sales batch 1 of assigned cases

SALES AND LEASE FULL TEXT CASES (1ST SET) 2014

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THIRD DIVISION

[G.R. No. 59266. February 29, 1988.]

SILVESTRE DIGNOS and ISABEL

LUMUNGSOD, petitioners, vs. HON. COURT OF APPEALS and

ATILANO G. JABIL, respondents.

SYLLABUS

1.CIVIL LAW; CONTRACTS; DEED OF SALE; ABSOLUTE IN NATURE WHERE

THERE IS NO PROVISION THAT TITLE IS RESERVED TO THE VENDOR OR

UNILATERALLY GIVING THE VENDOR THE RIGHT TO RESCIND

CONTRACT. It has been held that a deed of sale is absolute in nature

although denominated as a "Deed of Conditional Sale" where nowhere in the

contract in question is a proviso or stipulation to the effect that title to the property

sold is reserved in the vendor until full payment of the purchase price, nor is

there a stipulation giving the vendor the right to unilaterally rescind the contract

the moment the vendee fails to pay within a fixed period (Taguba v. Vda. de

Leon, 132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc.,

86 SCRA 305). A careful examination of the contract shows that there is no such

stipulation reserving the title ofthe property on the vendors nor does it give them

the right to unilaterally rescind the contract upon non-payment of the balance

thereof within a fixed period.

2.ID.; ID.; SALE; ELEMENTS. On the contrary, all the elements of a valid

contract of sale under Article 1458 of the Civil Code, are present, such as: (1)

consent or meetingof the minds; (2) determinate subject matter; and (3) price

certain in money or its equivalent.

3.ID.; ID.; OWNERSHIP IS TRANSFERRED BY DELIVERY OF THE THING

SOLD. In addition, Article 1477 of the same Code provides that "The


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ownership of the thing sold shall be transferred to the vendee upon actual or

constructive delivery thereof." As applied in the case of Froilan v. Pan Oriental

Shipping Co., et al. (12 SCRA 276), this Courtheld that in the

absence of stipulation to the contrary, the ownership of the thing sold passes to

the vendee upon actual or constructive delivery thereof.

4.ID.; ID.; ID.; ID.; ACTUAL DELIVERY IN CASE AT BAR. While it may be

conceded that there was no constructive delivery of the land sold in the case at

bar, as subject Deed of Sale is a private instrument, it is beyond question that

there was actual delivery thereof. As found by the trial court, the Dignos spouses

delivered the possession ofthe land in question to Jabil as early as March 27,

1965 so that the latter constructed thereon Sally's Beach Resort also known as

Jabil's Beach Resort in March, 1965; Mactan White Beach Resort on January 15,

1966 and Bevirlyn's Beach Resort on September 1, 1965. Such facts were

admitted by petitioner spouses (Decision, Civil Case No. 23-L; Record

on Appeal, p. 108).

5.ID.; ID.; ID.; SLIGHT DELAY IN THE PERFORMANCE OF OBLIGATION, NOT

SUFFICIENT GROUND FOR RESCISSION. It has been ruled, however, that

"where time is notof the essence of the agreement, a slight delay on the

part of one party in the performance of his obligation is not a sufficient ground for

the rescission of the agreement" (Taguba v. Vda. de Leon, supra). Considering

that private respondent has only a balance of P4,000.00 and was delayed in

payment only for one month, equity and justice mandate as in the aforecited case

that Jabil be given an additional period within which to complete payment of the

purchase price.

D E C I S I O N

BIDIN, J p:


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This is a petition for review on certiorari seeking the reversal of the: (1)

Decision* of the 9th Division, Court of Appeals dated July 31, 1981, affirming with

modification the Decision** dated August 25, 1972 of the Court of First

Instance of Cebu in Civil Case No. 23-L entitled Atilano G. Jabil vs. Silvestre

T. Dignos and Isabela Lumungsod deDignos and Panfilo Jabalde, as Attorney-in-

Fact of Luciano Cabigas and Jovita L. de Cabigas; and (2) its Resolution dated

December 16, 1981, denying defendant-appellant's (Petitioner's) motion for

reconsideration, for lack of merit.

The undisputed facts as found by the Court of Appeals are as follows:

"The Dignos spouses were owners of a parcel of land, known as Lot No.

3453, of the cadastral survey of Opon, Lapu-Lapu City. On June 7, 1965,

appellants (petitioners)Dignos spouses sold the said parcel of land to

plaintiff-appellant (respondent Atilano J. Jabil) for the

sum of P28,000.00, payable in two installments, with an

assumption of indebtedness with the First Insular Bank of Cebu in the

sum of P12,000.00, which was paid and acknowledged by the vendors in

the deed of sale (Exh. C) executed in favor of plaintiff-appellant, and the

next installment in the sum of P4,000.00 to be paid on or before

September 15, 1965.

"On November 25, 1965, the Dignos spouses sold the same land in

favor of defendants spouses, Luciano Cabigas and Jovita L. De

Cabigas, who were then U.S. citizens, for the price of P35,000.00. A

deed of absolute sale (Exh. J, also marked Exh. 3) was executed by

the Dignos spouses in favor of the Cabigas spouses, and which was

registered in the Office of the Register of Deeds pursuant to the

provisions of Act No. 3344.

"As the Dignos spouses refused to accept from plaintiff-appellant the

balance of the purchase price of the land, and as plaintiff- appellant

discovered the second sale made by defendants-appellants to the


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Cabigas spouses, plaintiff-appellant brought the present suit." (Rollo, pp.

27-28)

After due trial, the Court of First Instance of Cebu rendered its Decision on

August 25, 1972, the decretal portion of which reads:

"WHEREFORE, the Court hereby declares the deed of sale executed on

November 25, 1965 by defendant Isabela L. de Dignos in

favor of defendant Luciano Cabigas, a citizen of the United

States of America, null and void ab initio, and the deed of sale executed

by defendants Silvestre T. Dignos and Isabela Lumungsod

de Dignos not rescinded. Consequently, the plaintiff Atilano G. Jabil is

hereby ordered to pay the sum, of Sixteen Thousand Pesos

(P16,000.00) to the defendants-spouses upon the execution of the

Deed of Absolute Sale of Lot No. 3453, Opon Cadastre and when the

decision of this case becomes final and executory.

"The plaintiff Atilano G. Jabil is ordered to reimburse the defendants

Luciano Cabigas and Jovita L. de Cabigas, through their attorney-in-fact,

Panfilo Jabalde, reasonable amount corresponding to the expenses or

costs of the hollow block fence, so far constructed.

"It is further ordered that defendants-spouses Silvestre T. Dignos and

Isabela Lumungsod de Dignos should return to defendants-spouses

Luciano Cabigas and Jovita L. de Cabigas the sum of P35,000.00, as

equity demands that nobody shall enrich himself at the

expense of another.

"The writ of preliminary injunction issued on September 23, 1966,

automatically becomes permanent in virtue of this decision.

"With costs against the defendants."

From the foregoing, the plaintiff (respondent herein) and defendants-spouses

(petitioners herein) appealed to the Court of Appeals, which appeal was


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docketed therein as CA-G.R. No. 54393-R, "Atilano G. Jabil v. Silvestre

T. Dignos, et al."

On July 31, 1981, the Court of Appeals affirmed the decision of the

lower court except as to the portion ordering Jabil to pay for the expenses

incurred by the Cabigas spouses for the building of a fence upon the land in

question. The dispositive portion of said decision of the Court of Appeals reads:

"IN VIEW OF THE FOREGOING CONSIDERATIONS, except as to the

modification of the judgment as pertains to plaintiff-appellant above

indicated, the judgmentappealed from is hereby AFFIRMED in all other

respects.

"With costs against defendants-appellants.

"SO ORDERED.

"Judgment MODIFIED."

A motion for reconsideration of said decision was filed by the defendants-

appellants (petitioners) Dignos spouses, but on December 16, 1981, a resolution

was issued by theCourt of Appeals denying the motion for lack of merit.

Hence, this petition.

In the resolution of February 10, 1982, the Second Division of this Court denied

the petition for lack of merit. A motion for reconsideration of said resolution was

filed on March 16, 1982. In the resolution dated April 26, 1982, respondents were

required to comment thereon, which comment was filed on May 11, 1982 and a

reply thereto was filed on July 26, 1982 in compliance with the resolution of June

16, 1982 . On August 9, 1982, acting on the motion for reconsideration and on all

subsequent pleadings filed, this Courtresolved to reconsider its

resolution of February 10, 1982 and to give due course to the instant petition. On

September 6, 1982, respondents filed a rejoinder to reply ofpetitioners which was

noted on the resolution of September 20, 1982.

