Sanchez vs.

Rigos
45 SCRA 368
June 1972
OPTION CONTRACT
FACTS:
In an instrument entitled "Option to Purchase," executed on April 3, 1961, defendant-appellant
Severina Rigos "agreed, promised and committed ... to sell" to plaintiff-appellee Nicolas Sanchez
for the sum of P1,510.00 within two (2) years from said date, a parcel of land situated in the
barrios of Abar and Sibot, San Jose, Nueva Ecija. It was agreed that said option shall be deemed
"terminated and elapsed," if Sanchez shall fail to exercise his right to buy the property" within the
stipulated period. On March 12, 1963, Sanchez deposited the sum of Pl,510.00 with the CFI of
Nueva Ecija and filed an action for specific performance and damages against Rigos for the
latters refusal to accept several tenders of payment that Sanchez made to purchase the subject
land.
Defendant Rigos contended that the contract between them was only a unilateral promise to sell,
and the same being unsupported by any valuable consideration, by force of the New Civil Code,
is null and void." Plaintiff Sanchez, on the other hand, alleged in his compliant that, by virtue of
the option under consideration, "defendant agreed and committed to sell" and "the plaintiff agreed
and committed to buy" the land described in the option. The lower court rendered judgment in
favor of Sanchez and ordered Rigos to accept the sum Sanchez judicially consigned, and to
execute in his favor the requisite deed of conveyance. The Court of Appeals certified the case at
bar to the Supreme Court for it involves a question purely of law.
ISSUE:
Was there a contract to buy and sell between the parties or only a unilateral promise to sell?
COURT RULING:
The Supreme Court affirmed the lower courts decision. The instrument executed in 1961 is not a
"contract to buy and sell," but merely granted plaintiff an "option" to buy, as indicated by its own
title "Option to Purchase." The option did not impose upon plaintiff Sanchez the obligation to
purchase defendant Rigos' property. Rigos "agreed, promised and committed" herself to sell the
land to Sanchez for P1,510.00, but there is nothing in the contract to indicate that her
aforementioned agreement, promise and undertaking is supported by a consideration "distinct
from the price" stipulated for the sale of the land. The lower court relied upon Article 1354 of the
Civil Code when it presumed the existence of said consideration, but the said Article only applies
to contracts in general.
However, it is not Article 1354 but the Article 1479 of the same Code which is controlling in the
case at bar because the latters 2nd paragraph refers to "sales" in particular, and, more
specifically, to "an accepted unilateral promise to buy or to sell." Since there may be no valid
contract without a cause or consideration, the promisor is not bound by his promise and may,
accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes,
however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale.
Upon mature deliberation, the Court reiterates the doctrine laid down in the Atkins case and
deemed abandoned or modified the view adhered to in the Southwestern Company case.
GUZMAN, BOCALING & CO. v BONNEVIE
G.R. No. 86150 March 2, 1992
Facts:
Africa Valdez de Reynoso leased a parcel of land with two buildings constructed thereon to Raoul S.
Bonnevie and Christopher Bonnevie, for a period of one year beginning August 8, 1976, at a monthly

rental of P4,000.00, with an agreement that should Africa decide to sell the property, the respondent
lessee shall be givent the first priority to purchase the same.
Then on November 1976, Africa sent a letter to the respondents that she was selling the property for the
amount of P600,000 less a mortgage loan of P100,000, giving them 30 days to exercise their right of first
priority. Failure to exercise the said right, respondents should vacate the property not later than March
1977. Then on January 1977, Africa informed that the property have been sold to the petitioner, because
respondents failed to exercise their right to do such.
Respondent s on the other hand informed Africa that they have not received their letter and refused to
vacate the property. And on April of the same year, Africa demanded that they vacate the property for
failure to pay rent for four months, which they refused. Hence a complaint for ejectment was filed against
them. During the pendency of the ejectment case, respondent filed an action for annulment of the sale
between Africa and the herein petitioner and for the cancellation of the transfer certificate of title in the
name of the latter. Asking also that Africa be required to sell the property to them under the same terms
and conditions agreed upon in the Contract of Sale in favor of the petitioner.
Then on May 1980, the City Court ruled that the respondent to vacate the premises, and deliver
possession of the property to the petitioner as well as pay the rent due to them. Upon appeal to the Court
of First Instance of Manila, affirmed the said ejection case with modification and granted respondents
petition to cancel the Deed of Sale executed between Africa and the petitioner and ordered her to sell the
property to respondent, and for petitioner and Africa to pay respondent for damages. CA affirmed the said
decision but with modification on the amount of damages. Hence the petition.
Issue:
WON the respondent court erred in ruling that the grant of first priority to purchase the subject properties
by the judicial administratrix needed no authority from the probate court;
WON the Contract of Sale executed between the parties was not voidable but rescissible;
WON petitioner is a buyer in bad faith.
Ruling:
On the first issue, Africa failed to show that the letter sent by registered mail was received by the
respondents, only a photocopy of the letter without any receiving signature coming from the latter.
Furthermore, even if the latter received the letter and did not exercise their right of first priority, Africa
would still be guilty of violating Paragraph 20 of the Contract of Lease which specifically stated that the
private respondents could exercise the right of first priority, "all things and conditions being equal." Since
Africa had offered a lesser amount to the petitioner and more advantageous offer than that was offered to
the respondent. Also, respondent court is correct that it was not necessary to secure the approval by the
probate court of the Contract of Lease because it did not involve an alienation of real property of the
estate nor did the term of the lease exceed one year so as top make it fall under Article 1878(8) of the
Civil Code.
In the second issue, private respondents have the right to rescind the contract of sale because Africa had
failed to comply with her duty to give them first opportunity to purchase the subject property.
The petitioner argues that assuming the Contract of Sale to be voidable, only the parties thereto could
bring an action to annul it pursuant to Article 1397 of the Civil Code. It is stressed that private respondents
are strangers to the agreement and therefore have no personality to seek its annulment.
The respondent court correctly held that the Contract of Sale was not voidable but rescissible. Under
Article 1380 to 1381 (3) of the Civil Code, a contract otherwise valid may nonetheless be subsequently
rescinded by reason of injury to third persons, like creditors. The status of creditors could be validly
accorded the Bonnevies for they had substantial interests that were prejudiced by the sale of the subject

