G.R. Nos.

156547-51             February 4, 2008

MARIANO UN OCAMPO III, vs. PEOPLE OF THE PHILIPPINES

FACTS: DBM released National Aid for Local Government Units (NALGU) funds in the total amount of P100
million to the Province of Tarlac. The NALGU is a fund set aside in the General Appropriations Act to assist
local governments in their various projects and services. The distribution of this fund is entirely vested with the
Secretary of the DBM. Petitioner Gov. Ocampo of Tarlac loaned out P56.6 million of the P100 million to the
Lingkod Tarlac Foundation, Inc. (LTFI) for the implementation of various livelihood projects. How the P56.6
million released to LTFI was utilized became the subject matter of 25 criminal cases.

ISSUE: Whether petitioners IS guilty of the crime of malversation of public funds?

HELD: No. The funds released by the Province of Tarlac, including the money allegedly malversed by
petitioners in Crim. Case Nos. 16794 and 16795, were in the nature of a loan to LTFI. It became a private
fund. Art. 1953 of the Civil Code provides that "[a] person who receives a loan of money or any other fungible
thing acquires the ownership thereof, and is bound to pay to the creditor an equal amount of the same kind
and quality." Hence, petitioner Ocampo correctly argued that the NALGU funds shed their public character
when they were lent to LTFI as it acquired ownership of the funds with an obligation to repay the Province of
Tarlac the amount borrowed. The relationship between the Province of Tarlac and the LTFI is that of a creditor
and debtor. Failure to pay the indebtedness would give rise to a collection suit. The fact that the petitioner-
Governor contracted the loan, the public fund changed its nature to private character, thus it is not
malversation which is the subject of this case, instead it must be a simple collection of money suit against the
petitioner in case of non payment. Therefore, the petitioner is acquitted for the crime of malversation.

G.R. No. 139982             November 21, 2002

JULIAN FRANCISCO vs. PASTOR HERRERA

FACTS: Eligio Herrera, Sr., father of respondent Pastor Herrera, owned two parcels of land consisting of 500
sq. m. and 451 sq. m. located at Cainta, Rizal. The two parcels of land were sold at 1M and 750k to the
petitioner.

Pastor, contending that the contract price for the two parcels of land was grossly inadequate tried to negotiate
with petitioner to increase the purchase price. When petitioner refused, respondent then filed a complaint for
annulment of sale. Pastor alleged that the contract of sale was null and void on the ground that Eligio, Sr., at
that time, was already afflicted with senile dementia. Petitioner, on the other hand, contended that respondent
had effectively ratified both contracts of sales, by receiving the consideration offered in each transaction.

ISSUE: Whether the assailed contracts of sale void or merely voidable

RULING: It is voidable hence capable of being ratified. Vendor Eligio, Sr. entered into an agreement with
petitioner, but that the former’s capacity to consent was vitiated by senile dementia. Hence, it was ruled that
the assailed contracts are not void or inexistent per se; rather, these are contracts that are valid and binding
unless annulled through a proper action filed in court.

An annullable contract may be rendered perfectly valid by ratification, which can be express or implied. Implied
ratification may take the form of accepting and retaining the benefits of a contract. As in this case, respondent
negotiated for the increase of the purchase price while receiving the installment payments from the petitioner.
Clearly, respondent was agreeable to the contract. Further, there is no showing that respondent returned the
payments or made an offer to do so. This bolsters the view that indeed there was ratification. Therefore, the
two contracts of sale is declared valid.

G.R. No. 106063 November 21, 1996

EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC.,  MAYFAIR THEATER,
INC., 

FACTS: Carmelo entered into a contract of lease with Mayfair for the latter's lease of a portion of Carmelo's
property. Contracts of lease provides (sic) identically worded paragraph 8, which reads: That if the LESSOR
should desire to sell the leased premises, the LESSEE shall be given 30-days exclusive option to purchase the
same. In the event, however, that the leased premises is sold to someone other than the LESSEE, the
LESSOR is bound and obligated, as it hereby binds and obligates itself, to stipulate in the Deed of Sale hereof
that the purchaser shall recognize this lease and be bound by all the terms and conditions thereof.

Carmelo sold its entire C.M. Recto Avenue land and building, which included the leased premises housing the
"Maxim" and "Miramar" theatres, to Equatorial. Myfair wants the deed of sale annulled.

Carmelo argues however that since there was no separate consideration, which is a requisite for an option
contract to exist, given by Myfair, the latter cannot obligate the former to sell the property it (Myfair),

ISSUE: Whether what is involved in this case is an option contract or a right of refusal

HELD: The contractual stipulation provides for a right of first refusal in favor of Mayfair. It is not an option
clause or an option contract. It is a contract of a right of first refusal. As such, the requirement of a separate
consideration for the option, has no applicability in the instant case.
To rule that a contractual stipulation such as that found in paragraph 8 of the contracts is governed by Article
1324 on withdrawal of the offer or Article 1479 on promise to buy and sell would render in effectual or "inutile"
the provisions on right of first refusal so commonly inserted in leases of real estate nowadays.

The consideration for the lease includes the consideration for the right of first refusal. Thus, Mayfair is in effect
stating that it consents to lease the premises and to pay the price agreed upon provided the lessor also
consents that, should it sell the leased property, then, Mayfair shall be given the right to match the offered
purchase price and to buy the property at that price. While it initially recognized Mayfair's right of first refusal,
Carmelo violated such right when he sold, without prior notice to Mayfair, the entire Claro M Recto property to
Equatorial.

Equatorial was aware of the lease contracts because its lawyers had, prior to the sale, studied the said
contracts. As such, Equatorial cannot tenably claim to be a purchaser in good faith, and, therefore, rescission
lies. Contract of Sale was not voidable but rescissible. Under Article 1380 to 1381(3) of the Civil Code, a
contract otherwise valid may nonetheless be subsequently rescinded by reason of injury to third persons, like
creditors.

