Republic of the PhilippinesSUPREME COURTManilaSECOND
DIVISIONG.R. No. 107069 July 21, 1994HEIRS OF LEANDRO OLIVER,
REPRESENTED BY PURITA OLIVER and REMOQUILLO,petitioners,vs.THE
HONORABLE COURT OF APPEALS, JOSE SERADILLA, and NATIONAL HOUSING
AUTHORITY,respondents.Rosendo O. Chaves for petitioners.Emmanuel P.
Leonardo for private resondent.PUNO,J.:This is a petition for
review oncertiorariof: (1) the Decision1of respondent Court Appeals
in CA-G.R. CV No. 26735, entitled "Heirs of Leandro Oliver,
represented by Purita Oliver and Pedro Remoquillo,
Plaintiffs-Appellants, versus Jose Seradilla and National Housing
Authority, Defendants-Appellees," which affirmed the Decision2of
the Regional Trial Court of Bian, Laguna; and (2) the
Resolution3denying the motion for reconsideration, for lack of
merit.The findings of fact by the trial court which were adopted by
respondent Court of Appeals are as follows:In August, 1939, the
Republic of the Philippines acquired from Colegio de San Jose the
whole of the Tunasan Homesite.In that same year, Engineer Honorato
Maria, authorized by the Bureau of Lands, conducted a resurvey of
the whole Tunasan Homesite, San Pedro, Laguna on the basis of the
Bureau's 1939 Master List (Exhibit "20-A"; p. 13 TSN, June 22,
1989).On the basis of the 1939 resurvey, the relative positions of
Lots 19, 20, 22, 23, 24, 25, 26 and 27 were plotted with the vacant
lot adjoining the Landayan Creek having been designated as the Lot
24.On July 21, 1955, the government through Zoilo Castrillo, then
Director of Lands, entered into and executed an Agreement to Sell
(KASUNDUAN SA PAGBIBILI) with Patricio Seradilla, married to Rosa
Catalan, covering several parcels of land denominated as Lots 9,
9-A, 22, 23, 25 and 26 of Blocks 61 and 87 of the Tunasan Homesite,
San Pedro, Laguna (Exh. "1").During these times, Leandro Oliver,
predecessor of plaintiffs and brother of Patricio Seradilla and
thus an uncle of defendant Jose Seradilla, was said to have been
occupying Lot 24, Block 87.On September 15, 1955, Patricio
Seradilla died.On November 6, 1959, the heirs of Patricio Seradilla
namely: Soledad, Paz, Esperanza, Pilar, all surnamed Seradilla, but
without the participation of Jose Seradilla, allegedly for the good
location and valuability of Lot 24, Block 87 to the use of Lots 25,
26 and 27, Block 87, entered into an agreement with their uncle
Leandro Oliver, consolidating the latter's Lot 24 Block 87 with the
lots left by Patricio Seradilla Lots 22, 23, 25 and 26 Block 87 of
the Tunasan Homesite, San Pedro, Laguna, and dividing the same
equally among them without, however, touching the part occupied by
heir Jose Seradilla.On July 9, 1961, a sketch representing the
agreed partition of the mentioned lots with the respective
designation of each was executed and signed by all the heirs
including Jose Seradilla and Leandro Oliver (Exh.
"E-2").Apparently, pursuant to the Agreement of November 6, 1959
and the supplemental sketch drafted on July 9, 1961 (Exh. "E-2"),
Leandro Oliver vacated his Lot 24, Block 87 and occupied portion of
Lot 22, Block 87. This same lot was later designated as new Lot 26,
Block 87 which was subdivided into two lots designated as Lots 26
and 30, Block 21 (Exh. "7").On September 19, 1961, relying on the
Agreement of 1959, Leandro Oliver for a consideration of P500.00,
sold to plaintiff Pedro Remoquillo one-half (1/2) portion of Lot
26, Block 87 (portion of old Lot 22 Block 87) which was henceforth
designated as Lot 30 Block 21. This lot, therefore, originated and
was a portion of old Lot 22, Block 87 (Exhs. "7" and "8").In May
1983, (sic 1963) and upon the request of the heirs of Patricio
Seradilla, Engineer Honorato Sta. Maria made a resurvey of the lots
recorded in the name of Patricio Seradilla (Exh. "18").On June 30,
1963, visibly discontented, Jose Seradilla urged his co-heirs to
execute a new sketch based on the 1983 (sic 1963) resurvey of
Engineer Sta. Maria excluding Leandro Oliver from the partition and
adjudicating upon defendant Jose Seradilla Lots 14, 14-A Block 61,
and Lots 26 and 29 Block 87.Thus, on July 5, 1963, the heirs of
Patricio Seradilla formalized their agreement and executed an
Agreement of Partition revoking the Agreement of 1959 and
subdividing the parcels of land left by their parents in the
following manner (Exhibit "18"):To Soledad Lot 24, Block 87Paz Lot
25, Block 87Jose Lots 14, 14-ABlock 61Lots 26 and 29,Block
87Rosario Lots 10 and 10-ABlock 61Lot 22, Block 87Esperanza Lots
23, Block 87Pilar (deceased) Lot 27, Block 87On July 6, 1966,
pursuant to the survey conducted on September 2, 1951 to March 4,
1952, September 1, 1956 and July 31, 1958 to April 10, 1962, the
Director of Lands approved the Subdivision Plan of the Tunasan
Homesite and Block 87 was designated as Block 21 (Exh.
"20-B").Several years later, on August 13, 1970, the heirs of
Patricio Seradilla again executed an Extra-judicial Partition of
the same parcels of land duly published for three (3) consecutive
times in a newspaper (sic) of general circulation (Exh. "N-5") but
omitted to include Lots 26 and 30 Block 21 (Exhs. "N"; "N-1" to
"N-4") due to an alleged typographical error and they being unaware
of the existence of Lot 30 (pp. 9 to 12, TSN, October 20, 1988).On
January 16, 1980, on the basis of the representation of Jose
Seradilla that Lots 26 and 30, Block 21 were included in the
partition (Exh. "M"), the National Housing Authority through J.S.
de Vera, Manager, Estate Management Department, sold to Jose
Seradilla Lots 26 and 30, Block 21, Psd 74516 of the Tunasan
Homesite, San Pedro, Laguna (Exh. "Q"; "Q-1" to "Q-5", inclusive,
Exhs. "4"; "4-A"; "5" and "5-A").On January 25, 1980, Transfer of
Certificates Title No. T-67081 and T-67082 covering Lots 30 and 26,
respectively, were issued in favor of herein defendant Jose
Seradilla (Exhs. "R" and "S").4On June 4, 1982, petitioners filed a
complaint for Annulment of Title with Damages against respondents
before the Regional Trial Court of Bian, Laguna, Branch XXV,
docketed as Civil Case No. B-1863. They sought to annul two (2)
administrative patents issued by respondent National Housing
Authority (NHA) to respondent Jose Seradilla. They asserted
preferential rights over the same as heirs and vendees of Leandro
Oliver, respectively. These parcels of land were duly registered in
the name of Jose Seradilla and recorded as Transfer Certificates of
Title No. T-67081 and T-67082 in the Registry of Deeds of Calamba,
Laguna.5Respondents answered the complaint. On February 16, 1990,
the court rendered judgment against petitioners, the dispositive
portion of which reads:IN THE LIGHT OF THE FOREGOING, judgment is
hereby rendered in favor of the defendants and against the
plaintiffs dismissing the complaint and upholding the validity of
Transfer of Certificates of Title No. T-67081 and T-67082 of the
Registry of Deeds of Laguna covering Lots 30 and 26, respectively,
of the Tunasan Homesite San Pedro, Laguna in the name of Jose
Seradilla. Consequently, plaintiffs or their assigns are directed
to vacate and surrender to defendant Seradilla possession of Lots
26 and 30, Block 21 of the Tunasan Homesite, San Pedro, Laguna
covered by the above mentioned Transfer Certificates of Title.It
appearing that the case was not filed with any malicious intention
on the part of the plaintiffs, defendants' counterclaims are
likewise dismissed for lack of merits. (sic)SO ORDERED.6On appeal,
the respondent Court of Appeals affirmed the controverted decision
of the trial court. On September 11, 1992, petitioners' motion for
reconsideration was denied for lack of merit.Hence, this
petition.Petitioners raise the following issues,viz:IIS A BILATERAL
CONTRACT VOIDAB INITIOJUST BECAUSE ONLY 4 OUT OF 5 HEIRS
PARTICIPATED THEREIN REPRESENTING THEIR SIDE?IICAN A BILATERAL
CONTRACT BE SUPERSEDED BY A SUBSEQUENT UNILATERAL AGREEMENT
EXECUTED BY ALL OF THE 5 HEIRS BUT WITHOUT THE PARTICIPATION OF THE
OTHER PARTY?IIIFROM WHEN IS THE 5-YEAR RESTRICTION AGAINST TRANSFER
IN ADMINISTRATIVE PATENT COUNTED?IVWHAT IS THE EFFECT OF PERSONAL
DISQUALIFICATION TO BEING A PATENTEE OF PUBLIC DISPOSABLE LAND AND
THE UTTER LACK OF BASIS OF THE GRANT OF A PATENT?We rule for
private respondents.The petition at bench can succeed only by a
showing that the Consolidation and Partition Agreement dated
November 6, 1959 is valid. We uphold the respondent court in ruling
that it is void on the ground that it was made within the five (5)
year period prohibiting the sale, assignment, encumbrance,
mortgage, or transfer of land acquired under free patent or
homestead as mandated by C.A. 141, section 118, as amended by C.A.
