Sales Cases Part 1

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Republic of the PhilippinesSUPREME COURTManilaTHIRD DIVISION

G.R. No. L-59266 February 29, 1988

SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners, vs.HON. COURT OF APPEALS andATILANO G. JABIL, respondents.

BIDIN,J.:

This is a petition for review on certiorari seeking the reversal of the: (1) Decision * of the 9thDivision, Court of Appeals dated July 31,1981, affirming with modification the Decision, dated

August 25, 1972 of the Court of First Instance ** of Cebu in civil Case No. 23-L entitled AtilanoG. Jabil vs. Silvestre T. Dignos and Isabela Lumungsod de Dignos and Panfilo Jabalde, as

Attorney-in-Fact of Luciano Cabigas and Jovita L. de Cabigas; and (2) its Resolution dated

December 16, 1981, denying defendant-appellant's (Petitioner's) motion for reconsideration,

for lack of merit.

The undisputed facts as found by the Court of Appeals are as follows:

The Dignos spouses were owners of a parcel of land, known as Lot No. 3453, of the cadastral

survey of Opon, Lapu-Lapu City. On June 7, 1965, appellants (petitioners) Dignos spouses sold

the said parcel of land to plaintiff-appellant (respondent Atilano J. Jabil) for the sum of

P28,000.00, payable in two installments, with an assumption of indebtedness with the First

Insular Bank of Cebu in the sum of P12,000.00, which was paid and acknowledged by the

vendors in the deed of sale (Exh. C) executed in favor of plaintiff-appellant, and the next

installment in the sum of P4,000.00 to be paid on or before September 15, 1965.

On November 25, 1965, the Dignos spouses sold the same land in favor of defendants spouses,Luciano Cabigas and Jovita L. De Cabigas, who were then U.S. citizens, for the price of

P35,000.00. A deed of absolute sale (Exh. J, also marked Exh. 3) was executed by the Dignos

spouses in favor of the Cabigas spouses, and which was registered in the Office of the Register

of Deeds pursuant to the provisions of Act No. 3344.

As the Dignos spouses refused to accept from plaintiff-appellant the balance of the purchase

price of the land, and as plaintiff- appellant discovered the second sale made by defendants-

appellants to the Cabigas spouses, plaintiff-appellant brought the present suit. (Rollo, pp. 27-

28)

After due trial, the Court of first Instance of Cebu rendered its Decision on August 25,1972, the

decretal portion of which reads:

WHEREFORE, the Court hereby declares the deed of sale executed on November 25, 1965 by

defendant Isabela L. de Dignos in favor of defendant Luciano Cabigas, a citizen of the United

States of America, null and void ab initio, and the deed of sale executed by defendants Silvestre

T. Dignos and Isabela Lumungsod de Dignos not rescinded. Consequently, the plaintiff Atilano

G. Jabil is hereby ordered to pay the sum, of Sixteen Thousand Pesos (P16,000.00) to the


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I

THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN GROSSLY, INCORRECTLY

INTERPRETING THE TERMS OF THE CONTRACT, EXHIBIT C, HOLDING IT AS AN ABSOLUTE SALE,

EFFECTIVE TO TRANSFER OWNERSHIP OVER THE PROPERTY IN QUESTION TO THE RESPONDENT

AND NOT MERELY A CONTRACT TO SELL OR PROMISE TO SELL; THE COURT ALSO ERRED IN

MISAPPLYING ARTICLE 1371 AS WARRANTING READING OF THE AGREEMENT, EXHIBIT C, AS

ONE OF ABSOLUTE SALE, DESPITE THE CLARITY OF THE TERMS THEREOF SHOWING IT IS A

CONTRACT OF PROMISE TO SELL.

II

THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN INCORRECTLY APPLYING AND OR

IN MISAPPLYING ARTICLE 1592 OF THE NEW CIVIL CODE AS WARRANTING THE ERRONEOUS

CONCLUSION THAT THE NOTICE OF RESCISSION, EXHIBIT G, IS INEFFECTIVE SINCE IT HAS NOT

BEEN JUDICIALLY DEMANDED NOR IS IT A NOTARIAL ACT.

III

THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REJECTING THE APPLICABILITY OF

ARTICLES 2208,2217 and 2219 OF THE NEW CIVIL CODE AND ESTABLISHED JURISPRUDENCE AS

TO WARRANT THE AWARD OF DAMAGES AND ATTORNEY'S FEES TO PETITIONERS.

IV

PLAINTIFF'S COMPLAINT FOR SPECIFIC PERFORMANCE SHOULD HAVE BEEN DISMISSED, HE

HAVING COME TO COURT WITH UNCLEAN HANDS.

V

BY AND LARGE, THE COURT OF APPEALS COMMITTED AN ERROR IN AFFIRMING WITH

MODIFICATION THE DECISION OF THE TRIAL COURT DUE TO GRAVE MISINTERPRETATION,MISAPPLICATION AND MISAPPREHENSION OF THE TERMS OF THE QUESTIONED CONTRACT

AND THE LAW APPLICABLE THERETO.

The foregoing assignment of errors may be synthesized into two main issues, to wit:

I. Whether or not subject contract is a deed of absolute sale or a contract Lot sell.

II. Whether or not there was a valid rescission thereof.

There is no merit in this petition.

It is significant to note that this petition was denied by the Second Division of this Court in its

Resolution dated February 1 0, 1 982 for lack of merit, but on motion for reconsideration and

on the basis of all subsequent pleadings filed, the petition was given due course.

I.

The contract in question (Exhibit C) is a Deed of Sale, with the following conditions:

1. That Atilano G..Jabilis to pay the amount of Twelve Thousand Pesos P12,000.00) Phil.

Philippine Currency as advance payment;


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2. That Atilano G. Jabil is to assume the balance of Twelve Thousand Pesos (P12,000.00) Loan

from the First Insular Bank of Cebu;

3. That Atilano G. Jabil is to pay the said spouses the balance of Four. Thousand Pesos

(P4,000.00) on or before September 15,1965;

4. That the said spouses agrees to defend the said Atilano G. Jabil from other claims on the saidproperty;

5. That the spouses agrees to sign a final deed of absolute sale in favor of Atilano G. Jabil over

the above-mentioned property upon the payment of the balance of Four Thousand Pesos.

(Original Record, pp. 10-11)

In their motion for reconsideration, petitioners reiterated their contention that the Deed of

Sale (Exhibit "C") is a mere contract to sell and not an absolute sale; that the same is subject to

two (2) positive suspensive conditions, namely: the payment of the balance of P4,000.00 on or

before September 15,1965 and the immediate assumption of the mortgage of P12,000.00 with

the First Insular Bank of Cebu. It is further contended that in said contract, title or ownership

over the property was expressly reserved in the vendor, the Dignos spouses until thesuspensive condition of full and punctual payment of the balance of the purchase price shall

have been met. So that there is no actual sale until full payment is made (Rollo, pp. 51-52).

In bolstering their contention that Exhibit "C" is merely a contract to sell, petitioners aver that

there is absolutely nothing in Exhibit "C" that indicates that the vendors thereby sell, convey or

transfer their ownership to the alleged vendee. Petitioners insist that Exhibit "C" (or 6) is a

private instrument and the absence of a formal deed of conveyance is a very strong indication

that the parties did not intend "transfer of ownership and title but only a transfer after full

payment" (Rollo, p. 52). Moreover, petitioners anchored their contention on the very terms and

conditions of the contract, more particularly paragraph four which reads, "that said spouses has

agreed to sell the herein mentioned property to Atilano G. Jabil ..." and condition number fivewhich reads, "that the spouses agrees to sign a final deed of absolute sale over the mentioned

property upon the payment of the balance of four thousand pesos."

Such contention is untenable.

By and large, the issues in this case have already been settled by this Court in analogous cases.

Thus, it has been held that a deed of sale is absolute in nature although denominated as a

"Deed of Conditional Sale" where nowhere in the contract in question is a proviso or stipulation

to the effect that title to the property sold is reserved in the vendor until full payment of the

purchase price, nor is there a stipulation giving the vendor the right to unilaterally rescind the

contract the moment the vendee fails to pay within a fixed period Taguba v. Vda. de Leon, 132SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 305).

A careful examination of the contract shows that there is no such stipulation reserving the title

of the property on the vendors nor does it give them the right to unilaterally rescind the

contract upon non-payment of the balance thereof within a fixed period.

On the contrary, all the elements of a valid contract of sale under Article 1458 of the Civil Code,

are present, such as: (1) consent or meeting of the minds; (2) determinate subject matter; and


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(3) price certain in money or its equivalent. In addition, Article 1477 of the same Code provides

that "The ownership of the thing sold shall be transferred to the vendee upon actual or

constructive delivery thereof." As applied in the case of Froilan v. Pan Oriental Shipping Co., et

al. (12 SCRA 276), this Court held that in the absence of stipulation to the contrary, the

ownership of the thing sold passes to the vendee upon actual or constructive delivery thereof.

