ART.

1305 1346
1.

MENDOZA v. OZAMIS

of her friends; that she could no longer take care of herself nor manage her properties by
reason of her failing health, weak mind and absent-mindedness. Mario Mendezona and Luis
Mendezona, herein petitioners who are nephews of Carmen Ozamiz, and Pilar Mendezona,
a sister of Carmen Ozamiz, filed an opposition to the guardianship petition.

[G.R. No. 143370. February 6, 2002]

MARIO J. MENDEZONA and TERESITA M. MENDEZONA, LUIS J. MENDEZONA and
MARICAR L. MENDEZONA and TERESITA ADAD VDA. DE MENDEZONA, petitioners, vs.
JULIO H. OZAMIZ, ROBERTO J. MONTALVAN, JOSE MA. OZAMIZ, CARMEN H. OZAMIZ,
PAZ O. MONTALVAN, MA. TERESA O.F. ZARRAGA, CARLOS O. FORTICH, JOSE LUIS
O. ROS, PAULITA O. RODRIGUEZ, and LOURDES O. LON, respondents.
DECISION
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the Decision[1] and the Resolution[2] of the
Court of Appeals dated July 27, 1998 and May 19, 2000, respectively, in CA-G.R. CV No.
39752 which reversed and set aside the Decision[3] dated September 23, 1992 rendered in
favor of the petitioners by the Regional Trial Court (RTC) of Cebu City, Branch 6 in Civil Case
No. CEB-10766.
Civil Case No. CEB-10766 is a suit for quieting of title. It was instituted on September 25,
1991 by petitioner spouses Mario J. Mendezona and Teresita M. Mendezona as initial
plaintiffs,[4] and in the amended complaint filed on October 7, 1991, herein co-petitioner
spouses Luis J. Mendezona and Maricar L. Mendezona and Teresita Adad Vda. de
Mendezona joined as co-plaintiffs.[5]
In their complaint, the petitioners, as plaintiffs therein, alleged that petitioner spouses Mario
J. Mendezona and Teresita M. Mendezona, petitioner spouses Luis J. Mendezona and
Maricar L. Mendezona, and petitioner Teresita Adad Vda. de Mendezona own a parcel of land
each in the Banilad Estate, Lahug, Cebu City with almost similar areas of 3,462 square
meters, 3,466 square meters and 3,468 square meters, covered and described in Transfer
Certificate of Title (TCT) Nos. 116834, 116835, and 116836 respectively, of the Registry of
Deeds of Cebu City.[6]
The petitioners ultimately traced their titles of ownership over their respective properties from
a notarized Deed of Absolute Sale[7] dated April 28, 1989 executed in their favor by Carmen
Ozamiz for and in consideration of the sum of One Million Forty Thousand Pesos
(P1,040,000.00).
The petitioners initiated the suit to remove a cloud on their said respective titles caused by
the inscription thereon of a notice of lis pendens, which came about as a result of an incident
in Special Proceeding No. 1250 of the RTC of Oroquieta City. Special Proceeding No. 1250
is a proceeding for guardianship over the person and properties of Carmen Ozamiz initiated
by the respondents Julio H. Ozamiz, Jose Ma. Ozamiz, Carmen H. Ozamiz,[8] Paz O.
Montalvan, Ma. Teresa O.F. Zarraga, Carlos O. Fortich, Jose Luis O. Ros, Paulita O.
Rodriguez and Lourdes O. Lon.[9]
It appears that on January 15, 1991, the respondents instituted the petition for guardianship
with the Regional Trial Court of Oroquieta City, alleging therein that Carmen Ozamiz, then 86
years old, after an illness in July 1987, had become disoriented and could not recognize most

In the course of the guardianship proceeding, the petitioners and the oppositors thereto
agreed that Carmen Ozamiz needed a guardian over her person and her properties, and thus
respondent Paz O. Montalvan was designated as guardian over the person of Carmen
Ozamiz while petitioner Mario J. Mendezona, respondents Roberto J. Montalvan and Julio H.
Ozamiz were designated as joint guardians over the properties of the said ward.
As guardians, respondents Roberto J. Montalvan and Julio H. Ozamiz filed on August 6, 1991
with the guardianship court their inventories and Accounts,[10] listing therein Carmen
Ozamizs properties, cash, shares of stock, vehicles and fixed assets, including a 10,396
square meter property known as the Lahug property. Said Lahug property is the same
property covered by the Deed of Absolute Sale dated April 28, 1989 executed by Carmen
Ozamiz in favor of the petitioners. Respondents Roberto J. Montalvan and Julio H. Ozamiz
caused the inscription on the titles of petitioners a notice of lis pendens,[11] regarding Special
Proceeding No. 1250, thus giving rise to the suit for quieting of title, Civil Case No. CEB10766, filed by herein petitioners.
In their Answer[12] in Civil Case No. CEB-10766 the respondents opposed the petitioners
claim of ownership of the Lahug property and alleged that the titles issued in the petitioners
names are defective and illegal, and the ownership of the said property was acquired in bad
faith and without value inasmuch as the consideration for the sale is grossly inadequate and
unconscionable. Respondents further alleged that at the time of the sale on April 28, 1989
Carmen Ozamiz was already ailing and not in full possession of her mental faculties; and that
her properties having been placed in administration, she was in effect incapacitated to
contract with petitioners.
The issues for resolution were delimited in the pre-trial to: (a) the propriety of recourse to
quieting of title; (b) the validity or nullity of the Deed of Absolute Sale dated April 28, 1989
executed by Carmen Ozamiz in favor of herein petitioners; (c) whether the titles over the
subject parcel of land in plaintiffs names be maintained or should they be cancelled and the
subject parcels of land reconveyed; and (d) damages and attorneys fees.[13]
Trial on the merits ensued with the parties presenting evidence to prove their respective
allegations. Petitioners Mario Mendezona, Teresita Adad Vda. de Mendezona and Luis
Mendezona, as plaintiffs therein, testified on the circumstances surrounding the sale.
Carmencita Cedeno and Martin Yungco, instrumental witnesses to the Deed of Absolute Sale
dated April 28, 1989, and, Atty. Asuncion Bernades, the notary public who notarized the said
document, testified that on the day of execution of the said contract that Carmen Ozamiz was
of sound mind and that she voluntarily and knowingly executed the said deed of sale.
For the defendants, the testimonies of respondent Paz O. Montalvan, a sister of Carmen
Ozamiz; Concepcion Agac-ac, an assistant of Carmen Ozamiz; respondent Julio Ozamiz;
Carolina Lagura, a househelper of Carmen Ozamiz; Joselito Gunio, an appraiser of land;
Nelfa Perdido, a part-time bookkeeper of Carmen Ozamiz, and the deposition of Dr. Faith Go,
physician of Carmen Ozamiz, were offered in evidence.

The petitioners presented as rebuttal witnesses petitioners Mario Mendezona and Luis
Mendezona, to rebut the testimony of respondent Julio H. Ozamiz; and, Dr. William Buot, a
doctor of neurology to rebut aspects of the deposition of Dr. Faith Go on the mental capacity
of Carmen Ozamiz at the time of the sale.
During the trial, the trial court found that the following facts have been duly established:[14]
(1) On April 28, 1989, Carmen Ozamiz sold to her nephews, Mario, Antonio and Luis, all
surnamed Mendezona, three (3) parcels of residential land in Cebu City, per a Deed of
Absolute Sale (Exh. D) for a consideration of P1,040,000.00, in which deed the usufructuary
rights were reserved during her lifetime.
(2) The three parcels of land were subsequently transferred to the names of the three vendees
per TCTs Nos. 108729, 108730 and 108731 (Exhs. J, K & L, respectively). A partition
agreement was entered into by the three vendees (Exh. 3) and the parcels of land are now
titled in the names of the plaintiffs.

Wherefore, premises considered, the Court is of the opinion and so declares that:
1. The property described in the complaint was sold, with reservation of usufructuary rights
by Carmen Ozamiz to the plaintiffs under a valid contract, voluntarily and deliberately entered
into while she was of sound mind, for sufficient and good consideration, and without fraud,
force, undue influence or intimidation having been exercised upon her, and consequently, the
Court orders the defendants herein to acknowledge and recognize the plaintiffs title to the
aforecited property and to refrain from further clouding the same;
2. That the one-third (1/3) share erroneously titled to Antonio Mendezona should be titled in
the name of Teresita Adad vda. de Mendezona as her paraphernal property and the Register
of Deeds of Cebu City is hereby ordered to do so;
3. The Notice of Lis Pendens affecting the property should be eliminated from the record and
the Register of Deeds of Cebu City is ordered to expunge the same.

Mario Mendezona TCT No. 116834 (Exh. A);

No pronouncement as to costs.

Luis Mendezona TCT No. 116835 (Exh. B);

SO ORDERED.

Antonio Mendezona TCT No. 116836 (Exh. C);

On appeal to the Court of Appeals, the appellate court reversed the factual findings of the trial
court and ruled that the Deed of Absolute Sale dated April 28, 1989 was a simulated contract
since the petitioners failed to prove that the consideration was actually paid, and, furthermore,
that at the time of the execution of the contract the mental faculties of Carmen Ozamiz were
already seriously impaired. Thus, the appellate court declared that the Deed of Absolute Sale
of April 28, 1989 is null and void. It ordered the cancellation of the certificates of title issued
in the petitioners names and directed the issuance of new certificates of title in favor of
Carmen Ozamiz or her estate.

(3) The reservation of the usufructuary rights to the vendor Carmen Ozamiz during her lifetime
was confirmed by the plaintiffs-spouses Mario Mendezona and Teresita Moraza and plaintiffs
spouses Luis Mendezona and Maricar Longa in a sworn statement (Exh. I) executed on
October 15, 1990, which was duly annotated on the titles of the property;
(4) The capital gains tax was paid (Exh. H) on May 5, 1989 and a certificate (Exh. H-1) was
issued by the Bureau of Internal Revenue authorizing the Register of Deeds to transfer the
property to the vendees;
(5) A petition for guardianship over the person and properties of Carmen Ozamiz (Exh. E)
was filed by all the defendants, (except the defendant Roberto Montalvan) on January 15,
1991 with the Regional Trial Court of Oroquieta City, denominated as Spec. Proc. No. 1250
and subsequently, an Inventories and Accounts (Exh. F) was filed by court-appointed
guardians Roberto Montalvan and Julio Ozamiz, in which the property was listed (Exh. F-1)
and a Notice of Lis Pendens was filed with the Register of Deeds of Cebu City on August 13,
1991 by said joint guardians. Plaintiff Mario Mendezona, as another joint guardian over
Carmen Ozamiz, filed his opposition (Exh. R) to the Inventories and Accounts, with the
Oroquieta Court as to the inclusion of the property (Exh.R-1).
(6) Prior to his death, the deceased husband of plaintiff Teresita Adad Mendezona was
granted a General Power of Attorney (Exh. 1) by Carmen Ozamiz on March 23, 1988 and
after his demise, Carmen Ozamiz granted Mario Mendezona a General Power of Attorney
(Exh. 2.) on August 11, 1990. Both powers of attorney relate to the administration of the
property, subject of this action, in Cebu City.
On September 23, 1992 the trial court rendered its decision in favor of the petitioners, the
dispositive portion of which reads, to wit:

Petitioners filed a motion for reconsideration of the decision of the appellate court.
Subsequent thereto, the petitioners filed a motion for a new trial and/or for reception of
evidence. They contended, among other things, that the appellate court totally ignored the
testimony of Judge Teodorico Durias regarding the mental condition of Carmen Ozamiz a
month before the execution of the Deed of Absolute Sale in question. The said testimony was
taken in the Special Proceeding No. 1250 in the Regional Trial Court of Oroquieta City.
However, Judge Durias was not presented as a witness in Civil Case No. CEB-10766 in the
Regional Trial Court of Cebu City. Petitioners alleged that Judge Duriass testimony is a newlydiscovered evidence which could not have been discovered prior to the trial in the court below
by the exercise of due diligence.
The appellate court denied both motions in its Resolution dated May 19, 2000. Hence, the
instant petition anchored on the following grounds:[15]
I.
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE APRIL 28, 1989
DEED OF ABSOLUTE SALE WAS A SIMULATED CONTRACT.
A.

THE COURT OF APPEALS GRAVELY ERRED IN IGNORING THE STATUTORY

PRESUMPTIONS OF ACTUAL AND SUFFICIENT CONSIDERATION FOR, AND OF THE
REGULARITY AND TRUTHFULNESS OF, THE NOTARIZED DEED OF ABSOLUTE SALE.

THE COURT OF APPEALS GRAVELY ERRED IN GIVING WEIGHT TO THE HEARSAY

TESTIMONY OF DR. FAITH GO ON THE MENTAL CONDITION OF CARMEN OZAMIZ ON
THE DATE SHE EXECUTED THE DEED OF ABSOLUTE SALE.
D.

B.
THE COURT OF APPEALS GRAVELY ERRED IN IMPOSING ON THE PETITIONERS THE
BURDEN OF PROVING PAYMENT, AND IN REFUSING TO RECOGNIZE AND RULE THAT
IT WAS THE RESPONDENTS - AS THE PARTIES ASSAILING THE DEED OF ABSOLUTE
SALE - WHO HAD FAILED TO DISCHARGE THEIR BURDEN OF PROVING THAT THERE
WAS NO CONSIDERATION FOR THE TRANSACTION.
C.
THE COURT OF APPEALS GRAVELY ERRED IN REFUSING TO RECEIVE IN EVIDENCE
THE THREE (3) CHECKS, WHICH PROVED BEYOND ANY DOUBT THAT THE
PURCHASE PRICE FOR THE LAHUG PROPERTY HAD BEEN PAID TO CARMEN
OZAMIZ, AFTER ASKING FOR THEM AND HAVING THEM PRESENTED TO IT IN OPEN
COURT, THUS COOPERATING WITH RESPONDENTS EFFORTS TO SUPPRESS THE
CHECKS (WHICH THE COURT ITSELF AND RESPONDENTS CHALLENGED
PETITIONERS TO PRODUCE).
II.
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT CARMEN OZAMIZS
MENTAL FACULTIES WERE SERIOUSLY IMPAIRED WHEN SHE EXECUTED THE DEED
OF ABSOLUTE SALE ON APRIL 28, 1989.
A.
THE COURT OF APPEALS GRAVELY ERRED IN IGNORING THE STATUTORY
PRESUMPTION THAT CARMEN OZAMIZ WAS OF SOUND MIND AND HAD THE
REQUISITE CAPACITY TO CONTRACT WHEN SHE EXECUTED THE DEED OF
ABSOLUTE SALE, AND IN REFUSING TO RULE THAT IT WAS THE RESPONDENTS - AS
THE PARTIES ALLEGING MENTAL INCAPACITY- WHO HAD FAILED TO DISCHARGE
THEIR BURDEN OF REBUTTING THAT PRESUMPTION.
B.
THE COURT OF APPEALS GRAVELY ERRED IN REFUSING TO ACCEPT AND GIVE DUE
AND PREPONDERANT WEIGHT TO UNREFUTED EVIDENCE, INCLUDING THE
UNREFUTED TESTIMONIES OF THE INSTRUMENTAL WITNESSES AND OF THE
NOTARY PUBLIC, THAT CARMEN OZAMIZ EXECUTED THE DEED OF ABSOLUTE SALE
FREELY, VOLUNTARILY, KNOWINGLY, AND INTELLIGENTLY.
C.

