Gaite v.

Fonacier
Facts:
Gaite was appointed by Fonacier as attorney-in-fact to contract any party for the exploration and development of
mining claims. Gaite executed a deed of assignment in favor of a single proprietorship owned by him. For some
reasons, Fonacier revoked the agency, which was acceded to by Gaite, subject to certain conditions, one of which
being the transfer of ores extracted from the mineral claims for P75,000, of which P10,000 has already been paid
upon signing of the agreement and the balance to be paid from the first letter of credit for the first local sale of the
iron ores. To secure payment, Fonacier delivered a surety agreement with Larap Mines and some of its
stockholders, and another one with Far Eastern Insurance. When the second surety agreement expired with no sale
being made on the ores, Gaite demanded the P65,000 balance. Defendants contended that the payment was subject
to the condition that the ores will be sold.
Issue:
(1) Whether the sale is conditional or one with a period
(2) Whether there were insufficient tons of ores
Held:
(1) The shipment or local sale of the iron ore is not a condition precedent (or suspensive) to the payment of the
balance of P65,000.00, but was only a suspensive period or term. What characterizes a conditional obligation is
the fact that its efficacy or obligatory force (as distinguished from its demandability) is subordinated to the
happening of a future and uncertain event; so that if the suspensive condition does not take place, the parties would
stand as if the conditional obligation had never existed.
A contract of sale is normally commutative and onerous: not only does each one of the parties assume a correlative
obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to pay the price),but each
party anticipates performance by the other from the very start. While in a sale the obligation of one party can be
lawfully subordinated to an uncertain event, so that the other understands that he assumes the risk of receiving
nothing for what he gives (as in the case of a sale of hopes or expectations,emptio spei), it is not in the usual course
of business to do so; hence, the contingent character of the obligation must clearly appear. Nothing is found in the
record to evidence that Gaite desired or assumed to run the risk of losing his right over the ore without getting paid
for it, or that Fonacier understood that Gaite assumed any such risk. This is proved by the fact that Gaite insisted
on a bond a to guarantee payment of the P65,000.00, an not only upon a bond by Fonacier, the Larap Mines &
Smelting Co., and the company's stockholders, but also on one by a surety company; and the fact that appellants
did put up such bonds indicates that they admitted the definite existence of their obligation to pay the balance of
P65,000.00.
The appellant have forfeited the right court below that the appellants have forfeited the right to compel Gaite to
wait for the sale of the ore before receiving payment of the balance of P65,000.00, because of their failure to renew
the bond of the Far Eastern Surety Company or else replace it with an equivalent guarantee. The expiration of the
bonding company's undertaking on December 8, 1955 substantially reduced the security of the vendor's rights as
creditor for the unpaid P65,000.00, a security that Gaite considered essential and upon which he had insisted when
he executed the deed of sale of the ore to Fonacier.
(2) The sale between the parties is a sale of a specific mass or iron ore because no provision was made in their
contract for the measuring or weighing of the ore sold in order to complete or perfect the sale, nor was the price
of P75,000,00 agreed upon by the parties based upon any such measurement.(see Art. 1480, second par., New
Civil Code). The subject matter of the sale is, therefore, a determinate object, the mass, and not the actual number
of units or tons contained therein, so that all that was required of the seller Gaite was to deliver in good faith to his
buyer all of the ore found in the mass, notwithstanding that the quantity delivered is less than the amount estimated
by them.
Hernando R. Penalosa vs. Severino Santos
G.R. No. 133749 August 23, 2001
Facts:
Severino sold his property to henry. Henry applied for a loan with philam life. As It was already approved pending
the submission of certain documents such as the owners duplicate of transfer certificate of title which is in
possession of severino.
Henry already took possession of the property in question after ejectment of the lessees. He also paid an ernest
money of 300,000 under the premise that it shall be forfeited in favor of severino in case of nonpayment.
Severino now claims ownership over the property claiming that henry did not pay for the property, therefore there
was no sale to speak of.
Issue: whether or not there is a contract of sale perfected in this case.
Held: there was a perfected contract of sale due to the second deed of sale.
The basic characteristic of an absolutely simulated or fictitious contract is that the apparent contract is not really
desired or intended to produce legal effects or alter the juridical situation of the parties in any way.30 However,
in this case, the parties already undertook certain acts which were directed towards fulfillment of their respective
covenants under the second deed, indicating that they intended to give effect to their agreement.
Further, the fact that Severino executed the two deeds in question, primarily so that petitioner could eject the tenant
and enter into a loan/mortgage contract with Philam Life, is to our mind, a strong indication that he intended to
transfer ownership of the property to petitioner. For why else would he authorize the latter to sue the tenant for
ejectment under a claim of ownership, if he truly did not intend to sell the property to petitioner in the first place?
Needless to state, it does not make sense for Severino to allow petitioner to pursue the ejectment case, in petitioner's
own name, with petitioner arguing that he had bought the property from Severino and thus entitled to possession
thereof, if petitioner did not have any right to the property.
Also worth noting is the fact that in the case filed by Severino's tenant against Severino and petitioner in 1989,
assailing the validity of the sale made to petitioner, Severino explicitly asserted in his sworn answer to the
complaint that the sale was a legitimate transaction. He further alleged that the ejectment case filed by petitioner
against the tenant was a legitimate action by an owner against one who refuses to turn over possession of his
property.
It should be emphasized that the non-appearance of the parties before the notary public who notarized the deed
does not necessarily nullify nor render the parties' transaction void ab initio. We have held previously that the
provision of Article 1358 of the New Civil Code on the necessity of a public document is only for convenience,
not for validity or enforceability. Failure to follow the proper form does not invalidate a contract. Where a contract
is not in the form prescribed by law, the parties can merely compel each other to observe that form, once the
contract has been perfected.35 This is consistent with the basic principle that contracts are obligatory in whatever
form they may have been entered into, provided all essential requisites are present.3
The elements of a valid contract of sale under Art. 1458 of the Civil Code are: (1) consent or meeting of the minds;
(2) determinate subject matter; and (3) price certain in money or its equivalent.37 In the instant case, the second
deed reflects the presence of all these elements and as such, there is already a perfected contract of sale.
The non-payment of the contract price merely results in a breach of contract for non-performance and warrants an
action for rescission or specific performance under Article 1191 of the Civil Code.
Be that as it may, we agree with petitioner that although the law allows rescission as a remedy for breach of
contract, the same may not be availed of by respondents in this case. To begin with, it was Severino who prevented
full payment of the stipulated price when he refused to deliver the owner's original duplicate title to Philam Life.
His refusal to cooperate was unjustified, because as Severino himself admitted, he signed the deed precisely to
enable petitioner to acquire the loan. He also knew that the property was to be given as security therefor. Thus, it
cannot be said that petitioner breached his obligation towards Severino since the former has always been willing
to and could comply with what was incumbent upon him.
In sum, the only conclusion which can be deduced from the aforesaid circumstances is that ownership of the
property has been transferred to petitioner.
