1.

G.R. No. L-3784 October 17, 1952

ERNEST BERG, plaintiff-appellee,
vs.
MAGDALENA ESTATE, INC., defendant-appellant.
Claro M. Recto and Eusebio C. Encarnacion for appellant.
Alva Hill, Taada, Pelaez and Teehankee for appellee.
BAUTISTA ANGELO, J.:
This is an action for partition of the property known as Crystal Arcade situated in the City of
Manila.
The complaint avers that plaintiff and defendant are co-owners of said property, the former being
the owner of one-third interest and the latter of the remaining two-thirds. The division is asked
because plaintiff and defendant are unable to agree upon the management of the property and
upon the partition thereof.
Defendant answered setting up a special defense and a counterclaim. As a special defense,
defendant claims that on September 22, 1943, it sold to plaintiff one-third of the property in
litigation subject to the express condition that should either vendor or vendee decide to sell his or
its undivided share, the party selling would grant to the other part first an irrevocable option to
purchase the same at the seller's price. It avers that on January 1946 plaintiff fixed the sum of
P200,000 as the price of said share and offered to sell it to defendant, which offer was accepted,
and for the payment of said price plaintiff gave defendant a period of time which, including the
extensions granted, would expire on May 31, 1947. Defendant claims that, in spite of the
acceptance of the offer, plaintiff refused to accept the payment of the price, and for this refusal
defendant suffered damages in the amount of P100,000. For these reasons, defendant asks for
specific performance.
Plaintiff filed a reply setting forth therein that the transaction referred to by the defendant in its
special defense relative to the property in litigation is not supported by any note or memorandum
subscribed by the parties, as in fact no such note or memorandum has been made evidencing the
transaction, for which reason, plaintiff claims, this transaction falls under the statute of frauds and
cannot form the basis of the special defense invoked by the defendant.
After trial, at which the parties presented testimonial and documentary evidence, the lower court
found for the plaintiff holding that no agreement has been reached between the parties relative to
the purchase and sale of the property in question, and, recognizing the right of plaintiff to demand
partition under the provisions of Rule 71 of the Rules of Court, it granted the relief prayed for in
the complaint. Hence this appeal.
The pivotal issue to be determined is whether an agreement to sell has actually been reached
between plaintiff and defendant of the share of the former in the property in litigation for the sum
of P200,000, as claimed by defendants, or whether there have been merely negotiations between
them which never ripened into an agreement, as claimed by plaintiff. And in the determination of
this issue, the preliminary question to be threshed out is the point raised by plaintiff touching on
the evidence submitted by defendant in the light of the principle underlying the statute of frauds.
It is an undisputed facts that since September 22, 1943, plaintiff and defendant were co owners
pro indiviso of the property known as Crystal Arcade in the proportion of one-third interest
belonging to the former and two-thirds to the latter. In the deed of sale executed by the parties on
said date, they stipulated that, should either of them decide to sell his or her share, the other
party will have an irrevocable option to purchase it at the seller's price. Then a disagreement
ensued between the parties as to what really occurred concerning the deal.
Thus, while Berg claims that his negotiations with Hemady ended when an offer by the latter to
the former to buy his interest for the sum of P350,000, Hemady on the other hand claims that
Berg offered to sell it to him for P200,000 subject to the condition that the necessary permit be
obtained from the United States Treasury Department.
It should be stated that, aside from the testimony of Berg and Hemady, no document has been
presented evidencing that alleged agreement to sell, and so when defendant made attempts to
prove, through the testimony of Hemady, that plaintiff made an offer to sell his interest to
defendant for the sum of P200,000, the attempt met the vigorous opposition of plaintiff invoking
the rule that such agreement can only be established by a contract in writing, or by a note or
memorandum subscribed by the party sought to be charged, as prescribed by the statute of
frauds. It was then that defendant submitted in evidence exhibits "3" and "4", contending that
these documents, read in connection with the option to sell embodied in exhibit "1", constitute a
written proof contemplated by said statute. The crux of this case, therefore, lies in the
determination of whether said exhibits partake of the nature of a note or memorandum within the
purview of said statute as contended by defendant.
It appears that right after the liberation of the Philippines, both Ernest Berg and K.H. Hemady
were accused of collaboration for which reason the Treasury Department of the United States
ordered the freezing of their properties under the law known as Trading with the Enemy Act.
Under the provisions of this Act both Berg and Hemady could not sell or dispose of their
properties without first securing the permit required by it, and so to comply this requirement, both
Berg and Hemady filed separately an application with said Department for the purchase and sale
of the property in litigation. These applications are the ones marked as exhibits "3" and "4". In the
application exhibit "3", Ernest berg stated that he desires a license in order to sell his interest in
the Crystal Arcade, Escolta, Manila, for P200,000 in cash to Magdalena Estate, Inc. asking at the
same time for permission to place the amount in an account in his name or in the name of the
company he represents and to apply the same from time to time to the payment of the obligations
of Red Star Store Inc. In the application exhibit "4", defendant in turn stated, through its president
K. H. Hemady, that it desires a license in order "to use a portion of the P400,000 requested as a
loan from the National City Bank of New York, Manila, or from any other bank in Manila, together
with funds to be collected from old and new sales of his real estate properties, for the purchase of
the one-third (1/3) of the Crystal Arcade property in the Escolta, Manila, belonging to Mr. Ernest
Berg."
It is now defendant's position that if the option granted in exhibit "1" (deed of sale containing the
irrevocable option) is considered in relation to Berg's application exhibit "3" and defendant's
application exhibit "4", these documents constitute a sufficient note or memorandum of the
parties' alleged contract of purchase and sale within the purview of the statute of frauds. This
claim is disputed by Ernest Berg, appellee herein. Which of these contentions is correct?
Before we proceed, it is important to state at this juncture some principles governing the meaning,
extent and scope of the rule underlying the statute of frauds relative to the note or memorandum
that may serve as proof to determine the existence of an oral contract or agreement
contemplated by it, and for our purpose, it suffices for us to quote the following authorities:
No particular form of language or instrument is necessary to constitute a memorandum or
note in writing under the statute of frauds; any document or writing, formal or informal,
written either for the purpose of furnishing evidence of the contract or for another
purpose, which satisfies all the requirements of the statute as to contents and signature,
as discussed respectively infra secs. 178-200, and infra secs. 201-215, is a sufficient
memorandum or note. A memorandum may be written as well as with lead pencil as with
pen and ink. It may also be filled in on a printed form (37 C.J.S., 653-654).
The note or memorandum required by the statute of fraud need not be contained in a
single document, nor, when contained in two or more papers, need each paper to be
sufficient as to contents and signature to satisfy the statute. Two or more writings
properly connected may be considered together, matters missing or uncertain in one may
be supplied or rendered certain by another, and their sufficiency will depend on whether,
taken together, they meet the requirement of the statute as to contents and the
requirements of the statute as to signature, as considered respectively infra secs. 179-
200 and secs. 201-215.
Papers connected. The rule is frequently applied to two or more, or a series of letters
or telegrams, or letters and telegrams sufficiently connected to allow their consideration
together; but the rule is not confined in its application to letters and telegrams; any other
documents can be read together when one refers to the other. Thus, the rule has been
applied so as to allow the consideration together, when properly connected, of a letter
and an order of court, a letter and order for goods, a letter and a deposition, letters or
telegrams and undelivered deeds, wills, corresponding and related papers, a check and a
letter, a receipt and a check, deeds and a map, a memorandum of agreement and a
deed, a memorandum of sale and an abstract of title, a memorandum of sale and a will, a
memorandum of sale and a receipt, and a contract, deed and instruction to a depository
in escrow. The number of papers connected to make out a memorandum is immaterial.
(37 C.J.S. sec. 656-659).
Bearing in mind the foregoing rules, we are of the opinion that the applications marked exhibits
"3" and "4", whether considered separately or jointly, satisfy all the requirements of the statute as
to contents and signature and, as such, they constitute sufficient proof to evidence the agreement
in question. And we say so because in both applications all the requirements of a contract are
present, namely, the parties, the price or consideration, and the subject-matter. In the application
exhibit "3", Ernest Berg appears as the seller and the Magdalena Estate Inc. as the purchaser,
the former's interest in the Crystal Arcade as the subject-matter, and the sum of P200,000 as the
consideration. As the application appears signed by Ernest Berg, the party sought to be charged
by the obligation. In other words, it can clearly be implied that between Ernest Berg and the
Magdalena Estate Inc. there has been a clear agreement to sell said property for P200,000. From
the language of the application no other logical conclusion can be drawn for if there has not been
any previous agreement between the parties it is fool hardly to suppose that Ernest Berg would
take the trouble of filling an application with the Treasury Department of the United States to
secure a license to sell the property. the claim of Ernest Berg that the negotiations he had with
the Hemady ended with an offer on his part to buy his interest for P350,000 cannot be sustained,
for if such is the case it is indeed hard to comprehend why he should state in his application that
he was selling the property for P200,000. The fact that in the same application Berg also asked
for license to place the money in an account in his name, or in the name of the company he
represents, and to apply the same to the payment of the obligations of said company is of no
consequence, nor does it argue against the purpose of the application, for that request only
means that, should the sale be carried out, he would deposit the money in the name of the
company and later would apply it to the payment of its obligations.
We do not agree with the claim that the application Exhibit "4" submitted by the Magdalena Estate
Inc. does not harmonize with the terms appearing in the application Exhibit "3", for, contrary to the
claim, those two applications, considered together, harmonize and complement each other. And
we say so because the application Exhibit "4" states specifically that a portion of the sum of
P400,000 which is desired to be raised as a loan will be used for the purchase of the one-third
interest of Ernest Berg, which portion undoubtedly refers to the sum of P200,000 mentioned in
the application Exhibit "3". This can be plainly seen by harmonizing together the two applications.
As the rule well points out, the sufficiency of the two documents will depend on whether, taken
together, they meet the requirements of the statute as to contents and as to signature, and here
both requirements are met because the two documents should be consider as a whole. Whether,
therefore, we consider the two applications jointly or separately, it is safe to state that they meet
the requirements of the principle underlying the statutes of frauds.
Let us now take the terms of the agreement to sell, considering that this has been properly
established to see if defendant has complied with them and can ask now for specific
performance. We have already seen that plaintiff agreed to sell to defendant his undivided one-
third interest in the property for the sum of P200,000. The next question is: within what period
shall this consideration be paid? Here are two possible theories: one under application Exhibit "3"
and the other application Exhibit "4". If we follow the application Exhibit "3", it is clear that
payment is to be made in cash, or as soon as the license has been granted to effect the
transaction. This means that it shall be effected immediately upon obtaining the license, or within
a reasonable time thereafter. It is not disputed that this license was granted, but we find that
defendant failed to make good its offer within a reasonable time for lack of money, it being a fact
that defendant was only able to raise funds for that purpose when it succeeded in selling a portion
of its real estate to a foreign corporation one year thereafter, or on March 14, 1947. It is true that,
in its answer, defendant claims that plaintiff granted to defendant an extension of time up to May
31, 1947, within which to realize the transaction, but this claim is not supported by any proof. In
the opinion of the Court, this delay has the effect of relieving plaintiff of his obligation under the
law (Articles 1124-1451, of the old Civil Code).
Supposing that the term of payment is, as contended by defendant, until defendant has obtained
the loan of P400,000 from the National City Bank of New York, or after it has obtained funds from
other sources (considering the terms of application Exhibit "4") what is the legal effect of this
alternative clause? Can it be considered a term within the meaning of our old Civil Code? Let us
analyze it. Under article 1125 of said code, obligations, for the fulfillment of which a day
certain has been fixed, shall be demandable only when the day arrives. A day certain is
understood to be that which must necessarily arrive, even though it is not known when. In order
that an obligation may be with a term, it is, therefore, necessary that it should arrive, sooner or
later; otherwise, if its arrival is uncertain, the obligation is conditional. To constitute a term the
period must end on a day certain.
Viewing in this light the clause on which defendant relies for the enforcement of its right to buy the
property, it would seem that it is not a term, but a condition. Considering the first alternative, that
is, until defendant shall have obtained a loan from the National City Bank of New York, it is clear
that the granting of such loans is not definite and cannot be held to come within the terms "day
certain" provided for in the Civil code, for it may or it may not happen. As a matter of fact, the loan
did not materialize. And if we consider that the period given was until such time as defendant
could raise money from other sources, we also find it to be indefinite and contingent and so it is
also a condition and not a term within the meaning of the law. In any event it is apparent that the
fulfillment of the condition contained in this second alternative is made to depend upon the
defendant's exclusive will, and viewed in this light, we are of the opinion that plaintiff's obligation
to sell did not arise, for, under Article 1115 of the old Civil Code, "when the fulfillment of the
condition depends upon the exclusive will of the debtor the conditional obligation shall be void."
Having reached the foregoing conclusions, we find no legal way by which plaintiff could be
compelled to carry out the terms of his agreement to sell considering the circumstances
surrounding the transaction. To our mind, it is clear that there was an agreement to sell between
the parties under the terms appearing in the applications Exhibit "3" and "4". But it also appears
that the plaintiff has decided to agree to sell his interest because of his need of money at the
time. He needed it not only for his immediate needs but to pay the obligations of his own
company, the Red Star Stores. Inc. At that time the values of real estate were fast moving. They
were growing up in a rapid fashion. Time element was then of the essence of every transaction,
and the parties knew it. When, therefore, more than a year had transpired since the negotiations
started and defendant failed to come across, plaintiff changed his mind. The interest of defendant
to purchase the share of plaintiff in the property is understandable, not only because of the
advisability to consolidate its ownership in said property, but because it was a handsome
transaction with a brighter prospect in the future. But it is to be regretted that both Berg and
Hemady who were both experienced businessmen did not put the terms of their agreement
clearly in writing. Had they done so perhaps this case would have been avoided.
Finding no error in the decision appealed from, the same is hereby affirmed, with costs against
appellant.
Pablo, Padilla and Montemayor, JJ., concur.


Separate Opinions
BENGZON, J., concurring:
I concur in the result. I believe no agreement has been duly proved.


LABRADOR, J., concurring:
I concur. There might be some objection to considering Exhibit 3 (application of Ernest Berg with
the United States Treasury Department to sell his interest in the Crystal Arcade Building for
P200,000 cash) and Exhibit 4 (application of the Magdalena Estate, Inc., with the United States
Treasury Department for a portion of the P200,000 requested as loan from the National City Bank
of New York to purchase one-third of the Crystal Arcade Building belonging to Ernest Berg) as
notes or memoranda of the contract entered into between the parties for the sale of the property,
within the meaning of the statute of frauds. In some jurisdictions it is held that in order to comply
with the requirements of the statute of frauds a letter must be sent to the contracting party or his
agent (27 C.J.S., sec. 386, p. 302). Such a rule is the one adopted in the State of New Jersey.
But in the Code of Civil Procedure of the State of California (sections 1973-1974), from which our
original statute of frauds was taken (section 335 of Act No. 190), the rule is that a letter or
telegram of the party sought to be charged to a third person may be considered as a sufficient
memorandum within the meaning of the statute. Ibid.; Moss vs. Atkinson, 44 Cal. 3). This doctrine
is also followed in Kansas, Missouri, New York, Iowa, North Carolina, New England, and Ontario.
(See footnotes to 27 C.J.S. 302.) In a case decided in Kansas it was expressly held:
Nor is it necessary, in the case of a memorandum in the form of a letter, that it should be
addressed to the vendee. Letters to a third person are sufficient memoranda. Browne, St.
Frauds (5th Ed.) Sec. 354a. "The principle upon which these decisions are based we
understand to be that the statute was not intended to apply to written contracts, out to the
information of oral contracts when properly evidenced, as by the admission in writing of
the party to be charged. If the party sought to be charged has in writing admitted the
contract, this is sufficient, as we understand, to take the case out of the statute, no matter
to whom the writing may have been addressed. Warfield v. Cranberry Co., 33 Iowa, 312,
19 N.W. 224. (Miller v. Kansas City, Ft. S. & M. R. Co., et al., 58 Kan. 189, 48 P. 853,
854).
As section 21 of Rule 123, Rules of Court, our statute of frauds when the communications to the
United States Treasury Department were sent by the parties to this case, is a rule of evidence (as
to the character of the new provision [article 1403] of the New Civil Code, quaere), and the written
memorandum is not the contract itself, but merely evidence thereof, it is not necessary for the
admission as evidence of any note or memorandum signed by a party thereto, that it be signed
by, or addressed to, the other also.
Defendant-appellant's counterclaim to compel plaintiff-appellee to sell the property must,
however, be denied, for the reason that the conditions under which the contract to sell were to be
carried out did not materialize within a reasonable time after it was entered into, and both parties,
upon failure of the contingencies relied upon, impliedly withdrew therefrom. The agreement was
that the sale shall be carried out when the vendor will get the necessary permit to sell from the
United States Treasury Department, and the Magdalena Estate, Inc., will get the loan from the
National City Bank of New York with which to pay the price. These conditions are suspensive.
The sale was to be carried out only if these should materialize.
En el segundo parrafo del articulo 1.113 y en el 1.114 inicia el Codigo la clasificacion
mas importante de las condiciones en suspensivas y resolutorias, desenvolviendola
luego en los articulos 1.122 y siguientes, al determinar los efectos, consecuencia del
complimiento de unas y otras. Su diferencia es bien clara; unas y otras influyen en la
existencia de la obligacion, pero por modos diametralmente opuestos: si la condicion
suspensiva se cumple, la obligacion surge; si se cumple la resolutoria, la obligacion se
extingue; si la una no se realiza, el vinculo de derecho no llega a aparecer; si la otra no
se verifica, la relacion de derecho se consolida; mientras dura la duda, la obligacion, en
el primer caso, no aparece, pero su existencia es una esperanza; y en el segundo, surte
sus efectos, pero pesa sobre ella una amenaza de caducidad. (8 Manresa, 122
That there were suspensive conditions may be inferred from their conduct. The defendant-
appellant's manager did not demand that the sale be carried out until after the filing of the
complaint in the month of April, 1947, or fully one year after the contract to sell had been agreed
upon. Berg, the vendor, also raised the funds he needed for his business by selling a property of
his in Quezon City to the vendee itself. (Deposition of Ernest Berg, Exhibit A, p. 4.) During all the
time that they were in continuous correspondence regarding the administration of the property,
never was a word said about carrying out the sale. All these show that they actually desisted from
carrying out the terms of the contract to sell.
Paras, C.J. and Jugo, JJ., concur.
2.
[G.R. No. 118509. March 29, 1996]
LIMKETKAI SONS MILLING INC., petitioner,
vs. COURT OF APPEALS, ET AL., respondents.
R E S O L U T I O N
FRANCISCO, J.:
In this motion for reconsideration, the Court
*
is called upon to take a second hard look on its
December 1, 1995 decision reversing and setting aside respondent Court of Appeals judgment of
August 12, 1994 that dismissed petitioner Limketkai Sons Milling Inc.s complaint for specific
performance and damages against private respondents Bank of the Philippine Islands (BPI) and
National Book Store (NBS). Petitioner Limketkai Sons Milling, Inc., opposed the motion and filed
its Consolidated Comment, to which private respondent NBS filed a Reply. Thereafter, petitioner
filed its Manifestation and Motion for the voluntary inhibition of Chief Justice Andres R. Narvasa
from taking part in any subsequent deliberations in this case. The Honorable Chief Justice
declined.
[1]

