private respondents demand for the return of this amount in their
counterclaim.[34] In the same vein, petitioners possession and cultivation of the
two hectares are anchored on private respondents tolerance. Clearly, the
latters tolerance ceased upon their counterclaim and demand on the former to
vacate. Hence, their right to possess and cultivate the land ipso facto ceased.

Sales – Assignment No. 3 Page 17 of 37


[6] PETITION for review by certiorari of a decision of the Court of Appeals.
EN BANC
BENGZON, J.P., J.:
G.R. No. L-21489 and L-21628 May 19, 1966
The spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers,
MIGUEL MAPALO, ET AL., petitioners, were registered owners, with Torrens title certificate O.C.T. No. 46503, of a
vs. 1,635-square-meter residential land in Manaoag, Pangasinan. Said spouses-
MAXIMO MAPALO, ET AL., respondents. owners, out of love and affection for Maximo Mapalo — a brother of Miguel
who was about to get married — decided to donate the eastern half of the land
Contracts; Consent secured through fraud.—When the consent to a contract to him. O.C.T. No. 46503 was delivered. As a result, however, they were
was fraudulently obtained, the contract is voidable. deceived into signing, on October 15, 1936, a deed of absolute sale over
the entire land in his favor. Their signatures thereto were procured by fraud,
Purchase and sale; Contracts without cause or consideration; Statement of false that is, they were made to believe by Maximo Mapalo and by the attorney who
consideration.—The rule under the Civil Code, be it the old or the new, is that acted as notary public who "translated" the document, that the same was a
contracts without a cause or consideration produce no effect whatsoever. (Art. 1275, deed of donation in Maximo's favor covering one-half (the eastern half) of their
Old Civil Code; Art. 1352, New Civil Code.) Nonetheless, under the Old Civil Code, land. Although the document of sale stated a consideration of Five Hundred
the statement of a false consideration renders the contract voidable, unless it is proven (P500.00) Pesos, the aforesaid spouses did not receive anything of value for
that it is supported by another real and licit consideration. (Art. 1276, Old Civil Code.) the land. The attorney's misbehaviour was the subject of an investigation but
its result does not appear on record. However we took note of the fact that
Same; Annulment of contract on the ground of falsity of consideration; during the hearing of these cases said notary public was present but did not
Prescription.—The action for annulment of a contract on the ground of falsity of take the witness stand to rebut the plaintiffs' testimony supporting the
consideration shall last four years, the term to run from the date of the consummation allegation of fraud in the preparation of the document.
of the contract. (Art. 1301, Old Civil Code.)
Following the execution of the afore-stated document, the spouses Miguel
Same; Contract that states false consideration construed.—A contract that Mapalo and Candida Quiba immediately built a fence of permanent structure
states a false consideration is one that has in fact a real consideration but the same is in the middle of their land segregating the eastern portion from its western
not the one stated in the document. (Manresa, Codigo Civil, Tomo VIII, Vol. II, p. portion. Said fence still exists. The spouses have always been in continued
354.) possession over the western half of the land up to the present.

Same; Contract without consideration; Effect of statement of consideration in Not known to them, meanwhile, Maximo Mapalo, on March 15, 1938,
the document.—Where there was in fact no consideration, the statement of one in the registered the deed of sale in his favor and obtained in his name Transfer
deed will not suffice to bring it under the rule of Article 1276 of the Old Civil Code as Certificate of Title No. 12829 over the entire land. Thirteen years later on
stating a false consideration. October 20, 1951, he sold for P2,500.00 said entire land in favor of Evaristo,
Petronila Pacifico and Miguel all surnamed Narciso. The sale to the Narcisos
Same; Statement that purchase price was paid but in fact never been paid to the was in turn registered on November 5, 1951 and Transfer Certificate of Title
vendor.—A contract of purchase and sale is void and produces no effect whatsoever No. 11350 was issued for the whole land in their names.
where the same is without cause or consideration in that the purchase price, which
appears thereon as paid, has in fact never been paid by the purchaser to the vendor. The Narcisos took possession only of the eastern portion of the land in 1951,
after the sale in their favor was made. On February 7, 1952 they filed suit in
Same; Inexistent contract cannot be the subject of prescription.—The the Court of First Instance of Pangasinan (Civil Case No. 1191) to be declared
inexistence of a contract is permanent and incurable and cannot be the subject of owners of the entire land, for possession of its western portion; for damages;
prescription. and for rentals. It was brought against the Mapalo spouses as well as against
Floro Guieb and Rosalia Mapalo Guieb who had a house on the western part
Attorney’s fees.—Purchasers in bad faith of a parcel of land who brought an of the land with the consent of the spouses Mapalo and Quiba.
action for its recovery from the true owner were held liable to pay attorney’s fees to
the latter on his counterclaim. The Mapalo spouses filed their answer with a counterclaim on March 17, 1965,
seeking cancellation of the Transfer Certificate of Title of the Narcisos as to
Sales – Assignment No. 3 Page 18 of 37
the western half of the land, on the grounds that their (Mapalo spouses) (g) sentencing Maximo Mapalo and the Narcisos to pay the costs.
signatures to the deed of sale of 1936 was procured by fraud and that the
Narcisos were buyers in bad faith. They asked for reconveyance to them of IT IS SO ORDERED.
the western portion of the land and issuance of a Transfer Certificate of Title
in their names as to said portion. The Narcisos appealed to the Court of Appeals. In its decision on May 28,
1963, the Court of Appeals reversed the judgment of the Court of First
In addition, the Mapalo spouses filed on December 16, 1957 their own Instance, solely on the ground that the consent of the Mapalo spouses to the
complaint in the Court of First Instance of Pangasinan (Civil Case No. U-133) deed of sale of 1936 having been obtained by fraud, the same was voidable,
against the aforestated Narcisos and Maximo Mapalo. They asked that the not void ab initio, and, therefore, the action to annul the same, within four years
deeds of sale of 1936 and of 1951 over the land in question be declared null from notice of the fraud, had long prescribed. It reckoned said notice of the
and void as to the western half of said land. fraud from the date of registration of the sale on March 15, 1938. The Court of
First Instance and the Court of Appeals are therefore unanimous that the
Judge Amado Santiago of the Court of First Instance of Pangasinan located in spouses Mapalo and Quiba were definitely the victims of fraud. It was only on
the municipality of Urdaneta tried the two cases jointly. Said court rendered prescription that they lost in the Court of Appeals.
judgment on January 18, 1961, as follows:
From said decision of the Court of Appeals, the Mapalo spouses appealed to
WHEREFORE, judgment is hereby rendered as follows, to wit: this Court.

