Associated Bank Vs.

Spouses Montano
In 1964, spouses Justiniano and Ligaya Montano (the Montanos) owned three (3) parcels of land situated in Tanza, Cavite with an aggregate area of 590,558 square meters, more or less,[4] utilized as an integrated farm and as a stud farm used for raising horses.[5] Justiniano was then serving as congressman for the lone district of Cavite and as minority floor leader. In 1972, when then President Ferdinand Marcos placed the country under martial law, Justiniano went on selfexile to the United States of America (USA) to avoid the harassment and threats made against him by the dictator. Sometime in 1975, while still in the USA, the Montanos transferred the said properties to Tres Cruces Agro-Industrial Corporation (TCAIC) in exchange for shares of stock in the company,[6] allowing the Montanos to control 98% of the stockholdings of TCAIC.[7] Thus, on February 17, 1975, the certificates of title registered in the name of the Montanos were cancelled and were replaced with transfer certificates of title (TCTs) in TCAICs name. [8] A year later, in October 1976, TCAIC sold the properties to International Country Club, Inc. (ICCI) for P6,000,000.00.[9] The sale resulted in the cancellation of the titles of TCAIC, and in their transfer to ICCI on May 27, 1977.[10] After the transfer, ICCI immediately mortgaged the parcels of land to Citizens Bank and Trust Co. (later renamed as Associated Bank) for P2,000,000.00.[11] The loan matured but remained unpaid, prompting Associated Bank to foreclose the mortgage on May 31, 1984. [12] The properties were then put on public auction and were sold for P5,700,000.00 to Associated Bank, the sole and highest bidder.[13] Ownership over the said properties was consolidated by Associated Bank and, on May 19, 1987, new TCTs were issued in its name.[14] Meanwhile, in 1986, following the ouster of Marcos, the Montanos returned to the country. After discovering the transfer of the properties, the Montanos immediately took physical possession of the same and began cultivating the land.[15] On September 15, 1989, the Montanos filed an action for reconveyance of title against herein petitioner, praying, in sum, that the transfer of the properties from TCAIC to ICCI, and from ICCI to Associated Bank, be declared null and void.[16] In their complaint, respondents averred that the transfer of the parcels of land to TCAIC was done only to avoid the confiscatory acts being applied by the dictator against the Montanos properties, in retaliation for the latters open

opposition to Marcos.[17] They claimed that TCAIC was only forced to sell the properties to ICCI after the latter intimidated and threatened the relatives of the Montanos who were left in the country.[18]They also argued that the mortgage by ICCI to Associated Bank was made to generate money for the latters corporate officers as evidenced by the lack of any effort on the part of ICCI to service the loan.[19] On October 11, 1989, Associated Bank filed an Answer [20] setting forth affirmative defenses. Among its several pleas in avoidance were the arguments that the complaint did not state a cause of action; that the allegation of threat and intimidation was not averred with particularity; that the bank was an innocent purchaser for value; and that, even if the complaint stated a cause of action, the same had already prescribed or had been barred by estoppel and laches. We agree with the RTCs and the CAs rulings that petitioners argument on the failure of the complaint to state a cause of action is unavailing. When the ground for dismissal is that the complaint states no cause of action, such fact can be determined only from the facts alleged in the complaint and from no other, and the court cannot consider other matters aliunde.[33] The test, therefore, is whether, assuming the allegations of fact in the complaint to be true, a valid judgment could be rendered in accordance with the prayer stated therein. Where the allegations are sufficient but the veracity of the facts is assailed, the motion to dismiss should be denied.[34] In their complaint for reconveyance, respondents alleged that the transfer of the three parcels of land from TCAIC to ICCI was facilitated through threat, duress and intimidation employed by certain individuals. On its face, the complaint clearly states a cause of action and raises issues of fact that can be properly settled only after a full-blown trial. On this ground, petitioners motion to dismiss must, perforce, be denied. We do not, however, subscribe to the RTCs ruling that the action has already prescribed. It is true that an action for reconveyance of real property resulting from fraud may be barred by the statute of limitations, which requires that the action shall be filed within four (4) years from the discovery of the fraud. [35] The RTC, however, seemed to have overlooked the fact that the basis of respondents complaint for reconveyance is not fraud but threat, duress and intimidation, allegedly employed by Marcos cronies upon the relatives of the Montanos while the latter were on self-exile.[36] In fact, fraud was neither specifically alleged nor remotely implied in the complaint. HSBC VS. PAULI

(see notes) Felipe Vs. Heirs of Maximo Aldon Maximo Aldon married Gimena Almosara in 1936. The spouses bought several pieces of land sometime between 1948 and 1950. In 1960-62, the lands were divided into three lots, 1370, 1371 and 1415 of the San Jacinto Public Land Subdivision, San Jacinto, Masbate. In 1951, Gimena Almosara sold the lots to the spouses Eduardo Felipe and Hermogena V. Felipe. The sale was made without the consent of her husband, Maximo. On April 26, 1976, the heirs of Maximo Aldon, namely his widow Gimena and their children Sofia and Salvador Aldon, filed a complaint in the Court of First Instance of Masbate against the Felipes. The complaint alleged that the plaintiffs were the owners of Lots 1370, 1371 and 1415; that they had orally mortgaged the same to the defendants; and an offer to redeem the mortgage had been refused so they filed the complaint in order to recover the three parcels of land. The defendants asserted that they had acquired the lots from the plaintiffs by purchase and subsequent delivery to them. The trial court sustained the claim of the defendants. The plaintiffs appealed the decision to the Court of Appeals which rendered the following judgment: PREMISES CONSIDERED, the decision appealed from is hereby REVERSED The legal ground which deserves attention is the legal effect of a sale of lands belonging to the conjugal partnership made by the wife without the consent of the husband. It is useful at this point to re-state some elementary rules: The husband is the administrator of the conjugal partnership. (Art. 165, Civil Code.) Subject to certain exceptions, the husband cannot alienate or encumber any real property of the conjugal partnership without the wife's consent. (Art. 166, Idem.) And the wife cannot bind the conjugal partnership without the husband's consent, except in cases provided by law. (Art. 172, Idem.) In the instant case, Gimena, the wife, sold lands belonging to the conjugal partnership without the consent of the husband and the sale is not covered by the phrase "except in cases provided by law." The Court of Appeals described the sale as "invalid" - a term which is imprecise when used in relation to contracts because the Civil Code uses specific names in designating defective contracts, namely: rescissible (Arts. 1380 et seq.), voidable (Arts. 1390 et seq.), unenforceable (Arts. 1403, et seq.), and void or inexistent (Arts. 1409 et seq.) The sale made by Gimena is certainly a defective contract but of what category? The answer: it is a voidable contract.

