Obli Digests 4th Exam

7/28/2019 Obli Digests 4th Exam

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RosencorDevt and Rene Joaquin v. Paterno Inquing, Irene Guillermo,Frederico Bantugan, Fernando Magbanua, and Liza Tiangco

Facts: Paterno Inquing, Irene Guillermo, Frederico Bantugan, Fernando

Magbanua, and Liza Tiangco, herein respondents, averred that

they are the lessees, since 1971, of a two-story residentialapartment located at Tomas Morato Ave., Quezon City owned bythe spouses Faustino and Cresencia Tiangco.

The lease was not covered by a contract and the lessees wereassured by the Spouses Tiangco that they had the pre-emptiveright to purchase the property if ever there was a decision to sell it.

Upon the death of the Spouses Tiangco in 1975, the managementof the property was adjucated to their heirs who were representedby Eufrocina de Leon. The lessess were allegedly promised thesame pre-emptive rights to purchase by the heirs of the spousesTiangco.

In June 1990, the lessees received a letter from a certain Atty.Erlinda Aguila demanding that they vacate the premises so that

demolition to the building could be undertaken. The lessees refusedto vacate.

Thereafter, they received a letter from Eufrocina De Leon offeringto sell them the property for 2,000,000.00 pesos. The lesseescountered the offer by offering to buy the property for 1,000,000pesos. However, no answer was given by De Leon to accept theoffer.

However, in November 1990, Rene Joaquin, came to the leasedpremises introducing himself as the new owner.

In January 1991, the lessees again received another letter fromAtty. Aguila demanding that they vacate the premises. Andthereafter, they received a letter from De Leon advising them thatthe heirs had already sold the property to Rosencor.

The lessees, later on, received a copy of the Deed of Sale betweenDe Leon and Rosencor. They discovered that the sale took placeon September 1990 while the offer by De Leon happened a monthlater in October 1990.

The lessees offered to reimburse De Leon the selling price but theywere refused. They then filed an action, among others, for therescission of the Deed of Absolute Sale between De Leon andRosencor.

The RTC dismissed the complaint holding that the right of firstrefusal of the lessees was merely and oral one and was thusunenforceable by virtue of the statute of frauds.

The CA reversed the decision of the RTC and ordered, amongothers, the rescission of the Deed of Absolute Sale and for the heirsto afford the lessees to exercise their rights of first refusal.

Hence, the present petition wherein Rosencor and Rene Joaquinraise the following errors:I. THE CA GRAVELY ERRED WHEN IT ORDERED THE

RESCISSION OF THE DEED OF ABSOLUTE SALEII. THE CA COMMITTED MANIFEST ERROR IN

MANDATING THAT DE LEON AFFORD THERESPONDENTS THE OPPORTUNITY TO EXERCISETHEIR RIGHT OF FIRST REFUSAL

III. THE CA GRIEVOUSLY ERRED IN CONCLUDING THATRESPONDENTS HAVE ESTABLISHED THEIR RIGHTOF FIRST REFUSAL DESPITE PETITIONERSRELIANCE ON THEIR DEFENSE BASED ON THESTATUTE OF FRAUDS.

Issues: WON the oral contract for the rights of first refusal of the lesseeswas valid, WON the respondents have proven their right of first refusal, and

WON the rescission of the Deed of Absolute Sale was proper

First Issue Both the RTC and the CA based their decisions on the statue of

frauds. The RTC ruled that, being only oral, the right of refusal ofthe lessees was unenforceable. The CA, on the other hand, claimsthat the statute of frauds governs the said right.

However, the right of first refusal is not among those listedunenforceable under the statue of frauds. Paragraph 2(e) of Article1403 of the Civil Code only mentions a perfected contract of sale ofreal property. A right of first refusal is not a perfected contract ofsale of real property.

And, also, the Court has also previously held that not allagreements affecting land must be put into writing to attainenforceability.

Second Issue The Court agrees with the CA that the lessee-respondents have

proven the existence of their right of first refusal. All respondents have individually and uniformly testified that they

were promised by the late Spouses Tiangco and, later on, by theirheirs a right of first refusal over the property they were leasing.

Furthermore, the act by De Leon of offering to sell the property tothe lessees verifies that the heirs recognize the existence of theright of first refusal.


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Also, the petitioners did not present evidence that the rights of firstrefusal did not exist.

Third Issue The court mentioned four cases in relation to the third issue. In the first cases, the court held in Guzman, Bocaling and Co, Inc.

vs. Bonnevie that a Contract of Sale was not voidable butrescissible. Under Article 1380 to 1381 (paragraph 3) of the CivilCode, a contract otherwise valid may nonetheless be subsequentlybe rescinded by reason of injury to third persons, like creditors.

According to Tolentino, rescission is a remedy granted by law to thecontracting parties and even to third persons, to secure reparationsfor damages caused to them by a contract.

In the second case, Equatorial Realty and Devt, Inc. vs MayfairTheater, Inc, the court ordered the rescission of a contract enteredinto in violation of a right of first refusal. Mayfair could only exercisethe right if the fraudulent sale is first set aside or rescinded.

Third, in Paranaque Kings Enterprises, Inc. vs CA, the Court heldthat the allegations in a complaint showing violation of a contractual

right of first option to buy properties subject to lease constitute avalid cause of action by summarizing the rulings in the twopreviously cited cases.

Lastly, in the case of Litonjua vs L&R Corporation, the court heldthat the sale made therein in violation of a right of first refusalembodied in a mortgage contract was rescissible.

Thus, as enunciated in the cited cases, a contract of sale enteredinto in violation of a right of first refusal of another person isrescissible.

However, that doctrine cannot be applied to the case at bar. UnderArticle 1381 of the Civil Code, paragraph 3, a contract validlyagreed upon may be rescinded if it is undertaken in fraud ofcreditors when the latter cannot in any manner collect the

claim due them. Moreover, under Article 1385, rescission shall not take place when

the things which are the object of the contract are legally inthe possession of third persons who did not act in bad faith.

Good faith is always presumed unless contrary to the evidence isadduced. In the case at bar, there clear and convincing evidenceshould have been shown to prove that petitioners were aware ofthe right of first refusal accorded to the respondents.

Respondents point to the letter by Atty. Aguila as proof. However,no mention about the rights of first refusal was made in said letter.

Neither was there any showing that respondents notified Rosencorof Atty. Aguila of their right of first refusal after they received thesaid letter.

Respondents also point to the letter by De Leon where sherecognized the right of first refusal of the respondents. However, DeLeon was writing on her behalf and not on behalf of petitioners and,

as such, it only shows that De Leon was aware of the existence ofthe rights. It does not show that petitioners were aware of suchrights.

Clearly, De Leon is the only party in bad faith in this case. Considering the there was no showing of bad faith on the part of

the petitioners, the CA erred in ordering for the rescission of theDeed of Absolute Sale between Rosencor and De Leon.

Thus, the remedy for the respondent is not rescission but an actionfor damages against De Leon and the heirs of the Spouses Tiangcofor the unjustified disregard of their right of first refusal.

KHE HONG CHENG v. CA and PHILAM INSURANCE CO.

(355 SCRA 701)

Facts:

Petitioner Khe Hong Cheng is the owner of Butuan Shipping Lines.On or about 4 October 1985, the Philippine Agricultural Trading Corporationshipped on board the vessel M/V PRINCE ERIC (owned by petitioner) 3, 400bags of copra for delivery to Dipolog City. The said shipment was covered bya marine insurance policy issued by American Home Insurance Company(respondent Philams assured). M/V PRINCE ERIC, however, sank resultingin the total loss of the shipment. Because of this, the insurer, AmericanHome, paid the amount of P354, 000. 00 (the value of the copra) to the

consignee.

American Home then instituted a civil case based on breach ofcontract of carriage for the recovery of the money paid. While the case wasstill pending, or on 20 December 1989, petitioner Khe Hong Cheng executeddeeds of donations of parcels of land in favor of his children.

On 29 December 1993, four years after the donations were madeand the TCTs were registered in the donees names, the trial court renderedjudgment against petitioner. However, despite earnest efforts, the sherifffound no property under the name of Butuan Shipping Lines or petitionerKhe Hong Cheng to levy or garnish in satisfaction of the trial courts


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decision. When the sheriff, accompanied by counsel of respondent Philam,went to Butuan City on 17 January 1997 to enforce the alias writ ofexecution, they discovered that petitioner no longer had any property andthat he had conveyed the subject properties to his children. Philam thus fi leda complaint for the rescission of the deeds of donation alleging that thosewere executed in fraud of creditors.

Petitioners moved for the dismissal of the complaint on the groundthat the action had prescribed. This was denied by the trial court. The CAalso declared that the action to rescind the donations had not yet prescribed.It reckoned the accrual of respondent Philams cause of action on January1997, when it first learned that petitioner Khe Hong Cheng had no moreproperties in his name.

The issue for resolution posed by petitioners is this: When did thefour (4) year prescriptive period as provided for in Article 1389 of the CC forrespondent Philam to file its action for rescission commence to run?

Held:

Article 1389 of the CC simply provides that, The action to claimrescission must be commenced within four years. Since the provision of lawis silent as to when the prescriptive period would begin, the general rule asstated in Article 1150, from the moment the cause of action accrues,therefore applies.

Now, Article 1383 of the CC provides as follows:

Article 1383. An action for rescission issubsidiary, it cannot be instituted except when the partysuffering the damage has no other legal means to obtainreparation for the same.

