G.R. No.

L-20435

October 23, 1923

LUIS ASIAIN, plaintiff-appellant,

vs.
BENJAMIN JALANDONI, defendant-appellee.
Arroyo and Gurrea for appellant.
Francisco Soriano for appellee.

MALCOLM, J.:
Luis Asiain, the plaintiff-appellant in this case, is the owner of the hacienda known as "Maria"
situated in the municipality of La Carlota, Province of Occidental Negros, containing about 106
hectares. Benjamin Jalandoni, the defendant-appellee, is the owner of another hacienda adjoining of
Asiain.
Asiain and Jalandoni happening to meet no one of the days of May, 1920, Asiain said to Jalandoni
that he was willing to sell a portion of his hacienda for the sum of P55,000. With a wave of his hand,
Asiain indicated the tract of land in question, affirming that it contained between 25 and 30 hectares,
and that the crop of sugar cane then planted would produce not less than 2,000 piculs of sugar. But
Jalandoni, remaining doubtful as to the extent of the land and as to the amount of crop on it, Asiain
wrote Jalandoni the letter which follows:
HDA. MARIA

May, 26, 1920.

MR. BENJAMIN JALANDONI.

DEAR BENJAMIN: I am in receipt of your letter and with regard to your statement that parcel does
not contain 21 hectares I do not believe. I bet anything that part only which is planted with cane
contains more than 20 hectares, I bet 2 against 1.
If you agree, I would be that you pay only one-half. I am not a surveyor, but these days I had the
pleasure to survey the land and I know more or less its area.
1awph!l.net

Here we are not to deceive each other. If you like that parcel and if you want to buy it I will give you
good propositions. I don't know where and how they learned that I was selling the hacienda and they
made me a good offer, but as we do not want to part but with that parcel, hence my propositions are
the following, in view of the time that has elapsed and the progress of the cane.
I assure (aseguro) that there are 2,000 piculs and sell on that basis, provided that the cane is milled
in due time. In case the sugar does not amount to 2,000 piculs, I will pay in sugar all such amount as
will be necessary to complete the 2,000, but if after milling the cane, as I say, there is an excess over

2,000 piculs, all the excess shall be mine. So that if you like, I make the sale for the same price that
we talked about and the same conditions, not a dime more or less.
Since you left it did rain, so the "alociman" (Philippine herb) of Guimib must die on the field, whether
of the hacienda or of the "lagatio." You have a contract for a lump sum. Now they have begun to
plow the old plantations within the boundary some days ago and you may rest and throw one
(unintelligible), answer yes or no, so that I may decide.
Your friend LUIS ASIAIN
Sometime later, in July of the same year, Asiain and Jalandoni having met at Iloilo, they prepared
and signed the memorandum-agreement which follows:
Purchase of land of Mr. Luis Asiain and his wife Maria Cadenas, by B. Jalandoni, containing
25 hectares more or less of land bounded by property of the purchaser, with its
corresponding crop, estimated at 2,000 piculs, the total value of which is 55 thousand. The
price is to be paid by paying 30 thousand at the signing of the document, and 25 thousand
within one year, with interest at the rate of 10 per cent.
Mr. Asiain is under obligation to take care of all the plantation until the planting is finished
and in case the crop exceeds 2,000 piculs, all the excess will belong to Mr. Asiain.
The adjacent landowner on the north and the west is the vendor himself, on the east, B.
Jalandoni, and on the south, B. Jalandoni and the widow of Abdon Ferrer.
The purchaser is under obligation to answer for all the rights and obligations of the land with
the central of Inchausti.
After the planting of the cane is completely finished, Mr. Asiain shall vacate the parcel sold to
the purchaser.
The expenses for taking care of said plantation until the planting is completely finished will
be for the account of the vendor Mr. Asiain.
(Sgd.) "LUIS ASIAIN
"BENJAMIN JALANDONI"
During all of the period of negotiations, Jalandoni remained a doubting Thomas and was continually
suggesting that, in his opinion, the amount of the land and of the crop was overestimated. Asiain on
his part always gave assurances in conformity with the letter which he had written intended to
convince Jalandoni that the latter was in error in his opinion. As a result, the parties executed the
agreement which follows:
This document, executed in the city of Iloilo, Province of Iloilo, Philippine Islands, by and
between Messrs. Luis Asiain and Benjamin Jalandoni, of age and residents of the
municipality of La Carlota, Province of Occidental Negros, Philippine Islands.

Witnesseth:
(1) That Luis Asiain does hereby promise and bind himself to sell to Benjamin
Jalandoni a parcel of land the hacienda "Maria" of the aforesaid Luis Asiain, situated
in the municipality of La Carlota, Province of Occidental Negros, P.I.
(2) That Benjamin Jalandoni does hereby promise and bind himself to purchase the
aforesaid parcel of land in the sum P55,000 upon certain conditions specified in a
memorandum signed by the parties which is in the hands of Attorneys Padilla &
Treas.
(3) That upon the signing of this agreement, the vendor shall have the right to collect
from the purchaser part of the price giving receipts thereof signed by said vendor.
(4) That in case the vendor should withdraw from the contract and desist from
signing the document of final sale, the purchaser shall have the right to collect from
said vendor all such amount as may have been advanced on account of this sale,
with an indemnity of P15,000 as penalty.
(5) In case it is the purchaser who should withdraw from the contract of sale, then he
will lose all such amount as may have been paid in advance on account of this
transaction.
In witness whereof, we have hereunto affixed our signatures, at Iloilo, Iloilo, this 12th day of
July, 1920.
(Sgd) "LUIS ASIAIN
"BENJAMIN JALANDONI
Signed in the presence of:
(Sgd.) "ENGRACIO PADILLA
"P.T. TREAS"
Once in possession of the land, Jalandoni did two things. He had the sugar cane ground in La
Carlota Sugar Central with the result that it gave and output of P800 piculs and 23 cates of
centrifugal sugar. When opportunity offered, he secured the certificate of title of Asiain and produced
a surveyor to survey the land. According to his survey, the parcel in question contained an area of
118 hectares, 54 ares, and 22 centiares.
Of the purchase price of P55,000, Jalandoni had paid P30,000, leaving a balance unpaid of
P25,000. To recover the sum of P25,000 from Jalandoni or to obtain the certificate of title and the
rent from him, action was begun by Asiain in the Court of First Instance of Occidental Negros. To the
complaint, an answer and a counter-complaint were interposed by the defendant, by which it was
asked that he be absolved from the complaint, that the contract be annulled, both parties to return
whatever they had received, and that he recover from the plaintiff the sum of P3,600 annually as

damages. In a well-reasoned decision, the Honorable Eduardo Gutierrez David, Judge of First
Instance, declared null the document of purchase and its related memorandum; absolved the
defendant from the payment of P25,000; ordered the plaintiff to return to the defendant the sum of
P30,000 with legal interest from July 12, 1920; ordered the defendant to turn over to the plaintiff the
tract of land and the certificate of title No. 468, and absolved the plaintiff from the counter-complaint,
all without special finding as to the costs. It is from said judgment that the plaintiff has appealed.
The true facts need not give us pause. They are as found by the trial judge and as pratically agreed
to by the parties. It is only necessary to keep in mind that apparently there was always a difference
of opinion between Asiain and Jalandoni as to the area of the tract and as to the crop of sugar cane;
that the agreement between them mentions land containing 25 hectares more or less, giving the
boundaries, and a crop estimated and in one sense warranted at 2,000 piculs, and that in reality the
land contained only a little more than 18 hectares and produced a crop of only about 800 piculs. The
legal consequences arising from these facts are more difficult of determination.
Our Civil Code contains provisions which must be taken into consideration. Codal articles 1265,
1266, and 1269 relate to consent given by reason of error and deceit. They provide the rules which
shall avoid contracts for these and other reasons. But the provisions of the Civil Code most directly
pertinent are found in articles 1469, 1470, and 1471.
The first two mentioned articles, 1469 and 1470, are not applicable because of the proviso relating to
the sale being made at a certain price for each unit of measure or number which is not our case.
The facts seem to fall within article 1471. It first paragraph provides that in case of the sale of real
estate for a lump sum and not at the rate of specified price of each unit or measure, there shall be no
increase or decrease of the price even if the area be found to be more or less than that stated in the
contract. The next paragraph provides that the same rule is applicable when two or more estates are
sold for a single price. Then comes the following: ". . . but, if in addition to a statement of the
boundaries, which is indispensable in every conveyance of real estate, the area estate should be
designated in the contract, the vendor shall be obliged to deliver all that is included within such
boundaries, even should it exceed the area specified in the contract; and, should he not be able to
do so, he shall suffer a reduction of the price in proportion to what is lacking of the area, unless the
contract be annulled by reason of the vendee's refusal to accept anything other than that which was
stipulated."
A study of the Spanish commentators discloses that the meaning of article 1471 is not clear as it
might be, and that they are not unanimous in their views. Manresa gives emphasis to the intention of
the parties and the option on the part of the purchaser to rescind the contract. To quote from
Manresa:
The rule in the latter case is found in the second paragraph of article 1471, with the
exception of the first clause which refers to the former hypothesis. This rule may be
formulated as follows: Whether the case is one of sale of realty for a lump sum or of two or
more for a single price which is also a lump sum and, consequently, not at the rate of
specified price for each unit of measure or number, the vendor shall be bound to deliver all
that is within the boundaries stated although it may exceed the area or number expressed in
the contract; in case he cannot deliver it, the purchaser shall have the right to reduce the

price proportionately to what is lacking of the area or number, or rescind the contract at his
option.
xxx

xxx

xxx

The manner in which the matter covered by this article was distributed in its two paragraphs
contributes to making it difficult to understand. The rule might have been clearly stated had
the first clause of the second paragraph been included in the first paragraph, the latter to end
with the words, "The same rule shall apply when two or more estates are sold for a single
price." And if by constituting an independent paragraph, with the rest of the second
paragraph, it were made to appear more expressly that the rule of the second paragraph
thus drawn referred to all the cases of paragraph one, as we have expounded, namely, to the
case of a sale of one single estate and that of two or more for one single price, the precept
would have been clearer.
In our opinion, this would have better answered what we deem to be indubitable intention of
the legislator.
Some eminent commentators construe the last part of article 1471 in a different way. To them
the phrase "and should he not be able to do so" as applied to the vendor, does not mean as
apparently it does "should he not be able to deliver all that is included within the boundaries
stated," but this other thing, namely, that if by reason of the fact that a less area is included
within the boundaries than that expressed in the contract, it is not possible for the vendor to
comply therewith according to its literal sense, he must suffer either the effects of the nullity
of the contract or a reduction of the price proportionately to what may be lacking of the area
or number. It is added as a ground for this solution that if the vendor fulfills the obligation, as
stated in the article, by delivering what is not included within the boundaries, there can never
by any case of proportionate reduction of the price on account of shortage of an area,
because he does not give less who delivers all that he bound himself to.
According to this opinion, which we believe erroneous, if within the boundaries of the
property sold, there is included more than area than that expressed in the title deeds,
nothing can be claimed by the vendor who losses the value of that excess, but if there is less
area, then he loses also, because either the price is reduced or the contract is annulled. This
theory would be anomalous in case of sale of properties in bulk, but, above all, would do
gross injustice which the legislator never intended.
There is no such thing. So long as the vendor can deliver, and for that reason, delivers all the
land included within the boundaries assigned to the property, there can be no claim
whatsoever either on his part, although the area may be found to be much greater than what
was expressed, nor on the part of the purchaser although what area may be in reality much
smaller. But as he sold everything within the boundaries and this is all the purchaser has
paid, or must pay, for whether much or little, if afterwards, it is found that he cannot deliver
all, because, for instance, a part, a building, a valley, various pieces of land, a glen etc., are
not his, there is no sale of a specified thing, there is longer a sale of the object agreed upon,

and the solution given by the article is then just and logical: Either the contract is annulled or
the price is reduced proportionately." (10 Comentarious al Codigo Civil, p. 157.)
The principle is deduced from the Code, that if land shall be sold within boundaries with an
expression of the area and if the area is grossly deficient, the vendee has an option, either to have
the price reduced proportionately or to ask for the rescission of the contract. The rule of the civil law
is more favorable to the purchaser than is the common law. It gives the excess to the purchaser
without compensation to the vendor, where the property is sold by a specific description followed by
the mention of the quantity or measure, but allows the purchaser either to secure a deduction from
the price in case a deficiency or to annul the contract.
The decision of this court which gave most direct consideration to article 1471 of the Civil Code, now
chiefly relied upon by the appellant, is found in Irureta Goyena vs. Tambunting ([1902], 1 Phil., 490).
The rule announced in the syllabus is this: "An agreement to purchase a certain specified lot of land
at a certain price is obligatory and enforceable regardless of the fact that its area is less than that
mentioned in the contract." Taken literally, this rule would lead to the result desired by the appellant.
But the syllabus naturally must be understood in relation what is found in the decision itself; and the
fact was that the tract of land was mentioned as being located at No. 20 Calle San Jose, Ermita,
Manila. The private contract expressed a specific thing as the object of the contract and specified a
certain price. There was no statement in the document of the superficial area and no hint in the
record that either or both parties were misled. The facts, therefore, are different than those before us
and the doctrine in the Irureta Goyena vs. Tambunting case, can well be followed and distinguished.
A comparative study of the American Authorities throws considerable light on the situation. In volume
39 Cyc., page 1250, under the subject "Vendor and Purchaser," is found the following:
If, in a contract of sale the quantity of the realty to be conveyed is indicated by a unit of area,
as by the acre, a marked excess or deficiency in the quantity stipulated for is a ground for
avoiding the contract. Since it is very difficult, if not impossible, to ascertain the quality of a
tract with perfect accuracy, a slight excess or deficiency does not affect the validity of the
contract.
Where, however, the contract is not for the sale of a specific quantity of land, but for the sale
of particular tract, or designated lot or parcel, by name or description, for a sum in gross, and
the transaction is bona fide, a mutual mistake as to quantity, but not as to boundaries, will not
generally entitle the purchaser to compensation, and is not ground for rescission. But it is
well settled that a purchaser of land, when it is sold in gross, or with the description, "more or
less" or "about," does not thereby ipso facto take all risk of quantity in the tract. If the
difference between the real and the represented quantity is very great, both parties act
obviously under a mistake which it is the duty of a court of equity to correct. And relief will be
granted when the mistake is so material if the truth had been known to the parties the sale
would not have been made.
Volume 27 of the Ruling Case Law, pages 354, 434, 436, states what follows:

A mutual mistake as to the quantity of the land sold may afford ground for equitable relief. As
has been said, if, through gross and palpable mistake, more or less land should be conveyed
than was in the contemplation of the seller to part with or the purchaser to receive, the
injured party would be entitled to relief in like manner as he would be for an injury produced
by a similar cause in a contract of any other species. And when it is evident that there has
been a gross mistake s to quantity, and the complaining party has not been guilty of any
fraud or culpable negligence, nor has he otherwise impaired the equity resulting from the
mistake, he may be entitled to relief from the technical or legal effect of his contract, whether
it be executed or only executory. It has also been held that where there is a very great
diference between the actual and the estimated quantity of acres of land sold in gross, relief
may be granted on the ground of gross mistake. Relief, however, will not be granted as
general rule where it appears that the parties intended a contract of hazard, as where the
sale is a sale in gross and not by acreage or quantity as a basis for the price; and it has been
held that a mistake on the part of the vendor of a town lot sold by description as to number
on the plat, as to its area or dimensions, inducing a sale thereof at smaller price than he
would have asked had he been cognizant of its size, not in any way occasioned or
concealed by conduct of the purchaser, constitutes no ground for the rescission of the
contract. The apparent conflict and discrepancies in the adjudicated cases involving
mistakes as to quantity arise not from a denial of or a failure to recognize the general
principle, but from the difficulty of its practical application in particular cases in determining
the questions whether the contract was done of hazard as to quantity or not and whether the
variance is unreasonable. The relative extent of the surplus or deficit cannot furnish, per se,
an infallible criterion in each case for its determination, but each case must be considered
with reference not only to that but its other peculiar circumstances. The conduct of the
parties, the value, extent, and locality of the land, the date of the contract, the price, and
other nameless circumstances, are always important, and generally decisive. In other words,
each case must depend on its own peculiar circumstances and surroundings.
The rule denying relief in case of a deficit or an excess is frequently applied in equity as well
as at law, but a court of equity will not interfere on account of either a surplus or a deficiency
where it is clear that the parties intend a contract of hazard, and it is said that although this
general rule may not carry into effect the real intention of the parties it is calculated to
prevent litigation. From an early date, courts of equity under their general jurisdiction to grant
relief on the ground of mistake have in case of mistake in the estimation of the acreage in
tract sold and conveyed interposed their aid to grant relief to the vendor where there was a
large surplus over the estimated acreage, and to the purchaser where there was large
deficit. For the purpose of determining whether relief shall be granted the courts have divided
the cases into two general classes: (1) Where the sale is of a specific quantity which is
usually denominated a sale by the acre; (2) where the sale is usually called a sale in
gross. . . .
Sales in gross for the purpose of equitable relief may be divided into various subordinate
classifications: (1) Sales strictly and essentially by the tract, without reference in the
negotiation or in the consideration to any designated or estimated quantity of acres; (2) sales
of the like kind, in which, though a supposed quantity by estimation is mentioned or referred
to in the contract, the reference was made only for the purpose of description, and under

such circumstances or in such a manner as to show that the parties intended to risk the
contingency of quantity, whatever it might be, or how much so ever it might exceed or fall
short of that which was mentioned in the contract; (3) sales in which it is evident, from
extraneous circumstances of locality, value, price, time, and the conduct and conversations
of the parties, that they did not contemplate or intend to risk more than the usual rates of
excess or deficit in similar cases, or than such as might reasonably be calculated on as
within the range of ordinary contingency; (4) sales which, though technically deemed and
denominated sales in gross, are in fact sales by the acre, and so understood by the parties.
Contracts belonging to either of the two first mentioned classes, whether executed or
executory, should not be modified by the chancellor when there has been no fraud. But in
sales of either the third of fourth kind, an unreasonable surplus or deficit may entitle the
injured party to equitable relief, unless he has, by his conduct, waived or forfeited his equity. .
..
The memorandum-agreement between Asiain and Jalandoni contains the phrase or "more or less."
It is the general view that this phrase or others of like import, added to a statement of quantity, can
only be considered as covering inconsiderable or small differences one way or the other, and do not
in themselves determine the character of the sale as one in gross or by the acre. The use of this
phrase in designating quantity covers only a reasonable excess or deficiency. Such words may
indeed relieve from exactness but not from gross deficiency.
The apparent conflict and discrepancies in the adjudicated cases arise not from a denial of or a
failure to recognize the general principles. These principles, as commonly agreed to, may be
summarized as follows: A vendee of land when it is sold in gross or with the description "more or
less" does not thereby ipso facto take all risk of quantity in the land. The use of "more or less" or
similar words in designating quantity covers only a reasonable excess or deficiency. Mutual mistake
of the contracting parties to sale in regard to the subject-matter of the sale which is so material as to
go to the essence of the contract, is a ground for relief and rescission. It has even been held that
when the parties saw the premises and knew the boundaries it cannot prevent relief when there was
mutual gross mistake as to quantity. Innocent and mutual mistake alone are sufficient grounds for
rescission. (Bigham vs. Madison [1899], 47 L. R. A., 267) The difficulty comes from the application of
the principles in particular cases.
A practical demonstration of what has just been said is disclosed by the notes in volume 27 of Ruling
Case Law, page 439. In the following cases, relief was denied: Lawson vs. Floyd, 124 U. S., 108; 8
S. Ct., 409; 31 U. S. (L. ed.), 347 (estimated acreage about 1,000 acres; shortage 368 acres);
Frederick vs. Youngblood, 19 Ala., 680; 54 Am. Dec., 209 (estimated acreage 500 acres more or
less; shortage 39 acres); Jones vs. Plater, 2 Gill (Md.), 125; 41 Am. Dec., 408 (stated acreage 998
acres; shortage 55 acres); Frenche vs. State, 51 N. J. Eq., 624; 27 Atl., 140; 40 A. S. R., 548 (stated
acreage 195-98/100 be the same more or less; shortage 1-37/100); Faure vs.Martin, 7 N. Y., 210; 57
Am. Dec., 515 (stated acreage 96 acres more or less; deficit 10 acres); Smith vs. Evans, 6 Bin.
(Pa.), 102; 6 Am. Dec., 436 (shortage of 88 acres in tract conveyed as containing 991 1/4 acres
more or less); Jollife vs. Hite, 1 Call (Va.), 301; 1 Am. Dec., 519 (stated acreage 578 acres more or
less; shortage 66 acres); Pendleton vs. Stewart, 5 Call (Va.), 1;2 Am. Dec., 583 (stated acreage
1,100 acres more or less; shortage 160 acres); Nelson vs. Matthews, 2 Hen. & M. (Va.), 164; 3 Am.
Dec., 620 (stated acreage 852 acres more or less; shortage of 8 acres). In the following cases relief

was granted: Harrel vs. Hill, 19 Ark., 102; 68 Am. Dec., 202 (stated acreage 180 acres more or less;
deficit 84 acres); Solinger vs. Jewett, 25 Ind., 479; 87 Am. Dec., 372 (stated acreage 121 acres more
or less; deficit 36 acres); Hays vs. Hays, 126 Ind., 92; 25 N.E., 600; 11 L. R. A., 376 (stated acreage
28.4 acres more or less; deficit 5 acres); Baltimore, etc., Land Soc. vs. Smith, 54 Md., 187; 39 Am.
Rep., 374 (stated acreage about 65 acres; deficit 30 to 35 acres); Newton vs. Tolles, 66 N. H., 136;
19 Atl., 1092; 49 A. S. R., 593; 9 L. R. A., 50 (stated acreage about 200 acres; deficit 65 acres);
Couse vs. Boyles, 4 N. J. Eq., 212; 38 Am. Dec., 212 (stated acreage 135 acres more or less; deficit
30 acres) Belknap vs. Sealey, 14 N. Y., 143; 67 Am. Dec., 120 (stated acreage 8 acres more or less;
deficit 4 acres); Paine vs. Upton, 87 N.Y., 327; 41 Am. Rep., 371 (stated acreage "about 222 acres
be the same more or less;" shortage 18 acres); Bigham vs.Madison, 103 Tenn., 358; 52 S. W., 1074;
47 L. R. A., 267 (stated acreage 25 acres more or less; deficit 12 acres); Smith vs. Fly, 24 Tex., 345;
76 Am. Dec., 109 (stated acreage 500 acres more or less; deficit 115 acres); Triplett vs. Allen, 26
Grat. (Va.), 721; 21 Am. Dec., 320 (stated acreage 166 acres more or less; deficit 10 acres);
Epes vs. Saunders, 109 Va., 99; 63 S. E., 428; 132 A. S. R., 904 (stated acreage 75 acres more or
less; deficit 22 acres); McComb vs. Gilkeson, 110 Va., 406; 66 S. E., 77; 135 A. S. R., 944 (stated
acreage 245 acres more or less; deficit 10 acres).
A case often cited and which on examination is found to contain a most exhaustive review of the
decisions, is that of Belknap vs. Sealey ([1856], 14 N.Y. 143; 67 Am. Dec.,, 120) The facts were:
"Upon the merits of the controversy the case is quite simple in its facts. The land in question is
situated in the city of Brooklyn; and being valuable only for division and sale as city lots, its valuable
only for division and sale as city lots, its value is precisely in proportion to the quantity. In
consideration of the gross sum of fourteen thousand dollars, of which one thousand dollars was paid
down, the defendant agreed to convey the land to the plaintiff, describing it as "the premises
conveyed to him by Samuel T. Roberts," by deed dated about nine months previous. The deed of
Roberts contained a definite description by meters and bounds, and stated the quantity to be "about
nine acres, more or less," excepting a certain parcel of one acre and six perches. The quantity in fact
is only about half as much as the deed asserted. The plaintiff, in agreeing to purchase the tract at the
sum named, acted under a mistake which affected the price nearly one half, and the judge has found
that the seller was mistaken also. . . . The Judge has found that the actual quantity was substantially
and essentially less than the plaintiff supposed he was purchasing; and although the finding does
not so state in terms, there can be no difficulty, I think, in affirming that if the true quantity had been
known, the contract would not have been made. The agreement has never been consummated by a
conveyance. These are the only essential facts in the case." The learned Judge remarked: "The
counsel for the defendant is obliged to contend, and he does not contend, that mere mistake as to
the quantity of land affords no ground of relief against a contract in the terms of the present one,
however serious such mistake may be, and although we can readily see the contract would never
have been made if the quantity had been made known. The convenience of such a rule has been
insisted on, and in the denial of justice it certainly has the merit of simplicity. If the doctrine is true as
broadly as stated, then there is one class of contracts to which the settled maxim that equity will
relieve against mistake can have no application. Upon a careful examination of the cases cited, as
well as upon principle, my conclusion is, that agreements of this description are not necessarily proof
against the maxims which apply to all others." Then follows a review of the cases not alone of the
state of New York and other states in the America Union but of England as well. The rule was
announced that equity will rescind a contract for the sale of land for mutual mistake as to the quantity
of land which the boundaries given in the contract contained, where the deficiency is material. "More

or less," used in the contract in connection with the statement of the quantity, will not prevent the
granting of such relief.
Coordinating more closely the law and the facts in the instant case, we reach the following
conclusions: This was not a contract of hazard. It was a sale in gross in which there was a mutual
mistake as to the quantity of land sold and as to the amount of the standing crop. The mistake of fact
as disclosed not alone by the terms of the contract but by the attendant circumstances, which it is
proper to consider in order to throw light upon the intention of the parties, is, as it is sometimes
expressed, the efficient cause of the concoction. The mistake with reference to the subject-matter of
the contract is such that, at the option of the purchaser, it is rescindable. Without such mistake the
agreement would not have been made and since this is true, the agreement is inoperative and void.
It is not exactly a case of over reaching on the plaintiff's part, or of misrepresentation and deception,
or of fraud, but is more nearly akin to a bilateral mistake for which relief should be granted. Specific
performance of the contract can therefore not be allowed at the instance of the vendor.
The ultimate result is to put the parties back in exactly their respective positions before they became
involved in the negotiations and before accomplishment of the agreement. This was the decision of
the trial judge and we think that decision conforms to the facts, the law, and the principles of equity.
Judgment is affirmed, without prejudice to the right of the plaintiff to establish in this action in the
lower court the amount of the rent of the land pursuant to the terms of the complaint during the time
the land was in the possession of the defendant, and to obtain judgment against the defendant for
that amount, with costs against the appellant. So ordered.
Johnson, Avancea, Villamor and Romualdez, JJ., concur.
Johns, J., concurs in the result.
Street, J., dissents.

