(1) ANTONIO MEDINA, petitioner, vs.

COLLECTOR OF INTERNAL REVENUE and THE

COURT OF TAX APPEALS respondents.
REYES, J.B.L. J.:
Petition to review a decision of the Court of Tax Appeals upholding a tax assessment of the
Collector of Internal Revenue except with respect to the imposition of so-called compromise
penalties, which were set aside.
The records show that on or about May 20, 1944, petitioning taxpayer Antonio Medina
married Antonia Rodriguez. Before 1946, the spouses had neither property nor business of their
own. Later, however, petitioner acquired forest, concessions in the municipalities of San Mariano
and Palanan in the Province of Isabela. From 1946 to 1948, the logs cut and removed by the
petitioner from his concessions were sold to different persons in Manila through his agent, Mariano
Osorio.
Some time in 1949, Antonia R. Medina, petitioner's wife, started to engage in business as a lumber
dealer, and up to around 1952, petitioner sold to her almost all the logs produced in his San
Mariano, concession. Mrs. Medina, In turn, sold in Manila the logs bought from her husband
through the same agent, Mariano Osorio. The proceeds were, upon instructions from petitioner,
either received by Osorio for petitioner or deposited by said agent in petitioner's current account
with the Philippine National Bank.
On the thesis that the sales made by petitioner to his wife were null and void pursuant to the
provisions of Article 1490 of the Civil Code of the Philippines (formerly, Art. 1458, Civil Code of
1889), the Collector considered the sales made by Mrs. Medina as the petitioner's original sales
taxable under Section 186 of the National Internal Revenue Code and, therefore, imposed a tax
assessment on petitioner, calling for the payment of P4,553.54 as deficiency sales taxes and
surcharges from 1949 to 1952. This same assessment of September 26, 1953 sought also the
collection of another sum of P643.94 as deficiency sales tax and surcharge based on petitioner's
quarterly returns from 1946 to 1952.
On November 30, 1953, petitioner protested the assessment; however, respondent Collector
insisted on his demand. On July 9, 1954, petitioner filed a petition for reconsideration revealing for
the first time the existence of an alleged premarital agreement of complete separation of properties
between him and his wife, and contending that the assessment for the years 1946 to 1952 had
already prescribed. After one hearing, the Conference Staff of the Bureau of Internal Revenue
eliminated the 50% fraud penalty and held that the taxes assessed against him before 1948 had
already prescribed. Based on these findings, the Collector issued a modified assessment,
demanding the payment of only P3,325.68, computed as follows:
5% tax due on P7,209.83 P 360.49
-1949
5% tax due on 16,945.55 - 847.28
1950
5% tax due on 16,874.52 - 843.75
1951
5% tax due on 11,009.94 - 550.50
1952
TOTAL sales tax P2,602.0
due
25% Surcharge thereon
650.51
Short taxes per quarterly 58.52
returns, 3rd quarter, 1950
25% Surcharge thereon
14.63
TOTAL AMOUNT P3,325.68
due & collectible
Petitioner again requested for reconsideration, but respondent Collector, in his letter of April 4,
1955, denied the same.
Petitioner appealed to the Court of Tax Appeals, which rendered judgment as aforesaid. The
Court's decision was based on two main findings, namely, (a) that there was no premarital
agreement of absolute separation of property between the Medina spouse; and (b) assuming that

there was such an agreement, the sales in question made by petitioner to his wife were fictitious,
simulated, and not bona fide.
In his petition for review to this Court, petitioner raises several assignments of error revolving
around the central issue of whether or not the sales made by the petitioner to his wife could be
considered as his original taxable sales under the provisions of Section 186 of the National Internal
Revenue Code.
Relying mainly on testimonial evidence that before their marriage, he and his wife executed and
recorded a prenuptial agreement for a regime of complete separation of property, and that all trace
of the document was lost on account of the war, petitioner imputes lack of basis for the tax court's
factual finding that no agreement of complete separation of property was ever executed by and
between the spouses before their marriage. We do not think so. Aside from the material
inconsistencies in the testimony of petitioner's witnesses pointed out by the trial court, the
circumstantial evidence is against petitioner's claim. Thus, it appears that at the time of the
marriage between petitioner and his wife, they neither had any property nor business of their own,
as to have really urged them to enter into the supposed property agreement. Secondly, the
testimony that the separation of property agreement was recorded in the Registry of Property three
months before the marriage, is patently absurd, since such a prenuptial agreement could not be
effective before marriage is celebrated, and would automatically be cancelled if the union was
called off. How then could it be accepted for recording prior to the marriage? In the third place,
despite their insistence on the existence of the ante nuptial contract, the couple, strangely enough,
did not act in accordance with its alleged covenants. Quite the contrary, it was proved that even
during their taxable years, the ownership, usufruct, and administration of their properties and
business were in the husband. And even when the wife was engaged in lumber dealing, and she
and her husband contracted sales with each other as aforestated, the proceeds she derived from
her alleged subsequent disposition of the logs incidentally, by and through the same agent of her
husband, Mariano Osorio were either received by Osorio for the petitioner or deposited by said
agent in petitioner's current account with the Philippine National Bank. Fourth, although petitioner, a
lawyer by profession, already knew, after he was informed by the Collector on or about September
of 1953, that the primary reason why the sales of logs to his wife could not be considered as the
original taxable sales was because of the express prohibition found in Article 1490 of the Civil Code
of sales between spouses married under a community system; yet it was not until July of 1954 that
he alleged, for the first time, the existence of the supposed property separation agreement. Finally,
the Day Book of the Register of Deeds on which the agreement would have been entered, had it
really been registered as petitioner insists, and which book was among those saved from the
ravages of the war, did not show that the document in question was among those recorded therein.
We have already ruled that when the credibility of witnesses is the one at issue, the trial court's
judgment as to their degree of credence deserves serious consideration by this Court (Collector vs.
Bautista, et al., G.R. Nos. L-12250 & L-12259, May 27, 1959). This is all the more true in this case
because not every copy of the supposed agreement, particularly the one that was said to have
been filed with the Clerk of Court of Isabela, was accounted for as lost; so that, applying the "best
evidence rule", the court did right in giving little or no credence to the secondary evidence to prove
the due execution and contents of the alleged document (see Comments on the Rules of Court,
Moran, 1957 Ed., Vol. 3, pp. 10.12).
The foregoing findings notwithstanding, the petitioner argues that the prohibition to sell expressed
under Article 1490 of the Civil Code has no application to the sales made by said petitioner to his
wife, because said transactions are contemplated and allowed by the provisions of Articles 7 and
10 of the Code of Commerce. But said provisions merely state, under certain conditions, a
presumption that the wife is authorized to engage in business and for the incidents that flow
therefrom when she so engages therein. But the transactions permitted are those entered into with
strangers, and do not constitute exceptions to the prohibitory provisions of Article 1490 against
sales between spouses.
Petitioner's contention that the respondent Collector can not assail the questioned sales, he being
a stranger to said transactions, is likewise untenable. The government, as correctly pointed out by
the Tax Court, is always an interested party to all matters involving taxable transactions and,
needless to say, qualified to question their validity or legitimacy whenever necessary to block tax
evasion.

Contracts violative of the provisions of Article 1490 of the Civil Code are null and void (Uy Sui Pin
vs. Cantollas, 70 Phil. 55; Uy Coque vs. Sioca 45 Phil. 43). Being void transactions, the sales made
by the petitioner to his wife were correctly disregarded by the Collector in his tax assessments that
considered as the taxable sales those made by the wife through the spouses' common agent,
Mariano Osorio. In upholding that stand, the Court below committed no error.
It is also the petitioner's contention that the lower court erred in using illegally seized documentary
evidence against him. But even assuming arguendo the truth of petitioner's charge regarding the
seizure, it is now settled in this jurisdiction that illegally obtained documents and papers are
admissible in evidence, if they are found to be competent and relevant to the case (see Wong &
Lee vs. Collector of Internal Revenue, G.R. No. L-10155, August 30, 1958). In fairness to the
Collector, however, it should be stated that petitioner's imputation is vehemently denied by him, and
relying on Sections 3, 9, 337 and 338 of the Tax Code and the pertinent portions of Revenue
Regulations No. V-1 and citing this Court's ruling in U.S. vs. Aviado, 38 Phil. 10, the Collector
maintains that he and other internal revenue officers and agents could require the production of
books of accounts and other records from a taxpayer. Having arrived at the foregoing conclusion, it
becomes unnecessary to discuss the other issues raised, which are but premised on the
assumption that a premarital agreement of total separation of property existed between the
petitioner and his wife.
WHEREFORE, the decision appealed from is affirmed, with costs against the petitioner.

(2) 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.

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 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:
(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 the
lot, 1 which value would be reimbursed at the liquidation of the conjugal partnership. 2
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 the house
and lot to DAGUINES since MERCEDES had not given her consent to said sale. 4
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 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. 6 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 penned by Justice JBL Reyes (CA) 50 O.G. 3679, and
cited inMatabuena vs. Cervantes. 9 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
toconcubinage (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.

(3) G.R. No. 125172 June 26, 1998

Spouses ANTONIO and LUZVIMINDA GUIANG, petitioners, vs. COURT OF APPEALS and
GILDA COPUZ, respondents.