It is thus apparent that an action to rescind or an accion paulianamust be of last resort, availed of only after all other legal remedies havebeen exhausted and have been proven futile. For an accion pauliana toaccrue, the following requisites must concur:

(1) That the plaintiff asking for rescission has a credit prior to thealienation, although demandable later;

(2) That the debtor has made a subsequent contract conveying apatrimonial benefit to a third person;

(3) That the creditor has no other legal remedy to satisfy his claim, butwould benefit by rescission of the conveyance to the third person;

(4) That the act being impugned is fraudulent;

(5) That the third person who received the property conveyed, if byonerous title, has been an accomplice in the fraud.

As enunciated by the CA, for as long as the creditor still has aremedy at law for the enforcement of his claim against the debtor, he will nothave any cause of action for rescission of contracts. Indeed, an accion

pauliana presupposes a judgment and the issuance by the trial court of awrit of execution and the failure of the sheriff to enforce and satisfy such. Itpresupposes that the creditor has exhausted the property of the debtor. Thedate of decision of the trial court against the debtor is immaterial. What isimportant is that the credit antedates that of the fraudulent alienation ofproperty. After all, the decision of the trial court will retroact to the time whenthe debtor became indebted to the creditor.

Petitioners contend that the registration of the deeds of donation on27 December 1989 constituted constructive notice to respondent Philam,hence, the cause of action to rescind should have accrued by then. Thisargument runs counter to Article 1383 of the CC as well as settledjurisprudence. It would likewise contravene the 3

rdrequisite to file an action

for rescission of an allegedly fraudulent conveyance (that the creditor has noother legal remedy to satisfy his claim).

Even if respondent Philam was aware as of December 1989 thatpetitioner Khe Hong Cheng had executed the deeds of donation in favor ofhis children, the complaint against Butuan Shipping Lines was still pending.Respondent Philam had no inkling, at the time, that the trial courts judgmentwould be in its favor and further, that such judgment could not be satisfied.Had respondent Philam filed its complaint on 27 December 1989, suchcomplaint would have been dismissed for being premature.

As mentioned earlier, respondent Philam only learned about theunlawful conveyances in January 1997. It was only then that the cause ofaction accrued because then it could be said that it had exhausted all legal

means to satisfy the trial courts judgment. Since respondent Philam filed itscomplaint foraccion pauliana on 25 February 1997, barely a month from itsdiscovery that petitioner Khe Hong Cheng had no other property left, itsaction for rescission clearly had not yet prescribed.

Hence, the petition must be DENIED for lack of merit.

G.R. No. 152347 June 21, 2006UNION BANK OF THE PHILIPPINES, Petitioner,vs.


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SPS. ALFREDO ONG AND SUSANA ONG and JACKSONLEE, Respondents.

ISSUE:Is the suit commenced by the petitioner against the respondents forannulment or rescission of sale in fraud of creditors.

FACTS:1. Respondents, the spouses Alfredo Ong and Susana Ong, own the

majority capital stock of Baliwag Mahogany Corporation (BMC).2. On October 10, 1990, the spouses executed a Continuing Surety

Agreement in favor of Union Bank to secure a P40,000,000.00-credit line facility made available to BMC.

3. A year after the execution of the surety agreement, the spousesOng, forP12,500,000.00, sold their house and lot located inGreenhills, San Juan, Metro Manila, to their co-respondent,Jackson Lee (Lee, for short).

4. On November 22, 1991, BMC filed a Petition for Rehabilitation andfor Declaration of Suspension of Payments with the Securities and

Exchange Commission (SEC). To protect its interest, Union Bankfiled with the RTC of Pasig City an action for rescission of the salebetween the spouses Ong and Jackson Lee for purportedly being infraud of creditors.

5. The fraudulent design, according to Union Bank, is evidenced bythe following circumstances: (1) insufficiency of consideration, thepurchase price of P12,500,000.00 being below the fair market value

of the subject property at that time; (2) lack of financial capacity onthe part of Lee to buy the property at that time since his grossincome for the year 1990, per the credit investigation conducted bythe bank, amounted to only P346,571.73; and (3) Lee did not assert

absolute ownership over the property as he allowed the spousesOng to retain possession thereof under a purported Contract ofLease dated October 29, 1991.

6. RTC rendered decision, applying Article 1381 of the Civil Code andnoting that the evidence on record "present[s circumstancesdistinctly characterized by badges of fraud," rendered judgment forUnion Bank, the Deed of Sale executed by the spouses Ong infavor of Lee being declared null and void.

7. Respondents filed an appeal to CA . The CA reversed and setaside the trial court's ruling, observing that the contract of saleexecuted by the spouses Ong and Lee, being complete and regularon its face, is clothed with the prima facie presumption of regularityand legality.

HELD:

In this case , the determinative issue tendered in this case resolves itself intothe question of whether or not the Ong-Lee contract of sale partakes of aconveyance to defraud Union Bank.Essentially, petitioner anchors its case on Article 1381 of the Civil Codewhich lists as among the rescissible contracts "[T]hose undertaken in fraudof creditors when the latter cannot in any other manner collect the claim due

them."

1. In a bid to attach a badge of fraud on the transaction, petitionerraises the issue of inadequate consideration, alleging payment ofonly P12,500,000.00 for a property having a fair market value

of P14,500,000.00.

The Supreme Court held: The existence of fraud or the intent todefraud creditors cannot plausibly be presumed from the fact thatthe price paid for a piece of real estate is perceived to be slightlylower, if that really be the case, than its market value. That thespouses Ong acquiesced to the price ofP12,500,000.00, which may

be lower than the market value of the house and lot at the time of

alienation, is certainly not an unusual business phenomenon.

2. Petitioners assertion regarding respondent Lees lack of financialcapacity to acquire the property in question since his income in1990 was only P346,571.73 is clearly untenable.

The Supreme Court held: Assuming for argument that petitioner gotits figure right, it is clearly incorrect to measure ones purchasingcapacity with ones income at a given period. But the moreimportant consideration in this regard is the uncontroverted fact thatrespondent Lee paid the purchase price of said property. Where hesourced the needed cash is, for the nonce, really of no moment.

3. Petitioner has made much of respondent Lee not taking immediate

possession of the property after the sale, stating that such failure isan indication of his participation in the fraudulent scheme toprejudice petitioner bank

The Court held: Lee, it is true, allowed the respondent spouses tocontinue occupying the premises even after the sale. Thisdevelopment, however, is not without basis or practical reason. Thespouses' continuous possession of the property was by virtue of aone-year lease

20they executed with respondent Lee six days after

the sale. possession may be exercised in ones own name or in thename of another; an owner of a piece of land has possession,either when he himself physically occupies the same or when
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another person who recognizes his right as owner is in suchoccupancy.

4. In a last-ditch attempt to resuscitate a feeble cause, petitioner citesSection 70 of the Insolvency Law.

The Court held: Respondent spouses Ong have doubtlessly notfiled a petition for a declaration of their own insolvency. Neither hasone been filed against them.

WHEREFORE, the instant petition is DENIED and the assailed decision ofthe Court of Appeals is AFFIRMED.

Heirs of Sofia Quirong vs. DBP

Nature of the case:This case is about the prescriptive period of anaction for rescission of a contract of sale where the buyer is evictedfrom the thing sold by a subsequent judicial order in favor of a thirdparty.

Facts: When Emilio Dalope died he left 589 square meter lot to his

wife and their 9 childreno One of whom is Rosa Dalope-Funcion

To enable Rosa and his husband to obtain a loan from DBPo Felisa the wife of the Emilio sold the lot to Funcionso The deed of sale was in their favor and the tax declaration

transferred in their names The funcions mortgage the lot with the DBP Funcions failed to pay their loan

o DBP foreclosed the mortgage and consolidatedownership in its name on 1981

4 years after the DBP conditionally sold the lot to SofiaQuirong for the price of 78000.o In their contract of sale, Sofia Quirong waived any

warranty against eviction.

The contract provided that the DBP did not guarantee possessionof the property and that it would not be liable for any lien orencumbrance on the same.

o Quirong gave down payment of 14000 Two months after the sale Felisa and her eight children filed an

action for partition and declaration of nullity of documents withdamages against the DBP and Funcions before the the RTC.

On DEC 1984 notwithstanding the suit, the DBP executed a deedof absolute sale of the subject lot in Sofia Quirongs favor.

On May 1985Sofia Quirongs heirs filed an answer in interventionwhich they asked the RTC to award the lot to them and shouldinstead be given to the Dalopes, to allow the Quirongs heirs torecover the lots value from the DBP.

o The heirs failed to file a formal offer of evidence, the trialcourt did not rule on the merits of their claim to the lot.

On Dec 1992 the RTC declared that the DBPs sale to SofiaQuirong valid only with respect to the shares of Felisa andRosa in the property.

o It declares Felisas sale to the functions, the lattersmortgage to the DBP, and the latters sale to SofiaQuirong void. Insofar as they prejudiced the share ofthe 8 other children of Emilio and Felisa.

DBP received a copy of the decision on J AN 1993, but the DBPfailed to appeal supposedly because of excusable negligence andthe withdrawal of its counsel of record.

o When the RTC decision became final and the court

issued a writ of execution, the DBP resisted the writ bymotion to quash, claiming that the decision could notbe enforced because it failed to state by metes andbounds the particular portion of the lot that would beassigned to the different parties in the case. The RTCdenied the motion. The resolution became final andexecutory onJ AN 1995

On June 1998 the Quirong heir filed the present action againstthe DBP for Rescission of the contract of sale between SofiaQuirong and the DBP.

