FIRST DIVISION Aldecoa & Co. began a civil action against Alejandro S.
Co. began a civil action against Alejandro S. Macleod and others for the recovery of
[G.R. No. 5496. February 19, 1910. ]
MERCEDES MARTINEZ Y FERNANDEZ ET AL., Plaintiffs-Appellants, v. THE HONGKONG
& SHANGHAI BANKING CORPORATION ET AL., Defendants-Appellees.
Bruce and Lawrence, for Appellants.
Hausserman & Cohn and Rosado, Sanz & Opisso, for Appellees.
SYLLABUS
1. ACTION TO SET ASIDE A CONTRACT; DURESS. Action to set aside a contract on the
ground that it had been executed under duress. Facts fully examined and held not sufficient to On the 13th day of July, 1907, it becoming apparent that criminal proceedings would be
sustain the contention.
DECISION
MORELAND, J. :conveyance not only of all the property of Alejandro S. Macleod but also of at least a portion of
This is an action to set aside a contract on the ground that plaintiffs consent thereto was given conveyance required of her, maintaining that the property which she was asked to transfer was
under duress and undue influence. Alejandro S. Macleod is joined as plaintiff only for the reason her separate and exclusive property and not liable for the debts of her husband. Her position
that he is husband of Mercedes Martinez and he takes part in the action personally.
In the statement of the facts and some of the legal prepositions involved, we have made free
use of the forms contained in the briefs of both parties.
Alejandro S. Macleod was foe many years the managing partner of the house of Aldecoa & Co. her by Mr. Fisher and her attorney-in-fact. Some of these claims involved criminal as well as
in the city of Manila. he withdrew from the management on the 31st day of December, 1906,
when Aldecoa & Co. went into liquidation. At the time the Aldecoa & Co. ceased active business by Aldecoa & Co. The plaintiff, however, refused to accept such settlement.
the Hongkong & Shanghai Banking Corporation was a creditor of that firm to the extent of
several hundred thousand pesos and claimed to have a creditors lien in the nature of a pledge
over certain properties of the debtor. In April, 1907, the bank began a civil action against
Alejandro Macleod, his wife Mercedes Martinez, Aldecoa & Co., and the firm known as Viuda e
Hijos de Escao. In the banks complaint it was alleged that a certain undertaking in favor of the
Aldecoa & Co. had been hypothecated to the bank to secure the indebtedness of the Aldecoa &
Co., but that this obligation had been wrongfully transferred by Alejandro S. Macleod into an
obligation in favor of his wife, Mercedes Martinez, to the prejudice of the bank. In May. 1907,
certain shares of stock of the par value of P161,000 and for damages in the sum of P150,000,
basing its right to recover upon alleged criminal misconduct of Mr. Macleod in his management
of the firms affairs.
When the two causes of action above referred to were discovered and the suits there mentioned
commenced, Alejandro S. Macleod and Mercedes Martinez, his wife, engaged in services of
Messrs. Del-Pan, Ortigas and Fisher, attorneys at law, to represent and defend them in the
matter. Soon thereafter these attorneys made overtures to the liquidator of Aldecoa & Co. for
the settlement of the latters claims. While these negotiations were pending Aldecoa & Co.
claimed that they have made discoveries of many frauds which Macleod had perpetrated against
the company during the period of his management, whereby the company had been defrauded
of many thousands of pesos.
instituted against him, Macleod went from Manila to the Portuguese colony of Macao, a territory
covered, it appears, by extradition treaty between the United States and the Portuguese
Government. Four days thereafter, on the 17th day of July, Aldecoa & Co. filed a complaint
against Mr. Macleod, charging him with the falsification of the commercial document, and a
warrant of arrest was issued by the Court of First Instance of Manila, and the executive
department of the Philippine Government issued a formal request to the Portuguese authorities
for the extradition of the accused. This request was denied. In the meantime the attorneys for
the respective parties were engaged in the negotiations for the settlement and compromise of
the differences then pending a clearance of Mr. Macleod from all claims and demands of his
creditors, Aldecoa & Co. and the bank, as a consideration for such settlement, instead upon the
the property claimed by his wife, the plaintiff herein. The settlement offered at that time was
the same which was subsequently accepted and consummated on the 14th of August as shown
by Exhibit A. There appears to have been little resistance to this demand on the part of the
representatives of Mr. Macleod, but his wife, the plaintiff herein, stoutly objected to the
was fully stated by her to her attorney, Mr. Fisher, and to her attorney-in-fact, Mr. William
Macleod. An interview between her attorney and the attorney for Aldecoa & Co. followed this
declaration on her part. Thereafter on the ninth of August 4 another interview was had between
the plaintiff and her counsel, Mr. Fisher, and others, at which a long list of claims against Mr.
Macleod, prepared by Aldecoa & Co. was exhibited to the plaintiff and its contents explained to
civil liability. Mr. Fisher at that time favored a settlement in accordance with the terms proposed
This being the state of affairs, one of the attorneys for the bank, on the 7th day of August,
1907, was called upon by counsel for both Aldecoa & Co. and the plaintiff in this action, who
requested him to act as intermediary between the parties and to suggest means by which a
settlement could be obtained. At that interview it was agreed that a full explanation of the
condition of affairs should be made to Mr. Kingcome, a son-in-law of the plaintiff and a
businessman. This explanation was made by Mr. Stephen, manager of the Hongkong &
Shanghai Banking Corporation, one of the friends of Mr. Kingcome, at an interview arranged
between them the pursuant to the arrangements made by the attorneys for the parties.
Whether or not Mr. Kingcome communicated the substance of that interview with Mr. Stephen to the property in Malate, of which she had conveyed a half interest, into two equal parts. She
his mother-in-law, the plaintiff, before she signed the document in question is in dispute in this negotiated for a partition of the land on the basis of this survey. She joined in the motion for the
case. There is some doubt from the record as to exact language used in this conversation dismissal of the civil action to which she had been a party and in the motion in the Court of
between Kingcome and Stephen, but it appears that some reference was made to the interest Land Registration for the recording in the name of the grantees of a half interest in the Malate
with the British colony of Manila, of which Messrs. Stephen, Kingcome, and Macleod were land. All of these acts were in pursuance of Exhibit A.
prominent members, would have in avoiding the scandal and disgrace to the latter which might
be expected to ensue unless the differences between the parties to this action were amicably On December 3, 1907, the plaintiff filed her complaint in the present action, and, after the
arranged. It seems at that interview that Mr. Stephen suggested to Mr. Kingcome that he advise joining of issue and the hearing of evidence, judgment was rendered in favor of defendants on
his mother-in-law to act reasonably in negotiating the proposed settlement. It appears that Mr. the 29th of May, 1909. From this judgment, after the usual motion for a new trial, its denial and
Kingcome got the impression from that interview that Mr. Stephen thought unless the exception to such denial, plaintiff appealed to this court.
settlement were consummated additional and mortifying misfortunes would fall upon Mr.
Macleods family. The Civil Code in relation to the subject-matter in hand contains the following provisions: jgc:chanrobles.com .ph

About the time that the interview between Kingcome and Stephen was celebrated Mr. Fisher
was enlisting the services of Mr. William Macleod, a nephew and close friend of plaintiff and her
husband, and plaintiffs attorney-in-fact, for a mission to a plaintiff of a similar character to that
of Mr. Kingcome. Mr. William Macleod, as well as Mr. Kingcome, seems to have been persuaded
by what was told that the consequences of plaintiffs continued refusal to make the settlement
would be disastrous to Alejandro S. Macleod and his family would be an exhibition of very bad
judgment in every way.
"ART. 1265. Consent given under error, violence, intimidation, or deceit shall be null.
"ART. 1267. There is no violence when, in order to obtain the consent, irresistible force is used.
"There is intimidation when of the contracting parties gives his consent on account a reasonable
and well-grounded fear of suffering an imminent and serious injury to his person or property, or
to the person or property of his spouse, descendants, or ascendants.

On August 9, 1907, the prosecuting attorney filed a second complaint against Alejandro S.
Macleod and his associate, Osorio, charging them with embezzlement and causing warrants of
extradition to issue. The complaint was made at the instance of the prosecuting attorney
because he had heard that Macleod and Osorio were about to leave for Europe and he wanted
to intercept them in territory from which they could be extradited.
"In determining whether or not there is intimidation the age, sex, and status of the person
intimidated must be considered.
"Fear of displeasing the persons to whom obedience and respect are due shall not annul the
contract.

On the 11th of August along conference was held between plaintiff, her attorney, Mr. Kingcome, ART. 1268. Violence or intimidation shall annul the obligation, even though such violence or
her son-in-law, and William Macleod, her attorney-in-fact, at which she was informed in intimidation shall have been used by a third person who did not take part in the contract." cralaw virtua1aw library

substance that if she assented to the requirements of Aldecoa & Co. and the bank the civil suits
against herself and her husband would be dismissed and the criminal charges against him
withdrawn, while if she refused her husband must either spend the rest of his life in Macao or
criminally prosecuted on the charges already filed and to be filed. At that interview plaintiff
refused to accede to the terms of settlement and that interview was terminated by a statement
on the part of Mr. Fisher, which was "Gentlemen, it is evident that there can be no compromise
or settlement, and the only thing left us to do is to defend Mr. Macleod in the best possible
manner." cralaw virtua1aw library
In order that this contract be annulled it must be shown that the plaintiff never gave her
consent to the execution thereof. If a competent person has once assented to a contract freely
and fairly, he is bound. Contracts which are declared void and of no force upon the ground that
they were obtained by fraud, duress, or undue influence are so declared for the reason that the
complaining party never really gave his consent thereto. The consent in such case is not in the
eye of the law a consent at all. The person has not acted. He has done nothing. He was in
vinculis.

On the 12th of August, at an interview had between the plaintiff and her attorney-in-fact, Mr.
William Macleod, the plaintiff acceded to the terms proposed by the defendants and authorized
Mr. William Macleod to execute the contract of settlement on her behalf. The document of
settlement was prepared and after certain corrections upon the part of the plaintiffs attorney,
making the same entirely satisfactory to them, it was signed by the plaintiffs attorney-in-fact
on her behalf on the 14th of August. It was thereafter and on the same day ratified by the
plaintiff, who executed the same in person.
After Aldecoa & Co. and the bank had taken possession of the property of plaintiff and her
husband, conveyed to them by Exhibit A, the civil suits were dismissed, the criminal charges
withdrawn, and Mr. Macleod returned from Macao to Manila. The plaintiff had a surveyor divide
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 wishes and desires or even against his better judgment. Contracts are also valid
even though they are entered into by one of the parties without hope of advantage or profit. A
contract whereby reparation is made by one party for injuries which he has willfully inflicted
upon another is one which from its inherent nature is entered into reluctantly and against the
strong desires of the party making the reparation. He is confronted with a situation in which he
find the necessity either of making reparation or of taking the consequences, civil or criminal, of
his unlawful acts. He makes the contract of reparation with extreme reluctance and only by the
compelling force of the punishment threatened. Nevertheless such contract is binding and
enforceable. Such a contract differs entirely in its incidents from a contract entered into by a
party for the purpose of gain. The latter contract is made with pleasure and its terms complied v. Campbell (123 Mo., 1); Galusha v. Sherman (47 L. R. A., 417); McMahon v. Smith (47 Conn.,
with gladly. The former is a contract the execution of which the party is very apt to repent and 221, 36 Am. Rep., 67); Gorringe v. Reed (23 Utah, 120 90 Am. St. Rep., 692); Bank v. Bryan
terms of which he is very likely to evade if he can. It is not conclusive against them that (62 Ia., 42); Rau v. Zedlitz (132 Mass., 164); Lomerson v. Johnston (47 N. J. Eq., 312);
Aldecoa & Co. demanded that the plaintiff do something upon pain of punishing her husband for McGrory v. Reilly (14 Phila., 111); Foley v. Greene (14 R. I. 618); Coffman v. Lookout Bank (5
his crimes. It is not conclusive that the plaintiff disliked exceedingly to do what they demanded. Lea, 232); Haynes v. Rudd (102 N. Y., 372); Cribbs v. Sowle (87 Mich., 340); Osborne v.
Neither is it conclusive that the plaintiff now regrets having performed at their demand instead Robbins (36 N. Y., 365); Rall v. Raguet (4 Ohio, 400); Bank v. Kirk (90 Pa. St., 49); Eadie v.
of compelling a resort to judicial proceedings. It is not for these reasons that this contract may Slimmon (26 N. Y., 9); Harris v. Carmody (131 Mass., 51); Taylor v. Jacques(106 Mass., 291);
be declared null and void. If such a contract were illegal, then, for the same reason, every Bryant v. Peck & W. Co. (154 Mass., 460); Hensinger v. Dyer (147 Mo., 219); Mack v. Praug
contract would be illegal whereby pending litigation is settled by agreement of the parties rather (104 Wis., 1); Benedict v. Broome (106 Mich., 378); Williams v. Bayley (1 Eng. & Ir. App. Cas.,
than by decision of the court. If such a contract were null and void, then would be null and void 200); Central Bank v. Copeland (18 Md., 305, 81 Am. Dec., 597); Bradley v. Irish (42 Ill, App.,
every contract whereby a wrongdoer and he who assisted him made reparation for that which 85); Snyder v. Willey (33 Mich., 483).
he had misappropriated or misapplied. 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 All of the above case, except Harris v. Carmody, Hensinger v. Dyer, and Williams v. Bayley, are
greater gain or profit by reason of such change and an agreement wherein one of the distinguishable from the case at bar in the following particulars:
chanrob1es virtual 1aw library

contracting parties agrees to accept the lesser of two disadvantages. In either case he makes a
choice free and untrammeled and must accordingly abide by it. These are evidences of duress, 1. In those cases there was no time within which to deliberate the matter as it should have
facts from which duress may be inferred, but they are not duress of themselves. In the absence been deliberated.
of other proof and circumstances, they might very well be held to establish duress. But there is
other proof and we do not believe that under all the facts of this case as disclosed by the record 2. There was no time or opportunity to take the adivice of friends or of disinterested person.
we can say that the court below erred when he refuse to find that the plaintiff entered into the
contract in question by reason of duress and undue influence. We find lacking in this case many 3. There was no time or opportunity to take the advice of counsel.
of the essential elements usually found in cases of duress. The most that the facts disclose is
that the plaintiff was loath to relinquish certain rights which she claimed to have in certain 4. The threats made to secure the performance of the act complained of were made directly to
property to the end that she might be relieved from litigation them pending against her and that the complaining party by the person directly interested or by some one in his behalf who was
her husband might escape prosecution for crimes alleged to have committed; and that she working in his interest and who had no interest whatever in the welfare of the complaining
persisted for a considerable time in her refusal to relinquish such claimed rights. The fact that party.
she did relinquish them upon such consideration and under such condition does not of itself
constitute duress or intimidation, nor does it destroy the obligatory effect and force of her 5. There was no consideration for the performance of the act complained of except immunity
consent. In order to do so something more is needed. Such influence must have been exercised from the prosecution threatened.
over her that she was deprived of her free will and choice. She must have acted from fear and
not from judgment. 6. The property transferred or incumbered by the act complained of was the separate property
of the person performing the act in which the person for whom the act was performed claimed
Not every contract made by a wife to relieve her husband from the consequences of his crimes no interest whatever.
is voidable. Subject to certain restrictions a wife may legally dispose of her property as she
pleases; she may squander it; she may give it away; she may pledge or transfer it to keep her 7. There was no dispute as to the title of the property transferred or incumbered, no claim
husband out of state prison. The question in each case is exactly the same as in all such made to it by anybody, no suits pending to recover it or any portion of it, and no pretension that
relations, was she acting according to the dictates of her own judgment, whether good or bad, it could be taken for the debts of the husband or of any other person.
or from fear, force or undue influence? If there are time and opportunity for judgment to take
the place of fear, and if apart from the threat there are reasons disclosed which might lead one In the case of Harris v. Carmody, Hensinger v. Dyer, and Williams v. Bayley, above excepted, the
in the exercise of good judgment to perform the acts complained of, then the evidence as complainant had the benefit of legal advice and the advice of some friend but in none of those
duress and undue influence must be very clear in order that such acts may be recalled. cases were there present any of the other circumstances just enumerated.

The appellant cites many cases in support of her contention that the contract of the 14th of In the case of Hensinger and another v. Dyer 9147 Mo., 219), it appeared that the plaintiffs
August should be abrogated. were the tenants of the defendant on defendants farm. During the last year that they had
occupied this farm they raised some 500 bushels of corn upon which the defendant claimed to
We have carefully examined not only all of the cases cited by the appellant but also have a lien under the statute. The plaintiff Hensinger sold the corn and applied the proceeds to
substantially all of the cases within our reach relating to the question before us. Among them his own use. Dyer threatened to institute criminal proceedings against Hensinger for embezzling
are the following: Adams v. Irving National Bank (116 N. Y., 606); Allen v. Laflore County (76 the corn if he and his wife did not execute to him their note for its value, secured by a deed of
Miss., 671); Bentley v. Robson (117 Mich., 691); Burton v. McMillan (8 L. R. A., N. S., 991); Bell trust upon the land of Mrs. Hensinger. They testified that because of this threat and in fear of
said prosecution they executed the note and deed of trust as required. Shortly before the
papers were executed the defendant went to plaintiffs residence, some 7 miles from
defendants home, taking with him a notary public to take the acknowledgment of the deed of
trust in the event that he succeeded in getting the plaintiffs to execute it. This was one of the
occasions upon which the defendant threatened to prosecute Hensinger if he and his wife did
not execute the deed of trust as required. Mrs. Hensinger had all the time refused and still
refused to execute the deed; but upon the afternoon of that day plaintiffs went to Sedalia to
consult with their son and with their attorney and thereafter went to J. M. Bailers office and
if I did not obligate my property as security. Fearing that he was going to be put in jail again, I
was compelled to sign, it being a time when we and others were under fear and I was afraid
that he would be punished and that they would deport him. In the fear that I was then under I
did not know any other remedy but to sign. He told me that my husband would be sent again to
jail if I did not sign.
"This communication was carried on through the medium of an interpreter, one Pedro Regalado,
who testified:jgc:chanroble s.com.ph

there executed the papers in question. The court held that the note and deed of trust were
voidable as having been executed under duress. " The provost judge told Sra. Vicenta . . . in these terms: "You sign a document guaranteeing
with your property the obligation contracted by Sr. Doronilla, your husband." She answered to
It is at once apparent, however, that the facts differ materially from those in the case at bar. In these words that her husband was not guilty of the loss of the documents, as when the
that case the plaintiffs contended against the personal presence of the defendant and all of the bombardment came the documents were in a trunk and were lost during the bombardment.
influence which the presence implies. In that case there was absolutely no consideration moving When she said that she could not respond, then the provost said:" You sign this document; you
to Mrs. Hensinger inducing the execution of the papers in question except the release of her either sign this document or I will send your husband back to jail." More or less I remember
husband from prosecution. There was lacking in that case everything, every consideration which that he said:" Interpreter, tell her to either sign this document or I will have her husband sent
would appeal to the judgment or reason of the complaining party. again to jail." "

The same may be said of the other two cases, Harris v. Carmody and Williams v. Bayley. In this case the wife sued to set aside the obligation upon the ground that it was obtained from
her by duress and undue influence. She justly succeeded.
The plaintiff cites also the case of Jalbuena v. Ledesma Et. Al. (8 Phil. Rep., 601). In that case it
appeared, as stated by the court, that A mere reading of the facts in that case discloses that it can not be used as an authority in the
case at bar. It is widely different in its facts.
"Ildefonso Doronila, having been the tutor of the Ledesma minor children, was cited in August,
1900, before the provost court of Iloilo on the petition of the defendant Lopez, to show cause A careful analysis of this case discloses the following peculiarities:
chanrob1es virtual 1aw library

why he should not surrender the papers, securities, and money in his charge, and he was in the
course of the proceeding ordered to render his accounts as tutor, and it is to be inferred form In the first pace, the undisputed evidence demonstrates that the first offers of compromise were
the testimony of the defendant Ledesma that the accounts were in fact rendered. On December made by the plaintiff herself through her representatives. It appears that from first to last the
3, he came to an agreement with the defendant Lopez as representative of the Children, effort and anxiety to compromise the claims of the defendants were on the part of the plaintiff
whereby his accounts were allowed and accepted and the value of the missing papers, claimed though her representatives. The position of Aldecoa & Co. thoughout the negotiations, as it
to have been lost in the bombardment of Iloilo, was fixed at P12,000, and a certain obligation of appears from the testimony in the case, was that a settlement of their claims against the
the estate to Juan Casells to the amount of P4,000 was assumed by him. Subsequently this plaintiff would not result in any peculiar or especial benefit to them inasmuch as by the actions
agreement was ratified by the family council, which imposed, however, an additional condition already commenced against the plaintiff and her husband the defendants would be able, so they
that security should be given by Doronila for the payment of P16,000 in case the missing papers contended, to secure exactly the same property that they would obtain by the settlement
should not be produced within six months and the novation of the debt of Juan Casells accepted proposed. The soundness of this contention was admitted by the attorneys for the plaintiff. It
by the debtor. Thereafter he was brought before the provost judge in the pending proceeding was the desire on the part of a least one of the persons especially interested in Aldecoa & Co.
and was ordered to give additional security, and failing to do so was committed to jail, where he that Alejandro S. Macleod should suffer criminally for the acts which he had committed against
had already been once confined on the institution of the proceeding. As all of his property was the company and such person did not hesitate to say so repeatedly. There seems to have been
already bound to the estate for the performance of his duty as guardian, it became expedient to throughout the negotiations a fear on the part of the attorneys for the plaintiff that, partly, at
find a surety for him, and the plaintiff (wife of Doronila), who had accompanied him to the least, by reason of this especial desire of said person, the negotiations would be broken off by
court, was there upon induced to join with him in this undertaking. As to the proceedings in Aldecoa & Co. before a settlement could be consummated. The defendants never urged the
court, the testimony of the plaintiff, reduced to narrative form, is as follows:
jgc:chanrobles.com .ph plaintiff to desist from her pretensions or to accept the ultimatum laid down by the defendants.
They simply stated to the attorneys for the plaintiff that they must have all of the Maceod
" I remember having been in the office of the provost judge of Iloilo in December 1900. I went property in satisfaction of their claims, and it appeared from the position assumed that it was
there to visit my husband, who was in jail. While there I was summoned before the provost immaterial to them whether they obtained those properties through the courts or by means of a
judge by a soldier, and I went up before the provost and requested him to set my husband free, settlement. They left Macleod and his wife to choose for themselves, upon their own judgment
he not being guilty of anything. I asked him, crying, to put my husband at liberty, but the and upon the advice of their attorneys and relatives, the course to be by them pursued. That
provost did not listen to me; on the contrary, he asked me to file security for what was lost in the defendants were not especially urging the settlement in question is demostrated by the fact
my house during the bombardment, and he told me that he was going to put my husband in jail that Mr. Fisher, the attorney for the plaintiffs, was doubtful about securing the participation of
Aldecoa & Co. in the agreement up to the very moment of its execution, and it appears from the duress and undue influence, rather that as a result of her own deliberate judgment.
evidence of Mr. Chon that Mr. Fisher, laboring under such apprehension, actually withheld
important information from Aldecoa & Co. for fear such information would deter them at the last In the fourth place, it must be remembered that the plaintiff Mercedes Martinez, never at any
moment from giving their assent to the arrangement. time stood alone in the negotiations. There was never a moment when she did not have
interposed between her and the defendants the counsel of skilled attorneys and of interested
In the second place, there were at no time during the course of these negotiations for relatives. Whatever come to her from the defendants, their demands or their threats, if any,
settlement any direct personal relations or communications between the parties to this action. reached her through the medium of her friends and advisers. She had the assistance of legal
During the whole course of the negotiations no person communicated with the plaintiffs on learning and business intelligence and experience. She had the careful and thoughtful advise of
behalf of the defendants alone. The offers, propositions. or threats, if any made by the her family. She was as far as possible relieved from all fear, stress, or influence except such as
defendants were filtered to her through the personality, mind, and judgment of her own were inherent in the circumstances themselves. It appears undisputed that she and her
attorneys or relatives, all of them being persons who had her welfare and the welfare of her relatives and lawyers considered throughout the negotiations and down to and including the
family deeply at heart and who were acting for her and her husband and not for the defendants. time of the execution of the agreement of settlement that her best interest would be subserved
That personal presence of the threatening party and the influence springing therefrom, factors by acceding to the terms laid down by the defendants. From the evidence in the case it is
so potent in duress and undue influence, were wholly lacking. difficult to arrive at a conclusion other that that the acts which she performed in making the
settlement in question were acts which contributed to her welfare and the welfare and the
On the trial an attempt was made to show that the defendants had attempted to influence the welfare of their whole family. While this fact may not be conclusive in the present case, it
plaintiff, Mercedes Martinez, by acting upon her through her son-in-law, Mr. Kingcome. As stated nevertheless is of very great importance and significance in determining the question whether
above, Mr. Stephen was asked by the attorneys for the plaintiff, as well as the attorneys for the duress and undue influence were exercise or whether she acted from uncoerced judgment after
defendants, to see Mr. Kingcome and ask him to explain to his mother-in-law the facts and weighing the reasons pro and con.
circumstance which were the cause of the attempts at settlement for the purpose of inducing
her to act reasonably in the premises. There was some dispute as to whether or not Mr. In the fifth place, we must not overlook the fact that the plaintiff took advantage of said contact
Kingcome actually communicated the substance of that interview to his mother-in-law prior to after its execution and required the complete fulfilling of every one of its provisions favorable to
her signing the contract in question. Mr. Kingcome in his testimony states that according to his herself. She negotiated with Aldecoa & Co. for a partition of the Malate property and to that end
best recollection he communicated the substance of that interview to his mother-in-law on the caused a survey and a division thereof to be made. She demanded of Aldecoa & Co. payment of
11th day of August. In considering this matter it must be remembered that the interview the P2,000 provided for by the contract, which said sum she received. She caused one-half of
between Mr. Stephen and Mr. Kingcome was not brought about by Adecoa & Co. or its said Malate property to be assessed against said company. She caused a change to be made in
representatives. It Mr. Firsher and Mr. Rosado, the one the attorney for the plaintiffs and the the proceedings to register the title to said Malate lands previously begun by her, so as to
other the attorney for the defendant company, upon the request and with the express approval register her title to only one-half thereof. She caused to be dismissed the action pending against
of both of them. The interview which followed between Mr. Stephen and Mr. Kingcome was the her on account of the Escao notes, which dismissal occurred after this present action was
direct act of plaintiff in exactly the same manner and in exactly the same degree as it was the commenced.
act of Aldecoa & Co.
These acts are mentioned not to show a ratification of the contract in the sense that those acts
In the third place, the plaintiff by means of the negotiations and settlement in question was estopped her from thereafter questioning the same, but rather as confirmatory of the theory
engaged partly at least in the settlement of her own suits and controveries. The plaintiff, that in the execution of the contract complained of she acted according to the dictates of good
Mercedes Martinez, together with Aldecoa & Co. and Viuda e Hijos de F. Escao were sued in business judgment rather that from duress and undue influence.
April, 1907, by the Hongkong & Shanghai Banking Corporation in relation to P45,000 worth of
notes claimed to have been fraudulently taken from the assets of Aldecoa & Co. and transferred As we have already stated, not every contract executed by a wife, even though made solely to
into the name and possession of the plaintiff, Mercedes Martinez. This was one of the actions save her husband from the consequences of his crimes, is voidable. Solicitation, importunity,
settled and terminated by the contract in question. In this property the plaintiff released her argument, and persuasion are not undue influence and a contract is not to be set aside merely
rights under the settlement. The only other property to which she released her rights was a half because one party used these means to obtain the consent of the other. Influence obtained by
interest in property in Malate. As to the legality of her claim that this property was her own persuasion or argument or by appeals to the affections is not prohibited either in law or morals
individual property there was a serious question, so serious in fact that she was formally and and is not obnoxious even in courts of equity. Such may be termed "due influence." The line
repeatedly advised by her attorneys that such claim was in their judgment unfounded. These between due and undue influence, when draw, must be with full recognition of the liberty due
are the only interest which the plaintiff, Mercedes Martinez, released or gave over in the every true owner to obey the voice of justice, the dictates of friendship, of gratitude and of
settlement complained of. Both of the claims were substantially in litigation and the legality of benevolence, as well as the claims of kindred, and , when not hindered by personal incapacity
both was seriously questioned and strongly doubted by her own attorneys. While it is not or particular regulations, to dispose of his own property according to his own free choice. (9
necessary to decide and we do not decided whether her claim to either of those properties was Cyc., 455, and cases there cited.)
valid or invalid, still the fact that the validity of her claims thereto was denied by her own
attorneys strongly tends to impeach the claim that she released those properties by reason of On the other hand contracts entered into by a wife whereby she conveys property
unquestionably hers, the sole and only consideration for which contact is the obtaining for her executed the contract in suit of her own free will and choice and not from duress is fully
husband immunity from the criminal prosecution, are always justly the objects of suspicion, and sustained by the evidence.
it is a wise jurisprudence which holds that, where she defends upon the ground that show was
duressed, the party enforcing such contract must expect the very closest scrutiny of th e The judgment of the court below is, therefore, affirmed with cost against the Appellant. So
transaction with the presumptions all against him. Where, , however, as in this case, there is a ordered.
real question as to the validity of claims laid by the wife to the property transferred, some of
which claimed rights are involved in actual litigation in which she is a party, while the remainder
are alleged by opposing claimants to be subjects to seizure and sale under judgments against
the husband; and competent and honorable counsel, after careful and extended consideration of
the facts and the law, advise her that the rights so claimed by her in the property transferred
are fictitious, unreal and defeasible, having no foundation in law, and she, after abundant
opportunity for deliberate consideration, releases such claimed rights and thereby not only
secures immunity for her husband, but also quests litigation against herself, a very different
question is presented It is undisputed that the attorneys for the plaintiff this case advised her
that, from the facts which they had before them, facts of which show was fully informed, her
husband had been guilty of embezzlement and misappropriation in the management of the
business Adecoa & Co. and that, in their judgment, if prosecuted therefor, he would be
convicted. They further advised her that the P45,000 worth of notes claimed by her and to
recover which was part of the purpose of the action against her and her husband by the
Hongkong & Shanghai Banking Corporation were a part of the property of which her husband
had criminally deprived the said company. They advised her that she would not be able to hold
such notes as her own. They further advised her that from the facts before them Aldecoa & Co.
would have no difficulty in getting a judgment for a very large amount against her husband,
and, in that event, the interest which she claimed in the Malate property would be liable to
seizure and sale under said judgment, said property being in heir judgment ganancial. They
informed her that all that Aldecoa & Co. required of her was the transfer of her claimed rights in
said property. They further advised her that if she did not so transfer such property, Aldecoa &
Co. would nevertheless obtain it by means of the actions already commenced and to be
commenced; that if she did transfer it she would lose no more than she would lose by means of
said action and she would gain in addition the immunity of her husband from criminal
prosecution. In other words, under the advice of her counsel, the situation was so presented to
her that it was evident that in signing the agreement of the 14th of August she had all to gain
and nothing to lose, whereas, in refusing to sign said agreement, she had all to lose and
nothing to gain . In the one case she would lose her property and her husband too. The
argument thus presented to her by her attorneys addressed itself to judgment and not to fear. FIRST DIVISION
It appealed to reason and not to passion. It asked her to be moved by common sense and not
by love of family. It spoke to her own interest as much as to those of her husband. The [G.R. No. 90423. September 6, 1991.]
argument went to her financial interest as well as to those of the defendants. It spoke to her
business judgment as well as to her wifely affections. From the opinions of her attorneys, as FRANCIS LEE, Petitioner, v. COURT OF APPEALS, PEOPLE OF THE PHILIPPINES AND
they were presented to her upon facts assumed by all to be true, we do not well see how she PELAGIA PANLINO DE CHIN, Respondents.
could reasonably have reached a conclusion other than that which she did reach. It is of no
consequence here whether or not her lawyers advised her wrongly. It is of no importance Arturo S. Santos for Petitioner.
whether, as matter of law, she would have been deprived of her alleged interest in the
properties mentioned in the manner described and advised by her attorneys. The important
thing is that she believed and accepted their judgment and acted upon it. The question is not
did she make a mistake, but did she consent; not was she wrongly advised, but was she
coerced; not was she wise, but was she duressed.
SYLLABUS
From the whole case were are of the opinion that the finding of the court below that the plaintiff
 "WHEREFORE, premises considered, the Court finds the accused Francis Lee, guilty beyond
reasonable doubt of the offense of Grave Coercion, as charged, defined and penalized under Art.
1. REMEDIAL LAW; EVIDENCE; FACTUAL FINDINGS OF THE COURT OF APPEALS; RULE AND 286 of the Revised Penal Code, and is hereby sentenced to suffer an imprisonment of THREE (3)
EXCEPTION. As a general rule, the findings of facts of the Court of Appeals command utmost MONTHS, of arresto mayor, medium, and to pay a fine of P250.00, with cost.
respect. However, such findings are disregarded if there appears in the record some fact or
circumstance of weight and influence which has been overlooked or the significance of which "The accused is further ordered to indemnify the offended party, Pelagia Paulino de Chin, by
has been misinterpreted that, if considered, would affect the result of the case (see San way of civil liability the sum of P5,000.00 as moral damages and the sum of P2,000.00 as
Sebastian College v. Court of Appeals, Et Al., G.R. No. 84401, May 15, 1991) exemplary damages.

2. CRIMINAL LAW; GRAVE COERCION; FORCE MUST BE IMMEDIATE AND CONTINUOUS AND ". . . ." (p. 33, Rollo)
THREATEN GRAVE DANGER TO THE PERSON DURING ALL THE TIME THE ACT IS BEING
COMMITTED. American authorities have declared that" (t)he force which is claimed to have The facts as stated by the respondent Court of Appeals are undisputed, thus: jgc:chanrobles.com .ph

compelled criminal conduct against the will of the actor must be immediate and continuous and
threaten grave danger to his person during all of the time the act is being committed. That is, it "At about 10:00 oclock in the morning of June 20, 1984, the complainant Mana Pelagia Paulino
must be a dangerous force threatened `in praesenti. It must be a force threatening great bodily de Chin, 23 years old, was fetched from her house at 112 BLISS Site, 8th Avenue, Caloocan
harm that remains constant in controlling the will of the unwilling participant while the act is City by Atanacio Lumba, a bank employee, upon the instruction of the petitioner Branch
being performed and from which he cannot then withdraw in safety." (State v. Hood, 165 NE 2d, Manager Francis Lee of Pacific Banking Corporation (hereinafter referred to as bank). Upon
28, 31-32) arriving at the office of Pacific Banking Corporation located at Caloocan City, petitioner Francis
Lee did not attend to her immediately. After an hour later, the petitioner confronted the
complainant about a forged Midland National Bank Cashier Check No. 3528794, which the latter
allegedly deposited in the account of Honorio Carpio. During the said confrontation, the
petitioner Francis Lee was shouting at her with piercing looks and threatened to file charges
DECISION against her unless and until she returned all the money equivalent of the subject cashier check.
Accordingly, the complainant was caused to sign a prepared withdrawal slip, and later, an
affidavit prepared by the banks lawyer, where she was made to admit that she had swindled
the bank and had return the money equivalent of the spurious check. During her stay at the
said bank, the complainant, who was five (5) months in the family way, was watched by the
MEDIALDEA, J.:banks employees and security guards. It was about six oclock in the afternoon of the same day
when the complainant was able to leave the bank premises.

"Upon the other hand, the petitioner, 37 years old, presented his version, basically a denial of
the charges, to wit: he was the Branch Bank Manager of Pacific Banking Corporation. After
having been informed that Midland National Bank Cashier Check No. 3526794 was dishonored
This is a petition for review on certiorari to set aside the decision of the Court of Appeals dated
for being spurious, he examined the relevant bank records and discovered that complainant
June 29, 1989 which reversed the decision of the Regional Trial Court (RTC), National Capital
Maria Pelagia Paulino de Chin was instrumental in inducing their bank to accept the subject
Judicial Region, Branch 129 at Caloocan City, Metro Manila, and reinstated as well as affirmed in
dollar check and was also the one who withdrew the proceeds thereof, by utilizing a withdrawal
toto the decision of the Metropolitan Trial Court (MTC), Branch 2, same city. The RTC decision
slip purportedly signed by Honorio Carpio. Petitioner, thru Atanacio Lumba, invited the
found the petitioner guilty of the crime of light coercion, the dispositive portion of which
complainant to his office. Responding to his invitation, the complainant arrived at the bank
reads:
before noon of June 20, 1984, but was not attended to immediately as the petitioner had to
jgc:chanrobles.com .ph

attend to other bank clients. The complainant was merely informed about the subject fake dollar
"IN VIEW OF ALL THE FOREGOING, the judgment appealed from is hereby modified. The
check that was deposited with said bank upon her assurance that it was genuine. The
accused Francis Lee is hereby found guilty beyond reasonable doubt of the crime of light
complainant was not compelled into signing the withdrawal slip, but she acted freely and
coercion, as penalized under paragraph 2 of Article 287 of the Revised Penal Code and he is
voluntarily in executing her affidavit and in returning the money equivalent of the subject check.
hereby sentenced to suffer a penalty of TWENTY (20) DAYS of ARRESTO MENOR and to pay
There was nothing unusual during her lengthy stay in the bank." (pp. 44-45, Rollo).
one-third (1/3) of the costs." (p. 40, Rollo)
The sole issue posed in this petition is whether or not the acts of petitioner in simply "shouting
On the other hand, the MTC decision convicted the petitioner of the offense of grave coercion,
at the complainant with piercing looks" and "threats to file charges against her" are sufficient to
the pertinent portion of the same is hereby quoted as follows:
convict him of the crime of grave coercion (p. 6, Rollo).
chanroble svirtualawlibrary

chanrobles virtual lawlibrary

 somebody downstairs" ; that she assured Cruz that the check would be honored between banks
Article 286 of the Revised Penal Code provides: jgc:chanrobles.com .ph (TSN, April 15, 1985, pp. 89-92; Records, 180-183); that on June 11, 1984, the bank, after the
usual clearing period, sent out a notice to Carpio that the proceeds of the check were already
"ART. 286. Grave coercions. The penalty of arresto mayor and a fine not exceeding 500 pesos credited to his account but the same was returned to the bank because the address was false or
shall be imposed upon any person who, without authority of law, shall, by means of violence, not true; that the total amount of the check in pesos was P92,557.44; that the total deposit of
prevent another from doing something not prohibited by law, or compel him to do something Carpio was P92,607.44, his initial deposit of P50.00 being added to the amount of the check;
against his will, whether it be right or wrong. that on the same day, complainant personally inquired from the bank whether the proceeds of
the check have already been credited to Carpios account (TSN, June 11, 1985, p. 163, records,
"If the coercion be committed for the purpose of compelling another to perform any religious act p. 163); that upon an affirmative answer, the bank records show that on that day, the
or to prevent him from so doing, the penalty next higher in degree shall be imposed." complainant withdrew the sum of P12,607.00 thru a withdrawal slip purportedly signed by
cralaw virtua1aw library

Carpio; that in the interim, Carpio allegedly left abroad (Annex C, p. 17, Records); that on June
Considering that the present case does not involve violence but intimidation, the provisions of 13, 1984, she withdrew the sum of P80,000.44 from Carpios account by means of a withdrawal
Article 1335 of the New Civil Code on intimidation are relevant. It states:jgc:chanroble s.com.phslip allegedly signed by Carpio and then, she closed his account; that out of the said amount,
she re deposited the sum of P50,000.00 to her own savings account and received in cash the
"Art. 1335. . . . remaining balance of P30,000.44; and on June 15 and 18, 1984, complainant withdrew the
amounts of P2,000.00 and P18,000.00, respectively from her savings account (Exh. "3",
"There is intimidation when one of the contracting parties is compelled by a reasonable and Records, p. 15, in relation to TSN, October 8, 1985, pp. 194-195, Records, pp. 286-287). chanrobles.com .ph : virtual law library

well-grounded fear of an imminent and grave evil upon his person or property, or upon the
person or property of his spouse, descendants or ascendants, to give his consent. In the light of the foregoing circumstances, petitioners demand that the private respondent
return the proceeds of the check accompanied by a threat to file criminal charges was not
"To determine the degree of the intimidation, the age, sex and condition of the person shall be improper. There is nothing unlawful on the threat to sue. In the case of Berg v. National City
borne in mind. Bank of New York (102 Phil. 309, 316), We ruled that: jgc:chanrobles.com .ph

"A threat to enforce onces claim through competent authority, if the claim is just or legal, does ". . . it is a practice followed not only by banks but even by individuals to demand payment of
not vitiate consent."
cralaw virtua1aw library their accounts with the threat that upon failure to do so an action would be instituted in court.
Such a threat is proper within the realm of the law as a means to enforce collection. Such a
As a general rule, the findings of facts of the Court of Appeals command utmost respect. threat cannot constitute duress even if the claim proves to be unfounded so long as the creditor
However, such findings are disregarded if there appears in the record some fact or circumstance believes that it was his right to do so." cralaw virtua1aw library

of weight and influence which has been overlooked or the significance of which has been
misinterpreted that, if considered, would affect the result of the case (see San Sebastian
College v. Court of Appeals, Et Al., G.R. No. 84401, May 15, 1991).
While the appellate court emphasized the pregnancy and feminine gender of the complainant, it
overlooked other significant personal circumstances which are material in determining the
presence of coercion in this case.
The records show that complainant is a highly educated person who is familiar with banking
The Solicitor General argues that the complainant was intimidated and compelled into disclosing
her time deposit, signing the typewritten withdrawal slip and the affidavit by the petitioners
threat to detain her at the bank.
At this point, there is a need to make a distinction between a case where a person gives his
consent reluctantly and against his good sense and judgment and where he gives no consent at
all, as where he acts against his will under a pressure he cannot resist. Thus, in Vales v. Villa
(35 Phil. 769, 789), We ruled: jgc:chanrobles.com .ph

procedures. She is a graduate of Business Administration major in Banking and Finance from
NCBA. She also finished one semester of MA in graduate school. In 1983, complainant worked ". . . It is clear that one acts as voluntarily and independently in the eye of the law when he acts
with the Insular Bank of Asia and America as a bank teller (TSN, November 20, 1984, pp. 5-7; reluctantly and with hesitation as when he acts spontaneously and joyously. Legally speaking he
Records, pp. 96-98). acts as voluntarily and freely when he acts wholly against his better sense and judgment as
when he acts in conformity with them. Between the two acts there is no difference in law. But
Likewise, it appears that complainant actively participated in the deposit and withdrawal of the when his sense, judgment, and his will rebel and he refuses absolutely to act as requested, but
proceeds of the controversial check. We find that she told Honorio Carpio (, for short), a relative is nevertheless overcome by force or intimidation to such an extent that he becomes a mere
and payee of the check; to open a savings account with the Pacific Banking Corporation (Bank, automaton and acts mechanically only, a new element enters, namely, a disappearance of the
for short) and accompanied him; that subsequently, she presented a Midland National Bank personality of the actor. He ceases to exist as an independent entity with faculties and
Cashiers check payable to Carpio in the sum of $5,200.00 to Mr. Lamberto R. Cruz (Cruz, for judgment, and in his place is substituted another - the one exercising the force or making use
short), PRO Manager, Foreign Department; that she claimed that she was requested by her of the intimidation. While his hand signs, the will which moves it is anothers. While a contract is
uncle to deposit the check for collection; that she was a bank depositor and she "knew made, it has, in reality and in law, only one party to it; and, there being only one party, the one
using the force or the intimidation, it is unenforceable for lack of a second party. Q Why?

"From these considerations it is clear that every case of alleged intimidation must be examined "A He was insisting that I return the amount I have withdrawn especially on June 18 when I
to determine within which class it falls. If it is within the first class it is not duress in law, if it withdrew P18,000.00, Sir.
falls in the second, it is." cralaw virtua1aw library

"COURT: chanrob1es virtual 1aw library

The circumstances of this case reveal that the complainant, despite her protestations, indeed
voluntarily, albeit reluctantly, consented to do all the aforesaid acts. The question is why did you not leave and disregarded him?

Bearing in mind her involvement in the deposit and encashment of the check, the complainant "A Because I cannot just leave him that way, Your Honor.
admitted to being nervous upon being informed that the check was spurious (TSN, November
20, 1984, p. 15; Record, p. 106). "Atty. Dizon: chanrob1es virtual 1aw library

We find that complainants lengthy stay at the bank was not due to the petitioners threat. It Why? What was the reason that you cannot leave him?
was rather due to her desire to prove her innocence. Her testimony on this point is a
revelation: jgc:chanrobles.com .ph "A Because he is insisting that the responsibility of one person be my responsibility and at that
time I was feeling nervous and he did not tell me to stand up and leave, Sir." (ibid, pp. 18-20,
"Atty. Dizon: (counsel for petitioner) Records, pp. 109-111).

You are always talking of signing the withdrawal slip by force, is it not that earlier you admitted In her insistence to clear up her name, it is not farfetched for Us to think that the complainant
that no actual force was employed upon you in connection with the signing of this document voluntarily but grudgingly returned the money to show good faith. Thus, it was she who
and the force that you are claiming was the alleged shouting against you coupled with the informed the petitioner about the existence of the RCBC Time Deposit Certificate (Exh. "A", pp.
statement that you could not leave? 4-5, Records). The allegation that she did so because of petitioners threats came from the
complainant herself. She has not been able to present any other witness to buttress her claim.
"A Yes, sir.
Further, We find that contrary to complainants allegations in her affidavit (ibid, p. 5) it was not
"Q When Mr. Lee was requiring you to sign the withdrawal slip did it not occur to you to leave the petitioner who suggested the encashment of the BCBC Time Deposit Certificate but her
the bank? sister; and that again, it was not the petitioner who agreed to the sisters suggestion but Cruz,
the PRO Manager, Foreign Department of the bank (TSN, January 8, 1985, pp. 40-41, Records,
"Atty. Pangilinan: chanrob1es virtual 1aw library pp. 131-132).

The question has already been answered she said she cannot leave because she is being Moreover, while complainant claimed that her freedom of movement was restrained, she,
threatened. however, was able to move about freely unguarded from the office of the petitioner situated at
the ground floor to the office of Cruz at the mezzanine floor where her sister found her (ibid, pp.
"Atty. Dizon: chanrob1es virtual 1aw library 39-40, Records, pp. 130-131). Undoubtedly, during that time, there were many bank clients
who transacted business with the bank (TSN, November 20, 1984, p. 21; Records, p. 112). The
That was during the time when she first met Mr. Lee. bank security guards then were at their posts. Complainant herself admitted that they
manifested no overt acts to prevent her from leaving despite the alleged loud threats of the
"Court: chanrob1es virtual 1aw library petitioner (ibid, p. 20-21, Records, pp. 111-112) which could be heard considering that the door
to petitioners office was kept open (TSN, October 8, 1985, p. 184, Records, p. 276). Given such
Witness may answer. atmosphere, the complainant still did not leave the bank. chanrobles.com : virtual law library

"A When I was about to sign the withdrawal slip I inquired from him If I signed it I can leave The respondent court cited the prepared typewritten withdrawal slip and the non-presentation of
already but he insisted that I should not leave, Sir. the complainants passbook as indicators of her involuntary acts.

"Q When he told you that did it not occur to you to stand up and go out of the bank? We disagree. The petitioner testified that the general rule was that the bank requires the
presentation of the passbook whenever withdrawals are made. However, there was an exception
"A No, Sir. to this rule, i.e. when the depositor is a regular customer in depositing or withdrawing money in
the bank (TSN, October 8, 1985, pp. 189-190, Records, pp. 281-282). The prosecution failed to
submit evidence to rebut his contentions. Besides, the trial courts conclusion that the our bank who credited this account, Sir.
withdrawal slip was typewritten was without basis considering that the complainant merely
averred that the withdrawal slip was already prepared when she signed it (Exh. "A", Records, p. "Q So it is your bounded (sic) duty to recover money which was paid to someonelse (sic) which
4). payment is not due to him, am I correct?

We also take exception to the following ruling of the appellate court: jgc:chanroble s.com.ph "A It is the duty of our lawyer to recover it, Sir.

"It must be noted that the position of a bank manager is one of prestige and dignity and when "Q Is it not a fact that your lawyer is only your agent?
the said bank was cheated or swindled it certainly reflects on the capability and efficiency of the
manager and one can just imagine the kind of mental attitude and feeling of anger the latter "Atty. Dizon: chanrob1es virtual 1aw library

would have towards the alleged swindler. Shouting, raising of voice and dagger looks are
common characteristics of an angry man and that was what accused Lee exhibited to a fragile I think we are going too far, it has nothing to do with the particular incident subject matter of
weaker sex and pregnant offended party. It would be natural to get angry with someone who the criminal offense.
had victimized you. Naturalness, however is not always righteous. It is like taking the law into
your hands and that was what the accused Lee did." (CA Decision, pp. 11-12, Rollo, pp. 52-53). "Court: chanrob1es virtual 1aw library

This pronouncement creates an impression that the petitioner had made a personal case out of
the situation. However, the evidence does not support this view. We find that at the time the
check was deposited and encashed, the petitioner was then on leave (TSN, June 11, 1985, p.
156; Records, p. 248). Under this circumstance, it is not fair to consider the banks mistake in
accepting and paying the check as the petitioners mistake which could militate against his
efficiency. The petitioner attributed the mistake in the payment of the forged check to the usual
risks in banking business. He stated: chanrob1es virtual 1aw library
Atty. Pangilinan, Private prosecutor (authorized by the Fiscal to prosecute the case in the latters
stead)
"Q So you no longer consider him (Carpio) as entitled in (sic) the proceeds of the check (sic)
and therefore at that point of (sic) time you will now concede that the payment made by you to claimed to have compelled criminal conduct against the will of the actor must be immediate and
him was a big mistake?
"A When we were asking for the respondent and we were locating Honorio Carpio and we
cannot locate him, I consider that a mistake, Sir.
"Q It was a big mistake as a matter of fact?
"A When it comes to the falling of the business considering the big amount I would say big
mistake but only a mistake, it was a usual risk in banking business, Sir.
I see the point of the defense but the witness is very intelligent, I can see the point of counsel,
because in order not to effect his integrity he resorted to this, for example in case of a bark
employee who stole P500.00 and the other one is P200.00, it could have the same mistake
which is supposed to be admonished by removal. You answer.
"A Yes that is the same case whether it is small or big but when it comes to the Manager the
Head Office is very understanding when it comes to bogos checks and of course my work is a
supervisory. Sir." (ibid, pp. 170-171; Records, pp. 263-264).
The most telling proof of the absence of intimidation was the fact that the complainant refused
to sign the promissory note in spite of the alleged threats of the petitioner (TSN, January 8,
1985, p. 48; Records, p. 139). American authorities have declared that" (t)he force which is
continuous and threaten grave danger to his person during all of the time the act is being
committed. That is, it must be a dangerous force threatened in praesenti. It must be a force
threatening great bodily harm that remains constant in controlling the will of the unwilling
participant while the act is being performed and from which he cannot then withdraw in safety."
(State v. Hood, 165 NE 2d, 28, 31-32, Emphasis ours).
The complainant proferred excuses for her action. For one, she claimed that her sisters
presence helped her recover her composure (TSN, November 20, 1984, p. 29, Records, p.
120). chanrobles law library

"Q But of course Mr. Lee, being a mistake that mistake will harm and tense your personality as We are not persuaded. If indeed she had recovered her composure because of her sisters
a Bank Manager? presence, she could have just left the premises in a huff without encashing the RCBC Time
Deposit Certificate or if they (complainant and sister) were already at the RCBC, they could
"A It is up to our Manager to decide but when it comes to other transactions I am handling have desisted from encashing the check and then could have left for home notwithstanding the
Three Million plus and considering that check I dont think with all modesty it will affect me, Sir. alleged presence of Mr. Lumba who was no longer in his own bank but among the RCBC clients
or she could have refused to sign the affidavit which was handed to her first before the
"Q But you are called upon to try to recover any money which was in your judgment was promissory note. Yet, she did neither of these logical possibilities.
unlawfully taken from you by anybody?
Secondly, she averred that she refused to sign the promissory note because she was able to
"A When it comes to procedure I dont think it was unlawfully taken, as a matter of fact it was read its contents unlike the affidavit and she realized that she would have a great responsibility
to return the amount taken by Carpio (ibid, pp. 27-28, Records, pp. 118-119).

Such an excuse is flimsy and weak. It is strange that complainants sister, who was with her,
failed to corroborate her statement that she was denied the opportunity to read the affidavit.
Her bare assertion simply confirms the voluntariness of her actions. All her disputed acts were
geared towards proving her good faith. Complainant was willing to return the sum of
P48,000.00 she took since it was only up to this amount where her involvement lies. However,
as soon as she realized that she would have the enormous task of reimbursing the bank the
balance of the proceeds of the forged check allegedly taken by Carpio, she refused to cooperate
any further. Notwithstanding the alleged threats of petitioner, she did not budge. Thus, We find
it as a logical consequence that she merely asked for the receipt of the P18,000.00 she
deposited rather than the cancellation of her earlier withdrawal. On this point, complainant
claimed that after her refusal to sign the document, she no longer insisted on the return of the
money because she felt that it was the only way she could leave the bank premises (TSN,
November 20, 1984, p. 31, Records, p. 120). This pretense, however, was belied by her
subsequent actuations. We find that she and her sister left the bank unescorted to eat their
snack; that they were required by the petitioner to come back; and that they decided not to eat
but instead went home (TSN, November 20, 1984, pp. 31-32, Records, pp. 122-123 and
January 8, 1965, pp. 49-50, Records, pp. 140-141). With such behavior, We are at a loss to
understand how coercion could attach in this case. Obviously, the complainant has not been
cowed into submission.

Against this backdrop, We hold that coercion did not exist in this case. Consequently, the
petitioner should be acquitted.

ACCORDINGLY, the decision appealed from is hereby REVERSED and a new one hereby entered
ACQUITTING the accused of the crime of grave coercion. FIRST DIVISION

SO ORDERED. [G.R. No. 9421. July 24, 1915. ]

L. L. HILL, Plaintiff-Appellant, v. MAXIMINA CH. VELOSO ET AL., Defendants-

Appellees.

Martin M. Levering for Appellant.

P. E. del Rosario for Appellee.

SYLLABUS

1. BILLS AND NOTES; DEFENSES; BURDEN OF PROOF. By the acknowledgment of the

signature of a promissory note the document becomes wholly effective in an action, unless
some exception or defense permitted by law is proven, and if any such there be, the duty to
prove it falls upon the maker of the promissory note or upon the person who derives his right of
action therefrom and utilizes it at a trial.

2. ID.; ID.; DECEIT. As against the contents of a promissory note which sets forth the
consideration for the debt, the deceit and resulting error which one of the debtors ascribes to
his codebtor, because the latter induced him to sign a document in blank, making him believe
 that he was signing an obligation with a different consideration for the debt, is not an available pesos and thirty-three centavos (P6,319.33) shall be paid at the rate of five hundred pesos
defense or exception: (1) When this other obligation, containing a different consideration for the (P500) monthly on or before the 15th day of each month, and the interest shall also be paid
debt, was already set forth in writing in a document subscribed some years before by the debtor monthly. In case said monthly payments are not made in the manner that we have promised
who claims to have been deceived, and was absolutely complete and effective; (2) when the hereinabove, then all the unpaid principal shall become immediately demandable, at the option
codebtor charged with the deceit had nothing to do with the obligation which showed a different of the owner of this promissory note. In case suit be brought for the collection of the amount of
consideration for the debt but, nevertheless, signs, as a joint codebtor, the promissory note this promissory note or any part thereof, we bind ourselves jointly and severally to pay an
containing the consideration for the debt, and signs it as being interested, like the other debtor, additional and reasonable sum as fees of the plaintiffs attorney in said suit.
in the business which gave rise to the consideration for the debt, expressed in the note; (3)
when such allegation of deceit is totally destroyed by the contradictory evidence of the one who (Sgd.) "MAXIMINA CH. VELOSO.
makes the allegation, such evidence being corroborated by a final judgment admitted as proof
against him; and, finally, (4) when there has been a misconception of what constitutes causal "DOMINGO FRANCO.
deceit such as vitiates the contract.
"I consent to my wife, Maximina Ch. Veloso, signing the foregoing document.
3. ID.; ID.; ID. Deceit which annuls the contract is that which brings about consent; it is
termed causal and is not such as is merely incidental. "There is deceit when by words or (Sgd.) "MANUEL M. TIO CUANA.
insidious machinations on the part of one of the contracting parties the other is induced to
execute a contract which without them he would not have made." (Civil Code, art. 1269.) Deceit "CEBU, P. I., December 10, 1910." cralaw virtua1aw library

by a codebtor does not affect the creditor, except where the latter enters into collusion with the
former, when it may produce nullity of the contract; outside of this case it only affects the other This promissory note was indorsed to L. L. Hill on January 12, 1911. The following indorsement
debtor who was deceived and who has a right of action against the person who deceived him or appears on the back: jgc:chanrobles.com .ph

led him into error. Deceit by a third person does not, as a general rule, annul the consent; by
exception, it may lead the contracting party who is deceived into error, which as such, not as "JANUARY 12, 1911.
deceit, may vitiate the consent. In such a case, however, the aggrieved contracting party has
his right of action. "Pay to the order of L. L. Hill.

"E. MICHAEL, S. en C.

"By E. MICHAEL, Gerente." cralaw virtua1aw library

DECISION
Two thousand pesos have been paid on this note that is, four installments of P500 each on
February 10, March 16, April 16, and May 22, 1911, respectively.

On July 5, 1911, L. L. Hill brought the present suit to recover the following sums: P4,319.33,
ARELLANO, C.J. :with interest thereon at the rate of 11 per cent per month from July 1, 1911, until said sum
should be entirely paid; P473.18 as interest on the principal of said note from December 30 to
June 30, 1911; P1,000 as fees for plaintiffs attorney in this suit and for the costs of the
proceedings against the defendants, Maximina Ch. Veloso and Manuel Martinez Tio Cuana.

