Sui Man Hui Chan and Gonzalo Co

8/13/2019 Sui Man Hui Chan and Gonzalo Co

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SUI MAN HUI CHAN and GONZALO CO,petit ioners, vs. HON. COURTOF APPEALS and OSCAR D. MEDALLA, respondents .

D E C I S I O N

QUISUMBING, J .:

For review on certiorari is the Decision[1]

dated May 3, 2001, of theCourt of Appeals in CA-G.R. SP No. 61889, affirming the Order

[2] dated

January 11, 2000, of the Regional Trial Court (RTC) of Mandaluyong City,Branch 213, in Civil Case No. MC99-666, which had denied petitioners’Motion to Dismiss the complaint filed by private respondent.

The facts, as culled from records, are as follows:

On March 30, 1999, private respondent Oscar Medalla filed acomplaint before the RTC of Mandaluyong City, docketed as Civil Case No.MC99-666, for collection of a sum of money arising from breach of a contractof lease and damages, against petitioners Sui Man Hui Chan and Gonzalo

Co.

The complaint alleged that on November 14, 1988, Napoleon C.Medalla as lessor and Ramon Chan as lessee entered into a LeaseContract

[3] over a hotel building located at No. 29 Abanao Street, Baguio

City. Chan would use the leased premises as a restaurant named “CypressInn”. Pertinently, the parties agreed on the following:

1. The period of lease shall be for ten (10) years or from 15 July1988 to 15 July 1998.

2. The payment of the realty taxes due to the government on theleased premises shall be for the account of the Lessee.

3. The agreement is binding upon the heirs and/or successors-in-interest of the Lessor and the Lessee.

Petitioner Gonzalo Co was employed by Ramon Chan as the generalmanager of “Cypress Inn” and acted as his agent in all his dealings withNapoleon Medalla.

On August 5, 1989, Ramon Chan died. He was survived by his wife,petitioner Sui Man Hui Chan, who continued to operate the restaurant.

On July 17, 1996, Napoleon Medalla died. Among his heirs is privaterespondent Oscar Medalla, who succeeded him as owner and lessor of theleased premises. The contract was neither amended nor terminated after

the death of the original parties but was continued by their respectivesuccessors-in-interest pursuant to the terms thereof. Petitioners Chan andCo, the latter, in his capacity as agent and general manager, continued todeal with private respondent Medalla in all transactions pertaining to thecontract.

On various occasions, petitioners failed to pay the monthly rentals dueon the leased premises. Despite several Statements of Accounts sent byMedalla, petitioners failed to pay the rentals due but, nonetheless, continuedto use and occupy the leased premises.

On February 26, 1997, Medalla sent a letter addressed to RamonChan, indicating that (1) the contract of lease would expire on July 15, 1998,and (2) he was not amenable to a renewal of said contract after itsexpiration.

Medalla then sent demand letters to petitioners, but the latter still failedto pay the unpaid rentals. He also found out that petitioners had not paid therealty taxes due on the leased premises since 1991, amountingto P610,019.11. Medalla then asked petitioners to settle the unpaid rentals,

pay the unpaid real estate taxes, and vacate the leased premises.

On January 1999, petitioners vacated the premises but without payingtheir unpaid rentals and realty taxes. Aggrieved by petitioners’ refusal to paythe amounts owing, which had reachedP4,147,901.80 by March 1999,private respondent Medalla instituted Civil Case No. MC99-666.

In their Answer to the Complaint, petitioners denied owing privaterespondent the amounts claimed by the latter. They alleged that the lateRamon Chan had paid all the rentals due up to March 15, 1998. Moreover,they need not pay any balance owing on the rentals as they were required topay two (2) months advance rentals upon signing of the contract and make aguarantee deposit amounting to P220,000. On the matter of unpaid realtytaxes, petitioners alleged that private respondent was responsible therefor

as the owner of the leased premises, notwithstanding any contrarystipulations in the contract.

On July 19, 1999, petitioners filed a Supplemental Answer with Motionto Dismiss alleging that they were neither parties nor privies to the Contractof Lease, hence they are not the real parties-in-interest.

Private respondent filed a Reply and Opposition to petitioners’Supplemental Answer with Motion to Dismiss dated August 2, 1999, prayingfor the denial of the Motion to Dismiss for having been belatedly filed indirect contravention of Section 1, Rule 16, of the 1997 Rules of CivilProcedure.

[4] He further alleged that petitioner Chan, as the owner of the

business and petitioner Co as the agent of petitioner Chan, are clearly real

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respondent, notwithstanding that they are not signatories to the Contract ofLease.

A lease contract is not essentially personal in character. Thus, therights and obligations therein are transmissible to the heirs.

[11] The general

rule, therefore, is that heirs are bound by contracts entered into by their

predecessors-in-interest except when the rights and obligations arisingtherefrom are not transmissible by (1) their nature, (2) stipulation or (3)provision of law.

[12] In the subject Contract of Lease, not only were there no

stipulations prohibiting any transmission of rights, but its very terms andconditions explicitly provided for the transmission of the rights of the lessorand of the lessee to their respective heirs and successors. The contract isthe law between the parties. The death of a party does not excusenonperformance of a contract, which involves a property right, and the rightsand obligations thereunder pass to the successors or representatives of thedeceased. Similarly, nonperformance is not excused by the death of theparty when the other party has a property interest in the subject matter of thecontract.

[13]

Finally, as to petitioners’ contention that any claim should have been

filed before the estate proceeding of Ramon Chan pursuant to Section 5 ofRule 86, the trial court found that the unpaid rentals sought to be claimedwere for the period April 1993 to December 1998. Note that Ramon Chan,the original lessee, died on August 5, 1989. In other words, as the unpaidrentals did not accrue during the lifetime of Ramon Chan, but well after hisdeath, his estate might not be held liable for them. Hence, there is noindubitable basis to apply Section 5, Rule 86, of the Revised Rules of Courtas petitioners urge respondents to do.

WHEREFORE, the instant petition is DENIED and the Decision of theCourt of Appeals in CA-G.R. SP. No. 61889 is AFFIRMED. Costs againstpetitioners.

SO ORDERED.

Callejo, Sr., and Tinga, JJ., concur. Puno, J., (Chairman), on leave. Austria-Martinez, J., no part.















Uy v. CA

Facts:

Petitioners William Uy and Rodel Roxas are agents authorized to sell 8

parcels of land. Petitioners offered to sell the land to NHA for a housing

project. On February 14, 1989, NHA passed a resolution approving the

acquisition of said lands, and pursuant to this the parties executed Deeds of

Absolute Sale. However, only 5 out of 8 lands were paid for by NHA

because of a report from DENR that the remaining area is located at an

active landslide area and are therefore not conducive for housing. On

November 22, 1991, NHA issued a resolution canceling the sale of the

remaining lands and offered P1.225 million to the landowners as daños

perjuicios. On March 9, 1992, petitioners filed a complaint for damages

against NHA and its general manager Robert Balao. The RTC declared the

cancellation to be justified, but awarded the amount offered by NHA. The

Court of Appeals affirmed the decision, but deleted the award.

Issues:

(1) Whether the petitioners are real parties in interest

(2) Whether the cancellation is justified

Held:

(1) Petitioners claim that they lodged the complaint not in behalf of their

principals but in their own name as agents directly damaged by the

termination of the contract. Petitioners in this case purportedly brought the

action for damages in their own name and in their own behalf. An action

shall be prosecuted in the name of the party who, by the substantive law,

has the right sought to be enforced. Petitioners are not parties to the

contract of sale between their principals and NHA. They are mere agents of

the owners of the land subject of the sale. As agents, they only render some

service or do something in representation or on behalf of their principals.

The rendering of such service did not make them parties to the contracts of

sale executed in behalf of the latter. Since a contract may be violated only by

the parties thereto as against each other, the real parties-in-interest, either

as plaintiff or defendant, in an action upon that contract must, generally,

either be parties to said contract. Petitioners have not shown that they are

assignees of their principals to the subject contracts. While they alleged that

they made advances and that they suffered loss of commissions, they have

not established any agreement granting them "the right to receive payment

and out of the proceeds to reimburse [themselves] for advances and

commissions before turning the balance over to the principal[s]."

(2) The cancellation was not a rescission under Article 1191. Rather, the

cancellation was based on the negation of the cause arising from the

realization that the lands, which were the object of the sale, were not

suitable for housing. Cause is the essential reason which moves the

contracting parties to enter into it. In other words, the cause is the

immediate, direct and proximate reason which justifies the creation of an

obligation through the will of the contracting parties. Cause, which is the

essential reason for the contract, should be distinguished from motive, which

is the particular reason of a contracting party which does not affect the other

party. Ordinarily, a party's motives for entering into the contract do not affect

the contract. However, when the motive predetermines the cause, the

motive may be regarded as the cause. In this case, it is clear, and petitionersdo not dispute, that NHA would not have entered into the contract were the

lands not suitable for housing. In other words, the quality of the land was an

implied condition for the NHA to enter into the contract. On the part of the

NHA, therefore, the motive was the cause for its being a party to the sale.