While it may be conceded that there was no constructive delivery of the land sold in the case at

bar, as subject Deed of Sale is a private instrument, it is beyond question that there was actual

delivery thereof. As found by the trial court, the Dignos spouses delivered the possession of the

land in question to Jabil as early as March 27,1965 so that the latter constructed thereon Sally's

Beach Resort also known as Jabil's Beach Resort in March, 1965; Mactan White Beach Resort on

January 15,1966 and Bevirlyn's Beach Resort on September 1, 1965. Such facts were admitted

by petitioner spouses (Decision, Civil Case No. 23-L; Record on Appeal, p. 108).

Moreover, the Court of Appeals in its resolution dated December 16,1981 found that the acts of

petitioners, contemporaneous with the contract, clearly show that an absolute deed of sale was

intended by the parties and not a contract to sell.

Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses, they

were no longer owners of the same and the sale is null and void.

II.

Petitioners claim that when they sold the land to the Cabigas spouses, the contract of sale was

already rescinded.

Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is on all fours with

the case at bar, the contract of sale being absolute in nature is governed by Article 1592 of the

Civil Code. It is undisputed that petitioners never notified private respondents Jabil by notarial

act that they were rescinding the contract, and neither did they file a suit in court to rescind thesale. The most that they were able to show is a letter of Cipriano Amistad who, claiming to be

an emissary of Jabil, informed the Dignos spouses not to go to the house of Jabil because the

latter had no money and further advised petitioners to sell the land in litigation to another

party (Record on Appeal, p. 23). As correctly found by the Court of Appeals, there is no showing

that Amistad was properly authorized by Jabil to make such extra-judicial rescission for the

latter who, on the contrary, vigorously denied having sent Amistad to tell petitioners that he

was already waiving his rights to the land in question. Under Article 1358 of the Civil Code, it is

required that acts and contracts which have for their object the extinguishment of real rights

over immovable property must appear in a public document.

Petitioners laid considerable emphasis on the fact that private respondent Jabil had no money

on the stipulated date of payment on September 15,1965 and was able to raise the necessary

amount only by mid-October 1965.

It has been ruled, however, that "where time is not of the essence of the agreement, a slight

delay on the part of one party in the performance of his obligation is not a sufficient ground for

the rescission of the agreement" (Taguba v. Vda. de Leon, supra). Considering that private

respondent has only a balance of P4,000.00 and was delayed in payment only for one month,


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Republic of the PhilippinesSUPREME COURTManilaEN BANC

G.R. No. L-29421 January 30, 1971

LINO ARTATES and MANUELA POJAS, plaintiffs-appellants, vs.DANIEL URBI, CRISANTOSOLIVEN, assisted by his Guardian 'ad litem,' MARCELA B. SOLIVEN, REMEGIO BUTACAN andNEMESIO OATE, in their private capacities and/or as Ex-Oficio Provincial Sheriff and DeputySheriff of Cagayan, respectively, and BIENVENIDO CACATIAN, as Deputy Register of Deeds ofCagayan, defendants-appellees.

Bienvenido J. Jimenez for plaintiffs-appellants.

Rogelio Re. Ubarde for defendants-appellees Daniel Urbi and Crisanto Soliven.

Alfredo J. Donato for defendant-appellant Nemesio Oate.

The Provincial Fiscal (Cagayan) for defendants-appellees Provincial Sheriff and Deputy Registerof Deeds.

REYES, J.B.L.,J.:

This is an appeal from the decision of the Court of First Instance of Cagayan (Civil Case No. 116-

T), involving the public sale of a homestead to satisfy a civil judgment against the grantee.

The records show that in an action filed in the Court of First Instance of Cagayan, the spouses

Lino Artates and Manuela Pojas sought annulment of the execution of a homestead1

covered by

Patent No. V-12775 issued to them by the proper land authorities on 23 September 1952, and

duly registered in their names (OCT No. P-572). The public sale, conducted by the ProvincialSheriff of Cagayan on 2 June 1962, was made to satisfy a judgment against Lino Artates in the

amount of P1,476.35, and awarded to Daniel Urbi by the Justice of the Peace Court of

Camilaniugan, Cagayan, in its Civil Case No. 40, for physical injuries inflicted by Artates upon

Urbi on 21 October 1955. In the execution sale, the property was sold to the judgment creditor,

the only bidder, for P1,476.35. In their complaint, the plaintiffs spouses alleged that the sale of

the homestead to satisfy an indebtedness of Lino Artates that accrued on 21 October 1955,

violated the provision of the Public Land law exempting said property from execution for any

debt contracted within five years from the date of the issuance of the patent; that defendant

Urbi, with the intention of defrauding the plaintiffs, executed on 26 June 1961 a deed for the

sale of the same parcel of land to defendant Crisanto Soliven, a minor, supposedly for the sumof P2,676.35; that as a result of the aforementioned transactions, defendants Urbi and Soliven

entered into the possession of the land and deprived plaintiffs of the owners' share in the rice

crops harvested during the agricultural year 1961-1962. Plaintiffs, therefore, prayed that the

public sale of the land to defendant Urbi, as well as the deed of sale executed by the latter in

favor of defendant Soliven, be declared null and void; that defendants be ordered to deliver to

plaintiffs possession of the land; and to pay to plaintiffs compensatory damages at the rate of

P1,000.00 per agricultural year until possession is finally restored to them, the sum of


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P2,000.00 as damages for maliciously casting cloud upon plaintiffs' title on the land, plus

attorneys' fees and costs.

The defendants2

filed separate answers disputing the averments of the complaint. On 29 March

1953, the court rendered judgment upholding the regularity and validity of the execution

conducted by the defendant Provincial Sheriff, but finding that the sale of the lands by

defendant Urbi to the minor Soliven was simulated, intended to place the property beyond the

reach of the judgment debtor, and that plaintiffs had offered to redeem the land within the 5-

year period allowed by Section 119 of the Public Land law for reacquisition thereof by the

grantee. Consequently, the court declared the sale of the land by defendant Daniel Urbi to

defendant Crisanto Soliven null and void; and Daniel Urbi was ordered to reconvey the property

to the plaintiffs upon the latter's payment (to Urbi) of the sum of P1,476.35 plus the sheriff's

fee incident to the sale at public auction, with interest thereon at the rate of 12% per annum

from 2 June 1961 until said amount shall have been fully paid, and the further sum of P783.45

representing the amount paid by defendant Daniel Urbi to the Philippine National Bank for the

release of the real estate mortgage on the land, contracted by Lino Artates, with legal rate of

interest thereon from 29 June 1961.

From this decision, the plaintiffs interposed the present appeal assigning several errors

allegedly committed by the court below, all hinged on the validity or invalidity of the public sale

of the lot involved herein.

Section 118 of the Public Land law (Commonwealth Act 141) provides as follows:

SEC. 118. Except in favor of the Government or any of its branches, units, or institution, or

legally constituted banking corporations, lands acquired under free patent or homestead

provisions shall not be subject to encumbrance or alienation from the date of the approval of

the application and for a term of five years from and after the date of issuance of the patent or

grant, nor shall they become liable to the satisfaction of any debt contracted prior to theexpiration of said period, but the improvements or crops on the land may be mortgaged or

pledged to qualified persons, associations or corporations.

xxx xxx xxx

As thus prescribed by law, for a period of five years from the date of the government grant,

lands acquired by free or homestead patent shall not only be incapable of being encumbered or

alienated except in favor of the government itself or any of its institutions or of duly constituted

banking corporations, but also, they shall not be liable to the satisfaction of any debt contracted

within the said period,3

whether or not the indebtedness shall mature during or after the

prohibited time.4

This provision against the alienation or encumbrance of public lands granted

within five years from the issuance of the patent, it has been held, is mandatory;5 a sale madein violation thereof is null and void

6and produces no effect whatsoever. Though it may be a

limitation on the right of ownership of the grantee, the salutary purpose of the provision

cannot be denied: it is to preserve and keep for the homesteader or his family the land given to

him gratuitously by the State,7

so that being a property owner, he may become and remain a

contented and useful member of our society.8


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In the case at bar, the homestead patent covering the land in question (No.V-12775) wasissued to appellants on 23 September 1952, and it was sold at public auction to satisfy the civil

liability of appellant Lino Artates to Daniel Urbi, adjudged in the 14 March 1956 decision of the

