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VOL. 479, JANUARY 23, 2006 439

La’O vs. Republic

*
G.R. No. 160719. January 23, 2006.

EMILIO GONZALES LA’O, petitioner, vs. REPUBLIC OF

THE PHILIPPINES and THE GOVERNMENT SERVICE
INSURANCE SYSTEM, respondents.

Actions; Jurisdictions; Estoppel; While it is true that

jurisdiction over the subject matter of a case may be raised at any
stage of the proceedings since it is conferred by law, it is
nevertheless settled that a party may be barred from raising it on
the ground of estoppel.—Petitioner argued and discussed this
particular issue for the first time in his memorandum before this
Court. While it is true that jurisdiction over the subject matter of
a case may be raised at any

_______________

* SECOND DIVISION.

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440 SUPREME COURT REPORTS ANNOTATED

La’O vs. Republic

stage of the proceedings since it is conferred by law, it is

nevertheless settled that a party may be barred from raising it on
the ground of estoppel. After voluntarily submitting a cause and
encountering an adverse decision on the merits, it is improper and
too late for the losing party to question the jurisdiction of the
court. A party who has invoked the jurisdiction of a court over a
particular matter to secure affirmative relief cannot be permitted
to afterwards deny that same jurisdiction to escape liability. Thus
petitioner is estopped from questioning the jurisdiction of the
courts below.
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Contracts; Second contract was null and void ab initio for

being in contravention of Section 3(e) and (g) of RA 3019 otherwise
known as the “Anti-Graft and Corrupt Practices Act.”—The second
contract was null and void ab initio for being in contravention of
Section 3(e) and (g) of RA 3019, otherwise known as the “Anti-
Graft and Corrupt Practices Act.” Both the trial and appellate
courts found that the second contract gave petitioner
unwarranted benefits and was grossly disadvantageous to the
government. Under Article 1409(7) of the Civil Code, the contract
was null and void from the beginning.

PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

     Rolando P. Quimbo for petitioner.

CORONA, J.:
1
In this petition for review on certiorari, petitioner
2
Emilio
Gonzales La’O seeks to reverse the June 27, 2003 decision
of the Court of Appeals (CA) 3
in CA-G.R. CV No. 62580,
affirming in toto the decision of Branch 41 of the Regional
Trial Court

_______________

1 Under Rule 45 of the Rules of Court.

2 Penned by Associate Justice Andres B. Reyes, Jr. and concurred in by
Associate Justices Eugenio S. Labitoria and Regalado E. Maambong of the
Fifth Division of the Court of Appeals; Rollo, pp. 38-72.
3 Dated September 14, 1998 in Civil Case No. 89-48662 penned by
Judge Rodolfo A. Ponferrada; Rollo, pp. 179-192.

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La’O vs. Republic

(RTC) of 4 Manila and the CA’s November 10, 2003

resolution denying petitioner’s motion for reconsideration.
The factual antecedents follow.
The Government Service Insurance System (GSIS) is the
registered owner of three 5parcels of land with an area of
around 821 square meters, with 6a five-storey building and
the other improvements thereon. The property is situated
at the corner of Mabini and Arquiza streets in Ermita,

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Manila 7and covered by Transfer Certificate of Title No.

108252.
On June 22, 1978, the GSIS and the Republic of the
Philippines, through the Office of the Government
Corporate Counsel (OGCC), entered into a “lease-purchase”
agreement (first contract). GSIS agreed to transfer the
property to the OGCC for a consideration of P1.5 million,
payable in equal yearly amortization-lease
8
rentals of
P100,000 for a period of 15 years.
On December 9
22, 1980, petitioner offered to purchase
the property.
On May 10, 1982, GSIS and petitioner executed a “lease-
purchase” agreement (second contract). GSIS agreed to sell
the same property to petitioner for P2,000,000, with a down
payment of P200,000 and the balance payable within a
period 10of 15 years at 12% interest per annum, compounded
yearly.
Under the second contract, GSIS obligated itself to
construct for the OGCC a three-storey building on the
Manila Bay reclaimed area or to make available another
property

_______________

4 Rollo, p. 92.
5 Id., p. 149.
6 The parcels of land and the improvements will be collectively referred
to as the “property.”
7 Rollo, p. 39.
8 Id., pp. 133-134.
9 Id., p. 41.
10 Resulting in a yearly amortization of P264,278.37 including principal
and interest; Id., pp. 149-150.

