PROHIBITED CONTRACTS

INFOTECH v. COMELC
GR NO. 159139 January 17, 2000

FACTS:

Before us is a Petition4 under Rule 65 of the Rules of Court, seeking (1) to declare null and void
Resolution No. 6074 of the Commission on Elections (Comelec), which awarded "Phase II of the
Modernization Project of the Commission to Mega Pacific Consortium (MPC);" (2) to enjoin the
implementation of any further contract that may have been entered into by Comelec "either with
Mega Pacific Consortium and/or Mega Pacific eSolutions, Inc. (MPEI);" and (3) to compel
Comelec to conduct a re-bidding of the project.

Congress passed Republic Act 8046,5 which authorized Comelec to conduct a nationwide
demonstration of a computerized election system and allowed the poll body to pilot-test the
system in the March 1996 elections in the Autonomous Region in Muslim Mindanao (ARMM).

On December 22, 1997, Congress enacted Republic Act 84366 authorizing Comelec to use an
automated election system (AES) for the process of voting, counting votes and
canvassing/consolidating the results of the national and local elections. It also mandated the poll
body to acquire automated counting machines (ACMs), computer equipment, devices and
materials; and to adopt new electoral forms and printing materials.

ISSUE:

Whether the Commission on Elections, the agency vested with the exclusive
constitutional mandate to oversee elections, gravely abused its discretion when, in the exercise of
its administrative functions, it awarded to MPC the contract for the second phase of the
comprehensive Automated Election System.

RULING:
In the case of a consortium or joint venture desirous of participating in the bidding, it
goes without saying that the Eligibility Envelope would necessarily have to include a copy of the
joint venture agreement, the consortium agreement or memorandum of agreement -- or a
business plan or some other instrument of similar import -- establishing the due existence,
composition and scope of such aggrupation. Otherwise, how would Comelec know who it was
dealing with, and whether these parties are qualified and capable of delivering the products and
services being offered for bidding.

In the instant case, no such instrument was submitted to Comelec during the bidding
process. This fact can be conclusively ascertained by scrutinizing the two-inch thick "Eligibility
Requirements" file submitted by Comelec last October 9, 2003, in partial compliance with this
Court?s instructions given during the Oral Argument. This file purports to replicate the eligibility
documents originally submitted to Comelec by MPEI allegedly on behalf of MPC, in connection
with the bidding conducted in March 2003. Included in the file are the incorporation papers and
financial statements of the members of the supposed consortium and certain certificates, licenses
and permits issued to them.

However, there is no sign whatsoever of any joint venture agreement, consortium

agreement, memorandum of agreement, or business plan executed among the members of the
purported consortium.

Comelec had no basis at all for determining that the alleged consortium really existed and
was eligible and qualified, that the arrangements among the members were satisfactory and
sufficient to ensure delivery on the Contract and to protect the government interest.

Hence, had the proponent MPEI been evaluated based solely on its own experience,
financial and operational track record or lack thereof, it would surely not have qualified and
would have been immediately considered ineligible to bid, as respondents readily admit.

At any rate, it is clear that Comelec gravely abused its discretion in arbitrarily failing to
observe its own rules, policies and guidelines with respect to the bidding process, thereby
negating a fair, honest and competitive bidding.
 TEDDY G. PABUGAIS v. DAVE P. SAHIJWANI
G.R. No. 156846 February 23, 2004

FACTS:

Pursuant to an Agreement And Undertaking on December 3, 1993, petitioner Teddy G.

Pabugais, in consideration of the amount of P15,487,500.00, agreed to sell to respondent Dave P.
Sahijwani a lot containing 1,239 square meters located at Jacaranda Street, North Forbes Park,
Makati, Metro Manila. Respondent paid petitioner the amount of P600,000.00 as
option/reservation fee and the balance of P14,887,500.00 to be paid within 60 days from the
execution of the contract, simultaneous with delivery of the owners duplicate Transfer
Certificate of Title in respondents name the Deed of Absolute Sale; the Certificate of Non-Tax
Delinquency on real estate taxes and Clearance on Payment of Association Dues. The parties
further agreed that failure on the part of respondent to pay the balance of the purchase price
entitles petitioner to forfeit the P600,000.00 option/reservation fee; while non-delivery by the
latter of the necessary documents obliges him to return to respondent the said option/reservation
fee with interest at 18% per annum.