On December 30, 1910, Maximina Ch. Veloso, the wife of Manuel M. Tio Cuana, and Domingo
Franco, the first named with the consent of her husband, executed and signed a document of
the following tenor:
jgc:chanroble s.com.ph
Defendants, in answer to the complaint, alleged as a special defense that "about the middle of
December, 1910, the deceased Domingo Franco, who was their son-in-law, had stated to them
that attorney Martin M. Levering, in his capacity of guardian of the minor children of Potenciano
Chiong Veloso, had suggested to the said Franco the necessity of the defendants executing in

"For value of the goods we have received in La Cooperativa Filipina we promise to pay jointly Leverings behalf a document in which it should be set forth that the defendants would pay to
and severally to Michael & Co., S. en C., or its order, in the municipality of Cebu, the sum of six Levering, in his capacity of guardian of said minors, the sum of P8,000 which defendants had
thousand three hundred and nineteen pesos and thirty-three centavos (P6,319.33), in the borrowed from Damasa Ricablanca, the former guardian of these minors, in view of the fact that
manner hereinafter set forth, with interest on such part of said principal as may remain unpaid the court had removed this latter from office and appointed said attorney in her stead; that, by
at the end of each month at the rate of one and a half per cent per month until the principal reason of this statement by Levering to Franco, and having, as they did have, confidence in said
shall have been completely paid. The said sum of six thousand three hundred and nineteen decedent, Domingo Franco, on account of his being a member of their family, defendants were
willing to execute in behalf of the said attorney, Levering, a document that should set forth the
sum owed by them to the wards represented by Levering; that, consequently, said Domingo been told by the said Domingo Franco that it was such an obligation, and so she was willing to
Franco had defendants sign, outside his office, a blank paper, stating to them that said paper sign it, because "it was really a debt." cralaw virtua1aw library

would be filled out inside his office by recording on the sheet the obligation contracted by them
in behalf of said wards; that defendants did in fact sign the said paper for the purpose From this testimony of Maximina Ch. Veloso and from her written answer, it appears that in
indicated, and, up to the death of said Domingo Franco, which occurred in May of the present December, 1910, she signed in blank the promissory note now in question; that she signed it in
year (1911) confided in his good faith and in the belief that the paper which they had signed the belief that the obligation which it would contain would be that of acknowledging her debt of
had been duly filled out with the obligation contracted by them in behalf of said wards and had P8,000 in favor of the minor children of Damasa Ricablanca and of paying it to Levering, who at
been delivered to attorney Martin M. Levering as guardian of said minors, but that after the said that time was the guardian of the said minors; that for this reason, in her written answer of
Franco died they learned that at no time had he ever delivered to said attorney any document August 4, 1911, she set up that special defense of error and deceit, when she saw that the
whatever signed by defendants; that they believed that the paper which said deceased had obligation contained in the document signed in blank was a promissory note made out to
them sign for the alleged purpose aforementioned was filled out with a totally different Michael & Co. for P6,319 and some centavos.
obligation from that which they had been made to believe would be set forth therein.
Defendants therefore alleged that, as they had had no transaction whatever with Michael & Co., It appears that Levering, as guardian of the minor children of Damasa Ricablanca, commenced
S. en C., nor with the plaintiff, and as they had not received any kind of goods whatever from proceedings on November 1, 1911, to recover the P8,000 owed by the defendant Maximina Ch.
said firm, and it appearing that they, together with the deceased Domingo Franco, seemingly Veloso, and that the latter, on January 15, 1912, answered the complaint stating that her debt
signed the promissory note, plaintiffs Exhibit A, all these reasons induced them to believe, and was owing to Damasa Ricablanca herself in her own right, but not in her capacity of guardian of
they so alleged, that the said deceased, without their consent, utilized the aforementioned her minor children. (Record, pp. 34 and 36.)
paper for the execution of said promissory note. Defendants further alleged that at no time did
they intended to execute any promissory note in behalf of Michael & Co., S. en C.; that it was If she said this in 1912, it cannot be maintained that in 1910, on being required to recognize
false that Michael & Co. delivered goods to them in La Cooperativa Filipina; and that, of their and pay the debt of P8,000, she consented to sign a document in blank recognizing the debt
own free will, they did not execute any document whatever in behalf of the creditor mentioned and binding herself to pay it to Levering as the then guardian of the minor children of Damasa
in said promissory note." cralaw virtua1aw library Ricablanca. What would have been natural and logical is that then, as in 1912, she would have
refused to execute said obligation in writing in favor of Levering, as she did reject it on January
Evidence was adduced by the parties, after which the Court of First Instance of Cebu, who tried 18, 1912, since she did not consider herself to be in debt to the minors, but to their mother.
the case, rendered judgment absolving defendants from the complaint, with their costs.
This being shown by the record, the allegation of that other fact, entirely contradicted at trial by
Plaintiff appealed, and his appeal having been heard and the evidence reviewed, it appears: the same person, cannot be considered as proof of the error and deceit alleged in this action.
chanrob1es virtual 1aw library

That the trial court sustained defendants special defense in all its parts, making it the principal
ground for his judgment, to wit, that defendants signatures on the promissory note were
obtained by means of the fraud alleged in their answer to the complaint and that defendants at
the trial explicitly acknowledged their signatures. The defendant Maximina Ch. Veloso testified
that her son-in-law, Domingo Franco, had her sign the document in blank; that when she did so
it contained no writing; and that if he made her sign it, and if she did sign it, it was because
Franco had told her that Levering compelled her to execute a document in his behalf "for the
minor children of Damasa Ricablanca," her sister-in-law and widow of Potenciano Ch. Veloso,
who had deposited with her P8,000 belonging to her minor children to whom witness
acknowledged herself to be indebted in the said sum of P8,000.
Assuming this to be true, by the recognition of the signature of the promissory note, the
document became completely effective, unless there be proof of some exception permitted by
law. Were there such an exception, the maker was the person obliged to prove it and, in the
present case, that person is the defendant; and the latter has presented absolutely no proof of
the mistake by reason of which she says she signed the promissory note, nor of the fraud or
deceit she charges to her son-in-law, Domingo Franco, now deceased. Far from it, something
else was shown to have been proven by her own testimony and acts. On her being cross-
questioned as to whether it was true that, as she says, she signed the promissory note in blank
thinking that she was signing an obligation in behalf of Levering as guardian of the estate
belonging to the minor children of her deceased brother, she replied that it was, that she had
It is likewise proven in this case that during the trial, after the defendant Veloso had
acknowledged the debt owing the minors represented by Levering, she was cross-questioned as
to why she had denied it in 1912 when she was sued for its payment; she replied that possibly
demand had been made upon her for payment, but that she did not remember, and on being
cross-questioned as to whether she remembered that judgment had been rendered against her,
she replied that she did and that she had been informed of it by her own attorney.
This is the only thing in the record which may be opposed to the truth and presumption of truth
offered by the contents of a document freely and willingly signed.
This is not proof, much less preponderant proof, that can outweigh the contents of the
promissory note that is the basis of the complaint; on the contrary, it is conclusive proof of the
falsity of the other cause of debt alleged in the special defense.
But even granted that no such proofs existed in the case; even granted that it was proven at
trial that Domingo Franco acted in the manner stated in the answer and in the defendant
Maximina Ch. Velosos testimony, yet even so, the deceit and error alleged could not annul the
consent of the contracting parties to the promissory, note, nor exempt this defendant from the
obligation incurred. The deceit, in order that it may annul the consent, must be that which the
law defines as a cause. "There is deceit when by words or insidious machinations on the part of
one of the contracting parties, the other is induced to execute a contract which without them he
would not have made." (Civ. Code, art. 1269.) The third assignment of error should be considered like the foregoing two. The statement is in
all respects inadmissible that the promissory note in question is absolutely null and void, not
Domingo Franco is not one of the contracting parties who may have deceitfully induced the merely annulable, and that in such cases the Supreme Court has decided that no rights can be
other contracting party, Michael & Co., to execute the contract. The one and the other of the acquired by a person who obtains a promissory note by indorsement, in support of which
contracting parties, to whom the law refers, are the active and the passive subjects of the averment the decisions in the cases of Palma v. Caizares (1 Phil. Rep., 602) and Lichauco v.
obligation, the party of the first part and the party of the second part who execute the contract. Martinez (6 Phil. Rep., 594) are cited.
The active subject and party of the first part of the promissory note in question is Michael & Co.,
and the passive subject and party of the second part are Maximina Ch. Veloso and Domingo In neither of these decisions is such a doctrine set up The syllabus in the first case says: "A
Franco; two, or be they more, who are one single subject, one single party. Domingo Franco is promissory note which represents a gambling debt and is therefore unenforceable in the hands
not one contracting party with regard to Maximina Ch. Veloso as the other contracting party. of the payee, obtains no greater validity in the hands of an assignee in the absence of showing
They both are but one single contracting party in contractual relation with, or as against, that the debtor has consented to and approved of the assignment." cralaw virtua1aw library

Michael & Co. Domingo Franco, like any other person who might have been able to induce
Maximina Ch. Veloso to act in the manner she is said to have done, under the influence of
deceit, would be, for this purpose, but a third person. There would then not be deceit on the
part of one of the contracting parties exercised upon the other contracting party, but deceit
practiced by a third person.
And that of the second case: "Money lost at a prohibited game cannot be recovered, though the
loser deliver to the winner his note for the amount lost.
"An assignee of such note who took it after it became due has no more rights than his
assignor."
cralaw virtua1aw library

"In accordance with the text of the Code, which coincides with that of other foreign codes,
deceit by a third person does not in general annul consent, and in support of this opinion it is Both of these decisions deal with a promissory note for a sum of money lost at a prohibited
alleged that, in such a case, the two contracting parties act in good faith (on the hypothesis set game; and, in the case at bar, we have not to do with a promissory note of this nature. "The
forth, Michael & Co., and Maximina Ch. Veloso); that there is no reason for making one of the promissory note in question says the trial court was indorsed to L. L. Hill on January 12,
parties suffer for the consequences of the act of a third person in whom the other contracting 1911. The note had then already become due, although the date specified in the note for the
party may have reposed an imprudent confidence. Notwithstanding these reasons, the deceit payment of the first amount of P600 of the principal had not yet arrived." (Bill of ex., p. 13.)
caused by a third person may produce effects and, in some cases, bring about the nullification
of the contract. This will happen when the third person causes the deceit in connivance with, or If the date for the payment of the first amount of P500 had not yet arrived, it follows that the
at least with the knowledge, without protest, of the favored contracting party: the most note had not yet fallen due, because it could have no other due date than that of the first
probable suppositions, in which the latter cannot be considered exempt from responsibility. installment. and this fact was finally recognized by the court in another order wherein he says:
Moreover, and even without the attendance of that circumstance, the deceit caused by a third "It appears that the court erred in that part of his order where he held that the promissory note
person might lead the contracting party upon whom it was practiced into error, and as such, in question fell due on the date of its conveyance by indorsement to L L. Hill." (Bill of ex., p.
though it be not deceit, may vitiate consent. In any case, this deceit may give rise to more or 16.)
less extensive and serious responsibility on the part of the third person, and a corresponding
right of action for the contracting party prejudiced" (in the present hypothesis, Maximina Ch. So that, neither by reason of the indorsement, nor by reason of its object, is the promissory
Veloso against Domingo Franco). (8 Manresa, 659, 2d Ed.) note null, or annulable, and the aforecited decisions are absolutely inapplicable to the case at
bar.
With respect to the true cause of the debt or cause of the contract, it is not necessary to set
forth any consideration whatever, because, as the deceit and error alleged cannot be estimated, The absolution of the defendants from the complaint being unsupported by any grounds of fact
it is of no importance whether the La Cooperativa Filipina, whose goods were the cause of the or law, it devolves upon this court to set forth the conclusions of fact and law on which this
debt, exclusively belonged to one or the other of the debtors, the obligation of debt and decision rests.
payment being joint. But if any consideration with respect to this error alleged on appeal were
necessary, it would only be that the evidence against the finding contained in the judgment The defendants signatures on the promissory note herein concerned were identified at the
appealed from is very conclusive. Isabelo Alburo, a witness for the defense and manager of La trial.
Cooperativa Filipina, testified that the goods furnished by Michael were received in the store La
Cooperativa Filipina; that he signed the bills for collection; that the bill-heads bore the printed These signatures were written and the obligation was contracted, without error or deceit.
legend "La Cooperativa Filipina de Maximina Ch. Veloso;" and that all the forms, books and
accounts were printed in the same manner. The municipal treasurer exhibited the registry books There is no evidence whatever that Michael & Co. threatened to bring suit against Domingo
and testified that the license for that establishment was issued in the name of Maximina Ch. Franco unless Maximina Ch. Velos signed with Domingo Franco a promissory note for the said
Veloso, and the appellee herself testified that she was aware that it was conducted in her sum.
name.
The facts constituting the consideration for the contract contained in the promissory note are
fully proven (though proof was not necessary, as a presumption of law, not destroyed by any respect to the interest on the P2,000 paid on account.
evidence whatever to the contrary, lies in its favor), because it has been fully proven that the
goods, the consideration for the debt, were received in the La Cooperativa Filipina. It was The judgment appealed from is reversed. Twenty days after notification of this decision, let
likewise fully proven that the La Cooperativa Filipina belonged to the defendant, with or without judgment be entered against the defendant Maximina Ch. Veloso ordering the payment of
Domingo Franco having a share therein, and that the goods came from Michael & Co. P4,319, with the stipulated interest thereon at the rate of 11 per cent per month from July 1,
1911, and of P1,000 as attorneys fees, with costs of first instance, without special finding as to
There is nothing to support the finding that the sale of the goods by Michael & Co. was a sale to the costs of this second instance, it is so ordered.
Domingo Franco only. There is no proof whatever that Levering, as the guardian of the minor
children of Potenciano Veloso, had required Maximina Veloso in December, 1910, to sign a
document recognizing her debt to said minors, nor that Domingo Franco acted, for this purpose,
as the defendants attorney and adviser. With regard to the defendants debt of P8,000 to the
minor children of Potenciano Veloso and Damasa Ricablanca, the instrument attesting this debt,
executed by the defendants in favor of Damasa Ricablanca who was then the guardian of said SECOND DIVISION
minors, had already existed since June 30, 1907, and appears on page 34 of the record.
[G.R. No. 108253. February 23, 1994.]
The facts alleged in the special defense can not in any wise be held to be proven; as above
demonstrated in our examination of the parol evidence adduced in this case, and, besides, LYDIA L. GERALDEZ, Petitioner, v. HON. COURT OF APPEALS and KENSTAR TRAVEL
because of this other consideration: If, as stated in the special defense, "Domingo Franco, who CORPORATION, Respondents.
was a son-in-law of the defendants, had told them that attorney Martin M. Levering, in his
capacity as guardian of the minor children of Potenciano Ch. Veloso, had suggested to Franco
the necessity of the defendants executing an instrument setting out that they would pay to the
said Attorney Martin M. Levering, in his capacity of guardian of said minors, the sum of P8,000
which defendants had borrowed from Damasa Ricablanca, the former guardian of said minors;" DECISION
and if, as held by the trial court in his judgment, Domingo Franco had then acted as defendants
attorney and adviser, there is nothing in the record to show why Domingo Franco had to sign
such an instrument attesting a debt to the minors, as the principal obligor, when the creditor
required no one but the defendants to sign such a document; nor was it shown why, on such a
supposition, Manuel Martinez did not have to sign the instrument except merely to authorize his
REGALADO, J.:
wife, by his permission as her husband, to sign it, when in the special defense it is admitted
that the document in question contains an acknowledgment of the debt of P8,000 "which the
defendants had borrowed from Damasa Ricablanca." cralaw virtua1aw library

The alleged error cannot be sustained. There is no other signed document than the promissory
note presented with the intention, on its being signed, of securing the payment of the goods Our tourism industry is not only big business; it is a revenue support of the nations economy. It
sold to the La Cooperativa Filipina. has become a matter of public interest as to call for its promotion and regulation on a cabinet
level. We have special laws and policies for visiting tourists, but such protective concern has not
That is what the document says, and its contents must be accepted, pursuant to section 297 of been equally extended to Filipino tourists going abroad. Thus, with the limited judicial relief
Act No. 190 (Code of Civil Procedure). available within the ambit of present laws, our tourists often prefer to forget their grievances
against local tour operators who fail to deliver on their undertakings. This case illustrates the
The remainder of the principal owing, P4,319.33, must be paid. Payment must also be made of recourse of one such tourist who refused to forget.
the covenanted interest at the rate of 1 per cent per month from July 1, 1911, until the whole
of the said sum be completely paid; and, finally the P1,000 stipulated in the contract as fees for An action for damages by reason of contractual breach was filed by petitioner Lydia L. Geraldez
the plaintiffs attorney in this case must be paid. against private respondent Kenstar Travel Corporation, docketed as Civil Case No. Q-90-4649 of
the Regional Trial Court of Quezon City, Branch 80. 1 After the parties failed to arrive at an
With respect to the P473.18, interest on the principal of said promissory note from December amicable settlement, trial on the merits ensued.
30, 1910, to June 30, 1911, this amount cannot be recovered, because, in conformity with
article 1110 of the Civil Code, a receipt from the creditor for the principal, that contains no Culling from the records thereof, we find that sometime in October, 1989, Petitioner came to
stipulation regarding interest, extinguishes the obligation of the debtor with regard thereto; and know about private respondent from numerous advertisements in newspapers of general
the receipts issued by the International Bank show that no reservation whatever was made with circulation regarding tours in Europe. She then contacted private respondent by phone and the
latter sent its representative, Alberto Vito Cruz, who gave her the brochure for the tour and respondent court believed otherwise, or that, at least, there was substantial compliance with
later discussed its highlights. The European tours offered were classified into four, and petitioner such a representation.
chose the classification denominated as "VOLARE 3" covering a 22-day tour of Europe for
$2,990.00. She paid the total equivalent amount of P190,000.00 charged by private respondent While clearly there was therefore a violation of the rights of petitioner under the aforementioned
for her and her sister, Dolores.
chanrobles.com .ph : virtual law library circumstances, respondent court, contrary to the findings of the trial court, ruled that no malice
or bad faith could be imputed to private respondent, hence there is no justification for the
Petitioner claimed that, during the tour, she was very uneasy and disappointed when it turned award of moral and exemplary damages. Furthermore, it held that while petitioner is entitled to
out that, contrary to what was stated in the brochure, there was no European tour manager for nominal damages, the amount awarded by the trial court was unconscionable since petitioner
their group of tourists, the hotels in which she and the group were billeted were not first-class, did not suffer actual or substantial damage from the breach of contract, 13 hence its reduction
the UGC Leather Factory which was specifically added as a highlight of the tour was not visited, of such award as hereinbefore stated. chanrobles.com :cralaw:re d

and the Filipino lady tour guide by private respondent was a first timer, that is, she was
performing her duties and responsibilities as such for the first time. 2 After thorough and painstaking scrutiny of the case records of both the trial and appellate
courts, we are satisfactorily convinced, and so hold, that private respondent did commit
In said action before the Regional Trial Court of Quezon City, petitioner likewise moved for the fraudulent misrepresentations amounting to bad faith, to the prejudice of petitioner and the
issuance of a writ of preliminary attachment against private respondent on the ground that it members of the tour group.
committed fraud in contracting an obligation, as contemplated in Section 1 (d), Rule 57 of the
Rules of Court, to which no opposition by the latter appears on the record. This was granted by By providing the Volare 3 tourist group, of which petitioner was a member, with an
the court a quo 3 but the preliminary attachment was subsequently lifted upon the filing by inexperienced and a first timer tour escort, private respondent manifested its indifference to the
private respondent of a counterbond amounting to P990,000.00. 4 convenience, satisfaction and peace of mind of its clients during the trip, despite its express
commitment to provide such facilities under the Volare 3 Tour Program which had the grandiose
During the pendency of said civil case for damages, petitioner also filed other complaints before slogan "Let your heart sing." 14
the Department of Tourism in DOT Case No. 90-121 and the Securities and Exchange
Commission in PED Case No. 90-3738, 5 wherein, according to petitioner, herein private Evidently, an inexperienced tour escort, who admittedly had not even theretofore been to
respondent was meted out a fine of P10,000.00 by the Commission and P5,000.00 by the Europe, 15 cannot effectively acquaint the tourists with the interesting areas in the cities and
Department, 6 which facts are not disputed by private respondent in its comment on the places included in the program, or to promptly render necessary assistance, especially where
present petition. the latter are complete strangers thereto, like witnesses Luz Sui Haw and her husband who
went to Europe for their honeymoon. 16
On July 9, 1991, the court a quo rendered its decision 7 ordering private respondent to pay
petitioner P500.000.00 as moral damages, P200,000.00 as nominal damages, P300,000.00 as We agree with petitioner that the selection of Zapanta as the groups tour guide was deliberate
exemplary damages, P50,000.00 as and for attorneys fees, and the costs of the suit. 8 On and conscious choice on the part of private respondent in order to afford her an on-the-job
appeal, respondent court 9 deleted the award for moral and exemplary damages, and reduced training and equip her with the proper opportunities so as to later qualify her as an
the awards for nominal damages and attorneys fees to P30,000.00 and P10,000.00, "experienced" tour guide and eventually be an asset of respondent corporation. 17
respectively. 10 Unfortunately, this resulted in a virtual project experimentation with petitioner and the
members of the tour as the unwitting participants.
Hence, the instant petition from which, after sifting through the blades of contentions
alternately thrust and parried in the exchanges of the parties, the pivotal issue that emerges is We are, therefore, one with respondent court in faulting private respondents choice of Zapanta
whether or not private respondent acted in bad faith or with gross negligence in discharging its as a qualified tour guide for the Volare 3 tour package. It brooks no argument that to be true to
obligations under the contract. its undertakings, private respondent should have selected an experienced European tour guide,
or it could have allowed Zapanta to go merely as an understudy under the guidance, control and
Both the respondent court and the court a quo agree that private respondent failed to comply supervision of an experienced and competent European or Filipino tour guide, 18 who could give
faithfully with its commitments under the Volare 3 tour program, more particularly in not her the desired training.
cralawnad

providing the members of the tour group with a European tour manger whose duty, inter alia,
was to explain the points of interest of and familiarize the tour group with the places they would Moreover, a tour guide is supposed to attend to the routinary needs of the tourists, not only
visit in Europe, and in assigning instead a first timer Filipino tour guide, in the person of Rowena when the latter ask for the assistance but at the moment such need becomes apparent. In other
Zapanta, 11 to perform that role which definitely requires experience and knowledge of such words, the tour guide, especially by reason of her experience in previous tours, must be able to
places. It is likewise undisputed that while the group was able to pay a visit to the site of the anticipate the possible needs and problems of the tourists instead of waiting for them to bring it
UGC Leather Factory, they were brought there at a very late hour such that the factory was to her attention. While this is stating the obvious, it is her duty to see to it that basic personal
already closed and they were unable to make purchases at supposedly discounted prices. 12 As necessities such as soap, towels and other daily amenities are provided by the hotels. It is also
to the first-class hotels, however, while the court a quo found that the hotels were not fist-class, expected of her to see to it that the tourists are provided with sanitary surroundings and to
actively arrange for medical attention in case of accidents, as what befell petitioners sister and EUROPEAN TOUR MANAGER!
wherein the siblings had to practically fend for themselves since, after merely calling for an
ambulance, Zapanta left with the other tour participants. 19 You get the best of both worlds. Having done so many tours in the past with people like you, he
knows your sentiments, too. So knowledgeable about Europe, there is hardly a question he
Zapanta fell far short of the performance expected by the tour group, her testimony in open cant answer." 27
court being revelatory of her inexperience even on the basic function of a tour guide, to wit: jgc:chanrobles.com .ph

Private respondent contends that the term "European Tour Manager" does not refer to an
"Q Now, are you aware that there were times that the tourists under the Volare 3 were not individual but to an organization, allegedly the Kuoni Travel of Switzerland which supposedly
provided with soap and towels? prepared the itinerary for its "Volare Europe Tour," negotiated with all the hotels in Europe,
selected tourist spots and historical places to visit, and appointed experienced local tour guides
A They did not ell me that but I was able to ask them later on but then nobody is complaining." for the tour group. 28
20
We regret this unseemly quibbling which perforce cannot be allowed to pass judicial muster.
The inability of the group to visit the leather factory is likewise reflective of the neglect and
ineptness of Zapanta in attentively following the itinerary of the day. This incompetence must A cursory reading of said advertisement will readily reveal the express representation that the
necessarily be traced to the lack of due diligence on the part of private respondent in the contemplated European tour manager is a natural person, and not a juridical one as private
selection of its employees. It is true that among the thirty-two destinations, which included respondent asserts. A corporate entity could not possibly accompany the members of the tour
twenty-three cities and special visits to nine tourist spots, this was the only place that was not group to places in Europe; neither can it answer questions from the tourist during the tour. Of
visited. 21 It must be noted, however, that the visit to the UGC Leather Factory was one of the course, it is absurd that if a tourist would want to know how he could possibly go to the nearest
highlights 22 of the Volare 3 program which even had to be specifically inserted in the itinerary, store or supermarket, he would still have to call Kuoni Travel of Switzerland. cralawnad

hence it was incumbent upon the organizers of the tour to take special efforts to ensure the
same. Besides, Petitioner did expect much from the visit to that factory since it was represented Furthermore, both lower courts observed, and we uphold their observations, that indeed private
by private respondent that quality leather goods could be bought there at lower prices. 23 respondent had the obligation to provide the tour group not only with a European tour manger,
but also with local European tour guides. The latter, parenthetically, were likewise never made
Private respondent represents Zapantas act of making daily overseas calls to Manila as an available. 29 Zapanta claims that she was accompanied by a European local tour guide in most
exercise of prudence and diligence on the latters part as a tour guide. 24 It further claims that of the major cities in Europe. We entertain serious doubts on, and accordingly reject, this
these calls were needed so that it could monitor the progress of the tour and respond to any pretension for she could not even remember the name of said European tour guide. 30 If such a
problem immediately. 25 We are not persuaded. The truth of the matter is that Zapanta, as an guide really existed, it is incredible why she could not even identify the former when she
inexperienced trainee-on-the-job, was required to make these calls to private respondent for testified a year later, despite the length of their sojourn and the duration of their association.
the latter to gauge her ability in coping with her first assignment and to provide instructions to
her. 26 As to why the word "he" was used in the aforequoted advertisement, private respondent
maintains that the pronoun "he" also includes the word "it," as where it is used as a "nominative
Clearly, therefore, private respondents choice of Zapanta as the tour guide is a manifest case form in general statements (as in statutes) to include females, fictitious persons (as
disregard of its specific assurance to the tour group, resulting in agitation and anxiety on their corporations)." 31 We are constrained to reject this submission as patently strained and
part, and which deliberate omission is contrary to the elementary rules of good faith and fair untenable. As already demonstrated, it is incredible that the word "he" was used by private
play. It is extremely doubtful if any group of Filipino tourists would knowingly agree to be used respondent to denote an artificial or corporate being. From its advertisement, it is beyond cavil
in effect as guinea pigs in an employees training program of a travel agency, to be conducted in that the import of the word "he" is a natural and not a juridical person. There is no need for
unfamiliar European countries with their diverse cultures, lifestyles and languages.cralawnad further interpretation when the wordings are clear. The meaning that will determine the legal
effect of a contract is that which is arrived at by objective standards; one is bound, not by what
On the matter of the European tour manager, private respondents advertisement in its tour he subjectively intends, but by what he leads others reasonably to think he intends. 32
contract declares and represents as follows: jgc:chanrobles.com .ph

In an obvious but hopeless attempt to arrive at a possible justification, private respondent

"FILIPINO TOUR ESCORT! further contends that it explained the concept of a European tour manager to its clients at the
pre-departure briefing, which petitioner did not attend. 33 Significantly, however, private
He will accompany you throughout Europe. He speaks your language, shares your culture and respondent failed to present even one member of the tour group to substantiate its claim. It is a
feels your excitement. basic rule of evidence that a party must prove his own affirmative allegations. 34 Besides, if it
was really its intention to provide a juridical European tour manager, it could not have kept on
He wont be alone because you will also be accompanied by a . . . promising its tourists during the tour that a European tour manager would come, 35 supposedly
to join and assist them.
chanroble s virtualawlibrary chanrobles.com:chanrobles.com.ph
 tour package that the hotels it had chosen would provide the tourists complete amenities and
Veering to another line of defense, private respondent seeks sanctuary in the delimitation of its were conveniently located along the way for the daily itineraries. 44 It turned out that some of
responsibility as printed on the face of its brochure on the Volare 3 program, to wit: the hotels were not sufficiently equipped with even the basic facilities and were at a distance
jgc:chanrobles.com .ph

from the cities covered by the projected tour. Petitioner testified on her disgust with the
"RESPONSIBILITIES: KENSTAR TRAVEL CORPORATION, YOUR TRAVEL AGENT, THEIR conditions and locations of the hotels, thus: chanrobles.com : virtual law library

EMPLOYEES OR SUB-AGENTS SHALL BE RESPONSIBLE ONLY FOR BOOKING AND MAKING

ARRANGEMENTS AS YOUR AGENTS. Kenstar Travel Corporation, your Travel Agent, their "Q And that these bathrooms ha(ve) bath tub(s) and hot and cold shower(s)?
employees or sub-agents assume no responsibility or liability arising out of or in connection with
the services or lack of services, of any train, vessel, other conveyance or station whatsoever in A Not all, sir.
the performance of their duty to the passengers or guests, neither will they be responsible for
any act, error or omission, or of any damages, injury, loss, accident, delay or irregularity which Q Did they also provide soap and towels?
may be occasioned by reason (of) or any defect in . . . lodging place or any facilities. . . .
(Emphasis by private Respondent.) 36 A Not all, sir, some (had) no toilet paper. 45

While, generally, the terms of a contract result from the mutual formulation thereof by the Q Which one?
parties thereto, it is of common knowledge that there are certain contracts almost all the
provisions of which have been drafted by only one party, usually a corporation. Such contracts A The 2 stars, the 3 stars and some 4 stars (sic) hotels.
are called contracts of adhesion, because the only participation of the party is the affixing of his
signature or his "adhesion" thereto. 37 In situations like these, when a party imposes upon Q What I am saying . . .
another a ready-made form of contract, 38 and the other is reduced to the alternative of taking
it or leaving it, giving no room for negotiation and depriving the latter of the opportunity to A You are asking a question? I am answering you. 2 stars, 3 stars and some 4 stars (sic) hotels,
bargain on equal footing, a contract of adhesion results. While it is true that an adhesion no soap, toilet paper and (the) bowl stinks. . . .
contract is not necessarily void, it must nevertheless be construed strictly against the one who
drafted the same. 39 This is especially true where the stipulations are printed in fine letters and x x x
are hardly legible, as is the case of the tour contract 40 involved in the present controversy.

Yet, even assuming arguendo that the contractual limitation aforequoted is enforceable, private
respondent still cannot be exculpated for the reason that responsibility arising from fraudulent Q And that except for the fact that some of these four star hotels were outside the city they
acts, as in the instant case, cannot be stipulated against by reason of public policy. provided you with the comfort?
Consequently, for the foregoing reasons, private respondent cannot rely on its defense of
"substantial compliance" with the contract. A Not all, sir.

Private respondent submits likewise that the tour was satisfactory, considering that only Q Can you mention some which did not provide you that comfort?
petitioner, out of eighteen participants in the Volare 3 Tour Program, actually complained. 41 We
cannot accept this argument. Section 28, Rule 130 of the Rules of Court declares that the rights A For example, if Ramada Hotel Venezia is in Quezon City, our hotel is in Meycauayan. And if
of a party cannot be prejudiced by an act, declaration, or omission of another, a statutory Florence or Ferenze is in Manila, our hotel is in Muntinlupa. 46
adaptation of the first branch of the hornbook rule of res inter alios acta 42 which we do not
have to belabor here. x x x

Besides, it is a commonly known fact that there are tourists who, although the tour was far
from what the tour operator undertook under the contract, choose to remain silent and forego
recourse to a suit just to avoid the expenses, hassle and rancor of litigation, and not because A One more hotel, sir, in Barcelona, Hotel Saint Jacques is also outside the city. Suppose
the tour was in accord with what was promised. One does not relish adding to the bitter Barcelona is in Quezon City, our hotel is in Marilao. We looked for this hotel inside the city of
memory of a misadventure the unpleasantness of another extended confrontation. Furthermore, Barcelona for three (3) hours. We wasted our time looking for almost all the hotels and places
contrary to private respondents assertion, not only petitioner but two other members of the where to eat. That is the kind of tour that you have." 47
tour group. Luz Sui Haw and Ercilla Ampil, confirmed petitioners complaints when they testified
as witnesses for her as plaintiff in the court below. 43 Luz Sui Haw, who availed of the Volare 3 tour package with her husband for their honeymoon,
shared the sentiments of petitioner and testified as follows: chanrob1es virtual 1aw library

Private respondent likewise committed a grave misrepresentation when it assured in its Volare 3
Q . . . Will you kindly tell us why the hotels where you stayed are not considered first class
hotels?chanroble s law library : red Q You share the opinion of Miss Geraldez?

A Because the hotels where we went, sir, (are) far from the City and the materials used are not A Yes, sir.
first class and at times there were no towels and soap. And the two (2) hotels in Nevers and
Florence the conditions (are) very worse (sic). 48 Q The same is true with Grand Hotel Palatino which is not a first class hotel?

Q Considering that you are honeymooners together with your husband, what (were) your A Yes, sir.
feelings when you found out that the condition were not fulfilled by the defendant?
Q And Hotel Delta Florence is not first class hotel?
A I would like to be very honest. I got sick when I reached Florence and half of my body got itch
(sic). I think for a honeymooner I would like to emphasize that we should enjoy that day of our A That is how I got my itch, sir. Seven (7) days of itch.
life and it seems my feet kept on itching because of the condition of the hotel. And I was so
dissatisfied because the European Tour Manger was not around there (were) beautiful promises. Q How about Hotel Saint-Jacquez, Paris?
They kept on telling us that a European Tour Manager will come over; until our Paris tour was
ended there was no European tour manager. 49 A It is far from the city. It is not first class hotel.

x x x Q So with Hotel Le Prieure Du Coeur de Jesus neither a first class hotel?

A Yes, sir.

Q You will file an action against the defendant because there was a disruption of your Q Hotel De Nevers is not a first class hotel?
happiness, in your honeymoon, is that correct?
A Yes, sir.
A That is one of my causes of (sic) coming up here. Secondly, I was very dissatisfied (with) the
condition. Thirdly, that Volare 89 it says it will let your heart sing. That is not true. There was no Q Hotel Roc Blanc Andorra is not a first class hotel?
European tour (manager) and the highlights of the tour (were) very poor. The hotels were worse
(sic) hotels. 50 A Yes, sir.

Q All the conditions of the hotels as you . . . Q Saint Just Hotel, Barcelona is not a first class hotel?

A Not all but as stated in the brochure that it is first class hotel. The first class hotels state that A Yes, sir.
all things are beautiful and it is neat and clean with complete amenities and I encountered the
Luxembourg hotel which is quite very dilapidated because of the flooring when you step on the Q Hotel Pullman Nice neither is not a first class hotel?
side kumikiring and the cabinets (are) antiques and as honeymooners we dont want to be
disturbed or seen. 51 A Yes, sir.

x x x Q Hotel Prinz Eugen and Austrotel are not first class hotels?

A Yes, sir." 52

Q None of these are first class hotels? Private respondent cannot escape responsibility by seeking refuge under the listing of first-class
hotels in publications like the "Official Hotel and Resort Guide" and "Worldwide Hotel Guide." 53
A Yes, sir. Kuoni Travel, its tour operator, 54 which prepared the hotel listings, is a European-based travel
agency 55 and, as such, could have easily verified the matter of first-class accommodations.
Q So, for example Ramada Hotel Venezia which according to Miss Geraldez is first class hotel is Nor can it logically claim that the first-class hotels in Europe may not necessarily be the first-
not first class hotel? class hotels here in the Philippines. 56 It is reasonable for petitioner to assume that the
promised first-class hotels are equivalent to what are considered first-class hotels in Manila.
A Yes, sir. Even assuming arguendo that there is indeed a difference in classifications, it cannot be
gainsaid that a first-class hotel could at the very least provide basic necessities and sanitary
accommodations. We are accordingly not at all impressed by private respondents attempts to
trivialize the complaints thereon by petitioner and her companions. chanrobles virtual lawlibrary
In a last ditch effort to justify its choice of the hotels, private respondent contends that it
unable to visit the leather factory and when she did not receive first-class accommodations in
their lodgings which were misrepresented as first-class hotels. These, to our mind, justify the
award for moral damages, which are in the category of an award designed to compensate the
claimant for that injury which she had suffered, and not as a penalty on the wrongdoer, 66 we
believe that an award of P100,000.00 is sufficient and reasonable. chanroble s virtual lawlibrary

merely provided such "first class" hotels which were commensurate to the tourists budget, or
which were, under the given circumstances, the "best for their money." It postulated that it When moral damages are awarded, especially for fraudulent conduct, exemplary damages may
could not have offered better hostelry when the consideration paid for hotel accommodations by also be decreed. Exemplary damages are imposed by way of example or correction for the
the tour participants was only so much, 57 and the tour price of $2,990.00 covers a European public good, in addition to moral, temperate, liquidated or compensatory damages. According to
tour for 22 days inclusive of lower room rates and meals. 58 This is implausible, self-serving the Code Commission, exemplary damages are required by public policy, for wanton acts must
and borders on sophistry. be suppressed. 67 An award, therefore, of P50,000.00 is called for to deter travel agencies from
resorting to advertisements and enticements with the intention of realizing considerable profit at
The fact that the tourists were to pay a supposedly lower amount, such that private respondent the expense of the public, without ensuring compliance with their express commitments. While,
allegedly retained hardly enough as reasonable profit, 59 does not justify a substandard form of under the present state of the law, extraordinary diligence is not required in travel or tour
service in return. It was private respondent, in the first place, which fixed the charges for the contracts, such as that in the case at bar, the travel agency acting as tour operator must
package tour and determined the services that could be availed of corresponding to such price. nevertheless be held to strict accounting for contracted services, considering the public interest
Hence, it cannot now be heard to complain that it only made a putative marginal profit out of in tourism, whether in the local or in the international scene. Consequently, we have to likewise
the transaction. If it could not provide the tour participants with first-class lodgings on the basis reject the theory of private respondent that the promise it made in the tour brochure may be
of the amount that they paid, it could and should have instead increased the price to enable it regarded only as "commendatory trade talk." 68
to arrange for the promised first-class accommodations.
With regard to the honorarium for counsel as an item of damages, since we are awarding moral
On the foregoing considerations, respondent court erred in deleting the award for moral and and exemplary damages, 69 and considering the legal importance of the instant litigation and
exemplary damages. Moral damages may be awarded in breaches of contract where the obligor the efforts of counsel evident from the records of three levels of the judicial hierarchy, we
acted fraudulently or in bad faith. 60 From the facts earlier narrated, private respondent can be favorably consider the amount of P20,000.00 therefor.
faulted with fraud in the inducement, which is employed by a party to a contract in securing the
consent of the other.chanrobles lawlibrary : rednad WHEREFORE, premises considered, the decision of respondent Court of Appeals is hereby SET
ASIDE, and another one rendered, ordering private respondent Kenstar Travel Corporation to
This fraud or dolo which is present or employed at the time of birth or perfection of a contract pay petitioner Lydia L. Geraldez the sums of P100,000.00 by way of moral damages,
may either be dolo causante or dolo incidente. The first, or causal fraud referred to in Article P50,000.00 as exemplary damages, and P20,000.00 as and for attorneys fees, with costs
1338, are those deceptions or misrepresentations of a serious character employed by one party against private Respondent. The award for nominal damages is hereby deleted. chanroble s lawlibrary : rednad

and without which the other party would not have entered into the contract. Dolo incidente, or
incidental fraud which is referred to in Article 1344, are those which are not serious in character SO ORDERED.
and without which the other party would still have entered into the contract. 61 Dolo causante
determines or is the essential cause of the consent, while dolo incidente refers only to some
particular or accident of the obligations. 62 The effects of dolo causante are the nullity of the
contract and the indemnification of damages, 63 and dolo incidente also obliges the person
employing it to pay damages. 64

In either case, whether private respondent has committed dolo causante or dolo incidente by
making misrepresentations in its contracts with petitioner and other members of the tour group,
which deceptions became patent in the light of after-events when, contrary to its
representations, it employed an inexperienced tour guide, housed the tourist group in
substandard hotels, and reneged on its promise of a European tour manager and the visit to the
leather factory, it is indubitably liable for damages to petitioner.

In the belief that an experienced tour escort and a European tour manager would accompany
them, with the concomitant reassuring and comforting thought of having security and
assistance readily at hand, petitioner was induced to join the Volare 3 tourists, instead of
travelling alone. 65 She likewise suffered serious anxiety and distress when the group was
 FIRST DIVISION

[G.R. No. 90270. July 24, 1992.]

ARMANDO V. SIERRA, Petitioner, v. HON. COURT OF APPEALS, EPIFANIA EBARLE, SOL

AND ELE EBARLE, Respondents.

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; PAROL EVIDENCE; RULE; EXCEPTION; EVIDENCE REQUIRED TO

OVERTURN WRITTEN AGREEMENT. The Rules of Court provide that "when the terms of an
agreement have been reduced to writing, it is to be considered as containing all such terms,
and, therefore, there can be, between the parties and their successors in interest, no evidence
of the terms of the agreement other than the contents of the writing." It is true that parol
evidence may be admitted to challenge the contents of such agreement "where a mistake or
imperfection of the writing, or its failure to express the true intent and agreement of the
parties, or the validity of the agreement is put in issue by the pleadings." However, such
evidence must be clear and convincing and of such sufficient credibility as to overturn the
written agreement.

2. ID.; ID.; AUTHENTICATION AND PROOF OF DOCUMENTS; EVIDENTIARY NATURE OF PUBLIC

DOCUMENTS SUSTAINED IN ABSENCE OF STRONG, CONVINCING AND CONCLUSIVE PROOF OF
NULLITY; CASE AT BAR. The non-presentation at the trial of the notary public who attested
the promissory notes did not have the effect of invalidating them. It is well settled that the
evidentiary nature of public documents must be sustained in the absence of strong, complete,
and conclusive proof of its nullity. A notarial document, guaranteed by public attestation in
accordance with the law, must be sustained in full force and effect so long as he who impugns it
does not present strong, complete, and conclusive proof of its falsity or nullity on accounts of
some flaw or defect provided against by law. A mere denial of the receipt of the loan, which is
stated in a clear and unequivocal manner in a public instrument, is not sufficient. To overthrow
the recitals of a mortgage deed, clear, convincing and more than merely preponderant evidence
is necessary. A contrary rule would throw wide open doors to fraud. The mere assertion of the
private respondents that the notes were not notarized in their presence does not meet this
standard of proof. In any event, a promissory note does not have to be notarized to be binding.
The private respondents have admitted signing the two notes and they have not succeeded in
proving that they did so "under duress, fear and undue influence." cralaw virtua1aw library

3. CIVIL LAW; OBLIGATIONS AND CONTRACTS; UNDUE INFLUENCE; DEFINED; AMPLIFIED.

Art. 1337. There is undue influence when a person takes improper advantage of his power over
the will of another, depriving the latter of a reasonable freedom of choice. The following
circumstances shall be considered: the confidential, family, spiritual and other relations between
the parties, or the fact that the person alleged to have been unduly influenced was suffering
from mental weakness, or was ignorant or in financial distress. This definition is amplified by
Tolentino, who says that "undue influence is any means employed upon a party which, under
the circumstances, he could not well resist, and which controlled his volition and induced him to
give his consent to the contract, which otherwise he would not have entered into. It must, in
some measure, destroy the free agency of a party and interfere with the exercise of that
independent discretion which is necessary for determining the advantage or disadvantage of a
proposed contract. In every such case, there is a moral coercion. The moral coercion may be
not reflective of the true intention of the parties.
The present petition is a case in point.
On November 2, 1984, the petitioner filed complaint against the private respondents in the
Regional Trial Court of Dumaguete City. He sought recovery of a sum of money he allegedly lent
them under the following promissory note which he annexed to his complaint: chanrob1es virtual 1aw library

effected through threats, expressed or implied, or through harassing tactics."cralaw virtua1aw library

4. ID.; ID.; FRAUD; DEFINED; DEGREE OF FRAUD THAT RENDERS CONTRACT VOIDABLE;
PROOF REQUIRED. Art. 1338. There is fraud when, through insidious words or machinations
of one of the contracting parties, the other is induced to enter into a contract which, without
them, he would not have agreed to. Art. 1344. In order that fraud may make a contract
voidable, it should be serious and should not have been employed by both contracting parties.
To quote Tolentino again, the "misrepresentation constituting the fraud must be established by
full, clear, and convincing evidence, and not merely by a preponderance thereof. The deceit
must be serious. The fraud is serious when it is sufficient to impress, or to lead an ordinarily
prudent person into error; that which cannot deceive a prudent person cannot be a ground for
nullity. The circumstances of each case should be considered, taking into account the personal
conditions of the victim."
cralaw virtua1aw library
PROMISSORY NOTE
For value received, WE, EPIFANIA EBARLE, SOL EBARLE, & ELE EBARLE, hereby promise to pay
Mr. Armando V. Sierra, his heirs and assigns, the sum of EIGHTY FIVE THOUSAND PESOS ONLY
(P85,000.00) Philippine Currency, on or before October 8, 1984 at his residence in Dumaguete
City.
In case of default, I will shoulder all expenses incurred in the collection and attorneys fees of
P1,000.00 plus an interest of 12% per annum.
(Sgd.) EPIFANIA EBARLE

(Sgd.) SOL EBARLE

5. ID.; LOAN; PROMISSORY NOTE; NATURE THEREOF; LIABILITY OF MAKER. A promissory
note is a solemn acknowledgment of a debt and a formal commitment to repay it on the date (Sgd.) ELE EBARLE.
and under the conditions agreed upon by the borrower and the lender. A person who signs such
an instrument is bound to honor it as a legitimate obligation duly assumed by him through the September 8, 1984
signature he affixes thereto as a token of his good faith. If he reneges on his promise without
cause, he forfeits the sympathy and assistance of this Court and deserves instead its sharp Dumaguete City.
repudiation. So must it be in the case at bar.
WITNESSES: chanrob1es virtual 1aw library

1. (Illegible) 2. _______________________.

DECISION SUBSCRIBED AND SWORN TO BEFORE ME this 8th day of September 1984 at the City of
Dumaguete.

(Sgd.) FRANCISCO B. ZERNA, JR.

CRUZ, J.:Notary Public.

In their separate answers, the private respondents denied under oath "the genuineness, due
execution, legality and validity" of the promissory note. They alleged that the note was executed
"under duress, fear and undue influence." As affirmative defenses, they claimed that they had
A promissory note is supposed to be a genuine document acknowledging a loan duly received been tricked into signing the note for P85,000.00 (and another note for P54,550.00, but not the
and promising to pay the same on the date indicated in accordance with the conditions therein subject of this suit) and that the amount owing to the petitioner was only P20,000.00. This
set forth. There is no record as there cannot be of the number of times such a promise has represented the loan he had extended to Epifania Ebarle, mother of the other private
been fulfilled and the debt discharged. But our casebooks are replete with reports of litigations respondents, Sol Ebarle and Ele Ebarle. They also counterclaimed for damages.
where the promissory note has been rejected and even indignantly denounced. The usual
objection is that it is spurious or fabricated, or vitiated by fraud or duress or undue influence, or At the trial, the petitioner testified that he had lent the private respondents the sum of
P85,000.00 which they said they needed "to pay some cattle for fattening to be inspected by
the inspector of the Land Bank that day" in connection with their application for a loan of the Silliman University. Sol Ebarle holds a degree in commerce, Ele Ebarle in agriculture. There
P400,000.00 from the said bank to finance their logging and cattle business. The application is no question that these three professionals fully understood the import and consequences of
was apparently not approved. When the note fell due, he made demands for their payment, what they were doing when they signed the two promissory notes on September 8, 1984.
which were ignored. He thereupon filed his complaint.
The notes were written in plain English and consisted of only two short paragraphs. There was
For their part, the private respondents declared that on September 8, 1984, they were asked by no fine print to conceal hidden meanings. Each was a simple promise to pay to the petitioner,
the petitioner to sign two promissory notes, one for P85,000.00 and another for P54,550.00, in for value received, the amounts indicated therein not later than October 8, 1984, at his
consideration of Epifania Ebarles outstanding debt of P20,000.00 to him. They said they initially residence and to assume all litigation expenses, with 12% interest, in case of default.
objected because of the amounts indicated in the said notes. They eventually agreed, however,
on the petitioners assurance that the documents were a mere formality that he had to show his The private respondents say they had misgivings about signing the notes but they signed them
business partner, who was demanding immediate payment of the said loan. The petitioner also just the same upon the petitioners prodding. That is strange, considering their insistence that
said that if a complaint was filed against them for recovery under the notes, what they should all Epifania Ebarle owed the petitioner was the amount of P20,000.00, which she claimed to
do was not answer so that they would be declared in default. A new agreement would then be have received earlier. If that was all she really obtained, it is difficult to understand why all
concluded for the correct amount of Epifania Ebarles loan and with easier terms of payment. three of them signed the promissory notes for a total indebtedness of P139,550.00 or almost
seven times the mothers alleged loan. Their natural reaction when asked to sign the notes
On July 21, 1988, the trial court rendered a decision holding that the promissory note for would have been an irate refusal. What they should have done was demand the correction of
P85,000.00 was invalid and that the private respondents were liable to the petitioner only for the notes to reflect the true amount of the debt in only one note and to sign it only after
the loan of P20,000.00. 1 On appeal, this decision was affirmed by the respondent court. 2 The such correction. Instead, each of them, one after the other, willingly signed the two notes, the
petitioner then came to this Court to seek reversal of the courts below on factual and legal first in the morning and the second in the afternoon of the same day. without any reservation
grounds. whatsoever.

The petitioner argues that the Court of Appeals committed reversible error in the interpretation The private respondents say that the petitioner was in a hurry to conclude the transactions, but
of the promissory note in light of the established facts. It also erred in not according the said the fact is that they themselves were not. There was apparently no cogent reason for the
note the presumption of validity as a duly executed public document. immediate signing of the notes as far as they themselves were concerned. After all, Epifania
Ebarle had already received the alleged original and only loan of P20,000.00. or so they say,
Required to submit a comment, the private respondents contended that the assignment of which they were simply being made to affirm. Moreover, as they also insist, they had not
errors raised only questions of fact, the determination of which by the lower courts was as a received, nor did they expect to receive, the amounts indicated in the two notes.
rule final and conclusive upon this Court. In reply, the petitioner submitted that the erroneous
findings of fact made by the respondent court removed the case from the general rule and In this connection, we cannot agree that they could not have received the amounts stated in the
justified a review of the challenged decision. notes because it was not likely that the petitioner would keep such large amounts of cash in his
house. That is a mere conjecture. The petitioner operates his own vineyard as well as his
The Court has gone over the records of this case and finds that there was indeed a fathers hacienda, besides dealing in the sale of cars and real estate. His transactions require
misapprehension of facts by the trial and appellate courts. The testimonies of the private ready cash now and then, which is why he keeps substantial sums of money available in his
respondents on the circumstances surrounding the execution of the promissory note are, in our house.
view, not believable.
In any case, as he says correctly, it is his prerogative to keep money in his house in whatever
The Rules of Court provide that "when the terms of an agreement have been reduced to writing, amount he pleases, especially since he feels quite secure there with his guards and dogs. What
it is to be considered as" containing all such terms, and, therefore, there can be, between the is important is that the notes the private respondents signed expressly and categorically
parties and their successors in interest, no evidence of the terms of the agreement other than acknowledged that they received the specific amounts indicated therein. Whether the money
the contents of the writing." 3 It is true that parol evidence may be admitted to challenge the came from the bank or from the petitioners house did not affect the validity of their
contents of such agreement "where a mistake or imperfection of the writing, or its failure to acknowledged indebtedness.
express the true intent and agreement of the parties, or the validity of the agreement is put in
issue by the pleadings." 4 However, such evidence must be clear and convincing and of such Epifania Ebarle testified that she was also worried about the petitioners assurance that if they
sufficient credibility as to overturn the written agreement. allowed themselves to be declared in default when sued, a new agreement with easier terms
and for the correct amount of P20,000.00 would be concluded between them. Asked if she
The private respondents are not unlettered peasants with a modicum of intelligence and understood what default meant, she said she did. Nevertheless, despite her uneasiness, she
unfamiliar with business and legal matters. They are educated persons with not a little signed the two promissory notes one after the other, and so did her children even if they also
experience in business affairs and possibly even legal transactions. They own and operate an felt a similar anxiety. It was only afterwards, she said, that she "went to a lawyer."
cralaw virtua1aw library

hacienda consisting of 33 hectares. Epifania Ebarle was a professor in English for 25 years at
Remarkably, all three of the private respondents signed the two notes notwithstanding their nullity.
claimed individual reluctance. One of them at least could have voiced his or her apprehensions
and made efforts to dissuade the others from signing, but no one did. Everyone signed. And not A notarial document, guaranteed by public attestation in accordance with the law, must be
only that. Having signed one note in the morning, all of them again signed the second sustained in full force and effect so long as he who impugns it does not present strong,
promissory note in the afternoon, again with no one expressing his or her misgivings. It is as if complete, and conclusive proof of its falsity or nullity on accounts of some flaw or defect
they were all mesmerized by the petitioner into signing the promissory notes although, as they provided against by law. 8
now say in hindsight, they were all doing so against their better judgment.
A mere denial of the receipt of the loan, which is stated in a clear and unequivocal manner in a
The facts belie this supposition. public instrument, is not sufficient. To overthrow the recitals of a mortgage deed, clear,
convincing and more than merely preponderant evidence is necessary. A contrary rule would
Sol Ebarle admitted on the stand that no harassment or threat in any form was employed by the throw wide open doors to fraud. 9
petitioner upon any of them. 5
The mere assertion of the private respondents that the notes were not notarized in their
Neither were they subjected to any undue influence, which is described in the Civil Code thus: presence does not meet this standard of proof. In any event, a promissory note does not have
chanrob1es virtual

to be notarized to be binding. The private respondents have admitted signing the two notes and
1aw library

Art. 1337. There is undue influence when a person takes improper advantage of his power over they have not succeeded in proving that they did so "under duress, fear and undue influence."
library
cralaw virtua1aw

the will of another, depriving the latter of a reasonable freedom of choice. The following
circumstances shall be considered: the confidential, family, spiritual and other relations between The private respondents argument that the two promissory notes are spurious because they
the parties, or the fact that the person alleged to have been unduly influenced was suffering were signed separately on the same day is in fact an argument against them. As they acutely
from mental weakness, or was ignorant or in financial distress. observe, if indeed the purpose of the notes was simply to acknowledge and renew the
P20,000.00 loan, then it could have been accomplished in only one promissory note specifying
This definition is amplified by Tolentino, who says that "undue influence is any means employed this amount. True enough. But the point is that the purpose was not to acknowledge the
upon a party which, under the circumstances, he could not well resist, and which controlled his supposed loan. It was to acknowledge the two separate loans. The fact that two promissory
volition and induced him to give his consent to the contract, which otherwise he would not have notes were signed indicates that two different loans were actually extended, not simultaneously
entered into. It must, in some measure, destroy the free agency of a party and interfere with but successively, one in the morning and the other in the afternoon of September 8, 1984.
the exercise of that independent discretion which is necessary for determining the advantage or
disadvantage of a proposed contract. In every such case, there is a moral coercion. The moral It is a no less significant consideration that no written evidence of the supposed original loan of
coercion may be effected through threats, expressed or implied, or through harassing tactics." P20,000.00 extended to Epifania Ebarle has been presented. None of the private respondents
6 has produced a copy of any promissory note therefor, to prove that there was really such a loan.
As a businessman, and there being no special relationship between him and the private
Fraud must also be discounted, for according to the Civil Code:chanrob1es virtual 1aw library respondents, the petitioner would have required a written acknowledgment of that loan, and
given a copy of such instrument to the borrower.
Art. 1338. There is fraud when, through insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract which, without them, he would In sum, this Court is asked to believe that three highly educated persons, to acknowledge an
not have agreed to. alleged debt of only P20,000.00 owed by one of them, signed on the same day two notarized
promissory notes for the total amount of P139,550.00 on the assurance by the petitioner that it
Art. 1344. In order that fraud may make a contract voidable, it should be serious and should was a mere "formality." The notes were written in plain English, without the "whereases" and
not have been employed by both contracting parties. "wherefores" of the legal idiom, and could not have been misunderstood or not comprehended
by them. What is even worse, the private respondents insist that when they expressed their
To quote Tolentino again, the "misrepresentation constituting the fraud must be established by hesitation, the petitioner assured them that if they were sued on the notes, all they should do
full, clear, and convincing evidence, and not merely by a preponderance thereof. The deceit was allow themselves to be declared in default and a new and more liberal agreement
must be serious. The fraud is serious when it is sufficient to impress, or to lead an ordinarily specifying the correct amount of their loan would then be concluded. Although they admitted
prudent person into error; that which cannot deceive a prudent person cannot be a ground for knowing the meaning of default, they nevertheless accepted this assurance and freely signed
nullity. The circumstances of each case should be considered, taking into account the personal the notes without reservation. None of the three private respondents tried to dissuade the
conditions of the victim." 7 others when all of them signed the first note in the morning, and this same acquiescence was
repeated when all three of them, again in common concert, signed the second note that same
The non-presentation at the trial of the notary public who attested the promissory notes did not afternoon.
have the effect of invalidating them. It is well settled that the evidentiary nature of public
documents must be sustained in the absence of strong, complete, and conclusive proof of its The defense is preposterous. Despite its acceptance by the lower courts, we reject it as a rank
invention. Out of the vicissitudes of the unfortunate Electric Light Company of Lucena, Tayabas, has arisen
the present litigation between Mariano S. Tuason, plaintiff and appellant, and Crisanto Marquez,
A promissory note is a solemn acknowledgment of a debt and a formal commitment to repay it defendant and appellee. The facts are not in dispute, and the legal phases of the case are fairly
on the date and under the conditions agreed upon by the borrower and the lender. A person evident.
who signs such an instrument is bound to honor it as a legitimate obligation duly assumed by
him through the signature he affixes thereto as a token of his good faith. If he reneges on his On March 5, 1921, Crisanto Marquez, the owner of the electric light plan of Lucena Tayabas,
promise without cause, he forfeits the sympathy and assistance of this Court and deserves called Sucesores del Lucena Electric, gave an option to Antonio Tuason for the purchase of the
instead its sharp repudiation. So must it be in the case at bar. plant for P14,400. The option was taken advantage of by Mariano S. Tuason, the real principal,
on the 9th of the same month and year, and the contracts as then formulated was ratified
WHEREFORE, the appealed decision is REVERSED and SET ASIDE and a new judgment is hereby before a notary public on the 18th of the month and year. The agreement was, that Tuason was
rendered requiring the private respondents to pay the petitioner the sum of P85,000.00, with to pay Marquez a total of P14,400; P2,400 within sixty days, and the remainder, P12,000, within
12% interest from September 8, 1984, until full payment, plus P15,000.00 as moral damages a year. The first installment was paid subsequent to the sixty-day period; the second installment
and P15,000.00 as attorneys fees. Costs against the respondents. has not been paid.

SO ORDERED. Tuason being once in possession of the electric light plant, it was run under the management of
the Consolidated Electric Company for about sixteen months, that is, from March 20, 1921, to
July 19, 1922. On the date last mentioned, the property was sold under execution by reason of
a judgment in the case of Levy Hermanos vs. The Philippine Electric Light Company. The
purchaser at said sale was Gregorio Marquez, brother of Crisanto Marquez, who paid P5,501.57
for the property.

With this general background of the controversy, we have to give special attention to one clause
in the contract and its antecedents. The contract Exhibit B entered into by Tuason and Marquez
included as a portion of the property sold by Marquez to Tuason "el derecho a la franquicia
concedido a la Compaia para la explotacion de la industria a que la misma esta dedicada."

It appears that originally in either 1913 or 1914, a franchise for thirty-five years was granted
the Lucena Electric Company. The rights of this company passed to Crisanto Marquez at a
sheriff's sale on September 10, 1919. The company seems never to have functioned very
efficiently either at that time or at any other time, as appears from the constant complaint of
the municipal authorities of Lucena. Evidently, Marquez became disgusted with the business,
with the result that on February 28, 1921, that is, prior to the accomplishment of the contract,
he announced to the Public Utility Commissioner his intention to give up the franchise. On March
29, 1921, that is, subsequent to the accomplishment of the contract, the Public Utility
Commissioner took action and declared cancelled the franchise acquired by Crisanto Marquez
from the Lucena Electric Light, Ice & Water Company.

Tuason and his outfit were permitted to operate the company pursuant to a special license
which was to continue until they obtained a new franchise. The new franchise was finally
granted by the Public Utility Commissioner with certain conditions, which amounted to a
EN BANC renovation of the entire plant. It was then, following a knowledge of what was expected by the
G.R. No. L-20659 November 3, 1923 Government, and following the execution sale, that Tuason conceived the idea of bringing action
against Marquez for a rescission of the contract.
MARIANO S. TUASON, Plaintiff-Appellant, vs. CRISANTO MARQUEZ, Defendant-Appellee.
In the complaint filed in the Court of First Instance of Manila, Mariano S. Tuason, the plaintiff,
MALCOLM, J.:asked for judgment against Crisanto Marquez, defendant, for a total of P37,400. The answer
and cross-complaint of the defendant asked for a dismissal of the action and for an allowance of
a total of P12,654.50 from the plaintiff. The case was submitted on an agreed statement of facts
in relation with certain telegrams of record. Judgment was rendered, absolving the defendant
from the complaint and permitting the defendant to recover from the plaintiff P12,240, with APPEALS, HALSEMA INC. and RURAL BANK OF STA. MARIA,PANGASINAN, INC.,
legal interest from August 1, 1922. Parenthetically, it may be explained that P12,000 of this
judgment represented the amount still due on the contract, and P240 represented rent which respondents.
the plaintiff was expected to pay the defendant.

The plaintiff claims in effect that the contract should be rescinded and that he should be allowed
his damages, on account of the misrepresentation and fraud perpetrated by the defendant in SYNOPSIS
selling an electric light plan with a franchise, when the defendant had already given up his
rights to that franchise. In this connection, however, it should be emphasized that the contract On January 9, 1985 Manuel Behis mortgaged a parcel of land in favor of the Rural Bank of
in making mention of the property of the electric light company, merely renewed a previous Sta. Maria, Pangasinan. After being delinquent in paying his debts, Manuel sold the land to
inventory of the property. The franchise, therefore, was not the determining cause of the plaintiffs Rosario Rayandayan and Carmen Arceo in a Deed of Absolute Sale with Assumption of
purchase. Indeed, the franchise was then in force and either party could easily have ascertained Mortgage. On the same date, they executed another agreement whereby the plaintiffs were
its status by applying at the office of the Public Utility Commissioner. The innocent non- indebted to Manuel in the amount of P2,400,000.00, which was the real consideration of the
disclosure of a fact does not effect the formation of the contract or operate to discharge the sale. The title to the land, remained in the name of Manuel Behis. After Manuel Behis died,
parties from their agreement. The maxim caveat emptor should be recalled. plaintiffs Rayandayan and Arceo negotiated with the rural bank for the assumption of the
indebtedness of Manuel Behis and the subsequent release of the mortgage on the property by
The equitable doctrine termed with questionable propriety "estoppel by laches," has particular the bank. The bank was not informed of the real consideration of the sale.Subsequently, the
applicability to the facts before us. Inexcusable delay in asserting a right and acquiescene in bank consented to the substitution of Rayandayan and Arceo as mortgage debtors in place of
existing conditions are a bar to legal action. The plaintiff operated the electric light plant for Behis in a Memorandum of Agreement with restructured and liberalized terms for the payment
about sixteen months without question; he made the first payment on the contract without of the mortgage debt. When the bank came to know the real consideration of the agreement,
protest; he bestirred himself to secure what damages he could from the defendant only after the bank changed heart and transacted the Behis mortgage with Halsema, Inc.. The bank
the venture had proved disastrous and only after the property had passed into the hands of a considered its contract with Rayandayan and Arceo as cancelled. Hence, Rayandayan and Arceo
third party. instituted a civil case against the Rural Bank and Halsema, Inc. for specific performance,
declaration of nullity and/or annulment of mortgage and damages. The lower court declared
We find no proof of fraud on the part of the defendant and find the plaintiff in estopped to press that the Deed of Sale with Assumption of Mortgage and the Agreement between the bank and
his action. plaintiffs was valid until annulled or cancelled. However, the plaintiffs were ordered to pay the
bank damages as litigation expenses because of plaintiffs bad faith in deceiving the bank to
In accordance with the foregoing, we are clearly of the opinion that judgment should be, as it is enter into the Memorandum of Agreement by concealing the real purchase price of the land sold
hereby affirmed, with costs against the appellant. So ordered. to them by Manuel Behis. The plaintiffs and defendant Halsema, Inc. appealed. The Court of
Appeals affirmed the validity of the Memorandum of Agreement between the parties, but
reversed the finding that there was bad faith on the part of the plaintiffs when the bank entered
into the Memorandum of Agreement.

The Supreme Court affirmed the decision of the Court of Appeals. Rayandayan and Arceo
had no duty to disclose the real consideration of the sale between them and Manuel Behis. The
bank security remained unimpaired regardless of the consideration of the sale. Under the terms
THIRD DIVISION of the Agreement, the property remains as security for the payment of the indebtedness, in
case of default of payment.
[G.R. No. 110672. September 14, 1999]

RURAL BANK OF STA. MARIA, PANGASINAN, petitioner vs. THE HONORABLE

COURT OF APPEALS, ROSARIO R. RAYANDAYAN, CARMEN R. ARCEO,respondents.