We hold that the NHA was justified in canceling the contract. The realization

of the mistake as regards the quality of the land resulted in the negation of

the motive/cause thus rendering the contract inexistent.



Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-2277 December 29, 1950

MONICO CONCEPCION, plaintiff-appellant,vs.PACIENCIA STA. ANA, defendant-appellee.

Yap and Garcia for appellant.Tomas Yumol for appellee.

FERIA, J .:

An action was instituted by Monico Concepcion vs. Paciencia Sta. Ana toannul the sale made by the late Perpetua Concepcion, sister of the plaintiff,of three parcels of land with the improvements thereon to the defendant. Thecomplaint alleges, among others, that the plaintiff is the only survivinglegitimate brother of Perpetua Concepcion, who died on or about January28, 1948, without issue and without leaving any will; that in her life time or onabout June 29, 1945, said Perpetua Concepcion, in connivance with thedefendant and with intent to defraud the plaintiff, sold and conveyed threeparcels of land for a false and f ictitious consideration to the defendant, whosecured transfer certificates of title of said lands issued under her name; andthat the defendant has been in possession of the properties sold since thedeath of Perpetua Concepcion, thereby causing damages to the plaintiff inthe amount of not less than two hundred (P200) pesos.

Defendant filed a motion to dismiss the complaint on the ground that it doesnot state a cause of action, because the deceased being the owner of theproperties sold had the right to enjoy and dispose of them without furtherlimitation than those established by law.

The Court of First Instance of Manila granted the motion to dismiss anddismissed the complaint on the ground that "the plaintiff is not a party to thedeed of sale executed by Perpetua Concepcion in favor of the defendant.Even in the assumption that the consideration of the contract is fictitious, theplaintiff has no right of action against the defendant. Under article 1302 ofthe Civil Code, "the action to annul a contract may be brought by any person

principally or subsidiarily bound thereby." The plaintiff is not bound by thedeed of sale executed by the deceased in favor of the defendant. He has noobligation under the deed."

Plaintiff appealed from the order of the court dismissing his complaint, andnow assigns as erroneous the order appealed from on the following grounds:(1) that a simulated or fictitious sale for a fictitious or false consideration isnull and void per se or non-existence, hence it cannot transfer ownership;and (2) that according to article 1302 of the same code, "the action to annula contract may be brought by a person principally or subsidiarily boundthereby," and as under article 1257 of the Civil Code "contracts shall bebinding only upon the parties who make them and their heirs," the plaintiff asheir of the deceased contracting party can bring action to annul the contractof sale under consideration.

(1) The plaintiff's contention that a simulated or fictitious contract of sale witha false consideration is null and void per se, or is a contrato inexistente, notmerely a contrato nulo, is not correct. Article 1276 of the CivilCode 1expressly provides that "the statement of a false consideration in

contract shall be ground for annulment," and article 1301 of the same codeprovided for the limitation of actions for annulment of a contract.

In support of his contention that the contract of sale under considerationbeing a fictitious contract or contract with a false consideration is null perse or non-existent, plaintiff quotes Manresa's comment on article 1274 to1277, Vol. 8, p. 623, which says: "Recognizing this analogy, it was held bythe Supreme Court of Spain that a fictitious contract, or contract entered intowith false consideration does not confer any right or produce any legaleffect, citing the judgments of the Supreme Court of Spain of October 31,1865, of March 21, 1884, and of November 23, 1877." Appellant'sconclusion is not correct. By stating that contracts with false considerationconfer no right and produce no legal effect, Manresa does not mean to say

that they are null and void per se or non-existent as contradistinguished fromannullable, for the effects of both non-existent and annullable contracts thathave been annulled are the same: they confer no right and produce no legaleffect. What Manresa says on page 700 of the same volume, commentingon article 1301, is the following: "The expression of a false cause orconsideration in the contract does not make it non-existent, and it shall onlybe a ground for an action for nullity as provided by article 1276 andconfirmed by article 1301 of the Civil Code. There are some who considerthis somewhat confused under the Code; for us it is very clear, for the coderepeatedly provides that the effect of a false consideration is limited tomaking the contract voidable, and we have already pointed out that in thisparticular, our Civil Code has deviated deliberately from the French Code,



which includes indistinctly in one and the same provision contracts withoutconsideration and contracts in which the consideration is illicit or false."

In the case of De Belen vs. Collector of Customs and Sheriff of Manila(46Phil. 241), this court, through Mr. Justice Street, said that "The distinctionbetween entire absence of contract (inexistencia) and the situation requiringan action of rescission or nullity is fully expounded by Manresa in hiscomment on article 1300 of the Civil Code (q.v.)."

(2) As to the appellant's second and last contention, under the law action toannul a contract entered into with all the requisites mentioned in article 1261whenever they are tainted with the vice which invalidate them in accordancewith law, may be brought, not only by any person principally bound or whomade them, but also by his heir to whom the right and obligation arising fromthe contract are transmitted. Hence if no such rights, actions or obligationshave been transmitted to the heir, the latter can not bring an action to annulthe contract in representation of the contracting party who made it.In Wolfson vs. Estate of Martinez , 20 Phil., 340, this Supreme Court quotedwith approval the judgment of the Supreme Court of Spain of April 18, 1901,

in which it was held that "he who is not a party to a contract, or an assigneethereunder, or does not represent those who took part therein, has underarticles 1257 and 1302 of the Civil Code no legal capacity to challenge thevalidity of such contract." And in Irlanda vs. Pitargue (22 Phil. 383) we heldthat "the testamentary or legal heir continues in law as the juridicalpersonality of his predecessor in interest, who transmit to him from themoment of his death such of his rights, actions and obligations as are notextinguished thereby."lawphil.net

The question to be resolved is, therefore, whether the deceased PerpetuaConcepcion has transmitted to the plaintiff any right arising from the contractunder consideration in order that he can bring an action to annul the salevoluntarily made by her to the defendant with a false consideration.

We are of the opinion and so hold, that the late Perpetua Concepcion hasnot transmitted to the plaintiff any right arising from the contract ofconveyance or sale of her lands to the defendant, and therefore the plaintiffcannot file an action to annul such contract as representative of thedeceased.

According to the complaint, the deceased, in connivance with the defendantand with intent to defraud the plaintiff, (that is, in order not to leave theproperties above mentioned upon her death to the plaintiff) sold andconveyed them to the latter, for a false and fictitious consideration. It is,

therefore obvious, that the conveyance or sale of said properties to thedefendant was voluntarily made by the deceased to said defendant. As thedeceased had no forced heir, she was free to dispose of all her properties asabsolute owner thereof, without further limitation than those established bylaw, and the right to dispose of a thing involves the right to give or to conveyit to another without any consideration. The only limitation established by law

on her right to convey said properties to the defendant without anyconsideration is, that she could not dispose of or transfer her property toanother in fraud of her creditors. And this court, in Solis vs. Chua PuaHermanos (50 Phil. 636), through Mr. Justice Street, held that "a voluntaryconveyance, without any consideration whatever, is prima facie good asbetween the parties, and such an instrument can not be declared fraudulentas against creditors in the absence of proof, that there was at the time of theexecution of the conveyance a creditor who could be defrauded by theconveyance, 27 C. J., 470."

Even a forced heir of the deceased Perpetua Concepcion would have noright to institute as representative of the decedent, an action of nullity of acontract made by the decedent to defraud his creditors, because such a

contract being considered illicit under article 1306 of the Civil Code,Perpetua Concepcion herself had no right of action to annul it and recoverthe properties she had conveyed to the defendant. But the forced heir couldin such case bring an action to rescind the contract under article 1291 (3) ofthe Civil Code. Manresa in his comments on articles 1305 and 1306 of theCivil Code (4th edition, volume 8, pp. 717, 718), says: "As to heirs, it isinteresting that the judgment of May 6, 1902, of the Supreme Court of Spainwhich denied a forced heir the right to institute an action to annul contractsconsidered a illicit, for having been entered into by his predecessor ininterest for the purpose of depriving the forced heir of his legitime. The judgment purported to hold that the proper action would have been an actionto rescind conformity with what we indicated in commenting on article 1291,and declared that 'even forced heirs who accept an inheritance under thebenefit of inventory are within the rule 2 of article 1806, that denies to theguilty party the right to recover anything he may have given, or to enforcethe performance of any undertaking in his favor, when the other party hasnothing to do with the illicit consideration; a doctrine laid down in the judgment of July 4, 1896.'"

