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Cases on Sales – Parties to a Contract of Sale

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G.R. No. L-15113 January 28, 1961

ANTONIO MEDINA, petitioner,vs.COLLECTOR OF INTERNAL REVENUE and THE COURTOF TAX APPEALS respondents.

Eusebio D. Morales for petitioner.

Office of the Solicitor General for respondents.

REYES, J.B.L. J.:

Petition to review a decision of the Court of Tax Appealsupholding a tax assessment of the Collector of InternalRevenue except with respect to the imposition of so-calledcompromise penalties, which were set aside.

The records show that on or about May 20, 1944, petitioningtaxpayer Antonio Medina married Antonia Rodriguez.Before 1946, the spouses had neither property nor businessof their own. Later, however, petitioner acquired forest,concessions in the municipalities of San Mariano andPalanan in the Province of Isabela. From 1946 to 1948, the

logs cut and removed by the petitioner from his concessionswere 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 toaround 1952, petitioner sold to her almost all the logsproduced in his San Mariano, concession. Mrs. Medina, Inturn, sold in Manila the logs bought from her husbandthrough the same agent, Mariano Osorio. The proceedswere, upon instructions from petitioner, either received byOsorio for petitioner or deposited by said agent inpetitioner's current account with the Philippine NationalBank.

On the thesis that the sales made by petitioner to his wifewere null and void pursuant to the provisions of Article 1490of the Civil Code of the Philippines (formerly, Art. 1458, CivilCode of 1889), the Collector considered the sales made byMrs. Medina as the petitioner's original sales taxable underSection 186 of the National Internal Revenue Code and,therefore, imposed a tax assessment on petitioner, callingfor the payment of P4,553.54 as deficiency sales taxes andsurcharges from 1949 to 1952. This same assessment ofSeptember 26, 1953 sought also the collection of anothersum of P643.94 as deficiency sales tax and surchargebased on petitioner's quarterly returns from 1946 to 1952.

On November 30, 1953, petitioner protested the

assessment; however, respondent Collector insisted on hisdemand. On July 9, 1954, petitioner filed a petition forreconsideration revealing for the first time the existence ofan alleged premarital agreement of complete separation ofproperties between him and his wife, and contending thatthe assessment for the years 1946 to 1952 had alreadyprescribed. After one hearing, the Conference Staff of theBureau of Internal Revenue eliminated the 50% fraudpenalty and held that the taxes assessed against him before1948 had already prescribed. Based on these findings, theCollector issued a modified assessment, demanding thepayment of only P3,325.68, computed as follows:

5% tax due on P7,209.83 -1949

P 360.49

5% tax due on 16,945.55 - 1950

847.28

5% tax due on 16,874.52 - 1951

843.75

5% tax due on 11,009.94 - 1952

550.50

TOTAL sales tax due

P2,602.0

25% Surcharge thereon

650.51

Short taxes per quarterly returns, 3rd quarter, 1950

58.52

25% Surcharge thereon

14.63

TOTAL AMOUNT due & collectible

P3,325.68

Petitioner again requested for reconsideration, butrespondent Collector, in his letter of April 4, 1955, deniedthe same.

Petitioner appealed to the Court of Tax Appeals, whichrendered judgment as aforesaid. The Court's decision wasbased on two main findings, namely, (a) that there was nopremarital agreement of absolute separation of propertybetween the Medina spouse; and (b) assuming that therewas such an agreement, the sales in question made bypetitioner to his wife were fictitious, simulated, and not bonafide.

In his petition for review to this Court, petitioner raisesseveral assignments of error revolving around the centralissue of whether or not the sales made by the petitioner tohis wife could be considered as his original taxable sales

under the provisions of Section 186 of the National InternalRevenue Code.

Relying mainly on testimonial evidence that before theirmarriage, he and his wife executed and recorded aprenuptial agreement for a regime of complete separation ofproperty, and that all trace of the document was lost onaccount of the war, petitioner imputes lack of basis for thetax court's factual finding that no agreement of completeseparation of property was ever executed by and betweenthe spouses before their marriage. We do not think so.

Aside from the material inconsistencies in the testimony ofpetitioner's witnesses pointed out by the trial court, thecircumstantial evidence is against petitioner's claim. Thus, it




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appears that at the time of the marriage between petitionerand his wife, they neither had any property nor business oftheir own, as to have really urged them to enter into thesupposed property agreement. Secondly, the testimony thatthe separation of property agreement was recorded in theRegistry of Property three months before the marriage, ispatently absurd, since such a prenuptial agreement couldnot be effective before marriage is celebrated, and would

automatically be cancelled if the union was called off. Howthen could it be accepted for recording prior to themarriage? In the third place, despite their insistence on theexistence of the ante nuptial contract, the couple, strangelyenough, did not act in accordance with its allegedcovenants. Quite the contrary, it was proved that evenduring their taxable years, the ownership, usufruct, andadministration of their properties and business were in thehusband. And even when the wife was engaged in lumberdealing, and she and her husband contracted sales witheach other as aforestated, the proceeds she derived fromher alleged subsequent disposition of the logs —incidentally, by and through the same agent of her husband,Mariano Osorio — were either received by Osorio for thepetitioner or deposited by said agent in petitioner's current

account with the Philippine National Bank. Fourth, althoughpetitioner, a lawyer by profession, already knew, after hewas informed by the Collector on or about September of1953, that the primary reason why the sales of logs to hiswife could not be considered as the original taxable saleswas because of the express prohibition found in Article 1490of the Civil Code of sales between spouses married under acommunity system; yet it was not until July of 1954 that healleged, for the first time, the existence of the supposedproperty separation agreement. Finally, the Day Book of theRegister of Deeds on which the agreement would havebeen entered, had it really been registered as petitionerinsists, and which book was among those saved from theravages of the war, did not show that the document inquestion was among those recorded therein.

We have already ruled that when the credibility of witnessesis the one at issue, the trial court's judgment as to theirdegree of credence deserves serious consideration by thisCourt (Collector vs. Bautista, et al., G.R. Nos. L-12250 & L-12259, May 27, 1959). This is all the more true in this casebecause not every copy of the supposed agreement,particularly the one that was said to have been filed with theClerk of Court of Isabela, was accounted for as lost; so that,applying the "best evidence rule", the court did right in givinglittle or no credence to the secondary evidence to prove thedue execution and contents of the alleged document (seeComments on the Rules of Court, Moran, 1957 Ed., Vol. 3,pp. 10.12).

The foregoing findings notwithstanding, the petitionerargues that the prohibition to sell expressed under Article1490 of the Civil Code has no application to the sales madeby said petitioner to his wife, because said transactions arecontemplated and allowed by the provisions of Articles 7and 10 of the Code of Commerce. But said provisionsmerely state, under certain conditions, a presumption thatthe wife is authorized to engage in business and for theincidents that flow therefrom when she so engages therein.But the transactions permitted are those entered into withstrangers, and do not constitute exceptions to theprohibitory provisions of Article 1490 against sales betweenspouses.

Petitioner's contention that the respondent Collector can notassail the questioned sales, he being a stranger to saidtransactions, is likewise untenable. The government, ascorrectly pointed out by the Tax Court, is always aninterested party to all matters involving taxable transactionsand, needless to say, qualified to question their validity orlegitimacy whenever necessary to block tax evasion.

Contracts violative of the provisions of Article 1490 of theCivil Code are null and void (Uy Sui Pin vs. Cantollas, 70Phil. 55; Uy Coque vs. Sioca 45 Phil. 43). Being voidtransactions, the sales made by the petitioner to his wifewere correctly disregarded by the Collector in his taxassessments that considered as the taxable sales thosemade by the wife through the spouses' common agent,Mariano Osorio. In upholding that stand, the Court belowcommitted no error.

It is also the petitioner's contention that the lower court erredin using illegally seized documentary evidence against him.But even assuming arguendo the truth of petitioner's chargeregarding the seizure, it is now settled in this jurisdiction that

illegally obtained documents and papers are admissible inevidence, if they are found to be competent and relevant tothe case (see Wong & Lee vs. Collector of InternalRevenue, G.R. No. L-10155, August 30, 1958). In fairnessto the Collector, however, it should be stated thatpetitioner's imputation is vehemently denied by him, andrelying on Sections 3, 9, 337 and 338 of the Tax Code andthe pertinent portions of Revenue Regulations No. V-1 andciting this Court's ruling in U.S. vs. Aviado, 38 Phil. 10, theCollector maintains that he and other internal revenueofficers and agents could require the production of books ofaccounts and other records from a taxpayer. Having arrivedat the foregoing conclusion, it becomes unnecessary todiscuss the other issues raised, which are but premised onthe assumption that a premarital agreement of total

separation of property existed between the petitioner andhis wife.