496.7Indeed, this legal prohibition is expressly recited in the
Agreement to Sell dated July 21, 19558between the government and
the late Patricio Seradilla,viz:12. The Applicant shall not sell,
assign, encumber, mortgage, transfer, or in any other manner affect
his rights under this contract or in the property subject hereof
without first obtaining the written consent of the Administration
and this condition shall subsist until the lapse of five (5) years
from the date of the execution of the final deed of sale in his
favor and shall be annotated as an encumbrance on the certificate
of title of the property that may be issued in his favor.13. This
Agreement shall be binding upon the heirs, executors,
administrators, successors, and assigns of the respective parties
hereto.As the Consolidation and Partition Agreement contravened
section 118, C.A. 141, as amended by C.A. 496, it is null and void
pursuant to paragraph 7, Article 1409 of the Civil Code.9In this
light, the reliance of the petitioners on the sketch of July 9,
1961 signed by private respondent Jose Seradilla allegedly
confirming the Consolidation and Partition Agreement dated November
6, 1959 is hardly of any moment. As Article 1409 of the Civil
Code,op. cit.,expressly states that void contracts cannot be
ratified. Needless to state, the July 5, 1963 Agreement of the
heirs of Patricio Seradilla revoking the void Consolidation and
Partition Agreement dated November 6, 1959 cannot be faulted.Next,
petitioners further allege that Lots 26 and 30 were not among those
properties left by decedent Patricio Seradilla to his heirs. The
grant of patents in favor of private respondent Seradilla covering
these lots was therefore erroneous, it is urged.Again, we are not
persuaded for as correctly observed by the respondent court:10The
omission to specifically mention Lots 26 and Lot 30, Block 21, is
more apparent than real, because, as we explained above, said Lots
26 and 30, Block 21 were the subdivided lots of new Lot 26, Block
87, which was formerly Lot 22, Block 21, as mentioned. Besides,
said Lot 22, Block 87, was among the Lots which were awarded to
Patricio Seradilla or were subject of the Contract to Sell of July
21, 1955 between Patricio and the government (Exhibit 1). Block 21
was formerly Block 87 (Exhibits 7 and 8).Lastly, petitioners
contend that private respondent is disqualified from being a
patentee of the lots in question. They contend that their
predecessor-in-interest, Leandro Oliver, has better qualifications.
This submission was rejected by the trial court which found and
ruled:11FIRSTLY, Leandro Oliver failed to file the requisite
application over either Lot 24 where he allegedly stayed originally
but which was later identified as the vacant lot adjacent to the
Landayan creek (Exh. "20-A") and was during the 1951-1962 survey,
eroded by the Landayan creek (Exh. "20-B", p. 30, TSN, June 22,
1989; or Lot 26, Blocks 87) where he supposedly transferred in
exchange for Lot 24 per the Agreement of 1959.xxx xxx xxxSECONDLY,
the lots subject matter of the Agreement of November 6, 1959 were
awarded to Patricio Seradilla, pursuant to an Agreement to Sell
dated July 21, 1955 whereby the latter agreed to buy the parcels of
land therein mentioned restricted by the conditions laid down in
such contract, pertinent of which are paragraphs 12 and 13 (Exh.
"1").xxx xxx xxxTHIRDLY, Leandro Oliver died on December 23, 1976,
13 years from the time he had learned of the revocation of their
original agreement. Yet, he chose to remain silent; he did not move
to protest his right and slept thereon. He must, therefore, suffer
the ultimate effects of laches. The right of defendant Seradilla
over Lots 26 and 30 (portion of lot 22) must be put to rest and be
recognized.Obviously, petitioners are grasping on questions of
fact. Our unbending jurisprudence forbids us to entertain questions
of fact in a petition for review oncertiorariunder Rule 45 of the
Rules of Court.12This rule finds stronger application in the
petition at bench considering that it involves facts established in
administrative proceedings and confirmed by both trial court and
the respondent court.IN VIEW WHEREOF, the petition is DENIED there
being no showing of any reversible error committed by the
respondent court. Costs against petitioners.SO ORDERED.Republic of
the PhilippinesSUPREME COURTManilaTHIRD DIVISIONG.R. No. 97785
March 29, 1996PHILIPPINE COMMERCIAL INTERNATIONAL
BANK,petitioner,vs.COURT OF APPEALS and RORY W.
LIM,respondents.FRANCISCO,J.:pThis is a petition for review
oncertiorariseeking the reversal of the Decision of the Court of
Appeals in CA-G.R. No. 18843 promulgated on July 30, 1990, and the
Resolution dated March 11, 1991, affirming with modification the
judgment of the Regional Trial Court of Gingoog City which held
petitioner Philippine Commercial International Bank (PCIB) liable
for damages resulting from its breach of contract with private
respondent Rory W. Lim.Disputed herein is the validity of the
stipulation embodied in the standard application form/receipt
furnished by petitioner for the purchase of a telegraphic transfer
which relieves it of any liability resulting from loss caused by
errors or delays in the course of the discharge of its services.The
antecedent facts are as follows:On March 13, 1986, private
respondent Rory Lim delivered to his cousin Lim Ong Tian PCIB Check
No. JJJ 24212467 in the amount of P200,000.00 for the purpose of
obtaining a telegraphic transfer from petitioner PCIB in the same
amount. The money was to be transferred to Equitable Banking
Corporation, Cagayan de Oro Branch, and credited to private
respondent's account at the said bank. Upon purchase of the
telegraphic transfer, petitioner issued the corresponding receipt
dated March 13, 1986 [T/T No. 284]1which contained the assailed
provision, to wit:A G R E E M E N Txxx xxx xxxIn case of fund
transfer, the undersigned hereby agrees that such transfer will be
made without any responsibility on the part of the BANK, or its
correspondents, for any loss occasioned by errors, or delays in the
transmission of message by telegraph or cable companies or by the
correspondents or agencies, necessarily employed by this BANK in
the transfer of this money, all risks for which are assumed by the
undersigned.Subsequent to the purchase of the telegraphic transfer,
petitioner in turn issued and delivered eight (8) Equitable Bank
checks2to his suppliers in different amounts as payment for the
merchandise that he obtained from them. When the checks were
presented for payment, five of them bounced for insufficiency of
funds,3while the remaining three were held overnight for lack of
funds upon presentment.4Consequent to the dishonor of these checks,
Equitable Bank charged and collected the total amount of P1,100.00
from private respondent. The dishonor of the checks came to private
respondent's attention only on April 2, 1986, when Equitable Bank
notified him of the penalty charges and after receiving letters
from his suppliers that his credit was being cut-off due to the
dishonor of the checks he issued.Upon verification by private
respondent with the Gingoog Branch Office of petitioner PCIB, it
was confirmed that his telegraphic transfer (T/T No. 284) for the
sum of P200,000.00 had not yet been remitted to Equitable Bank,
Cagayan de Oro branch. In fact, petitioner PCIB made the
corresponding transfer of funds only on April 3, 1986, twenty one
(21) days after the purchase of the telegraphic transfer on March
13, 1986.Aggrieved, private respondent demanded from petitioner
PCIB that he be compensated for the resulting damage that he
suffered due to petitioner's failure to make the timely transfer of
funds which led to the dishonor of his checks. In a letter dated
April 23, 1986, PCIB's Branch Manager Rodolfo Villarmia
acknowledged their failure to transmit the telegraphic transfer on
time as a result of their mistake in using the control number twice
and the petitioner bank's failure to request confirmation and act
positively on the disposition of the said telegraphic
transfer.5Nevertheless, petitioner refused to heed private
respondent's demand prompting the latter to file a complaint for
damages with the Regional Trial Court of Gingoog City6on January
16, 1987. In his complaint, private respondent alleged that as a
result of petitioner's total disregard and gross violation of its
contractual obligation to remit and deliver the sum of Two Hundred
Thousand Pesos (P200,000.00) covered by T/T No. 284 to Equitable
Banking Corporation, Cagayan de Oro Branch, private respondent's
checks were dishonored for insufficient funds thereby causing his
business and credit standing to suffer considerably for which
petitioner should be ordered to pay damages.7Answering the
complaint, petitioner denied any liability to private respondent
and interposed as special and affirmative defense the lack of
privity between it and private respondent as it was not private
respondent himself who purchased the telegraphic transfer from
petitioner. Additionally, petitioner pointed out that private
respondent is nevertheless bound by the stipulation in the
telegraphic transfer application/form receipt8which provides:. . .
. In case of fund transfer, the undersigned hereby agrees that such
transfer will be made without any responsibility on the part of the
BANK, or its correspondents, for any loss occasioned by errors or
delays in the transmission of message by telegraph or cable
companies or by correspondents or agencies, necessarily employed by
this BANK in the transfer of this money, all risks for which are
assumed by the undersigned.According to petitioner, they utilized
the services of RCPI-Gingoog City to transmit the message regarding
private respondent's telegraphic transfer because their telex
machine was out of order at that time. But as it turned out, it was
only on April 3, 1986 that petitioner's Cagayan de Oro Branch had
received information about the said telegraphic transfer.9In its
decision dated July 27, 198810the Regional Trial Court of Gingoog
City held petitioner liable for breach of contract and struck down
the aforecited provision found in petitioner's telegraphic transfer
application form/receipt exempting it from any liability and
declared the same to be invalid and unenforceable. As found by the
trial court, the provision amounted to a contract of adhesion
wherein the objectionable portion was unilaterally inserted by
petitioner in all its application forms without giving any
opportunity to the applicants to question the same and express
their conformity thereto.11Thus, the trial court adjudged
.petitioner liable to private respondent for the following
amounts:WHEREFORE, judgment is hereby rendered in favor of
plaintiff and against the defendant, ordering the latter to pay the
former as follows:P 960,000.00 as moral damages;P 50,000.00 as
exemplary damages;P 40,000.00 as attorney's fees; andP 1,100.00 as
reimbursement for the surcharges paid by plaintiff to the Equitable
Banking Corporation, plus costs, all with legal interest of 6% per
annum from the date of this judgment until the same shall have been
paid in full.12Upon appeal by petitioner to the Court of Appeals,
respondent court affirmed with modifications the judgment of the
trial court and ordered as follows:WHEREFORE, premises considered,
judgment is hereby rendered affirming the appealed decision with
modification, as follows:The defendant-appellant is ordered to pay
to the plaintiff-appellee the following:1. The sum of Four Hundred
Thousand (P400,000.00) Pesos as/for moral damages;2. The sum of
Forty Thousand (P40,000.00) Pesos as exemplary damage to serve as
an example for the public good;3. The sum of Thirty Thousand
(P30,000.00) Pesos representing attorney's fees;4. The sum of One
Thousand One Hundred (P1,100.00) Pesos as actual damage, and5. To
pay the costs.SO ORDERED.13A motion for reconsideration was filed
by petitioner but respondent Court of Appeals denied the
same.14Still unconvinced, petitioner elevated the case to this
Court through the instant petition for review oncertiorariinvoking
the validity of the assailed provision found in the application
form/receipt exempting it from any liability in case of loss
resulting from errors or delays in the transfer of funds.Petitioner
mainly argues that even assuming that the disputed provision is a
contract of adhesion, such fact alone does not make it invalid
because this type of contract is not absolutely prohibited.