According to Art. 1390 of the Civil Code, among the voidable contracts are "[T]hose where one of the parties is incapable of giving consent to the contract." (Par. 1.) In the instant case-Gimena had no capacity to give consent to the contract of sale. The capacity to give consent belonged not even to the husband alone but to both spouses. The view that the contract made by Gimena is a voidable contract is supported by the legal provision that contracts entered by the husband without the consent of the wife when such consent is required, are annullable at her instance during the marriage and within ten years from the transaction questioned. (Art. 173, Civil Code.) The voidable contract of Gimena was subject to annulment by her husband only during the marriage because he was the victim who had an interest in the contract. Gimena, who was the party responsible for the defect, could not ask for its annulment. Their children could not likewise seek the annulment of the contract while the marriage subsisted because they merely had an inchoate right to the lands sold. The case of Sofia and Salvador Aldon is different. After the death of Maximo they acquired the right to question the defective contract insofar as it deprived them of their hereditary rights in their father's share in the lands. The father's share is one-half (1/2) of the lands and their share is two-thirds (2/3) thereof, one-third (1/3) pertaining to the widow. The petitioners have been in possession of the lands since 1951. It was only in 1976 when the respondents filed action to recover the lands. In the meantime, Maximo Aldon died. Two questions come to mind, namely: (1) Have the petitioners acquired the lands by acquisitive prescription? (2) Is the right of action of Sofia and Salvador Aldon barred by the statute of limitations? As to the second question, the children's cause of action accrued from the death of their father in 1959 and they had thirty (30) years to institute it (Art. 1141, Civil Code.) They filed action in 1976 which is well within the period. ARMENTIA VS. PATRIARCA Plaintiff Laurentio Armentia, and Juliana and Marta Armentia, were brother and sisters of the full blood. Jose Someciera is the acknowledged natural son of their deceased mother. Defendant Florencia Someciera is a daughter of Jose Someciera. Defendant Erlinda Patriarea is a granddaughter of Juliana Armentia. Marta Armentia was married to Gregorio Bueno who died sometime in 1942. July 22, 1955, Marta Armentia did two things: First, she adjudicated to herself a parcel of land (Lot 5482, Pototan cadastre, [Iloilo]) with the improvements thereon, covered by Transfer Certificate of Title 21328. and which she inherited from her deceased husband and second, for and in consideration of P99.00, which she acknowledged to have received from Erlinda Patriarca, 13

years of age, single, and Florencia Someciera, 20 years of age, single, she sold to them the property just mentioned. The foregoing document was, on July 22, 1955, recorded in the registry of deeds. - Whereupon, Torrens title 21323 was cancelled by Transfer Certificate of Title 18797 in the names of Erlinda Patriarca and Florencia Someciera. Marta Armentia died intestate and without forced heirs on May 28, 1960. On September 17, 1960, Laurentio Armentia commenced suit2 against Erlinda Patriarca and Florencia Someciera as principal defendants. 3 The complaint, as amended, and reamended, avers: That the sale made by Marta in favor of Erlinda and Florencia "is null and void because it is simulated and fictitious and if not null and void it is voidable because the said defendants were minors at the time the contract was executed and could not then have given their consent to the sale"; that "the said sale was fraudulently executed, and after the supposed sale, Marta Armentia remained in possession of the house and lot, as owner paying the taxes on the land until she died"; that "even assuming hypothetically that there was consideration in the supposed sale, the consideration was grossly inadequate. The complaint winds up with the prayer that the deed of sale be "declared inexistent or in the alternative annulled"; that plaintiff Laurentio Armentia and defendant Juliana Armentia, as heir of Marta Armentia, be declared owners of the land in dispute; that the Register of Deeds be directed to cancel Torrens title 18797 in the names of Erlinda Patriarca and Florencia Someciera, and, in lieu thereof, to issue a new title in the names of Laurentio Armentia and Juliana Armentia; that the house and lot and sewing machine be partitioned and plaintiff's share be delivered to him; and that should partition not be feasible, said properties be sold and plaintiff given his share. The complaint was met by defendant's motion to dismiss upon two grounds: (1) lack of cause of action and (2) prescription. 1. Plaintiff's attack is primarily directed at the sale. Plaintiff charges that the contract therefor was fraudulently executed, but in the same breadth characterizes it, as simulated and fictitious. These statements and but conclusions of law. Controlling, of course, is the statement of' ultimate facts. 6 Hypothetically admitting the truth of these allegations, the conclusion is irresistible that the sale is merely voidable. Because Marta Armentia executed the document, and this is not controverted by plaintiff. Besides, the fact that the vendees were minors, makes the contract, at worst, annullable by them. Then again, inadequacy of consideration does not imply total want of consideration. Without more, the purported acts of Marta Armentia after the sale did not indicate that said sale was void from the beginning. The sum total of all of these is that, in essence, plaintiff's case is bottomed on fraud, which renders the contract voidable.

2. May plaintiff annul the sale on the theory of fraud? Plaintiff was but a brother of the deceased Marta Armentia. True, he is an intestate heir of Marta; but he is not a forced heir. Upon the other hand, Marta was free to dispose of her properties the way she liked it. She had neither ascendants nor descendants. By Article 1397 of the Civil Code, "[t]he action for annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily". This must be construed in conjunction with Article 1311 of the same code providing that "[c]on tracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law", and that "the heir is not liable beyond the value of the property he received from the decedent". Plaintiff is not a forced heir. He is not obliged principally or subsidiarily under the contract. Marta Armentia did not transmit to him by devise or otherwise any rights to the property, the subject thereof. On the contrary, Marta voluntarily disposed of it. No creditors are defrauded; there are none. No legitimes are impaired. Therefore, plaintiff has no cause of action to annul or to rescind the sale.

UNENFORCEABLE CONTRACTS 17. Ortega vs. Leonardo

Well known is the general rule in the Statute of Frauds precluding enforcement of oral contracts for the sale of land. Not so well known is exception concerning the partially executed contracts least our jurisprudence offers few, if any, apposite illustrations. This appeal exemplifies such exception. Alleging partial performance, plaintiff sought to compel defendant to comply with their oral contract of sale of a parcel of land. Upon a motion to dismiss, the Manila court of first instance ordered dismissal following the above general rule. Hence this appeal. It should be sustained if the allegations of the complaint which the motion to dismiss admitted set out an instance of partial performance. Stripped of non-essentials, the complaint averred that long before and until her house had been completely destroyed during the liberation of the City of Manila, plaintiff occupied a parcel of land, designated as Lot 1, Block 3 etc. (hereinafter called Lot I) located at San Andres Street, Malate, Manila; that after liberation she re-occupied it; that when the administration and disposition of the said Lot I (together with other lots in the Ana Sarmiento Estate) were assigned by the Government to the Rural Progress Administration2 plaintiff asserted her right thereto (as occupant) for purposes of purchase; that defendant also asserted a similar right, alleging occupancy of a portion of the land subsequent to plaintiff's; that during the investigation of such conflicting interests, defendant asked plaintiff to desist from pressing her claim and definitely promised that if and when he succeeded in getting title to Lot I3 , he would sell to her a portion thereof with an area of

