Restituta Loenardo vs. Court of Appeals, et. al. G.R. No. 125485; September 13, 2004

By Rommel Heyrosa


The sole issue in this case is whether the consent given by petitioner to the extrajudicial settlement of estate was given voluntarily.

The essence of consent is the agreement of the parties on the terms of the contract, the acceptance by one of the offer made by the other. It is the concurrence of the minds of the parties on the object and the cause which constitutes the contract. The area of agreement must extend to all points that the parties deem material or there is no consent at all.

To be valid, consent must meet the following requisites: (a) it should be intelligent, or with an exact notion of the matter to which it refers; (b) it should be free and (c) it should be spontaneous. Intelligence in consent is vitiated by error; freedom by violence, intimidation or undue influence; and spontaneity by fraud.


FACTS:

Petitioner Restituta Leonardo is the only legitimate child of the late Sps. Tomasina Paul and Balbino Leonardo. Private respondents Teodoro, Victor, Corazon, Piedad, et. al, all surnamed Sebastian, are the illegitimate children of Tomasina with Jose Sebastian after she separated from Balbino Leonardo.

In 1988, private respondent Corazon Sebastian with her niece and a certain Bitang, came to Restituta’s house to persuade her to sign a deed of extrajudicial partition of the estate of Tomasina Paul and Jose Sebastian. Before signing the document, Restituta allegedly insisted that they wait for her husband Jose Ramos so he could translate the document which was written in English. Subsequently, she proceeded to sign the document even without her husband and without reading the document, on the assurance of private respondent Corazon that she will get her share as a legitimate daughter. Petitioner then asked private respondent Corazon and her companions to wait for her husband so he could read the document. When petitioner’s husband arrived, however, private respondent Corazon and her companions had left without leaving a copy of the document. It was only when petitioner hired a lawyer that they were able to secure a copy and read the contents thereof.

Petitioner refuted private respondents’ claim that they were the legitimate children and sole heirs of Jose Sebastian and Tomasina Paul since the latter were never married to each other, thus, the extrajudicial partition was therefore unlawful and illegal. Petitioner also claimed that her consent was vitiated because she was deceived into signing the extrajudicial settlement. She further denied having appeared before a Judge of MTC of Urbiztondo, Pangasinan to acknowledge the execution of the extrajudicial partition.

ISSUE:

Whether the consent given by petitioner to the extrajudicial settlement of estate was given voluntarily.

HELD:

No. Contracts where consent is given by mistake or because of violence, intimidation, undue influence or fraud are voidable. These circumstances are defects of the will, the existence of which impairs the freedom, intelligence, spontaneity and voluntariness of the party in giving consent to the agreement. In determining whether consent is vitiated, Courts are given a wide latitude in weighing the facts considering the age, physical infirmity, intelligence, relationship and the conduct of the parties at the time of making the contract and subsequent thereto, irrespective of whether the contract is in a public or private writing.

In this case, private respondents failed to offer any evidence to prove that the extrajudicial settlement of estate was explained in a language known to the petitioner, i.e. the Pangasinan dialect. Clearly, petitioner, who only finished Grade 3, was not in a position to give her free, voluntary and spontaneous consent without having the document, which was in English, explained to her in the Pangasinan dialect.

Rebecca Fullido vs. Gino Grilli, G.R. No. 215014, February 29, 2016

TOPIC: Void contracts
PONENTE: MENDOZA, J.

Facts:

Grilli financially assisted Fullido in procuring a lot from her parents which was registered in her name. On the said property, they constructed a house, which was funded by Grilli. Upon completion, they maintained a common-law relationship and lived there whenever Grilli was on vacation in the Philippines twice a year. In 1998, Grilli and Fullido executed a contract of lease, to define their respective rights over the house and lot. The lease contract stipulated, among others, that Grilli as the lessee, would rent the lot, registered in the name of Fullido, for a period of fifty (50) years, to be automatically renewed for another fifty (50) years upon its expiration in the amount of
P10,000.00 for the whole term of the lease contract; and that Fullido as the lessor, was prohibited from selling, donating, or encumbering the said lot without the written consent of Grilli. Their harmonious relationship turned sour after 16 years of living together. Both charged each other with infidelity. They could not agree who should leave the common property, and Grilli sent formal letters to Fullido demanding that she vacate the property, but these were unheeded. On September 8, 2010, Grilli filed a complaint for unlawful detainer with prayer for issuance of preliminary injunction against Fullido before the MCTC.