ARCHIPELAGO MANAGEMENT AND MARKETING CORPORATION vs COURT OF APPEALS

G.R. No. 128850 November 20, 1998

FACTS: When several offices in the Quezon City Hall were razed by fire in 1988, many records, including
original certificates of title, were reduced to ashes. Consequently, landowners with real properties in Quezon
City had to apply for reconstitution of their individual titles. Sometime in August of that year, it is alleged that
Emeterio Morales (Rosalina’s husband) took the owner's (Rosalina) duplicate certificate of title over the subject
property from Rosalina's designated caretaker, and on the pretext that he was going to apply for reconstitution
of title, he was able to convince Rosalina to affix her signature on several documents. One of those documents
turned out to be a Deed of Absolute Sale dated May 3, 1989, wherein it was stipulated that Rosalina sold to
the defendant-appellee corporation the subject property for 1.2M. By virtue thereof, a new title was issued in
favor of the defendant-appellee corporation. Rosalina Santos-Morales filed an action for annulment of the
Deed of Absolute Sale with damages against the defendant corporation. She denied having sold the subject
property, allegedly paraphernal, to anybody, much less to the defendant corporation. She further alleged that
her signature on the said document was obtained by means of fraud, deceit and insidious machinations on the
part of her husband, Emeterio, and her stepson, Narciso Morales

ISSUE: Whether fraud attended the execution of a contract is factual in nature

HELD: Causal fraud is clearly demonstrated by the following facts which were duly established during the trial:
1. Certificate of Title was obtained by misrepresentation.
2. Acts of ownership exercised by Rosalina even after the alleged execution of the Deed of Sale.
Sixteen days after the alleged execution of the Deed of Sale, 34 she entered into a contract of lease.
3. Upon learning of the existence of the Deed of Absolute Sale, Rosalina immediately denied that she
ever signed the said contract
4. There is no conclusive showing that Rosalina ever received any consideration for the alleged sale.
The fact that Rosalina's bank passbook shows no increase in the deposit on or after the date of the alleged
sale 43 supports the cause of the private respondents.

Taken together, the aforecited circumstances in this case overwhelmingly demonstrate the causal fraud
committed in obtaining Rosalina's signature on the Deed of Sale. Rosalina had no intention to part with her
property, and as the appellate court ruefully observed, she had no reason to.

The fertility of man's invention in devising new schemes of fraud is so great that courts have declined to
define it, reserving to themselves the liberty to deal with it under whatever form it may present itself." In the
case at bar the fraudulent scheme is evidenced by a series of related acts committed one after another,
silently, quietly and surreptitiously. Our jurisprudence abounds with cases where fraud had been held to exist
but we have found none in which all the circumstances above indicated are present, the circumstances being
varied as the men who schemed the fraud in each case.

URETA vs. URETA

G.R. No. 165748               September 14, 2011

FACTS: Alfonso and four of his children, namely, Policronio, Liberato, Prudencia, and Francisco, met
at the house of Liberato. Francisco, who was then a municipal judge, suggested that in order to reduce
the inheritance taxes, their father should make it appear that he had sold some of his lands to his
children. Accordingly, Alfonso executed four (4) Deeds of Sale covering several parcels of land in favor
of Policronio  Liberato,5 Prudencia,6 and his common-law wife, Valeriana Dela Cruz.7 

On April 19, 1989, Alfonso’s heirs executed a Deed of Extra-Judicial Partition,8 which included all the
lands that were covered by the four (4) deeds of sale that were previously executed by Alfonso for
taxation purposes. Conrado, Policronio’s eldest son, representing the Heirs of Policronio, signed the
Deed of Extra-Judicial Partition in behalf of his co-heirs.

ISSUE: WON Conrado’s lack of capacity to give his co-heirs’ consent to the Extra-Judicial Partition
rendered the same voidable

HELD: No. What is involved in this case is not lack of capacity to give consent to the contract as
contemplated under Art. 390(1) but rather lack of authority to do so.
The deed of extra-judicial partition and sale is therefore not voidable or annullable. The contract is only
valid and unenforceable against Conrado’s co heirs for having been entered into without authority.

G.R. No. 188417 September 24, 2012

CABALU vs.SPS. RENATO DOLORES TABU

FACTS:Faustina was the original owner of a parcel of land. Faustina died without any children. She left
a holographic will, assigning and distributing her property to her nephews and nieces. The said
holographic will, however, was not probated.Benjamin was one of Faustinas heirs. He died in 1960. He
had two heirs: his wife and his son, Domingo. On March 5, 1975, Domingo executed a Deed of Sale in
favor of Cabalu covering 9,000 square meters of the land inherited by his father from Faustina. The
RTC declared the deeds dated March 5, 1975 and October 8, 1996 null and void. On appeal, the CA
partially granted the petition and deleted the RTCs decision declaring the October 8, 1996 null and
void.

ISSUE: Whether or not the Deed of Sale of Undivided Parcel of Land is valid

HELD: The Deed of Sale null and void.Thus even if Benjamin (Domingo’s father) died sometime in
1960, Domingo in 1975 could not yet validly dispose of the whole or even a portion thereof for the
reason that he was not the sole heir of Benjamin, as his mother only died sometime in 1980. Besides,
under Article 1347 of the Civil Code, no contract may be entered into upon future inheritance except in
cases expressly authorized by law. The law applies when the following requisites concur: (1) the
succession has not yet been opened; (2) the object of the contract forms part of the inheritance; and (3)
the promissor has, with respect to the object, an expectancy of a right which is purely hereditary in
nature.In this case, at the time the deed was executed, Faustina’s will was not yet probated; the object
of the contract still formed part of the inheritance of his father from the estate of Faustina; and Domingo
had a mere inchoate hereditary right therein.