property to the petitioner without recognizing their right of first priority under the Contract of Lease.
Rescission is a remedy granted by law to the contracting parties and even to third persons, to secure
reparation for damages caused to them by a contract, even if this should be valid, by means of the
restoration of things to their condition at the moment prior to the celebration of said contract. It is a relief
allowed for the protection of one of the contracting parties and even third persons from all injury and
damage the contract may cause, or to protect some incompatible and preferent right created by the
contract. Recission implies a contract which, even if initially valid, produces a lesion or pecuniary
damage to someone that justifies its invalidation for reasons of equity.
It is true that the acquisition by a third person of the property subject of the contract is an obstacle to the
action for its rescission where it is shown that such third person is in lawful possession of the subject of
the contract and that he did not act in bad faith. However, this rule is not applicable in the case before us
because the petitioner is not considered a third party in relation to the Contract of Sale nor may its
possession of the subject property be regarded as acquired lawfully and in good faith. Petitioner was
aware f the lease in favor of the Bonnevies, who were actually occupying the subject property at the time
it was sold to it. Although the Contract of Lease was not annotated on the transfer certificate of title in the
name of the late Jose Reynoso and Africa Reynoso, the petitioner cannot deny actual knowledge of such
lease which was equivalent to and indeed more binding than presumed notice by registration.
A purchaser in good faith and for value is one who buys the property of another without notice that some
other person has a right to or interest in such property and pays a full and fair price for the same at the
time of such purchase or before he has notice of the claim or interest of some other person in the
property. Good faith connotes an honest intention to abstain from taking unconscientious advantage of
another. Tested by these principles, the petitioner cannot tenably claim to be a buyer in good faith as it
had notice of the lease of the property by the Bonnevies and such knowledge should have cautioned it to
look deeper into the agreement to determine if it involved stipulations that would prejudice its own
interests. Petitioners insistence that it was not aware of the right of first priority granted by the Contract of
Lease, If Guzman-Bocaling failed to inquire about the terms of the Lease Contract, which includes Par. 20
on priority right given to the Bonnevies, it had only itself to blame. Having known that the property it was
buying was under lease, it behooved it as a prudent person to have required Reynoso or the broker to
show to it the Contract of Lease in which Par. 20 is contained.
RIVERA FILIPINA INC v CA
Right of First Refusal
FACTS: In 1982, Reyes executed a 10-year (renewable) Contract of Lease with Riivera Filipina
over a parcel of land in EDSA. Under such contract, the lessee is given a right of first refusal
should the lessor decide to sell the property during the terms of the lease. Such property was
subject of a mortgage executed by Reyes in favor of Prudential Bank.
Since Reyes failed to pay the loan with the bank, it foreclosed the mortgage and it emerged as
the highest bidder in the auction sale. Realizing that he could not redeem the property, Reyes
decided to sell it and offered it to Riviera Filipina for P5,000/sqm. However, it bargained for
P3,500/sqm. Reyes rejected such offer. After 7 months, it again bargained for P4,000/sqm, which
again was rejected by Reyes who asked for P6,000/sqm price. After 2 months, it again bargained
for P5,000/sqm, but since Reyes insisted on P6,000/sqm price, he rejected Riviera's offer.
Nearing the expiry of the redemption period, Reyes and Traballo (his friend) agreed that the latter
would buy the same for P5,300. But such deal was not yet formally concluded and negotiations
with Riviera Filipina once again transpired but to no avail.
In 1989, Cypress and Cornhill Trading were able to come up with the amount sufficient to cover
the redemption money, with which Reyes paid to Prudential Bank to redeem the property.
Subsequently, a Deed of Absolute Sale was executed in favor of Cypress and Cornhill for P5.4M.
Cypress and Cornhill mortgaged the property in favor of Urban Dev. Bank for P3M. Riviera