(a) dismissing the complaint in Civil Case No. 11991; And here appellants press the contention that the document dated October 15,
1936, purporting to sell the entire land in favor of Maximo Mapalo, is void, not
(b) declaring Exhibit A, plaintiffs in Case No. 11991 and Exhibit 1, merely voidable, as to the western portion of the land for being absolutely
defendants in Case No. U-133 as a donation only over the eastern half simulated or fictitious.
portion of the above-described land, and as null and void with respect
to the western half portion thereof; Starting with fundamentals, under the Civil Code, either the old or the new, for
a contract to exist at all, three essential requisites must concur: (1) consent,
(c) declaring as null and void and without legal force and effect (2) object, and (3) cause or consideration.1 The Court of Appeals is right in that
Transfer Certificate of Title No. 12829 issued in favor of Maximo the element of consent is present as to the deed of sale of October 15, 1936.
Mapalo as regards the western half portion of the land covered therein; For consent was admittedly given, albeit obtained by fraud. Accordingly, said
consent, although defective, did exist. In such case, the defect in the consent
(d) declaring as null and void Transfer Certificate of Title No. 11350 in would provide a ground for annulment of a voidable contract, not a reason for
the names of the Narcisos insofar as the western half portion of the nullity ab initio.
land covered therein is concerned;
The parties are agreed that the second element of object is likewise present in
(e) ordering the spouses Mapalo and Quiba and the Narcisos to have the deed of October 15, 1936, namely, the parcel of land subject matter of the
the above-described land be subdivided by a competent land surveyor same.
and that the expenses incident thereto be borne out by said parties pro
rata; Not so, however, as to the third element of cause or consideration. And on this
point the decision of the Court of Appeals is silent.
(f) ordering the Register of Deeds of Pangasinan to issue in lieu of
Transfer Certificate of Title No. 11350 two new titles upon completion As regards the eastern portion of the land, the Mapalo spouses are not
of the subdivision plan, one in favor of the spouses Miguel Mapalo and claiming the same, it being their stand that they have donated and freely given
Candida Quiba covering the western half portion and another for the said half of their land to Maximo Mapalo. And since they did not appeal from
Narcisos covering the eastern half portion of the said land, upon the decision of the trial court finding that there was a valid and effective
payment of the legal fees; meanwhile the right of the spouses Mapalo donation of the eastern portion of their land in favor of Maximo Mapalo, the
and Quiba is hereby ordered to be annotated on the back of Transfer same pronouncement has become final as to them, rendering it no longer
Certificate of Title No. 11350; and proper herein to examine the existence, validity efficacy of said donation as to
said eastern portion.1äwphï1.ñët
Sales – Assignment No. 3 Page 19 of 37
Now, as to the western portion, however, the fact not disputed herein is that Si bien es elemento fundamental de todo negocio, la declaracion de
no donation by the Mapalo spouses obtained as to said portion. Accordingly, voluntad substracto de una voluntad efectiva, y la existencia de una
we start with the fact that liberality as a cause or consideration does not exist causa que leconfiera significado juridico señalando la finalidad que
as regards the western portion of the land in relation to the deed of 1936; that con este se persigue, no ha de deducirse de esta doctrina,
there was no donation with respect to the same. fundamentalmente recogida en el articulo 1.261 y concordantes del
Codigo civil, que cualquier falta de adecuacion entre cualquier
It is reduced, then, to the question whether there was an onerous conveyance incongruencia entre la causa expresada y la verdadera, y, en general,
of ownership, that is, a sale, by virtue of said deed of October 15, 1936, with entre la estructuracion y la finalidad economica; hayan de producir la
respect to said western portion. Specifically, was there a cause or ineficacia del negocio, pues por el contrario, puede este ser valido y
consideration to support the existence of a contrary of sale? producir sus efectos tanto en el caso de la mera disonancia entre el
medio juridico adoptado y el fin practico perseguido, por utilizacion de
The rule under the Civil Code, again be it the old or the new, is that una via oblicua o combinacion de formas juridicas entrelazadas que
contracts without a cause or consideration produce no effect permita la obtencion de un resultado no previsto en los cuadros de la
whatsoever.2 Nonetheless, under the Old Civil Code, the statement of a false ley — negocios indirectos y negocios fiduciarlos, validos cuando no
consideration renders the contract voidable, unless it is proven that it is envuelven fraude de ley, como en el caso de la verdadera
supported by another real and licitconsideration.3 And it is further provided by disconformidad entre la apariencia del acto y su real contenido,
the Old Civil Code that the action for annulment of a contract on the ground of preparada deliberadamente por las partes — negocio simulado — ,
falsity of consideration shall last four years, the term to run from the date of the ya que, cuando esta divergencia implica no una ausencia total de
consummation of the contract.4 voluntad y de acto real, sino mera ocultacion de un negocio verdadero
bajo la falsa apariencia de un negocio fingido "sirulacion relativa", la
Accordingly, since the deed of sale of 1936 is governed by the Old Civil Code, ineficacia de la forma externa simulada, no es obstaculo para la
it should be asked whether its case is one wherein there is no consideration, posible validez del negocio disimulado que contiene, en tanto este
or one with a statement of a false consideration. If the former, it is void and ultimo sea licito y reuna no solo los requisitos generales, sino tambien
inexistent; if the latter, only voidable, under the Old Civil Code. As observed los que corresponden a su naturaleza especial, doctrina, en obligada
earlier, the deed of sale of 1936 stated that it had for its consideration Five aplicacion de los preceptos de nuestra Ley civil, especialmente en su
Hundred (P500.00) Pesos. In fact, however, said consideration was totally art. 1.276, que, al establecer el principio de nulidad de los contratos
absent. The problem, therefore, is whether a deed which states a en los que se hace expresion de una causa falsa, deja a salvo el caso
consideration that in fact did not exist, is a contract without consideration, and de que esten fundados en otra verdadera y licita. (Manresa, Codigo
therefore void ab initio, or a contract with a false consideration, and therefore, Civil, Tomo VIII, Vol. II pp. 357-358)
at least under the Old Civil Code, voidable.
Sanchez Roman says:
According to Manresa, what is meant by a contract that states a false
consideration is one that has in fact a real consideration but the same is not Ya hemos dicho que la intervencion de causa en los contratos es
the one stated in the document. Thus he says: necesaria, y que sin ellos son nulos; solo se concibe que un hombre
perturbado en su razon pueda contratar sin causa. ...
En primer lugar, nor interesa recordar la diferencia entre simulacion y
el contrato con proposito fraudulento. Este aunque ilicito es real; mas Por la misma razon de la necesidad de la intervencion de causa en el
el primero es falso en realidad, aunque se le presente como contrato, es preciso que esta sea verdadera y no supuesta, aparente
verdadero. (Manresa, Codigo Civil, Tomo VIII, Vol. II, p. 354.) o figurada. Que la falsedad de la causa vicia el consentimiento y
anula el contrato, es, no solo doctrina indudable de Derecho Cientifico
And citing a decision of the Supreme Court of Spain on the matter, Manresa sino tambien de antiguo Derecho de Castilla, que en multitud de leyes
further clarifies the difference of false cause and no cause, thus: asi lo declararon. (Sanchez Roman, Derecho Civil, Tomo IV, p. 206.).

Insiste en el distingo con mas detenida descripcion la sentencia de 25 In a clearer exposition of the above distinction, Castan states:
de mayo de 1944, en la que se argumenta:
2.º. La causa ha de ser verdadera. La causa falsa puede ser erronea
o simulada. Es erronea como dice Giorgi, la causa que tiene por base

Sales – Assignment No. 3 Page 20 of 37


la credulidad en un hecho no existente; y simulada la que tiene lugar Under the existing classification, such contract would be "inexisting"
cuando se hace aparecer artificiosamente una distinta de la and "the action or defense for declaration" of such inexistence "does
verdadera. La erronea produce siempre la inexistencia del contrato; not prescribe". (Art. 1410, New Civil Code). While it is true that this is
la simulada no siempre produce este efecto, porque puede suceder a new provision of the New Civil Code, it is nevertheless a principle
que la causa oculta, pero verdadera, baste para sostener el contrato. recognized since Tipton vs. Velasco, 6 Phil. 67 that "mere lapse of
De acuerdo con esta doctrina, dice el art. 1.276 de nuestro Codigo time cannot give efficacy to contracts that are null and void".
que "la expresion de una causa falsa en los contratos dara lugar a la
nulidad, si no se probase que estaban fundados en otra verdadera y Anent the matter of whether the Narcisos were purchasers in good faith, the
licita". (Castan Derecho Civil Español, Tomo II, pp. 618-619) trial court in its decision resolved this issue, thus:

From the foregoing it can be seen that where, as in this case, there was in fact With regard to the second issue, the Narcisos contend that they are
no consideration, the statement of one in the deed will not suffice to bring it the owners of the above-described property by virtue of the deed of
under the rule of Article 1276 of the Old Civil Code as stating a false sale (Exh. B, plaintiffs in 11991 and Exh. 2, defendants in U-133)
consideration. Returning to Manresa: executed in their favor by Maximo Mapalo, and further claim that they
are purchasers for value and in good faith. This court, however, cannot
Figurando en nuestro Derecho positivo la causa, como un elemento also give weight and credit on this theory of the Narcisos on the
esential del contrato, es consecuencia ineludible, se reputar simulada following reasons: Firstly, it has been positively shown by the
la entrega del precio en la compraventa de autos, el que haya que undisputed testimony of Candida Quiba that Pacifico Narciso and
declararla nula por inexistente haciendose aplicacion indebida de art. Evaristo Narciso stayed for some days on the western side (the portion
1.276 por el Tribunal sentenciador al cohonestar la falta de precio in question) of the above-described land until their house was
admitiendo se pueda tratar de una donacion, ya que la recta removed in 1940 by the spouses Mapalo and Quiba; secondly,
aplicacion del citado precepto exige que los negocios simulados, o Pacifica Narciso admitted in his testimony in chief that when they
sea con causa falsa, se justifique la verdadera y licita en que se funda bought the property, Miguel Mapalo was still in the premises in
el acto que las partes han querido ocultar y el cumplimiento de las question (western part) which he is occupying and his house is still
formalidades impuestas por la Ley y, cual dice la sentencia de 3 de standing thereon; and thirdly, said Pacifico Narciso when presented
marzo de 1932, esta rigurosa doctrina ha de ser especialmente as a rebuttal and sub-rebuttal witness categorically declared that
impuesta en la donaciones puras y simples; de los que deduce que la before buying the land in question he went to the house of Miguel
sentencia recurrida al no decretar la nulidad instada por falta de Mapalo and Candida Quiba and asked them if they will permit their
causa, incide en la infraccion de los articulos 1.261, 1.274, 1.275 y elder brother Maximo to sell the property.
1.276 del Codigo Civil. (Sentencia de 22 de febrero de 1940).
(Manresa, Codigo Civil, Tomo VIII, Vol. II, p. 356) Aside from the fact that all the parties in these cases are neighbors,
except Maximo Mapalo the foregoing facts are explicit enough and
In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores, sufficiently reveal that the Narcisos were aware of the nature and
40 Phil. 921, is squarely applicable herein. In that case we ruled that a contract extent of the interest of Maximo Mapalo their vendor, over the above-
of purchase and sale is null and void and produces no effect whatsoever where described land before and at the time the deed of sale in their favor
the same is without cause or consideration in that the purchase price which was executed.
appears thereon as paid has in fact never been paid by the purchaser to the
vendor. Upon the aforestated declaration of Pacifico Narciso the following
question arises: What was the necessity, purpose and reason of
Needless to add, the inexistence of a contract is permanent and incurable and Pacifico Narciso in still going to the spouses Mapalo and asked them
cannot be the subject of prescription. In the words of Castan: "La inexistencia to permit their brother Maximo to dispose of the above-described
es perpetua e insubsanable no pudiendo ser objecto de confirmacion ni land? To this question it is safe to state that this act of Pacifico Narciso
prescripcion (Op. cit., p. 644.) In Eugenio v. Perdido, 97 Phil. 41, 42-43, is a conclusive manifestation that they (the Narcisos) did not only have
involving a sale dated 1932, this Court, speaking through Justice Cesar prior knowledge of the ownership of said spouses over the western
Bengzon, now Chief Justice, stated: half portion in question but that they also have recognized said
ownership. It also conclusively shows their prior knowledge of the want
of dominion on the part of their vendor Maximo Mapalo over the whole

Sales – Assignment No. 3 Page 21 of 37


land and also of the flaw of his title thereto. Under this situation, the
Narcisos may be considered purchasers in value but certainly not as
purchasers in good faith. ... (pp. 97-98, Record on Appeal.)

And said finding — which is one of fact — is found by us not a bit disturbed by
the Court of Appeals. Said the Court of Appeals:

In view of the conclusion thus reached, it becomes unnecessary to


pass on the other errors assigned. Suffice it to say that, on the merits
the appealed decision could have been upheld under Article 1332 of
the new Civil Code and the following authorities: Ayola vs. Valderrama
Lumber Manufacturers Co., Inc., 49 O.G. 980, 982; Trasporte vs.
Beltran, 51 O.G. 1434, 1435; Cortez vs. Cortez, CA-G.R. No. 18451-
R, August 8, 1961; Castillo vs. Laberinto, CA-G.R. No. 18118-R,
December 20, 1961; and 13 C.J. 372-373, as well as the several facts
and circumstances appreciated by the trial court as supporting
appellees' case.

thereby in effect sustaining — barring only its ruling on prescription — the


judgment and findings of the trial court, including that of bad faith on the part
of the Narcisos in purchasing the land in question. We therefore see no need
to further remand this case to the Court of Appeals for a ruling on this point, as
appellees request in their brief in the event we hold the contract of 1936 to be
inexistent as regards the western portion of the land.

