THE ROYAL SHIRT FACTORY, INC. vs. CO BON TIC

G.R. No. L-6313 May 14, 1954

MONTEMAYOR, J.:

FACTS: The present appeal involves an action originally brought in the Municipal Court of Manila by the plaintiff, the ROYAL SHIRT COURT, INC., to recover from defendant CO BON TIC the sum of P1,422 said to represent the balance of the purchase price of 350 pairs of "Balleteenas" shoes at P7 a pair, with interest at 12 per cent per annum from August 27, 1948, and 25 per cent of said sum as attorney's fees, and costs. A document from plaintiff pertaining to their agreement with Co Bin Tic stipulated that defendant could either consider the sale as one on consignment, sell as many shoes as he could at any price, pay for them at P8 a pair and at the end of nine days return the shoes unsold to the plaintiff, or, consider the sale of the 350 shoes as absolute at P7 a pair. Defendant did not sign the document but on plaintiff invoice of the said items, defendant noted down in his own handwriting the different partial payments of P500, P528 and lastly of the controversial P420 by check. It will also be noticed that the defendant in making said notations of payment considered the full purchase price of the 350 pairs of shoes at P7.00 or P2,450, and it was against said total that he had been making the payments, putting down the balance after each payment.

ISSUE: Is the agreement between the parties a sale on consignment?

HELD: No. He accepted the straight sale to him on credit of the whole 350 pairs of shoes for P2,450 and made partial payments on account thereof. In making said partial payments, he made no mention whatsoever of the number of shoes sold by him and the number of shoes remaining unsold, which he should have done had the sale been on the consignment basis. Furthermore, if the sale had been on consignment, a stipulation as to the period of time for the return of the unsold shoes should have been made; but evidently that had not been done and defendant kept the shoes unsold more or less indefinitely.

AGILENT TECHNOLOGIES SINGAPORE (PTE) LTD. vs. INTEGRATED SILICON TECHNOLOGY PHILIPPINES CORPORATION, TEOH KIANG HONG, TEOH KIANG SENG, ANTHONY CHOO, JOANNE KATE M. DELA CRUZ, JEAN KAY M. DELA CRUZ and ROLANDO T. NACILLA

G.R. No. 154618 April 14, 2004

YNARES-SANTIAGO, J.:

FACTS: This petition for review assails the Decision dated August 12, 2002 of the Court of Appeals in CA-G.R. SP No. 66574, which dismissed Civil Case No. 3123-2001-C and annulled and set aside the

Order dated September 4, 2001 issued by the Regional Trial Court of Calamba, Laguna, Branch 92.Petitioner is a foreign corporation, which, by its own admission, is not licensed to do business in the Philippines and respondent Integrated Silicon Technology Philippines Corporation a private domestic corporation, 100% foreign owned, which is engaged in the business of manufacturing and assembling electronics components. Respondents Teoh Kiang Hong, Teoh Kiang Seng and Anthony Choo, Malaysian nationals, are current members of Integrated Silicon’s board of directors, while JJoanne Kate M. dela Cruz, Jean Kay M. dela Cruz, and Rolando T. Nacilla are its former members. The parties entered into a 5- year Value Added Assembly Services Agreement entered into on April 2, 1996 between Integrated Silicon and the Hewlett-Packard Singapore Ltd., Singapore Components Operation. Under the terms of the agreement, Integrated Silicon manufacture and assemble fiber optics locally for export of HP Singapore. The latter on the other end, was to consign raw materials to Integrated Silicon; transport machinery to the plant of Integrated Silicon; and pay Integrated Silicon the purchase price of the finished products. On September 19, 1999, with the consent of Integrated Silicon,7 HP-Singapore assigned all its rights and obligations in the VAASA to Agilent. On July 2, 2001, Agilent filed a separate complaint against Integrated Silicon. Respondents filed a motion to dismiss on the grounds of lack of Agilents legal capacity to sue for not being licensed to do business in the Philippines. However, according to Republic Act No. 8179, as a foreign corporation not doing business in the Philippines, it needed no license before it can sue before our courts.