Petitioner failed to deliver the required documents. In compliance with their agreement,
he returned to respondent the latters P600,000.00 option/reservation fee by way of Far East
Bank & Trust Company Check, which was, however, dishonored.

Petitioner claimed that he twice tendered to respondent, through his counsel, the amount
of P672,900.00 (representing the P600,000.00 option/reservation fee plus 18% interest per
annum computed from December 3, 1993 to August 3, 1994) in the form of Far East Bank &
Trust Company Managers Check No. 088498, dated August 3, 1994, but said counsel refused to
accept the same. On August 11, 1994, petitioner wrote a letter to respondent saying that he is
consigning the amount tendered with the Regional Trial Court of Makati City. On August 15,
1994, petitioner filed a complaint for consignation.

Respondents counsel, on the other hand, admitted that his office received petitioners
letter dated August 5, 1994, but claimed that no check was appended thereto. He averred that
there was no valid tender of payment because no check was tendered and the computation of the
amount to be tendered was insufficient, because petitioner verbally promised to pay 3% monthly
interest and 25% attorneys fees as penalty for default, in addition to the interest of 18% per
annum on the P600,000.00 option/reservation fee.

On November 29, 1996, the trial court rendered a decision declaring the consignation
invalid for failure to prove that petitioner tendered payment to respondent and that the latter
refused to receive the same. Petitioner appealed the decision to the Court of Appeals.
Petitioners motion to withdraw the amount consigned was denied by the Court of Appeals and
the decision of the trial court was affirmed.
 On a motion for reconsideration, the Court of Appeals declared the consignation as valid
in an Amended Decision dated January 16, 2003. It held that the validity of the consignation had
the effect of extinguishing petitioners obligation to return the option/reservation fee to
respondent. Hence, petitioner can no longer withdraw the same.

Unfazed, petitioner filed the instant petition for review contending that he can withdraw
the amount deposited with the trial court as a matter of right because at the time he moved for the
withdrawal thereof, the Court of Appeals has yet to rule on the consignations validity and the
respondent had not yet accepted the same.

ISSUE:

Whether or not assigning the amount of P672, 900.00 to Atty. De Guzman is prohibited.

RULING:

The amount consigned with the trial court can no longer be withdrawn by petitioner
because respondents prayer in his answer that the amount consigned be awarded to him is
equivalent to an acceptance of the consignation, which has the effect of extinguishing
petitioners obligation.

Moreover, petitioner failed to manifest his intention to comply with the Agreement And
Undertaking by delivering the necessary documents and the lot subject of the sale to respondent
in exchange for the amount deposited. Withdrawal of the money consigned would enrich
petitioner and unjustly prejudice respondent.

The withdrawal of the amount deposited in order to pay attorneys fees to petitioners
counsel, Atty. De Guzman, Jr., violates Article 1491 of the Civil Code which forbids lawyers
from acquiring by assignment, property and rights which are the object of any litigation in which
they may take part by virtue of their profession. Furthermore, Rule 10 of the Canons of
Professional Ethics provides that the lawyer should not purchase any interest in the subject
matter of the litigation which he is conducting. The assailed transaction falls within the
prohibition because the Deed assigning the amount of P672,900.00 to Atty. De Guzman, Jr., as
part of his attorneys fees was executed during the pendency of this case with the Court of
Appeals. In his Motion to Intervene, Atty. De Guzman, Jr., not only asserted ownership over
said amount, but likewise prayed that the same be released to him. That petitioner knowingly
and voluntarily assigned the subject amount to his counsel did not remove their agreement within
the ambit of the prohibitory provisions. To grant the withdrawal would be to sanction a void contract.
 CONCHITA LIGUEZ, v.. THE HONORABLE COURT OF APPEALS, MARIA NGO
VDA. DE LOPEZ, ET AL.,
G.R. No. L-11240 December 18, 1957