The reason why a forced heir has the right to institute an action of rescissionis that the right to the legitime is similar to a credit of a creditor. As the sameSpanish author correctly states in commenting on article 1291 of the CivilCode: "The rights of a forced heir to the legitime are undoubtedly similar to acredit of a creditor in so far as the rights to the legitime may be defeated byfraudulent contracts, and are superior to the will of those bound to respect



them. In its judgment of October 28, 1897, the Supreme Court of Spain heldthat the forced heirs instituted as such by their father to the latter's testamenthave the undeniable right to institute an action to annul contracts enteredinto by the father to their prejudice. As it is seen the action is called action ofnullity, but it is rather an action of rescission taking into account the purposefor which it is instituted and the confusion of ideas that has prevailed in this

matter. The doctrine we shall expound in commenting on articles 1302 and1306 will confirm what we have just stated." (Manresa Codigo Civil , 4thedition, Vol. 8, pp. 667 and 668.)

Therefore, as the plaintiff in the present case, not being a forced heir of thelate Perpetua Concepcion, can not institute an action to annul under article1300 or to rescind under article 1291 (3) of the Civil Code the contract underconsideration entered into by the deceased with the defendant.

In view of the foregoing, the judgment of the lower court is affirmed withcosts against the appellant. So ordered.



HEIRS OF WILLIAM SEVILLA, NAMELY: WILFREDO SEVILLA, WILSONSEVILLA, WILMA SEVILLA, WILLINGTON SEVILLA, ANDWILLIAM SEVILLA, JR., HEIRS OF MARIA SEVILLA, NAMELY:AMADOR SEVILLA, JENO CORTES, VICTOR CORTES,MARICEL CORTES, ALELEI

* CORTES AND

ANJEI** CORTES, petit ioners , vs . LEOPOLDO SEVILLA, PETER

SEVILLA, AND LUZVILLA SEVILLA, respondents .

D E C I S I O N

YNARES-SANTIAGO, J .:

One who alleges defect or lack of valid consent to a contract by reasonof fraud or undue influence must establish by full, clear and convincingevidence such specific acts that vitiated a party’s consent, otherwise, thelatter’s presumed consent to the contract prevails.

[1]

The instant petition for review seeks to set aside the September 26,2000 Decision

[2] of the Court of Appeals in CA-G.R. CV No. 48956,

affirming in toto the Decision

[3]

of the Regional Trial Court of Dipolog City,Branch 6, in Civil Case No. 4240 which declared, inter alia, the questionedDeed of Donation Inter Vivos valid and binding on the parties.

The undisputed facts reveal that on December 10, 1973, Filomena Almirol de Sevilla died intestate leaving 8 children, namely: William, Peter,Leopoldo, Felipe, Rosa, Maria, Luzvilla, and Jimmy, all surnamedSevilla. William, Jimmy and Maria are now deceased and are survived bytheir respective spouses and children.

[4] Filomena Almirol de Sevilla left the

following properties:

PARCEL I:

A parcel of land known as Lot No. 653 situated at General Luna St., DipologCity, with an area of about 804 square meters, more or less, duly covered byTransfer Certificate of Title No. (T-6671)-1448 [in the name of Filomena Almirol de Sevilla, Honorata Almirol and Felisa Almirol] and assessed atP31,360.00 according to Tax Dec. No. 018-947;

PARCEL II:

A parcel of land known as Lot No. 3805-B situated at Olingan, Dipolog City,with an area of about 18,934 square meters, more or less, duly covered by

Transfer Certificate of Title No. T-6672 and assessed at P5,890 according toTax Dec. No. 009-761;

PARCEL III:

A parcel of land known as Lot No. 837-1/4 situated at Magsaysay Street,Dipolog City, with an area of about 880 square meters more or less, dulycovered by Original Certificate of Title No. 0-6064 and assessed atP12,870.00 according to Tax Dec. No. 020-1078;

PARCEL IV:

A parcel of residential land known as Lot No. 1106-B-3 situated at Sta.Filomena, Dipolog City, with an area of 300 square meters, more or less,assessed at P3,150.00 according to Tax Dec. No. 006-317;

Commercial building erected on Parcel I above-described; and residentialbuilding erected just at the back of the commercial building above-described

and erected on Parcel I above-described;[5]

Parcel I, Lot No. 653, is the paraphernal property of Filomena Almirolde Sevilla which she co-owned with her sisters, Honorata Almirol and Felisa Almirol,

[6] who were both single and without issue. Parcels II, II and IV are

conjugal properties of Filomena Almirol de Sevilla and her late husband Andres Sevilla.

[7] When Honorata died in 1982, her 1/3 undivided share in

Lot No. 653 was transmitted to her heirs, Felisa Almirol and the heirs ofFilomena Almirol de Sevilla, who thereby acquired the property in theproportion of one-half share each.

During the lifetime of Felisa and Honorata Almirol, they lived in thehouse of Filomena Almirol de Sevilla, together with their nephew,

respondent Leopoldo Sevilla and his family. Leopoldo attended to the needsof his mother, Filomena, and his two aunts, Honorata and Felisa.

[8]

Felisa died on July 6, 1988.[9]

Previous thereto, on November 25, 1985,she executed a last will and testament devising her 1/2 share in Lot No. 653to the spouses Leopoldo Sevilla and Belen Leyson.

[10] On August 8, 1986,

Felisa executed another document denominated as “Donation Inter Vivos”ceding to Leopoldo Sevilla her 1/2 undivided share in Lot No. 653, whichwas accepted by Leopoldo in the same document.

[11]

On September 3, 1986, Felisa Almirol and Peter Sevilla, in his ownbehalf and in behalf of the heirs of Filomena Almirol de Sevilla, executed aDeed of Extra-judicial Partition, identifying and adjudicating the 1/3 share of

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Honorata Almirol to the heirs of Filomena Almirol de Sevilla and to Felisa Almirol.

[12]

Thereafter, respondents Leopoldo, Peter and Luzvilla Sevilla obtainedthe cancellation of Transfer Certificate of Title No. (T-6671)-1448, over LotNo. 653, and the issuance of the corresponding titles to Felisa Almirol and

the heirs of Filomena Almirol de Sevilla. However, the requested titles forLot Nos. 653-A and 653-B, were left unsigned by the Register of Deeds ofDipolog City, pending submission by Peter Sevilla of a Special Power of Attorney authorizing him to represent the other heirs of Filomena Almirol deSevilla.

[13]

On June 21, 1990, Felipe Sevilla, Rosa Sevilla, and the heirs ofWilliam, Jimmy and Maria, all surnamed Sevilla, filed the instant caseagainst respondents Leopoldo Sevilla, Peter Sevilla and Luzvilla Sevilla, forannulment of the Deed of Donation and the Deed of Extrajudicial Partition, Accounting, Damages, with prayer for Receivership and for Partition of theproperties of the late Filomena Almirol de Sevilla.

[14] They alleged that the

Deed of Donation is tainted with fraud because Felisa Almirol, who was then81 years of age, was seriously ill and of unsound mind at the time of the

execution thereof; and that the Deed of Extra-judicial Partition is voidbecause it was executed without their knowledge and consent.

[15]

In their answer ,[16]

respondents denied that there was fraud or unduepressure in the execution of the questioned documents. They alleged thatFelisa was of sound mind at the time of the execution of the assailed deedsand that she freely and voluntarily ceded her undivided share in Lot No. 653in consideration of Leopoldo’s and his family’s love, affection, and servicesrendered in the past. Respondents further prayed that Parcels II, III, and IVbe partitioned among the heirs of Filomena Almirol de Sevilla in accordancewith the law on intestate succession.

On December 16, 1994, a decision was rendered by the Regional TrialCourt of Dipolog City, Zamboanga del Norte, Branch 6, upholding the validity

of the Deed of Donation and declaring the Deed of Extra-judicial Partitionunenforceable. The dispositive portion thereof, reads:

WHEREFORE, IN VIEW OF THE FOREGOING, summing up the evidencefor both the plaintiffs and the defendants, the Court hereby renders judgment:

1) Declaring the questioned Deed of Donation Inter Vivos valid andbinding, and, therefore, has the full force and effect of law;

2) Declaring the questioned Deed of Extra-Judicial Partition asunenforceable as yet as against the other heirs, as it lacks the legalrequisites of Special Power of Attorney or any other appropriate instrumentto be executed by the other heirs who were not made parties thereto;

3) Finding the parties herein entitled to the partition of Parcel II, III, IV as

designated in the Complaint, in equal shares, and, as to Lot No. 653designated as Parcel I, it shall be divided equally into two, betweendefendant Leopoldo Sevilla on one hand, and, collectively, the Heirs ofWilliam Sevilla, Heirs of Jimmy Sevilla, Heirs of Maria Sevilla, Felipe Sevilla,Leopoldo Sevilla, Peter Sevilla, Luzvilla Sevilla-Tan, on the other hand, aswell as the two buildings thereon in proportionate values;

4) Directing the parties, if they can agree, to submit herewith a project ofpartition, which shall designate the share which pertains to the heirs entitledthereto, that is, the particular and specific portions of the properties subjectof the partition;

5) Directing defendant Peter Sevilla to pay and/or collect from the partiesthe amounts corresponding to each one entitled or liable thereto, asrecorded in the Statement of Accounts, except for defendant LeopoldoSevilla who is found by the Court to have incurred only an overdraft ofP5,742.98 and not P33,204.33 as earlier computed therein.