Filipina filed a suit against Reyes, Cypress and Cornhill on the ground that they violated its right
of first refusal under the lease contract.
RTC ruled in favor of Reyes, Cypress, and Cornhill. On appeal, CA affirmed the decision of the
RTC.
ISSUE: W/N Riviera Filipina lost its right of first refusal
HELD: YES. As clearly shown by the records and transcripts of the case, the actions of the
parties to the contract of lease, Reyes and Riviera, shaped their understanding and interpretation
of the lease provision "right of first refusal" to mean simply that should the lessor Reyes decide to
sell the leased property during the term of the lease, such sale should first be offered to the
lessee Riviera. And that is what exactly ensued between Reyes and Riviera, a series of
negotiations on the price per square meter of the subject property with neither party, especially
Riviera, unwilling to budge from his offer, as evidenced by the exchange of letters between the
two contenders.
It can clearly be discerned from Rivieras letters that Riviera was so intractable in its position and
took obvious advantage of the knowledge of the time element in its negotiations with Reyes as
the redemption period of the subject foreclosed property drew near. Riviera strongly exhibited a
"take-it or leaveit" attitude in its negotiations with Reyes. It quoted its "fixed and final" price as
Five Thousand Pesos (P5,000.00) and not any peso more. It voiced out that it had other
properties to consider so Reyes should decide and make known its decision "within fifteen days."
Riviera even downgraded its offer when Reyes offered anew the property to it, such that whatever
amount Reyes initially receives from Riviera would absolutely be insufficient to pay off the
redemption price of the subject property. Naturally, Reyes had to disagree with Rivieras highly
disadvantageous offer.
Nary a howl of protest or shout of defiance spewed forth from Rivieras lips, as it were, but a
seemingly whimper of acceptance when the counsel of Reyes strongly expressed in a letter dated
December 5, 1989 that Riviera had lost its right of first refusal. Riviera cannot now be heard that
had it been informed of the offer of Five Thousand Three Hundred Pesos (P5,300.00) of Cypress
and Cornhill it would have matched said price. Its stubborn approach in its negotiations with
Reyes showed crystal-clear that there was never any need to disclose such information and
doing so would be just a futile effort on the part of Reyes. Reyes was under no obligation to
disclose the same.
Pursuant to Article 1339 of the New Civil Code, 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. The general rule is
applicable in the case at bar since Riviera failed to convincingly show that either of the exceptions
are relevant to the case at bar.
PARANAQUE KINGS ENTERPRISES INC v CA
FACTS: Catalina owned 8 parcels of land leased to Chua, who assigned its rights thereto to Lee
Ching Bing, who, in turn, assigned said rights to Paranaque King Enterprises, which introduced
significant improvements on the premises. Under the lease agreement, in case of sale, the
lessee shall have the option or priority to buy the said properties. Catalina, in violation of the said
stipulation, sold the lot to Raymundo for P5M. Paranaque King notified her of the said breach,
and she immediately had the lots reconveyed. She then offered the lot to Paranaque King for
P15M; but the latter refused claiming that the offer was ridiculous. Catalina thereafter sold it
again to Raymundo for P9M.
ISSUE: W/N there was compliance with the Right of First Refusal assigned to Paranaque King

