SANCHEZ vs RIGOS

G.R. No. L-25494

undertaking is supported by a consideration "distinct

from the price" stipulated for the sale of the land.

FACTS:

However, this Court itself, in the case of Atkins, Kroll

and Co., Inc. v. Cua Hian Tek, decided later that
Southwestern Sugar & Molasses Co. v. Atlantic Gulf &
Pacific Co., 9 saw no distinction between Articles 1324
and 1479 of the Civil Code and applied the former
where a unilateral promise to sell similar to the one
sued upon here was involved, treating such promise
as an option which, although not binding as a
contract in itself for lack of a separate consideration,
nevertheless generated a bilateral contract of
purchase and sale upon acceptance. Speaking
through Associate Justice, later Chief Justice, Cesar
Bengzon, this Court said:

Nicolas Sanchez and defendant Severina Rigos

executed an instrument entitled "Option to
Purchase," whereby Mrs. Rigos "agreed, promised
and committed ... to sell" to Sanchez the sum of
P1,510.00, a parcel of land situated in the barrios of
Abar and Sibot, municipality of San Jose, province of
Nueva Ecija, and more particularly described in
Transfer Certificate of Title No. NT-12528 of said
province, within two (2) years from said date with
the understanding that said option shall be deemed
"terminated and elapsed," if "Sanchez shall fail to
exercise his right to buy the property" within the
stipulated period. Inasmuch as several tenders of
payment of the sum of Pl,510.00, made by Sanchez
within said period, were rejected by Mrs. Rigos, on
March 12, 1963, the former deposited said amount
with the Court of First Instance of Nueva Ecija and
commenced against the latter the present action, for
specific performance and damages.
After the filing of defendant's answer admitting
some allegations of the complaint, denying other
allegations thereof, and alleging, as special defense,
that the contract between the parties "is a unilateral
promise to sell, and the same being unsupported by
any valuable consideration, by force of the New Civil
Code, is null and void" on February 11, 1964, both
parties, assisted by their respective counsel, jointly
moved for a judgment on the pleadings.
Accordingly, on February 28, 1964, the lower court
rendered judgment for Sanchez, ordering Mrs. Rigos
to accept the sum judicially consigned by him and to
execute, in his favor, the requisite deed of
conveyance. Mrs. Rigos was, likewise, sentenced to
pay P200.00, as attorney's fees, and other costs.
Hence, this appeal by Mrs. Rigos.
ISSUE:
WON there is already a perfected contract?
HELD:
NO.
The option did not impose upon plaintiff the
obligation to purchase defendant's property. Annex A
is not a "contract to buy and sell." It merely granted
plaintiff an "option" to buy. And both parties so
understood it, as indicated by the caption, "Option to
Purchase," given by them to said instrument. Under
the provisions thereof, the defendant "agreed,
promised and committed" herself to sell the land
therein described to the plaintiff for P1,510.00, but
there is nothing in the contract to indicate that her
aforementioned
agreement,
promise
and

Furthermore, an option is unilateral: a promise to sell

at the price fixed whenever the offeree should decide
to exercise his option within the specified time. After
accepting the promise and before he exercises his option,
the holder of the option is not bound to buy. He is
free either to buy or not to buy later. In this case,
however, upon accepting herein petitioner's offer a
bilateral promise to sell and to buy ensued, and the
respondent ipso facto assumed the obligation of a
purchaser. He did not just get the right subsequently
to buy or not to buy. It was not a mere option then; it
was a bilateral contract of sale.
Lastly, even supposing that Exh. A granted an
option, which is not binding for lack of
consideration, the authorities, holds that:
"If the option is given without a consideration, it is a
mere offer of a contract of sale, which is not binding
until accepted. If, however, acceptance is made
before a withdrawal, it constitutes a binding contract
of sale, even though the option was not supported by
a sufficient consideration. .... (77 Corpus Juris
Secundum, p. 652. See also 27 Ruling Case Law 339
and cases cited.)
"It can be taken for granted, as contended by the
defendant, that the option contract was not valid for
lack of consideration. But it was, at least, an offer to
sell, which was accepted by letter, and of the
acceptance the offerer had knowledge before said
offer was withdrawn. The concurrence of both acts
the offer and the acceptance could at all events
have generated a contract, if none there was before
(arts. 1254 and 1262 of the Civil Code)." (Zayco vs.
Serra, 44 Phil. 331.)
In other words, since there may be no valid contract
without a cause or consideration, the promisor is not
bound by his promise and may, accordingly,
withdraw it. Pending notice of its withdrawal, his
accepted promise partakes, however, of the nature of
an offer to sell, which, if accepted, results in a

perfected contract of sale.

This view has the advantage of avoiding a conflict
between Articles 1324 on the general principles on
contracts and 1479 on sales of the Civil
Code, in line with the cardinal rule of statutory
construction that, in construing different provisions
of one and the same law or code, such interpretation
should be favored as will reconcile or harmonize said
provisions and avoid a conflict between the same.
Indeed, the presumption is that, in the process of
drafting the Code, its author has maintained a
consistent philosophy or position. Moreover, the
decision in Southwestern Sugar & Molasses Co. v.
Atlantic Gulf & Pacific Co., holding that Art. 1324 is
modified by Art. 1479 of the Civil Code, in effect,
considers the latter as an exception to the former, and
exceptions are not favored, unless the intention to the
contrary is clear, and it is not so, insofar as said two
(2) articles are concerned. What is more, the
reference, in both the second paragraph of Art. 1479
and Art. 1324, to an option or promise supported by
or founded upon a consideration, strongly suggests
that the two (2) provisions intended to enforce or
implement the same principle.
TONG BROTHERS vs IAC
G.R. No. 73918
FACTS:
Sometime in December, 1974, the private respondent
allegedly contracted with the petitioner the annual
drydocking and repair of the Zamboanga-J. On the
ground that the petitioner did not complete and
execute all the work necessary, essential and
indispensable to rendering the vessel seaworthy
resulting in its deterioration and total loss, the
private respondent filed a complaint against the
petitioner for specific performance and damages
with the Court of First Instance of Cotabato.
The petitioner denied that there was a perfected
contract to repair Zamboanga-J between the two
parties.
ISSUE:
WON THERE IS A PERFECTED CONTRACT
BETWEEN HEREIN PETITIONER AND PRIVATE
RESPONDENT.
HELD:
The applicable laws on work done upon a vessel are
the general rules on contract. A contract may be
entered into in whatever form except where the law
requires a document or other special form as in the
contracts enumerated in Article 1388 of the Civil
Code. The general rule, therefore, is that a contract
may be oral or written. (Royal Lines, Inc. v. Court of
Appeals, 143 SCRA 608).

The fact that the parties' previous contracts for the

repair of the private respondent's vessels were an
oral and that the procedure consisted merely in the
vessels being drydocked at the petitioner's shipyard
and after repair the petitioner would just send the
bin to the private respondent, does not necessarily
result in a conclusive presumption that all
subsequent contracts between the parties of similar
or allied nature should also be oral and the
procedure be the same.
An examination of the records reveals that there are
circumstances overlooked by the appellate court
which support the petitioner's contentions that 1)
there was no perfected contract between the parties
to repair Zamboanga-J, and 2) the proximate cause of
the total loss of Zamboanga-J was the abandonment
of the vessel by the private respondent.
Several telegrams were exchanges and as can be
gleaned from the exchange of telegrams between the
two parties, there was not yet a meeting of the minds
as to the cause of the contract. The cause of a contract
has been defined "as the essential reason which
moves the contracting parties to enter into it (8
Manresa, 5th Edition, p. 450). In other words, the
cause is the immediate, direct and proximate reason
which justifies the creation of an obligation thru the
will of the contracting parties (3 Castan, 4th Edition,
p. 347)." (General Enterprises, Inc. v. Lianga Bay
Logging Co., Inc., 11 SCRA 733, 739). For the private
respondent, the cause of the contract was the repair
of its vessel Zamboanga-J while for the petitioner the
cause would be its commitment to repair the vessel
and make it seaworthy. The telegrams dated January
17, January 20, and January 28, 1975 sent by the
petitioner to the private respondent, however,
indicate that the former had not accepted the repair
of Zamboanga-J, the reason being that the extent of
the repair to be made necessitated a major expense so
that the petitioner insisted on the presence of the
private respondent for evaluation before it accepted
the repair of the wooden vessel. That the petitioner
had not yet consented to the contract is evident when
on January 28, 1975, it sent a telegram stating: "... NO
AGREEMENT AS TO THE EX TENT OF REPAIRS
AND PAYMENT WILL UNDOCK VESSEL." The fact
that the private respondent who received this
telegram ignored it, confirms that there was no
perfected contract to repair Zamboanga-J.
The private respondent did not bother from January
1975 to September 1976 or for almost two years, to
find out what happened to its vessel inspite of its full
knowledge that the boat had been undocked and to
take concrete steps to save and rehabilitate it. It
relied
completely
on
an
alleged
verbal
understanding in order to get from the petitioner the
full value of a functioning vessel and the income it

claimed would have been earned for the next five

years. Not only was a written agreement for the
repair of the vessel, missing in this case but the
petitioner formally refused to accept the job and to
enter into the contract unless certain terms were met.
VELASCO vs CA
FACTS:
This is a suit for specific performance filed by
Lorenzo Velasco against the Magdalena Estate, Inc.
on the allegation that on November 29, 1962 the
plaintiff and the defendant had entered into a
contract of sale (Annex A of the complaint) by virtue
of which the defendant offered to sell the plaintiff
and the plaintiff in turn agreed to buy a parcel of
land with an area of 2,059 square meters more
particularly described as Lot 15, Block 7, Psd-6129,
located at No. 39 corner 6th Street and Pacific
Avenue, New Manila, this City, for the total
purchase price of P100,000.00.
It is alleged by the plaintiff that the agreement was
that the plaintiff was to give a down payment of
P10,000.00 to be followed by P20,000.00 and the
balance of P70,000.00 would be paid in installments,
the equal monthly amortization of which was to be
determined as soon as the P30,000.00 down payment
had been completed. It is further alleged that the
plaintiff paid down payment of P10,000.00 on
November 29, 1962 as per receipt No. 207848 (Exh.
"A")and that when on January 8, 1964 he tendered to
the defendant the payment of the additional
P20,000.00 to complete the P30,000.00 the defendant
refused to accept and that eventually it likewise
refused to execute a formal deed of sale obviously
agreed upon. The plaintiff demands P25,000.00
exemplary damages, P2,000.00 actual damages and
P7,000.00 attorney's fees.
The defendant, in its Answer, denies that it has had
any direct dealings, much less, contractual relations
with the plaintiff regarding the property in question,
and contends that the alleged contract described in
the document attached to the complaint as Annex A
is entirely unenforceable under the Statute of Frauds;
that the truth of the matter is that a portion of the
property in question was being leased by a certain
Socorro Velasco who, on November 29, 1962, went to
the office of the defendant indicated her desire to
purchase the lot; that the defendant indicated its
willingness to sell the property to her at the price of
P100,000.00 under the condition that a down
payment of P30,000.00 be made, P20,000.00 of which
was to be paid on November 31, 1962, and that the
balance of P70,000.00 including interest a 9% per
annum was to be paid on installments for a period of
ten years at the rate of P5,381.32 on June 30 and
December of every year until the same shall have

been fully paid; that on November 29, 1962 Socorro

Velasco offered to pay P10,000.00 as initial payment
instead of the agreed P20,000.00 but because the
amount was short of the alleged P20,000.00 the same
was accepted merely as deposited and upon request
of Socorro Velasco the receipt was made in the name
of her brother-in-law the plaintiff herein; that Socorro
Velasco failed to complete the down payment of
P30,000.00 and neither has she paid any installments
on the balance of P70,000.00 up to the present time;
that it was only on January 8, 1964 that Socorro
Velasco tendered payment of P20,000.00, which offer
the defendant refused to accept because it had
considered the offer to sell rescinded on account of
her failure to complete the down payment on or
before December 31, 1962.
ISSUE:
WON there is a perfected contract?
HELD:
The court a quo agreed with the respondent's
(defendant therein) contention that no contract of
sale was perfected because the minds of the parties
did not meet "in regard to the manner of payment."
The court a quo appraisal of this aspect of the action
below is correct. The material averments contained in
the petitioners' complaint themselves disclose a lack
of complete "agreement in regard to the manner of
payment" of the lot in question. The complaint states
pertinently:
4.
That plaintiff and defendant further agreed
that the total down payment shall by P30,000.00,
including the P10,000.00 partial payment mentioned
in paragraph 3 hereof, and that upon completion of
the said down payment of P30,000.00, the balance of
P70,000.00 shall be said by the plaintiff to the
defendant in 10 years from November 29, 1962;
5.
That the time within the full down payment
of the P30,000.00 was to be completed was not
specified by the parties but the defendant was duly
compensated during the said time prior to
completion of the down payment of P30,000.00 by
way of lease rentals on the house existing thereon
which was earlier leased by defendant to the
plaintiff's sister-in-law, Socorro J. Velasco, and which
were duly paid to the defendant by checks drawn by
plaintiff.
It is not difficult to glean from the aforequoted
averments that the petitioners themselves admit that
they and the respondent still had to meet and agree
on how and when the down-payment and the
installment payments were to be paid. Such being
the situation, it cannot, therefore, be said that a
definite and firm sales agreement between the

parties had been perfected over the lot in question.

