SUN BROTHERS APPLIANCES v. DAMASO P PERIOD PEREZ, GR No.

L-17527, 1963-04-30

Facts:

action brought by the plaintiff to recover from defendant the sum of P1,404.00, the price of one Admiral Air
Conditioner... under a conditional sale... agreement entered into by and between them on December 6, 1958

Defendant answered that the air-conditioner in question was... delivered to him and installed in the office of the
defendant... on December 14, 1959... but that said air-conditioner was totally destroyed by fire

Defendant further claimed... that the machine was destroyed by force majeure, not by the defendant's fault
and/or negligence and, therefore, he is not liable under the conditional sale... defendant, after making down
payment of P274.00 to the plaintiff, did not pay any of the monthly installments of P78.00 thereafter, leaving a
balance of P1,404.00 in favor of the plaintiff

The conditional sale executed by the plaintiff and defendant contained the following stipulation:

"2. Title to said property shall vest in the Buyer only upon full payment of the entire account, as herein
provided, and only upon complete performance of all the other conditions herein specified;

"3. The Buyer shall kteep said property in good condition and properly protected against the elements, at his/its
address above-stated, and undertakes that if said property or any part thereof be lost, damaged, or destroyed
for any cause, he shall suffer such loss, or repair... such damage, it being distinctly understood and agreed that
said property remains at Buyer's risk after delivery;"... defendant... rgues that... the property sold shall vest in
the buyer only upon full payment of the price, the loss of the air conditioner should be for the exclusive account
of the vendor

Issues:

whether loss by fire... extinguishes the obligation of the defendant to pay to the plaintiff the subsequent
installments of the initial payment;"

Ruling:

The Court of First Instanc... rendered judgment condemning the defendant to pay the plaintiff the amount
demanded in the complaint... defendant has appealed

We believe that the agreement making the buyer responsible for any loss whatever, fortuitous or otherwise,
whatsoever even if the title to the property remains in the vendor, is neither contrary to law, nor to morals or
public policy. We have held such stipulation to be legal... in the case of government vs. Amechazurra

"The weight, of authority supports the rule that where, goods are sold and delivered to the vendee under an
agreement that the title is to reraairt in the vendor until payment, the loss or destruction of the property while in
the possession of the vendee before payment,... without his fault, does not relieve him from the obligation to
pay the price, and he, therefore, suffers the loss.

There are several bases for this rule. First is the... absolute and unconditional nature of the vendee's promise
to pay for the goods. The promise, is nowise dependent upon the transfer of the absolute title. Second is the
fact that the vendor has fully performed his contract and has nothing further to do except receive payment,
and... the vendee received what he bargained for when he obtained the right of possession and use of the
goods and the right to acquire title upon-making full payment of the price. A third basis advanced for the rule is
the policy of providing, an incentive to care properly for the... goods, they being exclusively under the control
and dominion at the vendee."
We, therefore, agree with the trial court that the loss by fire or fortuitous event was expressly agreed in the
contract to be borne by the buyer and this express agreement is not contrary to law but sanctioned by it as well
as by the demands of sound public policy. The... judgment of the court below is affirmed

CANUTO MARTIN vs. MARIA REYES and PEDRO REVILLA

FACTS:

The respondents Pedro Revilla and Maria Reyes obtained from the La Previsora Filipina sometime before
November 18, 1939 a loan of P6,500; and with the money, they the price of a lot, with improvements, which they
paid had previously purchased from the Archibishop of Manila. And they mortgaged the property to La Previsora
for the purpose of guaranteeing repayment of the debt in installments with interest at 12 per cent per annum.

