[G.R. No. L-28771. March 31, 1971.] CORNELIA MATABUENA, Plaintiff-Appellant, v. PETRONILA CERVANTES, Defendant-Appellee.

Alegre, Roces, Salazar & Saez, for Plaintiff-Appellant. Fernando Gerona, Jr., for Defendant-Appellee.

SYLLABUS 1. CIVIL LAW; PROPERTY RELATIONS BETWEEN HUSBAND AND WIFE; DONATIONS BY REASON OF MARRIAGE; PROHIBITION AGAINST DONATION BETWEEN SPOUSES DURING MARRIAGE; APPLICABLE TO COMMON LAW RELATIONSHIP. While Art. 133 of the Civil Code considers as void a "donation between the spouses during the marriage", policy considerations of the most exigent character as well as the dictates of morality require that the same prohibition should apply to a common-law relationship. A 1954 Court of Appeals decision Buenaventura v. Bautista, (50 O.G. 3679) interpreting a similar provision of the old Civil Code speaks unequivocally. If the policy of the law is, in the language of the opinion of the then Justice J.B.L. Reyes of that Court, "to prohibit donations in favor of the other consort and his descendants because of fear of undue and improper pressure and influence upon the donor, a prejudice deeply rooted in our ancient law; 'porque no se engaen despojandose el uno al otro por amor que han de consuno,' [according to] the Partidas (Part. IV, Tit. Xl, LAW IV), reiterating the rationale 'Ne mutuato amore invicem spoliarentur' of the Pandects (Bk 24, Tit. I, De donat, inter virum et uxorem); then there is every reason to apply the same prohibitive policy to persons living together as husband and wife without benefit of nuptials. For it is not to be doubted that assent to such irregular connection for thirty years bespeaks greater influence of one party over the other, so that the danger that the law seeks to avoid is correspondingly increased. Moreover, as already pointed out by Ulpian (in his lib. 32 ad Sabinum, fr. 1), it would not be just that such donations should subsist lest the condition of those who incurred guilt should turn out to be better. So long as marriage remains the cornerstone of our family law, reason and morality alike demand that the disabilities attached to marriage should likewise attach to concubinage. 2. ID.; SUCCESSION; INTESTATE SUCCESSION; SURVIVING SPOUSE; RULE WHERE A SISTER SURVIVES WITH THE WIDOW. The lack of validity of the donation made b~ the deceased to defendant Petronila Cervantes does not

necessarily result in plaintiff having exclusive right to the disputed property. Prior to the death of Felix Matabuena, the relationship between him and the defendant was legitimated by their marriage on March 28. 1962. She is therefore his widow. As provided in the Civil Code, she is entitled to one-half of the inheritance and the plaintiff, as the surviving sister to the other half.

DECISION

FERNANDO, J.: A question of first impression is before this Court in this litigation. We are called upon to decide whether the ban on a donation between the spouses during a marriage applies to a common-law relationship. 1 The plaintiff, now appellant Cornelia Matabuena, a sister to the deceased Felix Matabuena, maintains that a donation made while he was living maritally without benefit of marriage to defendant, now appellee Petronila Cervantes, was void. Defendant would uphold its validity. The lower court, after noting that it was made at a time before defendant was married to the donor, sustained the latter's stand. Hence this appeal. The question, as noted, is novel in character, this Court not having had as yet the opportunity of ruling on it. A 1954 decision of the Court of Appeals, Buenaventura v. Bautista, 2 by the then Justice J. B. L. Reyes, who was appointed to this Court later that year, is indicative of the appropriate response that should be given. The conclusion reached therein is that a donation between common-law spouses falls within the prohibition and is "null and void as contrary to public policy." 3 Such a view merits fully the acceptance of this Court. The decision must be reversed. In the decision of November 23, 1965, the lower court, after stating that in plaintiff's complaint alleging absolute ownership of the parcel of land in question, she specifically raised the question that the donation made by Felix Matabuena to defendant Petronila Cervantes was null and void under the aforesaid article of the Civil Code and that defendant on the other hand did assert ownership precisely because such a donation was made in 1956 and her marriage to the deceased did not take place until 1962, noted that when the case was called for trial on November 19, 1965, there was stipulation of facts which it quoted. 4 Thus: "The plaintiff and the defendant assisted by their respective counsels, jointly agree and stipulate: (1) That the deceased Felix Matabuena owned the property in question; (2) That said Felix Matabuena executed a Deed of Donation inter vivos in favor of Defendant, Petronila Cervantes over the parcel of land in question on February 20,

1956, which same donation was accepted by defendant; (3) That the donation of the land to the defendant which took effect immediately was made during the common law relationship as husband and wife between the defendant-done and the now deceased donor and later said donor and done were married on March 28, 1962; (4) That the deceased Felix Matabuena died intestate on September 13, 1962; (5) That the plaintiff claims the property by reason of being the only sister and nearest collateral relative of the deceased by virtue of an affidavit of self-adjudication executed by her in 1962 and had the land declared in her name and paid the estate and inheritance taxes thereon'" 5 The judgment of the lower court on the above facts was adverse to plaintiff. It reasoned out thus: "A donation under the terms of Article 133 of the Civil Code is void if made between the spouses during the marriage. When the donation was made by Felix Matabuena in favor of the defendant on February 20, 1956, Petronila Cervantes and Felix Matabuena were not yet married. At that time they were not spouses. They became spouses only when they married on March 28, 1962, six years after the deed of donation had been executed." 6 We reach a different conclusion. While Art. 133 of the Civil Code considers as void a "donation between the spouses during the marriage," policy considerations of the most exigent character as well as the dictates of morality require that the same prohibition should apply to a common-law relationship. We reverse. 1. As announced at the outset of this opinion, a 1954 Court of Appeals decision, Buenaventura v. Bautista, 7 interpreting a similar provision of the old Civil Code 8 speaks unequivocally. If the policy of the law is, in the language of the opinion of the then Justice J.B.L. Reyes of that Court, "to prohibit donations in favor of the other consort and his descendants because of fear of undue and improper pressure and influence upon the donor, a prejudice deeply rooted in our ancient law; 'porque no se engaen despojandose el uno al otro por amor que han de consuno [according to] the Partidas (Part IV, Tit. XI, LAW IV), reiterating the rationale 'Ne mutuato amore invicem spoliarentur' of the Pandects (Bk. 24, Tit. 1, De donat, inter virum et uxorem); then there is every reason to apply the same prohibitive policy to persons living together as husband and wife without the benefit of nuptials. For it is not to be doubted that assent to such irregular connection for thirty years bespeaks greater influence of one party over the other, so that the danger that the law seeks to avoid is correspondingly increased. Moreover, as already pointed out by Ulpian (in his lib. 32 ad Sabinum, fr. 1), 'it would not be just that such donations should subsist, lest the condition of those who incurred guilt should turn out to be better.' So long as marriage

remains the cornerstone of our family law, reason and morality alike demand that the disabilities attached to marriage should likewise attach to concubinage." 9 2. It is hardly necessary to add that even in the absence of the above pronouncement, any other conclusion cannot stand the test of scrutiny. It would be to indict the framers of the Civil Code for a failure to apply a laudable rule to a situation which in its essentials cannot be distinguished. Moreover, if it is at all to be differentiated, the policy of the law which embodies a deeply-rooted notion of what is just and what is right would be nullified if such irregular relationship instead of being visited with disabilities would be attended with benefits. Certainly a legal norm should not be susceptible to such a reproach. If there is ever any occasion where the principle of statutory construction that what is within the spirit of the law is as much a part of it as what is written, this is it. Otherwise the basic purpose discernible in such codal provision would not be attained. Whatever omission may be apparent in an interpretation purely literal of the language used must be remedied by an adherence to its avowed objective. In the language of Justice Pablo: "El espiritu que informa la ley debe ser la luz que ha de guiar a los tribunales en la aplicacin de sus disposiciones.'' 10 3. The lack of validity of the donation made by the deceased to defendant Petronila Cervantes does not necessarily result in plaintiff having exclusive right to the disputed property. Prior to the death of Felix Matabuena, the relationship between him and the defendant was legitimated by their marriage on March 28, 1962. She is therefore his widow. As provided for in the Civil Code, she is entitled to one-half of the inheritance and the plaintiff, as the surviving sister, to the other half. 11 WHEREFORE, the lower court decision of November 23, 1965 dismissing the complaint with costs is reversed. The questioned donation is declared void, with the rights of plaintiff and defendant as pro indiviso heirs to the property in question recognized. The case is remanded to the lower court for its appropriate disposition in accordance with the above opinion. Without pronouncement as to costs. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Barredo, Villamor and Makasiar,JJ., concur. Teehankee, J, took no part.

CORNELIA MATABUENA vs. PETRONILA CERVANTES FACTS: In 1956, herein appellant's brother Felix Matabuena donated a piece of lot to his common-law spouse, herein appellee Petronila Cervantes. Felix and Petronila got married only in 1962 or six years after the deed of donation was executed. Five months later, or September 13, 1962, Felix died. Thereafter, appellant Cornelia Matabuena, by reason of being the only sister and nearest collateral relative of the deceased, filed a claim over the property, by virtue of a an affidavit of self-adjudication executed by her in 1962, had the land declared in her name and paid the estate and inheritance taxes thereon. The lower court of Sorsogon declared that the donation was valid inasmuch as it was made at the time when Felix and Petronila were not yet spouses, rendering Article 133 of the Civil Code inapplicable.

ISSUE: Whether or not the ban on donation between spouses during a marriage applies to a common law relationship.

HELD: While Article 133 of the Civil Code considers as void a donation between the spouses during marriage, policy consideration of the most exigent character as well as the dictates of morality requires that the same prohibition should apply to a common-law relationship. As stated in Buenaventura vs. Bautista (50 OG 3679, 1954), if the policy of the law is to prohibit donations in favor of the other consort and his descendants because of fear of undue and improper pressure and influence upon the donor, then there is every reason to apply the same prohibitive policy to persons living together as husband and wife without the benefit of nuptials. The lack of validity of the donation by the deceased to appellee does not necessarily result in appellant having exclusive right to the disputed property. As a widow, Cervantes is entitled to onehalf of the inheritance, and the surviving sister to the other half. Article 1001, Civil Code: Should brothers and sisters or their children survive with the widow or widower, the latter shall be entitled to one-half of the inheritance and the brothers and sisters or their children to the other half.

SECOND DIVISION PATROCINIA RAVINA AND WILFREDO RAVINA, Petitioners, G.R. No. 160708 Present: QUISUMBING, ActingC.J., Chairperson, CARPIO MORALES, BRION, and BERSAMIN, ABAD, JJ.

- versus -

MARY ANN P. VILLA ABRILLE, for herself and in behalf of INGRID D'LYN P. VILLA ABRILLE, INGREMARK D'WIGHT VILLA ABRILLE, INGRESOLL DIELS VILLA ABRILLE AND INGRELYN DYAN VILLA ABRILLE, Respondents.

Promulgated: October 16, 2009

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION QUISUMBING, Acting C.J.: For review are the Decision[1] dated February 21, 2002 and the Resolution [2] dated October 7, 2003 of the Court of Appeals in CA-G.R. CV No. 54560. The appellate court modified the Decision[3] dated September 26, 1995 of the Regional Trial Court (RTC) of Davao City, Branch 15. Simply stated, the facts as found by the Court of Appeals[4] are as follows: Respondent Mary Ann Pasaol Villa Abrille and Pedro Villa Abrille are husband and wife. They have four children, who are also parties to the instant case and are represented by their mother, Mary Ann. In 1982, the spouses acquired a 555-square meter parcel of land denominated as Lot 7, located at Kamuning Street, Juna Subdivision, Matina, Davao City, and covered by Transfer Certificate of Title (TCT) No. T-88674 in their names. Said lot is adjacent to a parcel of land which Pedro acquired when he was still single and which is registered solely in his name under TCT No. T26471.

Through their joint efforts and the proceeds of a loan from the Development Bank of the Philippines (DBP), the spouses built a house on Lot 7 and Pedro's lot. The house was finished in the early 1980's but the spouses continuously made improvements, including a poultry house and an annex. In 1991, Pedro got a mistress and began to neglect his family. Mary Ann was forced to sell or mortgage their movables to support the family and the studies of her children. By himself, Pedro offered to sell the house and the two lots to herein petitioners, Patrocinia and Wilfredo Ravina. Mary Ann objected and notified the petitioners of her objections, but Pedro nonetheless sold the house and the two lots without Mary Ann's consent, as evidenced by a Deed of Sale[5] dated June 21, 1991. It appears on the said deed that Mary Ann did not sign on top of her name. On July 5, 1991 while Mary Ann was outside the house and the four children were in school, Pedro together with armed members of the Civilian Armed Forces Geographical Unit (CAFGU) and acting in connivance with petitioners[6] began transferring all their belongings from the house to an apartment. When Mary Ann and her daughter Ingrid Villa Abrille came home, they were stopped from entering it. They waited outside the gate until evening under the rain. They sought help from the Talomo Police Station, but police authorities refused to intervene, saying that it was a family matter. Mary Ann alleged that the incident caused stress, tension and anxiety to her children, so much so that one flunked at school. Thus, respondents Mary Ann and her children filed a complaint for Annulment of Sale, Specific Performance, Damages and Attorney's Fees with Preliminary Mandatory Injunction[7] against Pedro and herein petitioners (the Ravinas) in the RTC of Davao City. During the trial, Pedro declared that the house was built with his own money. Petitioner Patrocinia Ravina testified that they bought the house and lot from Pedro, and that her husband, petitioner Wilfredo Ravina, examined the titles when they bought the property. On September 26, 1995, the trial court ruled in favor of herein respondent Mary Ann P. Villa Abrille as follows: WHEREFORE, judgment is rendered as follows: 1. The sale of lot 8 covered by TCT No. 26471 by defendant Pedro Abrille appearing in the Deed of Sale marked as Exh. "E" is void as to one half or 277.5 square meters representing the share of plaintiff Mary Villa Abrille. 2. That sale of Lot 7 covered by TCT No. [88674] by defendant Pedro Villa Abrille in the Deed of Sale (Exh. "A") is valid as to one half or 277.5

square meters of the 555 square meters as one half belongs to defendant Pedro Abrille but it is void as to the other half or 277.5 square meters as it belongs to plaintiff Mary Abrille who did not sell her share nor give her consent to the sale. 3. That sale of the house mentioned in the Deed of Sale (Exh. "A") is valid as far as the one half of the house representing the share of defendant Pedro Abrille is concerned but void as to the other half which is the share of plaintiff Mary Abrille because she did not give her consent/sign the said sale. 4. The defendants shall jointly pay the plaintiffs.

4. A. Seventeen Thousand Pesos (P17,000.00) representing the value of the movables and belonging[s] that were lost when unknown men unceremoniously and without their knowledge and consent removed their movables from their house and brought them to an apartment. 4. B. One Hundred Thousand Pesos (P 100,000.00) to plaintiff Mary Abrille as moral damages. 4. C. Fifty Thousand Pesos (P50,000.00) to each of the four children as moral damages, namely: a) Ingrid Villa Abrille - Fifty Thousand Pesos (P50,000.00), b) Ingremark Villa Abrille - Fifty Thousand Pesos (P50,000.00), c) Ingresoll Villa Abrille - Fifty Thousand Pesos (P50,000.00) and d) Ingrelyn Villa Abrille - Fifty Thousand Pesos (P50,000.00). 5. Ten Thousand Pesos (P10,000.00) as exemplary damages by way of example and correction for the public good. 6. The costs of suit.[8]

On appeal, the Court of Appeals modified the decision, thus: WHEREFORE, the appealed judgment is hereby MODIFIED as follows: 1. The sale of lot covered by TCT No. 26471 in favor of defendants spouses Wilfredo and Patrocinia Ravina is declared valid. 2. The sale of lot covered by TCT No. 88674 in favor of said defendants spouses Ravina, together with the house thereon, is declared null andvoid.

3. Defendant Pedro Abrille is ordered to return the value of the consideration for the lot covered by TCT No. 88674 and the house thereon to co-defendants spouses Ravina. 4. Defendants spouses Ravina [a]re ordered to reconvey the lot and house covered by TCT No. 88674 in favor of spouses Pedro and Mary Villa Abrille and to deliver possession to them. 5. Plaintiffs are given the option to exercise their rights under Article [450] of the New Civil Code with respect to the improvements introduced by defendant spouses Ravina. 6. Defendants Pedro Villa Abrille and spouses Ravina are ordered to pay jointly and severally the plaintiffs as follows: a) One Hundred Thousand Pesos (P100,000.00) to plaintiff Mary Villa Abrille as moral damages. b) Fifty Thousand Pesos (P50,000.00) as moral damages to each of the four children, namely: Ingrid Villa Abrille, Ingremark Villa Abrille, Ingresoll Villa Abrille and Ingrelyn Villa Abrille. c) Ten Thousand (P10,000.00) as exemplary damages by way of example and correction for the public good. SO ORDERED.[9] Their Motion for Reconsideration having been denied, petitioners filed this petition. Petitioners argue that: I. THE COURT OF APPEALS ERRED WHEN IT DECLARED x x x THE SALE OF LOT COVERED BY TCT NO. 88674 IN FAVOR OF SPOUSES RAVINA, TOGETHER WITH THE HOUSE THEREON, AS NULL AND VOID SINCE IT IS CLEARLY CONTRARY TO LAW AND EVIDENCE. II. THE COURT OF APPEALS ERRED WHEN IT RULED THAT PETITIONERS PATROCIN[I]A RAVINA AND WILFREDO RAVINA ARE NOT INNOCENT PURCHASERS FOR VALUE, THE SAME BEING CONTRARY TO LAW AND EVIDENCE. III. THE COURT OF APPEALS ERRED WHEN IT RULED THAT PETITIONERS PATROCIN[I]A RAVINA AND WILFREDO RAVINA ARE LIABLE FO 0R DAMAGES, THE SAME BEING CONTRARY TO LAW AND EVIDENCE.[1 ]

In essence, petitioners assail the appellate court's declaration that the sale to them by Pedro of the lot covered by TCT No. T-88674 is null and void. However, in addressing this issue, it is imperative to determine: (1) whether the subject property covered by TCT No. T- 88674 is an exclusive property of Pedro or conjugal property, and (2) whether its sale by Pedro was valid considering the absence of Mary Ann's consent. Petitioners assert that the subject lot covered by TCT No. T-88674 was the exclusive property of Pedro having been acquired by him through barter or exchange.[11] They allege that the subject lot was acquired by Pedro with the proceeds of the sale of one of his exclusive properties. Allegedly, Pedro and his sister Carmelita initially agreed to exchange their exclusive lots covered by TCT No. T26479 and TCT No. T-26472, respectively. Later, however, Pedro sold the lot covered by TCT No. T26472 to one Francisca Teh Ting and purchased the property of Carmelita using the proceeds of the sale. A new title, TCT No. T-88674, was issued thereafter. Thus, petitioners insist that the subject lot remains to be an exclusive property of Pedro as it was acquired or purchased through the exclusive funds or money of the latter. We are not persuaded. Article 160 of the New Civil Code provides, "All property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife." There is no issue with regard to the lot covered by TCT No. T-26471, which was an exclusive property of Pedro, having been acquired by him before his marriage to Mary Ann. However, the lot covered by TCT No. T-88674 was acquired in 1982 during the marriage of Pedro and Mary Ann. No evidence was adduced to show that the subject property was acquired through exchange or barter. The presumption of the conjugal nature of the property subsists in the absence of clear, satisfactory and convincing evidence to overcome said presumption or to prove that the subject property is exclusively owned by Pedro.[12] Petitioners' bare assertion would not suffice to overcome the presumption that TCT No. T-88674, acquired during the marriage of Pedro and Mary Ann, is conjugal. Likewise, the house built thereon is conjugal property, having been constructed through the joint efforts of the spouses, who had even obtained a loan from DBP to construct the house. Significantly, a sale or encumbrance of conjugal property concluded after the effectivity of the Family Code on August 3, 1988, is governed by Article 124 of the same Code that now treats such a disposition to be void if done (a) without the consent of both the husband and the wife, or (b) in case of one spouse's inability, the authority of the court. Article 124 of the Family Code, the governing law at the time the assailed sale was contracted, is explicit: ART. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the court by the wife for proper remedy which must be availed of within five years from the date of the contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include the powers of disposition or encumbrance which must have the authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void . However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. (Emphasis supplied.) The particular provision in the New Civil Code giving the wife ten (10) years to annul the alienation or encumbrance was not carried over to the Family Code. It is thus clear that alienation or encumbrance of the conjugal partnership property by the husband without the consent of the wife is null and void. Hence, just like the rule in absolute community of property, if the husband, without knowledge and consent of the wife, sells conjugal property, such sale is void. If the sale was with the knowledge but without the approval of the wife, thereby resulting in a disagreement, such sale is annullable at the instance of the wife who is given five (5) years from the date the contract implementing the decision of the husband to institute the case.[13] Here, respondent Mary Ann timely filed the action for annulment of sale within five (5) years from the date of sale and execution of the deed. However, her action to annul the sale pertains only to the conjugal house and lot and does not include the lot covered by TCT No. T- 26471, a property exclusively belonging to Pedro and which he can dispose of freely without Mary Ann's consent. On the second assignment of error, petitioners contend that they are buyers in good Accordingly, they need not inquire whether the lot was purchased by money exclusively belonging to Pedro or of the common fund of the spouses and may rely on the certificates of title. faith.[14] The contention is bereft of merit. As correctly held by the Court of Appeals, a purchaser in good faith is one who buys the property of another without notice that some other person has a right to, or interest in, such property and pays a full and fair price for the same at the time of such purchase, or before he has notice of the claim or interest of some other person in the property.[15] To establish his status as a buyer for value in good faith, a person dealing with land registered in the name of and occupied by the seller need only show that he relied on the face of the seller's certificate of title. But for a person dealing with land registered in the name of and occupied by the seller whose capacity to sell is restricted, such as by Articles 166 and 173 of the

Civil Code or Article 124 of the Family Code, he must show that he inquired into the latter's capacity to sell in order to establish himself as a buyer for value in good faith.[16] In the present case, the property is registered in the name of Pedro and his wife, Mary Ann. Petitioners cannot deny knowledge that during the time of the sale in 1991, Pedro was married to Mary Ann. However, Mary Ann's conformity did not appear in the deed. Even assuming that petitioners believed in good faith that the subject property is the exclusive property of Pedro, they were apprised by Mary Ann's lawyer of her objection to the sale and yet they still proceeded to purchase the property without Mary Ann's written consent. Moreover, the respondents were the ones in actual, visible and public possession of the property at the time the transaction was being made. Thus, at the time of sale, petitioners knew that Mary Ann has a right to or interest in the subject properties and yet they failed to obtain her conformity to the deed of sale. Hence, petitioners cannot now invoke the protection accorded to purchasers in good faith. Now, if a voidable contract is annulled, the restoration of what has been given is proper. The relationship between the parties in any contract even if subsequently annulled must always be characterized and punctuated by good faith and fair dealing.[17] Hence, in consonance with justice and equity and the salutary principle of non-enrichment at another's expense, we sustain the appellate court's order directing Pedro to return to petitioner spouses the value of the consideration for the lot covered by TCT No. T-88674 and the house thereon. However, this court rules that petitioners cannot claim reimbursements for improvements they introduced after their good faith had ceased. As correctly found by the Court of Appeals, petitioner Patrocinia Ravina made improvements and renovations on the house and lot at the time when the complaint against them was filed. Ravina continued introducing improvements during the pendency of the action.[18] Thus, Article 449 of the New Civil Code is applicable. It provides that, "(h)e who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity."[19] On the last issue, petitioners claim that the decision awarding damages to respondents is not supported by the evidence on record.[20] The claim is erroneous to say the least. The manner by which respondent and her children were removed from the family home deserves our condemnation. On July 5, 1991, while respondent was out and her children were in school, Pedro Villa Abrille acting in connivance with the petitioners[21] surreptitiously transferred all their personal belongings to another place. The respondents then were not allowed to enter their rightful home or family abode despite their impassioned pleas.

Firmly established in our civil law is the doctrine that: "Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith."[22] When a right is exercised in a manner that does not conform with such norms and results in damages to another, a legal wrong is thereby committed for which the wrong doer must be held responsible. Similarly, any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damages caused.[23] It is patent in this case that petitioners' alleged acts fall short of these established civil law standards. WHEREFORE, we deny the instant petition for lack of merit. The Decision dated February 21, 2002 and the Resolution dated October 7, 2003 of the Court of Appeals in CA-G.R. CV No. 54560 are AFFIRMED. Costs against petitioners. SO ORDERED.

LEONARDO A. QUISUMBING Acting Chief Justice

WE CONCUR:

CONCHITA CARPIO MORALES Associate Justice

ARTURO D. BRION Associate Justice

LUCAS P. BERSAMIN Associate Justice

ROBERTO A. ABAD Associate Justice

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

LEONARDO A. QUISUMBING Acting Chief Justice

Ravina v. Villa Abrille G.R. No. 160708 G.R. No. 160708, October 16, 2009 FACTS: Respondent Mary Ann Pasaol Villa Abrille and Pedro Villa Abrille are husband and wife. They have four children, who are also parties to the instant case and are represented by their mother, Mary Ann. In 1982, the spouses acquired a 555-square meter parcel of land denominated as Lot 7, located in Davao City, and covered by Transfer Certificate of Title (TCT) No. T-88674 in their names. Said lot is adjacent to a parcel of land which Pedro acquired when he was still single and which is registered solely in his name under TCT No. T-26471. Through their joint efforts and the proceeds of a loan from the Development Bank of the Philippines (DBP), the spouses built a house on Lot 7 and Pedro's lot. The house was finished in the early 1980's but the spouses continuously made improvements, including a poultry house and an annex. In 1991, Pedro got a mistress and began to neglect his family. Mary Ann was forced to sell or mortgage their movables to support the family and the studies of her children. By himself, Pedro offered to sell the house and the two lots to herein petitioners, Patrocinia and Wilfredo Ravina. Mary Ann objected and notified the petitioners of her objections, but Pedro

nonetheless sold the house and the two lots without Mary Ann's consent, as evidenced by a Deed of Sale[5]. It appears on the said deed that Mary Ann did not sign on top of her name. On July 5, 1991 while Mary Ann was outside the house and the four children were in school, Pedro together with armed members of the Civilian Armed Forces Geographical Unit (CAFGU) and acting in connivance with petitioners[6] began transferring all their belongings from the house to an apartment. When Mary Ann and her daughter Ingrid Villa Abrille came home, they were stopped from entering it. They waited outside the gate until evening under the rain. They sought help from the Talomo Police Station, but police authorities refused to intervene, saying that it was a family matter. Mary Ann alleged that the incident caused stress, tension and anxiety to her children, so much so that one flunked at school. ISSUE: Whether petitioners patrocin[i]a ravina and wilfredo ravina are liable for damages, the same being contrary to law and evidence.[10]

RULING: The claim is erroneous to say the least. The manner by which respondent and her children were removed from the family home deserves our condemnation. While respondent was out and her children were in school, Pedro Villa Abrille acting in connivance with the petitioners[21] surreptitiously transferred all their personal belongings to another place. The respondents then were not allowed to enter their rightful home or family abode despite their impassioned pleas. Firmly established in our civil law is the doctrine that: "Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith."[22] When a right is exercised in a manner that does not conform with such norms and results in damages to another, a legal wrong is thereby committed for which the wrong doer must be held responsible. Similarly, any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damages caused.[23] It is patent in this case that petitioners' alleged acts fall short of these established civil law standards.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 165879 November 10, 2006

MARIA B. CHING, Petitioner, vs. JOSEPH C. GOYANKO, JR., EVELYN GOYANKO, JERRY GOYANKO, IMELDA GOYANKO, JULIUS GOYANKO, MARY ELLEN GOYANKO AND JESS GOYANKO, Respondents. DECISION CARPIO MORALES, J.: On December130, 1947, Joseph Goyanko (Goyanko) and Epifania dela Cruz (Epifania) were married. Out of the union were born respondents Joseph, Jr., Evelyn, Jerry, Imelda, Julius, Mary Ellen and Jess, all surnamed Goyanko. Respondents claim that in 1961, their parents acquired a 661 square meter property located at 29 F. Cabahug St., Cebu City but that as they (the parents) were Chinese citizens at the time, the property was registered in the name of their aunt, Sulpicia Ventura (Sulpicia). On May 1, 1993, Sulpicia executed a deed of sale2 over the property in favor of resp3ondents' father Goyanko. In turn, Goyanko executed on October 12, 1993 a deed of sale over the property in favor of his common-law-wife-herein petitioner Maria B. Ching. Transfer Certificate of Title (TCT) No. 138405 was thus issued in petitioner's name. After Goyanko's death on March 11, 1996, respondents discovered that ownership of the property had already been transferred in the name of petitioner. Respondents thereupon had the purported signature of their father in the deed of sale verified by4 the Philippine National Police Crime Laboratory which found the same to be a forgery. Respondents thus filed with the Regional Trial Court of Cebu City a complaint for recovery of property and damages against petitioner, praying for the nullification of the deed of sale and of TCT No. 138405 and the issuance of a new one in favor of their father Goyanko. In defense, petitioner claimed that she is the actual owner of the property as it was she who provided its purchase price. To disprove that Goyanko's signature in the questioned deed of sale is a forgery, she presented as witness the notary public who testified that Goyanko appeared and signed the document in his presence.

By Decision of October 16, 1998,5 the trial court dismissed the complaint against petitioner, the pertinent portions of which decision read: There is no valid and sufficient ground to declare the sale as null and void, fictitious and simulated. The signature on the questioned Deed of Sale is genuine. The testimony of Atty. Salvador Barrameda who declared in court that Joseph Goyanko, Sr. and Maria Ching together with their witnesses appeared before him for notarization of Deed of Sale in question is more reliable than the conflicting testimonies of the two document examiners. Defendant Maria Ching asserted that the Deed of Sale executed by Joseph Goyanko, Sr. in her favor is valid and genuine. The signature of Joseph Goyanko, Sr. in the questioned Deed of Absolute Sale is genuine as it was duly executed and signed by Joseph Goyanko, Sr. himself. The parcel of lands known as Lot No. 6 which is sought to be recovered in this case could never be considered as the conjugal property of the original Spouses Joseph C. Goyanko and Epifania dela Cruz or the exclusive capital property of the husband. The acquisition of the said property by defendant Maria Ching is well-elicited from the aforementioned testimonial and documentary evidence presented by the defendant. Although for a time being the property passed through Joseph Goyanko, Sr. as a buyer yet his ownership was only temporary and transitory for the reason that it was subsequently sold to herein defendant Maria Ching. Maria Ching claimed that it was even her money which was used by Joseph Goyanko, Sr. in the purchase of the land and so it was eventually sold to her. In her testimony, defendant Ching justified her financial capability to buy the land for herself. The transaction undertaken was from the original owner Sulpicia Ventura to Joseph Goyanko, Sr. and then from Joesph Goyanko, Sr. to herein defendant Maria Ching. The land subject of the litigation is already registered in the name of defendant Maria Ching under TCT No. 138405. By virtue of the Deed of Sale executed in favor of Maria Ching, Transfer Certificate of Title No. 138405 was issued in her favor. In recognition of the proverbial virtuality of a Torrens title, it has been repeatedly held that, unless bad faith can be established on the part of the person appearing as owner on the certificate of title, there is no other owner than that in whose favor it has been issued. A Torrens title is not subject to collateral attack. It is a well-known doctrine that a Torrens title, as a rule, is irrevocable and indefeasible, and the duty of the court is to see to it that this title is maintained and respected unless challenged in a direct proceedings [sic].6(Citations omitted; underscoring supplied) Before the Court of Appeals where respondents appealed, they argued that the trial court erred: 1. . . . when it dismissed the complaint a quo . . . , in effect, sustaining the sale of the subject property between Joseph, Sr. and the defendant-appellee, despite the proliferation in the records and admissions by both parties that defendant- appellee was the "mistress" or "common-law wife" of Joseph, Sr..

2. . . . when it dismissed the complaint a quo . . . , in effect, sustaining the sale of the subject property between Joseph, Sr. and the defendant-appellee, despite the fact that the marriage of Joseph, Sr. and Epifania was then still subsisting thereby rendering the subject property as conjugal property of Joseph, Sr. and Epifania. 3. . . . in dismissing the complaint a quo . . . , in effect, sustaining the validity of the sale of the subject property between Joseph, Sr. and the defendant-appellee, despite7 the clear findings of forgery and the non-credible testimony of notary public. By Decision dated October 21, 2003,8 the appellate court reversed that of the trial court and declared null and void the questioned deed of sale and TCT No. 138405. Held the appellate court: . . . The subject property having been acquired during the existence of a valid marriage between Joseph Sr. and Epifania dela Cruz-Goyanko, is presumed to belong to the conjugal partnership. Moreover, while this presumption in favor of conjugality is rebuttable with clear and convincing proof to the contrary, we find no evidence on record to conclude otherwise. The record shows that while Joseph Sr. and his wife Epifania have been estranged for years and that he and defendant-appellant Maria Ching, have in fact been living together as common-law husband and wife, there has never been a judicial decree declaring the dissolution of his marriage to Epifania nor their conjugal partnership. It is therefore undeniable that the 661-square meter property located at No. 29 F. Cabahug Street, Cebu City belongs to the conjugal partnership. Even if we were to assume that the subject property was not conjugal, still we cannot sustain the validity of the sale of the property by Joseph, Sr. to defendant-appellant Maria Ching, there being overwhelming evidence on records that they have been living together as common-law husband and wife. On this score, Art. 1352 of the Civil Code provides: "Art. 1352. Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order or public policy." We therefore find that the contract of sale in favor of the defendant-appellant Maria Ching was null and void for being contrary to morals and public policy. The purported sale, having been made by Joseph Sr. in favor of his concubine, undermines the stability of the family, a basic social institution which public policy vigilantly protects. Furthermore, the law emphatically prohibits spouses from selling property to each other, subject to certain exceptions. And this is so because transfers or conveyances between spouses, if allowed during the marriage would destroy the system of conjugal partnership, a basic policy in civil law. The prohibition was designed to prevent the exercise of undue influence by one spouse over the other and is likewise applicable

even to common-law relationships otherwise, "the co9ndition of those who incurred guilt would turn out to be better than those in legal union. (Underscoring supplied) Hence, the present petition, petitioners arguing that the appellate court gravely erred in: I. . . . APPLYING THE STATE POLICY ON PROHIBITION AGAINST CONVEYANCES AND TRANSFERS OF PROPERTIES BETWEEN LEGITIMATE AND COMMON LAW SPOUSES ON THE SUBJECT PROPERTY, THE SAME BEING FOUND BY THE COURT A QUO, AS THE EXCLUSIVE PROPERTY OF PETITIONER, AND THAT THE SAME WAS NEVER PART OF THE CONJUGAL PROPERTY OF THE MARRIAGE BETWEEN RESPONDENTS' MOTHER EPIFANIA GOYANKO AND PETITIONER'S COMMON LAW HUSBAND, JOSEPH GOYANKO, SR., NOR THE EXCLUSIVE OR CAPITAL PROPERTY OF THE LATTER AT ANYTIME BEFORE THE SAME WAS VALIDLY ACQUIRED BY PETITIONER. II. . . . NOT FINDING THAT A JURIDICAL RELATION OF TRUST AS PROVIDED FOR UNDER ARTICLES 1448 AND 1450 OF THE NEW CIVIL CODE CAN VALIDLY EXIST BETWEEN COMMON LAW SPOUSES. III. . . . NOT FINDING THAT A CONVEYANCE OVER A PROPERTY MADE BY A TRUSTEE, WHO BECAME AS SUCH IN CONTEMPLATION OF LAW, AND WHO HAPPENS TO BE A COMMON LAW HUSBAND OF THE BENEFICIARY, IS NOT A VIOLATION OF A STATE POLICY ON PROHIBITION AGAINST CONVEYANCES AND TRANSFERS OF PROPERTIES BETWEEN LEGITIMATE AND COMMON LAW SPOUSES. IV . . . . ALLOWING RESPONDENTS TO1ABANDON THEIR ORIGINAL THEORY OF THEIR CASE DURING APPEAL. 0 The pertinent provisions of the Civil Code which apply to the present case read: ART. 1352. Contracts without cause, or with unlawful cause, produce no effect whatever. The cause is unlawful if it is contrary to law, morals, good customs, public order or public policy. 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 or public policy; (2) Those which are absolutely simulated or fictitious; (3) Those whose cause or object did not exist at the time of the transaction; (4) Those whose object is outside the commerce of men; (5) Those which contemplate an impossible service; (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; (7) Those expressly prohibited or declared void by law. These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived. ARTICLE 1490. The husband and wife cannot sell property to each other, except: (1) When a separation of property was agreed upon in the marriage settlements; or (2) When there has been a judicial separation of property under Article 191. (Underscoring supplied) The proscription against sale of property between spouses applies even to comm11 on law relationships. So this Court ruled in Calimlim-Canullas v. Hon. Fortun, etc., et al.: Anent the second issue, we find that the contract of sale was null and void for being contrary to morals and public policy. The sale was made by a husband in favor of a concubine after he had abandoned his family and left the conjugal home where his wife and children lived and from whence they derived their support. The sale was subversive of the stability of the family, a basic social institution which public policy cherishes and protects. Article 1409 of the Civil Code states inter aliathat: contracts whose cause, object, or purposes is contrary to law, morals, good customs, public order, or public policy are void and inexistent from the very beginning. Article 1352 also provides that: "Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order, or public policy."

Additionally, the law emphatically prohibits the spouses from selling property to each other subject to certain exceptions.1wphi1 Similarly, donations between spouses during marriage are prohibited. And this is so because if transfers or conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to prevent the exercise of undue influence by one spouse over the other, as well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, "the condition of those who incurred guilt would turn out tobe better than those in legal union." Those provisions are dictated by public interest and their criterion must be imposed upon the will of the parties. . . .12 (Italics in the original; emphasis and underscoring supplied) As the conveyance in question was made by Goyangko in favor of his common- law- wifeherein petitioner, it was null and void. Petitioner's argument that a trust relationship was created between Goyanko as trustee and her as beneficiary as provided in Articles 1448 and 1450 of the Civil Code which read: ARTICLE 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child. ARTICLE 1450. If the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance is made to the lender or payor to secure the payment of the debt, a trust arises by operation of law in favor of the person to whom the money is loaned or for whom it is paid. The latter may redeem the property and compel a conveyance thereof to him. does not persuade. For petitioner's testimony that it was she who provided the purchase price is uncorroborated. That she may have been considered the breadwinner of the family and that there was proof that she earned a living do not conclusively clinch her claim. As to the change of theory by respondents from forgery of their father's signature in the deed of sale to sale contrary to public policy, it too does not persuade. Generally, a party in a litigation is not permitted to freely and substantially change the theory of his case so as not to put the other party to undue13disadvantage by not accurately and timely apprising him of what he is up against, and to ensure that the latter is given the opportunity during trial to refute all allegations against him by presenting evidence to the contrary. In the present case, petitioner cannot be said to have been put to undue

disadvantage and to have been denied the chance to refute all the allegations against her. For the nullification of the sale is anchored on its illegality per se, it being violative of the above-cited Articles 1352, 1409 and 1490 of the Civil Code. WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioner. SO ORDERED CONCHITA CARPIO MORALES Associate Justice

MARIA B. CHING v. JOSEPH C. GOYANKO, JR., et al. 506 SCRA 735 (2006) In line with the policy of the State, the law emphatically prohibits the sale of properties between spouses. Respondents Joseph Goyanko et al. filed with the Regional Trial Court of Cebu City a complaint for recovery of property and damages against Maria Ching, praying for the nullification of the deed of sale and of transfer certificate and the issuance of a new one. Goyanko et al. aver that they are the real owners of the property involved. They further contend that it was after their father's death that they found out that a contract of sale involving the same property has been executed by their father and common-law wife Ching. However, Ching claimed that she is the actual owner of the property as it was she who provided its purchase price. The RTC dismissed the complaint against Ching, declaring that there is no valid and sufficient ground to declare the sale as null and void, fictitious and simulated. On appeal, the Court of Appeals reversed the decision of the trial court and declared null and void the questioned deed of sale and TCT No. 138405. ISSUES: Whether or not the contract of sale and TCT No. 138405, in favor of the Maria Ching, was null and void for being contrary to morals and public policy HELD: The subject property having been acquired during the existence of a valid marriage between Joseph Sr. and Epifania dela Cruz-Goyanko, is presumed to belong to the conjugal partnership.

Moreover, while this presumption in favor of conjugality is rebuttable with clear and convincing proof to the contrary, the court find no evidence on record to conclude otherwise. The record shows that while Joseph Sr. and his wife Epifania have been estranged for years and that he and defendant-appellant Maria Ching, have in fact been living together as common-law husband and wife, there has never been a judicial decree declaring the dissolution of his marriage to Epifania nor their conjugal partnership. It is therefore undeniable that the property located at Cebu City belongs to the conjugal partnership. Assuming that the subject property was not conjugal, still the court cannot sustain the validity of the sale of the property by Joseph, Sr. to defendant-appellant Maria Ching, there being overwhelming evidence on records that they have been living together as common-law husband and wife. The court therefore finds the contract of sale in favor of the defendant-appellant Maria Ching null and void for being contrary to morals and public policy. The purported sale, having been made by Joseph Sr. in favor of his concubine, undermines the stability of the family, a basic social institution which public policy vigilantly protects.

Republic of the Philippines SUPREME COURT Manila

THIRD DIVISION

SPS. RAMON LEQUIN and VIRGINIA LEQUIN, Petitioners,

G.R. No. 177710 Present: CARPIO, J., Chairperson, CHICO-NAZARIO, VELASCO, JR., NACHURA, and PERALTA, JJ. Promulgated:

- versus -

SPS. RAYMUNDO VIZCONDE and SALOME LEQUIN VIZCONDE, Respondents.

October 12, 2009 x-----------------------------------------------------------------------------------------x DECISION

VELASCO, JR., J.: The Case This is an appeal under Rule 45 from the Decision[1] dated July 20, 2006 of the Court of Appeals (CA) in CA-G.R. CV No. 83595, which declared the Kasulatan ng Bilihang Tuluyan ng Lupa[2] (Kasulatan) valid as between the parties, but required respondents to return the amount of PhP 50,000 to petitioners. Also assailed is the March 30, 2007 CA Resolution [3] denying petitioners' motion for reconsideration.

The Facts Petitioner Ramon Lequin, husband of petitioner Virginia Lequin, is the brother of respondent Salome L. Vizconde and brother-in-law of respondent Raymundo Vizconde. With this consanguine and affinity relation, the instant case developed as follows: In 1995, petitioners, residents of Diamond Court, Brixton Ville Subdivision, Camarin, Caloocan City, bought the subject lot consisting of 10,115 square meters from one Carlito de Leon (de Leon). The sale was negotiated by respondent Raymundo Vizconde. The subject lot is located near the Sto. Rosario to Magsaysay road in Aliaga, Nueva Ecija. Adjacent thereto and located in between the subject lot and the road is a dried up canal (or sapang patay in the native language). In 1997, respondents represented to petitioners that they had also bought from Carlito de Leon a 1,012-square meter lot adjacent to petitioners' property and built a house thereon. As later confirmed by de Leon, however, the 1,012-square meter lot claimed by respondents is part of the 10,115-square meter lot petitioners bought from him. Petitioners believed the story of respondents, since it was Raymundo who negotiated the sale of their lot with de Leon. With the consent of respondents, petitioners then constructed their house on the 500-square meter half- portion of the 1,012 square-meter lot claimed by respondents, as this was near the road. Respondents' residence is on the remaining 512 square meters of the lot. Given this situation where petitioners' house stood on a portion of the lot allegedly owned by respondents, petitioners consulted a lawyer, who advised them that the 1,012-square

meter lot be segregated from the subject lot whose title they own and to make it appear that they are selling to respondents 512 square meters thereof. This sale was embodied in the February 12, 2000Kasulatan where it was made to appear that respondents paid PhP 15,000 for the purchase of the 512-square meter portion of the subject lot. In reality, the consideration of PhP 15,000 was not paid to petitioners. Actually, it was petitioners who paid respondents PhP 50,000 for the 500-square meter portion where petitioners built their house on, believing respondents' representation that the latter own the 1,012-square meter lot. In July 2000, petitioners tried to develop the dried up canal located between their 500square meter lot and the public road. Respondents objected, claiming ownership of said dried up canal or sapang patay. This prompted petitioners to look into the ownership of the dried up canal and the 1,012 square-meter lot claimed by respondents. Carlito de Leon told petitioners that what he had sold to respondents was the dried up canal or sapang patay and that the 1,012-square meter lot claimed by respondents really belongs to petitioners. Thus, on July 13, 2001, petitioners filed a Complaint [4] for Declaration of Nullity of Contract, Sum of Money and Damagesagainst respondents with the Regional Trial Court (RTC), Branch 28 in Cabanatuan City, praying, among others, for the declaration of the February 12, 2000 Kasulatan as null and void ab initio, the return of PhP 50,000 they paid to respondents, and various damages. The case was docketed as Civil Case No. 4063. The Ruling of the RTC On July 5, 2004, after due trial on the merits with petitioners presenting three witnesses and respondents only one witness, the trial court rendered a Decision[5] in favor of petitioners. The decretal portion reads:

WHEREFORE, viewed from the foregoing, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows: 1. Declaring the KASULATAN NG TULUYANG BILIHAN dated February 12, 2000 as NULL and VOID; and Ordering the defendants:

2.

(a) to return to the plaintiffs the amount of FIFTY THOUSAND PESOS which they have paid in the simulated deed of sale plus an interest of 12% per annum to commence from the date of the filing of this case; (b) To pay the plaintiffs moral damages in the amount of Php50 ,000.0 0; (c) To pay exemplary damages of Php50,000.00; (d) To pay attorney's fees in the amount of Php10,000.00; and (e) SO ORDERED.[6] To pay the costs of suit.

The RTC found the Kasulatan allegedly conveying 512 square meters to respondents to be null and void due to: (1) the vitiated consent of petitioners in the execution of the simulated contract of sale; and (2) lack of consideration, since it was shown that while petitioners were ostensibly conveying to respondents 512 square meters of their property, yet the consideration of PhP 15,000 was not paid to them and, in fact, they were the ones who paid respondents PhP 50,000. The RTC held that respondents were guilty of fraudulent misrepresentation. Aggrieved, respondents appealed the above RTC Decision to the CA. The Ruling of the CA The appellate court viewed the case otherwise. On July 20, 2006, it rendered the assailed Decision granting respondents' appeal and declaring as valid the Kasulatan. The fallo reads: WHEREFORE, premises considered, the Appeal is GRANTED. The Kasulatan ng Bilihang Tuluyan dated February 12, 2000 is declared valid. However, Spouses Raymundo Vizconde and Salome Lequin Vizconde are hereby ordered to return to the plaintiffs the amount of P50,000.00 without interest. SO ORDERED.[7]

In reversing and vacating the RTC Decision, the CA found no simulation in the contract of sale, i.e., Kasulatan. Relying onManila Banking Corporation v. Silverio,[8] the appellate court pointed out that an absolutely simulated contract takes place when the parties do not intend at all to be bound by it, and that it is characterized by the fact that the apparent contract is not really desired or intended to produce legal effects or in any way alter the juridical situation of the parties. It read the sale contract (Kasulatan) as clear and unambiguous, for respondents (spouses Vizconde) were the buyers and petitioners (spouses Lequin) were the sellers. Such being the case, petitioners are, to the CA, the owners of the 1,012-square meter lot, and as owners theyconveyed the 512-square meter portion to respondents. The CA viewed petitioners' claim that they executed the sale contract to make it appear that respondents bought the property as mere gratuitous allegation. Besides, the sale contract was duly notarized with respondents claiming the 512-square meter portion they bought from petitioners and not the whole 1,012-square meter lot as alleged by petitioners. Moreover, the CA dismissed allegations of fraud and machinations against respondents to induce petitioners to execute the sale contract, there being no evidence to show how petitioners were defrauded and much less the machinations used by respondents. It ratiocinated that the allegation of respondents telling petitioners that they own the 1,012-square meter lot and for which petitioners sold them 512 square meters thereof does not fall in the concept of fraud. Anent the PhP 50,000 petitioners paid to respondents for the 500-square meter portion of the 1,012-square meter lot claimed by respondents, the CA ruled that the receipt spoke for itself and, thus, required respondents to return the amount to petitioners. On March 30, 2007, the CA denied petitioners' Motion for Reconsideration of the above decision through the assailed resolution. Hence, petitioners went to this Court. The Issues

I THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT, ERRED IN NOT CLEARLY STATING IN THE ASSAILED DECISION AND RESOLUTION THE FACTS AND LAW ON WHICH THE SAME WERE BASED; II

THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT, ERRED IN NOT GIVING DUE CREDENCE TO THE FINDINGS OF FACTS OF THE TRIAL COURT AND HOW THE LATTER APPRECIATED THE TESTIMONIES GIVEN BY THE WITNESSES; III THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT, ERRED IN FINDING THAT THERE WAS NO FRAUD ON THE PART OF THE RESPONDENT-VIZCONDES; IV THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT, ERRED IN CONSIDERING THAT THE KASULATAN NG BILIHANG TULUYAN IS A VALID CONTRACT OF SALE; V THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT, ERRED IN NOT CONSIDERING THAT THE RESPONDENTS DID NOT HAVE THE FINANCIAL TO PURCHASE CAPACITY9][ THE SUBJECT LAND FROM THE PETITIONERS.

The Court's Ruling The petition is meritorious. The issues boil down to two core questions: whether or not the Kasulatan covering the 512 square-meter lot is a valid contract of sale; and who is the legal owner of the other 500 square-meter lot. We find for petitioners. The trial court found, inter alia, lack of consideration in the contract of sale while the appellate court, in reversing the decision of the trial court, merely ruled that the contract of sale is not simulated. With the contrary rulings of the courts a quo, the Court is impelled to review the records to judiciously resolve the petition.

