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SECOND DIVISION

[G.R. No. 72306. October 5, 1988.]

DAVID P. FORNILDA P. FORNILDA, EMILIA P. FORNILDA OLILI,


LEODADIA P. FORNILDA LABAYEN and ANGELA P. FORNILDA
GUTIERREZ , petitioners, vs. THE BRANCH 164, REGIONAL TRIAL COURT
IVTH JUDICIAL REGION, PASIG, JOAQUIN C. ANTONIL, Deputy Sheriff,
RTC, 4JR Tanay, Rizal and ATTY. SERGIO I. AMONOY , respondents.

Irene C. Ishiwata for petitioner A. Gutierrez.


Sergio I. Amonoy for and in his own behalf.

SYLLABUS

1. CIVIL LAW; ARTICLE 1491 CIVIL CODE; PROHIBITION TO LAWYERS WITH RESPECT
TO PROPERTIES OR RIGHTS UNDER LITIGATION; RATIONALE. A lawyer is prohibited
from acquiring either by purchase or assignment the property or rights involved which are
the object of the litigation in which they intervene by virtue of their profession (Padilla, Vol.
II Civil Law, 1974 Ed., p. 230 citing Hernandez vs. Villanueva, 40 Phil. 773 and Rubias vs.
Batiller; 51 SCRA 130). The prohibition on purchase is all embracing to include not only
sales to private individuals but also public or judicial sales (ibid., p. 221). The rationale
advanced for the prohibition is that public policy disallows the transactions in view of the
fiduciary relationship involved i.e., the relation of trust and confidence and the peculiar
control exercised by these persons (Paras, Civil Code, Vol. V, 1973., p. 70).
2. ID.; ID.; ID.; SUBJECT TRANSACTION FALLS SQUARELY WITHIN THE STATUTORY
PROHIBITION. The transaction involved falls squarely within the prohibition against any
acquisition by a lawyer of properties belonging to parties they represent which are still in
suit. For, while the Project of Partition was approved on 12 January 1965, it was not until 6
August 1969 that the estate was declared closed and terminated (Record on Appeal, Civil
Case No. 3103, p. 44). At the time the mortgage was executed, therefore, the relationship
of lawyer and client still existed, the very relation of trust and confidence sought to be
protected by the prohibition, when a lawyer occupies a vantage position to press upon or
dictate terms to an harassed client. What is more, the mortgage was executed only eight
(8) days after approval of the Project of Partition thereby evincing a clear intention on
Respondent Amonoy's part to protect his own interests and ride roughshod over that of
his clients. The fact that the properties were first mortgaged and only subsequently
acquired in an auction sale long after the termination of the intestate proceedings will not
remove it from the scope of the prohibition. To rule otherwise would be to countenance
indirectly what cannot be done directly.
3. ID.; MORTGAGE CONTRACT, NULL AND VOID AB INITIO; ACTION FOR
DECLARATION OF INEXISTENCE OF CONTRACTS DOES NOT PRESCRIBE. Considering
that the mortgage contract, entered into in contravention of Article 1491 of the Civil Code,
supra, is expressly prohibited by law, the same must be held inexistent and void ab initio
(Director of Lands vs. Abagat, 53 Phil. 147). Being a void contract, the action or defense
for the declaration of its inexistence is imprescriptible (Article 1410, Civil Code). The
defect of a void or inexistent contract is permanent. Mere lapse of time cannot give it
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efficacy. Neither can the right to set up the defense of illegality be waived (Article 1409,
Civil Code).
4. REMEDIAL LAW; ACTIONS; TRIAL COURT DID NOT ACQUIRE JURISDICTION OVER
SUBJECT MATTER; JUDGMENT RENDERED DID NOT ATTAIN FINALITY; RES JUDICATA NO
APPLICABLE. The Controverted Parcels could not have been the object of any mortgage
contract in favor of Respondent Amonoy and consequently neither of a foreclosure sale.
By analogy, the illegality must be held to extend to whatsoever results directly from the
illegal source (Article 1422, Civil Code). Such being the case, the Trial Court did not acquire
any jurisdiction over the subject matter of the Foreclosure Case and the judgment
rendered therein could not have attained any finality and could be attacked at any time.
Neither could it have been a bar to the action brought by petitioners for its annulment by
reason of res judicata. (Municipality of Antipolo vs. Zapanta, No. L-65334, December 26,
1984, 133 SCRA 820). Two of the requisites of the rule of prior judgment as a bar to a
subsequent case, namely, (1) a final judgment and (2) that it must have been rendered by a
Court having jurisdiction over the subject matter, are conspicuously absent.
5. CIVIL LAW; CONTRACTS; ARTICLE 1412, CIVIL CODE; RECOVERY OF WHAT HAS
BEEN GIVEN TO PARTY AT FAULT, WARRANTED. Since the nullity of the transaction
herein involved proceeds from the illegality of the cause or object of the contract, and the
act does not constitute a criminal offense, the return to petitioners of the Controverted
Parcels is in order. "Art. 1412. If the act in which the unlawful or forbidden cause consists
does not constitute a criminal offense, the following rules shall be observed: . . . When only
one of the contracting parties is at fault, he cannot recover what he has given by reason of
the contract, or ask for the fulfillment of what has been promised him. The other, who is
not at fault, may demand the return of what he has given without any obligation to comply
with his promise." (Civil Code)

