Villaflor v. CA [G.R. No. 95694. October 9, 1997.

] Third Division, Panganiban (J): 3 concur, 1 took no part Facts: On 16 January 1940, Cirilo Piencenaves, in a Deed of Absolute Sale, sold to Vicente Villafor, a parcel of agricultural land (planted to Abaca) containing an area of 50 hectares, more or less. The deed states that the land was sold to Villaflor on 22 June 1937, but no formal document was then executed, and since then until the present time, Villaflor has been in possession and occupation of the same. Before the sale of said property, Piencenaves inherited said property form his parents and was in adverse possession of such without interruption for more than 50 years. On the same day, Claudio Otero, in a Deed of Absolute Sale sold to Villaflor a parcel of agricultural land (planted to corn), containing an area of 24 hectares, more or less; Hermogenes Patete, in a Deed of Absolute Sale sold to Villaflor, a parcel of agricultural land (planted to abaca and corn), containing an area of 20 hectares, more or less. Both deed state the same details or circumstances as that of Piencenaves. On 15 February 1940, Fermin Bocobo, in a Deed of Absolute Sale sold to Villaflor, a parcel of agricultural land (planted with abaca), containing an area of 18 hectares, more or less. On 8 November 1946, Villaflor leased to Nasipit Lumber Co., Inc. a parcel of land, containing an area of 2 hectares, together with all the improvements existing thereon, for a period of 5 years (from 1 June 1946) at a rental of P200.00 per annum to cover the annual rental of house and building sites for 33 houses or buildings. The lease agreement allowed the lessee to sublease the premises to any person, firm or corporation; and to build and construct additional houses with the condition the lessee shall pay to the lessor the amount of 50 centavos per month for every house and building; provided that said constructions and improvements become the property of the lessor at the end of the lease without obligation on the part of the latter for expenses incurred in the construction of the same. On 7 July 1948, in an Agreement to Sell Villaflor conveyed to Nasipit Lumber, 2 parcels of land. Parcel 1 contains an area of 112,000 hectares more or less, divided into lots 5412, 5413, 5488, 5490, 5491, 5492, 5850, 5849, 5860, 5855, 5851, 5854, 5855, 5859, 5858, 5857, 5853, and 5852; and containing abaca, fruit trees, coconuts and thirty houses of mixed materials belonging to the Nasipit Lumber Company. Parcel 2 contains an area of 48,000 more or less, divided into lots 5411, 5410, 5409, and 5399, and

containing 100 coconut trees, productive, and 300 cacao trees. From said day, the parties agreed that Nasipit Lumber shall continue to occupy the property not anymore in concept of lessee but as prospective owners. On 2 December 1948, Villaflor filed Sales Application V-807 with the Bureau of Lands, Manila, to purchase under the provisions of Chapter V, XI or IX of CA 141 (The Public Lands Act), as amended, the tract of public lands. Paragraph 6 of the Application, states: I understand that this application conveys no right to occupy the land prior to its approval, and I recognize that the land covered by the same is of public domain and any and all rights I may have with respect thereto by virtue of continuous occupation and cultivation are hereby relinquished to the Government. On 7 December 1948, Villaflor and Nasipit Lumber executed an Agreement, confirming the Agreement to Sell of 7 July 1948, but with reference to the Sales Application filed with the Bureau of Land. On 31 December 1949, the Report by the public land inspector (District Land Office, Bureau of Lands, in Butuan) contained an endorsement of the said officer recommending rejection of the Sales Application of Villaflor for having leased the property to another even before he had acquired transmissible rights thereto. In a letter of Villaflor dated 23 January 1950, addressed to the Bureau of Lands, he informed the Bureau Director that he was already occupying the property when the Bureaus Agusan River Valley Subdivision Project was inaugurated, that the property was formerly claimed as private property, and that therefore, the property was segregated or excluded from disposition because of the claim of private ownership. Likewise, in a letter of Nasipit Lumber dated 22 February 1950 addressed to the Director of Lands, the corporation informed the Bureau that it recognized Villaflor as the real owner, claimant and occupant of the land; that since June 1946, Villaflor leased 2 hectares inside the land to the company; that it has no other interest on the land; and that the Sales Application of Villaflor should be given favorable consideration. On 24 July 1950, the scheduled date of auction of the property covered by the Sales Application, Nasipit Lumber offered the highest bid of P41.00 per hectare, but since an applicant under CA 141, is allowed to equal the bid of the highest bidder, Villaflor tendered an equal bid, deposited the equivalent of 10% of the bid price and then paid the assessment in full. On 16 August 1950, Villaflor executed a document, denominated as a Deed of Relinquishment of Rights, in favor on Nasipit Lumber, in

consideration of the amount of P5,000 that was to be reimbursed to the former representing part of the purchase price of the land, the value of the improvements Villaflor introduced thereon, and the expenses incurred in the publication of the Notice of Sale; in light of his difficulty to develop the same as Villaflor has moved to Manila. Pursuant thereto, on 16 August 1950, Nasipit Lumber filed a Sales Application over the 2 parcels of land, covering an area of 140 hectares, more or less. This application was also numbered V-807. On 17 August 1950 the Director of Lands issued an Order of Award in favor of Nasipit Lumber; and its application was entered in the record as Sales Entry V-407. On 27 November 1973, Villafor wrote a letter to Nasipit Lumber, reminding the latter of their verbal agreement in 1955; but the new set of corporate officers refused to recognize Villaflors claim. In a formal protest dated 31 January 1974 which Villaflor filed with the Bureau of Lands, he protested the Sales Application of Nasipit Lumber, claiming that the company has not paid him P5,000.00 as provided in the Deed of Relinquishment of Rights dated 16 August 1950. On 8 August 1977, the Director of Lands found that the payment of the amount of P5,000.00 in the Deed and the consideration in the Agreement to Sell were duly proven, and ordered the dismissal of Villaflors protest. On 6 July 1978, Villaflor filed a complaint in the trial court for Declaration of Nullity of Contract (Deed of Relinquishment of Rights), Recovery of Possession (of two parcels of land subject of the contract), and Damages at about the same time that he appealed the decision of the Minister of Natural Resources to the Office of the President. On 28 January 1983, he died. The trial court ordered his widow, Lourdes D. Villaflor, to be substituted as petitioner. After trial in due course, the then CFI Agusan del Norte and Butuan City, Branch III, dismissed the complaint on the grounds that: (1) petitioner admitted the due execution and genuineness of the contract and was estopped from proving its nullity, (2) the verbal lease agreements were unenforceable under Article 1403 (2)(e) of the Civil Code, and (3) his causes of action were barred by extinctive prescription and/or laches. It ruled that there was prescription and/or laches because the alleged verbal lease ended in 1966, but the action was filed only on 6 January 1978. The 6-year period within which to file an action on an oral contract per Article 1145 (1) of the Civil Code expired in 1972. Nasipit Lumber was declared the lawful owner and actual physical possessor of the 2 parcels of land (containing a total area of 160