ISSUE: Is the nature of the relationship between the parties of sale?

HELD: No. Section 1 of the Implementing Rules and Regulations of the FIA (as amended by Republic Act No. 8179) provides that the following shall not be deemed "doing business": Paragraph (6) Consignment by a foreign entity of equipment with a local company to be used in the processing of products for export.

By the clear terms of the VAASA, Agilent’s activities in the Philippines were confined to (1) maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by Integrated Silicon; and (2) consignment of equipment with Integrated Silicon to be used in the processing of products for export. As such, we hold that, based on the evidence presented thus far, Agilent cannot be deemed to be "doing business" in the Philippines. Respondents’ contention that Agilent lacks the legal capacity to file suit is therefore devoid of merit.

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

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

MELENCIO-HERRERA, J.:

FACTS: Petition for Review on certiorari assailing the Decision, dated October 6, 1980, and the Resolution on the Motion for Reconsideration, dated November 27, 1980, of the then Court of First Instance of Pangasinan, Branch I, in Civil Case No. 15620 entitled "Corazon DAGUINES vs. MERCEDES Calimlim-Canullas," upholding the sale of a parcel of land in favor of DAGUINES but not of the conjugal house thereon'.On December 19, 1962 Mercedes Calimlim-Canullas and Fernando Canullas were married and they begot five children. They lived in a small house on the residential land in question with an area of approximately 891 square meters in which Fernando inherited from his deceased father. On 1978, Fernando abandoned his family and was living with private respondent Corazon Daguines. On April 15, 1980, Fernando sold the subject property with the house thereon to Daguines for the sum of P2,000.00. Unable to take possession of the lot and house, Daguines initiated a complaint on June 19, 1980 for quieting of title and damages against Mercedes.

ISSUE: Is the sale between Fernando and Daguines living as husband and wife without the benefit of marriage a valid one?

HELD: No. The law emphatically prohibits the spouses from selling property to each other subject to certain exceptions. Similarly, donations between spouses during marriage are prohibited. And this is so because if transfers or conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to prevent the exercise of undue influence by one spouse over the other, as well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, "the condition of those who incurred guilt would turn out to be better than those in legal union." Those provisions are dictated by public interest and their criterion must be imposed upon the wig of the part

AGRIFINA AQUINTEY vs SPOUSES FELICIDAD AND RICO TIBONG

G.R. No. 166704 December 20, 2006

CALLEJO, SR., J.:

FACTS: On May 6, 1999, petitioner Agrifina Aquintey filed before the RTC of Baguio City, a complaint for sum of money and damages against the respondents, spouses Felicidad and Rico Tibong. Agrifina alleged that Felicidad had secured loans from her on several occasions, at monthly interest rates of 6% to 7%. Despite demands, the spouses Tibong failed to pay their outstanding loan, amounting to P773,000.00 exclusive of interests. However, spouses Tiong alleged that they had executed deeds of assignment in favor of Agrifina amounting to P546,459 and that their debtors had executed promissory notes in favor of Agrifina. Spouses insisted that by virtue of these documents, Agrifina became the new collector of their debts. Agrifina was able to collect the total amount of P301,000 from Felicdad’s debtors. She tried to collect the balance of Felicidad and when the latter reneged on her promise, Agrifina filed a complaint in the office of the barangay for the collection of P773,000.00. There was no settlement. RTC favored Agrifina. Court of Appeals affirmed the decision with modification ordering defendant to pay the balance of total indebtedness in the amount of P51,341,00 plus 6% per month.

ISSUE: Is the assignment of credits to the petitioner from the respondents would absolve the loans?

HELD: Yes. As regards to this case, CA correctly found that respondents' obligation to pay the balance of their account with petitioner was extinguished, pro tanto, by the deeds of assignment of credit executed by respondent Felicidad in favor of petitioner.

An assignment of credit is an agreement by virtue of which the owner of a credit, known as the assignor, by a legal cause, such as sale, dation in payment, exchange or donation, and without the consent of the debtor, transfers his credit and accessory rights to another, known as the assignee, who acquires the power to enforce it to the same extent as the assignor could enforce it against the debtor. It may be in the form of sale, but at times it may constitute a dation in payment, such as when a debtor, in order to obtain a release from his debt, assigns to his creditor a credit he has against a third person.