FACTS:

Petitioner filed a complaint for the recovery of parcel of land against the widow and heirs
of Salvador Lopez. Petitioner averred that he is the owner of the aforementioned parcel of land
pursuant to a Deed of Donation executed in her favor by the late owner, Salvador Lopez. The
defense interposed that the donation was null and void for having illicit cause or consideration
which was the petitioners entering into a marital relations with Salvador, a married man, and
that the property had been adjudicated to the appellees as heirs of Salvador Lopez by the Court
of First Instance.

Meanwhile, the Court of Appeals found that the Deed of Donation was prepared by a
Justice of Peace and was ratified and signed when petitioner Liquez was still a minor, 16 years of
age. It was the ascertainment of the Court of Appeals that the donated land belonged to the
conjugal partnership of Salvador and his wife and that the Deed of Donation was never recorded.
Hence, the Court of Appeals held that the Deed of Donation was inoperative and null and void
because the donation was tainted with illegal cause or consideration.

ISSUE:

Whether or not the Deed of Donation is void for having illicit cause or consideration.

RULING:

NO. Under Article 1279 of the Civil Code of 1989, which was the governing law during
the execution of the Deed of Donation, the liberality of the donor is deemed cover only in those
contracts that are pure beneficence. In these contracts, the idea of self interest is totally absent in
the part of the transferee. Here, the facts as found demonstrated that in making the donation,
Salvador Lopez was not moved exclusively by the desire to benefit the petitioner but also to
secure her cohabiting with him. Petitioner seeks to differentiate between the liberality of Lopez
as cause and his desire as a motive. However, motive may be regarded as cause when it
predetermined the purpose of the contract. The Court of Appeals rejected the claim of petitioner
on the ground on the rule on pari delicto embodied in Article 1912 of the Civil Code. However,
this rule cannot be applied in the case because it cannot be said that both parties had equal guilt
where petitioner was a mere minor when the donation was made and that it was not shown that
she was fully aware of the terms of the said donation.
 PHILIPPINE BANKING CORPORATION v. LUI SHE,
GR NO. L-17587 September 12, 1967
FACTS:

Justina who inherited parcels of land in Manila executed a contract of lease in favor of
Wong, covering a portion already leased to him and another portion of the property. The lease
was for 50 years, although the lessee was give the right to withdraw at anytime from the
agreement with a stipulated monthly rental.

She executed another contract giving Wong the option to buy the leased premises for
P120,000 payable within 10 years at monthly installment of P1,000. The option was conditioned
on his obtaining Philippine citizenship, which was then pending. His application for
naturalization was withdrawn when it was discovered that he was a resident of Rizal.

She executed two other contracts one extending the term to 99 years and the term fixing
the term of the option of 50 years. In the two wills, she bade her legatees to respect the contract
she had entered into with Wong, but it appears to have a change of heart in a codicil. Claiming
that the various contracts were made because of her machinations and inducements practiced by
him, she now directed her executor to secure the annulment of the contracts.

The complaint alleged that Wong obtained the contracts through fraud. Wong denied
having taken advantage of her trust in order to secure the execution of the contracts on question.
He insisted that the various contracts were freely and voluntarily entered into by the parties.

The lower court declared all the contracts null and void with the exception of the first,
which is the contract of lease.

ISSUE:

Whether or not the contracts entered into by the parties are void

RULING:

The contract is void. The Court held the lease and the rest of the contracts were obtained
with the consent of Justina freely given and voluntarily, hence the claim that the consent was
vitiated due to fraud or machination is bereft of merit. However the contacts are not necessarily
valid because the Constitution provides that aliens are not allowed to own lands in the
Philippines. The illicit purpose then becomes the illegal causa, rendering the contracts void.