DECISION

MELENCIO-HERRERA , J : p

The Petition entitled "Petisiyung Makapagpasuri Taglay ang Pagpapapigil ng Utos",


translated as one for Certiorari with Preliminary Injunction, was filed on 27 September
1985 by three (3) petitioners, namely David P. Fornilda, Emilia P. Fornilda-Olili, and Angela
P. Fornilda-Gutierrez. They seek the reversal of the Order of respondent Trial Court, dated
25 July 1985, granting a Writ of Possession, as well as its Orders, dated 25 April 1986 and
16 May 1986 (p. 241, Rollo), directing and authorizing respondent Sheriff to demolish the
houses of petitioners Angela and Leocadia Fornilda (who is listed as a petitioner but who
did not sign the Petition). Neither is Juan P. Fornilda a signatory.
LLjur

The facts disclose that the deceased, Julio M. Catolos, formerly owned six (6) parcels of
land located in Tanay, Rizal, which are the controverted properties in the present litigation.
His estate was the subject of settlement in Special Proceedings No. 3103 of the then
Court of First Instance of Rizal, at Pasig, Branch I. Francisca Catolos, Agues Catolos,
Alfonso I. Fornilda and Asuncion M. Pasamba were some of the legal heirs and were
represented in the case by Atty. Sergio Amonoy (hereinafter referred to as Respondent
Amonoy). A Project of Partition was filed in the Intestate Court whereby the Controverted
Parcels were adjudicated to Alfonso I. Fornilda and Asuncion M. Pasamba.

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On 12 January 1965, the Court approved the Project of Partition. It was not until 6 August
1969, however, that the estate was declared closed and terminated after estate and
inheritance taxes had been paid, the claims against the estate settled and all properties
adjudicated.
Eight (8) days thereafter, or on 20 January 1965, Alfonso I. Fornilda and Asuncion M.
Pasamba executed a Contract of Mortgage wherein they mortgaged the Controverted
Parcels to Respondent Amonoy as security for the payment of his attorney's fees for
services rendered in the aforementioned intestate proceedings, in the amount of
P27,600.00 (Annex "A", Comment).
Asuncion M. Pasamba died on 24 February 1969 while Alfonso I. Fornilda passed away on
2 July 1969. Petitioners are some of the heirs of Alfonso I. Fornilda.
Since the mortgage indebtedness was not paid, on 21 January 1970, Respondent Amonoy
instituted foreclosure proceedings before the Court of First Instance of Rizal, at Pasig,
Branch VIII, entitled "Sergio I. Amonoy vs. Heirs of Asuncion M. Pasamba and Heirs of
Alfonso I. Fornilda" [Civil Case No. 12726] (Annex "B", ibid.). Petitioners, as defendants
therein, alleged that the amount agreed upon as attorney's fees was only P11,695.92 and
that the sum of P27,600.00 was unconscionable and unreasonable. Appearing as
signatory counsel for Respondent Amonoy was Atty. Jose S. Balajadia. prLL