SYLLABUS

1. CIVIL LAW; CONTRACTS; FRAUD VITIATING CONSENT; ELEMENTS; NOT

[G.R. No. 111201. September 14, 1999]
ESTABLISHED IN CASE AT BAR.- All the elements of fraud vitiating consent for purposes
ROSARIO R. RAYANDAYAN and CARMEN R. ARCEO, petitioners vs. COURT OF of annulling a contracting must concur, to wit: (a) It was employed by a contracting party
upon the other; (b) It induced the other party to enter into the contract; (c) It was serious;
 and; (d) It resulted in damages and injury to the party seeking annulment. Petitioner bank Before us are two consolidated [1] petitions for review on certiorari under Rule 45 of the
has not sufficiently shown that it was induced to enter into the agreement by the non- Revised Rules of Court. In G.R. No. 110672, petitioner Rural Bank of Sta. Maria, Pangasinan,
disclosure of the purchase price, and that the same resulted in damages to the assails portions of the Decision dated March 17, 1993, and the Resolution dated January 25,
bank. Indeed, the general rule is that whosoever alleges fraud or mistake in any 1993, of the Court of Appeals [2] in CA-G.R. CV No. 21918, which affirmed with modification the
transaction must substantiate his allegation, since it is presumed that a person takes Decision of the Regional Trial Court (Branch 6, Baguio City) [3] in Civil Case No. 890-R
ordinary care for his concerns and that private transactions have been fair and entitled Rosario R. Rayandayan and Carmen R. Arceo versus Rural Bank of Sta. Maria,
regular. Petitioner banks allegation of fraud and deceit have not been established Pangasinan and Halsema, Inc. In G.R. No. 111201, petitioners Rosario R. Rayandayan and
sufficiently and competently to rebut the presumption of regularity and due execution of Carmen R. Arceo likewise assail portions of said Decision adverse to it.
the agreement
The facts as found by the trial court and adopted by the Court of Appeals insofar as
2. ID.; ID.; ID.; MUST BE THE DETERMINING CAUSE OF THE CONTRACT, OR MUST pertinent to the instant petitions are as follows:
HAVE CAUSED THE CONSENT TO BE GIVEN; NOT PRESENT IN CASE AT BAR.- The
kind of fraud that will vitiate a contract refers to those insidious words or machinations
resorted to by one of the contracting parties to induce the other to enter into a contract xxx, the Court Finds that a parcel of land of about 49,969 square meters, located in Residence
which without them he would not have agreed to. Simply stated, the fraud must be the Section J, Camp 7, Baguio City, covered by TCT T-29817 (land for short) is registered in the
determining cause of the contract, or must have caused the consent to be given. It isname of Manuel Behis, married to Cristina Behis (Exhibit B). Said land originally was part of a
believed that the non-disclosure to the bank of the purchase price of the sale of the land bigger tract of land owned by Behis (one name), father of Manuel Behis, covered by OCT-0-33
between private respondents and Manuel Behis cannot be the fraud contemplated by Article (Exhibit 26, Halsema, for history of the land). And upon the latters death on September 24,
1338 of the Civil Code. From the sole reason submitted by the petitioner bank that it was 1971, his children, namely: Saro Behis, Marcelo Behis, Manuel Behis, Lucia Behis, Clara Behis
kept in the dark as to the financial capacity of private respondents, the Court cannot see and Arana Behis, in an extrajudicial settlement with Simultaneous Sale of Inheritance
how the omission or concealment of the real purchase price could have induced the bank dated September 28, 1978, agreed to sell the land to Manuel Behis, married to Cristina Behis
into giving its consent to the agreement; or that the bank would not have otherwise given (Exhibit `2, Halsema) but which subsequently was explained as only an arrangement adopted
its consent had it known of the real purchase price. The bank had other means andby them to facilitate transactions over the land in a Confirmation of Rights of Co-Ownership over
opportunity of verifying the financial capacity of private respondents and cannot avoid the real Property dated September 26, 1983, showing that the Behis brothers and sisters, including
contract on the ground that they were kept in the dark as to the financial capacity by the Manuel Behis, are still co-owners thereof (Exhibit `30, Halsema, Exhibit `AA).
non-disclosure of the purchase price. As correctly pointed out by respondent court, the
bank security remained unimpaired regardless of the consideration of the sale. Under the
terms of the Memorandum of Agreement, the property remains as security for the payment
of the indebtedness, in case of default of payment. Thus, petitioner bank does not and can Manuel Behis mortgaged said land in favor of the Bank in a Real Estate Mortgage dated October
not even allege that the agreement was operating to its disadvantage. In fact, the bank 23, 1978 (Exhibit `Q-1) as security for loans obtained, covered by six promissory notes and
admits that no damages has been suffered by it. trust receipts under the Supervised Credit Program in the total sum of P156,750.00 (Exhibit `Q-
2 to `Q-7, Exhibits `4-A to `4-F, Halsema) and annotated at the back of the title on February
3. ID.; ID.; ID.; SILENCE OR CONCEALMENT; WHEN TO CONSTITUTE FRAUD.- Pursuant13, 1979 as Entry No. 85538-10-231 (Exhibit 1-A-1, Halsema). The mortgage, the promissory
to Article 1339 of the Civil Code, silence or concealment, by itself, does not constitute notes and trust receipts bear the signatures of both Manuel Behis and Cristina Behis.
fraud, unless there is a special duty to disclose certain facts, or unless according to good
faith and the usages of commerce the communication should be made.
Unfortunately thereafter, Manuel Behis was delinquent in paying his debts.
4. REMEDIAL LAW; CIVIL PROCEDURE; APPEAL; A PARTY WHO DOES NOT APPEAL
FROM THE DECISION MAY NOT OBTAIN ANY AFFIRMATIVE RELIEF FROM THE
APPELLATE COURT.- It is well-settled that a party who does not appeal from the decision
may not obtain any affirmative relief from the appellate court other than what he has On January 9, 1985, Manuel Behis sold the land to the plaintiffs[4] in a Deed of Absolute Sale
obtained from the lower court, if any, whose decision is brought up on appeal. with Assumption of Mortgage for the sum of P250,000.00 (Exhibit `A) which bears the signature
of his wife Cristina Behis. Manuel Behis took it upon himself to secure the signature of his wife
and came back with it. On the same date of January 9, 1985, plaintiffs and Manuel
DECISION Behis simultaneously executed another Agreement (Exhibit `15) whereby plaintiffs are indebted
to Manuel Behis for the sum of P2,400,000.00 payable in installments with P10,000.00 paid
GONZAGA REYES, J.:
_
upon signing and in case of default in the installments, Manuel Behis shall have legal recourse
to the portions of the land equivalent to the unpaid balance of the amounts in
installments. Obviously, the real consideration of the sale of the land of Manuel Behis to the
plaintiffs is contained in this Agreement (Exhibit `15).
`4. That the total obligation of the late Manuel Behis to the Bank amounts to P343,782.22;

Plaintiffs did not present to the Register of Deeds of Baguio said two contracts and ask that the
title, TCT T-29817 in the name of Manuel Behis be cancelled and a new one issued in their name `5. That the assignees hereby offer to redeem the aforesaid real property and the Bank hereby
which normally a buyer does. Neither did plaintiffs annotate at the back of the title the aforesaid agrees to release the mortgage thereon under the following terms and conditions:
two contracts. Nor did they immediately go to the Bank and present said two contracts. Thus,
the title to the land, TCT No. T-29817, remained in the name of Manuel Behis.

(a). That the amount of P35,000.00 shall be paid by the assignees to the Bank upon execution
of this Agreement;
Pursuant to their two contracts with Manuel Behis, plaintiffs paid him during his lifetime the sum
of P10,000.00 plus P50,000.00 plus P145,800.00 (Exhibit `U as stipulated in the hearing), and (b). That the amount of P108,000.00 shall be paid by the assignees to the Bank at the rate
the sum of P21,353.75 for the hospitalization, medical and burial expenses of Manuel Behis of P36,000.00 a month payable on September 15, 1985, October 15, 1985 and November 15,
when he died on June 21, 1985 (Exhibit `II, `JJ, `KK, `LL, `PP, `OO, and `RR). Obviously, from 1985;
the above payments, the plaintiffs were unable to complete their full payment to Manuel Behis
of the sale of the land as it is nowhere near P2,400,000.00. (c). That the balance of P200,000.00 shall be renewed for one year and shall be secured by
another mortgage over the same property which is renewable every year upon payment of
interests and at least 10 percent of the principal;

Meantime, the loan in the name of Manuel Behis with the Bank secured by the Real Estate
Mortgage on the land continued to accumulate being delinquent. By May 30, 1985, in a
Statement of Account (Exhibit `D) sent to Manuel Behis by the Bank thru the Paredes Law
Office for collection, the debt of P150,750.00 has ballooned into P316,368.13, with interest and
other charges. In fact, the Bank, thru its President, Vicente Natividad, initiated foreclosure
proceedings. But after the usual publication, the same was discontinued since many parties
were interested to buy the land outside the said procedure but none materialized.
(d). That the bank shall release the mortgage of Manuel Behis and a new mortgage shall be
executed by the assignees and the bank shall give its consent for the transfer of the title under
the name of the assignees.
x x x.
Plaintiffs did not annotate the Memorandum of Agreement in the title, TCT T-29817.

Pursuant to the Memorandum of Agreement, plaintiffs paid the Bank the following:

On June 19, 1985, Atty. William Arceo, in behalf of Manuel Behis, wrote a letter asking for a
more detailed Statement of Account from the Bank broken down as to principal, interest and
other charges (Exhibit `E).
Thereafter, plaintiffs finally presented the Deed of Absolute Sale with Assumption of Mortgage
(Exhibit `A) to the Bank when negotiating with its principal stockholder, Engr. Edilberto
Natividad, in Manila, but did not show to the latter the Agreement (Exhibit `15) with Manuel
Behis providing for the real consideration of P2,400,000.00. And thus, on August 1, 1985,
a Memorandum of Agreement (Exhibit `F) was entered into between plaintiffs, as assignees of
Manuel Behis, and the Bank, the salient features of which are:
`x x x x x x x x x
`3. That during the lifetime of Manuel Behis he had executed a Deed of Absolute Sale with
Assumption of Mortgage in favor of Carmen Arceo and Rosario Rayandayan;
(1) P35,000.00 on August 1, 1985 as initial deposit when the Agreement was signed
(Exhibits `G and `H);
(2) P15,000.00 on September 16, 1985 (Exhibit `I) and P21,000.00 on September 20,
1985 (Exhibit `J) to cover the obligation of P36,000.00 on September 15, 1985;
(3) P20,000.00 on October 17, 1985 (Exhibit `K) and P16,000.00 on October 25, 1985
(Exhibit `L) to cover the obligation to pay P36,000.00 on October 15, 1985;
(4) P36,000.00 in the form of dollars remitted to Engr. Edilberto Natividad on
December 18, 1985 (Exhibit `N) to cover the obligation to pay P36,000.00 on
November 15, 1985.
After the last payment of P36,000.00 on December 18, 1985, received in dollars (Exhibit `N)
which completed the P143,000.00 under paragraphs 5 (a) and 5 (b) of the Memorandum of
Agreement Engr. Edilberto Natividad, wrote a letter (Exhibit M) to Vicente Natividad, with
instructions that payment be duly credited and Atty. Arceo will communicate about the transfer
of title to them and to consult the Banks counsel on the matter, and with instructions also to
Ana Acosta of the Rural Bank of Tuba to debit said amount from the savings of Edilberto
Natividad. xxx.
From the above payments made, the total amount of P143,000.00 as required by paragraphs 5 xxx, upon suggestion of the lawyer of Halsema, an Assignment of Mortgage was entered into on
(a) and 5 (b) of the Memorandum of Agreement was fully paid by plaintiffs although they were July 28, 1986 between Halsema and the Bank for the consideration of P520,765.45 (Exhibit `1,
not paid on time. Bank) which amount was the total indebtedness of Manuel Behis with the Bank at the time
(Exhibit `7-A, Halsema). Note however, that what was assigned was the Mortgage made
originally by Manuel Behis and not the Mortgage as assumed by plaintiffs under a restructured
and liberalized terms.
Meanwhile, on September 5, 1985, Cristina Behis, widow of Manuel Behis, wrote a letter to the
Bank (Exhibit `3, Halsema) claiming the Real Estate mortgage was without her signature. And
in another letter dated October 28, 1985 to the Bank (Exhibit 4, Halsema), Cristina Behis
stressed she did not authorize anybody to redeem the property in her behalf as one of the As explained by Halsema lawyer, she suggested the Assignment of Mortgage as the cheapest
mortgagors of the land. and fastest way for Halsema to acquire the property of Manuel Behis as (1) they assume the
role of the Bank as Mortgagee with the assignment of mortgage credit, (2) they acquire the
property for the amount only of the mortgage debt at the time, (3) after execution thereof, the
Bank is out of the picture, and (4) in case of foreclosure, Halsema controls the foreclosure
On January 7, 1986, plaintiffs demanded in a letter (Exhibit `O) that the Bank comply with its proceedings and is assured of its legality.
obligation under the Memorandum of Agreement to (1) release the mortgage of Manuel Behis,
(2) give its consent for the transfer of title in the name of the plaintiffs, and (3) execute a new
mortgage with plaintiffs for the balance of P200,000.00 over the same land.
In turn, the Bank explained it entered into the Assignment of Mortgage because at the time
it considered the Memorandum of Agreement cancelled as first, plaintiffs failed to settle the
objections of Cristina Behis aforesaid on her signature being forged in the Deed of Sale with
Meanwhile on January 18, 1986, Cristina Behis went to the Bank inquiring about her protest Assumption of Mortgage despite the lapse of time from February, 1986 to July, 1986. Second,
about her signature. The Bank told her it did not receive her two letters and instead advised her the terms of the Memorandum of Agreement have not been fully complied with as the payments
to write the Bank again as well as the plaintiffs about her objections. were not made on time on the dates fixed therein; and third, their consent to the Memorandum
of Agreement was secured by the plaintiffs thrufraud as the Bank was not
shown the Agreement containing the real consideration of P2,400,000.00 of the sale of the land
of Manuel Behis to plaintiffs.
In a reply letter dated February 11, 1986, (Exhibit `B) to the demand of the plaintiffs, the Bank
said it cannot comply because of supervening circumstances, enclosing the two letters of
Cristina Behis dated September 5, 1985 and October 28, 1985 which they said were both self
explanatory, and suggested that plaintiffs take up the matter with Mrs. Cristina Behis. On the same date of July 28, 1986, Vicente Natividad of the Bank sent notice of the Assignment
of Mortgage to the debtor mortgagor, Manuel Behis (already dead at the time) and Cristina
Behis. Notice of the Assignment of Mortgage was not sent to plaintiffs for as aforesaid what was
assigned was the Mortgage originally made by Manuel Behis and not the Mortgage as assumed
On February 15, 1986, as suggested by the Bank, Cristina Behis wrote another letter to the by plaintiffs under the restructured and liberalized terms in the Memorandum of Agreement
Bank claiming this time that she was not a party to the Deed of Absolute Sale with Assumption which was considered by the Bank as cancelled.
of Mortgage and her signature was forged (Exhibit 5, Halsema) and requesting the Bank not to
release the title with copy furnished to the plaintiffs (Exhibit `5-B, Halsema).
xxx xxx xxx.

Then, months passed, and nothing was heard from the plaintiffs by the Bank. On the first week
of July, 1986, Teodoro Verzosa, President of Halsema, Inc., heard about the land and got
interested and had preliminary talks with Vicente Natividad, President of the Bank, and with
Edilberto Natividad, the principal stockholder of the bank.
x x x.
After the assignment of mortgage, the Bank returned the P143,000.00 to plaintiffs (Exhibit `13,
Bank). But the latter rejected the same maintaining the Memorandum of Agreement is valid
until annulled by Court Action. Subsequently, however, the Bank paid plaintiffs P143,000.00 and
P90,000.00 interest in settlement of the criminal case of Estafa against Edilberto Natividad and
Vicente Natividad (Exhibit `14, Bank).
In the meantime, since the account of the late Manuel Behis has been delinquent and his widow,
Cristina Behis, and his brothers and sisters could not pay as in fact they have already assigned
their rights to redeem, Halsema as Mortgage Creditor in place of the Bank instituted foreclosure
proceedings by filing an Application for Foreclosure of Real Estate Mortgage in
the Office of the Sheriff on July 31, 1986(Exhibit `37, Halsema) setting the public auction sale Without pronouncement as to costs.
on September 2, 1986 and was published and posted as required by law. A Notice of
Foreclosure was sent directly to the mortgagor (Exhibit `38, Halsema) and the public auction
sale was held on September 2, 1986 at 10:00 a.m. at the City Hall, Baguio City, with Halsema
as the only bidder to whom accordingly the Sheriffs Certificate of Sale was issued (Exhibit `8, SO ORDERED.[6]
Halsema).
At the auction sale, the lawyer of Halsema was approached by the plaintiff Rosario Rayandayan Appeals rendered herein assailed decision, the dispositive portion insofar as pertinent to this
who told the former that the land foreclosed was also sold to the plaintiffs. Since plaintiffs could case reads:
not do anything anymore, they registered and annotated on the title, TCT T-29817, their
adverse claim on September 3, 1986.[5]
Since the Bank could not comply with the Memorandum of Agreement, petitioners
Rayandayan and Arceo instituted Civil Case No. 890-R before the Regional Trial Court of Baguio
City (Branch 6) against the Rural Bank of Sta. Maria, Pangasinan and Halsema, Inc. for Specific
Performance, Declaration of Nullity and/or Annulment of Assignment of Mortgage and
Damages on September 5, 1986, and caused a notice of lis pendens annotated at the back of
the title, TCT T-29817, on the same date. On March 6, 1989, judgment was rendered, the
dispositive portion of the decision pertinent to this case reads:
WHEREFORE, in view of All the Foregoing, Judgment is hereby rendered, as follows:
1. xxx xxx xxx;
2. Declaring the Deed of Sale with assumption of Mortgage (Exhibit A) and the
Agreement (Exhibit 15) taken together valid until annulled or cancelled;
3. Ordering the Bank to pay the plaintiffs the sum of P30,000.00 as Moral Damages,
P10,000.00 as Exemplary Damages, P20,000.00 as Attorneys fees and P5,000.00
as litigation expenses for their bad faith in violating the Memorandum of Agreement
which took place while the Memorandum of Agreement was still valid there being
no court action first filed to nullify it before entering into the Assignment of
Mortgage;
4. Ordering the plaintiffs to pay the Bank the sum of P30,000.00 as Moral Damages,
P10,000.00 as Exemplary Damages, P20,000.00 as Attorneys fees and P5,000.00
as litigation expenses for plaintiffs bad faith in deceiving the Bank to enter into the
Memorandum of Agreement;
5. Ordering the setting off in compensation the Damages awarded to plaintiffs and the
Bank.
6. xxx xxx xxx;
7. Declaring the Memorandum of Agreement as annulled due to the fraud of plaintiffs;
8. xxx xxx xxx;
9. xxx xxx xxx;
10. xxx xxx xxx,
From the decision, plaintiffs Rayandayan and Arceo and defendant Halsema, Inc.
appealed. Defendant Rural Bank of Sta. Maria, Pangasinan did not appeal. [7] The Court of
WHEREFORE, premises considered, decision is hereby rendered:
1. xxx xxx xxx;
2. xxx xxx xxx;
3. xxx xxx xxx;
4. Declaring the Deed of Absolute Sale with Assumption of Mortgage, Exhibit A and the
Memorandum of Agreement, Exhibit F, valid as between the parties thereto;
5. Ordering and sentencing defendant Rural Bank of Sta. Maria, Pangasinan to pay
plaintiffs-appellant the sum of P229,135.00 as actual damages, the sum
of P30,000.00 as moral damages, P10,000.00 as exemplary damages, P20,000.00
as attorneys fees and P5,000.00 as litigation expenses;
6. Affirming the dismissal of all other counterclaims for damages;
7. Reversing and setting aside all other dispositions made by the trial court
inconsistent with this decision;
8. There is no pronouncement as to costs.
SO ORDERED.[8]
In sum, the Court of Appeals in its assailed decision: (1) affirmed the validity of the
Memorandum of Agreement between the parties thereto; (2) reversed and set aside the finding
of the trial court on the bad faith of Rayandayan and Arceo in concealing the real purchase price
of the land sold to them by Manuel Behis during negotiations with the bank on the assumption
of the mortgage debt; (3) modified the trial courts finding as to the damages due Rayandayan
and Arceo from the bank by adding P229,135.00 as actual damages; (4) dismissed the
counterclaim for damages by the bank and deleted the portion on the set-off of damages due
between the bank on the one hand, and Rayandayan and Arceo on the other.
Motions for reconsideration were filed by plaintiffs-appellants Rayandanan and Arceo and
defendant Rural Bank of Sta. Maria, Pangasinan which were denied for lack of merit. [9]
 the real consideration for the sale with assumption of mortgage of the property by Manuel Behis
Hence, the instant consolidated petitions. to Rayandayan and Arceo is P2,400,000.00, and not P250,000.00 as represented to petitioner
bank. According to petitioner bank, had it known of the real consideration for the sale, i.e. P2.4
In a Resolution dated August 25, 1993, this Court denied the petition for review on million, it would not have consented into entering the Memorandum of Agreement with
certiorari (G.R. No. 111201) filed by Rayandayan and Arceo for having been filed out of time Rayandayan and Arceo as it was put in the dark as to the real capacity and financial standing of
and for late payment of docket fees. [10] Petitioners Rayandayan and Arceo moved to reconsider; private respondents to assume the mortgage from Manuel Behis.Petitioner bank pointed out
this Court in a Resolution dated November 22, 1993, resolved to deny the same with finality that it would not have assented to the agreement, as it could not expect the private
considering petitioners failed to show any compelling reason and to raise any substantial respondents to pay the bank the approximately P343,000.00 mortgage debt when private
argument which would warrant a modification of the said resolution. [11] respondents have to pay at the same time P2,400,000.00 to Manuel Behis on the sale of the
land.
What remains for resolution then is G.R. No. 110672, wherein petitioner Rural Bank of Sta.
Maria, Pangasinan, contends that: The kind of fraud that will vitiate a contract refers to those insidious words or machinations
resorted to by one of the contracting parties to induce the other to enter into a contract which
I without them he would not have agreed to. [13] Simply stated, the fraud must be the determining
THE MEMORANDUM OF AGREEMENT (EXH. F) ENTERED INTO BETWEEN PRIVATE cause of the contract, or must have caused the consent to be given. It is believed that the non-
RESPONDENTS, AS ALLEGED ASSIGNEES OF MANUEL BEHIS, AND PETITIONER BANK IS disclosure to the bank of the purchase price of the sale of the land between private respondents
VOIDABLE AND MUST BE ANNULLED. and Manuel Behis cannot be the fraud contemplated by Article 1338 of the Civil Code. [14] From
the sole reason submitted by the petitioner bank that it was kept in the dark as to the financial
capacity of private respondent, we cannot see how the omission or concealment of the real
II purchase price could have induced the bank into giving its consent to the agreement; or that
PRIVATE RESPONDENTS ARE IN BAD FAITH, HENCE, THEY ARE NOT ENTITLED TO THE SUMS OF the bank would not have otherwise given its consent had it known of the real purchase price.
P30,000.00 AS MORAL DAMAGES; P10,000.00 AS EXEMPLARY DAMAGES; P20,000.00 AS
ATTORNEYS FEES; AND P5,000.00 AS LITIGATION EXPENSES.[12] First of all, the consideration for the purchase of the land between Manuel Behis and herein
private respondents Rayandayan and Arceo could not have been the determining cause for the
petitioner bank to enter into the memorandum of agreement. To all intents and purposes, the
The petition is devoid of merit. bank entered into said agreement in order to effect payment on the indebtedness of Manuel
Behis. As correctly ruled by the Court of Appeals:
Briefly, the antecedents material to this appeal are as follows: A Deed of Absolute Sale with
Assumption of Mortgage was executed between Manuel Behis as vendor/assignor and xxx. The real consideration for the sale with assumption of mortgage, or the non-disclosure
Rayandayan and Arceo as vendees/assignees for the sum of P250,000.00. On the same day,thereof, was not the determining influence on the consent of the bank.
Rayandayan and Arceo together with Manuel Behis executed another Agreement embodying the
real consideration of the sale of the land in the sum of P2,400,000.00. Thereafter, Rayandayan
and Arceo negotiated with the principal stockholder of the bank, Engr. Edilberto Natividad in
Manila, for the assumption of the indebtedness of Manuel Behis and the subsequent release of The bank received payments due under the Memorandum of Agreement, even if delayed. It
the mortgage on the property by the bank. Rayandayan and Arceo did not show to the bank the initially claimed that the sale with assumption of mortgage was invalid not because of the
Agreement with Manuel Behis providing for the real consideration of P2,400,000.00 for the sale concealment of the real consideration of P2,400,000.00 but because of the information given by
of the property to the former. Subsequently, the bank consented to the substitution of plaintiffs Cristina Behis, the widow of the mortgagor Manuel Behis that her signature on the deed of
as mortgage debtors in place of Manuel Behis in a Memorandum of Agreement between private absolute sale with assumption of mortgage was forged. Thus, the alleged nullity of the
respondents and the bank with restructured and liberalized terms for the payment of the Memorandum of Agreement, Exhibit F, is a clear aftertought. It was raised by defendant bank,
mortgage debt. Instead of the bank foreclosing immediately for non-payment of the delinquent by way of counterclaim only after it was sued.
account, petitioner bank agreed to receive only a partial payment of P143,000.00 by installment
on specified dates. After payment thereof, the bank agreed to release the mortgage of Manuel
Behis; to give its consent to the transfer of title to the private respondents; and to the payment
of the balance of P200,000.00 under new terms with a new mortgage to be executed by the The deceit which avoids the contract exists where the party who obtains the consent does so by
private respondents over the same land. means of concealing or omitting to state material facts, with intent to deceive, by reason of
which omission or concealment the other party was induced to give a consent which he would
This brings us to the first issue raised by petitioner bank that the Memorandum of not otherwise have given (Tolentino, Commentaries and Jurisprudence on the Civil Code, Vol. IV,
Agreement is voidable on the ground that its consent to enter said agreement was vitiated by p. 480). In this case, the consideration for the sale with assumption of mortgage was not the
fraud because private respondents withheld from petitioner bank the material information that inducement to defendant bank to give a consent which it would not otherwise have given.
 induced the other party to enter into the contract; (c) It was serious; and; (d) It resulted in
damages and injury to the party seeking annulment. [18] Petitioner bank has not sufficiently
Indeed, whether the consideration of the sale with assumption of mortgage was P250,000.00 as shown that it was induced to enter into the agreement by the non-disclosure of the purchase
stated in Exhibit A, or P2,400,000.00 as stated in the Agreement, Exhibit 15, should not be of price, and that the same resulted in damages to the bank. Indeed, the general rule is that
importance to the bank. Whether it was P250,000.00 or P2,400.000.00 the banks security whosoever alleges fraud or mistake in any transaction must substantiate his allegation, since it
remained unimpaired. is presumed that a person takes ordinary care for his concerns and that private transactions
have been fair and regular. Petitioner bank's allegation of fraud and deceit have not been
established sufficiently and competently to rebut the presumption of regularity and due
execution of the agreement.
The stipulation in Exhibit 15, reading in case of default in all of the above, Manuel Behis shall
have legal recourse to the portion of the parcel of land under TCT No. T-29817 equivalent to the Based on the foregoing, the second issue raised by petitioner bank must likewise
unpaid balance of the amount subject of this Agreement, obviously even if revealed would not fail. Petitioner bank's imputation of bad faith to private respondents premised on the same non-
have induced defendant bank to withhold its consent. The legal recourse to TCT No. T-29817 disclosure of the real purchase price of the sale so as to preclude their entitlement to damages
given to Manuel Behis, under the Agreement, is subordinate and inferior to the mortgage to the must necessarily be resolved in the negative. Petitioner bank does not question the actual
bank. damages awarded to private respondents in the amount of P229,135.00, but only the moral
damages of P30,000.00, exemplary damages of P10,000.00, attorney's fees of P20,000.00 and
litigation expenses of P5,000.00. We may no longer examine the amounts awarded by the trial
court and affirmed by the appellate court as petitioner bank did not appeal from the decision of
We are, therefore, constrained to uphold the validity of the Memorandum of Agreement, Exhibit
the trial court. It is well-settled that a party who does not appeal from the decision may not
F, and reverse and set aside the ruling declaring the same annulled allegedly due to fraud of
obtain any affirmative relief from the appellate court other than what he has obtained from the
plaintiffs-appellants (paragraph 7, dispositive portion).
lower court, if any, whose decision is brought up on appeal. [19]

WHEREFORE, the petition is hereby DENIED and the decision of the Court of Appeals,
With the above conclusion reached, the award of moral and exemplary damages, attorneys fees dated March 17, 1993 is AFFIRMED. No cost.
and expenses of litigation in favor of defendant bank and against plaintiffs-appellants in
paragraph 4 of the dispositive portion of the decision of the trial court must likewise be reversed SO ORDERED.
and set aside; and similarly, paragraph 5. The basis for the award, which we quote for plaintiffs
bad faith in deceiving the Bank to enter into the Memorandum of Agreement is not correct as
we have discussed.[15]

Secondly, pursuant to Article 1339 0f the Civil Code, [16] silence or concealment, by itself,
does not constitute fraud, unless there is a special duty to disclose certain facts, or unless
according to good faith and the usages of commerce the communication should be made. Verily,
private respondents Rayandayan and Arceo had no duty, and therefore did not act in bad faith,
in failing to disclose the real consideration of the sale between them and Manuel Behis.

Thirdly, the bank had other means and opportunity of verifying the financial capacity of
private respondents and cannot avoid the contract on the ground that they were kept in the EN BANC
dark as to the financial capacity by the non-disclosure of the purchase price. As correctly
pointed out by respondent court, the bank security remained unimpaired regardless of the [G.R. No. 29449. December 29, 1928.]
consideration of the sale. Under the terms of the Memorandum of Agreement, the property
remains as security for the payment of the indebtedness, in case of default of payment. Thus, LEODEGARIO AZARRAGA, Plaintiff-Appellee, v. MARIA GAY, Defendant-Appellant.
petitioner bank does not and can not even allege that the agreement was operating to its
disadvantage. If fact, the bank admits that no damages has been suffered by it. [17] Araneta & Zaragoza, for Appellant.

Consequently, not all elements of fraud vitiating consent for purposes of annulling a Azarraga & Panis, for Appellee.
contract concur, to wit: (a) It was employed by a contracting party upon the other; (b) It

SYLLABUS
1. REAL, PROPERTY; PURCHASE AND SALE; VENDORS ALLEGED FALSE REPRESENTATIONS.
When the purchaser proceeds to make investigations by himself, and the vendor does nothing
to prevent such investigation from being as complete as the former might wish, the purchaser
cannot later allege that the vendor made false representations to him. (National Cash Register
Co. v. Townsend, 137 N. C., 662; 70 L. R. A., 349; Williamson v. Holt, 147 N. C., 515.)
2. ID.; ID.; ID. One who contracts for the purchase of real estate in reliance on the
representations and statements of the vendor as to its character and value, but after he has
visited and examined it for himself, and has had the means and opportunity of verifying such
statements, cannot avoid the contract on the ground that they were false or exaggerated.
(Brown v. Smith, 109 Fed., 26.)
The defendant admits that she purchased the two parcels of land referred to by the plaintiff, by
virtue of the deed of sale Exhibit A, but alleges in defense: (a) That the plaintiff knowing that
the second parcel of land he sold had an area of 60 hectares, by misrepresentation lead the
defendant to believe that said second parcel contained 98 hectares, and thus made it appear in
the deed of sale and induced the vendee to bind herself to pay the price of P47,000 for the two
parcels of land, which he represented contained an area of no less than 200 hectares, to which
price the defendant would not have bound herself had she known that the real area of the
second parcel was 60 hectares, and, consequently, she is entitled to a reduction in the price of
the two parcels in proportion to the area lacking, that is, that the price be reduced to P38,000;
(b) that the defendant, in addition to the amounts acknowledged by the plaintiff, had paid other
sums amounting to P4,000; and (c) that the defendant never refused to pay the justly reduced
price, but the plaintiff refused to receive the just amount of the debt.
And by way of cross-complaint, the defendant prays that she be indemnified in the sum of
P15,000 for damages sustained by her by reason of the malicious filing of the instant
complaint.

The plaintiff, replying to the amended answer, alleges that the contract of sale in question was
DECISION made only for the lump sum of P47,000, and not at the rate of so much per hectare, and that
the defendants claim for alleged damages has prescribed.

The lower court, having minutely analyzed the evidence adduced by the parties held that
neither the plaintiff nor the defendant gave any importance to the area of the land in consenting
VILLAMOR, J.:to the contract in question, and that there having been no fraud when the parties agreed to the
lump sum for the two parcels of land described in the deed Exhibit A, following article 1471 of
the Civil Code, ordered the defendant to pay the plaintiff the sum of P19,300 with legal interest
at 8 per cent per annum from April 30, 1921 on the sum of P7,300, and from April 30, 1922, on
the sum of P12,000. And finally dismissed the defendants cross-complaint, without special
By a public document Exhibit A, dated January 17, 1921, the plaintiff sold two parcels of land to pronouncement as to costs.
the defendant for the lump sum of P47,000, payable in installments.
A motion for a new trial having been denied, this case was brought up to this court through the
proper bill of exceptions.
The conditions of the payment were: P5,000 at the time of signing the contract Exhibit A;
P20,000 upon delivery by the vendor to the purchaser of the Torrens title to the first parcel
described in the deed of sale, P10,000 upon delivery by the vendor to the purchaser of Torrens The appellant alleges that the trial court erred in not considering that the plaintiff induced the
defendant by deceit, to pay him the stipulated price for the two parcels he sold, stating falsely
title to the second parcel; and lastly the sum of P12,000 one year after the delivery of the
in the deed of sale that! the second of said parcels had an area of 98 hectares when he knew
Torrens title to the second parcel.
that in reality it only had about 60 hectares more or less, or at least, if such deceit was not
The vendee paid P5,000 to the vendor when the contract was signed. The vendor delivered the practiced that there was a mistake on the part of Maria Gay in believing that said second parcel
contained 98 hectares.
Torrens title to the first parcel to the vendee who, pursuant to the agreement, paid him
P20,000. In the month of March 1921, Torrens title to the second parcel was issued and
As a question of fact the trial court found from the evidence adduced by the parties, that the
forthwith delivered by the vendor to the vendee who, however, failed to pay the P10,000 is
plaintiff had not practiced any deception in agreeing with the defendant upon the sale of the two
agreed, neither did she pay the remaining P12,000 one year after having received the Torrens
parcels of land described in Exhibit A. We concur with the trial court in this conclusion. It
title to the second parcel.
appears of record that before the execution of the contract Exhibit A, the defendant went over
the plaintiffs land and made her own calculations as to the area of said two parcels. But this is
The plaintiff here claims the sum of P22,000, with legal interest from the month of April 1921
not all. The plaintiff delivered to the defendant the documents covering the land he was trying
on the sum of P10,000, and from April 1922 on the sum of P12,000, until full payment of the
to sell. As to the first parcel there is no question whatever and the defendants contention is
amounts claimed.
limited solely to the actual area of the second parcel. The defendant had document Exhibit 4 in
her possession which is the deed by which the plaintiff acquired the land from the original
owner, Crispulo Beramo, in which document it appears that the area of the second parcel is opportunity of verifying such statements, cannot avoid the contract on the ground that they
about 70 hectares. It was the defendant who intrusted the drawing of the deed of sale Exhibit A were false or exaggerated." (Brown v. Smith, 109 Fed., 26.)
to her attorney and notary, Hontiveros, and it is to be presumed that both she and the lawyer
who drew the document Exhibit A, had read the contents of the document Exhibit 4. The That the defendant knew that the area of the second parcel was only about 70 hectares is
plaintiff declares that he signed the document between 5 and 7 in the afternoon of that day and shown by the fact that she received the document Exhibit 4 before the execution of the contract
he did not pay any attention to the area of the second parcel, probably in the belief that in the Exhibit A, as also Exhibit E-3 on September 30,1920; which is the notification of the day for the
drawing of the document the data concerning the area of the land had been taken from the said trial of the application for registration of said parcel, wherein it appears that it had an area of 60
Exhibit 4. The defendant testified that she received from the plaintiff a note or piece of paper hectares more or less, and by the fact that she received from the plaintiff in the month of June
containing the data to be inserted in the contract Exhibit A. The plaintiff denies this and said 1924 the copy of the plans of the two parcels, wherein appear their respective areas; and yet,
note or piece of paper was not presented at the trial. We are of opinion that this testimony of in spite of all this, she did not complain of the difference in the area of said second parcel until
the defendants is unimportant, because, in reality, if the plaintiff had delivered Exhibit 4 to the
the year 1926. Moreover, the record contains several of the defendants letters to the plaintiff in
defendant, there was no need to deliver to her another note to indicate the area of the second the years 1921 to 1925, in which said defendant acknowledges her debt, and confining herself
parcel which already appeared in the said Exhibit 4. to petitioning for extensions of time within which to make payment for the reasons given
therein. But in none of these letters is there any allusion to such lack of area, nor did she
If, notwithstanding the fact that it appeared in Exhibit 4 that the area of the second parcel was, complain to the plaintiff of the supposed deceit of which she believes she is a victim. All of
approximately, 70 hectares, the defendant, however, stated in said document Exhibit A that said which, in our opinion, shows that no such deceit was practiced, as the trial court rightly found.
second parcel contained 98 hectares as was admitted by him in his interviews with the plaintiff
in the months of April and June, 1924, then she has no right to claim from the plaintiff the As to the alleged error to the effect that the trial court failed to order the reduction from the
shortage in area of the second parcel. Furthermore, there is no evidence of record that the price due on the second parcel as stated in the contract of sale Exhibit A, the proportional price
plaintiff made false representation to the defendant as to the area of said second parcel, and of the area lacking, we are of the opinion that said error has no legal ground.
even if he did make such false representations as are now imputed to him by the defendant, the
latter accepted such representations at her own risk and she is the only one responsible for the It appears that by the contract Exhibit A, the parties agreed to the sale of two parcels of land,
consequences of her inexcusable credulousness. In the case of Songco v. Sellner (37 Phil., 254), the first one containing 102 hectares, 67 ares and 32 centares, and the second one containing
the court said:jgc:chanrobles.com .ph about 98 hectares, for the lump sum of P47,000 payable partly in cash and partly in
installments. Said two parcels are defined by means of the boundaries given in the instrument.
"The law allows considerable latitude to sellers statements, or dealers talk; and experience Therefore, the case falls within the provision of article 1471 of the Civil Code, which reads as
teaches that it is exceedingly risky to accept it at its face value. follows: jgc:chanroble s.com.ph

"Assertions concerning the property which is the subject of a contract of sale, or in regard to its "ART. 1471. In case of the sale of real estate for a lump sum and not at the rate of a specified
qualities and characteristics, are the usual and ordinary means used by sellers to obtain a high price for each unit of measure, there shall be no increase or decrease of the price even if the
price and are always understood as affording to buyers no ground for omitting to make area be found to be more or less than that stated in the contract.
inquiries. A man who relies upon such an affirmation made by a person whose interest might so
readily prompt him to exaggerate the value of his property does so at his peril, and must take "The same rule shall apply when two or more estates are sold for a single price; but, if in
the consequences of his own imprudence." cralaw virtua1aw library addition to a statement of the boundaries, which is indispensable in every conveyance of real
estate, the area of the estate should be designated in the contract, the vendor shall be obliged
The defendant had ample opportunity to appraise herself of the condition of the land which she to deliver all that is included within such boundaries, even should it exceed the area specified in
purchased, and the plaintiff did nothing to prevent her from making such investigation as she the contract; and, should he not be able to do so, he shall suffer a reduction of the price in
deemed fit, and, it was said in Songco v. Sellner, supra, when the purchaser proceeds to make proportion to what is lacking of the area, unless the contract be annulled by reason of the
investigations by himself, and the vendor does nothing to prevent such investigation from being vendees refusal to accept anything other than that which was stipulated." cralaw virtua1aw library

as complete as the former might wish, the purchaser cannot later allege that the vendor made
false representations to him. (National Cash Register Co. v. Townsend, 137 N. C., 652; 70 L. R. The plaintiff contends that, in accordance with the first paragraph of this article, the defendant
A., 349; Williamson v. Holt, 147 N. C., 515.) The same doctrine has been sustained by the has no right to ask for the reduction of the price, whatever may be the area of the two parcels
courts of the United States in the following cases, among others: "Misrepresentations by a of land sold to her. On the other hand, the defendant contends that, according to paragraph 2 of
vendor of real property with reference to its area are not actionable, where a correct description the same article of the Civil Code, she has a right to ask for a reduction of the price due on the
of the property was given in the deed and recorded chain of title, which the purchasers agent second parcel, in proportion to the area lacking.
undertook to investigate and report upon, and the vendor made no effort to prevent a full
investigation." (Shappirio v. Goldberg, 48 Law. ed., 419.) "One who contracts for the purchase In his comments on the article cited, Manresa says, among other things: jgc:chanroble s.com.ph

of real estate in reliance on the representations and statements of the vendor as to its character
and value, but after he has visited and examined it for himself, and has had the means and ". . . If the sale was made for a price per unit of measure or number, the consideration of the
contract with respect to the vendee, is the number of such units, or, if you wish, the thing there can be no increase or decrease in price, no matter whether the area be more or less than
purchased as determined by the stipulated number of units. But if, on the other hand, the sale that given in the contract. From this a very important consequence follows, to wit: That if the
was made for a lump sum, the consideration of the contract is the object sold, independently of vendor is bound to deliver a determinate object, he is bound to deliver all of it, that is,
its number or measure, the thing as determined by the stipulated boundaries, which has been everything within its boundaries. even though these contain a greater area than that stated in
called in law a determinate object. the contract, and that from the moment he fails to do so, either because he cannot, or because,
ignoring the meaning of the contract, he alleges that it contains a greater area than that
"This difference in consideration between the two cases implies a distinct regulation of the stipulated, the contract is partially unfulfilled and it is but just that certain actions be available
obligation to deliver the object, because, for an acquittance delivery must be made in to the vendee for the protection of his right.
accordance with the agreement of the parties, and the performance of the agreement must
show the confirmation, in fact, of the consideration which induces each of the parties to enter "The rule in the latter case is found in the second paragraph of article 1471, with the exception
into the contract. of the first clause which refers to the former hypothesis. This rule may be stated as follows:
Whether or not the object of the sale be one realty for a lump sum, or two or more for a single
"From all this, it follows that the provisions of article 1471 concerning the delivery of price also a lump sum, and, consequently not at the rate of a specified prices for each unit of
determinate objects had to be materially different from those governing the delivery of things measure or number, the vendor shall be bound to deliver everything that is included within the
sold for a price per unit of measure or number. Let us examine it, and for the sake of greater boundaries stated, although it may exceed the area or number expressed in the contract; in
clearness, let us expound it as we understand it. case he cannot deliver it, the purchaser shall have the right either to reduce the price
proportionately to what is lacking of the area or number, or to rescind the contract at his
"With respect to the delivery of determinate objects two cases may arise, either the option.
determinate object is delivered as stipulated, that is, delivering everything included within the
boundaries, inasmuch as it is the entirety thereof that distinguishes the determinate object; or "Comprehending, the meaning of a sale of a determinate object, it is easily understood how, in
that such entirety is impaired in the delivery by failing to deliver to the purchaser something cases wherein by virtue of the rule enunciated, the vendor has to deliver a greater area than
included within the boundaries. These are the two cases for which the Code has provided that expressed in the contract, there is, strictly speaking, no excess of area, inasmuch as one
although, in our opinion, it has not been sufficiently explicit in expressing the distinction; hence, may always properly ask, excess with respect to what? With respect to the area appearing in
at first sight, the article seems somewhat difficult to understand. the deed, it will be answered. But as this area was not taken into account in entering into the
contract inasmuch as the parties made neither the amount of the price, nor the efficacy of the
"The first paragraph and the first clause of the second paragraph of article 1471 deal with the contract to depend on the number of its units; since that area was written in to fulfill a formal
first of said cases; that is where everything included within the boundaries as set forth in the requisite demanded by the present rules upon the drawing of public instruments, but not as a
contract has been delivered. The Code goes on to consider the case where a definite area or condition essential to the contract, which, if it were not true, would not be consummated, it
number has been expressed in the contract, and enunciates the rule to be followed when, after results in the long run, that this detail of the written recital, with respect to which the excess is
delivery, the area included within said boundaries is found not to coincide with the aforesaid to be estimated, is so negligible, so inconsistent, so haphazard, and in the vast majority of
content or number. Said rule may be thus stated: Whether or not the object of sale be one cases so wide of the mark, that it is impossible to calculate the excess; and considering the
realty for a lump sum, or two or more for a single price also a lump sum, and, consequently, not nature of a contract of sale of a definite object, it cannot be strictly held that there is any excess
for so much per unit of measure or number, there shall be no increase or decrease in the price at all.
even if the area be found to be more or less than that stated in the contract.
"If everything within the stipulated boundaries is not delivered, then the determinate object
"Thus understood the reason for the regulation is clear and no doubts can arise from its which was the consideration of the contract for the vendee, is not delivered; hence his power to
application. It is concerned with determinate objects. The consideration of the contract, and the nullify it. However, it might be (and this he alone can say), that although he has not received
thing to be delivered is a determinate object, and not the number of units it contains. The price the object, according to the stipulated terms, it suits him; hence his power to carry the contract
is determined with relation to it; hence, its greater or lesser area cannot influence the increase into effect with the just decrease in price referred to in the article under comment.
or decrease of the price agreed upon. We have just learned the reason for the regulation,
bearing in mind that object as determinate for the purposes now treated, when it is a single "The manner in which the matter covered by this article was distributed in its two paragraphs
realty as when it is two or more, so long as they are sold for a single price constituting a lump contributes to making it difficult to understand. The rule might have been clearly stated had the
sum and not for a specified amount per unit of measure or number. first clause of the second paragraph been included in the first paragraph, the latter to end with
the words: The same rule shall apply when two or more estates are sold for a single price. And
"We have stated that the second possible case in the delivery of determinate objects is that in if by constituting an independent paragraph, with the rest of the second paragraph, it were
which, on account of circumstances of diverse possible origins, everything included within the made to appear more expressly that the rule of the second paragraph thus drawn referred to all
boundaries is not delivered. the cases of paragraph one, as we have expounded, namely, to the case of a sale of one single
estate and that of two or more for one single price, the rule would have been clearer.
"We have indicated about that where everything included within the boundaries is delivered
"In our opinion, this would have better answered what we deem to be the indubitable intention price also a lump sum, and, consequently, not at the rate of a specified price for each unit of
of the legislator. measure or number, the vendor shall be bound to deliver everything that is included within the
boundaries stated, although it may exceed the area or number expressed in the contract; in
"Some eminent commentators construe the last part of article 1471 in a different way. To them case he cannot deliver it, the purchaser shall have the right either to reduce the price
the phrase and should he not be able to do so as applied to the vendor, does not mean as proportionately to what is lacking of the area or number, or to rescind the contract, at his
apparently it does should he not be able to deliver all that is included within the boundaries option."
cralaw virtua1aw library

stated, but this other thing, namely, that if by reason of the fact that a less area is included
within the boundaries than that expressed in the contract, it is not possible for the vendor to Considering the facts of the present controversy, it seems clear to us that the rule formulated
comply therewith according to its literal sense, he must suffer either the effects of the nullity of for the second paragraph of article 1471 is inapplicable in the instant case inasmuch as all the
the contract or a reduction of the price proportionately to what may be lacking of the area or land included within the boundaries of the two parcels sold has been delivered in its entirety to
number. It is added as a ground for this solution that If the vendor fulfills the obligation, as the vendee. There is no division of the land enclosed within the boundaries of the properties
stated in the article, by delivering what is not included within the boundaries, there can never sold; the determinate object which is the subject matter of the contract has been delivered by
be any case of proportionate reduction of the price on account of shortage of area, because he the vendor in its entirety as he obligated himself to do. Therefore, there is no right to complain
does not give less who delivers all that he bound himself to. either on the part of the vendor, even if there be a greater area than that stated in the deed, or
on the part of the vendee, though the area of the second parcel be really much smaller. (Irureta
"According to this opinion, which we believe erroneous, if within the boundaries of the property Goyena v. Tambunting, 1 Phil., 490.)
sold, there is included more area than that expressed in the title deeds, nothing can be claimed
by the vendor who loses the value of that excess, but if there is less area, then he loses also With regard to the damages prayed for by the defendant, the lower court finally dismissed the
because either the price is reduced or the contract is annulled. This theory would be anomalous cross-complaint without special pronouncement as to costs. And according to the decision of the
in case of sale of properties in bulk, but, especially, would work a gross injustice which the Supreme Court of Spain of 1897, a judgment absolving a party from a claim of damages against
legislator never intended. him, who has not contravened his obligations, does not violate articles 1101 and 1108 of the
Civil Code.
"There is no such thing. So long as the vendor can deliver, and for that reason, delivers all the
land included within the boundaries assigned to the property, there can be no claim whatsoever With respect to the question of interest, the lower court likewise held that, as the defendant had
either on his part, although the area may be found to be much greater than what was not paid the sum of P7,300 on April 30,1921, when the plaintiff had delivered the certificate of
expressed, nor on the part of the purchaser although that area may be in reality much smaller. title, she was in default from that date and also from the date of one year thereafter, with
But as he sold everything within the boundaries and this is all the purchaser has paid, or must respect to the sum of P12,000, constituting the last period of the obligation. We are of the
pay for whether much or little, if afterwards it is found that he cannot deliver all, because, for opinion that the lower court has committed no error which should be corrected by this court.
instance, a part, a building, a valley, various pieces of land, a glen, etc., are not his, there is no The judgment appealed from being in accordance with the law, it should be as it is hereby,
sale of a determinate object, there is no longer a sale of the object agreed upon, and the affirmed, with costs against the appellant. So ordered.
solution given by the article is then just and logical: Either the contract is annulled or the price
is reduced proportionately."cralaw virtua1aw library
THIRD DIVISION

We have quoted from Manresas Commentaries at length for a better understanding of the [G.R. No. 65922. December 3, 1991.]
doctrine on the matter, inasmuch as the contending counsel have inserted in their respective
briefs only such portions of said commentaries as relate to their respective contentions. LAURETA TRINIDAD, Petitioner, v. INTERMEDIATE APPELLATE COURT and VICENTE J.
FRANCISCO, Respondents.
It may be seen from a careful reading of the commentaries on said article 1471, that the great
author distinguishes between the two cases dealt with in article 1471, and formulates the Ramon A. Gonzales for Petitioner.
proper rules for each. In the delivery of a determinate object, says the author, two cases may
arise: either the determinate object is delivered as stipulated, that is, delivering everything Raymundo T. Francisco for R.J. Francisco.
included within the boundaries, inasmuch as it is the entirety thereof that distinguishes the
determinate object; or that such entirety is impaired in the delivery by failing to deliver to the Siquia Law Offices for respondents Trinidad J. Francisco & Rosario F. Kelemen.
purchaser something included within the boundaries. For the first case, Manresa gives the
following rule: "Whether or not the object of the sale be one realty for a lump sum, or two or
more for a single price also a lump sum, and, consequently, not for so much per unit of
measure or number, there shall be no increase or decrease in the price even if the area be
found to be more or less than that stated in the contract." And for the second case, this other: SYLLABUS
"Whether or not the object of the sale be one realty for a lump sum, or two or more for a single
 respondent, not the other way round, and that it was she who argued that the seller was not
entitled to the additional installments because of his violation of the contract. If she asked for
the annulment of the contract and the refund to her of the payments she had already made,
1. REMEDIAL LAW; EVIDENCE; DISPUTABLE PRESUMPTIONS; PRIVATE TRANSACTIONS HAVE plus damages, it was because she felt she had the right to do so. Given such circumstances, the
BEEN FAIR AND REGULAR. Fraud is never lightly inferred; it is good faith that is. Under the Court feels and so holds that the above-quoted stipulation should not be strictly enforced, to
Rules of Court, it is presumed that "a person is innocent of crime or wrong" and that "private justify the rescission of the contract. To make her forfeit the payments already made by her and
transactions have been fair and regular." While disputable, these presumptions can be overcome at the same time return the property to the private respondents for standing up to what she
only by clear and preponderant evidence. considered her right would, in our view, be unfair and unconscionable. Justice demands that we
moderate the harsh effects of the stipulation. Accordingly, in the exercise of our equity
2. CIVIL LAW; OBLIGATIONS AND CONTRACTS; FRAUD; A PARTY WHO RELIES UPON A jurisdiction, we hereby rule that the Contract of Conditional Sale shall be maintained between
SELLERS STATEMENT MUST TAKE THE CONSEQUENCES OF HIS OWN IMPRUDENCE. The law the parties except that the petitioner shall not return the house to the private respondents.
allows considerable latitude to sellers statements, or dealers talk, and experience teaches that However, she will have to pay them the balance of the purchase price in the sum of P52,500.00,
it is exceedingly risky to accept it at its face value . . . Assertions concerning the property which with 12% annual interest from July 1, 1972, until full payment.
is the subject of a contract of sale, or in regard to its qualities and characteristics, are the usual
and ordinary means used by sellers to obtain a high price and are always understood as 7. ID.; COURTS; NOT GUARDIANS OF PERSONS WHO ARE NOT LEGALLY INCOMPETENT. . . .
affording to buyers no ground for omitting to make inquiries. A man who relies upon such an Courts cannot follow one every step of his life and extricate him from bad bargains, protect him
affirmation made by a person whose interest might so readily prompt him to exaggerate the from unwise investments, relieve him from one-sided contracts, or annul the effects of foolish
value of his property does so at his peril, and must take the consequences of his own acts. Courts cannot constitute themselves guardians of persons who are not legally
imprudence. (Songco v. Sellner, 37 Phil. 254) incompetent. Courts operate not because one person has been defeated or overcome by
another, but because he has been defeated or overcome illegally. Men may do foolish things,
3. ID.; ID.; RESCISSION OF CONTRACTS; CONTRACT OF SALE CANNOT BE AVOIDED ON make ridiculous contracts, use miserable judgment, and lose money by them indeed, all they
GROUND OF FALSE AND EXAGGERATED REPRESENTATION OF SELLER. We have also held have in the world but not for that alone can the law intervene and restore. There must be, in
that "one who contracts for the purchase of real estate in reliance on the representations and addition, a violation of law, the commission of what the law knows as an actionable wrong,
statements of the vendor as to its character and value, but after he has visited and examined it before the courts are authorized to lay hold of the situation and remedy it. (Vales v. Villa, 35
for himself and has had the means and opportunity of verifying such statements, cannot avoid Phil. 769)
the contract on the ground that they were false and exaggerated." cralaw virtua1aw library

4. ID.; PUBLIC LAND ACT; TORRENS SYSTEM OF LAND REGISTRATION; INDEFEASIBILITY OF

TITLE AFTER ONE YEAR FROM ENTRY OF DECREE. Under the Land Registration Act, title to
the property covered by a Torrens certificate becomes indefeasible after the expiration of one DECISION
year from the entry of the decree of registration. Such decree of registration is incontrovertible
and is binding on all persons whether or not they were notified of or participated in the
registration proceedings.

5. ID.; PROPERTY REGISTRATION DECREE; TORRENS CERTIFICATE OF TITLE, NOT SUBJECT TO CRUZ, J.:
COLLATERAL ATTACK. If such title is to be challenged, it may not be done collaterally, as in
the present case, because the judicial action required is a direct attack. Section 48 of the
Property Registration Decree expressly provides that a certificate of title cannot be subject to
collateral attack and can be altered, modified or cancelled only in a direct proceeding in
accordance with law. This was the same rule under Act 496. Moreover, the right of reversion The house looked beautiful in summer but not when the waters came. Then it was flooded five
belongs to the State and may be invoked on its behalf only by the Solicitor General. feet deep and less than prepossessing, let alone livable. Disenchanted, the buyer sued the seller
for the annulment of the sale and damages, alleging fraud.
6. REMEDIAL LAW; SUPREME COURT; EXERCISE OF EQUITY JURISDICTION IN CASE AT BAR.
Nevertheless, we cannot say that the petitioner was, strictly speaking, in default in the payment The house was Bungalow No. 17, situated at Commonwealth Village in Quezon City, and
of the remaining amortizations in the sense contemplated in that stipulation. She was not belonged to the late Vicente J. Francisco. Sometime in early 1969, Laureta Trinidad, the
simply unable to make the required payments. The fact is she refused to make such payments. petitioner herein, approached him and offered to buy the property. Francisco was willing to sell.
If she suspended her payments, it was because she felt she was justified in doing so in view of Trinidad inspected the house and lot and examined a vicinity map which indicated drainage
the defects she found in the property. It is noteworthy that it was she who sued the private canals along the property. The purchase price was P70,000.00 with a down payment of
P17,500.00. The balance was to be paid in five equal annual installments not later than July 1 of d) ordering plaintiff to return to the defendants representatives the house and lot in question;
each year at 12% interest per annum.
e) ordering defendants representatives to pay the amount of P5,000.00 as and by way of
On March 29, 1969, Trinidad paid Francisco P5,000.00 as earnest money and entered into the attorneys fees.
possession of the house. However, as she relates it, she subsequently heard from her new
neighbors that two buyers had previously vacated the property because it was subject to WITH COSTS AGAINST THE DEFENDANT
flooding. She says she talked to Francisco about this matter and that he told her everything had
been fixed and the house would never be flooded again. Thus assured, she gave him Upon separate motions for reconsideration filed by both parties, Judge Apostol ordered and held
P12,500.00 to complete the down payment. They signed the Contract of Conditional Sale on a new trial, resulting in a new decision dated April 13, 1976, reiterating his original dispositions.
August 8, 1969. 1
Both parties appealed to the respondent court, which reversed the trial court in a decision
Trinidad paid the installment for 1970 and 1971 on time but asked Francisco for an extension of promulgated on May 31, 1983. 4 The dispositive portion read as follows: chanrob1es virtual 1aw library

60 days to pay the third installment due on July 1, 1972. However, she says she eventually
decided not to continue paying the amortizations because the house was flooded again on July WHEREFORE, the appeal of plaintiff is hereby dismissed. With respect to the appeal of
18, 21, and 30, 1972, the waters rising to as high as five feet on July 21. Upon her return from defendant, the decision of the lower court is hereby reversed and set aside and another one is
the United States on October 11, 1972, she wrote the City Engineers office of Quezon City and rendered dismissing the complaint and, upon the counterclaim, sustaining the cancellation of
requested an inspection of the subject premises to determine the cause of the flooding. The the contract of conditional sale (Exh. B) and the forfeiture of any and all sums of money paid by
finding of City Engineer Pantaleon P. Tabora was that "the lot is low and is a narrowed portion of plaintiff to the defendant on account of the contract to be treated as rentals for the use and
the creek." chanroble s virtual lawlibrary occupation of the property and ordering the plaintiff to vacate the property. No special
pronouncement as to costs.
On January 10, 1973, the petitioner filed her complaint against Francisco alleging that she was
induced to enter into the contract of sale because of his misrepresentations. She asked that the This Court gave due course to the herein petition for review on certiorari of the said decision
agreement be annulled and her payments refunded to her, together with the actual expenses and required the parties to submit their respective memoranda. Pendente lite, Vicente J.
she had incurred for the "annexes and decorations" she had made on the house. She also Francisco died and was eventually substituted by his heirs, 5 two of whom, Trinidad J. Francisco
demanded the actual cost of the losses she had suffered as a result of the floods, moral and and Rosario F. Kelemen, filed their own joint memorandum. 6 The Court has deliberated on the
exemplary damages in the sum of P200,000.00, and P10,000.00 attorneys fees. 2 issues and the arguments of the parties and is now ready to act on the motions filed by the
petitioner and the private respondents for the resolution of this case.
In his answer and amended answer, the defendant denied the charge of misrepresentation and
stressed that the plaintiff had thoroughly inspected the property before she decided to buy it. The petitioner faults the respondent court on the following grounds: chanrob1es virtual 1aw library

The claimed creek was a drainage lot, and the floods complained of were not uncommon in the
village and indeed even in the Greater Manila area if not the entire Luzon. In any event, the 1. The Intermediate Appellate Court palpable erred in not finding that the lot on which the
floods were fortuitous events not imputable to him. He asked for the rescission of the contract house in question stands is a portion of a creek, hence outside the commerce of man.
and the forfeiture of the payments made by the plaintiff plus monthly rentals with interest of
P700.00 for the property from July 2, 1972, until the actual vacation of the property by the 2. The Intermediate Appellate Court palpable erred in finding that there was no fraud prior to
plaintiff. He also claimed litigation expenses, including attorneys fees. 3 the sale that induced petitioner to enter into the said sale.

In his decision dated June 17, 1975, Judge Sergio F. Apostol of the then Court of First Instance 3. The Intermediate Appellate Court palpably erred in cancelling the complaint for non-payment
of Rizal held in favor of the plaintiff and disposed as follows:
chanrob1es virtual 1aw library of the installments and declaring the previous installments forfeited.

WHEREFORE, premises considered, judgment is hereby rendered:
a) ordering the annulment of the contract of conditional sale entered into by the parties;
b) ordering defendants representatives to pay to the plaintiff the amount of P49,840.00 with
interest from the time of the filing of the complaint;
chanrob1es virtual 1aw library 4. The Intermediate Appellate Court erred in not granting moral damages and attorneys fees to
petitioner.
The basic issue in this controversy is whether or not, under the established facts, there was
misrepresentation on the part of Francisco to justify the rescission of the sale and the award of
damages to the petitioner.

c) ordering the defendants representatives to pay the amount of P39,800.00 representing the The pertinent provisions of the Civil Code on fraud are the following: chanrob1es virtual 1aw library

value of the improvements and the losses she incurred by virtue of the flood;
ARTICLE 1338. There is fraud when, through insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract which, without them, he would own risk and must therefore be responsible for the consequences of her careless credulousness.
not have agreed to. In the case of Songco v. Sellner, 12 the Court said: chanrob1es virtual 1aw library

ARTICLE 1339. Failure to disclose facts, when there is a duty to reveal them, as when the The law allows considerable latitude to sellers statements, or dealers talk, and experience
parties are bound by confidential relations, constitutes fraud. teaches that it is exceedingly risky to accept it at its face value . . .

ARTICLE 1340. The usual exaggerations in trade, when the other party had an opportunity to Assertions concerning the property which is the subject of a contract of sale, or in regard to its
know the facts, are not in themselves fraudulent. qualities and characteristics, are the usual and ordinary means used by sellers to obtain a high
price and are always understood as affording to buyers no ground for omitting to make
Fraud is never lightly inferred; it is good faith that is. Under the Rules of Court, it is presumed inquiries. A man who relies upon such an affirmation made by a person whose interest might so
that "a person is innocent of crime or wrong" 7 and that "private transactions have been fair readily prompt him to exaggerate the value of his property does so at his peril, and must take
and regular." 8 While disputable, these presumptions can be overcome only by clear and the consequences of his own imprudence.
preponderant evidence.
We have also held that "one who contracts for the purchase of real estate in reliance on the
Our finding is that the fraud alleged by the petitioner has not been satisfactorily established to representations and statements of the vendor as to its character and value, but after he has
can for the annulment of the contract. This finding is based on the following considerations. visited and examined it for himself and has had the means and opportunity of verifying such
statements, cannot avoid the contract on the ground that they were false and exaggerated." 13
First, it was the petitioner who admittedly approached the private respondent, who never
advertised the property nor offered it for sale to her. The Court must also reject the petitioners contention that the lot on which the house stands is
a portion of a creek and therefore outside the commerce of man as part of the public domain.
Second, the petitioner had full opportunity to inspect the premises, including the drainage
canals indicated in the vicinity map that was furnished her, before she entered into the contract The said property is covered by TCT No. 102167 of the Registry of Deeds of Quezon City. Under
of conditional sale. the Land Registration Act, title to the property covered by a Torrens certificate becomes
indefeasible after the expiration of one year from the entry of the decree of registration. Such
Third, it is assumed that she made her appraisal of the property not with the untrained eye of decree of registration is incontrovertible and is binding on all persons whether or not they were
the ordinary prospective buyer but with the experience and even expertise of the licensed real notified of or participated in the registration proceedings.
estate broker that she was. 9 If she minimized the presence of the drainage canals, she has
only her own negligence to blame. If such title is to be challenged, it may not be done collaterally, as in the present case, because
the judicial action required is a direct attack. Section 48 of the Property Registration Decree
Fourth, seeing that the lot was depressed and there was a drainage lot abutting it, she cannot expressly provides that a certificate of title cannot be subject to collateral attack and can be
say she was not forewarned of the possibility that the place might be flooded. Notwithstanding altered, modified or cancelled only in a direct proceeding in accordance with law. This was the
the obvious condition of the property, she still decided to buy it. same rule under Act 496. 14 Moreover, the right of reversion belongs to the State and may be
invoked on its behalf only by the Solicitor General. 15
Fifth, there is no evidence except her own testimony that two previous owners of the property
had vacated it because of the floods and that Francisco assured her that the house would not be It is true, as the private respondents have insisted and the respondent court has found, that the
flooded again. The supposed previous owners were not presented as witnesses and neither were Contract of Conditional Sale contains the following condition: chanrob1es virtual 1aw library

the neighbors. Francisco himself denied having made the alleged assurance.
(d) That should the SECOND PARTY fail to make any of the payments referred to in the
Sixth, the petitioner paid the 1970 and 1971 amortizations even if, according to her Complaint, aforesaid paragraphs 2(a) and (b), of this contract of conditional sale, shall be considered
"since 1969 said lot had been under floods of about one (1) foot deep," 10 and despite the automatically rescinded and cancelled without the necessity of notice to the SECOND PARTY, or
floods of September and November 1970. of any Judicial declaration to that effect, and any and all sums paid by the SECOND PARTY shall
be considered rents and liquidated damages for the breach of this contract, and the SECOND
Seventh, it is also curious that notwithstanding the said floods, the petitioner still "made PARTY shall forthwith vacate the foresaid property peacefully.
annexes and decorations on the house," 11 all of a permanent nature, for which she now claims
reimbursement from the private Respondent. Nevertheless, we cannot say that the petitioner was, strictly speaking, in default in the payment
of the remaining amortizations in the sense contemplated in that stipulation. She was not
To repeat, it has not been satisfactorily established that the private respondent inveigled the simply unable to make the required payments. The fact is she refused to make such payments.
petitioner through false representation to buy the subject property. Assuming that he did make If she suspended her payments, it was because she felt she was justified in doing so in view of
such representations, as the petitioner contends, she is deemed to have accepted them at her the defects she found in the property. It is noteworthy that it was she who sued the private
respondent, not the other way round, and that it was she who argued that the seller was not
entitled to the additional installments because of his violation of the contract. If she asked for
the annulment of the contract and the refund to her of the payments she had already made,
plus damages, it was because she felt she had the right to do so.