hectares). The Agreements to Sell Real Rights and the Deed of Relinquishment of Rights over the 2 parcels were likewise declared binding between the parties, their successors and assigns; with double costs against Villaflor. The heirs of petitioner appealed to the Court of Appeals which, however, rendered judgment against them via the assailed Decision dated 27 September 1990 finding petitioners prayers (1) for the declaration of nullity of the deed of relinquishment, (2) for the eviction of private respondent from the property and (3) for the declaration of petitioners heirs as owners to be without basis. Not satisfied, petitioners heirs filed the petition for review dated 7 December 1990. In a Resolution dated 23 June 1991, the Court denied this petition for being late. On reconsideration, the Court reinstated the petition. SC dismissed the petition. 1. Doctrine of primary jurisdiction; Court does not interfere if question is within jurisdiction of an administrative tribunal Underlying the rulings of the trial and appellate courts is the doctrine of primary jurisdiction; i.e., courts cannot and will not resolve a controversy involving a question which is within the jurisdiction of an administrative tribunal, especially where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience and services of the administrative tribunal to determine technical and intricate matters of fact. In cases where the doctrine of primary jurisdiction is clearly applicable, the court cannot arrogate unto itself the authority to resolve a controversy, the jurisdiction over which is initially lodged with an administrative body of special competence. 2. Doctrine of primary jurisdiction; may apply even to questions which are judicial character It has been the jurisprudential trend to apply the doctrine to cases involving matters that demand the special competence of administrative agencies even if the question involved is also judicial in character. It applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such case, the judicial process is suspended pending referral of such issues to the administrative body for its view.

3. Doctrine of primary jurisdiction; cases In Machete vs. Court of Appeals, the Court upheld the primary jurisdiction of the Department of Agrarian Reform Adjudicatory Board (DARAB) in an agrarian dispute over the payment of back rentals under a leasehold contract. In Concerned Officials of the Metropolitan Waterworks and Sewerage System vs. Vasquez, the Court recognized that the MWSS was in the best position to evaluate and to decide which bid for a waterworks project was compatible with its development plan. In the present case, the questions on the identity of the land in dispute and the factual qualification of private respondent as an awardee of a sales application require a technical determination by the Bureau of Lands as the administrative agency with the expertise to determine such matters. Because these issues preclude prior judicial determination, it behooves the courts to stand aside even when they apparently have statutory power to proceed, in recognition of the primary jurisdiction of the administrative agency. 4. Interpretation of contracts and determination of private rights no longer uniquely judicial function One thrust of the multiplication of administrative agencies is that the interpretation of contracts and the determination of private rights thereunder is no longer a uniquely judicial function, exercisable only by our regular courts. 5. Primary jurisdiction of director of lands and minister or natural resources regarding identity of disputed land and qualification of awardee of a sales patent The primary jurisdiction of the director of lands and the minister of natural resources over the issues regarding the identity of the disputed land and the qualification of an awardee of a sales patent is established by Sections 3 and 4 of CA 141, also known as the Public Land Act. Section 3 of said act provides that the Secretary of Agriculture and Commerce (now Secretary of Natural Resources) shall be the executive officer charged with carrying out the provisions of this Act through the Director of Lands, who shall act under his immediate control. Section 4 provides that subject to said control, the Director of Lands shall have direct executive control of the survey, classification, lease, sale or any other form of concession or disposition and management of the lands of the public domain, and his decision as to questions of fact shall be conclusive when approved by the Secretary of Agriculture and Commerce. Sections 3 and 4 of the Public Land

Law mean that the Secretary of Agriculture and Natural Resources shall be the final arbiter on questions of fact in public land conflicts (Heirs of Varela vs. Aquino, 71 Phil 69; Julian vs. Apostol, 52 Phil 442). The Supreme Court has recognized that the Director of Lands is a quasi-judicial officer who passes on issues of mixed facts and law (Ortua vs. Bingson Encarnacion, 59 Phil 440). 6. Finding of fact by administrative agency accorded great respect Reliance by the trial and the appellate courts on the factual findings of the Director of Lands and the Minister of Natural Resources is not misplaced. By reason of the special knowledge and expertise of said administrative agencies over matters falling under their jurisdiction, they are in a better position to pass judgment thereon; thus, their findings of fact in that regard are generally accorded great respect, if not finality, by the courts. The findings of fact of an administrative agency must be respected as long as they are supported by substantial evidence, even if such evidence might not be overwhelming or even preponderant. It is not the task of an appellate court to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the administrative agency in respect of sufficiency of evidence. 7. Finding of fact by administrative agency accorded great respect ; Exception to the rule The rule that factual findings of an administrative agency are accorded respect and even finality by courts admits of exceptions. This is true also in assessing factual findings of lower courts. It is incumbent on the petitioner to show that the resolution of the factual issues by the administrative agency and/or by the trial court falls under any of the exceptions. Otherwise, this Court will not disturb such findings. 8. Public land; Lack of Technical description does not prove that the findings lacked substantial evidence The lack of technical description did not prove that the finding of the Director of Lands lacked substantial evidence. The evidence adduced by petitioner to establish his claim of ownership over the subject area consists of deeds of absolute sale executed in his favor. However, an examination of the technical descriptions of the tracts of land subject of the deeds of sale will disclose that said parcels are not identical to, and do not tally with, the area in controversy.

