Briefing Document: G.R. No.

139523
Case Title: SPS. FELIPE AND LETICIA CANNU vs. SPS. GIL AND FERNANDINA GALANG AND NATIONAL
HOME MORTGAGE FINANCE CORPORATION Court: SECOND DIVISION, Supreme Court of the Philippines
Date of Decision: May 26, 2005 Ponente: CHICO-NAZARIO, J.
I. Executive Summary:
This case involves a dispute arising from a "Deed of Sale with Assumption of Mortgage Obligation"
concerning a house and lot. Petitioners, Sps. Felipe and Leticia Cannu (the buyers), agreed to purchase
the property from respondents, Sps. Gil and Fernandina Galang (the sellers), for an agreed price and the
assumption of the sellers' mortgage obligations with the National Home Mortgage Finance Corporation
(NHMFC) and a second mortgage with CERF Realty.
The key issues revolve around the buyers' alleged failure to fully pay the agreed purchase price to the
sellers and their failure to properly assume and consistently pay the mortgage amortizations to NHMFC.
The sellers sought rescission of the contract due to these alleged breaches. The case progressed through
the Regional Trial Court (RTC) and the Court of Appeals (CA), both of which ruled in favor of the sellers,
ordering rescission of the contract. The Supreme Court, in this decision, affirms the rescission but
modifies the amount to be returned to the buyers.
II. Background and Key Facts:
 Sps. Galang obtained a loan from Fortune Savings & Loan Association (later purchased by
NHMFC) and constituted a real estate mortgage on their house and lot.
 Fernandina Galang, through an attorney-in-fact (Adelina R. Timbang), authorized the sale of the
property.
 Sps. Cannu agreed to buy the property for P120,000.00, plus the assumption of the mortgage
obligations with NHMFC and CERF Realty.
 A "Deed of Sale with Assumption of Mortgage Obligation" was executed, but the Court later
found it did not accurately reflect the true consideration, stating P250,000.00 instead of
P120,000.00 paid to the sellers.
 Sps. Cannu paid P75,000.00 of the P120,000.00 agreed upon amount to the sellers, leaving a
balance of P45,000.00.
 Sps. Cannu took possession of the property and made several payments to NHMFC, totaling
P55,312.47 from July 1990 to April 1993.
 Sps. Cannu also claimed to have paid the second mortgage with CERF Realty.
 Sps. Cannu's formal assumption of mortgage was not approved by NHMFC due to lack of
submitted requirements.
 Despite demands from the sellers, Sps. Cannu failed to pay the remaining P45,000.00 balance
and update their NHMFC amortizations.
 In May 1993, Fernandina Galang fully paid her remaining mortgage loan with NHMFC
(P233,957.64).
 Sps. Cannu filed a complaint for Specific Performance and Damages, seeking to be declared
owners subject to reimbursing the sellers for the NHMFC payment.
 Sps. Galang counterclaimed for rescission of the Deed of Sale due to the buyers' failure to
comply with their obligations.
 The RTC dismissed the Sps. Cannu's complaint and ordered rescission of the Deed of Sale,
requiring mutual restitution. It also ordered Sps. Cannu to pay litigation expenses and attorney's
fees.
 The Court of Appeals affirmed the rescission but modified the amount to be returned to the
buyers, stating P135,000.00.
 Sps. Cannu filed a Petition for Certiorari with the Supreme Court.
III. Main Themes and Important Ideas/Facts:
 Contractual Obligations and Breach: The case highlights the fundamental principle that
"Obligations arising from contract have the force of law between the contracting parties and
 should be complied in good faith." The core dispute revolves around whether the buyers (Sps.
Cannu) breached their obligations under the Deed of Sale with Assumption of Mortgage.
 Rescission (Resolution) under Article 1191: The decision extensively discusses the power to
rescind or resolve reciprocal obligations under Article 1191 of the Civil Code. This power is
implied when one party fails to comply with their undertaking.
 Substantial Breach as Basis for Rescission: The Court emphasizes that rescission is not permitted
for "a slight or casual breach." It must be for "such breaches that are substantial and
fundamental as to defeat the object of the parties in making the agreement."
 The Court found the Sps. Cannu's failure to pay the remaining P45,000.00 balance to the Sps.
Galang to be a substantial breach, noting it represented 18% of the P250,000.00 stated in the
Deed of Sale (though acknowledging the true amount was P120,000.00, making the P45,000.00
a larger percentage of that amount). Crucially, the lack of payment for 18 months before the
sellers paid the NHMFC balance demonstrated a clear intention to "renege on their obligation."
 The Court also found the Sps. Cannu's failure to religiously pay the monthly amortizations with
NHMFC (only covering 30 months in three years) and their failure to secure NHMFC's formal
approval for the mortgage assumption constituted another breach of the contract.
 Parole Evidence Rule and True Consideration: The Court addressed the discrepancy between
the P250,000.00 stated in the Deed of Sale and the actual agreed-upon consideration of
P120,000.00 to be paid to the sellers. It ruled that the case falls under an exception to the parole
evidence rule, allowing evidence aliunde (outside the written document) to prove the true intent
and agreement of the parties regarding the consideration.
 Tender of Payment vs. Consignation: The Court reiterated that "Tender of payment does not by
itself produce legal payment, unless it is completed by consignation." The Sps. Cannu's tender of
a Manager's Check after the case was filed was deemed insufficient to extinguish their
obligation.
 Judicial vs. Extrajudicial Rescission: While acknowledging that typically, the power to rescind
must be invoked judicially in the absence of a contractual stipulation allowing extrajudicial
rescission, the Court ruled that since the sellers' Answer and Counterclaim sought judicial
rescission, it was proper for the court to resolve the issue, rather than requiring a separate
action.
 Mutual Restitution upon Rescission: As a consequence of rescission, the parties must be
restored to their original situation. The Court ordered the Sps. Galang to return the payments
made by the Sps. Cannu.
 The Court calculated the total amount to be returned as P165,312.47, consisting of:
 P75,000.00 paid to Sps. Galang.
 P55,312.47 paid to NHMFC.
 P35,000.00 for the second mortgage with CERF Realty, which was admitted in the sellers' Answer
and confirmed by their witness.
IV. Key Quotes:
 "Obligations arising from contract have the force of law between the contracting parties and
should be complied in good faith." (Cited by the Court of Appeals and affirmed by the Supreme
Court)
 "The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should
not comply with what is incumbent upon him." (Citing Article 1191)
 "Rescission will not be permitted for a slight or casual breach of the contract. Rescission may be
had only for such breaches that are substantial and fundamental as to defeat the object of the
parties in making the agreement."
 "In the case at bar, we find petitioners’ failure to pay the remaining balance of P45,000.00 to be
substantial."
 "Taken together with the fact that the last payment made was on 28 November 1991, eighteen
months before the respondent Fernandina Galang paid the outstanding balance of the mortgage
loan with NHMFC, the intention of petitioners to renege on their obligation is utterly clear."
  "Tender of payment does not by itself produce legal payment, unless it is completed by
consignation."
 "From the foregoing, it is clear that rescission ('resolution' in the Old Civil Code) under Article
1191 is a principal action, while rescission under Article 1383 is a subsidiary action."
 "As a consequence of the rescission or, more accurately, resolution of the Deed of Sale with
Assumption of Mortgage, it is the duty of the court to require the parties to surrender whatever
they may have received from the other. The parties should be restored to their original
situation."
V. Conclusion:
The Supreme Court upheld the rescission of the Deed of Sale with Assumption of Mortgage. It found
that the buyers, Sps. Cannu, committed substantial breaches by failing to pay the full agreed-upon price
to the sellers and by failing to consistently pay the mortgage amortizations to NHMFC and secure formal
approval for the assumption. The Court clarified the true consideration of the sale and ordered the
sellers to return the total amount of payments made by the buyers, including payments to the sellers,
NHMFC, and for the second mortgage with CERF Realty.
Briefing Document: G.R. No. 144934
Case Title: Adelfa S. Rivera, Cynthia S. Rivera, and Jose S. Rivera vs. Fidela Del Rosario (deceased and
substituted by her co-respondents), and her children, Oscar, Rosita, Violeta, Enrique Jr., Carlos, Juanito
and Eloisa, all surnamed Del Rosario.
Court: Supreme Court of the Philippines, Second Division
Date of Decision: January 15, 2004
Subject Matter: Nullity of Contract of Sale, Annulment of Transfer Certificates of Title, Rescission of
Contract to Sell, Jurisdiction, Prescription, and Damages.
Key Facts:
 Respondents (Del Rosarios) were registered owners of Lot No. 1083-C (15,029 sq. m.) covered by
TCT No. T-50.668 (M).
 Fidela Del Rosario (mother of other respondents) was granted a Special Power of Attorney by her
children to sell, lease, mortgage, etc., their rights over Lot No. 1083-C.
 In early 1987, Fidela borrowed P 250,000 from Mariano Rivera (father of petitioners).
 To secure the loan, they agreed to execute a deed of real estate mortgage and an agreement to
sell.
 On March 9, 1987, Mariano Rivera had three documents drafted: a Deed of Real Estate
Mortgage, a Kasunduan (Agreement to Sell), and a Deed of Absolute Sale.
 The Kasunduan stipulated that petitioners (Mariano Rivera's children) would purchase Lot No.
1083-C for P 2,141,622.50, payable in three installments (P 250,000 upon signing, P 750,000 by
Aug 31, 1987, and P 1,141,622.50 by Dec 31, 1987). The Deed of Absolute Sale was to be
executed after the second installment and deposit of a postdated check for the last installment.
 The drafted Deed of Absolute Sale, however, listed a purchase price of only P 601,160 and
included Lot No. 1083-A in addition to Lot No. 1083-C.
 On March 9, 1987, petitioners signed all three documents as buyers/mortgagees.
 On March 10, 1987, Mariano Rivera brought Fidela and Oscar Del Rosario to his lawyer's office to
sign the documents.
 Fidela intended to sign only the Kasunduan and Real Estate Mortgage but inadvertently signed
all three documents, including the Deed of Absolute Sale, due to her age (around 72) and the
stacking of documents.
 Mariano Rivera gave Fidela P 250,000 on March 10, 1987, and an additional P 200,000 check on
October 30, 1987. He also gave Oscar Del Rosario P 67,800 despite Oscar's lack of authority to
receive payments.
 Fidela entrusted the owner's copy of TCT No. T-50.668 (M) to Mariano Rivera to guarantee
compliance with the Kasunduan.
 Mariano Rivera refused to return the TCT.
 Carlos Del Rosario annotated an Affidavit of Loss of the TCT owner's copy on September 7, 1992.
 Mariano Rivera registered the Deed of Absolute Sale on October 13, 1992, and annotated an
Affidavit of Recovery of Title on October 14, 1992.
 TCT No. T-50.668 (M) was cancelled and TCT No. 158443 (M) was issued in petitioners' names for
Lot No. 1083-C.
 Petitioners entered into an agreement with the agricultural tenant, Feliciano Nieto, regarding his
tenancy right over 9,000 sq. m. of the land. They gave Nieto 4,500 sq. m. of the land.
 Subdivision Plan No. Psd-031404-052505 was made, dividing Lot No. 1083-C into Lots 1083 C-1
and 1083 C-2.
 A document, Kasulatan sa Pagtatakwil ng Karapatan sa Pagmamay-ari ng Bahagi ng Isang
Lagay na Lupa, was executed between petitioners and Nieto on November 16, 1992, and
registered.
  Two new titles were issued: TCT No. T-161784 (M) in Nieto's name for 4,500 sq. m. and TCT No.
T-161785 (M) in petitioners' names for the remaining 10,529 sq. m.