PANGANIBAN, J.:
The sale of a conjugal property requires the consent of both the husband and the wife. The
absence of the consent of one renders the sale null and void, while the vitiation thereof makes it
merely voidable. Only in the latter case can ratification cure the defect.
The Case
These were the principles that guided the Court in deciding this petition for review of the
Decision 1 dated January 30, 1996 and the Resolution 2 dated May 28, 1996, promulgated by the
Court of Appeals in CA-GR CV No. 41758, affirming the Decision of the lower court and denying
reconsideration, respectively.
On May 28, 1990, Private Respondent Gilda Corpuz filed an Amended Complainant 3 against her
husband Judie Corpuz and Petitioner-Spouses Antonio and Luzviminda Guiang. The said
Complaint sought the declaration of a certain deed of sale, which involved the conjugal property of
private respondent and her husband, null and void. The case was raffled to the Regional Trial Court
of Koronadal, South Cotabato, Branch 25. In due course, the trial court rendered a Decision 4 dated
September 9, 1992, disposing as follow: 5
ACCORDINGLY, judgment is rendered for the plaintiff and against the defendants,
1. Declaring both the Deed of Transfer of Rights dated March 1, 1990 (Exh. "A") and
the "amicable settlement" dated March 16, 1990 (Exh. "B") as null void and of no
effect;
2. Recognizing as lawful and valid the ownership and possession of plaintiff Gilda
Corpuz over the remaining one-half portion of Lot 9, Block 8, (LRC) Psd-165409
which has been the subject of the Deed of Transfer of Rights (Exh. "A");
3. Ordering plaintiff Gilda Corpuz to reimburse defendants Luzviminda Guiang the
amount of NINE THOUSAND (P9,000.00) PESOS corresponding to the payment
made by defendants Guiangs to Manuel Callejo for the unpaid balance of the account
of plaintiff in favor of Manuel Callejo, and another sum of P379.62 representing onehalf of the amount of realty taxes paid by defendants Guiangs on Lot 9, Block 8,
(LRC) Psd-165409, both with legal interests thereon computed from the finality of the
decision.
No pronouncement as to costs in view of the factual circumstances of the case.
Dissatisfied, petitioners-spouses filed an appeal with the Court of Appeals. Respondent Court, in its
challenged Decision, ruled as follow: 6

WHEREFORE, the appealed of the lower court in Civil Case No. 204 is hereby
AFFIRMED by this Court. No costs considering plaintiff-appellee's failure to file her
brief despite notice.
Reconsideration was similarly denied by the same court in its assailed Resolution:

Finding that the issues raised in defendants-appellants motion for reconsideration of

Our decision in this case of January 30, 1996, to be a mere rehash of the same
issues which we have already passed upon in the said decision, and there [being] no
cogent reason to disturb the same, this Court RESOLVED to DENY the instant motion
for reconsideration for lack of merit.
The Facts
The facts of this case are simple. Over the objection of private respondent and while she was in
Manila seeking employment, her husband sold to the petitioners-spouses one half of their conjugal
peoperty, consisting of their residence and the lot on which it stood. The circumstances of this sale
are set forth in the Decision of Respondent Court, which quoted from the Decision of the trial court
as follows: 8
1. Plaintiff Gilda Corpuz and defendant Judie Corpuz are legally married spouses.
They were married on December 24, 1968 in Bacolod City, before a judge. This is
admitted by defendants-spouses Antonio and Luzviminda Guiang in their answer, and
also admitted by defendant Judie Corpuz when he testified in court (tsn. p. 3, June 9,
1992), although the latter says that they were married in 1967. The couple have three
children, namely: Junie 18 years old, Harriet 17 years of age, and Jodie or Joji,
the youngest, who was 15 years of age in August, 1990 when her mother testified in
court.
Sometime on February 14, 1983, the couple Gilda and Judie Corpuz, with plaintiffwife Gilda Corpuz as vendee, bought a 421 sq. meter lot located in Barangay Gen.
Paulino Santos (Bo. 1), Koronadal, South Cotabato, and particularly known as Lot 9,
Block 8, (LRC) Psd-165409 from Manuel Callejo who signed as vendor through a
conditional deed of sale for a total consideration of P14,735.00. The consideration
was payable in installment, with right of cancellation in favor of vendor should vendee
fail to pay three successive installments (Exh. "2", tsn p. 6, February 14, 1990).
2. Sometime on April 22, 1988, the couple Gilda and Judie Corpuz sold one-half
portion of their Lot No. 9, Block 8, (LRC) Psd-165409 to the defendants-spouses
Antonio and Luzviminda Guiang. The latter have since then occupied the one-half
portion [and] built their house thereon (tsn. p. 4, May 22, 1992). They are thus
adjoining neighbors of the Corpuzes.
3. Plaintiff Gilda Corpuz left for Manila sometime in June 1989. She was trying to look
for work abroad, in [the] Middle East. Unfortunately, she became a victim of an
unscrupulous illegal recruiter. She was not able to go abroad. She stayed for
sometime in Manila however, coming back to Koronadal, South Cotabato, . . . on
March 11, 1990. Plaintiff's departure for Manila to look for work in the Middle East was
with the consent of her husband Judie Corpuz (tsn. p. 16, Aug. 12, 1990; p. 10 Sept.
6, 1991).
After his wife's departure for Manila, defendant Judie Corpuz seldom went home to
the conjugal dwelling. He stayed most of the time at his place of work at Samahang
Nayon Building, a hotel, restaurant, and a cooperative. Daughter Herriet Corpuz went
to school at King's College, Bo. 1, Koronadal, South Cotabato, but she was at the
same time working as household help of, and staying at, the house of Mr. Panes. Her

brother Junie was not working. Her younger sister Jodie (Jojie) was going to school.
Her mother sometimes sent them money (tsn. p. 14, Sept. 6, 1991.)
Sometime in January 1990, Harriet Corpuz learned that her father intended to sell the
remaining one-half portion including their house, of their homelot to defendants
Guiangs. She wrote a letter to her mother informing her. She [Gilda Corpuz] replied
that she was objecting to the sale. Harriet, however, did not inform her father about
this; but instead gave the letter to Mrs. Luzviminda Guiang so that she [Guiang] would
advise her father (tsn. pp. 16-17, Sept. 6, 1991).
4. However, in the absence of his wife Gilda Corpuz, defendant Judie Corpuz pushed
through the sale of the remaining one-half portion of Lot 9, Block 8, (LRC) Psd165409. On March 1, 1990, he sold to defendant Luzviminda Guiang thru a document
known as "Deed of Transfer of Rights" (Exh. "A") the remaining one-half portion of
their lot and the house standing thereon for a total consideration of P30,000.00 of
which P5,000.00 was to be paid in June, 1990. Transferor Judie Corpuz's children
Junie and Harriet signed the document as witness.
Four (4) days after March 1, 1990 or on March 5, 1990, obviously to cure whatever
defect in defendant Judie Corpuz's title over the lot transferred, defendant Luzviminda
Guiang as vendee executed another agreement over Lot 9, Block 8, (LRC) Psd165408 (Exh. "3"), this time with Manuela Jimenez Callejo, a widow of the original
registered owner from whom the couple Judie and Gilda Corpuz originally bought the
lot (Exh. "2"), who signed as vendor for a consideration of P9,000.00. Defendant
Judie Corpuz signed as a witness to the sale (Exh. "3-A"). The new sale (Exh. "3")
describes the lot sold as Lot 8, Block 9, (LRC) Psd-165408 but it is obvious from the
mass of evidence that the correct lot is Lot 8, Block 9, (LRC) Psd-165409, the very lot
earlier sold to the couple Gilda and Judie Corpuz.
5. Sometimes on March 11, 1990, plaintiff returned home. She found her children
staying with other households. Only Junie was staying in their house. Harriet and Joji
were with Mr. Panes. Gilda gathered her children together and stayed at their house.
Her husband was nowhere to be found. She was informed by her children that their
father had a wife already.
6. For staying in their house sold by her husband, plaintiff was complained against by
defendant Luzviminda Guiang and her husband Antonio Guiang before the Barangay
authorities of Barangay General Paulino Santos (Bo. 1), Koronadal, South Cotabato,
for trespassing (tsn. p. 34, Aug. 17, 1990). The case was docketed by the barangay
authorities as Barangay Case No. 38 for "trespassing". On March 16, 1990, the
parties thereat signed a document known as "amicable settlement". In full, the
settlement provides for, to wit:
That respondent, Mrs. Gilda Corpuz and her three children, namely:
Junie, Hariet and Judie to leave voluntarily the house of Mr. and Mrs.
Antonio Guiang, where they are presently boarding without any charge,
on or before April 7, 1990.
FAIL NOT UNDER THE PENALTY OF THE LAW.
Believing that she had received the shorter end of the bargain, plaintiff to the
Barangay Captain of Barangay Paulino Santos to question her signature on the
amicable settlement. She was referred however to the Office-In-Charge at the time, a
certain Mr. de la Cruz. The latter in turn told her that he could not do anything on the
matter (tsn. p. 31, Aug. 17, 1990).

This particular point not rebutted. The Barangay Captain who testified did not deny
that Mrs. Gilda Corpuz approached him for the annulment of the settlement. He
merely said he forgot whether Mrs. Corpuz had approached him (tsn. p. 13, Sept. 26,
1990). We thus conclude that Mrs. Corpuz really approached the Barangay Captain
for the annulment of the settlement. Annulment not having been made, plaintiff stayed
put in her house and lot.
7. Defendant-spouses Guiang followed thru the amicable settlement with a motion for
the execution of the amicable settlement, filing the same with the Municipal Trial
Court of Koronadal, South Cotabato. The proceedings [are] still pending before the
said court, with the filing of the instant suit.
8. As a consequence of the sale, the spouses Guiang spent P600.00 for the
preparation of the Deed of Transfer of Rights, Exh. "A", P9,000.00 as the amount they
paid to Mrs. Manuela Callejo, having assumed the remaining obligation of the
Corpuzes to Mrs. Callejo (Exh. "3"); P100.00 for the preparation of Exhibit "3"; a total
of P759.62 basic tax and special education fund on the lot; P127.50 as the total
documentary stamp tax on the various documents; P535.72 for the capital gains tax;
P22.50 as transfer tax; a standard fee of P17.00; certification fee of P5.00. These
expenses particularly the taxes and other expenses towards the transfer of the title to
the spouses Guiangs were incurred for the whole Lot 9, Block 8, (LRC) Psd-165409.
Ruling of Respondent Court
Respondent Court found no reversible error in the trial court's ruling that any alienation or
encumbrance by the husband of the conjugal propety without the consent of his wife is null and
void as provided under Article 124 of the Family Code. It also rejected petitioners' contention that
the "amicable sttlement" ratified said sale, citing Article 1409 of the Code which expressly bars
ratification of the contracts specified therein, particularly those "prohibited or declared void by law."
Hence, this petition. 9
The Issues
In their Memorandum, petitioners assign to public respondent the following errors:

10

I
Whether or not the assailed Deed of Transfer of Rights was validly executed.
II
Whether or not the Cour of Appeals erred in not declairing as voidable contract under
Art. 1390 of the Civil Code the impugned Deed of Transfer of Rights which was validly
ratified thru the execution of the "amicable settlement" by the contending parties.
III
Whether or not the Court of Appeals erred in not setting aside the findings of the
Court a quo which recognized as lawful and valid the ownership and possession of
private respondent over the remaining one half (1/2) portion of the properly.
In a nutshell, petitioners-spouses contend that (1) the contract of sale (Deed of Transfer of Rights)
was merely voidable, and (2) such contract was ratified by private respondent when she entered
into an amicable sttlement with them.
This Court's Ruling

The petition is bereft of merit.

