Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

132305 December 4, 2001

IDA C. LABAGALA, petitioner, vs. NICOLASA T. SANTIAGO, AMANDA T. SANTIAGO and HON. COURT OF APPEALS, respondents. QUISUMBING, J.: This petition for review on certiorari seeks to annul the decision dated March 4, 1997,1 of the Court of Appeals in CA-G.R. CV No. 32817, which reversed and set aside the judgment dated October 17, 1990,2 of the Regional Trial Court of Manila, Branch 54, in Civil Case No.87-41515, finding herein petitioner to be the owner of 1/3 pro indiviso share in a parcel of land. 1wphi1.nt The pertinent facts of the case, as borne by the records, are as follows: Jose T. Santiago owned a parcel of land covered by TCT No. 64729, located in Rizal Avenue Extension, Sta. Cruz, Manila. Alleging that Jose had fraudulently registered it in his name alone, his sisters Nicolasa and Amanda (now respondents herein) sued Jose for recovery of 2/3 share of the property.3 On April 20, 1981, the trial court in that case decided in favor of the sisters, recognizing their right of ownership over portions of the property covered by TCT No. 64729. The Register of Deeds of Manila was required to include the names of Nicolasa and Amanda in the certificate of title to said property.4 Jose died intestate on February 6, 1984. On August 5, 1987, respondents filed a complaint for recovery of title, ownership, and possession against herein petitioner, Ida C. Labagala, before the Regional Trial Court of Manila, to, recover from her the 1/3 portion of said property pertaining to Jose but which came into petitioner's sole possession upon Jose's death. Respondents alleged that Jose's share in the property belongs to them by operation of law, because they are the only legal heirs of their brother, who died intestate and without issue. They claimed that the purported sale of the property made by their brother to petitioner sometime in March 19795 was executed through petitioner's machinations and with malicious intent, to enable her to secure the corresponding transfer certificate of title (TCT No. 1723346) in petitioner's name alone.7 Respondents insisted that the deed of sale was a forgery .The deed showed that Jose affixed his thumbmark thereon but respondents averred that, having been able to graduate from college, Jose never put his thumb mark on documents he executed but always signed his name in full. They claimed that Jose could not have sold the property belonging to his "poor and unschooled sisters who. ..sacrificed for his studies and personal welfare."8 Respondents also pointed out that it is highly improbable for petitioner to have paid the supposed consideration of P150,000 for the sale of the subject property because petitioner was unemployed and without any visible means of livelihood at the time of the alleged sale. They also stressed that it was quite unusual and questionable that petitioner registered the deed of sale only on January 26, 1987, or almost eight years after the execution of the sale.9 On the other hand, petitioner claimed that her true name is not Ida C. Labagala as claimed by respondent but Ida C. Santiago. She claimed not to know any person by the name of Ida C. Labagala. She claimed to be the daughter of Jose and thus entitled to his share in the subject property. She maintained that she had always stayed on the property, ever since she was a child. She argued that the purported sale of the property was in fact a donation to her, and that nothing could have precluded Jose from putting his thumbmark on the deed of sale instead of his

signature. She pointed out that during his lifetime, Jose never acknowledged respondents' claim over the property such that respondents had to sue to claim portions thereof. She lamented that respondents had to disclaim her in their desire to obtain ownership of the whole property. Petitioner revealed that respondents had in 1985 filed two ejectment cases against her and other occupants of the property. The first was decided in her and the other defendants' favor, while the second was dismissed. Yet respondents persisted and resorted to the present action. Petitioner recognized respondents' ownership of 2/3 of the property as decreed by the RTC. But she averred that she caused the issuance of a title in her name alone, allegedly after respondents refused to take steps that would prevent the property from being sold by public auction for their failure to pay realty taxes thereon. She added that with a title issued in her name she could avail of a realty tax amnesty. On October 17, 1990, the trial court ruled in favor of petitioner, decreeing thus: WHEREFORE, judgment is hereby rendered recognizing the plaintiffs [herein respondents] as being entitled to the ownership and possession each of one-third (1/3) pro indiviso share of the property originally covered by Transfer Certificate of Title No. 64729, in the name of Jose T. Santiago and presently covered by Transfer Certificate of Title No. 172334, in the name of herein defendant [herein petitioner] and which is located at No. 3075-A Rizal Avenue Extension, Sta. Cruz, Manila, as per complaint, and the adjudication to plaintiffs per decision in Civil Case No. 56226 of this Court, Branch VI, and the remaining one-third (1/3) pro indiviso share adjudicated in said decision to defendant Jose T. Santiago in said case, is hereby adjudged and adjudicated to herein defendant as owner and entitled to possession of said share. The Court does not see fit to adjudge damages, attorney's fees and costs. Upon finality of this judgment, Transfer Certificate of Title No. 172334 is ordered cancelled and a new title issued in the names of the two (2) plaintiffs and the defendant as owners in equal shares, and the Register of Deeds of Manila is so directed to effect the same upon payment of the proper fees by the parties herein. SO ORDERED.10 According to the trial court, while there was indeed no consideration for the deed of sale executed by Jose in favor of petitioner, said deed constitutes a valid donation. Even if it were not, petitioner would still be entitled to Jose's 1/3 portion of the property as Jose's daughter. The trial court ruled that the following evidence shows petitioner to be the daughter of Jose: (1) the decisions in the two ejectment cases filed by respondents which stated that petitioner is Jose's daughter, and (2) Jose's income tax return which listed petitioner as his daughter. It further said that respondents knew of petitioner's existence and her being the daughter of Jose, per records of the earlier ejectment cases they filed against petitioner. According to the court, respondents were not candid with the court in refusing to recognize petitioner as Ida C. Santiago and insisting that she was Ida C. Labagala, thus affecting their credibility. Respondents appealed to the Court of Appeals, which reversed the decision of the trial court. WHEREFORE, the appealed decision is REVERSED and one is entered declaring the appellants Nicolasa and Amanda Santiago the co-owners in equal shares of the one-third (1/3) pro indiviso share of the late Jose Santiago in the land and building covered by TCT No. 172334. Accordingly, the Register of Deeds of Manila is directed to cancel said title and issue in its place a new one reflecting this decision. SO ORDERED. Apart from respondents' testimonies, the appellate court noted that the birth certificate of Ida Labagala presented by respondents showed that Ida was born of different parents, not Jose and

his wife. It also took into account the statement made by Jose in Civil Case No. 56226 that he did not have any child. Hence, the present petition wherein the following issues are raised for consideration: 1. Whether or not petitioner has adduced preponderant evidence to prove that she is the daughter of the late Jose T. Santiago, and 2. Whether or not respondents could still impugn the filiation of the petitioner as the daughter of the late Jose T. Santiago. Petitioner contends that the trial court was correct in ruling that she had adduced sufficient evidence to prove her filiation by Jose Santiago, making her his sole heir and thus entitled to inherit his 1/3 portion. She points out that respondents had, before the filing of the instant case, previously "considered"11 her as the daughter of Jose who, during his lifetime, openly regarded her as his legitimate daughter. She asserts that her identification as Jose's daughter in his ITR outweighs the "strange" answers he gave when he testified in Civil Case No. 56226. Petitioner asserts further that respondents cannot impugn her filiation collaterally, citing the case of Sayson v. Court of Appeals12 in which we held that "(t)he legitimacy of (a) child can be impugned only in a direct action brought for that purpose, by the proper parties and within the period limited by law."13 Petitioner also cites Article 263 of the Civil Code in support of this contention.14 For their part, respondents contend that petitioner is not the daughter of Jose, per her birth certificate that indicates her parents as Leo Labagala and Cornelia Cabrigas, instead of Jose Santiago and Esperanza Cabrigas.15 They argue that the provisions of Article 263 of the Civil Code do not apply to the present case since this is not an action impugning a child's legitimacy but one for recovery of title, ownership, and possession of property . The issues for resolution in this case, to our mind, are (1) whether or not respondents may impugn petitioner's filiation in this action for recovery of title and possession; and (2) whether or not petitioner is entitled to Jose's 1/3 portion of the property he co-owned with respondents, through succession, sale, or donation. On the first issue, we find petitioner's reliance on Article 263 of the Civil Code to be misplaced. Said article provides: .Art. 263. The action to impugn the legitimacy of the child shall be brought within one year from the recording of the birth in the Civil Register, if the husband should be in the same place, or in a proper case, any of his heirs. If he or his heirs are absent, the period shall be eighteen months if they should reside in the Philippines; and two years if abroad. If the birth of the child has been concealed, the term shall be counted from the discovery of the fraud. This article should be read in conjunction with the other articles in the same chapter on paternity and filiation in the Civil Code. A careful reading of said chapter would reveal that it contemplates situations where a doubt exists that a child is indeed a man's child by his wife, and the husband (or, in proper cases, his heirs) denies the child's filiation. It does not refer to situations where a child is alleged not to be the child at all of a particular couple.16 Article 263 refers to an action to impugn the legitimacy of a child, to assert and prove that a person is not a man's child by his wife. However, the present case is not one impugning petitioner's legitimacy. Respondents are asserting not merely that petitioner is not a legitimate child of Jose,

but that she is not a child of Jose at all.17 Moreover, the present action is one for recovery of title and possession, and thus outside the scope of Article 263 on prescriptive periods. Petitioner's reliance on Sayson is likewise improper. The factual milieu present in Sayson does not obtain in the instant case. What was being challenged by petitioners in Sayson was (1) the validity of the adoption of Delia and Edmundo by the deceased Teodoro and Isabel Sayson, and (2) the legitimate status of Doribel Sayson. While asserting that Delia and Edmundo could not have been validly adopted since Doribel had already been born to the Sayson couple at the time, petitioners at the same time made the conflicting claim that Doribel was not the child of the couple. The Court ruled in that case that it was too late to question the decree of adoption that became final years before. Besides, such a challenge to the validity of the adoption cannot be made collaterally but in a direct proceeding.18 In this case, respondents are not assailing petitioner's legitimate status but are, instead, asserting that she is not at all their brother's child. The birth certificate presented by respondents support this allegation. We agree with the Court of Appeals that: The Certificate. of Record of Birth (Exhibit H)19 plainly states that... Ida was the child of the spouses Leon Labagala and [Cornelia] Cabrigas. This document states that it was Leon Labagala who made the report to the Local Civil Registrar and therefore the supplier of the entries in said Certificate. Therefore, this certificate is proof of the filiation of Ida. Appellee however denies that Exhibit H is her Birth Certificate. She insists that she is not Ida Labagala but Ida Santiago. If Exhibit H is not her birth certificate, then where is hers? She did not present any though it would have been the easiest thing to do considering that according to her baptismal certificate she was born in Manila in 1969. This court rejects such denials and holds that Exhibit H is the certificate of the record of birth of appellee Ida... Against such evidence, the appellee Ida could only present her testimony and a baptismal certificate (Exhibit 12) stating that appellee's parents were Jose Santiago and Esperanza Cabrigas. But then, a decisional rule in evidence states that a baptismal certificate is not a proof of the parentage of the baptized person. This document can only prove the identity of the baptized, the date and place of her baptism, the identities of the baptismal sponsors and the priest who administered the sacrament -- nothing more.20 (Citations omitted.) At the pre-trial conducted on August 11, 1988, petitioner's counsel admitted that petitioner did not have a birth certificate indicating that she is Ida Santiago, though she had been using this name all her life.21 Petitioner opted not to present her birth certificate to prove her relationship with Jose and instead offered in evidence her baptismal certificate.22 However, as we held in Heirs of Pedro Cabais v. Court of Appeals : ...a baptismal certificate is evidence only to prove the administration of the sacrament on the dates therein specified, but not the veracity of the declarations therein stated with respect to [a person's] kinsfolk. The same is conclusive only of the baptism administered, according to the rites of the Catholic Church, by the priest who baptized subject child, but it does not prove the veracity of the declarations and statements contained in the certificate concerning the relationship of the person baptized.23 A baptismal certificate, a private document, is not conclusive proof of filiation.24 More so are the entries made in an income tax return, which only shows that income tax has been paid and the amount thereof.25

We note that the trial court had asked petitioner to secure a copy of her birth certificate but petitioner, without advancing any reason therefor, failed to do so. Neither did petitioner obtain a certification that no record of her birth could be found in the civil registry, if such were the case. We find petitioner's silence concerning the absence of her birth certificate telling. It raises doubt as to the existence of a birth certificate that would show petitioner to be the daughter of Jose Santiago and Esperanza Cabrigas. Her failure to show her birth certificate would raise the presumption that if such evidence were presented, it would be adverse to her claim. Petitioner's counsel argued that petitioner had been using Santiago all her life. However, use of a family name certainly does not establish pedigree. Further, we note that petitioner, who claims to be Ida Santiago, has the same birthdate as Ida Labagala.26 The similarity is too uncanny to be a mere coincidence. During her testimony before the trial court, petitioner denied knowing Cornelia Cabrigas, who was listed as the mother in the birth certificate of Ida Labagala. In her petition before this Court, however, she stated that Cornelia is the sister of her mother, Esperanza. It appears that petitioner made conflicting statements that affect her credibility and could cast along shadow of doubt on her claims of filiation. Thus, we are constrained to agree with the factual finding of the Court of Appeals that petitioner is in reality the child of Leon Labagala and Cornelia Cabrigas, and contrary to her averment, not of Jose Santiago and Esperanza Cabrigas. Not being a child of Jose, it follows that petitioner can not inherit from him through intestate succession. It now remains to be seen whether the property in dispute was validly transferred to petitioner through sale or donation. On the validity of the purported deed of sale, however, we agree with the Court of Appeals that: ...This deed is shot through and through with so many intrinsic defects that a reasonable mind is inevitably led to the conclusion that it is fake. The intrinsic defects are extractable from the following questions: a) If Jose Santiago intended to donate the properties in question to Ida, what was the big idea of hiding the nature of the contract in the facade of the sale? b) If the deed is a genuine document, how could it have happened that Jose Santiago who was of course fully aware that he owned only 1/3 pro indiviso of the properties covered by his title sold or donated the whole properties to Ida? c) Why in heaven's name did Jose Santiago, a college graduate, who always signed his name in documents requiring his signature (citation omitted) [affix] his thumbmark on this deed of sale? d) If Ida was [the] child of Jose Santiago, what was the sense of the latter donating his properties to her when she would inherit them anyway upon his death? e) Why did Jose Santiago affix his thumbmark to a deed which falsely stated that: he was single (for he was earlier married to Esperanza Cabrigas ); Ida was of legal age (for [ s ]he was then just 15 years old); and the subject properties were free from liens and encumbrances (for Entry No. 27261, Notice of Adverse Claim and Entry No. 6388, Notice of Lis Pendens were already annotated in the title of said properties). If the deed was executed in 1979, how come it surfaced only in 1984 after the death of Jose Santiago and of all people, the one in possession was the baptismal sponsor of Ida?27 Clearly, there is no valid sale in this case. Jose did not have the right to transfer ownership of the entire property to petitioner since 2/3 thereof belonged to his sisters.28 Petitioner could not have given her consent to the contract, being a minor at the time.29 Consent of the contracting parties is among the essential requisites of a contract,30 including one of sale, absent which there can be no valid contract. Moreover, petitioner admittedly did not pay any centavo for the property,31 which makes the sale void. Article 1471 of the Civil Code provides: Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract.

Neither may the purported deed of sale be a valid deed of donation. Again, as explained by the Court of Appeals: ...Even assuming that the deed is genuine, it cannot be a valid donation. It lacks the acceptance of the donee required by Art. 725 of the Civil Code. Being a minor in 1979, the acceptance of the donation should have been made by her father, Leon Labagala or [her] mother Cornelia Cabrigas or her legal representative pursuant to Art. 741 of the same Code. No one of those mentioned in the law - in fact no one at all - accepted the "donation" for Ida.32 In sum, we find no reversible error attributable to the assailed decision of the Court of Appeals, hence it must be upheld. WHEREFORE, the petition is DENIED, and the decision of the Court of Appeals in CA-G.R. CY No. 32817 is AFFIRMED. Costs against petitioner. SO ORDERED.

SECOND DIVISION [G.R. No. 127540. October 17, 2001]

EUGENIO DOMINGO, CRISPIN MANGABAT and SAMUEL CAPALUNGAN, petitioners, vs. HON. COURT OF APPEALS, FELIPE C. RIGONAN and CONCEPCION R. RIGONAN, respondents. EUGENIO DOMINGO, CRISPIN MANGABAT and SAMUEL CAPALUNGAN, petitioners, vs. HON. COURT OF APPEALS, THE DIRECTOR OF LANDS, and FELIPE C. RIGONAN and CONCEPCION R. RIGONAN, respondents. DECISION QUISUMBING, J.: This petition[1] seeks to annul the decision of the Court of Appeals dated August 29, 1996, which set aside the decision of the Regional Trial Court of Batac, Ilocos Norte, Branch 17, in Civil Case No. 582-17 for reinvindicacion consolidated with Cadastral Case No. 1.[2] The petition likewise seeks to annul the resolution dated December 11, 1996, denying petitioners motion for reconsideration. The facts of this case, culled from the records, are as follows: Paulina Rigonan owned three (3) parcels of land, located at Batac and Espiritu, Ilocos Norte, including the house and warehouse on one parcel. She allegedly sold them to private respondents, the spouses Felipe and Concepcion Rigonan, who claim to be her relatives. In 1966, herein petitioners Eugenio Domingo, Crispin Mangabat and Samuel Capalungan, who claim to be her closest surviving relatives, allegedly took possession of the properties by means of stealth, force and intimidation, and refused to vacate the same. Consequently, on February 2, 1976, herein respondent Felipe Rigonan filed a complaint for reinvindicacion against petitioners in the Regional Trial Court of Batac, Ilocos Norte. On July 3, 1977, he amended the complaint and included his wife as co-plaintiff. They alleged that they were the owners of the three parcels of land through the deed of sale executed by Paulina Rigonan on January 28, 1965; that since then, they had been in continuous possession of the subject properties and had introduced permanent improvements thereon; and that defendants (now petitioners) entered the properties illegally, and they refused to leave them when asked to do so. Herein petitioners, as defendants below, contested plaintiffs claims. According to defendants, the alleged deed of absolute sale was void for being spurious as well as lacking consideration. They said that Paulina Rigonan did not sell her properties to anyone. As her nearest surviving kin within the fifth degree of consanguinity, they inherited the three lots and the permanent improvements thereon when Paulina died in 1966. They said they had been in possession of the contested properties for more than 10 years. Defendants asked for damages against plaintiffs. During trial, Juan Franco, Notary Public Evaristo P. Tagatag[3] and plaintiff Felipe Rigonan testified for plaintiffs (private respondents now). Franco testified that he was a witness to the execution of the questioned deed of absolute sale. However, when cross-examined and shown the deed he stated that the deed was not the document he signed as a witness, but rather it was the will and testament made by Paulina Rigonan. Atty. Tagatag testified that he personally prepared the deed, he saw Paulina Rigonan affix her thumbprint on it and he signed it both as witness and notary public. He further testified that he

also notarized Paulinas last will and testament dated February 19, 1965. The will mentioned the same lots sold to private respondents. When asked why the subject lots were still included in the last will and testament, he could not explain. Atty. Tagatag also mentioned that he registered the original deed of absolute sale with the Register of Deeds. Plaintiff Felipe Rigonan claimed that he was Paulinas close relative. Their fathers were first cousins. However, he could not recall the name of Paulinas grandfather. His claim was disputed by defendants, who lived with Paulina as their close kin. He admitted the discrepancies between the Register of Deeds copy of the deed and the copy in his possession. But he attributed them to the representative from the Office of the Register of Deeds who went to plaintiffs house after that Office received a subpoena duces tecum. According to him, the representative showed him blanks in the deed and then the representative filled in the blanks by copying from his (plaintiffs) copy. Counsel for defendants (petitioners herein) presented as witnesses Jose Flores, the owner of the adjacent lot; Ruben Blanco, then acting Registrar of Deeds in Ilocos Norte; and Zosima Domingo, wife of defendant Eugenio Domingo. Jose Flores testified that he knew defendants, herein petitioners, who had lived on the land with Paulina Rigonan since he could remember and continued to live there even after Paulinas death. He said he did not receive any notice nor any offer to sell the lots from Paulina, contrary to what was indicated in the deed of sale that the vendor had notified all the adjacent owners of the sale. He averred he had no knowledge of any sale between Paulina and private respondents. Ruben Blanco, the acting Registrar of Deeds, testified that only the carbon copy, also called a duplicate original, of the deed of sale was filed in his office, but he could not explain why this was so. Zosima Domingo testified that her husband, Eugenio Domingo, was Paulinas nephew. Paulina was a first cousin of Eugenios father. She also said that they lived with Paulina and her husband, Jose Guerson, since 1956. They took care of her, spent for her daily needs and medical expenses, especially when she was hospitalized prior to her death. She stated that Paulina was never badly in need of money during her lifetime. On March 23, 1994, the trial court rendered judgment in favor of defendants (now the petitioners). It disposed: WHEREFORE, premises considered, judgment is hereby rendered in favor of defendants and against the plaintiffs, and as prayed for, the Amended Complaint is hereby DISMISSED. Defendants are hereby declared, by virtue of intestate succession, the lawful owners and possessors of the house including the bodega and the three (3) parcels of land in suit and a Decree of Registration adjudicating the ownership of the said properties to defendants is hereby issued. The alleged deed of sale (Exhs. A, A-1, 1 and 1-a) is hereby declared null and void and fake and the prayer for the issuance of a writ of preliminary injunction is hereby denied. Plaintiffs are hereby ordered to pay defendants: a) P20,000.00 as moral damages; b) P10,000.00 as exemplary damages; c) P10,000.00 attorneys fees and other litigation expenses. No pronouncement as to costs.[4]

Private respondents herein appealed to the Court of Appeals. On August 29, 1996, the CA reversed the trial courts decision, thus: WHEREFORE, the decision dated March 23, 1994 is hereby SET ASIDE. The plaintiffs-appellants Felipe Rigonan and Concepcion Rigonan are declared the owners of the properties under litigation and the defendants-appellees are hereby ordered to VACATE the subject properties and SURRENDER the possession thereof to the heirs of the plaintiffs-appellants. Costs against the defendants-appellees.[5] Hence, this petition assigning the following as errors: I THE RESPONDENT COURT OF APPEALS HAS DECIDED QUESTIONS OF LEGAL SUBSTANCE AND SIGNIFICANCE NOT IN ACCORDANCE WITH THE EVIDENCE, LAW AND WITH THE APPLICABLE DECISIONS OF THIS HONORABLE COURT. II THAT THE FINDINGS OF RESPONDENT COURT OF APPEALS ARE CONTRARY TO THOSE OF THE TRIAL COURT AND CLEARLY VIOLATES THE RULE THAT THE FACTUAL FINDINGS OF TRIAL COURTS ARE ENTITLED TO GREAT WEIGHT AND RESPECT ON APPEAL, ESPECIALLY WHEN SAID FINDINGS ARE ESTABLISHED BY UNREBUTTED TESTIMONIAL AND DOCUMENTARY EVIDENCE. III THAT THE FINDINGS AND CONCLUSIONS OF RESPONDENT COURT OF APPEALS ARE GROUNDED ENTIRELY ON SPECULATIONS, SURMISES, CONJECTURES, OR ON INFERENCES MANIFESTLY MISTAKEN. IV THAT THE RESPONDENT COURT OF APPEALS MANIFESTLY OVERLOOKED CERTAIN RELEVANT FACTS NOT DISPUTED BY THE PARTIES AND WHICH, IF PROPERLY CONSIDERED, WOULD JUSTIFY A DIFFERENT CONCLUSION. V THAT THE FINDINGS OF FACT OF RESPONDENT COURT OF APPEALS ARE PREMISED ON SUPPOSED ABSENCE OF EVIDENCE BUT IS CONTRADICTED BY THE EVIDENCE ON RECORD THUS CONSTITUTES GRAVE ABUSE OF DISCRETION.[6] The basic issue for our consideration is, did private respondents sufficiently establish the existence and due execution of the Deed of Absolute and Irrevocable Sale of Real Property? Marked as Exhibits A, A-1, 1 and 1-a, this deed purportedly involved nine (9) parcels of land, inclusive of the three (3) parcels in dispute, sold at the price of P850 by Paulina Rigonan to private respondents on January 28, 1965, at Batac, Ilocos Norte.[7] The trial court found the deed fake, being a carbon copy with no typewritten original presented; and the court concluded that the documents execution was tainted with alterations, defects, tamperings, and irregularities which render it null and void ab initio.[8] Petitioners argue that the Court of Appeals erred in not applying the doctrine that factual findings of trial courts are entitled to great weight and respect on appeal, especially when said findings are established by unrebutted testimonial and documentary evidence. They add that the

Court of Appeals, in reaching a different conclusion, had decided the case contrary to the evidence presented and the law applicable to the case. Petitioners maintain that the due execution of the deed of sale was not sufficiently established by private respondents, who as plaintiffs had the burden of proving it. First, the testimonies of the two alleged instrumental witnesses of the sale, namely, Juan Franco and Efren Sibucao, were dispensed with and discarded when Franco retracted his oral and written testimony that he was a witness to the execution of the subject deed. As a consequence, the appellate court merely relied on Atty. Tagatags (the notary public) testimony, which was incredible because aside from taking the double role of a witness and notary public, he was a paid witness. Further his testimony, that the subject deed was executed in the house of Paulina Rigonan, was rebutted by Zosima Domingo, Paulinas housekeeper, who said that she did not see Atty. Tagatag, Juan Franco and Efren Sibucao in Paulinas house on the alleged date of the deeds execution. Secondly, petitioners said that private respondents failed to account for the typewritten original of the deed of sale and that the carbon copy filed with the Register of Deeds was only a duplicate which contained insertions and erasures. Further, the carbon copy was without an affidavit of explanation, in violation of the Administrative Code as amended, which requires that if the original deed of sale is not presented or available upon registration of the deed, the carbon copy or so-called duplicate original must be accompanied by an affidavit of explanation, otherwise, registration must be denied.[9] Thirdly, petitioners aver that the consideration of only P850 for the parcels of land sold, together with a house and a warehouse, was another indication that the sale was fictitious because no person who was financially stable would sell said property at such a grossly inadequate consideration. Lastly, petitioners assert that there was abundant evidence that at the time of the execution of the deed of sale, Paulina Rigonan was already senile. She could not have consented to the sale by merely imprinting her thumbmark on the deed. In their comment, private respondents counter that at the outset the petition must be dismissed for it lacks a certification against forum-shopping. Nonetheless, even disregarding this requirement, the petition must still be denied in due course for it does not present any substantial legal issue, but factual or evidentiary ones which were already firmly resolved by the Court of Appeals based on records and the evidence presented by the parties. Private respondents claim that the factual determination by the trial court lacks credibility for it was made by the trial judge who presided only in one hearing of the case. The trial judge could not validly say that the deed of absolute sale was fake because no signature was forged, according to private respondents; and indeed a thumbmark, said to be the sellers own, appears thereon. In their reply, petitioners said that the copy of the petition filed with this Court was accompanied with a certification against forum shopping. If private respondents copy did not contain same certification, this was only due to inadvertence. Petitioners ask for the Courts indulgence for anyway there was substantial compliance with Revised Circular No. 28-91. On the contention that here only factual issues had been raised, hence not the proper subject for review by this Court, petitioners reply that this general rule admits of exceptions, as when the factual findings of the Court of Appeals and the trial court are contradictory; when the findings are grounded entirely on speculations, surmises or conjectures; and when the Court of Appeals overlooked certain relevant facts not disputed by the parties which if properly considered would justify a different conclusion. All these, according to petitioners, are present in this case. Before proceeding to the main issue, we shall first settle procedural issues raised by private respondents. While the trial judge deciding the case presided over the hearings of the case only once, this circumstance could not have an adverse effect on his decision. The continuity of a court and the efficacy of its proceedings are not affected by the death, resignation or cessation from the service

of the presiding judge. A judge may validly render a decision although he has only partly heard the testimony of the witnesses.[10] After all, he could utilize and rely on the records of the case, including the transcripts of testimonies heard by the former presiding judge. On the matter of the certification against forum-shopping, petitioners aver that they attached one in the copy intended for this Court. This is substantial compliance. A deviation from a rigid enforcement of the rules may be allowed to attain their prime objective for, after all, the dispensation of justice is the core reason for the courts existence.[11] While the issues raised in this petition might appear to be mainly factual, this petition is properly given due course because of the contradictory findings of the trial court and the Court of Appeals. Further, the latter court apparently overlooked certain relevant facts which justify a different conclusion.[12] Moreover, a compelling sense to make sure that justice is done, and done rightly in the light of the issues raised herein, constrains us from relying on technicalities alone to resolve this petition. Now, on the main issue. Did private respondents establish the existence and due execution of the deed of sale? Our finding is in the negative. First, note that private respondents as plaintiffs below presented only a carbon copy of this deed. When the Register of Deeds was subpoenaed to produce the deed, no original typewritten deed but only a carbon copy was presented to the trial court. Although the Court of Appeals calls it a duplicate original, the deed contained filled in blanks and alterations. None of the witnesses directly testified to prove positively and convincingly Paulinas execution of the original deed of sale. The carbon copy did not bear her signature, but only her alleged thumbprint. Juan Franco testified during the direct examination that he was an instrumental witness to the deed. However, when cross-examined and shown a copy of the subject deed, he retracted and said that said deed of sale was not the document he signed as witness.[13] He declared categorically he knew nothing about it.[14] We note that another witness, Efren Sibucao, whose testimony should have corroborated Atty. Tagatags, was not presented and his affidavit was withdrawn from the court,[15] leaving only Atty. Tagatags testimony, which aside from being uncorroborated, was self-serving. Secondly, we agree with the trial court that irregularities abound regarding the execution and registration of the alleged deed of sale. On record, Atty. Tagatag testified that he himself registered the original deed with the Register of Deeds.[16] Yet, the original was nowhere to be found and none could be presented at the trial. Also, the carbon copy on file, which is allegedly a duplicate original, shows intercalations and discrepancies when compared to purported copies in existence. The intercalations were allegedly due to blanks left unfilled by Atty. Tagatag at the time of the deeds registration. The blanks were allegedly filled in much later by a representative of the Register of Deeds. In addition, the alleged other copies of the document bore different dates of entry: May 16, 1966, 10:20 A.M.[17] and June 10, 1966, 3:16 P.M.,[18] and different entry numbers: 66246, 74389[19] and 64369.[20] The deed was apparently registered long after its alleged date of execution and after Paulinas death on March 20, 1966.[21] Admittedly, the alleged vendor Paulina Rigonan was not given a copy.[22] Furthermore, it appears that the alleged vendor was never asked to vacate the premises she had purportedly sold. Felipe testified that he had agreed to let Paulina stay in the house until her death.[23] In Alcos v. IAC, 162 SCRA 823 (1988), the buyers immediate possession and occupation of the property was deemed corroborative of the truthfulness and authenticity of the deed of sale. The alleged vendors continued possession of the property in this case throws an inverse implication, a serious doubt on the due execution of the deed of sale. Noteworthy, the same parcels of land involved in the alleged sale were still included in the will subsequently executed by Paulina and notarized by the same notary public, Atty. Tagatag.[24] These circumstances, taken together, militate against unguarded acceptance of the due execution and genuineness of the alleged deed of sale. Thirdly, we have to take into account the element of consideration for the sale. The price allegedly paid by private respondents for nine (9) parcels, including the three parcels in dispute, a

house and a warehouse, raises further questions. Consideration is the why of a contract, the essential reason which moves the contracting parties to enter into the contract.[25] On record, there is unrebutted testimony that Paulina as landowner was financially well off. She loaned money to several people.[26] We see no apparent and compelling reason for her to sell the subject parcels of land with a house and warehouse at a meager price of P850 only. In Rongavilla vs. CA, 294 SCRA 289 (1998), private respondents were in their advanced years, and were not in dire need of money, except for a small amount of P2,000 which they said were loaned by petitioners for the repair of their houses roof. We ruled against petitioners, and declared that there was no valid sale because of lack of consideration. In the present case, at the time of the execution of the alleged contract, Paulina Rigonan was already of advanced age and senile. She died an octogenarian on March 20, 1966, barely over a year when the deed was allegedly executed on January 28, 1965, but before copies of the deed were entered in the registry allegedly on May 16 and June 10, 1966. The general rule is that a person is not incompetent to contract merely because of advanced years or by reason of physical infirmities.[27] However, when such age or infirmities have impaired the mental faculties so as to prevent the person from properly, intelligently, and firmly protecting her property rights then she is undeniably incapacitated. The unrebutted testimony of Zosima Domingo shows that at the time of the alleged execution of the deed, Paulina was already incapacitated physically and mentally. She narrated that Paulina played with her waste and urinated in bed. Given these circumstances, there is in our view sufficient reason to seriously doubt that she consented to the sale of and the price for her parcels of land. Moreover, there is no receipt to show that said price was paid to and received by her. Thus, we are in agreement with the trial courts finding and conclusion on the matter: The whole evidence on record does not show clearly that the fictitious P850.00 consideration was ever delivered to the vendor. Undisputably, the P850.00 consideration for the nine (9) parcels of land including the house and bodega is grossly and shockingly inadequate, and the sale is null and void ab initio.[28] WHEREFORE, the petition is GRANTED. The decision and resolution of the Court of Appeals dated August 29, 1996 and December 11, 1996, respectively, are REVERSED and SET ASIDE. The decision of the Regional Trial Court of Batac, Ilocos Norte, Branch 17, dated March 23, 1994, is REINSTATED. Costs against private respondents. SO ORDERED. Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

FIRST DIVISION [G.R. No. 125172. June 26, 1998]

