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

L-59266 February 29, 1988 SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners, vs. HON. COURT OF APPEALS and ATILANO G. JABIL, respondents.

BIDIN, J.: This is a petition for review on certiorari seeking the reversal of the: (1) Decision * of the 9th Division, Court of Appeals dated July 31,1981, affirming with modification the Decision, dated August 25, 1972 of the Court of First Instance ** of Cebu in civil Case No. 23-L entitled Atilano G. Jabil vs. Silvestre T. Dignos and Isabela Lumungsod de Dignos and Panfilo Jabalde, as Attorney-in-Fact of Luciano Cabigas and Jovita L. de Cabigas; and (2) its Resolution dated December 16, 1981, denying defendant-appellant's (Petitioner's) motion for reconsideration, for lack of merit. The undisputed facts as found by the Court of Appeals are as follows: The Dignos spouses were owners of a parcel of land, known as Lot No. 3453, of the cadastral survey of Opon, Lapu-Lapu City. On June 7, 1965, appellants (petitioners) Dignos spouses sold the said parcel of land to plaintiff-appellant (respondent Atilano J. Jabil) for the sum of P28,000.00, payable in two installments, with an assumption of indebtedness with the First Insular Bank of Cebu in the sum of P12,000.00, which was paid and acknowledged by the vendors in the deed of sale (Exh. C) executed in favor of plaintiff-appellant, and the next installment in the sum of P4,000.00 to be paid on or before September 15, 1965. On November 25, 1965, the Dignos spouses sold the same land in favor of defendants spouses, Luciano Cabigas and Jovita L. De Cabigas, who were then U.S. citizens, for the price of P35,000.00. A deed of absolute sale (Exh. J, also marked Exh. 3) was executed by the Dignos spouses in favor of the Cabigas spouses, and which was registered in the Office of the Register of Deeds pursuant to the provisions of Act No. 3344. As the Dignos spouses refused to accept from plaintiff-appellant the balance of the purchase price of the land, and as plaintiff- appellant discovered the second sale made by defendants-appellants to the Cabigas spouses, plaintiff-appellant brought the present suit. (Rollo, pp. 27-28) After due trial, the Court of first Instance of Cebu rendered its Decision on August 25,1972, the decretal portion of which reads: WHEREFORE, the Court hereby declares the deed of sale executed on November 25, 1965 by defendant Isabela L. de Dignos in favor of defendant Luciano Cabigas, a citizen of the United States of America, null and void ab initio, and the deed of sale executed by defendants Silvestre T. Dignos and Isabela Lumungsod de Dignos not rescinded. Consequently, the plaintiff Atilano G. Jabil is hereby ordered to pay the sum, of Sixteen

Thousand Pesos (P16,000.00) to the defendants-spouses upon the execution of the Deed of absolute Sale of Lot No. 3453, Opon Cadastre and when the decision of this case becomes final and executory. The plaintiff Atilano G. Jabil is ordered to reimburse the defendants Luciano Cabigas and Jovita L. de Cabigas, through their attorney-in-fact, Panfilo Jabalde, reasonable amount corresponding to the expenses or costs of the hollow block fence, so far constructed. It is further ordered that defendants-spouses Silvestre T. Dignos and Isabela Lumungsod de Dignos should return to defendants-spouses Luciano Cabigas and Jovita L. de Cabigas the sum of P35,000.00, as equity demands that nobody shall enrich himself at the expense of another. The writ of preliminary injunction issued on September 23, 1966, automatically becomes permanent in virtue of this decision. With costs against the defendants. From the foregoing, the plaintiff (respondent herein) and defendants-spouss (petitioners herein) appealed to the Court of Appeals, which appeal was docketed therein as CA-G.R. No. 54393-R, "Atilano G. Jabil v. Silvestre T. Dignos, et al." On July 31, 1981, the Court of Appeals affirmed the decision of the lower court except as to the portion ordering Jabil to pay for the expenses incurred by the Cabigas spouses for the building of a fence upon the land in question. The disposive portion of said decision of the Court of Appeals reads: IN VIEW OF THE FOREGOING CONSIDERATIONS, except as to the modification of the judgment as pertains to plaintiff-appellant above indicated, the judgment appealed from is hereby AFFIRMED in all other respects. With costs against defendants-appellants. SO ORDERED. Judgment MODIFIED. A motion for reconsideration of said decision was filed by the defendants- appellants (petitioners) Dignos spouses, but on December 16, 1981, a resolution was issued by the Court of Appeals denying the motion for lack of merit. Hence, this petition. In the resolution of February 10, 1982, the Second Division of this Court denied the petition for lack of merit. A motion for reconsideration of said resolution was filed on March 16, 1982. In the resolution dated April 26,1982, respondents were required to comment thereon, which comment was filed on May 11, 1982 and a reply thereto was filed on July 26, 1982 in compliance with the resolution of June 16,1 982. On August 9,1982, acting on the motion for reconsideration and on all subsequent pleadings filed, this Court resolved to reconsider its resolution of February 10, 1982 and to give due course to the instant petition. On September 6, 1982, respondents filed a rejoinder to reply of petitioners which was noted on the resolution of September 20, 1982. Petitioners raised the following assignment of errors:

I THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN GROSSLY, INCORRECTLY INTERPRETING THE TERMS OF THE CONTRACT, EXHIBIT C, HOLDING IT AS AN ABSOLUTE SALE, EFFECTIVE TO TRANSFER OWNERSHIP OVER THE PROPERTY IN QUESTION TO THE RESPONDENT AND NOT MERELY A CONTRACT TO SELL OR PROMISE TO SELL; THE COURT ALSO ERRED IN MISAPPLYING ARTICLE 1371 AS WARRANTING READING OF THE AGREEMENT, EXHIBIT C, AS ONE OF ABSOLUTE SALE, DESPITE THE CLARITY OF THE TERMS THEREOF SHOWING IT IS A CONTRACT OF PROMISE TO SELL. II THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN INCORRECTLY APPLYING AND OR IN MISAPPLYING ARTICLE 1592 OF THE NEW CIVIL CODE AS WARRANTING THE ERRONEOUS CONCLUSION THAT THE NOTICE OF RESCISSION, EXHIBIT G, IS INEFFECTIVE SINCE IT HAS NOT BEEN JUDICIALLY DEMANDED NOR IS IT A NOTARIAL ACT. III THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REJECTING THE APPLICABILITY OF ARTICLES 2208,2217 and 2219 OF THE NEW CIVIL CODE AND ESTABLISHED JURISPRUDENCE AS TO WARRANT THE AWARD OF DAMAGES AND ATTORNEY'S FEES TO PETITIONERS. IV PLAINTIFF'S COMPLAINT FOR SPECIFIC PERFORMANCE SHOULD HAVE BEEN DISMISSED, HE HAVING COME TO COURT WITH UNCLEAN HANDS. V BY AND LARGE, THE COURT OF APPEALS COMMITTED AN ERROR IN AFFIRMING WITH MODIFICATION THE DECISION OF THE TRIAL COURT DUE TO GRAVE MISINTERPRETATION, MISAPPLICATION AND MISAPPREHENSION OF THE TERMS OF THE QUESTIONED CONTRACT AND THE LAW APPLICABLE THERETO. The foregoing assignment of errors may be synthesized into two main issues, to wit: I. Whether or not subject contract is a deed of absolute sale or a contract Lot sell. II. Whether or not there was a valid rescission thereof. There is no merit in this petition. It is significant to note that this petition was denied by the Second Division of this Court in its Resolution dated February 1 0, 1 982 for lack of merit, but on motion for reconsideration and on the basis of all subsequent pleadings filed, the petition was given due course. I. The contract in question (Exhibit C) is a Deed of Sale, with the following conditions:

1. That Atilano G..Jabilis to pay the amount of Twelve Thousand Pesos P12,000.00) Phil. Philippine Currency as advance payment; 2. That Atilano G. Jabil is to assume the balance of Twelve Thousand Pesos (P12,000.00) Loan from the First Insular Bank of Cebu; 3. That Atilano G. Jabil is to pay the said spouses the balance of Four. Thousand Pesos (P4,000.00) on or before September 15,1965; 4. That the said spouses agrees to defend the said Atilano G. Jabil from other claims on the said property; 5. That the spouses agrees to sign a final deed of absolute sale in favor of Atilano G. Jabil over the above-mentioned property upon the payment of the balance of Four Thousand Pesos. (Original Record, pp. 10-11) In their motion for reconsideration, petitioners reiterated their contention that the Deed of Sale (Exhibit "C") is a mere contract to sell and not an absolute sale; that the same is subject to two (2) positive suspensive conditions, namely: the payment of the balance of P4,000.00 on or before September 15,1965 and the immediate assumption of the mortgage of P12,000.00 with the First Insular Bank of Cebu. It is further contended that in said contract, title or ownership over the property was expressly reserved in the vendor, the Dignos spouses until the suspensive condition of full and punctual payment of the balance of the purchase price shall have been met. So that there is no actual sale until full payment is made (Rollo, pp. 51-52). In bolstering their contention that Exhibit "C" is merely a contract to sell, petitioners aver that there is absolutely nothing in Exhibit "C" that indicates that the vendors thereby sell, convey or transfer their ownership to the alleged vendee. Petitioners insist that Exhibit "C" (or 6) is a private instrument and the absence of a formal deed of conveyance is a very strong indication that the parties did not intend "transfer of ownership and title but only a transfer after full payment" (Rollo, p. 52). Moreover, petitioners anchored their contention on the very terms and conditions of the contract, more particularly paragraph four which reads, "that said spouses has agreed to sell the herein mentioned property to Atilano G. Jabil ..." and condition number five which reads, "that the spouses agrees to sign a final deed of absolute sale over the mentioned property upon the payment of the balance of four thousand pesos." Such contention is untenable. By and large, the issues in this case have already been settled by this Court in analogous cases. Thus, it has been held that a deed of sale is absolute in nature although denominated as a "Deed of Conditional Sale" where nowhere in the contract in question is a proviso or stipulation to the effect that title to the property sold is reserved in the vendor until full payment of the purchase price, nor is there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period Taguba v. Vda. de Leon, 132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 305). A careful examination of the contract shows that there is no such stipulation reserving the title of the property on the vendors nor does it give them the right to unilaterally rescind the contract upon nonpayment of the balance thereof within a fixed period. On the contrary, all the elements of a valid contract of sale under Article 1458 of the Civil Code, are present, such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent. In addition, Article 1477 of the same Code provides that "The