It turned out later that Monte de Piedad y Caja de Ahorros had obtained a judgment against Pedro Revilla
for the sum of P45,000 and had levied execution therefor upon the property and its rentals. Apprised of this
development, the La Previsora started foreclosure proceedings, alleging non-payment of its credit by the
mortgagors. The conflicting interests were later the object of amicable settlement among the parties, as a result
of which the herein respondents notarized the deed Exhibit E whereby in satisfaction of their obligations to La
Previsora (then amounting to P8,204.60) they ceded the property to the said institutions, reserving the right to
repurchase for P8,204.60 within sixty days. The deed was acknowledged on November 3, 1941.

It seems that La Previsora at the same time, or immediately thereafter conveyed the property to petitioner
Canuto Martin, who then executed the document undertaking to allow respondents to repurchase the property
within sixty days from October 31, 1941, but at the price of P14,000. This document was signed by Maria Reyes
signifying her assent. At the trial she pleaded that the document, without embodying their true agreement, had
been obtained thru deceit and abuse of confidence. However, her assertions were not credited by the Court of
Appeals. Nevertheless, that court declared the document void for the only reasons that it had been signed by
Canuto Martin before acquiring ownership of the property by the cession of Maria Reyes and Pedro Revilla to
the La Previsora, and from the latter to them. The Court noted that whereas Exhibit E was acknowledged before
the notary on November 3, 1941, bore the date October 30, 1941, a few days before.

ISSUE:
WHETHER OR NOT VENDOR HAD AUTHORITY TO SELL EVEN IF HE IS NOT THE OWNER AT THE
TIME OF THE EXECUTION OF THE CONTRACT.

DECISION:

Property or goods which, at the time of the sale, are not owned by the seller, but which are thereafter to
be acquired by him, cannot be the subject of an executed sale, but may be the subject of a contract for the future
sale and delivery thereof, and it has been held that even though the contract is in the form of the present sale it
will not pass the title, after the goods have been acquired, until the seller has done some act appropriating them
to the contract. Such a contract of the future sale and delivery of goods, which the seller has not in possession
but which he intends to acquire by producing, manufacturing, or purchasing before the day of delivery, is valid
as an executory contract to be fulfilled by acquiring and delivering the goods specified in the contract, even
though the acquisition of the goods by the seller depends upon a contingency which may or may not happen.

It is not unusual for persons to agree to convey by a certain time, notwithstanding they have no title to
the land at the time of the contract, and the validity of such agreement is upheld. In such cases, the vendor
assume the risk of acquiring the title and making the conveyance, or responding in damages for the vendee's
loss of his bargain, One having an option to purchase real estate has a legal right to enter into an executory
contract to sell the property. A fortiori, it is not necessary that the vendor be the absolute owner of the property
at the time he enters into agreement of sale because the owner of the land, is as much the subject of sale as is
the land itself, and whenever one is so suited with reference to a tract of land that he can acquire the title thereto,
either by the voluntary act of the parties holding the title, or by proceeding at law or in equity, he is in a position
to make a valid agreement for the sale thereof, without disclosing the nature of his title.
 DELPHER TRADES CORPORATION, and DELPHIN PACHECO vs.

INTERMEDIATE APPELLATE COURT and HYDRO PIPES PHILIPPINES, INC.,

G.R. No. L-69259, January 26, 1988

FACTS:

In 1974, Delfin Pacheco and his sister, Pelagia Pacheco, were the owners of 27,169 square meters of
real estate Identified as Lot. No. 1095, Malinta Estate, in the Municipality of Polo (now Valenzuela), Province of
Bulacan (now Metro Manila) which is covered by Transfer Certificate of Title No. T-4240 of the Bulacan land
registry.

On April 3, 1974, the said co-owners leased to Construction Components International Inc. the same
property and providing that during the existence or after the term of this lease the lessor should he decide to sell
the property leased shall first offer the same to the lessee and the letter has the priority to buy under similar
conditions.

4 months later, lessee Construction Components International, Inc. assigned its rights and obligations
under the contract of lease in favor of Hydro Pipes Philippines, Inc. with the signed conformity and consent of
lessors Delfin Pacheco and Pelagia Pacheco.