It is true that this Court is not a trier of facts, but there are recognized exceptions to this general rule, such as when the appellate court had ignored, misunderstood, or misinterpreted cogent facts and circumstances which, if considered, would change the outcome of the case; or when its findings were totally devoid of support; or when its judgment was based on a misapprehension of facts.[10] As may be noted, the CA, without going into details, ruled that the contract of sale was not simulated, as it was duly notarized, and it clearly showed petitioners as sellers, and respondents as buyers, of the 512-square meter lot, subject matter of the sale. But the CA misappreciated the evidence duly adduced during the trial on the merits.

As established during the trial, petitioners bought the entire subject property consisting of 10,115 square meters from Carlito de Leon. The title of the subject property was duly transferred to petitioners' names. Respondents, on the other hand, bought the dried up canal consisting of 1,012 square meters from de Leon. This dried up canal is adjacent to the subject property of petitioners and is the lot or area between the subject property and the public road (Sto. Rosario to Magsaysay). The affidavit or Sinumpaang Salaysay [11] of de Leon attests to the foregoing facts. Moreover, de Leon's testimony in court confirmed and established such facts. These were neither controverted nor assailed by respondents who did not present any countervailing evidence. Before this factual clarification was had, respondents, however, made a claim against petitioners in 1997when subject lot was re-surveyed by petitionersthat respondents also bought a 1,012 square-meter lot from de Leon. Undeniably, the 1,012 square meters was a portion of the 10,115 square meters which de Leon sold to petitioners. Obviously, petitioners respected respondents' claim if not, to maintain peace and harmonious relationsand segregated the claimed portion. Whether bad faith or ill-will was involved or an honest erroneous belief by respondents on their claim, the records do not show. The situation was further complicated by the fact that both parties built their respective houses on the 1,012 square-meter portion claimed by respondents, it being situated near the public road.

To resolve the impasse on respondents' claim over 1,012 square meters of petitioners' property and the latter's house built thereon, and to iron out their supposed respective rights, petitioners consulted a notary public, who advised and proposed the solution of a contract of sale

which both parties consented to and is now the object of the instant action. Thus, the contract of sale was executed on February 12, 2000 with petitioners, being the title holders of the subject property who were ostensibly selling to respondents 512 square meters of the subject property while at the same time paying PhP 50,000 to respondents for the other 500 square-meter portion. From the above considerations, we conclude that the appellate court's finding that there was no fraud or fraudulent machinations employed by respondents on petitioners is bereft of factual evidentiary support. We sustain petitioners' contention that respondents employed fraud and machinations to induce them to enter into the contract of sale. As such, the CA's finding of fact must give way to the finding of the trial court that the Kasulatan has to be annulled for vitiated consent. Anent the first main issue as to whether the Kasulatan over the 512-square meter lot is voidable for vitiated consent, the answer is in the affirmative. A contract, as defined in the Civil Code, is a meeting of minds, with respect to the other, to give something or to render some service.[12] For a contract to be valid, it must have three essential elements: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established. The requisites of consent are (1) it should be intelligent or with an exact notion of the matter to which it refers; (2) it should be free; and (3) it should be spontaneous. In De Jesus v. Intermediate Appellate Court,[13] it was explained that intelligence in consent is vitiated by error, freedom by violence, intimidation or undue influence, and spontaneity by fraud. Article (Art.) 1330 of the Civil Code provides that when consent is given through fraud, the contract is voidable. Tolentino defines fraud as "every kind of deception whether in the form of insidious machinations, manipulations, concealments or misrepresentations, for the purpose of leading another party into error and thus execute a particular act." [14] Fraud has a "determining influence" on the consent of the prejudiced party, as he is misled by a false appearance of facts, thereby producing error on his part in deciding whether or not to agree to the offer. One form of fraud is misrepresentation through insidious words or machinations. Under Art. 1338 of the Civil Code, there is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which without them he would not have agreed to. Insidious words or machinations constituting deceit are those that ensnare, entrap, trick, or mislead the other party who was induced to give consent which he or she would not otherwise have given. Deceit is also present when one party, by means of concealing or omitting to state material facts, with intent to deceive, obtains consent of the other party without which, consent

could not have been given. Art. 1339 of the Civil Code is explicit that failure to disclose facts when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud.

From the factual milieu, it is clear that actual fraud is present in this case. The sale between petitioners and de Leon over the 10,115 square-meter lot was negotiated by respondent Raymundo Vizconde. As such, Raymundo was fully aware that what petitioners bought was the entire 10,115 square meters and that the 1,012-square meter lot which he claims he also bought from de Leon actually forms part of petitioners' lot. It cannot be denied by respondents that the lot which they actually bought, based on the unrebutted testimony and statement of de Leon, is the dried up canal which is adjacent to petitioners' 10,115-square meter lot. Considering these factors, it is clear as day that there was deception on the part of Raymundo when he misrepresented to petitioners that the 1,012-square meter lot he bought from de Leon is a separate and distinct lot from the 10,115-square meter lot the petitioners bought from de Leon. Raymundo concealed such material fact from petitioners, who were convinced to sign the sale instrument in question and, worse, even pay PhP 50,000 for the 500 square-meter lot which petitioners actually own in the first place. There was vitiated consent on the part of petitioners. There was fraud in the execution of the contract used on petitioners which affected their consent. Petitioners' reliance and belief on the wrongful claim by respondents operated as a concealment of a material fact in their agreeing to and in readily executing the contract of sale, as advised and proposed by a notary public. Believing that Carlito de Leon indeed sold a 1,012-square meter portion of the subject property to respondents, petitioners signed the contract of sale based on respondents' representations. Had petitioners known, as they eventually would sometime in late 2000 or early 2001 when they made the necessary inquiry from Carlito de Leon, they would not have entered or signed the contract of sale, much less pay PhP 50,000 for a portion of the subject lot which they fully own. Thus, petitioners' consent was vitiated by fraud or fraudulent machinations of Raymundo. In the eyes of the law, petitioners are the rightful and legal owners of the subject 512 square-meter lot anchored on their purchase thereof from de Leon. This right must be upheld and protected. On the issue of lack of consideration, the contract of sale or Kasulatan states that respondents paid petitioners PhP 15,000 for the 512-square meter portion, thus: Na kaming magasawang Ramon Lequin at Virginia R. Lequin, nawang may sapat na gulang, pilipino at nakatira sa 9 Diamond Court, Brixton Ville S ubdi vi s i on, Camarin, Kalookan City, alang-alang sa halagang LABINGLIMANG LIBONG PISO (P 15,000.00) salaping pilipino nabinayaran sa amin ng buong kasiyahang loob namin ng magasawang Raymundo Vizconde at Salome Lequin, nawang may sapat na gulang, pilipino at nakatira sa Sto. Rosario, Aliaga, Nueva Ecija, ay amin naman ngayon inilipat,

ibinigay at ipinagbili ng bilihang tuluyan sa naulit na magasawang R 1aymundo Vizconde at Salome Lequin, at sa kanilang mga tagapagmana ang x x x.[ 5]

On its face, the above contract of sale appears to be supported by a valuable consideration. We, however, agree with the trial court's finding that this is a simulated sale and unsupported by any consideration, for respondents never paid the PhP 15,000 purported purchase price. Section 9 of Rule 130 of the Revised Rules on Evidence gives both the general rule and exception as regards written agreements, thus: SEC. 9. Evidence of written agreements .When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement. However, a party may present evidence to modify, explain or add to the terms of the written agreement if he puts in issue in his pleading: (a) An intrinsic ambiguity, mistake or imperfection in written agreement; (b) The failure of the written agreement to express the true intent and agreement of the parties thereto; (c) The validity of the written agreement; or (d) The existence of other terms agreed to by the parties or their successors in interest after the execution of the written agreement. The term "agreement" includes wills. The second exception provided for the acceptance of parol evidence applies to the instant case. Lack of consideration was proved by petitioners' evidence aliunde showing that the Kasulatan did not express the true intent and agreement of the parties. As explained above, said sale contract was fraudulently entered into through the misrepresentations of respondents causing petitioners' vitiated consent. Moreover, the evidence of petitioners was uncontroverted as respondents failed to adduce any proof that they indeed paid PhP 15,000 to petitioners. Indeed, having asserted their purchase of the 512-square meter portion of petitioners based on the Kasulatan, it behooves upon respondents to prove such affirmative defense of purchase. Unless the party asserting the affirmative defense of an issue sustains the burden of proof, his or her cause will not succeed. If he or she fails to establish the facts of which the matter asserted is predicated, the complainant is entitled to a verdict or decision in his or her favor.[16]

In the instant case, the record is bereft of any proof of payment by respondents and, thus, their affirmative defense of the purported purchase of the 512-square meter portion fails. Thus, the clear finding of the trial court: 2. x x x [I]t was established by the plaintiffs [petitioners] that they were the ones who paid the defendants the amount of FIFTY THOUSAND PESOS (Php50,000.00) and execute a deed of sale also in favor of the defendants. In a simple logic, where can you find a contract that a VENDOR will convey his real property and at the same time pay[1t7h]e VENDEE a certain amount of money without receiving anything in return?

There can be no doubt that the contract of sale or Kasulatan lacked the essential element of consideration. It is a well-entrenched rule that where the deed of sale states that the purchase price has been paid but in fact has never been paid, the deed of sale is null and void ab initio for lack of consideration.[18] Moreover, Art. 1471 of the Civil Code, which provides that "if the price is simulated, the sale is void," also applies to the instant case, since the price purportedly paid as indicated in the contract of sale was simulated for no payment was actually made.[19] Consideration and consent are essential elements in a contract of sale. Where a party's consent to a contract of sale is vitiated or where there is lack of consideration due to a simulated price, the contract is null and void ab initio. Anent the second issue, the PhP 50,000 paid by petitioners to respondents as consideration for the transfer of the 500-square meter lot to petitioners must be restored to the latter. Otherwise, an unjust enrichment situation ensues. The facts clearly show that the 500- square meter lot is legally owned by petitioners as shown by the testimony of de Leon; therefore, they have no legal obligation to pay PhP 50,000 therefor. Art. 22 of the Civil Code provides that "every person who through an act or 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." Considering that the 512 square-meter lot on which respondents' house is located is clearly owned by petitioners, then the Court declares petitioners' legal ownership over said 512 square-meter lot. The amount of PhP 50,000 should only earn interest at the legal rate of 6% per annum from the date of filing of complaint up to finality of judgment and not 12% since such payment is neither a loan nor a forbearance of credit.[20] After finality of decision, the amount of PhP 50,000 shall earn interest of 12% per annum until fully paid.

The award of moral and exemplary damages must be reinstated in view of the fraud or fraudulent machinations employed by respondents on petitioners. The grant of damages in the concept of attorney's fees in the amount of PhP 10,000 must be maintained considering that

petitioners have to incur litigation expenses to protect their interest in conformity to Art. 2208(2)[21] of the Civil Code. Considering that respondents have built their house over the 512-square meter portion legally owned by petitioners, we leave it to the latter what course of action they intend to pursue in relation thereto. Such is not an issue in this petition. WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the CA Decision dated July 20, 2006 and Resolution dated March 30, 2007 in CA-G.R. CV No. 83595 are hereby REVERSED and SET ASIDE. The Decision of the RTC, Branch 28 in Cabanatuan City in Civil Case No. 4063 is REINSTATED with the MODIFICATION that the amount of fifty thousand pesos (PhP 50,000) which respondents must return to petitioners shall earn an interest of 6% per annum from the date of filing of the complaint up to the finality of this Decision, and 12% from the date of finality of this Decision until fully paid. No pronouncement as to costs. SO ORDERED.

PRESBITERO J. VELASCO, JR. Associate Justice WE CONCUR:

ANTONIO T. CARPIO Associate Justice Chairperson

MINITA V. CHICO-NAZARIO Associate Justice

ANTONIO EDUARDO B. NACHURA Associate Justice

DIOSDADO M. PERALTA Associate Justice

ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

ANTONIO T. CARPIO Associate Justice Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

LEONARDO A. QUISUMBING Acting Chief Justice

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. L-68838 March 11, 1991 FLORENCIO FABILLO and JOSEFA TANA (substituted by their heirs Gregorio Fabillo, Roman Fabillo, Cristeta F. Maglinte and Antonio Fabillo), petitioners, vs. THE HONORABLE INTERMEDIATE APPELLATE COURT (Third Civil Case

Division) and ALFREDO MURILLO (substituted by his heirs Fiamita M. Murillo, Flor M. Agcaoili and Charito M. Babol), respondents. Francisco A. Tan for petitioners. Von Kaiser P. Soro for private respondent.

FERNAN, C.J.:p In the instant petition for review on certiorari, petitioners seek the reversal of the appellate court's decision interpreting in favor of lawyer Alfredo M. Murillo the contract of services entered into between him and his clients, spouses Florencio Fabillo and Josefa Taa. In her last will and testament dated August 16, 1957, Justina Fabillo bequeathed to her brother, Florencio, a house and lot in San Salvador Street, Palo, Leyte which was covered by tax declaration No. 19335, and to her husband, Gregorio D. Brioso, a piece of land in Pugahanay, Palo, Leyte. 1 After Justina's death, Florencio filed a petition for the probate of said will. On June 2, 1962, the probate court approved the project of partition "with the reservation that the ownership of the land declared under Tax Declaration No. 19335 a2nd the house erected thereon be litigated and determined in a separate proceedings." Two years later, Florencio sought the assistance of lawyer Alfredo M. Murillo in recovering the San Salvador property. Acquiescing to render his services, Murillo wrote Florencio the following handwritten letter: Dear Mr. Fabillo: I have instructed my stenographer to prepare the complaint and file the same on Wednesday if you are ready with the filing fee and sheriffs fee of not less than P86.00 including transportation expenses. Considering that Atty. Montilla lost this case and the present action is a revival of a lost case, I trust that you will gladly give me 40% of the money value of the house and lot as a contigent (sic) fee in case of a success. When I come back I shall prepare the contract of services for your signature. Thank you. C o r

d i a ll y y o u r s , ( S g d . ) A l f r e d o M . M u ril l o A u g . 9

, 1 9 6 4
3

Thirteen days later, Florencio and Murillo entered into the following contract: CONTRACT OF SERVICES KNOW ALL MEN BY THESE PRESENTS: That I, FLORENCIO FABILLO, married to JOSEFA TANA, of legal age, Filipino citizen and with residence and postal address at Palo, Leyte, was the Petitioner in Special Proceedings No. 843, entitled "In the Matter of the Testate Estate of the late Justina Fabillo, Florencio Fabillo, Petitioner" of the Court of First Instance of Leyte; That by reason of the Order of the Court of First Instance of Leyte dated June 2, 1962, my claim for the house and lot mentioned in paragraph one (1) of the last will and testament of the late Justina Fabillo, was denied altho the will was probated and allowed by the Court; That acting upon the counsel of Atty. Alfredo M. Murillo, I have cause(d) the preparation and filing of another case, entitled "Florencio Fabillo vs. Gregorio D. Brioso," which was docketed as Civil Case No. 3532 of the Court of First Instance of Leyte; That I have retained and engaged the services of Atty. ALFREDO M. MURILLO, married and of legal age, with residence and postal address at Santa Fe, Leyte to be my lawyer not only in Social Proceedings No. 843 but also in Civil Case No. 3532 under the following terms and conditions; That he will represent me and my heirs, in case of my demise in the two cases until their successful conclusion or until the case is settled to my entire satisfaction; That for and in consideration for his legal services, in the two cases, I hereby promise and bind myself to pay Atty. ALFREDO M. MURILLO, in case of success in any or both cases the sum equivalent to FORTY PER CENTUM (40%) of whatever benefit I may derive from such cases to be implemented as follows:

If the house and lot in question is finally awarded to me or a part of the same by virtue of an amicable settlement, and the same is sold, Atty. Murillo, is hereby constituted as Atty. in-fact to sell and convey the said house and lot and he shall be given as his compensation for his services as counsel and as attorney-in-fact the sum equivalent to forty per centum of the purchase price of the house and lot; If the same house and lot is just mortgage(d) to any person, Atty. Murillo shall be given the sum equivalent to forty per centum (40%) of the proceeds of the mortgage; If the house and lot is leased to any person, Atty. Murillo shall be entitled to receive an amount equivalent to 40% (FORTY PER CENTUM) of the rentals of the house and lot, or a part thereof; If the house and lot or a portion thereof is just occupied by the undersigned or his heirs, Atty. Murillo shall have the option of either occupying or leasing to any interested party FORTY PER CENT of the house and lot. Atty. Alfredo M. Murillo shall also be given as part of his compensation for legal services in the two cases FORTY PER CENTUM of whatever damages, which the undersigned can collect in either or both cases, provided, that in case I am awarded attorney's fees, the full amount of attorney's fees shall be given to the said Atty. ALFREDO M. MURILLO; That in the event the house and lot is (sic) not sold and the same is maintained by the undersigned or his heirs, the costs of repairs, maintenance, taxes and insurance premiums shall be for the account of myself or my heirs and Attorney Murillo, in proportion to our rights and interest thereunder that is forty per cent shall be for the account of Atty. Murillo and sixty per cent shall be for my account or my heirs. IN WITNESS HEREOF, I hereby set unto my signature below this 22nd day of August 1964 at Tacloban City. (Sgd.) FLO R ENCI O FA B I L LO (Sgd.) JOSEFA T. FABILLO WITH MY CONFORMITY:

(Sgd.) ALFREDO M. MURILLO (Sgd.) ROMAN T. FABILLO (Sgd.) CRISTETA F. MAGLINTE (Witness) (Witness) 4 Pursuant to said contract, Murillo filed for Florencio Fabillo Civil Case No. 3532 against Gregorio D. Brioso to recover the San Salvador property. The case was terminated on October 29, 1964 when the court, upon the parties' joint motion in the nature of a compromise agreement, declared Florencio Fabillo as the lawful owner not only of the San Salvador property but also the Pugahanay parcel of land. Consequently, Murillo proceeded to implement the contract of services between him and Florencio Fabillo by taking possession and exercising rights of ownership over 40% of said properties. He installed a tenant in the Pugahanay property. Sometime in 1966, Florencio Fabillo claimed exclusive right over the two properties and refused to give Murillo his share of their produce. 5 Inasmuch as his demands for his share of the produce of the Pugahanay property were unheeded, Murillo filed on March 23, 1970 in the then Court of First Instance of Leyte a complaint captioned "ownership of a parcel of land, damages and appointment of a receiver" against Florencio Fabillo,6 his wife Josefa Taa, and their children Ramon (sic) Fabillo and Cristeta F. Maglinte. Murillo prayed that he be declared the lawful owner of forty per cent of the two properties; that defendants be directed to pay him jointly and severally P900.00 per annum from 1966 until he would be given his share of the produce of the land plus P5,000 as consequential damages and P1,000 as attorney's fees, and that defendants be ordered to pay moral and exemplary damages in such amounts as the court might deem just and reasonable. In their answer, the defendants stated that the consent to the contract of services of the Fabillo spouses was vitiated by old age and ailment; that Murillo misled them into believing that Special Proceedings No. 843 on the probate of Justina's will was already terminated when actually it was still pending resolution; and that the contingent fee of 40% of the value of the San Salvador property was excessive, unfair and unconscionable considering the nature of the case, the length of time spent for it, the efforts exerted by Murillo, and his professional standing. They prayed that the contract of services be declared null and void; that Murillo's fee be fixed at 10% of the assessed value of P7,780 of the San Salvador property; that Murillo be ordered to account for the P1,000 rental of the San Salvador property which he withdrew from the court and for the produce of the Pugahanay property from 1965 to 1966; that Murillo be ordered to vacate the portion of the San Salvador property which he had occupied; that the Pugahanay property which was not the subject of either Special Proceedings No. 843 or Civil Case No. 3532 be declared as the exclusive property of Florencio Fabillo, and that Murillo be ordered to pay moral damages and the total amount of P1,000 representing expenses of litigation and attorney's fees.

In its decision of December 2, 1975, 7 the lower court ruled that there was insufficient evidence to prove that the Fabillo spouses' consent to the contract was vitiated. It noted that the contract was witnessed by two of their children who appeared to be highly educated. The spouses themselves were old but literate and physically fit. In claiming jurisdiction over the case, the lower court ruled that the complaint being one "to recover real property from the defendant spouses and their heirs or to enforce a lien thereon," the case could be decided independent of the probate proceedings. Ruling that the contract of services did not violate Article 1491 of the Civil Code as said contract stipulated a contingent fee, the court upheld Murillo's claim for "contingent attorney's fees of 40% of the value of recoverable properties." However, the court declared Murillo to be the lawful owner of 40% of both the San Salvador and Pugahanay properties and the improvements thereon. It directed the defendants to pay jointly and severally to Murillo the amount of P1,200 representing 40% of the net produce of the Pugahanay property from 1967 to 1973; entitled Murillo to 40% of the 1974 and 1975 income of the Pugahanay property which was on deposit with a bank, and ordered defendants to pay the costs of the suit. Both parties filed motions for the reconsideration of said decision: Fabillo, insofar as the lower court awarded 40% of the properties to Murillo and the latter insofar as it granted only P1,200 for the produce of the properties from 1967 to 1973. On January 29, 1976, the lower court resolved the motions and modified its decision thus: ACCORDINGLY, the judgment heretofore rendered is modified to read as follows: (a) Declaring the plaintiff as entitled to and the true and lawful owner of forty percent (40%) of the parcels of land and improvements thereon covered by Tax Declaration Nos. 19335 and 6229 described in Paragraph 5 of the complaint; (b) Directing all the defendants to pay jointly and severally to the plaintiff the sum of Two Thousand Four Hundred Fifty Pesos (P2,450.00) representing 40% of the net produce of the Pugahanay property from 1967 to 1973; (c) Declaring the plaintiff entitled to 40% of the 1974 and 1975 income of said riceland now on deposit with the Prudential Bank, Tacloban City, deposited by Mr. Pedro Elona, designated receiver of the property; (d) Ordering the defendants to pay the plaintiff the sum of Three Hundred Pesos (P 300.00) as attorney's fees; and (e) Ordering the defendants to pay the costs of this suit. SO ORDERED.

In view of the death of both Florencio and Justina Fabillo during the pendency of the case in the lower court, their children, who substituted them as parties to the case, appealed the decision of the lower court to the then Intermediate Appellate Court. On March 27, 1984, said appellate court affirmed in toto the decision of the lower court. 8 The instant petition for review on certiorari which was interposed by the Fabillo children, was filed shortly after Murillo himself died. His heirs likewise substituted him in this case. The Fabillos herein question the appellate court's interpretation of the contract of services and contend that it is in violation of Article 1491 of the Civil Code. The contract of services did not violate said provision of law. Article 1491 of the Civil Code, specifically paragraph 5 thereof, prohibits lawyers from acquiring by purchase even at a public or judicial auction, properties and rights which are the objects of litigation in which they may take part by virtue of their profession. The said prohibition, however, applies only if the sale or assignment of the property takes place during the pendency of the litigation involving the client's property. 9 Hence, a contract between a lawyer and his client stipulating a contingent fee is not covered by said prohibition under Article 1491 (5) of the Civil Code because the payment of said fee is not made during the pendency of the litigation but only after judgment has been rendered in the case handled by the lawyer. In fact, under the 1988 Code of Professional Responsibility, a lawyer may have a lien over funds and property of his client and may appl1y0 so much thereof as may be necessary to satisfy his lawful fees and disbursements. As long as the lawyer does not exert undue influence on his client, that no fraud is committed or imposition applied, or that the compensation is clearly not excessive as to amount to extortion, a contract for contingent fee is valid and enforceable. 11 Moreover, contingent fees were impliedly sanctioned by No. 13 of the Canons of Professional Ethics which governed lawyer-client relationships when2the contract of services was entered into between the Fabillo spouses and Murillo. 1 However, we disagree with the courts below that the contingent fee stipulated between the Fabillo spouses and Murillo is forty percent of the properties subject of the litigation for which Murillo appeared for the Fabillos. A careful scrutiny of the contract shows that the parties intended forty percent of the value of the properties as Murillo's contingent fee. This is borne out by the stipulation that "in case of success of any or both cases," Murillo shall be paid "the sum equivalent to forty per centum of whatever benefit" Fabillo would derive from favorable judgments. The same stipulation was earlier embodied by Murillo in his letter of August 9, 1964 aforequoted. Worth noting are the provisions of the contract which clearly states that in case the properties are sold, mortgaged, or leased, Murillo shall be entitled respectively to 40% of the "purchase price," "proceeds of the mortgage," or "rentals." The contract is vague, however, with respect to a situation wherein the properties are neither sold, mortgaged or leased because Murillo is allowed "to have the option of occupying or leasing to any

interested party forty per cent of the house and lot." Had the parties intended that Murillo should become the lawful owner of 40% of the properties, it would have been clearly and unequivocally stipulated in the contract considering that the Fabillos would part with actual portions of their properties and cede the same to Murillo. The ambiguity of said provision, howe3ver, should be resolved against Murillo as it was he himself who drafted the contract. 1 This is in consonance with the rule of interpretation that, in construing a contract of professional services between a lawyer and his client, such construction as would be more fav1orable to the client should be adopted even if it would work prejudice to the lawyer. 4 Rightly so because of the inequality in situation between an attorney who knows the technicalities of the law on the one5hand and a client who usually is ignorant of the vagaries of the law on the other hand. 1 Considering the nature of the case, the value of the properties subject matter thereof, the length of time and effort exerted on it by Murillo, we hold that Murillo is entitled to the amount of Three Thousand Pesos (P3,000.00) as reasonable attorney's fees for services rendered in the case which ended on a compromise agreement. In so ruling, we uphold "the time-honored legal maxim that a lawyer shall at all times uphold the integrity and dignity of the legal profession so that his basic ideal becomes one of rendering service and securing justice, not money-making. For the worst scenario that can ever happen to a client is to lose the litigated property to his lawyer in whom all trust and confidence were bestowed at the very inception of the legal controversy." 16 WHEREFORE, the decision of the then Intermediate Appellate Court is hereby reversed and set aside and a new one entered (a) ordering the petitioners to pay Atty. Alfredo M. Murillo or his heirs the amount of P3,000.00 as his contingent fee with legal interest from October 29, 1964 when Civil Case No. 3532 was terminated until the amount is fully paid less any and all amounts which Murillo might have received out of the produce or rentals of the Pugahanay and San Salvador properties, and (b) ordering the receiver of said properties to render a complete report and accounting of his receivership to the court below within fifteen (15) days from the finality of this decision. Costs against the private respondent. SO ORDERED. Gutierrez, Jr., Feliciano, Bidin and Davide, Jr., JJ., concur.

Fabillo vs IAC (1991) Facts: - Justina Fabillo bequeathed to her brother Florencio a house and lot in San Salvador, Palo, Leyte, and to her husband a piece of land in Pugahanay, Palo, Leyte. After Justina's death,

Florencio filed a petition for the probate of said will. The court approved the project of partition but said that the ownership of the land of Florencio be litigated and determined in separate proceedings. So two years later, Florencio asked Atty. Murillo to assist him in recovering the San Salvador property. Murillo asked him for 40% of the money value of the house and lot as a contingent fee in case of success. Murillo and Florencio then entered into a contract: Florencio agreed to pay Murillo, in case of success, the sum equivalent to 40% of whatever benefit Florencio may derive from such cases. Also, if the house and lot or a portion thereof is just occupied by Florencio or his heirs, Murillo shall have the option of either occupying or leasing to any interested party 40% of the house and lot. - Murillo, pursuant to the contract, filed a case against Justina's husband to recover the San Salvador property. The case was terminated when the court, upon the parties' compromise agreement, declared Florencio the lawful owner of the San Salvador and Pugahanay property. So Murillo then proceeded to exercise ownership over 40% of said properties and installed a tenant in the Pugahanay property. - Eventually, Florencio claimed exclusive rights over the properties and refused to give Murillo the share of the produce of the properties. Murillo then filed a complaint, asking that he be declared owner of 40% of the two properties. Florencio asked that the contract be declared null and void, plus that they had vitiated consent. - The lower court: There was insufficient evidence to prove that the consent was vitiated. Ordered Florencio to pay 40% of the net produce of the property. Declared Murillo as owner of 40% of both the properties. IAC affirmed. - Note: The case is being carried on by Florencio and Murillo's heirs.

Issue: Stipulation valid?

Held: YES. A contingent fee does not fall under prohibition in Art 1491 par 5. While Art 1491 par 5 prohibits lawyers from acquiring by purchase the properties and rights which are the objects of litigation in which they may take part by virtue of their profession, this prohibition applies only if the sale of the assignment of the property takes place during the pendency of the litigation involving the client's property. A contract between a lawyer and his client stipulating a contingent fee is not covered by said prohibition. The payment of such fee is not made during the pendency of the litigation but only after judgment has been rendered in the case handled

by the lawyer. As long as the lawyer does not exert undue influence and no fraud is committed, a contract for contingent fee is valid and enforceable. However, a careful look at the contract shows that the parties intended 40% of the value of the properties as Murillo's contingent fee. Plus, the stipulation on Murillo having the option to occupy or lease to any interested party 40% of the house and lot is declared vague. The ambiguity should be resolved against Murillo because it was he who drafted the contract. IAC decision reversed. Florencio's heirs ordered to pay Murillo's heirs the amount of P3k as his contingent fee.

FIRST DIVISION

[G.R. No. 165420. June 30, 2005]

CONCEPCION R. AINZA, substituted by her legal heirs, DR. NATIVIDAD A. TULIAO, CORAZON A. JALECO and LILIA A. OLAYON, petitioners, vs. SPOUSES ANTONIO PADUA and EUGENIA PADUA, respondents. DECISION YNARES-SANTIAGO, J.: This petition for review on certiorari assai[1ls the February 24, 2004 decision of the Court of Appeals in CA-G.R. CV 2] No. 70239, ] and its September 28, 2004 resolution, denying reconsideration thereof.[ In he[r] complaint for partition of real property, annulment of titles with damages, 3 Concepcion Ainza (Concepcion) alleged that respondent-spouses Eugenia (Eugenia) and Antonio Padua (Antonio) owned a 216.40 sq. m. lot with an unfinished residential house located at No. 85-A Durian corner Pajo Sts., Barangay Quirino 2-C, Project 2, Quezon City, covered by Transfer Certificate of Title No. 271935. Sometime in April 1987, she bought one-half of an undivided portion of the property from her daughter, Eugenia and the latter's husband, Antonio, for One Hundred Thousand Pesos (P100,000.00). No Deed of Absolute Sale was executed to evidence the transaction, but cash payment was received by the respondents, and ownership was transferred to Concepcion through physical delivery to her attorney-in-fact and daughter, Natividad Tuliao (Natividad). Concepcion authorized Natividad and the latter's husband, Ceferino Tuliao (Ceferino) to occupy the premises, and make improvements on the unfinished building.

Thereafter, Concepcion alleged that without her consent, respondents caused the subdivision of the property into three portions and registered it in their names under TCT Nos. N-155122, N-155123 and N-155124 in violation of the restrictions annotated at the back of the title. On the other hand, Antonio averred that he bought the property in 1980 and introduced improvements thereon. Between 1989 and 1990, he and his wife, Eugenia, allowed Natividad and Ceferino to occupy the premises temporarily. In 1994, they caused the subdivision of the property and three (3) separate titles were issued. Thereafter, Antonio requested Natividad to vacate the premises but the latter refused and claimed that Concepcion owned the property. Antonio thus filed an ejectment suit on April 1, 1999. Concepcion, represented by Natividad, also filed on May 4, 1999 a civil case for partition of real property and annulment of titles with damages. Antonio claimed that his wife, Eugenia, admitted that Concepcion offered to buy one third (1/3) of the property who gave her small amounts over several years which totaled P100,000.00 by 1987 and for which she signed a receipt. On January 9, 2001, the Regional Trial Court of Quezon City, Branch 85, rendered judgment[4] in favor of Concepcion, the dispositive portion of which states: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants and ordering: 1. the subdivision of the subject property between the said plaintiff and defendants in equal shares with one-half of the property, including the portion occupied by the spouses Severino and Natividad Tuliao to be awarded to the plaintiff; 2. the cancellation of Transfer Certificates of Title Nos. N-155122, N-155123, N-155124 of the Registry of Deeds of Quezon City; 3. the defendants to pay to the plaintiff P50,000.00 as attorney's fees. SO ORDERED.[5] The trial court upheld the sale between Eugenia and Concepcion. It ruled that the sale was consummated when both contracting parties complied with their respective obligations. Eugenia transferred possession by delivering the property to Concepcion who in turn paid the purchase price. It also declared that the transfer of the property did not violate the Statute of Frauds because a fully executed contract does not fall within its coverage. On appeal by the respondents, the Court of Appeals reversed the decision of the trial court, and declared the sale null and void. Applying Article 124 of the Family Code, the Court of Appeals ruled that since the subject property is conjugal, the written consent of Antonio must be obtained for the sale to be valid. It also orde 6r]ed the spouses Padua to return the amount of P100,000.00 to petitioners plus interest.[

The sole issue for resolution in this petition for review is whether there was a valid contract of sale between Eugenia and Concepcion. A contract of sale is perfected by mere consent, upon a meeting of the minds on the offer and[7] the acceptance thereof based on subject matter, price and terms of payment. In this case, there was a perfected contract of sale between Eugenia and Concepcion. The records show that Eugenia offered to sell a portion of the property to Concepcion, who accepted the offer and agreed to pay P100,000.00 as consideration. The contract of sale was consummated when both parties fully complied with their respective obligations. Eugenia delivered the property to Concepcion, who in turn, paid Eugenia the price of One Hundred Thousand Pesos (P100,000.00), as evidenced by the receipt which reads: RECEIPT Received the amount of ONE HUNDRED THOUSAND PESOS (P100,000.00) as payment for the lot on 85-A Durian St., Project 2, Quezon City, from Mrs. Concepcion R. Ainza, on April, 1987. _______(Sgd.)______ Mrs.. Eugenia A. Padua[8] The verbal contract of sale between Eugenia and Concepcion did not violate the provisions of the Statute of Frauds that a contract for the sale of real property shall be unenforceable unless the contract or some note or m]emorandum of the sale is in writing and subscribed by the party charged or his agent.[9 When a verbal contract has been completed, executed or partially consummated, as in this case, its enforceability will not be barred [10by the Statute of Frauds, which applies only to an executory agreement. ] Thus, where one part ] y has performed his obligation, oral evidence will be admitted to prove the agreement.[11 In the instant case, the oral contract of sale between Eugenia and Concepcion was evidenced by a receipt signed by Eugenia. Antonio also stated that his wife admitted to him that she sold the property to Concepcion. It is undisputed that the subject property was conjugal and sold by Eugenia in April 1987 or prior to the effectivity of the Family Code on August 3, 1988, Article 254 of which repealed Title V, Book I of the Civil Code provisions on the property relations between husband and wife. However, Article 256 thereof limited its retroactive effect only to cases where it would not prejudice or impair vested or acquired rights in accordance with the Civil Code or other laws. In the case at bar, vested rights of Concepcion will be impaired or prejudiced by the application of the Family Code; hence, the provisions of the Civil Code should be applied. In Felipe v. Heirs of Aldon, et al.,[12] the legal effect of a sale of conjugal properties by the wife without the consent of the husband was clarified, to wit:

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). Gimena's contract is not rescissible for in such a contract all the essential elements are untainted but Gimena's consent was tainted. Neither can the contract be classified as unenforceable because it does not fit any of those described in Art. 1403 of the Civil Code. And finally, the contract cannot be void or inexistent because it is not one of those mentioned in Art. 1409 of the Civil Code. By process of elimination, it must perforce be a voidable contract. 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. (Emphasis supplied) The consent of both Eugenia and Antonio is necessary for the] sale of the conjugal property to be valid. Antonio's consent cannot be presumed.[13 Except for the selfserving testimony of petitioner Natividad, there is no evidence that Antonio participated or consented to the sale of the conjugal property. Eugenia alone is incapable of giving

consent to the contract. Therefore, in the absence of Antonio's consent, the disposition made by Eugenia is voidable.[14] The contract of sale between Eugenia and Concepcion being an oral contract, the action to annul t[h]5e same must be commenced within six years from the time the right of action accrued. 1 Eugenia sold the property in April 1987 hence Antonio should have asked the courts to annul the sale on or before April 1993. No action was commenced by Antonio to annul the sale, hence his right to seek its annulment was extinguished by prescription. Even assuming that the ten (10)-year prescriptive period under Art. 173 should apply, Antonio is still barred from instituting an action to annul the sale because since April 1987, more than ten (10) years had already lapsed without any such action being filed. In sum, the sale of the conjugal property by Eugenia without the consent of her husband is voidable. It is binding unless annulled. Antonio failed to exercise his right to ask for the annulment within the prescribed period, hence, he is now barred from questioning the validity of the sale between his wife and Concepcion. WHEREFORE, the petition is GRANTED. The decision dated February 24, 2004 of the Court of Appeals in CA-G.R. CV No. 70239 and its resolution dated September 28, 2004 are REVERSED and SET ASIDE. The decision dated January 9, 2001 of the Regional Trial Court of Quezon City, Branch 85, in Civil Case No. Q-99-37529, is REINSTATED. SO ORDERED. Davide, Jr., C.J. (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.

Ainza vs padua June 30, 2005, 462 scra 614 Meeting of the Minds in a Contract of Sale This is a case involving family members. In April 1987, Ainza and her daughter Eugenia orally agreed that Ainza pay P100k in exchange for half of the portion of Eugenia's undivided conjugal property (a lot located in QC). No Deed of Absolute Sale was executed. There was physical delivery of the land through Concepcion's other daughter (Natividad) acting as atty-in-fact. Concepcion thereafter allowed Natividad and her husband occupy the purchased portion of the land. In 1994, Antonio caused the division of the lot into three (two were occupied by the spouses), necessarily displacing Natividad. He also had each subdivision titled. Antonio requested Natividad to vacate the premises. Antonio averred that his wife only admitted

of selling 1/3 of the property to Concepcion for which a receipt was issued signed by Concepcion. The RTC ruled in favor of Concepcion. The CA reversed the RTC ruling. CA explained that the property is conjugal hence the sale should have been with Antonio's consent. ISSUE: Whether or not the contract of sale between Ainza and Eugenia is valid. HELD: Yes it is valid until annulled (voidable). There was a perfected contract of sale between Eugenia and Concepcion. The records show that Eugenia offered to sell a portion of the property to Concepcion, who accepted the offer and agreed to pay P100,000.00 as consideration. The contract of sale was consummated when both parties fully complied with their respective obligations. Eugenia delivered the property to Concepcion, who in turn, paid Eugenia the price of P100,000.00, as evidenced by the receipt. Since the land was undivided when it was sold, Concepcion is entitled to have half of it. Antonio cannot, however, attack the validity of the sale b/n his wife and his mom-in-law, either under the Family Code or the Old Civil Code due to prescription. The sale came to his knowledge in 1987. He only filed the case in 1999. His right prescribed in 1993 (under the FC [5 years]) and 1997 (under OCC [10 years]).

EN BANC G.R. No. L-10439 October 17, 1916

GAN TIANGCO, Plaintiff-Appellee, vs. SILVINO PABINGUIT, defendantppellant. Leopoldo Rovira for appellant. No appearance for appellee. ARELLANO, C.J.: chanrobles virtual law library It is not disputed in these proceedings that Candida Acabo was the owner of six parcels of land, all situated in the municipality of Jimalalud, Oriental Negros, of the following dimensions: The first, 8 hectares; the second, 40 ares; the third and fourth, each 20 ares; the fifth, 40 ares; and the sixth parcel, 20 ares.chanroblesvirtualawlibrary chanrobles virtual law library According to the notarial instrument, Exhibit A, admitted in evidence without objection, these lands were sold on June 12, 1911, by their owner Candida Acabo, to one Gan Tingco, for P500. .chanroblesvirtualawlibrary chanrobles virtual law library

But the purchaser Gan Tingcowas unable to take possession of the six parcels of land sold him by Acabo, for they were in the possession of Silvino Pabinguit, who alleges certain rights therein. He claims to have purchased them for P375 from Faustino Abad; that Abad yhad become their owner through purchase from Henry Gardner; that the latter, in turn, had owned tyhem by reason of having purchased them for P555 at a public auctiona held in the barrio of Martelo, municipality of Tayasan, on MArch 20, 1907. An effort was made to prove these facts by documents Exhibits 1, 2, and 3. Exhibit 1 is a notarial instrument, dated April 29, 1907, which purports to show that on this date Henry Gardner sold to Faustino Abad seven parcels of land for P275. Exhibit 2 is a notarial instrument which sets forth that Faustino Abad, on June 19, 1907, for the sum of P375 sold to Silvino Pabinguit six parcels of land, the area, situation and bounds of which are described in the document. Exhibit 3 is a copy which the deputy sheriff said he kept of the proceedings had by virtue of a writ of execution issued by the justice of the peace of Guijulngan, in whcih the latter directed him to make a demand upon Candida Acabo to comply with the judgment rendered against her as a result of the complaint, filed by Silvestre Basaltos, and further ordering him, in case of her failure to comply tehrewith, to levy upon "fixtures and other chattels and to collect the amounts ordered, that is, P157.50, plus P300 for losses damages, the proper costs and those of this execution." The date of the writ appears to be (for it has been corrected in an illegible manner) that of January 2, 1907, and the fist execution proceedings bear the date of March 14, 1907. In the return the deputy sheriff begins by saying that he made demand upon Candida Acabo and that the latter stated that she had neither corn nor money; that he levied upon three plow carabaos, one brood caraballa and the six parcles of land in question, for their identity was expressly admitted; that their sale was announced for the 20th of March, 1907 (but the return does not show the signature of the woman upon whom the demand was made, nor does it disclose any evidence whatever to show that the owner of this property had any knowledge of this attachment or levy); that on March 20, 1907, he proceeded to sell at public auction all the property levied upon; that the jsutice of the peace who ordered the execution, Henry Gardner, himself appeared as the highest bidder and offered P280 for the four carabaos and P275 for all the coconut groves, that, is the six parcels of land measuring nine hectares and a fraction in area, containing bearing fruit trees, or a total sum of P555, which the said successful bidder then and there paid over; and, finally, that the same justice of the peace, Gardner, the highest bidder, himself received the sum of P157.50, the remainder of the proceeds from the execution sale after deduction of the costs, as the person authrized so to do by the plaintiff Silvestre Basaltos; and that Gardner alone, not Basaltos nor the judgment debtor Candida Acabo, signed the record of the proceedings. Afterwards the deputy sheriff certified that the costs of the

execution amounted to P52.50, and that there was a surplus of P45 to Candida Acabo's credit, which was to be delivered to her after settlement of the matter of the certificates of ownership and the arrangment of the trabsfer of the carabaos. These proceedings were signed only by the deputy sheriff and recite that "by authorization of Candida Acabo I have delivered the sum of P29 as the true balance in favor of the Said Candida Acabo, of the P45 mentione in the precedeing statement, from which latter sum there has been deducted the amount of P16 which was paid to the treasusrer of this municipality on the following accounts: Fine, P8; certificate of ownership, P4; and certificate of transfer, P4." In that manner was the record closed and it was not signed by any other person than the deputy sheriff, ALejandro Sanchez.chanroblesvirtualawlibrary chanrobles virtual law library The jusrice of the peace, Gardner, and the deputy sheriff, Sanchez, were summoned to appear in the trial court on March 18, 1914. Sanchez did not put in an appearance, and on being required by telegraph to explain the reason and show why he should not be punished for contempt of court, he wired back, saying: "From 12th to 18th instant was making investigations attempted rape and theft. Will arrive there Monday, 23d. Will have enough time to finish investigation," and on the day for the hearing he presented the document Exhibit 3, referred to in the preceding paragragh.chanroblesvirtualawlibrary chanrobles virtual law library Henry Gardner, in testifying for the defense, stated that the deputy sheriff had executed in Gardner's favor a certificate of his purchase at auction sale, but witness did not know where the document was and did not need it because he, in turn, has sold everything he had purchased at that sale; that he was formerly justice of the peace of the municipality of Guijulngan, of Tayasan, and knew of a complaint by Silvestre Basaltos against Candida Acabo; that afterwards when the auction was held, he took part therein, but that as he subsequently learned that he was forbidden to do so, he sold what he had purchased to Faustino Abad, Candida Acabo's son, who was but a boy at the time; that the writ of execution was returnmed to him and he made a record of that matter; that he had it in the justice of the peace court and left it there when he ceased to hold office, in 1909.chanroblesvirtualawlibrary chanrobles virtual law library Faustino Abad testified that Henry Gardner did actually sell to him for P275 the coconut groves which Gardner had purchased at auction; that it was true that on April 29, 1907, witness was only 19 years old; that he knew that the coconut groves were those that had belonged to his mother Candida Acabo; and that he, in turn, sold the said coconut groves to Silvino Pabinguit for P375, on June 19 of the same year. Both Gardner's deed of sale to Abad and

the latter's to Pabinguit were certified by the same deputy sheriff ALejandro Sanchez as notary public of the municipality of Tayasan.chanroblesvirtualawlibrary chanrobles virtual law library This same Alejandro Sanchez, being then the justice of the peace of Tayasan, testified as a witness for the defense. He began by recognizing the aforesaid deeds as having been certified by him in his capacity of notary public of Tayasan, and afterwards stated that he had something to do with a writ of execution issued by the justice of the peace of Guijulngan, Henry Gardner, upon certain real estate belonging to Candida Acabo (it odes not so appear in the writ, wherein only fixtures and other chattels are referred to); that, in consideration of the P555 which Gardner paid at the time of the auction, witness, without any reservation whatsoever, delivered to Gardner the carabaos and lands knocked down to him at the sale; and that after he had received from Gardner the purchase price he returned it to him, just as he would have delivered it to the plaintiff Silvestre Basaltos, of whom Gardner claimed to be the representative duly authorized as such by this plaintiff.chanroblesvirtualawlibrary chanrobles virtual law library Candida Acabo testified that Alejandro Sanchez, while sheriff of Tayasan, did not take possession of her lands by reason of the levy; that the only property which he levied upon was four carabaos, and she did not know whether they had been sold at auction; and that Sanchez had not told her that he lands had been levied upon, or that they had been sold at auction.chanroblesvirtualawlibrary chanrobles virtual law library Silvino Pabinguit testified that in the month of February he was in Guijilngan searching for the record of the auction sale of Candida Acabo's property; that four persons made the search; and . . . the record was not found. This last statement was made by Alejandro Sanchez.chanroblesvirtualawlibrary chanrobles virtual law library The Court of First Instance of Oriental NEgros rendered judgment in behalf of the plaintiff, Gan Tingco, declaring him the owner of the lands described in the complaint, and ordered the defendant, Silvino Pabinguit, to restore the plaintiff to their possession. No express finfding was made as to the costs.chanroblesvirtualawlibrary chanrobles virtual law library The defendant appealed, with the right to a review of the evidence. The appeal was heard by this court, it having been brought it by bill of exceptions.chanroblesvirtualawlibrary chanrobles virtual law library The appellant alleges that the trial court erred in holding that, notwithstanding the sale of the lands in question at public auction, Candida

Acabo did not cease to be the owner of these properties, because there were certain irregularities and defects in the said auction.chanroblesvirtualawlibrary chanrobles virtual law library In the judgment appealed from several of these defects are specified and it is unnecessary to treat of them in detail. With respect to the legality of the proceedings had up to the time of the sale of the lands, there is certainly room for doubt. No evidence is found that Silvestre Basaltos filed any complaint against Candida Acabo before the justice of the peace court of Guijulngan and that any judgment was rendered on January 2, 1907, enabling the plaintiff to recover from the defendant 150 cavanes of corn, or in default thereof the sum of P157.50, and in addition P300 for losses and damages and court costs. Only the writ of execution appears in the record. The original copy of the return to the wirt of execution was not presented, because it was not found; there was offered in evidence only what the sheriff said was a copy of the return, and he delayed as long in presenting it as he did in obeting the summons of the court to appear as a witness. No copy of that judgment was delivered to the judgment debtor, in violation of the provisions of section 446 of Act No. 190. The sheriff sold lands belonging to the judgment debtor, and it does not appear that the provisions of section 445 of the same Act were complied with, to wit, that if real estate be levied upon and sold by virtue of the execution, the clerk must record the execution and the officer's return thereon and certify the same under his hand, as true copies, in a book to be called the "Execution Book." The justice of peace, in his writ, certainly did not order the levy upon ior sale of real estate, but only fixtures and other chattles; but the sheriff's return includes real estate levied upon and solt at public auction. The purchaser at public auction, the same justice of the peace, could not exhibit the instrument which he said the sheriff executed in his behalf, because, as he said, he did not know where it was and that he did not need it. We are not sure that Candida Acabo, a simple country woman, was not despoiled of her lands under the pretexts of debt, judgment, and execution.chanroblesvirtualawlibrary chanrobles virtual law library Leaving out of account that things which should have been proven at trial were not proven, it is a positive fact that Henry Gardner, justice of peace of Guijulngan, was the purchaser at public auction of Candida Acabo's lands and carabaos levied upon as a result of the judgment, and that he delivered the price of the sale, P555, to the sheriff; but hte latter returned this sum to the justice of the peace, who said that he wea authorized by Silvestre Basaltos, the supposed creditor, to receive the same. At the finish the sheriff delivered nothing to the owner Acabo, all the proceeds of the auction sale having been expended in one way or another without the consent of the

judgment debtor appearing of record.chanroblesvirtualawlibrary chanrobles virtual law library Aside from everything else, the trial court was impressed by the circumstance that in the public auction the purchaser was the justice of the peace himself. This, in the judge's opinion, was unauthorized, because article 1459, No. 5, of the Civil Code, prohibits judges from acquring by purchase, even at pub;ic or judicial sale, either in person or by an agent, any property or rights litigated in the court in the jurisdiction or territory within which they exercise their respective duties; this prohibition includes taking of property by assignment.chanroblesvirtualawlibrary chanrobles virtual law library The appellant alleges that the property purchased by justice of the peace Gardner was not the subject of litigation in the justice court; that the action was to recover a certain sum of money, and that he had ordered the property sold on execution.chanroblesvirtualawlibrary chanrobles virtual law library This raises, therefore, a question as to the true meaning of paragraph 5 of article 1459 of the Civil Code.chanroblesvirtualawlibrary chanrobles virtual law library The Ley de Bases, in accordance with which the Civil Code was enacted, provides as follows, in Base No. 26: The forms, requirements and conditions of each particular contract shall be determined and defined subject to the general list of obligations and their effects, with the understanding that the legislation in force and the legal principles evolved therefrom by judicial decisions, etc., etc., shall serve as basis. One of the bodies of law which conastitute the legislation now in force in the Novisima Recopilacion. In Law 4, Title 14, Book 5 of the same is found the following provision: "We order that in public auctions held by direction of our alcaldes, neither the latter nor any person whomsoever in their name shall bid in anything sold at such public auctions." The word alcaldes means judges. The caption of Title 14 is " Alcaldes or Provincial Judges," and the entire title deals with the exercise of judicial jurisdiction. Prior to the enactment of the Civil Code, the Penal Code was also in force. Article 400 of the latter prohinits, under penalty, any judge from taking part, either directly, or indirectly, in any operation of exchange, trade or porfit with respect to things not the product of his own property, within the territory over which he exercises jurisdiction. Judging from the

legal oprecedents on which the Civil Code is based, it would not seem too much to conclude that the said article of the Civil Code does not make any distinction between property in litigation. In effect, it appears to be as delicate a matter for a judge to take part in the sale of property that had been the subject of ligitgation in his court, as to intervene in auction of property which, though not directly litigated in his court, is nevertheless levied upon and sold as the result of a writ of execution issued by him. What the law intends to avoid is the improper interference with an interest of a judge in a thing levied upon and sold by his order.chanroblesvirtualawlibrary chanrobles virtual law library If under the law Gardner was prohibited from acquiring the ownership of Acabo's lands, then he could not have transmitted to Faustino Abad the right of ownership that he did not possess; nor could Abad, to whom this alleged ownership had not been transmitte, have conveyed the same to Pabinguit. What Gardner should have done in view of the fact that the sale, as he finally acknowledged, was void, was to claim the price that had been deposited in court, and the justice of the peace of Guijulngan should have declared the auction void and have ordered a new sale to be held, besides correcting the errors that had been committed in the proceedings. To the reasons already stated, there is to be added the additional one, with respect to the sale made by Faustino Abad to Silvino Pabinguit, that Abad was a minor at the time - a circumstance that deprived him of capacity to sell (Civil Code, art. 1263). Abad had no ownership to transmit to anyone and, besides, he had no personality to enable him to contract by himself, on account of his lack of legal age.chanroblesvirtualawlibrary chanrobles virtual law library Sanchez, the sheriff, the sole notary who certified all these deeds of conveyance in order that Pabinguit might become owner of those coconut lands with which his own lands adjoined, was in such a hurry that, as he testified at the trial, on the very same day of the auction he had already executed in behalf of Henry Gardner the final deed of sale of the said lands, without allowing time for their possible redemption. Section 466 of Act No. 190 prescribes that if redemption has not been requested, this deed is to be executed within the twelve months subsequent to the sale.chanroblesvirtualawlibrary chanrobles virtual law library This court finds no reason whatever why it should not affirm the judgment appealed from. It is therefore hereby affirmed with the costs of this instance against the appellant. So ordered..chanroblesvirtualawlibrary chanrobles virtual law library Torres, Johnson, Trent, and Araullo, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC A.M. No. 133-J May 31, 1982 BERNARDITA R. MACARIOLA, complainant, vs. HONORABLE ELIAS B. ASUNCION, Judge of the Court of First Instance of Leyte, respondent.