The DBP filed a motion to dismiss the action on ground ofprescription but the RTC denied their motion.

On Appeal the CA reversed the Decision of the RTC.o

The CA concluded that, reckoned from the finality of theDEC 1992 decision, the complaint was filed on JUNE1998 was already barred by the four-year prescriptiveperiod under Article 1389 of the NCC.

Issue: WON the Quirong heirs action for rescission of respondentDBPs sale to the subject property to Sofia Quirong was alreadybarredby prescription.

Held: Petitioner heirs claim that the prescriptive period should be

reckoned from January 17, 1995, the date this Courts resolutionin G.R. 116575 became final and executory.


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But the incident before this Court in G.R. 116575 did not deal withthe merit of the RTC decision in Civil Case D-7159. That decisionbecame final and executory on January 28, 1993 when the DBPfailed to appeal from it within the time set for such appeal.

Since this incident did not affect the finality of the decision inCivil Case D-7159, the prescriptive period remained to be

reckoned from January 28, 1993, the date of such finality. The DBP claims that it should be four years as provided under

Article 1389 of the Civil Code. Article 1389 provides that theaction to claim rescission must be commenced within four years.

The Quirong heirs, on the other hand, claim that it should be10 years as provided under Article 1144 which states thatactions upon a written contract must be brought within 10 yearsfrom the date the right of action accrues.

The remedy of rescission is not confined to the rescissiblecontracts enumerated under Article 1381. Article 1191 of the CivilCode gives the injured parties in reciprocal obligations, such aswhat contracts are about, the option to choose between fulfillmentand rescission.

Rescissionis a subsidiary action based on injury to the plaintiffseconomic interests as described in Articles 1380 and 1381.

Resolution, the action referred to in Article 1191, is based on thedefendants breach of faith, a violation of the reciprocity betweenthe parties. As an action based on the binding force of a writtencontract, therefore, rescission (resolution) under Article 1191prescribes in 10 years under Article 1144.

Actually, the cause of action of the Quirong heirs stems from theirhaving been ousted by final judgment from the ownership of the lotthat the DBP sold to Sofia Quirong, in violation of the warrantyagainst eviction that comes with every sale of property orthing. Article 1548 of the Civil Code provides:

Article 1548. Eviction shall take place whenever by a final

judgment based on a right prior to the sale or an act imputable tothe vendor, the vendee is deprived of the whole or of a part of thingpurchased.

o With the loss of 80% of the subject lot to the Dalopesby reason of the judgment of the RTC in Civil Case D-7159, the Quirong heirs had the right to file an actionfor rescission against the DBP pursuant to theprovision of Article 1556 of the Civil Code whichprovides:

Article 1556. Should the vendee lose, by reason of the eviction, apart of the thing sold of such importance, in relation to the whole,that he would not have bought it without said part, he may demand

the rescission of the contract; but with the obligation to return thething without other encumbrances than those which it had when heacquired it.

The action for rescission, which is based on a subsequenteconomic loss suffered by the buyer, was precisely the actionthat the Quirong heirs took against the DBP. Consequently, it

prescribed as Article 1389 provides in four years from the timethe action accrued. Since it accrued on January 28, 1993 whenthe decision in Civil Case D-7159 became final and executoryand ousted the heirs from a substantial portion of the lot, thelatter had only until January 28, 1997 within which to file theiraction for rescission. Given that they filed their action on June10, 1998, they did so beyond the four-year period.

Their action was barred by prescription.

ADA vs BAYLONFACTS: This case involves the estate of spouses Florentino Baylon and

Maximina Elnas Baylon. At the time of their death, Spouses Baylon were survived by 6 their

legitimate children. 2 of the children died instestate. One of them is survived by herein

respondent Florante Baylon. The petitioners filed with the RTC a Complaint for partition, accounting

and damages against Florante, Rita and Panfila. They alleged therein that Spouses Baylon, during their lifetime, owned

43 parcels of land5 all situated in Negros Oriental. After the death of Spouses Baylon, they claimed that Rita took

possession of the said parcels of land and appropriated for herself theincome from the same.

Using the income produced by the said parcels of land, Rita allegedly

purchased two parcels of land, Lot No. 47096 and half of Lot No. 4706,situated in Canda-uay, Dumaguete City. The petitioners averred that Rita refused to effect a partition of the said

parcels of land. In their Answer, Florante, Rita and Panfila asserted that they and the

petitioners co-owned 22 out of the 43 parcels of land mentioned in thelatters complaint, whereas Rita actually owned 10 parcels of land out ofthe 43 parcels which the petitioners sought to partition.

During the pendency of the case, Rita, through a Deed of Donationdated July 6, 1997, conveyed Lot No. 4709 and half of Lot No. 4706 toFlorante.

Rita died intestate and without any issue.


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Thereafter, learning of the said donation inter vivos in favor of Florante,the petitioners filed a Supplemental Pleading, praying that the saiddonation in favor of the respondent be rescinded in accordance withArticle 1381(4) of the Civil Code.

Florante and Panfila opposed the rescission of the said donation,asserting that Article 1381(4) of the Civil Code applies only when there

is already a prior judicial decree on who between the contending partiesactually owned the properties under litigation.

RTC ruled donation inter vivos executed by Rita Baylon in favor ofFlorante Baylon is rescissible for the reason that it refers to the parcelsof land in litigation without the knowledge and approval of the plaintiffsor of this Court.

CA held that before the petitioners may file an action for rescission, theymust first obtain a favorable judicial ruling that Lot No. 4709 and half ofLot No. 4706 actually belonged to the estate of Spouses Baylon and notto Rita.

ISSUE: WON the CA erred in ruling that the donation inter vivos of Lot No.4709 and half of Lot No. 4706 in favor of Florante may only be rescinded ifthere is already a judicial determination that the same actually belonged to

the estate of Spouses Baylon.HELD: The petition is partly meritotious.

The resolution of the instant dispute is fundamentally contingent upon adetermination of whether the donation inter vivos of Lot No. 4709 andhalf of Lot No. 4706 in favor of Florante may be rescinded pursuant toArticle 1381(4) of the Civil Code on the ground that the same was madeduring the pendency of the action for partition with the RTC.

Contracts which are rescissible due to fraud or bad faith include thosewhich involve things under litigation, if they have been entered into bythe defendant without the knowledge and approval of the litigants or ofcompetent judicial authority.

The RTC aptly ordered the rescission of the donation inter vivos of Lot

No. 4709 and half of Lot No. 4706 in favor of Florante. The petitioners had sufficiently established the presence of the

requisites for the rescission of a contract pursuant to Article 1381(4) ofthe Civil Code.

It is undisputed that, at the time they were gratuitously conveyed byRita, Lot No. 4709 and half of Lot No. 4706 are among the propertiesthat were the subject of the partition case then pending with the RTC.

It is also undisputed that Rita, then one of the defendants in the partitioncase with the RTC, did not inform nor sought the approval from thepetitioners or of the RTC with regard to the donation inter vivos of thesaid parcels of land to Florante.

Although the gratuitous conveyance of the said parcels of land in favorof Florante was valid, the donation inter vivos of the same being merelyan exercise of ownership, Ritas failure to inform and seek the approvalof the petitioners or the RTC regarding the conveyance gave thepetitioners the right to have the said donation rescinded pursuant toArticle 1381(4) of the Civil Code.

The petitioners right to institute the action for rescission pursuant toArticle 1381(4) of the Civil Code is not preconditioned upon the RTCsdetermination as to the ownership of the said parcels of land.

It bears stressing that the right to ask for the rescission of a contractunder Article 1381(4) of the Civil Code is not contingent upon the finaldetermination of the ownership of the thing subject of litigation.

The petition is partly granted. The decision of the CA is modified. Thecase remanded to the trial court for the determination of the ownershipof Lot No. 4709 and half of Lot No. 4706.

TIBURCIO SAMONTE, petitioner, vs. COURT OF APPEALS. MoeTomawisFacts:

From the pleadings and the evidence adduced by the parties the followingare not disputed or deemed admitted: that Lot 216, containing an area of12,753 square meters,Agusan (now del Norte) is covered by OCT No. RO-238 issued in 1927 in the name of Apolonia Abao and Irenea Tolero in equalundivided shares; that OCT No. RO-238 was administratively reconstitutedon August 8, 1957 and the assigned number of the reconstituted title is OCTNo. RO-238; that on August 8, 1957, based on an affidavit of Extra-judicialSettlement and Confirmation of Sale OCT No. RO-238 (555) was cancelledand lieu thereof TCT No. RT-476 was issued in the name of Irenea Tolero, share and Nicolas Jadol, share; that on February 13, 1959, based onsubdivision plan, subdividing Lot 216 into Lot 216-A and Lot 216-B, theRegister of Deeds of Agusan (now del Norte) cancelled TCT No. RT-476and issued in its place TCT No. RT-553 in the name of Tiburcio Samonte forLot 216-A and TCT No. RT-554. Irenea Tolero and Nicolas Jadol for Lot216-B; that on February 13, 1959 based on a subdivision plan subdividingLot 216-B to 216-B-1 and 216-B-2, TCT No. RT-554 was cancelled and in itsplace TCT No. RT-555 was issued in the name of Jacob B. Tagorda for Lot216-B-1 and TCT No. 556 in the name of Irenea Tolero and Nicolas Jadol forLot 216-B-2;Plaintiffs in their evidence claim ownership over the entire lot, Lot 216, asone-half (1/2) of the area of 12.753 square meters was registered in thename of their mother Irenea Tolero the other half was registered in the nameof their grandmother, Apolonia Abao. After Apolonia Abao died during theJapanese occupation and Irenea Tolero died in 1945, they inherited andbecame owners of Lot 216. Plaintiffs questioned the series of cancellation of