WHEREFORE, the decision appealed from is affirmed, withcosts against the petitioner.

G.R. No. L-57499 June 22, 1984

MERCEDES CALIMLIM- CANULLAS, petitioner,vs.HON. WILLELMO FORTUN, Judge, Court of Firstinstance of Pangasinan, Branch I, and CORAZONDAGUINES, respondents.

Fernandez Law Offices for petitioner.

Francisco Pulido for respondents.

MELENCIO-HERRERA, J.:

Petition for Review on certiorari assailing the Decision,dated October 6, 1980, and the Resolution on the Motion for




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Reconsideration, dated November 27, 1980, of the thenCourt of First Instance of Pangasinan, Branch I, in CivilCase No. 15620 entitled "Corazon DAGUINES vs.MERCEDES Calimlim-Canullas," upholding the sale of aparcel of land in favor of DAGUINES but not of the conjugalhouse thereon'

The background facts may be summarized as follows:

Petitioner MERCEDES Calimlim-Canullas and FERNANDOCanullas were married on December 19, 1962. They begotfive children. They lived in a small house on the residentialland in question with an area of approximately 891 squaremeters, located at Bacabac, Bugallon, Pangasinan. AfterFERNANDO's father died in 1965, FERNANDO inheritedthe land.

In 1978, FERNANDO abandoned his family and was livingwith private respondent Corazon DAGUINES. During thependency of this appeal, they were convicted ofconcubinage in a judgment rendered on October 27, 1981by the then Court of First Instance of Pangasinan, Branch II,which judgment has become final.

On April 15, 1980, FERNANDO sold the subject propertywith the house thereon to DAGUINES for the sum ofP2,000.00. In the document of sale, FERNANDO describedthe house as "also inherited by me from my deceasedparents."

Unable to take possession of the lot and house, DAGUINESinitiated a complaint on June 19, 1980 for quieting of titleand damages against MERCEDES. The latter resisted andclaimed that the house in dispute where she and herchildren were residing, including the coconut trees on theland, were built and planted with conjugal funds and throughher industry; that the sale of the land together with thehouse and improvements to DAGUINES was null and voidbecause they are conjugal properties and she had not given

her consent to the sale,

In its original judgment, respondent Court principallydeclared DAGUINES "as the lawful owner of the land inquestion as well as the one-half () of the house erected onsaid land." Upon reconsideration prayed for byMERCEDES, however, respondent Court resolved:

WHEREFORE, the dispositive portion of the Decision of thisCourt, promulgated on October 6, 1980, is hereby amendedto read as follows:

(1) Declaring plaintiff as the true and lawful owner ofthe land in question and the 10 coconut trees;

(2) Declaring as null and void the sale of the conjugalhouse to plaintiff on April 15, 1980 (Exhibit A) including the3 coconut trees and other crops planted during the conjugalrelation between Fernando Canullas (vendor) and hislegitimate wife, herein defendant Mercedes Calimlim-Canullas;

xxx xxx xxx

The issues posed for resolution are (1) whether or not theconstruction of a conjugal house on the exclusive propertyof the husband ipso facto gave the land the character ofconjugal property; and (2) whether or not the sale of the lot

together with the house and improvements thereon wasvalid under the circumstances surrounding the transaction.

The determination of the first issue revolves around theinterpretation to be given to the second paragraph of Article158 of the Civil Code, which reads:

xxx xxx xxx

Buildings constructed at the expense of the partnershipduring the marriage on land belonging to one of the spousesalso pertain to the partnership, but the value of the landshall be reimbursed to the spouse who owns the same.

We hold that pursuant to the foregoing provision both theland and the building belong to the conjugal partnership butthe conjugal partnership is indebted to the husband for thevalue of the land. The spouse owning the lot becomes acreditor of the conjugal partnership for the value of the lot, 1which value would be reimbursed at the liquidation of theconjugal 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 construidosdurante el matrimonio en suelo propio de uno de losconjuges son gananciales, abonandose el valor del suelo alconj uge a quien pertenezca.

It is true that in the case of Maramba vs. Lozano, 3 reliedupon by respondent Judge, it was held that the landbelonging to one of the spouses, upon which the spouseshave built a house, becomes conjugal property only whenthe conjugal partnership is liquidated and indemnity paid tothe owner of the land. We believe that the better rule is thatenunciated 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 fromparaphernal to conjugal assets should be deemed toretroact to the time the conjugal buildings were firstconstructed thereon or at the very latest, to the timeimmediately before the death of Narciso A. Padilla thatended the conjugal partnership. They can not be consideredto have become conjugal property only as of the time theirvalues were paid to the estate of the widow ConcepcionPaterno because by that time the conjugal partnership nolonger existed and it could not acquire the ownership of saidproperties. The acquisition by the partnership of theseproperties was, under the 1943 decision, subject to thesuspensive condition that their values would be reimbursedto the widow at the liquidation of the conjugal partnership;once paid, the effects of the fulfillment of the conditionshould be deemed to retroact to the date the obligation wasconstituted (Art. 1187, New Civil Code) ...

The foregoing premises considered, it follows thatFERNANDO could not have alienated the house and lot toDAGUINES since MERCEDES had not given her consent tosaid sale. 4

Anent the second issue, we find that the contract of salewas null and void for being contrary to morals and publicpolicy. The sale was made by a husband in favor of a




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concubine after he had abandoned his family and left theconjugal home where his wife and children lived and fromwhence they derived their support. That sale wassubversive of the stability of the family, a basic socialinstitution which public policy cherishes and protects. 5

Article 1409 of the Civil Code states inter alia that: contractswhose cause, object, or purpose is contrary to law, morals,

good customs, public order, or public policy are void andinexistent from the very beginning.

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

Additionally, the law emphatically prohibits the spouses fromselling property to each other subject to certain exceptions.6 Similarly, donations between spouses during marriage areprohibited. 7 And this is so because if transfers or conconveyances between spouses were allowed duringmarriage, that would destroy the system of conjugalpartnership, a basic policy in civil law. It was also designed

to prevent the exercise of undue influence by one spouseover the other, 8 as well as to protect the institution ofmarriage, which is the cornerstone of family law. Theprohibitions apply to a couple living as husband and wifewithout benefit of marriage, otherwise, "the condition ofthose who incurred guilt would turn out to be better thanthose in legal union." Those provisions are dictated bypublic interest and their criterion must be imposed upon thewig of the parties. That was the ruling in Buenaventura vs.Bautista, also penned by Justice JBL Reyes (CA) 50 O.G.3679, and cited in Matabuena vs. Cervantes. 9 We quotehereunder the pertinent dissertation on this point:

We reach a different conclusion. While Art. 133 of the CivilCode considers as void a donation between the spouses

during the marriage, policy considerations of the mostexigent character as wen as the dictates of morality requirethat the same prohibition should apply to a common-lawrelationship.

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 speaksunequivocally. If the policy of the law is, in the language ofthe opinion of the then Justice J.B.L. Reyes of that Court, 'toprohibit donations in favor of the other consort and hisdescendants because of fear of undue influence andimproper pressure upon the donor, a prejudice deeplyrooted in our ancient law, ..., then there is every reason toapply the same prohibitive policy to persons living togetheras husband and wife without benefit of nuptials. For it is notto be doubted that assent to such irregular connection forthirty years bespeaks greater influence of one party over theother, so that the danger that the law seeks to avoid iscorrespondingly increased'. Moreover, as pointed out byUlpian (in his lib 32 ad Sabinum, fr. 1), "It would not be justthat such donations —should subsist, lest the conditions ofthose who incurred guilt should turn out to be better." Solong as marriage remains the cornerstone of our family law,reason and morality alike demand that the disabilitiesattached to marriage should likewise attach to concubinage(Emphasis supplied),

WHEREFORE, the Decision of respondent Judge, datedOctober 6, 1980, and his Resolution of November 27, 1980on petitioner's Motion for Reconsideration, are hereby setaside and the sale of the lot, house and improvements inquestion, is hereby declared null and void. No costs.

SO ORDERED.

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 boththe husband and the wife. The absence of the consent ofone renders the sale null and void, while the vitiation thereof

makes it merely voidable. Only in the latter case canratification cure the defect.

The Case

These were the principles that guided the Court in decidingthis 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 denyingreconsideration, respectively.