 On February 18, 1993, respondents filed a complaint for rescission of the Kasunduan, annulment
of the Deed of Absolute Sale (citing fraud), cancellation of the new TCTs, and reconveyance of
the property.
 Respondents claimed Fidela did not intend to sign the Deed of Absolute Sale and was misled due
to the documents being stacked and the similar placement of signature lines.
 Petitioners argued the Deed of Absolute Sale was valid and superseded the Kasunduan, with a
lower price agreed upon after discovering Nieto's tenancy. They also raised laches or estoppel as
a defense due to the lapse of time before the complaint was filed.
Trial Court (RTC) Ruling:
 Declared the Deed of Absolute Sale dated March 10, 1987, as null and void.
 Annulled TCT No. T-158443 (M) and TCT No. T-161785 (M).
 Declared respondents the legitimate owners of the land covered by TCT No. T-161785 (M) and
ordered petitioners to reconvey it to respondents.
 Ordered the cancellation of TCT No. T-161785 (M) and the issuance of a new title in respondents'
names for that portion.
 Declared TCT No. T-161784 (M) in Nieto's name as valid, finding Nieto relied in good faith on
Mariano Rivera's representations.
 Rescinded the Kasunduan.
 Allowed petitioners to retain the P 450,000 paid as payment for the 4,500 sq. m. given to Nieto.
 Ordered petitioners to pay respondents P 191,246.98 (balance for the land given to Nieto), P
200,000 moral damages, P 50,000 exemplary damages, P 50,000 attorney's fees, and costs of
suit.
 Dismissed petitioners' counterclaim.
Court of Appeals Ruling:
 Affirmed the RTC judgment with modifications.
 Declared the Deed of Absolute Sale null and void only insofar as Lot No. 1083-C is concerned, but
valid for Lot No. 1083-A.
 Held that TCT No. 158443 (M) is valid for Lot No. 1083-A and should not be annulled for that
portion.
 Increased the amount to be paid by petitioners to respondents for the 4,500 sq. m. given to
Nieto to P 323,617.50.
Issues Raised by Petitioners on Appeal to the Supreme Court:
1. Lack of jurisdiction of the Court of Appeals regarding Lot 1083-A (claimed to be part of the North
Luzon Expressway).
2. Failure of respondents to pay the correct docket fees in the trial court.
3. Award of reliefs not specifically prayed for without requiring payment of correct fees.
4. Lack of jurisdiction of the trial court due to the involvement of an agricultural tenant (claiming
DARAB has jurisdiction).
5. Respondents' cause of action for rescission and annulment had prescribed under Articles 1389
and 1391 of the Civil Code.
Supreme Court Ruling and Key Concepts:
1. Jurisdiction (Docket Fees): The Court ruled that jurisdiction was validly acquired. They reiterated
the doctrine in Sun Insurance Office, Ltd., (SIOL) v. Asuncion, stating that jurisdiction vests upon
filing of the complaint and payment of the assessed docket fees. If the assessment is insufficient,
the clerk of court must make a deficiency assessment, and jurisdiction is not automatically lost.
 Petitioners' challenge to the assessment was untimely and based on a certification from a
different court.
 Quote: "Here it is beyond dispute that respondents paid the full amount of docket fees as
assessed by the Clerk of Court of the Regional Trial Court of Malolos, Bulacan, Branch 17, where
they filed the complaint. If petitioners believed that the assessment was incorrect, they should
have questioned it before the trial court."
1. Jurisdiction (Agricultural Tenant): The Court held that the trial court (regular judicial court) had
jurisdiction. The primary cause of action was for nullity of contract and annulment of titles
against the petitioners. Feliciano Nieto was impleaded as a necessary party, but the main dispute
did not center on agrarian relations. DARAB's jurisdiction is limited to cases involving the rights
and obligations of persons engaged in the management, cultivation, and use of agricultural
lands under the CARP Law.
 Quote: "However, the cause of action in this case is primarily against the petitioners, as
indispensable parties, for rescission of the Kasunduan and nullification of the Deed of Sale and
the TCTs issued because of them. Feliciano Nieto was impleaded merely as a necessary party,
stemming from whatever rights he may have acquired by virtue of the agreement between him
and the Riveras and the corresponding TCT issued. Hence, it is the regular judicial courts that
have jurisdiction over the case."
1. Validity of Deed of Absolute Sale (Lot 1083-A): The Court found the Court of Appeals' ruling on
Lot 1083-A erroneous. Both parties admitted Lot 1083-A had been expropriated before the Deed
of Absolute Sale. Furthermore, the case only involved Lot 1083-C and Lot 1083-A was not part of
the pleadings or evidence. Thus, the Court of Appeals lacked jurisdiction to rule on Lot 1083-A.
 Quote: "Noteworthy is that during the oral arguments before the Court of Appeals, both
petitioners and respondents admitted that Lot No. 1083-A had been expropriated by the
government long before the Deed of Absolute Sale was entered into... Thus, the Court of
Appeals had no jurisdiction to adjudicate on Lot 1083-A, as it was never touched upon in the
pleadings or made the subject of evidence at trial." Consequently, the Deed of Absolute Sale was
declared void in its entirety.
1. Prescription (Rescission vs. Annulment): The Court distinguished between rescission under
Article 1383 (subsidiary action for lesion) and rescission (resolution) of reciprocal obligations
under Article 1191 (principal action for breach). The Kasunduan is not a rescissible contract
under Article 1381, rendering Article 1383 and its requirements inapplicable.
 Quote: "Rescission of reciprocal obligations under Article 1191 of the New Civil Code should be
distinguished from rescission of contracts under Article 1383 of the same Code... Obviously, the
Kasunduan does not fall under any of those situations mentioned in Article 1381. Consequently,
Article 1383 is inapplicable."
1. Nature of the Kasunduan: The Court characterized the Kasunduan as a contract to sell, not a
contract of sale. In a contract to sell, ownership is retained by the vendor until full payment of
the purchase price, which is a positive suspensive condition. Failure to pay is not a breach of
an existing obligation but an event that prevents the vendor's obligation to convey title from
becoming effective.
 Quote: "A careful reading of the Kasunduan reveals that it is in the nature of a contract to sell, as
distinguished from a contract of sale... In a contract to sell, the payment of the purchase price is
a positive suspensive condition, the failure of which is not a breach, casual or serious, but a
situation that prevents the obligation of the vendor to convey title from acquiring an obligatory
force."
 Since petitioners failed to complete the payment of the second installment, the suspensive
condition was not fulfilled, rendering the contract to sell ineffective. The agreement could be set
aside due to the non-fulfillment of the condition, not due to a breach under Article 1191.
1. Prescription (Annulment): The Court found that the action for annulment of the Deed of
Absolute Sale had not prescribed. The prescriptive period for annulment based on fraud is four
years from the discovery of the fraud (Article 1391). The fraud was discovered in 1992, and the
complaint was filed in 1993, which is within the four-year period.
 Quote: "Coming now to the matter of prescription. Contrary to petitioners’ assertion, we find
that prescription has not yet set in. Article 1391 states that the action for annulment of void
contracts shall be brought within four years. This period shall begin from the time the fraud or
 mistake is discovered. Here, the fraud was discovered in 1992 and the complaint filed in 1993.
Thus, the case is well within the prescriptive period."
1. Damages: The Court affirmed the award of actual damages (P 323,617.50) but reduced the
amounts for moral damages (from P 200,000 to P 30,000), exemplary damages (from P 50,000 to
P 20,000), and attorney's fees (from P 50,000 to P 20,000). The reduction was based on the
principle that damages should not lead to unjust enrichment and the reduced amounts were
deemed sufficient under the circumstances.
 Quote: "While it has been sufficiently proven that the respondents are entitled to damages, the
actual amounts awarded by the lower court must be reduced because damages are not intended
for a litigant’s enrichment, at the expense of the petitioners... To avoid breaching the doctrine on
enrichment, award for damages other than actual should be reduced."
Final Judgment of the Supreme Court:
 Modified the Court of Appeals decision.
 Declared the Deed of Absolute Sale NULL and VOID in its entirety.
 Ordered petitioners to pay respondents P 323,617.50 as actual damages, P 30,000.00 as moral
damages, P 20,000.00 as exemplary damages, and P 20,000.00 as attorney's fees.
Key Takeaways:
 The case highlights the distinction between a contract of sale and a contract to sell, emphasizing
that in a contract to sell, full payment is a suspensive condition.
 Failure to fulfill a suspensive condition in a contract to sell prevents the vendor's obligation from
becoming binding, rather than constituting a breach of contract under Article 1191.
 Actions for annulment of contracts based on fraud have a prescriptive period of four years from
the discovery of the fraud.
 Rescission under Article 1191 (resolution for breach of reciprocal obligations) is distinct from
rescission under Article 1383 (subsidiary action for lesion in specific contracts listed in Article
1381).
 Regular courts, not DARAB, have jurisdiction over cases primarily involving contract nullity and
title annulment, even if an agricultural tenant is a necessary party.
 Jurisdiction over a case is generally acquired upon filing and payment of the assessed docket
fees; deficiency assessments are handled by the clerk of court and do not automatically divest
jurisdiction.
 Courts can only adjudicate on matters raised in the pleadings and supported by evidence at trial.
 Awards of damages should be reasonable and avoid unjust enrichment.
Briefing Document: MR Holdings, Ltd. vs. Sheriff Carlos P. Bajar, et al. (G.R. No. 138104. April 11, 2002)
Case Title: MR Holdings, Ltd., Petitioner, vs. Sheriff Carlos P. Bajar, Sheriff Ferdinand M. Jandusay,
Solidbank Corporation, and Marcopper Mining Corporation, Respondents. Supreme Court Division:
Third Division Date of Decision: April 11, 2002 Ponencia: SANDOVAL-GUTIERREZ, J.
I. Executive Summary:
This case revolves around a dispute over the assets of Marcopper Mining Corporation (Marcopper).
Solidbank Corporation (Solidbank), a judgment creditor of Marcopper, initiated execution proceedings
against Marcopper's properties. Petitioner MR Holdings, Ltd. (MR Holdings), claiming ownership of these
properties through assignment agreements, sought to prevent the auction sale by filing a third-party
claim and a reivindicatory action with a prayer for preliminary injunction. The lower courts (RTC and
Court of Appeals) denied MR Holdings' request for injunction, primarily on the grounds that MR
Holdings, as a foreign corporation, lacked the legal capacity to sue in the Philippines because it was
"doing business" without a license, and that the assignment agreements were potentially fraudulent.
The Supreme Court overturned the Court of Appeals' decision, finding that MR Holdings was not "doing
business" in the Philippines and thus had the legal capacity to sue. The Court also found no sufficient
evidence to support the claim that the assignment agreements were executed in fraud of creditors,
particularly Solidbank, especially considering the prior registered mortgage in favor of Asian
Development Bank (ADB), whose rights were assigned to MR Holdings. Furthermore, the Court rejected
the argument that MR Holdings, Placer Dome, Inc. (a shareholder of Marcopper and parent company of
MR Holdings), and Marcopper were a single entity, emphasizing the principle of separate corporate
personalities. The Court also clarified that MR Holdings' filing of a separate reivindicatory action as a
third-party claimant did not constitute forum shopping.
The Supreme Court ultimately granted the petition, setting aside the Court of Appeals' decision and
ordering the issuance of a preliminary injunction to restrain the sheriffs from implementing the writ of
execution against the subject properties, pending the resolution of the reivindicatory action in the RTC.
II. Factual Background:
 Asian Development Bank (ADB) and Marcopper entered into loan agreements in November
1992, totaling US$40,000,000.00 for a mining project.