Moreover, the terms thereof are expressed clearly, leaving no room
for doubt, and both contracting parties understood and had full
knowledge of the same.Private respondent however contends that the
agreement providing non-liability on petitioner's part in case of
loss caused by errors or delays despite its recklessness and
negligence is void for being contrary to public policy and
interest.15A contract of adhesion is defined as one in which one of
the parties imposes a ready-made form of contract, which the other
party may accept or reject, but which the latter cannot
modify.16One party prepares the stipulation in the contract, while
the other party merely affixes his signature or his "adhesion"
thereto,17giving no room for negotiation and depriving the latter
of the opportunity to bargain on equal footing.18Nevertheless,
these types of contracts have been declared as binding as ordinary
contracts, the reason being that the party who adheres to the
contract is free to reject it entirely.19It is equally important to
stress, though, that the Court is not precluded from ruling out
blind adherence to their terms if the attendant facts and
circumstances show that they should be ignored for being obviously
too one-sided.20On previous occasions, it has been declared that a
contract of adhesion may be struck down as void and unenforceable,
for being subversive to public policy, only when the weaker party
is imposed upon in dealing with the dominant bargaining party and
is reduced to the alternative of taking it or leaving it,
completely deprived of the opportunity to bargain on equal
footing.21And when it has been shown that the complainant is
knowledgeable enough to have understood the terms and conditions of
the contract, or one whose stature is such that he is expected to
be more prudent and cautious with respect to his transactions, such
party cannot later on be heard to complain for being ignorant or
having been forced into merely consenting to the contract.22The
factual backdrop of the instant case, however, militates against
applying the aforestated pronouncements. That petitioner failed to
discharge its obligation to transmit private respondent's
telegraphic transfer on time in accordance with their agreement is
already a settled matter as the same is no longer disputed in this
petition. Neither is the finding of respondent Court of Appeals
that petitioner acted fraudulently and in bad faith in the
performance of its obligation, being contested by petitioner.
Perforce, we are bound by these factual considerations.Having
established that petitioner acted fraudulently and in bad faith, we
find it implausible to absolve petitioner from its wrongful acts on
account of the assailed provision exempting it from any liability.
InGeraldez vs.Court of Appeals,23it was unequivocally declared that
notwithstanding the enforceability of a contractual limitation,
responsibility arising from a fraudulent act cannot be exculpated
because the same is contrary to public policy. Indeed, Article 21
of the Civil Code is quite explicit in providing that "[a]ny person
who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate
the latter for the damage". Freedom of contract is subject to the
limitation that the agreement must not be against public policy and
any agreement or contract made in violation of this rule is not
binding and will not be enforced.24The prohibition against this
type of contractual stipulation is moreover treated by law as void
which may not be ratified or waived by a contracting party. Article
1409 of the Civil Code states:Art. 1409. The following contracts
are inexistent and void from the beginning:(1) Those whose cause,
object or purpose is contrary to law, morals, good customs, public
order or public policy;xxx xxx xxxThese contracts cannot be
ratified. Neither can the right to set up the defense of illegality
be waived.Undoubtedly, the services being offered by a banking
institution like petitioner are imbued with public interest.25The
use of telegraphic transfers have now become commonplace among
businessmen because it facilitates commercial transactions. Any
attempt to completely exempt one of the contracting parties from
any liability in case of loss notwithstanding its bad faith, fault
or negligence, as in the instant case, cannot be sanctioned for
being inimical to public interest and therefore contrary to public
policy. Resultingly, there being no dispute that petitioner acted
fraudulently and in bad faith, the award of moral26and exemplary
damages were proper.But notwithstanding petitioner's liability for
the resulting loss and damage to private respondent, we find the
amount of moral damages adjudged by respondent court in the sum of
P400,000.00 exorbitant. Bearing in mind that moral damages are
awarded, not to penalize the wrongdoer, but rather to compensate
the claimant for the injuries that he may have suffered,27we
believe that an award of Two Hundred Thousand Pesos (P200,000.00)
is reasonable under the circumstances.WHEREFORE, subject to the
foregoing modification reducing the amount awarded as moral damages
to the sum of Two Hundred Thousand Pesos (P200,000.00), the
appealed decision is hereby AFFIRMED.SO ORDERED.Republic of the
PhilippinesSUPREME COURTManilaTHIRD DIVISIONG.R. No. 111448 January
16, 2002AF REALTY & DEVELOPMENT, INC. and ZENAIDA R.
RANULLO,petitioners,vs.DIESELMAN FREIGHT SERVICES, CO., MANUEL C.
CRUZ, JR. and MIDAS DEVELOPMENT
CORPORATION,respondents.SANDOVAL-GUTIERREZ,J.:Petition for review
oncertiorariassailing the Decision dated December 10, 1992 and the
Resolution (Amending Decision) dated August 5, 1993 of the Court of
Appeals in CA-G.R. CV No. 30133.Dieselman Freight Service Co.
(Dieselman for brevity) is a domestic corporation and a registered
owner of a parcel of commercial lot consisting of 2,094 square
meters, located at 104 E. Rodriguez Avenue, Barrio Ugong, Pasig
City, Metro Manila. The property is covered by Transfer Certificate
of Title No. 39849 issued by the Registry of Deeds of the Province
of Rizal.1On May 10, 1988, Manuel C. Cruz, Jr., a member of the
board of directors of Dieselman, issued a letter denominated as
"Authority To Sell Real Estate"2to Cristeta N. Polintan, a real
estate broker of the CNP Real Estate Brokerage. Cruz, Jr.
authorized Polintan "to look for a buyer/buyers and negotiate the
sale" of the lot at P3,000.00 per square meter, or a total of
P6,282,000.00. Cruz, Jr. has no written authority from Dieselman to
sell the lot.In turn, Cristeta Polintan, through a letter3dated May
19, 1988, authorized Felicisima ("Mimi") Noble4to sell the same
lot.Felicisima Noble then offered for sale the property to AF
Realty & Development, Inc. (AF Realty) at P2,500.00 per square
meter.5Zenaida Ranullo, board member and vice-president of AF
Realty, accepted the offer and issued a check in the amount of
P300,000.00 payable to the order of Dieselman. Polintan received
the check and signed an "Acknowledgement Receipt"6indicating that
the amount of P300,000.00 represents the partial payment of the
property but refundable within two weeks should AF Realty
disapprove Ranullo's action on the matter.On June 29, 1988, AF
Realty confirmed its intention to buy the lot. Hence, Ranullo asked
Polintan for the board resolution of Dieselman authorizing the sale
of the property. However, Polintan could only give Ranullo the
original copy of TCT No. 39849, the tax declaration and tax receipt
for the lot, and a photocopy of the Articles of Incorporation of
Dieselman.7On August 2, 1988, Manuel F. Cruz, Sr., president of
Dieselman, acknowledged receipt of the said P300,000.00 as "earnest
money" but required AF Realty to finalize the sale atP4,000.00per
square meter.8AF Realty replied that it has paid an initial down
payment of P300,000.00 and is willing to pay the balance.9However,
on August 13, 1988, Mr. Cruz, Sr. terminated the offer and demanded
from AF Realty the return of the title of the lot earlier delivered
by Polintan.10Claiming that there was a perfected contract of sale
between them, AF Realty filed with the Regional Trial Court, Branch
160, Pasig City a complaint for specific performance (Civil Case
No. 56278) against Dieselman and Cruz, Jr.. The complaint prays
that Dieselman be ordered to execute and deliver a final deed of
sale in favor of AF Realty.11In its amended complaint,12AF Realty
asked for payment of P1,500,000.00 as compensatory damages;
P400,000.00 as attorney's fees; and P500,000.00 as exemplary
damages.In its answer, Dieselman alleged that there was no meeting
of the minds between the parties in the sale of the property and
that it did not authorize any person to enter into such transaction
on its behalf.Meanwhile, on July 30, 1988, Dieselman and Midas
Development Corporation (Midas) executed a Deed of Absolute
Sale13of the same property. The agreed price was P2,800.00 per
square meter. Midas delivered to Dieselman P500,000.00 as down
payment and deposited the balance of P5,300,000.00 in escrow
account with the PCIBank.Constrained to protect its interest in the
property, Midas filed on April 3, 1989 a Motion for Leave to
Intervene in Civil Case No. 56278. Midas alleged that it has
purchased the property and took possession thereof, hence Dieselman
cannot be compelled to sell and convey it to AF Realty. The trial
court granted Midas' motion.After trial, the lower court rendered
the challenged Decision holding that the acts of Cruz, Jr. bound
Dieselman in the sale of the lot to AF Realty.14Consequently, the
perfected contract of sale between Dieselman and AF Realty bars
Midas' intervention. The trial court also held that Midas acted in
bad faith when it initially paid Dieselman P500,000.00 even without
seeing the latter's title to the property. Moreover, the notarial
report of the sale was not submitted to the Clerk of Court of the
Quezon City RTC and the balance of P5,300,000.00 purportedly
deposited in escrow by Midas with a bank was not
established.1wphi1.ntThe dispositive portion of the trial court's
Decision reads:"WHEREFORE, foregoing considered, judgment is hereby
rendered ordering defendant to execute and deliver to plaintiffs
the final deed of sale of the property covered by the Transfer
Certificate of Title No. 39849 of the Registry of Deed of Rizal,
Metro Manila District II, including the improvements thereon, and
ordering defendants to pay plaintiffs attorney's fees in the amount
of P50,000.00 and to pay the costs."The counterclaim of defendants
is necessarily dismissed."The counterclaim and/or the complaint in
intervention are likewise dismissed"SO ORDERED."15Dissatisfied, all
the parties appealed to the Court of Appeals.AF Realty alleged that
the trial court erred in not holding Dieselman liable for moral,
compensatory and exemplary damages, and in dismissing its
counterclaim against Midas.Upon the other hand, Dieselman and Midas
claimed that the trial court erred in finding that a contract of
sale between Dieselman and AF Realty was perfected. Midas further
averred that there was no bad faith on its part when it purchased
the lot from Dieselman.In its Decision dated December 10, 1992, the
Court of Appeals reversed the judgment of the trial court holding
that since Cruz, Jr. was not authorized in writing by Dieselman to
sell the subject property to AF Realty, the sale was not perfected;
and that the Deed of Absolute Sale between Dieselman and Midas is
valid, there being no bad faith on the part of the latter. The
Court of Appeals then declared Dieselman and Cruz, Jr. jointly and
severally liable to AF Realty for P100,000.00 as moral damages;
P100,000.00 as exemplary damages; and P100,000.00 as attorney's
fees.16On August 5, 1993, the Court of Appeals, upon motions for
reconsideration filed by the parties, promulgated an Amending
Decision, the dispositive portion of which reads:"WHEREFORE, The
Decision promulgated on October 10, 1992, is hereby AMENDED in the
sense that only defendant Mr. Manuel Cruz, Jr. should be made
liable to pay the plaintiffs the damages and attorney's fees
awarded therein, plus the amount of P300,000.00 unless, in the case
of the said P300,000.00, the same is still deposited with the Court
which should be restituted to plaintiffs."SO ORDERED."17AF Realty
now comes to this Court via the instant petition alleging that the
Court of Appeals committed errors of law.The focal issue for
consideration by this Court is who between petitioner AF Realty and
respondent Midas has a right over the subject lot.The Court of
Appeals, in reversing the judgment of the trial court, made the
following ratiocination:"From the foregoing scenario, the fact that
the board of directors of Dieselman never authorized, verbally and
in writing, Cruz, Jr. to sell the property in question or to look
for buyers and negotiate the sale of the subject property is
undeniable."While Cristeta Polintan was actually authorized by
Cruz, Jr. to look for buyers and negotiate the sale of the subject
property, it should be noted that Cruz, Jr. could not confer on
Polintan any authority which he himself did not have.Nemo dat quod
non habet. In the same manner, Felicisima Noble could not have
possessed authority broader in scope, being a mere extension of
Polintan's purported authority, for it is a legal truism in our
jurisdiction that a spring cannot rise higher than its source.