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

defendant it being the share of the latter's deceased mother, Felisa Espiras, and the other half which is the share of the deceased Francisco Reyes was to be divided equally among his children by his two marriages. On June 8, 1963, a decision was rendered by respondent Judge Asuncion in Civil Case 3010, the dispositive portion of which reads: IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court, upon a preponderance of evidence, finds and so holds, and hereby renders judgment (1) Declaring the plaintiffs Luz R. Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes and Priscilla Reyes as the only children legitimated by the subsequent marriage of Francisco Reyes Diaz to Irene Ondez; (2) Declaring the plaintiff Sinforosa R. Bales to have been an illegitimate child of Francisco Reyes Diaz; (3) Declaring Lots Nos. 4474, 4475, 4892, 5265, 4803, 4581, 4506 and 1/4 of Lot 1145 as belonging to the conjugal partnership of the spouses Francisco Reyes Diaz and Felisa Espiras; (4) Declaring Lot No. 2304 and 1/4 of Lot No. 3416 as belonging to the spouses Francisco Reyes Diaz and Irene Ondez in common partnership; (5) Declaring that 1/2 of Lot No. 1184 as belonging exclusively to the deceased Francisco Reyes Diaz; (6) Declaring the defendant Bernardita R. Macariola, being the only legal and forced heir of her mother Felisa Espiras, as the exclusive owner of onehalf of each of Lots Nos. 4474, 4475, 4892, 5265, 4803, 4581, 4506; and the remaining one-half (1/2) of each of said Lots Nos. 4474, 4475, 4892, 5265, 4803, 4581, 4506 and one-half (1/2) of one-fourth (1/4) of Lot No. 1154 as belonging to the estate of Francisco Reyes Diaz; (7) Declaring Irene Ondez to be the exclusive owner of one-half (1/2) of Lot No. 2304 and one-half (1/2) of one-fourth (1/4) of Lot No. 3416; the remaining one-half (1/2) of Lot 2304 and the remaining one-half (1/2) of one-fourth (1/4) of Lot No. 3416 as belonging to the estate of Francisco Reyes Diaz; (8) Directing the division or partition of the estate of Francisco Reyes Diaz in such a manner as to give or grant to Irene Ondez, as surviving widow of Francisco Reyes Diaz, a hereditary share of. one-twelfth (1/12) of the whole estate of Francisco Reyes Diaz (Art. 996 in relation to Art. 892, par 2, New Civil Code), and the remaining portion of the estate to be divided among the plaintiffs Sinforosa R. Bales, Luz R. Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes, Priscilla Reyes and defendant Bernardita R. Macariola, in such a way that the extent of the total share of plaintiff Sinforosa R. Bales in the hereditary estate shall not exceed

the equivalent of two-fifth (2/5) of the total share of any or each of the other plaintiffs and the defendant (Art. 983, New Civil Code), each of the latter to receive equal shares from the hereditary estate, (Ramirez vs. Bautista, 14 Phil. 528; Diancin vs. Bishop of Jaro, O.G. [3rd Ed.] p. 33); (9) Directing the parties, within thirty days after this judgment shall have become final to submit to this court, for approval a project of partition of the hereditary estate in the proportion above indicated, and in such manner as the parties may, by agreement, deemed convenient and equitable to them taking into consideration the location, kind, quality, nature and value of the properties involved; (10) Directing the plaintiff Sinforosa R. Bales and defendant Bernardita R. Macariola to pay the costs of this suit, in the proportion of one-third (1/3) by the first named and two-thirds (2/3) by the second named; and (I 1) Dismissing all other claims of the parties [pp 27-29 of Exh. C]. The decision in civil case 3010 became final for lack of an appeal, and on October 16, 1963, a project of partition was submitted to Judge Asuncion which is marked Exh. A. Notwithstanding the fact that the project of partition was not signed by the parties themselves but only by the respective counsel of plaintiffs and defendant, Judge Asuncion approved it in his Order dated October 23, 1963, which for convenience is quoted hereunder in full: The parties, through their respective counsels, presented to this Court for approval the following project of partition: COMES NOW, the plaintiffs and the defendant in the aboveentitled case, to this Honorable Court respectfully submit the following Project of Partition: l. The whole of Lots Nos. 1154, 2304 and 4506 shall belong exclusively to Bernardita Reyes Macariola; 2. A portion of Lot No. 3416 consisting of 2,373.49 square meters along the eastern part of the lot shall be awarded likewise to Bernardita R. Macariola; 3. Lots Nos. 4803, 4892 and 5265 shall be awarded to Sinforosa Reyes Bales; 4. A portion of Lot No. 3416 consisting of 1,834.55 square meters along the western part of the lot shall likewise be awarded to Sinforosa Reyes-Bales;

5. Lots Nos. 4474 and 4475 shall be divided equally among Luz Reyes Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes and Priscilla Reyes in equal shares; 6. Lot No. 1184 and the remaining portion of Lot No. 3416 after taking the portions awarded under item (2) and (4) above shall be awarded to Luz Reyes Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes and Priscilla Reyes in equal shares, provided, however that the remaining portion of Lot No. 3416 shall belong exclusively to Priscilla Reyes. WHEREFORE, it is respectfully prayed that the Project of Partition indicated above which is made in accordance with the decision of the Honorable Court be approved. Tacloban City, October 16, 1963. (SGD) BONIFACIO RAMO Atty. for the Defendant Tacloban City (SGD) ZOTICO A. TOLETE Atty. for the Plaintiff Tacloban City While the Court thought it more desirable for all the parties to have signed this Project of Partition, nevertheless, upon assurance of both counsels of the respective parties to this Court that the Project of Partition, as above- quoted, had been made after a conference and agreement of the plaintiffs and the defendant approving the above Project of Partition, and that both lawyers had represented to the Court that they are given full authority to sign by themselves the Project of Partition, the Court, therefore, finding the abovequoted Project of Partition to be in accordance with law, hereby approves the same. The parties, therefore, are directed to execute such papers, documents or instrument sufficient in form and substance for the vesting of the rights, interests and participations which were adjudicated to the respective parties, as outlined in the Project of Partition and the delivery of the respective properties adjudicated to each one in view of said Project of Partition, and to perform such other acts as are legal and necessary to effectuate the said Project of Partition. SO ORDERED. Given in Tacloban City, this 23rd day of October, 1963.

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

Case No. 3010 decided by him; [2] that he likewise violated Article 14, paragraphs I and 5 of the Code of Commerce, Section 3, paragraph H, of R.A. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, Section 12, Rule XVIII of the Civil Service Rules, and Canon 25 of the Canons of Judicial Ethics, by associating himself with the Traders Manufacturing and Fishing Industries, Inc., as a stockholder and a ranking officer while he was a judge of the Court of First Instance of Leyte; [3] that respondent was guilty of coddling an impostor and acted in disregard of judicial decorum by closely fraternizing with a certain Dominador Arigpa Tan who openly and publicly advertised himself as a practising attorney when in truth and in fact his name does not appear in the Rolls of Attorneys and is not a member of the Philippine Bar; and [4] that there was a culpable defiance of the law and utter disregard for ethics by respondent Judge (pp. 1- 7, rec.). Respondent Judge Asuncion filed on September 24, 1968 his answer to which a reply was filed on October 16, 1968 by herein complainant. In Our resolution of October 28, 1968, We referred this case to then Justice Cecilia Muoz Palma of the Court of Appeals, for investigation, report and recommendation. After hearing, the said Investigating Justice submitted her report dated May 27, 1971 recommending that respondent Judge should be reprimanded or warned in connection with the first cause of action alleged in the complaint, and for the second cause of action, respondent should be warned in case of a finding that he is prohibited under the law to engage in business. On the third and fourth causes of action, Justice Palma recommended that respondent Judge be exonerated. The records also reveal that on or about November 9 or 11, 1968 (pp. 481, 477, rec.), complainant herein instituted an action before the Court of First Instance of Leyte, entitled "Bernardita R. Macariola, plaintiff, versus Sinforosa R. Bales, et al., defendants," which was docketed as Civil Case No. 4235, seeking the annulment of the project of partition made pursuant to the decision in Civil Case No. 3010 and the two orders issued by respondent Judge approving the same, as well as the partition of the estate and the subsequent conveyances with damages. It appears, however, that some defendants were dropped from the civil case. For one, the case against Dr. Arcadio Galapon was dismissed because he was no longer a real party in interest when Civil Case No. 4234 was filed, having already conveyed on March 6, 1965 a portion of lot 1184-E to respondent Judge and on August 31, 1966 the remainder was sold to the Traders Manufacturing and Fishing Industries, Inc. Similarly, the case against defendant Victoria Asuncion was dismissed on the ground that she was no longer a real party in interest at the time the aforesaid Civil Case No. 4234 was filed as the portion of Lot 1184 acquired by her and respondent Judge from Dr. Arcadio Galapon was already sold on August 31, 1966 to the Traders Manufacturing and Fishing industries, Inc. Likewise, the cases against defendants Serafin P. Ramento, Catalina Cabus, Ben Barraza Go, Jesus Perez, Traders Manufacturing and Fishing Industries, Inc., Alfredo R. Celestial and Pilar P. Celestial, Leopoldo Petilla and Remedios Petilla, Salvador Anota and Enriqueta Anota and Atty. Zotico A. Tolete were dismissed with the conformity of complainant herein, plaintiff therein, and her counsel.

On November 2, 1970, Judge Jose D. Nepomuceno of the Court of First Instance of Leyte, who was directed and authorized on June 2, 1969 by the then Secretary (now Minister) of Justice and now Minister of National Defense Juan Ponce Enrile to hear and decide Civil Case No. 4234, rendered a decision, the dispositive portion of which reads as follows: A. IN THE CASE AGAINST JUDGE ELIAS B. ASUNCION (1) declaring that only Branch IV of the Court of First Instance of Leyte has jurisdiction to take cognizance of the issue of the legality and validity of the Project of Partition [Exhibit "B"] and the two Orders [Exhibits "C" and "C3"] approving the partition; (2) dismissing the complaint against Judge Elias B. Asuncion; (3) adjudging the plaintiff, Mrs. Bernardita R. Macariola to pay defendant Judge Elias B. Asuncion, (a) the sum of FOUR HUNDRED THOUSAND PESOS [P400,000.00] for moral damages; (b) the sum of TWO HUNDRED THOUSAND PESOS [P200,000.001 for exemplary damages; (c) the sum of FIFTY THOUSAND PESOS [P50,000.00] for nominal damages; and (d) he sum of TEN THOUSAND PESOS [PI0,000.00] for Attorney's Fees. B. IN THE CASE AGAINST THE DEFENDANT MARIQUITA VILLASIN, FOR HERSELF AND FOR THE HEIRS OF THE DECEASED GERARDO VILLASIN (1) Dismissing the complaint against the defendants Mariquita Villasin and the heirs of the deceased Gerardo Villasin; (2) Directing the plaintiff to pay the defendants Mariquita Villasin and the heirs of Gerardo Villasin the cost of the suit. C. IN THE CASE AGAINST THE DEFENDANT SINFOROSA R. BALES, ET AL., WHO WERE PLAINTIFFS IN CIVIL CASE NO. 3010

(1) Dismissing the complaint against defendants Sinforosa R. Bales, Adela R. Herrer, Priscilla R. Solis, Luz R. Bakunawa, Anacorita R. Eng and Ruperto O. Reyes. D. IN THE CASE AGAINST DEFENDANT BONIFACIO RAMO (1) Dismissing the complaint against Bonifacio Ramo; (2) Directing the plaintiff to pay the defendant Bonifacio Ramo the cost of the suit. SO ORDERED [pp. 531-533, rec.] It is further disclosed by the record that the aforesaid decision was elevated to the Court of Appeals upon perfection of the appeal on February 22, 1971. I WE find that there is no merit in the contention of complainant Bernardita R. Macariola, under her first cause of action, that respondent Judge Elias B. Asuncion violated Article 1491, paragraph 5, of the New Civil Code in acquiring by purchase a portion of Lot No. 1184-E which was one of those properties involved in Civil Case No. 3010. 'That Article provides: Article 1491. The following persons cannot acquire by purchase, even at a public or judicial action, either in person or through the mediation of another: xxx xxx xxx (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession [emphasis supplied]. The prohibition in the aforesaid Article applies only to the sale or assignment of the property which is the subject of litigation to the persons disqualified therein. WE have already ruled that "... for the prohibition to operate, the sale or assignment of the property must take place during the pendency of the litigation involving the property" (The Director of Lands vs. Ababa et al., 88 SCRA 513, 519 [1979], Rosario vda. de Laig vs. Court of Appeals, 86 SCRA 641, 646 [1978]).

In the case at bar, when the respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E, the decision in Civil Case No. 3010 which he rendered on June 8, 1963 was already final because none of the parties therein filed an appeal within the reglementary period; hence, the lot in question was no longer subject of the litigation. Moreover, at the time of the sale on March 6, 1965, respondent's order dated October 23, 1963 and the amended order dated November 11, 1963 approving the October 16, 1963 project of partition made pursuant to the June 8, 1963 decision, had long become final for there was no appeal from said orders. Furthermore, respondent Judge did not buy the lot in question on March 6, 1965 directly from the plaintiffs in Civil Case No. 3010 but from Dr. Arcadio Galapon who earlier purchased on July 31, 1964 Lot 1184-E from three of the plaintiffs, namely, Priscilla Reyes, Adela Reyes, and Luz R. Bakunawa after the finality of the decision in Civil Case No. 3010. It may be recalled that Lot 1184 or more specifically one-half thereof was adjudicated in equal shares to Priscilla Reyes, Adela Reyes, Luz Bakunawa, Ruperto Reyes and Anacorita Reyes in the project of partition, and the same was subdivided into five lots denominated as Lot 1184-A to 1184-E. As aforestated, Lot 1184-E was sold on July 31, 1964 to Dr. Galapon for which he was issued TCT No. 2338 by the Register of Deeds of Tacloban City, and on March 6, 1965 he sold a portion of said lot to respondent Judge and his wife who declared the same for taxation purposes only. The subsequent sale on August 31, 1966 by spouses Asuncion and spouses Galapon of their respective shares and interest in said Lot 1184-E to the Traders Manufacturing and Fishing Industries, Inc., in which respondent was the president and his wife was the secretary, took place long after the finality of the decision in Civil Case No. 3010 and of the subsequent two aforesaid orders therein approving the project of partition. While it appears that complainant herein filed on or about November 9 or 11, 1968 an action before the Court of First Instance of Leyte docketed as Civil Case No. 4234, seeking to annul the project of partition and the two orders approving the same, as well as the partition of the estate and the subsequent conveyances, the same, however, is of no moment. The fact remains that respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E from Dr. Arcadio Galapon; hence, after the finality of the decision which he rendered on June 8, 1963 in Civil Case No. 3010 and his two questioned orders dated October 23, 1963 and November 11, 1963. Therefore, the property was no longer subject of litigation. The subsequent filing on November 9, or 11, 1968 of Civil Case No. 4234 can no longer alter, change or affect the aforesaid facts that the questioned sale to respondent Judge, now Court of Appeals Justice, was effected and consummated long after the finality of the aforesaid decision or orders. Consequently, the sale of a portion of Lot 1184-E to respondent Judge having taken place over one year after the finality of the decision in Civil Case No. 3010 as well as

the two orders approving the project of partition, and not during the pendency of the litigation, there was no violation of paragraph 5, Article 1491 of the New Civil Code. It is also argued by complainant herein that the sale on July 31, 1964 of Lot 1184-E to Dr. Arcadio Galapon by Priscilla Reyes, Adela Reyes and Luz R. Bakunawa was only a mere scheme to conceal the illegal and unethical transfer of said lot to respondent Judge as a consideration for the approval of the project of partition. In this connection, We agree with the findings of the Investigating Justice thus: And so we are now confronted with this all-important question whether or not the acquisition by respondent of a portion of Lot 1184-E and the subsequent transfer of the whole lot to "TRADERS" of which respondent was the President and his wife the Secretary, was intimately related to the Order of respondent approving the project of partition, Exh. A. Respondent vehemently denies any interest or participation in the transactions between the Reyeses and the Galapons concerning Lot 1184-E, and he insists that there is no evidence whatsoever to show that Dr. Galapon had acted, in the purchase of Lot 1184-E, in mediation for him and his wife. (See p. 14 of Respondent's Memorandum). xxx xxx xxx On this point, I agree with respondent that there is no evidence in the record showing that Dr. Arcadio Galapon acted as a mere "dummy" of respondent in acquiring Lot 1184-E from the Reyeses. Dr. Galapon appeared to this investigator as a respectable citizen, credible and sincere, and I believe him when he testified that he bought Lot 1184-E in good faith and for valuable consideration from the Reyeses without any intervention of, or previous understanding with Judge Asuncion (pp. 391- 394, rec.). On the contention of complainant herein that respondent Judge acted illegally in approving the project of partition although it was not signed by the parties, We quote with approval the findings of the Investigating Justice, as follows: 1. I agree with complainant that respondent should have required the signature of the parties more particularly that of Mrs. Macariola on the project of partition submitted to him for approval; however, whatever error was committed by respondent in that respect was done in good faith as according to Judge Asuncion he was assured by Atty. Bonifacio Ramo, the counsel of record of Mrs. Macariola, That he was authorized by his client to submit said project of partition, (See Exh. B and tsn p. 24, January 20, 1969). While it is true that such written authority if there was any, was not presented by respondent in evidence, nor did Atty. Ramo appear to corroborate the statement of respondent, his affidavit being the

only one that was presented as respondent's Exh. 10, certain actuations of Mrs. Macariola lead this investigator to believe that she knew the contents of the project of partition, Exh. A, and that she gave her conformity thereto. I refer to the following documents: 1) Exh. 9 Certified true copy of OCT No. 19520 covering Lot 1154 of the Tacloban Cadastral Survey in which the deceased Francisco Reyes holds a "1/4 share" (Exh. 9-a). On tills certificate of title the Order dated November 11, 1963, (Exh. U) approving the project of partition was duly entered and registered on November 26, 1963 (Exh. 9-D); 2) Exh. 7 Certified copy of a deed of absolute sale executed by Bernardita Reyes Macariola onOctober 22, 1963, conveying to Dr. Hector Decena the one-fourth share of the late Francisco Reyes-Diaz in Lot 1154. In this deed of sale the vendee stated that she was the absolute owner of said one-fourth share, the same having been adjudicated to her as her share in the estate of her father Francisco Reyes Diaz as per decision of the Court of First Instance of Leyte under case No. 3010 (Exh. 7-A). The deed of sale was duly registered and annotated at the back of OCT 19520 on December 3, 1963 (see Exh. 9-e). In connection with the abovementioned documents it is to be noted that in the project of partition dated October 16, 1963, which was approved by respondent on October 23, 1963, followed by an amending Order on November 11, 1963, Lot 1154 or rather 1/4 thereof was adjudicated to Mrs. Macariola. It is this 1/4 share in Lot 1154 which complainant sold to Dr. Decena on October 22, 1963, several days after the preparation of the project of partition. Counsel for complainant stresses the view, however, that the latter sold her one-fourth share in Lot 1154 by virtue of the decision in Civil Case 3010 and not because of the project of partition, Exh. A. Such contention is absurd because from the decision, Exh. C, it is clear that one-half of one- fourth of Lot 1154 belonged to the estate of Francisco Reyes Diaz while the other half of said one-fourth was the share of complainant's mother, Felisa Espiras; in other words, the decision did not adjudicate the whole of the one-fourth of Lot 1154 to the herein complainant (see Exhs. C-3 & C-4). Complainant became the owner of the entire one-fourth of Lot 1154 only by means of the project of partition, Exh. A. Therefore, if Mrs. Macariola sold Lot 1154 on October 22, 1963, it was for no other reason than that she was wen aware of the distribution of the properties of her deceased father as per Exhs. A and B. It is also significant at this point to state that Mrs. Macariola admitted during the cross-examination that she went to Tacloban City in connection with the sale of Lot 1154 to Dr. Decena (tsn p. 92, November 28, 1968) from which we can deduce that

she could not have been kept ignorant of the proceedings in civil case 3010 relative to the project of partition. Complainant also assails the project of partition because according to her the properties adjudicated to her were insignificant lots and the least valuable. Complainant, however, did not present any direct and positive evidence to prove the alleged gross inequalities in the choice and distribution of the real properties when she could have easily done so by presenting evidence on the area, location, kind, the assessed and market value of said properties. Without such evidence there is nothing in the record to show that there were inequalities in the distribution of the properties of complainant's father (pp. 386389, rec.). Finally, while it is. true that respondent Judge did not violate paragraph 5, Article 1491 of the New Civil Code in acquiring by purchase a portion of Lot 1184-E which was in litigation in his court, it was, however, improper for him to have acquired the same. He should be reminded of Canon 3 of the Canons of Judicial Ethics which requires that: "A judge's official conduct should be free from the appearance of impropriety, and his personal behavior, not only upon the bench and in the performance of judicial duties, but also in his everyday life, should be beyond reproach." And as aptly observed by the Investigating Justice: "... it was unwise and indiscreet on the part of respondent to have purchased or acquired a portion of a piece of property that was or had been in litigation in his court and caused it to be transferred to a corporation of which he and his wife were ranking officers at the time of such transfer. One who occupies an exalted position in the judiciary has the duty and responsibility of maintaining the faith and trust of the citizenry in the courts of justice, so that not only must he be truly honest and just, but his actuations must be such as not give cause for doubt and mistrust in the uprightness of his administration of justice. In this particular case of respondent, he cannot deny that the transactions over Lot 1184-E are damaging and render his actuations open to suspicion and distrust. Even if respondent honestly believed that Lot 1184-E was no longer in litigation in his court and that he was purchasing it from a third person and not from the parties to the litigation, he should nonetheless have refrained from buying it for himself and transferring it to a corporation in which he and his wife were financially involved, to avoid possible suspicion that his acquisition was related in one way or another to his official actuations in civil case 3010. The conduct of respondent gave cause for the litigants in civil case 3010, the lawyers practising in his court, and the public in general to doubt the honesty and fairness of his actuations and the integrity of our courts of justice" (pp. 395396, rec.). II With respect to the second cause of action, the complainant alleged that respondent Judge violated paragraphs 1 and 5, Article 14 of the Code of Commerce when he associated himself with the Traders Manufacturing and Fishing Industries, Inc. as a stockholder and a ranking officer, said corporation having been organized to engage in business. Said Article provides that:

Article 14 The following cannot engage in commerce, either in person or by proxy, nor can they hold any office or have any direct, administrative, or financial intervention in commercial or industrial companies within the limits of the districts, provinces, or towns in which they discharge their duties: 1. Justices of the Supreme Court, judges and officials of the department of public prosecution in active service. This provision shall not be applicable to mayors, municipal judges, and municipal prosecuting attorneys nor to those who by chance are temporarily discharging the functions of judge or prosecuting attorney. xxx xxx xxx 5. Those who by virtue of laws or special provisions may not engage in commerce in a determinate territory. It is Our considered view that although the aforestated provision is incorporated in the Code of Commerce which is part of the commercial laws of the Philippines, it, however, partakes of the nature of a political law as it regulates the relationship between the government and certain public officers and employees, like justices and judges. Political Law has been defined as that branch of public law which deals with the organization and operation of the governmental organs of the State and define the relations of the state with the inhabitants of its territory (People vs. Perfecto, 43 Phil. 887, 897 [1922]). It may be recalled that political law embraces constitutional law, law of public corporations, administrative law including the law on public officers and elections. Specifically, Article 14 of the Code of Commerce partakes more of the nature of an administrative law because it regulates the conduct of certain public officers and employees with respect to engaging in business: hence, political in essence. It is significant to note that the present Code of Commerce is the Spanish Code of Commerce of 1885, with some modifications made by the "Commission de Codificacion de las Provincias de Ultramar," which was extended to the Philippines by the Royal Decree of August 6, 1888, and took effect as law in this jurisdiction on December 1, 1888. Upon the transfer of sovereignty from Spain to the United States and later on from the United States to the Republic of the Philippines, Article 14 of this Code of Commerce must be deemed to have been abrogated because where there is change of sovereignty, the political laws of the former sovereign, whether compatible or not with those of the new sovereign, are automatically abrogated, unless they are expressly reenacted by affirmative act of the new sovereign. Thus, We held in Roa vs. Collector of Customs (23 Phil. 315, 330, 311 [1912]) that:

By well-settled public law, upon the cession of territory by one nation to another, either following a conquest or otherwise, ... those laws which are political in their nature and pertain to the prerogatives of the former government immediately cease upon the transfer of sovereignty. (Opinion, Atty. Gen., July 10, 1899). While municipal laws of the newly acquired territory not in conflict with the, laws of the new sovereign continue in force without the express assent or affirmative act of the conqueror, the political laws do not. (Halleck's Int. Law, chap. 34, par. 14). However, such political laws of the prior sovereignty as are not in conflict with the constitution or institutions of the new sovereign, may be continued in force if the conqueror shall so declare by affirmative act of the commander-in-chief during the war, or by Congress in time of peace. (Ely's Administrator vs. United States, 171 U.S. 220, 43 L. Ed. 142). In the case of American and Ocean Ins. Cos. vs. 356 Bales of Cotton (1 Pet. [26 U.S.] 511, 542, 7 L. Ed. 242), Chief Justice Marshall said: On such transfer (by cession) of territory, it has never been held that the relations of the inhabitants with each other undergo any change. Their relations with their former sovereign are dissolved, and new relations are created between them and the government which has acquired their territory. The same act which transfers their country, transfers the allegiance of those who remain in it; and the law which may be denominated political, is necessarily changed, although that which regulates the intercourse and general conduct of individuals, remains in force, until altered by the newly- created power of the State. Likewise, in People vs. Perfecto (43 Phil. 887, 897 [1922]), this Court stated that: "It is a general principle of the public law that on acquisition of territory the previous political relations of the ceded region are totally abrogated. " There appears no enabling or affirmative act that continued the effectivity of the aforestated provision of the Code of Commerce after the change of sovereignty from Spain to the United States and then to the Republic of the Philippines. Consequently, Article 14 of the Code of Commerce has no legal and binding effect and cannot apply to the respondent, then Judge of the Court of First Instance, now Associate Justice of the Court of Appeals. It is also argued by complainant herein that respondent Judge violated paragraph H, Section 3 of Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, which provides that:

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

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

corresponding investigation. Clearly, the aforesaid section defines the grounds and prescribes the special procedure for the discipline of judges. And under Sections 5, 6 and 7, Article X of the 1973 Constitution, only the Supreme Court can discipline judges of inferior courts as well as other personnel of the Judiciary. It is true that under Section 33 of the Civil Service Act of 1959: "The Commissioner may, for ... violation of the existing Civil Service Law and rules or of reasonable office regulations, or in the interest of the service, remove any subordinate officer or employee from the service, demote him in rank, suspend him for not more than one year without pay or fine him in an amount not exceeding six months' salary." Thus, a violation of Section 12 of Rule XVIII is a ground for disciplinary action against civil service officers and employees. However, judges cannot be considered as subordinate civil service officers or employees subject to the disciplinary authority of the Commissioner of Civil Service; for, certainly, the Commissioner is not the head of the Judicial Department to which they belong. The Revised Administrative Code (Section 89) and the Civil Service Law itself state that the Chief Justice is the department head of the Supreme Court (Sec. 20, R.A. No. 2260) [1959]); and under the 1973 Constitution, the Judiciary is the only other or second branch of the government (Sec. 1, Art. X, 1973 Constitution). Besides, a violation of Section 12, Rule XVIII cannot be considered as a ground for disciplinary action against judges because to recognize the same as applicable to them, would be adding another ground for the discipline of judges and, as aforestated, Section 67 of the Judiciary Act recognizes only two grounds for their removal, namely, serious misconduct and inefficiency. Moreover, under Section 16(i) of the Civil Service Act of 1959, it is the Commissioner of Civil Service who has original and exclusive jurisdiction "(T)o decide, within one hundred twenty days, after submission to it, all administrative cases against permanent officers and employees in the competitive service, and, except as provided by law, to have final authority to pass upon their removal, separation, and suspension and upon all matters relating to the conduct, discipline, and efficiency of such officers and employees; and prescribe standards, guidelines and regulations governing the administration of discipline" (emphasis supplied). There is no question that a judge belong to the non-competitive or unclassified service of the government as a Presidential appointee and is therefore not covered by the aforesaid provision. WE have already ruled that "... in interpreting Section 16(i) of Republic Act No. 2260, we emphasized that only permanent officers and employees who belong to the classified service come under the exclusive jurisdiction of the Commissioner of Civil Service" (Villaluz vs. Zaldivar, 15 SCRA 710,713 [1965], Ang-Angco vs. Castillo, 9 SCRA 619 [1963]). Although the actuation of respondent Judge in engaging in private business by joining the Traders Manufacturing and Fishing Industries, Inc. as a stockholder and a ranking officer, is not violative of the provissions of Article 14 of the Code of Commerce and

Section 3(h) of the Anti-Graft and Corrupt Practices Act as well as Section 12, Rule XVIII of the Civil Service Rules promulgated pursuant to the Civil Service Act of 1959, the impropriety of the same is clearly unquestionable because Canon 25 of the Canons of Judicial Ethics expressly declares that: A judge should abstain from making personal investments in enterprises which are apt to be involved in litigation in his court; and, after his accession to the bench, he should not retain such investments previously made, longer than a period sufficient to enable him to dispose of them without serious loss. It is desirable that he should, so far as reasonably possible, refrain from all relations which would normally tend to arouse the suspicion that such relations warp or bias his judgment, or prevent his impartial attitude of mind in the administration of his judicial duties. ... WE are not, however, unmindful of the fact that respondent Judge and his wife had withdrawn on January 31, 1967 from the aforesaid corporation and sold their respective shares to third parties, and it appears also that the aforesaid corporation did not in anyway benefit in any case filed by or against it in court as there was no case filed in the different branches of the Court of First Instance of Leyte from the time of the drafting of the Articles of Incorporation of the corporation on March 12, 1966, up to its incorporation on January 9, 1967, and the eventual withdrawal of respondent on January 31, 1967 from said corporation. Such disposal or sale by respondent and his wife of their shares in the corporation only 22 days after the incorporation of the corporation, indicates that respondent realized that early that their interest in the corporation contravenes the aforesaid Canon 25. Respondent Judge and his wife therefore deserve the commendation for their immediate withdrawal from the firm after its incorporation and before it became involved in any court litigation III With respect to the third and fourth causes of action, complainant alleged that respondent was guilty of coddling an impostor and acted in disregard of judicial decorum, and that there was culpable defiance of the law and utter disregard for ethics. WE agree, however, with the recommendation of the Investigating Justice that respondent Judge be exonerated because the aforesaid causes of action are groundless, and WE quote the pertinent portion of her report which reads as follows: The basis for complainant's third cause of action is the claim that respondent associated and closely fraternized with Dominador Arigpa Tan who openly and publicly advertised himself as a practising attorney (see Exhs. I, I-1 and J) when in truth and in fact said Dominador Arigpa Tan does not appear in the Roll of Attorneys and is not a member of the Philippine Bar as certified to in Exh. K. The "respondent denies knowing that Dominador Arigpa Tan was an "impostor" and claims that all the time he believed that the latter was

a bona fide member of the bar. I see no reason for disbelieving this assertion of respondent. It has been shown by complainant that Dominador Arigpa Tan represented himself publicly as an attorney-at-law to the extent of putting up a signboard with his name and the words "Attorney-at Law" (Exh. I and 1- 1) to indicate his office, and it was but natural for respondent and any person for that matter to have accepted that statement on its face value. "Now with respect to the allegation of complainant that respondent is guilty of fraternizing with Dominador Arigpa Tan to the extent of permitting his wife to be a godmother of Mr. Tan's child at baptism (Exh. M & M-1), that fact even if true did not render respondent guilty of violating any canon of judicial ethics as long as his friendly relations with Dominador A. Tan and family did not influence his official actuations as a judge where said persons were concerned. There is no tangible convincing proof that herein respondent gave any undue privileges in his court to Dominador Arigpa Tan or that the latter benefitted in his practice of law from his personal relations with respondent, or that he used his influence, if he had any, on the Judges of the other branches of the Court to favor said Dominador Tan. Of course it is highly desirable for a member of the judiciary to refrain as much as possible from maintaining close friendly relations with practising attorneys and litigants in his court so as to avoid suspicion 'that his social or business relations or friendship constitute an element in determining his judicial course" (par. 30, Canons of Judicial Ethics), but if a Judge does have social relations, that in itself would not constitute a ground for disciplinary action unless it be clearly shown that his social relations be clouded his official actuations with bias and partiality in favor of his friends (pp. 403-405, rec.). In conclusion, while respondent Judge Asuncion, now Associate Justice of the Court of Appeals, did not violate any law in acquiring by purchase a parcel of land which was in litigation in his court and in engaging in business by joining a private corporation during his incumbency as judge of the Court of First Instance of Leyte, he should be reminded to be more discreet in his private and business activities, because his conduct as a member of the Judiciary must not only be characterized with propriety but must always be above suspicion. WHEREFORE, THE RESPONDENT ASSOCIATE JUSTICE OF THE COURT OF APPEALS IS HEREBY REMINDED TO BE MORE DISCREET IN HIS PRIVATE AND BUSINESS ACTIVITIES. SO ORDERED. Teehankee, Guerrero, De Castro, Melencio-Herrera, Plana, Vasquez, Relova and Gutierrez, JJ., concur.

Concepcion Jr., J., is on leave. Fernando, C.J., Abad Santos and Esolin JJ., took no part.

MACARIOLA vs. ASUNCION A.M. No. 133-J, May 31, 1982, 114 SCRA 77 FACTS: On June 8, 1963, a decision was rendered by respondent JudgeAsuncion in Civil Case 3010 which became final for lack of an appeal. One of the parties in that case was Macariola. On October 16, 1963, a project of partition was submitted to Judge Asuncion which he approved in an Order dated October 23, 1963, later amended on November 11, 1963. Lot 1184-E, which is one of the lots involved in the partition, was sold on July 31, 1964 to Dr. Arcadio Galapon. On March 6, 1965, Dr. Arcadio Galapon and his wife Sold a portion of the said lot to JudgeAsuncion and his wife, Victoria S. Asuncion. In a verified complaint dated August 6, 1968 Bernardita R. Macariola charged respondent Judge Elias B. Asuncion of the Court of First Instance of Leyte with "acts unbecoming a judge." The complainant alleged that that respondent Judge Asuncion violated Article 1491, paragraph 5, of the New Civil Code in acquiring by purchase a portion of Lot No. 1184-E which was one of those properties involved in Civil Case No. 3010 decided by him. ISSUE: Whether or not Judge Asuncion violated the said provision. HELD: The Court finds that there is no merit in the contention of complainant Bernardita R. Macariola. The prohibition in the aforesaid Article applies only to the sale or assignment of the property which is the subject of litigation to the persons disqualified therein. For the prohibition to operate, the sale or assignment of the property must take place during the pendency of the litigation involving the property. When the respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E, the decision in Civil Case No. 3010 which he rendered on June 8, 1963 was already final because none of the parties therein filed an appeal within the reglementary period; hence, the lot in question was no longer subject of the litigation. Moreover, at the time of the sale on March 6, 1965, respondent's order dated October 23, 1963 and the amended order dated November 11, 1963 approving the October 16, 1963 project of partition made pursuant to the June 8, 1963 decision, had long become final for there was no appeal from said orders. Furthermore, respondentJudge did not buy the lot in

question on March 6, 1965 directly from the plaintiffs in Civil Case No. 3010 but from Dr. Arcadio Galapon. Therefore, the respondent Associate Justice of the Court of Appealsis hereby reminded to be more discreet in his private and business activities.

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

MELENCIO-HERRERA, J.: Petition for Review on certiorari assailing the Decision, dated October 6, 1980, and the Resolution on the Motion for Reconsideration, dated November 27, 1980, of the then Court of First Instance of Pangasinan, Branch I, in Civil Case No. 15620 entitled "Corazon DAGUINES vs. MERCEDES Calimlim-Canullas," upholding the sale of a parcel of land in favor of DAGUINES but not of the conjugal house thereon' The background facts may be summarized as follows: Petitioner MERCEDES CalimlimCanullas and FERNANDO Canullas were married on December 19, 1962. They begot five children. They lived in a small house on the residential land in question with an area of approximately 891 square meters, located at Bacabac, Bugallon, Pangasinan. After FERNANDO's father died in 1965, FERNANDO inherited the land. In 1978, FERNANDO abandoned his family and was living with private respondent Corazon DAGUINES. During the pendency of this appeal, they were convicted of concubinage in a judgment rendered on October 27, 1981 by the then Court of First Instance of Pangasinan, Branch II, which judgment has become final.

On April 15, 1980, FERNANDO sold the subject property with the house thereon to DAGUINES for the sum of P2,000.00. In the document of sale, FERNANDO described the house as "also inherited by me from my deceased parents." Unable to take possession of the lot and house, DAGUINES initiated a complaint on June 19, 1980 for quieting of title and damages against MERCEDES. The latter resisted and claimed that the house in dispute where she and her children were residing, including the coconut trees on the land, were built and planted with conjugal funds and through her industry; that the sale of the land together with the house and improvements to DAGUINES was null and void because they are conjugal properties and she had not given her consent to the sale, In its original judgment, respondent Court principally declared DAGUINES "as the lawful owner of the land in question as well as the one-half () of the house erected on said land." Upon reconsideration prayed for by MERCEDES, however, respondent Court resolved: WHEREFORE, the dispositive portion of the Decision of this Court, promulgated on October 6, 1980, is hereby amended to read as follows: (1) Declaring plaintiff as the true and lawful owner of the land in question and the 10 coconut trees; (2) Declaring as null and void the sale of the conjugal house to plaintiff on April 15, 1980 (Exhibit A) including the 3 coconut trees and other crops planted during the conjugal relation between Fernando Canullas (vendor) and his legitimate wife, herein defendant Mercedes Calimlim- Canullas; xxx xxx xxx The issues posed for resolution are (1) whether or not the construction of a conjugal house on the exclusive property of the husband ipso facto gave the land the character of conjugal property; and (2) whether or not the sale of the lot together with the house and improvements thereon was valid under the circumstances surrounding the transaction. The determination of the first issue revolves around the interpretation to be given to the second paragraph of Article 158 of the Civil Code, which reads: xxx xxx xxx Buildings constructed at the expense of the partnership during the marriage on land belonging to one of the spouses also pertain to the partnership, but the value of the land shall be reimbursed to the spouse who owns the same.

We hold that pursuant to the foregoing provision both the land and the building belong to the conjugal partnership but the conjugal partnership is indebted to the husband for the value of the land. The spouse owning the lot becomes a creditor of the conjugal partnership for the value of t2he lot, 1 which value would be reimbursed at the liquidation of the conjugal partnership. In his commentary on the corresponding provision in the Spanish Civil Code (Art. 1404), Manresa stated: El articulo cambia la doctrine; los edificios construidos durante el matrimonio en suelo propio de uno de los conjuges son gananciales, abonandose el valor del suelo al conj uge a quien pertenezca. It is true that in the case of Maramba vs. Lozano, 3 relied upon by respondent Judge, it was held that the land belonging to one of the spouses, upon which the spouses have built a house, becomes conjugal property only when the conjugal partnership is liquidated and indemnity paid to the owner of the land. We believe that the better rule is that enunciated by Mr. Justice J.B.L. Reyes in Padilla vs. Paterno, 3 SCRA 678, 691 (1961), where the following was explained: As to the above properties, their conversion from paraphernal to conjugal assets should be deemed to retroact to the time the conjugal buildings were first constructed thereon or at the very latest, to the time immediately before the death of Narciso A. Padilla that ended the conjugal partnership. They can not be considered to have become conjugal property only as of the time their values were paid to the estate of the widow Concepcion Paterno because by that time the conjugal partnership no longer existed and it could not acquire the ownership of said properties. The acquisition by the partnership of these properties was, under the 1943 decision, subject to the suspensive condition that their values would be reimbursed to the widow at the liquidation of the conjugal partnership; once paid, the effects of the fulfillment of the condition should be deemed to retroact to the date the obligation was constituted (Art. 1187, New Civil Code) ... The foregoing premises considered, it follows that FERNANDO could not have alienated the4house and lot to DAGUINES since MERCEDES had not given her consent to said sale. Anent the second issue, we find that the contract of sale was null and void for being contrary to morals and public policy. The sale was made by a husband in favor of a concubine after he had abandoned his family and left the conjugal home where his wife and children lived and from whence they derived their support. That sale was subversive of the stability of the family, a basic social institution which public policy cherishes and protects. 5

Article 1409 of the Civil Code statesinter alia that: contracts whose cause, object, or purpose is contrary to law, morals, good customs, public order, or public policy are void and inexistent from the very beginning. Article 1352 also provides that: "Contracts without cause, or with unlawful cause, produce no effect whatsoever.The cause is unlawful if it is contrary to law, morals, good customs, public order, or public policy." Additionally, the law emphatically pr6ohibits the spouses from selling property to each other subject to certain exceptions. Similarly, donations between spouses during marriage are prohibited. 7 And this is so because if transfers or con conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to prevent the exercise of undue influence by one spouse over the other, 8 as well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, "the condition of those who incurred guilt would turn out to be better than those in legal union." Those provisions are dictated by public interest and their criterion must be imposed upon the wig of the parties. That was the ruling in Buenaventura vs. Bautista, also penne9d by Justice JBL Reyes (CA) 50 O.G. 3679, and cited in Matabuena vs. Cervantes. We quote hereunder the pertinent dissertation on this point: We reach a different conclusion. While Art. 133 of the Civil Code considers as void a donation between the spouses during the marriage, policy considerations of the most exigent character as wen as the dictates of morality require that the same prohibition should apply to a common- law relationship. As announced in the outset of this opinion, a 1954 Court of Appeals decision, Buenaventura vs. Bautista, 50 OG 3679, interpreting a similar provision of the old Civil Code speaks unequivocally. If the policy of the law is, in the language of the opinion of the then Justice J.B.L. Reyes of that Court, 'to prohibit donations in favor of the other consort and his descendants because of fear of undue influence and improper pressure upon the donor, a prejudice deeply rooted in our ancient law, ..., then there is every reason to apply the same prohibitive policy to persons living together as husband and wife without benefit of nuptials. For it is not to be doubted that assent to such irregular connection for thirty years bespeaks greater influence of one party over the other, so that the danger that the law seeks to avoid is correspondingly increased'. Moreover, as pointed out by Ulpian (in his lib 32 ad Sabinum, fr. 1), "It would not be just that such donations should subsist, lest the conditions of those who incurred guilt should turn out to be better." So long as marriage remains the cornerstone of our family law, reason and morality alike demand that the disabilities attached to marriage should likewise attach to concubinage (Emphasis supplied),

WHEREFORE, the Decision of respondent Judge, dated October 6, 1980, and his Resolution of November 27, 1980 on petitioner's Motion for Reconsideration, are hereby set aside and the sale of the lot, house and improvements in question, is hereby declared null and void. No costs. SO ORDERED. Teehankee (Chairman), Plana, Relova, Gutierrez, Jr., and De la Fuente, JJ., concur.

MERCEDES CALIMLIM- CANULLAS, petitioner, vs. HON. WILLELMO FORTUN, Judge, Court of First instance of Pangasinan, Branch I, and CORAZON DAGUINES, respondents.

FACTS: Petitioner MERCEDES Calimlim-Canullas and FERNANDO Canullas were married on December 19, 1962. They begot five children. They lived in a small house on the residential land in question with an area of approximately 891 square meters, located at Bacabac, Bugallon, Pangasinan. After FERNANDO's father died in 1965, FERNANDO inherited the land. In 1978, FERNANDO abandoned his family and was living with private respondent Corazon DAGUINES. During the pendency of this appeal, they were convicted of concubinage in a judgment rendered on October 27, 1981 by the then Court of First Instance of Pangasinan, Branch II, which judgment has become final. On April 15, 1980, FERNANDO sold the subject property with the house thereon to DAGUINES for the sum of P2,000.00. In the document of sale, FERNANDO described the house as "also inherited by me from my deceased parents." Unable to take possession of the lot and house, DAGUINES initiated a complaint on June 19, 1980 for quieting of title and damages against MERCEDES. The latter resisted and claimed that the house in dispute where she and her children were residing, including the coconut trees on the land, were built and planted with conjugal funds and through her industry; that the sale of the land together with the house and improvements to DAGUINES was null and void because they are conjugal properties and she had not given her consent to the sale, In its original judgment, respondent Court principally declared DAGUINES "as the lawful owner of the land in question as well as the one-half of the house erected on said land." Upon reconsideration prayed for by MERCEDES, however, respondent Court resolved:

WHEREFORE, the dispositive portion of the Decision of this Court, promulgated on October 6, 1980, is hereby amended to read as follows: Declaring plaintiff as the true and lawful owner of the land in question and the 10 coconut trees; Declaring as null and void the sale of the conjugal house to plaintiff on April 15, 1980 (Exhibit A) including the 3 coconut trees and other crops planted during the conjugal relation between Fernando Canullas (vendor) and his legitimate wife, herein defendant Mercedes CalimlimCanullas;

ISSUES: 1) Whether or not the construction of a conjugal house on the exclusive property of the husband ipso facto gave the land the character of conjugal property; (2) Whether or not the sale of the lot together with the house and improvements thereon was valid under the circumstances surrounding the transaction.

HELD: The determination of the first issue revolves around the interpretation to be given to the second paragraph of Article 158 of the Civil Code, which reads: xxx xxx xxx Buildings constructed at the expense of the partnership during the marriage on land belonging to one of the spouses also pertain to the partnership, but the value of the land shall be reimbursed to the spouse who owns the same.

We hold that pursuant to the foregoing provision both the land and the building belong to the conjugal partnership but the conjugal partnership is indebted to the husband for the value of the land. The spouse owning the lot becomes a creditor of the conjugal partnership for the value of the lot, which value would be reimbursed at the liquidation of the conjugal partnership.

It is true that in the case of Maramba vs. Lozano, relied upon by respondent Judge, it was held that the land belonging to one of the spouses, upon which the spouses have built a house,

becomes conjugal property only when the conjugal partnership is liquidated and indemnity paid to the owner of the land. We believe that the better rule is that enunciated by Mr. Justice J.B.L. Reyes in Padilla vs. Paterno, 3 SCRA 678, 691 (1961), where the following was explained: As to the above properties, their conversion from paraphernal to conjugal assets should be deemed to retroact to the time the conjugal buildings were first constructed thereon or at the very latest, to the time immediately before the death of Narciso A. Padilla that ended the conjugal partnership. They can not be considered to have become conjugal property only as of the time their values were paid to the estate of the widow Concepcion Paterno because by that time the conjugal partnership no longer existed and it could not acquire the ownership of said properties. The acquisition by the partnership of these properties was, under the 1943 decision, subject to the suspensive condition that their values would be reimbursed to the widow at the liquidation of the conjugal partnership; once paid, the effects of the fulfillment of the condition should be deemed to retroact to the date the obligation was constituted (Art. 1187, New Civil Code) ...