9. Public land; Property admitted to be public, cannot now be claimed otherwise The provision of the law is specific that public lands can only be acquired in the manner provided for therein and not otherwise (Sec. 11, CA. No. 141, as amended). In his sales application, petitioner expressly admitted that said property was public land. This is formidable evidence as it amounts to an admission against interest. The records show that Villaflor had applied for the purchase of lands in question with this Office (Sales Application V-807) on 2 Dec. 948. There is a condition in the sales application to the effect that he recognizes that the land covered by the same is of public domain and any and all rights he may have with respect thereto by virtue of continuous occupation and cultivation are relinquished to the Government of which Villaflor is very much aware. It also appears that Villaflor had paid for the publication fees appurtenant to the sale of the land. He participated in the public auction where he was declared the successful bidder. He had fully paid the purchase price thereof. It would be a height of absurdity for Villaflor to be buying that which is owned by him if his claim of private ownership thereof is to be believed. The area in dispute is not the private property of the petitioner. 10. Lands belong to the state, unless alienated It is a basic assumption of public policy that lands of whatever classification belong to the state. Unless alienated in accordance with law, it retains its rights over the same as dominus. (Santiago vs. de los Santos, L-20241, November 22, 1974, 61 SCRA 152). No public land can be acquired by private persons without any grant, express or implied from the government. It is indispensable then that there be showing of title from the state or any other mode of acquisition recognized by law. (Lee Hong Hok, et al. vs. David, et al., L30389, December 27, 1972, 48 SCRA 379). 11. Filing of sales application acknowledges that the land is not the private property of the applicant As such sales applicant manifestly acknowledged that he does not own the land and that the same is a public land under the administration of the Bureau of Lands, to which the application was submitted, all of its acts prior thereof, including its

real estate tax declarations, characterized its possessions of the land as that of a sales applicant. And consequently, as one who expects to buy it, but has not as yet done so, and is not, therefore, its owner. (Palawan Agricultural and Industrial Co., Inc. vs. Director of Lands, L25914, March 21, 1972, 44 SCRA 15). 12. Rule on the interpretation of contracts is used in affirming, not negating, their validity The rule on the interpretation of contracts (Article 1371) is used in affirming, not negating, their validity. Article 1373, which is a conjunct of Article 1371, provides that, if the instrument is susceptible of two or more interpretations, the interpretation which will make it valid and effectual should be adopted. In this light, it is not difficult to understand that the legal basis urged by petitioner does not support his allegation that the contracts to sell and the deed of relinquishment are simulated and fictitious. 13. Simulation not existing in the present case Simulation occurs when an apparent contract is a declaration of a fictitious will, deliberately made by agreement of the parties, in order to produce, for the purpose of deception, the appearance of a juridical act which does not exist or is different from that which was really executed. Such an intention is not apparent in the agreements. The intent to sell, on the other hand, is as clear as daylight. The fact, that the agreement to sell (7 December 1948) did not absolutely transfer ownership of the land to private respondent, does not show that the agreement was simulated. Petitioners delivery of the Certificate of Ownership and execution of the deed of absolute sale were suspensive conditions, which gave rise to a corresponding obligation on the part of the private respondent, i.e., the payment of the last installment of the consideration mentioned in the Agreement. Such conditions did not affect the perfection of the contract or prove simulation. 14. Nonpayment of the consideration does not prove simulation Nonpayment, at most, gives the vendor only the right to sue for collection. Generally, in a contract of sale, payment of the price is a resolutory condition and the remedy of the seller is to exact fulfillment or, in case of a substantial breach, to rescind the contract under Article 1191 of the Civil Code. However, failure to pay is not even a breach, but merely an event which prevents the vendors obligation to convey title from acquiring binding force.

15. Burden of proof rests upon the party who asserts the affirmative of an issue Prior to the amendment of the rules on evidence on March 14, 1989, Section 1, Rule 131, states that each party must prove his or her own affirmative allegations. Thus, the burden of proof in any cause rested upon the party who, as determined by the pleadings or the nature of the case, asserts the affirmative of an issue and remains there until the termination of the action. Although nonpayment is a negative fact which need not be proved, the party seeking payment is still required to prove the existence of the debt and the fact that it is already due. Petitioner showed the existence of the obligation with the presentation of the contracts, but did not present any evidence that he demanded payment from private respondent. The demand letters dated January 2 and 5, 1974, adduced in evidence by petitioner, were for the payment of back rentals, damages to improvements and reimbursement of acquisition costs and realty taxes, not payment arising from the contract to sell. 16. Lack of Notice of the Award not a suppression of evidence The lack of notice for petitioner (not listed as one of the parties to furnished a copy by the Director of Lands) can be easily explained. Petitioner was not entitled to said notice of award from the Director of Lands, because by then, he had already relinquished his rights to the disputed land in favor of private respondent. In the heading of the order, he was referred to as sales applicant-assignor. In paragraph number 4, the order stated that, on 16 August 1950, he relinquished his rights to the land subject of the award to private respondent. From such date, the sales application was considered to be a matter between the Bureau of Lands and private respondent only. Considering these facts, the failure to give petitioner a copy of the notice of the award cannot be considered as suppression of evidence. Furthermore, this order was in fact available to petitioner and had been referred to by him since 31 January 1974 when he filed his protest with the Bureau of Lands. 17. Requirement for a sales application under CA 141 The requirements for a sales application under the Public Land Act are: (1) the possession of the qualifications required by said Act (under Section 29) and (2) the lack of the disqualifications mentioned therein (under Sections 121, 122, and 123). Section 121 of the Act pertains to acquisitions of public land by a corporation from a