Petitioners raised the following assignment of errors:


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I

THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW

IN GROSSLY, INCORRECTLY INTERPRETING THE TERMS OF THE

CONTRACT, EXHIBIT C, HOLDING IT AS AN ABSOLUTE SALE,

EFFECTIVE TO TRANSFER OWNERSHIP OVER THE PROPERTY IN

QUESTION TO THE RESPONDENT AND NOT MERELY A

CONTRACT TO SELL OR PROMISE TO SELL; THE COURT ALSO

ERRED IN MISAPPLYING ARTICLE 1371 AS WARRANTING

READING OF THE AGREEMENT, EXHIBIT C, AS ONE OF ABSOLUTE

SALE, DESPITE THE CLARITY OF THE TERMS THEREOF SHOWING

IT IS A CONTRACT OF PROMISE TO SELL.

II

THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN

INCORRECTLY APPLYING AND OR IN MISAPPLYING ARTICLE

1592 OF THE NEW CIVIL CODE AS WARRANTING THE

ERRONEOUS CONCLUSION THAT THE NOTICE OF RESCISSION,

EXHIBIT G, IS INEFFECTIVE SINCE IT HAS NOT BEEN JUDICIALLY

DEMANDED NOR IS IT A NOTARIAL ACT.

III

THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN

REJECTING THE APPLICABILITY OF ARTICLES 2208, 2217 and

2219 OF THE NEW CIVIL CODE AND ESTABLISHED

JURISPRUDENCE AS TO WARRANT THE AWARD OF DAMAGES

AND ATTORNEY'S FEES TO PETITIONERS.

IV

PLAINTIFF'S COMPLAINT FOR SPECIFIC PERFORMANCE SHOULD

HAVE BEEN DISMISSED, HE HAVING COME TO COURT WITH

UNCLEAN HANDS.

V


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BY AND LARGE, THE COURT OF APPEALS COMMITTED AN ERROR

IN AFFIRMING WITH MODIFICATION THE DECISION OF THE

TRIAL COURT DUE TO GRAVE MISINTERPRETATION,

MISAPPLICATION AND MISAPPREHENSION OF THE

TERMS OF THE QUESTIONED CONTRACT AND THE LAW

APPLICABLE THERETO.

The foregoing assignment of errors may be synthesized into two main issues, to

wit:

I.Whether or not subject contract is a deed of absolute sale or a contract

to sell.

II.Whether or not there was a valid rescission thereof.

There is no merit in this petition.

It is significant to note that this petition was denied by the Second

Division of this Court in its Resolution dated February 10, 1982 for lack of merit,

but on motion for reconsideration and on the basis of all subsequent pleadings

filed, the petition was given due course.

I.

The contract in question (Exhibit C) is a Deed of Sale, with the following

conditions:

"1.That Atilano G. Jabil is to pay the amount of Twelve Thousand Pesos

(P12,000.00) Philippine Currency as advance payment;

"2.That Atilano G. Jabil is to assume the balance of Twelve Thousand

Pesos (P12,000.00) Loan from the First Insular Bank of Cebu;

"3.That Atilano G. Jabil is to pay the said spouses the balance of Four

Thousand Pesos (P4,000.00) on or before September 15, 1965.


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"4.That the said spouses agreed to defend the said Atilano G. Jabil from

other claims on the said property;

"5.That the spouses agrees to sign a final deed of absolute sale in

favor of Atilano G. Jabil over the above-mentioned property upon the

payment of the balance ofFour Thousand Pesos." (Original Record, pp.

10-11)

In their motion for reconsideration, petitioners reiterated their contention that the

Deed of Sale (Exhibit "C") is a mere contract to sell and not an absolute sale; that

the same is subject to two (2) positive suspensive conditions, namely: the

payment of the balance of P4,000.00 on or before September 15, 1965 and the

immediate assumption of the mortgage of P12,000.00 with the First Insular

Bank of Cebu. It is further contended that in said contract, title or ownership over

the property was expressly reserved in the vendor, the Dignos spouses, until the

suspensive condition of full and punctual payment of the balance of the purchase

price shall have been met. So that there is no actual sale until full payment is

made (Rollo, pp. 51-52).

In bolstering their contention that Exhibit "C" is merely a contract to sell,

petitioners aver that there is absolutely nothing in Exhibit "C" that indicates that

the vendors thereby sell, convey or transfer their ownership to the alleged

vendee. Petitioners insist that Exhibit "C" (or 6) is a private instrument and the

absence of a formal deed of conveyance is a very strong indication that the

parties did not intend "transfer of ownership and title but only a transfer after full

payment" (Rollo, p. 52). Moreover, petitioners anchored their contention on the

very terms and conditions of the contract, more particularly paragraph four which

reads, "that said spouses has agreed to sell the herein mentioned property to

Atilano G. Jabil . . ." and condition number five which reads, "that the spouses

agrees to sign a final deed of absolute sale over the mentioned property upon the

payment of the balance of four thousand pesos."

Such contention is untenable.


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By and large, the issues in this case have already been settled by this Court in

analogous cases.

Thus, it has been held that a deed of sale is absolute in nature although

denominated as a "Deed of Conditional Sale" where nowhere in the contract in

question is a proviso or stipulation to the effect that title to the property sold is

reserved in the vendor until full payment of the purchase price, nor is there a

stipulation giving the vendor the right to unilaterally rescind the contract the

moment the vendee fails to pay within a fixed period (Taguba v. Vda. de Leon,

132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 86

SCRA 305).

A careful examination of the contract shows that there is no such stipulation

reserving the title of the property on the vendors nor does it give them the right to

unilaterally rescind the contract upon non-payment of the balance thereof within

a fixed period.

On the contrary, all the elements of a valid contract of sale under Article

1458 of the Civil Code, are present, such as: (1) consent or meeting of the

minds; (2) determinate subject matter; and (3) price certain in money or its

equivalent. In addition, Article 1477 of the same Code provides that "The

ownership of the thing sold shall be transferred to the vendee upon actual or

constructive delivery thereof. As applied in the case of Froilan v. Pan Oriental

Shipping Co., et al. (12 SCRA 276), this Court held that in the

absence of stipulation to the contrary, the ownership of the thing sold passes to

the vendee upon actual or constructive delivery thereof.

While it may be conceded that there was no constructive delivery of the land sold

in the case at bar, as subject Deed of Sale is a private instrument, it is beyond

question that there was actual delivery thereof. As found by the trial court,

the Dignos spouses delivered the possession of the land in question to Jabil as

early as March 27, 1965 so that the latter constructed thereon Sally's Beach

Resort also known as Jabil's Beach Resort in March, 1965; Mactan White Beach

Resort on January 15, 1966 and Bevirlyn's Beach Resort on September 1, 1965.


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Such facts were admitted by petitioner spouses (Decision, Civil Case No. 23-L;

Record on Appeal, p. 108).

Moreover, the Court of Appeals in its resolution dated December 16, 1981 found

that the acts of petitioners, contemporaneous with the contract, clearly show that

an absolute deed of sale was intended by the parties and not a contract to sell.

Be that as it may, it is evident that when petitioners sold said land to the Cabigas

spouses, they were no longer owners of the same and the sale is null and void.

II.

Petitioners claim that when they sold the land to the Cabigas spouses, the

contract of sale was already rescinded.

Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is on

all fours with the case at bar, the contract of sale being absolute in nature is

governed by Article 1592 of the Civil Code. It is undisputed that petitioners never

notified private respondents Jabil by notarial act that they were rescinding the

contract, and neither did they file a suit in court to rescind the sale. The most that

they were able to show is a letter of Cipriano Amistad who, claiming to be an

emissary of Jabil, informed the Dignos spouses not to go to the house of Jabil

because the latter had no money and further advised petitioners to sell the land

in litigation to another party (Record on Appeal, p. 23). As correctly found by

the Court of Appeals, there is no showing that Amistad was properly authorized

by Jabil to make such extra judicial rescission for the latter who, on the contrary,

vigorously denied having sent Amistad to tell petitioners that he was already

waiving his rights to the land in question. Under Article 1358 of the Civil Code, it

is required that acts and contracts which have for their object the

extinguishment of real rights over immovable property must appear in a public

document.

Petitioners laid considerable emphasis on the fact that private respondent Jabil

had no money on the stipulated date of payment on September 15, 1965 and

was able to raise the necessary amount only by mid-October, 1965.


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It has been ruled, however, that "where time is not of the essence of the

agreement, a slight delay on the part of one party in the performance of his

obligation is not a sufficient ground for the rescission of the agreement"

(Taguba v. Vda. de Leon, supra). Considering that private respondent has only a

balance of P4,000.00 and was delayed in payment only for one month, equity

and justice mandate as in the aforecited case that Jabil be given an additional

period within which to complete payment of the purchase price.

WHEREFORE, the petition filed is hereby Dismissed for lack of merit and the

assailed decision of the Court of Appeals is Affirmed in toto.

SO ORDERED

Fernan, Gutierrez, Jr., Feliciano and Cortes, JJ., concur.

Footnotes

*Penned by Justice Elias B. Asuncion and concurred by Justices Porfirio V. Sison and

Vicente V. Mendoza.

**Penned by Judge Ramon E. Nazareno.

||| (Dignos v. Court of Appeals, G.R. No. 59266, February 29, 1988)


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FIRST DIVISION

[G.R. No. L-29421. January 30, 1971.]

