JULIAN FRANCISCO (SUBSTITUTED BY HIS HEIRS, NAMELY: CARLOS ALTEA FRANCISCO; THE HEIRS OF LATE ARCADIO FRANCISCO, NAMELY: CONCHITA SALANGSANG-FRANCISCO (SURVIVING SPOUSE), AND HI…

This is a petition for review on certiorari of the decision^[1]
of the Court of Appeals, dated August 30, 1999, in CA-G.R. CV No. 47869, which
affirmed in toto the judgment^[2]
of the Regional Trial Court (RTC) of Antipolo City, Branch 73, in Civil Case
No. 92-2267. The appellate court
sustained the trial court’s ruling which: (a) declared null and void the deeds of sale of the properties covered
by Tax Declaration Nos. 01-00495 and 01-00497; and (b) directed petitioner to
return the subject properties to respondent who, in turn, must refund to
petitioner the purchase price of P1,750,000.

The facts, as found by the trial court and affirmed by the Court
of Appeals, are as follows:

Eligio Herrera, Sr., the father of respondent, was the owner of
two parcels of land, one consisting of 500 sq. m. and another consisting of 451
sq. m., covered by Tax Declaration (TD) Nos. 01-00495 and 01-00497,
respectively. Both were located at
Barangay San Andres, Cainta, Rizal.^[3]

On January 3, 1991, petitioner bought from said landowner the
first parcel, covered by TD No. 01-00495, for the price of P1,000,000,
paid in installments from November 30, 1990 to August 10, 1991.

On March 12, 1991, petitioner bought the second parcel covered by
TD No. 01-00497, for P750,000.

Contending that the contract price for the two parcels of land
was grossly inadequate, the children of Eligio, Sr., namely, Josefina
Cavestany, Eligio Herrera, Jr., and respondent Pastor Herrera, tried to
negotiate with petitioner to increase the purchase price. When petitioner
refused, herein respondent then filed a complaint for annulment of sale, with
the RTC of Antipolo City, docketed as Civil Case No. 92-2267. In his complaint, respondent claimed
ownership over the second parcel, which is the lot covered by TD No. 01-00497,
allegedly by virtue of a sale in his favor since 1973. He likewise claimed that
the first parcel, the lot covered by TD No. 01-00495, was subject to the
co-ownership of the surviving heirs of Francisca A. Herrera, the wife of
Eligio, Sr., considering that she died intestate on April 2, 1990, before the
alleged sale to petitioner. Finally,
respondent also alleged that the sale of the two lots was null and void on the
ground that at the time of sale, Eligio, Sr. was already incapacitated to give
consent to a contract because he was already afflicted with senile dementia, characterized by
deteriorating mental and physical condition including loss of memory.

In his answer, petitioner as defendant below alleged that
respondent was estopped from assailing the sale of the lots. Petitioner
contended that respondent had effectively ratified both contracts of sales, by
receiving the consideration offered in each transaction.

On November 14, 1994, the Regional Trial Court handed down its
decision, the dispositive portion of which reads:

WHEREFORE, in view of all the foregoing, this court hereby orders
that:

1. The deeds of sale of the properties covered by Tax Dec. Nos.
01-00495 and 01-00497 are declared null and void;

2. The defendant is to return the lots in question including all
improvements thereon to the plaintiff and the plaintiff is ordered to
simultaneously return to the defendant the purchase price of the lots sold
totalling to P750,000.00 for lot covered by TD 01-00497 and P1,000,000.00
covered by TD 01-00495;

3. The court also orders the defendant to pay the cost of the
suit.

4. The counter-claim of the defendant is denied for lack of merit.

SO ORDERED.^[4]

Petitioner then elevated the matter to the Court of Appeals in
CA-G.R. CV No. 47869. On August 30, 1999, however, the appellate court affirmed
the decision of the Regional Trial Court, thus:

WHEREFORE, premises considered, the decision appealed from is hereby
AFFIRMED in toto. Costs
against defendant-appellant.