The Court is swayed to reconsider.
The bottomline issue is whether or not a contract of sale of the subject parcel of land existed
between the petitioner and respondent BPI. A re-evaluation of the attendant facts and the
evidence on record, specifically petitioners Exhibits A to I, yields the negative. To
elaborate:
Exhibit A
[2]
is a Deed of Trust dated May 14, 1976, entered into between Philippine
Remnants Co. Inc., as grantor, and respondent BPI, as trustee, stating that subject property
covered by TCT 493122 (formerly TCT No. 27324)
[3]
has [been] assigned, transferred, conveyed
and set over unto the Trustee
[4]
expressly authorizing and empowering the same in its own
name to sell and dispose of said trust property or any lot or parcel thereof
[5]
and to facilitate [the]
sale of the trust property, the Trustee may engage the services of real estate broker or brokers,
under such terms and conditions which the Trustee may deem proper, to sell the Trust property
or any lot or parcel thereof.
[6]

Exhibit B is a Letter of Authority for the petitioner issued by respondent BPI to Pedro A.
Revilla, Jr., a real estate broker, to sell the property pursuant to the Deed of Trust. The full text of
Exhibit B is hereby quoted:
Trust Account No. 75-09
23 June 1988
ASSETRADE CO.
70 San Francisco St.
Capitol Subdivision
Pasig, Metro Manila
Attention: Mr. Pedro P. Revilla, Jr.
Managing Partner .
Gentlemen:
This will serve as your authority to sell on an as is where is basis the property located at Pasig
Blvd., Bagong Ilog, Pasig, Metro Manila, under the following details and basic terms and
conditions:
TCT No. : 493122 in the name of BPI as trustee of Philippine Remnants Co.,
Inc.
Area : 33,056.0 square meters (net of 890 sq. m. sold to the Republic of
the Philippines due to the widening of Pasig Blvd.)
Price : P1,100.00 per sq. m. or P36,361,600.000.
Terms : Cash
Brokers Commission : 2%
Others : a) Docuemntary (sic) stamps to be affixed to Deed of Absolute Sale,
transfer tax, registration expenses, and other titling expenses for account
of the Buyer.
b) Capital gains tax, if payable, and real estate taxes up to 30 June
1988 shall be for the account of the Seller.
This authority which is good for thirty (30) days only from date hereof is non-exclusive and on a
first come first-serve basis.
Very truly yours,
BANK OF THE PHILIPPINE ISLANDS
as trustee of
Philippine Remnants Co., Inc.
(Sgd.) (Sgd.)
FERNANDO J. SISON, III ALFONSO R. ZAMORA
Assistant Vice-President Vice President
[Note: Italics supplied]
security guard on duty at subject property to allow him (Revilla, Jr.) and his companion to conduct
an ocular inspection of the premises.
[7]

Exhibit D is a letter addressed by Pedro Revilla, Jr. to respondent BPI informing the latter
that he has procured a prospective buyer.
[8]

Exhibit E is the written proposal submitted by Alfonso Y. Lim in behalf of petitioner
Limketkai Sons Milling, Inc., offering to buy the subject property at P1,000.00/sq. m.
[9]

Exhibit F is respondent BPIs letter addressed to petitioner pointing out that petitioners
proposal embodied in its Letter (Exhibit E) has been rejected by the respondent BPIs Trust
Committee.
[10]

Exhibit G is petitioners letter dated July 22, 1988 reiterating its offer to buy the subject
property at P1,000/sq. m. but now on cash basis.
[11]

Exhibit H refers to respondent BPIs another rejection of petitioners offer to buy the
property at P1,000/sq. m.
[12]

And finally, Exhibit I is a letter by petitioner addressed to respondent BPI claiming the
existence of a perfected contract of sale of the subject property between them.
[13]

These exhibits, either scrutinized singly or collectively, do not reveal a perfection of the
purported contract of sale. Article 1458 of the Civil Code defines a contract of sale as follows:
ART. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
A contract of sale may be absolute or conditional.
Article 1475 of the same code specifically provides when a contract of sale is deemed
perfected, to wit:
ART. 1475. The contract of sale is perfected at the moment there is meeting of minds upon the
thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the provisions of
the law governing the form of contracts.
The Court in Toyota Shaw, Inc. v. Court of Appeals
[14]
had already ruled that a definite agreement
on the manner of payment of the price is an essential element in the formation of a binding and
enforceable contract of sale. Petitioners exhibits did not establish any definitive agreement or
meeting of the minds between the concerned parties as regards the price or term of payment.
Instead, what merely appears therefrom is respondent BPIs repeated rejection of the petitioners
proposal to buy the property at P1,000/ sq.m.
[15]
In addition, even on the assumption that Exhibit
E reflects that respondent BPI offered to sell the disputed property for P1,000/sq. m., petitioners
acceptance of the offer is conditioned upon or qualified by its proposed terms
[16]
to which
respondent BPI must first agree with.
On the subject of consent as an essential element of contracts, Article 1319 of the Civil Code
has this to say:
ART. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. The offer must be certain and the acceptance
absolute. A qualified acceptance constitutes a counter-offer.
xxx xxx xxx.
The acceptance of an offer must therefor be unqualified and absolute. In other words, it must be
identical in all respects with that of the offer so as to produce consent or meeting of the
minds. This was not the case herein considering that petitioners acceptance of the offer was
qualified, which amounts to a rejection of the original offer.
[17]
And contrary to petitioners
assertion that its offer was accepted by respondent BPI, there was no showing that petitioner
complied with the terms and conditions explicitly laid down by respondent BPI for prospective
buyers.
[18]
Neither was the petitioner able to prove that its offer to buy the subject property was
formally approved by the beneficial owner of the property and the Trust Committee of the Bank,
an essential requirement for the acceptance of the offer which was clearly specified in Exhibits F
and H. Even more telling is petitioners unexplained failure to reduce in writing the alleged
acceptance of its offer to buy the property at P1,000/sq. m.
The Court also finds as unconvincing petitioners representation under Exhibits E, G, and
I that its proposal to buy the subject property for P 1,000/ sq. m. has been accepted by
respondent BPI, considering that none of the said Exhibits contained the signature of any
responsible official of respondent bank.
It is therefore evident from the foregoing that petitioners documentary evidence floundered
in establishing its claim of a perfected contract of sale.
Moreover, petitioners case failed to hurdle the strict requirements of the Statute of Frauds.
Article 1403 of the Civil Code states:
ART. 1403. - The following contracts are unenforceable, unless they are ratified:
(1) xxx xxx xxx
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the
following cases an agreement hereafter made shall be unenforceable by action, unless the same,
or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by
his agent; evidence, therefore, of the agreement cannot be received without the writing, or a
secondary evidence of its contents:
xxx xxx xxx
(e) An agreement for the leasing for a long period than one year, or for the sale of real property or
of an interest therein.
xxx xxx xxx.
In this case there is a patent absence of any deed of sale categorically conveying the subject
property from respondent BPI to petitioner. Exhibits E, G, I which petitioner claims as proof of
perfected contract of sale between it and respondent BPI were not subscribed by the party
charged, i.e., BPI, and did not constitute the memoranda or notes that the law speaks of.
[19]
To
consider them sufficient compliance with the Statute of Frauds is to betray the avowed purpose of
the law to prevent fraud and perjury in the enforcement of obligations. We share, in this
connection, respondent Court of Appeals observation when it said:
xxx. The requirement that the notes or memoranda be subscribed by BPI or its agents, as the
party charged, is very vital for the strict compliance with the avowed purpose of the Statute of
Frauds which is to prevent fraud and perjury in the enforcement of obligations depending for their
evidence on the unassisted memory of witnesses by requiring certain enumerated contracts and
transactions to be evidenced by a writing signed by the party to be charged (Asia Production Co.,
Inc. vs. Pano, 205 SCRA 458). It cannot be gainsaid that a shrewd person could easily concoct a
story in his letters addressed to the other party and present the letters to the court as notes to
prove the existence of a perfected oral contract of sale when in truth there is none.
In adherence to the provisions of the Statute of Frauds, the examination and evaluation of the
notes or memoranda adduced by the appellee was confined and limited to within the four corners
of the documents. To go beyond what appears on the face of the documents constituting the
notes or memoranda, stretching their import beyond what is written in black and white, would
certainly be uncalled for, if not violative of the Statute of Frauds and opening the doors to fraud,
the very evil sought to be avoided by the statute. In fine, considering that the documents
adduced by the appellee do not embody the essentials of the contract of sale aside from not
having been subscribed by the party charged or its agent, the transaction involved definitely falls
within the ambit of the Statute of Frauds.
[20]

[Note: Italics added]
Corrolarily, as the petitioners exhibits failed to establish the perfection of the contract of
sale, oral testimony cannot take their place without violating the parol evidence rule.
[21]
It was
therefore irregular for the trial court to have admitted in evidence testimony to prove the existence
of a contract of sale of a real property between the parties despite de persistent objection made
by private respondents counsels as early as the first scheduled hearing. While said counsels
cross-examined the witnesses, this, to our view, did not constitute a waiver of the parol evidence
rule. TheTalosig v. Vda. de Nieba,
[22]
and Abrenica v. Gonda and de Gracia
[23]
cases cited by the
Court in its initial decision, which ruled to the effect that an objection against the admission of any
evidence must be made at the proper time, i.e., x x x at the time question is asked,
[24]
and that if
not so made it will be understood to have been waived, do not apply as these two cases involved
facts
[25]
different from the case at bench. More importantly, here, the direct testimonies of the
witnesses were presented in affidavit-form where prompt objection to inadmissible evidence is
hardly possible, whereas the direct testimonies in these cited cases were delivered orally in open
court. The best that counsels could have done, and which they did, under the circumstances was
to preface the cross-examination with objection. Thus:
ATTY. VARGAS:
Before I proceed with the cross-examination of the witness, your Honor, may we object to the
particular portion of the affidavit which attempt to prove the existence of a verbal contract to
sell more specifically the answers contained in page 3, Par. 1, the whole of the answer.
x x x x x x x x x.
COURT:
Objection overruled.
Atty. VARGAS.
Your Honor, what has been denied by the Court was the motion for preliminary hearing on
affirmative defenses. The statement made by the witness to prove that there was a verbal
contract to sell is inadmissible in evidence in this case because an agreement must be in writing.
COURT:
Go ahead, that has been already overruled.
ATTY. VARGAS:
So may we reiterate our objection with regards to all other portions of the affidavit which deal on
the verbal contract. (TSN, Feb. 28, 1989, pp. 3-5; Italics supplied.)
[26]

xxx xxx xxx
ATTY. CORNAGO:
Before we proceed, we would like to make of record our continuing objection insofar as questions
and answers propounded to Pedro Revilla dated February 27, 1989, in so far as questions would
illicit (sic) answers which would be violative of the best evidence rule in relation to Art. 1403. I
refer to questions Nos. 8, 13, 16 and 19 of the affidavit of this witness which is considered as his
direct testimony. (T.S.N., June 29, 1990, p. 2)
ATTY. CORNAGO:
May we make of record our continued objection on the testimony which is violative of the best
evidence rule in relation to Art. 1403 as contained in the affidavit particularly questions Nos. 12,
14, 19 and 20 of the affidavit of Alfonso Lim executed on February 24, 1989 x x x. (T.S.N., June
28, 1990, p. 8).
[27]

Counsels should not be blamed and, worst, penalized for taking the path of prudence by choosing
to cross-examine the witnesses instead of keeping mum and letting the inadmissible testimony in
affidavit form pass without challenge. We thus quote with approval the observation of public
respondent Court of Appeals on this point:
As a logical consequence of the above findings, it follows that the court a quo erred in allowing
the appellee to introduce parol evidence to prove the existence of a perfected contract of sale
over and above the objection of the counsel for the defendant-appellant. The records show that
the court a quo allowed the direct testimony of the witnesses to be in affidavit form subject to
cross-examination by the opposing counsel. If the purpose thereof was to prevent the opposing
counsel from objecting timely to the direct testimony, the scheme failed for as early as the first
hearing of the case on February 28, 1989 during the presentation of the testimony in affidavit
form of Pedro Revilla, Jr., plaintiff-appellees first witness, the presentation of such testimony was
already objected to as inadmissible.
[28]

[Italics supplied.]
WHEREFORE, in view of the foregoing premises, the Court hereby GRANTS the motion for
reconsideration, and SETS ASIDE its December 1, 1995 decision. Accordingly, the petition is
DENIED and the Court of Appeals decision dated August 12, 1994, appealed from is
AFFIRMED in toto.
SO ORDERED.
Narvasa, C.J. (Chairman) and Davide, Jr., J., concur.
Panganiban, J., joins Justice Melos dissent.

3.
G.R. No. L-8334 December 28, 1957
BIENVENIDO BABAO, ETC., plaintiff-appellee,
vs.
FLORENCIO PEREZ, ETC., ET AL., defendants-appellants.
Ozaeta, Lichauco and Picazo for appellants.
Feria, Manglapuz and Associates for appellee.

