UNENFORCEABLE CONTRACTS REGAL FILMS VS CONCEPCION

FACTS: 1991 - R entered into a contract with P for services to be rendered by R in Ps movie. P undertook to give two parcels of land to R on top of the "talent fees" it had agreed to pay. 1993 - the parties renewed the contract, incorporating the same undertaking with respect to P giving 2 lands to R. however, P failed to comply with its promise w/ respect to the 2 lots. R filed an action against P for rescission of contract with damages. R contended that he was entitled to rescind the contract, plus damages, and to be released from further commitment to work exclusively for petitioner owing to the latter's failure to honor the agreement. P moved for its dismissal alleging that they had settled the problem. P averred that they had executed an agreement which was to so operate as an addendum to the 1991 and 1993 contracts between them. The agreement was signed by a representative of petitioner and by Solis purportedly acting for and in behalf of respondent Concepcion. Solis filed a motion to dismiss the complaint stating that she, acting for herself and for respondent Concepcion, had already settled the case amicably with P. However, R opposed it contending that the addendum, containing provisions grossly disadvantageous to him, was executed without his knowledge and consent. R stated that Solis had since ceased to be his manager and had to authority to sign the addendum for him. During the preliminary conference, P intimated to R its willingness to allow R to be released from his 1991 and 1993 contracts rather than to further pursue the addendum. R thru a manifestation honored the addendum to the 1991 and 1993 contracts and to have it considered as CA. RTC: rendered judgment on compromise; validated the addendum as a C.A. CA: affirmed the order of the RTC; addendum- valid kc may consent lahat ng parties. The intrigue cant affect the obligations of the P and Solis. ISSUES: WON the subject addendum could be the basis of the compromise judgment. WON the addendum is susceptible of ratification by a person on whose behalf it was executed. FIRST ISSUE: NO. A compromise is an agreement between two or more persons who, for preventing or putting an end to a lawsuit, adjust their respective positions by mutual consent in the way they feel they can live with. Reciprocal concessions are the very heart and life of every compromise agreement,3 where each party approximates and concedes in the hope of gaining balanced by the danger of losing. It is, in essence, a contract. In this instance, the addendum was flatly rejected by respondent on the theses (a) that he did not give his consent thereto nor authorized anyone to enter into the agreement, and (b) that it contained provisions grossly disadvantageous to him. The outright rejection of the addendum made known to

the other ended the offer. When respondent later filed his Manifestation, stating that he was, after all, willing to honor the addendum, there was nothing to still accept. Verily, consent could be given not only by the part himself but by anyone duly authorized and acting for and in his behalf. But by Rs own admission, the addendum was entered into without his knowledge and consent. A contract entered into in the name of another by one who ostensibly might have but who, in reality, had no real authority or legal representation, or who, having such authority, acted beyond his powers, would be unenforceable. SECOND ISSUE: YES. NO in this case. The answer would obviously be in the affirmative; however, that ratification should be made before its revocation by the other contracting party. The adamant refusal of respondent to accept the terms of the addendum constrained petitioner, during the preliminary conference held on 23 June 1995, to instead express its willingness to release respondent from his contracts prayed for in his complaint and to thereby forego the rejected addendum. Respondent's subsequent attempt to ratify the addendum came much too late for, by then, the addendum had already been deemed revoked by petitioner. VALENCIA VS LOQUIAO FACTS: Sps. Locquiao (6 children) executed a deed of donation propter nuptias in favor of their son, R Benito Locquiao bride, R Tomasa Mara. R were gifted with 4 parcels of land, as well as a male cow and 1/3 portion of the conjugal house of the Sps. Locquiao. Later, the R got married. The donees took their marriage vows on June 4, 1944 and the fact of their marriage was inscribed at the back of O.C.T. No. 18383. The Sps. Locquiao died. With the permission of R Sps, P Romana took possession and cultivated the subject land. When Ps husband got sick, her daughter P Constancia took over and has been in possession of the land. Meanwhile, R Sps. registered the deed with the Office of the Register of Deeds. A new TCT was issued under the R sps names. Subsequently, the heirs of the Sps. Loq., including R Benito and P Valencia, executed a Deed of Partition with Recognition of Rights, wherein they distributed among only 3 of them, the 12 parcels of land left by parents, excluding the land in question and other lots disposed of by the Locquiao spouses earlier. The Deed contained a statement that R Benito and Marciano Locquiao, along with the heirs of Lucio Locquiao, have already received our shares in the estates of our parents, and because of that the heirs of Lucio Locquaio were not made parties to the deed. All the living children of the Locquaio spouses at the time, including P Valencia, confirmed the previous dispositions and waived their rights to whomsoever the properties covered by the deed of partition were adjudicated.

