Sales Part IV Page |1

G.R. No. L-21489 and L-21628 May 19, 1966 Attorney’s fees.—Purchasers in bad faith of a parcel of land who brought an
action for its recovery from the true owner were held liable to pay attorney’s
MIGUEL MAPALO, ET AL., petitioners, fees to the latter on his counterclaim.
vs.
MAXIMO MAPALO, ET AL., respondents. Pedro P. Tuason for petitioners.
Primicias and Del Castillo for respondents.
Contracts; Consent secured through fraud.—When the consent to a contract
was fraudulently obtained, the contract is voidable. BENGZON, J.P., J.:

Purchase and sale; Contracts without cause or consideration; Statement of The spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers, were
false consideration.—The rule under the Civil Code, be it the old or the new, registered owners, with Torrens title certificate O.C.T. No. 46503, of a 1,635-
is that contracts without a cause or consideration produce no effect square-meter residential land in Manaoag, Pangasinan. Said spouses-owners,
whatsoever. (Art. 1275, Old Civil Code; Art. 1352, New Civil Code.) out of love and affection for Maximo Mapalo — a brother of Miguel who was
Nonetheless, under the Old Civil Code, the statement of a false consideration about to get married — decided to donate the eastern half of the land to him.
renders the contract voidable, unless it is proven that it is supported by O.C.T. No. 46503 was delivered. As a result, however, they were deceived into
another real and licit consideration. (Art. 1276, Old Civil Code.) signing, on October 15, 1936, a deed of absolute sale over the entire land in
his favor. Their signatures thereto were procured by fraud, that is, they were
Same; Annulment of contract on the ground of falsity of consideration; made to believe by Maximo Mapalo and by the attorney who acted as notary
Prescription.—The action for annulment of a contract on the ground of falsity public who "translated" the document, that the same was a deed of donation
of consideration shall last four years, the term to run from the date of the in Maximo's favor covering one-half (the eastern half) of their land. Although
consummation of the contract. (Art. 1301, Old Civil Code.) the document of sale stated a consideration of Five Hundred (P500.00) Pesos,
the aforesaid spouses did not receive anything of value for the land. The
Same; Contract that states false consideration construed.—A contract that attorney's misbehaviour was the subject of an investigation but its result does
states a false consideration is one that has in fact a real consideration but not appear on record. However we took note of the fact that during the hearing
the same is not the one stated in the document. (Manresa, Codigo Civil, of these cases said notary public was present but did not take the witness
Tomo VIII, Vol. II, p. 354.) stand to rebut the plaintiffs' testimony supporting the allegation of fraud in the
preparation of the document.
Same; Contract without consideration; Effect of statement of consideration in
the document.—Where there was in fact no consideration, the statement of Following the execution of the afore-stated document, the spouses Miguel
one in the deed will not suffice to bring it under the rule of Article 1276 of Mapalo and Candida Quiba immediately built a fence of permanent structure
the Old Civil Code as stating a false consideration. in the middle of their land segregating the eastern portion from its western
portion. Said fence still exists. The spouses have always been in continued
possession over the western half of the land up to the present.
Same; Statement that purchase price was paid but in fact never been paid to
the vendor.—A contract of purchase and sale is void and produces no effect
whatsoever where the same is without cause or consideration in that the Not known to them, meanwhile, Maximo Mapalo, on March 15, 1938,
purchase price, which appears thereon as paid, has in fact never been paid registered the deed of sale in his favor and obtained in his name Transfer
by the purchaser to the vendor. Certificate of Title No. 12829 over the entire land. Thirteen years later on
October 20, 1951, he sold for P2,500.00 said entire land in favor of Evaristo,
Petronila Pacifico and Miguel all surnamed Narciso. The sale to the Narcisos
Same; Inexistent contract cannot be the subject of prescription.—The
was in turn registered on November 5, 1951 and Transfer Certificate of Title
inexistence of a contract is permanent and incurable and cannot be the
No. 11350 was issued for the whole land in their names.
subject of prescription.
 Sales Part IV Page |2

The Narcisos took possession only of the eastern portion of the land in 1951, (d) declaring as null and void Transfer Certificate of Title No. 11350 in
after the sale in their favor was made. On February 7, 1952 they filed suit in the names of the Narcisos insofar as the western half portion of the
the Court of First Instance of Pangasinan (Civil Case No. 1191) to be declared land covered therein is concerned;
owners of the entire land, for possession of its western portion; for damages;
and for rentals. It was brought against the Mapalo spouses as well as against (e) ordering the spouses Mapalo and Quiba and the Narcisos to have
Floro Guieb and Rosalia Mapalo Guieb who had a house on the western part the above-described land be subdivided by a competent land surveyor
of the land with the consent of the spouses Mapalo and Quiba. and that the expenses incident thereto be borne out by said parties pro
rata;
The Mapalo spouses filed their answer with a counterclaim on March 17, 1965,
seeking cancellation of the Transfer Certificate of Title of the Narcisos as to (f) ordering the Register of Deeds of Pangasinan to issue in lieu of
the western half of the land, on the grounds that their (Mapalo spouses) Transfer Certificate of Title No. 11350 two new titles upon completion
signatures to the deed of sale of 1936 was procured by fraud and that the of the subdivision plan, one in favor of the spouses Miguel Mapalo and
Narcisos were buyers in bad faith. They asked for reconveyance to them of Candida Quiba covering the western half portion and another for the
the western portion of the land and issuance of a Transfer Certificate of Title Narcisos covering the eastern half portion of the said land, upon
in their names as to said portion. payment of the legal fees; meanwhile the right of the spouses Mapalo
and Quiba is hereby ordered to be annotated on the back of Transfer
In addition, the Mapalo spouses filed on December 16, 1957 their own Certificate of Title No. 11350; and
complaint in the Court of First Instance of Pangasinan (Civil Case No. U-133)
against the aforestated Narcisos and Maximo Mapalo. They asked that the (g) sentencing Maximo Mapalo and the Narcisos to pay the costs.
deeds of sale of 1936 and of 1951 over the land in question be declared null
and void as to the western half of said land. IT IS SO ORDERED.

Judge Amado Santiago of the Court of First Instance of Pangasinan located in The Narcisos appealed to the Court of Appeals. In its decision on May 28,
the municipality of Urdaneta tried the two cases jointly. Said court rendered 1963, the Court of Appeals reversed the judgment of the Court of First
judgment on January 18, 1961, as follows: Instance, solely on the ground that the consent of the Mapalo spouses to the
deed of sale of 1936 having been obtained by fraud, the same was voidable,
WHEREFORE, judgment is hereby rendered as follows, to wit: not void ab initio, and, therefore, the action to annul the same, within four
years from notice of the fraud, had long prescribed. It reckoned said notice of
(a) dismissing the complaint in Civil Case No. 11991; the fraud from the date of registration of the sale on March 15, 1938. The
Court of First Instance and the Court of Appeals are therefore unanimous that
(b) declaring Exhibit A, plaintiffs in Case No. 11991 and Exhibit 1, the spouses Mapalo and Quiba were definitely the victims of fraud. It was only
defendants in Case No. U-133 as a donation only over the eastern half on prescription that they lost in the Court of Appeals.
portion of the above-described land, and as null and void with respect
to the western half portion thereof; From said decision of the Court of Appeals, the Mapalo spouses appealed to
this Court.
(c) declaring as null and void and without legal force and effect
Transfer Certificate of Title No. 12829 issued in favor of Maximo And here appellants press the contention that the document dated October
Mapalo as regards the western half portion of the land covered 15, 1936, purporting to sell the entire land in favor of Maximo Mapalo, is void,
therein; not merely voidable, as to the western portion of the land for being absolutely
simulated or fictitious.
 Sales Part IV Page |3

Starting with fundamentals, under the Civil Code, either the old or the new, by the Old Civil Code that the action for annulment of a contract on the ground
for a contract to exist at all, three essential requisites must concur: (1) of falsity of consideration shall last four years, the term to run from the date
consent, (2) object, and (3) cause or consideration. 1 The Court of Appeals is of the consummation of the contract.4
right in that the element of consent is present as to the deed of sale of October
15, 1936. For consent was admittedly given, albeit obtained by fraud. Accordingly, since the deed of sale of 1936 is governed by the Old Civil Code,
Accordingly, said consent, although defective, did exist. In such case, the it should be asked whether its case is one wherein there is no consideration,
defect in the consent would provide a ground for annulment of a voidable or one with a statement of a false consideration. If the former, it is void and
contract, not a reason for nullity ab initio. inexistent; if the latter, only voidable, under the Old Civil Code. As observed
earlier, the deed of sale of 1936 stated that it had for its consideration Five
The parties are agreed that the second element of object is likewise present Hundred (P500.00) Pesos. In fact, however, said consideration was totally
in the deed of October 15, 1936, namely, the parcel of land subject matter of absent. The problem, therefore, is whether a deed which states a
the same. consideration that in fact did not exist, is a contract without consideration, and
therefore void ab initio, or a contract with a false consideration, and therefore,
Not so, however, as to the third element of cause or consideration. And on at least under the Old Civil Code, voidable.
this point the decision of the Court of Appeals is silent.
According to Manresa, what is meant by a contract that states a false
As regards the eastern portion of the land, the Mapalo spouses are not consideration is one that has in fact a real consideration but the same is not
claiming the same, it being their stand that they have donated and freely given the one stated in the document. Thus he says:
said half of their land to Maximo Mapalo. And since they did not appeal from
the decision of the trial court finding that there was a valid and effective En primer lugar, nor interesa recordar la diferencia entre simulacion y
donation of the eastern portion of their land in favor of Maximo Mapalo, the el contrato con proposito fraudulento. Este aunque ilicito es real; mas
same pronouncement has become final as to them, rendering it no longer el primero es falso en realidad, aunque se le presente como
proper herein to examine the existence, validity efficacy of said donation as to verdadero. (Manresa, Codigo Civil, Tomo VIII, Vol. II, p. 354.)
said eastern portion.1äwphï1.ñët
And citing a decision of the Supreme Court of Spain on the matter, Manresa
Now, as to the western portion, however, the fact not disputed herein is that further clarifies the difference of false cause and no cause, thus:
no donation by the Mapalo spouses obtained as to said portion. Accordingly,
we start with the fact that liberality as a cause or consideration does not exist Insiste en el distingo con mas detenida descripcion la sentencia de 25
as regards the western portion of the land in relation to the deed of 1936; that de mayo de 1944, en la que se argumenta:
there was no donation with respect to the same.
Si bien es elemento fundamental de todo negocio, la declaracion de
It is reduced, then, to the question whether there was an onerous conveyance voluntad substracto de una voluntad efectiva, y la existencia de una
of ownership, that is, a sale, by virtue of said deed of October 15, 1936, with causa que leconfiera significado juridico señalando la finalidad que con
respect to said western portion. Specifically, was there a cause or este se persigue, no ha de deducirse de esta doctrina,
consideration to support the existence of a contrary of sale? fundamentalmente recogida en el articulo 1.261 y concordantes del
Codigo civil, que cualquier falta de adecuacion entre cualquier
The rule under the Civil Code, again be it the old or the new, is that incongruencia entre la causa expresada y la verdadera, y, en general,
contracts without a cause or consideration produce no effect entre la estructuracion y la finalidad economica; hayan de producir la
whatsoever.2 Nonetheless, under the Old Civil Code, the statement of a false ineficacia del negocio, pues por el contrario, puede este ser valido y
consideration renders the contract voidable, unless it is proven that it is producir sus efectos tanto en el caso de la mera disonancia entre el
supported by another real and licit consideration.3 And it is further provided medio juridico adoptado y el fin practico perseguido, por utilizacion de
 Sales Part IV Page |4

una via oblicua o combinacion de formas juridicas entrelazadas que con esta doctrina, dice el art. 1.276 de nuestro Codigo que "la
permita la obtencion de un resultado no previsto en los cuadros de la expresion de una causa falsa en los contratos dara lugar a la nulidad,
ley — negocios indirectos y negocios fiduciarlos, validos cuando no si no se probase que estaban fundados en otra verdadera y licita".
envuelven fraude de ley, como en el caso de la verdadera (Castan Derecho Civil Español, Tomo II, pp. 618-619)
disconformidad entre la apariencia del acto y su real contenido,
preparada deliberadamente por las partes — negocio simulado — , ya From the foregoing it can be seen that where, as in this case, there was in
que, cuando esta divergencia implica no una ausencia total de fact no consideration, the statement of one in the deed will not suffice to bring
voluntad y de acto real, sino mera ocultacion de un negocio verdadero it under the rule of Article 1276 of the Old Civil Code as stating a false
bajo la falsa apariencia de un negocio fingido "sirulacion relativa", la consideration. Returning to Manresa:
ineficacia de la forma externa simulada, no es obstaculo para la
posible validez del negocio disimulado que contiene, en tanto este Figurando en nuestro Derecho positivo la causa, como un elemento
ultimo sea licito y reuna no solo los requisitos generales, sino tambien esential del contrato, es consecuencia ineludible, se reputar simulada
los que corresponden a su naturaleza especial, doctrina, en obligada la entrega del precio en la compraventa de autos, el que haya que
aplicacion de los preceptos de nuestra Ley civil, especialmente en su declararla nula por inexistente haciendose aplicacion indebida de art.
art. 1.276, que, al establecer el principio de nulidad de los contratos 1.276 por el Tribunal sentenciador al cohonestar la falta de precio
en los que se hace expresion de una causa falsa, deja a salvo el caso admitiendo se pueda tratar de una donacion, ya que la recta aplicacion
de que esten fundados en otra verdadera y licita . (Manresa, Codigo del citado precepto exige que los negocios simulados, o sea con causa
Civil, Tomo VIII, Vol. II pp. 357-358) falsa, se justifique la verdadera y licita en que se funda el acto que las
partes han querido ocultar y el cumplimiento de las formalidades
Sanchez Roman says: impuestas por la Ley y, cual dice la sentencia de 3 de marzo de 1932,
esta rigurosa doctrina ha de ser especialmente impuesta en la
Ya hemos dicho que la intervencion de causa en los contratos es donaciones puras y simples; de los que deduce que la sentencia
necesaria, y que sin ellos son nulos; solo se concibe que un hombre recurrida al no decretar la nulidad instada por falta de causa, incide
perturbado en su razon pueda contratar sin causa. ... en la infraccion de los articulos 1.261, 1.274, 1.275 y 1.276 del Codigo
Civil. (Sentencia de 22 de febrero de 1940). (Manresa, Codigo Civil,
Por la misma razon de la necesidad de la intervencion de causa en el Tomo VIII, Vol. II, p. 356)
contrato, es preciso que esta sea verdadera y no supuesta, aparente
o figurada. Que la falsedad de la causa vicia el consentimiento y anula In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores,
el contrato, es, no solo doctrina indudable de Derecho Cientifico sino 40 Phil. 921, is squarely applicable herein. In that case we ruled that a contract
tambien de antiguo Derecho de Castilla, que en multitud de leyes asi of purchase and sale is null and void and produces no effect whatsoever where
lo declararon. (Sanchez Roman, Derecho Civil, Tomo IV, p. 206.). the same is without cause or consideration in that the purchase price which
appears thereon as paid has in fact never been paid by the purchaser to the
In a clearer exposition of the above distinction, Castan states: vendor.

2.º. La causa ha de ser verdadera. La causa falsa puede ser erronea Needless to add, the inexistence of a contract is permanent and incurable and
o simulada. Es erronea como dice Giorgi, la causa que tiene por base cannot be the subject of prescription. In the words of Castan: "La inexistencia
la credulidad en un hecho no existente; y simulada la que tiene lugar es perpetua e insubsanable no pudiendo ser objecto de confirmacion ni
cuando se hace aparecer artificiosamente una distinta de la verdadera. prescripcion (Op. cit., p. 644.) In Eugenio v. Perdido, 97 Phil. 41, 42-43,
La erronea produce siempre la inexistencia del contrato; la simulada involving a sale dated 1932, this Court, speaking through Justice Cesar
no siempre produce este efecto, porque puede suceder que la causa Bengzon, now Chief Justice, stated:
oculta, pero verdadera, baste para sostener el contrato. De acuerdo
 Sales Part IV Page |5

Under the existing classification, such contract would be "inexisting" is a conclusive manifestation that they (the Narcisos) did not only have
and "the action or defense for declaration" of such inexistence "does prior knowledge of the ownership of said spouses over the western
not prescribe". (Art. 1410, New Civil Code). While it is true that this is half portion in question but that they also have recognized said
a new provision of the New Civil Code, it is nevertheless a principle ownership. It also conclusively shows their prior knowledge of the
recognized since Tipton vs. Velasco, 6 Phil. 67 that "mere lapse of time want of dominion on the part of their vendor Maximo Mapalo over the
cannot give efficacy to contracts that are null and void". whole land and also of the flaw of his title thereto. Under this situation,
the Narcisos may be considered purchasers in value but certainly not
Anent the matter of whether the Narcisos were purchasers in good faith, the as purchasers in good faith. ... (pp. 97-98, Record on Appeal.)
trial court in its decision resolved this issue, thus:
And said finding — which is one of fact — is found by us not a bit disturbed
With regard to the second issue, the Narcisos contend that they are by the Court of Appeals. Said the Court of Appeals:
the owners of the above-described property by virtue of the deed of
sale (Exh. B, plaintiffs in 11991 and Exh. 2, defendants in U-133) In view of the conclusion thus reached, it becomes unnecessary to
executed in their favor by Maximo Mapalo, and further claim that they pass on the other errors assigned. Suffice it to say that, on the merits
are purchasers for value and in good faith. This court, however, the appealed decision could have been upheld under Article 1332 of
cannot also give weight and credit on this theory of the Narcisos on the new Civil Code and the following authorities: Ayola vs. Valderrama
the following reasons: Firstly, it has been positively shown by the Lumber Manufacturers Co., Inc., 49 O.G. 980, 982; Trasporte vs.
undisputed testimony of Candida Quiba that Pacifico Narciso and Beltran, 51 O.G. 1434, 1435; Cortez vs. Cortez, CA-G.R. No. 18451-R,
Evaristo Narciso stayed for some days on the western side (the portion August 8, 1961; Castillo vs. Laberinto, CA-G.R. No. 18118-R,
in question) of the above-described land until their house was December 20, 1961; and 13 C.J. 372-373, as well as the several facts
removed in 1940 by the spouses Mapalo and Quiba; secondly, Pacifica and circumstances appreciated by the trial court as supporting
Narciso admitted in his testimony in chief that when they bought the appellees' case.
property, Miguel Mapalo was still in the premises in question (western
part) which he is occupying and his house is still standing thereon; thereby in effect sustaining — barring only its ruling on prescription — the
and thirdly, said Pacifico Narciso when presented as a rebuttal and judgment and findings of the trial court, including that of bad faith on the part
sub-rebuttal witness categorically declared that before buying the land of the Narcisos in purchasing the land in question. We therefore see no need
in question he went to the house of Miguel Mapalo and Candida Quiba to further remand this case to the Court of Appeals for a ruling on this point,
and asked them if they will permit their elder brother Maximo to sell as appellees request in their brief in the event we hold the contract of 1936 to
the property. be inexistent as regards the western portion of the land.