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the certificate of title starting from OCT No. RO-238 (555) and the Deed ofExtra-judicial Settlement and Confirmation of Sale executed by IgnacioAtupan on August 7, 1957 adjudicating one-half (1/2) of the area of Lot 216.Plaintiffs maintain that Ignacio Atupan is not a son of Apolonia Abao but heonly grew up while living with Apolonia Abao. That the plaintiffs or theirpredecessors-in-interest have not signed any document agreeing as to the

manner how Lot 216 was to be divided, nor have they consented to thepartition of the same.Accordingly, the court a quo jointly tried the two cases. After due t rial, thetrial court rendered separate decisions, both in favor of the plaintiffs therein.The CA affirmed.ISSUE: Whether or not the action for reconveyance is already barred bypresccription.It is not disputed that Ignacio Atupan caused the fraudulent cancellation ofOCT No. RO-238(555). The trial court found that Atupan, on the basis of hisAffidavit of Extra-judicial Settlement and Confirmation Sale, adjudicatedunto himself one-half of Lot 216 by misrepresenting himself as the sole heirof Apolonia Abao. Atupan, in said affidavit, likewise confirmed the twodeeds of sale allegedly executed by him and Abao on September 15 and 16,1939, covering the latters one-half lot in favor of Nicolas Jadol.The trial court found Atupans affidavit, dated August 7, 1957, to be taintedwith fraud because he falsely claimed therein that he was the sole heir ofAbao when in fact, he merely lived and grew up with her. Jadol and his wife,Beatriz, knew about this fact. Despite this knowledge, however, the Jadolspouses still presented the affidavit of Atupan before the Register of Deedsof the Province of Agusan when they caused the cancellation of OCT No.R0-238(555) and issuance of TCT No. RT-476 in their names covering thatportion owned by Abao.The trial court concluded that the incorporation of the statement in Atupansaffidavit confirming the alleged execution of the aforesaid deeds of sale wasintended solely to facilitate the issuance of the certificate of title in favor ofthe Jadol spouses. It was noted that the documents evidencing the allegedtransactions were not presented in the Register of Deeds. It was further

pointed out that the Jadol spouses only sought the registration of thesetransactions in 1957, eighteen (18) years after they supposedly took place ortwelve (12) years after Abao died.Nonetheless, petitioner contends that respondents action in the court a quohad already prescribed. Generally, an action for reconveyance of realproperty based on fraud may be barred by the statute of limitations whichrequires that the action must be commenced within four (4) years from thediscovery of fraud, and in case of registered land, such discovery is deemedto have taken place from the date of the registration of title.Petitioner, as successor-in-interest of the Jadol spouses, now argues thatthe respondents action for reconveyance, filed only in 1975, had longprescribed considering that the Jadol spouses caused the registration of a

portion of the subject lot in their names way back in August 8, 1957. It ispetitioners contention that since eighteen years had already lapsed from theissuance of TCT No. RT-476 until the time when respondents filed the actionin the court a quo in 1975, the same was time-barred.Petitioners defense of prescription is untenable. The general rule that thediscovery of fraud is deemed to have taken place upon the registration of

real property because it is conside red a constructive notice to allpersons[10] does not apply in this case.The Courts resolution of whether prescription had set in therein is quiteapropos to the instant case:It is true that registration under the Torrens system is constructive notice oftitle, but it has likewise been our holding that the Torrens title does notfurnish a shield for fraud. It is therefore no argument to say that the act ofregistration is equivalent to notice of repudiation, assuming there was one,notwithstanding the long-standing rule that registration operates as auniversal notice of title.For the same reason, we cannot dismiss private respondents claimscommenced in 1974 over the estate registered in 1955. While actions toenforce a constructive trust prescribes in ten years, reckoned from the dateof the registration of the property, we, as we said, are not prepared to countthe period from such a date in this case. We note the petitioners sub rosaefforts to get hold of the property exclusively for himself beginning with hisfraudulent misrepresentation in his unilateral affidavit of extrajudicialsettlement that he is the only heir and child of his mother Feliza with theconsequence that he was able to secure title in his name [alone].Accordingly, we hold that the right of the private respondents commencedfrom the time they actually discovered the petitioners act of defraudation.According to the respondent Court of Appeals, they "came to know [of it]apparently only during the progress of the litigation." Hence, prescription isnot a bar.In this case, the CA reckoned the prescriptive period from the timerespondents had actually discovered the fraudulent act of Atupan which was,as borne out by the records, only during the trial of Civil Case No. 1672.]

Citing Adille, the CA rightfully ruled that respondents action forreconveyance had not yet prescribed.WHEREFORE, the instant petition is DENIED for lack of merit. TheDecision, dated November 29, 1991 of the Court of Appeals and itsResolution, dated February 21, 1992, in CA-G.R. CV No. 16645 areAFFIRMED in toto.

Mendezona vs Ozamis(MARIO J. MENDEZONA and TERESITA M. MENDEZONA, LUIS J. MENDEZONA and MARICAR L.

MENDEZONA and TERESITA ADAD VDA. DE MENDEZONA, petitioners, vs. JULIO H. OZAMIZ, ROBERTO J.

MONTALVAN, JOSE MA. OZAMIZ, CARMEN H. OZAMIZ, PAZ O. MONTALVAN, MA. TERESA O.F.


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ZARRAGA, CARLOS O. FORTICH, JOSE LUIS O. ROS, PAULITA O. RODRIGUEZ, and LOURDES O.

LON, respondents. )

Facts: The original owner of the Lahug Property(subject property in this

case) by the name Carmen Ozamiz Executed a Notarized Deed of

Absolute Sale dated April 28, 1989 in favor of herein petitioners inconsideration of a sum of P1,040,000.

January 15, 1991 herein respondents instituted a petition forguardianship with the RTC alleging that Carmen Ozamiz, then 86years old, after an illness sometime in 1987 has becomedisoriented and could no longer take care of herself nor manageher properties.

Mario Mendezona and Luis Mendezona, two of herein petitionerand who are nephews of Carmen Ozamiz and a certain PilarMendezona filed an opposition to the above said guardianshippetition. In the course of the proceeding both parties agreed thatCarmen Ozamiz needed a guardian over her person andproperties.

One of herein respondent Paz O. Montalvan was designated asguardian over the person of Carmen Ozamiz while petitioner MarioJ. Mendezona, respondents Roberto J. Montalvan and JulioH. Ozamiz were designated as joint guardians over the propertiesof the said ward. And as guardians respondents Roberto and Juliofiled with the guardianship court their inventories and Accounts,listing Carmen Ozamizs assets including the property known asthe Lahug property. Said respondents also caused the inscript ionon the tit les of petitioners a notice of lis pendens (suit pending)prompting herein petitioners to file a suit for quieting of title (Aproceeding to establish an individual's right to ownership of realproperty against one or more adverse claimants.)

respondents opposed the petitioners claim of ownership ofthe Lahug property and alleged among others, that at the time ofthe sale on April 28, 1989 Carmen Ozamiz was already ailing andnot in full possession of her mental faculties.

During the case the petitioners presented the Notarized Deed ofAbsolute Sale and witnesses who testified for the regularity of thesaid document, on the other hand the respondents presenteddifferent testimonials and the deposition of Dr. Faith Go, physicianof Carmen Ozamiz.

RTC rendered a decision in favor of the petitioners upholding thevalidity of the contract and further stating said contract wasvoluntarily and deliberately entered into while Carmen Ozamis wasof sound mind, for sufficient and good consideration, and without

fraud, force, undue influence or intimidation having been exercisedupon her, and consequently, the Court orders the defendantsherein to acknowledge and recognize the plaintiffs title tothe aforecited property.

Upon appeal the CA reversed the factual finding of the RTC. Andfurther denied the petitioners motion for reconsideration and motion

for a new trial.Issue:

WON the wards mental faculties were indeed seriously impairedwhen she executed the contract so as to warrant its nullity.

Ruling. No. opposed to well-recognized statutory presumptions of regularity

enjoyed by a notarized document and that a contracting party to anotarized contract is of sound and disposing mind when executingthe contract.

The supreme Court held that the appellate court erred in ruling thatat the time of the execution of the Deed of Absolute Sale on April28, 1989 the mental faculties of Carmen Ozamiz were alreadyseriously impaired. The testimonies of the respondents witnesses

on the mental capacity of Carmen Ozamiz are far from being clearand convincing.1. Carolina Lagura, a househelper of Carmen Ozamiz, testified thatwhen Carmen Ozamiz was confronted by Paz O. Montalvan in January1989 with the sale of the Lahug property, Carmen Ozamiz denied thesame. She testified that Carmen Ozamiz understood the question then.However, this declaration is inconsistent with her (Carolinas)statement that since 1988 Carmen Ozamiz could not fully understandthe things around her, that she was physically fit but mentally could notcarry a conversation or recognize persons who visited her.Furthermore, the disputed sale occurred on April 28, 1989 or three (3)months after this alleged confrontation in January 1989. Thisinconsistency was not explained by the respondents.2. The revelation of Dr. Faith Go did not also shed light on the mental

capacity of Carmen Ozamiz on the relevant day - April 28, 1989 whenthe Deed of Absolute Sale was executed and notarized. At best, shemerely revealed that Carmen Ozamiz was suffering from certaininfirmities in her body and at times, she was forgetful, but there was nocategorical statement that Carmen Ozamiz succumbed to what therespondents suggest as her alleged second childhood as early as1987. The petitioners rebuttal witness, Dr. William Buot, a doctor ofneurology, testified that no conclusion of mental incapacity at the timethe said deed was executed can be inferred from Dr. Faith Gos clinicalnotes nor can such fact be deduced from the mere prescription of amedication for episodic memory loss.