Later, P Romana disagreed the distribution of the 2 lots covered by the deed of partition. So they again executed a Deed of Compromise Agreement which redistributed the land. Benito also signed the CA. all of them confirmed the stipulations etc in the CA. Sometime in 1983, P Constancia filed an action for annulment of title against the R Sps. R then filed a Complaint seeking the ejectment of P Constancia from the subject property. MTC: P Constancia vacate the land. Ps Romana and Constancia filed a Complaint for the annulment of TCT No. 84897 against R Sps. They alleged that the issuance of the transfer certificate of title was fraudulent; that the Inventario Ti Sagut is spurious; that the notary public who notarized the document had no authority to do so, and; that the donation did not observe the form required by law as there was no written acceptance on the document itself or in a separate public instrument. Meanwhile, the decision in the ejectment case was appealed to the same RTC, the court issued an Order suspending the proceedings in the ejectment case until it shall have decided the ownership issue in the title annulment case. RTC: Inventario- valid, complaint dismissed. CA: affirmed RTCs decision, action- prescribed; it was filed beyond the 10yr prescriptive period for actions for reconveyance (>15 yrs). The donation was valid kc nagpakasal tlaga sila. ISSUED: (1) WON the donation propter nuptias is authentic; (2) W/ respect on the formal requirements of donation propter nuptias, which one should be followed? OLD OR NCC? HELD: FIRST ISSUE: YES. The certification is not sufficient to prove the alleged inexistence or spuriousness of the challenged document. The appellate court is correct in pointing out that the mere absence of the notarial record does not prove that the notary public does not have a valid notarial commission and neither does the absence of a file copy of the document with the archives effect evidence of the falsification of the document. the failure of the notary public to furnish a copy of the deed to the appropriate office is a ground for disciplining him, but certainly not for invalidating the document or for setting aside the transaction therein involved. Similarly, Marciano Locquiao and the heirs of Lucio Locquiao were not allocated any more share in the deed of partition since they received theirs by virtue of prior donations or conveyances. SECOND ISSUE: Under the New Civil Code, the rules are different. Article 127 thereof provides that the form of donations propter nuptias are regulated by the Statute of Frauds. Article 1403, paragraph 2, which contains the Statute of Frauds requires that the contracts mentioned thereunder need be in writing only to be enforceable. However, as provided in Article 129, express acceptance is not necessary for the validity of these donations. Thus, implied acceptance is sufficient. (OLD CC marriage between the beneficiary couple, in tandem with compliance with the prescribed form => VALID donation propter nuptias.). Since the donation propter nuptias was executed in 1944 and the New Civil Code took effect only on August 30, 1950. As a consequence, applying Article 1330 of the Old Civil Code in the

determination of the validity of the questioned donation, it does not matter whether or not the donees had accepted the donation. The validity of the donation is unaffected in either case. Even if the provisions of the New Civil Code were to be applied, still even the implied acceptance of a donation propter nuptias suffices under the NCC.
LITONJUA VA FERNANDEZ FACTS:

Mrs. Lourdes Alimario and Agapito Fisico (brokers), offered to sell to the P the parcels of land covered by TCT Nos. 36754 and 36766. P were shown a locator plan and copies of the titles showing that the owners of the properties were represented by Mary Mediatrix Fernandez and Gregorio T. Eleosida, respectively. The brokers told the P that they were authorized by R Fernandez to offer the property for sale. Subsequently, P met with R and the two brokers. They agreed that P would but the property (36,742 sqm.) for the total sum of P5,098,500. On Dec. 1995, they met again to finalize the contract. It was agreed that on that date, R would present a SPA executed by the owners of the prop authorizing her to sell the prop. However, only Agapito Fisico attended the meeting. He said that R Fern was some problems with the tenants and was trying to work out a settlement with them. After a few weeks of waiting, P wrote R Fernandez demanding that their transaction be finalized by January 30, 1996. P sent R another letter demanding that the Deed of Absolute Sale be executed according to their agreement and that the properties should be given to them. In her response, R that they did not assure P that they will meet her on Dec 8. What was demanded by P in the mtg is that to assure if there were really no tenants on the property. R also emphasized that they have not demanded and received from you any earnest money, thereby, no obligations exist. P filed a complaint for specific performance with damages against R and the registered owners of the property. Rs CONTENTIONS: Although P offered to buy the property, R did not accept it, thus, no verbal contract to sell was ever perfected. The COS was unenforceable for failure to comply with the statute of frauds. On September 24, 1997, the trial court, upon motion of the petitioners, declared the other respondents in default for failure to file their responsive pleading within the reglementary period. At the pre-trial conference held on March 2, 1998, the parties agreed that the following issues were to be resolved by the trial court: (1) whether or not there was a perfected contract to sell; (2) in the event that there was, indeed, a perfected contract to sell, whether or not the respondents breached the said contract to sell; and (3) the corollary issue of damages. Respondent Fernandez testified that she requested Lourdes Alimario to look for a buyer of the properties in San Pablo City on a best offer basis. She was later informed by Alimario that the

petitioners were interested to buy the properties. On November 27, 1995, along with Alimario and another person, she met with the petitioners in the latters office and told them that she was at the conference merely to hear their offer, that she could not bind the owners of the properties as she had no written authority to sell the same. The petitioners offered to buy the property at P150 per square meter. After the meeting, respondent Fernandez requested Joy Marquez to secure a barangay clearance stating that the property was free of any tenants. She was surprised to learn that the clearance could not be secured. She contacted a cousin of hers, also one of the owners of the property, and informed him that there was a prospective buyer of the property but that there were tenants thereon. Her cousin told her that he was not selling his share of the property and that he was not agreeable to the price of P150 per square meter. She no longer informed the other owners of the petitioners offer. Respondent Fernandez then asked Alimario to apprise the petitioners of the foregoing developments, through their agent, Agapito Fisico. She was surprised to receive a letter from the petitioners dated January 5, 1996. Nonetheless, she informed the petitioners that she had changed her mind in pursuing the negotiations in a Letter dated January 18, 1996. When she received petitioners February 1, 1996 Letter, she sent a Reply-Letter dated February 14, 1996. After trial on the merits, the trial court rendered judgment in favor of the petitioners on June 23, 1999, the dispositive portion of which reads: WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of plaintiffs ANTONIO K. LITONJUA and AURELIO K. LITONJUA and against defendants MARY MEDIATRIX T. FERNANDEZ, HEIRS OF PAZ TICZON ELEOSIDA, represented by GREGORIO T. ELEOSIDA, JOHN DOES and JANE DOES; HEIRS OF DOMINGO B. TICZON, represented by MARY MEDIATRIX T. FERNANDEZ, CRISTETA TICZON, EVANGELINE JILL R. TICZON, ERLINDA T. BENITEZ, DOMINIC TICZON, JOSEFINA LUISA PIAMONTE, JOHN DOES and JANE DOES, ordering defendants to: 1. execute a Contract of Sale and/or Absolute Deed of Sale with the terms agreed upon by the parties and to secure all clearances from the concerned government agencies and removal of any tenants from the subject property at their expense to enable defendants to comply with their obligations under the perfected agreement to sell; and pay to plaintiffs the sum of Two Hundred Thousand (P200,000.00) Pesos as and by way of attorneys fees.