Succinctly stated, the alleged sale of the subject property was
effected through persons who were absolutely without any authority
whatsoever from Dieselman."The argument that Dieselman ratified the
contract by accepting the P300,000.00 as partial payment of the
purchase price of the subject property is equally untenable. The
sale of land through an agent without any written authority is
void.x x x x x x x x x"On the contrary, anent the sale of the
subject property by Dieselman to intervenor Midas, the records bear
out that Midas purchased the same from Dieselman on 30 July 1988.
The notice oflis pendenswas subsequently annotated on the title of
the property by plaintiffs on 15 August 1988. However, this
subsequent annotation of the notice oflis pendenscertainly operated
prospectively and did not retroact to make the previous sale of the
property to Midas a conveyance in bad faith. A subsequently
registered notice oflis pendenssurely is not proof of bad faith. It
must therefore be borne in mind that the 30 July 1988 deed of sale
between Midas and Dieselman is a document duly certified by notary
public under his hand and seal. x x x. Such a deed of sale being
public document acknowledged before a notary public is admissible
as to the date and fact of its execution without further proof of
its due execution and delivery (Bael vs. Intermediate Appellate
Court, 169 SCRA617; Joson vs. Baltazar, 194 SCRA 114) and to prove
the defects and lack of consent in the execution thereof, the
evidence must be strong and not merely preponderant x x x."18We
agree with the Court of Appeals.Section 23 of the Corporation Code
expressly provides that the corporate powers of all corporations
shall be exercised by the board of directors. Just as a natural
person may authorize another to do certain acts in his behalf, so
may the board of directors of a corporation validly delegate some
of its functions to individual officers or agents appointed by
it.19Thus, contracts or acts of a corporation must be made either
by the board of directors or by a corporate agent duly authorized
by the board.20Absent such valid delegation/authorization, the rule
is that the declarations of an individual director relating to the
affairs of the corporation, but not in the course of, or connected
with, the performance of authorized duties of such director, are
held not binding on the corporation.21In the instant case, it is
undisputed that respondent Cruz, Jr. has no written authority from
the board of directors of respondent Dieselman to sell or to
negotiate the sale of the lot, much less to appoint other persons
for the same purpose. Respondent Cruz, Jr.'s lack of such authority
precludes him from conferring any authority to Polintan involving
the subject realty. Necessarily, neither could Polintan authorize
Felicisima Noble. Clearly, the collective acts of respondent Cruz,
Jr., Polintan and Noble cannot bind Dieselman in the purported
contract of sale.Petitioner AF Realty maintains that the sale of
land by an unauthorized agent may be ratified where, as here, there
is acceptance of the benefits involved. In this case the receipt by
respondent Cruz, Jr. from AF Realty of the P300,000.00 as partial
payment of the lot effectively binds respondent Dieselman.22We are
not persuaded.Involved in this case is a sale of landthrough an
agent. Thus, the law on agency under the Civil Code takes
precedence. This is well stressed inYao Ka Sin Trading vs. Court of
Appeals:23"Since a corporation, such as the private respondent, can
act only through its officers and agents, all acts within the
powers of said corporationmay be performed by agents of its
selection; and, except so far as limitations or restrictions may be
imposed by special charter, by-law, or statutory provisions,thesame
general principles of law which govern the relation of agency for a
natural person govern the officer or agent of a corporation, of
whatever status or rank, in respect to hispower to act for the
corporation;and agents when once appointed,ormembers acting in
their stead,are subject to thesame rules, liabilities, and
incapacities as are agents of individuals and private persons."
(Emphasis supplied)Pertinently, Article 1874 of the same Code
provides:"ART. 1874. When asale of piece of landor any interest
therein isthrough an agent, theauthorityof the lattershallbe in
writing;otherwise,the sale shall be void." (Emphasis
supplied)Considering that respondent Cruz, Jr., Cristeta Polintan
and Felicisima Ranullo were not authorized by respondent Dieselman
to sell its lot, the supposed contract is void. Being a void
contract, it is not susceptible of ratification by clear mandate of
Article 1409 of the Civil Code, thus:"ART. 1409. The
followingcontractsareinexistent and void from the very beginning:x
x x(7) Thoseexpressly prohibitedordeclared void by law."These
contracts cannot be ratified. Neither can the right to set up the
defense of illegality be waived." (Emphasis supplied)Upon the other
hand, the validity of the sale of the subject lot to respondent
Midas is unquestionable. As aptly noted by the Court of
Appeals,24the sale was authorized by a board resolution of
respondent Dieselman dated May 27, 1988.1wphi1.ntThe Court of
Appeals awarded attorney's fees and moral and exemplary damages in
favor of petitioner AF Realty and against respondent Cruz, Jr.. The
award was made by reason of a breach of contract imputable to
respondent Cruz, Jr. for having acted in bad faith. We are no
persuaded. It bears stressing that petitioner Zenaida Ranullo,
board member and vice-president of petitioner AF Realty who
accepted the offer to sell the property, admitted in her
testimony25that a board resolution from respondent Dieselman
authorizing the sale is necessary to bind the latter in the
transaction; and that respondent Cruz, Jr. has no such written
authority. In fact, despite demand, such written authority was not
presented to her.26This notwithstanding, petitioner Ranullo
tendered a partial payment for the unauthorized transaction.
Clearly, respondent Cruz, Jr. should not be held liable for damages
and attorney's fees.WHEREFORE, the assailed Decision and Resolution
of the Court of Appeals are herebyAFFIRMEDwithMODIFICATIONin the
sense that the award of damages and attorney's fees is deleted.
Respondent Dieselman is ordered to return to petitioner AF Realty
its partial payment of P300,000.00. Costs against petitioners.SO
ORDERED.CUATON VS. SALUDOn January 5, 1993, respondent Rebecca
Salud, joined by her husband Rolando Salud, instituted a suit for
foreclosure of real estate mortgage with damages against petitioner
Mansueto Cuaton and his mother, Conchita Cuaton, with the Regional
Trial Court of General Santos City, Branch 35, docketed as SPL.
Civil Case No. 359. The trial court rendered a decision declaring
the mortgage constituted on October 31, 1991 as void, because it
was executed by Mansueto Cuaton in favor of Rebecca Salud without
expressly stating that he was merely acting as a representative of
Conchita Cuaton, in whose name the mortgaged lot was titled. The
court ordered petitioner to pay Rebecca Salud,inter alia, the loan
secured by the mortgage in the amount of One Million Pesos plus a
total P610,000.00 representing interests of 10% and 8% per month
for the period February 1992 to August 1992.ISSUE: whether the 8%
and 10% monthly interest rates imposed on the one-million-peso loan
obligation of petitioner to respondent Rebecca Salud are valid?
NO.RULING:InRuiz v. Court of Appeals,we declared that the Usury Law
was suspended by Central Bank Circular No. 905, s. 1982, effective
on January 1, 1983, and that parties to a loan agreement have been
given wide latitude to agree on any interest rate. However, nothing
in the said Circular grants lenderscarte blancheauthority to raise
interest rates to levels which will either enslave their borrowers
or lead to a hemorrhaging of their assets. The stipulated interest
rates are illegal if they are unconscionable.Thus, inMedel v. Court
of Appeals, andSpouses Solangon v. Salazar,the Court annulled a
stipulated 5.5% per month or 66% per annum interest on a
P500,000.00 loan and a 6% per month or 72% per annum interest on a
P60,000.00 loan, respectively, for being excessive, iniquitous,
unconscionable and exorbitant. In both cases, the interest rates
were reduced to 12% per annum.In the present case, the 10% and 8%
interest rates per month on the one-million-peso loan of petitioner
are even higher than those previously invalidated by the Court in
the above cases. Accordingly, the reduction of said rates to 12%
per annum is fair and reasonable.Stipulations authorizing
iniquitous or unconscionable interests are contrary to morals
(contra bonos mores), if not against the law. Under Article 1409 of
the Civil Code, these contracts are inexistent and void from the
beginning. They cannot be ratified nor the right to set up their
illegality as a defense be waived.OUANO VS. CAThe point of the
controversy of this case is a parcel of land situated in Cebu
registered in the name of the Development Bank of the Philippines
(DBP). Adjoining the said Lot are lands belonging to PR Echavez and
P, Ouano. What will have to be resolved are the conflicting claims
over this lot by the vendee thereof, Echavez, and Ouano.The
property was offered for sale by public bidding by the RFC..