BAUTISTA ANGELO, J.:
This is an action to recover one-half (!) of a parcel of land containing an area of 156 hectares
situated in San Juan, Batangas, plus the value of the produce gathered thereon from August,
1947 until actual recovery and in the alternative, to recover the Sum of P47,000 representing
reimbursement of the amount of useful and necessary expenses incurred to the clear and
improve the aforesaid land.
Plaintiff is the judicial administrator of the estate of the late Santiago Babao while defendant
Florencio Perez is the judicial administrator of the estate of the late Celestina Perez. The other
defendants are purchasers and actual owners of portions of the land which is sought to be
recovered in the present litigation.
The complaint alleges that Celestina Perez was in her lifetime the owner of the parcel of land in
question which was not registered either under Act 496 or under the Spanish Mortgage law: that
sometime in 1924 when the deceased Santiago Babao married Maria Cleofe Perez, niece of
Celestina Perez, the latter and the former entered into a verbal agreement whereby Santiago
Babao bound himself to improve the land by leveling and clearing all the forest trees standing
thereon and planting in lieu there of coconuts, rice, corn and other crops such as bananas and
bamboo trees, and to act at the same time as administrator thereof during the lifetime of
Celestina Perez, all expenses for labor, and materials to be at his cost, in consideration of which
Celestina in turn bound herself to convey to Santiago Babao or, his wife ! of land, together with
all the improvements thereon upon her death; that pursuant to said verbal agreement, Santiago
Babao in 1924 left his job as administrator of the Llana Estate in San Juan, Batangas for which
he was receiving a salary of P150 a month, and started leveling and clearing the land having
planted in an area of 50 hectares 50,000 coconuts trees, and rice and corn in another area of 70
hectares, leaving out only 50 hectares unimproved, all of which having been administered by him
from 1924 to 1946; that for clearing and improving the portions of land above-mentioned, he
incurred expenses amounting to P7,400 which added to his salary as administrator from l924 to
1946 at rate P150 a month mounting to P39,600, makes a total of P47,000; that in the violation of
the aforesaid verbal agreement, Celestina Perez, acting through Leovigildo Perez, to whom she
extended a power of Attorney to sell, sold few days before she died about 127 __ hectares of
the land in question in consequence of which Santiago Babao was deprived of the possession
and administration thereof from 1945. that said sales are fictitious and were made clear violation
of the oral agreement made between Celestina Perez and Santiago Babao and as such the same
are null and void; that Celestina Perez died on August 24, 1947 as a result of which intestate
proceedings were instituted for the settlement of her estate and one Florencio Perez was named
as judicial administrator; that Santiago Babao died on January 6, 1948 and as a consequence in
estate proceedings were instituted for the settlement of his estate and Bienvenido Babao failed to
recover the ! portion of the lane herein litigated, said estate would suffer an irreparable damage
of not less than P366,700 representing fruits which it has failed to receive during the last 20
years. Wherefore, plaintiff played for the conveyance of ! portion of the land in question and for
annulment of the sales of the portion for having been made fictitiously, and in the alternative, for
judgment in plaintiff's favor for the sum of P47,000 representing the amount of useful and
necessary expenses incurred by Santiago Babao in improving the land in line with the oral
agreement.
Defendants denied plaintiff's claim that a verbal agreement was entered into between Celestina
Perez Babao relative to the clearing, improving and administering the land belonging to the
former having an area of 156 hectares, as well as the other claim that Santiago Babao had
actually cleared and improve a great portion thereof at the cost at around P7,400. They alleged in
1924 and for many years prior thereto, the land in question had already been cleared and
cultivated for agricultural purposes with an exception of a portion of 50 hectares: that said land
was cleared and cultivated due partly to the effort made by Celestinas husband, Esteban de Villa,
her overseers and tenants, and partly to the "trusco" system employed by them whereby persons
were allowed to clear the land and plat thereon and from the harvest were compensated
according to a graduated scale of division varying from year to year; that the coconut trees,
banana plants and bamboo trees now standing thereon were planted not by Santiago Babao nor
at his expenses but by the tenants of the spouses Esteban de Villa and Celestina Perez who
were dully compensated according to the "trusco" system; that although Santiago Babao and
Maria Cleofe Perez were married in 1924, the former did not have anything to do with the land in
question to Esteban de Villa was then still living and actively managed the same with help of his
overseer and tenants until he died in 1930; that it was only in that year when Santiago Babao
began administering the land in the capacity of a nephew of Celestina until 1935 when Celestina
disgusted with the conduct of Santiago, left the company of Santiago and his wife and went to live
with her nephew Bernardo Perez until her death in 1947; that since then Celestina Perez
prohibited Santiago from interfering with the administration of the land and designated another
person in his place, and for the work he did from 1930 to 1935, he was more than compensated
because the proceeds of the harvests during said years were all given only to him and his wife
and Celestina was given only what was barely sufficient for her maintenance.
Defendants also alleged that the sales made by Celestina Perez through her attorney-in-fact
Leovigildo Perez of several portions of the land were not fictitious is alleged but were made with
full knowledge and authority of Celestina who executed in favor of Leovigildo Perez a power of
Attorney under the authority notary public in the presence of Santiago Babao himself who did not
interpose any objection to the execution of said power of attorney and, therefore, said sales are
real, valid and genuine, having been executed in accordance with law. Defendants prayed that
the complaint be dismissed with costs, after awarding to them moral damages in the amount that
the court may deem proper to fix.
After hearing, the court rendered in favor of the plaintiff and against the defendants,
Wherefore, judgement is rendered in favor of the plaintiff and against the defendants,
(1) Declaring the sales of Lupang Parang by and between the defendants, fraudulent and
fictitious, null and void;
(2) Ordering defendant Florencio Perea as administrator of the testate of the deceased
Celestina Perez, to pay plaintiff the sum of P3,786.66 annually from August 25, 1947 until
delivery of the land to the latter, with interest thereon at the rate of 6 per cent per annum
from the date of the filing of the complaint;
(3) Divesting the title of defendants over ! of Lupang Parang both in quantity and quality
and vesting title however in plaintiff pursuant to section 10 of Rule 39. To carry out this
judgement, the Clerk of Court is hereby appointed representative of this Court to
designate a disinterested surveyor for the necessary survey and division, the expenses
therefor to be defrayed half and half by plaintiff and Florencio Perez;
(4) Ordering defendants to surrender the possession of the half adjudicated and vested in
favor of the plaintiff after the same has been designated under the proceeding paragraph;
and .
(5) To pay the costs.
Defendants in due time took the case on appeal to the Court of Appeals where the parties
submitted their respective briefs within the reglementary period, and thereafter the court rendered
judgment reversing in toto the decision appealed from and dismissing the case without
pronouncement as to costs. But when its attention was called, thru a proper motion, that the court
acted without jurisdiction because the amount involved was more than P50,000, the court in a
resolution entered on August 14, 1954 set aside its decision and forwarded the case to us to have
remanded to the Court of Appeals proved futile.
While this case was pending in the lower court, counsel for appellants filed a motion to dismiss on
the ground, amount others, but the alleged verbal agreement between Santiago Babao and
Celestina Perez was enforceable under the Statute of frauds. The trial court denied this motion on
the ground that it appears from the complaint "that Santiago fully complied with his part of the oral
contract between the parties and that this is an action not only specific performance but also for
damages." Consequently, the court held that the Statute of frauds cannot be invoked for the
reason that "performance by one party of his part of the contract takes the case out of the
statute." And pursuant to such ruling, when the case was tried on the merits, the court overruled
to the introduction of oral testimony to prove the alleged verbal agreement.
The important question then to be determined is whether or not the alleged verbal agreement falls
within the prohibition of the Statute of frauds.
This statute, formerly incorporated as Section 21 of Rule 123 of our Rules of Court, is now found
in Article 1403 of the new Civil Code, which provides, in so far as pertinent to this case, as
follows:1awphi1.net
In the following cases an agreement hereafter made shall be enforceable by action
unless the same, or some note or memorandum thereof, be in writing, and subscribed by
the party charged or by his agent, evidence therefore, of the agreement cannot be
received without the writing, or secondary evidence of its contents;
(a) An agreement that by its terms is not to be performed within a year from the making
thereof.
x x x x x x x x x
(e) An agreement . . . for the sale of real property or of an interest therein.
Appellants contends that the alleged verbal agreement falls under the paragraphs (a) and (c)
above-quoted because the same may be considered as an agreement which by its terms is not to
be performed within one year from the making thereof, or one which involves a sale of real
property or of an interest therein. If this premise is correct, appellants contend, then the trial court
erred in allowing the introduction of parole evidence to prove the alleged agreement over the
vigorous objection of counsel for appellants.
That the alleged verbal agreement is one which by its terms is not to be performed within one
year is very apparent from the allegations of the complaint. Thus, it is therein alleged that the
agreement was allegedly made in 1924 and by its terms Santiago Babao bound himself (1) to
improve all the forest trees and planting thereon coconuts, rice, corn and other crops such as
bananas and bamboo trees, and (2) to act at the same time as administrator of said land and
improvements during the lifetime to Celestina Perez. And in consideration of such undertaking,
Celestina Perez "bound herself to give and deliver, either to Santiago Babao or his wife Cleofe
Perez, one-half (!) of the whole area of said land as improved with all the improvements
thereon upon her death". It is also alleged in the complaint that Celestina Perez died on August
24, 1947, or 23 years after the making of the alleged agreement while Santiago Babao died on
January 6, 1948. From the above terms, therefore, it is not difficult to see that the undertaking
assumed by Santiago Babao which was to clear, level and plant to coconut trees and other plants
156 hectares of forest land could not be accomplished in one year. In fact, the alleged
improvements were supposedly accomplished during the lifetime of Celestina, which lasted over
a period of 23 years, and even then not all was cleared and planted but only a portion thereof.
Another part of his undertaking is that he is to administer the land during the lifetime of Celestina,
and as we have already said, her death occurred 23 years after the agreement.
But the trial court expressed the view that the statute does not apply because it assumed that
Santiago Babao wasfully complied with his part of the oral contract between the parties, and in its
opinion "performance by one party of his part of the contract takes the case out of the statute."
Even if his assumption were correct, still we find one flaw in its logic which fully nullifies it for it
falls to consider that in order that a partial performance of the contract may take the case out of
the operation of the statute, it must appear clear that the full performance has been made by one
party within one year, as otherwise the statute would apply. Thus, the rule on this point is well
stated in Corpus Juris in the following wise: Contracts which by their terms are not to be
performed within one year, may be taken out of the statute through performance by one party
thereto. All that is required in such case is complete performance within the year by one party,
however many tears may have to elapse before the agreement is performed by the other
party. But nothing less than full performance by one party will suffice, and it has been held that, if
anything remains to be done after the expiration of the year besides the mere payment of money,
the statute will apply."
1
(Emphasis supplied). It is not therefore correct to state that Santiago
Babao has fully complied with his part within the year from the alleged contract in question.
When, in an oral contract which, by its terms, is to be performed within one year from the
execution of the contracting parties has complied within the year with obligations imposed
on him by said contract, the other party cannot avoid the fulfillment of those incumbent on
him under the same contract by invoking the statute of frauds because the latter aims to
prevent and not to protect fraud. (Shoemaker vs. La Tondea, Inc. 68 Phil., 24.).
The broad view is that the statute of Frauds applies only to agreements not to be
performed on either side within a year from the making thereof. Agreements to be fully
performed on one side within the year are taken out of the operation of the statute.
(National Bank vs. Philippine Vegetable Oil Co., Phil., 857, 858.).
Assuming arguendo that the agreement in question falls also under paragraph (a) of article 1403
of the new Civil Code, i.e., it is a contract or agreement for the sale of real property or of an
interest therein, it cannot also be contended that the provision does not apply to the present case
for the reason that there was part performance on the part of one of the parties. In this
connection, it must be noted that this statute is one based on equity. It is based on equitable
estoppel or estoppel by conduct. It operates only under certain specified conditions and when
adequate relief of law is unavailable (49 Am. Jur., Statute of Frauds, Section 422, p. 727). And
one of the requisites that need be present is that the agreement relied on must be certain,
definite, clear, unambiguous and unequivocal in its terms before the statute may operate. Thus,
the rule on this matter is as follows:
The contract must be fully made and completed in every respect except for the writing
required by the statute, in order to be enforceable on the ground of part performance.
The parol agreement relied on must be certain, definite, clear, unambiguous, and
unequivocal in its terms, particularly where the agreement is between parent and child,
and be clearly established by the evidence. The requisite of clearness and definiteness
extends to both the terms and the subject matter of the contract. Also, the oral contract
must be fair, reasonable and just in its provisions for equity to enforce it on the ground of
part performance. If it would be inequitable to enforce the oral agreement, or if its specific
enforcement would be harsh or oppressive upon the defendant, equity will withhold its
aid. Clearly, the doctrine of part performance taking an oral contract out of the statute of
frauds does not apply so as to support a suit for specific performance where both the
equities and the statute support the defendant's case. (49 Am. Jur., p. 729.).
The alleged agreement is far from complying with the above requirement for, according to the
complaint, Santiago Babao bound himself to convert a big parcel of forest land of 156 hectares
into a veritable farm planted to coconuts, rice, corn and other crops such as bananas and
bamboo trees and to act as administrator of said farm during the lifetime of Celestina Perez, while
the latter in turn bound herself to give either to Santiago or his wife ! of the land as improved
with all the improvements thereupon her death. This agreement is indeed vague and ambiguous
for it does not specify how many hectares was to be planted to coconuts, how many to rice and
corn, and what portion to bananas and bamboo trees. And as counsel for appellants puts it, "as
the alleged contract stands, if Santiago Babao should plant one-half hectares to coconuts, one-
half to rice, and another half hectare to corn, and the rest to bananas and bamboo trees, he
would be entitled to receive one-half of 156 hectares, or 78 hectares, of land for his services. That
certainly would be unfair and unheard of; no sane property owner would enter into such contract.
It costs much more time, money, and labor to plant coconut trees than to plant bananas and
bamboo trees; and it also costs less to convert forest land to rice and corn land than to convert it
into a coconut plantation. On the part of Celestina Perez, her promise is also incapable of
execution. How could she give and deliver one half of the land upon her death?"
The terms of the alleged contract would appear more vague if we consider the testimony of
Carlos Orense who claimed to have been present at the time the alleged agreement was made
between Celestina Perez and Santiago Babao for apparently the same does not run along the
same line as the one claimed by appellee. This is what Orense said: "You, Santiago, leave the
Llana estate and attend to this lupang parang. Have it cleared and planted to coconuts, for that
land will eventually fall in your hands" (as translated from Tagalog), which runs counter with the
claim of appellee. The agreement being vague and ambiguous, the doctrine of part performance
cannot therefore be invoked to take this case out of the operation of the statute.
Obviously, there can be no part performance until there is a definite and complete
agreement between the parties. In order to warrant the specific enforcement of a parol
contract for the sale of land, on the ground of part performance, all the essential terms of
the contract must be established by competent proof, and shown to be definite, certain,
clear, and unambiguous.
And this clearness and definiteness must extend to both the terms and the subject matter
of the contract.
The rule that the court will not specifically enforce a contract for the sale of land unless its
terms have been definitely understood and agreed upon by the parties, and established
by the evidence, is especially applicable to oral contracts sought to be enforced on the
ground of part performance. An oral contract, to be enforced on this ground, must at least
have that degree of certainty which is required of written contracts sought to be
specifically enforced.lawphi1.net
The parol contract must be sufficiently clear and definite to render the precise acts which
are to be performed thereunder clearly ascertainable. Its terms must be so clear and
complete as to allow no reasonable doubt respecting its enforcement according to the
understanding of the parties. (101 A.L.R., pp. 950-951).
In this jurisdiction, as in the United States, the existence of an oral agreement or
understanding such as that alleged in the complaint in the case at bar cannot be
maintained on vague, uncertain, and indefinitetestimony, against the reasonable
presumption that prudent men who enter into such contracts will execute them in writing,
and comply with the formalities prescribed by law for the creation of a valid mortgage. But
where the evidence as to the existence of such an understanding or agreement is clear,
convincing and satisfactory, the same broad principles of equity operate on this
jurisdiction as in the United States to compel the parties to live up to the terms of their
contract. (Cuyugan vs. Santos, 34 Phil., 100, 101.).
There is another flaw that we find in the decision of the court a quo. During the trial of this case,
counsel for appellants objected the admission of the testimony of plaintiff Bernardo Babao and
that of his mother Cleofe Perez as to what occurred between Celestina Perez and Santiago
Babao, with regard to the agreement on the ground that their testimony was prohibited by section
26(c) of Rule 123 of the Rules of Court. This rule prohibits parties or assignors of parties to a
case, or persons in whose behalf case is prosecuted, against an executor or administrator of a
deceased person upon a claim or demand against the estate of such deceased person from
testifying as to any matter of fact occurring before the death of such deceased person. But the
court overruled the opposition saying that said rule did not apply where the complaint against the
estate of a deceased person alleges fraud, citing the case of Ong Chua vs. Carr, 53 Phil., 980.
Here again the court is in error because if in that case the witness was allowed to testify it was
because the existence of fraud was first established by sufficient and competent evidence. Here,
however, the alleged fraud is predicated upon the existence of the agreement itself which violates
the rule ofpetitio principii. Evidently, the fraud to exist must be established by
evidence aliunde and not by the same evidence which is to sought to be prevented. The
infringement of the rule is evident.
. . . The reason for this rule is that "if death has closed the lips of one party, the policy of
the law is to close the lips of the other.' Another reason is that `the temptation to
falsehood and concealment in such cases is considered too great to allow the surviving
party to testify in his own behalf.' Accordingly, the incompetency applies whether the
deceased died before or after the commencement of the action against him, if at the time
the testimony was given he was dead and cannot disprove it, since the reason for the
prohibition, which is to discourage perjury, exists in both instances. (Moran, Comments
on the Rules of Court, Vol. 3, 1952 Ed., p. 234.).lawphi1.net
Having reached the conclusion that all the parol evidence of appellee was submitted in violation
of the Statute of Frauds, or of the rule which prohibits testimony against deceased persons, we
find unnecessary to discuss the other issues raised in appellants' brief.
Wherefore, the decision appealed from is reversed, and the case is dismissed, with costs against
appellee.
Bengzon, Paras, C.J., Padilla, Reyes, A., Labrador, Reyes, J.B.L., and Endencia, JJ., concur.
4.
G.R. No. L-29264 August 29, 1969
BARBARA RODRIGUEZ, petitioner,
vs.
HON. COURT OF APPEALS (Second Division, composed of JUSTICES JUAN P.
ENRIQUEZ, HERMOGENES CONCEPCION, JR. and EDILBERTO SORIANO), ATANACIO
VALENZUELA, MAXIMINA VICTORIO, LIBERATA SANTOS, NIEVES CRUZ, substituted by
her heirs, ARSENIO, JAYME, ANDRES, NELO and AMANDA, all surnamed NERY, and
CARMEN and ARSENIA, both surnamed MENDOZA, respondents.
Fortunato de Leon for petitioner.
Sycip, Salazar, Luna, Manalo and Feliciano for respondent Atanacio Valenzuela.
San Juan, Africa, Gonzales and San Agustin for respondent Nieves Cruz.
CASTRO, J.:
For a clear understanding of the issues posed by the present petition
for mandamus and certiorari with preliminary injunction, we hereunder quote the statement of the
case and the findings of fact made by the Court of Appeals in its decision dated October 4, 1967
in CA-G.R. 35084-R, as well as the dispositive portion of the said decision:
On December 31, 1958, in Paraaque, Rizal, by virtue of a document denominated
"Kasunduan" written in the vernacular and ratified before Notary Public Lazaro C. Ison of
that locality, Nieves Cruz, now deceased, authorized the spouses Atanacio Valenzuela,
and Maximina Victorio and Liberate Santos to sell a certain parcel of land of about 44,634
square meters belonging to her and situated in Sitio Matatdo, Barrio San Dionisio,
Paraaque, Rizal, the identity of which is not now in dispute. Among, the anent conditions
of this authority were that the price payable to Nieves Cruz for the land would be P1.60
per square meter and any overprice would pertain to the agents; that Nieves Cruz would