2.

On appeal to the Court of Appeals, the respondents ascribed the following errors to the court a quo: I. THE LOWER COURT ERRED IN HOLDING THAT THERE WAS A PERFECTED CONTRACT OF SALE OF THE TWO LOTS ON NOVEMBER 27, 1995. II. THE LOWER COURT ERRED IN NOT HOLDING THAT THE VERBAL CONTRACT OF SALE AS CLAIMED BY PLAINTIFFS-APPELLEES ANTONIO LITONJUA AND AURELIO LITONJUA WAS UNENFORCEABLE.

III. THE LOWER COURT ERRED IN HOLDING THAT THE LETTER OF DEFENDANTAPPELLANT FERNANDEZ DATED JANUARY 16, 1996 WAS A CONFIRMATION OF THE PERFECTED SALE AND CONSTITUTED AS WRITTEN EVIDENCE THEREOF. IV. THE LOWER COURT ERRED IN NOT HOLDING THAT A SPECIAL POWER OF ATTORNEY WAS REQUIRED IN ORDER THAT DEFENDANT-APPELLANT FERNANDEZ COULD NEGOTIATE THE SALE ON BEHALF OF THE OTHER REGISTERED COOWNERS OF THE TWO LOTS. V. THE LOWER COURT ERRED IN AWARDING ATTORNEYS FEES IN THE DISPOSITIVE PORTION OF THE DECISION WITHOUT STATING THE BASIS IN THE TEXT OF SAID DECISION. On February 28, 2001, the appellate court promulgated its decision reversing and setting aside the judgment of the trial court and dismissing the petitioners complaint, as well as the respondents counterclaim. The appellate court ruled that the petitioners failed to prove that a sale or a contract to sell over the property between the petitioners and the private respondent had been perfected. Hence, the instant petition for review on certiorari under Rule 45 of the Revised Rules of Court. The petitioners submit the following issues for the Courts resolution: A. WHETHER OR NOT THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN THE PARTIES. B. WHETHER OR NOT THE CONTRACT FALLS UNDER THE COVERAGE OF THE STATUTE OF FRAUDS. C. WHETHER OR NOT THE DEFENDANTS DECLARED IN DEFAULT ARE BENEFITED BY THE ASSAILED DECISION OF THE COURT OF APPEALS. The petition has no merit. The general rule is that the Courts jurisdiction under Rule 45 of the Rules of Court is limited to the review of errors of law committed by the appellate court. As the findings of fact of the appellate court are deemed continued, this Court is not duty-bound to analyze and calibrate all over again the evidence adduced by the parties in the court a quo. This rule, however, is not without exceptions, such as where the factual findings of the Court of Appeals and the trial court are conflicting or contradictory. Indeed, in this case, the findings of the trial court and its conclusion based on the said findings contradict those of the appellate court. However, upon careful review of the records of this case, we find no justification to grant the petition. We, thus, affirm the decision of the appellate court. On the first and second assignment of errors, the petitioners assert that there was a perfected contract of sale between the petitioners as buyers and the respondents-owners, through respondent Fernandez, as sellers. The petitioners contend that the perfection of the said contract is evidenced