Spouses ANTONIO and LUZVIMINDA GUIANG, petitioners, vs. COURT OF APPEALS and GILDA CORPUZ, respondents. DECISION PANGANIBAN, J.: The sale of a conjugal property requires the consent of both the husband and the wife. The absence of the consent of one renders the sale null and void, while the vitiation thereof makes it merely voidable. Only in the latter case can ratification cure the defect. The Case These were the principles that guided the Court in deciding this petition for review of the Decision[1] dated January 30, 1996 and the Resolution[2] dated May 28, 1996, promulgated by the Court of Appeals in CA-GR CV No. 41758, affirming the Decision of the lower court and denying reconsideration, respectively. On May 28, 1990, Private Respondent Gilda Corpuz filed an Amended Complaint[3] against her husband Judie Corpuz and Petitioners-Spouses Antonio and Luzviminda Guiang. The said Complaint sought the declaration of a certain deed of sale, which involved the conjugal property of private respondent and her husband, null and void. The case was raffled to the Regional Trial Court of Koronadal, South Cotabato, Branch 25. In due course, the trial court rendered a Decision[4] dated September 9, 1992, disposing as follows:[5] ACCORDINGLY, judgment is rendered for the plaintiff and against the defendants, 1. Declaring both the Deed of Transfer of Rights dated March 1, 1990 (Exh. A) and the amicable settlement dated March 16, 1990 (Exh. B) as null and void and of no effect; 2. Recognizing as lawful and valid the ownership and possession of plaintiff Gilda Corpuz over the remaining one-half portion of Lot 9, Block 8, (LRC) Psd-165409 which has been the subject of the Deed of Transfer of Rights (Exh. A); 3. Ordering plaintiff Gilda Corpuz to reimburse defendants Luzviminda and Antonio Guiang the amount of NINE THOUSAND (P9,000.00) PESOS corresponding to the payment made by defendants Guiangs to Manuel Callejo for the unpaid balance of the account of plaintiff in favor of Manuel Callejo, and another sum of P379.62 representing one-half of the amount of realty taxes paid by defendants Guiangs on Lot 9, Block 8, (LRC) Psd-165409, both with legal interests thereon computed from the finality of the decision. No pronouncement as to costs in view of the factual circumstances of the case. Dissatisfied, petitioners-spouses filed an appeal with the Court of Appeals. Respondent Court, in its challenged Decision, ruled as follows:[6]

WHEREFORE, the appealed decision of the lower court in Civil Case No. 204 is hereby AFFIRMED by this Court. No costs considering plaintiff-appellees failure to file her brief, despite notice. Reconsideration was similarly denied by the same court in its assailed Resolution:[7] Finding that the issues raised in defendants-appellants motion for reconsideration of Our decision in this case of January 30, 1996, to be a mere rehash of the same issues which We have already passed upon in the said decision, and there [being] no cogent reason to disturb the same, this Court RESOLVES to DENY the instant motion for reconsideration for lack of merit. The Facts The facts of this case are simple. Over the objection of private respondent and while she was in Manila seeking employment, her husband sold to the petitioners-spouses one half of their conjugal property, consisting of their residence and the lot on which it stood. The circumstances of this sale are set forth in the Decision of Respondent Court, which quoted from the Decision of the trial court, as follows:[8] 1. Plaintiff Gilda Corpuz and defendant Judie Corpuz are legally married spouses. They were married on December 24, 1968 in Bacolod City, before a judge. This is admitted by defendants-spouses Antonio and Luzviminda Guiang in their answer, and also admitted by defendant Judie Corpuz when he testified in court (tsn. p..3, June 9, 1992), although the latter says that they were married in 1967. The couple have three children, namely: Junie 18 years old, Harriet 17 years of age, and Jodie or Joji, the youngest, who was 15 years of age in August, 1990 when her mother testified in court. Sometime on February 14, 1983, the couple Gilda and Judie Corpuz, with plaintiff-wife Gilda Corpuz as vendee, bought a 421 sq. meter lot located in Barangay Gen. Paulino Santos (Bo. 1), Koronadal, South Cotabato, and particularly known as Lot 9, Block 8, (LRC) Psd-165409 from Manuel Callejo who signed as vendor through a conditional deed of sale for a total consideration of P14,735.00. The consideration was payable in installment, with right of cancellation in favor of vendor should vendee fail to pay three successive installments (Exh. 2, tsn. p. 6, February 14, 1990). 2. Sometime on April 22, 1988, the couple Gilda and Judie Corpuz sold one-half portion of their Lot No. 9, Block 8, (LRC) Psd-165409 to the defendants-spouses Antonio and Luzviminda Guiang. The latter have since then occupied the one-half portion [and] built their house thereon (tsn. p. 4, May 22, 1992). They are thus adjoining neighbors of the Corpuzes. 3. Plaintiff Gilda Corpuz left for Manila sometime in June 1989. She was trying to look for work abroad, in [the] Middle East. Unfortunately, she became a victim of an unscrupulous illegal recruiter. She was not able to go abroad. She stayed for sometime in Manila however, coming back to Koronadal, South Cotabato, x x x on March 11, 1990. Plaintiffs departure for Manila to look for work in the Middle East was with the consent of her husband Judie Corpuz (tsn. p. 16, Aug.12, 1990; p. 10, Sept. 6, 1991). After his wifes departure for Manila, defendant Judie Corpuz seldom went home to the conjugal dwelling. He stayed most of the time at his place of work at Samahang Nayon Building, a hotel, restaurant, and a cooperative. Daughter Harriet Corpuz went to school at Kings College, Bo. 1, Koronadal, South Cotabato, but she was at the same time working as

household help of, and staying at, the house of Mr. Panes. Her brother Junie was not working. Her younger sister Jodie (Joji) was going to school. Her mother sometimes sent them money (tsn. p. 14, Sept. 6, 1991). Sometime in January 1990, Harriet Corpuz learned that her father intended to sell the remaining one-half portion including their house, of their homelot to defendants Guiangs. She wrote a letter to her mother informing her. She [Gilda Corpuz] replied that she was objecting to the sale. Harriet, however, did not inform her father about this; but instead gave the letter to Mrs. Luzviminda Guiang so that she [Guiang] would advise her father (tsn. pp. 16-17, Sept. 6, 1991). 4. However, in the absence of his wife Gilda Corpuz, defendant Judie Corpuz pushed through the sale of the remaining one-half portion of Lot 9, Block 8, (LRC) Psd-165409. On March 1, 1990, he sold to defendant Luzviminda Guiang thru a document known as Deed of Transfer of Rights (Exh. A) the remaining one-half portion of their lot and the house standing thereon for a total consideration of P30,000.00 of which P5,000.00 was to be paid in June , 1990. Transferor Judie Corpuzs children Junie and Harriet signed the document as witnesses. Four (4) days after March 1, 1990 or on March 5, 1990, obviously to cure whatever defect in defendant Judie Corpuzs title over the lot transferred, defendant Luzviminda Guiang as vendee executed another agreement over Lot 9, Block 8, (LRC) Psd-165408 (Exh. 3), this time with Manuela Jimenez Callejo, a widow of the original registered owner from whom the couple Judie and Gilda Corpuz originally bought the lot (Exh. 2), who signed as vendor for a consideration of P9,000.00. Defendant Judie Corpuz signed as a witness to the sale (Exh. 3-A). The new sale (Exh. 3) describes the lot sold as Lot 8, Block 9, (LRC) Psd165408 but it is obvious from the mass of evidence that the correct lot is Lot 8, Block 9, (LRC) Psd-165409, the very lot earlier sold to the couple Gilda and Judie Corpuz. 5. Sometime on March 11, 1990, plaintiff returned home. She found her children staying with other households. Only Junie was staying in their house. Harriet and Joji were with Mr. Panes. Gilda gathered her children together and stayed at their house. Her husband was nowhere to be found. She was informed by her children that their father had a wife already. 6. For staying in their house sold by her husband, plaintiff was complained against by defendant Luzviminda Guiang and her husband Antonio Guiang before the Barangay authorities of Barangay General Paulino Santos (Bo. 1), Koronadal, South Cotabato, for trespassing (tsn. p. 34, Aug. 17, 1990). The case was docketed by the barangay authorities as Barangay Case No. 38 for trespassing. On March 16, 1990, the parties thereat signed a document known as amicable settlement. In full, the settlement provides for, to wit: That respondent, Mrs. Gilda Corpuz and her three children, namely: Junie, Hariet and Judie to leave voluntarily the house of Mr. and Mrs. Antonio Guiang, where they are presently boarding without any charge, on or before April 7, 1990. FAIL NOT UNDER THE PENALTY OF THE LAW. Believing that she had received the shorter end of the bargain, plaintiff went to the Barangay Captain of Barangay Paulino Santos to question her signature on the amicable settlement. She was referred however to the Officer-In-Charge at the time, a certain Mr. de la Cruz. The latter in turn told her that he could not do anything on the matter (tsn. p. 31,

Aug. 17, 1990). This particular point was not rebutted. The Barangay Captain who testified did not deny that Mrs. Gilda Corpuz approached him for the annulment of the settlement. He merely said he forgot whether Mrs. Corpuz had approached him (tsn. p. 13, Sept. 26, 1990). We thus conclude that Mrs. Corpuz really approached the Barangay Captain for the annulment of the settlement. Annulment not having been made, plaintiff stayed put in her house and lot. 7. Defendant-spouses Guiang followed thru the amicable settlement with a motion for the execution of the amicable settlement, filing the same with the Municipal Trial Court of Koronadal, South Cotabato. The proceedings [are] still pending before the said court, with the filing of the instant suit. 8. As a consequence of the sale, the spouses Guiang spent P600.00 for the preparation of the Deed of Transfer of Rights, Exh. A; P9,000.00 as the amount they paid to Mrs. Manuela Callejo, having assumed the remaining obligation of the Corpuzes to Mrs. Callejo (Exh. 3); P100.00 for the preparation of Exhibit 3; a total of P759.62 basic tax and special educational fund on the lot; P127.50 as the total documentary stamp tax on the various documents; P535.72 for the capital gains tax; P22.50 as transfer tax; a standard fee of P17.00; certification fee of P5.00. These expenses particularly the taxes and other expenses towards the transfer of the title to the spouses Guiangs were incurred for the whole Lot 9, Block 8, (LRC) Psd-165409. Ruling of Respondent Court Respondent Court found no reversible error in the trial courts ruling that any alienation or encumbrance by the husband of the conjugal property without the consent of his wife is null and void as provided under Article 124 of the Family Code. It also rejected petitioners contention that the amicable settlement ratified said sale, citing Article 1409 of the Code which expressly bars ratification of the contracts specified therein, particularly those prohibited or declared void by law. Hence, this petition.[9] The Issues In their Memorandum, petitioners assign to public respondent the following errors:[10] I Whether or not the assailed Deed of Transfer of Rights was validly executed. II Whether or not the Court of Appeals erred in not declaring as voidable contract under Art. 1390 of the Civil Code the impugned Deed of Transfer of Rights which was validly ratified thru the execution of the amicable settlement by the contending parties. III Whether or not the Court of Appeals erred in not setting aside the findings of the Court a quo which recognized as lawful and valid the ownership and possession of private respondent over the remaining one half (1/2) portion of the subject property.

In a nutshell, petitioners-spouses contend that (1) the contract of sale (Deed of Transfer of Rights) was merely voidable, and (2) such contract was ratified by private respondent when she entered into an amicable settlement with them. This Courts Ruling The petition is bereft of merit. First Issue: Void or Voidable Contract? Petitioners insist that the questioned Deed of Transfer of Rights was validly executed by the parties-litigants in good faith and for valuable consideration. The absence of private respondents consent merely rendered the Deed voidable under Article 1390 of the Civil Code, which provides: ART. 1390. The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties: xxx xxx xxx

(2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification.(n) The error in petitioners contention is evident. Article 1390, par. 2, refers to contracts visited by vices of consent, i.e., contracts which were entered into by a person whose consent was obtained and vitiated through mistake, violence, intimidation, undue influence or fraud. In this instance, private respondents consent to the contract of sale of their conjugal property was totally inexistent or absent. Gilda Corpuz, on direct examination, testified thus:[11] Q A xxx ATTY. FUENTES: Q A Q A When did you come back to Koronadal, South Cotabato? That was on March 11, 1990, Maam. Now, when you arrived at Koronadal, was there any problem which arose concerning the ownership of your residential house at Callejo Subdivision? When I arrived here in Koronadal, there was a problem which arose regarding my residential house and lot because it was sold by my husband without my knowledge. Now, on March 1, 1990, could you still recall where you were? I was still in Manila during that time. xxx xxx

This being the case, said contract properly falls within the ambit of Article 124 of the Family Code, which was correctly applied by the two lower courts: ART. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of disagreement, the husbands decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be

availed of within five years from the date of the contract implementing such decision. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include the powers of disposition or encumbrance which must have the authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors.(165a) (Italics supplied) Comparing said law with its equivalent provision in the Civil Code, the trial court adroitly explained the amendatory effect of the above provision in this wise:[12] The legal provision is clear. The disposition or encumbrance is void. It becomes still clearer if we compare the same with the equivalent provision of the Civil Code of the Philippines. Under Article 166 of the Civil Code, the husband cannot generally alienate or encumber any real property of the conjugal partnership without the wifes consent. The alienation or encumbrance if so made however is not null and void. It is merely voidable. The offended wife may bring an action to annul the said alienation or encumbrance. Thus, the provision of Article 173 of the Civil Code of the Philippines, to wit: Art. 173. The wife may, during the marriage and within ten years from the transaction questioned, ask the courts for the annulment of any contract of the husband entered into without her consent, when such consent is required, or any act or contract of the husband which tends to defraud her or impair her interest in the conjugal partnership property. Should the wife fail to exercise this right, she or her heirs after the dissolution of the marriage, may demand the value of property fraudulently alienated by the husband.(n) This particular provision giving the wife ten (10) years x x x during [the] marriage to annul the alienation or encumbrance was not carried over to the Family Code. It is thus clear that any alienation or encumbrance made after August 3, 1988 when the Family Code took effect by the husband of the conjugal partnership property without the consent of the wife is null and void. Furthermore, it must be noted that the fraud and the intimidation referred to by petitioners were perpetrated in the execution of the document embodying the amicable settlement. Gilda Corpuz alleged during trial that barangay authorities made her sign said document through misrepresentation and coercion.[13] In any event, its execution does not alter the void character of the deed of sale between the husband and the petitioners-spouses, as will be discussed later. The fact remains that such contract was entered into without the wifes consent. In sum, the nullity of the contract of sale is premised on the absence of private respondents consent. To constitute a valid contract, the Civil Code requires the concurrence of the following elements: (1) cause, (2) object, and (3) consent,[14] the last element being indubitably absent in the case at bar. Second Issue: Amicable Settlement Insisting that the contract of sale was merely voidable, petitioners aver that it was duly ratified by the contending parties through the amicable settlement they executed on March 16, 1990 in

Barangay Case No. 38. The position is not well taken. The trial and the appellate courts have resolved this issue in favor of the private respondent. The trial court correctly held:[15] By the specific provision of the law [Art. 1390, Civil Code] therefore, the Deed of Transfer of Rights (Exh. A) cannot be ratified, even by an amicable settlement. The participation by some barangay authorities in the amicable settlement cannot otherwise validate an invalid act. Moreover, it cannot be denied that the amicable settlement (Exh. B) entered into by plaintiff Gilda Corpuz and defendant spouses Guiang is a contract. It is a direct offshoot of the Deed of Transfer of Rights (Exh. A). By express provision of law, such a contract is also void. Thus, the legal provision, to wit: Art. 1422. A contract which is the direct result of a previous illegal contract, is also void and inexistent. (Civil Code of the Philippines). In summation therefore, both the Deed of Transfer of Rights (Exh. A) and the amicable settlement (Exh. 3) are null and void. Doctrinally and clearly, a void contract cannot be ratified.[16] Neither can the amicable settlement be considered a continuing offer that was accepted and perfected by the parties, following the last sentence of Article 124. The order of the pertinent events is clear: after the sale, petitioners filed a complaint for trespassing against private respondent, after which the barangay authorities secured an amicable settlement and petitioners filed before the MTC a motion for its execution. The settlement, however, does not mention a continuing offer to sell the property or an acceptance of such a continuing offer. Its tenor was to the effect that private respondent would vacate the property. By no stretch of the imagination, can the Court interpret this document as the acceptance mentioned in Article 124. WHEREFORE, the Court hereby DENIES the petition and AFFIRMS the challenged Decision and Resolution. Costs against petitioners. SO ORDERED. Davide, Jr., (Chairman), Bellosillo, Vitug, and Quisumbing, JJ., concur.

SECOND DIVISION [G.R. No. 155043. September 30, 2004]

ARTURO R. ABALOS, petitioner, vs. DR. GALICANO S. MACATANGAY, JR., respondent. DECISION TINGA, J.: The instant petition seeks a reversal of the Decision of the Court of Appeals in CA-G.R. CV No. 48355 entitled Dr. Galicano S. Macatangay, Jr. v. Arturo R. Abalos and Esther Palisoc-Abalos, promulgated on March 14, 2002. The appellate court reversed the trial courts decision which dismissed the action for specific performance filed by respondent, and ordered petitioner and his wife to execute in favor of herein respondent a deed of sale over the subject property. Spouses Arturo and Esther Abalos are the registered owners of a parcel of land with improvements located at Azucena St., Makati City consisting of about three hundred twenty-seven (327) square meters, covered by Transfer Certificate of Title (TCT) No. 145316 of the Registry of Deeds of Makati. Armed with a Special Power of Attorney dated June 2, 1988, purportedly issued by his wife, Arturo executed a Receipt and Memorandum of Agreement (RMOA) dated October 17, 1989, in favor of respondent, binding himself to sell to respondent the subject property and not to offer the same to any other party within thirty (30) days from date. Arturo acknowledged receipt of a check from respondent in the amount of Five Thousand Pesos (P5,000.00), representing earnest money for the subject property, the amount of which would be deducted from the purchase price of One Million Three Hundred Three Hundred Thousand Pesos (P1,300,000.00). Further, the RMOA stated that full payment would be effected as soon as possession of the property shall have been turned over to respondent. Subsequently, Arturos wife, Esther, executed a Special Power of Attorney dated October 25, 1989, appointing her sister, Bernadette Ramos, to act for and in her behalf relative to the transfer of the property to respondent. Ostensibly, a marital squabble was brewing between Arturo and Esther at the time and to protect his interest, respondent caused the annotation of his adverse claim on the title of the spouses to the property on November 14, 1989. On November 16, 1989, respondent sent a letter to Arturo and Esther informing them of his readiness and willingness to pay the full amount of the purchase price. The letter contained a demand upon the spouses to comply with their obligation to turn over possession of the property to him. On the same date, Esther, through her attorney-in-fact, executed in favor of respondent, a Contract to Sell the property to the extent of her conjugal interest therein for the sum of six hundred fifty thousand pesos (P650,000.00) less the sum already received by her and Arturo. Esther agreed to surrender possession of the property to respondent within twenty (20) days from November 16, 1989, while the latter promised to pay the balance of the purchase price in the amount of one million two hundred ninety thousand pesos (P1,290,000.00) after being placed in possession of the property. Esther also obligated herself to execute and deliver to respondent a deed of absolute sale upon full payment. In a letter dated December 7, 1989, respondent informed the spouses that he had set aside the amount of One Million Two Hundred Ninety Thousand Pesos (P1,290,000.00) as evidenced by Citibank Check No. 278107 as full payment of the purchase price. He reiterated his demand upon them to comply with their obligation to turn over possession of the property. Arturo and Esther failed

to deliver the property which prompted respondent to cause the annotation of another adverse claim on TCT No. 145316. On January 12, 1990, respondent filed a complaint for specific performance with damages against petitioners. Arturo filed his answer to the complaint while his wife was declared in default. The Regional Trial Court (RTC) dismissed the complaint for specific performance. It ruled that the Special Power of Attorney (SPA) ostensibly issued by Esther in favor of Arturo was void as it was falsified. Hence, the court concluded that the SPA could not have authorized Arturo to sell the property to respondent. The trial court also noted that the check issued by respondent to cover the earnest money was dishonored due to insufficiency of funds and while it was replaced with another check by respondent, there is no showing that the second check was issued as payment for the earnest money on the property. On appeal taken by respondent, the Court of Appeals reversed the decision of the trial court. It ruled that the SPA in favor of Arturo, assuming that it was void, cannot affect the transaction between Esther and respondent. The appellate court ratiocinated that it was by virtue of the SPA executed by Esther, in favor of her sister, that the sale of the property to respondent was effected. On the other hand, the appellate court considered the RMOA executed by Arturo in favor of respondent valid to effect the sale of Arturos conjugal share in the property. Dissatisfied with the appellate courts disposition of the case, petitioner seeks a reversal of its decision alleging that: I. The Court of Appeals committed serious and manifest error when it decided on the appeal without affording petitioner his right to due process. II. The Court of Appeals committed serious and manifest error in reversing and setting aside the findings of fact by the trial court. III. The Court of Appeals erred in ruling that a contract to sell is a contract of sale, and in ordering petitioner to execute a registrable form of deed of sale over the property in favor of respondent.[1] Petitioner contends that he was not personally served with copies of summons, pleadings, and processes in the appeal proceedings nor was he given an opportunity to submit an appellees brief. He alleges that his counsel was in the United States from 1994 to June 2000, and he never received any news or communication from him after the proceedings in the trial court were terminated. Petitioner submits that he was denied due process because he was not informed of the appeal proceedings, nor given the chance to have legal representation before the appellate court. We are not convinced. The essence of due process is an opportunity to be heard. Petitioners failure to participate in the appeal proceedings is not due to a cause imputable to the appellate court but because of petitioners own neglect in ascertaining the status of his case. Petitioners counsel is equally negligent in failing to inform his client about the recent developments in the appeal proceedings. Settled is the rule that a party is bound by the conduct, negligence and mistakes of his counsel.[2] Thus, petitioners plea of denial of due process is downright baseless. Petitioner also blames the appellate court for setting aside the factual findings of the trial court and argues that factual findings of the trial court are given much weight and respect when supported

by substantial evidence. He asserts that the sale between him and respondent is void for lack of consent because the SPA purportedly executed by his wife Esther is a forgery and therefore, he could not have validly sold the subject property to respondent. Next, petitioner theorizes that the RMOA he executed in favor of respondent was not perfected because the check representing the earnest money was dishonored. He adds that there is no evidence on record that the second check issued by respondent was intended to replace the first check representing payment of earnest money. Respondent admits that the subject property is co-owned by petitioner and his wife, but he objects to the allegations in the petition bearing a relation to the supposed date of the marriage of the vendors. He contends that the alleged date of marriage between petitioner and his wife is a new factual issue which was not raised nor established in the court a quo. Respondent claims that there is no basis to annul the sale freely and voluntarily entered into by the husband and the wife. The focal issue in the instant petition is whether petitioner may be compelled to convey the property to respondent under the terms of the RMOA and the Contract to Sell. At bottom, the resolution of the issue entails the ascertainment of the contractual nature of the two documents and the status of the contracts contained therein. Contracts, in general, require the presence of three essential elements: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established.[3] Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation.[4] In a contract of sale, the seller must consent to transfer ownership in exchange for the price, the subject matter must be determinate, and the price must be certain in money or its equivalent.[5] Being essentially consensual, a contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price.[6] However, ownership of the thing sold shall not be transferred to the vendee until actual or constructive delivery of the property.[7] On the other hand, an accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct and separate from the price, is what may properly be termed a perfected contract of option.[8] An option merely grants a privilege to buy or sell within an agreed time and at a determined price. It is separate and distinct from that which the parties may enter into upon the consummation of the option.[9] A perfected contract of option does not result in the perfection or consummation of the sale; only when the option is exercised may a sale be perfected.[10] The option must, however, be supported by a consideration distinct from the price.[11] Perusing the RMOA, it signifies a unilateral offer of Arturo to sell the property to respondent for a price certain within a period of thirty days. The RMOA does not impose upon respondent an obligation to buy petitioners property, as in fact it does not even bear his signature thereon. It is quite clear that after the lapse of the thirty-day period, without respondent having exercised his option, Arturo is free to sell the property to another. This shows that the intent of Arturo is merely to grant respondent the privilege to buy the property within the period therein stated. There is nothing in the RMOA which indicates that Arturo agreed therein to transfer ownership of the land which is an essential element in a contract of sale. Unfortunately, the option is not binding upon the promissory since it is not supported by a consideration distinct from the price.[12] As a rule, the holder of the option, after accepting the promise and before he exercises his option, is not bound to buy. He is free either to buy or not to buy later. In Sanchez v. Rigos[13] we ruled that in an accepted unilateral promise to sell, the promissor is not bound by his promise and

may, accordingly, withdraw it, since there may be no valid contract without a cause or consideration. Pending notice of its withdrawal, his accepted promise partakes of the nature of an offer to sell which, if acceded or consented to, results in a perfected contract of sale. Even conceding for the nonce that respondent had accepted the offer within the period stated and, as a consequence, a bilateral contract of purchase and sale was perfected, the outcome would be the same. To benefit from such situation, respondent would have to pay or at least make a valid tender of payment of the price for only then could he exact compliance with the undertaking of the other party.[14] This respondent failed to do. By his own admission, he merely informed respondent spouses of his readiness and willingness to pay. The fact that he had set aside a check in the amount of One Million Two Hundred Ninety Thousand Pesos (P1,290,000.00) representing the balance of the purchase price could not help his cause. Settled is the rule that tender of payment must be made in legal tender. A check is not legal tender, and therefore cannot constitute a valid tender of payment.[15] Not having made a valid tender of payment, respondents action for specific performance must fail. With regard to the payment of Five Thousand Pesos (P5,000.00), the Court is of the view that the amount is not earnest money as the term is understood in Article 1482 which signifies proof of the perfection of the contract of sale, but merely a guarantee that respondent is really interested to buy the property. It is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale.[16] No reservation of ownership on the part of Arturo is necessary since, as previously stated, he has never agreed to transfer ownership of the property to respondent. Granting for the sake of argument that the RMOA is a contract of sale, the same would still be void not only for want of consideration and absence of respondents signature thereon, but also for lack of Esthers conformity thereto. Quite glaring is the absence of the signature of Esther in the RMOA, which proves that she did not give her consent to the transaction initiated by Arturo. The husband cannot alienate any real property of the conjugal partnership without the wifes consent.[17] However, it was the Contract to Sell executed by Esther through her attorney-in-fact which the Court of Appeals made full use of. Holding that the contract is valid, the appellate court explained that while Esther did not authorize Arturo to sell the property, her execution of the SPA authorizing her sister to sell the land to respondent clearly shows her intention to convey her interest in favor of respondent. In effect, the court declared that the lack of Esthers consent to the sale made by Arturo was cured by her subsequent conveyance of her interest in the property through her attorney-in-fact. We do not share the ruling. The nullity of the RMOA as a contract of sale emanates not only from lack of Esthers consent thereto but also from want of consideration and absence of respondents signature thereon. Such nullity cannot be obliterated by Esthers subsequent confirmation of the putative transaction as expressed in the Contract to Sell. Under the law, a void contract cannot be ratified[18] and the action or defense for the declaration of the inexistence of a contract does not prescribe.[19] A void contract produces no effect either against or in favor of anyoneit cannot create, modify or extinguish the juridical relation to which it refers.[20] True, in the Contract to Sell, Esther made reference to the earlier RMOA executed by Arturo in favor of respondent. However, the RMOA which Arturo signed is different from the deed which Esther executed through her attorney-in-fact. For one, the first is sought to be enforced as a contract of sale while the second is purportedly a contract to sell only. For another, the terms and conditions as to the issuance of title and delivery of possession are divergent. The congruence of the wills of the spouses is essential for the valid disposition of conjugal property. Where the conveyance is contained in the same document which bears the conformity of

both husband and wife, there could be no question on the validity of the transaction. But when there are two documents on which the signatures of the spouses separately appear, textual concordance of the documents is indispensable. Hence, in this case where the wifes putative consent to the sale of conjugal property appears in a separate document which does not, however, contain the same terms and conditions as in the first document signed by the husband, a valid transaction could not have arisen. Quite a bit of elucidation on the conjugal partnership of gains is in order. Arturo and Esther appear to have been married before the effectivity of the Family Code. There being no indication that they have adopted a different property regime, their property relations would automatically be governed by the regime of conjugal partnership of gains.[21] The subject land which had been admittedly acquired during the marriage of the spouses forms part of their conjugal partnership.[22] Under the Civil Code, the husband is the administrator of the conjugal partnership. This right is clearly granted to him by law.[23] More, the husband is the sole administrator. The wife is not entitled as of right to joint administration.[24] The husband, even if he is statutorily designated as administrator of the conjugal partnership, cannot validly alienate or encumber any real property of the conjugal partnership without the wifes consent.[25] Similarly, the wife cannot dispose of any property belonging to the conjugal partnership without the conformity of the husband. The law is explicit that the wife cannot bind the conjugal partnership without the husbands consent, except in cases provided by law.[26] More significantly, it has been held that prior to the liquidation of the conjugal partnership, the interest of each spouse in the conjugal assets is inchoate, a mere expectancy, which constitutes neither a legal nor an equitable estate, and does not ripen into title until it appears that there are assets in the community as a result of the liquidation and settlement. The interest of each spouse is limited to the net remainder or remanente liquido (haber ganancial) resulting from the liquidation of the affairs of the partnership after its dissolution.[27] Thus, the right of the husband or wife to one-half of the conjugal assets does not vest until the dissolution and liquidation of the conjugal partnership, or after dissolution of the marriage, when it is finally determined that, after settlement of conjugal obligations, there are net assets left which can be divided between the spouses or their respective heirs.[28] In not a few cases, we ruled that the sale by the husband of property belonging to the conjugal partnership without the consent of the wife when there is no showing that the latter is incapacitated is void ab initio because it is in contravention of the mandatory requirements of Article 166 of the Civil Code.[29] Since Article 166 of the Civil Code requires the consent of the wife before the husband may alienate or encumber any real property of the conjugal partnership, it follows that acts or transactions executed against this mandatory provision are void except when the law itself authorizes their validity.[30] Quite recently, in San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals,[31] we ruled that neither spouse could alienate in favor of another, his or her interest in the partnership or in any property belonging to it, or ask for partition of the properties before the partnership itself had been legally dissolved. Nonetheless, alienation of the share of each spouse in the conjugal partnership could be had after separation of property of the spouses during the marriage had been judicially decreed, upon their petition for any of the causes specified in Article 191[32] of the Civil Code in relation to Article 214[33] thereof. As an exception, the husband may dispose of conjugal property without the wifes consent if such sale is necessary to answer for conjugal liabilities mentioned in Articles 161 and 162 of the Civil

Code.[34] In Tinitigan v. Tinitigan, Sr.,[35] the Court ruled that the husband may sell property belonging to the conjugal partnership even without the consent of the wife if the sale is necessary to answer for a big conjugal liability which might endanger the familys economic standing. This is one instance where the wifes consent is not required and, impliedly, no judicial intervention is necessary. Significantly, the Family Code has introduced some changes particularly on the aspect of the administration of the conjugal partnership. The new law provides that the administration of the conjugal partnership is now a joint undertaking of the husband and the wife. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal partnership, the other spouse may assume sole powers of administration. However, the power of administration does not include the power to dispose or encumber property belonging to the conjugal partnership.[36] In all instances, the present law specifically requires the written consent of the other spouse, or authority of the court for the disposition or encumbrance of conjugal partnership property without which, the disposition or encumbrance shall be void.[37] Inescapably, herein petitioners action for specific performance must fail. Even on the supposition that the parties only disposed of their respective shares in the property, the sale, assuming that it exists, is still void for as previously stated, the right of the husband or the wife to onehalf of the conjugal assets does not vest until the liquidation of the conjugal partnership. Nemo dat qui non habet. No one can give what he has not. WHEREFORE, the appealed Decision is hereby REVERSED and SET ASIDE. The complaint in Civil Case No. 90-106 of the Regional Trial Court of Makati is ordered DISMISSED. No pronouncement as to costs. SO ORDERED. Puno, (Chairman), Austria-Martinez, and Callejo, Sr., JJ., concur. Chico-Nazario, J., on leave.