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It has been held that a person is not incapacitated to contract merelybecause of advanced years or by reason of physical infirmities. Onlywhen such age or infirmities impair her mental faculties to such extentas to prevent her from properly, intelligently, and fairly protecting herproperty rights, is she considered incapacitated.The respondents utterlyfailed to show adequate proof that at the time of the sale on April 28,

1989 Carmen Ozamiz had allegedly lost control of her mental faculties. The court note that the respondents sought to impugn only one

document, namely, the Deed of Absolute Sale dated April 28, 1989,executed by Carmen Ozamiz. However, there are nine (9) otherimportant documents that were, signed by Carmen Ozamiz either beforeor after April 28, 1989 which were not assailed by the respondents.Such is contrary to their assertion of complete incapacity ofCarmen Ozamiz to handle her affairs since 1987. The court agrees withthe trial courts assessment that it is unfair for the [respondents] toclaim soundness of mind of Carmen Ozamiz when it benefits them andotherwise when it disadvantages them. A person is presumed to be ofsound mind at any particular time and the condition is presumed tocontinue to exist, in the absence of proof to the contrary. Competency

and freedom from undue influence, shown to have existed in the otheracts done or contracts executed, are presumed to continue until thecontrary is shown.

The petition is hereby GRANTED and the assailed Decision andResolution of the Court of Appeals are hereby REVERSED and SETASIDE. The Decision of the Regional Trial Court REINSTATED.

ROBERTO G. FAMANILA, petitionerVs. CA and BARBERSHIP MANAGEMENT LIMITED and NFD MANNINGAGENTS, respondentsFACTS:

In 1989, respondent NFD International Manning Agents Inc. hiredthe service of petitioner Roberto Famanila as Messman for HANSARIGA, a vessel registered and owned by its principal and co-respondent, Barbership Management Unlimited.

June 21, 1990, while HANSA RIGA was docked at the port ofeureka, California, USA, and while petitioner was assisting in theloading operations, the latter complained of a headache. Petitionerexperienced dizziness and he subsequently collapsed.

Upon examination, it was determined that he had sudden attack ofleft cerebral hemorrhage from a rupture cerebral aneurysm.Petitioner underwent a brain operation and e was confined at theEmmanuel hospital at Portland, Oregon, USA.

July 19, 1990, he again underwent a second brain operation.

Due to the physical and mental condition, he was repatriated to thePhilippines.

Aug. 21, 1990, petitioner was examined at the American Hospital inIntramuros, Manila, where the examining physician declared that hecannot go back to sea duty and has been observed for 120 daysand declared as permanently and totally disabled.

Authorized representatives of the respondents convinced thepetitioner to amicably settle his claims against the respondent byaccepting the offered amount of $13,200.

Petitioner accepted the offer as evidenced by his signature in thereceipt and release dated Feb. 28, 1991. The petitioners wife,Gloria Famanila and one Richard Famanila, acted as witnesses inthe signing of release.

June 11, 1997, petitioner filed a complaint with the NLRC prayingfor an award of disability benefits, share in the insurance proceeds,moral damages and attorneys fees.

Acting executive labor arbiter Balitaan dismissed the complaint onthe ground of prescription.

Appealed the decision with the NLRC and even filed a Motion for

Reconsideration yet both were dismissed for the fact that thesewere without merit.

Petitioner referred the case to the Court of appeals and raised theissue that, he did not sign the receipt and release voluntarilybecause he was permanently disabled and in financial constraints,but still dismissed the case for lack of merit.

ISSUE: WON the petitioners consent in the receipt and release was vitiateddue to his disability, thereby making the same VOID or Unenforceable?RULING: SC said No.

Vitiated consent does not make a contract void and unenforceable.A vitiated consent only gives rise to voidable agreement. Under theCC, vices of consent are Mistake, Violence, Intimidation, UndueInfluence or Fraud. If consent is given through any of the

aforementioned vices of consent, the contract is voidable. Avoidable contract is binding unless annulled by a proper action incourt.

Petitioners contention that his permanent and total disabilityvitiated his consent in the said agreement thereby renders it voidand unenforceable .

This court corrects it by mentioning that, disability is not among thefactors that may vitiate the consent. In the absence of proof ofvitiated consent, then the court must upheld to the validity of thereceipt and release.

In the case at bar, there are nothing in records showing thatpetitioners consent was vitiated when he signed the agreement.


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The document entitled receipt and release which was attached bypetitioner in its appeal does not show on its face any violation oflaw or public policy. In fact, the petitioner did not present any proofto show that the consideration for the same is not reasonable andacceptable.

Not all waiver and quitclaims are invalid as against public policy. If

the agreement was voluntarily entered into and represents areasonable settlement, it is binding on the parties and may not laterbe disowned simply because of change of mind.

It is only where there is clear and proof that the waiver waswangled from an unsuspecting or gullible person, or the terms ofthe settlement are unconscionable on its face, that the law will stepin to annul the questionable transaction.

In the case at bench, it was shown that the petitioner made thewaiver voluntarily with full understanding of what he was doing, andthe consideration for the quitclaim is credible and reasonable, thetransaction must be recognized as a valid and binding undertaking.

Dire necessity is not an acceptable ground for annullingwaiver since it has not been shown that employee was force to

sign it. The signing was even witnessed by the petitioners wife,and one Richard T. Famanila. the decision of CA was affirmed and denied the petition.

Catalan vs Basa

Facts: In 1948, Feliciano Catalan was discharged from active militaryservice. The Board of Medical Officers of the Department of Veteran Affairsfound that he was unfit to render military service due to his "schizophrenicreactions.

In 1949, Feliciano got married to Corazon Cerezo.

On June 16, 1951, a document was executed, titled Absolute Deed ofDONATION, wherein Feliciano allegedly donated to his sister MercedesCatalan a parcel of land located at Pangasinan. The donation was thenregistered with the Register of Deeds.

In 1953, Peoples Bank and Trust Company (presently known as BPI) filed aSpecial Proceeding before the CFI of Pangasinan to declare Felicianoincompetent. The trial court issued its order for adjudication of Incompetencyfor Appointing Guardian for the Estate and Fixing Allowance of Feliciano.The court consequently appointed Peoples Bank and Trust Company asFelicianos guardian.

In 1978, Feliciano and Corazon donated a real property to their son Eulogio.The spouses again, in 1983, donated to their children, Alex, Librada, andZenaida a parcel of land. On the same year, the spouses donated a parcelof land in favor of Eulogio and Florida Catalan.

Conversely, on March 26, 1979, Mercedes sold the property in issue in favorof her children Delia and Jesus Basa (herein respondents). The Deed ofAbsolute SALE was then registered with the Register of Deeds.

In April of 1997, BPI acting as Felicianos guardian, filed a case before thetrial court for the Declaration of Nullity of Documents, Recovery ofPossession and Ownership with damages against herein respondents.

BPI contented that Feliciano was not of sound mind and was thereforeincapable of giving a valid consent. Thus, it claimed that the Deed ofAbsolute DONATION was void and the subsequent Deed of Absolute SALEshould likewise be void, for Mercedes had no right to sell the property.

When Feliciano passed away on August of 1997, the original complaint wasamended to substitute his heirs in lieu of BPI as complainants.

The trial court rendered a decision in favor of respondents.

On appeal, the CA affirmed the decision of the trial court.

Hence, the present petition.

Trial Court Ruling: The evidence presented by the complainants wasinsufficient to overcome the presumption that Feliciano was sane andcompetent at the time he executed the deed of donation in favor ofMercedes Catalan. Thus the presumption of due execution of the donation inquestion must be upheld.

Issue: Whether or not the donation made by Feliciano was valid?

Held: Yes.

A donation is an act of liberality whereby a person disposes gratuitously athing or right in favor of another, who accepts it. Like any other contract, anagreement of the parties is essential. Consent in contracts presupposes thefollowing requisites: (1) it should be intelligent or with an exact notion of thematter to which it refers; (2) it should be free; and (3) it should bespontaneous. The parties' intention must be clear and the attendance of avice of consent, like any contract, renders the donation voidable.


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In order for donation of property to be valid, what is crucial is the donorscapacity to give consent at the time of the donation. Certainly, there lies nodoubt in the fact that insanity impinges on consent freely given. However,the burden of proving such incapacity rests upon the person who alleges it; ifno sufficient proof to this effect is presented, capacity will be presumed.

In the case at bar, the evidence presented by the petitioners was insufficientto overcome the presumption that Feliciano was competent when hedonated the property in question to Mercedes. Petitioners make much ado ofthe fact that, as early as 1948, Feliciano had been found to be suffering fromschizophrenia by the Board of Medical Officers of the Department of VeteranAffairs. By itself, however, the allegation cannot prove the incompetence ofFeliciano.