Fullido argues that she could not be ejected from her own lot based on the contract of lease and the MOA because those documents were null and void for being contrary to the Constitution, the law, public policy, morals and customs; that the MOA prevented her from disposing or selling her own land, while the contract of lease favoring Grilli, a foreigner, was contrary to the Constitution as it was a for a period of fifty (50) years, and, upon termination, was automatically renewable for another fifty (50) years. 

Grilli, on the other hand, contends that Fullido could not question the validity of the said contracts in the present ejectment suit unless she instituted a separate action for annulment of contracts. Thus, the Court is confronted with the issue of whether a contract could be declared void in a summary action of unlawful detainer. 

The MCTC dismissed the case after finding that Fullido could not be ejected from their house and lot. The MCTC opined that she was a co-owner of the house as she contributed to it by supervising its construction. The RTC reversed and set aside the MCTC decision. The RTC was of the view that Grilli had the exclusive right to use and possess the house and lot by virtue of the contract of lease executed by the parties. 

The CA upheld the decision of the RTC emphasizing that in an ejectment case, the only issue to be resolved would be the physical possession of the property. The CA was also of the view that as Fullido executed both the MOA and the contract of lease, which gave Grilli the possession and use of the house and lot, the same constituted as a judicial admission that it was Grilli who had the better right of physical possession.

Issue:

May patently null and void contracts be a basis of an ejectment order?

Held:

No.  A void or inexistent contract may be defined as one which lacks, absolutely either in
fact or in law, one or some of the elements which are essential for its validity. It 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. Quod nullum est nullum producit effectum. Article 1409 of the New Civil Code explicitly states that void contracts also cannot be ratified; neither can the right to set up the defense of illegality be waived. Accordingly, there is no need for an action to set aside a void or inexistent contract. 

A review of the relevant jurisprudence reveals that the Court did not hesitate to set aside a void contract even in an action for unlawful detainer. In Spouses Alcantara v. Nido, which involves an action for unlawful detainer, the petitioners therein raised a defense that the subject land was already sold to them by the agent of the owner. The Court rejected their defense and held that the contract of sale was void because the agent did not have the written authority of the owner to sell the subject land. 

Clearly, contracts may be declared void even in a summary action for unlawful detainer because, precisely, void contracts do not produce legal effect and cannot be the source of any rights. To emphasize, void contracts may not be invoked as a valid action or defense in any court proceeding, including an ejectment suit. The next issue that must be resolved by the Court is whether the assailed lease contract and MOA are null and void.

WHEREFORE, the petition is GRANTED.

The Roman Catholic Church vs Regino Pante, G.R. No. 174118, April 11, 2012

By Uriel Dela Cerna


The Court resolves to deny the petition.

No misrepresentation existed vitiating the seller’s consent and invalidating the contract.

Consent is an essential requisite of contracts as it pertains to the meeting of the offer and the acceptance upon the thing and the cause which constitute the contract.

To create a valid contract, the meeting of the minds must be free, voluntary, willful and with a reasonable understanding of the various obligations the parties assumed for themselves.

Where consent, however, is given through mistake, violence, intimidation, undue influence, or fraud, the contract is deemed voidable.

However, not every mistake renders a contract voidable. The Civil Code clarifies the nature of mistake that vitiates consent:

Article 1331. In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract.

Mistake as to the identity or qualifications of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of the contract.

A simple mistake of account shall give rise to its correction.