grantee: The private respondent, not the petitioner, was the direct grantee of the disputed land. Sections 122 and 123 disqualify corporations, which are not authorized by their charter, from acquiring public land; the records do not show that private respondent was not so authorized under its charter. 18. Determination of qualification of applicant included in the powers to dispose public lands In Espinosa vs. Makalintal, the Court ruled that, by law, the powers of the Secretary of Agriculture and Natural Resources regarding the disposition of public lands including the approval, rejection, and reinstatement of applications are of executive and administrative nature. (Such powers, however, do not include the judicial power to decide controversies arising from disagreements in civil or contractual relations between the litigants.) Consequently, the determination of whether private respondent is qualified to become an awardee of public land under CA 141 by sales application is included therein. 19. Prohibition of 1973 Constitution against the holding of public alienable lands by corporation not retroactive In Ayog vs. Cusi, Jr., the Court ruled that the constitutional prohibition of the 1973 Constitution against the holding of alienable lands of the public domain by corporations had no retroactive effect and could not prevail over a vested right to the land. Vested rights have to be respected. It could not be abrogated by the new Constitution. Section 2, Article XIII of the 1935 Constitution allowed private corporations to purchase public agricultural lands not exceeding 1,024 hectares. Action for prohibition is barred by the doctrine of vested rights in constitutional law. 20. Vested right A right is vested when the right to enjoyment has become the property of some particular person or persons as a present interest. It is the privilege to enjoy property legally vested, to enforce contracts, and enjoy the rights of property conferred by existing law or some right or interest in property which has become fixed and established and is no longer open to doubt or controversy (Downs vs. Blount, 170 Fed. 15, 20, cited in Balboa vs. Farrales, 51 Phil, 498, 502). Generally, the term vested right expresses the concept of present fixed interest, which in right reason and natural justice should be protected

against arbitrary State action, or an innately just and imperative right which an enlightened free society, sensitive to inherent and irrefragable individual rights, cannot deny (16 C.J.S. 1174, Note 71, No. 5, citing Pennsylvania Greyhound Lines, Inc. vs. Rosenthal, 192 At. 2nd 587). 21. Due process prohibits annihilation of vested rights The due process clause prohibits the annihilation of vested rights. A state may not impair vested rights by legislative enactment, by the enactment or by the subsequent repeal of a municipal ordinance, or by a change in the constitution of the State, except in a legitimate exercise of the police power. 22. Vested interest in sales application; Opinions of the Secretary of Justice In Opinion 64, series of 1973, the Secretary of Justice held that where the applicant, before the Constitution took effect, had fully complied with all his obligations under the Public Land Act in order to entitle him to a sales patent, there would seem to be no legal or equitable justification for refusing to issue or release the sales patent. In Opinion 140, series of 1974, the Secretary of Justice held that as soon as the applicant had fulfilled the construction or cultivation requirements and has fully paid the purchase price, he should be deemed to have acquired by purchase the particular tract of land and to him the area limitation in the new Constitution would not apply. In Opinion 185, series of 1976, the Secretary of Justice held that where the cultivation requirements were fulfilled before the new Constitution took effect but the full payment of the price was completed after 17 January 1973, the applicant was, nevertheless, entitled to a sales patent. 23. Executive construction given great respect A contemporaneous construction of the constitutional prohibition by a high executive official carries great weight and should be accorded much respect. It is a correct interpretation of section 11 of Article XIV. 24. Implementation of DOJ Opinion 64, s. 1973; Sales application for fishponds and for agricultural use Implementing Opinion 64, the then Secretary of Agriculture and Natural Resources issued a memorandum, dated 18 February 1974, providing that sales application of private individuals

covering areas in excess of 24 hectares and those of corporations, associations, or partnership which fall under any of the following categories shall be given due course and issued patents, to wit: Sales application for fishponds and for agricultural purposes (SFA, SA and IGPSA) wherein prior to 17 January 1973, the land covered thereby was awarded; cultivation requirements of law were complied with as shown by investigation reports submitted prior to 17 January 1973; land was surveyed and survey returns already submitted to the Director of Lands for verification and approval; and purchase price was fully paid.

Uy v. CA [G.R. No. 120465. September 9, 1999.] First Division, Kapunan (J): 3 concur, 1 on leave Facts: William Uy and Rodel Roxas are agents authorized to sell 8 parcels of land by the owners thereof. By virtue of such authority, they offered to sell the lands, located in Tuba, Tadiangan, Benguet to National Housing Authority (NHA) to be utilized and developed as a housing project. On 14 February 1989, the NHA Board passed Resolution 1632 approving the acquisition of said lands, with an area of 31.8231 hectares, at the cost of P23.867 million, pursuant to which the parties executed a series of Deeds of Absolute Sale covering the subject lands. Of the 8 parcels of land, however, only 5 were paid for by the NHA because of the report it received from the Land Geosciences Bureau of the Department of Environment and Natural Resources (DENR) that the remaining area is located at an active landslide area and therefore, not suitable for development into a housing project. On 22 November 1991, the NHA issued Resolution 2352 cancelling the sale over the 3 parcels of land. The NHA, through Resolution 2394, subsequently offered the amount of P1.225M to the landowners as daos perjuicios. On 9 March 1992, petitioners Uy and Roxas filed before the RTC Quezon City a Complaint for Damages against NHA and its General Manager Robert Balao. After trial, the RTC rendered a decision declaring the cancellation of the contract to be justified. The trial court nevertheless awarded damages to plaintiffs in the sum of P1.255 million, the same amount initially offered by NHA to petitioners as damages. Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and entered a new one dismissing the complaint. It held that since there was sufficient justifiable basis in cancelling the sale, it saw no reason for the award of damages. The Court of Appeals also noted that petitioners were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the action before the trial court. Their motion for reconsideration having been denied, petitioners seek relief from the Supreme Court. The Supreme Court denied the petition. 1. Real party-in-interest defined; Action to be prosecuted in the name of a party whose right is sought to be enforced Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and defended in the name of the real party-in-interest. The real party-in-interest is the party who stands to be benefited or injured by the judgment or the

party entitled to the avails of the suit. Interest, within the meaning of the rule, means material interest, an interest in the issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. Cases construing the real party-in-interest provision can be more easily understood if it is borne in mind that the true meaning of real party-in-interest may be summarized as follows: An action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced. 2. Action brought by an attorney-in-fact in his name and not in the name of his principal Dismissed Where the action is brought by an attorney-in-fact of a land owner in his name, (as in our present action) and not in the name of his principal, the action was properly dismissed (Ferrer vs. Villamor, 60 SCRA 406 [1974]; Marcelo vs. de Leon, 105 Phil. 1175) because the rule is that every action must be prosecuted in the name of the real parties-in-interest (Section 2, Rule 3, Rules of Court). 3. Article 1311 of the Civil Code Article 1311 of the Civil Code, provides that Contracts take effect only between the parties, their assigns, and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation, or by provision of law. If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. 4. Agents rendering service in behalf of parties do not render them parties to the contract of sale Petitioners are not parties to the contract of sale between their principals and NHA. They are mere agents of the owners of the land subject of the sale. As agents, they only render some service or do something in representation or on behalf of their principals. The rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter. Since a contract may be violated only by the parties thereto as against each other, the real parties-in-interest, either as plaintiff or defendant, in an action upon