The contract of lease, as well as the assignment of lease were annotated at the back of the title, as per
stipulation of the parties.

On January 3, 1976, a deed of exchange was executed between lessors Delfin and Pelagia Pacheco
and defendant Delpher Trades Corporation whereby the former conveyed to the latter the leased property
together with another parcel of land for 2,500 shares of stock of defendant corporation with a total value of
P1,500,000.00

On the ground that it was not given the first option to buy the leased property pursuant to the proviso in
the lease agreement, respondent Hydro Pipes Philippines, Inc., filed an amended complaint for reconveyance
of Lot. No. 1095 in its favor under conditions similar to those whereby Delpher Trades Corporation acquired the
property from Pelagia Pacheco and Delphin Pacheco.

The CFI of Bulacan ruled in favor of the plaintiff.

The IAC affirmed the decision of the CFI.

ISSUE:

Whether or not the "Deed of Exchange" of the properties executed by the Pachecos on the one hand and
the Delpher Trades Corporation on the other was meant to be a contract of sale which, in effect, prejudiced the
private respondent's right of first refusal over the leased property included in the "deed of exchange."

ARGUMENTS:

Eduardo Neria, a CPA and son-in-law of the late Pelagia Pacheco testified that Delpher Trades
Corporation is a family corporation and that the corporation was organized by the children of the two spouses
(spouses Pelagia Pacheco and Benjamin Hernandez and spouses Delfin Pacheco and Pilar Angeles in order to
perpetuate their control over the property through the corporation and as a means to avoid taxes.

Under this factual backdrop, the petitioners contend that there was actually no transfer of ownership of
the subject parcel of land since the Pachecos remained in control of the property. Thus, the petitioners allege:
"Considering that the beneficial ownership and control of Petitioner Corporation remained in the hands of the
original co-owners, there was no transfer of actual ownership interests over the land when the same was
transferred to Petitioner Corporation in exchange for the latter's shares of stock. The transfer of ownership, if
anything, was merely in form but not in substance. In reality, Petitioner Corporation is a mere alter ego or conduit
of the Pacheco co-owners

On the other hand, the private respondent argues that Delpher Trades Corporation is a corporate entity
separate and distinct from the Pachecosn and that there was actual transfer of ownership interests over the
leased property when the same was transferred to Delpher Trades Corporation in exchange for the latter's shares
of stock.

RULING:

No, it was not meant to be a contract of sale.

After incorporation, one becomes a stockholder of a corporation by subscription or by purchasing stock

directly from the corporation or from individual owners thereof (Salmon, Dexter & Co. v. Unson, 47 Phil, 649,
citing Bole v. Fulton [1912], 233 Pa., 609). In the case at bar, in exchange for their properties, the Pachecos
acquired 2,500 original unissued no par value shares of stocks of the Delpher Trades Corporation. Consequently,
the Pachecos became stockholders of the corporation by subscription "The essence of the stock subscription is
an agreement to take and pay for original unissued shares of a corporation, formed or to be formed.

It is to be stressed that by their ownership of the 2,500 no par shares of stock, the Pachecos have control
of the corporation. Their equity capital is 55% as against 45% of the other stockholders, who also belong to the
same family group.

In effect, the Delpher Trades Corporation is a business conduit of the Pachecos. What they really did
was to invest their properties and change the nature of their ownership from unincorporated to incorporated form
by organizing Delpher Trades Corporation to take control of their properties and at the same time save on
inheritance taxes.

The records do not point to anything wrong or objectionable about this "estate planning" scheme resorted
to by the Pachecos. "The legal right of a taxpayer to decrease the amount of what otherwise could be his taxes
or altogether avoid them, by means which the law permits, cannot be doubted.

The "Deed of Exchange" of property between the Pachecos and Delpher Trades Corporation cannot be
considered a contract of sale. There was no transfer of actual ownership interests by the Pachecos to a third
party. The Pacheco family merely changed their ownership from one form to another. The ownership remained
in the same hands. Hence, the private respondent has no basis for its claim of a light of first refusal under the
lease contract.