In view of defendants' bad faith under the circumstances we deem it just and
equitable to award, in plaintiffs' favor, attorneys' fees on appeal, in the amount
of P1,000.00 as prayed for in the counterclaim.

Wherefore, the decision of the Court of Appeals is hereby reversed and set
aside, and another one is hereby rendered affirming in toto the judgment of the
Court of First Instance a quo, with attorney's fees on appeal in favor of
appellants in the amount of P1,000.00, plus the costs, both against the private
appellees. So ordered.

Sales – Assignment No. 3 Page 22 of 37


[7] Same; Same; Senior Citizens; Public policy is also well served in defending the
FIRST DIVISION rights of the aged to legal protection, including their right to property that is their
home, as against fraud, misrepresentation, chicanery and abuse of trust and
G.R. No. 83974 August 17, 1998 confidence by those who owed them candor and respect.—Here in the present case,
there is no doubt about the credibility of plaintiffs below (herein private respondents)
SPOUSES NARCISO RONGAVILLA and DOLORES in pursuing their cause promptly and forcefully. They never intended to sell, nor
RONGAVILLA, petitioners, acceded to be bound by the sale of their land. Public policy is also well served in
vs. defending the rights of the aged to legal protection, including their right to property
COURT OF APPEALS and MERCEDES DELA CRUZ and FLORENCIA that is their home, as against fraud, misrepresentation, chicanery and abuse of trust and
DELA CRUZ, respondents. confidence by those who owed them candor and respect.

Same; Same; There is no need of an action to set aside a void or inexistent


Contracts; Sales; Land Titles; The admission by a party that he had resorted to contract, as in fact such action cannot logically exist, though an action to declare the
doctoring the price stated in a Deed of Sale, allegedly “to save on taxes,” surely opens non-existence of the contract can be maintained, and in that same action, the plaintiff
the door to questions on the integrity, genuineness and veracity of said public may recover what he has given by virtue of that contract.—And if the passage of time
instrument.—Despite the petitioners’ insistence that the deed of sale is presumed valid could not cure the fatal flaw in the inexistent and void contract, neither could an alleged
and, being registered, could not be disturbed anymore, we however find their ratification or confirmation thereof. Further, as in the case before us, reconveyance is
arguments and ratiocination less than persuasive. While petitioners would not want the proper. “The defect of inexistence of a contract is permanent and incurable, hence it
deed of sale to be impugned, they themselves contradict the recitals therein. On the cannot be cured either by ratification or by prescription. x x x There is no need of an
vital point of consideration, they and their witnesses, namely Juanita Jimenez and action to set aside a void or inexistent contract; in fact such action cannot logically
Atty. Arcadio Espiritu repeatedly declared that the true consideration paid for the sale exist. However, an action to declare the nonexistence of the contract can be
of the land was not P2,000 as stated in their own Exhibit “1,” the Deed of Sale, but in maintained; and in the same action, the plaintiff may recover what he has given by
fact P7,800.00. x x x By their own testimony, the petitioners are pictured as not exactly virtue of the contract.”
averse to bending the truth, particularly the purported consideration. Sadly, the irony
of it is that while they claimed they were regularly paying taxes on the land in question Same; Same; Experience is the life of the law.—Given the circumstances of the
they had no second thoughts stating at the trial and later on appeal that they had case and there being no reversible error in the challenged decision, we are in accord
resorted to doctoring the price stated in the disputed Deed of Sale, allegedly “to save with the judgment below and find the petitioners’ appeal without merit. For as well
on taxes.” That admission surely opens the door to questions on the integrity, said in the Court of Appeals’ Decision and Resolution under review, “We cannot
genuineness and veracity of said public instrument. contemplate of the rather absurd situation, which defendantsappellants would
ineluctably lead [u]s to, where plaintiffs-appellees would sell their only house, in
Same; Same; Pleadings and Practice; Appeals; In petitions under Rule 45, the which they have lived for so many years, in order to secure the measly sum of
Court does not dwell on the alleged grave abuse of discretion but limits its observation P2,000.00 to repair the roof of their only house, which would all be lost to them
to alleged errors of law.—But petitioners herein would further take to task the anyway upon the consummation of the sale. They would then become homeless, and
appellate court for grave abuse of discretion, as well as for a reversible error, in having the repaired roof would be of no use to them.” Experience which is the life of the law—
relied on the “purported Certification of the Bureau of Internal Revenue which was as well as logic and common sense—militates against the petitioners’ cause.
not offered in evidence.” Since this is a petition under Rule 45, however, we will not
dwell on the alleged grave abuse of discretion but limit our observation to the alleged PETITION for review on certiorari of a decision and resolution of the Court of
error of law. The BIR certificate was the subject of the testimony of witnesses at the Appeals.
hearing where both parties took full advantage of the opportunity for direct and cross-
examination as well as rebuttal and sur-rebuttal. QUISUMBING, J.:

Same; Same; Once a disputed deed is found to be inexistent and void, the statute For review on appeal by certiorari are the Decision 1 of the Court of Appeals
of limitations cannot apply—the cause of action for its declaration as such is in CA-G.R. CV No. 06543, promulgated on March 11, 1988, and the
imprescriptible.—Turning now to the issue of prescription, it follows that once the Resolution 2dated June 28, 1988, denying petitioners' motion for
disputed deed is found to be inexistent and void, the statute of limitations cannot apply. reconsideration.
As the courts below ruled, the cause of action for its declaration as such is
imprescriptible.

Sales – Assignment No. 3 Page 23 of 37


The appealed decision affirmed in toto the judgment of the Regional Trial Considering the circumstances in this case, including the relationship of the
Court of Pasay City in Civil Case No. LP-8790-P, which disposed of the parties, it behooves this Court now to examine closely and carefully the
controversy as follows: questioned judgment and the record below. For the Court could not but be
mindful of the codal admonition that:
WHEREFORE, judgment is hereby rendered declaring void and
inexistent the Deed of Absolute Sale (Exh. "1") dated June 3, 1976 In all contractual, property or other relations, when one of the parties
allegedly executed by plaintiffs in favor of defendant spouses, which is at a disadvantage on account of his moral dependence, ignorance,
document is now particularly identified as Doc. No. 164; Page No. 34; indigence, mental weakness, tender age, or other handicap, the courts
Book No. I; Series of 1976 in the Notarial Register of Arcadio Espiritu, must be vigilant for his protection. (Art. 24, Civil Code)
a Notary Public for and in the Province of Cavite. Further, defendant
spouses are hereby ordered — From the facts found below, it appears that in the month of May, 1976, the
private respondents borrowed the amount of two thousand (P2,000) from the
a. To reconvey to the plaintiffs, free from all liens and encumbrances, petitioners for the purpose of having their (respondents') dilapidated rooftop
the property covered by Transfer Certificate of Title No. S-28903 of repaired.
the Registry of Deeds for the Province of Rizal;
A month later, petitioner Dolores Rongavilla and her sister Juanita Jimenez
b. To pay to plaintiffs the sum of P5,000.00 as attorney's fees; and visited their aunts' home, bringing with them a document for the signature of
their aunts. The document is admittedly typewritten in English. When asked in
c. To pay the costs of the suit.3 Tagalog by one of the aunts, respondent Mercedes de la Cruz, what the paper
was all about, Dolores Rongavilla answered also in Tagalog, that it was just a
As gleaned from the record, the private parties are closely related. Plaintiffs document to show that the private respondents had a debt amounting to
below, now the private respondents, are the aunts of herein petitioner Dolores P2,000. On account of that representation, private respondents signed the
Rongavilla. Both spinsters, they earn their livelihood as embroiderers document.
("magbuburda") and dressmakers; although unschooled in English, they are
however able to read and write in Tagalog. Since they are of advanced age In September 1980, or after a lapse of over four years, petitioner Dolores
(Mercedes de la Cruz, 60 and Florencia de la Cruz, 71), their day to day Rongavilla went to private respondents' place and asked them to vacate the
activities were confined mostly close to home. parcel in question, claiming that she and her husband were already the new
owners of the land.
The property subject of this controversy between kith and kin is a parcel of
land, located in Manuyo, Las Piñas, Rizal (now Metro Manila) owned by private Surprised by petitioners' moves, private respondents with the help of friends
respondents, in the proportion of one-half (1/2) pro-indiviso, with another niece went to the Office of the Register of Deeds of the Province of Rizal to verify
named Juanita Jimenez as co-owner of the other one-half. The whole parcel the matter. They discovered that their Certificate of Title had been cancelled
consisted of 131 square meters and was covered by Original Certificate of Title and a new one, Transfer Certificate of Title No. S-28903, had been issued in
(OCT) No. 5415 of the Register of Deeds of the Province of Rizal. This OCT, favor of petitioners. They further discovered that said parcel of land had been
as well as the Transfer Certificate of Title (TCT) No. S-28903 after the parcel mortgaged with the Cavite Development Bank by the petitioners. It was only
was subdivided, was kept in the possession of Juanita Jimenez, who is the then that the private respondents realized that the document they had
elder sister of Dolores Rongavilla. previously been asked by their nieces to sign was a deed of sale.