First Issue: Void or Voidable Contract?
Petitioners insist that the questioned Deed of Transfer of Rights was validly executed by the
parties-litigants in good faith and for valuable consideration. The absence of private respondent's
consent merely rendered the Deed voidable under Article 1390 of the Civil Code, which provides:
Art. 1390. The following contracts are voidable or annullable, even though there may
have been no damage to the contracting parties:
xxx xxx xxx
(2) Those where the consent is vitiated by mistake, violence, intimidation, undue
influence or fraud.
These contracts are binding, unless they are annulled by a proper action in court.
They are susceptible of ratification.(n)
The error in petitioners' contention is evident. Article 1390, par. 2, refers to contracts visited by
vices of consent, i.e., contracts which were entered into by a person whose consent was obtained
and vitiated through mistake, violence, intimidation, undue influence or fraud. In this instance,
private respondent's consent to the contract of sale of their conjugal property was totally inexistent
or absent. Gilda Corpuz, on direct examination, testified thus: 11
Q Now, on March 1, 1990, could you still recall where you were?
A I was still in Manila during that time.
xxx xxx xxx
ATTY. FUENTES:
Q When did you come back to Koronadal, South Cotabato?
A That was on March 11, 1990, Ma'am.
Q Now, when you arrived at Koronadal, was there any problem which
arose concerning the ownership of your residential house at Callejo
Subdivision?
A When I arrived here in Koronadal, there was a problem which arose
regarding my residential house and lot because it was sold by my
husband without my knowledge.
This being the case, said contract properly falls within the ambit of Article 124 of the Family Code,
which was correctly applied by the teo lower court:
Art. 124. The administration and enjoyment of the conjugal partnerhip properly shall
belong to both spouses jointly. In case of disgreement, the husband's decision shall
prevail, subject 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.
(165a) (Emphasis supplied)
Comparing said law with its equivalent provision in the Civil Code, the trial court adroitly explained
the amendatory effect of the above provision in this wise: 12
The legal provision is clear. The disposition or encumbrance is void. It becomes still
clearer if we compare the same with the equivalent provision of the Civil Code of the
Philippines. Under Article 166 of the Civil Code, the husband cannot generally
alienate or encumber any real property of the conjugal partnershit without the wife's
consent. The alienation or encumbrance if so made however is not null and void. It is
merely voidable. The offended wife may bring an action to annul the said alienation or
encumbrance. Thus the provision of Article 173 of the Civil Code of the Philippines, to
wit:
Art. 173. The wife may, during the marriage and within ten years from
the transaction questioned, ask the courts for the annulment of any
contract of the husband entered into without her consent, when such
consent is required, or any act or contract of the husband which tends to
defraud her or impair her interest in the conjugal partnership property.
Should the wife fail to exercise this right, she or her heirs after the
dissolution of the marriage, may demand the value of property
fraudulently alienated by the husband.(n)
This particular provision giving the wife ten (10) years . . . during [the] marriage to
annul the alienation or encumbrance was not carried over to the Family Code. It is
thus clear that any alienation or encumbrance made after August 3, 1988 when the
Family Code took effect by the husband of the conjugal partnership property without
the consent of the wife is null and void.
Furthermore, it must be noted that the fraud and the intimidation referred to by petitioners were
perpetrated in the execution of the document embodying the amicable settlement. Gilda Corpuz
alleged during trial that barangay authorities made her sign said document through
misrepresentation
and
13
coercion. In any event, its execution does not alter the void character of the deed of sale between
the husband and the petitioners-spouses, as will be discussed later. The fact remains that such
contract was entered into without the wife's consent.
In sum, the nullity of the contract of sale is premised on the absence of private respondent's
consent. To constitute a valid contract, the Civil Code requires the concurrence of the following
elements: (1) cause, (2) object, and (3) consent, 14 the last element being indubitably absent in the
case at bar.
Second Issue: Amicable Settlement
Insisting that the contract of sale was merely voidable, petitioners aver that it was duly ratified by
the contending parties through the "amicable settlement" they executed on March 16, 1990 in
Barangay Case No. 38.
The position is not well taken. The trial and the appellate courts have resolved this issue in favor of
the private respondent. The trial court correctly held: 15
By the specific provision of the law [Art. 1390, Civil Code] therefore, the Deed to
Transfer of Rights (Exh. "A") cannot be ratified, even by an "amicable settlement".
The participation by some barangay authorities in the "amicable settlement" cannot

otherwise validate an invalid act. Moreover, it cannot be denied that the "amicable
settlement (Exh. "B") entered into by plaintiff Gilda Corpuz and defendent spouses
Guiang is a contract. It is a direct offshoot of the Deed of Transfer of Rights (Exh.
"A"). By express provision of law, such a contract is also void. Thus, the legal
provision, to wit:
Art. 1422. Acontract which is the direct result of a previous illegal
contract, is also void and inexistent. (Civil Code of the Philippines).
In summation therefore, both the Deed of transfer of Rights (Exh. "A") and the
"amicable settlement" (Exh. "3") are null and void.
Doctrinally and clearly, a void contract cannot be ratified.

16

Neither can the "amicable settlement" be considered a continuing offer that was accepted and
perfected by the parties, following the last sentence of Article 124. The order of the pertinent events
is clear: after the sale, petitioners filed a complaint for trespassing against private respondent, after
which the barangay authorities secured an "amicable settlement" and petitioners filed before the
MTC a motion for its execution. The settlement, however, does not mention a continuing offer to
sell the property or an acceptance of such a continuing offer. Its tenor was to the effect that private
respondent would vacate the property. By no stretch of the imagination, can the Court interpret this
document as the acceptance mentioned in Article 124.
WHEREFORE, the Court hereby DENIES the petition and AFFIRMS the challenged Decision and
Resolution. Costs against petitioners.
SO ORDERED.

(4) G.R. No. L-35702 May 29, 1973

DOMINGO D. RUBIAS, plaintiff-appellant, vs. ISAIAS BATILLER, defendant-appellee.
TEEHANKEE, J.:
In this appeal certified by the Court of Appeals to this Court as involving purely legal questions, we
affirm the dismissal order rendered by the Iloilo court of first instance after pre-trial and submittal of
the pertinent documentary exhibits.
Such dismissal was proper, plaintiff having no cause of action, since it was duly established in the
record that the application for registration of the land in question filed by Francisco Militante,
plaintiff's vendor and predecessor interest, had been dismissed by decision of 1952 of the land
registration court as affirmed by final judgment in 1958 of the Court of Appeals and hence, there
was no title or right to the land that could be transmitted by the purported sale to plaintiff.
As late as 1964, the Iloilo court of first instance had in another case of ejectment likewise upheld by
final judgment defendant's "better right to possess the land in question . having been in the actual
possession thereof under a claim of title many years before Francisco Militante sold the land to the
plaintiff."
Furthermore, even assuming that Militante had anything to sell, the deed of sale executed in 1956
by him in favor of plaintiff at a time when plaintiff was concededly his counsel of record in the land
registration case involving the very land in dispute (ultimately decided adversely against Militante
by the Court of Appeals' 1958 judgment affirming the lower court's dismissal of Militante's
application for registration) was properly declared inexistent and void by the lower court, as
decreed by Article 1409 in relation to Article 1491 of the Civil Code.

The appellate court, in its resolution of certification of 25 July 1972, gave the following
backgrounder of the appeal at bar:
On August 31, 1964, plaintiff Domingo D. Rubias, a lawyer, filed a suit to recover the
ownership and possession of certain portions of lot under Psu-99791 located in Barrio
General Luna, Barotac Viejo, Iloilo which he bought from his father-in-law, Francisco
Militante in 1956 against its present occupant defendant, Isaias Batiller, who illegally
entered said portions of the lot on two occasions in 1945 and in 1959. Plaintiff
prayed also for damages and attorneys fees. (pp. 1-7, Record on Appeal). In his
answer with counter-claim defendant claims the complaint of the plaintiff does not
state a cause of action, the truth of the matter being that he and his predecessors-ininterest have always been in actual, open and continuous possession since time
immemorial under claim of ownership of the portions of the lot in question and for the
alleged malicious institution of the complaint he claims he has suffered moral
damages in the amount of P 2,000.00, as well as the sum of P500.00 for attorney's
fees. ...
On December 9, 1964, the trial court issued a pre-trial order, after a pre-trial
conference between the parties and their counsel which order reads as follows..
'When this case was called for a pre-trial conference today, the plaintiff
appeared assisted by himself and Atty. Gregorio M. Rubias. The
defendant also appeared, assisted by his counsel Atty. Vicente R.
Acsay.
A. During the pre-trial conference, the parties have agreed that
the following facts are attendant in this case and that they will no longer
introduced any evidence, testimonial or documentary to prove them:
1. That Francisco Militante claimed ownership of a parcel of land located in the Barrio
of General Luna, municipality of Barotac Viejo province of Iloilo, which he caused to
be surveyed on July 18-31, 1934, whereby he was issued a plan Psu-99791 (Exhibit
"B"). (The land claimed contained an area of 171:3561 hectares.)
2. Before the war with Japan, Francisco Militante filed with the Court of First Instance
of Iloilo an application for the registration of the title of the land technically described
in psu-99791 (Exh. "B")opposed by the Director of Lands, the Director of Forestry and
other oppositors. However, during the war with Japan, the record of the case was lost
before it was heard, so after the war Francisco Militante petitioned this court to
reconstitute the record of the case. The record was reconstituted on the Court of the
First Instance of Iloilo and docketed as Land Case No. R-695, GLRO Rec. No. 54852.
The Court of First Instance heard the land registration case on November 14, 1952,
and after the trial this court dismissed the application for registration. The appellant,
Francisco Militante, appealed from the decision of this Court to the Court of Appeals
where the case was docketed as CA-GR No. 13497-R..
3. Pending the disposal of the appeal in CA-GR No. 13497-R and more particularly
on June 18, 1956, Francisco Militante sold to the plaintiff, Domingo Rubias the
land technically described in psu-99791 (Exh. "A"). The sale was duly recorded in the
Office of the Register of Deeds for the province of Iloilo as Entry No. 13609 on July
11, 1960 (Exh. "A-1").
(NOTE: As per deed of sale, Exh. A, what Militante purportedly sold to plaintiffappellant, his son-in-law, for the sum of P2,000.00 was "a parcel of untitled land
having an area Of 144.9072 hectares ... surveyed under Psu 99791 ... (and) subject
to the exclusions made by me, under (case) CA-i3497, Land Registration Case No.
R-695, G.L.R.O. No. 54852, Court of First Instance of the province of Iloilo. These