receive from said agents, by way of advance payment on account of the purchase price
to be paid by whomsoever may buy the land, the sum of P10,000.00 upon the execution
of the agreement aforesaid, and another P10,000.00 on January 5, 1959; that the
balance on the total purchase price would be payable to Nieves Cruz upon the issuance
of the Torrens title over the property, the obtention of which was undertaken by the
agents who also were bound to advance the expense therefor in the sum of P4,000.00
which would be deductible from the last amount due on the purchase price; and that
should the agent find no buyer by the time that Torrens title is issued, Nieves Cruz
reserved the right to look for a buyer herself although all sums already received from the
agents would be returned to them without interest.
As confirmed by Nieves Cruz in a "recibo", Exhibit 2, bearing the date "... ng Enero ng
1959," the stipulated "advance payment (paunang bayad)" of P20,000.00 was duly made
to her. Contrary to the agreement that the balance on the purchase price would be paid
upon the issuance of the Torrens title over the land (September 9, 1960), Nieves Cruz
and her children, however, collected from the agents, either thru Maximina Victorio or
thru Salud G. de Leon, daughter of Liberate Santos, various sums of money during the
period from July 3, 1959 up to September 3, 1961, all of which were duly receipted for by
Nieves Cruz and/or her children and in which receipts it is expressly stated that said
amounts were "bilang karagdagan sa ipinagbili naming lupa sa kanila (additional
payments for the land we sold to them)", Exhibits 12, 12-a to 12-z-1. These totalled
P27,198.60 which with the P20,000.00 previously paid amounted to P47,198.60.
Meanwhile, proceedings to place the land under the operation of the Torrens system
were initiated. In due season, the registration court finding a registrable title in the
name of the applicants, Emilio Cruz and Nieves Cruz, but that
"... the applicant Nieves Cruz has likewise sold her one-half (1/2) undivided share
to the spouses Atanacio Valenzuela and Maxima (Maximina) Victorio and to
Liberata Santos from whom she had received partial payments thereof in the
sum of P22,000.00;" (Exhibit 4-a).
decreed, on July 15, 1960, the registration of the land in the names of the applicants
aforesaid
"Subject ... to the rights of the spouses Atanacio Valenzuela and Maximina
Victorio and to Liberata Santos over the one-half share of Nieves Cruz of the
parcel of land for which the latter was paid P22,000.00 as partial payment
thereof." (Exhibit 4).
The judgment aforesaid having become final, the corresponding Original Certificate of
Title No. 2488 of the Registry of Deeds of Rizal was, on September 9, 1960, duly entered
and issued to the applicants aforesaid, subject, amongst others, to the limitation
heretofore stated.
Eventually, pursuant to a partition between Nieves Cruz and her brother, Emilio Cruz, by
virtue of which the entire land was subdivided into two lots of 48,260 square meters each,
Original Transfer of Title No. 2488 was cancelled and superseded by two new transfer
certificates respectively covering the two sub-divided lots, that which pertained to Nieves
Cruz, Lot A (LRC) Psd-13106, being covered by Transfer Certificate of Title No. 80110
issued on October 3, 1960. Said title carried over the annotation heretofore mentioned
respecting the rights of Atanacio Valenzuela and Maximina Victorio and Liberata Santos
over the portion covered thereby. (Exhibits 6 and 6-a).
Then, on September 15, 1961, Nieves Cruz sold the property in question to Barbara
Lombos Rodriguez, her "balae" because the latter's son was married to her daughter, for
the sum of P77,216.00 (Exhibit J). In consequence, Transfer Certificate of Title No.
80110 in the name of Nieves Cruz was cancelled and, in lieu thereof, Transfer Certificate
of Title No. 91135 was issued in the name of Barbara Lombos Rodriguez (Exhibit I) which
likewise carried over the annotation respecting the rights of Atanacio Valenzuela,
Maximina Victorio and Liberata Santos over the property covered thereby.
Forthwith, on September 16, 1961, Nieves Cruz, through counsel, gave notice to
Atanacio Valenzuela, Maximina Victorio and Liberata Santos of her decision to rescind
the original agreement heretofore adverted to, enclosing with said notice Bank of America
check for P48,338.60, representing sums advanced by the latter which were tendered to
be returned. Atanacio Valenzuela, Maximina Victorio and Liberata Santos, through
counsel, balked at the attempt at rescission, denying non-compliance with their
undertaking inasmuch as, per agreement, the balance on the purchase price for the land
was not due until after the 1962 harvest. They, accordingly, returned Nieves Cruz' check.
Thus rebuffed, plaintiff Nieves Cruz hailed defendants Atanacio Valenzuela, Maximina
Victorio and Liberate Santos before the Rizal Court in the instant action for rescission of
the "Kasunduan" heretofore adverted to, the cancellation of the annotation on the title to
the land respecting defendant's right thereto, and for damages and attorney's fees. In
their return to the complaint, defendants traversed the material averments thereof,
contending principally that the agreement sought to be rescinded had since been novated
by a subsequent agreement whereunder they were to buy the property directly. They also
impleaded Barbara Lomboa Rodriguez on account of the sale by the plaintiff to her of the
subject property and interposed a counterclaim against both plaintiff and Rodriguez for
the annulment of the sale of the land to the latter, as well as the transfer certificate of title
issued in her favor consequent thereto and the reconveyance of the land in their favor,
and also for damages and attorney's fees.
Pending the proceedings below, plaintiff Nieves Cruz died and was, accordingly,
substituted as such by her surviving children, to wit: Arsenio, Nelo, Jaime, Andres and
Amanda, all surnamed Nery, and Carmen and Armenia both surnamed Mendoza.
In due season, the trial court finding for plaintiff Nieves Cruz and her buyer, Barbara
Lombos Rodriguez, and against defendants rendered judgment thus
"IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered (1) Ordering
the cancellation at the back of Transfer Certificate of Title No. 91135 of the
Register of Deeds of Rizal, stating that the land covered thereby was sold to the
defendants; (2) Ordering the defendants to pay to the plaintiff, jointly and
severally the sum of P67,564.00 as actual damages and P5,000.00 by way of
attorney's fees; (3) Dismissing the defendants counterclaim; and (4) Ordering the
defendants to pay the costs of this suit jointly and severally."
x x x x x x x x x
We find no obstacle to appellants' purchase of the land in the prohibition against an agent
buying the property of his principal entrusted to him for sale. With the agreement of
Nieves Cruz to sell the land directly to said appellants, her agents originally, it cannot
seriously be contended that the purchase of the land by appellants was, without the
express consent of the principal Nieves Cruz. Accordingly, that purchase is beyond the
coverage of the prohibition.
By and large, we are satisfied from a meticulous assay of the evidence at bar that the
contract of sale over the land subsequently made by Nieves Cruz in favor of appellants
was duly and satisfactorily proved. No showing having been made by appellees to
warrant the rescission of that contract, the attempt of such rescission is legally untenable
and necessarily futile. The specific performance of that contract is under the
circumstances, legally compellable.
Considering that the rights of appellants, as such purchasers of the portion corresponding
to Nieves Cruz, is a matter of official record in the latter's certificate of title over the land
the annotation of which was authorized by the decision of the registration court and
which annotation was duly carried over in the subsequent titles issued therefor, including
that issued in the name of appellee Rodriguez said appellee must be conclusively
presumed to have been aware, as indeed she was, of the prior rights acquired by
appellants over the said portion. Said appellee's acquisition of the land from Nieves Cruz
remains subject, and must yield, to the superior rights of appellants. Appellee Rodriguez
cannot seek refuge behind the protection afforded by the Land Registration Act to
purchasers in good faith and for value. Aware as she was of the existence of the
annotated prior rights of appellants, she cannot now be heard to claim a right better than
that of her grantor, Nieves Cruz. Her obligation to reconvey the land to the appellants is
thus indubitable.
x x x x x x x x x
WHEREFORE, the judgment appealed from is hereby REVERSED in toto, and, in lieu
thereof, another is hereby rendered:
(1) Setting aside and annulling the deed of sale, Exhibit J, executed by plaintiff in favor of
Barbara Lombos Rodriguez;
(2) Declaring defendant-appellee Barbara Lombos Rodriguez divested of title over the
property covered by TCT No. 91135 of the Register of Deeds of Rizal and title thereto
vested in defendants-appellants upon payment of the latter to appellee Rodriguez of the
sum of P28,877.40, representing the balance of the agreed purchase price due on the
property minus P13,000.00 awarded under paragraph (4) within 90 days after this
decision shall have become final, and ordering the Register of Deeds of Rizal to cancel
TCT No. 91135 and issue in lieu thereof a new certificate of title in favor of appellants,
upon payment of corresponding fees;
(3) Ordering plaintiffs and defendant Barbara Lombos Rodriguez to deliver to the
defendants-appellants possession of the property aforementioned; and
(4) Ordering appellees jointly and severally to pay to defendants-appellants the sum of
P5,000.00 as temperate damages, P3,000.00 as moral damages and P5,000.00 as
attorney's fees plus costs. These amounts shall be deducted from the P28,877.40
appellants are required to pay to Rodriguez under paragraph (2) hereof.
This case is before us for the second time. In L-28462, the heirs of Nieves Cruz and the present
petitioner (Barbara Lombos Rodriguez) filed a joint petition for certiorari as an original action
under Rule 65 and, simultaneously, as an appeal under Rule 45. As the former, it sought redress
against the refuse of the respondent Court of Appeals to consider a motion for reconsideration
filed beyond the reglementary period. As the latter, it sought a review of the respondent Court's
findings of fact and conclusions of law. On January 3, 1968 we denied the joint petition; the joint
petition was thereafter amended, and this amended petition we likewise denied on January 26,
1968; on February 20, 1968 we denied the motion for reconsideration filed solely by Rodriguez.
On July 20, 1968, Rodriguez alone filed the present petition for mandamus and certiorari. She
prays for the issuance of a writ of preliminary injunction to restrain the respondents from enforcing
the decision of the Court of Appeals in CA-G.R. 35084-R and from entering into any negotiation
or transaction or otherwise exercising acts of ownership over the parcel of land covered by
transfer certificate of title 91135 issued by the Register of Deeds of Rizal. She also prays that
preliminary injunction issue to restrain the Register of Deeds of Rizal from registering any
documents affecting the subject parcel of land. No injunction, however, was issued by us.
The petition in the present case, L-29264, while again assailing the findings of fact and
conclusions of law made by the respondent Court, adds two new grounds. The first is the
allegation that the land involved in CA-G.R. 35084-R has a value in excess of P200,000. The
petitioner complains that the Court of Appeals should have certified the appeal to us, pursuant to
section 3 of Rule 50 in relation to section 17(5) of the Judiciary Act of 1948,
1
as she had asked
the said Court to do in her supplemental motion of June 14, 1968. The second ground is the claim
that the Court of Appeals gravely abused its discretion in denying her May 14, 1968 motion for
new trial, based on alleged newly discovered evidence.
In their answer, Atanacio Valenzuela, Maximina Victorio and Liberata Santos allege that the
findings of fact made by the Court of Appeals in its decision of October 4, 1967 are substantiated
by the record and the conclusions of law are supported by applicable laws and jurisprudence,
and, moreover, that these findings are no longer open to review inasmuch as the said decision
has become final and executory, the period of appeal provided in Rule 45 having expired.
Atanacio Valenzuela, et al. also maintain that the land in litigation had a value of less than
P200,000, according to the records of the case, when their appeal from the decision of the Court
of First Instance of Rizal in civil case 6901 was perfected; that the petitioner's motion for new trial
in the Court of Appeals was filed out of time; and that the petitioner is estopped from questioning
the jurisdiction of the Court of Appeals in the matter of the value of the land in controversy. Two
grounds for the defense of estoppel are offered by Atanacio Valenzuela, et al. One is that the
petitioner speculated in obtaining a favorable judgment in the Court of Appeals by submitting
herself to the jurisdiction of the said Court and she cannot now therefore be allowed to attack its
jurisdiction when the judgment turned out to be unfavorable. The other is that the petitioner's
laches made possible the sale in good faith by Atanacio Valenzuela, et al., of the land in litigation
to Emilio and Isidro Ramos, in whose names the land is at present registered under transfer
certificate of title 229135 issued on September 25, 1968 by the Register of Deeds of Rizal.
The heirs of Nieves Cruz filed an answer unqualifiedly admitting the basic allegations of the
petition, except as to the value of the land, as to which they are non-committal.
It is our considered view that the petitioner's claim of grave abuse by the respondent Court in
denying her motion for new trial is devoid of merit. It is not disputed that, on the assumption that
the respondent Court had jurisdiction over the appeal, the petitioner had already lost her right to
appeal from the decision of October 4, 1967 when the petition in L-28462 was filed in January
1968. It logically follows that the case had passed the stage for new trial on newly discovered
evidence when the petitioner filed her motion for new trial on May 14, 1968.
Two issues remain, to wit, (1) the value of the land in controversy; and (2) estoppel.
At the time appeal was taken to the Court of Appeals. section 17(5) of the Judiciary Act of 1948,
as amended, provided:
The Supreme Court shall have exclusive jurisdiction to review, revise, reverse modify or affirm on
appeal, certiorari or writ of error, as the law or rules of court may provide, final judgments and
decrees of inferior courts as herein provided, in
x x x x x x x x x
(5) All civil cases in which the value in controversy exceeds two hundred thousand pesos,
exclusive of interests and costs or in which the title or possession of real estate
exceeding in value the sum of two hundred thousand pesos to be ascertained by the oath
of a party to the cause or by other competent evidence, is involved or brought in
question. The Supreme Court shall likewise have exclusive jurisdiction over all appeals in
civil cases, even though the value in controversy, exclusive of interests and costs, is two
hundred thousand pesos or less, when the evidence involved in said cases is the same
as the evidence submitted in an appealed civil case within the exclusive jurisdiction of the
Supreme Court as provided herein.
The petitioner would have us believe that, other than a realtor's sworn statement dated June 14,
1968, which was filed with the respondent Court together with her supplemental motion, there is
nothing in the records that would indicate the value of the litigated parcel. We disagree. The
"Kasunduan" (annex A to the petition) dated December 31, 1958 executed by and between
Nieves Cruz and Atanacio Valenzuela, et al. fixed the value of the land (of an area of 44,634
square meters) at P1.60 per square meter. The decision (annex B) of the Court of First Instance
of Rizal dated August 12, 1964 assessed the value of the land at P3.00 per square meter. The
decision (annex D) dated October 4, 1967 of the respondent Court of Appeals pointed out that the
consideration stated in the deed of sale of the land executed by Nieves Cruz in favor of
Rodriguez, the petitioner herein, is P77,216. Moreover, until June 14, 1968, no party to the cause
questioned the valuation of P3.00 per square meter made by the trial court. The records,
therefore, overwhelmingly refute the petitioner's allegation. They also prove that the value of the
entire parcel of land had been impliedly admitted by the parties as being below P200,000.
Granting arguendo, however, that the value of the land in controversy is in excess of P200,000, to
set aside at this stage all proceedings had before the Court of Appeals in CA-G.R. 35084-R, and
before this Court in L-28462, would violate all norms of justice and equity and contravene public
policy. The appeal from the decision of the Court of First Instance of Rizal was pending before the
respondent Court during the period from 1964 until October 4, 1967, when on the latter date it
was decided in favor of the appellants and against the petitioner herein and the heirs of Nieves
Cruz. Yet, the appellees therein did not raise the issue of jurisdiction. The joint petition in L-28462
afforded the petitioner herein the opportunity to question the jurisdiction of the respondent Court.
Again, the value of the land in controversy, was not questioned by the petitioners, not even in
their amended joint petition. It was not until June 14, 1968 that the petitioner herein filed with the
respondent Court a supplemental motion wherein she raised for the first time the issue of value
and questioned the validity of the final decision of the respondent Court on the jurisdictional
ground that the real estate involved has a value in excess of P200,000. That the petitioner's
present counsel became her counsel only in May, 1968 provides no excuse for the petitioner's
failure to exercise due diligence for over three years to discover that the land has a value that
would oust the respondent Court of jurisdiction. The fact remains that the petitioner had allowed
an unreasonable period of time to lapse before she raised the question of value and jurisdiction,
and only after and because the respondent Court had decided the case against her. The doctrine
of estoppel by laches bars her from now questioning the jurisdiction of the Court of Appeals.
The learned disquisition of Mr. Justice Arsenio P. Dizon, speaking for this Court in Serafin Tijam,
et al. vs. Magdaleno Sibonghanoy, et al. (L-21450, April 15, 1968), explained, in unequivocal
terms, the reasons why, in a case like the present, a losing party cannot be permitted to belatedly
raise the issue of jurisdiction.
A party may be estopped or barred from raising a question in different ways and for
different reasons. Thus we speak of estoppel in pais, of estoppel by deed or by record,
and of estoppel by laches.
Laches, in a general sense, is failure or neglect, for an unreasonable and unexplained
length of time, to do that which, by exercising due diligence, could or should have been
done earlier; it is negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to assert it either has abandoned it or
declined to assert it.
The doctrine of laches or of "stale demands" is based upon grounds of public policy
which requires, for the peace of society, the discouragement of stale claims and, unlike
the statute of limitation is not a mere question of time but is principally a question of the
inequity or unfairness of permitting a right or claim to be enforced or asserted.
It has been held that a party cannot invoke the jurisdiction of a court to secure affirmative
relief against his opponent and, after obtaining or failing to obtain such relief, repudiate or
question that same jurisdiction (Dean vs. Dean, 136 Or. 694, 86 A. L. R. 79). In the case
just cited, by way of explaining the rule, it was further said that the question whether the
court had jurisdiction either of the subject matter of the action or of the parties was not
important in such cases because the party is barred from such conduct not because the
judgment or order of the court is valid and conclusive as an adjudication, but for the
reason that such a practice cannot be tolerated obviously for reasons of public policy.
Furthermore, it has also been held that after voluntarily submitting a cause and
encountering an adverse decision on the merits, it is too late for the loser to question the
jurisdiction or power of the court (Pease vs. Rathbun-Jones, etc., 243 U.S. 273, 61 L. Ed.
715, 37 S. Ct. 283; St. Louis, etc. vs. McBride, 141 U.S. 127, 35 L. Ed. 659). And
in Littleton vs. Burgess, 16 Wyo 58, the Court said that it is not right for a party who has
affirmed and invoked the jurisdiction of a court in a particular matter to secure an
affirmative relief, to afterwards deny that same jurisdiction to escape a penalty.
Upon this same principle is what We said in the three cases mentioned in the resolution
of the Court of Appeals of May 20, 1963 (supra) to the effect that we frown upon the
"undesirable practice" of a party submitting his case for decision and then accepting the
judgment, only if favorable, and attacking it for lack of jurisdiction, when adverse as
well as in Pindagan etc. vs. Dans, et al., G.R. L-14591, September 26,
1962; Montelibano, et al. vs. Bacolod-Murcia Milling Co., Inc., G.R. L-15092; Young Men
Labor Union, etc. vs. The Court of Industrial Relations, et al., G.R. No.
L-20307, Feb. 26, 1965; and Mejia vs. Lucas, 100 Phil. p. 277.
We do not here rule that where the pleadings or other documents in the records of a case state a
value of a real estate in controversy, a party to the cause may not show that the true value
thereof is more or is less than that stated in the records. Section 17(5) of the Judiciary Act of
1948 precisely allows a party to submit a sworn statement of such higher or lower value. This is
not to say, of course, that the court is bound by a party's sworn statement, for where more than
one party submit materially differing statements of value, or where a party's sworn statement
conflicts with other competent evidence, the true value is to be determined by the trial court as an
issue of fact before it.
The time when the issue of the value of a real estate in controversy is to be resolved is prior to, or
simultaneously with, the approval of the record on appeal and appeal bond, for it is upon the
perfection of the appeal that the appellate court acquires jurisdiction over the case (Rule 41,
section 9). It is at this time that a party to the cause, be he the intended appellant or the intended
appellee, must raise the issue of value before the trial court, for said court to allow appeal
involving a question of fact either to this Court or to the Court of Appeals, depending on its finding
on the value of the realty. Failure to raise this issue before the trial court amounts to a submission
of the issue solely on the basis of the pleadings and evidence a quo and is equivalent to a waiver
of the right to present the statement under oath or to adduce the other competent evidence
referred to in section 17(b) of the Judiciary Act of 1948.
A contrary rule would be disastrous. For one thing, to allow a party to present proof of value
before an appellate court would be to convert the said court to a trial court. For another thing, the
value of real estate may change between the perfection of an appeal and the receipt of the record
or the payment of the appellate court docket fee; hence, it is best, for stability, to have the value
determined at the precise instant when the trial court must decide to which appellate court the
appeal should be made and not at some uncertain time thereafter. Worse yet, to permit a party to
prove before the Court of Appeals or before us, after a decision on the merits has been rendered,
that a real estate in controversy exceeds, or does not exceed P200,000 in value, would be to
encourage speculation by litigants; for, a losing party can be expected to raise the issue of value
of the realty to show that it is in excess of P200,000 if the unfavorable judgment is rendered by
the Court of Appeals, or to show that it does not exceed P200,000 if the unfavorable judgment is
rendered by this Court, in an attempt to litigate the merits of the case all over again.
2