WHEREFORE, the petition is GRANTED.
Gregorio Fule vs CA, Cruz and Belarmino (286 SCRA 698)
Facts:
· Gregorio Fule, a banker and jeweler, acquired a 10 hectare of property in Rizal which used to be under the
name of Fr. Jacobe on which (Jacobe) mortgaged the land to the Bank of Alaminos to secure a loan of P10,000.
The mortgage was forclosed and the property later offered for public auction.
· 1984, Gregorio asked Remilia and Oliva to look for a buyer (property), the found Dr. Cruz, just so happens
that Gregorio wants the 2.5 carat EMERALD CUT EARRINGS of Dr. Ninevetch Cruz (MD), Gregorio offered
to buy the jewelry for P100,000, was refused, he then offered $6000 in the exchange rate of $1 is to P25, was still
refused. They agreed, however, on the land of Fule for the jewelry.
· Dr. Cruz asked her counsel, Atty. Belarmino to check the land for any impediments. There was. Gregorio
then executed to a DEED OF REDEMPTION to cut through the legal impediment. Land is now A-Okay J
· Dr. Cruz went to the bank with Gregorio to show the jewelry and said (non-verbatim “Oy bobo check this
shit out, tapat mo sa ilaw to see if it’s fake or not. ICE ba?”. Gregorio checked it and was happy. Gregorio and the
counsel executed a DEED OF ABSOLUTE SALE. The Property was for P200,000 and the Jewelry for P160,000,
both agreed that Dr. Cruz will pay the remaining P40,000 by cash.
· Gregorio happy with his jewelry, went straight to a appraiser named *wait for it* DIMAYUGAhahahahaha
but anyway, Dimayuga said that the jewel is fake.
· Gregorio then filed a complaint before the RTC, praying for the CONTRACT OF SALE be deemed null and
void.
· RTC ruled in favor of Cruz stating that Gerggy boy was in badfaith. CA affirmed.
Issue: W/ON CA erred in upholding the validity of the Contract of Sale
Held: No. The NCC provides that the Contract of Sale is consensual, and is perfected when the minds met.
Contract may be rendered void if (1) Party has no capacity to give consent, and (2) if consent was gained because
of VIMFU (Violence, Intimidation, Mistake, Fraud, and Undue Influence). Dr. Cruz was not Fraudulent. SC said
that Greggy Boy was also a jeweler, he was given time to inspect the jewel before perfecting the contract.
Quiroga vs Parsons
G.R. No. L-11491
Subject: Sales
Doctrine: Contract of Agency to Sell vs Contract of Sale
Facts: On Jan 24, 1911, plaintiff and the respondent entered into a contract making the latter an “agent” of the
former. The contract stipulates that Don Andres Quiroga, here in petitioner, grants exclusive rights to sell his beds
in the Visayan region to J. Parsons. The contract only stipulates that J.Parsons should pay Quiroga within 6 months
upon the delivery of beds.
Quiroga files a case against Parsons for allegedly violating the following stipulations: not to sell the beds at higher
prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the
beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the
dozen and in no other manner. With the exception of the obligation on the part of the defendant to order the beds
by the dozen and in no other manner, none of the obligations imputed to the defendant in the two causes of action
are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for the sale of his
beds in Iloilo, and that said obligations are implied in a contract of commercial agency. The whole question,
therefore, reduced itself to a determination as to whether the defendant, by reason of the contract hereinbefore
transcribed, was a purchaser or an agent of the plaintiff for the sale of his beds.
Issue: Whether the contract is a contract of agency or of sale.
Held: In order to classify a contract, due attention must be given to its essential clauses. In the contract in question,
what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant
with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in
the manner stipulated. Payment was to be made at the end of sixty days, or before, at the plaintiff’s request, or in
cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt
payment. These are precisely the essential features of a contract of purchase and sale. There was the obligation on
the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features
exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to
sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a
third person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff
and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed,
without any other consideration and regardless as to whether he had or had not sold the beds.
In respect to the defendant’s obligation to order by the dozen, the only one expressly imposed by the contract, the
effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place under
other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for having acted
thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and the defendant was
one of purchase and sale, and that the obligations the breach of which is alleged as a cause of action are not
imposed upon the defendant, either by agreement or by law.
Celestino Co vs CIR (G.R. No. L-8506)
Subject: Sales
Doctrine: Contract for Piece-of-work
Facts: Celestino Co & Company is a duly registered general co-partnership doing business under the trade name
of “Oriental Sash Factory”. From 1946 to 1951 it paid percentage taxes of 7% on the gross receipts of its sash,
door and window factory, in accordance with sec. 186 of the National Internal Revenue Code which is a tax on
the original sales of articles by manufacturer, producer or importer. However, in 1952 it began to claim only 3%
tax under Sec. 191, which is a tax on sales of services. Petitioner claims that it does not manufacture ready-made
doors, sash and windows for the public, but only upon special orders from the customers, hence, it is not engaged
in manufacturing under sec 186, but only in sales of services covered by sec 191. Having failed to convince BIR,
petitioner went to the Court of Tax Appeal where it also failed. CTA, in its decision, holds that the “petitioner has
chosen for its tradename and has offered itself to the public as a “Factory”, which means it is out to do business,
in its chosen lines on a big scale. As a general rule, sash factories receive orders for doors and windows of special
design only in particular cases but the bulk of their sales is derived from a ready-made doors and windows of
standard sizes for the average home.. Even if we were to believe petitioner’s claim that it does not manufacture
ready-made sash, doors and windows for the public and that it makes these articles only special order of its
customers, that does not make it a contractor within the purview of section 191 of the national Internal Revenue
Code… there are no less than fifty occupations enumerated in the aforesaid section…and after reading carefully
each and every one of them, we cannot find under which the business of manufacturing sash, doors and windows
upon special order of customers fall under the category” mentioned under Sec 191.
Issue: Whether the petitioner company provides special services or is engaged in manufacturing.
Held: The important thing to remember is that Celestino Co & Company habitually makes sash, windows and
doors, as it has represented in its stationery and advertisements to the public. That it “manufactures” the same is
practically admitted by appellant itself. The fact that windows and doors are made by it only when customers place
their orders, does not alter the nature of the establishment, for it is obvious that it only accepted such orders as
called for the employment of such material-moulding, frames, panels-as it ordinarily manufactured or was in a
position habitually to manufacture. The Oriental Sash Factory does nothing more than sell the goods that it mass-
produces or habitually makes; sash, panels, mouldings, frames, cutting them to such sizes and combining them in
such forms as its customers may desire.
Appellant invokes Article 1467 of the New Civil Code to bolster its contention that in filing orders for windows
and doors according to specifications, it did not sell, but merely contracted for particular pieces of work or “merely
sold its services”. In our opinion when this Factory accepts a job that requires the use of extraordinary or additional
equipment, or involves services not generally performed by it-it thereby contracts for a piece of work — filing
special orders within the meaning of Article 1467. The orders herein exhibited were not shown to be special. They
were merely orders for work — nothing is shown to call them special requiring extraordinary service of the factory.