THE COURT OF APPEALS GRAVELY ERRED IN IGNORING, AND IN REFUSING TO

RECEIVE IN EVIDENCE, JUDGE TEODORICO DURIASS TESTIMONY (THAT CARMEN
OZAMIZ WAS OF SOUND MIND WHEN SHE EXECUTED ANOTHER CONTRACT BARELY
A MONTH BEFORE SHE EXECUTED THE DEED OF ABSOLUTE SALE) ON THE GROUND
THAT THAT TESTIMONY WAS FORGOTTEN EVIDENCE.
We shall first rule on the issue of whether to consider the testimony of Judge Durias as newly
discovered evidence. A motion for new trial upon the ground of newly discovered evidence is
properly granted only where there is concurrence of the following requisites, namely: (a) the
evidence had been discovered after trial; (b) the evidence could not have been discovered
and produced during trial even with the exercise of reasonable diligence; and (c) the evidence
is material and not merely corroborative, cumulative or impeaching and is of such weight that
if admitted, would probably alter the result. All three (3) requisites must characterize the
evidence sought to be introduced at the new trial.
We find that the requirement of reasonable diligence has not been met by the petitioners. As
early as the pre-trial of the case at bar, the name of Judge Durias has already cropped up as
a possible witness for the defendants, herein respondents. That the respondents chose not
to present him is not an indicia per se of suppression of evidence, since a party in a civil case
is free to choose who to present as his witness. Neither can Judge Durias testimony in another
case be considered as newly discovered evidence since the facts to be testified to by Judge
Durias which were existing before and during the trial, could have been presented by the
petitioners at the trial below.[16] The testimony of Judge Durias has been in existence waiting
only to be elicited from him by questioning.[17]
It has been held that a lack of diligence is exhibited where the newly discovered evidence
was necessary or proper under the pleadings, and its existence must have occurred to the
party in the course of the preparation of the case, but no effort was made to secure it; there
is a failure to make inquiry of persons who were likely to know the facts in question, especially
where information was not sought from co-parties; there is a failure to seek evidence available
through public records; there is a failure to discover evidence that is within the control of the
complaining party; there is a failure to follow leads contained in other evidence; and, there is
a failure to utilize available discovery procedures.[18] Thus, the testimony of Judge Durias
cannot be considered as newly discovered evidence to warrant a new trial.
In this petition at bench, herein petitioners essentially take exception to two (2) main factual
findings of the appellate court, namely, (a) that the notarized Deed of Absolute Sale dated
April 28, 1989 was a simulated contract, and (b) that Carmen Ozamizs mental faculties were
seriously impaired when she executed the said contract on April 28, 1989. The petitioners
allege that both conclusions are contrary or opposed to well-recognized statutory
presumptions of regularity enjoyed by a notarized document and that a contracting party to a
notarized contract is of sound and disposing mind when she executes the contract.

The respondents posit a different view. They contend that clear and convincing evidence
refuted the presumptions on regularity of execution of the Deed of Absolute Sale and
existence of consideration thereof. Relying upon the testimonies of Paz O. Montalvan,
Concepcion Agac-ac, Carolina Lagura and Dr. Faith Go, they aver that they were able to show
that Carmen Ozamiz was already physically and mentally incapacitated since the latter part
of 1987 and could not have executed the said Deed of Absolute Sale on April 28, 1989
covering the disputed Lahug property. They also alleged that no error is ascribable to the
appellate court for not considering the allegedly rehearsed testimonies of the instrumental
witnesses and the notary public.
Factual findings of the appellate court are generally conclusive on this Court which is not a
trier of facts. It is not the function of the Supreme Court to analyze or weigh evidence all over
again. However, this rule is not without exception. If there is a showing that the appellate
courts findings of facts complained of are totally devoid of support in the record or that they
are so glaringly erroneous as to constitute grave abuse of discretion, this Court must discard
such erroneous findings of facts.[19] We find that the exception applies in the case at bench.
Simulation is defined as the declaration of a fictitious will, deliberately made by agreement of
the parties, in order to produce, for the purposes of deception, the appearances of a juridical
act which does not exist or is different from what that which was really executed.[20] The
requisites of simulation are: (a) an outward declaration of will different from the will of the
parties; (b) the false appearance must have been intended by mutual agreement; and (c) the
purpose is to deceive third persons.[21] None of these were clearly shown to exist in the case
at bar.
Contrary to the erroneous conclusions of the appellate court, a simulated contract cannot be
inferred from the mere non-production of the checks. It was not the burden of the petitioners
to prove so. It is significant to note that the Deed of Absolute Sale dated April 28, 1989 is a
notarized document duly acknowledged before a notary public. As such, it has in its favor the
presumption of regularity, and it carries the evidentiary weight conferred upon it with respect
to its due execution. It is admissible in evidence without further proof of its authenticity and is
entitled to full faith and credit upon its face.[22]
Payment is not merely presumed from the fact that the notarized Deed of Absolute Sale dated
April 28, 1989 has gone through the regular procedure as evidenced by the transfer
certificates of title issued in petitioners names by the Register of Deeds. In other words,
whosoever alleges the fraud or invalidity of a notarized document has the burden of proving
the same by evidence that is clear, convincing, and more than merely preponderant.[23]
Therefore, with this well-recognized statutory presumption, the burden fell upon the
respondents to prove their allegations attacking the validity and due execution of the said
Deed of Absolute Sale. Respondents failed to discharge that burden; hence, the presumption
in favor of the said deed stands. But more importantly, that notarized deed shows on its face
that the consideration of One Million Forty Thousand Pesos (P1,040,000.00) was
acknowledged to have been received by Carmen Ozamiz.
Simulation cannot be inferred from the alleged absence of payment based on the testimonies
of Concepcion Agac-ac, assistant of Carmen Ozamiz, and Nelfa Perdido, part-time
bookkeeper of Carmen Ozamiz. The testimonies of these two (2) witnesses are unreliable
and inconsistent.

While Concepcion Agac-ac testified that she was aware of all the transactions of Carmen
Ozamiz, she also admitted that not all income of Carmen Ozamiz passed through her since
Antonio Mendezona, as appointed administrator, directly reported to Carmen Ozamiz.[24]
With respect to Nelfa Perdido, she testified that most of the transactions that she recorded
refer only to rental income and expenses, and the amounts thereof were reported to her by
Concepcion Agac-ac only, not by Carmen Ozamiz. She does not record deposits or
withdrawals in the bank accounts of Carmen Ozamiz.[25] Their testimonies hardly deserve
any credit and, hence, the appellate court misplaced reliance thereon.
Considering that Carmen Ozamiz acknowledged, on the face of the notarized deed, that she
received the consideration at One Million Forty Thousand Pesos (P1,040,000.00), the
appellate court should not have placed too much emphasis on the checks, the presentation
of which is not really necessary. Besides, the burden to prove alleged non-payment of the
consideration of the sale was on the respondents, not on the petitioners. Also, between its
conclusion based on inconsistent oral testimonies and a duly notarized document that enjoys
presumption of regularity, the appellate court should have given more weight to the latter.
Spoken words could be notoriously unreliable as against a written document that speaks a
uniform language.[26]
Furthermore, the appellate court erred in ruling that at the time of the execution of the Deed
of Absolute Sale on April 28, 1989 the mental faculties of Carmen Ozamiz were already
seriously impaired.[27] It placed too much reliance upon the testimonies of the respondents
witnesses. However, after a thorough scrutiny of the transcripts of the testimonies of the
witnesses, we find that the respondents core witnesses all made sweeping statements which
failed to show the true state of mind of Carmen Ozamiz at the time of the execution of the
disputed document. The testimonies of the respondents witnesses on the mental capacity of
Carmen Ozamiz are far from being clear and convincing, to say the least.
Carolina Lagura, a househelper of Carmen Ozamiz, testified that when Carmen Ozamiz was
confronted by Paz O. Montalvan in January 1989 with the sale of the Lahug property, Carmen
Ozamiz denied the same. She testified that Carmen Ozamiz understood the question
then.[28] However, this declaration is inconsistent with her (Carolinas) statement that since
1988 Carmen Ozamiz could not fully understand the things around her, that she was
physically fit but mentally could not carry a conversation or recognize persons who visited
her.[29] Furthermore, the disputed sale occurred on April 28, 1989 or three (3) months after
this alleged confrontation in January 1989. This inconsistency was not explained by the
respondents.
The revelation of Dr. Faith Go did not also shed light on the mental capacity of Carmen
Ozamiz on the relevant day - April 28, 1989 when the Deed of Absolute Sale was executed
and notarized. At best, she merely revealed that Carmen Ozamiz was suffering from certain
infirmities in her body and at times, she was forgetful, but there was no categorical statement
that Carmen Ozamiz succumbed to what the respondents suggest as her alleged second
childhood as early as 1987. The petitioners rebuttal witness, Dr. William Buot, a doctor of
neurology, testified that no conclusion of mental incapacity at the time the said deed was
executed can be inferred from Dr. Faith Gos clinical notes nor can such fact be deduced from
the mere prescription of a medication for episodic memory loss.
It has been held that a person is not incapacitated to contract merely because of advanced
years or by reason of physical infirmities. Only when such age or infirmities impair her mental

faculties to such extent as to prevent her from properly, intelligently, and fairly protecting her
property rights, is she considered incapacitated.[30] The respondents utterly failed to show
adequate proof that at the time of the sale on April 28, 1989 Carmen Ozamiz had allegedly
lost control of her mental faculties.
We note that the respondents sought to impugn only one document, namely, the Deed of
Absolute Sale dated April 28, 1989, executed by Carmen Ozamiz. However, there are nine
(9) other important documents that were, signed by Carmen Ozamiz either before or after
April 28, 1989 which were not assailed by the respondents.[31] Such is contrary to their
assertion of complete incapacity of Carmen Ozamiz to handle her affairs since 1987. We
agree with the trial courts assessment that it is unfair for the [respondents] to claim soundness
of mind of Carmen Ozamiz when it benefits them and otherwise when it disadvantages
them.[32] A person is presumed to be of sound mind at any particular time and the condition
is presumed to continue to exist, in the absence of proof to the contrary.[33] Competency and
freedom from undue influence, shown to have existed in the other acts done or contracts
executed, are presumed to continue until the contrary is shown.[34]
All the foregoing considered, we find the instant petition to be meritorious and the same should
be granted.
WHEREFORE, the instant petition is hereby GRANTED and the assailed Decision and
Resolution of the Court of Appeals are hereby REVERSED and SET ASIDE. The Decision
dated September 23, 1992 of the Regional Trial Court of Cebu City, Branch 6, in Civil Case
No. CEB-10766 is REINSTATED. No pronouncement as to costs.
SO ORDERED.

2.

AYALA CORP v. CA

[G.R. No. 118305. February 12, 1998]

AYALA INVESTMENT & DEVELOPMENT CORP. and ABELARDO MAGSAJO, petitioners,
vs. COURT OF APPEALS and SPOUSES ALFREDO & ENCARNACION CHING,
respondents.
DECISION
MARTINEZ, J.:
Under Article 161 of the Civil Code, what debts and obligations contracted by the husband
alone are considered for the benefit of the conjugal partnership which are chargeable against
the conjugal partnership? Is a surety agreement or an accommodation contract entered into
by the husband in favor of his employer within the contemplation of the said provision?
These are the issues which we will resolve in this petition for review.
The petitioner assails the decision dated April 14, 1994 of the respondent Court of Appeals in
Spouses Alfredo and Encarnacion Ching vs. Ayala Investment and Development Corporation,
et. al., docketed as CA-G.R. CV No. 29632,[1] upholding the decision of the Regional Trial
Court of Pasig, Branch 168, which ruled that the conjugal partnership of gains of respondentsspouses Alfredo and Encarnacion Ching is not liable for the payment of the debts secured by
respondent-husband Alfredo Ching.
A chronology of the essential antecedent facts is necessary for a clear understanding of the
case at bar.
Philippine Blooming Mills (hereinafter referred to as PBM) obtained a P50,300,000.00 loan
from petitioner Ayala Investment and Development Corporation (hereinafter referred to as
AIDC). As added security for the credit line extended to PBM, respondent Alfredo Ching,
Executive Vice President of PBM, executed security agreements on December 10, 1980 and
on March 20, 1981 making himself jointly and severally answerable with PBMs indebtedness
to AIDC.
PBM failed to pay the loan. Thus, on July 30, 1981, AIDC filed a case for sum of money
against PBM and respondent-husband Alfredo Ching with the then Court of First Instance of
Rizal (Pasig), Branch VIII, entitled Ayala Investment and Development Corporation vs.
Philippine Blooming Mills and Alfredo Ching, docketed as Civil Case No. 42228.
After trial, the court rendered judgment ordering PBM and respondent-husband Alfredo Ching
to jointly and severally pay AIDC the principal amount of P50,300,000.00 with interests.
Pending appeal of the judgment in Civil Case No. 42228, upon motion of AIDC, the lower
court issued a writ of execution pending appeal. Upon AIDCs putting up of an P8,000,000.00
bond, a writ of execution dated May 12, 1982 was issued. Thereafter, petitioner Abelardo
Magsajo, Sr., Deputy Sheriff of Rizal and appointed sheriff in Civil Case No. 42228, caused
the issuance and service upon respondents-spouses of a notice of sheriff sale dated May 20,
1982 on three (3) of their conjugal properties. Petitioner Magsajo then scheduled the auction
sale of the properties levied.