6) Dismissing the plaintiffs’ claim for damages, which is not proved withsufficient evidence, and defendants’ counterclaim, on the same ground.

7) With costs de oficio.

IT IS SO ORDERED.[17]

Both parties appealed to the Court of Appeals. Petitioners contendedthat the Deed of Donation should be declared void and that Lot No. 653should be divided equally among them. Respondents, on the other hand,posited that the trial court erred in declaring the Deed of Extra-judicialPartition unenforceable against the other heirs of Filomena Almirol de Sevillawho were not parties to said Deed.

On September 26, 2000, the Court of Appeals affirmed in toto theassailed decision of the trial court.

[18] Petitioners filed a motion for

reconsideration but the same was denied on August 30, 2001.[19]

Hence, the instant petition based on the following assignment of errors:



































THAT THE HONORABLE COURT OF APPEALS ERRED IN NOTHOLDING AS VOID AB INITIO THE DEED OF DONATION EXCUTED BYFELISA ALMIROL IN FAVOR OF RESPONDENT LEOPOLDO SEVILLACEDING TO HIM ONE HALF PORTION OF LOT 653, DIPOLOGCADASTRE, IT HAVING BEEN EXECUTED WITH FRAUD, UNDUEPRESSURE AND INFLUENCE;

THAT THE APPELLATE COURT GREATLY ERRED IN NOT ORDERINGTHE PARTITION OF LOT 653, DIPOLOG CADASTRE EQUALLY AMONGTHE EIGHT (8) HEIRS OF FILOMENA, HONORATA AND FELISA, ALLSURNAMED ALMIROL.

[20]

To resolve the issue raised in the instant petition for review, the validityof the donation inter vivos executed by Felisa Almirol in favor of LeopoldoSevilla must first be determined.

Donation is an act of liberality whereby a person disposes gratuitouslyof a thing or right in favor of another who accepts it .

[21] Under Article 737 of

the Civil Code, the donor’s capacity shall be determined as of the time of the

making of the donation. Like any other contract, an agreement of the partiesis essential,

[22] and the attendance of a vice of consent renders the donation

voidable.[23]

In the case at bar, there is no question that at the time Felisa Almirolexecuted the deed of donation she was already the owner of 1/2 undividedportion of Lot No. 653. Her 1/3 undivided share therein was increased by1/2 when she and Filomena inherited the 1/3 share of their sister Honorataafter the latter’s death. Hence, the 1/2 undivided share of Felisa in Lot No.653 is considered a present property which she can validly dispose of at thetime of the execution of the deed of donation.

[24]

Petitioners, however, insist that respondent Leopoldo Sevilla employedfraud and undue influence on the person of the donor. This argument

involves appreciation of the evidence.[25]

The settled rule is that factualfindings of the trial court, if affirmed by the Court of Appeals, are entitled togreat respect.

[26] There are exceptional circumstances when findings of fact

of lower courts may be set aside[27]

but none is present in the case atbar. Indeed, neither fraud nor undue influence can be inferred from thefollowing circumstance alleged by the petitioners, to wit –

A. That Felisa Almirol lived with respondent Leopoldo Sevilla in theresidential house owned by petitioners and respondents;

B. That the old woman Felisa Almirol was being supported out of therentals derived from the building constructed on the land which was acommon fund….

C. That when Felisa Almirol was already 82 years old, he [LeopoldoSevilla] accompanied her in the Office of Atty. Vic T. Lacaya, Sr., for the

purpose of executing her last will and testament…

D. That in the last will and testament executed by Felisa Almirol, she haddevised in favor of respondent Leopoldo Sevilla one-half of the land inquestion;

E. That respondent Leopoldo Sevilla not contented with the execution byFelisa Almirol of her last will and testament, had consulted a lawyer as tohow he will be able to own the land immediately;

F. That upon the advice of Atty. Helen Angeles, Clerk of Court of theRegional Trial Court of Zamboanga del Norte, Dipolog City, Felisa Almirol

executed a Deed of Donation, hence, the questioned Deed of Donationexecuted in his favor;

G. That the subject matter of the Deed of Donation was the one-halfportion of Lot 653, Dipolog Cadastre, which was willed by Felisa Almirol, infavor of respondent Leopoldo Sevilla in her last will and testament;

H. That at the time of the execution of the Deed of Donation, Lot No. 653,Dipolog Cadastre, was not yet parti tioned between petitioners andrespondents they being heirs of the late Filomena and Honorata, allsurnamed Almirol;

I. That after the execution of the Deed of Donation, respondent PeterSevilla and the late Felisa Almirol were the only ones who executed theDeed of Extra-judicial Partition over Lot 653, Dipolog Cadastre, thepetitioners were not made parties in the said Deed of Extrajudicial Partition;

J. That on the basis of the Deed of Extrajudicial Partition and Deed ofDonation, respondent Leopoldo Sevilla caused the subdivision survey of Lot653, Dipolog Cadastre, dividing the same into two (2) lots, adjudicating one-half of the lot in his favor and the other half in favor of respondents peterSevilla and Luzvilla Sevilla, and to respondent Leopoldo Sevilla himself;



































K. That only two persons knew the actual survey of the land, petitionerFelipe Sevilla and respondent Leopoldo Sevilla himself, the rest of the co-owners were not even notified;

L. That on the basis of the Extrajudicial Partition, Deed of Donation, theapproved subdivision plan, respondent Leopoldo Sevilla filed a petition for

issuance of the corresponding titles for the two lots, but the Register ofDeeds of Dipolog City refused to issue the corresponding titles for the twolots to respondent Leopoldo Sevilla so that up to this moment … the two tileswere left unsigned by the Register of Deeds.

[28]

There is fraud when, through the insidious words or machinations ofone of the contracting parties, the other is induced to enter into a contractwhich, without them, he would not have agreed to.

[29] There is undue

influence when a person takes improper advantage of his power over the willof another, depriving the latter of a reasonable freedom of choice. Thefollowing circumstances shall be considered: the confidential, family, spiritualand other relations between the parties, or the fact that the person alleged tohave been unduly influenced was suffering from mental weakness, or was

ignorant or in financial distress.[30]

Ei incumbit probatio qui dicit, non qui negat . He who asserts, not hewho denies, must prove. We have consistently applied the ancient rule thatif the plaintiff, upon whom rests the burden of proving his cause of action,fails to show in a satisfactory manner facts on which he bases his claim, thedefendant is under no obligation to prove his exception or defense.

[31] In the

instant case, the self-serving testimony of the petitioners are vague on whatacts of Leopoldo Sevilla constituted fraud and undue influence and on howthese acts vitiated the consent of Felisa Almirol. Fraud and undue influencethat vitiated a party’s consent must be established by full, clear andconvincing evidence, otherwise, the latter’s presumed consent to thecontract prevails.

[32] Neither does the fact that the donation preceded the

partition constitute fraud. It is not necessary that partition should first be hadbecause what was donated to Leopoldo was the 1/2 undivided share ofFelisa in Lot No. 653.

Moreover, petitioners failed to show proof why Felisa should be heldincapable of exercising sufficient judgment in ceding her share to respondentLeopoldo.

[33] As testified by the notary public who notarized the Deed of

Donation, Felisa confirmed to him her intention to donate her share in LotNo. 653 to Leopoldo. He stressed that though the donor was old, she was ofsound mind and could talk sensibly. Significantly, there is nothing in therecord that discloses even an attempt by petitioners to rebut said declarationof the notary public.

Clearly, therefore, the courts below did not err in sustaining the validityof the deed of donation.

Anent the Deed of Extra-judicial Partition, we find that the same isvoid ab initio and not merely unenforceable. In Delos Reyes v. Court of Appeals,

[34] which is a case involving the sale of a lot by a person who is

neither the owner nor the legal representative, we declared the contractvoid ab initio. It was held that one of the requisites of a valid contract under Article 1318 of the Civil Code is the consent and the capacity to give consentof the parties to the contract. The legal capacity of the parties is an essentialelement for the existence of the contract because it is an indispensablecondition for the existence of consent. There is no effective consent in lawwithout the capacity to give such consent. In other words, legal consentpresupposes capacity. Thus, there is said to be no consent, andconsequently, no contract when the agreement is entered into by one inbehalf of another who has never given him authorization therefor unless hehas by law a right to represent the latter .

[35]

In the case at bar, at the time Felisa executed the deed of extra-judicialpartition dividing the share of her deceased sister Honarata between her and

the heirs of Filomena Almirol de Sevilla, she was no longer the owner of the1/2 undivided portion of Lot No. 653, having previously donated the same torespondent Leopoldo Sevilla who accepted the donation in the samedeed. A donation inter vivos, as in the instant case, is immediately operativeand final.