The thought occurs to us that if, as alleged-all the work of appellant is only to fill orders previously made, such
orders should not be called special work, but regular work. The Supreme Court affirms the assailed decision by
the CTA.
COMMISSIONER vs. ENGR. EQUIPMENT
FACTS:
Present case is a petition for certiorari of the decision of the Court of Tax Appeals (CTA) assessing a compensating
tax of P174,441.62 on the respondent Engineering Equipment and Supply Company (Engineering).
Engineering, a domestic corporation is an engineering and machinery firm. As operator of an integrated
engineering shop, it is engaged, among others, in the design and installation of central type air conditioning system,
pumping plants and steel fabrication.
One Juan de la Cruz, wrote the Commissioner of Internal Revenue (CIR) denouncing Engineering for tax evasion
by misdeclaring its imported articles and failing to pay the correct percentage taxes due thereon in connivance
with its foreign suppliers. It was also denounced to the Central Bank (CB) for alleged fraud in obtaining its dollar
allocations.
Revenue examiners reported and recommended to the Commissioner that Engineering be assessed for P480,912.
As deficiency advance sales tax on the theory that it misdeclared its importation of air conditioning units and parts
and accessories which are subject to tax.
This assessment was revised and raised and Commissioner demanded another increase of P10,000 as compromise
in extrajudicial settlement of Engineering’s liability for violating the tax Code.
The firm, however, contested this demand and requested that it be furnished wit the details and particulars of the
Commissioner’s assessment to which the Commissioner answered that the increase was done pursuant and in
compliance with what is provided for under the law.
Respondents appealed to the CTA and during the pendency of the appeal, the investigating revenue examiners
reduced the deficiency tax liabilities.
Thereafter, CTA rendered a decision declaring respondent as a contractor thus exempt from the deficiency
manfactures sales tax, however they are ordered to pay compensating tax and 25% surcharge.
Commissioner appealed the decision to the SC. On the other hand, Engineering filed with the CTA a motion for
reconsideration (MR) of the above decision which was subsequently denied prompting respondent to also file an
appeal with the SC.
Both appeals/cases were consolidated in the present case.
Commissioner contends that respondent is a manufacturer and seller of air conditioning units and parts or
accessories, therefore, it is subject to the 30% advance sales tax.
On the other hand, respondent claims that it is not a manufacturer and setter of air conditioning units and spare
parts or accessories but a contractor engaged in design, supply, and installation of the central type air conditioning
system subject to 3% tax under the Tax Code.
ISSUE: WON Engineering is a manufacturer of air condition units under the Tax Code or a contractor under the
same code.
HELD:
We find Engineering did not manufacture air conditioning units for sale to the general public, but imported some
items which were used in executing contracts entered into by it. respondent, therefore, undertook negotiations and
execution of individual contracts for the design, supply, and installation of air conditioning units of the central
type.
The distinction between a contract of sale and one for work, labor, and materials is tested by the inquiry whether
the thing transferred is one not in existence and which never would have existed but for the order of the party
desiring to acquire it, or a thing which would have existed and has been the subject of sale to some other persons
even if the order had not been given.
The true test of contractor would seem to be that he renders service in the course of an independent occupation,
representing the will of his employer only as to the result of his work, and not as to the means by which it is
accomplished.
The facts and circumstances support the theory that Engineering is a contractor rather than a manufacturer.
However, as the facts of the case also show that Engineering misdeclared its importations as alleged by the
petitioners, it is thus ordered to pay 50% fraud surcharge plus 30% compensating tax for the imported spare parts.
Decision appealed from is affirmed with modifications.
H. E. Heacock Company v. Buntal Manufacturing Company, Gregorio Nieva and Maria A. De Nieva.
[GR No. 44471. September 7, 1938]
TOPIC: Contract of Sale
FACTS:
Buntal, et al rented a machine from Heacock Company for a term of 20 calendar months.
Buntal, et al weren’t able to return the machine and failed to pay the lease.
Lower court held that the contract is a contract of lease. It also decided that Heacock should pay P555, the to tal
amount they bound themselves to pay (rate of rent is P35 a month starting August 1931)
ISSUE: Is the contract a contract of purchase and sale on instalments?
HELD: YES.
It was stipulated in the contract that:
“In consideration of the sum of P160 to it in hand paid by the hirer, the owner hereby grants to the hirer the option
to purchase, while the present lease is in force and effect, the property made the subject of this agreement, at the
purchase price of P860…”
Court finds that the amount P160 Buntal Manufacturing Company paid was an initial payment for the P860
purchase price.
Court also stated that the intention of the parties should be taken into consideration when the contract in question
is not clear.
The intention was seen in the contract they stipulated.
G.R. No. 142618 July 12, 2007
PCI LEASING AND FINANCE, INC., Petitioner, vs. GIRAFFE-X CREATIVE IMAGING, INC., Respondent.
Facts: On December 4, 1996, petitioner PCI LEASING and respondent GIRAFFE entered into a Lease Agreement,
whereby the former leased out to the latter two equipment with accessories. Forming parts of the basic lease
agreement were separate documents described that GIRAFFE as the "borrower" who acknowledged that it must
pay monthly for thirty-six (36) months. The agreement embodied a standard acceleration clause if GIRAFFE fails
to pay.
GIRAFFE defaulted in its monthly rental-payment obligations. Following a three-month default, PCI LEASING
addressed a pay-or-surrender-equipment demand letter to GIRAFFE. The demand went unheeded. Hence, PCI
LEASING instituted the instant case against GIRAFFE praying for the issuance of a writ of replevin for the
recovery of the leased property. After trial, judgment be rendered in favor of PCI LEASING. The trial court issued
a writ of replevin, paving the way for PCI LEASING to secure the seizure and delivery of the equipment.
GIRAFFE filed a Motion to Dismiss arguing that the seizure of the two leased equipment stripped PCI LEASING
of its cause of action. GIRAFFE argues that, pursuant to Article 1484 of the Civil Code on installment sales of
personal property, PCI LEASING is barred from further pursuing any claim arising from the lease agreement,
adding that the agreement between the parties is in reality a lease of movables with option to buy. The given
situation, GIRAFFE continues, squarely brings into applicable play Articles 1484 and 1485 of the Civil Code,
commonly referred to as the Recto Law.
In its opposition, PCI LEASING maintains that its contract with GIRAFFE is a straight lease without an option to
buy. PCI LEASING rejects the applicability of Article 1484 in relation to Article 1485 of the Civil Code, claiming
that, under the terms and conditions of the basic agreement, the relationship between the parties is one between an
ordinary lessor and an ordinary lessee.
In a decision, the trial court granted GIRAFFE’s motion to dismiss mainly on the interplay of the following
premises: 1) the lease agreement package, as memorialized in the contract documents, is akin to the contract
contemplated in Article 1485 of the Civil Code, and 2) GIRAFFE’s loss of possession of the leased equipment
consequent to the enforcement of the writ of replevin is "akin to foreclosure, … the condition precedent for
application of Articles 1484 and 1485.