ownership of the thing sold shall be transferred to the vendee upon actual or constructive delivery thereof." As applied in the case of Froilan v. Pan Oriental Shipping Co., et al. (12 SCRA 276), this Court held that in the absence of stipulation to the contrary, the ownership of the thing sold passes to the vendee upon actual or constructive delivery thereof. While it may be conceded that there was no constructive delivery of the land sold in the case at bar, as subject Deed of Sale is a private instrument, it is beyond question that there was actual delivery thereof. As found by the trial court, the Dignos spouses delivered the possession of the land in question to Jabil as early as March 27,1965 so that the latter constructed thereon Sally's Beach Resort also known as Jabil's Beach Resort in March, 1965; Mactan White Beach Resort on January 15,1966 and Bevirlyn's Beach Resort on September 1, 1965. Such facts were admitted by petitioner spouses (Decision, Civil Case No. 23-L; Record on Appeal, p. 108). Moreover, the Court of Appeals in its resolution dated December 16,1981 found that the acts of petitioners, contemporaneous with the contract, clearly show that an absolute deed of sale was intended by the parties and not a contract to sell. Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses, they were no longer owners of the same and the sale is null and void. II. Petitioners claim that when they sold the land to the Cabigas spouses, the contract of sale was already rescinded. Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is on all fours with the case at bar, the contract of sale being absolute in nature is governed by Article 1592 of the Civil Code. It is undisputed that petitioners never notified private respondents Jabil by notarial act that they were rescinding the contract, and neither did they file a suit in court to rescind the sale. The most that they were able to show is a letter of Cipriano Amistad who, claiming to be an emissary of Jabil, informed the Dignos spouses not to go to the house of Jabil because the latter had no money and further advised petitioners to sell the land in litigation to another party (Record on Appeal, p. 23). As correctly found by the Court of Appeals, there is no showing that Amistad was properly authorized by Jabil to make such extra-judicial rescission for the latter who, on the contrary, vigorously denied having sent Amistad to tell petitioners that he was already waiving his rights to the land in question. Under Article 1358 of the Civil Code, it is required that acts and contracts which have for their object the extinguishment of real rights over immovable property must appear in a public document. Petitioners laid considerable emphasis on the fact that private respondent Jabil had no money on the stipulated date of payment on September 15,1965 and was able to raise the necessary amount only by mid-October 1965. It has been ruled, however, that "where time is not of the essence of the agreement, a slight delay on the part of one party in the performance of his obligation is not a sufficient ground for the rescission of the agreement" (Taguba v. Vda. de Leon, supra). Considering that private respondent has only a balance of P4,000.00 and was delayed in payment only for one month, equity and justice mandate as in the aforecited case that Jabil be given an additional period within which to complete payment of the purchase price. WHEREFORE, the petition filed is hereby Dismissed for lack of merit and the assailed decision of the Court of Appeals is Affirmed in toto. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. L-29421 January 30, 1971 LINO ARTATES and MANUELA POJAS, plaintiffs-appellants, vs. DANIEL URBI, CRISANTO SOLIVEN, assisted by his Guardian 'ad litem,' MARCELA B. SOLIVEN, REMEGIO BUTACAN and NEMESIO OATE, in their private capacities and/or as Ex-Oficio Provincial Sheriff and Deputy Sheriff of Cagayan, respectively, and BIENVENIDO CACATIAN, as Deputy Register of Deeds of Cagayan, defendants-appellees. Bienvenido J. Jimenez for plaintiffs-appellants. Rogelio Re. Ubarde for defendants-appellees Daniel Urbi and Crisanto Soliven. Alfredo J. Donato for defendant-appellant Nemesio Oate. The Provincial Fiscal (Cagayan) for defendants-appellees Provincial Sheriff and Deputy Register of Deeds.

REYES, J.B.L., J.: This is an appeal from the decision of the Court of First Instance of Cagayan (Civil Case No. 116-T), involving the public sale of a homestead to satisfy a civil judgment against the grantee. The records show that in an action filed in the Court of First Instance of Cagayan, the spouses Lino Artates and Manuela Pojas sought annulment of the execution of a homestead1 covered by Patent No. V-12775 issued to them by the proper land authorities on 23 September 1952, and duly registered in their names (OCT No. P-572). The public sale, conducted by the Provincial Sheriff of Cagayan on 2 June 1962, was made to satisfy a judgment against Lino Artates in the amount of P1,476.35, and awarded to Daniel Urbi by the Justice of the Peace Court of Camilaniugan, Cagayan, in its Civil Case No. 40, for physical injuries inflicted by Artates upon Urbi on 21 October 1955. In the execution sale, the property was sold to the judgment creditor, the only bidder, for P1,476.35. In their complaint, the plaintiffs spouses alleged that the sale of the homestead to satisfy an indebtedness of Lino Artates that accrued on 21 October 1955, violated the provision of the Public Land law exempting said property from execution for any debt contracted within five years from the date of the issuance of the patent; that defendant Urbi, with the intention of defrauding the plaintiffs, executed on 26 June 1961 a deed for the sale of the same parcel of land to defendant Crisanto Soliven, a minor, supposedly for the sum of P2,676.35; that as a result of the aforementioned transactions, defendants Urbi and Soliven entered into the possession of the land and deprived plaintiffs of the owners' share in the rice crops harvested during the agricultural year 1961-1962. Plaintiffs, therefore, prayed that the public sale of the land to defendant Urbi, as well as the deed of sale executed by the latter in favor of defendant Soliven, be declared null and void; that