HELD: NO. In a Right of First Refusal, the seller cannot offer the property to another for a lower
price or under terms more favorable. It must be offered under the same terms & conditions to
Paranaque King; otherwise, the right of first refusal becomes illusory. Only if Paranaque King fails
to meet the offer may the property be offered for sale to another buyerand under the same
terms and conditions as well. The Right of First Refusal may also be validly transferred or
assignedas in this case.
LAO VS GENATO
Petition for certiorari with prayer for the declaration of nullity of the Order 1 1dated February 18,
1981 of the then Court of First Instance of Misamis Occidental-Branch I which confirmed and
approved the two Deeds of Sale, both dated August 15, 1980, involving a commercial property
belonging to the estate of the deceased Rosenda Abuton.chanroblesvirtualawlibrary chanrobles
virtual law library
Petitioner spouses were promisees in a Mutual Agreement of Promise to Sell executed between
them and private respondent Sotero B. Dionisio III, son of respondent Sotero A. Dionisio, Jr., heir
and administrator of the intestate estate of the deceased, whereby the promisor bound himself to
sell the subject property to petitioners, Private respondents, except Sotero Dionisio III and William
Go, are the children and only compulsory heirs of the
deceased.chanroblesvirtualawlibrary chanrobles virtual law library
On June 25, 1980, respondent administrator Sotero Dionisio, Jr., with due notice to all his coheirs, filed with the Probate Court in Special Proceedings No. 842 a Motion for Authority to Sell
certain properties of the deceased to settle the outstanding obligations of the
estate.chanroblesvirtualawlibrary chanrobles virtual law library
On July 8, 1980, after hearing, there being no opposition, the lower court issued an
Order2 2 authorizing the administrator to sell the therein described properties of the estate and
such other properties under his administration at the best price obtainable, and directing him to
submit to the court for approval the transaction made by him chanrobles virtual law library
On August 15, 1980, respondent-administrator pursuant to said authorization, sold to his son,
Sotero Dionisio III, the subject property for P75,000.00 per deed of sale 33acknowledged before
Notary Public Triumfo R. Velez. On the same date, Sotero Dionisio III executed a deed of sale 4 of
the same property in favor of respondent William Go for a consideration of P80.000.00. On
August 18, 1980, title was transferred to respondent Go.chanroblesvirtualawlibrary chanrobles
virtual law library
On August 27, 1980, respondent-heir Florida Nuqui, filed a Motion for Annulment/Revocation of
the Deeds of Absolute Sale for the reasons that the sale and subsequent transfer of title of the
property were made in violation of the court's order of July 8, 1980 and that the consideration of
the two sales were grossly inadequate as in fact many are willing to buy the pr property for
P400,000.00 since it is located along the corner of two main streets in the commercial center of
Oroquieta City.chanroblesvirtualawlibrary chanrobles virtual law library
The respondent-administrator filed an opposition to said motion of co-heir Nuqui alleging that the
actual consideration f the sale made by him is P200,000.00 and that it is the agreement of the
heirs that if any of the heirs or close relatives is interested in buying the property, preference will
be given to him or her in order to keep the property within the family of the
deceased.chanroblesvirtualawlibrarychanrobles virtual law library

On September 9, 1980, respondent Nuqui filed a Reply to said Opposition, stating that the two
sales were but a single transaction simultaneously hatched and consummated in one occasion as
shown by the Notary Public's document Nos. 56 & 57 and with the same witnesses; that the sales
were in reality a single deal between the administrator and William Go, because Sotero Dionisio
III is without means or income and so has no capacity to buy the property; and that the
transaction is an evidence of the administrator's intent to defraud the estate and his co-heirs, for
had it not been for the Motion for Annulment, he would not have disclosed the true and actual
consideration of the sale.chanroblesvirtualawlibrarychanrobles virtual law library
On September 10, 1980, all the co-heirs of respondent-administrator filed a Manifestation to
Adopt the Motion for Annulment/Revocation of Deeds of Absolute Sale. They likewise filed a
Manifestation on February 5, 1981 alleging that the Court order merely authorized the sale of the
subject property but did not approve the same, Thus, their prayer for the cancellation of the
registration of sale transaction between respondent- administrator and his son, and that between
the latter and respondent William Go.chanroblesvirtualawlibrarychanrobles virtual law library
Respondent Go filed a Motion for Leave to Intervene to protect his rights, manifesting that he paid
Sotero Dionisio III the actual consideration of P225,000.00 and being a purchaser in good faith
and for value, his title to the property is indefeasible pursuant to
law.chanroblesvirtualawlibrarychanrobles virtual law library
On February 6, 1981, petitioner spouses filed a "Manifestation In Intervention of Interest to
Purchase Property Authorized by the Court to be Sold", wherein they alleged that respondentadministrator, without revealing that the property had already been sold to William Go, entered
into a Mutual Agreement of Promise to Sell 5 5to herein petitioners, for the amount of P270,000
which was reduced to P220,000.00; that immediately upon the execution of the agreement,
petitioners paid the earnest money in the amount of P70,000.00 by IBAA Check No. OQT40063026 drawn out in favor of Sotero Dionisio III, as requested by respondent-administrator;
that it was agreed upon that the balance of P150,000.00 shall immediately be paid upon the
production of the Transfer Certificate of Title and the execution of the final Deed of Sale; that
although the agreement was executed in the name of Sotero Dionisio III the 'latter, was merely a
nominal party, for technically according to the administrator, he executed a Deed of Absolute Sale
in favor of his son, but the negotiation and transactions were directly and personally entered into
between the administrator and petitioners; that the contract of sale has been perfected
considering that the earnest money was already paid; that despite repeated demands the
administrator refused to execute a final Deed of Sale in favor of petitioners, who later found out
that the subject property was sold to William GO; that both contracts of sale were made to
defraud the estate and the other heirs; that assuming the consideration of P200,000.00 supplied
by William Go to Sotero Dionisio III who was not gainfully employed, then the contract of sale to
Go would be without consideration, hence, it would become fictitious and simulated and there is
no other recourse left to the court but to declare the sale null and void. Petitioners also
manifested that in the event that the court should finally declare the sale null and void, they ares
till interested to purchase the property for the same amount of P200,000.00 as previously
agreed.chanroblesvirtualawlibrarychanrobles virtual law library
At th hearing of the said incident involving the questioned sales petitioners submitted a copy of
the Contract of mortgage 66 dated July 18, 1980 executed by respondent-administrator in favor of
Juan Lao, one of the petitioners, whereby the former mortgaged "all his undivided interest in the
estate of his deceased mother, Rosenda Abuton Vda. de Nuqui, subject matter of this intestate
Estate No. 842, now pending before the Court of First Instance of Oroquieta City, Branch
I."chanrobles virtual law library
Respondent heir Florida A. Nuqui filed an Opposition to William Go's Motion to Intervene averring
therein that the deed of sale executed by Sotero Dionisio, Jr. in favor of Sotero Dionisio III created
no legal force and effect, since the validity of the sale absolutely depended on its approval by the