Justice of the Peace Court of Camalaniugan, Cagayan.lwph1.tThere can be no doubt that

the award of damages to Urbi created for Artates a civil obligation, an indebtedness, that

commenced from the date such obligation was decreed on 14 March 1956. Consequently, it isevident that it can not be enforced against, or satisfied out of, the sale of the homestead lot

acquired by appellants less than 5 years before the obligation accrued. And this is true even if

the sale involved here is not voluntary. For purposes of complying with the law, it is immaterial

that the satisfaction of the debt by the encumbrancing or alienation of the land grant made

voluntarily, as in the case of an ordinary sale, or involuntarily, such as that effected through levy

on the property and consequent sale at public auction. In both instances, the spirit of the law

would have been violated.9

Doubts have been expressed as to whether the words "debt contracted prior to the expiration

of said period" (of 5 years from and after the grant) would include the civil liability arising from

a crime committed by the homesteader. While there is no direct Philippine precedent on thispoint, there are various reasons why the non-liability of the homestead grant should be

extended to extra-contractual obligations. First and foremost, whether it be viewed as an

exemption or as a condition attached to the grant to encourage people to settle and cultivate

public land, the immunity in question is in consonance with the definite public policy underlying

these grants, which is to "preserve and keep in the family of the homesteader that portion of

public land which the State has given to him" so he may have a place to live with his family and

become a happy citizen and a useful member of society,10

and the exemption should not be

given restrictive application.11

A levy and sale of the homestead on account of extra-

contractual liability incurred would uproot the homesteader and his family and turn them into

homeless waifs as effectively as a levy for non-payment of a contractual debt. Secondly, the

word "debt" in exemption statutes,

in its wider sense, (it) includes all that is due to a man under any form or obligation or promise,

and covers not only obligations arising under contract, but also those imposed by law without

contract.12

Considering the protective policy of the law, it becomes apparent that "debt contracted" was

used in it in the sense of "obligation incurred," since Webster gives the verb to "contract" the

meaning of "to bring on; incur; acquire." Finally, our public land laws being copied from

American legislation,13

resort to American precedents reveals that, under the weight of

authority, exemption from "debts contracted" by a homesteader has been held to include

freedom from money liabilities, from torts or crimes committed by him, such as from bigamy(State vs. O'Neil, 7 Ore. 141, 11 Words and Phrases 318) or slander (Conway vs. Sullivan, 44 Ill.

451, 452), breach of contract (Flanagan vs. Forsythe, 50 Pac. 152, 153) or other torts (In Re

Radway, 20 Fed. Cas. 154, 162).

The execution sale in this case being null and void, the possession of the land should be

returned to the owners, the herein appellants. There would even be no need to order appellee

Urbi to execute a deed of reconveyance thereof to the owners. It appears that what was issued


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here to the judgment creditor/purchaser was only the sheriff's provisional certificate, under

which he derived no definite title or right until the period for redemption has expired, without a

redemption having been made,14

or issuance of a final deed or certificate of sale. In other

words, the purchaser herein has not acquired an absolute ownership or title in fee over the

land that would necessitate a deed of reconveyance to revert ownership back to the appellant

spouses. As things now stand, title to the property covered by OCT No. P-572 remains with theappellants, but Lino Artates shall continue to be under obligation to satisfy the judgment debt

to Daniel Urbi in the sum of P1,476.35, with legal interest thereon accruing from the date the

writ of execution was first returned unsatisfied. It appearing also that appellee Daniel Urbi paid

to the Philippine National Bank the sum of P783.45 to release the mortgage on the land,

appellants should reimburse him of said amount or of whatever amount appellants have

actually been benefited by the said payment.

FOR THE FOREGOING CONSIDERATIONS, the decision appealed from is hereby reversed, and

appellants are declared entitled to the return and possession of the lot covered by Original

Certificate of Title No. P-572, without prejudice to their continuing obligation to pay the

judgment debt, and expenses connected therewith. No costs.

Concepcion, C.J., Dizon, Zaldivar, Fernando and Makasiar, JJ., concur.

Separate Opinions

MAKALINTAL,J., concurring and dissenting:

I concur in the opinion of Justice Teehankee, and vote for the affirmance of the appealed

judgment in toto. The date of the issuance of the homestead patent to appellants was

September 23, 1952. Under Section 118 of the Public Land Law the homestead could not be

held liable for the satisfaction of any debt contracted during a period of five years thereafter, or

up to September 23, 1957. The opinion of the majority holds that since the civil obligation of

appellant Artates was adjudged on March 14, 1956, or within the said period, the homestead

cannot be held liable for its satisfaction.lwph1.tThe obvious implication is that if the

judgment had been delayed if for instance it had been rendered on September 24, 1957

the result would have been otherwise. I do not believe that such a difference should be made

to depend upon the more or less fortuitous and irrelevant circumstance of when the judgment

decreeing the obligation was rendered. I am for giving the word "contracted," as used in the

law, its ordinary meaning, for after all one who contracts with a homestead patentee during the

five-year period and accepts an obligation from him does so with full knowledge of the law's

exempting provision, which is deemed in effect a part of the agreement. The same, however, is

not true of the victim of a tort or a crime, as in the present case, for here his volition does not

come into play, the obligation being imposed entirely by law.

TEEHANKEE,J., concurring and dissenting:


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I vote for the affirmance in toto of the judgment appealed from. Hence, I concur in that portion

of the decision decreeing that appellants should reimburse appellee Urbi for the sums that Urbi

had paid to the Philippine National Bank to release the mortgage previously executed by

appellants on the subject homestead land, but I dissent from the principal decree thereof that

"title to the property .... remains with the appellants, but (appellant) Lino Artates shall continue

to be under obligation to satisfy the judgment debt to Daniel Urbi in the sum of P1,476.35, withlegal interest thereon accruing from the date the writ of execution was first returned

unsatisfied."

The issue at bar is whether the execution sale conducted in 1962 by the sheriff of Artates'

homestead lot acquired in 1952 to satisfy a 1956judgment against Artates in favor of Urbi (for

physical injuries inflicted by Artates upon Urbi in 1955), at which public sale the homestead lot

was sold to Urbi as the only bidder for the amount of his judgment credit in the sum of

P1,476.35 should be held null and void, as the majority would now hold, by virtue of the

prohibitory provisions of Section 118 of the Public Land Law. The key provision cited is that

providing that such homesteads "shall not be subject to encumbrance or alienation from the

date of the approval of the application andfor a term of five years from and after the date ofissuance of the patent or grant, nor shall they become liable to the satisfaction of any debt

contracted prior to the expiration of said period..".

Under the cited provision, all sales and alienations of the homestead property made by the

homesteader within the 5-year prohibition are null and void. Similarly, the homestead is held

not liable to the satisfaction of any debt contractedby the homesteader within the said period,

even though it be contractedthat the indebtedness shall mature afterthe prohibited period.

The law's purpose is clear and salutary: to preserve and keep for the homesteader the land

given to him gratuitously by the State and to protect him from his own weakness and

improvidence.

But in the case at bar, the judgment debt of the homesteader in favor of Ubi * was notcontractedbut duly adjudicated by a competent court in a lawful judgment for injuries inflicted

by Artates upon Urbi in 1955, which, gauging the same from the substantial amount of

P1,476.35 awarded, must have been quite serious. The happenstance that Artates' assault on

Urbi and the judgment award occurred within the prohibitory period should not be construed

beyond the law's text and intent to favor the wrongdoer Artates as against his victim Urbi.

We would have the anomalous situation thereby where, while recognizing that Artates has a

just and continuing obligation to pay Urbi the judgment debt, the debt would in effect be

nullified. The judgment debt was awarded since 1956 and would by now have prescribed, but

the majority decision would nullify the levy and public sale of the land to satisfy Urbi's judgment

credit conducted in 1966 long after the expiration of the statutory five-year prohibitory period.

The majority decision bars Urbiforeverfrom looking to Artates homestead property for the

satisfaction of his judgment credit. Artates' evasion of his judgment debt to Urbi is thereby

made certain. Any later creditor of Artates, real or simulated, from one day after the expiration

on 23 September 1957 of the said five-year prohibitory period is given sole and exclusive

preference to look to the said property for satisfaction as against Urbi beyond whose reach it is


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placed, contrary to the priority and preference that Urbi would lawfully be entitled to as a bona

fidejudgment creditor.

Finally, pursuant to Artates' offer to redeem the property from Urbi within the 5-year

redemption period allowed by section 119 of the Public Land Law, the lower court in its

appealed judgment so ordered such redemption and reconveyance. This strikes me as an

eminently fair and just judgment which should be upheld. Artates, the homesteader, is thus

assured of keeping and preserving his homestead in accordance ** with the spirit of the lawand the lawful judgment credit of Urbi against him is at the same time duly satisfied.

Castro and Villamor, JJ., concur.

BARREDO,J., dissenting:

I regret I am unable to concur in the ruling in this decision that the provision of Section 118 of

the Public Land Law which says that "lands acquired under free patent or homestead provisions

shall not ... become liable to the satisfaction of any debt contracted prior to the expiration of

five years from and after the date of issuance of the patent or grant" contemplates inclusively

"the civil liability arising from a crime committed by the homesteader" within said period.Indeed, I do not feel it is necessary to go deep into the Webster's dictionary meaning of the

verb "to contract" or to look for state court decisions in America, which could be isolated and

based on statutes not similarly phrased and oriented as Ours, to resolve the legal issue before

Us, it being sufficient, towards that end, to consider only the basic principles that underlie the

disposition of public lands under our own laws on the matter.