It does not follow from what has been said that because the parties are in pari delicto they
will be left where they are, without relief. For one thing, the original parties who were guilty of
violation of fundamental charter have died and have since substituted by their administrators to
whom it would e unjust to impute their guilt. For another thing, Article 1416 of the Civil Code
provides an exception to the pari de licto, that when the agreement is not illegal per se but is
merely prohibited, and the prohibition of the law is designed for the protection of the plaintiff, he
may recover what he has paid or delivered.
 VIGILAR v. AQUINO
G.R. No. 180388 January 18, 2011

FACTS:

On 19 June 1992, petitioner Angelito M. Twao, then Officer-in-Charge (OIC)-District

Engineer of the Department of Public Works and Highways (DPWH) 2nd Engineering District
of Pampanga sent an Invitation to Bid to respondent Arnulfo D. Aquino, the owner of A.D.
Aquino Construction and Supplies. The bidding was for the construction of a dike by bulldozing
a part of the Porac River at Barangay Ascomo-Pulungmasle, Guagua, Pampanga.Subsequently,
on 7 July 1992, the project was awarded to respondent, and a "Contract of Agreement" was
thereafter executed between him and concerned petitioners for the amount of PhP1,873,790.69,
to cover the project cost.

By 9 July 1992, the project was duly completed by respondent, who was then issued a
Certificate of Project Completion dated 16 July 1992. Respondent Aquino, however, claimed
that PhP1,262,696.20 was still due him, but petitioners refused to pay the amount. He thus filed a
Complaint for the collection of sum of money with damages before the Regional Trial Court of
Guagua, Pampanga.

Petitioners avers that the complaint was a suit against the state; that respondent failed to
exhaust administrative remedies; and that the "Contract of Agreement" covering the project was
void for violating Presidential Decree No. 1445, absent the proper appropriation and the
Certificate of Availability of Funds.

On 28 November 2003, the lower court ruled in favor of respondent. On appeal, the CA
reversed and set aside the decision of the lower court ,disposing that the "CONTRACT
AGREEMENT" entered into between the plaintiff-appellees construction company, which he
represented, and the government, through the Department of Public Works and Highway
(DPWH) Pampanga 2nd Engineering District, is declared null and void ab initio.

ISSUE:

Whether or not the contract agreement is valid, thus making respondent liable

HELD:

YES. Specifically, C.V. Canchela & Associates is similar to the case at bar, in that the
contracts involved in both cases failed to comply with the relevant provisions of Presidential
Decree No. 1445 and the Revised Administrative Code of 1987. Nevertheless, "the illegality of
the subject Agreements proceeds, it bears emphasis, from an express declaration or prohibition
by law, not from any intrinsic illegality. As such, the Agreements are not illegal per se, and the
party claiming there under may recover what had been paid or delivered. The government project
involved in this case, the construction of a dike, was completed way back on 9 July 1992. For
almost two decades, the public and the government benefitted from the work done by
respondent.
 Petitioners cannot escape the obligation to compensate respondent for services rendered
and work done by invoking the states immunity from suit. This Court has long established that
the doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating
an injustice to a citizen. Justice and equity sternly demand that the State's cloak of invincibility
against suit be shred in this particular instance, and that petitioners-contractors be duly
compensated on the basis of quantum meruit for construction done on the public works
housing project.
 EPG Construction vs Vigilar
GR No. 131544. March 16, 2001

FACTS:

In 1983, the Ministry of Human Settlement entered into a Memorandum of Agreement

(MOA) with the Ministry of Public Works and Highways, where the latter undertook to develop
a housing project by the ministry and on the site construct thereon 145 housing units.