LINO ARTATES & MANUELA POJAS, plaintiffs-

appellants, vs. DANIEL URBI, CRISANTO SOLIVEN, assisted by

his Guardian 'ad litem,' MARCELA B. SOLIVEN, REMEGIO

BUTACAN and NEMESIO OATE, in their private capacities

and/or as Ex-Oficio Provincial Sheriff and Deputy Sheriff of

Cagayan, respectively, and BIENVENIDO CACATIAN, as

Deputy Register of Deeds of Cagayan, defendants-appellees.

Bienvenido J. Jimenez for plaintiffs-appellants.

Rogelio Re. Ubarde for defendants-appellees Daniel Urbi and Crisanto Soliven.

Alfredo J. Donato for defendant-appellee Nemesio Oate.

The Provincial Fiscal (Cagayan) for defendants-appellees Provincial Sheriff and

Deputy Register of Deeds.

D E C I S I O N

REYES, J.B.L., J p:

This is an appeal from the decision of the Court of First Instance of

Cagayan (Civil Case No. 116-T), involving the public sale of a homestead to

satisfy a civil judgment against the grantee.


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The records show that in an action filed in the Court of First Instance of Cagayan,

the spouses Lino Artates and Manuela Pojas sought annulment of the execution

of a homestead 1 covered by Patent No. V-12775 issued to them by the proper

land authorities on 23 September 1952, and duly registered in their names (OCT

No. P-572). The public sale, conducted by the Provincial Sheriff of Cagayan on 2

June 1962, was made to satisfy a judgment against Lino Artates in the amount of

P1,476.35, and awarded to Daniel Urbi by the Justice of the Peace Court of

Camalaniugan, Cagayan, in its Civil Case No. 40, for physical injuries inflicted

by Artates upon Urbi on 21 October 1955. In the execution sale, the property was

sold to the judgment creditor, the only bidder, for P1,476.35. In their complaint,

the plaintiffs spouses alleged that the sale of the homestead to satisfy an

indebtedness of Lino Artates that accrued on 21 October 1955, violated the

provision of the Public Land law exempting said property from execution for any

debt contracted within five years from date of the issuance of the patent; that

defendant Urbi, with the intention of defrauding the plaintiffs, executed on 26

June 1961 a deed for the sale of the same parcel of land to defendant Crisanto

Soliven, a minor, supposedly for the sum of P2,676.35; that as a result of the

aforementioned transactions, defendants Urbi and Soliven entered into the

possession of the land and deprived plaintiffs of the owners' share in the rice

crops harvested during the agricultural year 1961-1962. Plaintiffs, therefore,

prayed that the public sale of the land to defendant Urbi, as well as the deed of

sale executed by the latter in favor of defendant Soliven, be declared null and

void; that defendants be ordered to deliver to plaintiffs possession of the land;

and to pay to plaintiffs compensatory damages at the rate of P1,000.00 per

agricultural year until possession is finally restored to them, the sum of P2,000.00

as damages for maliciously casting cloud upon plaintiffs' title on the land, plus

attorneys' fees and costs.

The defendants 2 filed separate answers disputing the averments of the

complaint. On 29 March 1963, the court rendered judgment upholding the

regularity and validity of the execution conducted by the defendant Provincial

Sheriff, but finding that the sale of the lands by defendant Urbi to the minor


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Soliven was simulated, intended to place the property beyond the reach of the

judgment debtor, and that plaintiffs had offered to redeem the land within the 5-

year period allowed by Section 119 of the Public Land law for reacquisition

thereof by the grantee. Consequently, the court declared the sale of the land by

defendant Daniel Urbi to defendant Crisanto Soliven null and void; and

DanielUrbi was ordered to reconvey the property to the plaintiffs upon the latter's

payment (to Urbi) of the sum of P1,476.35 plus the sheriff's fee incident to the

sale at public auction, with interest thereon at the rate of 12% per annum from 2

June 1961 until said amount shall have been fully paid, and the further sum of

P783.45 representing the amount paid by defendant Daniel Urbi to the Philippine

National Bank for the release of the real estate mortgage on the land, contracted

by Lino Artates, with legal rate of interest thereon from 29 June 1961.

From this decision, the plaintiffs interposed the present appear assigning several

errors allegedly committed by the court below, all hinged on the validity or

invalidity of the public sale of the lot involved herein.

Section 118 of the Public Land law (Commonwealth Act 141) provides as follows:

"Sec. 118.Except in favor of the Government or any of its branches,

units, or institution, or legally constituted banking corporations, lands

acquired under free patent or homestead provisions shall not be subject

to encumbrance or alienation from the date of the approval of the

application and for a term of five years from and after the date of

issuance of the patent or grant, nor shall they become liable to the

satisfaction of any debt contracted prior to the expiration of said period,

but the improvements or crops on the land may be mortgaged or

pledged to qualified persons, associations or corporations."

xxx xxx xxx

As thus prescribed by law, for a period of five years from the date of the

government grant, lands acquired by free or homestead patent shall not only be

incapable of being encumbered or alienated except in favor of the government

itself or any of its institutions or of duly constituted banking corporations, but also,


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they shall not be liable to the satisfaction of any debt contracted within the said

period. 3 whether or not the indebtedness shall mature during or after the

prohibited time. 4 This provision against the alienation or encumbrance of public

lands granted with in five years from the issuance of the patent, it has been held,

is mandatory; 5 a sale made in violation thereof is null and void 6 and produces no

effect whatsoever. Though it may be a limitation on the right of ownership of the

grantee, the sanitary purpose of the provision cannot be denied: it is to preserve

and keep for the homesteader or his family the land given to him gratuitously by

the State, 7 so that being a property owner, he may become and remain a

contented and useful member of our society. 8

In the case at bar, the homestead patent covering the land in question (No. V-

12775) was issued to appellants on 23 September 1952, and it was sold at public

auction to satisfy the civil liability of appellant Lino Artates to Daniel Urbi,

adjudged in the 14 March 1956 decision of the Justice of the Peace Court of

Camalaniugan, Cagayan. There can be no doubt that the award of damages

to Urbi created for Artates a civil obligation, an indebtedness, that commenced

from the date such obligation was decreed on 14 March 1956.Consequently, it is

evident that it can not be enforced against, or satisfied out of, the sale of the

homestead lot acquired by appellants less than 5 years before the obligation

accrued. And this is true even if the sale involved here is not voluntary. For

purposes of complying with the law, it is immaterial that the satisfaction of the

debt by the encumbrancing or alienation of the land grant was made voluntarily,

as in the case of an ordinary sale, or involuntarily, such as that effected through

levy on the property and consequent sale at public auction. In both instances, the

spirit of the law would have been violated. 9

Doubts have been expressed as to whether the words "debt contracted prior to

the expiration of said period" (of 5 years from and after the grant) would include

the civil liability arising from a crime committed by the homesteader. While there

is no direct Philippine precedent on this point, there are various reasons why the

non-liability of the homestead grant should be extended to extra-contractual

obligations. First and foremost, whether it be viewed as an exemption or as a


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condition attached to the grant to encourage people to settle and cultivate public

land, the immunity in question is in consonance with the definite public policy

underlying these grants, which is to "preserve and keep in the family of the

homesteader that portion of public land which the State has given to him" so he

may have a place to live with his family and become a happy citizen and a useful

member of society, 10 and the exemption should not be given restrictive

application. 11 A levy and sale of the homestead on account of extra-contractual

liability incurred would uproot the homesteader and his family and turn them into

homeless waifs as effectively as a levy for non-payment of a contractual debt.

Secondly, the word "debt" in exemption statutes,

"in its wider sense, (it) includes all that is due to a man under any

form or obligation or promise, and covers not only obligations

arising under contract, but also those imposed by law without

contract." 12

Considering the protective policy of the law, it becomes apparent that "debt

contracted" was used in it in the sense of "obligation incurred," since Webster

gives the verb to "contract" the meaning of "to bring on; incur; acquire."

Finally, our public land laws being copied from America legislation, 13 resort to

American precedents reveals that, under the weight of authority, exemption

from "debts contracted" by a homesteader has been held to include freedom

from money liabilities, from torts or crimes committed by him, such as from

bigamy (State vs. O'Neil, 7 Ore. 141, 11 Words and Phrases 318) or slander

(Conway vs. Sullivan, 44 Ill. 451, 452), breach of contract (Flanagan vs.

Forsythe, 50 Pac. 152, 153) or other torts (In Re Radway, 20 Fed. Cas. 154,

162).

The execution sale in this case being null and void, the possession of the land

should be returned to the owners, the herein appellants. There would even be no

need order appellee Urbi to execute a deed of reconveyance thereof of to the

owners. It appears that what was issued here to the judgment creditor/purchaser

was only the sheriff's provisional certificate, under which he derived no definite

title or right until the period for redemption has expired, without a redemption


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having been made, 14 or issuance of a final deed or certificate of sale. In other

words, the purchaser herein has not acquired an absolute ownership or title in

fee over the land that would necessitate a deed of reconveyance to revert

ownership back to the appellant spouses. As things now stand, title to the

property covered by OCT No. P-572 remains with the appellants, but

LinoArtates shall continue to be under obligation to satisfy the judgment debt to

Daniel Urbi in the sum of P1,476.35, with legal interest thereon accruing from the

date the writ of execution was first returned unsatisfied. It appearing also that

appellee Daniel Urbi paid to the Philippine National Bank the sum of P783.45 to

release the mortgage on the land, appellants should reimburse him of said

amount or of whatever amount appellants have actually been benefited by the

said payment.