Aside from the fact that all the parties in these cases are neighbors, In view of defendants' bad faith under the circumstances we deem it just and
except Maximo Mapalo the foregoing facts are explicit enough and equitable to award, in plaintiffs' favor, attorneys' fees on appeal, in the amount
sufficiently reveal that the Narcisos were aware of the nature and of P1,000.00 as prayed for in the counterclaim.
extent of the interest of Maximo Mapalo their vendor, over the above-
described land before and at the time the deed of sale in their favor Wherefore, the decision of the Court of Appeals is hereby reversed and set
was executed. aside, and another one is hereby rendered affirming in toto the judgment of
the Court of First Instance a quo, with attorney's fees on appeal in favor of
Upon the aforestated declaration of Pacifico Narciso the following appellants in the amount of P1,000.00, plus the costs, both against the private
question arises: What was the necessity, purpose and reason of appellees. So ordered.
Pacifico Narciso in still going to the spouses Mapalo and asked them
to permit their brother Maximo to dispose of the above-described
land? To this question it is safe to state that this act of Pacifico Narciso
 Sales Part IV Page |6

G.R. No. 83974. August 17, 1998 limitations cannot apply. As the courts below ruled, the cause of action for its
declaration as such is imprescriptible.
SPOUSES NARCISO RONGAVILLA and DOLORES
RONGAVILLA, petitioners, vs. COURT OF APPEALS AND MERCEDES Same; Same; Senior Citizens; Public policy is also well served in defending the
DELA CRUZ AND FLORENCIA DELA CRUZ, respondents. rights of the aged to legal protection, including their right to property that is
their home, as against fraud, misrepresentation, chicanery and abuse of trust
Contracts; Sales; Land Titles; The admission by a party that he had resorted and confidence by those who owed them candor and respect.—Here in the
to doctoring the price stated in a Deed of Sale, allegedly “to save on taxes,” present case, there is no doubt about the credibility of plaintiffs below (herein
surely opens the door to questions on the integrity, genuineness and veracity private respondents) in pursuing their cause promptly and forcefully. They
of said public instrument.—Despite the petitioners’ insistence that the deed of never intended to sell, nor acceded to be bound by the sale of their land.
sale is presumed valid and, being registered, could not be disturbed anymore, Public policy is also well served in defending the rights of the aged to legal
we however find their arguments and ratiocination less than persuasive. While protection, including their right to property that is their home, as against
petitioners would not want the deed of sale to be impugned, they themselves fraud, misrepresentation, chicanery and abuse of trust and confidence by
contradict the recitals therein. On the vital point of consideration, they and those who owed them candor and respect.
their witnesses, namely Juanita Jimenez and Atty. Arcadio Espiritu repeatedly
declared that the true consideration paid for the sale of the land was not Same; Same; There is no need of an action to set aside a void or inexistent
P2,000 as stated in their own Exhibit “1,” the Deed of Sale, but in fact contract, as in fact such action cannot logically exist, though an action to
P7,800.00. x x x By their own testimony, the petitioners are pictured as not declare the non-existence of the contract can be maintained, and in that same
exactly averse to bending the truth, particularly the purported consideration. action, the plaintiff may recover what he has given by virtue of that
Sadly, the irony of it is that while they claimed they were regularly paying contract.—And if the passage of time could not cure the fatal flaw in the
taxes on the land in question they had no second thoughts stating at the trial inexistent and void contract, neither could an alleged ratification or
and later on appeal that they had resorted to doctoring the price stated in the confirmation thereof. Further, as in the case before us, reconveyance is
disputed Deed of Sale, allegedly “to save on taxes.” That admission surely proper. “The defect of inexistence of a contract is permanent and incurable,
opens the door to questions on the integrity, genuineness and veracity of said hence it cannot be cured either by ratification or by prescription. x x x There
public instrument. is no need of an action to set aside a void or inexistent contract; in fact such
action cannot logically exist. However, an action to declare the nonexistence
Same; Same; Pleadings and Practice; Appeals; In petitions under Rule 45, the of the contract can be maintained; and in the same action, the plaintiff may
Court does not dwell on the alleged grave abuse of discretion but limits its recover what he has given by virtue of the contract.”
observation to alleged errors of law.—But petitioners herein would further
take to task the appellate court for grave abuse of discretion, as well as for a Same; Same; Experience is the life of the law.—Given the circumstances of
reversible error, in having relied on the “purported Certification of the Bureau the case and there being no reversible error in the challenged decision, we
of Internal Revenue which was not offered in evidence.” Since this is a are in accord with the judgment below and find the petitioners’ appeal
petition under Rule 45, however, we will not dwell on the alleged grave abuse without merit. For as well said in the Court of Appeals’ Decision and
of discretion but limit our observation to the alleged error of law. The BIR Resolution under review, “We cannot contemplate of the rather absurd
certificate was the subject of the testimony of witnesses at the hearing where situation, which defendantsappellants would ineluctably lead [u]s to, where
both parties took full advantage of the opportunity for direct and cross- plaintiffs-appellees would sell their only house, in which they have lived for so
examination as well as rebuttal and sur-rebuttal. many years, in order to secure the measly sum of P2,000.00 to repair the roof
of their only house, which would all be lost to them anyway upon the
Same; Same; Once a disputed deed is found to be inexistent and void, the consummation of the sale. They would then become homeless, and the
statute of limitations cannot apply—the cause of action for its declaration as repaired roof would be of no use to them.” Experience which is the life of the
such is imprescriptible.—Turning now to the issue of prescription, it follows law—as well as logic and common sense—militates against the petitioners’
that once the disputed deed is found to be inexistent and void, the statute of cause.
 Sales Part IV Page |7

DECISION parcel was subdivided, was kept in the possession of Juanita Jimenez, who is
the elder sister of Dolores Rongavilla.
QUISUMBING, J.:
Although the basic fact situation here might appear all too familiar, the legal
For review on appeal by certiorari are the Decision[1] of the Court of Appeals controversy itself is notable for having passed through the entire channel of
in CA-G.R. CV No. 06543, promulgated on March 11, 1988, and the the justice system.[4] The present petition before us was given due course per
Resolution[2] dated June 28, 1988, denying petitioner's motion for Resolution[5] dated June 26, 1989; but it was denied on September 20, 1989,
reconsideration. for non-compliance with certain requirements;[6] although, upon motion for
The appealed decision affirmed in toto the judgment of the Regional Trial reconsideration by the petitioners showing compliance, it was reinstated[7] on
Court of Pasay City in Civil Case No. LP-8790-P, which disposed of the September 2, 1991.
controversy as follows: Considering the circumstances in this case, including the relationship of the
parties, it behooves this Court now to examine closely and carefully the
"WHEREFORE, judgment is hereby rendered declaring void and inexistent the questioned judgment and the record below. For the Court could not but be
Deed of Absolute Sale (Exh. "I") dated June 3, 1976 allegedly executed by mindful of the codal admonition that:
plaintiffs in favor of defendant spouses, which document is now particulary
identified as Doc, No. 164; Page no. 34; Book No. I; Series of 1976 in the "In all contractual, property or other relations, when one of the parties is at a
Notarial Register of Arcadio Espiritu, a Notary Public for and in Province of disadvantage on account of his moral dependence, ignorance, indigence,
Cavite. Further, defendant spouses are hereby ordered - mental weakness, tender age, or other handicap, the courts must vigilant for
his protection." (Art. 24, Civil Code)
a. To reconvey to the plaintiffs, free from all liens and encumbrances, the From the facts found below, it appears that in the month of May, 1976, the
property covered by Transfer Certificate of Title No. S-28903 of the Registry private respondents borrowed the amount of two thousand (P2,000) from the
of Deeds for the Province of Rizal; petitioners for the purpose of having their (respondents') dilapidated rooftop
repaired.
b. . To pay to plaintiffs the sum of P5,000.00 as attorney's fees; and
A month later, petitioner Dolores Rongavilla and her sister Juanita Jimenez
visited their aunt's home, bringing with them a document for the signature of
c. To pay the cost of the suit."[3]
their aunts. The document is admittedly typewritten in English. When asked
in Tagalog by one of the aunts, respondent Mercedes de la Cruz, what the
As gleaned from the record, the private parties are closely related. Plaintiffs paper was all about, Dolores Rongavilla answered also in Tagalog, that it was
below, now the private respondents, are the aunts of herein petitioner Dolores just a document to show that the private respondents had a debt amounting
Rongavilla. Both spinsters, they earn their livelihood as embroiderers to P2,000. On account of that representation, private respondent signed the
("magbuburda") and dressmakers; although unschooled in English, they are document.
however able to read and write in Tagalog. Since they are of advanced age
(Mercedes de la Cruz, 60 and Florencia de la Cruz, 71), their day to day In September 1980, or after a lapse of over four years, petitioner Dolores
activities were confined mostly close to home. Rongavilla went to private respondents' place and asked them to vacate the
parcel in question, claiming that she and her husband were already the new
The property subject of this controversy between kith and kin is a parcel of owners of the land.
land, located in Manuyo, Las Pias, Rizal (now Metro Manila) owned by private
respondents, in the proportion of one-half (1/2) pro-indiviso, with another Surprised by petitioners' moves, private respondents with the help of friends
niece named Juanita Jimenez as co-owner of the other one-half. The whole went to the Office of the Register of Deeds of the Province of Rizal to verify
parcel consisted of 131 square meters and was covered by Original Certificate the matter. They discovered that their Certificate of Title had been cancelled
of Title (OCT) No. 5415 of the Register of Deeds of the Province of Rizal. This and a new one, Transfer Certificate of Title No. S-28903, had been issued in
OCT, as well as the Transfer Certificate of Title (TCT) No. S-28903 after the favor of petitioners. They further discovered that said parcel of land had been
 Sales Part IV Page |8

mortgaged with the Cavite Development Bank by the petitioners. It was only (3) The Court of Appeals committed grave abuse of discretion in relying on a
then that the private respondents realized that the document they had purported Certificate of Bureau of Internal Revenue which was not offered in
previously been asked by their nieces to sign was a deed of sale. evidence.
On February 3, 1981, private respondents filed with the Court of First Instance,
(4) The Court of Appeals committed grave error of law and abuse of discretion
now Regional Trial Court, of Pasay City the sworn complaint [8] to have the
and grave abuse of discretion amounting to lack or excess of jurisdiction in
purported deed of sale declared void and inexistent, for being fictitious and
ordering the petitioners to reconvey the subject parcel of land to the private
simulated, and secured by means of fraud and misrepresentation. They
respondents."[10]
alleged that they did not sell their property in question to the defendants; that
they did not receive any consideration on the supposed sale; that their Original
Certificate of Title was cancelled and TCT No. S-28903 was issued in favor of With a slight variation but consistent with the grounds they have relied on
defendants (herein petitioners), who thereafter mortgaged said title for a total petitioners raise in their Memorandum[11] the following:
of P40,000.00 to the damage and prejudice of the plaintiffs. They also claimed
moral and exemplary damages, as the court might determine. "ISSUES

Petitioners duly filed their answer[9] after the denial of their motion to dismiss,
1. Did the Court of Appeals commit a clear and patent error in declaring as
alleging that plaintiffs (now the private respondents) sold their parcel of land
'void and inexistent' the Deed of Absolute Sale (Exhibit 1) dated June
voluntarily, that there was consent to the deed of sale, that there was sufficient
3, 1976?
consideration therefor and that the document on the sale was complete in
itself and in due form, enabling the Register of deeds to cancel their old TCT
and issue a new one. Petitioners further stated that private respondent were 2. Did the Court of Appeals commit grave error in holding that the action to
fully appraised by the Notary Public, Atty. Arcadio G. Espiritu, on what the annul the Deed of Sale (Exhibit 1) does not prescribe?
document was all about, and having understood the explanation made by said
Notary Public, they voluntarily affixed their signatures on said document. 3. Did the Court of Appeals commit grave abuse of discretion in relying on a
Petitioners also asserted as affirmative and/or special defenses that purported Certificate of the Bureau of Internal Revenue which was not
prescription had set in and that private respondents no longer had a cause of offered in evidence?
action, and that the deed of sale contained all the pre-requisites of a contract,
namely consent of the parties, consideration or a price certain, and 4. Did the Court of Appeals commit grave error of law and grave abuse of
determinate thing or object; and could no longer be annulled. They also discretion amounting to lack of jurisdiction or in excess of jurisdiction
claimed moral and exemplary damages. in ordering petitioners to reconvey the subject parcel of land to the
private respondents?"
The trial court's judgment, quoted at the outset, being adverse to the
petitioners, they seasonably appealed. And after their rebuff at the appellate
These issues may be synthesized into one: Did the respondent Court of
level, they come now to this Court on certiorari under Rule 45 of the Rules of
Appeals commit reversible error when it upheld the trial court's judgment that
Court, citing the following grounds for their petition:
the disputed Deed of Sale (Exhibit "1") is void and inexistent?

"(1) It is clear and patent error of the Court of Appeals to declare as 'void and To resolve this pivotal issue, it must be noted that private respondents, as
inexistent the Deed of Absolute Sale (Exhibit 1) dated June 3, 1976. plaintiffs below, based their complaint to declare the disputed deed void and
inexistent on two fundamental grounds: (1) lack of consent and (2) want of
(2) The Court of Appeals committed grave error of law in holding that the consideration. Under oath, they strongly denied selling or even just agreeing
action to declare nullity of the Deed of Absolute Sale (Exhibit 1) does not to sell, their parcel of land to their niece and nephew-in-law. During the
prescribe. hearing, they also denied going to and appearing before the Notary Public who
prepared the deed of sale. They also vehemently denied receiving any
 Sales Part IV Page |9

consideration for the alleged sale. They added that their signatures on the "By more than mere preponderance of evidence of evidence plaintiffs [herein
purported deed of sale were obtained by fraud and misrepresentation as private respondents] have established the merit of their cause of action. The
petitioners had misled them to believe the document was just a paper to Court is of the opinion and so holds that there was fraud exercised by
evidence a debt of P2,000 they obtained to buy G.I sheets for the repair of defendant Dolores Rongavilla and her sister Juanita Jimenez in securing the
their leaking roof.[12] Private respondents were shocked and got sick when signature of the Deed of Absolute Sale (Exh. 'l') and there was no
they were told by petitioners that they (respondents) were no longer the consideration whatsoever dor the alleged sale. Undoubtedly, the said deed of
owners of the land.[13] sale is simulated, fictitious and void."[15]
On these two points of consent and consideration, the trial court found that:
And before concluding, the appellate court reiterated the proper
characterization of the deed of sale in question, not as an annullable contract,
"x x x. A careful analysis and meticulous evaluation of the evidence on record but as a void and inexistent contract asfound by the trial court:
has convinced the Court that the sale of their property to the defendants was
farthest from the plaintiffs' minds. The Court believes that when plaintiffs
"x x x. In the case at bar, however, We are dealing not merely with a voidable
voluntarily signed the document which turned out to be a deed of sale, they
contract which is tainted with fraud, mistake, undue influence, violence or
were misled by defendant Dolores Rongavilla and her sister Juanita Jimenez
intimidation which may justify the annulment of a contract, but with a contract
into believing that what they signed was a document acknowledging the
that is null and void ab initio.
loan of P2,000.00 extended them by said defendant.