exclusions referred to portions of the original area of over 171 hectares originally
claimed by Militante as applicant, but which he expressly recognized during the trial to
pertain to some oppositors, such as the Bureau of Public Works and Bureau of
Forestry and several other individual occupants and accordingly withdrew his
application over the same. This is expressly made of record in Exh. A, which is
the Court of Appeals' decision of 22 September 1958 confirming the land registration
court'sdismissal of Militante's application for registration.)
4. On September 22,1958 the Court of appeals in CA-G.R. No. 13497-R promulgated
its judgment confirming the decision of this Court in Land Case No. R-695, GLRO
Rec. No. 54852 which dismissed the application for Registration filed by Francisco
Militante (Exh. "I").
5. Domingo Rubias declared the land described in Exh. 'B' for taxation purposes
under Tax Dec. No. 8585 (Exh. "C") for 1957; Tax Dec. Nos. 9533 (Exh. "C-1") and
10019 (Exh. "C-3")for the year 1961; Tax Dec. No. 9868 (Exh. "C-2") for the year
1964, paying the land taxes under Tax Dec. No. 8585 and 9533 (Exh. "D", "D-1", "G6").
6. Francisco Militante immediate predecessor-in-interest of the plaintiff, has also
declared the land for taxation purposes under Tax Dec. No. 5172 in 1940 (Exh. "E")
for 1945; under Tax Dec. No. T-86 (Exh. "E-1") for 1948; under Tax Dec. No. 7122
(Exh. "2"), and paid the land taxes for 1940 (Exhs. "G" and "G-7"), for 1945 46 (Exh.
"G-1") for 1947 (Exh. "G-2"), for 1947 & 1948 (Exh. "G-3"), for 1948 (Exh. "G-4"), and
for 1948 and 1949 (Exh. "G-5").
7. Tax Declaration No. 2434 in the name of Liberato Demontao for the land
described therein (Exh. "F") was cancelled by Tax. Dec. No. 5172 of Francisco
Militante (Exh. "E"). Liberato Demontao paid the land tax under Tax Dec. No. 2434
on Dec. 20, 1939 for the years 1938 (50%) and 1959 (Exh. "H").
8. The defendant had declared for taxation purposes Lot No. 2 of the Psu-155241
under Tax Dec. Not. 8583 for 1957 and a portion of Lot No. 2, Psu-155241, for 1945
under Tax Dec. No. 8584 (Exh. "2-A" Tax No. 8583 (Exh. "2") was revised by Tax Dec.
No. 9498 in the name of the defendant (Exh. "2-B") and Tax Dec. No. 8584 (Exh. "2A") was cancelled by Tax Dec. No. 9584 also in the name of the defendant (Exh. "2C"). The defendant paid the land taxes for Lot 2, Psu-155241, on Nov. 9, 1960 for the
years 1945 and 1946, for the year 1950, and for the year 1960 as shown by the
certificate of the treasurer (Exh. "3"). The defendant may present to the Court other
land taxes receipts for the payment of taxes for this lot.
9. The land claimed by the defendant as his own was surveyed on June 6 and
7,1956, and a planapproved by Director of Land on November 15, 1956 was issued,
identified as Psu 155241 (Exh. "5").
10. On April 22, 1960, the plaintiff filed forcible Entry and Detainer case against Isaias
Batiller in the Justice of the Peace Court of Barotac Viejo Province of Iloilo (Exh. "4")
to which the defendant Isaias Batiller riled his answer on August 29, 1960 (Exh. "4A"). The Municipal Court of Barotac Viejo after trial, decided the case on May 10,
1961 in favor of the defendant and against the plaintiff (Exh. "4-B"). The
plaintiff appealed from the decision of the Municipal Court of Barotac Viejo which was
docketed in this Court as Civil Case No. 5750 on June 3, 1961, to which the
defendant, Isaias Batiller, on June 13, 1961 filed his answer (Exh. "4-C"). And this
Court after the trial. decided the case on November 26, 1964, in favor of the
defendant, Isaias Batiller and against the plaintiff (Exh. "4-D").

(NOTE: As per Exh. 4-B, which is the Iloilo court of first instance decision of 26
November 1964dismissing plaintiff's therein complaint for ejectment against
defendant, the iloilo court expressly found "that plaintiff's complaint is unjustified,
intended to harass the defendant" and "that the defendant, Isaias Batiller, has a
better right to possess the land in question described in Psu 155241 (Exh. "3"), Isaias
Batiller having been in the actual physical possession thereof under a claim of title
many years before Francisco Militante sold the land to the plaintiff-hereby dismissing
plaintiff's complaint and ordering the plaintiff to pay the defendant attorney's fees ....")
B. During the trial of this case on the merit, the plaintiff will prove by competent evidence the
following:
1. That the land he purchased from Francisco Militante under Exh. "A" was formerly
owned and possessed by Liberato Demontao but that on September 6, 1919 the
land was sold at public auction by virtue of a judgment in a Civil Case entitled "Edw J.
Pflieder plaintiff vs. Liberato Demontao Francisco Balladeros and Gregorio Yulo,
defendants", of which Yap Pongco was the purchaser (Exh. "1-3"). The sale was
registered in the Office of the Register of Deeds of Iloilo on August 4, 1920, under
Primary Entry No. 69 (Exh. "1"), and a definite Deed of Sale was executed by
Constantino A. Canto, provincial Sheriff of Iloilo, on Jan. 19, 1934 in favor of Yap
Pongco (Exh. "I"), the sale having been registered in the Office of the Register of
Deeds of Iloilo on February 10, 1934 (Exh. "1-1").
2. On September 22, 1934, Yap Pongco sold this land to Francisco Militante as
evidenced by a notarial deed (Exh. "J") which was registered in the Registry of Deeds
on May 13, 1940 (Exh. "J-1").
3. That plaintiff suffered damages alleged in his complaint.
C. Defendants, on the other hand will prove by competent evidence during the trial of this case the
following facts:
1. That lot No. 2 of the Psu-1552 it (Exh. '5') was originally owned and possessed by
Felipe Batiller, grandfather of the defendant Basilio Batiller, on the death of the former
in 1920, as his sole heir. Isaias Batiller succeeded his father , Basilio Batiller, in the
ownership and possession of the land in the year 1930, and since then up to the
present, the land remains in the possession of the defendant, his possession being
actual, open, public, peaceful and continuous in the concept of an owner, exclusive of
any other rights and adverse to all other claimants.
2. That the alleged predecessors in interest of the plaintiff have never been in the
actual possession of the land and that they never had any title thereto.
3. That Lot No. 2, Psu 155241, the subject of Free Patent application of the
defendant has beenapproved.
4. The damages suffered by the defendant, as alleged in his counterclaim."' 1
The appellate court further related the developments of the case, as follows:
On August 17, 1965, defendant's counsel manifested in open court that before any
trial on the merit of the case could proceed he would file a motion to dismiss plaintiff's
complaint which he did, alleging thatplaintiff does not have cause of action against
him because the property in dispute which he (plaintiff) allegedly bought from his
father-in-law, Francisco Militante was the subject matter of LRC No. 695 filed in the
CFI of Iloilo, which case was brought on appeal to this Court and docketed as CAG.R. No. 13497-R in which aforesaid case plaintiff was the counsel on record of

his father-in-law, Francisco Militante. Invoking Arts. 1409 and 1491 of the Civil Code
which reads:
'Art. 1409. The following contracts are inexistent and void from the
beginning:
xxx xxx xxx
(7) Those expressly prohibited by law.
'ART. 1491. The following persons cannot acquire any purchase, even
at a public auction, either in person of 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 of 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 an 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.'
defendant claims that plaintiff could not have acquired any interest in the property in
dispute as the contract he (plaintiff) had with Francisco Militante was inexistent and
void. (See pp. 22-31, Record on Appeal). Plaintiff strongly opposed defendant's
motion to dismiss claiming that defendant can not invoke Articles 1409 and 1491 of
the Civil Code as Article 1422 of the same Code provides that 'The defense of
illegality of contracts is not available to third persons whose interests are not directly
affected' (See pp. 32-35 Record on Appeal).
On October 18, 1965, the lower court issued an order disclaiming plaintiffs
complaint (pp. 42-49, Record on Appeal.) In the aforesaid order of dismissal the lower
court practically agreed with defendant's contention that the contract (Exh. A)
between plaintiff and Francism Militante was null and void. In due season plaintiff filed
a motion for reconsideration (pp. 50-56 Record on Appeal) which was denied by the
lower court on January 14, 1966 (p. 57, Record on Appeal).
Hence, this appeal by plaintiff from the orders of October 18, 1965 and January 14,
1966.
Plaintiff-appellant imputes to the lower court the following errors:
'1. The lower court erred in holding that the contract of sale between the
plaintiff-appellant and his father-in-law, Francisco Militante, Sr., now
deceased, of the property covered by Plan Psu-99791, (Exh. "A") was
void, not voidable because it was made when plaintiff-appellant was the
counsel of the latter in the Land Registration case.
'2. The lower court erred in holding that the defendant-appellee is an
interested person to question the validity of the contract of sale between
plaintiff-appellant and the deceased, Francisco Militante, Sr.
'3. The lower court erred in entertaining the motion to dismiss of the
defendant-appellee after he had already filed his answer, and after the
termination of the pre-trial, when the said motion to dismiss raised a
collateral question.