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442 SUPREME COURT REPORTS ANNOTATED

La’O vs. Republic

acceptable to the OGCC, to be conveyed to the Republic

under the same or mutually acceptable terms and
conditions as those of the first contract. In the meantime,
the OGCC was allowed to continue occupying the second to
the fifth floors of the building11 at an annual rental of
P100,000, payable to petitioner. Furthermore, petitioner
was entitled to lease 12out the ground floor and collect the
corresponding rentals.

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It appears that on April 11, 1982, then President

Ferdinand E. Marcos approved the second contract by
scribbling on the right upper hand13corner “11 April 1982—
Approved—Ferdinand E. Marcos.” On April 14
23, 1982, the
GSIS Board of Trustees approved the same.
In 1989, after the overthrow of Marcos (in 1986),
respondents filed before the RTC of Manila, Branch 41 a
complaint against petitioner alleging that:

“x x x      x x x      x x x

“9. Upon [petitioner’s] behest and representations, then

President Ferdinand E. Marcos directed then GSIS
General Manager Roman A. Cruz, Jr. to arrange the
transfer of [the property] to [petitioner].
10. On April 11, 1982, at a time when no action was yet taken
by the GSIS Board of Trustees on the transfer of [the
property], then President Marcos indicated his approval of
the second Lease-Purchase Agreement which had been
prepared pursuant to the instructions and orders of then
President Marcos who exercised total and absolute
power[.]
11. By reason of such insidious machinations engineered by
[petitioner] and upon instructions or orders of then
President Marcos, the Republic, through the OGCC, was
forced, intimidated and coerced to execute a waiver of its
rights and interests to the property, and the Board of
Trustees of the GSIS was likewise constrained

_______________

11 Rollo, pp. 147-150.

12 Id., p. 153.
13 Id., pp. 43 and 47.
14 Id., p. 47.

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VOL. 479, JANUARY 23, 2006 443

La’O vs. Republic

to approve [the] offer of [petitioner] and to execute [the second

Lease-Purchase Agreement] of May 10, 1982.

12. [The second Lease-Purchase Agreement] is burdensome

and grossly disadvantageous to the Republic, through the
OGCC and the GSIS. Notwithstanding that [the property
was] already valued then at or about Ten Million Pesos
(P10,000,000.00), they were sold to [petitioner] for only
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Two Million Pesos (P2,000,000.00), and, worse yet, payable

on a fifteen-year installment basis. Furthermore, the
agreement obligated the GSIS to provide the Republic,
through the OGCC, an office and parking space equivalent
to a three-storey office building at its new building located
at the Reclamation site in the Manila Bay Area or some
other acquired properties to house its offices, on or before
June 1989. The value of this obligation of the GSIS to the
Republic, at the moment is worth at least Twenty Million
Pesos (P20,000,000.00).
13. Since the terms of [the] second agreement are manifestly
and grossly disadvantageous to the government and to the
GSIS and its members, the contract is contrary to law,
being violative of RA 3019, and the public officers
responsible thereof are liable under Section 3(g) of [RA
3019]. Considering that the cause or consideration of the
second contract is contrary to law, the same is void (Art.
1352, Civil Code).

x x x      x x x      x x x
15. Also, the second agreement has not yet become effective.
Number 18, Page 10 thereof provides that the same shall become
effective upon its approval by the President of the Republic of the
Philippines. This notwithstanding, neither the former President
of the Philippines nor the incumbent President has given his/her
approval to the said agreement after its execution.
x x x      x x x      x x x