DISPOSITIVE PORTION

WHEREFORE, the instant petition is hereby GRANTED, The questioned decision and resolution of the
then Intermediate Appellate Court are REVERSED and SET ASIDE. The amended complaint in Civil Case No.
885-V-79 of the then Court of First Instance of Bulacan is DISMISSED. No costs.

Atty. Gomez vs Court of Appeals

FACTS:

 Atty. Gomez et al applied for registration of several lots before RTC

  Said lots were involved in Government vs Abran case where SC declared Consolacion Gomez as the
owner. Teodoro and Luis (Consolacion’s father and son) inherited the lots. When Teodoro died, Luis
executed a Quitclaim in favor of the Gomezes.
 In 1981, RTC adjudicated the lots in favor of the Gomezes. Subsequently, RTC issued an order
directing the Chief of the General Land Registration Office to issue the corresponding decrees of
registration over the lots.
 In 1984, Perez, Chief of the Division of Original Registration, Land Registration Commission (now
known as the National Land Titles and Deeds Registration Administration), submitted a report to the
RTC stating that the Lots were already covered by homestead patents issued in 1928 and 1929 and
registered under the Land Registration Act. Perez then recommended that the 1981 order be set aside.
 The Gomezes opposed the report, pointing out that no opposition was raised by the Bureau of Lands
during the registration proceedings and the 1981 decision should be implemented because it had long
become final and executor.
 RTC then set aside its earlier decision.
 CA affirmed the new decision of RTC holding that 1) prior to the issuance of the decree of registration,
RTC Judge has still the power and control over the decision he rendered; 2) The finality of an
adjudication of land in a registration or cadastral case takes place only after the expiration of the one-
year period after entry of the final decree of registration
 Gomez et al argued that 1) under Sec 30 and 32 of PD 1529, the 5 Aug 1981 decision having become
final, it may no longer be reopened, reviewed, much less, set aside; 2) Perez has no alternative but to
issue the decrees of registration because his duty is purely ministerial; 3) "the law of the case" is the
decision in Gov’t v. Abran, which held that the lands adjudicated to Consolacion Gomez were not public
lands thus, they could not have been acquired by holders of homestead titles as against them; 4) by
sustaining the 5 Aug 1981 decision, the homestead title holders may still vindicate their rights by filing a
separate civil action for cancellation of titles and for reconveyance in a court of ordinary civil jurisdiction

ISSUE: Would finality of the decision adjudicating the land to the Gomezes bar the RTC from setting it aside?

HELD:

 NO. Adjudication of land in a cadastral or land registration proceeding does not become final, in the
sense of incontrovertibility, until after the expiration of 1 year after the entry of the final decree of
registration. As long as a final decree has not been entered by the Land Registration Commission and
the period of 1 year has not elapsed from date of entry of the decree, the title is not finally adjudicated
and the decision in the registration proceeding continues to be under the control and sound discretion
of the court rendering it.
 Duty of the land registration officials to issue the decree is NOT purely ministerial. If land registration
officials are in doubt upon any point in relation to the preparation and issuance of the decree, it is their
duty to refer the matter to the court. They act, in this respect, as officials of the court.
 The lots were not private lands of Consolacion Gomez when homestead patents were issued over them
in 1928-1929. Gov’t vs. Abran, is not "the law of the case." It was promulgated only on 31 Dec 1931.
 The Gomezes can be the ones to vindicate their rights instead. If they are the true owner, they may
bring an action to have the ownership or title to land judicially settled.

TEOCO vs METROPOLITAN BANK AND TRUST COMPANY Case Digest

G.R. No. 162333, December 23, 2008

BIENVENIDO C. TEOCO and JUAN C. TEOCO, JR., Petitioners, vs. METROPOLITAN BANK AND TRUST
COMPANY, Respondent.