On May 28, 1990, Private Respondent Gilda Corpuz filed an Amended Complainant 3 against her husband Judie Corpuzand Petitioner-Spouses Antonio and Luzviminda Guiang.The said Complaint sought the declaration of a certain deedof sale, which involved the conjugal property of privaterespondent and her husband, null and void. The case wasraffled to the Regional Trial Court of Koronadal, SouthCotabato, Branch 25. In due course, the trial court rendereda Decision 4 dated September 9, 1992, disposing as follow:5

ACCORDINGLY, judgment is rendered for the plaintiff andagainst the defendants,

1. Declaring both the Deed of Transfer of Rightsdated March 1, 1990 (Exh. "A") and the "amicable




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settlement" dated March 16, 1990 (Exh. "B") as null voidand of no effect;

2. Recognizing as lawful and valid the ownership andpossession of plaintiff Gilda Corpuz over the remaining one-half portion of Lot 9, Block 8, (LRC) Psd-165409 which hasbeen the subject of the Deed of Transfer of Rights (Exh."A");

3. Ordering plaintiff Gilda Corpuz to reimbursedefendants Luzviminda Guiang the amount of NINETHOUSAND (P9,000.00) PESOS corresponding to thepayment made by defendants Guiangs to Manuel Callejo forthe unpaid balance of the account of plaintiff in favor ofManuel Callejo, and another sum of P379.62 representingone-half of the amount of realty taxes paid by defendantsGuiangs on Lot 9, Block 8, (LRC) Psd-165409, both withlegal interests thereon computed from the finality of thedecision.

No pronouncement as to costs in view of the factualcircumstances of the case.

Dissatisfied, petitioners-spouses filed an appeal with theCourt of Appeals. Respondent Court, in its challengedDecision, ruled as follow: 6

WHEREFORE, the appealed of the lower court in Civil CaseNo. 204 is hereby AFFIRMED by this Court. No costsconsidering plaintiff-appellee's failure to file her brief despitenotice.

Reconsideration was similarly denied by the same court inits assailed Resolution: 7

Finding that the issues raised in defendants-appellantsmotion for reconsideration of Our decision in this case ofJanuary 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, thisCourt RESOLVED to DENY the instant motion forreconsideration for lack of merit.

The Facts

The facts of this case are simple. Over the objection ofprivate respondent and while she was in Manila seekingemployment, her husband sold to the petitioners-spousesone half of their conjugal peoperty, consisting of theirresidence and the lot on which it stood. The circumstancesof this sale are set forth in the Decision of RespondentCourt, which quoted from the Decision of the trial court asfollows: 8

1. Plaintiff Gilda Corpuz and defendant Judie Corpuzare legally married spouses. They were married onDecember 24, 1968 in Bacolod City, before a judge. This isadmitted by defendants-spouses Antonio and LuzvimindaGuiang in their answer, and also admitted by defendantJudie Corpuz when he testified in court (tsn. p. 3, June 9,1992), although the latter says that they were married in1967. The couple have three children, namely: Junie —18years old, Harriet —17 years of age, and Jodie or Joji, theyoungest, who was 15 years of age in August, 1990 whenher mother testified in court.

Sometime on February 14, 1983, the couple Gilda andJudie Corpuz, with plaintiff-wife Gilda Corpuz as vendee,bought a 421 sq. meter lot located in Barangay Gen.Paulino Santos (Bo. 1), Koronadal, South Cotabato, andparticularly known as Lot 9, Block 8, (LRC) Psd-165409from Manuel Callejo who signed as vendor through aconditional deed of sale for a total consideration ofP14,735.00. The consideration was payable in installment,

with right of cancellation in favor of vendor should vendeefail to pay three successive installments (Exh. "2", tsn p. 6,February 14, 1990).

2. Sometime on April 22, 1988, the couple Gilda andJudie Corpuz sold one-half portion of their Lot No. 9, Block8, (LRC) Psd-165409 to the defendants-spouses Antonioand Luzviminda Guiang. The latter have since thenoccupied the one-half portion [and] built their house thereon(tsn. p. 4, May 22, 1992). They are thus adjoining neighborsof the Corpuzes.

3. Plaintiff Gilda Corpuz left for Manila sometime inJune 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 goabroad. She stayed for sometime in Manila however,coming back to Koronadal, South Cotabato, . . . on March11, 1990. Plaintiff's departure for Manila to look for work inthe Middle East was with the consent of her husband JudieCorpuz (tsn. p. 16, Aug. 12, 1990; p. 10 Sept. 6, 1991).

After his wife's departure for Manila, defendant JudieCorpuz seldom went home to the conjugal dwelling. Hestayed most of the time at his place of work at SamahangNayon 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 sametime working as household help of, and staying at, thehouse of Mr. Panes. Her brother Junie was not working. Her

younger sister Jodie (Jojie) was going to school. Her mothersometimes sent them money (tsn. p. 14, Sept. 6, 1991.)

Sometime in January 1990, Harriet Corpuz learned that herfather intended to sell the remaining one-half portionincluding their house, of their homelot to defendantsGuiangs. She wrote a letter to her mother informing her.She [Gilda Corpuz] replied that she was objecting to thesale. Harriet, however, did not inform her father about this;but instead gave the letter to Mrs. Luzviminda Guiang sothat 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 theremaining one-half portion of Lot 9, Block 8, (LRC) Psd-165409. On March 1, 1990, he sold to defendantLuzviminda Guiang thru a document known as "Deed ofTransfer of Rights" (Exh. "A") the remaining one-half portionof their lot and the house standing thereon for a totalconsideration of P30,000.00 of which P5,000.00 was to bepaid in June, 1990. Transferor Judie Corpuz's children Junieand 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 JudieCorpuz's title over the lot transferred, defendant LuzvimindaGuiang as vendee executed another agreement over Lot 9,




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Block 8, (LRC) Psd-165408 (Exh. "3"), this time withManuela Jimenez Callejo, a widow of the original registeredowner from whom the couple Judie and Gilda Corpuzoriginally bought the lot (Exh. "2"), who signed as vendor fora consideration of P9,000.00. Defendant Judie Corpuzsigned 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 verylot earlier sold to the couple Gilda and Judie Corpuz.

5. Sometimes on March 11, 1990, plaintiff returnedhome. She found her children staying with otherhouseholds. Only Junie was staying in their house. Harrietand Joji were with Mr. Panes. Gilda gathered her childrentogether and stayed at their house. Her husband wasnowhere to be found. She was informed by her children thattheir father had a wife already.

6. For staying in their house sold by her husband,plaintiff was complained against by defendant LuzvimindaGuiang and her husband Antonio Guiang before theBarangay authorities of Barangay General Paulino Santos

(Bo. 1), Koronadal, South Cotabato, for trespassing (tsn. p.34, Aug. 17, 1990). The case was docketed by thebarangay authorities as Barangay Case No. 38 for"trespassing". On March 16, 1990, the parties thereatsigned 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 thehouse of Mr. and Mrs. Antonio Guiang, where they arepresently 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 thebargain, plaintiff to the Barangay Captain of BarangayPaulino Santos to question her signature on the amicablesettlement. She was referred however to the Office-In-Charge at the time, a certain Mr. de la Cruz. The latter inturn told her that he could not do anything on the matter(tsn. p. 31, Aug. 17, 1990).

This particular point not rebutted. The Barangay Captainwho testified did not deny that Mrs. Gilda Corpuzapproached him for the annulment of the settlement. Hemerely said he forgot whether Mrs. Corpuz had approachedhim (tsn. p. 13, Sept. 26, 1990). We thus conclude that Mrs.Corpuz really approached the Barangay Captain for theannulment of the settlement. Annulment not having beenmade, plaintiff stayed put in her house and lot.

7. Defendant-spouses Guiang followed thru theamicable settlement with a motion for the execution of theamicable settlement, filing the same with the Municipal TrialCourt of Koronadal, South Cotabato. The proceedings [are]still pending before the said court, with the filing of theinstant suit.

8. As a consequence of the sale, the spouses Guiangspent P600.00 for the preparation of the Deed of Transfer ofRights, 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 thepreparation of Exhibit "3"; a total of P759.62 basic tax andspecial education fund on the lot; P127.50 as the totaldocumentary stamp tax on the various documents; P535.72for the capital gains tax; P22.50 as transfer tax; a standardfee of P17.00; certification fee of P5.00. These expensesparticularly the taxes and other expenses towards thetransfer 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 trialcourt's ruling that any alienation or encumbrance by thehusband of the conjugal propety without the consent of hiswife is null and void as provided under Article 124 of theFamily Code. It also rejected petitioners' contention that the"amicable sttlement" ratified said sale, citing Article 1409 ofthe Code which expressly bars ratification of the contractsspecified therein, particularly those "prohibited or declaredvoid by law."