By virtue of the MOA, the Ministry of Public Works and Highways forged individual
contracts with herein petitioners EPG Construction Co., Ciper Electrical and Engineering, Septa
Construction Co., Phil. Plumbing Co., Home Construction Inc., World Builders Inc., Glass
World Inc., Performance Builders Development Co. and De Leon Araneta Construction Co., for
the construction of the housing units. Under the contracts, the scope of construction and funding
therefor covered only around 2/3 of each housing unit. After complying with the terms of said
contracts, and by reason of the verbal request and assurance of then DPWH Undersecretary Aber
Canlas that additional funds would be available and forthcoming, petitioners agreed to undertake
and perform additional constructions for the completion of the housing units, despite the
absence of appropriations and written contracts to cover subsequent expenses for the additional
constructions.

Petitioners received payment for what was originally stipulated. However, petitioners
demanded payment for the unpaid balance of P5,918,315.63 constituting payment for the
additional constructions which petitioners argued formed an implied contract. They claimed that
payment should be based on the principle of quantum meruit. DPWH Secretary Gregorio Vigilar
denied the subject money claims prompting herein petitioners to file before the Regional Trial
Court of Quezon City, Branch 226, a Petition for Mandamus praying for payment.

ISSUE:
Whether or not petitioners are entitled to payment

RULING:

Although the Court agreed with respondents postulation that the implied contracts,
which covered the additional constructions, are void, in view of violation of applicable laws,
auditing rules and lack of legal requirements, it nonetheless find the instant petition laden with
merit and uphold, in the interest of substantial justice, petitioners-contractors right to be
compensated for the "additional constructions" on the public works housing project, applying the
principle of quantum meruit.
 To begin with, petitioners-contractors assented and agreed to undertake additional
constructions for the completion of the housing units, believing in good faith and in the interest
of the government and, in effect, the public in general, that appropriations to cover the additional
constructions and completion of the public works housing project would be available and
forthcoming. On this particular score, the records reveal that the verbal request and assurance of
then DPWH Undersecretary Canlas led petitioners-contractors to undertake the completion of the
government housing project, despite the absence of covering appropriations, written contracts,
and certification of availability of funds, as mandated by law and pertinent auditing rules and
issuances. To put it differently, the implied contracts, declared void in this case, covered only
the completion and final phase of construction of the housing units, which structures,
concededly, already existed, albeit not yet finished in their entirety at the time the implied
contracts were entered into between the government and the contractors.
 GOCHAN v YOUNG
GR No. 131889. March 12, 2001

FACTS:

Felix Gochan Sr.s daughter, Alice, mother of [herein respondents], inherited 50 shares of
stock in Gochan Realty from the former. Alice died in 1955, leaving the 50 shares to her
husband, John Young, Sr. When their all their children reached the age of majority, John, Sr.
requested Gochan Realty to partition the shares of his late wife by issuing the shares of stock to
[herein respondents] and cancelling it in his name. Respondent corporation refused. On 1990,
John, Sr. died, leaving the shares to the [respondents].

On February 8, 1994, [respondents] Cecilia Gochan Uy and Miguel Uy filed a complaint

with the SEC for issuance of shares of stock to he rightful owners, nullification of shares of
stock, reconveyance of property impressed with rust, accounting, removal of officers and
directors and damages against petitioners. Petitioners then assert that respondents were not the
real parties in interest and had no capacity to sue, and respondents causes of action had already
been barred by the Statute of limitations.

ISSUE:

Do respondents have legal standing to push through with their complaint?

RULING:

On November 21, 1979, respondents Felix Gochan & Sons Realty Corporation did not
have unrestricted earnings in its books to cover the purchase price of the 208 shares of stock it
was then buying from complainant Cecilia Gochan Uy, thereby rendering said purchase null and
void ab initio for being violative of the trust fund doctrine and contrary to law, morals, good
customs, public order, and public policy.

Thus, Cecilia remains a stockholder of the corporation in view of the nullity of the
Contract of Sale. Necessarily, petitioners contention that the action has prescribed cannot be
sustained. Prescription cannot be invoked as a ground if the contract is alleged to be void ab
initio. It is axiomatic that the action or defense for the declaration of nullity of a contract does
not prescribe.