On 28 September 1972, the Trial Court 1 rendered judgment in the Foreclosure Case
ordering the Pasamba and Fornilda heirs to pay Respondent Amonoy, within ninety (90)
days from receipt of the decision, the sums of P27,600.00 representing the attorney's fees
secured by the mortgage; P11,880.00 as the value of the harvest from two (2) parcels of
land; and 25% of the total of the two amounts, or P9,645.00, as attorney's fees, failing
which the Controverted Parcels would be sold at public auction (Annex "C", ibid.)
On 6 February 1973, the Controverted Parcels were foreclosed and on 23 March 1973, an
auction sale was held with Respondent Amonoy as the sole bidder for P23,760.00 (Annex
"D", ibid.). Said sale was confirmed by the Trial Court on 2 May 1973 (Annex "E", ibid.). To
satisfy the deficiency, another execution sale was conducted with Respondent Amonoy as
the sole bidder for P12,137.50. On the basis of an Affidavit of Consolidation of Ownership
by Respondent Amonoy, the corresponding tax declarations covering the Controverted
Parcels were consolidated in his name. LLphil

On 19 December 1973, or a year after the judgment in the Foreclosure Case, an action for
Annulment of Judgment entitled "Maria Penano, et al. vs. Sergio Amonoy, et al." (Civil Case
No. 18731) was filed before the then Court of First Instance of Rizal, at Pasig [the
Annulment Case] (Annex "F", ibid.) Petitioners were also included as plaintiffs. Appearing
for the plaintiffs in that case was Atty. Jose F. Tiburcio. Squarely put in issue were the
propriety of the mortgage, the validity of the judgment in the Foreclosure Case, and the
tenability of the acquisitions by Respondent Amonoy at the Sheriff's sale. Of particular
relevance to the instant Petition is the contention that the mortgage and the Sheriff's sales
were null and void as contrary to the positive statutory injunction in Article 1491 (5) of the
Civil Code, which prohibits attorneys from purchasing, even at a public or judicial auction,
properties and rights in litigation, and that the Trial Court, in the Foreclosure Case, had
never acquired jurisdiction over the subject matter of the action, i.e., the Controverted
Parcels. LLjur

On 7 November 1977, the Trial Court 2 dismissed the Annulment Case holding that the
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particular disqualification in Article 1491 of the Civil Code is not of general application nor
of universal effect but must be reconciled with the rule that permits judgment creditors to
be bidders at sheriffs sales, so that Respondent Amonoy was "clearly not prohibited from
bidding his judgment and his acquisitions therefore are sanctioned by law" (Annex "G",
ibid.).
On 22 July 1981, the Court of Appeals (in CA-G.R. No. 63214-R) (the Appealed Case) 3
affirmed the aforesaid judgment predicated on three principal grounds: (1) that no legal
impediment exists to bar an heir from encumbering his share of the estate after a project
of partition has been approved, that act being a valid exercise of his right of ownership; (2)
res judicata, since petitioners never questioned the capacity of Respondent Amonoy to
acquire the property in the Foreclosure Case; and (3) the complaint in the Annulment Case
did not allege extrinsic fraud nor collusion in obtaining the judgment so that the action
must fail. prLL

Upon remand of the Foreclosure Case to respondent Regional Trial Court, Branch 164, at
Pasig, Respondent Sheriff, on 26 August 1985, notified petitioners to vacate the premises
(p. 17, Rollo), subject of the Writ of Possession issued on 25 July 1985 (p. 18, Rollo).
On 27 September 1985, petitioners came to this Court in a pleading entitled "Petisiyung
Makapagpasuri Taglay ang Pagpapapigil ng Utos". On 11 November 1985, we dismissed
the petition for non-payment of docket and other fees. However, upon payment thereof,
the Order of dismissal was set aside and respondents were directed to submit their
Comment. cdrep

In his Comment, Respondent Amonoy denies that he had acquired the Controverted
Parcels through immoral and illegal means contending that "the question of attorney's
fees, the mortgage to secure the same, the sale of the mortgaged properties at public
auction, which was confirmed by the Court, and ultimately, the ownership and possession
over them, have all been judicially adjudicated." (p. 146, Rollo)
We gave due course to the petition and required the filing of the parties' respective
memoranda.
Meanwhile, on motion of Respondent Amonoy, dated 24 April 1986, respondent Trial
Court, in the Foreclosure Case, issued Orders dated 25 April and 16 May 1986 authorizing
the demolition of the houses and other structures of petitioners Leocadia and Angela
Fornilda (p. 241, Rollo). On 1 June 1986 the house of Angela Fornilda was totally
demolished while that of Leocadia was spared due to the latter's assurance that she would
seek postponement. llcd

On 1 June 1986, in a pleading entitled "Mahigpit na Musiyun Para Papanagutin Kaugnay ng