Regarding the deed of sale covering the remaining 4,500 square meters of the subject property
executed in favor of Renato Tabu, it is evidently null and void.The document itself, the Deed of
Absolute Sale, dated October 8, 1996, readily shows that it was executed on August 4, 1996 more than
two months after the death of Domingo. Contracting parties must be juristic entities at the time of the
consummation of the contract. Stated otherwise, to form a valid and legal agreement it is necessary
that there be a party capable of contracting and a party capable of being contracted with. Hence, if any
one party to a supposed contract was already dead at the time of its execution, such contract is
undoubtedly simulated and false and, therefore, null and void by reason of its having been made after
the death of the party who appears as one of the contracting parties therein. The death of a person
terminates contractual capacity.

Bersabal v. Salvador

G.R. No. L-35910 July 21, 1978

FACTS: Private Respondents filed an ejectment suit against the Petitioner. The subsequent decision
was appealed by the Petitioner and during its pendency, the court issued an order stating that
“counsels for both parties are given 30 days from receipt of this order within which to file their
memoranda in order for this case to be submitted for decision by the court.” After receipt, Petitioner
filed a motion ex parte to submit memorandum within 30 days from receipt of notice of submission of
the transcript of stenographic notes taken during the hearing of the case which was granted by the
court. But the Respondent judge issued an order dismissing the case for failure to prosecute
Petitioner’s appeal. Petitioner filed a motion for reconsideration citing the submitted ex parte motion but
the court denied it.

ISSUE: Wether the mere failure of an Appellant to submit the mentioned memorandumwould empower
the CFI to dismiss the appeal on the ground of failure to prosecute.

HELD: The court is not empowered by law to dismiss the appeal on the mere failure of an Appellant to
submit his memorandum. The law provides that “Courts shall decide cases on the basis of the
evidence and records transmitted from the city courts: Provided parties may submit memoranda if so
requested” It cannot be interpreted otherwise than that the submission of memoranda is optional.

ENRIQUE C. ABAD ET AL vs. GOLDLOOP PROPERTIES INC.

G.R. NO. 168108 APRIL 13, 2007

FACTS: Petitioners Enrique C. Abad and others were the owners of 13 parcels of titled agricultural land
covering a total of 53,562 square meters. Goldloop Properties Inc., entered into a Deed of Conditional
Sale with petitioners at the price of P650.00 per square meter, or a total of P34, 815,300.00 for the
entire land area. The Deed also provided for the consequence of respondents failure to fulfill its
obligation to pay the balance of the total consideration agreed upon: In the event that the BUYER fails
to comply with his part of the obligation within the specified extension period, the earnest money of 1M
given by the buyer shall be forfeited but the first payment check 6.7M shall be returned to the buyer
without any additional charges to the seller.

ISSUE: Whether petitioners’ contention that their obligation to return the first payment should be
deemed one with a period

HELD: The Court cannot sustain petitioners contention that their obligation to return the first payment
should be deemed one with a period, and that the Court should fix the period within which they should
comply with the obligation. Indeed, the parties to a contract are bound by their agreement, considering
that obligations arising from contracts have the force of law between the contracting parties and should
be complied with in good faith

G.R. No. L-18916          November 28, 1969

JOSE ABESAMIS vs. WOODCRAFT WORKS, LTD

FACTS: This case was a contract in the delivery of logs before the end of July 1951 but not earlier than
April of same year as an option depending on availability of logs and vessels between Woodcraft
Works and Abesamis Shipping. The failure of the appellant to send vessels to Dolores, Samar was
because of the storm that swept away all the log on May 5, 1951.
ISSUE: Whether appellant Abesamis is liable to pay of the loss?

HELD: No. Under the contract shipment was to be made before the end of July 1951, but not to
commence earlier than April of the same year. The obligation between the parties was a reciprocal
one, appellant to furnish the vessel and appellee to furnish the logs. It was also an obligation with a
term, which obviously was intended for the benefit of both parties, the period having been agreed upon
in order to avoid the stormy weather in Dolores, Samar, during the months of January to March. The
obligation being reciprocal and with a period, neither party could demand performance nor incur in
delay before the expiration of the period. Consequently, when the typhoon struck on May 5, 1951 there
was yet no delay on the part of appellant, and the corresponding loss must be shouldered by appellee.

G.R. No. 140715             September 24, 2004

JOSEFINA L. VALDEZ and CARLOS L. VALDEZ, JR., vs. COURT OF APPEALS

FACTS: Josefina executed a Special Power of Attorney in favor of her son, petitioner Carlos, Jr., as
her attorney-in-fact, authorizing the latter to sell the subject property, and petitioner Josefina, through
her son, executed the deed of absolute sale over the subject property. She also acknowledged receipt
of partial payments of the purchase price of the property. The parties, however, differ on the real nature
of their transaction and on whether the said affidavit formed an integral part of the deed of absolute
sale executed by petitioner Josefina in favor of the respondent.

In this case, the deed of absolute sale executed by petitioner Josefina reads:That for and in
consideration of the sum of ₱80,000.00, in hand paid by the VENDEE, receipt of which amount in Full
is hereby acknowledged by the VENDOR, to the ENTIRE and full satisfaction of the VENDOR, and who
by these presents do hereby sell, cede, deliver and convey unto the said VENDEE, his heirs, assigns
and successors in interests, a portion of the above-mentioned

ISSUE: Whether or not the contract of the parties being subject to the suspensive conditions agreed
upon was a contract to sell or a contract of sale

HELD: The contract is a contract of sale. In a contract of sale, the non-payment of the price is a
resolutory condition which extinguishes the transaction that, for a time, existed and discharges the
obligations created thereunder.54 In a contract to sell, ownership is, by agreement, reserved in the
vendor and is not to pass to the vendee until full payment of the purchase price.
Irrefragably, the deed is one of sale, not a contract to sell. The deed specifically states that the property
is sold and delivered to the respondent as vendee.