Although the basic fact situation here might appear all too familiar, the legal On February 3, 1981, private respondents filed with the Court of First Instance,
controversy itself is notable for having passed through the entire channel of now Regional Trial Court, of Pasay City the sworn complaint 8 to have the
the justice system. 4 The present petition before us was given due course per purported deed of sale declared void and inexistent, for being fictitious and
Resolution 5 dated June 26, 1989; but it was denied on September 20, 1989, simulated, and secured by means of fraud and misrepresentation. They
for non-compliance with certain requirements; 6 although, upon motion for alleged that they did not sell their property in question to the defendants; that
reconsideration by the petitioners showing compliance, it was reinstated7 on they did not receive any consideration on the supposed sale; that their Original
September 2, 1991. Certificate of Title was cancelled and TCT No. S-28903 was issued in favor of
defendants (herein petitioners), who thereafter mortgaged said title for a total

Sales – Assignment No. 3 Page 24 of 37


of P40,000.00 to the damage and prejudice of the plaintiffs. They also claimed 1. Did the Court of Appeals commit a clear and patent error in
moral and exemplary damages, as the court might determine. declaring as "void and inexistent" the Deed of Absolute Sale (Exhibit
1) dated June 3, 1976?
Petitioners duly filed their answer 9 after the denial of their motion to dismiss,
alleging that plaintiffs (now the private respondents) sold their parcel of land 2. Did the Court of Appeals commit grave error in holding that the
voluntarily, that there was consent to the deed of sale, that there was sufficient action to annul the Deed of Sale (Exhibit 1) does not prescribe?
consideration therefor, and that the document on the sale was complete in
itself and in due form, enabling the Register of Deeds to cancel their old TCT 3. Did the Court of Appeals commit grave abuse of discretion in relying
and issue a new one. Petitioners further stated that private respondents were on a purported Certificate of the Bureau of Internal Revenue which
fully apprised by the Notary Public, Atty. Arcadio G. Espiritu, on what the was not offered in evidence?
document was all about, and having understood the explanation made by said
Notary Public, they voluntarily affixed their signatures on said document. 4. Did the Court of Appeals commit grave error of law and grave abuse
Petitioners also asserted as affirmative and/or special defenses that of discretion amounting to lack of jurisdiction or in excess of jurisdiction
prescription had set in and that private respondents no longer had a cause of in ordering petitioners to reconvey the subject parcel of land to the
action, and that the deed of sale contained all the pre-requisites of a contract, private respondents?
namely consent of the parties, consideration or a price certain, and
determinate thing or object; and could no longer be annulled. They also These issues may be synthesized into one: Did the respondent Court of
claimed moral and exemplary damages. Appeals commit reversible error when it upheld the trial court's judgment that
the disputed Deed of Sale (Exhibit "1") is void and inexistent?
The trial court's judgment, quoted at the outset, being adverse to the
petitioners, they seasonably appealed. And after their rebuff at the appellate To resolve this pivotal issue, it must be noted that private respondents, as
level, they come now to this Court on certiorari under Rule 45 of the Rules of plaintiffs below, based their complaint to declare the disputed deed void and
Court, citing the following grounds for their petition: inexistent on two fundamental grounds: (1) lack of consent and (2) want of
consideration. Under oath, they strongly denied selling or even just agreeing
(1) It is clear and patent error of the Court of Appeals to declare as to sell, their parcel of land to their niece and nephew-in-law. During the hearing,
void and inexistent the Deed of Absolute Sale (Exhibit 1) dated June they also denied going to and appearing before the Notary Public who
3, 1976. prepared the deed of sale. They also vehemently denied receiving any
consideration for the alleged sale. They added that their signatures on the
(2) The Court of Appeals committed grave error of law in holding that purported deed of sale were obtained by fraud and misrepresentation as
the action to declare nullity of the Deed of Absolute Sale (Exhibit 1) petitioners had misled them to believe the document was just a paper to
does not prescribe. evidence a debt of P2,000 they obtained to buy G.I. sheets for the repair of
their leaking roof. 12 Private respondents were shocked and got sick when
(3) The Court of Appeals committed grave abuse of discretion in they were told by petitioners that they (respondents) were no longer the
relying on a purported Certificate of the Bureau of Internal Revenue owners of the land. 13
which was not offered in evidence.
On these two points of consent and consideration, the trial court found that:
(4) The Court of Appeals committed grave error of law and abuse of
discretion and grave abuse of discretion amounting to lack or excess . . . . A careful analysis and meticulous evaluation of the evidence on
of jurisdiction in ordering the petitioners to reconvey the subject parcel record has convinced the Court that the sale of their property to the
of land to the private respondents. 10 defendants was farthest from the plaintiffs' minds. The Court believes
that when plaintiffs voluntarily signed the document which turned out
With a slight variation but consistent with the grounds they have relied on, to be a deed of sale, they were misled by defendant Dolores
petitioners raise in their Memorandum 11 the following: Rongavilla and her sister Juanita Jimenez into believing that what they
signed was a document acknowledging the loan of P2,000.00
ISSUES extended them by said defendant.

Sales – Assignment No. 3 Page 25 of 37


The Deed of Absolute Sale (Exh. "1") mentions a consideration of have not given their consent at all. And since there was no consent,
P2,000.00. Three years after the alleged sale, the same property was the deed of absolute sale is, therefore, null and void ab initio. . . . 16
mortgaged by defendant spouses with the Cavite Development Bank
for P40,000.00. Clearly enough, the gross inadequacy and Dissatisfied, petitioners now seek from this Court the reversal of the judgment
unconsciounableness [sic] of the consideration deters the Court from below. They insist in their petition before us that the deed is valid; and that
subscribing to defendants' theory that plaintiffs sold the property to because of the statute of limitations, after the lapse of four years from its
them. It is more reasonable to assume that the amount of P2,000.00 execution and registration, it could no longer be annulled.
mentioned in the deed refers to the loan defendants extended to
plaintiffs for the same amount. They assert that "the presumption that contracts are presumed to be valid and
to be supported by lawful and good consideration has not been overthrown;"
Plaintiffs are now of advanced age. Their only property is the lot in and that "a stipulation in consideration of one dollar is just as effectual and
question and the house erected thereon. . . . . valuable as a larger sum stipulated or paid". 17

As there is no indication that plaintiffs were in dire need of money, They further assert that since private respondents signed the Deed of Sale, as
except for a few [sic] amount necessary for the repair of the roof of a public instrument, the truth of the recitals therein embodied could only be
their house for which they obtained a loan of P2,000.00 from impugned and disproved, not by mere preponderance of evidence, but by
defendants, there was no reason for plaintiffs to dispose of their evidence of "the clearest and most satisfactory character, convincing and
property. To do so would be inconsistent with the regular norm of overwhelming." 18 Petitioners further state that since they have been the ones
human conduct and the natural course of events. It is not in accord paying real estate taxes on the property, rather than their aunts, the latter by
with the natural promptings and instincts of human nature. 14 their acts had confirmed the deed executed by them. 19

To these findings by the trial court, the Court of Appeals in its own decision Despite the petitioners' insistence that the deed of sale is presumed valid and,
assented. In addition, it laid stress an the point of lack of consideration by being registered, could not be disturbed anymore, we however find their
quoting agreeably the trial judge's holding thereon: arguments and ratiocination less than persuasive. While petitioners would not
want the deed of sale to be impugned, they themselves contradict the recitals
By more than mere preponderance of evidence plaintiffs [herein therein. On the vital point of consideration, they and their witnesses, namely
private respondents] have established the merit of their cause of Juanita Jimenez and Atty. Arcadio Espiritu repeatedly declared that the true
action. The Court is of the opinion and so holds that there was fraud consideration paid for the sale of the land was not P2,000 as stated in their
exercised by defendant Dolores Rongavilla and her sister Juanita own Exhibit "1", the Deed of Sale, but in fact P7,800.00. 20
Jimenez in securing the signature of the Deed of Absolute Sale (Exh.
"1") and there was no consideration whatsoever for the alleged Petitioner Dolores Rongavilla herself on cross-examination testified as follows:
sale. Undoubtedly, the said deed of sale is simulated, fictitious and
void. 15 ATTY. RODRIGUEZ:

And before concluding, the appellate court reiterated the proper Q. You stated that you were present when this was explained by the
characterization of the deed of sale in question, not as an annullable contract, notary public, how did the notary public explain this deed of sale in
but as a void and inexistent contract as found by the trial court: English or Tagalog?

. . . In the case at bar, however, We are dealing not merely with a A. It was explained by the notary public that the property is being sold
voidable contract which is tainted with fraud, mistake, undue influence, by them to us and that the consideration was only P2,000.00 as
violence or intimidation which may justify the annulment of a contract, appearing in the document in order that we may be able to save for
but with a contract that is null and void ab initio. the payment of taxes and documentary stamps.