The foregoing premises considered, it follows that FERNANDO could not have alienated the house and lot to DAGUINES since MERCEDES had not given her consent to said sale.

Anent the second issue, we find that the contract of sale was null and void for being contrary to morals and public policy. The sale was made by a husband in favor of a concubine after he had abandoned his family and left the conjugal home where his wife and children lived and from whence they derived their support. That sale was subversive of the stability of the family, a basic social institution which public policy cherishes and protects.

Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purpose is contrary to law, morals, good customs, public order, or public policy are void and inexistent from the very beginning.

Article 1352 also provides that: "Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order, or public policy."

Additionally, the law emphatically prohibits the spouses from selling property to each other subject to certain exceptions. Similarly, donations between spouses during marriage are prohibited. And this is so because if transfers or con conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to prevent the exercise of undue influence by one spouse over the other, as well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, "the condition of those who incurred guilt would turn out to be better than those in legal union." Those provisions are dictated by public interest and their criterion must be imposed upon the wig of the parties. That was the ruling in Buenaventura vs. Bautista, also penned by Justice JBL Reyes (CA) 50 O.G. 3679, and cited in Matabuena vs. Cervantes. We quote hereunder the pertinent dissertation on this point:

We reach a different conclusion. While Art. 133 of the Civil Code considers as void a donation between the spouses during the marriage, policy considerations of the most exigent character as when the dictates of morality require that the same prohibition should apply to a common- law relationship.

As announced in the outset of this opinion, a 1954 Court of Appeals decision, Buenaventura vs. Bautista, 50 OG 3679, interpreting a similar provision of the old Civil Code speaks unequivocally. If the policy of the law is, in the language of the opinion of the then Justice J.B.L. Reyes of that Court, 'to prohibit donations in favor of the other consort and his descendants because of fear of undue influence and improper pressure upon the donor, a prejudice deeply rooted in our ancient law, ..., then there is every reason to apply the same prohibitive policy to persons living together as husband and wife without benefit of nuptials. For it is not to be doubted that assent to such irregular connection for thirty years bespeaks greater influence of one party over the other, so that the danger that the law seeks to avoid is correspondingly increased'. Moreover, as pointed out by Ulpian "It would not be just that such donations should subsist, lest the conditions of those who incurred guilt should turn out to be better." So long as marriage remains the cornerstone of our family law, reason and morality alike demand that the disabilities attached to marriage should likewise attach to concubinage (Emphasis supplied)

Republic of the Philippines SUPREME COURT Manila

THIRD DIVISION G.R. No. 81552 May 28, 1990 DIONISIO FIESTAN and JUANITA ARCONADO, petitioners vs. COURT OF APPEALS; DEVELOPMENT BANK OF THE PHILIPPINES, LAOAG CITY BRANCH; PHILIPPINE NATIONAL BANK, VIGAN BRANCH, ILOCOS SUR, FRANCISCO PERIA and REGISTER OF DEEDS OF ILOCOS SUR, respondents. Pedro Singson Reyes for petitioners. The Chief Legal Counsel for PNB. Public Assistance Office for Francisco Peria. Ruben O. Fruto, Bonifacio M. Abad and David C. Frez for DBP Laoag Branch.

FERNAN, C.J.: In this petition for review on certiorari, petitioners spouses Dionisio Fiestan and Juanita Arconada owners of a parcel of land (Lot No. 2B) situated in Ilocos Sur covered by TCT T-13218 which they mortgaged to the Development Bank of the Philippines (DBP) as security f1or their P22,400.00 loan, seek the reversal of the decision of the Court of Appeals dated June 5, 1987 affirming the dismissal of their complaint filed against the Development Bank of the Philippines, Laoag City Branch, Philippine National Bank, Vigan Branch, Ilocos Sur, Francisco Peria and the Register of Deeds of Ilocos Sur, for annulment of sale, mortgage, and cancellation of transfer certificates of title. Records show that Lot No. 2-B was acquired by the DBP as the highest bidder at a public auction sale on August 6, 1979 after it was extrajudicially foreclosed by the DBP in accordance with Act No. 3135, as amended by Act No. 4118, for failure of petitioners to pay their mortgage indebtedness. A certificate of sale was subsequently issued by the Provincial Sheriff of Ilocos Sur on the same day and the same was registered on September 28, 1979 in the Office of the Register of Deeds of Ilocos Sur. Earlier, or on September 26, 1979, petitioners executed a Deed of Sale in favor of DBP which was likewise registered on September 28, 1979. Upon failure of petitioners to redeem the property within the one (1) year period which expired on September 28, 1980, petitioners' TCT T-13218 over Lot No. 2-B was cancelled by the Register of Deeds and in lieu thereof TCT T-19077 was issued to the DBP upon presentation of a duly executed affidavit of consolidation of ownership.

On April 13,1982, the DBP sold the lot to Francisco Peria in a Deed of Absolute Sale and the same was registered on April 15, 1982 in the Office of the Register of Deeds of Ilocos Sur. Subsequently, the DBP's title over the lot was cancelled and in lieu thereof TCT T-19229 was issued to Francisco Peria. After title over said lot was issued in his name, Francisco Peria secured a tax declaration for said lot and accordingly paid the taxes due thereon. He thereafter mortgaged said lot to the PNB Vigan Branch as security for his loan of P115,000.00 as required by the bank to increase his original loan from P49,000.00 to P66,000.00 until it finally reached the approved amount of P115,000.00. Since petitioners were still in possession of Lot No. 2-B, the Provincial Sheriff ordered them to vacate the premises. On the other hand, petitioners filed on August 23, 1982 a complaint for annulment of sale, mortgage and cancellation of transfer certificates of title against the DBP-Laoag City, PNB Vigan Branch, Ilocos Sur, Francisco Peria and the Register of Deeds of Ilocos Sur, docketed as Civil Case No. 3447-V before the Regional Trial Court of Vigan, Ilocos Sur. After trial, the RTC of Vigan, Ilocos Sur, Branch 20, rendered its decision 2 on November 14, 1983 dismissing the complaint, declaring therein, as valid the extrajudicial foreclosure sale of the mortgaged property in favor of the DBP as highest bidder in the public auction sale held on August 6, 1979, and its subsequent sale by DBP to Francisco Peria as well as the real estate mortgage constituted thereon in favor of PNB Vigan as security for the P115,000.00 loan of Francisco Peria. The Court of Appeals affirmed the decision of the RTC of Vigan, Ilocos Sur on June 20, 1987. The motion for reconsideration having been denied 3 on January 19, 1988, petitioners filed the instant petition for review on certiorari with this Court. Petitioners seek to annul the extrajudicial foreclosure sale of the mortgaged property on August 6, 1979 in favor of the Development Bank of the Philippines (DBP) on the ground that it was conducted by the Provincial Sheriff of Ilocos Sur without first effecting a levy on said property before selling the same at the public auction sale. Petitioners thus maintained that the extrajudicial foreclosure sale being null and void by virtue of lack of a valid levy, the certificate of sale issued by the Provincial Sheriff cannot transfer ownership over the lot in question to the DBP and consequently the deed of sale executed by the DBP in favor of Francisco Peria and the real estate mortgage constituted thereon by the latter in favor of PNB Vigan Branch are likewise null and void. The Court finds these contentions untenable. The formalities of a levy, as an essential requisite of a valid execution sale under Section 15 of Rule 39 and a valid attachment lien under Rule 57 of the Rules of Court, are not basic requirements before an extrajudicially foreclosed property can be sold at public auction. At the outset, distinction should be made of the three different kinds of

sales under the law, namely: an ordinary execution sale, a judicial foreclosure sale, and an extrajudicial foreclosure sale, because a different set of law applies to each class of sale mentioned. An ordinary execution sale is governed by the pertinent provisions of Rule 39 of the Rules of Court. Rule 68 of the Rules of Court applies in cases of judicial foreclosure sale. On the other hand, Act No. 3135, as amended by Act No. 4118 otherwise known as "An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate Mortgages" applies in cases of extrajudicial foreclosure sale. The case at bar, as the facts disclose, involves an extrajudicial foreclosure sale. The public auction sale conducted on August 6, 1979 by the Provincial Sheriff of Ilocos Sur refers to the "sale" mentioned in Section 1 of Act No. 3135, as amended, which was made pursuant to a special power inserted in or attached to a real estate mortgage made as security for the payment of money or the fulfillment of any other obligation. It must be noted that in the mortgage contract, petitioners, as mortgagor, had appointed private respondent DBP, for the purpose of extrajudicial foreclosure, "as his attorney-infact to sell the property mortgaged under Act No. 3135, as amended, to sign all documents and perform any act requisite and necessary to accomplish said purpose .... In case of foreclosure, the Mortgagor hereby consents to the appointment of the mortgagee or any of its employees as receiver, without any bond, to4take charge of the mortgaged property at once, and to hold possession of the same ... There is no justifiable basis, therefore, to apply by analogy the provisions of Rule 39 of the Rules of Court on ordinary execution sale, particularly Section 15 thereof as well as the jurisprudence under said provision, to an extrajudicial foreclosure sale conducted under the provisions of Act No. 3135, as amended. Act No. 3135, as amended, being a special law governing extrajudicial foreclosure proceedings, the same must govern as against the provisions on ordinary execution sale under Rule 39 of the Rules of Court. In that sense, the case of Aparri vs. Court Of Appeals, 13 SCRA 611 (1965), cited by petitioners, must be distinguished from the instant case. On the question of what should be done in the event the highest bid made for the property at the extrajudicial foreclosure sale is in excess of the mortgage debt, this Court applied the rule and practice in a judicial foreclosure sale to an extrajudicial foreclosure sale in a similar case considering that the governing provisions of law as mandated by Section 6 of Act No. 3135, as amended, specifically Sections 29, 30 and 34 of Rule 39 of the Rules of Court (previously Sections 464, 465 and 466 of the Code of Civil Procedure) are silent on the matter. The said ruling cannot, however, be construed as the legal basis for applying the requirement of a levy under Section 15 of Rule 39 of the Rules of Court before an extrajudicially foreclosed property can be sold at public auction when none is expressly required under Act No. 3135, as amended. Levy, as understood under Section 15, Rule 39 of the Rules of Court in relation to execution of money judgments, has been defined by this Court as the act whereby a sheriff sets apart or appropriates for the purpose of sat5isfying the command of the writ, a part or the whole of the judgment-debtor's property.

In extrajudicial foreclosure of mortgage, the property sought to be foreclosed need not be identified or set apart by the sheriff from the whole mass of property of the mortgagor for the purpose of satisfying the mortgage indebtedness. For, the essence of a contract of mortgage indebtedness is that a property has been identified or set apart from the mass of the property of the debtor-mortgagor as security for the payment of money or the fulfillment of an obligation to answer the amount of indebtedness, in case of default of payment. By virtue of the special power inserted or attached to the mortgage contract, the mortgagor has authorized the mortgagee-creditor or any other person authorized to act for him to sell said property in accordance with the formalities required under Act No. 3135, as amended. The Court finds that the formalities prescribed under Sections 2, 3 and 4 of Act No. 3135, as amended, were substantially complied with in the instant case. Records show that the notices of sale were posted by the Provincial Sheriff of Ilocos Sur and the same were published in Ilocos Times, a newspaper of general circulation in the province of Ilocos Sur, setting the date of the auctio6n sale on August 6, 1979 at 10:00 a.m. in the Office of the Sheriff, Vigan, Ilocos Sur. The nullity of the extrajudicial foreclosure sale in the instant case is further sought by petitioners on the ground that the DBP cannot acquire by purchase the mortgaged property at the public auction sale by virtue of par. (2) of Article 1491 and par. (7) of Article 1409 of the Civil Code which prohibits agents from acquiring by purchase, even at a public or judicial auction either in person or through the mediation of another, the property whose administration or sale may have been entrusted to them unless the consent of the principal has been given. The contention is erroneous. The prohibition mandated by par. (2) of Article 1491 in relation to Article 1409 of the Civil Code does not apply in the instant case where the sale of the property in dispute was made under a special power inserted in or attached to the real estate mortgage pursuant to Act No. 3135, as amended. It is a familiar rule of statutory construction that, as between a specific statute and general statute, the former must prev7ail since it evinces the legislative intent more clearly than a general statute does. The Civil Code (R.A. 386) is of general character while Act No. 3135, as amended, is a special enactment and therefore the latter must prevail. 8 Under Act No. 3135, as amended, a mortgagee-creditor is allowed to participate in the bidding and purchase under the same conditions as any other bidder, as in the case at bar, thus: Section 5. At any sale, the creditor, trustee, or other person authorized to act for the creditor, may participate in the bidding and purchase under the same conditions as any other bidder, unless the contrary has been expressly provided in the mortgage or trust deed under which the sale is made.

In other words, Section 5 of Act No. 3135, as amended, creates and is designed to create an exception to the general rule that a mortgagee or trustee in a mortgage or deed of trust which contains a power of sale on default may not become the purchaser, either directly or through the agency of a third person, at a sale which he himself makes under the power. Under such an exception, the title of the mortgagee-creditor over the property cannot be impeached or defeated on the ground that the mortgagee cannot be a purchaser at his own sale. Needless to state, the power to foreclose is not an ordinary agency that contemplates exclusively the representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own protection. It is an ancillary stipulation supported by the same cause or consideration for the mortgage and forms an essential and inseparable part of that bilateral agreement. 9 Even in the absence of statutory provision, there is authority to hold that a mortgagee may purchase at a sale under his mortgage to protect his own interest or to av1oid a loss to himself by a sale to a third person at a price below the mortgage debt. 0 The express mandate of Section 5 of Act No. 3135, as amended, amply protects the interest of the mortgagee in this jurisdiction. WHEREFORE, in view of the foregoing, the petition is DENIED for lack of merit and the decision of the Court of Appeals dated June 20, 1987 is hereby AFFIRMED. No cost. SO ORDERED. Gutierrez, Jr., Feliciano, Bidin and Cortes JJ., concur.

Fiestan vs CA G.R. No. 81552 May 28, 1990 FACTS: Petitioners spouses Dionisio Fiestan and Juanita Arconada were the owners of a parcel of land wituated in Ilocos Sur which they mortgaged to the DBP as security for their P22,400.00 loan. For failure of petitioners to pay their mortgage indebtedness, the lot was acquired by the DBP as the highest bidder at a public auction sale after it was extrajudicially foreclosed by the DBP. A certificate of sale was subsequently issued by the Provincial Sheriff on the same day and the same was registered in the Office of the Register of Deeds. Earlier, petitioners executed a Deed of Sale in favor of DBP which was likewise registered. Upon failure of petitioners to redeem the property within the one-year period, petitioners' TCT lot was cancelled by the Register of Deeds and in lieu thereof, it was issued to the DBP upon presentation of a duly executed affidavit of consolidation of ownership. The DBP sold the lot to Francisco and the same was registered in

the Office of the Register of Deeds. Subsequently, the DBP's title over the lot was cancelled and in lieu thereof, the TCT was issued to Francisco Peria. Francisco Peria secured a tax declaration for said lot and accordingly paid the taxes due thereon. He thereafter mortgaged to the PNB as security for his loan of P15,000.00 as required by the bank to increase his original loan since petitioners were still in possession of the lot, the Provincial Sheriff ordered them to vacate the premises. On the other hand, petitioners filed on August 23, 1982 a complaint for annulment of sale, mortgage and cancellation of transfer certificates of title against the DBP, PNB, Francisco Peria and the Register of Deeds before the RTC. ISSUE: Whether or not that the extrajudicial foreclosure sale is null and void by virtue of lack of a valid levy. HELD: No. The formalities of a levy, as an essential requisite of a valid execution sale under Section 15 of Rule 39 and a valid attachment lien under Rule 57 of the Rules of Court, are not basic requirements before an extrajudicially foreclosed property be sold at public auction. The case at bar, as the facts disclose, involves an extrajudicial foreclosure sale. In extrajudicial foreclosure of mortgage, the property sought to be foreclosed need not be identified or set apart by the sheriff from the whole mass of property of the mortgagor for the purpose of satisfying the mortgage indebtedness. For, the essence of a contract of mortgage indebtedness is that a property has been identified or set apart from the mass of the property of the debtor-mortgagor as security for the payment or fulfillment of the obligation to answer the amount of indebtedness, in case of default of payment. By virtue of the special power inserted or attached to the mortgage contract, the mortgagor has authorized the mortgageecreditor or any other person authorized to act for him to sell said property in accordance with the formalities required under Act No. 3135, as amended. The Court finds that the formalities prescribed under Sections 2, 3 and 4 of Act No. 3135, as amended, were substantially complied with in the instant case.

G.R. No. L-31189 March 31, 1987 MUNICIPALITY OF VICTORIAS, petitioner, vs.

THE COURT OF APPEALS, NORMA LEUENBERGER and FRANCISCO SOLIVA, respondents. Enrique I. Soriano, Jr. for private respondents.

PARAS, J.: This is a Petition for Review on certiorari of the decision * of respondent Court of Appeals promulgated on September 29, 1969 in CA-G.R. No. 35036-R (Rollo, p. 11) setting aside the decision ** of the Court of First Intance of Negros Occidental, Branch I, dated September 24, 1964 which dismissed the complaint for recovery of possession in Civil Case No. 181-S and declared the cemetery site on Lot No. 76 in Victorias as property of the municipality of Victorias (Record on Appeal, p. 9). The dispositive portion of the questioned decision reads as follows: IN VIEW OF THE FOREGOING, the judgment of the lower court is hereby set aside and another is hereby rendered: (1) Ordering the defendant municipality and/or thru its appropriate officials to return and deliver the possession of the portion of Lot 76 used as cemetery or burial site of the plaintiffappellant. (2) Ordering defendant municipality to pay the plaintiff-appellant the sum of P400.00 a year from 1963 until the possession of said land is actually delivered. Lot No. 76 containing an area of 208,157 sq. meters forms a part of Cadastral Lot No. 140 (Rollo, p. 11), a 27.2460 ha. sugar land located in Bo. Madaniog, Victorias, Negros Occidental, in the name of the deceased Gonzalo Ditching under Tax Declaration No. 3429 of Negros Occidental for the year 1941 (Exh. "3," Folder of Exhibits, p. 22). He was survived by his widow Simeona Jingeo Vda. de Ditching and a daughter, Isabel, who died in 1928 (TSN, July 1, 1964, p. 7) leaving one off-spring, respondent Norma Leuenberger, who was then only six months old (TSN, July 1, 1964, p. 34). Respondent Norma Leuenberger, married to Francisco Soliva, inherited the whole of Lot No. 140 from her grandmother, Simeona J. Vda. de Ditching (not from her predeceased mother Isabel Ditching). In 1952, she donated a portion of Lot No. 140, about 3 ha., to the municipality for the ground of a certain high school and had 4 ha. converted into a subdivision. (TSN, July 1, 1964, p. 24). In 1963, she had the remaining 21 ha. or 208.157 sq. m. relocated by a surveyor upon request of lessee Ramon Jover who complained of being prohibited by municipal officials from

cultivating the land. It was then that she discovered that the parcel of land, more or less 4 ha. or 33,747 sq.m. used by Petitioner Municipality of Victorias, as a cemetery from 1934, is within her property which is now Identified as Lot 76 and covered by TCT No. 34546 (TSN, July 1, 1964, pp. 7-9; Exh. "4," Folder of Exhibits, p. 23 and Exh. "A," Folder of Exhibits, p. 1). On May 20, 1963, Respondent wrote the Mayor of Victorias regarding her discovery, demanding payment of past rentals and requesting delivery of the area allegedly illegally occupied by Petitioner (Exh. "G, Folder of Exhibits, p. 15). When the Mayor replied that Petitioner bought the land she asked to be shown the papers concerning the sale but was referred by the Mayor to the municipal treasurer who refused to show the same (TSN, July 1, 1964, pp. 32-33). On January 11, 1964, Respondents filed a complaint in the Court of First Instance of Negros Occidental, Branch 1, for recovery of possession of the parcel of land occupied by the municipal cemetery (Record on Appeal, p. 1). In its answer, petitioner Municipality, by way of special defense, alleged ownership of the lot, subject of the complaint, having bought it from Simeona Jingco Vda. de Ditching sometime in 1934 (Record on Appeal, p. 7). The lower court decided in favor of the Municipality. On appeal Respondent appellate Court set aside the decision of the lower court (Record on AppeaL p. 9); hence, this petition for review on certiorari. This petition was filed with the Court on November 6, 1969 (Rollo, p. 2), the Record on Appeal on December 19, 1969 (Rollo, p. 80). On January 5, 1970, the Court gave due course to the petition (Rollo, p. 84). The Brief for the Petitioner was filed on April 1, 1970 (Rollo, p. 88), the Brief for Respondents was filed on May 18, 1970 (Rollo, p. 92). On July 8, 1970, the Court resolved to consider the case submitted for decision without Petitioner's Reply Brief, Petitioner having failed to file the brief within the period which expired on June 10, 1970 (Rollo. p. 99). On motion of counsel for the Respondents (Rollo, p. 104), the Court resolved on June 30, 1972 to allow respondent Francisco Soliva to continue the appeal in behalf of the estate of respondent Norma Leuenberger who died on January 25, 1972, Respondent Francisco Soliva having been appointed special administrator in Special Proceedings No. 84-V of the Court of First Instance of Negros Occidental (Rollo, p. 110). In their brief, petitioner raised the following errors of respondent Court of Appeals: (Brief for the Petitioner, p. 1-3); I.

The Honorable Court of Appeals erred in holding that respondents Norma Leuenberger and Francisco Soliva are the lawful owners of the land in litigation as they are estopped from questioning the possession and ownership of herein petitioner which dates back to more than 30 years. II. The Honorable Court of Appeals also erred in ordering the petition petitioner to deliver the possession of the land in question to the respondents Nomia Leuenberger and Francisco Soliva, by holding that non-annotation on the Torrens Certificate of Title could not affect the said land when the possession by the petitioner of the said land for over 30 years and using it as a public cemetery for that length of time are sufficient proof of purchase and transfer of title and nonannotation of the Certificate of Title did not render the sale ineffectual III. The Honorable Court of Appeals further erred in ordering the petitioner Municipality of Victories to pay the respondents the sum of P400.00 a year from 1963 until possession is actually delivered because under the law, an owner of a piece of land has no obligation to pay rentals as it owns and possesses the same. There is merit in the petition. It is undisputed that petitioner failed to present before the Court a Deed of Sale to prove its purchase of the land in question which is included in the Transfer Certificate of Title No. T34546 in the name of private respondent Norma Leuenberger. The pivotal issue in this case is whether or not the secondary evidence presented by the petitioner municipality is sufficient to substantiate its claim that it acquired the disputed land by means of a Deed of Sale. Under the Best Evidence Rule when the original writing is lost or otherwise unavailable, the law in point provides: Sec. 4. Secondary evidence when original is lost or destroyed. When the original writing has been lost or destroyed, or cannot be produced in court, upon proof of its execution and loss or destruction or unavailability, its contents may be proved by a copy, or by a recital of its contents in some authentic document, or by the recollection of witnesses. (Rule 130, Rules of Court).

In lieu of a Deed of Sale, petitioner presented a certificate issued by the Archives Division of the Bureau of Records Management in Manila, of a page of the 1934 Notarial Register of Vicente D. Aragon with the following entries: Nature of Instrument Compra venta 2 porciones Terrenos: Lotes Nos. 140-A y 140-B, Victorias, Neg. Occidental pago por esso despues aprobacion Jusgado la Instance, Neg. Occidental causa civil 5116 Vendedora: Simeona Jingco Vda. de Ditching . . . administradora Abint. G. Ditching Comprador: Municipio Victorias, Neg. Occidental . . . . por su Pres.Mpal Vicente B. Arnaes Valor: P750.00 ... Vease copia correspondiente. Names of-persons Executing/ Acknowledging: Simeona Vda. de Ditching Adm. Abint actuacion especial No. 5116 Jusgado la Instance Neg. Occidental Vendedora Vicente B. Arnaes Pres. Municipal. Victorias Comprador Witnesses to the Signatures: Esteban Jalandoni Gregorio Elizalde Date: Month 9 Julio 1934 Fees: P2.00 Cedulas: Exenta por susexo

F1027880 Enero 26/34 Victories, Neg. Occidental Remarks. En Victorias, Neg. Occidental Los annexes A. y B. estan unidos solamente en el original de la escritura. Respondent Court of Appeals was of the view (Rollo, p. 16) that a mere entry in the notarial register of a notary public of an alleged sale cannot prove that a particular piece of land was sold by one person to another, one of the important requirements being the indication of the area and the technical description of the land being sold. In the present case, since no deed of sale could be produced, there is no way of telling what particular portion of the property was sold to defendant municipality and how big was the sale of the land conveyed to the defendant municipality. It will be observed that the entries in the notarial register clearly show: (a) the nature of the instrument. a deed of sale; (b) the subject of the sale two parcels of land, Lot Nos. 140-A and 140-B; (c) the parties of the contract the vendor Simeona J. Vda. de Ditching in her capacity as Administrator in Civil Case No. 5116 of the Court of First Instance of Negros Occidental and the vendee, Vicente B. Ananosa, Municipal Mayor of Victorias; (d) the consideration P750.00; (e) the names of the witnesses Esteban Jalandoni and Gregoria Elizado; and the date of the sale on July 9, 1934. It is beyond question that the foregoing certificate is an authentic document clearly corroborated and supported by: (a) the testimony of the municipal councilor of Victorias, Ricardo Suarez, (Original TSN Hearing of September 14, 1964, pp. 1222) who negotiated the sale; (b) the testimony of Emilio Cuesta, (Original TSN Hearing of September 14, 1964, pp. 2238) the municipal treasurer of said municipality, since 1932 up to the date of trial on September 14, 1964, who personally paid the amount of P750.00 to Felipe Leuenberger as consideration of the Contract of Sale; (c) Certificate of Settlement (Original Exhibits, p. 20) "as evidence of said payment;" (d) Tax Declaration No. 429 (Ibid., p. 22) which was cancelled and was substituted by Tax Declaration No. 3600 covering the portion of the property unsold (Decision, CFI, Neg. Occidental Orig. Record on Appeal, p. 6) and (e) Tax Declaration No. 3601 (Ibid, p. 23) in the name of the Municipal Government of Victorias covering the portion occupied as cemetery. Tax Declaration No. 3601 shows on its face the boundaries as follows:

North NE Lot No. 140-C of the Subdivision South SW Lot No. 140-C of the Subdivision West NW Lots Nos. 140-C & 140-B of the Subdivision. The area is 33,747 sq.m. At the back Exh. 4-A, the sale of a portion of the lot to the Municipality of Victorias was clearly explained as follows: Note: The whole Lot No. 140, belongs to Norma Leuenberger as evidenced by a Transfer of Cert. of Title No. 18672. Portion of this Lot, (30,000 sq.m. was sold to Municipality of Victories for Cemetery Site as evidenced by a Deed of Sale executed by Simeona Jingco Vda. de Ditching in favor of the aforesaid Municipality and ratified by Notary Public Mr. Vicente Aragon under Doc. No. 132; Page No. 2; Book No. 10, Series of 1934. At the lowest portion under Memoranda it was explained that The area under this declaration includes 3,746 sq. meters donated by Mrs. Simeona Jingco Vda. de Ditching and used as road leading to the cemetery. " (EXIL 4; Original Exhibits, p. 23). The above-mentioned testimonies and documentary evidence sufficiently Identify the land sold by the predecessors-in-interest of private respondent. To insist on the technical description of the land in dispute would be to sacrifice substance to form which would undoubtedly result in manifest injustice to the petitioner. Moreover, it is expressly provided by law that the thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee. (Civil Code Art. 1497). Where there is no express provision that title shall not pass until payment of the price, and the thing gold has been delivered, title passes from the moment the thing sold is placed in the possession and control of the buyer. (Kuenzle & Streiff vs. Watson & Co., 13 PhiL 26 [1909]). Delivery produces its natural effects in law, the principal and most important of which being the conveyance of ownership, without prejudice to the right of the vendor to payment of the price. (Ocejo, Perez & Co. vs. International Banking Corp., 37 PhiL 631 [1918]). Similarly, when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed, the contrary does not appear or cannot be clearly inferred. (Civil Code Art. 1498). The execution of the public instrument operates as a formal or symbolic delivery of the property sold and authorizes the buyer to use the document as proof of ownership. (Florendo v. Foz, 20 PhiL 388 [1911]).

In the case at bar it is undisputed that petitioner had been in open, public, adverse and continuous possession of the land for a period of more than thirty years. In fact, according to the municipal treasurer there are over 1000 graves in the cemetery. (Decision, Court of Appeals, Rollo, pp. 11-22). As correctly observed by Justice Magno S. Gatmaitan in his dissenting opinion (Rollo, pp. 23-28) in the decision of this case by the Court of Appeals, the evidence establishes without debate that the property was originally registered in 1916. Plaintiff was born only in 1928 and cannot possibly be the registered owner of the original lot 140 at the time. Indeed, according to her own evidence, (Exhibit A; Original Record pp. 13) she became the registered owner only in 1963. Likewise, it is undisputed that in the intestate estate of Gonzalo Ditching, the grandfather of private respondent Norma Leunberger, it was her grandmother, Simeona, the surviving spouse of Gonzalo who was named judicial administratrix. According to Norma's own testimony, Isabel her mother, died in 1928 (TSN Aug. 12, 1964, p. 34) while Simeona the grandmother died in 1942. (Ibid.) Therefore, as of 1934 when a document of sale was executed by Simeona in favor of the municipality of Victories as indubitably shown in the notarial register (Exhibit 5.A) in question, Simeona was still the administratrix of the properties left by her husband, Gonzalo and of their conjugal partnership. Consequently, she is the only person who could legally dispose of by sale this particular four- hectare portion of Lot 140. And so it is, that in 1934, Simeona Ditching in her capacity as judicial administratrix made and executed the document described in the Report as Lots 140-A and 140-B, showing clearly that they are portions of the original big Lot 140. As this conveyance was executed by the judicial administratrix, unquestionably the party authorized to dispose of the same, the presumption must be that she did so upon proper authority of the Court of First Instance. As to the description of the property sold, the fact that a notarial report shows that they are portions of Lot 140 and the property in question occupied by the public cemetery is admittedly a portion of said lot in the absence of evidence that there were other portions of Lot 140 ceded unto the petitioner municipality, the inevitable conclusion is that the sale executed in the Notarial Register refers to the disputed lot. Unfortunately, the purchaser Municipality of Victorias failed to register said Deed of Sale; hence, when Simeona Jingco Vda. de Ditching died, her grand-daughter, respondent Norma Leuenberger claimed to have inherited the land in dispute and succeeded in registering said land under the Torrens system. Said land is now covered by Transfer Certificate of Title No. T34036 (Exhibit A, supra) issued by the Register of Deeds of -Negros Occidental on March 11, 1963 in the name of Norma Leuenberger, married to Francisco Soliva, containing an area of 208,157 square meters. As registered owner, she is unquestionably entitled to the protection afforded to a holder of a Torrens Title.

Admittedly, it is well-settled that under the Torrens System "Every person receiving a certificate of title in pursuance of a decree of registration, . . . shall hold the same free of all encumbrance except those noted on said certificate ... " (Sec. 39, Act 496; now Sec. 43, PD 1529). In the instant case, however, respondent Norma Leuenberger admitted that she inherited the land covered by Transfer Certificate of Title No. T-34036 from her grandmother, who had already sold the land to the petitioner in 1934; hence, she merely stepped into the shoes of her grandmother and she cannot claim a better right than her predecessor-in-interest. When she applied for registration of the disputed land, she had no legal right to do so as she had no ownership of the land since land registration is not a mode of acquiring ownership but only of confirming ownership of the land. (Grande, et al. vs. Court of Appeals, et al., 115 Phil. 521.)"The Torrens System was not established as a means for the acquisition of title to private land, ..." It is intended merely to confirm and register the title which one may already have on the land. Where the applicant possesses no title or ownership over the parcel of land, he cannot acquire one under the Torrens system of Registration. (Torela, et al., vs. Torela, et al., L-27843, October 11, 1979). While an inherently defective Torrens title may not ordinarily be cancelled even after proof of its defect, the lawnevertheless safeguards the rightful party's interest in the titled land from fraud and improper use of technicalities by snowing such party, in appropriate cases, to judicially seek reconveyance to him of whatever he has been deprived of as long as the land has not been transferred or conveyed to a purchaser in good faith. (Pedro Pascua, et al., vs. Mariano Gopuyoc et al., L-23197, May 31, 1977.) The Civil Code provides: Art. 1456. If the property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. Thus, it has been held that where the land is decreed in the name of a person through fraud or mistake, such person is by operation of law considered a trustee of an implied trust for the benefit of the persons from whom the property comes. The beneficiary shag have the right t enforce the trust, notwithstanding the irrevocability of the Torrens title and the trustee and his successors-in-interest are bound to execute the deed of reconveyance. (Pacheco vs. Arro, 85 Phil. 505; Escobar vs. Locsin, 74 Phil. 86). As the land in dispute is held by private respondents in trust for the Municipality of Victorias, it is logical to conclude that the latter can neither be deprived of its possession nor be made to pay rentals thereof. Private respondent is in equity bound to reconvey the subject land to the

cestui que trust the Municipality of Victorias. The Torrens system was never calculated to foment betrayal in the performance of a trust. (Escobar vs. Locsin, 74 Phil. 86). For a more expeditious disposition of the case at bar, Rule 39 of the Rules of Court provides: SEC. 10. Judgment for Specific acts; vesting title. ... If real or personal property is within the Philippines, the court in lieu of directing a conveyance thereof may enter judgment divesting the title of any party and vesting it in others and such judgment shall have the force and effect of a conveyance executed in due form of law. Finally, the conclusions and findings of fact by the trial court are entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons because the trial court is in a better position to examine real evidence, as well as to observe the demeanor of the witnesses while testifying in the case. (Chase v. Buencamino, Sr., 136 SCRA 365 [1985]). PREMISES CONSIDERED, the judgment of the respondent appellate court is hereby SET ASIDE and the decision of the Court of First Instance of Negros Occidental, Branch I-Silay City in Civil Case No. 181-S declaring the cemetery site (Exh. E-2) on Lot No. 76 in Victories as the property of the municipality of Victorias, is hereby REINSTATED. Additionally, We hereby order (a) the petitioner to have the disputed land segregated by a licensed surveyor from the rest of Lot No. 76 described in Transfer Certificate of Title No. T-34036 and to have the corresponding subdivision plan, duly approved by the Land Registration Commission, submitted to the court of origin for approval; (b) the private respondents Norma Leuenberger and Francisco Soliva to be divested of their title to the disputed land under Rule 39, Sec. 10, Rules of Court; and (c) the Register of Deeds of Negros Occidental to cancel Transfer Certificate of Title No. 34036 and issue, in lieu thereof, one title in the name of the Municipality of Victories for the disputed land and another title in the names of the private respondents Norma Leuenberger and Francisco Soliva for the rest of Lot No. 76. Without costs. SOORDERED. Fernan (Chairman), Gutierrez, Jr., Padilla, Bidin, and Cortes, JJ., concur.

G.R. No. L-12342

August 3, 1918

A. A. ADDISON, plaintiff-appellant, vs.

MARCIANA FELIX and BALBINO TIOCO, defendants-appellees. Thos. D. Aitken for appellant. Modesto Reyes and Eliseo Ymzon for appellees. FISHER, J.: By a public instrument dated June 11, 1914, the plaintiff sold to the defendant Marciana Felix, with the consent of her husband, the defendant Balbino Tioco, four parcels of land, described in the instrument. The defendant Felix paid, at the time of the execution of the deed, the sum of P3,000 on account of the purchase price, and bound herself to pay the remainder in installments, the first of P2,000 on July 15, 1914, and the second of P5,000 thirty days after the issuance to her of a certificate of title under the Land Registration Act, and further, within ten years from the date of such title P10, for each coconut tree in bearing and P5 for each such tree not in bearing, that might be growing on said four parcels of land on the date of the issuance of title to her, with the condition that the total price should not exceed P85,000. It was further stipulated that the purchaser was to deliver to the vendor 25 per centum of the value of the products that she might obtain from the four parcels "from the moment she takes possession of them until the Torrens certificate of title be issued in her favor." It was also covenanted that "within one year from the date of the certificate of title in favor of Marciana Felix, this latter may rescind the present contract of purchase and sale, in which case Marciana Felix shall be obliged to return to me, A. A. Addison, the net value of all the products of the four parcels sold, and I shall obliged to return to her, Marciana Felix, all the sums that she may have paid me, together with interest at the rate of 10 per cent per annum." In January, 1915, the vendor, A. A. Addison, filed suit in Court of First Instance of Manila to compel Marciana Felix to make payment of the first installment of P2,000, demandable in accordance with the terms of the contract of sale aforementioned, on July 15, 1914, and of the interest in arrears, at the stipulated rate of 8 per cent per annum. The defendant, jointly with her husband, answered the complaint and alleged by way of special defense that the plaintiff had absolutely failed to deliver to the defendant the lands that were the subject matter of the sale, notwithstanding the demands made upon him for this purpose. She therefore asked that she be absolved from the complaint, and that, after a declaration of the rescission of the contract of the purchase and sale of said lands, the plaintiff be ordered to refund the P3,000 that had been paid to him on account, together with the interest agreed upon, and to pay an indemnity for the losses and damages which the defendant alleged she had suffered through the plaintiff's non-fulfillment of the contract.

The evidence adduced shows that after the execution of the deed of the sale the plaintiff, at the request of the purchaser, went to Lucena, accompanied by a representative of the latter, for the purpose of designating and delivering the lands sold. He was able to designate only two of the four parcels, and more than two-thirds of these two were found to be in the possession of one Juan Villafuerte, who claimed to be the owner of the parts so occupied by him. The plaintiff admitted that the purchaser would have to bring suit to obtain possession of the land (sten. notes, record, p. 5). In August, 1914, the surveyor Santamaria went to Lucena, at the request of the plaintiff and accompanied by him, in order to survey the land sold to the defendant; but he surveyed only two parcels, which are those occupied mainly by the brothers Leon and Julio Villafuerte. He did not survey the other parcels, as they were not designated to him by the plaintiff. In order to make this survey it was necessary to obtain from the Land Court a writ of injunction against the occupants, and for the purpose of the issuance of this writ the defendant, in June, 1914, filed an application with the Land Court for the registration in her name of four parcels of land described in the deed of sale executed in her favor by the plaintiff. The proceedings in the matter of this application were subsequently dismissed, for failure to present the required plans within the period of the time allowed for the purpose. The trial court rendered judgment in behalf of the defendant, holding the contract of sale to be rescinded and ordering the return to the plaintiff the P3,000 paid on account of the price, together with interest thereon at the rate of 10 per cent per annum. From this judgment the plaintiff appealed. In decreeing the rescission of the contract, the trial judge rested his conclusion solely on the indisputable fact that up to that time the lands sold had not been registered in accordance with the Torrens system, and on the terms of the second paragraph of clause (h) of the contract, whereby it is stipulated that ". . . within one year from the date of the certificate of title in favor of Marciana Felix, this latter may rescind the present contract of purchase and sale . . . ." The appellant objects, and rightly, that the cross-complaint is not founded on the hypothesis of the conventional rescission relied upon by the court, but on the failure to deliver the land sold. He argues that the right to rescind the contract by virtue of the special agreement not only did not exist from the moment of the execution of the contract up to one year after the registration of the land, but does not accrue until the land is registered. The wording of the clause, in fact, substantiates the contention. The one year's deliberation granted to the purchaser was to be counted "from the date of the certificate of title ... ." Therefore the right to elect to rescind the contract was subject to a condition, namely, the issuance of the title. The record show that up to the present time that condition has not been fulfilled; consequently the defendant cannot be heard to invoke a right which depends on the existence of that condition. If in the crosscomplaint it had been alleged that the fulfillment of the condition was impossible for reasons

imputable to the plaintiff, and if this allegation had been proven, perhaps the condition would have been considered as fulfilled (arts. 1117, 1118, and 1119, Civ. Code); but this issue was not presented in the defendant's answer. However, although we are not in agreement with the reasoning found in the decision appealed from, we consider it to be correct in its result. The record shows that the plaintiff did not deliver the thing sold. With respect to two of the parcels of land, he was not even able to show them to the purchaser; and as regards the other two, more than two-thirds of their area was in the hostile and adverse possession of a third person. The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered when it is placed "in the hands and possession of the vendee." (Civ. Code, art. 1462.) It is true that the same article declares that the execution of a public instruments is equivalent to the delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to reality the delivery has not been effected. As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his commentaries on article 1604 of the French Civil code, "the word "delivery" expresses a complex idea . . . the abandonment of the thing by the person who makes the delivery and the taking control of it by the person to whom the delivery is made." The execution of a public instrument is sufficient for the purposes of the abandonment made by the vendor; but it is not always sufficient to permit of the apprehension of the thing by the purchaser. The supreme court of Spain, interpreting article 1462 of the Civil Code, held in its decision of November 10, 1903, (Civ. Rep., vol. 96, p. 560) that this article "merely declares that when the sale is made through the means of a public instrument, the execution of this latter is equivalent to the delivery of the thing sold: which does not and cannot mean that this fictitious tradition necessarily implies the real tradition of the thing sold, for it is incontrovertible that, while its ownership still pertains to the vendor (and with greater reason if it does not), a third person

may be in possession of the same thing; wherefore, though, as a general rule, he who purchases by means of a public instrument should be deemed . . . to be the possessor in fact, yet this presumption gives way before proof to the contrary." It is evident, then, in the case at bar, that the mere execution of the instrument was not a fulfillment of the vendors' obligation to deliver the thing sold, and that from such nonfulfillment arises the purchaser's right to demand, as she has demanded, the rescission of the sale and the return of the price. (Civ. Code, arts. 1506 and 1124.) Of course if the sale had been made under the express agreement of imposing upon the purchaser the obligation to take the necessary steps to obtain the material possession of the thing sold, and it were proven that she knew that the thing was in the possession of a third person claiming to have property rights therein, such agreement would be perfectly valid. But there is nothing in the instrument which would indicate, even implicitly, that such was the agreement. It is true, as the appellant argues, that the obligation was incumbent upon the defendant Marciana Felix to apply for and obtain the registration of the land in the new registry of property; but from this it cannot be concluded that she had to await the final decision of the Court of Land Registration, in order to be able to enjoy the property sold. On the contrary, it was expressly stipulated in the contract that the purchaser should deliver to the vendor onefourth "of the products ... of the aforesaid four parcels from the moment when she takes possession of them until the Torrens certificate of title be issued in her favor." This obviously shows that it was not forseen that the purchaser might be deprived of her possession during the course of the registration proceedings, but that the transaction rested on the assumption that she was to have, during said period, the material possession and enjoyment of the four parcels of land. Inasmuch as the rescission is made by virtue of the provisions of law and not by contractual agreement, it is not the conventional but the legal interest that is demandable. It is therefore held that the contract of purchase and sale entered into by and between the plaintiff and the defendant on June 11, 1914, is rescinded, and the plaintiff is ordered to make restitution of the sum of P3,000 received by him on account of the price of the sale, together with interest thereon at the legal rate of 6 per annum from the date of the filing of the complaint until payment, with the costs of both instances against the appellant. So ordered. Torres, Johnson, Street, Malcolm and Avancea, JJ., concur.

Addison vs Felix 38 SCRA 404, No. 12342 August 3, 1918 FACTS: By a public instrument, plaintiff Addison sold to the defendant Marciana Felix and husband Balbino Tioco, 4 parcels of land. Defendants paid, at the time of the execution of the deed, the sum of P3,000.00 on account of the purchase price, and bound herself to pay the remainder in installments. It was further stipulated that the purchaser was to deliver to the vendor 25 per centum of the value of the products that she might obtain from the 4 parcels "from the moment she takes possession of them until the Torrens certificate of title be issued in her favor." It was likewise covenanted that "within I year from the date of the certificate of title in favor of Felix, she may rescind the contract of sale in which she shall be obliged to return to Addison the net value of all the products of the 4 parcels sold, and Addison shall be obliged to return to her all the sums that she may have paid, together with interest at the rate of I 0 percent per annum. However, Addison was able to designate only 2 of the 4 parcels and more than two-thirds of these two were found to be in the possession of one Juan Villafuerte, who claimed to be the owner of the parts so occupied by him. Addison filed suit in CFI to compel Felix to make payment of the first installment, in accordance with the terms of the contract and of the interest at the stipulated rate. Defendant answered and alleged that the plaintiff had failed to deliver the lands that were the subject matter of the sale. ISSUES: 1. Whether or not the delivery had been effected by reason of the issuance of the Torrens Certificate of title, notwithstanding the fact that the thing sold was not subject to the control of the vendor. 2. Whether or not the purchaser can rescind the contract. HELD: 1. No. The record shows that the plaintiff did not deliver the thing sold. With respect to two of the parcels of land, he was not even able to show them to the purchaser; and as regards the other two, more than two-thirds of their area was in the hostile and adverse possession of a third person.

The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered when it is placed "in the hands and possession of the vendee." It is true that the same article declares that the execution of a public instrument is equivalent to the delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, I t is necessary that the vendor shall have control over the thing sold that, at the moment of sale, it its material delivery could have been made. It is not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of the public instrument is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to reality - the delivery has not been effected. 2. Yes. It is evident in the case at bar, that the mere execution of the instrument was not a fulfillment of the vendor's obligation to deliver the thing sold, and that from such nonfulfillment arises the purchaser's right to demand, as she has demanded, the rescission of the sale and the return of the price. ADDISON V. FELIX (August 03, 1918) FACTS: Petitioner Addison sold four parcels of land to Defendant spouses Felix and Tioco located in LucenaCity. Respondents paid 3K for the purchase price and promised to pay the remaining by installment. The contract provides that the purchasers may rescind the contract within one year after the issuance of title on their name.

The petitioner went to Lucena for the survey designaton and delivery of the land but only 2 parcels were designated and 2/3 of it was in possession of a Juan Villafuerte. The other parcels were not surveyed and designated by Addison.

Addison demanded from petitioner the payment of the first installment but the latter contends that there was no delivery and as such, they are entitled to get back the 3K purchase price they gave upon the execution of the contract.

ISSUE: WON there was a valid delivery.

HELD: The record shows that the plaintiff did not deliver the thing sold. With respect to two of the parcels of land, he was not even able to show them to the purchaser; and as regards the other two, more than two-thirds of their area was in the hostile and adverse possession of a third person.

It is true that the same article declares that the execution of a public instruments is equivalent to the delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if there is an impediment, delivery cannot be deemed effected.

G.R. No. 91889 August 27, 1993 MANUEL R. DULAY ENTERPRISES, INC., VIRGILIO E. DULAY AND NEPOMUCENO REDOVAN, petitioners, vs. THE HONORABLE COURT OF APPEALS, EDGARDO D. PABALAN, MANUEL A. TORRES, JR., MARIA THERESA V. VELOSO AND CASTRENSE C. VELOSO, respondents. Virgilio E. Dulay for petitioners. Torres, Tobias, Azura & Jocson for private respondents.

NOCON, J.: This is a petition for review on certiorari to annul and set aside the decision 1 of the Court of Appeals affirming the decision 2 of the Regional Trial Court of Pasay, Branch 114 Civil Cases Nos. 8198-P, and 2880-P, the dispositive portion of which reads, as follows: Wherefore, in view of all the foregoing considerations, in this Court hereby renders judgment, as follows: In Civil Case No. 2880-P, the petition filed by Manuel R. Dulay Enterprises, Inc. and Virgilio E. Dulay for annulment or declaration of nullity of the decision of the Metropolitan Trial Court, Branch 46, Pasay City, in its Civil Case No. 38-81 entitled "Edgardo D. Pabalan, et al., vs. Spouses Florentino Manalastas, et al.," is dismissed for lack of merits; In Civil Case No. 8278-P, the complaint filed by Manuel R. Dulay Enterprises, Inc. for cancellation of title of Manuel A. Torres, Jr. (TCT No. 24799 of the Register of Deeds of Pasay City) and reconveyance, is dismissed for lack or merit, and, In Civil Case No. 8198-P, defendants Manuel R. Dulay Enterprises, Inc. and Virgilio E. Dulay are ordered to surrender and deliver possession of the parcel of land, together with all the improvements thereon, described in Transfer Certificate of Title No. 24799 of the Register of Deeds of Pasay City, in favor of therein plaintiffs Manuel A. Torres, Jr. as owner and Edgardo D. Pabalan as real estate administrator of said Manuel A. Torres, Jr.; to account for and return to said plaintiffs the rentals from dwelling unit No. 8-A of the apartment building (Dulay Apartment) from June 1980 up to the present, to indemnify plaintiffs, jointly and severally, expenses of litigation in the amount of P4,000.00 and attorney's fees in the sum of P6,000.00, for all the three (3) cases. Co-defendant Nepomuceno Redovan is ordered to pay the current and subsequent rentals on the premises leased by him to plaintiffs. The counterclaim of defendants Virgilio E. Dulay and Manuel R. Dulay Enterprises, Inc. and N. Redovan, dismissed for lack of merit. With costs against the three (3) aforenamed defendants. 3 The facts as found by the trial court are as follows: Petitioner Manuel R. Dulay Enterprises, Inc, a domestic corporation with the following as members of its Board of Directors: Manuel R. Dulay with 19,960 shares and designated as president, treasurer and general manager, Atty. Virgilio E. Dulay with 10 shares and designated as vice-president; Linda E. Dulay with 10 shares; Celia Dulay-Mendoza with 10 shares; and Atty. Plaridel C. Jose with 10 shares and designated as secretary, owned a property covered by TCT No. 17880 4 and known as Dulay Apartment consisting of sixteen (16) apartment units on a six

hundred eighty-nine (689) square meters lot, more or less, located at Seventh Street (now Buendia Extension) and F.B. Harrison Street, Pasay City. Petitioner corporation through its president, Manuel Dulay, obtained various loans for the construction of its hotel project, Dulay Continental Hotel (now Frederick Hotel). It even had to borrow money from petitioner Virgilio Dulay to be able to continue the hotel project. As a result of said loan, petitioner Virgilio Dulay occupied one of the unit apartments of the subject property since property since 1973 while at the same time managing the Dulay Apartment at his shareholdings in the corporation was subsequently increased by his father. 5 On December 23, 1976, Manuel Dulay by virtue of Board Resolution No 18 6 of petitioner corporation sold the subject property to private respondents spouses Maria Theresa and Castrense Veloso in the amount of P300,000.00 as evidenced by the Deed of Absolute Sale. 7 Thereafter, TCT No. 17880 was cancelled and TCT No. 23225 was issued to private respondent Maria Theresa Veloso. 8 Subsequently, Manuel Dulay and private respondents spouses Veloso executed a Memorandum to the Deed of Absolute Sale of December 23, 1976 9 dated December 9, 1977 giving Manuel Dulay within (2) years or until December 9, 1979 to repurchase the subject property for P200,000.00 which was, however, not annotated either in TCT No. 17880 or TCT No. 23225. On December 24, 1976, private respondent Maria Veloso, without the knowledge of Manuel Dulay, mortgaged the subject property to private respondent Manuel A. Torres for a loan of P250,000.00 which was duly annotated as Entry No. 68139 in TCT No. 23225. 10 Upon the failure of private respondent Maria Veloso to pay private respondent Torres, the subject property was sold on April 5, 1978 to private respondent Torres as the highest bidder in an extrajudicial foreclosure sale as evidenced by the Certificate of Sheriff's Sale 11 issued on April 20, 1978. On July 20, 1978, private respondent Maria Veloso executed a Deed of Absolute Assignment of the Right to Redeem 12 in favor of Manuel Dulay assigning her right to repurchase the subject property from private respondent Torres as a result of the extra sale held on April 25, 1978. As neither private respondent Maria Veloso nor her assignee Manuel Dulay was able to redeem the subject property within the one year statutory period for redemption, private respondent Torres filed an Affidavit of Consolidation of Ownership 13 with the Registry of Deeds of Pasay City and TCT No. 24799 14 was subsequently issued to private respondent Manuel Torres on April 23, 1979.

