G.R. No.

L-15113

January 28, 1961

ANTONIO MEDINA, petitioner, vs. COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX APPEALS respondents. Spouses Medina acquired forest, concessions in the municipalities of San Mariano and Palanan in the Province of Isabela. Mrs. Medina started business as a lumber dealer. On the thesis that the sales made by petitioner to his wife were null and void pursuant to Article 1490 of the Civil Code of the Philippines, the Collector considered the sales made by Mrs. Medina as the petitioner's original sales taxable under Section 186 of the National Internal Revenue Code. Petitioner filed a petition for reconsideration revealing an alleged premarital agreement of complete separation of properties between him and his wife. Based on these findings, the Collector issued a modified assessment. Petitioner appealed to the Court of Tax Appeals, which rendered judgment based on two main findings, namely, (a) that there was no premarital agreement of absolute separation of property between the Medina spouse; and (b) assuming that there was such an agreement, the sales in question made by petitioner to his wife were fictitious. Issue: Whether or not the sales made by the petitioner to his wife could be considered as his original taxable sales? Contracts violative of the provisions of Article 1490 of the Civil Code are null and void (Uy Sui Pin vs. Cantollas, 70 Phil. 55; Uy Coque vs. Sioca 45 Phil. 43). Being void transactions, the sales made by the petitioner to his wife were correctly disregarded by the Collector in his tax assessments that considered as the taxable sales those made by the wife through the spouses' common agent, Mariano Osorio.

JOSE C. LEE AND ALMA AGGABAO, in their capacities as President and Corporate Secretary, respectively, of Philippines Internationl Life Insurance Company, and FILIPINO LOAN ASSISTANCE GROUP, petitioners, vs. REGIONAL TRIAL COURT OF QUEZON CITY BRANCH 85 presided by JUDGE PEDRO M. AREOLA, BRANCH CLERK OF COURT JANICE Y. ANTERO, DEPUTY SHERIFFS ADENAUER G. RIVERA and PEDRO L. BORJA, all of the Regional Trial Court of Quezon City Branch 85, MA. DIVINA ENDERES claiming to be Special Administratrix, and other persons/ public officers acting for and in their behalf, respondents. Dr. Juvencio P. Ortaez incorporated the Philippine International Life Insurance Company, Inc. on which he owned ninety percent (90%) of the subscribed capital stock. When he died, he left behind a wife, three legitimate children and five illegitimate children by Ligaya Novicio. The decedents wife, Juliana S. Ortaez, claiming that she owned 1,0141[4] Philinterlife shares of stock as her conjugal share in the estate, sold said shares with right to repurchase in favor of herein petitioner Filipino Loan Assistance Group (FLAG), represented by its president, herein petitioner Jose C. Lee. Juliana Ortaez failed to repurchase the shares of stock within the stipulated period. Later on, Jose Ortaez, acting in his personal capacity and claiming that he owned the remaining 1,0112[5] Philinterlife shares of stocks as his inheritance share in the estate, sold said shares with right to repurchase also in favor of herein petitioner FLAG. He also failed to repurchase the same. Special Administratrix Enderes (Later appointed) filed a motion to declare void ab initio the deeds of sale of Philinterlife shares of stock. The intestate court granted the the same and later on a motion for execution confirming the nullity of the sale. Issue: Wheter there was a valid contract of sale?