Actually this was the second public bidding scheduled for the
property. The first in which both Ouano and Echavez participated,
together with others was nullified on account of a protest by
Ouano.Now, it appears that prior to the second bidding, Ouano and
Echavez orally agreed that only Echavez would make a bid, and that
if it was accepted, they would divide the property in proportion to
their adjoining properties. To ensure success of their enterprise,
they also agreed to induce the only other party known to be
interested in the property-a group headed by a Mrs. Bonsucan to
desist from presenting a bid. They broached the matter to Mrs.
Bonsucan's group. The latter agreed to withdraw, as it did in fact
withdraw from the sale; and Ouano's wife paid it P2,000 as
reimbursement for its expenses.As expected, the highest bid
submitted, and thus accepted by the RFC, was that of Francisco
Echavez, who offered P27,826.00 for the land .Echavez paid the sum
of P5,565.00 representing 20% deposit of the prefferred price.A
week later, Echavez sent a letter to Ouano regarding the P2,000.00
paid by the latter's wife to the Bonsucan group. The content of the
letter stated that Echavez will give a 250sq. m. lot to Ouano in
lieu of the 2k. Thereafter, the parties agreed and executed an
Agreement. However, the RFC never approved the sharing agreement
between Echavez and Ouano concerning Lot 3-A-1. It approved the
sale of the lot to Echavez only, on May 9, 1958, on the condition
that the purchase price of P27,825.00 be paid in cash. Apparently
Echavez found great initial difficulty in complying with this
condition. It took all of four years, and patient negotiation and
diligent effort on his part, for him ultimately to acquire title to
the property, which came about in December, 1963. Ouano, in his
turn, tried to have DBP either accept and implement his sharing
agreement with Echavez, or allow him to pay the full price of the
lot in Echavez's behalf. By his own account, he sent a letter to
the DBP, "handcarried by his wife," "requesting among others, that
he be permitted to pay immediately either for his share but the
Bank turned down his request.
Shortly after his representation with the DBP were rebuffed more
precisely on June 24, 1963, months before the deed of absolute sale
was executed by the DBP in Echavez's favor Paterno J. Ouano filed
suit for "specific performance and reconveyance" in the Court of
First Instance of Cebu against Francisco Echavez and the
Development Bank of the Philippines (DBP).
RULING:
Two material facts, however, about which Ouano and Echavez are
in agreement, render these questions of academic interest only,
said facts being determinative of this dispute on an altogether
different ground. These facts are:1) that they bad both orally
agreed that only Echavez would make a bid at the second bidding
called by the RFC, and that if it was accepted, they would divide
the property in proportion to their adjoining properties; and2)
that to ensure success of their scheme, they had also agreed to
induce the only other party known to be interested in the property
a group headed by a Mrs. Bonsucan to desist from presenting a bid,
as they did succeed in inducing Mrs. Bonsucan's group to withdraw
from the sale, paying said group P2,000 as reimbursement for its
expenses.These acts constitute a crime, as the Trial Court has
stressed. Ouano and Echavez had promised to share in the property
in question as a consideration for Ouano's refraining from taking
part in the public auction, and they had attempted to cause and in
fact succeeded in causing another bidder to stay away from the
auction. in order to cause reduction of the price of the property
auctioned In so doing, they committed the felony ofmachinations in
public auctionsdefined and penalized in Article 185 of the Revised
Penal Code,supra.That both Ouano and Echavez did these acts is a
matter of record, as is the fact that thereby only one bid that of
Echavez was entered for the 'land in consequence of which Echavez
eventually acquired it. The agreement therefore being criminal in
character, the parties not only have no action against each other
but are both liable to prosecution and the things and price of
their agreement subject to disposal according to the provisions of
the criminal code. This, in accordance with the so-calledpari
delictoprinciple set out in the Civil Code.Article 1409 of said
Code declares as "inexistent and void from the beginning" those
contracts, among others, "whose cause, object or purpose is
contrary to law, morals, good customs, public order or public
policy," or "expressly prohibited ... by law." Such contracts
"cannot be ratified "the right to set up the defense of illegality
(cannot) be waived;" and, Article 1410 adds, the "action or defense
for the declaration of the inexistence ... (thereof) does not
prescribe." Furthermore, according to Article 1411 of the same Code
... When the nullity proceeds from the illegality of the cause or
object of the contract, and the act constitutes a criminal offense,
both parties being in pari delicto, they shall have no action
against each other, and both shall be prosecuted. Moreover,the
provisions of the Penal Code relative to the disposal of effects or
instruments of a crime shall be applicable to the things or the
price of the contract.xxx xxx xxxThe dismissal of Ouano's action by
both the Trial Court and the Court of Appeals was thus correct,
being plainly in accord with the Civil Code provisions just
referred to. Article 1411 also dictates the proper disposition of
the land involved, i.e., "the forfeiture of the proceeds of the
crime and the instruments or tools with which it was committed," as
mandated by the provisions of Article 45 of the Revised Penal Code,
this being obviously the provision "of the Penal Code relative to
the disposal of effects or instruments of a crime" that Article
1411 makes "applicable to the things or the price of the
contract."The subject lot was forfeited in favor of the
government.
BUENAVENTURA VS. CAJulian Caia, was the occupant and tenant of a
parcel of land, owned by the Republic of the Philippines but
administered at first by the then Rural Progress Administration and
later by the Peoples Homesite and Housing Corporation (PHHC).The
Republic of the Philippines acquired the aforesaid lot, together
with other lots in the Gonzales Estate by Expropriation to be
resold to qualified and bonafide tenants-occupants and, to achieve
this end, the President of the Philippines, designated the PHHC
with the task of selling and transferring the said lots to
qualified tenants concerned and/or their lawful heirs.Julian Caia
had a brother, Justo Caia. The latter had three children, namely,
Emeteria Buenaventura, Lorenzo Caia and Francisca Caia. Emeteria
Buenaventura died and was survived by Maria Buenaventura and
Narciso Buenaventura, the Private Respondents in this case.On
November 4, 1965, the People Homesite and Housing Corporation
executed a 'Deed of Absolutes Sale' over the said lot to Lorenzo
Caia and Francisca Caia-Rivera, as the sole heirs and
successor-in-interest of Julian Caia for and in consideration of
the purchase price of P96,048.80. The following day Title were
issued in the name of the latter.On January 26, 1966, Lorenzo Caia
and Francisca Caia-Rivera executed a 'Deed of Absolutes Sale' over
the said lot in favor of Francisco M. Custodio after which the
latter was issued on January 26, 1966 a new TCT issued in his name
as the owner.On January 26, 1966, Francisco Custodio executed a
'Deed of Absolute Sale' over the said lot in favor of the
Petitioner for which the latter was issued on January 26, 1966.On
December 24, 1976, Petitioner filed a complaint for Annulment of
Titles, Contracts and/or Sales. Reconveyance and Damages.RTC ruled
in favor of the PR. Aggrieved by the rules of the trial court,
herein private respondents filed a petition with the Court of
Appeals which later granted and ordered the dismissal of the
complaint of then private respondents, now herein petitioners, on
the ground that their action has already prescribed.ISSUE: WON Art.
1410 is applicable in the instant case? NO.RULING:The Court of
Appeals, in directing the dismissal of the complaint filed by the
petitioners in the court of origin, held that Article 1410 of the
Civil Code on imprescriptibility of actions is not applicable
because fraud in the transfer of the property was alleged in
petitioner's complaint.Petitioners' allegation in their complaint
filed in the court of origin, that fraud was employed in the
execution of a deed of sale and subsequently, in the issuance of a
transfer certificate of title, renders their action for
reconveyance susceptible to prescription either within 4 years or
10 years.In the present case, even if one bends backwards and
considers the circumstances alleged as having created an implied or
constructive trust, such that the action for reconveyance would
prescribed in the longer period of 10 years, still petitioners'
action is plainly time-barred. Considering that the deed of sale
executed by the Philippine Homesite and Housing Corporation in
favor of Lorenzo Caia and Francisca Caia-Rivera was executed on
November 4, 1965 and on the following day, Transfer Certificate of
Title No. 21484 was issued in favor of the vendees (private
respondents), the party allegedly defrauded in the transaction,
herein petitioners, had only 10 years or until September 5, 1975
within which to file the appropriate action. In the instant case,
the action was filed only on December 28, 1976, which was beyond
the prescribed period set by law.Verily, the principle on
prescription of actions is designed to cover situations such as the
case at bar, where there have been a series of transfers to
innocent purchasers for value. To set aside these transactions only
to accommodate a party who has slept on his rights is anathema to
good order.GOCHAN VS. HEIRS OF BABAThe facts show that Lot No.
3537, a conjugal property of spouses Raymundo Baba and Dorotea
Inot. After Raymundos demise in 1947, an extrajudicial settlement
of his estate, including Lot No. 3537, was executed among the heirs
of Raymundo, namely, Dorotea Inot and his 2 children, Victoriano
Baba and Gregorio Baba.One-half undivided portion of the lot was
adjudicated in favor of Dorotea, and the other half divided between
Victoriano and Gregorio.On December 28, 1966, Dorotea, Victoriano
and Gregorio, in consideration of the amount of P2,346.70, sold Lot
No. 3537 to petitioner Felix Gochan and Sons Realty Corporation
(Gochan Realty).Sometime in 1995, Gocahn Realty entered into a
joint venture agreement with Sta. Lucia Realty and Development
Corporation Inc. for the development, among others, of Lot No.