Issue: Whether or not the Lease Agreement between the parties are covered by Articles 1484 and 1485 of the New
Civil Code.
Held: Yes. The PCI LEASING- GIRAFFE lease agreement is in reality a lease with an option to purchase the
equipment. This has been made manifest by the actions of the petitioner itself of which is the declarations made
in its demand letter to the respondent. There could be no other explanation than that if the respondent paid the
balance, then it could keep the equipment for its own; if not, then it should return them. This is clearly an option
to purchase given to the respondent. Being so, Article 1485 of the Civil Code should apply.
PARAGAS v. HEIRS OF DOMINADOR BALACANO
FACTS: Gregorio Balacano, married to Lorenza, owned 2 parcels of land. He was already 81 years old, very weak,
could barely talk, and had been battling w/ liver disease for over a month. On his deathbed, barely a week before
he died, he allegedly signed a Deed of Absolute Sale over the lots in favor of the Paragas Spouses, accompanied
by Atty. De Guzman who proceeded to notarize the same, alleging that it was a mere confirmation of a previous
sale and that Gregorio had already paid a P 50,000.00 deposit. The Paragas’ driver was also there to take a picture
of Gregorio signing the said deed, w/ a ballpen in his hand. There was nothing to show that the contents of the
deed were explained to Gregorio. Paragas then sold a portion of the disputed lot to Catalino. The grandson of
Gregorio, Domingo, sought to annul the sale and partition. There was no sufficient evidence to support any prior
agreement or partial execution thereof.
ISSUE: W/N Balacano is incapacitated to enter into a contract of sale
HELD: A person is not rendered incompetent merely because of old age; however, when such age has impaired
the mental faculties as to prevent a person from protecting his rights, then he is undeniably incapacitated. He is
clearly at a disadvantage, and the courts must be vigilant for his protection. In this case, Gregorio’s consent was
clearly absent – hence the sale was null and void. The dubious circumstances raise serious doubts on his capacity
to render consent. Considering that the Paragas Spouses are not owners of the said properties, it only follows that
the subsequent sale thereof to Catalino – who was not in good faith – is likewise void. Further, the lots pertained
to the conjugal partnership – having been inherited by Gregorio during his marriage to Lorenza. It cannot thus be
sold w/o the latter’s consent.
LABAGALA vs. SANTIAGO
FACTS: Jose T. Santiago owned a parcel of land in Manila. However, his sisters sued him for recovery of 2/3
share of the land alleging that he had fraudulently registered it in his name. The trial court decided in favor of his
sisters.
Jose died intestate. His sisters then filed a complaint before the RTC for recovery of the 1/3 portion of said property
which was in the possession of Ida C. Labagala (who claimed to be Ida C. Santiago, the daughter of Jose).
The trial court ruled in favor of Labagala. According to the trial court, the 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.
When appealed, the Court of Appeals (CA) reversed the decision of the trial court. It took into account that Ida
was born of different parents, as indicated her birth certificate.
ISSUES: WON respondents may impugn petitioner's filiation in this action for recovery of title and possession.
WON petitioner is entitled to Jose's 1/3 portion of the property he co-owned with respondents, through succession,
sale, or donation.
HELD: The Court AFFIRMED the decision of the CA.
On Issue No. 1 Yes. 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 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.
A baptismal certificate, a private document, is not conclusive proof of filiation. Use of a family name certainly
does not establish pedigree. Thus, she cannot inherit from him through intestate succession.
On Issue No. 2 No. The Court ruled that 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. Petitioner could not have
given her consent to the contract, being a minor at the time. Consent of the contracting parties is among the
essential requisites of a contract, including one of sale, absent which there can be no valid contract. Moreover,
petitioner admittedly did not pay any centavo for the property which makes the sale void. Article 1471 of the Civil
Code provides that 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. 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, the acceptance of the donation should have been made by her father or mother or her legal representative
pursuant to Art. 741 of the same Code. No one of those mentioned in the law accepted the donation for Ida.
GUIANG v. COURT OF APPEALS June 26, 1998 (291 SCRA 372)
FACTS: 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.
Over the objection of private respondent Gilda Corpuz and while she was in Manila seeking employment (with
the consent of her husband), her husband sold to the petitioners-spouses Antonio and Luzviminda Guiang one half
of their conjugal peoperty, consisting of their residence and the lot on which it stood. Upon her return to Cotabato,
respondent gathered her children and went back to the subject property. Petitioners filed a complaint for
trespassing. Later, there was an amicable settlement between the parties. Feeling that she had the shorter end of
the bargain, respondent filed an Amended Complaint against her husband and petitioners. 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.
ISSUE: WON contract without the consent of wife is void
HELD: Yes. Art 124 of the FC rules that 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.
Respondent’s consent to the contract of sale of their conjugal property was totally inexistent or absent. The nullity
of the contract of sale is premised on the absence of private respondent’s consent. To constitute a valid contract,
the Civil Code requires the concurrence of the following elements: (1) cause, (2) object, and (3) consent, the last
element being indubitably absent in the case at bar.
A void contract cannot be ratified.
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.
Uy Siu Pin and Chua Hue vs Casimira Cantollas et al
Around 1929, Sps Pedro Velegaño & Casimira Cantollas were indebted to El Hogar Filipino, P2,000 secured by
a mortgage on a land with OCT No. 1017. Upon the death of Pedro Velegaño in 1929, the unpaid balance was
P1,300. On April 2, 1932, Casimira and son Blas, who succeeded to the mortgaged land, entered into a contract
with Uy Siu Pin by which the former agreed to deliver said land to the latter with full right on Uy to possess and
enjoy the land with its improvements for 15 yrs from April 2, 1932, provided that Uy would pay to El Hogar the
unpaid P1,300 + all other expenses including realty taxes. And after the 15 yrs, Uy would return the land to
Casimira and Blas w/o the latter paying anything. But if Casimira and Blas can pay, they would have the right to
redeem from Uy at P1,750. Uy paid El Hogar, P600 up to July 1933 only. So El Hogar foreclosed the mortgage
on land. In the foreclosure sale, El Hogar was the highest bidder P1,062.66. After Casimira and Blas failed to
redeem during the statutory period so a final deed of sale was issued. Then El Hogar sold the land to Uy for
P1,198.17 (TCT No. 8446 was issued). Then Uy sold the land to his wife for P4,000 (TCT No. 8447 was issued).
Then Chua sold to Juan Magbajos. In 1935, Casimira and Blas filed at CFI a complaint against Sps Uy and Chua,
praying that the sale to them be cancelled etc.
SC: The sale from Uy to his wife Chua Hue is null and void not only because the former had no right to dispose
of the land in controversy in view of the existence of the contract, but because such sale comes within the
prohibition of article 1458 of the Civil Code.
Modina Vs. CA
Facts: This case involves parcels of land registered under the name of Ramon Chiang.