Hence, this petition. 9

The Issues

In their Memorandum, petitioners assign to publicrespondent the following errors: 10

I

Whether or not the assailed Deed of Transfer of Rights wasvalidly executed.

II

Whether or not the Cour of Appeals erred in not declairingas voidable contract under Art. 1390 of the Civil Code the

impugned Deed of Transfer of Rights which was validlyratified thru the execution of the "amicable settlement" bythe contending parties.

III

Whether or not the Court of Appeals erred in not settingaside the findings of the Court a quo which recognized aslawful and valid the ownership and possession of privaterespondent over the remaining one half (1/2) portion of theproperly.

In a nutshell, petitioners-spouses contend that (1) thecontract of sale (Deed of Transfer of Rights) was merelyvoidable, and (2) such contract was ratified by privaterespondent when she entered into an amicable sttlementwith 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 ofRights was validly executed by the parties-litigants in goodfaith and for valuable consideration. The absence of private




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respondent's consent merely rendered the Deed voidableunder Article 1390 of the Civil Code, which provides:

Art. 1390. The following contracts are voidable orannullable, even though there may have been no damage tothe 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 aproper 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 whoseconsent was obtained and vitiated through mistake,violence, intimidation, undue influence or fraud. In thisinstance, private respondent's consent to the contract ofsale of their conjugal property was totally inexistent orabsent. Gilda Corpuz, on direct examination, testified thus:

11

Q Now, on March 1, 1990, could you still recall whereyou were?

A I was still in Manila during that time.

xxx xxx xxx

ATTY. FUENTES:

Q When did you come back to Koronadal, SouthCotabato?

A That was on March 11, 1990, Ma'am.

Q Now, when you arrived at Koronadal, was thereany problem which arose concerning the ownership of yourresidential house at Callejo Subdivision?

A When I arrived here in Koronadal, there was aproblem which arose regarding my residential house and lotbecause it was sold by my husband without my knowledge.

This being the case, said contract properly falls within theambit of Article 124 of the Family Code, which was correctlyapplied by the teo lower court:

Art. 124. The administration and enjoyment of the conjugalpartnerhip properly shall belong to both spouses jointly. Incase 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 ofthe contract implementing such decision.

In the event that one spouse is incapacitated or otherwiseunable to participate in the administration of the conjugalproperties, the other spouse may assume sole powers ofadministration. These powers do not include the powers ofdisposition or encumbrance which must have the authorityof the court or the written consent of the other spouse. Inthe absence of such authority or consent, the disposition orencumbrance shall be void. However, the transaction shall

be construed as a continuing offer on the part of theconsenting spouse and the third person, and may beperfected as a binding contract upon the acceptance by theother spouse or authorization by the court before the offer iswithdrawn by either or both offerors. (165a) (Emphasissupplied)

Comparing said law with its equivalent provision in the Civil

Code, the trial court adroitly explained the amendatoryeffect of the above provision in this wise: 12

The legal provision is clear. The disposition or encumbranceis void. It becomes still clearer if we compare the same withthe equivalent provision of the Civil Code of the Philippines.Under Article 166 of the Civil Code, the husband cannotgenerally alienate or encumber any real property of theconjugal partnershit without the wife's consent. Thealienation or encumbrance if so made however is not nulland void. It is merely voidable. The offended wife may bringan action to annul the said alienation or encumbrance. Thusthe provision of Article 173 of the Civil Code of thePhilippines, to wit:

Art. 173. The wife may, during the marriage and within tenyears from the transaction questioned, ask the courts for theannulment of any contract of the husband entered intowithout her consent, when such consent is required, or anyact or contract of the husband which tends to defraud her orimpair her interest in the conjugal partnership property.Should the wife fail to exercise this right, she or her heirsafter the dissolution of the marriage, may demand the valueof property fraudulently alienated by the husband.(n)

This particular provision giving the wife ten (10) years . . .during [the] marriage to annul the alienation orencumbrance was not carried over to the Family Code. It isthus 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 theconsent of the wife is null and void.

Furthermore, it must be noted that the fraud and theintimidation referred to by petitioners were perpetrated inthe execution of the document embodying the amicablesettlement. Gilda Corpuz alleged during trial that barangayauthorities made her sign said document throughmisrepresentation andcoercion. 13 In any event, its execution does not alter thevoid character of the deed of sale between the husband andthe petitioners-spouses, as will be discussed later. The factremains that such contract was entered into without thewife's consent.

In sum, the nullity of the contract of sale is premised on theabsence of private respondent's consent. To constitute avalid contract, the Civil Code requires the concurrence ofthe following elements: (1) cause, (2) object, and (3)consent, 14 the last element being indubitably absent in thecase at bar.

Second Issue: Amicable Settlement

Insisting that the contract of sale was merely voidable,petitioners aver that it was duly ratified by the contendingparties through the "amicable settlement" they executed onMarch 16, 1990 in Barangay Case No. 38.




8

The position is not well taken. The trial and the appellatecourts have resolved this issue in favor of the privaterespondent. 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") cannotbe ratified, even by an "amicable settlement". The

participation by some barangay authorities in the "amicablesettlement" cannot otherwise validate an invalid act.Moreover, it cannot be denied that the "amicable settlement(Exh. "B") entered into by plaintiff Gilda Corpuz anddefendent spouses Guiang is a contract. It is a directoffshoot of the Deed of Transfer of Rights (Exh. "A"). Byexpress provision of law, such a contract is also void. Thus,the legal provision, to wit:

Art. 1422. Acontract which is the direct result of aprevious illegal contract, is also void and inexistent. (CivilCode 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 acontinuing offer that was accepted and perfected by theparties, following the last sentence of Article 124. The orderof the pertinent events is clear: after the sale, petitionersfiled a complaint for trespassing against private respondent,after which the barangay authorities secured an "amicablesettlement" and petitioners filed before the MTC a motion forits execution. The settlement, however, does not mention acontinuing offer to sell the property or an acceptance ofsuch a continuing offer. Its tenor was to the effect thatprivate respondent would vacate the property. By no stretch

of the imagination, can the Court interpret this document asthe acceptance mentioned in Article 124.

WHEREFORE, the Court hereby DENIES the petition and AFFIRMS the challenged Decision and Resolution. Costsagainst petitioners.

SO ORDERED.

G.R. No. L-35702 May 29, 1973

DOMINGO D. RUBIAS, plaintiff-appellant,vs.

ISAIAS BATILLER, defendant-appellee.

Gregorio M. Rubias for plaintiff-appellant.

Vicente R. Acsay for defendant-appellee.

TEEHANKEE, J.:

In this appeal certified by the Court of Appeals to this Courtas involving purely legal questions, we affirm the dismissalorder 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 ofaction, since it was duly established in the record that theapplication for registration of the land in question filed byFrancisco Militante, plaintiff's vendor and predecessorinterest, had been dismissed by decision of 1952 of the landregistration court as affirmed by final judgment in 1958 ofthe Court of Appeals and hence, there was no title or right tothe land that could be transmitted by the purported sale to

plaintiff.

As late as 1964, the Iloilo court of first instance had inanother case of ejectment likewise upheld by final judgmentdefendant's "better right to possess the land in question .having been in the actual possession thereof under a claimof title many years before Francisco Militante sold the landto the plaintiff."

Furthermore, even assuming that Militante had anything tosell, the deed of sale executed in 1956 by him in favor ofplaintiff at a time when plaintiff was concededly his counselof record in the land registration case involving the very landin dispute (ultimately decided adversely against Militante bythe 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 lowercourt, as decreed by Article 1409 in relation to Article 1491of the Civil Code.

The appellate court, in its resolution of certification of 25July 1972, gave the following backgrounder of the appeal atbar:

On August 31, 1964, plaintiff Domingo D. Rubias, a lawyer,filed a suit to recover the ownership and possession ofcertain portions of lot under Psu-99791 located in BarrioGeneral Luna, Barotac Viejo, Iloilo which he bought from hisfather-in-law, Francisco Militante in 1956 against its presentoccupant defendant, Isaias Batiller, who illegally enteredsaid portions of the lot on two occasions —in 1945 and in1959. 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 doesnot state a cause of action, the truth of the matter being thathe and his predecessors-in-interest have always been inactual, open and continuous possession since timeimmemorial under claim of ownership of the portions of thelot in question and for the alleged malicious institution of thecomplaint he claims he has suffered moral damages in theamount of P 2,000.00, as well as the sum of P500.00 forattorney's fees. ...