that contract must, generally, either be parties to said contract. Neither has there been any allegation, much less proof, that petitioners are the heirs of their principals. 5. Assignment of rights In McMicking vs. Banco Espaol-Filipino, it was held that the rule requiring every action to be prosecuted in the name of the real party-ininterest recognizes the assignments of rights of action and also recognizes that when one has a right of action assigned to him he is then the real party in interest and may maintain an action upon such claim or right. The purpose is to require the plaintiff to be the real party in interest, or, in other words, he must be the person to whom the proceeds of the action shall belong, and to prevent actions by persons who have no interest in the result of the same. Thus, an agent, in his own behalf, may bring an action founded on a contract made for his principal, as an assignee of such contract. 6. Section 372 (1) of the Restatement of the Law on Agency Section 372 (1) of the Restatement of the Law on Agency [Agent as Owner of Contract Right] declares that Unless otherwise agreed, an agent who has or who acquires an interest in a contract which he makes on behalf of his principal can, although not a promisee, maintain such action thereon as might a transferee having a similar interest. 7. Agent-transferee; Section 372 (1) explained One who has made a contract on behalf of another may become an assignee of the contract and bring suit against the other party to it, as any other transferee. The customs of business or the course of conduct between the principal and the agent may indicate that an agent who ordinarily has merely a security interest is a transferee of the principals rights under the contract and as such is permitted to bring suit. If the agent has settled with his principal with the understanding that he is to collect the claim against the obligor by way of reimbursing himself for his advances and commissions, the agent is in the position of an assignee who is the beneficial owner of the chose in action. He has an irrevocable power to sue in his principals name. And, under the statutes which permit the real party in interest to sue, he can maintain an action in his own name. This power to sue is not affected by a settlement between the principal and the obligor if the latter has notice of the agents interest. Even though the agent has not settled with his principal, he

may, by agreement with the principal, have a right to receive payment and out of the proceeds to reimburse himself for advances and commissions before turning the balance over to the principal. In such a case, although there is no formal assignment, the agent is in the position of a transferee of the whole claim for security; he has an irrevocable power to sue in his principals name and, under statutes which permit the real party in interest to sue, he can maintain an action in his own name. 8. Petitioners not assignees Petitioners have not shown that they are assignees of their principals to the subject contracts. While they alleged that they made advances and that they suffered loss of commissions, they have not established any agreement granting them the right to receive payment and out of the proceeds to reimburse themselves for advances and commissions before turning the balance over to the principals. Further, it does not appear that petitioners are beneficiaries of a stipulation pour autrui under the second paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in any of the Deeds of Absolute Sale clearly and deliberately conferring a favor to any third person. 9. Section 372 (2) of the Restatement of the Law on Agency Section 372 (2) of the Restatement of the Law on Agency (Second) provides that An agent does not have such an interest in a contract as to entitle him to maintain an action at law upon it in his own name merely because he is entitled to a portion of the proceeds as compensation for making it or because he is liable for its breach. The fact that an agent who makes a contract for his principal will gain or suffer loss by the performance or nonperformance of the contract by the principal or by the other party thereto does not entitle him to maintain an action on his own behalf against the other party for its breach. An agent entitled to receive a commission from his principal upon the performance of a contract which he has made on his principals account does not, from this fact alone, have any claim against the other party for breach of the contract, either in an action on the contract or otherwise. An agent who is not a promisee cannot maintain an action at law against a purchaser merely because he is entitled to have his compensation or advances paid out of the purchase price before payment to the principal.

10. Failure to obtain commissions due nonperformance of contract does not entitle petitioners to file action against NHA In Hopkins vs. Ives, the Supreme Court of Arkansas, citing Section 372 (2) above, denied the claim of a real estate broker to recover his alleged commission against the purchaser in an agreement to purchase property. In Goduco vs. Court of Appeals, it was held that granting that appellant had the authority to sell the property, the same did not make the buyer liable for the commission she claimed. At most, the owner of the property and the one who promised to give her a commission should be the one liable to pay the same and to whom the claim should have been directed. Similarly, in the present case, that petitioners did not obtain their commissions or recoup their advances because of the nonperformance of the contract did not entitle them to file the action below against NHA. As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour autrui under the contracts of sale, they do not, under substantive law, possess the right they seek to enforce. 11. Decision pointless if petitioners are not real parties-in-interest Petitioners not being the real parties-in-interest, any decision rendered would be pointless since the same would not bind the real parties-ininterest. 12. Cancellation of contract in present case not rescission under Article 1191 The right of rescission or, more accurately, resolution, of a party to an obligation under Article 1191 is predicated on a breach of faith by the other party that violates the reciprocity between them. The power to rescind, therefore, is given to the injured party. Article 1191 states that the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. In the present case, the NHA did not rescind the contract. Indeed, it did not have the right to do so for the other parties to the contract, the vendors, did not commit any breach, much less a substantial breach, of their obligation. Their obligation was merely to deliver the parcels of land to the NHA, an obligation that they fulfilled. The NHA did not suffer any injury by the performance thereof.