THIRD DIVISION [G.R. No. 109355. October 29, 1999]

SERAFIN MODINA, petitioner vs. COURT OF APPEALS AND ERNESTO HONTARCIEGO, PAUL FIGUEROA, TEODORO HIPALLA AND RAMON CHIANG, MERLINDA CHIANG, respondents. DECISION PURISIMA, J.: At bar is a Petition for Review on Certiorari assailing the decision of the Court of Appeals in CA G.R. CV No. 26051 affirming the decision of the trial court in the case, entitled Serafin Modina vs Ernesto Hontarciego, Paulino Figueroa and Ramon Chiang vs Merlinda Plana Chiang, intervenors, which declared as void and inexistent the deed of definite sale dated December 17, 1975 as well as the Certificates of Title Nos. T-86912, T-86913, T-86914 in the name of Ramon Chiang. The facts that matter are as follows: The parcels of land in question are those under the name of Ramon Chiang (hereinafter referred to as CHIANG ) covered by TCT Nos. T-86912, T-86913, and T-86914. He theorized that subject properties were sold to him by his wife, Merlinda Plana Chiang (hereinafter referred to as MERLINDA), as evidenced by a Deed of Absolute Sale dated December 17, 1975,[1] and were subsequently sold by CHIANG to the petitioner Serafin Modina (MODINA), as shown by the Deeds of Sale, dated August 3, 1979 and August 24, 1979, respectively. MODINA brought a Complaint for Recovery of Possession with Damages against the private respondents, Ernesto Hontarciego, Paul Figueroa and Teodoro Hipalla, docketed as Civil Case No. 13935 before the Regional Trial Court of Iloilo City. Upon learning the institution of the said case, MERLINDA presented a Complaint-in-intervention, seeking the declaration of nullity of the Deed of Sale between her husband and MODINA on the ground that the titles of the parcels of land in dispute were never legally transferred to her husband. Fraudulent acts were allegedly employed by him to obtain a Torrens Title in his favor. However, she confirmed the validity of the lease contracts with the other private respondents. MERLINDA also admitted that the said parcels of land were those ordered sold by Branch 2 of the then Court of First Instance of Iloilo in Special Proceeding No. 2469 in Intestate Estate of Nelson Plana where she was appointed as the administratix, being the widow of the deceased, her first husband. An Authority to Sell was issued by the said Probate Court for the sale of the same properties.[2] After due hearing, the Trial Court decided in favor of MERLINDA, disposing thus: WHEREFORE, judgment is hereby rendered (1) declaring as void and inexistent the sale of Lots 10063, 10088, 10085 and 10089 of the Cadastral Survey of Sta. Barbara by Merlinda Plana in favor of Ramon Chiang as evidenced by the deed of definite sale dated December 17, 1975 (Exhibits H; 3-Chiang; 9 Intervenor) as well as the Certificates of Title Nos. T-86912, T-86913, T-86914 and T86915 in the name of Ramon Chiang; (2) declaring as void and inexistent the sale of the same properties by Ramon Chiang in favor of Serafin Modina as evidenced by the deeds of sale (Exhibits A, B, 6 Chiang and 7 Chiang) dated August 3, and 24, 1979, as well as. Certificates of Title

Nos. T-102631, 102630, 102632 and 102890 in the name of Serafin Modina; (3) ordering the Register of Deeds of Iloilo to cancel said certificates of title in the names of Ramon Chiang and Serafin Modina and to reinstate the Certificates of Title Nos. T-57960, T-57962, T-57963 and T-57864 in the name of Nelson Plana; (4) ordering Serafin Modina to vacate and restore possession of the lots in question to Merlinda Plana Chiang; (5) ordering Ramon Chiang to restitute and pay to Serafin Modina the sum of P145,800.00 and; (6) ordering Serafin Modina to pay Ernesto Hontarciego the sum of P44,500.00 as actual and compensatory damages plus the sum of P5,000.00, for and as attorneys fees, with costs in favor of said defendants against the plaintiff. On appeal, the Court of Appeals affirmed the aforesaid decision in toto. Dissatisfied therewith, petitioner found his way to this Court via the present Petition for Review under Rule 45 seeking to set aside the assailed decision of the Court of Appeals. Raised for resolution here are: (1) whether the sale of subject lots should be nullified, (2) whether petitioner was not a purchaser in good faith, (3) whether the decision of the trial court was tainted with excess of jurisdiction; and (4) whether or not only three-fourths of subject lots should be returned to the private respondent. Anent the first issue, petitioner theorizes that the sale in question is null and void for being violative of Article 1490[3] of the New Civil Code prohibiting sales between spouses. Consequently, what is applicable is Article 1412[4] supra on the principle of in pari delicto, which leaves both guilty parties where they are, and keeps undisturbed the rights of third persons to whom the lots involved were sold; petitioner stressed. Petitioner anchors his submission on the following statements of the Trial Court which the Court of Appeals upheld, to wit: Furthermore, under Art. 1490, husband and wife are prohibited to sell properties to each other. And where, as in this case, the sale is inexistent for lack of consideration, the principle of in pari delicto non oritur actio does not apply. (Vasquez vs Porta, 98 Phil 490). (Emphasis ours) Thus, Art. 1490 provides: Art. 1490. The husband and the wife cannot sell property to each other, except: (1) when a separation of property was agreed upon in the marriage settlements; or (2) when there has been a judicial separation of property under Art. 191. The exception to the rule laid down in Art. 1490 of the New Civil Code not having existed with respect to the property relations of Ramon Chiang and Merlinda Plana Chiang, the sale by the latter in favor of the former of the properties in question is invalid for being prohibited by law. Not being the owner of subject properties, Ramon Chiang could not have validly sold the same to plaintiff Serafin Modina. The sale by Ramon Chiang in favor of Serafin Modina is, likewise, void and inexistent. xxx xxx xxx[5]

The Court of Appeals, on the other hand, adopted the following findings a quo: that there is no sufficient evidence establishing fault on the part of MERLINDA, and therefore, the principle of in pari delicto is inapplicable and the sale was void for want of consideration. In effect, MERLINDA can recover the lots sold by her husband to petitioner MODINA. However, the Court of Appeals ruled that the sale was void for violating Article 1490 of the Civil Code, which prohibits sales between spouses.

The principle of in pari delicto non oritur actio[6] 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.[7] When two persons are 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.[8] In the petition under consideration, the Trial Court found that subject Deed of Sale was a nullity for lack of any consideration.[9] This finding duly supported by evidence was affirmed by the Court of Appeals. Well-settled is the rule that this Court will not disturb such finding absent any evidence to the contrary.[10] Under Article 1409[11] of the New Civil Code, enumerating void contracts, a contract without consideration is one such void contract. One of the characteristics of a void or inexistent contract is that it produces no effect. So also, inexistent contracts can be invoked by any person whenever juridical effects founded thereon are asserted against him. A transferor can recover the object of such contract by accion reivindicatoria and any possessor may refuse to deliver it to the transferee, who cannot enforce the transfer.[12] Thus, petitioners insistence that MERLINDA cannot attack subject contract of sale as she was a guilty party thereto is equally unavailing. But the pivot of inquiry here is whether MERLINDA is barred by the principle of in pari delicto from questioning subject Deed of Sale. It bears emphasizing that as the contracts under controversy are inexistent contracts within legal contemplation, Articles 1411 and 1412 of the New Civil Code are inapplicable. In pari delicto doctrine applies only to contracts with illegal consideration or subject matter, whether the attendant facts constitute an offense or misdemeanor or whether the consideration involved is merely rendered illegal.[13] The statement below that it is likewise null and void for being violative of Article 1490 should just be treated as a surplusage or an obiter dictum on the part of the Trial Court as the issue of whether the parcels of land in dispute are conjugal in nature or they fall under the exceptions provided for by law, was neither raised nor litigated upon before the lower Court. Whether the said lots were ganancial properties was never brought to the fore by the parties and it is too late to do so now. Futhermore, if this line of argument be followed, the Trial Court could not have declared subject contract as null and void because only the heirs and the creditors can question its nullity and not the spouses themselves who executed the contract with full knowledge of the prohibition.[14] Records show that in the complaint-in-intervention of MERLINDA, she did not aver the same as a ground to nullify subject Deed of Sale. In fact, she denied the existence of the Deed of Sale in favor of her husband. In the said Complaint, her allegations referred to the want of consideration of such Deed of Sale. She did not put up the defense under Article 1490, to nullify her sale to her husband CHIANG because such a defense would be inconsistent with her claim that the same sale was inexistent. The Trial Court debunked petitioners theory that MERLINDA intentionally gave away the bulk of her and her late husbands estate to defendant CHIANG as his exclusive property, for want of evidentiary anchor. They insist on the Deed of Sale wherein MERLINDA made the misrepresentation that she was a widow and CHIANG was single, when at the time of execution thereof, they were in fact already married. Petitioner insists that this document conclusively established bad faith on the part of MERLINDA and therefore, the principle of in pari delicto should have been applied. These issues are factual in nature and it is not for this Court to appreciate and evaluate the pieces of evidence introduced below. An appellate court defers to the factual findings of the Trial

Court, unless petitioner can show a glaring mistake in the appreciation of relevant evidence. Since one of the characteristics of a void or inexistent contract is that it does not produce any effect, MERLINDA can recover the property from petitioner who never acquired title thereover. As to the second issue, petitioner stresses that his title should have been respected since he is a purchaser in good faith and for value. The Court of Appeals, however, opined that he (petitioner) is not a purchaser in good faith. It found that there were circumstances known to MODINA which rendered their transaction fraudulent under the attendant circumstances. As a general rule, in a sale under the Torrens system, a void title cannot give rise to a valid title. The exception is when the sale of a person with a void title is to a third person who purchased it for value and in good faith. A purchaser in good faith is one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price at the time of the purchase or before he has notice of the claim or interest of some other person in the property. In the case under scrutiny, petitioner cannot claim that he was a purchaser in good faith. There are circumstances which are indicia of bad faith on his part, to wit: (1) He asked his nephew, Placido Matta, to investigate the origin of the property and the latter learned that the same formed part of the properties of MERLINDAs first husband; (2) that the said sale was between the spouses; (3) that when the property was inspected, MODINA met all the lessees who informed that subject lands belong to MERLINDA and they had no knowledge that the same lots were sold to the husband. It is a well-settled rule that a purchaser cannot close his eyes to facts which would put a reasonable man upon his guard to make the necessary inquiries, and then claim that he acted in good faith. His mere refusal to believe that such defect exists, or his wilful closing of his eyes to the possibility of the existence of a defect in his vendors title, will not make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation.[15] Thus, petitioner cannot claim that the sale between him and MODINA falls under the exception provided for by law. With regard to the third issue posed by petitioner - whether the Trial Courts decision allowing recovery on the part of Merlinda Chiang of subject properties was void - petitioners contention is untennable. It is theorized that as the sale by MERLINDA was by virtue of an Order to Sell issued in the Intestate Estate Proceedings of her late husband, Nelson Plana - to allow recovery will defeat the said order of the Probate Court. Petitioner equated the aforesaid Order to Sell as a judgment, which another court in a regular proceeding has no jurisdiction to reverse. Petitioner is under the mistaken impression that as the Order to Sell had become a judgment in itself as to the validity of the sale of the properties involved, any question as to its nullity should have been brought before the Court of Appeals on appeal when the said Order was issued. It is a well-settled rule that a Court of First Instance (now Regional Trial Court) has jurisdiction over a case brought to rescind a sale made upon prior authority of a Probate Court. This does not constitute an interference or review of the order of a co-equal Court since the Probate Court has no jurisdiction over the question of title to subject properties. Consequently, a separate action may be brought to determine the question of ownership.[16] Lastly, on the issue of whether only three-fourths of the property in question should have been returned to MERLINDA, petitioners stance is equally unsustainable. It is a settled doctrine that an issue which was neither averred in the Complaint nor raised during the trial before the lower court

cannot be raised for the first time on appeal, as such a recourse would be offensive to the basic rules of fair play, justice, and due process.[17] The issue of whether only three-fourths of subject property will be returned was never an issue before the lower court and therefore, the petitioner cannot do it now. A final word. In a Petition for Review, only questions of law may be raised. It is perceived by the Court that what petitioner is trying to, albeit subtly, is for the Court to examine the probative value or evidentiary weight of the evidence presented below[18] The Court cannot do that unless the appreciation of the pieces of evidence on hand is glaringly erroneous. But this is where petitioner utterly failed. WHEREFORE, the Petition is DENIED and the decision of the Court of Appeals, dated September 30, 1992, in CA-G.R. CV No. 26051 AFFIRMED. No pronouncement as to costs. SO ORDERED. Melo, (Chairman), and Gonzaga Reyes, JJ., concur. Vitug, and Panganiban, JJ., in the result.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-57499 June 22, 1984 MERCEDES CALIMLIM- CANULLAS, petitioner, vs. HON. WILLELMO FORTUN, Judge, Court of First instance of Pangasinan, Branch I, and CORAZON DAGUINES, respondents. Fernandez Law Offices for petitioner. Francisco Pulido for respondents.

MELENCIO-HERRERA, J.: Petition for Review on certiorari assailing the Decision, dated October 6, 1980, and the Resolution on the Motion for Reconsideration, dated November 27, 1980, of the then Court of First Instance of Pangasinan, Branch I, in Civil Case No. 15620 entitled "Corazon DAGUINES vs. MERCEDES Calimlim-Canullas," upholding the sale of a parcel of land in favor of DAGUINES but not of the conjugal house thereon' The background facts may be summarized as follows: Petitioner MERCEDES Calimlim-Canullas and FERNANDO Canullas were married on December 19, 1962. They begot five children. They lived in a small house on the residential land in question with an area of approximately 891 square meters, located at Bacabac, Bugallon, Pangasinan. After FERNANDO's father died in 1965, FERNANDO inherited the land. In 1978, FERNANDO abandoned his family and was living with private respondent Corazon DAGUINES. During the pendency of this appeal, they were convicted of concubinage in a judgment rendered on October 27, 1981 by the then Court of First Instance of Pangasinan, Branch II, which judgment has become final. On April 15, 1980, FERNANDO sold the subject property with the house thereon to DAGUINES for the sum of P2,000.00. In the document of sale, FERNANDO described the house as "also inherited by me from my deceased parents." Unable to take possession of the lot and house, DAGUINES initiated a complaint on June 19, 1980 for quieting of title and damages against MERCEDES. The latter resisted and claimed that the house in dispute where she and her children were residing, including the coconut trees on the land, were built and planted with conjugal funds and through her industry; that the sale of the land together with the house and improvements to DAGUINES was null and void because they are conjugal properties and she had not given her consent to the sale, In its original judgment, respondent Court principally declared DAGUINES "as the lawful owner of the land in question as well as the one-half () of the house erected on said land." Upon reconsideration prayed for by MERCEDES, however, respondent Court resolved: WHEREFORE, the dispositive portion of the Decision of this Court, promulgated on October 6, 1980, is hereby amended to read as follows:

(1) Declaring plaintiff as the true and lawful owner of the land in question and the 10 coconut trees; (2) Declaring as null and void the sale of the conjugal house to plaintiff on April 15, 1980 (Exhibit A) including the 3 coconut trees and other crops planted during the conjugal relation between Fernando Canullas (vendor) and his legitimate wife, herein defendant Mercedes Calimlim- Canullas; xxx xxx xxx The issues posed for resolution are (1) whether or not the construction of a conjugal house on the exclusive property of the husband ipso facto gave the land the character of conjugal property; and (2) whether or not the sale of the lot together with the house and improvements thereon was valid under the circumstances surrounding the transaction. The determination of the first issue revolves around the interpretation to be given to the second paragraph of Article 158 of the Civil Code, which reads: xxx xxx xxx Buildings constructed at the expense of the partnership during the marriage on land belonging to one of the spouses also pertain to the partnership, but the value of the land shall be reimbursed to the spouse who owns the same. We hold that pursuant to the foregoing provision both the land and the building belong to the conjugal partnership but the conjugal partnership is indebted to the husband for the value of the land. The spouse owning the lot becomes a creditor of the conjugal partnership for the value of the lot, 1 which value would be reimbursed at the liquidation of the conjugal partnership. 2 In his commentary on the corresponding provision in the Spanish Civil Code (Art. 1404), Manresa stated: El articulo cambia la doctrine; los edificios construidos durante el matrimonio en suelo propio de uno de los conjuges son gananciales, abonandose el valor del suelo al conj uge a quien pertenezca. It is true that in the case of Maramba vs. Lozano, 3 relied upon by respondent Judge, it was held that the land belonging to one of the spouses, upon which the spouses have built a house, becomes conjugal property only when the conjugal partnership is liquidated and indemnity paid to the owner of the land. We believe that the better rule is that enunciated by Mr. Justice J.B.L. Reyes in Padilla vs. Paterno, 3 SCRA 678, 691 (1961), where the following was explained: As to the above properties, their conversion from paraphernal to conjugal assets should be deemed to retroact to the time the conjugal buildings were first constructed thereon or at the very latest, to the time immediately before the death of Narciso A. Padilla that ended the conjugal partnership. They can not be considered to have become conjugal property only as of the time their values were paid to the estate of the widow Concepcion Paterno because by that time the conjugal partnership no longer existed and it could not acquire the ownership of said properties. The acquisition by the partnership of these properties was, under the 1943 decision, subject to the suspensive condition that their values would be reimbursed to the widow at the liquidation of the conjugal partnership; once paid, the effects of the fulfillment of the condition should be deemed to retroact to the date the obligation was constituted (Art. 1187, New Civil Code) ... The foregoing premises considered, it follows that FERNANDO could not have alienated the house and lot to DAGUINES since MERCEDES had not given her consent to said sale. 4

Anent the second issue, we find that the contract of sale was null and void for being contrary to morals and public policy. The sale was made by a husband in favor of a concubine after he had abandoned his family and left the conjugal home where his wife and children lived and from whence they derived their support. That sale was subversive of the stability of the family, a basic social institution which public policy cherishes and protects. 5 Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purpose is contrary to law, morals, good customs, public order, or public policy are void and inexistent from the very beginning. Article 1352 also provides that: "Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order, or public policy." Additionally, the law emphatically prohibits the spouses from selling property to each other subject to certain exceptions. 6 Similarly, donations between spouses during marriage are prohibited. 7 And this is so because if transfers or con conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to prevent the exercise of undue influence by one spouse over the other, 8 as well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, "the condition of those who incurred guilt would turn out to be better than those in legal union." Those provisions are dictated by public interest and their criterion must be imposed upon the wig of the parties. That was the ruling in Buenaventura vs. Bautista, also penned by Justice JBL Reyes (CA) 50 O.G. 3679, and cited in Matabuena vs. Cervantes. 9 We quote hereunder the pertinent dissertation on this point: We reach a different conclusion. While Art. 133 of the Civil Code considers as void a donation between the spouses during the marriage, policy considerations of the most exigent character as wen as the dictates of morality require that the same prohibition should apply to a common-law relationship. As announced in the outset of this opinion, a 1954 Court of Appeals decision, Buenaventura vs. Bautista, 50 OG 3679, interpreting a similar provision of the old Civil Code speaks unequivocally. If the policy of the law is, in the language of the opinion of the then Justice J.B.L. Reyes of that Court, 'to prohibit donations in favor of the other consort and his descendants because of fear of undue influence and improper pressure upon the donor, a prejudice deeply rooted in our ancient law, ..., then there is every reason to apply the same prohibitive policy to persons living together as husband and wife without benefit of nuptials. For it is not to be doubted that assent to such irregular connection for thirty years bespeaks greater influence of one party over the other, so that the danger that the law seeks to avoid is correspondingly increased'. Moreover, as pointed out by Ulpian (in his lib 32 ad Sabinum, fr. 1), "It would not be just that such donations should subsist, lest the conditions of those who incurred guilt should turn out to be better." So long as marriage remains the cornerstone of our family law, reason and morality alike demand that the disabilities attached to marriage should likewise attach to concubinage (Emphasis supplied), WHEREFORE, the Decision of respondent Judge, dated October 6, 1980, and his Resolution of November 27, 1980 on petitioner's Motion for Reconsideration, are hereby set aside and the sale of the lot, house and improvements in question, is hereby declared null and void. No costs. SO ORDERED. Teehankee (Chairman), Plana, Relova, Gutierrez, Jr., and De la Fuente, JJ., concur.

FIRST DIVISION [G.R. No. 120122. November 6, 1997]

GLORIA R. CRUZ, petitioner, vs. COURT OF APPEALS, ROMY V. SUZARA and MANUEL R. VIZCONDE, respondents. DECISION BELLOSILLO, J.: A woman spurned and beguiled now whines - a costly odyssey in relations extra legem. Gloria R. Cruz was the owner of Lot 10, Blk. 565, PSD-38911, with an area of 747.7 square meters, together with the improvements thereon, situated at 22 Bituan St., Bgy. Doa Imelda, Quezon City, covered by TCT No. 242553 in her name; in 1977 she and respondent Romeo V. Suzara lived together as husband and wife without benefit of marriage; in September 1982, solely out of love and affection for Suzara, she executed a deed of absolute sale over Lot 10 in favor of Suzara without any monetary consideration; thereafter, Suzara registered the document in his favor and used the property as collateral for a bank loan of P350,000.00; he however failed to pay the loan so that after four (4) years the mortgage was foreclosed. She paid the bank P40,638.88 to restructure the loan resulting in the extension of the redemption period to two (2) years. However, without her knowledge and before the expiration of the extended period, Suzara redeemed the property. She tried to talk to him but he avoided her. Finally, to protect her interest, she executed an Affidavit of Adverse Claim which she filed with the Register the Deeds of Quezon City asserting that her sale in favor of Suzara was null and void for lack of consideration and being contrary to law and public policy. On 22 February 1990 she filed a complaint with the Regional Trial Court of Manila against respondent Suzara for quieting of title, declaration of nullity of documents and damages with prayer for writ of preliminary injunction. Denying petitioner's claim, respondent Suzara claimed that he was already the registered owner of the property as evidenced by TCT No. 295388, having acquired the same from petitioner through a notarized deed of absolute sale; the sale was for a valuable consideration and not tainted with fraud nor executed under duress; and, petitioner was estopped from impugning the validity of the sale and questioning his title over the property. On 22 March 1990 the trial court issued a temporary restraining order enjoining private respondent, his agents and/or any person or persons acting in his behalf, from disposing and/or encumbering the litigated property until further orders. On 3 April 1990 petitioner filed an ex parte motion to admit her amended complaint impleading respondent Manuel R. Vizconde as additional defendant and praying that the Register of Deeds of Quezon City be ordered to annotate her notice of lis pendens on respondent Suzaras title. Favorably resolving her motion, the trial court admitted her amended complaint and ordered the Register of Deeds to show cause why it was refusing to annotate the notice of lis pendens filed by her. On 22 May 1990 the Register of Deeds filed a manifestation informing the trial court that the property had been sold by respondent Suzara to his co-respondent Vizconde who was already the registered owner thereof and since Vizconde was not impleaded in the case the notice of lis pendens could not be annotated on his title until the requirements of law were met and the annotation of the notice judicially ordered. As stated in the immediately preceding paragraph, the motion to admit

amended complaint impleading respondent Vizconde was filed ex parte on 3 April 1990.[1] On 24 September 1990, responding to the amended complaint, Vizconde answered that there was no privity of contract between him and petitioner; he (Vizconde) was a purchaser for value in good faith; the sale between him and Suzara was executed on 22 December 1989 or long before the execution of the Affidavit of Adverse Claim; and, the action was barred by laches, estoppel and prescription. On 24 May 1993 the trial court rendered a decision dismissing the complaint and the counterclaims as well as the cross claim of respondent Vizconde. It ruled that the sale between petitioner and respondent Suzara was valid with "love, affection and accommodation" being the consideration for the sale. It also found Vizconde an innocent purchaser for value because at the time he purchased the property he was unaware of the adverse claim of petitioner.[2] On appeal, the Court of Appeals affirmed the judgment of the court a quo.[3] Petitioner now comes to us for review on certiorari seeking to reverse and set aside the decision of the Court of Appeals and that of the trial court. She contends that the lower courts erred in holding that the sale between her and Suzara was valid; that she had no legal personality to question the legality of the sale in his favor, and, respondent Vizconde was an innocent purchaser for value in good faith. Petitioner insists that there being a factual finding by the trial court and the Court of Appeals that she and respondent Suzara were common-law husband and wife, the sale between them was void and inexistent, citing Art. 1490 of the Civil Code. She argues that the consideration of "love, affection and accommodation" for the sale was not a valid cause for the conveyance of the property as there was no price paid in money or its equivalent, and since her sale to Suzara was null and void the issue of its illegality cannot be waived or ratified; resultantly, the sale by Suzara to his co-respondent Vizconde must also be declared null and void the latter being a purchaser in bad faith. Petitioner also contends that although she filed her adverse claim on 22 January 1990 or after the execution of the deed of sale between the private respondents on 22 December 1989, the sale was nevertheless nullified when it was substituted by a second deed of sale dated 5 February 1990, registered 6 March 1990, to avoid payment of fines and penalties for late registration. We cannot sustain petitioner. Although under Art. 1490 the husband and wife cannot sell property to one another as a rule which, for policy consideration and the dictates of morality require that the prohibition apply to common-law relationships,[4] petitioner can no longer seek reconveyance of the property to her as it has already been acquired by respondent Vizconde in good faith and for value from her own transferee. The real purpose of the Torrens system of registration is to quiet title to land and to put a stop to any question of legality of the title except claims which have been recorded in the certificate of title at the time of registration or which may arise subsequent thereto.[5] Every registered owner and every subsequent purchaser for value in good faith holds the title to the property free from all encumbrances except those noted in the certificate. Hence, a purchaser is not required to explore further what the Torrens title on its face indicates in quest for any hidden defect or inchoate right that may subsequently defeat his right thereto.[6] Where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the property the court cannot disregard such rights and order the total cancellation of the certificate.[7] The effect of such an outright cancellation would be to impair public confidence in the certificate of title, for everyone dealing with property registered under the Torrens system would

have to inquire in every instance whether the title has been regularly or irregularly issued. This is contrary to the evident purpose of the law.[8] Every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go behind the certificate to determine the condition of the property.[9] Even if a decree in a registration proceeding is infected with nullity, still an innocent purchaser for value relying on a Torrens title issued in pursuance thereof is protected. A purchaser in good faith is one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim of another person. Both lower courts found that at the time respondent Suzara executed the deed of absolute sale on 22 December 1989 in favor of respondent Vizconde, which was acknowledged before a notary public, Suzara was the registered owner appearing in the certificate of title. When the sale was executed, nothing was annotated in the certificate to indicate any adverse claim of a third person or the fact that the property was the subject of a pending litigation. It was only on 22 January 1990, after the sale to respondent Vizconde, that petitioner filed her adverse claim with the Register of Deeds. Based on this factual backdrop, which we consider binding upon this Court, there is no doubt that respondent Vizconde was a purchaser for value in good faith and that when he bought the property he had no knowledge that some other person had a right to or an adverse interest in the property. As the Court of Appeals observed, Vizconde paid a full and fair price for the property at the time of the purchase and before he had any notice of petitioner's claim or interest in the property. For purposes of resolving the present controversy, the allegation that there was a second deed of sale executed solely for the purpose of evading the penalties resulting from late payment of taxes and registration is immaterial. The fact is, petitioner herself admits that the actual sale of the property occurred on 22 December 1989. A contract of sale is consensual and is perfected once agreement is reached between the parties on the subject matter and the consideration therefor. We cannot grant petitioner's prayer to have respondent Vizconde's certificate of title declared null and void. Neither can we order the reconveyance of the property to petitioner. Vizconde being a purchaser of registered land for value in good faith holds an indefeasible title to the land. This is without prejudice however to any appropriate remedy petitioner may take against her erstwhile common-law husband, respondent Suzara. WHEREFORE, the petition is DENIED. The decision of the Court of Appeals affirming that of the trial court is AFFIRMED. Costs against petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 158907 February 12, 2007

EDUARDO B. OLAGUER, Petitioner, vs. EMILIO PURUGGANAN, JR. AND RAUL LOCSIN, Respondents. DECISION CHICO-NAZARIO, J.: This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the Decision,1 dated 30 June 2003, promulgated by the Court of Appeals, affirming the Decision of the Regional Trial Court, dated 26 July 1995, dismissing the petitioners suit. The parties presented conflicting accounts of the facts. EDUARDO B. OLAGUERS VERSION Petitioner Eduardo B. Olaguer alleges that he was the owner of 60,000 shares of stock of Businessday Corporation (Businessday) with a total par value of P600,000.00, with Certificates of Stock No. 005, No. 028, No. 034, No. 070, and No. 100.2 At the time he was employed with the corporation as Executive Vice-President of Businessday, and President of Businessday Information Systems and Services and of Businessday Marketing Corporation, petitioner, together with respondent Raul Locsin (Locsin) and Enrique Joaquin (Joaquin), was active in the political opposition against the Marcos dictatorship.3 Anticipating the possibility that petitioner would be arrested and detained by the Marcos military, Locsin, Joaquin, and Hector Holifea had an unwritten agreement that, in the event that petitioner was arrested, they would support the petitioners family by the continued payment of his salary.4 Petitioner also executed a Special Power of Attorney (SPA), on 26 May 1979, appointing as his attorneys-in-fact Locsin, Joaquin and Hofilea for the purpose of selling or transferring petitioners shares of stock with Businessday. During the trial, petitioner testified that he agreed to execute the SPA in order to cancel his shares of stock, even before they are sold, for the purpose of concealing that he was a stockholder of Businessday, in the event of a military crackdown against the opposition.5 The parties acknowledged the SPA before respondent Emilio Purugganan, Jr., who was then the Corporate Secretary of Businessday, and at the same time, a notary public for Quezon City.6 On 24 December 1979, petitioner was arrested by the Marcos military by virtue of an Arrest, Search and Seizure Order and detained for allegedly committing arson. During the petitioners detention, respondent Locsin ordered fellow respondent Purugganan to cancel the petitioners shares in the books of the corporation and to transfer them to respondent Locsins name.7 As part of his scheme to defraud the petitioner, respondent Locsin sent Rebecca Fernando, an employee of Businessday, to Camp Crame where the petitioner was detained, to pretend to borrow Certificate of Stock No. 100 for the purpose of using it as additional collateral for Businessday s then outstanding loan with the National Investment and Development Corporation. When Fernando returned the borrowed stock certificate, the word "cancelled" was already written therein. When the petitioner became upset, Fernando explained that this was merely a mistake committed by respondent Locsins secretary.8

During the trial, petitioner also agreed to stipulate that from 1980 to 1982, Businessday made regular deposits, each amounting to P10,000.00, to the Metropolitan Bank and Trust Company accounts of Manuel and Genaro Pantig, petitioners in-laws. The deposits were made on every 15th and 30th of the month.9 Petitioner alleged that these funds consisted of his monthly salary, which Businessday agreed to continue paying after his arrest for the financial support of his family.10 After receiving a total of P600,000.00, the payments stopped. Thereafter, respondent Locsin and Fernando went to ask petitioner to endorse and deliver the rest of his stock certificates to respondent Locsin, but petitioner refused. 11 On 16 January 1986, petitioner was finally released from detention. He then discovered that he was no longer registered as stockholder of Businessday in its corporate books. He also learned that Purugganan, as the Corporate Secretary of Businessday, had already recorded the transfer of shares in favor of respondent Locsin, while petitioner was detained. When petitioner demanded that respondents restore to him full ownership of his shares of stock, they refused to do so. On 29 July 1986, petitioner filed a Complaint before the trial court against respondents Purugganan and Locsin to declare as illegal the sale of the shares of stock, to restore to the petitioner full ownership of the shares, and payment of damages.12 RESPONDENT RAUL LOCSINS VERSION In his version of the facts, respondent Locsin contended that petitioner approached him and requested him to sell, and, if necessary, buy petitioners shares of stock in Businessday, to assure support for petitioners family in the event that something should happen to him, particularly if he was jailed, exiled or forced to go underground.13 At the time petitioner was employed with Businessday, respondent Locsin was unaware that petitioner was part of a group, Light-a-Fire Movement, which actively sought the overthrow of the Marcos government through an armed struggle.14 He denied that he made any arrangements to continue paying the petitioners salary in the event of the latters imprisonment.15 When petitioner was detained, respondent Locsin tried to sell petitioners shares, but nobody wanted to buy them. Petitioners reputation as an oppositionist resulted in the poor financial condition of Businessday and discouraged any buyers for the shares of stock.16 In view of petitioners previous instructions, respondent Locsin decided to buy the shares himself.1awphi1.net Although the capital deficiency suffered by Businessday caused the book value of the shares to plummet below par value, respondent Locsin, nevertheless, bought the shares at par value.17 However, he had to borrow from Businessday the funds he used in purchasing the shares from petitioner, and had to pay the petitioner in installments of P10,000.00 every 15th and 30th of each month.18 The trial court in its Decision, dated 26 July 1995, dismissed the Complaint filed by the petitioner. It ruled that the sale of shares between petitioner and respondent Locsin was valid. The trial court concluded that petitioner had intended to sell the shares of stock to anyone, including respondent Locsin, in order to provide for the needs of his family should he be jailed or forced to go underground; and that the SPA drafted by the petitioner empowered respondent Locsin, and two other agents, to sell the shares for such price and under such terms and conditions that the agents may deem proper. It further found that petitioner consented to have respondent Locsin buy the shares himself. It also ruled that petitioner, through his wife, received from respondent Locsin the amount of P600,000.00 as payment for the shares of stock.19 The dispositive part of the trial courts Decision reads: WHEREFORE, for failure of the [herein petitioner] to prove by preponderance of evidence, his causes of action and of the facts alleged in his complaint, the instant suit is hereby ordered DISMISSED, without pronouncement as to costs.