Facts: Lydia T. Co, married to Ramon Co, was the registered owner of two parcels of land. Ramon Co mortgaged
the said parcels of land to Metrobank for a sum of P200,000.00.

The properties were sold to Metrobank in an extrajudicial foreclosure sale under Act No. 3135. One year after
the registration of the Certificates of Sale, the titles to the properties were consolidated in the name of Metrobank
for failure of Ramon Co to redeem the same within the one year period provided for by law.
Metrobank filed a petition for the issuance of a writ of possession against Ramon Co and Lydia Co (the spouses
Co).

The brothers Teoco filed an answer-in-intervention alleging that they are the successors-in-interest of the
spouses Co, and that they had duly and validly redeemed the subject properties within the reglementary period
provided by law. Teoco had deposited the amount of P356,297.57 to the clerk of court of the RTC. Metrobank
refused to accept the amount deposited by the brothers Teoco, alleging that they are obligated to pay the
spouses Co’s subsequent obligations to Metrobank as well.

Issues:

1. WON petitioners need to pay not only the P200,000 principal obligation but also that previously
extended.
2. WON additional loan granted by Metrobank to Sps. Co were secured by the real estate mortgage.

Held:

No. But without prejudice to the right of Metrobank to foreclose anew the mortgage. Neither petitioners, the
brothers Teoco, nor respondent, Metrobank, were able to present sufficient evidence to prove whether the
additional loans granted to the spouses Co by Metrobank were covered by the mortgage agreement between
them. While we agree with Metrobank that mortgages intended to secure future advancements are valid and
legal contracts,[13]entering into such mortgage contracts does not necessarily put within its coverage all loan
agreements that may be subsequently entered into by the parties.

In order to prevent any injustice to, or unjust enrichment of, any of the parties, this Court holds that the fairest
resolution is to allow the brothers Teoco to redeem the foreclosed properties based on the amount for which it
was foreclosed (P255,441.14 plus interest). This is subject, however, to the right of Metrobank to foreclose the
same property anew in order to satisfy the succeeding loans entered into by the spouses Co, if they were, indeed,
covered by the mortgage contract.

In the case at bar, Metrobank would not be prejudiced by the assignment by the spouses Co of their right of
redemption in favor of the brothers Teoco. As conceded by Metrobank, the assignees, the brothers Teoco, would
merely step into the shoes of the assignors, the spouses Co.

WHEREFORE, the decision of the Court of Appeals is SET ASIDE. The decision of the Regional Trial Court in
Catbalogan, Samar is REINSTATED with the following MODIFICATION: the redemption by Bienvenido C. Teoco
and Juan C. Teoco, Jr. of the properties covered by TCT Nos. T-6910 and T-6220 shall be without prejudice to
the subsequent foreclosure of same properties by Metropolitan Bank and Trust Company to satisfy other loans
covered by the Real Estate Mortgage.

MARIANO V. CA | GOSIENGFIAO, 222 SCRA 736- Redemption by a Co-owner

FACTS:

Francisco Gosiengfaio is the registered owner of a parcel of land in Tuguegarao. In his lifetime, he mortgaged
the land to Rural Bank of Tuguegarao to secure payment of a loan. Francisco died in without paying the debt.
His intestate heirs were: his wife Antonia and children Amparo, Carlos, Severo, Grace, Emma, Ester,
Francisco, Jr., Norma, Lina, and Jacinto.
The bank foreclosed on the mortgage but before the redemption period expired, Antonia, Emma, Lina, Norma,
Lina, Carlos and Severo executed a deed of assignment of the right of redemption in favor of Amparo. Amparo
later on sold the land to Spouses Mariano.
Grace Gosengfiao, and the other heirs excuded in the deed of assignment filed a complaint for recovery and
legal redemption with damages against spouses Mariano.
RTC decided in favor of spouses Mariano. CA for Grace Gosiengfia, et. al.