FOR THE FOREGOING CONSIDERATIONS, the decision appealed from is

hereby reversed, and appellants are declared entitled to the return and

possession of the lot covered by Original Certificate of Title No. P-572, without

prejudice to their continuing obligation to pay the judgment debt, and expenses

connected therewith. No costs.

Concepcion, C.J., Dizon, Zaldivar, Fernando and Makasiar, JJ., concur.

Makalintal, J., concurs with Mr. Justice Teehankee in a separate opinion.

Castro, J., concurs in the dissenting opinion of Mr. Justice Teehankee.

Teehankee, J., concurs and dissents in a separate opinion.

Barredo, J., dissents in separate opinion.

Villamor, J., concurs in the separate concurring and dissenting opinion of Mr.

Justice Teehankee.

Separate Opinions


18 KASC

MAKALINTAL, J., concurring:

I concur in the opinion of Justice Teehankee, and vote for the affirmance of the

appealed judgment in toto. The date of the issuance of the homestead patent to

appellants was September 23, 1952. Under Section 118 of the Public Land Law

the homestead could not be held liable for the satisfaction of any debt contracted

during a period of five years thereafter, or up to September 23, 1957. The opinion

of the majority holds that since the civil obligation of appellant Artates was

adjudged on March 14, 1956, or within the said period, the homestead cannot be

held liable for its satisfaction. The obvious implication is that if the judgment had

been delayed if for instance it had been rendered on September 24, 1957

the result would have been otherwise. I do not believe that such a difference

should be made to depend upon the more or less fortuitous and irrelevant

circumstance of when the judgment decreeing the obligation was rendered. I am

for giving the word "contracted," as used in the law, its ordinary meaning, for after

all one who contracts with a homestead patentee during the five-year period and

accepts an obligation from him does so with full knowledge of the law's

exempting provision, which is deemed in effect a part of the agreement. The

same, however, is not true of the victim of a tort or a crime, as in the present

case, for here his volition does not come into play, the obligation being imposed

entirely by law.

TEEHANKEE, J., concurring and dissenting:

I vote for the affirmance in toto of the judgment appealed from. Hence, I concur in

that portion of the decision decreeing that appellants should reimburse

appellee Urbi for the sums that Urbi had paid to the Philippine National Bank to

release the mortgage previously executed by appellants on the subject

homestead land, but I dissent from the principal decree thereof that "title to the

property . . . remains with the appellants, but (appellant) Lino Artates shall

continue to be under obligation to satisfy the judgment debt to Daniel Urbi in the

sum of P1,476.35, legal interest thereon accruing from the date the writ of

execution was first returned unsatisfied."


19 KASC

The issue at bar is whether the execution sale conducted in 1962 by the sheriff

of Artates' homestead lot acquired in 1952 to satisfy a 1956 judgment

against Artates in favor of Urbi (for physical injuries inflicted

by Artates upon Urbi in 1955), at which public sale the homestead lot was sold

to Urbi as the only bidder for the amount of his judgment credit in the sum of

P1,476.35 should be held null and void, as the majority would now hold, by virtue

of the prohibitory provisions of Section 118 of the Public Land Law. The key

provision cited is that providing that such homesteads "shall not be subject to

encumbrance or alienation from the date of the approval of the application

and for a term of five years from and after the date of issuance of the patent or

grant, nor shall they become liable to the satisfaction of any debt contracted prior

to the expiration of said period . . ."

Under the cited provision, all sales and alienations of the homestead property

made by the homesteader within the 5-year prohibition are null and void.

Similarly, the homestead is held not liable to the satisfaction of any

debt contracted by the homesteader within the said period, even though it

be contracted that the indebtedness shall mature after the prohibited period. The

law's purpose is clear and salutary: to preserve and keep for the homesteader

the land given to him gratuitously by the State and to protect him from his own

weakness and improvidence.

But in the case at bar, the judgment debt of the homesteader in favor

of Urbi * was not contracted but duly adjudicated by a competent

by Artates upon Urbi in 1955, which, gauging the same from the substantial

amount of P1,476.35 awarded, must have been quite serious. The happenstance

that Artates' assault on Urbi and the judgment award occurred within the

prohibitory period should not be construed beyond the law's text and intent to

favor the wrongdoer Artates as against his victim Urbi.

We would have the anomalous situation thereby where, while recognizing

that Artates has a just and continuing obligation to pay Urbi the judgment debt,

the debt would in effect be nullified. The judgment debt was awarded


20 KASC

since 1956 and would by now have prescribed, but the majority decision would

nullify the levy and public sale of the land to satisfy Urbi's judgment credit

conducted in 1966 long after the expiration of the statutory five-year prohibitory

period. The majority decision bars Urbi forever from looking toArtates homestead

property for the satisfaction of his judgment credit. Artates' evasion of his

judgment debt to Urbi is thereby made certain. Any later creditor of Artates, real

or simulated, from one day after the expiration on 23 September 1957 of the said

five-year prohibitory period is given sole and exclusive preference to look to the

said property for satisfaction as against Urbi beyond whose reach it is placed,

contrary to the priority and preference that Urbi would lawfully be entitled to as

a bona fide judgment creditor.

Finally, pursuant to Artates' offer to redeem the property from Urbi within the 5-

year redemption period allowed by section 119 of the Public Land Law, the lower

court in its appealed judgment so ordered such redemption and reconveyance.

This strikes me as an eminently fair an just judgment which should be

upheld. Artates, the homesteader, is thus assured of keeping and preserving his

homesteader, is thus assured of keeping and preserving his homestead in

accordancer ** with the spirit of the law and the lawful judgment credit

of Urbi against him is at the same time duly satisfied.

BARREDO, J., dissenting:

I regret I am unable to concur in the ruling in this decision that the provision of

Section 118 of the Public Land which says that "lands acquired under free patent

homestead provisions shall not . . . become liable to the satisfaction of any debt

contracted prior to the expiration of five years from and after the date of issuance

of the patent or grant" contemplates inclusively "the civil liability arising from a

crime committed by the homesteader" within said period. Indeed, I do not feel it is

necessary I deep into the Webster's dictionary meaning of the verb "to contract"

or to look for state court decisions in America which could be isolated and based

on statutes not similarly phrased and oriented as Ours, to resolve the legal issue

before Us, it being sufficient, towards that end, to consider only the basic


21 KASC

principles that underlie the disposition of public lands under our own laws on the

matter.

I understand that the ultimate reason behind the exceptions contained in the

cited provision of the Public Land Law is to insure the accomplishment of the

double purpose of a homestead grant, which is to encourage the development of

arable lands and enhance their productivity in the interest of the national

economy and, at the same time, provide qualified citizens with a piece of land

which they and their families may call their own, on which they can live and which

they can work and thereby become useful members of society. Accordingly, the

homesteader is safeguarded against his own weaknesses, imprudence and

improvidence by making it impossible for him to directly or indirectly, by his

voluntary ad, dispose of or lose the land in favor of others. So also do the

exceptions make it impossible for him to allow himself to be utilized as dummy of

opportunists. If this understanding of mine is correct, it should follow necessarily

that for these purposes to be achieved, a homesteader must be, during the

exempt period, in physical condition to work the land granted to him. I cannot

help wondering how a person who has been convicted of a crime, the penalty for

which is most likely to include a period of incarceration can work on and develop

his homestead in the manner conceived in the law. That such a contingency may

not be true in all instances, for there may be punishment of crimes with

imprisonment of insignificantly short duration or even fines only, does not affect

the general principle involved. I consider it implicit in all land grants by the State

that the grantees bind themselves to be loyal and useful members of society, at

least, during the period of development thereof that the law contemplates,

namely, the first five years from the grant. Surely, one who commits an offense

against the State and his fellow-citizens or other inhabitants in this country is far

from being a useful member of society. To be sure his act of committing an

offense is voluntary, but this is not the voluntary act of imprudence and

improvidence against which the law guards the homesteader even against

himself. Crime is an assault upon the sovereign people and the social order,

even if not always directly against the national security. and it is my considered


22 KASC

view that, in principle, one who is guilty thereof forfeits whatever rights he might

have acquired by virtue of the State's generosity, particularly, when, as in this

case, it is a grant of a special privilege under specified circumstances and not

generally and commonly enjoyed by all citizens/inhabitants of the country.

For these reasons, I vote to affirm the judgment of the court a quo which, after

all, recognizes the appellants' right to redeem the land in question under Section

119 of the Public Land Law, which is the most they should expect from the State,

as thus, their right to the land is reinstated without practically depriving the

innocent victims of the crime herein involved of their remedy for the private injury

they have suffered. In other words, under the trial court's decision, all the ends of

justice and equity are subserved, whereas it is difficult to say the same of the

decision of this Court.