defendants be ordered to deliver to plaintiffs possession of the land; and to pay to plaintiffs compensatory damages at the rate of P1,000.00 per agricultural year until possession is finally restored to them, the sum of P2,000.00 as damages for maliciously casting cloud upon plaintiffs' title on the land, plus attorneys' fees and costs. The defendants2 filed separate answers disputing the averments of the complaint. On 29 March 1953, the court rendered judgment upholding the regularity and validity of the execution conducted by the defendant Provincial Sheriff, but finding that the sale of the lands by defendant Urbi to the minor Soliven was simulated, intended to place the property beyond the reach of the judgment debtor, and that plaintiffs had offered to redeem the land within the 5-year period allowed by Section 119 of the Public Land law for reacquisition thereof by the grantee. Consequently, the court declared the sale of the land by defendant Daniel Urbi to defendant Crisanto Soliven null and void; and Daniel Urbi was ordered to reconvey the property to the plaintiffs upon the latter's payment (to Urbi) of the sum of P1,476.35 plus the sheriff's fee incident to the sale at public auction, with interest thereon at the rate of 12% per annum from 2 June 1961 until said amount shall have been fully paid, and the further sum of P783.45 representing the amount paid by defendant Daniel Urbi to the Philippine National Bank for the release of the real estate mortgage on the land, contracted by Lino Artates, with legal rate of interest thereon from 29 June 1961. From this decision, the plaintiffs interposed the present appeal assigning several errors allegedly committed by the court below, all hinged on the validity or invalidity of the public sale of the lot involved herein. Section 118 of the Public Land law (Commonwealth Act 141) provides as follows: SEC. 118. Except in favor of the Government or any of its branches, units, or institution, or legally constituted banking corporations, lands acquired under free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of issuance of the patent or grant, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period, but the improvements or crops on the land may be mortgaged or pledged to qualified persons, associations or corporations. xxx xxx xxx As thus prescribed by law, for a period of five years from the date of the government grant, lands acquired by free or homestead patent shall not only be incapable of being encumbered or alienated except in favor of the government itself or any of its institutions or of duly constituted banking corporations, but also, they shall not be liable to the satisfaction of any debt contracted within the said period,3 whether or not the indebtedness shall mature during or after the prohibited time.4 This provision against the alienation or encumbrance of public lands granted within five years from the issuance of the patent, it has been held, is mandatory;5 a sale made in violation thereof is null and void 6 and produces no effect whatsoever. Though it may be a limitation on the right of ownership of the grantee, the salutary purpose of the provision cannot be denied: it is to preserve and keep for the homesteader or his family the land given to him gratuitously by the State,7 so that being a property owner, he may become and remain a contented and useful member of our society.8 In the case at bar, the homestead patent covering the land in question (No. V-12775) was issued to appellants on 23 September 1952, and it was sold at public auction to satisfy the civil liability of appellant Lino Artates to Daniel Urbi, adjudged in the 14 March 1956 decision of the Justice of the Peace Court of Camalaniugan, Cagayan. There can be no doubt that
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the award of damages to Urbi created for Artates a civil obligation, an indebtedness, that commenced from the date such obligation was decreed on 14 March 1956. Consequently, it is evident that it can not be enforced against, or satisfied out of, the sale of the homestead lot acquired by appellants less than 5 years before the obligation accrued. And this is true even if the sale involved here is not voluntary. For purposes of complying with the law, it is immaterial that the satisfaction of the debt by the encumbrancing or alienation of the land grant made voluntarily, as in the case of an ordinary sale, or involuntarily, such as that effected through levy on the property and consequent sale at public auction. In both instances, the spirit of the law would have been violated.9 Doubts have been expressed as to whether the words "debt contracted prior to the expiration of said period" (of 5 years from and after the grant) would include the civil liability arising from a crime committed by the homesteader. While there is no direct Philippine precedent on this point, there are various reasons why the non-liability of the homestead grant should be extended to extra-contractual obligations. First and foremost, whether it be viewed as an exemption or as a condition attached to the grant to encourage people to settle and cultivate public land, the immunity in question is in consonance with the definite public policy underlying these grants, which is to "preserve and keep in the family of the homesteader that portion of public land which the State has given to him" so he may have a place to live with his family and become a happy citizen and a useful member of society, 10 and the exemption should not be given restrictive application. 11 A levy and sale of the homestead on account of extra-contractual liability incurred would uproot the homesteader and his family and turn them into homeless waifs as effectively as a levy for non-payment of a contractual debt. Secondly, the word "debt" in exemption statutes, in its wider sense, (it) includes all that is due to a man under any form or obligation or promise, and covers not only obligations arising under contract, but also those imposed by law without contract. 12 Considering the protective policy of the law, it becomes apparent that "debt contracted" was used in it in the sense of "obligation incurred," since Webster gives the verb to "contract" the meaning of "to bring on; incur; acquire." Finally, our public land laws being copied from American legislation, 13 resort to American precedents reveals that, under the weight of authority, exemption from "debts contracted" by a homesteader has been held to include freedom from money liabilities, from torts or crimes committed by him, such as from bigamy (State vs. O'Neil, 7 Ore. 141, 11 Words and Phrases 318) or slander (Conway vs. Sullivan, 44 Ill. 451, 452), breach of contract (Flanagan vs. Forsythe, 50 Pac. 152, 153) or other torts (In Re Radway, 20 Fed. Cas. 154, 162). The execution sale in this case being null and void, the possession of the land should be returned to the owners, the herein appellants. There would even be no need to order appellee Urbi to execute a deed of reconveyance thereof to the owners. It appears that what was issued here to the judgment creditor/purchaser was only the sheriff's provisional certificate, under which he derived no definite title or right until the period for redemption has expired, without a redemption having been made, 14 or issuance of a final deed or certificate of sale. In other words, the purchaser herein has not acquired an absolute ownership or title in fee over the land that would necessitate a deed of reconveyance to revert ownership back to the appellant spouses. As things now stand, title to the property covered by OCT No. P-572 remains with the appellants, but Lino Artates shall continue to be under obligation to satisfy the judgment debt to Daniel Urbi in the sum of P1,476.35, with legal interest thereon accruing from the date the writ of execution was first returned unsatisfied. It appearing also that appellee Daniel Urbi paid to the Philippine National Bank the sum of P783.45 to release the mortgage on the land, appellants should reimburse him of said amount or of whatever amount appellants have actually been benefited by the said payment.

FOR THE FOREGOING CONSIDERATIONS, the decision appealed from is hereby reversed, and appellants are declared entitled to the return and possession of the lot covered by Original Certificate of Title No. P-572, without prejudice to their continuing obligation to pay the judgment debt, and expenses connected therewith. No costs. Concepcion, C.J., Dizon, Zaldivar, Fernando and Makasiar, JJ., concur. Separate Opinions MAKALINTAL, J., concurring and dissenting: I concur in the opinion of Justice Teehankee, and vote for the affirmance of the appealed judgment in toto. The date of the issuance of the homestead patent to appellants was September 23, 1952. Under Section 118 of the Public Land Law the homestead could not be held liable for the satisfaction of any debt contracted during a period of five years thereafter, or up to September 23, 1957. The opinion of the majority holds that since the civil obligation of appellant Artates was adjudged on March 14, 1956, or within the said period, the homestead cannot be held liable for its satisfaction. The obvious implication is that if the judgment had been delayed if for instance it had been rendered on September 24, 1957 the result would have been otherwise. I do not believe that such a difference should be made to depend upon the more or less fortuitous and irrelevant circumstance of when the judgment decreeing the obligation was rendered. I am for giving the word "contracted," as used in the law, its ordinary meaning, for after all one who contracts with a homestead patentee during the five-year period and accepts an obligation from him does so with full knowledge of the law's exempting provision, which is deemed in effect a part of the agreement. The same, however, is not true of the victim of a tort or a crime, as in the present case, for here his volition does not come into play, the obligation being imposed entirely by law.
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TEEHANKEE, J., concurring and dissenting: I vote for the affirmance in toto of the judgment appealed from. Hence, I concur in that portion of the decision decreeing that appellants should reimburse appellee Urbi for the sums that Urbi had paid to the Philippine National Bank to release the mortgage previously executed by appellants on the subject homestead land, but I dissent from the principal decree thereof that "title to the property .... remains with the appellants, but (appellant) Lino Artates shall continue to be under obligation to satisfy the judgment debt to Daniel Urbi in the sum of P1,476.35, with legal interest thereon accruing from the date the writ of execution was first returned unsatisfied." The issue at bar is whether the execution sale conducted in 1962 by the sheriff of Artates' homestead lot acquired in 1952 to satisfy a 1956 judgment against Artates in favor of Urbi (for physical injuries inflicted by Artates upon Urbi in 1955), at which public sale the homestead lot was sold to Urbi as the only bidder for the amount of his judgment credit in the sum of P1,476.35 should be held null and void, as the majority would now hold, by virtue of the prohibitory provisions of Section 118 of the Public Land Law. The key provision cited is that providing that such homesteads "shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of issuance of the patent or grant, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period ..". Under the cited provision, all sales and alienations of the homestead property made by the homesteader within the 5-year prohibition are null and void. Similarly, the homestead is held not liable to the satisfaction of any debt contracted by the homesteader within the said period, even though it be contracted that the indebtedness shall mature after the prohibited period. The law's