According to medical references, on one hand, in persons withschizophrenia, there is a gradual onset of symptoms, with symptomsbecoming increasingly bizarre as the disease progresses. It has beenproven; on the other hand, that administration of correct medicine helps thepatient to manage such symptoms and reduces the chances of relapse.Schizophrenia can result in a dementing illness similar in many aspects toAlzheimers disease. However, the illness will wax and wane over manyyears, with only very slow deterioration of intellect.

From these scientific studies it can be deduced that a person suffering fromschizophrenia does not necessarily lose his competence to intelligentlydispose his property. By merely alleging the existence of schizophrenia,petitioners failed to show substantial proof that at the date of the donation,Feliciano Catalan had lost total control of his mental faculties. Furthermore,the presumption was bolstered by the existence of the other contracts heentered into like his marriage with Corazon and the other donations made infavor of petitioners.

It must be noted that sufficient proof of his infirmity to give consent tocontracts was only established when the CFI of Pangasinan declared him anincompetent on December 22, 1953.

Finally, the petitioners raised the issue of prescription and laches for the firsttime on appeal before this Court. It is sufficient to note that even if thepresent appeal had prospered, the Deed of Donation was still a voidable, nota void, contract. As such, it remained binding as it was not annulled in aproper action in court within four years. (Refer to Article 1390 and 1391)

Note:

Art. 1390. The following contracts are voidable or annullable, even thoughthere may have been no damage to the contracting parties:

1. Those where one of the parties is incapable of giving consent to acontract;

2. Those where the consent is vitiated by mistake, violence,intimidation, undue influence or fraud.

These contracts are binding, unless they are annulled by a proper action incourt. They are susceptible of ratification.

Art. 1391. The action for annulment shall be brought within four years xxx.

Villanueva, petitioners vs Chiong, respondentsFacts:Respondents Florentino and Elisera Chiong were married sometime in 1960but have been separated in fact since 1975. During their marriage, theyacquired a lot situated at Poblacion, Dipolog City, covered by a TCT issuedby the Registry of Deeds of Zamboanga del Norte.Sometime in 1985, Florentino sold the one-half western portion of the lot to

petitioners for P8,000, payable in installments. Thereafter, Florentinoallowed petitioners to occupythe lot and build a store, a shop, and a house

thereon. Shortly after their last installment payment, petitioners demandedfrom respondents the execution of a deed of sale in their favor. Elisera,however, refused to sign a deed of sale.On 1991, Elisera filed a civil case for Complaint for Quieting of Title withDamages. On 1992, petitioners filed a Complaint for Specific Performancewith Damages.On May 1992, Florentino executed the questioned Deed of Absolute Sale infavor of petitioners.RTC: ANNULED the deed of absolute sale dated May 1992, and orderedpetitioners to vacate the lot and remove all improvements therein;DISMISSED Civil Case filed by petitioners, but ordered Florentino to returnto petitioners the consideration of the sale with interest from May 1992.

CA: AFFIRMED.Petitioners contend that the lot is not a conjugal property. It belongsexclusively to Florentino because respondents were already separated infact at the time of sale and that the share of Elisera, had previously beensold to Spouses Jesus Y. Castro and Aida Cuenca. They also aver that theseparation in fact resulted in its actual liquidation. Even assuming that the lotis still conjugal, the transaction should not be entirely voided as Florentinohad one-half share over it.Elisera counters that the sale of the lot to petitioners without her knowledge,consent or authority, was void because the lot is conjugal property. It wasneither authorized by any competent court nor did it redound to her or theirchildren's benefit. As proof of the lot's conjugal nature, she presented a


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transfer certificate of title, a real property tax declaration, and aMemorandum of Agreement which she and her husband had executed forthe administration of their conjugal properties.Issue:(1) WON the subject lot is an exclusive property of Florentino or a conjugalproperty of respondents?

(2) WON the sale by Florentino without Elisera's consent is valid?

Held:1st issue.The lot retains its conjugal nature. Respondents' separation in fact neitheraffected the conjugal nature of the lot nor prejudiced Elisera's interest over it.Under Article 178 of the Civil Code, the separation in fact between husbandand wife without judicial approval shall not affect the conjugal partnership.Likewise, under Article 160 of the Civil Code, all property acquired by thespouses during the marriage is presumed to belong to the conjugalpartnership of gains, unless it is proved that it pertains exclusively to thehusband or to the wife.The real property tax declaration acknowledged Elisera and Florentino asowners of the lot. Both also declared in the Memorandum of Agreement theyexecuted that the lot is a conjugal property.

Florentino admitted the same in

the Deed of Absolute Sale where he declared his capacity to sell as a co-owner of the subject lot.2nd issue.The court held that without the wife's consent, the husband's alienation orencumbrance of conjugal property prior to the effectivity of the Family Codeon August 3, 1988 is not void, but merely voidable.

ART. 166 CC. Unless the wife has been declared a non composmentis or a spendthrift, or is under civil interdiction or is confined ina leprosarium, the husband cannot alienate or encumber anyreal property of the conjugal partnership without the wife'sconsent.

ART. 173 CC. The wife may, during the marriage, and withinten years from the transaction questioned, ask the courts forthe annulment of any contract of the husband entered intowithout her consent, when such consent is required, or any act orcontract of the husband which tends to defraud her or impair herinterest in the conjugal partnership property. Should the wife fail toexercise this right, she or her heirs, after the dissolution of themarriage, may demand the value of property fraudulently alienatedby the husband. (Emphasis supplied.)

In this case, the requisite consent of Elisera was not obtained for the sale ofa conjugal property to be valid. Accordingly, the contract entered byFlorentino is annullable at Elisera's instance, during the marriage and within

ten years from the transaction questioned. Fortunately, Elisera timelyquestioned.Moreover, according to jurisprudence, plain meaning attached to the plainlanguage of the law is that the contract, in its entirety, executed by thehusband without the wife's consent, may be annulled by the wife.Now, if a voidable contract is annulled, the restoration of what has been

given is proper. Article 1398 of the Civil Code provides:An obligation having been annulled, the contracting parties shallrestore to each other the things which have been the subject matterof the contract, with their fruits, and the price with its interest,except in cases provided by law.

Strictly applying Article 1398 to the instant case, petitioners should return torespondents the land with its fruits and respondent Florentino should returnthe sum of P8,000, which he received as the price of the land, together withinterest thereon.SC: Petitioners have been using the land and have derived benefit from itjust as respondent Florentino has used the price of the land in the sumof P8,000. Hence, it would be equitable to consider the two amounts asoffsetting each other. CA decision AFFIRMED WITH MODIFICATION. Theorder for the payment of interest is DELETED.

Ayson v. Paragas

GREGORIO DESTREZA, vs.ATTY. MA. GRACIA RIOZA-PLAZO andMA. FE ALARAS, Respondents.The Facts

on November 16, 1989 Pedro L. Rioza (Rioza) died leavingseveral heirs, including herein respondents Ma. Gracia R. Plazo(Plazo) and Ma. Fe R. Alaras (Alaras).

In the course of settling Riozas estate, Plazo wrote a letter to theRegistry of Deeds requesting for certified true copies of all titles inRiozas name, including a sugarland located at Barangay Utod,Batangas covered by TCT 40353. When she delivered the letter,Plazo also asked that she be shown the originals of the titles butthey were not available. To inquire on the matter, she talked to theRegister of Deeds, Atty. Bonuan. According to Bonuan, he had thetitles in his personal files and there were no transactions involvingthem.

Thereafter, Plazo wrote a letter to Bonuan, reiterating her requestfor copies of the titles. Since the latter was abroad, it was the actingRegister of Deeds furnished her with certified true copies of thetitles, except that of TCT 40353 which was missing.


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in an effort to find TCT 40353, Plazo found another title, TCT55396, at the Assessors Office covering the same Utod sugarlandand canceling the missing TCT 40353. The new title was in thename of the Destreza Spouses

Respondent Plazo also went to the Bureau of Internal Revenue(BIR) of Batangas City to inquire on any record involving the sale of

the Utod sugarland. But it did not have any record of sale of thesugarland covered by TCT 40353.

Finally testified that before the death of Rioza, he gave her thetitle of a land that he wanted to mortgage to her uncle. Rioza toldher that the land was located at Barangay Utod, Nasugbu,Batangas. She did not, however, look at the number of the title.Unable to secure a mortgage from her uncle, she returned the titleto her father and never saw it again.

Their discovery prodded respondents Plazo and Alaras to file acomplaint against the Destreza spouses and the Register of Deedsbefore the RTC claiming serious irregularities in the issuance ofTCT 55396. They asked that TCT 55396 be nullified, that TCT40353 be restored, and that the Destrezas be ordered to reconvey

the land to the Rioza estate. In his answer, Atty. Bonuan denied that TCT 40353 was missing

since he had the title safe in his office and no transaction affecting ithad been recorded. With regard to TCT 55396, he explained thatthe new title had not yet been released to the Destreza spousesbecause they were yet to submit certain required documents.Bonuan claimed that during his lifetime, the late Rioza, asked himfor a photocopy of TCT 55396. As a courtesy to the ex-mayor,Bonuan gave him a copy.

the Destreza spouses, petitioner Destreza testified they bought theUtod sugarland from Rioza through Toribio Ogerio, acommon kumpadre. He paid him P100,000.00.