Indeed, this Court has already ruled before that a
definite agreement on the manner of payment of the
purchase price is an essential element in the
formation of a binding and unforceable contract of
sale. 3 The fact, therefore, that the petitioners
delivered to the respondent the sum of P10,000 as
part of the down-payment that they had to pay
cannot be considered as sufficient proof of the
perfection of any purchase and sale agreement
between the parties herein under article 1482 of the
new Civil Code, as the petitioners themselves admit
that some essential matter the terms of payment
still had to be mutually covenanted.
Pentacapital Investment Corp. v Makilito Mahinay
GR. No. 171736
Facts:
Petitioner filed a complaint for a sum of money
against respondent Makilito Mahinay based on two
separate loans obtained by the latter, amounting to P
1,520,000.00 and P 416,800.00, or total amount of P
1,936,800.00. These loans were evidence by two
promissory notes dated February 23, 1996. Despite
repeated demands, respondent failed to pay the
loans, hence, the complaint. In his Answer with
Compulsory Counterclaim, respondent claimed that
petitioner had no cause of action because the
promissory notes on which its complaint was based
were subject to a condition that did not occur. While
admitting that he indeed signed the promissory
notes, he insisted that he never took out a loan and
that the notes were not intended to be evidences of
indebtedness. By way or counterclaim, respondent
prayed for the payment of moral and exemplary
damages plus attorneys fees. In this case,
respondent denied liability on the ground that the
promissory notes lacked consideration as he did not
receive the proceeds of the loan.
Issue:
Whether or not the respondent is bound by the
promissory note.
Held:
YES. In its complaint for sum of money, petitioner
prayed that respondent be ordered to pay his
obligation amounting to P 1,936,800.00 plus interest
and penalty charges, and attorneys fees. This
obligation was evidenced by two promissory notes
executed by respondent. Respondent, however,
denied liability on the ground that his obligation was
subject to a condition that did not occur. He
explained that the promissory notes were dependent
upon the happening of a remote event that the
parties tried to anticipate at the time they transacted
with each other, and the event did not happen. He
further insisted that he did not receive the proceeds

of the loan. To ascertain whether or not respondent is

bound by the promissory notes, it must be
established that all the elements of a contract of loan
are present. Like any other contract, a contract of
loan is subject to the rules governing the requisites
and validity of contracts in general. It is elementary
in this jurisdiction that what determines the validity
of contract, in general, is the presence of the
following elements: (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.
Under Article 1354 of the Civil Code, it is presumed
that consideration exists and is lawful unless the
debtor proves the contrary. Moreover, under Section
3, Rule 131 of the Rules of Court, the following are
disputable presumptions: (1) private transactions
have been fair and regular; (2) the ordinary course of
business has been followed; and (3) there was
sufficient consideration for a contract. A
presumption may operate against an adversary who
has not introduced proof to rebut it. The effect of a
legal presumption upon a burden of proof is to
create the necessity of presenting evidence to meet
the legal presumption or the prima facie case created
thereby, and which, if no proof to the contrary is
presented and offered, will prevail. The burden of
proof remains where it is, but by the presumption,
the one who has that burden is relieved for the time
being from introduction evidence in support of the
avernment, because the presumption stands in the
place of evidence unless rebutted.
In the present case, as proof of his claim of lack of
consideration, respondent denies under oath that he
owed petitioner a single centavo. He added that he
did not apply for a loan and that when he signed the
promissory notes, they were all blank forms and all
the blank spaces were to be filled up only if the sale
transaction over the subject properties would not
push through because of a possible adverse decision
in the civil cases involving them (the properties). He
thus posits that since the sale pushed through, the
promissory notes did not become effective. Contrary
to the conclusions of the RTC and the CA, we find
such proof insufficient to overcome the presumption
of consideration. The presumption that a contract has
sufficient consideration cannot be overthrown by the
bare, uncorroborated and self-serving assertion of
respondent that it has no consideration. The alleged
lack of consideration must be shown by
preponderance of evidence.
Weldon Construction Corp. v CA and Manuel
Cancio
GR. No. L-35721
Facts:

In 1961, Lucio Lee, whose name was later changed to

Lucio Lee Rodriguez, was doing business under the
trade name Weldon Construction, the predecessorin-interest of the herein petitioner, Weldon
Construction Corporation. The latter corporation was
incorporated in July 1963 as a closed corporation
composed of Lucio Tee (owner of Weldon
Corporation), his wife, his sister and the latters
husband, and a cousin. The assets of Weldon
Construction were transferred to, and its liabilities
assumed by the new corporation. Hence, the instant
case was brought by Weldon Construction
Corporation as successor-in-interest of Weldon
Construction and Lucio Lee.
Prior to March 7, 1961, Lucio Lee drafted plans for a
theater-apartment
building,
which
private
respondent Cancio intended to put up. Thereafter, on
March 7, 1961, he submitted to the latter a proposal
for the supervision of the construction of said
building on commission basis. The proposal was
signed not by Lee but by his office manager, Antonio
Wong. The private respondent never affixed his
signature on the document.
Among the provisions contained in the proposal was
the setting up of a revolving fund of P 10,000.00
pesos for the costs and expenditures to be incurred in
the construction of the building, such as materials
and labor among others. The fund was to be
replenished by the owner of the building from time
to time. The proposal also provided for the payment
to Weldon Construction of commission of ten per
cent of the total value of the building.
Issue:
Whether or not the contract providing for the
commission of Weldon was perfected.
Held:
NO. In view of all the foregoing considerations, this
Court finds that the agreement between the parties is
the contract of construction for a stipulated price
which is akin to a contract for a piece of work
defined in the aforementioned article. Both parties
having fully performed their reciprocal obligations in
accordance with said contract, petitioner is estopped
from invoking an entirely different agreement so as
to demand additional consideration. Once a contract
has been consummated, there is nothing left to be
done or to be demanded by the parties thereto. All
obligations arising from the contract are
extinguished.
As set by the parties, the consideration for the
construction of the Gay Theater building is P
600,000.00 pesos which amount has been fully paid
by the private respondent. There is no basis for the

petitioners demand for the payment of P 62,378.83

as commission of 10 per cent of the total cost of the
construction.
The first proposal submitted by Weldon
Construction for rendering service under the contract
of supervision (Exhibit A) is simply that, a proposal.
It never attained perfection as the contract between
the parties. Only an absolute or unqualified
acceptance of a definite offer manifests the consent
necessary to a perfect contract (Article 1319, New
Civil Code). The advance payment of P 10,000.00 was
not an unqualified acceptance of the offer contained
in the first proposal (Exhibit A) as in fact an entirely
new proposal (Exhibit 4) was submitted by Weldon
Construction subsequently. If, as claimed by the
petitioner, the parties had already agreed upon a
contract of supervision under Exhibit A, why then
was a second proposal made? Res ipsa loquitor. The
existence of the second proposal belies the perfection
of any contract arising from the first proposal.
C & C COMMERCIAL CORPORATION, plaintiffappellee,
vs.
ANTONIO C. MENOR, as Acting General Manager
of the National Waterworks and Sewerage
Authority, and MEMBERS OF THE COMMITTEE
ON
PRE-QUALIFICATION,
NAWASA,
defendants-appellants.
Judge Cloribel of the Court of First Instance of
Manila in his decision dated March 1, 1967 in Civil
Case No. 66750, a mandamus case, ordered the
Acting General Manager of the National Waterworks
and Sewerage Authority and the members of the
Committee on Pre-Qualification to allow C & C
Commercial Corporation to participate as a qualified
bidder in the public bidding for the supply of
asbestos cement pressure pipes to the Nawasa in
spite of the fact that it had a pending tax case and
had no tax clearance certificate.
By virtue of that judgment, which became final
because the Nawasa did not appeal, C & C
Commercial Corporation took part in the bidding.
When the bids were opened on May 18, 1967, it was
found to be the lowest bidder.
On that same date, July 25, 1967, or long after Judge
Cloribel's judgment had been executed and when he
had no more jurisdiction to amend it, C & C
Commercial Corporation filed a motion in Civil Case
No. 66750 wherein it prayed that the Nawasa
officials be ordered to award to the said corporation
the contract for the supply of asbestos cement
pressure pipes, that they be restrained from
awarding the contract to another bidder and that
they be required to show cause why they should not
be held in contempt of court. In effect, that motion
was another petition for mandamus.

Judge Cloribel in his order of August 23, 1967

granted the motion and ordered Menor and the other
Nawasa officials to award within ten days from
notice the contract to C & C Commercial Corporation
as the lowest bidder. From that order, the Nawasa
appealed to this Court. Judge Cloribel approved its
record on appeal in his order of November 9, 1967.
ISSUE:
WON Judge Cloribel acted without jurisdiction
and with grave abuse of discretion in ordering
Nawasa to award the contract to C & C.
HELD:
YES. The order is erroneous and void for the
following reasons:
1. The said order was an amendment of a judgment
that had already been satisfied. The case was closed
and terminated. Judge Cloribel had no right and
authority to issue such an order after he had lost
jurisdiction over the case. The award of the contract
to C & C Commercial Corporation was not the lis
mota in the mandamus case before Judge Cloribel. It
was an extraneous matter that could not have been
injected into that case nor resolved therein. What was
in issue was whether C & C Commercial Corporation
should be allowed to take part in the bidding even if
it had no tax clearance certificate.
2. The Nawasa was justified in not awarding the
contract- to C & C Commercial Corporation because
it had no tax clearance certificate. It had a pending
tax case in the Bureau of Internal Revenue. The
award to C & C Commercial Corporation would be
in gross contravention of Administrative Order No.
66.
That was the ruling in Nawasa vs. Reyes, L-28597,
February 29, 1968, 22 SCRA 905, where the bidder
was also the appellee herein, C & C Commercial
Corporation. It was held therein that C & C
Commercial Corporation was disqualified under the
said order to take part in the bidding to supply the
Nawasa with steel pipes because it had "tremendous
tax liabilities".
Under Administrative Order No. 66, the Nawasa
officials would be subject to administrative
disciplinary action if they awarded the contract to C
& C Commercial Corporation in spite of its unsettled
tax liabilities.
The trial court erred in holding that Administrative
Order No. 66 could not be given a retroactive effect
to the bid of C & C Commercial Corporation which
allegedly had been allowed to bid in prior
transactions with the Nawasa in spite of its pending

tax case,
It erred because Administrative Order No. 66
(promulgated after Judge Cloribel had rendered his
decision of March 1, 1967) covers not only the
bidding but also the "execution of any contract with"
the lowest bidder. In this case, at the time the said
order was issued, no award had as yet been made
and when the award was to be made, the said order
was already in force.
3. Moreover, it was not the ministerial duty of the
Nawasa officials to award the contract to C & C
Commercial Corporation even if it was the lowest
bidder, The Nawasa in its addendum No.1 to the
invitation to bid dated July 6, 1966 reserved the right
"to reject the bid of any bidder" (p. 35, Record on
Appeal).
Therefore, a bidder whose bid is rejected has no
cause for complaint nor a right to dispute the award
to another bidder (Esguerra & Sons vs. Aytona, 114
Phil. 1189; Surigao Mineral Reservation Board vs.
Cloribel, L-27072, July 31, 1968, 24 SCRA 491).
It should be noted that "advertisements for bidders
are simply invitations to make proposals, and the
advertiser is not bound to accept the highest or
lowest bidder, unless the contrary appears" (Art.
1326, Civil Code). No such contrary intention
appears in this case.
VICENTE E. TANG, petitioner,
vs.
HON. COURT OF APPEALS and PHILIPPINE
AMERICAN LIFE INSURANCE COMPANY
FACTS: Lee See Guat, an illiterate who spoke only
Chinese, applied for an insurance on her life for
P60,000 with the respondent Company. The
application consisted of two parts, both in the
English language. The second part of her application
dealt with her state of health and because her
answers indicated that she was healthy, the
Company issued her a policy, with her nephew
Vicente E. Tang, herein Petitioner, as her beneficiary,
Lee See Guat again applied with the respondent
Company for an additional insurance on her life for
P40,000. Considering that her first application had
just been approved, no further medical examination
was made.
A few months thereafter, Lee See Guat died of lung
cancer. Herein petitioner, the beneficiary of the two
policies, claimed for their face value in the amount of
P100,000 which the insurance company refused to
pay on the ground that the insured was guilty of
concealment and misrepresentation at the time she
applied for the two policies.