In the case at bar, the records as of the perfection of the appeal on August 12, 1964 show
that the litigated real estate had a value not in excess of P200,000. Conformably with the
Judiciary Act of 1948, therefore, the appeal from the decision of the Court of First Instance of
Rizal in civil case 6901 was within the jurisdiction of the Court of Appeals.
Other issues, both of fact and of law, are raised in the pleadings. Considering our conclusion that
the respondent Court had jurisdiction over the appeal, it is not necessary to discuss, much less
resolve, any of those other issues. However, because the petitioner and the heirs of Nieves Cruz
have hammered on the twin issues of the existence of an oral contract of sale and of the efficacy
of an oral novatory contract of sale, a brief discussion of these issues would not be amiss.
The agency agreement of December 31, 1958 is not impugned by any of the parties. Nieves
Cruz, however, asserted that the agency remained in force until she rescinded it on September
16, 1961 by notice to that effect to Atanacio Valenzuela, et al., tendering with the said notice the
return, in check, of the sum of P48,338.60 which she had received from Atanacio Valenzuela, et
al. The defendants, upon the other hand, contend that the agency agreement was novated by a
contract of sale in their favor and that the balance of the purchase price was not due until after
the 1962 harvest. Rodriguez, when impleaded by Atanacio Valenzuela, et al., denied that she
was a buyer in bad faith from Nieves Cruz.
The parties and the lower courts are agreed that Nieves Cruz had received P20,000 from
Atanacio Valenzuela, et al., by January 5, 1959 and that the payment of this total sum was in
accordance with the agency agreement. The parties and the lower courts, however, are at
variance on the basis or reason for the subsequent payments. The petitioner herein, the heirs of
Nieves Cruz and the Court of First Instance of Rizal take the position that the payments after
January 5, 1959 were received by Nieves Cruz as partial or installment payments of the purchase
price on the representations of Atanacio Valenzuela, et al., that they had a buyer for the property
from whom these payments came, all pursuant to the agency agreement. The respondents
Atanacio Valenzuela, et al., on the other hand, assert that those amounts were paid by them, as
disclosed buyers, to Nieves Cruz and her children, pursuant to a novatory verbal contract of sale
entered into with Nieves Cruz, subsequent to the agency agreement and prior to the issuance of
the decree of registration of July 15, 1960.
It is thus clear that the decisive issues are (a) whether or not Nieves Cruz did agree to sell to
Atanacio Valenzuela, et al., the litigated parcel of land sometime after January 5, 1959, and (b)
whether or not the said agreement is enforceable or can be proved under the law. The fact that
Atanacio Valenzuela, et al. were agents of Nieves Cruz under the agency agreement of
December 31, 1958 is not material, for if it is true that Nieves Cruz did agree to sell to her agents
the real estate subject of the agency, her consent took the transaction out of the prohibition
contained in article 1491(2) of the Civil Code. Neither are articles 1874 and 1878(5) and (12) of
the Civil Code relevant, for they refer to sales made by an agent for a principal and not to sales
made by the owner personally to another, whether that other be acting personally or through a
representative.
Was there a novatory oral contract to sell entered into by Nieves in favor of Atanacio Valenzuela,
et al.? In resolving this question, the respondent Court pointed to significant facts and
circumstances sustaining an affirmative answer.
Cited by the Court of Appeals is the testimony of Andres Nery, a successor-in-interest of Nieves
Cruz and a substitute plaintiff upon Nieves Cruz' death, to the effect that after they had gone to
the defendants several times, they were told that the buyer was Salud de Leon. This witness also
said, according to the transcript cited by the respondent Court, that they were paid little by little
and had been paid a grand total of P48,000. The respondent Court likewise adverted to the
receipts (exhibits L-12 to L-22, exhibit L-24, exhibit L-26, and exhibits 12, 12-a to 12-z-1) signed
by Nieves Cruz and/or her children and concluded that on the faces of these receipts it is clear
that the amounts therein stated were in payment by Atanacio Valenzuela, et al. of the land which
the recipients had sold to them ("ipinagbile naming lupa sa kanila"). Of incalculable significance is
the notation in the original certificate of title and in the transfer certificate of title in the name of
Nieves Cruz which, in unambiguous language, recorded Nieves Cruz' sale of her interest in the
land to Atanacio Valenzuela, et al. If that notation were inaccurate or false, Nieves Cruz would not
have remained unprotesting for over a year after the entry of the decree of registration in July,
1960, nor would she and her children have received 13 installment payments totalling P19,963
during the period from September 9, 1960 to September 3, 1961.
Salud de Leon, it should be borne in mind, is the husband of Rogaciano F. de Leon and the
daughter of the defendant Liberata Santos. It should likewise be remembered that, as remarked
by the trial court, Salud de Leon testified that it was she who had the oral agreement with Nieves
Cruz for the purchase by Atanacio Valenzuela, et al. of the litigated property and, as found by the
respondent Court, Salud de Leon was the representative of Atanacio Valenzuela, et al., not of
Nieves Cruz.
We conclude, therefore, that there is substantial evidence in the record sustaining the finding of
the respondent Court that the parties to the agency agreement subsequently entered into a new
and different contract by which the landowner, Nieves Cruz, verbally agreed to sell her interest in
the litigated real estate to Atanacio Valenzuela, et al.
A legion of receipts there are of payments of the purchase price signed by Nieves Cruz. True,
these receipts do not state all the basic elements of a contract of sale, for they do not expressly
identify the object nor fix a price or the manner of fixing the price. The parties, however, are
agreed at least the plaintiff has not questioned the defendants' claim to this effect that the
object of the sale referred to in the receipts is Nieves Cruz' share in the land she co-owned with
her brother Emilio and that the price therefor is P1.60 per square meter. At all events, by failing to
object to the presentation of oral evidence to prove the sale and by accepting from the
defendants a total of P27,198.60 after January 5, 1959, the plaintiff thereby ratified the oral
contract, conformably with article 1405 of the Civil Code, and removed the partly executed
agreement from the operation of the Statute of Frauds. And, finally, the sale was established and
recognized in the land registration proceedings wherein the land court, in its decision,
categorically stated:
[T]he applicant Nieves Cruz has likewise sold her one-half (!) undivided share to the
spouses Atanacio Valenzuela and Maximina Victorio and Liberata Santos from whom she
had received partial payment thereof in the sum of P22,000.00.
The pertinent certificates of title bear the annotation of the aforesaid right of Atanacio Valenzuela,
et al. The final decision of the land court to the effect that Nieves Cruz had sold her undivided
share to Atanacio Valenzuela, et al., and had received a partial payment of P22,000 is now
beyond judicial review, and, because a land registration case is a proceeding in rem, binds even
Rodriguez.
Rodriguez nevertheless insist that despite the rescission by the Court of Appeals of her purchase
from Nieves Cruz, the said respondent Court did not order Nieves Cruz to return the P77,216
which she had received from her. While mutual constitution follows rescission of a contract
(article 1385, Civil Code), the respondent Court should not be blamed for omitting to order Nieves
Cruz to restore what she had received from the petitioner on account of the rescinded contract of
sale. In the first place, in the pleadings filed before the trial court, Rodriguez made no claim for
restitution against Nieves Cruz or her heirs. In the second place, Nieves Cruz died in the course
of the proceedings below and was substituted by her heirs who, necessarily, can be held
individually liable for restitution only to the extent that they inherited from her.
Nevertheless, inasmuch as rescission of the contract between Nieves Cruz and the petitioner
herein was decreed by the respondent Court, the latter should be entitled to restitution as a
matter of law. It is of no moment that herein petitioner did not file any cross-claim for restitution
against the plaintiff, for her answer was directed to the defendants' claim which was in the nature
of a third-party complaint. She was neither a co-defendant nor a co-third-party defendant with
Nieves Cruz; nor were Nieves Cruz and the herein petitioner opposing parties a quo, for they
joined in maintaining the validity of their contract. Section 4 of Rule 9, therefore, has no
application to the petitioner's right to restitution.
We declare, consequently, that the estate of Nieves Cruz is liable to Barbara Lombos Rodriguez
for the return to the latter of the sum of P77,216, less the amount which Atanacio Valenzuela, et
al. had deposited with the trial court in accordance with the decision of respondent Court. We
cannot order the heirs of Nieves Cruz to make the refund. As we observed above, these heirs are
liable for restitution only to the extent of their individual inheritance from Nieves Cruz. Other
actions or proceedings have to be commenced to determine the liability accruing to each of the
heirs of Nieves Cruz.
ACCORDINGLY, the present petition for mandamus and certiorari is denied, at petitioner's cost.
1wph1.t
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Capistrano, Teehankee and Barredo, JJ.,
concur.
Fernando, J., took no part.
Reyes, J.B.L., J., is on leave.
5.
G.R. No. 23717 September 28, 1925
DOMINGO ALMIROL AND MARIA CARIO, applicants-appellants,
vs.
RAFAEL MONTSERRAT, guardian of the minors Emilio Rivera y Ricanor and Dominga
Rivera y Ricanor,opponent-appellee.
Turner and Rheberg for appellants.
The appellee in his own behalf.
ROMUALDEZ, J.:
This appeal deals with the second parcel sought to be registered in the above entitled
proceeding, the registration having been denied by the Court of First Instance of Pangasinan,
except as to one-half of portion "a" of said parcel, which was ordered registered in the name of
applicants. The latter appeal from the judgment and assign various errors thereto.
By agreement of the parties, the following facts appear in the record: That, of the parcel in
question, portion "b" was acquired by Bartolome Ricanor in the year 1874 by occupancy; that
portion "a" of said parcel was acquired by purchase from Josefa Bugayong, widow of Pedro Allas,
on April 17, 1907, by the spouses Bartolome Ricanor and Maria Almirol, who were married in the
year 1881; that these spouses had a daughter by the name of Leonora Ricanor who was married
with Estanislao Rivera, the latter having died on August 30, 1910; that Bartolome Ricanor died on
July 6, 1912, and his daughter Leonora in turn died on November 29 of the same year 1912,
leaving two children, Emilio Rivera Ricanor and Dominga Ricanor.
These two grandchildren of Bartolome Ricanor are the herein opponents and appellees.
The applicants and appellants alleged, and presented evidence to the effect, that they are and
have been in possession of the parcel in question since the year 1912, when Bartolome Ricanor,
before his death, and his wife Maria Almirol delivered to them said land pursuant to a verbal
contract of sale for the price of P/1,500 payable in installments, of which the applicants had then
paid to the sellers P/500 on account, and the latter delivered to them the documents of the lands
Exhibits F and G, which are possessory informations, the first, that is, Exhibit F, referring to
portion "b" of the parcel in question, and issued in the name of Bartolome Ricanor, and the
second, namely, Exhibit G, to portion "a" of the same parcel, in the name of Pedro Allas, his
widow having sold the land to the spouses Bartolome Ricanor and Maria Almirol.
The applicants have also introduced evidence to the effect that since then their possession has
been, and is up to the present time, under claim of ownership, exclusive and continuous; that
upon the death of Bartolome Ricanor, his widow demanded of them the payment of the unpaid
balance of the price, and as they had no money to make such payment, it was agreed between
them and said widow to sell the land to a Chinaman by the name of Uy Quico, with the right of
repurchase reserved to the applicants (Exhibits J, K, and L); that said agreement was carried into
effect and after the land was repurchased by said applicants, Maria Almirol executed two deeds
of sale in their favor (Exhibits H and I), one for the portion "a", and the other for the portion "b", of
the parcel in question.
From the evidence it finally appears that Bartolome Ricanor and Maria Almirol and, before them,
their predecessors in interest, had been in possession of said land long before the year 1894 as
owners, publicly, peacefully and continuously, until said possession and title were delivered to the
herein applicants in the year 1912.
So that taking into account the possession of the applicants, together with the possession of
Bartolome Ricanor and his wife, it clearly appears that the applicants are entitled to have their title
over said parcel registered, as applied for in this proceeding.
But the trial court, applying section 335 of the Code of Civil Procedure, held that the applicants
could not invoke either their possession of the land or that of their predecessors in interest, for the
reason that the transfer made in their favor by Bartolome Ricanor and his wife was verbal; and
that for this reason the possession of the former could not prejudice the opponents, both of whom
were minors at the time of the trial of this case, inasmuch as the period of prescription could not
run against them while they were under age.
But section 335 of the Code of Civil Procedure upon which is founded the denial of the application
for these appellants makes only ineffective the action to enforce performance of the contracts
therein enumerated, but does not declare them absolutely void and of no legal effect.
Said section 335 of the Code of Civil Procedure is not applicable where, as in the instant case,
the verbal contract is adduced, not for the purpose of enforcing performance thereof, but as the
basis of the lawful possession of the applicants entitling them to have the land thereby sold
registered in their name.
Even if this were a case for the specific performance of such a verbal contract of sale, still the
theory might be invoked that said section 335 of our Code of Civil Procedure refers to executory
rather than executed contracts; and the one before us is a contract partially executed since a part
of the price was paid by the applicants in the year 1912 to the spouses Bartolome Ricanor and
Maria Almirol, and pursuant to said contract said spouses delivered then the land to the herein
applicants, as well as the documents pertaining thereto.
Consequently the evidence introduced in this case relative to the sale in question should not be
rejected, but must be taken into account, and is considered by this court in the decision of this
case.
Giving said evidence its worth, it appears that the applicants had the right to have the whole land
in question registered in their name.
For the foregoing, the judgment appealed from is reversed so far as it is in conflict with this
opinion, and it is ordered that the whole of the second parcel in question, with the improvements
thereon, be adjudicated to and registered in the name of the conjugal partnership of Domingo
Almirol and Maria Cario. Without special finding as to costs, it is so ordered.
Avancea, C.J., Johnson, Street, Malcolm, Villamor, Ostrand, Johns, and Villa-Real, JJ. concur.