17. Upon execution of the second Lease-Purchase Agreement,

[petitioner] took possession of one (1) commercial space of
the five-storey building of the subject premises and leased
out the rest of the ground floor thereof to other persons,
thus, realizing a monthly rental income in the sum of
[P25,000], more or less, apart from the [P100.000] yearly
rental he receives from the Republic, through the OGCC.
18. Considering the circumstances attendant to the
negotiation and execution of the second Lease-Purchase
Agreement, the

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444 SUPREME COURT REPORTS ANNOTATED

La’O vs. Republic

same is null and void, and [petitioner] should be made to pay

for the office space he had been occupying thereunder and to
account for and to return to the Republic, though the OGCC, all
moneys he unjustly received, including those received from such
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tenant-lessees by way of rentals beginning May, 15

1982, with
interest thereon at the legal rate until fully paid.”

Respondents prayed for the nullification of the second

contract and the forfeiture of all payments made by
petitioner to the GSIS in favor of the Republic, through the
OGCC, which payments were to be deemed payments by
the Republic to the GSIS under the first contract. They also
prayed for the payment by petitioner to the Republic,
through the OGCC, of: (a) a reasonable amount as rental
for his occupancy of one commercial space in the ground
floor from May, 1982 until he vacated the same; (b) all
sums of money received as rentals from the tenant-lessees
of the building at the rate of P25,000 per month, plus legal
interest, and (c) all sums of money received from the
Republic, through the OGCC, by way of rentals at the
annual rate of P100,000 from May, 1982, with legal
interest thereon until fully paid. Respondents further
prayed for the payment of actual damages, attorney’s fees
and 16litigation expenses, exemplary damages and costs of
suit.
On September 14, 1998, the trial court rendered its
decision. It ruled in favor of respondents and declared the
May 10, 1982 lease-purchase agreement between GSIS and
petitioner null and void. It also ordered the forfeiture in
favor of respondents of the purchase price paid by
petitioner 17to GSIS as well as the rentals received by
petitioner.
As stated18 earlier, the CA affirmed the decision of the
RTC in toto.

_______________

15 Id., pp. 124-126, citations omitted.

16 Id., pp. 127-128.
17 Id., p. 192.
18 Id., p. 72.

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La’O vs. Republic

19
Hence this petition.
The issues raised by petitioner are actually anchored to
one main issue: Was the second contract valid as claimed
by petitioner or null and void as decided by the courts
below?
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Before we delve into the merits, we shall first dispose of

the question of jurisdiction. Petitioner asserts that it is the
Sandiganbayan, not the RTC, which has jurisdiction over
this “ill-gotten wealth” case because the complaint involved
the annulment of a fraudulent conveyance of government
property to a Marcos crony and the recovery of such “ill-
gotten

_______________

19 The petition is anchored on the following grounds:

THE [CA] ERRED IN FINDING THAT THE MAY 10, 1982 AGREEMENT WAS
VITIATED BY UNDUE INFLUENCE OR MORAL COERCION ON THE MERE
PREMISE THAT AT THE TIME IT WAS ENTERED INTO “THE GOVERNMENT
WAS DICTATORIAL.”

II

THE [CA] ERRED IN CONCLUDING THAT THE HANDWRITTEN

APPROVAL OF THEN PRESIDENT FERDINAND E. MARCOS ON THE RIGHT
TOP MARGIN OF THE AGREEMENT WAS NOT THE APPROVAL
CONTEMPLATED IN THE LETTER OF INSTRUCTION NO. 620, BUT THAT
SUCH APPROVAL MUST APPEAR ON THE FINAL DRAFT OF THE
AGREEMENT.

III

THE [CA] ERRED IN AFFIRMING THE RULING DECISION OF THE [RTC]

ORDERING THE FORFEITURE OF THE AMOUNTS PAID BY PETITIONER.

IV

THE [CA] ERRED IN AFFIRMING THE DECISION OF THE [RTC]

DISMISSING PETITIONER’S COUNTERCLAIM. (Rollo, pp. 16-17.)