The requisites for dacion en pago are:

(1) There must be a performance of the prestation in lieu of payment (animo solvendi) which may consist in the delivery of a corporeal thing or a real right or a credit against the third person;

(2) There must be some difference between the prestation due and that which is given in substitution (aliud pro alio); and

(3) There must be an agreement between the creditor and debtor that the obligation is immediately extinguished by reason of the performance of a prestation different from that due.

All the requisites for a valid dation in payment are present in this case. As gleaned from the deeds, respondent Felicidad assigned to petitioner her credits "to make good" the balance of her obligation. Felicidad testified that she executed the deeds to enable her to make partial payments of her account, since she could not comply with petitioner's frenetic demands to pay the account in cash. Petitioner

and respondent Felicidad agreed to relieve the latter of her obligation to pay the balance of her account, and for petitioner to collect the same from respondent's debtors.

ROBERTO D. TUAZON vs. LOURDES Q. DEL ROSARIO-SUAREZ, CATALINA R. SUAREZ-DE LEON, WILFREDO DE LEON, MIGUEL LUIS S. DE LEON, ROMMEL LEE S. DE LEON, and GUILLERMA L. SANDICO-SILVA

G.R. No. 168325 December 8, 2010

DEL CASTILLO, J.:

FACTS: In a situation where the lessor makes an offer to sell to the lessee a certain property at a fixed price within a certain period, and the lessee fails to accept the offer or to purchase on time, then the lessee loses his right to buy the property and the owner can validly offer it to another. On June 24, 1994, Roberto Tuazon and Lourdes Del Rosario-Suarez, who owned a parcel of land in Quezon City, executed a contract of lease over the said land for a period of three years. The lease commenced in March 1994 and ended in February 1997. During the effectivity of the lease, Lourdes sent a letter dated January 2, 1995 to Roberto where she offered to sell to the latter subject parcel of land at the price of P37,541,000.00 and gave him two years from January 2, 1995. Roberto did accept the offer stating that the price is high and even negotiated to Lourdes to sell the property at a lower price, which the latter did not heed. On June 1997, Lourdes sold the land to her only child Catalina to her family for only P2,750,000.00. The new owners through their attorney-in-fact notified Roberto to vacate the premises but the latter refused contending Lourdes violated his right to buy subject property under the principle of “right of first refusal” by not giving him notice and the opportunity to buy the property under the same terms at a lower price paid by her child.

ISSUE: Is the letter sent to Roberto on January 1995 constitutes a right of first refusal?

HELD: No. Right of first refusal is an agreement in writing to give a person the ‘option’ to purchase lands within a given time at a named price is neither a sale nor an agreement to sell. It is simply a contract by which the owner of property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time. He does not sell his land; he does not then agree to sell it; but he does sell something; that is, the right or privilege to buy at the election or option of the other party. In a right of first refusal, while the object might be made determinate, the exercise of the right, however, would be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that obviously are yet to be later firmed up.

From the foregoing, it is thus clear that an option contract is entirely different and distinct from a right of first refusal in that in the former, the option granted to the offeree is for a fixed period and at a determined price. Lacking these two essential requisites, what is involved is only a right of first refusal.

Roberto’s reliance in Equatorial is misplaced. Despite his claims, the facts in Equatorial radically differ from the facts of this case. Roberto overlooked the fact that in Equatorial, there was an express provision in the Contract of Lease that :

(i)f the LESSOR should desire to sell the leased properties, the LESSEE shall be given 30-days exclusive option to purchase the same.

There is no such similar provision in the Contract of Lease between Roberto and Lourdes. What is involved here is a separate and distinct offer made by Lourdes through a letter dated January 2, 1995 wherein she is selling the leased property to Roberto for a definite price and which gave the latter a definite period for acceptance. Roberto was not given a right of first refusal. The letter-offer of Lourdes did not form part of the Lease Contract because it was made more than six months after the commencement of the lease. It is clear that the above letter embodies an option contract as it grants Roberto a fixed period of only two years to buy the subject property at a price certain.