In the present case, plaintiffs-appellees declared under oath in their Q. Did the plaintiffs not say anything when the notary public according
complaint that they signed the alleged document without knowing that to you explained that instead of P7,800.00, P2,000.00 will be stated in
said document was deed of absolute sale. This means that plaintiffs- the document?
appellees consent was not only vitiated, but that plaintiffs-appellees
Sales – Assignment No. 3 Page 26 of 37
A. They did not say anything because we gave to them the amount of the lawyer-notary public in Bacoor, Cavite, on June 3, 1976, the date of
the consideration agreed between us the sum of P7,800.00. (t.s.n., execution shown in the deed, or on any other date. While indeed the BIR
Sept. 2, 1982, pp. 9-10) 21 certificate was not formally offered in evidence, hence no longer available on
review, the record would show that said BIR certificate was presented during
By their own testimony, the petitioners are pictured as not exactly averse to the testimony on rebuttal of respondent Mercedes de la Cruz: 25
bending the truth, particularly the purported consideration. Sadly, the irony of
it is that while they claimed they were regularly paying taxes on the land in ATTY. RODRIGUEZ:
question they had no second thoughts stating at the trial and later on appeal
that they had resorted to doctoring the price stated in the disputed Deed of According to the defendants, there was the alleged deed of sale
Sale, allegedly "to save on taxes". That admission surely opens the door to executed by you and your sister in favor of the defendants before
questions on the integrity, genuineness and veracity of said public instrument. Notary Public Arcadio G. Espiritu. It appears you have presented Tax
Account No. (TAN) 2345-463-6 and your sister Florencia de la Cruz
Thus, the trial court could not be said to err in asserting that "while it is true also presented Tax Account No. (TAN) 2345-468-4. Now, do you have
that public documents are presumed genuine and regular under the provisions any tax account number?
of the Rules of Court, this presumption is a rebuttable presumption which may
be overcome by clear, strong and convincing evidence." 22 WITNESS:

Moreover, Exhibit "1", the deed itself, shows that contrary to the testimony of None, sir. 26
the notary public, who appeared as a witness for petitioners, what was
originally typed therein was the amount of "Three Thousand Pesos (P3,000)", xxx xxx xxx
which later on was substituted by the handwritten amount now of "Two
Thousand Pesos (P2,000)." 23 There is no need to speculate on the ATTY. RODRIGUEZ:
motivation for this alteration. The notary public might have just wanted to
further save on taxes, rather than short-change the coffers of the government. I am showing to you this certification from the "Kawanihan ng Rentas,
But, again, the whole fabric of petitioners' claim to the sanctity of the deed as Quezon City, dated June 16, 1982, addressed to Miss Florencia de la
public instrument had thereby been shredded. Cruz and Miss Mercedes de la Cruz, Las Piñas, Metro-Manila, issued
by the accounting chief, stating that in reply to you[r] request dated
If as petitioners claimed on trial, the price paid was P7,800 while their deed June 14, 1982, requesting certification of your TAN, the records of
showed only P2,000, after the amount of P3,000 in the deed was altered, one their office do not show that you were issued any tax account number,
may well inquire: which figure could this Court believe? Could one say that the what relation has this document which for purposes of identification,
trial and the appellate courts both erred in holding that no consideration passed we respectfully request that the same be marked Exhibit "C" to
from the buyer to the seller? the certification issued by the BIR?

But petitioners herein would further take to task the appellate court for grave WITNESS:
abuse of discretion, as well as for a reversible error, in having relied on the
"purported Certification of the Bureau of Internal Revenue which was not Yes, this is the one. 27
offered in evidence". Since this is a petition under Rule 45, however, we will
not dwell on the alleged grave abuse of discretion but limit our observation to Now even if the matter of the official certification by the BIR is set aside, the
the alleged error of law. The BIR certificate was the subject of the testimony of whole question of the TAN being fake or belonging to somebody else, would
witnesses at the hearing where both parties took full advantage of the boil down to one of credibility between the two camps. Unfortunately for the
opportunity for direct and cross-examination as well as rebuttal and petitioners herein, the trial court found them and their witnesses far from
sur-rebuttal. 24 On the witness stand, private respondents as plaintiffs below credible. As remarked by the trial Judge, "the declarations of defendants
denied that they had any tax account number nor even residence certificates. [herein petitioners] do not inspire rational belief." 28 It would thus appear that
They were supported by their witnesses, testifying also under oath. They the trial court and the appellate court committed no grave error of law, that
contradicted the claim of the petitioners' lawyer-notary public, that the disputed would impel us on this point to override their judgment.
deed of sale was complete and in due form and was signed in his presence by
the private respondents. They further denied even having gone to the office of

Sales – Assignment No. 3 Page 27 of 37


Neither can we give assent to the assertion of petitioners that the appealed This Court in Mapalo v. Mapalo, 17 SCRA 114 (1966) stated:
Court of Appeals (CA) decision here as well as the judgment below is "contrary
to settled jurisprudence". This Court in Rivero v. Court of Appeals, 80 SCRA The rule under the Civil Code, again be it the old or the new, is that
411 (1977) had occasion already to affirm a trial court's judgment declaring contracts without a cause or consideration produce no effect
null and void the questioned deed of sale where it found: whatsoever. 32

The undisputed facts of record support the finding of the trial court that The "problem" before the Court "is whether a deed which states a
the consent of Ana Concepcion to the deed of sale was obtained consideration that in fact did not exist, is a contract, without consideration, and
through fraudulent misrepresentation of [her nephew] Jaime Rivero therefore void ab initio, or a contract with a false consideration, and therefore,
that the contract she was signing was one of mortgage. at least under the Old Civil Code, voidable." This problem arose, as observed
by the Court, because the questioned "deed of sale" between the brothers
The land in question is located in the municipality of Polo, Bulacan, Magpalo, in 1936, stated that it had for its consideration Five Hundred
very near Manila. It has an area of 2 hectares, 32 ares and 45 (P500.00) Pesos. In fact, however, said "consideration was totally absent." 33
centares. The consideration for the sale of said land is only P5,000.00
which is not only grossly inadequate but shocking to the conscience . Thus, the Court concluded:
. . 29
In our view, therefore, the ruling of this Court in Ocejo, Perez & Co.
In Ocejo, Perez & Co. vs. Flores, 40 Phil. 921 (1920), regarding the sale of vs. Flores, 40 Phil. 921 is squarely applicable herein. In that case we
land in Tayabas, Quezon, the Court confronted a similar question: ruled that a contract of purchase and sale is null and void and
produces no effect whatsoever where the same is without cause or
The first question presented is whether the contract of sale executed consideration in that the purchase price which appears thereon as
by Isabel Flores in favor of Joaquin Bas is valid or not. paid has in fact never been paid by the purchaser to the vendor. 34

By relying upon the documents executed in his favor by Isabel Flores Turning now to the issue of prescription, it follows that once the disputed deed
evidencing the contract of sale, Joaquin Bas insists that there has is found to be inexistent and void, the statute of limitations cannot apply. As
been a perfect and valid contract of sale of real estate between them the courts below ruled, the cause of action for its declaration as such is
and that he paid to her the consideration of P20,000 mentioned in said imprescriptible. 35 Petitioners-spouses contend, however, that this is contrary
documents. . . . . to settled jurisprudence because the applicable precedent should be Pangadil
v. CFI of Cotabato, 116 SCRA 347 (1982). But the fact situation of that case
Isabel Flores, on the other hand, maintained that there was neither a differs radically from the present controversy. There the Court upheld the
real sale nor did she receive a centavo from the defendant, as the dismissal of the action to declare a document known as "Ratificacion de Una
price of said sale, . . . 30 Venta" as inexistent and void after finding that it was "not a contract wherein
the parties do not intend to be bound at all," that no circumstance was alleged
Concluded the Court, after reviewing the series of transactions on record: to sustain the contention "that the execution of the aforesaid document is
contrary to public policy;" 36 and that for 27 years the petitioners did not even
It is then evident that the contract of sale mentioned in the notarial care to verify the status of the land in question. "Their inaction for such a
document of May 7, 1915, lacks cause or consideration and is considerable period of time reflects on the credibility of their pretense that they
therefore null and void and without any effect whatsoever according to merely intended to confirm an oral mortgage, instead of a sale of the land in
Article 1275 of the Civil Code, for it has been satisfactorily and question." 37
conclusively proven that the purchaser Joaquin Bas has not paid
Isabel Flores for the price of the lands that the latter has sold to him, Here in the present case, there is no doubt about the credibility of plaintiffs
and after being contented with having for a long time given several below (herein private respondents) in pursuing their cause promptly and
promises showing that he had no intention to comply with his contract, forcefully. They never intended to sell, nor acceded to be bound by the sale of
he concluded by executing four promissory notes payable to the their land. Public policy is also well served in defending the rights of the aged
vendor, which recite the aforementioned purchase price and which to legal protection, including their right to property that is their home, as against
were not also paid, there appearing in the record facts from which it fraud, misrepresentation, chicanery and abuse of trust and confidence by
can be inferred that fraud has been committed. 31 those who owed them candor and respect.
Sales – Assignment No. 3 Page 28 of 37
More to the point, in our view, is Baranda v. Baranda, 150 SCRA 59 (1987), Costs against petitioners.
where this Court found that:
SO ORDERED.
The Civil Code provides in Article 1391 that an action to annul a
contract on the ground of vitiated consent must be filed within four
years from the discovery of the vice of consent. In the instant case,
however, we are dealing not with a voidable contract tainted with
fraud, mistake, undue influence, violence or intimidation that can
justify its nullification, but with a contract that is null and void ab initio.

Paulina Baranda declared under oath in her complaint that she signed
the deeds of sale without knowing what they were, which means that
her consent was not merely marred by the above-stated vices, so as
to make the contracts voidable, but that she had not given her
consent at all. We are also satisfied that there was no void
consideration either for the alleged transfers, for reasons already
discussed. Lack of consent and consideration made the deeds of sale
void altogether 38 and rendered them subject to attack at any time,
conformably to the rule in Article 1410 that an action to declare the
inexistence of void contracts "does not prescribe". 39

And if the passage of time could not cure the fatal flaw in the inexistent and
void contract, neither could an alleged ratification or confirmation thereof.
Further, as in the case before us, reconveyance is proper. "The defect of
inexistence of a contract is permanent and incurable, hence it cannot be cured
either by ratification or by prescription. . . . There is no need of an action to set
aside a void or inexistent contract; in fact such action cannot logically exist.
However, an action to declare the non-existence of the contract can be
maintained; and in the same action, the plaintiff may recover what he has given
by virtue of the contract." 40

Given the circumstances of the case and there being no reversible error in the
challenged decision, we are in accord with the judgment below and find the
petitioners' appeal without merit. For as well said in the Court of Appeals'
Decision and Resolution under review, "We cannot contemplate of the rather
absurd situation, which defendants-appellants would ineluctably lead [u]s to,
where plaintiffs-appellees would sell their only house, in which they have lived
for so many years, in order to secure the measly sum of P2,000.00 to repair
the roof of their only house, which would all be lost to them anyway upon the
consummation of the sale. They would then become homeless, and the
repaired roof would be of no use to them." 41 Experience which is the life of
the law — as well as logic and common sense — militates against the
petitioners' cause.