Given such circumstances, the Court feels and so holds that the above-quoted stipulation should
not be strictly enforced, to justify the rescission of the contract. To make her forfeit the
payments already made by her and at the same time return the property to the private
respondents for standing up to what she considered her right would, in our view, be unfair and
unconscionable. Justice demands that we moderate the harsh effects of the stipulation.
Accordingly, in the exercise of our equity jurisdiction, we hereby rule that the Contract of
Conditional Sale shall be maintained between the parties except that the petitioner shall not
return the house to the private respondents. However, she will have to pay them the balance of
the purchase price in the sum of P52,500.00, ** with 12% annual interest from July 1, 1972,
until full payment.

Obviously, rejection of the petitioners claim for moral and exemplary damages must also be
sustained.

What we see here is a bad bargain, not an illegal transaction vitiated by fraud. While we may FIRST DIVISION
commiserate with the petitioner for a purchase that has proved unwise, we can only echo what
Mr. Justice Moreland observed in Vales v. Villa, 16 thus: chanrob1es virtual 1aw library
[G.R. No. 11513. December 4, 1917. ]

. . . Courts cannot follow one every step of his life and extricate him from bad bargains, protect LAMBERTO SONGCO, Plaintiff-Appellee, v. GEORGE C. SELLNER, Defendant-Appellant.
him from unwise investments, relieve him from one-sided contracts, or annul the effects of
foolish acts. Courts cannot constitute themselves guardians of persons who are not legally Thos. D. Aitken for Appellant.
incompetent. Courts operate not because one person has been defeated or overcome by
another, but because he has been defeated or overcome illegally. Men may do foolish things, Perfecto Gabriel for Appellee.
make ridiculous contracts, use miserable judgment, and lose money by them indeed, all they
have in the world but not for that alone can the law intervene and restore. There must be, in SYLLABUS
addition, a violation of law, the commission of what the law knows as an actionable wrong,
before the courts are authorized to lay hold of the situation and remedy it. 1. CIVIL PROCEDURE; DENIAL OR EXECUTION OF WRITTEN INSTRUMENT. In an action upon
a promisory note, a general denial of the complaint under oath does not raise an issue as to the
WHEREFORE, the appealed decision is AFFIRMED as above modified, with no pronouncement as genuineness or due execution of the note, as contemplated in section 103 of the code of Civil
to costs. It is so ordered. Procedure. Nor is such an issue raised by an answer under oath setting up the defense that the
note was procured by fraud.

2. FRAUD; FALSE REPRESENTATION AS TO MATTER OF OPINION. The seller of the can

standing in a certain field made an exaggerated statement concerning the probable yield of
sugar from said cane but refused to warrant the amount of the yield. The purchaser
nevertheless credited the statement and bought the cane in the belief that it would produce
substantially the amount stated by the seller; but the yield in fact turned out to be much less.
Held: That the purchaser had no right to rely upon such representation and the fact that the
furnished no ground for relieving the purchaser from his contract to pay the price agreed upon.
 DECISION much less. It appears that in the course of the negotiations Sellner requested Songco to
guarantee the quantity which the latter claimed to be in the fields but he would not do so. He,
however, repeated that he was sure the fields contained the quantity estimated by him. Some
evidence was introduced tending to show that the disparity between Songcos estimate and the
quantity actually obtained would have been less if the cutting and hauling of the cane hand
STREET, J. :been more expeditiously conducted. We do not think there is much in this; and even making
allowance for weight unnecessarily lost, the harvest fell far short of the amount estimated by
Songco. We think it is fairly shown by the evidence that Songco knew at the time he made the
representation in question that he was greatly exaggerating the probable produce of his fields,
and it is impossible to believe that his estimate honestly reflected his true opinion. He knew
In December, 1915, the defendant, George C. Sellner, was the owner of a farm at Floridablanca, what these same fields had been producing over a long period of years; and he knew that,
Pampanga, which was contiguous to a farm owned by the plaintiff Lamberto Songco. Both judging from the customary yield, the harvest of this year should fall far below the amount
properties had a considerable quantity of sugar cane ready to be cut. At Dinalupijan, a short stated.
distance away, was located a sugar central, and Sellner desired to mill his cane at this central.
On obstacle was that the owners of the central were not sure they could mill his cane and would Notwithstanding the fact that Songcos statement as to the probable output of his crop was
not promise to take it. Sellner, however, learning that the central was going to mill Songcos disingenuous and uncandid, we nevertheless think that Sellner was bound and that he must pay
cane, conceived the idea of buying the cane of the latter, expecting to run his own cane in at the price stipulated. The representation in question can only be considered matter of opinion ad
the same time the other should be milled. Another motive which evidently operated upon the the cane was still standing in the field, and the quantity of sugar it would produce could not be
mind of Sellner was the desire to get a right of way over Songcos land for conveying his own known with certainty until it should be harvested and milled. Undoubtedly Songco had better
sugar to the central. Accordingly he bought Songcos cane as it stood in the fields for the agreed experience and better information on which to form an opinion on this question than Sellner.
sum of P12,000 and executed therefor three promissory notes of P4,000 each. Two of these Nevertheless the latter could judge with his own eyes as to the character of the cane, and it is
notes were paid; and the present action was instituted to recover upon the third. From a shown that the measured the fields and ascertained that they contained 961/2 hectares.
judgment rendered in favor of the plaintiff, the defendant has appealed.
It is of course elementary that a misrepresentation upon a mere matter of opinion is not an
The note, upon which the action was brought, was exhibited with the complaint. The answer of actionable deceit, nor is it a sufficient ground for avoiding a contract as fraudulent. We are
the defendant was made under oath, and contained a general denial of all the allegations of the aware that statement may be found in the books to the effect that there is a difference between
complaint. The answer also contained the allegation, asserted by way of special defense, that giving an honest opinion and making a false representation as to what ones real opinion is. We
the promissory note in question was obtained from the defendant by means of certain false and do not think, however, that this is case where any such distinction should be drawn.
fraudulent representation therein specified. The note was admitted in evidence by the court;
and error is here assigned upon this action, on the ground that the genuineness and due The law allows considerable latitude to sellers statements, or dealers talk; and experience
execution of the note was not proved. There is nothing in this contention for several reasons. In teaches that it is exceedingly risky to accept it at its face value. The refusal of the seller to
the first place a general denial of a complaint does not raise a question as to the genuineness or warrant his estimate should have admonished the purchaser that the estimate was put forth as
due execution of a written instrument. Under section 103 of the Code of Civil Procedure it is a mere opinion; an we will not now hold the seller to a liability equal to that which would have
necessary that the genuineness denied before an issue is raised upon this point. This means been created by a warranty, if one had been given.
that the defendant must declare under oath that he did not sign the document or that it is
otherwise false or fabricated. Neither does the statement of the answer to the effect that the Assertions concerning the property which is the subject of a contract of sale, or in regard to its
instrument was procured by fraudulent representation raise any issue as to its genuineness or qualities and characteristics, are the usual and ordinary means used by sellers to obtain a high
due execution. On the contrary such a plea is an admission both of the genuineness and due price and are always understood as affording to buyers no ground for omitting to make
execution thereof, since it seeks to avoid the instrument upon a ground not affecting either. inquiries. A man who relies upon such an affirmation made by a person whose interest might so
Furthermore, in this particular case the fourth paragraph of the answer expressly admits the readily prompt him to exaggerate the value of his property does so at his peril, and must take
execution of the instrument by the defendant. the consequences of his own imprudence.

The principal defense here urged relates to a false representation which, it is claimed, was made The principles enunciated above are fully supported by the weight of judicial authority. In a case
by the plaintiff Songco with respect to the quantity of uncut cane standing in the fields at the where the owners of certain logs represented to their vendee that the logs would produce a
time the defendant Sellner became the purchaser thereof. Upon this point it in proved that greater per cent of superior lumber than was actually realized, but refused to warrant their
Songco estimated that this cane would produce 3,000 piculs of sugar and that Sellner bought quality and required the vendee to examine for himself before making the contract, it was held
the crop believing this estimate to be substantially correct. As the crop turned out it produced that the vendee could not avoid the contract. (Fauntleroy v. Wilcox, 80 III., 477.) In Williamson
2,017 piculs, gross, and after the toll for milling was deducted the net left to Sellner was very v. Holt (147 N.C. 515; 17 L.R. A. [N.S. ], 240), it appeared that the defendant had bought an
ice plant with the knowledge that its operation had been abandoned because the output did not
equal its capacity. He had full opportunity to investigate its condition. It was held that he could
not avoid paying the purchase price because the vendor stated that, with some repairs, it would
turn out about a certain amount per day. In Poland v. Brownell (131 Mass., 138), where a man
who bought a stock of goods had ample opportunity to examine and investigate, it was held
that he could not rely on the sellers misrepresentations as to the value of the goods or the
extent of the business. It would have been different if the seller had fraudulently induced him to
forbear inquiries or examination which he would otherwise have made.

It is not every representation relating to the subject matter of a contract which will render it
void. It must be as to matters of fact substantially affecting the buyers interest, not as to
matters of opinion, judgment, probability, or expectation. (Long v. Woodman, 58 Me., 52;
Hazard v. Irwin, 18 Pick [Mass], 95; Gordon v. Parmelee, 2 Allen [Mass. ], 212; Williams v.
FIRST DIVISION
McFadden, 23 Fla., 143, 11 Am. St. Rep., 345.) When the purchaser undertakes to make an
investigation of his own, and the seller does nothing to prevent this investigation form being as
[G.R. No. L-11872. December 1, 1917. ]
full as he chooses to make it, the purchaser cannot afterwards allege that the seller made
misrepresentations. (National Cash Register Co. v. Townsend, 137 N.C. 652 70 L.R.A., 349;
DOMINGO MERCADO and JOSEFA MERCADO, Plaintiffs-Appellants, v. JOSE ESPIRITU,
Williamson v. Holt, 147 N.C. 515.)
administrator of the estate of the deceased Luis Espiritu, Defendant-Appellee.
We are aware that where one party to a contract, having special or expert knowledge, takes
Perfecto Salas Rodriguez for Appellants.
advantage of the ignorance of another to impose upon him, the false representation may afford
ground for relief, though otherwise the injured party would be bound. But we do not think that
Vicente Foz for Appellee.
the fact that Songco was an experienced former, while Sellner was, as he claims, a mere novice
in the business, brings this case within that exception.
SYLLABUS
An incident of this action was that the plaintiffs sued out an attachment against the defendant,
1. VENDOR AND PURCHASER; MINORS. The annulment of a deed of sale of a piece of land
at the time of the institution of the suit, upon the ground that he was disposing of his property
was sought on the ground that two of the four parties thereto were minors, 18 and 19 years
in fraud of his creditors. This charge was completely refuted by proof showing that the
old, respectively, on the date when the instrument was executed, but no direct proof of this
defendant is a man of large resources and had not attempted to convey away his property as
alleged circumstance was adduced by means of certified copies of the baptismal certificates of
alleged. The court below therefore found that this attachment had been wrongfully sued out,
the two minors, nor any supplemental proof such as might establish that in fact they were
and awarded damages to the defendant equivalent to the amount actually paid out by him in
minors on that date. Held: That the statement made by one of the adult parties of said deed, in
procuring the dissolution of the attachment. No appeal was taken from this action of the court
reference to certain notes made in a book or copybook of a private nature, which she said their
by the plaintiff; but the defendant assigns errors to the action of the court in refusing to award
father kept during his lifetime and until his death, is not sufficient to prove the plaintiffs
to him further damages for the injury done to his credit. In this connection he shows that one of
minority on the date of the execution of the deed.
his creditors, being appraised to the fact that the defendant had been made the subject of an
attachment, withheld further credit and forced him to sell a large quantity of sugar at a price
2. ID.; ID. The courts have laid down the rule that the sale of real estate, effected by minors
much lower than he would have received if he could have carried it a few weeks longer. We
who have already passed the ages of puberty and adolescence and are near the adult age when
think the court below committed no error in refusing to award damages upon this ground, as
they pretend to have already reached their majority, while in fact they have not, is valid, and
such damages were remote and speculative. It could hardly be foreseen as a probale
they cannot be permitted after wards to excuse themselves from compliance with the obligation
consequence of the suing out of this attachment that the hands of the creditors would come
assumed by them or to seek their annulment. (Law 6, title 19, 6th partida.) The judgment that
down upon their unfortunate client with such disastrous results; and the plaintiff certainly
holds such a sale to be valid and absolves the purchaser from the complaint filed against him
cannot be held accountable for the complications of the defendants affairs which made possible
does not violate the laws relative to the sale of minors property nor the rules laid down in
the damage which in fact resulted. The court below also refused to award punitive damages
consonance therewith. (Decisions of the Supreme Court of Spain, of April 27, 1860, July 11,
claimed by the plaintiff on the ground that the attachment was maliciously sued out. The action
1868, and March 1, 1875.) This doctrine is entirely in accord with the provisions of section 333
of the court in this respect will not be here disturbed.
of the Code of Civil Procedure, which determines cases of estoppel.
From what has been said it follows that the judgment of the court below must be affirmed, with
costs against the appellant. So ordered.
 DECISION father, in his capacity as administrator of the property of his children sold under pacto de retro
to the same Luis Espiritu at the price of P375 the remainder of said land, to wit, an area
covered by six cavanes of seed to meet the expenses of the maintenance of his (Wenceslaos)
children, and this amount being still insufficient he successively borrowed from said Luis Espiritu
other sums of money aggregating a total of P600; but that later, on May 17, 1910, the plaintiffs,
TORRES, J. :alleging themselves to be of legal age, executed, with their sisters Maria del Consejo and Maria
de la Paz, the notarial instrument inserted integrally in the 5th paragraph of the answer, by
which instrument, ratifying said sale under pacto de retro of the land that had belonged to their
mother Margarita Espiritu, effected by their father Wenceslao Mercado in favor of Luis Espiritu
for the sum of P2,600, they sold absolutely and perpetually to said Luis Espiritu, in
This is an appeal by bill of exceptions, filed by counsel for the plaintiffs from the judgment of consideration of P400, the property that had belonged to their deceased mother and which they
September 22, 1914, in which the judge of the Seventh Judicial District dismissed the complaint acknowledged having received from the aforementioned purchaser. In his cross complaint the
filed by the plaintiffs and ordered them to keep perpetual silence in regard to the litigated land, defendant alleged that the complaint filed by the plaintiffs was unfounded and malicious, and
and to pay the costs of the suit. that thereby losses and damages in the sum of P1,000 had been caused to the intestate estate
of the said Luis Espiritu. He therefore asked that judgment be rendered by ordering the
By a complaint dated April 9, 1913, counsel for Domingo and Josefa Mercado brought suit in the plaintiffs to keep perpetual silence with respect to the land in litigation and, besides, to pay said
Court of First Instance of Bulacan, against Luis Espiritu, but, as the latter died soon thereafter, intestate estate P1,000 for losses and damages, and that the costs of the trial be charged
the complaint was amended by being directed against Jose Espiritu in his capacity of against them.
administrator of the estate of the deceased Luis Espiritu. The plaintiffs alleged that they and
their sisters Concepcion and Paz, all surnamed Mercado, were the children and sole heirs of In reply to the cross-complaint, the plaintiffs denied each and all of the facts therein set forth,
Margarita Espiritu, a sister of the deceased Luis Espiritu; that Margarita Espiritu died in 1897, and in special defense alleged that at the time of the execution of the deed of sale inserted in
leaving as her paraphernal property a tract of land of 48 hectares in area situated in the barrio the cross-complaint the plaintiffs were still minors, and that since they reached their majority
of Panducot, municipality of Calumpit, Bulacan, and bounded as described in paragraph 4 of the the four years fixed by law for the annulment of said contract had not yet elapsed. They
amended complaint, which hereditary portion had since then been held by the plaintiffs and therefore asked that they be absolved from the defendants cross-complaint.
their sisters, through their father Wenceslao Mercado, husband of Margarita Espiritu; that,
about the year 1910, said Luis Espiritu, by means of cajolery, induced, and fraudulently After trial and the introduction of evidence by both parties, the court rendered the judgment
succeeded in getting the plaintiffs Domingo and Josefa Mercado to sign a deed of sale of the aforementioned, to which the plaintiffs excepted and in writing moved for a reopening of the
land left by their mother, for the sum of P400, which amount was divided among the two case and a new trial. This motion was overruled, exception was taken by the petitioners, and,
plaintiffs and their sisters Concepcion and Paz, notwithstanding the fact that said land, the proper bill of exceptions having been presented, the same was approved and transmitted to
according to its assessment, was valued at P3,795; that one-half of the land in question the clerk of this court.
belonged to Margarita Espiritu, and one-half of this share, that is, one-fourth of said land, to the
plaintiffs, and the other one-fourth, to their two sisters Concepcion and Paz; that the part of the As the plaintiffs assailed the validity of the deed of sale, Exhibit 3, executed by them on May 17,
land belonging to the two plaintiffs could produce 180 cavanes of rice per annum, which, at 1910, on the ground that they were minors when they executed it, the questions submitted to
P2.50 per cavanes was equivalent to P450 per annum; and that Luis Espiritu had received said the decision of this court consist in determining whether it is true that the plaintiffs were then
products from 1901 until the time of his death. Said counsel therefore asked that judgment be minors and therefore incapable of selling their property on the date borne by the instrument
rendered in plaintiffs favor by holding to be null and void the sale they made of their respective Exhibit 3; and in case they then were such, whether a person who is really and truly a minor
shares of their land, to Luis Espiritu, and that the defendant be ordered to deliver and restore to and, notwithstanding, attests that he is of legal age, can, after the execution of the deed and
the plaintiffs the shares of the land that fell to the latter in the partition of the estate of their within the legal period, ask for the annulment of the instrument executed by him, because of
deceased mother Margarita Espiritu, together with the products thereof, uncollected since 1901, some defect that invalidates the contract, in accordance with the law (Civ. Code, arts. 1263 and
or their equivalent, to wit, P450 per annum, and to pay the costs of the suit. 1300), so that he may obtain the restitution of the land sold.

In due season the defendant administrator answered the aforementioned complaint, denying The record shows it to have been fully proven that in 1891 Lucas Espiritu obtained title by
each and all of the allegations therein contained, and in special defense alleged that the land, composition with the State, to three parcels of land, adjoining each other, in the sitio of
the subject-matter of the complaint, had an area of only 21 cavanes of seed rice; that, on May Panducot of the pueblo of Calumpit, Bulacan, containing altogether an area of 75 hectares, 25
25, 1894, its owner, the deceased Margarita Espiritu y Yutoc, the plaintiffs mother, with the due ares and 69 centares, which facts appear in the title Exhibit D; that, upon Luis Espiritus death,
authorization of her husband Wenceslao Mercado y Arnedo Cruz sold to Luis Espiritu for the sum his said lands passed by inheritance to his four children named Victoria, Ines, Margarita, and
of P2,000 a portion of said land, to wit, an area such as is usually required for fifteen cavanes of Luis; and that, in the partition of said decedents estate, the parcel of land described in the
seed; that subsequently, on May 14, 1901, Wenceslao Mercado y Aredo Cruz, the plaintiffs complaint as containing forty-seven and odd hectares was allotted to the brother and sister Luis
and Margarita in equal shares. Margarita Espiritu, married to Wenceslao Mercado y Arnedo Cruz,
had by this husband five children, Maria Consejo, Maria de la Paz, Domingo, Josefa, and Amalia, 1890-1891, were lost or burned, the witness Maria Consejo Mercado recognized and identified
all surnamed Mercado y Espiritu, who, at the death of their mother in 1896 inherited, by the book Exhibit A, which she testified had been kept and taken care of by her deceased father
operation of law, one-half of the land described in the complaint. Wenceslao Mercado, pages 396 and 397 of which bear the attestation that the plaintiff Domingo
Mercado was born on August 4, 1890, and Josefa Mercado, on July 14, 1891. Furthermore, this
The plaintiffs petition for the annulment of the sale and the consequent restitution to them of witness corroborated the averment of the plaintiffs minority, by the personal registration
two-fourths of the land left by their mother, that is, of one-fourth of all the land described in the certificate of said Domingo Mercado, of the year 1914, Exhibit C, by which it appears that in he
complaint, and which, they stated amounts to 11 hectares, 86 ares and 37 centares. To this was only 23 years old, whereby it would also appear that Josefa Mercado was 22 years of age in
claim the defendant excepted, alleging that the land in question comprised only an area such as 1910, and therefore, on May 17, 1910, when the instrument of purchase and sale, Exhibit 3,
is customarily covered by 21 cavanes of seed. was executed the plaintiffs must have been, respectively, 19 and 18 years of age.

It was also duly proven that, by a notarial instrument of May 25, 1894, the plaintiffs mother The witness Maria Consejo Mercado also testified that after her fathers death her brother and
conveyed by actual and absolute sale for the sum of P2,000, to her brother Luis Espiritu a sisters removed to Manila to live there, although her brother Domingo used to reside with his
portion of the land now in litigation, or an area such as is usually covered by about 15 cavanes uncle Luis Espiritu, who took charge of the administration of the property left by his
of seed; and that, on account of the loss of the original of said instrument, which was in the predecessors in interest; that it was her uncle Luis who got for her brother Domingo the other
possession of the purchaser Luis Espiritu, and furthermore because, during the revolution, the cedula, Exhibit B, pertaining to the year 1910, wherein it appears that the latter was then
protocols or registers of public documents of the Province of Bulacan were burned, Wenceslao already 23 years of age; that she did not know why her uncle did so; that she and her brother
Mercado y Arnedo Cruz, the widower of the vendor and father of the plaintiffs, executed, at the and sisters merely signed the deed of May 17, 1910; and that her father Wenceslao Mercado,
instance of the interested party Luis Espiritu, the notarial instrument Exhibit 1, of the date of prior to his death had pledged the land to her uncle Luis Espiritu.
May 20, 1901, in his own name and in those of his minor children Maria Consejo, Maria de la
Paz, Domingo, Josefa, and Amalia, and therein set forth that it was true that the sale of said The witness Ines Espiritu testified that after the death of the plaintiffs father, it was Luis
portion of land had been made by his aforementioned wife, then deceased, to Luis Espiritu in Espiritu who directed the cultivation of the land in litigation. This testimony was corroborated by
1894. her sister Victoria Espiritu, who added that her nephew, the plaintiff Domingo, had lived for
some time, she did not know just how long, under the control of Luis Espiritu.
However, even prior to said date, to wit, on May 14th of the same year, 1901, the widower
Wenceslao Mercado, according to the private document Exhibit 2, pledged or mortgaged to the Roque Galang, married to a sister of Luis Espiritu, stated that the land that fell to his wife and
same man, Luis Espiritu, for P375, a part, or an area covered by six cavanes of seed, of the to his sister-in-law Victoria, and which had an area of about 8 hectares less than that of the
land that had belonged to this vendors deceased wife, Margarita Espiritu, adjoining the parcel land allotted to the aforementioned Luis and Margarita produced for his wife and his sister-in-
previously sold to the said Luis Espiritu and which now forms a part of the land in question a law Victoria a net and minimum yield of 507 cavanes in 1907, in spite of its being high land and
transaction which Mercado was obliged to ,make in order to obtain funds with which "to cover of inferior quality, as compared with the land in dispute, and that its yield was still larger in
his childrens needs." Wenceslao Mercado, the plaintiffs father, having died, about the year 1914, when the said two sisters share was 764 cavanes.
1904, the plaintiffs Domingo and Josefa Mercado, together with their sisters Consejo and Paz,
declaring themselves to be of legal age and in possession of the required legal status to Patricio Tanjucto, the notary before whom the deed Exhibit 3 was ratified, was a witness for the
contract, executed and subscribed before a notary- the document Exhibit 3, on May 17, 1910, in defendant. He testified that the was drawn up by him at the request of the plaintiff Josefa
which referring to the previous sale of the land, effected by their deceased mother for the sum Mercado; that the grantors of the instrument assured him that they were all of legal age; that
of P2,600 and with her husbands permission and authorization, they sold absolutely and in said document was signed by the plaintiffs and the other contracting parties, after it had been
perpetuity to Luis Espiritu, for the sum of P400 "as an increase" of the previous purchase price, read to them and had been translated into the Pampangan dialect for those of them who did not
the land described in said instrument and situated in Panducot, pueblo of Calumpit, Bulacan, of understand Spanish. On cross-examination, witness added that ever since he was 18 years of
an area equal to that usually sown with 21 cavanes of seed, bounded on the north by the lands age and began to court, he had known the plaintiff Josefa Mercado, who was then a young
of Flaviano Abreu and the heirs of Pedro Espiritu, on the east by those of Victoria Espiritu and maiden, although she had not yet commenced to attend social gatherings, and that all this took
Ines Espiritu, on the south by those of Luis Espiritu, and on the west by those of Hermogenes place about the year 1898, for witness said that he was then [at the time of his testimony,
Tan-Toco and by the Sapang-Maitu stream. 1914,] 34 years of age.

In this status of the case the plaintiffs seek the annulment of the deed Exhibit 3, on the ground Antonio Espiritu, 60 years of age, who knew Lucas Espiritu and the properties owned by the
that on the date of its execution they were minors without legal capacity to contract, and for the latter, testified that Espiritus land contained an area of only 84 cavanes, and, after its owners
further reason that the deceased purchaser Luis Espiritu availed himself of deceit and fraud in death, was under witness administration during two harvest seasons; that the products yielded
obtaining their consent for the execution of said deed. by a portion of this land, to wit, an area such as is sown by about 15 cavanes of seed, had
been, since 1894, utilized by Luis- Espiritu, by reason of his having acquired the land; and that,
As it was proven by the testimony of the clerk of the parochial church of Apalit (the plaintiffs after Margarita Espiritus death, her husband Wenceslao Mercado took possession of another
were born in Apalit) that the baptismal register books of that parish pertaining to the years portion of the land, containing an area of six cavanes of seed and which had been left by this
deceased, and that he held the same until 1901, when he conveyed it to Luis Espiritu.
In the aforementioned sale, according to the deed of May 25, 1894, Margarita Espiritu conveyed
The defendant-administrator, Jose Espiritu, a son of the deceased Luis Espiritu, testified that the to her brother Luis the parcel of 15 cavanes of seed, Exhibit 1, and after her death the plaintiffs
plaintiff Domingo Mercado used to live off and on in the house of his deceased father, about the widowed father mortgaged or pledged the remaining portion or parcel of 6 cavanes of seed to
year 1909 or 1910, and used to go back and forth between his fathers house and those of his her brother-in-law, Luis Espiritu, in May, 1901 (Exhibit 2). So it is that the notarial instrument
other relatives. He denied that his father had at any time administered the property belonging Exhibit 3, which was assailed by the plaintiffs, recognized the validity of the previous contracts,
to the Mercado brother and sisters. and the totality of the land, consisting of an area containing 21 cavanes of seed rice, was sold
absolutely and in perpetuity, the vendors receiving in exchange P400 more; and there is no
In rebuttal, Antonino Mercado, a cousin of Wenceslao, father of the plaintiffs, testified that he conclusive proof in the record that this last document was false and simulated on account of the
mediated in several transactions in connection with a piece of land belonging to Margarita employment of any violence, intimidation, fraud, or deceit, in the procuring of the consent of
Espiritu. When shown the deed of purchase and sale Exhibit 1, he stated that he was not the vendors who executed it.
acquainted with its contents. This same witness also testified that he mediated in a transaction
had between Wenceslao Mercado and Luis Espiritu (he did not remember the year), in which the Considering the relation that exists between the document Exhibit 3 and those of previous
former sold to the latter a parcel of land situated in Panducot. He stated that as he was a dates, Exhibits 1 and 2, and taking into account the relationship between the contracting
witness of the deed of sale he could identify this instrument were it exhibited to him; but he did parties, and also the general custom that prevails in many provinces of these Islands for the
not do so, for no instrument whatever was presented to him for identification. The transaction vendor or debtor to obtain an increase in the price of the sale or of the pledge, or an increase in
mentioned must have concerned either the ratification of the sale of the land of 15 cavanes, in the amount loaned, without proof to the contrary, it would be improper and illegal to hold, in
1901, attested in Exhibit 1, or the mortgage or pledge of the other parcel of 6 cavanes, given view of the facts hereinabove set forth, that the purchaser Luis Espiritu, now deceased, had any
on May 14, 1901, by Wenceslao Mercado to Luis Espiritu, as may be seen by the private need to forge or simulate the document Exhibit 3 inasmuch as, since May 1894, he has held in
document Exhibit 2. In rebuttal, the plaintiff Josefa Mercado denied having gone to the house of the capacity of owner by virtue of a prior acquisition, the parcel of land of 15 cavanes of seed,
the notary Tanjutco for the purpose of requesting him to draw up any document whatever. She and likewise, since May, 1901, according to the contract of mortgage or pledge, the parcel of 6
stated that she saw the document Exhibit 3 for the first time in the house of her uncle Luis cavanes, or the remainder of the total area of 21 cavanes.
Espiritu on the day she signed it, on which occasion and while said document was being signed
said notary was not present, nor were the witnesses thereto whose names appear therein; and So that Luis Espiritu was, during his lifetime, and now after his death, his testate or intestate
that she went to her said uncles house, because he had sent for her, as well as her brother and estate is in lawful possession of the parcel of land situated in Panducot that contains 21 cavanes
sisters, sending a carromata to fetch them. Victoria Espiritu denied ever having been in the of seed, by virtue of the title of conveyance of ownership of the land measuring 15 cavanes and,
house of her brother Luis Espiritu in company with the plaintiffs, for the purpose of giving her in consequence of the contract of pledge or mortgage in security for the sum of P600, is likewise
consent to the execution of any deed in behalf of her brother. in lawful possession of the remainder of the land, or an area containing 6 cavanes of seed.

The evidence adduced at the trial does not show, even circumstantially, that the purchaser Luis The plaintiffs have absolutely no right whatever to recover said first parcel of land, as its
Espiritu employed fraud, deceit, violence or intimidation, in order to effect the sale mentioned in ownership was conveyed to the purchaser by means of a singular title of purchase and sale; and
the document Exhibit 3, executed on May 17, 1910. In this document the vendors, the brother as to the other portion of 6 cavanes of seed, they could have redeemed it before May 17, 1910,
and sisters Domingo, Maria del Consejo, Paz, and Josefa, surnamed Mercado y Espiritu, attested upon the payment or the return of the sum which their deceased father Wenceslao Mercado
the certainty of the previous sale which their mother, during her lifetime, had made in behalf of had, during his lifetime, received as a loan under security of the pledged property; but, after
said purchaser Luis Espiritu, her brother, with the consent of her husband Wenceslao Mercado, the execution of the document Exhibit 3, the creditor Luis Espiritu definitely acquired the
father of the vendors of the portion of land situated in the barrio of Panducot, pueblo of ownership of said parcel of 6 cavanes. It is therefore a rash venture to attempt to recover this
Calumpit, Bulacan; and in consideration of the fact that the said vendor Luis Espiritu paid them, latter parcel by means of the contract of final and absolute sale, set forth in the deed Exhibit 3.
as an increase, the sum of P400, by virtue of the contract made with him, they declare having
sold to him absolutely and in perpetuity said parcel of land, and waive thenceforth any and all Moreover, the notarial document Exhibit 1, as regards the statements made therein, is of the
rights they may have, inasmuch as said sum constitutes the just price of the property. nature of a public document and is evidence of the fact which gave rise to its execution and of
the date of the latter, even against a third person and his predecessors in interest such as are
So that said document Exhibit 3 is virtually an acknowledgment of the contract of sale of the the plaintiffs. (Civ. Code, art. 1218.)
parcel or portion of land that would contain 15 cavanes of seed rice made by the vendors
mother in favor of the purchaser Luis Espiritu, their uncle, and likewise an acknowledgment of The plaintiffs father, Wenceslao Mercado, recognizing it to be perfectly true that his wife
the contract of pledge or mortgage of the remainder of said land, an area of six cavanes, made Margarita Espiritu sold said parcel of land which she inherited from her father, of an area of
with the same purchaser, at an increase of P400 over the price of P2,600, making an aggregate about "15 cavanes of seed," to her brother Luis Espiritu, by means of an instrument executed
sum of P3,000, decomposed as follows: P2,000, collected during her lifetime, by the vendors by her on May 25, 1894 an instrument that disappeared or was burned and likewise
deceased mother; P600 collected by the vendors father; and the said increase of P400, recognizing that the protocols and register books belonging to the Province of Bulacan were
collected by the plaintiffs. destroyed as a result of the past revolution, at the request of his brother-in-law Luis Espiritu he
had no objection to give the testimony recorded in said notarial instrument, as it was the truth Exhibit 3, that, on the date when they executed it, they were already of legal age, and, besides
regarding what had occurred, and in so doing he acted as the plaintiffs legitimate father in the the annotation contained in the copybook Exhibit A, no supplemental proof of their true ages
exercise of his parental authority, inasmuch as he had personal knowledge of said sale, he was introduced.
himself being the husband who authorized said conveyance, notwithstanding that his testimony
affected his childrens interests and prejudiced his own, as the owner of any fruits that might be Aside from the foregoing, from a careful examination of the record in this case, it cannot be
produced by said real property. concluded that the plaintiffs, who claim to have been minors when they executed the notarial
instrument Exhibit 3, have suffered positive and actual losses and damages in their rights and
The signature and handwriting of the document Exhibit 2 were identified as authentic by one of interests as a result of the execution of said document, inasmuch as the sale effected by the
the plaintiffs, Consejo Mercado, and as the record shows no evidence whatever that this plaintiffs mother, Margarita Espiritu, in May, 1894, of the greater part of the land of 21 cavanes
document is false, and it does not appear to have been assailed as such, and as it was signed of seed, did not occasion the plaintiffs any damage or prejudice whatever, for the reason that
by the plaintiffs father, there is no legal ground or well-founded reason why it should be the portion of the land sold to Luis Espiritu was disposed of by its lawful owner, and, with
rejected. It was therefore properly admitted as evidence of the certainty of the facts therein set respect to the area of 6 cavanes that was a part of the same property and was pledged or
forth. mortgaged by the plaintiffs father, neither did this transaction occasion any damage or
prejudice to the plaintiffs, inasmuch as their father stated in the document Exhibit 2 that he was
The principal defect attributed by the plaintiffs to the document Exhibit 3 consista in that, on obliged to mortgage or pledge said remaining portion of the land in order to secure the loan of
the date of May 17, 1910, when it was executed and they signed it, they were minors, that is, the P375 furnished by Luis Espiritu and which was subsequently increased to P600 so as to
they had not yet attained the age of 21 years fixed by Act No. 1891, though no evidence provide for certain engagements or perhaps to meet the needs of his children, the plaintiff; and
appears in the record that the plaintiffs Josefa and Domingo Mercado were in fact minors, for no therefore, to judge from the statements made by their father himself, they received through
certified copies were presented of their respective baptismal certificates, nor did the plaintiffs him, in exchange for the land of 6 cavanes of seed, which passed into the possession of the
adduce any supplemental evidence whatever to prove that Domingo was actually 19 and Josefa creditor Luis Espiritu, the benefit which must have accrued to them from the sums of money
18 years of age when they signed the document Exhibit 3, on May 17, 1910, inasmuch as the received as loans; and, finally, on the execution of the impugned document Exhibit 3, the
copybook, Exhibit A, notwithstanding the testimony of the plaintiff Consejo Mercado, does not plaintiffs received and divided between themselves the sum of P400, which sum, added to that
constitute sufficient proof of the dates of the births of the said Domingo and Josefa. of the P2,000 received by Margarita Espiritu, and to that of the P600 collected by Wenceslao
Mercado, widower of the latter and father of the plaintiffs, makes all together the sum of
However, even in the doubt whether they certainly were of legal age on the date referred to, it P3,000, the amount paid by the purchaser as the price of all the land containing 21 cavanes of
cannot be gainsaid that in the document Exhibit 3 they stated that they were of legal age at the seed, and is the just price of the property, was not impugned, and, consequently, should be
time they executed and signed it, and on that account the sale mentioned in said notarial deed considered as equivalent to, and compensatory for, the true value of said land.
Exhibit 3 is perfectly valid a sale that is considered as limited solely to the parcel of land of 6
cavanes of seed, pledged by the deceased father of the plaintiffs in security for P600 received For the foregoing reasons, whereby the errors assigned to the judgment appealed from have
by him as a loan from his brother-in-law Luis Espiritu, for the reason that the parcel of 15 been refuted, and deeming said judgment to be in accordance with law and the evidence of
cavanes had been lawfully sold by its original owner, the plaintiffs mother. record, we should, and do hereby, affirm the same, with the costs against the appellants. So
ordered.
The courts, in their interpretation of the law, have laid down the rule that the sale of real estate,
made by minors who pretend to be of legal age, when in fact they are not, is valid, and they will Arellano, C.J., Johnson, Araullo, Street and Malcolm, JJ., concur.
not be permitted to excuse themselves from the fulfillment of the obligations contracted by
them, or to have them annulled in pursuance of the provisions of Law 6, title 19, of the 6th Separate Opinions
Partida; and the judgment that holds such a sale to be valid and absolves the purchaser from
the complaint filed against him does not violate the laws relative to the sale of minors property,
nor the juridical rules established in consonance therewith. (Decisions of the supreme court of
Spain, of April 27, 1860, July 11, 1868, and March 1, 1875.) CARSON, J., concurring: chanrob1es virtual 1aw library

With respect to the true age of the plaintiffs, no proof was adduced of the fact that it was Luis
Espiritu who took out Domingo Mercados personal registration certificate on April 13, 1910,
causing the age of 23 years to be entered therein in order to corroborate the date of the
notarial instrument of May 17th of the same year; and the supposition that he did, would also
allow it to be supposed, in order to show the propriety of the claim, that the cedula Exhibit C
was taken out on February 14, 1914, wherein it is recorded that Domingo Mercado was on that
date 23 years of age, for both these facts are not proved; neither was any proof adduced
against the statement made by the plaintiffs Domingo and Josefa in the notarial instrument
I concur.
But in order to avoid misunderstanding, I think it well to indicate that the general statement in
the prevailing opinion to the effect that the making of false representations as to his age by an
infant executing a contract will preclude him from disaffirming the contract or setting up the
defense of infancy, must be understood as limited to cases wherein, on account of the minors
representations as to his majority. and because of his near approach thereto, the other party
had good reason to believe, and did in fact believe the minor capable of contracting.
 tenus, et tunc non restituitur, nisi per instrumentum seu scripturam probet se minorem; et si
The doctrine set forth in the Partidas, relied upon by the supreme court of Spain in the cases juravit corporaliter, nullo modo restituitur, ut ibi; et per quze instrumenta probentur, cum verbo
cited in the prevailing opinion, is substantially similar to the doctrine of estoppel as applied in tenus juravit, vide per Specul. tit. de restit, in integr. s. quis autem, col. 4. vers. sed cujusmodi
like instances by many of the courts in the United States. erit scriptura, ubi etiam vide per Speculatorem aliquas notabiles quaestiones in ista materia, in
col. 5. videlicet, an praejudicet sibi minor ex tali juramento in aliis contractibus, et tenet, quod
For purposes of convenient comparison, I here insert some citations of authority, Spanish and non; et tenet glossa finalis in 1. de aetate, D. de minor. in fin. gloss. vide ibi per Speculat. ubi
American, recognizing the limitations upon the general doctrine to which I am inviting attention etiam de aliis in ista materia." cralaw virtua1aw library

at this time; and in this connection it is worthy of note that the courts of the United States look
with rather less favor than the supreme court of Spain upon the application of the doctrine, In the decision of the supreme court of Spain dated the 27th of April, 1860, I find an excellent
doubtless because the cases wherein it may properly be applied, are much less likely to occur in illustration of the conditions under which that court applied the doctrine, as appears from the
a jurisdiction where majority is reached at the age of 21 than a jurisdiction wherein majority is following resolution therein set forth.
not ordinarily attained until the infant reaches the age of 25.
"Sales of real estate made by minors are valid when the latter pretend to be twenty-five years
Ley 6, tit. 19, Partida 6.a is, in part, as follows:
jgc:chanrobles.com .ph of age and, due to the circumstances that they are nearly of that age, are married, or have the
administration of their property, or on account of other special circumstances affecting them,
"If he who is a minor (1) deceitfully says or sets forth in an instrument that he is over twenty- the other parties to the contract believe them to be of legal age." cralaw virtua1aw library

five years of age, and this assertion is believed by another person who takes him to be of about
that age, (2) in an action at law he should be deemed to be of the age he asserted, and should With these citations compare the general doctrine in the United States as set forth in 22 Cyc.
not (3) afterwards be released from liability on the plea that he was not of said age when he (p. 610), supported by numerous citations of authority.
assumed the obligation. The reason for this is that the law helps the deceived and not the
deceivers."cralaw virtua1aw library "Estoppel to dissaffirm (I) In General. The doctrine of estoppel not being as a general rule
applicable to infants, the court will not readily hold that his acts during infancy have created an
In the glossary to these provisions of the Partidas by Gregorio Lopez, I find the following: estoppel against him to disaffirm his contracts. Certainly the infant cannot be estopped by the
jgc:chanrobles.com .ph

acts or admissions of other persons.

"(1) De tal tiempo. Nota bene hoc verbum, nam si appareret ex aspectu eum esse minorem,
tunc adversarius non potest dicere se deceptum; imo tam ipse, quam minor videntur esse in "(II) False representations as to age. According to some authorities the fact that an infant at
dolo, quo casu competit minori restitutio, quia facta doli compensatione, perinde est ac si nullus the time of entering into a contract falsely represented to the person with whom he dealt that
fuisset in dolo, et ideo datur restitutio; et quia scienti dolus non infertur, l. 1. D. de act. empt. he had attained the age of majority does not give any validity to the contract or estop the infant
secundum Cyn. Alberic et Salic. in l. 3. C. si minor se major. dixer. adde Albericum tenentem, from disaffirming the same or setting up the defense of infancy against the enforcement of any
quando per aspectum aliter constaret, in authent. sacramenta puberuqm, col. 3. C. si advers rights thereunder; but there is also authority for the view that such false representations will
vendit. create an estoppel against the infant, and under the statutes of some states no contract can be
disaffirmed where, on account of the minors representations as to his majority, the other party
"(2) Enganosamente. Adde 1. 2. et 3. C. si minor se major. dixer. Et adverte nam per istam had good reason to believe the minor capable of contracting. Where the infant has made no
legem Partitarum quae non distinguit, an adultus, vel pupillus talerrl assertionem faciat, videtur representations whatever as to his age the mere fact that the person with whom he dealt
comprobari dictum Guillielm. de Cun de quo per Paul. de Castr. in 1. qui jurasse. in princ. D de believed him to be of age, even though his belief was warranted by the infants appearance and
jurejur. quod si pupillus proximus pubertati juret, cum contrahit, se esse puberem, et postea the surrounding, circumstances, and the infant knew of such belief, will not render the contract
etiam juret, quod non veniet contra contractum quod habebit locum dispositio authenticae valid or estop the infant to disaffirm."
sacramenta puberum, sicut si esset pubes: et cum isto dicto transit ibi Paul. de Cast. multum
commedans, dicens, se alibi non legisse; si tamen teneamus illam opinionem, quod etiam
pupillus doli capax obligatur ex Juramento, non esset ita miranda dicta, decissio; vide per
Alexand. in dict. 1. qui jurasse, in princ. Item lex ista Partitarum expresse sentit de adulto, non
de pupillo, cum superius dixit, que paresciere de tal tiempo: Doctores etiam intelligunt de adulto
11. dict. tit. C. si minor. se major dixer. et patet ex 11. illius tituli. Quid autem dicemus in dubio,
cum non constat de dolo minoris? Azon. in summa illius tit. in fin. dicit, quod praesumitur dolug
in minore, qui se majorem dixit; et idem tenet Glossa in dict. 1. 3. et ibi Odofred. in fin. Cynus
tamen, et alli, tenent oppositum, quia dolus non praesumitur, nisi probetur, 1. quotiens, s., qui
dolo, D. de probat. Et hoc etiam vult ista lex Partitarum, cum dicit, si lo faze enganosamente: et
ita tenent Alberic et Salicet. in dict. 1. 3. ubi etiam Bart. in fin. Si autem minor sui facilitate
asserat se majorem, et ita juret, tunc distingue, ut habetur dict. 1. 3 quia aut juravit verbo
 R. P. Sarandi and F. Valdez Anama for Respondents.

SYLLABUS

1. CONTRACTS; INCAPACITY OF PARTIES; MINORITY; WHEN CAN BE MADE THE BASIS OF AN

ACTION OF DECEIT. The failure of the minor to disclose his minority when making a contract
does not per se, constitute a fraud which can be made the basis of an action of deceit. In order
to hold the minor liable, the fraud must be actual and not constructive.

2. ID.; ID.; ID.; LIABILITY OF MINOR UNDER THE CONTRACT. Although the written contract
is unenforceable because of non-age, however, the minor shall make restitution to the extent
that he may have profited by the king he received.

3. ID.; ID.; ID.; ANNULMENT; FOUR YEAR PERIOD WHEN NOT APPLICABLE. Where minority
is set up only as a defense to an act on, without the minor asking for any positive relief from
the contract, the four-year period fixed by Article 1301 of the Civil Code may not be applied.

DECISION

BENGZON, J.:

Rosario L. de Braganza and her sons Rodolfo and Guillermo petition for review of the Court of
Appeals decision whereby they were required solidarily to pay Fernando F. de Villa Abrelle the
sum of P10,000 plus 2% interest from October 30, 1944.
EN BANC
The above petitioners, it appears, received from Villa Abrille, as a loan, on October 30, 1944
[G.R. No. L-12471. April 13, 1959.]
P70,000 in Japanese war notes and in consideration thereof, promised in writing (Exhibit A) to
pay him P10,000 "in legal currency of the P. I. two years after the cessation of the present
ROSARIO L. DE BRAGANZA, ET AL., Petitioners, v. FERNANDO F. DE VILLA
hostilities or as soon as International Exchange has been established in the Philippines", plus
ABRILLE,Respondent.
2% per annum.
Oscar M. Herrera, for Petitioners.
Because payment had not been made, Villa Abrille sued them in March 1949.

In their answer before the Manila court of first Instance, defendants claimed to have received
P40,000 only--instead of P70,000 as plaintiff asserted. They also averred that Guillermo and
Rodolfo were minors when they signed the promissory note Exhibit A. After hearing the parties
and their evidence, said court rendered judgment, which the appellate court affirmed, in the
terms above described.
limiting the scope of the application of the Mercado ruling, what with the consideration that the
very minority which incapacitated minors from contracting should likewise exempt them from
the results of misrepresentation.
We hold, on this point, that being minors, Rodolfo and Guillermo Braganza could not be legally
bound by their signatures in Exhibit A.

There can be no question about the responsibility of Mrs. Rosario L. Braganza because the It is argued, nevertheless, by respondent that inasmuch as this defense was interposed only in
minority of her consigners does not release her from liability; since it is a personal defense of 1951, and inasmuch as Rodolfo reached the age of majority in 1947, it was too late to invoke it
the minors. However, such defense will benefit her the extent of the shares for which such because more than 4 years had elapsed after he had becomes emancipated upon reaching the
minors may be responsible. (Art. 1148, Civil Code). It is not denied that at the time of signing age or majority. The provisions of Article 1301 of the Civil Code are quoted to the effect that "an
Exhibit A, Guillermo and Rodolfo Braganza were minors--16 and 18 respectively. However, the action to annul a contract by reason has reached majority age. The parties do not specify the
Court of Appeals found them liable pursuant to the following reasoning: jgc:chanrobles.com .ph exact date of Rodolfos birth. It is undenied, however, that in October 1944, he was 18 years
old. On the basis of such datum, it should be held that in October 1947, he was 21 years old,
". . . These two appellants did not make it appear in the promissory note that they were not yet and in October 1951 he was 25 years old. So that when this defense was interposed in June
of legal age. If they were really fair to their creditor, they should have apprised him on their 1951, four years had not yet completely elapsed from October 1947.
incapacity, and if the former, in spite of the information relative to their age, parted with his
money, then he should be contended with the consequence of his act. But, that was not the Furthermore, there is reason to doubt the pertinency of the 4-year period fixed by Article 1301
case. Perhaps defendants in their desire to acquire much needed money, they readily and of the Civil Code where minority is set up only as a defense to an action, without the minors
willingly signed the promissory note, without disclosing the legal impediment with respect to asking for any positive relief from the contract. For one thing, they have not filed in this case an
Guillermo and Rodolfo. When minors, like in the instant case, pretended to be of legal age, action for annulment. 2 They merely interposed an excuse from liability.
when in fact they were not, they will not later on be permitted to excuse themselves from the
fulfillment of the obligation contracted by them or to have it annulled." (Mercado, Et. Al. v. Upon the other hand, these minors may not be entirely absolved from monetary responsibility.
Espiritu, 37 Phil., 215.) [Emphasis Suppled.] In accordance with the provisions of the Civil Code, even if their written contract is
unenforceable because of non-age, they shall make restitution to the extent that they may have
We cannot agree to the above conclusions. From the minors failure to disclose their minority in profited by the money they received. (Art. 1340) There is testimony that the funds delivered to
the same promissory note they signed, it does not follow as a legal proposition, that they will them by Villa Abrille were used for their support during the Japanese occupation. Such being the
not be permitted thereafter to assert it. They had no juridical duty to disclose their inability. In case, it is but fair to hold that they had profited to the extent of the value of such money, which
fact, according to Corpus Juris Secundum, 43 p. 206; value has been authoritatively established in the so-called Ballantine Schedule: in October
1944, P40.00 Japanese notes were equivalent to P1 of current Philippine money. Wherefore, as
". . . . Some authorities consider that a false representation as to age inducing a contract is a the share of these minors was 2/3 of P70,000 or P46,666.66, that should now return P1,166.67.
part of the contract and accordingly hold that it cannot be the basis of an action in tort. Other 3 Their promise to pay P10,000 in Philippine currency, (Exhibit A) can not enforced, as already
authorities hold that such misrepresentation may be the basis of such an action, on the theory stated, since they were minors incapable of binding themselves. Their liability, to repeat, is
that such misrepresentation is not a part of, and does not grow out of, the contract, or that the presently declared without regard of said Exhibit A, but solely in pursuance of Article 1304 of
enforcement of liability for such misrepresentation as a tort does not constitute an indirect the Civil Code.
method of enforcing liability on the contract. In order to hold the infant liable, however, the
fraud must be actual and not constructive. It has been held that his mere silence when making Accordingly, the appealed decision should be modified in the sense that Rosario Braganza shall
a contract as to his age does not constitute a fraud which can be made the basis of an action of pay 1/3 of P10,000 i.e., P3,333.33 4 plus 2% interest from October 1944; and Rodolfo and
deceit." (Emphasis Supplied.) Guillermo Braganza shall pay jointly 5 to the same creditor the total amount of P1,166.67 plus
6% interest beginning March 7, 1949, when the complaint was filed. No costs in this instance.
"The fraud of which an infant may be held liable to one who contracts with him in the belief that
he is of full age must be actual not constructive, and mere failure of the infant to disclose his
age is not sufficient." (27 American Jurisprudence, p. 819.)

The Mercado case 1 cited in the decision under review is different because the document signed
therein by the minor specifically stated he was of age; here Exhibit A contained no such
statement. In other words, in the Mercado case, the minor was guilty of active
misrepresentation; whereas in this case, if the minors were guilty at all, which we doubt it is of
passive (or constructive) misrepresentation. Indeed, there is a growing sentiment in favor of

EN BANC
[G.R. No. L-23002. July 31, 1967.]
CONCEPCION FELIX VDA. DE RODRIGUEZ, Plaintiff-Appellant, v. GERONIMO
RODRIGUEZ, ET AL., Defendants-Appellees.
Ozaeta, Gibbs & Ozaeta for Respondent.
Sycip, Salazar, Luna & Associates and Nueves & Galang for Appellees.
SYLLABUS
1. CONTRACTS; SIMULATED CONTRACTS DISTINGUISHED FROM CONTRACTS IN FRAUDEM
LEGIS. The characteristic of simulated contracts is that the apparent contract is not really
desired or in any way alter the juridical situation of the parties, while contracts in fraudem legis
are really desired or intended to be fully operative in order to indirectly attain a result that the
law forbids.
2. CONTRACTS; CONTRACTS RESORTED TO CIRCUMVENT PROHIBITION AGAINST DONATIONS
BETWEEN SPOUSES; EFFECT ON PARTIES. Where plaintiff sold her paraphernal property to
her daughter for a stated consideration, and the latter in turn conveyed against the same to her
mother and her stepfather also for a stated consideration in order to circumvent the legal
prohibition that spouses should not make donations to each other during their lifetime, the
contracts are not simulated but illegal and said plaintiff cannot recover back the property, for
Articles 1305 and 1306 of the Civil Code of 1889 (then in force) apply rigorously the rule in pari
delicto non oritur actio, denying all recovery to guilty parties inter se.
3. ID.; ID.; ART. 1306; APPLICATION. That Article 1306 applies to cases where the nullity
arises from the illegality of the consideration, or of the purpose of the contract, was expressly
recognized by this Court in Gustilo v. Maravilla, 48 Phil., 449-450.
4. ID.; ID.; ACTION FOR NULLITY, LACHES. When the plaintiff appellant had knowledge of the
nullity of the contract for the transfer of the properties in 1934, because she was even a party
thereto, yet her present action was filed only on May 28, 1962 and only after the breaking up of
friendly relations between her and defendants-appellees, appellants inaction to enforce her
right for 28 years cannot be justified by the lame excuse that she assume that transaction
would have been obtained by the exercise of diligence. Ignorance which is the effect of
inexcusable negligence is no excuse for laches. (Go Chi Gun, etc., Et. Al. v. Co Cho, Et Al., 96
Phil., 622).
5. ID.; ID.; ESTOPPEL. Even assuming for the sake of argument that appellant held her
peace during the lifetime of her husband out of legitimate fear for her life, there is no
justification for her failure to bring the proper action after his death in 1953. Instead, she
entered into a series of agreements with herein appellees, the children of her husband by a
prior marriage, of partition, usufruct and lease of their share in the fish ponds, transactions that
necessarily assumed that Rodriguez had acquired one-half of the litigated fishponds. In the
circumstances, appellants cause has become a stale demand and her conduct placed her in
estoppel to question the validity of the transfer of her properties. (Manila, et al, v. Galvan, Et
Al., G.R. No. L-23507, May 24, 1967; Perez v. Herranz, 7 Phil., 695 -696).

6. SETTLEMENT OF ESTATE; EXTRAJUDICIAL SETTLEMENT; RESCISSION; ALTERNATIVE PRAYER
FOR 1/5 OF THE CONTROVERTED PROPERTIES. Plaintiffs alternative cause of action for 1/5
of the properties in controversy should such properties be adjudged as belonging to the
conjugal partnership will not prosper as the action for rescission on the extrajudicial settlement
should have been filed within 4 years from its execution, i.e. not later than March 16, 1953.
This is an appeal by Concepcion Felix Vda. de Rodriguez from the decision of the Court of First
Instance of Bulacan in Civil Case No. 2565, which she commenced on May 28, 1962, to secure
declaration of nullity of two contracts executed on January 24, 1934 and for recovery of certain
properties.
The facts of this case may be briefly stated as follows: chanrob1es virtual 1aw library

7. EVIDENCE; DURESS; CHARGE OF DURESS SHOULD BE TREATED WITH CAUTION. The Concepcion Felix, widow of the late Don Felipe Calderon and with whom she had one living child,
charge of duress should be treated with caution. Duress, like fraud, is not to be lightly laid at Concepcion. Calderon, contracted a second marriage on June 20, 1929, with Domingo
the door of men already dead (cf. Prevost v. Gratz, 6 Wheat. (U.S.), 481; Sinco v. Longa, 51 Rodriguez, a widower with four children by a previous marriage, named Geronimo, Esmeragdo,
Phil. 507). Jose and Mauricio, all surnamed Rodriguez. There was no issue in this second marriage.

8. ID.; ID.; PERIOD WITHIN WHICH TO BRING ACTION BASED ON DURESS. Duress being Prior to her marriage to Rodriguez, Concepcion Felix was the registered owner of 2 fishponds
merely a vice or defect of consent, an action based upon it must be brought within four years located in the barrio of Babagad, municipality of Bulacan, Bulacan province, with a total area
after it has ceased (Art. 1301, old Civil Code). In the case at bar, the action was instituted only of 557,711 square meters covered by OCT Nos. 605 and 807. Under date of January 24, 1934,
in 1962, twenty-eight (28) years after the intimidation is claimed to have occurred, and no less Concepcion Felix appeared to have executed a deed of sale conveying ownership of the
than nine (9) years after the supposed culprit died (1953). On top of it, appellant entered into a aforesaid properties to her daughter, Concepcion Calderon, for the sum of P2,500.00 which the
series of subsequent transactions with appellees that confirmed the contracts that she now tries latter in turn appeared to have transferred to her mother and stepfather by means of a
to set aside. Therefore, this cause of action is clearly barred. document dated January 27, 1934. Both deeds, notarized by Notary Public Jose D. Mendoza,
were registered in the Office of the Register of Deeds of Bulacan on January 29, 1934, as a
9. ID.; CONSIDERATION; CASE AT BAR. The two conveyances from appellant to her daughter consequence of which, the original title were cancelled and TCT Nos. 13815 and 13816 were
and from the latter to the spouses Rodriguez are not void ab initio nor inexistent for lack of issued in the names of the spouses Domingo Rodriguez and Concepcion Felix.
consideration. In the first transaction, the price of P2,500 is recited in the deed itself (Exh. A);
in the second (Exh. B), the consideration set forth is P3,000. Now, Article 1274 of the Civil Code On March 6, 1953, Doming Rodriguez died intestate, survived by the widow, Concepcion Felix,
of 1889 (in force when the deeds were executed) provided that "in onerous contracts the cause his children Geronimo, Esmeragdo and Mauricio and grandchildren Oscar, Juan and Ana,
is understood to be, for each contracting party, the prestation or promise of a thing or service surnamed Rodriguez, children of a son, Jose, who had predeceased him.
by the other." Since in each conveyance the buyer became obligated to pay a definite price in
money, such undertakings constituted in themselves actual cause or consideration for the On March 16, 1953, the above-named widow, children and grandchildren of the deceased
conveyance of the fishponds. That the prices were not paid (assuming ad arguendo that entered into an extrajudicial settlement of his (Domingos) estate, consisting of one-half of the
Concepcion Martelinos testimony to this effect is true) does not make the sale inexistent for properties allegedly belonging to the conjugal partnership. Among the properties listed as
want of causa. As ruled in Enriquez de la Cavada v. Diaz, 37 Phil. 982, "the consideration conjugal were the two parcels of land in Bulacan, Bulacan, which, together with another piece of
(causa) need not pass from one (party) to the other at the time the contract is entered into. . . property, were divided among the heirs in this manner: jgc:chanrobles.com .ph

The consideration need not be paid at the time of the promise. The one promise is a
consideration for the other." "WHEREAS, the parties have furthermore agreed that the fishpond covered by TCT Nos. 13815,
13816 and 24109 of the Office of the Register of Deeds of Bulacan, containing an area of
557,971 sq. m., which is likewise the conjugal property of the deceased and his surviving
spouse; 1/2 of the same or 278,985.5 sq. m. belongs to said Concepcion Felix Vda. de
Rodriguez, as her share in the conjugal property; and 3/4 of the remaining half or 209,239.125
DECISION sq. m. are transferred in full ownership to Geronimo Rodriguez, Esmeragdo Rodriguez and
Mauricio Rodriguez, share alike, while the other 1/4 or 69,746.375 sq. m. of the said remaining
share half goes in equal shares to Oscar Rodriguez, Juan Rodriguez and Ana Rodriguez." cralaw virtua1aw library

As a result of this partition, TCT Nos. 13815 and 13816 were cancelled and TCT Nos. T-11431
REYES, J.B.L., J.:and T-14423 were issued in the names of the said heirs of the deceased.

