2. Olegario v.

CA (Feli) DOCTRINE:
November 14, 1994 | J. Puno | Cause of Contracts - Unlawful Motive and Art 1352: Contracts without cause, or with unlawful cause, produce no effect
Cause whatever. The cause is unlawful if it is contrary to law, morals, good customs,
public order, or public policy.

PETITIONER: Bonifacio Olegario and Adelaida Victorino Motive may be regarded as the consideration when it predetermines the
RESPONDENTS: CA, Manuel Rivera, Paz Olegario, and Socorro Olegario- purpose of the contract (When the motive is unlawful, the contract is null and
Teves void)

SUMMARY: Manuel and Aurelia Olegario own a 91-sq. meter lot in Caloocan
City. They did not have any children, but they raised respondents Manuel
Rivera, Paz Olegario, and Socorro Olegario-Teves. When Aurelia died,
Marciliano, to prevent her heirs from inherting and to avoid the payment of
taxes, executed a Deed of Absolute Sale to Manuel, Paz, and Socorro. After
Marciliano died, petitioners Bonifacio and Adelaida, who became the sole
heirs of the spouses, executed a deed of Extra-judicial Settlement over the lot
and a new TCT was issued in their names. They then sold the lot to Elena
Adaon and Nestor Tejon. Manuel, Paz, and Socorro filed a civil case for the
annulment of the Settlement. Likewise, Bonifacio and Adelaida assailed the
Deed of Absolute Sale between Marciliano and the respondents. The trial court
ruled in favor of Manuel, Paz, and Socorro and annulled the Extra-judicial
Settlement, which was affirmed by the CA.

The SC reversed the CA decision, ruling that Bonifacio and Adelaida were the
lawful heirs of the Olegario spouses. They also ruled that since Marciliano’s
motive in selling the land to Manuel, Paz and Socorro was to frustrate
Bonifacio and Adelaida’s inheritance and to avoid paying estate tax, the motive
for the contract is unlawful, and therefore the contract is null and void. Finally,
they ruled that the respondents did not have a valid cause because they did not
actually have P50,000 and paid the same to Marciliano, since they had to
borrow P30,000 to prove their financial capacity.
FACTS:
1. Marciliano Olegario and Aurelia Rivera-Olegario own a parcel of
land measuring 91 square meters in Caloocan City. The couple was
childless but raised Manuel Rivera, Paz Olegario, and Socorro
Olegario-Teves (petitioner Bonifacio is the brother of Marciliano,
while petitioner Adelaida is the niece of Aurelia)
2. When Aurelia died, Marciliano, to prevent her heirs from inheriting
and to avoid payment of taxes, executed a Deed of Absolute Sale of
 the property in favor of Manuel, Paz, and Socorro for P50,000. The
contract was not registered.
3. After Marciliano died, Bonifacio and Adelaida became the sole heirs
of the Olegario spouses. They executed a Deed of Extra-judicial
Settlement of Estate over the lot. The Settlement was recorded in the
Register of Deeds of Caloocan City and a new TCT was issued in
their names.
4. Bonifacio and Adelaida sold the lot on August 1 for P200,000 to
Elena Adaon and Nestor Tejon. A new TCT was issued in the
vendee’s names.
5. Manuel, Paz, and Socorro alleged that the Settlement came only to
their knowledge on August 21. They tried to register the contract of
sale on that day, three years from its execution (the deed of sale was
made in 1986, and they tried to register it in 1989). The registration,
however, was denied because the property had already been
transferred to Elena and Nestor.
6. Manuel, Paz, and Socorro filed a civil case for the annulment of the
Extra-judicial Settlement and damages. Bonifacio and Adelaida
assailed the Deed of Absolute Sale between Marciliano and Manuel,
Paz, and Socorro. Elena and Nestor, on the other hand, maintained
they were buyers in good faith.
7. The trial court ruled in favor of Manuel, Paz, and Socorro, and
annulled the Extra-judicial Settlement and the sale of the lot to Elena
and Nestor.
8. The CA affirmed the decision, but ordered that the register of deeds
issue a title to Manuel, Paz, and Socorro corresponding to ¾ of the
disputed lot and that Bonifacio and Adelaida are ordered only to pay
P10,000 in damages.
ISSUES:
1. WON the Deed of Absolute Sale between Marciliano and
respondents is null and void? - YES
2. WON the CA erred in sustaining the efficacy of the Deed of
Absolute Sale over the Extra-judicial Settlement? - YES
RATIO: PETITION GRANTED
1. Bonifacio and Adelaida are the lawful heirs of the spouses Olegario.
a. The lot is conjugal property (CC Art. 160), and the death
of Aurelia dissolved the conjugal partnership.
b. Because of the dissolution, ½ of the property goes to
Marciliano for his share of the estate plus ¼ for his share
as the suriving spouse.
c. Adelaida, as Aurelia’s suriving neice, is entitled to the
other ¼ of the lot. Bonifacio took Marciliano’s share when
he died.
2. In a contract of sale, consideration is different from motive.
a. Consideration - right, interest, benefit, or advantage
conferred upon the promissor, to which he is otherwise not
lawfully entitled, or any detriment, prejudice, loss, or
disadvantage suffered or undertaken by the promisee other
than to such as he is as the time of consent bound to suffer
b. Motive - condition of the mind which incites to action;
includes also the inference as to the existence of such
condition (from an external fact of a nature to produce such
a condition)
3. Motive may be regarded as the consideration when it
predetermines the purpose of the contract
a. When the motive is unlawful, the contract is null and void
4. The primary motive of Marciliano in selling the lot to Manuel, Paz,
and Socorro was to frustrate Bonifacio and Adelaida’s right of
inheritance and to avoid payment of estate tax.
a. Manuel, Paz, and Socorro did not refute the charge that the
sale was fictitious
5. Therefore, the sale of the lot is NULL AND VOID because illegal motive
predetermined the purpose of the contract.

6. The trial court and CA also failed to consider the lack of cause in the deed
of sale.
a. The evidence does not show that Manuel, Paz, and Socorro had
P50,000 and paid this to Marciliano
b. They allegedly borrowed P30,000 from the Mary Help of Christian
Parish to prove their financial capacity.

7. Because there is not valid cause, the deed of sale is void (applying Art.
1352)
a. Art 1352: Contracts without cause, or with unlawful cause, produce
no effect whatever. The cause is unlawful if it is contrary to law,
morals, good customs, public order, or public policy.
b. [FOR REFERENCE] Art. 1350: In onerous contracts, the cause is
understood to be, for each contracting party, the prestation or
promise of a thing or service by the other; in remuneratory ones, the
service or benefit which is remuneratedl and in contracts of pure
beneficence, the mere liberality of the benefactor

8. [OTHER ISSUES] Even if the contract of sale is valid, it cannot prejudice

Bonifacio and Adelaida and third persons (Elena Adaon and Nestor Tejon)
since the deed was not registered.