WHEREFORE, the instant petition is hereby DENIED. The Decision and the
Resolution of the Court of Appeals in CA-G.R. CV No. 06543 are hereby
AFFIRMED.

Sales – Assignment No. 3 Page 29 of 37


[8] with modification the decision of the trial court, the dispositive portion of which
SECOND DIVISION reads, to wit:

G.R. No. 120724-25 May 21, 1998 WHEREFORE, this Court finds the Deed of Sale with Right of
Repurchase executed October 6, 1986 valid and binding between
FERNANDO T. MATE, petitioner, plaintiff and defendant (as vendor and vendee-a-retro respectively);
vs. that as the period to redeem has expired, ownership thereof was
THE HONORABLE COURT OF APPEALS and INOCENCIO consolidated by operation of law, and the Register of Deeds is hereby
TAN, respondents. ordered to REGISTER this decision consolidating the defendant's
ownership over the properties covered by Transfer Certificate of Title
Civil Law; Sales; The filing of the criminal cases was a tacit admission by No. T-90-71, covering Lot 8; Original Certificate of Title No. N-311
petitioner that there was a consideration of the pacto de retro sale.—As admitted by covering Lot 5370, all of the Tacloban Cadastre, and issuing to
petitioner, by virtue of the sale with pacto de retro, Josie Rey gave him, as vendor-a- defendant Inocencio Tan his titles after cancellation of the titles
retro, a postdated check in the amount of P1.4 Million, which represented the presently registered in plaintiff Fernando T. Mate's name and that of
repurchase price of the two (2) lots. Aside from the P1.4 Million check, Josie gave his wife.
another postdated check to petitioner in the amount of P420,000.00, ostensibly as
interest for six (6) months but which apparently was his fee for having executed the The plaintiff Fernando Mate is further ordered to pay defendant the
pacto de retro document. Josie thus assumed the responsibility of paying the sum of ONE HUNDRED FORTY THOUSAND (P140,000.00) PESOS,
repurchase price on behalf of petitioner to private respondent. Unfortunately, the two for and as attorney's fees.
checks issued by Josie Rey were worthless. Both were dishonored upon presentment
by petitioner with the drawee banks. However, there is absolutely no basis for With costs against the plaintiff Fernando Mate.
petitioner to file a complaint against private respondent Tan and Josie Rey to annul the
pacto de retro sale on the ground of lack of consideration, invoking his failure to encash SO ORDERED.2
the two checks. Petitioner’s cause of action was to file criminal actions against Josie
Rey under B.P. 22, which he did. The filing of the criminal cases was a tacit admission The facts of this case, as summarized in the petition, are reproduced
by petitioner that there was a consideration of the pacto de retro sale. hereunder:

Same; Same; Between two innocent parties, the one who made it possible for the On October 6, 1986 Josefina R. Rey (hereafter referred to as "Josie"
wrong to be done should be the one to bear the resulting loss.—Petitioner then for short) and private respondent went to the residence of petitioner at
postulates that “it is not only illegal but immoral to require him to repurchase his own Tacloban City. Josie who is a cousin of petitioner's wife solicited his
properties with his own money when he did not derive any benefit from the help to stave off her and her family's prosecution by private respondent
transaction.” Thus, he invokes the case of Singson vs. Isabela Sawmill, 88 SCRA 633, for violation of B.P. 22 on account of the rubber checks that she, her
643, where the Court said that “where one or two innocent persons must suffer, that mother, sister and brother issued to private respondent amounting to
person who gave occasion for the damages to be caused must bear consequences.” P4,435067.00. She requested petitioner to cede to private respondent
Petitioner’s reliance on this doctrine is misplaced. He is not an innocent person. As a his three (3) lots in Tacloban City in order to placate him. On hearing
matter of fact, he gave occasion for the damage caused by virtue of the deed of sale Josie's proposal he immediately rejected it as he owed private
with right to repurchase which he prepared and signed. Thus, there is the equitable respondent nothing and he was under no obligation to convey to him
maxim that between two innocent parties, the one who made it possible for the wrong his properties. Furthermore, his lots were not for sale. Josie explained
to be done should be the one to bear the resulting loss. to him that he was in no danger of losing his properties as he will
merely execute a simulated document transferring them to private
PETITION for review on certiorari of a decision of the Court of Appeals. respondent but they will be redeemed by her with her own funds. After
a long discussion, he agreed to execute a fictitious deed of sale with
MARTINEZ, J.: right to repurchase covering his three (3) lots mentioned above subject
to the following conditions:
In this petition for review, petitioner assails the Decision 1 of the Court of
Appeals dated August 29, 1994 in CA-G.R. CV No. 28225-26, which affirmed 1. The amount to be stated in the document is P1,400,000.00 with
interest thereon at 5% a month;
Sales – Assignment No. 3 Page 30 of 37
2. The properties will be repurchased within six (6) months or on or In this petition for review, the petitioner presents as the sole issue the validity
before April 4, 1987; of the Deed of Sale with Right to Repurchase. He contends that it is null and
void for lack of consideration because allegedly no money changed hands
3. Although it would appear in the document that petitioner is the when he signed it and the checks that were issued for redemption of the
vendor, it is Josie who will provide the money for the redemption of the properties involved in the sale have been dishonored by the drawee bank for
properties with her own funds; having been drawn against a closed account. 4

4. Titles to the properties will be delivered to private respondent but The contention is without merit.
the sale will not be registered in the Register of Deeds and annotated
on the titles. There was a consideration. The respondent court aptly observed that —

To assure petitioner that Josie will redeem the aforesaid properties, In preparing and executing the deed of sale with right of repurchase
she issued to him two (2) BPI checks both postdated December 15, and in delivering to Tan the land titles, appellant actually
1986. One check was for P1,400,000.00 supposedly for the selling accommodated Josefina so she would not be charged criminally by
price and the other was for P420,000.00 corresponding to the interests Tan. To ensure that he could repurchase his lots, appellant got a check
for 6 months. Immediately thereafter petitioner prepared the Deed of of P1,400,000.00 from her. Also, by allowing his titles to be in
Sale with Right to Repurchase (Exh. A) and after it has been signed possession of Tan for a period of six months, appellant secured from
and notarized, it was given to private respondent together with the her another check for P420,000.00. With this arrangement, appellant
titles of the properties and the latter did not register the transaction in was convinced he had a good bargain. Unfortunately his expectation
the Register of Deeds as agreed upon. crumbled. For this tragic incident, not only Josefina, but also Tan,
according to appellant must be answerable.
On January 14, 1987, petitioner deposited the check for
P1,400,000.00 (Exh. B) in his account at the United Coconut Planters xxx xxx xxx
Bank and the other check for P420,000.00 (Exh. D) in his account at
METROBANK preparatory to the redemption of his properties. It is plain that consideration existed at the time of the execution of the
However, both of them were dishonored by the drawee bank for deed of sale with right of repurchase. It is not only appellant's kindness
having been drawn against a closed account. Realizing that he was to Josefina, being his cousin, but also his receipt of P420,000.00 from
swindled, he sent Josie a telegram about her checks and when she her which impelled him to execute such contract. 5
failed to respond, he went to Manila to look for her but she could not
be found. So he returned to Tacloban City and filed Criminal Cases Furthermore, while petitioner did not receive the P1.4 Million purchase prices
Nos. 8310 and 8312 against her for violation of B.P. 22 but the cases from respondent Tan, he had in his possession a postdated check of Josie
were later archived as the accused (Josie) could not be found as she Rey in an equivalent amount precisely to repurchase the two lots on or before
went into hiding. To protect his interest, he filed Civil Case No. 7396 the sixth month.
of the Regional Trial Court of Leyte, Branch VII, entitled "Fernando T.
Mate vs. Josefina R. Rey and Inocencio Tan" for Annulment of As admitted by petitioner, by virtue of the sale with pacto de retro, Josie Rey
Contract with Damages. Defendant Josefina R. Rey (Josie) was gave him, as vendor-a-retro, a postdated check in the amount of P1.4 Million,
declared in default and the case proceeded against private which represented the repurchase price of the two (2) lots. Aside from the P1.4
respondent. But during the trial the RTC court asked private Million check, Josie gave another postdated check to petitioner in the amount
respondent to file an action for consolidation of ownership of the of P420,000.00, ostensibly as interest for six (6) months but which apparently
properties subject of the sale and pursuant thereto he filed Civil Case was his fee for having executed the pacto de retro document. Josie thus
No. 7587 that was consolidated with the case he filed earlier which assumed the responsibility of paying the repurchase price on behalf of
were later decided jointly by the trial court in favor of private petitioner to private respondent.
respondent and was subsequently appealed to respondent Court that
affirmed it with modification. Thereupon, petitioner filed a motion to Unfortunately, the two checks issued by Josie Rey were worthless. Both were
reconsider the decision but it was denied. Hence, the instant petition dishonored upon presentment by petitioner with the drawee banks. However,
for review.3 there is absolutely no basis for petitioner to file a complaint against private
respondent Tan and Josie Rey to annul the pacto de retro sale on the ground
Sales – Assignment No. 3 Page 31 of 37
of lack of consideration, invoking his failure to encash the two checks. right to collect from Josefina Rey by virtue of the pacto de retro sale. In turn,
Petitioner's cause of action was to file criminal actions against Josie Rey under Josefina gave petitioner a postdated check in the amount of P1.4 Million to
B.P. 22, which he did. The filing of the criminal cases was a tacit admission by ensure that the latter would not lose his two lots. Petitioner, a lawyer, should
petitioner that there was a consideration of the pacto de retro sale. have known that the transaction was fraught with risks since Josefina Rey and
family had a checkered history of issuing worthless checks. But had petitioner
Petitioner further claims that the pacto de retro sale was subject to the not agreed to the arrangement, respondent Tan would not have agreed to
condition that in the event the checks given by Josie Reyes to him for the waive prosecution of Josefina Rey.
repurchase of the property were dishonored, then the document shall be
declared null and void for lack of consideration. Apparently, it was petitioner's agreed for a huge profit that impelled him to
accede to the scheme of Josefina Rey even if he knew it was a dangerous
We are not persuaded. undertaking. When the drafted the pacto de retro document, he threw caution
to the winds forgetting that prudence might have been the better course of
Private respondent Tan was already poised to file criminal cases against Josie action. We can only sympathize with petitioner's predicament. However, a
Rey and her family. It would not be logical for respondent Tan to agree to the contract is a contract. One agreed upon, and provided all the essential
conditions allegedly imposed by petitioner. Petitioner knew that he was bound elements are present, it is valid and binding between the parties.
by the deed of sale with right to repurchase, as evidenced by his filing criminal
cases against Josie Rey when the two checks bounced. Petitioner has no one to blame but himself for his misfortune.