On March 23, 1953, in a power of attorney executed by the children and grandchildren of
Domingo Rodriguez, Concepcion Felix Vda. de Rodriguez was named their attorney-in-fact,
authorized to manage their shares in the fishponds (Exh. 4).
On July 2, 1954, the heirs ended their co-ownership by executing a deed of partition, dividing of the land up to August 15, 1962 in the sum of P3,000.00, for attorneys fees and expenses of
and segregating their respective shares in the properties, pursuant to a consolidation and litigation.
subdivision plan (PCS-3702), in accordance with which, Concepcion Felix Vda. de Rodriguez
obtained TCT No. T-12910, for the portion pertaining to her (Exh. L), with TCT No. T-12911 was On October 5, 1963, judgment was rendered for the defendants. In upholding the validity of the
issued to the other heirs, for their shares. This latter title was subsequently replaced by TCT No. contracts, the court found that although the two documents, Exhibits A and B, were executed
16660 (Exh. M). for the purpose of converting plaintiffs separate properties into conjugal assets of the marriage
with Domingo Rodriguez, the consent of the parties thereto was voluntary, contrary to the
On October 12, 1954, the Rodriguez children executed another document granting unto the allegations of plaintiff and her witness. The court also ruled that having taken part in the
widow lifetime usufruct over one-third of the fishpond which they received as hereditary share questioned transactions, plaintiff was not the proper party to plead lack of consideration to
in the estate of Domingo Rodriguez, which grant was accepted by Concepcion Felix Vda. de avoid the transfers; that contracts without consideration are not inexistent, but are only
Rodriguez. voidable, following the ruling in the case of Concepcion v. Sta. Ana (87 Phil. 787); that there
was ratification or confirmation by the plaintiff of the transfer of her property, by her execution
Then. in a contract dated December 15, 1961, the widow appeared to have leased from the (with the other heirs) of the extrajudicial settlement of estate; that being a voluntary party to
Rodriguez children and grandchildren the fishpond (covered by TCT No. 16660) for a period of 5 the contracts, Exhibits A and B, plaintiff cannot recover the properties she have thereunder.
years commencing August 16, 1962, for an annual rental of P7,161.37 (Exh. 5). Plaintiffs alternative cause of action was also rejected on the ground that action for rescission
of the deed of extrajudicial settlement should have been filed within 4 years from its execution
At about this time, it seemed that the relationship between the widow and her stepchildren had (on March 16, 1953).
turned for the worse. Thus, when she failed to deliver to them the balance of the earnings of
the fishponds, in the amount of P3,000.00, her stepchildren endorsed the matter to their lawyer From the decision of the Court of First Instance, plaintiff duly appealed to this Court, insisting
who, on May 16, 1962, sent a letter of demand to the widow for payment thereof. On May 28, that the conveyances in issue were obtained through duress, and were inexistent, being
1962, Concepcion Felix Vda. de Rodriguez filed the present action in the Court of First Instance simulated and without consideration.
of Manila naming as defendants. Geronimo Rodriguez, Esmeragdo Rodriguez, Oscar Rodriguez,
Concepcion Bautista Vda. de Rodriguez, as guardian of the minors Juan and Ana Rodriguez, and We agree with the trial Court that the evidence is not convincing that the contracts of transfer
Antonio Diaz de Rivera and Renato Diaz de Rivera, as guardians of the minors Maria Ana, from Concepcion Felix to her daughter, and from the latter to her mother and stepfather were
Mercedes, Margarita, Mauricio, Jr. and Domingo (Children of Mauricio Rodriguez who had also executed through violence or intimidation. The charge is predicated solely upon the improbable
died). and biased testimony of appellants daughter, Concepcion C. Martelino, whom the trial court
refused to believe, considering that her version of violence and harassment was contradicted by
The action to declare null and void the deeds of transfer of plaintiffs properties to the conjugal Bartolome Gualberto, who had lived with the Rodriguez spouses from 1917 to 1953, and by the
partnership was based on the alleged employment or exercise by plaintiffs deceased husband of improbability of Rodriguez threatening his stepdaughter in front of the Notary Public who ratified
force and pressure on her, that the conveyances of the properties from plaintiff to her her signature. Furthermore, as pointed out by the appealed decision, the charge of duress
daughter and then to the conjugal partnership of plaintiff and her husband are both without should be treated with caution considering that Rodriguez had already died when the suit was
consideration; that plaintiff participated in the extrajudicial settlement of estate (of the brought, for duress, like fraud, is not to be lightly laid at the door of men already dead. (cf.
deceased Domingo Rodriguez) and in other subsequent deeds or instruments involving the Prevost v. Gratz, 6 Wheat. [U.S.] 481, 498; Sinco v. Longa, 51 Phil. 507).
properties in dispute, on the false assumption that the said properties had become conjugal by
reason of the execution of the deeds of transfer in 1934; that laboring under the same false What is more decisive is that duress being merely a vice or defect of consent, an action based
assumption, plaintiff delivered to defendants, as income of the properties from 1953 to 1961, upon it must be brought within four years after it has ceased; 1 and the present action was
the total amount of P56,976.58. As alternative cause of action, she contended that she would instituted only in 1962, twenty-eight (28) years after the intimidation is claimed to have
claim for her share, as surviving widow of 1/5 of the properties in controversy, should such occurred, and no less than nine (9) years after the supposed culprit died (1953). On top of it,
properties be adjudicated as belonging to the conjugal partnership. Thus, plaintiff prayed that appellant entered into a series of subsequent transactions with appellees that confirmed the
the deeds of transfer mentioned in the complaint be declared fictitious and simulated; that the contracts that she now tries to set aside. Therefore, this cause of action is clearly barred.
Extrajudicial Settlement of Estate be also declared null and void, that TCT No. 16660 of the
Registry of Deeds of Bulacan be cancelled and another one be issued in the name of plaintiff Appellants main stand in attaching the conveyances in question is that they are simulated or
Concepcion Felix Vda. de Rodriguez; that defendants be ordered to pay to plaintiff the sum of fictitious, and inexistent for lack of consideration. We shall examine each purported defect
P56,976.58, with legal interest thereon from the date of the filing of the complaint, and for separately.
appropriate relief in connection with her alternative cause of action.
The charge of simulation is untenable, for the characteristic of simulation is the fact that the
In their separate answers, defendants not only denied the material allegations of the complaint, apparent contract is not really desired or intended to produce legal effects or in any way alter
but also set up as affirmative defenses lack of cause of action, prescription, estoppel and laches. the juridical situation of the parties. Thus, where a person, in order to place his property beyond
As counterclaim, they asked for payment by the plaintiff of the unpaid balance of the earnings the reach of his creditors, simulates a transfer of it to another, he does not really intend to
divest himself of his title and control of the property; hence, the deed of transfer is but a sham.
But appellant contends that the sale by her to her daughter, and the subsequent sale by the Appellant invokes our decision in Vazquez v. Porta, 98 Phil. 490, but to no purpose. The
latter to appellant and her husband, the late Domingo Rodriguez, were done for the purpose of mortgage and foreclosure sale involved in that case were typical simulations, merely apparent
converting the property from paraphernal to conjugal, thereby vesting a half interest in but not really intended to produce legal effects, as proved by the Courts finding that the alleged
Rodriguez, and evading the prohibition against donations from one spouse to another during creditor and buyer at the foreclosure sale "Porta himself ostensibly acknowledged by his inertia
coverture (Civil Code of 1889, Art. 1334). If this is true, then the appellant and her daughter in allowing the doctor (alleged mortgagor debtor) to exercise dominical power thereon without
must have intended the two conveyances to be real and effective; for appellant could not intend any protest on his part." (cas, cit., p. 495). Not only this, but the mortgagors wife, when her
to keep the ownership of the fishponds and at the same time vest half of them in her husband. husband died, "found among his papers Portas cancellation of the mortgage in his favor and the
The two contracts of sale then could not have been simulated, but were real and intended to be draft of the complaint for foreclosure." Plainly, the precedent cited is here inapplicable.
fully operative, being the means to achieve the result desired.
Were the two conveyances from appellant to her daughter and from the latter to the spouses
Nor does the intention of the parties to circumvent by these contracts the law against donations Rodriguez void ab initio or inexistent for lack of consideration? We do not find them to be so. In
between spouses make them simulated ones. the first transaction, the price of P2,500.00 is recited in the deed itself (Exh. A); in the second
(Exh. B), the consideration set forth is P3,000.00. Now, Article 1274 of the Civil Code of 1889
Ferrara, in his classic book, "La Simulacion de los Negocios Juridicos" (Sp. trans. 1926), pp. 95, (in force when the deeds were executed) provided that
105, clearly explains the difference between simulated transactions and transactions in fraudem
legis:
jgc:chanroble s.com.ph "In onerous contracts the causa is understood to be for each contracting part, the prestation or
promise of a thing or service by the other." (Emphasis supplied)
"Otra figura debe distinguirse de la simulacion es el fraus legis. Tambien aqui se da una gran
confusion que persiste aun en la jurisprudencia, apegada tenazmente a antiguos errores. Se Since in each conveyance the buyer became obligated to pay a definite price in money, such
debe a Bahr el haber defendido con vigor la antitesis teorica que existe entre negocio fingido y undertakings constituted in themselves actual causa or consideration for the conveyance of the
negocio fraudulento, y haber atacado la doctrine comun que hada una mescolanza con los dos fishponds. That the prices were not paid (assuming ad arguendo that Concepcion Martelinos
conceptos. testimony to this effect is true) does not make the sales inexistent for want of causa. As ruled in
Enriquez de la Cavada v. Diaz, 37 Phil. 982, "the consideration (causa) is entered into . . . The
"Se confunde dice (2) , el negocio in fraudem legis con el negocio simulado, aunque la consideration need not be paid at the time of the promise. The one promise is a consideration
naturaleza de ambos sea totalmente diversa. El negocio fraudulento no es, en absoluto, un for the other." cralaw virtua1aw library

negocio aparente. Es perfectamente serio: se quiere realmente. Es mas, se quiere tal como es
ha realizado, con todas las consecuencias que corresponden a la forma juridica elegida. Muchas What would invalidate the conveyances now under a scrutiny is the fact that they were resorted
veces, estas consecuencias son incomodas para una u otra de las partes, aunque serian mas to in order to circumvent the legal prohibition against donations between spouses contained in
incomodas las consecuencias que llevaria consigo el acto prohibido. Article 1334, paragraph 1, of the Civil Code of 1889, then prevailing. That illegal purpose
tainted the contracts, for as held by the Spanish Tribunal Supremo in its decision of 2 April
x x x 1941.

"ha de ser reputado ineficaz, por exigencias ineludibles del caracter social y moral del Derecho,
todo contrato que persiga un in ilicito o inmoral, sea cualquiera el medio empleado por los
"El resultado de las precedentes investigaciones es el siguiente: el negocio simulado quiere contratantes para lograr esa finalidad, no justificada por un interes digno de ser socialmente
producir una apariencia; el negocio fraudulento, una realidad; los negocios simulados son protegido." cralaw virtua1aw library

ficticios, no queridos; los negocios in fraudem son serios, reales, y realizados en tal forma por
las partes para consequir un resultado prohibido: la simulacion nunca es un medio para eludir la The illicit purpose then becomes illegal causa within the terms of the old Civil Code, for as
ley, sino para ocultar su violacion. La transgresin del contenido verbal e inmediato de la norma declared by the same Spanish Court in its decision of 14 December 1940
se encubre bajo el manto de un negocio licito, lo cual no altera el caracter del contra legem
agere. Tan verdad, es que si se ha redactado una contraescritura que documenta y declara la "toda vez que lo que caracteriza fundamentalmente la ilicitud lesion de un inters general
verdadera naturaleza del nogocio realizado, no queda mas que aplicar pura y simplemente la juridico omoral." cralaw virtua1aw library

prohibicion.
a ruling reiterated in the decision of 2 April 1941 when the Court ruled: jgc:chanrobles.com .ph

Tambien el fraude quiere perjudicar la ley, pero emplea para ello medios diversos y sigue
distintos caminos. No oculta el acto exterior, sino que lo deja claro y visible, tratando de huir "El concepto de la causa ilicita, tal como la desenvuelve y aplica con gran amplitud y Flexibilidad
sesgadamente de la aplicacin de la ley merced a una artistica y sabia combinacion de varios la doctrina moderna, permite cobijar, no solo las convenciones ilicitas por razn de su objecto
medios juridicos no reprobados." cralaw virtua1aw library ode su motivo . . . sino tambien multiples convenciones que no encerrando en si ningun
elemento de directa antijuricidad son ilicitas por el matiz inmoral que reviste la operacion en su
conjunto . . ."
cralaw virtua1aw library

Unfortunately for herein appellant, in contracts invalidated by illegal subject matter or illegal
causa, Article 1305 and 1306 of the Civil Code then in force apply rigorously the rule in pari
delicto non oritur actio, denying all recovery to the guilty parties inter se. And appellant is
clearly as guilty as her husband in the attempt to evade the legal interdiction of Article 1334 of
the Code, already cited. Wherefore, her present action to reivindicate the conveyed properties
was correctly repulsed by the Court below.

"ART. 1306. If the act which constitutes the illicit consideration is neither a crime nor a
misdemeanor, the following rules shall be observed: chanrob1es virtual 1aw library

1. When both parties are guilty, neither of them can recover what he may have given by virtue
of the contract, or enforce the performance of the undertaking of the other party;

x x x

That Article 1306 applies to cases where the nullity arises from the illegality of the consideration
of the purpose of the contract was expressly recognized by this Supreme Court in Gustilo v.
Maravilla, 48 Phil. 449-450. 2

Finally, it cannot be denied that plaintiff-appellant had knowledge of the nullity of the contract
for the transfer of her properties in 1934, because she was even a party thereto. And yet, her
present action was filed only on May 28, 1962 and after the breaking up of friendly relations
between her and defendants-appellees. Appellants inaction to enforce her right, for 28 years,
cannot be justified by the lame excuse that she assumed that the transfer was valid. Knowledge
of the effect of that transaction would have been obtained by the exercise of diligence.
Ignorance which is the effect of inexcusable negligence, it has been said, is no excuse for
laches. (Go Chi Gun, etc., Et. Al. v. Co Cho, et al,, 96 Phil., 622). Even assuming for the sake of
argument that appellant held her peace, during the lifetime of her husband, out of legitimate
fear for her life, there is no justification of her failure to bring the proper action after his death
in 1953. Instead, she entered into a series of agreements with herein appellees, the children of
her husband by a prior marriage, of partition, usufruct and lease of their share in the fishponds,
transactions that necessarily assumed that Rodriguez had acquired one-half of the litigated
fishponds. In the circumstances, appellants cause has become a stale demand and her conduct
placed her in estoppel to question the validity of the transfer of her properties. (Manila, Et. Al. v.
Galvan, Et Al., G. R. No. L-23507, May 24, 1967; Perez v. Herranz, 7 Phil. 695-696).

In view of the foregoing, the decision appealed from is affirmed. Costs against appellant
Concepcion Felix Vda. de Rodriguez. So ordered.
 HERMOSISIMA, JR., J.:

Grave danger of destitution and ruin or irretrievable loss of property awaits those who practise
or condone accommodation in order to circumvent the law or to hide from it. This case,
involving Federico Suntay, a wealthy landowner from Bulacan, is in point. He is here pitted
against his own lawyer, unfortunately his own nephew, Rafael Suntay, in whose favor he signed
and executed a deed of sale of a parcel of valuable and productive real property for a measly
P20,000.00. Federico claims that the sale was merely simulated and has been executed only for
purposes of accommodation. Rafael Suntay, to the consternation of Federico, insists that the
transaction was a veritable sale. Under what showing may the sale be deemed susceptible of
nullification for being simulated? Do we thereby abandon every reverence we have hitherto
reposed on instruments notarized before notaries public?

Before us is a Petition for Review on Certiorari of the Amended Decision 1 of respondent Court
of Appeals 2 and of its Resolution 3 denying petitioners motion for reconsideration.

These are the pertinent facts: chanrob1es virtual 1aw library

Respondent Federico Suntay was the registered 4 owner of a parcel of land with an area of
5,118 square meters, more or less, situated in Sto. Nino, Hagonoy, Bulacan. On the land may
be found: a rice mill, a warehouse, and other improvements. A rice miller, Federico, in a letter,
dated September 30, 1960, applied as a miller-contractor of the then National Rice and Corn
Corporation (NARIC). He informed the NARIC that he had a daily rice mill output of 400 cavans
of palay and warehouse storage capacity of 150,000 cavans of palay. 5 His application, although
prepared by his nephew-lawyer, petitioner Rafael Suntay, 6 was disapproved, 7 obviously
because at that time he was tied up with several unpaid loans. For purposes of circumvention,
he had thought of allowing Rafael to make the application for him. Rafael prepared 8 an
absolute deed of sale 9 whereby Federico, for and in consideration of P20,000.00 conveyed to
Rafael said parcel of land with all its existing structures. Said deed was notarized as Document
FIRST DIVISION No. 57 and recorded on Page 13 of Book 1, Series of 1962, of the Notarial Register of Atty.
Herminio V. Flores. 10 Less than three months after this conveyance, a counter sale 11 was
[G.R. No. 114950. December 19, 1995.] prepared 12 and signed 13 by Rafael who also caused its delivery 14 to Federico. Through this
counter conveyance, the same parcel of land with all its existing structures was sold by Rafael
RAFAEL G. SUNTAY, substituted by his heirs, namely: Rosario, Rafael, Jr., Apolinario, back to Federico for the same consideration of P20,000.00. 15 Although on its face, this second
Raymund, Maria Victoria, Maria Rosario and Maria Lourdes, all surnamed deed appears to have been notarized as Document No. 56 and recorded on Page 15 of Book 1,
SUNTAY,Petitioners, v. THE HON. COURT OF APPEALS and FEDERICO C. Series of 1962, 16 of the notarial register of Atty. Herminio V. Flores, an examination thereof
SUNTAY, Respondents. will show that, recorded as Document No. 56 on Page 13, is not the said deed of sale but a
certain "real estate mortgage of a parcel of land with TCT No. 16157 to secure a loan of
P3,500.00 in favor of the Hagonoy Rural Bank." Nowhere on page 13 of the same notarial
register could be found any entry pertaining to Rafaels deed of sale. 17 Testifying on this
irregularity, Atty. Flores admitted that he failed to submit to the Clerk of Court a copy of the
DECISION second deed. Neither was he able to enter the same in his notarial register. 18 Even Federico
himself alleged in his Complaint that, when Rafael delivered the second deed to him, it was to accommodate and assist defendant . . ..
neither dated nor notarized. 19
2.5 Defendant registered the Deed of Absolute Sale . . . with the Register of Deeds of Bulacan,
Upon the execution and registration of the first deed, Certificate of Title No. 0-2015 in the name and as a result, O. C. T. No. 0-2015 in plaintiffs name was cancelled and T.C.T. Na 36714 was
of Federico was cancelled and in lieu thereof, TCT No. T-36714 was issued in the name of issued in defendants name.
Rafael. Even after the execution of the deed, Federico remained in possession of the property
sold in concept of owner. Significantly, notwithstanding the fact that Rafael became the titled 2.6 After the Deed of Absolute Sale . . . had been registered, defendant prepared and delivered
owner of said land and rice mill, he never made any attempt to take possession thereof at any to plaintiff a counter-deed likewise entitled Deed of Absolute Sale, duly signed by him, in which
time, 20 while Federico continued to exercise rights of absolute ownership over the property. 21 he purported to sell back to plaintiff the same land and improvements . . . for the same
consideration of P20,000.00 . . . .
In a letter, 22 dated August 14, 1969, Federico, through his new counsel, Agrava & Agrava,
requested that Rafael deliver his copy of TCT No. T-36714 so that Federico could have the 2.7 At the time defendant delivered the counter-deed . . . to plaintiff it was signed by
counter deed of sale in his favor registered in his name. The request having been obviously defendant, but not dated or notarized, as defendant told plaintiff that he was delivering the
turned down, Agrava & Agrava filed a petition 23 with the Court of First Instance of Bulacan 24 signed counter-deed as a recognition of the fictitious character of the Deed . . . and authorized
asking Rafael to surrender his owners duplicate certificate of TCT No. T-36714. In opposition plaintiff to date the deed and cause it to be notarized at any time that plaintiff deemed it
thereto, Rafael chronicled the discrepancy in the notarization of the second deed of sale upon necessary or convenient to do so . . . .
which said petition was premised and ultimately concluded that said deed was a counterfeit or
"at least not a public document which is sufficient to transfer real rights according to law." 25 2.8 From the time plaintiff acquired the land and improvements . . . from his parents,
On September 8, 1969, Agrava & Agrava filed a motion 26 to withdraw said petition, and, on continuously until the present, plaintiff has been in open, public possession, use and enjoyment
September 13, 1969, the Court granted the same. 27 of the land, rice mill, warehouse and other improvements . . . for his sole and exclusive benefit,
and has paid all taxes thereon; and, in fact, from May 19, 1962, the date of the simulated Deed
On July 8, 1970, Federico filed a complaint 28 for reconveyance and damages against Rafael. He of Absolute Sale . . . until the present, defendant has not exercised a single act of ownership,
alleged, among others, that: chanrob1es virtual 1aw library possession, use or enjoyment of the said land and improvements.

x x x 2.9 During the months of June to August, 1969, desiring to expand his rice mill and warehouse
2.2 Sometime around May, 1962, defendant approached plaintiff and asked plaintiff, purely as
an accommodation and in order only to help defendant in an application that defendant had
then filed or intended to file with the Rice and Corn Administration to be licensed as a rice
dealer, to cause the title over the land and improvement described above to be placed in
defendants name, but with the clear and express understanding that ownership, possession,
use, enjoyment and all other incidents of title would remain vested in plaintiff; and that, at any
time that plaintiff needed or desired that the title be restored to plaintiffs name, defendant
would execute whatever deed and take whatever steps would be necessary to do so; to which
business located on the land in question, because of government efforts to stimulate rice
production, plaintiff requested defendant to deliver to him the owners duplicate of the transfer
certificate of title over the properties in question, in order that plaintiff might register the
counter-deed . . . and use the property as collateral in securing a bank loan to f nance the
expansion of the rice mill and warehouse facilities; but defendant failed and refused, and
continues to fail and refuse to do so, without just cause or legal reason." 29
In his answer, Rafael scoffed at the attack against the validity and genuineness of the sale to
him of Federicos land and rice mill. Rafael insisted that said property was "absolutely sold and
conveyed . . . for a consideration of P20,000.00, Philippine currency, and for other valuable
consideration." 30 Accordingly, he raised the following affirmative and/or special defenses: chanrob1es virtual 1aw library

request, in view of their relationship as uncle and nephew, plaintiff acceded.

x x x
2.3 Accordingly, defendant prepared a deed entitled Deed of Absolute Sale over the land and
improvements . . . which purported to be a sale thereof by plaintiff to defendant in
consideration of P20,000.00; which document plaintiff signed on or about May 19, 1962.
2.2 Plaintiff is now estopped from questioning the validity, genuineness, valuable consideration
x x x and due execution of the Deed of Absolute Sale, Annex A of the Complaint, since he admitted
the same in his Petition in L.R. Case No. 1356 . . . pertinent portions of which are quoted
hereunder: chanrob1es virtual 1aw library

2.4 Defendant never paid or delivered, and plaintiff never demanded or received, the sum of . . . On August 12, 1962, Rafael G. Suntay sold the property above-described to petitioner
P20,000.00 or any other valuable consideration for executing the aforesaid Deed of Absolute through a Deed of Absolute Sale . . ..
Sale, since the same was and is an absolutely simulated or fictitious transaction, intended solely
and likewise, plaintiff admitted the validity, genuineness, valuable consideration and due absolute sale he executed in favor of the defendant, to wit: chanrob1es virtual 1aw library

execution of aforesaid Deed of Absolute Sale . . . as evidenced by the letter of plaintiffs

counsel, Attorneys Agrava and Agrava . . .. (a) . . . a demand letter of Attys. Agrava & Agrava, counsel of the plaintiff the pertinent portion
of which is quoted as follows: chanrob1es virtual 1aw library

3. . . . Sometime in 1962, plaintiff informed defendant that he would repurchase aforesaid

property and requested the defendant to prepare the necessary document. Considering the
trust and confidence that defendant had in plaintiff and pursuant to said request, defendant
prepared the proposed Deed of Sale . . . signed the same and delivered it to the plaintiff with
the clear and express understanding that the owners duplicate Transfer Certificate of Title
would be delivered to the plaintiff only upon full payment of the agreed repurchase price of
P20,000.00 after which said proposed Deed of Sale would be duly notarized. The amount of
P20,000. 00 was stated in said proposed Deed of Sale upon request of plaintiff in view of the
On May 19, 1972, our client, Federico C. Suntay sold to your good self for P20,000.00 a parcel
of land situated at Hagonoy, Bulacan . . ..
(b) . . . a Petition for the Surrender of Owners Duplicate Certificate of Title and/or Cancellation
and Issuance of Substitute Owners Copy of Transfer Certificate of Title filed in Court on August
19, 1969 by the plaintiff against the defendant docketed as LRC Case No. 1356 . . . hereby
quoted as follows: chanrob1es virtual 1aw library

fact that that was the same amount appearing in the Deed of Absolute Sale, Annex A of the
Complaint. The plaintiff, not only failed to pay to defendant the agreed repurchase price of (sic)
any portion thereof but even caused the falsification of the proposed Deed of Sale by making it
appear, in connivance with Attorney Herminio Flores, that defendant acknowledged said
document before said Attorney Flores, when in truth and in fact as plaintiff and Attorney Flores
very well knew at the time that defendant never appeared, much less acknowledged, before
Attorney Flores said document . . . ." 31
At the initial hearing on April 7, 1971, Federico took the stand and, when asked why title to the
property was no longer in his name, Rafaels counsel objected thereto upon the ground that
2. Petitioner is the vendee of a parcel of land, together with the improvements existing thereon
situated in the Barrio of Sto. Nino, Hagonoy, Bulacan . . . title to which is still . . . issued in the
name of the vendor Rafael G. Suntay . . . .
3. On August 12, 1962, Rafael G. Suntay sold the property . . . to petitioner . . . .
(c) . . . a notice of adverse claim f led by the plaintiff in the Registry of Deeds of Bulacan on the
land in question . . . admitting the ownership of the defendant of said land, which is quoted as
follows:chanrob1es virtual 1aw library

Federico, in the petition wherein he asked Rafael to surrender his owners duplicate of TCT No.
T-36714, had alleged that he sold the land to Rafael, which allegation, Rafael contends, That the properly has been sold to me by Rafael G. Suntay through an Absolute Deed of Sale . .
constitutes as a judicial admission which may not be subject to contradiction, unless previously . .
shown to have been made through palpable mistake. 32 Rafaels counsel, in effect, was
assailing the admissibility of Federicos anticipated answer which would most likely tend to These documents alone are more than sufficient evidence to conclude that Exhibit A is not a
establish the simulated nature of the sale executed by Federico in favor of Rafael. Judge simulated Deed of Absolute Sale but a genuine Deed of Absolute Sale which transferred the
Emmanuel Munoz overruled the objection and reset the case for hearing on June 9, 1971. ownership of the property in question from the plaintiff to the defendant. The mere allegation of
the plaintiff that the Deed of Sale (Exh. A) is simulated and without consideration cannot prevail
On June 7, 1971, Rafael, obviously for the purpose of delay on account of its pettiness, over his aforesaid admissions.
institutedcertiorari proceedings in the Court of Appeals in order to have the aforecited ruling
nullified and set aside. Rafael was naturally rebuffed by the Appellate Court. Considering that . . . In addition thereto is the fact that this Deed of Absolute Sale (Exh. A) was duly recorded in
the petition for Rafael to surrender his owners duplicate of TCT No. T-36714 had been the Notarial Registry of Notary Public Herminio V. Flores . . . thus showing the regularity and
withdrawn upon motion of Federico, the alleged admission of Federico as to the questioned due execution of the aforesaid document. . . . .
deeds validity in effect disappeared from the record and had ceased to have any standing as a
judicial admission. 33 Dissatisfied with the ruling, Rafael elevated the matter to the Supreme The mere fact that plaintiff is in continuous possession of property in question, pays realty taxes
Court via a petition for review on certiorari. This was summarily denied by us for lack of merit.thereon and have introduced several improvements despite the execution of Deed of Absolute
34 Sale (Exh. A) is not sufficient basis to conclude that Exh A is just a simulated sale in the light of
the admissions of the plaintiff in the aforementioned documentary evidences and furthermore it
Whereupon, Rafaels counsel moved, as he often did previously, for continuation of trial of the was explained by the defendant that plaintiff has been in possession of the property in question
main case. 35 After a thirteen-year trial with no less than six different Presiding Judges; 36 and paid taxes thereon because it was their express understanding that plaintiff would
numerous changes of lawyers; countless incidents; and a mountain-pile of pleadings a subsequently repurchase the property in question and all the fruits thus enjoyed by plaintiff and
decision in the case was finally rendered on April 30, 1984. Resolving the sole issue of whether taxes thus paid by him would be accounted for . . . This is borne out by the receipts of payment
or not the deed of sale executed by Federico in favor of Rafael was simulated and without of realty taxes which expressly show that plaintiff paid the taxes for and in the name of
consideration, the trial court ruled:
jgc:chanroble s.com.ph defendant Rafael Suntay." 37

"The following documents undisputedly show the admission of the plaintiff that the deed of While the trial court upheld the validity and genuineness of the deed of sale executed by
absolute sale (Exh. A) is not a simulated or fictitious document but is a genuine deed of Federico in favor of Rafael, which deed is referred to above as Exhibit A, it ruled that the
counter-deed, referred to as Exhibit B, executed by Rafael in favor of Federico, was simulated trial court. On January 27, 1993, the Court of Appeals rendered judgment in affirmance of the
and without consideration, hence, null and void ab initio. trial courts decision, with a modification. Federico was ordered to surrender the possession of
the disputed property to Rafael. 40
The trial court ratiocinated that: jgc:chanrobles.com .ph

The Court of Appeals ruled: jgc:chanroble s.com.ph

"The Deed of Absolute Sale (Exh. B) which is a resale of the property in question executed by
the defendant in favor of the plaintiff was signed by the defendant but at the time it was handed "After a careful examination of the evidence on record, we are inclined to agree with the lower
to the plaintiff it was not dated, not notarized and above all it has no consideration because court that Exhibit A is indeed a genuine deed of absolute sale which transferred to Rafael the
plaintiff did not pay defendant the consideration of the sale in the sum of P20,000.00. . . . . full ownership of the litigated property, including the improvements found thereon.

Although Exh. B was subsequently notarized, the fact remained that defendant did not appear For one, it immediately strikes us as rather unusual for Federico to wait until 1969, or after a
and acknowledge the same before the Notary Public . . . and did not receive the consideration of period of more than seven (7) years from May 19, 1962 when he executed Exhibit A, to seek
the aforesaid Exh. B . . . . Consequently (sic), this Exh. B for want of consideration and not the restoration of his title over the same property. Were Federico to be believed, he executed
having been acknowledged by defendant before the Notary Public is therefore null and void and Exhibit A simply to accommodate his nephew in connection with the latters alleged application
hence did not transfer ownership of the property in question to the defendant. as rice dealer of RCA. There is nothing in the record, however, that Rafael ever became a
licensed rice dealer of RCA from 1962 to 1969. . . . .
A contract of purchase and sale is void and produces no effect whatsoever where the same is
without cause or consideration in that the purchase price, which appears thereon as paid, has in . . . Prudence if not common sense should have cautioned Federico of the dangers attendant to
fact never been paid by the purchaser to the vendor (Mapalo v. Mapalo . . . 17 SCRA 114)." 38 his inaction to assert immediately his alleged unaffected ownership over the same property. It is
simply unthinkable that Federico could not have considered the possibility that an innocent
While the trial court adjudged Rafael as the owner of the property in dispute, it did not go to the purchaser for value may acquire the property from Rafael. Such a thought alone is enough
extent of ordering Federico to pay back rentals for the use of the property as the court made reason for Federico to be wary of the situation which he allowed to continue for seven (7) years.
the evidential finding that Rafael simply allowed his uncle to have continuous possession of the
property because of their understanding that Federico would subsequently repurchase the Nor can Federico draw comfort from his continued physical possession of the property even
same. The decretal portion of the decision of the trial court reads: after the same was sold to Rafael. As plausibly explained by Rafael, he allowed Federico to
jgc:chanroble s.com.ph

remain in the premises and enjoy the fruits thereof because of their express understanding that
"WHEREFORE, a decision is hereby rendered: chanrob1es virtual 1aw library Federico may subsequently repurchase the property and all the fruits thus enjoyed by the
plaintiff and the taxes paid by him would be accounted for at the time of the repurchase . . ..
1. Dismissing this complaint filed by the plaintiff against herein defendant; Indeed, the receipts of payment of realty taxes clearly show on their face that Federico paid the
taxes for and in behalf of Rafael . . . .
2. Declaring the Deed of Absolute Sale (Exh. A) executed by the plaintiff in favor of the
defendant of a parcel of land covered by OCT No. 0-2015-Bulacan Registry as a genuine and Independent of the foregoing, documents are on record which are replete with Federicos
valid document; admissions showing that Exhibit A could not have been a simulated or fictitious deed of
sale. . . . .
3. Ordering the defendant to pay the Government of the Republic of the Philippines thru the
Office of the Register of Deeds of Bulacan the true and correct registration fees for the Deed of Finally, it is not disputed that Exhibit A was duly recorded in the Notarial Register of Notary
Absolute Sale (Exh. A) on the basis of the true consideration of the sale as admitted by the Public Herminio V. Flores . . . who testified on the due execution of the same . . . . Against this
defendant which is P20,000.00 as stated in the document plus his unpaid attorneys fees in the overwhelming evidence, Federicos self-serving declaration that Exhibit A is a fictitious and
sum of P114,000.00 within fifteen (15) days from the finality of this decision; simulated contract must certainly fall.

4. Declaring the Deed of Sale (Exh. B) executed by the defendant in favor of the plaintiff of a This brings us to the Deed of Absolute Sale (Exh.B) executed by Rafael in favor of Federico
parcel of land covered by TCT No. T-36714 Bulacan Registry as null and void ab initio; over the same property.

5. The prayer for P500.00/month rental from May, 1962 is hereby denied for lack of merit; We cannot add more to what the court a quo has said in declaring that Exhibit B is null and
void, for which reason it could not have transferred the ownership of the same property to
6. With costs against the plaintiff." 39 Federico. . . . . 41

From the aforecited decision of the trial court, both Federico and Rafael appealed. Before the Counsel of Federico filed a motion for reconsideration of the aforecited decision. While the
Court of Appeals both pleaded invariably the same arguments which they had raised before the motion was pending resolution, Atty. Ricardo M. Fojas entered his appearance in behalf of the
heirs of Rafael who had passed away on November 23, 1988. Atty. Fojas prayed that said heirs than a recognition on the part of Federico of the factual existence of Exhibit A, by virtue of
be substituted as defendants-appellants in the case. The prayer for substitution was duly noted which his OCT No. 0-2015 was cancelled and a new title (TCT No. T-36714) issued in the name
by the court in a resolution dated April 6, 1993. Thereafter, Atty. Fojas filed in behalf of the of Rafael. . . ..
heirs an opposition to the motion for reconsideration. The parties to the case were heard on oral
argument on October 12, 1993. In fine, this Court rules and so holds that the Deed of Absolute Sale executed on May 19, 1962
by plaintiff-appellant Federico Suntay in favor of his nephew Rafael G. Suntay (Exh.A ), is
On December 15, 1993, the Court of Appeals reversed itself and rendered an amended absolutely simulated and fictitious As such, it is void and is not susceptible of ratification (Art.
judgment, pertinent portions of which read: jgc:chanroble s.com.ph 1409, Civil Code), produces no legal effects (Carino v. Court of Appeals, 152 SCRA 529), and
does not convey property rights nor in any way after the juridical situation of the parties
". . . this Court is convinced that the desired consideration is impressed with compelling merit. (Tongay v. Court of Appeals, 100 SCRA 99). Along the same vein, the counter deed of sale
For truly, certain premises stand out in the chain of evidence, the interplay of which supports (Exh.B), executed by Rafael in favor of his uncle Federico, purportedly re-selling to the latter
the conclusion that the parties meant Exhibit A to be a mere accommodation arrangement the very same property earlier fictitiously conveyed by Federico is likewise infected with the
executed without any consideration and therefore a simulated contract of sale. Consider the same infirmity that vitiates Exhibit A . Like the latter document, Exhibit B is also simulated
following:chanrob1es virtual 1aw library and therefore it, too, is incapable of producing legal effects. In short, it was as if no contract of
sale was ever executed by Federico in favor of Rafael, on the one hand, and by Rafael in favor
1. Two (2) instruments were executed closely one after the other involving transfer and re- of Federico, on the other hand, although the sad reality must be acknowledged that on account
transfer of the same property at exactly the same price; of Exhibit A, Federicos title to the property was cancelled and replaced by a new one in the
name of Rafael whose change of heart brought about Federicos travails." 42
2. The existing close relationship between the parties; and
We cannot but uphold the foregoing findings and conclusions of the Court of Appeals. While the
3. The value and location of the property purportedly sold, which project in bold relief the gross rule is that factual findings of the Court of Appeals are binding on us, we endeavored, however,
inadequacy of the stated contractual consideration therefor. to scrutinize the case records and read and examined the pleadings and transcripts submitted
before the trial court 43 because the factual findings of the Court of Appeals and that of the trial
x x x court are contrary to each other. 44

The sole issue in this case concerns the validity and integrity of the aforedescribed deed of sale
in favor of Rafael Suntay. We necessarily begin with two veritable legal presumptions: first, that
There is more. Similarly looming large to attest to the simulated character of Exhibit A which, there was sufficient consideration for the contract 45 and, second, that it was the result of a fair
in hindsight, was unjudiciously brushed aside is the undisputed fact that the physical and regular private transaction. 46 These presumptions if shown to hold, infer prima facie the
possession, enjoyment and use of the property in question remained through the years and up transactions validity, except that it must yield to the evidence adduced. 47
to the present in the hands of Federico. Rafael, as records show, never assumed the benefits,
let alone the burden, of ownership. He did not even include the property in his statement of In the aggregate, the evidence on record demonstrate a combination of circumstances from
assets and liabilities . . . nor paid the taxes therefor. This factor, juxtaposed with Rafaels which may be reasonably inferred certain badges of simulation that attach themselves to the
execution of the counter deed of sale (Exh.B), cannot but unmistakably indicate that the deed of sale in question.
parties never meant to regard Exhibit A as producing actual transfer of ownership and/or
rights attached to ownership. Doubtless, Exhibit B manifested, and is an affirmation of such I
intention.

We are thus inclined to agree with Federicos main submission that Exhibit A is merely a
fragment of the intended transaction, that is, an accommodation loan of title to Rafael and its The late Rafael Suntay and private respondent Federico Suntay were relatives, undisputedly,
subsequent return to Federico. The counter deed of sale executed by Rafael (Exh.B), completed whose blood relation was the foundation of their professional and business relationship. The late
it. Stated differently, the first instrument merely recited a portion of the entire accommodation Rafael testified that he had completely trusted Federico and so he signed and delivered the
transaction; the second, as a complementary part, and, in addition to the first, integrated and counter-deed of sale even without prior payment of the alleged repurchase price of P20,000.00.
made clear the simulated character of the entire agreement. Federico had such faith and confidence in the late Rafael, as nephew and counsel, that he
blindly signed and executed the sale in question. He had recommended Rafael as legal counsel
It is true that in the Decision under consideration, this Court took stock, as Rafael urges, of and corporate secretary of the Hagonoy Rural Bank of which he was founder and once
Federicos admission in the letter dated August 14, 1969 of the Agrava and Agrava Law Office . . President. He had entrusted to Rafael many of his business documents and personal papers, the
. in Federicos petition for registration . . . and in his affidavit/notice of adverse claim. Viewed in return of which he did not demand even upon termination of their professional relationship. It
its proper perspective, however, we are now inclined to consider such admission as no more was precisely because of this relationship that Federico consented to what he alleged as a loan
of title over his land and rice mill in favor of the late Rafael. We are all too familiar with the Rafael never attempted to physically dispossess his uncle or actually take over the rice mill
practice in the typical Filipino family where the patriarch with the capital and business standing during his lifetime.
takes into his fold the young, upcoming, inexperienced but brilliant and brashly ambitious son,
nephew or godchild who, in turn, becomes to his father, uncle, or godparent, the jack of all II
trades, trouble shooter and most trusted liaison officer cum adviser. He wittingly serves his
patron without the security of a formal contract and without clarifying the matter of
compensation.
The late Rafael insisted that the sale to him of his uncles property was in fact a "dacion en
The record is replete with circumstances that establish the closeness, mutual trust and business pago" in satisfaction of Federicos unpaid attorneys fees. 50 What prominently stands out from
and professional interdependence between the late Rafael and private Respondent. When their the mass of records, however, is the fact that this claim of the late Rafael was only raised in
relationship turned sour, the late Rafael, in all probability knew where to hit Federico where it 1976 when he testified on direct examination. The answer that he filed in 1970 in response to
really hurt because he had been privy to most of Federicos business and personal dealings and Federicos complaint never mentioned nor even alluded to any standing liability on the part of
transactions. The documentary evidence alone proffered by the late Rafael showed the extent of Federico as regards unpaid attorneys fees. Neither did the late Rafael deny or refute Federicos
Rafaels knowledge and involvement in both the business and private affairs of Federico, his testimony that they did not have a clear-cut compensation scheme and that Federico gave him
wife, his son, and even his wifes relatives. Rafael admitted in open court that he had come to money at times, which compensation enabled the late Rafael to purchase his first car. The late
the possession thereof in the course of rendering legal services to his uncle. These documents Rafael even affirmed Federicos testimony respecting his appointment as the legal counsel and
on record and the testimonies of the late Rafael and private respondent establish the existence corporate secretary of the Hagonoy Rural Bank for which he received compensation as well.
of, not only the facts therein stated, but also the circumstance pertaining to the nature of the
relationship between the late Rafael and private respondent was indeed a badge of simulation. Equally significant is the admission of the late Rafael that he did not inform Federico that he
considered the transfer to be in consideration of his alleged unpaid attorneys fees. 51
"There are at least three distinguishable classes of so-called circumstances in evidence which, Apparently, it is true, as Federico claimed, that no accounting was undertaken between uncle-
however, cannot safely be interpreted in the same way. One class of circumstances, often client and nephew-lawyer in order to arrive at the definite amount of the alleged unpaid
referred to in trials at law, includes all outside and related incidents, conditions and happenings attorneys fees. Strange and irregular as this matter seems to be, the same may only become
which are described by witnesses and necessarily are subject to all of the dangers and defects comprehensible when considered as a grave symptom of simulation
of oral and memory testimony. There are also circumstances which are admitted, or which arise
from the nature of the case itself which cannot be denied, and lastly there are tangible and III
visible facts before court . . . which are the basis for a judgment . . . .

. . . The law, as well as logic, makes a distinction between surroundings, conditions, and
circumstances as compared with real and tangible facts. . . . A bungling, overwritten, traced Indeed the most protuberant index of simulation is the complete absence of an attempt in any
signature, as well as a coat with a bullet-hole in the breast are both . . .silent circumstances manner on the part of the late Rafael to assert his rights of ownership over the land and rice
that do not commit perjury. Though silent they often are eloquent. . . . . mill in question. After the sale, he should have entered the land and occupied the premises
thereof. He did not even attempt to. If he stood as owner, he would have collected rentals from
All these quite distinct classes of evidence form the basis of legal verdicts and judgments The Federico for the use and occupation of the land and its improvements. All that the late Rafael
great mass of legal evidence consists of testimony of oral witnesses which has force in had was a title in his name.
proportion as it is believed, but in many important cases a verdict must be based mainly upon
the second or the third class of evidence . . . Circumstances and facts must be interpreted and "It is to be emphasized that the private respondents never parted with the ownership and
illustrated in order to show whether a definite conclusion can be based on them. In many cases possession of that portion of Lot No 785 x x x nor did the petitioners ever enter into possession
a particular conclusion is irresistible." 48 thereof as earlier stated, the issuance of TCT No. T-1346 did not operate to vest upon the latter
ownership over the private respondents property. That act has never been recognized as a
The history and relationship of trust, interdependence and intimacy between the late Rafael and mode of acquiring ownership. As a matter of fact, even the original registration of immovable
Federico is an unmistakable token of simulation. It has been observed that fraud is generally property does not vest title thereto; it is merely evidence of such title over a particular property.
accompanied by trust. 49 Hardly is it inconsistent with practical experience, especially in the The Torrens system of land registration should not be used as a means to perpetrate fraud
context of the Filipino familys way of life, that Federico, the uncle, would almost naively lend his against the rightful owner of real property." 52
land title to his nephew and agree to its cancellation in his nephews favor because Federico, in
the first place, trusted his nephew; was well aware of his power over him as uncle, client, and The failure of the late Rafael to take exclusive possession of the property allegedly sold to him is
patron; and was actually in possession of the land and rice mill. No one could even conceive of a clear badge of fraud. 53 The fact that, notwithstanding the title transfer, Federico remained in
the possibility of ejecting Federico therefrom on the basis of the sham transaction. The late actual possession, cultivation and occupation of the disputed lot from the time the deed of sale
was executed until the present, is a circumstance which is unmistakably added proof of the
fictitiousness of the said transfer, 54 the same being contrary to the principle of ownership. 55
When the document is to serve the purpose of a mere sham, this principle in strictness
Of course, according to the late Rafael, he allowed Federico to remain in the premises and enjoy exonerates the makers. . . . ." 56
the fruits thereof because of their understanding that Federico may subsequently repurchase
the property. Contrary to what Rafael thought, this in fact is added reason for simulation. The The cumulative effect of the evidence on record as chronicled aforesaid identified badges of
idea of allowing a repurchase goes along the same lines posed by the theory of Federico. simulation proving that the sale by Federico to his deceased nephew of his land and rice mill,
was not intended to have any legal effect between them. Though the notarization of the deed of
If it were true that the first sale transaction was actually a "dacion en pago" in satisfaction of sale in question vests in its favor the presumption of regularity, it is not the intention nor the
Federicos alleged unpaid attorneys fees, it does strain the logical mind that Rafael had agreed function of the notary public to validate and make binding an instrument never, in the first
to allow the repurchase of the property three months thereafter. Federico was obviously place, intended to have any binding legal effect upon the parties thereto. The intention of the
financially liquid. Had he intended to pay attorneys fees, he would have paid Rafael in cash and parties still and always is the primary consideration in determining the true nature of a contract.
not part with valuable income-producing real property.
VI
IV

While the late Rafael vehemently upholds the validity and effectiveness of the deed of sale in
The late Rafael, at the very outset, made much of an uproar over the alleged admissions made question, this posture is eroded by his admission on cross-examination during trial that he
by Federico in several documents executed by him or in his behalf. On the whole, it was the late never declared his ownership of the subject property in his annual Statement of Assets and
Rafaels inflexible stand that Federico admitted in various documents that he had absolutely sold Liabilities. The fact that the late Rafael denied both intention and knowledge involving the sham
his land and rice mill to him and could not, thus, subsequently deny or attack that sale. Upon sale and firmly maintained the validity and genuineness thereof has become incongruous
our examination of such documents, however, we find that neither the letter of Agrava & because it is irreconcilable with the circumstance that he apparently never considered the
Agrava, nor the petition to compel delivery of the owners duplicate of title and the notice of disputed property as one of his assets over which he had rights of absolute ownership.
adverse claim, supports the late Rafaels posture. Nowhere is it stated in the aforesaid petition
and notice of adverse claim that Federico sold the subject property to the late Rafael. What was The allegation of Rafael that the lapse of seven (7) years before Federico sought the issuance of
alleged was that Rafael resold to Federico the said property, and not the other way around, a new title in his name necessarily makes Federicos claim stale and unenforceable does not
precisely because both documents were assertions of remedies resorted to by Federico upon the hold water. Federicos title was not in the hands of a stranger or mere acquaintance; it was in
refusal by the late Rafael to tender his owners duplicate title. the possession of his nephew who, being his lawyer, had served him faithfully for many years.
Federico had been all the while in possession of the land covered by his title and so there was
V no pressing reason for Federico to have a title in his name issued. Even when the relationship
between the late Rafael and Federico deteriorated, and eventually ended, it is not at all strange
for Federico to have been complacent and unconcerned about the status of his title over the
disputed property since he has been possessing the same actually, openly, and adversely, to the
Neither does the undisputed fact that the deed of sale executed by Federico in favor of the late exclusion of Rafael. It was only when Federico needed the title in order to obtain a collaterized
Rafael, is a notarized document, justify the conclusion that said sale is undoubtedly a true loan 57 that Federico began to attend to the task of obtaining a title in his name over the
conveyance to which the parties thereto are irrevocably and undeniably bound. subject land and rice mill.

"Conduct, to be given jural effects, must be jural in its subject x x x i.e. must concern jural We, therefore, hold that the deed of sale executed by Federico in favor of his now deceased
relations, not relations of friendship or other non jural relations The father who promises to nephew, Rafael, is absolutely simulated and fictitious and, hence, null and void, said parties
bring home a box of tools for his boy is not bound in contract, though the same promise to his having entered into a sale transaction to which they did not intend to be legally bound. As no
neighbor may be binding. The friend who invites one with an offer of a dinner is not legally property was validly conveyed under the deed, the second deed of sale executed by the late
liable, though he who agrees with a restaurant-keeper for a banquet to be spread there is under Rafael in favor of his uncle, should be considered ineffective and unavailing.
contract of liability. . . . In all such cases, therefore, the conduct is jurally ineffective, or void. In
the traditional phraseology of the parole evidence rule, then, it my always be shown that the WHEREFORE, the Amended Decision promulgated by the Court of Appeals on December 15,
transaction was understood by the parties not to have jural effect. 1993 in CA-G.R. CV No. 08179 is hereby AFFIRMED IN TOTO. Petitioners, the heirs of Rafael G.
Suntay, are hereby ordered to reconvey to private respondent Federico C. Suntay the property
(1) Ordinarily, the bearing of this principle is plain enough on the circumstances. It has been described in paragraph 2.1 of the complaint, within ten (10) days from the finality of this
judicially applied to household services rendered by a member of the family, and to a writing Decision, and to surrender to him within the same period the owners duplicate copy of Transfer
representing merely a family understanding. . . .. Certificate of Title No. T-36714 of the Registry of Deeds of the Province of Bulacan. In the event
that the petitioners fail or refuse to execute the necessary deed of reconveyance as herein oral sale. Even on the assumption that the ratification was attended by fraud, such circumstance
directed, the Clerk of Court of the Regional Trial Court of Bulacan is hereby ordered to execute would only make the contract voidable which prescribes in four years from the time of the
the same at the expense of the aforesaid heirs. discovery of the fraud.

Costs against petitioners.

SO ORDERED. SYLLABUS

1. CIVIL LAW; CONTRACTS; IMPRESCRIPTIBILITY OF ACTIONS TO DECLARE VOID AN

INEXISTENT CONTRACT; NOT APPLICABLE TO CASE AT BAR. The imprescriptibility of an
action to declare the inexistence of a contract refers only to the contracts expressly enumerated
in Art. 1409 of the Civil Code. The facts appearing herein, even those alleged by the petitioners
but denied by the private respondents, do not provide a basis to categorize the document in
FIRST DIVISION
question as inexistent and void ab initio. No circumstance flat been alleged by the petitioners to
sustain its contention that the execution of the aforesaid document is contrary to public policy.
[G.R. No. L-32437. August 31, 1982.]
Admitted facts show that conveyance of the land in question in favor of the private respondents
had been affected by the father of the petitioners during his lifetime. It may not be said,
SALANDANG PANGADIL, Et Al., Petitioners, v. THE COURT OF FIRST INSTANCE OF
therefore, that in executing a deed to ratify said transaction executed by her father, petitioners
COTABATO, BRANCH I, Et Al., Respondents.
Salandang Pangadil and Tinting Pangadil deprived their minor brothers and sisters of their
supposed shares in the inheritance from their deceased father.
Estanislao V. Valdez, for Petitioners.
2. ID.; ID.; VOIDABLE CONTRACTS; PRESCRIPTION OF. Assuming that the execution of the
Zain B. Angas for Respondents.
deed of ratification was attended by fraud, such circumstance would only make the contract
voidable or annulable and not an inexistent and void at in to contract in accordance with Art.
SYNOPSIS
1409 of the Civil Code. The action to annul a voidable contract is not prescriptible, unlike in the
case of an existent contract. If the action to annul a voidable contract is based on fraud, as in
Sometime in 1941, a parcel of land owned by petitioners father was conveyed to the private the case herein, it prescribes in four years from the time of the discovery of the fraud (Art.
respondents in an oral transaction. In 1946, petitioner Salandang Pangadil filed in respondent 1391, Civil Code).
court an action praying for her appointment as guardian of her minor brothers and sisters who
are the other petitioners in this case, to enable her to execute the necessary document to 3. ID.; ID.; SIMULATION OF CONTRACTS. There is less legal basis to hold that the questioned
formalize the verbal sale executed by their father. The petition was granted and subsequently document is inexistent and void ab initio for being supposedly a simulated or fictitious contract.
the questioned document, entitled "Ratification De Una Venta", acknowledging the sale made by Under the law, the simulation of a contract may either be absolute or relative. It is only when
their deceased father in favor of private respondent for the consideration of P750.00 was the contract is absolutely simulated or fictitious that it is deemed void. There is absolute
presented to court for approval. Upon approval of the document, the guardianship proceeding simulation when the parties do not intend to be bound at all. In case the parties merely conceal
was declared closed. On January 7, 1969, petitioners filed Civil Case No. 2187 seeking the their true agreement, the simulation is relative, and the contract with that defect is binding
annulment of the aforementioned document and the declaration of the nullity of the court order upon the parties unless it prejudices a third person and is intended for a purpose contrary to
approving said document. They contended that the transaction was a mortgage and not a sale law, morals, good customs, public order or public policy (Arts. 1345 & 1346, Civil Code).
as claimed by private respondents. A motion to dismiss was filed on the grounds that plaintiffs
cause of action has already prescribed and that the same is barred by a prior judgment. The 4. ID.; ID.; DOCUMENT ACKNOWLEDGING AN ORAL SALE NOT A VOID ONE; ACTION TO
respondent court declared the questioned document legal and binding and the action to annul DECLARE CONTRACT INEXISTENT NOT IMPRESCRIPTIBLE. The document in question may
the sale filed more than twenty-one years after the approval thereof barred by the statute of not be deemed absolutely simulated or fictitious. By petitioners own admission, they intended
limitations. to be bound thereby; they merely contend that they thought it was to ratify a contract of oral
mortgage, instead of an oral sale of land. In short, it is not a contract wherein the parties do not
On certiorari, the Supreme Court held that the document in question may not be deemed intend to be bound at all which would thereby make it absolutely simulated and, therefore, void.
absolutely simulated or fictitious and void, and therefore imprescriptible. Petitioners intended to Petitioners accordingly, may not seek umbrage under the provision that an action to annul an
be bound thereby, although they contend misrepresentation as they were made to sign the inexistent contract is imprescriptible.
document thinking it was merely to ratify an oral contract of mortgage, and not to confirm an
 approval of the said document, the guardianship proceeding was declared closed in an order
dated August 10, 1948.

DECISION On January 7, 1969, the petitioners filed Civil Case No. 2187 seeking the annulment of the
aforementioned document and for a declaration of the nullity of the order of the Court of First
Instance of Cotabato in "Actuacion Especial No. 33" approving the said document.

VASQUEZ, J.:that plaintiffs cause of action has already prescribed; and (2) that the cause of action is barred
This is a petition for review on certiorari of the dismissal of Civil Case No. 2187 of the
respondent court of first instance. The petition was given due course in the Resolution of June
22, 1970 on the ground that the petitioners have raised only questions of law.
cralawnad
The respondent filed a motion to dismiss Civil Case No. 2187 on two (2) grounds, namely: (1)
by a prior judgment. In the questioned order dated March 5, 1969, the respondent court
dismissed the said case on the ground of prescription. The respondent court declared the
document, entitled "Ratificacion De Una Venta" legal, binding and effective and, hence, the
action to annul the sale which was filed more than twenty-one years after the approval thereof
is already barred by the statute of limitations.
In their present petition for review on certiorari, petitioners dispute the said pronouncement by
the respondent court on the principal ground that the document known as "Ratificacion De Una

Civil Case No. 2187 of the respondent court is an action filed by the herein petitioners to declare Venta" is inexistent and void and the action for a declaration of its non-existence does not
a document known as "Ratificacion De Una Venta" as inexistent and void ab initio for being prescribe pursuant to Art. 1410 of the Civil Code.
absolutely simulated and fictitious contract.
The validity of the posture assumed by the petitioners requires a showing that the document in
The record reveals that the parties are in disagreement as to certain facts underlying their question is, indeed, inexistent and void from the beginning. The basis of their claim that the
controversy. Nonetheless, insofar as determining the correctness of the dismissal of the action said document is of that nature is that it is allegedly fictitious and contrary to public policy. It is
filed by the petitioners concerned, the material facts relative thereto are not in serious dispute. supposedly violative of public policy because it deprived the minor brothers and sisters of
Salandang Pangadil of their shares in the inheritance from their father. The contention that it is
The parcel of land in question was formerly owned by Pangadil Maslamama, his ownership being fictitious is premised on the allegation that respondent Tandingan Kagui misled petitioners
evidenced by Original Certificate of Title No. 1272. Sometime in December 1941, the said land Salandang Pangadil and Tinting Pangadil into affixing their thumbmarks to the questioned
was conveyed by Pangadil Maslamama in favor of the herein private respondents. The said document on the misrepresentation that it was merely to ratify an oral contract of mortgage
transaction, the nature of which the petitioners insist to be a mortgage and not a sale as entered into by their father Pangadil Maslamama in favor of respondent Tandingan Kagui. chanroble s.com : virtual law library

claimed by the private respondents, was merely oral and not evidenced by any writing.
On December 20, 1946, petitioner Salandang Pangadil, one of the petitioners herein, who is a
daughter of Pangadil Maslamama, filed in the respondent court "Actuacion Especial No. 33"
praying for her appointment as guardian of her minor brothers and sisters who are the other
petitioners in this case. The avowed purpose of the said guardianship proceeding, as stated in
the petition filed therein, was to enable the petitioners to execute the necessary document to
formalize the verbal sale executed by their father Pangadil Maslamama of the land in question
favor of private respondent Tandingan Kagui executed during the lifetime of Pangadil
Maslamama. The petition was granted, Salandang Pangadil was appointed guardian and took
her oath as such.
On February 10, 1947, Salandang Pangadil, in her personal capacity and in her capacity as
guardian of her minor brothers and sisters, and her sister Tinting Pangadil who had attained
majority age in the meantime, executed the questioned document, entitled "Ratificacion De Una
Venta" pursuant to which they acknowledged the sale made by their deceased father Pangadil
Maslamama over the parcel of land in question in favor of respondent Tandingan Kagui for the
consideration of the sum of P750.00. Upon the said document being presented to the
guardianship court, the sale was approved pursuant to the order of May 19, 1947. Upon the
The imprescriptibility of an action to declare the inexistence of a contract refers only to the
contracts expressly enumerated in Article 1409 of the Civil Code. The facts appearing herein,
even those alleged by the petitioners but denied by the private respondents, do not provide a
basis to categorize the document in question as inexistent and void ab initio. No circumstance
has been alleged by the petitioners to sustain its contention that the execution of the aforesaid
document is contrary to public policy. Admitted facts show that the conveyance of the land in
in question in favor of the private respondents had been effected by the father of the petitioners
during his lifetime. It may not be said, therefore, that in executing a deed to ratify said
transaction executed by her father, petitioners Salandang Pangadil and Tinting Pangadil deprived
their minor brothers and sisters of their supposed shares in the inheritance from their deceased
father.
The supposed inexistence of the questioned contract is predicated on the allegation of the
petitioners that the execution of the questioned document was attended by fraud and
misrepresentation. In their complaint filed in the trial court, they averred that petitioners
Salandang Pangadil and Tinting Pangadil were made to sign the document on the
misrepresentation that it was merely to ratify an oral contract of mortgage executed by her
father during the latters lifetime, and not to confirm an oral sale of the land in question.
Assuming, once again, that the execution of the deed of ratification was attended by fraud, such
circumstance would only make the contract voidable or annulable (Art. 1309, Civil Code), and
not an inexistent and void contract in accordance with Article 1409 of the same Code. The
action to annul a voidable contract is not imprescriptible, unlike in the case of an inexistent
contract. If the action to annul a voidable contract is based on fraud, as in the case herein, it
prescribes in four years from the time of the discovery of the fraud. (Art. 1391, Civil Code.)
It cannot be true, as alleged in the complaint of the petitioners in Civil Case 2187, that it was
only sometime before the filing of the said case, or when the petitioners sought to release the
oral contract of mortgage by tendering to respondent Tandingan Kagui the payment of the
person and is intended for a purpose contrary to law, morals, good customs, public order or
public policy. (Arts. 1345 and 1346, Civil Code.)
The document in question may not be deemed absolutely simulated or fictitious. By petitioners
own admission, they intended to be bound thereby; they merely contend that they thought it
was to ratify a contract of oral mortgage, instead of an oral sale of land. In short, it is not a
contract wherein the parties do not intend to be bound at all which would thereby make it
absolutely simulated and, therefore, void. Petitioners, accordingly, may not seek umbrage
under, the provision that an action to annul an inexistent contract is imprescriptible.
chanrobles law library

amount of the mortgage loan obtained by their deceased father, that they learned of the alleged
fraud consisting of the fact that the document signed by Salandang Pangadil and Tinting WHEREFORE, the Order appealed from is hereby affirmed. With costs against the petitioners.
Pangadil was not a document to confirm an oral contract of mortgage but one to ratify a deed of
sale. The record abundantly reveals facts in refutation of such pretense on the part of the
petitioners which was evidently intended to justify the very much delayed filing of Civil Case No.
2187. The nature of the transaction entered into between the father of the petitioners and
private respondents Tandingan Kagui was brought to the attention of petitioner Salandang
Pangadil not once but at least two separate times. Petitioners do not deny that the land had
been conveyed by their father to private respondent Tandingan Kagui by means of a transaction
which was not evidenced by a writing. They merely claim that it was not a sale but only a
mortgage. It appears that in the hearing of the petition for the appointment of Salandang
Pangadil as guardian in "Actuacion Especial No. 33," evidence was presented by her consisting,
among others, of a document dated August 3, 1944 marked therein as Exhibit "A" which was a
private writing signed also by petitioners Salandang Pangadil and Tinting Pangadil (who was
then already of age) confirming the sale made by their father Pangadil Maslamama in favor of
private respondent Tandingan Kagui, the said instrument having been witnessed by Datu
Ugalingan Piang, a former congressman of Cotabato. Salandang Pangadil was the petitioner in
the guardianship proceedings wherein she asked that she be appointed as guardian of her minor
brothers and sisters precisely to enable her to formalize the same sale orally done by her father
during his lifetime. It is not easy to imagine that in the execution of the document on August 3,
1944 and in the proceedings taken in connection with "Actuacion Especial No. 33", all of which
show indubitably the intention to ratify a sale executed by the father of the petitioners in favor
of the private respondents, the herein petitioner Salandang Pangadil, who appears to be the
eldest child of Pangadil Maslamama, could have been totally ignorant of the nature of the
documents to which she had affixed her written conformity.

It is equally unbelievable that in the span of time from December 1941 up to the date that Civil
Case No. 2187 was filed on January 7, 1969, a period of more than twenty-seven years, the
petitioners would not have taken any step to verify the status of the land of their father which
had been in the possession of the private respondents during all the time, particularly as to the
possibility of redeeming the supposed mortgage their father had constituted thereon. Their
inaction for such a considerable period of time reflects on the credibility of their pretense that
they merely intended to confirm an oral mortgage, instead of a sale of the land in question.