ISSUE:

Whether or not a co-owner who redeems the whole property with her own personal funds becomes the sole
owner of said property and terminates the existing state of co-ownership?

HELD:

No. Admittedly, as the property in question was mortgaged by the decedent, a co-ownership existed among
the heirs during the period given by law to redeem the foreclosed property. Redemption of the whole property
by a co-owner does not vest in him sole ownership over said property but will inure to the benefit of all co-
owners. In other words, it will not end to the existing state of co-ownership. Redemption is not a mode of
terminating a co-ownership.

Respondents have not lost their right to redeem, for in the absence of a written notification of the sale by the
vendors, the 30-day period has not even begun to run.

ADORACION ROSALES RUFLOE v. LEONARDA BURGOS, GR No. 143573, 2009-01-30

Facts:

Petitioner Adoracion Rufloe is the wife of Angel Rufloe, now deceased, while co-petitioners Alfredo and
Rodrigo are their children

During the marriage of Adoracion and Angel, they acquired a 371-square meter parcel of land... covered... by
Transfer Certificate of Title (TCT) No. 406851 which is the subject of the present controversy.

Sometime in 1978, respondent Elvira Delos Reyes forged the signatures of Adoracion and Angel in a Deed of
Sale dated September 8, 1978 to make it appear that the disputed property was sold to her by the spouses
Rufloe.

the basis of the said deed of sale, Delos Reyes succeeded... in obtaining a title in her name, TCT No. S-74933.

alleging that the Deed of Sale was falsified as the signatures appearing thereon were forged because Angel
Rufloe died in 1974, which was four (4) years before the... alleged sale in favor of Delos Reyes.

December 4, 1984, during the pendency of Civil Case No. M-7690, Delos Reyes sold the subject property to
respondent siblings Anita, Angelina, Angelito and Amy (Burgos siblings). A new title, TCT No. 135860, was
then issued in their names.

On December 12, 1985, the Burgos siblings, in turn, sold the same property to their aunt, Leonarda Burgos.
However, the sale in favor of Leonarda was not registered. Thus, no title was issued in her name.

February 6, 1989,... Deed of Sale in favor of Delos Reyes was falsified as the signatures of the spouses Rufloe
had been forged.

The trial court ruled... that Delos Reyes did not acquire ownership over the subject property. Said decision had
become final and execut... the trial court rendered a decision declaring that Leonarda and the Burgos siblings
were not innocent purchasers for value and did not have a better right to the property in question than the true
and legal owners, the Rufloes. The trial court also held... that the subsequent conveyance of the disputed
property to Leonarda by the Burgos siblings was simulated to make it appear that Leonarda was a buyer in
good faith
Issues:

(1) whether the sale of the subject property by Delos Reyes to the Burgos siblings and the subsequent sale by
the siblings to Leonarda were valid and binding;... and (2) whether respondents were innocent purchasers in
good faith and for... value despite the forged deed of sale of their transferor Delos Reyes.

Ruling:

It is undisputed that the forged deed of sale was null and void and conveyed no title. It is a well-settled principle
that no one can give what one does not have, nemo dat quod non habet. One can sell only what one owns or
is authorized... to sell, and the buyer can acquire no more right than what the seller can transfer legally

Due to the forged deed of sale, Delos Reyes acquired no right over the subject property which she could
convey to the Burgos siblings. All the transactions... subsequent to the falsified sale between the spouses
Rufloe and Delos Reyes are likewise void, including the sale made by the Burgos siblings to their aunt,
Leonarda.