On October 1, 1979, private respondent Torres filed a petition for the issuance of a writ of possession against private respondents spouses Veloso and Manuel Dulay in LRC Case No. 1742-P. However, when petitioner Virgilio Dulay was never authorized by the petitioner corporation to sell or mortgage the subject property, the trial court ordered private respondent Torres to implead petitioner corporation as an indispensable party but the latter moved for the dismissal of his petition which was granted in an Order dated April 8, 1980. On June 20, 1980, private respondent Torres and Edgardo Pabalan, real estate administrator of Torres, filed an action against petitioner corporation, Virgilio Dulay and Nepomuceno Redovan, a tenant of Dulay Apartment Unit No. 8-A for the recovery of possession, sum of money and damages with preliminary injunction in Civil Case, No. 8198-P with the then Court of First Instance of Rizal. On July 21, 1980, petitioner corporation filed an action against private respondents spouses Veloso and Torres for the cancellation of the Certificate of Sheriff's Sale and TCT No. 24799 in Civil Case No. 8278-P with the then Court of First Instance of Rizal. On January 29, 1981, private respondents Pabalan and Torres filed an action against spouses Florentino and Elvira Manalastas, a tenant of Dulay Apartment Unit No. 7-B, with petitioner corporation as intervenor for ejectment in Civil Case No. 38-81 with the Metropolitan Trial Court of Pasay City which rendered a decision on April 25, 1985, dispositive portion of which reads, as follows: Wherefore, judgment is hereby rendered in favor of the plaintiff (herein private respondents) and against the defendants: 1. Ordering the defendants and all persons claiming possession under them to vacate the premises. 2. Ordering the defendants to pay the rents in the sum of P500.000 a month from May, 1979 until they shall have vacated the premises with interest at the legal rate; 3. Ordering the defendants to pay attorney's fees in the sum of P2,000.00 and P1,000.00 as other expenses of litigation and for them to pay the costs of the suit. 15 Thereafter or on May 17, 1985, petitioner corporation and Virgilio Dulay filed an action against the presiding judge of the Metropolitan Trial Court of Pasay City, private respondents Pabalan and Torres for the annulment of said decision with the Regional Trial Court of Pasay in Civil Case No. 2880-P. Thereafter, the three (3) cases were jointly tried and the trial court rendered a decision in favor of private respondents.

Not satisfied with said decision, petitioners appealed to the Court of Appeals which rendered a decision on October 23, 1989, the dispositive portion of which reads, as follows: PREMISES CONSIDERED, the decision being appealed should be as it is hereby AFFIRMED in full. 16 On November 8, 1989, petitioners filed a Motion for Reconsideration which was denied on January 26, 1990. Hence, this petition. During the pendency of this petition, private respondent Torres died on April 3, 1991 as shown in his death certificate 17 and named Torres-Pabalan Realty & Development Corporation as his heir in his holographic will 18 dated October 31, 1986. Petitioners contend that the respondent court had acted with grave abuse of discretion when it applied the doctrine of piercing the veil of corporate entity in the instant case considering that the sale of the subject property between private respondents spouses Veloso and Manuel Dulay has no binding effect on petitioner corporation as Board Resolution No. 18 which authorized the sale of the subject property was resolved without the approval of all the members of the board of directors and said Board Resolution was prepared by a person not designated by the corporation to be its secretary. We do not agree. Section 101 of the Corporation Code of the Philippines provides: Sec. 101. When board meeting is unnecessary or improperly held. Unless the by-laws provide otherwise, any action by the directors of a close corporation without a meeting shall nevertheless be deemed valid if: 1. Before or after such action is taken, written consent thereto is signed by all the directors, or 2. All the stockholders have actual or implied knowledge of the action and make no prompt objection thereto in writing; or 3. The directors are accustomed to take informal action with the express or implied acquiese of all the stockholders, or 4. All the directors have express or implied knowledge of the action in question and none of them makes prompt objection thereto in writing.

If a directors' meeting is held without call or notice, an action taken therein within the corporate powers is deemed ratified by a director who failed to attend, unless he promptly files his written objection with the secretary of the corporation after having knowledge thereof. In the instant case, petitioner corporation is classified as a close corporation and consequently a board resolution authorizing the sale or mortgage of the subject property is not necessary to bind the corporation for the action of its president. At any rate, corporate action taken at a board meeting without proper call or notice in a close corporation is deemed ratified by the absent director unless the latter promptly files his written objection with the secretary of the corporation after having knowledge of the meeting which, in his case, petitioner Virgilio Dulay failed to do. It is relevant to note that although a corporation is an entity which has a personality distinct and separate from its individual stockholders or members, 19 the veil of corporate fiction may be pierced when it is used to defeat public convenience justify wrong, protect fraud or defend crime. 20 The privilege of being treated as an entity distinct and separate from its stockholder or members is therefore confined to its legitimate uses and is subject to certain limitations to prevent the commission of fraud or other illegal or unfair act. When the corporation is used merely as an alter ego or business conduit of a person, the law will regard the corporation as the act of that person. 21 The Supreme Court had repeatedly disregarded the separate personality of the corporation where the corporate entity was used to annul a valid contract executed by one of its members. Petitioners' claim that the sale of the subject property by its president, Manuel Dulay, to private respondents spouses Veloso is null and void as the alleged Board Resolution No. 18 was passed without the knowledge and consent of the other members of the board of directors cannot be sustained. As correctly pointed out by the respondent Court of Appeals: Appellant Virgilio E. Dulay's protestations of complete innocence to the effect that he never participated nor was even aware of any meeting or resolution authorizing the mortgage or sale of the subject premises (see par. 8, affidavit of Virgilio E. Dulay, dated May 31, 1984, p. 14, Exh. "21") is difficult to believe. On the contrary, he is very much privy to the transactions involved. To begin with, he is a incorporator and one of the board of directors designated at the time of the organization of Manuel R. Dulay Enterprise, Inc. In ordinary parlance, the said entity is loosely referred to as a "family corporation". The nomenclature, if imprecise, however, fairly reflects the cohesiveness of a group and the parochial instincts of the individual members of such an aggrupation of which Manuel R. Dulay Enterprises, Inc. is typical: four-fifths of its incorporators being close relatives namely, three (3) children and their father whose name identifies their corporation (Articles of Incorporation of Manuel R. Dulay Enterprises, Inc. Exh. "31-A"). 22

Besides, the fact that petitioner Virgilio Dulay on June 24, 1975 executed an affidavit 23 that he was a signatory witness to the execution of the post-dated Deed of Absolute Sale of the subject property in favor of private respondent Torres indicates that he was aware of the transaction executed between his father and private respondents and had, therefore, adequate knowledge about the sale of the subject property to private respondents. Consequently, petitioner corporation is liable for the act of Manuel Dulay and the sale of the subject property to private respondents by Manuel Dulay is valid and binding. As stated by the trial court: . . . the sale between Manuel R. Dulay Enterprises, Inc. and the spouses Maria Theresa V. Veloso and Castrense C. Veloso, was a corporate act of the former and not a personal transaction of Manuel R. Dulay. This is so because Manuel R. Dulay was not only president and treasurer but also the general manager of the corporation. The corporation was a closed family corporation and the only non-relative in the board of directors was Atty. Plaridel C. Jose who appeared on paper as the secretary. There is no denying the fact, however, that Maria Socorro R. Dulay at times acted as secretary. . . ., the Court can not lose sight of the fact that the Manuel R. Dulay Enterprises, Inc. is a closed family corporation where the incorporators and directors belong to one single family. It cannot be concealed that Manuel R. Dulay as president, treasurer and general manager almost had absolute control over the business and affairs of the corporation. 24 Moreover, the appellate courts will not disturb the findings of the trial judge unless he has plainly overlooked certain facts of substance and value that, if considered, might affect the result of the case, 25 which is not present in the instant case. Petitioners' contention that private respondent Torres never acquired ownership over the subject property since the latter was never in actual possession of the subject property nor was the property ever delivered to him is also without merit. Paragraph 1, Article 1498 of the New Civil Code provides: When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary do not appear or cannot clearly be inferred. Under the aforementioned article, the mere execution of the deed of sale in a public document is equivalent to the delivery of the property. Likewise, this Court had held that: It is settled that the buyer in a foreclosure sale becomes the absolute owner of the property purchased if it is not redeemed during the period of one year after the registration of the sale.

As such, he is entitled to the possession of the said property and can demand it at any time following the consolidation of ownership in his name and the issuance to him of a new transfer certificate of title. The buyer can in fact demand possession of the land even during the redemption period except that he has to post a bond in accordance with Section 7 of Act No. 3133 as amended. No such bond is required after the redemption period if the property is not redeemed. Possession of the land then becomes an absolute right of the purchaser as confirmed owner. 26 Therefore, prior physical delivery or possession is not legally required since the execution of the Deed of Sale in deemed equivalent to delivery. Finally, we hold that the respondent appellate court did not err in denying petitioner's motion for reconsideration despite the fact that private respondents failed to submit their comment to said motion as required by the respondent appellate court from resolving petitioners' motion for reconsideration without the comment of the private respondent which was required merely to aid the court in the disposition of the motion. The courts are as much interested as the parties in the early disposition of cases before them. To require otherwise would unnecessarily clog the courts' dockets. WHEREFORE, the petition is DENIED and the decision appealed from is hereby AFFIRMED. SOORDERED.

Manuel R. Dulay Enterprises vs. Court of Appeals GR 91889, 27 August 1993

Facts: Manuel R.Dulay Enterprises, Inc., a domestic corporation with the following as members of its Board of Directors: Manuel R. Dulay with 19,960 shares and designated as president, treasurer and general manager; Atty. Virgilio E. Dulay with 10 shares and designated as vicepresident; Linda E. Dulay with 10 shares; Celia Dulay-Mendoza with 10 shares; and Atty. Plaridel C. Jose with 10 shares and designated as secretary, owned a property known as Dulay Apartment consisting of 16 apartment units. The corporation through its president, Manuel Dulay, obtained various loans for the construction of its hotel project, Dulay Continental Hotel (now Frederick Hotel.) It even had to borrow money from Virgilio Dulay to be able to continue the hotel project. As a result of said loan, Virgilio Dulay occupied one of the unit apartments of the subject property since 1973 while at the same time managing the Dulay Apartment as his shareholdings in the corporation was subsequently increased by his father.

On 23 December 1976, Manuel Dulay by virtue of Board Resolution 18 of the corporation, sold the subject property to spouses Maria Theresa and CastrenseVeloso in the amount of P300,000 as evidenced by the Deed of Absolute Sale. TCT 23225 was issued to Maria Theresa Veloso. Subsequently, Manuel Dulay and the spouses Veloso executed a Memorandum to that Deed of Absolute Sale giving Manuel Dulay within 2 years to repurchase the subject property for P200,000.00 which was, however, not annotated either in TCT 17880 or TCT 23225. On 24 December 1976, Maria Veloso, without the knowledge of Manuel Dulay, mortgaged the subject property to Manuel A. Torres for a loan of P250,000.00 which was duly annotated as Entry 68139 in TCT 23225. Upon the failure of Maria Veloso to pay Torres, the subject property was to Torres as the highest bidder in an extrajudicial foreclosure sale.

On 20 July 1978, Maria Veloso executed a Deed of Absolute Assignment of the Right to Redeem in favor of Manuel Dulay assigning her right to repurchase the subject property from Torres as a result of the extrajudicial sale. As neither Maria Veloso nor her assignee Manuel Dulay were able to redeem the subject property within the 1-year statutory period for redemption, Torres filed an Affidavit of Consolidation of Ownership 13 with the Registry of Deeds of Pasay City and TCT 24799 was subsequently issued to Torres on 23 April 1979. On 1 October 1979, Torres filed a petition for the issuance of a writ of possession against spouses Veloso and Manuel Dulay. However, when Virgilio Dulay appeared in court to intervene in said case alleging that Manuel Dulay was never authorized by the corporation to sell or mortgage the subject property, the trial court ordered Torres to implead the corporation as an indispensable party but the latter moved for the dismissal of his petition which was granted in an Order dated 8 April 1980. On 20 June 1980, Torres and Edgardo Pabalan, real estate administrator of Torres, filed an action against the corporation, Virgilio Dulay and NepomucenoRedovan, a tenant of Dulay Apartment Unit No. 8-A for the recovery of possession, sum of money and damages with preliminary injunction in Civil Case 8198-P with the then Court of First Instance of Rizal. On 21 July 1980, the corporation filed an action against spouses Veloso and Torres for the cancellation of the Certificate of Sheriff's Sale and TCT 24799 in Civil Case 8278-P with the then Court of First Instance of Rizal. On 29 January 1981, Pabalan and Torres filed an action against spouses Florentino and Elvira Manalastas, a tenant of Dulay Apartment Unit No. 7-B, with the corporation as intervenor for ejectment in Civil Case 38-81 with the Metropolitan Trial Court of Pasay City which rendered a decision on 25 April 1985, in favor of Pabalan, et al., ordering the spouses Manalastas and all persons claiming possession under them to vacate the premises; and to pay the rents in the

sum of P500.00 a month from May 1979 until they shall have vacated the premises with interest at the legal rate; and to pay attorney's fees in the sum of P2,000.00 and P1,000.00 as other expenses of litigation and for them to pay the costs of the suit. Thereafter or on 17 May 1985, the corporation and Virgilio Dulay filed an action against the presiding judge of the Metropolitan Trial Court of Pasay City, Pabalan and Torres for the annulment of said decision with the Regional Trial Court of Pasay in Civil Case 2880-P. Thereafter, the 3 cases were jointly tried and the trial court rendered a decision in favor of Pabalan and Torres. Not satisfied with said decision, the corporation, et al. appealed to the Court of Appeals which rendered a decision on 23 October 1989, affirming the trial court decision. On 8 November 1989, the corporation, et al. filed a Motion for Reconsideration which was denied on 26 January 1990. The corporation, et al. filed the petition for review on certiorari. During the pendency of the petition, Torres died on 3 April 1991 as shown in his death certificate and named Torres-Pabalan Realty & Development Corporation as his heir in his holographic will dated 31 October 1986.

Issue: Whether the sale of the subject property between spouses Veloso and Manuel Dulay has no binding effect on the corporation as Board Resolution 18 which authorized the sale of the subject property was resolved without the approval of all the members of the board of directors and said Board Resolution was prepared by a person not designated by the corporation to be its secretary.

Held: Section 101 of the Corporation Code of the Philippines provides that "When board meeting is unnecessary or improperly held. Unless the by-laws provide otherwise, any action by the directors of a close corporation without a meeting shall nevertheless be deemed valid if: (1) Before or after such action is taken, written consent thereto is signed by all the directors; or (2) All the stockholders have actual or implied knowledge of the action and make no prompt objection thereto in writing; or (3) The directors are accustomed to take informal action with the express or implied acquiesce of all the stockholders; or (4) All the directors have express or implied knowledge of the action in question and none of them makes prompt objection thereto in writing. If a directors' meeting is held without proper call or notice, an action taken therein within the corporate powers is deemed ratified by a director who failed to attend, unless he promptly files his written objection with the secretary of the corporation after having knowledge thereof." Herein, the corporation is classified as a close corporation and consequently a board resolution authorizing the sale or mortgage of the subject property is not necessary to bind the corporation for the action of its president. At any rate, a corporate action

taken at a board meeting without proper call or notice in a close corporation is deemed ratified by the absent director unless the latter promptly files his written objection with the secretary of the corporation after having knowledge of the meeting which, in this case, Virgilio Dulay failed to do so. The corporation's claim that the sale of the subject property by its president, Manuel Dulay, to spouses Veloso is null and void as the alleged Board Resolution 18 was passed without the knowledge and consent of the other members of the board of directors cannot be sustained. Virgilio E. Dulay's protestations of complete innocence to the effect that he never participated nor was even aware of any meeting or resolution authorizing the mortgage or sale of the subject premises is difficult to believe. On the contrary, he is very much privy to the transactions involved. To begin with, he is an incorporator and one of the directors designated at the time of the organization of Manuel R. Dulay Enterprises, Inc. In ordinary parlance, the said entity is loosely referred to as a "family corporation." The nomenclature, if imprecise, however, fairly reflects the cohesiveness of a group and the parochial instincts of the individual members of such an aggrupation of which Manuel R. Dulay Enterprises, Inc. is typical: fourfifths of its incorporators being close relatives namely, 3 children and their father whose name identifies their corporation. Besides, the fact that Virgilio Dulay on 24 June 1975 executed an affidavit that he was a signatory witness to the execution of the post-dated Deed of Absolute Sale of the subject property in favor of Torres indicates that he was aware of the transaction executed between his father and Torres and had, therefore, adequate knowledge about the sale of the subject property to Torres. Consequently, the corporation is liable for the act of Manuel Dulay and the sale of the subject property to Torres by Manuel Dulay is valid and binding. It cannot be concealed that Manuel R. Dulay as president, treasurer and general manager almost had absolute control over the business and affairs of the corporation. The petition is DENIED and the decision appealed from is hereby AFFIRMED.

G.R. No. L-21998 November 10, 1975 CALIXTO PASAGUI and FAUSTA MOSAR, plaintiffs-appellants, vs. ESTER T. VILLABLANCA, ZOSIMO VILLABLANCA, EUSTAQUIA BOCAR and CATALINA BOCAR defendants-appellees.

Julio Siayngco for plaintiffs-appellants. Filomeno Arteche, Jr. for defendants-appellees. .

ANTONIO, J.: The only issue posed by this appeal is whether or not, from the nature of the action pleaded as appears in the allegations of the complaint, the aforesaid action is one of forcible entry, within the exclusive jurisdiction of the municipal court. . On February 4, 1963, appellants Calixto Pasagui and Fausta Mosar filed a complaint with the Court of First Instance at Tacloban City, alleging that onNovember 15, 1962, for and in consideration of Two Thousand Eight Hundred Pesos (P2,800.00), they bought from appellees Eustaquia Bocar and Catalina Bocar a parcel of agricultural land with an area of 2.6814 hectares, situated in Hamindangon, Pastrana, Leyte; that the corresponding document of sale was executed, notarized on the same date, and recorded in the Registry of Deeds of Tacloban, Leyte on November 16, 1962; that during the first week of February, 1963, defendant spouses Ester T. Villablanca and Zosimo Villablanca, "illegally and without any right, whatsoever, took possession of the above property harvesting coconuts from the coconut plantation thereon, thus depriving plaintiffs" of its possession; that despite demands made by the plaintiffs upon the abovementioned defendants "to surrender to them the above-described property and its possession" the latter failed or refused to return said parcel of land to the former, causing them damage; and that Eustaquia and Catalina Bocar, vendors of the property, are included defendants in the complaint by virtue of the warranty clause contained in the document of sale. Plaintiffs prayed for a decision ordering defendants to surrender the possession of the parcel of land above-described to them and to pay damages in the amounts specified. . On February 21, 1963, appellees moved to dismiss the complaint on the ground that the Court of First Instance had no jurisdiction over the subject matter, the action being one of forcible entry. Appellants opposed the Motion to Dismiss asserting that the action is not one for forcible entry inasmuch as in the complaint, there is no allegation that the deprivation of possession was effected through "force, intimidation, threat, strategy or stealth." . On May 13, 1963, the trial court issued an order dismissing the complaint for lack of jurisdiction, it appearing from the allegations in the complaint that the case is one for forcible entry which belongs to the exclusive jurisdiction of the Justice of the Peace (now Municipal Court) of Pastrana, Leyte. The first Motion for Reconsideration was denied on May 27, 1963 and the second was likewise denied on July 5, 1963. From the aforementioned orders, appeal on a pure question of law was interposed to this Court. .

It is well-settled that what determines the jurisdiction of the municipal court in a forcible entry case is the nature of the action pleaded as appears from the allegations in the complaint. In ascertaining whether or not the action is one of forcible entry within the original exclusive jurisdiction of the municipal court, the averments of the complaint and the character of the relief sought are the ones to be consulted.. 1 . In the case at bar, the complaint does not allege that the plaintiffs were in physical possession of the land and have been deprived of that possession through force, intimidation, threat, strategy, or stealth. It simply avers that plaintiffs-appellants bought on November 12, 1962 from defendants-appellees Eustaquia Bocar and Catalina Bocar the parcel of land in question for the amount of P2,800.00; that a deed of sale was executed, notarized and registered;that "during this first week of February, 1963, defendants Ester T. Villablanca and her husband, Zosimo Villablanca, illegally and without any right whatsoever, took possession of the above described property, harvesting coconuts from the coconut plantation therein, thus depriving of its possession herein plaintiffs, and causing them damages for the amount of EIGHT HUNDRED PESOS (P800.00)"; that for the purpose of enforcing the vendors' warranty in case of eviction, Eustaquia Bocar and Catalina Bocar were also included as defendants; and, therefore, plaintiffsappellants pray that a decision be rendered, ordering (a) defendants Ester T. Villablanca and her husband, Zosimo Villablanca, "to surrender the possession of the above described property to said plaintiffs"; (b) defendants Ester T. Villablanca and her husband, Zosimo Villablanca, "to pay to said plaintiffs the amount of EIGHT HUNDRED PESOS (P800.00) as damages for the usurpation by them of said property"; and (c) defendants Eustaquia Bocar and Catalina Bocar "to pay the plaintiffs the amount of P2,800.00, plus incidental expenses, as provided for by Art. 1555 of the Civil Code, in case of eviction or loss of ownership to said above described property on the part of plaintiffs." . It is true that the execution of the deed of absolute sale in a public instrument is equivalent to delivery of the land subject of the sale. 2 This presumptive delivery only holds true when there is no impediment that may prevent the passing of the property from the hands of the vendor into those of the vendee. It can be negated by the reality that the vendees actually failed to obtain material possession of the land subject of the sale.. 3 It appears from the records of the case at bar that plaintiffs-appellants had not acquired physical possession of the land since its purchase on November 12, 1962. As a matter of fact, their purpose in filing the complaint in Civil Case No. 3285 is precisely to "get the possession of the property." 4 In order that an action may be considered as one for forcible entry, it is not only necessary that the plaintiff should allege his prior physical possession of the property but also that he was deprived of his possession by any of the means provided in section 1, Rule 70 of the Revised Rules of Court, namely: force, intimidation, threats, strategy and stealth. For, if the dispossession did not take place by any of these means, the courts of first instance, not the municipal courts, have

jurisdictions.. 5 The bare allegation in the complaint that the plaintiff has been "deprived" of the land of which he is and has been the legal owner for a long period has been held to be insufficient. 6 It is true that the mere act of a trespasser in unlawfully entering the land, planting himself on the ground and excluding therefrom the prior possessor would imply the use of force. In the case at bar, no such inference could be made as plaintiffs-appellants had not claimed that they were in actual physical possession of the property prior to the entry of the Villablancas. Moreover, it is evident that plaintiffs-appellants are not only seeking to get the possession of the property, but as an alternative cause of action, they seek the return of the price and payment of damages by the vendors "in case of eviction or loss of ownership" of the said property. It is, therefore, not the summary action of forcible entry within the context of the Rules. . WHEREFORE, the order of dismissal is hereby set aside, and the case remanded to the court a quo for further proceedings. Costs against defendants-appellees. . Barredo, Actg. (Chairman), Aquino, Concepcion, Jr. and Martin. JJ., concur. . Fernando (Chairman), J, is on leave. .

Footnotes 1 Cananay v. Sarmiento, 79 Phil. 36. 2 Article 1498, Civil Code of the Philippines. 3 Montenegro v. Roxas de Gomez, 58 Phil. 723; Masallo v. Cesar. 39 Phil. 134; Addison v. Felix and Tioco, 38 Phil. 404. 4 p. 21, Record on Appeal; p. 9, Brief of Appellants. 5 Valderama Lumber Manufacturer's Co., Inc. v. L. S. Sarmiento, 5 SCRA 287, 291. "In the present case the allegation in the complaint is simply that the plaintiff has been "deprived" of the land of which he is and has been the legal owner for a long period. This allegation is not sufficient to show that the action is based upon the provisions of said section 80. Moreover, upon an examination of the prayer of the complaint, it is seen that the plaintiff is not only seeking to be repossessed of the land but desires also a declaration that he is the owner of the same. It is quite clear, from an examination of the complaint, that, had the same been presented in the court of the justice of the peace, it would have been demurrable, for the reason that the facts alleged fail to show that the plaintiff had been dispossessed by any of the methods mentioned in said section 80.

"It is a general rule of pleading and practice that in all pleadings filed in courts of special jurisdiction, the special facts giving the court jurisdiction must be specially alleged and set out. Unless these special jurisdictional facts are alleged, the complaint is demurrable. The complaint in the present case not containing allegations showing the special jurisdiction of the justice of the peace, the same would have been demurrable had it been filed in the court of justice of the peace. "Said section 80 does not cover all of the cases of dispossession of lands. Whenever the owner is dispossessed by any other means than those mentioned in said section, he may maintain his action in a Court of First Instance, and it is not necessary for him to wait until the expiration of twelve months before commencing an action to be repossessed and to be declared to be the owner of said land. The summary action before a justice of the peace is given only for the special circumstances mentioned in said section (80). In all other cases Courts of First Instance have jurisdiction, even though the twelve months have not elapsed. (Alonzo vs. Municipality of Placer, 5 Phil. Rep., 71; Roman Catholic Church vs. Familiar, 11 Phil. Rep., 310; Gutierrez vs. Rosario, 15 Phil. Rep., 116.)." (Gumiran v. Gumiran, 21 Phil. 174, 178-179.)

PASAGUI V. VILLABLANCA (November 10, 1975) FACTS: Plaintiffs Calixto Pasagui and Fausta Mosar bought a property in Leyte from Estaquia and Catalina Bocar for P2,800. Before they could take possession of the property, defendant spouses Ester T. Villablanca and Zosimo Villablanca took possession of it and harvested from the coconut plantation thereon. Plaintiffs demanded the return of the property but the defendants refused.

Plaintiffs filed a case in the CFI but respondents contend that the case is a forcible entry and as such, CFI has no jurisdiction.

ISSUE: WON the case is of forcible entry.

HELD:

In order that an action may be considered as one for forcible entry, it is not only necessary that the plaintiff should allege his prior physical possession of the property but also that he was deprived of his possession by any of the means provided in section 1, Rule 70 of the Revised Rules of Court.

It is true that the execution of the deed of absolute sale in a public instrument is equivalent to delivery of the land subject of the sale. This presumptive delivery only holds true when there is no impediment that may prevent the passing of the property from the hands of the vendor into those of the vendee. It can be negated by the reality that the vendees actually failed to obtain material possession of the land subject of the sale.

G.R. No. L-69970 November 28, 1988 FELIX DANGUILAN, petitioner, vs. INTERMEDIATE APPELLATE COURT, APOLONIA MELAD, assisted by her husband, JOSE TAGACAY,respondents. Pedro R. Perez, Jr. for petitioner. Teodoro B. Mallonga for private respondent.

CRUZ, J.: The subject of this dispute is the two lots owned by Domingo Melad which is claimed by both the petitioner and the respondent. The trial court believed the petitioner but the respondent court, on appeal, upheld the respondent. The case is now before us for a resolution of the issues once and for all. On January 29, 1962, the respondent filed a complaint against the petitioner in the then Court of First Instance of Cagayan for recovery of a farm lot and a residential lot which she claimed she had purchased from Domingo Melad in 1943 and were now being unlawfully withheld by the defendant. 1 In his answer, the petitioner denied the allegation and averred that he was the owner of the said lots of which he had been in open, continuous and adverse possession,

having acquired them from Domingo Melad in 1941 and 1943. 2 The case was dismissed for failure to prosecute but was refiled in 1967. 3 At the trial, the plaintiff presented a deed of sale dated December 4, 1943, purportedly signed by Domingo Melad and duly notarized, which conveyed the said properties to her for the sum of P80.00. 4 She said the amount was earned by her mother as a worker at the Tabacalera factory. She claimed to be the illegitimate daughter of Domingo Melad, with whom she and her mother were living when he died in 1945. She moved out of the farm only when in 1946 Felix Danguilan approached her and asked permission to cultivate the land and to stay therein. She had agreed on condition that he would deliver part of the harvest from the farm to her, which he did from that year to 1958. The deliveries having stopped, she then consulted the municipal judge who advised her to file the complaint against Danguilan. The plaintiff 's mother, her only other witness, corroborated this testimony. 5 For his part, the defendant testified that he was the husband of Isidra Melad, Domingo's niece, whom he and his wife Juana Malupang had taken into their home as their ward as they had no children of their own. He and his wife lived with the couple in their house on the residential lot and helped Domingo with the cultivation of the farm. Domingo Melad signed in 1941 a private instrument in which he gave the defendant the farm and in 1943 another private instrument in which he also gave him the residential lot, on the understanding that the latter would take care of the grantor and would bury him upon his death. 6 Danguilan presented three other witnesses 7 to corroborate his statements and to prove that he had been living in the land since his marriage to Isidra and had remained in possession thereof after Domingo Melad's death in 1945. Two of said witnesses declared that neither the plaintiff nor her mother lived in the land with Domingo Melad. 8 The decision of the trial court was based mainly on the issue of possession. Weighing the evidence presented by the parties, the judge 9 held that the defendant was more believable and that the plaintiff's evidence was "unpersuasive and unconvincing." It was held that the plaintiff's own declaration that she moved out of the property in 1946 and left it in the possession of the defendant was contradictory to her claim of ownership. She was also inconsistent when she testified first that the defendant was her tenant and later in rebuttal that he was her administrator. The decision concluded that where there was doubt as to the ownership of the property, the presumption was in favor of the one actually occupying the same, which in this case was the defendant. 10 The review by the respondent court 11 of this decision was manifestly less than thorough. For the most part it merely affirmed the factual findings of the trial court except for an irrelevant modification, and it was only toward the end that it went to and resolved what it considered the lone decisive issue.

The respondent court held that Exhibits 2-b and 3-a, by virtue of which Domingo Melad had conveyed the two parcels of land to the petitioner, were null and void. The reason was that they were donations of real property and as such should have been effected through a public instrument. It then set aside the appealed decision and declared the respondents the true and lawful owners of the disputed property. The said exhibits read as follows: EXHIBIT 2-b is quoted as follows: 12 I, DOMINGO MELAD, of legal age, married, do hereby declare in this receipt the truth of my giving to Felix Danguilan, my agricultural land located at Barrio Fugu-Macusi, Penablanca, Province of Cagayan, Philippine Islands; that this land is registered under my name; that I hereby declare and bind myself that there is no one to whom I will deliver this land except to him as he will be the one responsible for me in the event that I will die and also for all other things needed and necessary for me, he will be responsible because of this land I am giving to him; that it is true that I have nieces and nephews but they are not living with us and there is no one to whom I will give my land except to Felix Danguilan for he lives with me and this is the length175 m. and the width is 150 m. IN WITNESS WHEREOF, I hereby sign my name below and also those present in the execution of this receipt this 14th day of September 1941. Penablanca Cagayan, September 14, 1941. (SGD.) DOMINGO MELAD WITNESSES: 1. (T.M.) ISIDRO MELAD 2. (SGD.) FELIX DANGUILAN 3. (T.M.) ILLEGIBLE EXHIBIT 3-a is quoted as follows: 13 I, DOMINGO MELAD, a resident of Centro, Penablanca, Province of Cagayan, do hereby swear and declare the truth that I have delivered my residential lot at Centro, Penablanca, Cagayan, to Felix Danguilan, my son-in-law because I have no child; that I have thought of giving him my land because he will be the one to take care of SHELTERING me or bury me when I die and this is why I have thought of executing this document; that the boundaries of this lot ison the east, Cresencio Danguilan; on the north, Arellano Street; on the south by Pastor Lagundi and on

the west, Pablo Pelagio and the area of this lot is 35 meters going south; width and length beginning west to east is 40 meters. IN WITNESS HEREOF, I hereby sign this receipt this 18th day of December 1943. (SGD.) DOMINGO MELAD WITNESSES: (SGD.) ILLEGIBLE (SGD.) DANIEL ARAO It is our view, considering the language of the two instruments, that Domingo Melad did intend to donate the properties to the petitioner, as the private respondent contends. We do not think, however, that the donee was moved by pure liberality. While truly donations, the conveyances were onerous donations as the properties were given to the petitioner in exchange for his obligation to take care of the donee for the rest of his life and provide for his burial. Hence, it was not covered by the rule in Article 749 of the Civil Code requiring donations of real properties to be effected through a public instrument. The case at bar comes squarely under the doctrine laid down in Manalo v. De Mesa, 14 where the Court held: There can be no doubt that the donation in question was made for a valuable consideration, since the donors made it conditional upon the donees' bearing the expenses that might be occasioned by the death and burial of the donor Placida Manalo, a condition and obligation which the donee Gregorio de Mesa carried out in his own behalf and for his wife Leoncia Manalo; therefore, in order to determine whether or not said donation is valid and effective it should be sufficient to demonstrate that, as a contract, it embraces the conditions the law requires and is valid and effective, although not recorded in a public instrument. The private respondent argues that as there was no equivalence between the value of the lands donated and the services for which they were being exchanged, the two transactions should be considered pure or gratuitous donations of real rights, hence, they should have been effected through a public instrument and not mere private writings. However, no evidence has been adduced to support her contention that the values exchanged were disproportionate or unequal. On the other hand, both the trial court and the respondent court have affirmed the factual allegation that the petitioner did take care of Domingo Melad and later arranged for his burial in accordance with the condition imposed by the donor. It is alleged and not denied that he died when he was almost one hundred years old, 15which would mean that the petitioner farmed the land practically by himself and so provided for the donee (and his wife) during the

latter part of Domingo Melad's life. We may assume that there was a fair exchange between the donor and the donee that made the transaction an onerous donation. Regarding the private respondent's claim that she had purchased the properties by virtue of a deed of sale, the respondent court had only the following to say: "Exhibit 'E' taken together with the documentary and oral evidence shows that the preponderance of evidence is in favor of the appellants." This was, we think, a rather superficial way of resolving such a basic and important issue. The deed of sale was allegedly executed when the respondent was only three years old and the consideration was supposedly paid by her mother, Maria Yedan from her earnings as a wage worker in a factory. 16 This was itself a suspicious circumstance, one may well wonder why the transfer was not made to the mother herself, who was after all the one paying for the lands. The sale was made out in favor of Apolonia Melad although she had been using the surname Yedan her mother's surname, before that instrument was signed and in fact even after she got married. 17 The averment was also made that the contract was simulated and prepared after Domingo Melad's death in 1945. 18 It was also alleged that even after the supposed execution of the said contract, the respondent considered Domingo Melad the owner of the properties and that she had never occupied the same. 19 Considering these serious challenges, the appellate court could have devoted a little more time to examining Exhibit "E" and the circumstances surrounding its execution before pronouncing its validity in the manner described above. While it is true that the due execution of a public instrument is presumed, the presumption is disputable and will yield to contradictory evidence, which in this case was not refuted. At any rate, even assuming the validity of the deed of sale, the record shows that the private respondent did not take possession of the disputed properties and indeed waited until 1962 to file this action for recovery of the lands from the petitioner. If she did have possession, she transferred the same to the petitioner in 1946, by her own sworn admission, and moved out to another lot belonging to her step-brother. 20 Her claim that the petitioner was her tenant (later changed to administrator) was disbelieved by the trial court, and properly so, for its inconsistency. In short, she failed to show that she consummated the contract of sale by actual delivery of the properties to her and her actual possession thereof in concept of purchaser- owner. As was held in Garchitorena v. Almeda: 21 Since in this jurisdiction it is a fundamental and elementary principle that ownership does not pass by mere stipulation but only by delivery (Civil Code, Art. 1095; Fidelity and Surety Co. v. Wilson, 8 Phil. 51), and the execution of a public document does not constitute sufficient

delivery where the property involved is in the actual and adverse possession of third persons (Addison vs. Felix, 38 Phil. 404; Masallo vs. Cesar, 39 Phil. 134), it becomes incontestable that even if included in the contract, the ownership of the property in dispute did not pass thereby to Mariano Garchitorena. Not having become the owner for lack of delivery, Mariano Garchitorena cannot presume to recover the property from its present possessors. His action, therefore, is not one of revindicacion, but one against his vendor for specific performance of the sale to him. In the aforecited case of Fidelity and Deposit Co. v. Wilson, 22 Justice Mapa declared for the Court: Therefore, in our Civil Code it is a fundamental principle in all matters of contracts and a wellknown doctrine of law that "non mudis pactis sed traditione dominia rerum transferuntur". In conformity with said doctrine as established in paragraph 2 of article 609 of said code, that "the ownership and other property rights are acquired and transmitted by law, by gift, by testate or intestate succession, and, in consequence of certain contracts, by tradition". And as the logical application of this disposition article 1095 prescribes the following: "A creditor has the rights to the fruits of a thing from the time the obligation to deliver it arises. However, he shall not acquire a real right" (and the ownership is surely such) "until the property has been delivered to him." In accordance with such disposition and provisions the delivery of a thing constitutes a necessary and indispensable requisite for the purpose of acquiring the ownership of the same by virtue of a contract. As Manresa states in his Commentaries on the Civil Code, volume 10, pages 339 and 340: "Our law does not admit the doctrine of the transfer of property by mere consent but limits the effect of the agreement to the due execution of the contract. ... The ownership, the property right, is only derived from the delivery of a thing ... " As for the argument that symbolic delivery was effected through the deed of sale, which was a public instrument, the Court has held: The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered when it is placed "in the hands and possession of the vendee." (Civil Code, art. 1462). It is true that the same article declares that the execution of a public instrument is equivalent to the delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser

by the sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to realitythe delivery has not been effected. 23 There is no dispute that it is the petitioner and not the private respondent who is in actual possession of the litigated properties. Even if the respective claims of the parties were both to be discarded as being inherently weak, the decision should still incline in favor of the petitioner pursuant to the doctrine announced in Santos & Espinosa v. Estejada 24 where the Court announced: If the claim of both the plaintiff and the defendant are weak, judgment must be for the defendant, for the latter being in possession is presumed to be the owner, and cannot be obliged to show or prove a better right. WHEREFORE, the decision of the respondent court is SET ASIDE and that of the trial court REINSTATED, with costs against the private respondent. It is so ordered.

DANGUILAN V. AIC (November 28, 1988) FACTS:

A residential and farm lot in Cagayan owned by Dominggo Melad were being claimed by petitioner Felix Danguilan and respondent Apolonia Melad.

Apolonia contends that she acquired the property when Dominggo Melad sold it to her when she was just three years old in which her mother paid the consideration. She contends that she just moved out of the farm only when in 1946 Felix Danguilan approached her and asked permission to cultivate the land and to stay therein.

Dangguilan presented for his part 2 documents to prove his claim that the properties were given to him by Dominggo Melad through an onerous donation. The onerous part of the donation includes the taking care of the farm and the arrangement of the burial of Dominggo.

HELD: The ruling should be in favor of Danguilan. The contention of Apolonia that the deed of donation is void because it was not made through a public document is of no merit. The deed was an onerous one and hence, it was not covered by the rule in Article 749 requiring donations of real properties to be effected through a public instrument. An onerous donation is effective and valid if it embraces the conditions that the law requires. Since it has been proven that Danguilan did the conditions in the onerous donation particularly the arrangement of Dominggo's burial, the deed is deemed valid.

On the other hand, the deed of sale made in favor of Apolonia is suspicious. One may well wonder why the transfer was not made to the mother herself, who was after all the one paying for the lands. The averment was also made that the contract was simulated and prepared after Domingo Melad's death in 1945.

Even assuming the validity of the deed of sale, the record shows that the private respondent did not take possession of the disputed properties and indeed waited until 1962 to file this action for recovery of the lands from the petitioner. If she did have possession, she transferred the same to the petitioner in 1946, by her own sworn admission, and moved out to another lot belonging to her step-brother. In short, she failed to show that she consummated the contract of sale by actual delivery of the properties to her and her actual possession thereof in concept of purchaser-owner. Ownership does not pass by mere stipulation but only by delivery.

G.R. No. 92989 July 8, 1991 PERFECTO DY, JR. petitioner, vs. COURT OF APPEALS, GELAC TRADING INC., and ANTONIO V. GONZALES, respondents. Zosa & Quijano Law Offices for petitioner. Expedito P. Bugarin for respondent GELAC Trading, Inc.

GUTIERREZ, JR., J.:p This is a petition for review on certiorari seeking the reversal of the March 23, 1990 decision of the Court of Appeals which ruled that the petitioner's purchase of a farm tractor was not validly consummated and ordered a complaint for its recovery dismissed. The facts as established by the records are as follows: The petitioner, Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979, Wilfredo Dy purchased a truck and a farm tractor through financing extended by Libra Finance and Investment Corporation (Libra). Both truck and tractor were mortgaged to Libra as security for t heloa n. The petitioner wanted to buy the tractor from his brother so on August 20, 1979, he wrote a letter to Libra requesting that he be allowed to purchase from Wilfredo Dy the said tractor and assume the mortgage debt of the latter. In a letter dated August 27, 1979, Libra thru its manager, Cipriano Ares approved the petitioner's request. Thus, on September 4, 1979, Wilfredo Dy executed a deed of absolute sale in favor of the petitioner over the tractor in question. At this time, the subject tractor was in the possession of Libra Finance due to Wilfredo Dy's failure to pay the amortizations. Despite the offer of full payment by the petitioner to Libra for the tractor, the immediate release could not be effected because Wilfredo Dy had obtained financing not only for said tractor but also for a truck and Libra insisted on full payment for both. The petitioner was able to convince his sister, Carol Dy-Seno, to purchase the truck so that full payment could be made for both. On November 22, 1979, a PNB check was issued in the amount of P22,000.00 in favor of Libra, thus settling in full the indebtedness of Wilfredo Dy with the financing firm. Payment having been effected through an out-of-town check, Libra insisted that it be cleared first before Libra could release the chattels in question. Meanwhile, Civil Case No. R-16646 entitled "Gelac Trading, Inc. v. Wilfredo Dy", a collection case to recover the sum of P12,269.80 was pending in another court in Cebu. On the strength of an alias writ of execution issued on December 27, 1979, the provincial sheriff was able to seize and levy on the tractor which was in the premises of Libra in Carmen, Cebu.

The tractor was subsequently sold at public auction where Gelac Trading was the lone bidder. Later, Gelac sold the tractor to one of its stockholders, Antonio Gonzales. It was only when the check was cleared on January 17, 1980 that the petitioner learned about GELAC having already taken custody of the subject tractor. Consequently, the petitioner filed an action to recover the subject tractor against GELAC Trading with the Regional Trial Court of Cebu City. On April 8, 1988, the RTC rendered judgment in favor of the petitioner. The dispositive portion of the decision reads as follows: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, pronouncing that the plaintiff is the owner of the tractor, subject matter of this case, and directing the defendants Gelac Trading Corporation and Antonio Gonzales to return the same to the plaintiff herein; directing the defendants jointly and severally to pay to the plaintiff the amount of P1,541.00 as expenses for hiring a tractor; P50,000 for moral damages; P50,000 for exemplary damages; and to pay the cost. (Rollo, pp. 35-36) On appeal, the Court of Appeals reversed the decision of the RTC and dismissed the complaint with costs against the petitioner. The Court of Appeals held that the tractor in question still belonged to Wilfredo Dy when it was seized and levied by the sheriff by virtue of the alias writ of execution issued in Civil Case No. R-16646. The petitioner now comes to the Court raising the following questions: A. WHETHEROR NOT THE HONORABLE COURT OF APPEALS MISAPPREHENDED THE FACTS AND ERRED IN NOT AFFIRMING THE TRIAL COURT'S FINDING THAT OWNERSHIP OF THE FARM TRACTOR HAD ALREADY PASSEDTO HEREIN PETITIONERWHEN SAID TRACTORWAS LEVIEDON BY THE SHERIFF PURSUANT TO AN ALIAS WRIT OF EXECUTION ISSUED IN ANOTHER CASE IN FAVOR OF RESPONDENT GELACTRADING INC. B. WHETHEROR NOT THE HONORABLE COURT OF APPEALS EMBARKED ON MERE CONJECTURE AND SURMISE IN HOLDING THAT THE SALE OF THE AFORESAID TRACTOR TO PETITIONERWAS DONE IN FRAUD OF WILFREDO DY'S CREDITORS, THERE BEING NO EVIDENCE OF SUCH FRAUD AS FOUND BY THE TRIAL COURT. C.

WHETHEROR NOT THE HONORABLE COURT OF APPEALS MISAPPREHENDED THE FACTS AND ERRED IN NOT SUSTAINING THE FINDING OF THE TRIAL COURT THAT THE SALE OF THE TRACTOR BY RESPONDENT GELAC TRADING TO ITS CO-RESPONDENT ANTONIO V. GONZALES ON AUGUST 2, 1980 AT WHICH TIME BOTH RESPONDENTS ALREADY KNEW OF THE FILING OF THE INSTANT CASE WAS VIOLATIVE OF THE HUMAN RELATIONS PROVISIONS OF THE CIVIL CODE AND RENDERED THEM LIABLE FOR THE MORAL AND EXEMPLARY DAMAGES SLAPPED AGAINST THEM BY THE TRIAL COURT. (Rollo, p. 13) The respondents claim that at the time of the execution of the deed of sale, no constructive delivery was effected since the consummation of the sale depended upon the clearance and encashment of the check which was issued in payment of the subject tractor. In the case of Servicewide Specialists Inc. v. Intermediate Appellate Court. (174 SCRA 80 [1989]), we stated that: xxx xxx xxx The rule is settled that the chattel mortgagor continues to be the owner of the property, and therefore, has the power to alienate the same; however, he is obliged under pain of penal liability, to secure the written consent of the mortgagee. (Francisco, Vicente, Jr., Revised Rules of Court in the Philippines, (1972), Volume IV-B Part 1, p. 525). Thus, the instruments of mortgage are binding, while they subsist, not only upon the parties executing them but also upon those who later, by purchase or otherwise, acquire the properties referred to therein. The absence of the written consent of the mortgagee to the sale of the mortgaged property in favor of a third person, therefore, affects not the validity of the sale but only the penal liability of the mortgagor under the Revised Penal Code and the binding effect of such sale on the mortgagee under the Deed of Chattel Mortgage. xxx xxx xxx The mortgagor who gave the property as security under a chattel mortgage did not part with the ownership over the same. He had the right to sell it although he was under the obligation to secure the written consent of the mortgagee or he lays himself open to criminal prosecution under the provision of Article 319 par. 2 of the Revised Penal Code. And even if no consent was obtained from the mortgagee, the validity of the sale would still not be affected. Thus, we see no reason why Wilfredo Dy, as the chattel mortgagor can not sell the subject tractor. There is no dispute that the consent of Libra Finance was obtained in the instant case. In a letter dated August 27, 1979, Libra allowed the petitioner to purchase the tractor and

assume the mortgage debt of his brother. The sale between the brothers was therefore valid and binding as between them and to the mortgagee, as well. Article 1496 of the Civil Code states that the ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501 or in any other manner signing an agreement that the possession is transferred from the vendor to the vendee. We agree with the petitioner that Articles 1498 and 1499 are applicable in the case at bar. Article 1498 states: Art. 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. xxx xxx xxx Article 1499 provides: Article 1499. The delivery of movable property may likewise be made by the mere consent or agreement of the contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time of the sale, or if the latter already had it in his possession for any other reason. (1463a) In the instant case, actual delivery of the subject tractor could not be made. However, there was constructive delivery already upon the execution of the public instrument pursuant to Article 1498 and upon the consent or agreement of the parties when the thing sold cannot be immediately transferred to the possession of the vendee. (Art. 1499) The respondent court avers that the vendor must first have control and possession of the thing before he could transfer ownership by constructive delivery. Here, it was Libra Finance which was in possession of the subject tractor due to Wilfredo's failure to pay the amortization as a preliminary step to foreclosure. As mortgagee, he has the right of foreclosure upon default by the mortgagor in the performance of the conditions mentioned in the contract of mortgage. The law implies that the mortgagee is entitled to possess the mortgaged property because possession is necessary in order to enable him to have the property sold. While it is true that Wilfredo Dy was not in actual possession and control of the subject tractor, his right of ownership was not divested from him upon his default. Neither could it be said that Libra was the owner of the subject tractor because the mortgagee can not become the owner of or convert and appropriate to himself the property mortgaged. (Article 2088, Civil Code) Said property continues to belong to the mortgagor. The only remedy given to the mortgagee is to

have said property sold at public auction and the proceeds of the sale applied to the payment of the obligation secured by the mortgagee. (See Martinez v. PNB, 93 Phil. 765, 767 [1953]) There is no showing that Libra Finance has already foreclosed the mortgage and that it was the new owner of the subject tractor. Undeniably, Libra gave its consent to the sale of the subject tractor to the petitioner. It was aware of the transfer of rights to the petitioner. Where a third person purchases the mortgaged property, he automatically steps into the shoes of the original mortgagor. (See Industrial Finance Corp. v. Apostol, 177 SCRA 521 [1989]). His right of ownership shall be subject to the mortgage of the thing sold to him. In the case at bar, the petitioner was fully aware of the existing mortgage of the subject tractor to Libra. In fact, when he was obtaining Libra's consent to the sale, he volunteered to assume the remaining balance of the mortgage debt of Wilfredo Dy which Libra undeniably agreed to. The payment of the check was actually intended to extinguish the mortgage obligation so that the tractor could be released to the petitioner. It was never intended nor could it be considered as payment of the purchase price because the relationship between Libra and the petitioner is not one of sale but still a mortgage. The clearing or encashment of the check which produced the effect of payment determined the full payment of the money obligation and the release of the chattel mortgage. It was not determinative of the consummation of the sale. The transaction between the brothers is distinct and apart from the transaction between Libra and the petitioner. The contention, therefore, that the consummation of the sale depended upon the encashment of the check is untenable. The sale of the subject tractor was consummated upon the execution of the public instrument on September 4, 1979. At this time constructive delivery was already effected. Hence, the subject tractor was no longer owned by Wilfredo Dy when it was levied upon by the sheriff in December, 1979. Well settled is the rule that only properties unquestionably owned by the judgment debtor and which are not exempt by law from execution should be levied upon or sought to be levied upon. For the power of the court in the execution of its judgment extends only over properties belonging to the judgment debtor. (Consolidated Bank and Trust Corp. v. Court of Appeals, G.R. No. 78771, January 23, 1991). The respondents further claim that at that time the sheriff levied on the tractor and took legal custody thereof no one ever protested or filed a third party claim. It is inconsequential whether a third party claim has been filed or not by the petitioner during the time the sheriff levied on the subject tractor. A person other than the judgment debtor who claims ownership or right over levied properties is not precluded, however, from taking other legal remedies to prosecute his claim. (Consolidated Bank and Trust Corp. v. Court of Appeals,

supra) This is precisely what the petitioner did when he filed the action for replevin with the RTC. Anent the second and third issues raised, the Court accords great respect and weight to the findings of fact of the trial court. There is no sufficient evidence to show that the sale of the tractor was in fraud of Wilfredo and creditors. While it is true that Wilfredo and Perfecto are brothers, this fact alone does not give rise to the presumption that the sale was fraudulent. Relationship is not a badge of fraud (Goquiolay v. Sycip, 9 SCRA 663 [1963]). Moreover, fraud can not be presumed; it must be established by clear convincing evidence. We agree with the trial court's findings that the actuations of GELAC Trading were indeed violative of the provisions on human relations. As found by the trial court, GELAC knew very well of the transfer of the property to the petitioners on July 14, 1980 when it received summons based on the complaint for replevin filed with the RTC by the petitioner. Notwithstanding said summons, it continued to sell the subject tractor to one of its stockholders on August 2, 1980. WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals promulgated on March 23, 1990 is SET ASIDE and the decision of the Regional Trial Court dated April 8, 1988 is REINSTATED. SOORDERED.