Footnotes

1.Lot No. 151 of the Allacapan Public Land Subdivision, situated in barrio Allig,

municipality of Allacapan, province of Cagayan.

2.Defendant Crisanto Soliven, a minor, was represented by Marcela B. Soliven, who

was appointed by the court as his guardian ad litem.

3.Francisco vs. Parsons Hardware, 67 Phil 234.

4.Bautista vs. Marcos, L-17072, 31 October 1961.

5.Republic vs. Ruiz, L-23712, 29 April 1968, 23 SCRA 348.

6.Eugenio vs. Perdido, 97 Phil. 41; Angeles vs. Court of Appeals, 102 Phil. 1006;

Cadiz vs. Nicolas, 102 Phil. 1032; Santander vs. Villanueva, 103 Phil. 1; Felices

vs. Iriola, 103 Phil. 125; Del Rosario vs. Abad, L-10881, 30 Sept. 1958;

Republic vs. Garcia, 105 Phil. 826; Republic vs. Ruiz, supra.; Baje vs. Court of

Appeals, L-18783, 25 May 1964.

7.Manzano vs. Ocampo, L-14778, 28 February 1961, 1 SCRA 691.

8.Cadiz vs. Nicolas, supra.


23 KASC

9.Beach vs. Pacific Commercial Co., 49 Phil. 765; Francisco vs. Parsons Hardware

Co., 67 Phil. 234; Gonzalo Puyat & Sons vs. De las Ama, 74 Phil. 3; Cadiz vs.

Nicolas, 102 Phil. 1032, 1039.

10.Pascual vs. Talens, 80 Phil. 792; Santos vs. Roman Catholic Church, 94 Phil. 406,

409; Cadiz vs. Nicolas, 102 Phil. 1039; Jocson vs. Soriano, 45 Phil. 375;

Beniga vs. Bugas, L-28918, 29 September 1970.

11.Duling vs. Salaz, 26 Pac. 2d. 1069; 22 Am. Jur. 80 793, 795.

12.Duling vs. Salaz, 26 Pac. 2d. 1069; 22 Am. Jur. 80.

13.Jocson vs. Soriano, 45 Phil. 375, 379.

14.Section 26, Revised Rule 39: 2 Moran's Comments on the Rules of Court, 1970

ed., page 327.

*Editor's Note: Should be read "Urbi."

**Editor's Note: Should be read "accordance."

||| (Artates v. Urbi, G.R. No. L-29421, January 30, 1971)


24 KASC

FIRST DIVISION

[G.R. No. L-54070. February 28, 1983.]

HEIRS OF ENRIQUE ZAMBALES and

JOAQUINA ZAMBALES, petitioners, vs. THE COURT OF APPEA

LS, NIN BAY MINING CORPORATION, ANGELA C. PREYSLER

and JOAQUIN B. PREYSLER, respondents.

Reynaldo S. Yap for petitioners.

Benjamin T. Garcia for respondents.

SYLLABUS

1.REMEDIAL LAW; APPEAL; FACTUAL

FINDING OF THE COURT OF APPEALS, SUSTAINED IN THE CASE AT BAR.

The Court sustains the finding of the Court of Appeals that fraud and

misrepresentation did not vitiate petitioners' consent to the Agreement when it

observed: Taking into account the foregoing observations, this Court is not

convinced that indeed appellees were victims of a fraudulent scheme employed

upon them by their former counsel by reason of their alleged illiteracy and

ignorance. The evidence discloses that appellees, although unschooled, are

intelligent, well-informed and intelligent people. They are not the kind of persons

who could easily be fooled oftheir rights and interests.

2.ID.; ID.; AUTHORITY OF THE SUPREME COURT TO REVIEW MATTERS

NOT ASSIGNED AS ERRORS IN THE APPEAL. The fact that the issue was


25 KASC

not raised in the Courtsbelow is not a deterrent factor considering that the

question affects the validity of the agreement between the parties. The

Supreme Court has the authority to review matters even if they are not assigned

as errors in the appeal, if it is found that their consideration is necessary in

arriving at a just decision of the case. (Saura Import & Export Co., Inc. vs. Phil.

International Surety Co., Inc., 8 SCRA 143 [1963]; Miguel vs. Court of Appeals,

29 SCRA 760 [1969]).

3.ID.; ID.; CHANGE IN LEGAL THEORY ALLOWED IF ON THE FACTUAL

BASES THEREOF, PRESENTATION OF FURTHER EVIDENCE NOT

REQUIRED. A party may change his legal theory on appeal only when the

factual bases thereof would not require presentation of any further evidence by

the adverse party in order to enable it to properly meet the issue raised in the

new theory. (Lianga Lumber Company vs. Lianga Timber Co., Inc., 76 SCRA 197

[1977]).

4.CIVIL LAW; HOMESTEAD; SALE WITHIN THE PROHIBITORY PERIOD,

ILLEGAL AND VOID. The sale of a homestead lot within the five-year

prohibitory period is illegal and void. The law does not distinguish between

executory and consummated sales. The bilateral promise to buy and sell the

homestead lot at a price certain, which was reciprocally demandable (Article

1479. Civil Code), was entered into within the five-year prohibitory period and is

therefore, illegal and void. Further, the agency to sell the homestead lot to a third

party was coupled with an interest inasmuch as a bilateral contract was

dependent on it and was not revocable at will by any of the parties. (Article 1927,

ibid.) To all intents and purposes, therefore, there was an actual executory sale

perfected during the period of prohibition except that it was reciprocally

demandable thereafter and the agency to sell to any third party was deferred until

after the expiration of the prohibitory period. That "rentals" were ostensibly to be

paid during the five-year prohibitory period, and the agency to sell made effective

only after the lapse of the said period, was merely a devise to circumvent the

prohibition. The Court holds, therefore, that the bilateral promise to buy and sell,

and the agency to sell, entered into within five years from the date of the


26 KASC

homestead patent, was in violation of Section 118 of the Public Land Law,

although the executed sale was deferred until after the expiration of the five-year-

prohibitory period.

5.ID.; ID.; ID.; ACTION FOR DECLARATION OF ITS INEXISTENCE,

IMPRESCRIPTIBLE. As the contract is sold from the beginning, for being

expressly prohibited by law (Article 1409, ibid.) the action for the declaration of its

inexistence does not prescribe. (Article 1410, ibid.) Being absolutely void, it is

entitled to no authority or respect, the sale may be impeached in a collateral

proceeding by any one with whose rights and interest it conflicts. There is no

presumption of its validity. (Inton vs. Quintana, 81 Phil. 97 [1948].) The

approval of the sale by the Secretary of Agriculture and Natural Resources after

the lapse of five years from the date of the patent would neither legalize the sale.

(Santander vs. Villanueva, 103 Phil. 1 [1958]; Cadiz vs. Nicolas, 102 Phil. 1032

[1958]; cited in Mansano vs. Ocampo, 1 SCRA 691 [1961]).

6.ID.; ID.; ID.; ACTION FOR REVERSION NOT DISCOUNTED. The

homestead in question should be returned to the Zambaleses, petitioners herein,

who are, in turn, bound to restore to the Corporation the sum of P8,923.70 as the

price thereof. This is without prejudice to the corresponding action on the

part of the State for reversion ofthe property and its improvements, if any, under

Section 124 of the Public Land Act.

D E C I S I O N

MELENCIO-HERRERA, J p:

The Decision of respondent Court of Appeals in the case entitled

"Enrique Zambales and Joaquina Zambales, Plaintiffs-appellees vs. Atty.

Perfecto de los Reyes, Nin Bay Mining Corporation and Joaquin B. Preysler,

Defendants-appellants" (CA-G.R. No. 59386-R), setting aside the

judgment of the Court of First Instance of Palawan in Civil Case No. 678 for


27 KASC

Annulment of a Deed of Sale with Recovery of Possession and Ownership with

Damages", is the subject of this Petition for Review on Certiorari. LLjur

Joaquin B. Preysler is now deceased and was substituted by Angela C. Preysler,

his widow.

Atty. Perfecto de los Reyes was originally a defendant in Civil Case No. 678 but

he did not appeal from the Decision of the lower Court.

The Zambales spouses (Zambaleses, for brevity) were the homestead

patentees of a parcel of land with an area of 17.8474 hectares situated in the

Municipality of Del Pilar, Roxas, Palawan, covered by Original Certificate of Title

No. G-1193 of the Registry of Deeds for the Province of Palawan, issued

pursuant to Homestead Patent No. V-59502 dated September 6, 1955.

Claiming that the Nin Bay Mining Corporation (Corporation, for short) had

removed silica sand from their land and destroyed the plants and others

improvements thereon, the Zambaleses instituted, on November 10, 1958, Civil

Case No. 316 before the Court of First Instance of Palawan claiming damages in

the total sum of P48,000.00.