1409-1422

1.
G.R. No. L-65594 July 9, 1986
MAHARLIKA PUBLISHING CORPORATION, ANGELA CALICA, ADOLFO CALICA and the
HEIRS OF THE LATE PIO CALICA, petitioners,
vs.
SPOUSES LUZ R. TAGLE and EDILBERTO TAGLE and the GOVERNMENT SERVICE
INSURANCE SYSTEM and the HONORABLE INTERMEDIATE APPELLATE
COURT, respondents.

GUTIERREZ, JR., J.:
The Government Service Insurance System (GSIS) was the registered owner of a parcel of land
consisting of 1,373 square meters situated in the district of Paco and covered by Transfer
Certificate of Title No. 5986 of the Registry of Deeds of Manila.
On June 4, 1963, the GSIS entered into a conditional contract to sell the parcel of land to
petitioner Maharlika Publishing Corporation (Maharlika for short) together with the building
thereon as well as the printing machinery and equipment therein. Among the conditions of the
sale are that the petitioner shall pay to the GSIS monthly installments of P969.94 until the total
purchase price shall have been fully paid and that upon the failure of petitioner to pay any
monthly installment within ninety (90) days from due date, the contract shall be deemed
automatically cancelled.
After Maharlika failed to pay the installments for several months, the GSIS, on June 7, 1966,
notified Maharlika in writing of its arrearages and warned Maharlika that the conditions of the
contract would be enforced should Maharlika fail to settle its account within fifteen (15) days from
notice. Because of Maharlika's failure to settle the unpaid accounts, the GSIS notified Maharlika
in writing on June 26, 1967 that the conditional contract of sale was annulled and cancelled and
required Maharlika to sign a lease contract. Maharlika refused to vacate the premises and to sign
the lease contract.
Sometime later, the GSIS published an invitation to bid several acquired properties, among which
was the property in question, to be held at the Office of the General Manager, second floor, GSIS
Building, Arroceros Street, Manila, from 9:00 a.m. to 3:00 p.m. on February 12, 1971.
Meanwhile, on February 11, 1971, or one day before the scheduled public bidding, Maharlika
represented by its president Adolfo Calica addressed to GSIS a letter-proposal to repurchase
their foreclosed properties proposing that they be allowed to pay P11,000.00 representing ten
percent (10%) of their total account; that they be allowed to pay P18,300.00 as balance to
complete the twenty-five percent (25%) of their total arrearages( P117,175.00) not later than
February 28, 1971 and the remaining seventy-five percent (75%) to be paid in twenty four (24)
months.
This letter-proposal was discussed by Adolfo Calica with GSIS Board Vice-Chairman Leonilo
Ocampo, who wrote a note to the General Manager Roman Cruz, Jr., the last paragraph of which
reads as follows:
It sounds fair and reasonable subject to your wise judgment, as usual. (Exhibit 4,
Maharlika)
Said letter-proposal and Ocampo's note were taken by Calica to General Manager Cruz, Jr., who,
in turn, wrote on the face of Exhibit 4-Maharlika a note to one Mr. Ibaez which reads: "Hold
Bidding. Discuss with me." The letter-proposal together with two (2) checks amounting to
P11,000.00 were submitted to the office of General Manager Cruz, Jr. and were received by his
Secretary.
On February 12, 1971, however, the public bidding of this particular property was held as
scheduled prompting Adolfo Calica to submit his bid to the Bidding Committee with a deposit of
P11,000.00 represented by the same two checks submitted to General Manager Cruz, Jr.,
together with his letter-proposal. His bid proposal reads: "I bid to match the highest bidder."
The bidding committee rejected Maharlika's bid as an imperfect bid and recommended
acceptance of private respondent Luz Tagle's bid of P130,000.00 with a ten percent (10%)
deposit of P13,000.00.
On February 19, 1971, the GSIS addressed a letter to Adolfo Calica informing him of the non-
acceptance of his bid and returning his two checks.
After approval and confirmation of the sale of the subject property to Luz Tagle on April 20, 1971,
the GSIS executed a Deed of Conditional Sale in favor of the Tagles on June 8, 1971.
Due to the refusal of petitioners to surrender the possession of the property in question,
respondent spouses Luz R. Tagle and Edilberto Tagle filed a case for Recovery of Possession
with Damages with the Court of First Instance of Manila which rendered the following decision on
May 15, 1974:"
IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court hereby renders
judgment:
(a) declaring the letter-proposal (Exh.. 3-Maharlika) ineffective and without any
binding effect, being imperfect to create any contractual relation between GSIS
and defendants Maharlika and Adolfo Calica;
(b) declaring plaintiffs and (sic) entitled to the possession of the properties in
question and directing, therefore, defendants Maharlika and Adolfo Calica, or any
person or persons holding or possessing the properties in their behalf, to
forthwith vacate the properties in question and to surrender the same to the
plaintiffs;"
(c) dismissing the complaint as against defendants 'Heirs of the deceased Pio
Calica' (except Angela Calica) it appearing that they were not properly
summoned and represented in the instant suit:"
(d) directing the defendants Maharlika, Adolfo Calica and Angela Calica, to pay
jointly and severally the plaintiffs a monthly rental of the properties in question in
the sum of P976.00 a month commencing 12 February 1971, until the said
properties are vacated by said defendants, with legal interest of all sums due
from 12 Feb. 1971 up to the rendition of this judgment in this instant suit, such
interest to commence from the filing of the complaint until the same is fully paid;
and that such monthly rentals commencing from the date of this judgment, shall
also earn interest at the legal rate unless paid within the first ten days of the
current month for the rental of the preceding month;"
(e) dismissing the counterclaim of defendants Maharlika and the Calicas against
plaintiffs;
(f) dismissing the cross-claim of defendants Maharlika and the Calicos against
defendant GSIS;"
(g) dismissing all other claims which the parties may have against each other;
and
(h) directing defendants Maharlika, Adolfo Calica and Angela Calica to pay the
costs of this suit.
After a motion to set aside judgment and grant a new trial was denied by the trial court for lack of
merit, the case was brought on appeal to the former Court of Appeals on April 8, 1976. On March
2, 1983, the Intermediate Appellate Court affirmed the decision of the trial court, stating as
follows:
xxx xxx xxx
The mere offer to repurchase of the subject property and the deposit of the
amount of P11,000.00 by the defendants on February 11, 1971, does not have
the effect of reviving the conditional deed of sale (Exhibit 4-GSIS, Ibid, p. 29)
executed by the GSIS and the defendants. To revive the said contract, and for
the defendants to be deemed to have repurchased the subject property, there
should have been payment in favor of the GSIS of all the installments due and
interests thereon in the total amount of P117,175.00 as of February 11, 1971
But the defendants insist that the notations of Leonilo M. Ocampo, Vice-
Chairman of the GSIS Board of Trustees, to GSIS General Manager Roman
Cruz, Jr. (Exhibits 4-A and 4-B Maharlika, Ibid, p. 76) as well as the notation of
GSIS General Manager Roman Cruz, Jr.' to hold bidding. Discuss with me'
(Exhibit 4-C Maharlika, Ibid, p. 76) means that the GSIS had accepted
defendants' offer and had revived the conditional contract of sale dated June 4,
1963.
This interpretation is far-fetched. The notations referred to by the defendants do
not show acceptance of defendants' offer to repurchase the subject property. In
fact, the defendants themselves were aware that their offer was not accepted at
all because they submitted to and participated in the bidding of the subject
property on February 12,1971 (Exhibits K, K-1, 6, 6-A, Ibid, pp. 16-34), using its
letter- proposal as deposit for its bid. But defendants' bid was rejected because it
was imperfect and not accompanied with a deposit of 10% of the highest bid
(Exhibits B-1, 7 GSIS, 7-A Maharlika, Ibid, pp. 5, 35), and that defendants' bid did
not contain a specific bid price proposal (Exhibit 7 GSIS, Ibid, p. 35).
The consequent auction sale of the property on February 12, 1971 and execution
of the conditional deed of sale in favor of the plaintiffs (Exhibit A, Ibid, p. 1) is
valid. The plaintiffs are entitled to the possession of the subject property.
xxx xxx xxx
A motion for reconsideration and/or new trial was filed by petitioners. The motion was denied by
the respondent Appellate Court.
Hence, this petition for review on certiorari filed on December 16,1983.
On January 9, 1984, we resolved to deny in a minute resolution, the petition for lack of merit. A
timely motion for reconsideration was filed by the petitioners which contained the following
reasons to warrant review of the case:
It is apparent that petitioners will suffer serious injustice, consisting in the loss of
the subject property, by reason of the failure of respondent Court to decide
questions of substance involved herein in a way not in accord with law and the
applicable decisions of this Honorable Court, such questions being the following:
(1) Whether or not respondent Edilberto Tagle's being a GSIS officer at the time
of the sale by the GSIS of the subject property to his wife should be allowed to be
introduced as newly discovered evidence or at any rate received in the interest of
justice;"
(2) Whether or not respondent Court acted with grave abuse of discretion in
ignoring the irregular appearance of respondent Luz Tagle's bid and the
inference of fraud flowing therefrom in the context of surrounding circumstances;
(3) Whether or not the auction sale in question is void for having been conducted
despite the directive of the GSIS General Manager to suspend the same in virtue
of petitioners' offer to repurchase the subject property and their payment of
P11,000.00 in checks as earnest money which he accepted.
Significantly, on September 21, 1984, the GSIS filed a Supplemental Memorandum submitting for
resolution of this Court the matter of whether the respondent spouses Luz and Edilberto Tagle
can still enforce their claim as winning bidders considering the fact that they have so far made
only two payments to the GSIS amounting to P32,500.00 in violation of the terms and conditions
of the conditional sale executed in their favor and which provides for its automatic cancellation in
such case, or whether the petitioners can still repurchase the property in question as original
owners thereof.
We find the petitioners' motion for reconsideration impressed with merit.
The certification secured by the petitioners from GSIS on April 28, 1983 shows that Edilberto
Tagle was Chief, Retirement Division, GSIS, from 1970 to 1978. He worked for the GSIS since
1952. Strictly speaking, the evidence of Mr. Tagle's being a GSIS official when his wife bid for the
disputed property is not newly discovered evidence. However, we cannot simply ignore the fact
that on February 12, 1971 when Adolfo Calica was desperately trying to retrieve the property
foreclosed against him, after receiving assurances from the highest GSIS officials that his letter-
proposal would be accepted and after the sale at public auction of the property was, in fact,
ordered to be stopped, the wife of a GSIS official would be allowed to bid for that property and
would actually win in the bidding.
As stated by the petitioners, this important factor implicit in good government, should have been
considered in the interest of justice. It was incumbent under the law for GSIS to have rejected the
bid of the wife of a GSIS official and to have refused to enter into the deed of conditional sale with
the respondents Tagle.
The petitioners bank on the allegation that the indirect participation of Edilberto Tagle in the public
bidding creates a "conflict of interests situation" which invalidates the aforesaid transaction under
the precept laid down in Article 1409 paragraph (1) of the Civil Code making his participation void
for being contrary to morals, good customs, and public policy.
The Supreme Court has ample authority to go beyond the pleadings when in the interest of
justice and the promotion of public policy there is a need to make its own finding to support its
conclusions. In this particular case, there is absolutely no doubt that Mr. Edilberto Tagle was a
GSIS Division Chief when his wife bid for the property being sold by GSIS. The only issue is
whether or not to consider this fact because it surfaced only after trial proper.
We declare it to be a policy of the law that public officers who hold positions of trust may not bid
directly or indirectly to acquire prop properties foreclosed by their offices and sold at public
auction.
Article XIII, Section 1 of our Constitution states that:
Public office is a public trust. Public officers and employees shall serve with the
highest degree of responsibility, integrity, loyalty and efficiency, and shall remain
accountable to the people.
We stated in Ancheta vs. Hilario (96 SCRA 62);
xxx xxx xxx
...A public servant must exhibit at all times the highest sense of honesty and integrity. ...
Under Article 1491 of the Civil Code the following persons cannot acquire by purchase, even at a
public or judicial auction, either in person or through the mediation of another:
(1) The guardian, the property of the person or persons who may be under his
guardianship;
(2) Agents, the property whose administration or sale may have been intrusted to
them, unless the consent of the principal has been given;
(3) Executors and administrators, the property of the estate under administration;
(4) Public officers and employees, the property of the State or of any subdivisions
thereof, or of any government owned or controlled corporation, or institution, the
administration of which has been intrusted to them; this provision shall apply to
judges and government experts who, in any manner whatsoever, take part in the
sale;
(5) Justices, judges, prosecuting attorneys, clerk of superior and inferior courts,
and other officers and employees connected with the administration of justice,
the property and rights in litigation or levied upon an execution before the court
within whose jurisdiction or territory they exercise their respective functions; this
prohibition includes the act of acquiring by assignment and shall apply to
lawyers, with respect to the property and rights which may be the object of any
litigation in which they may take part by virtue of their profession;
(6) Any others specially disqualified by law.
In so providing, the Code tends to prevent fraud, or more precisely, tends not to give occasion for
fraud, which is what can and must be done (Francisco, Sales, p. 111). We, therefore, reject the
contention of respondents that the fact that Edilberto Tagle was, at the time of the public bidding,
a GSIS official, will not alter or change the outcome of the case.
A Division Chief of the GSIS is not an ordinary employee without influence or authority. The mere
fact that he exercises ample authority with respect to a particular activity, i.e., retirement, shows
that his influence cannot be lightly regarded.
The point is that he is a public officer and his wife acts for and in his name in any transaction with
the GSIS. If he is allowed to participate in the public bidding of properties foreclosed or
confiscated by the GSIS, there will always be the suspicion among other bidders and the general
public that the insider official had access to information and connections with his fellow GSIS
officials as to allow him to eventually acquire the property. It is precisely the need to forestall such
suspicions and to restore confidence in the public service that the Civil Code now declares such
transactions to be void from the beginning and not merely voidable (Rubias vs. Batiller, 51 SCRA
120). The reasons are grounded on public order and public policy. We do not comment on the
motives of the private respondents or the officers supervising the bidding when they entered into
the contract of sale. Suffice it to say that it fags under the prohibited transactions under Article
1491 of the Civil Code and, therefore, void under Article 1409.
In the case of Garciano vs. Oyao (102 SCRA 195), this Court held:
xxx xxx xxx
...We need not exaggerate the importance of being absolutely free from any
suspicion which may unnecessarily erode the faith and confidence of the People
in their government. As the Constitution categorically declared: 'Public office is a
public trust. Public officers and employees shall serve with the highest degree of
responsibility, integrity, loyalty and efficiency, and shall remain accountable to the
people' (Art. XIII, Sec. 1, Constitution).
xxx xxx xxx
Respondent Wilfredo Oyao, should avoid so far as reasonably possible a
situation which would normally tend to arouse any reasonable suspicion that he
is utilizing his official position for personal gain or advantage to the prejudice of
party litigants or the public in general. In the language of then Justice, now Chief
Justice Enrique M. Fernando in the case of Pineda vs. Claudio (28 SCRA 34,
54): 'There may be occasion then where the needs of the collectivity that is the
government may collide with his private interest as an individual.
In Mclain vs. Miller County (23 SW 2d. 2-4; 255) the Court ruled that:
As the efficiency of the public service is a matter of vital concern to the public, it
is not surprising that agreements tending to injure such service should be
regarded as being contrary to public policy. It is not necessary that actual fraud
should be shown, for a contract which tends to the injury of the public service is
void, although the parties entered into it honestly, and proceeded under it in good
faith. The courts do not inquire into the motives of the parties in the particular
case to ascertain whether they were corrupt or not, but stop when it is
ascertained that the contract is one which is opposed to public policy. Nor is it
necessary to show that any evil was in fact, done by or through the contract. The
purpose of the rule is to prevent persons from assuming a position where selfish
motives may impel them to sacrifice the public good to private benefit.
There is no need, therefore, to pass upon the issue of irregularity in the appearance of the private
respondents' bid and the alleged inference of fraud flowing therefrom.
We reiterate that assuming the transaction to be fair and not tainted with irregularity, it is still
looked upon with disfavor because it places the officer in a position which might become
antagonistic to his public duty.
There are other grounds which contain us to grant this petition.