JERRY T. MOLES,vs.INTERMEDIATE APPELLATE COURT and MARIANO M. DIOLOSA

G.R. No. 73913 January 31, 1989

REGALADO, J.:

FACTS: This petition for review on certiorari assails the decision of the then Intermediate Appellate Court 1 dismissing the complaint filed by herein petitioner against the herein private respondent in the former Court of First Instance of Negros Occidental in Civil Case No. 13821 thereof. On his second visit to the Diolosa Publishing House, petitioner together with Rogelio Yusay, a letter pressmachine operator, decided to buy the linotype machine, Model 14. The transaction was basically verbalin nature but to facilitate the loan application with the DBP, a pro forma invoice, dated April 23, 1977 and reflecting the amount of P50,000.00 as the consideration of the sale, was signed by petitioner with an addendum that payment had not yet been made but that he promised to pay the full amount upon the release of his loan from the aforementioned bank on or before the end of the month. 5 Although the agreed selling price was only P40,000.00, the amount on the invoice was increased by P10,000.00, said increase being intended for the purchase of new matrices for said machine.

Sometime between April and May, 1977, the machine was delivered to petitioner's publishing house at Tangub, Bacolod City where it was installed by one Crispino Escurido, an employee of respondent Diolosa. Another employee of the Diolosa Publishing House, Tomas Plondaya, stayed at petitioners house for almost a month to train the latter's cousin in operating the machine. 6

Under date of August 29, 1977, private respondent issued a certification wherein he warranted that the machine sold was in A-1 condition, together with other express warranties.

ISSUE: is there an express warranty?

Held: Yes. A certification to the effect that the linotype machine bought by petitioner was in A-1 condition was issued by private respondent in favor of the former. This cannot but be considered as an express warranty. However, it is private respondent's submission, that the same is not binding on him, not being a part of the contract of sale between them. This contention is bereft of substance.

It must be remembered that the certification was a condition sine qua non for the release of petitioner's loan which was to be used as payment for the purchase price of the machine. Private respondent failed to refute this material fact. Neither does he explain why he made that express warranty on the condition of the machine if he had not intended to be bound by it. In fact, the respondent court, in declaring that petitioner should have availed of the remedy of requiring repairs as provided for in said certification, thereby considered the same as part and parcel of the verbal contract between the parties.

On the basis of the foregoing circumstances, the inescapable conclusion is that private respondent is indeed bound by the express warranty he executed in favor of herein petitioner.

The court disagrees with respondent court those private respondents express warranty as to the A-1 condition of the machine was merely dealer's talk. Private respondent was not a dealer of printing or linotype machines to who could be ascribed the supposed resort to the usual exaggerations of trade in said items. His certification as to the condition of the machine was not made to induce petitioner to purchase it but to confirm in writing for purposes of the financing aspect of the transaction his representations thereon. Ordinarily, what does not appear on the face of the written instrument

should be regarded as dealer's or trader's talk; 25 conversely, what is specifically represented as true in said document, as in the instant case, cannot be considered as mere dealer's talk.

JESUS TERAN, plaintiff-appellee, vs.FRANCISCA VILLANUEVA, VIUDA DE RIOSA, ET AL.

G.R. No. L-34697 March 26, 1932

VILLAMOR, J.:

FACTS: On October 6, 1928, the parties in this case executed the deed of sale Exhibit A, whereby the defendants sold to the plaintiff for P4,000 the parcel of land therein described as containing an area of 34 hectares, 52 ares, and 43 centares.

The plaintiff brought this action for rescission of the contract, with damages, upon discovering that the parcel of land contained only about then hectares.