purpose is clear and salutary: to preserve and keep for the homesteader the land given to him gratuitously by the State and to protect him from his own weakness and improvidence. But in the case at bar, the judgment debt of the homesteader in favor of Ubi * was not contracted but duly adjudicated by a competent court in a lawful judgment for injuries inflicted by Artates upon Urbi in 1955, which, gauging the same from the substantial amount of P1,476.35 awarded, must have been quite serious. The happenstance that Artates' assault on Urbi and the judgment award occurred within the prohibitory period should not be construed beyond the law's text and intent to favor the wrongdoer Artates as against his victim Urbi. We would have the anomalous situation thereby where, while recognizing that Artates has a just and continuing obligation to pay Urbi the judgment debt, the debt would in effect be nullified. The judgment debt was awarded since 1956 and would by now have prescribed, but the majority decision would nullify the levy and public sale of the land to satisfy Urbi's judgment credit conducted in 1966 long after the expiration of the statutory five-year prohibitory period. The majority decision bars Urbi forever from looking to Artates homestead property for the satisfaction of his judgment credit. Artates' evasion of his judgment debt to Urbi is thereby made certain. Any later creditor of Artates, real or simulated, from one day after the expiration on 23 September 1957 of the said fiveyear prohibitory period is given sole and exclusive preference to look to the said property for satisfaction as against Urbi beyond whose reach it is placed, contrary to the priority and preference that Urbi would lawfully be entitled to as a bona fide judgment creditor. Finally, pursuant to Artates' offer to redeem the property from Urbi within the 5-year redemption period allowed by section 119 of the Public Land Law, the lower court in its appealed judgment so ordered such redemption and reconveyance. This strikes me as an eminently fair and just judgment which should be upheld. Artates, the homesteader, is thus assured of keeping and preserving his homestead in accordance ** with the spirit of the law and the lawful judgment credit of Urbi against him is at the same time duly satisfied. Castro and Villamor, JJ., concur. BARREDO, J., dissenting: I regret I am unable to concur in the ruling in this decision that the provision of Section 118 of the Public Land Law which says that "lands acquired under free patent or homestead provisions shall not ... become liable to the satisfaction of any debt contracted prior to the expiration of five years from and after the date of issuance of the patent or grant" contemplates inclusively "the civil liability arising from a crime committed by the homesteader" within said period. Indeed, I do not feel it is necessary to go deep into the Webster's dictionary meaning of the verb "to contract" or to look for state court decisions in America, which could be isolated and based on statutes not similarly phrased and oriented as Ours, to resolve the legal issue before Us, it being sufficient, towards that end, to consider only the basic principles that underlie the disposition of public lands under our own laws on the matter. I understand that the ultimate reason behind the exceptions contained in the cited provision of the Public Land Law is to insure the accomplishment of the double purpose of a homestead grant, which is to encourage the development of arable lands and enhance their productivity in the interest of the national economy and, at the same time, provide qualified citizens with a piece of land which they and their families may call their own, on which they can live and which they can work and thereby become useful members of society. Accordingly, the homesteader is safeguarded against his own weaknesses imprudence and improvidence by making it impossible for him to directly or indirectly, by his voluntary act, dispose of or lose the land in favor of others. So also do the exceptions make it

impossible for him to allow himself to be utilized as dummy of opportunists. If this understanding of mine is correct, it should follow necessarily that for these purposes to be achieved, a homesteader must be, during the exempt period, in physical condition to work the land granted to him. I cannot help wondering how a person who has been convicted of a crime, the penalty for which is most likely to include a period of incarceration can work on and develop his homestead in the manner conceived in the law. That such a contingency may not be true in all instances, for there may be punishment of crimes with imprisonment of insignificantly short duration or even fines only, does not affect the general principle involved. I consider it implicit in all land grants by the State that the grantees bind themselves to be loyal and useful members of society, at least, during the period of development thereof that the law contemplates, namely, the first five years from the grant. Surely, one who commits an offense against the State and his fellow-citizens or other inhabitants in this country is far from being a useful member of society. To be sure, his act of committing an offense is voluntary, but this is not the voluntary act of imprudence and improvidence against which the law guards the homesteader even against himself. Crime is an assault upon the sovereign people and the social order, even if not always directly against the national security, and it is my considered view that, in principle, one who is guilty thereof forfeits whatever rights he might have acquired by virtue of the State's generosity, particularly, when, as in this case, it is a grant of a special privilege under specified circumstances and not generally and commonly enjoyed by all citizens/inhabitants of the country. For these reasons, I vote to affirm the judgment of the court a quo which, after all, recognizes the appellants' right to redeem the land in question under Section 119 of the Public Land Law, which is the most they should expect from the State, as thus, their right to the land is reinstated without practically depriving the innocent victims of the crime herein involved of their remedy for the private injury they have suffered. In other words, under the trial court's decision, all the ends of justice and equity are subserved, whereas it is difficult to say the same of the decision of this Court. REYES, J.B.L., J.:

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-54070 February 28, 1983 HEIRS OF ENRIQUE ZAMBALES and JOAQUINA ZAMBALES, petitioners, vs. COURT OF APPEALS, NIN BAY MINING CORPORATION, ANGELA C. PREYSLER and JOAQUIN B. PREYSLER, respondents.