court; that it therefore follows that the succeeding sale to Go and consequent issuance of the title
to him are also null and void from their inception and that the admission by William Go of the
actual and true consideration of the sale at his stage, hardly bespeaks of "innocence" or "good
faith".chanroblesvirtualawlibrary chanrobles virtual law library
After several ,days of hearing, respondent Judge allowed all the interested parties to bid for the
property at the highest obtainable price pursuant to his Order of July 8,
1980.chanroblesvirtualawlibrary chanrobles virtual law library
On February 16, 1981, in open court, respondent Go offered to buy the property in the amount of
P280,000.00. Petitioners counter-offered at P282,000.00, spot cash. On that same day, all the
heirs, except the administrator, filed a Motion Ex Parte 77 stating among other things, that the offer
of William Go appears the highest obtainable price and that the offer of petitioners is not well
taken as the same has not been made within a reasonable period of five (5) days from February
11, 1981.chanroblesvirtualawlibrary chanrobles virtual law library
On February 17, 1981, all the parties, with the exception. of the Lao spouses and Sotero Dionisio
III, submitted for approval an Amicable Settlement 88 stating:
xxx xxx xxxchanrobles virtual law library
That after the administrator, Sotero A. Dionisio, Jr., had accounted for the actual price received by
him out of the transaction between him and Sotero B. Dionisio III in the amount of Two Hundred
thousand (P200,000.00) Pesos and that in the interest of a peaceful settlement William L. Go has
offered and is ready, able and to pay to the heirs an additional amount of Eighty Thousand
(P80,000.00 ) Pesos an arrangement which is most advantageous to the heirs and which they
willingly accept to their satisfaction. the heirs of Rosenda Abuton hereby declare that they have
no objection to the confirmation and approval of the sales/transactions executed by Sotero A.
Dionisio, Jr., in favor of Sotero B. Dionisio III and that executed by Sotero B. Dionisio III in favor of
the intervenor, William L. Go, and they likewise have no more objection to the lifting and
cancellation of the notice of lis pendens from TCT No.
8807.chanroblesvirtualawlibrary chanrobles virtual law library
WHEREFORE, it is most respectfully prayed that an order issued by this Hon. Court confirming
and approving the transaction executed by Sotero A. Dionisio, Jr., in favor of Sotero B. Dionisio III
and that between the latter and William L. Go, and to direct the Register of Deeds of the Province
of Misamis Occidental at Oroquieta City, for the cancellation of the notice of lis pendens
annotated on Transfer Certificate of Title No. 8807, and to finally consider the matter treated in
the Motion of Florida A. Nuqui dated August 27, 1980 and adopted by all the other heirs forever
closed and terminated.chanroblesvirtualawlibrary chanrobles virtual law library
Oroquieta City, February 17, 1981.chanroblesvirtualawlibrary chanrobles virtual law library
xxx xxx xxx
On February 18, 1981, petitioners filed an opposition to the approval of the Amicable Settlement
on the following grounds: chanrobles virtual law library
(a) They have an interest in the property as vendees in a promise to sell and as Mortgagee, of an
undivided share of one of the heirs but they were not signatories to the amicable settlement,
hence it is contrary to Article 2028 of the Civil Code providing that "A compromise is a contract
whereby the parties, by making reciprocal concessions, avoid litigation or put an end to one
already commenced"; chanrobles virtual law library