Paglalapastangan", followed by a "Musiyung Makahingi ng Utos sa Pagpapapigil ng
Pagpapagiba at Papanagutin sa Paglalapastangan" petitioners applied for a Restraining
Order, which we granted on 2 June 1986, enjoining respondents and the Sheriff of Rizal
from demolishing petitioners' houses (p. 221, Rollo). In a pleading entitled "Mahigpit na
Musiyun para Papanagutin Kaugnay ng Paglalapastangan" and "Masasamang Gawain (Mal-
Practices)" and "Parinindigan (Memorandum)" both filed on 16 June 1988, petitioners
likewise charged Respondent Amonoy with malpractice and prayed for his disbarment (pp.
224; 226, Rollo).
In Respondent Amonoy's "Comment and Manifestations" filed on 30 June 1986, he
indicated that the Restraining Order received by the Deputy Sheriff of Rizal only on 6 June
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1986 had already become moot and academic as Angela Fornilda's house had been
demolished on 2 June 1986 while Leocadia offered to buy the small area of the land where
her house is built and he had relented. cdphil

In the interim, Respondent Amonoy was appointed as Assistant Provincial Fiscal of Rizal,
and subsequently as a Regional Trial Court Judge in Pasay City.
The threshold issue is whether or not the mortgage constituted on the Controverted
Parcels in favor of Respondent Amonoy comes within the scope of the prohibition in
Article 1491 of the Civil Code.
The pertinent portions of the said Articles read:
"Art. 1491. The following persons cannot acquire by purchase even at a
public or judicial or auction, either in person or through the mediation of another:
xxx xxx xxx
(5) Justices, judges, prosecuting attorneys, . . . the property and rights in
litigation or levied upon on execution before the court within whose jurisdiction or
territory they exercise their respective functions; this prohibition includes the act
of acquiring by assignment and shall apply to lawyers, with respect to the
property and rights which may be the object of any litigation in which they may
take part by virtue of their profession." (Emphasis supplied)
Under the aforequoted provision, a lawyer is prohibited from acquiring either by purchase
or assignment the property or rights involved which are the object of the litigation in which
they intervene by virtue of their profession (Padilla, Vol. II Civil Law, 1974 Ed., p. 230 citing
Hernandez vs. Villanueva, 40 Phil. 773 and Rubias vs. Batiller, 51 SCRA 130). The
prohibition on purchase is all embracing to include not only sales to private individuals but
also public or judicial sales (ibid., p. 221).
The rationale advanced for the prohibition is that public policy disallows the transactions
in view of the fiduciary relationship involved i.e., the relation of trust and confidence and the
peculiar control exercised by these persons (Paras, Civil Code, Vol. V, 1973., p. 70).
In the instant case, it is undisputed that the Controverted Parcels were part of the estate of
the late Julio M. Catolos, subject of intestate estate proceedings, wherein Respondent
Amonoy acted as counsel for some of the heirs from 1959 until 1968 by his own
admission (Comment, p. 145, Rollo); that these properties were adjudicated to Alfonso
Fornilda and Asuncion M. Pasamba in the Project of Partition approved by the Court on 12
January 1965; that on 20 January 1965, or only eight (8) days thereafter, and while he was
still intervening in the case as counsel, these properties were mortgaged by petitioners'
predecessor-in-interest to Respondent Amonoy to secure payment of the latter's
attorney's fees in the amount of P27,600.00; that since the mortgage indebtedness was
not paid, Respondent Amonoy instituted an action for judicial foreclosure of mortgage on
21 January 1970; that the mortgage was subsequently ordered foreclosed and auction
sale followed where Respondent Amonoy was the sole bidder for P23,600.00; and that
being short of the mortgage indebtedness, he applied for and further obtained a deficiency
judgment. prcd

Telling, therefore, is the fact that the transaction involved falls squarely within the
prohibition against any acquisition by a lawyer of properties belonging to parties they
represent which are still in suit. For, while the Project of Partition was approved on 12
January 1965, it was not until 6 August 1969 that the estate was declared closed and
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terminated (Record on Appeal, Civil Case No. 3103, p. 44). At the time the mortgage was
executed, therefore, the relationship of lawyer and client still existed, the very relation of
trust and confidence sought to be protected by the prohibition, when a lawyer occupies a
vantage position to press upon or dictate terms to a harassed client. What is more, the
mortgage was executed only eight (8) days after approval of the Project of Partition
thereby evincing a clear intention on Respondent Amonoy's part to protect his own
interests and ride roughshod over that of his clients. From the time of the execution of the
mortgage in his favor, Respondent Amonoy had already asserted a title adverse to his
clients' interests at a time when the relationship of lawyer and client had not yet been
severed. LLphil