'4. The lower court erred in dismissing the complaint of the plaintiffappellant.'
The appellate court concluded that plaintiffs "assignment of errors gives rise to two (2) legal posers
(1) whether or not the contract of sale between appellant and his father-in-law, the late Francisco
Militante over the property subject of Plan Psu-99791 was void because it was made when plaintiff
was counsel of his father-in-law in a land registration case involving the property in dispute; and (2)
whether or not the lower court was correct in entertaining defendant-appellee's motion to dismiss
after the latter had already filed his answer and after he (defendant) and plaintiff-appellant had
agreed on some matters in a pre-trial conference. Hence, its elevation of the appeal to this Court as
involving pure questions of law.
It is at once evident from the foregoing narration that the pre-trial conference held by the trial court
at which the parties with their counsel agreed and stipulated on the material and relevant facts and
submitted their respective documentary exhibits as referred to in the pre-trial
order, supra, 2 practically amounted to a fulldress trial which placed on record all the facts and
exhibits necessary for adjudication of the case.
The three points on which plaintiff reserved the presentation of evidence at the-trial dealing with the
source of the alleged right and title of Francisco Militante's predecessors, supra, 3 actually are
already made of record in the stipulated facts and admitted exhibits. The chain of Militante's alleged
title and right to the land as supposedly traced back to Liberato Demontao was actually
asserted by Militante (and his vendee, lawyer and son-in-law, herein plaintiff) in the land registration
case and rejected by the Iloilo land registration court which dismissed Militante's application for
registration of the land. Such dismissal, as already stated, was affirmed by the final judgment in
1958 of the Court of Appeals. 4
The four points on which defendant on his part reserved the presentation of evidence at the trial
dealing with his and his ancestors' continuous, open, public and peaceful possession in the
concept of owner of the land and the Director of Lands' approval of his survey plan
thereof, supra, 5 are likewise already duly established facts of record, in the land registration case
as well as in the ejectment case wherein the Iloilo court of first instance recognized the superiority
of defendant's right to the land as against plaintiff.
No error was therefore committed by the lower court in dismissing plaintiff's complaint upon
defendant's motion after the pre-trial.
1. The stipulated facts and exhibits of record indisputably established plaintiff's lack of cause of
action and justified the outright dismissal of the complaint. Plaintiff's claim of ownership to the land
in question was predicated on the sale thereof for P2,000.00 made in 1956 by his father-in- law,
Francisco Militante, in his favor, at a time when Militante's application for registration thereof had
already been dismissed by the Iloilo land registration court and was pending appeal in the Court of
Appeals.
With the Court of Appeals' 1958 final judgment affirming the dismissal of Militante's application for
registration, the lack of any rightful claim or title of Militante to the land was conclusively and
decisively judicially determined. Hence, there was no right or title to the land that could be
transferred or sold by Militante's purported sale in 1956 in favor of plaintiff.
Manifestly, then plaintiff's complaint against defendant, to be declared absolute owner of the land
and to be restored to possession thereof with damages was bereft of any factual or legal basis.
2. No error could be attributed either to the lower court's holding that the purchase by a lawyer of
the property in litigation from his client is categorically prohibited by Article 1491, paragraph (5) of
the Philippine Civil Code, reproduced supra; 6 and that consequently, plaintiff's purchase of the
property in litigation from his client (assuming that his client could sell the same since as already
shown above, his client's claim to the property was defeated and rejected) was void and could

produce no legal effect, by virtue of Article 1409, paragraph (7) of our Civil Code which provides
that contracts "expressly prohibited or declared void by law' are "inexistent and that "(T)hese
contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived."
The 1911 case of Wolfson vs. Estate of Martinez 7 relied upon by plaintiff as holding that a sale of
property in litigation to the party litigant's lawyer "is not void but voidable at the election of the
vendor" was correctly held by the lower court to have been superseded by the later 1929 case
of Director of Lands vs. Abagat. 8 In this later case of Abagat, the Court expressly cited two
antecedent cases involving the same transaction of purchase of property in litigation by the lawyer
which was expressly declared invalid under Article 1459 of the Civil Code of Spain (of which Article
1491 of our Civil Code of the Philippines is the counterpart) upon challenge thereof not by the
vendor-client but by the adverse parties against whom the lawyer was to enforce his rights as
vendee thus acquired.
These two antecedent cases thus cited in Abagat clearly superseded (without so expressly stating
the previous ruling in Wolfson:
The spouses, Juan Soriano and Vicente Macaraeg, were the owners of twelve
parcels of land. Vicenta Macaraeg died in November, 1909, leaving a large number of
collateral heirs but no descendants. Litigation between the surviving husband, Juan
Soriano, and the heirs of Vicenta immediately arose, and the herein appellant
Sisenando Palarca acted as Soriano's lawyer. On May 2, 1918, Soriano executed a
deed for the aforesaid twelve parcels of land in favor of Sisenando Palarca and on the
following day, May 3, 1918, Palarca filed an application for the registration of the land
in the deed. After hearing, the Court of First Instance declared that the deed was
invalid by virtue of the provisions of article 1459 of the Civil Code, which prohibits
lawyers and solicitors from purchasing property rights involved in any litigation in
which they take part by virtue of their profession. The application for registration was
consequently denied, and upon appeal by Palarca to the Supreme Court, the
judgement of the lower court was affirmed by a decision promulgated November
16,1925. (G.R. No. 24329, Palarca vs. Director of Lands, not reported.)
In the meantime cadastral case No. 30 of the Province of Tarlac was instituted, and
on August 21, 1923, Eleuteria Macaraeg, as administratrix of the estate of Vicente
Macaraeg, filed claims for the parcels in question. Buenaventura Lavitoria
administrator of the estate of Juan Soriano, did likewise and so did Sisenando
Palarca. In a decision dated June 21, 1927, the Court of First Instance, Judge
Carballo presiding, rendered judgment in favor of Palarea and ordered the registration
of the land in his name. Upon appeal to this court by the administration of the estates
of Juan Soriano and Vicente Macaraeg, the judgment of the court below was
reversed and the land adjudicated to the two estates as conjugal property of the
deceased spouses. (G.R. No. 28226, Director of Lands vs. Abagat, promulgated May
21, 1928, not reported.) 9
In the very case of Abagat itself, the Court, again affirming the invalidity and nullity of the lawyer's
purchase of the land in litigation from his client, ordered the issuance of a writ of possession for the
return of the land by the lawyer to the adverse parties without reimbursement of the price paid by
him and other expenses, and ruled that "the appellant Palarca is a lawyer and is presumed to know
the law. He must, therefore, from the beginning, have been well aware of the defect in his title and
is, consequently, a possessor in bad faith."
As already stated, Wolfson and Abagat were decided with relation to Article 1459 of the Civil Code
of Spain then adopted here, until it was superseded on August 30, 1950 by the Civil Code of the
Philippines whose counterpart provision is Article 1491.
Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six
paragraphs certain persons, by reason of the relation of trust or their peculiar control over the

property, from acquiring such property in their trust or control either directly or indirectly and "even
at a public or judicial auction," as follows: (1) guardians; (2) agents; (3) administrators; (4) public
officers and employees; judicial officers and employees, prosecuting attorneys, and lawyers; and
(6) others especially disqualified by law.
In Wolfson which involved the sale and assignment of a money judgment by the client to the
lawyer, Wolfson, whose right to so purchase the judgment was being challenged by the judgment
debtor, the Court, through Justice Moreland, then expressly reserved decision on "whether or not
the judgment in question actually falls within the prohibition of the article" and held only that the
sale's "voidability can not be asserted by one not a party to the transaction or his representative,"
citing from Manresa 10 that "(C)onsidering the question from the point of view of the civil law, the
view taken by the code, we must limit ourselves to classifying as void all acts done contrary to the
express prohibition of the statute. Now then: As the code does not recognize such nullity by the
mere operation of law, the nullity of the acts hereinbefore referred to must be asserted by the
person having the necessary legal capacity to do so and decreed by a competent
court." 11
The reason thus given by Manresa in considering such prohibited acquisitions under Article 1459 of
the Spanish Civil Code as merely voidable at the instance and option of the vendor and not void
"that the Code does not recognize such nullity de pleno derecho" is no longer true and
applicable to our own Philippine Civil Code whichdoes recognize the absolute nullity of contracts
"whose cause, object, or purpose is contrary to law, morals, good customs, public order or public
policy" or which are "expressly prohibited or declared void by law" and declares such contracts
"inexistent and void from the beginning." 12
The Supreme Court of Spain and modern authors have likewise veered from Manresa's view of the
Spanish codal provision itself. In its sentencia of 11 June 1966, the Supreme Court of Spain ruled
that the prohibition of Article 1459 of the Spanish Civil Code is based on public policy, that violation
of the prohibition contract cannot be validated by confirmation or ratification, holding that:
... la prohibicion que el articulo 1459 del C.C. establece respecto a los
administradores y apoderados, la cual tiene conforme a la doctrina de esta Sala,
contendia entre otras, en S. de 27-5-1959, un fundamento de orden moral lugar la
violacion de esta a la nulidad de pleno derecho del acto o negocio celebrado, ... y
prohibicion legal, afectante orden publico, no cabe con efecto alguno la
aludidaretification ... 13
The criterion of nullity of such prohibited contracts under Article 1459 of the Spanish Civil Code
(Article 1491 of our Civil Code) as a matter of public order and policy as applied by the Supreme
Court of Spain to administrators and agents in its above cited decision should certainly apply with
greater reason to judges, judicial officers, fiscals and lawyers under paragraph 5 of the codal
article.
Citing the same decisions of the Supreme Court of Spain, Gullon Ballesteros, his "Curso de
Derecho Civil, (Contratos Especiales)" (Madrid, 1968) p. 18, affirms that, with respect to Article
1459, Spanish Civil Code:.
Que caracter tendra la compra que se realice por estas personas? Porsupuesto no
cabe duda de que el caso (art.) 1459, 40 y 50, la nulidad esabsoluta porque el motivo
de la prohibicion es de orden publico. 14
Perez Gonzales in such view, stating that "Dado el caracter prohibitivo delprecepto, la
consequencia de la infraccion es la nulidad radical y ex lege." 15
Castan, quoting Manresa's own observation that.