It is clear that Juliana Ortaez, and her three sons, invalidly entered into a memorandum of agreement extrajudicially partitioning the intestate estate among themselves, despite their knowledge that there were other heirs or claimants to the estate and before final settlement of the estate by the intestate court. Since the appropriation of the estate properties by Juliana Ortaez and her children (Jose, Rafael and Antonio Ortaez) was invalid, the subsequent sale thereof by Juliana and Jose to a third party (FLAG), without court approval, was likewise void. An heir may only sell his ideal or undivided share in the estate, not any specific property therein. This they could not lawfully do pending the final adjudication of the estate by the intestate court because of the undue prejudice it would cause the other claimants to the estate, as what happened in the present case. The sale of the property of the estate by an administrator without the order of the probate court is void and passes no title to the purchaser. The title of the purchaser like herein petitioner FLAG can be struck down by the intestate court after a clear showing of the nullity of the alienation. The sale of any property of the estate by an administrator or prospective heir without order of the probate or intestate court is void and passes no title to the purchaser. JUANITA P. PINEDA, assisted by her husband, CRISPIN PINEDA, and LILIA SAYOC, petitioners, vs. COURT OF APPEALS and TERESITA A. GONZALES, assisted by her husband, FRANCISCO G. GONZALES, respondents. The Facts The Spouses Virgilio and Adorita Benitez mortgaged a house and lot in favor of Juanita P. Pineda and Leila P. Sayoc to secure a mortgage. Pineda and Sayoc did not register the mortgage with the Register of Deeds. With the consent of Pineda, the Spouses Benitez sold the house to Olivia G. Mojica. Mojica the filed a petition for the issuance of a second owners duplicate of alleging that she purchased a parcel of land and the owners duplicate copy was lost. Subsequently the Spouses Benitez sold the lot to Mojica and TCT (2nd) was transferred to her. Mojica then obtained a loan from Teresita A. Gonzales and executed a deed of mortgage over the Property in favor of Gonzales. Gonzales registered this deed of mortgage with the Register of Deeds. Pineda and Sayoc filed a complaint before the Court against the Spouses Benitez and Mojica. The complaint prayed for the cancellation of the second owners duplicate of TCT. The trial court rendered a judgment declaring the second owners duplicate of TCT as null and void. However, Mojica defaulted in paying her obligation to Gonzales hence she extrajudicially foreclosed the mortgage. The TCT(3rd) is now transferred in the name of Gonzales. On appeal the Court of Appeals ruled that the trial court erred when it voided TCT(2nd). The Court of Appeals further held that the trial court erred in ordering the reinstatement of TCT (1st) in the name of the Spouses Benitez. The Issues Whether or not there was a valid contract of sale between Mojica and Domiguez? Held: Mojica was not a purchaser in good faith. Mojica claimed that the owners duplicate of TCT (1st) was lost for her to obtain a new one. Therefore, TCT (2nd) issued in the name of Mojica is void. However, what is void is the transfer certificate of title and not the title over the Property. However the nullity of TCT (2nd) did not automatically carry with it the nullity of the annotation of Gonzales mortgage. The rule is that a mortgage annotated on a void title is valid if the mortgagee registered the mortgage in good faith. The nullity of TCT (2nd) did not affect the validity of the title or ownership of Mojica or Gonzales as subsequent transferees of the Property. The notice of lis pendens could not defeat Gonzales rights over the Property for two reasons. First, Gonzales registered in good faith her mortgage before the notation of the lis pendens, making the

registration of her mortgage valid despite the invalidity of TCT (2nd). Second, since Gonzales mortgage was valid, the auction sale retroacted to the date of registration of her mortgage, making the auction sale prior in time to the notice of lis pendens. Thus, TCT (3rd), issued to Gonzales as a result of the foreclosure sale, is valid. Gonzales had no actual notice of the prior unregistered mortgage in favor of Pineda and Sayoc. To bind third parties to an unregistered encumbrance, the law requires actual notice.

G.R. No. 59550 January 11, 1995 EDILBERTO NOEL (now PINITO W. MERCADO) as ADMINISTRATOR OF THE INTESTATE ESTATE OF GREGORIO NANAMAN and HILARIA TABUCLIN, petitioner, vs. COURT OF APPEALS and JOSE C. DELESTE, respondents. Gregorio Nanaman and Hilaria Tabuclin were childless. Gregorio, however, had a child named Virgilio Nanaman by another woman. Since he was two years old, Virgilio was reared by Gregorio and Hilaria. The couple acquired a property in Tambo, Iligan City on which they planted sugarcane, corn and bananas. When Gregorio died. Hilaria and Virgilio administered the land. Virgilio declared the property in his name for taxation then he and Hilaria mortgaged the land in favor of private respondent. Later on Hilaria and Virgilio executed a deed of sale over the same. From then on, private respondent has paid the taxes on the property. Subsequently Hilaria died. Esperanza and Caridad Nanaman filed intestate estate proceedings concerning the estate of their father, Gregorio. Included in the list the subject property. Noel (as administrator) filed an action against private respondent for the version of title over the land to the Nanaman estate. On December 14, 1973, the trial court rendered a decision, holding that the action for annulment of the deed of sale had prescribed Noel appealed to the Court of Appeals.The appellate court ruled that Hilaria could not validly sell the land because it was conjugal property, and Hilaria could sell only her one-half share thereof. Issue: Whether the is a valid contract of sale? Held: Thus, succession to the estate of Gregorio was governed primarily by the provisions of the Spanish Civil Code of 1889. Under Article 953 thereof, a spouse like Hilaria, who is survived by brothers or sisters or children of brothers or sisters of the decedent, as is obtaining in this case, was entitled to receive in usufruct the part of the inheritance pertaining to said heirs. Hilaria, however, had full ownership, not merely usufruct, over the undivided half of the estate (Spanish Civil Code of 1889, Art. 493). It is only this undivided half-interest that she could validly alienate. On the other hand, Virgilio was not an heir of Gregorio under the Spanish Civil Code of 1889. Although he was treated as a child by the Nanaman spouses, illegitimate children who were not natural were disqualified to inherit under the said Code. Therefore, Virgilio had no right at all to transfer ownership over which he did not own. In a contract of sale, it is essential that the seller is the owner of the property he is selling.