 Placer Dome, Inc., a 40% owner of Marcopper, executed a "Support and Standby Credit
Agreement" to provide cash flow support for Marcopper's loan payments to ADB.
 Marcopper executed a "Deed of Real Estate and Chattel Mortgage" in favor of ADB in November
1992, covering substantially all of its properties in Marinduque. This mortgage was registered.
 Marcopper defaulted on its loan.
 Placer Dome, through its subsidiary MR Holdings, assumed Marcopper's obligation to ADB in the
amount of US$18,453,450.02.
 ADB assigned its rights, interests, and obligations under the loan and mortgage agreements to
MR Holdings via an "Assignment Agreement" on March 20, 1997.
 Marcopper executed a "Deed of Assignment" in favor of MR Holdings on December 8, 1997,
conveying its properties, equipment, and facilities.
 Meanwhile, Solidbank obtained a Partial Judgment against Marcopper on May 7, 1997, in a
separate collection case (Civil Case No. 96-80083).
 Solidbank obtained a writ of execution pending appeal and initiated levy and auction sale
proceedings against Marcopper's properties.
 MR Holdings filed an "Affidavit of Third-Party Claim" asserting ownership of the levied properties
based on the assignment agreements.
 Upon denial of the third-party claim by the Manila RTC, MR Holdings filed a complaint for
reivindication of properties with prayer for preliminary injunction in the RTC of Boac,
Marinduque (Civil Case No. 98-13).
 The RTC of Boac denied the preliminary injunction, citing MR Holdings' lack of legal capacity to
sue as a foreign corporation doing business without a license, the principle of non-interference
with a co-equal court's judgment, and questions surrounding the validity and timing of the
assignment agreements.
  The Court of Appeals affirmed the RTC's decision.
III. Main Themes and Key Ideas:
 Legal Capacity of Foreign Corporations to Sue: A central issue was whether MR Holdings, a
foreign corporation, had the legal standing to sue in Philippine courts.
o The Court reiterated established principles:
 Foreign corporations "doing business" without a license cannot sue.
 Foreign corporations not doing business in the Philippines can sue on "isolated
transactions" or causes of action independent of business transactions without a
license.
 Foreign corporations "doing business" with a license can sue on any transaction.
 The key is not the absence of a license, but "doing business" without
one.
 Quote: "These principles may be condensed in three statements, to wit: a) if a foreign
corporation does business in the Philippines without a license, it cannot sue before the Philippine
courts; b) if a foreign corporation is not doing business in the Philippines, it needs no license to
sue before Philippine courts on an isolated transaction or on a cause of action entirely
independent of any business transaction; and c) if a foreign corporation does business in the
Philippines with the required license, it can sue before Philippine courts on any transaction.
Apparently, it is not the absence of the prescribed license but the “doing (of) business” in the
Philippines without such license which debar the foreign corporation from access to our courts."
 Defining "Doing Business": The Court emphasized that "doing business" implies a "continuity of
commercial dealings and arrangements" and the "performance of acts or works or the exercise
of some of the functions normally incident to, and in progressive prosecution of, the purpose
and object for which the corporation was organized." Isolated acts, contracts, or transactions are
generally not considered "doing business."
 Quote: "The expression “doing business” should not be given such a strict and literal
construction as to make it apply to any corporate dealing whatever. At this early stage and with
petitioner’s acts or transactions limited to the assignment contracts, it cannot be said that it had
performed acts intended to continue the business for which it was organized."
 The Court rejected the Court of Appeals' finding that MR Holdings' "unmistakable intention" was
to continue Marcopper's business, deeming it based on conjecture and speculation.
 Quote: "Indeed, the Court of Appeals’ holding that petitioner was determined to be “doing
business” in the Philippines is based mainly on conjectures and speculation. In concluding that
the “unmistakable intention” of petitioner is to continue Marcopper’s business, the Court of
Appeals hangs on the wobbly premise that “there is no other way for petitioner to recover its
huge financial investments which it poured into Marcopper’s rehabilitation without it (petitioner)
continuing Marcopper’s business in the country.” This is a mere presumption."
 The Court viewed MR Holdings' assumption of Marcopper's debt to ADB and the subsequent
assignments as isolated acts stemming from Placer Dome's prior commitment to support
Marcopper.
 Fraudulent Conveyance: The Court addressed Solidbank's claim that the assignment agreements
were made in fraud of creditors under Article 1387 of the Civil Code, which presumes fraud in
alienations by onerous title when made by persons against whom a judgment or writ of
attachment has been issued.
 Quote: "Alienations by onerous title are also presumed fraudulent when made by persons
against whom some judgment has been rendered in any instance or some writ of attachment
has been issued."
 However, the Court stressed that this presumption is not conclusive and can be rebutted by
evidence of good faith and valuable consideration.
 Quote: "This presumption of fraud is not conclusive and may be rebutted by satisfactory and
convincing evidence. All that is necessary is to establish affirmatively that the conveyance is
made in good faith and for a sufficient and valuable consideration."
  The Court found that the assignment contracts were supported by valuable consideration (MR
Holdings assuming Marcopper's debt to ADB).
 Crucially, the Court considered the timeline of events, noting that the "Support and Standby
Credit Agreement" between ADB and Placer Dome predated Solidbank's collection case and
judgment. This indicated a prior commitment that led to the assignments.
 The existence of the prior, registered "Deed of Real Estate and Chattel Mortgage" in favor of
ADB, which was assigned to MR Holdings, was a significant factor in determining good faith. This
prior lien meant Solidbank's claim, as an unsecured judgment creditor, was subordinate to MR
Holdings' rights as the assignee of the preferred creditor (ADB).
 Piercing the Corporate Veil: The Court rejected Solidbank's argument to pierce the corporate
veil and treat MR Holdings, Placer Dome, and Marcopper as a single entity. While MR Holdings
was a wholly-owned subsidiary of Placer Dome, which was a minority stockholder of Marcopper,
the Court cited the principle that mere stock ownership is insufficient to disregard separate
corporate personalities.
 Quote: "The record is lacking in circumstances that would suggest that petitioner corporation,
Placer Dome and Marcopper are one and the same entity. While admittedly, petitioner is a
wholly-owned subsidiary of Placer Dome, which in turn, which, in turn, was then a minority
stockholder of Marcopper, however, the mere fact that a corporation owns all of the stocks of
another corporation, taken alone is not sufficient to justify their being treated as one entity."
 The Court referenced circumstances useful in determining if a subsidiary is a mere
instrumentality, but found that only stock ownership was present in this case, lacking other
factors like common directors acting without independence or the parent corporation using the
subsidiary's property as its own.
 Forum Shopping: The Court found that MR Holdings was not guilty of forum shopping. As a
third-party claimant, MR Holdings had the right to file a separate reivindicatory action under the
Rules of Civil Procedure.
 Quote: "But since petitioner has a separate personality, it has the right to pursue its third-party
claim by filing the independent reivindicatory action with the RTC of Boac, Marinduque, pursuant
to Rule 39, Section 16 of the 1997 Rules of Civil Procedures."
 A reivindicatory action by a third-party claimant is distinct from the case where execution was
issued, and thus there is no identity of parties, rights/causes of action, or reliefs sought to
constitute forum shopping.
 Propriety of Preliminary Injunction: The Court concluded that MR Holdings was entitled to a
preliminary injunction to prevent the sale of the properties.
 An execution can only be issued against a party to the case, not a third person.
 Levying on the property of a third person to satisfy the debt of another is improper.
 Allowing the execution to proceed would prejudice MR Holdings' rights and potentially render
the judgment in the reivindicatory action ineffectual.
 Injunction is a proper remedy to prevent a sheriff from selling the property of a third person.
 Issuing an injunction in a reivindicatory action filed by a third-party claimant does not constitute
improper interference with a co-equal court's judgment.
 Quote: "Petitioner’s right to stop the further execution of the properties covered by the
assignment contracts is clear under the facts so far established. An execution can be issued only
against a party and not against one who did not have his day in court. The duty of the sheriff is
to levy the property of the judgment debtor not that of a third person. For, as the saying goes,
one man’s goods shall not be sold for another man’s debts."
IV. Most Important Ideas or Facts:
 The distinction between "doing business" and engaging in isolated transactions for foreign
corporations, and its impact on legal capacity to sue.
 The presumption of fraudulent conveyance under Article 1387 is rebuttable, and evidence of
good faith and valuable consideration can overcome it.
  The significance of a prior registered mortgage and the principle of preference of credit – a
registered mortgage lien takes precedence over a subsequent unsecured judgment credit.
 The strict application of the principle of separate corporate personalities, requiring more than
just stock ownership to pierce the corporate veil.
 The right of a third-party claimant to file a separate reivindicatory action to protect their
property from execution, and that this does not constitute forum shopping.
 The propriety of issuing a preliminary injunction in a reivindicatory action filed by a third-party
claimant to prevent wrongful execution.
V. Conclusion:
The Supreme Court's decision in this case clarifies important legal principles concerning the rights of
foreign corporations, the nuances of "doing business," the application of fraudulent conveyance
presumptions, the sanctity of separate corporate personalities, and the remedies available to third-party
claimants in execution proceedings. By carefully examining the timeline of events and the nature of the
transactions, the Court determined that MR Holdings was not "doing business" and that the
assignment agreements, particularly in light of the prior registered mortgage, were not necessarily
fraudulent conveyances aimed at defrauding Solidbank. The decision underscores the importance of
distinguishing between a judgment debtor's property and that of a third party, and the legal recourse
available to the latter to protect their interests.
Briefing Document: G.R. No. L-28774
Date: 28 February 1980
Case: Development Bank of the Philippines (Petitioner) vs. The Court of Appeals, Hon. Hermogenes
Caluag, and Spouses Honesto G. Nicandro and Elisa F. Nicandro (Respondents)
Court: Supreme Court of the Philippines, Second Division
Justice: Antonio, J.
Summary:
This case involves a dispute over the ownership of two lots (Lots 2 and 4) in the Diliman Estate
Subdivision, Quezon City. The Development Bank of the Philippines (DBP) claimed ownership based on
a sales agreement with the People's Homesite and Housing Corporation (PHHC) entered into on October
20, 1955, as part of a housing project for DBP employees. The respondent spouses, Honesto G.
Nicandro and Elisa F. Nicandro (the Nicandros), also claimed ownership based on deeds of sale
executed in their favor by the PHHC on November 7, 1958.
The core issues revolved around the validity of the DBP's initial purchase under Republic Act No. 85 (the
DBP Charter), the effect of a subsequent amendment to the DBP Charter (Republic Act No. 3147), and
the legal effect of the registration of the respective sales agreements under the Torrens system. The
Supreme Court ultimately reversed the decisions of the trial court and the Court of Appeals, which had
favored the Nicandros, and upheld the DBP's claim to the lots.
Main Themes and Important Ideas:
1. Corporate Powers and Ultra Vires Acts: A significant issue raised was whether the DBP's
acquisition of land for a housing project for its employees was within its corporate powers under
Section 13 of Republic Act No. 85. This section prohibited officers or employees from borrowing
money from the bank or being obligors for borrowed money. The Secretary of Justice initially
opined that the housing project was ultra vires (beyond the legal power or authority of the
corporation) and violated Section 13. This highlights the limitations placed on government
corporations and the legal scrutiny they faced regarding their activities.
2. Effect of Curative Statutes: The enactment of Republic Act No. 3147 on June 17, 1961, amended
Section 13 of Republic Act No. 85, specifically allowing the DBP to provide for housing for its
officials and employees. The Court examined whether this amendment had retroactive effect
and could validate the DBP's earlier purchase. The principle of "curative statutes" is discussed:
 Definition: "retrospective legislation which reach back on past events to correct errors or
irregularities and to render valid and effective attempted acts which would be otherwise
ineffective for the purpose the parties intended."