"In the present case, plaintiffs-appellees declared under oath in their complaint
"The Deed of Absolute Sale (Exh. "l") mentions a consideration of P2,000.00.
that they signed the alleged document without knowing that said document
Three years after the alleged sale, the same property was mortgaged by
was a deed of absolute sale. This means that plaintiffs-appelles consent was
defendant spouses with the Cavite Development Bank for P40,000.00. Clearly
not only vitiated, but that plaintiffs-appealles have not give their consent at
enough, the gross inadequacy and unconsciounableness [sic] of the
all. And since there was no consent, the deed of absolute sale is, therefore,
consideration deters the Court from subscribing to defendants' theory that
null and void ab initio. xxx'"[16]
plaintiffs sold the property to them. It is more reasonable to assume that the
amount of P2,000.00 mentioned in the deed refers to the loan defendants
extended to plaintiffs for the same amount. Dissatisfied, petitioners now seek from this Court the reversal of the judgment
below. They insist in their petition before us that the deed is valid; and that
because of the statute of limitations, after the lapse of four years from its
"Plaintiffs are now of advanced age. Their only property is the lot in question
execution and registration, it could no longer be annulled.
and the house erected thereon. x x x.
They assert that "the presumption that contracts are presumed to be valid and
"As there is no indication that plaintiffs were in dire need of money, except for to be supported by lawful and good consideration of one dollar is just as
few [sic] amount, except for few [sic] amount necessary for the repair of the effectual and valuable as a larger sum stipulated or paid''.[17]
roof of their house for which they obtained a loan of P2,000.00 from
defendants, there was no reason for plaintiffs to dispose of their property. To They further assert that since private respondents signed the Deed of Sale, as
do so would be inconsistent with the regular norm of human conduct and the a public instrument, the truth of the recitals therein embodied could only be
natural course of events. It is not in accord with the natural promptings and impugned and disproved, not by mere preponderance of evidence, but by
instincts of human nature."[14] evidence of the "the clearest and most satisfactory character, convincing and
overwhelming.'"[18] Petitioners further state that since they have been the ones
paying real estate taxes on the property, rather than their aunts, the latter by
To these findings by thetrial court, the Court of Appelas in its own decision
their acts had confirmed the deed executed by them.[19]
asserted. In addition, it laid stress on the point of lack of consideration by
quoting agreeably the trial judge's holding thereon: Despite the petitioners' insistence that the deed of sale is presumed valid and,
being registered, could not be disturbed anymore, we however find their
 S a l e s P a r t I V P a g e | 10

arguments and ratiocination less than persuasive. While petitioners would not for this alteration. The notary public might have just wanted to further save
want the deed of sale to be impugned, they themselves contradict the recitals on taxes, rather than short-change the coffers of the government. But, again,
therein. On the vital point of consideration, they and their witnesses, namely the whole fabric of petitioners' claim to the sanctity of the deed as public
Juanita Jimenez and Atty. Arcadio Espiritu repeatedly declared that the true instrument had thereby been shredded.
consideration paid for the sale of the land was not P2,000 as stated in their
own Exhibit "l", the Deed of Sale, but in fact P7,800.00.[20] If as petitioners claimed on trial, the price paid was P7,800 while their deed
showed only P2,000, after the amount of P3,000 in the deed was altered, one
Petitioner Dolores Rongavilla herself on cross-examination testified as follows: may well inquire: which figure could this Court believe? Could one say that the
trial and the appellate courts both erred in holding that no consideration
"Atty. Rodriguez: passed from the buyer to the seller?
Q. You stated that you were present when this was explained by the notary But petitioners herein would further take to task the appellate court for grave
public, how did the notary public explain this deed of sale in English abuse of discretion, as well as for a reversible error, in having relied on the
or Tagalog? "purported Certification of the Bureau of Internal Revenue which was not
A. It was explained by the notary public that the property is being sold by offered in evidence". Since this is a petition under Rule 45, however, we will
them to us and that the consideration was only P2,000.00 as not dwell on the alleged grave abuse of discretion but limit our observation to
appearing in the document in order that we may be able to save for the alleged error of law. The BIR certificate was the subject of the testimony
the payment of taxes and documentary stamps. of witnesses at the hearing where both parties took full advantage of the
opportunity for direct and cross-examination as well as rebuttal and sur-
Q. Did the plaintiffs not say anything when the notary public according to you rebuttal.[24] On the witness stand, private respondents as plaintiffs below
explained that instead of P7,800.00, P2,000.00 will be stated in the denied that they had any tax account number nor even residence certificates.
document? They were supported by their witnesses, testifying also under oath. They
A. They did not say anything because we gave to them the amount of the contradicted the claim of the petitioners' lawyer-notary public, that the
consideration agreed between us the sum of P7,800.00. (t.s.n., Sept. disputed deed of sale was complete and in due form and was signed in his
2, 1982, pp. 9-10)"[21] presence by the private respondents. They further denied even having gone
to the office of the lawyer-notary public in Bacoor, Cavite, on June 3, 1976,
By their own testimony, the petitioners are pictured as not exactly averse to the date of execution shown in the deed, or on any other date. While indeed
bending the truth, particularly the purported consideration. Sadly, the irony of the BIR certificate was not formally offered in evidence, hence no longer
it is that while they claimed they were regulary paying taxes on the land in available on review, the record would show that said BIR certificate was
question they had no second thoughts stating at the trial and later on appeal presented during the testimony on rebuttal of respondent Mercedes de la
that they had resorted to doctoring the price stated in the disputed Deed of Cruz:[25]
Sale, allegedly "to save on taxes". That admission surely opens the door to
questions on the integrity, genuineness and veracity of said public instrument. "ATTY. RODRIGUEZ:

Thus, the trial court could not be said to err in asserting that "while it is true According to the defendants, there was the alleged deed of sale executed
that public documents are presumed genuine and regular under the provisions by you and your sister in favor of the defendants before Notary Public
of the Rules of Court, this presumption is a rebuttable presumption which may Arcadio G. Espiritu. It appears you have presented Tax Account No.
be overcome by clear, strong and convincing evidence."[22] (TAN) 2345-463-6 and your sister Florencia de la Cruz also presented
Tax Account No. (TAN) 2345-468-4. Now, do you have any tax
Moreover, Exhibit "l", the deed itself, shows that contrary to the testimony of account number?
the notary public, who appeared as a witness for petitioners, what was
originally typed therein was the amount of "Three Thousand Pesos (P3,000)", WITNESS:
which later on was substituted by the handwritten amount now of Two None, sir.[26]
Thousand Pesos (P2,000)."[23] There is no need to speculate on the motivation
 S a l e s P a r t I V P a g e | 11

xxx In Ocejo, Perez & Co. vs. Flores, 40 Phil. 921 (1920), regarding the sale of
land in Tayabas, Quezon, the Court confronted a similar question:
ATTY. RODRIGUEZ:
I am showing to you this certification from the "Kawanihan ng Rentas, "The first question presented is whether the contract of sale executed by
Quezon City , dated June 16, 1982, addressed to Miss Florencia de la Isabel Flores in favor of Joaquin Bas is valid or not.
Cruz and Miss Mercedes de la Cruz, Las Pias, Metro-Manila, issued by
the accounting chief, stating that in reply to you[r] request dated June "By relying upon the documents executed in his favor by Isabel Flores
14, 1982, requesting certification of your TAN, the records of their evidencing the contract of sale, Joaquin Bas insists that there has been a
office do not show that you were issued any tax account number, what perfect and valid contract of sale of real estate between them and that he paid
relation has this document which for purposes of identification, we to her the consideration of P20,000 mentioned in said documents. x x x.
respectfully request that the same be marked Exhibit "C" to
the certification issued by the BIR? "Isabel Flores, on the other hand, maintained that there was neither a real
WITNESS: sale nor did she receive a centavo from the defendant, as the price of said
sale, x x x."[30]
"Yes, this is the one."[27]
Now even if the matter of the official certification by the BIR is set aside, the Concluded the Court, after reviewing the series of transactions on record:
whole question of the TAN being fake or belonging to somebody else, would
boil down to one of credibility between the two camps. Unfortunately for the "It is then evident that the contract of sale mentioned in the notarial document
petitioners herein, the trial court found them and their witnesses far from of May 7, 1915, lacks cause or consideration and is therefore null and void and
credible. As remarked by the trial Judge, "the declarations of defendants without any effect whatsoever according to Article 1275 of the Civil Code, for
[herein petitioners] do not inspire rational belief."[28] It would thus appear that it has been satisfactorily and conclusively proven that the purchaser Joaquin
the trial court and the appellate court committed no grave error of law, that Bas has not paid Isabel Flores for the price of the lands that the latter has sold
would impel us on this point to override their judgment. to him, and after being contented with having for a long time given several
promises showing that he had no intention to comply with his contract, he
Neither can we give assent to the assertion of petitioners that the appealed concluded by executing four promissory notes payable to the vendor, which
Court of Appeals (CA) decision here as well as the judgment below is "contrary recite the aforementioned purchase price and which were not also paid, there
to settled jurisprudence". This Court in Rivero v. Court of Appeals, 80 SCRA appearing in the record facts from which it can be inferred that fraud has been
411 (1977) had occasion already to affirm a trial court's judgment declaring committed."[31]
null and void the questioned deed of sale where it found:
This Court in Mapalo v. Mapalo, 17 SCRA 114 (1966) stated:
"The undisputed facts of record support the finding of the trial court that
the consent of Ana Concepcion to the deed of sale was obtained through "The rule under the Civil Code, again be it the old or the new, is that contracts
fraudulent misrepresentation of [her nephew] Jaime Rivero that the contract without a cause or consideration produce no effect whatsoever."[32]
she was signing was one of mortgage."
The "problem" before the Court "is whether a deed which states a
"The land in question is located in the municipality of Polo, Bulacan, very near consideration that in fact did not exist, is a contract, without consideration,
Manila. It has an area of 2 hectares, 32 ares and 45 centares. and therefore void ab initio, or a contract with a false consideration, and
The consideration for the sale of said land is only P5,000.00 which is not only therefore, at least under the Old Civil Code, voidable." This problem arose, as
grossly inadequate but shocking to the conscience x x x"[29] observed by the Court, because the questioned "deed of sale" between the
brothers Magpalo, in 1936, stated that it had for its consideration Five Hundred
(P500.00) Pesos. In fact, however, said "consideration was totally absent."[33]
 S a l e s P a r t I V P a g e | 12

Thus, the Court concluded: "Paulina Baranda declared under oath in her complaint that she signed the
deeds of sale without knowing what they were, which means that her consent
"In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores, was not merely marred by the above-stated vices, so as to make the contracts
40 Phil. 921 is squarely applicable herein. In that case we ruled that a contract voidable, but that she had not given her consent at all. We are also satisfied
of purchase and sale is null and null and void and produces no effect that there was no valid consideration either for the alleged transfers, for
whatsoever where the same is without cause or consideration in that the reasons already discussed. Lack of consent and consideration made the deeds
purchase price which appears thereon as paid has in fact never been paid by of sale void altogether[38]and rendered them subject to attack at any time,
the puchaser to vendor."[34] conformably to the rule in Article 1410 that an action to declare the inexistence
Turning now to the issue of prescription, it follows that once the disputed deed of void contracts 'does not prescribe'."[39]
is found to be inexistent and void, the statute of limitations cannot apply. As
the courts below ruled, the cause of action for its declaration as such is And if the passage of time could not cure the fatal flaw in the inexistent and
imprescriptible.[35] Petitioners-spouses contend, however, that this is contrary void contract, neither could an alleged ratification or confirmation thereof.
to settled jurisprudence because the applicable precedent should be Pangadil Further, as in the case before us, reconveyance is proper. "The defect of
v. CFI of Cotabato, 116 SCRA 347 (1982). But the fact situation of that case inexistence of a contract is permanent and incurable, hence it cannot be cured
differs radically from the present controversy. There the Court upheld the either by ratification or by prescription. x x x There is no need of an action to
dismissal of the action to declare a document known as " Ratificacion de Una set aside a void or inexistent contract; in fact such action cannot logically exist.
Venta" as inexistent and void after finding that it was "not a contract wherein However, an action to declare the non-existence of the contract can be
the parties do not intend to be bound at all;" that no circumstance was alleged maintained; and in the same action, the plaintiff may recover what he has
to sustain the contention "that the execution of the aforesaid document is given by virtue of the contract."[40]
contrary to public policy;"[36] and that for 27 years the petitioners did not even
care to verify the status of the land in question. "Their inaction for such a Given the circumstances of the case and there being no reversible error in the
considerable period of time reflects on the credibility of their pretense that challenged decision, we are in accord with the judgment below and find the
they merely intended to confirm an oral mortgage, instead of sale of the land petitioners' appeal without merit. For as well said in the Court of Appeals'
in question."[37] Decision and Resolution under review, "We cannot contemplate of the rather
absurd situation, which defendants-appellants would ineluctably lead [u]s to,
Here in the present case, there is no doubt about the credibility of plaintiffs
where plaintiffs-appellees would sell their only house, in which they have lived
below (herein private respondents) in pursuing their cause promptly and
for so many years, in order to secure the measly sum of P2,000.00 to repair
forcefully. They never intended to sell, nor acceded to be bound by the sale
the roof of their only house, which would all be lost to them anyway upon the
of their land. Public policy is also well served in defending the rights of the
consummation of the sale. They would then become homeless, and the
aged to legal protection, including their right to property that is their home, as
repaired roof would be of no use to them."[41] Experience which is the life of
against fraud, misrepresentation, chicanery and abuse of trust and confidence
the law -- as well as logic and common sense -- militates against the
by those who owed them candor and respect.
petitioners' cause.
More to the point, in our view, is Baranda v. Baranda, 150 SCRA 59 (1987),
WHEREFORE, the instant petition is hereby DENIED. The Decision and the
where this Court found that:
Resolution of the Court of Appeals in CA-G.R. CV No. 06543 are hereby
AFFIRMED.
"This Civil Code provides in Article 1391 that an action to annul a contract on
the ground of vitiated consent must be filed within four years from the Cost against petitioners.
discovery of the vice of consent. In the instant case, however, we are dealing
SO ORDERED.
not with a voidable contract tainted with fraud, mistake, undue influence,
violence or intimidation that can justify its nullification, but with a contract that
is null and void ab initio
 S a l e s P a r t I V P a g e | 13

[G.R. No. 120724-25. May 21, 1998] MARTINEZ, J.:

FERNANDO T. MATE, petitioner, vs. THE HONORABLE COURT OF In this petition for review, petitioner assails the Decision[1] of the Court of
APPEALS and INOCENCIO TAN, respondents. Appeals dated August 29, 1994 in CA-G.R. CV No. 28225-26, which affirmed
with modification the decision of the trial court, the dispositive portion of which
Civil Law; Sales; The filing of the criminal cases was a tacit admission by reads, to wit:
petitioner that there was a consideration of the pacto de retro sale.—As
admitted by petitioner, by virtue of the sale with pacto de retro, Josie Rey WHEREFORE, this Court finds the Deed of Sale with Right of Repurchase
gave him, as vendor-a-retro, a postdated check in the amount of P1.4 executed October 6, 1986 valid and binding between plaintiff and defendant
Million, which represented the repurchase price of the two (2) lots. Aside (as vendor and vendee-a-retro respectively); that as the period to redeem has
from the P1.4 Million check, Josie gave another postdated check to petitioner expired, ownership thereof was consolidated by operation of law, and the
in the amount of P420,000.00, ostensibly as interest for six (6) months but Register of Deeds is hereby ordered to REGISTER this decision consolidating
which apparently was his fee for having executed the pacto de retro the defendants ownership over the properties covered by Transfer Certificate
document. Josie thus assumed the responsibility of paying the repurchase of Title No. T-90-71, covering Lot 8; Original Certificate of Title No. N-311
price on behalf of petitioner to private respondent. Unfortunately, the two covering Lot 5370, all of the Tacloban Cadastre, and issuing to defendant
checks issued by Josie Rey were worthless. Both were dishonored upon Inocencio Tan his titles after cancellation of the titles presently registered in
presentment by petitioner with the drawee banks. However, there is plaintiff Fernando T. Mates name and that of his wife.
absolutely no basis for petitioner to file a complaint against private
respondent Tan and Josie Rey to annul the pacto de retro sale on the ground The plaintiff Fernando Mate is further ordered to pay defendant the sum of
of lack of consideration, invoking his failure to encash the two checks. ONE HUNDRED FORTY THOUSAND (P140,000.00) PESOS, for and as attorneys
Petitioner’s cause of action was to file criminal actions against Josie Rey fees.
under B.P. 22, which he did. The filing of the criminal cases was a tacit
admission by petitioner that there was a consideration of the pacto de retro With costs against the plaintiff Fernando Mate.
sale.
SO ORDERED.[2]
Same; Same; Between two innocent parties, the one who made it possible
for the wrong to be done should be the one to bear the resulting loss.— The facts of this case, as summarized in the petition, are reproduced
Petitioner then postulates that “it is not only illegal but immoral to require hereunder:
him to repurchase his own properties with his own money when he did not
derive any benefit from the transaction.” Thus, he invokes the case of On October 6, 1986 Josefina R. Rey (hereafter referred to as Josie for short)
Singson vs. Isabela Sawmill, 88 SCRA 633, 643, where the Court said that and private respondent went to the residence of petitioner at Tacloban
“where one or two innocent persons must suffer, that person who gave City. Josie who is a cousin of petitioners wife solicited his help to stave off her
occasion for the damages to be caused must bear consequences.” and her family’s prosecution by private respondent for violation of B.P. 22 on
Petitioner’s reliance on this doctrine is misplaced. He is not an innocent account of the rubber checks that she, her mother, sister and brother issued
person. As a matter of fact, he gave occasion for the damage caused by to private respondent amounting to P4,432,067.00. She requested petitioner
virtue of the deed of sale with right to repurchase which he prepared and to cede to private respondent his three (3) lots in Tacloban City in order to
signed. Thus, there is the equitable maxim that between two innocent placate him. On hearing Josies proposal, he immediately rejected it as he owed
parties, the one who made it possible for the wrong to be done should be private respondent nothing and he was under no obligation to convey to him
the one to bear the resulting loss. his properties. Furthermore, his lots were not for sale. Josie explained to him
that he was in no danger of losing his properties as he will merely execute a
DECISION simulated document transferring them to private respondent but they will be
redeemed by her with her own funds. After a long discussion, he agreed to
 S a l e s P a r t I V P a g e | 14

execute a fictitious deed of sale with right to repurchase covering his three (3) an action for consolidation of ownership of the properties subject of the sale
lots mentioned above subject to the following conditions: and pursuant thereto he filed Civil Case No. 7587 that was consolidated with
the case he filed earlier which were later decided jointly by the trial court in
1. The amount to be stated in the document is P1,400,000.00 with interest favor of private respondent and was subsequently appealed to respondent
thereon at 5% a month; Court that affirmed it with modification. Thereupon, petitioner filed a motion
to reconsider the decision but it was denied. Hence, the instant petition for
review.[3]