The Corporation denied having caused any damages and claimed that it had

excavated and extracted silica sand only from its own mining claims and on

which it had mining lease contracts with the Philippine Government.

On October 29, 1959, the Zambaleses, duly assisted by their counsel, Atty.

Perfecto de los Reyes, and the Corporation, entered into a Compromise

Agreement, the portions ofwhich, pertinent to this case, read:

"1.DEFENDANT shall pay the PLAINTIFFS a rental of TWENTY

(P20.00) PESOS per hectare per year from September 9, 1955 to

September 30, 1960, or a total rental price of ONE THOUSAND SEVEN

HUNDRED EIGHTY-FOUR PESOS AND SEVENTY-FOUR CENTAVOS

(P1,784.74), Philippine currency, in lieu of all damages . . .

"2.The payment to the PLAINTIFFS of the above-mentioned rental price

shall be considered full, absolute and final payment and indemnity for all


28 KASC

the alleged damages to PLAINTIFFS' property and its improvements, or

any other actual, moral, exemplary or other damages that PLAINTIFFS

may have suffered or will suffer in connection with the mining

operations of DEFENDANT on the property in question, which property,

by virtue of the terms of this Agreement shall be used by DEFENDANT

as occupant thereof until September 30, 1960.

"3.PLAINTIFFS hereby agree and bind themselves to sell, transfer and

convey, and DEFENDANT or its assigns, qualified to acquire or hold

lands of the public domain, hereby agrees to purchase and pay for, the

aforesaid property of the PLAINTIFFS, containing an area of 17.8474

hectares, situated in the Municipality of Del Pilar, Roxas, Palawan, and

covered by Original Certificate of Title No. G-1193 of the

Registry of Deeds of Palawan, at the fixed selling price of FIVE

HUNDRED (P500.00) PESOS per hectare or a total purchase

price of EIGHT THOUSAND NINE HUNDRED TWENTY THREE

PESOS and SEVENTY CENTAVOS (P8,923.70), Philippine currency.

The contract to purchase and sell herein provided for, shall be

reciprocally demandable and enforceable by the parties hereto on

September 10, 1960. PLAINTIFFS hereby irrevocably constitute and

appoint DEFENDANT, its successors and/or assigns their true and

lawful attorney-in-fact with full power and authority to sell, transfer and

convey on September 10, 1960 or at any time thereafter the whole or

any part of PLAINTIFFS' property hereinabove mentioned to the

DEFENDANT, its successors and/or assigns, or to any third party, and to

execute and deliver all instruments and documents whatsoever

necessary for the purpose, and all acts done and to be done by

DEFENDANT, its successors and/or assigns in conformity with the

powers herein granted are hereby ratified and confirmed by the

PLAINTIFFS. . . ."

"4.In consideration of the payment of the amount of P1,784.74 by

DEFENDANT, and of other good and valuable consideration,


29 KASC

PLAINTIFFS, jointly and severally, do hereby forever release, fully and

completely, said DEFENDANT, its successors and/or assigns in interest,

from any and all liabilities, whether arising from past, present or future

excavation or removal of silica sand from the property in question or

otherwise, and from all the other claims against the DEFENDANT

contained in their Complaint in Civil Case No. 316 of the Court of First

Instance of Palawan." 1

The Trial Court rendered judgment on October 29, 1959 based on the

Compromise Agreement. The document was duly annotated an OCT No. G-1193

(Exhibit "A") the day after, or on October 30, 1959 (Exhibit "10-A"). prcd

On September 10, 1960, the Corporation, as attorney-in-fact for the Zambaleses,

as Vendors, sold the disputed property to Joaquin B. Preysler for the

sum of P8,923.70 fixed in the Compromise Agreement (Exhibit "11"). Transfer

Certificate of Title No. T-970 was issued in the vendee's name on December 19,

1960 (Exhibit "12").

The Deed of Sale to Preysler contained the following proviso:

"The VENDORS hereby represent and warrant that the five-year

restrictive period on alienation of lands acquired under the homestead

provisions of Commonwealth Act No. 141, as amended, otherwise

known as the Public Land Act, has already expired, the

date of issuance of the herein homestead patent to the VENDORS as

aforesaid being September 6, 1955 as shown in Original

Certificate of Title No. G-1193."

On October 18, 1960, the Secretary of Agriculture and Natural Resources

approved the sale to Preysler of the subject property (Exhibit "13").

On December 6, 1969, or ten (10) years after the Trial Court's Decision based on

the Compromise Agreement, and nine (9) years after the sale to Preysler, the

Zambaleses filed Civil Case No. 678 before the Court of First


30 KASC

Instance of Palawan for "Annulment of a Deed of Sale with

Recovery of Possession and Ownership with Damages". They contended that it

was their lawyer who prevailed upon them to sign the Compromise Agreement;

that they are unschooled and did not understand the contents thereof; that they

were made to understand that they would receive the sum of P10,700.00, only as

payment for damages sustained by the land from 1955 to 1960; that through

fraud, deceit and manipulation by their lawyer and the Corporation, they were

made to agree to appoint the Corporation as their attorney-in-fact with full power

and authority to sell; that it was never their intention to sell the land; that in

September 1969, they were surprised to learn that the land was already titled in

the name of Joaquin B. Preysler; that the land was acquired and registered in the

latter's name through fraud and deceit. The Zambaleses then prayed that the

deed of sale and the title in Preysler's name be annulled on the ground of fraud

and that the property be reconveyed to them.

In their Answer, the Corporation denied all allegations that the Zambaleses had

signed the Compromise Agreement without understanding the contents thereof,

the truth being that it was read to them by their counsel, Atty. Perfecto de los

Reyes, who explained thoroughly the full implication and legal

consequence of each and every provision, which was then submitted and

approved by then Presiding Judge Juan L. Bocar; and that the Corporation had

sold the property to Preysler as a duly constituted attorney-in-fact pursuant to the

Compromise Agreement. LLjur

After trial, the lower Court rendered judgment in favor of the Zambaleses, the

dispositive part of which reads:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs

and against the defendants as follows:

1)That the deed of sale executed by Nin Bay Mining Corporation through

its president, to Joaquin B. Preysler is hereby declared null and void;

2)That the defendant Joaquin B. Preysler is hereby ordered to reconvey

the land subject matter of this litigation to the plaintiffs;


31 KASC

3)That the defendants Nin Bay Mining Corporation and Joaquin B.

Preysler shall pay the plaintiffs the sum of P85,000.00 as actual

damages plus the legal rate ofinterest from September 30, 1960 up to

the time the amount is fully paid;

4)That the defendants to pay the sum of FIVE THOUSAND (P5,000.00)

PESOS as attorneys fees; and

5)The defendants to pay the costs."

On appeal by the Corporation, the Court of Appeals reversed the Trial Court,

after finding that the alleged fraud or misrepresentation in the execution of the

Compromise Agreement had not been substantiated by evidence.

The case is now before us on review.

The controversy revolves around the issue of due execution and validity of the

Compromise Agreement (Exhibit "8") dated October 29, 1959, and of the

subsequent Deed ofSale (Exhibit "11"), dated 10 September 1960.

I.

The general rule is that whoever alleges fraud or mistake must substantiate his

allegation, since the presumption is that a person takes ordinary care of his

concerns and that private transactions have been fair and regular. The rule

admits of an exception in Article 1332 of the Civil Code which provides:

"When one of the parties is unable to read, or if the contract is in a

language not understood by him, and mistake or fraud is alleged, the

person enforcing the contract must show that the terms thereof have

been fully explained to the former."

For the proper application of said provision, it has first to be established

convincingly that the illiterate or the party at a disadvantage could not read or

understand the language in which the contract was written. 2 The evidence

discloses that the spouses Zambales are unschooled. They cannot read, speak,

much less understand English or write, except to sign their names. 3 The


32 KASC

Zambaleses alleged in their Complaint that the Compromise Agreement (Exhibit

"8") was executed through fraud by the Corporation and by their counsel Atty.