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446 SUPREME COURT REPORTS ANNOTATED

La’O vs. Republic

20
wealth” by the government. Furthermore, for failure to
consolidate this civil case with the criminal case in the
Sandiganbayan [charging petitioner with violation of
Section 3(g)21 of RA 3019], this case should be considered
abandoned.
Petitioner’s contention has no merit.
Petitioner argued and discussed this particular issue for
22
the first time in his memorandum before this Court.

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While it is true that jurisdiction over the subject matter of

a case may be raised at any stage of the proceedings since
it is conferred by law, it is nevertheless settled that a party
23
may be barred from raising it on the ground of estoppel.
After voluntarily submitting a cause and encountering an
adverse decision on the merits, it is improper and too late
for the24
losing party to question the jurisdiction of the
court. A party who has invoked the jurisdiction of a court
over a particular matter to secure affirmative relief cannot
be permitted to afterwards
25
deny that same jurisdiction to
escape liability. Thus petitioner is estopped from
questioning the jurisdiction of the courts below.
Now, the merits of the petition. 26
We agree with the conclusion of the CA and the RTC
that the second contract was null and void ab initio.

_______________

20 Petitioner cited Executive Order No. 14 (1986); Rollo, pp. 395 and
397.
21 Petitioner cited PD 1606 as amended by PD 1861, RA 7975 and RA
8249.
22 Rollo, p. 399. Petitioner also raised the issue of lack of jurisdiction in
his Answer with Compulsory Counterclaim without however explaining
his basis; Rollo, p. 161.
23 Ocheda v. Court of Appeals, G.R. No. 85517, 16 October 1992, 214
SCRA 629, 639, citations omitted.
24 Id., p. 640.
25 Id.
26 However, we do not concur with the CA when it stated that the
second contract is null and void because respondents’ consent was vitiated
by the undue influence of then President Marcos. It is

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La’O vs. Republic

The second contract was null and void ab initio for being in
contravention of Section 3(e) and (g) of RA 3019, otherwise27
known as the “Anti-Graft and Corrupt Practices Act.”
Both

_______________

clear under the law of contracts that vitiation of consent does not make
a contract null and void ab initio. It merely results in a void-able contract.

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We declared this in MWSS v. CA (357 Phil. 966, 978-979; 297 SCRA 287,
300 [1998]):
As noted by both lower courts, petitioner MWSS admits that it
consented to the sale of the property, with the qualification that such
consent was allegedly unduly influenced by President Marcos. Taking
such allegation to be hypothetically true, such would have resulted in only
voidable contracts because all three elements of a contract, still obtained
nonetheless. The alleged vitiation of MWSS' consent did not make the sale
null and void ab initio. Thus, “a contract where consent is given through
mistake, violence, intimidation, undue influence or fraud, is voidable.”
Contracts “where consent is vitiated by mistake, violence, intimidation,
undue influence or fraud” are voidable or annullable. These are not void
as—

“Concepts of Voidable Contracts.—Voidable or anullable contracts are existent,

valid, and binding, although they can be annulled because of want of capacity or
vitiated consent of the one of the parties, but before annulment, they are effective
and obligatory between parties. Hence, it is valid until it is set aside and its
validity may be assailed only in an action for that purpose. They can be confirmed
or ratified.”

27 Sec. 3. Corrupt practices of public officers.—In addition to acts or

omissions of public officers already penalized by existing law, the
following shall constitute corrupt practices of any public officer and are
hereby declared to be unlawful:
(e) Causing any undue injury to any party, including the Government,
or giving any private party any unwarranted benefits, advantage or
preference in the discharge of his official, administrative or judicial
functions through manifest partiality, evident bad faith or gross
inexcusable negligence. This provision shall apply to officers and
employees of offices or government corporations charged with the grant of
licenses or permits or other concessions.
x x x      x x x      x x x

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La’O vs. Republic

the trial and appellate courts found that the second

contract gave petitioner unwarranted benefits
28
and was
grossly disadvantageous to29 the government. Under Article
1409(7) of the Civil Code, the contract was null and void
from the beginning.
We quote the discussion of the CA with approval:

The inquiry that must be settled is—Whether or not the subject

Agreement had been grossly disadvantageous to the economic
interests of the Republic.
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x x x      x x x      x x x
x x x prior to the subject Agreement, there was a subsisting
lease-purchase Agreement between GSIS and the Republic, thru
the OGCC, whereby the latter undertakes to pay the former the
total amount of [P1,500,000], payable within [15] years and the
payment of the yearly amortization of [P100,000] shall be made in
equal quarterly installments of [P25,000]. Under the same
Agreement, the Republic, thru the OGCC shall manage and
administer the leased premises as if it were the absolute owner
thereof. As of August 1982, the Republic, thru the OGCC had
been collecting an average monthly rental of [P10,000] from
[various tenants of the premises].
The foregoing figures [leads] to the conclusion that the
Republic, thru the OGCC, had been earning an average annual
rental income of [P120,000], an amount which is more than
enough to cover its yearly amortization-rental to the GSIS which
is only [P100,000].
The economic benefit which the Republic, thru the OGCC,
enjoys during the subsistence of the prior Agreement is shown by
its being able to liquidate its yearly amortization-rental from the
rental income of the subject property without any need for the
Republic to

_______________

(g) Entering, on behalf of the Government, into any contract or transaction

manifestly and grossly disadvantageous to the same, whether or not the public
officer profited or will profit thereby.
28 Rollo, pp. 185 and 191.
29 Art. 1409. The following contracts are inexistent and void from the beginning:
x x x      x x x      x x x
(7) Those expressly prohibited or declared void by law.

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La’O vs. Republic

appropriate additional funds for such disbursement and further,

by the transfer of absolute ownership of the subject property to the
Republic, thru the OGCC, at the termination of the [15] year
lease-purchase Agreement.
In the subject Agreement with [petitioner], the consideration
was increased to [P2,000,000] with a down payment of [P200,000]
and the balance payable within a period of [15] years at [12%] per
annum interest thereon, compounded yearly, with a yearly
amortization of [P264,278.37], including principal and interest.
Under the same Agreement, the OGCC was likewise allowed to

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continue occupying its offices from the second to the fifth floors of
the premises, at the rental rate of [P100,000] annually.
The Agreement between [petitioner] and the GSIS
which is the subject of the instant case had in fact
transferred the economic benefits which the Republic
used to enjoy to [petitioner]. At the end of [15] years,
[petitioner] shall become the absolute owner of the subject
property upon full payment of the [15] yearly amortizations. At
bottom, however, is the fact that, at least for the first [five] years
of the [Agreement], [petitioner] shall not be shelling out of his
own pocket the yearly amortization since the same shall be
covered by the annual rental coming from the OGCC and the
other tenants thereof. In the meantime, the Republic, thru the
OGCC, shall not only be appropriating additional funds for its
annual rental but worse, it was stripped of the opportunity to
become the absolute owner of the subject property.
The Court cannot also ignore the marked differences between
the consideration of TWO MILLION PESOS (P2,000,000.00) and
the valuations of the subject property in 1982 as appraised by Mr.
Narlito Mariño to the effect that the fair market value of the
subject property from FIVE MILLION FIVE HUNDRED
SEVENTY FIVE THOUSAND PESOS (P5,575,000.00) as the
minimum and SEVEN MILLION EIGHTY THREE THOUSAND
THREE HUNDRED PESOS (P7,083,300.00) as the maximum and
Cuervo Appraisers, Inc. to the effect that the fair market value of
the subject property is EIGHT MILLION FIVE THOUSAND
FIVE HUNDRED PESOS (P8,005,500.00). While concededly the
foregoing property appraisal was conducted in 1989 and 1996
respectively, the Court is not unmindful of the fact that the
valuations were arrived at by taking into consideration all the
parameters that, by practice, could provide

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450 SUPREME COURT REPORTS ANNOTATED

La’O vs. Republic

reasonable statistical indication of the value of the subject

property in 1982.
On this respect, [respondents’] assertion that the subject
Agreement is at the behest of [petitioner] and is grossly
disadvantageous to the Republic had become self-evident since it
certainly bewilders the mind why the GSIS would enter into an
Agreement which smacks of disturbing economic implications, i.e.
the Republic would need to appropriate additional funds
to pay for its rentals and abandon the chance of becoming
the owner of the subject property which it uses for