2. The properties will be repurchased within six (6) months or on or before In this petition for review, the petitioner presents as the sole issue the validity
April 4, 1987; of the Deed of Sale with Right to Repurchase. He contends that it is null and
void for lack of consideration because allegedly no money changed hands
3. Although it would appear in the document that petitioner is the vendor, it when he signed it and the checks that were issued for redemption of the
is Josie who will provide the money for the redemption of the properties with properties involved in the sale have been dishonored by the drawee bank for
her own funds; having been drawn against a closed account.[4]
The contention is without merit.
4. Titles to the properties will be delivered to private respondent but the sale
will not be registered in the Register of Deeds and annotated on the titles. There was a consideration. The respondent court aptly observed that –
In preparing and executing the deed of sale with right of repurchase and in
To assure petitioner that Josie will redeem the aforesaid properties, she issued
delivering to Tan the land titles, appellant actually accommodated Josefina so
to him two (2) BPI checks both postdated December 15, 1986. One check was
she would not be charged criminally by Tan. To ensure that he could
for P1,400,000.00 supposedly for the selling price and the other was
repurchase his lots, appellant got a check of P1,400,000.00 from her. Also, by
for P420,000.00 corresponding to the interests for 6 months. Immediately
allowing his titles to be in possession of Tan for a period of six months,
thereafter petitioner prepared the Deed of Sale with Right to Repurchase (Exh.
appellant secured from her another check for P420,000.00. With this
A) and after it has been signed and notarized, it was given to private
arrangement, appellant was convinced he had a good bargain. Unfortunately
respondent together with the titles of the properties and the latter did not
his expectation crumbled. For this tragic incident, not only Josefina, but also
register the transaction in the Register of Deeds as agreed upon.
Tan, according to appellant must be answerable.

On January 14, 1987, petitioner deposited the check for P1,400,000.00 (Exh. xxxxxxxxx
B) in his account at the United Coconut Planters Bank and the other check
for P420,000.00 (Exh. D) in his account at METROBANK preparatory to the It is plain that consideration existed at the time of the execution of the deed
redemption of his properties. However, both of them were dishonored by the of sale with right of repurchase. It is not only appellants kindness to Josefina,
drawee bank for having been drawn against a closed account.Realizing that being his cousin, but also his receipt of P420,000.00 from her which impelled
he was swindled, he sent Josie a telegram about her checks and when she him to execute such contract.[5]
failed to respond, he went to Manila to look for her but she could not be
found. So he returned to Tacloban City and filed Criminal Cases Nos. 8310 and Furthermore, while petitioner did not receive the P1.4 Million purchase price
8312 against her for violation of B.P. 22 but the cases were later archived as from respondent Tan, he had in his possession a postdated check of Josie Rey
the accused (Josie) could not be found as she went into hiding. To protect his in an equivalent amount precisely to repurchase the two lots on or before the
interest, he filed Civil Case No. 7396 of the Regional Trial Court of Leyte, sixth month.
Branch VII, entitled `Fernando T. Mate vs. Josefina R. Rey and Inocencio Tan
for Annulment of Contract with Damages. Defendant Josefina R. Rey (Josie) As admitted by petitioner, by virtue of the sale with pacto de retro, Josie Rey
was declared in default and the case proceeded against private gave him, as vendor-a-retro, a postdated check in the amount of P1.4 Million,
respondent. But during the trial the RTC court asked private respondent to file which represented the repurchase price of the two (2) lots. Aside from
 S a l e s P a r t I V P a g e | 15

the P1.4 Million check, Josie gave another postdated check to petitioner in the doctrine is misplaced. He is not an innocent person. As a matter of fact, he
amount of P420,000.00, ostensibly as interest for six (6) months but which gave occasion for the damage caused by virtue of the deed of sale with right
apparently was his fee for having executed the pacto de retro document. Josie to repurchase which he prepared and signed. Thus, there is the equitable
thus assumed the responsibility of paying the repurchase price on behalf of maxim that between two innocent parties, the one who made it possible for
petitioner to private respondent. the wrong to be done should be the one to bear the resulting loss.[6]
Unfortunately, the two checks issued by Josie Rey were worthless. Both were Petitioner further insinuates that private respondent deceived him into signing
dishonored upon presentment by petitioner with the drawee banks. However, the deed of sale with right to repurchase. This is not borne out by the evidence
there is absolutely no basis for petitioner to file a complaint against private nor by petitioner’s own statement of facts which we heretofore reproduced. As
respondent Tan and Josie Rey to annul the pacto de retro sale on the ground aptly observed by the respondent court We are at a loss why herein appellant
of lack of consideration, invoking his failure to encash the two ascribes false pretenses to Tan who merely signed the contract.[7] Contrary to
checks. Petitioners cause of action was to file criminal actions against Josie petitioners pretension, respondent Tan did not employ any devious scheme to
Rey under B.P. 22, which he did. The filing of the criminal cases was a tacit make the former sign the deed of sale. It is to be noted that Tan waived his
admission by petitioner that there was a consideration of the pacto de right to collect from Josefina Rey by virtue of the pacto de retro sale. In turn,
retro sale. Josefina gave petitioner a postdated check in the amount of P1.4 Million to
ensure that the latter would not lose his two lots. Petitioner, a lawyer, should
Petitioner further claims that the pacto de retro sale was subject to the have known that the transaction was fraught with risks since Josefina Rey and
condition that in the event the checks given by Josie Reyes to him for the family had a checkered history of issuing worthless checks. But had petitioner
repurchase of the property were dishonored, then the document shall be not agreed to the arrangement, respondent Tan would not have agreed to
declared null and void for lack of consideration. waive prosecution of Josefina Rey.
We are not persuaded. Apparently, it was petitioner’s greed for a huge profit that impelled him to
Private respondent Tan was already poised to file criminal cases against Josie accede to the scheme of Josefina Rey even if he knew it was a dangerous
Rey and her family. It would not be logical for respondent Tan to agree to the undertaking. When he drafted the pacto de retro document, he threw caution
conditions allegedly imposed by petitioner. Petitioner knew that he was bound to the winds forgetting that prudence might have been the better course of
by the deed of sale with right to repurchase, as evidenced by his filing criminal action. We can only sympathize with petitioners predicament.However, a
cases against Josie Rey when the two checks bounced. contract is a contract. Once agreed upon, and provided all the essential
elements are present, it is valid and binding between the parties.
The respondent court further made the candid but true observation that:
Petitioner has no one to blame but himself for his misfortune.
If there is anybody to blame for his predicament, it is appellant himself. He is
a lawyer. He was the one who prepared the contract. He knew what he was WHEREFORE, the Decision of the Court of Appeals dated August 29, 1994 is
entering into. Surely, he must have been aware of the risk involved. When hereby AFFIRMED. The petition for review is hereby DENIED DUE COURSE for
Josefinas checks bounced, he should have repurchased his lots with his own lack of merit.
money. Instead, he sued not only Josefina but also Tan for annulment of SO ORDERED.
contract on the ground of lack of consideration and false pretenses on their
part.
Petitioner then postulates that it is not only illegal but immoral to require him
to repurchase his own properties with his own money when he did not derive
any benefit from the transaction. Thus, he invokes the case of Singson vs.
Isabela Sawmill, 88 SCRA 633, 643, where the Court said that where one or
two innocent persons must suffer, that person who gave occasion for the
damages to be caused must bear consequences. Petitioners reliance on this
 S a l e s P a r t I V P a g e | 16

[G.R. No. 144735. October 18, 2001] the law leaves them as they are and denies recovery by either one of them.
However, this principle does not apply with respect to inexistent and void
YU BUN GUAN, petitioner, vs. ELVIRA ONG, respondent. contracts. Said this Court in Modina v. Court of Appeals: “The principle of in
pari delicto non oritur actio denies all recovery to the guilty parties inter se. It
Appeals; Evidence; It is axiomatic that factual findings of the trial court, applies to cases where the nullity arises from the illegality of the consideration
especially when affirmed by the Court of Appeals, are binding and conclusive or the purpose of the contract. When two persons are equally at fault, the law
on the Supreme Court.—We find no reason to disturb the findings of the RTC does not relieve them. The exception to this general rule is when the principle
and the CA that the source of the money used to acquire the property was is invoked with respect to inexistent contracts.” Yu Bun Guan vs. Ong, 367
paraphernal. This issue is factual in nature. It is axiomatic that “factual findings SCRA 559, G.R. No. 144735 October 18, 2001
of the trial court, especially when affirmed by the Court of Appeals, as in this
case, are binding and conclusive on the Supreme Court. It is not the function DECISION
of this Court to re-examine the lower courts’ findings of fact. While there are
exceptions to this rule, petitioner has not shown its entitlement to any of PANGANIBAN, J.:
them.”
A simulated deed of sale has no legal effect, and the transfer certificate of title
Witnesses; The unnatural and contradictory testimony of a witness makes him issued in consequence thereof should be cancelled. Pari delicto does not apply
unreliable.—The testimony of petitioner as to the source of the money he had to simulated sales.
supposedly used to purchase the property was at best vague and unclear. At
first he maintained that the money came from his own personal funds. Then Statement of the Case
he said that it came from his mother; and next, from his father. Time and time
again, “we [have] held that the unnatural and contradictory testimony of a Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing
witness, x x x makes him unreliable x x x.” His statement that the JP Rizal the April 25, 2000 Decision[1] and the August 31, 2000 Resolution[2] of the
property was bought with his own money can hardly be believed, when he Court of Appeals[3] (CA) in CA-GR CV No. 61364. The decretal portion of the
himself was unsure as to the source of those funds. Decision reads as follows:

Contracts; Sales; Simulated Contracts; A Deed of Sale that is completely We cannot see any justification for the setting aside of the contested Decision.
simulated is void and without effect.—In the present case, it is clear from the
factual findings of both lower courts that the Deed of Sale was completely THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED.[4]
simulated and, hence, void and without effect. No portion of the P200,000
consideration stated in the Deed was ever paid. And, from the facts of the The assailed Resolution denied petitioners Supplemental Motion for
case, it is clear that neither party had any intention whatsoever to pay that Reconsideration with Leave to Submit [Newly] Discovered Evidence.
amount. Instead, the Deed of Sale was executed merely to facilitate the
transfer of the property to petitioner pursuant to an agreement between the The CA sustained the Decision of the Regional Trial Court (RTC) of Makati City
parties to enable him to construct a commercial building and to sell the Juno (Branch 60), which had disposed as follows:[5]
property to their children. Being merely a subterfuge, that agreement cannot
be taken as the consideration for the sale. 23. WHEREFORE, the Court hereby renders judgment as follows:

Principle of In Pari Delicto; Words and Phrases; The principle of in pan delicto 23.1. The Deed of Sale dated July 24, 1992 (Exh. EE or Exh. 3) is declared
provides that when two parties are equally at fault, the law leaves them as VOID.
they are and denies recovery by either one of them; The principle of in pari
delicto does not apply with respect to inexistent and void contracts.—The
principle of in pari delicto provides that when two parties are equally at fault,
 S a l e s P a r t I V P a g e | 17

23.2. The plaintiff ELVIRA ONG is declared the OWNER of the property covered 26, 1992, because of the latters incurable promiscuity, volcanic temper and
by Transfer Certificate of Title No. 217614, Registry of Deeds, Makati (Exh. other vicious vices; out of the reunion were born three (3) children, now living
DD). with her [respondent].

23.3. The Register of Deeds, City of Makati is ordered to: She purchased on March 20, 1968, out of her personal funds, a parcel of land,
then referred to as the Rizal property, from Aurora Seneris, and supported by
23.2.1. Cancel Transfer Certificate of Title No. 181033 (Exh. HH); and Title No. 26795, then subsequently registered on April 17, 1968, in her name.

23.2.2. Issue in lieu thereof, a transfer certificate of title in the name of ELVIRA Also during their marriage, they purchased, out of their conjugal funds, a
A. ONG, of legal age, single, Filipino; house and lot, in 1983, thereafter, registered in their names, under Title No.
118884.
23.[4]. The defendant YU BUN GUAN is ordered to pay to the said plaintiff,
the following:
Before their separation in 1992, she reluctantly agreed to the [petitioners]
importunings that she execute a Deed of Sale of the J.P. Rizal property in his
23.[4].1. P48,631.00 As reimbursement of the capital gains tax (Exh. FF);
favor, but on the promise that he would construct a commercial building for
the benefit of the children. He suggested that the J.P. Rizal property should
23.[4].2. Six (6) percent of P48,631.00 per annum from November 23, 1993,
be in his name alone so that she would not be involved in any obligation. The
until the said P48,631.00 is paid as damages
consideration for the simulated sale was that, after its execution in which he
would represent himself as single, a Deed of Absolute Sale would be executed
23.[4].3. P100,000.00 - as moral damages;
in favor of the three (3) children and that he would pay the Allied Bank, Inc.
the loan he obtained.

23.[4].4. P 50,000.00 as exemplary damages; Because of the glib assurances of [petitioner], [respondent] executed a Deed
of Absolute Sale in 1992, but then he did not pay the consideration
of P200,000.00, supposedly the ostensible valuable consideration. On the
23.[4].5. P 100,000.00 as attorneys fees.
contrary, she paid for the capital gains tax and all the other assessments even
amounting to not less than P60,000.00, out of her personal funds.
23.[5]. The COUNTERCLAIM is DISMISSED.
Because of the sale, a new title (TCT No. 181033) was issued in his name, but
23.[6]. Cost is taxed against the defendant. to insure that he would comply with his commitment, she did not deliver the
owners copy of the title to him.
24. In Chambers, City of Makati, June 23, 1998.
Because of the refusal of [petitioner] to perform his promise, and also because
The Facts he insisted on delivering to him the owners copy of the title [to] the JP Rizal
property, in addition to threats and physical violence, she decided executing
The antecedents of the case are succinctly summarized by the Court of Appeals an Affidavit of Adverse Claim.
in this wise:
Also to avoid burdening the JP Rizal property with an additional loan amount,
[Herein respondent] said that she and [petitioner] are husband and wife, she wrote the Allied Bank, Inc. on August 25, 1992, withdrawing her authority
having been married according to Chinese rites on April 30, 1961. They lived for [petitioner] to apply for additional loans.
together until she and her children were abandoned by [petitioner] on August
 S a l e s P a r t I V P a g e | 18

To save their marriage, she even sought the help of relatives in an earnest Before the court a quo, the issues were: who purchased the JP Rizal property?
effort [at] reconciliation, not to mention a letter to [petitioner] on November [W]as the Deed of Sale void? and damages.[6]
3, 1992.
Ruling of the Trial Court
[Petitioner], on the other hand, filed with the RTC, Makati, in 1993 (Case No.
M-2905), a Petition for Replacement of an owners duplicate title. After examining the evidence adduced by both parties, the RTC found that the
JP Rizal property was the paraphernal property of respondent, because (1) the
Attached to the Petition was the Affidavit of Loss dated March 26, 1993, in title had been issued in her name; (2) petitioner had categorically admitted
which he falsely made it appear that the owners copy of the title was lost or that the property was in her name; (3) petitioner was estopped from claiming
misplaced, and that was granted by the court in an Order dated September otherwise, since he had signed the Deed of Absolute Sale that stated that she
17, 1993, following which a new owners copy of the title was issued to was the absolute and registered owner; and (4) she had paid the real property
[petitioner]. taxes thereon.[7]
The trial court further held that the in pari delicto rule found in Articles 1411
Upon discovery of the fraudulent steps taken by the [petitioner], [respondent]
and 1412 of the Civil Code was not applicable to the present case, because it
immediately executed an Affidavit of Adverse Claim on November 29, 1993.
would apply only to existing contracts with an illegal cause or object, not to
simulated or fictitious contracts or to those that were inexistent due to lack of
She precisely asked the court that the sale of the JP Rizal property be declared an essential requisite such as cause or consideration.[8] It likewise voided the
as null and void; for the title to be cancelled; payment of actual, moral and Deed of Absolute Sale of the JP Rizal property for having been simulated and
exemplary damages; and attorneys fees. executed during the marriage of the parties.[9]