On June 9, 1982, private respondents filed a case of injunction against petitioners with the
then Court of First Instance of Rizal (Pasig), Branch XIII, to enjoin the auction sale alleging
that petitioners cannot enforce the judgment against the conjugal partnership levied on the
ground that, among others, the subject loan did not redound to the benefit of the said conjugal
partnership.[2] Upon application of private respondents, the lower court issued a temporary
restraining order to prevent petitioner Magsajo from proceeding with the enforcement of the
writ of execution and with the sale of the said properties at public auction.
AIDC filed a petition for certiorari before the Court of Appeals,[3] questioning the order of the
lower court enjoining the sale. Respondent Court of Appeals issued a Temporary Restraining
Order on June 25, 1982, enjoining the lower court[4] from enforcing its Order of June 14,
1982, thus paving the way for the scheduled auction sale of respondents-spouses conjugal
properties.
On June 25, 1982, the auction sale took place. AIDC being the only bidder, was issued a
Certificate of Sale by petitioner Magsajo, which was registered on July 2, 1982. Upon
expiration of the redemption period, petitioner sheriff issued the final deed of sale on August
4, 1982 which was registered on August 9, 1983.
In the meantime, the respondent court, on August 4, 1982, decided CA-G.R. SP No. 14404,
in this manner:
WHEREFORE, the petition for certiorari in this case is granted and the challenged order of
the respondent Judge dated June 14, 1982 in Civil Case No. 46309 is hereby set aside and
nullified. The same petition insofar as it seeks to enjoin the respondent Judge from proceeding
with Civil Case No. 46309 is, however, denied. No pronouncement is here made as to costs.
x x x x.[5]
On September 3, 1983, AIDC filed a motion to dismiss the petition for injunction filed before
Branch XIII of the CFI of Rizal (Pasig) on the ground that the same had become moot and
academic with the consummation of the sale. Respondents filed their opposition to the motion
arguing, among others, that where a third party who claims ownership of the property attached
or levied upon, a different legal situation is presented; and that in this case, two (2) of the real
properties are actually in the name of Encarnacion Ching, a non-party to Civil Case No.
42228.
The lower court denied the motion to dismiss. Hence, trial on the merits proceeded. Private
respondents presented several witnesses. On the other hand, petitioners did not present any
evidence.
On September 18, 1991, the trial court promulgated its decision declaring the sale on
execution null and void. Petitioners appealed to the respondent court, which was docketed as
CA-G.R. CV No. 29632.
On April 14, 1994, the respondent court promulgated the assailed decision, affirming the
decision of the regional trial court. It held that:
The loan procured from respondent-appellant AIDC was for the advancement and benefit of
Philippine Blooming Mills and not for the benefit of the conjugal partnership of petitionersappellees.

xxxxxxxxx
As to the applicable law, whether it is Article 161 of the New Civil Code or Article 1211 of the
Family Code-suffice it to say that the two provisions are substantially the same. Nevertheless,
We agree with the trial court that the Family Code is the applicable law on the matter x x x x
x x.
Article 121 of the Family Code provides that The conjugal partnership shall be liable for: x x
x (2) All debts and obligations contracted during the marriage by the designated AdministratorSpouse for the benefit of the conjugal partnership of gains x x x. The burden of proof that the
debt was contracted for the benefit of the conjugal partnership of gains, lies with the creditorparty litigant claiming as such. In the case at bar, respondent-appellant AIDC failed to prove
that the debt was contracted by appellee-husband, for the benefit of the conjugal partnership
of gains.
The dispositive portion of the decision reads:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered DISMISSING the
appeal. The decision of the Regional Trial Court is AFFIRMED in toto.[6]
Petitioner filed a Motion for Reconsideration which was denied by the respondent court in a
Resolution dated November 28, 1994.[7]
Hence, this petition for review. Petitioner contends that the respondent court erred in ruling
that the conjugal partnership of private respondents is not liable for the obligation by the
respondent-husband.

There is a difference between the phrases: redounded to the benefit of or benefited from (on
the one hand) and for the benefit of (on the other). The former require that actual benefit must
have been realized; the latter requires only that the transaction should be one which normally
would produce benefit to the partnership, regardless of whether or not actual benefit
accrued.[8]
We do not agree with petitioners that there is a difference between the terms redounded to
the benefit of or benefited from on the one hand; and for the benefit of on the other. They
mean one and the same thing. Article 161 (1) of the Civil Code and Article 121 (2) of the
Family Code are similarly worded, i.e., both use the term for the benefit of. On the other hand,
Article 122 of the Family Code provides that The payment of personal debts by the husband
or the wife before or during the marriage shall not be charged to the conjugal partnership
except insofar as they redounded to the benefit of the family. As can be seen, the terms are
used interchangeably.
Petitioners further contend that the ruling of the respondent court runs counter to the
pronouncement of this Court in the case of Cobb-Perez vs. Lantin,[9] that the husband as
head of the family and as administrator of the conjugal partnership is presumed to have
contracted obligations for the benefit of the family or the conjugal partnership.
Contrary to the contention of the petitioners, the case of Cobb-Perez is not applicable in the
case at bar. This Court has, on several instances, interpreted the term for the benefit of the
conjugal partnership.
In the cases of Javier vs. Osmea,[10] Abella de Diaz vs. Erlanger & Galinger, Inc.,[11] CobbPerez vs. Lantin[12] and G-Tractors, Inc. vs. Court of Appeals,[13] cited by the petitioners,
we held that:

Specifically, the errors allegedly committed by the respondent court are as follows:
I. RESPONDENT COURT ERRED IN RULING THAT THE OBLIGATION INCURRED BY
RESPONDENT HUSBAND DID NOT REDOUND TO THE BENEFIT OF THE CONJUGAL
PARTNERSHIP OF THE PRIVATE RESPONDENT.
II RESPONDENT COURT ERRED IN RULING THAT THE ACT OF RESPONDENT
HUSBAND IN SECURING THE SUBJECT LOAN IS NOT PART OF HIS INDUSTRY,
BUSINESS OR CAREER FROM WHICH HE SUPPORTS HIS FAMILY.
Petitioners in their appeal point out that there is no need to prove that actual benefit
redounded to the benefit of the partnership; all that is necessary, they say, is that the
transaction was entered into for the benefit of the conjugal partnership. Thus, petitioners aver
that:
The wordings of Article 161 of the Civil Code is very clear: for the partnership to be held liable,
the husband must have contracted the debt for the benefit of the partnership, thus:
Art. 161. The conjugal partnership shall be liable for:
1) all debts and obligations contracted by the husband for the benefit of the conjugal
partnership x x x.

The debts contracted by the husband during the marriage relation, for and in the exercise of
the industry or profession by which he contributes toward the support of his family, are not his
personal and private debts, and the products or income from the wifes own property, which,
like those of her husbands, are liable for the payment of the marriage expenses, cannot be
excepted from the payment of such debts. (Javier)
The husband, as the manager of the partnership (Article 1412, Civil Code), has a right to
embark the partnership in an ordinary commercial enterprise for gain, and the fact that the
wife may not approve of a venture does not make it a private and personal one of the husband.
(Abella de Diaz)
Debts contracted by the husband for and in the exercise of the industry or profession by which
he contributes to the support of the family, cannot be deemed to be his exclusive and private
debts. (Cobb-Perez)
x x x if he incurs an indebtedness in the legitimate pursuit of his career or profession or suffers
losses in a legitimate business, the conjugal partnership must equally bear the indebtedness
and the losses, unless he deliberately acted to the prejudice of his family. (G-Tractors)

However, in the cases of Ansaldo vs. Sheriff of Manila, Fidelity Insurance & Luzon Insurance
Co.,[14] Liberty Insurance Corporation vs. Banuelos,[15] and Luzon Surety Inc. vs. De
Garcia,[16] cited by the respondents, we ruled that:
The fruits of the paraphernal property which form part of the assets of the conjugal
partnership, are subject to the payment of the debts and expenses of the spouses, but not to
the payment of the personal obligations (guaranty agreements) of the husband, unless it be
proved that such obligations were productive of some benefit to the family. (Ansaldo;
parenthetical phrase ours.)
When there is no showing that the execution of an indemnity agreement by the husband
redounded to the benefit of his family, the undertaking is not a conjugal debt but an obligation
personal to him. (Liberty Insurance)
In the most categorical language, a conjugal partnership under Article 161 of the new Civil
Code is liable only for such debts and obligations contracted by the husband for the benefit
of the conjugal partnership. There must be the requisite showing then of some advantage
which clearly accrued to the welfare of the spouses. Certainly, to make a conjugal partnership
respond for a liability that should appertain to the husband alone is to defeat and frustrate the
avowed objective of the new Civil Code to show the utmost concern for the solidarity and wellbeing of the family as a unit. The husband, therefore, is denied the power to assume
unnecessary and unwarranted risks to the financial stability of the conjugal partnership.
(Luzon Surety, Inc.)
From the foregoing jurisprudential rulings of this Court, we can derive the following
conclusions:
(A) If the husband himself is the principal obligor in the contract, i.e., he directly received the
money and services to be used in or for his own business or his own profession, that contract
falls within the term x x x x obligations for the benefit of the conjugal partnership. Here, no
actual benefit may be proved. It is enough that the benefit to the family is apparent at the time
of the signing of the contract. From the very nature of the contract of loan or services, the
family stands to benefit from the loan facility or services to be rendered to the business or
profession of the husband. It is immaterial, if in the end, his business or profession fails or
does not succeed. Simply stated, where the husband contracts obligations on behalf of the
family business, the law presumes, and rightly so, that such obligation will redound to the
benefit of the conjugal partnership.
(B) On the other hand, if the money or services are given to another person or entity, and the
husband acted only as a surety or guarantor, that contract cannot, by itself, alone be
categorized as falling within the context of obligations for the benefit of the conjugal
partnership. The contract of loan or services is clearly for the benefit of the principal debtor
and not for the surety or his family. No presumption can be inferred that, when a husband
enters into a contract of surety or accommodation agreement, it is for the benefit of the
conjugal partnership. Proof must be presented to establish benefit redounding to the conjugal
partnership.
Thus, the distinction between the Cobb-Perez case, and we add, that of the three other
companion cases, on the one hand, and that of Ansaldo, Liberty Insurance and Luzon Surety,
is that in the former, the husband contracted the obligation for his own business; while in the

latter, the husband merely acted as a surety for the loan contracted by another for the latters
business.
The evidence of petitioner indubitably show that co-respondent Alfredo Ching signed as
surety for the P50M loan contracted on behalf of PBM. Petitioner should have adduced
evidence to prove that Alfredo Chings acting as surety redounded to the benefit of the
conjugal partnership. The reason for this is as lucidly explained by the respondent court:
The loan procured from respondent-appellant AIDC was for the advancement and benefit of
Philippine Blooming Mills and not for the benefit of the conjugal partnership of petitionersappellees. Philippine Blooming Mills has a personality distinct and separate from the family of
petitioners-appellees - this despite the fact that the members of the said family happened to
be stockholders of said corporate entity.
xxxxxxxxx
x x x. The burden of proof that the debt was contracted for the benefit of the conjugal
partnership of gains, lies with the creditor-party litigant claiming as such. In the case at bar,
respondent-appellant AIDC failed to prove that the debt was contracted by appellee-husband,
for the benefit of the conjugal partnership of gains. What is apparent from the facts of the case
is that the judgment debt was contracted by or in the name of the Corporation Philippine
Blooming Mills and appellee-husband only signed as surety thereof. The debt is clearly a
corporate debt and respondent-appellants right of recourse against appellee-husband as
surety is only to the extent of his corporate stockholdings. It does not extend to the conjugal
partnership of gains of the family of petitioners-appellees. x x x x x x. [17]
Petitioners contend that no actual benefit need accrue to the conjugal partnership. To support
this contention, they cite Justice J.B.L. Reyes authoritative opinion in the Luzon Surety
Company case:
I concur in the result, but would like to make of record that, in my opinion, the words all debts
and obligations contracted by the husband for the benefit of the conjugal partnership used in
Article 161 of the Civil Code of the Philippines in describing the charges and obligations for
which the conjugal partnership is liable do not require that actual profit or benefit must accrue
to the conjugal partnership from the husbands transaction; but it suffices that the transaction
should be one that normally would produce such benefit for the partnership. This is the ratio
behind our ruling in Javier vs. Osmea, 34 Phil. 336, that obligations incurred by the husband
in the practice of his profession are collectible from the conjugal partnership.
The aforequoted concurring opinion agreed with the majority decision that the conjugal
partnership should not be made liable for the surety agreement which was clearly for the
benefit of a third party. Such opinion merely registered an exception to what may be construed
as a sweeping statement that in all cases actual profit or benefit must accrue to the conjugal
partnership. The opinion merely made it clear that no actual benefits to the family need be
proved in some cases such as in the Javier case. There, the husband was the principal obligor
himself. Thus, said transaction was found to be one that would normally produce x x x benefit
for the partnership. In the later case of G-Tractors, Inc., the husband was also the principal
obligor - not merely the surety. This latter case, therefore, did not create any precedent. It did
not also supersede the Luzon Surety Company case, nor any of the previous accommodation
contract cases, where this Court ruled that they were for the benefit of third parties.

But it could be argued, as the petitioner suggests, that even in such kind of contract of
accommodation, a benefit for the family may also result, when the guarantee is in favor of the
husbands employer.
In the case at bar, petitioner claims that the benefits the respondent family would reasonably
anticipate were the following:
(a) The employment of co-respondent Alfredo Ching would be prolonged and he would be
entitled to his monthly salary of P20,000.00 for an extended length of time because of the
loan he guaranteed;
(b) The shares of stock of the members of his family would appreciate if the PBM could be
rehabilitated through the loan obtained;
(c) His prestige in the corporation would be enhanced and his career would be boosted should
PBM survive because of the loan.
However, these are not the benefits contemplated by Article 161 of the Civil Code. The
benefits must be one directly resulting from the loan. It cannot merely be a by-product or a
spin-off of the loan itself.
In all our decisions involving accommodation contracts of the husband,[18] we underscored
the requirement that: there must be the requisite showing x x x of some advantage which
clearly accrued to the welfare of the spouses or benefits to his family or that such obligations
are productive of some benefit to the family. Unfortunately, the petition did not present any
proof to show: (a) Whether or not the corporate existence of PBM was prolonged and for how
many months or years; and/or (b) Whether or not the PBM was saved by the loan and its
shares of stock appreciated, if so, how much and how substantial was the holdings of the
Ching family.
Such benefits (prospects of longer employment and probable increase in the value of stocks)
might have been already apparent or could be anticipated at the time the accommodation
agreement was entered into. But would those benefits qualify the transaction as one of the
obligations x x x for the benefit of the conjugal partnership? Are indirect and remote probable
benefits, the ones referred to in Article 161 of the Civil Code? The Court of Appeals in denying
the motion for reconsideration, disposed of these questions in the following manner:
No matter how one looks at it, the debt/credit extended by respondents-appellants is purely a
corporate debt granted to PBM, with petitioner-appellee-husband merely signing as surety.
While such petitioner-appellee-husband, as such surety, is solidarily liable with the principal
debtor AIDC, such liability under the Civil Code provisions is specifically restricted by Article
122 (par. 1) of the Family Code, so that debts for which the husband is liable may not be
charged against conjugal partnership properties. Article 122 of the Family Code is explicit The
payment of personal debts contracted by the husband or the wife before or during the
marriage shall not be charged to the conjugal partnership except insofar as they redounded
to the benefit of the family.
Respondents-appellants insist that the corporate debt in question falls under the exception
laid down in said Article 122 (par. one). We do not agree. The loan procured from respondent-