[36] As a mode of acquiring ownership, it results in an effective

transfer of title over the property from the donor to the donee and thedonation is perfected from the moment the donor knows of the acceptanceby the donee. And once a donation is accepted, the donee becomes theabsolute owner of the property donated.

Evidently, Felisa did not possess the capacity to give consent to orexecute the deed of partition inasmuch as she was neither the owner nor theauthorized representative of respondent Leopoldo to whom she previouslytransmitted ownership of her undivided share in Lot No. 653. Considering

that she had no legal capacity to give consent to the deed of partition, itfollows that there is no consent given to the execution of the deed, andtherefore, there is no contract to speak of. As such, the deed of partition isvoid ab initio, hence, not susceptible of ratification.

Nevertheless, the nullity of the deed of extra-judicial partition will notaffect the validity of the donation inter vivos ceding to respondent LeopoldoSevilla the 1/2 undivided share of Felisa Almirol in Lot No. 653. Said lotshould therefore be divided as follows: 1/2 shall go to respondent LeopoldoSevilla by virtue of the deed of donation, while the other half shall be dividedequally among the heirs of Filomena Almirol de Sevilla including LeopoldoSevilla, following the rules on intestate succession.







































Finally, we note that the name of Rosa Sevilla, daughter of Filomena Almirol de Sevilla, and one of the plaintiffs herein, was omitted in thedispositive portion of the trial court’s decision.

[37] Her name should therefore

be included in the dispositive portion as one of the heirs entitled to share inthe properties of the late Filomena Almirol de Sevilla.

WHEREFORE, in view of all the foregoing, the Decision of the Court of Appeals in CA-G.R. CV No. 48956, affirming in toto the Decision of theRegional Trial Court of Dipolog City, Branch 6, in Civil Case No. 4240, is AFFIRMED with MODIFICATION. The Deed of Extra-judicial Partition datedSeptember 3, 1986 is declared void, and the name of Rosa Sevilla isordered included in the dispositive portion of the trial court’s judgment.








Manila

FIRST DIVISION

G.R. No. 137162 January 24, 2007

CORAZON L. ESCUETA, assisted by her husband EDGAR ESCUETA,IGNACIO E. RUBIO, THE HEIRS OF LUZ R. BALOLOY, namely,ALEJANDRINO R. BALOLOY and BAYANI R. BALOLOY, Petitioners,vs.RUFINA LIM, Respondent.

D E C I S I O N

AZCUNA, J. :

This is an appeal by certiorar i1 to annul and set aside the Decision andResolution of the Court of Appeals (CA) dated October 26, 1998 andJanuary 11, 1999, respectively, in CA-G.R. CV No. 48282, entitled "RufinaLim v. Corazon L. Escueta, etc., et. al."

The facts2 appear as follows:

Respondent Rufina Lim filed an action to remove cloud on, or quiet title to,real property, with preliminary injunction and issuance of [a hold-departureorder] from the Philippines against Ignacio E. Rubio. Respondent amendedher complaint to include specific performance and damages.

In her amended complaint, respondent averred inter alia that she bought thehereditary shares (consisting of 10 lots) of Ignacio Rubio [and] the heirs ofLuz Baloloy, namely: Alejandrino, Bayani, and other co-heirs; that saidvendors executed a contract of sale dated April 10, 1990 in her favor; thatIgnacio Rubio and the heirs of Luz Baloloy received [a down payment] orearnest money in the amount of P102,169.86 and P450,000, respectively;that it was agreed in the contract of sale that the vendors would securecertificates of title covering their respective hereditary shares; that thebalance of the purchase price would be paid to each heir upon presentationof their individual certificate[s] of [title]; that Ignacio Rubio refused to receivethe other half of the down payment which isP[100,000]; that Ignacio Rubiorefused and still refuses to deliver to [respondent] the certificates of title

covering his share on the two lots; that with respect to the heirs of LuzBaloloy, they also refused and still refuse to perform the delivery of the twocertificates of title covering their share in the disputed lots; that respondentwas and is ready and willing to pay Ignacio Rubio and the heirs of LuzBaloloy upon presentation of their individual certificates of title, free fromwhatever lien and encumbrance;

As to petitioner Corazon Escueta, in spite of her knowledge that the disputedlots have already been sold by Ignacio Rubio to respondent, it is alleged thata simulated deed of sale involving said lots was effected by Ignacio Rubio inher favor; and that the simulated deed of sale by Rubio to Escueta hasraised doubts and clouds over respondent’s title.

In their separate amended answers, petitioners denied the materialallegations of the complaint and alleged inter alia the following:

For the heirs of Luz Baloloy (Baloloys for brevity):

Respondent has no cause of action, because the subject contract of salehas no more force and effect as far as the Baloloys are concerned, sincethey have withdrawn their offer to sell for the reason that respondent failed topay the balance of the purchase price as orally promised on or before May1, 1990.

For petitioners Ignacio Rubio (Rubio for brevity) and Corazon Escueta(Escueta for brevity):

Respondent has no cause of action, because Rubio has not entered into acontract of sale with her; that he has appointed his daughter Patricia Llamasto be his attorney-in-fact and not in favor of Virginia Rubio Laygo Lim (Limfor brevity) who was the one who represented him in the sale of the disputed

lots in favor of respondent; that theP100,000 respondent claimed hereceived as down payment for the lots is a simple transaction by way of aloan with Lim.

The Baloloys failed to appear at the pre-trial. Upon motion of respondent, thetrial court declared the Baloloys in default. They then filed a motion to lift theorder declaring them in default, which was denied by the trial court in anorder dated November 27, 1991. Consequently, respondent was allowed toadduce evidence ex parte. Thereafter, the trial court rendered a partialdecision dated July 23, 1993 against the Baloloys, the dispositive portion ofwhich reads as follows:

http://www.lawphil.net/judjuris/juri2007/jan2007/gr_137162_2007.html#fnt1










IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of[respondent] and against [petitioners, heirs] of Luz R. Balolo[y], namely: Alejandrino Baloloy and Bayani Baloloy. The [petitioners] Alejandrino Baloloyand Bayani Baloloy are ordered to immediately execute an [Absolute] Deedof Sale over their hereditary share in the properties covered by TCT No.74392 and TCT No. 74394, after payment to them by [respondent] the

amount of P[1,050,000] or consignation of said amount in Court. [For] failureof [petitioners] Alejandrino Baloloy and Bayani Baloloy to execute the Absolute Deed of Sale over their hereditary share in the property covered byTCT No. T-74392 and TCT No. T-74394 in favor of [respondent], the Clerk ofCourt is ordered to execute the necessary Absolute Deed of Sale in behalf ofthe Baloloys in favor of [respondent,] with a consideration ofP[1,500,000].Further[,] [petitioners] Alejandrino Baloloy and Bayani Baloloy are ordered to jointly and severally pay [respondent] moral damages in the amountof P[50,000] and P[20,000] for attorney’s fees. The adverse claim annotatedat the back of TCT No. T-74392 and TCT No. T-74394[,] insofar as theshares of Alejandrino Baloloy and Bayani Baloloy are concerned[,] [is]ordered cancelled.

With costs against [petitioners] Alejandrino Baloloy and Bayani Baloloy.

SO ORDERED.3

The Baloloys filed a petition for relief from judgment and order dated July 4,1994 and supplemental petition dated July 7, 1994. This was denied by thetrial court in an order dated September 16, 1994. Hence, appeal to the Courtof Appeals was taken challenging the order denying the petition for relief.

Trial on the merits ensued between respondent and Rubio and Escueta. After trial, the trial court rendered its assailed Decision, as follows:

IN VIEW OF THE FOREGOING, the complaint [and] amended complaint aredismissed against [petitioners] Corazon L. Escueta, Ignacio E. Rubio[,] andthe Register of Deeds. The counterclaim of [petitioners] [is] also dismissed.However, [petitioner] Ignacio E. Rubio is ordered to return to the[respondent], Rufina Lim[,] the amount of P102,169.80[,] with interest at therate of six percent (6%) per annum from April 10, [1990] until the same isfully paid. Without pronouncement as to costs.

SO ORDERED.4

On appeal, the CA affirmed the trial court’s order and partial decision, butreversed the later decision. The dispositive portion of its assailed Decisionreads:

WHEREFORE, upon all the foregoing premises considered, this Court rules:

1. the appeal of the Baloloys from the Order denying the Petition forRelief from Judgment and Orders dated July 4, 1994 andSupplemental Petition dated July 7, 1994 is DISMISSED. TheOrder appealed from is AFFIRMED.

2. the Decision dismissing [respondent’s] complaint is REVERSEDand SET ASIDE and a new one is entered. Accordingly,

a. the validity of the subject contract of sale in favor of[respondent] is upheld.

b. Rubio is directed to execute a Deed of Absolute Sale

conditioned upon the payment of the balance of thepurchase price by [respondent] within 30 days from thereceipt of the entry of judgment of this Decision.

c. the contracts of sale between Rubio and Escuetainvolving Rubio’s share in the disputed properties isdeclared NULL and VOID.

d. Rubio and Escueta are ordered to pay jointly andseverally the [respondent] the amount ofP[20,000] asmoral damages and P[20,000] as attorney’s fees.