(b) The Amicable Settlement seeks the confirmation and approval of the questioned transactions
but as borne out by the pleadings and oral arguments, the Deed of Absolute Sale executed by the
administrator in favor of his son is without consideration, therefore, it is fictitious and simulated
hence it cannot be confirmed or ratified pursuant to Article 1409 of the New Civil
Code; chanrobles virtual law library
(c) The Amicable Settlement is a device to defraud the Government of Capital Gains Tax, charges
and other fees because the Deeds of Sales do not reflect the true consideration; and chanrobles
virtual law library
(d) The Deeds of Sale sought to be confirmed included the undivided share of Sotero A. Dionisio,
Jr. which is presently mortgaged to herein' spouses, which was executed prior to the sale, thus, if
approved, the Court would abet the commission of the crime of estafa as the mortgage has not
yet been paid and released.chanroblesvirtualawlibrary chanrobles virtual law library
Petitioners likewise pointed out in their opposition that respondent Judge had intimated in open
court that somebody offered to buy the property for the price of P300,000.00 but since there was
no formal offer in writing, they (petitioners) are ready and willing to buy the property at that
amount, which definitely is the best price obtainable in the market and most beneficial to all the
heirs.chanroblesvirtualawlibrarychanrobles virtual law library
Despite said opposition, respondent Judge issued an Order 99 on February 18, 1981 approving
the Amicable Settlement, confirming and ratifying the two questioned Deeds of Sale. Petitioners'
motion for reconsideration having been denied, they now come before Us through the instant
petition raising the issue of whether or not respondent Judge is guilty of grave abuse of discretion
in 1) approving the amicable settlement and confirming the two (2) Deeds of Sale in question; and
2) in not accepting the offer of the petitioners in the amount of P300,000.00 for the purchase of
the lot in question.chanroblesvirtualawlibrary chanrobles virtual law library
Sotero Dionisio, Jr. is the Administrator of the estate of his deceased mother Rosenda Abuton. As
such Administrator, he occupies a position of the highest trust and confidence, He is required to
exercise reasonable diligence and act in entire good faith in the performance of that trust,
Although he is not a guarantor or insurer of the safety of the estate nor is he expected to be
infallible yet the same degree of prudence, care and judgment which a person of a fair average
capacity and ability exercises in similar transactions of his own, serves as the standard by which
his conduct is to be judged.chanroblesvirtualawlibrary chanrobles virtual law library
In the discharge of his functions, the administrator should act with utmost circumspection in order
to preserve the estate and guard against its dissipation so as not to prejudice its editors and the
heirs of the decedents who are entitled to the net residue thereof. In the case at bar, the sale was
made necessary "in order to settle other existing obligations of the estate. This purpose is clearly
manifested in the Motion for to Sell 1010 filed by Dionisio, Jr. The subsisting obligation referred to,
although not specified, must be those due and owing to the creditors of the estate and also the
taxes due the government. In order to guarantee faithful compliance with the authority
granted 1111 respondent Judge, through the aforesaid Order made it an emphatic duty on the part
of the administrator Dionisio." . . . to submit to this Court for approval the transactions made by
him." chanrobles virtual law library
The sale was made. But of all people, to his very son Sotero Dionisio III and for the grossly low
price of only P75,000,00, That sale was indubitably shown to be fictitious, it clearly appearing that
Dionisio III has no income whatsoever. In fact, he is still a dependent of his father, administrator
Dionisio, Jr. On top of that, not a single centavo, of the P75,000.00 stated consideration was ever
accounted for nor reported by Dionisio, Jr. to the probate court. Neither did he submit said
transaction as mandated by the order authorizing him to sell, to the probate court for its approval

and just so its validity and fairness may be passed upon and resolved. It was only upon the filing
by one of the heirs, Florida A. Nuqui, of the "Motion for Annulment/Revocation of Deeds of
Absolute Sale" 1212questioning the genuineness aid validity of the transactions, that Dionisio, Jr.
was compelled to admit that the actual consideration for the sale made by him was
P200,000.00. 13 13This sale is one of the illegal and irregular transactions that was confirmed and
legalized by His HONOR's approval of the assailed Amicable Settlement. No doubt, respondent
Judge's questioned approval violates Article 1409 of the New Civil Code and cannot work to
confirm nor serve to ratify a fictitious contract which is non-existent and void from the very
beginning. The fact that practically all the heirs are parties-signatories to the said Compromise
Agreement is of no moment. Their assent to such an illegal scheme does not legalize the same
nor does it impose any obligation upon respondent Judge to approve the same to the prejudice
not only of the creditors of the estate, and the government by the non-payment of the correct
amount of taxes legally due from the estate.chanroblesvirtualawlibrarychanrobles virtual law
library
The offer by the petitioner of P300,000.00 for the purchase of the property in question does not
appear seriously disputed on record. As against the price stated in the assailed Compromise
Agreement the former amount is decidedly more beneficial and advantageous not only to the
estate, the heirs of the descendants, but more importantly to its creditors, for whose account and
benefit the sale was made. No satisfactory and convincing reason appeared given for the
rejection and/or non-acceptance of said offer thus giving rise to a well-grounded suspicion that a
collusion of some sort exists between the administrator and the heirs to defraud the creditors and
the government.chanroblesvirtualawlibrary chanrobles virtual law library
IN VIEW OF THE FOREGOING CONSIDERATIONS, the assailed Order dated February 18,
1981 of the respondent Judge approving the questioned Amicable Settlement is declared NULL
and VOID and hereby SET ASIDE. Consequently, the sale in favor of Sotero Dionisio III and by
the latter to William Go is likewise declared NULL and VOID, The Transfer Certificate of Title
issued to the latter is hereby CANCELLED.chanroblesvirtualawlibrary chanrobles virtual law
library
The proper Regional trial Court of Misamis Occidental to whom this case is now assigned is
hereby ordered to conduct new proceedings for the sale of the property involved in this
case.chanroblesvirtualawlibrarychanrobles virtual law library
No pronouncement as to costs.chanroblesvirtuala

DAVID P. FORNILDA, JUAN P. FORNILDA, EMILIA P. FORNILDAOLILI, LEOCADIA P.