appellant AIDC was for the sole advancement and benefit of Philippine Blooming Mills and
not for the benefit of the conjugal partnership of petitioners-appellees.
x x x appellee-husband derives salaries, dividends benefits from Philippine Blooming Mills
(the debtor corporation), only because said husband is an employee of said PBM. These
salaries and benefits, are not the benefits contemplated by Articles 121 and 122 of the Family
Code. The benefits contemplated by the exception in Article 122 (Family Code) is that benefit
derived directly from the use of the loan. In the case at bar, the loan is a corporate loan
extended to PBM and used by PBM itself, not by petitioner-appellee-husband or his family.
The alleged benefit, if any, continuously harped by respondents-appellants, are not only
incidental but also speculative.[19]
We agree with the respondent court. Indeed, considering the odds involved in guaranteeing
a large amount (P50,000,000.00) of loan, the probable prolongation of employment in PBM
and increase in value of its stocks, would be too small to qualify the transaction as one for the
benefit of the suretys family. Verily, no one could say, with a degree of certainty, that the said
contract is even productive of some benefits to the conjugal partnership.
We likewise agree with the respondent court (and this view is not contested by the petitioners)
that the provisions of the Family Code is applicable in this case. These provisions highlight
the underlying concern of the law for the conservation of the conjugal partnership; for the
husbands duty to protect and safeguard, if not augment, not to dissipate it.
This is the underlying reason why the Family Code clarifies that the obligations entered into
by one of the spouses must be those that redounded to the benefit of the family and that the
measure of the partnerships liability is to the extent that the family is benefited.[20]
These are all in keeping with the spirit and intent of the other provisions of the Civil Code
which prohibits any of the spouses to donate or convey gratuitously any part of the conjugal
property.[21] Thus, when co-respondent Alfredo Ching entered into a surety agreement he,
from then on, definitely put in peril the conjugal property (in this case, including the family
home) and placed it in danger of being taken gratuitously as in cases of donation.
In the second assignment of error, the petitioner advances the view that acting as surety is
part of the business or profession of the respondent-husband.
This theory is new as it is novel.
The respondent court correctly observed that:
Signing as a surety is certainly not an exercise of an industry or profession, hence the cited
cases of Cobb-Perez vs. Lantin; Abella de Diaz vs. Erlanger & Galinger; G-Tractors, Inc. vs.
CA do not apply in the instant case. Signing as a surety is not embarking in a business.[22]
We are likewise of the view that no matter how often an executive acted or was persuaded to
act, as a surety for his own employer, this should not be taken to mean that he had thereby
embarked in the business of suretyship or guaranty.
This is not to say, however, that we are unaware that executives are often asked to stand as
surety for their companys loan obligations. This is especially true if the corporate officials have

sufficient property of their own; otherwise, their spouses signatures are required in order to
bind the conjugal partnerships.
The fact that on several occasions the lending institutions did not require the signature of the
wife and the husband signed alone does not mean that being a surety became part of his
profession. Neither could he be presumed to have acted for the conjugal partnership.
Article 121, paragraph 3, of the Family Code is emphatic that the payment of personal debts
contracted by the husband or the wife before or during the marriage shall not be charged to
the conjugal partnership except to the extent that they redounded to the benefit of the family.
Here, the property in dispute also involves the family home. The loan is a corporate loan not
a personal one. Signing as a surety is certainly not an exercise of an industry or profession
nor an act of administration for the benefit of the family.
On the basis of the facts, the rules, the law and equity, the assailed decision should be upheld
as we now uphold it. This is, of course, without prejudice to petitioners right to enforce the
obligation in its favor against the PBM receiver in accordance with the rehabilitation program
and payment schedule approved or to be approved by the Securities & Exchange
Commission.
WHEREFORE, the petition for review should be, as it is hereby, DENIED for lack of merit.
SO ORDERED.

3.

MANILA BANKING v. SILVERIO

[G.R. No. 132887. August 11, 2005]

THE MANILA BANKING CORPORATION, petitioner, vs. EDMUNDO S. SILVERIO and THE
COURT OF APPEALS, respondents.
DECISION
CHICO-NAZARIO, J.:
Before the Court is a petition for review on certiorari of the Decision[1] and Resolution[2] of
the Court of Appeals reversing the dismissal by the Regional Trial Court (RTC) of Makati City
of the petition of private respondent for cancellation of notice of levy on attachment and writ
of attachment on two (2) parcels of land located in Paraaque City.
The facts that gave rise to the present controversy are as follows:
Purificacion Ver was the registered owner of two parcels of land located at La Huerta,
Paraaque City, covered by Transfer Certificates of Title (TCTs) No. 31444 (452448) and No.
45926 (452452) of the Registry of Deeds of Paraaque City.[3]
On 16 April 1979, Purificacion Ver sold the properties to Ricardo C. Silverio, Sr. (Ricardo, Sr.)
for P1,036,475.00.[4] The absolute deed of sale evidencing the transaction was not
registered; hence, title remained with the seller, Purificacion Ver.
On 22 February 1990, herein petitioner, The Manila Banking Corporation (TMBC), filed a
complaint with the RTC of Makati City for the collection of a sum of money with application for
the issuance of a writ of preliminary attachment against Ricardo, Sr. and the Delta Motors
Corporation docketed as Civil Case No. 90-513.[5] On 02 July 1990, by virtue of an Order of
Branch 62 of the RTC of Makati City, notice of levy on attachment of real property and writ of
attachment were inscribed on TCTs No. 31444 (452448) and No. 45926 (452452).[6] On 29
March 1993, the trial court rendered its Decision in favor of TMBC and against Ricardo, Sr.
and the Delta Motors Corporation.[7] The Decision was brought up to the Court of Appeals
for review.[8]
In the meantime, on 22 July 1993, herein private respondent, Edmundo S. Silverio
(Edmundo), the nephew[9] of judgment debtor Ricardo, Sr., requested TMBC to have the
annotations on the subject properties cancelled as the properties were no longer owned by
Ricardo, Sr.[10] This letter was referred to the Bangko Sentral Ng Pilipinas, TMBCs statutory
receiver.[11] No steps were taken to have the annotations cancelled.[12] Thus, on 17
December 1993, Edmundo filed in the RTC of Makati City a case for Cancellation of Notice
of Levy on Attachment and Writ of Attachment on Transfer Certificates of Title Nos. 452448
and 452452 of the Office of the Registrar of Land Titles and Deeds of Paraaque, Metro Manila.
In his petition, Edmundo alleged that as early as 11 September 1989, the properties, subject
matter of the case, were already sold to him by Ricardo, Sr. As such, these properties could
not be levied upon on 02 July 1990 to answer for the debt of Ricardo, Sr. who was no longer
the owner thereof. In its Answer with Compulsory Counterclaim, TMBC alleged, among other
things, that the sale in favor of Edmundo was void, therefore, the properties levied upon were
still owned by Ricardo, Sr., the debtor in Civil Case No. 90-513.

On 02 May 1995, after trial on the merits, the lower court rendered its Decision dismissing
Edmundos petition. TMBCs counterclaim was likewise dismissed for lack of sufficient merit.
The trial court held:
After a careful study of the facts proven in the instant case, the Court is compelled to rule that
the petitioner is not entitled to a cancellation of the annotations/inscriptions of the notice of
levy on attachment and writ of attachment appearing on Transfer Certificates of Title Nos.
45228 31444 and (452452) 45926 of the Registry of Deeds of Paraaque, Metro Manila. The
Court is inclined to agree with the contention of oppositor that the supposed deed of sale in
favor of herein petitioner is fictitious and simulated and thus void ab initio. The all-important
factor that what appears in the notarial register of the notary public, albeit in loose form, is not
a deed of sale but a mere affidavit of a different person Maria J. Segismundo --, as shown in
Exhibit 10-A, is sufficient to prove that no effective, valid and legal sale of the properties in
question was executed between the Silverio uncle and nephew. There being no valid sale to
him, petitioner has no right at all to ask for the cancellation of the aforementioned annotations.
WHEREFORE, the instant petition is hereby dismissed, with costs against petitioner.
Oppositors counterclaim is ordered dismissed for lack of sufficient merit.[13]
The Court of Appeals, upon reviewing the case at the instance of Edmundo, reversed and set
aside the trial courts ruling. The dispositive portion of its Decision reads:
WHEREFORE, foregoing considered, the appealed decision is hereby REVERSED and SETASIDE. A new one is rendered ORDERING the Register of Deeds of Paraaque City to cancel
the Notice of Levy on Attachment and the Writ of Attachment made on TCT Nos. 452448 and
452452.
Costs against oppositor-appellee.[14]
The motion for reconsideration filed by TMBC was denied for lack of merit in a Resolution
dated 25 February 1998.[15]
Hence, the present petition, TMBC imputing upon the Court of Appeals grave error in:
I.
. . . HOLDING THAT PETITIONER TMBC CANNOT QUESTION THE VALIDITY OF THE
SALE OF THE PROPERTIES COVERED BY TCT NO. 31444 (452448) AND 45926
(452452); UNDER ARTICLE 1421 OF THE CIVIL CODE, THE DEFENSE OF NULLITY OF
A CONTRACT IS AVAILABLE TO THIRD PERSONS WHOSE INTERESTS ARE DIRECTLY
AFFECTED.
II.
ORDERING THE CANCELLATION OF THE NOTICE OF LEVY ON ATTACHMENT AND
THE WRIT OF ATTACHMENT MADE ON TCT NO. 452448 AND 452452 SINCE AS
AGAINST TWO (2) TRANSACTIONS CONCERNING THE SAME LAND, THE REGISTERED
TRANSACTION PREVAILS OVER THE ALLEGED EARLIER UNREGISTERED RIGHT.
III.

FINDING THAT PETITIONER TMBC IS GUILTY OF BAD FAITH IN FAILING TO MAKE

INQUIRIES ON THE RIGHTS OF RICARDO SILVERIO, SR. OVER THE SUBJECT
PROPERTIES.
Basic is the rule that only properties belonging to the debtor can be attached, and an
attachment and sale of properties belonging to a third party are void.[16] At the pith of the
controversy, therefore, is the issue of ownership of the subject properties at the time of the
levy thereof as the right of petitioner TMBC, as creditor, depends on whether such properties
were still owned by its debtor, Ricardo, Sr., and not by Edmundo, who is concededly not a
debtor of TMBC. If the properties were validly transferred to Edmundo before the levy thereof
then cancellation of the annotation is in order. If, however, the sale was absolutely simulated
and was entered into between uncle and nephew for the lone reason of removing the
properties from the reach of TMBC, then the annotation should stay.
The issue of whether the contract is simulated or real is factual in nature, and the Court
eschews factual examination in a petition for review under Rule 45 of the Rules of Court.[17]
This rule, however, is not without exceptions, one of which is when there exists a conflict
between the factual findings of the trial court and of the appellate court,[18] as in the case at
bar.
The trial court, in ruling that TMBC was well within its rights to cause the levy of the properties
through a writ of preliminary attachment, held that the sale between Ricardo, Sr. and his
nephew, Edmundo, ostensibly effected before the levy of the subject properties, was void for
being absolutely simulated. The fictitious nature of the sale between the uncle and nephew,
according to the trial court, is made evident by the all-important factor that what appears in
the notarial register of the notary public, albeit in loose form, is not a deed of sale but a mere
affidavit of a different person Maria J. Segismundo -- as shown in Exhibit 10-A. The trial court
thus concluded that as the sale was void, the properties were still owned by Ricardo, Sr. at
the time the levy thereon was effected.
In reversing the trial court, the Court of Appeals reasoned, among other things, that the sale
between Ricardo, Sr. and Edmundo was not void and that assuming it to be void, only the
parties to the sale and/or their assigns can impugn or assail its validity. Moreover, assailing
the validity of a sale for being in fraud of creditors is a remedy of last resort, i.e., accion
pauliana can be availed of only after the creditor has had exhausted all the properties of the
debtor not exempt from execution.[19] In herein case, it does not appear that TMBC sought
other properties of Ricardo, Sr. other than the subject properties alleged to have been
transferred in fraud of creditors. Thus, as the sale of the subject properties was not void, it
rightfully transferred ownership to Edmundo who is not a debtor of TMBC. Consequently,
TMBC could not legally attach the same under Section 5, Rule 57 of the Rules of Civil
Procedure.
The validity of the contract of sale being the focal point in the two courts decision, we begin
our analysis into the matter with two veritable presumptions: first, that there was sufficient
consideration of the contract[20] and, second, that it was the result of a fair and regular private
transaction.[21] As we held in Suntay v. Court of Appeals,[22] if shown to hold, these
presumptions infer prima facie the transactions validity, except that it must yield to the
evidence adduced.

Between the disparate positions of the trial court and the Court of Appeals, we find those of
the trial court to be more in accord with the evidence on hand and the laws applicable thereto.
It will be noted that the Court of Appeals never justified its ruling that the lower court erred in
finding the subject sale was void. On the other hand, the evidence is overwhelming that the
sale dated 11 September 1989 between Ricardo Sr. and Edmundo was absolutely simulated
and that it was non-existent prior to its initial appearance on 22 July 1993 when the latter
wrote TMBC to cause the cancellation of its lien.
An absolutely simulated contract, under Article 1346 of the Civil Code, is void.[23] It takes
place when the parties do not intend to be bound at all.[24] The characteristic of simulation is
the fact that the apparent contract is not really desired or intended to produce legal effects or
in any way alter the juridical situation of the parties.[25] Thus, where a person, in order to
place his property beyond the reach of his creditors, simulates a transfer of it to another, he
does not really intend to divest himself of his title and control of the property; hence, the deed
of transfer is but a sham.[26] Lacking, therefore, in a fictitious and simulated contract is
consent which is essential to a valid and enforceable contract.[27]
In herein case, badges of fraud and simulation permeate the whole transaction, thus, we
cannot but refuse to give the sale validity and legitimacy. Consider the following
circumstances:
1) There is no proof that the said sale took place prior to the date of the attachment. The
notarized deed of sale, which would have served as the best evidence of the transaction, did
not materialize until 22 July 1993, or three (3) years after TMBC caused the annotation of its
lien on the titles subject matter of the alleged sale. Mr. Jerry Tanchuan, Archivist 1 of the
Records Management of the Archives Office (RMAO), testified that the procedure being
followed with respect to notarized documents is that the Records Section of the RTC will
transmit to the RMAO copies in its possession of the original documents notarized by a notary
public together with the Notarial Registry Book.[28] In herein case, the RTC did not transmit
any book of Atty. Anacleto T. Lacanilao, Jr., the notary public who allegedly notarized the
deed of sale between Ricardo, Sr. and Edmundo for the year 1989.[29] Instead, what the
RMAO was in possession of was only a loose leaf entry form for Document No. 444, Page
90, Book No. 17, Series of 1989 which is an affidavit of one Maria J. Segismundo dated 11
September 1989.[30] The RMAO did not have available in its file the particular deed of sale
acknowledged by Atty. Lacanilao as Document No. 444, Page 90, Book No. 17, Series of
1989.[31] In Tala Realty Services Corporation v. Banco Filipino Savings and Mortgage
Bank,[32] as reiterated in two other Tala cases,[33] the Court rejected a notarized deed that
was not reported to the Clerk of Court of the RTC by the notary public who notarized it. The
Court held that this fact militates against the use of the document as basis to uphold the
petitioners claim. The same is true in this case. The fact that the assailed deed of sale is not
one of those submitted by Atty. Lacanilao to the Clerk of Court of the RTC of Makati City[34]
renders it virtually worthless in the absence of corroboration as to its due execution other than
petitioner (now private respondent) Edmundos self-serving statements. This being the case,
Edmundo could simply have presented the witnesses to the transaction (his wife and his
lawyer), Atty. Lacanilao or the seller himself, Ricardo Sr., to testify as to the execution of the
contract of sale on 11 September 1989. This he did not do, thus lending more credence to
the theory of TMBC that the sale was entered into only as an afterthought, hatched to prevent
the transfer of the properties to TMBC after the latter had already annotated its lien thereon.