In Section 2 of Rule 87, while permitting an executor or administrator to represent or to

bring suits on behalf of the deceased, do not prohibit the heirs from representing the deceased.
The heirs can thusly represent Young in the present case.

Given the circumstances, the claim of petitioners was then dismissed and the case
remanded to the RTC for trial.
 FRANCISCO v . HERRERA
GR No. 139982. November 21, 2002

FACTS:

Eligio Herrera, Sr., father of the respondent, was the owner of two parcels of land. At
two incidents on 1991, petitioner bought the two parcels of land for Php1,000,000.00 and
PhP750,000.00. Contending that the purchase price was inadequate, the children of Eligio, Sr.,
namely, Josefina Cavettany, Eligio Herrera, Jr., and respondent Pastor Herrera tried to negotiate
for an increase of the purchase price. When petitioner refused respondents then filed a complaint
for annulment of sale on the ground that at the time of sale, Eligio Sr., was already afflicted with
senile dementia, characterized by deteriorating mental and physical condition including loss of
memory. Both the RTC and CA decided in favor of respondent.

ISSUE:

Is the disputed contract void and therefore unenforceable?

RULING:

In the present case, it was established that the vendor Eligio, Sr., entered into an
agreement with petitioner, but that the formers capacity to consent was vitiated by senile
dementia. Hence, the assailed contracts are not void or inexistent per se; rather, these are
contracts that are valid and binding unless annulled through a proper action filed in court
seasonably.

An annullable contract may be rendered perfectly valid by ratification which can be

express or implied. Implied ratification may take the form of accepting and retaining the benefit
of a contract. This is what happened in this case. Respondent negotiated for the increase of the
purchase price while receiving the installment payments.

One cannot negotiate for an increase in the price in one breath and in the same breath
contend that the contract of sale is void.
 MENDEZONA VS. OZAMIZ
GR. No. 143370 February 6, 2002

FACTS:

The petitioners ultimately traced their titles of ownership over their respective properties
from a notarized Deed of Absolute Sale dated April 28, 1989 executed in their favor by Carmen
Ozamiz for and in consideration of the sum of One Million Forty Thousand Pesos
(P1,040,000.00).The petitioners initiated the suit to remove a cloud on their said respective titles
caused by the inscription thereon of a notice of lis pendens, which came about as a result of an
incident in a Special Proceeding of the RTC. This Special Proceeding is a proceeding for
guardianship over the person and properties of Carmen Ozamiz.

In the course of the guardianship proceeding, the petitioners and the oppositors thereto
agreed that Carmen Ozamiz needed a guardian over her person and her properties, and thus
respondent Montalvan was designated as guardian over the person of Carmen Ozamiz while
petitioner Mendezona, respondents Roberto J. Montalvan and Julio H. Ozamiz were designated
as joint guardians over the properties of the said ward.

The respondents opposed the petitioners claim of ownership of the Lahug property and
alleged that the titles issued in the petitioners names are defective and illegal, and the ownership
of the said property was acquired in bad faith and without value inasmuch as the consideration
for the sale is grossly inadequate and unconscionable. Respondents further alleged that at the
time of the sale on April 28, 1989 Carmen Ozamiz was already ailing and not in full possession
of her mental faculties; and that her properties having been placed in administration, she was in
effect incapacitated to contract with petitioners.

Trial on the merits ensued and the lower court ruled in favor of petitioners. The appellate
court reversed the factual findings of the trial court and ruled that the Deed of Absolute Sale
dated April 28, 1989 was a simulated contract since the petitioners failed to prove that the
consideration was actually paid, and, furthermore, that at the time of the execution of the contract
the mental faculties of Carmen Ozamiz were already seriously impaired. Thus, the appellate
court declared that the Deed of Absolute Sale of April 28, 1989 is null and void. It ordered the
cancellation of the certificates of title issued in the petitioners names and directed the issuance
of new certificates of title in favor of Carmen Ozamiz or her estate. The motion for
reconsideration was denied.