The trial court found no evidence of bad faith on the part of the defendants, and we agree with this finding. This land, with the same area stated in the contract, was inherited by the defendants from their late father, Mariano Villanueva; and the same area appears in the tax declaration given to the plaintiff by an agent of the defendants, named Rafael Villanueva. The latter, accompanied by the plaintiff, inspected the land. Villanueva pointed out some of the boundaries, as they did not go over all of them. Without further investigating the area of the land, the plaintiff agreed to purchase it for the sum of four thousand pesos, paying the amount and taking possession thereof. The plaintiff alleges that after the 1928 harvest he discovered that the boundaries pointed out to him by Rafael Villanueva were not the real ones, and, in order to ascertain the exact area of the land, he went to the cadastral office in Malinao and got a sketch of the property (Exh. B), which shows that the land in question contains only ten hectares, and not thirty-four, as appears in the deed of sale.

In view of these facts, the plaintiff now seeks to rescind the contract on the ground that the property contains a smaller area than that stated in the deed of sale. Evidently this is a sale of real estate with area and boundaries given, for a lump sum and not so much per unit of measure, provided for in article 1471 of the Civil Code.

ISSUE: Is there a warranty on the said case?

HELD: No. The law allows considerable latitude to seller's statements, or dealer's talk; and experience teaches that it is exceedingly risky to accept it at its face value.

Assertions concerning the property which is the subject of a contract of sale, or in regard to its qualities and characteristics, are the usual and ordinary means used by sellers to obtain a high price and are always understood as affording to buyers no ground for omitting to make inquiries. A man who relies upon such an affirmation made by a person whose interest might so readily prompted him to exaggerate the value of his property does so at his peril, and must take the consequences of his own imprudence.

The plaintiff had ample opportunity to investigate the conditions of the land he was purchasing, without the defendant's doing anything to prevent him from making as many inquiries as he deemed expedient, for which reason he cannot now allege that the vendors made false representations. (National Cash Register Co. vs. Townsend, 137 N. C., 515.) The same doctrine is upheld by the courts of the United States, in the following case among others: "Misrepresentation by a vendor of real property with reference to its area are not actionable, where a correct description of the property was given in the deed and recorded chain of title, which the purchaser's agent undertook to investigate and report upon, and the vendor made no effort to prevent a full investigation." (Shappirio vs. Goldberg, 48 Law. ed., 419.)

In the present case the parties did not consider the area as an essential element of the contract. There is no evidence of the negotiation leading up to the sale of the land, except that the parties executed the deed Exhibit A. There is no evidence of record that the parties fixed the price at so much per hectare. If the plaintiff wanted to but the land at so much per unit of measure, he should have so stated in the contract. The plaintiff testified that one of the defendants, Francisca Villanueva, signified her willingness to set aside the contract in case there was a considerable difference in area. But in her letter Exhibit E-1, this defendant stated that she had to wait for the decision of her sister or the latter's husband before acting upon the plaintiff's claim. The court believes that he most that can be inferred from such a statement is that she was disposed to settle the case with a view to avoiding litigation; but this does not mean that the parties agreed to fix the price of the land at so much per unit of measure.

ENGINEERING & MACHINERY CORPORATION vs. COURT OF APPEALS and PONCIANO L. ALMEDAG.R. No. 52267 January 24, 1996

PANGANIBAN, J.:

FACTS:

On September 10, 1962, Petitioner, in a contract with Almeda, undertook to fabricate, furnish and install air-conditioning system in the latter's building for Php 210,000. Petitioner was to furnish the materials, labor, tools and all services required in order to so fabricate and install said system, and said undertaking was completed in 1963.After about 2 years, Ponciano sold the building to NIDC but there was some disagreement with the terms and conditions Ponciano rescinded from the sale. It was also then that he learned from some NIDC employees that the air-conditioning system had some defects. According to a technical evaluation of an engineer, it was not able to maintain the desired room temperature. Hence, Ponciano filed an action for damages. The petitioner moved to dismiss the complaint contending that the prescriptive period of six months had set in regarding the responsibility of a vendor for any hidden faults or defects in the thing sold. Private respondent countered that the contract was not a contract for sale but a contract for a piece of work and under Article 1144 (1) of the same Code, it was timely brought within the ten-year prescriptive period.

ISSUE: Was the nature of contract of sale a piece of work?

RULING: Yes.

According to Article 1467: A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work.