The respondent court further made the candid but true observation that: WHEREFORE, the Decision of the Court of Appeals dated August 29, 1994 is
hereby AFFIRMED. The petition for review is hereby DENIED DUE COURSE
If there is anybody to blame for his predicament, it is appellant himself. for lack of merit.
He is a lawyer. He was the one who prepared the contract. He knew
what he was entering into. Surely, he must have been aware of the SO ORDERED.
risk involved. When Josefina's checks bounced, he should have
repurchased his lots with his own money. Instead, he sued not only
Josefina but also Tan for annulment of contract on the ground of lack
of consideration and false pretenses on their part.

Petitioner then postulates that "it is not only illegal but immoral to require him
to repurchase his own properties with his own money when he did not derive
any benefit from the transaction." Thus, he invokes the case of Singson
vs. Isabela Sawmill, 88 SCRA 633, 643, where the Court said that "where one
or two innocent persons must suffer, that person who gave occasion for the
damages to be caused must bear consequences." Petitioner's reliance on this
doctrine is misplaced. He is not an innocent person. As a matter of fact, he
gave occasion for the damage caused by virtue of the deed of sale with right
to repurchase which he prepared and signed. Thus, there is the equitable
maxim that between two innocent parties, the one who made it possible for the
wrong to be done should be the one to bear the resulting loss.6

Petitioner further insinuates that private respondent deceived him into signing
the deed of sale with right to repurchase. This is not borne out by the evidence
nor by petitioner's own statement of facts which we heretofore produced. As
aptly observed by the respondent court "We are at a loss why herein appellant
ascribes false pretenses to Tan who merely signed the contract." 7 Contrary
to petitioner's pretension, respondent Tan did not employ any devious scheme
to make the former sign the deed of sale. It is to be noted that Tan waived his
Sales – Assignment No. 3 Page 32 of 37
[9] guilty parties inter se. It applies to cases where the nullity arises from the illegality of
THIRD DIVISION the consideration or the purpose of the contract. When two persons are equally at fault,
the law does not relieve them. The exception to this general rule is when the principle
[G.R. No. 144735. October 18, 2001] is invoked with respect to inexistent contracts.”

YU BUN GUAN, petitioner, vs. ELVIRA ONG, respondent. PETITION for review on certiorari of a decision of the Court of Appeals.

DECISION PANGANIBAN, J.:

Appeals; Evidence; It is axiomatic that factual findings of the trial court, A simulated deed of sale has no legal effect, and the transfer certificate
especially when affirmed by the Court of Appeals, are binding and conclusive on the of title issued in consequence thereof should be cancelled. Pari delicto does
Supreme Court.—We find no reason to disturb the findings of the RTC and the CA not apply to simulated sales.
that the source of the money used to acquire the property was paraphernal. This issue
is factual in nature. It is axiomatic that “factual findings of the trial court, especially Statement of the Case
when affirmed by the Court of Appeals, as in this case, are binding and conclusive on
the Supreme Court. It is not the function of this Court to re-examine the lower courts’ Before us is a Petition for Review under Rule 45 of the Rules of Court,
findings of fact. While there are exceptions to this rule, petitioner has not shown its assailing the April 25, 2000 Decision[1] and the August 31, 2000 Resolution[2] of
entitlement to any of them.” the Court of Appeals[3] (CA) in CA-GR CV No. 61364. The decretal portion of
the Decision reads as follows:
Witnesses; The unnatural and contradictory testimony of a witness makes him
unreliable.—The testimony of petitioner as to the source of the money he had We cannot see any justification for the setting aside of the contested Decision.
supposedly used to purchase the property was at best vague and unclear. At first he
maintained that the money came from his own personal funds. Then he said that it THE FOREGOING CONSIDERED, the appealed Decision is hereby
came from his mother; and next, from his father. Time and time again, “we [have] held AFFIRMED.[4]
that the unnatural and contradictory testimony of a witness, x x x makes him unreliable
x x x.” His statement that the JP Rizal property was bought with his own money can The assailed Resolution denied petitioners Supplemental Motion for
hardly be believed, when he himself was unsure as to the source of those funds. Reconsideration with Leave to Submit [Newly] Discovered Evidence.

Contracts; Sales; Simulated Contracts; A Deed of Sale that is completely The CA sustained the Decision of the Regional Trial Court (RTC) of
simulated is void and without effect.—In the present case, it is clear from the factual Makati City (Branch 60), which had disposed as follows:[5]
findings of both lower courts that the Deed of Sale was completely simulated and,
hence, void and without effect. No portion of the P200,000 consideration stated in the 23. WHEREFORE, the Court hereby renders judgment as follows:
Deed was ever paid. And, from the facts of the case, it is clear that neither party had
any intention whatsoever to pay that amount. Instead, the Deed of Sale was executed 23.1. The Deed of Sale dated July 24, 1992 (Exh. EE or Exh. 3) is declared
merely to facilitate the transfer of the property to petitioner pursuant to an agreement VOID.
between the parties to enable him to construct a commercial building and to sell the
Juno property to their children. Being merely a subterfuge, that agreement cannot be 23.2. The plaintiff ELVIRA ONG is declared the OWNER of the
taken as the consideration for the sale. property covered by Transfer Certificate of Title No. 217614,
Registry of Deeds, Makati (Exh. DD).
Principle of In Pari Delicto; Words and Phrases; The principle of in pan delicto
provides that when two parties are equally at fault, the law leaves them as they are 23.3. The Register of Deeds, City of Makati is ordered to:
and denies recovery by either one of them; The principle of in pari delicto does not
apply with respect to inexistent and void contracts.—The principle of in pari 23.2.1. Cancel Transfer Certificate of Title No. 181033 (Exh.
delicto provides that when two parties are equally at fault, the law leaves them as they HH); and
are and denies recovery by either one of them. However, this principle does not apply
with respect to inexistent and void contracts. Said this Court in Modina v. Court of 23.2.2. Issue in lieu thereof, a transfer certificate of title in the
Appeals: “The principle of in pari delicto non oritur actio denies all recovery to the name of ELVIRA A. ONG, of legal age, single, Filipino;
Sales – Assignment No. 3 Page 33 of 37
23.[4]. The defendant YU BUN GUAN is ordered to pay to the said plaintiff, the in favor of the three (3) children and that he would pay the Allied Bank, Inc. the
following: loan he obtained.

23.[4].1. P48,631.00 As reimbursement of the capital gains tax (Exh. FF); Because of the glib assurances of [petitioner], [respondent] executed a Deed
of Absolute Sale in 1992, but then he did not pay the consideration
23.[4].2. Six (6) percent of P48,631.00 per annum from November 23, 1993, of P200,000.00, supposedly the ostensible valuable consideration. On the
until the said P48,631.00 is paid as damages contrary, she paid for the capital gains tax and all the other assessments even
amounting to not less than P60,000.00, out of her personal funds.
23.[4].3. P100,000.00 - as moral damages;
Because of the sale, a new title (TCT No. 181033) was issued in his name, but
23.[4].4. P 50,000.00 as exemplary damages; to insure that he would comply with his commitment, she did not deliver the
owners copy of the title to him.
23.[4].5. P 100,000.00 as attorneys fees.
Because of the refusal of [petitioner] to perform his promise, and also because
23.[5]. The COUNTERCLAIM is DISMISSED. he insisted on delivering to him the owners copy of the title [to] the JP Rizal
property, in addition to threats and physical violence, she decided executing
23.[6]. Cost is taxed against the defendant. an Affidavit of Adverse Claim.

24. In Chambers, City of Makati, June 23, 1998. Also to avoid burdening the JP Rizal property with an additional loan amount,
she wrote the Allied Bank, Inc. on August 25, 1992, withdrawing her authority
The Facts for [petitioner] to apply for additional loans.