ISSUE:

Whether or not the CA erred in ruling that the Deed of Absolute Sale dated on April 28,
1989 was a Simulated Contract
RULING:

YES. Simulation is defined as "the declaration of a fictitious will, deliberately made by

agreement of the parties, in order to produce, for the purposes of deception, the appearances of a
juridical act which does not exist or is different from what that which was really executed." The
requisites of simulation are: (a) an outward declaration of will different from the will of the
parties; (b) the false appearance must have been intended by mutual agreement; and (c) the
purpose is to deceive third persons. None of these were clearly shown to exist in the case at bar.

Contrary to the erroneous conclusions of the appellate court, a simulated contract cannot
be inferred from the mere non-production of the checks. It was not the burden of the petitioners
to prove so. It is significant to note that the Deed of Absolute Sale dated April 28, 1989 is a
notarized document duly acknowledged before a notary public. As such, it has in its favor the
presumption of regularity, and it carries the evidentiary weight conferred upon it with respect to
its due execution. It is admissible in evidence without further proof of its authenticity and is
entitled to full faith and credit upon its face. Payment is not merely presumed from the fact that
the notarized Deed of Absolute Sale dated April 28, 1989 has gone through the regular procedure
as evidenced by the transfer certificates of title issued in petitioners names by the Register of
Deeds.

Considering that Carmen Ozamiz acknowledged, on the face of the notarized deed, that
she received the consideration at One Million Forty Thousand Pesos (P1,040,000.00), the
appellate court should not have placed too much emphasis on the checks, the presentation of
which is not really necessary. Besides, the burden to prove alleged non-payment of the
consideration of the sale was on the respondents, not on the petitioners. Also, between its
conclusion based on inconsistent oral testimonies and a duly notarized document that enjoys
presumption of regularity, the appellate court should have given more weight to the latter.
Spoken words could be notoriously unreliable as against a written document that speaks a
uniform language.

It has been held that a person is not incapacitated to contract merely because of advanced
years or by reason of physical infirmities. Only when such age or infirmities impair her mental
faculties to such extent as to prevent her from properly, intelligently, and fairly protecting her
property rights, is she considered incapacitated. The respondents utterly failed to show adequate
proof that at the time of the sale on April 28, 1989 Carmen Ozamiz had allegedly lost control of
her mental faculties.

A person is presumed to be of sound mind at any particular time and the condition is
presumed to continue to exist, in the absence of proof to the contrary. Competency and freedom
from undue influence, shown to have existed in the other acts done or contracts executed, are
presumed to continue until the contrary is shown.
 NATURAL OBLIGATIONS

MANZANILLA v. CA
GR No. L-75342 March 15, 1990

FACTS:

Spouses Manzanilla sold on installment an undivided one-half portion of their residential

house and lot. At the time of the sale, the said property was mortgaged to the Government
Service Insurance System (GSIS), which fact was known to the vendees, spouses Magdaleno and
Justina Campo. The Campo spouses took possession of the premises upon payment of the first
installment. Some payments were made to petitioners while some were made directly to GSIS.
The GSIS filed its application to foreclose the mortgage on the property for failure of the
Manzanilla spouses to pay their monthly amortizations. The property was sold at public auction
where GSIS was the highest bidder. Two months before the expiration of the
period to redeem, the Manzanilla spouses executed a Deed of Absolute Sale of the undivided one
half portion of their property in favor of the Campo spouses. Upon the expiration of the period to
redeem without the Manzanilla spouses exercising their right of redemption, title to the property
was consolidated in favor of the GSIS and a new title issued in its name. The
Manzanilla spouses succeeded in re-acquiring the property from the GSIS. An Absolute Deed of
Sale was executed by GSIS in favor of the Manzanilla spouses and a new certificate of title was
issued to them.