There is less legal basis to hold that the questioned document is inexistent and void ab initio for
being supposedly a simulated or fictitious contract. Under the law, the simulation of a contract
may either be absolute or relative. It is only when the contract is absolutely simulated or
fictitious that it is deemed void. There is absolute simulation "when the parties do not intend to
be bound at all." In case the parties merely conceal their true agreement, the simulation is
relative, and the contract with that defect is binding upon the parties unless it prejudices a third

SECOND DIVISION
[G.R. No. 89561. September 13, 1990.]
BUENAFLOR C. UMALI, MAURICIA M. VDA. DE CASTILLO, VICTORIA M. CASTILLO,
BERTILLA C. RADA, MARIETTA C. ABAEZ, LEOVINA C. JALBUENA and SANTIAGO M.
RIVERA, Petitioners, v. COURT OF APPEALS, BORMAHECO, INC. and PHILIPPINE
MACHINERY PARTS MANUFACTURING CO., INC., Respondents.
Edmundo T. Zepeda, for Petitioners.
Martin M. De Guzman for respondent BORMAHECO, Inc.
Renato J. Robles for P.M. Parts Manufacturing Co., Inc.
DECISION
This is a petition to review the decision of respondent Court of Appeals, dated August 3,1989, in Meer Vda. de Castillo and of her children, namely: Buenaflor, Bertilla, Victoria, Marietta and
CA GR CV No. 15412, entitled "Buenaflor M. Castillo Umali, Et. Al. v. Philippine Machinery Parts Leovina, all surnamed Castillo has (sic) been issued, namely: TCT No. T-12113 (Exhibit E); TCT
Manufacturing Co., Inc., Et Al.," 1 the dispositive portion whereof provides:
jgc:chanroble s.com.ph
"WHEREFORE, viewed in the light of the entire record, the judgment appealed from must be, as d) That mentioned parcels of land were submitted as guaranty in the Agreement of Counter-
it is hereby REVERSED.
In lieu thereof, a judgment is hereby rendered
1) Dismissing the complaint, with costs against plaintiffs;
2) Ordering plaintiffs-appellees to vacate the subject properties; and
3) Ordering plaintiffs-appellees to pay upon defendants counterclaims: chanrob1es virtual 1aw library
a) To defendant-appellant PM Parts: (i) damages consisting of the value of the fruits in the
subject parcels of land of which they were deprived in the sum of P26,000.00 and (ii) attorneys
fees of P15,000.00
b) To defendant-appellant Bormaheco: (i) expenses of litigation in the amount of P5,000.00 and
(ii) attorneys fees of P15,000.00.
SO ORDERED." cralaw virtua1aw library
The original complaint for annulment of title filed in the court a quo by herein petitioners
included as party defendants the Philippine Machinery Parts Manufacturing Co., Inc. (PM Parts),
Insurance Corporation of the Philippines (ICP), Bormaheco, Inc., (Bormaheco) and Santiago M.
Rivera (Rivera). A Second Amended Complaint was filed, this time impleading Santiago M.
Rivera as party plaintiff.
During the pre-trial conference, the parties entered into the following stipulation of facts: jgc:chanroble s.com.ph
"As between all parties: chanrob1es virtual 1aw library
a) Plaintiff Buenaflor M. Castillo is the judicial administratrix of the estate of Felipe Castillo in
Special Proceeding No. 4053, pending before Branch IX, CFI of Quezon (per Exhibit A) which
intestate proceedings was instituted by Mauricia Meer Vda. de Castillo, the previous
administration of the said proceedings prior to 1970 (per exhibits A-1 and A-2) which case was
filed in Court way back in 1964;
b) The four (4) parcels of land described in paragraph 3 of the Complaint were originally
covered by TCT No. T-42104 and Tax Dec. No. 14134 with assessed value of P3,100.00; TCT No.
T-32227 and Tax Dec. No. 14132, with assessed value of P5,130,00; TCT No. T-31752 and Tax
Dec. No. 14135, with assessed value of P6,150.00; and TCT No. T-42103 with Tax Dec. No.
REGALADO, J.:14133, with assessed value of P3,580.00 (per Exhibits A-2 and B, B-1 to B-3, C, C-1 to C-3);
c) That the above-enumerated four (4) parcels of land were the subject of the Deed of Extra-
Judicial Partition executed by the heirs of Felipe Castillo (per Exhibit D) and by virtue thereof the
titles thereto has (sic) been cancelled and in lieu thereof, new titles in the name of Mauricia
No. T-13113 (Exhibit F); TCT No. T-13116 (Exhibit G); and TCT No. T-13117 (Exhibit H);
Guaranty with Chattel/Real Estate Mortgage executed on 24 October 1970 between Insurance
Corporation of the Philippines and Slobec Realty Corporation represented by Santiago Rivera
(Exhibit I);
e) That based on the Certificate of Sale issued by the Sheriff of the Province of Quezon in favor
of Insurance Corporation of the Philippines it was able to transfer to itself the titles over the lots
in question, namely: TCT No. T-23705 (Exhibit M), TCT No. T-23706 (Exhibit N), TCT No. T-
23707 (Exhibit O) and TCT No. T-23708 (Exhibit P);
 Caterpillar Crawler Tractor as described therein as security for the payment in favor of the
f) That on 10 April 1975, the Insurance Corporation of the Philippines sold to PM Parts the mortgagee of the amount of P180,000.00 (per Exhibit K); that said document was superseded
immovables in question (per Exhibit 6 for PM Parts) and by reason thereof, succeeded in by another chattel mortgage dated January 23, 1971 (Exhibit 15);
transferring unto itself the titles over the lots in dispute, namely: per TCT No. T-24846 (Exhibit
Q), per TCT No. T-24847 (Exhibit R), TCT No. T-24848 (Exhibit), TCT No. T-24849 (Exhibit T); p) On 18 December 1970, at Makati, Rizal, the Bormaheco, Inc., represented by its Vice-
President Modesto Cervantes and Slobec Realty Corporation represented by Santiago Rivera
g) On 26 August 1976, Mauricia Meer Vda. de Castillo sent her letter to Modesto N. Cervantes executed the sales agreement concerning the sale of one (1) unit Model CAT D-7 Caterpillar
stating that she and her children refused to comply with his demands (Exhibit V-2); Crawler Tractor as described therein for the amount of P230,000.00 (per Exhibit J) which
document was superseded by the Sales Agreement dated January 23, 1971 (Exhibit 16);
h) That from at least the months of October, November and December 1970 and January 1971,
Modesto N. Cervantes was the Vice-President of Bormaheco, Inc. later President thereof, and q) Although it appears on the document entitled Chattel Mortgage (per Exhibit K) that it was
also he is one of the Board of Directors of PM Parts; on the other hand, Atty. Martin M. De executed on 25 November 1970, and in the document entitled Sales Agreement (per Exhibit J)
Guzman was the legal counsel of Bormaheco, Inc., later Executive Vice-President thereof, and that it was executed on 18 December 1970, it appears in the notarial register of the notary
who also is the legal counsel of Insurance Corporation of the Philippines and PM Parts; that public who notarized them that those two documents were executed on 11 December 1970. The
Modesto N. Cervantes served later on as President of PM Parts, and that Atty. de Guzman was certified xerox copy of the notarial register of Notary Public Guillermo Aragones issued by the
retained by Insurance Corporation of the Philippines specifically for foreclosure purposes only; Bureau of Records Management is hereto submitted as Exhibit BB. That said chattel mortgage
was superseded by another document dated January 23, 1971;
i) Defendant Bormaheco, Inc. on November 25, 1970 sold to Slobec Realty and Development,
Inc., represented by Santiago Rivera, President, one (1) unit Caterpillar Tractor D-7 with Serial r) That on 23 January 1971, Slobec Realty Development Corporation, represented by Santiago
No. 281114 evidenced by a contract marked Exhibit J and Exhibit I for Bormaheco, Inc.; Rivera, received from Bormaheco, Inc. one (1) tractor Caterpillar Model D-7 pursuant to Invoice
No. 33234 (Exhibits 9 and 9-A, Bormaheco, Inc.) and delivery receipt No. 10368 (per Exhibits
j) That the Surety Bond No. 14010 issued by co-defendant ICP was likewise secured by an 10 and 10-A for Bormaheco, Inc.);
Agreement with Counter-Guaranty with Real Estate Mortgage executed by Slobec Realty &
Development, Inc., Mauricia Castillo Meer, Buenaflor Castillo, Bertilla Castillo, Victoria Castillo, s) That on 28 September 1973, Atty. Martin M. de Guzman, as counsel of Insurance Corporation
Marietta Castillo and Leovina Castillo, as mortgagors in favor of ICP which document was of the Philippines purchased at public auction for said corporation the four (4) parcels of land
executed and ratified before notary public Alberto R. Navoa of the City of Manila on October subject of this case (per Exhibit L), and which document was presented to the Register of Deeds
24,1970; on 1 October 1973;

k) That the property mortgaged consisted of four (4) parcels of land situated in Lucena City and t) Although it appears that the realties in issue has (sic) been sold by Insurance Corporation of
covered by TCT Nos. T-13114, T-13115, T-13116 and T-13117 of the Register of Deeds of the Philippines in favor of PM Parts on 10 April 1975, Modesto N. Cervantes, formerly Vice-
Lucena City; President and now President of Bormaheco, Inc., sent his letter dated 9 August 1976 to Mauricia
Meer Vda. de Castillo (Exhibit V), demanding that she and her children should vacate the
l) That the tractor sold by defendant Bormaheco, Inc. to Slobec Realty & Development, Inc. was premises;
delivered to Bormaheco, Inc. on or about October 2, 1973, by Mr. Menandro Umali for purposes
of repair; u) That the Caterpillar Crawler Tractor Model CAT D-7 which was received by Slobec Realty
Development Corporation was actually reconditioned and repainted." 2
m) That in August 1976, PM Parts notified Mrs. Mauricia Meer about its ownership and the
assignment of Mr. Petronilo Roque as caretaker of the subject property; We cull the following antecedents from the decision of respondent Court of Appeals: jgc:chanroble s.com.ph

n) That plaintiff and other heirs are harvesting fruits of the property (daranghita) which is worth "Plaintiff Santiago Rivera is the nephew of plaintiff Mauricia Meer Vda. de Castillo. The Castillo
no less than P1,000.00 per harvest. family are the owners of a parcel of land located in Lucena City which was given as security for
a loan from the Development Banks of the Philippines. For their failure to pay the amortization,
"As between plaintiffs and foreclosure of the said property was about to be initiated. This problem was made known to
Santiago Rivera, who proposed to them the conversion into subdivision of the four (4) parcels of
defendant Bormaheco, Inc.: chanrob1es virtual 1aw library land adjacent to the mortgaged property to raise the necessary fund. The idea was accepted by
the Castillo family and to carry out the project, a Memorandum of Agreement (Exh. U, p. 127,
o) That on 25 November 1970, at Makati, Rizal, Santiago Rivera, in representation of the Slobec Record) was executed by and between Slobec Realty and Development, Inc., represented by its
Realty & Development Corporation executed in favor of Bormaheco, Inc., represented by its Vice President Santiago Rivera and the Castillo family. In this agreement, Santiago Rivera obliged
President Modesto N. Cervantes a Chattel Mortgage concerning one unit model CAT D-7 himself to pay the Castillo family the sum of P70,000.00 immediately after the execution of the
agreement and to pay the additional amount of P400,000.00 after the property has been
converted into a subdivision. Rivera, armed with the agreement, Exhibit U, approached Mr. "Thereafter, PM Parts, through its President, Mr. Modesto Cervantes, sent a letter dated August
Modesto Cervantes, President of defendant Bormaheco, and proposed to purchase from 9,1976 addressed to plaintiff Mrs. Mauricia Meer Castillo requesting her and her children to
Bormaheco two (2) tractors Model D-7 and D-8. Subsequently, a Sales Agreement was executed vacate the subject property, who (Mrs. Castillo) in turn sent her reply expressing her refusal to
on December 28, 1970 (Exh. J, p. 22, Record). comply with his demands.

"On January 23, 1971, Bormaheco, Inc. and Slobec Realty and Development, Inc., represented "On September 29, 1976, the heirs of the late Felipe Castillo, particularly plaintiff Buenaflor M.
by its President, Santiago Rivera, executed a Sales Agreement over one unit of Caterpillar Castillo Umali as the appointed administratrix of the properties in question filed an action for
Tractor D-7 with Serial No. 281114, as evidenced by the contract marked Exhibit `16. As shown annulment of title before the then Court of First Instance of Quezon and docketed thereat as
by the contract, the price was P230,000.00 of which P50,000.00 was to constitute a down Civil Case No. 8085. Thereafter, they filed an Amended Complaint on January 10,1980 (p. 444,
payment, and the balance of P180,000.00 payable in eighteen monthly installments. On the Record). On July 20, 1983, plaintiffs filed their Second Amended Complaint, impleading
same date, Slobec, through Rivera, executed in favor of Bormaheco a Chattel Mortgage (Exh. K, Santiago M. Rivera as a party plaintiff (p. 706, Record). They contended that all the
p. 29, Record) over the said equipment as security for the payment of the aforesaid balance of aforementioned transactions starting with the Agreement of Counter-Guaranty with Real Estate
P180,000.00. As further security of the aforementioned unpaid balance, Slobec obtained from Mortgage (Exh. I), Certificate of Sale (Exh. L) and the Deeds of Authority to Sell, Sale and the
Insurance Corporation of the Phil. a Surety Bond, with ICP (Insurance Corporation of the Phil.) Affidavit of Consolidation of Ownership (Annexes F, G, U, I) as well as the Deed of Sale
as surety and Slobec as principal, in favor of Bormaheco, as borne out by Exhibit `8 (p. 111, (Annexes J, K, L and M) are void for being entered into in fraud and without the consent and
Record). The aforesaid surety bond was in turn secured by an Agreement of Counter-Guaranty approval of the Court of First Instance of Quezon, (Branch IX) before whom the administration
with Real Estate Mortgage (Exhibit 1, p. 24, Record) executed by Rivera as president of Slobec proceedings has been pending. Plaintiffs pray that the four (4) parcels of land subject hereof be
and Mauricia Meer Vda. de Castillo, Buenaflor Castillo Umali, Bertilla Castillo Rada, Victoria declared as owned by the estate of the late Felipe Castillo and that an Transfer Certificates of
Castillo, Marietta Castillo and Leovina Castillo Jalbuena, as mortgagors and Insurance Title Nos. 13114, 13115, 13116, 13117, 23705, 23706, 23707, 23708, 24846, 24847, 24848
Corporation of the Philippines (ICP) as mortgagee. In this agreement, ICP guaranteed the and 24849 as well as those appearing as encumbrances at the back of the certificates of title
obligation of Slobec with Bormaheco in the amount of P180,000.00. In giving the bond, ICP mentioned be declared as a nullity and defendants to pay damages and attorneys fees (pp.
required that the Castillos mortgage to them the properties in question, namely, four parcels of 710-711, Record).
land covered by TCTs in the name of the aforementioned mortgagors, namely TCT Nos. 13114,
13115, 13116 and 13117 all of the Register of Deeds for Lucena City. "In their amended answer, the defendants controverted the complaint and alleged, by way of
affirmative and special defenses that the complaint did not state facts sufficient to state a cause
"On the occasion of the execution on January 23, 1971, of the Sales Agreement Exhibit `16, of action against defendants; that plaintiffs are not entitled to the reliefs demanded; that
Slobec, represented by Rivera received from Bormaheco the subject matter of the said Sales plaintiffs are estopped or precluded from asserting the matters set forth in the Complaint; that
Agreement, namely, the aforementioned tractor Caterpillar Model D-7, as evidenced by Invoice plaintiffs are guilty of laches in not asserting their alleged right in due time; that defendant PM
No. 33234 (Exhs. 9 and 9-A, p. 112, Record) and Delivery Receipt No. 10368 (Exhs. 10 and 10- Parts is an innocent purchaser for value and relied on the face of the title before it bought the
A, p. 113). This tractor was known by Rivera to be a reconditioned and repainted one subject property (p. 744, Record). 3
[Stipulation of Facts, Pre-trial Order, par. (u)].
After trial, the court a quo rendered judgment, with the following decretal portion: jgc:chanrobles.com .ph

"Meanwhile, for violation of the terms and conditions of the Counter-Guaranty Agreement (Exh.
I), the properties of the Castillos were foreclosed by ICP. As the highest bidder with a bid of "WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
P285,212.00, a Certificate of Sale was issued by the Provincial Sheriff of Lucena City and defendants, declaring the following documents: chanrob1es virtual 1aw library

Transfer Certificates of Title over the subject parcels of land were issued by the Register of
Deeds of Lucena City in favor of ICP, namely, TCT Nos. T-23705, T-23706, T-23707 and T-23708 Agreement of Counter-Guaranty with Chattel/Real Estate Mortgage dated October 24, 1970
(Exhs. M to P, pp. 38-45). The mortgagors had one (1) year from the date of the registration of (Exhibit I); chanroble s.com.ph : virtual law library

the certificate of sale, that is, until October 1,1974, to redeem the property, but they failed to
do so. Consequently, ICP consolidated its ownership over the subject parcels of land through the Sales Agreement dated December 28, 1970 (Exhibit J);
requisite affidavit of consolidation of ownership dated October 29, 1974, as shown in Exh.22
(p. 138, Rec.). Pursuant thereto, a Deed of Sale of Real Estate covering the subject properties Chattel Mortgage dated November 25, 1970 (Exhibit K);
was issued in favor of ICP (Exh. 23, p. 139, Rec.).
Sales Agreement dated January 23, 1971 (Exhibit 16);
"On April 10, 1975, Insurance Corporation of the Phil. (ICP) sold to Phil. Machinery Parts
Manufacturing Co. (PM Parts) the four (4) parcels of land and by virtue of said conveyance, PM Chattel Mortgage dated January 23, 1971 (Exhibit 17);
Parts transferred unto itself the titles over the lots in dispute so that said parcels of land are
now covered by TCT Nos. T-24846, T-24847, T-24848 and T-24849 (Exhs. Q-T, pp. 46-49, Rec.). Certificate of Sale dated September 28, 1973 executed by the Provincial Sheriff of Quezon in
favor of Insurance Corporation of the Philippines (Exhibit L); made any advance payment, in the alleged amount of P50,000.00, to Bormaheco; that the
tractor was received by Rivera only on January 23, 1971 and not in 1970 as stated in the
null and void for being fictitious, spurious and without consideration. Consequently, Transfer Chattel Mortgage (Exhibit K); and that when the Agreement of Counter-Guaranty with
Certificates of Title Nos. T-23705, T-23706, T23707 and T-23708 (Exhibits M, N, O and P) Chattel/Real Estate Mortgage was executed on October 24,1970, to secure the obligation of ICP
issued in the name of Insurance Corporation of the Philippines, are likewise null and void. under its surety bond, the Sales Agreement and Chattel Mortgage had not as yet been
executed, aside from the fact that it was Bormaheco, and not Rivera, which paid the premium
The sale by Insurance Corporation of the Philippines in favor of defendant Philippine Machinery for the surety bond issued by ICP.
Parts Manufacturing Co., Inc., over said four (4) parcels of land and Transfer Certificates of Title
Nos. T-24846, T-24847, T-24848 and T-24849 subsequently issued by virtue of said sale in the At the outset, it will be noted that petitioners submission under the first assigned error hinges
name of Philippine Machinery Parts Manufacturing Co, Inc., are similarly declared null and void,
purely on questions of fact. Respondent Court of Appeals made several findings to the effect
and the Register of Deeds of Lucena City is hereby directed to issue, in lieu thereof, transfer
that the questioned documents are valid and binding upon the parties, that there was no fraud
certificates of title in the names of the plaintiffs, except Santiago Rivera. employed by private respondents in the execution thereof, and that, contrary to petitioners
allegation, the evidence on record reveals that petitioners had every intention to be bound by
Orders the defendants jointly and severally to pay the plaintiffs moral damages in the sum of their undertakings in the various transactions had with private respondents. It is a general rule
P10,000.00, examplary damages in the amount of P5,000.00, and actual litigation expenses in in this jurisdiction that findings of fact of said appellate court are final and conclusive and, thus,
the sum of P6,500.00. binding on this Court in the absence of sufficient and convincing proof, inter alia, that the
former acted with grave abuse of discretion. Under the circumstances, we find no compelling
Defendants are likewise ordered to pay the plaintiffs, jointly and severally, the sum of reason to deviate from this long-standing jurisprudential pronouncement.
P10,000.00 for and as attorneys fees.
In addition, the alleged failure of Rivera to pay the consideration agreed upon in the Sales
With costs against the defendants. Agreement, which clearly constitutes a breach of the contract, cannot be availed of by the guilty
party to justify and support an action for the declaration of nullity of the contract. Equity and
SO ORDERED." 4 fair play dictates that one who commits a breach of his contract may not seek refuge under the
protective mantle of the law.
As earlier stated, respondent court reversed the aforequoted decision of the trial court and
rendered the judgment subject of this petition. The evidence of record, on an overall calibration, does not convince us of the validity of
petitioners contention that the contracts entered into by the parties are either absolutely
Petitioners contend that respondent Court of Appeals erred: chanrob1es virtual 1aw library simulated or downright fraudulent. chanrobles lawlibrary : rednad

1. In holding and finding that the transactions entered into between petitioner Rivera with There is absolute simulation, which renders the contract null and void, when the parties do not
Cervantes are all fair and regular and therefore binding between the parties thereto; intend to be bound at all by the same. 9 The basic characteristic of this type of simulation of
contract is the fact that the apparent contract is not really desired or intended to either produce
2. In reversing the decision of the lower court, not only based on erroneous conclusions of facts, legal effects or in any way alter the juridical situation of the parties. The subsequent act of
erroneous presumptions not supported by the evidence on record, but also, holding valid and Rivera in receiving and making use of the tractor subject matter of the Sales Agreement and
bonding the supposed payment by ICP of its obligation to Bormaheco, despite the fact that the Chattel Mortgage, and the simultaneous issuance of a surety bond in favor of Bormaheco,
surety bond it issued had already expired when it opted to foreclose extra judiciary the concomitant with the execution of the Agreement of Counter-Guaranty with Chattel/Real Estate
mortgage executed by the petitioners; Mortgage, conduce to the conclusion that petitioners had every intention to be bound by these
contracts. The occurrence of these series of transactions between petitioners and private
3. In setting aside the finding of the lower court that there was necessity to pierce the veil of respondents is a strong indication that the parties actually intended, or at least expected, to
corporate existence; and exact fulfillment of their respective obligations from one another.

4. In reversing the decision of the lower court instead of affirming the same. 5 Neither will an allegation of fraud prosper in this case where petitioners failed to show that they
were induced to enter into a contract through the insidious words and machinations of private
I. Petitioners aver that the transactions entered into between Santiago M. Rivera, as President respondents without which the former would not have executed such contract. To set aside a
of Slobec Realty and Development Company (Slobec) and Modesto Cervantes, as Vice-President document solemnly executed and voluntarily delivered, the proof of fraud must be clear and
of Bormaheco, such as the Sales Agreement, 6 Chattel Mortgage 7 and the Agreement of convincing. 10 We are not persuaded that such quantum of proof exists in the case at bar.
Counter-Guaranty with Chattel Real Estate Mortgage, 8 are all fraudulent and simulated and
should, therefore, be declared null and void. Such allegation is premised primarily on the fact The fact that it was Bormaheco which paid the premium for the surety bond issued by ICP does
that contrary to the stipulations agreed upon in the Sales Agreement (Exhibit J), Rivera never not per se affect the validity of the bond. Petitioners themselves admit in their present petition
that Rivera executed a Deed of Sale with Right of Repurchase of his car in favor of Bormaheco properties by ICP. Petitioners argue that the foreclosure proceedings should be declared null and
and agreed that a part of the proceeds thereof shall be used to pay the premium for the bond. void for two reasons, viz.: (1) no written notice was furnished by Bormaheco to ICP anent the
11 In effect, Bormaheco accepted the payment of the premium as an agent of ICP. The failure of Slobec in paying its obligation with the former, plus the fact that no receipt was
execution of the deed of sale with a right of repurchase in favor of Bormaheco under such presented to show the amount allegedly paid by ICP to Bormaheco; and (b) at the time of the
circumstances sufficiently establishes the fact that Rivera recognized Bormaheco as an agent of foreclosure of the mortgage, the liability of ICP under the surety bond had already expired.
ICP. Such payment to the agent of ICP is, therefore, binding on Rivera. He is now estopped from
questioning the validity of the suretyship contract. Respondent court, in finding for the validity of the foreclosure sale, declared: jgc:chanrobles.com .ph

II. Under the doctrine of piercing the veil of corporate entity, when valid grounds therefore
exist, the legal fiction that a corporation is an entity with a juridical personality separate and
distinct from its members or stockholders may be disregarded. In such cases, the corporation
will be considered as a mere association of persons. The members or stockholders of the
corporation will be considered as the corporation, that is, liability will attach directly to the
officers and stockholders. 12 The doctrine applies when the corporate fiction is used to defeat
public convenience, justify wrong, protect fraud, or defend crime, 13 or when it is made as a
shield to confuse the legitimate issues, 14 or where a corporation is the mere alter ego or
business conduit of a person, or where the corporation is so organized and controlled and its
affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of
another corporation. 15
In the case at bar, petitioners seek to pierce the veil of corporate entity of Bormaheco, ICP and authorization to foreclose the mortgage upon Slobecs default, which resulted in the accrual of
PM Parts, alleging that these corporations employed fraud in causing the foreclosure and
subsequent sale of the real properties belonging to petitioners. While we do not discount the
possibility of the existence of fraud in the foreclosure proceedings, neither are we inclined to
apply the doctrine invoked by petitioners in granting the relief sought. It is our considered
opinion that piercing the veil of corporate entity is not the proper remedy in order that the
foreclosure proceeding may be declared a nullity under the circumstances obtaining in the case 1306, New Civil Code)." 17
at bar.
chanroble s virtual lawlibrary
"Now to the question of whether or not the foreclosure by the ICP of the real estate mortgage
was in the exercise of a legal right, We agree with the appellants that the foreclosure
proceedings instituted by the ICP was in the exercise of a legal right. First, ICP has in its favor
the legal presumption that it had indemnified Bormaheco by reason of Slobecs default in the
payment of its obligation under the Sales Agreement, especially because Bormaheco consented
to ICPs foreclosure of the mortgage. This presumption is in consonance with pars. R and Q,
Section 5, Rule 5, * New Rules of Court which provides that it is disputably presumed that
private transactions have been fair and regular. Likewise, it is disputably presumed that the
ordinary course of business has been followed: Second, ICP had the right to proceed at once to
the foreclosure of the mortgage as mandated by the provisions of Art. 2071 Civil Code for these
further reasons: Slobec, the principal debtor, was admittedly insolvent; Slobecs obligation
becomes demandable by reason of the expiration of the period of payment; and its
ICPs liability to Bormaheco. Third, the Agreement of Counter-Guaranty with Real Estate
Mortgage (Exh. I) expressly grants to ICP the right to foreclose the real estate mortgage in the
event of non-payment or non-liquidation of the entire indebtedness or fraction thereof upon
maturity as stipulated in the contract. This is a valid and binding stipulation in the absence of
showing that it is contrary to law, morals, good customs, public order or public policy. (Art.

1. Petitioners asseverate that there was no notice of default issued by Bormaheco to ICP, which
In the first place, the legal corporate entity is disregarded only if it is sought to hold the officers would have entitled Bormaheco to demand payment from ICP under the suretyship contract.
and stockholders directly liable for a corporate debt or obligation. In the instant case,
petitioners do not seek to impose a claim against the individual members of the three Surety Bond No. B-14010 which was issued by ICP in favor of Bormaheco, wherein ICP and
corporations involved; on the contrary, it is these corporations which desire to enforce an Slobec undertook to guarantee the payment of the balance of P180,000.00 payable in eighteen
alleged right against petitioners. Assuming that petitioners were indeed defrauded by private (18) monthly installments on one unit of Model CAT D-7 Caterpillar Crawler Tractor, pertinently
respondents in the foreclosure of the mortgaged properties, this fact alone is not, under the provides in part as follows:
chanrobles virtual lawlibrary

circumstances, sufficient to justify the piercing of the corporate fiction, since petitioners do not
intend to hold the officers and/or members of respondent corporations personally liable therefor. "1. The liability of INSURANCE CORPORATION OF THE PHILIPPINES, under this BOND will expire
Petitioners are merely seeking the declaration of the nullity of the foreclosure sale, which relief Twelve (12) months from date hereof. Furthermore, it is hereby agreed and understood that the
may be obtained without having to disregard the aforesaid corporate fiction attaching to INSURANCE CORPORATION OF THE PHILIPPINES will not be liable for any claim not presented in
respondent corporations. Secondly, petitioners failed to establish by clear and convincing writing to the Corporation within THIRTY (30) DAYS from the expiration of this BOND, and that
evidence that private respondents were purposely formed and operated, and thereafter the obligee hereby waives his right to bring claim or file any action against Surety and after the
transacted with petitioners, with the sole intention of defrauding the latter. termination of one (1) year from the time his cause of action accrues." 18

The mere fact, therefore, that the businesses of two or more corporations are interrelated is not The surety bond was dated October 24, 1970. However, an annotation on the upper part thereof
a justification for disregarding their separate personalities, 16 absent sufficient showing that the states: "NOTE: EFFECTIVITY DATE OF THIS BOND SHALL BE ON JANUARY 22, 1971." 19
corporate entity was purposely used as a shield to defraud creditors and third persons of their
rights. On the other hand, the Sales Agreement dated January 23, 1971 provides that the balance of
P180,000.00 shall be payable in eighteen (18) monthly installments. 20 The Promissory Note
III. The main issue for resolution is whether there was a valid foreclosure of the mortgaged executed by Slobec on even date in favor of Bormaheco further provides that the obligation
shall be payable on or before February 23, 1971 up to July 23, 1972, and that non-payment of bar, the surety bond issued by ICP was to expire on January 22, 1972, twelve (12) months from
any of the installments when due shall make the entire obligation immediately due and its effectivity date whereas Slobecs installment payment was to end on July 23, 1972.
demandable. 21 Therefore, while ICP guaranteed the payment by Slobec of the balance of P180,000 00, such
guaranty was valid only for and within twelve (12) months from the date of effectivity of the
It is basic that liability on a bond is contractual in nature and is ordinarily restricted to the surety bond, or until January 22, 1972. Thereafter, from January 23, 1972 up to July 23, 1972,
obligation expressly assumed therein. We have repeatedly held that the extent of a suretys the liability of Slobec became an unsecured obligation. The default of Slobec during this period
liability is determined only by the clause of the contract of suretyship as well as the conditions cannot be a valid basis for the exercise of the right to foreclose by ICP since its surety contract
stated in the bond. It cannot be extended by implication beyond the terms the contract. 22 had already been terminated. Besides, the liability of ICP was extinguished when Bormaheco
failed to file a written claim against it within thirty (30) days from the expiration of the surety
Fundamental likewise is the rule that, except where required by the provisions of the contract, a bond. Consequently, the foreclosure of the mortgage, after the expiration of the surety bond
demand or notice of default is not required to fix the suretys liability. 23 Hence, where the under which ICP as surety has not incurred any liability, should be declared null and void.
contract of suretyship stipulates that notice of the principals default be given to the surety,
generally the failure to comply with the condition will prevent recovery from the surety. There 3. Lastly, it has been held that where the guarantor holds property of the principal as collateral
are certain instances, however, when failure to comply with the condition will not extinguish the surety for his personal indemnity, to which he may resort only after payment by himself, until
suretys liability, such as a failure to give notice of slight defaults, which are waived by the he has paid something as such guarantor neither he nor the creditor can resort to such
obligee; or on mere suspicion of possible default; or where, if a default exists, there is excuse or collaterals. 30
provision in the suretyship contract exempting the surety or liability therefor, or where the
surety already has knowledge or is chargeable with knowledge of the default. 24 The Agreement of Counter-Guaranty with Chattel/Real Estate Mortgage states that it is being
issued for and in consideration of the obligations assumed by the Mortgagee-Surety Company
In the case at bar, the suretyship contract expressly provides that ICP shall not be liable for any under the terms and conditions of ICP Bond No. 14010 in behalf of Slobec Realty Development
claim not filed in writing within thirty (30) days from the expiration of the bond. In its decision Corporation and in favor of Bormaheco, Inc. 31 There is no doubt that said Agreement of
dated May 25, 1987, the court a quo categorically stated that" (n)o evidence was presented to Counter-Guaranty is issued for the personal indemnity of ICP. Considering that the fact of
show that Bormaheco demanded payment from ICP nor was there any action taken by payment by ICP has never been established, it follows, pursuant to the doctrine above adverted
Bormaheco on the bond posted by ICP to guarantee the payment of plaintiffs obligation. There to, that ICP cannot foreclose on the subject properties.
is nothing in the records of the proceedings to show that ICP indemnified Bormaheco for the
failure of the plaintiffs to pay their obligation." 25 The failure, therefore, of Bormaheco to notify IV. Private respondent PM Parts posits that it is a buyer in good faith and, therefore, it acquired
ICP in writing about Slobecs supposed default released ICP from liability under its surety bond. a valid title over the subject properties. The submission is without merit and the conclusion is
Consequently, ICP could not validly foreclose that real estate mortgage executed by petitioners specious.
in its favor since it never incurred any liability under the surety bond. It cannot claim exemption
from the required written notice since its case does not fall under any of the exceptions herein We have stated earlier that the doctrine of piercing the veil of corporate fiction is not applicable
before enumerated. in this case. However, its inapplicability has no bearing on the good faith or bad faith of private
respondent PM Parts. It must be noted that Modesto N. Cervantes served as Vice-President of
Furthermore, the allegation of ICP that it has paid Bormaheco is not supported by any Bormaheco and, later, as President of PM Parts. On this fact alone, it cannot be said that PM
documentary evidence. Section 1, Rule 131 of the Rules of Court provides that the burden on Parts had no knowledge of the aforesaid several transactions executed between Bormaheco and
evidence lies with the party who asserts an affirmative allegation. Since ICP failed to duly prove petitioners. In addition, Atty. Martin de Guzman, who is the Executive Vice-President of
the fact of payment, the disputable presumption that private transactions have been fair and Bormaheco, was also the legal counsel of ICP and PM Parts. These facts were admitted without
regular, as erroneously relied upon by respondent Court of Appeals, finds no application to the qualification in the stipulation of facts submitted by the parties before the trial court. Hence, the
case at bar.chanroble s virtual lawlibrary defense of good faith may not be resorted to by private respondent PM Parts which is charged
with knowledge of the true relations existing between Bormaheco, ICP and herein petitioners.
2. The liability of a surety is measured by the terms of his contract, and, while he is liable to the Accordingly, the transfer certificates of title issued in its name, as well as the certificate of sale,
full extent thereof, such liability is strictly limited to that assumed by its terms. 26 While must be declared null and void since they cannot be considered altogether free of the taint of
ordinarily the termination of a suretys liability is governed by the provisions of the contract of bad faith. chanrobles virtual lawlibrary

suretyship, where the obligation of a surety is, under the terms of the bond, to terminate at a
specified time, his obligation cannot be enlarged by an unauthorized extension thereof. 27 This WHEREFORE, the decision of respondent Court of Appeals is hereby REVERSED and SET ASIDE,
is an exception to the general rule that the obligation of the surety continues for the same and judgment is hereby rendered declaring the following as null and void: (1) Certificate of
period as that of the principal debtor. 28 Sale, dated September 28, 1973, executed by the Provincial Sheriff of Quezon in favor of the
Insurance Corporation of the Philippines; (2) Transfer Certificates of Title Nos. T-23705, T-
It is possible that the period of suretyship may be shorter than that of the principal obligation, 23706, T-23707 and T-23708 issued in the name of the Insurance Corporation of the
as where the principal debtor is required to make payment by installments. 29 In the case at Philippines; (3) the sale by Insurance Corporation of the Philippines in favor of Philippine
Machinery Parts Manufacturing Co., Inc. of the four (4) parcels of land covered by the aforesaid
certificates of title; and (4) Transfer Certificates of Title Nos. T-24846, T-24847, T-24848 and
T24849 subsequently issued by virtue of said sale in the name of the latter corporation.

The Register of Deeds of Lucena City is hereby directed to cancel Transfer Certificates of Title
Nos. T-24846, T-24847, T24848 and T-24849 in the name of Philippine Machinery Parts
Manufacturing Co., Inc. and to issue in lieu thereof the corresponding transfer certificates of title
in the name of herein petitioners, except Santiago Rivera.

The foregoing dispositions are without prejudice to such other and proper legal remedies as
may be available to respondent Bormaheco, Inc. against herein petitioners.

SO ORDERED.

EN BANC

[G.R. No. L-14070. March 29, 1961.]

MARIA GERVACIO BLAS, MANUEL GERVACIO BLAS, LEONCIO GERVACIO BLAS and
LOIDA GERVACIO, Plaintiffs-Appellants, v. ROSALINA SANTOS, in her capacity as
Special Administratrix of the Estate of the deceased MAXIMA SANTOS VDA. DE BLAS,
in Sp. Proc. No. 2524, Court of First Instance of Rizal, Defendant-Appellee. MARTA
GERVACIO BLAS and DR. JOSE CHIVI, Defendants-Appellants.

Teofilo Sison and Nicanor Sison, for Plaintiffs-Appellants.

De los Santos, Caluag, Pascual and Felizardo for Defendants-Appellees.

 Annex "H" and introduced at the trial as Exhibit "A." (Ibid., pp. 258-259.) The complaint also
alleges that the plaintiffs are entitled to inherit certain properties enumerated in paragraph 3
thereof, situated in Malabon, Rizal and Obando, Bulacan, but which properties have already
SYLLABUS been included in the inventory of the estate of the deceased Simeon Blas and evidently
partitioned and conveyed to his heirs in the proceedings for the administration of his (Simeon
Blas) estate.

Defendant, who is the administratrix of the estate of the deceased Maxima Santos Vda. de Blas,
1. WILLS AND TESTAMENTS; FUTURE INHERITANCE; WHEN AGREEMENT TO TRANSMIT ONE- filed an answer with a counterclaim, and later, an amended answer and a counterclaim. The said
HALF OF THE CONJUGAL SHARE NOT DEEMED A CONTRACT ON FUTURE INHERITANCE. A amended answer admits the allegations of the complaint as to her capacity as administratrix;
document signed by the testators wife, promising that she would respect and obey all the the death of Simeon Blas on January 3, 1937; the fact that Simeon Blas and Marta Cruz begot
dispositions in the latters will, and that she would hold one-half of her share in the conjugal three children, only one of whom, namely, Eulalia Blas, left legitimate descendants; that Simeon
assets in trust for the heirs and legatees of her husband in his will, with the obligation of Blas contracted a second marriage with Maxima Santos on June 28, 1898. She denies, for lack
conveying the same to such of his heirs or legatees as she might choose in her last will and of sufficient information and belief, knowledge of the first marriage of Simeon Blas to Marta
testament, is a compromise and at the same time a contract with sufficient cause or Cruz, the averment that Simeon Blas and Marta Cruz acquired properties situated in Obando,
consideration. Bulacan, that said properties were utilized as capital, etc. As special defenses, she alleges that
the properties of the spouses Blas and Santos had been settled and liquidated in the project of
2. ID.; ID.; ID.; ACCRUAL OF CAUSE OF ACTION UPON DEATH. The action to enforce the partition of the estate of said Simeon Blas; that pursuant to the project of partition, plaintiffs
wifes promise to convey in her testament, upon her death, one-half of the conjugal properties and some defendants had already received the respective properties adjudicated to them; that
she would receive as her share in the conjugal properties, did not arise until and after her death the plaintiffs and the defendants Marta Gervacio and Jose Chivi are estopped from impugning
when it was found that she did not comply with her promise. (Article 1969, old Civil Code). the validity of the project of partition of the estate of the deceased Simeon Blas and from
questioning the ownership in the properties conveyed in the project of partition to Maxima
3. ID.; ID.; DEFINITION. Future inheritance is any property or right not in existence or Santos as her own exclusive property; that the testament executed by Maxima Santos is valid,
capable of determination at the time of the contract, that a person may in the future acquire by the plaintiffs having no right to recover any portion of Maxima Santos estate now under
succession. administration by the court. A counterclaim for the amount of P50,000 as damages is also
included in the answer, as also a cross-claim against Marta Gervacio Blas and Jose Chivi.

Trial of the case was conducted and, thereafter, the court, Hon. Gustavo Victoriano, presiding,
rendered judgment dismissing the complaint, with costs against plaintiff, and dismissing also
DECISION the counterclaim and cross-claim filed by the defendants. From this decision, the plaintiffs have
appealed to this Court.

The facts essential to an understanding of the issues involved in the case may be briefly
summarized as follows: Simeon Blas contracted a first marriage with Marta Cruz sometime
before 1898. They had three children, only one of whom, Eulalia, left children, namely, Maria
LABRADOR, J.:
Gervacio Blas, one of the plaintiffs, Marta Gervacio Blas, one of the defendants, and Lazaro
Gervacio Blas. Lazaro died in 1953 and is survived by three legitimate children who are plaintiffs
herein, namely, Manuel Gervacio Blas, Leoncio Gervacio Blas and Loida Gervacio Blas. Marta
Cruz died in 1898, and the following year, Simeon Blas contracted a second marriage with
Maxima Santos. At the time of this second marriage, no liquidation of the properties acquired by
This action was instituted by plaintiffs against the administratrix of the estate of Maxima Santos, Simeon Blas and Marta Cruz was made. Three of the properties left are fishponds located in
to secure a judicial declaration that one-half of the properties left by said Maxima Santos Vda. Obando, Bulacan. Maxima Santos does not appear to have apportioned properties to her
de Blas, the greater bulk of which are set forth and described in the project of partition marriage with Simeon Blas.
presented in the proceedings for the administration of the estate of the deceased Simeon Blas,
had been promised by the deceased Maxima Santos to be delivered upon her death and in her On December 26, 1936, only over a week before his death on January 9, 1937, Simeon Blas
will to the plaintiffs, and requesting that the said properties so promised be adjudicated to the executed a last will and testament. In the said testament Simeon Blas makes the following
plaintiffs. The complaint also prays for actual damages in the a mount of P50,000. (Record on declarations:
Appeal, pp. 1-65.) The alleged promise of the deceased Maxima Santos is contained in a
chanrob1es virtual 1aw library

document executed by Maxima Santos on December 26, 1936 attached to the complaint as
I
 as follows: jgc:chanrobles.com .ph

"2. Sa panahon ng aking pangalawang asawa, MAXIMA SANTOS DE BLAS, ay nagkaroon ako at
nakatipon ng mga kayamanan (bienes) at pag-aari (propiedades) na ang lahat ng lupa,
palaisdaan at iba pang pag-aari ay umaabot sa halagang ANIM NA RAAN PITONG PUT WALONG
DAAN LIBO WALONG DAAN AT WALONG PUNG PISO (678,880.00) sang-ayon sa mga halaga sa
amillarimento (valor Amillarado.)"
II
"Q To whom do you refer with the word `they?
A Simeon Blas and his first wife, Marta Cruz. When Marta Cruz died they had not made a
liquidation of their conjugal properties and so all those properties were included all in the assets
of the second marriage, and that is the reason why this document was prepared." (t.s.n.,
Sarmiento, p. 36.)
The above testimony is fully corroborated by that of Leoncio Gervacio, son-in-law of Simeon
Blas:jgc:chanrobles.com .ph

"1. Ang kalahati ng lahat ng aming pag-aari, matapos mabayaran ang lahat ng aking o aming "Q Please state to the Court?
pag-kakautang na mag-asawa, kung mayroon man, yayamang ang lahat ng ito ay kita sa loob
ng matrimonio (bienes gananciales) ay bahagi ng para sa aking asawa, Maxima Santos de Blas, A My children were claiming from their grandfather Simeon Blas the properties left by their
sang-ayon sa batas." (Record on Appeal, pp. 250-251.) grandmother Marta Cruz in the year 1936.

The above testamentary provisions may be translated as follows: chanrob1es virtual 1aw library
x x x

"Q And what happened with that claim of your children against Simeon Blas regarding these
assets or properties of the first marriage that were left after the death of Marta Cruz in 1936?
"2. During my second marriage with Maxima Santos de Blas, I possessed and acquired wealth
and properties, consisting of lands, fishponds and other kinds of properties, the total assessed A The claim was not pushed through because they reached into an agreement whereby the
value of which reached the amount of P678,880.00." cralaw virtua1aw library parties Simeon Blas, Maxima Santos, Maria Gervacio Blas, Marta Gervacio Blas and Lazaro
Gervacio Blas agreed that Simeon Blas and Maxima Blas will give one-half of the estate of
II Simeon Blas." (t.s.n., Sarmiento, pp. 143-144).

The document which was thus prepared and which is marked as Exhibit "A" reads in Tagalog,
thus: jgc:chanrobles.com .ph

"1. One-half of our properties, after the payment of my and our indebtedness, all these
properties having been acquired during marriage (conjugal properties), constitutes the share of "MAUNAWA NG SINO MANG MAKABABASA: chanrob1es virtual 1aw library

my wife Maxima Santos de Blas, according to the law." cralaw virtua1aw library

Na akong si MAXIMA SANTOS DE BLAS, nasa hustong gulang kasal kay SIMEON BLAS, taga
At the time of the execution of said will, Andres Pascual, a son- in-law of the testator, and bayan ng Malabon, Rizal, Philippines, sa pamamagitan ng kasulatang ito ay malaya kong
Avelino Pascual and others, were present. Andres Pascual had married a descendant by the first ipinahahayag: chanrob1es virtual 1aw library

marriage. The will was prepared by Andres Pascual, with the help of his nephew Avelino Pascual.
The testator asked Andres Pascual to prepare a document which was presented in court as Na aking nabasa at naunawa ang testamento at huling kalooban na nilagdaan ng aking asawa,
Exhibit "A", thus:
jgc:chanrobles.com .ph SIMEON BLAS, at ipinahahayag ko sa ilalim ng aking karangalan at sa harap ng aking asawa na
igagalang at pagpipitaganan ang lahat at bawat isang bahagi ng nabanggit na testamento at
"Q Was there anybody who asked you to prepare this document? ipinangangako ko pa sa pamamagitan ng kasulatang ito na ang lahat ng maiiwang pag-aari at
kayamanan naming mag-asawa, na nauukol at bahaging para sa akin sa paggawa ko naman ng
A Don Simeon Blas asked me to prepare this document (referring to Exhibit `A)." (t.s.n., aking testamento ay ipagkakaloob ko ang kalahati (1/2 sa mga herederos at legatarios o
Sarmiento, p. 24). pinamamanahan ng aking nabanggit na asawa, SIMEON BLAS, sa kaniyang testamento, na
akoy makapipili o makahihirang sa kahit kangino sa kanila ng aking pagbibigyan at
The reason why the testator ordered the preparation of Exhibit "A" was because the properties pamamanahan sang-ayon sa paggalang, paglilingkod, at pakikisama na gagawin sa akin.
that the testator had acquired during his first marriage with Marta Cruz had not been liquidated
and were not separated from those acquired during the second marriage. Pascuals testimony is SA KATUNAYAN NG LAHAT NG ITO, ay nilagdaan ko ang kasulatang ito ngayon ika 26 ng
Diciembre ng taong 1936, dito sa San Francisco del Monte, San Juan, Rizal, Philippines." (Exh.
"A", pp. 29-30 Appellants brief). Plaintiffs-appellants argue before us that Exhibit "A" is both a trust agreement and a contract in
the nature of a compromise to avoid litigation. Defendants-appellees, in answer, claim that it is
(Fdo.) MAXIMA SANTOS DE BLAS neither a trust agreement nor a compromise agreement. Considering that the properties of the
first marriage of Simeon Blas had not been liquidated when Simeon Blas executed his will on
and which, translated into English, reads as follows: December 26, 1936, and the further fact that such properties were actually included as conjugal
jgc:chanroble s.com.ph

properties acquired during the second marriage, we find, as contended by plaintiffs-appellants,

"KNOW ALL MEN BY THESE PRESENTS: jgc:chanroble s.com.ph that the preparation and execution of Exhibit "A" was ordered by Simeon Blas evidently to
prevent his heirs by his first marriage from contesting his will and demanding liquidation of the
"That I Maxima Santos de Blas, of legal age, married to Simeon Blas, resident of Malabon, Rizal, conjugal properties acquired during his first marriage, and an accounting of the fruits and
Philippines, voluntarily state:
chanrob1es virtual 1aw library proceeds thereof from the time of the death of his first wife.

That I have read and knew the contents of the will signed by my husband, Simeon Blas, (2) and Exhibit "A", therefore, appears to be the compromise defined in Article 1809 of the Civil Code of
I promise on my word of honor in the presence of my husband that I will respect and obey all Spain, in force at the time of the execution of Exhibit "A", which provides as follows:
jgc:chanroble s.com.ph

and every disposition of said will (3) and furthermore, I promise in this document that all the
properties my husband and I will leave, the portion and share corresponding to me when I "Compromise is a contract by which each of the parties in interest, by giving, promising, or
make my will, I will give one-half (1/2) to the heirs and legatees or the beneficiaries named in retaining something avoids the provocation of a suit or terminates one which has already been
the will of my husband, (4) and that I can select or choose any of them to whom I will give instituted." (Italics supplied.)
depending upon the respect, service and treatment accorded to me.
Exhibit "A" states that the maker (Maxima Santos) had read and knew the contents of the will
IN WITNESS WHEREOF, I signed this document this 26th day of December, 1936 at San of her husband Simeon Blas she was evidently referring to the declaration in the will (of
Francisco del Monte, San Juan, Rizal, Philippines." (Exh. `A, pp. 30-31, Appellants brief). Simeon Blas) that his properties are conjugal properties and one-half thereof belongs to her
(Maxima Santos) as her share of the conjugal assets under the law. The agreement or promise
(Sgd.) MAXIMA SANTOS DE BLAS that Maxima Santos makes in Exhibit "A" is to hold one half of her said share in the conjugal
assets in trust for the heirs and legatees of her husband in his will, with the obligation of
The court below held that said Exhibit "A" has not created any right in favor of plaintiffs which conveying the same to such of his heirs or legatees as she may choose in her last will and
can serve as a basis of the complaint; that neither can it be considered as a valid and testament. It is to be noted that the conjugal properties referred to are those that were actually
enforceable contract for lack of consideration and because it deals with future inheritance. The existing at that time, December 26, 1936. Simeon Blas died on January 9, 1937. On June 2,
court also declared that Exhibit "A" is not a will because it does not comply with the requisites 1937, an inventory of the properties left by him, all considered conjugal, was submitted by
for the execution of a will; nor could it be considered as a donation, etc. Maxima Santos herself as administratrix of his estate. A list of said properties is found in Annex
"E", the complete inventory submitted by Maxima Santos Vda. de Blas, as administratrix of the
Both the court below in its decision and the appellees in their brief before us, argue vehemently estate of her husband, dated March 10, 1939. The properties which were given to Maxima
that the heirs of Simeon Blas and his wife Marta Cruz can no longer make any claim for the Santos as her share in the conjugal properties are also specified in the project of partition
unliquidated conjugal properties acquired during said first marriage, because the same were submitted by said Maxima Santos herself on March 14, 1939. (Record on Appeal, pp. 195-241.)
already included in the mass of properties constituting the estate of the deceased Simeon Blas Under Exhibit "A", therefore, Maxima Santos contracted the obligation and promised to give
and in the adjudications made by virtue of his will, and that the action to recover the same has one-half of the above indicated properties to the heirs and legatees of Simeon Blas.
prescribed. This contention is correct. The descendants of Marta Cruz can no longer claim the
conjugal properties that she and her husband may have acquired during their marriage although Counsel for the defendant-appellee claims Exhibit "A" is a worthless piece of paper because it is
no liquidation of such properties and delivery thereof to the heirs of Marta Cruz have been not a will nor a donation mortis causa nor a contract. As we have indicated above, it is a
made, no action to recover said properties having been presented in the proceedings for the compromise and at the same time a contract with a sufficient cause or consideration. It is also
settlement of the estate of Simeon Blas. contended that it deals with future inheritance. We do not think that Exhibit "A" is a contract on
future inheritance. It is an obligation or promise made by the maker to transmit one-half of her
But the principal basis for the plaintiffs action in the case at bar is the document Exhibit "A." It share in the conjugal properties acquired with her husband, which properties are stated or
is not disputed that this document was prepared at the instance of Simeon Blas for the reason declared to be conjugal properties in the will of the husband. The conjugal properties were in
that the conjugal properties of his first marriage had not been liquidated; that it was prepared existence at the time of the execution of Exhibit "A" on December 26, 1936. As a matter of fact,
at the same time as the will of Simeon Blas on December 26, 1936, at the instance of the latter Maxima Santos included these properties in her inventory of her husbands estate of June 2,
himself. It is also not disputed that the document was signed by Maxima Santos and one copy 1937. The promise does not refer to any properties that the maker would inherit upon the death
thereof, which was presented in court as Exhibit "A", was kept by plaintiffs witness Andres of her husband. The document refers to existing properties which she will receive by operation
Pascual. of law on the death of her husband, because it is her share in the conjugal assets. That the kind
of agreement or promise contained in Exhibit "A" is not void under Article 1271 of the old Civil Neither can the claim of prescription be considered in favor of the defendants. The right of
Code, has been decided by the Supreme Court of Spain in its decision of October 8, 1915, action arose at the time of the death of Maxima Santos on October 5, 1956, when she failed to
thus:jgc:chanrobles.com .ph comply with the promise made by her in Exhibit "A." The plaintiffs-appellants immediately
presented this action on December 27, 1956, upon learning of such failure on the part of
"Que si bien el art. 1271 del Codigo civil dispone que sobre la herencia futura no se podra Maxima Santos to comply with said promise. This defense is, therefore, also without merit.
celebrar otros contratos que aquellos cuyo objeto sea practicar entre vivos la division de un
caudal, conforme al articulo 1056, esta prohibicion no es aplicable al caso, porque la obligacion It is next contended by the defendant-appellee that Maxima Santos complied with her above-
que contrajo el recurrido en contrato privado de otorgar testamento instituir heredera a su mentioned promise, - that Andres Pascual, Tomasa Avelino, Justo Garcia, Ludovico Pimpin and
sobrina de los bienes que adquirio en virtud de herencia, procedentes de su finada consorte que Marta Gervacio Blas were given substantial legacies in the will and testament of Maxima Santos.
le quedasen sobrantes despus de pagar las deudas, y del ganancial que se expresa, asi como To determine whether she had actually complied with the promise made in Exhibit "A", there is
de reconocer, ademas, con alguna cosa a otros sobrinos, se refiere a bienes conocidos y herein set forth a list only of the fishponds and their respective areas as contained in the list of
determinados existentes cuando tal compromiso se otorgo, y no a la universalidad de una properties she acquired as her share in the conjugal partnership, which list includes, besides,
herencia que, segun el art. 659 del citado Codigo civil, se determina a muerte del causante, many ricelands as well as residential lots, thus: jgc:chanrobles.com .ph

constituyendola todos los bienes, derechos y obligaciones que por ella no se hayan extinguido: .
. ." (Emphasis supplied.) "31. Paco, Obando, Bulacan 5.8396 hectares

It will be noted that what is prohibited to be the subject matter of a contract under Article 1271 32. Pangjolo, Obando, Bulacan 3.5857 hectares
of the Civil Code is "future inheritance." To us future inheritance is any property or right not in
existence or capable of determination at the time of the contract, that a person may in the 34. Batang Pirasuan, Lubao, Pampanga 11.9515 hectares
future acquire by succession. The properties subject of the contract Exhibit "A" are well-defined
properties, existing at the time of the agreement, which Simeon Blas declares in his testament 35. Calangian, Lubao, Pampanga 30.2059 hectares
as belonging to his wife as her share in the conjugal partnership. Certainly his wifes actual
share in the conjugal properties may not be considered as future inheritance because they were 38. Bakuling, Lubao, Pampanga 215.4325 hectares
actually in existence at the time Exhibit "A" was executed.
39. Bakuling, Lubao, Pampanga 8.8763 hectares
The trial court held that the plaintiffs-appellants in the case at bar are concluded by the
judgment rendered in the proceedings for the settlement of the estate of Simeon Blas for the 40. Bangkal, Sinubli, Lubao Pampanga 23.0730 hectares
reason that the properties left by him belonged to himself and his wife Maxima Santos; that the
project of partition in the said case, adjudicating to Maxima Santos one-half as her share in the 41. Tagulod, Lubao, Pampanga 6.8692 hectares
conjugal properties, is a bar to another action on the same subject matter, Maxima Santos
having became absolute owner of the said properties adjudicated in her favor. As already 44. Bangkal Pugad, Lubao, Pampanga
adverted to above, these contentions would be correct if applied to the claim of the plaintiffs-
appellants that said properties were acquired with the first wife of Simeon Blas, Marta Cruz. But (a) 84.2779 hectares
the main ground upon which plaintiffs base their present action is the document Exhibit "A",
already fully considered above. As this private document contains the express promise made by (b) 51.7919 hectares
Maxima Santos to convey in her testament, upon her death, one-half of the conjugal properties
she would receive as her share in the conjugal properties, the action to enforce the said promise (c) 2.5202 hectares
did not arise until and after her death when it was found that she did not comply with her
above-mentioned promise. (Art. 1969, old Civil Code.) The argument that the failure of the 45. Magtapat, Bangkal, Lubao, Pampanga
plaintiffs-appellants herein to oppose the project of partition in the settlement of the estate of
Simeon Blas, especially that portion of the project which assigned to Maxima Santos one-half of (a) 18.0024 hectares
all the conjugal properties, bars their present action, is, therefore, devoid of merit. It may be
added that plaintiffs-appellants did not question the validity of the project of partition precisely (b) 7.3265 hectares
because of the promise made by Maxima Santos in the compromise Exhibit "A" ; they
acquiesced in the approval of said project of partition because they were relying on the promise (c) 53.5180 hectares
made by Maxima Santos in Exhibit "A", that she would transmit one-half of the conjugal
properties that she was going to receive as her share in the conjugal partnership, upon her 46. Pinanganakan, Lubao, Pampanga 159.0078 hectares
death and in her will, to the heirs and legatees of her husband Simeon Blas.
47. Emigdio Lingid, Lubao, Pampanga 34.5229 hectares

48. Propios, Lubao, Pampanga 30.6382 hectares
49. Batang Mabuanbuan, Sexmoan, Pampanga 43.3350 hectares
50. Binatang Mabuanbuan, Sexmoan, Pampanga 3.5069 hectares
51. Sapang Magtua, Sexmoan, Pampanga 56.8242 hectares
52. Kay Limpin, Sexmoan, Pampanga 5.0130 hectares
53. Calise Mabalumbum, Sexmoan, Pampanga 23.8935 hectares
54. Messapinit Kineke, Sexmoan, Pampanga
(a) 5.2972 hectares
(b) 4.9230 hectares
(c) 1.4633 hectares
(d) 1.4638 hectares
(e) 2.8316 hectare
(f) 10.4412 hectares
(g) 3.9033 hectares
(h) 11.8268 hectares
(i). 6.0574 hectares
55. Dalang, Banga, Sexmoan, Pampanga 23.3989 hectares
62. Alaminos, Alaminos, Pangasinan 47.1242 hectares
80. Mangasu, Sexmoan, Pampanga 10.0000 hectares
81. Don Tomas, Sexmoan, Pampanga 21.6435 hectares
82. Matikling, Lubao, Pampanga 16.0000 hectares
Total area 1,045.7863 hectares
Padilla, Paredes and Dizon, JJ., concur.
(See Record on Record
pp. 195-241.)
In her will, Maxima Santos devised to Marta Gervacio Blas the 80- hectare fishpond situated in
Lubao, Pampanga. The fishpond devised is evidently that designated as "Propios" in Lubao,
Pampanga, item No. 48 in the list of properties adjudicated to her in the project of partition.
(Record on Appeal, p.215.) Considering that the total area of the fishpond amounts to
1,045.7863 hectares, the 80 hectares devised to Marta Gervacio Blas is not even one-tenth of
the total area of the fishponds. Add to this the fact that in the will she imposed upon Marta
Gervacio Blas de Chivi an existing obligation on said fishponds, namely, its lease in 1957 and
the duty to pay out of the rentals thereof an obligation to the Rehabilitation Finance Corporation
(RFC). (Ibid., pp. 262-263.) Angelina Blas was given only a lot of 150 square meters in Hulong
Duhat, Malabon, Rizal, and Leony Blas, the sum of P300.00 (Ibid., p. 264.)
It is evident from a consideration of the above figures and facts that Maxima Santos did not
comply with her obligation to devise one- half of her conjugal properties to the heirs and
legatees of her husband. She does not state that she had complied with such obligation in her
will. If she intended to comply therewith by giving some of the heirs of Simeon Blas the
properties mentioned above, the most that can be considered in her favor is to deduct the value
of said properties from the total amount of properties which she had undertaken to convey upon
her death.
All the issues in the pleadings of the parties and in their respective briefs, have now been fully
discussed and considered. Reiterating what we have stated above, we declare that by Exhibit
"A", a compromise to avoid litigation, Maxima Santos promised to devise to the heirs and
legatees of her husband Simeon Blas, one-half of the properties she received as her share in
the conjugal partnership of herself and her husband, which share is specified in the project of
partition submitted by herself on March 14, 1939 in the settlement of the estate of her
husband, and which is found on pages 195 to 240 of the record on appeal and on pages 27 to
46 of the project of partition, submitted by Maxima Santos herself before the Court of First
Instance of Rizal in Civil Case No. 6707, entitled "Testamentaria del Finado Don Simeon Blas,
Maxima Santos Vda. de Blas, Administradora" ; and that she failed to comply with her
aforementioned obligation. (Exhibit "A").
WHEREFORE, the judgment appealed from is hereby reversed and the defendant-appellee,
administratrix of the estate of Maxima Santos, is ordered to convey and deliver one-half of the
properties adjudicated to Maxima Santos as her share in the conjugal properties in said Civil
Case No. 6707, entitled "Testamentaria del Finado Don Simeon Blas, Maxima Santos Vda. de
Blas, Administradora", to the heirs and the legatees of her husband Simeon Blas. Considering
that all said heirs and legatees, designated in the will of Simeon Blas as the persons for whose
benefit Exhibit "A" had been executed, have not appeared in these proceedings, the record is
hereby remanded to the court below, with instructions that, after the conveyance of the
properties hereinabove ordered had been effected, the said heirs and legatees (of Simeon Blas)
file adversary pleadings to determine the participation of each and every one of them in said
properties. Costs against the defendant-appellee Rosalina Santos.
Bengzon, C.J., reserves his vote.
 en el extremo a que los dichos motivos se refieren." (Sentencia 25 abril 1951) (Emphasis ours)
Concepcion, J., took no part.
It can thus be seen that the constant authoritative interpretation of the prohibition against
Separate Opinions agreements involving future inheritance requires not only that a future succession be
contemplated but also that the subject matter of the bargain should be either the universality or
complex or mass of property owned by the grantor at the time of his death, or else an aliquot
portion thereof. Castan, in his Treatise already mentioned, sums up the rulings in this wise:
jgc:chanrobles.com .ph

REYES, J.B.L., J., concurring: chanrob1es virtual 1aw library

"Por otra parte, se ha de entender: 1.Que la cesio o enajenacion de los derechos hereditarios
I concur in the opinion of Mr. Justice Labrador, and would only add that the doctrine in the puede hacerse una vez fallecido el causante, aunque no se haya entrado en posesion material
decision of 8 October 1915 of the Supreme Court of Spain, applied in the main opinion, is not a de los bienes. 2 Que la prohibicion legal se reere solo a los contratos concluidos sobre la
mere accident nor an isolated instance, but one of a series of decisions reaffirming the legal herencia misma o alguna de sus cuotas, no sobre objetos aislados que, eventualmente, hayan
proposition therein laid down. Thus, the Presiding Justice Castan of the Spanish Tribunal de adquirirse a virtud de la herencia." cralaw virtua1aw library

Supremo, in volume 3 of his Treaties on Civil Law (1951 Edition, page 344, footnote 2),
observes that: jgc:chanrobles.com .ph It has been contended that the doctrine thus stated confuses future inheritance (herencia
futura) with future property (bienes futuros). This is a misapprehension. In construing the term
"(2) La sentencia de 16 de mayo de 1940 declara que segn la doctrina sentada por el Tribunal "future inheritance" as the contingent universality or complex of property rights and obligations
Supremo en sus fallos de 8 de octubre de 1915 y 26 de octubre de 1926 y por la Direccion de that are to pass to the heirs upon the death of the grantor, the rule advocated merely correlates
los Registros en su resolucion de 19 de mayo de 1917, la prohibicion contenida en el art. 1.271 the prohibition against contracts over "future inheritance" with the definition of "inheritance"
se refiere nica y exclusivamente a los pactos sobre la universalidad de una herencia que, given in Article 659 of the Spanish Civil Code, which is now Article 776 of the Civil Code of the
segun el art. 659, se determina a la muerte del causante, constituyendola todos los bienes, Philippines: jgc:chanrobles.com .ph

derechos y obligaciones que por ella no se hayan extinguido y no al pacto sobre bienes
conocidos y determinados, existentes, cuando tal compromiso se otorgo, en el dominio del "ART. 776. The inheritance includes all the property, rights and obligations of a person which are
cedente."cralaw virtua1aw library not extinguished by his death." cralaw virtua1aw library

And in a later decision of 25 April 1951, the Supreme Court of Spain once more insisted on the
rule that a successional agreement concerning property already owned by the grantor at the
time the contract was perfected is not banned by Article 1271 of the Spanish Civil Code
(corresponding to Article 1347 of the Civil Code of the Philippines):
The inheritance of a person may, and usually does, include not only property that he already
owns at a given time, but also his future property, that is to say, the property that he may
subsequently acquire. But it may include only future property whenever he should dispose of
the present property before he dies. And future inheritance may include only property he
jgc:chanrobles.com .ph

already owns at any given moment, if he should thereafter acquire no other property until his
"CONSIDERANDO: Que el tercer motivo del recurso de doria M. G. G. y el sexto del formulado death. In any case, the inheritance or estate consists of the totality of assets and liabilities he
por doa D. G. G., hacen referencia a la ultima de las tres cuestiones que son objeto del debate holds at the time of his demise, and not what he possesses at any other time. If the questioned
en ambos recursos interpuestos, esto es, la discutida cesion que las hermanas seoras G. G., contract envisages all or a fraction of that contingent mass, then it is a contract over "herencia
hoy recurrentes, hicieron a doa C. A. de la mitad de los bienes muebles e inmuebles que futura", otherwise it is not. The statutory prohibition, in other words, is not so much concerned
recibiesen por herencia de doa M. P., procedentes de la de doa M. A. P., antes N., consignada with the process of transfer as with the subject matter of the bargain. It is addressed to "future
en documento privado de fecha 2 de noviembre de 1928, firmado y reconocida su autenticidad inheritance", not "future succession."
por las tres seoras interesadas, cuya validez y eficacia es obieto de la cuarta pieza de los
presentes autos acumulados, y si se examina con detenimiento el documento aludio y el pacto Of course, it can be said that every single item of property that a man should hold at any given
que en el se consigna habra de advertirse de mode notorio que se halla afectado de vicio de instant of his life may become a part of his inheritance - if he keeps it long enough. But is that
nulidad, porque su objeto son unos bienes que claramente se expresa que han de entrar en el mere possibility (or even probability) sufficient to stamp upon a contract over an individualized
patrimonio de las cedentes mediante una transmision hereditaria, lo que constituye el pacto item of existing property the outlaw brand of "contract over future inheritance" ? If it should
sobre herencia fatura prohibido por el parrafo segundo del articulo 1271 del Codigo Civil, ya que ever be, then no agreement concerning present property can escape the legal ban. No donation
no se concreta sobre bienes conocidos y determinados, existentes en el dominio dei cedente intervivos, no reversionary clause, no borrowing of money, and no alienation, not even a
cuando el compromiso se otorgo sino que se refiere a la universalidad de bienes que habrian de contract of sale (or other contract in praesenti for that matter), with or without deferred
adquirirse a la muerte del causante, sentido en el que conforme a la jurisprudencia de esta Sala delivery, will avoid the reproach that it concerns or affects the grantors "future inheritance." It
es de plena aplicacion la norma substantiva antes citada, y al no haberlo asi entendido la Sala is permissible to doubt whether the law ever contemplated the sweeping away of the entire
de instancia, ha incurrido en la infraccion de interpretar erroneamente y por ello ha hecho contractual system so carefully regulated in the Code.
aplicacion indebida de dicho precepto y procede la estimacion de los motivos que al principio se
citan y que denuncian la estimada infraccion, produciendo la casacion de la sentencia recurrida The restrictive interpretation given by the Spanish Supreme Court to the codal prohibition of
agreements involving future inheritance is justified not only by the fact that the prohibition
limits contractual freedom (and therefore, should not be given extensive interpretation), but
also because there is no real or substantial difference between (1) an agreement whereby a
person, for a valuable consideration, agrees to bequeath some of the property he already owns,
and (2) a contract whereby he disposes of that property, subject to the condition that he will be
entitled to its usufruct until the time he dies. The court has repeatedly sanctioned even
donations inter vivos wherein the donor has reserved to himself the right to enjoy the donated
property for the remainder of his days, and defers the actual transfer of possession to the time
of his death (Guzman v. Ibea, 67 Phil., 633; Balagui v. Dongso, 53 Phil., 673; Laureta v. Mata,
44 Phil., 668). Whatever objection is raised against the effects of the first kind of contracts can
be made to apply to the second.
but only to part of her present property at the time the contract was made; since the promise to
retransfer one-half of her conjugal share was supported by adequate consideration as shown in
the main decision; since the contract obviated protracted litigation and complicated accounting
in settling the conjugal partnership of Blas and his first (deceased) wife; and since the
testament that the widow promised to make was merely the mode chosen to perform the
contract and carry out the promised devolution of the property, being thus of secondary
importance, I can see no reason for declaring the entire arrangement violative of the legal
interdiction of contracts over future inheritance, and disappoint the legitimate expectation held
by the heirs of the first wife during all these years.
BARRERA, J., concurring: chanrob1es virtual 1aw library

Mature reflection will show that where present (existing) property is the object of the bargain, It seems to me clear that the document Exhibit "A", basis of the action of the plaintiffs-
all arguments brandished against convention over future succession (post mortem) are just as appellants, refers specifically to and affects solely the share of the grantor Maxima Santos in the
applicable to other contracts de praesenti with deferred execution, the validity of which has conjugal properties as determined and specified in the will of her husband Simeon Blas, whose
never been questioned. Thus, the loss of the power be bequeath the bargained property to provisions, which she expressly acknowledged to have read and understood, constitute the
persons of the grantors choice, and the awakening of the grantees desire for the early death of raison detre of her promise to deliver or convey, by will, one-half of that specific share to the
the grantor (the Roman "votum mortis captandae") in order to obtain prompt control of the heirs and legatees named in her husbands will (who are his heirs by his first marriage).
contracted goods, occur in both cases. In truth, the latter ground would bar even a contract of Nowhere in the document Exhibit "A" is there reference to her hereditary estate that she herself
life insurance in favor of a stated beneficiary. It may also be noted that since the later part of would leave behind at the time of her own demise which legally would be her "future
the nineteenth century, the civilists have recognized that the progress in social relations has inheritance." For this reason, I believe the contractual obligation assumed by Maxima Santos in
rendered such objections obsolete (Puig Pea, Derecho Civil, Vol. V, part I, p. 613 et seq.) . virtue of Exhibit "A" does not come within the prohibition of Article 1271 of the Spanish Civil
Code, now Article 1347 of the Civil Code of the Philippines.
But where the contract involves the universality of the estate that will be left at a persons death
(the "herencia futura" as understood by the Spanish Tribunal Supremo), there is another reason I, therefore, concur in the opinions of Justices Labrador and Reyes.
which I believe to be the true justification for the legal interdiction, and it is this: that if a man
were to be allowed to bargain away all the property he expects to leave behind (i.e., his estate BAUTISTA ANGELO, J., dissenting: chanrob1es virtual 1aw library

as a whole), he would practically remain without any incentive to practice thrift and frugality, or
to conserve and invest his earnings and property. He would then be irresistibly drawn to be a While I agree with the theory that the document Exhibit A does not involve a contract on future
wasteful spendthrift, a social parasite, without any regard for his future, because whatever he inheritance but a promise made by Maxima Santos to transmit one-half of her share in the
leaves will belong to another by virtue of his contract. The disastrous effects upon family and conjugal property acquired during her marriage to Simeon Blas to the heirs and legatees of the
society if such agreements were to be held binding can be readily imagined. Hence, the latter, I am however of the opinion that herein appellants have no cause of action because
interpretation given to Article 1271 (now Art. 1347) by the Supreme Court of Spain appears Maxima Santos has substantially complied with her promise.
amply supported by practical reasons, and there is no ground to deny its application.
It should be noted that Maxima Santos promise to transmit is predicated on the condition that
Much emphasis has been placed on the provisions of the contract Exhibit "A" that the widow, she can freely choose and select from among the heirs and legatees of her husband those to
Maxima Santos de Blas, would execute a testament in favor of the appellees. To me this is whom she would like to give and bequeath depending on the respect, service and
purely secondary, since it is merely the method selected by the parties for carrying out the companionship that they may render to her. Her commitment is not an absolute promise to give
widows agreement to convey to the appellees the property in question without her losing its to all but only to whom she may choose and select. And here this promise has been
enjoyment during her natural life, and does not affect the substance or the validity of the substantially complied with.
transaction. To ensure the widows possession of the property and the perception of its fruits
while she was alive, the means logically selected was to return it by will, since such a Thus, it appears that Maxima Santos selected eight of such heirs and legatees instituted in the
conveyance could only be operative after death. There might be a doubt as to the validity of this will of her husband. Note that appellant Marta Gervacio Blas, who was given a legacy of only
arrangement if the widows promise had been purely gratuitous, because then it could be P38,000.00 in the will of Simeon Blas, was given by her a legacy worth around P400,000.00;
argued that the promise involved a hybrid donation mortis causa yet irrevocable; 1 but here the appellants Loida Gervacio Blas (or Luding Blas) and Leoncio (Leony) Gervacio Blas were given a
obligation to return is concededly irrevocable and supported by adequate consideration duly legacy of P300.00 each every year to last during their lifetime: and Lorenzo Santos was given a
received in advance. legacy of two fishponds and one-tenth of the whole residuary estate. It may be stated that
although appellant Maria Gervacio Blas was not given any legacy in Maxima Santos will, yet her
Since the agreement in the instant case did not refer to the future estate of the widow of Blas, son Simeon Dungao was given a legacy of a residential land in Tonsuya, Malabon.
I, therefore, consider not in keeping with the nature of the pledge made by Maxima Santos the
decision of the majority in ordering her administratrix to convey and deliver one-half of her
share in the conjugal property to all the heirs and legatees of her husband Simeon Blas,
because only such heirs and legatees are entitled to share the property as may be selected by
Maxima Santos, and this she has already done. For these reasons, I dissent.