It was, on the other hand, the version of [petitioner] that sometime in 1968 Ruling of the Court of Appeals
or before he became a Filipino, through naturalization, the JP Rizal property The Court of Appeals upheld the trial courts findings that the JP Rizal property
was being offered to him for sale. Because he was not a Filipino, he utilized had been acquired by respondent alone, out of her own personal funds. It
[respondent] as his dummy and agreed to have the sale executed in the name ruled thus:
of [respondent], although the consideration was his own and from his personal
funds.
x x x [T]he JP Rizal property was purchased by the [respondent] alone;
therefore it is a paraphernal property. As a matter of fact, the title was issued
When he finally acquired a Filipino citizenship in 1972, he purchased another in her name, Exh. DD. This was even admitted by [petitioner] in the Answer
property being referred to as the Juno lot out of his own funds. If only to that the sale was executed in her name alone. He also signed the sale
reflect the true ownership of the JP Rizal property, a Deed of Sale was then mentioning [respondent] to be an absolute owner; therefore, he should be
executed in 1972. Believing in good faith that his owners copy of the title was estopped from claiming otherwise. She alone likewise did the payment of the
lost and not knowing that the same was surreptitiously concealed by taxes.[10]
[respondent], he filed in 1993 a petition for replacement of the owners copy
of the title, in court.
The CA debunked the contention of petitioner that he had purchased the
property out of his own funds and merely used respondent as his dummy.[11] It
[Petitioner] added that [respondent] could not have purchased the property also held that the latter was not in pari delicto with him, because the contract
because she had no financial capacity to do so; on the other hand, he was was simulated or fictitious due to the lack of consideration. The contract was
financially capable although he was disqualified to acquire the property by deemed void for having been executed during the couples marriage. [12] The
reason of his nationality. [Respondent] was in pari delicto being privy to the CA likewise affirmed the award of actual, moral and exemplary damages to
simulated sale. respondent.[13]
 S a l e s P a r t I V P a g e | 19

Hence, this Petition.[14] Petitioner contends that the JP Rizal property should be deemed as co-owned,
considering that respondent testified during trial that the money she used in
Issues purchasing it had come from her income, salaries and savings, which are
In his Memorandum, petitioner raises the following issues for the Courts conjugal in nature.
consideration: On the other hand, respondent maintains that the finding of the two lower
I courts that the property was acquired using funds solely owned by her is
binding and supported by evidence. She further argues that the two defenses
Whether or not the Court of Appeals gravely erred in not applying [the] rules of petitioner are contradictory to each other because, if the property is co-
on co-ownership under Article 144 of the New Civil Code in determining the owned, he cannot claim to own it in its entirety.
proprietary rights of the parties herein even as respondent herself expressly We find no reason to disturb the findings of the RTC and the CA that the
declared that the money with which she allegedly bought the property in source of the money used to acquire the property was paraphernal. This issue
question in 1968 came from her funds, salaries and savings at the time she is factual in nature. It is axiomatic that factual findings of the trial court,
and petitioner already lived as husband and wife. especially when affirmed by the Court of Appeals, as in this case, are binding
and conclusive on the Supreme Court. It is not the function of this Court to
II reexamine the lower courts findings of fact. While there are exceptions to this
rule, petitioner has not shown its entitlement to any of them. [16]
Whether or not the Court of Appeals likewise palpably erred in declaring the
The testimony of petitioner as to the source of the money he had supposedly
sale of the subject property to herein petitioner in 1992 to be fictitious,
used to purchase the property was at best vague and unclear. At first he
simulated and inexistent.
maintained that the money came from his own personal funds. Then he said
that it came from his mother; and next, from his father. Time and time again,
III we [have] held that the unnatural and contradictory testimony of a witness, x
x x makes him unreliable x x x.[17] His statement that the JP Rizal property was
Whether or not the Court of Appeals further erred in not applying the [in] pari bought with his own money can hardly be believed, when he himself was
delicto rule to the sale of the subject property in favor of the petitioner in 1992 unsure as to the source of those funds.
contrary to the express declaration to that effect in the very same case it cited
(Rodriguez v. Rodriguez; 20 SCRA 908) in the decision herein sought to be On the other hand, the capacity of respondent to purchase the subject
reviewed. property cannot be questioned. It was sufficiently established during trial that
she had the means to do so. In fact, her testimony that she had purchased
IV several other lots using her personal funds was not disputed.
Equally without merit is the contention of petitioner that, because he was a
Whether or not the Court of Appeals gravely erred in annul[l]ing the title (TCT Chinese national at the time, respondent was merely used as a dummy in
No. 181033) to the subject property in the name of herein petitioner in the acquiring the property; thus, she could not have legally acquired title
absence of actual fraud.[15](Underscoring in the original.) thereto. He testified that sometime during the last month of 1968, he had
consulted a certain Atty. Flores, who advised him that the property be
This Court’s Ruling registered in the name of respondent. However, TCT No. 217614 had been
issued earlier on April 17, 1968. Thus, it appears that the subject property had
The Petition is devoid of merit. already been bought and registered in the name of respondent, long before
Atty. Flores allegedly advised him to have the property registered in her name.
First Issue: Nature of the Property
 S a l e s P a r t I V P a g e | 20

We therefore agree with the CAs affirmation of the RTCs findings that the Instead, the Deed of Sale was executed merely to facilitate the transfer of the
property had been acquired using respondents paraphernal property. The CA property to petitioner pursuant to an agreement between the parties to enable
ruled thus: him to construct a commercial building and to sell the Juno property to their
children. Being merely a subterfuge, that agreement cannot be taken as the
The fact however, is that Yu never refuted Elviras testimony that: (a) the consideration for the sale.
money with which she acquired the JP Rizal property came from: (1) her
Third Issue: Inapplicability of the in Pari Delicto Principle
income as a cashier in the Hong Kiat Hardware; (2) income from her
paraphernal property a lot in Guadalupe; (3) her savings from the money The principle of in pari delicto provides that when two parties are equally at
which her parents gave her while she was still a student; and (4) the money fault, the law leaves them as they are and denies recovery by either one of
which her sister gave her for helping her run the beauty parlor; (b) her parents them. However, this principle does not apply with respect to inexistent and
were well off they had stores, apartments and beauty parlors from which they void contracts. Said this Court in Modina v. Court of Appeals:[21]
derived income; (c) before her marriage she bought lots in different places (p.
8, TSN, Jan. 26, 1998; pp. 22-23, TSN March 10, 1998).[18] The principle of in pari delicto non oritur actio denies all recovery to the guilty
parties inter se. It applies to cases where the nullity arises from the illegality
of the consideration or the purpose of the contract. When two persons are
Second Issue: Fictitious, Simulated and Inexistent Sale
equally at fault, the law does not relieve them. The exception to this general
rule is when the principle is invoked with respect to inexistent contracts.[22]
Next, petitioner argues that there was a valid sale between the parties, and
that the consideration consisted of his promise to construct a commercial Fourth Issue: Cancellation of TCT
building for the benefit of their three children and to pay the loan he had
Finally, based on the foregoing disquisition, it is quite obvious that the Court
obtained from Allied Bank.
of Appeals did not err in ordering the cancellation of TCT No. 181033, because
We disagree. In Rongavilla v. Court of Appeals,[19] the Court declared that a the Deed of Absolute Sale transferring ownership to petitioner was completely
deed of sale, in which the stated consideration had not in fact been paid, is simulated, void and without effect. In fact, there was no legal basis for the
null and void: issuance of the certificate itself.
WHEREFORE, the Petition is hereby DENIED and the assailed
The problem before the Court is whether a deed which states a consideration Decision AFFIRMED. Costs against petitioner.
that in fact did not exist, is a contract, without consideration, and therefore
void ab initio, or a contract with a false consideration, and therefore, at least SO ORDERED.
under the Old Civil Code, voidable. x x x."

"In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores,
40 Phil. 921[,] is squarely applicable herein. In that case we ruled that a
contract of purchase and sale is null and null and void and produces no effect
whatsoever where the same is without cause or consideration in that the
purchase price which appears thereon as paid has in fact never been paid by
the purchaser to vendor."[20]

In the present case, it is clear from the factual findings of both lower courts
that the Deed of Sale was completely simulated and, hence, void and without
effect. No portion of the P200,000 consideration stated in the Deed was ever
paid. And, from the facts of the case, it is clear that neither party had any
intention whatsoever to pay that amount.
 S a l e s P a r t I V P a g e | 21

G.R. No. L-67888 October 8, 1985 Ong assails the interpretation given by respondent Appellate Court to the
questioned Quitclaim Deed.
IMELDA ONG, ET AL., petitioners,
vs. Records show that on February 25, 1976 Imelda Ong, for and in consideration
ALFREDO ONG, ET AL., respondents. of One (P1.00) Peso and other valuable considerations, executed in favor of
private respondent Sandra Maruzzo, then a minor, a Quitclaim Deed whereby
Civil Law; Sales; Consideration; Conveyance of property for P1.00 she transferred, released, assigned and forever quit-claimed to Sandra
consideration and other valuable considerations, valid.—A careful perusal of Maruzzo, her heirs and assigns, all her rights, title, interest and participation
the subject deed reveals that the conveyance of the one-half (½) undivided in the ONE-HALF (½) undivided portion of the parcel of land, particularly
portion of the above-described property was for and in consideration of the described as follows:
One (P1.00) Peso and the other valuable considerations (italics supplied)
paid by private respondent Sandra Maruzzo, through her representative, A parcel of land (Lot 10-B of the subdivision plan (LRC) Psd
Alfredo Ong, to petitioner Imelda Ong. Stated differently, the cause or 157841, being a portion of Lot 10, Block 18, Psd-13288, LRC
consideration is not the One (P1.00) Peso alone but also the other valuable (GLRC) Record No. 2029, situated in the Municipality of
considerations. Makati, Province of Rizal, Island of Luzon ... containing an
area of ONE HUNDRED AND TWENTY FIVE (125) SQUARE
Same; Same; Same; Bad faith and inadequacy of monetary consideration do METERS, more or less.
not render a conveyance inexistent, as the assignor's liability may be
sufficient cause for a valid contract.—lt is not unusual, however, in deeds of On November 19, 1980, Imelda Ong revoked the aforesaid Deed of Quitclaim
conveyance adhering to the AngloSaxon practice of stating that the and, thereafter, on January 20, 1982 donated the whole property described
consideration given is the sum of P1.00, although the actual consideration above to her son, Rex Ong-Jimenez.
may have been much more. Moreover, assuming that said consideration of
P1.00 is suspicious, this circumstance, alone, does not necessarily justify the On June 20, 1983, Sandra Maruzzo, through her guardian ( ad litem) Alfredo
inference that Reyes and the Abellas were not purchasers in good faith and Ong, filed with the Regional Trial Court of Makati, Metro Manila an action
for value. Neither does this inference warrant the conclusion that the sales against petitioners, for the recovery of ownership/possession and nullification
were null and void ab initio. Indeed, bad faith and inadequacy of the of the Deed of Donation over the portion belonging to her and for Accounting.
monetary consideration do not render a conveyance inexistent, for the
assignor's liberality may be sufficient cause for a valid contract (Article 1350, In their responsive pleading, petitioners claimed that the Quitclaim Deed is
Civil Code), whereas fraud or bad faith may render either rescissible or null and void inasmuch as it is equivalent to a Deed of Donation, acceptance
voidable, although valid until annulled, a contract concerning an object of which by the donee is necessary to give it validity. Further, it is averred that
certain entered into with a cause and with the consent of the contracting the donee, Sandra Maruzzo, being a minor, had no legal personality and
parties, as in the case at bar." Ong vs. Ong, 139 SCRA 133, No. L-67888 therefore incapable of accepting the donation.
October 8, 1985
Upon admission of the documents involved, the parties filed their responsive
Faustino Y Bautista and Fernando M. Mangubat for private respondent. memoranda and submitted the case for decision.

RELOVA, J.: On December 12, 1983, the trial court rendered judgment in favor of
respondent Maruzzo and held that the Quitclaim Deed is equivalent to a Deed
This is a petition for review on certiorari of the decision, dated June 20, 1984, of Sale and, hence, there was a valid conveyance in favor of the latter.
of the Intermediate Appellate Court, in AC-G.R. No. CV-01748, affirming the
judgment of the Regional Trial Court of Makati, Metro Manila. Petitioner Imelda
 S a l e s P a r t I V P a g e | 22

Petitioners appealed to the respondent Intermediate Appellate Court. They be overcome by a simple assertion of lack of consideration
reiterated their argument below and, in addition, contended that the One especially when the contract itself states that consideration
(P1.00) Peso consideration is not a consideration at all to sustain the ruling was given, and the same has been reduced into a public
that the Deed of Quitclaim is equivalent to a sale. instrument with all due formalities and solemnities. To
overcome the presumption of consideration the alleged lack
On June 20, 1984, respondent Intermediate Appellate Court promulgated its of consideration must be shown by preponderance of
Decision affirming the appealed judgment and held that the Quitclaim Deed is evidence in a proper action. (Samanilla vs, Cajucom, et al.,
a conveyance of property with a valid cause or consideration; that the 107 Phil. 432).
consideration is the One (P1.00) Peso which is clearly stated in the deed itself;
that the apparent inadequacy is of no moment since it is the usual practice in The execution of a deed purporting to convey ownership of a realty is in itself
deeds of conveyance to place a nominal amount although there is a more prima facie evidence of the existence of a valuable consideration, the party
valuable consideration given. alleging lack of consideration has the burden of proving such allegation.
(Caballero, et al. vs. Caballero, et al., (CA), 45 O.G. 2536).
Not satisfied with the decision of the respondent Intermediate Appellate Court,
petitioners came to Us questioning the interpretation given by the former to Moreover, even granting that the Quitclaim deed in question is a donation,
this particular document. Article 741 of the Civil Code provides that the requirement of the acceptance
of the donation in favor of minor by parents of legal representatives applies
On March 15, 1985, respondent Sandra Maruzzo, through her guardian ad only to onerous and conditional donations where the donation may have to
litem Alfredo Ong, filed an Omnibus Motion informing this Court that she has assume certain charges or burdens (Article 726, Civil Code). The acceptance
reached the age of majority as evidenced by her Birth Certificate and she prays by a legal guardian of a simple or pure donation does not seem to be necessary
that she be substituted as private respondent in place of her guardian ad (Perez vs. Calingo, CA-40 O.G. 53). Thus, Supreme Court ruled in Kapunan vs.
litem Alfredo Ong. On April 15, 1985, the Court issued a resolution granting Casilan and Court of Appeals, (109 Phil. 889) that the donation to an
the same. incapacitated donee does not need the acceptance by the lawful
representative if said donation does not contain any condition. In simple and
A careful perusal of the subject deed reveals that the conveyance of the one- pure donation, the formal acceptance is not important for the donor requires
half (½) undivided portion of the above-described property was for and in no right to be protected and the donee neither undertakes to do anything nor
consideration of the One (P 1.00) Peso and the other valuable assumes any obligation. The Quitclaim now in question does not impose any
considerations (emphasis supplied) paid by private respondent Sandra condition.
Maruzzo through her representative, Alfredo Ong, to petitioner Imelda Ong.
Stated differently, the cause or consideration is not the One (P1.00) Peso alone The above pronouncement of respondent Appellate Court finds support in the
but also the other valuable considerations. As aptly stated by the Appellate ruling of this Court in Morales Development Co., Inc. vs. CA, 27 SCRA 484,
Court- which states that "the major premise thereof is based upon the fact that the
consideration stated in the deeds of sale in favor of Reyes and the Abellas is
... although the cause is not stated in the contract it is P1.00. It is not unusual, however, in deeds of conveyance adhering to the
presumed that it is existing unless the debtor proves the Anglo-Saxon practice of stating that the consideration given is the sum of
contrary (Article 1354 of the Civil Code). One of the disputable P1.00, although the actual consideration may have been much more.
presumptions is that there is a sufficient cause of the contract Moreover, assuming that said consideration of P1.00 is suspicious, this
(Section 5, (r), Rule 131, Rules of Court). It is a legal circumstance, alone, does not necessarily justify the inference that Reyes and
presumption of sufficient cause or consideration supporting a the Abellas were not purchasers in good faith and for value. Neither does this
contract even if such cause is not stated therein (Article 1354, inference warrant the conclusion that the sales were null and void ab initio.
New Civil Code of the Philippines.) This presumption cannot Indeed, bad faith and inadequacy of the monetary consideration do not render
a conveyance inexistent, for the assignor's liberality may be sufficient cause
 S a l e s P a r t I V P a g e | 23

for a valid contract (Article 1350, Civil Code), whereas fraud or bad faith may
render either rescissible or voidable, although valid until annulled, a contract
concerning an object certain entered into with a cause and with the consent
of the contracting parties, as in the case at bar."

WHEREFORE. the appealed decision of the Intermediate Appellate Court

should be, as it is hereby AFFIRMED, with costs against herein petitioners.