55.60 square meters (particularly described) at the rate of P25.00 per square meter, provided she paid for the surveying and subdivision of the Lot and provided further that after he acquired title, she could continue holding the lot as tenant by paying a monthly rental of P10.00 until said portion shall have been segregated and the purchase price fully paid; that plaintiff accepted defendant's offer, and desisted from further claiming Lot I; that defendant finally acquired title thereto; that relying upon their agreement, plaintiff caused the survey and segregation of the portion which defendant had promised to sell incurring expenses therefor, said portion being now designated as Lot I-B in a duly prepared and approved subdivision plan; that in remodelling her son's house constructed on a lot adjoining Lot I she extended it over said Lot I-B; that after defendant had acquired Lot I plaintiff regularly paid him the monthly rental of P10.00; that in July 1954, after the plans of subdivision and segregation of the lot had been approved by the Bureau of Lands, plaintiff tendered to defendant the purchase price which the latter refused to accept, without cause or reason. The court below explained in its order of dismissal: It is admitted by both parties that an oral agreement to sell a piece of land is not enforceable. (Art. 1403, Civil Code, Section 21, Rule 123, Rules of Court.) Plaintiff, however, argues that the contract in question, although verbal, was partially performed because plaintiff desisted from claiming the portion of lot I in question due to the promise of defendant to transfer said portion to her after the issuance of title to defendant. The court thinks that even granting that plaintiff really desisted to claim not on oral promise to sell made by defendant, the oral promise to sell cannot be enforced. The desistance to claim is not a part of the contract of sale of the land. Only in essential part of the executory contract will, if it has already been performed, make the verbal contract enforceable, payment of price being an essential part of the contract of sale. If the above means that partial performance of a sale contract occurs only when part of the purchase price is paid, it surely constitutes a defective statement of the law. American Jurisprudence in its title "Statute of Frauds" lists other acts of partial performance, such as possession, the making of improvements, rendition of services, payment of taxes, relinquishment of rights, etc. Thus, it is stated that "The continuance in possession may, in a proper case, be sufficiently referable to the parol contract of sale to constitute a part performance thereof. There may be additional acts or peculiar circumstances which sufficiently refer the possession to the contract. . . . Continued possession under an oral contract of sale, by one already in possession as a tenant, has been held a sufficient part performance, where accompanied by other acts which characterize the continued possession and refer it to the contract of purchase. Especially is this true where the circumstances of the case include the making of substantial, permanent, and valuable improvements." (49 American Jurisprudence 44) It is also stated that "The making of valuable permanent improvements on the land by the purchaser, in pursuance of the agreement and with the knowledge of the vendor, has been said to be the strongest and the most unequivocal act of part performance by which a verbal contract to sell land is taken out of the statute of frauds, and is ordinarily an important element in such part performance. . . . Possession by the purchaser under a parol contract for the purchase of real property, together with his making valuable and permanent improvements on the property which are referable exclusively to the contract, in reliance on the contract, in the honest belief that he has a right to make them, and with the

knowledge and consent or acquiescence of the vendor, is deemed a part performance of the contract. The entry into possession and the making of the improvements are held on amount to such an alteration in the purchaser's position as will warrant the court's entering a degree of specific performance." (49 American Jurisprudence p.755, 756.) Again, it is stated that "A tender or offer of payment, declined by the vendor, has been said to be equivalent to actual payment, for the purposes of determining whether or not there has been a part performance of the contract. This is apparently true where the tender is by a purchaser who has made improvements. But the doctrine now generally accepted, that not even the payment of the purchase price, without something more, . . . is a sufficient part performance. (49 American Jurisprudence p. 772.) And the relinquishment of rights or the compromise thereof has likewise been held to constitute part performance. (Seesame title secs. 473, 474, 475.) In the light of the above four paragraphs, it would appear that the complaint in this case described several circumstance indicating partial performance: relinquishment of rights4 continued possession, building of improvements, tender of payment plus the surveying of the lot at plaintiff's expense and the payment of rentals. We shall not take, time to discuss whether one or the other or any two or three of them constituted sufficient performance to take the matter away from the operation of the Statute of Frauds. Enough to hold that the combination of all of them amounted to partial performance; and we do so line with the accepted basis of the doctrine, that it would be a fraud upon the plaintiff if the defendant were permitted to oppose performance of his part after he has allowed or induced the former to perform in reliance upon the agreement. (See 49 American Jurisprudence p. 725.) The paragraph immediately preceding will serve as our comment on the appellee's quotations from American Jurisprudence itself to the effect that "relinquishment" is not part performance, and that neither "surveying the land"5 nor tender of payment is sufficient. The precedents hereinabove transcribed oppose or explain away or qualify the appellee's citations. And at the risk of being repetitious we say: granting that none of the three circumstances indicated by him, (relinquishment, survey, tender) would separately suffice, still the combination of the three with the others already mentioned, amounts to more than enough. Hence, as there was partial performance, the principle excluding parol contracts for the sale of realty, does not apply. The judgment will accordingly be reversed and the record remanded for further proceedings. With costs against appellee

BABAO VS. PEREZ

Bienvenido Babao vs. Florencio Perez (Article 1324; statute of fraud) Facts: Santiago Babao married the niece of Celestina Perez. 1924, Santi and Celestina allegedly had a verbal agreement where Santi was

bound to improve the land of Celestina by leveling, clearing, planting fruits and other crops; that he will act as the administrator of the land; that all expenses for labor and materials will be at his cost, in consideration of which Celestina in turn bound herself to convey to Santi or his wife of the land,, with all the improvements after the death of Celestina. But, shortly before Celestinas death, she sold the land to another part. Thus, Santi filed this complaint alleging the sale of the land as fraudulent and fictitious and prays to recover the land or the expenses he incurred in improving the land. Issue: whether or not the verbal agreement falls within the Stature of Frauds Held: Contracts which by their terms are not to be performed within one year, may be taken out of the statute through performance by one party thereto. All that is required in such case is complete performance within the year by one party, however many tears may have to elapse before the agreement is performed by the other party. But nothing less than full performance by one party will suffice, and it has been held that, if anything remains to be done after the expiration of the year besides the mere payment of money, the statute will apply. It is not therefore correct to state that Santiago Babao has fully complied with his part within the year from the alleged contract in question. Having reached the conclusion that all the parol evidence of appellee was submitted in violation of the Statute of Frauds, or of the rule which prohibits testimony against deceased persons, we find unnecessary to discuss the other issues raised in appellants' brief. The case is dismissed, with costs against appellee.

G.R. No. 176841 June 29, 2010 Velasco, Jr., J.: FACTS:Antonita Ordua purchased a residential lot from Gabriel Sr.payable in installments but no deed of sale was executed. The installm ents were paid to Gabriel Sr. and later to Gabri el Jr. aft er t h e d e a t h o f t h e f o r m e r . I m p r o v e m e n t s w e r e t h e r e a f t e r introduced by petitioner and the latter even paid its real propertyt a x s i n c e 1 9 7 9 . U n k n o w n t o O r d u a , t h e p r o p e r t y has beensubject to further alienations until the sa m e w a s c e d e d t o respondent, Fuentebilla, Jr. Ordua, after b e i n g d e m a n d e d b y Fuentebilla to vacate the disputed land, then filed a Complaint forA n n u l m e n t o f S a l e , T i t l e , R e c o n v e y a n c e w i t h D a m a g e s w i t h a prayer to acquire ownership over the subject lot upon payment of their remaining balance. The Regi onal Trial C ourt dismissed thepetition because the verbal sale between Gabriel Sr. and Orduaw a s u n e n f o r c e a b l e u n d e r t h e S t a t u t e o f F r a u d s . T h i s w a s l a t e r affirmed by the Court of Appeals. ISSUE:W h e t h e r o r n o t t h e s a l e o f t h e s u b j e c t l o t b y G a b r i e l S r . t o Antonita is unenforceable under the Statute of Frauds HELD:N o . I t i s a w e l l s e t t l e d r u l e t h a t t h e S t a t u t e o f F r a u d s a s express ed in Article 1403, par. (2), of the C ivil Cod e is applicableo n l y t o p u r e l y e x e c u t o r y c o n t r a c t s a n d n o t t o c o n t r a c t s w h i c h have alread y been executed either tota lly or partially. Here, theverbal c ontract of sa le has been partially executed through thepartial paym ents made b y Ordua duly rec eived b y both Gabri el J r . a n d h i s f a t h e r . T h e p u r p o s e o f t h e S t a t u t e o f F r a u d i s prevention fraud and perjury in the enforcement of obligationsd e p e n d i n g f o r t h e i r e v i d e n c e o n t h e u n a s s i s t e d m e m o r y o f witnesses, by requiring some contracts and transa c t i o n s t o b e evidenced b y a writing signed b y the part y to be charged. Sincet h e r e i s a l r e a d y r a t i f i c a t i o n o f t h e v e r b a l c o n t r a c t t h r o u g h theacceptance of benefits through the partial payments, it is t h u s withdrawn from the purview of the Statute of Frauds.