SECOND DIVISION

[G.R. NO. 141882 : March 11, 2005]

J.L.T. AGRO, INC., represented by its Manager, JULIAN L.

TEVES, Petitioner, v. ANTONIO BALANSAG and HILARIA CADAYDAY, Respondents.

DECISION

TINGA, J.:

Once again, the Court is faced with the perennial conflict of property claims between two sets of
heirs, a conflict ironically made grievous by the fact that the decedent in this case had resorted
to great lengths to allocate which properties should go to which set of heirs.

This is a Rule 45 petition assailing the Decision1 dated 30 September 1999 of the Court of
Appeals which reversed the Decision2 dated 7 May 1993 of the Regional Trial Court (RTC),
Branch 45, of Bais City, Negros Oriental.

The factual antecedents follow.

Don Julian L. Teves (Don Julian) contracted two marriages, first with Antonia Baena (Antonia),
and after her death, with Milagros Donio Teves (Milagros Donio). Don Julian had two children
with Antonia, namely: Josefa Teves Escao (Josefa) and Emilio Teves (Emilio). He had also
four (4) children with Milagros Donio, namely: Maria Evelyn Donio Teves (Maria Evelyn), Jose
Catalino Donio Teves (Jose Catalino), Milagros Reyes Teves (Milagros Reyes) and Pedro Reyes
Teves (Pedro).3
On 16 November 1972, Don Julian, Emilio and Josefa executed a Deed of Assignment of Assets
with Assumption of Liabilities8 in favor of J.L.T. Agro, Inc. (petitioner). Less than a year later,
Don Julian, Josefa and Emilio also executed an instrument entitled Supplemental to the Deed of
Assignment of Assets with the Assumption of Liabilities (Supplemental Deed) 9 dated 31 July
1973. This instrument which constitutes a supplement to the earlier deed of assignment
transferred ownership over Lot No. 63, among other properties, in favor of petitioner.10 On 14
April 1974, Don Julian died intestate.

The present controversy involves a parcel of land covering nine hundred and fifty-four (954)
square meters, known as Lot No. 63 of the Bais Cadastre, which was originally registered in the On the strength of the Supplemental Deed in its favor, petitioner sought the registration of the
name of the conjugal partnership of Don Julian and Antonia under Original Certificate of Title subject lot in its name. A court, so it appeared, issued an order 11 cancelling OCT No. 5203 in the
(OCT) No. 5203 of the Registry of Deeds of Bais City. When Antonia died, the land was among name of spouses Don Julian and Antonia on 12 November 1979, and on the same date TCT No.
the properties involved in an action for partition and damages docketed as Civil Case No. 3443 T-375 was issued in the name of petitioner.12 Since then, petitioner has been paying taxes
entitled "Josefa Teves Escao v. Julian Teves, Emilio B. Teves, et al." 4 Milagros Donio, the assessed on the subject lot.13
second wife of Don Julian, participated as an intervenor. Thereafter, the parties to the case
entered into a Compromise Agreement5 which embodied the partition of all the properties of
Don Julian.
Meanwhile, Milagros Donio and her children had immediately taken possession over the subject
lot after the execution of the Compromise Agreement. In 1974, they entered into a yearly lease
agreement with spouses Antonio Balansag and Hilaria Cadayday, respondents herein. 14 On Lot
On the basis of the compromise agreement and approving the same, the Court of First Instance No. 63, respondents temporarily established their home and constructed a lumber yard.
(CFI) of Negros Oriental, 12th Judicial District, rendered a Decision6 dated 31 January 1964. The Subsequently, Milagros Donio and her children executed a Deed of Extrajudicial Partition of Real
CFI decision declared a tract of land known as Hacienda Medalla Milagrosa as property owned in Estate15 dated 18 March 1980. In the deed of partition, Lot No. 63 was allotted to Milagros
common by Don Julian and his two (2) children of the first marriage. The property was to Donio and her two (2) children, Maria Evelyn and Jose Catalino.
remain undivided during the lifetime of Don Julian.7 Josefa and Emilio likewise were given other
properties at Bais, including the electric plant, the "movie property," the commercial areas, and Unaware that the subject lot was already registered in the name of petitioner in 1979,
the house where Don Julian was living. The remainder of the properties was retained by Don respondents bought Lot No. 63 from Milagros Donio as evidenced by the Deed of Absolute Sale
Julian, including Lot No. 63. of Real Estate16 dated 9 November 1983.

Paragraph 13 of the Compromise Agreement, at the heart of the present dispute, lays down the At the Register of Deeds while trying to register the deed of absolute sale, respondents
effect of the eventual death of Don Julian vis - -vis his heirs: discovered that the lot was already titled in the name of petitioner. Thus, they failed to register
the deed.17
13. That in the event of death of Julian L. Teves, the properties hereinafter adjudicated to Josefa
Teves Escao and Emilio B. Teves, (excluding the properties comprised as Hacienda Medalla
Milagrosa together with all its accessories and accessions) shall be understood as including not
only their one-half share which they inherited from their mother but also the legitimes and Respondents, as vendees of Lot No. 63, filed a complaint before the RTC Branch 45 of Bais City,
other successional rights which would correspond to them of the other half belonging to their seeking the declaration of nullity and cancellation of TCT No. T-375 in the name of petitioner
father, Julian L. Teves. In other words, the properties now selected and adjudicated to and the transfer of the title to Lot No. 63 in their names, plus damages. 18
Julian L. Teves (not including his share in the Hacienda Medalla Milagrosa) shall
exclusively be adjudicated to the wife in second marriage of Julian L. Teves and his four
minor children, namely, Milagros Donio Teves, his two acknowledged natural children Milagros
Reyes Teves and Pedro Reyes Teves and his two legitimated children Maria Evelyn Donio Teves After hearing, the trial court dismissed the complaint filed by respondents. The dispositive
and Jose Catalino Donio Teves. (Emphasis supplied) rllbrr
portion of the decision reads:
WHEREFORE, premises considered, by preponderance of evidence, this Court finds judgment in
favor of the defendant and against the plaintiff, and thus hereby orders:
(1) That complaint be dismissed;
(2) That plaintiffs vacate the subject land, particularly identified as Lot No. 63 registered under court added.27
Transfer Certificate of Title No. T-375;
The trial court ruled that at the time of Don Julian's death on 14 April 1974, Lot No. 63 was no
longer a part of his estate since he had earlier assigned it to petitioner on 31 July 1973.
Consequently, the lot could not be a proper subject of extrajudicial partition by Milagros Donio
and her children, and not being the owners they could not have sold it. Had respondents
exercised prudence before buying the subject lot by investigating the registration of the same
with the Registry of Deeds, they would have discovered that five (5) years earlier, OCT No. 5203
had already been cancelled and replaced by TCT No. T-375 in the name of petitioner, the trial

The Court of Appeals, however, reversed the trial court's decision. The decretal part of the
(3) That plaintiffs pay costs. appellate decision reads:

WHEREFORE, premises considered, the decision appealed from is hereby REVERSED and SET
ASIDE and a new one is entered declaring the Transfer Certificate of Title No. T-375 registered
Finding no basis on the counterclaim by defendant, the same is hereby ordered dismissed. 19
in the name of J.L.T. Agro, Inc. as null and void.

The trial court ruled that the resolution of the case specifically hinged on the interpretation of With costs against defendant J.L.T. Agro, Inc. represented by its Manager, Julian L. Teves.
paragraph 13 of the Compromise Agreement.20 It added that the direct adjudication of the
properties listed in theCompromise Agreement was only in favor of Don Julian and his two
children by the first marriage, Josefa and Emilio.21 Paragraph 13 served only as an amplification
of the terms of the adjudication in favor of Don Julian and his two children by the first marriage. SO ORDERED.28

According to the trial court, the properties adjudicated in favor of Josefa and Emilio comprised Per the appellate court, the Compromise Agreement incorporated in CFI decision dated 31
their shares in the estate of their deceased mother Antonia, as well as their potential share in January 1964, particularly paragraph 13 thereof, determined, adjudicated and reserved to Don
the estate of Don Julian upon the latter's death. Thus, upon Don Julian's death, Josefa and Julian's two sets of heirs their future legitimes in his estate except as regards his (Don Julian's)
Emilio could not claim any share in his estate, except their proper share in the Hacienda Medalla share in Hacienda Medalla Milagrosa.29 The two sets of heirs acquired full ownership and
Milagrosa which was adjudicated in favor of Don Julian in the Compromise Agreement. As such, possession of the properties respectively adjudicated to them in the CFI decision and Don Julian
the properties adjudicated in favor of Don Julian, except Hacienda Medalla Milagrosa, were free himself could no longer dispose of the same, including Lot No. 63. The disposition in the CFI
from the forced legitimary rights of Josefa and Emilio, and Don Julian was under no impediment decision constitutes res judicata.30 Don Julian could have disposed of only his conjugal share in
to allocate the subject lot, among his other properties, to Milagros Donio and her four (4) the Hacienda Medalla Milagrosa.31
children.22

The trial court further stressed that with the use of the words "shall be," the adjudication in
favor of Milagros Donio and her four (4) children was not final and operative, as the lot was still
subject to future disposition by Don Julian during his lifetime. 23 It cited paragraph 1424 of
the Compromise Agreement in support of his conclusion.25 With Lot No. 63 being the conjugal
property of Don Julian and Antonia, the trial court also declared that Milagros Donio and her
children had no hereditary rights thereto except as to the conjugal share of Don Julian, which
they could claim only upon the death of the latter.26
The appellate court likewise emphasized that nobody in his right judgment would preterit his
legal heirs by simply executing a document like the Supplemental Deed which practically covers
all properties which Don Julian had reserved in favor of his heirs from the second marriage. It
also found out that the blanks reserved for the Book No. and Page No. at the upper right corner
of TCT No. T-375, "to identify the exact location where the said title was registered or
transferred," were not filled up, thereby indicating that the TCT is "spurious and of dubious
origin."32
Aggrieved by the appellate court's decision, petitioner elevated it to this Court via a Petition for or right not in existence or capable of determination at the time of the contract, that a
Review on Certiorari, raising pure questions of law. person may in the future acquire by succession. Article 1347 of the New Civil Code explicitly
provides:

Before this Court, petitioner assigns as errors the following rulings of the appellate court, to wit:
(a) that future legitime can be determined, adjudicated and reserved prior to the death of Don ART. 1347. All things which are not outside the commerce of men, including future things, may
Julian; (b) that Don Julian had no right to dispose of or assign Lot No. 63 to petitioner because be the object of a contract. All rights which are not intransmissible may also be the object of
he reserved the same for his heirs from the second marriage pursuant to the Compromise contracts.
Agreement; (c) that theSupplemental Deed was tantamount to a preterition of his heirs from
the second marriage; and (d) that TCT No. T-375 in the name of petitioner is spurious for not
containing entries on the Book No. and Page No.33
No contract may be entered into upon future inheritance except in cases expressly
authorized by law.

While most of petitioner's legal arguments have merit, the application of the appropriate
provisions of law to the facts borne out by the evidence on record nonetheless warrants the
affirmance of the result reached by the Court of Appeals in favor of respondents. All services which are not contrary to law, morals, good customs, public order or public policy
may likewise be the object of a contract.

Being the key adjudicative provision, paragraph 13 of the Compromise Agreement has to be
quoted again: Well-entrenched is the rule that all things, even future ones, which are not outside the
commerce of man may be the object of a contract. The exception is that no contract may be
entered into with respect to future inheritance, and the exception to the exception is the
partition inter vivos referred to in Article 1080.35
13. That in the event of death of Julian L. Teves, the properties herein adjudicated to Josefa
Teves Escao and Emilio B. Teves, (excluding the properties comprised as Hacienda Medalla
Milagrosa together with all its accessories and accessions) shall be understood as including not
only their one-half share which they inherited from their mother but also the legitimes and For the inheritance to be considered "future," the succession must not have been opened at the
other successional rights which would correspond to them of the other half belonging to their time of the contract.36 A contract may be classified as a contract upon future inheritance,
father, Julian L.Teves. In other words, the properties now selected and adjudicated to prohibited under the second paragraph of Article 1347, where the following requisites concur:
Julian L. Teves (not including his share in the Hacienda Medalla Milagrosa) shall
exclusively be adjudicated to the wife in second marriage of Julian L. Teves and his
four minor children, namely, Milagros Donio Teves, his two acknowledged natural
children Milagros Reyes Teves and Pedro Reyes Teves and his two legitimated (1) That the succession has not yet been opened;
children Maria Evelyn Donio Teves and Jose Catalino Donio Teves." (Emphasis supplied)
(2) That the object of the contract forms part of the inheritance; and
rl

lbrr

cralawlibrary

(3) That the promissor has, with respect to the object, an expectancy of a right which is purely
hereditary in nature.37
With the quoted paragraph as basis, the Court of Appeals ruled that the adjudication in favor of
the heirs of Don Julian from the second marriage became automatically operative upon the
approval of theCompromise Agreement, thereby vesting on them the right to validly dispose of
Lot No. 63 in favor of respondents. The first paragraph of Article 1080, which provides the exception to the exception and therefore
aligns with the general rule on future things, reads:

Petitioner argues that the appellate court erred in holding that future legitime can be
determined, adjudicated and reserved prior to the death of Don Julian. The Court agrees. Our
declaration in Blas v. Santos34 is relevant, where we defined future inheritance as any property
ART. 1080. Should a person make a partition of his estate by an act inter vivos, or by will, such owner of the subject lot, Don Julian retained the absolute right to dispose of it during his
partition shall be respected, insofar as it does not prejudice the legitime of the compulsory lifetime. His right cannot be challenged by Milagros Donio and her children on the ground that it
heirs. had already been adjudicated to them by virtue of the compromise agreement.

....

Emerging as the crucial question in this case is whether Don Julian had validly transferred
ownership of the subject lot during his lifetime. The lower court ruled that he had done so
In interpreting this provision, Justice Edgardo Paras advanced the opinion that if the partition is through the Supplemental Deed. The appellate court disagreed, holding that the Supplemental
made by an act inter vivos, no formalities are prescribed by the Article.38 The partition will of Deed is not valid, containing as it does a prohibited preterition of Don Julian's heirs from the
course be effective only after death. It does not necessarily require the formalities of a will second marriage. Petitioner contends that the ruling of the Court of Appeals is erroneous. The
for after all it is not the partition that is the mode of acquiring ownership. Neither will the contention is well-founded.
formalities of a donation be required since donation will not be the mode of acquiring the
ownership here after death; since no will has been made it follows that the mode will be
succession (intestate succession). Besides, the partition here is merely the physical
determination of the part to be given to each heir.39 Article 854 provides that the preterition or omission of one, some, or all of the compulsory heirs
in the direct line, whether living at the time of the execution of the will or born after the death
of the testator, shall annul the institution of heir; but the devises and legacies shall be valid
insofar as they are not inofficious. Manresa defines preterition as the omission of the heir in
The historical antecedent of Article 1080 of the New Civil Code is Article 1056 40 of the old Civil the will, either by not naming him at all or, while mentioning him as father, son, etc., by not
Code. The only change in the provision is that Article 1080 now permits any person (not a instituting him as heir without disinheriting him expressly, nor assigning to him some part of the
testator, as under the old law) to partition his estate by act inter vivos. This was intended to properties.44 It is the total omission of a compulsory heir in the direct line from inheritance. 45 It
abrogate the then prevailing doctrine that for a testator to partition his estate by an act inter consists in the silence of the testator with regard to a compulsory heir, omitting him in
vivos, he must first make a will with all the formalities provided by law.41 the testament, either by not mentioning him at all, or by not giving him anything in the
hereditary property but without expressly disinheriting him, even if he is mentioned in the will in
the latter case.46 But there is no preterition where the testator allotted to a descendant a share
less than the legitime, since there was no total omission of a forced heir.47
Article 1056 of the old Civil Code (now Article 1080) authorizes a testator to partition inter
vivos his property, and distribute them among his heirs, and this partition is neither a donation
nor a testament, but an instrument of a special character, sui generis, which is revocable
at any time by thecausante during his lifetime, and does not operate as a conveyance In the case at bar, Don Julian did not execute a will since what he resorted to was a
of title until his death. It derives its binding force on the heirs from the respect due to the will partition inter vivosof his properties, as evidenced by the court approved Compromise
of the owner of the property, limited only by his creditors and the intangibility of the legitime of Agreement. Thus, it is premature if not irrelevant to speak of preterition prior to the death of
the forced heirs.42 Don Julian in the absence of a will depriving a legal heir of his legitime. Besides, there are other
properties which the heirs from the second marriage could inherit from Don Julian upon his
death. A couple of provisions in the Compromise Agreement are indicative of Don Julian's desire
along this line.48 Hence, the total omission from inheritance of Don Julian's heirs from the
The partition inter vivos of the properties of Don Julian is undoubtedly valid pursuant to Article second marriage, a requirement for preterition to exist, is hardly imaginable as it is unfounded.
1347. However, considering that it would become legally operative only upon the death of Don
Julian, the right of his heirs from the second marriage to the properties adjudicated to him
under the compromise agreement was but a mere expectancy. It was a bare hope of succession
to the property of their father. Being the prospect of a future acquisition, the interest by its Despite the debunking of respondents' argument on preterition, still the petition would
nature was inchoate. It had no attribute of property, and the interest to which it related was at ultimately rise or fall on whether there was a valid transfer effected by Don Julian to petitioner.
the time nonexistent and might never exist.43 Notably, Don Julian was also the president and director of petitioner, and his daughter from the
first marriage, Josefa, was the treasurer thereof. There is of course no legal prohibition against
such a transfer to a family corporation. Yet close scrutiny is in order, especially considering that
such transfer would remove Lot No. 63 from the estate from which Milagros and her children
Evidently, at the time of the execution of the deed of assignment covering Lot No. 63 in favor of could inherit. Both the alleged transfer deed and the title which necessarily must have
petitioner, Don Julian remained the owner of the property since ownership over the subject lot emanated from it have to be subjected to incisive and detailed examination.
would only pass to his heirs from the second marriage at the time of his death. Thus, as the
 As petitioner bases its right to the subject lot on the Supplemental Deed, it should have
presented it to the Register of Deeds to secure the transfer of the title in its name.
Well-settled, of course, is the rule that a certificate of title serves as evidence of an indefeasible
title to the property in favor of the person whose name appears therein. 49 A certificate of title
accumulates in one document a precise and correct statement of the exact status of the fee
held by its owner. The certificate, in the absence of fraud, is the evidence of title and shows Apparently, it had not done so. There is nothing on OCT No. 5203 or on the succeeding TCT No.
exactly the real interest of its owner.50 T-375 either which shows that it had presented the Supplemental Deed. In fact, there is
absolutely no mention of a reference to said document in the original and transfer certificates of
title. It is in this regard that the finding of the Court of Appeals concerning the absence of
entries on the blanks intended for the Book No. and Page No. gains significant relevance.
To successfully assail the juristic value of what a Torrens title establishes, a sufficient and Indeed, this aspect fortifies the conclusion that the cancellation of OCT No. 5203 and the
convincing quantum of evidence on the defect of the title must be adduced to overcome the consequent issuance of TCT No. T-375 in its place are not predicated on a valid transaction.
predisposition in law in favor of a holder of a Torrens title. Thus, contrary to the appellate
court's ruling, the appearance of a mere thumbmark of Don Julian instead of his signature in
the Supplemental Deed would not affect the validity of petitioner's title for this Court has ruled
that a thumbmark is a recognized mode of signature.51 What appears instead on OCT No. 5203 is the following pertinent entry:

The truth, however, is that the replacement of OCT No. 5203 in the name of Julian by T.C.T. No.
T-375 is marred by a grave irregularity which is also an illegality, as it contravenes the
orthodox, conventional and normal process established by law. And, worse still, the illegality is Entry No. 1374: Kind: Order: Executed in favor of J.L.T. AGRO, INC.
reflected on the face of both titles. Where, as in this case, the transferee relies on a voluntary
instrument to secure the issuance of a new title in his name such instrument has to be
presented to the Registry of Deeds. This is evident from Sections 53 and 57 of Presidential
Decree (P.D.) No. 1529 or the Property Registration Decree. The sections read, thus: CONDITIONS: Lost owner's duplicate is hereby cancelled, and null and void and a new
Certificate of Title No. 375 is issued per Order of the Court of First Instanceon file in
this office.

SEC. 53. Presentation of owner's duplicate upon entry of new certificate. 'No voluntary
instrument shall be registered by the Register of Deeds unless the owner's duplicate certificate
is presented with such instrument, except in cases expressly provided for in this Decree or Date of Instrument: November 12, 1979
upon order of the court, for cause shown. (Emphasis supplied) rllbrr

....
Date of Inscription: Nov. 12, 1979 4:00 P.M.

(SGD) MANUEL C. MONTESA

SEC. 57. Procedure in registration of conveyances. 'An owner desiring to convey his registered
land in fee simple shall execute and register a deed of conveyance in a form sufficient in
law. The Register of Deeds shall thereafter make out in the registration book a new certificate
of title to the grantee and shall prepare and deliver to him an owner's duplicate certificate. The
Register of Deeds shall note upon the original and duplicate certificate the date of transfer, the
volume and page of the registration book in which the new certificate is registered and a
reference by number to the last preceding certificate. The original and the owner's duplicate of
the grantor's certificate shall be stamped "cancelled." The deed of conveyance shall be filed
and endorsed with the number and the place of registration of the certificate of title
of the land conveyed. (Emphasis supplied) rllbrr
Acting Deputy Register of Deeds II
(Emphasis supplied)52
What the entry indicates is that the owner's duplicate of OCT No. 5203 was lost, a petition for
the reconstitution of the said owner's duplicate was filed in court, and the court issued an order
for the reconstitution of the owner's duplicate and its replacement with a new one. But if the
entry is to be believed, the court concerned (CFI, according to the entry) issued an order for the
issuance of a new title which is TCT No. T-375 although the original of OCT No. 5203 on file with
the Registry of Deeds had not been lost.
Going by the legal, accepted and normal process, the reconstitution court may order the
reconstitution and replacement of the lost title only, nothing else. Since what was lost is the
owner's copy of OCT No. 5203, only that owner's copy could be ordered replaced. Thus, the Lot No. 63, Tax Dec. No. 33, Certificate of Title No. 5203, together with all improvements.
Register of Deeds exceeded his authority in issuing not just a reconstituted owner's copy of the Assessed value - P2,720.00
original certificate of title but a new transfer certificate of title in place of the original certificate
of title. But if the court order, as the entry intimates, directed the issuance of a new transfer ....
certificate of title even designating the very number of the new transfer certificate of title itself
the order would be patently unlawful. A court cannot legally order the cancellation and
replacement of the original of the O.C.T. which has not been lost, 53 as the petition for
reconstitution is premised on the loss merely of the owner's duplicate of the OCT WHEREAS, this Deed of Assignment is executed by the parties herein in order to effect the
registration of the transfer of the above corporation.

Apparently, petitioner had resorted to the court order as a convenient contrivance to effect the
transfer of title to the subject lot in its name, instead of the Supplemental Deed which should be NOW, THEREFORE, for and in consideration of the above premises the ASSIGNOR hereby
its proper course of action. It was so constrained to do because the Supplemental Deed does transfers, conveys, and assigns unto J.L.T. AGRO, INC., the above described parcel of
not constitute a deed of conveyance of the "registered land in fee simple" "in a form sufficient in land[s] with a fair market value of EIGHTY-FOUR THOUSAND PESOS
law," as required by Section 57 of P.D. No. 1529. (P84,000.00), Philippine Currency, and which transfer, conveyance and assignment shall
become absolute upon signing. 54 (Emphasis supplied) rllbrr

A plain reading of the pertinent provisions of the Supplemental Deed discloses that the
assignment is not supported by any consideration. The provision reads:
....
WHEREAS, in the Deed of Assignment of Assets with the Assumption of Liabilities executed by
Julian L. Teves, Emilio B. Teves and Josefa T. Escao at Dumaguete City on 16 th day of
November 1972 and ratified in the City of Dumaguete before Notary Public Lenin Victoriano, and
entered in the latter's notarial register as Doc. No. 367; Page No. 17; Book No. V; series of
1972, Julian L. Teves, Emilio B. Teves and Josefa T. Escao, transferred, conveyed and
assigned unto J.L.T. AGRO, INC., all its assets and liabilities as reflected in the Balance Sheet of annotated on the back
the former as of December 31, 1971.
The amount of P84,000.00 adverted to in the dispositive portion of the instrument does not
represent the consideration for the assignment made by Don Julian. Rather, it is a mere
statement of the fair market value of all the nineteen (19) properties enumerated in the
instrument, of which Lot No. 63 is just one, that were transferred by Don Julian in favor of
petitioner. Consequently, the testimony55 of petitioner's accountant that the assignment is
supported by consideration cannot prevail over the clear provision to the contrary in
the Supplemental Deed.
The Court of Appeals, on the other hand, apparently considered the 1948 mortgage which is
of the TCT No. T-375 as the consideration for the assignment. 56 However,
the said annotation shows that the mortgage was actually executed in favor of Rehabilitation
57

Finance Corporation, not of petitioner.58 Clearly, said mortgage, executed as it was in favor of
the Rehabilitation Finance Corporation and there being no showing that petitioner itself paid off
the mortgate obligation, could not have been the consideration for the assignment to petitioner.
WHEREAS, on the compromise agreement, as mentioned in the Decision made in the Court of
First Instance of Negros Oriental, 12 th Judicial District Branch II, on Dec. 31, 1964 pertaining to
Civil Case No. 3443 the following properties were adjudicated to Don Julian L. Teves. We quote.
Article 1318 of the New Civil Code enumerates the requisites of a valid contract, namely: (1)
consent of the contracting parties; (2) object certain which is the subject matter of the
contract; and (3) Causeof the obligation which is established.
From the properties at Bais

Thus, Article 1352 declares that contracts without cause, or with unlawful cause produce no
Adjudicated to Don Julian L.Teves
effect whatsoever. Those contracts lack an essential element and they are not only voidable but
.... void or inexistent pursuant to Article 1409, paragraph (2). 59 The absence of the usual recital of
consideration in a transaction which normally should be supported by a consideration such as complete resolution of the case, or to serve the interest of justice or to avoid dispensing
the assignment made by Don Julian of all nineteen (19) lots he still had at the time, coupled piecemeal justice.65
with the fact that the assignee is a corporation of which Don Julian himself was also the
President and Director, forecloses the application of the presumption of existence of
consideration established by law.60
In the instant case, the correct characterization of the Supplemental Deed, i.e., whether it is
valid or void, is unmistakably determinative of the underlying controversy. In other words, the
issue of validity or nullity of the instrument which is at the core of the controversy is interwoven
Neither could the Supplemental Deed validly operate as a donation. Article 749 of the New Civil with the issues adopted by the parties and the rulings of the trial court and the appellate
Code is clear on the point, thus: court.66 Thus, this Court is also resolute in striking down the alleged deed in this case, especially
as it appears on its face to be a blatant nullity.
Art. 749. In order that the donation of the immovable may be valid, it must be made in a public
document, specifying therein the property donated and the value of the charges which the
donee must satisfy.
WHEREFORE, foregoing premises considered, the Decision dated 30 September 1999 of the
Court of Appeals is hereby AFFIRMED. Costs against petitioner J.L.T. Agro, Inc.

The acceptance may be made in the same deed of donation or in a separate public document,
but it shall not take effect unless it is done during the lifetime of the donor.
SO ORDERED.

If the acceptance is made in a separate instrument, the donor shall be notified thereof in an
authentic form, and this step shall be noted in both instruments.

In Sumipat, et al v. Banga, et al.,61 this Court declared that title to immovable property does
not pass from the donor to the donee by virtue of a deed of donation until and unless it has
been accepted in a public instrument and the donor duly notified thereof. The acceptance may
be made in the very same instrument of donation. If the acceptance does not appear in the
same document, it must be made in another. Where the deed of donation fails to show the
acceptance, or where the formal notice of the acceptance, made in a separate instrument, is
either not given to the donor or else not noted in the deed of donation and in the separate
acceptance, the donation is null and void.

In the case at bar, although the Supplemental Deed appears in a public document,62 the
absence of acceptance by the donee in the same deed or even in a separate document is a
glaring violation of the requirement.

One final note. From the substantive and procedural standpoints, the cardinal objectives to
write finis to a protracted litigation and avoid multiplicity of suits are worth pursuing at all
times.63 Thus, this Court has ruled that appellate courts have ample authority to rule on specific
matters not assigned as errors or otherwise not raised in an appeal, if these are indispensable
or necessary to the just resolution of the pleaded issues. 64 Specifically, matters not assigned as
errors on appeal but consideration of which are necessary in arriving at a just decision and
 1. SALES; CONSIDERATION; NON-PAYMENT OF PRICE DOES NOT CONVERT INTO "NUDUM
PACTUM." In the sale of real property, the subsequent non-payment of the price at the time
agreed upon does not convert the contract into one without cause or consideration: a nudum
pactum. The situation is rather one in which there is failure to pay the consideration, with its
resultant consequences.

2. ID.; ID.; ID.; VENDORS REMEDY. The vendors remedy in such a case is generally to
demand legal interest for the delay or to demand rescission in court.

3. ID.; ID.; ID.; AUTOMATIC RESCISSION; VENDEE MAY ENFORCE CONTRACT BEFORE DEMAND
FOR RESCISSION IS MADE UPON HIM. Even if the contract of sale expressly provides for
"automatic rescission upon failure to pay the price" the vendee may enforce the contract even
after the expiration of the period but before demand for rescission has been made upon him
either by suit or by notarial act.

DECISION

BENGZON, J.:

In the Court of First Instance of Antique, in November, 1950, Eusebio de la Cruz sued Apolonio
FIRST DIVISION
Legaspi and his wife to compel delivery of the parcel of land they bad sold to him in December
1949. The complaint alleged the execution of the contract, the terms thereof, the refusal of
[G.R. No. L-8024. November 29, 1955.]
defendants to accept payment of the purchase price of P450 which he had tendered, and undue
retention of the realty.
EUSEBIO DE LA CRUZ, Plaintiff-Appellee, v. APOLONIO LEGASPI and CONCORDIA
SAMPEROY,Defendants-Appellants.
The defendants, in their answer, admitted the sale and the price; but they alleged that before
the document (of sale) "was made, the plaintiff agreed to pay the defendants the amount of
Jose A. Fornier for Appellants.
P450 right after the document is executed that very day December 5, 1949, but after the
document was signed and ratified by the Notary Public and after the plaintiff has taken the
Ramor Maza for Appellee.
original of the said document, the said plaintiff refused to pay the sum of P450 which is the
purchase price of the said land in question." They asserted that for lack of consideration and for
deceit, the document of sale should be annulled.

Plaintiffs next move was a petition for judgment on the pleadings, contending that the
SYLLABUS allegations of the answer gave the defendants no excuse to retain the property, rejecting the
price.

Joining the motion for judgment on the pleadings, the defendants maintained that the sale
should be annulled pursuant to their answers allegations.
 Code, Vol. 10, p. 288, 2d Ed.; Villaruel v. Tan King, 43 Phil. 251.)
The Honorable F. Imperial Reyes, Judge, rendered judgment (a) ordering plaintiff to pay the
price of P450 to defendants; (b) ordering the latter to receive such price and immediately after The appealed judgment will therefore be affirmed, with costs against appellants. So ordered.
such receipt, to deliver possession of the property to plaintiff.

Having failed in a motion to reconsider, defendants appealed in due time. The seven errors
assigned in their printed brief, assail the correctness of the judgment, maintaining two principal
propositions, namely: (1) the trial judge erroneously disregarded their allegations, in their
answer, of non-payment of the price, as hereinbefore quoted; (2) such allegations which must
be deemed admitted by plaintiff when he moved for judgment on the pleadings established a
good defense, because the contract was without consideration, and was resolved by plaintiffs
failure to pay the price "right after the document was executed." cralaw virtua1aw library

As to the first proposition, the decision does not say so, but there is no reason to doubt that as
requested in the plaintiffs motion, His Honor considered the allegations made both in the
complaint and in the answer. However, he found that defendants allegations constituted no
defense. He read the law correctly, as we shall forthwith explain.

On the second proposition, appellants rightly say that the Civil Code not the New Civil Code
regulates the transaction, which occurred in 1949. Yet they err in the assertion that as
plaintiff failed to pay the price after the execution of the document of sale as agreed previously,
the contract became null and void for lack of consideration. It cannot be denied that when the
document was signed the cause or consideration existed: P450. The document specifically said
so; and such was undoubtedly the agreement. Subsequent non- payment of the price at the
time agreed upon did not convert the contract into one without cause or consideration: a nudum
pactum. (Levy v. Johnson, 4 Phil. 650; Puato v. Mendoza, 64 Phil, 457.) The situation was
rather one in which there is failure to pay the consideration, with its resultant consequences. In
other words, when after the notarization of the contract, plaintiff failed to hand the money to
defendants, as he previously promised, there was default on his part at most, and defendants
right was to demand interest legal interest for the delay, pursuant to article 1501 (3) of
the Civil Code (Villaruel v. Tan King, 43 Phil. 251), or to demand rescission in court. (Escueta v.
Pardo, 42 Off. Gaz. 2759; Cortes v. Bibao, 41 Phil. 298.) Such failure, however, did not ipso
facto resolve the contract, no stipulation to that effect having been alleged. (Cf. Warner Barnes
& Co. v. Inza, 43 Phil., 505.) Neither was there any agreement nor allegation that payment on
time was essential. (Cf. Abella v. Francisco, 55 Phil., 447; Berg v. Magdalena Estate, 92 Phil.,
110.

Indeed, even if the contract of sale here in question had expressly provided for "automatic
rescission upon failure to pay the price," the trial judge could allow plaintiff to enforce the
contract, as the judgment does, in effect because defendants had not made a previous demand
on him, by suit or notarial act.

"In the sale of real property, even though it may have been stipulated that in default of the
price within the time agreed upon, the resolution of the contract shall take place ipso facto, the
vendee may pay even after the expiration of the period, at any time before demand has been
made upon him either by suit or by notarial act. After such demand has been made the judge
cannot grant him further time." (Art. 1504 Civil Code.)

By the way, this previous demand, Manresa explains, is a demand for rescission. (Manresa Civil
 1. DONATION; CAUSE OR CONSIDERATION; LIBERALITY OF DONOR WHEN DEEMED "CAUSA."
Under Article 1274, of the Civil Code of 1889, liberality of the donor is deemed causa only in
those contracts that are of "pure" beneficience that is to say, contracts designed solely and
exclusively to procure the welfare of the beneficiary, without any intent of producing any
satisfaction for the donor; contacts, in other words, in which the idea of self-interest is totally
absent on the part of the transferor. For this very reason, the same Article 1274 provides that in
remuneratory contracts, the consideration is the service or benefit for which the remuneration is
given; causa is not liberality in these cases because the contract or conveyance is not made out
of pure beneficience, but "solvendi animo."

2. ID.; ID.; MOTIVE REGARDED AS "CAUSA.." The motive of the parties may be regarded as
causa when it predetermines the purpose of the contract.

3. ID.; DONATION OF CONJUGAL PROPERTY BY THE HUSBAND, EFFECT OF. The right of the
husband to donate community property is strictly limited by law (Article 1409, 1413, 1415, Civil
Code of 1889; Baello v. Villanueva, 54 Phil. 213). However, the donation made in contravention
of the law is not void in its entirely, but only in so far as it prejudices the interest of the wife.
The rule applies whether the donation is gratuitous or for a consideration.

4. ID.; ID.; LEGITIMATE OF FORCED HEIRS UNAFFECTED; LEGITIMATE, HOW COMPUTED.

The forced heirs are entitled to have the donation set aside in so far as inofficious; i.e., in
excess of the portion of free disposal (Civil Code of 1889, Arts. 636, 654), computed as
provided in Article 818 and 819, and bearing in mind that "collationable gifts" under Article 818
should include gifts made not only in favor of the forced heirs, but even those made in favor of
strangers. (Decision of the Supreme Court Spain, May 4, 1889 and June 16, 1902.)

5. "PARI DELICTO" PARTIES TO ILLEGAL CONTRACT BARRED FROM PLEADING ILLEGALITY OF

BARGAIN. The rule that the parties to an illegal contract, if equally guilty, will not be aided by
the law but will both be left where it finds them, has been interpreted by this Court as barring
the party from pleading the illegality of the bargain either as a cause of action or as a defense.
FIRST DIVISION
6. ACCESSION; RULES GOVERNING IMPROVEMENTS MADE IN GOOD FAITH. Improvements
[G.R. No. L-11240. December 18, 1957.] made in good faith are governed by the rules of accession and possession in good faith.

CONCHITA LIGUEZ, Petitioner, v. THE HONORABLE COURT OF APPEALS, MARIA NGO

VDA. DE LOPEZ, ET AL., Respondents.

Ruiz, Ruiz & Ruiz for Appellant. DECISION

Laurel Law Offices for Appellees.

REYES, J. B. L., J.:

SYLLABUS
 erred in holding the donation void for having an illicit causa or consideration. It is argued that
under Article 1274 of the Civil Code of 1889 (which was the governing law in 1943, when the
donation was executed), "in contracts of pure beneficence the consideration is the liberality of
From a decision of the Court of Appeals, affirming that of the Court of First Instance of Davao the donor", and that liberality per se can never be illegal, since it is neither against law or
dismissing her complaint for recovery of land, Conchita Liguez has resorted to this Court, morals or public policy.
praying that the aforesaid decision be reversed on points of law. We granted certiorari on
October 9, 1956. The flaw in this argument lies in ignoring that under Article 1274, liberality of the donor is
deemed causa only in those contracts that are of "pure" beneficence; that is to say, contracts
The case began upon complaint filed by petitioner-appellant against the widow and heirs of the designed solely and exclusively to procure the welfare of the beneficiary, without any intent of
late Salvador P. Lopez to recover a parcel of 51.84 hectares of land, situated in Barrio Bogac- producing any satisfaction for the donor; contracts, in other words, in which the idea of self-
Linot, of the municipality of Mati, Province of Davao. Plaintiff averred to be its legal owner, interest is totally absent on the part of the transferor. For this very reason, the same Article
pursuant to a deed of donation of said land, executed in her favor by the late owner, Salvador P. 1274 provides that in remuneratory contracts, the consideration is the service or benefit for
Lopez, on 18 May 1943. The defense interposed was that the donation was null and void for which the remuneration is given; causa is not liberality in these cases because the contract or
having an illicit causa or consideration, which was plaintiffs entering into marital relations with conveyance is not made out of pure beneficence, but "solvendi animo." In consonance with this
Salvador P. Lopez, a married man; and that the property had been adjudicated to the appellees view, this Supreme Court in Philippine Long Distance Co. v. Jeturian* G. R. L-7756, July 30,
as heirs of Lopez by the Court of First Instance, since 1949. 1955, like the Supreme Court of Spain in its decision of 16 Feb. 1899, has ruled that bonuses
granted to employees to excite their zeal and efficiency, with consequent benefit for the
The Court of Appeals found that the deed of donation was prepared by the Justice of the Peace employer, do not constitute donation having liberality for a consideration.
of Mati, Davao, before whom it was signed and ratified on the date aforesaid. At the time,
appellant Liguez was a minor, only 16 years of age. While the deed recites Here the facts as found by the Court of Appeals (and which we can not vary) demonstrate that
in making the donation in question, the late Salvador P. Lopez was not moved exclusively by the
"That the DONOR, Salvador P. Lopez, for and in consideration of his love and affection for the desire to benefit appellant Conchita Liguez, but also to secure her cohabiting with him, so that
said DONEE, Conchita Liguez, and also for the good and valuable services rendered to the he could gratify his sexual impulses. This is clear from the confession of Lopez to the witnesses
DONOR by the DONEE, does by these presents, voluntarily give, grant and donate to the said Rodriguez and Ragay, that he was in love with appellant, but her parents would not agree
donee, etc." (Paragraph 2, Exhibit "A") unless he donated the land in question to her. Actually, therefore, the donation was but one part
of an onerous transaction (at least with appellants parents) that must be viewed in its totality.
the Court of Appeals found that when the donation was made, Lopez had been living with the Thus considered, the conveyance was clearly predicated upon an illicit causa.
parents of appellant for barely a month; that the donation was made in view of the desire of
Salvador P. Lopez, a man of mature years to have sexual relations with appellant Conchita Appellant seeks to differentiate between the alleged liberality of Lopez, as causa for the
Liguez; that Lopez had confessed to his love for appellant to the instrumental witnesses, with donation in her favor, and his desire for cohabiting with appellant, as motives that impelled him
the remark that her parents would not allow Lopez to live with her unless he first donated the to make the donation, and quotes from Manresa and the jurisprudence of this Court on the
land in question; that after the donation, Conchita Liguez and Salvador P. Lopez lived together distinction that must be maintained between causa and motives (De Jesus v. Urrutia and Co., 33
in the house that was built upon the latters orders, until Lopez was killed on July 1st, 1943, by Phil. 171). It is well to note, however, that Manresa himself (Vol. 8, pp. 641-642), while
some guerrillas who believed him to be pro-Japanese. maintaining the distinction and upholding the inoperativeness of the motives of the parties to
determine the validity of the contract, expressly excepts from the rule those contracts that are
It was also ascertained by the Court of Appeals that the donated land originally belonged to the conditioned upon the attainment of the motives of either party.
conjugal partnership of Salvador P. Lopez and his wife, Maria Ngo; that the latter had met and
berated Conchita for living maritally with her husband, sometime during June of 1943; that the ". . . distincion importantisima, que impide anular el contrato por la sola influencia de los
widow and children of Lopez were in possession of the land and made improvements thereon; motivos a no ser que se hubiera subordinado al cumplimiento de estos como condiciones la
that the land was assessed in the tax rolls first in the name of Lopez and later in that of his eficacia de aquel."
cralaw virtua1aw library

widow; and that the need of donation was never recorded.

The same view is held by the Supreme Court of Spain, in its decisions of February 4, 1941, and
Upon these facts, the Court of Appeals held that the deed of donation was inoperative, and null December 4, 1946, holding that the motive may be regarded as causa when it predetermines
and void (1) because the husband, Lopez, had no right to donate conjugal property to the the purpose of the contract.
plaintiff appellant; and (2) because the donation was tainted with illegal causa or consideration,
of which donor and donee were participants. In the present case, it is scarsely disputable that Lopez would not have conveyed the property
in question had he known that appellant would refuse to cohabit with him; so that the
Appellant vigorously contends that the Court of First Instance as well as the Court of Appeals cohabitation was an implied condition to the donation, and being unlawful, necessarily tainted
the donation itself.
The Court of Appeals rejected the appellants claim on the basis of the well-known rule "in pari In the case at bar the plaintiff could establish prima facie his sole ownership by the bill of sale
delicto non oritur actio" as embodied in Article 1306 of the Code of 1889 (reproduced in Article from Smith, Bell & Co. and the official registration. The defendant, on his part, might overthrow
1412 of the new Civil Code): jgc:chanroble s.com.ph this title by proof through a certain subsequent agreement between him and the plaintiff, dated
March 16, 1902, that they had become owners in common of the vessel, the agreement not
"ART. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a disclosing the illegal motive for placing the formal title in the plaintiff. Such an ownership is not
criminal offense, the following rules shall be observed: in itself prohibited, for the United States courts recognize the equitable ownership of a vessel as
chanrob1es virtual 1aw library

against the holder of a legal title, where the arrangement is not one in fraud of the law. (Weston
(1) When the fault is on the part of both contracting parties, neither may recover what he has v. Penniman, Federal Case 17455; Scudder v. Calais Steamboat Company, Federal Case
given by virtue of the contract, or demand the performance of the others undertaking; 12566.)

(2) When only one of the contracting parties is at fault, he cannot recover what he has given by On this proof, the defendant being a part owner of the vessel, would have defeated the action
reason of the contract, or ask for fulfillment of what has been promised him. The other, who is for its exclusive possession by the plaintiff. The burden would then be cast upon the plaintiff to
not at fault, may demand the return of what he has given without any obligation to comply with show the illegality of the arrangement, which under the cases cited he would not be allowed to
his promise."cralaw virtua1aw library do."cralaw virtua1aw library

In our opinion, the Court of Appeals erred in applying to the present case the pari delicto rule.
First, because it can not 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 between 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; and that the substance of the
testimony of the instrumental witnesses is that it was the appellants parents who insisted on
the donation before allowing her to live with Lopez. These facts are more suggestive of
seduction than of immoral bargaining on the part of appellant. It must not be forgotten that
illegality is not presumed, but must be duly and adequately proved.
In the second place, the rule that parties to an illegal contract, if equally guilty, will not be aided donate community property is strictly limited by law (Civil Code of 1889, Arts. 1409, 1415,
by the law but will both be left where it finds them, has been interpreted by this Court as
barring the party from pleading the illegality of the bargain either as a cause of action or as a
defense. Memo auditor propriam turpitudinem allegans. Said this Court in Perez v. Herranz, 7
Phil. 695-696: jgc:chanrobles.com .ph
"It is unnecessary to determine whether a vessel for which a certificate and license have been should they not have stipulated that such expenditures should be borne in whole or in part by
fraudulently obtained incurs forfeiture under these or any other provisions of this act. It is
The rule was reaffirmed in Lim v. Lim ChuKao, 51 Phil. 477.
The situation confronting us is exactly analogous. 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
1413; Baello v. Villanueva, 54 Phil. 213).
"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 them a profession or by both spouses by common consent,
the separate property of one of them." cralaw virtua1aw library

enough for this case that the statute prohibits such an arrangement as that between the
plaintiff and defendant so as to render illegal both the arrangement itself and all contracts "ART. 1415. The husband may dispose of the property of the conjugal partnership for the
between the parties growing out of it. purposes mentioned in Article 1409." cralaw virtua1aw library

It does not, however, follow that the plaintiff can succeed in this action. There are two answers "ART. 1413. In addition to his powers as manager the husband may for a valuable consideration
to his claim as urged in his brief. It is a familiar principle that the courts will not aid either party alienate and encumber the property of the conjugal partnership without the consent of the
to enforce an illegal contract, but will leave them both where it finds them; but where the wife." cralaw virtua1aw library

plaintiff can establish a cause of action without exposing its illegality, the vice does not affect his
right to recover. The American authorities cited by the plaintiff fully sustain this doctrine. The The text of the articles makes it plain that the donation made by the husband in contravention
principle applies equally to a defense. The law in those Islands applicable to the case is found in of law is not void in its entirety, but only in so far as it prejudices the interest of the wife. In this
article 1305 of the Civil Code, shutting out from relief either of the two guilty parties to an regard, as Manresa points out (Commentaries, 5th Ed., pp. 650-651, 652-653), the law makes
illegal or vicious contract. no distinction between gratuitous transfers and conveyances for a consideration.
 favor of the appellant when the improvements were made.
"Puede la mujer como proprietaria hacer anular las donaciones aun durante el matrimonio? Esta
es, en suma, la cuestion, reducida a determinar si la distinta naturaleza entre los actos a titulo The appellees, relying on Galion v. Garayes, 53 Phil. 43, contend that by her failure to appear at
oneroso y los actos a titulo lucrativo, y sus especiales y diversas circunstancias, pueden motivar the liquidation proceedings of the estate of Salvador P. Lopez in July 1943, the appellant has
una solucion diferente en cuanto a la epoca en que la mujer he de reclamar y obtener la nulidad forfeited her right to uphold the donation if the prejudice to the widow Maria Ngo resulting from
del acto; cuestion que no deja de ser interesantisima. the donation could be made good out of the husbands share in the conjugal profits. It is also
argued that appellant was guilty of laches in failing to enforce her rights as donee until 1951.
El Codigo, a pesar de la variacion que ha introducido en el proyecto de 1851, poniendo como This line of argument overlooks the capital fact that in 1943, appellant was still a minor of
segundo parrafo del articulo 1.413, o como limitacion de las enajenaciones uobligaciones a sixteen; and she did not reach the age of majority until 1948. Hence, her action in 1951 was
titulo oneroso, lo que era una limitacion general de todos los actos del marido, muestra, sin only delayed three years. Nor could she be properly expected to intervene in the settlement of
embargo, que no ha variado de criterio, y que para el las donaciones deben en todo equipararse the estate of Lopez: first, because she was a minor during the great part of the proceedings;
a cualquier otro acto ilegal o fraudulento de caracter oneroso, al decir en el art. 1.419: Tambien second, because she was not given notice thereof; and third, because the donation did not
se traera a colacion en el inventario de la sociedad el importe de las donaciones y make her a creditor of the estate. As we have ruled in Lopez v. Olbes, 15 Phil. 547-548: jgc:chanrobles.com .ph

enajenaciones que deban considerarse ilegales o fraudulentas, con sujecion al art. 1.413.
(Debio tambien citarse el articulo 1.415, que es el que habla de donaciones.)" "The prima facie donation inter vivos and its acceptance by the donees having been proved by
means of a public instrument, and the donor having been duly notified of said acceptance, the
"En resumen: el marido solo puede donar los bienes gananciales dentro de los limites marcados contract is perfect and obligatory and it is perfectly in order to demand its fulfillment, unless an
en el art. 1.415. Sin embargo, solo la mujer o sus herederos pueden reclamar contra la valides exception is proved which is based on some legal reason opportunely alleged by the donor or
de la donacion, pues solo eusuinteres se establece la prohibicion. La mujer o sus herederos, her heirs.
para poder dejar sin efecto el acto, han de sufrir verdadero perjuicio, entendiendose que no le
hay hasta, tanto que, terminada por cualquier causa la sociedad de gananciales, y hecha So long as the donation in question has not been judicially proved and declared to be null,
suliquidacion, no pueda imputarse lo donado al haber por cualquier concepto del marido, ni inefficacious, or irregular, the land donated is of the absolute ownership of the donees and
obtener en suconsecuencia la mujer la dibida indemnizacion. La donacion reviste por tanto consequently, does not form a part of the property of the estate of the deceased Martina Lopez,
legalmente, una eficacia condicional, y en armonia con este caracter, deben fijarse los efectos wherefore the action instituted demanding compliance with the contract, the delivery by the
de la misma con relacion a los adquirentes y a los terceros poseedores, teniendo, en sucaso, en deforciant of the land donated, or that it be prohibited to disturb the right of the donees, should
cuenta lo dispuesto en la ley Hipotecaria. Para prevenir todo perjuicio, puede la mujer, durante not be considered as incidental to the probate proceedings aforementioned." cralaw virtua1aw library

el matrimonio inmediatamente al acto, hacer constar ante los Tribunales suexistencia y solicitar
medidas de precaucion, como ya se ha dicho. Para evitarlo en lo sucesivo, y cuando las The case of Galion v. Gayares, supra, is not in point. First, because that case involved a
circunstancias lo requieran, puede instar la declaracion de prodigalidad." cralaw virtua1aw library simulated transfer that can have no effect, while a donation with illegal causa may produce
effects under certain circumstances where the parties are not of equal guilt; and again, because
To determine the prejudice to the widow, it must be shown that the value of her share in the the transferee in the Galion case took the property subject to lis pendens notice, that in this
property donated can not be paid out of the husbands share of the community profits. The case does not exist.
requisite data, however, are not available to us and necessitate a remand of the records to the
court of origin that settled the estate of the late Salvador P. Lopez. In view of the foregoing, 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
The situation of the children and forced heirs of Lopez approximates that of the widow. As found, upon proper liquidation, not to prejudice the share of the widow Maria Ngo in the
privies of their parent, they are barred from invoking the illegality of the donation. But their conjugal partnership with Salvador P. Lopez or the legitimes of the forced heirs of the latter. The
right to a legitime out of his estate is not thereby affected, since the legitime is granted them by records are ordered remanded to the court of origin for further proceedings in accordance with
the law itself, over and above the wishes of the deceased. Hence, the forced heirs are entitled to this opinion. Costs against appellees. So ordered.
have the donation set aside in so far as inofficious: i.e., in excess of the portion of free disposal
(Civil Code of 1889, Articles 636, 654), computed as provided in Articles 818 and 819, and
bearing in mind that "collationable gifts" under Article 818 should include gifts made not only in
favor of the forced heirs, but even those made in favor of strangers, as decided by the Supreme
Court of Spain in its decisions of 4 May 1899 and 16 June 1902. So that in computing the
legitimes, the value of the property donated to herein appellant, Conchita Liguez, should be
considered part of the donors estate. Once again, only the court of origin has the requisite date
to determine whether the donation is inofficious or not. With regard to the improvements in the
land in question, the same should be governed by the rules of accession and possession in good
faith, it being undisputed that the widow and heirs of Lopez were unaware of the donation in
 This is an appeal by certiorari from the decision of the Court of Appeals in CA-G.R. 36078-R
promulgated on December 23, 1970 reversing the judgment of the Court of First Instance of
Baguio City, Branch II, in Civil Case 804, and from the appellate courts resolution dated March
7, 1971 denying herein petitioners motion for reconsideration. Mateo Carantes was the original
owner of Lot No. 44 situated at Loakan, Baguio City, as evidenced by Original Certificate of Title
No. 3 issued in his name on September 22, 1910 by virtue of Free Patent No. 5 granted to him
on the same date. In 1913 Mateo died. He was survived by his widow Ogasia and six children,
namely, Bilad, Lauro, Crispino, Maximino, Apung and Sianang, all surnamed Carantes.

In 1930 construction of the Loakan Airport was commenced by the Government. Because a
portion of Lot No. 44 was needed for the landing field, the Government instituted proceedings
(Civil Case 338) for its expropriation. For the purpose, Lot No. 44 was subdivided into Lots Nos.
44-A, 44-B 44-C, 44-D and 44-E. The portion expropriated by the Government was Lot No. 44-
A.

In 1933 Special Proceedings Nos. 409 to 413 were filed with the court for the settlement of the
estate of the late Mateo Carantes. One of his sons, herein petitioner Maximino Carantes, was
appointed and qualified as judicial administrator of the estate. In his capacity as administrator,
Maximino filed on June 20, 1939 a project of partition wherein he listed as the heirs of Mateo
Carantes who were entitled to inherit the estate, himself and his brothers and sisters, or the
latters surviving children. Apparently because negotiations were, by that time, under way for
the purchase by the Government of Lots Nos. 44-B and 44-C for the purpose of widening the
Loakan Airport, the only property listed by Maximino in the project of partition was the
remaining portion of Lot No. 44. chanroble s law library : red

FIRST DIVISION
On October 23, 1939 a deed denominated "Assignment of Right to Inheritance" was executed
by four of Mateo Carantes children, namely, Bilad, Sianang, Lauro and Crispino, and the heirs of
[G.R. No. L-33360. April 25, 1977.]
Apung Carantes (also a son of Mateo who died in 1923), namely, Pitag, Bill, Alson, Eduardo and
MAXIMINO CARANTES (Substituted by Engracia Mabanta Carantes), Petitioner, v. Juan, assigning to Maximino Carantes their rights to inheritance in Lot No. 44. The stated
COURT OF APPEALS, BILAD CARANTES, LAURO CARANTES, EDUARDO CARANTES and monetary consideration for the assignment was P1.00. However, the document contains a recital
to the effect that the said lots, "by agreement of all the direct heirs and heirs by representation
MICHAEL TUMPAO,Respondents.
of the deceased Mateo Carantes as expressed and conveyed verbally by him during his lifetime,
rightly and exclusively belong to the particular heir, Maximino Carantes, now and in the past in
Sinforoso Fangonil and Sinai C. Hamada for Petitioner.
the exclusive, continuous, peaceful and notorious possession of the same for more than ten
years."
Ruben C. Ayson for Private Respondents. cralaw virtua1aw library

On the same date Maximino Carantes sold to the Government Lots Nos. 44-B and 44-C and
divided the proceeds of the sale among himself and the other heirs of Mateo.