FORNILDA LABAYEN and ANGELA P. FORNILDAGUTIERREZ,
petitioners,vs.
THE BRANCH 164, REGIONAL TRIAL COURT IVTH JUDICIALREGION, PASIG, JOAQUIN C.
ANTONIO Deputy Sheriff, RTC, 4JR Tanay, Rizal and ATTY. SERGIO I. AMONOY
respondents.
G.R. No. 72306 October 6, 1988FACTS:

The Controverted Parcels were part of the estate of the late JulioM. Catolos subject of intestate
estate proceedings, whereinRespondent Amonoy acted as counsel for some of the heirs
from1959 until 1968 by his own admission.

These properties were adjudicated to Alfonso Fornilda andAsuncion M. Pasamba in the Project of
Partition approved by theCourt on 12 January 1965

On 20 January 1965, or only eight (8) days thereafter, and whilehe was still intervening in the
case as counsel, these propertieswere mortgaged by petitioners' predecessor-in-interest

toRespondent Amonoy to secure payment of the latter's attorney'sfees in the amount of

P27,600.00

Since the mortgage indebtedness was not paid, RespondentAmonoy instituted an action for
judicial foreclosure of mortgageon 21 January 1970

The mortgage was subsequently ordered foreclosed and auctionsale followed where Respondent
Amonoy was the sole bidder forP23,600.00

Being short of the mortgage indebtedness, he applied for andfurther obtained a deficiency
judgment.
ISSUE:
Whether or not the mortgage constituted on the ControvertedParcels in favor of Respondent
Amonoy comes within the scope of theprohibition in Article 1491 of the Civil Code.
HELD: YES

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 inperson or through the mediation of another:xxx xxx
xxx(5) Justices, judges, prosecuting attorneys, ...
the property and rights in litigation
or levied upon onexecution before the court within whose junction orterritory they exercise their
respective functions; thisprohibition includes the act of acquitting by assignmentand shall apply
to lawyers with respect to the property and rights which may be the object of any litigation inwhich
they may take part by virtue of their profession
.(Emphasis supplied)

Under the aforequoted provision

, a lawyer is prohibited fromacquiring either by purchase or assignment the property or rights
involved which are the object of the litigation inwhich they intervene by virtue of their profession.
Theprohibition on purchase is all embracing to include not only salesto private individuals but also
public or judicial sales

At the time the mortgage was executed, therefore, therelationship 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 ordictate terms to a harassed client. From the
time of the executionof the mortgage in his favor, Respondent Amonoy had alreadyasserted a title
adverse to his clients' interests at a time when therelationship of lawyer and client had not yet
been severed.

Considering that the mortgage contract, entered into incontravention of Article 1491 of the Civil
Code is expresslyprohibited by law, the same must be held inexistent and void
Abinitio.

DIRECTOR OF LANDS vs. ABABA

(88 SCRA 513); February 27, 1979
FACTS: The adverse claimant Atty. Fernandez was retained as counsel by petitioner (Abarquez)
in a civil a case for the annulment of a contract of sale with right of repurchase and for the