[Herein respondents] counterclaims, however, are hereby DISMISSED, likewise, for dearth of substantial evidentiary support.20 On appeal, the Court of Appeals affirmed the Decision of the trial court that there was a perfected contract of sale.21 It further ruled that granting that there was no perfected contract of sale, petitioner, nevertheless, ratified the sale to respondent Locsin by his receipt of the purchase price, and his failure to raise any protest over the said sale.22 The Court of Appeals refused to credit the petitioners allegation that the money his wife received constituted his salary from Businessday since the amount he received as his salary, P24,000.00 per month, did not correspond to the amount he received during his detention, P20,000.00 per month (deposits of P10,000.00 on every 15th and 30th of each month in the accounts of the petitioners in-laws). On the other hand, the total amount received, P600,000.00, corresponds to the aggregate par value of petitioners shares in Businessday. Moreover, the financial condition of Businessday prevented it from granting any form of financial assistance in favor of the petitioner, who was placed in an indefinite leave of absence, and, therefore, not entitled to any salary. 23 The Court of Appeals also ruled that although the manner of the cancellation of the petitioners certificates of stock and the subsequent issuance of the new certificate of stock in favor of respondent Locsin was irregular, this irregularity will not relieve petitioner of the consequences of a consummated sale.24 Finally, the Court of Appeals affirmed the Decision of the trial court disallowing respondent Locsins claims for moral and exemplary damages due to lack of supporting evidence.25 Hence, the present petition, where the following issues were raised: I. THE APPELLATE COURT ERRED IN RULING THAT THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN PETITIONER AND MR. LOCSIN OVER THE SHARES; II. THE APPELLATE COURT ERRED IN RULING THAT PETITIONER CONSENTED TO THE ALLEGED SALE OF THE SHARES TO MR. LOCSIN; III. THE APPELLATE COURT ERRED IN RULING THAT THE AMOUNTS RECEIVED BY PETITIONERS IN LAWS WERE NOT PETITIONERS SALARY FROM THE CORPORATION BUT INSTALLMENT PAYMENTS FOR THE SHARES; IV. THE APPELLATE COURT ERRED IN RULING THAT MR. LOCSIN WAS THE PARTY TO THE ALLEGED SALE OF THE SHARES AND NOT THE CORPORATION; AND V. THE APPELLATE COURT ERRED IN RULING THAT THE ALLEGED SALE OF THE SHARES WAS VALID ALTHOUGH THE CANCELLATION OF THE SHARES WAS IRREGULAR.26

The petition is without merit. The first issue that the petitioner raised is that there was no valid sale since respondent Locsin exceeded his authority under the SPA27 issued in his, Joaquin and Holifenas favor. He alleged that the authority of the afore-named agents to sell the shares of stock was limited to the following conditions: (1) in the event of the petitioners absence and incapacity; and (2) for the limited purpose of applying the proceeds of the sale to the satisfaction of petitioners subsisting obligations with the companies adverted to in the SPA.28 Petitioner sought to impose a strict construction of the SPA by limiting the definition of the word "absence" to a condition wherein "a person disappears from his domicile, his whereabouts being unknown, without leaving an agent to administer his property,"29 citing Article 381 of the Civil Code, the entire provision hereunder quoted: ART 381. When a person disappears from his domicile, his whereabouts being unknown, and without leaving an agent to administer his property, the judge, at the instance of an interested party, a relative, or a friend, may appoint a person to represent him in all that may be necessary. This same rule shall be observed when under similar circumstances the power conferred by the absentee has expired. Petitioner also puts forward that the word "incapacity" would be limited to mean "minority, insanity, imbecility, the state of being deaf-mute, prodigality and civil interdiction."30 He cites Article 38 of the Civil Code, in support of this definition, which is hereunder quoted: ART. 38 Minority, insanity or imbecility, the state of being a deaf-mute, prodigality and civil interdiction are mere restrictions on capacity to act, and do not exempt the incapacitated person, from certain obligations, as when the latter arise from his acts or from property relations, such as easements. Petitioner, thus, claims that his arrest and subsequent detention are not among the instances covered by the terms "absence or incapacity," as provided under the SPA he executed in favor of respondent Locsin. Petitioners arguments are unpersuasive. It is a general rule that a power of attorney must be strictly construed; the instrument will be held to grant only those powers that are specified, and the agent may neither go beyond nor deviate from the power of attorney. However, the rule is not absolute and should not be applied to the extent of destroying the very purpose of the power. If the language will permit, the construction that should be adopted is that which will carry out instead of defeat the purpose of the appointment. Clauses in a power of attorney that are repugnant to each other should be reconciled so as to give effect to the instrument in accordance with its general intent or predominant purpose. Furthermore, the instrument should always be deemed to give such powers as essential or usual in effectuating the express powers.31 In the present case, limiting the definitions of "absence" to that provided under Article 381 of the Civil Code and of "incapacity" under Article 38 of the same Code negates the effect of the power of attorney by creating absurd, if not impossible, legal situations. Article 381 provides the necessarily stringent standards that would justify the appointment of a representative by a judge. Among the standards the said article enumerates is that no agent has been appointed to administer the property. In the present case, petitioner himself had already authorized agents to do specific acts of administration and thus, no longer necessitated the appointment of one by the court. Likewise, limiting the construction of "incapacity" to "minority, insanity, imbecility, the state of being a deaf-mute, prodigality and civil interdiction," as provided under Article 38, would render the SPA ineffective.

Article 1919(3) of the Civil Code provides that the death, civil interdiction, insanity or insolvency of the principal or of the agent extinguishes the agency. It would be equally incongruous, if not outright impossible, for the petitioner to require himself to qualify as a minor, an imbecile, a deaf-mute, or a prodigal before the SPA becomes operative. In such cases, not only would he be prevented from appointing an agent, he himself would be unable to administer his property. On the other hand, defining the terms "absence" and "incapacity" by their everyday usage makes for a reasonable construction, that is, "the state of not being present" and the "inability to act," given the context that the SPA authorizes the agents to attend stockholders meetings and vote in behalf of petitioner, to sell the shares of stock, and other related acts. This construction covers the situation wherein petitioner was arrested and detained. This much is admitted by petitioner in his testimony.32 Petitioners contention that the shares may only be sold for the sole purpose of applying the proceeds of the sale to the satisfaction of petitioners subsisting obligations to the company is far-fetched. The construction, which will carry out the purpose, is that which should be applied. Petitioner had not submitted evidence that he was in debt with Businessday at the time he had executed the SPA. Nor could he have considered incurring any debts since he admitted that, at the time of its execution, he was concerned about his possible arrest, death and disappearance. The language of the SPA clearly enumerates, as among those acts that the agents were authorized to do, the act of applying the proceeds of the sale of the shares to any obligations petitioner might have against the Businessday group of companies. This interpretation is supported by the use of the word "and" in enumerating the authorized acts, instead of phrases such as "only for," "for the purpose of," "in order to" or any similar terms to indicate that the petitioner intended that the SPA be used only for a limited purpose, that of paying any liabilities with the Businessday group of companies. Secondly, petitioner argued that the records failed to show that he gave his consent to the sale of the shares to respondent Locsin for the price of P600,000.00. This argument is unsustainable. Petitioner received from respondent Locsin, through his wife and in-laws, the installment payments for a total of P600,000.00 from 1980 to 1982, without any protest or complaint. It was only four years after 1982 when petitioner demanded the return of the shares. The petitioners claim that he did not instruct respondent Locsin to deposit the money to the bank accounts of his in-laws fails to prove that petitioner did not give his consent to the sale since respondent Locsin was authorized, under the SPA, to negotiate the terms and conditions of the sale including the manner of payment. Moreover, had respondent Locsin given the proceeds directly to the petitioner, as the latter suggested in this petition, the proceeds were likely to have been included among petitioners properties which were confiscated by the military. Instead, respondent Locsin deposited the money in the bank accounts of petitioners in-laws, and consequently, assured that the petitioners wife received these amounts. Article 1882 of the Civil Code provides that the limits of an agents authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him. In addition, petitioner made two inconsistent statements when he alleged that (1) respondent Locsin had not asked the petitioner to endorse and deliver the shares of stock, and (2) when Rebecca Fernando asked the petitioner to endorse and deliver the certificates of stock, but petitioner refused and even became upset.33 In either case, both statements only prove that petitioner refused to honor his part as seller of the shares, even after receiving payments from the buyer. Had the petitioner not known of or given his consent to the sale, he would have given back the payments as soon as Fernando asked him to endorse and deliver the certificates of stock, an incident which unequivocally confirmed that the funds he received, through his wife and his in-laws, were intended as payment for his shares of stocks. Instead, petitioner held on to the proceeds of the sale after it had been made clear to him that respondent Locsin had considered the P600,000.00 as payment for the shares, and asked petitioner, through Fernando, to endorse and deliver the stock certificates for cancellation.

As regards the third issue, petitioners allegation that the installment payments he was adjudged to have received for the shares were actually salaries which Businessday promised to pay him during his detention is unsupported and implausible. Petitioner received P20,000.00 per month through his in-laws; this amount does not correspond to his monthly salary at P24,000.00.34 Nor does the amount received correspond to the amount which Businessday was supposed to be obliged to pay petitioner, which was only P45,000.00 to P60,000.00 per annum.35 Secondly, the petitioners wife did not receive funds from respondent Locsin or Businessday for the entire duration of petitioners detention. Instead, when the total amount received by the petitioner reached the aggregate amount of his shares at par value -- P600,000.00 -- the payments stopped. Petitioner even testified that when respondent Locsin denied knowing the petitioner soon after his arrest, he believed respondent Locsins commitment to pay his salaries during his detention to be nothing more than lip-service.36 Granting that petitioner was able to prove his allegations, such an act of gratuity, on the part of Businessday in favor of petitioner, would be void. An arrangement whereby petitioner will receive "salaries" for work he will not perform, which is not a demandable debt since petitioner was on an extended leave of absence, constitutes a donation under Article 72637 of the Civil Code. Under Article 748 of the Civil Code, if the value of the personal property donated exceeds P5,000.00, the donation and the acceptance shall have to be made in writing. Otherwise, the donation will be void. In the present case, petitioner admitted in his testimony38 that such arrangement was not made in writing and, hence, is void. The fact that some of the deposit slips and communications made to petitioners wife contain the phrase "household expenses" does not disprove the sale of the shares. The money was being deposited to the bank accounts of the petitioners in-laws, and not to the account of the petitioner or his wife, precisely because some of his property had already been confiscated by the military. Had they used the phrase "sale of shares," it would have defeated the purpose of not using their own bank accounts, which was to conceal from the military any transaction involving the petitioners property. Petitioner raised as his fourth issue that granting that there was a sale, Businessday, and not respondent Locsin, was the party to the transaction. The curious facts that the payments were received on the 15th and 30th of each month and that the payor named in the checks was Businessday, were adequately explained by respondent Locsin. Respondent Locsin had obtained cash advances from the company, paid to him on the 15th and 30th of the month, so that he can pay petitioner for the shares. To support his claim, he presented Businessdays financial records and the testimony of Leo Atienza, the Companys Accounting Manager. When asked why the term "shares of stock" was used for the entries, instead of "cash advances," Atienza explained that the term "shares of stock" was more specific rather than the broader phrase "cash advances."39 More to the point, had the entries been for "shares of stock," the issuance of shares should have been reflected in the stock and transfer books of Businessday, which the petitioner presented as evidence. Instead the stock and transfer books reveal that the increase in respondent Locsins shares was a result of the cancellation and transfer of petitioners shares in favor of respondent Locsin. Petitioner alleges that the purported sale between himself and respondent Locsin of the disputed shares of stock is void since it contravenes Article 1491 of the Civil Code, which provides that: ART. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: xxxx (2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; x x x.

It is, indeed, a familiar and universally recognized doctrine that a person who undertakes to act as agent for another cannot be permitted to deal in the agency matter on his own account and for his own benefit without the consent of his principal, freely given, with full knowledge of every detail known to the agent which might affect the transaction.40 The prohibition against agents purchasing property in their hands for sale or management is, however, clearly, not absolute. It does not apply where the principal consents to the sale of the property in the hands of the agent or administrator.>41 In the present case, the parties have conflicting allegations. While respondent Locsin averred that petitioner had permitted him to purchase petitioners shares, petitioner vehemently denies having known of the transaction. However, records show that petitioners position is less credible than that taken by respondent Locsin given petitioners contemporaneous and subsequent acts.42 In 1980, when Fernando returned a stock certificate she borrowed from the petitioner, it was marked "cancelled." Although the petitioner alleged that he was furious when he saw the word cancelled, he had not demanded the issuance of a new certificate in his name. Instead of having been put on his guard, petitioner remained silent over this obvious red flag and continued receiving, through his wife, payments which totalled to the aggregate amount of the shares of stock valued at par. When the payments stopped, no demand was made by either petitioner or his wife for further payments. From the foregoing, it is clear that petitioner knew of the transaction, agreed to the purchase price of P600,000.00 for the shares of stock, and had in fact facilitated the implementation of the terms of the payment by providing respondent Locsin, through petitioners wife, with the information on the bank accounts of his in-laws. Petitioners wife and his son even provided receipts for the payments that were made to them by respondent Locsin,43 a practice that bespeaks of an onerous transaction and not an act of gratuity. Lastly, petitioner claims that the cancellation of the shares and the subsequent transfer thereof were fraudulent, and, therefore, illegal. In the present case, the shares were transferred in the name of the buyer, respondent Locsin, without the petitioner delivering to the buyer his certificates of stock. Section 63 of the Corporation Code provides that: Sec.63. Certificate of stock and transfer of shares. xxx Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred. (Emphasis provided.) The aforequoted provision furnishes the procedure for the transfer of shares the delivery of the endorsed certificates, in order to prevent the fraudulent transfer of shares of stock. However, this rule cannot be applied in the present case without causing the injustice sought to be avoided. As had been amply demonstrated, there was a valid sale of stocks. Petitioners failure to deliver the shares to their rightful buyer is a breach of his duty as a seller, which he cannot use to unjustly profit himself by denying the validity of such sale. Thus, while the manner of the cancellation of petitioners certificates of stock and the issuance of the new certificates in favor of respondent Locsin was highly irregular, we must, nonetheless, declare the validity of the sale between the parties. Neither does this irregularity prove that the transfer was fraudulent. In his testimony, petitioner admitted that they had intended to conceal his being a stockholder of Businessday.44 The cancellation of his name from the stock and transfer book, even before the shares were actually sold, had been done with his consent. As earlier explained, even the subsequent sale of the shares in favor of Locsin had been done with his consent. IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court AFFIRMS the assailed

Decision of the Court of Appeals, promulgated on 30 June 2003, affirming the validity of the sale of the shares of stock in favor of respondent Locsin. No costs. SO ORDERED. MINITA V. CHICO-NAZARIO Associate Justice

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. L-35702 May 29, 1973 DOMINGO D. RUBIAS, plaintiff-appellant, vs. ISAIAS BATILLER, defendant-appellee. Gregorio M. Rubias for plaintiff-appellant. Vicente R. Acsay for defendant-appellee.

TEEHANKEE, J.: In this appeal certified by the Court of Appeals to this Court as involving purely legal questions, we affirm the dismissal order rendered by the Iloilo court of first instance after pre-trial and submittal of the pertinent documentary exhibits. Such dismissal was proper, plaintiff having no cause of action, since it was duly established in the record that the application for registration of the land in question filed by Francisco Militante, plaintiff's vendor and predecessor interest, had been dismissed by decision of 1952 of the land registration court as affirmed by final judgment in 1958 of the Court of Appeals and hence, there was no title or right to the land that could be transmitted by the purported sale to plaintiff. As late as 1964, the Iloilo court of first instance had in another case of ejectment likewise upheld by final judgment defendant's "better right to possess the land in question . having been in the actual possession thereof under a claim of title many years before Francisco Militante sold the land to the plaintiff." Furthermore, even assuming that Militante had anything to sell, the deed of sale executed in 1956 by him in favor of plaintiff at a time when plaintiff was concededly his counsel of record in the land registration case involving the very land in dispute (ultimately decided adversely against Militante by the Court of Appeals' 1958 judgment affirming the lower court's dismissal of Militante's application for registration) was properly declared inexistent and void by the lower court, as decreed by Article 1409 in relation to Article 1491 of the Civil Code. The appellate court, in its resolution of certification of 25 July 1972, gave the following backgrounder of the appeal at bar: On August 31, 1964, plaintiff Domingo D. Rubias, a lawyer, filed a suit to recover the ownership and possession of certain portions of lot under Psu-99791 located in Barrio General Luna, Barotac Viejo, Iloilo which he bought from his father-in-law, Francisco Militante in 1956 against its present occupant defendant, Isaias Batiller, who illegally entered said portions of the lot on two occasions in 1945 and in 1959. Plaintiff prayed also for damages and attorneys fees. (pp. 1-7, Record on Appeal). In his answer with counter-claim defendant claims the complaint of the plaintiff does not state a cause of action, the truth of the matter being that he and his predecessors-in-interest have always been in actual, open and continuous possession since time immemorial under claim of ownership of the

portions of the lot in question and for the alleged malicious institution of the complaint he claims he has suffered moral damages in the amount of P 2,000.00, as well as the sum of P500.00 for attorney's fees. ... On December 9, 1964, the trial court issued a pre-trial order, after a pre-trial conference between the parties and their counsel which order reads as follows.. 'When this case was called for a pre-trial conference today, the plaintiff appeared assisted by himself and Atty. Gregorio M. Rubias. The defendant also appeared, assisted by his counsel Atty. Vicente R. Acsay. A. During the pre-trial conference, the parties have agreed that the following facts are attendant in this case and that they will no longer introduced any evidence, testimonial or documentary to prove them: 1. That Francisco Militante claimed ownership of a parcel of land located in the Barrio of General Luna, municipality of Barotac Viejo province of Iloilo, which he caused to be surveyed on July 18-31, 1934, whereby he was issued a plan Psu-99791 (Exhibit "B"). (The land claimed contained an area of 171:3561 hectares.) 2. Before the war with Japan, Francisco Militante filed with the Court of First Instance of Iloilo an application for the registration of the title of the land technically described in psu-99791 (Exh. "B") opposed by the Director of Lands, the Director of Forestry and other oppositors. However, during the war with Japan, the record of the case was lost before it was heard, so after the war Francisco Militante petitioned this court to reconstitute the record of the case. The record was reconstituted on the Court of the First Instance of Iloilo and docketed as Land Case No. R-695, GLRO Rec. No. 54852. The Court of First Instance heard the land registration case on November 14, 1952, and after the trial this court dismissed the application for registration. The appellant, Francisco Militante, appealed from the decision of this Court to the Court of Appeals where the case was docketed as CAGR No. 13497-R.. 3. Pending the disposal of the appeal in CA-GR No. 13497-R and more particularly on June 18, 1956, Francisco Militante sold to the plaintiff, Domingo Rubias the land technically described in psu-99791 (Exh. "A"). The sale was duly recorded in the Office of the Register of Deeds for the province of Iloilo as Entry No. 13609 on July 11, 1960 (Exh. "A-1"). (NOTE: As per deed of sale, Exh. A, what Militante purportedly sold to plaintiff-appellant, his son-inlaw, for the sum of P2,000.00 was "a parcel of untitled land having an area Of 144.9072 hectares ... surveyed under Psu 99791 ... (and) subject to the exclusions made by me, under (case) CA-i3497, Land Registration Case No. R-695, G.L.R.O. No. 54852, Court of First Instance of the province of Iloilo. These exclusions referred to portions of the original area of over 171 hectares originally claimed by Militante as applicant, but which he expressly recognized during the trial to pertain to some oppositors, such as the Bureau of Public Works and Bureau of Forestry and several other individual occupants and accordingly withdrew his application over the same. This is expressly made of record in Exh. A, which is the Court of Appeals' decision of 22 September 1958 confirming the land registration court's dismissal of Militante's application for registration.) 4. On September 22,1958 the Court of appeals in CA-G.R. No. 13497-R promulgated its judgment confirming the decision of this Court in Land Case No. R-695, GLRO Rec. No. 54852 which dismissed the application for Registration filed by Francisco Militante (Exh. "I"). 5. Domingo Rubias declared the land described in Exh. 'B' for taxation purposes under Tax Dec. No.

8585 (Exh. "C") for 1957; Tax Dec. Nos. 9533 (Exh. "C-1") and 10019 (Exh. "C-3")for the year 1961; Tax Dec. No. 9868 (Exh. "C-2") for the year 1964, paying the land taxes under Tax Dec. No. 8585 and 9533 (Exh. "D", "D-1", "G-6"). 6. Francisco Militante immediate predecessor-in-interest of the plaintiff, has also declared the land for taxation purposes under Tax Dec. No. 5172 in 1940 (Exh. "E") for 1945; under Tax Dec. No. T-86 (Exh. "E-1") for 1948; under Tax Dec. No. 7122 (Exh. "2"), and paid the land taxes for 1940 (Exhs. "G" and "G-7"), for 1945 46 (Exh. "G-1") for 1947 (Exh. "G-2"), for 1947 & 1948 (Exh. "G-3"), for 1948 (Exh. "G-4"), and for 1948 and 1949 (Exh. "G-5"). 7. Tax Declaration No. 2434 in the name of Liberato Demontao for the land described therein (Exh. "F") was cancelled by Tax. Dec. No. 5172 of Francisco Militante (Exh. "E"). Liberato Demontao paid the land tax under Tax Dec. No. 2434 on Dec. 20, 1939 for the years 1938 (50%) and 1959 (Exh. "H"). 8. The defendant had declared for taxation purposes Lot No. 2 of the Psu-155241 under Tax Dec. Not. 8583 for 1957 and a portion of Lot No. 2, Psu-155241, for 1945 under Tax Dec. No. 8584 (Exh. "2-A" Tax No. 8583 (Exh. "2") was revised by Tax Dec. No. 9498 in the name of the defendant (Exh. "2-B") and Tax Dec. No. 8584 (Exh. "2-A") was cancelled by Tax Dec. No. 9584 also in the name of the defendant (Exh. "2-C"). The defendant paid the land taxes for Lot 2, Psu-155241, on Nov. 9, 1960 for the years 1945 and 1946, for the year 1950, and for the year 1960 as shown by the certificate of the treasurer (Exh. "3"). The defendant may present to the Court other land taxes receipts for the payment of taxes for this lot. 9. The land claimed by the defendant as his own was surveyed on June 6 and 7,1956, and a plan approved by Director of Land on November 15, 1956 was issued, identified as Psu 155241 (Exh. "5"). 10. On April 22, 1960, the plaintiff filed forcible Entry and Detainer case against Isaias Batiller in the Justice of the Peace Court of Barotac Viejo Province of Iloilo (Exh. "4") to which the defendant Isaias Batiller riled his answer on August 29, 1960 (Exh. "4-A"). The Municipal Court of Barotac Viejo after trial, decided the case on May 10, 1961 in favor of the defendant and against the plaintiff (Exh. "4-B"). The plaintiff appealed from the decision of the Municipal Court of Barotac Viejo which was docketed in this Court as Civil Case No. 5750 on June 3, 1961, to which the defendant, Isaias Batiller, on June 13, 1961 filed his answer (Exh. "4-C"). And this Court after the trial. decided the case on November 26, 1964, in favor of the defendant, Isaias Batiller and against the plaintiff (Exh. "4-D"). (NOTE: As per Exh. 4-B, which is the Iloilo court of first instance decision of 26 November 1964 dismissing plaintiff's therein complaint for ejectment against defendant, the iloilo court expressly found "that plaintiff's complaint is unjustified, intended to harass the defendant" and "that the defendant, Isaias Batiller, has a better right to possess the land in question described in Psu 155241 (Exh. "3"), Isaias Batiller having been in the actual physical possession thereof under a claim of title many years before Francisco Militante sold the land to the plaintiff-hereby dismissing plaintiff's complaint and ordering the plaintiff to pay the defendant attorney's fees ....") B. During the trial of this case on the merit, the plaintiff will prove by competent evidence the following: 1. That the land he purchased from Francisco Militante under Exh. "A" was formerly owned and possessed by Liberato Demontao but that on September 6, 1919 the land was sold at public auction by virtue of a judgment in a Civil Case entitled "Edw J. Pflieder plaintiff vs. Liberato Demontao Francisco Balladeros and Gregorio Yulo, defendants", of which Yap Pongco was the purchaser (Exh. "1-3"). The sale was registered in the Office of the Register of Deeds of Iloilo on August 4, 1920,

under Primary Entry No. 69 (Exh. "1"), and a definite Deed of Sale was executed by Constantino A. Canto, provincial Sheriff of Iloilo, on Jan. 19, 1934 in favor of Yap Pongco (Exh. "I"), the sale having been registered in the Office of the Register of Deeds of Iloilo on February 10, 1934 (Exh. "1-1"). 2. On September 22, 1934, Yap Pongco sold this land to Francisco Militante as evidenced by a notarial deed (Exh. "J") which was registered in the Registry of Deeds on May 13, 1940 (Exh. "J-1"). 3. That plaintiff suffered damages alleged in his complaint. C. Defendants, on the other hand will prove by competent evidence during the trial of this case the following facts: 1. That lot No. 2 of the Psu-1552 it (Exh. '5') was originally owned and possessed by Felipe Batiller, grandfather of the defendant Basilio Batiller, on the death of the former in 1920, as his sole heir. Isaias Batiller succeeded his father , Basilio Batiller, in the ownership and possession of the land in the year 1930, and since then up to the present, the land remains in the possession of the defendant, his possession being actual, open, public, peaceful and continuous in the concept of an owner, exclusive of any other rights and adverse to all other claimants. 2. That the alleged predecessors in interest of the plaintiff have never been in the actual possession of the land and that they never had any title thereto. 3. That Lot No. 2, Psu 155241, the subject of Free Patent application of the defendant has been approved. 4. The damages suffered by the defendant, as alleged in his counterclaim."' 1 The appellate court further related the developments of the case, as follows: On August 17, 1965, defendant's counsel manifested in open court that before any trial on the merit of the case could proceed he would file a motion to dismiss plaintiff's complaint which he did, alleging that plaintiff does not have cause of action against him because the property in dispute which he (plaintiff) allegedly bought from his father-in-law, Francisco Militante was the subject matter of LRC No. 695 filed in the CFI of Iloilo, which case was brought on appeal to this Court and docketed as CAG.R. No. 13497-R in which aforesaid case plaintiff was the counsel on record of his father-in-law, Francisco Militante. Invoking Arts. 1409 and 1491 of the Civil Code which reads: 'Art. 1409. The following contracts are inexistent and void from the beginning: xxx xxx xxx (7) Those expressly prohibited by law. 'ART. 1491. The following persons cannot acquire any purchase, even at a public auction, either in person of through the mediation of another: . xxx xxx xxx (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights of in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their

respective functions; this prohibition includes the act of acquiring an assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession.' defendant claims that plaintiff could not have acquired any interest in the property in dispute as the contract he (plaintiff) had with Francisco Militante was inexistent and void. (See pp. 22-31, Record on Appeal). Plaintiff strongly opposed defendant's motion to dismiss claiming that defendant can not invoke Articles 1409 and 1491 of the Civil Code as Article 1422 of the same Code provides that 'The defense of illegality of contracts is not available to third persons whose interests are not directly affected' (See pp. 32-35 Record on Appeal). On October 18, 1965, the lower court issued an order disclaiming plaintiffs complaint (pp. 42-49, Record on Appeal.) In the aforesaid order of dismissal the lower court practically agreed with defendant's contention that the contract (Exh. A) between plaintiff and Francism Militante was null and void. In due season plaintiff filed a motion for reconsideration (pp. 50-56 Record on Appeal) which was denied by the lower court on January 14, 1966 (p. 57, Record on Appeal). Hence, this appeal by plaintiff from the orders of October 18, 1965 and January 14, 1966. Plaintiff-appellant imputes to the lower court the following errors: '1. The lower court erred in holding that the contract of sale between the plaintiff-appellant and his father-in-law, Francisco Militante, Sr., now deceased, of the property covered by Plan Psu-99791, (Exh. "A") was void, not voidable because it was made when plaintiff-appellant was the counsel of the latter in the Land Registration case. '2. The lower court erred in holding that the defendant-appellee is an interested person to question the validity of the contract of sale between plaintiff-appellant and the deceased, Francisco Militante, Sr. '3. The lower court erred in entertaining the motion to dismiss of the defendant-appellee after he had already filed his answer, and after the termination of the pre-trial, when the said motion to dismiss raised a collateral question. '4. The lower court erred in dismissing the complaint of the plaintiff-appellant.' The appellate court concluded that plaintiffs "assignment of errors gives rise to two (2) legal posers (1) whether or not the contract of sale between appellant and his father-in-law, the late Francisco Militante over the property subject of Plan Psu-99791 was void because it was made when plaintiff was counsel of his father-in-law in a land registration case involving the property in dispute; and (2) whether or not the lower court was correct in entertaining defendant-appellee's motion to dismiss after the latter had already filed his answer and after he (defendant) and plaintiff-appellant had agreed on some matters in a pre-trial conference. Hence, its elevation of the appeal to this Court as involving pure questions of law. It is at once evident from the foregoing narration that the pre-trial conference held by the trial court at which the parties with their counsel agreed and stipulated on the material and relevant facts and submitted their respective documentary exhibits as referred to in the pre-trial order, supra, 2 practically amounted to a fulldress trial which placed on record all the facts and exhibits necessary for adjudication of the case. The three points on which plaintiff reserved the presentation of evidence at the-trial dealing with the

source of the alleged right and title of Francisco Militante's predecessors, supra, 3 actually are already made of record in the stipulated facts and admitted exhibits. The chain of Militante's alleged title and right to the land as supposedly traced back to Liberato Demontao was actually asserted by Militante (and his vendee, lawyer and son-in-law, herein plaintiff) in the land registration case and rejected by the Iloilo land registration court which dismissed Militante's application for registration of the land. Such dismissal, as already stated, was affirmed by the final judgment in 1958 of the Court of Appeals.
4

The four points on which defendant on his part reserved the presentation of evidence at the trial dealing with his and his ancestors' continuous, open, public and peaceful possession in the concept of owner of the land and the Director of Lands' approval of his survey plan thereof, supra, 5 are likewise already duly established facts of record, in the land registration case as well as in the ejectment case wherein the Iloilo court of first instance recognized the superiority of defendant's right to the land as against plaintiff. No error was therefore committed by the lower court in dismissing plaintiff's complaint upon defendant's motion after the pre-trial. 1. The stipulated facts and exhibits of record indisputably established plaintiff's lack of cause of action and justified the outright dismissal of the complaint. Plaintiff's claim of ownership to the land in question was predicated on the sale thereof for P2,000.00 made in 1956 by his father-in- law, Francisco Militante, in his favor, at a time when Militante's application for registration thereof had already been dismissed by the Iloilo land registration court and was pending appeal in the Court of Appeals. With the Court of Appeals' 1958 final judgment affirming the dismissal of Militante's application for registration, the lack of any rightful claim or title of Militante to the land was conclusively and decisively judicially determined. Hence, there was no right or title to the land that could be transferred or sold by Militante's purported sale in 1956 in favor of plaintiff. Manifestly, then plaintiff's complaint against defendant, to be declared absolute owner of the land and to be restored to possession thereof with damages was bereft of any factual or legal basis. 2. No error could be attributed either to the lower court's holding that the purchase by a lawyer of the property in litigation from his client is categorically prohibited by Article 1491, paragraph (5) of the Philippine Civil Code, reproduced supra; 6 and that consequently, plaintiff's purchase of the property in litigation from his client (assuming that his client could sell the same since as already shown above, his client's claim to the property was defeated and rejected) was void and could produce no legal effect, by virtue of Article 1409, paragraph (7) of our Civil Code which provides that contracts "expressly prohibited or declared void by law' are "inexistent and that "(T)hese contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived." The 1911 case of Wolfson vs. Estate of Martinez 7 relied upon by plaintiff as holding that a sale of property in litigation to the party litigant's lawyer "is not void but voidable at the election of the vendor" was correctly held by the lower court to have been superseded by the later 1929 case of Director of Lands vs. Abagat. 8 In this later case of Abagat, the Court expressly cited two antecedent cases involving the same transaction of purchase of property in litigation by the lawyer which was expressly declared invalid under Article 1459 of the Civil Code of Spain (of which Article 1491 of our Civil Code of the Philippines is the counterpart) upon challenge thereof not by the vendor-client but by the adverse parties against whom the lawyer was to enforce his rights as vendee thus acquired. These two antecedent cases thus cited in Abagat clearly superseded (without so expressly stating the

previous ruling in Wolfson: The spouses, Juan Soriano and Vicente Macaraeg, were the owners of twelve parcels of land. Vicenta Macaraeg died in November, 1909, leaving a large number of collateral heirs but no descendants. Litigation between the surviving husband, Juan Soriano, and the heirs of Vicenta immediately arose, and the herein appellant Sisenando Palarca acted as Soriano's lawyer. On May 2, 1918, Soriano executed a deed for the aforesaid twelve parcels of land in favor of Sisenando Palarca and on the following day, May 3, 1918, Palarca filed an application for the registration of the land in the deed. After hearing, the Court of First Instance declared that the deed was invalid by virtue of the provisions of article 1459 of the Civil Code, which prohibits lawyers and solicitors from purchasing property rights involved in any litigation in which they take part by virtue of their profession. The application for registration was consequently denied, and upon appeal by Palarca to the Supreme Court, the judgement of the lower court was affirmed by a decision promulgated November 16,1925. (G.R. No. 24329, Palarca vs. Director of Lands, not reported.) In the meantime cadastral case No. 30 of the Province of Tarlac was instituted, and on August 21, 1923, Eleuteria Macaraeg, as administratrix of the estate of Vicente Macaraeg, filed claims for the parcels in question. Buenaventura Lavitoria administrator of the estate of Juan Soriano, did likewise and so did Sisenando Palarca. In a decision dated June 21, 1927, the Court of First Instance, Judge Carballo presiding, rendered judgment in favor of Palarea and ordered the registration of the land in his name. Upon appeal to this court by the administration of the estates of Juan Soriano and Vicente Macaraeg, the judgment of the court below was reversed and the land adjudicated to the two estates as conjugal property of the deceased spouses. (G.R. No. 28226, Director of Lands vs. Abagat, promulgated May 21, 1928, not reported.) 9 In the very case of Abagat itself, the Court, again affirming the invalidity and nullity of the lawyer's purchase of the land in litigation from his client, ordered the issuance of a writ of possession for the return of the land by the lawyer to the adverse parties without reimbursement of the price paid by him and other expenses, and ruled that "the appellant Palarca is a lawyer and is presumed to know the law. He must, therefore, from the beginning, have been well aware of the defect in his title and is, consequently, a possessor in bad faith." As already stated, Wolfson and Abagat were decided with relation to Article 1459 of the Civil Code of Spain then adopted here, until it was superseded on August 30, 1950 by the Civil Code of the Philippines whose counterpart provision is Article 1491. Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six paragraphs certain persons, by reason of the relation of trust or their peculiar control over the property, from acquiring such property in their trust or control either directly or indirectly and "even at a public or judicial auction," as follows: (1) guardians; (2) agents; (3) administrators; (4) public officers and employees; judicial officers and employees, prosecuting attorneys, and lawyers; and (6) others especially disqualified by law. In Wolfson which involved the sale and assignment of a money judgment by the client to the lawyer, Wolfson, whose right to so purchase the judgment was being challenged by the judgment debtor, the Court, through Justice Moreland, then expressly reserved decision on "whether or not the judgment in question actually falls within the prohibition of the article" and held only that the sale's "voidability can not be asserted by one not a party to the transaction or his representative," citing from Manresa 10 that "(C)onsidering the question from the point of view of the civil law, the view taken by the code, we must limit ourselves to classifying as void all acts done contrary to the express prohibition of the statute. Now then: As the code does not recognize such nullity by the mere operation of law, the nullity of the acts hereinbefore referred to must be asserted by the person having the necessary legal

capacity to do so and decreed by a competent court." 11 The reason thus given by Manresa in considering such prohibited acquisitions under Article 1459 of the Spanish Civil Code as merely voidable at the instance and option of the vendor and not void "that the Code does not recognize such nullity de pleno derecho" is no longer true and applicable to our own Philippine Civil Code which does recognize the absolute nullity of contracts "whose cause, object, or purpose is contrary to law, morals, good customs, public order or public policy" or which are "expressly prohibited or declared void by law" and declares such contracts "inexistent and void from the beginning." 12 The Supreme Court of Spain and modern authors have likewise veered from Manresa's view of the Spanish codal provision itself. In its sentencia of 11 June 1966, the Supreme Court of Spain ruled that the prohibition of Article 1459 of the Spanish Civil Code is based on public policy, that violation of the prohibition contract cannot be validated by confirmation or ratification, holding that: ... la prohibicion que el articulo 1459 del C.C. establece respecto a los administradores y apoderados, la cual tiene conforme a la doctrina de esta Sala, contendia entre otras, en S. de 27-5-1959, un fundamento de orden moral lugar la violacion de esta a la nulidad de pleno derecho del acto o negocio celebrado, ... y prohibicion legal, afectante orden publico, no cabe con efecto alguno la aludida retification ... 13 The criterion of nullity of such prohibited contracts under Article 1459 of the Spanish Civil Code (Article 1491 of our Civil Code) as a matter of public order and policy as applied by the Supreme Court of Spain to administrators and agents in its above cited decision should certainly apply with greater reason to judges, judicial officers, fiscals and lawyers under paragraph 5 of the codal article. Citing the same decisions of the Supreme Court of Spain, Gullon Ballesteros, his "Curso de Derecho Civil, (Contratos Especiales)" (Madrid, 1968) p. 18, affirms that, with respect to Article 1459, Spanish Civil Code:. Que caracter tendra la compra que se realice por estas personas? Porsupuesto no cabe duda de que el caso (art.) 1459, 40 y 50, la nulidad esabsoluta porque el motivo de la prohibicion es de orden publico. 14 Perez Gonzales in such view, stating that "Dado el caracter prohibitivo delprecepto, la consequencia de la infraccion es la nulidad radical y ex lege." 15 Castan, quoting Manresa's own observation that. "El fundamento do esta prohibicion es clarisimo. No sa trata con este precepto tan solo de guitar la ocasion al fraude; persiguese, ademasel proposito de rodear a las personas que intervienen en la administrcionde justicia de todos los retigios que necesitan pora ejercer su ministerio librandolos de toda suspecha, que aunque fuere in fundada, redundura endescredito de la institucion." 16 arrives at the contrary and now accepted view that "Puede considerace en nuestro derecho inexistente 'o radicalmente nulo el contrato en los siguentes cases: a) ...; b) cuando el contrato se ha celebrado en violacion de una prescripcion 'o prohibicion legal, fundada sobre motivos de orden publico (hipotesis del art. 4 del codigo) ..." 17 It is noteworthy that Caltan's rationale for his conclusion that fundamental consideration of public policy render void and inexistent such expressly prohibited purchase (e.g. by public officers and employees of government property intrusted to them and by justices, judges, fiscals and lawyers of property and rights in litigation and submitted to or handled by them, under Article 1491, paragraphs