Perfecto de los Reyes, whom they included as a defendant. The burden of proof,

therefore, shifted to the Corporation to show that the compromise agreement had

been fully explained to the plaintiffs. prcd

In refuting the allegation that plaintiffs were misled into signing the compromise

agreement, their former counsel, Atty. Perfecto de los Reyes, and the notary,

Atty. Salomon Reyes, a lawyer for Nin Bay Mining Corporation, established that

the terms and conditions of the Compromise Agreement were thoroughly

explained and fully understood by the spouses Zambales in accordance with

their proposal to sell the land at P500.00 a hectare; that before the signing of the

Compromise Agreement, the notary requested Atty. de los Reyes to read and

explain each and every provision to the spouses, and with the help of Ricardo

Nuala, Atty. de los Reyes did so in their dialect (Cuyuno). Thereafter, the parties

went to Judge Juan Bocar, who was assured that the

spouses Zambales understood and signed the Compromise Agreement. 4

We sustain the finding of the Court of Appeals that fraud and misrepresentation

did not vitiate petitioners' consent to the Agreement when it observed:

"Taking into account the foregoing observations, this Court is not

convinced that indeed appellees were victims of a fraudulent scheme

employed upon them by their former counsel by reason of their alleged

illiteracy and ignorance. The evidence discloses that appellees, although

unschooled, are intelligent, well-informed and intelligent people. They

are not the kind of persons who could easily be fooled of their rights and

interests. Even as commented by the court a quo, which had a chance to

observe the demeanor of the witness, it had no observation that the

witness, Joaquina Zambales, is ignorant. As correctly observed by

appellants, appellees 'are political leaders and chief campaigners; they

speak in the platform during political rallies; and they are widely

travelled' (p. 28, Appellants' Brief). As a matter of fact they are


33 KASC

knowledgeable of the right connections in the government. They had

approached former Sen. Rogelio de la Rosa, no less, the congressman

and the governor. Even the lawyers they have retained previous to their

present counsel are the Padilla Law Office and the Diokno Law Office. It

is common knowledge that these law offices are among the established

law offices in Manila. It is far convincing that an ignorant couple would

have knowledge of these law firms. All these are obvious

manifestations of their being well-informed and the way they have

conducted their way of living apparently is inconsistent with the

plea of being illiterate and/or ignorant. They cannot capitalize on the fact

that they are uneducated only because they had no formal schooling

inasmuch as one's knowledge of the facts of life is not dependent on

whether one had formal schooling or not and it does not necessarily

follow always that if one is unschooled he is ignorant.

Furthermore, when plaintiffs-appellees signed the questioned

compromise agreement they were duly assisted and represented by

their counsel, Atty. de los Reyes. When Atty. de los Reyes testified

in court he categorically declared that it was to the best interest of his

clients that they compromise Civil Case No. 316. This declaration finds

support in Joaquina Zambales' testimony wherein she stated thus:

ATTY. SEMBRANO:

Q.Except for this present case, would you say to the Court that Atty. de

los Reyes extended to you legal assistance to your satisfaction?

A.Yes, sir, he is good to us.

xxx xxx xxx

Q.So these people never gave their services to you?

A.Nobody was able to help us except Atty. de los Reyes. (Tsn., pp. 29,

31 & 32, June 19, 1974).


34 KASC

. . . Thus, it having been established that appellees could not have

been misled by their former counsel into signing the compromise

agreement and taking into account the acts of the appellees and

their children subsequent to the execution of the compromise

agreement perforce the court a quo erred in not giving credence to

the clear and convincing testimonies of Atty. Perfecto de los Reyes

and Atty. Salomon Reyes anent the execution of the compromise

agreement." 5

However, although we find that the Zambaleses were not misled into signing the

Compromise Agreement, we hold that there has been violation of the Public Land

Act. The evidence on record shows that the land in question was awarded to the

Zambaleses as a homestead on September 6, 1955 (Exhibit "A"), Before us, the

Zambaleses now argue that the Compromise Agreement executed on October

29, 1959 is in violation of the Public Land Act, which prohibits alienation and

encumbrance of a homestead lot within five years from the issuance of the

patent. 6

We sustain that contention. The fact that the issue was not raised in

the Courts below is not a deterrent factor considering that the question affects

the validity of the agreement between the parties. The Supreme Court has the

authority to review matters even if they are not assigned as errors in the appeal,

if it is found that their consideration is necessary in arriving at a just

decision of the case. 7 Moreover, a party may change his legal theory

on appeal only when the factual bases thereof would not require

presentation of any further evidence by the adverse party in order to enable it to

properly meet the issue raised in the new theory. 8 In the case at bar it is

indisputable that Homestead Patent No. V-59502 was issued on September 6,

1955 as shown in Original Certificate of Title No. 1193 (Exhibit "A"). LLpr

The sale of a homestead lot within the five-year prohibitory period is illegal and

void. The law does not distinguish between executory and consummated sales.


35 KASC

"The law prohibiting any transfer or alienation of homestead land within

five years from the issuance of the patent does not distinguish between

executory and consummated sales; and it would hardly be in keeping

with the primordial aim of this prohibition to preserve and keep in the

family of the homesteader the piece ofland that the state had gratuitously

given to them, to hold valid a homestead sale actually perfected during

the period of prohibition but with the execution of the formal

deed of conveyance and the delivery of possession of the land sold to

the buyer deferred until after the expiration of the prohibitory period,

purposely to circumvent the very law that prohibits and declares invalid

such transaction to protect the homesteader and his family." 9

In the compromise agreement executed between the parties, (1) the Zambaleses

promised to sell and the Corporation agreed to buy the disputed lot at P500.00

per hectare, the contract to be reciprocally demandable and enforceable on

September 10, 1960; and as a substitute procedure, (2) an irrevocable agency

was constituted in favor of the Corporation as attorney-in-fact to sell the land to

any third person on September 10, 1960 or any time thereafter.

Clearly, the bilateral promise to buy and sell the homestead lot at a price certain,

which was reciprocally demandable 10 , was entered into within the five-year

prohibitory period and is therefore, illegal and void. Further, the agency to sell the

homestead lot to a third party was coupled with an interest inasmuch as a

bilateral contract was dependent on it and was not revocably at will by any of the

parties. 11 To all intents and purposes, therefore, there was an actual executory

sale perfected during the period ofprohibition except that it was reciprocally

demandable thereafter and the agency to sell to any third party was deferred until

after the expiration of the prohibitory period. That "rentals" were ostensibly to be

paid during the five-year prohibitory period, and the agency to sell made effective

only after the lapse of the said period, was merely a devise to circumvent the

prohibition.


36 KASC

To hold valid such an arrangement would be to throw the door wide open to all

possible subterfuges that persons interested in homesteads may devise to defeat

the legal prohibition against alienation within five years from the issuance of the

patent. LibLex

We hold, therefore, that the bilateral promise to buy and sell, and the agency to

sell, entered into within five years from the date of the homestead patent, was in

violation ofsection 118 of the Public Land Law, although the executed sale was

deferred until after the expiration of the five-year-prohibitory period.

As the contract is void from the beginning, for being expressly prohibited by

law 12 the action for the declaration of its inexistence does not prescribe. 13 Being

absolutely void, it is entitled to no authority or respect, the sale may be

impeached in a collateral proceeding by any one with whose rights and interest it

conflicts. There is no presumption ofits validity. 14 The approval of the sale by the

Secretary of Agriculture and Natural Resources after the lapse of five years from

the date of the patent would neither legalize the sale. 15

The homestead in question should be returned to the Zambaleses, petitioners

herein, who are, in turn, bound to restore to the Corporation the

sum of P8,923.70 as the price thereof. The actual damages awarded by the

Trial Court of P85,000.00 have not been adequately substantiated. Moreover,

under the agreement, the total rental price ofP1,784.74 was intended to be "in

lieu of all damages, or any other actual, moral, exemplary or other damages."

This is without prejudice to the corresponding action on the part of the State for

reversion of the property and its improvements, if any, under Section 124 of the

Public Land Act. 16

WHEREFORE, the judgment under review is hereby REVERSED, and another

one entered (1) declaring null and void a) the bilateral promise to buy and sell

entered into between Enrique Zambales and Joaquina Zambales, on the one

hand, and the Nin Bay Mining Corporation on the other, and b) the sale executed

by Nin Bay Mining Corporation in favor of Joaquin B. Preysler; (2) ordering

Angela C. Preysler to reconvey the land subject; matter of this litigation to


37 KASC

petitioners upon refund by the latter to the Nin Bay Mining Corporation of the

sum of P8,923.70, all expenses for the reconveyance to be borne by private

respondents; (3) ordering Nin Bay Mining Corporation to pay rentals to

petitioners at the price of P20.00 per hectare per year from December 6, 1969,

the date of the institution of the Complaint, till the date that possession is turned

over to petitioners; and (4) ordering the Register of Deeds for the

Province of Palawan to cancel Transfer Certificate of Title No. T-970 of his

Registry, and reissue to the Heirsof Enrique Zambales and

Joaquina Zambales the title to the homestead in question.

Let a copy of this Decision be served on the Solicitor General.

No costs. llcd

SO ORDERED.

Teehankee, Plana, Vasquez, Relova and Gutierrez, Jr., JJ., concur.

Footnotes

1.Annex "E", pp. 88-90, Rollo.

2.Bunyi vs. Reyes, 39 SCRA 504 (1971).

3.T.s.n., February 23, 1972, p. 18; t.s.n., January 8, 1973, pp. 4, 20 & 26; t.s.n., June

19, 1974, p. 30.

4.T.s.n., July 28, 1975, pp. 23-27; Deposition of Atty. Salomon F. Reyes (Exhibit "18"),

pp. 27-33.

5.Pp. 61-63, Rollo.

6.Sec. 118, Commonwealth Act No. 141, as amended.

7.Saura Import & Export Co., Inc. vs. Phil. International Surety Co., Inc., 8 SCRA 143

(1963); Miguel vs. Court of Appeals, 29 SCRA 760 (1969).

8.Lianga Lumber Company vs. Lianga Timber Co., Inc., 76 SCRA 197 (1977).