Hence, the filing of a civil action was for the

enforcement of two insurance policies which was
dismissed because of the concealment.
Petitioner claims that because Lee See Guat was
illiterate and spoke only Chinese, she could not be
held guilty of concealment of her health history
because the applications for insurance were in
English and the insurer has not proved that the terms
thereof had been fully explained to her.
ISSUE: W/N art 1332 of the Civil Code is applicable.
HELD: NO. The issue in this appeal is the
application of Art. 1332 of the Civil Code which
stipulates:
Art. 1332. When one of the parties is unable
to read, or if the contract is in a language not
understood by him, and mistake or fraud is
alleged, the person enforcing the contract
must show that the terms thereof have been
fully explained to the former.
It should be noted that under Art. 1332 above
quoted, the obligation to show that the terms of the
contract had been fully explained to the party who is
unable to read or understand the language of the
contract, when fraud or mistake is alleged, devolves
on the party seeking to enforce it. Here the insurance
company is not seeking to enforce the contracts; on
the contrary, it is seeking to avoid their performance.
It is petitioner who is seeking to enforce them even
as fraud or mistake is not alleged. Accordingly,
respondent company was under no obligation to
prove that the terms of the insurance contracts were
fully explained to the other party. Even if we were to
say that the insurer is the one seeking the
performance of the contracts by avoiding paying the
claim, it has to be noted as above stated that there
has been no imputation of mistake or fraud by the
illiterate insured whose personality is represented by
her beneficiary the petitioner herein. In sum, Art.
1332 is inapplicable to the case at bar.
JUANITO CARIO and CIRILA VICENCIO,
petitioners,
vs.
COURT OF APPEALS, PABLO ENCABO and
JUANITA DE LOS SANTOS, and LAND
AUTHORITY, respondents.
FACTS:
On 22 January 1954, Pablo Encabo formally applied
with the Land Estates Division, Bureau of Lands, to
purchase a parcel of land designated as Lot 1, Block
4, Plan Psd-24819, which was a part of the Tuason
Estate purchased by the government pursuant to the
provisions of Commonwealth Act No. 539, for resale

to bona fide tenants or occupants who are qualified

to own public land in the Philippines.
Thereafter, Encabo, through petitioner Cirila
Vicencio, supposedly as "agent, " came to an
agreement with Josue Quesada transferring rights
over the lot to the latter, conditioned on approval by
the Land Tenure Administration (LTA, for short).
The husband of Cirila Vicencio (Juanito Cario) is a
relative of Quesada; Cirila Vicencio is also a
"comadre" of Quesada's wife. The transfer of rights
by Encabo to Quesada was not put in writing but
payment of the price for the rights transferred was
evidenced by receipts on which Cirila Vicencio
signed as a witness.
On 30 July 1957, the LTA, unaware of the transfer of
rights by Encabo to Quesada, adjudicated the lot in
favor of Encabo, and the LTA and Encabo signed an
"Agreement to Sell" (Exh. "G-1"). LTA later came to
know about the "transfer" of rights from Encabo to
Quesada. It disapproved the same on the ground that
Quesada was not qualified to acquire the lot because
he is already a lot owner. However, before the LTA's
disapproval of the transfer of Encabo's rights to
Quesada, the latter had entered into possession of the
lot in question. Quesada had also allowed Cirila
Vicencio to enter into possession and occupancy of
the same lot.
In November (undated) 1958, Encabo executed a
Deed of Sale of House and Transfer of Rights,
purportedly conveying to herein petitioners (Juanito
Cario and Cirila Vicencio), his rights over the lot,
subject to approval of the LTA. On 17 December
1958, Encabo wrote a letter to the LTA requesting
permission to transfer his rights. Another such
request was made on 20 April 1960 but without
making mention of who the transferee would be, just
like in the first letter. On 18 April 1960, however,
Encabo and Quesada executed a document wherein
the latter purportedly resold to the former (Encabo)
the house and the rights over the lot.
ISSUE:
Whether the respondent Court of Appeals
committed grave abuse of discretion in concluding
that the Deed of Sale of House and Transfer of
Rights, on which the petitioners have based their
application over the questioned lot, is simulated and,
therefore, an inexistent deed of sale.
HELD:
The circumstances surrounding the execution of the
document Exhibit "D-1" as recounted by the
petitioners are bereft of credence. They are so weak
that they lead to the conclusion that indeed, there
was no real and actual Deed of Sale entered into. The

petitioners herein have nothing else to support their

claim over the disputed lot except for the Deed of
Sale, Exhibit "D-1" which is even unnotarized, and
the exact date of execution, unknown. Whereas, on
the other hand, the private respondents clearly have
a preponderance of evidence negating the validity of
such deed.
Contracts of sale are void and produce no effect
whatsoever where the price, which appears therein
as paid, has in fact never been paid by the vendee to
the vendor. A sale of land without consideration, but
intended merely to protect a party to a joint venture
for the cash advances he was to make for the realty
subdivision that the parties wanted to put up, is null
and void. The law is clear on this matter. The Civil
Code provides:
Art. 1409. The following contracts are inexistent and
void from the beginning:
xxx
xxx
xxx
(2) Those which are absolutely simulated or
fictitious;
xxx
xxx
xxx
These contracts cannot be ratified. Neither can the
right to set up the defense of illegality be waived.
Furthermore, even without going into the merits
and/or validity of Exhibit "D-1", it is clear that there
has been no legal transfer of rights in favor of the
Carios because neither the LTA nor the Land
Authority has approved or given due course to such
transfer of rights.25 The LTA never waived its right to
approve the transfer of rights. It only ruled that the
status quo will be maintained so long as the Court
has not yet ruled on the authenticity of document
Exhibit "D-1". The ownership of the lot by the
Carios is still contingent on the approval of the LTA
upon their compliance with all the requirements of
the latter. Since no approval or due course has yet
been given by the LTA or LA to such transfer of
rights, the document Exhibit "D-1" is not enforceable
against the latter.
MANUEL LAGUNZAD, petitioner,
vs.
MARIA SOTO VDA. DE GONZALES and THE
COURT OF APPEALS, respondents.
FACTS:
Sometime in August, 1961, petitioner Manuel
Lagunzad, a newspaperman, began the production
of a movie entitled "The Moises Padilla Story" under
the name of his own business outfit, the "MML
Productions." It was based mainly on the
copyrighted but unpublished book of Atty. Ernesto
Rodriguez, Jr., entitled "The Long Dark Night in

Negros" subtitled "The Moises Padilla Story," the

rights to which petitioner had purchased from Atty.
Rodriguez in the amount of P2,000.00.
The book narrates the events which culminated in
the murder of Moises Padilla sometime between
November 11 and November 17, 1951. Padilla was
then a mayoralty candidate of the Nacionalista Party
(then the minority party) for the Municipality of
Magallon, Negros Occidental, during the November,
1951 elections. Governor Rafael Lacson, a member of
the Liberal Party then in power and his men were
tried and convicted for that murder in People vs.
Lacson, et al. In the book, Moises Padilla is portrayed
as "a martyr in contemporary political history."
Although the emphasis of the movie was on the
public life of Moises Padilla, there were portions
which dealt with his private and family life including
the portrayal in some scenes, of his mother, Maria
Soto Vda. de Gonzales, private respondent herein,
and of one "Auring" as his girl friend.
The movie was scheduled for a premiere showing on
October 16, 1961, or at the very latest, before the
November, 1961 elections.
On October 3, 1961, petitioner received a telephone
call from one Mrs. Nelly Amante, half-sister of
Moises Padilla, objecting to the filming of the movie
and the "exploitation" of his life. Shown the early
"rushes" of the picture, Mrs. Amante and her sister,
Mrs. Gavieres, objected to many portions thereof
notwithstanding petitioner's explanation that the
movie had been supervised by Ernesto Rodriguez,
Jr., based on his book "The Long Dark Night in
Negros." On October 5, 1961, Mrs. Amante, for and in
behalf of her mother, private respondent, demanded
in writing for certain changes, corrections and
deletions in the movie. Petitioner contends that he
acceded to the demands because he had already
invested heavily in the picture to the extent of
mortgaging his properties, in addition to the fact that
he had to meet the scheduled target date of the
premiere showing.
On the same date, October 5, 1961, after some
bargaining as to the amount to be paid, which was
P50,000.00 at first, then reduced to P20,000.00,
petitioner and private respondent, represented by
her daughters and Atty. Ernesto Rodriguez, at the
law office of Jalandoni and Jamir, executed a
"Licensing Agreement".
Petitioner takes the position that he was pressured
into signing the Agreement because of private
respondent's demand, through Mrs. Amante, for
payment for the "exploitation" of the life story of
Moises Padilla, otherwise, she would "call a press
conference declaring the whole picture as a fake,
fraud and a hoax and would denounce the whole
thing in the press, radio, television and that they

were going to Court to stop the picture."

WON the licensing agreement is void.

change, and an agreement wherein one of the

contracting parties agrees to accept the lesser of two
disadvantages. In either case, he makes a choice free
and untramelled and must accordingly abide by it.
The Licensing Agreement has the force of law
between the contracting parties and since its
provisions are not contrary to law, morals, good
customs, public order or public policy (Art. 1306,
Civil Code), petitioner Should comply with it in good
faith.

HELD:

(FORMS OF CONTRACTS)

Petitioner's contention that respondent Court failed

to make complete findings of fact on all issues raised
before it is without basis. A careful study of the
Decision reveals that respondent Court has
substantially and sufficiently complied with the
injunction that a decision must state clearly and
distinctly the facts and the law on which it is based.
The rule remains that the ultimate test as to the
sufficiency of a Court's findings of fact is "whether
they are comprehensive enough and pertinent to the
issues raised to provide a basis for decision." The
judgment sought to be reviewed sufficiently
complies with this requirement.

Gallardo vs. IAC

G.R. No. L-67742

On October 10, 1961, petitioner paid private

respondent the amount of P5,000.00 but contends
that he did so not pursuant to their Agreement but
just to placate private respondent.
ISSUE:

Neither do we agree with petitioner's submission

that the Licensing Agreement is null and void for
lack of, or for having an illegal cause or
consideration. While it is true that petitioner had
purchased the rights to the book entitled "The Moises
Padilla Story," that did not dispense with the need
for prior consent and authority from the deceased
heirs to portray publicly episodes in said deceased's
life and in that of his mother and the members of his
family. As held in Schuyler v. Curtis, "a privilege may
be given the surviving relatives of a deceased person
to protect his memory, but the privilege exists for the
benefit of the living, to protect their feelings and to
prevent a violation of their own rights in the
character and memory of the deceased."
We also find it difficult to sustain petitioner's posture
that his consent to the Licensing Agreement was
procured thru duress, intimidation and undue
influence exerted on him by private respondent and
her daughters at a time when he had exhausted his
financial resources, the premiere showing of the
picture was imminent, and "time was of the essence."
As held in Martinez vs. Hongkong & Shanghai Bank, it
is necessary to distinguish between real duress and
the motive which is present when one gives his
consent reluctantly. A contract is valid even though
one of the parties entered into it against his own
wish and desires, or even against his better
judgment. In legal effect, there is no difference
between a contract wherein one of the contracting
parties exchanges one condition for another because
he looks for greater profit or gain by reason of such

Facts:
The subject matter of controversy involves a parcel of
land owned and registered in the name of the late
Pedro Villanueva. Petitioners claimed that the land
was sold to them in a private document, an
unnotarized deed of sale that was allegedly signed
by the late Pedro Villanueva conveying and
transferring the property in question in favor of
petitioners. Subsequently, the Original Certificate of
Title (OCT) was cancelled on the basis of the private
document of sale and a new certificate was issued in
the name of petitioners.
During the Second World War, the records of the
Office of the Register of Deeds of Laguna, where the
original of their new transfer certificate of title was
kept, were completely burned. Accordingly, by
virtue of an Affidavit of Reconstitution, the title was
administratively reconstituted and the Register of
Deeds of Laguna issued the TCT in the name of the
petitioners.
On November 17, 1976, defendant Marta Villanueva
filed an Affidavit of Adverse Claim. When
petitioners learned of this affidavit, attempt was
made to settle said controversy amicably. However,
when private respondent Marta Villanueva refused
to sign an Affidavit of Quit-claim, petitioners
instituted the court suit against the private
respondent by filing a complaint for Quieting of Title
and Damages, demanding that their title over the
questioned land be fortified by a declaration of
ownership in their favor. Accordingly, private
respondents in their answer countered that the Deed
of Sale and the petitioners title over the land be
declared void ab initio.
The Court of First Instance rendered its decision
declaring the deed of sale, as well as the
reconstituted transfer certificate of title of petitioners,
void ab initio. Thus, the petitioners filed an appeal.
However, the Intermediate Appellate Court,
affirmed in toto the decision of the trial court.

Issue: Whether or not the unnotarized deed of sale

purportedly executed by the primitive owner Pedro
Villanueva, in favor of petitioners, can be considered
as a valid instrument for effecting the alienation by
way of sale of a parcel of land?
Held:
No.
A private conveyance of registered property is valid
as between the parties. However, the only right of
the vendee of registered property in a private
document is to compel through court processes the
vendor to execute a deed of conveyance sufficient in
law for purposes of registration.
The general rule enunciated in Art. 1356 of the Civil
Code is that contracts are obligatory, in whatever
form they may have been entered, provided all the
essential requisites for their validity are present.
The next sentence provides the exception, requiring
a contract to be in some form when the law so
requires for validity or enforceability. Said law is
Sec. 127 of Act 496 which requires, among other
things, that the conveyance be executed before the
judge of a court of record or clerk of a court of record
or a notary public or a justice of the peace, who shall
certify such acknowledgment substantially in form.
Such law was violated in this case. The action of the
Register of Deeds of Laguna in allowing the
registration of the private deed of sale was
unauthorized and did not lend a bit of validity to the
defective private document of sale.
Acts and contracts which have for their object the
creation,
transmission,
modification
or
extinguishment of real rights over immovable
property must appear in a public document.

(INTERPRETATION OF CONTRACTS)
G.R. No. L-31087 September 27, 1979

petitioner's vessel, the SS "EASTERN PLANET"

for discharge at Hamburg, Germany. Petitioner's bill
of lading for the cargo provided as follows:
... Except as otherwise stated herein and in - the
Charter Party, this contract shag be governed by the
laws of the Flag of the Ship carrying the goods. In
case of average, same shall be adjusted according to
York-Antwerp Rules of 1950.
A fire broke out aboard and caused water damage to
the copra shipment in the amount of US$
591.38. Petitioner corporation rejected respondent's
claim for payment of the and respondent filed on
June 18, 1966 in the Manila court of first instance its
complaint against petitioner as defendant for
recovery of the same and US$ 250.00- attorney's fees
and expenses of litigation.
After trial, the lower court rejected petitioner's
defense that did not exceed 5% of respondent's
interest in the cargo it was not liable under
Philippine Law for the damage which rendered
judgment on April 25, 1969 "ordering the defendant,
Eastern Shipping Lines, Inc. to pay to the plaintiff,
Margarine-Verkaufs-Union GMBH, the sum of US$
591.38, with interest at the legal rate from the date of
the filing of the complaint until fully paid, plus US$
250.00 as attorney's fees and the costs of the suit."
In this review on questions of law, petitioner
reiterates as its first assignment of error its submittal
that Article 848 of the Code of Commerce which
would bar claims for averages not exceeding 5% of
the claimant's interest should be applied rather than
the lower court's ruling that petitioner's bill of lading
expressly contained "an agreement to the contrary,"
i.e. for the application of the York-Antwerp Rules
which provide for respondent's full recovery of the
damage loss.
ISSUE:

MARGARINE-VERKAUFS-UNION, respondent.