 Purpose: "to enable persons to carry into effect that which they have designed and intended,
but which has failed of expected legal consequences by reason of some statutory disability or
irregularity in their action."
 Limitation: Curative statutes may not be given retroactive effect if "vested rights are impaired
thereby."
1. Vested Rights: The Court had to determine if the Nicandro spouses had "vested rights" in the
property that would be impaired by the retroactive application of Republic Act No. 3147.
 Definition of Vested Right: "one which is absolute, complete, and unconditional, to the exercise
of which no obstacle exists, and which is immediate and perfect in itself and not dependent
upon a contingency."
 Requirement for a Vested Right: "To be vested in its accurate legal sense, a right must be
complete and consummated, and one of which the person to whom it belongs cannot be
divested without his consent."
1. Registration of Land and the Torrens System: A crucial aspect of the case is the operation of the
Torrens system of land registration in resolving competing claims.
 Operative Act: Under the Torrens system, "Registration is the means whereby the property is
made subject to the terms of the instrument. It is the operative act that gives validity to the
transfer or creates a lien upon the land."
  Prior Registration: The Court reiterated the principle that prior valid registration binds third
parties. In this case, the annotation of the DBP's sales agreement on the original certificate of
title (TCT No. 1356) on January 15, 1959, was deemed a prior valid registration compared to the
Nicandros' adverse claim annotated on February 17, 1959.
 Adverse Claims (Section 110 of Act 496): The Court clarified that the remedy of filing an adverse
claim is available "if no other provision is made in this Act for registering the same." Since a
contract of sale can be registered under Section 57 of Act 496, the Nicandros' reliance on an
adverse claim was considered ineffective for protecting their right based on a perfected sale.
1. Standing to Sue (Locus Standi): The DBP argued that the Nicandro spouses lacked the legal
personality to question the legality of the sale between PHHC and DBP.
 General Rule: The action for annulment of contracts can only be maintained by parties "bound
either principally or subsidiarily by virtue thereof."
 Exception: This Court recognized an exception: "a person who is not obliged principally or
subsidiarily in a contract may exercise an action for nullity of the contract if he is prejudiced in
his rights with respect to one of the contracting parties, and can show the detriment which could
positively result to him from the contract in which he had no intervention." The Court applied
this exception, finding that the Nicandros, having paid for the lots, were prejudiced.
Most Important Facts:
 March 18, 1955: DBP appropriates funds to purchase land for an employee housing project.
 October 20, 1955: DBP purchases 159 lots (including Lots 2 and 4) from PHHC via a sales
agreement, making a down payment.
 December 6, 1955: DBP Auditor expresses doubts about the legality of the acquisition under
Section 13 of Republic Act No. 85.
 July 30, 1957: The question of the legality of the acquisition is referred to the Secretary of
Justice.
 September 29, 1958: PHHC requests DBP to exclude Lots 2 and 4 from the sale, claiming
inadvertent inclusion.
 October 14, 1958: Acting Manager of PHHC approves the order of payment for Lots 2 and 4 in
favor of the Nicandros, who make a down payment.
 November 3, 1958: The Nicandros pay the full purchase price for Lots 2 and 4 to the PHHC.
 November 7, 1958: Deeds of sale for Lots 2 and 4 are prepared in favor of the Nicandros but the
originals are retained by PHHC. Evidence suggests the Nicandros knew of the prior sale to DBP at
this time.
 November 13, 1958: A PHHC official recommends suspending the execution of final deeds of
sale to the Nicandros until the arrangement with DBP employees is determined, noting the prior
sale to DBP.
 January 15, 1959: DBP's sales agreement is presented for registration and annotated on the
original title (TCT No. 1356).
 January 20, 1959: Secretary of Justice issues Opinion No. 16, s. of 1959, stating the DBP's
housing project is ultra vires and violates Section 13 of Republic Act No. 85.
 February 16, 1959: Honesto G. Nicandro attempts to register copies of the deeds of sale but
registration is denied.
 February 17, 1959: The Nicandros file affidavits of adverse claims on Lots 2 and 4, which are
registered.
 March 6, 1959: DBP requests annotation of its sales agreement on the new title (TCT No. 36533),
which is done.
 April 29, 1961: The Supreme Court rules in Register of Deeds of Quezon City v. Nicandro, et al. (L-
16448) that the DBP's annotation on TCT No. 1356 on January 15, 1959, constituted sufficient
registration to bind third parties and orders the Register of Deeds to issue title to DBP.
 March 14, 1960: Secretary of Justice issues Opinion No. 40, holding the deed of sale covering the
159 lots to DBP is illegal and void.
  June 17, 1961: Republic Act No. 3147 is enacted, amending Republic Act No. 85 and authorizing
the DBP to provide housing for its employees.
 November 10, 1961: The Nicandro spouses file the current case to rescind the sale to DBP.
 February 29, 1968: The Court of Appeals affirms the trial court's decision favoring the Nicandros.
 February 28, 1980: The Supreme Court reverses the Court of Appeals, favoring the DBP.
Quotes from Original Source:
 On the purpose of the DBP's acquisition: "It was contemplated that the Bank itself will build
houses on the land to be acquired and these will then be sold to employees who do not yet own
homes and who shall pay for them in monthly installments over a period of twenty (20) years."
 On the DBP Auditor's initial concern: "...expressed his doubts as to whether the DBP could
acquire the property in question for the intended purpose of a housing project in the light of the
then Section 13 of Republic Act No. 85..."
 On the Secretary of Justice's opinion regarding the legality: "Premises considered, it is our
opinion that the RFC (DBP) has no express or incidental power to undertake the housing project
under consideration and that the same is incongruous with, if not a clear violation of, the
prohibition contained in Section 13 of Republic Act No. 85."
 On the knowledge of the Nicandros regarding the prior sale: "Cariaga informed them (Gray and
Nicandro) forthwith that both lots were part of those already sold to the DBP." and also the
testimony of Atty. Roman Cariaga: "I cannot remember his exact words but in substance I think
he said that if the deeds of sale were executed and released to him it would give him more
bargaining power with the DBP."
 On the recommendation against executing the final deeds of sale to the Nicandros: "However, as
to the sale of Lots 2 and 4, Block WT-21, it is recommended that the execution of the final deeds
of sale be suspended until after the aforestated arrangement shall have been determined..."
 On the Supreme Court's ruling in Register of Deeds of Quezon City v. Nicandro, et al.: "...the
annotation of the deed of sale in favor of the DBP on TCT No. 1356 on January 15, 1959
constituted sufficient registration to bind third parties..." and "...the certificate of title on the two
lots in controversy should be issued in favor of the first registrant, the DBP."
 On the definition of curative statutes: "...forms of 'retrospective legislation which reach back on
past events to correct errors or irregularities and to render valid and effective attempted acts
which would be otherwise ineffective for the purpose the parties intended.'"
 On the definition of a vested right: "A 'vested right is one which is absolute, complete, and
unconditional, to the exercise of which no obstacle exists, and which is immediate and perfect in
itself and not dependent upon a contingency.'" and "...a right must be complete and
consummated, and one of which the person to whom it belongs cannot be divested without his
consent."
 On the operative act of registration: "Registration is the means whereby the property is made
subject to the terms of the instrument. It is the operative act that gives validity to the transfer
or creates a lien upon the land."
Conclusion:
The Supreme Court found that while the initial legality of the DBP's purchase was questionable under
the original Republic Act No. 85, the subsequent enactment of Republic Act No. 3147, which authorized
such housing projects, served as a curative statute. Crucially, the Court determined that the Nicandro
spouses did not have vested rights in the property at the time of the amendment because the DBP's
prior registration of its sales agreement under the Torrens system was the operative act that
established a superior claim. Despite the Nicandros having paid in full and having deeds of sale prepared,
their inability to register their claim effectively (and their awareness of the DBP's prior purchase) meant
they did not possess the "absolute, complete, and unconditional" right required for a vested right. The
Court therefore ordered the issuance of title to the DBP, while also requiring the DBP to reimburse the
Nicandros for their payments with interest.
Briefing Document: G.R. No. 132415
Date: January 30, 2002 Case Name: Miguel Katipunan, et al. v. Braulio Katipunan, Jr. Court: Supreme
Court of the Philippines, Third Division Justices: Sandoval-Gutierrez, J. (Ponente); Melo, Chairman; Vitug,
Panganiban, Carpio, JJ. Nature of Action: Petition for review on certiorari assailing a Court of Appeals
Decision that set aside a Regional Trial Court Decision in a case for annulment of a Deed of Absolute Sale.
Summary of the Case:
This case involves a dispute over a property owned by Braulio Katipunan, Jr. (respondent), who has
limited intellectual capacity. He alleged that his brother Miguel Katipunan, Inocencio Valdez, Edgardo
Balguma, and Leopoldo Balguma, Jr. (petitioners) tricked him into signing a Deed of Absolute Sale for his
property, which he believed to be an employment contract to work abroad. He claimed he did not
understand the document, did not receive the full consideration, and that his brother Miguel profited
from the transaction. The Regional Trial Court initially dismissed the complaint, but the Court of Appeals
reversed this decision, annulling the sale and ordering the return of the property and collected rentals to
Braulio. The petitioners appealed this decision to the Supreme Court.
Main Themes and Most Important Ideas/Facts:
1. Vitiated Consent due to Mental Incapacity and Fraud/Undue Influence: The central theme of
the case revolves around whether Braulio Katipunan, Jr.'s consent to the Deed of Absolute Sale
was valid given his documented low IQ and limited comprehension.
 Key Fact: Medical evidence, specifically the testimony of Dr. Ana Marie Revilla, a psychiatrist,
established that Braulio had a very low IQ, a mental age of a six-year-old child, was illiterate, and
slow in comprehension.
 Legal Principle Applied: The Court of Appeals, affirmed by the Supreme Court, relied heavily on
Article 1332 of the Civil Code, which states: "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." They also considered Article 1330 and 1390 of the Civil Code regarding vitiated consent
and voidable contracts.
 Important Finding: The Supreme Court agreed with the Court of Appeals that Braulio's lack of
education and mental affliction rendered him "incapable of giving rational consent" and made
him "most vulnerable to the deceitful cajoling and intimidation of petitioners."
 Quote: The Court of Appeals, citing Dr. Revilla's testimony, stated: "It is a proven fact that
Braulio reached only Grade III due to his very low IQ; that he is illiterate; and that he can not
read and is slow in comprehension. His mental age is only that of a six-year old child."
 Quote: Braulio's testimony regarding signing the document: "I do not know [what kind of
document I was signing]." and "Nobody informed me what document I was signing." He also
stated that his brother Miguel and Sencio asked him to sign and that "According to them, if I will
not sign, something will happen."
1. Failure to Explain the Contract to an Incapacitated Party: A crucial element in the finding of
vitiated consent was the lack of evidence that the terms of the English-language Deed of
Absolute Sale were explained to Braulio in a language he understood.
 Key Fact: The contracts (deeds of mortgage and sale) were in English, and there was no showing
that they were read, explained, or translated to Braulio, who was illiterate and had limited
comprehension.
 Legal Principle Applied: Article 1332 of the Civil Code placed the burden on the petitioners to
show that the terms were fully explained to Braulio. They failed to do so.
 Quote: The Court of Appeals noted: "There is no showing that the contracts were read and/or
explained to Braulio nor translated in a language he understood."
1. Lack of Receipt of the Full Consideration: Evidence suggested that Braulio did not receive the
stated purchase price of P187,000.00.