Clearly, the contract in question is one for a piece of work. It is not petitioner's line of business to manufacture air-conditioning systems to be sold "off-the-shelf." Its business and particular field of expertise is the fabrication and installation of such systems as ordered by customers and in accordance with the particular plans and specifications provided by the customers. Naturally, the price or compensation for the system manufactured and installed will depend greatly on the particular plans and specifications agreed upon with the customers.

CARMINA G. BROKMANN vs. PEOPLE OF THE PHILIPPINESG.R. No. 199150 February 6, 2012

BRION, J.:

FACTS: As borne by the records, the criminal charge stemmed from the failure of the petitioner to return or remit the proceeds of jewelries amounting toP1,861,000.00. The prosecution anchored its case on the testimony of Anna de Dios (private complainant), and the Memorandum of Agreement (MOA) executed between the private complainant and the petitioner. The gist of the MOA provides: (1) the petitioner’s acknowledgment and receipt, on various dates, of jewelries from the private complainant amounting to P1,861,000.00; (2) the petitioner failed to remit the proceeds of the sale of the subject jewelries; and (3) the private complainant filed the estafa case against the petitioner for the non-remittance of the proceeds of the sale of the jewelries.

The petitioner asserted her lack of bad faith, that she had no intention to deceive petitioner, that not all the jewelries were sold and she made partial payments of her obligation and that there was no fixed period as to when she should remit the proceeds. She admitted receiving the subject jewelries on a consignment basis but she averred that not all the jewelries were sold.

The RTC ruled in favor of private complainant and appeal to the CA affirmed the earlier decision describing the relationship of the parties and the obligation of petitioner to private complainant. Aside from the penalty provided, the SC affirmed the lower courts' decision. ISSUE: Is the nature of the relationship between the two a contract of sale?

RULING: No.

According to Article 1458: the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. On the other end Article 1466 says a contract of agency to sell is one that essentially establishes a representative capacity in the person of agent on behalf of the principal. Brokmann agreed to hold in trust the said pieces of jewelry for the purpose of selling them to the customers and with the obligation to remit the proceeds of those sold and return the items unsold. What was created was an agency for the sale of jewelry, in which Brokmann as an agent has the duty to return the jewelry upon demand of its owner.

HEIRS OF INTAC VS. CA

G.R. No. 173211 October 11, 2012

MENDOZA, J.

FACTS: From the records, it appears that Ireneo Mendoza (Ireneo), married to Salvacion Fermin (Salvacion), was the owner of the subject property, presently covered by TCT No. 242655 of the Registry of Deeds of Quezon City and situated at No. 36, Road 8, Bagong Pag-asa, Quezon City, which he purchased in 1954. Ireneo had two children: respondents Josefina and Martina (respondents), Salvacion being their stepmother. When he was still alive, Ireneo, also took care of his niece, Angelina, since she was three years old until she got married. The property was then covered by TCT No. 106530 of the Registry of Deeds of Quezon City. On October 25, 1977, Ireneo, with the consent of Salvacion, executed a deed of absolute sale of the property in favor of Angelina and her husband, Mario (Spouses Intac).Despite the sale, Ireneo and his family, including the respondents, continued staying in the premises and paying the realty taxes. After Ireneo died intestate in 1982, his widow and the respondents remained in the premises.3After Salvacion died, respondents still maintained their residence there. Up to the present, they are in the premises, paying the real estate taxes thereon, leasing out portions of the property, and collecting the rentals. On October 25, 1977, Ireneo, with the consent of Salvacion, executed a deed of absolute sale of the property in favor of Angelina and her husband (Spouses Intac). It was said that the sale was made in order to allow Spouses Intac to use the property as collateral for a loan from which they shall build a hospital in Laguna.

Ireneo and his family, including the children, continued staying in the premises and paying the realty taxes even after the parents died. The children also leased out portions of the property and collected the rentals. Sometime later, the children found out that the original title was already cancelled and another was issued under TCT No. 242655 in the name of Spouses Intac.