Chiang theorized that the subject properties were sold to him by his wife, Merlinda Plana Chiang as evidenced
by a Deed of Sale and were subsequently sold by Chiang to the petitioner Serafin Modina. (Dates of sale:August
3, 1979 and August 24, 1979, respectively.)
Modina brought a Complaint for Recovery of Possession with Damages against the private respondents before the
RTC.
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.
She contended that fraudulent acts were allegedly employed by her husband 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 the CFI of Iloilo 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.
RTC ruled in favor of the wife Merlinda declaring the two sales in August 1979 as void and inexistent.
Upon appeal, the CA affirmed in toto the RTC ruling.
Issues: WON the sale of subject lots should be nullified. YES
WON petitioner Modina was a purchaser in good faith. NO Held:
1st issue: The sale of the subject lots should be nullified
Prohibition of sale between spouses
Art. 1490. The husband and the wife cannot sell property to each other, except:
when a separation of property was agreed upon in the marriage settlements; or
when there has been a judicial separation of property under Art. 191.
The sale between Chiang spouses was null and void. The ownership of the lot did not transfer to Ramon Chiang.
Hence, the sale to Modina was null and void.
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. Serafin Modina is, likewise, void and inexistent.
A contract of sale without consideration is a void contract
Under Article 1409of 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.
Thus, Modina’s insistence that Merlinda cannot attack subject contract of sale as she was a guilty party thereto is
equally unavailing.
Merlinda can recover the property
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.
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.
2nd issue: Modina was not a purchaser in good faith
There are circumstances which are indicia of bad faith on Mondina’s part (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
MERLINDA’s first husband;
that the said sale was between the spouses;
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 vendor’s
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.
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. [ G.R. No. L-8477, May 31, 1956 ]
FACTS: Mariano L Bernardo, a minor, inherited from his father, Marcelo Bernardo 17 parcels of land located in
Guiguinto, Bulacan. In view of his minority, guardianship proceedings were instituted on July 27, 1947, where
Socorro Roland, surviving spouse of Marcelo and step-mother of Mariano, was appointed as guardian of the latter.
Also, Socorro filed a motion asking authority to sell as guardian the 17 parcels for the sum of P14,700 to his
brother-in-law, Dr. Fidel C. Ramos, the purpose of the sale being allegedly to invest money in a residential house,
which the minor desired to have on Tindalo St., Manila. The motion was granted. On August 5, 1947 Socorro, as
guardian, then executed the proper deed of sale in favor of Fidel Ramos and on August 12, 1947, she asked for
and obtained judicial confirmation of the sale. However, on August 13, 1947, Fidel Ramos executed in favor of
Socorro personally, a deed of conveyance covering the same 17 parcels for the sum of P15,000. And on October
21, 1947 Socorro sold 4 out of the 17 parcels to Emilio Cruz for P3,000, reserving herself the right to repurchase.
On August 10, 1948, petitioner Phil. Trust Co. replaced Socorro as guardian. Petitioner filed a complaint to annul
two contracts regarding the 17 parcels of land: a) the sale thereof by Socorro, as guardian, to Fidel Ramos; and b)
sale thereof by Fidel Ramos to Socorro personally. Petitioner contends that the step-mother in effect, sold to
herself, the properties of her ward thus should be annulled as it violates Art. 1459 of the Civil Code prohibiting
the guardian from purchasing “either in person or through the mediation of another” the property of her ward. As
to the third conveyance, that Socorro had acquired no valid title to convey to Cruz. The trial court held that Art
1459 was not controlling as there was no proof that Ramos was a mere intermediary or that the latter agreed with
Socorro to but the parcels of land for her benefit. The Court of Appeals affirmed the judgment, adding that the
minor new the particulars of, and approved the transactions, and that ‘only clear and positive evidence of fraud
and bad faith, and not mere insinuations and interferences will overcome the presumptions that a sale was
concluded in all good faith for value. Hence, this petition.
ISSUE: Whether the two contracts of sale made by Socorro was valid.
HELD: No. The court held that even without proof that Socorro had connived with Fidel 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 ward's interest and in line with the court's suspicion whenever the guardian acquires the
ward's property we have no hesitation to declare that in this case, in the eyes of the law, Socorro Roldan took by
purchase her ward's parcels thru Dr. Ramos, and that Article 1459 of the Civil Code applies. 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. 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 it (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.
Rodriguez vs. Mactal
Nature: This is an appeal from an order of the Court of First Instance of Nueva Ecija, issued in the intestate
proceeding of Mauricia de Guzman, deceased, denying the motion of the appellants in which they sought to annul
a sale, executed January 23, 1926, by the administratrix Trinidad Mactal, of a parcel of land to Silverio Choco and
a resale of the same land on March 10, 1928, to the administratrix Trinidad Mactal.
Facts: The appellants Catalina and Rodriguez, and the appellee Mactal, are all heirs of Mauricia de Guzman whose
estate is under administration in CFI.
Appellee Mactal was appointed as administratrix. The committee of claims submitted a report in which various
claims against the estate were allowed. The report was approved by the court.
The administratrix prayed that she be allowed to sell the only parcel of land belonging to the estate with an area
of 19 hectares for the purpose of paying debts. This land was a part of a parcel of land of 23 hectares of which
belonged to Rodriguez."
The court authorized the administratrix to sell the land. The latter then sold it to Silverio Choco. Thereafter,
the administratrix paid the approved claims against the estate. These payments, all of which were made after the
sale in favor of Silverio Choco, conclusively prove that sale was not fictitious as alleged by the appellants.
More than two years later, Choco sold the same land to the spouses Pio Villar and Trinidad Mactal for the sum of
P4,500, who in turn mortgaged it to PNB for the same amount.
Petitioners-appellant’s contention: they alleged that this sale was fictitious, that there was collusion between Choco
and Mactal and that the former never paid the latter.
The appellants relied on article 1459 of the Civil Code, which enumerates persons who cannot take by purchase,
i.e. agents and executors.
They insisted that the administratrix bought the land indirectly through the mediation of Choco and that both sales
should be annulled under the provisions of the article cited above.
Issue: WON the sale in question should be annulled due to the fact that it falls under the prohibition under article
1459 with respect to purchase by executors/ administrators.
Held: No. The proofs in this case do not substantiate this claim of the appellants. The SC declared that 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 Choco and Mactal to the effect that Choco 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.
The evidence before this court does not establish such agreement.
Note: (Additional contention of the appellants)
The appellants also alleged that the order of the court authorizing the administrator to sell the land in question is
null and void due to the fact the motion of Trinidad Mactal, praying that she be authorized to sell, was not
accompanied by the written consent of the heirs or their duly authorized guardian.
The SC applied Act No. 3882, sec 714 provides that: Realty may be sold or encumbered. — When there is no
personal estate of the deceased or when, though there be such, its sale would redound to the detriment of the
interests of the participants in the estate and the deceased has left no testamentary disposition for the payment of
his debts and charges of administration, the court, on application of the executor or administrator, and on written
notice to the heirs, devisees, and other persons interested, may grant him a license to sell, mortgage, or otherwise
encumber for that purpose real estate, if it clearly appears that such sale, mortgaging or encumbrance would be
beneficial to the persons interested and will not defeat any devise of land; in which case the assent of the devisee
shall be required.