She did not reserve the ownership over the property, as well as any right to unilaterally rescind the
contract. There has been, by the execution of the said deed, a constructive delivery of the property to
the respondent; hence, the latter acquired ownership over the same.57 Upon payment of the purchase
price, petitioner Josefina was obliged to deliver the torrens title over the property to and under the
name of the respondent as the new owner and place him, as vendee, in actual possession thereof;
otherwise, the failure or inability to do so constitutes a breach of the contract sufficient to justify its
rescission.

G.R. No. 155879 December 2, 2005

MANILA INTERNATIONAL AIRPORT AUTHORITY vs. THE HON. HENRICK F. GINGOYON,

FACTS: To avoid a protracted litigation, petitioner and private respondent entered into a compromise
agreement where they agreed to execute a lease contract within 30 days from approval of the
compromise agreement. They agreed to adopt the rental rates stated in MIAA Administrative Order No.
1, Series of 1993, stipulating ₱39.60/sqm. monthly rental. This rental rate was subject to automatic
adjustment as follows: xxx Any subsequent amendment to Administrative Order No. 1, Series of 1993
which increases or escalates the monthly rentals or imposes new and additional fees and charges,
shall be deemed incorporated herein and shall automatically amend this contract as to effect an
upward adjustment of the monthly rentals, fees and charges.7

ISSUE: Whether MIAA is correct in its contention that the contract is clear and expressly allows the
adjustment of rental rates by any administrative order subsequent to A.O. No. 1, Series of 1993.

HELD: MIAA is not correct. The various stipulations of a contract are to be interpreted together,
attributing to the doubtful ones that sense which may result from all of them taken jointly.16 Thus, in this
case, the phrase "any subsequent administrative orders" in paragraph 2.04 should not be read in
isolation, as what petitioner has erroneously done, but should be read together with the provisions of
paragraph 7.17. Said paragraph provides that the lease contract "may not … be modified or altered
except by an instrument in writing duly signed by the parties hereto and/or by administrative order duly
issued/promulgated hereafter", that is, after May 29, 1998, the date the parties signed the lease
contract. Accordingly, for an administrative order to be incorporated into the contract and thereby effect
an adjustment of the monthly rental, it is necessary that the administrative order amending the rates be
issued or promulgated after May 29, 1998. Such is not the case of A.O. No. 1, Series of 1998, which
was issued much earlier on April 2, 1998.

G.R. No. 132887. August 11, 2005

THE MANILA BANKING CORPORATION vs. EDMUNDO S. SILVERIO

FACTS: On 22 February 1990, petitioner, TMBC, filed a complaint with the RTC for the collection of a
sum of money with application for the issuance of a writ of preliminary attachment against Ricardo,
Sr.by virtue of an Order of the RTC, notice of levy on attachment of real property was issued. On 22
July 1993, Edmundo, the nephew9 of judgment debtor Ricardo, Sr., requested TMBC to have the
annotations on the subject properties cancelled as the properties were no longer owned by Ricardo,
Sr.10 

ISSUE: Whether the contract between Ricardo and Edmundo is simulated or real is factual in nature

HELD: Badges of fraud and simulation permeate the whole transaction, thus, the contract is void.
There is no proof that the said sale took place prior to the date of the attachment. The notarized deed
of sale, which would have served as the best evidence of the transaction, materialized only 3 years
after TMBC caused the annotation of its lien on the titles subject matter of the alleged sale. The sale
was entered into only as an afterthought, hatched to prevent the transfer of the properties to TMBC
after the latter had already annotated its lien thereon. An indication of simulation of contract is the
complete absence of an attempt in any manner on the part of the ostensible buyer to assert rights of
ownership over the subject properties. In herein case, Edmundo did not attempt to have the 1989 deed
of sale registered until 1993.41 He was not in possession of the properties. 42 He did not have a contract
of lease with the actual occupant of the properties
Taken together with the other circumstances surrounding the sale, Edmundo’s failure to exercise acts
of dominium over the subject properties buttresses TMBC’s position that the former did not at all intend
to be bound by the contract of sale

When a contract is void, the right to set-up its nullity or non-existence is available to third persons
whose interests are directly affected thereby.52 The material interest of TMBC need not be belabored.
Suffice it to say that as judgment creditor of Ricardo, Sr., it has the right to protect its lien acquired
through a writ of preliminary attachment as security for the satisfaction of any judgment in its favor.

The Court of Appeals erroneously ruled that TMBC should first go after the properties of its debtor,
Ricardo, Sr., and, failing therein would be the only time it will acquire a material interest over the
subject properties, thus:

Article 117 of the New Civil Code is very explicit that the right or remedy of the creditor to impugn the
acts which the debtor may have done to defraud them is subsidiary in nature. It can only be availed of
in the absence of any other legal remedy to obtain reparation for the injury. Otherwise stated, the right
of accion pauliana can be availed of only AFTER the creditor have exhausted all the properties of the
debtor not exempt from executions.

Contrary to the position taken by the Court of Appeals, TMBC need not look farther than the subject
properties to protect its rights. The remedy of accion pauliana is available when the subject matter
is a conveyance, otherwise valid¸ undertaken in fraud of creditors. 54 Such a contract is governed
by the rules on rescission which prescribe, under Art. 1383 of the Civil Code, that such action can be
instituted only when the party suffering damage has no other legal means to obtain reparation for the
same. The contract of sale before us, albeit undertaken as well in fraud of creditors, is not
merely rescissible but is void ab initio for lack of consent of the parties to be bound thereby. A
void or inexistent contract is one which has no force and effect from the very beginning, as if it had
never been entered into; it produces no effect whatsoever either against or in favor of
anyone.55 Rescissible contracts, on the other hand, are not void ab initio, and the principle, "quod
nullum est nullum producit effectum," in void and inexistent contracts is inapplicable.56 Until set aside in
an appropriate action, rescissible contracts are respected as being legally valid, binding and in force.57 
Absolute simulation implies that there is no existing contract, no real act executed; while fraudulent
alienation means that there is a true and existing transfer or contract. The former can be attacked by
any creditor, including one subsequent to the contract; while the latter can be assailed only by the
creditors before the alienation. In absolute simulation, the insolvency of the debtor making the
simulated transfer is not a prerequisite to the nullity of the contract; while in fraudulent alienation, the
action to rescind, or accion pauliana, requires that the creditor cannot recover in any other manner
what is due him. Finally, the action to declare a contract absolutely simulated does not prescribe
(articles 1409 and 1410); while the accion pauliana to rescind a fraudulent alienation prescribes in four
years (article 1389).58