I understand that the ultimate reason behind the exceptions contained in the cited provision of

the Public Land Law is to insure the accomplishment of the double purpose of a homestead

grant, which is to encourage the development of arable lands and enhance their productivity in

the interest of the national economy and, at the same time, provide qualified citizens with a

piece of land which they and their families may call their own, on which they can live and whichthey can work and thereby become useful members of society. Accordingly, the homesteader is

safeguarded against his own weaknesses imprudence and improvidence by making it

impossible for him to directly or indirectly, by his voluntary act, dispose of or lose the land in

favor of others. So also do the exceptions make it impossible for him to allow himself to be

utilized as dummy of opportunists. If this understanding of mine is correct, it should follow

necessarily that for these purposes to be achieved, a homesteader must be, during the exempt

period, in physical condition to work the land granted to him. I cannot help wondering how a

person who has been convicted of a crime, the penalty for which is most likely to include a

period of incarceration can work on and develop his homestead in the manner conceived in the

law. That such a contingency may not be true in all instances, for there may be punishment ofcrimes with imprisonment of insignificantly short duration or even fines only, does not affect

the general principle involved. I consider it implicit in all land grants by the State that the

grantees bind themselves to be loyal and useful members of society, at least, during the period

of development thereof that the law contemplates, namely, the first five years from the grant.

Surely, one who commits an offense against the State and his fellow-citizens or other

inhabitants in this country is far from being a useful member of society. To be sure, his act of

committing an offense is voluntary, but this is not the voluntary act of imprudence and


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improvidence against which the law guards the homesteader even against himself. Crime is an

assault upon the sovereign people and the social order, even if not always directly against the

national security, and it is my considered view that, in principle, one who is guilty thereof

forfeits whatever rights he might have acquired by virtue of the State's generosity, particularly,

when, as in this case, it is a grant of a special privilege under specified circumstances and not

generally and commonly enjoyed by all citizens/inhabitants of the country.

For these reasons, I vote to affirm the judgment of the court a quo which, after all, recognizes

the appellants' right to redeem the land in question under Section 119 of the Public Land Law,

which is the most they should expect from the State, as thus, their right to the land is reinstated

without practically depriving the innocent victims of the crime herein involved of their remedy

for the private injury they have suffered. In other words, under the trial court's decision, all the

ends of justice and equity are subserved, whereas it is difficult to say the same of the decision

of this Court.

REYES, J.B.L.,J.:

Separate Opinions

MAKALINTAL,J., concurring and dissenting:

I concur in the opinion of Justice Teehankee, and vote for the affirmance of the appealed

judgment in toto. The date of the issuance of the homestead patent to appellants was

September 23, 1952. Under Section 118 of the Public Land Law the homestead could not be

held liable for the satisfaction of any debt contracted during a period of five years thereafter, or

up to September 23, 1957. The opinion of the majority holds that since the civil obligation of

appellant Artates was adjudged on March 14, 1956, or within the said period, the homesteadcannot be held liable for its satisfaction. The obvious implication is that if the judgment had

been delayed if for instance it had been rendered on September 24, 1957 the result would

have been otherwise. I do not believe that such a difference should be made to depend upon

the more or less fortuitous and irrelevant circumstance of when the judgment decreeing the

obligation was rendered. I am for giving the word "contracted," as used in the law, its ordinary

meaning, for after all one who contracts with a homestead patentee during the five-year period

and accepts an obligation from him does so with full knowledge of the law's exempting

provision, which is deemed in effect a part of the agreement.lwph1.tThe same, however, is

not true of the victim of a tort or a crime, as in the present case, for here his volition does not

come into play, the obligation being imposed entirely by law.

TEEHANKEE,J., concurring and dissenting:

I vote for the affirmance in toto of the judgment appealed from. Hence, I concur in that portion

of the decision decreeing that appellants should reimburse appellee Urbi for the sums that Urbi

had paid to the Philippine National Bank to release the mortgage previously executed by

appellants on the subject homestead land, but I dissent from the principal decree thereof that

"title to the property .... remains with the appellants, but (appellant) Lino Artates shall continue


14/66

to be under obligation to satisfy the judgment debt to Daniel Urbi in the sum of P1,476.35, with

legal interest thereon accruing from the date the writ of execution was first returned

unsatisfied."

The issue at bar is whether the execution sale conducted in 1962 by the sheriff of Artates'

homestead lot acquired in 1952 to satisfy a 1956judgment against Artates in favor of Urbi (for

physical injuries inflicted by Artates upon Urbi in 1955), at which public sale the homestead lot

was sold to Urbi as the only bidder for the amount of his judgment credit in the sum of

P1,476.35 should be held null and void, as the majority would now hold, by virtue of the

prohibitory provisions of Section 118 of the Public Land Law. The key provision cited is that

providing that such homesteads "shall not be subject to encumbrance or alienation from the

date of the approval of the application andfor a term of five years from and after the date of

issuance of the patent or grant, nor shall they become liable to the satisfaction of any debt

contracted prior to the expiration of said period..".

Under the cited provision, all sales and alienations of the homestead property made by the

homesteader within the 5-year prohibition are null and void. Similarly, the homestead is held

not liable to the satisfaction of any debt contractedby the homesteader within the said period,

even though it be contractedthat the indebtedness shall mature afterthe prohibited period.

The law's purpose is clear and salutary: to preserve and keep for the homesteader the land

given to him gratuitously by the State and to protect him from his own weakness and

improvidence.

But in the case at bar, the judgment debt of the homesteader in favor of Ubi * was not

contractedbut duly adjudicated by a competent court in a lawful judgment for injuries inflicted

by Artates upon Urbi in 1955, which, gauging the same from the substantial amount of

P1,476.35 awarded, must have been quite serious. The happenstance that Artates' assault on

Urbi and the judgment award occurred within the prohibitory period should not be construed

beyond the law's text and intent to favor the wrongdoer Artates as against his victim Urbi.

We would have the anomalous situation thereby where, while recognizing that Artates has a

just and continuing obligation to pay Urbi the judgment debt, the debt would in effect be

nullified. The judgment debt was awarded since 1956 and would by now have prescribed, but

the majority decision would nullify the levy and public sale of the land to satisfy Urbi's judgment

credit conducted in 1966 long after the expiration of the statutory five-year prohibitory

period.lwph1.tThe majority decision bars Urbiforeverfrom looking to Artates homestead

property for the satisfaction of his judgment credit. Artates' evasion of his judgment debt to

Urbi is thereby made certain. Any later creditor of Artates, real or simulated, from one day after

the expiration on 23 September 1957 of the said five-year prohibitory period is given sole and

exclusive preference to look to the said property for satisfaction as against Urbi beyond whose

reach it is placed, contrary to the priority and preference that Urbi would lawfully be entitled to

as a bona fidejudgment creditor.

Finally, pursuant to Artates' offer to redeem the property from Urbi within the 5-year

redemption period allowed by section 119 of the Public Land Law, the lower court in its

appealed judgment so ordered such redemption and reconveyance. This strikes me as an

eminently fair and just judgment which should be upheld. Artates, the homesteader, is thus


15/66

assured of keeping and preserving his homestead in accordance ** with the spirit of the law

and the lawful judgment credit of Urbi against him is at the same time duly satisfied.

Castro and Villamor, JJ., concur.

BARREDO,J., dissenting:

I regret I am unable to concur in the ruling in this decision that the provision of Section 118 ofthe Public Land Law which says that "lands acquired under free patent or homestead provisions

shall not ... become liable to the satisfaction of any debt contracted prior to the expiration of

five years from and after the date of issuance of the patent or grant" contemplates inclusively

"the civil liability arising from a crime committed by the homesteader" within said period.

Indeed, I do not feel it is necessary to go deep into the Webster's dictionary meaning of the

verb "to contract" or to look for state court decisions in America, which could be isolated and

based on statutes not similarly phrased and oriented as Ours, to resolve the legal issue before

Us, it being sufficient, towards that end, to consider only the basic principles that underlie the

disposition of public lands under our own laws on the matter.

I understand that the ultimate reason behind the exceptions contained in the cited provision ofthe Public Land Law is to insure the accomplishment of the double purpose of a homestead

grant, which is to encourage the development of arable lands and enhance their productivity in

the interest of the national economy and, at the same time, provide qualified citizens with a

piece of land which they and their families may call their own, on which they can live and which

they can work and thereby become useful members of society. Accordingly, the homesteader is

safeguarded against his own weaknesses imprudence and improvidence by making it

impossible for him to directly or indirectly, by his voluntary act, dispose of or lose the land in

favor of others. So also do the exceptions make it impossible for him to allow himself to be

utilized as dummy of opportunists. If this understanding of mine is correct, it should follow

necessarily that for these purposes to be achieved, a homesteader must be, during the exemptperiod, in physical condition to work the land granted to him. I cannot help wondering how a

person who has been convicted of a crime, the penalty for which is most likely to include a

period of incarceration can work on and develop his homestead in the manner conceived in the

law. That such a contingency may not be true in all instances, for there may be punishment of

crimes with imprisonment of insignificantly short duration or even fines only, does not affect

the general principle involved. I consider it implicit in all land grants by the State that the

grantees bind themselves to be loyal and useful members of society, at least, during the period

of development thereof that the law contemplates, namely, the first five years from the grant.