WON Article 848 of the Code of Commerce is

applicable considering that petitioner's bill of lading
expressly contained "an agreement to the contrary,"
i.e. for the application of the York- Antwerp Rules
which provide for respondent's full recovery of the
damage loss?

FACTS:

HELD:

Respondent corporation, a West German corporation

not engaged in business in the

NO. The Court affirms the appealed judgment

holding petitioner liable under the terms of its own
bill of lading for the damage suffered by
respondent's copra cargo on board petitioner's
vessel. The Court finds no error and upholds the
lower court's ruling sustaining respondent's damage
claim although the amount thereof did not exceed

EASTERN SHIPPING LINES, INC., petitioner,

vs.

Philippines, was the consignee of 500 long tons of

Philippine copra in bulk with a total value of
US$ 108,750.00 shipped from Cebu City on board

5% of respondent's interest in the cargo and would

have been barred by the cited article of the
Commerce Code. We hold that the lower court
correctly ruled the cited codal article to be "not
applicable in this particular case for the reason that
the bill of lading (Exhibit "F") contains "an agreement
to the contrary" for it is expressly provided in the last
sentence of the first paragraph that "In case of
average, same shall be adjusted according to YorkAntwerp Rules of 1950." The insertion of said
condition is expressly authorized by Commonwealth
Act No. 65 which has adopted in toto the U.S.
Carriage of Goods by Sea Act. Now, it has not been
shown that said rules limit the recovery of damage to
cases within a certain percentage or proportion that
said damage may bear to claimant's interest either in
the vessel or cargo as provided in Article 848 of the
Code of Commerce On the contrary, Rule 3 of said
York-Antwerp Rules expressly states that "Damage
done to a ship and cargo, or
either of them, by water or otherwise, including
damage by breaching or scuttling a burning ship, in
extinguishing a fire on board the ship, shall be made
good as general average. ... "
There is a clear and irreconcilable inconsistency
between the York-Antwerp Rules expressly adopted
by the parties as their contract under the bill of
lading which sustains respondent's claim and the
codal article cited by petitioner which would bar the
same. Furthermore, as correctly contended by
respondent, what is here involved is a contract of
adhesion as embodied in the printed bill of lading
issued by petitioner for the shipment to which
respondent as the consignee merely adhered, having
no choice in the matter, and consequently, any
ambiguity therein must be construed against
petitioner as the author.

(RESCISSIBLE CONTRACTS)
Isidora Cabaliw and Soledad Sadorra vs. Sotero
Sadorra, et al.
G.R. No. L-25650
Facts: Isidora Cabaliw was the wife of Benigno
Sadorra by his second marriage. The couple had a
daughter named Soledad Sadorra. During their
marriage, the spouses acquired two (2) parcels of
land situated in Iniangan, Dupax, Nueva Vizcaya.
Having been abandoned by her husband, Isidora
Cabaliw instituted an action for support with then
CFI of Manila. Judgment was rendered requiring
Benigno Sadorra to pay his wife, Isidora Cabaliw, the
amount of P75.00 a month in terms of support as of
January 1, 1933, and P150.00 in concept of attorney's
fees and the costs.

Unknown to Isidora Cabaliw, Benigno Sadorra

executed two (2) deeds of sale over the two parcels of
land above described in favor of his son-in-law,
Sotero Sadorra, the latter being married to
Encarnacion Sadorra, a daughter of Benigno Sadorra
by his first marriage. Because of the failure of her
husband to comply with the judgment of support,
Isidora Cabaliw filed a motion to cite Benigno
Sadorra for contempt and the Court authorized
Isidora to take possession of the conjugal property, to
administer the same, and to avail herself of the fruits
thereof in payment of the monthly support in
arrears. With this order of the Court, Isidora
proceeded to Nueva Vizcaya to take possession of
the aforementioned parcels of land, and it was then
that she discovered that her husband had sold them
to his son-in-law Sotero. Isidora then filed with the
CFI of Nueva Vizcaya against her husband and
Sotero Sadorra for the recovery of the lands in
question on the ground that the sale was fictitious; at
the same time a notice of lis pendens was filed with
the Register of Deeds of Nueva Vizcaya.
Issue: Whether the sale by Benigno to Sotero Sadorra
was valid.
Held: No. The facts clearly shows that the
conveyances made by Benigno Sadorra in favor of
his son-in-law were fraudulent. For the heart of the
matter is that about seven months after a judgment
was rendered against him by the CFI of Manila and
without paying any part of that judgment, Benigno
Sadorra sold the only two parcels of land belonging
to the conjugal partnership to his son-in-law. Such a
sale even if made for a valuable consideration is
presumed to be in fraud of the judgment creditor
who in this case happens to be the offended wife.
Article 1297 of the old Civil Code which was the
law in force at the time of the transaction provides:
Contracts by virtue of which the debtor alienates
property by gratuitous title are presumed to be made in
fraud of creditors.
Alienations by onerous title are also presumed
fraudulent when made by persons against whom some
judgment has been rendered in any instance or some writ
of attachment has been issued. The decision or attachment
need not refer to the property alienated and need not have
been obtained by the party seeking rescission
Petitioners have in their favor, by a specific provision
of law, the presumption of a fraudulent transaction.
Furthermore, the presumption of fraud established
by the law in favor of petitioners is bolstered by
other indicia of bad faith on the part of the vendor
and vendee. Thus (1) the vendee is the son-in-law of
the vendor; (2) At the time of the conveyance, the
vendee, Sotero, was living with his father-in-law, the
vendor, and he knew that there was a judgment
directing the latter to give a monthly support to his

wife Isidora and that his father-in-law was avoiding

payment and execution of the judgment; and (3) It
was known to the vendee that his father-in-law had
no properties other than those two parcels of land
which were being sold to him. The fact that a vendor
transfers all of his property to a third person when
there is a judgment against him is a strong indication
of a scheme to defraud one who may have a valid
interest over his properties.
Article. 1413 of the old Civil Code which
authorizes the husband as administrator to alienate
and bind by onerous title the property of the
conjugal partnership without the consent of the wife,
and by reason thereof, concludes that petitioner
Isidora Cabaliw cannot now seek annulment of the
sale made by her husband. However, what was
claimed by petitioner Isidora Cabaliw was that the
conveyances or deeds of sale were executed by her
husband to avoid payment of the monthly support
adjudged in her favor and to deprive her of the
means to execute said judgment. In other words,
petitioner seeks relief not so much as an aggrieved
wife but more as a judgment creditor of Benigno
Sadorra. Art. 1413 therefore is inapplicable; but even
if it were, the result would be the same because the
very article reserves to the wife the right to seek
redress in court for alienations, which prejudice her
or her heirs.
(VOIDABLE CONTACTS)
EDUARDO FELIPE, HERMOGENA V. FELIPE
AND VICENTE V. FELIPE, petitioners,
vs.
HEIRS OF MAXIMO ALDON, NAMELY:
GIMENA
ALMOSARA,
SOFIA
ALDON,
SALVADOR ALDON, AND THE HONORABLE
COURT OF APPEALS, respondents.
FACTS:
Maximo Aldon married Gimena Almosara in 1936.
The spouses bought several pieces of land sometime
between 1948 and 1950. In 1960-62, the lands were
divided into three lots, 1370, 1371 and 1415 of the San
Jacinto Public Land Subdivision, San Jacinto,
Masbate.
In 1951, Gimena Almosara sold the lots to the
spouses Eduardo Felipe and Hermogena V. Felipe.
The sale was made without the consent of her
husband, Maximo.
On April 26, 1976, the heirs of Maximo Aldon,
namely his widow Gimena and their children Sofia
and Salvador Aldon, filed a complaint in the Court of
First Instance of Masbate against the Felipes. The
complaint which was docketed as Civil Case No.
2372 alleged that the plaintiffs were the owners of

Lots 1370, 1371 and 1415; that they had orally

mortgaged the same to the defendants; and an offer
to redeem the mortgage had been refused so they
filed the complaint in order to recover the three
parcels of land.
The defendants asserted that they had acquired the
lots from the plaintiffs by purchase and subsequent
delivery to them. The trial court sustained the claim
of the defendants and rendered the following
judgment:
a.

declaring the defendants to be the lawful owners

of the property subject of the present litigation;

b. declaring the complaint in the present action to be

without merit and is therefore hereby ordered
dismissed;
c. ordering the plaintiffs to pay to the defendants the
amount of P2,000.00 as reasonable attorney's fees and
to pay the costs of the suit.
ISSUE:
WON there is a valid contract
HELD:
According to Art. 1390 of the Civil Code, among the
voidable contracts are "[T]hose where one of the
parties is incapable of giving consent to the contract."
(Par. 1.) In the instant case-Gimena had no capacity
to give consent to the contract of sale. The capacity to
give consent belonged not even to the husband alone
but to both spouses.
The view that the contract made by Gimena is a
voidable contract is supported by the legal provision
that contracts entered by the husband without the
consent of the wife when such consent is required,
are annullable at her instance during the marriage
and within ten years from the transaction
questioned. (Art. 173, Civil Code.)
Gimena's contract is not rescissible for in such
contract all the essential elements are untainted but
Gimena's consent was tainted. Neither can the
contract be classified as unenforceable because it
does not fit any of those described in Art. 1403 of the
Civil Code. And finally, the contract cannot be void
or inexistent because it is not one of those mentioned
in Art. 1409 of the Civil Code. By process of
elimination, it must perforce be a voidable contract.
The voidable contract of Gimena was subject to
annulment by her husband only during the marriage
because he was the victim who had an interest in the
contract. Gimena, who was the party responsible for
the defect, could not ask for its annulment. Their
children could not likewise seek the annulment of
the contract while the marriage subsisted because

they merely had an inchoate right to the lands sold.

The termination of the marriage and the dissolution
of the conjugal partnership by the death of Maximo
Aldon did not improve the situation of Gimena.
What she could not do during the marriage, she
could not do thereafter.
The case of Sofia and Salvador Aldon is different.
After the death of Maximo they acquired the right to
question the defective contract insofar as it deprived
them of their hereditary rights in their father's share
in the lands. The father's share is one-half (1/2) of the
lands and their share is two-thirds (2/3) thereof, onethird (1/3) pertaining to the widow.
The petitioners have been in possession of the lands
since 1951. It was only in 1976 when the respondents
filed action to recover the lands. In the meantime,
Maximo Aldon died.

(UNENFORCEABLE CONTRACTS)
MARTA C. ORTEGA vs DANIEL LEONARDO
GR NO. L-11311
FACTS: Well known is the general rule in the
Statute of Frauds precluding enforcement of oral
contracts for the sale of land. Not so well known is
exception concerning the partially executed
contracts1 least our jurisprudence offers few, if
any, apposite illustrations. This appeal exemplifies
such exception.
Alleging partial performance, plaintiff sought to
compel defendant to comply with their oral contract
of sale of a parcel of land. Upon a motion to dismiss,
the Manila court of first instance ordered dismissal
following the above general rule.
The plaintiff alleged that she had been previously
occupying a particular lot in Manila, and that after
the liberation of Manila, she assumed occupation
thereof, but defendant asserts his right as well.
Through oral agreements, the defendant asked the
plaintiff to quit her claim and let the land be
registered in defendants name with a promise to
give the portion claimed by the plaintiff to the latter
through payment of rent and option to pay for the
purchase price should the latter choose later on,
provided the plaintiff pays for the surveying and
subdivision of the lot, to which she agreed and
complied. That after defendant had acquired Lot I
plaintiff regularly paid him the monthly rental of
P10.00; that in July 1954, after the plans of
subdivision and segregation of the lot had been
approved by the Bureau of Lands, plaintiff tendered
to defendant the purchase price which the latter
refused to accept, without cause or reason.

The lower court dismissed the action, ruling that an

oral agreement to sell a piece of land is not
enforceable. (Art. 1403, Civil Code, Section 21, Rule
123, Rules of Court.)...The desistance to claim is not a
part of the contract of sale of the land. Only in
essential part of the executory contract will, if it has
already been performed, make the verbal contract
enforceable, payment of price being an essential part
of the contract of sale.
ISSUE/S: Whether or not the oral agreements
between the parties, and after performance of such
agreements, are binding in contracts of sale which
may warrant its enforceability.
HELD: Yes, as a form of exception to the General
Rule. Continued possession under an oral contract
of sale, by one already in possession as a tenant, has
been held a sufficient part performance, where
accompanied by other acts which characterize the
continued possession and refer it to the contract of
purchase. Especially is this true where the
circumstances of the case include the making of
substantial,
permanent,
and
valuable
improvements." (49 American Jurisprudence 44)
"The making of valuable permanent improvements
on the land by the purchaser, in pursuance of the
agreement and with the knowledge of the vendor,
has been said to be the strongest and the most
unequivocal act of part performance by which a
verbal contract to sell land is taken out of the statute
of frauds, and is ordinarily an important element in
such part performance. . . . Possession by the
purchaser under a parol contract for the purchase of
real property, together with his making valuable and
permanent improvements on the property which are
referable exclusively to the contract, in reliance on
the contract, in the honest belief that he has a right to
make them, and with the knowledge and consent or
acquiescence of the vendor, is deemed a part
performance of the contract. The entry into
possession and the making of the improvements are
held on amount to such an alteration in the
purchaser's position as will warrant the court's
entering a degree of specific performance." (49
American Jurisprudence p.755, 756.)
"A tender or offer of payment, declined by the
vendor, has been said to be equivalent to actual
payment, for the purposes of determining whether or
not there has been a part performance of the contract.
This is apparently true where the tender is by a
purchaser who has made improvements. But the
doctrine now generally accepted, that not even the
payment of the purchase price, without something
more, . . . is a sufficient part performance. (49
American Jurisprudence p. 772.)