G.R. No. 152347             June 21, 2006

UNION BANK OF THE PHIL vs. SPS. ONG

FACTS: Sps. Ong own the majority capital stock of BMC. On October 10, 1990, the spouses executed
a Continuing Surety Agreement in favor of Union Bank to secure a P40,000,000.00-credit line facility
made available to BMC. The agreement expressly stipulated a solidary liability undertaking. On
October 22, 1991, the spouses Ong, for P12,500,000.00, sold their 974-square meter lot to their co-
respondent, Jackson Lee. The following day, Lee registered the sale and was then issued Transfer
Certificate of Title. At about this time, BMC had already availed itself of the credit facilities, and had in
fact executed a total of 22 promissory notes in favor of Union Bank. To protect its interest, Union Bank
lost no time in filing with the RTC of Pasig City an action for rescission of the sale between the spouses
Ong and Jackson Lee for purportedly being in fraud of creditors.

Issue: Whether he Ong-Lee contract of sale partakes of a conveyance to defraud Union Bank 

Ruling: The Ong-Lee contract of sale partakes a conveyance of bona fide transaction and not a trick to
defeat creditors. Contracts in fraud of creditors are those executed with the intention to prejudice the
rights of creditors. They should not be confused with those entered into without such mal-intent, even if,
as a direct consequence thereof, the creditor may suffer some damage. In the present case,
respondent spouses Ong, had sufficiently established the legitimacy of the sale. It was supported by
sufficient consideration. The disparity between the price and the real value of the property was not as
gross to support a conclusion of fraud. Furthermore, there was no evidence to prove that the spouses
Ong and Lee were conniving cheats. Even if the spouses Ong did not leave the premises immediately
after the sale, such action was supported by a valid contract of lease. It could not also be contended
that Lee was not financially capable of purchasing the property, since mere income for a specific year
is not sufficient to establish his incapacity

G.R. No. 169790             April 30, 2008

CONGREGATION OF THE RELIGIOUS OF THE VIRGIN MARY (RVM) vs. EMILIO Q. OROLA

Facts: A contract to sell made out in the names of petitioner and respondents as parties to the agreement was
presented in evidence pegging the total consideration of the property at P5,555,000.00 with 10% of the total
consideration payable upon the execution of the contract, and which was already signed by all the
respondents.
On June 7, 1999, respondents acknowledged receipt of 10% down payment. Thereafter, respondents, asked
the payment of the remaining balance of the purchase price. However, RVM denied respondents' demand for
payment because: (1) the purported Contract to Sell was merely signed by Sr. Enhenco as witness, and not by
VRM Balleque, head of the corporation sole; and (2) ascdiscussed by counsels in their phone conversations,
RVM will only be in a financial position to pay the balance of the purchase price in two years time. Thus,
respondents filed with the RTC a complaint with alternative causes of action of specific performance or
rescission.
Issue: Whether RVM is liable for interest on the balance of the purchase price.
Ruling: The remedy of resolution/rescission applies only to reciprocal obligations such that a party's breach
thereof partakes of a tacit resolutory condition which entitles the injured party to rescission. The present article,
as in the Old Civil Code, contemplates alternative remedies for the injured party who is granted the option to
pursue, as principal actions, either a rescission or specific performance of the obligation, with payment of
damages in each case. On the other hand, rescission under Article 1381 of the Civil Code, taken from Article
1291 of the Old Civil Code, is a subsidiary action, and is not based on a party's breach of obligation.
There was a perfected contract of sale between the parties. A contract of sale carries the correlative duty of the
seller to deliver the property and the obligation of the buyer to pay the agreed price. As there was already a
binding contract of sale between the parties, RVM had the corresponding obligation to pay the remaining
balance of the purchase price upon the issuance of the title in the name of respondents. The supposed 2-year
period within which to pay the balance did not affect the nature of the agreement as a perfected contract of
sale.
The CA mistakenly applied Articles 1383 and 1384 of the Civil Code to this case because respondents' cause
of action against RVM is predicated on Article 1191 of the same code for breach of the reciprocal obligation.
RVM committed a breach of the obligation when it suddenly refused to execute and sign the agreement and
pay the balance of the purchase price. Thus, when RVM refused to pay the balance and thereby breached the
contract, respondents rightfully availed of the alternative remedies provided in Article 1191. Accordingly,
respondents are entitled to damages regardless of whichever relief, rescission or specific performance, would
be granted by the lower courts.

G.R. No. 130913               June 21, 2005

LAPERAL and FILIPINAS GOLF & COUNTRY CLUB INC., (FGSDC)  vs. SOLID HOMES, INC

FACTS: FGSDC, predecessor-in-interest of Filipinas Golf and Country Club, Inc., entered into a
Development and Management Agreement with respondent Solid Homes, Inc., involving several
parcels of land owned by Laperal and FGSDC. Respondent undertook to convert at its own expense
the land subject of the agreement into a first-class residential subdivision, in consideration of which
respondent will get 45% of the lot titles of the saleable area in the entire project. The parties canceled
the aforementioned Agreement, and, in lieu thereof, respondent with the two successors-in-interest of
FGSDC entered into two contracts identically denominated Revised Development and Management
Agreement. Unlike the original agreement, both Revised Agreements omitted the obligation of
petitioners Laperal and FGCCI to make available to respondent Solid Homes, Inc. the owner’s
duplicate copies of the titles covering the subject parcels of land. It appears, however, that even as the
Revised Agreements already provided for the non-surrender of the owner’s duplicate copies of the
titles, respondent persisted in its request for the delivery thereof. Then, petitioners served on
respondent notices of rescission of the Revised Agreements with a demand to vacate the subject
properties and yield possession thereof to them.