HEIRS OF WILLIAM SEVILLA, NAMELY: WILFREDO SEVILLA, WILSON

SEVILLA, WILMA SEVILLA, WILLINGTON SEVILLA, AND WILLIAM
SEVILLA, JR., HEIRS OF MARIA SEVILLA, NAMELY: AMADOR
SEVILLA, JENO CORTES, VICTOR CORTES, MARICEL CORTES,
ALELEI* CORTES AND ANJEI** CORTES,petitioners,
vs.
LEOPOLDO SEVILLA, PETER SEVILLA, AND LUZVILLA
SEVILLA, respondents.
YNARES-SANTIAGO, J.:

One who alleges defect or lack of valid consent to a contract by reason of fraud or undue influence
must establish by full, clear and convincing evidence such specific acts that vitiated a party's
consent, otherwise, the latter's presumed consent to the contract prevails. 1
The instant petition for review seeks to set aside the September 26, 2000 Decision 2 of the Court of
Appeals in CA-G.R. CV No. 48956, affirming in toto the Decision3 of the Regional Trial Court of
Dipolog City, Branch 6, in Civil Case No. 4240 which declared, inter alia, the questioned Deed of
Donation Inter Vivos valid and binding on the parties.
The undisputed facts reveal that on December 10, 1973, Filomena Almirol de Sevilla died intestate
leaving 8 children, namely: William, Peter, Leopoldo, Felipe, Rosa, Maria, Luzvilla, and Jimmy, all
surnamed Sevilla. William, Jimmy and Maria are now deceased and are survived by their respective
spouses and children.4Filomena Almirol de Sevilla left the following properties:
PARCEL I:
A parcel of land known as Lot No. 653 situated at General Luna St., Dipolog City, with an
area of about 804 square meters, more or less, duly covered by Transfer Certificate of Title
No. (T-6671)-1448 [in the name of Filomena Almirol de Sevilla, Honorata Almirol and Felisa
Almirol] and assessed at P31,360.00 according to Tax Dec. No. 018-947;
PARCEL II:
A parcel of land known as Lot No. 3805-B situated at Olingan, Dipolog City, with an area of
about 18,934 square meters, more or less, duly covered by Transfer Certificate of Title No. T6672 and assessed at P5,890 according to Tax Dec. No. 009-761;
PARCEL III:
A parcel of land known as Lot No. 837-1/4 situated at Magsaysay Street, Dipolog City, with
an area of about 880 square meters more or less, duly covered by Original Certificate of Title
No. 0-6064 and assessed at P12,870.00 according to Tax Dec. No. 020-1078;
PARCEL IV:
A parcel of residential land known as Lot No. 1106-B-3 situated at Sta. Filomena, Dipolog
City, with an area of 300 square meters, more or less, assessed at P3,150.00 according to
Tax Dec. No. 006-317;
Commercial building erected on Parcel I above-described; and residential building erected
just at the back of the commercial building above-described and erected on Parcel I abovedescribed;5
Parcel I, Lot No. 653, is the paraphernal property of Filomena Almirol de Sevilla which she co-owned
with her sisters, Honorata Almirol and Felisa Almirol,6 who were both single and without issue.
Parcels II, III and IV are conjugal properties of Filomena Almirol de Sevilla and her late husband

Andres Sevilla.7 When Honorata died in 1982, her 1/3 undivided share in Lot No. 653 was
transmitted to her heirs, Felisa Almirol and the heirs of Filomena Almirol de Sevilla, who thereby
acquired the property in the proportion of one-half share each.
During the lifetime of Felisa and Honorata Almirol, they lived in the house of Filomena Almirol de
Sevilla, together with their nephew, respondent Leopoldo Sevilla and his family. Leopoldo attended
to the needs of his mother, Filomena, and his two aunts, Honorata and Felisa. 8
Felisa died on July 6, 1988.9 Previous thereto, on November 25, 1985, she executed a last will and
testament devising her 1/2 share in Lot No. 653 to the spouses Leopoldo Sevilla and Belen
Leyson.10 On August 8, 1986, Felisa executed another document denominated as "Donation Inter
Vivos" ceding to Leopoldo Sevilla her 1/2 undivided share in Lot No. 653, which was accepted by
Leopoldo in the same document.11
On September 3, 1986, Felisa Almirol and Peter Sevilla, in his own behalf and in behalf of the heirs
of Filomena Almirol de Sevilla, executed a Deed of Extra-judicial Partition, identifying and
adjudicating the 1/3 share of Honorata Almirol to the heirs of Filomena Almirol de Sevilla and to
Felisa Almirol.12
Thereafter, respondents Leopoldo, Peter and Luzvilla Sevilla obtained the cancellation of Transfer
Certificate of Title No. (T-6671)-1448, over Lot No. 653, and the issuance of the corresponding titles
to Felisa Almirol and the heirs of Filomena Almirol de Sevilla. However, the requested titles for Lot
Nos. 653-A and 653-B, were left unsigned by the Register of Deeds of Dipolog City, pending
submission by Peter Sevilla of a Special Power of Attorney authorizing him to represent the other
heirs of Filomena Almirol de Sevilla.13
On June 21, 1990, Felipe Sevilla, Rosa Sevilla, and the heirs of William, Jimmy and Maria, all
surnamed Sevilla, filed the instant case against respondents Leopoldo Sevilla, Peter Sevilla and
Luzvilla Sevilla, for annulment of the Deed of Donation and the Deed of Extrajudicial Partition,
Accounting, Damages, with prayer for Receivership and for Partition of the properties of the late
Filomena Almirol de Sevilla.14 They alleged that the Deed of Donation is tainted with fraud because
Felisa Almirol, who was then 81 years of age, was seriously ill and of unsound mind at the time of
the execution thereof; and that the Deed of Extra-judicial Partition is void because it was executed
without their knowledge and consent.15
In their answer,16 respondents denied that there was fraud or undue pressure in the execution of the
questioned documents. They alleged that Felisa was of sound mind at the time of the execution of
the assailed deeds and that she freely and voluntarily ceded her undivided share in Lot No. 653 in
consideration of Leopoldo's and his family's love, affection, and services rendered in the past.
Respondents further prayed that Parcels II, III, and IV be partitioned among the heirs of Filomena
Almirol de Sevilla in accordance with the law on intestate succession.
On December 16, 1994, a decision was rendered by the Regional Trial Court of Dipolog City,
Zamboanga del Norte, Branch 6, upholding the validity of the Deed of Donation and declaring the
Deed of Extra-judicial Partition unenforceable. The dispositive portion thereof, reads:

WHEREFORE, IN VIEW OF THE FOREGOING, summing up the evidence for both the
plaintiffs and the defendants, the Court hereby renders judgment:
1) Declaring the questioned Deed of Donation Inter Vivos valid and binding, and, therefore,
has the full force and effect of law;
2) Declaring the questioned Deed of Extra-Judicial Partition as unenforceable as yet as
against the other heirs, as it lacks the legal requisites of Special Power of Attorney or any
other appropriate instrument to be executed by the other heirs who were not made parties
thereto;
3) Finding the parties herein entitled to the partition of Parcel II, III, IV as designated in the
Complaint, in equal shares, and, as to Lot No. 653 designated as Parcel I, it shall be divided
equally into two, between defendant Leopoldo Sevilla on one hand, and, collectively, the
Heirs of William Sevilla, Heirs of Jimmy Sevilla, Heirs of Maria Sevilla, Felipe Sevilla,
Leopoldo Sevilla, Peter Sevilla, Luzvilla Sevilla-Tan, on the other hand, as well as the two
buildings thereon in proportionate values;
4) Directing the parties, if they can agree, to submit herewith a project of partition, which
shall designate the share which pertains to the heirs entitled thereto, that is, the particular
and specific portions of the properties subject of the partition;
5) Directing defendant Peter Sevilla to pay and/or collect from the parties the amounts
corresponding to each one entitled or liable thereto, as recorded in the Statement of
Accounts, except for defendant Leopoldo Sevilla who is found by the Court to have incurred
only an overdraft of P5,742.98 and not P33,204.33 as earlier computed therein.
6) Dismissing the plaintiffs' claim for damages, which is not proved with sufficient evidence,
and defendants' counterclaim, on the same ground.
7) With costs de officio.
IT IS SO ORDERED.17
Both parties appealed to the Court of Appeals. Petitioners contended that the Deed of Donation
should be declared void and that Lot No. 653 should be divided equally among them. Respondents,
on the other hand, posited that the trial court erred in declaring the Deed of Extra-judicial Partition
unenforceable against the other heirs of Filomena Almirol de Sevilla who were not parties to said
Deed.
On September 26, 2000, the Court of Appeals affirmed in toto the assailed decision of the trial
court.18 Petitioners filed a motion for reconsideration but the same was denied on August 30, 2001. 19
Hence, the instant petition based on the following assignment of errors:

THAT THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING AS VOID AB INITIO
THE DEED OF DONATION EXECUTED BY FELISA ALMIROL IN FAVOR OF RESPONDENT
LEOPOLDO SEVILLA CEDING TO HIM ONE HALF PORTION OF LOT 653, DIPOLOG
CADASTRE, IT HAVING BEEN EXECUTED WITH FRAUD, UNDUE PRESSURE AND
INFLUENCE;
THAT THE APPELLATE COURT GREATLY ERRED IN NOT ORDERING THE PARTITION OF LOT
653, DIPOLOG CADASTRE EQUALLY AMONG THE EIGHT (8) HEIRS OF FILOMENA,
HONORATA AND FELISA, ALL SURNAMED ALMIROL.20
To resolve the issue raised in the instant petition for review, the validity of the donation inter
vivos executed by Felisa Almirol in favor of Leopoldo Sevilla must first be determined.
Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of
another who accepts it.21 Under Article 737 of the Civil Code, the donor's capacity shall be
determined as of the time of the making of the donation. Like any other contract, an agreement of
the parties is essential,22 and the attendance of a vice of consent renders the donation voidable. 23
In the case at bar, there is no question that at the time Felisa Almirol executed the deed of donation
she was already the owner of 1/2 undivided portion of Lot No. 653. Her 1/3 undivided share therein
was increased by 1/2 when she and Filomena inherited the 1/3 share of their sister Honorata after
the latter's death. Hence, the 1/2 undivided share of Felisa in Lot No. 653 is considered a present
property which she can validly dispose of at the time of the execution of the deed of donation. 24
Petitioners, however, insist that respondent Leopoldo Sevilla employed fraud and undue influence on
the person of the donor. This argument involves appreciation of the evidence. 25 The settled rule is
that factual findings of the trial court, if affirmed by the Court of Appeals, are entitled to great
respect.26 There are exceptional circumstances when findings of fact of lower courts may be set
aside27 but none is present in the case at bar. Indeed, neither fraud nor undue influence can be
inferred from the following circumstance alleged by the petitioners, to wit
A. That Felisa Almirol lived with respondent Leopoldo Sevilla in the residential house owned
by petitioners and respondents;
B. That the old woman Felisa Almirol was being supported out of the rentals derived from the
building constructed on the land which was a common fund. . . .
C. That when Felisa Almirol was already 82 years old, he [Leopoldo Sevilla] accompanied
her in the Office of Atty. Vic T. Lacaya, Sr., for the purpose of executing her last will and
testament . . .
D. That in the last will and testament executed by Felisa Almirol, she had devised in favor of
respondent Leopoldo Sevilla one-half of the land in question;

E. That respondent Leopoldo Sevilla not contented with the execution by Felisa Almirol of her
last will and testament, had consulted a lawyer as to how he will be able to own the land
immediately;
F. That upon the advice of Atty. Helen Angeles, Clerk of Court of the Regional Trial Court of
Zamboanga del Norte, Dipolog City, Felisa Almirol executed a Deed of Donation, hence, the
questioned Deed of Donation executed in his favor;
G. That the subject matter of the Deed of Donation was the one-half portion of Lot 653,
Dipolog Cadastre, which was willed by Felisa Almirol, in favor of respondent Leopoldo Sevilla
in her last will and testament;
H. That at the time of the execution of the Deed of Donation, Lot No. 653, Dipolog Cadastre,
was not yet partitioned between petitioners and respondents they being heirs of the late
Filomena and Honorata, all surnamed Almirol;
I. That after the execution of the Deed of Donation, respondent Peter Sevilla and the late
Felisa Almirol were the only ones who executed the Deed of Extra-judicial Partition over Lot
653, Dipolog Cadastre, the petitioners were not made parties in the said Deed of
Extrajudicial Partition;
J. That on the basis of the Deed of Extrajudicial Partition and Deed of Donation, respondent
Leopoldo Sevilla caused the subdivision survey of Lot 653, Dipolog Cadastre, dividing the
same into two (2) lots, adjudicating one-half of the lot in his favor and the other half in favor
of respondents Peter Sevilla and Luzvilla Sevilla, and to respondent Leopoldo Sevilla
himself;
K. That only two persons knew the actual survey of the land, petitioner Felipe Sevilla and
respondent Leopoldo Sevilla himself, the rest of the co-owners were not even notified;
L. That on the basis of the Extrajudicial Partition, Deed of Donation, the approved subdivision
plan, respondent Leopoldo Sevilla filed a petition for issuance of the corresponding titles for
the two lots, but the Register of Deeds of Dipolog City refused to issue the corresponding
titles for the two lots to respondent Leopoldo Sevilla so that up to this moment . . . the two
titles were left unsigned by the Register of Deeds.28
There is fraud when, through the insidious words or machinations of one of the contracting parties,
the other is induced to enter into a contract which, without them, he would not have agreed
to.29 There is undue influence when a person takes improper advantage of his power over the will of
another, depriving the latter of a reasonable freedom of choice. The following circumstances shall be
considered: the confidential, family, spiritual and other relations between the parties, or the fact that
the person alleged to have been unduly influenced was suffering from mental weakness, or was
ignorant or in financial distress.30
Ei incumbit probatio qui dicit, non qui negat. He who asserts, not he who denies, must prove. We
have consistently applied the ancient rule that if the plaintiff, upon whom rests the burden of proving

his cause of action, fails to show in a satisfactory manner facts on which he bases his claim, the
defendant is under no obligation to prove his exception or defense. 31 In the instant case, the selfserving testimony of the petitioners are vague on what acts of Leopoldo Sevilla constituted fraud and
undue influence and on how these acts vitiated the consent of Felisa Almirol. Fraud and undue
influence that vitiated a party's consent must be established by full, clear and convincing evidence,
otherwise, the latter's presumed consent to the contract prevails.32 Neither does the fact that the
donation preceded the partition constitute fraud. It is not necessary that partition should first be had
because what was donated to Leopoldo was the 1/2 undivided share of Felisa in Lot No. 653.
Moreover, petitioners failed to show proof why Felisa should be held incapable of exercising
sufficient judgment in ceding her share to respondent Leopoldo. 33 As testified by the notary public
who notarized the Deed of Donation, Felisa confirmed to him her intention to donate her share in Lot
No. 653 to Leopoldo. He stressed that though the donor was old, she was of sound mind and could
talk sensibly. Significantly, there is nothing in the record that discloses even an attempt by petitioners
to rebut said declaration of the notary public.
Clearly, therefore, the courts below did not err in sustaining the validity of the deed of donation.
Anent the Deed of Extra-judicial Partition, we find that the same is void ab initio and not merely
unenforceable. InDelos Reyes v. Court of Appeals,34 which is a case involving the sale of a lot by a
person who is neither the owner nor the legal representative, we declared the contract void ab initio.
It was held that one of the requisites of a valid contract under Article 1318 of the Civil Code is the
consent and the capacity to give consent of the parties to the contract. The legal capacity of the
parties is an essential element for the existence of the contract because it is an indispensable
condition for the existence of consent. There is no effective consent in law without the capacity to
give such consent. In other words, legal consent presupposes capacity. Thus, there is said to be no
consent, and consequently, no contract when the agreement is entered into by one in behalf of
another who has never given him authorization therefor unless he has by law a right to represent the
latter.35
In the case at bar, at the time Felisa executed the deed of extra-judicial partition dividing the share of
her deceased sister Honorata between her and the heirs of Filomena Almirol de Sevilla, she was no
longer the owner of the 1/2 undivided portion of Lot No. 653, having previously donated the same to
respondent Leopoldo Sevilla who accepted the donation in the same deed. A donation inter vivos, as
in the instant case, is immediately operative and final.36 As a mode of acquiring ownership, it results
in an effective transfer of title over the property from the donor to the donee and the donation is
perfected from the moment the donor knows of the acceptance by the donee. And once a donation is
accepted, the donee becomes the absolute owner of the property donated.
Evidently, Felisa did not possess the capacity to give consent to or execute the deed of partition
inasmuch as she was neither the owner nor the authorized representative of respondent Leopoldo to
whom she previously transmitted ownership of her undivided share in Lot No. 653. Considering that
she had no legal capacity to give consent to the deed of partition, it follows that there is no consent
given to the execution of the deed, and therefore, there is no contract to speak of. As such, the deed
of partition is void ab initio, hence, not susceptible of ratification.

Nevertheless, the nullity of the deed of extra-judicial partition will not affect the validity of the
donation inter vivosceding to respondent Leopoldo Sevilla the 1/2 undivided share of Felisa Almirol
in Lot No. 653. Said lot should therefore be divided as follows: 1/2 shall go to respondent Leopoldo
Sevilla by virtue of the deed of donation, while the other half shall be divided equally among the heirs
of Filomena Almirol de Sevilla including Leopoldo Sevilla, following the rules on intestate succession.
Finally, we note that the name of Rosa Sevilla, daughter of Filomena Almirol de Sevilla, and one of
the plaintiffs herein, was omitted in the dispositive portion of the trial court's decision. 37 Her name
should therefore be included in the dispositive portion as one of the heirs entitled to share in the
properties of the late Filomena Almirol de Sevilla.
WHEREFORE, in view of all the foregoing, the Decision of the Court of Appeals in CA-G.R. CV No.
48956, affirming in toto the Decision of the Regional Trial Court of Dipolog City, Branch 6, in Civil
Case No. 4240, is AFFIRMED with MODIFICATION. The Deed of Extra-judicial Partition dated
September 3, 1986 is declared void, and the name of Rosa Sevilla is ordered included in the
dispositive portion of the trial court's judgment.
SO ORDERED.
Davide, Jr., C .J ., Vitug, Carpio and Azcuna, JJ ., concur.

G.R. No. 82670 September 15, 1989

DOMETILA M. ANDRES, doing business under the name and style
"IRENE'S WEARING APPAREL,"petitioner,
vs.
MANUFACTURERS HANOVER & TRUST CORPORATION and COURT
OF APPEALS, respondents.
Roque A. Tamayo for petitioner.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for private
respondent.

CORTES, J.:

Assailed in this petition for review on certiorari is the judgment of the Court of Appeals, which,
applying the doctrine of solutio indebiti, reversed the decision of the Regional Trial Court, Branch CV,
Quezon City by deciding in favor of private respondent.
Petitioner, using the business name "Irene's Wearing Apparel," was engaged in the manufacture of
ladies garments, children's wear, men's apparel and linens for local and foreign buyers. Among its
foreign buyers was Facets Funwear, Inc. (hereinafter referred to as FACETS) of the United States.
In the course of the business transaction between the two, FACETS from time to time remitted
certain amounts of money to petitioner in payment for the items it had purchased. Sometime in
August 1980, FACETS instructed the First National State Bank of New Jersey, Newark, New Jersey,
U.S.A. (hereinafter referred to as FNSB) to transfer $10,000.00 to petitioner via Philippine National
Bank, Sta. Cruz Branch, Manila (hereinafter referred to as PNB).
Acting on said instruction, FNSB instructed private respondent Manufacturers Hanover and Trust
Corporation to effect the above- mentioned transfer through its facilities and to charge the amount to
the account of FNSB with private respondent. Although private respondent was able to send a telex
to PNB to pay petitioner $10,000.00 through the Pilipinas Bank, where petitioner had an account, the
payment was not effected immediately because the payee designated in the telex was only "Wearing
Apparel." Upon query by PNB, private respondent sent PNB another telex dated August 27, 1980
stating that the payment was to be made to "Irene's Wearing Apparel." On August 28, 1980,
petitioner received the remittance of $10,000.00 through Demand Draft No. 225654 of the PNB.
Meanwhile, on August 25, 1980, after learning about the delay in the remittance of the money to
petitioner, FACETS informed FNSB about the situation. On September 8, 1980, unaware that
petitioner had already received the remittance, FACETS informed private respondent about the
delay and at the same time amended its instruction by asking it to effect the payment through the
Philippine Commercial and Industrial Bank (hereinafter referred to as PCIB) instead of PNB.
Accordingly, private respondent, which was also unaware that petitioner had already received the
remittance of $10,000.00 from PNB instructed the PCIB to pay $10,000.00 to petitioner. Hence, on
September 11, 1980, petitioner received a second $10,000.00 remittance.
Private respondent debited the account of FNSB for the second $10,000.00 remittance effected
through PCIB. However, when FNSB discovered that private respondent had made a duplication of
the remittance, it asked for a recredit of its account in the amount of $10,000.00. Private respondent
complied with the request.
Private respondent asked petitioner for the return of the second remittance of $10,000.00 but the
latter refused to pay. On May 12, 1982 a complaint was filed with the Regional Trial Court, Branch
CV, Quezon City which was decided in favor of petitioner as defendant. The trial court ruled that Art.
2154 of the New Civil Code is not applicable to the case because the second remittance was made
not by mistake but by negligence and petitioner was not unjustly enriched by virtue thereof [Record,
p. 234]. On appeal, the Court of Appeals held that Art. 2154 is applicable and reversed the RTC
decision. The dispositive portion of the Court of Appeals' decision reads as follows:

WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE and
another one entered in favor of plaintiff-appellant and against defendant-appellee
Domelita (sic) M. Andres, doing business under the name and style "Irene's Wearing
Apparel" to reimburse and/or return to plaintiff-appellant the amount of $10,000.00,
its equivalent in Philippine currency, with interests at the legal rate from the filing of
the complaint on May 12, 1982 until the whole amount is fully paid, plus twenty
percent (20%) of the amount due as attomey's fees; and to pay the costs.
With costs against defendant-appellee.
SO ORDERED. [Rollo, pp. 29-30.]
Thereafter, this petition was filed. The sole issue in this case is whether or not the private respondent
has the right to recover the second $10,000.00 remittance it had delivered to petitioner. The
resolution of this issue would hinge on the applicability of Art. 2154 of the New Civil Code which
provides that:
Art. 2154. If something received when there is no right to demand it, and it was
unduly delivered through mistake, the obligation to return it arises.
This provision is taken from Art. 1895 of the Spanish Civil Code which provided that:
Art. 1895. If a thing is received when there was no right to claim it and which, through
an error, has been unduly delivered, an obligation to restore it arises.
In Velez v. Balzarza, 73 Phil. 630 (1942), the Court, speaking through Mr. Justice Bocobo explained
the nature of this article thus:
Article 1895 [now Article 2154] of the Civil Code abovequoted, is therefore
applicable. This legal provision, which determines the quasi-contract of solution
indebiti, is one of the concrete manifestations of the ancient principle that no one
shall enrich himself unjustly at the expense of another. In the Roman Law Digest the
maxim was formulated thus: "Jure naturae acquum est, neminem cum alterius
detrimento et injuria fieri locupletiorem." And the Partidas declared: "Ninguno non
deue enriquecerse tortizeramente con dano de otro." Such axiom has grown through
the centuries in legislation, in the science of law and in court decisions. The
lawmaker has found it one of the helpful guides in framing statutes and codes. Thus,
it is unfolded in many articles scattered in the Spanish Civil Code. (See for example,
articles, 360, 361, 464, 647, 648, 797, 1158, 1163, 1295, 1303, 1304, 1893 and
1895, Civil Code.) This time-honored aphorism has also been adopted by jurists in
their study of the conflict of rights. It has been accepted by the courts, which have not
hesitated to apply it when the exigencies of right and equity demanded its assertion.
It is a part of that affluent reservoir of justice upon which judicial discretion draws
whenever the statutory laws are inadequate because they do not speak or do so with
a confused voice. [at p. 632.]

For this article to apply the following requisites must concur: "(1) that he who paid was not under
obligation to do so; and, (2) that payment was made by reason of an essential mistake of fact" [City
of Cebu v. Piccio, 110 Phil. 558, 563 (1960)].
It is undisputed that private respondent delivered the second $10,000.00 remittance. However,
petitioner contends that the doctrine of solutio indebiti, does not apply because its requisites are
absent.
First, it is argued that petitioner had the right to demand and therefore to retain the second
$10,000.00 remittance. It is alleged that even after the two $10,000.00 remittances are credited to
petitioner's receivables from FACETS, the latter allegedly still had a balance of $49,324.00. Hence, it
is argued that the last $10,000.00 remittance being in payment of a pre-existing debt, petitioner was
not thereby unjustly enriched.
The contention is without merit.
The contract of petitioner, as regards the sale of garments and other textile products, was with
FACETS. It was the latter and not private respondent which was indebted to petitioner. On the other
hand, the contract for the transmittal of dollars from the United States to petitioner was entered into
by private respondent with FNSB. Petitioner, although named as the payee was not privy to the
contract of remittance of dollars. Neither was private respondent a party to the contract of sale
between petitioner and FACETS. There being no contractual relation between them, petitioner has
no right to apply the second $10,000.00 remittance delivered by mistake by private respondent to
the outstanding account of FACETS.
Petitioner next contends that the payment by respondent bank of the second $10,000.00 remittance
was not made by mistake but was the result of negligence of its employees. In connection with this
the Court of Appeals made the following finding of facts:
The fact that Facets sent only one remittance of $10,000.00 is not disputed. In the
written interrogatories sent to the First National State Bank of New Jersey through
the Consulate General of the Philippines in New York, Adelaide C. Schachel, the
investigation and reconciliation clerk in the said bank testified that a request to remit
a payment for Facet Funwear Inc. was made in August, 1980. The total amount
which the First National State Bank of New Jersey actually requested the plaintiffappellant Manufacturers Hanover & Trust Corporation to remit to Irene's Wearing
Apparel was US $10,000.00. Only one remittance was requested by First National
State Bank of New Jersey as per instruction of Facets Funwear (Exhibit "J", pp. 4-5).
That there was a mistake in the second remittance of US $10,000.00 is borne out by
the fact that both remittances have the same reference invoice number which is 263
80. (Exhibits "A-1- Deposition of Mr. Stanley Panasow" and "A-2-Deposition of Mr.
Stanley Panasow").