(4) and (5) of our Civil Code) has been adopted in a new article of our Civil Code, viz, Article 1409 declaring such prohibited contracts as "inexistent and void from the beginning." 18 Indeed, the nullity of such prohibited contracts is definite and permanent and cannot be cured by ratification. The public interest and public policy remain paramount and do not permit of compromise or ratification. In his aspect, the permanent disqualification of public and judicial officers and lawyers grounded on public policy differs from the first three cases of guardians, agents and administrators (Article 1491, Civil Code), as to whose transactions it had been opined that they may be "ratified" by means of and in "the form of a new contact, in which cases its validity shall be determined only by the circumstances at the time the execution of such new contract. The causes of nullity which have ceased to exist cannot impair the validity of the new contract. Thus, the object which was illegal at the time of the first contract, may have already become lawful at the time of the ratification or second contract; or the service which was impossible may have become possible; or the intention which could not be ascertained may have been clarified by the parties. The ratification or second contract would then be valid from its execution; however, it does not retroact to the date of the first contract."
19

As applied to the case at bar, the lower court therefore properly acted upon defendant-appellant's motion to dismiss on the ground of nullity of plaintiff's alleged purchase of the land, since its juridical effects and plaintiff's alleged cause of action founded thereon were being asserted against defendantappellant. The principles governing the nullity of such prohibited contracts and judicial declaration of their nullity have been well restated by Tolentino in his treatise on our Civil Code, as follows: Parties Affected. Any person may invoke the in existence of the contract whenever juridical effects founded thereon are asserted against him. Thus, if there has been a void transfer of property, the transferor can recover it by the accion reinvindicatoria; and any prossessor may refuse to deliver it to the transferee, who cannot enforce the contract. Creditors may attach property of the debtor which has been alienated by the latter under a void contract; a mortgagee can allege the inexistence of a prior encumbrance; a debtor can assert the nullity of an assignment of credit as a defense to an action by the assignee. Action On Contract. Even when the contract is void or inexistent, an action is necessary to declare its inexistence, when it has already been fulfilled. Nobody can take the law into his own hands; hence, the intervention of the competent court is necessary to declare the absolute nullity of the contract and to decree the restitution of what has been given under it. The judgment, however, will retroact to the very day when the contract was entered into. If the void contract is still fully executory, no party need bring an action to declare its nullity; but if any party should bring an action to enforce it, the other party can simply set up the nullity as a defense. 20 ACCORDINGLY, the order of dismissal appealed from is hereby affirmed, with costs in all instances against plaintiff-appellant. So ordered. Makalintal, Zaldivar, Castro,. Fernando, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.

EN BANC [G.R. No. L-8477. May 31, 1956.] THE PHILIPPINE TRUST COMPANY, as Guardian of the Property of the minor, MARIANO L. BERNARDO, Petitioner, vs. SOCORRO ROLDAN, FRANCISCO HERMOSO, FIDEL C. RAMOS and EMILIO CRUZ, Respondents. D E C I S I O N BENGZON, J.: As guardian of the property of the minor Mariano L. Bernardo, the Philippine Trust Company filed in the Manila court of first instance a complaint to annul two contracts regarding 17 parcels of land: (a) sale thereof by Socorro Roldan, as guardian of said minor, to Fidel C. Ramos and (b) (b) sale thereof by Fidel C. Ramos to Socorro Roldan personally. The complaint likewise sought to annul a conveyance of four out of the said seventeen parcels by Socorro Roldan to Emilio Cruz. The action rests on the proposition that the first two sales were in reality a sale by the guardian to herself therefore, null and void under Article 1459 of the Civil Code. As to the third conveyance, it is also ineffective, because Socorro Roldan had acquired no valid title to convey to Cruz. The material facts of the case are not complicated. These 17 parcels located in Guiguinto, Bulacan, were part of the properties inherited by Mariano L. Bernardo from his father, Marcelo Bernardo, deceased. In view of his minority, guardianship proceedings were instituted, wherein Socorro Roldan was appointed his guardian. She was the surviving spouse of Marcelo Bernardo, and the stepmother of said Mariano L. Bernardo. On July 27, 1947, Socorro Roldan filed in said guardianship proceedings (Special Proceeding 2485, Manila), a motion asking for authority to sell as guardian the 17 parcels for the sum of P14,700 to Dr. Fidel C. Ramos, the purpose of the sale being allegedly to invest the money in a residential house, which the minor desired to have on Tindalo Street, Manila. The motion was granted. On August 5, 1947 Socorro Roldan, as guardian, executed the proper deed of sale in favor of her brother-in- law Dr. Fidel C. Ramos (Exhibit A-1), and on August 12, 1947 she asked for, and obtained, judicial confirmation of the sale. On August 13, 1947, Dr. Fidel C. Ramos executed in favor of Socorro Roldan, personally, a deed of conveyance covering the same seventeen parcels, for the sum of P15,000 (Exhibit A-2). And on October 21, 1947 Socorro Roldan sold four parcels out of the seventeen to Emilio Cruz for P3,000, reserving to herself the right to repurchase (Exhibit A-3). The Philippine Trust Company replaced Socorro Roldan as guardian, on August 10, 1948. And this litigation, started two months later, seeks to undo what the previous guardian had done. The step-mother in effect, sold to herself, the properties of her ward, contends the Plaintiff, and the sale should be annulled because it violates Article 1459 of the Civil Code prohibiting the guardian from purchasing either in person or through the mediation of another the property of her ward. The court of first instance, following our decision in Rodriguez vs. Mactal, 60 Phil. 13 held the article was not controlling, because there was no proof that Fidel C. Ramos was a mere intermediary or that the latter had previously agreed with Socorro Roldan to buy the parcels for her benefit. However, taking the former guardian at her word - she swore she had repurchased the lands from Dr. Fidel C. Ramos to preserve it and to give her protege opportunity to redeem the court rendered judgment upholding the contracts but allowing the minor to repurchase all the parcels by paying P15,000, within one year.
2 years before reacquired from buyer

The Court of Appeals affirmed the judgment, adding that the minor knew the particulars of, and approved the transaction, and that only clear and positive evidence of fraud or bad faith, and not mere insinuations and inferences will overcome the presumptions that a sale was concluded in all good faith for value. At first glance the resolutions of both courts accomplished substantial justice: the minor recovers his properties. But if the conveyances are annulled as prayed for, the minor will obtain a better deal: he receives all the fruits of the lands from the year 1947 (Article 1303 Civil Code) and will return P14,700, not P15,000. To our minds the first two transactions herein described couldnt be in a better juridical situation than if this guardian had purchased the seventeen parcels on the day following the sale to Dr. Ramos. Now, if she was willing to pay P15,000 why did she sell the parcels for less? In one day (or actually one week) the price could not have risen so suddenly. Obviously when, seeking approval of the sale she represented the price to be the best obtainable in the market, she was not entirely truthful. This is one phase to consider. Again, supposing she knew the parcels were actually worth P17, 000; then she agreed to sell them to Dr. Ramos at P14, 700;yand knowing the realtys value she offered him the next day P15,000 or P15,500, and got it. Will there be any doubt that she was recreant to her guardianship, and that her acquisition should be nullified? Even without proof that she had connived with Dr. Ramos. Remembering the general doctrine that guardianship is a trust of the highest order, and the trustee cannot be allowed to have any inducement to neglect his wards interest and in line with the courts suspicion whenever the guardian acquires the wards property 1 we have no hesitation to declare that in this case, in the eyes of the law, Socorro Roldan took by purchase her wards parcels thru Dr. Ramos, and that Article 1459 of the Civil Code applies. She acted it may be true without malice; there may have been no previous agreement between her and Dr. Ramos to the effect that the latter would buy the lands for her. But the stubborn fact remains that she acquired her proteges properties, through her brother-in-law. That she planned to get them for herself at the time of selling them to Dr. Ramos, may be deduced from the very short time between the two sales (one week). The temptation, which naturally besets a guardian so circumstanced, necessitates the annulment of the transaction, even if no actual collusion is proved (so hard to prove) between such guardian and the intermediate purchaser. This would uphold a sound principle of equity and justice. 2 We are aware of course that in Rodriguez vs. Mactal, 60 Phil. p. 13 wherein the guardian Mactal sold in January 1926 the property of her ward to Silverio Chioco, and in March 1928 she bought it from Chioco, this Court said: In order to bring the sale in this case within the part of Article 1459, quoted above, it is essential that the proof submitted establish some agreement between Silverio Chioco and Trinidad Mactal to the effect that Chioco should buy the property for the benefit of Mactal. If there was no such agreement, either express or implied, then the sale cannot be set aside. (Page 16yItalics supplied.) However, the underlined portion was not intended to establish a general principle of law applicable to all subsequent litigations. It merely meant that the subsequent purchase by Mactal could not be annulled in that particular case because there was no proof of a previous agreement between Chioco and her. The court then considered such proof necessary to establish that the two sales were actually part of one scheme guardian getting the wards property through another person because two years had elapsed between the sales. Such period of time was sufficient to dispel the natural suspicion of the guardians motives or actions. In the case at bar, however, only one week had elapsed. And if we were technical, we could say, only one day had elapsed from the judicial approval of the sale (August 12), to the purchase by the guardian (Aug. 13). Attempting to prove that the transaction was beneficial to the minor, Appellees attorney alleges that the money (P14,700) invested in the house on Tindalo Street produced for him rentals of P2,400 yearly; whereas the parcels of land yielded to his step-mother only an average of P1,522 per year. 3 The argument would carry

some weight if that house had been built out of the purchase price of P14,700 only. 4 One thing is certain: the calculation does not include the price of the lot on which the house was erected. Estimating such lot at P14,700 only, (ordinarily the city lot is more valuable than the building) the result is that the price paid for the seventeen parcels gave the minor an income of only P1,200 a year, whereas the harvest from the seventeen parcels netted his step-mother a yearly profit of P1,522.00. The minor was thus on the losing end. Hence, from both the legal and equitable standpoints these three sales should not be sustained: the first two for violation of article 1459 of the Civil Code; and the third because Socorro Roldan could pass no title to Emilio Cruz. The annulment carries with is (Article 1303 Civil Code) the obligation of Socorro Roldan to return the 17 parcels together with their fruits and the duty of the minor, through his guardian to repay P14,700 with legal interest. Judgment is therefore rendered: a. Annulling the three contracts of sale in question; b. declaring the minor as the owner of the seventeen parcels of land, with the obligation to return to Socorro Roldan the price of P14,700 with legal interest from August 12, 1947; c. Ordering Socorro Roldan and Emilio Cruz to deliver said parcels of land to the minor; d. Requiring Socorro Roldan to pay him beginning with 1947 the fruits, which her attorney admits, amounted to P1,522 a year; e. Authorizing the minor to deliver directly to Emilio Cruz, out of the price of P14,700 above mentioned, the sum of P3,000; f. charging Appellees with the costs. SO ORDERED. Paras, C.J., Padilla, Montemayor, Reyes, A., Bautista Angelo, Concepcion, Reyes, J.B.L., and Endencia, JJ., concur. Look at the circumstances of each case

EN BANC [Adm. Case No. 133-J. May 31, 1982.] BERNARDITA R. MACARIOLA, complainant, vs. HONORABLE ELIAS B. ASUNCION, Judge of the Court of First Instance of Leyte, respondent.

SYNOPSIS Respondent judge was charged for having violated (1) Article 1491 of the New Civil Code when he acquired by purchase portion of a lot which was involved in a civil case decided by him; (2) Article 14 of the Code of Commerce, the Anti-Graft and Corrupt Practices Act, the Civil Service Rules, and the Canons of Judicial Ethics, when he associated himself with the Traders Manufacturing and Fishing Industries, Inc., as a stockholder and a ranking officer while he was a judge of the Court of First Instance. The Supreme Court held that there was no violation of Paragraph 5, Article 1491 of the New Civil Code because the sale took place after finality of the decision; that respondent may not be held liable under paragraphs 1 and 5, Article 14 of the Code of Commerce (which is of Spanish vintage), because the provision partakes of the nature of a political law as it regulates the relationship between the government and certain public officers and employees and as such is deemed to have been automatically abrogated with the change of sovereignty from Spain to the United States; that respondent cannot be held liable under Paragraph H, Section 3 of the Anti-Graft and Corrupt Practices Act because there is no showing (a) that he participated or intervened in his official capacity in the business or transaction of the Traders Manufacturing and Fishing Industries, Inc., or (b) that said corporation gained any undue advantage by reason of respondent's financial involvement in it, and because neither the 1935 nor the 1973 Constitution of the Philippines or any existing law expressly prohibits members of the Judiciary from engaging or having any interest in any lawful business. Respondent is reminded to be more discreet in his private and business activities. SYLLABUS
1. CIVIL LAW; CONTRACTS; SALES; PROHIBITION TO BUY IN ARTICLE 1491 REFERS TO PROPERTIES UNDER LITIGATION; NO VIOLATION IN CASE AT BAR. The prohibition in Article 1491 of the Civil Code applies only to the sale or assignment of the property which is the subject of litigation to the persons disqualified therein. WE have already ruled that " . . . for the prohibition to operate, the sale or assignment of the property must take place during the pendency of the litigation involving the property" (The Director of Lands vs. Ababa, et al., 88 SCRA 513). Consequently, the sale of a portion of Lot 1184-E to respondent Judge having taken place over one year after the finality of the decision in Civil Case No. 3010 as well as the two orders approving the project of partition, and not during the pendency of the litigation, there was no violation of paragraph 5, Article 1491 of the New Civil Code. 2. JUDICIAL ETHICS; CANONS OF JUDICIAL ETHICS; JUDGE'S CONDUCT SHOULD BE FREE FROM APPEARANCE OF IMPROPRIETY; JUDGE'S TRANSACTIONS REGARDING PROPERTIES LITIGATED IN HIS COURT, NOT PROPER. Finally, while it is true that respondent Judge did not violate paragraph 5, Article 1491 of the New Civil Code in acquiring by purchase a portion of Lot 1184-E which was in litigation in his court, it was, however, improper for him to have acquired the same. He should be reminded of Canon 3 of the Canons of Judicial Ethics which requires that: "A judge's official conduct should be free from the appearance of impropriety, and his personal behavior, not only upon the bench and in the performance of judicial duties, but also in his everyday life, should be beyond reproach." Even if respondent honestly believed that Lot 1184-E was no longer in litigation in his

court and that he was purchasing it from a third person and not from the parties to the litigation, he should nonetheless have refrained from buying it for himself and transferring it to a corporation in which he and his wife were financially involved, to avoid possible suspicion that his acquisition was related in one way or another to his official actuations in civil case 3010. The conduct of respondent gave cause for the litigants in civil case 3010, the lawyers practising in his court, and the public in general to doubt the honesty and fairness of his actuations and the integrity of our courts of justice. 3. MERCANTILE LAW; CODE OF COMMERCE; ARTICLE 14 THEREOF PARTAKES OF THE NATURE OF A POLITICAL LAW. Although Article 14 of the Code of Commerce is part of the commercial laws of the Philippines, it, however, partakes of the nature of a political law as it regulates the relationship between the government and certain public officers and employees, like justices and judges. 4. CONSTITUTIONAL LAW; POLITICAL LAW, DEFINED. Political law has been defined as that branch of public law which deals with the organization and operation of the governmental organs of the State and defines the relations of the state with the inhabitants of its territory (People vs. Perfecto, 43 Phil. 887). It must be recalled that a political law embraces constitutional law, law of public corporations, administrative law including the law on public officers and election. 5. MERCANTILE LAW; CODE OF COMMERCE, ARTICLE 14 THEREOF ABROGATED BY CHANGE OF SOVEREIGNTY. Upon the transfer of sovereignty from Spain to the United States to the Republic of the Philippines, Article 14 of this Code of Commerce must be deemed to have abrogated because where there is change of sovereignty, the political laws of the former sovereign, whether compatible or not with those of the new sovereign, are automatically abrogated, unless they are expressly re-enacted by affirmative act of the new sovereign. 6. CRIMINAL LAW; ANTI-GRAFT AND CORRUPT PRACTICES ACT; PROHIBITED PECUNIARY INTEREST UNDER PARAGRAPH H OF SECTION 3 THEREOF REFERS TO ONE HERE THE PUBLIC OFFICER INTERVENES OR TAKES PART IN HIS OFFICIAL CAPACITY. Respondent Judge can not be held liable under paragraph 4 Section 3 of the Anti-Graft and Corrupt Practices Act because there is- no showing that respondent participated or intervened in his official capacity in the business or transactions of the Traders Manufacturing And Fishing Industries, Inc. In the case at bar, the business of the corporation in which respondent participated has obviously no relation or connection with his official office. The business of said corporation is not that kind where respondent intervenes or takes part in his capacity as Judge of the Court of First Instance. As was held in one case involving the application of Article 216 of the Revised Penal Code which has a similar prohibition on public officers against directly or indirectly becoming interested in any contract or business in which it is his official duty to intervene, "It is not enough to be a public official to be subject to this crime; it is necessary that by reason of his office, he has to intervene in said contracts or transactions; and hence, the official who intervenes in contracts or transactions which have no relation to his office can not commit this crime" (People vs. Meneses, C.A. 40 C.G. 11th Supp. 134; Revised Penal Code, p. 1174, Vol 11(1976). 7. JUDICIAL ETHICS; JUDGES NOT PROHIBITED FROM ENGAGING IN LAWFUL BUSINESS. There is no provision in both the 1935 and 1973 Constitutions of the Philippines, nor is there an existing law expressly prohibiting members of the Judiciary from engaging or having interest in any lawful business. It may be pointed out that Republic Act No. 296, as amended, also known as the Judiciary Act of 1948, does not contain any prohibition to that effect. As a matter of fact, under Section 77 of said law, municipal judges may engage in teaching or other vocation not involving the practice of the law after office hours but with the permission of the district judge concerned. Likewise, Article 14 of the Code of Commerce which prohibits judges from engaging in commerce is, as heretofore stated, deemed abrogated automatically upon the transfer of sovereignty from Spain to America, because it is political in nature. 8. ID.; ID.; CIVIL SERVICE ACT AND RULES PROMULGATED THEREUNDER NOT APPLICABLE TO MEMBERS OF THE JUDICIARY. On the contention of complainant that respondent Judge violated Section 12, Rule XVIII of the Civil Service Rules, We hold that the Civil Service Act of 1959 (R.A. No. 2260) and the Civil Service Rules promulgated thereunder, particularly Section 12 of Rule XVIII, do not apply to the members of the Judiciary. It must be emphasized at the outset that respondent, being a member of the Judiciary, 45 covered by Republic Act No. 296, as amended, otherwise known as the Judiciary Act of 1948 and by Section 7, Article X, 1973 Constitution. Judges cannot be considered as subordinate civil service officers or employees subject to the disciplinary authority of the Commissioner of Civil Service; for, certainly. the Commissioner is not the head of the Judicial Department to which they belong. The Revised Administrative Code (Section 89) and the Civil Service Law itself state thru the Chief Justice is the department head of the Supreme Court (Sec. 20, R.A. No. 2260 [1959]); and under the 1973 Constitution, the Judiciary is the only other or second branch of the government (Sec. 1, Art. X, 1973 Constitution). Besides, a violation of Section 12, Rule XVIII cannot be considered as a ground for disciplinary action against judges because to recognize the same as applicable to them, would be adding another ground for the discipline of judges and, as aforestated, Section 67 of the Judiciary Act recognizes only two grounds for their removal, namely, serious misconduct and inefficiency.

9. ID.; ID.; JUDGES; ENGAGING IN PRIVATE BUSINESS, IMPROPER UNDER THE CANONS. Although the actuation of respondent Judge in engaging in private business by joining the Traders Manufacturing and Fishing Industries, Inc. as a stockholder and a ranking officer, is not violative of the provisions of Article 14 of the Code of Commerce and Section 3 (h) of the Anti-Graft and Corrupt Practices Act as well as Section 12, Rule XVIII of the Civil Service Rules promulgated pursuant to the Civil Service Act of 1959, the impropriety of the same is clearly unquestionable because Canon 25 of the Canons of Judicial Ethics expressly declares that: "A judge should abstain from making personal investments in enterprises which are apt to be involved in litigation in his court; and, after his accession to the bench, he should not retain such investments previously made, longer than a period sufficient to enable him to dispose of them without serious loss The disposal or sale by respondent and his wife of their shares in the corporation only 22 days after the incorporation of the corporation, indicates that ' respondent realized that early that their interest in the corporation contravenes the aforesaid Canon 25. Respondent Judge and his wife therefore deserve commendation for their immediate withdrawal from the firm after its incorporation and before it became involved in any court litigation.

DECISION

MAKASIAR, J p: In a verified complaint dated August 6, 1968 Bernardita R. Macariola charged respondent Judge Elias B. Asuncion of the Court of First Instance of Leyte, now Associate Justice of the Court of Appeals, with "acts unbecoming a judge." The factual setting of the case is stated in the report dated May 27, 1971 of then Associate Justice Cecilia Muoz Palma of the Court of Appeals now retired Associate Justice of the Supreme Court, to whom this case was referred on October 28, 1968 for investigation, thus: llcd "Civil Case No. 3010 of the Court of First Instance of Leyte was a complaint for partition filed by Sinforosa R. Bales, Luz R. Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes, and Priscilla Reyes, plaintiffs, against Bernardita R. Macariola, defendant, concerning the properties left by the deceased Francisco Reyes, the common father of the plaintiff and defendant. "In her defenses to the complaint for partition, Mrs. Macariola alleged among other things that: a) plaintiff Sinforosa R. Bales was not a daughter of the deceased Francisco Reyes; b) the only legal heirs of the deceased were defendant Macariola, she being the only offspring of the first marriage of Francisco Reyes with Felisa Espiras, and the remaining plaintiffs who were the children of the deceased by his second marriage with Irene Ondes; c) the properties left by the deceased were all the conjugal properties of the latter and his first wife, Felisa Espiras, and no properties were acquired by the deceased during his second marriage; d) if there was any partition to be made, those conjugal properties should first be partitioned into two parts, and one part is to be adjudicated solely to defendant it being the share of the latter's deceased mother, Felisa Espiras, and the other half which is the share of the deceased Francisco Reyes was to be divided equally among his children by his two marriages. "On June 8, 1963, a decision was rendered by respondent Judge Asuncion in Civil Case 3010, the dispositive portion of which reads: "'IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court, upon a preponderance of evidence, finds and so holds, and hereby

renders judgment (1) Declaring the plaintiffs Luz R. Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes and Priscilla Reyes as the only children legitimated by the subsequent marriage of Francisco Reyes Diaz to Irene Ondez; (2) Declaring the plaintiff Sinforosa R. Bales to have been an illegitimate child of Francisco Reyes Diaz; (3) Declaring Lots Nos. 4474, 4475, 4892, 5265, 4803, 4581, 4506 and 1/4 of Lot 1145 as belonging to the conjugal partnership of the spouses Francisco Reyes Diaz and Felisa Espiras; (4) Declaring Lot No. 2304 and 1/4 of Lot No. 3416 as belonging to the spouses Francisco Reyes Diaz and Irene Ondez in common partnership; (5) Declaring that 1/2 of Lot No. 1184 as belonging exclusively to the deceased Francisco Reyes Diaz; (6) Declaring the defendant Bernardita R. Macariola, being the only legal and forced heir of her mother Felisa Espiras, as the exclusive owner of onehalf of each of Lots Nos. 4474, 4475, 4892, 5265, 4803, 4581, 4506; and the remaining one-half (1/2) of each of said Lots Nos. 4474, 4475, 4892, 5265, 4803, 4581, 4506 and one-half (1/2) of one-fourth (1/4) of Lot No. 1154 as belonging to the estate of Francisco Reyes Diaz; (7) Declaring Irene Ondez to be the exclusive owner of one-half (1/2) of Lot No. 2304 and one-half (1/2) of one-fourth (1/4) of Lot No. 3416; the remaining onehalf (1/2) of Lot 2304 and the remaining one-half (1/2) of one fourth (1/4) of Lot No. 3416 as belonging to the estate of Francisco Reyes Diaz; (8) Directing the division or partition of the estate of Francisco Reyes Diaz in such a manner as to give or grant to Irene Ondez, as surviving widow of Francisco Reyes Diaz, a hereditary share of one-twelfth (1/12) of the whole estate of Francisco Reyes Diaz (Art. 996 in relation to Art. 892, par 2, New Civil Code), and the remaining portion of the estate to be divided among the plaintiffs Sinforosa R. Bales, Luz R. Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes, Priscilla Reyes and defendant Bernardita R. Macariola, in such a way that the extent of the total share of plaintiff Sinforosa R. Bales in the hereditary estate shall not exceed the equivalent of two-fifth (2/5) of the total share of any or each of the other plaintiffs and the defendant (Art. 983, New Civil Code), each of the latter to receive equal shares from the hereditary estate, (Ramirez vs. Bautista, 14 Phil. 528; Diancin vs. Bishop of Jaro, O.G. [3rd Ed.] p. 33); (9) Directing the parties, within thirty days after this judgment shall have become final to submit to this court, for approval, a project of partition of the hereditary estate in the proportion above indicated, and in such manner as the parties may, by agreement, deemed convenient and equitable to them taking into consideration the location, kind, quality, nature and value of the properties involved; (10) Directing the plaintiff Sinforosa R. Bales and defendant Bernardita R. Macariola to pay the costs of this suit, in the proportion of one-third (1/3) by the first named and two-thirds (2/3) by the second named; and (11) Dismissing all other claims of the parties [pp. 27-29 of Exh. C]. "The decision in civil case 3010 became final for lack of an appeal, and on October 16, 1963, a project of partition was submitted to Judge Asuncion which is marked Exh. A. Notwithstanding the fact that the project of partition was not signed by the parties themselves but only by the respective counsel of plaintiffs and defendant, Judge Asuncion approved it in his Order dated October 23, 1963, which for convenience is quoted hereunder in full:

'The parties, through their respective counsels, presented to this Court for approval the following project of partition: LLjur 'COMES NOW, the plaintiffs and the defendant in the aboveentitled case, to this Honorable Court respectfully submit the following Project of Partition: '1. The whole of Lots Nos. 1154, 2304 and 4506 shall belong exclusively to Bernardita Reyes Macariola; '2. A portion of Lot No. 3416 consisting of 2,373.49 square meters along the eastern part of the lot shall be awarded likewise to Bernardita R. Macariola; '3. Lots Nos. 4803, 4892 and 5265 shall be awarded to Sinforosa Reyes Bales; '4. A portion of Lot No. 3416 consisting of 1,834.55 square meters along the western part of the lot shall likewise be awarded to Sinforosa Reyes-Bales; '5. Lots Nos. 4474 and 4475 shall be divided equally among Luz Reyes Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes and Priscilla Reyes in equal shares; '6. Lot No. 1184 and the remaining portion of Lot No. 3416 after taking the portions awarded under item (2) and (4) above shall be awarded to Luz Reyes Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes and Priscilla Reyes in equal shares, provided, however that the remaining portion of Lot No. 3416 shall belong exclusively to Priscilla Reyes. 'WHEREFORE, it is respectfully prayed that the Project of Partition indicated above which is made in accordance with the decision of the Honorable Court be approved. 'Tacloban City, October 16, 1963. (SGD) BONIFACIO RAMO Atty. for the Defendant Tacloban City '(SGD) ZOTICO A. TOLETE Atty. for the Plaintiff Tacloban City 'While the Court thought it more desirable for all the parties to have signed this Project of Partition, nevertheless, upon assurance of both counsels of the respective parties to this Court that the Project of Partition, as above-quoted, had been made after a conference and agreement of the plaintiffs and the defendant approving the above Project of Partition, and that both lawyers had represented to the Court that they are given full authority to sign by themselves the Project of Partition, the Court, therefore, finding the above-quoted project of Partition to be in accordance with law, hereby approves the same. The parties, therefore, are directed to execute such papers, documents or instrument sufficient in form and substance for the vesting of the rights, interests and participations which were adjudicated to the respective parties, as outlined in the Project of Partition and the delivery of the respective properties adjudicated to each one in view of said Project of Partition, and to perform such other acts as are legal and necessary to effectuate the said Project of Partition. 'SO ORDERED.