PERFECTO DY, JR. petitioner, vs. COURT OF APPEALS, GELAC TRADING INC., and ANTONIO V. GONZALES, Respondents.

G.R. No. 92989 July 8, 1991

FACTS: Wilfredo Dy purchased a truck and a farm tractor through LIBRA which was also mortgaged with the latter, as a security to the loan.

Petitioner, expresses his desire to purchased his brother's tractor in a letter to LIBRA which also includes his intention to shoulder its mortgaged. LIBRA approved the request. At the time that

Wilfredo Dy executed a deed of absolute sale in favor of petitioner, the tractor and truck were in the possession of LIBRA for his failure to pay the amortization.

When petitioner finally fulfilled its obligation to pay the tractor, LIBRA would only release the same only if he would also pay for the truck. In order to fulfill LIBRA's condition, petitioner convinced his sister to pay for the remaining truck, to which she released a check amounting to P22,000. LIBRA however, insisted that the check must be first cleared before it delivers the truck and tractor.

Meanwhile, another case penned "Gelac Trading Inc vs. Wilfredo Dy" was pending in Cebu as a case to recover for a sum of money (P12,269.80). By a writ of execution the court in Cebu ordered to seize and levy the tractor which was in the premise of LIBRA, it was sold in a public auction to which it was purchased by GELAC. The latter then sold the tractor to Antonio Gonzales.

RTC rendered in favor of petitioner.

CA dismissed the case, alleging that it still belongs to Wilfredo Dy.

ISSUE: Whether or not there was a consummated sale between Petitioner and LIBRA?

HELD: NO. The payment of the check was actually intended to extinguish the mortgage obligation so that the tractor could be released to the petitioner. It was never intended nor could it be considered as payment of the purchase price because the relationship between Libra and the petitioner is not one of sale but still a mortgage. The clearing or encashment of the check which produced the effect of payment determined the full payment of the money obligation and the release of

the chattel mortgage. It was not determinative of the consummation of the sale. The transaction between the brothers is distinct and apart from the transaction between Libra and the petitioner. The contention, therefore, that the consummation of the sale depended upon the encashment of the check is untenable.

G.R. No. 143369

November 27, 2002

LEOPOLDO C. LEONARDO, represented by his daughter EMERENCIANA LEONARDO, petitioner, vs. VIRGINIA TORRES MARAVILLA and LEONOR C. NADAL, as Administratrices of the Estate of MARIANO TORRES, as substituted by FE NADAL VENTURINA, respondents. DECISION YNARES-SANTIAGO, J.: This is a petition for review seeking to set aside the decision1 dated November 26, 1999 and the resolution2 dated May 19, 2000 of the Court of Appeals3 in CA-G.R. CV No. 52932, which affirmed the order4 of the Regional Trial Court of Pasay City, Branch III, dismissing petitioner's complaint5 for "Delivery of Possession of Property, Owner's Duplicate Certificate of Title, Rentals and Damages," in Civil Case No. 93-10282. The instant controversy stemmed from a dispute over a 1,151.80 square meter lot, located in Pasay City, covered by Transfer Certificate of Title No. 2355 (34515),6 and registered in the name of Mariano Torres y Chavarria, the predecessor-in-interest of respondents. Petitioner claims that he is the lawful owner of the disputed lot, having purchased it on September 29, 1972 from a certain Eusebio Leonardo Roxas,7 who in turn acquired the same lot by purchase on August 28, 1972 from Mariano Torres y Chavarria.8 On September 14, 1972, Eusebio Leonardo Roxas sent a letter-request9 to the Register of Deed of Pasay City asking for the registration of the deed of sale allegedly executed in his favor by Mariano Torres y Chavarria. The letter was entered in the Register's Primary Book under Entry No. 55780, Vol. V. The Office of the Register of Deeds, however, did not register the deed as it was awaiting the final disposition of a pending case10 between Mariano Torres y Chavarria and a certain Francisco E. Fernandez involving title of the lot.11 Incidentally, the said case was decided in favor of Mariano Torres y Chavarria, which decision became final and executory on September 21, 1972.12

On October 6, 1972, petitioner likewise asked the Register of Deeds to register the deeds of sale dated August 28, 1972 and the September 29, 1972 involving Transfer Certificate of Title No. 2355 (34515), and to issue the corresponding transfer certificate of title in his name.13 Petitioner did not present the owner's duplicate copy of Transfer Certificate of Title No. 2355 (34515), which remained in the possession of respondents. Petitioner's letter-request was entered in the Primary Books of the Register of Deeds under Entry No. 55952, V.5, on October 19, 1972. The Register of Deeds, however, certified that the original copy of TCT No. 2355 (34515), could not be retrieved or located in the office of the Register of Deeds of Pasay, hence, the requested registration could not be effected.14 On November 13, 1972, petitioner executed an affidavit of adverse claim15 over TCT No. 2355 (34515) which was entered in the Primary Book under Entry No. 56039, Vol. 5, on November 15, 1972. On May 18, 1993, the Register of Deeds of Pasay City was able to retrieve the original copy of TCT No. 2355 (34515).16 On May 20, 1993, petitioner caused the annotation of his affidavit of adverse claim on TCT No. 2355 (34515),17and asked the respondents to deliver possession of the owner's duplicate copy of TCT No. 2355 (34515). When the latter ignored his demand, petitioner filed on September 6, 1993 a complaint for "Delivery of Possession of Property, Owner's Duplicate Certificate of Title, Rentals and Damages." Petitioner alleged that he filed the case against respondents only in 1993 because he was living abroad.18 In their Answer, respondents countered that since 1938 up to the present, the lot in question has been registered in the name of the late Mariano Torres y Chavarria, their predecessor-in- interest, and that they have been in material possession thereof in the concept of owners. In the settlement of the estate of Mariano Torres y Chavarria, who died on August 30, 1974,19 his widow, Rosario Nadal, and his natural child, Virginia Torres Maravilla, acquired the disputed lot by succession.20 After the demise of Rosario Nadal, sometime in January 1990, her share in the said lot was inherited by her sister, Leonor Nadal, who was appointed as special administratrix of the estate of Rosario Nadal.21 Subsequently, Leonor Nadal was also appointed administratrix of the estate of Mariano Torres y Chavarria.22 Respondents maintain that they have been in open and peaceful possession of the said property and that it was only in 1993 when they came to know of the alleged claim of petitioners over the same property. Respondents contended further that the deeds of sale dated August 28, 1972 and September 29, 1972 are falsified documents and that the signature of Mariano Torres y Chavarria on the August 28, 1972 deed of absolute sale was a forgery. On February 28, 1994, respondents filed a

motion to dismiss23 the complaint on the grounds of: (1) non-payment of the correct docket fees; (2) prescription; and (3) laches. The motion to dismiss was denied on July 25, 1995. Meanwhile, Leonor Nadal died on October 23, 1995, and was substituted by Fe Nadal Venturina on January 19, 1996.24 On motion of respondents, the trial court reconsidered its order of July 25, 1995, and issued an order on February 1, 1996, dismissing petitioner's complaint on the ground of prescription and laches. Dissatisfied, petitioner appealed to the Court of Appeals which affirmed the assailed order on November 26, 1999. The motion for reconsideration was denied on May 19, 2000. Hence, the instant petition contending that the Court of Appeals erred in holding that: I THE RIGHT OF PETITIONER TO ENFORCE THE DEEDS (EXHS. 2 AND 4) THROUGH HIS COMPLAINT FILED ON SEPTEMBER 6, 1993 HAD ALREADY PRESCRIBED ON SEPTEMBER 29, 1982 PER ARTICLE 114[4]; II THE TITLE ONTHE PROPERTY REMAINED IN THE VENDOR'S (MARIO TORRES) NAME BEFORE AND AFTER THE EXECUTION OF THE DEEDS (EXHS. 2 AND 4); III IF THE ORIGINAL COPY OF THE TCT WAS LOST/MISSING IN THE FILES OF THE REGISTER OF DEEDS, PETITIONER SHOULD HAVE FILED A PETITION FOR RECONSTITUTION OF THE TITLE; IV PETITIONER'S INACTION FOR 21 YEARS TO ENFORCE HIS RIGHTS ON THE DEEDS (EXHS. 2 AND 4) MADE RESPONDENTS BELIVE THAT HE HAD ABANDONED HIS RIGHTS ON THE PROPERTY; and, V LACHES HAD OPERATEDNOTWITHSTANDING THAT PETITIONERWROTE THE REGISTER OF DEEDS OF PASAY CITY (EXH. 8) AND THE LATTER REPLIED THAT REGISTRATION COULD NOT BE EFFECTED BECAUSE THE TITLE WAS MISSING (EXH. 9).25 The issue in the instant case is whether or not petitioner's action is barred by prescription and laches.

The Court of Appeals ruled that petitioner's cause of action is founded on the deed of absolute sale allegedly executed by respondents' predecessor-in-interest on August 28, 1972, which purportedly conveyed the disputed lot to Eusebio Leonardo Roxas, and the deed of sale dated September 29, 1972, whereby the latter sold the same lot to petitioner. Being an action based on written contracts, petitioner's complaint falls under Article 114426 of the Civil Code, which provides that an action upon a written contract shall prescribe in ten years from the time the right of action accrued. Since petitioner brought the instant case only on September 6, 1993, or 21 years from the time his supposed right of action accrued on September 29, 1972, i.e., the date of execution of the contract conveying to him the questioned lot, his action was clearly barred by the statute of limitations. Petitioner, on the other hand, contends that the applicable provision is Article 114127 and not 1144 of the Civil Code because his action is one for recovery of possession of real property which prescribes in thirty years. The contention is without merit. Petitioner's action is actually an action for specific performance, i.e., to enforce the deed of absolute sale allegedly executed in his favor. It is a fundamental principle that ownership does not pass by mere stipulation but by delivery. The delivery of a thing constitutes a necessary and indispensable requisite for the purpose of acquiring the ownership of the same by virtue of a contract.28 Under Article 1498 of the Civil Code, when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. Thus, the execution of the contract is only a presumptive, not conclusive delivery which can be rebutted by evidence to the contrary, as when there is failure on the part of the vendee to take material possession of the land subject of the sale in the concept of a purchaser-owner.29 In the case at bar, it is not disputed that the lot in question was never delivered to petitioner notwithstanding the alleged execution of a deed of absolute sale. From 1972 to 1993, petitioner neither had, nor demanded, material possession of the disputed lot. It was the respondents who have been in control and possession thereof in the concept of owners since 1938 up to the present. It follows that ownership of the lot was never transferred to petitioner. Hence, he can not claim that the instant case is an accion reivindicatoria or an action to recover ownership and full possession of the property which, in the first place, never came into his possession for lack of the requisite delivery. Thus, in Danguilan v. Intermediate Appellate Court,30 where the requisite delivery was not effected, the Court held that: Since in this jurisdiction it is a fundamental and elementary principle that ownership does not pass by mere stipulation but only by delivery (Civil Code, Art. 1095; Fidelity and Surety Co. v. Wilson, 8 Phil. 51), and the execution of a public document does not constitute sufficient

delivery where the property involved is in the actual and adverse possession of third persons (Addison v. Felix, 38 Phil. 404; Masallo v. Cesar, 39 Phil. 134), it becomes incontestable that even if included in the contract, the ownership of the property in dispute did not pass... Not having become the owner for lack of delivery, [one] cannot presume to recover the property from its present possessors. [The] action, therefore, is not one of revindicacion, but one against [the] vendor for specific performance of the sale ... Clearly, the case filed by petitioner was an action for specific performance of a written contract of sale which, pursuant to Article 1144 of the Civil Code, prescribes in 10 years from the accrual of the right of action. In a contract of sale, there is a reciprocal obligation to pay the purchase price and the corresponding delivery of the thing sold, which obligations give rise to a right of action in case of breach.31 Here, petitioner's right of action for specific performance or rescission arose when delivery of the thing sold was not effected on September 29, 1972, despite the payment of the purchase price. Hence, from 1972 to 1993, when petitioner filed the instant case, 21 years had elapsed barring the institution of petitioner's action which is definitely beyond the 10 year prescriptive period. Petitioner's claim that the prescriptive period was tolled when he registered his adverse claim with the Register of Deeds is untenable. In Garbin v. Court of Appeals, et al.,32 wherein an action for annulment of a deed of sale was dismissed on the ground of prescription and laches, the Court held that the registration of an adverse claim does not toll the running of the prescriptive period, thus: x x x the title of the defendant must be upheld for failure or the neglect of the plaintiffs for an unreasonable and unexplained length of time of more than fifteen (15) years since they registered their adverse claim, or for a period of more than three (3) decades since the execution of the deed of sale in their favor upon which their adverse claim is based, to do that which, by exercising diligence, could or should have been done earlier. For it is this negligence or omission to assert a right within reasonable time that is construed that plaintiffs had abandoned their right to claim ownership under the deed of sale, or declined to assert it. Thus, when a person slept on his rights for 28 years from the time of the transaction, before filing the action, amounts to laches which cannot be excused even by ignorance resulting from inexcusable negligence (Vda. de Lima v. Tiu, 52 SCRA 516 [1970]). In the same vein, the annotation on May 20, 1993 of the November 13, 1972 affidavit of adverse claim on TCT No. 2355 (34515) afforded no protection to petitioner for the same reason that said belated assertion of his alleged right over the property is barred by prescription and laches.

Moreover, the affidavit of adverse claim registered by petitioner in 1972 was ineffective. The law enforced at the time petitioner filed an adverse claim was Section 110, of Act 496,33 also known as the Land Registration Act, (now Section 7034 of P.D. No. 1529, or the Property Registration Decree35), which stated: Sec. 110. Whoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to the date of the original registration, may, if no other provision is made in this Act for registering the same, make a statement in writing setting forth fully his alleged right or interest, and how or under whom acquired, and a reference to the volume and page of the certificate of title of the registered owner, and a description of the land in which the right or interest is claimed. The statement shall be signed and sworn to, and shall state the adverse claimant's residence and designate a place at which all notices may be served upon him. This statement shall be entitled to registration as an adverse claim, and the court, upon a petition of any party in interest, shall grant a speedy hearing upon the question of the validity of such adverse claim and shall enter such decree therein as justice and equity may require. If the claim is adjudged to be invalid, the registration shall be cancelled. If in any case the court after notice and hearing shall find that a claim thus registered was frivolous or vexatious, it may tax the adverse claimant double or treble costs in its discretion. In Junio v. De los Santos, et al.,36 an action for cancellation of an adverse claim, the Court ruled that the procedure for registration of voluntary instruments, like a deed of sale, is laid down in Section 5737 of Act 496. But where the vendor refused to deliver to the vendee the owner's duplicate certificate of title, which title must be presented in order that the deed of conveyance may be registered and the corresponding transfer certificate of title may be issued,38 the vendee may file with the Register of Deeds an adverse claim under Section 110 of Act No. 496. For an adverse claim to be valid, it must be shown that a demand was made on the vendor and that the latter refused to surrender the owner's duplicate certificate of title.39 In instant case, it was not shown that Mariano Torres y Chavarria, the registered owner of the disputed lot, refused to surrender the owner's duplicate certificate of title, nor that petitioner demanded the surrender thereof. In the affidavit of adverse claim registered by petitioner he merely stated: "9. That in the meantime the herein (VENDEE) LEOPOLDO C. LEONARDO has no means to get or secure the aforementioned Owner[']s Duplicate Copy of Title No. 2355 (34515) Pasay City Registry Office, from the said Parties, he (Leopoldo C. Leonardo) hereby requests the Register of Deeds of Pasay City to annotate whatever rights and interest on the ORIGINAL CERTIFICATE OF TITLE No. 2355 (34515), Pasay Registry Office, in the name of MARIANO C. TORRES as a Notice of Adverse Claim(s) in favor of LEOPOLDO C. LEONARDO to any third party/ies;" For lack of the requisite unjustified refusal of the registered owner to surrender the

owner's duplicate certificate of title, the affidavit of adverse claim registered by petitioner is not valid. Likewise, there is no merit in petitioner's assertion that the prescriptive period should commence to run only on May 18, 1993 when the original copy of Transfer Certificate of Title No. 2355 (34515) was retrieved by the Register of Deeds. The loss of the original title will not prevent petitioner's pursuit to enforce his right. Otherwise stated, the recovery of the original title or the reconstitution thereof is not the only means by which petitioner could protect his right. Under Article 1155 of the Civil Code - "[t]he prescription of actions is interrupted when they are filed in court, when there is a written extrajudicial demand by the creditors, and when there is any written acknowledgement of the debt by the debtor." Petitioner therefore may pursue either judicial or extrajudicial means manifesting his interest in the questioned propertyin order to interrupt the prescriptive period. Certainly, petitioner's action filed on September 6, 1993 is barred by the 10 year prescriptive period from the accrual of his alleged right of action on September 29, 1972. In the same vein, said action is barred by laches having allowed 21 years to lapse before enforcing his alleged right. Laches is defined as failure or neglect for an unreasonable and unexplained length of time, to do that which, by exercising due diligence could or should have been done earlier. It is negligence or omission to assert a right within a reasonable time, warranting presumption that the party entitled to assert it has abandoned it or has declined to assert it.40 Tempus enim modus tollendi obligationes et actiones, quia tempus currit contra desides et sui juris contemptores - For time is a means of dissipating obligations and actions, because time runs against the slothful and careless of their own rights.41 WHEREFORE, in view of all the foregoing, the instant petition is DENIED. The November 26, 1999 decision and the May 19, 2000 resolution of the Court of Appeals in CA-G.R. CV No. 52932, which sustained the February 1, 1996 order of the Regional Trial Court of Pasay City, Branch III, dismissing petitioner's complaint in Civil Case No. 93-10282 on the ground of prescription and laches, is AFFIRMED. SOORDERED.

LEONARDO v. MARAVILLA GR No. 143369 November 27, 2002

FACTS:

Mariano Torres, predecessor-in-interest of respondents, owns a parcel of land covered by TCT No. 2355 (34515). The said land was sold by Mariano to Eusebio Roxas but the latter was not able to register the same due to a legal dispute between Mariano and a certain Francisco Fernandez. Mariano eventually won that case in 1972.

Petitioner now buys the lot from Eusebio Roxas and asked that it be registered under his name. He was not able to do so because the Owner's Duplicate Certificate of Title (ODCT) was still in the hands of respondents and that the Register of Deeds made an affidavit that the original copy of TCT No. 2355 (34515) could not be retrieved or located in their office. Petitioner files an adverse claim. On May 1993, the Register of Deeds found the original TCT of the land and annotated thereon the adverse claim filed by petitioner on May 20, 1993.

Petitioner claims that he is the lawful owner of said land having purchased it from Eusebio Roxas and having protected his rights through the annotation of adverse claim when the register of Deeds found the Original TCT. Respondents counter that the action has been barred by prescription and laches, it being filed only 21 years from the time the right of action has commenced. Petitioner claims that his action is an accion reivindicatoria which prescribes in 30 years.

ISSUE: Whether or not petitioner's action is barred by prescription and laches.

HELD: Yes. Petitioner's action is actually an action for specific performance. It is a fundamental principle that ownership does not pass by mere stipulation but by delivery. The delivery of a thing constitutes a necessary and indispensable requisite for the purpose of acquiring the ownership of the same by virtue of a contract. The execution of the contract is only a presumptive, not conclusive delivery which can be rebutted by evidence to the contrary, as when there is failure on the part of the vendee to take material possession of the land subject of the sale in the concept of a purchaser-owner.

Since in this jurisdiction it is a fundamental and elementary principle that ownership does not pass by mere stipulation but only by delivery, and the execution of a public document does not constitute sufficient delivery where the property involved is in the actual and adverse possession of third persons, it becomes incontestable that even if included in the contract, the ownership of the property in dispute did not pass.

Clearly, the case filed by petitioner was an action for specific performance of a written contract of sale which, pursuant to Article 1144 of the Civil Code, prescribes in 10 years from the accrual of the right of action. the annotation on May 20, 1993 of the November 13, 1972 affidavit of adverse claim on TCT No. 2355 (34515) afforded no protection to petitioner for the same reason that said belated assertion of his alleged right over the property is barred by prescription and laches.

Moreover, the affidavit of adverse claim registered by petitioner in 1972 was ineffective. The law enforced at the time petitioner filed an adverse claim was Section 110 of Act 496, also known as the Land Registration Act.

Likewise, there is no merit in petitioner's assertion that the prescriptive period should commence to run only on May 18, 1993 when the original copy of Transfer Certificate of Title No. 2355 (34515) was retrieved by the Register of Deeds. The loss of the original title will not prevent petitioner's pursuit to enforce his right. Otherwise stated, the recovery of the original title or the reconstitution thereof is not the only means by which petitioner could protect his right. Under Article 1155 of the Civil Code - "[t]he prescription of actions is interrupted when they are filed in court, when there is a written extrajudicial demand by the creditors, and when there is any written acknowledgement of the debt by the debtor." Petitioner therefore may pursue either judicial or extrajudicial means manifesting his interest in the questioned property in order to interrupt the prescriptive period.

Certainly, petitioner's action filed on September 6, 1993 is barred by the 10 year prescriptive period from the accrual of his alleged right of action on September 29, 1972. In the same vein, said action is barred by laches having allowed 21 years to lapse before enforcing his alleged right. Laches is defined as failure or neglect for an unreasonable and unexplained length of time, to do that which, by exercising due diligence could or should have been done earlier. It is

negligence or omission to assert a right within a reasonable time, warranting presumption that the party entitled to assert it has abandoned it or has declined to assert it.

G.R. No. 91622. April 6, 1993. P.T. CERNA CORPORATION, petitioner, vs. COURT OF APPEALS, PETER SCHEIDER and JUAN BUNYI, respondents. De Guzman, Florentino & Associates for petitioner. Belo, Abiera & Associates and Casiano P. Laquihon for private respondents. SYLLABUS 1. CIVIL LAW; OWNERSHIP; SALES INVOICE; NOT CONSIDERED PROOF OF TRANSFER OF OWNERSHIP. ? It has been held time and again that the issuance of a sales invoice does not prove transfer of ownership of the thing sold to the buyer. An invoice is nothing more than a detailed statement of the nature, quantity and cost of the thing sold and has been considered not a bill of sale. Thus, petitioner's contention that the issuance of the invoices in its name occurred much earlier than the execution of the Deeds of Sale between private respondent Scheider and the vendor corporations, becomes inconsequential. Inasmuch as petitioner's invoices are mere statements regarding the thing sold, as opposed to private respondent Scheider's Deeds of Sale which are public documents, petitioner's claim of ownership cannot prosper. 2. REMEDIAL LAW; NOTARIAL DOCUMENT; ENJOYS PRESUMPTION OF REGULARITY IN ITS FAVOR. ? The Deeds of Sale, being notarial documents, are evidence of the facts in clear, unequivocal manner therein expressed. As such, they have in their favor, the presumption of regularity. To contradict facts in a notarial document and the presumption of regularity in its favor, the evidence must be clear, convincing and more than merely preponderant. 3. ID; EVIDENCE ; BURDEN OF PROOF IN CIVIL CASES RESTS UPON THE PARTY WHO ASSERTS THE AFFIRMATIVE OF AN ISSUE. ? To prove fraud, it has been held that full and convincing evidence is required. This again, petitioner was not able to accomplish. It bears reiterating at this point that in civil cases, the burden of proof rests upon the party who, as determined by the pleadings or the nature of the case, asserts the affirmative of an issue. In this case, the

burden lies on the petitioner, who is duty bound to prove the allegations in its complaint. As this Court has held, he who alleges a fact has the burden of proving it and a mere allegation is not evidence. DECISION CAMPOS, JR., J p: The instant Petition seeks the review of the Decision ** of the Court of Appeals, dated August 9, 1989 and of its Resolution 1 dated December 21, 1989, both regarding CA-G.R. CV No. 05089. 2 The dispositive portion of the questioned decision reads: "HENCE, there being no reversible error on the appealed judgment, the same is hereby AFFIRMED with costs against appellant. SO ORDERED." 3 Respondent court's Resolution of which a review is also sought, denied petitioner-appellant's motion for reconsideration of the above cited decision for lack of merit. This case originated from a complaint for Replevin filed by P.T. Cerna Corporation against Peter Scheider and Juan Bunyi. Consonant with the factual findings of the trial court, respondent court found that the subjects of this case are three (3) personal properties, all of which are "jaw crushers." The first one is a rock crusher, jaw size 34" x 33", purchased from Bormaheco, Inc. for P165,000.00. The other two are US Mfg. jaw crushers, both purchased from the International Tractor Sales, each for P111,000.00. Both parties, petitioner and private respondent Scheider, claim ownership over the three jaw crushers. Petitioner anchored its claim of ownership of the first rock crusher on the "Customer's Copy" of Invoice No. 43984, dated January 24, 1984 issued in the name of the corporation by Bormaheco., Inc. for P165,000.00. As to the other two crushers, it presented Invoice No. 601-A, dated March 30, 1984, by International Tractor and Equipment Sales, for the total purchase price of P222,000.00. All of these purchases were purportedly paid through the corporation checks duly signed by Noe de la Cerna and Edwin Tiu, its President and Vice-President, respectively. Petitioner's president alleged further that sometime in late 1983, an agreement was entered into by private respondent Scheider to quarry stones and crush them for sale to the public; that he was able to find a suitable land for the quarry and had negotiated for its lease. Private respondent Scheider, as per agreement, was supposed to be the technical man, and was thus in

possession of said machineries for a complete check-up. However, allegedly, private respondents Scheider and Bunyi took advantage of their possession and proceeded to organize their own company, together with Scheider's in-laws and other private persons, to engage in the quarrying of stones and rocks and without the knowledge of the corporation, using the litigated rock crushers for said purpose. Private respondent Scheider, on the other hand, claimed that the three rock crushers were actually purchased by him and in reality are owned by him. he presented the "Sales Department Copy" of the same Invoice No. 43984, which was in his name properly countersigned by Mr. Cervantes, the President of Bormaheco. He also presented a notarized deed of sale of said rock crushers executed by Bormaheco in his favor and a further certification by Mr. Cervantes, dated August 3, 1984, stating that the purchaser and owner of said equipment was Mr. Peter Scheider. For the two rock crushers, he also managed to present a notarized deed of sale executed by Mr. Virgil Lundberg in his favor. In connection with this, he presented a delivery receipt and a certification by Mr. Virgil Lundberg attesting that Mr. Peter Scheider is the purchaser and owner of the two rock crushers. Private respondent Scheider, however, admitted that the purchase price of the crushers were paid for by petitioner, but only to set off outstanding obligations of the same to him due to various spare parts sold to petitioner, prior to the dispute, amounting to over P500,000.00. On August 1, 1984, the trial court issued a Replevin Order, requiring delivery to petitioner of possession of the three (3) rock crushers. Pursuant to said Replevin, the Deputy Sheriff of Rizal was able to take possession of one of the three rock crushers, and was able to eventually transfer possession thereof to petitioner. Private respondents Scheider and Bunyi filed a "Motion for Reconsideration," dated August 7, 1984, of the Replevin Order. After several hearings were held on the motion, the trial court on December 21, 1984, 4 gave due course to the motion and set aside and revoked the Replevin Order dated August 1, 1984. The sheriff, in the same order, was directed to immediately restore physical possession to private respondent Scheider of the rock crusher seized by him. The same order dismissed the complaint as the cause of action which was the question of ownership had been accordingly resolved in favor of then defendants, herein private respondents. On January 3, 1985, petitioner filed with the trial court a notice of appeal of said order. Petitioner also filed, on the same day, a petition against the Hon. Antonio Y. Benedicto, the presiding judge; the Deputy Provincial Sheriff of Rizal (RTC, Antipolo, Rizal); Peter Scheider and Juan Bunyi, for "Certiorari and Prohibition with Preliminary Injunction and Restraining Order," praying for the annulment of the trial court's order of December 21, 1984 insofar as it ordered

the immediate restoration of the replevined property to the private respondent. Said Certiorari Case was docketed as AC-G.R. SP No. 05066. On January 4, 1985, the Court of Appeals, in AC-G.R. SP No. 05066 issued a Resolution enjoining the respondents therein "from enforcing that part of the order dated December 21, 1984 directing the return to respondents of the replevined property, until further orders or notice from this Court". On January 9, 1985, the trial court issued an Order stating that no further action shall be taken on the case until the certiorari case shall have been resolved by the appellate court. On May 3, 1985, the Court of Appeals promulgated in AC-G.R. SP No. 05066, a Decision setting aside the order of December 21, 1984, insofar as it directed the immediate restoration of the replevined property to private respondents. The appeal of petitioner from the Order of December 21, 1984 was docketed as CA-G.R. CV No. 05089. The judgment regarding this appeal and the subsequent denial by respondent court of petitioner's motion for reconsideration are being challenged in this petition. This Court is called upon to finally settle the question of ownership of the three jaw crushers. Who, as between the claimants, is the rightful owner? We rule in favor of private respondent Scheider. Petitioner relies heavily on the invoices as evidence of purchase and delivery. Petitioner's theory is correct, but only up to this point. however, as to its claim that said invoices vested in the corporation ownership over the disputed equipment, We simply cannot agree. It has been held time and again that the issuance of a sales invoice does not prove transfer of ownership of the thing sold to the buyer. An invoice is nothing more than a detailed statement of the nature, quantity and cost of the thing sold and has been considered not a bill of sale. 5 Thus, petitioner's contention that the issuance of the invoices in its name occurred much earlier than the execution of the Deeds of Sale between private respondent Scheider and the vendor corporations, becomes inconsequential. Inasmuch as petitioner's invoices are mere statements regarding the thing sold, as opposed to private respondent Scheider's Deeds of Sale which are public documents, petitioner's claim of ownership cannot prosper. The Deeds of Sale, being notarial documents, are evidence of the facts in clear, unequivocal manner therein expressed. As such, they have in their favor, the presumption of regularity. 6 To contradict facts in a notarial document and the presumption of regularity in its favor, the evidence must be clear, convincing and more than merely preponderant. 7 As borne out by the

records of the case, petitioner challenged the authenticity of the invoices presented by private respondent Scheider, alleging falsification of the same. The ruling however of this court with respect to this matter still would not affect the evidentiary value of the Deeds of Sale. Petitioner should have attacked private respondent Scheider's deeds of sale on which the latter anchors his claim. Instead, petitioner did not even present the signatories to the contracts of sale to successfully rebut the presumption of regularity accorded the deeds of sale. Consequently, petitioner failed miserably to overcome the binding force and effect of the deeds of sale. Petitioner also attempted to discredit the sale of the equipment to private respondent Scheider by alleging fraud employed by private respondents Scheider and Bunyi, who purportedly reneged on their obligations with respect to an alleged joint venture. The latter undertaking, as professed by petitioner, was entered into by herein claimant parties, with private respondents as the technical partners. However, petitioner failed to substantiate this claim. No sufficient evidence, as held by the trial court, was adduced to even prove the existence of said agreement. To prove fraud, it has been held that full and convincing evidence is required. 8 This again, petitioner was not able to accomplish. It bears reiterating at this point that in civil cases, the burden of proof rests upon the party who, as determined by the pleadings or the nature of the case, asserts the affirmative of an issue. 9 In this case, the burden lies on the petitioner, who is duty bound to prove the allegations in its complaint. As this Court has held, he who alleges a fact has the burden of proving it and a mere allegation is not evidence. 10 A careful evaluation of the evidence presented by petitioner reveals its insufficiency to detract from the evidentiary force of the public instrument which appears on its face, as having been drawn up with all the formalities prescribed by the law. This leads Us to the inescapable conclusion that private respondent Scheider is the owner of the litigated properties. To hold otherwise would mean establishing a very dangerous precedent that would open the door to fraud. WHEREFORE, in light of the foregoing and finding no reversible error committed by respondent Court, the petition is hereby DENIED. The decision of respondent Court dated August 9, 1989 and its resolution of December 21, 1989 are both AFFIRMED. SOORDERED.

P.T. Cerna Corp. vs. CA, G.R. No. 91622. April 6, 1993 Facts: Both parties, petitioner and private respondent Scheider, claim ownership over the three jaw crushers. Petitioner anchored its claim of ownership of the first rock crusher on the "Customer's Copy" dated January 24, 1984 issued in the name of the corporation by Bormaheco., Inc. for P165,000.00. As to the other two crushers, it presented Invoice No. 601-A, dated March 30, 1984, by International Tractor and Equipment Sales, for the total purchase price of P222,000.00. All of these purchases were purportedly paid through the corporation checks duly signed by Noe de la Cerna and Edwin Tiu, its President and Vice-President, respectively.

Petitioner's president alleged further that sometime in late 1983, an agreement was entered into by private respondent Scheider to quarry stones and crush them for sale to the public; that he was able to find a suitable land for the quarry and had negotiated for its lease. Private respondent Scheider, as per agreement, was supposed to be the technical man, and was thus in possession of said machineries for a complete check-up. However, allegedly, private respondents Scheider and Bunyi took advantage of their possession and proceeded to organize their own company, together with Scheider's in-laws and other private persons, to engage in the quarrying of stones and rocks and without the knowledge of the corporation, using the litigated rock crushers for said purpose.

Private respondent Scheider, on the other hand, claimed that the three rock crushers were actually purchased by him and in reality are owned by him. He presented the "Sales Department Copy" of the same Invoice No. 43984, which was in his name properly countersigned by Mr. Cervantes, the President of Bormaheco. He also presented a notarized deed of sale of said rock crushers executed by Bormaheco in his favor and a further certification by Mr. Cervantes, dated August 3, 1984, stating that the purchaser and owner of said equipment was Mr. Peter Scheider. For the two rock crushers, he also managed to present a notarized deed of sale executed by Mr. Virgil Lundberg in his favor. In connection with this, he presented a delivery receipt and a certification by Mr. Virgil Lundberg attesting that Mr. Peter Scheider is the purchaser and owner of the two rock crushers.

Private respondent Scheider, however, admitted that the purchase price of the crushers were paid for by petitioner, but only to set off outstanding obligations of the same to him due to various spare parts sold to petitioner, prior to the dispute, amounting to over P500,000.00.

ISSUE: Who, as between the claimants, is the rightful owner?

HELD: The Court rule in favor of private respondent Scheider. The issuance of a sales invoice does not prove transfer of ownership of the thing sold to the buyer. An invoice is nothing more than a detailed statement of the nature, quantity and cost of the thing sold and has been considered not a bill of sale. Thus, petitioner's contention that the issuance of the invoices in its name occurred much earlier than the execution of the Deeds of Sale between private respondent Scheider and the vendor corporations, becomes inconsequential. Inasmuch as petitioner's invoices are mere statements regarding the thing sold, as opposed to private respondent Scheider's Deeds of Sale which are public documents, petitioner's claim of ownership cannot prosper. The Deeds of Sale, being notarial documents, are evidence of the facts in clear, unequivocal manner therein expressed. As such, they have in their favor, the presumption of regularity.

To contradict facts in a notarial document and the presumption of regularity in its favor, the evidence must be clear, convincing and more than merely preponderant. In civil cases, the burden of proof rests upon the party who, as determined by the pleadings or the nature of the case, asserts the affirmative of an issue. In this case, the burden lies on the petitioner, who is duty bound to prove the allegations in its complaint. As this Court has held, he who alleges a fact has the burden of proving it and a mere allegation is not evidence. A careful evaluation of the evidence presented by petitioner reveals its insufficiency to detract from the evidentiary force of the public instrument which appears on its face, as having been drawn up with all the formalities prescribed by the law. This leads us to the inescapable conclusion that private respondent Scheider is the owner of the litigated properties. To hold otherwise would mean establishing a very dangerous precedent that would open the door to fraud.

G.R. No. L-11897

October 31, 1964

FERNANDO A. FROILAN, plaintiff-appellee, vs. PAN ORIENTAL SHIPPING COMPANY, defendant-appellant, REPUBLIC OF THE PHILIPPINES, and COMPANIA MARITIMA, intervenors-appellees. Sycip, Salazar & Associates and Enrique Fernando & Emma Quisumbing-Fernando for defendant-appellant. The Government Corporate Counsel for intervenors-appellees. Rafael Dinglasan for plaintiff-appellee. BARRERA, J.: On March 7, 1947, Fernando A. Froilan purchased from the Shipping Administration a boat described as MV/FS 197 for the sum of P200,000.00, with a down payment of P50,000,00. To secure payment of the unpaid balance of the purchase price, a mortgage was constituted on the vessel in favor of the Shipping Administration in a contract which provides, among others, the following: In the event that the FIRST PARTY should elect to exercise its rights to rescind under the terms of this contract, it shall have the right to take possession of the vessel herein sold in the condition that it is at the time of rescission but in no case in a worse condition than when originally delivered to the second party, ordinary wear and tear excepted and in case at the time of rescission the condition of the vessel is not satisfactory to the FIRST PARTY, it shall have the right to have the vessel reconditioned, repaired, dry-docked at the expense of the SECOND PARTY. The same right is hereby granted to the FIRST PARTY in case the SECOND PARTY should for any reason refuse or fail to comply with this condition of sale and return the vessel herein sold in a condition not satisfactory to the FIRST PARTY. The right of rescission shall be considered as a cumulative remedy granted to the FIRST PARTY and shall not in any way prejudice his right to demand immediate and complete payment of the purchase price of the vessel under the terms herein provided, and to demand and collect from the SECOND PARTY such damages caused by the non-compliance with this contract. This contract was duly approved by the President of the Philippines.

Froilan appeared to have defaulted in spite of demands, not only in the payment of the first installment on the unpaid balance of the purchase price and the interest thereon when they fell due, but also failed in his express undertaking to pay the premiums on the insurance coverage of the vessel, obliging the Shipping Administration to advance such payment to the insurance company. Consequently, the Shipping Administration requested the Commissioner of Customs on June 1, 1948 to refuse clearance on the vessel and the voyage thereof was ordered suspended. Thereafter, Froilan asked for a reconsideration of the action taken by the Shipping Administration, claiming that his failure to pay the required installments was due to the fact that he was awaiting the decision of the President on the petition of the shipowners for an extension of the period of payment of the purchased vessels, which petition was favorably acted upon. On July 3, 1948, the Shipping Administration and Froilan entered into an agreement whereby the latter undertook to liquidate immediately all of his outstanding accounts, including the insurance premiums, within 30 days, and have the vessel overhauled, and promised that in case of his default, he shall "waive, any formal notice of demand and to redeliver the said vessel peaceably and amicably without any other proceedings" (Exh. 39). Again, Froilan failed to settle his accounts within the prescribed period, thus, the Shipping Administration threatened to rescind the contract unless payment be immediately made. On August 28, 1948, upon Froilan's request, the Shipping Administration agreed to release the vessel on condition that the same would be overhauled and repaired and the accrued interest on the first installment would be paid. The Administration also allowed the mortgagor to pay his overdue accounts, amounting now to P48,500.00 in monthly installments, with warming that in case of further default, it would immediately repossess the vessel and rescind the contract. Froilan failed to pay. On January 17, 1949, the Shipping Administration required him to return the vessel or else file a bond for P25,000.00 in five days. In a letter dated January 28, 1949, Froilan requested that the period for filing the bond be extended to February 15, 1949, upon the express condition and understanding that: ... . If I fail to file the required bond on the said date, February 15, 1949, to the satisfaction of the Shipping Administration, I am willing to relinquish and I do hereby relinquish any and all rights I have or may have on the said vessel including any payments made thereon to the Shipping Administration, without prejudice to other rights the Shipping Administration may have against me under the contract of sale executed in my favor. I wish to reiterate that if I fail to file the bond within the period I have requested, any and all rights I have on the vessel and any payments made to the Shipping Administration shall be

considered automatically forfeited in favor of the Shipping Administration and the ownership of the said vessel will be as it is hereby automatically transferred to the Shipping Administration which is then hereby authorized to take immediate possession of said vessel. (Exh. 66) This letter of Froilan was submitted by the General Manager of the Shipping Administration to the board of directors for proper consideration. By resolution of January 31, 1949, the petition was granted subject specifically to the conditions set forth therein. Froilan again failed to make good his promises. Hence, on February 18, 1949, the General Manager of the Shipping Administration wrote the Collector of Customs of Manila, advising the latter that the Shipping Administration, by action of its board, terminated the contract with Froilan, and requesting the suspension of the clearance of the boat effective that date (Exh. 70). On February 21, 1949, the General Manager directed its officers, Capt. Laconico and others, to take immediate possession of the vessel and to suspend the unloading of all cargoes on the same until the owners thereof made the corresponding arrangement with the Shipping Administration. Pursuant to these instructions, the boat was, not only actually repossessed, but the title thereto was registered again in the name of the Shipping Administration, thereby retransferring the ownership thereof to the government. On February 22, 1949, Pan Oriental Shipping Co., hereinafter referred to as Pan Oriental, offered to charter said vessel FS-197 for a monthly rent of P3,000.00. Because the government was then spending for the guarding of the boat and subsistence of the crew-members since repossession, the Shipping Administration on April 1, 1949, accepted Pan Oriental's offer "in principle" subject to the condition that the latter shall cause the repair of the vessel, advancing the cost of labor and drydocking thereof, and the Shipping Administration to furnish the necessary spare parts. In accordance with this charter contract, the vessel was delivered to the possession of Pan Oriental. In the meantime, or on February 22, 1949, Froilan tried to explain his failure to comply with the obligations he assumed and asked that he be given another extension up to March 15, 1949 to file the necessary bond. Then on March 8, Froilan offered to pay all his overdue accounts. However, as he failed to fulfill even these offers made by him in these two communications, the Shipping Administration denied his petition for reconsideration (of the rescission of the contract) on March 22, 1949. It should be noted that while his petition for reconsideration was denied on March 22, it does not appear when he formally formulated his appeal. In the meantime, as already stated, the boat has being repossessed by the Shipping Administration and the title thereto re-registered in the name of the government, and delivered to the Pan Oriental in virtue of the charter agreement. On June 2, 1949, Froilan protested to the President against the charter of the vessel.

On the same date, the Executive Office advised the Administration and the Commissioner of Customs not to dispose of the vessel in favor of another party pending final decision by the President on the appeal of Froilan (Exhs. 93-A and 93-D). But since the vessel was already cleared in favor of Pan Oriental prior to the receipt of the foregoing communication, and allegedly in order to prevent its being made answerable for damages, the General Manager of the Shipping Administration advised the Collector of Customs not to suspend the voyage of the vessel pending final decision on the appeal of Froilan. Similar manifestation, to allow the Pan Oriental's operation of the vessel without prejudice to whatever action the President may take in the case, was also made by the Administration to the Executive Secretary. On June 4, 1949, the Shipping Administration and the Pan Oriental formalized the charter agreement and signed a bareboat contract with option to purchase, containing the following pertinent provisions: III. CHARTER HIRE, TIME OF PAYMENT. The CHARTERER shall pay to the owner a monthly charter hire of THREE THOUSAND (P3,000.00) PESOS from date of delivery of the vessel, payable in advance on or before the 5th of every current month until the return of the vessel to OWNER or purchase of the vessel by CHARTERER. XII. RIGHT OF OPTION TO PURCHASE. The right of option to purchase the vessel at the price of P150,000.00 plus the amount expended for its present repairs is hereby granted to the CHARTERER within 120 days from the execution of this Contract, unless otherwise extended by the OWNER. This right shall be deemed exercised only if, before the expiration of the said period, or its extension by the OWNER the CHARTERER completes the payment, including any amount paid as Charter hire, of a total sum of not less than twenty-five percentum (25%) of said price of the vessel. The period of option may be extended by the OWNER without in any way affecting the other provisions, stipulations, and terms of this contract. If, for any reason whatsoever, the CHARTERER fails to exercise its option to purchase within the period stipulated, or within the extension thereof by the OWNER, its right of option to purchase shall be deemed terminated, without prejudice to the continuance of the Charter Party provisions of this contract. The right to dispose of the vessel or terminate the Charter Party at its discretion is reserved to the OWNER. XIII. TRANSFER OF OWNERSHIP OF THE VESSEL. After the CHARTERER has exercised his right of option as provided in the preceding paragraph (XII), the vessel shall be deemed conditionally sold to the purchaser, but the ownership thereof shall not be deemed transferred unless and until all the price of the vessel, together with the interests thereon, and any other obligation due and payable to the OWNER under this contract, have been fully paid by the CHARTERER.

xxx

xxx

xxx

XXI. APPROVAL OF THE PRESIDENT. This contract shall take effect only upon approval of His Excellency, the President. On September 6, 1949, the Cabinet revoked the cancellation of Froilan's contract of sale and restored to him all his rights thereunder, on condition that he would give not less than P10,000.00 to settle partially his overdue accounts and that reimbursement of the expenses incurred for the repair and drydocking of the vessel performed by Pan Oriental was to be made in accordance with future adjustment between him and the Shipping Administration (Exh. I). Later, pursuant to this reservation, Froilan's request to the Executive Secretary that the Administration advance the payment of the expenses incurred by Pan Oriental in the drydocking and repair of the vessel, was granted on condition that Froilan assume to pay the same and file a bond to cover said undertaking (Exh. 111). On September 7, 1949, the formal bareboat charter with option to purchase filed on June 4, 1949, in favor of the Pan Oriental was returned to the General Manager of the Shipping Administration without action (not disapproval), only because of the Cabinet resolution of September 6, 1949 restoring Froilan to his rights under the conditions set forth therein, namely, the payment of P10,000.00 to settle partially his overdue accounts and the filing of a bond to guarantee the reimbursement of the expenses incurred by the Pan Oriental in the drydocking and repair of the vessel. But Froilan again failed to comply with these conditions. And so the Cabinet, considering Froilan's consistent failure to comply with his obligations, including those imposed in the resolution of September 6, 1949, resolved to reconsider said previous resolution restoring him to his previous rights. And, in a letter dated December 3, 1949, the Executive Secretary authorized the Administration to continue its charter contract with Pan Oriental in respect to FS-197 and enforce whatever rights it may still have under the original contract with Froilan (Exh. 188). Froilan, for his part, petitioned anew for a reconsideration of this action of the Cabinet, claiming that other ship purchasers, including the President-Treasurer of the Pan Oriental himself, had also defaulted in payment and yet no action to rescind their contracts had been taken against them. He also offered to make a cash partial payment of P10,000.00 on his overdue accounts and reimburse Pan Oriental of all its necessary expense on the vessel. Pan Oriental, however, not only expressed its unwillingness to relinquish possession of the vessel, but also tendered the sum of P15,000.00 which, together with its alleged expenses already made on the vessel, cover 25% of the cost of the vessel, as provided in the option granted in the bareboat contract (Exh. 122). This amount was accepted by the Administration as deposit, subject to the final determination of Froilan's appeal by the President. The Executive Secretary was also informed of the exercise by Pan Oriental of said option to purchase.