Plaintiff-appellant made the second remittance on the wrong assumption that

defendant-appellee did not receive the first remittance of US $10,000.00. [Rollo, pp.
26-27.]
It is evident that the claim of petitioner is anchored on the appreciation of the attendant facts which
petitioner would have this Court review. The Court holds that the finding by the Court of Appeals that
the second $10,000.00 remittance was made by mistake, being based on substantial evidence, is
final and conclusive. The rule regarding questions of fact being raised with this Court in a petition
for certiorari under Rule 45 of the Revised Rules of Court has been stated in Remalante v. Tibe, G.R.
No. 59514, February 25, 1988, 158 SCRA 138, thus:
The rule in this jurisdiction is that only questions of law may be raised in a petition for
certiorari under Rule 45 of the Revised Rules of Court. "The jurisdiction of the
Supreme Court in cases brought to it from the Court of Appeals is limited to reviewing
and revising the errors of law imputed to it, its findings of fact being conclusive"
[Chan v. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737,
reiterating a long line of decisions]. This Court has emphatically declared that "it is
not the function of the Supreme Court to analyze or weigh such evidence all over
again, its jurisdiction being limited to reviewing errors of law that might have been
committed by the lower court" [Tiongco v. De la Merced, G.R. No. L-24426, July 25,
1974, 58 SCRA 89; Corona v. Court of Appeals, G.R. No.L-62482, April 28, 1983,
121 SCRA 865; Baniqued v. Court of Appeals, G. R. No.L-47531, February 20, 1984,
127 SCRA 596]. "Barring, therefore, a showing that the findings complained of are
totally devoid of support in the record, or that they are so glaringly erroneous as to
constitute serious abuse of discretion, such findings must stand, for this Court is not
expected or required to examine or contrast the oral and documentary evidence
submitted by the parties" [Santa Ana, Jr. v. Hernandez, G.R. No. L-16394, December
17, 1966, 18 SCRA 9731. [at pp. 144-145.]
Petitioner invokes the equitable principle that when one of two innocent persons must suffer by the
wrongful act of a third person, the loss must be borne by the one whose negligence was the
proximate cause of the loss.
The rule is that principles of equity cannot be applied if there is a provision of law specifically
applicable to a case [Phil. Rabbit Bus Lines, Inc. v. Arciaga, G.R. No. L-29701, March 16, 1987,148
SCRA 433; Zabat, Jr. v. Court of Appeals, G.R. No. L36958, July 10, 1986, 142 SCRA 587; Rural
Bank of Paranaque, Inc. v. Remolado, G.R. No. 62051, March 18, 1985, 135 SCRA 409; Cruz v.
Pahati, 98 Phil. 788 (1956)]. Hence, the Court in the case of De Garcia v. Court of Appeals, G.R.
No.L-20264, January 30, 1971, 37 SCRA 129, citing Aznar v. Yapdiangco, G.R. No. L-18536, March
31, 1965, 13 SCRA 486, held:
... The common law principle that where one of two innocent persons must suffer by
a fraud perpetrated by another, the law imposes the loss upon the party who, by his
misplaced confidence, has enabled the fraud to be committed, cannot be applied in a
case which is covered by an express provision of the new Civil Code, specifically

Article 559. Between a common law principle and a statutory provision, the latter
must prevail in this jurisdiction. [at p. 135.]
Having shown that Art. 2154 of the Civil Code, which embodies the doctrine of solutio indebiti,
applies in the case at bar, the Court must reject the common law principle invoked by petitioner.
Finally, in her attempt to defeat private respondent's claim, petitioner makes much of the fact that
from the time the second $10,000.00 remittance was made, five hundred and ten days had elapsed
before private respondent demanded the return thereof. Needless to say, private respondent
instituted the complaint for recovery of the second $10,000.00 remittance well within the six years
prescriptive period for actions based upon a quasi-contract [Art. 1145 of the New Civil Code].
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals is hereby
AFFIRMED.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr. and Bidin, JJ., concur.
Feliciano, J., is on leave.

G.R. No. 126013 February 12, 1997

SPOUSES HEINZRICH THEIS AND BETTY THEIS, petitioners,
vs.
HONORABLE COURT OF APPEALS, HONORABLE ELEUTERIO
GUERRERO, ACTING PRESIDING JUDGE, BRANCH XVIII, REGIONAL
TRIAL COURT, TAGAYTAY CITY, CALSONS DEVELOPMENT
CORPORATION,respondents.

HERMOSISIMA, JR., J.:

In the instant petition, we shall have the occasion to apply the concept of mistake in the annulment
of contracts.
Private respondent Calsons Development Corporation is the owner of three (3) adjacent parcels of
land covered by Transfer Certificate of Title (TCT) Nos. 15515 (parcel no. 1 in the location map),
15516 (parcel no. 2) and 15684 (parcel no. 3), with the area of 1,000 square meters, 226 square

meters and 1,000 square meters, respectively. All three parcels of land are situated along Ligaya
Drive, Barangay Francisco, Tagaytay City. Adjacent to parcel no. 3, which is the lot covered by TCT
No. 15684, is a vacant lot denominated as parcel no. 4.
In 1985, private respondent constructed a two-storey house on parcel no. 3. The lots covered by
TCT No. 15515 and TCT No. 15516, which are parcel no. 1 and parcel no. 2, respectively, remained
idle.
However, in a survey conducted in 1985, parcel no. 3, where the two-storey house stands, was
erroneously indicated to be covered not by TCT No. 15684 but by TCT No. 15515, while the two idle
lands (parcel nos. 1 and 2) were mistakenly surveyed to be located on parcel no. 4 instead (which
was not owned by private respondent) and covered by TCT Nos. 15516 and 15684.
On October 26, 1987, unaware of the mistake by which private respondent appeared to be the
owner of parcel no. 4 as indicated in the erroneous survey, and based on the erroneous information
given by the surveyor that parcel no. 4 is covered by TCT No. 15516 and 15684, private respondent,
through its authorized representative, one Atty. Tarcisio S. Calilung, sold said parcel no. 4 to
petitioners.
Upon execution of the Deed of Sale, private respondent delivered TCT Nos. 15516 and 15684 to
petitioners who, on October 28, 1987, immediately registered the same with the Registry of Deeds of
Tagaytay City. Thus, TCT Nos. 17041 and 17042 in the names of the petitioners were issued.
Indicated on the Deed of Sale as purchase price was the amount of P130,000.00. The actual price
agreed upon and paid, however, was P486,000.00. This amount was not immediately paid to private
respondent; rather, it was deposited in escrow in an interest-bearing account in its favor with the
United Coconut Planters Bank in Makati City. The P486,000.00 in escrow was released to, and
received by, private respondent on December 4, 1987.
Thereafter, petitioners did not immediately occupy and take possession of the two (2) idle parcels of
land purchased from private respondent. Instead, petitioners went to Germany.
In the early part of 1990, petitioners returned to the Philippines. When, they went to Tagaytay to look
over the vacant lots and to plan the construction of their house thereon, they discovered that parcel
no. 4 was owned by another person. They also discovered that the lots actually sold to them were
parcel nos. 2 and 3 covered by TCT Nos. 15516 and 15684. respectively. Parcel no. 3, however,
could not have been sold to the petitioners by the private respondents as a two-storey house, the
construction cost of which far exceeded the price paid by the petitioners, had already been built
thereon even prior to the execution of the contract between the disputing parties.
Petitioners insisted that they wanted parcel no. 4, which is the idle lot adjacent to parcel no. 3, and
persisted in claiming that it was parcel no. 4 that private respondent sold to them. However, private
respondent could not have possibly sold the same to them for it did not own parcel no. 4 in the first
place.
The mistake in the identity of the lots is traceable to the erroneous survey conducted in 1985.

To remedy the mistake, private respondent offered parcel nos. 1 and 2 covered by TCT Nos. 15515
and 15516, respectively, as these two were precisely the two vacant lots which private respondent
owned and intended to sell when it entered into the transaction with petitioners. Petitioners
adamantly rejected the good faith offer. They refused to yield to reason and insisted on taking parcel
no. 3, covered by TCT No. 155864 and upon which a two-storey house stands, in addition to parcel
no. 2, covered by TCT No. 15516, on the ground that these TCTs have already been cancelled and
new ones issued in their name.
Such refusal of petitioners prompted private respondent to make another offer, this time, the return
of an amount double the price paid by petitioners. Petitioners still refused and stubbornly insisted in
their stand.
Private respondent was then compelled to file an action for annulment of deed of sale and
reconveyance of the properties subject thereof 1 in the Regional Trial Court. 2
The trial court rendered judgment in favor of private respondent. Identifying the core issue in the
instant controversy to be the voidability of the contract of sale between petitioners and private
respondent on the ground of mistake, the trial court annulled said contract of sale after finding that
there was indeed a mistake in the identification of the parcels of land intended to be the subject
matter of said sale. The trial court ratiocinated:
Meeting head-on the issue of alleged mistake in the object of the same, defendants
in their answer averred that they relied on the technical descriptions of TCT Nos.
15516 and 15684 appearing in the deed of sale.
...
A resolution of the conflicting claims of the parties to the instant controversy calls for
an inquiry on their real intent relative to the identity of the parcels which plaintiff
intended to sell to defendants and which the latter in turn, intended to buy from the
former. For, the Court cannot ignore the dictates of logic and common sense which,
ordinarily, could not push a person to sell to another, a property which the former
does not own in the first place, for fear of adverse consequences. The vendee,
following the same reasoning, would not buy a thing unless he is totally certain that
the seller is the real owner of the thing offered for sale. It is equally true that when
one sells or buys a real property, he either sells or buys the property as he sees it, in
its actual setting and by its physical metes and bounds, and not be the mere lot
number assigned to the same property in the certificate of title or in any document.
And, when a buyer of real property decides to purchase from his seller, he is
ordinarily bound by prudence to ascertain the true nature, identity or character of the
property that he intends to buy and ascertain the title of his vendor before he parts
with his money. It is quite obvious that the foregoing precepts and precautions were
observed by the parties in the case at bar as there is no question at all that he sale in
question was consummated through the initiative of Mrs. Gloria Contreras and then
Vice-Mayor Benjamin Erni . . . both brokers of the sale who, after a chance meeting
with defendants at the Taal Vista Lodge Hotel prior to the sale of plaintiffs parcels,
brought defendants to the vicinity where plaintiffs three (3) adjacent parcels of land

are located and pointed to defendants the two (2) vacant parcels right beside
plaintiffs house. It is also undisputed that when defendants intimated to the brokers
their desire to buy the vacant lots pointed to them when they visited the same place,
they were brought to plaintiffs representative, Tarcisio S. Calilung, at the latter's office
in Makati where the parties discussed the terms of the sale.
The Court notes further from the records that defendants' desire to buy vacant lots
from plaintiff is not only confirmed by the testimony of Gloria Contreras and the
ocular inspection conducted by the court but by defendant Betty Theis herself when
the latter testified as follows:
"COURT:
Q. Why, what was the lot that you intended to buy?
A. The right side of the house, Your Honor." (TSN of November 8,
1991, page 19)
Similarly, in answer to a question propounded to the same defendant by their counsel, she stated
that
"ATTY. ROSALES:
Q. In other words, the titles delivered to you were not the titles
covering the right side of the house?
A No, sir." (Ibid., page 20)
It is relevant to mention that when the defendants attempted to take possession of
the parcels of land they bought from the plaintiff on which they intended to construct
their house after their return from a foreign sojourn, they admittedly wanted to take
that vacant area, which as herein shown, turns out to be a property not owned by
plaintiff. From this act of the defendants, a clear meaning is shown. Defendants
themselves, knew right from the beginning that what they intended to buy was that
vacant lot, not the lot where plaintiffs house stands, covered by TCT No. 15684
which was wrongly mentioned as one of the objects of the sale. . . .
The fact that the Deed of Sale subsequently executed by plaintiff and the defendants
on October 27, 1987 covers the parcel of land where plaintiffs two- storey house was
constructed will clearly reflect a situation that is totally different from what defendants
had intended to buy from the plaintiff viz-a-viz [sic] the latter's intention to sell its two
(2) vacant lots to defendants. Notwithstanding defendants' claim that it was not
possible for plaintiffs representative not to be familiar with its properties, the acts and
circumstances established in this case would clearly show, and this Court is
convinced, that the inclusion of the parcel where plaintiffs house is constructed is
solely attributable to a mistake in the object of the sale between the parties. This

mistake, obviously, was made, on the part of plaintiffs representative when the latter
mistook the vacant lot situated on the right side of plaintiffs house as its vacant
parcels of land when its vacant lots are actually situated on the left side of the same
house. Indeed, such mistake on plaintiffs part appears to be tragic as it turned out
later that the vacant lot on the right side of plaintiffs house did not belong to plaintiff.
Worse, is the fact that what was conveyed to defendants under the deed of sale was
the parcel where plaintiff s house already stood at the time of the sale. This,
definitely, is not what the parties intended.
. . . Going by the facts established by defendants' evidence, it is clear
that defendants did not intend to buy the parcel of land where plaintiffs house stood
as defendant Betty Theis declared in her testimony that they wanted to buy the
parcel at the right side of plaintiffs house where she and her husband would
construct their house (TSN of June 4 1991, page 56). Neither can this Court accept
the hypothesis that plaintiff intended to sell that parcel where its house was already
constructed for if this was its true intention. it would not sell its two (2) lots at the
price of P486,000.00 which is way below the costs of its construction of
P1,500,000.00.
The law itself explicitly recognizes that consent of the parties is one of the essential
elements to the validity of the contract and where consent is given through mistake,
the validity of the contractual relations between the parties is legally impaired.
As earlier stated, the facts obtaining in the case at bar undoubtedly show that when
defendants bought the properties of plaintiff, they intended to buy the vacant lots
owned by the latter. As the sale that was finally consummated by the parties had
covered the parcel where plaintiffs house was constructed even before the sale took
place, this Court can safely assume that the deed of sale executed by the parties did
not truly express their true intention. In other words, the mistake or error on the
subject of the sale in question appears to be substantial as the object of the same
transaction is different from that intended by the parties. This fiasco could have been
cured and the pain and travails of this litigation avoided,had parties agreed to a
reformation of the deed of sale. But.as shown by the sequence of events occurring
after the sale was consummated. and the mistake was discovered. the defendants
refused, insisting that they wanted the vacant lots on the right side of plaintiffs house.
which was impossible the vacant lots on the right side for plaintiff to do, as said
vacant lots were not of its own dominion. 3 [Emphasis ours]
Aggrieved by the decision of the trial court, petitioners sought its
reversal 4 from respondent Court of Appeals 5. Respondent court, however, did not find the appeal
meritorious and accordingly affirmed 6 the trial court decision. Ruled the respondent appellate court:
There is no doubt that when defendants-appellants attempted to take physical
possession of Parcel No. 4 in May, 1990, they were prevented by the true owner
thereof from taking possession of said land. To clear the matter, plaintiff-appellee
hired a new surveyor who revealed in his survey that Parcel No. 4 is not included in

plaintiff-appellee's Transfer Certificates of Title from which said plaintiff-appellee

mistakenly offered defendants-appellants said Parcel No. 4. Realizing its mistake,
plaintiff- appellee offered defendants-appellants Parcels Nos. 1 and 2 under the
same Transfer Certificates of Title or the reimbursement of the purchase price in
double amount. But defendants-appellants insisted this time to acquire Parcel No. 3
wherein plaintiff-appellee had already a house, and was not the object of the sale.
Said Parcel No. 3 cannot be the object of the sale between the parties as plaintiffappellee's house already stands in the said area even before defendants-appellants
had chosen Parcel No. 4 which was described to be on the right side of said plaintiffappellee's house in Parcel No. 3. There is no dispute that defendants-appellants
wanted to buy Parcel No. 4 as testified to by defendant-appellant Petty Theis, herself
(p. 19, tsn, Nov. 8, 1991), which lot turned out to be outside of the Transfer
Certificates of Title of plaintiff-appellee. Defendants-appellants cannot now insist on
Parcel No. 3 as the same was not the object of the sale between the parties.
Clearly, therefore.there was honest mistake on the part of Plaintiff- appellee in the
sale of Parcel No. 4 to defendants-appellants which plaintiff- appellee tried to remedy
by offering defendants-appellant instead his Parcels Nos. 1 or 2, or reimbursement of
the purchase price in double amount. 7[Emphasis ours]
We find that respondent court correctly affirmed the findings and conclusions of the trial court in
annulling the deed of sale as the former are supported by evidence and the latter are in accordance
with existing law and jurisprudence.
Art. 1390 of the New Civil Code provides:
Art. 1390. The following contracts are voidable or annullable, even though there may
have been no damage to the contracting parties:
(1) . . .
(2) Those where the consent is vitiated by mistake, violence, intimidation, undue
influence, or fraud.
xxx xxx xxx
In the case at bar, the private respondent obviously committed an honest mistake in selling parcel
no. 4. As correctly noted by the Court of Appeals, it is quite impossible for said private respondent to
sell the lot in question as the same is not owned by it. The good faith of the private respondent is
evident in the fact that when the mistake was discovered, it immediately offered two other vacant lots
to the petitioners or to reimburse them with twice the amount paid. That petitioners refused either
option left the private respondent with no other choice but to file an action for the annulment of the
deed of sale on the ground of mistake. As enunciated in the case of Mariano vs. Court of Appeals: 8

A contract may be annulled where the consent of one of the contracting parties was
procured by mistake, fraud, intimidation, violence, or undue influence.
Art. 1331 of the New Civil Code provides for the situations whereby mistake may invalidate consent.
It states:
Art. 1331. In order that mistake may invalidate consent, it should refer to the
substance of the thing which is the object of the contract, or to those conditions
which have principally moved one or both parties to enter into the contract.
Tolentino 9 explains that the concept of error in this article must include both ignorance, which is the
absence of knowledge with respect to a thing, and mistake properly speaking, which is a wrong
conception about said thing, or a belief in the existence of some circumstance, fact, or event, which in
reality does not exist. In both cases, there is a lack of full and correct knowledge about the thing. The
mistake committed by the private respondent in selling parcel no. 4 to the petitioners falls within the
second type. Verily, such mistake invalidated its consent and as such, annulment of the deed of sale is
proper.
The petitioners cannot be justified in their insistence that parcel no. 3, upon which private
respondent constructed a two-storey house, be given to them in lieu of parcel no. 4. The cost of
construction in 1985 for the said house (P1,500,000.00) far exceeds the amount paid by the
petitioners to the private respondent (P486,000.00). Moreover, the trial court, in questioning private
respondent's witness, Atty. Tarciso Calilung (who is also its authorized representative) clarified that
parcel no. 4, the lot mistakenly sold, was a vacant lot: 10
COURT: What property did you point to them?
A. I pointed to parcel No. 4, as appearing in the sketch.
COURT: Parcel No. 4 is a vacant lot?
A. Yes, your Honor.
COURT: So, there was no house on that lot?
A. There was no house. There were pineapple crops existing on the property.
COURT: So, you are telling the Court that the intended lot is vacant lot or Parcel 4?
A. Yes, your Honor.
Thus, to allow the petitioners to take parcel no. 3 would be to countenance unjust enrichment.
Considering that petitioners intended at the outset to purchase a vacant lot, their refusal to accept
the offer of the private respondent to give them two (2) other vacant lots in exchange, as well as their
insistence on parcel no. 3, which is a house and lot, is manifestly unreasonable. As held by this
Court in the case of Security Bank and Trust Company v. Court of Appeals 11:

Hence, to allow petitioner bank to acquire the constructed building at a price far
below its actual construction cost would undoubtedly constitute unjust enrichment for
the bank to the prejudice of the private respondent. Such unjust enrichment, as
previously discussed, is not allowed by law.
WHEREFORE, the petition is hereby DISMISSED and the decision of the Court Appeals in CA-G.R.
47000 dated May 31, 1996 AFFIRMED. Costs against the petitioner.
SO ORDERED.
Padilla, Belosillo, Vitug and Kapunan, JJ., concur.

G.R. No. L-10462

March 16, 1916

ANDREA DUMASUG, plaintiff -appellee,

vs.
FELIX MODELO, defendant-appellant.
Fortunato Borromeo Veloso for appellant.
Tomas Alonso for appellee.
TORRES, J.:
An appeal raised, by bill of exceptions, by counsel for defendant from the judgment of September
21, 1914, in which the Court of First Instance of Cebu held to be null and void the document, marked
as Exhibit 1, executed by the plaintiff Andrea Dumasug, by virtue whereof defendant claims that the
lands and carabao, the subject matter of the complaint, were conveyed to him. The said judgment
further declared the plaintiff to be the exclusive owner of said lands; ordered defendant to deliver
and restore the same to the plaintiff and, moreover, to pay her the sum of P120, the value of her
carabao unlawfully sold by him, and likewise P75 as rent for the use and occupation of the lands in
question during the time they were in defendant's possession, and to pay the costs.
On June 17, 1912, counsel for Andrea Dumasug filed a written complaint in the Court of First
Instance of Cebu, in which he alleged that about the month of November, 1911, defendant
persuaded plaintiff to sign a document by falsely and maliciously making her believe that it contained
an engagement on plaintiff's part to pay defendant a certain sum of money as expresses occasioned
the latter by reason of a lawsuit in which plaintiff Dumasug was one of the parties and was protected
and aided by defendant; that this document, plaintiff, who does not know how to write, signed by
affixing her mark thereto, believing in good faith that defendant had told her the truth and that said
document referred to the expenses incurred by defendant; but that three months after the execution
of said document, defendant took possession of a carabao belonging to plaintiff and also of two
parcels of land, likewise belonging to her, situated in the barrio of Katang, pueblo of Argao, Cebu,
the area and boundaries of which are specified in the complaint, and notified plaintiff that she had

conveyed to him by absolute sale said parcels of land and the plow carabao; that in spite of plaintiff's
opposition and protests, defendant took possession of said property and, up to the date of the
complaint, continued to hold possession thereof and to enjoy the products of the lands and of the
labor of the carabao; and that, by reason of such acts, defendant had caused loss and damage to
plaintiff in the sum of P1,000. Said counsel therefore prayed the court to render judgment by
declaring null and void and of no value whatever the alleged contract of purchase and sale of the
carabao and the two parcels of land described in the complaint, to order defendant to restore to
plaintiff said work animal and lands, and, besides, to pay her the sum of P1,000 for the loss and
damage caused her, in addition to the costs of the suit.
The demurrer to the aforementioned complaint having been overruled, counsel for defendant in his
answer denied each and all of the facts alleged in the complaint, and in special defense set forth that
if defendant had in his possession the property described in the complaint, it was due to the fact that
plaintiff sold it to him, which sale was recorded in a public instrument duly executed and signed by
plaintiff in the presence of witnesses. Defendant's counsel therefore prayed the court to absolve his
client from the complaint and to hold defendant to be the absolute owner of the disputed property,
and to sentence plaintiff to hold her peace for ever and to pay the costs.
After trial and the hearing of evidence by both parties, the court rendered the aforementioned
judgment, to which defendant excepted and by written motion asked for a reopening of the case and
a new trial. This motion was denied, exception to this ruling was taken by defendant and, upon
presentation of the proper bill of exceptions, the same was approved and transmitted to the clerk of
this court.
The sole question to be resolved in this litigation is whether or not the instrument of purchase and
sale of two parcels of land and a plow carabao, Exhibit 1, is null and void. The defendant alleges that
by means thereof he acquired the possession and ownership of the said property, while the plaintiff,
in turn, sets forth in her complaint that the said instrument is of no value whatever, as her consent
thereto was obtained by means of fraud and deceit on the part of defendant.
The instrument, the annulment whereof is requested by the plaintiff, is Exhibit 1 (p. 27 of the record).
If sets forth that on November 3, 1911, plaintiff Andrea Dumasug, in consideration of the sum of
P333.49 which she received from defendant, Felix Modelo, sold and conveyed to the latter outright
two parcels of land and the plow carabao which are the subject matter of the complaint, and
furthermore bound herself to warrant and defend the title thereto. This contract of sale appears to be
authorized by the vendor, Andrea Dumasug, by means of a cross placed between her Christian
name and surname in the presence of the witnesses Mariano Abear and Apolina Minosa, and
certified before a notary on the very date of its execution.
In regard to the events leaving up to the said contract, it ought to be stated that on October 12, 1910,
Andrea Dumasug filed suit in the justice of the peace court of Argao against Rosales Albarracin and
Gaudencio Saniel, for the recovery of a parcel of land belonging to plaintiff, measuring two gantas,
on which were growing seven clumps of bamboo. Judgment was rendered for the plaintiff and the
usurped land was ordered restored to her. (See case No. 1211, p. 1, record.) But subsequently, on
March 2, 1911, these former defendants, Rosales Albarracin and Gaudencio Saniel, commenced
proceedings in the Court of First Instance of Cebu against the said Andrea Dumasug in which they

prayed for the annulment of the judgment rendered in the court of the justice of the peace of Argao.
In that case Andrea Dumasug, through her attorney, Andres Jayme, appeared in the said Court of
First Instance and demurrer to the complaint.
Before this demurrer had even been ruled on, counsel for plaintiff moved the court to dismiss their
complaint, and this was done by an order of October 2, 1911, in which ruling attorney Jayme
acquiesced. (Pages 1 to 13, record, case No. 1211.) The defendant in the case at bar, Felix Modelo,
is neither an attorney nor a procurador judicial, and the record does not show that he acted as an
attorney, procurador judicial, or friend of Andrea Dumasug in the case brought by the latter in the
justice of the peace court of Argao, or in the said case No. 1211, prosecuted in the Court of First
Instance of Cebu.
Probably all that Andrea Dumasug did was to ask the advice of Felix Modelo about what she ought
to do in view of the infringement of her rights on the part of Saniel, and defendant probably advised
plaintiff to bring the matter before the authorities; and so far as defendant's direct intervention in
those cases was concerned it was limited to engaging the services of the attorney Andres Jayme to
represent plaintiff in the Court of First Instance.
The defendant Felix Modelo stated in his sworn testimony that the sale of the parcels of land and the
carabao was in payment of a debt of P333.49 which the plaintiff was owing him for money he had
advanced her to maintain two actions against Albarracin and Saniel, which sum plaintiff had
borrowed of him in small amounts, first P101.87, afterwards P184.85 and finally P46.77, making a
total of P333.49; and that these sums of money were expended by plaintiff in the payment of
attorney's fees, traveling expenses for herself and her witnesses and for their expenses while in
Cebu. The witness Mariano Abear corroborated defendant's testimony to the effect that the
document Exhibit 1 was signed by mark of plaintiff before the notary public Anselmo S. Legaspi, after
the latter had explained to her that it was a conveyance by absolute sale of the lands and carabao
now in question. It would be improper to give credence to the testimony of the justice of the peace
Antonio Minosa, of the pueblo of Argao, with respect to the expenses which plaintiff had to pay on
account of her trips to Cebu, because, as he was a party defendant in case No. 1211, brought to
secure the annulment of the judgment rendered by him, it is incredible that the other defendant,
Andrea Dumasug, should have defrayed Minosa's expenses in Cebu, allowing him to board in
restaurants, to amuse himself in the cinematographs and to remain four days in that city each time
that he went there all at the expense of his codefendant, Andrea Dumasug when the
proceedings in the case had not gone beyond the filing of a demurrer and the principal defendant
went to Cebu only twice, staying there one day each time.
Plaintiff testified that one day in the month of November, 1911, defendant sent for her and after she
was inside defendant's house he told her to sign a document acknowledging that she owed him the
sum of P101 for the work he had performed in her behalf in the two actions she had brought to
recover here land; that she did not object to so doing and signed said document by mark in the
presence of the defendant while they were alone and without any attesting witness and that when
she was afterwards taken by defendant to the house of the notary Anselmo Saniel y Legaspi the
latter said nothing to her about the pretended sale of her property. She added that she had never
sold her lands or her carabao to defendant; that she neither offered to sell them to defendant, nor did
the latter offer to buy them for her; that if defendant was now in possession of her two parcels of land

and her carabao, it was due to the fact that three months after she had signed the acknowledgment
of indebtedness defendant took possession of said property by intimidation and force; and that since
then defendant had been harvesting the products of her lands and benefiting himself by the labor of
her plow carabao. She also stated that she signed only one document in favor of the defendant Felix
Modelo, which was that in which she acknowledged she owed him the sum of P101.
It is inconceivable that, in order to recover possession of a parcel of land measuring two gantas,
containing seven clumps of bamboo, by commencing proceedings therefor in the justice of the
peace court in Argao (where Andrea Dumasug lived); and that, in order to defendant herself by filing
a demurrer in a suit instituted in the Court of First Instance of Cebu (which suit was not continued
because plaintiffs themselves moved its dismissal), the defendant in that suit scarcely commenced,
now plaintiff in the case at bar, had already incurred expenses amounting to more than P333. It
would have been preferable to have left the small portion of usurped land in the possession of the
deforciant, than to have maintained, in order to defend herself from such usurper, an unterminated
suit which might have resulted in the entire loss of all the aggrieved party's properties by their being
kept, not by the usurper, but by her adviser, a sort of hombre bueno.
The evidence discloses that the only great expense which Andrea Dumasug could have incurred
was the sum that as fees she had to pay the attorney Andres Jayme for filing a demurrer in the Court
of First Instance. Said attorney testified that he received from Andrea Dumasug only P80 or P90, the
only large sum which the latter had to expend. Therefore if plaintiff finally had to admit that she was
owing Felix Modelo the sum of P101, and if for this reason she had to execute the receipt to which
she referred in her testimony, it is not unreasonable to suppose that said sum was the principal
expense she incurred, in addition to P20 or P30 for her traveling expenses from Argao to Cebu, the
two times that she made that trip, and for her stay in the latter city. Defendant's allegation that the
traveling expenses of the witnesses taken to Cebu amounted to the large sum of P333.49 cannot be
credited, inasmuch as the proceedings in the Court of First Instance were dismissed before the
complaint was answered and the trial was held, so no witnesses were examined.
The lower court held that the statements of Andrea Dumasug were well worthy of credence, and,
taking into consideration the merits of the case, reached the conclusion that the sole document
which plaintiff signed about the month of November, 1911, related to the sum of P101 which she
acknowledged she was owing to Felix Modelo, and not to the sale of all her properties. The record
shows plaintiff to have stated that she received an offer of P120 for her carabao, but that she did not
wish to sell the animal as she rented if for fifty centavos per day, her only means of livelihood.
It is, then, perfectly evident that the document Exhibit 1, by means of which defendant made himself
the owner of the properties in question is not the instrument of debt which Andrea Dumasug had
signed, and if it is the same one its contents were not duly and faithfully explained to plaintiff in the
act of its execution. In either case, the consent said to have been given by Andrea Dumasug in said
document Exhibit 1 is null and void, as it was given by mistake (arts. 1265 and 1266, Civil Code).
This error invalidates the contract, because it goes to the very substance of the thing which was the
subject matter of said contract, for, had the maker thereof truly understood the contents of said
document, she would neither have accepted nor authenticated it by her mark.