13. Cancellation based on the negation of cause The cancellation was based on the negation of the cause arising from the realization that the lands, which were the object of the sale, were not suitable for housing. 14. Cause defined; Distinguished from motive Cause is the essential reason which moves the contracting parties to enter into it. The cause is the immediate, direct and proximate reason which justifies the creation of an obligation through the will of the contracting parties. Cause, which is the essential reason for the contract, should be distinguished from motive, which is the particular reason of a contracting party which does not affect the other party. For example, in a contract of sale of a piece of land, such as in this case, the cause of the vendor in entering into the contract is to obtain the price. For the vendee, it is the acquisition of the land. The motive of the NHA, on the other hand, is to use said lands for housing. 15. Motives ordinarily affects the contract, unless if it predetermines the cause; motive thus may be regarded as the cause Ordinarily, a partys motives for entering into the contract do not affect the contract. However, when the motive predetermines the cause, the motive may be regarded as the cause. In Liguez vs. Court of Appeals, it was noted that Manresa himself (Vol. 8, pp. 641-642), while maintaining the distinction and upholding the inoperativeness of the motives of the parties to determine the validity of the contract, expressly excepts from the rule those contracts that are conditioned upon the attainment of the motives of either party. The same view is held by the Supreme Court of Spain, in its decisions of 4 February 1941, and 4 December 1946, holding that the motive may be regarded as causa when it predetermines the purpose of the contract. In the present case, it is clear that NHA would not have entered into the contract were the lands not suitable for housing. The quality of the land was an implied condition for the NHA to enter into the contract. On the part of the NHA, therefore, the motive was the cause for its being a party to the sale. 16. Report of Land Geosciences Bureau is sufficient basis for the cancellation of the sale The findings contained in the report of the Land Geosciences Bureau dated 15 July 1991 sufficient basis for the cancellation of the sale. The report stated that In Tadiangan, Tuba, the housing site is situated in an area of moderate

topography. There are more areas of less sloping ground apparently habitable. The site is underlain by thick slide deposits (4-45m) consisting of huge conglomerate boulders mixed with silty clay materials. These clay particles when saturated have some swelling characteristics which is dangerous for any civil structures especially mass housing development. 17. Assessment preliminary only insofar as to the ascertainment of geological attributes; otherwise conclusive The portion stating that there is a need to conduct further geottechnical [sic] studies in the NHA property. Standard Penetration Test (SPT) must be carried out to give an estimate of the degree of compaction (the relative density) of the slide deposit and also the bearing capacity of the soil materials. Another thing to consider is the vulnerability of the area to landslides and other mass movements due to thick soil cover. Preventive physical mitigation methods such as surface and subsurface drainage and regrading of the slope must be done in the area mean only that further tests are required to determine the degree of compaction, the bearing capacity of the soil materials, and the vulnerability of the area to landslides, since the tests already conducted were inadequate to ascertain such geological attributes. It is only in this sense that the assessment was preliminary. 18. Vendee justified in canceling contract; Requisites of contract NHA was justified in cancelling the contract. The realization of the mistake as regards the quality of the land resulted in the negation of the motive/cause thus rendering the contract inexistent. Article 1318 of the Civil Code states that There is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; and (3) Cause of the obligation which is established. 19. Petitioners not entitled to damages Assuming that petitioners are parties, assignees or beneficiaries to the contract of sale, they would not be entitled to any award of damages, as the cancellation of the contract is justified.

Mapalo v. Mapalo [G.R. No. L-21489 and L21628. May 19, 1966.] En Banc, Bengzon JP (J): 10 concur Facts: Spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers, were registered owners of a 1,635 sq.ms. residential land in Manaoag, Pangasinan (OCT 46503). The spouses-owners, out of love and affection for Maximo Mapalo, brother of Miguel who was about to get married, decided to donate the eastern half of the land to him. OCT 46503 was delivered. As a result, however, they were deceived into signing, on 15 October 1936, a deed of absolute sale over the entire land in his favor. Their signature thereto were procured by fraud, i.e. they were made to believe by Maximo Mapalo and the attorney who acted as notary public who translated the document, that the same was a deed of donation in Maximos favor covering (the eastern half) of their land. Although the document of sale stated a consideration of P500, the spouses did not receive anything of value for the land. The attorneys misbehavior was the subject of an investigation but its result does not appear on record. Following the execution of the document the spouses immediately built a fence of permanent structure in the middle of their land segregating the eastern portion from its western portion. Said fence still exists. The spouses have always been in continued possession over the western half of the land up to the present. Unknown to them, Maximo Mapalo, on 15 March 1938, registered the deed of sale in his favor and obtained in his name TCT 12829 over the entire land. 13 years later, on 20 October 1951, he sold for P2,500.00 said entire land in favor Evaristo, Petronila, Pacifico and Miguel Narciso. The sale to the Narcisos was in turn registered on 5 November 1951 and TCT 11350 was issued for the whole land in their names. The Narcisos took possession only of the eastern portion of the land in 1951, after the sale in their favor was made. On 7 February 1952 the Narcisos filed suit in the CFI Pangasinan (Civil Case 11991) to be declared owners of the entire land; for possession of its western portion; for damages; and for rentals. It was brought against the Mapalo spouses as well as against Floro Guieb and Rosalia Mapalo Guieb who had a house on the western part of the land with the consent of the spouses Mapalo and Quiba. The Mapalo spouses filed their answer with a counterclaim on 17 March 1952, seeking cancellation of the TCT of the Narcisos as to the western half of the land, on the grounds that their signatures to the deed of sale of 1936 were procured by fraud and that the Narcisos were buyers in bad faith. They asked for