"El fundamento do esta prohibicion es clarisimo. No sa trata con este precepto tan solo de guitar la
ocasion al fraude; persiguese, ademasel proposito de rodear a las personas que intervienen en la
administrcionde justicia de todos los retigios que necesitan pora ejercer su ministerio librandolos
de toda suspecha, que aunque fuere in fundada, redundura endescredito de la
institucion." 16 arrives at the contrary and now accepted view that "Puede considerace en nuestro
derecho inexistente 'o radicalmente nulo el contrato en los siguentes cases: a) ...; b) cuando el
contrato se ha celebrado en violacion de unaprescripcion 'o prohibicion legal, fundada sobre
motivos de orden publico (hipotesis del art. 4 del codigo) ..." 17
It is noteworthy that Caltan's rationale for his conclusion that fundamental consideration of public
policy render void and inexistent such expressly prohibited purchase (e.g. by public officers and
employees of government property intrusted to them and by justices, judges, fiscals and lawyers of
property and rights in litigation and submitted to or handled by them, under Article 1491,
paragraphs (4) and (5) of our Civil Code) has been adopted in a new article of our Civil Code, viz,
Article 1409 declaring such prohibited contracts as "inexistent and void from the beginning." 18
Indeed, the nullity of such prohibited contracts is definite and permanent and cannot be cured by
ratification. The public interest and public policy remain paramount and do not permit of
compromise or ratification. In his aspect, the permanent disqualification of public and judicial
officers and lawyers grounded on public policy differs from the first three cases of guardians,
agents and administrators (Article 1491, Civil Code), as to whose transactions it had been opined
that they may be "ratified" by means of and in "the form of a new contact, in which cases its validity
shall be determined only by the circumstances at the time the execution of such new contract. The
causes of nullity which have ceased to exist cannot impair the validity of the new contract. Thus,
the object which was illegal at the time of the first contract, may have already become lawful at the
time of the ratification or second contract; or the service which was impossible may have become
possible; or the intention which could not be ascertained may have been clarified by the parties.
The ratification or second contract would then be valid from its execution; however, it does not
retroact to the date of the first contract." 19
As applied to the case at bar, the lower court therefore properly acted upon defendant-appellant's
motion to dismiss on the ground of nullity of plaintiff's alleged purchase of the land, since its
juridical effects and plaintiff's alleged cause of action founded thereon were being asserted against
defendant-appellant. The principles governing the nullity of such prohibited contracts and judicial
declaration of their nullity have been well restated by Tolentino in his treatise on our Civil Code, as
follows:
Parties Affected. Any person may invoke the in existence of the contract whenever
juridical effects founded thereon are asserted against him. Thus, if there has been a
void transfer of property, the transferor can recover it by the accion reinvindicatoria;
and any prossessor may refuse to deliver it to the transferee, who cannot enforce the
contract. Creditors may attach property of the debtor which has been alienated by the
latter under a void contract; a mortgagee can allege the inexistence of a prior
encumbrance; a debtor can assert the nullity of an assignment of credit as a defense
to an action by the assignee.
Action On Contract. Even when the contract is void or inexistent, an action is
necessary to declare its inexistence, when it has already been fulfilled. Nobody can
take the law into his own hands; hence, the intervention of the competent court is
necessary to declare the absolute nullity of the contract and to decree the restitution
of what has been given under it. The judgment, however, will retroact to the very day
when the contract was entered into.
If the void contract is still fully executory, no party need bring an action to declare its
nullity; but if any party should bring an action to enforce it, the other party can simply
set up the nullity as a defense. 20

ACCORDINGLY, the order of dismissal appealed from is hereby affirmed, with costs in all instances
against plaintiff-appellant. So ordered.

(5) G.R. No. L-8477. May 31, 1956.

THE PHILIPPINE TRUST COMPANY, as Guardian of the Property of the minor, MARIANO L.
BERNARDO, Petitioner, vs. SOCORRO ROLDAN, FRANCISCO HERMOSO, FIDEL C. RAMOS
and EMILIO CRUZ, Respondents.
DECISION
BENGZON, J.:
As guardian of the property of the minor Mariano L. Bernardo, the Philippine Trust Company filed in
the Manila court of first instance a complaint to annul two contracts regarding 17 parcels of
land:chanroblesvirtuallawlibrary (a) sale thereof by Socorro Roldan, as guardian of said minor, to
Fidel C. Ramos; chan roblesvirtualawlibraryand (b) sale thereof by Fidel C. Ramos to Socorro
Roldan personally. The complaint likewise sought to annul a conveyance of four out of the said
seventeen parcels by Socorro Roldan to Emilio Cruz.
The action rests on the proposition that the first two sales were in reality a sale by the guardian to
herself therefore, null and void under Article 1459 of the Civil Code. As to the third conveyance,
it is also ineffective, because Socorro Roldan had acquired no valid title to convey to Cruz.
The material facts of the case are not complicated. These 17 parcels located in Guiguinto, Bulacan,
were part of the properties inherited by Mariano L. Bernardo from his father, Marcelo Bernardo,
deceased. In view of his minority, guardianship proceedings were instituted, wherein Socorro
Roldan was appointed his guardian. She was the surviving spouse of Marcelo Bernardo, and the
stepmother of said Mariano L. Bernardo.
On July 27, 1947, Socorro Roldan filed in said guardianship proceedings (Special Proceeding
2485, Manila), a motion asking for authority to sell as guardian the 17 parcels for the sum of
P14,700 to Dr. Fidel C. Ramos, the purpose of the sale being allegedly to invest the money in a
residential house, which the minor desired to have on Tindalo Street, Manila. The motion was
granted.
On August 5, 1947 Socorro Roldan, as guardian, executed the proper deed of sale in favor of her
brother-in-law Dr. Fidel C. Ramos (Exhibit A-1), and on August 12, 1947 she asked for, and
obtained, judicial confirmation of the sale. On August 13, 1947, Dr. Fidel C. Ramos executed in
favor of Socorro Roldan, personally, a deed of conveyance covering the same seventeen parcels,
for the sum of P15,000 (Exhibit A-2). And on October 21, 1947 Socorro Roldan sold four parcels
out of the seventeen to Emilio Cruz for P3,000, reserving to herself the right to repurchase (Exhibit
A-3).
The Philippine Trust Company replaced Socorro Roldan as guardian, on August 10, 1948. And this
litigation, started two months later, seeks to undo what the previous guardian had done. The stepmother in effect, sold to herself, the properties of her ward, contends the Plaintiff, and the sale
should be annulled because it violates Article 1459 of the Civil Code prohibiting the guardian from
purchasing either in person or through the mediation of another the property of her ward.
The court of first instance, following our decision in Rodriguez vs. Mactal, 60 Phil. 13 held the
article was not controlling, because there was no proof that Fidel C. Ramos was a mere
intermediary or that the latter had previously agreed with Socorro Roldan to buy the parcels for her
benefit.
However, taking the former guardian at her word - she swore she had repurchased the lands from
Dr. Fidel C. Ramos to preserve it and to give her protege opportunity to redeem the court

rendered judgment upholding the contracts but allowing the minor to repurchase all the parcels by
paying P15,000, within one year.
The Court of Appeals affirmed the judgment, adding that the minor knew the particulars of, and
approved the transaction, and that only clear and positive evidence of fraud or bad faith, and not
mere insinuations and inferences will overcome the presumptions that a sale was concluded in all
good faith for value.
At
first
glance
the
resolutions
of
both
courts
accomplished
substantial
justice:chanroblesvirtuallawlibrary the minor recovers his properties. But if the conveyances are
annulled as prayed for, the minor will obtain a better deal:chanroblesvirtuallawlibrary he receives all
the fruits of the lands from the year 1947 (Article 1303 Civil Code) and will return P14,700, not
P15,000.
To our minds the first two transactions herein described couldnt be in a better juridical situation
than if this guardian had purchased the seventeen parcels on the day following the sale to Dr.
Ramos. Now, if she was willing to pay P15,000 why did she sell the parcels for less? In one day (or
actually one week) the price could not have risen so suddenly. Obviously when, seeking approval
of the sale she represented the price to be the best obtainable in the market, she was not entirely
truthful. This is one phase to consider.
Again, supposing she knew the parcels were actually worth P17,000; chan
roblesvirtualawlibrarythen she agreed to sell them to Dr. Ramos at P14,700; chan
roblesvirtualawlibraryand knowing the realtys value she offered him the next day P15,000 or
P15,500, and got it. Will there be any doubt that she was recreant to her guardianship, and that her
acquisition should be nullified? Even without proof that she had connived with Dr. Ramos.
Remembering the general doctrine that guardianship is a trust of the highest order, and the trustee
cannot be allowed to have any inducement to neglect his wards interest and in line with the courts
suspicion whenever the guardian acquires the wards property 1 we have no hesitation to declare
that in this case, in the eyes of the law, Socorro Roldan took by purchase her wards parcels thru
Dr. Ramos, and that Article 1459 of the Civil Code applies.
She acted it may be true without malice; chan roblesvirtualawlibrarythere may have been no
previous agreement between her and Dr. Ramos to the effect that the latter would buy the lands for
her. But the stubborn fact remains that she acquired her proteges properties, through her brotherin-law. That she planned to get them for herself at the time of selling them to Dr. Ramos, may be
deduced from the very short time between the two sales (one week). The temptation which
naturally besets a guardian so circumstanced, necessitates the annulment of the transaction, even
if no actual collusion is proved (so hard to prove) between such guardian and the intermediate
purchaser. This would uphold a sound principle of equity and justice. 2
We are aware of course that in Rodriguez vs. Mactal, 60 Phil. p. 13 wherein the guardian Mactal
sold in January 1926 the property of her ward to Silverio Chioco, and in March 1928 she bought it
from Chioco, this Court said:chanroblesvirtuallawlibrary
In order to bring the sale in this case within the part of Article 1459, quoted above, it is essential
that the proof submitted establish some agreement between Silverio Chioco and Trinidad Mactal to
the effect that Chioco should buy the property for the benefit of Mactal. If there was no such
agreement, either express or implied, then the sale cannot be set aside cralaw . (Page 16; chan
roblesvirtualawlibraryItalics supplied.)
However, the underlined portion was not intended to establish a general principle of law applicable
to all subsequent litigations. It merely meant that the subsequent purchase by Mactal could not be
annulled in that particular case because there was no proof of a previous agreement between
Chioco and her. The court then considered such proof necessary to establish that the two sales
were actually part of one scheme guardian getting the wards property through another person