3. the appeal of Rubio and Escueta on the denial of theircounterclaim is DISMISSED.

SO ORDERED.5

Petitioners’ Motion for Reconsideration of the CA Decision was denied.Hence, this petition.

The issues are:















I

THE HONORABLE COURT OF APPEALS ERRED IN DENYING THEPETITION FOR RELIEF FROM JUDGMENT FILED BY THE BALOLOYS.

II

THE HONORABLE COURT OF APPEALS ERRED IN REINSTATING THECOMPLAINT AND IN AWARDING MORAL DAMAGES AND ATTORNEY’SFEES IN FAVOR OF RESPONDENT RUFINA L. LIM CONSIDERINGTHAT:

A. IGNACIO E. RUBIO IS NOT BOUND BY THE CONTRACT OFSALE BETWEEN VIRGINIA LAYGO-LIM AND RUFINA LIM.

B. THE CONTRACT ENTERED INTO BETWEEN RUFINA LIM AND VIRGINIA LAYGO-LIM IS A CONTRACT TO SELL AND NOT A CONTRACT OF SALE.

C. RUFINA LIM FAILED TO FAITHFULLY COMPLY WITH HEROBLIGATIONS UNDER THE CONTRACT TO SELL THEREBYWARRANTING THE CANCELLATION THEREOF.

D. CORAZON L. ESCUETA ACTED IN UTMOST GOOD FAITH INENTERING INTO THE CONTRACT OF SALE WITH IGNACIO E.RUBIO.

III

THE CONTRACT OF SALE EXECUTED BETWEEN IGNACIO E.

RUBIO AND CORAZON L. ESCUETA IS VALID.

IV

THE HONORABLE COURT OF APPEALS ERRED INDISMISSING PETITIONERS’ COUNTERCLAIMS.

Briefly, the issue is whether the contract of sale between petitioners andrespondent is valid.

Petitioners argue, as follows:

First, the CA did not consider the circumstances surrounding petitioners’failure to appear at the pre-t rial and to file the petition for relief on time.

As to the failure to appear at the pre-trial, there was fraud, accident and/orexcusable neglect, because petitioner Bayani was in the United States.There was no service of the notice of pre-trial or order. Neither did theformer counsel of record inform him. Consequently, the order declaring himin default is void, and all subsequent proceedings, orders, or decision arevoid.

Furthermore, petitioner Alejandrino was not clothed with a power of attorneyto appear on behalf of Bayani at the pre-trial conference.

Second, the sale by Virginia to respondent is not binding. Petitioner Rubiodid not authorize Virginia to transact business in his behalf pertaining to theproperty. The Special Power of Attorney was constituted in favor of Llamas,

and the latter was not empowered to designate a substitute attorney-in-fact.Llamas even disowned her signature appearing on the "Joint Special Powerof Attorney," which constituted Virginia as her true and lawful attorney-in-factin selling Rubio’s properties.

Dealing with an assumed agent, respondent should ascertain not only thefact of agency, but also the nature and extent of the former’s authority.Besides, Virginia exceeded the authority for failing to comply with herobligations under the "Joint Special Power of Attorney."

The amount encashed by Rubio represented not the down payment, but thepayment of respondent’s debt. His acceptance and encashment of the checkwas not a ratification of the contract of sale.

Third, the contract between respondent and Virginia is a contract to sell, nota contract of sale. The real character of the contract is not the title given, butthe intention of the parties. They intended to reserve ownership of theproperty to petitioners pending full payment of the purchase price. Togetherwith taxes and other fees due on the properties, these are conditionsprecedent for the perfection of the sale. Even assuming that the contract isambiguous, the same must be resolved against respondent, the party whocaused the same.



Fourth, Respondent failed to faithfully fulfill her part of the obligation. Thus,Rubio had the right to sell his properties to Escueta who exercised duediligence in ascertaining ownership of the properties sold to her. Besides, apurchaser need not inquire beyond what appears in a Torrens title.

The petition lacks merit. The contract of sale between petitioners and

respondent is valid.lawphil.net

Bayani Baloloy was represented by his attorney-in-fact, Alejandrino Baloloy.In the Baloloys’ answer to the original complaint and amended complaint,the allegations relating to the personal circumstances of the Baloloys areclearly admitted.

"An admission, verbal or written, made by a party in the course of theproceedings in the same case, does not require proof."

6 The "factual

admission in the pleadings on record [dispenses] with the need x x x topresent evidence to prove the admitted fact."

7 It cannot, therefore, "be

controverted by the party making such admission, and [is] conclusive"8 as to

them. All proofs submitted by them "contrary thereto or inconsistenttherewith should be ignored whether objection is interposed by a party ornot."

9 Besides, there is no showing that a palpable mistake has been

committed in their admission or that no admission has been made by them.

Pre-trial is mandatory.10

The notices of pre-trial had been sent to both theBaloloys and their former counsel of record. Being served with notice, he is"charged with the duty of notifying the party represented by him."

11 He must

"see to it that his client receives such notice and attends the pre-trial."

12 What the Baloloys and their former counsel have alleged instead in

their Motion to Lift Order of As In Default dated December 11, 1991 is thebelated receipt of Bayani Baloloy’s special power of attorney in favor of theirformer counsel, not that they have not received the notice or been informedof the scheduled pre-trial. Not having raised the ground of lack of a specialpower of attorney in their motion, they are now deemed to have waived it.Certainly, they cannot raise it at this late stage of the proceedings. For lackof representation, Bayani Baloloy was properly declared in default.

Section 3 of Rule 38 of the Rules of Court states:

SEC. 3. Time for filing petition; contents and verification. – A petitionprovided for in either of the preceding sections of this Rule must be verified,filed within sixty (60) days after the petitioner learns of the judgment, finalorder, or other proceeding to be set aside, and not more than six (6) monthsafter such judgment or final order was entered, or such proceeding was

taken; and must be accompanied with affidavits showing the fraud, accident,mistake, or excusable negligence relied upon, and the facts constituting thepetitioner’s good and substantial cause of action or defense, as the casemay be.

There is no reason for the Baloloys to ignore the effects of the above-cited

rule. "The 60-day period is reckoned from the time the party acquiredknowledge of the order, judgment or proceedings and not from the date heactually read the same."

13 As aptly put by the appellate court:

The evidence on record as far as this issue is concerned shows that Atty. Arsenio Villalon, Jr., the former counsel of record of the Baloloys received acopy of the partial decision dated June 23, 1993 on April 5, 1994. At thattime, said former counsel is still their counsel of record. The reckoning of the60 day period therefore is the date when the said counsel of record receiveda copy of the partial decision which was on April 5, 1994. The petition forrelief was filed by the new counsel on July 4, 1994 which means that 90days have already lapsed or 30 days beyond the 60 day period. Moreover,the records further show that the Baloloys received the partial decision on

September 13, 1993 as evidenced by Registry return cards which bear thenumbers 02597 and 02598 signed by Mr. Alejandrino Baloloy.

The Baloloys[,] apparently in an attempt to cure the lapse of the aforesaidreglementary period to file a petition for relief from judgment[,] included in itspetition the two Orders dated May 6, 1994 and June 29, 1994. The firstOrder denied Baloloys’ motion to fix the period within which plaintiffs-appellants pay the balance of the purchase price. The second Order refersto the grant of partial execution, i.e. on the aspect of damages. TheseOrders are only consequences of the partial decision subject of the petitionfor relief, and thus, cannot be considered in the determination of thereglementary period within which to file the said petition for relief.

Furthermore, no fraud, accident, mistake, or excusable negligence exists inorder that the petition for relief may be granted.

14 There is no proof of

extrinsic fraud that "prevents a party from having a trial x x x or frompresenting all of his case to the court"

15 or an "accident x x x which ordinary

prudence could not have guarded against, and by reason of which the partyapplying has probably been impaired in his rights."

16 There is also no proof

of either a "mistake x x x of law"17

or an excusable negligence "caused byfailure to receive notice of x x x the trial x x x that it would not be necessaryfor him to take an active part in the case x x x by relying on another personto attend to the case for him, when such other person x x x was chargeable



















































with that duty x x x, or by other circumstances not involving fault of themoving party."

18

Article 1892 of the Civil Code provides:

Art. 1892. The agent may appoint a substitute if the principal has notprohibited him from doing so; but he shall be responsible for the acts of thesubstitute:

(1) When he was not given the power to appoint one x x x.

Applying the above-quoted provision to the special power of attorneyexecuted by Ignacio Rubio in favor of his daughter Patricia Llamas, it is clearthat she is not prohibited from appointing a substitute. By authorizing VirginiaLim to sell the subject properties, Patricia merely acted within the limits ofthe authority given by her father, but she will have to be "responsible for theacts of the sub-agent,"

19 among which is precisely the sale of the subject

properties in favor of respondent.