reconveyance to them of the western portion of the land and issuance of a TCT in their names as to said portion. In addition, the Mapalo spouses filed on 16 December 1957 their own complaint in the CFI Pangasinan (Civil Case U-133) against the the Narcisos and Maximo Mapalo. They asked that the deeds of sale of 1936 and of 1951 over the land in question declared null and void as to the western half of said land. Judge Amado Santiago of the CFI Pangasinan located in the municipality of Urdaneta the two cases jointly. Said court rendered judgment on 18 January 1961 dismissing the complaint in Civil Case 11991, declaring the deed as that of donation only over the eastern half portion of the land, and as null and void with respect to the western half portion thereof, declaring TCT 12829 issued to Maximo Mapalo as regards the western portion of the land null and void and without legal force as well as TCT 11350 subsequently issued to the Narcisos, ordering the Mapalo spouses and the Narcisos to have the land subdivided by a competent land surveyor, the expenses of which to be borne out by the parties pro-rata, ordering the Register of Deed to issue in lieu of TCT 11350 two new titles upon completion of the subdivision plan (one in favor of the Mapalo spouses for the western portion, and one for the Narcisos covering the eastern half), and ordering Maximo Mapalo and the Narcisos to pay the costs. The Narcisos appealed to the Court of Appeals. In its decision on 28 May 1963, the Court of Appeals reversed the Judgment of the CFI, solely on the ground that the consent of the Mapalo spouses to the deed of sale of 1936 having been obtained by fraud, the same was voidable, not void ab initio, and, therefore, the action to annul the same, within 4 years from notice of the fraud, had long prescribed. It reckoned said notice of the fraud from the date of registration of the sale on 15 March 1938. The CFI and the CA are therefore unanimous that the spouses Mapalo and Quiba were definitely the victims of fraud. It was only on prescription that they lost in the Court of Appeals. From said decision of the Court of Appeals, the Mapalo spouses appealed to the Court. The Supreme Court reversed and set aside the decision of the Court of Appeals, and rendered another affirming in toto the judgment of the CFI, with attorneys fees on appeal in favor of the Mapalo Spouses in the amount of P1,000.00, plus the costs, both against Maximo Mapalo and the Narcisos. 1. Contract; Requisites Under the Civil Code, either old or the new, for a contract to exist at all, three essential requisites

must concur: (1) consent; (2) object, and (3) cause or consideration. 2. Eastern half donated; Finding of the lower court as to the donation not assailed and thus is final As regards the eastern portion of the land, the Mapalo spouses are not claiming the same, it being their stand that they had donated and freely given said half of their land to Maximo Mapalo. And since they did not appeal from the decision of the trial court finding that there was a valid and effective donation of the eastern portion of their land in favor of Maximo Mapalo, the same pronouncement has become final as to them, rendering it no longer proper herein to examine the existence, validity or efficacy of said donation as to said eastern portion. 3. Contracts without a cause void Under the Civil Code, be it the old or the new, is that contracts without a cause or consideration produce no effect whatsoever. 4. Old Civil Code; Contracts with false consideration voidable; Prescription of voidable contracts Under the Old Civil Code, the statement of a false consideration renders the contract voidable, unless it is proven that it is supported by another real and licit consideration. And it is further provided by the Old Civil Code that the action for annulment of a contract on the ground of falsity of consideration shall last 4 years, the term to run from the date of the consummation of the contract. 5. False consideration a real consideration but not the one stated in the document According to Manresa, what is meant by a contract that states a false consideration is one that has in fact a real consideration but the same is not the one stated in the document. (The difference between simulation and the contract with fraudulent intention (purpose). This, although illicit is real; but the first is false in fact, although it appears to be real. [Manresa, Civil Code Volume VIII, vol. II, p. 354]). 6. Only a disturbed man would contract without cause; False cause vitiates consent and annuls contract (Sanchez Roman) The inspection of cause in the contract is necessary, and that without it they are null; it can only be conceived that a disturbed man would, in his reason, contract without cause. For the same reason of the necessity of inspection of cause in

the contract, it is precise that such is real and not supposed, as it pretends or appears. The falsification of the cause vitiates the consent and annuls the contract, that is, not only as a doctrine undoubtedly of scientific law, but also of old laws of Castile, that in multitude of laws that declare it. (Sanchez Roman, Civil Right, Volume IV, p. 206.) 7. No consideration does not mean false consideration for Article 1276 to be applied Where there was in fact no consideration, the statement of one in the deed will not suffice to bring it under the rule of Article 1276 of the Old Civil Code as stating a false consideration. 8. Oceio Perez v. Flores applies; Contract null and void if without cause or consideration The ruling of the Court in Ocejo Perez & Co. vs. Flores (40 Phil. 921), is squarely applicable herein. In that case, it was ruled that a contract of purchase and sale is null and void and produces no effect whatsoever where the same is without cause or consideration in that the purchase price which appears thereon as paid has in fact never been paid by the purchaser to the vendor. 9. Void contract incurable and cannot be subject of prescription The inexistence of a contract is permanent and incurable and cannot be the subject of prescription. The nonexistence is perpetual and irreplaceable not being able to be object of confirmation nor prescription. As held in Eugenio vs. Perdido (97 Phil. 41, 42-43 [1932]), it was stated that under the existing classification, such contract would be inexistent and the action or defense for declaration of such inexistence does not prescribe. (Art. 1410, New Civil Code.) While it is true that this is a new provision of the New Civil Code, it is nevertheless a principle recognized since Tipton vs. Velasco (6 Phil. 67) that mere a lapse of time cannot give efficacy to contracts that are null and void. 10. Narcisos not purchasers in good faith It has been positively shown by the undisputed testimony of Candida Quiba that Pacifico Narciso and Evaristo Narciso stayed for some days on the western side of the land until their house was removed in 1940 by the spouses Mapalo. Also, Pacifico Narciso admitted in his testimony that when they bought the property, Miguel Mapalo was still in the premises in question (western part) which he is occupying and his house is still standing thereon. Moreover, Pacifico Narciso when presented as a rebuttal and sub-rebuttal witness categorically declared that before buying

the land in question he went to the house of spouses Mapalo and asked them if they will permit Maximo Mapalo to sell the property. Further, as the parties in the cases are neighbors (except Maximo Mapalo), it is clear that the Narcisos were aware of the extent of the interest of Maximo Mapalo over the land before and after the execution of the deed of sale. Under the situation, thus, the Narcisos may be considered in value but certainly not as purchasers in good faith. 11. No need to remand case to trial court as facts of trial court sustained by Court of Appeals As the Court of Appeals declared that on the merits, the appealed decision called have been upheld under Article 1332 of Civil Code and the following authorities: Ayola vs. Valderrama Lumber Manufacturers Ca., Inc., 49 OG 980, 982; Trasporte Beltran, 51 OG 1434, 1435; Cortez vs. Cortez, CA- 18451-R, August 8, 1961; Castilllo vs. Laberinto, CA-G.R. No. 18118-R, December 20, 1961; and 13 C. J. 372-373, as well as the several facts and circumstances appreciated by the trial court as supporting the Mapalo spouses case, it thus sustained barring only its ruling on prescription the judgment and findings of the trial court, including that of bad faith on the part of the Narcisos in purchasing the land in question. The SC thus do not see the need to further remand the case to the Court of Appeals for a ruling on the point in the event that the 1936 contract is held to be inexistent as regards the western portion of the land. 12. Bad faith justifies award of attorneys fees In view of the Narcisos bad faith under the circumstances we deem it just and equitable to award, in the Mapalo spouses favor, attorneys fees on appeal, in the amount of P1,000.00 as prayed for in the counterclaim.