On August 25, 1950, the Cabinet resolved once more to restore Froilan to his rights under the original contract of sale, on condition that he shall pay the sum of P10,000.00 upon delivery of the vessel to him, said amount to be credited to his outstanding accounts; that he shall continue paying the remaining installments due, and that he shall assume the expenses incurred for the repair and drydocking of the vessel (Exh. 134). Pan Oriental protested to this restoration of Froilan's rights under the contract of sale, for the reason that when the vessel was delivered to it, the Shipping Administration had authority to dispose of the said property, Froilan having already relinquished whatever rights he may have thereon. Froilan paid the required cash of P10,000.00, and as Pan Oriental refused to surrender possession of the vessel, he filed an action for replevin in the Court of First Instance of Manila (Civil Case No. 13196) to recover possession thereof and to have him declared the rightful owner of said property. Upon plaintiff's filing a bond of P400,000.00, the court ordered the seizure of the vessel from Pan Oriental and its delivery to the plaintiff. Pan Oriental tried to question the validity of this order in a petition for certiorari filed in this Court (G.R. No. L-4577), but the same was dismissed for lack of merit by resolution of February 22, 1951. Defendant accordingly filed an answer, denying the averments of the complaint. The Republic of the Philippines, having been allowed to intervene in the proceeding, also prayed for the possession of the vessel in order that the chattel mortgage constituted thereon may be foreclosed. Defendant Pan Oriental resisted said intervention, claiming to have a better right to the possession of the vessel by reason of a valid and subsisting contract in its favor, and of its right of retention, in view of the expenses it had incurred for the repair of the said vessel. As counterclaim, defendant demanded of the intervenor to comply with the latter's obligation to deliver the vessel pursuant to the provisions of the charter contract. Thereafter, and upon plaintiff's presenting proof that he had made payment to the intervenor Republic of the Philippines, of the sum of P162,576.96, covering the insurance premiums, unpaid balance of the purchase price of the vessel and interest thereon, the lower court by order of February 8, 1952, dismissed the complaint in intervention on the ground that the claim or demand therein had already been released. Said dismissal, however, was made without prejudice to the determination of defendant's right, and that the release and cancellation of the chattel mortgage did not "prejudge the question involved between the plaintiff and the defendant which is still the subject of determination in this case." In view of the dismissal of its complaint, intervenor Republic of the Philippines also moved for the dismissal of defendant's counterclaims against it, which was granted by the court. On appeal by Pan Oriental to this Court (G.R. No. L-6060), said order was reversed and the case remanded to the lower court for further proceedings.

Subsequently, Compaia Maritima, as purchaser of the vessel from Froilan, was allowed to intervene in the proceedings (in the lower court), said intervenor taking common cause with the plaintiff Froilan. In its answer to the complaint in intervention, defendant set up a counterclaim for damages in the sum of P50,000.00, alleging that plaintiff secured the Cabinet resolutions and the writ of replevin, resulting in its deprivation of possession of the, vessel, at the instigation and inducement of Compaia Maritima. This counterclaim was denied by both plaintiff and intervenor Maritima. On September 28, 1956, the lower court rendered a decision upholding Froilan's (and Compaia Maritima's) right to the ownership and possession of the FS-197. It was ruled that Froilan's violations of the conditions of the contract of sale in his favor did not automatically deprive him of his right of ownership of the vessel, which passed to him upon execution of the contract, but merely gave rise to the Shipping Administration's right either to foreclose the mortgage or rescind the contract by court action. As the Shipping Administration failed to avail itself of any of these remedies, Froilan's right of ownership remained unaffected. And the subsequent resolutions of the Cabinet, restoring him to his rights under the said contract, reaffirmed the same. The charter contract between the Shipping Administration and defendant was declared null and void, not only because the former could not have legally bound the vessel, but also due to the fact that said agreement has not been perfected for lack of approval by the President of the Philippines. And, even assuming that the said charter contract was valid, the lower court held that, as the owner (Republic of the Philippines) under the same agreement was given the right to terminate the charter or dispose of the vessel anytime, the action of the Cabinet in cancelling or withdrawing the rescission of Froilan's contract, had the effect of terminating the charter agreement with the defendant. The court also dismissed (1) defendant's counterclaims against plaintiff Froilan and intervenor Compaia Maritima, on the ground that it (defendant) was a possessor in bad faith, and consequently, not entitled to damages; (2) plaintiff's counterclaims against defendant, for the reason that the same should have been directed against intervenor Republic of the Philippines; and (3) defendant's counterclaims said intervenor Republic, on the ground that the order dismissing the complaint in intervention had already become final and it was materially impossible for the latter to secure possession of the vessel. From this decision, Pan Oriental brought the instant appeal. Contrary to appellant's contention, the ruling of the lower court that under the contract of sale with mortgage, ownership of the vessel passed to Froilan, upon delivery of the property to the latter, must be sustained. It is to be noted that unlike in the charter contract where it was specifically prescribed that ownership of the vessel shall be transferred to the vendee only upon full payment of the purchase price, no similar provision appears in the contract of sale in favor of Froilan. In the absence of stipulation to the contrary, the ownership of the thing sold passes to the vendee upon the actual or constructive delivery thereof (Art. 1477, new Civil

Code). It is for this reason that Froilan was able to constitute a mortgage on the vessel in favor of the Administration, to secure payment of the unpaid balance of the purchase price. There is no gainsaying the fact that there was continuous violation by Froilan of the terms of said contract of sale. The records conclusively show that notwithstanding the numerous opportunities given him, Froilan had been remiss in the fulfillment of his obligations thereunder. Nevertheless, the lower court upheld his allegation that the Administration may not legally rescind the contract without filing the corresponding complaint in court. Under Article 11911 of the Civil Code, in case of reciprocal obligations, the power to rescind the contract where a party incurs in default, is impliedly given to the injured party. Appellee maintains however, that the law contemplates of rescission of contract by judicial action and not a unilateral act by the injured party; consequently, the action of the Shipping Administration contravenes said provision of the law. This is not entirely correct, because there is also nothing in the law that prohibits the parties from entering into agreement that violation of the terms of the contract would cause cancellation thereof, even without court intervention. In other words, it is not always necessary for the injured party to resort to court for rescission of the contract. As already held2judicial action is needed where there, is absence of special provision in the contract granting to a party the right of rescission. In the instant case, while it may be true that the contract of sale did not expressly give to the mortgagee the right to cancel the agreement it was, nevertheless, provided therein that said party may rescind the contract as it may see fit in case of breach of the terms thereof by the mortgagor. Taking into account the promises, waivers and representations made by Froilan, to the extent that he agreed to the automatic transfer of ownership of the vessel to the Administration, should he fall to fulfill what was incumbent upon him, which did happen, the rescission of the contract without judicial action is proper. The next question to be determined is whether there had been a valid and enforceable charter contract in favor of appellant Pan Oriental, and what was the effect thereon of the subsequent restoration to Froilan by the Cabinet, of his rights under the original contract of sale with mortgage. It is not disputed that appellant Pan Oriental took possession of the vessel in question after it had been repossessed by the Shipping Administration and title thereto reacquired by the government, and operated the same from June 2, 1949 after it had repaired the vessel until it was dispossessed of the property on February 3, 1951, in virtue of a bareboat charter contract entered into between said company and the Shipping Administration. In the same agreement, appellant as charterer, was given the option to purchase the vessel, which may be exercised upon payment of a certain amount within a specified period. The President and Treasurer of

the appellant company, tendered the stipulated initial payment on January 16, 1950. Appellant now contends that having exercised the option, the subsequent Cabinet resolutions restoring Froilan's rights on the vessel violated its existing rights over the same property. To the contention of plaintiff Froilan that the charter contract never became effective because it never received presidential approval, as required therein, Pan Oriental answers that the letter of the Executive Secretary dated December 3, 1949 (Exh. 118), authorizing the Shipping Administration to continue its charter contract with appellant, satisfies such requirement (of presidential approval). It is to be noted, however, that said letter was signed by the Executive Secretary only and not under authority of the President. The same, therefore, cannot be considered to have attached unto the charter contract the required consent of the Chief Executive for its validity. Upon the other hand, the Cabinet resolutions purporting to restore Froilan to his former rights under the deed of sale, cannot also be considered as an act of the President which is specifically required in all contracts relating to these vessels (Executive Order No. 31, series of 1946). Actions of the Cabinet are merely recommendatory or advisory in character. Unless afterwards specifically adopted by the President as his own executive act, they cannot be considered as equivalent to the act of approval of the President expressly required in cases involving disposition of these vessels. In the circumstances of this case, therefore, the resulting situation is that neither Froilan nor the Pan Oriental holds a valid contract over the vessel. However, since the intervenor Shipping Administration, representing the government practically ratified its proposed contract with Froilan by receiving the full consideration of the sale to the latter, for which reason the complaint in intervention was dismissed as to Froilan, and since Pan Oriental has no capacity to question this actuation of the Shipping Administration because it had no valid contract in its favor, the decision of the lower court adjudicating the vessel to FroiIan and its successor Compaia Maritima, must be sustained. Nevertheless, under the circumstances already adverted to, Pan Oriental cannot be considered a possessor in bad faith until after the institution of the instant case. However, since it is not disputed that said appellant made useful and necessary expenses on the vessel, appellant is entitled to the refund of such expenses with the right to retain the vessel until he has been reimbursed therefor (Art. 546, Civil Code). As it is by the concerted acts of defendants and intervenor Republic of the Philippines that appellant was deprived of the possession of the vessel over which appellant had a lien for his expenses, appellees Froilan, Compaia Maritima, and the Republic of the Philippines3are declared liable for the reimbursement to appellant of its legitimate expenses, as allowed by law, with legal interest from the time of disbursement.

Modified in this manner, the decision appealed from is affirmed, without costs. Case is remanded to the lower court for further proceedings in the matter of expenses. So ordered.

Froilan vs. Pan Oriental Shipping Co: "There is nothing in the law that prohibits the parties from entering into agreement that violation of the terms of the contract would cause cancellation thereof, even without court intervention. In other words, it is not always necessary for the injured party to resort to court for rescission of the contract."

Froilan vs. Pan Oriental Shipping Co. September 30, 1954 103 PHIL. 473 PARAS, J.: Nature of the Case: Appeal from an Order of the CFI of M an ila. FACTS Defendant Pan Oriental took possession of the vessel in question after it had been repossessed by the Shipping Administration and title thereto reacquired by the government, following the original purchaser, Fernando

Froilan's, default in his payment of the unpaid balance and insurance premiums for the said vessel. Pan Oriental chartered said vessel and operated the same after it had repaired the vessel and paid the stipulated initial payment, thereby exercising its option to purchase, pursuant to a bareboat charter contract entered between said company and the Shipping Corporation. The Cabinet resolved to restore Froilan to his rights under the original contract of sale on condition that he shall pay a sum of money upon delivery of the vessel to him, that he shall continue paying the remaining installments due, and that he shall assume the expenses incurred for the repair and by docking of the vessel. Pan Oriental protested to this restoration of Froilan's rights under the contract of sale, for the reason that when the vessel was delivered to it, the Shipping Administration had authority to dispose of said authority to the property, Froilan having already relinquished whatever rights he may have thereon. Froilan paid the required cash of P10, 000.00 and as Pan Oriental refused to surrender possession of the vessel, he filed an action for in the CFI of Manila to recover possession thereof and have him declared the rightful owner of said property. The Republic of the Philippines was allowed to

intervene in said civil case praying for the possession of the in order that the chattel mortgage constituted thereon may be foreclosed. ISSUE Whether or not the government's motion to dismiss Pan Oriental counterclaims may prosper. HELD: Under the circumstances already ad voted to, Pan Oriental cannot be considered a possessor in bad faith until after the institution of the instant case. However, since it is not disputed that said appellant is entitled to the refund of such expenses with the right to retain the vessel until he has been reimbursed therefore. As it is by the corrected acts of defendant and intervenor Republic of the Philippines that the appellant ha a lien far his expenses, appellees Froilan, Compania Maratma, and the Republic of the Philippines are declared liable for the reimbursement to appellant of its legitimate expenses, as allowed by law, with legal interest from the time of disbursement.

G.R. No. L-19545 April 18, 1975 PHILIPPINE SUBURBAN DEVELOPMENT CORPORATION, petitioner,

vs. THE AUDITOR GENERAL, PEDRO M. GIMENEZ, respondent. Magno L. Dajao for petitioner. First Assistant Solicitor General Esmeraldo Umali and Solicitor Sumilang V. Bernardo for respondent.

ANTONIO, J.:+.wph!1 Appeal by certiorari from the decision dated December 11, 1961, of then Auditor General Pedro M. Gimenez, disallowing the request of petitioner for the refund of real estate tax in the amount of P30,460.90 paid to the Provincial Treasurer of Bulacan. The facts of the case are as follows: On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines, acting on the reports of the Committee created to survey suitable lots for relocating squatters in Manila and suburbs, and of the Social Welfare Administrator together with the recommendation of the Manager of the Government Service Insurance System, approved in principle the acquisition by the People's Homesite and Housing Corporation of the unoccupied portion of the Sapang Palay Estate in Sta. Maria, Bulacan for relocating the squatters who desire to settle north of Manila, and of another area either in Las Pias or Paraaque, Rizal, or Bacoor, Cavite for those who desire to settle south of Manila. The project was to be financed through the flotation of bonds under the charter of the PHHC in the amount of P4.5 million, the same to be absorbed by the Government Service Insurance System. The President, through the Executive Secretary, informed the PHHC of such approval by letter bearing the same date (Annex "B"). On June 10, 1960, the Board of Directors of the PHHC passed Resolution No. 700 (Annex "C") authorizing the purchase of the unoccupied portion of the Sapang Palay Estate at P0.45 per square meter "subject to the following conditions precedent: t.hqw 1. That the confirmation by the OEC and the President of the purchase price of P0.45 per sq. m. shall first be secured, pursuant to OEC Memorandum Circular No. 114, dated May 6, 1957. 2. That the portion of the estate to be acquired shall first be defined and delineated. 3. That the President of the Philippines shall first provide the PHHC with the necessary funds to effect the purchase and development of this property from the proposed P4.5 million bond issue to be absorbed by the GSIS.

4. That the contract of sale shall first be approved by the Auditor General pursuant to Executive Order dated February 3, 1959. 5. The vendor shall agree to the dismissal with prejudice of Civil Case No. Q-3332 C.F.I. Quezon City, entitled "Phil. Suburban Dev. Corp. V. Ortiz, et al." On July 13, 1960, the President authorized the floating of bonds under Republic Act Nos. 1000 and 1322 in the amount of P7,500,000.00 to be absorbed by the GSIS, in order to finance the acquisition by the PHHC of the entire Sapang Palay Estate at a price not to exceed P0.45 per sq. m ete r. On December 29,1960, after an exchange of communications, Petitioner Philippine Suburban Development Corporation, as owner of the unoccupied portion of the Sapang Palay Estate (specifically two parcels covered by TCT Nos. T-23807 and T-23808), and the People's Homesite and Housing Corporation, entered into a contract embodied in a public instrument entitled "Deed of Absolute Sale" (Annex "F") whereby the former conveyed unto the latter the two parcels of land abovementioned, under the following terms and conditions, among others: t.hqw 1. That for and in consideration of the sum of THREE MILLION THREE HUNDRED EIGHTY-SIX THOUSAND TWO HUNDRED TWENTY THREE (P3,386,223.00) PESOS, Philippine currency, to be paid by the VENDEE to the herein VENDOR in the manner outlined hereinbelow, the VENDOR by these presents does hereby sell, transfer and convey by way of absolute sale unto the VENDEE, its successors, administrators or assigns, the above described two (2) parcels of land, together with all the improvements existing thereon; 2. That the payment of the consideration mentioned in paragraph 1 above shall be made as follows: (a) The vendee is presently negotiating or securing from the GOVERNMENT SERVICE INSURANCE SYSTEM, by virtue of a directive of the President of the Philippines, a loan for the purchase of the above described two (2) parcels of land in anticipation of the purchase by the said GOVERNMENT SERVICE INSURANCE SYSTEM of the bonds to be floated by the National Government to enable the VENDEE to make this purchase, and from whatever amount may be granted as loan by the GOVERNMENT SERVICE INSURANCE SYSTEM to the VENDEE, ONE MILLION SEVEN HUNDRED TEN THOUSAND (P1,710,000.00) PESOS shall be retained by the said VENDEE for the purpose of paying and clearing the existing lien annotated at the back of the aforesaid Transfer Certificates of Title Nos. T-23807 and T-23808, said payment to be made directly to the MORTGAGEES and the difference shall be paid to the VENDOR, provided that this first payment shall not be less than ONE MILLION SEVEN HUNDRED TEN THOUSAND (P1,710,000.00) PESOS and the VENDOR is hereby constituted as Attorney-in-fact and

authorized to receive from, and the GOVERNMENT SERVICE INSURANCE SYSTEM is directed to pay the balance of the loan direct to the herein VENDOR chargeable against VENDEE's loan from the GOVERNMENT SERVICE INSURANCE SYSTEM; provided, however, That should this amount be more than sufficient to cover the said mortgage lien, the VENDEE shall pay the difference to the VENDOR; and provided, further, That the VENDOR shall take charge of the preparation and registration of the documents necessary in clearing the above referred to mortgage lien, with the understanding that the expenses for preparation, notarization, registration, including documentary stamps, and other expenses for the cancellation of said mortgage lien shall be for the account of the VENDOR and shall be advanced by the VENDEE to the VENDOR; (b) That out of the sum of P1,710,000.00 to be retained by the VENDEE mentioned in the immediately preceding paragraph 2(a) for the purpose of discharging the said mortgage lien, the VENDEE shall deduct and further retain or keep as a trust fund the amount of FORTY THOUSAND (P40,000) PESOS, Philippine Currency, to answer for the remaining Notice of Lis Pendens annotated at the back of Transfer Certificate of Title Nos. T-23807 and T-23808 until such lien shall have been discharged or cancelled, the VENDEE binding itself to deliver forthwith the said amount of P40,000.00 unto the successful party involved in said Notice of Lis Pendens; (c) The remaining balance of the total consideration in the amount of ONE MILLION SIX HUNDRED SEVENTY-SIX THOUSAND TWO HUNDRED TWENTY-THREE PESOS (P1,676,223.00), Philippine Currency, or whatever amount is not paid by virtue of the first payment mentioned in paragraph (a) above, shall be paid by the VENDEE unto the VENDOR immediately upon the VENDEE's obtaining sufficient funds from proceeds of bonds floated by the VENDEE or the Government for the purchase of the properties subject of this transaction; provided, however, That full and complete payment of the balance mentioned in this particular paragraph 2(c) shall be made or paid by the VENDEE within a period of sixty (60) days from date of delivery of title by the VENDOR in the name of the VENDEE; and provided, further, That this sixty (60) days period may be extended for another period of sixty (60) days upon written request by the VENDEE at least five (5) days prior to the expiration of the said sixty (60) days period. Should there be instituted any legal action, however, for the collection of any amounts due from the VENDEE in favor of the VENDOR, the VENDEE binds itself to pay unto the VENDOR a sum equivalent to twenty-five (25%) per centum of the total balance due from the, VENDEE in favor of the VENDOR as and by way of attorney's fees, and the costs of suit; 3. That the VENDOR hereby warrants to defend the title and ownership of the VENDEE to the two (2) parcels of land above described from any claim or claims of third parties whomsoever;

(4.) That all expenses for the preparation and notarization of this document shall be for the account of the VENDOR; provided, however, That registration and issuance of certificates of title in the name of the VENDEE shall be for the account of the VENDEE." (Annex "F") The above document was not registered in the Office of the Register of Deeds until March 14, 1961, due to the fact, petitioner claims, that the PHHC could not at once advance the money needed for registration expenses. In the meantime, the Auditor General, to whom a copy of the contract had been submitted for approval in conformity with Executive Order No. 290, expressed objections thereto and requested a re-examination of the contract, in view of the fact that from 1948 to December 20, 1960, the entire hacienda was assessed at P131,590.00, and reassessed beginning December 21, 1960 in the greatly increased amount of P4,898,110.00. Said objections were embodied in a letter to the President, dated January 9, 1961, but this notwithstanding, the President, through the Executive Secretary, approved the Deed of Absolute Sale on February 1, 1961. It appears that as early as the first week of June, 1960, prior to the signing of the deed by the parties, the PHHC acquired possession of the property, with the consent of petitioner, to enable the said PHHC to proceed immediately with the construction of roads in the new settlement and to resettle the squatters and flood victims in Manila who were rendered homeless by the floods or ejected from the lots which they were then occupying (Annexes "D" and "D-1"). On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC to withhold the amount of P30,099.79 from the purchase price to be paid by it to the Philippine Suburban Development Corporation. Said amount represented the realty tax due on the property involved for the calendar year 1961 (Annex "G"). Petitioner, through the PHHC, paid under protest the abovementioned amount to the Provincial Treasurer of Bulacan and thereafter, or on June 13, 1961, by letter, requested then Secretary of Finance Dominador Aytona to order a refund of the amount so paid. Petitioner claimed that it ceased to be the owner of the land in question upon the execution of the Deed of Absolute Sale on December 29, 1960. Upon recommendation of the Provincial Treasurer of Bulacan, said request was denied by the Secretary of Finance in a letter-decision dated August 22, 1961. Pertinent portions of this decision are quoted hereunder: t.hqw .... the records show that the deed of sale executed on December 29, 1960 ... was approved by the President upon favorable recommendation of the Cabinet and the Committee created for the purpose of surveying suitable lots which may be acquired for relocating squatters in Manila on February 1, 1961 only and that said instrument of sale was registered with the Register of Deeds on March 14, 1961.

That Corporation, as vendor, maintains that in view of the execution of the deed of sale on December 29, 1960 it ceased to be the owner of the property involved and that consequently it was under no obligation to pay the real property tax thereon effective January 1, 1961. In support of its stand, that Corporation cites Article 1498 of the New Civil Code of the Philippines which provides that "when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred" and Article 1496 of the same Code which states that "the ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee." On the other hand, the Provincial Treasurer contends that, as under the Land Registration Act (Act No. 496) the Philippine Suburban Development Corporation is still the owner of the property until the deed of sale covering the same has been actually registered, the vendor is still liable to the payment of real property tax for the calendar year 1961. It is now claimed in this appeal that the Auditor General erred in disallowing the refund of the real estate tax in the amount of P30,460.90 because aside from the presumptive delivery of the property by the execution of the deed of sale on December 29, 1960, the possession of the property was actually delivered to the vendee prior to the sale, and, therefore, by the transmission of ownership to the vendee, petitioner has ceased to be the owner of the property involved, and, consequently, under no obligation to pay the real property tax for the year 1961. Respondent, however, argues that the presumptive delivery of the property under Article 1498 of the Civil Code does not apply because of the requirement in the contract that the sale shall first be approved by the Auditor General, pursuant to the Executive Order dated February 3, 1959 and later by the President, and that the petitioner should register the deed and secure a new title in the name of the vendee before the government can be compelled to pay the balance of P1,676,223.00 of the purchase price. Respondent further contends that since the property involved is a land registered under the Land Registration Act (Act No. 496), until the deed of sale has been actually registered, the vendor remains as the owner of the said property, and, therefore, liable for the payment of real property tax. We find the petition meritorious. I. It cannot be denied that the President of the Philippines, on June 8, 1960, at his Cabinet meeting, approved and authorized the purchase by the national government, through the PHHC, of the unoccupied portion of the property of petitioner; that on June 10, 1960, the

PHHC, acting pursuant to the aforecited approval of the President, passed its Resolution No. 700 approving and authorizing the purchase of the unoccupied portion of said property; and that after the PHHC took possession of the aforementioned property on the first week of June, 1960 to use it as a resettlement area for squatters and flood victims from Manila and suburbs, the President of the Philippines at his Cabinet meeting on June 13, 1960, approved and authorized the purchase by the PHHC of the entire property consisting of 752.4940 hectares, instead of only the unoccupied portion thereof as was previously authorized. Considering the aforementioned approval and authorization by the President of the Philippines of the specific transaction in question, and the fact that the contract here involved which is for a special purpose to meet a special situation was entered into precisely to implement the Presidential directive, the prior approval by the Auditor General envisioned by Administrative Order No. 290, dated February 3, 1959, would therefore, not be necessary. As We held in Federation of the United NAMARCO Distributors v. National Marketing Corporation, 1 the approval by the Auditor General contemplated by Administrative Order No. 290 dated February 3, 1959, refers to contracts in general, ordinarily entered into by government offices and government-owned or controlled corporations, and not to a contract for a special purpose, to meet a special situation and entered into in implementation of a Presidential directive to solve and emergency. In other words, where the contract already bears the approval of the President, the action of the Auditor General would no longer be necessary because under the said Administrative Order, the President has, at any rate, the final say. II Under the civil law, delivery (tradition) as a mode of transmission of ownership maybe actual (real tradition) or constructive (constructive tradition). 2 When the sale of real property is made in a public instrument, the execution thereof is equivalent to the delivery of the thing object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. 3 In other words, there is symbolic delivery of the property subject of the sale by the execution of the public instrument, unless from the express terms of the instrument, or by clear inference therefrom, this was not the intention of the parties. Such would be the case, for instance, when a certain date is fixed for the purchaser to take possession of the property subject of the conveyance, or where, in case of sale by installments, it is stipulated that until the last installment is made, the title to the property should remain with the vendor, or when the vendor reserves the right to use and enjoy the properties until the gathering of the pending crops, 4 or where the vendor has no control over the thing sold at the moment of the sale, and, therefore, its material delivery could not have been made. 5

In the case at bar, there is no question that the vendor had actually placed the vendee in possession and control over the thing sold, even before the date of the sale. The condition that petitioner should first register the deed of sale and secure a new title in the name of the vendee before the latter shall pay the balance of the purchase price, did not preclude the transmission of ownership. In the absence of an express stipulation to the contrary, the payment of the purchase price of the good is not a condition, precedent to the transfer of title to the buyer, but title passes by the delivery of the goods. 6 III . We fail to see the merit in respondent's insistence that, although possession was transferred to the vendee and the deed of sale was executed in a public instrument on December 29, l960, the vendor still remains as owner of the property until the deed of sale is actually registered with the Office of the Register of Deeds, because the land sold is registered under the Torrens System. In a long line of cases already decided by this Court, the constant doctrine has been that, as between the parties to a contract of sale, registration is not necessary to make it valid and effective, for actual notice is equivalent to registration. 7 Indeed, Section 50 of the Land Registration Act provides that, even without the act of registration, a deed purporting to convey or affect registered land shall operate as a contract between the parties. The registration is intended to protect the buyer against claims of third persons arising from subsequent alienations by the vendor, and is certainly not necessary to give effect to the deed of sale, as between the parties to the contract. 8 The case of Vargas v. Tancioco, 9 cited by respondent, refers to a case involving conflicting rights over registered property and those of innocent transferees who relied on the clean titles of the properties in question. It is, therefore, not relevant to the case at bar. In the case at bar, no rights of third persons are involved, much less is there any subsequent alienation of the same property. It is undisputed that the property is in the possession of the vendee, even as early as the first week of June, 1960, or six (6) months prior to the execution of the Deed of Absolute Sale on December 29, 1960. Since the delivery of possession, coupled with the execution of the Deed of Absolute Sale, had consummated the sale and transferred the title to the purchaser, 10 We, therefore, hold that the payment of the real estate tax after such transfer is the responsibility of the purchaser. However, in the case at bar, the purchaser PHHC is a government entity not subject to real property tax. 11 WHEREFORE, the appealed decision is hereby reversed, and the real property tax paid under protest to the Provincial Treasurer of Bulacan by petitioner Philippine Suburban Development Corporation, in the amount of P30,460,90, is hereby ordered refunded. Without any pronouncement as to costs.

Makalintal, C.J., Fernando, Barredo and Aquino, JJ., concur.1wph1.t

Philippine Suburban Dev Corp vs Auditor General G.R. No. L-19545 Subject: Sales Doctrine: Constructive or legal delivery Facts: On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines, acting on the reports of the Committee created to survey suitable lots for relocating squatters in Manila and suburbs, approved in principle the acquisition by the People's Homesite and Housing Corporation of the unoccupied portion of the Sapang Palay Estate in Sta. Maria, Bulacan and of another area either in Las Pias or Paraaque, Rizal, or Bacoor, Cavite for those who desire to settle south of Manila. On June 10, 1960, the Board of Directors of the PHHC passed Resolution No. 700 (Annex "C") authorizing the purchase of the unoccupied portion of the Sapang Palay Estate at P0.45 per square meter "subject to the following conditions precedent: 3. That the President of the Philippines shall first provide the PHHC with the necessary funds to effect the purchase and development of this property from the proposed P4.5 million bond issue to be absorbed by the GSIS. 4. That the contract of sale shall first be approved by the Auditor General pursuant to Executive Order dated February 3, 1959. On July 13, 1960, the President authorized the floating of bonds under Republic Act Nos. 1000 and 1322 in the amount of P7,500,000.00 to be absorbed by the GSIS, in order to finance the acquisition by the PHHC of the entire Sapang Palay Estate at a price not to exceed P0.45 per sq. m ete r. On December 29,1960, Petitioner Philippine Suburban Development Corporation, as owner of the unoccupied portion of the Sapang Palay Estate and the People's Homesite and Housing Corporation, entered into a contract embodied in a public instrument entitled "Deed of Absolute Sale" whereby the former conveyed unto the latter the two parcels of land abovementioned. This was not registered in the Office of the Register of Deeds until March 14, 1961, due to the fact, petitioner claims, that the PHHC could not at once advance the money needed for registration expenses.

In the meantime, the Auditor General, to whom a copy of the contract had been submitted for approval in conformity with Executive Order No. 290, expressed objections thereto and requested a re-examination of the contract, in view of the fact that from 1948 to December 20, 1960, the entire hacienda was assessed at P131,590.00, and reassessed beginning December 21, 1960 in the greatly increased amount of P4,898,110.00. It appears that as early as the first week of June, 1960, prior to the signing of the deed by the parties, the PHHC acquired possession of the property, with the consent of petitioner, to enable the said PHHC to proceed immediately with the construction of roads in the new settlement and to resettle the squatters and flood victims in Manila who were rendered homeless by the floods or ejected from the lots which they were then occupying. On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC to withhold the amount of P30,099.79 from the purchase price to be paid by it to the Philippine Suburban Development Corporation. Said amount represented the realty tax due on the property involved for the calendar year 1961. Petitioner, through the PHHC, paid under protest the abovementioned amount to the Provincial Treasurer of Bulacan and thereafter, or on June 13, 1961, by letter, requested then Secretary of Finance Dominador Aytona to order a refund of the amount so paid. Upon recommendation of the Provincial Treasurer of Bulacan, said request was denied by the Secretary of Finance in a letter-decision dated August 22, 1961. **Petitioner claimed that it ceased to be the owner of the land in question upon the execution of the Deed of Absolute Sale on December 29, 1960. It is now claimed in this appeal that the Auditor General erred in disallowing the refund of the real estate tax in the amount of P30,460.90 because aside from the presumptive delivery of the property by the execution of the deed of sale on December 29, 1960, the possession of the property was actually delivered to the vendee prior to the sale, and, therefore, by the transmission of ownership to the vendee, petitioner has ceased to be the owner of the property involved, and, consequently, under no obligation to pay the real property tax for the year 1961. **Respondent, however, argues that the presumptive delivery of the property under Article 1498 of the Civil Code does not apply because of the requirement in the contract that the sale shall first be approved by the Auditor General, pursuant to the Executive Order. ISSUE: WON there was already a valid transfer of ownership between the parties. HELD: Considering the aforementioned approval and authorization by the President of the Philippines of the specific transaction in question, the prior approval by the Auditor General envisioned by Administrative Order would therefore, not be necessary.

Under the civil law, delivery (tradition) as a mode of transmission of ownership maybe actual (real tradition) or constructive (constructive tradition). 2 When the sale of real property is made in a public instrument, the execution thereof is equivalent to the delivery of the thing object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. 3 In other words, there is symbolic delivery of the property subject of the sale by the execution of the public instrument, unless from the express terms of the instrument, or by clear inference therefrom, this was not the intention of the parties. Such would be the case, for instance, when a certain date is fixed for the purchaser to take possession of the property subject of the conveyance, or where, in case of sale by installments, it is stipulated that until the last installment is made, the title to the property should remain with the vendor, or when the vendor reserves the right to use and enjoy the properties until the gathering of the pending crops, or where the vendor has no control over the thing sold at the moment of the sale, and, therefore, its material delivery could not have been made. In the case at bar, there is no question that the vendor had actually placed the vendee in possession and control over the thing sold, even before the date of the sale. The condition that petitioner should first register the deed of sale and secure a new title in the name of the vendee before the latter shall pay the balance of the purchase price, did not preclude the transmission of ownership. In the absence of an express stipulation to the contrary, the payment of the purchase price of the good is not a condition, precedent to the transfer of title to the buyer, but title passes by the delivery of the goods. WHEREFORE, the appealed decision is hereby reversed, and the real property tax paid under protest to the Provincial Treasurer of Bulacan by petitioner Philippine Suburban Development Corporation, in the amount of P30,460,90, is hereby ordered refunded. Without any pronouncement as to costs.

G.R. No. 108515 October 16, 1995 LUIS BALANTAKBO, AMADEO BALANTAKBO and HEIRS OF SANCHO BALANTAKBO, petitioners, vs. COURT OF APPEALS and LAGUNA AGRO-INDUSTRIAL, COCONUT COOPERATIVE, INC., respondents.

NARVASA, C.J.: Private respondent Laguna Agro-Industrial Coconut Cooperative, Inc. (hereafter simply LAGUNA), a family corporation organized by the heirs of the deceased spouses Honorio Sumaya and Crispina Orlanda, was the plaintiff in an action to quiet title over a parcel of unregistered coconut land in Bo. Dita. Liliw, Laguna, filed in the Regional Trial Court, Br. XXVII, Laguna against herein private respondents and docketed as Civil Case No. SC-1367 The complaint in said action alleged basically that the land in question had been purchased by the Sumaya spouses (LAGUNA's predecessors) for P800.00 from Consuelo Vda. de Balantakbo (mother of petitioner Luis Balantakbo and Sancho Balantakbo), the sale being evidenced by a deed 1 executed by Consuelo on December 13, 1955; and that some twenty (20) years later, or on March 8, 1975, the seller's heirs, intruded into the land and harvested the coconuts found therein. In their answer the Balantakbos denied knowledge of the sale and alleged that the land claimed sued for was different from that owned and held by them. In the course of the trial the parties, stipulated upon the following facts and circumstances, to wit: 1) on October 8, 1975: the genuineness and due execution of (a) the Deed of Extrajudicial Partition executed on December 10, 1945 by the heirs of the deceased Jose Balantakbo, Sr., and of (b) the affidavit of Consuelo J. Vda. de Balantakbo executed November 3, 1952, adjudicating to herself ownership of the property left by the deceased Raul Balantakbo; 2) on July 21, 1981: (a) the description of the land subject of the suit, i.e., as having an area of 2,000 square meters, and as being bounded by the property of named individuals, and (b) the substance of their respective contentions, viz: 1) LAGUNA's theory that what had been sold to its predecessors, the Sumaya Spouses, was the land within the identified boundaries, regardless of the area; and 2) the Balantakbos' countervailing theory that the land within said boundaries had an area of 6,870 square meters, more or less, only a portion thereof measuring 2,000 square meters, having been sold by their mother to the Sumayas: and they are therefore the owners of the remaining area of 4,870 square meters which they had in fact long possessed. The Regional Trial Court rendered judgment (per Judge Francisco C. Manabat, Branch 27, Sta. Cruz, Laguna) in favor of the Balantakbos, dismissing LAGUNA's complaint, upholding the former's theory of the case and ruling that what was contemplated in the descriptive words "more or less" immediately following the stated area of 2,000 square meters in the description

of the land was construable as referring only to a "slight difference" in said area,2 not to a difference as large as 4,870 square meters, or more than double the 2,000 square meters actually stated and intended to be sold. The judgment was appealed to the Court of Appeals which after due proceedings reversed it by decision promulgated on July 9, 1992. The Appellate Court declared LAGUNA the owner of the entire land, not only of a 2,000-square meter portion thereof, ruling that the area embraced within the stated boundaries prevails over the area set forth in the descriptions which must have been based on mere estimates, and that the buyer was entitled to receive all that was included within the boundaries thus stated in the deed of sale. 3 The Court finds no reversible error in said judgment now on appeal by certiorari by the Balantakbos. The issue here may be stated simply, thus: In case of conflict between the area described and the actual boundaries of the land, which should prevail? And it is by no means a novel question. On the contrary, the rule is quite well-settled that what really defines a piece of land is not the area, calculated with more or less certainty mentioned in the description, but the boundaries therein laid down, as enclosing the land and indicating its limits. 4 In Dichoso, supra, this Court held: . . . In a contract of sale of land in mass, it is well established that the specific boundaries stated in the contract must control over any statement with respect to the area contained within its boundaries. It is not of vital consequence that a deed or contract of sale of land should disclose the area with mathematical accuracy. It is sufficient that its extent is objectively indicated with sufficient precision to enable one to identify it. An error as to the superficial area is immaterial. 5 The case at bar is on all fours with this Court's ruling in the recent case of Miguel Semira vs. Court of Appeals and Buenaventura An, G.R. No. 76031, promulgated on March 2, 1994 6 There, private respondent purchased a parcel of land designated as Lot 4221 in Sto. Nio, Taysan, Batangas for P850.00 from one Juana Rodriguez. The sale was evidenced by a "Kasulatan ng Bilihan ng Lupa" executed on January 4, 1961 on which appeared the estimated area of the property as 822.5 square meters with its boundaries defined. On October 18, 1972, the private respondent sold the lot to his nephew, Cipriano Ramirez, with the same area and boundaries, the eastern side of which had now reflected private respondent's subsequent acquisition of an adjoining property from Pascual Hornilla. On March 12, 1979, Ramirez in turn sold the lot to the petitioner for P20,000,00 but this time, the area stated in the document of

sale was 2,200 sq. m. as actually delimited by its boundaries and confirmed by the cadastral survey conducted in 1974. When the petitioner occupied the premises and began construction of a rice-mill thereon, private respondent filed a complaint for forcible entry in the MCTC, claiming that Lot 4221 belonging to petitioner should only be 822.5 sq. m. and that the excess of 1,377 sq. m. allegedly forcibly occupied formed part of his Lot 4215 acquired in 1964 from P. Hornilla over which was subsequently issued OCT No. P-12694 in his name covering said lot and another lot which he (respondent) had also acquired, both having a combined area of 19,606 sq. m. The MCTC adjudged petitioner the rightful and lawful owner and possessor of the area in question and threw out the ejectment suit. On appeal, the RTC reversed and was thereafter sustained by the Court of Appeals. This Court in turn reversed the CA judgment and reinstated the MCTC decision, holding: We have repeatedly ruled that where land is sold for a lump sum and not so much per unit of measure or number, the boundaries of the land stated in the contract determine the effects and scope of the sale, not the area thereof. 7 Hence, the vendors are obligated to deliver all the land included within the boundaries, regardless of whether the real area should be greater or smaller than that recited in the deed. This is particularly true where the area is described as "humigit kumulang," that is, more or less. 8These conclusions are drawn from Art. 1542 of the Civil Code which states In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or less area or number than that stated in the contract.

The same rule shall be applied when two or more immovables are sold for a single price;but if, besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall be bound to deliver all that is included within said boundaries, even when it exceeds the area or number specified in the contract; and, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated. 9 In the present case, it is clear that the disputed parcel of unregistered land was sufficiently identified and described. The Second Partial Stipulation of Facts submitted by the Parties sufficiently demonstrates that the parties lay claim to one and the same parcel of land, that descended to Raul Balantakbo from his father Jose Balantakbo, Sr. 10 later inherited by Consuelo Joaquin Vda. de Balantakbo from the same Raul, her son 11 and then sold by Consuelo to the Spouses Honorio Sumaya and Crispina Orlanda. Uniform descriptions of the subject lot were made in the Deed of Sale executed by Consuelo Joaquin Vda. de Balantakbo in

favor of herein private respondent in 1955, in the Affidavit of Self-Adjudication executed by Consuelo on November 3, 1952, and in the Extrajudicial Partition of December 10, 1945, to wit: A parcel of land with the improvements thereon, with fence of madre-cacao trees, situated in Barrio Dita, Municipality of Lilio. Bounded on the N., by Jose Balantakbo; on the E., by Jose Balantakbo; on the S., by Venancio Villarica; and on the W., by Cornelio Napil and Prudencio Ardeza. Containing an area of 2,000 square meters, more or less. It appears, too, that after the 1970 survey of the property when the true area of the lot was determined to be 6,870 square meters, more or less, Luis Balantakbo was able to secure in 1975 a new Tax Declaration No. 9397 in the name of the Heirs of Jose Balantakbo, Sr., covering a 4,873 square-meter parcel of land located at Dita, Liliw, Laguna. Tax Declaration No. 9397 was supposedly a revival of Tax Declaration No. 42, which, as mentioned in the first paragraph of the Second Partial Stipulation of Facts, covered the property then described as containing an area of 2,000 square meters, more or less. This shows that the Tax Declaration No. 9397, obtained by Luis Balantakbo, covers the same lot, which contains an area equivalent to the difference between the actual area of the subject land and the area mentioned in the deed of sale, sold to the Sumayas and not another separate parcel of land. Moreover, in his testimony, petitioner Luis Balantakbo admitted that the supposed separate parcel of land for which he obtained a tax declaration is part and parcel of the land inherited by his brother Raul, then by his mother Consuelo, and thereafter sold by the latter to the Sumayas, Thus: COURT: So when your mother sold the land even under Exhibit A, Deed of Sale in 1955, she sold unsurveyed land of 2,000 square meters which when surveyed in 1970 it turns out to be 6,000 plus square meters? WITNESS: Yes, your Honor. 12 Since it was only in 1970 that the true area of the disputed property was determined after a survey, Consuelo Joaquin Vda. de Balantakbo could not have sold in 1955 only a portion of the lot which then was known (or believed) to have an area of only 2,000 square meters, more or less, as mentioned in all the documents covering the land. And apart from the Tax Declaration secured by Luis Balantakbo after the survey of the subject property, petitioners failed to present other proof in support of their argument that the land

claimed by them is different from that sold by their mother Consuelo Joaquin Vda. de Balantakbo to the Sumayas. Clearly, therefore, the position taken by petitioners that there are two different parcels of land involved is untenable. Only one parcel of land is involved and the respondent Appellate Court correctly formulated and resolved affirmatively in favor of private respondent the issue of whether the actual boundaries should prevail over the area described. Petitioners' reliance on the Asiain case 13 is misplaced. Following the arguments advanced by the trial court, petitioners contend that the descriptive words "more or less" after the area which is 2,000 square meters refer only to a slight or inconsiderable difference or a reasonable excess or deficiency, hence could not have included the 4,870 square meters claimed by petitioners, which is more than double the area of the lot sold by petitioners' mother to the Sumayas in 1955. InAsiain, the main consideration of the transaction between the seller Asiain and the buyer Jalandoni was the size or the area of the land. To convince Jalandoni to buy the land, Asiain even guaranteed that the land would produce so much sugar in piculs, hence the relevance of the phrase "more or less" which followed the statement if area in hectares which Asiainassured his land contains. It developed, however that the area was much less than what was thus represented by the seller. The Court therein ruled that the mistake with reference to the subject matter of the contract was such as to render it rescindable, at the buyer's option. The case at bar is clearly quite different, the stated area being only an additional description of the land already sufficiently identified and described as being fenced by madre cacao trees and bounded on all sides by properties with identified owners or holders. As correctly held by the respondent Appellate Court, this is a case where the land was sold a cuerpo cierto for a lump sum of P800.00 and not at the rate of a certain sum per unit of measure or number, with boundaries clearly delimited, hence the area embraced within said boundaries must be held to prevail over the area indicated in the documents. WHEREFORE, the petition is DENIED for lack of merit. The appealed decision of the respondent Court of Appeals is AFFIRMED in toto. SOORDERED.

G.R. No. 95937 August 16, 1991 FORTUNE TOBACCO CORPORATION, petitioner, vs.

NATIONAL LABOR RELATIONS COMMISSION & EDGARDO DE LA CRUZ, ET AL respondents. Pedro A. Revilla and Cesar V. Aguilar for petitioner. Evangelista, Mostrales & Associates for private respondents.