The appealed order of the lower court is affirmed with costs against the appellants.
Rubias vs Batiller (1973)
Facts: Francisco Militante claimed that he owned a parcel of land located in Iloilo. He filed with the CFI of Iloilo
an application for the registration of title of the land. This was opposed by the Director of Lands, the Director of
Forestry, and other oppositors. The case was docked as a land case, and after trial the court dismissed the
application for registration. Militante appealed to the Court of Appeals.
Pending that appeal, he sold to Rubias (his son-in-law and a lawyer) the land.
The CA rendered a decision, dismissing the application for registration.
Rubias filed a Forcible Entry and Detainer case against Batiller.
In that case, the court held that Rubias has no cause of action because the property in dispute which Rubias
allegedly bought from Militante was the subject matter of a land case, in which case Rubias was the counsel on
record of Militante himself. It thus falls under Article 1491 of the Civil Code. (Hence, this appeal.)
Issue: Whether the sale of the land is prohibited under Article 1491.
Held: YES. Article 1491 says that “The following persons cannot acquire any purchase, even at a public or judicial
auction, either in person or through the mediation of another…. (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 lawyesr, 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.” The present case clearly falls under this, especially since the case was
still pending appeal when the sale was made.
Issue: Legal effect of a sale falling under Article 1491?
Held: NULL AND VOID.CANNOT BE RATIFIED.
Manresa considered such prohibited acquisitions (which fell under the Spanish Civil Code) as merely voidable
because the Spanish Code did not recognize nullity. But our Civil Code does recognize the absolute nullity of
contracts “whose cause, object or purpose is contract 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.” 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 this
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 (under Art 1491). As to their transactions, it has
been opined that they may be “ratified” by means of and in “the form of a new contract, in which case its validity
shall be determined only by the circumstances at the time of execution of such new contract.” In those cases, 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 intent, or the service which was impossible. The ratification or second
contract would then be valid from its execution; however, it does not retroact to the date of the first contract.
Decision affirmed.
DIRECTOR OF LANDS vs. ABABA (1979)
FACTS: Atty. Alberto Fernandez is the adverse claimant of Lots No. 5600 and 5602 in Cebu. Fernandez was
retained as counsel by petitioner Maximo Abarquez in a civil case for the annulment of a contract of sale with
right of repurchase and for the recovery of the land for said lots against Agripina Abarquez. The CFI of Cebu ruled
against Maximo so he appealed to the CA. Maximo litigated as a pauper in the lower court and engaged the services
of Fernandez on a contingent basis, liable to compensate his lawyer for the appeal by obliging himself to give 1/2
of whatever he might recover from the 2 lots should the appeal prosper. Lots 5600 and 5602 were part of the estate
of Maximo’s deceased parents, which were partitioned to Maximo and Agripina, his sister, as heirs.
Subsequently, CA annulled the deed of pacto de retro and ruled in favor of Maximo. A TCT was issued in
Maximo’s name over his adjudged share. Atty. Fernandez waited for Maximo to comply with his obligation under
the executed document by him to deliver 1/2 of the recovered land. Maximo refused to comply with his obligation
and instead offered to sell the whole land to petitioner-spouses Larrazabal.
Atty. Fernandez took stops to protect his interest by filing to annotate an attorney’s lien on the TCT and by
notifying the Larrazabal spouses of his claim over 1/2 portion of the land. Notwithstanding the annotation of the
adverse claim, Maximo conveyed by deed of absolute sale 2/3 of the lands to spouses Larrazabal. Spouses
Larrazabal subsequently filed for cancellation of adverse claim on the new TCT. Atty. Fernandez filed the present
appeal to deny the petition for cancellation of adverse claim.
ISSUE: WON the registration of the adverse claim of Atty. Fernandez was null since his interest was based on a
contract for a contingent fee as Maximo’s counsel, prohibited under Art 1491 of the NCC?
HELD: NO. A contract for a contingent fee is valid. There was no contract of sale on the property which is the
subject of litigation.
Art 1491 provides that the following persons cannot acquire by purchase even at a public or judicial auction, either
in person or through the petition of another. (5) Justices, judges, prosecuting attorneys, clerks of superior and
inferior courts and other 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.
Art 1491 only prohibits the sale or assignment between the lawyer and his client, of property which is the subject
of litigation. In other words, for the prohibition to operate, the sale or transfer of the property must take place
during the pendency of the litigation involving the property.
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 the assets realized by the litigation. There is a clear distraction between
such cases and one in which the lawyer speculates on the outcome of the matter in which he is employed.
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 1/2 of whatever Maximo 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 ½ 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.
Under the Canons of Professional Ethics, 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, allowed a reasonable contingent fee
contract.
In the present case, there is no iota of proof to show that Atty. Fernandez had exerted any undue influence or
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.
The contract for a contingent fee, being valid, vested in Atty. Fernandez an interest or right over the lots in question
to 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 1/2 portion of the lots in question became effective and binding.
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 attomey'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.
Therefore, as an interest in registered land, the only adequate remedy open to Atty. Fernandez is to register such
interest as an adverse claim.
The 1/2 interest of Atty. Fernandez in the lots in question should therefore be respected. Indeed, he has a better
right than petitioner-spouses Larrazabal. They purchased their 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 TCT and was
later annotated on the new TCT issued to them. 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.
The SC AFFIRMED the lower court ruling to deny petition for cancellation of adverse claim.
FABILLO v. IAC
FACTS: Florencio Fabillo contracted the services of Atty. Murillo to revive a lost case over his inheritance from
his deceased sister Justinia. He sought to acquire the San Salvador and Pugahanay Properties that his sister left
behind, against the latter’s husband. They entered into a contract where a contingent fee in favor of Atty. Murillo
in case the case was won was agreed upon. The fee was for 40% of the value of whatever benefit Florencio may
derive from the suit – such as if the properties were sold, rented, or mortgaged. It was vague, however, regarding
the fee in case Florencio or his heirs decide to occupy the house – allowing Atty. Murillo the option to occupy or
lease 40% of the said house and lot. A compromise agreement was entered into where Florencio acquired both
the San Salvador and Pugahanay Properties. Atty. Murillo installed a tenant in the Pugahanay Property; later on
Florencio claimed exclusive rights over the properties invoking Art. 1491 of the Civil Code. Florencio and Atty.
Murillo both died and were succeeded by their respective heirs.
ISSUE: W/N contingent fees agreed upon are valid
HELD: Contingent fees are not contemplated by the prohibition in Art. 1491 disallowing lawyers to purchase
properties of their clients under litigation. The said prohibition applies only during the pendency of the litigation.
Payment of the contingent fee is made after the litigation, and is thus not covered by the prohibition. For as long
as there is no fraud or undue influence, or as long as the fees are not exorbitant, the same is valid and enforceable.