We now come to the issue whether or not there was a repurchase of the property in question
from the GSIS effected by the petitioners the day before the public bidding.
In Article 1475 of the Civil Code, we find that "the contract of sale is perfected at the moment
there is a meeting of minds upon the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the law
governing the form of contracts. "
This Court in the case of Central Bank of the Philippines vs. Court of Appeals (63 SCRA 431)
ruled on the perfection of government contracts in the following manner:
We are not persuaded that petitioner's posture conforms with law and equity.
According to Paragraph IB 114.1 of the Instructions to Bidders, Ablaza was
'required to appear in the office of the Owner (the Bank) in person, or, if a firm or
corporation, a duly authorized representative (thereof )and to execute the
contract within five (5) days after notice that the contract has been awarded to
him. Failure or neglect to do so shall constitute a breach of agreement effected
by the acceptance of the Proposal. There can be no other meaning of this
provision than that the Bank's acceptance of the bid of respondent Ablaza
effected an actionable agreement between them. We cannot read it in the
unilateral sense suggested by petitioner that it bound only the contractor, without
any corresponding responsibility or obligation at all on the part of the Bank. An
agreement presupposed a meeting of minds and when that point is reached in
the negotiations between two parties intending to enter into a contract, the
purported contract is deemed perfected and none of them may thereafter
disengage himself therefrom without being liable to the other in an action for
specific performance. "
In American Jurisprudence, 2d., Section 73 (pp. 186-187), we read:
The principle is fundamental that a party cannot be held to have contracted if
there was no assent, and this is so both as to express contracts and contracts
implied in fact. There must be mutual assent or a meeting of minds in all
essential elements or terms in order to form a binding contract. However,
ordinarily no more is meant by this than an expression or manifestation of mutual
assent, as an objective thing, is necessary, and that is generally deemed
sufficient in the formation of a contract ... In other words, appropriate conduct by
the parties may be sufficient to establish an agreement, and there may be
instances where interchanged correspondence does not disclose the exact point
at which the deal was closed, but the actions of the parties may indicate that a
binding obligation has been undertaken.
It is undisputed that when the letter-proposal of petitioners was presented to GSIS General
Manager Roman Cruz, Jr., he wrote on the face of such letter the words "Hold Bidding. Discuss
with me." These instructions were addressed to one Mr. Ibaez who was in-charge of public
bidding. Thereafter, a deposit of P11,000.00 in checks was accepted by the Secretary of Mr.
Roman Cruz, Jr. In the light of these circumstances an inference may be made that General
Manager Cruz, Jr. had already accepted the petitioners' offer of repurchase or at the very least
had led them to understand that he had arrived at a decision to accept it.
It should also be noted that there is no serious denial as to General Manager Cruz, Jr.'s capacity
to enter into binding contractual obligations for GSIS without the prior approval of the Board of
Trustees.
On the other hand, the letter of endorsement made by the GSIS Board Vice-Chairman Leonilo
Ocampo which states ...subject to your wise judgment, as usual leads one to conclude that it has
been the practice of GSIS to permit the General Manager to do acts within the scope of his
apparent authority.
In the case of Francisco vs. Government Service Insurance System (7 SCRA 577), we held that:
xxx xxx xxx
... Corporate transactions would speedily come to a standstill were every person
dealing with a corporation held duty-bound to disbelieve every act of its
responsible officers, no matter how regular they should appear on their face. This
Court has observed in Ramirez vs. Orientalist Co., 38 Phil. 634, 654-655, that
In passing upon the liability of a corporation in cases of this kind it is always well
to keep in mind the situation as it presents itself to the third party with whom the
contract is made. Naturally he can have little or no information as to what occurs
in corporate meetings; and he must necessarily rely upon the external
manifestation of corporate consent. The integrity of commercial transactions can
only be maintained by holding the corporation strictly to the liability fixed upon it
by its agents in accordance with law; and we would be sorry to announce a
doctrine which would permit the property of a man in the city of Paris to be
whisked out of his hands and carried into a remote quarter of the earth without
recourse against the corporation whose name and authority had been used in the
manner disclosed in this case. As already observed, it is familiar doctrine that if a
corporation knowingly permits one of its officers, or any other agent, to do acts
within the scope of an apparent authority, and thus holds him out to the public as
possessing power to do those acts, the corporation will, as against any one who
has in good faith dealt with the corporation through such agent, be estopped from
denying his authority; and where it is said if the corporation permits' this means
the same as 'if the thing is permitted by the directing power of the corporation.
We note that the petitioners are not complete strangers entering into a contract with respondent
GSIS for the first time. There was an earlier contract to sell the same properties to the petitioners.
That contract was perfected and there had been partial compliance with its terms. The transaction
now under question in this case merely referred to the curing of certain defects which led to the
cancellation of the earlier contract by GSIS. Under the peculiar circumstances of this case,
therefore, the acceptance of the petitioners' letter-proposal by Mr. Roman Cruz, Jr., the person
with authority to do so, and his order to his subordinates to stop the bidding so that they could
first discuss the matter with him, created an agreement of binding nature with the petitioners.
WHEREFORE, the decision and resolution of the Intermediate Appellate Court subject of the
instant petition for review on certiorari are hereby SET ASIDE. The conditional sale entered into
between public respondent GSIS and private respondents Luz and Edilberto Tagle is declared
NULL and VOID for being contrary to public policy. The prayer of petitioners for the repurchase of
the subject property in an amount equal to the amount offered by private respondents and to
retain ownership and possession of the disputed property is GRANTED.
SO ORDERED.
2.
G.R. No. L-15127 May 30, 1961
EMETERIO CUI, plaintiff-appellant,
vs.
ARELLANO UNIVERSITY, defendant-appellee.
G.A.S. Sipin, Jr., for plaintiff-appellant.
E. Voltaire Garcia for defendant-appellee.
CONCEPCION, J.:
Appeal by plaintiff Emeterio Cui from a decision of the Court of First Instance of Manila, absolving
defendant Arellano University from plaintiff's complaint, with costs against the plaintiff, and
dismissing defendant's counter claim, for insufficiency of proof thereon.
In the language of the decision appealed from:
The essential facts of this case are short and undisputed. As established by the
agreement of facts Exhibits X and by the respective oral and documentary evidence
introduced by the parties, it appears conclusive that plaintiff, before the school year 1948-
1949 took up preparatory law course in the defendant University. After finishing his
preparatory law course plaintiff enrolled in the College of Law of the defendant from the
school year 1948-1949. Plaintiff finished his law studies in the defendant university up to
and including the first semester of the fourth year. During all the school years in which
plaintiff was studying law in defendant law college, Francisco R. Capistrano, brother of
the mother of plaintiff, was the dean of the College of Law and legal counsel of the
defendant university. Plaintiff enrolled for the last semester of his law studies in the
defendant university but failed to pay his tuition fees because his uncle Dean Francisco
R. Capistrano having severed his connection with defendant and having accepted the
deanship and chancellorship of the College of Law of Abad Santos University, plaintiff left
the defendant's law college and enrolled for the last semester of his fourth year law in the
college of law of the Abad Santos University graduating from the college of law of the
latter university. Plaintiff, during all the time he was studying law in defendant university
was awarded scholarship grants, for scholastic merit, so that his semestral tuition fees
were returned to him after the ends of semester and when his scholarship grants were
awarded to him. The whole amount of tuition fees paid by plaintiff to defendant and
refunded to him by the latter from the first semester up to and including the first semester
of his last year in the college of law or the fourth year, is in total P1,033.87. After
graduating in law from Abad Santos University he applied to take the bar examination. To
secure permission to take the bar he needed the transcripts of his records in defendant
Arellano University. Plaintiff petitioned the latter to issue to him the needed transcripts.
The defendant refused until after he had paid back the P1,033 87 which defendant
refunded to him as above stated. As he could not take the bar examination without those
transcripts, plaintiff paid to defendant the said sum under protest. This is the sum which
plaintiff seeks to recover from defendant in this case.
Before defendant awarded to plaintiff the scholarship grants as above stated, he was
made to sign the following contract covenant and agreement:
"In consideration of the scholarship granted to me by the University, I hereby waive my
right to transfer to another school without having refunded to the University (defendant)
the equivalent of my scholarship cash.
(Sgd.) Emeterio Cui".
It is admitted that, on August 16, 1949, the Director of Private Schools issued Memorandum No.
38, series of 1949, on the subject of "Scholarship," addressed to "All heads of private schools,
colleges and universities," reading:
1. School catalogs and prospectuses submitted to this, Bureau show that some schools
offer full or partial scholarships to deserving students for excellence in scholarship or
for leadership in extra-curricular activities. Such inducements to poor but gifted students
should be encouraged. But to stipulate the condition that such scholarships are good only
if the students concerned continue in the same school nullifies the principle of merit in the
award of these scholarships.
2. When students are given full or partial scholarships, it is understood that such
scholarships are merited and earned. The amount in tuition and other fees corresponding
to these scholarships should not be subsequently charged to the recipient students when
they decide to quit school or to transfer to another institution. Scholarships should not be
offered merely to attract and keep students in a school.
3. Several complaints have actually been received from students who have enjoyed
scholarships, full or partial, to the effect that they could not transfer to other schools since
their credentials would not be released unless they would pay the fees corresponding to
the period of the scholarships. Where the Bureau believes that the right of the student to
transfer is being denied on this ground, it reserves the right to authorize such transfer.
that defendant herein received a copy of this memorandum; that plaintiff asked the Bureau of
Private Schools to pass upon the issue on his right to secure the transcript of his record in
defendant University, without being required to refund the sum of P1,033.87; that the Bureau of
Private Schools upheld the position taken by the plaintiff and so advised the defendant; and that,
this notwithstanding, the latter refused to issue said transcript of records, unless said refund were
made, and even recommended to said Bureau that it issue a written order directing the defendant
to release said transcript of record, "so that the case may be presented to the court for judicial
action." As above stated, plaintiff was, accordingly, constrained to pay, and did pay under protest,
said sum of P1,033.87, in order that he could take the bar examination in 1953. Subsequently, he
brought this action for the recovery of said amount, aside from P2,000 as moral damages, P500
as exemplary damages, P2,000 as attorney's fees, and P500 as expenses of litigation.
In its answer, defendant reiterated the stand it took, vis-a-vis the Bureau of Private Schools,
namely, that the provisions of its contract with plaintiff are valid and binding and that the
memorandum above-referred to is null and void. It, likewise, set up a counterclaim for P10,000.00
as damages, and P3,000 as attorney's fees.
The issue in this case is whether the above quoted provision of the contract between plaintiff and
the defendant, whereby the former waived his right to transfer to another school without refunding
to the latter the equivalent of his scholarships in cash, is valid or not. The lower court resolved
this question in the affirmative, upon the ground that the aforementioned memorandum of the
Director of Private Schools is not a law; that the provisions thereof are advisory, not mandatory in
nature; and that, although the contractual provision "may be unethical, yet it was more unethical
for plaintiff to quit studying with the defendant without good reasons and simply because he
wanted to follow the example of his uncle." Moreover, defendant maintains in its brief that the
aforementioned memorandum of the Director of Private Schools is null and void because said
officer had no authority to issue it, and because it had been neither approved by the
corresponding department head nor published in the official gazette.
We do not deem it necessary or advisable to consider as the lower court did, the question
whether plaintiff had sufficient reasons or not to transfer from defendant University to the Abad
Santos University. The nature of the issue before us, and its far reaching effects, transcend
personal equations and demand a determination of the case from a high impersonal plane.
Neither do we deem it essential to pass upon the validity of said Memorandum No. 38, for,
regardless of the same, we are of the opinion that the stipulation in question is contrary to public
policy and, hence, null and void. The aforesaid memorandum merely incorporates a sound
principle of public policy. As the Director of Private Schools correctly pointed, out in his letter,
Exhibit B, to the defendant,
There is one more point that merits refutation and that is whether or not the contract
entered into between Cui and Arellano University on September 10, 1951 was void as
against public policy. In the case of Zeigel vs. Illinois Trust and Savings Bank, 245 Ill.
180, 19 Ann. Case 127, the court said: 'In determining a public policy of the state, courts
are limited to a consideration of the Constitution, the judicial decisions, the statutes,
andthe practice of government officers.' It might take more than a government bureau or
office to lay down or establish a public policy, as alleged in your communication, but
courts consider the practices of government officials as one of the four factors in
determining a public policy of the state. It has been consistently held in America that
under the principles relating to the doctrine of public policy, as applied to the law of
contracts, courts of justice will not recognize or uphold a transaction which its object,
operation, or tendency is calculated to be prejudicial to the public welfare, to sound
morality or to civic honesty (Ritter vs. Mutual Life Ins. Co., 169 U.S. 139; Heding vs.
Gallaghere 64 L.R.A. 811; Veazy vs. Allen, 173 N.Y. 359). If Arellano University
understood clearly the real essence of scholarships and the motives which prompted this
office to issue Memorandum No. 38, s. 1949, it should have not entered into a contract of
waiver with Cui on September 10, 1951, which is a direct violation of our Memorandum
and an open challenge to the authority of the Director of Private Schools because the
contract was repugnant to sound morality and civic honesty. And finally, in Gabriel vs.
Monte de Piedad, Off. Gazette Supp. Dec. 6, 1941, p. 67 we read: 'In order to declare a
contract void as against public policy, a court must find that the contract as to
consideration or the thing to be done, contravenes some established interest of society,
or is inconsistent with sound policy and good moralsor tends clearly to undermine the
security of individual rights. The policy enunciated in Memorandum No. 38, s. 1949 is
sound policy. Scholarship are awarded in recognition of merit not to keep outstanding
students in school to bolster its prestige. In the understanding of that university
scholarships award is a business schemedesigned to increase the business potential of
an education institution. Thus conceived it is not only inconsistent with sound policy but
also good morals. But what is morals? Manresa has this definition. It is good customs;
those generally accepted principles of morality which have received some kind of social
and practical confirmation. The practice of awarding scholarships to attract students and
keep them in school is not good customs nor has it received some kind of social and
practical confirmation except in some private institutions as in Arellano University. The
University of the Philippines which implements Section 5 of Article XIV of the Constitution
with reference to the giving of free scholarships to gifted children, does not require
scholars to reimburse the corresponding value of the scholarships if they transfer to other
schools. So also with the leading colleges and universities of the United States after
which our educational practices or policies are patterned. In these institutions
scholarships are granted not to attract and to keep brilliant students in school for their
propaganda mine but to reward merit or help gifted students in whom society has an
established interest or a first lien. (Emphasis supplied.)
WHEREFORE, the decision appealed from is hereby reversed and another one shall be entered
sentencing the defendant to pay to the plaintiff the sum of P1,033.87, with interest thereon at the
legal rate from September 1, 1954, date of the institution of this case, as well as the costs, and
dismissing defendant's counterclaim. It is so ordered.
Bengzon, C.J., Padilla, Labrador, Reyes, J.B.L., Barrera, Parades, Dizon, De Leon and Natividad,
JJ., concur.
Bautista Angelo, J., reserves his vote.