9

On December 9, 1964, the trial court issued a pre-trialorder, after a pre-trial conference between the parties andtheir 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. GregorioM. Rubias. The defendant also appeared, assisted by hiscounsel Atty. Vicente R. Acsay.

A. During the pre-trial conference, the parties have agreedthat the following facts are attendant in this case and thatthey will no longer introduced any evidence, testimonial ordocumentary to prove them:

1. That Francisco Militante claimed ownership of aparcel of land located in the Barrio of General Luna,municipality of Barotac Viejo province of Iloilo, which hecaused to be surveyed on July 18-31, 1934, whereby hewas issued a plan Psu-99791 (Exhibit "B"). (The landclaimed contained an area of 171:3561 hectares.)

2. Before the war with Japan, Francisco Militante filedwith the Court of First Instance of Iloilo an application for the

registration of the title of the land technically described inpsu-99791 (Exh. "B") opposed by the Director of Lands, theDirector of Forestry and other oppositors. However, duringthe war with Japan, the record of the case was lost before itwas heard, so after the war Francisco Militante petitionedthis court to reconstitute the record of the case. The recordwas reconstituted on the Court of the First Instance of Iloiloand docketed as Land Case No. R-695, GLRO Rec. No.54852. The Court of First Instance heard the landregistration case on November 14, 1952, and after the trialthis court dismissed the application for registration. Theappellant, Francisco Militante, appealed from the decision ofthis Court to the Court of Appeals where the case wasdocketed 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, FranciscoMilitante sold to the plaintiff, Domingo Rubias the landtechnically described in psu-99791 (Exh. "A"). The sale wasduly recorded in the Office of the Register of Deeds for theprovince of Iloilo as Entry No. 13609 on July 11, 1960 (Exh."A-1").

(NOTE: As per deed of sale, Exh. A, what Militantepurportedly sold to plaintiff-appellant, his son-in-law, for thesum of P2,000.00 was "a parcel of untitled land having anarea 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 ofover 171 hectares originally claimed by Militante asapplicant, but which he expressly recognized during the trialto pertain to some oppositors, such as the Bureau of PublicWorks and Bureau of Forestry and several other individualoccupants and accordingly withdrew his application over thesame. This is expressly made of record in Exh. A, which isthe Court of Appeals' decision of 22 September 1958confirming the land registration court's dismissal ofMilitante's application for registration.)

4. On September 22,1958 the Court of appeals inCA-G.R. No. 13497-R promulgated its judgment confirming

the decision of this Court in Land Case No. R-695, GLRORec. No. 54852 which dismissed the application forRegistration filed by Francisco Militante (Exh. "I").

5. Domingo Rubias declared the land described inExh. 'B' for taxation purposes under Tax Dec. No. 8585(Exh. "C") for 1957; Tax Dec. Nos. 9533 (Exh. "C-1") and10019 (Exh. "C-3")for the year 1961; Tax Dec. No. 9868

(Exh. "C-2") for the year 1964, paying the land taxes underTax Dec. No. 8585 and 9533 (Exh. "D", "D-1", "G-6").

6. Francisco Militante immediate predecessor-in-interest of the plaintiff, has also declared the land fortaxation purposes under Tax Dec. No. 5172 in 1940 (Exh."E") for 1945; under Tax Dec. No. T-86 (Exh. "E-1") for1948; under Tax Dec. No. 7122 (Exh. "2"), and paid the landtaxes for 1940 (Exhs. "G" and "G-7"), for 1945 46 (Exh. "G-1") for 1947 (Exh. "G-2"), for 1947 & 1948 (Exh. "G-3"), for1948 (Exh. "G-4"), and for 1948 and 1949 (Exh. "G-5").

7. Tax Declaration No. 2434 in the name of LiberatoDemontaño for the land described therein (Exh. "F") wascancelled by Tax. Dec. No. 5172 of Francisco Militante

(Exh. "E"). Liberato Demontaño paid the land tax under TaxDec. No. 2434 on Dec. 20, 1939 for the years 1938 (50%)and 1959 (Exh. "H").

8. The defendant had declared for taxation purposesLot No. 2 of the Psu-155241 under Tax Dec. Not. 8583 for1957 and a portion of Lot No. 2, Psu-155241, for 1945under Tax Dec. No. 8584 (Exh. "2-A" Tax No. 8583 (Exh."2") was revised by Tax Dec. No. 9498 in the name of thedefendant (Exh. "2-B") and Tax Dec. No. 8584 (Exh. "2-A")was cancelled by Tax Dec. No. 9584 also in the name of thedefendant (Exh. "2-C"). The defendant paid the land taxesfor Lot 2, Psu-155241, on Nov. 9, 1960 for the years 1945and 1946, for the year 1950, and for the year 1960 asshown by the certificate of the treasurer (Exh. "3"). The

defendant may present to the Court other land taxesreceipts for the payment of taxes for this lot.

9. The land claimed by the defendant as his own wassurveyed on June 6 and 7,1956, and a plan approved byDirector of Land on November 15, 1956 was issued,identified as Psu 155241 (Exh. "5").

10. On April 22, 1960, the plaintiff filed forcible Entryand Detainer case against Isaias Batiller in the Justice ofthe Peace Court of Barotac Viejo Province of Iloilo (Exh. "4")to which the defendant Isaias Batiller riled his answer on

August 29, 1960 (Exh. "4-A"). The Municipal Court ofBarotac Viejo after trial, decided the case on May 10, 1961in favor of the defendant and against the plaintiff (Exh. "4-B"). The plaintiff appealed from the decision of the MunicipalCourt of Barotac Viejo which was docketed in this Court asCivil Case No. 5750 on June 3, 1961, to which thedefendant, Isaias Batiller, on June 13, 1961 filed his answer(Exh. "4-C"). And this Court after the trial. decided the caseon November 26, 1964, in favor of the defendant, IsaiasBatiller and against the plaintiff (Exh. "4-D").

(NOTE: As per Exh. 4-B, which is the Iloilo court of firstinstance decision of 26 November 1964 dismissing plaintiff'stherein complaint for ejectment against defendant, the iloilocourt expressly found "that plaintiff's complaint is unjustified,intended to harass the defendant" and "that the defendant,




10

Isaias Batiller, has a better right to possess the land inquestion described in Psu 155241 (Exh. "3"), Isaias Batillerhaving been in the actual physical possession thereof undera claim of title many years before Francisco Militante soldthe land to the plaintiff-hereby dismissing plaintiff'scomplaint and ordering the plaintiff to pay the defendantattorney's fees ....")

B. During the trial of this case on the merit, theplaintiff will prove by competent evidence the following:

1. That the land he purchased from FranciscoMilitante under Exh. "A" was formerly owned and possessedby Liberato Demontaño but that on September 6, 1919 theland was sold at public auction by virtue of a judgment in aCivil Case entitled "Edw J. Pflieder plaintiff vs. LiberatoDemontaño 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 Registerof Deeds of Iloilo on August 4, 1920, under Primary EntryNo. 69 (Exh. "1"), and a definite Deed of Sale was executedby 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 ofIloilo on February 10, 1934 (Exh. "1-1").

2. On September 22, 1934, Yap Pongco sold thisland to Francisco Militante as evidenced by a notarial deed(Exh. "J") which was registered in the Registry of Deeds onMay 13, 1940 (Exh. "J-1").

3. That plaintiff suffered damages alleged in hiscomplaint.

C. Defendants, on the other hand will prove bycompetent evidence during the trial of this case thefollowing facts:

1. That lot No. 2 of the Psu-1552 it (Exh. '5') wasoriginally owned and possessed by Felipe Batiller,grandfather of the defendant Basilio Batiller, on the death ofthe former in 1920, as his sole heir. Isaias Batillersucceeded his father , Basilio Batiller, in the ownership andpossession of the land in the year 1930, and since then upto the present, the land remains in the possession of thedefendant, his possession being actual, open, public,peaceful and continuous in the concept of an owner,exclusive of any other rights and adverse to all otherclaimants.

2. That the alleged predecessors in interest of theplaintiff have never been in the actual possession of theland and that they never had any title thereto.