It is even recognized by the Cannons of Professional Ethics. However, considering that the contract is vague on
the matter of division of the shares if Florencio occupies the property; the ambiguity is to be construed against
Atty. Murillo being the one who drafted the contract and being a lawyer more knowledgeable about the law. The
Court thus, invoking the time-honored principle that a lawyer shall uphold the dignity of the legal profession,
ordered only a contingent fee of P 3,000.00 as reasonable attorney’s fees.
Bautista vs Gonzales [A.M. No. 1625. February 12, 1990] case digest
FACTS:
In a verified complaint filed by Angel L. Bautista, respondent Ramon A. Gonzales was charged with malpractice,
deceit, gross misconduct and violation of lawyer’s oath. Required by this Court to answer the charges against him,
respondent filed a motion for a bill of particulars asking this Court to order complainant to amend his complaint
by making his charges more definite. In a resolution the Court granted respondent’s motion and required
complainant to file an amended complaint. Complainant submitted an amended complaint for disbarment, alleging
that respondent committed the following acts:
1. Accepting a case wherein he agreed with his clients, namely, Alfaro Fortunado, Nestor Fortunado and Editha
Fortunado [hereinafter referred to as the Fortunados] to pay all expenses, including court fees, for a contingent fee
of fifty percent (50%) of the value of the property in litigation.
xxx
4. Inducing complainant, who was his former client, to enter into a contract with him on
August 30, 1971 for the development into a residential subdivision of the land involved in
Civil Case No. Q-15143, covered by TCT No. T-1929, claiming that he acquired fifty percent (50%) interest
thereof as attorney’s fees from the Fortunados, while knowing fully well that the said property was already sold
at a public auction on June 30, 1971, by the Provincial Sheriff of Lanao del Norte and registered with the Register
of Deeds of Iligan City; x x x
Pertinent to No. 4 above, the contract, in No. 1 above, reads:
We the [Fortunados] agree on the 50% contingent fee, provided, you [respondent Ramon Gonzales] defray all
expenses, for the suit, including court fees.
ISSUE:
Whether or not respondent committed serious misconduct involving a champertous contract.
HELD:
YES. Respondent was suspended from practice of law for six (6) months.
RATIO:
The Court finds that the agreement between the respondent and the Fortunados contrary to Canon 42 of the Canons
of Professional Ethics which provides that a lawyer may not properly agree with a client to pay or bear the expenses
of litigation. [See also Rule 16.04, Code of Professional Responsibility]. Although a lawyer may in good faith,
advance the expenses of litigation, the same should be subject to reimbursement. The agreement between
respondent and the Fortunados, however, does not provide for reimbursement to respondent of litigation expenses
paid by him. An agreement whereby an attorney agrees to pay expenses of proceedings to enforce the client’s
rights is champertous [citation omitted]. Such agreements are against public policy especially where, as in this
case, the attorney has agreed to carry on the action at his own expense in consideration of some bargain to have
part of the thing in dispute [citation omitted]. The execution of these contracts violates the fiduciary relationship
between the lawyer and his client, for which the former must incur administrative sanctions.
GAN TIANCO V. PABINGUIT
FACTS: CANDIDA ACABO was the owner of 6 parcels of land. She sold these lands to Gan Tiangco. However,
Gan Tianco was unable to take possessions of the lands since such were in the possession of Silvino Pabinguit
who alleges certain rights therein. He claims to have purchased them from Faustino ABAD; That Abad had become
the owner through purchase from Henry GARDNER; that Gardner owned the land by reason of having purchased
it at a public auction where he was the Justice of the Peace then, after such land were levied by ACABO. Gardner
claims that after the acution, he had learned that he was forbidden to take part in it and thus sold what he had
purchased to Abad. The CFI declared Gan Tianco as the owner of the parcels of land. The trial court was of the
opinion in that Gardner’s purchase of the lot as being the justice of the peace of court was unauthorized, since the
Civil Code prohibits judges from acquiring by purchase even at a public auction or judicial sale, either in person
or by an agent, any property or rights litigated in the court in the jurisdiction or territory which they exercise their
respective duties; this prohibition includes taking of property by assignment.
ISSUE: Whether or not Gardner’s purchase of the land being the Justice of Peace Court is authorized.
HELD: NO. It appears to be as delicate matter of a judge to take part in the sale of property that had been the
subject of litigation in his court, as to intervene in auction of the property which, though not directly litigated in
this court, is nevertheless law intends to avoid is the improper interference with an interest of a judge in a thing
levied upon and sold by his order.
If under the law Gardner was prohibited from acquiring the ownership of Acabo’s land, then he could not have
transmitted (transfer) to Abad the right of ownership which he did not possess; nor could Abad, to whom this
alleged ownership had been transmitted, have conveyed the same to
Pabinguit.
SIMEON B. MIGUEL, ET AL. vs. FLORENDO CATALINO, G.R. No. L-23072,
Facts: Appellants Simeon, Emilia and Marcelina Miguel, and appellant Grace Ventura brought suit in the
Court below against Florendo Catalino for the recovery of the land originally titled in the name of their father
Bacaquio, situated in the Barrio of San Pascual, Municipality of Tuba, Benguet, Mountain Province. They claim
to be the children and heirs of the original registered owner. They averred that defendant, without their
knowledge or consent, had unlawfully taken possession of the land, gathered its produce and unlawfully excluded
plaintiffs therefrom. Defendant answered pleading ownership and adverse possession for 30 years. The trial the
Court dismissed the complaint, declared defendant to be the rightful owner, and ordered the Register of Deeds to
issue a transfer certificate in lieu of the original. Plaintiffs appealed directly to this Court, assailing the trial Court's
findings of fact and law.
Grace Ventura is the only child of Bacaquio by his first wife and the other plaintiffs-appellants, Simeon, Emilia
and Marcelina, all surnamed "Miguel", are his children by his third wife.
Bacaquio, who died in 1943, acquired the land when his second wife died and sold it to Catalino
Agyapao, father of the defendant Florendo Catalino, for P300.00 in 1928. Of the purchase price P100.00 was paid
and receipted for when the land was surveyed, but the receipt was lost; the balance was paid after the certificate
of title was issued. No formal deed of sale was executed, but since the sale in 1928, or for more than 30 years,
vendee Catalino Agyapao and his son, defendant-appellee Florendo Catalino, had been in possession of the land,
in the concept of owner, paying the taxes thereon and introducing improvements.
On 1 February 1949, Grace Ventura, by herself alone, "sold" (as per her Transferor's Affidavit, Exhibit "6") anew
the same land for P300.00 to defendant Florendo Catalino.
In 1961, Catalino Agyapao in turn sold the land to his son, the defendant Florendo Catalino.
This being a direct appeal from the trial court, where the value of the property involved does not exceed
P200,000.00, only the issues of law are reviewable by the Supreme Court, the findings of fact of the court a quo
being deemed conceded by the appellant. We are thus constrained to discard appellant's second and third
assignments of error.