 Key Fact: Braulio testified that he received only "small denominations, 'barya'" (loose change)
from his brother Miguel, amounting to maybe twenty pesos or ten pesos at a time.
 Key Fact: Miguel Katipunan did not refute Braulio's claim that he only gave him small amounts.
 Key Fact: Atty. Balguma admitted that it was Miguel who received the money from him.
  Important Finding: The Court concluded that Miguel profited from the transaction and that the
"loose change or 'barya-barya'" received by Braulio was "grossly disproportionate to the value of
his property."
 Quote: Braulio's testimony regarding receiving money: "Yes, he would give me small
denominations, 'barya'." and "May be twenty pesos, may be ten pesos, but they are all loose
change." He also stated: "After signing that document, Atty. Balguma gave me several loose
change 'barya', no paper bills. A just handful of coins."
1. Conspiracy and Exploitation of Vulnerability: The Court found that the petitioners, particularly
Miguel and Atty. Balguma, likely conspired to take advantage of Braulio's ignorance and mental
weakness.
 Key Fact: The scheme allegedly involved enticing Braulio to go abroad, and documents related to
this plan were purportedly falsified and used to induce him to sign the Deed of Sale.
 Important Finding: The Court agreed with the Court of Appeals' conclusion that it was "most
probable that it was Miguel who wanted to go abroad and needed the money for it."
 Legal Principle Applied: The Court cited Section 2, Rule 92 of the Rules of Court, which defines
"incompetent" persons who are an "easy prey for deceit and exploitation."
 Legal Principle Applied: Article 24 of the Civil Code, which enjoins courts to protect parties to a
contract who are at a disadvantage due to ignorance, mental weakness, or other handicaps.
1. Voidable Contract and Restitution: Due to the vitiated consent, the Deed of Absolute Sale was
deemed voidable. The annulment of the contract necessitates the restoration of the parties to
their original positions.
 Legal Principle Applied: Article 1390 of the Civil Code states that contracts where a party is
incapable of giving consent or where consent is vitiated are voidable.
 Legal Principle Applied: Article 1398 of the Civil Code dictates that annulment restores parties
to the status quo ante, while Article 1399 provides an exception for incapacitated persons, who
are not obliged to make restitution unless they benefited from what they received.
 Outcome: The Supreme Court affirmed the annulment of the Deed of Sale, the cancellation of
the new title, and the restoration of Braulio's original title. It also modified the Court of Appeals'
decision by explicitly ordering the Balguma brothers to return all collected rentals from January
1986, with legal interest.
Conclusion:
The Supreme Court upheld the Court of Appeals' decision, finding that Braulio Katipunan, Jr.'s lack of
mental capacity and the circumstances surrounding the signing of the Deed of Absolute Sale
demonstrated that his consent was vitiated by undue influence and fraud. The petitioners failed to prove
that the terms of the contract were explained to him, and evidence indicated that he did not receive the
full consideration. The Court emphasized its duty to protect vulnerable individuals who are susceptible
to exploitation, as mandated by the Civil Code. The annulment of the sale and the ordered restitution of
the property and its fruits underscore the invalidity of the contract entered into under such
circumstances.
Briefing Document: G.R. No. L-39119
Case Title: Feliciana Bumanlag and Flaviano Bumanlag, petitioners, vs. Hon. Anacleto B. Alzate, as
Presiding Judge, Branch II, Court of first Instance of Tarlac, Tomasa Bumanlag, and Silvino Espugado,
respondents.
Court: Supreme Court of the Philippines
Division: Second Division
Date of Decision: September 26, 1986
Presiding Justice: PARAS, J.
The case involves petitioners Feliciana Bumanlag and Flaviano Bumanlag and private respondents
Tomasa Bumanlag and Silvino Espugado, among others1.... The case was brought before the Supreme
Court by certiorari, assailing an Order of the Court of First Instance of Tarlac in Civil Case No. 49122.
The petitioners initially sued the private respondents for partition of lots that both parties had
inherited from their deceased father2.
The respondents moved to dismiss the partition case. Their ground for dismissal was that a final and
executory judgment had previously been rendered based on a compromise agreement. This prior case
involved the same parties, the same subject matter, and the same causes of action2. They argued that
the doctrine of res judicata clearly barred the new partition case2.
The petitioners countered that the earlier judgment was void. Their contention was based on the
argument that the compromise agreement underlying that judgment had been signed on their behalf by
their lawyer who had not been authorised by them to enter into such an agreement2. They argued that
if the compromise agreement was void, then there could be no res judicata2.
The principal issue before the Supreme Court was the validity of a compromise agreement signed by a
lawyer on behalf of a party but without authorisation from that party1.
The Supreme Court held that a compromise agreement signed by a lawyer without authorization is not
void but merely unenforceable1. Such an agreement can be ratified by the party1.
Applying this principle to the facts, the Court found that the petitioners had ratified the act of their
attorney. This ratification was shown by their silence for sixteen years and by overt acts of exchanging
or bartering some of the lots awarded to them with some of the lots of the private respondents3.
Since the compromise agreement was ratified (and therefore valid), the Court concluded that the
requisites of res judicata were present, and the principle applied to the instant case3.
The Court also addressed an argument that the partition in the first case was not done "with metes and
bounds," stating that there was a physical and actual partition, not merely a metaphysical one3.
Ultimately, the Supreme Court dismissed the petition and affirmed the assailed Order of the Court of
First Instance4.

Core Issue: The validity of a compromise agreement signed by a lawyer without explicit authorization
from their client and its implications for the doctrine of res judicata.
Main Themes and Key Ideas:
1. Nature of a Compromise Agreement Signed Without Authorization: The central finding of the
court is that a compromise agreement entered into by a lawyer on behalf of a client without
express authorization is not void but merely unenforceable. This is a crucial distinction, as it
means the agreement can be validated through subsequent actions. The court cites Article 1403
(no. 1 and 1st sentence) of the Civil Code in support of this principle.
 Quote: "We hold that such a compromise agreement is merely unenforceable (not void) and may
therefore be ratified by said party expressly or implicity."
1. Ratification of an Unenforceable Agreement: The court emphasizes that an unenforceable
agreement can be ratified by the affected party. This ratification can be express (explicitly stating
approval) or implicit (through actions or inaction that demonstrate acceptance).
 Quote: "We hold that such a compromise agreement is merely unenforceable (not void) and may
therefore be ratified by said party expressly or implicity."
 1. Application of Res Judicata: The case hinges on the application of the doctrine of res judicata.
This doctrine prevents the relitigation of issues that have already been finally decided by a
competent court in a previous case between the same parties involving the same subject matter
and causes of action. The respondents argued that a prior final and executory judgment based
on the disputed compromise agreement barred the petitioners' current case for partition.
2. Petitioners' Argument Against Res Judicata: The petitioners contended that the prior judgment
was void because the underlying compromise agreement was signed without their
authorization. They argued that a void agreement could not serve as the basis for res judicata.
3. Court's Finding of Ratification and Application of Res Judicata: The court rejected the
petitioners' argument. It found that the petitioners had indeed ratified the actions of their
attorney. The court pointed to two specific actions as evidence of implicit ratification:
 Silence for Sixteen Years: The petitioners' failure to challenge the compromise agreement or the
subsequent judgment for a significant period of sixteen years indicated their acceptance.
 Overt Acts of Exchange: The petitioners actively participated in the outcome of the partition
outlined in the compromise agreement by exchanging or bartering some of the lots awarded to
them with lots belonging to the private respondents. This demonstrated their engagement with
and acceptance of the terms of the original settlement.
 Quote: "The petitioners by their silence for sixteen (16) years and by their overt acts of
exchanging or bartering some of the lots awarded to them with some of the lots of the private
respondents have doubtless ratified the act of their attorney; ergo, the requisites of res judicata
being all present, the principle applies to the instant case."
o The elements of res judicata are: (1) the judgment sought to bar the new action must be final;
(2) the decision must have been rendered by a court having jurisdiction over the subject matter
and the parties; (3) the disposition of the case must be a judgment on the merits; and (4) there
must be as between the first and second action, identity of parties, subject matter, and causes of
action

1. Rejection of the "Metaphysical Partition" Argument: The petitioners also attempted to argue
that the partition in the first case was not a physical, concrete division but merely a
"metaphysical one." The court dismissed this argument as "bankrupt," stating that there was a
"physical and actual partition."
 Quote: "One final point. The argument that the partition in the first case was not one with metes
and bounds is bankrupt. There was such a physical and actual partition, not merely a
metaphysical one."

Conclusion:
The Supreme Court dismissed the petitioners' appeal and affirmed the Order of the Court of First
Instance of Tarlac. The court's decision is based on the principle that a compromise agreement signed
by a lawyer without authorization is not void but merely unenforceable. Crucially, the court found that
the petitioners had implicitly ratified their attorney's actions through their prolonged silence and overt
acts of exchanging property based on the terms of the agreement. This ratification validated the
compromise agreement and the subsequent judgment, thereby activating the doctrine of res judicata
and barring the petitioners' current case for partition.
Briefing Document: G.R. No. 74623 - Bisaya Land Transportation Co., Inc. vs. Marciano C. Sanchez
Date: 24 May 2024
Subject: Review of Supreme Court Decision in G.R. No. 74623 regarding a contract of agency dispute.
Sources: Excerpts from "G.R. No. 74623", Republic of the Philippines Supreme Court Manila, SECOND
DIVISION, August 31, 1987.
This briefing document summarizes the key themes, facts, and legal arguments presented in the
provided excerpts of the Supreme Court decision in G.R. No. 74623, concerning a dispute between
Bisaya Land Transportation Company, Inc. (BISTRANCO) and their shipping agent, Marciano C. Sanchez.
1. Case Overview:
The case is a petition for certiorari filed by BISTRANCO and individuals Antonio V. Cuenco and Benjamin
G. Roa, seeking to overturn the decision of the Intermediate Appellate Court, which affirmed a lower
court ruling in favour of Marciano C. Sanchez. The original case was a suit for Specific Performance with
Preliminary Injunction and Damages initiated by Sanchez against BISTRANCO. The core of the dispute
revolves around the validity and enforceability of two contracts of agency between BISTRANCO and
Sanchez, and whether BISTRANCO's actions constituted a breach of these contracts.
2. Key Parties and Background:
 Petitioner: Bisaya Land Transportation Co., Inc. (BISTRANCO), a shipping business, and
individuals Antonio V. Cuenco and Benjamin G. Roa.
 Respondent: Marciano C. Sanchez and the Intermediate Appellate Court.
 Background: Sanchez, a former BISTRANCO employee, was appointed as BISTRANCO's shipping
agent in Butuan City in May 1975. Formal contracts were executed in July 1976 (Contract of
Agency) and July 1976 (Supplemental Shipping Agency Contract). Sanchez made significant
investments in infrastructure and personnel to support the agency, leading to a substantial
increase in BISTRANCO's business in Butuan City. In December 1979, BISTRANCO informed
Sanchez it would open its own branch office in Butuan City, effectively intending to terminate his
agency. Sanchez viewed this as a repudiation of their contracts and filed suit.
3. Main Themes and Issues Raised:
The case hinges on several key legal issues and factual determinations:
 Validity of Contracts Entered into by a Receiver Without Court Approval: A central question is
whether contracts entered into by a court-appointed receiver (Atty. Adolfo V. Amor) without the
explicit approval of the receivership court are valid and binding.
 Status of the Contracts (Void vs. Unenforceable): Depending on the validity issue, the court had
to determine whether the contracts were void ab initio or merely unenforceable and potentially
subject to ratification.