by the January 16, 1996 Letter of respondent Fernandez. The pertinent portions of the said letter are as follows: [M]y cousin and I have thereby changed our mind and that the sale will no longer push through. I specifically instructed her to inform you thru your broker that we will not be attending the meeting to be held sometime first week of December. In view thereof, I regret to formally inform you now that we are no longer selling the property until all problems are fully settled. We have not demanded and received from you any earnest money, thereby, no obligations exist The petitioners argue that the letter is a sufficient note or memorandum of the perfected contract, thus, removing it from the coverage of the statute of frauds. The letter specifically makes reference to a sale which respondent Fernandez agreed to initially, but which the latter withdrew because of the emergence of some people who claimed to be tenants on both parcels of land. According to the petitioners, the respondents-owners, in their answer to the complaint, as well as respondent Fernandez when she testified, admitted the authenticity and due execution of the said letter. Besides, when the petitioner Antonio Litonjua testified on the contract of sale entered into between themselves and the respondents-owners, the latter did not object thereto. Consequently, the respondents-owners thereby ratified the said contract of sale. The petitioners thus contend that the appellate courts declaration that there was no perfected contract of sale between the petitioners and the respondents-owners is belied by the evidence, the pleadings of the parties, and the law. The petitioners contention is bereft of merit. In its decision, the appellate court ruled that the Letter of respondent Fernandez dated January 16, 1996 is hardly the note or memorandum contemplated under Article 1403(2)(e) of the New Civil Code, which reads: Art. 1403. The following contracts are unenforceable, unless they are ratified: (2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or secondary evidence of its contents: (e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein. The appellate court based its ruling on the following disquisitions: In the case at bar, the letter dated January 16, 1996 of defendant-appellant can hardly be said to constitute the note or memorandum evidencing the agreement of the parties to enter into a contract

of sale as it is very clear that defendant-appellant as seller did not accept the condition that she will be the one to pay the registration fees and miscellaneous expenses and therein also categorically denied she had already committed to execute the deed of sale as claimed by the plaintiffsappellees. The letter, in fact, stated the reasons beyond the control of the defendant-appellant, why the sale could no longer push through because of the problem with tenants. The trial court zeroed in on the statement of the defendant-appellant that she and her cousin changed their minds, thereby concluding that defendant-appellant had unilaterally cancelled the sale or backed out of her previous commitment. However, the tenor of the letter actually reveals a consistent denial that there was any such commitment on the part of defendant-appellant to sell the subject lands to plaintiffs-appellees. When defendant-appellant used the words changed our mind, she was clearly referring to the decision to sell the property at all (not necessarily to plaintiffs-appellees) and not in selling the property to herein plaintiffs-appellees as defendant-appellant had not yet made the final decision to sell the property to said plaintiffs-appellees. This conclusion is buttressed by the last paragraph of the subject letter stating that we are no longer selling the property until all problems are fully settled. To read a definite previous agreement for the sale of the property in favor of plaintiffs-appellees into the contents of this letter is to unduly restrict the freedom of the contracting parties to negotiate and prejudice the right of every property owner to secure the best possible offer and terms in such sale transactions. We believe, therefore, that the trial court committed a reversible error in finding that there was a perfected contract of sale or contract to sell under the foregoing circumstances. Hence, the defendant-appellant may not be held liable in this action for specific performance with damages. In Rosencor Development Corporation vs. Court of Appeals, the term statute of frauds is descriptive of statutes which require certain classes of contracts to be in writing. The statute does not deprive the parties of the right to contract with respect to the matters therein involved, but merely regulates the formalities of the contract necessary to render it enforceable. The purpose of the statute is to prevent fraud and perjury in the enforcement of obligations, depending for their existence on the unassisted memory of witnesses, by requiring certain enumerated contracts and transactions to be evidenced by a writing signed by the party to be charged. The statute is satisfied or, as it is often stated, a contract or bargain is taken within the statute by making and executing a note or memorandum of the contract which is sufficient to state the requirements of the statute. The application of such statute presupposes the existence of a perfected contract. However, for a note or memorandum to satisfy the statute, it must be complete in itself and cannot rest partly in writing and partly in parol. The note or memorandum must contain the names of the parties, the terms and conditions of the contract and a description of the property sufficient to render it capable of identification. Such note or memorandum must contain the essential elements of the contract expressed with certainty that may be ascertained from the note or memorandum itself, or some other writing to which it refers or within which it is connected, without resorting to parol evidence. To be binding on the persons to be charged, such note or memorandum must be signed by the said party or by his agent duly authorized in writing. In City of Cebu v. Heirs of Rubi, we held that the exchange of written correspondence between the parties may constitute sufficient writing to evidence the agreement for purposes of complying with the statute of frauds.