And the relinquishment of rights or the compromise

thereof has likewise been held to constitute part
performance. (See same title secs. 473, 474, 475.)
In the light of the above four paragraphs, it would
appear that the complaint in this case described
several circumstance indicating partial performance:
relinquishment of rights4 continued possession,
building of improvements, tender of payment plus
the surveying of the lot at plaintiff's expense and the
payment of rentals.
Enough to hold that the combination of all of
them amounted to partial performance; and we do so
line with the accepted basis of the doctrine, that it
would be a fraud upon the plaintiff if the defendant
were permitted to oppose performance of his part
after he has allowed or induced the former to
perform in reliance upon the agreement. (See 49
American Jurisprudence p. 725.)
Hence, as there was partial performance, the
principle excluding parol contracts for the sale of
realty, does not apply.
Carbonnel vs. Poncio
103 Phil. 655
Facts: This is an appeal from an order of the Court of
First Instance of Rizal.
Plaintiff Rosario Carbonnel alleges in her second
amended complaint,, filed with the Court of First of
Rizal, that, on January 27, 1955, she purchased from
defendant Jose Poncio, at P 9.50 a square meter. The
plaintiff paid P 247.26 on account of the price and
assumed Poncios obligation with the understanding
that the balance would be payable upon execution of
the corresponding deed of conveyance, that one of
the condition of the sale was that Poncio would
continue staying in land for one year. Poncio refuses
to execute the corresponding deed of sale despite
repeated demands. The plaintiff has thereby suffered
damages in the sum of P 5,000.00 aside from
attorneys fees amounting to P 1,000.00, that Poncio
has conveyed the same property to defendants
Ramon R. Infante and Emma L. Infarte who knew of
the first sale to plaintiff and that the Infantes had
thereby caused damages to plaintiff in the sum of P
5,000.00
Defendants moved to dismiss said complaint upon
the ground that plaintiffs claim is unenforceable
under the Statute of Frauds, and that said pleading
does not state facts sufficient to constitute a cause of
action.
The Infantes filed an answer denying most of the
allegations of said complaint and alleged, by way of
special defense, that they purchased the land in
question in good faith, for value, and without
knowledge of the alleged sale to plaintiff and that
plaintiffs claim is unenforceable under the Statute of

Frauds. They likewise, set up counterclaims for

damages.
Poncio denied specifically some allegations of said
complaint and alleged that he had no knowledge
sufficient to form a belief as to the truth of the other
averments. Pocio similarly set up a counterclaim for
damages.
The lower court issued an order dismissing plaintiffs
complaint, without costs, upon the ground that her
cause of action is unenforceable under the Statute of
Frauds. The counterclaims were also dismissed.
Issue:
Whether or not the Statute of Fraud is applicable in
this case.
Held:
The order appealed from hereby set aside, and let
this case be remanded to the lower court for further
proceedings not inconsistent with this decision.
The Statute of Frauds is applicable only to executory
contracts, not to contracts that are totally or partially
performed. The reason is simple. In executory
contracts there is a wide field for fraud because,
unless they be in writing there is no palpable
evidence of the intention of the contracting parties.
However, if a contract has been totally or partially
performed, the exclusion of parol evidence would
promote fraud or bad faith, for it would promote
fraud or bad faith, for it would enable the defendant
to keep the benefits already derived by him from the
transaction in litigation, and, at the same time, evade
the obligations, responsibilities or liabilities assumed
or contracted by him thereby. So that when the party
concerned has pleaded partial performance, such
party is entitled to a reasonable chance to establish
by parole evidence the truth of this allegation, as well
as the contract itself. The recognition of the
exceptional effect of part performance in taking an
oral contract out of the statute of frauds involves the
principle that oral evidence is admissible in such
cases to prove both contract and the part
performance of the contract.
CABAGUE VS AUXILLIO
92 PHIL. 294
FACTS:
Felipe Cabague & his son Geromino sued
Matias Auxilio & his daughter Socorro to
recover damages resulting from defendants
refusal to carry out the agreed marriage
between Soccorro & Geromino.2. It was said that
Socorro promised to marry Geronimo provided that
would

improve their house and spend for wedding

feast
and
needs
of
the
bride.
The plaintiffs complied and spent 700php,but
then the defendants later on refused to honor their
pledged word. The defendants moved to dismiss and
said that such is just an oral agreement and
there is no
written
agreement
that
was
executed under the new rules of court, the defendant
may now present a motion to dismiss on the ground
that the contract was not in writing and such may be
proved.
ISSUE:
Can Felipe Cabague & his son Geronimo
recover damages and sue Soccorro and his father
forBreach of a mutal promise to marry?
HELD:
YES & NO.
There are 2 kinds of agreements involved
in this case. One is the agreement between
Felipe Cabague & the defendant in consideration of
the
marriage of Soccorro & Geronimo, the second
one
is between the two lovers as the mutual
promise to marry
1. YES. For the breach of mutual promise to marry,
Geronimo may sue Socorro for damages.
2. NO. For the case of Felipe Cabague's action, such
may not prosper because it is to enforce an
agreement in consideration of marriage, such cannot
be maintain under the theory of mutual promise to
marry. Neither Felipe can maintain an action against
Socorro for failure to marry his son. However, yet
again the court declares Geronimo may continue his
suit against Socorro for damages as may have
resulted from failure to carry out their mutual
patrimonial promises.
Yuvienco vs. Dacuycuy
GR L-55048
FACTS:
Petitioners Yuvienco own a property (Sotto property)
in Tacloban City which they intend to sell for P6.5M.
They gave the respondents the preference to
purchase the property but respondents have to made
known their decision to the petitioner until July 31,
1978. Respondents replied that they agree to buy the
property and they will negotiate for details.
Petitioner sent another telegram informing
respondents that their proposal is accepted and a
contract will be prepared.
Atty. Gamboa, petitioners representative, arrived
bringing a contract to purchase an to sell.
Respondents and the said representative found

variance between the terms of payment.

Respondents alleges that petitioners changed the
mode of payment with respect to the balance of
P4.5M by imposing upon plaintiffs to pay same
amount within thirty (30) days from execution of the
contract instead of the former term of ninety (90)
days, P2M to be paid in full on the date of the
execution of the contract.
ISSUE:
WON there was already a perfected contract of sale
between the parties.
WON the claim alleged therein is unenforceable
under the Statute of Frauds
HELD:
1. There was no perfected contract of sale yet
because both parties are still under
negotiation and hence, no meeting of the
minds. Mr.Gamboa even went to the
respondents to negotiate for the sale. The
implication of "to negotiate", the court held,
is practically the opposite of the Idea that an
agreement has been reached. Importantly, it
must be borne in mind that the respondents
telegram simply says "we agree to buy
property". It does not necessarily connote
acceptance of the price but instead suggests
that the details were to be subject of
negotiation. Even though there was an
agreement on the terms of payment, there
was no absolute acceptance because
respondents still insisted on further
negotiation of details.
2.

The court held that in any sale of real

property on installments, the Statute of
Frauds read together with the perfection
requirements of Article 1475 of the Civil
Code must be understood and applied in the
sense that the idea of payment on
installments must be in the requisite of a
note or memorandum therein contemplated.
It is nowhere alleged in the complaint that
there is any writing or memorandum, much
less a duly signed agreement to the effect
that the price of 6.5M fixed by petitioners for
the real property herein involved was agreed
to be paid not in cash but in installments as
alleged
by
respondents.
The
only
documented indication of the non-whollycash payment extant in the record is that
stipulated in the deeds already signed by the
petitioners and taken to Tacloban by Atty.
Gamboa for the signatures of the
respondents. In other words, the 90-day term
for the balance of P4.5 M insisted upon by
respondents choices not appear in any note,
writing or memorandum signed by either

the petitioners or any of them, not even by

Atty. Gamboa. Hence, looking at the pose of
respondents that there was a perfected
agreement of purchase and sale between
them and petitioners under which they
would pay in installments of P2 M down and
P4.5 M within ninety 90) days afterwards it
is evident that such oral contract involving
the "sale of real property" comes squarely
under the Statute of Frauds (Article 1403,
No. 2(e), Civil Code.)

delivered the amount of P1,000.00 as earnest money,

subject to the above conditions and that the amount
was returned by the petitioner upon his learning
definitely that his co-heirs and co-owners refused to
give their consent to the projected sale.
Issue:

Clarin vs Rulona
GR No. L-30786
Facts:
Clarin is one of the heirs of the CLARIN
HERMANOS in a decision rendered in Cad. Case
No. 20. From his share, Clarin sold a 10-hectare land
in Carmen, Bohol to Rulona for 2,500 pesos. The
conditions of the sale were: downpayment of
P1,000.00 was to be made and then the balance of
P1,500.00 was to be paid in monthly installment of
P100.00.
Rulona delivered to the petitioner a downpayment of
P800.00 and on the first week of June the amount of
P200.00 was also delivered thereby completing the
downpayment of P1,000.00. On the first week of
August, another delivery was made by the
respondent in the amount of P100.00 as payment for
the first installment.
Rulona filed a complaint for specific performance
and recovery of improvements on the ground that
the petitioner and his wife violated the terms of the
agreement of sale by returning by their own volition
and without the consent of plaintiff, the amount of
P1,100.00 in six postal money orders, covering the
downpayment of P1,000.00 and first installment of
P100.00.
Clarin alleged that while it is true that he had a
projected contract of sale of a portion of land with
the respondent, such was subject to the following
conditions:
(1) that the contract would be realized only if
his co-heirs would give their consent to
the sale of a specific portion of their
common inheritance from the late Aniceto
Clarin before partition of the said
common property and
(2) that should his co-heirs refuse to give their
consent, the projected contract would be
discontinued or would not be realized.
Petitioner further contended that the respondent
knew fully well the above terms and accepted them
as conditions precedent to the perfection or
consummation of the contract; that respondent

Whether or not there was a perfected

contract of sale between the petitioner and
the respondent, and that even assuming that
the latter were a perfected contract of sale,
such was subject to a condition precedent
with which there was no compliance.

Held:
Contract of sale, how perfected.While it is true that
Exhibits A and B are, in themselves, not contracts of
sale, they are, however, clear evidence that a contract
of sale was perfected between the petitioner and the
respondent and that such contract had already been
partially fulfilled and executed. A 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.
Acceptance of payment, an indication of partys consent to
the contract; Contract partially executed, not covered by
Statute of Frauds.Hence, it cannot be denied that
there was a perfected contract of sale between the
parties and that such contract was already partially
executed when the petitioner received the initial
payment of P800.00. The latters acceptance of the
payment clearly showed his consent to the contract
thereby precluding him from rejecting its binding
effect. With the contract being partially executed, the
same is no longer covered by the requirements of the
Statute of Frauds in order to be enforceable.
Therefore, with the contract being valid and
enforceable, the petitioner cannot avoid his
obligation by interposing that Exhibit A is not a
public document. On the contrary, under Article
1357 of the Civil Code, the petitioner can even be
compelled by the respondent to execute a public
document to embody their valid and enforceable
contract.
The reasons given by the petitioner cannot
operate against the validity of the contract in
question. A contract is valid even though one of the
parties entered into it against his better judgment.
Finally, we agree with the lower courts
holding that although as a co-owner, the petitioner
cannot dispose of a specific portion of the land, his
share shall be bound by the effect of the sale.
BISAYA
LAND
SANCHEZ
GR No. 74623

TRANSPORTATION

vs

FACTS:
BISTRANCO has been engaged in the
shipping business and one of its ports of call is found
in Butian City. When BISTRANCO was under
receivership,
Sanchez
was
appointed
by
BISTRANCO as its acting shipping agent for its
vessels in Butian City by its Receiver Atty. Amor,
pending the execution of the formal contract of
agency. Thereafter a formal Contract of Agency was
executed between BISTRANCO, represented by
Receiver Amor and Sanchez. Sanchez then executed
a Supplemental Shipping Agency Contract after
finding that a paragraph of the Contract of Agency
was quite prejudicial to him which was then signed
by both parties. HOWEVER BOTH THE
CONTRACT
OF
AGENCY
AND
THE
SUPPLEMENTAL
SHIPPING
AGENCY
CONTRACT WERE NEVER SUBMITTED BY ATTY.
AMOR TO THE RECEIVER COURT FOR ITS
APPROVAL.
By virtue of Contracts, Sanchez performed
his duties as shipping agent of BISTRANCO. Under
Sanchezs endeavors, he had managed to increase the
volume of the shipping business of BISTRANCO at
Butuan City and helped it flourished. Then one day,
petitioner wrote to Sanchez that they would
commence operating its branch office at Butuan City
and thereafter actually operated a branch office,
which in effect repudiated the Contracts.
Under the rules of court it is necessary that
the acts of the receiver have the approval or
authorization of the court, which appointed him as a
receiver. A court-appointed receiver cannot validity
enter into a contract without the approval of the
court.
ISSUE:
WON THE STATUS OF THE CONTRACTS
WHICH RECEIVER ATTY. AMOR ENTERED
INTO WITH SANCHEZ, WITHOUT THE
APPROVAL
OF
THE
COURT
WHICH
APPOINTED HIM RECEIVER IS EITHER VOID
OR UNENFORCEABLE.
HELD:
Unenforceable but ratified. The contract is valid.
The determination of whether the questioned
contracts are void or merely unenforceable is
important, because of the settled distinction that a
void and inexistent contract CAN NOT BE
RATIFIED AND BECOME ENFORCEABLE, whereas
an unenforceable contract may still be ratified and
thereafter, enforced.
Citing Art. 1409 (1), there is nothing in the
cause, object, or purpose of the Contracts which can

be said as contrary to law, morals, good customs,

public order or public policy so as to render them
void. On the other hand, Art. 1403 (1) of the Civil
Code provides that contracts entered into in the
name of another person by one who has been given
no authority or legal representation, or who has
acted beyond his powers are unenforceable, unless
they are ratified.