For mistake as to the qualification of one of the parties to vitiate consent, two requisites must concur:

1. the mistake must be either with regard to the identity or with regard to the qualification of one of the contracting parties; and

2. the identity or qualification must have been the principal consideration for the celebration of the contract.

In the present case, the Church contends that its consent to sell the lot was given on the mistaken impression arising from Pante’s fraudulent misrepresentation that he had been the actual occupant of the lot. Willful misrepresentation existed because of its policy to sell its lands only to their actual occupants or residents. Thus, it considers the buyer’s actual occupancy or residence over the subject lot a qualification necessary to induce it to sell the lot.

Whether the facts, established during trial, support this contention shall determine if the contract between the Church and Pante should be annulled. In the process of weighing the evidentiary value of these established facts, the courts should consider both the parties’ objectives and the subjective aspects of the transaction, specifically, the parties’ circumstances - their condition, relationship, and other attributes - and their conduct at the time of and subsequent to the contract. These considerations will show what influence the alleged error exerted on the parties and their intelligent, free, and voluntary consent to the contract.

Contrary to the Church’s contention, the actual occupancy or residency of a buyer over the land does not appear to be a necessary qualification that the Church requires before it could sell its land. Had this been indeed its policy, then neither Pante nor the spouses Rubi would qualify as buyers of the 32-square meter lot, as none of them actually occupied or resided on the lot. We note in this regard that the lot was only a 2x16-meter strip of rural land used as a passageway from Pante’s house to the municipal road.

We find well-taken Pante’s argument that, given the size of the lot, it could serve no other purpose than as a mere passageway; it is unthinkable to consider that a 2x16-meter strip of land could be mistaken as anyone’s residence. In fact, the spouses Rubi were in possession of the adjacent lot, but they never asserted possession over the 2x16-meter lot when the 1994 sale was made in their favor; it was only then that they constructed the concrete fence blocking the passageway.

We find it unlikely that Pante could successfully misrepresent himself as the actual occupant of the lot; this was a fact that the Church (which has a parish chapel in the same barangay where the lot was located) could easily verify had it conducted an ocular inspection of its own property. The surrounding circumstances actually indicate that the Church was aware that Pante was using the lot merely as a passageway.

The above view is supported by the sketch plan, attached to the contract executed by the Church and Pante, which clearly labeled the 2x16-meter lot as a "RIGHT OF WAY"; below these words was written the name of "Mr. Regino Pante." Asked during cross-examination where the sketch plan came from, Pante answered that it was from the Archbishop’s Palace; neither the Church nor the spouses Rubi contradicted this statement.

The records further reveal that the sales of the Church’s lots were made after a series of conferences with the occupants of the lots.

The then parish priest of Canaman, Fr. Marcaida, was apparently aware that Pante was not an actual occupant, but nonetheless, he allowed the sale of the lot to Pante, subject to the approval of the Archdiocese’s Oeconomous. Relying on Fr. Marcaida’s recommendation and finding nothing objectionable, Fr. Ragay (the Archdiocese’s Oeconomous) approved the sale to Pante.

The above facts, in our view, establish that there could not have been a deliberate, willful, or fraudulent act committed by Pante that misled the Church into giving its consent to the sale of the subject lot in his favor. That Pante was not an actual occupant of the lot he purchased was a fact that the Church either ignored or waived as a requirement. In any case, the Church was by no means led to believe or do so by Pante’s act; there had been no vitiation of the Church’s consent to the sale of the lot to Pante.

From another perspective, any finding of bad faith, if one is to be made, should be imputed to the Church. Without securing a court ruling on the validity of its contract with Pante, the Church sold the subject property to the spouses Rubi. Article 1390 of the Civil Code declares that voidable contracts are binding, unless annulled by a proper court action. From the time the sale to Pante was made and up until it sold the subject property to the spouses Rubi, the Church made no move to reject the contract with Pante; it did not even return the down payment he paid. The Church’s bad faith in selling the lot to Rubi without annulling its contract with Pante negates its claim for damages.