recovery of the land which was the subject matter thereof. Unable to compensate his lawyer
whom he also retained for his appeal, the petitioner executed a document whereby he obliged
himself to give to his lawyer of whatever he might recover from Lots 5600 and 5602 should the
appeal prosper.
The real property sought to be recovered was actually the share of petitioner in Lots 5600
and 5602 which were part of the estate of his deceased parents and which were partitioned
among the heirs, which included petitioner and his sister.
The case having been resolved and title having been issued to petitioner, adverse
claimant waited for petitioner to comply with his obligation under the document executed by him
by delivering the portion of the said parcels of land. Petitioner refused to comply with his
obligation and instead offered to sell the whole parcels of land to spouses Larrazabal. Then,
adverse claimant immediately took steps to protect his interest by filing a motion to annotate his
attorneys lien and by notifying the prospective buyers of his claim over the portion of the
parcels of land.
The motion was granted. The annotation of adverse claim appeared on the new transfer
certificate of title. This adverse claim became the subject of cancellation proceedings filed by
petitioner-spouses. The trial court resolved the case in favor of the adverse claimant. On appeal,
petitioners contended that a contract for a contingent fee violates Article 1491 because it involves
an assignment of a property subject of litigation.
ISSUE: WON the contract for a contingent fee as basis of the interest of Atty. Fernandez is
prohibited by Article 1491 of the Civil Code.
RULING: NO! The contention is without merit. Article 1491 prohibits only the sale or assignment
between the lawyer and his client of property which is the subject of litigation. For the
prohibition to operate, the sale or assignment of the property must take place during the
pendency of the litigation involving the property.
Likewise, under American Law, the prohibition does not apply to cases where after
completion of litigation the lawyer accepts on account of his fee and interest in the assets realized
by the litigation. There is clear distinction between such cases and one in which the lawyer
speculates on the outcome of the matter in which he is employed.
Further, a contract for a contingent fee is not covered by Article 1491 because the
transfer or assignment of the property in litigation takes effect only after the finality of a favorable
judgment. In the instant case, the attorneys fees of Atty. Fernandez, consisting of of whatever
the petitioner might recover from his share in the lots in question is contingent upon the success
of the appeal. Hence, the payment of the attorneys fees, that is, the transfer or assignment of
of the property in litigation will take place only if the appeal prospers. Therefore, the transfer
actually takes effect after the finality of a favorable judgment rendered on appeal and not during
the pendency of litigation involving the property in question. Consequently, the contract for a
contingent fee is not covered by Article 1491 of the Civil Code.
G.R. No. L-33048 April 16, 1982
EPIFANIA SARSOSA VDA. DE BARSOBIA and PACITA W. VALLAR, petitioners,
vs.
VICTORIANO T. CUENCO, respondent.
FACTS:
Sought to be reviewed herein is the judgment dated August 18, 1970, of the Court of Appeals,
rendered in CA-G.R. No. 41318-R, entitled "Victoriano T. Cuenco, Plaintiff-appellant, vs. Epifania
Sarsosa Vda. de Barsobia and Pacita W. Vallar, Defendants- appellees, " declaring Victoriano T.
Cuenco (now the respondent) as the absolute owner of the coconut land in question.
The lot in controversy is a one-half portion (on the northern side) of two adjoining parcels of
coconut land located at Barrio Mancapagao, Sagay, Camiguin, Misamis Oriental (now Camiguin
province), with an area of 29,150 square meters, more or less. The entire land was owned
previously by a certain Leocadia Balisado, who had sold it to the spouses Patricio Barsobia (now
deceased) and Epifania Sarsosa, one of the petitioners herein. They are Filipino citizens. On

September 5, 1936, Epifania Sarsosa then a widow, sold the land in controversy to a Chinese,
Ong King Po, for the sum of P1,050.00 .Ong King Po took actual possession and enjoyed the
fruits thereof. On August 5, 1961, Ong King Po sold the litigated property to Victoriano T. Cuenco
(respondent herein), a naturalized Filipino, for the sum of P5,000.00. Respondent immediately
took actual possession and harvested the fruits therefrom. On March 6, 1962, Epifania "usurped"
the controverted property, and on July 26, 1962, Epifania (through her only daughter and child,
Emeteria Barsobia), sold a one-half (1/2) portion of the land in question to Pacita W. Vallar, the
other petitioner herein .On September 19, 1962, respondent filed a Forcible Entry case against
Epifania before the Municipal Court of Sagay, Camiguin. The case was dismissed for lack of
jurisdiction since, as the laws then stood, the question of possession could not be properly
determined without first settling that of ownership. On December 27, 1966, respondent instituted
before the Court of First Instance of Misamis Oriental a Complaint for recovery of possession and
ownership of the litigated land, against Epifania and Pacita Vallar (hereinafter referred to simply
as petitioners).
Issue: Whether or not Victoriano T. Cuenco ), a naturalized Filipino is the rightful owner of the
land after buying it from Ong King Po, a Chinese.
HELD: The trial Court rendered judgment:
1. Dismissing the complaint with costs against plaintiff (respondent herein).
2. Declaring the two Deeds of Sale, Exhibits A and B, respectively, inexistent and void from the
beginning; and
3. Declaring defendant Pacita W. Vallar as the lawful owner and possessor of the portion of land
she bought from Emeteria Barsobia (pp. 57, 67, Record.)
The respondent appealed and the Court of Appeals reversed the the aforementioned Decision
and decreed instead that respondent was the owner of the litigated property.
The judgment appealed from is hereby reversed. In lieu thereof, The Court renders judgment:
(a) Declaring the plaintiff-appellant Victoriano T. Cuenco the absolute owner of the land in
question, with the right of possession thereof;
(b) Ordering the defendants-appellees to restore the possession of said land to the plaintiff;
(c) Dismissing the defendants' counterclaim;
(d) Condemning the defendants to pay to the plaintiff the sum of P10,000.00 representing the
latter's share from the sale of copra which he failed to receive since March, 1962 when he was
deprived of his possession over the land, and which defendants illegally appropriated it to their
own use and benefit, plus legal interest from the filing of the complaint until fully paid; plus
P2,000.00 representing expenses and attorney's fees;
(e) Sentencing the defendants to pay the costs.