The fact that the properties were first mortgaged and only subsequently acquired in an
auction sale long after the termination of the intestate proceedings will not remove it from
the scope of the prohibition. To rule otherwise would be to countenance indirectly what
cannot be done directly.
There is no gainsaying that petitioners' predecessor-in-interest, as an heir, could encumber
the property adjudicated to him; that the Complaint in the Annulment Case did not contain
any specific allegation of fraud or collusion in obtaining the judgment appealed from as
opined by the Court of Appeals in the Appealed Case; and that the auction sale of the
properties to Respondent Amonoy was judicially confirmed and ownership and
possession of the Controverted Parcels ultimately transferred to him.
Nonetheless, considering that the mortgage contract, entered into in contravention of
Article 1491 of the Civil Code, supra, is expressly prohibited by law, the same must be held
inexistent and void ab initio (Director of Lands vs. Abagat, 53 Phil. 147).
"Art. 1409. The following contracts are inexistent and void from the
beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good
customs, public order or public policy;
xxx xxx xxx
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of
illegality be waived." (Civil Code)

Being a void contract, the action or defense for the declaration of its inexistence is
imprescriptible (Article 1410, Civil Code). The defect of a void or inexistent contract is
permanent. Mere lapse of time cannot give it efficacy. Neither can the right to set up the
defense of illegality be waived (Article 1409, Civil Code).
The Controverted Parcels could not have been the object of any mortgage contract in
favor of Respondent Amonoy and consequently neither of a foreclosure sale. By analogy,
the illegality must be held to extend to whatsoever results directly from the illegal source
(Article 1422, Civil Code). Such being the case, the Trial Court did not acquire any
jurisdiction over the subject matter of the Foreclosure Case and the judgment rendered
therein could not have attained any finality and could be attacked at any time. Neither could
it have been a bar to the action brought by petitioners for its annulment by reason of res
judicata. (Municipality of Antipolo vs. Zapanta, No. L-65334, December 26, 1984, 133 SCRA
820). Two of the requisites of the rule of prior judgment as a bar to a subsequent case,
namely, (1) a final judgment and (2) that it must have been rendered by a Court having
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jurisdiction over the subject matter, are conspicuously absent. LLpr

And since the nullity of the transaction herein involved proceeds from the illegality of the
cause or object of the contract, and the act does not constitute a criminal offense, the
return to petitioners of the Controverted Parcels is in order.
"Art. 1412. If the act in which the unlawful or forbidden cause consists does
not constitute a criminal offense, the following rules shall be observed:
xxx xxx xxx
(2) When only one of the contracting parties is at fault, he cannot recover
what he has given by reason of the contract, or ask for the fulfillment of what has
been promised him. The other, who is not at fault, may demand the return of what
he has given without any obligation to comply with his promise." (Civil Code).

WHEREFORE, Certiorari is granted; the Order of respondent Trial Court, dated 25 July
1985, granting a Writ of Possession, as well as its Orders, dated 25 April 1986 and 16 May
1986, directing and authorizing respondent Sheriff to demolish the houses of petitioners
Angela and Leocadia Fornilda are hereby set aside, and the Temporary Restraining Order
heretofore issued, is made permanent. The six (6) parcels of land herein controverted are
hereby ordered returned to petitioners unless some of them have been conveyed to
innocent third persons.
With respect to petitioners' prayer for disbarment by reason of malpractice of Respondent
Amonoy embodied in their pleading entitled "Mahigpit na Musiyun para Papanagutin
Kaugnay ng Paglalapastangan" and "Masasamang Gawain (Mal-Practices)" and
"Paninindigan (Memorandum)" both filed on 16 June 1988, Respondent Sergio I. Amonoy
is hereby required, within fifteen (15) days from notice hereof, to submit an Answer
thereto. After receipt of the same, a new docket number will be assigned to the case.
Costs against respondent, Sergio I. Amonoy.
SO ORDERED.
Paras, Sarmiento and Regalado, JJ., concur.
Padilla, J., took no part.
Footnotes

1. Judge Benjamin H. Aquino, presiding.


2. Decision penned by Judge Serafin E. Camilon.
3. Decision penned by Justice Guillermo F. Villasor, and concurred in by Justices Mama D.
Busran, Chairman, and Jose A. R. Melo, Members.

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