Surely, one who commits an offense against the State and his fellow-citizens or other

inhabitants in this country is far from being a useful member of society. To be sure, his act of

committing an offense is voluntary, but this is not the voluntary act of imprudence and

improvidence against which the law guards the homesteader even against himself. Crime is an

assault upon the sovereign people and the social order, even if not always directly against the

national security, and it is my considered view that, in principle, one who is guilty thereof

forfeits whatever rights he might have acquired by virtue of the State's generosity, particularly,

when, as in this case, it is a grant of a special privilege under specified circumstances and not

generally and commonly enjoyed by all citizens/inhabitants of the country.


16/66

For these reasons, I vote to affirm the judgment of the court a quo which, after all, recognizes

the appellants' right to redeem the land in question under Section 119 of the Public Land Law,

which is the most they should expect from the State, as thus, their right to the land is reinstated

without practically depriving the innocent victims of the crime herein involved of their remedy

for the private injury they have suffered. In other words, under the trial court's decision, all the

ends of justice and equity are subserved, whereas it is difficult to say the same of the decisionof this Court.

REYES, J.B.L., J., concu.r

Footnotes

1 Lot No. 151 of the Allacapan Public Land Subdivision, situated in barrio Allig, municipality of

Allacapan, province of Cagayan.

2 Defendant Crisanto Soliven, a minor, was represented by Marcela B. Soliven, who was

appointed by the court as his guardian ad litem.

3 Francisco vs. Parsons Hardware, 67 Phil. 234.4 Bautista vs. Marcos, L-17072, 31 October 1961.

5 Republic vs. Ruiz, L-23712, 29 April 1968, 23 SCRA 348.

6 Eugenio vs. Perdido, 97 Phil. 41; Angeles vs. Court of Appeals, 102 Phil. 1006; Cadiz vs.

Nicolas, 102 Phil. 1032; Santander vs. Villanueva, 103 Phil. 1; Felices vs. Iriola, 103 Phil. 125: Del

Rosario vs. Abad, L-10881, 30 Sept. 1958; Republic vs. Garcia, 105 Phil. 826; Republic vs. Ruiz,

supra.; Baje vs. Court of Appeals, L-18783, 25 May 1964.

7 Manzano vs. Ocampo, L-14778, 28 February 1961, 1 SCRA 691.

8 Cadiz vs. Nicolas, supra.

9 Beach vs. Pacific Commercial Co., 49 Phil. 765; Francisco vs. Parsons Hardware Co., 67 Phil.

234: Gonzalo Puyat & Sons vs. De las Ama, 74 Phil. 3; Cadiz vs. Nicolas, 102 Phil. 1032, 1039.

10 Pascua vs. Talens, 80 Phil. 792; Santos vs. Roman Catholic Church, 94 Phil. 406, 409; Cadiz vs.

Nicolas, 102 Phil. 1039; Jocson vs. Soriano, 45 Phil. 375; Beniga vs. Bugas, L-28918, 29

September 1970.

11 Duling vs. Salaz, 26 Pac. 2d. 1069; 22 Am. Jur. 80, 793, 795.

12 Duling vs. Salaz, 26 Pac. 2d. 1069; 22 Am. Jur. 80.

13 Jocson vs. Soriano, 45 Phil. 375, 379.

14 Section 26, Revised Rule 39; 2 Moran's Comments on the Rules of Court, 1970 ed., page 327.

TEEHANKEE, J., concurring and dissenting:

* Editor's Note: Should be read "Urbi." .

** Editor's Note: Should be read "accordance."


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Republic of the PhilippinesSUPREME COURTManilaFIRST DIVISION

G.R. No. L-54070 February 28, 1983

HEIRS OF ENRIQUE ZAMBALES and JOAQUINA ZAMBALES, petitioners, vs.COURT OFAPPEALS, NIN BAY MINING CORPORATION, ANGELA C. PREYSLER and JOAQUIN B. PREYSLER,respondents.

MELENCIO-HERRERA,J.:

The Decision of respondent Court of Appeals in the case entitled "Enrique Zambales and

Joaquina Zambales, Plaintiffs-appellees vs. Atty. Perfecto de los Reyes, Nin Bay Mining

Corporation and Joaquin B. Preysler, Defendants-appellants" (CA-G.R. No. 59386-R), setting

aside the judgment of the Court of First Instance of Palawan in Civil Case No. 678 for Annulment

of a Deed of Sale with Recovery of Possession and Ownership with Damages", is the subject of

this Petition for Review on Certiorari.

Joaquin B. Preysler is now deceased and was substituted by Angela C. Preysler, his widow.

Atty. Perfecto de los Reyes was originally a defendant in Civil Case No. 678 but he did not

appeal from the Decision of the lower Court.

The Zambales spouses (Zambaleses, for brevity) were the homestead patentees of a parcel of

land with an area of 17,8474 hectares situated in the Municipality of Del Pilar, Roxas, Palawan,

covered by Original Certificate of Title No. G 1193 of the Registry of Deeds for the Province of

Palawan, issued pursuant to Homestead Patent No. V-59502 dated September 6, 1955.

Claiming that the Nin Bay Mining Corporation (Corporation, for short) had removed silica sand

from their land and destroyed the plants and others improvements thereon, the Zambalesesinstituted, on November 10, 1958, Civil Case No. 316 before the Court of First Instance of

Palawan claiming damages in the total sum of P48,000.00.

The Corporation denied having caused any damages and claimed that it had excavated and

extracted silica sand only from its own mining claims and on which it had mining lease contracts

with the Philippine Government.

On October 29, 1959, the Zambaleses, duly assisted by their counsel, Atty. Perfecto de los

Reyes, and the Corporation, entered into a Compromise Agreement, the portions of which,

pertinent to this case, read:

1. DEFENDANT shall pay the PLAINTIFFS a rental of TWENTY (P20.00) PESOS per hectare peryear from September 9, 1955 to September 30, 1960, or a total rental price of ONE THOUSAND

SEVEN HUNDRED EIGHTY-FOUR PESOS AND SEVENTY- FOUR CENTAVOS (P1,784.74), Philippine

currency, in lieu of all damages...

2. The payment to the PLAINTIFFS of the above-mentioned rental price shall be considered full,

absolute and final payment and indemnity for all the alleged damages to PLAINTIFFS' property

and its improvements, or any other actual, moral, exemplary or other damages that PLAINTIFFS


18/66

may have suffered or will suffer in connection with the mining operations of DEFENDANT on

the property in question, which property, by virtue of the terms of this Agreement shall be used

by DEFENDANT as occupant thereof until September 30, 1960.

3. PLAINTIFFS hereby agree and bind themselves to sell, transfer and convey, and DEFENDANT

or its assigns, qualified to acquire or hold lands of the public domain, hereby agrees to purchase

and pay for, the aforesaid property of the PLAINTIFFS, containing an area of 17.8474 hectares,

situated in the Municipality of Del Pilar, Roxas, Palawan, and covered by Original Certificate of

Title No. G1193 of the Registry of Deeds of Palawan, at the fixed selling price of FIVE HUNDRED

(P500.00) PESOS per hectare or a total purchase price of EIGHT THOUSAND NINE HUNDRED

TWENTY THREE PESOS and SEVENTY CENTAVOS (P8,923.70), Philippine currency. The contract

to purchase and sell herein provided for, shall be reciprocally demandable and enforceable by

the parties hereto on September 10, 1960. PLAINTIFFS hereby irrevocably constitute and

appoint DEFENDANT, its successors and/or assigns their true and lawful attorney-in-fact with

full power and authority to sell, transfer and convey on September 10, 1960 or at any time

thereafter the whole or any part of PLAINTIFFS' property hereinabove mentioned to the

DEFENDANT, its successors and/or assigns, or to any third party, and to execute and deliver allinstruments and documents whatsoever necessary for the purpose, and all acts done and to be

done by DEFENDANT, its successors and/or assigns in conformity with the powers herein

granted are hereby ratified and confirmed by the PLAINTIFFS. ...

4. In consideration of the payment of the amount of P1,784.74 by DEFENDANT, and of other

good and valuable consideration, PLAINTIFFS, jointly and severally, hereby forever release, fully

and completely, said DEFENDANT, its successors and/or assigns in interest, from any and all

liabilities, whether arising from past, present or future excavation or removal of silica sand from

the property in question or otherwise, and from all the other claims against the DEFENDANT

contained in their Complaint in Civil Case No. 316 of the Court of First Instance of Palawan.1

The Trial Court rendered judgment on October 29, 1959 based on the Compromise Agreement.

The document was duly annotated an OCT No. G - 1193 (Exhibit " A ") the day after, or on

October 30, 1959 (Exhibit " 10 A ").