 because two years had elapsed between the sales. Such period of time was sufficient to dispel
the natural suspicion of the guardians motives or actions. In the case at bar, however, only one
week had elapsed. And if we were technical, we could say, only one day had elapsed from the
judicial approval of the sale (August 12), to the purchase by the guardian (Aug. 13).
Attempting to prove that the transaction was beneficial to the minor, Appellees attorney alleges that
the money (P14,700) invested in the house on Tindalo Street produced for him rentals of P2,400
yearly; chan roblesvirtualawlibrarywhereas the parcels of land yielded to his step-mother only an
average of P1,522 per year. 3 The argument would carry some weight if that house had been built
out of the purchase price of P14,700 only. 4 One thing is certain:chanroblesvirtuallawlibrary the
calculation does not include the price of the lot on which the house was erected. Estimating such
lot at P14,700 only, (ordinarily the city lot is more valuable than the building) the result is that the
price paid for the seventeen parcels gave the minor an income of only P1,200 a year, whereas the
harvest from the seventeen parcels netted his step-mother a yearly profit of P1,522.00. The minor
was thus on the losing end.
Hence, from both the legal and equitable standpoints these three sales should not be
sustained:chanroblesvirtuallawlibrary the first two for violation of article 1459 of the Civil Code;
chan roblesvirtualawlibraryand the third because Socorro Roldan could pass no title to Emilio Cruz.
The annulment carries with is (Article 1303 Civil Code) the obligation of Socorro Roldan to return
the 17 parcels together with their fruits and the duty of the minor, through his guardian to repay
P14,700 with legal interest.
Judgment is therefore rendered:chanroblesvirtuallawlibrary
a. Annulling the three contracts of sale in question; chan roblesvirtualawlibraryb. declaring the
minor as the owner of the seventeen parcels of land, with the obligation to return to Socorro Roldan
the price of P14,700 with legal interest from August 12, 1947; chan roblesvirtualawlibraryc.
Ordering Socorro Roldan and Emilio Cruz to deliver said parcels of land to the minor; chan
roblesvirtualawlibraryd. Requiring Socorro Roldan to pay him beginning with 1947 the fruits, which
her attorney admits, amounted to P1,522 a year; chan roblesvirtualawlibrarye. Authorizing the
minor to deliver directly to Emilio Cruz, out of the price of P14,700 above mentioned, the sum of
P3,000; chan roblesvirtualawlibraryand f. charging Appellees with the costs. SO ORDERED.
G.R. No. L-36902 January 30, 1982
LUIS
vs.
PRUDENCIO ALONZO, respondent.

PICHEL, petitioner,

GUERRERO, J.:
This is a petition to review on certiorari the decision of the Court of First Instance of Basilan City
dated January 5, 1973 in Civil Case No. 820 entitled "Prudencio Alonzo, plaintiff, vs. Luis Pichel,
defendant."
This case originated in the lower Court as an action for the annulment of a "Deed of Sale" dated
August 14, 1968 and executed by Prudencio Alonzo, as vendor, in favor of Luis Pichel, as vendee,
involving property awarded to the former by the Philippine Government under Republic Act No.
477. Pertinent portions of the document sued upon read as follows:
That the VENDOR for and in consideration of the sum of FOUR THOUSAND TWO
HUNDRED PESOS (P4,200.00), Philippine Currency, in hand paid by the VENDEE to
the entire satisfaction of the VENDOR, the VENDOR hereby sells transfers, and
conveys, by way of absolute sale, all the coconut fruits of his coconut land,
designated as Lot No. 21 - Subdivision Plan No. Psd- 32465, situated at Balactasan
Plantation, Lamitan, Basilan City, Philippines;

That for the herein sale of the coconut fruits are for all the fruits on the
aforementioned parcel of land presently found therein as well as for future fruits to be
produced on the said parcel of land during the years period; which shag commence to
run as of SEPTEMBER 15,1968; up to JANUARY 1, 1976 (sic);
That the delivery of the subject matter of the Deed of Sale shall be from time to time
and at the expense of the VENDEE who shall do the harvesting and gathering of the
fruits;
That the Vendor's right, title, interest and participation herein conveyed is of his own
exclusive and absolute property, free from any liens and encumbrances and he
warrants to the Vendee good title thereto and to defend the same against any and all
claims of all persons whomsoever. 1
After the pre-trial conference, the Court a quo issued an Order dated November 9, 1972 which in
part read thus:
The following facts are admitted by the parties:
Plaintiff Prudencio Alonzo was awarded by the Government that parcel of land
designated as Lot No. 21 of Subdivision Plan Psd 32465 of Balactasan, Lamitan,
Basilan City in accordance with Republic Act No. 477. The award was cancelled by
the Board of Liquidators on January 27, 1965 on the ground that, previous thereto,
plaintiff was proved to have alienated the land to another, in violation of law. In 197 2,
plaintiff's rights to the land were reinstated.
On August 14, 1968, plaintiff and his wife sold to defendant an the fruits of the
coconut trees which may be harvested in the land in question for the period,
September 15, 1968 to January 1, 1976, in consideration of P4,200.00. Even as of
the date of sale, however, the land was still under lease to one, Ramon Sua, and it
was the agreement that part of the consideration of the sale, in the sum of P3,650.00,
was to be paid by defendant directly to Ramon Sua so as to release the land from the
clutches of the latter. Pending said payment plaintiff refused to snow the defendant to
make any harvest.
In July 1972, defendant for the first time since the execution of the deed of sale in his
favor, caused the harvest of the fruit of the coconut trees in the land.
xxx xxx xxx
Considering the foregoing, two issues appear posed by the complaint and the answer
which must needs be tested in the crucible of a trial on the merits, and they are:
First. Whether or nor defendant actually paid to plaintiff the full sum of P4,200.00
upon execution of the deed of sale.
Second. Is the deed of sale, Exhibit 'A', the prohibited encumbrance contemplated
in Section 8 of Republic Act No. 477? 2
Anent the first issue, counsel for plaintiff Alonzo subsequently 'stipulated and agreed that his
client ... admits fun payment thereof by defendant. 3 The remaining issue being one of law, the
Court below considered the case submitted for summary judgment on the basis of the pleadings of
the parties, and the admission of facts and documentary evidence presented at the pre-trial
conference.
The lower court rendered its decision now under review, holding that although the agreement in
question is denominated by the parties as a deed of sale of fruits of the coconut trees found in the
vendor's land, it actually is, for all legal intents and purposes, a contract of lease of the land itself.
According to the Court:
... the sale aforestated has given defendant complete control and enjoyment of the
improvements of the land. That the contract is consensual; that its purpose is to allow
the enjoyment or use of a thing; that it is onerous because rent or price certain is

stipulated; and that the enjoyment or use of the thing certain is stipulated to be for a
certain and definite period of time, are characteristics which admit of no other
conclusion. ... The provisions of the contract itself and its characteristics govern its
nature. 4
The Court, therefore, concluded that the deed of sale in question is an encumbrance prohibited by
Republic Act No. 477 which provides thus:
Sec. 8. Except in favor of the Government or any of its branches, units, or institutions,
land acquired under the provisions of this Act or any permanent improvements
thereon shall not be thereon and for a term of ten years from and after the date of
issuance of the certificate of title, nor shall they become liable to the satisfaction of
any debt contracted prior to the expiration of such period.
Any occupant or applicant of lands under this Act who transfers whatever rights he
has acquired on said lands and/or on the improvements thereon before the date of
the award or signature of the contract of sale, shall not be entitled to apply for another
piece of agricultural land or urban, homesite or residential lot, as the case may be,
from the National Abaca and Other Fibers Corporation; and such transfer shall be
considered null and void. 5
The dispositive portion of the lower Court's decision states:
WHEREFORE, it is the judgment of this Court that the deed of sale, Exhibit 'A',
should be, as it is, hereby declared nun and void; that plaintiff be, as he is, ordered to
pay back to defendant the consideration of the sale in the sum of P4,200.00 the same
to bear legal interest from the date of the filing of the complaint until paid; that
defendant shall pay to the plaintiff the sum of P500.00 as attorney's fees.
Costs against the defendant.

Before going into the issues raised by the instant Petition, the matter of whether, under the
admitted facts of this case, the respondent had the right or authority to execute the "Deed of Sale"
in 1968, his award over Lot No. 21 having been cancelled previously by the Board of Liquidators on
January 27, 1965, must be clarified. The case in point is Ras vs. Sua 7 wherein it was categorically
stated by this Court that a cancellation of an award granted pursuant to the provisions of Republic
Act No. 477 does not automatically divest the awardee of his rights to the land. Such cancellation
does not result in the immediate reversion of the property subject of the award, to the State.
Speaking through Mr. Justice J.B.L. Reyes, this Court ruled that "until and unless an appropriate
proceeding for reversion is instituted by the State, and its reacquisition of the ownership and
possession of the land decreed by a competent court, the grantee cannot be said to have been
divested of whatever right that he may have over the same property." 8
There is nothing in the record to show that at any time after the supposed cancellation of herein
respondent's award on January 27, 1965, reversion proceedings against Lot No. 21 were instituted
by the State. Instead, the admitted fact is that the award was reinstated in 1972. Applying the
doctrine announced in the above-cited Ras case, therefore, herein respondent is not deemed to
have lost any of his rights as grantee of Lot No. 21 under Republic Act No. 477 during the period
material to the case at bar, i.e., from the cancellation of the award in 1965 to its reinstatement in
1972. Within said period, respondent could exercise all the rights pertaining to a grantee with
respect to Lot No. 21.
This brings Us to the issues raised by the instant Petition. In his Brief, petitioner contends that the
lower Court erred:
1. In resorting to construction and interpretation of the deed of sale in question where
the terms thereof are clear and unambiguous and leave no doubt as to the intention
of the parties;
2. In declaring granting without admitting that an interpretation is necessary the
deed of sale in question to be a contract of lease over the land itself where the
respondent himself waived and abandoned his claim that said deed did not express
the true agreement of the parties, and on the contrary, respondent admitted at the