SO ORDERED.
 S a l e s P a r t I V P a g e | 24

G.R. No. L-38498 August 10, 1989 The facts underlying this appeal by certiorari are not in dispute. Hilario
Mateum of Kawit, Cavite, died on March 11, 1964, single, without ascendants
ISAAC BAGNAS, ENCARNACION BAGNAS, SILVESTRE BAGNAS or descendants, and survived only by collateral relatives, of whom petitioners
MAXIMINA BAGNAS, SIXTO BAGNAS and AGATONA herein, his first cousins, were the nearest. Mateum left no will, no debts, and
ENCARNACION, petitioners, an estate consisting of twenty-nine parcels of land in Kawit and Imus, Cavite,
vs. ten of which are involved in this appeal. 1
HON. COURT OF APPEALS, ROSA L. RETONIL TEOFILO
ENCARNACION, and JOSE B. NAMBAYAN respondents. On April 3, 1964, the private respondents, themselves collateral relatives of
Mateum though more remote in degree than the petitioners, 2 registered with
Civil Law; Sales; Consideration; The apparent gross disproportion between the Registry of Deeds for the Province of Cavite two deeds of sale purportedly
the stipulated price and the undisputably valuable real estate allegedly sold, executed by Mateum in their (respondents') favor covering ten parcels of land.
demonstrates that the deeds of sale in question state a false consideration, Both deeds were in Tagalog, save for the English descriptions of the lands
thereby making them not merely voidable, but void ab initio.—Without conveyed under one of them; and each recited the reconsideration of the sale
necessarily according all these assertions its full concurrence, but upon the to be" ... halagang ISANG PISO (Pl.00), salaping Pilipino, at mga
consideration alone that the apparent gross, not to say enormous, naipaglingkod, ipinaglilingkod sa aking kapakanan ..." ("the sum of ONE PESO
disproportion between the stipulated price (in each deed) of P1.00 plus Pl.00), Philippine Currency, and services rendered, being rendered and to be
unspecified and unquantified services and the undisputably valuable real rendered for my benefit"). One deed was dated February 6,1963 and covered
estate allegedly sold—worth at least P10,500.00 going only by assessments five parcels of land, and the other was dated March 4, 1963, covering five
for tax purposes which, it is well-known, are notoriously low indicators of other parcels, both, therefore, antedating Mateum's death by more than a
actual value—plainly and unquestionably demonstrates that they state a year. 3 It is asserted by the petitioners, but denied by the respondents, that
false and fictitious consideration, and no other true and lawful cause having said sales notwithstanding, Mateum continued in the possession of the lands
been shown, the Court finds both said deeds, insofar as they purport to be purportedly conveyed until his death, that he remained the declared owner
sales, not merely voidable, but void ab initio. thereof and that the tax payments thereon continued to be paid in his
name. 4 Whatever the truth, however, is not crucial. What is not disputed is
Same; Same; Same; Same; Succession; Intestate Heirs; The transfers in that on the strength of the deeds of sale, the respondents were able to secure
question being void, the properties covered thereby remain part of the estate title in their favor over three of the ten parcels of land conveyed thereby. 5
of the deceased, and are therefore recoverable by the intestate heirs of the
latter.—The transfers in question being void, it follows as a necessary On May 22,1964 the petitioners commenced suit against the respondents in
consequence and conformably to the concurring opinion in Armentia, with the Court of First Instance of Cavite, seeking annulment of the deeds of sale
which the Court fully agrees, that the properties purportedly conveyed as fictitious, fraudulent or falsified, or, alternatively, as donations void for want
remained part of the estate of Hilario Mateum, said transfers of acceptance embodied in a public instrument. Claiming ownership pro
notwithstanding, recoverable by his intestate heirs, the petitioners herein, indiviso of the lands subject of the deeds by virtue of being intestate heirs of
whose status as such is not challenged. Bagnas vs. Court of Appeals, 176 Hilario Mateum, the petitioners prayed for recovery of ownership and
SCRA 159, G.R. No. 38498 August 10, 1989 possession of said lands, accounting of the fruits thereof and damages.
Although the complaint originally sought recovery of all the twenty-nine
Beltran, Beltran & Beltran for petitioners. parcels of land left by Mateum, at the pre-trial the parties agreed that the
controversy be limited to the ten parcels subject of the questioned sales, and
the Trial Court ordered the exclusion of the nineteen other parcels from the
Jose M. Legaspi for private respondents.
action. 6 Of the ten parcels which remained in litigation, nine were assessed
for purposes of taxation at values aggregating P10,500 00. The record does
NARVASA, J.: not disclose the assessed value of the tenth parcel, which has an area of 1,443
square meters. 7
 S a l e s P a r t I V P a g e | 25

In answer to the complaint, the defendants (respondents here) denied the One issue clearly predominates here. It is whether, in view of the fact that, for
alleged fictitious or fraudulent character of the sales in their favor, asserting properties assuredly worth in actual value many times over their total assessed
that said sales were made for good and valuable consideration; that while "... valuation of more than P10,000.00, the questioned deeds of sale each state a
they may have the effect of donations, yet the formalities and solemnities of price of only one peso (P1.00) plus unspecified past, present and future
donation are not required for their validity and effectivity, ... that defendants services to which no value is assigned, said deeds were void or inexistent from
were collateral relatives of Hilario Mateum and had done many good things for the beginning ("nulo") or merely voidable, that is, valid until annulled. If they
him, nursing him in his last illness, which services constituted the bulk of the were only voidable, then it is a correct proposition that since the vendor
consideration of the sales; and (by way of affirmative defense) that the Mateum had no forced heirs whose legitimes may have been impaired, and
plaintiffs could not question or seek annulment of the sales because they were the petitioners, his collateral relatives, not being bound either principally or
mere collateral relatives of the deceased vendor and were not bound, subsidiarily to the terms of said deeds, the latter had and have no actionable
principally or subsidiarily, thereby. 8 right to question those transfers.

After the plaintiffs had presented their evidence, the defendants filed a motion On the other hand, if said deeds were void ab initio because to all intents and
for dismissal in effect, a demurrer to the evidence reasserting the defense set purposes without consideration, then a different legal situation arises, and
up in their answer that the plaintiffs, as mere collateral relatives of Hilario quite another result obtains, as pointed out by the eminent civil law authority,
Mateum, had no light to impugn the latter's disposition of his properties by Mr. Justice J.B.L. Reyes who, in his concurring opinion in Armentia, said:
means of the questioned conveyances and submitting, additionally, that no
evidence of fraud maintaining said transfers had been presented. 9 I ... cannot bring myself to agree to the proposition that the
heirs intestate would have no legal standing to contest the
The Trial Court granted the motion to dismiss, holding (a) on the authority of conveyance made by the deceased if the same were made
Armentia vs. Patriarca, 10 that the plaintiffs, as mere collateral relatives, not without any consideration, or for a false and fictitious
forced heirs, of Hilario Mateum, could not legally question the disposition made consideration. For under the Civil Code of the Philippines, Art.
by said deceased during his lifetime, regardless of whether, as a matter of 1409, par. 3, contracts with a cause that did not exist at the
objective reality, said dispositions were valid or not; and (b) that the plaintiffs time of the transaction are inexistent and void from the
evidence of alleged fraud was insufficient, the fact that the deeds of sale each beginning. The same is true of contracts stating a false cause
stated a consideration of only Pl.00 not being in itself evidence of fraud or (consideration) unless the persons interested in upholding the
simulation. 11 contract should prove that there is another true and lawful
consideration therefor. (lbid., Art. 1353).
On appeal by the plaintiffs to the Court of Appeals, that court affirmed,
adverting with approval to the Trial Court's reliance on the Armentia ruling If therefore the contract has no causa or consideration, or
which, it would appear, both courts saw as denying, without exception, to the causa is false and fictitious (and no true hidden causa is
collaterals, of a decedent, not forced heirs, the right to impugn the latter's proved) the property allegedly conveyed never really leaves
dispositions inter vivos of his property. The Appellate Court also analyzed the the patrimony of the transferor, and upon the latter's death
testimony of the plaintiffs' witnesses, declared that it failed to establish fraud without a testament, such property would pass to the
of any kind or that Mateum had continued paying taxes on the lands in transferor's heirs intestate and be recoverable by them or by
question even after executing the deeds conveying them to the defendants, the Administrator of the transferor's estate. In this particular
and closed with the statement that "... since in duly notarized and registered regard, I think Concepcion vs. Sta. Ana, 87 Phil. 787 and Sobs
deeds of sale consideration is presumed, we do not and it necessary to rule vs. Chua Pua Hermanos, 50 Phil. 536, do not correctly state
on the alternative allegations of the appellants that the said deed of sale were the present law, and must be clarified.
(sic) in reality donations. 12
To be sure the quoted passage does not reject and is not to be construed as
rejecting the Concepcion and Solisrulings 13 as outrightly erroneous, far from
 S a l e s P a r t I V P a g e | 26

it. On the contrary, those rulings undoubtedly read and applied correctly the obtained, cannot be posthumously impugned by collateral relatives succeeding
law extant in their time: Art. 1276 of the Civil Code of 1889 under which the to his estate who are not principally or subsidiarily bound by such transfers.
statement of a false cause in a contract rendered it voidable only, not void ab For the reasons already stated, that ruling is not extendible to transfers which,
initio. In observing that they "... do not correctly state the present law and though made under closely similar circumstances, are void ab initio for lack or
must be clarified," Justice Reyes clearly had in mind the fact that the law as it falsity of consideration.
is now (and already was in the time Armentia) no longer deems contracts with
a false cause, or which are absolutely simulated or fictitious, merely voidable, The petitioners here argue on a broad front that the very recitals of the
but declares them void, i.e., inexistent ("nulo") unless it is shown that they are questioned deeds of sale reveal such want or spuriousness of consideration
supported by another true and lawful cause or consideration. 14 A logical and therefore the void character of said sales. They:
consequence of that change is the juridical status of contracts without, or with
a false, cause is that conveyances of property affected with such a vice cannot 1. advert to a decision of the Court of Appeals in Montinola vs. Herbosa (59
operate to divest and transfer ownership, even if unimpugned. If afterwards O.G. No. 47, pp, 8101, 8118) holding that a price of P l.00 for the sale of things
the transferor dies the property descends to his heirs, and without regard to worth at least P20,000.00 is so insignificant as to amount to no price at all,
the manner in which they are called to the succession, said heirs may bring an and does not satisfy the law which, while not requiring for the validity of a sale
action to recover the property from the purported transferee. As pointed out, that the price be adequate, prescribes that it must be real, not fictitious,
such an action is not founded on fraud, but on the premise that the property stressing the obvious parallel between that case and the present one in stated
never leaves the estate of the transferor and is transmitted upon his death to price and actual value of the property sold;
heirs, who would labor under no incapacity to maintain the action from the
mere fact that they may be only collateral relatives and bound neither
2. cite Manresa to the same effect: that true price, which is essential to the
principally or subsidiarily under the deed or contract of conveyance.
validity of a sale, means existent, real and effective price, that which does not
consist in an insignificant amount as, say, P.20 for a house; that it is not the
In Armentia the Court determined that the conveyance questioned was merely same as the concept of a just price which entails weighing and measuring, for
annullable not void ab initio, and that the plaintiff s action was based on fraud economic equivalence, the amount of price against all the factors that
vitiating said conveyance. The Court said: determine the value of the thing sold; but that there is no need of such a close
examination when the immense disproportion between such economic values
Hypothetically admitting the truth of these allegations (of is patent a case of insignificant or ridiculous price, the unbelievable amount of
plaintiffs complaint), the conclusion is irresistible that the sale which at once points out its inexistence; 15
is merely voidable. Because Marta Armentia executed the
document, and this is not controverted by plaintiff. Besides, 3. assert that Art. 1458 of the Civil Code, in prescribing that a sale be for a ...
the fact that the vendees were minors, makes the contract, at price certain in money or its equivalent ... requires that "equivalent" be
worst, annullable by them, Then again, inadequacy of something representative of money, e.g., a check or draft, again citing
consideration does not imply total want of consideration. Manresa 16 to the effect that services are not the equivalent of money insofar
Without more, the parted acts of Marta Armentia after the as said requirement is concerned and that a contract is not a true sale where
sale did not indicate that the said sale was void from the the price consists of services or prestations;
being.
4. once more citing Manresa 17 also point out that the "services" mentioned in
The sum total of all these is that, in essence, plaintiffs case is the questioned deeds of sale are not only vague and uncertain, but are
bottomed on fraud, which renders the contract voidable. unknown and not susceptible of determination without the necessity of a new
agreement between the parties to said deeds.
It therefore seems clear that insofar as it may be considered as setting or
reaffirming precedent, Armentia only ruled that transfers made by a decedent
in his lifetime, which are voidable for having been fraudulently made or
 S a l e s P a r t I V P a g e | 27

Without necessarily according all these assertions its full concurrence, but showing that the transfers lacked such consideration as they alleged in their
upon the consideration alone that the apparent gross, not to say enormous, complaint, that burden was shifted to the private respondents when the
disproportion between the stipulated price (in each deed) of P l.00 plus petitioners presented the deeds which they claimed showed that defect on
unspecified and unquantified services and the undisputably valuable real their face and it became the duty of said respondents to offer evidence of
estate allegedly sold worth at least P10,500.00 going only by assessments for existent lawful consideration.
tax purposes which, it is well-known, are notoriously low indicators of actual
value plainly and unquestionably demonstrates that they state a false and As the record clearly demonstrates, the respondents not only failed to offer
fictitious consideration, and no other true and lawful cause having been any proof whatsoever, opting to rely on a demurrer to the petitioner's evidence
shown, the Court finds both said deeds, insofar as they purport to be sales, and upon the thesis, which they have maintained all the way to this Court,
not merely voidable, but void ab initio. that petitioners, being mere collateral relatives of the deceased transferor,
were without right to the conveyances in question. In effect, they gambled
Neither can the validity of said conveyances be defended on the theory that their right to adduce evidence on a dismissal in the Trial Court and lost, it
their true causa is the liberality of the transferor and they may be considered being the rule that when a dismissal thus obtained is reversed on appeal, the
in reality donations 18 because the law 19 also prescribes that donations of movant loses the right to present evidence in his behalf. 23
immovable property, to be valid, must be made and accepted in a public
instrument, and it is not denied by the respondents that there has been no WHEREFORE, the appealed Decision of the Court of Appeals is reversed. The
such acceptance which they claim is not required. 20 questioned transfers are declared void and of no force or effect. Such
certificates of title as the private respondents may have obtained over the
The transfers in question being void, it follows as a necessary consequence properties subject of said transfers are hereby annulled, and said respondents
and conformably to the concurring opinion in Armentia, with which the Court are ordered to return to the petitioners possession of an the properties
fully agrees, that the properties purportedly conveyed remained part of the involved in tills action, to account to the petitioners for the fruits thereof during
estate of Hilario Mateum, said transfers notwithstanding, recoverable by his the period of their possession, and to pay the costs. No damages, attorney's
intestate heirs, the petitioners herein, whose status as such is not challenged. fees or litigation expenses are awarded, there being no evidence thereof
before the Court.
The private respondents have only themselves to blame for the lack of proof
that might have saved the questioned transfers from the taint of invalidity as
being fictitious and without ilicit cause; proof, to be brief, of the character and
value of the services, past, present, and future, constituting according to the
very terms of said transfers the principal consideration therefor. The
petitioners' complaint (par. 6) 21 averred that the transfers were "...
fraudulent, fictitious and/or falsified and (were) ... in reality donations of
immovables ...," an averment that the private respondents not only specifically
denied, alleging that the transfers had been made "... for good and valuable
consideration ...," but to which they also interposed the affirmative
defenses that said transfers were "... valid, binding and effective ...," and, in
an obvious reference to the services mentioned in the deeds, that they "... had
done many good things to (the transferor) during his lifetime, nursed him
during his ripe years and took care of him during his previous and last illness
...," (pars. 4, 6, 16 and 17, their answer).lâwphî1.ñèt 22 The onus, therefore,
of showing the existence of valid and illicit consideration for the questioned
conveyances rested on the private respondents. But even on a contrary
assumption, and positing that the petitioners initially had the burden of
 S a l e s P a r t I V P a g e | 28