ISSUE: Whether the termination of the Revised Agreement and Addendum, because of the contractual
breach committed by respondent solid homes, carried with it the effect provided under Article 1385 of
the New Civil Code.

HELD: Mutual restitution is required in cases involving rescission under Article 1191. Since Article 1385
of the Civil Code expressly and clearly states that “rescission creates the obligation to return the things
which were the object of the contract, together with their fruits, and the price with its interest,” the Court
finds no justification to sustain petitioners’ position that said Article 1385 does not apply to rescission
under Article 1191. As a consequence of the resolution by petitioners, rights to the lot should be
restored to private respondent or the same should be replaced by another acceptable lot. Applying the
clear language of the law and the consistent jurisprudence on the matter, therefore, the Court rules that
rescission under Article 1191 in the present case, carries with it the corresponding obligation of
restitution.

G.R. No. 144225               June 17, 2003

SPOUSES ALFREDO vs. SPOUSES BORRAS

FACTS: By virtue of the contract of sale, petitioners delivered the Subject Land to respondents,
placing the latter in actual physical possession of the Subject Land. Godofredo and Carmen also
turned over to Armando and Adelia the documents of ownership to the Subject Land, namely the
owner’s duplicate copy of OCT No. 284, the tax declaration and the receipts of realty tax
payments. On the other hand, Armando and Adelia paid the full purchase price as evidenced by
the receipt dated 11 March 1970 issued by Carmen.

Now, petitioners claim that the sale of the Subject Land to Armando and Adelia is void on two
grounds. First, Carmen sold the Subject Land without the marital consent of Godofredo. Second,
the sale was made during the 25-year period that the law prohibits the alienation of land grants
without the approval of the Secretary of Agriculture and Natural Resources.

ISSUE: Whether the sale is void or voidable

HELD: The sale is merely voidable. The Family Code, which took effect on 3 August 1988,
provides that any alienation or encumbrance made by the husband of the conjugal partnership
property without the consent of the wife is void. However, when the sale is made before the
effectivity of the Family Code, as in this case, the applicable law is the Civil Code. Article 173 of
the Civil Code provides that the disposition of conjugal property without the wife’s consent is not
void but merely voidable.

Godofredo can no longer question the sale. Voidable contracts are susceptible of
ratification.24 Godofredo ratified the sale when he introduced Armando and Adelia to his tenants
as the new owners of the Subject Land. He did not. The prescriptive period to annul the sale has
long lapsed. Godofredo’s conduct belies his claim that his wife sold the Subject Land without his
consent.

The failure to secure the approval of the Secretary does not ipso facto make a sale void.32 The
absence of approval by the Secretary does not nullify a sale made after the expiration of the 5-
year period, for in such event the requirement of Section 118 of the Public Land Act becomes
merely directory33 or a formality.34 The approval may be secured later, producing the effect of
ratifying and adopting the transaction as if the sale had been previously authorized.

G.R. No. 148116             April 14, 2004

ANTONIO K. LITONJUA and AURELIO K. LITONJUA, JR., vs. MARY ANN GRACE FERNANDEZ

FACTS: Agapito Fisico who worked as brokers, offered to sell to the petitioners, Antonio K.
Litonjua and Aurelio K. Litonjua, Jr., the parcels of land. The brokers told the petitioners that they
were authorized by respondent Fernandez to offer the property for sale. The petitioners and
respondent Fernandez agreed that the petitioners would buy the property. However, Fisico

informed the petitioners that respondent Fernandez was encountering some problems with the
tenants. Petitioners filed the instant Complaint for specific performance with damages13 against
respondent Fernandez and the registered owners of the property. The petitioners contend that
the perfection of the said contract is evidenced by the January 16, 1996 Letter of respondent
Fernandez saying that she changed her mind hence she’s no longer selling the parcel of land.
ISSUE: Whether there is a perfected contract of sale

HELD: Art. 1403. The following contracts are unenforceable, unless they are ratified: X X X (e)
An agreement for the leasing for a longer period than one year, or for the sale of real property
or of an interest therein. For a note or memorandum to satisfy the statute, it must be complete
in itself and cannot rest partly in writing and partly in parol. The note or memorandum must
contain the names of the parties, the terms and conditions of the contract and a description of the
property sufficient to render it capable of identification.33 Such note or memorandum must contain
the essential elements of the contract expressed with certainty that may be ascertained from the
note or memorandum itself, or some other writing to which it refers or within which it is connected,
without resorting to parol evidence.34 To be binding on the persons to be charged, such note or
memorandum must be signed by the said party or by his agent duly authorized in writing.35

In this case there was no perfected contract of sale between the respondents-owners, as sellers,
and the petitioners, as buyers.There is no documentary evidence on record that the respondents-
owners specifically authorized respondent Fernandez to sell their properties to another, including
the petitioners. Article 1878 of the New Civil Code provides that a special power of attorney is
necessary to enter into any contract by which the ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable consideration,37 or to create or convey real rights
over immovable property,38 or for any other act of strict dominion.39 Any sale of real property by
one purporting to be the agent of the registered owner without any authority therefor in writing
from the said owner is null and void.40 The declarations of the agent alone are generally
insufficient to establish the fact or extent of her authority.41 In this case, the only evidence
adduced by the petitioners to prove that respondent Fernandez was authorized by the
respondents-owners is the testimony of petitioner Antonio Litonjua that respondent Fernandez
openly represented herself to be the representative of the respondents-owners, 42 and that she
promised to present to the petitioners on December 8, 1996 a written authority to sell the
properties.43 However, the petitioners’ claim was belied by respondent Fernandez when she
testified