If Exhibit 1 is the document signed by her, it is undeniable that she was deceived in order to obtain
her consent thereto, and if the document which she signed is different from the one now presented
as Exhibit 1, then this latter has no value whatever, for the reason that it is not the one which, of her
own free will, she authenticated with her mark.
The consent given by plaintiff being null and void, the document Exhibit 1 is consequently also null,
void, and of no value or effect. Article 1303 of the Civil Code is therefore, applicable, which
prescribes that: "When the nullity of an obligation has been declared, the contracting parties shall
restore to each other the things which have been the object of the contract with their fruits, and the
value with its interest." In accordance with this legal provision defendant must return and deliver to
plaintiff the two parcels of land in question with their fruits, the subject of the complaint, or the value
thereof collected by him, which value was justly estimated by the trial judge at P75.
With respect to the plow carabao that died while in defendant's possession, the value of which is
P120, (record, p. 31) defendant is obliged pursuant to the provision of article 1307 of the same code
(to pay and deliver to plaintiff the value of said animal, with interest as an indemnity for the detriment
caused to its owner.)
Defendant has made no claim whatever for reimbursement of the sum of money which he paid to the
attorney Andres Jayme for defending plaintiff in the Court of First Instance of Cebu. It would
therefore be improper to decide in the present case whether he is or is not entitled to such
reimbursement. (Secs. 95-97, Code of Civ. Proc.)
For the foregoing reasons, whereby the errors assigned to the judgment appealed from are deemed
to have been refuted, said judgment should be as it is hereby, affirmed, with the costs of this
instance against the appellant. So ordered.
Arellano, C. J., Johnson, Moreland, Trent, and Araullo, JJ., concur.

G.R. No. 107132 October 8, 1999

MAXIMA HEMEDES, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, DOMINIUM REALTY AND
CONSTRUCTION CORPORATION, ENRIQUE D. HEMEDES and R & B
INSURANCE CORPORATION, respondents.
G.R. No. 108472 October 8, 1999
R & B INSURANCE CORPORATION, petitioner,
vs.

THE HONORABLE COURT OF APPEALS, DOMINIUM REALTY AND

CONSTRUCTION CORPORATION, ENRIQUE D. HEMEDES and
MAXIMA HEMEDES, respondents.
GONZAGA-REYES, J.:
Assailed in these petitions for review on certiorari is the decision 1 of the eleventh division of the Court
of Appeals in CA-G.R. CV No. 22010 promulgated on September 11, 1992 affirming in toto the decision of
Branch 24 of the Regional Trial Court of Laguna in Civil Case No. B-1766 dated February 22, 1989, 2 and
the resolution dated December 29, 1992 denying petitioner R & B Insurance Corporation's (R & B
Insurance) motion for reconsideration. As the factual antecedents and issues are the same, we shall
decide the petitions jointly.
The instant controversy involves a question of ownership over an unregistered parcel of land,
identified as Lot No. 6, plan Psu-111331, with an area of 21,773 square meters, situated in Sala,
Cabuyao, Laguna. It was originally owned by the late Jose Hemedes, father of Maxima Hemedes
and Enrique D. Hemedes. On March 22, 1947 Jose Hemedes executed a document entitled
"Donation Inter Vivos With Resolutory Conditions" 3 whereby he conveyed ownership over the subject
land, together with all its improvements, in favor of his third wife, Justa Kauapin, subject to the following
resolutory conditions:
(a) Upon the death or remarriage of the DONEE, the title to the property donated
shall revert to any of the children, or their heirs, of the DONOR expressly designated
by the DONEE in a public document conveying the property to the latter; or
(b) In absence of such an express designation made by the DONEE before her death
or remarriage contained in a public instrument as above provided, the title to the
property shall automatically revert to the legal heirs of the DONOR in common.
Pursuant to the first condition above mentioned, Justa Kausapin executed on September 27, 1960 a
"Deed of Conveyance of Unregistered Real Property by Reversion" 4 conveying to Maxima Hemedes
the subject property under the following terms
That the said parcel of land was donated unto me by the said Jose Hemedes, my
deceased husband, in a deed of "DONATION INTER VIVOS WITH RESOLUTORY
CONDITIONS" executed by the donor in my favor, and duly accepted by me on
March 22, 1947, before Notary Public Luis Bella in Cabuyao, Laguna;
That the donation is subject to the resolutory conditions appearing in the said deed of
"DONATION INTER VIVOS WITH RESOLUTORY CONDITIONS," as follows:
(a) Upon the death or remarriage of the DONEE, the title to the
property donated shall revert to any of the children, or their heirs, of
the DONOR expressly designated by the DONEE in a public
document conveying the property to the latter; or
(b) In absence of such an express designation made by the DONEE
before her death or remarriage contained in a public instrument as
above provided, the title to the property shall automatically revert to
the legal heirs of the DONOR in common.

That, wherefore, in virtue of the deed of donation above mentioned and in the
exercise of my right and privilege under the terms of the first resolutory condition
therein contained and hereinabove reproduced, and for and in consideration of my
love and affection, I do hereby by these presents convey, transfer, and deed unto my
designee, MAXIMA HEMEDES, of legal age, married to RAUL RODRIGUEZ, Filipino
and resident of No. 15 Acacia Road, Quezon City, who is one of the children and
heirs of my donor, JOSE HEMEDES, the ownership of, and title to the property
hereinabove described, and all rights and interests therein by reversion under the
first resolutory condition in the above deed of donation; Except the possession and
enjoyment of the said property which shall remain vested in me during my lifetime, or
widowhood and which upon my death or remarriage shall also automatically revert
to, and be transferred to my designee, Maxima Hemedes.
Maxima Hemedes, through her counsel, filed an application for registration and confirmation of title
over the subject unregistered land. Subsequently, Original Certificate of Title (OCT) No. (0-941) 0198 5 was issued in the name of Maxima Hemedes married to Raul Rodriguez by the Registry of Deeds of
Laguna on June 8, 1962, with the annotation that "Justa Kausapin shall have the usufructuary rights over
the parcel of land herein described during her lifetime or widowhood."
It is claimed by R & B Insurance that on June 2, 1964, Maxima Hemedes and her husband Raul
Rodriguez constituted a real estate mortgage over the subject property in its favor to serve as
security for a loan which they obtained in the amount of P6,000.00. On February 22, 1968, R & B
Insurance extrajudicially foreclosed the mortgage since Maxima Hemedes failed to pay the loan
even after it became due on August 2, 1964. The land was sold at a public auction on May 3, 1968
with R & B Insurance as the highest bidder and a certificate of sale was issued by the sheriff in its
favor. Since Maxima Hemedes failed to redeem the property within the redemption period, R & B
Insurance executed an Affidavit of Consolidation dated March 29, 1974 and on May 21, 1975 the
Register of Deeds of Laguna cancelled OCT No. (0-941) 0-198 and issued Transfer Certificate of
Title (TCT) No. 41985 in the name of R & B Insurance. The annotation of usufruct in favor of Justa
Kausapin was maintained in the new title. 6
Despite the earlier conveyance of the subject land in favor of Maxima Hemedes, Justa Kausapin
executed a "Kasunduan" on May 27, 1971 whereby she transferred the same land to her stepson
Enrique D. Hemedes, pursuant to the resolutory condition in the deed of donation executed in her
favor by her late husband Jose Hemedes. Enrique D. Hemedes obtained two declarations of real
property in 1972, and again, in 1974, when the assessed value of the property was raised. Also,
he has been paying the realty taxes on the property from the time Justa Kausapin conveyed the
property to him in 1971 until 1979. In the cadastral survey of Cabuyao, Laguna conducted from
September 8, 1974 to October 10, 1974, the property was assigned Cadastral No. 2990, Cad. 455D, Cabuyao Cadastre, in the name of Enrique Hemedes. Enrique Hemedes is also the named owner
of the property in the records of the Ministry of Agrarian Reform office at Calamba, Laguna.
On February 28, 1979, Enriques D. Hemedes sold the property to Dominium Realty and
Construction Corporation (Dominium). On April 10, 1981, Justa Kausapin executed an affidavit
affirming the conveyance of the subject property in favor of Enrique D. Hemedes as embodied in the
"Kasunduan" dated May 27, 1971, and at the same time denying the conveyance made to Maxima
Hemedes.
On May 14, 1981, Dominium leased the property to its sister corporation Asia Brewery, Inc. (Asia
Brewery) who, even before the signing of the contract of lease, constructed two warehouses made
of steel and asbestos costing about P10,000,000.00 each. Upon learning of Asia Brewery's
constructions upon the subject property, R & B Insurance sent it a letter on March 16, 1981 informing

the former of its ownership of the property as evidenced by TCT No. 41985 issued in its favor and of
its right to appropriate the constructions since Asia Brewery is a builder in bad faith. On March 27,
1981, a conference was held between R & B Insurance and Asia Brewery but they failed to arrive at
an amicable settlement.
1wphi1.nt

On May 8, 1981, Maxima Hemedes also wrote a letter addressed to Asia Brewery wherein she
asserted that she is the rightful owner of the subject property by virtue of OCT No. (0-941) 0-198 and
that, as such, she has the right to appropriate Asia Brewery's constructions, to demand its
demolition, or to compel Asia Brewery to purchase the land. In another letter of the same date
addressed to R & B Insurance, Maxima Hemedes denied the execution of any real estate mortgage
in favor of the latter.
On August 27, 1981, Dominium and Enrique D. Hemedes filed a
complaint 7 with the Court of First Instance of Binan, Laguna for the annulment of TCT No. 41985 issued
in favor of R & B Insurance and/or the reconveyance to Dominium of the subject property. Specifically, the
complaint alleged that Dominium was the absolute owner of the subject property by virtue of the February
28, 1979 deed of sale executed by Enrique D. Hemedes, who in turn obtained ownership of the land from
Justa Kausapin, as evidenced by the "Kasunduan" dated May 27, 1971. The plaintiffs asserted that Justa
Kausapin never transferred the land to Maxima Hemedes and that Enrique D. Hemedes had no
knowledge of the registration proceedings initiated by Maxima Hemedes.
After considering the merits of the case, the trial court rendered judgment on February 22, 1989 in
favor of plaintiffs Dominium and Enrique D. Hemedes, the dispositive portion of which states
WHEREFORE, judgment is hereby rendered:
(a) Declaring Transfer Certificate of Title No. 41985 of the Register of
Deeds of Laguna null and void and ineffective;
(b) Declaring Dominium Realty and Construction Corporation the
absolute owner and possessor of the parcel of land described in
paragraph 3 of the complaint;
(c) Ordering the defendants and all persons acting for and/or under
them to respect such ownership and possession of Dominium Realty
and Construction Corporation and to forever desist from asserting
adverse claims thereon nor disturbing such ownership and
possession; and
(d) Directing the Register of Deeds of Laguna to cancel said Transfer
Certificate of Title No. 41985 in the name of R & B Insurance
Corporation, and in lieu thereof, issue a new transfer certificate of title
in the name of Dominium Realty and Construction Corporation. No
pronouncement as to costs and attorney's fees. 8
Both R & B Insurance and Maxima Hemedes appealed from the trial court's decision. On September
11, 1992 the Court of Appeals affirmed the assailed decision in toto and on December 29, 1992, it
denied R & B Insurance's motion for reconsideration. Thus, Maxima Hemedes and R & B Insurance
filed their respective petitions for review with this Court on November 3, 1992 and February 22,
1993, respectively.

In G.R. No. 107132 9, petitioner Maxima Hemedes makes the following assignment of errors as regards
public respondent's ruling
I
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN APPLYING ARTICLE
1332 OF THE NEW CIVIL CODE IN DECLARING AS SPURIOUS THE DEED OF
CONVEYANCE OF UNREGISTERED REAL PROPERTY BY REVERSION
EXECUTED BY JUSTA KAUSAPIN IN FAVOR OF PETITIONER MAXIMA
HEMEDES.
II
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING AS
VOID AND OF NO LEGAL EFFECT THE "KASUNDUAN" DATED 27 MAY 1971
EXECUTED BY JUSTA KAUSAPIN IN FAVOR OF RESPONDENT ENRIQUE
HEMEDES AND THE SALE OF THE SUBJECT PROPERTY BY RESPONDENT
ENRIQUE HEMEDES IN FAVOR OF RESPONDENT DOMINIUM REALTY AND
CONSTRUCTION CORPORATION.
III
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING
RESPONDENTS ENRIQUE AND DOMINIUM IN BAD FAITH.
IV
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT
ORIGINAL CERTIFICATE OF TITLE NO. (0-941) 0-198 ISSUED IN THE NAME OF
PETITIONER MAXIMA HEMEDES NULL AND VOID.
V
RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT NO LOAN
WAS OBTAINED BY PETITIONER MAXIMA HEMEDES FROM RESPONDENT R &
B INSURANCE CORPORATION.
VI
RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT NO REAL
ESTATE MORTGAGE OVER THE SUBJECT PROPERTY WAS EXECUTED BY
PETITIONER MAXIMA HEMEDES IN FAVOR OF RESPONDENT R & B
INSURANCE CORPORATION.
VII
RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT THE VALID
TITLE COVERING THE SUBJECT PROPERTY IS THE ORIGINAL CERTIFICATE
OF TITLE NO. (0-941) 0-198 IN THE NAME OF PETITIONER MAXIMA HEMEDES
AND NOT THE TRANSFER CERTIFICATE OF TITLE (TCT) NO. 41985 IN THE
NAME OF R & B INSURANCE CORPORATION. 10

Meanwhile, in G.R. No. 108472 11, petitioner R & B Insurance assigns almost the same errors, except
with regards to the real estate mortgage allegedly executed by Maxima Hemedes in its favor. Specifically,
R & B Insurance alleges that:
I
RESPONDENT COURT ERRONEOUSLY ERRED IN APPLYING ARTICLE 1332 OF
THE CIVIL CODE.
II
RESPONDENT COURT SERIOUSLY ERRED IN GIVING CREDENCE ON (sic) THE
KASUNDUAN BY AND BETWEEN JUSTA KAUSAPIN AND ENRIQUE
NOTWITHSTANDING THE FACT THAT JUSTA KAUSAPIN BY WAY OF A DEED OF
CONVEYANCE OF UNREGISTERED REAL PROPERTY BY REVERSION CEDED
THE SUBJECT PROPERTY TO MAXIMA SOME ELEVEN (11) YEARS EARLIER.
III
RESPONDENT COURT SERIOUSLY ERRED IN GIVING CREDENCE ON (sic) THE
AFFIDAVIT OF REPUDIATION OF JUSTA KAUSAPIN NOTWITHSTANDING THE
FACT THAT SHE IS A BIAS (sic) WITNESS AND EXECUTED THE SAME SOME
TWENTY-ONE (21) YEARS AFTER THE EXECUTION OF THE DEED OF
CONVEYANCE IN FAVOR OF MAXIMA.
IV
RESPONDENT COURT SERIOUSLY ERRED IN NOT FINDING THAT THE
COMPLAINT OF ENRIQUE AND DOMINIUM HAS PRESCRIBED AND/OR THAT
ENRIQUE AND DOMINIUM WERE GUILTY OF LACHES.
V
RESPONDENT COURT SERIOUSLY ERRED IN FINDING
R & B AS A MORTGAGEE NOT IN GOOD FAITH.
VI
RESPONDENT COURT SERIOUSLY ERRED IN NOT GRANTING THE DAMAGES
PRAYED FOR BY R & B IN ITS COUNTERCLAIM AND CROSSCLAIM. 12
The primary issue to be resolved in these consolidated petitions is which of the two conveyances by
Justa Kausapin, the first in favor of Maxima Hemedes and the second in favor of Enrique D.
Hemedes, effectively transferred ownership over the subject land.
The Register of Deeds of Laguna issued OCT No. (0-941) 0-198 in favor of Maxima Hemedes on the
strength of the "Deed of Conveyance of Unregistered Real Property by Reversion" executed by
Justa Kausapin. Public respondent upheld the trial court's finding that such deed is sham and
spurious and has "no evidentiary value under the law upon which claimant Maxima Hemedes may
anchor a valid claim of ownership over the property." In ruling thus, it gave credence to the April 10,
1981 affidavit executed by Justa Kausapin repudiating such deed of conveyance in favor of Maxima

Hemedes and affirming the authenticity of the "Kasunduan" in favor of Enrique D. Hemedes. Also, it
considered as pivotal the fact that the deed of conveyance in favor of Maxima Hemedes was in
English and that it was not explained to Justa Kausapin, although she could not read nor understand
English; thus, Maxima Hemedes failed to discharge her burden, pursuant to Article 1332 of the Civil
Code, to show that the terms thereof were fully explained to Justa Kausapin. Public respondent
concluded by holding that the registration of the property on the strength of the spurious deed of
conveyance is null and void and does not confer any right of ownership upon Maxima Hemedes. 13
Maxima Hemedes argues that Justa Kausapin's affidavit should not be given any credence since
she is obviously a biased witness as it has been shown that she is dependent upon Enrique D.
Hemedes for her daily subsistence, and she was most probably influenced by Enrique D. Hemedes
to execute the "Kasunduan" in his favor. She also refutes the applicability of article 1332. It is her
contention that for such a provision to be applicable, there must be a party seeking to enforce a
contract; however, she is not enforcing the "Deed of Conveyance of Unregistered Real Property by
Reversion" as her basis in claiming ownership, but rather her claim is anchored upon OCT No. (0941) 0-198 issued in her name, which document can stand independently from the deed of
conveyance. Also, there exist various circumstances which show that Justa Kausapin did in fact
execute and understand the deed of conveyance in favor of Maxima Hemedes. First, the "Donation
Intervivos With Resolutory Conditions" executed by Jose Hemedes in favor of Justa Kausapin was
also in English, but she never alleged that she did not understand such document. Secondly, Justa
Kausapin failed to prove that it was not her thumbmark on the deed of conveyance in favor of
Maxima Hemedes and in fact, both Enrique D. Hemedes and Dominium objected to the request of
Maxima Hemedes' counsel to obtain a specimen thumbmark of Justa Kausapin. 14
Public respondent's finding that the "Deed of Conveyance of Unregistered Real Property By
Reversion" executed by Justa Kausapin in favor of Maxima Hemedes is spurious is not supported by
the factual findings in this case. It is grounded upon the mere denial of the same by Justa Kausapin.
A party to a contract cannot just evade compliance with his contractual obligations by the simple
expedient of denying the execution of such contract. If, after a perfect and binding contract has been
executed between the parties, it occurs to one of them to allege some defect therein as a reason for
annulling it, the alleged defect must be conclusively proven, since the validity and fulfillment of
contracts cannot be left to the will of one of the contracting parties. 15
Although a comparison of Justa Kausapin's thumbmark with the thumbmark affixed upon the deed of
conveyance would have easily cleared any doubts as to whether or not the deed was forged, the
records do not show that such evidence was introduced by private respondents and the lower court
decisions do not make mention of any comparison having been made. 16 It is a legal presumption that
evidence willfully suppressed would be adverse if produced. 17 The failure of private respondents to refute
the due execution of the deed of conveyance by making a comparison with Justa Kausapin's thumbmark
necessarily leads one to conclude that she did in fact affix her thumbmark upon the deed of donation in
favor of her stepdaughter.
Moreover, public respondent's reliance upon Justa Kausapin's repudiation of the deed of
conveyance is misplaced for there are strong indications that she is a biased witness. The trial court
found that Justa Kausapin was dependent upon Enrique D. Hemedes for financial
assistance. 18 Justa Kausapin's own testimony attests to this fact
Atty. Conchu:
Q: Aling Justa, can you tell the Honorable Court why you donated this
particular property to Enrique Hemedes?

A: Because I was in serious condition and he was the one supporting

me financially.
Q: As of today, Aling Justa are you continuing to receive any
assistance from Enrique Hemedes?
A: Yes Sir.
(TSN pp. 19 and 23, November 17, 1981)

19

Even Enrique Hemedes admitted that Justa Kausapin was dependent upon him for financial
support. The transcripts state as follows:
Atty. Mora:
Now you said that Justa Kausapin has been receiving from you
advances for food, medicine & other personal or family needs?
E. Hemedes:
A: Yes.
Q: Was this already the practice at the time this "Kasunduan" was
executed?
A: No that was increased, no, no, after this document.
xxx xxx xxx
Q: And because of these accommodations that you have given to
Justa Kausapin; Justa Kausapin has in turn treated you very well
because she's very grateful for that, is it not?
A: I think that's human nature.
Q: Answer me categorically, Mr. Hemedes she's very grateful?
A: Yes she might be grateful but not very grateful.
(TSN, p. 34, June 15, 1984) 20
A witness is said to be biased when his relation to the cause or to the parties is such that he has an
incentive to exaggerate or give false color to his statements, or to suppress or to pervert the truth, or
to state what is false. 21At the time the present case was filed in the trial court in 1981, Justa Kausapin
was already 80 years old, suffering from worsening physical infirmities and completely dependent upon
her stepson Enrique D. Hemedes for support. It is apparent that Enrique D. Hemedes could easily have
influenced his aging stepmother to donate the subject property to him. Public respondent should not have
given credence to a witness that was obviously biased and partial to the cause of private respondents.
Although it is a well-established rule that the matter of credibility lies within the province of the trial court,
such rule does not apply when the witness' credibility has been put in serious doubt, such as when there
appears on the record some fact or circumstance of weight and influence, which has been overlooked or

the significance of which has been

misinterpreted. 22

Finally, public respondent was in error when it sustained the trial court's decision to nullify the "Deed
of Conveyance of Unregistered Real Property by Reversion" for failure of Maxima Hemedes to
comply with 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.
Art. 1332 was intended for the protection of a party to a contract who is at a disadvantage due to his
illiteracy, ignorance, mental weakness or other handicap. 23 This article contemplates a situation
wherein a contract has been entered into, but the consent of one of the parties is vitiated by mistake or
fraud committed by the other contracting party.24 This is apparent from the ordering of the provisions
under Book IV, Title II, Chapter 2, section 1 of the Civil Code, from which article 1332 is taken. Article
1330 states that
A contract where consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable.
This is immediately followed by provisions explaining what constitutes mistake, violence,
intimidation, undue influence, or fraud sufficient to vitiate consent. 25 In order that mistake may
invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to
those conditions which have principally moved one or both parties to enter into the contract. 26 Fraud, on
the other hand, is present when, through insidious words or machinations of one of the contracting
parties, the other is induced to enter into a contract which, without them, he would not have agreed
to.27 Clearly, article 1332 assumes that the consent of the contracting party imputing the mistake or fraud
was given, although vitiated, and does not cover a situation where there is a complete absence of
consent.
1wphi1.nt