2) Edmundo, to say the least, was very evasive when questioned regarding details of the
alleged sale. The deed of sale mentioned Three Million One Hundred Nine Thousand and
Four Hundred Twenty-Five pesos (P3,109,425.00) as the contract price paid by hand during
the execution of the contract, yet, when asked on cross-examination, Edmundo could not
remember if he paid directly to Ricardo, Sr.[35] Worse, he could not remember where Ricardo,
Sr. was at the time of the sale.[36] Thus:

A: When you said date, there was an exemption of payments made.

Q: But you gave the payment personally to Mr. Silverio?
A: I have to recall.
Q: So you cannot recall?

Q: Now, Mr. Silverio, there is on page 2 marked as Exhibit D-1 a signature over the typewritten
name Edmundo S. Silverio, will you please tell us whose signature is that?
A. My signature.
Q. And again, there is a signature over the typewritten name Ricardo Silverio, vendor, will you
please tell us whose signature is that?
A: That is the signature of the seller.
Q: And why do you say or how did you know that this is the signature of Ricardo Silverio?
A: Because the Deed of Absolute Sale was executed and signed infront of me.[37]

A: I cannot recall.[38]
If it were true that money indeed changed hands on 11 September 1989 as evidenced by the
assailed deed of sale, then, at the very least, Edmundo, as buyer, would definitely not have
forgotten personally handing P3,109,425.00 to the seller, Ricardo, Sr. It goes against ordinary
human experience for a person to simply forget the details of the day when he became poorer
by P3,109,425.00 cash. The only logical conclusion is that there was actually no consideration
for the said sale. Verily, a deed of sale in which the stated consideration has not in fact been
paid is a false contract that is void ab initio.[39] Likewise, a contract of purchase and sale is
null and void and produces no effect whatsoever where it appears that [the] same is without
cause or consideration which should have been the motive thereof, or the purchase price
appears thereon as paid but which in fact has never been paid by the purchaser to the vendor.
[40]

...
Q: And Mr. Witness, at the time of the Deed of Sale on September 11, 1989, was Ricardo
Silverio in the country at that time?
A: I cannot give the exact presence of him. I cannot remember now.
Q: But at the time of the Deed of Sale on September 11, 1989, you know if he was in the
country or not?

3) As correctly pointed out by TMBC, an indication of simulation of contract is the complete

absence of an attempt in any manner on the part of the ostensible buyer to assert rights of
ownership over the subject properties. In herein case, Edmundo did not attempt to have the
1989 deed of sale registered until 1993.[41] He was not in possession of the properties.[42]
He did not have a contract of lease with the actual occupant of the properties.[43] As late as
1991, it was Ricardo, Sr. who was claiming to be the rightful owner of the properties in
connection with an ejectment case he filed against third persons.[44] When asked to explain
why it was Ricardo, Sr. who was asserting ownership over the properties, Edmundo lamely
replied because I am asking him so.[45]

A: I cannot remember.
Q: With respect to the consideration for the purchase of subject parcels of land, what was the
manner of payment for said consideration?
A: It is already mentioned in the Deed of Absolute Sale.
Q: In the deed of Absolute Sale there is mentioned made by hand, can you explain that?
A: The Deed of Absolute Sale clearly specified already the payment on which the payment
was made.
Q: The Deed of Absolute Sale mentioned by hand, what does that mean that you personally
handed the payment to Mr. Silverio?
A: Payment was made to him.
Q: By hand you mean he was present?

Taken together with the other circumstances surrounding the sale, Edmundos failure to
exercise acts of dominium over the subject properties buttresses TMBCs position that the
former did not at all intend to be bound by the contract of sale. In Suntay,[46] as reiterated in
such cases as Santiago v. Court of Appeals,[47] Cruz v. Bancom Finance Corporation[48]
and Ramos v. Heirs of Ramos, Sr.,[49] we held that the most proturberant index of simulation
is the complete absence of an attempt in any manner on the part of the [ostensible buyer] to
assert his rights of ownership over the [properties] in question. The supposed buyers failure
to take exclusive possession of the property allegedly sold or, in the alternative, to collect
rentals, is contrary to the principle of ownership.[50] Such failure is a clear badge of simulation
that renders the whole transaction void pursuant to Article 1409 of the Civil Code.[51]
When a contract is void, the right to set-up its nullity or non-existence is available to third
persons whose interests are directly affected thereby.[52] The material interest of TMBC need
not be belabored. Suffice it to say that as judgment creditor of Ricardo, Sr., it has the right to
protect its lien acquired through a writ of preliminary attachment as security for the satisfaction
of any judgment in its favor.

The Court of Appeals, however, erroneously ruled that TMBC should first go after the
properties of its debtor, Ricardo, Sr., and, failing therein would be the only time it will acquire
a material interest over the subject properties, thus:
Article 117 of the New Civil Code is very explicit that the right or remedy of the creditor to
impugn the acts which the debtor may have done to defraud them is subsidiary in nature. It
can only be availed of in the absence of any other legal remedy to obtain reparation for the
injury. Otherwise stated, the right of accion pauliana can be availed of only AFTER the creditor
have exhausted all the properties of the debtor not exempt from executions.
This fact is not present in this case. Not a single proof was offered to show that oppositorappellee had exhausted all the properties of Ricardo Silverio before it tried to question the
validity of the contract of sale. In fact, oppositor-appellee never alleged in its pleadings that it
had exhausted all the properties of Ricardo Silverio before it impugned the validity of the sale
made by Ricardo Silverio to petitioner-appellant.
This being the case, oppositor-appellee cannot and is not in the proper position to question
the validity of the sale of the subject properties by Ricardo Silverio to petitioner-appellant.
Oppositor-appellee has not shown that it has the material interest to question the sale.[53]
Contrary to the position taken by the Court of Appeals, TMBC need not look farther than the
subject properties to protect its rights. The remedy of accion pauliana is available when the
subject matter is a conveyance, otherwise valid undertaken in fraud of creditors.[54] Such a
contract is governed by the rules on rescission which prescribe, under Art. 1383 of the Civil
Code, that such action can be instituted only when the party suffering damage has no other
legal means to obtain reparation for the same. The contract of sale before us, albeit
undertaken as well in fraud of creditors, is not merely rescissible but is void ab initio for lack
of consent of the parties to be bound thereby. A void or inexistent contract is one which has
no force and effect from the very beginning, as if it had never been entered into; it produces
no effect whatsoever either against or in favor of anyone.[55] Rescissible contracts, on the
other hand, are not void ab initio, and the principle, quod nullum est nullum producit effectum,
in void and inexistent contracts is inapplicable.[56] Until set aside in an appropriate action,
rescissible contracts are respected as being legally valid, binding and in force.[57] Tolentino,
a noted civilist, distinguished between these two types of contracts entered into in fraud of
creditors, thus:
Absolute simulation implies that there is no existing contract, no real act executed; while
fraudulent alienation means that there is a true and existing transfer or contract. The former
can be attacked by any creditor, including one subsequent to the contract; while the latter can
be assailed only by the creditors before the alienation. In absolute simulation, the insolvency
of the debtor making the simulated transfer is not a prerequisite to the nullity of the contract;
while in fraudulent alienation, the action to rescind, or accion pauliana, requires that the
creditor cannot recover in any other manner what is due him. Finally, the action to declare a
contract absolutely simulated does not prescribe (articles 1409 and 1410); while the accion
pauliana to rescind a fraudulent alienation prescribes in four years (article 1389).[58]
IN SUM, considering that an absolutely simulated contract is not a recognized mode of
acquiring ownership,[59] the levy of the subject properties on 02 July 1990 pursuant to a writ
of preliminary attachment duly issued by the RTC in favor of TMBC and against its debtor,
Ricardo, Sr., was validly made as the properties were invariably his. Consequently, Edmundo,

who has no legal interest in these properties, cannot cause the cancellation of the annotation
of such lien for the reasons stated in his petition.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 17 October
1997 and its Resolution dated 25 February 1998 are hereby REVERSED and SET ASIDE.
The Decision of the Regional Trial Court of Makati City, Branch 145, dated 02 May 1995, is
REINSTATED, dismissing the petition for Cancellation of Notice of Levy on Attachment and
Writ of Attachment on Transfer Certificates of Title No. 31444 (452448) and No. 45926
(452452) of the Registry of Deeds of Paraaque City. With costs.
SO ORDERED.

4.

DELA CRUZ v. DELA CRUZ

[G.R. No. 146222. January 15, 2004]

ERLINDA DELA CRUZ, PRISCILLA DE MESA, ZENAIDA LAMBERTO, FLORA DRISKELL
and ANGELITO DELA CRUZ, petitioners, vs. FORTUNATO DELA CRUZ, DIVINA
GUTIERREZ and CLARK GUTIERREZ, respondents.
DECISION
QUISUMBING, J.:
This petition seeks to annul and set aside the decision[1] of the Court of Appeals, promulgated
on September 14, 2000, in CA-G.R. CV No. 53679, affirming the decision[2] of the Regional
Trial Court (RTC) of Malolos, Bulacan, Branch 17, dated December 14, 1995, in Civil Case
No. 37-M-89. The trial court dismissed the complaint in Civil Case No. 37-M-89 and held that
herein respondents Clark and Divina Gutierrez are the lawful owners of the property in
dispute. Petitioners also seek to annul the appellate courts resolution,[3] dated November 28,
2000, denying their motion for reconsideration.
As culled from the records, the following are the facts of the case:
Paciencia dela Cruz, the original plaintiff in Civil Case No. 37-M-89, was the owner of a parcel
of land with an area of two (2) ares[4] and ninety (90) centares,[5] located at Lolomboy,
Bocaue, Bulacan. Said parcel was registered in her name under Transfer Certificate of Title
(TCT) No. T-14.585 (M). A flea market (talipapa) with fifty or so vendors was located on the
property and Paciencia collected from them their daily stall rentals. Paciencia had six (6)
children, namely Priscilla, Erlinda, Fortunato, Flora, Angelita and Zenaida, all surnamed dela
Cruz.
On September 25, 1980, Paciencia allegedly executed a Deed of Sale whereby for and in
consideration of P21,000, she conveyed said parcel in favor of her son, Fortunato dela
Cruz.[6] On November 26, 1980, the Register of Deeds of Bulacan issued TCT No. T-34.723
(M) in Fortunatos name.[7] Fortunato declared the property for taxation purposes and paid
realty taxes due thereon.[8] Sometime between August 1985 to September 1988, Fortunato
mortgaged the property three (3) times to one Erlinda de Guzman for the sums of P25,000,
P50,000 and P100,000.[9] Fortunato was unable to pay these loans.
On January 11, 1989, Fortunato executed a Kasulatan ng Bilihang Patuluyan[10] in favor of
Clark and Divina Gutierrez, the children of Claudio and Adoracion Gutierrez, to whom he
earlier offered to sell the property. The Kasulatan alleged the purchase price to be P58,000
only but the amount actually paid by the Gutierrezes to Fortunato was P600,000 as evidenced
by a receipt showing the true consideration for the sale.[11] That same day, the sale was
registered, leading to the cancellation of TCT No. T-34.723 (M) in the name of Fortunato.
Seven days later, a new certificate of title, TCT No. T-101011 (M) was issued in the name of
Clark and Divina Gutierrez. Thereafter, the Gutierrezes took possession of the property, had
the talipapa repaired, and collected the daily stall rentals from the vendors.

On February 8, 1989, the Complaint was amended to implead Clark and Divina Gutierrez, the
children of spouses Claudio and Adoracion Gutierrez, as defendants who had the subject
property titled in their names.
In her Complaint, Paciencia alleged that sometime in 1980, her son Fortunato, took advantage
of his close ties with her to induce her to sign an instrument which appeared to be a Deed of
Sale. Paciencia alleged that Fortunato assured her that she would remain the owner thereof
while Fortunato would hold the property in trust for her and upon her death, all her children
would share in the property. Fortunato allegedly did not pay her any consideration for such
sale. She also claimed that she continued to collect the daily stall rentals from the talipapa
tenants until sometime in 1986 when she fell ill and had to be hospitalized. As a result,
Fortunato took over the collection of the rentals. After Paciencia had recovered, she sought
to resume collecting the daily rentals but upon the plea of Fortunato who had no means of
income at that time, Paciencia allowed him to continue collecting the stall rentals. Fortunato,
however, was remiss in remitting the daily collections to Paciencia.
Sometime in December 1988, Paciencia was shocked to learn that Fortunato was offering the
property for sale. She then demanded that the property be reconveyed to her but Fortunato
refused to do so. Meanwhile upon learning that Fortunato was negotiating the sale of the land
with the Gutierrez spouses, Paciencia sent her daughter, Erlinda dela Cruz, to warn them that
Paciencia owned the property, and not Fortunato. However, the Gutierrez couple insisted on
buying the property and registered the same in favor of their children, Divina and Clark
Gutierrez. Consequently, the Gutierrezes took over the collection of stall rentals from the
tenants of the subject property.
In sum, Paciencia alleged that the sale of the property to the Gutierrezes was null and void
and fraudulently made as Fortunato had neither right nor authority from her to sell or convey
the subject property, as he only held it in trust for her.
In his Answer, Fortunato averred that he lawfully acquired the subject property from
Paciencia, who absolutely conveyed the same to him, delivered to him the owners duplicate
of the title, and upon her instructions, caused the registration of the property in his name.
For their part, Clark and Divina Gutierrez alleged that: (1) the subject property was titled in
the name of Fortunato dela Cruz; (2) Fortunato was also the one collecting the daily rentals
from the market vendors; (3) Fortunato feared he would lose the property due to his inability
to pay his mortgage indebtedness to Erlinda de Guzman; and (4) he pleaded with them to
help him, as a result of which they turned to their parents who withdrew their lifetime savings
just to be able to buy the property. Clark and Divina likewise alleged that Fortunato disclosed
to them that Paciencia herself did not like this instant suit as she had already given to all her
children her properties through similar transfers.
On December 14, 1995, the trial court decided Civil Case No. 37-M-89 in this wise:
WHEREFORE, premises considered, judgment is hereby rendered:

On January 20, 1989, Paciencia instituted an action for reconveyance of property with
preliminary injunction against Fortunato and the spouses Claudio and Adoracion Gutierrez,
before the RTC of Malolos, Bulacan, which docketed the complaint as Civil Case No. 37-M89.

