CAPACITY TO BUY OR SELL 

(1489-1492)

Art. 1489. All persons who are authorized in this Code to obligate
themselves, may enter into a contract of sale, saving the
modifications contained in the following articles.
Where necessaries are those sold and delivered to a minor or
other person without capacity to act, he must pay a reasonable
price therefor. Necessaries are those referred to in Article 290.
(1457a)
Who may enter into a Contract of Sale?

The persons who may enter into a Contract of Sale, as a general rule, are
all persons, whether natural or juridical, who can bind themselves, have the legal
capacity to buy and sell.

Who may NOT enter into a Contract of Sale?

Those who are incapacitated: Absolute Incapacity and Relative Incapacity.

A. Absolute Incapacity-

Those that are considered absolutely incapable of entering into a contract of sale are
those that cannot bind themselves because of reasons for example like age, defect
intellect and mental capacity.

B. Relative Incapacity

- when certain persons, under certain circumstances, cannot buy certain

property. (See Articles 1490 - 1491)

Art. 1490. The husband and the wife cannot sell property to each
other, except:
(1) When a separation of property was agreed upon in
the marriage settlements; or
(2) When there has been a judicial separation or
property under Article 191. (1458a)
 REASON: for protection of third persons who enters into a contract with either of
them only to find out that the property relied upon was transferred to the other
spouse.
Who may question the sale?

(Cook vs. McMicking, 27 Phil. 10 [1914])

* The heirs of either spouse;
* Creditors at the time of the transfer can attack the validity of the sale but not
creditors who became such only after the transaction.

(Medina vs.Collector of Internal Revenue)

 The government is always an interested party in all matters involving
taxable transactions. It is competent to question their validity or legitimacy
whenever necessary to block tax evasion. It can impugn sales between
husband and wife.

Art. 1491. The following persons cannot acquire by purchase, even

at a public or judicial auction, either in person or through the
mediation of another:
(1) The guardian, the property of the person or persons who
may be under his guardianship;
(2) Agents, the property whose administration or sale may
have been entrusted to them, unless the consent of the principal has
been given;
(3) Executors and administrators, the property of the estate
under administration;
(4) Public officers and employees, the property of the State or
of any subdivision thereof, or of any government-owned or
controlled corporation, or institution, the administration of which
has been intrusted to them; this provision shall apply to judges and
government experts who, in any manner whatsoever, take part in
the sale;
(5) Justices, judges, prosecuting attorneys, clerks of superior
and inferior courts, and other officers and employees connected
with the administration of justice, the property and rights in
litigation or levied upon an execution before the court within whose
jurisdiction or territory they exercise their respective functions;
this prohibition includes the act of acquiring by assignment and
shall apply to lawyers, with respect to the property and rights
which may be the object of any litigation in which they may take
part by virtue of their profession.
(6) Any others specially disqualified by law. (1459a)

NOTE: The persons disqualified to buy referred to in Articles 1490and 1491

are also disqualified to become lessees of the things mentioned thereon. (Art.
1646.)

Other persons especially disqualified.

1)aliens who are disqualified to purchase private agricultural lands (Art. XII, Secs. 3, 7,
Constitution; see Krivenko vs.Register of Deeds, 79 Phil. 461 [1947].);

(2) an unpaid seller having a right of lien or having estopped the goods in
transitu, who is prohibited from buying the goods either directly or indirectly in
the resale of the same at a public or private sale which he may make (Art. 1533, par. 5;
Art. 1476[4].);and

(3)The officer conducting the execution sale or his deputies cannot become a

purchaser, or be interested directly or indirectly in any purchase at an execution
sale. (Sec. 19, Rule 39, Rules of Court.)
In the case of aliens, the disqualification is founded on express provision
of the Constitution and not by reason of any fiduciary relationship. It has been
held, however, that where a land is sold to an alien who later sold it to a Filipino,
the sale to the latter can-not be impugned. In such case, there would be no more
public policy to be served in allowing the Filipino seller or his heirs to recover the
land as the same is already owned by a qualified person. (Herrera vs. Tuy Kim Guan, 1 SCRA
406 [1961]; Godinez vs.Fong Pak Luen, 120 SCRA 223 [1983].)

Art. 1492. The prohibitions in the two preceding articles are

applicable to sales in legal redemption, compromises and
renunciations. (n)
CASES
1. Medina v. CIR, 1 SCRA 302 (1961)(between spouses)
FACTS
Subsequent to marriage, petitioners engaged in concessions with the government, while
his wife started to engage in business as a lumber dealer. From 1949 to 1952, petitioner
sold logs to his wife. On the thesis that the sales are null and void, CIR considered the
sales by Mrs. Medina as the petitioner’s original sales taxable under the NIRC. Petitioner
filed a petition for reconsideration, revealing for the first time the alleged premarital
agreement of complete separation of property.
ISSUE
WON the sales made by the petitioner to his wife could be considered as his original
taxable sales
HELD
It appears that at the time of the marriage between petitioner and his wife, they neither
had any property nor business of their own, as to have really urged them to enter into the
supposed property agreement. Secondly, the testimony that the separation of property
agreement was recorded in the Registry of Property three months before the marriage, is
patently absurd, since such a prenuptial agreement could not be effective before marriage
is celebrated, and would automatically be cancelled if the union was called off. In the
third place, despite their insistence on the existence of the ante nuptial contract, the
couple, strangely enough, did not act in accordance with its alleged covenants. It was not
until July of 1954 that he alleged, for the first time, the existence of the supposed
property separation agreement. Finally, the Day Book of the Register of Deeds on which
the agreement would have been entered, had it really been registered as petitioner insists,
and which book was among those saved from the ravages of the war, did not show that
the document in question was among those recorded therein.
The wife is authorized to engage in business and for the incidents that flow therefrom
when she so engages therein. But the transactions permitted are those entered into with
strangers, and do not constitute exceptions to the prohibitory provisions of Article 1490
against sales between spouses.
Contracts violative of the provisions of Article 1490 of the Civil Code are null and void.
Being void transactions, the sales made by the petitioner to his wife were correctly
disregarded by the Collector in his tax assessments that considered as the taxable sales
those made by the wife through the spouses' common agent, Mariano Osorio. In
upholding that stand, the Court below committed no error.
2. Rubias v. Batiller, 51 SCRA 120 (1973) (special disqualification
(judges)