GANCAYCO, J.:p The computation of the backwages to be paid to the herein private respondents is in issue in this petition for certiorari and prohibition. The record of the case discloses the following facts: On January 29, 1986, the private respondents filed a complaint for illegal dismissal against their employer, the herein petitioner Fortune Tobacco Corporation before the National Labor Relations Commission (NLRC) praying that they be reinstated in the company with full backwages and without loss of seniority rights. The case was docketed as NLRC Case No. 1381- 86. The parties submitted their respective position papers with the petitioner maintaining that it had already sold its redrying plant as of October 17, 1985. In due time, the labor arbiter to whom the case was assigned rendered a decision, the dispositive portion of which reads as follows: WHEREFORE, respondent (herein petitioner) is hereby ordered to reinstate the individual complainants (herein private respondents) to their former position(s) with full backwages reckoned from October 5, 1985 up to actual reinstatement, or, in the alternative, to pay each of the complainants their separation pay equivalent at least to one month salary for every year of service, whichever is higher a fraction of six months being considered as one whole year, and for purposes of computing said benefit, the usual or normal seasonal period of one (1) calendar year shall be treated as one (1) whole year. xxx xxx xxx 1 The petitioner appealed the said decision of the labor arbiter to the NLRC. On July 31,1989, the NLRC promulgated its resolution modifying the decision appealed from, thus: And considering that as alleged by the respondent without any contravention from the complainants that the plant had already been sold, respondent-appellant must pay separation pay to all those who opt not to be rehired by the new owner of the plant. Respondentappellant must also pay the complainants' backwages from October 5, 1985 up to the date the plant was actually sold. Such backwages must be computed by taking into consideration the nature of complainants work as seasonal period in one (1) calendar year should be treated as one (1) whole year (sic) wherefore, except for the above modification the decision sought to be

reversed should be as it is hereby AFFIRMED. Costs against respondent-appellant. (Emphasis supplied .) 2 The petitioner went to this Court in G.R. No. 89477 by way of a petition. The same was, however, dismissed in a resolution dated September 4, 1989 issued by the Second Division of this Court. 3 Thus, the decision of the NLRC became final and executory. On August 21. 1990, the Research and Information Unit of the NLRC came up with its "Computation of Backwages and Separation Pay" pursuant to the decision dated July 31, 1989. 4 The amount stated in the computation is P3,863,464.89. The said amount was apparently reached by reckoning the computation period to start from October 5, 1985 up to August 1990. The research unit also stated that it took into account this period because the date of the actual sale of the plant is not ascertained. On August 28, 1990, in a hearing set up for the purpose, the petitioner was given ample time to establish by way of competent proof the date of the actual sale of the plant and its facilities cited in the final and executory decision of the NLRC. On September 7, 1990, the petitioner filed its manifestation to which was attached a certified copy of the "Deed of Conditional Sale" executed by and between the petitioner and Premium Tobacco Redrying and Fluecuring Company, Inc. (PTRFC) dated October 17,1985. The petitioner also attached its own computation of the amounts which should be paid the private respondents. In fine, the petitioner has taken the position that the date of the actual sale of the plant and its facilities is October 17, 1985 and as such the amount stated in the computation of the research unit of the NLRC should be substantially reduced. On September 29, 1990, the private respondents filed their "Opposition to Manifestation" with annexes showing a certification from the Office of the Municipal Assessor of Marikina, Metro Manila, a copy of a Declaration of Real Property and an affidavit of one of the complainants in this case alleging that there was no actual sale of the plant and its facilities to the alleged vendee. The opposition alleges, among others, that there was no actual transfer or actual sale of the plant and its facilities in favor of the PTRFCI; that only a change in name and form has been undertaken by the petitioner; that the properties are still declared in the name of the petitioner; that the PTRFCI representative, a certain Mr. Angelo Ang, is the plant manager of the Vigan, Ilocos Sur plant of the petitioner; that the control, management, operation and funding of the plant are in the hands of the petitioner notwithstanding the alleged sale; and that the computation made by the NLRC is in order. The petitioner filed its comment/rejoinder on September 27, 1990, alleging therein that the sale on October 17, 1985 is valid and that the property remains in the name of the petitioner pending the full payment of the purchase price agreed upon by the vendor and the vendee . 5 On October 26, 1990, Labor Arbiter Ramon Reyes issued an order holding, among others, that there was no actual sale between the petitioner and the PTRFCI; that the Deed of Conditional Sale entered into by the said parties does not state any consideration; and that no actual sale has taken place. With this observations, the labor arbiter went on to declare that The

computation of the research unit of the NLRC in the amount of P3,863,464.89 is in accord with the resolution of the said Commission. On October 30, 1990, the labor arbiter issued a writ of execution directing the Acting Sheriff of the NLRC to collect the aforestated amount of P3,863,464.89 from the petitioner in satisfaction of its obligation or to cause the full satisfaction of the same out of the chattels of the immovable properties of the petitioner. 6 The petitionee elevated the case to this Court by way of the instant petition with the same arguments raised before the NLRC recited therein. The petitioner prays for the issuance of a temporary restraining order and/or writ of preliminary injunction. The thrust of the petition is that the computation made by the NLRC is attended with grave abuse of discretion and thus, the writ of execution should not be enforced. The petitioner also argues that the award of damages should be limited to cover a three-year period only, in accordance with prevailing jurisprudence. On November 21, 1990, this Court resolved to issue a temporary restraining order enjoining the private respondents from enforcing the challenged writ of execution. The petitioner filed a bond in the amount of P100,000.00. The Office of the Solicitor General, as counsel for the NLRC, filed its comment praying therein for the dismissal of the petition on the ground that no jurisdictional infirmity attended the issuance of the challenged writ of execution because there is no actual sale of the plant and its facilities up to the present time. 7 The Court eventually resolved to give due course to the petition. After the parties filed the required pleadings, the case was deemed submitted for decision. Pursuant to the resolution of the NLRC dated July 31, 1989, which was for all intents and purposes sustained by this Court as explained earlier, the petitioner is required to, among others, pay the backwages of the private respondents for the period coveting October 5,1985 up to the time the plant and its facilities are actually sold. The petitioner maintains that the plant and its facilities were sold on October 17, 1985 by virtue of the Deed of Conditional Sale, bearing the same date, executed by the petitioner and the PTRFCI. Thus put, the petitioner contends that the amount of backwages to be paid to the private respondents should be based on the period covering October 5 to 17, 1985. On the other hand, the private respondents maintain that there has been no actual sale of the plant and its facilities up to the present time and as such the backwages to be paid should be computed accordingly. The NLRC shares the view of the private respondents. The Court finds that there is no actual sale of the plant and its facilities up to the present time. While the Deed of Conditional Sale was executed on October 17, 1985, it does not necessarily follow that the plant and its facilities were, ipso facto, sold on that very day. The pertinent portions of the said document are as follows:

1. Upon execution of this Deed the PROPERTIES shall be deemed transferred to the possession of the VENDEE. Ownership, however, over the PROPERTIES shall be retained by the VENDOR until the VENDEE shall have paid in full the purchase price stipulated in Article I hereof. The VENDEE shall not, in the meantime, sell, lease, let or otherwise encumber or dispose of the PROPERTIES or assign its rights under this Agreement without the prior written consent of the VENDOR. Any disposition made in violation of this article shall be void ab initio. 2. The VENDOR, upon full payment by the VENDEE of the unpaid balance of the purchase price inclusive of interest charges above specified will execute and deliver to the VENDEE a final or absolute deed of sale over the PROPERTIES. II. DEFAULT AND FORFEITURE 1. That in case the VENDEE fails to make timely payment as specified above, or fails to perform any of the covenants or agreements hereof, this contract shall, at the exclusive option of the VENDOR, be annulled and in such event, all payments made by the VENDEE by virtue of this contract shall be automatically forfeited and retained by the VENDOR as rental payments for the use of said PROPERTIES and/or liquidated damages sustained by it as a result of the VENDEE's default; and the VENDEE shall forthwith surrender the possession and custody of the PROPERTIES to the VENDOR. A careful evaluation of the stipulations of the said agreement will readily show that the petitioner has no intention to transfer ownership over the plant and its facilities to the vendee unless there is full payment of the purchase price on the part of the latter. In fact, it is clearly stipulated that ownership over the plant and its facilities will be transferred to the vendee by way of "a final and absolute deed of sale" only after such fun payment, inclusive of interest charges. The terms and conditions of the agreement speak for themselves. At any rate, even accepting that the plant and its facilities hive been sold on a conditional basis, there can be no actual sale thereof unless the plant and its facilities are unconditionally conveyed to the PTRFCI by virtue of "a final or absolute deed of sale" in accordance with the terms and conditions stated in the agreement between the parties. The Solicitor General manifests that the tax records of the petitioner as well as the certification issued by the Municipal Assessor of Marikina reveal that the plant is still registered in the name of the petitioner. 9 The Solicitor General points out that under these circumstances, the petitioner may not validly contend that there has been an actual sale of the plant and its facilities to the PTRFCI. These observations are well-taken. The petitioner, however, correctly asserts that the award of backwages should be limited to cover a three-year period, and, a fortiori, any award in excess of such period is null and void. The contention finds support in prevailing jurisprudence. 10 A modification is, therefore, in order. The backwages to be paid to the private respondents should not exceed a

period covering three years, computed from October 5, 1985. WHEREFORE, the instant petition is hereby DISMISSED. The backwages to be paid to the private respondents should, however, not exceed a period covering three (3) years, computed from October 5, 1985. No pronouncement as to costs. SO ORDERED. G.R. No. 150678 February 18, 2005

BIENVENIDO R. MEDRANO and IBAAN RURAL BANK, petitioners, vs. COURT OF APPEALS, PACITA G. BORBON, JOSEFINA E. ANTONIO and ESTELA A. FLOR, respondents. DECISION CALLEJO, SR., J.: This is a petition for review of the Decision1 of the Court of Appeals (CA) affirming in toto the Decision2 of the Regional Trial Court (RTC) of Makati City, Branch 135, in Civil Case No. 15664 which awarded to the respondents their 5% broker's commission. The facts are as follows: Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural Bank, a bank owned by the Medrano family. In 1986, Mr. Medrano asked Mrs. Estela Flor, a cousin-in-law, to look for a buyer of a foreclosed asset of the bank,3a 17-hectare mango plantation priced at P2,200,000.00, located in Ibaan, Batangas.4 Mr. Dominador Lee, a businessman from Makati City, was a client of respondent Mrs. Pacita G. Borbon, a licensed real estate broker. The two met through a previous transaction where Lee responded to an ad in a newspaper put up by Borbon for an 8-hectare property in Lubo, Batangas, planted with atis trees. Lee expressed that he preferred a land with mango trees instead. Borbon promised to get back to him as soon as she would be able to find a property according to his specifications. Borbon relayed to her business associates and friends that she had a ready buyer for a mango orchard. Flor then advised her that her cousin-in-law owned a mango plantation which was up for sale. She told Flor to confer with Medrano and to give them a written authority to negotiate the sale of the property.5 Thus, on September 3, 1986, Medrano issued the Letter of Authority, as follows:

Mrs. Pacita G. Borbon & Miss Josefina E. Antonio Campos Rueda Building Tindalo, Makati, M.M. Mrs. Estela A. Flor & Miss Maria Yumi S. Karasig 23 Mabini Street Quezon City, M.M. Dear Mesdames: This letter will serve as your authority* to negotiate with any prospective buyer for the sale of a certain real estate property more specifically a mango plantation which is described more particularly therein below: Location : Barrio Tulay-na-Patpat, Ibaan, Batangas Lot Area : 17 hectares (more or less) per attached Appendix "A" Improvements : 720 all fruit-bearing mango trees (carabao variety) and other trees Price : P 2,200,000.00 For your labor and effort in finding a purchaser thereof, I hereby bind myself to pay you a commission of 5% of the total purchase price to be agreed upon by the buyer and seller. Very truly yours, (Sgd.) B.R. Medrano Owner * Subject to price sale.6 The respondents arranged for an ocular inspection of the property together with Lee which never materialized - the first time was due to inclement weather; the next time, no car was available for the tripping to Batangas.7 Lee then called up Borbon and told her that he was on

his way to Lipa City to inspect another property, and might as well also take a look at the property Borbon was offering. Since Lee was in a hurry, the respondents could no longer accompany him at the time. Thus, he asked for the exact address of the property and the directions on how to reach the lot in Ibaan from Lipa City. Thereupon, Lee was instructed to get in touch with Medrano's daughter and also an officer of the bank, Mrs. Teresa Ganzon, regarding the property.81vvphi1.nt Two days after the visit, respondent Josefina Antonio called Lee to inquire about the result of his ocular inspection. Lee told her that the mango trees "looked sick" so he was bringing an agriculturist to the property. Three weeks thereafter, Antonio called Lee again to make a follow-up of the latter's visit to Ibaan. Lee informed her that he already purchased the property and had made a down payment of P1,000,000.00. The remaining balance of P1,200,000.00 was to be paid upon the approval of the incorporation papers of the corporation he was organizing by the Securities and Exchange Commission. According to Antonio, Lee asked her if they had already received their commission. She answered "no," and Lee expressed surprise over this.9 A Deed of Sale was eventually executed on November 6, 1986 between the bank, represented by its President/General Manager Teresa M. Ganzon (as Vendor) and KGB Farms, Inc., represented by Dominador Lee (as Vendee), for the purchase price of P1,200,000.00.10 Since the sale of the property was consummated, the respondents asked from the petitioners their commission, or 5% of the purchase price. The petitioners refused to pay and offered a measly sum of P5,000.00 each.11 Hence, the respondents were constrained to file an action against herein petitioners. The petitioners alleged that Medrano issued the letter of authority in favor of all the respondents, upon the representation of Flor that she had a prospective buyer. Flor was the only person known to Medrano, and he had never met Borbon and Antonio. Medrano had asked that the name of their prospective buyer be immediately registered so as to avoid confusion later on, but Flor failed to do so. Furthermore, the other officers of the bank had never met nor dealt with the respondents in connection with the sale of the property. Ganzon also asked Lee if he had an agent and the latter replied that he had none. The petitioners also denied that the purchase price of the property was P2,200,000.00 and alleged that the property only cost P1,200,000.00. The petitioners further contended that the letter of authority signed by Medrano was not binding or enforceable against the bank because the latter had a personality separate and distinct from that of Medrano. Medrano, on the other hand, denied liability, considering that he was not the registered owner of the property, but the bank. The petitioners, likewise, filed a counterclaim as they were constrained to hire the services of counsel and suffered damages.12

After the case was submitted for decision, Medrano died, but no substitution of party was made at this time.13 The trial court resolved the case based on the following common issues: 1. Whether or not the letter of authority is binding and enforceable against the defendant Bank only or both defendants; and 2. Whether or not the plaintiffs are entitled to any commission for the sale of the subject property.14 On September 21, 1994, the trial court rendered a Decision in favor of the respondents. The petitioners were ordered to pay, jointly and severally, the 5% broker's commission to herein respondents. The trial court found that the letter of authority was valid and binding as against Medrano and the Ibaan Rural bank. Medrano signed the said letter for and in behalf of the bank, and as owner of the property, promising to pay the respondents a 5% commission for their efforts in looking for a purchaser of the property. He is, therefore, estopped from denying liability on the basis of the letter of authority he issued in favor of the respondents. The trial court further stated that the sale of the property could not have been possible without the representation and intervention of the respondents. As such, they are entitled to the broker's commission of 5% of the selling price of P1,200,000.00 as evidenced by the deed of sale.15 The fallo of the decision reads as follows: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants, for the latter, jointly and severally: 1. To pay plaintiffs the sum of P60,000.00 representing their five percent (5%) commission of the purchase price of the property sold based on Exh. "D" or "9" plus legal interest from date of filing of the herein complaint until fully paid; 2. To pay plaintiffs the sum of P20,000.00 as and for attorney's fees; 3. To pay the plaintiffs the sum of P10,000.00 as litigation expenses; 4. To pay the costs of the proceedings.16 Unable to agree with the RTC decision, petitioner Ibaan Rural Bank filed its notice of appeal.17 On October 10, 1994, the heirs of Bienvenido Medrano filed a Motion for Reconsideration18 praying that the late Bienvenido Medrano be substituted by his heirs. They further prayed that the trial court's decision as far as Medrano was concerned be set aside and dismissed considering his demise. The trial court denied the motion for reconsideration.19 Hence, the heirs of Medrano also filed their notice of appeal.20

On appeal, the petitioners reiterated their stance that the letter of authority was not binding and enforceable, as the same was signed by Medrano, who was not actually the owner of the property. They refused to give the respondents any commission, since the latter did not perform any act to consummate the sale. The petitioners pointed out that the respondents (1) did not verify the real owner of the property; (2) never saw the property in question; (3) never got in touch with the registered owner of the property; and (4) neither did they perform any act of assisting their buyer in having the property inspected and verified.21 The petitioners further raised the trial court's error in not dismissing the case against Bienvenido Medrano considering his death. On May 3, 2001, the CA promulgated the assailed decision affirming the finding of the trial court that the letter of authority was valid and binding. Applying the principle of agency, the appellate court ruled that Bienvenido Medrano constituted the respondents as his agents, granting them authority to represent and act on behalf of the former in the sale of the 17hectare mango plantation. The CA also ruled that the trial court did not err in finding that the respondents were the procuring cause of the sale. Suffice it to state that were it not for the respondents, Lee would not have known that there was a mango orchard offered for sale.1awphi1.nt The CA further ruled that an action for a sum of money continues even after the death of the defendant, and shall remain as a money claim against the estate of the deceased. Undaunted by the CA's unfavorable decision, the petitioners filed the instant petition, raising eight (8) assignments of errors, to wit: I. THE COURT OF APPEALS ERREDWHEN IT FOUND THE PRIVATE RESPONDENTS TO BE THE PROCURING CAUSE OF THE SALE; II. THE COURT OF APPEALS ERRED IN GIVING CREDENCE TO THE LETTER-AUTHORITY OF PETITIONER MR. MEDRANO; III. THE COURT OF APPEALS MADE A MISTAKE WHEN IT CORRECTLY RECOGNIZED THE EXTENT OF THE PRIVATE RESPONDENTS'OBLIGATION AND AUTHORITY CONTAINED INMEDRANO'S LETTER-AUTHORITY ANDYET ERRONEOUSLY GRANTED THE PRIVATE-RESPONDENTS' DEMAND, NOTWITHSTANDING THE NON-PERFORMANCE OF THEIR OBLIGATION THEREUNDER; IV. THE COURT OF APPEALS ERRED IN PRESUMING BAD FAITH UPON THE PETITIONERS; V. THE COURT OF APPEALS ERRED IN PLACING THE BURDEN OF PROOF UPON THE DEFENDANTS-PETITIONERS;

VI. THE COURT OF APPEALS FAILED TO SUBSTANTIATE ITS CONCLUSIONWITH EVIDENCE AND INSTEAD RELIEDON INFERENCE; VII. THE COURT OF APPEALS FAILED TO SUBSTANTIATE ITS CONCLUSIONWITH EVIDENCE AND MERELY RELIEDON SPECULATION AND SURMISE; VIII. THE COURT OF APPEALS MISAPPRECIATED THE FACTS PRESENTED BEFORE IT, AND CONSEQUENTLY FAILED TO CONSIDER REASONABLY THE TWO (2) BASIC ARGUMENTS OF THE PETITIONERS.22 The petition is denied. The records disclose that respondent Pacita Borbon is a licensed real estate broker23 and respondents Josefina Antonio and Estela A. Flor are her associates.24 A broker is generally defined as one who is engaged, for others, on a commission, negotiating contracts relative to property with the custody of which he has no concern; the negotiator between other parties, never acting in his own name but in the name of those who employed him; he is strictly a middleman and for some purposes the agent of both parties. A broker is one whose occupation is to bring parties together, in matters of trade, commerce or navigation.25 For the respondents' participation in finding a buyer for the petitioners' property, the petitioners refuse to pay them commission, asserting that they are not the efficient procuring cause of the sale, and that the letter of authority signed by petitioner Medrano is not binding against the petitioners. "Procuring cause" is meant to be the proximate cause.26 The term "procuring cause," in describing a broker's activity, refers to a cause originating a series of events which, without break in their continuity, result in accomplishment of prime objective of the employment of the broker - producing a purchaser ready, willing and able to buy real estate on the owner's terms.27 A broker will be regarded as the "procuring cause" of a sale, so as to be entitled to commission, if his efforts are the foundation on which the negotiations resulting in a sale are begun.28 The broker must be the efficient agent or the procuring cause of the sale. The means employed by him and his efforts must result in the sale. He must find the purchaser, and the sale must proceed from his efforts acting as broker.29 Indeed, the evidence on record shows that the respondents were instrumental in the sale of the property to Lee. Without their intervention, no sale could have been consummated. They were the ones who set the sale of the subject land in motion.30 Upon being informed by Flor that Medrano was selling his mango orchard, Borbon lost no time in informing Lee that they had found a property according to his specifications. An ocular inspection of the property together with Lee was immediately planned; unfortunately, it never pushed through for reasons beyond the respondents' control. Since Lee was in a hurry to see the property, he

asked the respondents the exact address and the directions on how to reach Ibaan, Batangas. The respondents thereupon instructed him to look for Teresa Ganzon, an officer of the Ibaan Rural Bank and the person to talk to regarding the property. While the letter-authority issued in favor of the respondents was non-exclusive, no evidence was adduced to show that there were other persons, aside from the respondents, who informed Lee about the property for sale. Ganzon testified that no advertisement was made announcing the sale of the lot, nor did she give any authority to other brokers/agents to sell the subject property.31 The fact that it was Lee who personally called Borbon and asked for directions prove that it was only through the respondents that Lee learned about the property for sale.32Significantly, too, Ms. Teresa Ganzon testified that there were no other persons other than the respondents who inquired from her about the sale of the property to Lee.33 It can thus be readily inferred that the respondents were the only ones who knew about the property for sale and were responsible in leading a buyer to its consummation. All these circumstances lead us to the inescapable conclusion that the respondents were the procuring cause of the sale. When there is a close, proximate and causal connection between the broker's efforts and the principal's sale of his property, the broker is entitled to a commission.34 The petitioners insist that the respondents are not entitled to any commission since they did not actually perform any acts of "negotiation" as required in the letter-authority. They refuse to pay the commission since according to them, the respondents' participation in the transaction was not apparent, if not nil. The respondents did not even look at the property themselves; did not introduce the buyer to the seller; did not hold any conferences with the buyer, nor take part in concluding the sale. For the non-compliance of this obligation "to negotiate," the petitioners argue, the respondents are not entitled to any commission. We find the argument specious.l^vvphi1.net The letter of authority must be read as a whole and not in its truncated parts. Certainly, it was not the intention of Medrano to expect the respondents to do just that (to negotiate) when he issued the letter of authority. The clear intention is to reward the respondents for procuring a buyer for the property. Before negotiating a sale, a broker must first and foremost bring in a prospective buyer. It has been held that a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made.35 The essential feature of a broker's conventional employment is merely to procure a purchaser for a property ready, able, and willing to buy at the price and on the terms mutually agreed upon by the owner and the purchaser. And it is not a prerequisite to the right to compensation that the broker conduct the negotiations between the parties after they have been brought into contact with each other through his efforts.36 The case ofMacondray v. Sellner37 is quite instructive:

The business of a real estate broker or agent, generally, is only to find a purchaser, and the settled rule as stated by the courts is that, in the absence of an express contract between the broker and his principal, the implication generally is that the broker becomes entitled to the usual commissions whenever he brings to his principal a party who is able and willing to take the property and enter into a valid contract upon the terms then named by the principal, although the particulars may be arranged and the matter negotiated and completed between the principal and the purchaser directly. Notably, there are cases where the right of the brokers to recover commissions were upheld where they actually took no part in the negotiations, never saw the customer, and even some in which they did nothing except advertise the property, as long as it can be shown that they were the efficient cause of the sale.38 In the case at bar, the role of the respondents in the transaction is undisputed. Whether or not they participated in the negotiations of the sale is of no moment. Armed with an authority to procure a purchaser and with a license to act as broker, we see no reason why the respondents can not recover compensation for their efforts when, in fact, they are the procuring cause of the sale.39 Anent the validity of the letter-authority signed by Medrano, we find no reversible error with the findings of the appellate and trial courts that the petitioners are liable thereunder. Such factual findings deserve this Court's respect in the absence of any cogent reason to reverse the same. Medrano's obligation to pay the respondents commission for their labor and effort in finding a purchaser or a buyer for the described parcel of land is unquestionable. In the absence of fraud, irregularity or illegality in its execution, such letter-authority serves as a contract, and is considered as the law between the parties. As such, Medrano can not renege on the promise to pay commission on the flimsy excuse that he is not the registered owner of the property. The evidence shows that he comported himself to be the owner of the property. His testimony is quite telling: Q Mr. Medrano, do you know any of the plaintiffs in this case, Pacita Borbon, Josefina Antonio, and Stella (sic) F. Flor? WITNESS A I know only Stella (sic) F. Flor. The rest, I do not know them. I have never met them, up to now. Q How about the co-defendant Ibaan Rural Bank?

A I know co-defendant Ibaan Rural Bank, having been the founder and at one time or another, I have served several capacities from President to Chairman of the Board. Q Are you familiar with a certain parcel of land located at Barrio Tulay na Patpat, Ibaan, Batangas, with an area of 17 hectares? A Yes, Sir. I used to own that property but later on mortgaged it to Ibaan Rural Bank. Q And what, if any, [did] the bank do to your property after you have mortgaged the same to it? A After many demands for payment or redemption of my mortgage, which I failed to do so, the Ibaan Rural Bank sold it. Q After it was foreclosed? A Yes, Sir. Q Do you recall having made any transaction with plaintiff Stella (sic) F. Flor regarding the property? A Yes, Sir. Since she is the first cousin of my wife, I remember [that] she came to my office once and requested for a letter of authority which I issued [in] September 1986, I think, and I gave her the letter of authority.40 As to the liability of the bank, we quote with favor the disquisition of the respondent court, to wit: Further, the appellants cannot use the flimsy excuse (only to evade liability) that "(w)hat Mr. Medrano represented to the plaintiffs-appellees, without the knowledge or consent of the defendant Bank, did not bind the Bank. Res inter alios acta alteri nocere non debet." (page 8 of the Appellant's Brief; page 35 of the Rollo). While it may be true that technically the Ibaan Rural Bank did not authorize Bienvenido R. Medrano to sell the land under litigation or that the latter was no longer an officer of the said bank, still, these circumstances do not convince this Court fully well to absolve the bank. Note that, as former President of the said bank, it is improbable that he (Bienvenido R. Medrano) was completely oblivious of the developments therein. By reason of his past association with the officers of the said bank (who are, in fact, his relatives), it is unbelievable that Bienvenido R. Medrano could simply have issued the said letter of authority without the knowledge of the said officers. Granting por aguendo that Bienvenido R. Medrano did not act on behalf of the bank, however, We doubt that he had no financial and/or material interest in the said sale - a fact that could not possibly have eluded Our attention.41 From all the foregoing, there can be no other conclusion than the respondents are indeed the procuring cause of the sale. If not for the respondents, Lee would not have known about the

mango plantation being sold by the petitioners. The sale was consummated. The bank had profited from such transaction. It would certainly be iniquitous if the respondents would not be rewarded their commission pursuant to the letter of authority. WHEREFORE, the petition is DENIED due course. The Decision of the Court of Appeals is AFFIRMED. SOORDERED. Puno, (Chairman), Tinga, and Chico-Nazario, JJ., concur. Austria-Martinez, J., no part.

G.R. No. 154645

July 13, 2004

MILAGROS JOAQUINO a.k.a. MILAGROS J. REYES, petitioner, vs. LOURDES REYES, MERCEDES, MANUEL, MIRIAM and RODOLFO JR. -- all surnamed REYES, respondents.

DECISION

PANGANIBAN, J.: Though registered in the paramour's name, property acquired with the salaries and earnings of a husband belongs to his conjugal partnership with the legal spouse. The filiation of the paramour's children must be settled in a probate or special proceeding instituted for the purpose, not in an action for recovery of property. The Case Before the Court is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to nullify the February 4, 2002 Decision2 and the August 14, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 45883. The CA disposed as follows:

"WHEREFORE, premises considered, the appeal is hereby partially DENIED and the Decision dated May 30, 1994, of the Regional Trial Court of Pasay City, Branch 111 in Civil Case No. 9722P is MODIFIED to read, as follows: "WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against the defendant as follows: 'a. Declaring the house and lot registered under Transfer Certificate of Title No. 90293 (26627- A) of the Registry of Deeds of Metro Manila, District IV as conjugal partnership property of the late Spouses Rodolfo and Lourdes Reyes; 'b. Ordering the [petitioner] to surrender possession of said subject property, pursuant to the applicable law on succession, to the respective estates of the late Rodolfo Reyes and Lourdes Reyes and to pay a reasonable rental of P10,000.00 a month, to the same juridical entities, upon their failure to do so until possession of the property is delivered; and 'c. To pay [respondents] attorney's fees in the sum of P20,000.00 and to pay the costs.'"4 The questioned Resolution, on the other hand, denied petitioner's Motion for Reconsideration. The Facts The CA narrated the facts as follows: "[Respondents] filed a Complaint for reconveyance and damages, dated January 23, 1982, before the Court of First Instance of Rizal, containing the following allegations: 'x x x The complaint alleges that [respondent] Lourdes P. Reyes is the widow of Rodolfo A. Reyes who died on September 12, 1981; that [respondents] Mercedes, Manuel, Miriam and Rodolfo, Jr. are the legitimate children of [respondent] Lourdes P. Reyes and the deceased Rodolfo A. Reyes; that for years before his death, Rodolfo A. Reyes had illicit relations with [petitioner] Milagros B. Joaquino; that before his death, x x x Rodolfo A. Reyes was Vice President and Comptroller of Warner Barnes and Company with an income of P15,000.00 a month and, after retirement on September 30, 1980, received from said company benefits and emoluments in the amount of P315,0[1]1.79; that [respondent] wife was not the recipient of any portion of the said amount. 'The complaint further alleges that on July 12, 1979, a [D]eed of [S]ale of a property consisting of a house and lot at BF Homes, Paraaque, Metro Manila was executed by the spouses Ramiro Golez and Corazon Golez in favor of [petitioner] Milagros B. Joaquino for which Transfer Certificate of Title No. 90293 of the Register of Deeds of Metro Manila, District IV was issued in the name of [petitioner] Milagros B. Joaquino; that the funds used to purchase this property

were conjugal funds and earnings of the deceased Rodolfo A. Reyes as executive of Warner Barnes and Company as [petitioner] Joaquino was without the means to pay for the same; that [petitioner] executed a Special Power of Attorney in favor of Rodolfo A. Reyes to mortgage the property to Commonwealth Insurance Corporation in order to pay the balance of the purchase price; that said Rodolfo A. Reyes executed a mortgage in favor of Commonwealth Insurance Corporation for P140,000.00 and to guaranty payment thereof, he secured a life insurance [policy] with Philam Life Insurance Corporation for the said amount, assigning the proceeds thereof to Commonwealth Insurance Corporation; that the monthly amortizations of the mortgage were paid by said Rodolfo A. Reyes before his death and at the time of his death, the outstanding balance of P110,000.00 was to be paid out of his Philam Life Insurance [p]olicy. 'The complaint finally alleges that the deceased had two cars in [petitioner's] possession and that the real and personal properties in [petitioner's] possession are conjugal partnership propert[ies] of the spouses Lourdes P. Reyes and Rodolfo A. Reyes and one-half belongs exclusively to [respondent] Lourdes P. Reyes and the other half to the estate of Rodolfo A. Reyes to be apportioned among the [other respondents] as his forced heirs. [Respondents] therefore, pray that the property covered by T.C.T. No. 90293 be declared conjugal property of the spouses Lourdes P. Reyes and Rodolfo A. Reyes and that [petitioner] be ordered to reconvey the property in [respondents'] favor; that the two cars in [petitioner's] possession be delivered to [respondents] and that [petitioner] be made to pay actual, compensatory and moral damages to [respondents] as well as attorney's fees.' xxx xxx xxx

"[Petitioner] eventually filed her Answer, dated August 1, 1982, the allegations of which have been summarized by the trial court in the following manner: 'In her Answer, [petitioner] Milagros B. Joaquino alleges that she purchased the real property in question with her own exclusive funds and it was only for convenience that the late Rodolfo Reyes facilitated the mortgage over the same; that although the late Rodolfo Reyes paid the monthly amortization of the mortgage as attorney-in-fact of [petitioner], the money came exclusively from [her]. '[Petitioner] further alleges in her answer, by way of special and affirmative defenses, that during all the nineteen (19) years that [she] lived with Rodolfo Reyes from 1962 continuously up to September 12, 1981 when the latter died, [petitioner] never had knowledge whatsoever that he was married to someone else, much less to [respondent] Lourdes P. Reyes; that [petitioner] was never the beneficiary of the emoluments or other pecuniary benefits of the late Rodolfo Reyes during his lifetime or after his death because [she] had the financial capacity to support herself and her children begotten with the late Rodolfo Reyes. [Petitioner] prays for

a judgment dismissing [respondents'] complaint and for the latter to pay unto [petitioner] moral and exemplary damages in such amounts as may be determined during the trial, including atto[r]ney's fees and the costs of the suit. x x x.' xxx xxx xxx

"On February 2, 1993, [respondent] Lourdes Reyes died. "Subsequently, the trial court granted the complaint based on the following factual findings: 'Lourdes Reyes was legally married to Rodolfo Reyes on January 3, 1947 in Manila. They have four children, namely: Mercedes, Manuel, Miriam and Rodolfo Jr., all surnamed Reyes and co[respondents] in this case. Rodolfo Reyes died on September 12, 1981. At the time of his death, Rodolfo Reyes was living with his common-law wife, Milagros Joaquino, x x x with whom she begot three (3) children namely: Jose Romillo, Imelda May and Charina, all surnamed Reyes. 'During his lifetime, Rodolfo Reyes worked with Marsman and Company and later transferred to Warner Barnes & Co., where he assumed the position of Vice-President [Comptroller] until he retired on September 30, 1980. His monthly salary at Warner Barnes & Co. was P15,000.00 x x x and upon his separation or retirement from said company, Rodolfo Reyes received a lump sum of P315,011.79 in full payment and settlement of his separation and retirement benefits. 'During the common-law relationship of Rodolfo Reyes and [petitioner] Milagros Joaquino and while living together, they decided to buy the house and lot situated at No. 12 Baghdad Street, Phase 3, BF Homes, Paraaque, Metro Manila. A Deed of Absolute Sale dated July 12, 1979 was executed in favor of [petitioner] Milagros Joaquino and Transfer Certificate of Title No. S-90293 covering the said property was issued in the name of [petitioner only] on July 20, 1979. 'To secure the finances with which to pay the purchase price of the property in the amount ofP140,000.00, [petitioner] executed on July 20, 1979, a Special Power of Attorney in favor of Rodolfo A. Reyes for the latter, as attorney-in-fact, to secure a loan from the Commonwealth Insurance Company. An application for mortgage loan was filed by Rodolfo Reyes with the Commonwealth Insurance Company and a Real Estate Mortgage Contract was executed as collateral to the mortgage loan. The loan was payable in ten (10) years with a monthly amortization of P1,166.67. The monthly amortizations were paid by Rodolfo Reyes and after his death, the balance of P109,797.64 was paid in full to the Commonwealth Insurance by the Philam Life Insurance Co. as insurer of the deceased Rodolfo A. Reyes.'"5 On appeal to the CA, petitioner questioned the following findings of the trial court: 1) that the house and lot had been paid in full from the proceeds of the loan that Rodolfo Reyes obtained from the Commonwealth Insurance Company; 2) that his salaries and earnings, which were his

and Lourdes' conjugal funds, paid for the loan and, hence, the disputed property was conjugal; and 3) that petitioner's illegitimate children, not having been recognized or acknowledged by him in any of the ways provided by law, acquired no successional rights to his estate. Ruling of the Court of Appeals Affirming the RTC, the CA held that the property had been paid out of the conjugal funds of Rodolfo and Lourdes because the monthly amortizations for the loan, as well as the premiums for the life insurance policy that paid for the balance thereof, came from his salaries and earnings. Like the trial court, it found no sufficient proof that petitioner was financially capable of buying the disputed property, or that she had actually contributed her own exclusive funds to pay for it. Hence, it ordered her to surrender possession of the property to the respective estates of the spouses. The appellate court, however, held that the trial court should not have resolved the issue of the filiation and the successional rights of petitioner's children. Such issues, it said, were not properly cognizable in an ordinary civil action for reconveyance and damages and were better ventilated in a probate or special proceeding instituted for the purpose. Hence, this Petition.6 Issues Petitioner submits the following issues for the Court's consideration: "I. Whether or not it has been indubitably established in a court of law and trier of facts, the Regional Trial Court, that petitioner's three [3] illegitimate children are x x x indeed the children of the late Rodolfo Reyes. "II. Whether or not it is legally permissible for [respondents] to make a mockery of the law by denying [the] filiations of their [two] 2 illegitimate sisters and one [1] illegitimate brother when in fact the very complaint filed by their mother, the lawful wife, Lourdes[,] shows that her husband Rodolfo had illicit relations with the petitioner Milagros and had lived with her in a house and lot at Baghdad Street. "III. Whether or not the fact that the Court of Appeals made a finding that the house and lot at Baghdad Street are conjugal property of lawfully wedded Rodolfo and Lourdes including the

insurance proceeds which was used to pay the final bill for the house and lot, this will prevail over Articles 19 and 21 of the Civil Code. "IV. Whether or not the Supreme Court should enforce the rule that the parties to a lawsuit should only tell the truth at the trial and in [their] pleadings x x x. "V. Whether or not the legitimate children of the late Rodolfo Reyes should respect their father's desire that his illegitimate children should have a home or a roof over their heads in consonance with his duty to love, care and provide for his children even after his death."7 The issues boil down to the following: 1) the nature of the house and lot on Baghdad Street (BF Homes Paraaque, Metro Manila); and 2) the propriety of ruling on the filiation and the successional rights of petitioner's children. The Court's Ruling The Petition is devoid of merit. First Issue: The Conjugal Nature of the Disputed Property Before tackling the merits, we must first point out some undisputed facts and guiding principles. As to the facts, it is undisputed that the deceased Rodolfo Reyes was legally married to Respondent Lourdes Reyes on January 3, 1947.8 It is also admitted that for 19 years or so, and while their marriage was subsisting, he was actually living with petitioner. It was during this time, in 1979, that the disputed house and lot was purchased and registered in petitioner's nam e. Plainly, therefore, the applicable law is the Civil Code of the Philippines. Under Article 145 thereof, a conjugal partnership of gains (CPG) is created upon marriage9 and lasts until the legal union is dissolved by death, annulment, legal separation or judicial separation of property.10 Conjugal properties are by law owned in common by the husband and wife.11 As to what constitutes such properties are laid out in Article 153 of the Code, which we quote: "(1) That which is acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership, or for only one of the spouses;

(2) That which is obtained by the industry, or work, or as salary of the spouses, or of either of them; (3) The fruits, rents or interests received or due during the marriage, coming from the common property or from the exclusive property of each spouse." Moreover, under Article 160 of the Code, all properties of the marriage, unless proven to pertain to the husband or the wife exclusively, are presumed to belong to the CPG. For the rebuttable presumption to arise, however, the properties must first be proven to have been acquired during the existence of the marriage.12 The law places the burden of proof13 on the plaintiffs (respondents herein) to establish their claim by a preponderance of evidence14 -- evidence that has greater weight or is more convincing than that which is offered to oppose it.15 On the other hand, Article 14416 of the Civil Code mandates a co-ownership between a man and a woman who are living together but are not legally married. Prevailing jurisprudence holds, though, that for Article 144 to apply, the couple must not be incapacitated to contract marriage.17 It has been held that the Article is inapplicable to common-law relations amounting to adultery or concubinage, as in this case. The reason therefor is the absurdity of creating a co-ownership in cases in which there exists a prior conjugal partnership between the man and his lawful wife.18 In default of Article 144 of the Civil Code, Article 148 of the Family Code has been applied.19 The latter Article provides: "Art. 148. In cases of cohabitation not falling under the preceding Article, only the properties acquired by both of the parties through their actual joint contribution of money, property, or industry shall be owned by them in common in proportion to their respective contributions. In the absence of proof to the contrary, their contributions and corresponding shares are presumed to be equal. The same rule and presumption shall apply to joint deposits of money and evidence of credit. "If one of the parties is validly married to another, his or her share in the co-ownership shall accrue to the absolute community or conjugal partnership existing in such valid marriage. If the party which acted in bad faith is not validly married to another, his or her share shall be forfeited in the manner provided in the last paragraph of the preceding Article. "The foregoing rules on forfeiture shall likewise apply even if both parties are in bad faith."

Thus, when a common-law couple have a legal impediment to marriage, only the property acquired by them -- through their actual joint contribution of money, property or industry -- shall be owned by them in common and in proportion to their respective contributions. With these facts and principles firmly settled, we now proceed to the merits of the first issue. The present controversy hinges on the source of the funds paid for the house and lot in question. Upon the resolution of this issue depends the determination of whether the property is conjugal (owned by Rodolfo and Lourdes) or exclusive (owned by Milagros) or co-owned by Rodolfo and Milagros. The above issue, which is clearly factual, has been passed upon by both the trial and the appellate courts, with similar results in favor of respondents. Such finding is generally conclusive; it is not the function of this Court to review questions of fact. 20 Moreover, it is well-settled that only errors of law and not of facts are reviewable by this Court in cases brought to it from the Court of Appeals or under Rule 45 of the Rules of Court.21 This principle applies with greater force herein, because the CA came up with the same factual findings as those of the RTC. Even then, heeding petitioner's plea, we have gone through the pleadings and the evidence presented by the parties to find out if there is any circumstance that might warrant a reversal of the factual findings. Unfortunately for petitioner, we have found none. Indeed, a preponderance of evidence has duly established that the disputed house and lot was paid by Rodolfo Reyes, using his salaries and earnings. By substantial evidence, respondents showed the following facts: 1) that Rodolfo was gainfully employed as comptroller at Warner, Barnes and Co., Inc. until his retirement on September 30, 1980, upon which he received a sizeable retirement package;22 2) that at exactly the same time the property was allegedly purchased,23 he applied for a mortgage loan24 -- intended for "housing"25 -- from the Commonwealth Insurance Company; 3) that he secured the loan with a real estate mortgage26 over the same property; 4) that he paid the monthly amortizations for the loan27 as well as the semi-annual premiums28 for a Philam Life insurance policy, which he was required to take as additional security; and 5) that with the proceeds of his life insurance policy, the balance of the loan was paid to Commonwealth by Philam Life Insurance Company.29 All told, respondents have shown that the property was bought during the marriage of Rodolfo and Lourdes, a fact that gives rise to the presumption that it is conjugal. More important, they have established that the proceeds of the loan obtained by Rodolfo were used to pay for the property; and that the loan was, in turn, paid from his salaries and earnings, which were conjugal funds under the Civil Code.

In contrast, petitioner has failed to substantiate either of her claims -- that she was financially capable of buying the house and lot, or that she actually contributed to the payments therefor. Indeed, it does not appear that she was gainfully employed at any time after 196130 when the property was purchased. Hearsay are the Affidavits31 and the undated Certification32 she had presented to prove that she borrowed money from her siblings and had earnings from a jewelry business. Respondents had not been given any opportunity to cross-examine the affiants, who had not testified on these matters. Based on the rules of evidence, the Affidavits and the Certification have to be rejected. In fact, they have no probative value.33 The CA was also correct in disregarding petitioner's allegation that part of the purchase money had come from the sale of a drugstore34 four years earlier. Under the circumstances, therefore, the purchase and the subsequent registration of the realty in petitioner's name was tantamount to a donation by Rodolfo to Milagros. By express provision of Article 739(1) of the Civil Code, such donation was void, because it was "made between persons who were guilty of adultery or concubinage at the time of the donation." The prohibition against donations between spouses35 must likewise apply to donations between persons living together in illicit relations; otherwise, the latter would be better situated than the former.36 Article 87 of the Family Code now expressly provides thus: "Art. 87. Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void, except moderate gifts which the spouses may give each other on the occasion of any family rejoicing. The prohibition shall also apply to persons living together as husband and wife without a valid marriage." (Italics supplied) Regarding the registration of the property in petitioner's name, it is enough to stress that a certificate of title under the Torrens system aims to protect dominion; it cannot be used as an instrument for the deprivation of ownership.37 It has been held that property is conjugal if acquired in a common-law relationship during the subsistence of a preexisting legal marriage, even if it is titled in the name of the common-law wife.38 In this case, a constructive trust is deemed created under Article 1456 of the Civil Code, which we quote: "Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes." The registration of the property in petitioner's name was clearly designed to deprive Rodolfo's legal spouse and compulsory heirs of ownership. By operation of law, petitioner is deemed to hold the property in trust for them. Therefore, she cannot rely on the registration in

repudiation of the trust, for this case is a well-known exception to the principle of conclusiveness of a certificate of title.39 Second Issue: Ruling on Illegitimate Filiation Not Proper It is petitioner's alternative submission that her children are entitled to a share in the disputed property, because they were voluntarily acknowledged by Rodolfo as his children. Claiming that the issue of her children's illegitimate filiation was duly established in the trial court, she faults the CA for ruling that the issue was improper in the instant case. Her position is untenable. Indeed, it has been ruled that matters relating to the rights of filiation and heirship must be ventilated in the proper probate court in a special proceeding instituted precisely for the purpose of determining such rights.40 Sustaining the appellate court in Agapay v. Palang,41 this Court held that the status of an illegitimate child who claimed to be an heir to a decedent's estate could not be adjudicated in an ordinary civil action which, as in this case, was for the recovery of property. Considerations of due process should have likewise deterred the RTC from ruling on the status of petitioner's children. It is evident from the pleadings of the parties that this issue was not presented in either the original42 or the Supplemental Complaint43 for reconveyance of property and damages; that it was not pleaded and specifically prayed for by petitioner in her Answers44 thereto; and that it was not traversed by respondents' Reply to the Supplemental Complaint.45 Neither did petitioner's Memorandum,46 which was submitted to the trial court, raise and discuss this issue. In view thereof, the illegitimate filiation of her children could not have been duly established by the proceedings as required by Article 887 of the Civil Code.47 In view of the foregoing reasons, the CA cannot be faulted for tackling the propriety of the RTC's ruling on the status of the children of petitioner, though she did not assign this matter as an error. The general rule -- that only errors assigned may be passed upon by an appellate court - admits of exceptions. Even unassigned errors may be taken up by such court if the consideration of those errors would be necessary for arriving at a just decision or for serving the interest of justice.48 The invocation by petitioner of Articles 1949 and 2150 of the Civil Code is also unmeritorious. Clearly, the illegitimate filiation of her children was not the subject of inquiry and was in fact not duly established in this case. Thus, she could not have shown that respondents had acted in

bad faith or with intent to prejudice her children. These are conditions necessary to show that an act constitutes an abuse of rights under Article 19.51 She also failed to show that respondents -- in violation of the provisions of Article 21 of the Civil Code -- had acted in a manner contrary to morals, good customs or public policy. Moreover, we note that the issue concerning the applicability of Articles 19 and 21 was not raised by petitioner in the trial court or even in the CA. Hence, she should not be permitted to raise it now. Basic is the rule that parties may not bring up on appeal issues that have not been raised on trial.52 WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and Resolution of the Court of AppealsAFFIRMED. Costs against petitioner. SOORDERED.

A.C. No. 6210

December 9, 2004

FEDERICO N. RAMOS, complainant, vs. ATTY. PATRICIO A. NGASEO, respondent.

DECISION

YNARES-SANTIAGO, J.: This is a complaint for suspension of respondent Atty. Patricio A. Ngaseo for violation of the Code of Professional Responsibility and Article 1491 of the Civil Code by demanding from his client, complainant Federico N. Ramos, the delivery of 1,000 square meters of land, a litigated property, as payment for his appearance fees. The facts as narrated by the complainant are as follows: Sometime in 1998, complainant Federico Ramos went to respondent Atty. Patricio Ngaseo's Makati office to engage his services as counsel in a case1 involving a piece of land in San Carlos, Pangasinan. Respondent agreed to handle the case for an acceptance fee of P20,000.00,

appearance fee of P1,000.00 per hearing and the cost of meals, transportation and other incidental expenses. Complainant alleges that he did not promise to pay the respondent 1,000 sq. m. of land as appearance fees.2 On September 16, 1999, complainant went to the respondent's office to inquire about the status of the case. Respondent informed him that the decision was adverse to them because a congressman exerted pressure upon the trial judge. Respondent however assured him that they could still appeal the adverse judgment and asked for the additional amount of P3,850.00 and another P2,000.00 on September 26, 2000 as allowance for research made.3 Although an appeal was filed, complainant however charges the respondent of purposely failing to submit a copy of the summons and copy of the assailed decision. Subsequently, complainant learned that the respondent filed the notice of appeal 3 days after the lapse of the reglementary period. On January 29, 2003, complainant received a demand-letter from the respondent asking for the delivery of the 1,000 sq. m. piece of land which he allegedly promised as payment for respondent's appearance fee. In the same letter, respondent also threatened to file a case in court if the complainant would not confer with him and settle the matter within 30 days. Respondent alleged that sometime in the late 1997, a former client, Federico Ramos and his brother, Dionisio, went to his Makati office to engage his professional services in connection with a 2-hectare parcel of land situated in San Carlos, Pangasinan which the complainant's family lost 7 years earlier through an execution sale in favor of one Alfredo T. Castro. Complainant, who was deaf and could only speak conversational Tagalog haltingly, was assisted by his brother Dionisio. They came all the way from Pangasinan because no lawyer in San Carlos City was willing to handle the case. Complainant, through Dionisio, avers that he has consulted 2 local lawyers but did not engage their services because they were demanding exorbitant fees. One local lawyer was willing to handle the case for at least one-half of the land involved as his attorney's fee, plus cash expenses, while the other asked for of the land in addition to a large sum of money. Respondent agreed to handle the case for an acceptance fee of P60,000.00 plus an appearance fee of P3,000.00 per hearing. Complainant told him that he would consult his siblings on the matter. Six months later, i.e., in April 1998, complainant, assisted by one Jose Castillo, went to respondent's office to discuss the legal fees. Complainant, through Castillo, told respondent that he was willing to pay an acceptance fee of P40,000.00, P20,000.00 of which shall be paid upon engagement and the remaining P20,000.00 to be paid after their treasure hunt operations in Nueva Viscaya were terminated. Further, complainant offered, in lieu of P3,000.00 per appearance, 1,000 sq. m. of land from the land subject matter of the case, if they win, or from

another piece of property, if they lose. In addition, complainant also offered to defray the expenses for transportation, meals and other incidental expenses. Respondent accepted the complainant's offer. Respondent claims that after the trial court dismissed Civil Case No. SCC 2128, he filed a timely notice of appeal and thereafter moved to be discharged as counsel because he had colon cancer. Complainant, now assisted by one Johnny Ramos, implored respondent to continue handling the case, with an offer to double the 1,000 sq. m. piece of land earlier promised and the remaining balance of P20,000.00 acceptance fee. Johnny Ramos made a written commitment and gave respondent's secretary P2,000.00 of the P3,850.00 expenses for the preparation of the appellant's brief. On July 18, 2001, the Court of Appeals rendered a favorable decision ordering the return of the disputed 2-hectare land to the complainant and his siblings. The said decision became final and executory on January 18, 2002. Since then complainant allegedly failed to contact respondent, which compelled him to send a demand letter on January 29, 2003. On February 14, 2003, complainant filed a complaint before the IBP charging his former counsel, respondent Atty. Ngaseo, of violation of the Code of Professional Responsibility for demanding the delivery of 1,000 sq. m. parcel of land which was the subject of litigation. In a report dated July 18, 2003, IBP Commissioner Rebecca Villanueva-Maala found the respondent guilty of grave misconduct and conduct unbecoming of a lawyer in violation of the Code of Professional Responsibility and recommended that he be suspended from the practice of law for 1 year.4 On August 30, 2003, the IBP Board of Governors passed Resolution No. XVI-2003-47 the full text of which reads:5 RESOLVED to ADOPT and APPROVE, as it is hereby ADOPTED and APPROVED, the Report and Recommendation of the Investigating Commissioner of the above-entitled case, herein made part of this Resolution/Decision as Annex "A"; and, finding the recommendation fully supported by the evidence on record and the applicable laws and rules, with modification, and considering that respondent have violated the Code of Professional Responsibility for grave misconduct and conduct unbecoming of a lawyer Atty. Patricio A. Ngaseo is hereby SUSPENDED from the practice of law for six (6) months. On December 11, 2003, respondent filed a petition for review assailing IBP Resolution No. XVI2003-47 for having been issued without or in excess of jurisdiction.6

Respondent argues that he did not violate Article 1491 of the Civil Code because when he demanded the delivery of the 1,000 sq. m. of land which was offered and promised to him in lieu of the appearance fees, the case has been terminated, when the appellate court ordered the return of the 2-hectare parcel of land to the family of the complainant. Respondent further contends that he can collect the unpaid appearance fee even without a written contract on the basis of the principle of quantum meruit. He claims that his acceptance and appearance fees are reasonable because a Makati based legal practitioner, would not handle a case for an acceptance fee of only P20,000.00 and P1,000.00 per court appearance. Under Article 1491(5) of the Civil Code, lawyers are prohibited from acquiring either by purchase or assignment the property or rights involved which are the object of the litigation in which they intervene by virtue of their profession.7 The prohibition on purchase is all embracing to include not only sales to private individuals but also public or judicial sales. The rationale advanced for the prohibition is that public policy disallows the transactions in view of the fiduciary relationship involved, i.e., the relation of trust and confidence and the peculiar control exercised by these persons.8 It is founded on public policy because, by virtue of his office, an attorney may easily take advantage of the credulity and ignorance of his client and unduly enrich himself at the expense of his client.9However, the said prohibition applies only if the sale or assignment of the property takes place during the pendency of the litigation involving the client's property. Consequently, where the property is acquired after the termination of the case, no violation of paragraph 5, Article 1491 of the Civil Code attaches. Invariably, in all cases where Article 1491 was violated, the illegal transaction was consummated with the actual transfer of the litigated property either by purchase or assignment in favor of the prohibited individual. In Biascan v. Lopez, respondent was found guilty of serious misconduct and suspended for 6 months from the practice of law when he registered a deed of assignment in his favor and caused the transfer of title over the part of the estate despite pendency of Special Proceedings No. 98037 involving the subject property.10 In the consolidated administrative cases of Valencia v. Cabanting,11 the Court suspended respondent Atty. Arsenio Fer Cabanting for six (6) months from the practice of law when he purchased his client's property which was still the subject of a pending certiorari proceeding. In the instant case, there was no actual acquisition of the property in litigation since the respondent only made a written demand for its delivery which the complainant refused to comply. Mere demand for delivery of the litigated property does not cause the transfer of ownership, hence, not a prohibited transaction within the contemplation of Article 1491. Even assuming arguendo that such demand for delivery is unethical, respondent's act does not fall within the purview of Article 1491. The letter of demand dated January 29, 2003 was made long after the judgment in Civil Case No. SCC-2128 became final and executory on January 18, 2002.

We note that the report of the IBP Commissioner, as adopted by the IBP Board of Governors in its Resolution No. XVI-2003-47, does not clearly specify which acts of the respondent constitute gross misconduct or what provisions of the Code of Professional Responsibility have been violated. We find the recommended penalty of suspension for 6 months too harsh and not proportionate to the offense committed by the respondent. The power to disbar or suspend must be exercised with great caution. Only in a clear case of misconduct that seriously affects the standing and character of the lawyer as an officer of the Court and member of the bar will disbarment or suspension be imposed as a penalty.12 All considered, a reprimand is deemed sufficient and reasonable. WHEREFORE, in view of the foregoing, respondent Atty. Patricio A. Ngaseo is found guilty of conduct unbecoming a member of the legal profession in violation of Rule 20.04 of Canon 20 of the Code of Professional Responsibility. He is REPRIMANDED with a warning that repetition of the same act will be dealt with more severely. SOORDERED.