1) dismissing the case and declaring defendants Clark and Divina Gutierrez as the lawful
owners of the property now covered by TCT No. T-101011(M);

2) ordering the plaintiff to pay defendant Fortunato dela Cruz litigation expenses of P2,000.00
and to pay the costs of the suit;
3) dismissing the counterclaim of defendants Gutierrezes for moral damages and attorneys
fees.
SO ORDERED.[12]
Paciencia then moved for reconsideration, but the trial court denied the motion. She then
interposed an appeal with the Court of Appeals, docketed as CA-G.R. CV No. 53679.
On January 22, 1997, Paciencia dela Cruz died and was substituted by her children, namely:
petitioners Erlinda dela Cruz, Priscilla de Mesa y dela Cruz, Zenaida Lamberto y dela Cruz,
Flora Driskell y dela Cruz and Angelita dela Cruz.
On September 14, 2000, the Court of Appeals affirmed the trial courts decision, thus:
WHEREFORE, premises considered, the appealed decision in Civil Case No. 37-M-89 is
hereby AFFIRMED. No costs.
SO ORDERED.[13]
Herein petitioners then moved for reconsideration, but it was denied by the appellate court.
Hence, this instant petition grounded on the following issues:
1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT
THE DECEASED PACIENCIA DELA CRUZ VOLUNTARILY EXECUTED THE DEED OF
ABSOLUTE SALE IN FAVOR OF RESPONDENT DELA CRUZ.
2. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT
THE RESPONDENTS GUTIERREZES ARE BUYERS IN GOOD FAITH.
3. WHETHER OR NOT THE EVIDENCE ON RECORD SUPPORTS THE DECISION OF THE
HONORABLE COURT OF APPEALS SUBJECT MATTER OF THE INSTANT PETITION
FOR REVIEW.[14]
Simply put, we find that the core issue in this case is whether the Deed of Absolute Sale
executed by the mother, Paciencia dela Cruz, in favor of her son respondent Fortunato dela
Cruz is simulated and must be declared void.
Petitioners contend that the Court of Appeals erred in holding that Paciencia dela Cruz, now
deceased, had voluntarily executed the Deed of Absolute Sale in favor of her son, Fortunato.
They fault the court a quo for failing to appreciate the fact that the Deed was entirely and
completely written in English, a language neither known nor understood by his mother,
Paciencia. Hence, the appellate court went against the dictates of Articles 1330 and 1332 of
the Civil Code.[15] Petitioners stress that there is no showing that the terms of the Deed had
been fully explained to Paciencia who allegedly executed the document.

Petitioners also contend that respondents Clark and Divina Gutierrez are not buyers in good
faith. A buyer in good faith is one who buys a thing for value and is not aware of any defect in
the title of the seller. Their father, Claudio Gutierrez, was the actual buyer of the subject
property, and was aware of the defect in the title of Fortunato. Hence, Claudio could not be a
buyer in good faith. Neither could his children respondents Clark and Divina Gutierrez qualify
and be deemed as buyers in good faith, since the said property was actually bought by their
father, who then caused the registration of the property in their names.
Respondents, for their part, maintain that the Court of Appeals did not err in affirming the trial
courts ruling that Paciencia dela Cruz voluntarily executed the Deed of Sale in Fortunatos
favor. They aver there was nothing amiss in said Deed. The Gutierrezes were innocent
purchasers in good faith entitled to the full protection of the law. In order that the purchaser
of land with a Torrens title may be considered in good faith, according to respondents, it is
enough that he examined the latest certificate of title, which was issued in the name of the
immediate transferor. This the Gutierrezes did. Moreover, they had reason to believe that
respondent Fortunato dela Cruzs title was free from flaws and defects upon learning that the
latter was the one collecting the daily stall rentals from the tenants and the fact that
respondent Fortunato had mortgaged the said property three (3) times and was then selling
the property to pay off his loans.
We find for respondents. Petitioners arguments are less than persuasive, to say the least. As
a rule, when the terms of a contract are clear and unambiguous as to the intention of the
contracting parties, the literal meaning of its stipulations shall control. It is only when the words
appear to contravene the evident intention of the parties that the latter shall prevail over the
former. The real nature of a contract may be determined from the express terms of the
agreement and from the contemporaneous and subsequent acts of the parties thereto.[16]
When they have no intention to be bound at all, the purported contract is absolutely simulated
and void. Hence, the parties may recover what they gave under the simulated contract. If, on
the other hand, the parties state a false cause in the contract to conceal their real agreement,
the contract is relatively simulated and the parties real agreement may be held binding
between them.[17]
In the present case, it is not disputed that Paciencia dela Cruz executed a Deed of Sale in
favor of her son, respondent Fortunato dela Cruz. However, petitioners insist that the said
document does not reflect the true intention and agreement of the parties. According to
petitioners, Fortunato was to merely hold the property in trust for their mother and that
ownership thereof would remain with the mother. Petitioners, however, failed to produce even
one credible witness who could categorically testify that such was the intent of Paciencia and
Fortunato. There is nothing on record to support sufficiently petitioners contention. Instead,
the evidence is unclear on whether Paciencia in her lifetime, or later the petitioners
themselves, actually asserted or attempted to assert rights of ownership over the subject
property after the alleged sale thereof to Fortunato. The lot in dispute was thrice mortgaged
by Fortunato with nary a protest or complaint from petitioners. When they learned that
Fortunato mortgaged the property to Erlinda de Guzman on three occasions: August 26, 1985,
April 6, 1987 and September 7, 1988, they refused to redeem the property. They reasoned
that if they would redeem the property and pay the debts of Fortunato, the property would
merely return to him.[18] Indeed, how could Fortunato have thrice obtained a mortgage over
the property, without having dominion over it? Fortunato declared the property in his name for
taxation purposes and paid the realty taxes, without any protest from Paciencia or petitioners.
His actions are contrary to petitioners allegation that the parties never intended to be bound

by the assailed contract. Tax receipts and declaration of ownership for taxation purposes are
strong evidence of ownership. It has been ruled that although tax declarations or realty tax
payments are not conclusive evidence of ownership, nevertheless, they are good indicia of
possession in the concept of owner for no one in his right mind will be paying taxes for a
property that is not in his actual or constructive possession.[19]
As the Court of Appeals well observed, for nine (9) years, Paciencia allowed Fortunato to
benefit from the property. It was only when she learned of its impending sale to the Gutierrez
spouses, that she took action to forestall the transfer of the property to a third person. She
then caused the annotation of her adverse claim on the certificate of title on the same day the
deed in favor of the Gutierrez children was registered. This was rather belated, for the deed
was already done.
Petitioners harp on the fact that the assailed Deed was in English and that it was not explained
to Paciencia. But we find that the petitioners failed to prove their allegation that Pacencia
could not speak, read, or understand English. Moreover, Paciencias bare testimony[20] on
this point is uncorroborated. For Article 1332 to apply, it must first be convincingly established
that the illiterate or disadvantaged party could not read or understand the language in which
the contract was written,[21] or that the contract was left unexplained to said party. Petitioners
failed to discharge this burden.
The Deed of Absolute Sale dated September 25, 1980 was duly acknowledged before a
notary public. As a notarized document, it has in its favor the presumption of regularity and it
carries the evidentiary weight conferred upon it with respect to its due execution. It is
admissible in evidence without further proof of its authenticity and is entitled to full faith and
credit upon its face.[22]
Coming now to whether the Gutierrezes were buyers in good faith, we note that both the trial
and appellate courts found that when Fortunato executed the Kasulatan ng Bilihang
Patuluyan on January 11, 1989 in favor of respondents Clark and Divina Gutierrez, the name
of the registered owner appearing in the certificate of title was that of Fortunato dela Cruz.
This Kasulatan was duly executed and acknowledged before a notary public. At the time of
its execution, there was no annotation on Fortunatos certificate of title to indicate any adverse
claim of any third person. Only two cautionary entries regarding Section 4,[23] Rule 74 of the
Rules of Court appear thereon. Nothing more substantial appears in the certificate of title to
indicate a scintilla of flaw or defect in Fortunatos title. Hence, we cannot fairly rule that in
relying upon said title, the respondent Gutierrezes were in bad faith. A person dealing with
registered land may safely rely upon the correctness of the certificate of title issued therefor
and the law will in no way oblige him to go behind the certificate to determine the condition of
the property. The law considers said person as an innocent purchaser for value. An innocent
purchaser for value is one who buys the property of another, without notice that some other
person has a right or interest in such property and pays the full price for the same, at the time
of such purchase or before he has notice of the claims or interest of some other person in the
property.[24]
We note, furthermore, that the Gutierrezes did not simply rely upon the face of Fortunatos
Certificate of Title to the property. They also employed the services of counsel Atty. Crisanta
Abarrientos, who verified the title with the Registry of Deeds. Thus, they took all the necessary
precautions to ascertain the true ownership of the property, even engaging the services of
legal counsel for that specific purpose, and it was only after said counsel assured them that

everything was in order did they finalize the arrangements to purchase the property. Hence,
we entertain no doubt that the respondent Gutierrezes were purchasers for value and in good
faith.[25]
WHEREFORE, the instant petition is DENIED for lack of merit. The assailed decision dated
September 14, 2000 of the Court of Appeals in CA-G.R. CV No. 53679, which sustained the
decision of the Regional Trial Court of Malolos, Bulacan, Branch 17, dated December 14,
1995, in Civil Case No. 37-M-89, as well as the appellate courts resolution of November 28,
2000, is AFFIRMED. Costs against petitioners.
SO ORDERED.

5.

NAVARRA v. PLANTERS DEVT BANK

FIRST DIVISI0N
SPS. JORGE NAVARRA and CARMELITA BERNARDO NAVARRA and RRRC
DEVELOPMENT CORPORATION,
Petitioners,
- versus -

PLANTERS DEVELOPMENT BANK and ROBERTO GATCHALIAN REALTY, INC.,

Respondents.
G.R. No. 172674
Present:
PUNO, C.J., Chairperson,
*SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA and
GARCIA, JJ.
Promulgated:
July 12, 2007
x---------------------------------------------------------------------------------------x
DECISION

On July 5, 1982, the Navarras obtained a loan of P1,200,000.00 from Planters Bank and, by
way of security therefor, executed a deed of mortgage over their aforementioned five (5)
parcels of land. Unfortunately, the couple failed to pay their loan obligation. Hence, Planters
Bank foreclosed on the mortgage and the mortgaged assets were sold to it for P1,341,850.00,
it being the highest bidder in the auction sale conducted on May 16, 1984. The one-year
redemption period expired without the Navarras having redeemed the foreclosed properties.
On the other hand, co-petitioner RRRC Development Corporation (RRRC) is a real estate
company owned by the parents of Carmelita Bernardo Navarra. RRRC itself obtained a loan
from Planters Bank secured by a mortgage over another set of properties owned by RRRC.
The loan having been likewise unpaid, Planters Bank similarly foreclosed the mortgaged
assets of RRRC. Unlike the Navarras, however, RRRC was able to negotiate with the Bank
for the redemption of its foreclosed properties by way of a concession whereby the Bank
allowed RRRC to refer to it would-be buyers of the foreclosed RRRC properties who would
remit their payments directly to the Bank, which payments would then be considered as
redemption price for RRRC. Eventually, the foreclosed properties of RRRC were sold to third
persons whose payments therefor, directly made to the Bank, were in excess by P300,000.00
for the redemption price.
In the meantime, Jorge Navarra sent a letter to Planters Bank, proposing to repurchase the
five (5) lots earlier auctioned to the Bank, with a request that he be given until August 31,
1985 to pay the down payment of P300,000.00. Dated July 18, 1985 and addressed to then
Planters Bank President Jesus Tambunting, the letter reads in full:
This will formalize my request for your kind consideration in allowing my brother and me to
buy back my house and lot and my restaurant building and lot together with the adjacent road
lot.
Since my brother, who is working in Saudi Arabia, has accepted this arrangement only
recently as a result of my urgent offer to him, perhaps it will be safe for us to set August 31,
1985 as the last day for the payment of a P300,000.00 downpayment. I hope you will grant
us the opportunity to raise the funds within this period, which includes an allowance for delays.

GARCIA, J.:
Assailed and sought to be set aside in this petition for review under Rule 45 of the Rules of
Court is the decision[1] dated September 27, 2004 of the Court of Appeals (CA) in CA-G.R.
CV No. 50002, as reiterated in its resolution[2] dated May 8, 2006, denying reconsideration
thereof. The challenged decision reversed that of the Regional Trial Court (RTC) of Makati
City, Branch 66, in its Civil Case No. 16917, an action for Specific Performance and Injunction
thereat commenced by the herein petitioners against the respondents. The Makati RTC ruled
that a perfected contract of sale existed in favor of Jorge Navarra and Carmelita Bernardo
Navarra (Navarras) over the properties involved in the suit and accordingly ordered Planters
Development Bank (Planters Bank) to execute the necessary deed of sale therefor. The CA
reversed that ruling. Hence, this recourse by the petitioners.
The facts:
The Navarras are the owners of five (5) parcels of land located at B.F. Homes, Paraaque and
covered by Transfer Certificates of Title (TCT) Nos. S-58017, S-58011, S-51732, S-51733
and A-14574. All these five (5) parcels of land are the subject of this controversy.

The purchase price, I understand, will be based on the redemption value plus accrued interest
at the prevailing rate up to the date of our sales contract. Maybe you can give us a long term
payment scheme on the basis of my brothers annual savings of roughly US$30,000.00
everytime he comes home for his home leave.
I realize that this is not a regular transaction but I am seeking your favor to give me a chance
to reserve whatever values I can still recover from the properties and to avoid any legal
complications that may arise as a consequence of the total loss of the Balangay lot. I hope
that you will extend to me your favorable action on this grave matter.
In response, Planters Bank, thru its Vice-President Ma. Flordeliza Aguenza, wrote back
Navarra via a letter dated August 16, 1985, thus:
Regarding your letter dated July 18, 1985, requesting that we give up to August 31, 1985 to
buy back your house and lot and restaurant and building subject to a P300,000.00

downpayment on the purchase price, please be advised that the Collection Committee has
agreed to your request.

In a decision dated July 10, 1995, the trial court ruled that there was a perfected contract of
sale between the Navarras and Planters Bank, and accordingly rendered judgment as follows:

Please see Mr. Rene Castillo, Head, Acquired Assets Unit, as soon as possible for the details
of the transaction so that they may work on the necessary documentation.