G.R. No. L-10141 January 31, 1958 questioned in the Court of First Instance, it is presumed that he was properly
authorized to file the complaint-in-intervention and appear for his client.
REPUBLIC OF THE PHILIPPINES, petitioner,
vs. 5.CORPORATION; DERIVATIVE SUIT; A SINGLE STOCKHOLDER MAY SUE IN
PHILIPPINE RESOURCES DEVELOPMENT CORPORATION and the BEHALF OF THE CORPORATION.—Where the counsel is the secretary
COURT OF APPEALS, respondents. treasurer of the respondent corporation and a member of the board of
directors, and the other members of the board, who should normally initiate
PLEADING AND PRACTICE; INTERVENTION, WHERE INTERVENOR PosSESS the action to protect the corporate properties and interests are the ones to
LEGAL INTEREST IN THE MATTER IN LITIGATION; RIGHT TO INTERVENE.— be adversely affected thereby, Held: That a single stockholder under such
In the exercise of discretion under section 3 of Rule 13 of the Rules of Court, circumstances may sue in behalf of the corporation. Counsel as a stockholder
the court shall consider whether the intervention will unduly delay the and director of the respondent corporation may sue in its behalf and file the
adjudication of the rights of the original parties and whether the intervenor's complaint-in-intervention in the proper court. Republic vs. Phil. Resources
rights may be fully protected in a separate proceeding. Although the Dev. Corp., et al., 102 Phil. 960, No. L-10141 January 31, 1958
respondent corporation is entitled to bring a separate action against any or
all the parties thereto, yet as the determination of the issues joined by the Office of the Solicitor General Ambrosio Padilla, and Solicitor Frine C.
parties in the case would vitally affect the rights not only of the original Zaballero for petitioner.
parties but also of the herein respondent corporation; and as the allowance Vicente L. Santiago for respondent Corporation.
of the complaint in intervention, far from unduly delaying the adjudication of
the rights of the original parties or bringing confusion in the original case, PADILLA, J.:
would help clarify the vital issue of the ownership of the materials involved
and would prevent multiplicity of suits, intervention should be allowed. This is a petition under Rule 46 to review a judgment rendered by the Court
of Appeals,in CA-GR No. 15767-R, Philippine Resources Development
2.OBLIGATION AND CONTRACT; PAYMENT; KINDS OF PAYMENT; IN TERMS Corporation vs. The Hon. Judge Magno Gatmaitan et al.
OF MONEY OR ITS EQUIVALENT.—Although Article 1458 of the new Civil
Code provides that price * * * is always paid in terms of money and the The findings of the Court of Appeals are, as follows.
supposed payment being in kind it is no payment at all," yet the same article
provides that the purchaser may pay "a price certain in money or its
It appears that on May 6, 1955, the Republic of the Philippines in
equivalent" which means that payment of the price need not be money.
representation of the Bureau of Prisons instituted against Macario
Apostol and the Empire Insurance Co. a complaint docketed as Civil
3.CORPORATION; POWER TO SUE AND BE SUED; BOARD OF DIRECTORS Case No. 26166 of the Court of First instance of Manila. The complaint
NOT THE PRESIDENT.—The power of a corporation to sue and be sued in alleges as the first cause of action, that defendant Apostol submitted
any court is lodged in the board of directors that exercised its corporate the highest bid the amount P450.00 per ton for the purchase of 100
powers, and not in the president. tons of Palawan Almaciga from the Bureau of Prisons; that a contract
therefor was drawn and by virtue of which, Apostol obtained goods
4.ATTORNEY AND CLIENT; AUTHORITY TO APPEAR AS COUNSEL.— Where from the Bureau of Prisons valued P15,878.59; that of said account,
the motion for admission of complaint in intervention and the complaint in Apostol paid only P691.10 leaving a balane obligation of P15,187.49.
intervention attached thereto, signed by counsel and filed in the Court of The complaint further averes, as second cause of action, that Apostol
First Instance begin with the following statement; "COMES NOW the above- submitted the best bid with the Bureau of Prisons for the purchase of
named Intervenor, by its undersigned counsel. * * *", and underneath his three million board feet of logs at P88.00 per 1,000 board feet; that a
typewritten name is affixed the description "Counsel for the Intervenor," the contract was executed between the Director of Prisons and Apostol
latter's authority to appear for the respondent corporation not having pursuant to which contract Apostol obtained deliveries of logs valued
 S a l e s P a r t I V P a g e | 29

at P65.830.00, and that Apostol failed to pay a balance account Of The Goverment contends that the intervenor has no legal interest in the matter
P18,827.57. All told, for the total demand set forth in complaint in litigation, because the action brought in the Court of First Instance of Manila
against Apostol is for P34,015.06 with legal interests thereon from against Macario Apostol and the Empire Insurance Company (Civil Case No.
January 8, 1952. The Empire lnsurance Company was included in the 26166, Annex A) is just for the collection from the defendant Apostol of a sum
complaint having executed a performance bond of P10,000.00 in favor of money, the unpaid balance of the purchase price of logs and almaciga
of Apostol. bought by him from the Bureau of Prisons, whereas the intervenor seeks to
recover ownership and possession of G. I. sheets, black sheets, M. S. plates,
In his answer, Apostol interposed payment as a defense and sought round bars and G. I. pipes that it claims its owns-an intervention which would
the dismissal of the complaint. change a personal action into one ad rem and would unduly delay the
disposition of the case.
On July 19, 1955, the Philippine Resources Development Corporation
moved to intervene, appending to its motion, the complaint in the The Court of Appeals held that:
intervention of even date. The complaint recites that for sometime
prior to Apostol's transactions the corporate had some goods Petitioner ardently claims that the reason behind its motion to
deposited in a warehouse at 1201 Herran, Manila; that Apostol, then intervene is the desire to protect its rights and interests over some
the president of the corporation but without the knowledge or consent materials purportedly belonging to it; that said material were
of the stockholders thereof, disposed of said goods by delivering the unauthorizedly and illegally assigned and delivered to the Bureau of
same to the Bureau of Prisons of in an attempt to settle his personal Prisons by petitioning corporation's president Macario Apostol in
debts with the latter entity; that upon discovery of Apodol's act, the payment of the latter's personal accounts with the said entity; and
corporation took steps to recover said goods by demanding from the that the Bureau of Prisons refused to return said materials despite
Bureau of Prisons the return thereof; and that upon the refusal of the petitioner's demands to do so.
Bureau to return said goods, the corporation sought leave to intervene
in Civil Case No. 26166. Petitioner refers to the particulars recited in Apostol's answer dated
July 12, 1955 to the effect that Apostol had paid unto the Bureau of
As aforestated, His Honor denied the motion for intervention and Prisons his accounts covered, among others, by BPPO 1077 for the
thereby issued an order to this effect on July 23, 1955. A motion for sum of P4,638.40 and BPPO 1549 for the amount of P4,398.54.
the reconsideration of said order was filed by the movant corporation Petitioner moreover, points to the State of Paid and Unpaid accounts
and the same was likewise denied by His Honor on August 18, 1955 . of Apostol dated January 16, 1954 prepared by the accounting of
. . (Annex L.). officer of the Bureau of Prisons (Annex B. Complaint in Intervention),
wherein it appears that the aforementioned accounts covered
On 3 September 1955, in a petition for a writ of certiorari filed in the Court of respectively by BPPO Nos. 1077 for 892 pieces of GI sheets and 1549
Appeals, the herein respondent corporation prayed for the setting aside of the for 399 pieces of GI pipes in the total sum of P9,036.94 have not been
order of the Court of First Instance that had denied the admission of its credited to Apostol's account in view of lack of supporting papers; and
complaint-in-intervention and for an order directing the latter Court to allow that according to the reply letter of the Undersecretary of Justice, said
the herein respondent corporation to intervene in the action (Annex G). On 12 GI sheets and pipes were delivered by Macario Apostol to the Bureau
December 1955 the Court of Appeals set aside the order denying the motion of Prisons allegedly in Apostol's capacity as owner and that the black
to intervene and ordered the respondent court to admit the herein respondent iron sheets were delivered by Apostol as President of the petitioner
corporation's complaint-in-intervention with costs against Macario Apostol. corporation.

On 9 January 1956 the Republic of the Philippines filed this petition in this Respondents, on the other hand, assert that the subject matter of the
Court for the purpose stated at the beginning of this opinion. original litigation is a sum of money allegedly due to the Bureau of
Prisons from Macario Apostol and not the goods or the materials
 S a l e s P a r t I V P a g e | 30

reportedly turned over by Apostol as payment of his private debts to We find no reason for disturbing the foregoing pronouncements. The
the Bureau of Prisons and the recovery of which is sought by the Government argues that "Price . . . is always paid in terms of money and the
petitioner; and that for this reason, petitioner has no legal interest in supposed payment beeing in kind, it is no payment at all, "citing Article 1458
the very subject matter in litigation as to entitle it to intervene. of the new Civil Code. However, the same Article provides that the purschaser
may pay "a price certain in money or its equivalent," which means that they
We find no merit in respondents' contention. It is true that the very meant of the price need not be in money. Whether the G.I. sheets, black
subject matter of the original case is a sum of money. But it is likewise sheets, M. S. Plates, round bars and G. I. pipes claimed by the respondent
true as borne out by the records, that the materials purportedly corporation to belong to it and delivered to the Bureau of Prison by Macario
belonging to the petitioner corporation have been assessed and Apostol in payment of his account is sufficient payment therefore, is for the
evaluated and their price equivalent in terms of money have been court to pass upon and decide after hearing all the parties in the case. Should
determined; and that said materials for whatever price they have been the trial court hold that it is as to credit Apostol with the value or price of the
assigned by defendant now respondent Apostol as tokens of payment materials delivered by him, certainly the herein respondent corporation would
of his private debts with the Bureau of Prisons. In view of these be affected adversely if its claim of ownership of such sheets, plates, bars and
considerations, it becomes enormously plain in the event the pipes is true.
respondent judge decides to credit Macario Apostol with the value of
the goods delivered by the latter to the Bureau of Prisons, the The Government reiterates in its original stand that counsel appearing for the
petitioner corporation stands to be adversely affected by such respondent corporation has no authority to represent it or/and sue in its
judgment. The conclusion, therefore, is inescapable that the petitioner behalf, the Court of Appeals held that:
possesses a legal interest in the matter in litigation and that such
interest is of an actual, material, direct and immediate nature as to Respondents aver also that petitioner lacks legal capacity to sue and
entitle petitioner to intervene. that its counsel is acting merely in an individual capacity without the
benefit of the corporate act authorizing him to bring sue. In this
xxx xxx xxx connection, respondents invoked among others section 20 of Rule 127
which provision, in our opinion, squarely disproves their claim as by
Section 3 of Rule 13 of the Rules of Court endows the lower Court virtue thereof, the authority of petitioner's counsel is pressumed.
with discretion to allow or disapprove the motion for intrvention Withal, the claim of the counsel for the petitioner that a resolution to
(Santarromana et al. vs. Barrios, 63 Phil. 456); and that in the exercise proceed against Apostol, had been unanonimously adopted by the
of such discretion, the court shall consider whether or not the stockholders of the corporation, has not been refuted.
intervention will unduly delay or prejudice the adjudicatio of the rights
of the original parties and whether or not the intervenors the rights Evidently, petitioner is a duly organized corporation with offices at the
may be fully protected in a separate proceeding. The petitioner in the Samanillo Building and that as such, it is endowed with a personality
instant case positively authorized to a separate action against any of distinct and separate from that of its president or stockholders. It has
all the respondents. But considering that the resolution of the issues the right to bring suit to safeguard its interests and ordinarily, such
raised in and enjoined by the pleadings in the main case, would virtally right is exercised at the instance of the president. However, under the
affect the rights not only the original parties but also of the berein circumstance now obtaining, such right properly devolves upon the
petitioner: that far from unduly delaying or prejudicing the other officers of the corporations as said right is sought to be exercised
adjudication of the rights of the original parties or bringing about against the president himself who is the very object of the intended
confusion in the original case, the adnission of the complaint in suit.
intervention would help clarify the vital issue of the true and real
ownership of the materials involved, besides preventing an abhorrent The power of a corporation to sue and be sued in any court 1 is lodged in the
munltiplicity of suit, we believe that the motion to intervene should be board of directors which exercises it corporater powers,2 and not in the
given due to cause. president, as contended by the Government. The "motion for admission of
 S a l e s P a r t I V P a g e | 31

complaint in intervention" (Annex C) and the "complaint in intervention"

attached thereto, signed by counsel and filed in the Court of First Instance
begin with the following statement: "COMES NOW the above-name
Intervenor, by its undersigned counsel, . . . , "and underneath his typewritten
name is affixed the description" Counsel for the Intervenor." As counsels
authority to appeal for the respondent corporation was newer questioned in
the Court of First Instance, it is to be pressumed that he was properly
authorized to file the complaint in intervention and appeal for his client. 1 It
was only in the Court of Appeals where his authority to appear was questioned.
As the Court of Appeals was satisfied that counsel was duly authorized by his
client to file the complaint does in intervention and to appear in its behalf, hte
resolution of the Court of Appeals on this point should not be disturbed.

Granting that counsel has not been actually authorized by the board of
directors to appear for and in behalf of the respondent corporation, the fact
that counsel is the secretary treasurer of the respondent corporation and
member of the board of directors; and that the other members of the board,
namely, Macario Apostol, the president, and his wife Pacita R. Apostol, who
shuold normally initiate the action to protect the corporate properties and in
interest are the ones to be adversely affected thereby, a single stockholder
under such circumstances may sue in behalf of the corporation. 2 Counsel as a
stockholder and director of the respondent corporation may sue in its behalf
and file the complaint in intervention in the proper court.

The judgment under review is affirmed, without pronouncements as to costs.

 S a l e s P a r t I V P a g e | 32

Same; Same; Before a valid and binding contract of sale can exist, the manner
SPS. JORGE NAVARRA and G.R. No. 172674 of payment of the purchase price must first be established since the agreement
CARMELITA BERNARDO on the manner of payment goes into the price such that a disagreement on
NAVARRA and RRRC Present: the manner of payment is tantamount to a failure to agree on the price.—
DEVELOPMENT CORPORATION, While the foregoing letters indicate the amount of P300,000.00 as down
Petitioners, PUNO, C.J., Chairperson, payment, they are, however, completely silent as to how the succeeding
*
SANDOVAL-GUTIERREZ, installment payments shall be made. At most, the letters merely acknowledge
CORONA, that the down payment of P300,000.00 was agreed upon by the parties.
- versus - AZCUNA and However, this fact cannot lead to the conclusion that a contract of sale had
GARCIA, JJ. been perfected. Quite recently, this Court held that before a valid and binding
contract of sale can exist, the manner of payment of the purchase price must
Promulgated: first be established since the agreement on the manner of payment goes into
PLANTERS DEVELOPMENT BANK the price such that a disagreement on the manner of payment is tantamount
and ROBERTO GATCHALIAN July 12, 2007 to a failure to agree on the price.
REALTY, INC.,
Respondents. Same; Same; A letter/offer that merely stated that the “purchase price will be
based on the redemption value plus accrued interest at the prevailing rate up
to the date of the sales contract” fails to specify a definite amount of the
purchase price—the ambiguity of such statement only bolsters the uncertainty
DECISION of the “offer.”—The Navarras’ letter/offer failed to specify a definite amount
Contracts; Stages; In general, contracts undergo three distinct stages, to wit: of the purchase price for the sale/repurchase of the subject properties. It
negotiation, perfection or birth, and consummation.—In general, contracts merely stated that the “purchase price will be based on the redemption value
undergo three distinct stages, to wit: negotiation, perfection or birth, and plus accrued interest at the prevailing rate up to the date of the sales contract.”
consummation. Negotiation begins from the time the prospective contracting The ambiguity of this statement only bolsters the uncertainty of the Navarras’
parties manifest their interest in the contract and ends at the moment of their so-called “offer” for it leaves much rooms for such questions, as: what is the
agreement. Perfection or birth of the contract takes place when the parties redemption value? what prevailing rate of interest shall be followed: is it the
agree upon the essential elements of the contract, i.e., consent, object and rate stipulated in the loan agreement or the legal rate? when will the date of
price. Consummation occurs when the parties fulfill or perform the terms the contract of sale be based, shall it be upon the time of the execution of the
agreed upon in the contract, culminating in the extinguishment thereof. deed of sale or upon the time when the last installment payment shall have
been made? To our mind, these questions need first to be addressed,
Same; Sales; A negotiation is formally initiated by an offer which should be discussed and negotiated upon by the parties before a definite purchase price
certain with respect to both the object and the cause or consideration of the can be arrived at.
envisioned contract—there must be acceptance, which may be express or
implied, but it must not qualify the terms of the offer.—A negotiation is Same; Same; The absence of a stipulated period within which the repurchase
formally initiated by an offer which should be certain with respect to both the price shall be paid all the more adds to the indefiniteness of the offer to
object and the cause or consideration of the envisioned contract. In order to purchase.—The offer was not clear insofar as concerned the exact number of
produce a contract, there must be acceptance, which may be express or years that will comprise the longterm payment scheme. As we see it, the
implied, but it must not qualify the terms of the offer. The acceptance of an absence of a stipulated period within which the repurchase price shall be paid
offer must be unqualified and absolute to perfect the contract. In other words, all the more adds to the indefiniteness of the Navarras’ offer.
it must be identical in all respects with that of the offer so as to produce
consent or meeting of the minds.
 S a l e s P a r t I V P a g e | 33