a person dealing with registered land has a right to rely on the Torrens certificate of title and to dispense with
the need of inquiring further except when the party has actual knowledge of facts and circumstances that
would impel a reasonably cautious man to... make such inquiry or when the purchaser has knowledge of a
defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into
the status of the title of the property in litigation. The presence of anything which excites or... arouses suspicion
should then prompt the vendee to look beyond the certificate and investigate the title of the vendor appearing
on the face of said certificate. One who falls within the exception can neither be denominated an innocent
purchaser for value nor a purchaser in good... faith and, hence, does not merit the protection of the law... at the
time the Burgos siblings bought the subject property on December 4, 1984, Civil Case No. M-7690,[19] an
action for damages, and Criminal Case No. 10914-P,[20] for estafa, filed by the Rufloes against Delos Reyes,
were both... pending before the RTC of Pasay City. This circumstance should have alerted the Burgos siblings
as to the validity of Delos Reyes' title and her authority and legal right to sell the property.

. It was Amado Burgos who bought the property for his children, the Burgos siblings. Amado was not
personally acquainted with Delos Reyes... prior to the sale because he bought the property through a real
estate broker, a certain Jose Anias, and not from Delos Reyes herself.

There was no showing that Amado or any of the Burgos siblings exerted any effort to personally verify with the
Register of Deeds if Delos Reyes'... certificate of title was clean and authentic.

In the same vein, Leonarda cannot be categorized as a purchaser in good faith. Since it was the Rufloes who
continued to have actual possession of the property, Leonarda should have investigated the nature of their
possession.

DOMINGO GONZALO, Petitioner, vs.JOHN TARNATE, JR., Respondent.

TOPIC: Void or inexistent contract

FACTS:

After the DPWH had awarded on July 22, 1997 the contract for the improvement of the Sadsadan-
Maba-ay Section of the Mountain Province-Benguet Road to his company, Gonzalo Construction, petitioner
Gonzalo subcontracted to respondent Tarnate on October 15, 1997, the supply of materials and labor for the
project under the latter’s business known as JNT Aggregates. Their agreement stipulated, among others, that
Tarnate would pay to Gonzalo eight percent and four percent of the contract price, respectively, upon Tarnate’s
first and second billing in the project.
 In furtherance of their agreement, Gonzalo executed on April 6, 1999 a deed of assignment whereby
he, as the contractor, was assigning to Tarnate an amount equivalent to 10% of the total collection from the
DPWH for the project. This 10% retention fee was the rent for Tarnate’s equipment that had been utilized in the
project. In the deed of assignment, Gonzalo further authorized Tarnate to use the official receipt of Gonzalo
Construction in the processing of the documents relative to the collection of the 10% retention fee and in
encashing the check to be issued by the DPWH for that purpose. The deed of assignment was submitted to the
DPWH on April 15, 1999. During the processing of the documents for the retention fee, however, Tarnate learned
that Gonzalo had unilaterally rescinded the deed of assignment by means of an affidavit of cancellation of deed
of assignment dated April 19, 1999 filed in the DPWH on April 22, 1999; and that the disbursement voucher for
the 10% retention fee had then been issued in the name of Gonzalo, and the retention fee released to him.

Tarnate demanded the payment of the retention fee from Gonzalo, but to no avail.

ISSUE:

Whether or not the subcontract and deed of assignment are void contracts.

HELD:

YES. The Court held that the subcontract agreement and deed of assignment between Gonzalo and
Tarnate are void for being contrary to law. However, even though both parties are in pare delicto the Court
allowed Tarnate to recover his retention fee, as an exception, due to unjust enrichment.

Contract is void

Every contractor is prohibited from subcontracting with or assigning to another person any contract or
project that he has with the DPWH unless the DPWH Secretary has approved the subcontracting or assignment.
Gonzalo, who was the sole contractor of the project in question, subcontracted the implementation of the project
to Tarnate in violation of the statutory prohibition. Their subcontract was illegal, therefore, because it did not bear
the approval of the DPWH Secretary. Necessarily, the deed of assignment was also illegal, because it sprung
from the subcontract.