9.Manzano vs. Ocampo, 1 SCRA 691, 697 (1961).


38 KASC

10.Article 1479, Civil Code.

11.Article 1927, ibid.



14.Inton vs. Quintana, 81 Phil. 97 (1948).

15.Santander vs. Villanueva, 103 Phil. 1 (1958); Cadiz vs. Nicolas, 102 Phil. 1032

(1958); cited in Manzano vs. Ocampo, 1 SCRA 691 (1961).

16.SEC. 124.Any acquisition, conveyance, alienation, transfer, or other contract made

or executed in violation of any of the provisions of sections one hundred and

eighteen, one hundred and twenty, one hundred and twenty-one, one hundred

and twenty-two, and one hundred and twenty-three of this Act shall be unlawful

and null and void from its execution and shall produce the effect of annulling

and cancelling the grant, title, patent, or permit originally issued, recognized or

confirmed, actually or presumptively, and cause the reversion of the property

and its improvements to the State.

||| (Heirs of Zambales v. Court of Appeals, G.R. No. L-54070, February 28, 1983)


39 KASC

EN BANC

[G.R. No. 11491. August 23, 1918.]

ANDRES QUIROGA, plaintiff-appellant, vs. PARSONS

HARDWARE CO., defendant-appellee.

Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza, for appellant.

Crossfield & O'Brien, for appellee.

SYLLABUS

1.SALES; INTERPRETATION OF CONTRACT. For the classification

of contracts, due regard must be paid to their essential clauses. In the

contract in the instant case, what was essential, constituting its cause and

subject matter, was that the plaintiff was to furnish the defendant with the

beds which the latter might order, at the stipulated price, and that the

defendant was to pay this price in the manner agreed upon. These are

precisely the essential features of a contract of purchase and sale. There was

the obligation on the part of the plaintiff to supply the beds, and, on that of the

defendant, to pay their price. These features exclude the legal conception of

an agency or older to sell whereby the mandatary or agent receives the thing

to sell it, and does not pay its price, but delivers to the principal the price he

obtains from the sale of the thing to a third person, and if he does not succeed


40 KASC

in selling it, he returns it, Held: That this contract is one of purchase and sale,

and not of commercial agency.

2.ID., ID. The testimony of the person who drafted this contract, to

the effect that his purpose was to be an agent for the beds and to collect a

commission on the sales, is of no importance to prove that the contract was

one of agency, inasmuch as the agreements contained in the contract

constitute, according to law, covenants of purchase and sale, and not of

commercial agency. It must be understood that a contract is what the law

defines it to be, and not what it is called by the contracting parties.

3.ID.; ID. The fact that the contracting parties did not perform the

contract in accordance with its terms, only shows mutual tolerance and gives

no right to have the contract considered, not as the parties stipulated it, but as

they performed it.

4.ID.; ID. Only the acts of the contracting parties, subsequent to and

in connection with, the performance of the contract must be considered in the

interpretation of the contract when such interpretation is necessary, but not

when, as in the instant case its essential agreements are clearly set forth and

plainly show that the contract belongs to a certain kind and not to another

5.ID.; ID. The defendant obligated itself to order the beds from the

plaintiff by the dozen. Held: That the effect of a breach of this clause by the

defendant would only entitle the plaintiff to disregard the orders which the

defendant might place under other conditions, but if the plaintiff consents to fill

them, he waives his right and cannot complain for having acted thus at his

own free will.

D E C I S I O N

AVANCEA, J p:


41 KASC

On January 24, 1911, in this city of Manila, a contract in the following

tenor was entered into by and between the plaintiff, as party of the first part,

and J. Parsons (to whose rights and obligations the present defendant later

subrogated itself), as party of the second part:

CONTRACT EXECUTED BY AND BETWEEN ANDRES

QUIROGA AND J. PARSONS, BOTH MERCHANTS ESTABLISHED IN

MANILA FOR THE EXCLUSIVE SALE OF QUIROGA BEDS IN THE

VISAYAN ISLANDS.

"ARTICLE 1.Don Andres Quiroga grants the exclusive right to sell

his beds in the Visayan Islands to J. Parsons under the following

conditions:

"(A)Mr. Quiroga shall furnish beds of his manufacture to Mr.

Parsons for the latter's establishment in Iloilo, and shall invoice them at

the same price he has fixed for sales, in Manila, and, in the invoices,

shall make an allowance of a discount of 25 per cent of the invoiced

prices, as commission on the sales; and Mr. Parsons shall order the

beds by the dozen, whether of the same or of different styles.

"(B)Mr. Parsons binds himself to pay Mr. Quiroga for the beds

received, within a period of sixty days from the date of their shipment.

"(C)The expenses for transportation and shipment shall be borne

by M. Quiroga, and the freight, insurance, and cost of unloading from the

vessel at the point where the beds are received, shall be paid by Mr.

Parsons.

"(D)If, before an invoice falls due, Mr. Quiroga should request its

payment, said payment when made shall be considered as a prompt

payment, and as such a deduction of 2 per cent shall be made from the

amount of the invoice.

"The same discount shall be made on the amount of any invoice

which Mr. Parsons may deem convenient to pay in cash.


42 KASC

"(E)Mr. Quiroga binds himself to give notice at least fifteen days

before hand of any alteration in price which he may plan to make in

respect to his beds, and agrees that if on the date when such alteration

takes effect he should have any order pending to be served to Mr.

Parsons, such order shall enjoy the advantage of the alteration if the

price thereby be lowered, but shall not be affected by said alteration if

the price thereby be increased, for, in this latter case, Mr. Quiroga

assumed the obligation to invoice the beds at the price at which the

order was given.

"(F)Mr. Parsons binds himself not to sell any other kind except the

'Quiroga' beds.

"ART. 2.In compensation for the expenses of advertisement

which, for the benefit of both contracting parties, Mr. Parsons may find

himself obliged to make, Mr. Quiroga assumes the obligation to offer and

give the preference to Mr. Parsons in case anyone should apply for the

exclusive agency for any island not comprised within the Visayan group.

"ART. 3.Mr. Parsons may sell, or establish branches of his

agency for the sale of 'Quiroga' beds in all the towns of the Archipelago

where there are no exclusive agents, and shall immediately report such

action to Mr. Quiroga for his approval.

"ART. 4.This contract is made for an unlimited period, and may be

terminated by either of the contracting parties on a previous notice of

ninety days to the other party "

Of the three causes of action alleged by the plaintiff in his complaint,

only two of them constitute the subject matter of this appeal and both

substantially amount to the averment that the defendant violated the following

obligations: not to sell the beds at higher prices than those of the invoices; to

have an open establishment in Iloilo; itself to conduct the agency; to keep the

beds on public exhibition, and to pay for the advertisement expenses for the

same; and to order the beds by the dozen and in no other manner. As may be


43 KASC

seen, with the exception of the obligation on the part of the defendant to order

the beds by the dozen and in no other manner, none of the obligations

imputed to the defendant in the two causes of action are expressly set forth in

the contract. But the plaintiff alleged that the defendant was his agent for the

sale of his beds in Iloilo, and that said obligations are implied in a contract of

commercial agency. The whole question, therefore, reduces itself to a

determination as to whether the defendant, by reason of the contract

hereinbefore transcribed, was a purchaser or an agent of the plaintiff for the

sale of his beds.

In order to classify a contract, due regard must be given to its essential

clauses. In the contract in question, what was essential, as constituting its

cause and subject matter, is that the plaintiff was to furnish the defendant with

the beds which the latter might order, at the price stipulated) and that the

defendant was to pay the price in the manner stipulated. The price agreed

upon was the one determined by the plaintiff for the sale of these beds in

Manila, with a discount of from 20 to 25 per cent, according to their class.

Payment was to be made at the end of sixty days, or before, at the plaintiff's

request, or in cash, if the defendant so preferred, and in these last two cases

an additional discount was to be allowed for prompt payment. These are

precisely the essential features of a contract of purchase and sale. There was

the obligation on the part of the plaintiff to supply the beds, and, on the part of

the defendant, to pay their price. These features exclude the legal conception

of an agency or order to sell whereby the mandatory or agent received the

thing to sell it, and does not pay its price, but delivers to the principal the price

he obtains from the sale of the thing to a third person, and if he does not

succeed in selling it, he returns it. By virtue of the contract between the

plaintiff and the defendant, the latter, on receiving the beds, was necessarily

obliged to pay their price within the term fixed, without any other consideration

and regardless as to whether he had or had not sold the beds.

It would be enough to hold, as we do, that the contract by and between

the defendant and the plaintiff is one of purchase and sale, in order to show


44 KASC

that it was not one made on the basis of a commission on sales, as the

plaintiff claims it was, for these contracts are incompatible with each other.

But, besides, examining the clauses of this contract, none of them is found

that substantially supports the plaintiff's contention. Not a single one of these

clauses necessarily conveys the idea of an

sales batch 1 of assigned cases

Documents

actual delivery

constructive delivery

valid contract of sale

subject deed of sale

sale elements

deed of conditional

civil case

jabils beach resort