BARCELIZA P. CAPISTRANO, PETITIONER, VS. DARRYL LIMCUANDO AND FE S. SUMIRAN, RESPONDENTS.

Capistrano versus Limcuando

The Case

This is a petition for review of a decision of the Court of Appeals in an action for annulment of a deed of sale, or in the alternative, for repurchase of real property. Barceliza Capistrano, the petitioner, sued Darryl Limcuando and Fe Sumiran, the respondents, to annul the deed of absolute sale she had executed in their favor over one half of a parcel of land, and alternatively to be allowed to repurchase that portion under the Public Land Act. The case matters because it joins two doctrines every examinee must hold together: the rule that a person who employed fraud cannot sue to annul the contract on the strength of his own fraud, and the rule that the right of repurchase granted to a patentee under the Public Land Act is not available to one whose motive is speculation and profit rather than the preservation of a family home.

Procedural History

Capistrano filed her complaint in the Regional Trial Court of San Pablo City, Laguna, an action for annulment of the deed of sale or, alternatively, for repurchase of the property. The trial court, in its amended decision, sustained the validity of the deed of absolute sale and denied the right to repurchase, but found that the true consideration was 75,000 pesos, of which 10,000 pesos had been paid, and ordered the respondents to pay the balance of 65,000 pesos within thirty days, without interest. Both sides appealed. The Court of Appeals affirmed the trial court in all respects, holding that the right to repurchase no longer existed and that the petitioner had come to court with unclean hands. Capistrano then brought the matter to the Supreme Court by petition for review.

Facts

Capistrano owned a parcel of land in Barangay Talaga, Rizal, Laguna, covered by a free patent issued on August 23, 1977. On December 31, 1985, she sold that parcel with a right of repurchase in favor of the spouses Felimon Zuasola and Anita Subida.

On February 1, 1989, she sold one half of the same parcel to the respondents for 75,000 pesos, on the understanding that they would pay 10,000 pesos as partial payment and the balance in monthly installments. She received the 10,000 pesos and signed a deed of absolute sale, denominated a Kasulatan ng Bilihang Tuluyan. The respondents then defaulted on the installments. She demanded the balance of 65,000 pesos, but they refused, claiming they had already paid the full consideration stated in the deed.

The respondents later learned of the earlier sale to the spouses Zuasola and Subida, and on April 10, 1991, they filed a criminal complaint for estafa against Capistrano, who was eventually convicted. On August 19, 1991, she repurchased the land from the spouses Zuasola and Subida, and offered to repurchase the portion she had sold to the respondents, who refused. On September 27, 1991, a transfer certificate of title over the disputed portion was issued in the names of the respondents. On May 27, 1993, Capistrano filed her complaint for annulment of the deed, or alternatively for repurchase under Section 119 of the Public Land Act.

Issues

• Whether or not the deed of absolute sale in favor of the respondents may be annulled on the ground that the petitioner had previously sold the same property to other vendees.
• Whether or not the respondents, by participating in the criminal case for estafa, should be deemed to have themselves assailed the validity of the deed of sale.
• Whether or not the petitioner may still exercise the right of repurchase under Section 119 of the Public Land Act over the portion she conveyed to the respondents.

Applicable Provisions

Article 1397 of the Civil Code provides:

Article 1397. The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or caused mistake base their action upon these flaws of the contract.

This is the provision that bars the petitioner from seeking annulment on the basis of the very fraud she perpetrated.

Section 119 of Commonwealth Act No. 141, the Public Land Act, as discussed in the decision, provides:

Section 119. Any provision of law to the contrary notwithstanding, any person who has acquired from the Government of the Philippines title to land by free patent or by homestead, or any of his heirs, may sell, transfer or convey the same, or any part thereof, to any other person, after the expiration of five years from the date of the issuance of the patent or grant, but the vendor, his widow or legal heirs shall have the right to repurchase the same within five years from the date of such sale, transfer or conveyance, under the same conditions and terms as in the case of a sale with right of repurchase.

This is the provision on which the petitioner's alternative cause of action rests, and which the Court holds unavailable to her because of her bad faith.

Ruling

On the first issue, the Court held that the deed of sale cannot be annulled. It is elementary that he who comes to court must do so with clean hands. As vendor in both sales, the petitioner knew perfectly well that she had already sold the property to the spouses Zuasola and Subida when she offered it to the respondents. She therefore fraudulently obtained their consent, and she even admits her conviction of estafa for the deception. The Court applied Article 1397 of the Civil Code and held that she is precluded from seeking annulment based on the fraud she herself caused.

On the second issue, the Court held that the theory is bereft of legal basis. The civil action impliedly instituted with a criminal case pertains only to the recovery of civil liability arising from the offense charged, meaning indemnity under the Revised Penal Code and damages under the enumerated articles of the Civil Code. An action to annul a deed of sale is obviously not among them. The respondents' participation in the prosecution, and their concession that fraud attended the deed, would have significance only as to civil indemnity. The action to annul must be ventilated in a separate civil action.

On the third issue, the Court held that the right to repurchase cannot be sustained. The Public Land Act exists to preserve the land in the family of the homesteader and to provide a home for the destitute. Prevailing jurisprudence requires that the motive of the patentee in repurchasing be consistent with that noble intent, and the right fails where the underlying cause is contrary to everything the law stands for. The Court found that the petitioner repurchased from the first buyers only after an information for estafa had been filed, and sought to repurchase from the second buyers only during the pendency of that criminal case. Her successive conveyances for valuable consideration showed a profit-making motive and a lack of intention to preserve the land for herself and her family. The Court refused to allow the salutary policy of the law to be used to amass a hefty profit, and would not reward rather than sanction an act of injustice.

Doctrine

First, under Article 1397 of the Civil Code, a person who employed fraud, intimidation, violence, undue influence, or caused mistake cannot base an action for annulment of the contract upon those very flaws. The doctrine of clean hands closes the courthouse door to the author of the defect.

Second, the civil action impliedly instituted with a criminal action is limited to the recovery of civil liability arising from the offense, meaning indemnity under the Revised Penal Code and damages under the specified articles of the Civil Code. It does not include an action to annul the contract involved in the offense.

Third, the right of repurchase under Section 119 of the Public Land Act is not absolute. It is granted to preserve the land in the family of the patentee, and it will fail where the patentee's motive is speculation and profit, or where the repurchase would reward the patentee's own bad faith.

Disposition

The petition was denied for lack of merit, and the decision of the Court of Appeals affirming the trial court was upheld, so the respondents prevailed.

Remember This

Memorize this line: he who comes to court must come with clean hands, and a patentee who employed fraud cannot use the Public Land Act to reward his own injustice. Examiners use this case to test Article 1397 of the Civil Code and the motive requirement that limits the right of repurchase under Section 119 of the Public Land Act.