SO ORDERED.^[5]

Hence, this petition for review anchored on the following
grounds:

I. THE COURT OF APPEALS
COMPLETELY IGNORED THE BASIC DIFFERENCE BETWEEN A VOID AND A MERELY VOIDABLE
CONTRACT THUS MISSING THE ESSENTIAL SIGNIFICANCE OF THE ESTABLISHED FACT OF
RATIFICATION BY THE RESPONDENT WHICH EXTINGUISHED WHATEVER BASIS RESPONDENT MAY
HAVE HAD IN HAVING THE CONTRACT AT BENCH ANNULLED.

II. THE DECISION OF THE
COURT OF APPEALS ON “SENILE DEMENTIA”:

A. DISREGARDED THE FACTUAL BACKGROUND OF THE CASE;

B. WAS CONTRARY TO ESTABLISHED JURISPRUDENCE; AND

C. WAS PURELY CONJECTURAL, THE CONJECTURE BEING ERRONEOUS.

III. THE COURT OF APPEALS
WAS IN GROSS ERROR AND IN FACT VIOLATED PETITIONERS’ RIGHT TO DUE PROCESS WHEN
IT RULED THAT THE CONSIDERATION FOR THE QUESTIONED CONTRACTS WAS GROSSLY
INADEQUATE.^[6]

The resolution of this case hinges on one pivotal issue: Are the
assailed contracts of sale void or merely voidable and hence capable of being
ratified?

Petitioner contends that the Court of Appeals erred when it
ignored the basic distinction between void and voidable contracts. He argues
that the contracts of sale in the instant case, following Article 1390^[7]
of the Civil Code are merely voidable and not void ab initio. Hence, said contracts can be ratified. Petitioner argues
that while it is true that a demented person cannot give consent to a contract
pursuant to Article 1327,^[8]
nonetheless the dementia affecting
one of the parties will not make the contract void per se but merely voidable. Hence, when respondent accepted the
purchase price on behalf of his father who was allegedly suffering from senile dementia, respondent effectively
ratified the contracts. The ratified contracts then become valid and enforceable
as between the parties.

Respondent counters that his act of receiving the purchase price
does not imply ratification on his part. He only received the installment payments on his senile father’s behalf,
since the latter could no longer account for the previous payments. His act was
thus meant merely as a safety measure to prevent the money from going into the
wrong hands. Respondent also maintains that the sales of the two properties
were null and void. First, with respect to the lot covered by TD No. 01-00497,
Eligio, Sr. could no longer sell the same because it had been previously sold
to respondent in 1973. As to lot
covered by TD No. 01-00495, respondent contends that it is co-owned by Eligio,
Sr. and his children, as heirs of Eligio’s wife. As such, Eligio, Sr. could not
sell said lot without the consent of his co-owners.

We note that both the trial court and the Court of Appeals found
that Eligio, Sr. was already suffering from senile
dementia at the time he sold the lots in question. In other words, he was
already mentally incapacitated when he entered into the contracts of sale.
Settled is the rule that findings of fact of the trial court, when affirmed by
the appellate court, are binding and conclusive upon the Supreme Court.^[9]

Coming now to the pivotal issue in this controversy. A void or
inexistent contract is one which has no force and effect from the very
beginning. Hence, it is as if it has never been entered into and cannot be
validated either by the passage of time or by ratification. There are two types of void contracts: (1) those
where one of the essential requisites of a valid contract as provided for by
Article 1318^[10] of the Civil Code is totally wanting; and
(2) those declared to be so under Article 1409^[11] of
the Civil Code. By contrast, a voidable or annullable contract is one in which
the essential requisites for validity under Article 1318 are present, but
vitiated by want of capacity, error, violence, intimidation, undue influence,
or deceit.

Article 1318 of the Civil Code states that no contract exists
unless there is a concurrence of consent of the parties, object certain as
subject matter, and cause of the obligation established. Article 1327 provides
that insane or demented persons cannot give consent to a contract. But, if an insane
or demented person does enter into a contract, the legal effect is that the
contract is voidable or annullable as specifically provided in Article 1390.^[12]

In the present case, it was established that the vendor Eligio,
Sr. entered into an agreement with petitioner, but that the former’s capacity
to consent was vitiated by senile
dementia. Hence, we must rule that the assailed contracts are not void or
inexistent per se; rather, these are
contracts that are valid and binding unless annulled through a proper action
filed in court seasonably.