In this case, Justa Kausapin disclaims any knowledge of the "Deed of Conveyance of Unregistered
Real Property by Reversion" in favor of Maxima Hemedes. In fact, she asserts that it was only during
the hearing conducted on December 7, 1981 before the trial court that she first caught a glimpse of
the deed of conveyance and thus, she could not have possibly affixed her thumbmark thereto. 28 It is
private respondents' own allegations which render article 1332 inapplicable for it is useless to determine
whether or not Justa Kausapin was induced to execute said deed of conveyance by means of fraud
employed by Maxima Hemedes, who allegedly took advantage of the fact that the former could not
understand English, when Justa Kausapin denies even having seen the document before the present
case was initiated in 1981.
It has been held by this Court that ". . . mere preponderance of evidence is not sufficient to
overthrow a certificate of a notary public to the effect that the grantor executed a certain document
and acknowledged the fact of its execution before him. To accomplish this result, the evidence must
be so clear, strong and convincing as to exclude all reasonable controversy as to the falsity of the
certificate, and when the evidence is conflicting, the certificate will be
upheld." 29 In the present case, we hold that private respondents have failed to produce clear, strong, and
convincing evidence to overcome the positive value of the "Deed Conveyance of Unregistered Real
Property by Reversion" a notarized document. The mere denial of its execution by the donor will not
suffice for the purpose.
In upholding the deed of conveyance in favor of Maxima Hemedes, we must concomitantly rule that
Enrique D. Hemedes and his transferee, Dominium, did not acquire any rights over the subject

property. Justa Kausapin sought to transfer to her stepson exactly what she had earlier transferred to
Maxima Hemedes the ownership of the subject property pursuant to the first condition stipulated
in the deed of donation executed by her husband. Thus, the donation in favor of Enrique D.
Hemedes is null and void for the purported object thereof did not exist at the time of the transfer,
having already been transferred to his sister. 30 Similarly, the sale of the subject property by Enrique D.
Hemedes to Dominium is also a nullity for the latter cannot acquire more rights than its predecessor-ininterest and is definitely not an innocent purchaser for value since Enrique D. Hemedes did not present
any certificate of title upon which it relied.
The declarations of real property by Enrique D. Hemedes, his payment of realty taxes, and his being
designated as owner of the subject property in the cadastral survey of Cabuyao, Laguna and in the
records of the Ministry of Agrarian Reform office in Calamba, Laguna cannot defeat a certificate of
title, which is an absolute and indefeasible evidence of ownership of the property in favor of the
person whose name appears therein. 31Particularly, with regard to tax declarations and tax receipts, this
Court has held on several occasions that the same do not by themselves conclusively prove title to
land. 32
We come now to the question of whether or not R & B Insurance should be considered an innocent
purchaser of the land in question. At the outset, we note that both the trial court and appellate court
found that Maxima Hemedes did in fact execute a mortgage over the subject property in favor of R &
B Insurance. This finding shall not be disturbed because, as we stated earlier, it is a rule that the
factual findings of the trial court, especially when affirmed by the Court of Appeals, are entitled to
respect, and should not be disturbed on
appeal. 33
In holding that R & B Insurance is not a mortgagee in good faith, public respondent stated that the
fact that the certificate of title of the subject property indicates upon its face that the same is subject
to an encumbrance, i.e. usufructuary rights in favor of Justa Kausapin during her lifetime or
widowhood, should have prompted R & B Insurance to ". . . investigate further the circumstances
behind this encumbrance on the land in dispute," but which it failed to do. Also, public respondent
considered against R & B Insurance the fact that it made it appear in the mortgage contract that the
land was free from all liens, charges, taxes and encumbrances. 34
R & B Insurance alleges that, contrary to public respondent's ruling, the presence of an
encumbrance on the certificate of title is not reason for the purchaser or a prospective mortgagee to
look beyond the face of the certificate of title. The owner of a parcel of land may still sell the same
even though such land is subject to a usufruct; the buyer's title over the property will simply be
restricted by the rights of the usufructuary. Thus, R & B Insurance accepted the mortgage subject to
the usufructuary rights of Justa Kausapin. Furthermore, even assuming that R & B Insurance was
legally obliged to go beyond the title and search for any hidden defect or inchoate right which could
defeat its right thereto, it would not have discovered anything since the mortgage was entered into in
1964, while the "Kasunduan" conveying the land to Enrique D. Hemedes was only entered into in
1971 and the affidavit repudiating the deed of conveyance in favor of Maxima Hemedes was
executed by Justa Kausapin in 1981. 35
We sustain petitioner R & B Insurance's claim that it is entitled to the protection of a mortgagee in
good faith.
It is a well-established principle that every person dealing with registered land may safely rely on the
correctness of the certificate of title issued and the law will in no way oblige him to go behind the
certificate to determine the condition of the property. 36 An innocent purchaser for value 37 is one who
buys the property of another without notice that some other person has a right to or interest in such

property and pays a full and fair price for the same at the time of such purchase or before he has notice of
the claim of another person. 38

The annotation of usufructuary rights in favor of Justa Kausapin upon Maxima Hemedes' OCT dose
not impose upon R & B Insurance the obligation to investigate the validity of its mortgagor's title.
Usufruct gives a right to enjoy the property of another with the obligation of preserving its form and
substance. 39 The usufructuary is entitled to all the natural, industrial and civil fruits of the property 40 and
may personally enjoy the thing in usufruct, lease it to another, or alienate his right of usufruct, even by a
gratuitous title, but all the contracts he may enter into as such usufructuary shall terminate upon the
expiration of the usufruct. 41
Clearly, only the jus utendi and jus fruendi over the property is transferred to the usufructuary. 42 The
owner of the property maintains the jus disponendi or the power to alienate, encumber, transform, and
even destroy the same. 43 This right is embodied in the Civil Code, which provides that the owner of
property the usufruct of which is held by another, may alienate it, although he cannot alter the property's
form or substance, or do anything which may be prejudicial to the usufructuary. 44
There is no doubt that the owner may validly mortgage the property in favor of a third person and the
law provides that, in such a case, the usufructuary shall not be obliged to pay the debt of the
mortgagor, and should the immovable be attached or sold judicially for the payment of the debt, the
owner shall be liable to the usufructuary for whatever the latter may lose by reason thereof. 45
Based on the foregoing, the annotation of usufructuary rights in favor of Justa Kausapin is not
sufficient cause to require R & B Insurance to investigate Maxima Hemedes' title, contrary to public
respondent's ruling, for the reason that Maxima Hemedes' ownership over the property remained
unimpaired despite such encumbrance. R & B Insurance had a right to rely on the certificate of title
and was not in bad faith in accepting the property as a security for the loan it extended to Maxima
Hemedes.
Even assuming in gratia argumenti that R & B Insurance was obligated to look beyond the certificate
of title and investigate the title of its mortgagor, still, it would not have discovered any better rights in
favor of private respondents. Enrique D. Hemedes and Dominium base their claims to the property
upon the "Kasunduan" allegedly executed by Justa Kausapin in favor of Enrique Hemedes. As we
have already stated earlier, such contract is a nullity as its subject matter was inexistent. Also, the
land was mortgaged to R & B Insurance as early as 1964, while the "Kasunduan" was executed only
in 1971 and the affidavit of Justa Kausapin affirming the conveyance in favor of Enrique D. Hemedes
was executed in 1981. Thus, even if R & B Insurance investigated the title of Maxima Hemedes, it
would not have discovered any adverse claim to the land in derogation of its mortgagor's title. We
reiterate that at no point in time could private respondents establish any rights or maintain any claim
over the land.
It is a well-settled principle that where innocent third persons rely upon the correctness of a
certificate of title and acquire rights over the property, the court cannot just disregard such rights.
Otherwise, public confidence in the certificate of title, and ultimately, the Torrens system, would be
impaired for everyone dealing with registered property would still have to inquire at every instance
whether the title has been regularly or irregularly issued. 46Being an innocent mortgagee for value, R &
B Insurance validly acquired ownership over the property, subject only to the usufructuary rights of Justa
Kausapin thereto, as this encumbrance was properly annotated upon its certificate of title.
The factual findings of the trial court, particularly when affirmed by the appellate court, carry great
weight and are entitled to respect on appeal, except under certain circumstances. 47 One such
circumstance that would compel the Court to review the factual findings of the lower courts is where the
lower courts manifestly overlooked certain relevant facts not disputed by the parties and which, if properly

considered, would justify a different conclusion. 48 Also, it is axiomatic that the drawing of the proper legal
conclusions from such factual findings are within the peculiar province of this Court. 49

As regards R & B Insurance's prayer that Dominium be ordered to demolish the warehouses or that
it be declared the owner thereof since the same were built in bad faith, we note that such
warehouses were constructed by Asia Brewery, not by Dominium. However, despite its being a
necessary party in the present case, the lower courts never acquired jurisdiction over Asia Brewery,
whether as a plaintiff or defendant, and their respective decisions did not pass upon the
constructions made upon the subject property. Courts acquire jurisdiction over a party plaintiff upon
the filing of the complaint, while jurisdiction over the person of a party defendant is acquired upon
the service of summons in the manner required by law or by his voluntary appearance. As a rule, if a
defendant has not been summoned, the court acquires no jurisdiction over his person, and any
personal judgment rendered against such defendant is null and void. 50 In the present case, since Asia
Brewery is a necessary party that was not joined in the action, any judgment rendered in this case shall
be without prejudice to its rights. 51
As to its claim for moral damages, we hold that R & B Insurance is not entitled to the same for it has
not alleged nor proven the factual basis for the same. Neither is it entitled to exemplary damages,
which may only be awarded if the claimant is entitled to moral, temperate, liquidated or
compensatory damages. 52 R & B Insurance's claim for attorney's fees must also fail. The award of
attorney's fees is the exception rather than the rule and counsel's fees are not to be awarded every time a
party wins a suit. Its award pursuant to article 2208 of the Civil Code demands factual, legal and equitable
justification and cannot be left to speculation and conjecture. 53 Under the circumstances prevailing in the
instant case, there is no factual or legal basis for an award of attorney's fees.
WHEREFORE, the assailed decision of public respondent and its resolution dated February 22,
1989 are REVERSED. We uphold petitioner R & B Insurance's assertion of ownership over the
property in dispute, as evidenced by TCT No. 41985, subject to the usufructuary rights of Justa
Kausapin, which encumbrance has been properly annotated upon the said certificate of title. No
pronouncement as to costs.
SO ORDERED.
Panganiban and Purisima, JJ., concur.
Melo, J., please see dissenting opinion.
Vitug, J., please see separate (concurring) opinion.
Separate Opinions

VITUG, J., separate opinion;

I share the opinion expressed by my esteemed colleague, Mme. Justice Minerva P. Gonzaga-Reyes,
in herponencia.
I just would like to add that a donation would not be legally feasible if the donor has neither
ownership nor real right that he can transmit to the donee. Unlike an ordinary contract, a donation,
under Article 712, in relation to Article 725, of the Civil Code is also a mode of acquiring and
transmitting ownership and other real rights by an act of liberality whereby a person disposes
gratuitously that ownership or real right in favor of another who accepts it. It would be an
inefficacious process if the donor would have nothing to convey at the time it is made.

Art. 744 of the Civil Code states that the "donation of the same thing to two or more different donees
shall be governed by the provisions concerning the sale of the same thing to two or more
persons," i.e., by Article 1544 of the same Code, as if so saying that there can be a case of "double
donations" to different donees with opposing interest. Article 744 is a new provision, having no
counterpart in the old Civil Code, that must have been added unguardedly. Being a mode of
acquiring and transmitting ownership or other real rights, a donation once perfected would deny the
valid execution of a subsequent inconsistent donation (unless perhaps if the prior donation has
provided a suspensive condition which still pends when the later donation is made).
In sales, Article 1544, providing for the rules to resolve the conflicting rights of two or more buyers, is
appropriate since the law does not prohibit but, in fact, sanctions the perfection of a sale by a nonowner, such as the sale of future things or a short sale, for it is only at the consummation stage of
the sale, i.e., delivery of the thing sold, that ownership would be deemed transmitted to the buyer. In
the meanwhile, a subsequent sale to another of the same thing by the same seller can still be a legal
possibility. This rule on double sales finds no relevance in an ordinary donation where the law
requires the donor to have ownership of the thing or the real right he donates at the time of its
perfection (see Article 750, Civil Code) since a donation constitutes a mode, not just a title, in an
acquisition and transmission of ownership.
MELO, J., dissenting opinion;
I find myself unable to join the majority. The opinion written by my esteemed colleague, Madame
Justice Minerva Gonzaga-Reyes, will have far-reaching ramifications on settled doctrines concerning
the finality and conclusiveness of the factual findings of the trial court in view of its unique advantage
of being able to observe at first-hand the demeanor and deportment of witnesses, and especially
when such findings of facts are affirmed by the Court of Appeals, which is the final arbiter of
questions of fact (People vs. Edao, 64 SCRA 675 [1975]; People vs. Tala, 141 SCRA 240; People
vs. Canada and Dondoy, 144 SCRA 121 [1986]; People vs. Clore, 184 SCRA 638 [1990]; Binalay vs.
Manalo, 195 SCRA 374 [1991]; People vs. Miscala, 202 SCRA 26 [1991]; People vs. Lagrosa, 230
SCRA. 298 [1994]). All these conditions are present in the case at bar, and I have grave reservations
about the propriety of setting aside time-tested principles in favor of a finding that hinges principally
on the credibility of a single witness, whom we are asked to disbelieve on the basis merely of her
recorded testimony without the benefit of the advantage that the trial court had, disregarding in the
process another long-established rule that mere relationship of a witness to a party does not
discredit his testimony in court (U.S. vs. Mante, 27 Phil 124; People vs. Pagaduan, 37 Phil 90;
People vs. Reyes, 69 SCRA 474 [1976]; People vs. Padiernos, 69 SCRA 484 [1976]; Borromeo vs.
Court of Appeals, 70 SCRA 329 [1976]; People vs. Estocada, 75 SCRA 295 [1977]; People vs. Ciria,
106 SCRA 381 [1981]; People vs. Ramo, 132 SCRA 174 [1984]; People vs. Atencio, 156 SCRA 242
[1987]; People vs. Gutierrez. Jr., 158 SCRA 614 [1988]; People vs. Bandoquillo, 167 SCRA 549
[1988]; People vs. Suitos, 220 SCRA 419 [1993]).
The primordial issue is whether or not the "Deed of Conveyance of Unregistered Real Property by
Reversion" dated September 27, 1960 conveying the subject property to Maxima Hemedes is valid.
If the transfer is not valid, no title passed to her successor-in-interest, R & B Insurance Corporation.
The Court of Appeals, confirming and summarizing the findings of fact and law made by the trial
court, declared:
We sustain the findings of the trial court.
To begin with, the "Deed of Conveyance of Unregistered Real Property by
Reversion" was nullified by the trial court on two (2) grounds:

First, MAXIMA failed to comply with the requirements laid down by Article 1332 of the
Civil Code. Said provision reads:
Art. 1332. 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.
In her testimony, MAXIMA admitted the entire document was written in English, a
language not known to Justa Kausapin (TSN, 17 November 1981, pp. 7-8;
Deposition of Justa Kausapin). Yet, MAXIMA failed to introduce sufficient evidence
that would purportedly show that the deed of conveyance was explained to Justa
Kausapin before the latter allegedly affixed her thumbmark. On the contrary, she
admitted having failed to translate the deed of conveyance to Justa Kausapin
because according to her, the latter has "no voice" anyway insofar as the property is
concerned. Her testimony reads:
Q In connection with this deed of conveyance which has been
marked as Exh. "2-Maxima," we note that this is written in English, do
you know, Mrs. Hernandez (MAXIMA), whether this document was
ever translated to Justa Kausapin?
A Justa Kausapin has no voice because that's the order of my
father, so anyway. . .
Court Answer the question, you were only asked whether that was
translated.
A No.(TSN 26 November, 1984, pp. 36-37, Maxima Hemedes).
Second, MAXIMA failed to repudiate the allegation of Justa Kausapin disclaiming
knowledge of her having executed such a deed. As a matter of fact, Justa Kausapin
claimed that it was only during the hearing conducted on 07 December 1981 that she
first caught glimpse of the deed of conveyance (TSN, 07 December 1981, pp. 2223, ibid.) She therefore could not have possibly affixed her thumbmark therein. In the
light of such a denial, the burden of proving that the deed of conveyance was indeed
genuine laid on MAXIMA. After all, any party who asserts the affirmative of the issue
has the burden of presenting evidence required to obtain a favorable judgment
(Republic v. Court of Appeals, 182 SCRA 290).
1wphi1.nt

Instead, what was clearly established from the deposition of Justa Kausapin is the
fact that she never executed any document donating the property to anybody else
except ENRIQUE. This can be readily gleaned from her testimony, reading:
Q From the time, Aling Justa, that your husband Jose Hemedes
donated the property to you up to the time you in turn donated the
same to Enrique Hemedes in 1971, do you recall having executed
any document donating this particular property to anybody else?
A None, Sir. (TSN, 17 November 1981, p. 21)

)
There is no dispute that Justa Kausapin twice repudiated the conveyance in favor of Maxima
Hemedes. As found by the trial court:
In an Affidavit dated April 10, 1981 executed by Justa Kausapin before three
witnesses (Exh. D-Dominium), said affiant disowned the alleged "Deed of
Conveyance of Unregistered Real Property by Reversion" invoked by defendant
Maxima Hemedes, and expressly stated that she never granted any right over the
property to Maxima Hemedes, whether as owner or mortgagor, that she never
allowed her to use the land as security or collateral for a loan. In the same affidavit,
Justa Kausapin affirmed the authenticity of the "Kasunduan" whereby she transferred
ownership of the disputed land to Enrique Hemedes, her stepson and reliable source
of assistance throughout the years that she was in need of help. The testimony of
Justa Kausapin was also taken by deposition on November 17, December 7 and 14,
1981 and on January 14, 1982, wherein all the contending parties were represented
and had the opportunity to cross-examine her. In her testimony (the entire transcript
of which has been submitted as Exh. K-Enrique), Justa Kausapin reiterated her
repudiation of the Deed of Conveyance in favor of Maxima Hemedes and re-affirmed
the validity of the "Kasunduan" in favor of Enrique Hemedes, as well as the
subsequent sale of the land by Enrique Hemedes to Dominium.
(pp. 83-84, Rollo.)
The majority would hold that the twin repudiations cannot be given credence because the witness is
biased in favor of Enrique Hemedes, who, by providing support and financial assistance to the
witness before, during and after the execution of the "Kasunduan," is said to have influenced her into
signing the same. This issue refers to the credibility of witnesses which, as stated earlier, is best left
for determination by the trial court (People vs. Oliano, 287 SCRA 158 [1998], citing People vs.
Pontillar, Jr., 275 SCRA 338 [1997]; People vs. Rubio, 257 SCRA 528 [1996]; People vs. Del Prado,
253 SCRA 731 [1996]). I am not prepared to substitute my judgment for that of the trial court on the
credibility of Justa Kausapin on the basis alone of the relationship between her and Enrique
Hemedes. To reiterate, the rule is: "Mere relationship of a witness to a party does not discredit his
testimony in court." (U.S. vs. Mante, supra; Aznar vs. Court of Appeals, 70 SCRA 329 [1976]; People
vs. Letigio, 268 SCRA 227, 243 [1997]).
I cannot infer from the mere circumstance that Justa Kausapin was receiving support and
sustenance from Enrique Hemedes that she had any improper motives to testify in favor of Enrique
and against Maxima. It must be remembered that Justa Kausapin had a legal right to such financial
assistance, not only from respondent Enrique Hemedes, but also from Maxima Hemedes, who are
both her stepchildren. If one must impute improper motives in favor of Enrique, one could just as
easily ascribe these to Maxima. Furthermore, it must be noted that Justa Kausapin's entitlement to
support flowed from her usufructuary rights contained in the "Donation Inter Vivos with Resolutory
Conditions" executed by her late husband, Jose Hemedes, the common father of petitioner Maxima
and respondent Enrique Hemedes. In supporting his stepmother, Enrique was, therefore, merely
performing a legal or contractual duty in favor of Justa Kausapin. There was nothing improper in
Justa Kausapin's repudiation of the conveyance in favor of Maxima, especially so if one considers
the fact that the latter did not adduce any other evidence to defeat the presumption that Justa
Kausapin was stating the truth when she said that she never conveyed the property to Justa
Maxima. As the trial court found:

. . . The actuation of Enrique Hemedes towards Justa Kausapin is legally and morally
justified. It must be remembered that Justa Kausapin is the stepmother of Enrique
Hemedes; she was also the usufructuary of the property in dispute. It is only natural
and in keeping with law and custom, or Filipino tradition, for a son to support his
mother (even if she happens to be a stepmother); and form a legal standpoint, the
naked owner Enrique Hemedes was bound to support Justa Kausapin by way of
giving her what she was entitled to as usufructuary.
(p. 104, Rollo.)
The trial court's ruling on the invalidity of the title of Maxima is not based solely on Justa Kausapin's
repudiation of the deed of conveyance, but likewise on the very acts of Maxima and her transferee R
& B Surety and Insurance. The factual findings of the trial court are to the effect that despite the
alleged transfer of ownership from Justa Kausapin to Maxima Hemedes on September 27, 1960 and
the subsequent transfer to R & B Insurance on May 3, 1968 by way of foreclosure and public auction
sale, neither do these petitioners exercised their rights of ownership over the disputed property,
never even asserting their supposed ownership rights until it was too late. The following findings of
the trial court stand unassailed:
There are other indications which led this Court to believe that neither defendant
Maxima Hemedes nor defendant R & B INSURANCE consider themselves the owner
of the property in question. Both of these claimants never declared themselves as
owners of the property for tax purposes; much less did they pay a single centavo in
real estate taxes. The argument that since Justa Kausapin was in possession of the
property as usufructuary she should pay the taxes contravenes the clear provision of
the Civil Code that the taxes which may be imposed directly on the capital during the
usufruct, in this case the realty taxes, shall be at the expense of the owner (Article
597, Civil Code). If Maxima Hemedes and R & B INSURANCE were convinced that
they were the owners of the property, why did they not pay taxes for the same? This
attitude is not consistent with that of an owner in good faith. The Court has noted that
the very owner of R & B INSURANCE has admitted in her testimony that they
declared the property as one of the assets of R & B INSURANCE only in 1976, which
is eight years after they supposedly bought it at public auction in 1968 (TSN, July 6,
1987, pp. 22-23) (Decision, pp. 32-33).
Faced with the categorical and straightforward repudiations of the conveyance supposedly made in
her favor, Maxima Hemedes could only gratuitously assert otherwise, as no other testimonial or
documentary evidence was adduced in support thereof. Maxima's self-serving assertions, however,
are legally infirm in view of her admission that the deed of conveyance in her favor was written in a
language unknown to the person who supposedly executed the same and the terms thereof were
not fully explained to the person who executed the same. These are the facts as found by the trial
court:
Questioned about the execution of the "Deed of Conveyance of Unregistered Real
Property by Reversion" which is the basis of her claim, defendant Maxima Hemedes
admitted that the document which is in English was not translated or explained to
Justa Kausapin before the latter supposedly affixed her thumbmark to the document
(TSN, November 26, 1984, p. 34; TSN, December 10, 1984, p. 9). The Court has
noted from the records that the Notary Public before whom the said document was
notarized was not presented as a wittiness by defendant Maxima Hemedes, if only to
attest to the execution of said document by Justa Kausapin, considering that the
latter is an illiterate when it comes to documents written in English. Maxima

explained the non-translation of the Deed of Conveyance into a language understood

by Justa Kausapin with the statement that the latter (Justa Kausapin) "has no voice"
anyway in so far as the property is concerned (TSN, November 26, 1984, p. 36) . . .
the Notary Public before whom the said document was supposed to have been
axknowledged was also not presented as a witness, and there was no explanation as
to why he was not also presented. In the face of such an admission and failure on
the part of defendant Maxima Hemedes, coupled with the straightforward repudiation
by Justa Kausapin herself of the document relied upon by said defendant the Court
finds and so concludes that the "Deed of Conveyance of Unregistered Real Property
by Reversion" is not a credible and convincing evidence and is of no evidentiary
value under the law upon which claimant Maxima Hemedes may anchor a valid claim
of ownership over the property subject of this action.
It is argued that private respondents failed to have the thumbmarks of Justa Kausapin appearing on
the deeds executed in favor of Maxima and Enrique compared and this failure may be taken as wilful
suppression of evidence that is presumed to be adverse if produced (Rules of Court, Rule 131, Sec.
3(e). The applicability of this rule presupposes that the suppressed evidence is not available to the
other party for production in court (People vs. Padiernos, 69 SCRA 484 [1976]; People vs. Silvestre,
279 SCRA 474, 495 [1997]). This is not the case here for the same documents were available to
petitioners. In fact, the records show that counsel for Maxima Hemedes pledged to submit the
document which will be compared with the specimen thumbmark to be obtained from Justa
Kausapin (TSN, December 7, 1981, p. 28). The records, however, do not show that said counsel
persisted in his request for comparison of Kausapin's thumbmarks. If petitioners were convinced that
the specimen thumbprint of Justa Kausapin was of crucial importance to their cause, they should
have insisted on presenting her as a witness and, thereupon, obtaining her thumbprint. Their own
failure to pursue the production of the specimen thumbprint of Justa Kausapin negated any belated
claim that the said specimen was suppressed (People vs. Tulop, citingPeople vs. Pagal, 272 SCRA
443 [1998]; Commissioner of Internal Revenue vs. Tokyo Shipping Company, Ltd., 244 SCRA 332
[1995]; citing Nicolas vs. Nicolas, 52 Phil 265 [1928] and Ang Seng Quiem vs. Te Chico, 7 Phil 541
[1907]).
1wphi1.nt

The two courts below were, to my mind, most perceptive when they held that proof of authenticity of
the thumbprint of Justa Kausapin would not render valid an otherwise void document in light of the
admission of Maxima Hemedes that she did not explain the English contents thereof to Justa
Kausapin in a language understood by her.
On the other hand, the validity of the conveyance to Enrique Hemedes is amply proven by the
evidence on record. Thus, largely uncontested are the following findings of fact of the trial court:
Enough has already been said hereinabove concerning the claim of ownership of
plaintiff Enrique. From an overall evaluation of the facts found by the Court to be
substantiated by the evidence on record, the Court is convinced and so holds that
the three conflicting claimants, it is party plaintiffs, Enrique Hemedes and now
DOMINIUM, who have both law and equity on their side. Plaintiff Enrique Hemedes'
title to the property in question by virtue of the "Kasunduan" dated May 27, 1971 was
confirmed twice by his grantor, Justa Kausapin; he complied with his obligations as
naked owner by giving Justa Kausapin her usufructuary rights in the form of financial
and other assistance; he declared his ownership of the property openly and
adversely to other claimants by recording the same in the appropriate government
agencies, namely, the Municipal and Provincial Assessor's Office, the Ministry of
Agrarian Reform and the Bureau of Lands; he was openly known in the community
where the property is located as the owner thereof; he paid the taxes on the property

conscientiously from the time he acquired the same to the time he sold the same to
co-plaintiff DOMINIUM; he was in continuous possession of the property during the
said period; he paid the tenant, Nemesio Marquez, the disturbance fee required
under the Land Reform Law.
The Court of Appeals, therefore, did not err in holding that since the deed of conveyance to Maxima
was found to be spurious, it necessarily follows that OCT No. (0-941) 0-198 issued in her name is
null and void. This is because the registration will not invalidate a forged or invalid document.
I, therefore, vote to dismiss the petition and to affirm the decision appealed from.

G.R. No. 111924 January 27, 1997

ADORACION LUSTAN, petitioner,
vs.
COURT OF APPEALS, NICOLAS PARANGAN and SOLEDAD
PARANGAN, PHILIPPINE NATIONAL BANK,respondents.

FRANCISCO, J.:
Petitioner Adoracion Lustan is the registered owner of a parcel of land otherwise known as Lot 8069
of the Cadastral Survey of Calinog, Iloilo containing an area of 10.0057 hectares and covered by
TCT No. T-561. On February 25, 1969, petitioner leased the above described property to private
respondent Nicolas Parangan for a term of ten (10) years and an annual rent of One Thousand
(P1,000.00) Pesos. During the period of lease, Parangan was regularly extending loans in small
amounts to petitioner to defray her daily expenses and to finance her daughter's education. On July
29, 1970, petitioner executed a Special Power of Attorney in favor of Parangan to secure an
agricultural loan from private respondent Philippine National Bank (PNB) with the aforesaid lot as
collateral. On February 18, 1972, a second Special Power of Attorney was executed by petitioner, by
virtue of which, Parangan was able to secure four (4) additional loans, to wit: the sums of
P24,000.00, P38,000.00, P38,600.00 and P25,000.00 on December 15, 1975, September 6, 1976,
July 2, 1979 and June 2, 1980, respectively. The last three loans were without the knowledge of
herein petitioner and all the proceeds therefrom were used by Parangan for his own benefit. 1 These
encumbrances were duly annotated on the certificate of title. On April 16, 1973, petitioner signed a
Deed of Pacto de Retro Sale 2 in favor of Parangan which was superseded by the Deed of Definite
Sale 3 dated May 4, 1979 which petitioner signed upon Parangan's representation that the same
merely evidences the loans extended by him unto the former.