In the absence of any vitiation of consent, the contract between the Church and Pante stands valid and existing. Any delay by Pante in paying the full price could not nullify the contract, since (as correctly observed by the CA) it was a contract of sale. By its terms, the contract did not provide a stipulation that the Church retained ownership until full payment of the price.


The right to repurchase given to the Church in case Pante fails to pay within the grace period provided would have been unnecessary had ownership not already passed to Pante.

The sale of the lot to Pante and later to the spouses Rubi resulted in a double sale that called for the application of the rules in Article 1544 of the Civil Code:

Article 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. 

As neither Pante nor the spouses Rubi registered the sale in their favor, the question now is who, between the two, was first in possession of the property in good faith.

Jurisprudence has interpreted possession in Article 1544 of the Civil Code to mean both actual physical delivery and constructive delivery.

Under either mode of delivery, the facts show that Pante was the first to acquire possession of the lot.

Actual delivery of a thing sold occurs when it is placed under the control and possession of the vendee.

Pante claimed that he had been using the lot as a passageway, with the Church’s permission, since 1963. After purchasing the lot in 1992, he continued using it as a passageway until he was prevented by the spouses Rubi’s concrete fence over the lot in 1994. Pante’s use of the lot as a passageway after the 1992 sale in his favor was a clear assertion of his right of ownership that preceded the spouses Rubi’s claim of ownership.

Pante also stated that he had placed electric connections and water pipes on the lot, even before he purchased it in 1992, and the existence of these connections and pipes was known to the spouses Rubi.

Thus, any assertion of possession over the lot by the spouses Rubi (e.g., the construction of a concrete fence) would be considered as made in bad faith because works had already existed on the lot indicating possession by another. "A buyer of real property in the possession of persons other than the seller must be wary and should investigate the rights of those in possession. Without such inquiry, the buyer can hardly be regarded as a buyer in good faith and cannot have any right over the property."

Delivery of a thing sold may also be made constructively. Article 1498 of the Civil Code states that:

Article 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred.

Under this provision, the sale in favor of Pante would have to be upheld since the contract executed between the Church and Pante was duly notarized, converting the deed into a public instrument.

In Navera v. Court of Appeals, the Court ruled that:

After the sale of a realty by means of a public instrument, the vendor, who resells it to another, does not transmit anything to the second vendee, and if the latter, by virtue of this second sale, takes material possession of the thing, he does it as mere detainer, and it would be unjust to protect this detention against the rights of the thing lawfully acquired by the first vendee.

Thus, under either mode of delivery, Pante acquired prior possession of the lot.

Valentina Clemente VS Court of Appeals GR No. 175483 14 October 2015

By Norbert Pagaspas


Facts:

 Adela owned three (3) adjoining parcels of land in Quezon City, subdivided as Lots 32, 34 and 35-B.

Sometime in 1985 and 1987, Adela simulated the transfer of Lots 32 and Lot 34 to her two grandsons (Carlos Jr and Dennis Shotwell).

On April 18, 1989, prior to Adela and petitioner’s departure for the United States, Adela requested Carlos Jr. and Dennis to execute a deed of reconveyance over Lots 32 and 34 which were in fact executed and registered with the Register of Deeds.

On April 25, 1989, Adela executed a deed of absolute sale11 over Lots 32 and 34, and their improvements, in favor of petitioner, bearing on its face the price of ¬250,000.00. On the same day, Adela also executed a special power of attorney (SPA) in favor of petitioner. Petitioner’s authority under the SPA included the power to administer, take charge and manage, for Adela’s benefit, the Properties and all her other real and personal properties in the Philippines.

When petitioner returned to the Philippines, she registered the sale over Lots 32 and 34. Soon thereafter, petitioner sought to eject Annie and Carlos Sr who thereafter filed a complaint for reconveyance of the property. They alleged that Adela only wanted to help petitioner travel to the United States, by making it appear that petitioner has ownership of the Properties. They further alleged that similar to the previous simulated transfers to Carlos Jr. and Dennis, petitioner also undertook and warranted to execute a deed of reconveyance in favor of the deceased over the Properties, if and when Adela should demand the same.