3. That Lot No. 2, Psu 155241, the subject of FreePatent application of the defendant has been approved.

4. The damages suffered by the defendant, asalleged in his counterclaim."' 1

The appellate court further related the developments of thecase, as follows:

On August 17, 1965, defendant's counsel manifested inopen court that before any trial on the merit of the casecould proceed he would file a motion to dismiss plaintiff's

complaint which he did, alleging that plaintiff does not havecause of action against him because the property in disputewhich he (plaintiff) allegedly bought from his father-in-law,Francisco Militante was the subject matter of LRC No. 695filed in the CFI of Iloilo, which case was brought on appealto this Court and docketed as CA-G.R. No. 13497-R inwhich aforesaid case plaintiff was the counsel on record ofhis father-in-law, Francisco Militante. Invoking Arts. 1409

and 1491 of the Civil Code which reads:

'Art. 1409. The following contracts are inexistent and voidfrom the beginning:

xxx xxx xxx

(7) Those expressly prohibited by law.

'ART. 1491. The following persons cannot acquire anypurchase, even at a public auction, either in person ofthrough the mediation of another: .

xxx xxx xxx

(5) Justices, judges, prosecuting attorneys, clerks ofsuperior and inferior courts, and other officers andemployees connected with the administration of justice, theproperty and rights of in litigation or levied upon anexecution before the court within whose jurisdiction orterritory they exercise their respective functions; thisprohibition includes the act of acquiring an assignment andshall apply to lawyers, with respect to the property andrights which may be the object of any litigation in which theymay take part by virtue of their profession.'

defendant claims that plaintiff could not have acquired anyinterest in the property in dispute as the contract he(plaintiff) had with Francisco Militante was inexistent andvoid. (See pp. 22-31, Record on Appeal). Plaintiff strongly

opposed defendant's motion to dismiss claiming thatdefendant can not invoke Articles 1409 and 1491 of the CivilCode as Article 1422 of the same Code provides that 'Thedefense of illegality of contracts is not available to thirdpersons whose interests are not directly affected' (See pp.32-35 Record on Appeal).

On October 18, 1965, the lower court issued an orderdisclaiming plaintiffs complaint (pp. 42-49, Record on

Appeal.) In the aforesaid order of dismissal the lower courtpractically agreed with defendant's contention that thecontract (Exh. A) between plaintiff and Francism Militantewas null and void. In due season plaintiff filed a motion forreconsideration (pp. 50-56 Record on Appeal) which wasdenied by the lower court on January 14, 1966 (p. 57,Record on Appeal).

Hence, this appeal by plaintiff from the orders of October18, 1965 and January 14, 1966.

Plaintiff-appellant imputes to the lower court the followingerrors:

'1. The lower court erred in holding that the contract ofsale between the plaintiff-appellant and his father-in-law,Francisco Militante, Sr., now deceased, of the propertycovered by Plan Psu-99791, (Exh. "A") was void, not




11

voidable because it was made when plaintiff-appellant wasthe counsel of the latter in the Land Registration case.

'2. The lower court erred in holding that thedefendant-appellee is an interested person to question thevalidity of the contract of sale between plaintiff-appellantand the deceased, Francisco Militante, Sr.

'3. The lower court erred in entertaining the motion todismiss of the defendant-appellee after he had already filedhis answer, and after the termination of the pre-trial, whenthe said motion to dismiss raised a collateral question.

'4. The lower court erred in dismissing the complaintof the plaintiff-appellant.'

The appellate court concluded that plaintiffs "assignment oferrors gives rise to two (2) legal posers —(1) whether or notthe contract of sale between appellant and his father-in-law,the late Francisco Militante over the property subject of PlanPsu-99791 was void because it was made when plaintiffwas counsel of his father-in-law in a land registration caseinvolving the property in dispute; and (2) whether or not the

lower court was correct in entertaining defendant-appellee'smotion to dismiss after the latter had already filed hisanswer and after he (defendant) and plaintiff-appellant hadagreed on some matters in a pre-trial conference. Hence, itselevation of the appeal to this Court as involving purequestions of law.

It is at once evident from the foregoing narration that thepre-trial conference held by the trial court at which theparties with their counsel agreed and stipulated on thematerial and relevant facts and submitted their respectivedocumentary exhibits as referred to in the pre-trial order,supra, 2 practically amounted to a fulldress trial whichplaced on record all the facts and exhibits necessary foradjudication of the case.

The three points on which plaintiff reserved the presentationof evidence at the-trial dealing with the source of the allegedright and title of Francisco Militante's predecessors, supra, 3actually are already made of record in the stipulated factsand admitted exhibits. The chain of Militante's alleged titleand right to the land as supposedly traced back to LiberatoDemontaño was actually asserted by Militante (and hisvendee, lawyer and son-in-law, herein plaintiff) in the landregistration case and rejected by the Iloilo land registrationcourt which dismissed Militante's application for registrationof the land. Such dismissal, as already stated, was affirmedby the final judgment in 1958 of the Court of Appeals. 4

The four points on which defendant on his part reserved thepresentation of evidence at the trial dealing with his and hisancestors' continuous, open, public and peacefulpossession in the concept of owner of the land and theDirector of Lands' approval of his survey plan thereof, supra,5 are likewise already duly established facts of record, in theland registration case as well as in the ejectment casewherein the Iloilo court of first instance recognized thesuperiority of defendant's right to the land as againstplaintiff.

No error was therefore committed by the lower court indismissing plaintiff's complaint upon defendant's motionafter the pre-trial.

1. The stipulated facts and exhibits of recordindisputably established plaintiff's lack of cause of actionand justified the outright dismissal of the complaint.Plaintiff's claim of ownership to the land in question waspredicated on the sale thereof for P2,000.00 made in 1956by his father-in- law, Francisco Militante, in his favor, at atime when Militante's application for registration thereof had

already been dismissed by the Iloilo land registration courtand was pending appeal in the Court of Appeals.

With the Court of Appeals' 1958 final judgment affirming thedismissal of Militante's application for registration, the lackof any rightful claim or title of Militante to the land wasconclusively and decisively judicially determined. Hence,there was no right or title to the land that could betransferred or sold by Militante's purported sale in 1956 infavor of plaintiff.

Manifestly, then plaintiff's complaint against defendant, to bedeclared absolute owner of the land and to be restored topossession thereof with damages was bereft of any factualor legal basis.

2. No error could be attributed either to the lowercourt's holding that the purchase by a lawyer of the propertyin litigation from his client is categorically prohibited by

Article 1491, paragraph (5) of the Philippine Civil Code,reproduced supra; 6 and that consequently, plaintiff'spurchase of the property in litigation from his client(assuming that his client could sell the same since asalready shown above, his client's claim to the property wasdefeated and rejected) was void and could produce no legaleffect, by virtue of Article 1409, paragraph (7) of our CivilCode which provides that contracts "expressly prohibited ordeclared void by law' are "inexistent and that "(T)hesecontracts cannot be ratified. Neither can the right to set upthe defense of illegality be waived."

The 1911 case of Wolfson vs. Estate of Martinez 7 reliedupon by plaintiff as holding that a sale of property inlitigation to the party litigant's lawyer "is not void butvoidable at the election of the vendor" was correctly held bythe lower court to have been superseded by the later 1929case of Director of Lands vs. Abagat. 8 In this later case of

Abagat, the Court expressly cited two antecedent casesinvolving the same transaction of purchase of property inlitigation by the lawyer which was expressly declared invalidunder Article 1459 of the Civil Code of Spain (of which

Article 1491 of our Civil Code of the Philippines is thecounterpart) upon challenge thereof not by the vendor-clientbut by the adverse parties against whom the lawyer was toenforce his rights as vendee thus acquired.

These two antecedent cases thus cited in Abagat clearlysuperseded (without so expressly stating the previous rulingin Wolfson:

The spouses, Juan Soriano and Vicente Macaraeg, werethe owners of twelve parcels of land. Vicenta Macaraeg diedin November, 1909, leaving a large number of collateralheirs but no descendants. Litigation between the survivinghusband, Juan Soriano, and the heirs of Vicentaimmediately arose, and the herein appellant SisenandoPalarca acted as Soriano's lawyer. On May 2, 1918, Sorianoexecuted a deed for the aforesaid twelve parcels of land in




12

favor of Sisenando Palarca and on the following day, May 3,1918, Palarca filed an application for the registration of theland in the deed. After hearing, the Court of First Instancedeclared that the deed was invalid by virtue of theprovisions of article 1459 of the Civil Code, which prohibitslawyers and solicitors from purchasing property rightsinvolved in any litigation in which they take part by virtue oftheir profession. The application for registration was

consequently denied, and upon appeal by Palarca to theSupreme Court, the judgement of the lower court wasaffirmed by a decision promulgated November 16,1925.(G.R. No. 24329, Palarca vs. Director of Lands, notreported.)