The antecedents of the case are succinctly summarized by the Court of To save their marriage, she even sought the help of relatives in an earnest
Appeals in this wise: effort [at] reconciliation, not to mention a letter to [petitioner] on November 3,
1992.
[Herein respondent] said that she and [petitioner] are husband and wife, having
been married according to Chinese rites on April 30, 1961. They lived together [Petitioner], on the other hand, filed with the RTC, Makati, in 1993 (Case No.
until she and her children were abandoned by [petitioner] on August 26, 1992, M-2905), a Petition for Replacement of an owners duplicate title.
because of the latters incurable promiscuity, volcanic temper and other vicious
vices; out of the reunion were born three (3) children, now living with her Attached to the Petition was the Affidavit of Loss dated March 26, 1993, in
[respondent]. which he falsely made it appear that the owners copy of the title was lost or
misplaced, and that was granted by the court in an Order dated September 17,
She purchased on March 20, 1968, out of her personal funds, a parcel of land, 1993, following which a new owners copy of the title was issued to [petitioner].
then referred to as the Rizal property, from Aurora Seneris, and supported by
Title No. 26795, then subsequently registered on April 17, 1968, in her name. Upon discovery of the fraudulent steps taken by the [petitioner], [respondent]
immediately executed an Affidavit of Adverse Claim on November 29, 1993.
Also during their marriage, they purchased, out of their conjugal funds, a house
and lot, in 1983, thereafter, registered in their names, under Title No. 118884. She precisely asked the court that the sale of the JP Rizal property be declared
as null and void; for the title to be cancelled; payment of actual, moral and
Before their separation in 1992, she reluctantly agreed to the [petitioners] exemplary damages; and attorneys fees.
importunings that she execute a Deed of Sale of the J.P. Rizal property in his
favor, but on the promise that he would construct a commercial building for the It was, on the other hand, the version of [petitioner] that sometime in 1968 or
benefit of the children. He suggested that the J.P. Rizal property should be in before he became a Filipino, through naturalization, the JP Rizal property was
his name alone so that she would not be involved in any obligation. The being offered to him for sale. Because he was not a Filipino, he utilized
consideration for the simulated sale was that, after its execution in which he [respondent] as his dummy and agreed to have the sale executed in the name
would represent himself as single, a Deed of Absolute Sale would be executed of [respondent], although the consideration was his own and from his personal
funds.
Sales – Assignment No. 3 Page 34 of 37
When he finally acquired a Filipino citizenship in 1972, he purchased another The CA debunked the contention of petitioner that he had purchased the
property being referred to as the Juno lot out of his own funds. If only to reflect property out of his own funds and merely used respondent as his dummy.[11] It
the true ownership of the JP Rizal property, a Deed of Sale was then executed also held that the latter was not in pari delicto with him, because the contract
in 1972. Believing in good faith that his owners copy of the title was lost and was simulated or fictitious due to the lack of consideration. The contract was
not knowing that the same was surreptitiously concealed by [respondent], he deemed void for having been executed during the couples marriage. [12] The
filed in 1993 a petition for replacement of the owners copy of the title, in court. CA likewise affirmed the award of actual, moral and exemplary damages to
respondent.[13]
[Petitioner] added that [respondent] could not have purchased the property
because she had no financial capacity to do so; on the other hand, he was Hence, this Petition.[14]
financially capable although he was disqualified to acquire the property by
reason of his nationality. [Respondent] was in pari delicto being privy to the Issues
simulated sale.
In his Memorandum, petitioner raises the following issues for the Courts
Before the court a quo, the issues were: who purchased the JP Rizal property? consideration:
[W]as the Deed of Sale void? and damages.[6]
I
Ruling of the Trial Court
Whether or not the Court of Appeals gravely erred in not applying [the] rules
After examining the evidence adduced by both parties, the RTC found on co-ownership under Article 144 of the New Civil Code in determining the
that the JP Rizal property was the paraphernal property of respondent, proprietary rights of the parties herein even as respondent herself expressly
because (1) the title had been issued in her name; (2) petitioner had declared that the money with which she allegedly bought the property in
categorically admitted that the property was in her name; (3) petitioner was question in 1968 came from her funds, salaries and savings at the time she
estopped from claiming otherwise, since he had signed the Deed of Absolute and petitioner already lived as husband and wife.
Sale that stated that she was the absolute and registered owner; and (4) she
had paid the real property taxes thereon.[7] II

The trial court further held that the in pari delicto rule found in Articles Whether or not the Court of Appeals likewise palpably erred in declaring the
1411 and 1412 of the Civil Code was not applicable to the present case, sale of the subject property to herein petitioner in 1992 to be fictitious,
because it would apply only to existing contracts with an illegal cause or object, simulated and inexistent.
not to simulated or fictitious contracts or to those that were inexistent due to
lack of an essential requisite such as cause or consideration. [8] It likewise III
voided the Deed of Absolute Sale of the JP Rizal property for having been
simulated and executed during the marriage of the parties.[9] Whether or not the Court of Appeals further erred in not applying the [in] pari
delicto rule to the sale of the subject property in favor of the petitioner in 1992
Ruling of the Court of Appeals contrary to the express declaration to that effect in the very same case it cited
(Rodriguez v. Rodriguez; 20 SCRA 908) in the decision herein sought to be
The Court of Appeals upheld the trial courts findings that the JP Rizal reviewed.
property had been acquired by respondent alone, out of her own personal
funds. It ruled thus: IV

x x x [T]he JP Rizal property was purchased by the [respondent] alone; Whether or not the Court of Appeals gravely erred in annul[l]ing the title (TCT
therefore it is a paraphernal property. As a matter of fact, the title was issued No. 181033) to the subject property in the name of herein petitioner in the
in her name, Exh. DD. This was even admitted by [petitioner] in the Answer absence of actual fraud.[15] (Underscoring in the original.)
that the sale was executed in her name alone. He also signed the sale
mentioning [respondent] to be an absolute owner; therefore, he should be This Courts Ruling
estopped from claiming otherwise. She alone likewise did the payment of the
taxes.[10] The Petition is devoid of merit.
Sales – Assignment No. 3 Page 35 of 37
First Issue: Nature of the Property We therefore agree with the CAs affirmation of the RTCs findings that the
property had been acquired using respondents paraphernal property. The CA
Petitioner contends that the JP Rizal property should be deemed as co- ruled thus:
owned, considering that respondent testified during trial that the money she
used in purchasing it had come from her income, salaries and savings, which The fact however, is that Yu never refuted Elviras testimony that: (a) the
are conjugal in nature. money with which she acquired the JP Rizal property came from: (1) her
income as a cashier in the Hong Kiat Hardware; (2) income from her
On the other hand, respondent maintains that the finding of the two lower paraphernal property a lot in Guadalupe; (3) her savings from the money which
courts that the property was acquired using funds solely owned by her is her parents gave her while she was still a student; and (4) the money which
binding and supported by evidence. She further argues that the two defenses her sister gave her for helping her run the beauty parlor; (b) her parents were
of petitioner are contradictory to each other because, if the property is co- well off they had stores, apartments and beauty parlors from which they
owned, he cannot claim to own it in its entirety. derived income; (c) before her marriage she bought lots in different places (p.
8, TSN, Jan. 26, 1998; pp. 22-23, TSN March 10, 1998).[18]
We find no reason to disturb the findings of the RTC and the CA that the
source of the money used to acquire the property was paraphernal. This issue Second Issue: Fictitious, Simulated and Inexistent Sale
is factual in nature. It is axiomatic that factual findings of the trial court,
especially when affirmed by the Court of Appeals, as in this case, are binding Next, petitioner argues that there was a valid sale between the parties,
and conclusive on the Supreme Court. It is not the function of this Court to and that the consideration consisted of his promise to construct a commercial
reexamine the lower courts findings of fact. While there are exceptions to this building for the benefit of their three children and to pay the loan he had
rule, petitioner has not shown its entitlement to any of them.[16] obtained from Allied Bank.

The testimony of petitioner as to the source of the money he had We disagree. In Rongavilla v. Court of Appeals,[19] the Court declared that
supposedly used to purchase the property was at best vague and unclear. At a deed of sale, in which the stated consideration had not in fact been paid, is
first he maintained that the money came from his own personal funds. Then null and void:
he said that it came from his mother; and next, from his father. Time and time
again, we [have] held that the unnatural and contradictory testimony of a The problem before the Court is whether a deed which states a consideration
witness, x x x makes him unreliable x x x. [17] His statement that the JP Rizal that in fact did not exist, is a contract, without consideration, and therefore void
property was bought with his own money can hardly be believed, when he ab initio, or a contract with a false consideration, and therefore, at least under
himself was unsure as to the source of those funds. the Old Civil Code, voidable. x x x."

On the other hand, the capacity of respondent to purchase the subject "In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores,
property cannot be questioned. It was sufficiently established during trial that 40 Phil. 921[,] is squarely applicable herein. In that case we ruled that a
she had the means to do so. In fact, her testimony that she had purchased contract of purchase and sale is null and null and void and produces no effect
several other lots using her personal funds was not disputed. whatsoever where the same is without cause or consideration in that the
purchase price which appears thereon as paid has in fact never been paid by
Equally without merit is the contention of petitioner that, because he was the purchaser to vendor."[20]
a Chinese national at the time, respondent was merely used as a dummy in
acquiring the property; thus, she could not have legally acquired title In the present case, it is clear from the factual findings of both lower courts
thereto. He testified that sometime during the last month of 1968, he had that the Deed of Sale was completely simulated and, hence, void and without
consulted a certain Atty. Flores, who advised him that the property be effect. No portion of the P200,000 consideration stated in the Deed was ever
registered in the name of respondent. However, TCT No. 217614 had been paid. And, from the facts of the case, it is clear that neither party had any
issued earlier on April 17, 1968. Thus, it appears that the subject property had intention whatsoever to pay that amount.
already been bought and registered in the name of respondent, long before
Atty. Flores allegedly advised him to have the property registered in her name. Instead, the Deed of Sale was executed merely to facilitate the transfer of
the property to petitioner pursuant to an agreement between the parties to
enable him to construct a commercial building and to sell the Juno property to

Sales – Assignment No. 3 Page 36 of 37


their children. Being merely a subterfuge, that agreement cannot be taken as
the consideration for the sale.

Third Issue: Inapplicability of the in Pari Delicto Principle

The principle of in pari delicto provides that when two parties are equally
at fault, the law leaves them as they are and denies recovery by either one of
them. However, this principle does not apply with respect to inexistent and void
contracts. Said this Court in Modina v. Court of Appeals:[21]

The principle of in pari delicto non oritur actio denies all recovery to the guilty
parties inter se. It applies to cases where the nullity arises from the illegality of
the consideration or the purpose of the contract. When two persons are equally
at fault, the law does not relieve them. The exception to this general rule is
when the principle is invoked with respect to inexistent contracts.[22]

Fourth Issue: Cancellation of TCT

Finally, based on the foregoing disquisition, it is quite obvious that the


Court of Appeals did not err in ordering the cancellation of TCT No. 181033,
because the Deed of Absolute Sale transferring ownership to petitioner was
completely simulated, void and without effect. In fact, there was no legal basis
for the issuance of the certificate itself.

WHEREFORE, the Petition is hereby DENIED and the assailed


Decision AFFIRMED. Costs against petitioner.

SO ORDERED.

Sales – Assignment No. 3 Page 37 of 37