On September 10, 1960, the Corporation, as attorney-in-fact for the Zambaleses, as Vendors,

sold the disputed property to Joaquin B. Preysler for the sum of P8,923.70 fixed in the

Compromise Agreement (Exhibit " 11 "). Transfer Certificate of Title No. T-970 was issued in the

vendee's name on December 19, 1960 (Exhibit " 2 ").

The Deed of Sale to Preysler contained the following proviso:

The VENDORS hereby represent and warrant that the five-year restrictive period on alienation

of lands acquired under the homestead provisions of Commonwealth Act No. 141, as amended,otherwise known as the Public Land Act, has already expired, the date of issuance of the herein

homestead patent to the VENDORS as aforesaid being September 6, 1955 as shown in Original

Certificate of Title No. G-1193.

On October 18, 1960, the Secretary of Agriculture and Natural Resources approved the sale to

Preysler of the subject property (Exhibit "13 ").


19/66

On. December 6, 1969, or ten (10) years after the Trial Court's Decision based on the

Compromise Agreement, and nine (9) years after the sale to Preysler, the Zambaleses filed Civil

Case No. 678 before the Court of First Instance of Palawan for "Annulment of a Deed of Sale

with Recovery of Possession and Ownership with Damages". They contended that it was their

lawyer who prevailed upon them to sign the Compromise Agreement; that they are unschooled

and did not understand the contents thereof; that they were made to understand that theywould receive the sum of P10,700.00, only as payment for damages sustained by the land from

1955 to 1960; that through fraud, deceit and manipulation by their lawyer and the Corporation,

they were made to agree to appoint the Corporation as their attorney-in-fact with full power

and authority to sell; that it was never their intention to sell the land; that in September 1969,

they were surprised to learn that the land was already titled in the name of Joaquin B. Preysler;

that the land was acquired and registered in the latter's name through fraud and deceit. The

Zambaleses then prayed that the deed of sale and the title in Preysler's name be annulled on

the ground of fraud and that the property be reconveyed to them.

In their Answer, the Corporation denied all allegations that the Zambaleses had signed the

Compromise Agreement without understanding the contents thereof, the truth being that itwas read to them by their counsel, Atty. Perfecto de los Reyes, who explained thoroughly the

full implication and legal consequence of each and every provision, which was then submitted

and approved by then Presiding Judge Juan L. Bocar; and that the Corporation had sold the

property to Preysler as a duly constituted attorney-in-fact pursuant to the Compromise

Agreement.

After trial, the lower Court rendered judgment in favor of the Zambaleses, the dispositive part

of which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants

as follows:

1) That the deed of sale executed by Nin Bay Mining Corporation through its president, to

Joaquin B. Preysler is hereby declared null and void;

2) That the defendant Joaquin B. Preysler is hereby ordered to reconvey the land subject matter

of this litigation to the plaintiffs;

3) That the defendants Nin Bay Mining Corporation and Joaquin B. Preysler shall pay the

plaintiffs the sum of P85,000.00 as actual damages plus the legal rate of interest from

September 30, 1960 up to the time the amount is fully paid;

4) That the defendants to pay the sum of FIVE THOUSAND (P5,000.00) PESOS as attorneys fees;

and

5) The defendants to pay the costs.

On appeal by the Corporation, the Court of Appeals reversed the Trial Court, after finding that

the alleged fraud or misrepresentation in the execution of the Compromise Agreement had not

been substantiated by evidence.

The case is now before us on review.


20/66

The controversy revolves around the issue of due execution and validity of the Compromise

Agreement (Exhibit "8") dated October 29; 1959, and of the subsequent Deed of Sale (Exhibit

"11 "), dated 10 September 1960.

I

The general rule is that whoever alleges fraud or mistake must substantiate his allegation, sincethe presumption is that a person takes ordinary care of his concerns and that private

transactions have been fair and regular. The rule admits of an exception in Article 1332 of the

Civil Code which provides:

When one of the parties is unable to read, or if the contract is in a language not understood by

him, and mistake or fraud is alleged, the person enforcing the contract must show that the

terms thereof have been fully explained to the former.

For the proper application of said provision, it has first to be established convincingly that the

illiterate or the party at a disadvantage could not read or understand the language in which the

contract was written.2The evidence discloses that the spouses Zambales are unschooled. They

cannot read, speak, much less understand English or write, except to sign their names. 3 TheZambaleses alleged in their Complaint that the Compromise Agreement (Exhibit "8") was

executed through fraud by the Corporation and by their counsel Atty. Perfecto de los Reyes,

whom they included as a defendant. The burden of proof, therefore, shifted to the Corporation

to show that the compromise agreement had been fully explained to the plaintiffs.

In refuting the allegation that plaintiffs were misled into signing the compromise agreement,

their former counsel, Atty. Perfecto de los Reyes, and the notary, Atty. Salomon Reyes, a lawyer

for Nin Bay Mining Corporation, established that the terms and conditions of the Compromise

Agreement were thoroughly explained and fully understood by the spouses Zambales in

accordance with their proposal to sell the land at P500.00 a hectare; that before the signing of

the Compromise Agreement, the notary requested Atty. de los Reyes to read and explain eachand every provision to the spouses, and with the help of Ricardo Nunala, Atty. de los Reyes did

so in their dialect (Cuyuno). Thereafter, the parties went to Judge Juan Bocar, who was assured

that the spouses Zambales understood and signed the Compromise Agreement.4

We sustain the finding of the Court of Appeals that fraud and misrepresentation did not vitiate

petitioners' consent to the Agreement when it observed:

Taking into account the foregoing observations, this Court is not convinced that indeed

appellees were victims of a fraudulent scheme employed upon them by their former counsel by

reason of their alleged illiteracy and ignorance. The evidence discloses that appellees, although

unschooled, are intelligent, well-informed and intelligent people. They are not the kind of

persons who could easily be fooled of their rights and interests. Even as commented by the

court a quo, which had a chance to observe the demeanor of the witness, it had no observation

that the witness, Joaquina Zambales, is ignorant. As correctly observed by appellants, appellees

'are political leaders and chief campaigners; they speak in the platform during political rallies;

and they are widely travelled' (p. 28, Appellants' Brief). As a matter of fact they are

knowledgeable of the right connections in the government. They had approached former Sen.

Rogelio de la Rosa, no less, the congressman and the governor. Even the lawyers they have


21/66

retained previous to their present counsel are the Padilla Law Office and the Diokno Law Office,

It is common knowledge that these law offices are among the established law offices in Manila.

It is far convincing that an ignorant couple would have knowledge of these law firms. All these

are obvious manifestations of their being well-informed and the way they have conducted their

way of living apparently is inconsistent with the plea of being illiterate and/or ignorant. They

cannot capitalize on the fact that they are uneducated only because they had no formalschooling inasmuch as one's knowledge of the facts of life is not dependent on whether one

had formal schooling or not and it does not necessarily follow always that if one is unschooled

he is ignorant.

Furthermore, when plaintiffs-appellees signed the questioned compromise agreement they

were duly assisted and represented by their counsel, Atty. de los Reyes. When Atty. de los

Reyes testified in court he categorically declared that it was to the best interest of his clients

that they compromise Civil Case No. 316. This declaration finds support in Joaquina Zambales'

testimony wherein she stated thus:

ATTY. SEMBRANO:

Q. Except for this present case, would you say to the Court that Atty. de los Reyes extended to

you legal assistance to your satisfaction?

A. Yes, sir, he is good to us.

xxx xxx xxx

Q. So these people never gave their services to you?

A. Nobody was able to help us except Atty. de los Reyes. (Tsn., pp. 29, 31 & 32, June 19, 1974)

... Thus, it having been established that appellees could not have been misled by their former

counsel into signing the compromise agreement and taking into account the acts of the

appellees and their children subsequent to the execution of the compromise agreement

perforce the court a quo erred in not giving credence to the clear and convincing testimonies of

Atty. Perfecto de los Reyes and Atty. Salomon Reyes anent the execution of the compromise

agreement.5

However, although we find that the Zambaleses were not misled into signing the Compromise

Agreement, we hold that there has been violation of the Public Land Act. The evidence on

record shows that the land in question was awarded t the Zambaleses as a homestead on

September 6, 1955 (Exhibit "A"). Before us, the Zambaleses now argue that the Compromise

Agreement executed on October 29, 1959 is in violation of the Public Land Act, which prohibits

alienation and encumbrance of a homestead lot within five years from the issuance of the

patent. 6

We sustain that contention. The fact that the issue was not raised in the Courts below is not a

deterrent factor considering that the question affects the validity of the agreement between

the parties. The Supreme Court has the authority to review matters even if they are not

assigned as errors in the appeal, if it is found that their consideration is necessary in arriving at

a just decision of the case.7Moreover, a party may change his legal theory on appeal only

when the factual bases thereof would not require presentation of any further evidence by the


22/66

adverse party in order to enable it to properly meet the issue raised in the new theory.8

In the

case at bar it is indisputable that Homestead Patent No. V-59502 was issued on September 6,

1955 as shown in Original Certificate of Title No. 1193 (Exhibit "A ").