G.R. No. 169617             April 4, 2007

HEIRS OF ZOILO ESPIRITU vs. SPOUSES LANDRITO

FACTS: Spouses Landrito loaned from the Spouses Espiritu the amount of ₱350,000.00 payable
in three months. From the ₱350,000.00 that the Landritos were supposed to receive, ₱17,500.00
was deducted as interest for the first month which was equivalent to five percent of the principal
debt, and ₱7,500.00 was further deducted as service fee. Thus, they actually received a net
amount of ₱325,000.00. The agreement, however, provided that the principal indebtedness earns
"interest at the legal rate. After three months, when the debt became due and demandable, the
Spouses Landrito were unable to pay the principal, and had not been able to make any interest
payments other than the amount initially deducted from the proceeds of the loan. On 29
December 1986, the loan agreement was extended to 4 January 1987 through an Amendment of
Real Estate Mortgage. The loan was restructured in such a way that the unpaid interest became
part of the principal, thus increasing the principal to ₱385,000. On 29 July 1987, the principal was
increased to ₱507,000.00 inclusive of running interest. On 11 March 1988, it was increased to
₱647,000.00. And on 21 October 1988, the principal was increased to ₱874,125.00.6 

ISSUE: Whether interests on the mortgage loans are unreasonable

HELD: The interest is unconscionable. The total interest and charges amounting to ₱559,125.00
on the original principal of ₱350,000 was accumulated over only two years and one month. These
charges are not found in any written agreement between the parties. The records fail to show any
computation on how much interest was charged and what other fees were imposed. Not only did
lack of transparency characterize the aforementioned agreements, the interest rates and the
service charge imposed, at an average of 6.39% per month, are excessive.

Stipulation authorizing iniquitous or unconscionable interests are contrary to morals, if not against
the law. Under Article 1409 of the Civil Code, these contracts are inexistent and void from the
beginning. They cannot be ratified nor the right to set up their illegality as a defense be
waived.22 The nullity of the stipulation on the usurious interest does not, however, affect the
lender’s right to recover the principal of the loan.23 Nor would it affect the terms of the real estate
mortgage. The right to foreclose the mortgage remains with the creditors, and said right can be
exercised upon the failure of the debtors to pay the debt due. The debt due is to be considered
without the stipulation of the excessive interest. A legal interest of 12% per annum will be added
in place of the excessive interest formerly imposed.

G.R. No. 169454               December 27, 2007

THE HEIRS OF MARCELINO DORONIO vs. HEIRS OF FORTUNATO DORONIO

Facts: Spouses Simeon Doronio and Cornelia Gante, now both deceased, were the registered owners
of a parcel of land. On April 24, 1919, the spouses in favor of Marcelino Doronio executed a private deed
of donation propter nuptias. It appears that the property described in the deed of donation is the one
covered by OCT No. 352.  However, there is a significant discrepancy with respect to the identity of the
owner of adjacent property at the eastern side. 
According to petitioners, they are now the owners of the entire property in view of the private deed of...
donation propter nuptias in favor of their predecessors, Marcelino Doronio and Veronica Pico.
Respondents, on the other hand, claim that only half of the property was actually incorporated in the said
deed of donation because it stated that Fortunato Doronio, instead of Zacarias Najorda and Alejandro
Najorda, is the owner of the adjacent property at the eastern... side.
Determined to remain in their possessed property, respondent heirs of Fortunato Doronio (as plaintiffs)
filed an action for reconveyance and damages with prayer for preliminary injunction15 against petitioner
heirs of Marcelino Doronio (as defendants) before the RTC, Branch 45, Anonas, Urdaneta City,
Pangasinan. Respondents contended, among others, that the subject land is different from what was
donated as the descriptions of the property under OCT No. 352 and under the private deed of donation
were different.
Issues: Whether the transfer of the whole property on the basis of the registration of the private deed of
donation notwithstanding the discrepancy in the description is valid

Ruling: We cannot agree with petitioners’ contention that respondents may no longer question the
validity of the deed of donation on the ground that they already impliedly admitted it. Under the
provisions of the Civil Code, a void contract is inexistent from the beginning. The right to set up the
defense of its illegality cannot be waived.49 The right to set up the nullity of a void or non-existent
contract is not limited to the parties as in the case of annullable or voidable contracts; it is extended to
third persons who are directly affected by the contract.50
Consequently, although respondents are not parties in the deed of donation, they can set up its nullity
because they are directly affected by the same.51 The subject of the deed being the land they are
occupying, its enforcement will definitely affect them.

G.R. No. 165088             March 17, 2006

POTENCIANO RAMIREZ vs. MA. CECILIA RAMIREZ

FACTS: Petitioner filed a complaint against respondent Ramirez before the RTC for annulment of
a Deed of Donation. After trial, the RTC ruled that the signature of Dolores on the Deed of
Donation was a forgery. It also found petitioner’s signatures on both documents to be genuine. It
then held petitioner and respondent in pari delicto, as participants to the forgery, and ruled that
they must bear the consequences of their acts without cause of action against each other in
accordance with Article 1412 of the Civil Code.

ISSUE: Whether petitioner and respondent are in pari delicto.

HELD: Petitioner and respondent are in pari delicto. ARTICLE 1411. When the nullity proceeds
from the illegality of the cause or object of the contract, and the act constitutes a criminal offense,
both parties being in pari delicto, they shall have no action against each other, and both shall be
prosecuted.

Forging a person’s signature corresponds to the felony of falsification hence, the act of forging
Dolores’s signature constitutes a criminal offense under the terms of Article 1411 of the Civil
Code.

Object and cause are two separate elements of a donation and the illegality of either element
gives rise to the application of the doctrine of pari delicto. Object is the subject matter of the
donation, while cause is the essential reason which moves the parties to enter into the
transaction.

The cause which moved the parties to execute the Deed of Donation and the Waiver of
Possessory Rights, the motive behind the forgery, is the desire to evade the payment of
publication expenses and inheritance taxes, which became due upon the death of
Dolores.6 Undeniably, the Deed of Donation and the Waiver of Possessory Rights were executed
for an illegal cause, thus completing all the requisites for the application of Article 1411. Both
petitioner and respondent are, therefore, in pari delicto. Neither one may expect positive relief
from the courts from their illegal acts and transactions. Consequently, they will be left as they
were at the time the case was filed.