 Ratification of Unenforceable Contracts: If the contracts were deemed unenforceable due to
lack of court approval, the court examined whether BISTRANCO's subsequent actions
constituted ratification.
 Breach of Contract: The court assessed whether BISTRANCO's decision to open a branch office in
Butuan City violated the terms and spirit of the agency contracts with Sanchez.
 Effect of Subsequent Agreements (Novation): The court considered whether later agreements
(Memorandum of Agreement and Working Agreement) between the parties constituted a
novation, extinguishing the original agency contracts.
 Justification for Damages: The court evaluated whether the award of damages to Sanchez for
unearned commissions and other losses was justified.
4. Most Important Ideas and Facts:
 Contracts Entered into by Receiver Lack Initial Authority Without Court Approval: The Supreme
Court reiterates the principle that a court-appointed receiver's actions are subject to court
control. While a receiver can manage property, entering into significant contracts requires court
authorization. The excerpt states: "a court-appointed receiver cannot validly enter into a
contract without the approval of the court."
  Unenforceable Contracts, Not Void: The court determined that the contracts, while lacking
court approval, were not void ab initio under Article 1409(l) of the Civil Code. Their cause,
object, and purpose (creating an agency for BISTRANCO) were not inherently contrary to law or
public policy. Instead, they were classified as unenforceable under Article 1403(l) because the
receiver acted beyond his powers without the necessary court authorization. The excerpt
explains: "Consequently, the questioned Contracts can rightfully be classified as unenforceable
for having been entered into by one who had acted beyond his powers, due to Receiver
Amor's failure to secure the court's approval of said Contracts."
 BISTRANCO Ratified the Unenforceable Contracts: The Court found compelling evidence that
BISTRANCO effectively ratified the contracts. This was based on:
o Letters from BISTRANCO's Executive Vice-President (Benjamin G. Roa) sent after Sanchez
filed his complaint, which referred to and sought to enforce provisions of the agency
contracts (e.g., commission rates, bonding requirements). The court cited these letters
as evidence that BISTRANCO "in effect recognized and gave efficacy to the Contracts in
question."
o Acknowledgement of the contracts by a subsequent receiver (Atty. Fulveo Pelaez)
through BISTRANCO's shipping manager.
o BISTRANCO receiving material benefits from Sanchez's performance under the contracts.
The court cited the increase in freight earnings in Butuan City as evidence of this benefit.
 Opening a Branch Office Violated the Contracts (Good Faith and Implied Prohibition): Although
the contracts did not explicitly prohibit BISTRANCO from opening a branch, the court found that
doing so constituted a violation. This was based on the provision in the Supplemental Shipping
Agency Contract where BISTRANCO agreed "not to appoint or employ another agent in Butuan
City or in any of the City's neighboring towns without the written consent of the AGENT first
obtained." The court reasoned that the purpose of this clause was to protect Sanchez from
competition and allow him to recover his significant investments. Opening a branch office by
BISTRANCO itself had a more detrimental effect than appointing another agent. The court
invoked Article 1315 of the Civil Code, stating that contracts imply not only express stipulations
but also consequences in keeping with good faith and usage.
 Agency Was Coupled with an Interest and Not Revocable: The court determined that the
agency was not simply a revocable mandate but was a means for Sanchez to fulfill his obligations
(investments in infrastructure and personnel) and recover his costs and expected profits.
Therefore, under Article 1927 of the Civil Code, the agency could not be unilaterally revoked by
BISTRANCO, especially since a bilateral contract (the agency agreement with its reciprocal
obligations) depended upon it. The excerpt states: "An agency cannot be revoked if a bilateral
contract depends upon it, or if it is the means of fulfilling an obligation already contracted."
 Subsequent Agreements Did Not Constitute Novation: The court rejected BISTRANCO's
argument that later agreements (Exhibits "S" and "U") novated the original contracts. The court
found that these agreements primarily modified specific terms (like commission rates) for a
limited period, intended as temporary concessions to help the company under receivership.
They did not fundamentally change the core object or essence of the agency relationship, and
the original contracts remained in effect after the expiration of the temporary modifications. The
court reiterated that novation requires explicit statement or manifest incompatibility, which was
not present.
 Award for Unearned Commissions and Damages Justified: Given the court's finding that
BISTRANCO violated the valid and binding contracts, the award of P588,000.00 for unearned
commissions and damages was deemed justified. This was based on Sanchez's proven average
monthly earnings prior to BISTRANCO's breach.
5. Conclusion of the Court:
The Supreme Court denied BISTRANCO's petition, affirming the decision of the lower courts. The court
found that the contracts of agency were valid and binding, having been ratified by BISTRANCO despite
their initial unenforceability due to the receiver's lack of court approval. BISTRANCO's action in opening a
branch office was found to be a violation of these contracts, both in terms of the specific clause
regarding appointing other agents and the broader principle of good faith, and the agency was not
unilaterally revocable due to being coupled with an interest. Consequently, the award of damages to
Sanchez was upheld.
Briefing Document: G.R. No. L-45142 - Espina v. Abaya
Date: October 26, 2023
Subject: Review of Supreme Court ruling in G.R. No. L-45142 concerning an action for partition among
co-heirs.
Source: Excerpts from G.R. No. L-45142, Supreme Court, Manila, First Division, April 26, 1991.
Key Personnel:
 Petitioners: Simprosa Vda. de Espina, Recaredo Espina, Timoteo Espina, Celia Espina, Gaudiosa
Espina, and Necifora Espina.
 Private Respondents: Sofia Espina and Jose Espina.
 Respondent Judge: Hon. Otilio Abaya, Court of First Instance of Surigao del Sur, Branch II.
Case Background:
The case involves a petition for certiorari seeking the nullification of orders issued by Judge Otilio Abaya
in Civil Case No. L-108, an action for partition of the estate of the deceased Marcos Espina. Marcos
Espina died on February 14, 1953, survived by his spouse Simprosa Vda. de Espina and their seven
children. The estate consisted of four parcels of land.
Petitioners filed an action for partition on August 23, 1973, alleging that the properties were owned in
common by the heirs and demanding their partition. They claimed that Parcel No. 1 was exclusive
property of the deceased, to be divided into eight equal parts, while the other three parcels were
conjugal properties, with half belonging to Simprosa and the other half to be divided equally among the
eight heirs. They also alleged that title to portions of Parcel No. 1 had been acquired by Sofia Espina and
Jose Espina as trustees for the heirs.
Private respondents, Sofia and Jose Espina, argued that a temporary verbal division and assignment of
shares had been made by Marcos Espina and Simprosa in April 1951, which was finalised by the heirs
after Marcos' death in April 1952. They claimed that they had taken possession of their respective
shares, including portions ceded by Simprosa in exchange for quarterly payments of P50.00 until her
death. Based on this alleged agreement, Sofia and Jose obtained Original Certificates of Title in their
names for portions of Parcel No. 1, claiming exclusive ownership.
Trial Court Proceedings and Dismissal:
Private respondents filed a motion to dismiss the complaint based on three grounds:
1. Lack of jurisdiction due to non-compliance with the condition sine qua non concerning suits
between family members.
2. Cause of action is barred by the statute of limitations.
3. Petitioners lack legal capacity to sue.
The trial court granted the motion and dismissed the complaint on May 9, 1975. Petitioners' subsequent
motions for reconsideration were denied. Their notice of appeal and motion for extension of time to file
the Record on Appeal were also denied by the respondent judge on March 15, 1976, on the ground that
the notice of appeal was filed out of time.
Issues Raised by Petitioners in the Supreme Court:
Petitioners raised four assignment of errors:
1. Whether an action for partition among co-heirs prescribes.
2. Whether an oral partition among co-heirs is valid.
3. Whether a hearing on a motion for reconsideration is indispensable, the lack of which
constitutes a denial of due process.
4. Whether the second motion for reconsideration was pro forma.
Main Themes and Important Ideas/Facts:
1. Prescriptibility of Action for Partition: The Supreme Court reiterates the established principle
that an action for partition is generally imprescriptible. However, this changes when one or more
co-heirs claim exclusive ownership and possess the property as such. In such a scenario, the
action transforms from one of partition to one of ownership, and prescription can apply. The
 Court quotes: "We already ruled... that an action for partition is imprescriptible. However, an
action for partition among co-heirs ceases to be such, and becomes one for title where the
defendants allege exclusive ownership."
 Application to the Case: The Court found that the imprescriptibility of the action for partition
could not be invoked because Sofia and Jose Espina possessed the property as exclusive owners
for 21 years, which is sufficient for acquisition by prescription. "In the case at bar, the
imprescriptibility of the action for partition cannot be invoked because two of the co-heirs,
namely private respondents Sora and Jose Espina possessed the property as exclusive owners
and their possession for a period of twenty one (21) years is sufficient to acquire it by
prescription."
1. Validity of Oral Partition: The Court upholds the validity of oral agreements for partition among
co-owners. This is based on the principle that partition is not a conveyance of property but a
segregation of shares. The Statute of Frauds does not apply to such agreements. The Court cites
and quotes: "An agreement of partition may be made orally or in writing. An oral agreement
for the partition of the property owned in common is valid and enforceable upon the parties.
The Statute of Frauds has no operation in this kind of agreements, for partition is not a
conveyance of property but simply a segregation and designation of the part of the property
which belong to the co-owners."
 Application to the Case: The Court sustained the validity of the alleged oral partition among the
Espina heirs.
1. Hearing on Motion for Reconsideration and Due Process: The Court clarifies that a hearing on a
motion for reconsideration is not mandatory and rests within the sound discretion of the court.
Its refusal does not automatically constitute a denial of due process, especially if the issues have
been fully discussed in the pleadings. The Court quotes: "Time and again, the Court stresses
that the hearing of a motion for reconsideration in oral argument is a matter which rests upon
the sound discretion of the Court. Its refusal does not constitute a denial of due process in the
absence of a showing of abuse of discretion." The Court found that in this case, the grounds for
the motion were determined by referencing the challenged pleading, and the issues were fully
discussed in the pleadings, making oral argument unnecessary.
2. Pro Forma Motion for Reconsideration: The Court defines a pro forma motion for
reconsideration as one that merely reiterates grounds already raised in a previous motion. Such
a motion does not suspend the running of the period for appeal. The Court found the
petitioners' second motion for reconsideration to be pro forma because it repeated the grounds
of the first motion. "We adhere to the findings of the trial court that the second motion for
reconsideration dated August 11, 1975 is pro forma, to it The grounds stated in said motion
being in reiteration of the same grounds alleged in his first motion, the same is pro-forma."
3. Certiorari as a Substitute for Lost Appeal: The Court reiterates the fundamental rule that
certiorari cannot be used as a substitute for a lost appeal due to failure to file a timely notice.
While exceptions exist in cases of manifest failure or miscarriage of justice, the Court found that
the present case lacked merit, and a strict application of the rule was warranted. " Finally, it has
been a basic rule that certiorari is not a substitute for appeal which had been lost."
Conclusion:
The Supreme Court found the petition to be devoid of merit. The actions of the respondent judge in
dismissing the partition case and denying the motions for reconsideration did not amount to grave abuse
of discretion. The Court upheld the trial court's findings regarding the applicability of prescription due to
the private respondents' claim of exclusive ownership and the validity of the oral partition. The denial of
a hearing on the motion for reconsideration and the classification of the second motion as pro forma
were also deemed correct. Consequently, the petition was dismissed.
Briefing Document: G.R. No. L-23351 - Paredes v. Espino
Date: March 13, 1968
Case: G.R. No. L-23351
Court: Supreme Court of the Philippines
Parties:
 Plaintiff-Appellant: Cirilo Paredes
 Defendant-Appellee: Jose L. Espino
Subject Matter: Appeal from an order of the Court of First Instance of Palawan dismissing a complaint
seeking specific performance of a contract for the sale of real property and damages.