The sale of a homestead lot within the five-year prohibitory period is illegal and void. The law

does not distinguish between executory and consummated sales.

The law prohibiting any transfer or alienation of homestead land within five years from the

issuance of the patent does not distinguish between executory and consummated sales; and it

would hardly be in keeping with the primordial aim of this prohibition to preserve and keep in

the family of the homesteader the piece of land that the state had gratuitously given to them,

to hold valid a homestead sale actually perfected during the period of prohibition but with the

execution of the formal deed of conveyance and the delivery of possession of the land sold to

the buyer deferred until after the expiration of the prohibitory period, purposely to circumvent

the very law that prohibits and declares invalid such transaction to protect the homesteader

and his family.9

In the compromise agreement executed between the parties, (1) the Zambaleses promised tosell and the Corporation agreed to buy the disputed lot at P500.00 per hectare, the contract to

be reciprocally demandable and enforceable on September 10, 1960; and as a substitute

procedure, (2) an irrevocable agency was constituted in favor of the Corporation as attorney-

in-fact to sell the land to any third person on September 10, 1960 or any time thereafter.

Clearly, the bilateral promise to buy and sell the homestead lot at a price certain, which was

reciprocally demandable10

, was entered into within the five-year prohibitory period and is

therefore, illegal and void. Further, the agency to sell the homestead lot to a third party was

coupled with an interest inasmuch as a bilateral contract was dependent on it and was not

revocable at will by any of the parties.11

To all intents and purposes, therefore, there was an

actual executory sale perfected during the period of prohibition except that it was reciprocallydemandable thereafter and the agency to sell to any third party was deferred until after the

expiration of the prohibitory period. That "rentals" were ostensibly to be paid during the five-

year prohibitory period, and the agency to sell made effective only after the lapse of the said

period, was merely a devise to circumvent the prohibition.

To hold valid such an arrangement would be to throw the door wide open to all possible

subterfuges that persons interested in homesteads may devise to defeat the legal prohibition

against alienation within five years from the issuance of the patent.

We hold, therefore, that the bilateral promise to buy and sell, and the agency to sell, entered

into within five years from the date of the homestead patent, was in violation of section 118 of

the Public Land Law, although the executed sale was deferred until after the expiration of thefive-year- prohibitory period.

As the contract is void from the beginning, for being expressly prohibited by law12

the action

for the declaration of its inexistence does not prescribe.13

Being absolutely void, it is entitled to

no authority or respect, the sale may be impeached in a collateral proceeding by any one with

whose rights and interest it conflicts. There is no presumption of its validity.14

The approval of


23/66

the sale by the Secretary of Agriculture and Natural Resources after the lapse of five years from

the date of the patent would neither legalize the sale.15

The homestead in question should be returned to the Zambaleses, petitioners herein, who are,

in turn, bound to restore to the Corporation the sum of P8,923.70 as the price thereof. The

actual damages awarded by the Trial Court of P85,000.00 have not been adequately

substantiated. Moreover, under the agreement, the total rental price of P1,784.74 was

intended to be "in lieu of all damages, or any other actual, moral, exemplary or other damages.

This is without prejudice to the corresponding action on the part of the State for reversion of

the property and its improvements, if any, under Section 124 of the Public Land Act.16

WHEREFORE, the judgment under review is hereby REVERSED, and another one entered (1)

declaring null and void a) the bilateral promise to buy and sell entered into between Enrique

Zambales and Joaquina Zambales, on the one hand, and the Nin Bay Mining Corporation on the

other, and b) the sale executed by Nin Bay Mining Corporation in favor of Joaquin B. Preysler;

(2) ordering Angela C. Preysler to reconvey the land subject matter of this litigation to

petitioners upon refund by the latter to the Nin Bay Mining Corporation of the sum ofP8,923.70, all expenses for the reconveyance to be borne by private respondents; (3) ordering

Nin Bay Mining Corporation to pay rentals to petitioners at the price of P20.00 per hectare per

year from December 6, 1969, the date of the institution of the Complaint, till the date that

possession is turned over to petitioners; and (4) ordering the Register of Deeds for the Province

of Palawan to cancel Transfer Certificate of Title No. T-970 of his Registry, and reissue to the

Heirs of Enrique Zambales and Joaquina Zambales the title to the homestead in question.

Let a copy of this Decision be served on the Solicitor General.

No costs.

SO ORDERED.Teehankee (Chairman), Plana, Vasquez, Relova and Gutierrez, Jr., JJ., concur.

Footnotes

1 Annex "E ", pp. 88-90, Rollo.

2 Bunyi vs. Reyes, 39 SCRA 504 (1971).

3 T.s.n., February 23, 1972, p. 18; t.s.n., January 8, 1973, pp. 4,20 & 26; t.s.n., June 19, 1974,

p.30.

4 T.s.n., July 28, 1975, pp. 23-27; Deposition of Atty. Salomon F. Reyes (Exhibit "18"), pp. 27-33.

5 Pp. 61-63, Rollo.,

6 Sec. 118, Commonwealth Act No. 141, as amended.

7 Saura Import & Export Co., Inc. vs. Phil. International Surety Co., Inc., 8 SCRA 143 (1963);

Miguel vs. Court of Appeals, 29 SCRA 760 (1969).

8 Lianga Lumber Company vs. Lianga Timber Co., Inc., 76 SCRA 197 (1977).


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9 Manzano vs. Ocampo, 1 SCRA 691, 697 (1961).

10 Article 1479, Civil Code.

11 Article 1927, Ibid.

12 Article 1409, Ibid

13 Article 1410, Ibid

14 Inton vs. Quintana, 81 Phil. 97 (1948).

15 Santander vs. Villanueva, 103 Phil. 1 (1958); Cadiz vs. Nicolas, 102 Phil. 1032 (1958); cited in

Manzano vs. Ocampo, 1 SCRA 691 (1961).

16 SEC. 124. Any acquisition, conveyance, alienation, transfer. or other contract made or

executed in violation of any of the provisions of sections one hundred and eighteen, one

hundred and twenty, one hundred and twenty-one, one hundred and twenty-two, and one

hundred and twenty- three of this Act shall be unlawful and null and void from its execution

and shau produce the effect of annulling and cancelling the grant, title, patent, or permit

originally issued, recognized or confirmed, actually or presumptively, and cause the reversion of

the property and its improvements to the State.


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Republic of the PhilippinesSUPREME COURTManilaEN BANC

G.R. No. L-11491 August 23, 1918

ANDRES QUIROGA, plaintiff-appellant, vs.PARSONS HARDWARE CO., defendant-appellee.Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant. Crossfield & O'Brien forappellee.

AVANCEA,J.:

On January 24, 1911, in this city of manila, a contract in the following tenor was entered into by

and between the plaintiff, as party of the first part, and J. Parsons (to whose rights and

obligations the present defendant later subrogated itself), as party of the second part:

CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J. PARSONS, BOTH

MERCHANTS ESTABLISHED IN MANILA, FOR THE EXCLUSIVE SALE OF "QUIROGA" BEDS IN THE

VISAYAN ISLANDS.

ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands

to J. Parsons under the following conditions:

(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's

establishment in Iloilo, and shall invoice them at the same price he has fixed for sales, in

Manila, and, in the invoices, shall make and allowance of a discount of 25 per cent of the

invoiced prices, as commission on the sale; and Mr. Parsons shall order the beds by the dozen,

whether of the same or of different styles.

(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of sixty

days from the date of their shipment.

(C) The expenses for transportation and shipment shall be borne by M. Quiroga, and the freight,

insurance, and cost of unloading from the vessel at the point where the beds are received, shall

be paid by Mr. Parsons.

(D) If, before an invoice falls due, Mr. Quiroga should request its payment, said payment when

made shall be considered as a prompt payment, and as such a deduction of 2 per cent shall be

made from the amount of the invoice.

The same discount shall be made on the amount of any invoice which Mr. Parsons may deem

convenient to pay in cash.

(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration in

price which he may plan to make in respect to his beds, and agrees that if on the date when

such alteration takes effect he should have any order pending to be served to Mr. Parsons, such

order shall enjoy the advantage of the alteration if the price thereby be lowered, but shall not

be affected by said alteration if the price thereby be increased, for, in this latter case, Mr.

Quiroga assumed the obligation to invoice the beds at the price at which the order was given.

(F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds.


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ART. 2. In compensation for the expenses of advertisement which, for the benefit of both

contracting parties, Mr. Parsons may find himself obliged to make, Mr. Quiroga assumes the

obligation to offer and give the preference to Mr. Parsons in case anyone should apply for the

exclusive agency for any island not comprised with the Visayan group.

ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga" beds

in all the towns of the Archipelago where there are no exclusive agents, and shall immediately

report such action to Mr. Quiroga for his approval.

ART. 4. This contract is made for an unlimited period, and may be terminated by either of the

contracting parties on a previous notice of ninety days to the other party.