pre-trial that his agreement with petitioner was one of sale of the fruits of the coconut
trees on the land;
3. In deciding a question which was not in issue when it declared the deed of sale in
question to be a contract of lease over Lot 21;
4. In declaring furthermore the deed of sale in question to be a contract of lease over
the land itself on the basis of facts which were not proved in evidence;
5. In not holding that the deed of sale, Exhibit "A" and "2", expresses a valid contract
of sale;
6. In not deciding squarely and to the point the issue as to whether or not the deed of
sale in question is an encumbrance on the land and its improvements prohibited by
Section 8 of Republic Act 477; and
7. In awarding respondent attorney's fees even granting, without admitting, that the
deed of sale in question is violative of Section 8 of Republic Act 477.
The first five assigned errors are interrelated, hence, We shall consider them together. To begin
with, We agree with petitioner that construction or interpretation of the document in question is not
called for. A perusal of the deed fails to disclose any ambiguity or obscurity in its provisions, nor is
there doubt as to the real intention of the contracting parties. The terms of the agreement are clear
and unequivocal, hence the literal and plain meaning thereof should be observed. Such is the
mandate of the Civil Code of the Philippines which provides that:
Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of
the contracting parties, the literal meaning of its stipulation shall control ... .
Pursuant to the afore-quoted legal provision, the first and fundamental duty of the courts is the
application of the contract according to its express terms, interpretation being resorted to only when
such literal application is impossible. 9
Simply and directly stated, the "Deed of Sale dated August 14, 1968 is precisely what it purports to
be. It is a document evidencing the agreement of herein parties for the sale of coconut fruits of Lot
No. 21, and not for thelease of the land itself as found by the lower Court. In clear and express
terms, the document defines the object of the contract thus: "the herein sale of the coconut fruits
are for an the fruits on the aforementioned parcel of land during the years ...(from) SEPTEMBER
15, 1968; up to JANUARY 1, 1976." Moreover, as petitioner correctly asserts, the document in
question expresses a valid contract of sale. It has the essential elements of a contract of sale as
defined under Article 1485 of the New Civil Code which provides thus:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
The subject matter of the contract of sale in question are the fruits of the coconut trees on the land
during the years from September 15, 1968 up to January 1, 1976, which subject matter is a
determinate thing. Under Article 1461 of the New Civil Code, things having a potential existence
may be the object of the contract of sale. And in Sibal vs. Valdez, 50 Phil. 512, pending crops which
have potential existence may be the subject matter of the sale. Here, the Supreme Court, citing
Mechem on Sales and American cases said which have potential existence may be the subject
matter of sale. Here, the Supreme Court, citing Mechem on Sales and American cases said:
Mr. Mechem says that a valid sale may be made of a thing, which though not yet
actually in existence, is reasonably certain to come into existence as the natural
increment or usual incident of something already in existence, and then belonging to
the vendor, and the title will vest in the buyer the moment the thing comes into
existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers
Exchange, 21 Am. St. Rep. 63) Things of this nature are said to have a potential
existence. A man may sell property of which he is potentially and not actually

possess. He may make a valid sale of the wine that a vineyard is expected to
produce; or the grain a field may grow in a given time; or the milk a cow may yield
during the coming year; or the wool that shall thereafter grow upon sheep; or what
may be taken at the next case of a fisherman's net; or fruits to grow; or young animals
not yet in existence; or the goodwill of a trade and the like. The thing sold, however,
must be specific and Identified. They must be also owned at the time by the vendor.
(Hull vs. Hull 48 Conn. 250 (40 Am. Rep., 165) (pp. 522-523).
We do not agree with the trial court that the contract executed by and between the parties is
"actually a contract of lease of the land and the coconut trees there." (CFI Decision, p. 62,
Records). The Court's holding that the contract in question fits the definition of a lease of things
wherein one of the parties binds himself to give to another the enjoyment or use of a thing for a
price certain and for a period which may be definite or indefinite (Art. 1643, Civil Code of the
Philippines) is erroneous. The essential difference between a contract of sale and a lease of things
is that the delivery of the thing sold transfers ownership, while in lease no such transfer of
ownership results as the rights of the lessee are limited to the use and enjoyment of the thing
leased.
In Rodriguez vs. Borromeo, 43 Phil. 479, 490, the Supreme Court held:
Since according to article 1543 of the same Code the contract of lease is defined as
the giving or the concession of the enjoyment or use of a thing for a specified time
and fixed price, and since such contract is a form of enjoyment of the property, it is
evident that it must be regarded as one of the means of enjoyment referred to in said
article 398, inasmuch as the terms enjoyment, use, and benefit involve the same and
analogous meaning relative to the general utility of which a given thing is capable.
(104 Jurisprudencia Civil, 443)
In concluding that the possession and enjoyment of the coconut trees can therefore be said to be
the possession and enjoyment of the land itself because the defendant-lessee in order to enjoy his
right under the contract, he actually takes possession of the land, at least during harvest time,
gather all of the fruits of the coconut trees in the land, and gain exclusive use thereof without the
interference or intervention of the plaintiff-lessor such that said plaintiff-lessor is excluded in fact
from the land during the period aforesaid, the trial court erred. The contract was clearly a "sale of
the coconut fruits." The vendor sold, transferred and conveyed "by way of absolute sale, all the
coconut fruits of his land," thereby divesting himself of all ownership or dominion over the fruits
during the seven-year period. The possession and enjoyment of the coconut trees cannot be said
to be the possession and enjoyment of the land itself because these rights are distinct and
separate from each other, the first pertaining to the accessory or improvements (coconut trees)
while the second, to the principal (the land). A transfer of the accessory or improvement is not a
transfer of the principal. It is the other way around, the accessory follows the principal. Hence, the
sale of the nuts cannot be interpreted nor construed to be a lease of the trees, much less extended
further to include the lease of the land itself.
The real and pivotal issue of this case which is taken up in petitioner's sixth assignment of error
and as already stated above, refers to the validity of the "Deed of Sale", as such contract of sale,
vis-a-vis the provisions of Sec. 8, R.A. No. 477. The lower Court did not rule on this question,
having reached the conclusion that the contract at bar was one of lease. It was from the context of
a lease contract that the Court below determined the applicability of Sec. 8, R.A. No. 477, to the
instant case.
Resolving now this principal issue, We find after a close and careful examination of the terms of the
first paragraph of Section 8 hereinabove quoted, that the grantee of a parcel of land under R.A. No.
477 is not prohibited from alienating or disposing of the natural and/or industrial fruits of the land
awarded to him. What the law expressly disallows is the encumbrance or alienation of the land
itself or any of the permanent improvements thereon. Permanent improvements on a parcel of land
are things incorporated or attached to the property in a fixed manner, naturally or artificially. They
include whatever is built, planted or sown on the land which is characterized by fixity, immutability
or immovability. Houses, buildings, machinery, animal houses, trees and plants would fall under the
category of permanent improvements, the alienation or encumbrance of which is prohibited by R.A.
No. 477. While coconut trees are permanent improvements of a land, their nuts are natural or
industrial fruits which are meant to be gathered or severed from the trees, to be used, enjoyed, sold
or otherwise disposed of by the owner of the land. Herein respondents, as the grantee of Lot No.

21 from the Government, had the right and prerogative to sell the coconut fruits of the trees
growing on the property.
By virtue of R.A. No. 477, bona fide occupants, veterans, members of guerilla organizations and
other qualified persons were given the opportunity to acquire government lands by purchase, taking
into account their limited means. It was intended for these persons to make good and productive
use of the lands awarded to them, not only to enable them to improve their standard of living, but
likewise to help provide for the annual payments to the Government of the purchase price of the
lots awarded to them. Section 8 was included, as stated by the Court a quo, to protect the grantees
from themselves and the incursions of opportunists who prey on their misery and poverty." It is
there to insure that the grantees themselves benefit from their respective lots, to the exclusion of
other persons.
The purpose of the law is not violated when a grantee sells the produce or fruits of his land. On the
contrary, the aim of the law is thereby achieved, for the grantee is encouraged and induced to be
more industrious and productive, thus making it possible for him and his family to be economically
self-sufficient and to lead a respectable life. At the same time, the Government is assured of
payment on the annual installments on the land. We agree with herein petitioner that it could not
have been the intention of the legislature to prohibit the grantee from selling the natural and
industrial fruits of his land, for otherwise, it would lead to an absurd situation wherein the grantee
would not be able to receive and enjoy the fruits of the property in the real and complete sense.
Respondent through counsel, in his Answer to the Petition contends that even
granting arguendo that he executed a deed of sale of the coconut fruits, he has the "privilege to
change his mind and claim it as (an) implied lease," and he has the "legitimate right" to file an
action for annulment "which no law can stop." He claims it is his "sole construction of the meaning
of the transaction that should prevail and not petitioner. (sic). 10 Respondent's counsel either
misapplies the law or is trying too hard and going too far to defend his client's hopeless cause.
Suffice it to say that respondent-grantee, after having received the consideration for the sale of his
coconut fruits, cannot be allowed to impugn the validity of the contracts he entered into, to the
prejudice of petitioner who contracted in good faith and for a consideration.
The issue raised by the seventh assignment of error as to the propriety of the award of attorney's
fees made by the lower Court need not be passed upon, such award having been apparently based
on the erroneous finding and conclusion that the contract at bar is one of lease. We shall limit
Ourselves to the question of whether or not in accordance with Our ruling in this case, respondent
is entitled to an award of attorney's fees. The Civil Code provides that:
Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation,
other than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to litigate with
third persons or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff's plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled
workers;
(8) In actions for indemnity under workmen's compensation and employer's liability
laws;
(9) In a separate civil action to recover civil liability arising from a crime;

(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and equitable that attorney's fees
and expenses of litigation should be recovered.
In all cases, the attorney's fees and expenses of litigation must be reasonable.
We find that none of the legal grounds enumerated above exists to justify or warrant the grant of
attorney's fees to herein respondent.
IN VIEW OF THE FOREGOING, the judgment of the lower Court is hereby set aside and another
one is entered dismissing the Complaint. Without costs.
SO ORDERED.