'Given in Tacloban City, this 23rd day of October, 1963. '(SGD) ELIAS B. ASUNCION Judge' "EXH. B. "The above Order of October 23, 1963, was amended on November 11, 1963, only for the purpose of giving authority to the Register of Deeds of the Province of Leyte to issue the corresponding transfer certificates of title to the respective adjudicatees in conformity with the project of partition (see Exh. U). "One of the properties mentioned in the project of partition was Lot 1184 or rather one-half thereof with an area of 15,162.5 sq. meters. This lot, which according to the decision was the exclusive property of the deceased Francisco Reyes, was adjudicated in said project of partition to the plaintiffs Luz, Anacorita, Ruperto, Adela, and Priscilla all surnamed Reyes in equal shares, and when the project of partition was approved by the trial court the adjudicatees caused Lot 1184 to be subdivided into five lots denominated as Lot 1184-A to 1184-E inclusive (Exh. V). "Lot 1184-D was conveyed to Enriqueta D. Anota, a stenographer in Judge Asuncion's court (Exhs. F, F-1 and V-1), while Lot 1184-E which had an area of 2,172.5556 sq. meters was sold on July 31, 1964 to Dr. Arcadio Galapon (Exh. 2) who was issued transfer certificate of title No. 2338 of the Register of Deeds of the city of Tacloban (Exh. 12). "On March 6, 1965, Dr. Arcadio Galapon and his wife sold a portion of Lot 1184-E with an area of around 1,306 sq. meters to Judge Asuncion and his wife, Victoria S. Asuncion (Exh. 11), which particular portion was declared by the latter for taxation purposes (Exh. F). "On August 31, 1966, spouses Asuncion and spouses Galapon conveyed their respective shares and interest in Lot 1184-E to 'The Traders Manufacturing and Fishing Industries Inc.' (Exh. 15 & 16). At the time of said sale the stockholders of the corporation were Dominador Arigpa Tan, Humilia Jalandoni Tan, Jaime Arigpa Tan, Judge Asuncion, and the latter's wife, Victoria S. Asuncion, with Judge Asuncion as the President and Mrs. Asuncion as the secretary (Exhs. E-4 to E-7). The Articles of Incorporation of 'The Traders Manufacturing and Fishing Industries, Inc.' which we shall henceforth refer to as 'TRADERS' were registered with the Securities and Exchange Commission only on January 9, 1967 (Exh. E)" [pp. 378-385, rec.]. Complainant Bernardita R. Macariola filed on August 9, 1968 the instant complaint dated August 6, 1968 alleging four causes of action, to wit: [1] that respondent Judge Asuncion violated Article 1491, paragraph 5, of the New Civil Code in acquiring by purchase a portion of Lot No. 1184-E which was one of those properties involved in Civil Case No. 3010 decided by him; [2] that he likewise violated Article 14, paragraphs 1 and 5 of the Code of Commerce, Section 3, paragraph H, of R.A. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, Section 12, Rule XVIII of the Civil Service Rules, and Canon 25 of the Canons of Judicial Ethics, by associating himself with the Traders Manufacturing and Fishing Industries, Inc., as a stockholder and a ranking officer while he was a judge of the Court of First Instance of Leyte; [3] that respondent was guilty of coddling an impostor and acted in disregard of judicial decorum by closely fraternizing

with a certain Dominador Arigpa Tan who openly and publicly advertised himself as a practising attorney when in truth and in fact his name does not appear in the Rolls of Attorneys and is not a member of the Philippine Bar; and [4] that there was a culpable defiance of the law and utter disregard for ethics by respondent Judge (pp. 1-7, rec.). Respondent Judge Asuncion filed on September 24, 1968 his answer to which a reply was filed on October 16, 1968 by herein complainant. In Our resolution of October 28, 1968, We referred this case to then Justice Cecilia Muoz Palma of the Court of Appeals, for investigation, report and recommendation. After hearing, the said Investigating Justice submitted her report dated May 27, 1971 recommending that respondent Judge should be reprimanded or warned in connection with the first cause of action alleged in the complaint, and for the second cause of action, respondent should be warned in case of a finding that he is prohibited under the law to engage in business. On the third and fourth causes of action, Justice Palma recommended that respondent Judge be exonerated. LLpr The records also reveal that on or about November 9 or 11, 1968 (pp. 481, 477, rec.), complainant herein instituted an action before the Court of First Instance of Leyte, entitled "Bernardita R. Macariola, plaintiff, versus Sinforosa R. Bales, et al., defendants," which was docketed as Civil Case No. 4235, seeking the annulment of the project of partition made pursuant to the decision in Civil Case No. 3010 and the two orders issued by respondent Judge approving the same, as well as the partition of the estate and the subsequent conveyances with damages. It appears, however, that some defendants were dropped from the civil case. For one, the case against Dr. Arcadio Galapon was dismissed because he was no longer a real party in interest when Civil Case No. 4234 was filed, having already conveyed on March 6, 1965 a portion of lot 1184-E to respondent Judge and on August 31, 1966 the remainder was sold to the Traders Manufacturing and Fishing Industries, Inc. Similarly, the case against defendant Victoria Asuncion was dismissed on the ground that she was no longer a real party in interest at the time the aforesaid Civil Case No. 4234 was filed as the portion of Lot 1184 acquired by her and respondent Judge from Dr. Arcadio Galapon was already sold on August 31, 1966 to the Traders Manufacturing and Fishing Industries, Inc. Likewise, the cases against defendants Serafin P. Ramento, Catalina Cabus, Ben Barraza Go, Jesus Perez, Traders Manufacturing and Fishing Industries, Inc., Alfredo R. Celestial and Pilar P. Celestial, Leopoldo Petilla and Remedios Petilla, Salvador Anota and Enriqueta Anota and Atty. Zotico A. Tolete were dismissed with the conformity of complainant herein, plaintiff therein, and her counsel. On November 2, 1970, Judge Jose D. Nepomuceno of the Court of First Instance of Leyte, who was directed and authorized on June 2, 1969 by the then Secretary (now Minister) of Justice and now Minister of National Defense Juan Ponce Enrile to hear and decide Civil Case No. 4234, rendered a decision, the dispositive portion of which reads as follows: "A. IN THE CASE AGAINST JUDGE ELIAS B. ASUNCION "(1) declaring that only Branch IV of the Court of First Instance of Leyte has jurisdiction to take cognizance of the issue of the legality and validity of the Project of Partition [Exhibit "B"] and the two Orders [Exhibits 'C' and 'C-3'] approving the partition; "(2) dismissing the complaint against Judge Elias B. Asuncion; "(3) adjudging the plaintiff, Mrs. Bernardita R. Macariola to pay defendant Judge Elias B. Asuncion, "(a) the sum of FOUR HUNDRED THOUSAND PESOS

[P400,000.00] for moral damages; "(b) the sum of TWO HUNDRED THOUSAND PESOS [P200,000.00] for exemplary damages; "(c) the sum of FIFTY THOUSAND PESOS [P50,000.00] for nominal damages; and "(d) the sum of TEN THOUSAND PESOS [P10,000.00] for Attorney's Fees. "B. IN THE CASE AGAINST THE DEFENDANT MARIQUITA VILLASIN, FOR HERSELF AND FOR THE HEIRS OF THE DECEASED GERARDO VILLASIN "(1) Dismissing the complaint against the defendants Mariquita Villasin and the heirs of the deceased Gerardo Villasin; "(2) Directing the plaintiff to pay the defendants Mariquita Villasin and the heirs of Gerardo Villasin the cost of the suit. "C. IN THE CASE AGAINST THE DEFENDANT SINFOROSA R. BALES, ET AL., WHO WERE PLAINTIFFS IN CIVIL CASE NO. 3010 "(1) Dismissing the complaint against defendants Sinforosa R. Bales, Adela R. Herrer, Priscilla R. Solis, Luz R. Bakunawa, Anacorita R. Eng and Ruperto O. Reyes. "D. IN THE CASE AGAINST DEFENDANT BONIFACIO RAMO "(1) Dismissing the complaint against Bonifacio Ramo; "(2) Directing the plaintiff to pay the defendant Bonifacio Ramo the cost of the suit. "SO ORDERED" [pp. 531-533, rec.]. It is further disclosed by the record that the aforesaid decision was elevated to the Court of Appeals upon perfection of the appeal on February 22, 1971. I WE find that there is no merit in the contention of complainant Bernardita R. Macariola, under her first cause of action, that respondent Judge Elias B. Asuncion violated Article 1491, paragraph 5, of the New Civil Code in acquiring by purchase a portion of Lot No. 1184-E which was one of those properties involved in Civil Case No. 3010. That Article provides: "Article 1491. The following persons cannot acquire by purchase, even at a public or judicial action, either in person or through the mediation of another: xxx xxx xxx "(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of

acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession" [italics supplied]. The prohibition in the aforesaid Article applies only to the sale or assignment of the property which is the subject of litigation to the persons disqualified therein. WE have already ruled that ". . . for the prohibition to operate, the sale or assignment of the property must take place during the pendency of the litigation involving the property" (The Director of Lands vs. Ababa, et al., 88 SCRA 513, 519 [1979]; Rosario vda. de Laig vs. Court of Appeals, 86 SCRA 641, 646 [1978]). In the case at bar, when the respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E, the decision in Civil Case No. 3010 which he rendered on June 8, 1963 was already final because none of the parties therein filed an appeal within the reglementary period; hence, the lot in question was no longer subject of the litigation. Moreover, at the time of the sale on March 6, 1965, respondent's order dated October 23, 1963 and the amended order dated November 11, 1963 approving the October 16, 1963 project of partition made pursuant to the June 8, 1963 decision, had long become final for there was no appeal from said orders. Furthermore, respondent Judge did not buy the lot in question on March 6, 1965 directly from the plaintiffs in Civil Case No. 3010 but from Dr. Arcadio Galapon who earlier purchased on July 31, 1964 Lot 1184-E from three of the plaintiffs, namely, Priscilla Reyes, Adela Reyes, and Luz R. Bakunawa after the finality of the decision in Civil Case No. 3010. It may be recalled that Lot 1184 or more specifically one-half thereof was adjudicated in equal shares to Priscilla Reyes, Adela Reyes, Luz Bakunawa, Ruperto Reyes and Anacorita Reyes in the project of partition, and the same was subdivided into five lots denominated as Lot 1184-A to 1184-E. As aforestated, Lot 1184-E was sold on July 31, 1964 to Dr. Galapon for which he was issued TCT No. 2338 by the Register of Deeds of Tacloban City, and on March 6, 1965 he sold a portion of said lot to respondent Judge and his wife who declared the same for taxation purposes only. The subsequent sale on August 31, 1966 by spouses Asuncion and spouses Galapon of their respective shares and interest in said Lot 1184-E to the Traders Manufacturing and Fishing Industries, Inc., in which respondent was the president and his wife was the secretary, took place long after the finality of the decision in Civil Case No. 3010 and of the subsequent two aforesaid orders therein approving the project of partition. LLphil While it appears that complainant herein filed on or about November 9 or 11, 1968 an action before the Court of First Instance of Leyte docketed as Civil Case No. 4234, seeking to annul the project of partition and the two orders approving the same, as well as the partition of the estate and the subsequent conveyances, the same, however, is of no moment. The fact remains that respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E from Dr. Arcadio Galapon; hence, after the finality of the decision which he rendered on June 8, 1963 in Civil Case No. 3010 and his two questioned orders dated October 23, 1963 and November 11, 1963. Therefore, the property was no longer subject of litigation. The subsequent filing on November 9, or 11, 1968 of Civil Case No. 4234 can no longer alter, change or affect the aforesaid facts that the questioned sale to respondent Judge, now Court of Appeals Justice, was effected and consummated long after the finality of the aforesaid decision or orders.

Consequently, the sale of a portion of Lot 1184-E to respondent Judge having taken place over one year after the finality of the decision in Civil Case No. 3010 as well as the two orders approving the project of partition, and not during the pendency of the litigation, there was no violation of paragraph 5, Article 1491 of the New Civil Code. It is also argued by complainant herein that the sale on July 31, 1964 of Lot 1184-E to Dr. Arcadio Galapon by Priscilla Reyes, Adela Reyes and Luz R. Bakunawa was only a mere scheme to conceal the illegal and unethical transfer of said lot to respondent Judge as a consideration for the approval of the project of partition. In this connection, We agree with the findings of the Investigating Justice thus: "And so we are now confronted with this all-important question whether or not the acquisition by respondent of a portion of Lot 1184-E and the subsequent transfer of the whole lot to 'TRADERS' of which respondent was the President and his wife the Secretary, was intimately related to the Order of respondent approving the project of partition, Exh. A. "Respondent vehemently denies any interest or participation in the transactions between the Reyeses and the Galapons concerning Lot 1184-E, and he insists that there is no evidence whatsoever to show that Dr. Galapon had acted, in the purchase of Lot 1184-E, in mediation for him and his wife. (See p. 14 of Respondent's Memorandum). xxx xxx xxx "On this point, I agree with respondent that there is no evidence in the record showing that Dr. Arcadio Galapon acted as a mere 'dummy' of respondent in acquiring Lot 1184-E from the Reyeses. Dr. Galapon appeared to this investigator as a respectable citizen, credible and sincere, and I believe him when he testified that he bought Lot 1184-E in good faith and for valuable consideration from the Reyeses without any intervention of, or previous understanding with Judge Asuncion" (pp. 391394, rec.). On the contention of complainant herein that respondent Judge acted illegally in approving the project of partition although it was not signed by the parties, We quote with approval the findings of the Investigating Justice, as follows: "1. I agree with complainant that respondent should have required the signature of the parties more particularly that of Mrs. Macariola on the project of partition submitted to him for approval; however, whatever error was committed by respondent in that respect was done in good faith as according to Judge Asuncion he was assured by Atty. Bonifacio Ramo, the counsel of record of Mrs. Macariola, that he was authorized by his client to submit said project of partition, (See Exh. B and tsn. p. 24, January 20, 1969). While it is true that such written authority if there was any, was not presented by respondent in evidence, nor did Atty. Ramo appear to corroborate the statement of respondent, his affidavit being the only one that was presented as respondent's Exh. 10, certain actuations of Mrs. Macariola lead this investigator to believe that she knew the contents of the project of partition, Exh. A, and that she gave her conformity thereto. I refer to the following documents: "1) Exh. 9 Certified true copy of OCT No. 19520 covering Lot 1154 of the Tacloban Cadastral Survey in which the deceased Francisco

Reyes holds a '1/4 share' (Exh. 9-a). On this certificate of title the Order dated November 11, 1963, (Exh. U) approving the project of partition was duly entered and registered on November 26, 1963 (Exh. 9-D); "2) Exh. 7 Certified copy of a deed of absolute sale executed by Bernardita Reyes Macariola on October 22, 1963, conveying to Dr. Hector Decena the one-fourth share of the late Francisco Reyes-Diaz in Lot 1154. In this deed of sale the vendee stated that she was the absolute owner of said one-fourth share, the same having been adjudicated to her as her share in the estate of her father Francisco Reyes Diaz as per decision of the Court of First Instance of Leyte under case No. 3010 (Exh. 7-A). The deed of sale was duly registered and annotated at the back of OCT 19520 on December 3, 1963 (see Exh. 9-e). "In connection with the abovementioned documents it is to be noted that in the project of partition dated October 16, 1963, which was approved by respondent on October 23, 1963, followed by an amending Order on November 11, 1963, Lot 1154 or rather 1/4 thereof was adjudicated to Mrs. Macariola. It is this 1/4 share in Lot 1154 which complainant sold to Dr. Decena on October 22, 1963, several days after the preparation of the project of partition. "Counsel for complainant stresses the view, however, that the latter sold her one-fourth share in Lot 1154 by virtue of the decision in Civil Case 3010 and not because of the project of partition, Exh. A. Such contention is absurd because from the decision, Exh. C, it is clear that one-half of one-fourth of Lot 1154 belonged to the estate of Francisco Reyes Diaz while the other half of said one-fourth was the share of complainant's mother, Felisa Espiras; in other words, the decision did not adjudicate the whole of the one-fourth of Lot 1154 to the herein complainant (see Exhs. C-3 & C-4). Complainant became the owner of the entire one fourth of Lot 1154 only by means of the project of partition, Exh. A. Therefore, if Mrs. Macariola sold Lot 1154 on October 22, 1963, it was for no other reason than that she was well aware of the distribution of the properties of her deceased father as per Exhs. A and B. It is also significant at this point to state that Mrs. Macariola admitted during the cross-examination that she went to Tacloban City in connection with the sale of Lot 1154 to Dr. Decena (tsn. p. 92, November 28, 1968) from which we can deduce that she could not have been kept ignorant of the proceedings in civil case 3010 relative to the project of partition. "Complainant also assails the project of partition because according to her the properties adjudicated to her were insignificant lots and the least valuable. Complainant, however, did not present any direct and positive evidence to prove the alleged gross inequalities in the choice and distribution of the real properties when she could have easily done so by presenting evidence on the area, location, kind, the assessed and market value of said properties. Without such evidence there is nothing in the record to show that there were inequalities in the distribution of the properties of complainant's father" (pp. 386-389, rec.). Finally, while it is true that respondent Judge did not violate paragraph 5, Article 1491 of the New Civil Code in acquiring by purchase a portion of Lot 1184-E which was in litigation in his court, it was, however, improper for him to have acquired the same. He should be reminded of Canon 3 of the Canons of Judicial Ethics which requires that: "A

judge's official conduct should be free from the appearance of impropriety, and his personal behavior, not only upon the bench and in the performance of judicial duties, but also in his everyday life, should be beyond reproach." And as aptly observed by the Investigating Justice: ". . . it was unwise and indiscreet on the part of respondent to have purchased or acquired a portion of a piece of property that was or had been in litigation in his court and caused it to be transferred to a corporation of which he and his wife were ranking officers at the time of such transfer. One who occupies an exalted position in the judiciary has the duty and responsibility of maintaining the faith and trust of the citizenry in the courts of justice, so that not only must he be truly honest and just, but his actuations must be such as not give cause for doubt and mistrust in the uprightness of his administration of justice. In this particular case of respondent, he cannot deny that the transactions over Lot 1184-E are damaging and render his actuations open to suspicion and distrust. Even if respondent honestly believed that Lot 1184-E was no longer in litigation in his court and that he was purchasing it from a third person and not from the parties to the litigation, he should nonetheless have refrained from buying it for himself and transferring it to a corporation in which he and his wife were financially involved, to avoid possible suspicion that his acquisition was related in one way or another to his official actuations in civil case 3010. The conduct of respondent gave cause for the litigants in civil case 3010, the lawyers practising in his court, and the public in general to doubt the honesty and fairness of his actuations and the integrity of our courts of justice" (pp. 395-396, rec.). LexLib II With respect to the second cause of action, the complainant alleged that respondent Judge violated paragraphs 1 and 5, Article 14 of the Code of Commerce when he associated himself with the Traders Manufacturing and Fishing Industries, Inc. as a stockholder and a ranking officer, said corporation having been organized to engage in business. Said Article provides that: "Article 14 The following cannot engage in commerce, either in person or by proxy, nor can they hold any office or have any direct, administrative, or financial intervention in commercial or industrial companies within the limits of the districts, provinces, or towns in which they discharge their duties: "1. Justices of the Supreme Court, judges and officials of the department of public prosecution in active service. This provision shall not be applicable to mayors, municipal judges, and municipal prosecuting attorneys nor to those who by chance are temporarily discharging the functions of judge or prosecuting attorney. xxx xxx xxx "5. Those who by virtue of laws or special provisions may not engage in commerce in a determinate territory." It is Our considered view that although the aforestated provision is incorporated in the Code of Commerce which is part of the commercial laws of the Philippines, it, however, partakes of the nature of a political law as it regulates the relationship between the government and certain public officers and employees, like justices and judges. Political Law has been defined as that branch of public law which deals with the organization and operation of the governmental organs of the State and define the relations of the state with the inhabitants of its territory (People vs. Perfecto, 43 Phil. 887,

897 [1922]). It may be recalled that political law embraces constitutional law, law of public corporations, administrative law including the law on public officers and elections. Specifically, Article 14 of the Code of Commerce partakes more of the nature of an administrative law because it regulates the conduct of certain public officers and employees with respect to engaging in business; hence, political in essence. It is significant to note that the present Code of Commerce is the Spanish Code of Commerce of 1885, with some modifications made by the "Comision de Codificacion de las Provincias de Ultramar," which was extended to the Philippines by the Royal Decree of August 6, 1888, and took effect as law in this jurisdiction on December 1, 1888. Upon the transfer of sovereignty from Spain to the United States and later on from the United States to the Republic of the Philippines, Article 14 of this Code of Commerce must be deemed to have been abrogated because where there is change of sovereignty, the political laws of the former sovereign, whether compatible or not with those of the new sovereign, are automatically abrogated, unless they are expressly reenacted by affirmative act of the new sovereign. Thus, We held in Roa vs. Collector of Customs (23 Phil. 315, 330, 311 [1912]) that: "'By well-settled public law, upon the cession of territory by one nation to another, either following a conquest or otherwise, . . . those laws which are political in their nature and pertain to the prerogatives of the former government immediately cease upon the transfer of sovereignty.' (Opinion, Atty. Gen., July 10, 1899). "While municipal laws of the newly acquired territory not in conflict with the laws of the new sovereign continue in force without the express assent or affirmative act of the conqueror, the political laws do not. (Halleck's Int. Law, chap. 34, par. 14). However, such political laws of the prior sovereignty as are not in conflict with the constitution or institutions of the new sovereign, may be continued in force if the conqueror shall so declare by affirmative act of the commander-in-chief during the war, or by Congress in time of peace. (Ely's Administrator vs. United States, 171 U.S. 220, 43 L. Ed. 142). In the case of American and Ocean Ins. Cos. vs. 356 Bales of Cotton (1 Pet. [26 U.S.] 511, 542, 7 L. Ed. 242), Chief Justice Marshall said: 'On such transfer (by cession) of territory, it has never been held that the relations of the inhabitants with each other undergo any change. Their relations with their former sovereign are dissolved, and new relations are created between them and the government which has acquired their territory. The same act which transfers their country, transfers the allegiance of those who remain in it; and the law which may be denominated political, is necessarily changed, although that which regulates the intercourse and general conduct of individuals, remains in force, until altered by the newly-created power of the State.'" Likewise, in People vs. Perfecto (43 Phil. 887, 897 [1922]), this Court stated that: "It is a general principle of the public law that on acquisition of territory the previous political relations of the ceded region are totally abrogated." There appears no enabling or affirmative act that continued the effectivity of the aforestated provision of the Code of Commerce after the change of sovereignty from Spain to the United States and then to the Republic of the Philippines. Consequently,

Article 14 of the Code of Commerce has no legal and binding effect and cannot apply to the respondent, then Judge of the Court of First Instance, now Associate Justice of the Court of Appeals. It is also argued by complainant herein that respondent Judge violated paragraph H, Section 3 of Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, which provides that: "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: xxx xxx xxx "(h) Directly or indirectly having financial or pecuniary interest in any business, contract or transaction in connection with which he intervenes or takes part in his official capacity, or in which he is prohibited by the Constitution or by any law from having any interest." Respondent Judge cannot be held liable under the aforestated paragraph because there is no showing that respondent participated or intervened in his official capacity in the business or transactions of the Traders Manufacturing and Fishing Industries, Inc. In the case at bar, the business of the corporation in which respondent participated has obviously no relation or connection with his judicial office. The business of said corporation is not that kind where respondent intervenes or takes part in his capacity as Judge of the Court of First Instance. As was held in one case involving the application of Article 216 of the Revised Penal Code which has a similar prohibition on public officers against directly or indirectly becoming interested in any contract or business in which it is his official duty to intervene, "(I)t is not enough to be a public official to be subject to this crime: it is necessary that by reason of his office, he has to intervene in said contracts or transactions; and, hence, the official who intervenes in contracts or transactions which have no relation to his office cannot commit this crime" (People vs. Meneses, C.A. 40 O.G. 11th Supp. 134, cited by Justice Ramon C. Aquino; Revised Penal Code, p. 1174, Vol. II [1976]). It does not appear also from the records that the aforesaid corporation gained any undue advantage in its business operations by reason of respondent's financial involvement in it, or that the corporation benefited in one way or another in any case filed by or against it in court. It is undisputed that there was no case filed in the different branches of the Court of First Instance of Leyte in which the corporation was either party plaintiff or defendant except Civil Case No. 4234 entitled "Bernardita R. Macariola, plaintiff, versus Sinforosa O. Bales, et al.," wherein the complainant herein sought to recover Lot 1184-E from the aforesaid corporation. It must be noted, however, that Civil Case No. 4234 was filed only on November 9 or 11, 1968 and decided on November 2, 1970 by CFI Judge Jose D. Nepomuceno when respondent Judge was no longer connected with the corporation, having disposed of his interest therein on January 31, 1967. cdrep Furthermore, respondent is not liable under the same paragraph because there is no provision in both the 1935 and 1973 Constitutions of the Philippines, nor is there an existing law expressly prohibiting members of the Judiciary from engaging or having interest in any lawful business. It may be pointed out that Republic Act No. 296, as amended, also known as the Judiciary Act of 1948, does not contain any prohibition to that effect. As a matter of fact,

under Section 77 of said law, municipal judges may engage in teaching or other vocation not involving the practice of law after office hours but with the permission of the district judge concerned. Likewise, Article 14 of the Code of Commerce which prohibits judges from engaging in commerce is, as heretofore stated, deemed abrogated automatically upon the transfer of sovereignty from Spain to America, because it is political in nature. Moreover, the prohibition in paragraph 5, Article 1491 of the New Civil Code against the purchase by judges of a property in litigation before the court within whose jurisdiction they perform their duties, cannot apply to respondent Judge because the sale of the lot in question to him took place after the finality of his decision in Civil Case No. 3010 as well as his two orders approving the project of partition; hence, the property was no longer subject of litigation. In addition, although Section 12, Rule XVIII of the Civil Service Rules made pursuant to the Civil Service Act of 1959 prohibits an officer or employee in the civil service from engaging in any private business, vocation, or profession or be connected with any commercial, credit, agricultural or industrial undertaking without a written permission from the head of department, the same, however, may not fall within the purview of paragraph h, Section 3 of the Anti-Graft and Corrupt Practices Act because the last portion of said paragraph speaks of a prohibition by the Constitution or law on any public officer from having any interest in any business and not by a mere administrative rule or regulation. Thus, a violation of the aforesaid rule by any officer or employee in the civil service, that is, engaging in private business without a written permission from the Department Head may not constitute graft and corrupt practice as defined by law. On the contention of complainant that respondent Judge violated Section 12, Rule XVIII of the Civil Service Rules, We hold that the Civil Service Act of 1959 (R.A. No. 2260) and the Civil Service Rules promulgated thereunder, particularly Section 12 of Rule XVIII, do not apply to the members of the Judiciary. Under said Section 12: "No officer or employee shall engage directly in any private business, vocation, or profession or be connected with any commercial, credit, agricultural or industrial undertaking without a written permission from the Head of Department . . ." It must be emphasized at the outset that respondent, being a member of the Judiciary, is covered by Republic Act No. 296, as amended, otherwise known as the Judiciary Act of 1948 and by Section 7, Article X, 1973 Constitution. Under Section 67 of said law, the power to remove or dismiss judges was then vested in the President of the Philippines, not in the Commissioner of Civil Service, and only on two grounds, namely, serious misconduct and inefficiency, and upon the recommendation of the Supreme Court, which alone is authorized, upon its own motion, or upon information of the Secretary (now Minister) of Justice to conduct the corresponding investigation. Clearly, the aforesaid section defines the grounds and prescribes the special procedure for the discipline of judges. And under Sections 5, 6 and 7, Article X of the 1973 Constitution, only the Supreme Court can discipline judges of inferior courts as well as other personnel of the Judiciary. cdphil It is true that under Section 33 of the Civil Service Act of 1959: "The Commissioner may, for . . . violation of the existing Civil Service Law and rules or of reasonable office regulations, or in the interest of the service, remove any subordinate officer or employee from the service, demote him in rank, suspend him for not more than

one year without pay or fine him in an amount not exceeding six months' salary." Thus, a violation of Section 12 of Rule XVIII is a ground for disciplinary action against civil service officers and employees. However, judges cannot be considered as subordinate civil service officers or employees subject to the disciplinary authority of the Commissioner of Civil Service; for, certainly, the Commissioner is not the head of the Judicial Department to which they belong. The Revised Administrative Code (Section 89) and the Civil Service Law itself state that the Chief Justice is the department head of the Supreme Court (Sec. 20, R.A. No. 2260) [1959]); and under the 1973 Constitution, the Judiciary is the only other or second branch of the government (Sec. 1, Art. X, 1973 Constitution). Besides, a violation of Section 12, Rule XVIII cannot be considered as a ground for disciplinary action against judges because to recognize the same as applicable to them, would be adding another ground for the discipline of judges and, as aforestated, Section 67 of the Judiciary Act recognizes only two grounds for their removal, namely, serious misconduct and inefficiency. Moreover, under Section 16(i) of the Civil Service Act of 1959, it is the Commissioner of Civil Service who has original and exclusive jurisdiction "(T)o decide, within one hundred twenty days, after submission to it, all administrative cases against permanent officers and employees in the competitive service, and, except as provided by law, to have final authority to pass upon their removal, separation, and suspension and upon all matters relating to the conduct, discipline, and efficiency of such officers and employees; and prescribe standards, guidelines and regulations governing the administration of discipline" (emphasis supplied). There is no question that a judge belong to the non-competitive or unclassified service of the government as a Presidential appointee and is therefore not covered by the aforesaid provision. WE have already ruled that ". . . in interpreting Section 16(i) of Republic Act No. 2260, we emphasized that only permanent officers and employees who belong to the classified service come under the exclusive jurisdiction of the Commissioner of Civil Service" (Villaluz vs. Zaldivar, 15 SCRA 710, 713 [1965], Ang-Angco vs. Castillo, 9 SCRA 619 [1963]). Although the actuation of respondent Judge in engaging in private business by joining the Traders Manufacturing and Fishing Industries, Inc. as a stockholder and a ranking officer, is not violative of the provisions of Article 14 of the Code of Commerce and Section 3(h) of the Anti-Graft and Corrupt Practices Act as well as Section 12, Rule XVIII of the Civil Service Rules promulgated pursuant to the Civil Service Act of 1959, the impropriety of the same is clearly unquestionable because Canon 25 of the Canons of Judicial Ethics expressly declares that: "A judge should abstain from making personal investments in enterprises which are apt to be involved in litigation in his court; and, after his accession to the bench, he should not retain such investments previously made, longer than a period sufficient to enable him to dispose of them without serious loss. It is desirable that he should, so far as reasonably possible, refrain from all relations which would normally tend to arouse the suspicion that such relations warp or bias his judgment, or prevent his impartial attitude of mind in the administration of his judicial duties. . . ." WE are not, however, unmindful of the fact that respondent Judge and his wife had withdrawn on January 31, 1967 from the aforesaid corporation and sold their respective shares to third parties, and it appears also that the aforesaid corporation did not in anyway benefit in any case filed by or against it in court as there was no case filed in the different branches of the Court of First Instance of Leyte from the time of the

drafting of the Articles of Incorporation of the corporation on March 12, 1966, up to its incorporation on January 9, 1967, and the eventual withdrawal of respondent on January 31, 1967 from said corporation. Such disposal or sale by respondent and his wife of their shares in the corporation only 22 days after the in corporation of the corporation, indicates that respondent realized that early that their interest in the corporation contravenes the aforesaid Canon 25. Respondent Judge and his wife therefore deserve the commendation for their immediate withdrawal from the firm after its incorporation and before it became involved in any court litigation. III With respect to the third and fourth causes of action, complainant alleged that respondent was guilty of coddling an impostor and acted in disregard of judicial decorum, and that there was culpable defiance of the law and utter disregard for ethics. WE agree, however, with the recommendation of the Investigating Justice that respondent Judge be exonerated because the aforesaid causes of action are groundless, and WE quote the pertinent portion of her report which reads as follows: "The basis for complainant's third cause of action is the claim that respondent associated and closely fraternized with Dominador Arigpa Tan who openly and publicly advertised himself as a practising attorney (see Exhs. I, I-1 and J) when in truth and in fact said Dominador Arigpa Tan does not appear in the Roll of Attorneys and is not a member of the Philippine Bar as certified to in Exh. K. The "respondent denies knowing that Dominador Arigpa Tan was an 'impostor' and claims that all the time he believed that the latter was a bona fide member of the bar. I see no reason for disbelieving this assertion of respondent. It has been shown by complainant that Dominador Arigpa Tan represented himself publicly as an attorney-at-law to the extent of putting up a signboard with his name and the words 'Attorney-at-Law' (Exh. I and I-1) to indicate his office, and it was but natural for respondent and any person for that matter to have accepted that statement on its face value. "Now with respect to the allegation of complainant that respondent is guilty of fraternizing with Dominador Arigpa Tan to the extent of permitting his wife to be a godmother of Mr. Tan's child at baptism (Exh. M & M-1), that fact even if true did not render respondent guilty of violating any canon of judicial ethics as long as his friendly relations with Dominador A. Tan and family did not influence his official actuations as a judge where said persons were concerned. There is no tangible convincing proof that herein respondent gave any undue privileges in his court to Dominador Arigpa Tan or that the latter benefitted in his practice of law from his personal relations with respondent, or that he used his influence, if he had any, on the Judges of the other branches of the Court to favor said Dominador Tan. "Of course it is highly desirable for a member of the judiciary to refrain as much as possible from maintaining close friendly relations with practising attorneys and litigants in his court so as to avoid suspicion 'that his social or business relations or friendship constitute an element in determining his judicial course" (par. 30, Canons of Judicial Ethics), but if a Judge does have social relations, that in itself would not constitute a ground for disciplinary action unless it be clearly shown that his social

relations beclouded his official actuations with bias and partiality in favor of his friends" (pp. 403-405, rec.). In conclusion, while respondent Judge Asuncion, now Associate Justice of the Court of Appeals, did not violate any law in acquiring by purchase a parcel of land which was in litigation in his court and in engaging in business by joining a private corporation during his incumbency as judge of the Court of First Instance of Leyte, he should be reminded to be more discreet in his private and business activities, because his conduct as a member of the Judiciary must not only be characterized with propriety but must always be above suspicion. LibLex WHEREFORE, THE RESPONDENT ASSOCIATE JUSTICE OF THE COURT OF APPEALS IS HEREBY REMINDED TO BE MORE DISCREET IN HIS PRIVATE AND BUSINESS ACTIVITIES. SO ORDERED. Teehankee, Guerrero, De Castro, Melencio-Herrera, Plana, Vasquez, Relova and Gutierrez, JJ., concur. Fernando, C.J. Abad Santos and Escolin, JJ., took no part. Barredo, J., I vote with Justice Aquino. Aquino, J., I vote for respondent's unqualified exoneration. Concepcion, Jr., J., is on leave.

EN BANC [A.C. No. 1302. April 26, 1991.] PAULINO VALENCIA, complainant, vs. ATTY. ARSENIO FER. CABANTING, respondent.