(VOID OR INEXISTENT)
HERNANDEZ VS. COURT OF APPEALS
G.R. NO. L-41132
FACTS: Fr. Lucio V. Garcia applied for the
registration of a lot in Paraaque. His property
adjoined that of petitioner Hernandez. Their
properties did not have dividing boundaries, since
the entire property was owned by one Andres San
Buenaventura, until cadastral surveyors from the
Bureau of Lands laid down the official monuments to
mark the separation of their respective lots.
Unknown to Hernandez, the application submitted
in Fr. Garcia's behalf to the land registration court
included 220 square meters of land which
encroached pro tanto on the land on his [Hernandez]
land. Hernandez and his tenants occupied said lot
for many years prior to the date of Fr. Garcia's
application.
Hernandez initially proffered no opposition to Fr.
Garcia's application, relying on their earlier
agreement as to the limits of their respective
properties and confident that the visible landmarks
installed by the government surveyors precluded
any overstepping of those limits. Petitioners
discovered the anomaly in the application only when
the court ordered the registration of the lots in Fr.
Garcia's name.
ISSUE: WON the Statute of Frauds applies to Fr
Garcias and Mr Hernandezs agreement as to the
boundary?
HELD: NO. The recorded facts prove Hernandez's
entitlement to the relief sought. The private
respondent heirs' reliance on the Statute of Frauds to
secure a contrary judgment is misplaced. The Statute
of Frauds finds no application to this case. Not every
agreement "affecting land" must be put in writing
to attain enforceability. Under the Statute of
Frauds, Article 1403(2) (e) of the Civil Code, such
formality is only required of contracts involving
leases for longer than one year, or for the sale of
real property or of an interest therein. Hernandez's
testimony is thus admissible to establish his
agreement with Fr. Garcia as to the boundary of their
estates. It is also to be noted that the presence of
Hernandez's tenants on the land within his side of

the border, were this to be reckoned from the

"mojones," further buttresses his claim.
Hernandez avows that the mojones were purposely
installed to mark the limits of their estates agreed
upon by the parties as boundaries. He further argues
that if indeed the Advance Plan, basis of Fr. Garcia's
application, was prepared without regard to the
boundary indicated by the fence and the surveyors
markers, and worse, "falsely designate(d) as
boundaries the lines marked by ... corners not actually
marked by any Bureau of Lands monuments" which
purposely left the mistaken impression that the exact
limits of the adjoining estates had been faithfully
drawn, then he was truly a victim of fraud, deftly
cheated of the chance to vindicate his claim to the
land. The respondents again did not care to refute
the premises on which the argument is predicated. In
any event, the argument is entirely in accord with the
evidence and the norms of logic.
G.R. No. L-25891
November 29, 1977
BENEDICTO M. JAVIER, as administrator of the
Estate of Eusebio Cruz, petitioner,
vs.
DOMINGA VDA. DE CRUZ, and LEONILA,
ROMAN, ELISEO, LIBERATA, and MELECIO, all
surnamed CRUZ,respondents.
FACTS:
1. February 1, 1960 - Benedicto M. Javier, as
administrator of the Estate of Eusebio Cruz,
instituted against Dominga Vda. de Cruz and her
children Civil Case No. 5996 to declare null and void
a deed of sale of a part of a parcel of land located in
Barrio San Isidro, Taytay, Rizal in the name of Estate
of E. Cruz.
2. The amended complaint stated that Eusebio Cruz,
who died on at the age of 100 years without leaving
any will nor compulsory heirs, was the absolute and
exclusive owner of a parcel of mountainous and
unimproved land situated in sitio Matogalo, Taytay,
Rizal.
3. That during his lifetime, Eusebio had been living
with one Teodora Santos 'without the sanction of
marriage". Teodora Santos had with her as distant
relatives and protegees the brothers Gregorio Cruz
and Justo Cruz.
4. Gregorio Cruz was the father of Delfin Cruz,
deceased husband of defendant Dominga Vda. de

Cruz and father of defendants Leonila, Roman,

Eliseo, Leberata and Melecio.
5. January 16, 1941- Delfin Cruz, by means of deceit
and in collusion with persons among them his
father Gregorio Cruz made Eusebio Cruz, who
could read and write, stamp his thumbmark on a
deed of sale of a portion of the land described in
the complaint consisting of 26,577 square meters for
the sum of P700.00 in favor of said Delfin Cruz.
ISSUE:
WON the deed of sale is valid.
HELD:
No. It is inexistent. Alleged vendor was made to
stamp his thumbmark by means of deceit. There was
lack of consent.
DIRECTOR VS ABABA
Facts:

Maximo Abarquez was plaintiff in a case for

annulment of sale of a parcel of land against his
sister Agripina. Since he had neither properties nor
money to pay his counsel Atty. Alberto Fernandez,
he contracted with the latter for contingent fees as
payment for his services. The consideration for such
contract was half of the land to be awarded to
Abarquez. Abarquez was able to annul the sale.
Thereafter, Atty. Fernandez waited for Abarquez to
comply with his obligation under the document
executed by him on June 10, 1961 by delivering the
one-half (1/2) portion of the said parcels of land.
Abarquez refused to deliver the portion. Instead, he
offered 2/3 of the parcel for sale to the Sps.
Larrazabal.
Atty. Fernandez immediately filed with the trial
court a motion to annotate his attorney's lien on the
TCT of the property and by notifying the prospective
buyers of his claim over the one-half portion of the
parcels of land. He also filed an affidavit of adverse
claim with the Register of Deeds of Cebu.
By virtue of the registration of said affidavit, the
adverse claim for one-half (1/2) of the lots covered
by the June 10, 1961 document was annotated on the
TCT. Despite these developments, Abarquez still
sold 2/3 of the land to the spouses. When the land
was sought to be registered, the adverse claim of
Atty. Fernandez necessarily had to appear on the
new transfer certificate of title. This annotation was
subject to a cancellation proceedings filed by the
spouses which was denied by the lower court. They
appealed the decision immediately to the Supreme
Court. The spouses contend that a contract for the
contingent fee herein violates Article 1491 (5) of the

NCC because it involves an assignment of a property

subject of litigation.
Issue:

Whether or not the contract for a contingent

fee, basis of the interest of Atty. Fernandez, is
prohibited by the Article 1491 of the New Civil Code
and Canon 13 of the Canons of Professional Ethics?
Held:

No. Article 1491 prohibits only the sale or

assignment between the lawyer and his client, of
property which is the subject of litigation.
In the recent case of Rosario Vda de Laig vs.
Court of Appeals, et al. (supra), which involved a
contingent fee of one-half () of the property in
question, held that, contingent fees are recognized in
this jurisdiction (Canon 13 of the Canons of
Professional Ethics adopted by the Philippine Bar
association in 1917 [Appendix B, Revised Rules of
Court)), which contingent fees may be a portion of
the property in litigation.
The Supreme Court of Spain, in its sentencia of 12
November 1917, has ruled that Article 1459 of the
Spanish Civil Code (Article 1491 of our Civil Code)
does not apply to a contract for a contingent fee
because it is not contrary to morals or to law.
A contingent fee contract is always subject to the
supervision of the courts with respect to the
stipulated amount and may be reduced or nullified.
So that in the event that there is any undue influence
or fraud in the execution of the contract or that the
fee is excessive, the client is not without remedy
because the court will amply protect him.
The contract for a contingent fee, being valid, vested
in Atty Fernandez an interest or right over the lots in
question to the extent of one-half thereof. Said
interest became vested in Atty. Fernandez after the
case was won on appeal because only then did the
assignment of the one-half () portion of the lots in
question became effective and binding. So that when
he filed his affidavit of adverse claim his interest was
already an existing one. There was therefore a valid
interest in the lots to be registered in favor of Atty.
Fernandez adverse to Mo Abarquez.
The one-half () interest of Atty. Fernandez in the
lots in question should therefore be respected.
Indeed, he has a better right than petitioner-spouses,
Juan Larrazabal and Marta C. de Larrazabal. They
purchased their two-thirds (2/3) interest in the lots
in question with the knowledge of the adverse claim
of Atty. Fernandez. The adverse claim was annotated
on the old transfer certificate of title and was later
annotated on the new transfer certificate of title
issued to them. As held by this Court: The annotation

of an adverse claim is a measure designed to protect the

interest of a person over a piece of real property where the
registration of such interest or right is not otherwise
provided for by the Land Registration Act, and serves as a
notice and warning to third parties dealing with said
property that someone is claiming an interest on the same
or a better right than the registered owner thereof
(Sanchez, Jr. vs. Court of Appeals, 69 SCRA 332 [1976];
Paz Ty Sin Tei vs. Jose Le Dy Piao supra).
Petitioner Spouses having purchased the property
with the knowledge of the adverse claim, they are
therefore in bad faith. Consequently, they are
estopped from questioning the validity of the
adverse claim.
ARSENAL vs. IAC
G.R. No. L-66696
FACTS:
In 1954, respondent FilomenoPalaos secured a
homestead patent over a parcel of land. In 1957,
Palaos sold a 4-hectare portion of the land to
Torcuato Suralta, who immediately took possession
of the same in the concept of owner. In 1964, spouses
Remedio and Francisa Arsenal became tenants of the
adjoining property. Suralta learned of spouses
Arsenals intention to buy the remaining land of
Palaos. In 1967, Palaos sold the remaining 3 hectares
to spouses Arsenal, without knowing that the
document covered the entire property, including the
portion purchased by Suralta. Spouses Arsenal took
possession of the 3 hectares. Suralta learned of the
transfer of the tax declaration on the entire property
to spouses Arsenal, and agreed to contribute for the
payment of land taxes.
In 1973, Suralta presented the contract of sale to the
register of deeds, but it was refused registration for
having been executed within the 5-year prohibitory
period. He caused Palaos to sign a new contract of
sale to cure the defect. Later, Suralta learned that the
deed of sale in favor of Arsenal covered the entire
property. Suralta approached Francisca Arsenal for a
satisfactory arrangement, but the latter insisted on
abiding by the contract. Francisca registered the sale
and obtained a TCT for the entire property without
the knowledge of Suralta.
In 1974, Suralta filed a case against spouses Palaos,
spouses Arsenal and the Register of Deeds for the
annulment of the TCT issued to spouses Arsenal,
insofar as it covers the portion previously sold to
him. Spouses Palaos confirmed that they previously
sold the 4-hectar portion to Suralta. The lower court,
finding bad faith on the part of spouses Arsenal,
ruled in favor of Suralta. The CA affirmed.
Spouses Arsenal relies heavily on the nullity of the
contract of sale between spouses Palaos and Suralta.
They allege that because the previous sale was void

from the beginning, it cannot be ratified, and no

amount of bad faith on their part could make it valid
and enforceable.
ISSUE:
Who is entitled to the 4-hectare portion of the land?
HELD:
A contract which purports of alienate, transfer,
convey or encumber any homestead within the
prohibitory period of five years from the date of the
issuance of the patent is void from its execution. A
void contract is inexistent from the beginning. It
cannot be ratified; neither can the right to set up the
defense of its illegality be waived. Any person may
invoke the inexistence of the contract whenever
juridical effects founded thereon are asserted against
him.
An alienation or sale of a homestead executed within
the five-year prohibitory period is void and cannot
be confirmed or ratified. The respondents Palaos and
Suralta admitted that they executed the subsequent
contract of sole in 1973 in order to cure the defects of
their previous contract. The second contract of sale
being merely confirmatory, it produces no effect and
cannot be binding.
However, petitioners are not entitled to the land. The
issue of bad faith constitutes the fundamental barrier
to their claim of ownership. The petitioners were in
bad faith in including the entire area of the land in
their deed of sale. They cannot be entitled to the
four-hectare portion of the land for lack of
consideration. To uphold their claim of ownership
over that portion of land would be contrary to the
well-entrenched principle against unjust enrichment
consecrated in our Civil Code to the end that in cases
not foreseen by the lawmaker, no one may unjustly
benefit himself to the prejudice of another.
Suralta cannot be entitled to the land because he was
guilty of transgressing the law. Equity cannot give
validity to a void contract. In cases where the
homestead has been the subject of void conveyances,
the law still regards the original owner as the rightful
owner subject to escheat proceedings by the State.
The pari delicto doctrine may not be invoked since it
is the policy of the State that the forfeiture of a
homestead is a matter between the State and the
grantee or his heirs, and that until the State had
taken steps to annul the grant and asserts title to the
homestead the purchaser is, as against the vendor or
his heirs, no more entitled to keep the land than any
intruder. The land in question belongs to the spouses
Palaos, subject to the right of the State to institute
reversion proceedings.
MANOTOK
APPEALS

REALTY,

INC.