WHEREFORE, in view of the foregoing, judgment is hereby rendered ordering:

Accordingly, Jorge Navarra went to the Office of Mr. Rene Castillo on August 20, 1985,
bringing with him a letter requesting that the excess payment of P300,000.00 in connection
with the redemption made by the RRRC be applied as down payment for the Navarras
repurchase of their foreclosed properties.
Because the amount of P300,000.00 was sourced from a different transaction between RRRC
and Planters Bank and involved different debtors, the Bank required Navarra to submit a
board resolution from RRRC authorizing him to negotiate for and its behalf and empowering
him to apply the excess amount of P300,000.00 in RRRCs redemption payment as down
payment for the repurchase of the Navarras foreclosed properties.
Meanwhile, titles to said properties were consolidated in the name of Planters Bank, and on
August 27, 1985, new certificates of title were issued in its name, to wit: TCT Nos. 97073,
97074, 97075, 97076 and 97077.

a)
the cancellation of the Deed of Absolute Sale (Exh. 2) over lot 4137-C between
defendant Planters Development Bank and defendant Roberto Gatchalian Realty Corporation
(RGRI) with the vendor bank refunding all the payments made by the vendee RGRI without
interest less the five percent (5%) brokers commission:
b)
the defendant Planters Development Bank to execute the Deed of Absolute Sale
over the lots covered by TCT Nos. 97073, 97074, 97075, 97076, and 97077 in favor of all the
plaintiffs for a consideration of ONE MILLION EIGHT HUNDRED THOUSAND
(P1,800,000.00) less the downpayment of P300,000.00 plus interest at the rate of twenty five
percent (25%) per year for five (5) years to be paid in full upon the execution of the contract;
c)
the defendant Planters Development Bank the amount of TEN THOUSAND
PESOS (P10,000.00) by way of attorneys fees.
d)

No costs.

SO ORDERED.
Then, on January 21, 1987, Planters Bank sent a letter to Jorge Navarra informing him that it
could not proceed with the documentation of the proposed repurchase of the foreclosed
properties on account of his non- compliance with the Banks request for the submission of
the needed board resolution of RRRC.
In his reply-letter of January 28, 1987, Navarra claimed having already delivered copies of
the required board resolution to the Bank. The Bank, however, did not receive said copies.
Thus, on February 19, 1987, the Bank sent a notice to the Navarrras demanding that they
surrender and vacate the properties in question for their failure to exercise their right of
redemption.
Such was the state of things when, on June 31, 1987, in the RTC of Makati City, the Navarras
filed their complaint for Specific Performance with Injunction against Planters Bank. In their
complaint docketed in said court as Civil Case No. 16917 and raffled to Branch 66 thereof,
the Navarras, as plaintiffs, alleged that a perfected contract of sale was made between them
and Planters Bank whereby they would repurchase the subject properties for P1,800,000.00
with a down payment of P300,000.00.
In its Answer, Planters Bank asserted that there was no perfected contract of sale because
the terms and conditions for the repurchase have not yet been agreed upon.
On September 9, 1988, a portion of the lot covered by TCT No. 97077 (formerly TCT No. A14574) was sold by Planters Bank to herein co-respondent Roberto Gatchalian Realty, Inc.
(Gatchalian Realty). Consequently, TCT No. 97077 was cancelled and TCT No. 12692 was
issued in the name of Gatchalian Realty. This prompted the Navarras to amend their
complaint by impleading Gatchalian Realty as additional defendant.

Therefrom, Planters Bank and Gatchalian Realty separately went on appeal to the CA
whereat their appellate recourse were consolidated and docketed as CA-G.R. CV No. 50002.
As stated at the threshold hereof, the appellate court, in its decision of September 27, 2004,
reversed that of the trial court and ruled that there was no perfected contract of sale between
the parties. Partly says the CA in its decision:
The Court cannot go along with the deduction of the trial court that the response of Planters
Bank was favorable to Jorge Navarras proposal and that the P300,000.00 in its possession
is a down payment and as such sufficient bases to conclude that there was a valid and
perfected contract of sale. Based on the turn of events and the tenor of the communications
between the offerors and the creditor bank, it appears that there was not even a perfected
contract to sell, much less a perfected contract of sale.
Article 1319 cited by the trial court provides that the acceptance to an offer must be absolute.
Simply put, there must be unqualified acceptance and no condition must tag along. But Jorge
Navarra in trying to convince the bank to agree, had himself laid out terms in offering (1) a
downpayment of P300,000.00 and setting (2) as deadline August 31, 1985 for the payment
thereof. Under these terms and conditions the bank indeed accepted his offer, and these are
essentially the contents of Exhibits J and K.
But was there compliance? According to the evidence on file the P300,000.00, if at all, was
given beyond the agreed period. The court a quo missed the fact that the said amount came
from the excess of the proceeds of the sale to the Pea spouses which Jorge Navarra made
to appear was made before the deadline he set of August 31, 1985. But this is athwart Exhibits
M-1 and N, the Contract to Sell and the Deed of Sale between RRRC and the Peas, for these
were executed only on September 13, 1985 and October 7, 1985 respectively.

xxx xxx xxx

Letter dated July 18, 1985 of Jorge Navarra:

There were two separate and independent loans secured by distinct mortgages on different
lots and their only commonality is the relationship of the Navarras and Bernardo families. It is
thus difficult to conceive and to conclude that such Byzantine arrangement was acquiesced
to and provided for in that single and simple letter of the bank.

This will formalize my request for your kind consideration in allowing my brother and me to
buy back my house and lot and my restaurant building and lot together with the adjacent road
lot.

With their motion for reconsideration having been denied by the CA in its resolution of May 8,
2006, petitioners are now with this Court via this recourse on their submission that the CA
erred I
XXX IN CONCLUDING THAT THERE WAS NO PERFECTED CONTRACT TO
REPURCHASE THE FORECLOSED PROPERTIES BETWEEN THE PETITIONERS AND
THE PRIVATE RESPONDENT PLANTERS DEVELOPMENT BANK, AS CORRECTLY
FOUND BY THE TRIAL COURT.
II

Since my brother, who is working in Saudi Arabia, has accepted this arrangement only
recently as a result of my urgent offer to him, perhaps it will be safe for us to set August 31,
1985 as the last day for the payment of a P300,000.00 downpayment. I hope you will grant
us the opportunity to raise the funds within this period, which includes an allowance for delays.
The purchase price, I understand, will be based on the redemption value plus accrued interest
at the prevailing rate up to the date of our sales contract. Maybe you can give us a long term
payment scheme on the basis of my brothers annual savings of roughly US$30,000.00
everytime he comes home for his home leave.
I realize that this is not a regular transaction but I am seeking your favor to give me a chance
to reserve whatever values I can still recover from the properties and to avoid any legal
complications that may arise as a consequence of the total loss of the Balangay lot. I hope
that you will extend to me your favorable action on this grave matter.

XXX IN HOLDING THAT THE PARTIES NEVER GOT PAST THE NEGOTIATION STAGE.
While the question raised is essentially one of fact, of which the Court normally eschews from,
yet, given the conflicting factual findings of the trial and appellate courts, the Court shall go
by the exception[3] to the general rule and proceed to make its own assessment of the
evidence.
We DENY.
Petitioners contend that a perfected contract of sale came into being when respondent Bank,
thru a letter dated August 16, 1985, formally accepted the offer of the Navarras to repurchase
the subject properties.
In general, contracts undergo three distinct stages, to wit: negotiation, perfection or birth, and
consummation. Negotiation begins from the time the prospective contracting parties manifest
their interest in the contract and ends at the moment of their agreement. Perfection or birth of
the contract takes place when the parties agree upon the essential elements of the contract,
i.e., consent, object and price. Consummation occurs when the parties fulfill or perform the
terms agreed upon in the contract, culminating in the extinguishment thereof.[4]
A negotiation is formally initiated by an offer which should be certain with respect to both the
object and the cause or consideration of the envisioned contract. In order to produce a
contract, there must be acceptance, which may be express or implied, but it must not qualify
the terms of the offer. The acceptance of an offer must be unqualified and absolute to perfect
the contract. 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.[5]
Here, the Navarras assert that the following exchange of correspondence between them and
Planters Bank constitutes the offer and acceptance, thus:

Letter dated August 16, 1985 of Planters Bank

Regarding your letter dated July 18, 1985, requesting that we give up to August 31, 1985 to
buy back your house and lot and restaurant and building subject to a P300,000.00
downpayment on the purchase price, please be advised that the Collection Committee has
agreed to your request.
Please see Mr. Rene Castillo, Head, Acquired Assets Unit, as soon as possible for the details
of the transaction so that they may work on the necessary documentation. (Emphasis ours)
Given the above, the basic question that comes to mind is: Was the offer certain and the
acceptance absolute enough so as to engender a meeting of the minds between the parties?
Definitely not.
While the foregoing letters indicate the amount of P300,000.00 as down payment, they are,
however, completely silent as to how the succeeding installment payments shall be made. At
most, the letters merely acknowledge that the down payment of P300,000.00 was agreed
upon by the parties. However, this fact cannot lead to the conclusion that a contract of sale
had been perfected. Quite recently, this Court held that before a valid and binding contract of
sale can exist, the manner of payment of the purchase price must first be established since
the agreement on the manner of payment goes into the price such that a disagreement on
the manner of payment is tantamount to a failure to agree on the price.[6]
Too, the Navarras letter/offer failed to specify a definite amount of the purchase price for the
sale/repurchase of the subject properties. It merely stated that the purchase price will be
based on the redemption value plus accrued interest at the prevailing rate up to the date of
the sales contract. The ambiguity of this statement only bolsters the uncertainty of the
Navarras so-called offer for it leaves much rooms for such questions, as: what is the
redemption value? what prevailing rate of interest shall be followed: is it the rate stipulated in
the loan agreement or the legal rate? when will the date of the contract of sale be based, shall

it be upon the time of the execution of the deed of sale or upon the time when the last
installment payment shall have been made? To our mind, these questions need first to be
addressed, discussed and negotiated upon by the parties before a definite purchase price
can be arrived at.
Significantly, the Navarras wrote in the same letter the following:

Evidently, what transpired between the parties was only a prolonged negotiation to buy and
to sell, and, at the most, an offer and a counter-offer with no definite agreement having been
reached by them. With the hard reality that no perfected contract of sale/repurchase exists in
this case, any independent transaction between the Planters Bank and a third-party, like the
one involving the Gatchalian Realty, cannot be affected.

Maybe you can give us a long-term payment scheme on the basis of my brothers annual
savings of roughly US$30,000.00 every time he comes home for his home leave.

WHEREFORE, the petition is DENIED and the assailed decision and resolution of the Court
of Appeals are AFFIRMED.

Again, the offer was not clear insofar as concerned the exact number of years that will
comprise the long-term payment scheme. As we see it, the absence of a stipulated period
within which the repurchase price shall be paid all the more adds to the indefiniteness of the
Navarras offer.

No pronouncement as to costs.

Clearly, then, the lack of a definite offer on the part of the spouses could not possibly serve
as the basis of their claim that the sale/repurchase of their foreclosed properties was
perfected. The reason is obvious: one essential element of a contract of sale is wanting: the
price certain. There can be no contract of sale unless the following elements concur: (a)
consent or meeting of the minds; (b) determinate subject matter; and (c) price certain in
money or its equivalent. Such contract is born or perfected from the moment there is a meeting
of minds upon the thing which is the object of the contract and upon the price.[7] Here, what
is dramatically clear is that there was no meeting of minds vis-a-vis the price, expressly or
impliedly, directly or indirectly.
Further, the tenor of Planters Banks letter-reply negates the contention of the Navarras that
the Bank fully accepted their offer. The letter specifically stated that there is a need to
negotiate on the other details of the transaction[8] before the sale may be formalized. Such
statement in the Banks letter clearly manifests lack of agreement between the parties as to
the terms of the purported contract of sale/repurchase, particularly the mode of payment of
the purchase price and the period for its payment. The law requires acceptance to be absolute
and unqualified. As it is, the Banks letter is not the kind which would constitute acceptance as
contemplated by law for it does not evince any categorical and unequivocal undertaking on
the part of the Bank to sell the subject properties to the Navarras.
The Navarras attempt to prove the existence of a perfected contract of sale all the more
becomes futile in the light of the evidence that there was in the first place no acceptance of
their offer. It should be noted that aside from their first letter dated July 18, 1985, the Navarras
wrote another letter dated August 20, 1985, this time requesting the Bank that the down
payment of P300,000.00 be instead taken from the excess payment made by the RRRC in
redeeming its own foreclosed properties. The very circumstance that the Navarras had to
make this new request is a clear indication that no definite agreement has yet been reached
at that point. As we see it, this request constitutes a new offer on the part of the Navarras,
which offer was again conditionally accepted by the Bank as in fact it even required the
Navarras to submit a board resolution of RRRC before it could proceed with the proposed
sale/repurchase. The eventual failure of the spouses to submit the required board resolution
precludes the perfection of a contract of sale/repurchase between the parties. As earlier
mentioned, contracts are perfected when there is concurrence of the parties wills, manifested
by the acceptance by one of the offer made by the other.[9] Here, there was no concurrence
of the offer and acceptance as would result in a perfected contract of sale.

SO ORDERED.

6.

ARROGANTE v. DELIARTE

LORDITO ARROGANTE, JOHNSTON ARROGANTE, ARME ARROGANTE, and FE D.

ARROGANTE,
Petitioners,
- versus -

A series of misfortunes struck the Deliarte family. The first tragedy occurred when a brother
of Beethoven and Fe was hospitalized and eventually died in Davao. Beethoven shouldered
the hospitalization and other related expenses, including the transport of the body from Davao
to Cebu and then to Daanbantayan.
The next occurrence took place a year after, when Gregoria was likewise hospitalized and
subsequently died on July 29, 1978. Once again, Beethoven paid for all necessary expenses.
Soon thereafter, it was Bernabe, the parties ailing father, who died on November 7, 1980. Not
surprisingly, it was Beethoven who spent for their fathers hospitalization and burial.

Present:

In between the deaths of Gregoria and Bernabe, on November 16, 1978, the Deliarte siblings
agreed to waive and convey in favor of Beethoven all their rights, interests, and claims to the
subject lot in consideration of P15,000.00.[3] At the signing of the deed of absolute sale, the
siblings who failed to attend the family gathering, either because they were dead or were
simply unable to, were represented by their respective spouses who signed the document on
their behalf.[4] Bernabe, who was already blind at that time, was likewise present and knew
of the sale that took place among his children.

YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO, and
NACHURA, JJ.

Thus, from then on, Beethoven occupied and possessed the subject lot openly, peacefully,
and in the concept of owner. He exercised full ownership and control over the subject lot
without any objection from all his siblings, or their heirs, until 1993 when the controversy
arose.[5] In fact, on March 26, 1986, all of Beethovens siblings, except Fe, signed a deed of
confirmation of sale in favor of Beethoven to ratify the 1978 private deed of sale.

Promulgated:

Sometime in August 1993, petitioner Lordito Arrogante installed placards on the fence erected
by respondents, claiming that the subject lot was illegally acquired by the latter.[6] The
placards depicted Beethoven as a land grabber who had unconscionably taken the subject
lot from Lordito who claimed that the lot is a devise from his grandfather.[7] Allegedly, the
bequeathal was made in Bernabes last will and testament which was, unfortunately, torn up
and destroyed by Beethoven.[8]

BEETHOVEN DELIARTE, Joined by SPOUSE LEONORA DUENAS,

Respondents.
G.R. No. 152132

July 24, 2007

x------------------------------------------------------------------------------------x
DECISION

Thus, on November 10, 1993, respondents filed an action for quieting of title and damages
against the petitioners.