MELENCIO-HERRERA, J.: The Decision of respondent Court of Appeals in the case entitled "Enrique Zambales and Joaquina Zambales, Plaintiffs-appellees vs. Atty. Perfecto de los Reyes, Nin Bay Mining Corporation and Joaquin B. Preysler, Defendants-appellants" (CA-G.R. No. 59386-R), setting aside the judgment of the Court of First Instance of Palawan in Civil Case No. 678 for Annulment of a Deed of Sale with Recovery of Possession and Ownership with Damages", is the subject of this Petition for Review on Certiorari. Joaquin B. Preysler is now deceased and was substituted by Angela C. Preysler, his widow. Atty. Perfecto de los Reyes was originally a defendant in Civil Case No. 678 but he did not appeal from the Decision of the lower Court. The Zambales spouses (Zambaleses, for brevity) were the homestead patentees of a parcel of land with an area of 17,8474 hectares situated in the Municipality of Del Pilar, Roxas, Palawan, covered by Original Certificate of Title No. G 1193 of the Registry of Deeds for the Province of Palawan, issued pursuant to Homestead Patent No. V-59502 dated September 6, 1955. Claiming that the Nin Bay Mining Corporation (Corporation, for short) had removed silica sand from their land and destroyed the plants and others improvements thereon, the Zambaleses instituted, on November 10, 1958, Civil Case No. 316 before the Court of First Instance of Palawan claiming damages in the total sum of P48,000.00. The Corporation denied having caused any damages and claimed that it had excavated and extracted silica sand only from its own mining claims and on which it had mining lease contracts with the Philippine Government. On October 29, 1959, the Zambaleses, duly assisted by their counsel, Atty. Perfecto de los Reyes, and the Corporation, entered into a Compromise Agreement, the portions of which, pertinent to this case, read: 1. DEFENDANT shall pay the PLAINTIFFS a rental of TWENTY (P20.00) PESOS per hectare per year from September 9, 1955 to September 30, 1960, or a total rental price of ONE THOUSAND SEVEN HUNDRED

EIGHTY-FOUR PESOS AND SEVENTY- FOUR CENTAVOS (P1,784.74), Philippine currency, in lieu of all damages... 2. The payment to the PLAINTIFFS of the above-mentioned rental price shall be considered full, absolute and final payment and indemnity for all the alleged damages to PLAINTIFFS' property and its improvements, or any other actual, moral, exemplary or other damages that PLAINTIFFS may have suffered or will suffer in connection with the mining operations of DEFENDANT on the property in question, which property, by virtue of the terms of this Agreement shall be used by DEFENDANT as occupant thereof until September 30, 1960. 3. PLAINTIFFS hereby agree and bind themselves to sell, transfer and convey, and DEFENDANT or its assigns, qualified to acquire or hold lands of the public domain, hereby agrees to purchase and pay for, the aforesaid property of the PLAINTIFFS, containing an area of 17.8474 hectares, situated in the Municipality of Del Pilar, Roxas, Palawan, and covered by Original Certificate of Title No. G1193 of the Registry of Deeds of Palawan, at the fixed selling price of FIVE HUNDRED (P500.00) PESOS per hectare or a total purchase price of EIGHT THOUSAND NINE HUNDRED TWENTY THREE PESOS and SEVENTY CENTAVOS (P8,923.70), Philippine currency. The contract to purchase and sell herein provided for, shall be reciprocally demandable and enforceable by the parties hereto on September 10, 1960. PLAINTIFFS hereby irrevocably constitute and appoint DEFENDANT, its successors and/or assigns their true and lawful attorney-infact with full power and authority to sell, transfer and convey on September 10, 1960 or at any time thereafter the whole or any part of PLAINTIFFS' property hereinabove mentioned to the DEFENDANT, its successors and/or assigns, or to any third party, and to execute and deliver all instruments and documents whatsoever necessary for the purpose, and all acts done and to be done by DEFENDANT, its successors and/or assigns in conformity with the powers herein granted are hereby ratified and confirmed by the PLAINTIFFS. ... 4. In consideration of the payment of the amount of P1,784.74 by DEFENDANT, and of other good and valuable consideration, PLAINTIFFS, jointly and severally, hereby forever release, fully and completely, said DEFENDANT, its successors and/or assigns in interest, from any and all liabilities, whether arising from past, present or future excavation or removal of silica sand from the property in question or otherwise, and from all the other claims against the DEFENDANT contained in their Complaint in Civil Case No. 316 of the Court of First Instance of Palawan. 1 The Trial Court rendered judgment on October 29, 1959 based on the Compromise Agreement. The document was duly annotated an OCT No. G - 1193 (Exhibit " A ") the day after, or on October 30, 1959 (Exhibit " 10 A "). On September 10, 1960, the Corporation, as attorney-in-fact for the Zambaleses, as Vendors, sold the disputed property to Joaquin B. Preysler for the sum of P8,923.70 fixed in the Compromise Agreement (Exhibit " 11 "). Transfer Certificate of Title No. T-970 was issued in the vendee's name on December 19, 1960 (Exhibit " 2 ").