Of the three causes of action alleged by the plaintiff in his complaint, only two of them

constitute the subject matter of this appeal and both substantially amount to the averment

that the defendant violated the following obligations: not to sell the beds at higher prices than

those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to

keep the beds on public exhibition, and to pay for the advertisement expenses for the same;

and to order the beds by the dozen and in no other manner. As may be seen, with theexception of the obligation on the part of the defendant to order the beds by the dozen and in

no other manner, none of the obligations imputed to the defendant in the two causes of action

are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent

for the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial

agency. The whole question, therefore, reduced itself to a determination as to whether the

defendant, by reason of the contract hereinbefore transcribed, was a purchaser or an agent of

the plaintiff for the sale of his beds.

In order to classify a contract, due regard must be given to its essential clauses. In the contract

in question, what was essential, as constituting its cause and subject matter, is that the plaintiff

was to furnish the defendant with the beds which the latter might order, at the price stipulated,and that the defendant was to pay the price in the manner stipulated. The price agreed upon

was the one determined by the plaintiff for the sale of these beds in Manila, with a discount of

from 20 to 25 per cent, according to their class. Payment was to be made at the end of sixty

days, or before, at the plaintiff's request, or in cash, if the defendant so preferred, and in these

last two cases an additional discount was to be allowed for prompt payment. These are

precisely the essential features of a contract of purchase and sale. There was the obligation on

the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price.

These features exclude the legal conception of an agency or order to sell whereby the

mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the

principal the price he obtains from the sale of the thing to a third person, and if he does not

succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the

defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within

the term fixed, without any other consideration and regardless as to whether he had or had not

sold the beds.

It would be enough to hold, as we do, that the contract by and between the defendant and the

plaintiff is one of purchase and sale, in order to show that it was not one made on the basis of a

commission on sales, as the plaintiff claims it was, for these contracts are incompatible with


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each other. But, besides, examining the clauses of this contract, none of them is found that

substantially supports the plaintiff's contention. Not a single one of these clauses necessarily

conveys the idea of an agency. The words commission on sales used in clause (A) of article 1

mean nothing else, as stated in the contract itself, than a mere discount on the invoice price.

The word agency, also used in articles 2 and 3, only expresses that the defendant was the only

one that could sell the plaintiff's beds in the Visayan Islands. With regard to the remainingclauses, the least that can be said is that they are not incompatible with the contract of

purchase and sale.

The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of the

defendant corporation and who established and managed the latter's business in Iloilo. It

appears that this witness, prior to the time of his testimony, had serious trouble with the

defendant, had maintained a civil suit against it, and had even accused one of its partners,

Guillermo Parsons, of falsification. He testified that it was he who drafted the contract Exhibit

A, and, when questioned as to what was his purpose in contracting with the plaintiff, replied

that it was to be an agent for his beds and to collect a commission on sales . However, according

to the defendant's evidence, it was Mariano Lopez Santos, a director of the corporation, whoprepared Exhibit A. But, even supposing that Ernesto Vidal has stated the truth, his statement

as to what was his idea in contracting with the plaintiff is of no importance, inasmuch as the

agreements contained in Exhibit A which he claims to have drafted, constitute, as we have said,

a contract of purchase and sale, and not one of commercial agency. This only means that

Ernesto Vidal was mistaken in his classification of the contract. But it must be understood that a

contract is what the law defines it to be, and not what it is called by the contracting parties.

The plaintiff also endeavored to prove that the defendant had returned beds that it could not

sell; that, without previous notice, it forwarded to the defendant the beds that it wanted; and

that the defendant received its commission for the beds sold by the plaintiff directly to persons

in Iloilo. But all this, at the most only shows that, on the part of both of them, there was mutualtolerance in the performance of the contract in disregard of its terms; and it gives no right to

have the contract considered, not as the parties stipulated it, but as they performed it. Only the

acts of the contracting parties, subsequent to, and in connection with, the execution of the

contract, must be considered for the purpose of interpreting the contract, when such

interpretation is necessary, but not when, as in the instant case, its essential agreements are

clearly set forth and plainly show that the contract belongs to a certain kind and not to another.

Furthermore, the return made was of certain brass beds, and was not effected in exchange for

the price paid for them, but was for other beds of another kind; and for the letter Exhibit L-1,

requested the plaintiff's prior consent with respect to said beds, which shows that it was not

considered that the defendant had a right, by virtue of the contract, to make this return. As

regards the shipment of beds without previous notice, it is insinuated in the record that these

brass beds were precisely the ones so shipped, and that, for this very reason, the plaintiff

agreed to their return. And with respect to the so-called commissions, we have said that they

merely constituted a discount on the invoice price, and the reason for applying this benefit to

the beds sold directly by the plaintiff to persons in Iloilo was because, as the defendant

obligated itself in the contract to incur the expenses of advertisement of the plaintiff's beds,

such sales were to be considered as a result of that advertisement.


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In respect to the defendant's obligation to order by the dozen, the only one expressly imposed

by the contract, the effect of its breach would only entitle the plaintiff to disregard the orders

which the defendant might place under other conditions; but if the plaintiff consents to fill

them, he waives his right and cannot complain for having acted thus at his own free will.

For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and

the defendant was one of purchase and sale, and that the obligations the breach of which is

alleged as a cause of action are not imposed upon the defendant, either by agreement or by

law.

The judgment appealed from is affirmed, with costs against the appellant. So ordered.

Arellano, C.J., Torres, Johnson, Street and Malcolm, JJ., concur.


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Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISION

G.R. No. 55793 May 18, 1990

CONCRETE AGGREGATES, INC., petitioner, vs.COURT OF TAX APPEALS and COMMISSIONEROF INTERNAL REVENUE, respondents.

Santiago, Tinga & Associates for petitioner.

REGALADO,J.:

This petition for review on certiorariseeks the annulment of the decision of respondent Court

of Tax Appeals,1

dated September 19, 1980, and its resolution denying reconsideration thereof,

dated December 3, 1980, both promulgated in CTA Case No. 2433, entitled "Concrete

Aggregates, Inc. vs. Commissioner of Internal Revenue," the decretal portion of which decisionreads:

Having reached the conclusion that petitioner is a manufacturer subject to the 7% sales tax

under Section 186 of the then National Internal Revenue Code, the decision of respondent

dated July 24, 1972 should therefore be sustained. Accordingly, petitioner Concrete Aggregates,

Inc. is hereby ordered to pay to respondent Commissioner of Internal Revenue the total

amount of P244,022.76 representing sales and ad valorem taxes for the first semester of 1968

inclusive of surcharges, plus interest at the rate of 14% per centum from January 1, 1973 up to

the date of full payment thereof pursuant to Section 183 (now 193) of the National Internal

Revenue Code.

WHEREFORE, the decision appealed from is hereby affirmed at petitioner's costs.

SO ORDERED.2

The records disclose that petitioner is a domestic corporation, duly organized and existing

under the laws of the Philippines, with business address at Longos, Quezon City. It has an

aggregate plant at Montalban, Rizal which processes rock aggregates mined by it from private

lands. Petitioner also maintains and operates a plant at Longos, Quezon City for the production

of ready-mixed concrete and plant-mixed hot asphalt.

Sometime in 1968, the agents of respondent commissioner conducted an investigation of

petitioner's tax liabilities. As a consequence thereof, in a letter dated December 14, 1970 said

respondent assessed and demanded payment from petitioner of the amount of P244,002.76 assales and ad valorem taxes for the first semester of 1968, inclusive of surcharges. Petitioner

disputed the said assessment in its letter dated February 2, 1971 without, however, contesting

the portion pertaining to the ad valorem tax.

In his letter dated July 24, 1972, respondent reiterated the said assessment of sales and ad

valorem taxes which, as explained in his preceding letter, had been arrived at as follows.3

Taxable sales P 4,164,092.44


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7% sales tax due thereon P 291,486.47

Less: Tax already paid 116,523.55Deficiency tax due P 174,962.92

Add: 25% surcharge 43,740.73Total deficiency tax and surcharge P 218,703.65

Add: 1 1/2% ad valorem on P20,239.29

25% surcharge thereon 5,059.82 25,299.11TOTAL AMOUNT DUE & COLLECTIBLE P244,002.76

Consequently, demand for the payment of the said amount within ten days from receipt of the

letter was made by respondent on petitioner, otherwise the same would be collected thru the

summary remedies provided for by law. Instead of paying, petitioner appealed to respondent

court.

As earlier stated, a judgment adverse to petitioner was handed down by respondent court,

whereupon he came to this Court on a petition for review. In its resolution dated September 7,

1981, the Court, through its First Division, denied the petition for review for lack of merit.4

Petitioner filed a motion for reconsideration which was likewise denied in the resolution of

October 19, 1981 for lack of merit, the denial being expressly declared to be final.5With leave

of court, petitioner filed its second motion for reconsideration which was granted by t

Documents

Sales Cases Part 1