ORDUNA VS. FUENTABELLA

ORDUA, ET AL. v. FUENTEBELLA, ET AL.

Bisaya Land Transportation v. Sanchez, G.R. No. 74623 August 31, 1987, 153 SCRA 532 Facts: Bisaya Land Transportation Company, Inc. (BISTRANCO) has been engaged in the shipping business and one of its ports of call is found in Butuan City. When BISTRANCO was under receivership Mariano Sanchez (Sanchez) was appointed by BISTRANCO as its acting shipping agent for its vessels in Butuan City by its Receiver Atty. Adolfo V. Amor (Amor)

pending the execution of the formal contract of agency. Thereafter a formal Contract of Agency was executed between BISTRANCO, represented by Receiver Atty. Amor and Sanchez. Sanchez then executed a Supplemental Shipping Agency Contract after finding that a paragraph of the Contract of Agency was quite prejudicial to him which was then signed by both parties. However both the Contract of Agency and the Supplemental Shipping Agency Contract (Contracts) were never submitted by Atty. Amor to the receivership court for its approval. By virtue of the Contracts, Sanchez performed his duties as shipping agent of BISTRANCO. Under Sanchezs endeavors, he had managed to increase the volume of the shipping business of BISTRANCO at Butuan City and helped it flourished. Then one day, BISTRANCO wrote Sanchez that they would commence operating its branch office at Butuan City and thereafter actually operated a branch office which in effect repudiated the Contracts. Under the rules of court it is necessary that the acts of the receiver have the approval or authorization of the court which appointed him as a receiver. A court-appointed receiver cannot validly enter into a contract without the approval of the court. Issue: Whether the status of the Contracts which Receiver Atty. Amor entered into with Sanchez, without the approval of the court which appointed him receiver is either void or unenforceable. Held: Unenforceable but ratified. Contract is valid. Ratio: The determination of whether the questioned contracts are void or merely unenforceable is important, because of the settled distinction that a void and inexistent contract can not be ratified and become enforceable, whereas an unenforceable contract may still be ratified and, thereafter, enforced. Citing Article 1409 (1), there is nothing in the cause, object, or purpose of the Contracts which can be said as contrary to law, morals, good customs, public order or public policy so as to render them void. On the other hand, Article 1403 (1) of the Civil Code provides that contracts "entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers" are unenforceable, unless they are ratified. Consequently, the questioned Contracts can rightfully be classified as unenforceable for having been entered into by one who had acted

beyond his powers, due to Receiver Amor's failure to secure the court's approval of said Contracts. These unenforceable Contract were nevertheless deemed ratified by BISTRANCO when they sent three (3) letters to Sanchez which recognizes and gave efficacy to the Contracts. Furthermore, it is clear that BISTRANCO received material benefits from the contracts of agency of Sanchez, based upon the monthly statements of income of BISTRANCO, upon which the commissions of Sanchez were based.
PINEDA VS. DELA RAMA

FACTS: Dela Rama is a practising lawyer whose services were retained by Pineda for the purpose of making representations with the chairman and general manager of the National Rice and Corn Administration (NARIC) to stop or delay the institution of criminal charges against Pineda who allegedly misappropriated 11,000 cavans of palay deposited at his ricemill in Concepcion, Tarlac. The NARIC general manager was allegedly an intimate friend of Dela Rama. According to Dela Rama, petitioner Pineda has used up all his funds to buy a big hacienda in Mindoro and, therefore, borrowed the P9,300.00 subject of his complaint for collection. In addition to filling the suit to collect the loan evidenced by the matured promissory note, Dela Rama also sued to collect P5,000.00 attorney's fees for legal services rendered as Pineda's counsel in the case being investigated by NARIC. We agree with the trial court which believed Pineda. It is indeed unusual for a lawyer to lend money to his client whom he had known for only three months, with no security for the loan and on interest. Dela Rama testified that he did not even know what Pineda was going to do with the money he borrowed from him. The petitioner had just purchased a hacienda in Mindoro for P210,000.00, owned sugar and rice lands in Tarlac of around 800 hectares, and had P60,000.00 deposits in three banks when he executed the note. It is more logical to believe that Pineda would not borrow P5,000.00 and P4,300.00 five days apart from a man whom he calls a "fixer" and whom he had known for only three months. There is no dispute that an air-conditioning unit valued at P1,250.00 was purchased by Pineda's son and given to Dela Rama although the latter claims he paid P1,250.00 for the unit when he received it. Pineda, however, alleged that he gave the air-conditioning unit because Dela Rama told him that Dr. Rodriguez was asking for one air-conditioning machine of 1.5 horsepower for the latter's NARIC office. Pineda further testified that six cavans of first class rice also

intended for the NARIC Chairman and General Manager, together with the airconditioning unit, never reached Dr. Rodriguez but were kept by the lawyer. Considering the foregoing, we agree with the trial court that the promissory note was executed for an illegal consideration. Articles 1409 and 1412 of the Civil Code in part, provide: Art. 1409. The following contracts are inexistent and void from the beginning: (1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order and public policy; xxx xxx xxx Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: (1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking. The consideration for the promissory note - to influence public officers in the performance of their duties - is contrary to law and public policy. The promissory note is void ab initio and no cause of action for the collection cases can arise from it.

operated casinos under specified terms and conditions and in accordance with industry practice

3. The Korean-based ABS Corporation was one of the international

groups that availed of the Program. In a letter-agreement dated 25 April 1996 (Junket Agreement), ABS Corporation agreed to bring in foreign players to play at the five designated gaming tables of the Casino Filipino Silahis at the Grand Boulevard Hotel in Manila (Casino Filipino).

4. Petitioner, a Korean national, alleges that from November 1996 to

March 1997, he came to the Philippines four times to play for high stakes at the Casino Filipino.

5. Petitioner claims that in the course of the games, he was able to

accumulate gambling chips worth US$2.1 million. Petitioner presented as evidence during the trial gambling chips with a face value of US$1.1 million. Petitioner contends that when he presented the gambling chips for encashment with PAGCORs employees or agents, PAGCOR refused to redeem them

6. Petitioner brought an action against PAGCOR seeking the redemption

of gambling chips valued at US$2.1 million. claims that he won the gambling chips at the Casino Filipino, playing continuously day and night. alleges that every time he would come to Manila, PAGCOR would extend to him amenities deserving of a high roller. A PAGCOR official who meets him at the airport would bring him to Casino Filipino, a casino managed and operated by PAGCOR. The card dealers were all PAGCOR employees, the gambling chips, equipment and furnitures belonged to PAGCOR, and PAGCOR enforced all the regulations dealing with the operation of foreign exchange gambling pits. Petitioner states that he was able to redeem his gambling chips with the cashier during his first few winning trips. But later on, the casino cashier refused to encash his gambling chips so he had no recourse but to deposit his gambling chips at the Grand Boulevard Hotels deposit box, every time he departed from Manila

Yun Kwan Byung vs PAGCOR

1. PAGCOR is a government-owned and controlled corporation tasked to

establish and operate gambling clubs and casinos as a means to promote tourism and generate sources of revenue for the government. To achieve these objectives, PAGCOR is vested with the power to enter into contracts of every kind and for any lawful purpose that pertains to its business.