COURT

OF

GR No. L-45038
FACTS:
Felipe Madlangawa, respondent claims that he has
been occupying a parcel of land in the Clara de
Tambunting de Legarda Subdivision since 1949 upon
permission being obtained from Andres Ladores,
then an overseer of the subdivision, with the
understanding that the respondent would eventually
buy the lot.
The owner of the lot, Clara Tambunting, died and
her entire estate, including her paraphernal
properties covering the lot occupied by the
respondent were placed under custodia legis.
Vicente Legarda, husband of Tambunting received
the deposit of respondent amounting to P1,500 for
the lot.
Respondent had a remaining balance of P5,700which
he did not pay or was unable to pay because the
heirs of Tambunting could not settle their
differences.
April 28, 1950 Don Vicente Legarda was appointed
as a special administrator of the estate and the
respondent remained in possession of the lot in
question.
Petitioner Manotok Realty, Inc. became the
successful and vendee of the Tambunting de Legarda
Subdivision pursuant to the deeds of sale executed in
its favor by the Philippine Trust Company, as
administrator of the Testate Estate of Clara
Tambunting de Legarda. The lot in dispute was one
of those covered by the sale. The Deed of Sale
provided for terms and conditions.
Petitioner caused the publication of several notices in
the Manila Times and the Taliba advising the
occupants to vacate their respective premises,
otherwise, court action with damages would follow.
This includes respondent among others who refused
to vacate the lots
Trial Court dismissed the petitioner's action. CA
ruled that the only right remaining to the petitioner
is to enforce the collection of the balance because
accordingly ,it stepped into the shoes of its
predecessor (Don VicenteLegarda).
ISSUE: Whether Don Vicente Legarda could validly
disposeof the paraphernal property?
HELD: There is nothing in the records that wig
show that Don Vicente Legarda was the
administrator of the paraphernal properties of Dona
Clara Tambunting during the lifetime of the latter.
Thus, it cannot be said that the sale which was
entered into by the private respondent and Don
Vicente Legarda had its inception before the death of

Dona Clara Tambunting and was entered into by the

former for and on behalf of the latter, but was only
consummated after her death. Don Vicente Legarda,
therefore, could not have validly disposed of the lot
in dispute as a continuing administrator of the
paraphernal properties of Dona Clara Tambunting.
It is also undisputed that the probate court appointed
Don Vicente Legarda as administrator of the estate
only on August 28, 1950, more than three months
after the questioned sale had taken place.
We are, therefore, led to the inevitable conclusion
that the sale between Don Vicente Legarda and the
private respondent is void ab initio, the former being
neither an owner nor administrator of the subject
property. Such being the case, the sale cannot be the
subject of the ratification by the Philippine Trust
Company or the probate court. As was held in the
case of Arsenal v. Intermediate Appellate Court (143
SCRA 40, 49):
Under the provisions of the Civil Code, a void
contract is inexistent from the beginning. It cannot be
ratified neither can the right to set up the defense of
its illegality be waived. (Art. 1409, Civil Code .
To further distinguish this contract from the other
kinds of contract, a commentator has stated that.
The right to set up the nullity of a void or nonexistent contract is not limited to the parties as in the
case of annuable or voidable contracts, it is extended
to third persons who are directly affected by the
contract. (Tolentino, Civil Code of the Philippines,
Vol. IV, p. 604, [1973]).
Any person may invoke the inexistence of the
contract whenever juridical affects founded thereon
are asserted against him. (Id. P. 595).
Section 1, Rule 89 of the Revised Rules of Court
provides for the procedure on how a property in
custodia legis can be disposed of by sale:
Order of sale of personalty. Upon the application
of the executor or administrator, and on written
notice to the heirs and other persons interested, the
court may order the whole or a part of the personal
estate to be sold, if it appears necessary for the
purpose of paying debts, expenses of administration,
or legacies, or for the preservation of the property.
After the appointment of Don Vicente Legarda as
administrator of the estate of Dona Clara
Tambunting, he should have applied before the
probate court for authority to sell the disputed
property in favor of the private respondent. If the
probate court approved the request, then Don
Vicente Legarda would have been able to execute a
valid deed of sale in favor of the respondent.
Unfortunately, there was no effort on the part of the
administrator to comply with the above-quoted rule

of procedure nor on that of the respondent to protect

his interests or to pay the balance of the installments
to the court appointed administrator.
As was held in Kline v. Shoup (226 Pacific Reporter
729, 731), which we find applicable in the case at bar:
There are, however, certain steps to be taken in the
administration of an estate which the law deems of
sufficient importance to have placed without the
power of the probate court to effect under the
jurisdiction acquired over the general subject matter
by law and over the estate and those interested
therein, by the filing and due service of the petition
for the appointment of an administrator and the
order of appointment and issuance of letters, and at
least one of such steps is the sale of the real property
of an estate for the payment of the debts of the
deceased. C.S. 7603, provides that
No sale of any property of an estate of a decedent is
valid unless made under order of the probate court.
...
From the foregoing, it cannot be denied that the law
recognizes the issuance of an order of sale as an
indispensable requisite in effecting a valid sale of the
property of a decedent's estate. ...
Considering the location of the disputed lot, we find
a monthly rental of Twenty Centavos (P0.20) per
square meter to be more than fair to the private
respondent for his use of the premises. The
petitioner, however, should return the P 1,500.00
received by Mr. Legarda, with legal interest, to the
respondent.
Barsobia vs. Cuenco
FACTS:
The lot in controversy is one half portion (on the
northern side) of two adjoining parcels of coconut
land located at Barrio Mancapagao Sagay Camiguin,
Misamis Oriental (now Camiguin province). The
entire land was owned previously by a certain
Leocadia Balisado, who had sold it to spouses
Patricio Barsobia (now deceased) and Epifania
Sarsosa, who were Filipino citizens. Epifania who
was then a widow sold the land in controversy to a
Chinese, Ong King Po who later took actual
possession and enjoyed the fruits of the property.
Epifania later usurped the controverted property
who later sold one half of the property to Pacita
Vallar. Epifania claimed that it was not her intention
to sell the property as it was only to evidence her
indebtedness to Ong King Po. Cuenco then filed a
case for forcible entry against Epifania before the
MTC which was later dismissed since the question of
possession could not be properly determined

without first settling the issue of ownership. Cuenco

then later filed a case in the CFI for recovery and
possession of ownership of the said land. The CFI
rendered a decision in favor of Epifania and Vallar.
The CA later reversed the decision decreeing instead
the Cuenco was the owner of the litigated property.
ISSUE:
Who is the rightful owner of the property? CUENCO
HELD:
No private lands shall be transferred or conveyed to
aliens.
There should be no question that the sale of the land
in question in 1936 by Epifania to Ong King Po was
inexistent and void from the beginning (Art. 1409 [7],
Civil Code) because it was a contract executed
against the mandatory provision of the 1935
Constitution, which is an expression of public policy
to conserve lands for the Filipinos.
Had this been a suit between Epifania and Ong King
Po, she could have been declared entitled to the
litigated land.
But the factual set-up has changed. The litigated
property is now in the hands of a naturalized
Filipino. It is no longer owned by a disqualified
vendee. Respondent, as a naturalized citizen, was
constitutionally qualified to own the subject
property. There would be no more public policy to
be served in allowing petitioner Epifania to recover
the land as it is already in the hands of a qualified
person.
While, strictly speaking, Ong King Po, private
respondent's vendor, had no rights of ownership to
transmit, it is likewise inescapable that petitioner
Epifania had slept on her rights for 26 years from
1936 to 1962. By her long inaction or inexcusable
neglect, she should be held barred from asserting her
claim to the litigated property.
Respondent, therefore, must be declared to be the
rightful owner of the property.
Godinez v. Fong Pak Luen
G.R. No. L-36731 January 27, 1983
FACTS:
Jose Godinez was married to Martina in 1910. During
their marriage, they acquired a parcel of land with an
area of 3,665 square meters as evidenced by Original
Certificate of Title No. 179 (D -155). Martina died in
1938, leaving their children (herein plaintiffs) as their
sole surviving heirs.

On 27 November 1941, without the knowledge of the

plaintiffs, Jose sold said parcel of land to the
defendant Fong Pak Luen, a Chinese citizen and
Transfer
Certificate
Title
No.
884
was
correspondingly issued to him. On 11 January 1963,
Fong Pak Luen executed a power of attorney in favor
of his co-defendant Kwan Pun Ming, also a Chinese
citizen, who then conveyed and sold said parcel of
land to co-defendant Trinidad S. Navata, a Filipino
citizen. Transfer Certificate of Title No. 1322 was
issued in her favor.
Repeated demands were made on Trinidad for the
surrender of said parcel of land, but to no avail. The
plaintiffs filed this case for its recovery on the
ground that the sale was null and void ab initio since
it violates applicable provisions of the Constitution
and the Civil Code. The RTC dismissed the
complaint. The MR was denied.
ISSUE:
Whether or not the heirs of a person, who sold a
parcel of land to an alien in violation of a
constitutional prohibition, may recover the property
if it had, in the meantime, been conveyed to a
Filipino citizen qualified to own and possess it.
HELD:
No. The ruling that, under the Constitution aliens
may not acquire private or agricultural lands,
including residential lands" is a declaration of an
imperative constitutional policy. Thus, prescription
may never be invoked to defend that which the
Constitution prohibits. However, it does not
necessarily follow that the plaintiffs may be allowed
to recover the property sold to an alien.
In sales of real estate to aliens incapable of holding
title thereto by virtue of the provisions of the
Constitution, both the vendor and the vendee are
deemed to have committed the constitutional
violation and being thus in pari delicto the courts
will not afford protection to either party. The vendor
divests himself of the title to such real estate and is
not permitted to sue for the annulment of his
contract. It is only the State that is entitled to have a
forfeiture or escheat proceedings declared against the
vendee who is incapable of holding title to the real
estate sold and conveyed to him.
Laches has been defined as the failure or neglect, for
an unrea
JESUS PINEDA vs JOSE V. DELA RAMA
G.R. No. L-31831
Facts:

Dela Rama is a practising lawyer whose

services were retained by Pineda for the purpose of
making representations with the chairman and
general manager of the National Rice and Corn
Administration (NARIC) to stop or delay the
institution of criminal charges against Pineda who
allegedly misappropriated 11,000 cavans of palay
deposited at his ricemill in Concepcion, Tarlac. The
NARIC general manager was allegedly an intimate
friend of Dela Rama.

Art. 1409. The following contracts are inexistent and

void from the beginning:
(1) Those whose cause, object or purpose is contrary
to law, morals, good customs, public order and
public policy;
xxx xxx xxx
Art. 1412. If the act in which the unlawful or
forbidden cause consists does not constitute a
criminal offense, the following rules shall be
observed:

According to Dela Rama, petitioner Pineda

has used up all his funds to buy a big hacienda in
Mindoro and, therefore, borrowed the P9,300.00
subject of his complaint for collection. In addition to
filling the suit to collect the loan evidenced by the
matured promissory note, Dela Rama also sued to
collect P5,000.00 attorney's fees for legal services
rendered as Pineda's counsel in the case being
investigated by NARIC. The Court of First Instance
of Manila decided in favor of petitioner Pineda. The
court believed the evidence of Pineda that he signed
the promissory note for P9,300.00 only because Dela
Rama had told him that this amount had already
been advanced to grease the palms of the 'Chairman
and General Manager of NARIC in order to save
Pineda from criminal prosecution also such amount
was never given to such officials nor was there any
contemplated case against the defendant. The
purpose for which such amount was intended was
indeed illegal. The Court of Appeals reversed the
decision of the trial court on a finding that Pineda,
being a person of more than average intelligence,
astute in business, and wise in the ways of men
would not "sign any document or paper with his
name unless he was fully aware of the contents and
important thereof, knowing as he must have known
that the language and practices of business and of
trade and commerce call to account every careless or
thoughtless word or deed. Hence the petition.

(1) When the fault is on the part of both contracting

parties, neither may recover what he has given by
virtue of the contract, or demand the performance of
the other's undertaking. The consideration for the
promissory note - to influence public officers in the
performance of their duties - is contrary to law and
public policy. The promissory note is void ab initio
and no cause of action for the collection cases can
arise from it.