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governmental purposes and the fact that the subject property

was negotiated by the government via a losing proposition.
x x x      x x x      x x x
. . . [I]n view of GSIS’ undertaking to construct another
building for the OGCC . . . what was revealed is the fact that if
only to accommodate the subject Agreement with the [petitioner],
the GSIS had undertaken to build another building for the OGCC
or to make available for OGCC’s use any other acquired property
and to grant the same terms and conditions as that of the
previous agreement. Necessarily so, the GSIS had imposed
additional economic burden upon itself, at the expense of
government funds, in order to meet the terms and conditions of
the subject Agreement when the same 30was not necessary during
the subsistence of the prior agreement.” (emphasis supplied)

The foregoing clearly shows that the second contract

caused undue injury to the government, gave petitioner
unwarranted benefits and was grossly disadvantageous to
the government. The disquisition of the CA is sufficiently
exhaustive and convincing considering that in civil cases
like this one, the party with the burden of proof (in this
case, the respondents) needs
31
only to establish its case by a
preponderance of evidence.

_______________

30 Rollo, pp. 61-66, 70-71.

31 See Londres v. Court of Appeals, G.R. No. 136427, 17 December 2002,
394 SCRA 133, 143, citing Sapu-an v. Court of Appeals, G.R. No. 91869, 19
October 1992, 214 SCRA 701, 706.

451

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La’O vs. Republic

The act of entering into the second contract was a corrupt

practice and was therefore unlawful. It was a contract
expressly prohibited by RA 3019. As a result, it was null
and void
32
from the beginning under Art. 1409(7) of the Civil
Code.
As for the forfeiture of the payments made by petitioner,
the latter did not raise any substantial argument against
it. He merely stated that “there should be no reason why
the amounts paid by petitioner should be forfeited in favor
of the Republic” since the property was owned by GSIS and
the Republic, through the OGCC, was merely a lessee.

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The RTC decision was clear. The amount forfeited was

in favor of GSIS as owner of the property.
Having disposed of the main issue and ruling that the
second contract was void ab initio for being prohibited by
law, a discussion of the other ancillary issues raised by
petitioner is no longer necessary.
WHEREFORE, the petition is hereby DENIED and the
June 27, 2003 decision and November 10, 2003 resolution
of the Court of Appeals in CA-G.R. CV No. 62580
AFFIRMED. Costs against petitioner.

_______________

32 See E. Razon, Inc. v. Philippine Ports Authority (G.R. L-75197, 22

June 1987, 151 SCRA 233). We held in that case that the management
contract executed by and between E. Razon, Inc. and PPA, represented by
its then General Manager. E.S. Baclig, Jr. on June 27, 1980 was null and
void. At the time of the execution of the management contract, E. Razon,
Inc. later known as Metro Port Services, Inc. was controlled by Alfredo
“Bejo” Romualdez, brother-in-law of deposed President Marcos. Under
Section 5 of the Anti-Graft and Corrupt Practices Act (R.A. No. 3019)
Romualdez, by reason of his relationship with the then President of the
Philippines, was prohibited from intervening, directly or indirectly, in any
transaction or business with the government. Thus, the management
contract, entered into by E. Razon, Inc. which was controlled by Alfredo
Romualdez as 60% equity owner thereof, is null and void and of no
effect, being one expressly prohibited by law (par. [7], Art. 1409,
Civil Code of the Philippines).

452

452 SUPREME COURT REPORTS ANNOTATED

Cabalitan vs. Department of Agrarian Reform

SO ORDERED.

     Puno (Chairman), Azcuna and Garcia, JJ., concur.

     Sandoval-Gutierrez, J., No part.

Petition denied, judgment and resolution affirmed.

Note.—While it is a rule that a jurisdictional question

may be raised at any time this however admits of an
exception where as in this case estoppel has supervened.
(TCL Sales Corporation vs. Court of Appeals, 349 SCRA 35
[2001])

——o0o——

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