NACHURA, J.:

This Petition for Review on Certiorari assails the Decision[1] dated August 28, 2001 of the
Court of Appeals (CA) in CA-G.R. CV No. 58493 which affirmed the Decision[2] dated
February 18, 1997 of the Regional Trial Court (RTC), Branch 10, of Cebu City in an action for
quieting of title and damages.
It appears that the lot in controversy, Lot No. 472-A (subject lot), is situated in Poblacion
Daanbantayan, Cebu, and was originally conjugal property of the spouses Bernabe Deliarte,
Sr. and Gregoria Placencia who had nine children, including herein respondent Beethoven
Deliarte and petitioner Fe Deliarte Arrogante. The other petitioners, Lordito, Johnston, and
Arme, Jr., all surnamed Arrogante, are the children of Fe and, thus, nephews of Beethoven.
Respondent Leonora Duenas is the wife of Beethoven.

In their answer, the petitioners averred that Beethoven does not own the whole of the subject
lot because Bernabe was still alive in 1978 when Beethovens siblings sold to him all their
rights and claims to and interests in that lot. Thus, the siblings could sell only their respective
inheritance from one-half of the subject lot, representing Gregorias share in the conjugal
property. Corollarily, the petitioners claimed that Fe continues to own 1/9 of one-half of the
subject lot, comprising Bernabes share of the property, which allegedly was not contemplated
in the conveyance in 1978. According to petitioners, this contention is supported by Fes failure
to sign the deed of confirmation of sale in 1986.
As regards the damaging placards, the petitioners asseverated that Lordito acted on his own
when he installed the same, and that this was resorted to merely to air his grievance against
his uncle, Beethoven, for claiming ownership of the entire lot.
After trial, the RTC rendered a Decision quieting title on the subject lot in favor of respondents
and directing petitioners, jointly and severally, to pay the respondents P150,000.00 as moral
damages, P25,000.00 as attorneys fees, and P10,000.00 as litigation expenses.

On appeal, the CA affirmed the trial courts decision but deleted the award of attorneys fees
and litigation expenses. In ruling for the respondents, both the trial and appellate courts
upheld the validity of the 1978 sale as between the parties. Considering that petitioner Fe
signed the document and consented to the transaction, she is now barred from repudiating
the terms thereof. In this regard, the RTC and the CA applied the parole evidence rule and
allowed the introduction of evidence on the additional consideration for the conveyance,
namely, the expenses incurred by Beethoven during the three tragedies that had befallen the
Deliarte family. Both courts found that the sale was already completely executed, thus
removing it from the ambit of the Statute of Frauds.[9]
As for the award of moral damages, the trial and appellate courts held that the other
petitioners failure to prevent Lordito from putting up, or at least, removing the placards,
amounted to the defamation and opprobrium of Beethoven with their knowledge and
acquiescence. Thus, the assessment of moral damages was appropriate, given the
humiliation and embarrassment suffered by Beethoven considering his stature and reputation
in the community as an electrical engineer handling several big projects.
However, petitioners insist that the lower courts erred in their rulings. They maintain that the
1978 sale did not contemplate the alienation of Bernabes share in the conjugal partnership
as he failed to sign the private document. As such, the courts application of the parole
evidence rule and the Statute of Frauds were erroneous. In the same vein, the petitioners
posit that both courts ruling that they are jointly and severally liable for moral damages is
inconsistent with the evidence on record that Lordito was the sole author of the damaging
placards.
In this appeal, the issues for the resolution of this Court are:
I.
WHETHER OR NOT THE PRIVATE DEED OF SALE EXECUTED IN 1978 IS A VALID
CONVEYANCE OF THE ENTIRE LOT 472-A TO PETITIONER BEETHOVEN DELIARTE.
II.
WHETHER OR NOT THE PAROLE EVIDENCE RULE IS APPLICABLE TO THIS CASE.
III.
WHETHER OR NOT THE STATUTE OF FRAUDS IS APPLICABLE TO THIS CASE.
IV.
WHETHER OR NOT THE PETITIONERS ARE JOINTLY AND SEVERALLY LIABLE FOR
MORAL DAMAGES.
At the outset, we note that both the lower and the appellate courts failed to identify the
applicable law.

First. The 1978 private deed of sale, insofar as it disposed of Bernabes share in the conjugal
partnership prior to his death, is void for being a conveyance of the Deliarte siblings future
inheritance.
Article 1347, paragraph 2 of the Civil Code characterizes a contract entered into upon future
inheritance as void.[10] The law applies when the following requisites concur: (1) the
succession has not yet been opened; (2) the object of the contract forms part of the
inheritance; and (3) the promissor has, with respect to the object, an expectancy of a right
which is purely hereditary in nature.[11]
In this case, at the time the contract was entered into, succession to Bernabes estate had yet
to be opened, and the object thereof, i.e., Bernabes share in the subject lot, formed part of
his childrens inheritance, and the children merely had an inchoate hereditary right thereto.
True, the prohibition on contracts respecting future inheritance admits of exceptions, as when
a person partitions his estate by an act inter vivos under Article 1080 of the Civil Code.[12]
However, the private deed of sale does not purport to be a partition of Bernabes estate as
would exempt it from the application of Article 1347. Nowhere in the said document does
Bernabe separate, divide, and assign to his children his share in the subject lot effective only
upon his death.[13] Indeed, the document does not even bear the signature of Bernabe.
Neither did the parties demonstrate that Bernabe undertook an oral partition of his estate.
Although we have held on several occasions that an oral or parole partition is valid, our
holdings thereon were confined to instances wherein the partition had actually been
consummated, enforced, and recognized by the parties.[14] Absent a showing of an overt act
by Bernabe indicative of an unequivocal intent to partition his estate among his children, his
knowledge and ostensible acquiescence to the private deed of sale does not equate to an
oral partition by an act inter vivos. Besides, partition of property representing future
inheritance cannot be made effective during the lifetime of its owner.[15]
Considering the foregoing, it follows that the 1986 deed of confirmation of sale which sought
to ratify the 1978 sale likewise suffers from the same infirmity.[16] In short, the 1986 deed is
also void.
Nevertheless, it is apparent that Bernabe treated his share[17] in the subject lot as his
childrens present inheritance, and he relinquished all his rights and claim thereon in their favor
subject to Beethovens compensation for the expenses he initially shouldered for the family.
The records reveal that Bernabe, prior to his hospitalization and death, wanted to ensure that
his children attended to the expenditure relating thereto, and even articulated his desire that
such surpass the provision for both his son and wife, Beethovens and Fes brother and mother,
respectively.[18] Their arrangement contemplated the Deliarte siblings equal responsibility for
the familys incurred expenses.
We take judicial notice of this collective sense of responsibility towards family. As with most
nuclear Filipino families, the Deliarte siblings endeavored to provide for their parents or any
member of their family in need. This was evident in Florenda Deliarte Nacuas, the youngest
Deliarte siblings, remittance to her parents of her salary for two years so they could redeem
the subject lot.[19]

Florenda corroborated the testimony of Beethoven that their father was present during, and
was aware of, the transaction that took place among his children.[20] The 1978 deed of sale,
albeit void, evidenced the consent and acquiescence of each Deliarte sibling to said
transaction. They raised no objection even after Beethoven forthwith possessed and occupied
the subject lot.

More importantly, the parties, including petitioner Fe, ratified the agreement by the
acceptance of benefits thereunder.[26]
One other thing militates against Fes claim of ownership - silence and palpable failure to
object to the execution of the agreement. Fe insists that she only intended to sell her share
of the lot inherited from her mothers estate, exclusive of her fathers share therein.

The foregoing arrangement, vaguely reflected in the void deed of sale, points to a meeting of
the minds among the parties constitutive of an innominate contract, akin to both an onerous
and a remuneratory donation.[21] In this regard, Bernabes waiver and relinquishment of his
share in the subject lot is effectively a donation inter vivos to his children. However, the
gratuitous act is coupled with an onerous cause equal accountability of the Deliarte siblings
for the hospitalization and death expenses of deceased family members to be taken from their
shares in the subject lot. In turn, the remunerative cause pertains to Beethovens recompense
for the family expenses he initially shouldered.

We are not persuaded by the belated claim. This afterthought is belied by the express
stipulations in the 1978 deed of sale that the heirs of Bernabe and Gregoria, absolutely sell,
quitclaim, and transfer the subject lot in favor of Beethoven. Although a void contract is not a
source of rights and obligations between the parties, the provisions in the written agreement
and their signature thereon are equivalent to an express waiver of all their rights and interests
in the entire lot in favor of Beethoven, regardless of which part pertained to their mothers or
fathers estate.

During his lifetime, Bernabe remained the absolute owner of his undivided interest in the
subject lot. Accordingly, he could have validly disposed of his interest therein. His consent to
the disposition of the subject lot in favor of Beethoven, agreed upon among his children, is
evident, considering his presence in, knowledge of, and acquiescence to the transaction.
Further, the arrangement was immediately effected by the parties with no objection from
Bernabe or any of the Deliarte siblings, including herein petitioner Fe. Ineluctably, the actual
arrangement between the parties included Bernabe, and the object thereof did not constitute
future inheritance.

Truly significant is the fact that in all the years that Beethoven occupied the subject lot, Fe
never disturbed the former in his possession. Neither did she present her other siblings to
buttress her contradicting claim over the subject lot. Likewise, she never asked for a partition
of the property even after the death of their father, Bernabe, to settle his estate, or when her
other siblings executed the deed of confirmation of sale in 1986. Fe also does not pretend to
share in the payment of realty taxes thereon, but merely advances the claim that Priscillana,
one of their siblings, had already paid said taxes.[27] Ultimately, petitioner Fe is estopped
from staking a claim on the subject lot and wresting ownership therein from Beethoven.

Second. The parole evidence rule is applicable. While the application thereof presupposes
the existence of a valid agreement, the innominate contract between the parties has been
directly put in issue by the respondents. Verily, the failure of the deed of sale to express the
true intent and agreement of the parties supports the application of the parole evidence
rule.[22]
Contrary to petitioners contention, the absence of Bernabes signature in the 1978 deed of
sale is not necessarily conclusive of his dissent or opposition to the effected arrangement. As
previously adverted to, the agreement had multiple causes or consideration, apart from the
P15,000.00 stated in the deed of sale. To repeat, the agreement between the parties had
both an onerous and a remunerative cause. Also worthy of note is the moral consideration for
the agreement given the relationship between the parties.
Third. We agree with both the lower and the appellate courts that the Statute of Frauds is not
applicable to the instant case.
The general rule is that contracts are valid in whatever form they may be.[23] One exception
thereto is the Statute of Frauds which requires a written instrument for the enforceability of a
contract.[24] However, jurisprudence dictates that the Statute of Frauds only applies to
executory, not to completed, executed, or partially consummated, contracts.[25]
In the case at bench, we find that all requisites for a valid contract are present, specifically:
(1) consent of the parties; (2) object or subject matter, comprised of the parties respective
shares in the subject lot; and (3) the consideration, over and above the P15,000.00 stipulated
price. We note that the agreement between the parties had long been consummated and
completed. In fact, the agreement clearly contemplated immediate execution by the parties.

Our holding in the case of Tinsay v. Yusay[28] is still good law, thus:
Juana Servando not being a party to the partition agreement Exhibit 1, the agreement
standing alone was, of course, ineffective as against her. The attempt to partition her land
among her heirs, constituting a partition of future inheritance was invalid under the second
paragraph of Article 1271 of the Civil Code and for the same reason the renunciation of all
interest in the land which now constitutes lots Nos. 241 and 713 made by the appellants in
favor of the children of Jovito Yusay would likewise be of no binding force as to the undivided
portion which belonged to Juan Servando. But if the parties entered into the partition
agreement in good faith and treated all of the land as a present inheritance, and if the
appellants on the strength of the agreement obtained their Torrens title to the land allotted to
them therein, and if Perpetua Sian in reliance on the appellants renunciation of all interest
claimed by her on behalf of her children in the cadastral case refrained from presenting any
opposition to the appellants claim to the entire fee in the land assigned to them in the partition
agreement and if the appellants after the death of Juana Servando continued to enjoy the
benefits of the agreement refusing to compensate the heirs of Jovito Yusay for the latters loss
of their interest in lots Nos. 2 and 744 through the registration of the lots in the name of the
appellants and the subsequent alienation of the same to innocent third parties, said appellants
are now estopped from repudiating the partition agreement of 1911 and from claiming any
further interest in lots Nos. 241 and 713. There is, however, no reason why they should not
be allowed to share in the distribution of the other property left by Juana Servando.
Fourth. As to the lower courts award of moral damages, we sustain respondents entitlement
thereto. Undeniably, respondents suffered besmirched reputation, wounded feelings, and

social humiliation due to the damaging placards.[29] The injury is aggravated because of the
relationship among the parties. Respondent Beethoven was able to prove that his nephews,
petitioners Lordito, Johnston, and Arme, Jr., stayed with him at some point, and that he
financially supported and trained them to be electricians.[30]
Yet, Lordito denies malice in the aforesaid act. He argues that his only quarrel with Beethoven
stems from the latters claim of ownership over the subject lot which was, supposedly, already
bequeathed to him by his grandfather, Bernabe. Lordito maintains that his claim is valid,
supported by a will Beethoven had torn up, which allegedly negates malice in his act of putting
up the placards.
We are not convinced.
To begin with, the supposed devise to Lordito appears to be void. Considering that Bernabes
estate consisted merely of his conjugal share in the subject lot, the bequeathal infringes on
his compulsory heirs legitimes, including that of Lorditos mother, Fe.[31] Lorditos claim,
therefore, is only subordinate to Beethovens claim as a compulsory heir, even without delving
into the innominate contract between the parties. In all, the ascription of malice and Lorditos
corresponding liability for moral damages is correct given the words he employed in the
placards.
However, we agree with petitioners that there is a dearth of evidence pointing to their
collective responsibility for Lorditos act.
Corollary thereto, Lordito admits and claims sole responsibility for putting up the placards.
The other petitioners specific participation in the tortious act was not proven. Failure to prevent
Lordito or command him to remove the placards, alone, does not justify the finding that all the
petitioners are jointly and severally liable. It does not suffice that all the petitioners were
moved by a common desire to acquire the subject property, absent any proof that they
individually concurred in Lorditos act.
Entrenched is the rule that the rights of a party cannot be prejudiced by an act, declaration,
or omission of another.[32] The exception under Section 32, Rule 130 of the Rules of Court
does not obtain in this instance. The other petitioners acquiescence to and apparent
concurrence in Lorditos act cannot be inferred merely from their failure to remove the placards
or reprimand Lordito. While the placards indeed defamed Beethoven, there is nothing that
directly links the other petitioners to this dastardly act.
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The August 28,
2001 Decision of the Court of Appeals is hereby MODIFIED. Petitioner Lordito Arrogante is
held solely liable to respondents for moral damages in the amount of P150,000.00. The
quieting of title in favor of respondents is hereby AFFIRMED. No costs.
SO ORDERED.