3537, into a subdivision. On June 13, 1996, respondents Bestra,
Maricel, Crecencia, Antonio and Petronila, all surnamed Baba, filed
a complaint for quieting of title and reconveyance with damages
against petitioners with the RTC of Lapu-Lapu City, they alleged
that they are among the 7 children of Dorotea Inot and Raymundo
Baba; that petitioners connived with Dorotea Inot, Victoriano and
Gregorio Baba in executing the extrajudicial settlement and deed of
sale which fraudulently deprived them of their hereditary share in
Lot No. 3537; and that said transactions are void insofar as their
respective shares are concerned because they never consented to the
said sale and extrajudicial settlement, which came to their
knowledge barely a year prior to the filing of the complaint. In
its answer, petitioner Gochan Realty averred that respondents have
no personality to sue because they are not children of Dorotea Inot
and Raymundo Baba; that even assuming they are lawful heirs of the
spouses, their action is barred by estoppel, laches and
prescription for having been filed more than 28 years after the
issuance of the transfer certificate of title in its name.ISSUE:
Whether or not respondents complaint is dismissible on the ground
of prescription? NO.RULING:Under Article 1318 of the Civil Code,
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.
The absence of any of these essential requisites renders the
contract inexistent and an action or defense to declare said
contract voidab initiodoes not prescribe, pursuant to Article 1410
of the same Code.In actions for reconveyance of property predicated
on the fact that the conveyance complained of was null and void ab
initio, a claim of prescription of action would be unavailing. The
action or defense for the declaration of the inexistence of a
contract does not prescribeLikewise, in the cases of Solomon v.
Intermediate Appellate Court,Vda. De Portugal v. Intermediate
Appellate Court,Garanciang v. Garanciang,and Lacsamana v. Court of
Appeals,the Court ruled that conveyances by virtue of a forged
signature or a fictitious deed of sale are void ab initio. The
absence of the essential requites of consent and cause or
consideration in these cases rendered the contract inexistent and
the action to declare their nullity is imprescriptible.ARROYO VS.
CAThe Court summarized the facts of the case in this manner:Dr.
Jorge B. Neri filed a criminal complaint for adultery before the
Regional Trial Court (RTC) of Benguet against his wife, Ruby Vera
Neri, and Eduardo Arroyo.The RTC convicted petitioner and Mrs. Ruby
Vera Neri of adultery as defined under Article 333 of the Revised
Penal Code.The essential facts of the case, as found by the trial
court and the Court of Appeals, are as follows:... On November 2,
1982, accused, Mrs. Ruby Vera Neri in the company of Mrs. Linda
Sare and witness Jabunan, took the morning plane to Baguio.
Arriving at around 11:00 a.m., they dropped first at the house of
Mrs. Vera, mother of Ruby Vera at Crystal Cave, Baguio City then
proceeded to the Mines View Park Condominium of the Neri spouses.
At around 7:00 o' clock in the evening, accused Eduardo Arroyo
arrived at the Neris' condominium. Witness opened the door for
Arroyo who entered, he went down to and knocked at the master's
bedroom where accused Ruby Vera Neri and her companion Linda Sare
were. On accused Ruby Vera Neri's request, Linda Sare left the
master's bedroom and went upstairs to the sala leaving the two
accused. About forty-five minutes later, Arroyo Jr. came up and
told Linda Sare that she could already come down. Three of them,
thereafter, went up to the sala then left the condominium.
Petitioner Arroyo filed a Motion for Reconsideration of the Court
of Appeals' Decision. Petitioner Ruby Vera Neri also moved for
reconsideration or a new trial, contending that a pardon had been
extended by her husband, private complainant Dr. Jorge B. Neri, and
that her husband had later con traded marriage with another woman
with whom he is presently co-habiting. Both motions were denied by
the Court of Appeals.ISSUE: Whether or not Dr. Neri's extra-marital
affair precludes him from filing the criminal complaint on the
ground ofpari delicto? NO.RULING:We turn to the contention
thatpari-delicto"is a valid defense to a prosecution for adultery
and concubinage and that in such a case "it would be only a
hypocritical pretense for such spouse to appear in court as the
offended spouse."In the first place, the case cited does not
support petitioner Neri's position. In theGuinucudcase, the Court
found that the complaining husband, by entering into an agreement
with his wife that each of them were to live separately and could
marry other persons and by filing complaint only about a year after
discovering his wife's infidelity, had "consented to, and
acquiesced in, the adulterous relations existing between the
accused, and he is, therefore, not authorized by law to institute
the criminal proceedings." In fine, theGuinucudcase refers not to
the notion ofpari delictobut to consent as a bar to the institution
of the criminal proceedings.In the present case, no such
acquiescence can be implied: the accused did not enter into any
agreement with Dr. Neri allowing each other to marry or cohabit
with other persons; and Dr. Neri promptly filed his complaint after
discovering the illicit affair.Moreover, the concept ofpari
delictois not found in the Revised Penal Code, but only in Article
1411 of the Civil Code. The Court notes that Article 1411 of the
Civil Code relates only to contracts with illegal consideration.
The case at bar does not involve any illegal contract which either
of the contracting parties is now seeking to enforce.PAJUYO VS.
CAIn June 1979, petitioner Pajuyo paidP400 to a certain Pedro Perez
for the rights over a 250-square meter lot in Barrio Payatas,
Quezon City. Pajuyo then constructed a house made of light
materials on the lot. Pajuyo and his family lived in the house from
1979 to 7 December 1985.On 8 December 1985, Pajuyo and private
respondent Eddie Guevarra executed aKasunduanor agreement. Pajuyo,
as owner of the house, allowed Guevarra to live in the house for
free provided Guevarra would maintain the cleanliness and
orderliness of the house. Guevarra promised that he would
voluntarily vacate the premises on Pajuyos demand.In September
1994, Pajuyo informed Guevarra of his need of the house and
demanded that Guevarra vacate the house. Guevarra refused.Pajuyo
filed an ejectment case against Guevarra with the MTC of Quezon
City.In his Answer, Guevarra claimed that Pajuyo had no valid title
or right of possession over the lot where the house stands because
the lot is within the 150 hectares set aside by Proclamation No.
137 for socialized housing. Guevarra pointed out that from December
1985 to September 1994, Pajuyo did not show up or communicate with
him. Guevarra insisted that neither he nor Pajuyo has valid title
to the lot.ISSUE: WON the parties are in pari delicto being both
squatters, therefore, illegal occupants over the contested parcel
of land? NO.
RULING:
The principle ofpari delicto will not applyto this case.Articles
1411 and 1412 of the Civil Code embody the principle ofpari
delicto. We explained the principle of pari delicto in these
words:The rule of pari delicto is expressed in the maxims ex dolo
malo non eritur actio and in pari delicto potior est conditio
defedentis. The law will not aid either party to an illegal
agreement. It leaves the parties where it finds them.The
application of the pari delicto principle is not absolute, as there
are exceptions to its application. One of these exceptions is where
the application of the pari delicto rule would violate
well-established public policy.InDrilon v. Gaurana, the SC
reiterated the basic policy behind the summary actions of forcible
entry and unlawful detainer. The application of the principle
ofpari delictoto a case of ejectment between squatters is fraught
with danger. To shut out relief to squatters on the ground ofpari
delictowould openly invite mayhem and lawlessness. A squatter would
oust another squatter from possession of the lot that the latter
had illegally occupied, emboldened by the knowledge that the courts
would leave them where they are. Nothing would then stand in the
way of the ousted squatter from re-claiming his prior possession at
all cost.Petty warfare over possession of properties is precisely
what ejectment cases or actions for recovery of possession seek to
prevent. Even the owner who has title over the disputed property
cannot take the law into his own hands to regain possession of his
property. The owner must go to court.Courts must resolve the issue
of possession even if the parties to the ejectment suit are
squatters. The determination of priority and superiority of
possession is a serious and urgent matter that cannot be left to
the squatters to decide. To do so would make squatters receive
better treatment under the law. The law restrains property owners
from taking the law into their own hands. However, the principle
ofpari delictoas applied by the Court of Appeals would give
squatters free rein to dispossess fellow squatters or violently
retake possession of properties usurped from them. Courts should
not leave squatters to their own devices in cases involving
recovery of possession.
CITY OF ANGELES VS. CAA Deed of Donation was executed where it
stated that the private respondent donated to the City of Angeles,
51 parcels of land situated in Barrio Pampang, City of Angeles,
with an aggregate area of 50,676 square meters, more or less, part
of a bigger area also belonging to private respondent. The
pertinent consitionds in the deedprovided, among others, that:2.
The properties donated shall be devoted as a Sports Complex.3. No
commercial building, commercial complex, market or any other
similar complex, mass or tenament (sic) housing/building(s) shall
be constructed in the properties donated nor shall cockfighting, be
allowed in the premises.8. Any substantial breach of the foregoing
provisos shall entitle the DONOR to revoke or rescind this Deed of
Donation, and in such eventuality, the DONEE agrees to vacate and
return the premises, together with all improvements, to the DONOR
peacefully without necessity of judicial action.On July 19, 1988,
petitioners started the construction of a drug rehabilitation
center on a portion of the donated land. Upon learning thereof,
private respondent protested such action for being violative of the
terms and conditions of the amended deed and prejudicial to its
interest and to those of its clients and residents. Private
respondent also offered another site for the rehabilitation center.
However, petitioners ignored the protest, maintaining that the
construction was not violative of the terms of the donation. The
alternative site was rejected because, according to petitioners,
the site was too isolated and had no electric and water
facilities.On August 8, 1988, private respondent filed a complaint
with the RTC in Angeles City against the petitioners, alleging
breach of the conditions imposed in the amended deed of donation
and seeking the revocation of the donation and damages, with
preliminary injunction and/or temporary restraining order to halt
the construction of the said center.ISSUE: WON revocation of the
donated property will prosper? NO.PRS DEFENSE: The private
respondent contends that the building of said drug rehabilitation
center is violative of the Deed of Donation. Therefore, under
Article 764 of the New Civil Code and stipulation no. 8 of the
deed, private respondent is empowered to revoke the donation when
the donee has failed to comply with any of the conditions imposed
in the deed.RULING:We disagree. Article 1412 of the Civil Code
which provides that:If the act in which the unlawful or forbidden
cause consists does not constitute a criminal offense, the
following rules shall be observed:(1) When the fault is on the part
of both contracting parties, neither may recover what he has given
by virtue of the contract, or demand the performance of the other's
undertaking;comes into play here. Both petitioners and private
respondents are in violation of P.D. 957 as amended, for donating
and accepting a donation of open space less than that required by
law, and for agreeing to build and operate a sports complex on the
non-buildable open space so donated; and petitioners, for
constructing a drug rehabilitation center on the same non-buildable
area.Moreover, since the condition to construct a sport complex on
the donated land has previously been shown to be contrary to law,
therefore, stipulation no. 8 of the amended deed cannot be
implemented because (1) novalid stipulation of the amended deed had
been breached, and (2) it is highly improbable that the decree
would have allowed the return of the donated land for open space
under any circumstance, considering the non-alienable character of
such open space, in the light of the second Whereas clause of P.D.