In the meantime cadastral case No. 30 of the Province ofTarlac was instituted, and on August 21, 1923, EleuteriaMacaraeg, as administratrix of the estate of VicenteMacaraeg, filed claims for the parcels in question.Buenaventura Lavitoria administrator of the estate of JuanSoriano, did likewise and so did Sisenando Palarca. In adecision dated June 21, 1927, the Court of First Instance,Judge Carballo presiding, rendered judgment in favor ofPalarea and ordered the registration of the land in his name.

Upon appeal to this court by the administration of theestates of Juan Soriano and Vicente Macaraeg, the

judgment of the court below was reversed and the landadjudicated to the two estates as conjugal property of thedeceased 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 affirmingthe invalidity and nullity of the lawyer's purchase of the landin litigation from his client, ordered the issuance of a writ ofpossession for the return of the land by the lawyer to theadverse parties without reimbursement of the price paid byhim and other expenses, and ruled that "the appellantPalarca is a lawyer and is presumed to know the law. Hemust, therefore, from the beginning, have been well aware

of the defect in his title and is, consequently, a possessor inbad faith."

As already stated, Wolfson and Abagat were decided withrelation to Article 1459 of the Civil Code of Spain thenadopted here, until it was superseded on August 30, 1950by the Civil Code of the Philippines whose counterpartprovision is Article 1491.

Article 1491 of our Civil Code (like Article 1459 of theSpanish Civil Code) prohibits in its six paragraphs certainpersons, by reason of the relation of trust or their peculiarcontrol over the property, from acquiring such property intheir trust or control either directly or indirectly and "even ata public or judicial auction," as follows: (1) guardians; (2)agents; (3) administrators; (4) public officers andemployees; judicial officers and employees, prosecutingattorneys, and lawyers; and (6) others especiallydisqualified by law.

In Wolfson which involved the sale and assignment of amoney judgment by the client to the lawyer, Wolfson, whoseright to so purchase the judgment was being challenged bythe judgment debtor, the Court, through Justice Moreland,then expressly reserved decision on "whether or not the

judgment in question actually falls within the prohibition ofthe article" and held only that the sale's "voidability can notbe asserted by one not a party to the transaction or his

representative," citing from Manresa 10 that "(C)onsideringthe question from the point of view of the civil law, the viewtaken by the code, we must limit ourselves to classifying asvoid all acts done contrary to the express prohibition of thestatute. Now then: As the code does not recognize suchnullity by the mere operation of law, the nullity of the actshereinbefore referred to must be asserted by the personhaving the necessary legal capacity to do so and decreed

by a competentcourt." 11

The reason thus given by Manresa in considering suchprohibited acquisitions under Article 1459 of the SpanishCivil Code as merely voidable at the instance and option ofthe vendor and not void — "that the Code does notrecognize such nullity de pleno derecho" —is no longer trueand applicable to our own Philippine Civil Code which doesrecognize 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 "expresslyprohibited or declared void by law" and declares suchcontracts "inexistent and void from the beginning." 12

The Supreme Court of Spain and modern authors havelikewise veered from Manresa's view of the Spanish codalprovision itself. In its sentencia of 11 June 1966, theSupreme Court of Spain ruled that the prohibition of Article1459 of the Spanish Civil Code is based on public policy,that violation of the prohibition contract cannot be validatedby confirmation or ratification, holding that:

... la prohibicion que el articulo 1459 del C.C. establecerespecto a los administradores y apoderados, la cual tieneconforme a la doctrina de esta Sala, contendia entre otras,en S. de 27-5-1959, un fundamento de orden moral lugar laviolacion de esta a la nulidad de pleno derecho del acto onegocio celebrado, ... y prohibicion legal, afectante ordenpublico, no cabe con efecto alguno la aludida retification ...

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The criterion of nullity of such prohibited contracts under Article 1459 of the Spanish Civil Code (Article 1491 of ourCivil Code) as a matter of public order and policy as appliedby the Supreme Court of Spain to administrators and agentsin its above cited decision should certainly apply withgreater reason to judges, judicial officers, fiscals andlawyers under paragraph 5 of the codal article.

Citing the same decisions of the Supreme Court of Spain,Gullon Ballesteros, his "Curso de Derecho Civil, (ContratosEspeciales)" (Madrid, 1968) p. 18, affirms that, with respectto Article 1459, Spanish Civil Code:.

Que caracter tendra la compra que se realice por estaspersonas? Porsupuesto no cabe duda de que el caso (art.)1459, 40 y 50, la nulidad esabsoluta porque el motivo de laprohibicion es de orden publico. 14

Perez Gonzales in such view, stating that "Dado el caracterprohibitivo delprecepto, la consequencia de la infraccion esla nulidad radical y ex lege." 15

Castan, quoting Manresa's own observation that.

"El fundamento do esta prohibicion es clarisimo. No sa tratacon este precepto tan solo de guitar la ocasion al fraude;




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persiguese, ademasel proposito de rodear a las personasque intervienen en la administrcionde justicia de todos losretigios que necesitan pora ejercer su ministerio librandolosde toda suspecha, que aunque fuere in fundada, redunduraendescredito de la institucion." 16 arrives at the contraryand now accepted view that "Puede considerace en nuestroderecho inexistente 'o radicalmente nulo el contrato en lossiguentes cases: a) ...; b) cuando el contrato se ha

celebrado en violacion de una prescripcion 'o prohibicionlegal, fundada sobre motivos de orden publico (hipotesis delart. 4 del codigo) ..." 17

It is noteworthy that Caltan's rationale for his conclusion thatfundamental consideration of public policy render void andinexistent such expressly prohibited purchase (e.g. by publicofficers and employees of government property intrusted tothem and by justices, judges, fiscals and lawyers of propertyand 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 definiteand permanent and cannot be cured by ratification. Thepublic interest and public policy remain paramount and donot permit of compromise or ratification. In his aspect, thepermanent disqualification of public and judicial officers andlawyers grounded on public policy differs from the first threecases of guardians, agents and administrators (Article 1491,Civil Code), as to whose transactions it had been opinedthat they may be "ratified" by means of and in "the form of anew contact, in which cases its validity shall be determinedonly by the circumstances at the time the execution of suchnew contract. The causes of nullity which have ceased toexist 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 wasimpossible may have become possible; or the intentionwhich could not be ascertained may have been clarified bythe parties. The ratification or second contract would thenbe valid from its execution; however, it does not retroact tothe date of the first contract." 19

As applied to the case at bar, the lower court thereforeproperly acted upon defendant-appellant's motion to dismisson the ground of nullity of plaintiff's alleged purchase of theland, since its juridical effects and plaintiff's alleged cause ofaction founded thereon were being asserted againstdefendant-appellant. The principles governing the nullity ofsuch prohibited contracts and judicial declaration of theirnullity have been well restated by Tolentino in his treatise onour Civil Code, as follows:

Parties Affected. —Any person may invoke the in existenceof the contract whenever juridical effects founded thereonare asserted against him. Thus, if there has been a voidtransfer of property, the transferor can recover it by theaccion reinvindicatoria; and any prossessor may refuse todeliver it to the transferee, who cannot enforce the contract.Creditors may attach property of the debtor which has beenalienated by the latter under a void contract; a mortgageecan allege the inexistence of a prior encumbrance; a debtorcan assert the nullity of an assignment of credit as adefense to an action by the assignee.

Action On Contract. — Even when the contract is void orinexistent, an action is necessary to declare its inexistence,when it has already been fulfilled. Nobody can take the lawinto his own hands; hence, the intervention of the competentcourt is necessary to declare the absolute nullity of thecontract and to decree the restitution of what has beengiven 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 needbring an action to declare its nullity; but if any party shouldbring an action to enforce it, the other party can simply setup the nullity as a defense. 20

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

[G.R. No. L-8477. May 31, 1956.]

THE PHILIPPINE TRUST COMPANY, as Guardian of theProperty of the minor, MARIANO L. BERNARDO, Petitioner,vs. SOCORRO ROLDAN, FRANCISCO HERMOSO, FIDELC. RAMOS and EMILIO CRUZ, Respondents.