2. Pursuant to this authority, PAGCOR launched its Foreign Highroller

Marketing Program (Program). The Program aims to invite patrons from foreign countries to play at the dollar pit of designated PAGCOR-

7.

PAGCOR claims that petitioner, who was brought into the Philippines by ABS Corporation, is a junket player who played in the dollar pit exclusively leased by ABS Corporation for its junket players. PAGCOR alleges that it provided ABS Corporation with distinct junket chips. ABS Corporation distributed these chips to its junket players. At the end of each playing period, the junket players would surrender the chips to ABS Corporation. Only ABS Corporation would make an accounting of these chips to PAGCORs casino treasury. As additional information for the junket players playing in the gaming room leased to ABS Corporation, PAGCOR posted a notice written in English and Korean languages which reads: NOTICE This GAMING ROOM is exclusively operated by ABS under arrangement with PAGCOR, the former is solely accountable for all PLAYING CHIPS wagered on the tables. Any financial ARRANGEMENT/TRANSACTION between PLAYERS and ABS shall only be binding upon said PLAYERS and ABS

out ABS Corporation with any apparent authority to represent it in any capacity. The Junket Agreement was merely a contract of lease of facilities and services. Ratio: Article 1869 of the Civil Code states that implied agency is derived from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. Implied agency, being an actual agency, is a fact to be proved by deductions or inferences from other facts On the other hand, apparent authority is based on estoppel and can arise from two instances. First, the principal may knowingly permit the agent to hold himself out as having such authority, and the principal becomes estopped to claim that the agent does not have such authority. Second, the principal may clothe the agent with the indicia of authority as to lead a reasonably prudent person to believe that the agent actually has such authority. In an agency by estoppel, there is no agency at all, but the one assuming to act as agent has apparent or ostensible, although not 49 real, authority to represent another. The law makes no presumption of agency and proving its existence, nature and extent is incumbent upon the person alleging it.Whether or not an agency has been created is a question to be determined by the fact that one represents and is acting for another. - The basis for agency is representation that is, the agent acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same legal effect as if they were 59 personally executed by the principal. On the part of the principal, there must be anactual intention to appoint or an intention naturally inferable from his words or actions, while on the part of the agent, there must be an intention to accept the 60 appointment and act on it. Absent such mutual intent, there is generally no agency

8. PAGCOR argues that petitioner is not a PAGCOR player because under

PAGCORs gaming rules, gambling chips cannot be brought outside the casino. The gambling chips must be converted to cash at the end of every gaming period as they are inventoried every shift. Under PAGCORs rules, it is impossible for PAGCOR players to accumulate two million dollars worth of gambling chips and to bring the chips out of the casino premises

9. TC: dismissed the complaint and counterclaim. ruled that based on

PAGCORs charter PAGCOR has no authority to lease any portion of the gambling tables to a private party like ABS Corporation.

10. CA affirmed. Issue#1. WON an implied agency was created

Held: NO. There is no implied agency in this case because PAGCOR did not hold out to the public as the principal of ABS Corporation. PAGCORs actions did not mislead the public into believing that an agency can be implied from the arrangement with the junket operators, nor did it hold

Issue # 2 Whether the CA erred in using intent of the contracting parties as the test for creation of agency, when such is not relevant since the instant case involves liability of the presumed principal in implied agency to a third party HELD: NO. The Court of Appeals correctly used the intent of the contracting parties in determining whether an agency by estoppel existed in this case. Ratio: An agency by estoppel, which is similar to the doctrine of apparent authority requires proof of reliance upon the representations, and that, in turn, needs proof that the representations predated the action taken in reliance. There can be no apparent authority of an agent without acts or conduct on the part of the principal and such acts or conduct of the principal must have been known and relied upon in good faith and as a result of the exercise of reasonable prudence by a third person as claimant, and such must have produced a change of 63 position to its detriment. Such proof is lacking in this case. In the entire duration that petitioner played in Casino Filipino, he was dealing only with ABS Corporation, and availing of the privileges extended only to players brought in by ABS Corporation. The facts that he enjoyed special treatment upon his arrival in Manila and special accommodations in Grand Boulevard Hotel, and that he was playing in special gaming rooms are all indications that petitioner cannot claim good faith that he believed he was dealing with PAGCOR. Petitioner cannot be considered as an innocent third party and he cannot claim entitlement to equitable relief as well

Civil Code provides that contracts expressly prohibited or declared void by law, such as gambling contracts, "cannot be ratified." RE: VALIDITY OF AGREEMENT: - PAGCOR has the sole and exclusive authority to operate a gambling activity. While PAGCOR is allowed under its charter to enter into operators or management contracts, PAGCOR is not allowed under the same charter to relinquish or share its franchise. PAGCOR cannot delegate its power in view of the legal principle of delegata potestas delegare non potest, inasmuch as there is nothing in the charter to show that it has been expressly authorized to do 41 so. Similarly, in this case, PAGCOR, by taking only a percentage of the earnings of ABS Corporation from its foreign currency collection, allowed ABS Corporation to operate gaming tables in the dollar pit. The Junket Agreement is in direct violation of PAGCORs charter and is therefore void. Since the Junket Agreement violates PAGCORs charter, gambling between the junket player and the junket operator under such agreement is illegal and may 42 not be enforced by the courts. Article 2014 of the Civil Code, which refers to illegal gambling, states that no action can be maintained by the winner for the collection of what he has won in a game of chance.

CAMPOS AND CAMPOS-BAUTISTA VS. PASTRANA

The first case arose from the refusal of Carlito Campos (Carlito), the father of herein petitioners, to surrender the possession of a fishpond he leased from respondents mother, Salvacion Buenvenida, despite the expiration of their contract of lease in 1980. Alleging that he was an agricultural lessee, Carlito filed an agrarian case docketed as CAR Case No. 1196 (Agrarian Case) against his lessor. While the appeal in the Agrarian Case was pending before the CA, herein respondents filed the second case, Civil Case No. V-5417, against Carlito for Recovery of Possession and Damages with Preliminary Mandatory Injunction (Possession Case) involving the same fishpond subject of the earlier agrarian case.

Issue#3 Whether the CA erred in failing to consider that PAGCOR ratified, or at least adopted, the acts of the agent, ABS Corporation Held: NO. The trial court has declared, and we affirm, that the Junket Agreement is void. A void or inexistent contract is one which has no force and effect from the very beginning. Hence, it is as if it has never been entered into and cannot be 64 validated either by the passage of time or by ratification. Article 1409 of the

During the pendency of the Agrarian Case, as well as prior to the filing of the Possession Case, Carlito was the registered owner of the following properties:

1. Residential Lots 3715-A and 3715-B-2 covered by Transfer Certificates of Title Nos. 182057 and 18417,8respectively and 2. Agricultural Lots 850 and 852 covered by Original Certificates of Title
Nos. P-9199 and P-9200, respectively. When the respondents were about to levy these properties to satisfy the judgment in the Possession Case, they discovered that spouses Carlito and Margarita Campos transferred these lots to their children Rosemarie and Jesus Campos, herein petitioners, by virtue of Deeds of Absolute Sale dated October 18, 198511 and November 2, 1988.12Specifically, spouses Campos sold the residential lots (Lots 3715-A and 3715-B-2), with a total area of 1,393 square meters, to their daughter Rosemarie for P7,000.00 and the agricultural lots (Lots 850 and 852) with a combined area of 7,972 square meters, to their son Jesus for P5,600.00. On February 18, 1997, respondents instituted the third case, Civil Case No. V-7028 (Nullity of Sale Case) Petitioners assail the application of Article 140920 of the Civil Code on void contracts as against Article 1381(3)21 of the Civil Code on rescissible contracts in fraud of creditors, considering that the questioned conveyances executed by the spouses Campos to their children were allegedly done to evade the enforcement of the writ of execution in the Possession Case.22 In addition, petitioners allege that the CA misappreciated the facts of this case when it found that the questioned transactions were tainted with badges of fraud.23 Respondents arguments
9 10