Ong v. Ong [G.R. No. L-67888. October 8, 1985.]First Division, Relova (J): 5 concur, 1 concur in result Facts: On 25 February 1976, Imelda Ong for and in consideration of P1 and other valuable considerations, executed in favor of Sandra Maruzzo, then a minor, a Quitclaim Deed whereby she transferred, released, assigned and forever quitclaimed to Sandra Maruzzo, her heirs and assigns, all her rights, title, interest and participation in 1/2 undivided portion of a parcel of land (Lot 10-B of the subdivision plan (LRC) Psd- 157841, a portion of lot 10 Block 18 of PSD-13288 LCR (GLRC) Record 2029, situated in Makati, containing 125 square meters. On 19 November 1980, Imelda Ong revoked the aforesaid Deed of Quitclaim and, thereafter, on 20 January 1982 donated the whole property to her son, Rex Ong Jimenez. On 20 June 1983, Sandra Maruzzo, through her guardian ad litem Alfredo Ong, filed with the RTC Makati an action against Imelda Ong, for the recovery of ownership/possession and nullification of the Deed of Donation over the portion belonging to her and for accounting. Imelda Ong claimed that the Quitclaim Deed is null and void inasmuch as it is equivalent to a Deed of Donation, acceptance of which by the donee is necessary to give it validity. Further, it is averred that the donee, Sandra Maruzzo, being a minor, had no legal personality and therefore incapable of accepting the donation. Upon admission of the documents involved, the parties filed their responsive memoranda and submitted the case for decision. On 12 December 1983, the trial court rendered judgment in favor of Maruzzo and held that the Quitclaim Deed is equivalent to a Deed of Sale and, hence, there was a valid conveyance in favor of the latter. Imelda Ong appealed to the Intermediate Appellate Court. On 20 June 1984, IAC promulgated its Decision affirming the appealed judgment and held that the Quitclaim Deed is a conveyance of property with a valid cause or consideration; that the consideration is P1 which is clearly stated in the deed itself; that the apparent inadequacy is of no moment since it is the usual practice in deeds of conveyance to place a nominal amount although there is a more valuable consideration given. Hence, the petition for review on certiorari. On 15 March 1985, Sandra Maruzzo, through her guardian ad litem Alfredo Ong, filed an Omnibus Motion informing this Court that she has reached the age of majority as evidenced by her Birth Certificate and she prays that she be substituted

as private respondent in place of her guardian ad litem. On 15 April 1985, the Court issued a resolution granting the same. SC affirmed the appealed decision of the IAC, with costs against Imelda Ong. 1. Consideration or cause is not P1 alone but also other valuable considerations The subject deed reveals that the conveyance of the 1/2 undivided portion of the property was for and in consideration of P1 and the other valuable considerations paid by Sandra Maruzzo, through her representative, Alfredo Ong, to petitioner Imelda Ong. Stated differently, the cause or consideration is not P1 alone but also the other valuable considerations. 2. Cause not stated in contract is presumed existing unless proven to the contrary; Execution of deed a prima facie evidence of existence of valuable consideration Although the cause is not stated in the contract it is presumed that it is existing unless the debtor proves the contrary (Article 1354 of the Civil Code). One of the disputable presumptions is that there is a sufficient cause of the contract (Section 5, (r), Rule 131, Rules of Court). It is a legal presumption of sufficient] cause or consideration supporting a contract even if such cause is not stated therein (Article 1354, New Civil Code) This presumption cannot be overcome by a simple assertion of lack of consideration especially when the contract itself states that consideration was given, and the same has been reduced into a public instrument with all due formalities and solemnities. To overcome the presumption of consideration the alleged lack of consideration must be shown by preponderance of evidence in a proper action. (Samanilla vs. Cajucom, et al., 107 Phil. 432). The execution of a deed purporting to convey ownership of a realty is in itself prima facie evidence of the existence of a valuable consideration, the party alleging lack of consideration has the burden of proving such allegation. (Caballero, et al. vs. Caballero, et al., (CA), 45 O.G. 2536). 3. Acceptance by legal representatives of minor applies to onerous and conditional donations Granting that the Quitclaim deed is a donation, Article 741 of the Civil Code provides that the requirement of the acceptance of the donation in favor of minor by parents of legal representatives applies only to onerous and conditional donations where the donation may have to assume certain charges or burdens (Article 726, Civil Code).

The acceptance by a legal guardian of a simple or pure donation does not seem to be necessary (Perez vs. Calingo, CA-40 O.G. 53). Thus, Supreme Court ruled in Kapunan vs. Casilan and CA (109 Phil. 889) that the donation to an incapacitated donee does not need the acceptance by the lawful representative if said donation does not contain any condition. In simple and pure donation, the formal acceptance is not important for the donor requires no right to be protected and the donee neither undertakes to do anything nor assumes any obligation. The Quitclaim in question does not impose any condition. 4. Bad faith and inadequacy of monetary consideration does not render conveyance inexistent, assignors liberality may be sufficient cause for a valid contract It is not unusual in deeds of conveyance adhering to the Anglo-Saxon practice of stating that the consideration given is the sum of P1, although the actual consideration may have been much more. Moreover, assuming that said consideration of P1 is suspicious, this circumstance, alone, does not necessarily justify the inference that the vendees were not purchasers in good faith and for value. Neither does this inference warrant the conclusion that the sales were null and void ab initio. Indeed, bad faith and inadequacy of the monetary consideration do not render a conveyance inexistent, for the assignors liberality may be sufficient cause for a valid contract (Article 1350, Civil Code), whereas fraud or bad faith may render either rescissible or voidable, although valid until annulled, a contract concerning an object certain entered into with a cause and with the consent of the contracting parties(See Morales Development v. CA, 27 SCRA 484).