For fear that her property might be prejudiced by the continued borrowing of Parangan, petitioner
demanded the return of her certificate of title. Instead of complying with the request, Parangan
asserted his rights over the property which allegedly had become his by virtue of the aforementioned
Deed of Definite Sale. Under said document, petitioner conveyed the subject property and all the
improvements thereon unto Parangan absolutely for and in consideration of the sum of Seventy Five
Thousand (P75,000.00) Pesos.
Aggrieved, petitioner filed an action for cancellation of liens, quieting of title, recovery of possession
and damages against Parangan and PNB in the Regional Trial Court of Iloilo City. After trial, the
lower court rendered judgment, disposing as follows:
WHEREFORE and in view of the foregoing, a decision is rendered as follows:
1. Ordering cancellation by the Register of Deeds of the Province of Iloilo, of the
unauthorized loans, the liens and encumbrances appearing in the Transfer Certificate
of Title No. T-561, especially entries nos. 286231; 338638; and 352794;
2. Declaring the Deed of Pacto de Retro Sale dated April 25, 1978 and the Deed of
Definite Sale dated May 6, 1979, both documents executed by Adoracion Lustan in
favor of Nicolas Parangan over Lot 8069 in TCT No. T-561 of the Register of Deeds
of Iloilo, as null and void, declaring the same to be Deeds of Equitable Mortgage;
3. Ordering defendant Nicolas Parangan to pay all the loans he secured from
defendant PNB using thereto as security TCT No. T-561 of plaintiff and defendant
PNB to return TCT No. T-561 to plaintiff;
4. Ordering defendant Nicolas Parangan to return possession of the land in question,
Lot 8069 of the Calinog Cadastre, described in TCT No. T-561 of the Register of
Deeds of Iloilo, to plaintiff upon payment of the sum of P75,000.00 by plaintiff to
defendant Parangan which payment by plaintiff must be made within ninety (90) days
from receipt of this decision; otherwise, sale of the land will be ordered by the court
to satisfy payment of the amount;
5. Ordering defendant Nicolas Parangan to pay plaintiff attorney's fees in the sum of
P15,000.00 and to pay the costs of the suit.
SO ORDERED. 4
Upon appeal to the Court of Appeals (CA), respondent court reversed the trial court's decision.
Hence this petition contending that the CA committed the following errors:
IN ARRIVING AT THE CONCLUSION THAT NONE OF THE CONDITIONS STATED
IN ART. 1602 OF THE NEW CIVIL CODE HAS BEEN PROVEN TO EXIST BY
PREPONDERANCE OF EVIDENCE;

IN CONCLUDING THAT PETITIONER SIGNED THE DEED OF SALE WITH

KNOWLEDGE AS TO THE CONTENTS THEREOF;
IN ARRIVING AT THE CONCLUSION THAT THE TESTIMONY OF WITNESS DELIA
CABIAL DESERVES FULL FAITH AND CREDIT;
IN FINDING THAT THE SPECIAL POWER OF ATTORNEY AUTHORIZING
MORTGAGE FOR "UNLIMITED" LOANS AS RELEVANT.
Two main issues confront us in this case, to wit: whether or not the Deed of Definite Sale is in reality
an equitable mortgage and whether or not petitioner's property is liable to PNB for the loans
contracted by Parangan by virtue of the special power of attorney. The lower court and the CA
arrived at different factual findings thus necessitating a review of the evidence on record. 5 After a
thorough examination, we note some errors, both in fact and in law, committed by public respondent
CA.
The court a quo ruled that the Deed of Definite Sale is in reality an equitable mortgage as it was
shown beyond doubt that the intention of the parties was one of a loan secured by petitioner's
land. 6 We agree.
A contract is perfected by mere consent. 7 More particularly, a contract of sale is perfected at the
moment there is a meeting of minds upon the thing which is the object of the contract and upon the
price. 8 This meeting of the minds speaks of the intent of the parties in entering into the contract
respecting the subject matter and the consideration thereof. If the words of the contract appear to be
contrary to the evident intention of the parties, the latter shall prevail over the former. 9 In the case at
bench, the evidence is sufficient to warrant a finding that petitioner and Parangan merely intended to
consolidate the former's indebtedness to the latter in a single instrument and to secure the same
with the subject property. Even when a document appears on its face to be a sale, the owner of the
property may prove that the contract is really a loan with mortgage by raising as an issue the fact
that the document does not express the true intent of the parties. In this case, parol evidence then
becomes competent and admissible to prove that the instrument was in truth and in fact given
merely as a security for the repayment of a loan. And upon proof of the truth of such allegations, the
court will enforce the agreement or understanding in consonance with the true intent of the parties at
the time of the execution of the contract. 10
Articles 1602 and 1604 of the Civil Code respectively provide:
The contract shall be presumed to be an equitable mortgage in any of the following
cases:
1) When the price of a sale with right to repurchase is unusually inadequate;
2) When the vendor remains in possession as lessor or otherwise;
3) When upon or after the expiration of the right to repurchase, another instrument
extending the period of redemption or granting a new period is executed;

4) When the vendor binds himself to pay the taxes on the thing sold;
5) When the purchaser retains for himself a part of the purchase price;
6) In any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the performance
of any other obligation.
Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to
be an absolute sale.
From a reading of the above-quoted provisions, for a presumption of an equitable mortgage to arise,
we must first satisfy two requisites namely: that the parties entered into a contract denominated as a
contract of sale and that their intention was to secure an existing debt by way of mortgage. Under
Art. 1604 of the Civil Code, a contract purporting to be an absolute sale shall be presumed to be an
equitable mortgage should any of the conditions in Art. 1602 be present. The existence of any of the
circumstances therein, not a concurrence nor an overwhelming number of such circumstances,
suffices to give rise to the presumption that the contract is an equitable mortgage. 11
Art. 1602, (6), in relation to Art 1604 provides that a contract of sale is presumed to be an equitable
mortgage in any other case where it may be fairly inferred that the real intention of the parties is that
the transaction shall secure the payment of a debt or the performance of any other obligation. That
the case clearly falls under this category can be inferred from the circumstances surrounding the
transaction as herein set forth:
Petitioner had no knowledge that the contract 12 she signed is a deed of sale. The contents of the
same were not read nor explained to her so that she may intelligibly formulate in her mind the
consequences of her conduct and the nature of the rights she was ceding in favor of Parangan.
Petitioner is illiterate and her condition constrained her to merely rely on Parangan's assurance that
the contract only evidences her indebtedness to the latter. When one of the contracting 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. 13 Settled is the rule that where a party to a contract is illiterate or cannot
read or cannot understand the language in which the contract is written, the burden is on the party
interested in enforcing the contract to prove that the terms thereof are fully explained to the former in
a language understood by him. 14 To our mind, this burden has not been satisfactorily discharged.
We do not find the testimony of Parangan and Delia Cabial that the contract was duly read and
explained to petitioner worthy of credit. The assessment by the trial court of the credibility of
witnesses is entitled to great respect and weight for having had the opportunity of observing the
conduct and demeanor of the witnesses while testifying. 15 The lower court may not have
categorically declared Cabial's testimony as doubtful but this fact is readily apparent when it ruled on
the basis of petitioner's evidence in total disregard of the positive testimony on Parangan's side. We
have subjected the records to a thorough examination, and a reading of the transcript of
stenographic notes would bear out that the court a quo is correct in its assessment. The CA
committed a reversible error when it relied on the testimony of Cabial in upholding the validity of the

Deed of Definite Sale. For one, there are noted major contradictions between the testimonies of
Cabial and Judge Lebaquin, who notarized the purported Deed of Definite Sale. While the former
testified that receipts were presented before Judge Lebaquin, who in turn made an accounting to
determine the price of the land 16, the latter categorically denied the allegation. 17 This contradiction
casts doubt on the credibility of Cabial as it is ostensible that her version of the story is concocted.
On the other hand, petitioner's witness Celso Pamplona, testified that the contract was not read nor
explained to petitioner. We believe that this witness gave a more accurate account of the
circumstances surrounding the transaction. He has no motive to prevaricate or concoct a story as he
witnessed the execution of the document at the behest of Parangan himself who, at the outset,
informed him that he will witness a document consolidating petitioner's debts. He thus testified:
Q: In (sic) May 4, 1979, you remember having went (sic) to the
Municipality of Calinog?
A: Yes, sir.
Q: Who invited you to go there?
A: Parangan.
Q: You mean Nicolas Parangan?
A: Yes, sir.
Q: What did Nicolas tell you why he invited you to go there?
A: He told me that I will witness on the indebtedness of Adoracion to
Parangan.
Q: Before Adoracion Lustan signed her name in this Exh. "4", was
this document read to her?
A: No, sir.
Q: Did Nicolas Parangan right in that very room tell Adoracion what
she was signing?
A: No, sir.
xxx xxx xxx
Q: What did you have in mind when you were signing this document,
Exh. "4"?

A: To show that Adoracion Lustan has debts with Nicolas

Parangan. 18
Furthermore, we note the absence of any question propounded to Judge Lebaquin to establish that
the deed of sale was read and explained by him to petitioner. When asked if witness has any
knowledge whether petitioner knows how to read or write, he answered in the negative. 19 This latter
admission impresses upon us that the contract was not at all read or explained to petitioner for had
he known that petitioner is illiterate, his assistance would not have been necessary.
The foregoing squares with the sixth instance when a presumption of equitable mortgage prevails.
The contract of definite sale, where petitioner purportedly ceded all her rights to the subject lot in
favor of Parangan, did not embody the true intention of the parties. The evidence speaks clearly of
the nature of the agreement it was one executed to secure some loans.
Anent the issue of whether the outstanding mortgages on the subject property can be enforced
against petitioner, we rule in the affirmative.
Third persons who are not parties to a loan may secure the latter by pledging or mortgaging their
own property.20 So long as valid consent was given, the fact that the loans were solely for the benefit
of Parangan would not invalidate the mortgage with respect to petitioner's property. In consenting
thereto, even granting that petitioner may not be assuming personal liability for the debt, her property
shall nevertheless secure and respond for the performance of the principal obligation. 21 It is
admitted that petitioner is the owner of the parcel of land mortgaged to PNB on five (5) occasions by
virtue of the Special Powers of Attorney executed by petitioner in favor of Parangan. Petitioner
argues that the last three mortgages were void for lack of authority. She totally failed to consider that
said Special Powers of Attorney are a continuing one and absent a valid revocation duly furnished to
the mortgagee, the same continues to have force and effect as against third persons who had no
knowledge of such lack of authority. Article 1921 of the Civil Code provides:
Art. 1921. If the agency has been entrusted for the purpose of contracting with
specified persons, its revocation shall not prejudice the latter if they were not given
notice thereof.
The Special Power of Attorney executed by petitioner in favor of Parangan duly authorized the latter
to represent and act on behalf of the former. Having done so, petitioner clothed Parangan with
authority to deal with PNB on her behalf and in the absence of any proof that the bank had
knowledge that the last three loans were without the express authority of petitioner, it cannot be
prejudiced thereby. As far as third persons are concerned, an act is deemed to have been performed
within the scope of the agent's authority if such is within the terms of the power of attorney as written
even if the agent has in fact exceeded the limits of his authority according to the understanding
between the principal and the agent. 22 The Special Power of Attorney particularly provides that the
same is good not only for the principal loan but also for subsequent commercial, industrial,
agricultural loan or credit accommodation that the attorney-in-fact may obtain and until the power of
attorney is revoked in a public instrument and a copy of which is furnished to PNB. 23 Even when the
agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed
the latter to act as though he had full powers (Article 1911, Civil Code). 24 The mortgage directly and

immediately subjects the property upon which it is imposed. 25 The property of third persons which
has been expressly mortgaged to guarantee an obligation to which the said persons are foreign, is
directly and jointly liable for the fulfillment thereof; it is therefore subject to execution and sale for the
purpose of paying the amount of the debt for which it is liable. 26 However, petitioner has an
unquestionable right to demand proportional indemnification from Parangan with respect to the sum
paid to PNB from the proceeds of the sale of her property 27 in case the same is sold to satisfy the
unpaid debts.
WHEREFORE, premises considered, the judgment of the lower court is hereby REINSTATED with
the following MODIFICATIONS:
1. DECLARING THE DEED OF DEFINITE SALE AS AN EQUITABLE MORTGAGE;
2. ORDERING PRIVATE RESPONDENT NICOLAS PARANGAN TO RETURN THE POSSESSION
OF THE SUBJECT LAND UNTO PETITIONER UPON THE LATTER'S PAYMENT OF THE SUM OF
P75,000.00 WITHIN NINETY (90) DAYS FROM RECEIPT OF THIS DECISION;
3. DECLARING THE MORTGAGES IN FAVOR OF PNB AS VALID AND SUBSISTING AND MAY
THEREFORE BE SUBJECTED TO EXECUTION SALE.
4. ORDERING PRIVATE RESPONDENT PARANGAN TO PAY PETITIONER THE AMOUNT OF
P15,000.00 BY WAY OF ATTORNEY'S FEES AND TO PAY THE COSTS OF THE SUIT.
SO ORDERED.
Narvasa, C.J., Davide, Jr., Melo and Panganiban, JJ., concur.

G.R. No. 132415

January 30, 2002

MIGUEL KATIPUNAN, INOCENCIO VALDEZ, EDGARDO BALGUMA

and LEOPOLDO BALGUMA, JR.,petitioners,
vs.
BRAULIO KATIPUNAN, JR., respondent.
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari1 assailing the Decision2 of the Court of Appeals dated
July 31, 1997 in CA-GR CV No. 45928, "Braulio Katipunan, Jr. vs. Miguel Katipunan, Inocencio
Valdez, Atty. Leopoldo Balguma, Sr., Edgardo Balguma and Leopoldo Balguma, Jr." which set aside
the Decision of the Regional Trial Court (RTC) of Manila, Branch 28, in Civil Case No. 87-39891 for
annulment of a Deed of Absolute Sale.

The antecedents are:

Respondent Braulio Katipunan, Jr. is the owner of a 203 square meter lot and a five-door apartment
constructed thereon located at 385-F Matienza St., San Miguel, Manila. The lot is registered in his
name under TCT No. 1091933 of the Registry of Deeds of Manila. The apartment units are occupied
by lessees.
On December 29, 1985, respondent, assisted by his brother, petitioner Miguel Katipunan, entered
into a Deed of Absolute Sale4with brothers Edgardo Balguma and Leopoldo Balguma, Jr. (copetitioners), represented by their father Atty. Leopoldo Balguma, Sr., involving the subject property
for a consideration of P187,000.00. Consequently, respondents title to the property was cancelled
and in lieu thereof, TCT No. 1683945 was registered and issued in the names of the Balguma
brothers. In January, 1986, Atty. Balguma, then still alive, started collecting rentals from the lessees
of the apartments.
On March 10, 1987, respondent filed with the RTC of Manila, Branch 21, 6 a complaint for annulment
of the Deed of Absolute Sale, docketed as Civil Case No. 87-39891. 7 He averred that his brother
Miguel, Atty. Balguma and Inocencio Valdez (defendants therein, now petitioners) convinced him to
work abroad. They even brought him to the NBI and other government offices for the purpose of
securing clearances and other documents which later turned out to be falsified. Through insidious
words and machinations, they made him sign a document purportedly a contract of employment,
which document turned out to be a Deed of Absolute Sale. By virtue of the said sale, brothers
Edgardo and Leopoldo, Jr. (co-defendants), were able to register the title to the property in their
names. Respondent further alleged that he did not receive the consideration stated in the contract.
He was shocked when his sister Agueda Katipunan-Savellano told him that the Balguma brothers
sent a letter to the lessees of the apartment informing them that they are the new owners. Finally, he
claimed that the defendants, now petitioners, with evident bad faith, conspired with one another in
taking advantage of his ignorance, he being only a third grader.
In their answer, petitioners denied the allegations in the complaint, alleging that respondent was
aware of the contents of the Deed of Absolute Sale and that he received the consideration involved;
that he also knew that the Balguma brothers have been collecting the rentals since December, 1985
but that he has not objected or confronted them; and that he filed the complaint because his sister,
Agueda Savellano, urged him to do so.8
Twice respondent moved to dismiss his complaint (which were granted) on the grounds that he was
actually instigated by his sister to file the same; and that the parties have reached an amicable
settlement after Atty. Balguma, Sr. paid him P2,500.00 as full satisfaction of his claim. In granting his
motions for reconsideration, the trial court was convinced that respondent did not sign the motions to
dismiss voluntarily because of his poor comprehension, as shown by the medical report of Dr.
Annette Revilla, a Resident Psychiatrist at the Philippine General Hospital. Besides, the trial court
noted that respondent was not assisted by counsel in signing the said motions, thus it is possible
that he did not understand the consequences of his action.9
Eventually the trial court set the case for pre-trial. The court likewise granted respondents motion to
appoint Agueda Savellano as his guardian ad litem.10
After hearing, the trial court dismissed the complaint, holding that respondent failed to prove his
causes of action since he admitted that: (1) he obtained loans from the Balgumas; (2) he signed the
Deed of Absolute Sale; and (3) he acknowledged selling the property and that he stopped collecting
the rentals.

Upon appeal by respondent, the Court of Appeals, on July 31, 1997, rendered the assailed Decision,
the dispositive portion of which reads:
"WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE, and a
new one entered annulling the Deed of Sale. Consequently, TCT No. 168394 is hereby
declared null and void and of no force and effect. The Register of Deeds of Manila is directed
to cancel the same and restore TCT No. 109193 in the name of Braulio Katipunan.
"SO ORDERED."
In reversing the RTC Decision, the Court of Appeals ruled:
"Upon close scrutiny of all the evidence on record, plaintiff-appellants contention finds
support in the certification dated August 4, 1987 issued by Dr. Ana Marie Revilla, a
psychiatrist at the UP-PGH, who was presented as an expert witness. Her findings explained
the reason why plaintiff-appellant showed a lot of inconsistencies when he was put on the
stand. It supports the fact that plaintiff-appellant is slow in comprehension and has a very low
IQ. Based on such findings, the trial court was faulted for its wrong assessment of appellants
mental condition. It arbitrarily disregarded the testimony of a skilled witness and made an
unsupported finding contrary to her expert opinion.
Admittedly, expert witnesses when presented to the court must be construed to have been
presented not to sway the court in favor of any of the parties, but to assist the court in the
determination of the issue before it(Espiritu vs. Court of Appeals, 242 SCRA 362). Expert
opinions are not ordinarily conclusive. They are generally regarded as purely advisory in
character; the court may place whatever weight they choose upon such testimony and may
reject it if they find it inconsistent with the facts in the case or otherwise unreasonable (Basic
Evidence by Ricardo J. Francisco, pp. 202).
The trial court whose decision is now under review refused to admit the experts testimony
and prefer to base its decision on its findings that contrary to the allegation of the appellant,
he is nonetheless capable of responding to the questions expounded to him while on the
stand. In short, the court was swayed by its own observation of appellants demeanor on the
stand. Of course, the rule is to accord much weight to the impressions of the trial judge, who
had the opportunity to observe the witnesses directly and to test their credibility by their
demeanor on the stand (People vs. Errojo, 229 SCRA 49). Such impression however, is
not per se the basis of a conclusion, for it needs conformity with the findings of facts relevant
to the case.
We find it indispensable to give credit to the findings of Dr. Ana Marie Revilla, whose
testimony remains unshaken and unimpeached. The tests she made are revealing and
unrebutted and has a bearing on facts of the case.
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. On the other hand, the documents presented by the appellees in their
favor, i.e., the deeds of mortgage and of sale, are all in English. There is no showing that the
contracts were read and/or explained to Braulio nor translated in a language he understood.
Article 1332 of the Civil Code provides:

Art. 1332. 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.
Furthermore, if Braulio has a mental state of a six year old child, he can not be considered as
fully capacitated. He falls under the category of incompetent as defined in Section 2, Rule
92 of the Rules of Court, which reads:
Sec. 2. Meaning of Word Incompetent - Under this rule, the word incompetent
includes persons suffering the penalty of civil interdiction or who are hospitalized
lepers, prodigals, deaf and dumb who are unable to read and write, those who are of
unsound mind, even though they have lucid intervals, and persons not being of
unsound mind, but by reason of age, disease, weak mind, and other similar causes,
can not, without outside aid, take care of themselves and manage their property,
becoming thereby an easy prey for deceit and exploitation.
We also note the admission of defendant-appellee Miguel Katipunan, that he and Braulio
received the considerations of the sale, although he did not explain what portion went to
each other of them. Anyway, there is no reason why Miguel should receive part of the
consideration, since he is not a co-owner of the property. Everything should have gone to
Braulio. Yet, Miguel did not refute that he was giving him only small amounts (coins).
As to the allegation of the scheme utilized in defrauding Braulio, neither Miguel nor Atty.
Balguma refuted the statement of Braulio that he was being enticed to go abroad - which
was the alleged reason for the purported sale. Nothing was explained about the alleged trip
to NBI, the fake passport, etc., nor of Miguels own plans to go abroad. It is then most
probable that it was Miguel who wanted to go abroad and needed the money for it.
In view of the foregoing, it is apparent that the contract entered into by Braulio and Atty.
Balguma is voidable, pursuant to the provisions of Article 1390 of the Civil Code, to wit:
Art. 1390. The following contracts are voidable or annullable, even though there may
have been no damage to the contracting parties:
(1) Those where one of the parties is incapable of giving consent to a contract;
(2) Those where the consent is vitiated by mistake, violence, intimidation, undue
influence or fraud.
These contracts are binding, unless they are annulled by a proper action in court,
they are susceptible of ratification."11
Petitioners filed a motion for reconsideration but was denied. Hence, this petition.
Petitioners, in seeking the reversal of the Court of Appeals Decision, rely heavily on the rule that
findings of fact by the trial courts are entitled to full faith and credence by the Appellate Court.
Petitioners contend that the Court of Appeals erred when it overturned the factual findings of the trial
court which are amply supported by the evidence on record.
The petition is devoid of merit.

While it may be true that findings of a trial court, given its peculiar vantage point to assess the
credibility of witnesses, are entitled to full faith and credit and may not be disturbed on appeal, this
rule is not infallible, for it admits of certain exceptions. One of these exceptions is when there is a
showing that the trial court had overlooked, misunderstood or misapplied some fact or circumstance
of weight and substance, which, if considered, could materially affect the result of the case. 12Also,
when the factual findings of the trial court contradict those of the appellate court, this Court is
constrained to make a factual review of the records and make its own assessment of the case. 13The
instant case falls within the said exception.
A contract of sale is born from the moment there is a meeting of minds upon the thing which is the
object of the contract and upon the price.14This meeting of the minds speaks of the intent of the
parties in entering into the contract respecting the subject matter and the consideration
thereof.15Thus, the elements of a contract of sale are consent, object, and price in money or its
equivalent.16Under Article 1330 of the Civil Code, consent may be vitiated by any of the following: (a)
mistake, (2) violence, (3) intimidation, (4) undue influence, and (5) fraud. 17The presence of any of
these vices renders the contract voidable.
Here, as borne by the facts on hand, respondent signed the deed without the remotest idea of what
it was, thus:
"ATTY. SARMIENTO:
Q After Miguel received that money which amount you do not remember how much, do
you remember having signed a document purported to be sale of property that which you
owned?
A

Yes, I signed something because they forced me to sign.

COURT (To the witness)

Q

Do you know how to affix your signature?

Yes, Your Honor.

Q You sign your name here. (witness is given a piece of paper by the court wherein he
was made to sign his name)
ATTY. SARMIENTO:
Q You said that you remember you have signed a document. Did you come to know
what kind of document was that which you signed at that time?
A

I do not know.

Where did you sign that document?

I signed that document in the house of Sencio.

Where is this house of Sencio?

It is just behind our house at San Miguel.

Nobody informed you what document you were signing?

Nobody informed me what document I was signing.

Who asked you to sign that document?

My brother Miguel and Sencio asked me to sign that document.

You never bothered to ask your brother Miguel why you were signing that document?

According to them, if I will not sign, something will happen.

Who particularly told you that if you will not sign that document something will happen?

Atty. Balguma. (witness pointing to Atty. Balguma)

Q You want to tell the court that Atty. Balguma at that time you signed that document was
present?
A

Yes, sir, he was there.

What if any did Atty. Balguma do when you were asked to sign that document?

He was asking me also to sign.

COURT (To the witness)

Q

Were you threatened with a gun or any instrument?

No, Your Honor.

How were you threatened?

A I was shoved aside by Sencio and Miguel and I was surprised why they made me
sign.
Q

Did you fall down when you were shoved?

I was made to move to the side.

And because of that you signed that document that you were being forced to sign?

Yes, sir.

What kind of paper did you sign?

A coupon bond paper.

Was there something written?

There was something written on it, but I do not know.

Was it typewritten?

A There was something typewritten when it was shown to me but I do not know what it
was."18(Underscoring supplied)
The circumstances surrounding the execution of the contract manifest a vitiated consent on the part
of respondent. Undue influence was exerted upon him by his brother Miguel and Inocencio Valdez
(petitioners) and Atty. Balguma. It was his brother Miguel who negotiated with Atty. Balguma.
However, they did not explain to him the nature and contents of the document. Worse, they deprived
him of a reasonable freedom of choice. It bears stressing that he reached only grade three. Thus, it
was impossible for him to understand the contents of the contract written in English and embellished
in legal jargon. Even the trial court, in reinstating the case which it earlier dismissed, took
cognizance of the medical finding of Dr. Revilla (presented by respondents counsel as expert
witness) who testified during the hearing of respondents motion for reconsideration of the first order
dismissing the complaint. According to her, based on the tests she conducted, she found that
respondent has a very low IQ and a mind of a six-year old child.19 In fact, the trial court had to clarify
certain matters because Braulio was either confused, forgetful or could not comprehend. 20 Thus, his
lack of education, coupled with his mental affliction, placed him not only at a hopelessly
disadvantageous position vis--vis petitioners to enter into a contract, but virtually rendered him
incapable of giving rational consent. To be sure, his ignorance and weakness made him most
vulnerable to the deceitful cajoling and intimidation of petitioners. The trial court obviously erred
when it disregarded Dr. Revillas testimony without any reason at all. It must be emphasized that
petitioners did not rebut her testimony.
Even the consideration, if any, was not shown to be actually paid to respondent. Extant from the
records is the fact that Miguel profited from the entire transaction and gave only small amounts of
money to respondent, thus:
"Q Do you know how much money was given to Miguel and from whom did that money
come from?
A

I do not know how much, but the money came from Atty. Balguma.

Q You do not know how much amount was given by Atty. Balguma and for what
consideration was the money given you are not aware of that?
A

I am not aware because I was not there, I do not know anything.

Q You want to tell the court that despite that it is you being the owner of this
property it was Miguel who negotiated the asking of money from Atty. Balguma?
A

Yes, it is like that.

Were you consulted by your brother Miguel when he asked money from Atty. Balguma?

No, sir, in the beginning he kept it a secret then later on he told us.