1216 which declares that . . . such open spaces, roads, alleys and
sidewalks in residential subdivisions are for public use and
are,therefore, beyond the commerce of men.Further, as a matter of
public policy, private respondent cannot be allowed to evade its
statutory obligation to donate the required open space through the
expediency of invoking petitioners breach of the aforesaid
condition. It is a familiar principle that the courts will not aid
either party to enforce an illegal contract, but will leave them
both where they find them. Neither party can recover damages from
the other arising from the act contrary to law, or plead the same
as a cause of action or as a defense. Each must bear the
consequences of his own acts.There is therefore no legal basis
whatsoever to revoke the donation of the subject open space and to
return the donated land to private respondent. The donated land
should remain with the donee as the law clearly intended such open
spaces to be perpetually part of the public domain, non-alienable
and permanently devoted to public use as such parks, playgrounds or
recreation areas.
CDB VS. CYRUS LIMPetitioners Cavite Development Bank (CDB) and
Far East Bank and Trust Company (FEBTC) are banking institutions
duly organized and existing under Philippine laws.On or about June
15, 1983, a certain Rodolfo Guansing obtained a loan in the amount
of P90,000.00 from CDB, to secure which he mortgaged a parcel of
land registered in his name. As Guansing defaulted in the payment
of his loan, CDB foreclosed the mortgage. At the foreclosure sale
the mortgaged property was sold to CDB as the highest bidder.
Guansing failed to redeem, and on March 2, 1987, CDB consolidated
title to the property in its name.On June 16, 1988, private
respondent Lolita Chan Lim, assisted by a broker named Remedios
Gatpandan, offered to purchase the property from CDB. The written
Offer to Purchase, signed by Lim and Gatpandan, states in part:We
hereby offer to purchase your property at #63 Calavite and Retiro
Sts., La Loma, Quezon City for P300,000.00 under the following
terms and conditions:(1) 10% Option Money;(2) Balance payable in
cash;(3) Provided that the property shall be cleared of illegal
occupants or tenants.Pursuant to the foregoing terms and conditions
of the offer, Lim paid CDB P30,000.00 as Option Money. However,
after some time following up the sale, Lim discovered that the
subject property was originally registered in the name of Perfecto
Guansing, father of mortgagor Rodolfo Guansing. Rodolfo succeeded
in having the property registered in his name, the same title he
mortgaged to CDB and from which the latter's title was derived. It
appears, however, that the father, Perfecto, instituted Civil Case
No. Q-39732 in the Regional Trial Court, Branch 83, Quezon City,
for the cancellation of his son's title.On March 23, 1984, the
trial court rendered a decision2restoring Perfecto's previous title
(TCT No. 91148) and cancelling TCT No. 300809 on the ground that
the latter was fraudulently secured by Rodolfo. This decision has
since become final and executory.
Aggrieved by what she considered a serious misrepresentation by
CDB and its mother-company, FEBTC, on their ability to sell the
subject property, Lim, joined by her husband, filed an action for
specific performance and damages against petitioners in the
Regional Trial Court of Quezon City.RTC ruled in favor of the Lim
spouses and further ordered to pay the petitioners for damages.CA
affirmed the decision of the RTC in toto.ISSUE: WON the Court of
Appeals erred in ordering petitioners to pay moral damages,
exemplary damages, attorney's fees and costs of suit? NO.RULING:In
this case, the sale by CDB to Lim of the property mortgaged by
Rodolfo Guansing is deemed a nullity for CDB did not have a valid
title to the said property. CDB never acquired a valid title to the
property because the foreclosure sale, by virtue of which, the
property had been awarded to CDB as highest bidder, is likewise
void since the mortgagor was not the owner of the property
foreclosed.
We now come to the civil effects of the void contract of sale
between the parties. Article 1412(2) of the Civil Code provides:If
the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be
observed:x x x x x x x x x(2) When only one of the contracting
parties is at fault, he cannot recover what he has given by reason
of the contract, or ask for the fulfillment of what has been
promised him. The other, who is not at fault, may demand the return
of what he has given without any obligation to comply with his
promise.Private respondents are thus entitled to recover the
P30,000,00 option money paid by them. Moreover, since the filing of
the action for damages against petitioners amounted to a demand by
respondents for the return of their money, interest thereon at the
legal rate should be computed from August 29, 1989, the date of
filing of Civil Case No. Q-89-2863, not June 17, 1988, when
petitioners accepted the payment. This is in accord with our ruling
in Castillo v.Abalayan that in case of a void sale, the seller has
no right whatsoever to keep the money paid by virtue thereof and
should refund it, with interest at the legal rate, computed from
the date of filing of the complaint until fully paid. Indeed, Art.
1412(2) which provides that the non-guilty party "may demand the
return of what he has given" clearly implies that without such
prior demand, the obligation to return what was given does not
become legally demandable.Considering CDB's negligence, we sustain
the award of moral damages on the basis of Arts. 21 and 2219 of the
Civil Code and our ruling inTan v.Court of Appeals that moral
damages may be recovered even if a bank's negligence is not
attended with malice and bad faith.
DE LEON VS. CAOn October 18, 1969, private respondent Jose
Vicente De Leon and petitioner Sylvia Lichauco De Leon were united
in wedlock before the Municipal Mayor of Binangonan, Rizal. On
August 28, 1971, a child named Susana L. De Leon was born from this
union.Sometime in October, 1972, a de facto separation between the
spouses occured due to irreconcilable marital differences, with
Sylvia leaving the conjugal home. Sometime in March, 1973, Sylvia
went to the United States where she obtained American
citizenship.On November 23, 1973, Sylvia filed with the Superior
Court of California, a petition for dissolution of marriage against
Jose Vicente. In the said divorce proceedings, Sylvia also filed
claims for support and distribution of properties. It appears,
however, that since Jose Vicente was then a Philippine resident and
did not have any assets in the United States, Sylvia chose to hold
in abeyance the divorce proceedings, and in the meantime,
concentrated her efforts to obtain some sort of property
settlements with Jose Vicente in the Philippines.Thus, on March 16,
1977, Sylvia succeeded in entering into a Letter-Agreement with her
mother-in-law, private respondent Macaria De Leon.On the same date,
Macaria made cash payments to Sylvia in the amount of P100,000 and
US$35,000.00 or P280,000.00, in compliance with her obligations as
stipulated in the aforestated Letter-Agreement.On March 30, 1977,
Sylvia and Jose Vicente filed before the then Court of First
Instance of Rizal a joint petition for judicial approval of
dissolution of their conjugal partnership.Afterex-partehearings,
the trial court issued an Order dated February 19, 1980 approving
the petition.On March 17, 1980, Sylvia moved for the execution of
the above-mentioned order. However, Jose Vicente moved for a
reconsideration of the order alleging that Sylvia made a verbal
reformation of the petition as there was no such agreement for the
payment of P4,500.00 monthly support to commence from the alleged
date of separation and that there was no notice given to him that
Sylvia would attempt verbal reformation of the agreement contained
in the joint petition.
While the said motion for reconsideration was pending
resolution, Macaria filed with the trial court a motion for leave
to intervene alleging that she is the owner of the properties
involved in the case. The motion was granted.
On October 29, 1980, Macaria assisted by her husband filed her
complaint in intervention. She assailed the validity and legality
of the Letter-Agreement which had for its purpose, according to
her, the termination of marital relationship between Sylvia and
Jose Vicente.
ISSUE: WON the Letter-Agreement is valid? NO.
RULING:Article 1306 of the New Civil Code provides:Art. 1306.
The contracting parties may establish such stipulations, clauses,
terms, and conditions as they may deem convenient, provided they
are not contrary to law, morals, good customs, public order or
public policy.If the stipulation is contrary to law, morals or
public policy, the contract is void and inexistent from the
beginning.Art. 1409. The following contracts are inexistent and
void from the beginning:Those whose cause, object or purpose is
contrary to law, morals, good customs, public order or public
policy;xxx xxx xxx(7) Those expressly prohibited or declared void
by law.These contracts cannot be ratified. Neither can the right to
set up the defense of illegality be waived.
From the foregoing provisions of the New Civil Code, this court
is of the considered opinion and so holds that the Letter-Agreement
premised on the termination of marital relationship is not only
contrary to law but contrary to Filipino morals and public Policy.
As such, any agreement or obligations based on such unlawful
consideration and which is contrary to public policy should be
deemed null and void.
In the ultimate analysis, therefore, both parties acted in
violation of the laws. However, thepari delictorule, expressed in
the maxims "Ex dolo malo non oritur actio" and "In pari delicto
potior est conditio defendentis," which refuses remedy to either
party to an illegal agreement and leaves them where they are, does
not apply in this case.Article 1414 of the Civil Code, which is an
exception to thepari delictorule, is the proper law to be applied.
It provides:When money is paid or property delivered for an illegal
purpose, the contract may be repudiated by one of the parties
before the purpose has been accomplished, or before any damage has
been caused to a third person. In such case, the courts may, if the
public interest wig thus be subserved, allow the party repudiating
the contract to recover the money or property.Since the
Letter-Agreement was repudiated before the purpose has been
accomplished and to adhere to thepari delictorule in this case is
to put a premium to the circumvention of the laws, positive relief
should be granted to Macaria. Justice would be served by allowing
her to be placed in the position in which she was before the
transaction was entered into.