On February 6, 1940, upon joint petition of the heirs of Mateo Carantes, the Court of First
DECISION
Instance of Baguio City issued an Order in another proceeding - Administrative Case No. 368 -
cancelling O.C.T. No. 3. Pursuant thereto the said title was cancelled, and in its place Transfer
Certificate of Title No. 2533 was issued in the joint names of the five children of Mateo Carantes
and the children of Apung Carantes (representing their deceased father) as co-owners pro
indiviso, or one-sixth share for each child.
CASTRO, J.:
On March 16, 1940 Maximino Carantes, registered the deed of "Assignment of Right to
Inheritance." Accordingly, T.C.T. No 2533 in the names of the heirs was cancelled, and in lieu
thereof Transfer Certificate of Title No. 2540 was issued on the same date in the name of
Maximino Carantes. Also on the same date, Maximino, acting as exclusive owner of the land wife had been divided and distributed among their six children; that the deed of "Assignment of
covered by T.C.T. No. 2540, executed a formal deed of sale in favor of the Government over Right to Inheritance" was an acknowledgment of the fact of designation of the property therein
Lots Nos. 44-B and 44-C. described as specifically pertaining or belonging by right of inheritance to the defendant
Maximino Carantes; that there was never any agreement between the assignors and the
On February 21, 1947, as a result of the approval of the Subdivision Survey Plan psd-16786, assignee authorizing the latter to merely represent his co-heirs in negotiations with the
and pursuant to the deed of sale executed in 1940 by Maximino Carantes in favor of the Government, and that the assignors knew fully well that the deed of assignment contained
Government, T.C.T. No. 2540 in Maximinos name was cancelled, and in lieu thereof Transfer what, on its face, it represented. By way of special defenses, the defendants alleged that any
Certificate of Title No. T98, covering Lots Nos. 44-A, 44-B and 44-C, was issued in the name of supposed agreement between the plaintiffs and/or their predecessors-in-interest and the
the Government, while Transfer Certificate of Title No. T-99, covering the remaining Lots Nos. defendant Maximino Carantes, other than the deed of assignment, is barred by the statute of
44-D (100, 345 square meters) and 44-E (10,070 square meters) was issued in the name of frauds and is null and void because not in writing, much less, in a public instrument; that the
Maximino Carantes, who has up to the present remained the registered owner of said lots. only agreement between the parties is what appears in the deed of assignment; that the
plaintiffs right of action has already prescribed; that the defendant Maximino Carantes acquired
On September 4, 1958 the present complaint was filed by three children of the late Mateo absolute ownership over the property in question by acquisitive prescription and registration;
Carantes, namely, Bilad, Lauro and Crispino, and by some of the surviving heirs of Apung and of and that any obligation on the part of the defendants in relation to the property had been
Sianang (also children of Mateo Carantes). Maximino Carantes was named principal defendant, discharged by novation, condonation and compensation. The defendants set up the
and some of the heirs of Apung and Sianang were impleaded as parties-defendants in view of counterclaim that in the event the rights of the heirs are disturbed, the produce from the lands
their alleged reluctance to join as parties-plaintiffs. inherited by the plaintiffs from Mateo Carantes as well as the real estate taxes on the land paid
by the defendant Maximino Carantes should be collated; and that the filing of the complaint
In their complaint the plaintiffs alleged inter alia that they and/or their predecessors-in-interest being malicious, the defendants should be awarded the sum of 194,500 by way of nominal,
executed the deed of "Assignment of Right to Inheritance" on October 23, 1939, only because compensatory, moral and corrective damages, including attorneys fees and expenses of
they were made to believe by the defendant Maximino Carantes that the said instrument litigation. The defendants prayed for the dismissal of the complaint and payment of damages to
embodied the understanding among the parties that it merely authorized the defendant them.
Maximino to convey portions of Lot No. 44 to the Government in their behalf to minimize
expenses and facilitate the transaction; and that it was only on February 18, 1958, when the An answer to the counterclaim was filed by the plaintiffs on November 7, 1958 denying the
plaintiffs secured a copy of the deed, that they came to know that the same purported to assign material allegations of the counterclaim. chanroble s law library

in favor of Maximino their rights to inheritance from Mateo Carantes. The plaintiffs prayed that
the deed of "Assignment of Right to Inheritance" he declared null and void; that Lots Nos. 44-D After trial, the court rendered its decision on January 28, 1965. It was the trial courts opinion
and 44-E covered by T.C.T. No. T-99 be ordered partitioned into six (6) equal shares and the that since an action based on fraud prescribes in four years from the discovery of the fraud, and
defendant Maximino Carantes be accordingly ordered to execute the necessary deeds of in this case the fraud allegedly perpetrated by the defendant Maximino Carantes must be
conveyance in favor of the other distributees; and that the said defendant he ordered to pay the deemed to have been discovered on March 16, 1940 when the deed of assignment was
plaintiffs the sum of P1,000 as attorneys fees and the sum of P200 as costs of suit. registered, the plaintiffs right of action had already prescribed when they filed the action in
chanroble s.com:cralaw:red

1958; and even assuming that the land remained the common property of the plaintiffs and the
On September 10, 1958 the defendants filed a motion to dismiss on the grounds (1) that the defendant Maximino Carantes notwithstanding the execution of the deed of assignment, the co-
plaintiffs cause of action is barred by the statute of limitations because the deed of assignment ownership was completely repudiated by the said defendant by performance of several acts, the
was recorded in the Registry of Property at the latest on February 21, 1947, hence, plaintiffs first of which was his execution of a deed of sale in favor of the Government on October 23,
cause of action accrued from the said date, and since pursuant to article 1144 of the new Civil 1939, hence, ownership had vested in the defendant Maximino Carantes by acquisitive
Code an action based on a written contract must be brought within ten years from the time the prescription. The court accordingly dismissed the complaint. It likewise dismissed the
right of action accrues, plaintiffs right to file the complaint had already prescribed on counterclaim.
September 4, 1958; and (2) that the complaint states no cause of action because ownership
over the property became vested in Maximino Carantes by acquisitive prescription ten years The plaintiffs moved for reconsideration. Their motion having been denied in an Order dated
from its registration in his name on February 21, 1947. March 8, 1965, they appealed to the Court of Appeals.

In an Order dated September 30, 1958, the trial court denied the motion to dismiss on the As adverted to above, the Court of Appeals reversed the judgment of the trial court, hence the
grounds that there are allegations of co-ownership and trust in the complaint, and, therefore, present recourse.
prescription did not lie, and that the complaint alleges that the plaintiffs discovered the alleged
fraud only in February, 1958. -I-

In their answer filed on October 7, 1958, the defendants traversed the material averments of In her brief filed with this Court, the petitioner argues that the private respondents action is not
the complaint and alleged inter alia that the property of the deceased Mateo Carantes and his actually one for annulment of the deed of "Assignment of Right to Inheritance" but for the
reformation thereof, hence, the said action has prescribed long before the filing of the
complaint. The present action is one to annul the contract entitled "Assignment of Right to Inheritance" on
the ground of fraud.
The petitioners theory that the private respondents action is for reformation of an instrument is
a new one, adopted by the petitioner for the first time on appeal to this Court. Her husband did Article 1390 of the new Civil code provides that a contract "where the consent is vitiated by
not raise it as a defense in his answer filed with the trial court, where, consequently, trial mistake, violence, intimidation, undue influence or fraud," is voidable or annullable. Even article
proceeded on the theory that the action sought the declaration of nullity of the deed of 1359, which deals on reformation of instruments, provides in its paragraph 2 that "If mistake,
assignment. When the case reached the respondent court the petitioner likewise did not raise fraud, inequitable conduct, or accident has prevented a meeting of the minds of the parties, the
this issue, although in truth, even had she done so, it would have been a belated and futile proper remedy is not reformation of the instrument but annulment of the contract." When the
exercise. She cannot be allowed to change her theory of the case at this stage of the consent to a contract was fraudulently obtained, the contract is voidable. 6 Fraud or deceit does
proceedings. not render a contract void ab initio, and can only be a ground for rendering the contract
voidable or annullable pursuant to article 1390 of the new Civil Code by a proper action in court.
The settled rule is that defenses not pleaded in the answer may not be raised for the first time 7
on appeal. 1 A party cannot, on appeal, change fundamentally the nature of the issue in the
case. 2 When a party deliberately adopts a certain theory and the case is decided upon that The present action being one to annul a contract on the ground of fraud, its prescriptive period
theory in the court below, he will not be permitted to change the same on appeal, because to is four years from the time of the discovery of the fraud. 8
permit him to do so would he unfair to the adverse party. 3
The next question that must be resolved is: from what time must fraud, assuming that there
Consequently, we have to disregard the petitioners theory that the action is for reformation of was fraud, be deemed to have been discovered in the case at bar? From February, 1958, when,
an instrument, and must proceed on the basis of the issues properly raised and ventilated according to the private respondents, and as found by the respondent court, the private
before the trial court. respondents actually discovered that they were defrauded by the petitioner Maximino Carantes
when rumors spread that he was selling the property for half a million pesos? Or from March 16,
- II - 1940, when, as admitted by the parties and found by both the trial court and the respondent
court, the deed of "Assignment of Right to Inheritance" was registered by the petitioner in the
We do not agree with the respondent courts legal conclusion that the deed of "Assignment of Office of the Register of Deeds?
Right to Inheritance" is void ab initio and inexistent on the grounds that real consent was
wanting and the consideration of P1.00 is so shocking to the conscience that there was in fact The weight of authorities is to the effect that the registration of an instrument in the Office of
no consideration, hence, the action for the declaration of the contracts inexistence does not the Register of Deeds constitutes constructive notice to the whole world, and, therefore,
prescribe pursuant to article 1410 of the new Civil Code. discovery of the fraud is deemed to have taken place at the time of the registration. 9 In this
case the deed of assignment was registered on March 16, 1940, and in fact on the same date
Article 1409 (2) of the new Civil Code relied upon by the respondent court provides that T.C.T. No. 2533 in the names of the heirs of Mateo Carantes was cancelled, and T.C.T. No. 2540
contracts "which are absolutely simulated or fictitious" are inexistent and void from the in the name of the petitioner was issued in lieu thereof. The four-year period within which the
beginning. The basic characteristic of simulation is the fact that the apparent contract is not private respondents could have filed the present action consequently commenced on March 16,
really desired or intended to produce legal effects or in any way alter the juridical situation of 1940; and since they filed it only on September 4, 1958, it follows that the same is barred by
the the statute of limitations.

parties. 4 The respondent court refused to accord recognition to the rule of constructive notice, because,
according to it, there was a fiduciary relationship between the parties. Upon this premise it
The respondents action may not be considered as one to declare the inexistence of a contract concluded that the four-year prescriptive period should he deemed to have commenced in
for lack of consideration. It is total absence of cause or consideration that renders a contract February, 1958 when private respondents had actual notice of the fraud. Without resolving the
absolutely void and inexistent. 5 In the case at bar consideration was not absent. The sum of question of whether or not constructive notice applies when a fiduciary relationship exists
P1.00 appears in the document as one of the considerations for the assignment of inheritance. between the parties a point which is not in issue in this case we hold that the respondent
In addition and this of great legal import the document recites that the decedent Mateo courts conclusion, lacking the necessary premise upon which it should be predicated, is
Carantes had, during his lifetime, expressed to the signatories to the contract that the property erroneous.
subject-matter thereof rightly and exclusively belonged to the petitioner Maximino Carantes.
This acknowledgment by the signatories definitely constitutes valuable consideration for the Definitely, no express trust was created in favor of the private respondents. If trust there was, it
contract. could only be as held by respondent court a constructive trust, which is imposed by law. In
constructive trusts there is neither promise nor fiduciary relations; the so-called trustee does
- III - not recognize any trust and has no intent to hold the property for the beneficiary. 10 In at least
two cases, the rule of constructive notice was applied by this Court although a constructive trust declaration as owner of the land and the name of the petitioner as administrator, that the real
had been created. Thus, in Lopez, et at. v. Gonzaga, Et Al., 11 where the plaintiffs and the estate taxes, were shared by the other heirs with the petitioner, and that some of the heirs are
defendants were co-heirs and the decedent owner of the lands had merely allowed the principal living in houses erected by them on the land, wane in legal significance in the face of the
defendant to use the products and rentals of the lands for purposes of coconut oil petitioners aforesaid uncontroverted acts of strict dominion. In connection with the payment of
experimentation, but said defendant later caused the transfer of the certificates of title in his real estate taxes, it is to be noted that the respondent court also found that all the receipts
own name through the registration of certain judicial orders, this Court held that the recording were issued in the name of the petitioner. The circumstances mentioned above do not make out
of the judicial orders sufficed as notice to the other heirs, for the rule is that knowledge of what a case of a continuing and subsisting trust.
might have been revealed by proper inquiry is imputable to the inquirer. In Gerona, et al v. De
Guzman, Et Al., supra, the petitioners and the private respondents were co-heirs, and the ACCORDINGLY, the judgment of the Court of Appeals appealed from is set aside, and another
petitioners action for partition and reconveyance was based upon a constructive trust resulting entered dismissing the complaint in Civil Case No. 804 of the Court of First Instance of Baguio.
from fraud. This Court held that the discovery of the fraud "is deemed to have taken place, in No costs.
the case at bar, on June 25, 1948, when said instrument was filed with the Register of Deeds
and new certificates of title were issued in the name of respondents exclusively, for the Makasiar, Muoz Palma and Martin, JJ., concur.
registration of the deed of extrajudicial settlement constituted constructive notice to the whole
world." cralaw virtua1aw library
Separate Opinions

- IV -

The decision under review found that a constructive trust was created in favor of the private TEEHANKEE, J., concurring: chanrob1es virtual 1aw library

respondents, and, holding that an action for reconveyance based on constructive trust is
imprescriptible, recognized the right of the private respondents to file an action for Concur on the ground that respondents action based on constructive trust prescribed after ten
reconveyance regardless of the lapse of time, citing Gayandato v. Treasurer of the Philippine years.chan

Islands, Et. Al. 12

We have examined Gaglandato, and have failed to find support therein for the holding of the
respondent court. In any event, it is now settled that an action for reconveyance based on
implied or constructive trust is prescriptible; it prescribes in ten years. 13 In this case the ten-
year prescriptive period began on March 16, 1940, when the petitioner registered the deed of
"Assignment of Right to Inheritance" and secured the cancellation of the certificate of title in the
joint names of the heirs of Mateo Carantes, and, in lieu thereof, the issuance of a new title
exclusively in his name. 14 Since the present action was commenced only on September 4,
1958, it is clear that the same is barred by extinctive prescription.

-V-

It was also held by the respondent court that the petitioner was merely holding the property in
trust for the benefit of his co-heirs as administrator, hence, there was a continuing and
subsisting trust, and pursuant to section 38 of the Code of Civil Procedure, the provisions of the
said Code on prescription (Secs. 40-41) do not apply. It is our view, however, that there was no
continuing and subsisting trust.

From March 16, 1940, when the petitioner registered the deed of assignment and had the
certificate of title in the names of the heirs cancelled and a new certificate of title issued in his
own name, he began to hold the property in open and clear repudiation of any trust. 15 It will
be noted that on the same date, the petitioner also executed a formal deed of sale over portions
of Lot No. 44 in favor of the Government. In 1948 he mortgaged Lot No. 44-D with the
Philippine National Bank as his exclusive property. The petitioners exercise of such rights of
dominion is anathema to the concept of a continuing and subsisting trust. The circumstances,
found by the respondent court, that the name of Mateo Carantes still appeared in the tax
 This is a petition for review on certiorari 1 to annul the Decision 2 dated 26 June 1996 of the
Court of Appeals in CA-G.R. CV No. 41996. The Court of Appeals affirmed the Decision 3 dated
18 February 1993 rendered by Branch 65 of the Regional Trial Court of Makati ("trial court") in
Civil Case No. 89-5174. The trial court dismissed the case after it found that the parties
executed the Deeds of Sale for valid consideration and that the plaintiffs did not have a cause of
action against the defendants.chanrob1es virtua1 1aw 1ibrary

The Facts

The Court of Appeals summarized the facts of the case as follows: chanrob1es virtual 1aw library

Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs
Consolacion, Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita,
Felicitas, Fe, and Gavino, all surnamed JOAQUIN. The married Joaquin children are joined in this
action by their respective spouses.

Sought to be declared null and void ab initio, are certain deeds of sale of real property executed
by defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant
FIRST DIVISION children and the corresponding certificates of title issued in their names, to wit: chanrob1es virtual 1aw library

[G.R. No. 126376. November 20, 2003.] 1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-256395 executed
on 11 July 1978, in favor of defendant Felicitas Joaquin, for a consideration of P6,000.00 (Exh.
SPOUSES BERNARDO BUENAVENTURA and CONSOLACION JOAQUIN, SPOUSES "C"), pursuant to which TCT No. [36113/T-172] was issued in her name (Exh. "C-1");
JUANITO EDRA and NORA JOAQUIN, SPOUSES RUFINO VALDOZ and EMMA JOAQUIN,
and NATIVIDAD JOAQUIN, Petitioners, v. COURT OF APPEALS, SPOUSES LEONARDO 2. Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394 executed
JOAQUIN and FELICIANA LANDRITO, SPOUSES FIDEL JOAQUIN and CONCHITA on 7 June 1979, in favor of defendant Clarita Joaquin, for a consideration of P1[2],000.00 (Exh.
BERNARDO, SPOUSES TOMAS JOAQUIN and SOLEDAD ALCORAN, SPOUSES ARTEMIO "D"), pursuant to which TCT No. S-109772 was issued in her name (Exh. "D-1");
JOAQUIN and SOCORRO ANGELES, SPOUSES ALEXANDER MENDOZA and CLARITA
JOAQUIN, SPOUSES TELESFORO CARREON and FELICITAS JOAQUIN, SPOUSES 3. Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394 executed
DANILO VALDOZ and FE JOAQUIN, and SPOUSES GAVINO JOAQUIN and LEA on 12 May 1988, in favor of defendant spouses Fidel Joaquin and Conchita Bernardo, for a
ASIS, Respondents. consideration of P54,[3]00.00 (Exh. "E"), pursuant to which TCT No. 155329 was issued to
them (Exh. "E-1");
DECISION
4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394 executed
on 12 May 1988, in favor of defendant spouses Artemio Joaquin and Socorro Angeles, for a
consideration of P[54,3]00.00 (Exh. "F"), pursuant to which TCT No. 155330 was issued to them
(Exh. "F-1"); and
CARPIO, J.:
5. Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-256395
executed on 9 September 1988, in favor of Tomas Joaquin, for a consideration of P20,000.00
(Exh. "G"), pursuant to which TCT No. 157203 was issued in her name (Exh. "G-1").

The Case [6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-256395 executed
on 7 October 1988, in favor of Gavino Joaquin, for a consideration of P25,000.00 (Exh. "K"),
pursuant to which TCT No. 157779 was issued in his name (Exh. "K-1").]
 court stated: chanrob1es virtual 1aw library

In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title,
plaintiffs, in their complaint, aver:
chanrob1es virtual 1aw library In the first place, the testimony of the defendants, particularly that of the . . . father will show
that the Deeds of Sale were all executed for valuable consideration. This assertion must prevail
x x x over the negative allegation of plaintiffs.

And then there is the argument that plaintiffs do not have a valid cause of action against
defendants since there can be no legitime to speak of prior to the death of their parents. The
The deeds of sale, Annexes "C," "D," "E," "F," and "G," [and "K" ] are simulated as they are, are court finds this contention tenable. In determining the legitime, the value of the property left at
NULL AND VOID AB INITIO because the death of the testator shall be considered (Art. 908 of the New Civil Code). Hence, the
legitime of a compulsory heir is computed as of the time of the death of the decedent. Plaintiffs
a) Firstly, there was no actual valid consideration for the deeds of sale . . . over the properties therefore cannot claim an impairment of their legitime while their parents live.
in litis;
All the foregoing considered, this case is DISMISSED.
b) Secondly, assuming that there was consideration in the sums reflected in the questioned
deeds, the properties are more than three-fold times more valuable than the measly sums In order to preserve whatever is left of the ties that should bind families together, the
appearing therein; counterclaim is likewise DISMISSED.

c) Thirdly, the deeds of sale do not reflect and express the true intent of the parties (vendors No costs.
and vendees); and
SO ORDERED. 8
d) Fourthly, the purported sale of the properties in litis was the result of a deliberate conspiracy
designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime. The Ruling of the Court of Appeals

x x x The Court of Appeals affirmed the decision of the trial court. The appellate court ruled: chanrob1es virtual 1aw library

Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos. 36113/T-172,
S-109772, 155329, 155330, 157203 [and 157779] issued by the Registrar of Deeds over the
properties in litis . . . are NULL AND VOID AB INITIO.
Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against
them as well as the requisite standing and interest to assail their titles over the properties in
litis; (2) that the sales were with sufficient considerations and made by defendants parents
voluntarily, in good faith, and with full knowledge of the consequences of their deeds of sale;
and (3) that the certificates of title were issued with sufficient factual and legal basis. 4
(Emphasis in the original)
The Ruling of the Trial Court
To the mind of the Court, appellants are skirting the real and decisive issue in this case, which
is, whether . . . they have a cause of action against appellees.
Upon this point, there is no question that plaintiffs-appellants, like their defendant brothers and
sisters, are compulsory heirs of defendant spouses, Leonardo Joaquin and Feliciana Landrito,
who are their parents. However, their right to the properties of their defendant parents, as
compulsory heirs, is merely inchoate and vests only upon the latters death. While still alive,
defendant parents are free to dispose of their properties, provided that such dispositions are not
made in fraud of creditors.
Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do they
claim to be creditors of their defendant parents. Consequently, they cannot be considered as
real parties in interest to assail the validity of said deeds either for gross inadequacy or lack of
consideration or for failure to express the true intent of the parties. In point is the ruling of the
Supreme Court in Velarde, Et. Al. v. Paez, Et Al., 101 SCRA 376, thus: chanrob1es virtual 1aw library

Before the trial, the trial court ordered the dismissal of the case against defendant spouses
Gavino Joaquin and Lea Asis. 5 Instead of filing an Answer with their co-defendants, Gavino The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily
Joaquin and Lea Asis filed a Motion to Dismiss. 6 In granting the dismissal to Gavino Joaquin bound thereby; hence, they have no legal capacity to challenge their validity.
and Lea Asis, the trial court noted that "compulsory heirs have the right to a legitime but such
right is contingent since said right commences only from the moment of death of the decedent Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by the
pursuant to Article 777 of the Civil Code of the Philippines." 7 dispositions made by their defendant parents in favor of their defendant brothers and sisters.
But, as correctly held by the court a quo, "the legitime of a compulsory heir is computed as of
After trial, the trial court ruled in favor of the defendants and dismissed the complaint. The trial the time of the death of the decedent. Plaintiffs therefore cannot claim an impairment of their
legitime while their parents live." cralaw virtua1aw library ownership of the lots would eventually revert to their respondent parents. If their parents die
still owning the lots, petitioners and their respondent siblings will then co-own their parents
With this posture taken by the Court, consideration of the errors assigned by plaintiffs- estate by hereditary succession. 11
appellants is inconsequential.
It is evident from the records that petitioners are interested in the properties subject of the
WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against plaintiffs- Deeds of Sale, but they have failed to show any legal right to the properties. The trial and
appellants. appellate courts should have dismissed the action for this reason alone. An action must be
prosecuted in the name of the real party-in-interest. 12
SO ORDERED. 9
[T]he question as to "real party-in-interest" is whether he is "the party who would be benefited
Hence, the instant petition. or injured by the judgment, or the party entitled to the avails of the suit."

Issues x x x

Petitioners assign the following as errors of the Court of Appeals: chanrob1es virtual 1aw library In actions for the annulment of contracts, such as this action, the real parties are those who are
parties to the agreement or are bound either principally or subsidiarily or are prejudiced in their
1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN QUESTION rights with respect to one of the contracting parties and can show the detriment which would
HAD NO VALID CONSIDERATION. positively result to them from the contract even though they did not intervene in it (Ibaez v.
Hongkong & Shanghai Bank, 22 Phil. 572 [1912]) . . . .
2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING THAT THERE WAS
A CONSIDERATION, THE SAME IS GROSSLY INADEQUATE. These are parties with "a present substantial interest, as distinguished from a mere expectancy
or future, contingent, subordinate, or consequential interest. . . . The phrase present
3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE DO NOT substantial interest more concretely is meant such interest of a party in the subject matter of
EXPRESS THE TRUE INTENT OF THE PARTIES. the action as will entitle him, under the substantive law, to recover if the evidence is sufficient,
or that he has the legal title to demand and the defendant will be protected in a payment to or
4. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE WAS PART AND recovery by him." 13
PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING THE REST OF THE CHILDREN OF
THE SPOUSES LEONARDO JOAQUIN AND FELICIANA LANDRITO OF THEIR INTEREST OVER THE Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As
SUBJECT PROPERTIES. the appellate court stated, petitioners right to their parents properties is merely inchoate and
vests only upon their parents death. While still living, the parents of petitioners are free to
5. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS HAVE A GOOD, dispose of their properties. In their overzealousness to safeguard their future legitime,
SUFFICIENT AND VALID CAUSE OF ACTION AGAINST THE PRIVATE RESPONDENTS. 10 petitioners forget that theoretically, the sale of the lots to their siblings does not affect the value
of their parents estate. While the sale of the lots reduced the estate, cash of equivalent value
The Ruling of the Court replaced the lots taken from the estate.

We find the petition without merit. Whether the Deeds of Sale are void for lack of consideration

We will discuss petitioners legal interest over the properties subject of the Deeds of Sale before Petitioners assert that their respondent siblings did not actually pay the prices stated in the
discussing the issues on the purported lack of consideration and gross inadequacy of the prices Deeds of Sale to their respondent father. Thus, petitioners ask the court to declare the Deeds of
of the Deeds of Sale. Sale void.

Whether Petitioners have a legal interest over the properties subject of the Deeds of Sale
Petitioners Complaint betrays their motive for filing this case. In their Complaint, petitioners
asserted that the "purported sale of the properties in litis, was the result of a deliberate
conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of
their legitime." Petitioners strategy was to have the Deeds of Sale declared void so that
A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a
contract of sale becomes a binding and valid contract upon the meeting of the minds as to price.
If there is a meeting of the minds of the parties as to the price, the contract of sale is valid,
despite the manner of payment, or even the breach of that manner of payment. If the real price
is not stated in the contract, then the contract of sale is valid but subject to reformation. If
there is no meeting of the minds of the parties as to the price, because the price stipulated in
the contract is simulated, then the contract is void. 14 Article 1471 of the Civil Code states that make ridiculous contracts, use miserable judgment, and lose money by them indeed, all they
if the price in a contract of sale is simulated, the sale is void. have in the world; but not for that alone can the law intervene and restore. There must be, in
addition, a violation of the law, the commission of what the law knows as an actionable wrong,
It is not the act of payment of price that determines the validity of a contract of sale. Payment before the courts are authorized to lay hold of the situation and remedy it. (Emphasis in the
of the price has nothing to do with the perfection of the contract. Payment of the price goes into original)
the performance of the contract. Failure to pay the consideration is different from lack of
consideration. The former results in a right to demand the fulfillment or cancellation of the Moreover, the factual findings of the appellate court are conclusive on the parties and carry
obligation under an existing valid contract while the latter prevents the existence of a valid greater weight when they coincide with the factual findings of the trial court. This Court will not
contract. 15 weigh the evidence all over again unless there has been a showing that the findings of the lower
court are totally devoid of support or are clearly erroneous so as to constitute serious abuse of
Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To discretion. 20 In the instant case, the trial court found that the lots were sold for a valid
prove simulation, petitioners presented Emma Joaquin Valdozs testimony stating that their consideration, and that the defendant children actually paid the purchase price stipulated in
father, respondent Leonardo Joaquin, told her that he would transfer a lot to her through a deed their respective Deeds of Sale. Actual payment of the purchase price by the buyer to the seller
of sale without need for her payment of the purchase price. 16 The trial court did not find the is a factual finding that is now conclusive upon us.
chanrob1es virtua1 1aw 1ibrary

allegation of absolute simulation of price credible. Petitioners failure to prove absolute

simulation of price is magnified by their lack of knowledge of their respondent siblings financial WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto.
capacity to buy the questioned lots. 17 On the other hand, the Deeds of Sale which petitioners
presented as evidence plainly showed the cost of each lot sold. Not only did respondents minds SO ORDERED.
meet as to the purchase price, but the real price was also stated in the Deeds of Sale. As of the
filing of the complaint, respondent siblings have also fully paid the price to their respondent
father. 18

Whether the Deeds of Sale are void for gross inadequacy of price

Petitioners ask that assuming that there is consideration, the same is grossly inadequate as to
invalidate the Deeds of Sale.

Articles 1355 of the Civil Code states: chanrob1es virtual 1aw library

Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake or undue influence. (Emphasis supplied)

Article 1470 of the Civil Code further provides: chanrob1es virtual 1aw library

Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a
defect in the consent, or that the parties really intended a donation or some other act or
contract. (Emphasis supplied)

Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil
Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement
that the price be equal to the exact value of the subject matter of sale. All the respondents
believed that they received the commutative value of what they gave. As we stated in Vales v.
Villa: 19

Courts cannot follow one every step of his life and extricate him from bad bargains, protect him
from unwise investments, relieve him from one-sided contracts, or annul the effects of foolish
acts. Courts cannot constitute themselves guardians of persons who are not legally
incompetent. Courts operate not because one person has been defeated or overcome by
another, but because he has been defeated or overcome illegally. Men may do foolish things,
 The claim arose from an accident that occurred on October 24, 1999, when the mini bus owned
and operated by Cruz and driven by one Arturo Davin collided with the Toyota Corolla car of
Gruspe; Gruspe's car was a total wreck. The next day, on October 25, 1999, Cruz, along with
Leonardo Q. Ibias went to Gruspe's office, apologized for the incident, and executed a Joint
Affidavit of Undertaking promising jointly and severally to replace the Gruspe's damaged car in
20 days, or until November 15, 1999, of the same model and of at least the same quality; or,
alternatively, they would pay the cost of Gruspe's car amounting to P350,000.00, with interest
at 12% per month for any delayed payment after November 15, 1999, until fully paid. 5 When
Cruz and Leonardo failed to comply with their undertaking, Gruspe filed a complaint for
collection of sum of money against them on November 19, 1999 before the RTC.

In their answer, Cruz and Leonardo denied Gruspe's allegation, claiming that Gruspe, a lawyer,
prepared the Joint Affidavit of Undertaking and forced them to affix their signatures thereon,
without explaining and informing them of its contents; Cruz affixed his signature so that his
mini bus could be released as it was his only means of income; Leonardo, a barangay official,
SECOND DIVISION accompanied Cruz to Gruspe's office for the release of the mini bus, but was also deceived into
signing the Joint Affidavit of Undertaking.
G.R. NO. 191431 : March 13, 2013

Leonardo died during the pendency of the case and was substituted by his widow, Esperanza.
RODOLFO G. CRUZ and ESPERANZA IBIAS, Petitioners, v. ATTY. DELFIN Meanwhile, Gruspe sold the wrecked car for P130,000.00.
GRUSPE, Respondent.

In a decision dated September 27, 2004, the RTC ruled in favor of Gruspe and ordered Cruz and
DECISION Leonardo to pay P220,000.00,6 plus 15% per annum from November 15, 1999 until fully paid,
and the cost of suit.

BRION, J.:
On appeal, the CA affirmed the RTC decision, but reduced the interest rate to 12% per annum
pursuant to the Joint Affidavit of Undertaking. 7 It declared that despite its title, the Joint
Affidavit of Undertaking is a contract, as it has all the essential elements of consent, object
Before the Court is the petition for review on certiorari1 filed under Rule 45 of the Rules of
certain, and consideration required under Article 1318 of the Civil Code. The CA further said that
Court, assailing the decision dated July 30, 2009 and the resolution dated February 19, 2010
2 3
Cruz and Leonardo failed to present evidence to support their contention of vitiated consent. By
of the Court of Appeals (CA) in CA-G.R. CV No. 86083. The CA rulings affirmed with modification
signing the Joint Affidavit of Undertaking, they voluntarily assumed the obligation for the
the decision dated September 27, 2004 of the Regional Trial Court (RTC) of Bacoor, Cavite,
damage they caused to Gruspe's car; Leonardo, who was not a party to the incident, could have
Branch 19, in Civil Case No. BCV-99-146 which granted respondent Atty. Delfin Grupe's claim
refused to sign the affidavit, but he did not.
for payment of sum of money against petitioners Rodolfo G. Cruz and Esperanza Ibias. 4
chanroble svirtualawlibrary

THE PETITION
THE FACTUAL BACKGROUND

In their appeal by certiorari with the Court, Cruz and Esperanza assail the CA ruling, contending
that the Joint Affidavit of Undertaking is not a contract that can be the basis of an obligation to
pay a sum of money in favor of Gruspe. They consider an affidavit as different from a contract:
an affidavit's purpose is simply to attest to facts that are within his knowledge, while a contract
requires that there be a meeting of the minds between the two contracting parties.
There is also no merit to the argument of vitiated consent. An allegation of vitiated consent
must be proven by preponderance of evidence; Cruz and Leonardo failed to support their
allegation.

Even if the Joint Affidavit of Undertaking was considered as a contract, Cruz and Esperanza
claim that it is invalid because Cruz and Leonardo's consent thereto was vitiated; the contract
was prepared by Gruspe who is a lawyer, and its contents were never explained to them. Although the undertaking in the affidavit appears to be onerous and lopsided, this does not
Moreover, Cruz and Leonardo were simply forced to affix their signatures, otherwise, the mini necessarily prove the alleged vitiation of consent. They, in fact, admitted the genuineness and
van would not be released. due execution of the Joint Affidavit and Undertaking when they said that they signed the same
to secure possession of their vehicle. If they truly believed that the vehicle had been illegally
impounded, they could have refused to sign the Joint Affidavit of Undertaking and filed a
complaint, but they did not. That the release of their mini bus was conditioned on their signing
Also, they claim that prior to the filing of the complaint for sum of money, Gruspe did not make the Joint Affidavit of Undertaking does not, by itself, indicate that their consent was forced they
any demand upon them. Hence, pursuant to Article 1169 of the Civil Code, they could not be may have given it grudgingly, but it is not indicative of a vitiated consent that is a ground for
considered in default. Without this demand, Cruz and Esperanza contend that Gruspe could not the annulment of a contract.
yet take any action.

Thus, on the issue of the validity and enforceability of the Joint Affidavit of Undertaking, the CA
THE COURT'S RULING did not commit any legal error that merits the reversal of the assailed decision.

The Court finds the petition partly meritorious and accordingly modifies the judgment of the CA. Nevertheless, the CA glossed over the issue of demand which is material in the computation of
interest on the amount due. The RTC ordered Cruz and Leonardo to pay Gruspe "P350,000.00
as cost of the car xxx plus fifteen percent (15%) per annum from November 15, 1999 until fully
paid."11 The 15% interest (later modified by the CA to be 12%) was computed from November
Contracts are obligatory no matter what their forms may be, whenever the essential requisites 15, 1999 the date stipulated in the Joint Affidavit of Undertaking for the payment of the value of
for their validity are present. In determining whether a document is an affidavit or a contract, Gruspe's car. In the absence of a finding by the lower courts that Gruspe made a demand prior
the Court looks beyond the title of the document, since the denomination or title given by the to the filing of the complaint, the interest cannot be computed from November 15, 1999
parties in their document is not conclusive of the nature of its contents. In the construction or because until a demand has been made, Cruz and Leonardo could not be said to be in
interpretation of an instrument, the intention of the parties is primordial and is to be pursued. If default.12 "In order that the debtor may be in default, it is necessary that the following
the terms of the document are clear and leave no doubt on the intention of the contracting requisites be present: (1) that the obligation be demandable and already liquidated; (2) that
parties, the literal meaning of its stipulations shall control. If the words appear to be contrary to the debtor delays performance; and (3) that the creditor requires the performance judicially and
the parties' evident intention, the latter shall prevail over the former.9
chanroblesvirtualawlibrary

extrajudicially."13 Default generally begins from the moment the creditor demands the
performance of the obligation. In this case, demand could be considered to have been made
upon the filing of the complaint on November 19, 1999, and it is only from this date that the
interest should be computed.
A simple reading of the terms of the Joint Affidavit of Undertaking readily discloses that it
contains stipulations characteristic of a contract. As quoted in the CA decision, the Joint
10

Affidavit of Undertaking contained a stipulation where Cruz and Leonardo promised to replace
the damaged car of Gruspe, 20 days from October 25, 1999 or up to November 15, 1999, of the Although the CA upheld the Joint Affidavit of Undertaking, we note that it imposed interest rate
same model and of at least the same quality. In the event that they cannot replace the car on a per annum basis, instead of the per month basis that was stated in the Joint Affidavit of
within the same period, they would pay the cost of Gruspe's car in the total amount Undertaking without explaining its reason for doing so. 14 Neither party, however, questioned the
of P350,000.00, with interest at 12% per month for any delayed payment after November 15, change. Nonetheless, the Court affirms the change in the interest rate from 12% per month to
1999, until fully paid. These, as read by the CA, are very simple terms that both Cruz and 12% per annum, as we find the interest rate agreed upon in the Joint Affidavit of Undertaking
Leonardo could easily understand. excessive.15
chanroblesvirtualawlibrary
WHEREFORE, we AFFIRM the decision dated July 30, 2009 and the resolution dated February
19, 2010 of the Court of Appeals in CA-G.R. CV No. 86083, subject to the Modification that the
twelve percent (12%) per annum interest imposed on the amount due shall accrue only from
November 19, 1999, when judicial demand was made.

SO ORDERED.
 DESPITE LACK OF SUCH NOTICE. As to the lack of 3 days notice, the record shows that
appellees had filed their opposition (in detail) to the second motion to reconsider; so that even
if it were true that respondents were not given the full 3 days notice, they were not deprived of
any substantial right.
EN BANC
5. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CIVIL CODES CONTRACTUAL SYSTEM
[G.R. No. L-27010. April 30, 1969.] FOLLOWS THAT OF THE SPANISH CIVIL CODE OF 1889 AND OF THE "ORDENAMIENTO DE
ALCALA." In the matter of formalities, the contractual system of the Civil Code still follows
MARLENE DAUDEN-HERNAEZ, Petitioner, v. HON. WALFRIDO DELOS ANGELES, Judge that of the Spanish Civil Code of 1889 and of the "Ordenamiento de Alcala" of upholding the
of the Court of First Instance of Quezon City, HOLLYWOOD FAR EAST PRODUCTIONS, spirit and intent of the parties over formalities: hence, in general, contracts are valid and
INC., AND RAMON VALENZUELA, Respondents. binding from their perfection regardless of form, whether they be oral or written. This is plain
from Articles 1315 and 1356 of the present Civil Code.
R. M . Coronado & Associates for Petitioner.
6. ID.; ID.; GENERAL RULE AS REGARDS FORM IN CONTRACT; EXCEPTION. The general rule
Francisco Lavides for Respondent. that the form (oral and written) is irrelevant to the binding effect inter partes of a contract that
possesses the three validating elements of consent, subject matter and causa, Article 1356 of
the Civil Code establishes only two exceptions, to wit: (a) Contracts or which the law itself
requires that they be in some particular form (writing) in order to make them valid and
enforceable (the so-called solemn contracts). Of these the typical example are the donation of
SYLLABUS immovable property (Article 749) and donation of movables worth more than P5,000.00 (Article
743); contracts to pay interest on loans (mutuum) (Article 1956); and the agreements
contemplated by Articles 1744, 1773, 1874 and 2134 of the present Civil Code. (b) Contracts
that the law requires to be proved by some writing (memorandum) of its terms, as in those
covered by the old Statute of Frauds, now Article 1403(2) of the Civil Code. Their existence not
1. REMEDIAL LAW; PLEADING AND PRACTICE; MOTION TO DISMISS: WHEN COURT SUSTAINS being provable by mere oral testimony (unless whooly or partly executed), these contracts are
SUCH MOTION PLAINTIFF SHOULD BE GIVEN OPPORTUNITY TO AMEND HIS COMPLAINT. It is exceptional in requiring a writing embodying the terms thereof for their enforceability by action
well established rule in our jurisprudence that when a court sustains a demurrer or motion to in court.
dismiss it is error for the court to dismiss the complaint without giving the party plaintiff an
opportunity to amend his complaint if he so chooses. Insofar as the first order of dismissal did 7. ID.; ID.; CONTRACT FOR SERVICE; WRITTEN FORM THEREOF IS NOT NECESSARY FOR
not provide that the same was without prejudice to amendment of the complaint, or reserve to ENFORCEMENT. The contract sued upon by petitioner (compensation for services) need not
the plaintiff the right to amend his complaint, the said order was erroneous; and this error was be in written form. It is true that it appears included in Article 1358, last clause, providing that
compounded when the motion to accept the amended complaint was denied in the subsequent "all other contracts where the amount involved exceeds five hundred pesos must appear in
order of 3 October 1966. Hence, the petitioner-plaintiff was within her rights in filing her so- writing, even a private one." But Article 1358 nowhere provides that the absence of written
called second motion for reconsideration, which was actually a first motion against the refusal to form in this case will make the agreement invalid or unenforceable. On the contrary, Article
admit the amended complaint. 1357 clearly indicates that contracts covered by Article 1358 are binding and enforceable by
action or suit despite the absence of writing.
2. ID.; ID.; ID.; MOTION TO DISMISS IS NOT A RESPONSIVE PLEADING; PLAINTIFF ENTITLED
TO AMEND ORIGINAL DISMISSED COMPLAINT. Since a motion to dismiss is not a responsive
pleading, the plaintiff- petitioner was entitled as of right to amend the original dismissed
complaint.
DECISION
3. ID.; ID.; MOTION FOR RECONSIDERATION; SECOND MOTION NOT PRO FORMA WHEN BASED
ON A DIFFERENT GROUND. The second motion for reconsideration was addressed to the
courts refusal to allow an amendment to the original complaint, and this was a ground not
invoked in the first motion for reconsideration. Thus, the second motion to reconsider was really
not pro forma, as it was based on a different ground, even if in its first part it set forth in REYES, J.B.L., Acting C.J.:
greater detail the arguments against the correctness of the first order to dismiss.

4. ID.; ID.; REQUIREMENT OF 3 DAYS NOTICE; NO DEPRIVATION OF SUBSTANTIAL RIGHT

 defendant-appellee the 3 days notice provided by the rules. This argument is not tenable, for
the reason that the second motion for reconsideration was addressed to the courts refusal to
allow an amendment to the original complaint, and this was a ground not invoked in the first
Petition for a writ of certiorari to set aside certain orders of the Court of First Instance of motion for reconsideration. Thus, the second motion to reconsider was really not pro forma, as
Quezon City (Branch IV), in its Civil Case No. Q-10288, dismissing a complaint for breach of it was based on a different ground, even if in its first part it set forth in greater detail the
contract and damages, denying reconsideration, refusing to admit an amended complaint, and arguments against the correctness of the first order to dismiss. And as to the lack of 3 days
declaring the dismissal final and unappealable. notice, the record shows that appellees had filed their opposition (in detail) to the second
motion to reconsider (Answer, Annex 4); so that even if it were true that respondents were not
The essential facts are the following: chanrob1es virtual 1aw library
given the full 3 days notice, they were not deprived of any substantial right. Therefore, the
claim that the first order of dismissal had become final and unappealable must be overruled.
Petitioner Marlene Dauden Hernaez, a motion picture actress, had filed a complaint against
herein private respondents, Hollywood Far East Productions, Inc., and its President and General It is well to observe in this regard that since a motion to dismiss is not a responsive pleading,
Manager, Ramon Valenzuela, to recover P14,700.00 representing a balance allegedly due said the plaintiff-petitioner was entitled as of right to amend the original dismissed complaint. In
petitioner for her services as leading actress in two motion pictures produced by the company, Paeste v. Jaurigue, 94 Phil. 179, 181, this Court ruled as follows: jgc:chanrobles.com .ph

and to recover damages. Upon motion of defendants, the respondent court (Judge Walfrido
delos Angeles, presiding) ordered the complaint dismissed, mainly because the "claim of "Appellants contend that the lower court erred in not admitting their amended complaint and in
plaintiff was not evidenced by any written document, either public or private" and the complaint holding that their action had already prescribed. Appellants are right on both counts.
"was defective on its face" for violating Articles 1356 and 1358 of the Civil Code of the
Philippines, as well as for containing defective allegations. Plaintiff sought reconsideration of the "Amendments to pleadings are favored and should be liberally allowed in the furtherance of
dismissal and for admission of an amended complaint, attached to the action. The court denied justice (Torres v. Tomacruz, 49 Phil. 913). Moreover, under Section 1 of Rule 17, Rules of Court,
reconsideration and the leave to amend, whereupon, a second motion for reconsideration was a party may amend his pleading once as a matter of course, that is, without leave of court, at
filed. Nevertheless, the court also denied it for being pro forma, as its allegations "are, more or any time before a responsive pleading is served. A motion to dismiss is not a responsive
less, the same as the first motion," and for not being accompanied by an affidavit of merits, and pleading (Moran on the Rules of Court, vol. 1, 1952, ed., p. 376). As plaintiffs amended their
further declared the dismissal final and unappealable. In view of the attitude of the Court of complaint before it was answered, the motion to admit the amendment should not have been
First Instance, plaintiff resorted to this Court. denied. It is true that the amendment was presented after the original complaint had been
ordered dismissed. But that order was not yet final for it was still under reconsideration." cralaw virtua1aw library

The answer sets up the defense that "the proposed amended complaint did not vary in any
material respect from the original complaint except in minor details, and suffers from the same The foregoing observations leave this Court free to discuss the main issue in this petition. Did
vital defect of the original complaint," which is the violation of Article 1356 of the Civil Code, in the court below abuse its discretion in ruling that a contract for personal services involving more
that the contract sued upon was not alleged to be in writing; that by Article 1358 the writing than P500.00 was either invalid or unenforceable under the last paragraph of Article 1358 of the
was absolute and indispensable, because the amount involved exceeds five hundred pesos; and Civil Code of the Philippines?
that the second motion for reconsideration did not interrupt the period for appeal, because it
was not served on three days notice. We hold that there was abuse, since the ruling herein contested betrays a basic and lamentable
misunderstanding of the role of the written form in contracts, as ordained in the present Civil
We shall take up first the procedural question. It is a well established rule in our jurisprudence Code.
that when a court sustains a demurrer or motion to dismiss it is error for the court to dismiss
the complaint without giving the party plaintiff an opportunity to amend his complaint if he so In the matter of formalities, the contractual system of our Civil Code still follows that of the
chooses. 1 Insofar as the first order of dismissal (Annex D, Petition) did not provide that the Spanish Civil Code of 1889 and of the "Ordenamiento de Alcala" 2 of upholding the spirit and
same was without prejudice to amendment of the complaint, or reserve to the plaintiff the right intent of the parties over formalities: hence, in general, contracts are valid and binding from
to amend his complaint, the said order was erroneous; and this error was compounded when their perfection regardless or form, whether they be oral or written. This is plain from Articles
the motion to accept the amended complaint was denied in the subsequent order of 3 October 1315 and 1356 of the present Civil Code. Thus, the first cited provision prescribes: jgc:chanrobles.com .ph

1966 (Annex F, Petition). Hence, the petitioner-plaintiff was within her rights in filing her so-
called second motion for reconsideration, which was actually a first motion against the refusal to "ARTICLE 1315. Contracts are perfected by mere consent, and from that moment the parties
admit the amended complaint. are bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage and
It is contended that the second motion for reconsideration was merely pro forma and did not law." (Emphasis supplied)
suspend the period to appeal from the first order of dismissal (Annex D) because (1) it merely
reiterated the first motion for reconsideration and (2) it was filed without giving the counsel for Concordantly, the first part of Article 1356 of the Code provides: jgc:chanroble s.com.ph
"ARTICLE 1356. Contracts shall be obligatory in whatever form they may have been entered for services was not in writing the same could not be sued upon, or that her complaint should
into, provided all the essential requisites for their validity are present . . ." (Emphasis supplied) be dismissed for failure to state a cause of action because it did not plead any written
agreement.
These essential requisites last mentioned are normally (1) consent, (2) proper subject matter,
and (3) consideration or causa for the obligation assumed (Article 1318). 3 So that once the The basic error in the lower courts decision lies in overlooking that in our contractual system it
three elements exist, the contract is generally valid and obligatory, regardless of the form, oral is not enough that the law should require that the contract be in writing, as it does in Article
or written, in which they are couched. 1358. The law must further prescribe that without the writing the contract is not valid or not
enforceable by action.
To this general rule, the Code admits exceptions, set forth in the second portion of Article
1356: jgc:chanrobles.com .ph WHEREFORE, the order dismissing the complaint is set aside, and the case is ordered remanded
to the court of origin for further proceedings not at variance with this decision. Costs to be
"However, when the law requires that a contract be in some form in order that it may be valid or solidarily paid by private respondents Hollywood Far Fast Productions, Inc., and Ramon
enforceable, or that a contract be proved in a certain way, that requirement is absolute and Valenzuela.
indispensable . . ." cralaw virtua1aw library

It is thus seen that to the general rule that the form (oral or written) is irrelevant to the binding
effect inter partes of a contract that possesses the three validating elements of consent, subject
matter, and causa, Article 1356 of the Code establishes only two exceptions, to wit: chanrob1es virtual 1aw library

(a) Contracts for which the law itself requires that they be in some particular form (writing) in
order to make them valid and enforceable (the so-called solemn contracts). Of these typical
example is the donation of immovable property that the law (Article 749) requires to be
embodied in a public instrument in order "that the donation may be valid," i.e., existing or
binding. Other instances are the donation of movables worth more than P5,000.00 which must
be in writing, "otherwise the donation shall be void" (Article 748); contracts to pay interest on
loans (mutuum) that must be "expressly stipulated in writing" (Article 1956); and the
agreements contemplated by Articles 1744, 1773, 1874 and 2134 of the present Civil Code.

(b) Contracts that the law requires to be proved by some writing (memorandum) of its terms,
as in those covered by the old Statute of Frauds, now Article 1403(2) of the Civil Code. Their
existence not being provable by mere oral testimony (unless wholly or partly executed), these
contracts are exceptional in requiring a writing embodying the terms thereof for their
enforceability by action in court.

The contract sued upon by petitioner herein (compensation for services) does not come under
either exception. It is true that it appears included in Article 1358, last clause, providing that
"all other contracts where the amount involved exceeds five hundred pesos must appear in
writing, even a private one." But Article 1358 nowhere provides that the absence of written
form in this case will make the agreement invalid or unenforceable. On the contrary, Article
1357 clearly indicates that contracts covered by Article 1358 are binding and enforceable by
action or suit despite the absence of writing.

"ARTICLE 1357. If the law requires a document or other special form, as in the acts and
contracts enumerated in the following article, the contracting parties may compel each other to
observe that form, once the contract has been perfected. This right may be exercised
simultaneously with the action upon the contract." (Emphasis supplied)

It thus becomes inevitable to conclude that both the court a quo as well as the private
respondents herein were grossly mistaken in holding that because petitioner Daudens contract
 The facts are as follows:

Private respondent, the late Juanito Borromeo, Sr.4 (hereinafter, respondent), is the co-owner
and overseer of certain parcels of land located in Pooc, Talisay, Cebu, designated as Lots Nos.
2587 and 2592 of the Talisay-Manglanilla Estate. Respondent owns six-eighths (6/8) of Lot No.
2587 while the late spouses Inocencio Bascon and Basilisa Maneja (Spouses Bascon) own two-
eights (2/8) thereof. On the other hand, Lot No. 2592 is owned in common by respondent and
the heirs of one Nicolas Maneja. However, the proportion of their undivided shares was not
determined a quo.

Prior to the institution of the present action, petitioners Tining Resuena, Alejandra Garay, Lorna
Resuena, Eleuterio Resuena, and Unisima Resuena resided in the upper portion of Lot No. 2587,
allegedly under the acquiescence of the Spouses Bascon and their heir, Andres Bascon. On the
other hand, petitioner Eutiquia Rosario occupied a portion of Lot No. 2592, allegedly with the
permission of the heirs of Nicolas Maneja, one of the original co-owners of Lot No. 2587.
Respondent claims that all petitioners have occupied portions of the subject property by virtue
of his own liberality.

Respondent developed portions of Lots Nos. 2587 and 2592 occupied by him into a resort
SECOND DIVISION known as the Borromeo Beach Resort. In his desire to expand and extend the facilities of the
resort that he established on the subject properties, respondent demanded that petitioners
[G.R. NO. 128338 : March 28, 2005] vacate the property. Petitioners, however, refused to vacate their homes.

TINING RESUENA, ALEJANDRA GARAY, LORNA RESUENA, ELEUTERIO RESUENA, On 16 February 1994, respondent filed a Complaint5 for ejectment with the MTC against the
EUTIQUIA ROSARIO and UNISIMA RESUENA, Petitioner, v. HON. COURT OF APPEALS, petitioners. After a summary proceeding, the MTC, in a Decision dated 10 October 1994, found
6

11th DIVISION and JUANITO BORROMEO, SR., Respondents. that Lots Nos. 2587 and 2592 were owned in common by respondent with other persons. The
MTC ruled that respondent did not have a preferential right of possession over the portions
occupied by petitioners, since Lots Nos. 2587 and 2592 were not yet partitioned nor the
disputed portions assigned to respondent as his determinate share. Thus, the MTC held that
DECISION respondent had no right to evict petitioners therefrom. Consequently,
respondent's Complaint was dismissed.

TINGA, J.:
Notably, the MTC held that respondent and the spouses Bascon were the owners in common of
Lot No. 2587 and their respective shares had not yet been determined by partition as proven by
a testimony given by respondent in Civil Case No. R-14600, viz:
This is a Rule 45 Petition for Review on Certiorari of the Decision1 of the Court of Appeals
affirming that of the Regional Trial Court (RTC) of Cebu,2 which in turn reversed that of the
Metropolitan Trial Court (mtc) of Talisay, Cebu.3
Q. And the participation there of Inocencio Bascon is 2/8 of the said parcel of land? cralawlibrary
A. Yes sir.
Q. And until the present that parcel of land is undivided? cralawlibrary
A. It is not yet partitioned, but during the time of Basilisa Maneja we had already made some
indications of the portions that we came to occupy.
Q. That is the parcel of land where you have your beach resort? cralawlibrary
A. Yes, sir; and that was our agreement, verbally, that with respect to the portion of the land
towards the sea-shore it will be my share and that portion of the land towards the upper part
will be theirs."7
On appeal, the RTC reversed the Decision of the MTC. It held that Article 487 of the Civil Code,
which allows any one of the co-owners to bring an action in ejectment, may successfully be
invoked by the respondent because, in a sense, a co-owner is the owner and possessor of the
whole, and that the suit for ejectment is deemed to be instituted for the benefit of all co-
owners.8 The RTC also ruled that assuming petitioners were authorized to occupy a portion of
the co-owned property, they could resume this occupation when the properties shall have been
partitioned and allocated to the ones who gave them permission to reside therein. It thus held:
WHEREFORE, judgment of the lower court is hereby reversed and the defendants are hereby
directed to vacate the premises in question without prejudice to their going back to the land
after partition shall have been effected by the coheirs and/or co-owners among themselves but Appeals, that respondent has the right to eject petitioner Eutiquia Rosario from Lot No. 2592.
to the specific portion or portions adjudicated to the person or persons who allegedly authorized
them to occupy their portions by tolerance.9
The Court of Appeals affirmed the Decision of the RTC; hence, this petition which involves the
following assignment of errors:10
1. That with grave abuse of discretion, amounting to excess of jurisdiction, the honorable
eleventh division of the court of appeals erred in NOT APPLYING and/or in NOT DECLARING
private respondent juanito borromeo estopped in filing this ejectment case against the herein
six (6) petitioners.
2. That with grave abuse of discretion, the honorable eleventh division of the court of appeals
erred in incorrectly applying the statute of frauds, considering that the verbal agreement
entered into by and between spouses inocencio bascon and basilisa maneja on the one hand
and juanito borromeo on the other more than twenty (20) years ago today, was already an
EXECUTED CONTRACT.
3. That with grave abuse of discretion, amounting to excess of jurisdiction, the honorable
eleventh division of the court of appeals erred in ignoring outright article 493 of the new civil
code of the philippines, considering that the six (6) petitioners are only ASSIGNEES, pure and
simple, of co-owners spouses ignacio bascon and basilisa maneja and/or andres bascon, the
adopted son of the said spouses.
4. That granting arguendo that the herein six (6) petitioners have to be ejected, the eleventh
division of the court of appeals erred in NOT remanding this case to the court of origin for the
reception of evidence for damages, pursuant to and in accordance with art. 546, new civil code.
The petition cannot prosper.
At the outset it must be stated that petitioners ground their petition on respondent's testimony
in Civil Case No. R-14600 that he had agreed with co-owner, Basilisa Maneja, on the portions
they each were to occupy in Lot No. 2587 prior to the partition of the property. However,
respondent's testimony and, consequently, the agreement alluded to therein pertains solely to
Lot No. 2587 which, admittedly, all of petitioners occupy, save for Eutiquia Rosario who occupies
Lot No. 2592. No argument was presented in this petition as regards the latter's claim. Having
no basis to review Eutiquia Rosario's claim to be allowed to continue in her occupation of Lot No.
2592, this Court maintains the holding of the RTC on this matter, as affirmed by the Court of
With regard to the other five (5) petitioners, the Court notes that their first three assignments
of errors are interrelated and built on each other. Petitioners allege that respondent's testimony
in Civil Case No. R-14600, expressing that the upper two-eighths (2/8) portion of Lot No. 2587
would be occupied by Basilisa Maneja, constituting as it does a waiver of said portion, has
estopped respondent from claiming the portion. Basilisa Maneja and her husband allegedly
relied on this agreement when the spouses assigned the upper portion of Lot No. 2587 to
petitioners. Moreover, petitioners claim that their occupation of the upper portion of Lot No.
2587 had consummated the verbal agreement between respondent and Basilisa Maneja and
brought agreement beyond the purview of the Statute of Frauds.
A careful perusal of the foregoing issues reveals that petitioners assumed the following as
proven facts: (1) respondent had indicated to Basilisa Maneja the portions they were to occupy
in Lot No. 2587; and (2) the Spouses Bascon assigned to petitioners their portions of Lot No.
2587. By claiming these as the bases for their assignment of errors, petitioners in essence are
raising questions of fact.11
 Petitioners' lack of authority to occupy the properties, coupled with respondent's right under
Article 487, clearly settles respondent's prerogative to eject petitioners from Lot No. 2587. Time
The issues raised by petitioners on the application of estoppel, statute of frauds, and the and again, this Court has ruled that persons who occupy the land of another at the latter's
assignment of properties owned in common in their favor, while ostensibly raising questions of tolerance or permission, without any contract between them, are necessarily bound by an
law, invite this Court to rule on questions of fact. This runs counter to the settled rule that only implied promise that they will vacate the same upon demand, failing in which a summary action
questions of law may be raised in a Petition for Review before the Court and the same must be for ejectment is the proper remedy against them. 17
distinctly set forth.12

Petitioners pose the strange claim that respondent had estopped himself from filing an
It is not the function of this Court to weigh anew the evidence already passed upon by the Court ejectment case against petitioners by his aforequoted testimony in Civil Case No. R-14600.
of Appeals for such evidence is deemed final and conclusive and may not be reviewed on Such testimony is irrelevant to the case at bar, as it does nothing to strengthen the claim of
appeal. A departure from the general rule may be warranted, among others, where the findings petitioners that they had a right to occupy the properties. This testimony merely indicates that
of fact of the Court of Appeals are contrary to the findings and conclusions of the trial court, or there might have been an agreement between the Spouses Bascon and Borromeo as to which of
when the same is unsupported by the evidence on record. 13 them would occupy what portion of Lot No. 2587. Yet this averment hardly establishes a
definitive partition, or moreover, any right of petitioners to dwell in any portion of Lot No. 2587.
Besides, "[e]stoppel is effective only as between the parties thereto or their successors in
interest;" thus, only the spouses Bascon or their successors in interest may invoke such
In the instant case, the RTC and the Court of Appeals rendered judgment merely on questions "estoppel." A stranger to a transaction is neither bound by, nor in a position to take advantage
of law as applied to the facts as determined by the MTC. Consequently this Court must proceed of, an estoppel arising therefrom.18
on the same set of facts without assuming, as petitioners have done, the veracity of claims
which have been considered, but not accepted as facts, by the courts below.

Guided by the foregoing, this Court finds in this case that filtered of the muddle from
petitioners' assignment of errors, it is unmistakable that respondent has a right to eject the
petitioners from Lot No. 2587.
Article 487 of the Civil Code, which provides simply that "[a]ny one of the co-owners may bring Thus, in order that the petition may acquire any whiff of merit, petitioners are obliged to
an action in ejectment," is a categorical and an unqualified authority in favor of respondent to establish a legal basis for their continued occupancy of the properties. The mere tolerance of
evict petitioners from the portions of Lot. No. 2587.
This provision is a departure from Palarca v. Baguisi, which held that an action for ejectment
14
must be brought by all the co-owners. Thus, a co-owner may bring an action to exercise and
protect the rights of all. When the action is brought by one co-owner for the benefit of all, a
favorable decision will benefit them; but an adverse decision cannot prejudice their rights. 15
Respondent's action for ejectment against petitioners is deemed to be instituted for the benefit
of all co-owners of the property16 since petitioners were not able to prove that they are
authorized to occupy the same.
For the same reason, it is of no moment whether indeed, as petitioners claim, there was a
verbal contract between Basilisa Maneja and Borromeo when the latter indicated the portions
they each were to occupy in Lot No. 2587. Such verbal contract, assuming there was one, does
not detract from the fact that the common ownership over Lot No. 2587 remained inchoate and
undivided, thus casting doubt and rendering purely speculative any claim that the Spouses
Bascon somehow had the capacity to assign or transmit determinate portions of the property to
petitioners.
one of the co-owners, assuming that there was such, does not suffice to establish such right.
Tolerance in itself does not bear any legal fruit, and it can easily be supplanted by a sudden
change of heart on the part of the owner. Petitioners have not adduced any convincing evidence
that they have somehow become successors-in-interest of the Spouses Bascon, or any of the
owners of Lot No. 2587.
Indeed, there is no writing presented to evidence any claim of ownership or right to occupancy
to the subject properties. There is no lease contract that would vest on petitioners the right to
stay on the property. As discussed by the Court of Appeals, 19 Article 1358 of the Civil Code
provides that acts which have for their object the creation, transmission, modification or
extinguishment of real rights over immovable property must appear in a public instrument. How
then can this Court accept the claim of petitioners that they have a right to stay on the subject
properties, absent any document which indubitably establishes such right? Assuming that there
was any verbal agreement between petitioners and any of the owners of the subject lots, Article
1358 grants a coercive power to the parties by which they can reciprocally compel the
documentation of the agreement. 20

Thus, the appellate court correctly appreciated the absence of any document or any occupancy
right of petitioners as a negation of their claim that they were allowed by the Spouses Bascon to
construct their houses thereon and to stay thereon until further notice. On this note, this Court
will no longer belabor petitioners' allegation that their occupation of Lot No. 2587 is justified
pursuant to the alleged but unproven permission of the Spouses Bascon.

All six (6) petitioners claim the right to be reimbursed "necessary expenses" for the cost of
constructing their houses in accordance with Article 546 of the Civil Code. 21 It is well-settled
that while the Article allows full reimbursement of useful improvements and retention of the
premises until reimbursement is made, applies only to a possessor in good faith, i.e., one who
builds on land with the belief that he is the owner thereof. Verily, persons whose occupation of a
realty is by sheer tolerance of its owners are not possessors in good faith. 22

The lower courts have made a common factual finding that petitioners are occupying portions of
Lots No. 2587 and 2592 by mere tolerance. Thus, petitioners have no right to get reimbursed
for the expenses they incurred in erecting their houses thereon.

WHEREFORE, premises considered, the Petition is DENIED and the Decision of the Court of
Appeals AFFIRMED. Costs against petitioners.

SO ORDERED.