D E C I S I O N

BENGZON, J.:

As guardian of the property of the minor Mariano L.Bernardo, the Philippine Trust Company filed in the Manilacourt of first instance a complaint to annul two contractsregarding 17 parcels of land:chanroblesvirtuallawlibrary (a)sale thereof by Socorro Roldan, as guardian of said minor,to Fidel C. Ramos; chan roblesvirtualawlibraryand (b) salethereof by Fidel C. Ramos to Socorro Roldan personally.The complaint likewise sought to annul a conveyance offour out of the said seventeen parcels by Socorro Roldan toEmilio Cruz.

The action rests on the proposition that the first two saleswere in reality a sale by the guardian to herself —therefore,null and void under Article 1459 of the Civil Code. As to thethird conveyance, it is also ineffective, because SocorroRoldan had acquired no valid title to convey to Cruz.

The material facts of the case are not complicated. These17 parcels located in Guiguinto, Bulacan, were part of theproperties inherited by Mariano L. Bernardo from his father,Marcelo Bernardo, deceased. In view of his minority,




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guardianship proceedings were instituted, wherein SocorroRoldan was appointed his guardian. She was the survivingspouse of Marcelo Bernardo, and the stepmother of saidMariano L. Bernardo.

On July 27, 1947, Socorro Roldan filed in said guardianshipproceedings (Special Proceeding 2485, Manila), a motionasking for authority to sell as guardian the 17 parcels for the

sum of P14,700 to Dr. Fidel C. Ramos, the purpose of thesale being allegedly to invest the money in a residentialhouse, which the minor desired to have on Tindalo Street,Manila. The motion was granted.

On August 5, 1947 Socorro Roldan, as guardian, executedthe proper deed of sale in favor of her brother-in-law Dr.Fidel C. Ramos (Exhibit A-1), and on August 12, 1947 sheasked for, and obtained, judicial confirmation of the sale. On

August 13, 1947, Dr. Fidel C. Ramos executed in favor ofSocorro Roldan, personally, a deed of conveyance coveringthe same seventeen parcels, for the sum of P15,000(Exhibit A-2). And on October 21, 1947 Socorro Roldan soldfour 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 asguardian, on August 10, 1948. And this litigation, started twomonths later, seeks to undo what the previous guardian haddone. The step-mother in effect, sold to herself, theproperties of her ward, contends the Plaintiff, and the saleshould be annulled because it violates Article 1459 of theCivil Code prohibiting the guardian from purchasing “ eitherin person or through the mediation of another” the propertyof her ward.

The court of first instance, following our decision inRodriguez vs. Mactal, 60 Phil. 13 held the article was notcontrolling, because there was no proof that Fidel C. Ramoswas a mere intermediary or that the latter had previously

agreed with Socorro Roldan to buy the parcels for herbenefit.

However, taking the former guardian at her word - sheswore she had repurchased the lands from Dr. Fidel C.Ramos to preserve it and to give her protege opportunity toredeem — the court rendered judgment upholding thecontracts but allowing the minor to repurchase all theparcels by paying P15,000, within one year.

The Court of Appeals affirmed the judgment, adding that theminor knew the particulars of, and approved the transaction,and that “ only clear and positive evidence of fraud or badfaith, and not mere insinuations and inferences willovercome the presumptions that a sale was concluded in allgood faith for value” .

At first glance the resolutions of both courts accomplishedsubstantial justice:chanroblesvirtuallawlibrary the minorrecovers his properties. But if the conveyances are annulledas prayed for, the minor will obtain a betterdeal:chanroblesvirtuallawlibrary he receives all the fruits ofthe lands from the year 1947 (Article 1303 Civil Code) andwill return P14,700, not P15,000.

To our minds the first two transactions herein describedcouldn’ t be in a better juridical situation than if thisguardian had purchased the seventeen parcels on the day

following the sale to Dr. Ramos. Now, if she was willing topay P15,000 why did she sell the parcels for less? In oneday (or actually one week) the price could not have risen sosuddenly. Obviously when, seeking approval of the sale sherepresented the price to be the best obtainable in themarket, she was not entirely truthful. This is one phase toconsider.

Again, supposing she knew the parcels were actually worthP17,000; chan roblesvirtualawlibrarythen she agreed to sellthem to Dr. Ramos at P14,700; chanroblesvirtualawlibraryand knowing the realty’ s value sheoffered him the next day P15,000 or P15,500, and got it.Will there be any doubt that she was recreant to herguardianship, and that her acquisition should be nullified?Even without proof that she had connived with Dr. Ramos.Remembering the general doctrine that guardianship is atrust of the highest order, and the trustee cannot be allowedto have any inducement to neglect his ward’ s interest andin line with the court’ s suspicion whenever the guardianacquires the ward’ s property 1 we have no hesitation todeclare that in this case, in the eyes of the law, SocorroRoldan took by purchase her ward’ s parcels thru Dr.

Ramos, and that Article 1459 of the Civil Code applies.

She acted it may be true without malice; chanroblesvirtualawlibrarythere may have been no previousagreement between her and Dr. Ramos to the effect that thelatter would buy the lands for her. But the stubborn factremains that she acquired her protege’ s properties,through her brother-in-law. That she planned to get them forherself at the time of selling them to Dr. Ramos, may bededuced from the very short time between the two sales(one week). The temptation which naturally besets aguardian so circumstanced, necessitates the annulment ofthe transaction, even if no actual collusion is proved (sohard to prove) between such guardian and the intermediatepurchaser. This would uphold a sound principle of equity

and justice. 2

We are aware of course that in Rodriguez vs. Mactal, 60Phil. p. 13 wherein the guardian Mactal sold in January1926 the property of her ward to Silverio Chioco, and inMarch 1928 she bought it from Chioco, this Courtsaid:chanroblesvirtuallawlibrary

“ In order to bring the sale in this case within the part of Article 1459, quoted above, it is essential that the proofsubmitted establish some agreement between SilverioChioco and Trinidad Mactal to the effect that Chioco shouldbuy the property for the benefit of Mactal. If there was nosuch agreement, either express or implied, then the salecannot be set aside cralaw . (Page 16; chanroblesvirtualawlibraryItalics supplied.)”

However, the underlined portion was not intended toestablish a general principle of law applicable to allsubsequent litigations. It merely meant that the subsequentpurchase by Mactal could not be annulled in that particularcase because there was no proof of a previous agreementbetween Chioco and her. The court then considered suchproof necessary to establish that the two sales were actuallypart of one scheme —guardian getting the ward’ s propertythrough another person —because two years had elapsedbetween the sales. Such period of time was sufficient todispel the natural suspicion of the guardian’ s motives or




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actions. In the case at bar, however, only one week hadelapsed. And if we were technical, we could say, only oneday 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 tothe minor, Appellee’ s attorney alleges that the money(P14,700) invested in the house on Tindalo Street produced

for him rentals of P2,400 yearly; chanroblesvirtualawlibrarywhereas the parcels of land yielded tohis step-mother only an average of P1,522 per year. 3 Theargument would carry some weight if that house had beenbuilt out of the purchase price of P14,700 only. 4 One thingis certain:chanroblesvirtuallawlibrary the calculation doesnot include the price of the lot on which the house waserected. Estimating such lot at P14,700 only, (ordinarily thecity lot is more valuable than the building) the result is thatthe price paid for the seventeen parcels gave the minor anincome of only P1,200 a year, whereas the harvest from theseventeen parcels netted his step-mother a yearly profit ofP1,522.00. The minor was thus on the losing end.

Hence, from both the legal and equitable standpoints these

three sales should not besustained:chanroblesvirtuallawlibrary the first two forviolation of article 1459 of the Civil Code; chanroblesvirtualawlibraryand the third because Socorro Roldancould pass no title to Emilio Cruz. The annulment carrieswith is (Article 1303 Civil Code) the obligation of SocorroRoldan to return the 17 parcels together with their fruits andthe duty of the minor, through his guardian to repay P14,700with legal interest.

Judgment is therefore rendered:chanroblesvirtuallawlibrary

a. Annulling the three contracts of sale in question; chanroblesvirtualawlibraryb. declaring the minor as the owner ofthe seventeen parcels of land, with the obligation to return

to Socorro Roldan the price of P14,700 with legal interestfrom August 12, 1947; chan roblesvirtualawlibraryc.Ordering Socorro Roldan and Emilio Cruz to deliver saidparcels of land to the minor; chan roblesvirtualawlibraryd.Requiring Socorro Roldan to pay him beginning with 1947the fruits, which her attorney admits, amounted to P1,522 ayear; chan roblesvirtualawlibrarye. Authorizing the minor todeliver directly to Emilio Cruz, out of the price of P14,700above mentioned, the sum of P3,000; chanroblesvirtualawlibraryand f. charging Appellees with thecosts. SO ORDERED.

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