Same; Same; Elements.—The lack of a definite offer on the part of the spouses deed of sale therefor. The CA reversed that ruling. Hence, this recourse by the
could not possibly serve as the basis of their claim that the sale/repurchase of petitioners.
their foreclosed properties was perfected. The reason is obvious: one essential
element of a contract of sale is wanting: the price certain. There can be no The facts:
contract of sale unless the following elements concur: (a) consent or meeting
of the minds; (b) determinate subject matter; and (c) price certain in money The Navarras are the owners of five (5) parcels of land located at B.F. Homes,
or its equivalent. Such contract is born or perfected from the moment there is Paraaque and covered by Transfer Certificates of Title (TCT) Nos. S-58017, S-
a meeting of minds upon the thing which is the object of the contract and 58011, S-51732, S-51733 and A-14574. All these five (5) parcels of land are
upon the price. Here, what is dramatically clear is that there was no meeting the subject of this controversy.
of minds vis-à-vis the price, expressly or impliedly, directly or indirectly.
On July 5, 1982, the Navarras obtained a loan of P1,200,000.00 from Planters
Same; Same; Where the letter-reply specifically stated that there is a need to Bank and, by way of security therefor, executed a deed of mortgage over
negotiate on the other details of the transaction before the sale may be their aforementioned five (5) parcels of land. Unfortunately, the couple failed
formalized, the same clearly manifested lack of agreement between the parties to pay their loan obligation. Hence, Planters Bank foreclosed on the mortgage
as to the terms of the purported contract of sale/repurchase, particularly the and the mortgaged assets were sold to it for P1,341,850.00, it being the
mode of payment of the purchase price and the period for its payment.—The highest bidder in the auction sale conducted on May 16, 1984. The one-year
tenor of Planters Bank’s letter-reply negates the contention of the Navarras redemption period expired without the Navarras having redeemed the
that the Bank fully accepted their offer. The letter specifically stated that there foreclosed properties.
is a need to negotiate on the other details of the transaction before the sale
may be formalized. Such statement in the Bank’s letter clearly manifests lack On the other hand, co-petitioner RRRC Development Corporation (RRRC) is a
of agreement between the parties as to the terms of the purported contract real estate company owned by the parents of Carmelita Bernardo Navarra.
of sale/repurchase, particularly the mode of payment of the purchase price RRRC itself obtained a loan from Planters Bank secured by a mortgage over
and the period for its payment. The law requires acceptance to be absolute another set of properties owned by RRRC. The loan having been likewise
and unqualified. As it is, the Bank’s letter is not the kind which would constitute unpaid, Planters Bank similarly foreclosed the mortgaged assets of RRRC.
acceptance as contemplated by law for it does not evince any categorical and Unlike the Navarras, however, RRRC was able to negotiate with the Bank for
unequivocal undertaking on the part of the Bank to sell the subject properties the redemption of its foreclosed properties by way of a concession whereby
to the Navarras. the Bank allowed RRRC to refer to it would-be buyers of the foreclosed RRRC
properties who would remit their payments directly to the Bank, which
GARCIA, J.: payments would then be considered as redemption price for RRRC. Eventually,
the foreclosed properties of RRRC were sold to third persons whose payments
Assailed and sought to be set aside in this petition for review under Rule 45 therefor, directly made to the Bank, were in excess by P300,000.00 for the
of the Rules of Court is the decision[1] dated September 27, 2004 of the Court redemption price.
of Appeals (CA) in CA-G.R. CV No. 50002, as reiterated in its
resolution[2] dated May 8, 2006, denying reconsideration thereof. The In the meantime, Jorge Navarra sent a letter to Planters Bank, proposing to
challenged decision reversed that of the Regional Trial Court (RTC) repurchase the five (5) lots earlier auctioned to the Bank, with a request that
of Makati City, Branch 66, in its Civil Case No. 16917, an action for Specific he be given until August 31, 1985 to pay the down payment of P300,000.00.
Performance and Injunction thereat commenced by the herein petitioners Dated July 18, 1985 and addressed to then Planters Bank President Jesus
against the respondents. The Makati RTC ruled that a perfected contract of Tambunting, the letter reads in full:
sale existed in favor of Jorge Navarra and Carmelita Bernardo This will formalize my request for your kind
Navarra (Navarras) over the properties involved in the suit and accordingly consideration in allowing my brother and me to buy back my
ordered Planters Development Bank (Planters Bank) to execute the necessary house and lot and my restaurant building and lot together
with the adjacent road lot.
 S a l e s P a r t I V P a g e | 34

Since my brother, who is working in Saudi Arabia, has Because the amount of P300,000.00 was sourced from a different transaction
accepted this arrangement only recently as a result of my between RRRC and Planters Bank and involved different debtors, the Bank
urgent offer to him, perhaps it will be safe for us to set August required Navarra to submit a board resolution from RRRC authorizing him to
31, 1985 as the last day for the payment of a P300,000.00 negotiate for and its behalf and empowering him to apply the excess amount
downpayment. I hope you will grant us the opportunity to of P300,000.00 in RRRCs redemption payment as down payment for the
raise the funds within this period, which includes an allowance repurchase of the Navarras foreclosed properties.
for delays.
Meanwhile, titles to said properties were consolidated in the name of Planters
The purchase price, I understand, will be based on Bank, and on August 27, 1985, new certificates of title were issued in its name,
the redemption value plus accrued interest at the prevailing to wit: TCT Nos. 97073, 97074, 97075, 97076 and 97077.
rate up to the date of our sales contract. Maybe you can give
us a long term payment scheme on the basis of my brothers Then, on January 21, 1987, Planters Bank sent a letter to Jorge Navarra
annual savings of roughly US$30,000.00 everytime he comes informing him that it could not proceed with the documentation of the
home for his home leave. proposed repurchase of the foreclosed properties on account of his non-
compliance with the Banks request for the submission of the needed board
I realize that this is not a regular transaction but I am resolution of RRRC.
seeking your favor to give me a chance to reserve whatever
values I can still recover from the properties and to avoid any In his reply-letter of January 28, 1987, Navarra claimed having already
legal complications that may arise as a consequence of the delivered copies of the required board resolution to the Bank. The Bank,
total loss of the Balangay lot. I hope that you will extend to however, did not receive said copies. Thus, on February 19, 1987, the Bank
me your favorable action on this grave matter. sent a notice to the Navarrras demanding that they surrender and vacate the
properties in question for their failure to exercise their right of redemption.

In response, Planters Bank, thru its Vice-President Ma. Flordeliza Aguenza, Such was the state of things when, on June 31, 1987, in the RTC of Makati
wrote back Navarra via a letter dated August 16, 1985, thus: City, the Navarras filed their complaint for Specific Performance with
Injunction against Planters Bank. In their complaint docketed in said court
Regarding your letter dated July 18, 1985, requesting that we as Civil Case No. 16917 and raffled to Branch 66 thereof, the Navarras, as
give up to August 31, 1985 to buy back your house and lot plaintiffs, alleged that a perfected contract of sale was made between them
and restaurant and building subject to a P300,000.00 and Planters Bank whereby they would repurchase the subject properties
downpayment on the purchase price, please be advised that for P1,800,000.00 with a down payment of P300,000.00.
the Collection Committee has agreed to your request.
In its Answer, Planters Bank asserted that there was no perfected contract of
Please see Mr. Rene Castillo, Head, Acquired Assets sale because the terms and conditions for the repurchase have not yet been
Unit, as soon as possible for the details of the transaction so agreed upon.
that they may work on the necessary documentation.
On September 9, 1988, a portion of the lot covered by TCT No. 97077
Accordingly, Jorge Navarra went to the Office of Mr. Rene Castillo on (formerly TCT No. A-14574) was sold by Planters Bank to herein co-respondent
August 20, 1985, bringing with him a letter requesting that the excess Roberto Gatchalian Realty, Inc. (Gatchalian Realty). Consequently, TCT No.
payment of P300,000.00 in connection with the redemption made by 97077 was cancelled and TCT No. 12692 was issued in the name of Gatchalian
the RRRC be applied as down payment for the Navarras repurchase Realty. This prompted the Navarras to amend their complaint by impleading
of their foreclosed properties. Gatchalian Realty as additional defendant.
 S a l e s P a r t I V P a g e | 35

As stated at the threshold hereof, the appellate court, in its decision

In a decision dated July 10, 1995, the trial court ruled that there was a of September 27, 2004, reversed that of the trial court and ruled that there
perfected contract of sale between the Navarras and Planters Bank, and was no perfected contract of sale between the parties. Partly says the CA in
accordingly rendered judgment as follows: its decision:

WHEREFORE, in view of the foregoing, judgment is hereby rendered The Court cannot go along with the deduction of the trial court
ordering: that the response of Planters Bank was favorable to Jorge
Navarras proposal and that the P300,000.00 in its possession
a) the cancellation of the Deed of is a down payment and as such sufficient bases to conclude
Absolute Sale (Exh. 2) over lot 4137-C that there was a valid and perfected contract of sale. Based
between defendant Planters Development on the turn of events and the tenor of the communications
Bank and defendant Roberto Gatchalian between the offerors and the creditor bank, it appears that
Realty Corporation (RGRI) with the vendor there was not even a perfected contract to sell, much less a
bank refunding all the payments made by the perfected contract of sale.
vendee RGRI without interest less the five
percent (5%) brokers commission: Article 1319 cited by the trial court provides that the
acceptance to an offer must be absolute. Simply put, there
b) the defendant Planters Development must be unqualified acceptance and no condition must tag
Bank to execute the Deed of Absolute Sale along. But Jorge Navarra in trying to convince the bank to
over the lots covered by TCT Nos. 97073, agree, had himself laid out terms in offering (1) a
97074, 97075, 97076, and 97077 in favor of downpayment of P300,000.00 and setting (2) as deadline
all the plaintiffs for a consideration of ONE August 31, 1985 for the payment thereof. Under these terms
MILLION EIGHT HUNDRED THOUSAND and conditions the bank indeed accepted his offer, and these
(P1,800,000.00) less the downpayment of are essentially the contents of Exhibits J and K.
P300,000.00 plus interest at the rate of
twenty five percent (25%) per year for five But was there compliance? According to the evidence on file
(5) years to be paid in full upon the execution the P300,000.00, if at all, was given beyond the agreed
of the contract; period. The court a quo missed the fact that the said amount
came from the excess of the proceeds of the sale to the Pea
c) the defendant Planters Development spouses which Jorge Navarra made to appear was made
Bank the amount of TEN THOUSAND PESOS before the deadline he set of August 31, 1985. But this is
(P10,000.00) by way of attorneys fees. athwart Exhibits M-1 and N, the Contract to Sell and the Deed
of Sale between RRRC and the Peas, for these were executed
d) No costs. only on September 13, 1985 and October 7,
1985 respectively.
SO ORDERED.
xxx xxx xxx
Therefrom, Planters Bank and Gatchalian Realty separately went on appeal to
the CA whereat their appellate recourse were consolidated and docketed There were two separate and independent loans secured by
as CA-G.R. CV No. 50002. distinct mortgages on different lots and their only
commonality is the relationship of the Navarras and Bernardo
families. It is thus difficult to conceive and to conclude that
 S a l e s P a r t I V P a g e | 36

such Byzantine arrangement was acquiesced to and provided contract. In order to produce a contract, there must be acceptance, which may
for in that single and simple letter of the bank. be express or implied, but it must not qualify the terms of the offer. The
acceptance of an offer must be unqualified and absolute to perfect the
With their motion for reconsideration having been denied by the CA in its contract. In other words, it must be identical in all respects with that of the
resolution of May 8, 2006, petitioners are now with this Court via this recourse offer so as to produce consent or meeting of the minds.[5]
on their submission that the CA erred -
Here, the Navarras assert that the following exchange of correspondence
between them and Planters Bank constitutes the offer and acceptance, thus:
I
Letter dated July 18, 1985 of Jorge Navarra:
XXX IN CONCLUDING THAT THERE WAS NO PERFECTED
CONTRACT TO REPURCHASE THE FORECLOSED PROPERTIES This will formalize my request for your kind
BETWEEN THE PETITIONERS AND THE PRIVATE consideration in allowing my brother and me to buy back my
RESPONDENT PLANTERS DEVELOPMENT BANK, AS house and lot and my restaurant building and lot together
CORRECTLY FOUND BY THE TRIAL COURT. with the adjacent road lot.

II Since my brother, who is working in Saudi Arabia, has

accepted this arrangement only recently as a result of my
XXX IN HOLDING THAT THE PARTIES NEVER GOT PAST THE urgent offer to him, perhaps it will be safe for us to set August
NEGOTIATION STAGE. 31, 1985 as the last day for the payment of a P300,000.00
downpayment. I hope you will grant us the opportunity to
While the question raised is essentially one of fact, of which the Court normally raise the funds within this period, which includes an allowance
eschews from, yet, given the conflicting factual findings of the trial and for delays.
appellate courts, the Court shall go by the exception[3] to the general rule and
proceed to make its own assessment of the evidence. The purchase price, I understand, will be based on
the redemption value plus accrued interest at the prevailing
We DENY. rate up to the date of our sales contract. Maybe you can give
Petitioners contend that a perfected contract of sale came into being when us a long term payment scheme on the basis of my brothers
respondent Bank, thru a letter dated August 16, 1985, formally accepted the annual savings of roughly US$30,000.00 everytime he comes
offer of the Navarras to repurchase the subject properties. home for his home leave.

In general, contracts undergo three distinct stages, to wit: negotiation, I realize that this is not a regular transaction but I am
perfection or birth, and consummation. Negotiation begins from the time the seeking your favor to give me a chance to reserve whatever
prospective contracting parties manifest their interest in the contract and ends values I can still recover from the properties and to avoid any
at the moment of their agreement. Perfection or birth of the contract takes legal complications that may arise as a consequence of the
place when the parties agree upon the essential elements of the contract, i.e., total loss of the Balangay lot. I hope that you will extend to
consent, object and price. Consummation occurs when the parties fulfill or me your favorable action on this grave matter.
perform the terms agreed upon in the contract, culminating in the
extinguishment thereof.[4] Letter dated August 16, 1985 of Planters Bank
Regarding your letter dated July 18, 1985, requesting that we
A negotiation is formally initiated by an offer which should be certain with give up to August 31, 1985 to buy back your house and lot
respect to both the object and the cause or consideration of the envisioned and restaurant and building subject to a P300,000.00
 S a l e s P a r t I V P a g e | 37

downpayment on the purchase price, please be advised that

the Collection Committee has agreed to your request. Again, the offer was not clear insofar as concerned the exact number of years
that will comprise the long-term payment scheme. As we see it, the absence
Please see Mr. Rene Castillo, Head, Acquired of a stipulated period within which the repurchase price shall be paid all the
Assets Unit, as soon as possible for the details of the more adds to the indefiniteness of the Navarras offer.
transaction so that they may work on the necessary
documentation. (Emphasis ours) Clearly, then, the lack of a definite offer on the part of the spouses could not
possibly serve as the basis of their claim that the sale/repurchase of their
Given the above, the basic question that comes to mind is: Was the offer foreclosed properties was perfected. The reason is obvious: one essential
certain and the acceptance absolute enough so as to engender a meeting of element of a contract of sale is wanting: the price certain. There can be no
the minds between the parties? Definitely not. contract of sale unless the following elements concur: (a) consent or meeting
of the minds; (b) determinate subject matter; and (c) price certain in money
While the foregoing letters indicate the amount of P300,000.00 as down or its equivalent. Such contract is born or perfected from the moment there is
payment, they are, however, completely silent as to how the succeeding a meeting of minds upon the thing which is the object of the contract and
installment payments shall be made. At most, the letters merely acknowledge upon the price.[7] Here, what is dramatically clear is that there was no meeting
that the down payment of P300,000.00 was agreed upon by the parties. of minds vis-a-vis the price, expressly or impliedly, directly or indirectly.
However, this fact cannot lead to the conclusion that a contract of sale had
been perfected. Quite recently, this Court held that before a valid and binding Further, the tenor of Planters Banks letter-reply negates the contention of the
contract of sale can exist, the manner of payment of the purchase price must Navarras that the Bank fully accepted their offer. The letter specifically stated
first be established since the agreement on the manner of payment goes into that there is a need to negotiate on the other details of the
the price such that a disagreement on the manner of payment is tantamount transaction[8] before the sale may be formalized. Such statement in the Banks
to a failure to agree on the price.[6] letter clearly manifests lack of agreement between the parties as to the terms
of the purported contract of sale/repurchase, particularly the mode of payment
Too, the Navarras letter/offer failed to specify a definite amount of the of the purchase price and the period for its payment. The law requires
purchase price for the sale/repurchase of the subject properties. It merely acceptance to be absolute and unqualified. As it is, the Banks letter is not the
stated that the purchase price will be based on the redemption value plus kind which would constitute acceptance as contemplated by law for it does not
accrued interest at the prevailing rate up to the date of the sales contract. The evince any categorical and unequivocal undertaking on the part of the Bank to
ambiguity of this statement only bolsters the uncertainty of the Navarras so- sell the subject properties to the Navarras.
called offer for it leaves much rooms for such questions, as: what is the
redemption value? what prevailing rate of interest shall be followed: is it the The Navarras attempt to prove the existence of a perfected contract of sale
rate stipulated in the loan agreement or the legal rate? when will the date of all the more becomes futile in the light of the evidence that there was in the
the contract of sale be based, shall it be upon the time of the execution of the first place no acceptance of their offer. It should be noted that aside from their
deed of sale or upon the time when the last installment payment shall have first letter dated July 18, 1985, the Navarras wrote another letter dated August
been made? To our mind, these questions need first to be addressed, 20, 1985, this time requesting the Bank that the down payment
discussed and negotiated upon by the parties before a definite purchase price of P300,000.00 be instead taken from the excess payment made by the RRRC
can be arrived at. in redeeming its own foreclosed properties. The very circumstance that the
Navarras had to make this new request is a clear indication that no definite
Significantly, the Navarras wrote in the same letter the following: agreement has yet been reached at that point. As we see it, this request
constitutes a new offer on the part of the Navarras, which offer was again
Maybe you can give us a long-term payment scheme conditionally accepted by the Bank as in fact it even required the Navarras to
on the basis of my brothers annual savings of roughly submit a board resolution of RRRC before it could proceed with the proposed
US$30,000.00 every time he comes home for his home leave. sale/repurchase. The eventual failure of the spouses to submit the required
 S a l e s P a r t I V P a g e | 38

board resolution precludes the perfection of a contract of sale/repurchase

between the parties. As earlier mentioned, contracts are perfected when there
is concurrence of the parties wills, manifested by the acceptance by one of the
offer made by the other.[9] Here, there was no concurrence of the offer and
acceptance as would result in a perfected contract of sale.

Evidently, what transpired between the parties was only a prolonged

negotiation to buy and to sell, and, at the most, an offer and a counter-offer
with no definite agreement having been reached by them. With the hard reality
that no perfected contract of sale/repurchase exists in this case, any
independent transaction between the Planters Bank and a third-party, like the
one involving the Gatchalian Realty, cannot be affected.

WHEREFORE, the petition is DENIED and the assailed decision and

resolution of the Court of Appeals are AFFIRMED.