The Deed of Sale to Preysler contained the following proviso: The VENDORS hereby represent and warrant that the five-year restrictive period on alienation of lands acquired under the homestead provisions of Commonwealth Act No. 141, as amended, otherwise known as the Public Land Act, has already expired, the date of issuance of the herein homestead patent to the VENDORS as aforesaid being September 6, 1955 as shown in Original Certificate of Title No. G-1193. On October 18, 1960, the Secretary of Agriculture and Natural Resources approved the sale to Preysler of the subject property (Exhibit "13 "). On. December 6, 1969, or ten (10) years after the Trial Court's Decision based on the Compromise Agreement, and nine (9) years after the sale to Preysler, the Zambaleses filed Civil Case No. 678 before the Court of First Instance of Palawan for "Annulment of a Deed of Sale with Recovery of Possession and Ownership with Damages". They contended that it was their lawyer who prevailed upon them to sign the Compromise Agreement; that they are unschooled and did not understand the contents thereof; that they were made to understand that they would receive the sum of P10,700.00, only as payment for damages sustained by the land from 1955 to 1960; that through fraud, deceit and manipulation by their lawyer and the Corporation, they were made to agree to appoint the Corporation as their attorney-in-fact with full power and authority to sell; that it was never their intention to sell the land; that in September 1969, they were surprised to learn that the land was already titled in the name of Joaquin B. Preysler; that the land was acquired and registered in the latter's name through fraud and deceit. The Zambaleses then prayed that the deed of sale and the title in Preysler's name be annulled on the ground of fraud and that the property be reconveyed to them. In their Answer, the Corporation denied all allegations that the Zambaleses had signed the Compromise Agreement without understanding the contents thereof, the truth being that it was read to them by their counsel, Atty. Perfecto de los Reyes, who explained thoroughly the full implication and legal consequence of each and every provision, which was then submitted and approved by then Presiding Judge Juan L. Bocar; and that the Corporation had sold the property to Preysler as a duly constituted attorney-in-fact pursuant to the Compromise Agreement. After trial, the lower Court rendered judgment in favor of the Zambaleses, the dispositive part of which reads: WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows: 1) That the deed of sale executed by Nin Bay Mining Corporation through its president, to Joaquin B. Preysler is hereby declared null and void; 2) That the defendant Joaquin B. Preysler is hereby ordered to reconvey the land subject matter of this litigation to the plaintiffs; 3) That the defendants Nin Bay Mining Corporation and Joaquin B. Preysler shall pay the plaintiffs the sum of P85,000.00 as actual damages plus the legal rate of interest from September 30, 1960 up to the time the amount is fully paid;

4) That the defendants to pay the sum of FIVE THOUSAND (P5,000.00) PESOS as attorneys fees; and 5) The defendants to pay the costs. On appeal by the Corporation, the Court of Appeals reversed the Trial Court, after finding that the alleged fraud or misrepresentation in the execution of the Compromise Agreement had not been substantiated by evidence. The case is now before us on review. The controversy revolves around the issue of due execution and validity of the Compromise Agreement (Exhibit "8") dated October 29; 1959, and of the subsequent Deed of Sale (Exhibit "11 "), dated 10 September 1960. I The general rule is that whoever alleges fraud or mistake must substantiate his allegation, since the presumption is that a person takes ordinary care of his concerns and that private transactions have been fair and regular. The rule admits of an exception in Article 1332 of the Civil Code which provides: When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former. For the proper application of said provision, it has first to be established convincingly that the illiterate or the party at a disadvantage could not read or understand the language in which the contract was written. 2 The evidence discloses that the spouses Zambales are unschooled. They cannot read, speak, much less understand English or write, except to sign their names. 3 The Zambaleses alleged in their Complaint that the Compromise Agreement (Exhibit "8") was executed through fraud by the Corporation and by their counsel Atty. Perfecto de los Reyes, whom they included as a defendant. The burden of proof, therefore, shifted to the Corporation to show that the compromise agreement had been fully explained to the plaintiffs. In refuting the allegation that plaintiffs were misled into signing the compromise agreement, their former counsel, Atty. Perfecto de los Reyes, and the notary, Atty. Salomon Reyes, a lawyer for Nin Bay Mining Corporation, established that the terms and conditions of the Compromise Agreement were thoroughly explained and fully understood by the spouses Zambales in accordance with their proposal to sell the land at P500.00 a hectare; that before the signing of the Compromise Agreement, the notary requested Atty. de los Reyes to read and explain each and every provision to the spouses, and with the help of Ricardo Nunala, Atty. de los Reyes did so in their dialect (Cuyuno). Thereafter, the parties went to Judge Juan Bocar, who was assured that the spouses Zambales understood and signed the Compromise Agreement. 4 We sustain the finding of the Court of Appeals that fraud and misrepresentation did not vitiate petitioners' consent to the Agreement when it observed: Taking into account the foregoing observations, this Court is not convinced that indeed appellees were victims of a fraudulent scheme employed upon

them by their former counsel by reason of their alleged illiteracy and ignorance. The evidence discloses that appellees, although unschooled, are intelligent, well-informed and intelligent people. They are not the kind of persons who could easily be fooled of their rights and interests. Even as commented by the court a quo, which had a chance to observe the demeanor of the witness, it had no observation that the witness, Joaquina Zambales, is ignorant. As correctly observed by appellants, appellees 'are political leaders and chief campaigners; they speak in the platform during political rallies; and they are widely travelled' (p. 28, Appellants' Brief). As a matter of fact they are knowledgeable of the right connections in the government. They had approached former Sen. Rogelio de la Rosa, no less, the congressman and the governor. Even the lawyers they have retained previous to their present counsel are the Padilla Law Office and the Diokno Law Office, It is common knowledge that these law offices are among the established law offices in Manila. It is far convincing that an ignorant couple would have knowledge of these law firms. All these are obvious manifestations of their being well-informed and the way they have conducted their way of living apparently is inconsistent with the plea of being illiterate and/or ignorant. They cannot capitalize on the fact that they are uneducated only because they had no formal schooling inasmuch as one's knowledge of the facts of life is not dependent on whether one had formal schooling or not and it does not necessarily follow always that if one is unschooled he is ignorant. Furthermore, when plaintiffs-appellees signed the questioned compromise agreement they were duly assisted and represented by their counsel, Atty. de los Reyes. When Atty. de los Reyes testified in court he categorically declared that it was to the best interest of his clients that they compromise Civil Case No. 316. This declaration finds support in Joaquina Zambales' testimony wherein she stated thus: ATTY. SEMBRANO: Q. Except for this present case, would you say to the Court that Atty. de los Reyes extended to you legal assistance to your satisfaction? A. Yes, sir, he is good to us. xxx xxx xxx Q. So these people never gave their services to you? A. Nobody was able to help us except Atty. de los Reyes. (Tsn., pp. 29, 31 & 32, June 19, 1974) ... Thus, it having been established that appellees could not have been misled by their former counsel into signing the compromise agreement and taking into account the acts of the appellees and their children subsequent to the execution of the compromise agreement perforce the court a quo erred in not giving credence to the clear and convincing testimonies of Atty. Perfecto