Obviously, without the Sub-Contract Agreement there will be no Deed of Assignment to speak of. The
illegality of the Sub-Contract Agreement necessarily affects the Deed of Assignment because the rule is that an
illegal agreement cannot give birth to a valid contract. To rule otherwise is to sanction the act of entering into
transaction the object of which is expressly prohibited by law and thereafter execute an apparently valid contract
to subterfuge the illegality. The legal proscription in such an instance will be easily rendered nugatory and
meaningless to the prejudice of the general public.

Under Article 1409 (1) of the Civil Code, a contract whose cause, object or purpose is contrary to law
is a void or inexistent contract. As such, a void contract cannot produce a valid one. To the same effect is Article
1422 of the Civil Code, which declares that “a contract, which is the direct result of a previous illegal contract, is
also void and inexistent.”

Rigid application of in pare delicto in void contracts; exception

According to Article 1412 (1) of the Civil Code, the guilty parties to an illegal contract cannot recover
from one another and are not entitled to an affirmative relief because they are in pari delicto or in equal fault.
The doctrine of in pari delicto is a universal doctrine that holds that no action arises, in equity or at law, from an
illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be
sold or delivered, or the money agreed to be paid, or damages for its violation; and where the parties are in pari
delicto, no affirmative relief of any kind will be given to one against the other.

Nonetheless, the application of the doctrine of in pari delicto is not always rigid. An accepted exception
arises when its application contravenes well-established public policy.
 There is no question that Tarnate provided the equipment, labor and materials for the project in
compliance with his obligations under the subcontract and the deed of assignment; and that it was Gonzalo as
the contractor who received the payment for his contract with the DPWH as well as the 10% retention fee that
should have been paid to Tarnate pursuant to the deed of assignment. Considering that Gonzalo refused despite
demands to deliver to Tarnate the stipulated 10% retention fee that would have compensated the latter for the
use of his equipment in the project, Gonzalo would be unjustly enriched at the expense of Tarnate if the latter
was to be barred from recovering because of the rigid application of the doctrine of in pari delicto. The prevention
of unjust enrichment called for the exception to apply in Tarnate’s favor.

Domingo vs Court of Appeals

FACTS:
Roberto Domingo married Delia Soledad in 1976 while being married with Emerlina dela Paz.
He has been unemployed and completely dependent upon Delia, who has been working in Saudi Arabia, for
support and subsistence.
Delia only found out about the prior marriage when Emerlina sued them for bigamy in 1983.
In 1989, she found out that Roberto was cohabiting with another woman and he was disposing of some of her
properties without her knowledge and consent.
In May 1991, Delia filed a petition for judicial declaration of nullity of her marriage to Roberto and separation of
property.

ISSUE:
Whether or not a petition for judicial declaration of a void marriage is necessary. If in affirmative, whether the
same should be filed only for purpose of remarriage.

RULING:
Yes. A declaration of the absolute nullity of marriage is now explicitly required either as a cause of action or a
ground for defense. Where the absolute nullity of a previous marriage is sought to be invoked for purpose of
contracting a second marriage, the sole basis acceptable in law for the said projected marriage be free from
legal infirmity is a final judgment declaring the previous marriage void.

The requirement for a declaration of absolute nullity of a marriage is also for the protection of the spouse who,
believing that his or her marriage is illegal and void, marries again. With the judicial declaration of the nullity of
his or her first marriage, the person who marries again cannot be charged with bigamy.

Article 40 as finally formulated included the significant clause denotes that final judgment declaring the
previous marriage void need not be obtained only for purposes of remarriage. A person can conceive of other
instances other than remarriage, such as in case of an action for liquidation, partition, distribution and
separation of property between the spouses, as well as an action for the custody and support of their common
children and the delivery of the latters' presumptive legitimes. In such cases, however, one is required by law
to show proof that the previous one was an absolute nullity.

Marriage is an “inviolable social institution, is the foundation of the family;” as such, it “shall be protected by the
State. As a matter of policy, there should be a final judgment declaring the marriage void and a party should
not declare for himself or herself whether or not the marriage is void.