3.
G.R. No. L-64693 April 27, 1984
LITA ENTERPRISES, INC., petitioner,
vs.
SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M.
OCAMPO and FRANCISCA P. GARCIA, respondents.
Manuel A. Concordia for petitioner.
Nicasio Ocampo for himself and on behalf of his correspondents.

ESCOLIN, J.:+.wph!1
"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the tune-honored
maxim that must be applied to the parties in the case at bar. Having entered into an illegal
contract, neither can seek relief from the courts, and each must bear the consequences of his
acts.
The factual background of this case is undisputed.
Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private
respondents, purchased in installment from the Delta Motor Sales Corporation five (5) Toyota
Corona Standard cars to be used as taxicabs. Since they had no franchise to operate taxicabs,
they contracted with petitioner Lita Enterprises, Inc., through its representative, Manuel
Concordia, for the use of the latter's certificate of public convenience in consideration of an initial
payment of P1,000.00 and a monthly rental of P200.00 per taxicab unit. To effectuate Id
agreement, the aforesaid cars were registered in the name of petitioner Lita Enterprises, Inc,
Possession, however, remained with tile spouses Ocampo who operated and maintained the
same under the name Acme Taxi, petitioner's trade name.
About a year later, on March 18, 1967, one of said taxicabs driven by their employee, Emeterio
Martin, collided with a motorcycle whose driver, one Florante Galvez, died from the head injuries
sustained therefrom. A criminal case was eventually filed against the driver Emeterio Martin,
while a civil case for damages was instituted by Rosita Sebastian Vda. de Galvez, heir of the
victim, against Lita Enterprises, Inc., as registered owner of the taxicab in the latter case, Civil
Case No. 72067 of the Court of First Instance of Manila, petitioner Lita Enterprises, Inc. was
adjudged liable for damages in the amount of P25,000.00 and P7,000.00 for attorney's fees.
This decision having become final, a writ of execution was issued. One of the vehicles of
respondent spouses with Engine No. 2R-914472 was levied upon and sold at public auction for
12,150.00 to one Sonnie Cortez, the highest bidder. Another car with Engine No. 2R-915036 was
likewise levied upon and sold at public auction for P8,000.00 to a certain Mr. Lopez.
Thereafter, in March 1973, respondent Nicasio Ocampo decided to register his taxicabs in his
name. He requested the manager of petitioner Lita Enterprises, Inc. to turn over the registration
papers to him, but the latter allegedly refused. Hence, he and his wife filed a complaint against
Lita Enterprises, Inc., Rosita Sebastian Vda. de Galvez, Visayan Surety & Insurance Co. and the
Sheriff of Manila for reconveyance of motor vehicles with damages, docketed as Civil Case No.
90988 of the Court of First Instance of Manila. Trial on the merits ensued and on July 22, 1975,
the said court rendered a decision, the dispositive portion of which reads: t.hqw
WHEREFORE, the complaint is hereby dismissed as far as defendants Rosita
Sebastian Vda. de Galvez, Visayan Surety & Insurance Company and the Sheriff
of Manila are concerned.
Defendant Lita Enterprises, Inc., is ordered to transfer the registration certificate
of the three Toyota cars not levied upon with Engine Nos. 2R-230026, 2R-
688740 and 2R-585884 [Exhs. A, B, C and D] by executing a deed of
conveyance in favor of the plaintiff.
Plaintiff is, however, ordered to pay Lita Enterprises, Inc., the rentals in arrears
for the certificate of convenience from March 1973 up to May 1973 at the rate of
P200 a month per unit for the three cars. (Annex A, Record on Appeal, p. 102-
103, Rollo)
Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the same was
denied by the court a quo on October 27, 1975. (p. 121, Ibid.)
On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the Intermediate Appellate Court
modified the decision by including as part of its dispositive portion another paragraph, to
wit: t.hqw
In the event the condition of the three Toyota rears will no longer serve the
purpose of the deed of conveyance because of their deterioration, or because
they are no longer serviceable, or because they are no longer available, then Lita
Enterprises, Inc. is ordered to pay the plaintiffs their fair market value as of July
22, 1975. (Annex "D", p. 167, Rollo.)
Its first and second motions for reconsideration having been denied, petitioner came to Us,
praying that: t.hqw
1. ...
2. ... after legal proceedings, decision be rendered or resolution be issued,
reversing, annulling or amending the decision of public respondent so that:
(a) the additional paragraph added by the public respondent to the DECISION of
the lower court (CFI) be deleted;
(b) that private respondents be declared liable to petitioner for whatever amount
the latter has paid or was declared liable (in Civil Case No. 72067) of the Court of
First Instance of Manila to Rosita Sebastian Vda. de Galvez, as heir of the victim
Florante Galvez, who died as a result ot the gross negligence of private
respondents' driver while driving one private respondents' taxicabs. (p. 39, Rollo.)
Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabit
system", whereby a person who has been granted a certificate of convenience allows another
person who owns motors vehicles to operate under such franchise for a fee. A certificate of public
convenience is a special privilege conferred by the government . Abuse of this privilege by the
grantees thereof cannot be countenanced. The "kabit system" has been Identified as one of the
root causes of the prevalence of graft and corruption in the government transportation offices. In
the words of Chief Justice Makalintal, 1 "this is a pernicious system that cannot be too severely
condemned. It constitutes an imposition upon the goo faith of the government.
Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized
as being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil
Code, It is a fundamental principle that the court will not aid either party to enforce an illegal
contract, but will leave them both where it finds them. Upon this premise, it was flagrant error on
the part of both the trial and appellate courts to have accorded the parties relief from their
predicament. Article 1412 of the Civil Code denies them such aid. It provides:t.hqw
ART. 1412. if the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed;
(1) when the fault, is on the part of both contracting parties, neither may recover
what he has given by virtue of the contract, or demand the performance of the
other's undertaking.
The defect of inexistence of a contract is permanent and incurable, and cannot be cured by
ratification or by prescription. As this Court said in Eugenio v. Perdido,
2
"the mere lapse of time
cannot give efficacy to contracts that are null void."
The principle of in pari delicto is well known not only in this jurisdiction but also in the United
States where common law prevails. Under American jurisdiction, the doctrine is stated thus: "The
proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit
can be maintained for its specific performance, or to recover the property agreed to be sold or
delivered, or damages for its property agreed to be sold or delivered, or damages for its violation.
The rule has sometimes been laid down as though it was equally universal, that where the parties
are in pari delicto, no affirmative relief of any kind will be given to one against the
other."
3
Although certain exceptions to the rule are provided by law, We see no cogent reason
why the full force of the rule should not be applied in the instant case.
WHEREFORE, all proceedings had in Civil Case No. 90988 entitled "Nicasio Ocampo and
Francisca P. Garcia, Plaintiffs, versus Lita Enterprises, Inc., et al., Defendants" of the Court of
First Instance of Manila and CA-G.R. No. 59157-R entitled "Nicasio Ocampo and Francisca P.
Garica, Plaintiffs-Appellees, versus Lita Enterprises, Inc., Defendant-Appellant," of the
Intermediate Appellate Court, as well as the decisions rendered therein are hereby annuleled and
set aside. No costs.
SO ORDERED.1wph1.t
Feranando, C.J., Teehankee, Makasiar, Concepcion, Jr., Guerrero, Abad Santos, De Castro,
Melencio-Herrera, Plana, Relova, Gutierrez, Jr. and De la Fuente, JJ., concur.
Aquino, J., took no part.
4.
G.R. No. L-23303 May 20, 1969
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
LEOCADIO BAUTISTA Y BASA @ CADIO, ET AL., defendants, ARMANDO GONZALES Y
JOSE @ BOY, defendant-appellant.
G.R. No. L-23304 May 20, 1969
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
FORTUNATO ANGELES Y SARMIENTO, defendant-appellant.
Pio G. Balingcongan for appellant.
Office of the Solicitor General for appellee.
DIZON, J.:
Leocadio Bautista, alias Cadio, Armando Gonzales, alias Boy, and Fortunato Angeles, alias
Totoy, were charged with robbery with homicide in two separate informations filed in the Court of
First Instance of Manila (Criminal Case No. 72552 where the defendants Bautista and Gonzales,
and Criminal Case No. 72619 which the lone defendant was Angeles). After a joint trial upon a
plea of not guilty entered by all the defendants, the court found them guilty of attempted robbery
with homicide and rendered judgment as follows:
FOR ALL THE FOREGOING CONSIDERATIONS, the Court finds the accused herein,
Leocadio Bautista y Basa @ Cadio, Armando Gonzales y Jose @ Boy and Fortunato
Angeles y Sarmiento @ Totoy, guilty beyond reasonable doubt of the crime of attempted
robbery with homicide, as defined and punished under Art. 297 of the Revised Penal
Code, and considering the aggravating circumstance of superior strength, hereby
sentences each and all of them to suffer the penalty of reclusion perpetua, with the
accessories of the law, to indemnify the heirs of the deceased, jointly and severally in the
amount of P5,000, without, however, any further subsidiary imprisonment in case of
insolvency, and to pay the proportionate amount of the costs.
SO ORDERED.
From the above decision only Gonzales and Angeles appealed (G.R. L-23303 and L-23304,
respectively).
The evidence shows that at about 2 o'clock in the afternoon of August 28, 1963, while a delivery
truck of the Central Salted Foods Manufacturing Company driven by Filemon King, with truck
helper Jose Tan beside him, was cruising near the corner of Yakal and Tayabas streets, Manila,
an unidentified person stepped on its running board on the side of Tan, while appellant Angeles
stepped on the opposite running board beside King and asked liquor money from him. When King
refused to give, the unidentified man on the running board threw a stone at Tan. The stone hit the
switch of the truck and forced it to a stop. Thereupon King and Tan went down but were met with
a volley of stones thrown at them by Angeles, Gonzales, Bautista and others. Upon being hit King
asked Tan to call a policeman. Tan then ran towards Camarines street where, with the help of
someone, he was able to contact a policeman, whom he informed that they had been held up at
the corner of Yakal and Tayabas streets. Having done this, Tan returned to the scene of the
incident where he found King sprawled on the gutter. He then hailed a tricycle and brought him to
the North General Hospital where, in spite of medical assistance, King died the following morning.
Dr. David S. Cabrera on the Manila Police Department performed an autopsy on the cadaver of
the deceased and found the latter to have sustained the following injuries:
MISCELLANEOUS EXTERNAL WOUNDS AND EXTENSION INTERNALLY:
(1) Sutured contused lacerated wound, measuring 3 cm. long on the frontal region of the
head, left.
(2) Another sutured contused lacerated wound measuring 2.5 cm. long located on the
vertex of the head.
(3) Multiple (10) incised wounds, measurement ranging from 2 to 3 cm. long, located on
the right face.
MISCELLANEOUS FINDINGS IN INTERNAL ORGANS:
CENTRAL NERVOUS SYSTEM:
Hemorrhage, subdural, extensive, brain.
BONES AND JOINTS:
Compound committed fracture, occipital, left and right parietal bone.
Fracture-separation, sagittal suture, parieto occipital bone.
CAUSE OF DEATH:
Shock and hemorrhage due to traumatic fracture of the skull and subdural hemorrhage,
severe. (Exh. A, p. 68, rec. of L-23303; pp. 1-2, t.s.n.).
A criminal complaint in connection with the death of King was subsequently lodged with the
Manila Police Department by the manager of the latter's employer, this having led to the arrest of
Gonzales and Bautista. Subsequently, the corresponding information against them was filed.
In the course of the police investigation, the names of the other confederates of Bautista and
Gonzales were revealed, among them being Fortunato Angeles who, as a result, was prosecuted
in a separate information (Criminal Case 72691).lawphi1.et
Appellant Armando Gonzales (in G.R. L-23303) and appellant Fortunato Angeles (in G.R. L-
23304) submitted separate briefs.
Angeles' brief submits the following assignment of errors:
I
THE TRIAL COURT ERRED IN HOLDING THAT THE ACCUSED DEMANDED LIQUOR
MONEY FROM THE VICTIM.
II
THE TRIAL COURT ERRED IN CONCLUDING THAT VICTIM'S REFUSAL TO GIVE
LIQUOR MONEY WAS THE CAUSE OF THE STONING OF SAID VICTIM.
III
THE TRIAL COURT ERRED IN HOLDING THAT THE ACCUSED ACTED IN CONCERT
WITH EACH OTHER IN STONING THE VICTIM.
IV
THE TRIAL COURT ERRED IN CONVICTING THE ACCUSED FORTUNATO ANGELES
OF THE CRIME OF ATTEMPTED ROBBERY WITH HOMICIDE.
V
THAT, GRANTING ARGUENDO, THAT THE CRIME OF HOMICIDE WAS COMMITTED
THE TRIAL COURT ERRED IN IMPOSING THE PENALTY OF RECLUSION
PERPETUA AND IN NOT TAKING INTO CONSIDERATION THE ATTENDING
MITIGATING CIRCUMSTANCES IN THIS CASE.
Gonzales' brief, in turn, submits the following assignment of errors:
I
THE TRIAL COURT ERRED IN GIVING GREATER WEIGHT AND CREDIT TO THE
EVIDENCE FOR THE PROSECUTION DESPITE THE FACT THAT THE EVIDENCE
PRESENTED BY THE DEFENSE IS MORE TRUSTWORTHY, RELIABLE AND MORE
WORTHY OF CREDIT.
II
THE TRIAL COURT ERRED IN FINDING DEFENDANT-APPELLANT ARMANDO
GONZALES ACTED IN CONCERT WITH HIS CO-ACCUSED IN THE COMMISSION OF
THE CRIME OF ATTEMPTED ROBBERY WITH HOMICIDE.
III
THE TRIAL COURT ERRED IN CONVICTING DEFENDANT-APPELLANT ARMANDO
GONZALES OF THE CRIME OF ATTEMPTED ROBBERY WITH HOMICIDE
ALTHOUGH THE EVIDENCE OF THE PROSECUTION WITH RESPECT TO HIM IS
UTTERLY INSUFFICIENT TO ESTABLISH HIS GUILT BEYOND REASONABLE
DOUBT.
It is clearly deducible from the assignment of errors and statement of facts made in the separate
briefs submitted by appellants that they admit having been present at the scene of the crime.
Gonzales, however, denies having thrown stones at the deceased King, while Angeles claims
that the only thing he did was to pick up a small stone in throw it against the glass window at the
rear of the truck, and that when he was hit on the leg by a stone he ran home. Thus it is clear that
the main questions raised by both appellants are factual.
The trial court, after a thorough examination of the evidence, including the sworn statements
made by the three defendants, arrived at the following conclusions: .
There is then no dispute over the fact that the deceased Filemon King, driver of the
delivery truck of the Central Salted Foods Manufacturing Company, was stoned to death
by several persons. The three accused herein are the only ones charged in connection
with the said stoning. As far as they are concerned, it is a question of evidence whether
they are guilty or not as co-participants in the commission of this crime. The only witness
of the prosecution who identified the three accused as among those who took part in the
stoning of the deceased is Jose Tan, the truck helper who was on the truck during the
commission of the crime. According to him, these three persons, particularly Fortunato
Angeles, who was the one who asked for money for liquor, boarded the truck on the
running board nearest the driver. The other person who boarded on the other side of the
truck on the running board has not been identified. However, among those who took part
in the stoning were not only Fortunato Angeles but the two other accused Leocadio
Bautista and Armando Gonzales in this case. The accused Leocadio Bautista, who was
arrested first, admitted having stoned the deceased no less than 3 times with big stones.
Fortunato Angeles was surrendered by his mother for being involved, admitted having
taken part in the said stoning of the Chinese and named his other companions.
Having thus participated in the act that led to the death of the deceased, their
responsibility for the consequences remains the same, whether it was their stones that
finished with the deceased or not. They have acted in concert and, therefore, answerable
for the direct and natural consequences of their acts and those of their companions.
After going over the record ourselves we have come to the conclusion that the evidence fully
sustains the findings made by the trial court.
Prosecution witness Jose Tan unquestionably saw the incident at close range and could not have
been mistaken as to the identity of the parties who attacked him and the deceased King. He gave
a straightforward narration of the incident and, as far as the whole record is concerned, there is
nothing to indicate that he perjured himself and testified falsely.
Appellant Gonzales' main contention, on the other hand, is that the trial court erred in giving
credence to the prosecution evidence in spite of the fact that the evidence for the defense is more
trustworthy and reliable. As already stated, an examination of the record has failed to disclose
anything justifying the conclusion that the trial judge had seriously misconstrued the evidence and
had arrived at his conclusions arbitrarily. Inasmuch as he had the advantage which is denied
to us of having heard the testimony of the witnesses, and had the opportunity to observe their
conduct and demeanor on the witness stand, it is clear that we must accept, as we do accept, his
conclusions concerning the weight and credibility of the evidence and of the witnesses presented
by both parties.
As regards Gonzales' contention that the trial court erred in finding him guilty of the crime of
attempted robbery with homicide, the following must be taken into consideration: Gonzales,
Angeles, Bautista and their other companions, by concerted action, had shown that their intention
was to extort money when they stopped the truck driven by King. When the latter refused to
capitulate to their demand, they assaulted him and his truck helper. It is true that, according to the
evidence, only one of them actually demanded money from King, but there being sufficient
evidence of conspiracy, all his companions must also be deemed guilty of attempted robbery
(People vs. Timbol, G.R. L-47471-73, August 4, 1944 and People vs. Macabuhay, G.R. L-16150,
April 29, 1949).
The Solicitor General recommends that, in the light of the facts established by the evidence, the
mitigating circumstance of lack of intention to commit so grave a wrong as the one actually
committed be considered in favor of appellants. We are constrained not to agree with such
recommendation precisely because the evidence shows that, if not all the persons who attacked
the deceased King, at least some of them, intended to cause his death by throwing at him stones
of such size and weight as to cause, as in fact they caused, a fracture of his skull. And as the act
of one or some of them is deemed to be the act of the others in view of sufficient proof of
conspiracy, We believe that the Court a quo was right in not considering such mitigating
circumstance in favor of appellants.
On the other hand, the commission of the crime must be deemed aggravated by the
circumstance that the attackers took advantage of their superior strength. Since this circumstance
is not alleged in the information, it may only be considered as a general aggravating circumstance
in the imposition of the corresponding penalty.
The indemnity of P5,000.00 which appellants were sentenced to pay, jointly and severally, is
however raised to P12,000.00 in accordance with previous rulings of this Court.
WHEREFORE, thus modified, the appealled decision is affirmed, with costs. So ordered.
Reyes, J.B.L., Makalintal, Zaldivar, Sanchez, Fernando and Capistrano, JJ., concur.
Teehankee and Barredo, JJ., took no part.
Concepcion, C.J., and Castro, J., are on leave.