G.R. No. L-67888 October 8, 1985

IMELDA ONG, ET AL., petitioners, vs. ALFREDO ONG, ET AL., respondents. Imelda Ong, for and in consideration of One (P1.00) Peso and other valuable considerations, executed in favor of private respondent Sandra Maruzzo, then a minor, a Quitclaim Deed whereby she transferred, released, assigned and forever quit-claimed to Sandra Maruzzo, her heirs and assigns, all her rights, title, interest and participation in the ONE-HALF () undivided portion of the parcel of land, particularly described as follows. Then Imelda Ong revoked the aforesaid Deed of Quitclaim and, thereafter, donated the whole property described above to her son, Rex Ong-Jimenez. On June 20, 1983, Sandra Maruzzo, through her guardian (ad litem) Alfredo Ong, filed with the Regional Trial Court of Makati, Metro Manila an action against petitioners, for the recovery of ownership/possession and nullification of the Deed of Donation over the portion belonging to her and for Accounting. The trial court rendered judgment in favor of respondent Maruzzo and held that the Quitclaim Deed is equivalent to a Deed of Sale.On appeal the Intermediate Appellate Court promulgated its Decision affirmed the said judgement. Issue: Whether the is a valid contract of sale? Held: Yes. Although the cause is not stated in the contract it is presumed that it is existing unless the debtor proves the contrary (Article 1354 of the Civil Code). One of the disputable presumptions is that there is a sufficient cause of the contract (Section 5, (r), Rule 131, Rules of Court). This presumption cannot be overcome by a simple assertion of lack of consideration especially when the contract itself states that consideration was given, and the same has been reduced into a public instrument with all due formalities and solemnities. To overcome the presumption of consideration the alleged lack of consideration must be shown by preponderance of evidence in a proper action. (Samanilla vs, Cajucom, et al., 107 Phil. 432). The execution of a deed purporting to convey ownership of a realty is in itself prima facie evidence of the existence of a valuable consideration, the party alleging lack of consideration has the burden of proving such allegation. Moreover, even granting that the Quitclaim deed in question is a donation, Article 741 of the Civil Code provides that the requirement of the acceptance of the donation in favor of minor by parents of legal representatives applies only to onerous and conditional donations where the donation may have to assume certain charges or burdens (Article 726, Civil Code).

G.R. No. 159550

June 27, 2008

LUCIA CARLOS ALIO, substituted by her Surviving Heirs, Nicolas C. Alio and Potenciano C. Alio, petitioners, vs. HEIRS OF ANGELICA A. LORENZO, namely: Servillano V. Lorenzo, Agerico Lorenzo, Virginia Servangelli L. Aspera, Ben Errol Aspera, Servillano A. Lorenzo, Jr., Servillano Santiago A. Lorenzo III, Ma. Angelica A. Lorenzo, Servillano II and Anthony A. Lorenzo, represented by Servillano V. Lorenzo, Sr. (father), and Atty. Armando Lauban, in his capacity as Register of Deeds for Cotabato City, respondents.

The subject lot was registered in the name of petitioner Lucia Carlos Alio (Lucia). Angelica A. Lorenzo, Lucia's daughter, bought the subject lot under a Deed of Absolute Sale. Consequently,a new TCT was issued in her name and was declared for taxation purposes. However Lucia continued to pay, under her name, the real estate taxes due on the subject lot. Lucia designated Vivian Losaria as caretaker of the subject lot. Then, Angelica died, leaving private respondents, as surviving heirs, her husband, Servillano, Sr. and their eight children. The heirs executed an Extra-Judicial Settlement of her estate. The subject lot was adjudicated to Servillano III, Ma. Angelica and Anthony, then all minors. As a result, a new TCT was issued in their name. Subsequently, Lucia offered to sell to the Central Bank of the Philippines (CBP) her lots including the subject lot, as registered in Angelica's name. Lucia wrote a letter to Servillano, Sr. demanding the return of the subject lot however he refuesd. Lucia filed a Complaint against the heirs of Angelica for the declaration of nullity of the Deed of Absolute Sale. She alleged that the sale of the subject lot was simulated, intended to merely accommodate the housing loan application of Angelica. The RTC rendered a Decision, dismissing the complaint. On Appeal the CA rendered a Decision adopting the findings of the RTC. Issue: Wheter or not there was valid contract of sale? Held: It is a cardinal rule in the interpretation of contracts that the intention of the parties shall be accorded primordial consideration.29 Such intention is determined from the express terms of their agreement,30 as well as their contemporaneous and subsequent acts. In the present case, the evidence clearly shows that Angelica or Servillano, Sr. did not attempt to exercise any act of dominion over the subject lot. In contrast, Lucia was in actual possession of the property. She designated Vivian as caretaker of the subject lot. Furthermore, Lucia religiously paid the realty taxes on the subject lot. In the validity of the sale, Suffice it to state that the concept of inadequacy or non-payment of price is irreconcilable with the concept of simulation. If there exists an actual consideration for transfer evidenced by the alleged act of sale, no matter how inadequate it be, the transaction could not be a "simulated sale." G.R. No. L-45965 April 29, 1939