Issue:

Whether or not the consideration for the

promissory note is valid.
Held:

NO. The SC agree with the trial court which

believed Pineda. It is indeed unusual for a lawyer to
lend money to his client whom he had known for
only three months, with no security for the loan and
on interest. Dela Rama testified that he did not even
know what Pineda was going to do with the money
he borrowed from him.
Also, The SC agree with the trial court that
the promissory note was executed for
an illegal consideration. Articles 1409 and 1412 of the
Civil Code in part, provide:

Conchita Liguez vs. CA

December 18, 1957
Facts: The case began upon complaint filed by
Conchita Liguez, plaintiff, against the widow and
heirs of the late Salvador P. Lopez to recover a parcel
of land. Plaintiff averred to be its legal owner,
pursuant to a deed of donation of said land, executed
in her favor by the late owner, Salvador P.
Lopez. The donated land originally belonged to the
conjugal partnership of Lopez and his wife, Maria
Ngo. The defense interposed was that the donation
was null and void for having an illicit causa or
consideration, which was plaintiff's entering into
marital relations with Salvador P. Lopez, a married
man. In the Court of First the property was
adjudicated to the appellees as heirs of Lopez.
At the time of the donation, plaintiff was a minor,
only 16 years of age. The donation was made in view
of the desire of Salvador P. Lopez, a man of mature
years, to have sexual relations her. Lopez had
confessed to his love for but the parents of the
plaintiff would not allow him to live with her unless
he first donated the land in question. Lopez
conveyed the land to the plantiffs parents.
Upon these facts, the Court of Appeals held that the
deed of donation was inoperative, and null and void
(1) because the husband, Lopez, had no right to
donate conjugal property to the plaintiff appellant;
and (2) because the donation was tainted with illegal
causa
or
consideration, of which donor and donee were
participants.
Issues: Whether or not (1) the donation is valid
notwithstanding its illegal causa and (2) does the
plaintiff have a right to recover the land adjudicated?

Held: The Court of Appeals erred in applying to the

present case the pari delicto rule. First, because it
cannot be said that both parties here had equal guilt
when we consider that as against the deceased
Salvador P. Lopez, who was a man advanced in
years and mature experience, the appellant was a
mere minor, 16 years of age, when the donation was
made; that there is no finding made by the Court of
Appeals that she was fully aware of the terms of the
bargain entered into by and Lopez and her parents;
that, her acceptance in the deed of donation (which
was authorized by Article 626 of the Old Civil Code)
did not necessarily imply knowledge of conditions
and terms not set forth therein.
The appellant seeks recovery of the disputed land on
the strength of a donation regular on its face. To
defeat its effect, the appellees must plead and prove
that the same is illegal. But such plea on the part of
the Lopez heirs is not receivable, since Lopez,
himself, if living, would be barred from setting up
that plea; and his heirs, as his privies and successors
in interest, can have no better rights than Lopez
himself.
Appellees, as successors of the late donor, being thus
precluded from pleading the defense of immorality
or illegal causa of the donation, the total or partial
ineffectiveness of the same must be decided by
different legal principles. In this regard, the Court of
Appeals correctly held that Lopez could not donate
the entirety of the property in litigation, to the
prejudice of his wife Maria Ngo, because said
property was conjugal in character and the right of
the husband to donate community property is
strictly limited by law.
ART. 1409. The conjugal partnership shall
also be chargeable with anything which may
have been given or promised by the husband
alone to the children born of the marriage in
order to obtain employment for them or give
then, a profession or by both spouses by
common consent, should they not have
stipulated that such expenditures should be
borne in whole or in part by the separate
property of one of them.".
ART. 1415. The husband may dispose of the
property of the conjugal partnership for the
purposes mentioned in Article 1409.)
ART. 1413. In addition to his powers as
manager the husband may for a valuable
consideration alienate and encumber the
property of the conjugal partnership without
the consent of the wife.

The text of the articles makes it plain that the

donation made by the husband in contravention of
law is not void in its entirety, but only in so far as it
prejudices the interest of the wife.
The decisions appealed from are reversed and set
aside, and the appellant Conchita Liguez declared
entitled to so much of the donated property as may
be found, upon proper liquidation, not to prejudice
the share of the widow Maria Ngo in the conjugal
partnership with Salvador P. Lopez or the legitimes
of the forced heirs of the latter.
PHILIPPINE
BANKING
CORPORATION,
representing the estate of JUSTINA SANTOS Y
CANON FAUSTINO, deceased vs.LUI SHE in her
own behalf and as administratrix of the intestate
estate
of
Wong
Heng,
deceased
G.R. No. L-17587
FACTS:
Justina Santos y Canon Faustino and her sister
Lorenza were the owners in common of a piece of
land
in
Manila.
The sisters lived in one of the houses, while Wong
Heng, a Chinese, lived with his family in the
restaurant. Wong had been a long-time lessee of a
portion of the property, having a monthly rental of
P2,620.
On September 22, 1957 Justina Santos became the
owner of the entire property as her sister died with
no other heir. Then already well advanced in years,
being at the time 90 years old, blind, crippled and an
invalid, she was left with no other relative to live
with, but she was taken cared of by Wong.
"In grateful acknowledgment of the personal services
of the Lessee to her," Justina Santos executed on
November 15, 1957, a contract of lease in favor of
Wong, covering the portion then already leased to
him and another portion fronting Florentino Torres
street. The lease was for 50 years, although the lessee
was given the right to withdraw at any time from the
agreement; the monthly rental was P3,120. Ten days
later (November 25), the contract was amended so as
to make it cover the entire property, including the
portion on which the house of Justina Santos stood,
at an additional monthly rental of P360.
On December 21 she executed contract giving Wong
the option to buy the leased premises for P120,000,
payable within ten years at a monthly installment of
P1,000. The option was conditioned on his obtaining
Philippine citizenship, a petition for which was then
pending in the Court of First Instance of Rizal.
On November 18, 1958 she executed two other

contracts, one extending the term of the lease to 99

years, and another fixing the term of the option at 50
years. Both contracts are written in Tagalog. In two
wills executed on August 24 and 29, 1959, she bade
her legatees to respect the contracts she had entered
into with Wong, but in a codicil of a later date
(November 4, 1959) she appears to have a change of
heart. Claiming that the various contracts were made
by her because of machinations and inducements
practised by him, she now directed her executor to
secure
the
annulment
of
the
contracts.

with conditions
fulfillment

Both parties however died, Wong Heng on October

21, 1962 and Justina Santos on December 28, 1964.
Wong was substituted by his wife, Lui She, the other
defendant in this case, While Justina Santos was
substituted by the Philippine Banking Corporation.
Justina Santos maintained now reiterated by the
Philippine Banking Corporation that the lease
contract should have been annulled along with the
four other contracts because it lacks mutuality,
among
others

2. No. The contract of lease, as in this case, cannot be

sustained. However, to be sure, a lease to an alien for
a reasonable period was valid, so was an option
giving an alien the right to buy real property on
condition that he is granted Philippine citizenship.

Paragraph 5 of the lease contract states that "The

lessee may at any time withdraw from this
agreement." It is claimed that this stipulation offends
article 1308 of the Civil Code which provides that
"the contract must bind both contracting parties; its
validity or compliance cannot be left to the will of
one
of
them."
ISSUES:
1. WON the insertion in the contract of a resolutory
condition, permitting the cancellation of the contract
by
one
of
the
parties,
was
valid?
2. WON the contract between Wong (Lui She) and
Justina Santos (Phil. Banking) enforceable?
RULING:
1. Yes. In the early case of Taylor vs. Uy Tiong Piao,
the
Supreme
Court
said:
Article 1256 [now art. 1308] of the Civil Code in our
opinion creates no impediment to the insertion in a
contract for personal service of a resolutory condition
permitting the cancellation of the contract by one of
the parties. Such a stipulation, as can be readily seen,
does not make either the validity or the fulfillment of
the contract dependent upon the will of the party to
whom is conceded the privilege of cancellation; for
where the contracting parties have agreed that such
option shall exist, the exercise of the option is as
much in the fulfillment of the contract as any other
act which may have been the subject of agreement.
Indeed, the cancellation of a contract in accordance

agreed

upon

beforehand

is

Further, in the case at bar, the right of the lessee to

continue the lease or to terminate it was so
circumscribed by the term of the contract that it
cannot be said that the continuance of the lease
depends upon his will. At any rate, even if no term
had been fixed in the agreement, this case would at
most justify the fixing of a period but not the
annulment
of
the
contract.

But if an alien was given not only a lease of, but also
an option to buy, a piece of land, by virtue of which
the Filipino owner cannot sell or otherwise dispose
of his property, this to last for 50 years, then it
became clear that the arrangement was a virtual
transfer of ownership whereby the owner divested
himself in stages not only of the right to enjoy the
land (jus possidendi, jus utendi, jus fruendi and jus
abutendi) but also of the right to dispose of it (jus
disponendi) rights the sum total of which make
up ownership. It was just as if today the possession is
transferred, tomorrow, the use, the next day, the
disposition, and so on, until ultimately all the rights
of which ownership is made up are consolidated in
an alien. And yet this was just exactly what the
parties in this case did within this pace of one year,
with the result that Justina Santos' ownership of her
property was reduced to a hollow concept. If this can
be done, then the Constitutional ban against alien
landholding in the Philippines, is indeed in grave
peril.
The contracts in question are annulled and set aside;
the land subject-matter of the contracts was ordered
returned to the estate of Justina Santos as
represented by the Philippine Banking Corporation.
AVILA vs CA
Facts:
In 1939, the Court of First Instance of Misamis
Oriental, as a cadastral court, adjudicated Lots 594
and 828 of the Cadastral Survey of Cagayan to Paz
Chavez. But because Paz Chavez failed to pay the
property taxes of Lot 594, the government offered the
same for sale at a public auction. Marciana G. Avila,
a teacher, wife of Leonardo Avila and the mother of
the herein petitioners, participated in and won the
bidding. Despite the provision of Section 579 of the
Revised Administrative Code prohibiting public
school teachers from buying delinquent properties,

nobody, not even the government questioned her

participation in said auction sale. In fact on February
20, 1940, after the expiration of the redemption
period, the Provincial Treasurer executed in her
favor the final bill of sale.

Issue:
WON the sale of the lot to Avila is valid?
Ruling:
While it is true that Marciana Avila, their mother and
predecessor-in-interest, purchased the questioned
property at a public auction conducted by the
government; paid the purchase price; and was issued
a final bill of sale after the expiration of the
redemption period, it is however undisputed that
such purchase was prohibited under Section 579 of
the Revised Administrative Code, as amended,
which provides:
Section 579. Inhibition against purchase of property
at tax sale.-Official and employees of the
Government of the Republic of the Philippines are
prohibited from purchasing, directly or indirectly,
from the Government, any property sold by the
Government for the non-payment of any public tax.
Any such purchase by a public official or employee
shall be void.

Primitivo P. Cammayo upon the usurious agreement

that defendant pays to the plaintiff and that the
plaintiff reserve and secure, as in fact plaintiff
reserved and secured himself, out of the alleged loan
of P1,500.00 as interest the sum of P300.00 for one
year. That although the mortgage contract was
executed for securing the payment of P1,500.00 for a
period of one year, without interest, the truth and the
real fact is that plaintiff delivered to the defendant
Primitivo P. Cammayo only the sum of P1,200.00 and
withheld the sum of P300.00 which was intended as
advance interest for one year. That on account of said
loan of P1,200.00, defendant Primitivo P. Cammayo
paid to the plaintiff during the period from October
1955 to July 1956 the total sum of P330.00 which
plaintiff, illegally and unlawfully refuse to
acknowledge as part payment of the account but as
in interest of the said loan for an extension of another
term of one year.
That said contract of loan entered into between
plaintiff and defendant Primitivo P. Cammayo is a
usurious contract and is contrary to law, morals,
good customs, public order or public policy and is,
therefore, in existent and void from the beginning
(Art. 1407 Civil Code) Hence, Aurelio cannot recover
the principal obligation.
Issue:
Whether the creditor is entitled to collect from the
debtor the amount representing the principal
obligation.

Thus, the sale to her of Lot 594 is void.

Held:

On the other hand, under Article 1409 of the Civil

Code, a void contract is inexistent from the
beginning. It cannot be ratified neither can the right
to set up the defense of its illegality be waived.
(Arsenal, et al. vs, The Intermediate Appellate Court.
et al., G.R. No. 66696, July 14, 1986). Moreover,
Marciana Avila was a party to an illegal transaction,
and therefore, under Art. 1412 of the Civil Code, she
cannot recover what she has given by reason of the
contract or ask for the fulfillment of what has been
promised her.

YES. We do not agree with such reasoning, Article

1411 of the New Civil Code is not new; it is the same
as Article 1305 of the Old Civil Code. Therefore, said
provision is no warrant for departing from previous
interpretation that, as provided in the Usury Law
(Act No. 2655, as amended), a loan with usurious
interest is not totally void only as to the interest.

Furthermore, in a registration case, the judgment

confirming the title of the applicant and ordering its
registration in his name necessarily carries with it the
delivery of possession, which is an inherent element
of the right of ownership.
Aurelio Briones vs. Primitivo Cammayo, et al., Oct.
4, 1971, J. Dizon
Facts:
Defendants executed the real estate mortgage, as
security for the loan of P1,200.00 given to defendant

True, as stated in Article 1411 of the New Civil Code,

the rule of pari delicto applies where a contract's
nullity proceeds from illegality of the cause or object
of said contract.
However, appellants fail to consider that a contract
of loan with usurious interest consists of principal
and accessory stipulations; the principal one is to pay
the debt; the accessory stipulation is to pay interest
thereon.
And said two stipulations are divisible in the sense
that the former can still stand without the latter.
Article 1273, Civil Code, attests to this: "The
renunciation of the principal debt shall extinguish
the accessory obligations; but the waiver of the latter
shall leave the former in force."

The question therefore to resolve is whether the

illegal terms as to payment of interest likewise
renders a nullity the legal terms as to payments of
the principal debt. Article 1420 of the New Civil
Code provides in this regard: "In case of a divisible
contract, if the illegal terms can be separated from
the legal ones, the latter may be enforced."
In simple loan with stipulation of usurious interest,
the prestation of the debtor to pay the principal debt,
which is the cause of the contract (Article 1350, Civil
Code), is not illegal. The illegality lies only as to the
prestation to pay the stipulated interest; hence, being
separable, the latter only should be deemed void,
since it is the only one that is illegal.