Issue: Whether or not the decision by the council for the settlement of ownership and possession of the land
is admissible in evidence
In their first assignment, appellants assail the admission in evidence over the objection of the appellant of Exhibit
"3". This exhibit is a decision in favor of the defendant-appellee against herein plaintiff-appellant Grace Ventura,
by the council of Barrio of San Pascual, Tuba, Benguet, in its Administrative Case No. 4, for the settlement of
ownership and possession of the land. The decision is ultra vires because barrio councils, which are not courts,
have no judicial powers (Sec. 1, Art. VIII, Constitution; see Sec. 12, Rep. Act 2370, otherwise known as the Barrio
Charter). Therefore, as contended by appellants, the exhibit is not admissible in a judicial proceeding as evidence
for ascertaining the truth respecting the fact of ownership and possession (Sec. 1, Rule 128, Rules of Court).
Appellants are likewise correct in claiming that the sale of the land in 1928 by Bacaquio to Catalino Agyapao,
defendant's father, is null and void ab initio, for lack of executive approval. However, it is not the provisions of
the Public Land Act (particularly Section 118 of Act 2874 and Section 120 of Commonwealth Act 141) that nullify
the transaction, for the reason that there is no finding, and the contending parties have not shown, that the land
titled in the name of Bacaquio was acquired from the public domain (Palad vs. Saito, 55 Phil. 831). The laws
applicable to the said sale are: Section 145(b) of the Administrative Code of Mindanao and Sulu, providing that
no conveyance or encumbrance of real property shall be made in that department by any non-christian inhabitant
of the same, unless, among other requirements, the deed shall bear indorsed upon it the approval of the provincial
governor or his representative duly authorized in writing for the purpose; Section 146 of the same Code, declaring
that every contract or agreement made in violation of Section 145 "shall be null and void"; and Act 2798, as
amended by Act 2913, extending the application of the above provisions to Mountain Province and Nueva
Vizcaya.
Since the 1928 sale is technically invalid, Bacaquio remained, in law, the owner of the land until his death in 1943,
when his title passed on, by the law on succession, to his heirs, the plaintiffs-appellants.
Notwithstanding the errors aforementioned in the appealed decision, we are of the opinion that the judgment in
favor of defendant-appellee Florendo Catalino must be sustained. For despite the invalidity of his sale to Catalino
Agyapao, father of defendant-appellee, the vendor Bacaquio suffered the latter to enter, possess and enjoy the land
in question without protest, from 1928 to 1943, when the seller died; and the appellants, in turn, while succeeding
the deceased, also remained inactive, without taking any step to reivindicate the lot from 1944 to 1962, when the
present suit was commenced in court. Even granting appellants' proposition that no prescription lies against their
father's recorded title, their passivity and inaction for more than 34 years (1928-1962) justifies the defendant-
appellee in setting up the equitable defense of laches in his own behalf. As a result, the action of plaintiffs-
appellants must be considered barred and the Court below correctly so held. Courts can not look with favor at
parties who, by their silence, delay and inaction, knowingly induce another to spend time, effort and expense in
cultivating the land, paying taxes and making improvements thereon for 30 long years, only to spring from ambush
and claim title when the possessor's efforts and the rise of land values offer an opportunity to make easy profit at
his expense. In Mejia de Lucas vs. Gamponia, 100 Phil. 277, 281, this Court laid down a rule that is here squarely
applicable:
Upon a careful consideration of the facts and circumstances, we are constrained to find, however, that while no
legal defense to the action lies, an equitable one lies in favor of the defendant and that is, the equitable defense of
laches. We hold that the defense of prescription or adverse possession in derogation of the title of the registered
owner Domingo Mejia does not lie, but that of the equitable defense of laches. Otherwise stated, we hold that
while defendant may not be considered as having acquired title by virtue of his and his predecessors' long
continued possession for 37 years, the original owner's right to recover back the possession of the property and
title thereto from the defendant has, by the long period of 37 years and by patentee's inaction and neglect, been
converted into a stale demand.
As in the Gamponia case, the four elements of laches are present in the case at bar, namely: (a) conduct on the part
of the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made and for
which the complaint seeks a remedy; (b) delay in asserting the complainant's rights, the complainant having had
knowledge or notice, of the defendant's conduct and having been afforded an opportunity to institute a suit; (c)
lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he
bases his suit; and (d) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the
suit is not held to be barred. In the case at bar, Bacaquio sold the land in 1928 but the sale is void for lack of the
governor's approval. The vendor, and also his heirs after him, could have instituted an action to annul the sale from
that time, since they knew of the invalidity of the sale, which is a matter of law; they did not have to wait for 34
years to institute suit. The defendant was made to feel secure in the belief that no action would be filed against
him by such passivity, and also because he "bought" again the land in 1949 from Grace Ventura who alone tried
to question his ownership; so that the defendant will be plainly prejudiced in the event the present action is not
held to be barred.
The difference between prescription and laches was elaborated in Nielsen & Co., Inc. vs. Lepanto Consolidated
Mining Co., L-21601, 17 December 1966, 18 SCRA p. 1040, as follows:
Appellee is correct in its contention that the defense of laches applies independently of prescription. Laches is
different from the statute of limitations. Prescription is concerned with the fact of delay, whereas laches is
concerned with the effect of delay. Prescription is a matter of time; laches is principally a question of inequity of
permitting a claim to be enforced, this inequity being founded on some change in the condition of the property or
the relation of the parties. Prescription is statutory; laches is not. Laches applies in equity, whereas prescription
applies at law. Prescription is based on fixed time laches is not, (30 C.J.S., p. 522. See alsoPomeroy's Equity
Jurisprudence, Vol. 2, 5th ed., p. 177) (18 SCRA 1053).
With reference to appellant Grace Ventura, it is well to remark that her situation is even worse than that of her co-
heirs and co-plaintiffs, in view of her executing an affidavit of transfer (Exh. 6) attesting under oath to her having
sold the land in controversy to herein defendant-appellee, and the lower Court's finding that in 1949 she was paid
P300.00 for it, because she, "being a smart woman of enterprise, threatened to cause trouble if the defendant failed
to give her P300.00 more, because her stand (of being the owner of the land) was buttressed by the fact that
Original Certificate of Title No. 31 is still in the name of her father, Bacaquio" (Decision, Record on Appeal, p.
24). This sale, that was in fact a quitclaim, may not be contested as needing executive approval; for it has not been
shown that Grace Ventura is a non-christian inhabitant like her father, an essential fact that cannot be assumed
(Sale de Porkan vs. Yatco, 70 Phil. 161, 175).
Since the plaintiffs-appellants are barred from recovery, their divestiture of all the elements of ownership in the
land is complete; and the Court a quo was justified in ordering that Bacaquio's original certificate be cancelled,
and a new transfer certificate in the name of Florendo Catalino be issued in lieu thereof by the Register of Deeds.
FOR THE FOREGOING REASONS, the appealed decision is hereby affirmed, with costs against the plaintiffs-
appellants.