Key Issues:
1. Whether the contract for the sale of the property is unenforceable under the Statute of Frauds
due to the absence of a single written contract.
2. Whether letters and a telegram can constitute a sufficient memorandum to satisfy the
requirements of the Statute of Frauds.
3. Whether the authenticity of the written memorandum needs to be established at the motion to
dismiss stage.
Summary of Facts:
Cirilo Paredes filed a complaint to compel Jose L. Espino to execute a deed of sale for Lot No. 67 of the
Puerto Princesa Cadastre and to pay damages. Paredes alleged that Espino had agreed to sell the lot to
him for P4.00 per square meter, and that the agreement was "closed by letter and telegram". The
execution of the deed and payment were deferred until Espino's arrival in Puerto Princesa. Upon arrival,
Espino refused to execute the deed despite Paredes' willingness and ability to pay and written demands.
Espino filed a motion to dismiss, arguing that the complaint failed to state a cause of action and that the
claim was unenforceable under the Statute of Frauds as there was no written contract.
Paredes opposed the motion, attaching copies of a letter from Espino dated May 18, 1964, accepting
Paredes' offer of P4.00 per square meter for the 1826 square meter lot on a cash basis, and stating their
intention to go to Puerto Princesa to facilitate the transaction. He also attached a telegram advising of
Espino's expected arrival and a previous letter referring to the lot by its Certificate of Title number.
The Court of First Instance dismissed the complaint, reasoning that although the contract might be valid,
it was unenforceable under Article 1403 of the Civil Code due to the lack of a written contract.
Paredes appealed this decision to the Supreme Court.
Main Themes and Important Ideas/Facts:
 Application of the Statute of Frauds (Article 1403 of the Civil Code): The core of the case
revolves around the interpretation and application of the Statute of Frauds concerning
agreements for the sale of real property. Article 1403(2)(e) states that such agreements are
unenforceable "unless the same, or some note or memorandum thereof, be in writing, and
subscribed by the party charged, or by his agent".
 Requirement of a "Note or Memorandum": The Supreme Court clarified that the Statute of
Frauds "does not require that the contract itself be in writing." Instead, a written "note or
memorandum, embodying the essentials of the contract and signed by the party charged, or
his agent, suffices to make the verbal agreement enforceable". This is a crucial distinction from
requiring a formal written contract.
 Sufficiency of Multiple Documents as a Memorandum: The Court found that the letters
(specifically the one dated May 18, 1964, and the previous letter referring to the title number)
and the telegram, taken together, constituted an "adequate memorandum of the transaction".
This aligns with previous rulings (e.g., Berg vs. Magdalena Estate, Inc.) that a sufficient
memorandum can be contained in "two or more documents."
 Essential Terms of the Contract in the Memorandum: The Court identified that the attached
documents contained "all the essential terms of the contract", including:
 Identification of the parties (implied through the correspondence).
  Identification of the property ("a lot in Puerto Princesa, Palawan, covered, by TCT No. 62").
 Area of the property ("1826 square meters").
 Purchase price ("four (P4.00) pesos per square meter").
 Terms of payment ("p 0020ayable in cash").
 Requirement of Signature by the Party Charged: The Court noted that the letters were "signed
by the defendant-appellee", satisfying another requirement of the Statute of Frauds.
 Authenticity of Documents at the Motion to Dismiss Stage: The defendant argued that the
authenticity of the letters had not been established. The Court rejected this, stating that
establishing authenticity is a matter of evidence for trial and is not necessary at the motion to
dismiss stage to show a prima facie case of enforceability. The Court cited Shaffer vs. Palma to
support this point, stating that "whether the agreement is in writing or not, is a question of
evidence; and the authenticity of the writing need not be established until the trial is held."
 Improper Dismissal by the Lower Court: The Supreme Court concluded that the lower court
"plainly erred in holding that it was unenforceable." They stated that since the plaintiff alleged
the contract was supported by letters and a telegram which constituted a sufficient
memorandum, his cause of action was "thereby established". The Court also suggested that if
the lower court had doubts about the memorandum's existence, it should have held a
preliminary hearing rather than dismissing the complaint.
Quotes from Original Source:
 "The Statute of Frauds, embodied in Article 1403 of the Civil Code of the Philippines, does not
require that the contract itself be in writing."
 "The plain text of Article 1403, paragraph (2) is clear that a written note or memorandum,
embodying the essentials of the contract and signed by the party charged, or his agent, suffices
to make the verbal agreement enforceable, taking it out of the operation of the statute."
 "In the case at bar, the complaint in its paragraph 3 pleads that the deal had been closed by
letter and telegram" (Record on Appeal, p. 2), and the letter referred to was evidently the one
copy of which was appended as Exhibit A to plaintiff's opposition to the motion dismiss. This
letter, transcribed above in part, together with that one marked as Appendix B, constitute an
adequate memorandum of the transaction."
 "We have in them therefore, all the essential terms of the contract, and they satisfy the
requirements of the Statute of Frauds."
 "We have ruled in Berg vs. Magdalena Estate, Inc ., 92 Phil. 110, 115, that a sufficient
memorandum may be contained in two or more documents."
 "That is not necessary for the purpose of showing prima facie that the contract is enforceable.
For as ruled by us in Shaffer vs. Palma , L-24115, March 1, 1968, whether the agreement is in
writing or not, is a question of evidence; and the authenticity of the writing need not be
established until the trial is held."
 "The plaintiff having alleged that the contract is backed by letter and telegram, and the same
being a sufficient memorandum, his cause of action is thereby established, especially since the
defendant has not denied the letters in question."
Conclusion:
The Supreme Court found that the Court of First Instance erred in dismissing the complaint . The Court
held that the collection of letters and the telegram provided by the plaintiff constituted a sufficient
memorandum of the agreement, satisfying the requirements of the Statute of Frauds. The authenticity
of these documents was a matter for trial, not for determination at the motion to dismiss stage.
Consequently, the Court set aside the appealed order and remanded the case back to the lower court for
trial.
Briefing Document: G.R. No. 148376
Date: October 26, 2023
Subject: Review of Supreme Court Decision in G.R. No. 148376 concerning the validity of a land sale and
co-ownership rights.
Source: Excerpts from "G.R. No. 148376" - Republic of the Philippines Supreme Court, Third Division,
G.R. No. 148376. March 31, 2005. LEONARDO ACABAL and RAMON NICOLAS, Petitioners, vs. VILLANER
ACABAL, EDUARDO ACABAL, SOLOMON ACABAL, GRACE ACABAL, MELBA ACABAL, EVELYN ACABAL,
ARMIN ACABAL, RAMIL ACABAL, and BYRON ACABAL, Respondents.
Summary:
This Supreme Court decision resolves a dispute over an 18.15-hectare parcel of land in Negros Oriental,
Philippines. The core issue is the nature of a document signed by Villaner Acabal in favour of his nephew,
Leonardo Acabal, on April 19, 1990. Villaner claims he signed a lease contract, while Leonardo asserts it
was a Deed of Absolute Sale. The case also involves a subsequent sale of the property by Leonardo to
Ramon Nicolas and the claim of Villaner's children, as heirs of his deceased wife, to co-ownership rights.
The Supreme Court ultimately reversed the Court of Appeals' decision, finding that Villaner failed to
prove he was deceived into signing the Deed of Absolute Sale. However, the Court ruled that the sale
was only valid to the extent of Villaner's proportionate share in the property, as it was conjugal property
with his deceased wife, and her heirs (including their children) had co-ownership rights. The appropriate
remedy for the co-owners was deemed to be an action for partition.
Main Themes and Important Ideas/Facts:
 Nature of the Disputed Document: The central conflict revolves around whether the document
signed by Villaner Acabal was a "Lease Contract" as he claims, or a "Deed of Absolute Sale" as
Leonardo Acabal asserts.
 Villaner's Claim: Villaner testified that he signed a document titled "Lease Contract" with a
three-year term and a per-hectare rental. He stated he did not read the contents and was
"puzzled" why it now appears as a Deed of Sale. He alleged that copies of the deed of sale might
have been placed under the lease contract by the document preparer.
 Leonardo's Claim: Leonardo claims the document was a Deed of Absolute Sale for a
consideration of ₱10,000.00, which he had paid.
 Carmelo Cadalin's Testimony: Carmelo Cadalin, who prepared the document, corroborated
Leonardo's claim, stating that Villaner requested him to prepare a deed of sale, read the
document, and signed it. He also identified his and his wife's signatures as witnesses on the
Deed of Absolute Sale.
 Burden of Proof and Allegations of Fraud: The Court emphasized that the burden of proof lies
with the party making the allegations. Allegations of fraud or undue influence must be
established by "clear and convincing evidence."
 Quote: "It is a basic rule in evidence that the burden of proof lies on the party who makes the
allegations... More specifically, allegations of a defect in or lack of valid consent to a contract by
reason of fraud or undue influence are never presumed but must be established not by mere
preponderance of evidence but by clear and convincing evidence."
 The Court found that Villaner failed to present sufficient evidence beyond his "bare allegation"
to support his claim of deception. His conjecture about documents being swapped was
dismissed as "facts not conjectures decide cases."
 Inadequacy of Price: Villaner argued that the stated purchase price of ₱10,000.00 was
"unusually low and inadequate" for the property, suggesting it was not a genuine sale.
 The Court noted that Villaner failed to provide evidence of the property's fair market value as of
the sale date (April 19, 1990).
 An ocular inspection report indicated that only a small portion (3-4 hectares) was cultivated for
sugarcane, with the rest being rocky and unsuitable. It also highlighted difficulties in accessing
the land.
 Evidence of a nearby property being sold at a significantly lower per-hectare price further
undermined the claim of price inadequacy.
 Quote: "Absent any evidence of the fair market value of a land as of the time of its sale, it
cannot be concluded that the price at which it was sold was inadequate. Inadequacy of price
must be proven because mere speculation or conjecture has no place in our judicial system."
 The Court concluded that the ₱10,000.00 price was "more than reasonable" given the property's
condition and comparable sales. It reiterated that mere inadequacy of price per se does not
invalidate a sale unless "grossly inadequate or shocking to the conscience."
 Comprehensive Agrarian Reform Law (CARL) Violation Claim: Villaner argued the sale violated
CARL's retention limits.
 The Court cited the relevant provisions of Rep. Act No. 6657, which apply to private lands
"devoted to or suitable for agriculture."
 The ocular inspection report indicated that most of the property was not suitable for agriculture
due to its rocky composition.
 Even the cultivated area (at most 4 hectares) was less than the maximum retention limit of 5
hectares.
 Thus, the Court found no violation of CARL.
 Principle of Pari Delicto: The Court introduced the principle of pari delicto ("in case of equal or
mutual fault"), suggesting that if Villaner knowingly entered into an illegal transaction (e.g., a
simulated sale to evade CARL), he would not be entitled to judicial relief.
 Quote: "Even assuming that the disposition of the property by Villaner was contrary to law, he
would still have no remedy under the law as he and Leonardo were in pari delicto, hence, he is
not entitled to afirmative relief – one who seeks equity and justice must come to court with
clean hands. In pari delicto potior est conditio defendentis."
 The Court noted that the exception to pari delicto under Article 1416 of the Civil Code (allowing
recovery when the prohibition is for the plaintiff's protection) was not applicable here, as CARL is
intended to protect beneficiary farmers, not landowners.
 Conjugal Partnership and Co-ownership: Villaner's children were impleaded as plaintiffs,
claiming co-ownership rights as heirs of his deceased wife, Justiniana Lipajan.