Even assuming that Virginia Lim has no authority to sell the subjectproperties, the contract she executed in favor of respondent is not void, butsimply unenforceable, under the second paragraph of Article 1317 of theCivil Code which reads:

Art. 1317. x x x

A contract entered into in the name of another by one who has no authorityor legal representation, or who has acted beyond his powers, shall beunenforceable, unless it is ratified, expressly or impliedly, by the person onwhose behalf it has been executed, before it is revoked by the othercontracting party.

Ignacio Rubio merely denies the contract of sale. He claims, withoutsubstantiation, that what he received was a loan, not the down payment forthe sale of the subject properties. His acceptance and encashment of thecheck, however, constitute ratification of the contract of sale and "producethe effects of an express power of agency."

20 "[H]is action necessarily

implies that he waived his right of action to avoid the contract, and,consequently, it also implies the tacit, if not express, confirmation of the saidsale effected" by Virginia Lim in favor of respondent.

Similarly, the Baloloys have ratified the contract of sale when they acceptedand enjoyed its benefits. "The doctrine of estoppel applicable to petitionershere is not only that which prohibits a party from assuming inconsistentpositions, based on the principle of election, but that which precludes himfrom repudiating an obligation voluntarily assumed after having acceptedbenefits therefrom. To countenance such repudiation would be contrary to

equity, and would put a premium on fraud or misrepresentation."21

Indeed, Virginia Lim and respondent have entered into a contract of sale.Not only has the title to the subject properties passed to the latter upondelivery of the thing sold, but there is also no stipulation in the contract thatstates the ownership is to be reserved in or "retained by the vendor until fullpayment of the price."

22

Applying Article 1544 of the Civil Code, a second buyer of the property whomay have had actual or constructive knowledge of such defect in the seller’stitle, or at least was charged with the obligation to discover such defect,cannot be a registrant in good faith. Such second buyer cannot defeat thefirst buyer’s title. In case a title is issued to the second buyer, the first buyer

may seek reconveyance of the property subject of the sale.23 Even theargument that a purchaser need not inquire beyond what appears in aTorrens title does not hold water. A perusal of the certificates of title alonewill reveal that the subject properties are registered in common, not in theindividual names of the heirs.

Nothing in the contract "prevents the obligation of the vendor to convey titlefrom becoming effective"

24 or gives "the vendor the right to unilaterally

resolve the contract the moment the buyer fails to pay within a fixedperiod."

25Petitioners themselves have failed to deliver their individual

certificates of title, for which reason it is obvious that respondent cannot beexpected to pay the stipulated taxes, fees, and expenses.

"[A]ll the elements of a valid contract of sale under Article 1458 of the CivilCode are present, such as: (1) consent or meeting of the minds; (2)determinate subject matter; and (3) price certain in money or itsequivalent."

26 Ignacio Rubio, the Baloloys, and their co-heirs sold their

hereditary shares for a price certain to which respondent agreed to buy andpay for the subject properties. "The offer and the acceptance are concurrent,since the minds of the contracting parties meet in the terms of theagreement."

27

In fact, earnest money has been given by respondent. "[I]t shall beconsidered as part of the price and as proof of the perfection of the










































contract.28

It constitutes an advance payment to "be deducted from the totalprice."

29

Article 1477 of the same Code also states that "[t]he ownership of the thingsold shall be transferred to the vendee upon actual or constructive deliverythereof."

30 In the present case, there is actual delivery as manifested by acts

simultaneous with and subsequent to the contract of sale when respondentnot only took possession of the subject properties but also allowed their useas parking terminal for jeepneys and buses. Moreover, the execution itself ofthe contract of sale is constructive delivery.

Consequently, Ignacio Rubio could no longer sell the subject properties toCorazon Escueta, after having sold them to respondent. "[I]n a contract ofsale, the vendor loses ownership over the property and cannot recover ituntil and unless the contract is resolved or rescinded x x x."

31 The records

do not show that Ignacio Rubio asked for a rescission of the contract. Whathe adduced was a belated revocation of the special power of attorney heexecuted in favor of Patricia Llamas. "In the sale of immovable property,even though it may have been stipulated that upon failure to pay the price at

the time agreed upon the rescission of the contract shall of right take place,the vendee may pay, even after the expiration of the period, as long as nodemand for rescission of the contract has been made upon him either judicially or by a notarial act."

32

WHEREFORE, the petition is DENIED. The Decision and Resolution of theCourt of Appeals in CA-G.R. CV No. 48282, dated

October 26, 1998 and January 11, 1999, respectively, arehereby AFFIRMED. Costs against petitioners.

SO ORDERED.
























Manila

THIRD DIVISION

G.R. No. 167812 December 19, 2006

JESUS M. GOZUN, petitioner,vs.JOSE TEOFILO T. MERCADO a.k.a. ‘DON PEPITO

MERCADO, respondent.

D E C I S I O N

CARPIO MORALES, J .:

On challenge via petition for review on certiorari is the Court of Appeals’Decision of December 8, 2004 and Resolution of April 14, 2005 in CA-G.R.CV No. 76309

1 reversing the trial court’s decision

2 against Jose Teofilo T.

Mercado a.k.a. Don Pepito Mercado (respondent) and accordinglydismissing the complaint of Jesus M. Gozun (petitioner).

In the local elections of 1995, respondent vied for the gubernatorial post in

Pampanga. Upon respondent’s request, petitioner, owner of JMG PublishingHouse, a printing shop located in San Fernando, Pampanga, submitted torespondent draft samples and price quotation of campaign materials.

By petitioner’s claim, respondent’s wife had told him that respondent alreadyapproved his price quotation and that he could start printing the campaignmaterials, hence, he did print campaign materials like posters bearingrespondent’s photograph,

3 leaflets containing the slate of party

candidates,4 sample ballots,

5 poll watcher identification cards,

6 and stickers.

Given the urgency and limited time to do the job order, petitioner availed ofthe services and facilities of Metro Angeles Printing and of St. JosephPrinting Press, owned by his daughter Jennifer Gozun and mother EpifaniaMacalino Gozun, respectively.

7

Petitioner delivered the campaign materials to respondent’s headquarters

along Gapan-Olongapo Road in San Fernando, Pampanga.8

Meanwhile, on March 31, 1995, respondent’s sister -in-law, Lilian Soriano(Lilian) obtained from petitioner "cash advance" of P253,000 allegedly for theallowances of poll watchers who were attending a seminar and for otherrelated expenses. Lilian acknowledged on petitioner’s 1995 diar y

9 receipt of

the amount.10

Petitioner later sent respondent a Statement of Account11

in the total amountof P2,177,906 itemized as follows:P640,310 for JMG PublishingHouse; P837,696 for Metro Angeles Printing; P446,900 for St. JosephPrinting Press; and P253,000, the "cash advance" obtained by Lilian.

On August 11, 1995, respondent’s wife partially paid P1,000,000 topetitioner who issued a receipt

12 therefor.

Despite repeated demands and respondent’s promise to pay, respondentfailed to settle the balance of his account to petitioner.

Petitioner and respondent being compadres, they having been principalsponsors at the weddings of their respective daughters, waited for more thanthree (3) years for respondent to honor his promise but to no avail,compelling petitioner to endorse the matter to his counsel who sentrespondent a demand letter .

13 Respondent, however, failed to heed the

demand.14

Petitioner thus filed with the Regional Trial Court of Angeles City onNovember 25, 1998 a complaint

15 against respondent to collect the

remaining amount of P1,177,906 plus "inflationary adjustment" andattorney’s fees.

In his Answer with Compulsory Counterclaim,16

respondent denied havingtransacted with petitioner or entering into any contract for the printing ofcampaign materials. He alleged that the various campaign materialsdelivered to him were represented as donations from his family, friends andpolitical supporters. He added that all contracts involving his personal

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expenses were coursed through and signed by him to ensure compliancewith pertinent election laws.

On petitioner’s claim that Lilian, on his (respondent’s) behalf, had obtainedfrom him a cash advance of P253,000, respondent denied having given herauthority to do so and having received the same.

At the witness stand, respondent, reiterating his allegations in his Answer,claimed that petitioner was his over-all coordinator in charge of the conductof seminars for volunteers and the monitoring of other matters bearing on hiscandidacy; and that while his campaign manager, Juanito "Johnny" Cabalu(Cabalu), who was authorized to approve details with regard to printingmaterials, presented him some campaign materials, those were partlydonated.

17

When confronted with the official receipt issued to his wife acknowledgingher payment to JMG Publishing House of the amount of P1,000,000,respondent claimed that it was his first time to see the receipt, albeit hebelatedly came to know from his wife and Cabalu that the P1,000,000represented "compensation [to petitioner] who helped a lot in the campaignas a gesture of goodwill."