[A.C. No. 1391. April 26, 1991.] CONSTANCIA L. VALENCIA, complainant, vs. ATTY. DIONISIO C. ANTINIW, ATTY. EDUARDO U. JOVELLANOS and ATTY. ARSENIO FER. CABANTING, respondents.

[A.C. No. 1543. April 26, 1991.] LYDIA BERNAL, complainant, vs. ATTY. DIONISIO C. ANTINIW, respondent.

SYLLABUS
1. LEGAL AND JUDICIAL ETHICS; ATTORNEY AND CLIENT; PROHIBITED TRANSACTIONS. Public policy prohibits the transactions in view of the fiduciary relationship involved. It is intended to curtail any undue influence of the lawyer upon his client. Greed may get the better of the sentiments of loyalty and disinterestedness. Any violation of this prohibition would constitute malpractice (In re Attorney Melchor Ruste, 40 O.G. p. 78) and is a ground for suspension. (Beltran vs. Fernandez, 70 Phil. 248). 2. ID.; ID.; ID.; APPLIES WHILE LITIGATION IS PENDING. Art. 1491, prohibiting the sale to the counsel concerned, applies only while the litigation is pending. (Director of Lands vs. Adaba, 88 SCRA 513; Hernandez vs. Villanueva, 40 Phil. 775). 3. ID.; ID.; ID.; ID.; A THING IS IN LITIGATION WHILE A CERTIORARI IS STILL IN PROGRESS; CASE AT BAR. In the case at bar, while it is true that Atty. Arsenio Fer Cabanting purchased the lot after finality of judgment, there was still a pending certiorari proceeding. A thing is said to be in litigation not only if there is some contest or litigation over it in court, but also from the moment that it becomes subject to the judicial action of the judge. (Gan Tingco vs. Pabinguit, 35 Phil. 81). Logic dictates, in certiorari proceedings, that the appellate court may either grant or dismiss the petition. Hence, it is not safe to conclude, for purposes under Art. 1491 that the litigation has terminated when the judgment of the trial court become final while a certiorari connected therewith is still in progress. Thus, purchase of the property by Atty. Cabanting in this case constitutes malpractice in violation of Art. 1491 and the Canons of Professional Ethics. Clearly, this malpractice is a ground for suspension. 4. REMEDIAL LAW; EVIDENCE; CREDIBILITY OF WITNESSES; AFFIRMATIVE TESTIMONY IS GIVEN GREATER WEIGHT THAN NEGATIVE TESTIMONY. It is asserted by Paulino that Atty. Antiniw asked for and received the sum of P200.00 in consideration of his executing the document "Compraventa Definitiva" which would show that Paulino bought the property. This charge, Atty. Antiniw simply denied. It is settled jurisprudence that affirmative testimony is given greater weight than negative testimony (Bayasen vs. CA, L-25785, Feb. 26, 1981; Vda. de Ramos vs. CA, et al., L-40804, Jan. 31, 1978). When an individual's integrity is challenged by evidence, it is not enough that he deny the charges against him; he must meet the issue and overcome the evidence for the relator and show proofs that he still maintains the highest degree of morality and integrity which at all time is expected of him. (De los Reyes vs. Aznar, Adm. Case No. 1334, Nov. 28, 1989). 5. ID.; ID.; ID.; TESTIMONY OF A FARMER WHO FINISHED ONLY GRADE IV ON DELICATE SUBJECT GIVEN CREDENCE. Although Paulino was a common farmer who finished only Grade IV, his testimony, even if not corroborated by another witness, deserves credence and can be relied upon. His declaration dwelt on a subject which was so delicate and confidential that it would be difficult to believe that he fabricated his evidence.

6. LEGAL AND JUDICIAL ETHICS; ATTORNEY AND CLIENT; FIRST DUTY OF A LAWYER IS NOT TO CLIENT BUT TO ADMINISTRATION OF JUSTICE. A lawyer owes entire devotion to the interest of his client (Santos vs. Dichoso, 84 SCRA 622), but not at the expense of truth. (Cosmos Foundry Shop workers Union vs. La Bu, 63 SCRA 313). The first duty of a lawyer is not to his client but to the administration of justice. (Lubiano vs. Gordalla, 115 SCRA 459) To that end, his client's success is wholly subordinate. His conduct ought to and must always be scrupulously observant of law and ethics. While a lawyer must advocate his client's cause in utmost earnestness and with the maximum skill he can marshal, he is not at liberty to resort to illegal means for his client's interest. It is the duty of an attorney to employ, for the purpose of maintaining the causes confided to him, such means as are consistent with truth and honor. (Pangan vs. Ramos, 93 SCRA 87). 7. ID.; DISBARMENT; NOT MEANT AS PUNISHMENT BUT INTENDED TO PROTECT THE ADMINISTRATION OF JUSTICE. Membership in the Bar is a privilege burdened with conditions. By far, the most important of them is mindfulness that a lawyer is an officer of the court. (In re: Ivan T. Publico, 102 SCRA 722). This Court may suspend or disbar a lawyer whose acts show his unfitness to continue as a member of the Bar. (Halili vs. CIR, 136 SCRA 112). Disbarment, therefore, is not meant as a punishment depriving him of a source of livelihood but is rather intended to protect the administration of justice by requiring that those who exercise this function should be competent, honorable and reliable in order that courts and the public may rightly repose confidence in them. (Noriega vs. Sison, 125 SCRA 293). Atty. Antiniw failed to live up to the high standards of the law profession. 8. ID.; ID.; RESPONDENT LAWYER SHOULD BE GIVEN OPPORTUNITY TO CROSS-EXAMINE WITNESSES. Procedural due process demands that respondent lawyer should be given an opportunity to cross-examine the witnesses against him. He enjoys the legal presumption that he is innocent of the charges against him until the contrary is proved. (Santos vs. Dichoso, 84 SCRA 622). The case must be established by clear, convincing and satisfactory proof. (Camus vs. Diaz, Adm. Case No. 1616, February 9, 1989). Since Atty. Antiniw was not accorded this procedural due process, it is but proper that the direct testimony of Lydia Bernal be stricken out. 9. ID.; ID.; AFFIDAVIT OF DESISTANCE DOES NOT RESULT IN DISMISSAL OF CASE; EXCEPTION. In view also of the affidavit of desistance executed by the complainant, Administrative Case No. 1543 should be dismissed. Although the filing of an affidavit of desistance by complainant for lack of interest does not ipso facto result in the termination of a case for suspension or disbarment of an erring lawyer. (Munar vs. Flores, 122 SCRA 448), We are constrained in the case at bar, to dismiss the same because there was no evidence to substantiate the charges. 10. REMEDIAL LAW; EVIDENCE; HEARSAY. The additional charge against Atty. Antiniw in Administrative Case No. 1391 is predicated on the information furnished by Lydia Bernal. It was not based on the personal knowledge of Constancia L. Valencia: hence, hearsay. "Any evidence, whether oral or documentary, is hearsay if its probative value is not based on the personal knowledge of the witness but on the knowledge of some other person not on the witness stand." (Regalado, Remedial Law Compendium, 6th ed., vol. 2, 1989, p. 486). Being hearsay, the evidence presented is inadmissible. 11. LEGAL AND JUDICIAL ETHICS; ATTORNEY; CAMARADERIE AMONG LAWYERS IS NOT PROOF OF CONSPIRACY. Besides, the camaraderie among lawyers is not proof of conspiracy, but a sign of brotherhood among them. One of the fourfold duties of a lawyer in his duty to the Bar. A lawyer should treat the opposing counsel, and his brethren in the law profession, with courtesy, dignity and civility. They may "do as adversaries do in the law: strive mightily but (they) eat and drink as friends." This friendship does not connote conspiracy.

DECISION

PER CURIAM p: These consolidated administrative cases seek to disbar respondents Dionisio Antiniw, Arsenio Fer Cabanting and Eduardo Jovellanos (the last named, now an MCTC Judge) for grave malpractice and misconduct in the exercise of their legal profession committed in the following manner: 1. Administrative Cases No. 1302 and 1391 In 1933, complainant Paulino Valencia (Paulino in short) and his wife Romana allegedly bought a parcel of land, where they built their residential house, from a certain Serapia Raymundo, an heir of

Pedro Raymundo the original owner. However, they failed to register the sale or secure a transfer certificate of title in their names. Sometime in December, 1968, a conference was held in the house of Atty. Eduardo Jovellanos to settle the land dispute between Serapia Raymundo (Serapia in short) another heir of Pedro Raymundo, and the Valencia spouses since both were relatives and distant kin of Atty. Jovellanos. Serapia was willing to relinquish ownership if the Valencias could show documents evidencing ownership. Paulino exhibited a deed of sale written in the Ilocano dialect. However, Serapia claimed that the deed covered a different property. Paulino and Serapia were not able to settle their differences. (Report of Investigating Judge Catalino Castaeda, Jr., pp. 21-22). On December 15, 1969 Serapia, assisted by Atty. Arsenio Fer Cabanting, filed a complaint against Paulino for the recovery of possession with damages. The case was docketed as Civil Case No. V2170, entitled "Serapia Raymundo, Plaintiff, versus Paulino Valencia, Defendant." (Report, p. 11) Summoned to plead in Civil Case No. V-2170, the Valencias engaged the services of Atty. Dionisio Antiniw. Atty. Antiniw advised them to present a notarized deed of sale in lieu of the private document written in Ilocano. For this purpose, Paulino gave Atty. Antiniw an amount of P200.00 to pay the person who would falsify the signature of the alleged vendor (Complaint, p. 2; Rollo, p. 7). A "Compraventa Definitiva" (Exh. B) was executed purporting to be a sale of the questioned lot. llcd On January 22, 1973, the Court of First Instance of Pangasinan, Branch V, rendered a decision in favor of plaintiff, Serapia Raymundo. The lower court expressed the belief that the said document is not authentic. (Report, p. 14).

Paulino, thereafter, filed a Petition for Certiorari, under Rule 65, with Preliminary Injunction before the Court of Appeals alleging that the trial court failed to provide a workable solution concerning his house. While the petition was pending, the trial court, on March 9, 1973, issued an order of execution stating that "the decision in this case has already become final and executory" (Exhibits 3 and 3-A). On March 14, 1973, a writ of execution was issued. On March 20, 1973, Serapia sold 40 square meters of the litigated lot to Atty. Jovellanos and the remaining portion she sold to her counsel, Atty. Arsenio Fer Cabanting, on April 25, 1973. (Annex "A" of Administrative Case No. 1302). On March 4, 1974, Paulino filed a disbarment proceeding (docketed as Administrative Case No. 1302) against Atty. Cabanting on the ground that said counsel allegedly violated Article 1491 of the New Civil Code as well as Article II of the Canons of Professional Ethics, prohibiting the purchase of property under litigation by a counsel. On March 21, 1974 the appellate court dismissed the petition of Paulino. On October 14, 1974, Constancia Valencia, daughter of Paulino, filed a disbarment proceeding (docketed as Administrative Case No. 1391) against Atty. Dionisio Antiniw for his participation in the forgery of "Compraventa Definitiva" and its subsequent introduction as evidence for his client; and also, against Attys. Eduardo Jovellanos and Arsenio Cabanting for purchasing a litigated property allegedly in violation of Article 1491 of the New Civil Code; and against the three lawyers, for allegedly rigging Civil Case No. V-2170 against her parents. On August 17, 1975, Constancia Valencia filed additional charges against Atty. Antiniw and Atty. Jovellanos as follows:

"1. AGAINST ATTY. DIONISIO ANTINIW: "In the year 1973 Atty. Dionisio Antiniw fraudulently and in confabulation with one Lydia Bernal had a deed of sale, fabricated, executed and ratified before him as Notary Public by one Santiago Bernal in favor of Lydia Bernal when as a matter of fact said Santiago Bernal had died already about eight years before in the year 1965. "2. AGAINST ATTY. EDUARDO JOVELLANOS: "In the year 1954 Atty. Eduardo Jovellanos, fraudulently and in bad faith, in confabulation with Rosa de los Santos as vendee had, as Notary Public, executed and ratified before him, two (2) deeds of sale in favor of said Rosa de los Santos when as a matter of fact the said deeds were not in fact executed by the supposed vendor Rufino Rincoraya and so said Rufino Rincoraya had filed a Civil Case in Court to annul and declare void the said sales." (p. 7, Report) 2. Administrative Case No. 1543. A deed of donation propter nuptias, involving the transfer of a piece of land by the grandparents of Lydia Bernal (complainant) in favor of her parents, was lost during the last world war. For this reason, her grandmother (the living donor) executed a deed of confirmation of the donation propter nuptias with renunciation of her rights over the property. (Complaint, p. 1). Notwithstanding the deed, her grandmother still offered to sell the same property in favor of the complainant, ostensibly to strengthen the deed of donation (to prevent others from claiming the property). prLL On consultation, Atty. Antiniw advised them to execute a deed of sale. Atty. Antiniw allegedly prepared and notarized the deed of sale in the name of her grandfather (deceased at the time of signing) with her grandmother's approval. Felicidad Bernal-Duzon, her aunt who had a claim over the property, filed a complaint against her (Lydia Bernal) and her counsel, Atty. Antiniw for falsification of a public document. (Complaint, pp. 12) The fiscal exonerated the counsel for lack of evidence, while a case was filed in court against Lydia Bernal. On October 3, 1975, Lydia Bernal filed a disbarment proceeding (docketed as Administrative Case No. 1543) against Atty. Antiniw for illegal acts and bad advice. Pursuant to the resolution of the First Division of this Court dated December 9, 1974, the resolution of the Second Division dated March 3, 1975 and the two resolutions of the Second Division both dated December 3, 1975, Administrative Cases Nos. 1302, 1391 and 1543 were referred to the Office of the Solicitor General for investigation, report and recommendation. Upon formal request of Constancia L. Valencia and Lydia Bernal dated March 3, 1976, all of these cases were ordered consolidated by Solicitor General Estelito P. Mendoza per his handwritten directive of March 9, 1976. On April 12, 1988, We referred the investigation of these cases to the Integrated Bar of the Philippines. When Atty. Jovellanos was appointed as Municipal Circuit Trial Court Judge of AlcalaBautista, Pangasinan, We referred the investigation of these cases to Acting Presiding Judge Cesar Mindaro, Regional Trial Court, Branch 50, Villasis, Pangasinan, for further investigation. In view of the seriousness of the charge against the respondents and the alleged threats against the

person of complainant Constancia L. Valencia, We directed the transfer of investigation to the Regional Trial Court of Manila. The three administrative cases were raffled to Branch XVII of the Regional Trial Court of Manila, under the sala of Judge Catalino Castaeda, Jr. After investigation, Judge Catalino Castaeda, Jr., recommended the dismissal of cases against Atty. Jovellanos and Atty. Arsenio Fer Cabanting; dismissal of Administrative Case No. 1543 and the additional charges in Administrative Case No. 1391 against Antiniw and Judge Jovellanos; however, he recommended the suspension of Atty. Antiniw from the practice of law for six months finding him guilty of malpractice in falsifying the "Compraventa Definitiva." The simplified issues of these consolidated cases are: I. Whether or not Atty. Cabanting purchased the subject property in violation of Art. 1491 of the New Civil Code. cdll II. Whether or not Attys. Antiniw and Jovellanos are guilty of malpractice in falsifying notarial documents. III. Whether or not the three lawyers connived in rigging Civil Case No. V-2170. I Under Article 1491 of the New Civil Code: The following persons cannot acquire by purchase, even at a public of judicial auction, either in person or through the mediation of another: xxx xxx xxx (5) . . .this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they make take part by virtue of their profession. Public policy prohibits the transactions in view of the fiduciary relationship involved. It is intended to curtail any undue influence of the lawyer upon his client. Greed may get the better of the sentiments of loyalty and disinterestedness. Any violation of this prohibition would constitute malpractice (In re Attorney Melchor Ruste, 40 O.G. p. 78) and is a ground for suspension. (Beltran vs. Fernandez, 70 Phil. 248). Art. 1491, prohibiting the sale to the counsel concerned, applies only while the litigation is pending. (Director of Lands vs. Adaba, 88 SCRA 513; Hernandez vs. Villanueva, 40 Phil. 775). In the case at bar, while it is true that Atty. Arsenio Fer Cabanting purchased the lot after finality of judgment, there was still a pending certiorari proceeding. A thing is said to be in litigation not only if there is some contest or litigation over it in court, but also from the moment that it becomes subject to the judicial action of the judge. (Gan Tingco vs. Pabinguit, 35 Phil. 81). Logic dictates, in certiorari proceedings, that the appellate court may either grant or dismiss the petition. Hence, it is not safe to conclude, for purposes under Art. 1491 that the litigation has terminated when the judgment of the trial court become final while a certiorari connected therewith is still in progress. Thus, purchase of the property by Atty. Cabanting in this case constitutes malpractice in violation of Art. 1491 and the Canons of Professional Ethics. Clearly, this malpractice is a ground for suspension.

The sale in favor of Atty. Jovellanos does not constitute malpractice. There was no attorney-client relationship between Serapia and Atty. Jovellanos, considering that the latter did not take part as counsel in Civil Case No. V-2170. The transaction is not covered by Art. 1491 nor by the Canons adverted to. II It is asserted by Paulino that Atty. Antiniw asked for and received the sum of P200.00 in consideration of his executing the document "Compraventa Definitiva" which would show that Paulino bought the property. This charge, Atty. Antiniw simply denied. It is settled jurisprudence that affirmative testimony is given greater weight than negative testimony (Bayasen vs. CA, L-25785, Feb. 26, 1981; Vda. de Ramos vs. CA, et al., L-40804, Jan. 31, 1978). When an individual's integrity is challenged by evidence, it is not enough that he deny the charges against him; he must meet the issue and overcome the evidence for the relator and show proofs that he still maintains the highest degree of morality and integrity which at all time is expected of him. (De los Reyes vs. Aznar, Adm. Case No. 1334, Nov. 28, 1989). Although Paulino was a common farmer who finished only Grade IV, his testimony, even if not corroborated by another witness, deserves credence and can be relied upon. His declaration dwelt on a subject which was so delicate and confidential that it would be difficult to believe the he fabricated his evidence. llcd There is a clear preponderant evidence that Atty. Antiniw committed falsification of a deed of sale, and its subsequent introduction in court prejudices his prime duty in the administration of justice as an officer of the court. A lawyer owes entire devotion to the interest of his client (Santos vs. Dichoso, 84 SCRA 622), but not at the expense of truth. (Cosmos Foundry Shop workers Union vs. La Bu, 63 SCRA 313). The first duty of a lawyer is not to his client but to the administration of justice. (Lubiano vs. Gordalla, 115 SCRA 459) To that end, his client's success is wholly subordinate. His conduct ought to and must always be scrupulously observant of law and ethics. While a lawyer must advocate his client's cause in utmost earnestness and with the maximum skill he can marshal, he is not at liberty to resort to illegal means for his client's interest. It is the duty of an attorney to employ, for the purpose of maintaining the causes confided to him, such means as are consistent with truth and honor. (Pangan vs. Ramos, 93 SCRA 87).

Membership in the Bar is a privilege burdened with conditions. By far, the most important of them is mindfulness that a lawyer is an officer of the court. (In re: Ivan T. Publico, 102 SCRA 722). This Court may suspend or disbar a lawyer whose acts show his unfitness to continue as a member of the Bar. (Halili vs. CIR, 136 SCRA 112). Disbarment, therefore, is not meant as a punishment depriving him of a source of livelihood but is rather intended to protect the administration of justice by requiring that those who exercise this function should be competent, honorable and reliable in order that courts and the public may rightly repose confidence in them. (Noriega vs. Sison, 125 SCRA 293). Atty. Antiniw failed to live up to the high standards of the law profession. The other charges of malpractice against Atty. Antiniw and Atty. Jovellanos should be dismissed for lack of evidence. During the proceedings in Administrative Case No. 1543, Lydia Bernal testified in full on direct examination, but she never submitted herself for cross-examination. Several subpoenas for crossexamination were unheeded. She eventually requested the withdrawal of her complaint.

Procedural due process demands that respondent lawyer should be given an opportunity to crossexamine the witnesses against him. He enjoys the legal presumption that he is innocent of the charges against him until the contrary is proved. (Santos vs. Dichoso, 84 SCRA 622). The case must be established by clear, convincing and satisfactory proof. (Camus vs. Diaz, Adm. Case No. 1616, February 9, 1989). Since Atty. Antiniw was not accorded this procedural due process, it is but proper that the direct testimony of Lydia Bernal be stricken out. In view also of the affidavit of desistance executed by the complainant, Administrative Case No. 1543 should be dismissed. Although the filing of an affidavit of desistance by complainant for lack of interest does not ipso facto result in the termination of a case for suspension or disbarment of an erring lawyer. (Munar vs. Flores, 122 SCRA 448), We are constrained in the case at bar, to dismiss the same because there was no evidence to substantiate the charges. The additional charge against Atty. Antiniw in Administrative Case No. 1391 is predicated on the information furnished by Lydia Bernal. It was not based on the personal knowledge of Constancia L. Valencia: hence, hearsay. "Any evidence, whether oral or documentary, is hearsay if its probative value is not based on the personal knowledge of the witness but on the knowledge of some other person not on the witness stand." (Regalado, Remedial Law Compendium, 6th ed., vol. 2, 1989, p. 486). Being hearsay, the evidence presented is inadmissible. LLjur The additional charge filed by Constancia L. Valencia against Atty. Jovellanos in Administrative Case No. 1391 was not proved at all. Complainant failed to prove her additional charges. III There is no evidence on record that the three lawyers involved in these administrative cases conspired in executing the falsified "Compraventa Definitiva" and rigged the Civil Case No. V-2170. Atty. Jovellanos is a distant kin of the Raymundos and Valencias. In fact, he and the Valencias are neighbors and only two meters separate their houses. It would not be believable that Atty. Jovellanos, a practicing lawyer, would hold a meeting with the heirs of Pedro Raymundo in his house with the intention of inducing them to sue the Valencias. Atty. Jovellanos even tried to settle the differences between the parties in a meeting held in his house. He appeared in Civil Case No. V-2170 as an involuntary witness to attest to the holding of the conference. Besides, the camaraderie among lawyers is not proof of conspiracy, but a sign of brotherhood among them. One of the fourfold duties of a lawyer in his duty to the Bar. A lawyer should treat the opposing counsel, and his brethren in the law profession, with courtesy, dignity and civility. They may "do as adversaries do in the law: strive mightily but (they) eat and drink as friends." This friendship does not connote conspiracy. WHEREFORE, judgment is hereby rendered declaring: 1. Dionisio Antiniw DISBARRED from the practice of law, and his name is ordered stricken off from the roll of attorneys; 2. Arsenio Fer Cabanting SUSPENDED from the practice of law for six months from finality of this judgment; and 3. Administrative Case No. 1391 against Attorney Eduardo Jovellanos and additional charges therein, and Administrative Case No. 1543 DISMISSED. SO ORDERED. Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Grio-Aquino, Medialdea, Regalado and Davide, Jr., JJ., concur.

FIRST DIVISION [G.R. No. 32977. November 17, 1930.] THE MUNICIPAL COUNCIL OF ILOILO, plaintiff-appellee, vs. JOSE EVANGELISTA ET AL., defendants-appellees. TAN ONG SZE VDA. DE TAN TOCO, appellant.

Trenas & Laserna for defendant-appellant. Provincial Fiscal Blanco of Iloilo for plaintiff-appellee. Felipe Ysmael for appellee Mauricio Cruz & Co. No appearance for other appellees. SYLLABUS
1. PRINCIPAL AND AGENT; POWER OF AGENT; PAYMENTS OF ATTORNEYS' FEES. An agent or attorney-in-fact empowered to pay the debts of the principal, and to employ attorneys to defend the latter's interests, is impliedly empowered to pay the attorney's fees for services rendered in the interests of said principal, and may satisfy them by an assignment of a judgment rendered in favor of said principal. 2. ID.; APPOINTMENT OF TWO AGENTS. When a person appoints two agents independently, the consent of one will not be required to validate the acts of the other, unless that appears positively to have been the principal's attention. 3. JUDGMENT; ASSIGNMENT OF AMOUNT FOR PROFESSIONAL SERVICES. The assignment of the amount of a judgment made by a person to his attorney, who has not taken any part in the case wherein said judgment was rendered, made in payment of professional services in other cases, does not contravene the prohibition of article 1459, case 5, of the Civil Code.

DECISION

VILLA-REAL, J p: This is an appeal taken by the defendant Tan Ong Sze Vda. de Tan Toco from the judgment of the Court of First Instance of Iloilo, providing as follows: "Wherefore, judgment is hereby rendered, declaring valid and binding the deed of assignment of the credit executed by Tan Toco's widow, through her attorney-in-fact Tan Buntiong, in favor of the late Antero Soriano; likewise the assignment executed by the latter during his lifetime in favor of the defendant Mauricio Cruz & Co., Inc., and the plaintiff is hereby ordered to pay the said Mauricio Cruz & Co., Inc., the balance of P30,966.40; the plaintiff is also ordered to deposit said sum in a local bank within the period of ninety days from the time this judgment shall become final, at the disposal of the aforesaid Mauricio Cruz & Co., Inc., and in case that the plaintiff shall not make such deposit in the manner indicated, said amount shall bear the legal interest of six per cent per annum from the date when the plaintiff shall fail to make the deposit within the period herein set forth, until fully paid.

"Without special pronouncement of costs." In support of its appeal, the appellant assigns the following alleged errors as committed by the trial court in its decision, to wit: "1. The lower court erred in rejecting as evidence Exhibit 4-A, Tan Toco, and Exhibit 4-B, Tan Toco. "2. The lower court erred in sustaining the validity of the deed of assignment of the credit, Exhibit 2-Cruz, instead of finding that said assignment made by Tan Buntiong to Attorney Antero Soriano was null and void. "3. The lower court erred in upholding the assignment of that credit by Antero Soriano to Mauricio Cruz & Co., Inc., instead of declaring it null and void. "4. The court below erred in holding that the balance of the credit against the municipality of Iloilo should be adjudicated to the appellant herein, Tan Toco's widow. "5. The lower court erred in denying the motion for a new trial filed by the defendant-appellant." The facts of the case are as follows: On March 20, 1924, the Court of First Instance of Iloilo rendered judgment in civil case No. 3514 thereof, wherein the appellant herein, Tan Ong Sze Vda. de Tan Toco was the plaintiff, and the municipality of Iloilo the defendant, and the former sought to recover of the latter the value of a strip of land belonging to said plaintiff taken by the defendant to widen a public street; the judgment entitled the plaintiff to recover P42,966.40, representing the value of said strip of land, from the defendant (Exhibit A). On appeal to this court (G. R. No. 22617) 1 the judgment was affirmed on November 28, 1924 (Exhibit B). After the case was remanded to the court of origin, and the judgment rendered therein had become final and executory, Attorney Jose Evangelista, in his own behalf and as counsel for the administratrix of Jose Ma. Arroyo's intestate estate, filed a claim in the same case for professional services rendered by him, which the court, acting with the consent of the appellant widow, fixed at 15 per cent of the amount of the judgment (Exhibit 22 Soriano). At the hearing on said claim, the claimants appeared, as did also the Philippine National Bank, which prayed that the amount of the judgment be turned over to it because the land taken over had been mortgaged to it. Antero Soriano also appeared claiming the amount of the judgment as it had been assigned to him, and by him, in turn, assigned to Mauricio Cruz & Co., Inc. After hearing all the adverse claims on the amount of the judgment, the court ordered that the attorney's lien in the amount of 15 per cent of the judgment, be recorded in favor of Attorney Jose Evangelista, in his own behalf and as counsel for the administratrix of the deceased Jose Ma. Arroyo, and directed the municipality of Iloilo to file an action of interpleading against the adverse claimants, the Philippine National Bank, Antero Soriano, Mauricio Cruz & Co., Jose Evangelista, and Jose Arroyo, as was done, the case being filed in the Court of First Instance of Iloilo as civil case No. 7702. After due hearing, the court rendered the decision quoted from at the beginning. On March 29, 1928, the municipal treasurer of Iloilo, with the approval of the auditor, of the provincial treasurer of Iloilo, and of the Executive Bureau, paid the late Antero Soriano the amount of P6,000 in part payment of the judgment mentioned above, assigned to him by Tan Boon Tiong, acting as attorney-in-fact of the appellant herein, Tan Ong Sze Vda. de Tan Toco. On December 18, 1928, the municipal treasurer of Iloilo deposited with the clerk of the

Court of First Instance of Iloilo the amount of P6,000 on account of the judgment rendered in said civil case No. 3514. In pursuance of the resolution of the court below ordering that the attorney's lien in the amount of 15 per cent of the judgment be recorded in favor of Attorney Jose Evangelista, in his own behalf and as counsel for the late Jose Ma. Arroyo, the said clerk of court delivered on the same date to said Attorney Jose Evangelista the said amount of P6,000. At the hearing of the instant case, the codefendants of Attorney Jose Evangelista agreed not to discuss the payment made to the latter by the clerk of the Court of First Instance of Iloilo of the amount of P6,000 mentioned above in consideration of said lawyer's waiver of the remainder of the 15 per cent of said judgment amounting to P444.69. With these two payments of P6,000 each making a total of P12,000, the judgment for P42,966.44 against the municipality of Iloilo was reduced to P30,966.40, which was adjudicated by said court to Mauricio Cruz & Co. This appeal, then, is confined to the claim of Mauricio Cruz & Co. as alleged assignee of the rights of the late Attorney Antero Soriano by virtue of the said judgment in payment of professional services rendered by him to the said widow and her coheirs. The only question to be decided in this appeal is the legality of the assignment made by Tan Boon Tiong, as attorney-in-fact of the appellant Tan Ong Sze Viuda de Tan Toco, to Attorney Antero Soriano, of all the credits, rights and interests belonging to said appellant Tan Ong Sze Viuda de Tan Toco by virtue of the judgment rendered in civil case No. 3514 of the Court of First Instance of Iloilo, entitled Viuda de Tan Toco vs. The Municipal Council of Iloilo, adjudicating to said widow the amount of P42,966.40, plus the costs of court, against said municipal council of Iloilo, in consideration of professional services rendered by said attorney to said widow of Tan Toco and her coheirs, by virtue of the deed Exhibit 2. The appellant contends, in the first place, that said assignment was not made in consideration of professional services by Attorney Antero Soriano, for they had already been satisfied before the execution of said deed of assignment, but in order to facilitate the collection of the amount of said judgment in favor of the appellant, for the reason that, being Chinese, she had encountered many difficulties in trying to collect. In support of her contention on this point, the appellant alleges that the payments admitted by the court in its judgment, as made by Tan Toco's widow to Attorney Antero Soriano for professional services rendered to her and to her coheirs, amounting to P2,900, must be added to the P700 evidenced by Exhibits 4-A, Tan Toco, and 4-B, Tan Toco, respectively, which exhibits the court below rejected as evidence, on the ground that they were considered as payments made for professional services rendered, not by Antero Soriano personally, but by the firm of Soriano & Arroyo. A glance at these receipts shows that those amounts were received by Attorney Antero Soriano for the firm of Soriano & Arroyo, which is borne out be the stamp on said receipts reading, "Bufete Soriano & Arroyo," and the manner in which said attorney receipted for them, "Soriano & Arroyo, by A. Soriano." Therefore, the appellant's contention that the amounts of P200 and P500 evidenced by said receipts should be considered as payments made to Attorney Antero Soriano for professional services rendered by him personally to the interests of the widow of Tan Toco, is untenable. Besides, if at the time of the assignment to the late Antero Soriano, his professional services to the appellant widow of Tan Toco had already been paid for, no reason can be given why it was necessary to wire him money in payment of professional services on March 14, 1928 (Exhibit 5-G Tan Toco) and December 15, of the same year (Exhibit 5-H Tan Toco) after the deed of assignment, (Exhibit 2-Cruz) dated September 27, 1927, had been executed. In view of

the fact that the amounts involved in the cases prosecuted by Attorney Antero Soriano as counsel for Tan Toco's widow, some of which cases have been appealed to this court, run into the hundreds of thousands of pesos, and considering that said attorney had won several of those cases for his clients, the sum of P10,000 to date paid to him for professional services is wholly inadequate, and shows, even if indirectly, that the assignment of the appellant's rights and interests made to the late Antero Soriano and determined in the judgment aforementioned, was made in consideration of the professional services rendered by the latter to the aforesaid widow and her coheirs. The defendant-appellant also contends that the deed of assignment Exhibit 2-Cruz was drawn up in contravention of the prohibition contained in article 1459, case 5, of the Civil Code, which reads as follows: "ART. 1459. The following persons cannot take by purchase, even at a public or judicial auction, either in person or through the mediation of another: xxx xxx xxx "5. Justices, judges, members of the department of public prosecution, clerks of superior and inferior courts, and other officers of such courts, the property and rights in litigation before the court within whose jurisdiction or territory they perform their respective duties. This prohibition shall include the acquisition of such property by assignment. "Actions between co-heirs concerning the hereditary property, assignments in payment of debts, or to secure the property of such persons, shall be excluded from this rule. "The prohibition contained in this paragraph shall include lawyers and solicitors with respect to any property or rights involved in any litigation in which they may take part by virtue of their profession and office." It does not appear that Attorney Antero Soriano was counsel for the herein appellant in civil case No. 3514 of the Court of First Instance of Iloilo, which she instituted against the municipality of Iloilo, Iloilo, for the recovery of the value of a strip of land expropriated by said municipality for the widening of a certain public street. The only lawyers who appear to have represented her in that case were Arroyo and Evangelista, who filed a claim for their professional fees. When the appellant's credit, right, and interests in that case were assigned by her attorneyin-fact Tan Boon Tiong, to Attorney Antero Soriano in payment of professional services rendered by the latter to the appellant and her coheirs in connection with other cases, that particular case had been decided, and the only thing left to do was to collect the judgment. There was no relation of attorney and client, then, between Antero Soriano and the appellant, in the case where that judgment was rendered; and therefore the assignment of her credit, right and interests to said lawyer did not violate the prohibition cited above. As to whether Tan Boon Tiong, as attorney-in-fact of the appellant, was empowered by his principal to make an assignment of credits, rights, and interests, in payment of debts for professional services rendered by lawyers, in paragraph VI of the power of attorney, Exhibit 5Cruz, Tan Boon Tiong is authorized to employ and contract for the services of lawyers upon such conditions as he may deem convenient, to take charge of any actions necessary or expedient for the interests of his principal, and to defend suits brought against her. This power necessarily implies the authority to pay for the professional services thus engaged. In the present case, the assignment made by Tan Boon Tiong, as attorney-in-fact for the appellant, in favor of Attorney Antero Soriano for professional services rendered in other cases in the interests of the appellant and her coheirs, was that credit which she had against the municipality of Iloilo, and such

assignment was equivalent to the payment of the amount of said credit to Antero Soriano for professional services. With regard to the failure of the other attorney-in-fact of the appellant, Tan Montano, authorized by Exhibit 1 Tan Toco, to consent to the deed of assignment, the latter being also authorized to pay, in the name and behalf of the principal, all her debts and the liens and encumbrances of her property, the very fact that different letters of attorney were given to each of these two representatives shows that it was not the principal's intention that they should act jointly in order to make their acts valid. Furthermore, the appellant was aware of that assignment and she not only did not repudiate it, but she continued employing Attorney Antero Soriano to represent her in court. For the foregoing considerations, the court is of opinion and so holds: (1) That an agent or attorney-in-fact empowered to pay the debts of the principal, and to employ lawyers to defend the latter's interests, is impliedly empowered to pay the lawyer's fees for services rendered in the interests of said principal, and may satisfy them by an assignment of a judgment rendered in favor of said principal; (2) that when a person appoints two attorneys-in-fact independently, the consent of the one will not be required to validate the acts of the other unless that appears positively to have been the principal's intention; and (3) that the assignment of the amount of a judgment made by a person to his attorney, who has not taken any part in the case wherein said judgment was rendered, made in payment of professional services in other cases, does not contravene the prohibition of article 1459, case 5, of the Civil Code. By virtue whereof, and finding no error in the judgment appealed from, the same is affirmed in its entirety, with costs against the appellant. So ordered. Avancea, C. J., Johnson, Street, Malcolm, Villamor, Ostrand, Johns and Romualdez, JJ., concur.