 The Court established that the property was acquired during Villaner's marriage to Justiniana,
thus presumed to be conjugal property under Article 160 of the Civil Code.
 Upon Justiniana's death, the conjugal partnership was terminated, and her one-half share
devolved to her heirs, including Villaner and their eight children. This created a regime of co-
ownership.
 The Court calculated Villaner's share as five-ninths (5/9) of the entire property (one-half as his
conjugal share plus one-ninth of his wife's half share).
 Sale of Co-owned Property: While a co-owner can sell their undivided share (Article 493 of the
Civil Code), they cannot alienate the shares of other co-owners without their consent.
 Villaner sold the entire property without the consent of his co-heirs.
 Quote: "Thus, it is now settled that the appropriate recourse of co-owners in cases where their
consent were not secured in a sale of the entire property as well as in a sale merely of the
undivided shares of some of the co-owners is an action for PARTITION under Rule 69 of the
Revised Rules of Court."
 The sale was deemed valid only with respect to Villaner's five-ninths share, making Leonardo
(and subsequently Ramon Nicolas) a co-owner with the other heirs.
 Buyer in Good Faith (Unregistered Land): Ramon Nicolas claimed to be a buyer in good faith.
 The Court ruled that the issue of good faith is relevant only for registered land. Since the
property was unregistered, a buyer takes it at their peril. – (danger or cause of loss)
 Quote: "Cruz, however, is not applicable for the simple reason that in the case at bar the
property in dispute is unregistered. The issue of good faith or bad faith of a buyer is relevant
only where the subject of the sale is a registered land but not where the property is an
unregistered land."
Key Decisions and Outcomes:
 The Court GRANTED the petition of Leonardo Acabal and Ramon Nicolas, reversing the Court of
Appeals decision.
 The sale in favor of Leonardo Acabal and the subsequent sale to Ramon Nicolas were declared
valid but only insofar as five-ninths (5/9) of the subject property is concerned.
 The appropriate action for Villaner's children (the co-heirs) is an action for partition of the
common property.
Significant Quotes:
 "It is a basic rule in evidence that the burden of proof lies on the party who makes the
allegations... More specifically, allegations of a defect in or lack of valid consent to a contract by
reason of fraud or undue influence are never presumed but must be established not by mere
preponderance of evidence but by clear and convincing evidence."
 "Absent any evidence of the fair market value of a land as of the time of its sale, it cannot be
concluded that the price at which it was sold was inadequate. Inadequacy of price must be
proven because mere speculation or conjecture has no place in our judicial system."
 "Even assuming that the disposition of the property by Villaner was contrary to law, he would
still have no remedy under the law as he and Leonardo were in pari delicto, hence, he is not
entitled to affirmative relief – one who seeks equity and justice must come to court with clean
hands. In pari delicto potior est conditio defendentis."
 "Thus, it is now settled that the appropriate recourse of co-owners in cases where their consent
were not secured in a sale of the entire property as well as in a sale merely of the undivided
shares of some of the co-owners is an action for PARTITION under Rule 69 of the Revised Rules
of Court."
 "Cruz, however, is not applicable for the simple reason that in the case at bar the property in
dispute is unregistered. The issue of good faith or bad faith of a buyer is relevant only where the
subject of the sale is a registered land but not where the property is an unregistered land."
Here is a detailed briefing document reviewing the main themes and most important ideas or facts from
the provided source, G.R. No. 143958.
Briefing Document: G.R. No. 143958
Date: October 26, 2023
Subject: Review of the Supreme Court Decision in Alfred Fritz Frenzel vs. Ederlina P. Catito (G.R. No.
143958, July 11, 2003)
Case Overview: This document reviews the Supreme Court's decision in G.R. No. 143958, which upheld
the rulings of the Court of Appeals and the Regional Trial Court (RTC) of Davao City. The case involves a
dispute between Alfred Fritz Frenzel, an Australian citizen, and Ederlina P. Catito, a Filipina, over the
ownership of several properties in the Philippines. Frenzel sought to recover properties and funds he
provided to Catito during their relationship, claiming he was the sole source of the funds for these
acquisitions.
Key Individuals and Their Relationship:
 Alfred Fritz Frenzel: Petitioner, an Australian citizen of German descent, electrical engineer, and
pilot. He was legally married to Teresita Santos, a Filipina, though separated from bed and board
at the time of the relationship with Catito.
 Ederlina P. Catito: Respondent, a Filipina. She was married to Klaus Muller, a German national,
during her relationship with Frenzel.
 Relationship: Frenzel and Catito had an "amorous relationship" or "common-law relationship"
(as referred to in the Davao RTC complaint) which began in Sydney, Australia, and continued in
the Philippines.
Factual Background:
 Frenzel met Catito in Sydney in February 1983.
 Frenzel persuaded Catito to return to the Philippines and start a business, offering to finance it.
 Frenzel provided funds for Catito to establish a beauty parlor in Ermita, Manila, registered under
her name.
 Frenzel decided to purchase properties in the Philippines, including a house and lot in Quezon
City, a house and lot in Davao City, a parcel of land in Babak, Davao, and a four-hectare land in
Camudmud, Babak, Davao for a beach resort.
 Knowing he was an alien and disqualified from owning land in the Philippines, Frenzel agreed to
have Catito's name appear as the sole buyer in the deeds of sale and the certificates of title for
these properties. He admitted this arrangement was made to "skirt the constitutional
prohibition."
 Frenzel funded the purchase of all these properties and the development of the beach resort. He
also transferred significant funds from his Hong Kong bank account to a joint account and then
to an account solely in Catito's name.
 Frenzel was aware that Catito was married to Klaus Muller during their relationship. Catito
admitted this but assured Frenzel she would seek a divorce. Frenzel funded Catito's attempts to
divorce Muller, which were unsuccessful.
 The relationship deteriorated when Catito failed to secure a divorce and after an incident
involving damage to Frenzel's car.
 Frenzel sought to recover the properties and funds from Catito, arguing he was the sole provider
of funds and that Catito had acted fraudulently by not initially disclosing her marriage and by
taking his money. Catito claimed she acquired the properties with her own funds.
Legal Issues and Arguments:
 Alien Acquisition of Land: The central legal issue is the constitutional prohibition against aliens
acquiring private land in the Philippines, except in cases of hereditary succession.
 Validity of the Sales: The Court examined whether the sales of the three parcels of land to
Catito, funded by Frenzel, were valid, considering Frenzel was the actual source of the money
but his name did not appear on the deeds or titles as owner.
  Applicability of the Pari Delicto Doctrine: Frenzel argued that he and Catito were not equally
guilty and that Catito's fraud (not disclosing her marriage) should exempt him from the pari
delicto doctrine. He contended that his intention was not to permanently own the properties but
to be declared a transient owner to facilitate their sale and recover his funds.
 Applicability of Civil Code Provisions: Frenzel invoked Article 1416 (recovery of payment in
prohibited but not illegal per se contracts) and Article 22 (unjust enrichment) of the New Civil
Code to support his claim for recovery of funds.
Court Decisions:
 Regional Trial Court (Davao City): Dismissed Frenzel's complaint. It found that Catito was the
recorded purchaser of the lands based on documentary evidence. More importantly, it ruled
that even if Frenzel funded the purchases, he had no cause of action because as an alien, he
was disqualified from owning land in the Philippines. The sales were deemed null and void ab
initio. Applying the pari delicto doctrine, the court held that Frenzel was precluded from
recovering the properties from Catito.
 Court of Appeals: Affirmed the RTC decision in toto. It agreed that Frenzel knowingly violated
the Constitution and was barred from recovering the money used to purchase the lands.
Allowing recovery, the CA held, would encourage aliens to violate the Constitution.
 Supreme Court: Affirmed the decision of the Court of Appeals, dismissing Frenzel's petition.
Key Findings and Reasoning of the Supreme Court:
 Constitutional Prohibition: The Court reiterated the clear constitutional prohibition against
aliens acquiring private land in the Philippines, as stated in Section 14, Article XIV of the 1973
Constitution (applicable at the time). "Save in cases of hereditary succession, no private land
shall be transferred or conveyed except to individuals, corporations, or associations qualified to
acquire or hold lands in the public domain."
 Nullity of the Sales: The Court found that even if Frenzel was the real buyer, the transactions
were "in violation of the Constitution; hence, are null and void ab initio." A void contract "vests
no rights and creates no obligations. It produces no legal effect at all."
 Pari Delicto Doctrine: The Court applied the pari delicto doctrine ("in equal fault the position of
the defendant is the stronger"). Since Frenzel was a party to an illegal contract (the purchase of
land by an alien, even if disguised), he cannot seek judicial remedy to recover his losses. The
Court cited the maxims: "EX DOLO ORITUR ACTIO" (No action arises from deceit) and "IN PARI
DELICTO POTIOR EST CONDITIO DEFENDENTIS".
 Frenzel's Knowledge of the Prohibition: The Court explicitly found that Frenzel "cannot feign
ignorance of the constitutional proscription, nor claim that he acted in good faith, let alone
assert that he is less guilty than the respondent." His own complaint and testimony showed he
was fully aware of his disqualification and deliberately arranged for the properties to be titled in
Catito's name to circumvent the law. The Court quoted his testimony: "Ederlina Catito because I
was informed being not a Filipino, I cannot own the property." and "That is correct but as she
would eventually be my wife that would be owned by us later on."
 Marriage Status Irrelevant to Land Ownership: The Court stated that Frenzel's claim that he
intended to marry Catito and jointly own the property was irrelevant and an "afterthought."
Even if they could lawfully marry (which they couldn't, as both were already married), Frenzel
would still be disqualified as an alien from owning the land.
 Article 1416 Inapplicable: The Court ruled that Article 1416, which allows recovery for contracts
"merely prohibited" for the protection of the plaintiff, does not apply to contracts that are "void
ab initio." The sale of land to a foreigner is "illegal per se" and violates the Constitution, thus
being void from the beginning.
 Article 22 (Unjust Enrichment) Inapplicable: The Court held that Article 22, the principle of
unjust enrichment, does not apply when the action is "proscribed by the Constitution or by the
application of the pari delicto doctrine." While it may seem unfair to Frenzel, public policy
dictates that parties to an illegal contract are left where they are found.
Most Important Ideas/Facts:
 The Philippine Constitution strictly prohibits aliens from acquiring private land, except through
hereditary succession.
  Any transaction involving the purchase of private land by an alien is considered null and void ab
initio.
 The pari delicto doctrine generally prevents parties to an illegal contract from seeking relief from
the courts against each other.
 A party who knowingly participates in an illegal transaction, even if claiming to be defrauded or
less guilty, cannot typically recover what they have given or demand performance from the
other party under the pari delicto rule.
 Circumventing the constitutional prohibition by placing the property in the name of a qualified
Filipino is illegal and does not exempt the alien from the pari delicto rule.
 Civil Code provisions like Article 1416 (contracts merely prohibited) and Article 22 (unjust
enrichment) do not override the constitutional prohibition and the application of the pari delicto
doctrine in cases involving void ab initio contracts that violate public policy.
Conclusion: The Supreme Court's decision in Frenzel vs. Catito strongly affirms the constitutional
prohibition on alien land ownership in the Philippines and the application of the pari delicto doctrine to
prevent aliens who knowingly violate this prohibition from recovering the properties or funds used in
such illegal transactions. The Court found that Frenzel was aware of the prohibition and deliberately
structured the purchases to evade it, making him equally culpable under the law, regardless of his claims
of fraud or intent to marry. The decision leaves parties to such void contracts where they are found,
prioritising public policy over the equitable claims of one party against the other.