18

Acknowledging that petitioner is engaged in the printing business,respondent explained that he sometimes discussed with petitioner strategiesrelating to his candidacy, he (petitioner) having actively volunteered to helpin his campaign; that his wife was not authorized to enter into a contract withpetitioner regarding campaign materials as she knew her limitations; that heno longer questioned the P1,000,000 his wife gave petitioner as he thoughtthat it was just proper to compensate him for a job well done; and that hecame to know about petitioner’s claim against him only after receiving a copyof the complaint, which surprised him because he knew fully well that thecampaign materials were donations.

19

Upon questioning by the trial court, respondent could not, however, confirmif it was his understanding that the campaign materials delivered bypetitioner were donations from third parties.

20

Finally, respondent, disclaiming knowledge of the Comelec rule that if acampaign material is donated, it must be so stated on its face,acknowledged that nothing of that sort was written on all the materials madeby petitioner .

21

As adverted to earlier, the trial court rendered judgment in favor of petitioner,the dispositive portion of which reads:

WHEREFORE, the plaintiff having proven its (sic) cause of actionby preponderance of evidence, the Court hereby renders a decisionin favor of the plaintiff ordering the defendant as follows:

1. To pay the plaintiff the sum of P1,177,906.00 plus 12% interestper annum from the filing of this complaint until fully paid;

2. To pay the sum of P50,000.00 as attorney’s fees and the costs ofsuit.

SO ORDERED.22

Also as earlier adverted to, the Court of Appeals reversed the trial court’sdecision and dismissed the complaint for lack of cause of action.

In reversing the trial court’s decision, the Court of Appeals held that otherthan petitioner’s testimony, there was no evidence to support his claim thatLilian was authorized by respondent to borrow money on his behalf. It notedthat the acknowledgment receipt

23 signed by Lilian did not specify in what

capacity she received the money. Thus, applying Article 131724

of the CivilCode, it held that petitioner’s claim for P253,000 is unenforceable.

On the accounts claimed to be due JMG Publishing House – P640,310,Metro Angeles Printing – P837,696, and St. Joseph Printing Press – P446,900, the appellate court, noting that since the owners of the last twoprinting presses were not impleaded as parties to the case and it was notshown that petitioner was authorized to prosecute the same in their behalf,held that petitioner could not collect the amounts due them.

Finally, the appellate court, noting that respondent’s wife hadpaid P1,000,000 to petitioner, the latter’s claim of P640,310 (after excludingthe P253,000) had already been settled.

Hence, the present petition, faulting the appellate court to have erred:

1. . . . when it dismissed the complaint on the ground that there isno evidence, other than petitioner’s own testimony, to prove that


































Lilian R. Soriano was authorized by the respondent to receive thecash advance from the petitioner in the amount of P253,000.00.

x x x x

2. . . . when it dismissed the complaint, with respect to the amountsdue to the Metro Angeles Press and St. Joseph Printing Press onthe ground that the complaint was not brought by the real party ininterest.

x x x x25

By the contract of agency a person binds himself to render some service orto do something in representation or on behalf of another, with the consentor authority of the latter .

26 Contracts entered into in the name of another

person by one who has been given no authority or legal representation orwho has acted beyond his powers are classified as unauthorized contractsand are declared unenforceable, unless they are ratified.

27

Generally, the agency may be oral, unless the law requires a specificform.

28 However, a special power of attorney is necessary for an agent to, as

in this case, borrow money, unless it be urgent and indispensable for thepreservation of the things which are under administration.

29 Since nothing in

this case involves the preservation of things under administration, adetermination of whether Soriano had the special authority to borrow moneyon behalf of respondent is in order.

Lim Pin v. Liao Tian, et al .30

held that the requirement of a special power ofattorney refers to the nature of the authorization and not to its form.

. . . The requirements are met if there is a clear mandate from theprincipal specifically authorizing the performance of the act. Asearly as 1906, this Court in Strong v. Gutierrez-Repide (6 Phil. 680)stated that such a mandate may be either oral or written. The onething vital being that it shall be express. And more recently, Westated that, if the special authority is not written, then it mustbe duly established by evidence:

"…the Rules require, for attorneys to compromise the litigation oftheir clients, a special authority. And while the same does not statethat the special authority be in writing the Court has every reason toexpect that, if not in writing, the same be duly established by

evidence other than the self-serving assertion of counsel himselfthat such authority was verbally given him."

31 (Emphasis and

underscoring supplied)

Petitioner submits that his following testimony suffices to establish thatrespondent had authorized Lilian to obtain a loan from him, viz:

Q : Another caption appearing on Exhibit "A" is cash advance, itstates given on 3-31-95 received by Mrs. Lilian Soriano in behalfof Mrs. Annie Mercado, amount P253,000.00, will you kindly tellthe Court and explain what does that caption means?

A : It is the amount representing the money borrowed from me bythe defendant when one morning they came very early andtalked to me and told me that they were not able to go to the bankto get money for the allowances of Poll Watchers who were havinga seminar at the headquarters plus other election related expensesduring that day, sir.

Q : Considering that this is a substantial amount which according toyou was taken by Lilian Soriano, did you happen to make heracknowledge the amount at that time?

A : Yes, sir .32

(Emphasis supplied)

Petitioner’s testimony failed to categorically state, however, whether the loanwas made on behalf of respondent or of his wife. While petitioner claims thatLilian was authorized by respondent, the statement of account marked asExhibit "A" states that the amount was received by Lilian "in behalf of Mrs. Annie Mercado."

Invoking Article 187333 of the Civil Code, petitioner submits that respondentinformed him that he had authorized Lilian to obtain the loan, hence,following Macke v. Camps

34 which holds that one who clothes another

with apparent authority as his agent, and holds him out to the public assuch, respondent cannot be permitted to deny the authority.

Petitioner’s submission does not persuade. As the appellate court observed:

. . . Exhibit "B" [the receipt issued by petitioner] presented byplaintiff-appellee to support his claim unfortunately only indicatesthe Two Hundred Fifty Three Thousand Pesos (P253,0000.00)











































was received by one Lilian R. Soriano on 31 March 1995, butwithout specifying for what reason the said amount was deliveredand in what capacity did Lilian R. Soriano received [sic] the money.The note reads:

"3-31-95

261,120 ADVANCE MONEY FOR TRAINEE –

RECEIVED BY

RECEIVED FROM JMG THE AMOUNT OF 253,000 TWOHUNDRED FIFTY THREE THOUSAND PESOS

(SIGNED)

LILIAN R. SORIANO

3-31-95"

Nowhere in the note can it be inferred that defendant-appellant wasconnected with the said transaction. Under Article 1317 of the NewCivil Code, a person cannot be bound by contracts he did notauthorize to be entered into his behalf .

35 (Underscoring supplied)

It bears noting that Lilian signed in the receipt in her name alone, withoutindicating therein that she was acting for and in behalf of respondent. Shethus bound herself in her personal capacity and not as an agent ofrespondent or anyone for that matter.

It is a general rule in the law of agency that, in order to bind the principal bya mortgage on real property executed by an agent, it must upon its facepurport to be made, signed and sealed in the name of the principal,otherwise, it will bind the agent only. It is not enough merely that the agentwas in fact authorized to make the mortgage, if he has not acted in the nameof the principal. x x x

36 (Emphasis and underscoring supplied)

On the amount due him and the other two printing presses, petitionerexplains that he was the one who personally and directly contracted withrespondent and he merely sub-contracted the two printing establishments inorder to deliver on time the campaign materials ordered by respondent.

Respondent counters that the claim of sub-contracting is a change inpetitioner’s theory of the case which is not allowed on appeal.

In Oco v. Limbaring ,37

this Court ruled:

The parties to a contract are the real parties in interest in an actionupon it, as consistently held by the Court. Only the contractingparties are bound by the stipulations in the contract; they are theones who would benefit from and could violate it. Thus, one who isnot a party to a contract, and for whose benefit it was not expresslymade, cannot maintain an action on it. One cannot do so, even ifthe contract performed by the contracting parties would incidentallyinure to one's benefit.

38 (Underscoring supplied)

In light thereof, petitioner is the real party in interest in this case. The trialcourt’s findings on the matter were affirmed by the appellate court.

39 It erred,

however, in not declaring petitioner as a real party in interest insofar asrecovery of the cost of campaign materials made by petitioner’s mother andsister are concerned, upon the wrong notion that they should have been, butwere not, impleaded as plaintiffs.

In sum, respondent has the obligation to pay the total cost of printing hiscampaign materials delivered by petitioner in the total of P1,924,906, lessthe partial payment of P1,000,000, or P924,906.

WHEREFORE, the petition is GRANTED. The Decision dated December 8,2004 and the Resolution dated April 14, 2005 of the Court of Appeals arehereby REVERSED and SET ASIDE.

The April 10, 2002 Decision of the Regional Trial Court of Angeles City,Branch 57, is REINSTATED mutatis mutandis, in light of the foregoing

discussions. The trial court’s decision is modified in that the amount payableby respondent to petitioner is reduced to P924,906.





















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