FIRST DIVISION [G.R. No. L-26096. February 27, 1979.] THE DIRECTOR OF LANDS, petitioner, vs. SILVERETRA ABABA, ET AL., claimants, JUAN LARRAZABAL, MARTA C. DE LARRAZABAL, MAXIMO ABARQUEZ and ANASTACIA CABIGAS, petitioners-appellants, ALBERTO FERNANDEZ, adverse claimant-appellee.

Juanito Ll. Abao for petitioners-appellants. Alberto B. Fernandez in his own behalf. SYNOPSIS
After winning a case for annulment of a contract of sale with right of repurchase and recovery of the parcels of land subject matter thereof, petitioner Abarquez refused to comply with his contractual obligation to his counsel to give the latter 1/2 of the property recovered as attorney's fees, and instead offered to sell the whole parcels of land to the petitioner-spouses Larrazabal. Hence, his counsel, Atty. Fernandez, filed an affidavit of adverse claim with the Register of Deeds of Cebu, annotating his claim on petitioner Abarquez' Transfer Certificate of Title. Despite said annotation, Abarquez sold 2/3 of the lands to petitioner-spouses Larrazabal. Subsequently, the latter filed a cancellation proceeding of the adverse claim before the trial court where it was dismissed. The petitioner-spouses appealed from the order of dismissal directly to the Supreme Court contending among others that a contract for a contingent fee is violative of Article 1491 of the New Civil Code. The Supreme Court affirmed the trial court's decision and held that a contract for a contingent fee is not covered by Article 1491 of the New Civil Code since the transfer of 1/2 of the property in litigation takes effect only after the finality of a favorable judgment and not during the pendency of the litigation of the property in question; that Canon 13 of the Canons of Professional Ethics expressly recognizes contingent fees as an exception to Canon 10; that the adverse-claimant's contingent fee is valid; and that the registration thereof as the only remedy open to him, substantially complied with Section 110 of Act 496.

SYLLABUS
Of the Ruling of the Court 1. ATTORNEY AND CLIENT; CONTINGENT FEES; PROHIBITION UNDER ARTICLE 1491, N.C.C. CONSTRUED. The prohibition in Article 1491 of the New Civil Code applies only to a sale or assignment to the lawyer by his client of the property which is the subject of litigation. For the prohibition to operate, the sale or assignment of the property must take place during the pendency of the litigation involving the property. The prohibition does not apply to cases where after completion of litigation the lawyer accepts on account of his fee, an interest in the assets realized by the litigation. There is a clear distinction between such cases and one in which the lawyer speculates on the outcome of the matter in which he is employed. 2. ID.; ID.; SCHOOLS OF THOUGHT. Spanish civilists differ in their views on whether or not a contingent fee contract (quota litis agreement) is covered by Article 1491, with Manresa advancing that it is covered and Castoln maintaining that it is not covered. The Supreme Court of Spain, in its sentencia of 12 November 1917, has ruled that Article 1459 of the Spanish Civil Code (Article 1491 of our Civil Code) does not apply to a contract for a contingent fee because it is not contrary to morals or to law. 3. ID.; CANONS OF PROFESSIONAL ETHICS, NOT INFRINGED BY CONTRACT FOR CONTINGENT FEE. Contingent fees are not prohibited in the Philippines. They are impliedly sanctioned by law and are subject to the supervision of the court in order that clients may be protected from unjust charges. 4. ID.; ID.; ID.; REASON FOR ALLOWANCE. The reason for allowing compensation for professional services based on

contingent fees is that of a person could not secure counsel by a promise of large fees in case of success, to be derived from the subject matter of the suit, it would often place the poor in such a condition as to amount to a practical denial of justice. It not infrequently happens that persons are injured through the negligence or willful misconduct of others, but by reason of poverty are unable to employ counsel to assert their rights. In such event their only means of redress lies in gratuitous service, which is rarely given, or in their ability to find someone who will conduct the case for a contingent fee. That relations of this kind are often abused by speculative attorneys or that suits of this character are turned into a sort of commercial traffic by the lawyer does not destroy the beneficial result to one who is so poor to employ counsel. 5. ID.; CONTINGENT FEE CONTRACT SUBJECT TO SUPERVISION OF COURTS. A contingent fee contract is always subject to the supervision of the courts with respect to the stipulated amount and may be reduced or nullified. So that in the event that there is any undue influence or fraud in the execution of the contract or that the fee is excessive, the client is not without remedy because the court will amply protect him. 6. ID.; PROFESSIONAL ETHICS; CONTRACT FOR CONTINGENT FEE IS VALID. Canon 13 of the Canons of Professional Ethics expressly recognizes contingent fees by way of exception to Canon 10. For while Canon 10 prohibits a lawyer from purchasing ". . . any interest in the subject matter of the litigation he is conducting", Canon 13, on the other hand, allows reasonable contingent fee contract, thus: "A contract for a contingent fee where sanctioned by law, should be reasonable under all circumstances of the case, including the risk and uncertainty of the compensation, but should always be subject to the supervision of a court, as to its reasonableness." The distinction is between buying an interest in the litigation as a speculation, which Canon 10 condemns, and agreeing, in a case which the lawyer undertakes primarily in his professional capacity, to accept his compensation contingent on the outcome. 7. ID.; ID.; NATURE. Canons of Professional Ethics have already received judicial recognition by being cited and applied by the Supreme Court of the Philippines in its opinion. And they have likewise been considered sources of Legal Ethics. More importantly, the American Bar Association, speaking through Chairman Howe of the Ethics Committee, opined that "The Canons of Professional Ethics are legislative expressions of professional opinion." Therefore, the Canons have some binding effect. 8. LAND REGISTRATION; SECTION 110, REGISTRATION OF INTEREST OR ADVERSE CLAIM, ALLOWED. An adverse claim may be registered only by whoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to the date of the original registration, if no other provision is made in this Act (496) for registering the same. A contract for a contingent fee being valid, it vested in the adverse-claimant an interest or right over the lots in question to the extent of one-half thereof. The interest become vested in adverse-claimant after the case was won on appeal because only then did the assignment of the one half portion of the lots in question became effective and binding. Since the interest or claim of counsel in the lots in question arose long after the original registration, there is no other provision of the Land Registration Act under which the interest or claim may be registered except as an adverse claim under Section 110 of the Act. The interest or claim cannot be registered as an attorney's charging lien. There being substantial compliance with Section 110 of Act 496, the registration of the adverse claim is valid. Being valid, its registration should not be canceled because it is only when such claim is found unmeritorious that the registration thereof may be canceled. 9. ID.; ID.; EFFECT. The annotation of an adverse claim is an measure designed to protect the interest of a person over a piece of real property where the registration of such interest or right is not otherwise provided for by the Land Registration Act, and serves as a notice and warning to third parties dealing with said property that someone is claiming an interest in the same or a better right than the registered owner thereof. 10. PLEADING AND PRACTICE; RULE 138, SECTION 37, SCOPE. A charging lien under Section 37, Rule 138 of the Revised Rules of Court is limited only to money judgments and not to judgments for the annulment of a contract or for delivery of real property.

DECISION

MAKASIAR, J p: This is an appeal from the order of the Court of First Instance of Cebu dated March 19, 1966 denying the petition for the cancellation of an adverse claim registered by the adverse claimant on the transfer certificate of title of the petitioners.

The adverse claimant, Atty. Alberto B. Fernandez was retained as counsel by petitioner, Maximo Abarquez, in Civil Case No. R-6573 of the Court of First Instance of Cebu, entitled "Maximo Abarquez vs. Agripina Abarquez", for the annulment of a contract of sale with right of repurchase and for the recovery of the land which was the subject matter thereof. The Court of First Instance of Cebu rendered a decision on May 29, 1961 adverse to the petitioner and so he appealed to the Court of Appeals. Litigating as a pauper in the lower court and engaging the services of his lawyer on a contingent basis, petitioner, unable to compensate his lawyer whom he also retained for his appeal, executed a document on June 10, 1961 in the Cebuano-Visayan dialect whereby he obliged himself to give to his lawyer or one-half (1/2) of whatever he might recover from Lots 5600 and 5602 should the appeal prosper. The contents of the document as translated are as follows: Cdpr "AGREEMENT "KNOW ALL MEN BY THESE PRESENTS: "That I, MAXIMO ABARQUEZ, plaintiff in Case No. R-6573 of the Court of First Instance of Cebu, make known through this agreement that for the services rendered by Atty. Alberto B. Fernandez, who is my lawyer in this case, if the appeal is won up to the Supreme Court, I promise and will guarantee that I will give to said lawyer one-half (1/2) of what I may recover from the estate of my father in Lots No. 5600 and 5602 which are located at Bulacao, Pardo, City of Cebu. That with respect to any money which may be adjudged to me from Agripina Abarquez, except 'Attorney's Fees', the same shall pertain to me and not to said lawyer.

"IN WITNESS WHEREOF, I have caused my right thumbmark to be affixed hereto this 10th of June, 1961, at the City of Cebu. THUMBMARK MAXIMO ABARQUEZ" (p. 5, Petitioner-Appellant's Brief, p. 26, rec.). The real property sought to be recovered in Civil Case No. R-6573 was actually the share of the petitioner in Lots 5600 and 5602, which were part of the estate of his deceased parents and which were partitioned among the heirs which included petitioner Maximo Abarquez and his elder sister, Agripina Abarquez, the defendant in said civil case. This partition was made pursuant to a project of partition approved by the Court which provided, among others, that Lots Nos. 5600 and 5602 were to be divided into three equal parts, one third of which shall be given to Maximo Abarquez. However, Agripina Abarquez claimed the share of her brother, stating that the latter executed an instrument of pacto de retro prior to the partition conveying to her any or all rights in the estate of their parents. Petitioner discovered later that the claim of his sister over his share was based on an instrument he was induced to sign prior to the partition, an instrument he believed all along to be a mere acknowledgment of the receipt of P700.00 which his sister gave to him as a consideration for taking care of their father during the latter's illness and never an instrument of pacto de retro. Hence, he instituted an action to annul the alleged instrument of pacto de retro. The Court of Appeals in a decision promulgated on August 27, 1963 reversed the decision of the

lower court and annulled the deed of pacto de retro. Appellee Agripina Abarquez filed a motion for reconsideration but the same was denied in a resolution dated January 7, 1964 (p. 56, Record on Appeal; p. 13, Rec.) and the judgment became final and executory on January 22, 1964. cdrep Subsequently, Transfer Certificate of Title No. 31841 was issued on May 19, 1965 in the name of Maximo Abarquez, married to Anastacia Cabigas, over his adjudged share in Lots Nos. 5600 and 5602 containing an area of 4,085 square meters (p. 110, ROA; p. 13, rec.). These parcels of land later became the subject matter of the adverse claim filed by the claimant. The case having been resolved and title having been issued to petitioner, adverse claimant waited for petitioner to comply with his obligation under the document executed by him on June 10, 1961 by delivering the one-half (1/2) portion of the said parcels of land. Petitioner refused to comply with his obligation and instead offered to sell the whole parcels of land covered by TCT No. 31841 to petitioner-spouses Juan Larrazabal and Marta C. de Larrazabal. Upon being informed of the intention of the petitioner, adverse claimant immediately took steps to protect his interest by filing with the trial court a motion to annotate his attorney's lien on TCT No. 31841 on June 10, 1965 and by notifying the prospective buyers of his claim over the one-half portion of the parcels of land. Realizing later that the motion to annotate attorney's lien was a wrong remedy, as it was not within the purview of Section 37, rule 138 of the Revised Rules of Court, but before the same was denied by the trial court, adverse claimant filed an affidavit of adverse claim on July 19, 1966 with the Register of Deeds of Cebu (p. 14, ROA; p. 13, rec.). By virtue of the registration of said affidavit. the adverse claim for one-half (1/2) of the lots covered by the June 10, 1961 document was annotated on TCT No. 31841. Notwithstanding the annotation of the adverse claim, petitioner-spouses Maximo Abarquez and Anastacia Cabigas conveyed by deed of absolute sale on July 29, 1965 two thirds (2/3 of the lands covered by TCT No. 31841 to petitioner-spouses Juan Larrazabal and Marta C. de Larrazabal. When the new transfer certificate of title No. 32996 was issued, the annotation of adverse claim on TCT No. 31841 necessarily had to appear on the new transfer certificate of title. This adverse claim on TCT No. 32996 became the subject of cancellation proceedings filed by herein petitioner-spouses on March 7, 1966 with the Court of First Instance of Cebu (p. 2, ROA; p. 13, rec.). The adverse claimant, Atty. Alberto B. Fernandez, filed his opposition to the petition for cancellation on March 18, 1966 (p. 20, ROA; p. 13, rec.). The trial court resolved the issue on March 19, 1966, when it declared that: ". . . the petition to cancel the adverse claim should be denied. The admission by the petitioners that the lawyers (Attys. Fernandez and Batiguin) are entitled to only one-third of the lot described in Transfer Certificate of Title No. 32966 is the best proof of the authority to maintain said adverse claim" (p. 57, ROA; p. 13 rec.). Petitioner-spouses decided to appeal the order of dismissal to this Court and correspondingly filed the notice of appeal or April 1, 1966 with the trial court. On April 2, 1966, petitioner-spouses filed the appeal bond and subsequently filed the record on appeal on April 6, 1966. The records of the case were forwarded to this Court through the Land Registration Commission of Manila and were received by this Court on May 5, 1966. prLL Counsel for the petitioner-spouses filed the printed record on appeal on July 12, 1966. Required to file the appellants' brief, counsel filed one on August 29, 1966 while that of the appellee was filed on October 1, 1966 after having been granted an extension to file his brief.

The case was submitted for decision on December 1, 1966. Counsel for the petitioners filed a motion to expunge appellees' brief on December 8, 1966 for having been filed beyond the reglementary period, but the same was denied by this Court in a resolution dated February 13, 1967. The pivotal issue to be resolved in the instant case is the validity or nullity of the registration of the adverse claim of Atty. Fernandez, resolution of which in turn hinges on the question of whether or not the contract for a contingent fee, basis of the interest of Atty. Fernandez, is prohibited by the Article 1491 of the New Civil Code and Canon 13 of the Canons of Professional Ethics. Petitioners contend that a contract for a contingent fee violates Article 1491 because it involves an assignment of a property subject of litigation. That article provides: "Article 1491. The following persons cannot acquire by purchase even at a public or judicial auction, either in person or through the mediation of another: "xxx xxx xxx "(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession" (emphasis supplied). This contention is without merit. Article 1491 prohibits only the sale or assignment between the lawyer and his client, of property which is the subject of litigation. As WE have already stated "The prohibition in said article applies only to a sale or assignment to the lawyer by his client of the property which is the subject of litigation, In other words, for the prohibition to operate, the sale or assignment of the property must take place during the pendency of the litigation involving the property" (Rosario Vda. de Laig vs. Court of Appeals, et al., L-26882, November 21, 1978). cdphil Likewise, under American Law, the prohibition does not apply to "cases where after completion of litigation the lawyer accepts on account of his fee, an interest in the assets realized by the litigation" (Drinker, Henry S., Legal Ethics, p. 100 [1953], citing App. A, 280; N.Y. Ciu 714). "There is a clear distinction between such cases and one in which the lawyer speculates on the outcome of the matter in which he is employed" (Drinker, supra, p. 100 citing A.B.A. Op. 279). A contract for a contingent fee is not covered by Article 1491 because the transfer or assignment of the property in litigation takes effect only after the finality of a favorable judgment. In the instant case, the attorney's fees of Atty. Fernandez, consisting of one-half (1/2) of whatever Maximo Abarquez might recover from his share in the lots in question, is contingent upon the success of the appeal. Hence, the payment of the attorney's fees, that is, the transfer or assignment of one-half (1/2) of the property in litigation will take place only if the appeal prospers. Therefore, the transfer actually takes effect after the finality of a favorable judgment rendered on appeal and not during the pendency of the litigation involving the property in question. Consequently, the contract for a contingent fee is not covered by Article 1491. While Spanish civilists differ in their views on the above issue whether or not a contingent fee contract (quota litis agreement) is covered by Article 1491 with Manresa advancing that it is covered, thus:

"Se ha discutido si en la incapacidad de los Procuradores y Abogados esta incluido el pacto de quota litis. Consiste este, como es sabido, en la estipulacion de que el Abogado o el Procurador han de hacer suyos una parte alicuota de la cosa que se litiga, si la sentencia es favorable. Con este concepto a la vista, es para nosortros indudable que el articulo que comentamos no menciona ese pacto; pero como la incapacidad de los Abogados y Procuradores se extinede al acto de adquirir por cesion; y la efectividad del pacto de quota litis implica necesariamente una cesion, estimamos que con solo el num. 5x del articulo 1459 podria pedirse con exito la nulidad de ese pacto tradicionalmente considerado como ilicito. "xxx xxx xxx

"Debe tenerse tambien en cuenta, respecto del ultimo parrafo del articulo 1459, la sentencia del Tribunal Supreme de 25 de Enero 1902, que delcara que si bien el procurador no puede adquirir para si los bienes, en cuanto a los cuales tiene incapacidad, puede adquirirlos para otra persona en quien no concurra incapacidad alguna" (Manresa, Comentarios al Codigo Civil Espaol, Tomo X, p. 110 [4a ed., 1931] emphasis supplied). Castan, maintaining that it is not covered, opines thus: "C. Prohibiciones impuestas a las personas encargadas, mas o menos directamente, de la administracion de justicia. El mismo art 1.459 del Codigo civil prohibe a los Magistrados, Jueces, individuos del Ministerio fiscal, Secretarios de Tribunales y Juzgados y Oficiales de Justicia adquirir por compra (aunque sea en subasta publica o judicial por si ni por persona alguna intermedia), 'Los bienes y derechos que estuviesen en litigio ante el Tribunal en cuya jurisdiccion on teritorio ejercieran sus respectivas funciones, extendiendo se esta prohibicion al acto de adquirir por cesion', y siendo tambien extensiva 'A los Abogados y Procuradores respecto a los bienes y derechos que fueran objeto del un litigio en que intervengan por su profesion y oficio.' "El fundamento de esta prohibicion es clarisimo. No solo se trata dice Manresa de quitar la ocasion al fraude; persiguese, ademas, el proposito de rodear a las personas que intervienen en la administracion de justicia de todos los prestigios que necesitan para ejercer su ministerio, librando los de toda sospecha, que, aunque fuere infundada, redundaria en descredito de la institucion. "Por no dar lugar a recelos de ninguna clase, admite el Codigo (en el apartado penutimo del art. 1.459) algunos casos en que, por excepcion, no se aplica el principio prohibitivo de que venimos hablando. Tales son los de que se trate de acciones hereditarias entre coherederos, de cesion en pago de creditos, o de garantia de los bienes que posean los funcionarios de justicia. 'Algunos autores (Goyena, Manresa, Valverde) creen que en la prohibicion del art. 1.459 esta comprendido el pacto de quota litis (o sea el convenio por el cual se concede al Abogado o Procurador, para el caso de obtener sentencia favorable, una parte alicuota de la cosa o cantidad que se litiga), porque dicho pacto supone la venta o cesion de

una parte de la cosa o drecho que es objecto del litigio. Pero Mucius Scaevola oberva, con razon, que en el repetido pacto no hay propiamente caso de compraventa ni de cesion de derechos, y bastan para estimario nulo otros preceptos del Codigo como los relativos a la ilicitud de la causa'" (Castan, Derecho Civil Espaol, Tomo 4, pp. 68-69, [9a ed., 1956], emphasis supplied). The Supreme Court of Spain, in its sentencia of 12 November 1917, has ruled that Article 1469 of the Spanish Civil Code (Article 1491 of our Civil Code) does not apply to a contract for a contingent fee because it is not contrary to morals or to law, holding that: ". . . que no es susceptible de aplicarse el precepto contenido en el nun. 5 del art. 1.459 a un contrato en el que se restringen los honorarios de un Abogado a un tanto por ciento de lo que se obtuviera en el litigio, cosa no repudiada por la moral ni por la ley" (Tolentino, Civil Code of the Philippines, p. 36, Vol. V [1959]; Castan, supra; Manresa, supra). In the Philippines, among the Filipino commentators, only Justice Capistrano ventured to state his view on the said issue, thus: "The incapacity to purchase or acquire by assignment, which the law also extends to lawyers with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession, also covers contracts for professional services quota litis. Such contracts, however, have been declared valid by the Supreme Court" (Capistrano, Civil Code of the Philippines, p. 44, Vol. IV [1951]). Dr. Tolentino merely restated the views of Castan and Manresa as well as the state of jurisprudence in Spain, as follows: "Attorneys-at-law Some writers, like Goyena, Manresa and Valverde, believe that this article covers quota litis agreements, under which a lawyer is to be given an aliquot part of the property or amount in litigation if he should win the case for his client. Scaevola and Castan, however, believe that such a contract does not involve a sale or assignment of rights, but it may be void under other articles of the Code such as those referring to illicit cause. On the other hand, the Spanish Supreme Court has held that this article is not applicable to a contract which limits the fees of a lawyer to a certain percentage of what may be recovered in litigation, as this is not contrary to morals or to law." (Tolentino, Civil Code of the Philippines, p. 35, Vol. V [1959]; Castan, supra, emphasis supplied). Petitioners further contend that a contract for a contingent fee violates the Canons of Professional Ethics, this is likewise without merit. This posture of petitioners overlooked Canon 13 of the Canons which expressly recognizes contingent fees by way of exception to Canon 10 upon which petitioners relied. For while Canon 10 prohibits a lawyer from purchasing ". . . any interest in the subject matter of the litigation which he is conducting", Canon 13, on the other hand, allows a reasonable contingent fee contract, thus: "A contract for a contingent fee where sanctioned by law, should be reasonable under all the circumstances of the case, including the risk and uncertainty of the compensation, but should always be subject to the supervision of a court, as to its reasonableness." As pointed out by an authority on Legal Ethics: LexLib "Every lawyer is intensely interested in the successful outcome of his case, not only as affecting his reputation, but also his compensation. Canon 13 specifically

permits the lawyer to contract for a contingent fee which, of itself, negatives the thought that the Canons preclude the lawyer's having a stake in his litigation. As pointed out by Professor Cheatham on page 170 n. of his Case Book, there is an inescapable conflict of interest between lawyer and client in the matter of fees. Nor, despite some statements to the contrary in Committee opinions, is it believed that, particularly in view of Canon 13, Canon 10 precludes in every case an arrangement to make the lawyer's fee payable only out of the results of the litigation. The distinction is between buying an interest in the litigation as a speculation, which Canon 10 condemns, and agreeing, in a case which the lawyer undertakes primarily in his professional capacity, to accept his compensation contingent on the outcome" (Drinker, Henry S., Legal Ethics, p. 99, [1953], emphasis supplied). These Canons of Professional Ethics have already received "judicial recognition by being cited and applied by the Supreme Court of the Philippines in its opinion" Malcolm, Legal and Judicial Ethics, p. 9 [1949]). And they have likewise been considered sources of Legal Ethics. More importantly, the American Bar Association, speaking through Chairman Howe of the Ethics Committee, opined that "The Canons of Professional Ethics are legislative expressions of professional opinion (A.B.A. Op. 37 [1912])" [See footnote 25, Drinker, Legal Ethics, p. 27]. Therefore, the Canons have some binding effect. Likewise, it must be noted that this Court has already recognized this type of a contract as early as the case of Ulanday vs. Manila Railroad Co. (45 Phil. 540 [1923]), where WE held that "contingent fees are not prohibited in the Philippines, and since impliedly sanctioned by law 'Should be under the supervision of the court in order that clients may be protected from unjust charges' (Canons of Professional Ethics)". The same doctrine was subsequently reiterated in Grey vs. Insular Lumber Co. (97 Phil. 833 [1955]) and Recto vs. Harden (100 Phil. 427 [1956]). In the 1967 case of Albano vs. Ramos (20 SCRA 171 [1967]), the attorney was allowed to recover in a separate action her attorney's fees of one-third (1/3) of the lands and damages recovered as stipulated in the contingent fee contract. And this Court in the recent case of Rosario Vda. de Laig vs. Court of Appeals, et al. (supra), which involved a contingent fee of one-half (1/2) of the property in question, held that "contingent fees are recognized in this jurisdiction (Canon 13 of the Canons of Professional Ethics adopted by the Philippine Bar association in 1917 [Appendix B, Revised Rules of Court]), which contingent fees may be a portion of the property in litigation." LexLib Contracts of this nature are permitted because they redound to the benefit of the poor client and the lawyer "especially in cases where the client has meritorious cause of action, but no means with which to pay for legal services unless he can, with the sanction of law, make a contract for a contingent fee to be paid out of the proceeds of the litigation" (Francisco, Legal Ethics, p. 294 [1949], citing Lipscomb vs. Adams 91 S.W. 1046, 1048 [1906]). Oftentimes, contingent fees are the only means by which the poor and helpless can seek redress for injuries sustained and have their rights vindicated. Thus: "The reason for allowing compensation for professional services based on contingent fees is that if a person could not secure counsel by a promise of large fees in case of success, to be derived from the subject matter of the suit, it would often place the poor in such a condition as to amount to a practical denial of justice. It not infrequently happens that person are injured through the negligence or willful misconduct of others, but by reason of poverty are unable to employ counsel to assert their rights. In such event their only means of redress lies in gratuitous service, which is rarely given, or in their ability to find some one who

will conduct the case for a contingent fee. That relations of this kind are often abused by speculative attorneys or that suits of this character are turned into a sort of commercial traffic by the lawyer, does not destroy the beneficial result to one who is so poor to employ counsel" (id., at p. 293, citing Warvelle, Legal Ethics, p. 92, emphasis supplied).

Justice George Malcolm, writing on contingent fees, also stated that: ". . . the system of contingent compensation has the merit of affording to certain classes of persons the opportunity to procure the prosecution of their claims which otherwise would be beyond their means. In many cases in the United States and the Philippines, the contingent fee is socially necessary" (Malcolm, Legal and Judicial Ethics, p. 55 [1949], italics supplied). Stressing further the importance of contingent fees, Professor Max Radin of the University of California, said that: "The contingent fee certainly increases the possibility that vexatious and unfounded suits will be brought. On the other hand, it makes possible the enforcement of legitimate claims which otherwise would be abandoned because of the poverty of the claimants. Of these two possibilities, the social advantage seems clearly on the side of the contingent fee. It may in fact be added by way of reply to the first objection that vexatious and unfounded suits have been brought by men who could and did pay substantial attorney's fees for that purpose" (Radin, Contingent Fees in California, 28 Cal. L. Rev. 587, 589 [1940], emphasis supplied). Finally, a contingent fee contract is always subject to the supervision of the courts with respect to the stipulated amount may be reduced or nullified. So that in the event that there is any undue influence or fraud in the execution of the contract or that the fee is excessive, the client is not without remedy because the court will amply protect him. As held in the case of Grey vs. Insular Lumber Co., supra, citing the case of Ulanday vs. Manila Railroad Co., supra: LibLex "Where it is shown that the contract for a contingent fee was obtained by any undue influence of the attorney over the client, or by any fraud or imposition, or that the compensation is so clearly excessive as to amount to extortion, the court will in a proper case protect the aggrieved party." In the present case, there is no iota of proof to show that Atty. Fernandez had exerted any undue influence or had perpetrated fraud on, or had in any manner taken advantage of his client, Maximo Abarquez. And, the compensation of one-half of the lots in question is not excessive nor unconscionable considering the contingent nature of the attorney's fees. With these considerations, WE find that the contract for a contingent fee in question is not violative of the Canons of Professional Ethics. Consequently, both under the provisions of Article 1491 and Canons 10 and 13 of the Canons of Professional Ethics, a contract for a contingent fee is valid. In resolving now the issue of the validity or nullity for the registration of the adverse claim, Section 110 of the Land Registration Act (Act 496) should be considered. Under said section, an adverse claim may be registered only by:

"Whoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to the date of the original registration . . . if no other provision is made in this Act for registering the same . . ." The contract for a contingent fee, being valid, vested in Atty. Fernandez an interest or right over the lots in question the extent of one-half thereof. Said interest became vested in Atty. Fernandez after the case was won on appeal because only then did the assignment of the one half (1/2) portion of the lots in question became effective and binding. So that when he filed his affidavit of adverse claim his interest was already an existing one. There was therefore a valid interest in the lots to registered in favor of Atty. Fernandez adverse to Maximo Abarquez. Moreover, the interest or claim of Atty. Fernandez in the lots in question arose long after the original registration which took place many years ago. And, there is no other provision of the Land Registration Act under which the interest or claim may be registered except as an adverse claim under Section 110 thereof. The interest or claim cannot be registered as an attorney's charging lien. The lower court was correct in denying the motion to annotate the attorney's lien. A charging lien under Section 37, Rule 138 of the Revised Rules of Court is limited only to money judgments and not to judgments for the annulment of a contract or for delivery of real property as in the instant case. Said Section provides that: LLphil "Section 37. An attorney shall have a hen upon the funds, documents and papers of his client which have lawfully come into his oppossession and may retain the same until his lawful fees and disbursements have been paid, and may apply such funds to the satisfaction thereof. He shall also have a lien to the same extent upon all judgments, for the payment of money, and executions issued in pursuance of such judgments, which he has secured in a litigation of his client . . ." (emphasis supplied). Therefore, as an interest in registered land, the only adequate remedy open to Atty. Fernandez is to register such interest as an adverse claim. Consequently, there being a substantial compliance with Section 110 of Act 496, the registration of the adverse claim is held to be valid. Being valid, its registration should not be cancelled because as WE have already stated, "it is only when such claim is found unmeritorious that the registration thereof may be cancelled" (Paz Ty Sin Tei vs. Jose Lee Dy Piao, 103 Phil. 867 [1958]). The one-half (1/2) interest of Atty. Fernandez in the lots in question should therefore be respected. Indeed, he has a better right than petitioner-spouses, Juan Larrazabal and Marta C. de Larrazabal. They purchased their two thirds (2/3) interest in the lots in question with the knowledge of the adverse claim of Atty. Fernandez. The adverse claim was annotated on the old transfer certificate of title and was later annotated on the new transfer certificate of title issued to them. As held by this Court: "The annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property where the registration of such interest or right is not otherwise provided for by the Land Registration Act. and serves as a notice and warning to third parties dealing with said property that someone is claiming an interest on the same or a better right than the registered owner thereof" (Sanchez, Jr. vs. Court of Appeals, 69 SCRA 332 [1976]; Paz Ty Sin Tei vs. Jose Le Dy Piao, supra]. Having purchased the property with the knowledge of the adverse claim, they are therefore in bad faith. Consequently, they are estopped from questioning the validity of the adverse claim. WHEREFORE, THE DECISION OF THE LOWER COURT DENYING THE PETITION FOR THE

CANCELLATION OF THE ADVERSE CLAIM SHOULD BE, AS IT IS HEREBY AFFIRMED, WITH COSTS AGAINST PETITIONER-APPELLANTS JUAN LARRAZABAL AND MARTA C. DE LARRAZABAL. SO ORDERED. Teehankee (Chairman), Fernandez, Guerrero, De Castro and Melencio-Herrera, JJ., concur.