de los Reyes and Atty. Salomon Reyes anent the execution of the compromise agreement. 5 However, although we find that the Zambaleses were not misled into signing the Compromise Agreement, we hold that there has been violation of the Public Land Act. The evidence on record shows that the land in question was awarded t the Zambaleses as a homestead on September 6, 1955 (Exhibit "A"). Before us, the Zambaleses now argue that the Compromise Agreement executed on October 29, 1959 is in violation of the Public Land Act, which prohibits alienation and encumbrance of a homestead lot within five years from the issuance of the patent. 6 We sustain that contention. The fact that the issue was not raised in the Courts below is not a deterrent factor considering that the question affects the validity of the agreement between the parties. The Supreme Court has the authority to review matters even if they are not assigned as errors in the appeal, if it is found that their consideration is necessary in arriving at a just decision of the case. 7 Moreover, a party may change his legal theory on appeal only when the factual bases thereof would not require presentation of any further evidence by the adverse party in order to enable it to properly meet the issue raised in the new theory. 8 In the case at bar it is indisputable that Homestead Patent No. V-59502 was issued on September 6, 1955 as shown in Original Certificate of Title No. 1193 (Exhibit "A "). The sale of a homestead lot within the five-year prohibitory period is illegal and void. The law does not distinguish between executory and consummated sales. The law prohibiting any transfer or alienation of homestead land within five years from the issuance of the patent does not distinguish between executory and consummated sales; and it would hardly be in keeping with the primordial aim of this prohibition to preserve and keep in the family of the homesteader the piece of land that the state had gratuitously given to them, to hold valid a homestead sale actually perfected during the period of prohibition but with the execution of the formal deed of conveyance and the delivery of possession of the land sold to the buyer deferred until after the expiration of the prohibitory period, purposely to circumvent the very law that prohibits and declares invalid such transaction to protect the homesteader and his family. 9 In the compromise agreement executed between the parties, (1) the Zambaleses promised to sell and the Corporation agreed to buy the disputed lot at P500.00 per hectare, the contract to be reciprocally demandable and enforceable on September 10, 1960; and as a substitute procedure, (2) an irrevocable agency was constituted in favor of the Corporation as attorney- in-fact to sell the land to any third person on September 10, 1960 or any time thereafter. Clearly, the bilateral promise to buy and sell the homestead lot at a price certain, which was reciprocally demandable 10, was entered into within the five-year prohibitory period and is therefore, illegal and void. Further, the agency to sell the homestead lot to a third party was coupled with an interest inasmuch as a bilateral contract was dependent on it and was not revocable at will by any of the parties. 11 To all intents and purposes, therefore, there was an actual executory sale perfected during the period of prohibition except that it was reciprocally demandable thereafter and the agency to sell to any third party was deferred until after the expiration of the prohibitory period. That "rentals" were ostensibly to be paid during the five-year prohibitory period, and the agency to sell made effective only after the lapse of the said period, was merely a devise to circumvent the prohibition.

To hold valid such an arrangement would be to throw the door wide open to all possible subterfuges that persons interested in homesteads may devise to defeat the legal prohibition against alienation within five years from the issuance of the patent. We hold, therefore, that the bilateral promise to buy and sell, and the agency to sell, entered into within five years from the date of the homestead patent, was in violation of section 118 of the Public Land Law, although the executed sale was deferred until after the expiration of the five-yearprohibitory period. As the contract is void from the beginning, for being expressly prohibited by law 12 the action for the declaration of its inexistence does not prescribe. 13 Being absolutely void, it is entitled to no authority or respect, the sale may be impeached in a collateral proceeding by any one with whose rights and interest it conflicts. There is no presumption of its validity. 14 The approval of the sale by the Secretary of Agriculture and Natural Resources after the lapse of five years from the date of the patent would neither legalize the sale. 15 The homestead in question should be returned to the Zambaleses, petitioners herein, who are, in turn, bound to restore to the Corporation the sum of P8,923.70 as the price thereof. The actual damages awarded by the Trial Court of P85,000.00 have not been adequately substantiated. Moreover, under the agreement, the total rental price of P1,784.74 was intended to be "in lieu of all damages, or any other actual, moral, exemplary or other damages. This is without prejudice to the corresponding action on the part of the State for reversion of the property and its improvements, if any, under Section 124 of the Public Land Act. 16 WHEREFORE, the judgment under review is hereby REVERSED, and another one entered (1) declaring null and void a) the bilateral promise to buy and sell entered into between Enrique Zambales and Joaquina Zambales, on the one hand, and the Nin Bay Mining Corporation on the other, and b) the sale executed by Nin Bay Mining Corporation in favor of Joaquin B. Preysler; (2) ordering Angela C. Preysler to reconvey the land subject matter of this litigation to petitioners upon refund by the latter to the Nin Bay Mining Corporation of the sum of P8,923.70, all expenses for the reconveyance to be borne by private respondents; (3) ordering Nin Bay Mining Corporation to pay rentals to petitioners at the price of P20.00 per hectare per year from December 6, 1969, the date of the institution of the Complaint, till the date that possession is turned over to petitioners; and (4) ordering the Register of Deeds for the Province of Palawan to cancel Transfer Certificate of Title No. T-970 of his Registry, and reissue to the Heirs of Enrique Zambales and Joaquina Zambales the title to the homestead in question. Let a copy of this Decision be served on the Solicitor General. No costs. SO ORDERED.