The Manzanilla spouses mortgaged the property to the Bian Rural Bank. Petitioner Ines
Carpio purchased the property from the Manzanilla spouses and agreed to assume the mortgage
in favor of Bian Rural Bank.

Private respondent Justina Campo registered her adverse claim over the said portion of
land with the Register of Deeds of Quezon City. On the other hand, petitioner Ines Carpio filed
an ejectment case against private respondent Justina. Private respondent Justina Campo filed a
case for quieting of title against the Manzanilla spouses and Ines Carpio praying for the issuance
to her of a certificate of title over the undivided one-half portion of the property in question.

ISSUE:

Whether petitioners Manzanillas are under any legal duty to reconvey the undivided one-
half portion of the property to private respondent Justina Campo

RULING:

In view of the failure of either the Manzanilla spouses or the Campo spouses to redeem
the property from GSIS, title to the property was consolidated in the name of GSIS. The new title
cancelled the old title in the name of the Manzanilla spouses. GSIS at this point had a clean title
free from any lien in favor of any person including that of the Campo spouses.
Art. 1456. If property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of
the person from whom the property comes. There was no mistake or fraud on the part of
petitioners when the subject property was re-acquired from the GSIS. The fact that they
previously sold one-half portion thereof has no more significance in this re-acquisition. Private
respondent's right over the one-half portion was obliterated when absolute ownership and title
passed on to the GSIS after the foreclosure sale. The property as held by GSIS had a clean title.
The property that was passed on to petitioners retained that quality of title. As regards the rights
of private respondent Ines Carpio, she is a buyer in good faith and for value. There was no
showing that at the time of the sale to her of the subject property, she knew of any lien on the
property except the mortgage in favor of the Bian Rural Bank. No other lien was annotated on
the certificate of title. She is also not required by law to go beyond what appears on the face of
the title. When there is nothing on the certificate of title to indicate any cloud or vice in the
ownership of the property or any encumbrances thereon, the purchaser is not to explore further
than what the Torrens Title upon its face indicates in quest for any hidden defect or inchoate
right thereof.
 RURAL BANK OF PARAQUE VS REMOLADO
GR No. L-62051. March 18, 1985

FACTS:

This case is about the repurchase of mortgage property after the period of redemption and
had expired. Isidra Remolado, 64, a widow, and resident of Makati, Rizal, owned a lot with an
area of 308 square meters, with a bungalow thereon, which was leased to Beatriz Cabagnot. On
April 17, 1971 she mortgaged it again to petitioner. She eventually secured loans totalling
P18,000 (Exh. At D). the loans become overdue. The bank foreclosed the mortagage on July 21,
1972 and bought the property at the foreclosure sale for P22,192.70. The one-year period of
redemption was to expire on August 21, 1973.

On August 9, 1973 or 14 days before the expiration of the one-year redemption period,
the bank gave her a statement showing that she should pay P25,491.96 for the redemption of the
property on August 23. No redemption was made on that date. On September 3, 1973 the bank
consolidated its ownership over the property. Remolado's title was cancelled. Remolado was
offered a period until October 31, 1973 from which she could repurchase the lot. She only
exercised that option on November 5. Remolado then filed an action for reconveyance which the
lower courts granted her.

ISSUE:

Is Remolado entitled to reconveyance?

RULING:

There was no binding agreement for its repurchase. Even on the assumption that the bank
should be bound by its commitment to allow repurchase on or before October 31, 1973, still
Remolado had no cause of action because she did not repurchase the property on that date.

Justice is done according to law. As a rule, equity follows the law. There may be a moral
obligation, often regarded as an equitable consideration (meaning compassion), but if there is no
enforceable legal duty, the action must fail although the disadvantaged party deserves
commiseration or sympathy.

In the instant case, the bank acted within its legal rights when it refused to give Remolado
any extension to repurchase after October 31, 1973. It had given her about two years to liquidate
her obligation. She failed to do so. The decision of the CA affirming the decision of the RTC was
reversed.