Q You want to tell this court that it was only when your brother Miguel gave (you)
money that he told you that "we have now the money from Atty. Balguma"?

A No, sir, I did not even know where that money came from. He was about to leave
for abroad when he told me that he received money from Atty. Balguma.
Q Did you receive any amount from Miguel every time he was given by Atty.
Balguma? You received also money from Miguel every time he was given by Atty.
Balguma?
A

Yes, he would give me small denominations, "barya".

Q When you said "barya", would you be able to tell the court how much this barya you are
referring to is?
A

May be twenty pesos, may be ten pesos, but they are all loose change.

Q Tell us how many times did Miguel receive money from Atty. Balguma as much as you
can recall?
A I do not know because every time my brother Miguel and Atty. Balguma would
transact business, I was not present.
x

Q Before or after the signing of this piece of paper were you given any big amount
of money by your brother Miguel or Atty. Balguma or Sencio?
A After signing that document, Atty. Balguma gave me several loose change
"barya", no paper bills. A just handful of coins."21 (Underscoring supplied)
We are convinced that respondent was telling the truth that he did not receive the purchase price.
His testimony on this point was not controverted by Miguel. Moreover, Atty. Balguma admitted that
it was Miguel who received the money from him.22 What Miguel gave respondent was merely
loose change or "barya-barya," grossly disproportionate to the value of his property. We agree with
the conclusion of the Court of Appeals that "it is then most probable that it was Miguel who wanted to
go abroad and needed the money for it."
In the case of Archipelago Management and Marketing Corp. vs. Court of Appeals,23penned by
Justice Artemio V. Panganiban, this Court sustained the decision of the Court of Appeals annulling
the deed of sale subject thereof. In that case, Rosalina (the owner) was convinced by her second
husband to sign several documents, purportedly an application for the reconstitution of her burned
certificate of title. However, said documents turned out to be a Deed of Absolute Sale where it was
stipulated that she sold her property for P 1,200,000.00, a consideration which she did not receive.
The Court ruled that Rosalina, who was quite old at that time she signed the deed, was tricked by
her own husband, who employed fraud and deceit, into believing that what she was signing was her
application for reconstitution of title.
A contract where one of the parties is incapable of giving consent or where consent is vitiated by
mistake, fraud, or intimidation is not void ab initio but only voidable and is binding upon the parties
unless annulled by proper Court action. The effect of annulment is to restore the parties to the
status quo ante insofar as legally and equitably possible-- this much is dictated by Article 1398 of the
Civil Code. As an exception however to the principle of mutual restitution, Article 1399 provides that
when the defect of the contract consists in the incapacity of one of the parties, the incapacitated

person is not obliged to make any restitution, except when he has been benefited by the things or
price received by him. Thus, since the Deed of Absolute Sale between respondent and the Balguma
brothers is voidable and hereby annulled, then the restitution of the property and its fruits to
respondent is just and proper. Petitioners should turn over to respondent all the amounts they
received starting January, 1986 up to the time the property shall have been returned to the latter.
During the pre-trial and as shown by the Pre-Trial Order, the contending parties stipulated that the
Balguma brothers received from the lessees monthly rentals in the following amounts:

PERIOD

AMOUNT OF RENTALS

January, 1986 to
December, 1987

P 481.00 per month

January, 1988 to
December, 1988

P2,100.00 per month

January, 1989 to
present

P3,025.00 per month

Article 24 of the Civil Code enjoins courts to be vigilant for the protection of a party to a contract who
is placed at a disadvantage on account of his ignorance, mental weakness or other handicap, like
respondent herein. We give substance to this mandate.
WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated July 3,
1997 in CA-GR CV No. 45928 is AFFIRMED with MODIFICATION in the sense that petitioners
Edgardo Balguma and Leopoldo Balguma, Jr., are ordered to turn over to respondent Braulio
Katipunan, Jr. the rentals they received for the five-door apartment corresponding to the period from
January, 1986 up to the time the property shall have been returned to him, with interest at the legal
rate. Costs against petitioners.
SO ORDERED.
Melo, (Chairman), Vitug, Panganiban, and Carpio, JJ., concur.

G.R. No. 125485

September 13, 2004

RESTITUTA LEONARDO, assisted by JOSE T. RAMOS, petitioners,

vs.
COURT OF APPEALS, and TEODORO SEBASTIAN, VICENTE
SEBASTIAN, CORAZON SEBASTIAN, assisted by ANDRES
MARCELO; PEDAD SEBASTIAN, HEIRS OF EDUVIGIS SEBASTIAN,
namely: EDUARDO S. TENORLAS, ABELARDO J. TENORLAS, ADELA
S. and SOLEDAD S. TENORLAS, represented by EDUARDO S.
TENORLAS, and HEIRS OF DOMINADOR, namely: NAPOLEON
SEBASTIAN, RUPERTO SEBASTIAN, ADORACION SEBASTIAN,
PRISCILLA SEBASTIAN, LITA SEBASTIAN, TITA SEBASTIAN and
GLORIA SEBASTIAN, represented by NAPOLEON SEBASTIAN;
EVELYN SEBASTIAN; AURORA SEBASTIAN; and JULIETA
SEBASTIAN, respondents.
DECISION
CORONA, J.:
This is a petition for review under Rule 45 of the Rules of Court seeking to reverse and set aside the
decision1 of the Court of Appeals which in turn affirmed the judgment 2 of Branch 57, Regional Trial
Court (RTC) of San Carlos City, dismissing for lack of cause of action the complaint filed by
petitioner against private respondents for declaration of nullity of the extrajudicial settlement of the
estate of Jose Sebastian and Tomasina Paul.
Petitioner Restituta Leonardo is the only legitimate child of the late spouses Tomasina Paul and
Balbino Leonardo. Private respondents Teodoro, Victor, Corazon, Piedad, as well as the late
Eduvigis and Dominador, all surnamed Sebastian, are the illegitimate children of Tomasina with Jose
Sebastian after she separated from Balbino Leonardo.
In an action to declare the nullity of the extrajudicial settlement of the estate of Tomasina Paul and
Jose Sebastian before Branch 57, RTC of San Carlos City, Pangasinan, petitioner alleged that, on
June 24, 1988, at around 5:00 p.m., private respondent Corazon Sebastian and her niece Julieta
Sebastian, and a certain Bitang, came to petitioners house to persuade her to sign a deed of
extrajudicial partition of the estate of Tomasina Paul and Jose Sebastian. Before signing the
document, petitioner allegedly insisted that they wait for her husband Jose Ramos so he could
translate the document which was written in English. Petitioner, however, proceeded to sign the
document even without her husband and without reading the document, on the assurance of private
respondent Corazon Sebastian that petitioners share as a legitimate daughter of Tomasina Paul
was provided for in the extrajudicial partition. Petitioner then asked private respondent Corazon and
her companions to wait for her husband so he could read the document. When petitioners husband
arrived, however, private respondent Corazon and her companions had left without leaving a copy of

the document. It was only when petitioner hired a lawyer that they were able to secure a copy and
read the contents thereof.
Petitioner refuted3 private respondents claim that they were the legitimate children and sole heirs of
Jose Sebastian and Tomasina Paul. Despite the (de facto) separation of petitioners father Balbino
Leonardo and Tomasina Paul, the latter remained the lawful wife of Balbino. Petitioner maintained
that no joint settlement of the estate of Jose Sebastian and Tomasina Paul could be effected since
what existed between them was co-ownership, not conjugal partnership. They were never married to
each other. The extrajudicial partition was therefore unlawful and illegal.
Petitioner also claimed that her consent was vitiated because she was deceived into signing the
extrajudicial settlement. She further denied having appeared before Judge Juan Austria of the
Municipal Trial Court (MTC) of Urbiztondo, Pangasinan on July 27, 1988 to acknowledge the
execution of the extrajudicial partition.
Private respondents, in their answer with counterclaim, 4 raised the defense of lack of cause of
action. They insisted that the document in question was valid and binding between the parties.
According to them, on July 27, 1988, they personally appeared before Judge Austria of the MTC of
Urbiztondo, who read and explained the contents of the document which all of them, including
petitioner, voluntarily signed.
Private respondents contended that their declaration that they were legitimate children of Jose
Sebastian and Tomasina Paul did not affect the validity of the extrajudicial partition. Petitioners act
of signing the document estopped her to deny or question its validity. They moreover averred that
the action filed by petitioner was incompatible with her complaint. Considering that petitioner claimed
vitiation of consent, the proper action was annulment and not declaration of nullity of the instrument.
On July 27, 1989, petitioner filed an amended complaint 5 to include parties to the extrajudicial
partition who were not named as defendants in the original complaint.
During the August 23, 1990 pre-trial conference,6 no amicable settlement was reached and the
parties agreed that the only issue to be resolved was whether petitioners consent to the extrajudicial
partition was voluntarily given.
In a decision dated February 22, 1993, the RTC of San Carlos City, Pangasinan rendered a
decision7 dismissing the complaint as well as the counterclaim. The court a quo ruled that the
element of duress or fraud that vitiates consent was not established and that the proper action was
the reformation of the instrument, not the declaration of nullity of the extrajudicial settlement of
estate. By way of obiter dictum, the trial court stated that, being a legitimate child, petitioner was
entitled to one-half (or 19,282.5 sq.m.) of Tomasina Pauls estate as her legitime. The 7,671.75
square meters allotted to her in the assailed extrajudicial partition was therefore less than her correct
share as provided by law.
On appeal, the Court of Appeals affirmed the judgment of the trial court in its May 23, 1996
decision.8 Hence, this petition for review on certiorari under Rule 45.

The sole issue in this case is whether the consent given by petitioner to the extrajudicial settlement
of estate was given voluntarily.
We hold that it was not.
The essence of consent is the agreement of the parties on the terms of the contract, the acceptance
by one of the offer made by the other. It is the concurrence of the minds of the parties on the object
and the cause which constitutes the contract.9 The area of agreement must extend to all points that
the parties deem material or there is no consent at all. 10
To be valid, consent must meet the following requisites: (a) it should be intelligent, or with an exact
notion of the matter to which it refers; (b) it should be free and (c) it should be spontaneous.
Intelligence in consent is vitiated by error; freedom by violence, intimidation or undue influence; and
spontaneity by fraud.11
In determining the effect of an alleged error, the courts must consider both the objective and
subjective aspects of the case which is the intellectual capacity of the person who committed the
mistake.12
Mistake, on the other hand, in order to invalidate consent "should refer to the substance of the thing
which is the object of the contract, or to those conditions which have principally moved one or both
parties to enter into the contract."13
According to the late civil law authority, Arturo M. Tolentino, the (old) rule that a party is presumed to
know the import of a document to which he affixes his signature and is bound thereby, has been
altered by Art. 1332 of the Civil Code. The provision states that "[w]hen 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."
Article 1332 was a provision taken from american law, necessitated by the fact that there continues
to be a fair number of people in this country without the benefit of a good education or documents
have been written in English or Spanish.14 The provision was intended to protect a party to a contract
disadvantaged by illiteracy, ignorance, mental weakness or some other handicap. It contemplates a
situation wherein a contract is entered into but the consent of one of the contracting parties is
vitiated by mistake or fraud committed by the other.15
Thus, in case one of the parties to a contract is unable to read and fraud is alleged, the person
enforcing the contract must show that the terms thereof have been fully explained to the
former.16 Where a party is unable to read, and he expressly pleads in his reply that he signed the
voucher in question "without knowing (its) contents which have not been explained to him," this plea
is tantamount to one of mistake or fraud in the execution of the voucher or receipt in question and
the burden is shifted to the other party to show that the former fully understood the contents of the
document; and if he fails to prove this, the presumption of mistake (if not fraud) stands unrebutted
and controlling.17

Contracts where consent is given by mistake or because of violence, intimidation, undue influence or
fraud are voidable.18 These circumstances are defects of the will, the existence of which impairs the
freedom, intelligence, spontaneity and voluntariness of the party in giving consent to the agreement.
In determining whether consent is vitiated by any of the circumstances mentioned in Art. 1330 of the
Civil Code, courts are given a wide latitude in weighing the facts or circumstances in a given case
and in deciding in favor of what they believe actually occurred, considering the age, physical
infirmity, intelligence, relationship and the conduct of the parties at the time of making the contract
and subsequent thereto, irrespective of whether the contract is in a public or private writing. 19
Although under Art. 1332 there exists a presumption of mistake or error accorded by the law to those
who have not had the benefit of a good education, one who alleges any defect or the lack of a valid
consent to a contract must establish the same by full, clear and convincing evidence, not merely by
preponderance of evidence.20Hence, even as the burden of proof shifts to the defendants to rebut
the presumption of mistake, the plaintiff who alleges such mistake (or fraud) must show that his
personal circumstances warrant the application of Art. 1332.
In this case, the presumption of mistake or error on the part of petitioner was not sufficiently rebutted
by private respondents. Private respondents failed to offer any evidence to prove that the
extrajudicial settlement of estate was explained in a language known to the petitioner, i.e. the
Pangasinan dialect. Clearly, petitioner, who only finished Grade 3, was not in a position to give her
free, voluntary and spontaneous consent without having the document, which was in English,
explained to her in the Pangasinan dialect. She stated in open court that she did not understand
English. Her testimony, translated into English, was as follows:
Q : While you were there is your house at barangay Angatel, Urbiztondo, Pangasinan, what
happened?
A: On June 24, 1988, I was in our house because I got sick, sir.
Q: What happened?
A: When the time was about 5:00 oclock, I was awaken by my daughter-in-law, Rita Ramos,
and told me that my half sister Corazon would like to tell us something, sir.
Q: What did you do?
A: I let them come in, sir.
Q: Did they come in?
A: Yes, sir.
Q: Who was the companion of your half sister Corazon Sebastian when she arrived in your
house?
A: Julita Sebastian and her daughter Bitang, sir.

Q: And who is this Julita Sebastian to you?

A: She is my niece, sir.
Q: And then when they got inside the house, what happened?
A: I asked them their purpose, sir.
Q: Did they tell you their purpose?
A: I asked their purpose in coming to our house and they told me, "I came here because I
have a partition executed so that the share of each one of us will be given", she said sir.
Q: Did you see that document?
A: Yes, sir.
ATTY. L. TULAGAN
Q: Did you read the document?
A: No, sir because I was waiting for my husband to have that document read or translated to
me because I could not understand, sir.
Q: What could you not understand?
A: I can not understand English, sir.
Q: But anyway, can you read?
A: Yes, sir in Pangasinan.
Q: Now, that document which according to you was brought by your half sister Corazon
Sebastian, what happened to that document?
A: Corazon Sebastian request(ed) me to sign, sir.
Q: Did you sign immediately?
A: Yes, sir, because according to her, all my shares were embodied in that document as a
legal daughter.21
Petitioners wish to wait for her husband, Jose T. Ramos, to explain to her the contents of the
document in the Pangasinan dialect was a reasonable and prudent act that showed her uncertainty
over what was written. Due to her limited educational attainment, she could not understand the
document in English. She wanted to seek assistance from her husband who was then out of the

house. However, due to the misrepresentation, deception and undue pressure of her half-sister
Corazon Sebastian, petitioner signed the document. Corazon assured petitioner that she would
receive her legitimate share in the estate of their late mother.
Later on, when petitioners husband examined the extrajudicial partition agreement, he found out
that petitioner was deprived of her full legitime. Under the law, petitioners share should have been
one-half of her mothers estate, comprising a total area of 19,282.50 square meters. Under the
defective extrajudicial settlement of estate, however, petitioner was to receive only 7,671.75 square
meters. This was a substantial mistake clearly prejudicial to the substantive interests of petitioner in
her mothers estate. There is no doubt that, given her lack of education, petitioner is protected by Art.
1332 of the Civil Code. There is reason to believe that, had the provisions of the extrajudicial
agreement been explained to her in the Pangasinan dialect, she would not have consented to the
significant and unreasonable diminution of her rights.
MTC Judge Austria, the officer who notarized the extrajudicial settlement, stated that he explained
the contents to all the parties concerned. Granting arguendo, however, that Judge Austria did indeed
explain the provisions of the agreement to them, the records do not reflect that he explained it to
petitioner in a language or dialect known to her. Judge Austria never stated in his testimony before
the court a quo what language or dialect he used in explaining the contents of the document to the
parties.22 Significantly, he was not even certain if the parties to the agreement were present during
the notarization of the document:
ATTY. TULAGAN
Q. Reflected upon all the pages of this Exhibit "1" are numerous signatures, two of whom
belongs (sic) to Piedad Paul Sebastian and Eduardo Sebastian Tenorlas.
ATTY. D. TULAGAN
(continuing)
The Philippines on July, 1989, will you please educate us now Judge Austria on this
document?
ATTY.O. DE GUZMAN
That will be improper, your Honor.
COURT
What is the question, you repeat the question.
INTERPRETER:
"Reflected upon all the pages of this Exhibit "1" are numerous signatures, two of whom
belongs (sic) to Piedad Paul Sebastian and Eduardo Sebastian Tenorlas, in your just

concluded testimony, you said that everyone of them appeared with you, we have here a
documented evidence coming from the Department of Justice, Bureau of Immigration and
Deportation, Manila, certifying that Piedad Paul Sebastian and Eduardo Sebastian Tenorlas
did not arrive in the Philippines or departed from the Philippines on July, 1998, will you
please educate us now Judge Austria on this document?
ATTY. O. DE GUZMAN:
Your Honor please, before the witness answer, may we examine the certification first and
may we state for the record that the month of July, 1998 does not specify any date.
ATTY.. L. TULAGAN:
July.
ATTY. O. DE GUZMAN:
But not a particular date, for the record.
ATTY. L. TUL.AGAN:
For the whole month of July, no departure and no arrival. This is a certificate from the Bureau
of Immigration, Manila. I do not know about this, as a matter of fact, I do not even know this
person personally
WITNESS:
Somebody that kind of name appeared before me.
ATTY. L. TULAGAN:
Q: Since you do not know everybody from Urbiztondo, Pangasinan it is possible that another
person appeared and signed for that name?
A: Yes, possible.23
Therefore, the presumption of mistake under Article 1332 is controlling, having remained unrebutted
by private respondents. The evidence proving that the document was not fully explained to petitioner
in a language known to her, given her low educational attainment, remained uncontradicted by
private respondents. We find that, in the light of the circumstances presented by the testimonies of
the witnesses for both parties, the consent of petitioner was invalidated by a substantial mistake or
error, rendering the agreement voidable. The extrajudicial partition between private respondents and
petitioner should therefore be annulled and set aside on the ground of mistake.
In Rural Bank of Caloocan, Inc. v. Court of Appeals,24 we ruled that a contract may be annulled on
the ground of vitiated consent, even if the act complained of is committed by a third party without the

connivance or complicity of one of the contracting parties. We found that a substantial mistake arose
from the employment of fraud or misrepresentation. The plaintiff in that case was a 70-year-old
unschooled and unlettered woman who signed an unauthorized loan obtained by a third party on her
behalf. The Court annulled the contract due to a substantial mistake which invalidated her consent.
By the same reasoning, if it is one of the contracting parties who commits the fraud or
misrepresentation, such contract may all the more be annulled due to substantial mistake.
In Remalante v. Tibe,25 this Court ruled that misrepresentation to an illiterate woman who did not
know how to read and write, nor understand English, is fraudulent. Thus, the deed of sale was
considered vitiated with substantial error and fraud. This Court further held: 26
Since it has been established by uncontradicted evidence that the plaintiff is practically
unschooled and illiterate, not knowing how to read, write and understand the English
language in which Exhibit 22 was drafted, it would have been incumbent upon the defendant
to show that the terms there of have been fully explained to the plaintiff. The evidence is
entirely lacking at this point, and the lack of it is fatal to the cause of the defendant for his
failure to discharge the burden of proof.
Generally, the remedy of appeal by certiorari under Rule 45 of the Rules of Court contemplates only
questions of law and not issues of fact.27 This rule, however, is inapplicable in cases such as the one
at bar where the factual findings complained of are absolutely devoid of support in the records or the
assailed judgment of the appellate court is based on a misapprehension of facts. 28 Thus, this case is
an exception to the general rule on the conclusiveness of facts, the evidence pointing to no other
conclusion but the existence of vitiated consent, given the diminished intellectual capacity of the
petitioner and the misrepresentation of private respondent Corazon Sebastian on the contents of the
extrajudicial partition.
Private respondents also maintain that petitioner has no cause of action since the remedy that
should be pursued is an action for annulment and not for declaration of nullity. Private respondents
therefore pray for the dismissal of this petition on the ground of lack of cause of action.
Before ruling on this procedural matter, a distinction between an action for annulment and one for
declaration of nullity of an agreement is called for.1avvphil.net
An action for annulment of contract is one filed where consent is vitiated by lack of legal capacity of
one of the contracting parties, or by mistake, violence, intimidation, undue influence or fraud. 29 By its
very nature, annulment contemplates a contract which is voidable, that is, valid until annulled. Such
contract is binding on all the contracting parties until annulled and set aside by a court of law. It may
be ratified. An action for annulment of contract has a four-year prescriptive period. 30
On the other hand, an action for declaration of nullity of contract presupposes a void contract or one
where all of the requisites prescribed by law for contracts are present but the cause, object or
purpose is contrary to law, morals, good customs, public order or public policy, prohibited by law or
declared by law to be void.31 Such contract as a rule produces no legal and binding effect even if it is

not set aside by direct legal action. Neither may it be ratified. An action for the declaration of nullity of
contract is imprescriptible.32
The petitioners pleading was for the declaration of nullity of the extrajudicial settlement of estate.
However, this did not necessarily mean the automatic dismissal of the case on the ground of lack of
cause of action.
Granting that the action filed by petitioner was incompatible with her allegations, it is not the caption
of the pleading but the allegations that determine the nature of the action. 33 The court should grant
the relief warranted by the allegations and the proof even if no such relief is prayed for.34 In this case,
the allegations in the pleading and the evidence adduced point to no other remedy but to annul the
extrajudicial settlement of estate because of vitiated consent.
WHEREFORE, the decision of the Court of Appeals dated 23 May 1996 is hereby REVERSED. The
extrajudicial settlement of the estate of Tomasina Paul and Jose Sebastian is
hereby ANNULLED and SET ASIDE. No cost.
SO ORDERED.
Panganiban, Sandoval-Gutierrez*, and Carpio Morales, JJ., concur.

G.R. No. L-5496

February 19, 1910

MERCEDES MARTINEZ Y FERNANDEZ, ET AL., plaintiffs-appellants,

vs.
THE HONGKONG & SHANGHAI BANKING CORPORATION, ET
AL., defendants-appellants.
Bruce & Lawrence, for appellants.
Haussermann & Cohn and Rosado, Sanz & Opisso, for appellees.
MORELAND, J.:
This is an action to set aside a contract on the ground that plaintiff's consent thereto was given under
duress and undue influence. Alejandro S. Macleod is joined as plaintiff only for the reason that he is
the husband of Mercedes Martinez and he takes no part in the action personally.
In the statement of facts and some of the legal propositions involved, we have made free use of the
forms contained in the briefs of both parties.
Alejandro S. Macleod was for many years the managing partner of the house of Aldecoa & Co. in the
city of Manila. He withdrew from the management on the 31st day of December, 1906, when

Aldecoa & Co. went into liquidation. At the time that Aldecoa & Co. ceased active business the
Hongkong & Shanghai banking Corporation was a creditor of that firm to the extent of several
hundred thousand pesos and claimed to have a creditor's lien in the nature of a pledge over certain
properties of the debtor. In April, 1907, the bank began a civil action against Alejandro S. Macleod,
his wife, Mercedes Martinez, Aldecoa & Co., and the firm known as Viuda e Hijos de Escao. In the
bank's complaint it was alleged that a certain undertaking in favor of Aldecoa & Co. had been
hypothecated to the bank to secure the indebtedness of Aldecoa & Co., but that this obligation had
been wrongfully transferred by Alejandro S. Macleod into an obligation in favor in his wife, Mercedes
Martinez, to the prejudice of the bank. In May, 1907, Aldecoa & Co. began a civil action against
Alejandro S. Macleod and others for the recovery of certain shares of stock of the par value of
P161.000 and for damages in the sum of P150,000, basing its right to recover upon alleged criminal
misconduct of Mr. Macleod in his management of the firm's affairs.
When the two causes of action above referred to were discovered and the suits there mentioned
commenced, Alejandro S. Macleod and Mercedes Martinez, his wife, engaged the services of
Messrs. Del-Pan, Ortigas and Fisher, attorneys at law, to represent and defend them in the matter.
Soon thereafter these attorneys made overtures to the liquidation of Aldecoa & Co, for the settlement
of the latter's claims. While these negotiations were pending Aldecoa & Co. claimed that they had
made discoveries of many frauds which Macleod had perpetrated against the company during the
period of his management, whereby the company had been defrauded of many thousands of pesos.
On the 13th day of July, 1907, it becoming apparent that criminal proceedings would be instituted
against him, Macleod went from Manila to the Portuguese colony of Macao, a territory not covered, it
appears, by extradition treaty between the United States and the Portuguese Government. Four
days thereafter, on the 17th day of July, Aldecoa & Co. filed a complaint against Mr. Macleod,
charging him with the falsification of a commercial document, and a warrant for his arrest was issued
by the Court of First Instance of Manila, and the executive department of the Philippine Government
issued a formal request to the Portuguese authorities for the extradition of the accused. This request
was denied. In the meantime the attorneys for the respective parties were engaged in negotiations
for the settlement and compromise of the difference then pending and a clearance of Mr. Macleod
from all claims and demands of his creditors. Aldecoa & Co. and the bank, as a consideration for
such settlement, insisted upon the conveyance not only of all the property of Alejandro S. Macleod
but also of at least a portion of the property claimed by his wife, the plaintiff herein. The settlement
offered at that time was the same which was subsequently accepted and consummated on the 14th
of August as shown by Exhibit A. There appears to have been little resistance to this demand on the
part of the representatives of Mr. Macleod, but his wife, the plaintiff herein, stoutly objected to the
conveyance required of her, maintaining that the property which she was asked to transfer was her
separate and exlusive property and not liable for the debts of her husband. Her position was fully
stated by her to her attorney, Mr. Fisher, and to her attorney-in-fact, Mr. William Macleod. An
interview between her attorney and the attorney for Aldecoa & Co. followed this declaration on her
part. Thereafter and on the night of August 4 another interview was had between the plaintiff and her
counsel, Mr. Fisher, and others, at which a long list of claims against Mr. Macleod, prepared by
Aldecoa & Co., was exhibited to the plaintiff and its contends explained to her by Mr. Fisher and her
attorney-in-fact. Some of these claims involved criminal as well as civil liability. Mr. Fisher at that time
favored a settlement in accordance with the terms proposed by Aldecoa & Co. The plaintiff, however,
refused to accept such settlement.