FACTS

On August 31, 1964, plaintiff Domingo D. Rubias, a lawyer, filed a suit to recover the
ownership and possession of certain portions of lot located in Barrio General Luna,
Barotac Viejo, Iloilo which he bought from his father-in-law, Francisco Militante in 1956
against its present occupant defendant, Isaias Batiller, who illegally entered said portions
of the lot. Plaintiff prayed also for damages and attorney’s fees. In his answer with
counter-claim defendant claims the complaint of the plaintiff does not state a cause of
action, the truth of the matter being that he and his predecessors-in-interest have always
been in actual, open and continuous possession since time immemorial under claim of
ownership of the portions of the lot in question and for the alleged malicious institution
of the complaint he claims he has suffered moral damages in the amount of P 2,000.00, as
well as the sum of P500.00 for attorney’s fees.

Defendant claims that plaintiff could not have acquired any interest in the property in
dispute as the contract he (plaintiff) had with Francisco Militante was inexistent and void.
Plaintiff strongly opposed defendant’s motion to dismiss claiming that defendant cannot
invoke Articles 1409 and 1491 of the Civil Code as Article 1422 of the same Code
provides that ‘The defense of illegality of contracts is not available to third persons
whose interests are not directly affected’.

ISSUE

WON the contract of sale between appellant and his father-in-law, the late Francisco
Militante over the property was void because it was made when plaintiff was counsel of
his father-in-law in a land registration case involving the property in dispute.

HELD

The stipulated facts and exhibits of record indisputably established plaintiff’s lack of
cause of action and justified the outright dismissal of the complaint. Plaintiff’s claim of
ownership to the land in question was predicated on the sale thereof for P2,000.00 made
in 1956 by his father-in-law, Francisco Militante, in his favor, at a time when Militante’s
application for registration thereof had already been dismissed by the Iloilo land
registration court and was pending appeal in the Court of Appeals.

Hence, there was no right or title to the land that could be transferred or sold by
Militante’s purported sale in 1956 in favor of plaintiff. Manifestly, then plaintiff’s
complaint against defendant, to be declared absolute owner of the land and to be restored
to possession thereof with damages was bereft of any factual or legal basis.
 Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in
its six paragraphs certain persons, by reason of the relation of trust or their peculiar
control over the property, from acquiring such property in their trust or control either
directly or indirectly and even at a public or judicial auction as follows: (1) guardians; (2)
agents; (3) administrators; (4)public officers and employees; judicial officers and
employees, prosecuting attorneys, and lawyers; and (6) others especially disqualified by
law.

3. Maharlika Publishing v. Tagle, G.R. No. L-65594, 9 July 1986

(public officers)
FACTS

GSIS owned a parcel of land with a building and printing equipment in Paco, Manila. It
was sold to Maharlika in a Conditional Contract of Sale with the stipulation that if
Maharlika failed to pay monthly installments in 90 days, the GSIS would automatically
cancel the contract. Because Maharlika failed to pay several monthly installments, GSIS
demanded that Maharlika vacate the premises. Even though Maharlika refused to do so,
the GSIS published an advertisement inviting the public to bid in a public auction. A day
before the scheduled bidding, Adolfo Calica, the President of Maharlika, gave the GSIS
head office 2 checks worth 11,000 and a proposal for a compromise agreement. The
GSIS General Manager Roman Cruz gave a not to Maharlika saying “Hold Bidding.
Discuss with me.” However, the public bidding took place as scheduled and the property
was subsequently awarded to Luz Tagle, the wife of the GSIS Retirement Division Chief.
Maharlika demanded that the sale be considered null and void, as Mrs. Tagle should have
been disqualified from bidding for the GSIS property. RTC and CA both ruled that the
Tagles were entitled to the property and Maharlika should vacate the premises.

ISSUE

WON Tagle is entitled to the property?

HELD

NO. The sale to them was against public policy. First of all, the GSIS head office was
stopped from claiming that they did not give the impression to Maharlika that they were
accepting the proposal for a compromise agreement. The act of the general manager is
binding on GSIS. Second, Article 1491 (4) of the CC provides that public officers and
employees are prohibited from purchasing the property of the state or any GOCC or
institution, the administration of which has been entrusted to them cannot purchase, even
at public or judicial auction, either in person or through the mediation of another. The SC
held that as an employee of the GSIS, Edilberto Tagle and his wife are disqualified from
bidding on the property belonging to the GSIS because it gives the impression that there
was politics involved in the sale. It is not necessary that actual fraud be shown, for a
contract which tends to injure the public service is void although the parties entered into
it honestly and proceeded under it in good faith.