Republic of the PhilippinesSUPREME COURTManilaSECOND
DIVISIONG.R. No. 143958 July 11, 2003ALFRED FRITZ
FRENZEL,petitioner,vs.EDERLINA P. CATITO,respondent.CALLEJO,
SR.,J.:Before us is a petition for review of the Decision1of the
Court of Appeals in CA-G.R. CV No. 53485 which affirmed the
Decision2of the Regional Trial Court of Davao City, Branch 14, in
Civil Case No. 17,817 dismissing the petitioner's complaint, and
the resolution of the Court of Appeals denying his motion for
reconsideration of the said decision.The Antecedents3As gleaned
from the evidence of the petitioner, the case at bar stemmed from
the following factual backdrop:Petitioner Alfred Fritz Frenzel is
an Australian citizen of German descent. He is an electrical
engineer by profession, but worked as a pilot with the New Guinea
Airlines. He arrived in the Philippines in 1974, started engaging
in business in the country two years thereafter, and married
Teresita Santos, a Filipino citizen. In 1981, Alfred and Teresita
separated from bed and board without obtaining a divorce.Sometime
in February 1983, Alfred arrived in Sydney, Australia for a
vacation. He went to King's Cross, a night spot in Sydney, for a
massage where he met Ederlina Catito, a Filipina and a native of
Bajada, Davao City. Unknown to Alfred, she resided for a time in
Germany and was married to Klaus Muller, a German national. She
left Germany and tried her luck in Sydney, Australia, where she
found employment as amasseusein the King's Cross nightclub. She was
fluent in German, and Alfred enjoyed talking with her. The two saw
each other again; this time Ederlina ended up staying in Alfred's
hotel for three days. Alfred gave Ederlina sums of money for her
services.4Alfred was so enamored with Ederlina that he persuaded
her to stop working at King's Cross, return to the Philippines, and
engage in a wholesome business of her own. He also proposed that
they meet in Manila, to which she assented. Alfred gave her money
for her plane fare to the Philippines. Within two weeks of
Ederlina's arrival in Manila, Alfred joined her. Alfred reiterated
his proposal for Ederlina to stay in the Philippines and engage in
business, even offering to finance her business venture. Ederlina
was delighted at the idea and proposed to put up a beauty parlor.
Alfred happily agreed.Alfred told Ederlina that he was married but
that he was eager to divorce his wife in Australia. Alfred proposed
marriage to Ederlina, but she replied that they should wait a
little bit longer.Ederlina found a building at No. 444 M.H. del
Pilar corner Arquiza Street, Ermita, Manila, owned by one Atty.
Jose Hidalgo who offered to convey his rights over the property for
P18,000.00. Alfred and Ederlina accepted the offer. Ederlina put up
a beauty parlor on the property under the business name Edorial
Beauty Salon, and had it registered with the Department of Trade
and Industry under her name. Alfred paid Atty. Hidalgo P20,000.00
for his right over the property and gave P300,000.00 to Ederlina
for the purchase of equipment and furniture for the parlor. As
Ederlina was going to Germany, she executed a special power of
attorney on December 13, 19835appointing her brother, Aser Catito,
as her attorney-in-fact in managing the beauty parlor business. She
stated in the said deed that she was married to Klaus Muller.
Alfred went back to Papua New Guinea to resume his work as a
pilot.When Alfred returned to the Philippines, he visited Ederlina
in her Manila residence and found it unsuitable for her. He decided
to purchase a house and lot owned by Victoria Binuya Steckel in San
Francisco del Monte, Quezon City, covered by Transfer Certificate
of Title No. 218429 for US$20,000.00. Since Alfred knew that as an
alien he was disqualified from owning lands in the Philippines, he
agreed that only Ederlina's name would appear in the deed of sale
as the buyer of the property, as well as in the title covering the
same. After all, he was planning to marry Ederlina and he believed
that after their marriage, the two of them would jointly own the
property. On January 23, 1984, a Contract to Sell was entered into
between Victoria Binuya Steckel as the vendor and Ederlina as the
sole vendee. Alfred signed therein as a witness.6Victoria received
from Alfred, for and in behalf of Ederlina, the amount of
US$10,000.00 as partial payment, for which Victoria issued a
receipt.7When Victoria executed the deed of absolute sale over the
property on March 6, 1984,8she received from Alfred, for and in
behalf of Ederlina, the amount of US$10,000.00 as final and full
payment. Victoria likewise issued a receipt for the said
amount.9After Victoria had vacated the property, Ederlina moved
into her new house. When she left for Germany to visit Klaus, she
had her father Narciso Catito and her two sisters occupy the
property.Alfred decided to stay in the Philippines for good and
live with Ederlina. He returned to Australia and sold his fiber
glass pleasure boat to John Reid for $7,500.00 on May 4, 1984.10He
also sold his television and video business in Papua New Guinea for
K135,000.00 to Tekeraoi Pty. Ltd.11He had his personal properties
shipped to the Philippines and stored at No. 14 Fernandez Street,
San Francisco del Monte, Quezon City. The proceeds of the sale were
deposited in Alfred's account with the Hong Kong Shanghai Banking
Corporation (HSBC), Kowloon Branch under Bank Account No.
018-2-807016.12When Alfred was in Papua New Guinea selling his
other properties, the bank sent telegraphic letters updating him of
his account.13Several checks were credited to his HSBC bank account
from Papua New Guinea Banking Corporation, Westpac Bank of
Australia and New Zealand Banking Group Limited and Westpac
Bank-PNG-Limited. Alfred also had a peso savings account with HSBC,
Manila, under Savings Account No. 01-725-183-01.14Once, when Alfred
and Ederlina were in Hong Kong, they opened another account with
HSBC, Kowloon, this time in the name of Ederlina, under Savings
Account No. 018-0-807950.15Alfred transferred his deposits in
Savings Account No. 018-2-807016 with the said bank to this new
account. Ederlina also opened a savings account with the Bank of
America Kowloon Main Office under Account No. 30069016.16On July
28, 1984, while Alfred was in Papua New Guinea, he received a
Letter dated December 7, 1983 from Klaus Muller who was then
residing in Berlin, Germany. Klaus informed Alfred that he and
Ederlina had been married on October 16, 1978 and had a blissful
married life until Alfred intruded therein. Klaus stated that he
knew of Alfred and Ederlina's amorous relationship, and discovered
the same sometime in November 1983 when he arrived in Manila. He
also begged Alfred to leave Ederlina alone and to return her to
him, saying that Alfred could not possibly build his future on his
(Klaus') misfortune.17Alfred had occasion to talk to Sally
MacCarron, a close friend of Ederlina. He inquired if there was any
truth to Klaus' statements and Sally confirmed that Klaus was
married to Ederlina. When Alfred confronted Ederlina, she admitted
that she and Klaus were, indeed, married. But she assured Alfred
that she would divorce Klaus. Alfred was appeased. He agreed to
continue the amorous relationship and wait for the outcome of
Ederlina's petition for divorce. After all, he intended to marry
her. He retained the services of Rechtsanwaltin Banzhaf with
offices in Berlin, as her counsel who informed her of the progress
of the proceedings.18Alfred paid for the services of the lawyer.In
the meantime, Alfred decided to purchase another house and lot,
owned by Rodolfo Morelos covered by TCT No. 92456 located in Pea
Street, Bajada, Davao City.19Alfred again agreed to have the deed
of sale made out in the name of Ederlina. On September 7, 1984,
Rodolfo Morelos executed a deed of absolute sale over the said
property in favor of Ederlina as the sole vendee for the amount of
P80,000.00.20Alfred paid US$12,500.00 for the property.Alfred
purchased another parcel of land from one Atty. Mardoecheo
Camporedondo, located in Moncado, Babak, Davao, covered by TCT No.
35251. Alfred once more agreed for the name of Ederlina to appear
as the sole vendee in the deed of sale. On December 31, 1984, Atty.
Camporedondo executed a deed of sale over the property for
P65,000.00 in favor of Ederlina as the sole vendee.21Alfred,
through Ederlina, paid the lot at the cost of P33,682.00 and
US$7,000.00, respectively, for which the vendor signed
receipts.22On August 14, 1985, TCT No. 47246 was issued to Ederlina
as the sole owner of the said property.23Meanwhile, Ederlina
deposited on December 27, 1985, the total amount of US$250,000 with
the HSBC Kowloon under Joint Deposit Account No.
018-462341-145.24The couple decided to put up a beach resort on a
four-hectare land in Camudmud, Babak, Davao, owned by spouses
Enrique and Rosela Serrano. Alfred purchased the property from the
spouses for P90,000.00, and the latter issued a receipt
therefor.25A draftsman commissioned by the couple submitted a
sketch of the beach resort.26Beach houses were forthwith
constructed on a portion of the property and were eventually rented
out by Ederlina's father, Narciso Catito. The rentals were
collected by Narciso, while Ederlina kept the proceeds of the sale
of copra from the coconut trees in the property. By this time,
Alfred had already spent P200,000.00 for the purchase, construction
and upkeep of the property.Ederlina often wrote letters to her
family informing them of her life with Alfred. In a Letter dated
January 21, 1985, she wrote about how Alfred had financed the
purchases of some real properties, the establishment of her beauty
parlor business, and her petition to divorce Klaus.27Because
Ederlina was preoccupied with her business in Manila, she executed
on July 8, 1985, two special powers of attorney28appointing Alfred
as attorney-in-fact to receive in her behalf the title and the deed
of sale over the property sold by the spouses Enrique Serrano.In
the meantime, Ederlina's petition for divorce was denied because
Klaus opposed the same. A second petition filed by her met the same
fate. Klaus wanted half of all the properties owned by Ederlina in
the Philippines before he would agree to a divorce. Worse, Klaus
threatened to file a bigamy case against Ederlina.29Alfred proposed
the creation of a partnership to Ederlina, or as an alternative,
the establishment of a corporation, with Ederlina owning 30% of the
equity thereof. She initially agreed to put up a corporation and
contacted Atty. Armando Dominguez to prepare the necessary
documents. Ederlina changed her mind at the last minute when she
was advised to insist on claiming ownership over the properties
acquired by them during their coverture.Alfred and Ederlina's
relationship started deteriorating. Ederlina had not been able to
secure a d