Respondents argue that the application of Article 1409 on void contracts was a natural and logical consequence of the CAs finding that subject deeds of sale were absolutely simulated and fictitious, consistent with the nature of the respondents cause of action which was for declaration of nullity of said contracts and the transfer certificates of titles issued pursuant thereto.24 Respondents also stressed that the CAs finding is conclusive upon us and that only questions of law may be raised in a petition for review on certiorari under Rule 45 of the Rules of Court.25 The subject Deeds of Absolute Sale executed by the Spouses Campos to their children (herein petitioners) are absolutely simulated and fictitious. The CA correctly held that the assailed Deeds of Absolute Sale were executed when the Possession Case was already pending, evidently to avoid the properties subject thereof from being attached or levied upon by the respondents. While the sales in question transpired on October 18, 1985 and November 2, 1988, as reflected on the Deeds of Absolute Sale, the same were registered with the Registry of Deeds only on October 25, 1990 and September 25, 1990. We also agree with the findings of the CA that petitioners failed to explain the reasons for the delay in the registration of the sale, leading the appellate court to conclude that the conveyances were made only in 1990 or sometime just before their actual registration and that the corresponding Deeds of Absolute Sale were antedated. This conclusion is bolstered by the fact that the supposed notary public before whom the deeds of sale were acknowledged had no valid notarial commission at the time of the notarization of said documents.26 Indeed, the Deeds of Absolute Sale were executed for the purpose of putting the lots in question beyond the reach of creditors

CLANOR VS. IAC

Petitioner Cornelia Clanor and her late husband Pascual Portugal, during the lifetime of the latter, were able to accumulate several parcels of real property. Among these were a parcel of residential land situated in Poblacion, Gen. Trias, Cavite, an agricultural land located at Pasong Kawayan, Gen. Trias, Cavite, Sometime in January, 1967, the private respondent Hugo Portugal, a son of the spouses, borrowed from his mother, Cornelia, the certificates of title to the above-mentioned parcels of land on the pretext that he had to use them in securing a loan that he

was negotiating. Cornelia, the loving and helpful mother that she was, assented and delivered the titles to her son. The matter was never again brought up until after Pascual Portugal died on November 17, 1974. (Cornelia herself died on November 12, 1987.) When the other heirs of the deceased Pascual Portugal, the petitioners herein, for the purposes of executing an extra-judicial partition of Pascual's estate, wished to have all the properties of the spouses collated, Cornelia asked the private respondent for the return of the two titles she previously loaned, Hugo manifested that the said titles no longer exist. When further questioned, Hugo showed the petitioners Transfer Certificate of Title T.C.T. No. 23539 registered in his and his brother Emiliano Portugal's names, and which new T.C.T. cancelled the two previous ones. This falsification was triggered by a deed of sale by which the spouses Pascual Portugal and Cornelia Clanor purportedly sold for P8,000.00 the two parcels of land adverted to earlier to their two sons, Hugo and Emiliano. Confronted by his mother of this fraud, Emiliano denied any participation. And to show his good faith, Emiliano caused the reconveyance of Lot No. 2337 previously covered by TCT No. RT-9356 and which was conveyed to him in the void deed of sale. Hugo, on the other hand, refused to make the necessary restitution thus compelling the petitioners, his mother and his other brothers and sisters, to institute an action for the annulment of the controversial deed of sale and the reconveyance of the title over Lot. the alleged contract of sale is vitiated by the total absence of a valid cause or consideration. The petitioners in their complaint, assert that they, particularly Cornelia, never knew of the existence of the questioned deed of sale. They claim that they came to know of the supposed sale only after the private respondent, upon their repeated entreaties to produce and return the owner's duplicate copy of the transfer certificate of title covering the two parcels of land, showed to them the controversial deed. And their claim was immeasurably bolstered when the private respondent's co-defendant below, his brother Emiliano Portugal, who was allegedly his co-vendee in the transaction, disclaimed any knowledge or participation therein. If this is so, and this is not contradicted by the decisions of the courts below, the inevitable implication of the allegations is that contrary to the recitals found in the assailed deed, no consideration was ever paid at all by the private respondent. Applying the provisions of Articles 1350, 1352, and 1409 of the new Civil Code in relation to the indispensable requisite of a valid cause or consideration in any contract, and what constitutes a void or inexistent contract, we rule that the disputed deed of sale is void ab initio or inexistent, not merely voidable. And it is provided in Article 1410 of the Civil Code, that '(T)he action or defense for the declaration of the inexistence of a contract does not prescribe.

LITA ENTERPRISES VS. IAC

Facts: Spouses Nicasio Ocampo and Francisca Garcia (private respondents) purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to be used as taxi. Since they had no franchise to operate taxicabs, they contracted with petitioner Lita Enterprise, Inc., through its representative Manuel Concordia, for the use of the latters certificate of public convenience for a consideration of P1, 000.00 and a monthly rental of P200.00/taxicab unit. For the agreement to take effect, the cars were registered in the name of Lita Enterprises, Inc. The possession, however, remains with spouses Ocampo and Garcia who operated and maintained the same under Acme Taxi, petitioners trade name. A year later, one of the taxicabs, driven by their employee, Emeterio Martin, collided with a motorcycle. Unfortunately the driver of the motorcycle, Florante Galvez died from the injuries it sustained. Criminal case was filed against Emeterio Martin, while a civil case was filed by the heir of the victim against Lita Enterprises. In the decision of the lower court Lita Enterprises was held liable for damages for the amount of P25, 000.00 and P7, 000.00 for attorneys fees. A writ of execution for the decision followed, 2 of the cars of the respondents spouses were levied and were sold to a public auction. On March 1973, respondent Ocampo decided to register his taxicabs in his own name. The manager of petitioner refused to give him the registration papers. Thus, making spouses file a complaint against petitioner. In the decision, Lita Enterprise was ordered to return the three certificate of registration not levied in the prior case. Petitioner now prays that private respondent be held liable to pay the amount they have given to the heir of Galvez. Issue: Whether or not petitioner can recover from private respondent, knowing they are in an arrangement known as kabit system. Held: Kabit system is defined as, when a person who has been granted a certificate of convenience allows another person who owns

a motor vehicle to operate under such franchise for a fee. This system is not penalized as a criminal offense but is recognized as one that is against public policy; therefore it is void and inexistent. It is fundamental that the court will not aid either of the party to enforce an illegal contract, but will leave them both where it finds them. Upon this premise, it was flagrant error on the part of both trial and appellate courts to have accorded the parties relief from their predicament. Specifically Article 1412 states that: If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: when the fault, is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the others undertaking. The principle of in pari delicto is evident in this case. the proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to sold or delivered, or damages for its property agreed to be sold or delivered, or damages for its violation. The parties in this case are in pari delicto, therefore no affirmative relief can be granted to them.
ALFRED FRITZ FRENZEL vs. EDERLINA P. CATITO FACTS: Petitioner Alfred Fritz Frenzel is an Australian citizen of German descent. He worked as a pilot with the New Guinea Airlines. He arrived in the Philippines in 1974, started engaging in business in the country two years thereafter, and married Teresita Santos, a Filipino citizen. In 1981, Alfred and Teresita separated from bed and board without obtaining a divorce. Sometime in February 1983, Alfred arrived in Sydney, Australia for a vacation. He went to King's Cross, a night spot in Sydney, for a massage where he met EderlinaCatito, a Filipina. Unknown to Alfred, she resided for a time in Germany and was married to Klaus Muller, a German national. She left Germany and tried her luck in Sydney, Australia, where she found employment as a masseuse in the King's Cross nightclub. Alfred was so enamored with