Issue:

Whether or not the contracts of sale to petitioner were simulated


Held:

 YES. The Deeds of Absolute Sale between petitioner and the late Adela Shotwell are null and void for lack of consent and consideration. While the Deeds of Absolute Sale appear to be valid on their face, the courts are not completely precluded to consider evidence aliunde in determining the real intent of the parties.

The Civil Code defines a contract as a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. Article 1318 provides that there is no contract unless the following requisites concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the

contract; and

(3) Cause of the obligation which is established.

Here, there was no valid contract of sale between petitioner and Adela because their consent was absent. The contract of sale was a mere simulation. Simulation takes place when the parties do not really want the contract they have executed to produce the legal effects expressed by its wordings.

In determining the true nature of a contract, the primary test is the intention of the parties. If the words of a contract appear to contravene the evident intention of the parties, the latter shall prevail. Such intention is determined not only from the express terms of their agreement, but also from the contemporaneous and subsequent acts of the parties. This is especially true in a claim of absolute simulation where a colorable contract is executed. In ruling that the Deeds of Absolute Sale were absolutely simulated, the lower courts considered the totality of the prior, contemporaneous and
subsequent acts of the parties such as 1) the execution of the SPA the same day the Dee the Deeds of Absolute Sale appointing petitioner as administratrix of Adela’s properties, and) the history of simulations in favor of Carlos Jr and Dennis.

Carbonell vs. Court of Appeals, and Poncio 69 SCRA 99

By Lynielle Crisologo

A contract of sale is a legal contact. It is a contract for the exchange of goods, services or property that are the subject of exchange from seller (or vendor) to buyer (or purchaser) for an agreed upon value in money (or money equivalent) paid or the promise to pay same. It is a specific type of legal contract.

In Article 1403 it is deemed unenforceable if the qualification such as statute of fraud is not complied and that includes contract of sales such as buying or selling goods. An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action, or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum;” 

CARBONELL V PONCIO further explained the general rule relating to the Statute of Frauds being a cautious qualification to the general rule that contracts, no matter in what form they are entered into, are valid and enforceable. (Vide Arts. 1315 and 1356). As in Article 1403 contracts can be deemed unenforceable if this said qualification is not complied with. It is for the the purpose quite obviously, to prevent, and not to promote fraud. It is well settled in Great Britain and in this country, with the exception of a few states, that a sufficient part performance by the purchaser under a parol contract for the sale of real estate removes the contract from the operation of the statute of frauds. (49 Am. Jur., 722-723.)’” 

“In the words of former Chief Justice Morán: ‘The reason is simple. In executory contracts there is a wide field for fraud because unless they be in writing there is no palpable evidence of the intention of the contracting parties. The statute has precisely been enacted to prevent fraud.’ (Comments on the Rules of Court, by Morán, Vol. III [1957 ed.], p. 178.) However, if a contract has been totally or partially performed, the exclusion of parol evidence would promote fraud or bad faith, for it would enable the defendant to keep the benefits already derived by him from the transaction in litigation, and, at the same time, evade the obligations, responsibilities or liabilities assumed or contracted by him thereby.”

Ortega vs. Court of Appeals, 245 SCRA 529

By Jereka Escalona


Under the case of Ortega v. Court of Appeals, “The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners. The right to choose with whom a person wishes to associate himself is the foundation and essence of partnership.”

xxx

“Its continued existence is, in turn, dependent on the mutual resolve, along with each partner’s capability to give it, and the absence of a cause for dissolution provided by law itself. Verily, any one of the partners may, at his sole pleasure, dictate dissolution of the partnership at will. He must however, act in good faith not that the attendance of bad faith can prevent the dissolution of the partnership at will.”