In this case, we agree with the findings of the appellate court that there was no perfected contract of sale between the respondents-owners, as sellers, and the petitioners, as buyers. There is no documentary evidence on record that the respondents-owners specifically authorized respondent Fernandez to sell their properties to another, including the petitioners. Article 1878 of the New Civil Code provides that a special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration, or to create or convey real rights over immovable property, or for any other act of strict dominion. Any sale of real property by one purporting to be the agent of the registered owner without any authority therefor in writing from the said owner is null and void. The declarations of the agent alone are generally insufficient to establish the fact or extent of her authority. In this case, the only evidence adduced by the petitioners to prove that respondent Fernandez was authorized by the respondents-owners is the testimony of petitioner Antonio Litonjua that respondent Fernandez openly represented herself to be the representative of the respondents-owners, and that she promised to present to the petitioners on December 8, 1996 a written authority to sell the properties. However, the petitioners claim was belied by respondent Fernandez when she testified, thus: Q Madam Witness, what else did you tell to the plaintiffs? A I told them that I was there representing myself as one of the owners of the properties, and I was just there to listen to his proposal because that time, we were just looking for the best offer and I did not have yet any written authorities from my brother and sisters and relatives. I cannot agree on anything yet since it is just a preliminary meeting, and so, I have to secure authorities and relate the matters to my relatives, brother and sisters, sir. Q And what else was taken up? A Mr. Antonio Litonjua told me that they will be leaving for another country and he requested me to come back on the first week of December and in the meantime, I should make an assurance that there are no tenants in our properties, sir. The petitioners cannot feign ignorance of respondent Fernandez lack of authority to sell the properties for the respondents-owners. It must be stressed that the petitioners are noted businessmen who ought to be very familiar with the intricacies of business transactions, such as the sale of real property. The settled rule is that persons dealing with an assumed agent are bound at their peril, and if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to prove it. In this case, respondent Fernandez specifically denied that she was authorized by the respondentsowners to sell the properties, both in her answer to the complaint and when she testified. The Letter dated January 16, 1996 relied upon by the petitioners was signed by respondent Fernandez alone, without any authority from the respondents-owners. There is no evidence on record that the respondents-owners ratified all the actuations of respondent Fernandez in connection with her

dealings with the petitioners. As such, said letter is not binding on the respondents as owners of the subject properties. Contrary to the petitioners contention, the letter of January 16, 1996 is not a note or memorandum within the context of Article 1403(2) because it does not contain the following: (a) all the essential terms and conditions of the sale of the properties; (b) an accurate description of the property subject of the sale; and, (c) the names of the respondents-owners of the properties. Furthermore, the letter made reference to only one property, that covered by TCT No. T-36755. We note that the petitioners themselves were uncertain as to the specific area of the properties they were seeking to buy.

MUNICIPALITY VS DUMDUM

FACTS: In the middle of the year 2000, R, doing business as KD Surplus and as such engaged in buying and selling surplus trucks etc., was contacted by P Ople. R had entered into an agreement with P municipality through Ople for the delivery of motor vehicles, which were needed to carry out certain developmental undertakings in the municipality.