Ederlina that he persuaded her to stop working at King's Cross, return to the Philippines, and engage in a wholesome business of her own. He also proposed that they meet in Manila, to which she assented. Within two weeks of Ederlina's arrival in Manila, Alfred joined her. Alfred reiterated his proposal for Ederlina to stay in the Philippines and engage in business, even offering to finance her business venture. Alfred told Ederlina that he was married but that he was eager to divorce his wife in Australia. Alfred proposed marriage to Ederlina, but she replied that they should wait a little bit longer. Alfred decided to stay in the Philippines for good and live with Ederlina. On different occasions, Alfred bought several properties in the Philippines for Ederlinas business and for the couples residence using his own funds but since Alfred knew that as an alien he was disqualified from owning lands in the Philippines, he agreed that only Ederlina's name would appear in the deed of sale as the buyer of the property, as well as in the title covering the same. Alfred also sold his properties in Australia and the proceeds of the sale were deposited in Alfred's account with the Hong Kong Shanghai Banking Corporation (HSBC), Kowloon Branch. When Ederlina opened her own account with HSBC Kowloon, Alfred transferred his with the said bank to this new account. Alfred received a Letter from Klaus Muller. Klaus informed Alfred that he and Ederlina had been married on October 16, 1978 and had a blissful married life until Alfred intruded therein. Klaus stated that he knew of Alfred and Ederlina's amorous relationship and begged Alfred to leave Ederlina alone and to return her to him. When Alfred confronted Ederlina, she admitted that she and Klaus were, indeed, married. But she assured Alfred that she would divorce Klaus. Alfred was appeased. He agreed to continue the amorous relationship and wait for the outcome of Ederlina's petition for divorce. Ederlina's petition for divorce was denied twice because Klaus opposed the same. Klaus wanted half of all the properties owned by Ederlina in the Philippines before he would agree to a divorce. Worse, Klaus threatened to file a bigamy case against Ederlina. Alfred and Ederlina's relationship started deteriorating. Ederlina had not been able to secure a divorce from Klaus. The latter could charge her for

bigamy and could even involve Alfred, who himself was still married. To avoid complications, Alfred decided to live separately from Ederlina and cut off all contacts with her. Ederlina complained that he had ruined her life. Shortly thereafter, Alfred filed a Complaint against Ederlina, with the RTC of Quezon City for recovery of real and personal properties. In his complaint, Alfred alleged that Ederlina, without his knowledge and consent, managed to transfer funds from their joint account in HSBC Hong Kong, to her own account with the same bank. Using the said funds, Ederlina was able to purchase the properties subject of the complaints. Ederlina failed to file her answer and was declared in default. In the meantime, Alfred also filed a complaint against Ederlina with the RTC of Davao City for specific performance, declaration of ownership of real and personal properties, sum of money, and damages. He alleged that during the period of their common-law relationship, he acquired solely through his own efforts and resources real and personal properties in the Philippines valued more or less at P724,000.00 The RTC of Quezon City ruled in favor of Alfred. However, after due proceedings in the RTC of Davao City, the trial court ruled in favor of Erlinda. The trial court ruled that based on documentary evidence, the purchaser of the three parcels of land subject of the complaint was Ederlina. The court further stated that even if Alfred was the buyer of the properties; he had no cause of action against Ederlina for the recovery of the same because as an alien, he was disqualified from acquiring and owning lands in the Philippines. The sale of the three parcels of land to the petitioner was null and void ab initio. Applying the pari delicto doctrine, the petitioner was precluded from recovering the properties from the respondent. The CA rendered a decision affirming in toto the decision of the RTC Hence, the petition at bar.

2.

Whether petitioner is entitled to recovery under Article 22 of the Civil Code?

HELD: 1. NO. Under Article 1416 of the Civil Code: When the agreement is not illegal per se but is merely prohibited, and the prohibition by the law is designed for the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he has paid or delivered. The provision applies only to those contracts which are merely prohibited, in order to benefit private interests. It does not apply to contracts void ab initio. The sale of three parcels of land in favor of the petitioner who is a foreigner is illegal per se. The transactions are void ab initio because they were entered into in violation of the Constitution. Thus, to allow the petitioner to recover the properties or the money used in the purchase of the parcels of land would be subversive of public policy. 2. NO. Article 22 of the Civil Code provides: Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him. The provision is expressed in the maxim: "MEMO CUM ALTERIUS DETER DETREMENTO PROTEST" (No person should unjustly enrich himself at the expense of another). An action for recovery of what has been paid without just cause has been designated as an accion in rem verso. This provision does not apply if, as in this case, the action is proscribed by the Constitution or by the application of the pari delicto doctrine. It may be unfair and unjust to bar the petitioner from filing an accion in rem verso over the subject properties, or from recovering the money he paid for the said properties, but, as Lord Mansfield stated in the early case of Holman vs. Johnson: "The objection that a contract is immoral or illegal as between the plaintiff and the defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff."

ISSUES: 1. Can petitioner is entitled to recover the property under Article 1416 of the Civil Code?

Failure of the parties to describe the subject property does not render the contract void; reformation is the remedy

JOAQUIN VILLEGAS VS, RURAL BANK

Sometime in June, 1982, [petitioners], spouses Joaquin and Emma Villegas, obtained an agricultural loan of P350,000.00 from [respondent] Rural Bank of Tanjay, Inc. The loan was secured by a real estate mortgage on [petitioners] residential house and 5,229 sq.m. lot situated in Barrio Bantayan, Dumaguete City and covered by TCT No. 12389. For failure of [petitioners] to pay the loan upon maturity, the mortgage was extrajudicially foreclosed. At the foreclosure sale, [respondent], being the highest bidder, purchased the foreclosed properties for P367,596.16. Thereafter, the Sheriff executed in favor of [respondent] a certificate of sale, which was subsequently registered with the Registry of Deeds of Dumaguete City. [Petitioners] failed to redeem the properties within the one-year redemption period. In May, 1987, [respondent] and [petitioner] Joaquin Villegas, through his attorney-in-fact[,] Marilen Victoriano, entered into an agreement denominated as Promise to Sell, whereby [respondent] promised to sell to [petitioners] the foreclosed properties for a total price of P713,312.72, payable within a period of five (5) years. The agreement reads in part

intended to be bound thereby. There are two juridical acts involved in relative simulation the ostensible act and the hidden act.[7] The ostensible act is the contract that the parties pretend to have executed while the hidden act is the true agreement between the parties.[8] To determine the enforceability of the actual agreement between the parties, we must discern whether the concealed or hidden act is lawful and the essential requisites of a valid contract are present. In this case, the juridical act which binds the parties are the loan and mortgage contracts, i.e., petitioners procurement of a loan from respondent. Although these loan and mortgage contracts were concealed and made to appear as sugar crop loans to make them fall within the purview of the Rural Banks Act, all the essential requisites of a contract[9] were present. However, the purpose thereof is illicit, intended to circumvent the Rural Banks Act requirement in the procurement of loans.[10] Consequently, while the parties intended to be bound thereby, the agreement is void and inexistent under Article 1409[11] of the Civil Code.