Facts:

On December 19, 1980, respondent Misa associated himself together, as senior partner with petitioners Ortega, del Castillo, Jr., and Bacorro, as junior partners. On Feb. 17, 1988, respondent Misa wrote a letter stating that he is withdrawing and retiring from the firm and asking for a meeting with the petitioners to discuss the mechanics of the liquidation. On June 30, 1988, petitioner filed a petition to the Commision's Securities Investigation and Clearing Department for the formal dissolution and liquidation of the partnership. On March 31, 1989, the hearing officer rendered a decision ruling that the withdrawal of the petitioner has not dissolved the partnership. On appeal, the SEC en banc reversed the decision and was affirmed by the Court of Appeals. Hence, this petition.

Issue:

Whether or not the Court of Appeals has erred in holding that the partnership is a partnership at will and whether or not the Court of Appeals has erred in holding that the withdrawal of private respondent dissolved the partnership regardless of his good or bad faith


Held:


No. The SC upheld the ruling of the CA regarding the nature of the partnership. The SC further stated that a partnership that does not fix its term is a partnership at will. The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners. The right to choose with whom a person wishes to associate himself is the very foundation and essence of that partnership. Its continued existence is, in turn, dependent on the constancy of that mutual resolve, along with each partner's capability to give it, and the absence of a cause for dissolution provided by the law itself. Verily, any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership at will. He must, however, act in good faith, not that the attendance of bad faith can prevent the dissolution of the partnership but that it can result in a liability for damages.

Onglenco vs. Ozaeta (70 Phil. 43)

By Ashley Patalinjug


PETITIONER: Rosendo Onglenco

RESPONDENT: Roman Ozaeta and Melitona Hernandez

Facts:

This is a petition for certiorari for the contention of the petitioner that the CA erred in ruling that the subject land’s sale should be annulled and that the respondents are not absolute owners of the land but with the right to its immediate and peaceful possession.


The case was initially filed in the CFI of Tayabas by the petitioner against the respondents praying that he be declared the sole owner and possessor of the subject land and that the sale of it executed by the Provincial Sheriff of Tayabas by virtue of a writ of execution in Civil Case 3506 in the same court, conveying the aforesaid land to the respondents, be annulled.


The land in question was owned to Gregorio Hernandez and Paciencia Ona. After Hernandex’ death, Ona and her children sold the same to spouses Villanueva and Macalalag. The latter defaulted in paying their balance that lead the former to file a case (Civil Case 3506) against the spouses. The judgment was affirmed on appeal on February 2nd 1935.


Further, the petitioner alleged that the respondents sold the subject land to them in January 11th 1935 and its deed of conveyance was provided in June 22nd of the same year. When the subject land was the subject of execution in Civil Case 3506, the petitioners presented a Third-Party Claim. On the other hand, the respondents claimed that they acquired interest through pacto de retro for the failure of the original owners to exercise their right of redemption and that they acquired the subject property through the execution of July 29, 1935 in Civil Case 3506, with the Shereff’s sale being definitive on September 7, 1936 in default of redemption by the redemption debtors. It was registered in the Office of the Register of Deeds on September 14, 1936.


The Court of Appeals found and so held that, as the alleged sale from Villanueva and Macalalag to the petitioner took place on January 11 1935, or subsequent to the judgment against his vendors in civil case No 3506, it was presumptively fraudulent.


Issue: 

Whether the sale can be rescinded .


Laws: 

- Article 1380.
- Contracts validly agreed upon may be rescinded in the cases established by law. (1290)


Ruling:

No. The sale cannot be rescinded. Contracts capable of rescission are those validly entered into (Art. 1290. Civil Code), as an action to rescind is founded upon and presupposes the existence of a contract (Tan Chay Heng vs. West Coast Life Insurance Co., 51 Phil., 80)


The Court of Appeals held that the sale is to be presumed fraudulent for having been executed posterior to the entry of the judgment against the petitioner’s supposed vendors in civil case No. 3506, evidently in pursuance of the provisions of article 1297 of the Civil Code. But as there is nothing else in the appealed decision to indicate that rescission was contemplated under article 1291 of said Code, the aforesaid presumption must have been considered merely as one of the grounds for holding that the sale is fictitious.