On February 22, 1994, the children filed the Complaint for Cancellation of Transfer Certificate of Title (TCT) No. 2426555 against the Spouses Intac before the RTC and also prayed for its reconveyance to them claiming that the sale was only simulated and, thus, void.

The RTC ruled that the sale was null and void for being a simulated one considering that the said parties had no intention of binding themselves at all. It explained that the questioned deed did not reflect the true intention of the parties and construed the said document to be an equitable mortgage.

The CA, on the other hand, concluded that the deed of absolute sale was a simulated document and had no legal effect. Hence, appeal by Petitioners.

ISSUE: Was the contract and price absolutely simulated?

RULING: Yes. Article 1345 provides that: "Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter, when the parties conceal their true agreement."

Also, Article 1346 states that: "An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement."

Moreover, Article 1471 of the Civil Code, provides that "if the price is simulated, the sale is void.”

In the case at bench, no valid sale of the subject property actually took place as there was simply no consideration and no intent to sell it. The price purportedly paid as indicated in the contract of sale was simulated for no payment was actually made.

Marietto, characterized as a credible witness of the RTC, testified that Ireneo personally told him that he was going to execute a document of sale because Spouses Intac needed to borrow the title to the property and use it as collateral for their loan application. Ireneo and Salvacion never intended to sell or permanently transfer the full ownership of the subject property to Spouses Intac. Aside from their plain denial, petitioners failed to present any concrete evidence to disprove Marietto’s testimony.

The spouses also claimed that they actually paid P150,000.00 for the subject property. They, however, failed to adduce proof, even by circumstantial evidence, that they did, in fact, pay it. Even for the consideration of P60,000.00 as stated in the contract, petitioners could not show any tangible evidence of any payment therefor. Their failure to prove their payment only strengthened Marietto’s story that there was no payment made because Ireneo had no intention to sell the subject property.

CALIMLIM-CANULLAS VS. FORTUN

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

MELENCIO-HERRERA, J.

FACTS: Petitioner MERCEDES Calimlim-Canullas and FERNANDO Canullas were married on December 19, 1962. They begot five children. They lived in a small house on the residential land in question with an area of approximately 891 square meters, located at Bacabac, Bugallon, Pangasinan. After FERNANDO's father died in 1965, FERNANDO inherited the land. In 1978, unfortunately, Fernando abandoned his family and cohabited with private respondent, Corazon Daguines. They were later convicted of concubinage in 1981.

In 1980, Fernando sold the said house and lot to Daguines for 2000. In the document of sale, the house was described to be inherited, when in fact; it was only the land which he did inherit. Despite the sale,

Daguines was not able to take possession of them as Mercedes and the children still reside in the house. Mercedes claimed that the house, including the coconut trees, were built and planted with conjugal funds and through her industry. Also, being a conjugal property, the sale was null and void as she had not given consent to it.

The CFI of Pangasinan initially ruled in favor of Daguines, declaring her to be the owner of the lot and 1/2 of the house, but upon Motion for Consideration by Mercedes, it was modified. The sale of the house, coconut trees and other crops was declared void but the land was still owned by Daguines. Hence, petition.

ISSUE: Was the sale of the house and lot together with the improvements thereon valid?

RULING: No. With regard to the parties in a sale, the law emphatically prohibits spouses from selling property to each other subject to certain exceptions. While Article 133 of the Civil Code considers as void a donation between the spouses during the marriage, policy considerations of the most exigent character as when as the dictates of morality require that the same prohibition should apply to a common-law relationship, otherwise, "the condition of those who incurred guilt would turn out to be better than those in legal union."

Article 1409 of the Civil Code also states among others that "Contracts whose cause, object, or purpose is contrary to law, morals, good customs, public order, or public policy are void and inexistent from the very beginning."

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

In the case at bar, the sale was made by a husband in favor of a concubine after he had abandoned his family and left the conjugal home where his wife and children lived and from whence they derived their support. It was null and void for being contrary to morals and public policy as it was subversive of the stability of the family, a basic social institution which public policy cherishes and protects.

The Court is consistent that so long as marriage remains the cornerstone of our family law, reason and morality alike demand that the disabilities attached to marriage should likewise attach to concubinage.