An annullable contract may be rendered perfectly valid by
ratification, which can be express or implied. Implied ratification may take
the form of accepting and retaining the benefits of a contract.^[13]
This is what happened in this case. Respondent’s contention that he merely
received payments on behalf of his father merely to avoid their misuse and that
he did not intend to concur with the contracts is unconvincing. If he was not
agreeable with the contracts, he could have prevented petitioner from
delivering the payments, or if this was impossible, he could have immediately
instituted the action for reconveyance and have the payments consigned with the
court. None of these happened. As found by the trial court and the Court of
Appeals, upon learning of the sale, respondent negotiated for the increase of
the purchase price while receiving the installment payments. It was only when
respondent failed to convince petitioner to increase the price that the former
instituted the complaint for reconveyance of the properties. Clearly,
respondent was agreeable to the contracts, only he wanted to get more. Further, there is no showing that respondent
returned the payments or made an offer to do so. This bolsters the view that
indeed there was ratification. One cannot negotiate for an increase in the
price in one breath and in the same breath contend that the contract of sale is
void.

Nor can we find for respondent’s argument that the contracts were
void as Eligio, Sr., could not sell the lots in question as one of the
properties had already been sold to him, while the other was the subject of a
co-ownership among the heirs of the deceased wife of Eligio, Sr. Note that it
was found by both the trial court and the Court of Appeals that Eligio, Sr.,
was the “declared owner” of said lots. This finding is conclusive on us. As declared owner of said parcels of land,
it follows that Eligio, Sr., had the right to transfer the ownership thereof
under the principle of jus disponendi.

In sum, the appellate court erred in sustaining the judgment of
the trial court that the deeds of sale of the two lots in question were null
and void.

WHEREFORE, the instant petition is GRANTED. The decision dated August 30, 1999 of the
Court of Appeals in CA-G.R. CV No. 47869, affirming the decision of the
Regional Trial Court in Civil Case No. 92-2267 is REVERSED. The two contracts
of sale covering lots under TD No. 01-00495 and No. 01-00497 are hereby
declared VALID. Costs against respondent.

SO ORDERED.

Bellosillo (Chairman), Mendoza, and Callejo, Sr., JJ., concur.

Austria-Martinez, J., on leave.

---

^[1]
Rollo, pp. 33-40.

^[2]
Records, pp. 224-232.

^[3]
Id. at 224-225.

^[4]
Id. at 231-232.

^[5]
Rollo, p. 39.

^[6]
Id. at 16-17.

^[7]
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.

^[8]
ART. 1327. – The following cannot give
consent to a contract:

x x x         x x x         x x x

(2) Insane or demented persons, and deaf-mutes who do not
know how to write.

^[9]
Bordalba v.
Court of Appeals, G.R. No. 112443,
January 25, 2002, p. 7.

^[10]
ART. 1318. 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;

(3) Cause of the obligation which is established.

^[11]
ART. 1409. The following contracts are inexistent and void from the beginning:

(1) Those whose cause, object or purpose is contrary to law,
morals, good customs, public order or public policy;

(2) Those which are absolutely simulated or fictitious;

(3) Those whose cause or object did not exist at the time of
the transaction;

(4) Those whose object is outside the commerce of man;

(5) Those which contemplate an impossible service;

(6) Those where the intention of the parties relative to the
principal object of the contract cannot be ascertained;

(7) Those expressly prohibited or declared by law.

These contracts cannot be ratified. Neither can the right to
set up the defense of illegality be waived.

^[12]
Civil Code, 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;

x x x         x x
x         x x x

These contracts are binding, unless they are annulled by a
proper action in court. They are
susceptible of ratification.

^[13]
Metropolitan Waterworks and Sewerage
System (MWSS) vs. Court of Appeals,
297 SCRA 287, 307 (1998).