18Destreza did not

get a copy of the deed of sale nor a receipt for the payment butRioza accompanied him to the Register of Deeds. After about amonth, Destreza returned to the Register of Deeds and got a copyof TCT 55396 in his name and immediately took possession of theland until the case was filed

The RTC cancelled TCT 55396, nullified the deed of sale andrestored TCT 40353 after it found that TCT 55396 was yetinexistent on July 15, 1989 when petitioner Destreza claims healready received a copy from the Register of Deeds. It declared thatthe deed of sale between Rioza and Destreza is not a publicdocument for the failure of the notary public to submit his report tothe RTC notarial section.

the Court of Appeals affirmed the decision of the RTC, contendingthat the deed of sale may be presumed regular despite the notarysfailure to report the transcaton to the RTC notarial section howeverthe Destrea spouses destroyed such presumption when they failedto prove its authenticity and genuineness, furthermore the destrezaspouses claimed that they have paid rinoza 100T but the price

stated in the DOS was only 60T placed the veracity of DOS indoubt. Hence this petition.

Issueswhether or not sufficient evidence warranted the nullification of the deed ofsale that the late Rioza executed in favor of the Destrezas.HELD

the notarized deed of sale should be admitted as evidence despitethe failure of the Notary Public in submitting his notarial report tothe notarial section of the RTC Manila. It is the swearing of aperson before the Notary Public and the latters act of signing andaffixing his seal on the deed that is material and not the submissionof the notarial report. They should not be made to suffer theconsequences of the negligence of the Notary Public in followingthe procedures prescribed by the Notarial Law.

Under the rules of evidence, "Every instrument duly acknowledgedor proved and certified as provided by law, may be presented inevidence without further proof, the certificate of acknowledgmentbeing prima facie evidence of the execution of the instrument ordocument involved. A certain Atty. Ducusin notarized the deed ofsale that Rioza acknowledged as his free act and deed. By signingand affixing his notarial seal on the deed, Atty. Ducusin converted itfrom a private document to a public document. As such, the deed ofsale is entitled to full faith and credit upon its face. And sinceRioza, the executor of the deed, is already dead, the notarizeddeed of absolute sale is the best evidence of his consent to thesale. it is also not disputed that the Destrezas immediately andopenly occupied the land right after the sale.

An allegation of fraud with regard to the execution of a notarizeddeed of absolute sale is a grave allegation. It cannot be declared onmere speculations. In fact, to overcome the presumption ofregularity and due execution of a notarized deed, there must beclear and convincing evidence showing otherwise. The burden ofproof to overcome the presumption lies on the one contesting thesame which in this case are the respondents plazo andalaras. Without such evidence, the presumption remainsundiminished

There were 3 evidences obtained by respondents to prove that their fatherdid not sell the subject land to the destrezas.


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First: the premature release of a copy of the title to the Destrezaspouses even before it was entered into the books of the register ofdeeds and despite the fact that they still needed to submitregistration requirements.

The SC held that such premature release of a copy of theregistered title cannot affect the validity of the contract of sale

between Rinoza and the Destrezas. Registration only serves as theoperative act to convey or affect the land insofar as third personsare concerned. And even if a deed is not registered, the deed willcontinue to operate as a contract between the parties. furthermore,the declaration of Bonuan that he furnished ex-mayor Rioza with acopy of TCT 55396 strengthens the case of the Destrezas. It showsthat Rioza knew of and gave consent to the sale of his Utodsugarland to them considering that he even helped facilitate theregistration of the deed of sale. Whatever irregularity in registrationmay have been incurred, it did not affect the validity of the sale.

Second: Alaras claims that months after the sale of the Utodsugarland to the Destrezas, her father Rioza asked her tomortgage some land. He gave Alaras the title to it, telling her that

such title covered a land in Barangay Utod. But this does not provethat the sale of the Utod sugarland to the Destrezas is void. Alarasadmitted that she did not see the number of the title nor did sheidentify in court any specific title as the one she got. To be of valueto her cause, Alaras needed to testify that TCT 40353 remaineduncancelled in her fathers hands even after the supposed entry ofTCT 55396 in the Registry of Deeds. But she did not so testify.

Third: the testimony of the Destrezas that they paid P100T whenthe price on the deed of sale was only P60,000.00. Again, this isnot sufficient ground to nullify such deed. The fact remains thatRioza sold his land to the Destrezas under that document andthey paid for it. The explanation for the difference in the prices canbe explained only by Rioza and Gregorio Destreza. Unfortunately,Rioza had died and respondednt failed to confront Destreza

regarding that difference when the latter took the witness stand.Hence, the notarized deed of sale is valid and binding upon them and theirsuccessors-in-interest.

#13: KINGS PROPERTIES CORPORATION vs CANUTO GALIDO(VOIDABLE CONTRACTS)

Facts: On April 1966, Rufina Eniceo and Maria Eniceo (heirs of Domingo

Eniceo) were awarded with Homestead Patent No. 112947

consisting of four parcels of land located in San Isidro, Antipolo,Rizal. The Antipolo property with a total area of 14.8882 hectareswas registered under Original Certificate of Title (OCT) No. 535.The issuance of the homestead patent was subject to the followingconditions:

o To have and to hold the said tract of land, with the

appurtenances thereunto of right belonging unto the saidHeirs of Domingo Eniceo and to his heir or heirs andassigns forever, subject to the provisions of sections 118,121, 122 and 124 of Commonwealth Act No. 141, asamended, which provide that except in favor of theGovernment or any of its branches, units or institutions,the land hereby acquired shall be inalienable and shall notbe subject to incumbrance for a period of five (5) yearsnext following the date of this patent, and shall not beliable for the satisfaction of any debt contracted prior to theexpiration of that period; that it shall not be alienated,transferred or conveyed after five (5) years and beforetwenty-five (25) years next following the issuance of title,without the approval of the Secretary of Agriculture andNatural Resources; that it shall not be incumbered,alienated, or transferred to any person, corporation,association, or partnership not qualified to acquire publiclands under the said Act and its amendments; x x x

On September 1973, Rufina and Maria sold the Antipolo property toCanuto Galido for P250,000. A deed of sale was executed betweenthem and Carmen Aldana delivered the owners duplicate copy ofOCT No. 535 to respondent.

On 1988, the Eniceo heirs (actual occupant of the property)registered a Notice of Loss with the Registry of Deeds of MarkinaCity and filed a petition for the issuance of a new owners duplicatecopy of OCT No. 535 with Branch 72 of the RTC of Antipolo. RTCfound that the certified true copy of OCT No. 535 contained no

annotation in favor of any person, corporation or entity. It thenordered the Registry of Deeds to issue a second owners copy ofOCT No. 535 in favor of the Eniceo heirs and declared the originalowners copy of OCT NO. 535 cancelled and considered of nofurther value.

On April 1989, the Registry of Deeds issued a second owners copyof OCT No. 535 in favor of the Eniceo heirs.

Petitioner alleges that sometime in February 1995, Leonila Bolinas(a relative of the Eniceo heirs) came to the office of Alberto TronioJr (petitioners general manager) and offered to sell the Antipoloproperty. Tronio then did an on-site inspection and ascertained that


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OCT No. 535 was clean and had no lien and encumbrances.Petitioner then bought the Antipolo property.

On March 14, 1995, respondent caused the annotation of hisadverse claim in OCT No. 535.

On March 20, 1995, the Eniceo heirs executed a deed of absolutesale in favor of petitioner covering lots 3 & 4 of the Antipolo

property for P500,000. New TCTs were issued. On April 5, 1995, the Eniceo heirs again executed another deed of

sale in favor of petitioner covering the remaining lots of the Antipoloproperty for P1,000,000. The previous TCT was cancelled and anew one was issued in the name of petitioner.

On August 17, 1995, the DENR Secretary approved the deed ofsale between the Eniceo heirs and respondent.

On 16 January 1996, respondent filed a civil complaint with the trialcourt against the Eniceo heirs and petitioner. Respondent prayedfor the cancellation of the certificates of title issued in favor ofpetitioner, and the registration of the deed of sale and issuance of anew transfer certificate of title in favor of respondent.

On 4 July 2000, the trial court rendered its decision dismissing the

case for lack of legal and factual basis. Respondent appealed tothe Court of Appeals. On 20 December 2004, the CA rendered adecision reversing the trial courts decision.Aggrieved by the CAsdecision and resolution, petitioner elevated the case before thisCourt.

Petitioners Contentions:

*The DENR Secretary gave only his approval for the deed of sale in favor ofrespondent after 21 years from the date the deed was executed.*The deed of sale to respondent was a forgery.*The deed of sale in favor of respondent is an equitable mortgage becausethe Eniceo heirs remained in possession of the Antipolo property despite theexecution of the deed of sale.

*The subsequent sale must be upheld because the petitioner is a buyer ingood faith.*The respondent is guilty of laches because he slept on his rights by failingto register the sale of the Antipolo property at the earliest possible time.

Issue: Whether or not the deed of sale to respondent may be annulled

Held: NO.

1. The contract between the Eniceo heirs and respondent executed on10 September 1973 was a perfected contract of sale. A contract is

perfected once there is consent of the contracting parties on the objectcertain and on the cause of the obligation. In the present case, the object ofthe sale is the Antipolo property and the price certain is P250,000.