AMPARO GONZALEZ and ALFREDO TRINIDAD, petitioners, vs. PRIMITIVO TRINIDAD and MARIA YNARES, respondents. On November 11, 1931, the then plaintiffs executed in favor of the now petitioners a deed of sale of an urban property situated in the City of Manila. As the property was mortgaged to the Bureau of Lands, the purchasers assumed the encumbrance. The sale was simulated and the supposed

vendors did not receive the alleged price, the idea being to save the property, which was fictitiously sold, from attachment by Dr. Ramon Papa to whom Lorenzo Perez had endorsed a note for P4,000 executed and signed by Primitivo Trinidad. Dr. Papa, however, died and the credit represented by the note was adjudicated to Carmen Papa with whom the said Primitivo Trinidad had a subsequent agreement to the effect that he would pay the note as soon as he had the money. Thus the litigation and attachment which Primitivo Trinidad feared were averted. In their brief the petitioners contend that the decision of the Court of Appeals is erroneous: (1) because it held that articles 1305 and 1306 of the Civil Code are not applicable, and (2) because it reversed instead of affirming the decision of the trial court. Articles 1305 and 1306 of the Civil Code are not applicable to the contract entered into by the parties because they refer to contracts with an illegal consideration or subject matter, whether the facts constitute an offense or misdemeanor or whether the consideration is only rendered illegal. The contract of sale, being onerous, has for its cause or consideration the price of P10,000 (article 1274 of the Civil Code); and both this consideration as well as the subject matter of the contract, namely, the property, are lawful and not penalized by law. However, as the contract was in itself fictitious and simulated price, the consideration being thus lacking, said contract is null and void per se or nonexistent (article 1261 of the Civil Code). As has been held by the Court of Appeals, the object of the contracting parties or the motives which the vendors had in entering into the simulated contract should not be confused with the consideration which was not be confused with the consideration which was not present in the transaction. The former, although illegal, neither determine nor take the place of the consideration. The author, Manresa, in his Commentaries on the Civil Code, volume 8, pages 618, 619, commenting on the distinction between the consideration and the motives, uses the following language: But when the notion of consideration is applied to contracts, it represents, as it already meant in Rome, the why of the contacts, the essential reason which moves the contracting parties to enter into the contract. In this sense, expressed in the provisions of the Code, the consideration is related to the personal element of the contract, because it represents the demand of reasonable and legal motives for the determination of the wills which concur in consent. But while this is true, not less true is the relation of the consideration with the subject matter of the contract, which is so close that at times it distinction offers a real problem. In fact, in a contract like that of a sale, the thing and the price are the subject matter of the contract; but in consideration thereof, the consideration for the purchaser and the vendor is determined as indicated by the first of the definitions contained in article 1274. Considering the concept of the consideration as the explanation and motive of the contract, it is related to the latter's object and even more to its motives with which it is often confused. It is differentiated from them, however, in that the former is the essential reason for the contract, while the latter are the particular reasons of a contracting party which do not affect the other party and which do not preclude the existence of a different consideration. To clarify by an example: A thing purchased constitutes the consideration for the purchaser and not the motives which have influenced his mind, like its usefulness, its perfection, it relation to another, the use thereof which he may have in mind, etc., a

very important distinction, which precludes the annulment of the contract by the sole influence of the motives, unless the efficacy of the former had been subordinated to compliance with the latter as conditions. The jurisprudence shows some cases wherein this important distinction is established. The consideration of contracts, states the decision of February 24, 1904, is distinct from the motive which may prompt the parties in executing them. The inaccuracies committed in expressing its accidental or secondary details do not imply lack of consideration or false consideration, wherefore, they do not affect the essence and validity of the contract. In a loan the consideration in its essence is, for the borrower the acquisition of the amount, and for the lender the power to demand its return, whether the money be for the the former or for another person and whether it be invested as stated or otherwise. The same distinction between the consideration and the motive is found in the decisions of November 23, 1920 and March 5, 1924. We conclude that the Court of Appeals did not commit the errors assigned, wherefore, we deny the remedy sought, with the costs to the petitioner-appellants. So ordered. Avancea, C. J., Villa-Real, Diaz, Laurel, and Concepcion, JJ., concur.