Ople assured R that the funds had already been allocated for the project, thus she agreed to deliver 24 motor vehicles valuing P5,820,000.00. However, despite having made several deliveries, Ople allegedly did not heed Rs claim for payment. R filed a complaint for collection of a sum of money and damages. The total obligation of petitioner had already totaled P10,026,060.13 exclusive of penalties and damages. RTC: issued a Writ of Preliminary Attachment directing the sheriff "to attach the estate, real and personal properties" of P. P filed a Motion to Dismiss on the ground that the claim was unenforceable under the statute of frauds, pointing out that there was no written contract or document that would evince the supposed agreement they entered into with R. RTC: denied the 2 motions of P. CA: affirmed the decision HELD: Petitioners have not expressly denied this allegation. In other words, since there exists an indication by way of allegation that there has been performance of the obligation on the part of respondent, the case is excluded from the coverage of the rule on dismissals based on unenforceability under the statute of frauds, and either party may then enforce its claims against the other. P theorize that there could not have been a contract by which the municipality agreed to be bound, because it was not shown that there had been compliance with the required bidding or that the municipal council had approved the contract. The argument is flawed. By invoking unenforceability under the Statute of Frauds, petitioners are in effect acknowledging the existence of a contract between them and private respondent only, the said contract cannot be enforced by action for being non-compliant with the legal requisite that it be reduced into writing. Suffice it to say that while this assertion might be a viable defense against respondents claim, it is principally a matter of evidence that may be properly ventilated at the trial of the case on the merits.
VOID CONTRACTS MODINA VS CA

FACTS: The parcels of land in question are those under the name of Ramon Chiang (hereinafter referred to as CHIANG ) covered by TCT Nos. T-86912, T-86913, and T-86914. Chiang contended that the parcels of land were sold to him by his wife, Merlinda, as evidenced by a DOAS. The land were subsequently sold to P Modina. P brought a Complaint for Recovery of Possession with Damages against the R Ernesto Hontarciego, Paul Figueroa and Teodoro Hipalla. Upon learning of the said case, MERLINDA presented a Complaint-in-intervention, seeking the declaration of nullity of the Deed of Sale between her husband and MODINA on the ground that the titles of the parcels of land in dispute were never legally transferred to her husband. Fraudulent acts were allegedly employed by him to obtain a Torrens Title in his favor. However, she confirmed the validity of the lease contracts with the other private respondents. RTC: in favor of Merlinda; sale betw Merlinda and Chiang, Chiang and Modina = void. CA: affirmed the decision ISSUES: 1. WON the sale should be nullified. 2. WON P was a purchaser in good faith.

FIRST ISSUE: YES. In the petition under consideration, the Trial Court found that subject Deed of Sale was a nullity for lack of any consideration. It bears emphasizing that as the contracts under controversy are inexistent contracts within legal contemplation, Articles 1411 and 1412 of the New Civil Code are inapplicable. Records show that in the complaint-in-intervention of MERLINDA, she did not aver the same as a ground to nullify subject Deed of Sale. In fact, she denied the existence of the Deed of Sale in favor of her husband. In the said Complaint, her allegations referred to the want of consideration of such Deed of Sale. She did not put up the defense under Article 1490, to nullify her sale to her husband CHIANG because such a defense would be inconsistent with her claim that the same sale was inexistent. Since one of the characteristics of a void or inexistent contract is that it does not produce any effect, MERLINDA can recover the property from petitioner who never acquired title thereover. SECOND ISSUE: NO. A purchaser in good faith is one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price at the time of the purchase or before he has notice of the claim or interest of some other person in the property. In the case under scrutiny, P cannot claim that he was a purchaser in good faith. There are circumstances which are indicia of bad faith on his part, to wit: (1) He asked his nephew, Placido Matta, to investigate the origin of the property and the latter learned that the same formed part of the properties of MERLINDAs first husband; (2) that the said sale was between the spouses; (3) that when the property was inspected, MODINA met all the lessees who informed that subject lands belong to MERLINDA and they had no knowledge that the same lots were sold to the husband.
GURREA VS SUPLICO