This being the state of affairs, one of the attorneys for the bank, on the 7th of August, 1907, was
called upon by counsel for both Aldecoa & Co. and the plaintiff in this action, who requested him to
act as intermediary between the parties and to suggest means by which a settlement could be
obtained. At that interview it was agreed that a full explanation of the condition of affairs should be
made to Mr. Kingcome, a son-in-law of the plaintiff and a businessman. This explanation was made
by Mr. Stephen, manager of the Hongkong & Shanghai Banking Corporation, one of the friends of
Mr. Kingcome, at an interview arranged between them pursuant to the arrangements made by the
attorneys for the parties. Whether or not Mr. Kingcome communicated the substance of that
interview with Mr. Stephen to his mother-in-law, the plaintiff, before she signed the document in
question is in dispute in this case. There is some doubt from the record as to the exact language
used in this conversation between Kingcome and Stephen, but it appears that some reference was
made tothe interest which the British colony in Manila, of which Messrs. Stephen, Kingcome, and
Macleod were prominent members, would have in avoiding the scandal and disgrace to the latter
which might be expected to ensue unless the differences between the parties to this action were
amicably arranged. It seems at that interview that Mr. Stephen suggested to Mr. Kingcome that he
advise his mother-in-law to act reasonably in negotiating the proposed settlement. It appears that Mr.
Kingcome got the impression from that interview that Mr. Stephen thought unless the settlement
were consummated additional and mortifying misfortunes wound fall upon Mr. Macleod's family.
About the time that the inmterview between Kingcome and Stephen was celebrated Mr. Fisher was
enlisting the services of Mr. William Macleod, a nephew and close friend of plaintiff and her husband,
and plaintiff's attorney-in-fact, for a mission to plaintiff of a similar character to that of Mr. Kingcome.
Mr. William Macleod, as well as Mr. Kingcome, seems to have been persuaded by what he was told
that the consequences of plaintiff's continued refusal to make the settlement would be disastrous to
Alejandro S. Macleod and his family and would be an exhibition of very bad judgment in every way.
On August 9, 1907, the prosecuting attorney filed a second complaint against Alejandro S. Macleod
and his associate, Osorio, charging them with embezzlement and causing warrants of extradition to
issue. The complaint was made at the instance of the prosecuting attorney because he had heard
that Macleod and Osorio were about to leave for Europe and he wanted to intercept them in territory
from which they could be extradited.
On the 11th of August a long conference was held between plaintiff, her attorney, Mr. Kingcome, her
son-in-law, and William Macleod, her attorney-in-fact, at which she was informed in substance that if
she assented to the requirements of Aldecoa & Co. and the bank the civil suits against herself and
her husband would be dismissed and the criminal charges against him withdrawn, while if she
refused her husband must either spend the rest of his life in Macao or be criminally prosecuted on
the charged already filed and tobe filed. At that interview plaintiff refused to accede to the terms of
settlement and that interview was terminated by a statement on the part of Mr. Fisher, which was
"Gentlemen, it is evident that there can be no compromise or settlement, and the only thing left us to
do is to defend Mr. Macleod in the best possible manner."
On the 12th of August, at an interview had between theplaintiff and her attorney-in-fact, Mr. William
Macleod, the plaintiff acceded to the terms proposed by the defendants and authorized Mr. William
Macleod to execute the contractof settlement on her behalf. The document of settlement was
prepared and after certain corrections upon the part of the plaintiff's attorneys, making the same

entirely satisfactory to them, it was signed by the plaintiff's attorney-in-fact on her behalf on the 14th
of August. It was thereafter and on the same day ratified by the plaintiff, who executed the same in
person.
After Adecoa & Co. and the bank had taken possession of the property of plaintiff and her husband,
conveyed to them by Exhibit A, the civil suits were dismissed, the criminal charges withdrawn, and
Mr. Macleod returned from macao to Manila. The plaintiff had a surveyor divide the property in
Malate, of which she had conveyed a half interest, into two equal parts. She negotiated for apartition
of the land on the basis of this survey. She joined in the motion for the dismissal of the civil action to
which she had been a party and in the motion in the Court of Land Registration for the recording in
the name of thegrantees of a half interest in the Malate land. All of these acts were in pursuance of
Exhibit A.
On December 3, 1907, the plaintiff filed her complaint in the present action, and, after the joining of
issue and thehearing of evidence, judgment was rendered in favor of defendants on the 29th day of
May, 1909. From this judgment, after the usual motion for a new trial, its denial and exception to
such denial, plaintiff appealed to this court.
The Civil Code in relation to the subject-matter in hand contains the following provisions:
ART. 1265. Consent given under error, violence, intimidation, or deceit shall be null.
ART. 1267. There is violence when, inorder to obtain the consent, irresistible force is used.
There is intimidation when one of the contracting parties gives his consent on account of a
reasonable and well-grounded fear of suffering an imminent and serious injury to his person
or property, or to the person or property of his spouse, descendants, or ascendants.
In determining whether or not there is intimidation the age, sex, and status of the person
intimidated must be considered.
Fear of displeasing the persons to whom obedience and respect are due shall not annul the
contract.
ART. 1268. Violence or intimidation shall annul the obligation, even though such violence or
intimidation shall have been used by a third person who did not take part in the contract.
In order that this contract be annuled it must be shown that the plaintiff never gave her consent to
the execution thereof. If a competent person has once assented to a contract freely and fairly, he is
bound. Contracts which are declared void and of no force upon the ground that they were obtained
by fraud, duress, or undue influence are so declared for the reason that the complaining party never
really gave his consent thereto. The consent in such case is not in the eye of the law a consent at
all. The person has not acted. He has done nothing he was in vinculis.
It is necessary to distinguish between real duress and the motive which is present when one gives
his consent reluctantly. A contract is valid even though one of the parties entered into it against his

wishes and desires or even against his better judgment. Contracts are also valid even though they
are entered into by one of the parties without hope of advantage or profit. A contract whereby
reparation is made by one party for injuries which he has willfully inflicted upon another is one which
from its inherent nature is entered into reluctantly and against the strong desires of the party making
the reparation. He is confronted with a situation in which he finds the necessityeither of making
reparation or of taking the consequences, civil or criminal, of his unlawfull acts. Hemakes the
contract of reparation with extreme reluctance and only by thecompelling force of the punishment
threatened. Nevertheless such contract is binding and enforceable. Such a contract differs entirely in
its incidents from a contractentered into by a party for the purpose of gain. The latter contract is
made with pleasure and its terms complied with gladly. The former is a contract the execution of
which the party is very apt to repent and the terms of which he is very likely to evade if he can. It is
not conclusive against them that Aldecoa & Co. demanded that the plaintiff do something upon pain
of punishing her husband for his crimes. It is not conclusive that the plaintiff disliked exceedingly to
do what they demanded. Neither is it conclusive that the plaintiff now regrets having performed at
their demand instead of compelling a resort to judicial proceedings. It is not for these reasons that
this contract may be declared null and void. If such a contract were illegal whereby pending litigation
is settled by agreement of the parties rather than by decision of the court. If such a contract were null
and void, then would be null and void every contract whereby a wrongdoer and he who assisted him
made reparation for that which he had mis appropriated or misapplied. In legal effect there is no
difference between a contract wherein one of the contracting parties exchanges one condition for
another because he looks for greater gain or profit by reason of such change and an agreement
wherein one of the contracting parties agrees to accept the lesser of two disadvantages. In either
case he makes a choice free and untrammeled and must accordingly abide by it. These are
evidence of duress, facts from which duress may be inferred, but they are not duress of themselves.
In the absence of other proof and circumstances, they might very well be held to establish duress.
But there is other proof and we do not believe that under all the facts of this case as disclosed by the
record we can say that the court below erred when he refused to findthat the plaintiff entered into the
contract in question by reason of duress and undue influence. We find lacking in this case amny of
the essential elements usually found in cases of duress. The most that the facts disclose is that the
plaintiff was loath to relinquish certain rights which she claimed to have in certain property to the end
that she might be relieved from litigation then pending against her and that her husband might
escape prosecution for crimes alleged to have been committed; and that she persisted for a
considerable time in her refusal to relinquish such claimed rights. The fact that she did relinquish
them upon such consideration and under such condition does not of itself constitute duress or
intimidation, nor does it destroy the obligatory effect and force of her consent. In order to do so
something more is needed. Such influence must havebeen exercised over her that she was deprived
of her free will and choice. She must have acted from fear and not from judgment.
Not every contract made by a wife to relieve her husband from the consequences of his crimes is
viodable. Subject to certain restrictions a wife may legally dispose of herproperty as she pleases;
she may squander it; she may give it away; she may pledge or transfer it to keep her husband out of
state prison. The question in each case is exactly the same as in all such relations, was she acting
according to the dictates of her own judgment, whether good or bad, or from fear, force, or undue
influence? If there are time and opportunity for judgment to take the place of fear, and if apart from
the threat there are reasons disclosed which might lead one in the exercise of good judgment to

perform the acts complained of, then the evidence as to duress and undue influence must be very
clear in order that such acts may be recalled.
The appellant cites many cases in support of her contention that the contract of the 14th of August
should be abrogated.
We have carefully examined not only all of the cases cited by the appellant but also substancially all
of the cases within our reach relating to the questions before vs. Among them are the following:
Adams vs. Irving National Bank (116 N.Y., 606); Allen vs Laflore County (76 Miss., 671);
Bently vs. Ronson (11 Mich., 691; Burton vs McMillan (8 L. R. A., N.S., 991); Bell vs. Campbell (123
Mo., 1); Galusha vs Sherman (47 L. R. A., 417); MaMahon vs. Smith (47 Conn., 221, 36 Am Rep.,
67); Gorringe vs Reed (23 Utah, 120, 90 Am St. Rep., 692); Bank vs Bryan (62 Ia., 42);
Rau vs. Zedlitz (132 Mass., 164); Lomerson vs. Johnston (47 N. J. Eq., 312); McGroryvs. Reilly (14
Phila., 111); Foley vs. Greene (14 R.I., 618); Coffman vs. Lookout Bank (5 Lea., 232);
Haynes vs.Rudd (102 N. Y., 372); Cribbs vs. Sowle (87 Mich., 340); Osborne vs. Robins (36 N.Y.,
365); Rall vs. Raguet (4 Ohio, 400); Bank vs. Kirk (90 Pa. St., 49); Eadie vs. Slimmon (26 N.Y., 9);
Harris vs. Carmody (131 Mass., 51; Taylor vs. Jacques (106 Mass., 291); Bryant vs. Peck & W. Co.
(154 Mass., 460); Hesinger vs. Dyer (147 Mo., 219); Mack vs. Praug (104 Wis., 1);
Benedict vs. Broome (106 Mich., 378); Williams vs Bayley (1 Eng. & Ir. App. Cas., 200); Central
Bank vs. Copeland (18 Md., 305 , 81 Am. Dec., 597); Bradley vs. Irish (42 Ill. app., 85);
Snyder vs. Willey (33 Mich., 483).
All of the above cases, except Harris vs. Carmody, Hesinger vs. Dyer, and Williams vs. Bayley, are
distinguishable from the case at bar in the following particulars:
1. In those cases there was no time within which to deliberate the matter as it should have
been deliberated.
2. There was no time or opportunity to take the advice of friends or of disinterested persons.
3. There was no time or opportunity to take advice of counsel.
4. The treats made to secure the performance of the acts complained of were made directly
to the complaining party by the person directly interested or by somene in his behalf who
was working in his interest and who had no interest whatever in the welfare of the
complaining party.
5. There was no consideration for the performance of the act complained of except immunity
from the prosecution threatened.
6. The property transferred or incumbered by the act complained of was the separate
property of the person performing the act in which the person for whome the act was
performed claimed no interest whatever.

7. There was no dispute as to the title of the property transferred or incumbered, no claim
made to it by anybody, no suits pending to recover it or any portion of it, and no pretension
that it could be taken for the debts of the husband or of any other person.
In the cases of Harris vs. Carmody, Hesinger vs. Dyer, and Williams vs. Bayley, above excepted, the
complainant had the benefit of legal advice and the advice of some friend but in none of those were
there present any of the other circumstances just enumerated.
In the case of Hesinger and another vs. Dyer (147 Mo., 219), it appeared that the plaintiffs were the
tenants of the defendant on defendant's farm. During the last year that they had occupied this farm
they raised some 500 bushels of corn upon which the defendant claimed to have a lien under the
statue. The plaintiff Hesinger sold the corn and applied the proceeds to his own use. Dyer
threatened to institute criminal proceedings against Hesinger for embezzling the corn if he and his
wife did not execute to him their note for its value, secured by a deed of trust upon the land of Mrs.
Hesinger. They testified that because of this threat and in fear of said prosecution they executed the
note and deed of trust as required. Shortly before the papers were executed the defendant's home,
taking with him a notary public to take the acknowledgement of the deed of trust in the event that he
succeeded in getting the plaintiffs to execute it. This was one of the occasions upon which the
defendant threatened to prosecute Hesinger if he and his wife did not execute the deed of trust as
required. Mrs. Hesinger had all the time refused and still refused to execute the deed; but upon the
afternoon of that day plaintiffs went to Sedalia to consult with their son and with their attorney and
thereafter went to J.M. Bailer's office and there executed the papers in question. The court held that
the note and deed of trust were voidable as having been executed under duress.
It is at once apparent, however, that the facts differ materially from those in the case at bar. In that
case the plaintiffs contended against the personal presence of the defendant and all of the influence
which that presence implies. In that case there was absolutely no consideration moving to Mrs.
Hesinger inducing the execution of the papers in question except the release of her husband from
prosecution. There was lacking in that case everything, every consideration which would appeal to
the judgment or reason of the complaining party.
The same may be said of the other two cases, Harris vs. Carmody and Williams vs. Bayley.
The plaintiff cites also the case of Jalbuena vs. Ledesma et al. (8 Phil. Rep., 601). In that case it
appeared, as stated by the court, that
Ildefonso Doronila, having been the tutor of the Ledesma minor children, was cited in
August, 1900, before the provost court of Iloilo on the petition of the defendant Lopez, to
show cause why he should not surrender the papers, securities, and money in his charge,
and he was in the course of the proceeding ordered to render his accounts as tutor, and it is
to be inferred from the testimony of the defendant Ledesma that the accounts were in fact
rendered. On December 3 he came to an agreement with the defendant Lopez, as
representative of the children, whereby his accounts were allowed and accepted and the
value of the missing papers, claimed to have been lost in the bombardment of Iloilo, was
fixed at P12,000, and a certain obligation of the estate to Juan Casells to the amount of
P4,000 was assumed by him. Subsequently this agreement was ratified by the family

council, which imposed, however, an additional condition that security should be given by
Doronila for the payment of P16,000 in case the missing papers should not be produced
within six months and the novation of the debt of Juan Casells accepted by the debtor.
Thereafter he was brought before the provost judge in the pending proceeding and was
ordered to give additional security, and failing to do so was committed to jail, where he had
already been once confined on the institution of the proceeding. As all of his property was
already bound to the estate for the performance of his duty as guardian, it became expedient
to find a surety for him, and the plaintiff (wife of Doronila), who had accompanied him to the
court, was thereupon induced to join with him in this undertaking. As to the preceedings in
court, the testimony of the plaintiff, reduced to narrative form, is as follows:
"I remeber having been in the office of the provost judge of Iloilo in December, 1900.
I went there to visit my husband, who was in jail. While there I was summoned before
the provost judge by a soldier, and I went up before the provost and requested him to
set my husband free, he not being guilty of anything. I asked him, crying, to put my
husmand at liberty, but the provost did not listen to me; on the contrary, he asked me
to file security for what was lost in my house during the bombardment, and he told
me that he was going to put my husband in jail if I did not obligate my property as
security. Fearing that he was going to be put in jail again, I was compelled to sign, it
being a time when we and others were under fear and I was afraid that he would be
punished and that they would deport him. In the fear that I was then under I did not
know any other remedy but to sign. He told me that my husband would be sent again
to jail if I did not sign."
This communication was carried on through the medium of an interpreter, one Pedro
Regalado, who testified:
"The provost judge told Sra. Vicenta . . . in these terms: "You sign a document
guaranteeing with your property the obligation contracted by Sr. Doronila, your
husband." She answered to these words that her husband was not guilty of the loss
of the documents, as when the bombardment came the documents were in a trunk
and were lost during the bombardment. When she said that she could not respond,
then the provost said: "You sign this document; you either sign this document or I will
send you husband back to jail." More or less I remember that he said: "Interpreter,
tell her to either sign this document or I will have her husband sent again to jail."
In this case the wife sued to set aside the obligation upon the ground that it was obtained from her
by duress and undue influence. She justly succeded.
A mere reading of the facts in that case discloses that it can not be used as an authority in the case
at bar. It is widely different in its facts.
A careful analysis of this case discloses the following pecularities:
In the first place, the undisputed evidence demostrates that the first offers of compromise were
made by the plaintiff herself through her representatives. It appears that from first to last the effort

and anxiety to compromise the claims of the defendants were on the part of the plaintiff through her
representatives. The position of Aldecoa & Co. throughout the negotiations, as it appears from the
testimony in the case, was that a settlement of their claims against the plaintiffs would not result in
any peculiar or especial benefit to them inasmuch as by the actions already commenced against the
plaintiff and her husband the defendants would be able, so they contended, to secure exactly the
same property that they would obtain by the settlement proposed. The soundness of this contention
was admitted by the attorneys for the plaintiff. It was the desire on the part of at least one of the
persons especially interested in Aldecoa & Co. that Alejandro S. Macleod should suffer criminally for
the acts which he had committed against that company and such person did not hesitate to say so
repeatedly. There seems to have been throughout the negotations a fear of the part of the attornets
for the plaintiff that, partly, at least, by reason of this especial desire of said person, the negotiations
would be broken off by Aldecoa & Co. before a settlement could be consummated. The defendants
never urged the ultimatum laid down by the defendants. They simply stated to the attorneys for the
plaintiffs that they must claims, and it appeared from the position assumed that it was immaterial to
them whether they obtained those properties through the courts or by means of a settlement. They
left Macleod and his wife to choose foir themselves, upon their own judgment and upon the advice of
their attorneys and relatives, the course to be by them pursued. That the defendants were not
especially urging the settlement in question is demonstrated by the fact that Mr. Fisher, the attorney
for the plaintiffs, was doubtful about securing the participation of Aldecoa & Co. in the agreement up
to the very moment of its execution, and it appears from the evidence of Mr. Cohn that Mr. Fisher,
laboring under such apprehension, actually withheld important information from Aldecoa & Co. for
fear such information would deter them at the last moment from giving their assent to the
arrangement.
In the secon place, there were at no time during the course of these negotiations for settlement any
direct personal relations or communications between the parties to this action. During the whole
course of the negotiations no person communicated with the plaintiffs on behalf of the defendants
alone. The offers, proposition, or treats, if any, made by the defendants were filtered to her through
the personality, mind, and judgment of her own attorneys or relatives, all of them being persons who
had her welfare and the welfare of her family deeply at heart and who were acting for her and her
husband and not for the defendants. That personal presence of threatening party and the influence
springing therefrom, factors so potent in duress and undue influence, were wholly lacking.
On the trial an attempt was made to show that the defendants had attempted to influence the
plaintiff, Mercedes Martinez, by acting upon her through her son-in-law, Mr. Kingcome. As stated
above, Mr. Stephen was asked by the attorneys for the plaintiff, as well as the attorneys for the
defendants, to see Mr. Kingcome and ask him to explain to his mother-in-law the facts and
circumstances which were the cause of the attempts at settlement for the purpose of inducing her to
act reasonably in the premises. There was some dispute as to whether or not Mr. Kingcome actually
communicated the substance of the interview to his mother-in-law prior to her signing the contract in
question. Mr. Kingcome in his testimony states that according to his best recollection he
communicated the substance of that interview to his mother-in-law on the 11th day of August. In
considering this matter it must be remembered that the interview between Mr. Stephen and Mr.
Kingcome was not brought about by Aldecoa & Co. or its representative. It was brought about by Mr.
Cohn acting as mediary between Mr. Fisher and Mr. Rosado, the one the attorney for the plaintiffs
and the other the attorney for the defendant company, upon the request and with the express

approval of both of them. The interview which followed between Mr. Stephen and Mr. Kingcome was
the direct act of plaintiff in exactly the same manner and in exactly the same degree as it was the act
of Aldecoa & Co.
In the third place, the plaintiff by means of the negotiations and settlement in question was engaged
partly at least in the settlement of her own suits and controversies. The plaintiff, Mercedes Martinez,
together with Aldecoa & Co. and Viuda e Hijos de F. Escao were sued in April, 1907, by the
Hongkong & Shanghai Banking Corporation in relation to P45,000 worth of notes claimed to have
been fraudulently taken from the assets of Aldecoa & Co. and transferred into the name and
possessio of the plaintiff, Mercedes Martinez. This was one of the actions settled and terminated by
the contract in question. In this property the plaintiff released her rights under the settlement. The
only other property to which she released her rights was a half interest in property in Malate. As to
the legality of her claim that this property was her own individual property there was a serious
question, so serious in fact that she was formally and reapetedly advised by her attorneys that such
claim was in their judgment unfounded. These are the only interest which the plaintiff, Mercedes
Martinez, released or gave over in the settlement complainted of. Both of the claims were
substantially in litigation and the legality of both was seriously questioned and strongly doubted by
her own attorneys. While it is not necessary to decide and we do not decide whether her claim to
either of those properties was valid or invalid, still the fact that the validity of her claims thereto was
denied by her own attorneys strongly tends to impeach the claim that she released those properties
by reason of duress and undue influence, rather that as a result of her own deliberate judgment.
In the fourt place, it must be remembered that the plaintiff, Mercedes Martinez, never at any time
stood alone in the negotiations. There was never a moment when she did not have interposed
between her and the defendants the counsel of skilled attorneys and of interested relatives.
Whatever came to her from the defendants, their demands or their threats, if any, reached her
through the medium of her friends and advisers. She had the assistance of legal learning and
business intelligence and experience. She had the careful and thoughtful advice of her family. She
was as far as possible relieved from all fear, stress, or influence except such as were inherent in the
circumstances themselves. It appears undisputed that she and her relatives and lawyers considered
throughout the negotiations and down to and including the time of the execution of the agreement of
settlement that her best interest would be subserved by acceding to the terms laid down by the
defendants. From the evidence in the case it is difficult to arrive at a conclusion other that that the
acts which she performed in making the settlement in question were acts which contributed to her
welfare and the welfare of her whole family. While this fact may not be conclusive in the present
case, it nevertheless is of very importance and significance in determining the question whether
duress and undue influence were exercised or weighing the reasons pro and con.
In the fifth place, we must bot overlook the fact that the plaintiff took advantage of said contract after
its execution and required the complete fulfilling of every one of its provisions favorable to herself.
She negotiated with Aldecoa & Co. for a partition of the Malate property and to that end caused a
survey and a division thereof to be made. She demanded of Aldecoa & Co. payment of the P2,000
provided for by the contract, which said sum she received. She caused one-half of said Malate
property to be assessed against said company. She caused a change to be made in the proceedings
to register the title to said Malate lands, previously begun by her, so as to register her title to only

one-half thereof. She caused to be dismissed the action pending against her on account of the
Escao notes, which dismissal occured after this present action was commenced.
These acts are mentioned not to show a ratification of the contract in the sence that those acts
estopped her from thereafter questioning the same, but rather as confirmatory of the theory that in
the execution of the contract complained of she acted accroding to the dictates of good business
judgment rather that from duress and undue influence.
As we have already stated, not every contract executed by a wife, even though made solely to save
her husband from the consequences of his crimes, is voidable. Solicitation, importunity, argument,
and persuasion are not undue influence and a contract is not to be set aside merely because one
party used these means to obtain the consent of the other. Influence obtained by persuation or
argument or by appeals to the affection is not prohibited either in law or morals and is not obnoxious
even in courts of equity. Such may be termed "due influence." The line between due and undue
influence, when drawn, must be with full recognition of the liberty due every true owner to obey the
voice of justice, the dictates of friendship, of gratitude and of benevolence, as well as the claims of
kindred, and, when not hindered by personal incapacity or particular regulation, to dispose of his
own property according to his own free choice. (9 Cyc. 455, and cases there cited.)
On the other hand contracts entered into by a wife whereby she conveys property unquestionably
hers, the sole and only consideration for which contract is the obtaining for her husband immunity
from criminal prosecution, are always justly the objects of suspicion, and it is a wise jurisprudence
which holds that, where she defends upon the ground that she was duressed, the party enforcing
such contract must expect the very closest scrunity of the transaction with the presumptions all
against him. Where, however, as in this case, there is a real question as to the validity of claims laid
by the wife to the property transferred, some of which claimed rights are involved in actual litigation
in which she is a party, while the remainder are alleged by opposing claimants to be subject to
seizure and sale under judgements against the husband; and competent and honorable counsel,
after careful and extended consideration of the facts and the law, advise her that the rights so
claimed by her in the property transferred are fictitious, unreal, and defeasible, having no foundation
in law, and she, after abundant opportunity for deliberate consideration, release such claimed rights
and thereby not only secures immunity for her husband, but also quiets litigation against herself, a
very different question is presented. It is undisputed that the attorneys for the plaintiff in this case
advised her that, from the facts which they had before them, facts of which she was fully informed,
her husband had been guilty of embezzlement and misappropriation in the management of the
business of Aldecoa & Co. and that, in their judgment, if prosecuted therefor, he would be convicted.
They further advised her that the P45,000 worth of notes claimed by her and to recover which was
part of the purpose of the action against her and her husband by the Hongkong & Shanghai Banking
Corporation were a part of the property of which her husband had criminally deprived the said
company. They advised her that she would not be able to hold such notes as her own. They further
advised her that from the facts before them Aldecoa & Co. would have no difficulty in getting a
judgment for a very large amount against her husband, and, in that event, the interest which she
claimed in the Malate property would be liable in their judgment ganancial. They informed her that all
that Aldecoa & Co. required of here was the transfer of her claims rights in said property. They
further advised her that if she did not so transfer such property, Aldecoa & Co. would nevertheless
obtain it by means of the actions already commenced and to be commenced; that if she did transfer

it she would lose no more than she would lose by means of said action and she would gain in
addition the immunity of her husband from criminal prosecution. In other words, under the advice of
her counsel, the situation was so presented to her that it was evidenct that in signing the agreement
of the 14th of August she had all to gain and nothing to lose, whereas, in refusing to sign said
agreement, she had all to lose and nothing to gain. In the one case she would lose her property and
save her husband. In the other, she would lose her property and her husband too. The argument
thus presented to her by her attorneys addressed itself to judgment and not to fear. It appealed to
reason and not to passion. It asked her to be moved by common sense and not by love of family. It
spoke to her own interest as much as to those of her husband. The argument went to her financial
interest as well as to those of the defendants. It spoke to her business judgment as well as to her
wifely affections. From the opinions of her attorneys, as they were presented to her upon facts
assumed by all to be true, we do not well see how she could reasonably have reached a conclusion
other than that which she did reach. It is of no consequence here whether or not her lawyers, as
matter of law, she would have been deprived of her alleged interests in the properties mentioned in
the manner described and advised by her attorneys. The important thing is that she believed and
accepted their judicial and acted upon it. The question is not did he make a mistake, but did she
consent; not was she wrongly advised, but was she coerced; not was she wise, but was she
duressed.
From the whole case we are of the opinion that the finding of the court below that the plaintiff
executed the contract in suit of her own free will and choice and not from duress is fully sustained by
the evidence.
The judgment of the court below, is therefore, affirmed with costs against the appellant. So ordered.
Arellano, C.J., Torres, Mapa and Johnson, JJ., concur.