Upon the signing of the agreement, [petitioners] gave [respondent] the sum of P250,000.00 as down payment. [Petitioners], however, failed to pay the first yearly installment, prompting [respondent] to consolidate its ownership over the properties. Accordingly, TCT No. 12389 was cancelled and a new one, TCT No. 19042, (Exh. 14) was issued in *respondents+ name on November 8, 1989. Thereafter, [respondent] took possession of the properties. Hence, the action by [petitioners for declaration of nullity of loan and mortgage contracts, recovery of possession of real property, accounting and damages and, in the alternative, repurchase of real estate] commenced on January 15, 1990. In resisting the complaint, [respondent] averred that [petitioners] have absolutely no cause of action against it, and that the complaint was filed only to force it to allow [petitioners] to reacquire the foreclosed properties under conditions unilaterally favorable to them. Given the factual antecedents of this case, it is obvious that the sugar crop loans were relatively simulated contracts and that both parties

QUEENSLAND-TOKYO COMMODITIES VS. GEORGE

JOSELITO VILLEGAS v. COURT OF APPEALS Respondents. Facts: Ciciarco D. Andres and Henson Caigas had four (4) hectares of land registered under their names. They sold the land to Fortune Tobacco Corporation and both executed a joint affidavit declaring that they had no tenants on said lot. Later, they executed a Deed of Reconveyance of the same lot in favor of Filomena Domingo, the mother of Joselito Villegas, defendant in the case. On December 4, 1976, the Office of the Register of Deeds of Isabela was burned together with all titles in the office. Thirteen days after, the original of TCT No. T91864 was administratively reconstituted by the Register of Deeds. On April 10, 1991, the trial court upon a petition filed by Fortune ordered the reconstitution of the original of TCT No. T-68737. After trial on the merits, the trial court rendered its assailed decision in favor of Fortune Tobacco, declaring it to be entitled to the property. Petitioners thus and and DOMINGA FORTUNE VILLEGAS, TOBACCO Petitioners,

CORPORATION,

appealed this decision to the Court of Appeals, which affirmed the trial courts decision, with a modification on the award of damages and attorneys fees. Issues: a) Who among of the parties is entitled to the property based from the validity of their respective titles? b) Has laches set in against private respondent Fortune Tobacco Corporation? Held: It is petitioners contention that Fortune was a buyer in bad faith. They allege that Fortune should have investigated if the property had any occupants. If it had done so, it would have found petitioners and their predecessors-in-interest in possession thereof. Petitioners also allege that Andres and Caigas were not the owners of the property at the time it was sold to Fortune. Throughout their pleadings, petitioners claim that Fortunes title is fake and spurious, having proceeded from its so-called reconstitution. Lastly, petitioners invoke the doctrine of laches against Fortunes bid to recover the property. Invoking the prior title rule, Fortune declares that it is the lawful owner of the property, as the certificate of title in its name was issued before issuance of another title to petitioners predecessor-in-interest, Filomena Domingo. Fortune claims that petitioners title is spurious. It also alleges that petitioners admitted the validity of Fortunes title, and that petitioners continuous possession of the property cannot defeat said title. Fortune also asserts that it bought the property in good faith. It was held however, that the Court is clothed with ample authority to review matters, even if they are not assigned as errors in the appeal, if it finds that their consideration is necessary in arriving at a just decision of the case. In the case at bar, Fortunes title was judicially reconstituted by virtue of an order dated April 10, 1991, issued by the Regional Trial Court in Cauayan, Isabela. Section 110 of Presidential Decree No. 1529 provides:

been afforded an opportunity to institute a suit; (3) 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 (4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred. In the case at bar, there is no question on the presence of the first element. The object of Fortunes complaint before the trial court was to recover possession of the property in question, which is presently in the hands of petitioners. The second element of delay is also present in this case. Fortunes suit for recovery of possession and damages was instituted only on May 29, 1991, fifteen years after the registration of Filomena Domingos title to the property in 1976. The third element of laches also present in this case. There is nothing in the record which shows that petitioners had any inkling of Fortunes intent to possess the subject property. As to the fourth element of laches, it goes without saying that petitioners will be prejudiced if Fortunes complaint is accorded relief, or not held barred, as then petitioners would be deprived of the property on which their households stand. The Decision is granted. COMMISIONER CORPORATION OF INTERNAL REVENUE VS. KUDOS METAL

FACTS:
CIR assessed Kudos Metal Corporation for taxable year 1998. A Waiver of the Statute of Limitations was executed on December 2001. The CTA issued a Resolution canceling the assessment notices issued against Petitioner for having been issued beyond the prescriptive period as the waiver purportedly failed to (a) have the valid officer execute the same (i.e., only the Assistant Commissioner signed it and not the CIR); (b) the date of acceptance was not indicated; (c) the fact of receipt by the taxpayer was not indicated in the original copy.

SEC. 110. Reconstitution of lost or destroyed original of Torrens title. Original copies of certificates of title lost or destroyed in the offices of Register of Deeds as well as liens and encumbrances affecting the lands covered by such titles shall be reconstituted judicially in accordance with the procedure described in Republic Act No. 26 insofar as not inconsistent with this Decree. The elements of laches are: (1) conduct on the part of the defendant, or one under whom he claims, giving rise to the situation that led to the complaint and for which the complaint seeks a remedy; (2) delay in asserting the complainants rights, having had knowledge or notice of the defendants conduct and having

ISSUE:
Has the CIRs right to assess prescribed?

HELD:

YES. The requirements for a valid waiver as laid down in RMO 20-90 and RDAO No. 5-01 are mandatory to give effect to Section 222 of the Tax Code. Specifically, the flaws in the waiver executed by Kudos Metal were as follows: (a) there was no notarized written authority in favor of the signatory for the company; (b) there is no stated date of acceptance by the Commissioner or his representative; and (c) the fact of the receipt of the copy was not indicated in the original waivers.

act of tolerance does not constitute approval. Thus, the petitioners did not, by accepting and paying for Change Order Nos. 1, 16, and 17, do away with the contractual term on change orders nor with the application of Article 1724. The payments for Change Order Nos. 1, 16, and 17 are, at best, acts of tolerance on the petitioners part that could not modify the contract. Consistent with this ruling, the petitioners are still liable for the P130,000.00 balance on Change Order Nos. 16 and 17 that, to date, remain

Neither can it be said that by merely executing the waiver the taxpayer is already estopped from disputing an action by the CIR beyond the statutory 3-year period since the exception under the Suyoc case (i.e., when the delays were due to taxpayers acts) does not apply.

SPOUSES CHUNG VS. ULANDAY CONSTRUCTION The petitioners payment of Change Order Nos. 1, 16, and 17 and their non-objection to the other change orders effected by the respondent cannot give rise to estoppel in pais that would render the petitioners liable for the payment of all change orders. Estoppel in pais, or equitable estoppel, arises when one, by his acts, representations or admissions or by his silence when he ought to speak out, intentionally or through culpable negligence, induces another to believe certain facts to exist and the other rightfully relies and acts on such beliefs so that he will be prejudiced if the former is permitted to deny the existence of such facts.[48] The real office of the equitable norm of estoppel is limited to supplying deficiency in the law, but it should not supplant positive law.[49] In this case, the requirement for the petitioners written consent to any change or alteration in the specifications, plans and works is explicit in Article 1724 of the Civil Code and is deemed written in the contract between the parties.[50] The contract also expressly provides that a mere