The contract of sale has also been consummated because thevendors and vendee have performed their respective obligations under thecontract. In a contract of sale, the seller obligates himself to transfer the

ownership of the determinate thing sold, and to deliver the same to thebuyer, who obligates himself to pay a price certain to the seller. Theexecution of the notarized deed of sale and the delivery of the ownersduplicate copy of OCT No. 535 to respondent is tantamount to a constructivedelivery of the object of the sale.2. As to the late approval by DENR Secretary: The sale of the Antipoloproperty cannot be annulled on the ground that the DENR Secretarygave his approval after 21 years from the date the deed of sale in favorof respondent was executed.In Spouses Alfredo v. Spouses Borras, the Court explained the implicationsof Section 118 of CA 141. Thus:

o A grantee or homesteader is prohibited from alienating to a privateindividual a land grant within five years from the time that the patentor grant is issued. A violation of this prohibition renders a sale void.This, however, expires on the fifth year. From then on until the next20 years, the land grant may be al ienated provided the Secretary ofAgriculture and Natural Resources approves the alienation. TheSecretary is required to approve the alienation unless there are"constitutional and legal grounds" to deny the approval. In thiscase, there are no apparent or legal grounds for the Secretary todisapprove the sale of the Subject Land.

The failure to secure the approval of the Secretary does not ipso factomake a sale void. The absence of approval by the Secretary does not asale made after the expiration of the 5-year period, for in such eventthe requirement of Section 118 of the Public Land Act becomes merelydirectory or a formality. The approval may be secured later, producingthe effect of ratifying and adopting the transaction as if the sale had

been previously authorized.3. On Forgery: As correctly held by the CA, forgery can never bepresumed. The party alleging forgery is mandated to prove it with clear andconvincing evidence. Whoever alleges forgery has the burden of proving it.In this case, petitioner and the Eniceo heirs failed to discharge thisburden.4. On Equitable Mortgage: An equitable mortgage is "one which althoughlacking in some formality, or form or words, or other requisites demanded bya statute, nevertheless reveals the intention of the parties to charge realproperty as security for a debt, and contains nothing impossible or contraryto law." The essential requisites of an equitable mortgage are:


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1. The parties entered into a contract denominated as a contract ofsale; and2. Their intention was to secure existing debt by way of a mortgage.Petitioner has not shown any proof that the Eniceo heirs were

indebted to respondent. On the contrary, the deed of sale executed in favorof respondent was drafted clearly to convey that the Eniceo heirs sold and

transferred the Antipolo property to respondent. Hence, the Court ruled thatthe contract was a sale and not an equitable mortgage.5. Petitioner is not a buyer in good faith. In Agricultural and HomeExtension Development Group v. Court of Appeals, a buyer in good faith isdefined as "one who buys the property of another without notice thatsome other person has a right to or interest in such property and paysa full and fair price for the same at the time of such purchase or beforehe has notice of the claim or interest of some other person in theproperty." Petitioner does not dispute that respondent registered hisadverse claim with the Registry of Deeds on 14 March 1995. The registrationof the adverse claim constituted, by operation of law, notice to the wholeworld. From that date onwards, subsequent buyers were deemed to haveconstructive notice of respondents adverse claim. Petitioner purchased theAntipolo property only on 20 March 1995 and 5 April 1995 as shown by thedates in the deeds of sale. On the same dates, the Registry of Deeds issuednew TCTs in favor of petitioner with the annotated adverse claim.Consequently, the adverse claim registered prior to the second sale chargedpetitioner with constructive notice of the defect in the title of Eniceo heirs.Therefore, petitioner cannot be deemed as a purchaser in good faith whenthey bought and registered the Antipolo property.6. On Laches: The essence of laches is the failure or neglect, for anunreasonable and unexplained length of time, to do that which,through due diligence, could have been done earlier, thus giving rise toa presumption that the party entitled to assert it had either abandonedor declined to assert it.

Respondent discovered in 1991 that a new owners copy of OCTNo. 535 was issued to the Eniceo heirs. Respondent filed a criminal case

against the Eniceo heirs for false testimony. When respondent learned thatthe Eniceo heirs were planning to sell the Antipolo property, respondentcaused the annotation of an adverse claim. On 16 January 1996, whenrespondent learned that OCT No. 535 was cancelled and new TCTs wereissued, respondent filed a civil complaint with the trial court against theEniceo heirs and petitioner. Respondents actions negate petitionersargument that respondent is guilty of laches.

The petition was denied.

VILORIA VS. CONTINENTAL AIRLINES 663 SCRA 57

FACTS: On or about July 21, 1997 and while in the US, Fernando Viloria

purchased for himself and his wife, Lourdes, 2 round trip airlinetickets from San Diego, California to Newark, New Jersey on boardContinental Airlines.

He purchased the tickets at US$400.00 each from a travel agencycalled Holiday Travel and was attended to by a certain MargaretMager.

According to Spouses Viloria, Fernando agreed to buy the saidtickets after Mager informed them that there were no availableseats at Amtrak (intercity passenger train service provider in theUS).

Per the tickets, Spouses Viloria were scheduled to leave forNewark on August 13, 1997 and return to San Diego on August 21,1997.

Subsequently, Fernando requested Mager to reschedule their flightto Newark to an earlier date or August 6, 1997.

Mager informed him that flights to Newark via Continental Airlines

were already fully booked and offered the alternative of a round tripflight via Frontier Air. Since flying with Frontier Air called for a higher fare of US$526.00

per passenger and would mean traveling by night, Fernando optedto request for a refund. Mager, however, denied his request as thesubject tickets are non-refundable and the only option thatContinental Airlines can offer is the re-issuance of new ticketswithin 1 year from the date the subject tickets were issued.Fernando decided to reserve 2 seats with Frontier Air.

As he was having second thoughts on traveling via Frontier Air,Fernando went to the Greyhound Station where he saw an Amtrakstation nearby. Fernando made inquiries and was told that thereare seats available and he can travel on Amtrak anytime and anyday he pleased. Fernando then purchased 2 tickets forWashington, D.C.

From Amtrak, Fernando went to Holiday Travel and confrontedMager with the Amtrak tickets, telling her that she had misledthem into buying the Continental Airlines tickets bymisrepresenting that Amtrak was already fully booked.Fernando reiterated his demand for a refund but Mager wasfirm in her position that the subject tickets are non-refundable.

Upon returning to the Philippines, Fernando sent a letter to CAI,demanding a refund and alleging that Mager had deluded them intopurchasing the subject tickets.


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On September 8, 2000, Spouses Viloria filed a complaint againstCAI, praying that CAI be ordered to refund the money they used inthe purchase of the subject tickets with legal interest from July 21,1997 and to pay P1,000,000.00 as moral damages, P500,000.00as exemplary damages and P250,000.00 as attorneys fees.

CAI interposed the following defenses: (a) Spouses Viloria have no

right to ask for a refund as the subject tickets are non-refundable;(b) Fernando cannot insist on using the ticket in Lourdes name forthe purchase of a round trip ticket to Los Angeles since the same isnon-transferable; (c) as Mager is not a CAI employee, CAI is notliable for any of her acts; (d) CAI, its employees and agents did notact in bad faith as to entitle Spouses Viloria to moral and exemplarydamages and attorneys fees.

RTC ruled in favor of the spouses Viloria. On appeal, CA reversed the decision of RTC. Hence, the present

petition.

ISSUE: WON the representation of Mager as to unavailability of seats at

Amtrak be considered fraudulent as to vitiate the consent of Spouse Viloriain the purchase of the subject tickets.

HELD: No. Article 1390, in relation to Article 1391 of the Civil Code, provides

that if the consent of the contracting parties was obtained throughfraud, the contract is considered voidable and may be annulledwithin four (4) years from the time of the discovery of the fraud.Once a contract is annulled, the parties are obliged under Article1398 of the same Code to restore to each other the things subjectmatter of the contract, including their fruits and interest.

Under Article 1338 of the Civil Code, there is fraud when, throughinsidious words or machinations of one of the contracting parties,the other is induced to enter into a contract which, without them, hewould not have agreed to. In order that fraud may vitiate consent, itmust be the causal (dolo causante), not merely the incidental (doloincidente), inducement to the making of the contract.

Also, fraud must be serious and its existence must be establishedby clear and convincing evidence.

Article 1344 provides that in order that fraud may make a contractvoidable, it should be serious and should not have been employedby both contracting parties.

After meticulously poring over the records, this Court finds thatthe fraud alleged by Spouses Viloria has not been

satisfactorily established as causal in nature to warrant theannulment of the subject contracts. In fact, Spouses Viloriafailed to prove by clear and convincing evidence that Magersstatement was fraudulent. Specifically, Spouses Viloria failedto prove that (a) there were indeed available seats at Amtrakfor a trip to New Jersey on August 13, 1997 at the time they

spoke with Mager on July 21, 1997; (b) Mager knew about this;and (c) that she purposely informed them otherwise. This Court finds the only proof of Magers alleged fraud, which

is Fernandos testimony that an Amtrak had assured him ofthe perennial availability of seats at Amtrak, to be wanting.

As CAI correctly pointed out and as Fernando admitted , it waspossible that during the intervening period of three (3) weeksfrom the time Fernando purchased the subject tickets to thetime he talked to said Amtrak employee, other passengers mayhave cancelled their bookings and reservations with Amtrak,making it possible for Amtrak to accommodate them. Indeed,the existence of fraud cannot be proved by mere speculationsand conjectures. Fraud is never lightly inferred; it is good faiththat is.

Under the Rules of Court, it is presumed that "a person is innocentof crime or wrong" and that "private transactions have been fair andregular."

Spouses Viloria failed to overcome this presumption.

Even assuming that Magers representation is causal fraud,the subject contracts have been impliedly ratified whenSpouses Viloria decided to exercise their right to use thesubject tickets for the purchase of new ones. Under Article1392 of the Civil Code, ratification extinguishes the action toannul a voidable contract.

Ratification of a voidable contract is defined under