G.R. No. 161407               June 5, 2009

JOAQUIN VILLEGAS and EMMA M. VILLEGAS vs. RURAL BANK OF TANJAY, INC

FACTS: Petitioners obtained an agricultural loan of ₱350,000.00 from respondent Rural Bank of.
The loan was secured by a real estate mortgage on petitioners residential house. For failure of
petitioners to pay the loan upon maturity, the mortgage was extrajudicially foreclosed. Petitioners
filed an he action for declaration of nullity of loan and mortgage contracts, recovery of possession
of real property admiting that the loan and mortgage contracts were made to appear as several
sugar crop loans not exceeding ₱50,000.00 each – even if they were not – just so the respondent
rural bank could grant and approve the same pursuant to Republic Act (R.A.) No. 720, the Rural
Banks Act.

ISSUE: Whether petitioners may recover possession of the mortgaged properties.

Petitioners

HELD: Although these loan and mortgage contracts were concealed and made to appear as
sugar crop loans to make them fall within the purview of the Rural Banks Act, all the essential
requisites of a contract9 were present. However, the purpose thereof is illicit, intended to
circumvent the Rural Banks Act requirement in the procurement of loans.10 Consequently, while
the parties intended to be bound thereby, the agreement is void and inexistent under Article
140911 of the Civil Code.

Petitioners did not come to court with clean hands. They admit that they never planted sugarcane
on any property, much less on the mortgaged property. Yet, they eagerly accepted the proceeds
of the simulated sugar crop loans. Petitioners readily participated in the ploy to circumvent the
Rural Banks Act and offered no objection when their original loan of ₱350,000.00 was divided
into small separate loans not exceeding ₱50,000.00 each.

Clearly, both petitioners and respondent are in pari delicto, and neither should be accorded
affirmative relief as against the other.

G.R. No. 150654               December 13, 2007

HEIRS OF ANACLETO B. NIETO vs. MUNICIPALITY OF MEYCAUAYAN, BULACAN

FACTS: Anacleto Nieto was the registered owner of a parcel of land. Upon Anacleto’s death on
July 26, 1993, his wife, Sixta P. Nieto, and their three children, herein petitioners, collated all the
documents pertaining to his estate. Petitioners discovered that the missing copy of the title was in
the possession of the respondent. Consequently demanded from respondent the return of
property and the certificate of title. Respondent alleged that the property was donated to it and
that the action was already time-barred because 32 years had elapsed since it possessed the
property.

ISSUE: Whether the action for recovery has prescribed and is already barred by laches

HELD: No. An action to recover possession of a registered land never prescribes in view of the
provision of Section 44 of Act No. 496 to the effect that no title to registered land in derogation of
that of a registered owner shall be acquired by prescription or adverse possession. The rule on
imprescriptibility of registered lands not only applies to the registered owner but extends to the
heirs of the registered owner as well. 9 Hence, petitioners, cannot be barred by prescription from
claiming the property.

Even if we apply the doctrine of laches to registered lands, it would still not bar petitioners’ claim.
Case law teaches that if the claimant’s possession of the land is merely tolerated by its lawful
owner, the latter’s right to recover possession is never barred by laches. Even if it be supposed
that petitioners were aware of respondent’s occupation of the property, and regardless of the
length of that possession, the lawful owners have a right to demand the return of their property at
any time as long as the possession was unauthorized or merely tolerated, if at all.
G.R. No. 160346               August 25, 2009

PURITA PAHUD, SOLEDAD PAHUD vs. COURT OF APPEALS

FACTS: Eufemia, Ferdinand and Raul executed a Deed of Absolute Sale of Undivided
Shares5 conveying in favor of petitioners (the Pahuds) their respective shares from the lot they
inherited from their deceased parents. Eufemia also signed the deed on behalf of her 4 other co-
heirs, namely: Isabelita on the basis of a special power of attorney executed on September 28,
1991,7 and also for Milagros, Minerva, and Zenaida but without their apparent written
authority.8 Alarmed and bewildered by the ongoing construction on the lot they purchased, the
Pahuds immediately confronted Eufemia who confirmed to them that Virgilio had sold the
property to the Belarminos.20 

ISSUE: What is the status of the sale of the subject property by Eufemia and her co-heirs to the
Pahuds.

HELD: Article 1874 of the Civil Code plainly provides that when a sale of a piece of land or any
interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the
sale shall be void. Also, under Article 1878, 25 a special power of attorney is necessary for an
agent to enter into a contract by which the ownership of an immovable property is transmitted or
acquired, either gratuitously or for a valuable consideration.
In several cases, we have repeatedly held that the absence of a written authority to sell a piece of
land is, ipso jure, void. However, while the sale with respect to the 3/8 portion is void by express
provision of law and not susceptible to ratification, 31 we nevertheless uphold its validity on the
basis of the common law principle of estoppel.

True, at the time of the sale to the Pahuds, Eufemia was not armed with the requisite special
power of attorney to dispose of the 3/8 portion of the property. However, during the pre-trial
conference, they admitted that they had indeed sold 7/8 of the property to the Pahuds sometime
in 1992.33 Thus, the previous denial was superseded, if not accordingly amended, by their
subsequent admission. The 3 heirs concerned assail the validity of the transaction made by
Eufemia to the Pahuds on the basis of want of written authority to sell. They could have easily
filed a case for annulment of the sale of their respective shares against Eufemia and the Pahuds.
Instead, they opted to remain silent

By their continued silence, Zenaida, Milagros and Minerva have caused the Pahuds to believe
that they have indeed clothed Eufemia with the authority to transact on their behalf. Clearly, the
three co-heirs are now estopped from impugning the validity of the sale from assailing the
authority of Eufemia to enter into such transaction.