J.A.B. Bulao & Associates

LEGAL NOTE 0054: VOIDABLE CONTRACTS

SOURCE: CORNELIA M. HERNANDEZ VS. CECILIO F. HERNANDEZ (G.R. NO. 158576, 9 MARCH 2011, PEREZ, J.) SUBJECTS: QUITCLAIM; WHEN CONSENT IN CONTRACT IS VOIDABLE. (BRIEF TITLE: HERNANDEZ VS. HERNANDEZ).

WHEN IS A CONTRACT VOIDABLE?

A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable.^[35] 

HOW DOES THE COURT DETERMINE WHETHER CONSENT TO A CONTRACT IS VITIATED?

In determining whether consent is vitiated by any of the circumstances mentioned, courts are given a wide latitude in weighing the facts or circumstances in a given case and in deciding in their favor what they believe to have actually occurred, considering the age, physical infirmity, intelligence, relationship, and the conduct of the parties at the time of the making of the contract and subsequent thereto, irrespective of whether the contract is in public or private writing.^[36] 

HOW  WILL MISTAKE INVALIDATE CONSENT?

And, in order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or those conditions which have principally moved one or both parties to enter the contract.^[37] 

^[1]               Under Rule 45 of the Rules of Court.

^[2]               Rollo, pp. 37-51.

^[3]               Decision of the RTC Branch 150, id. at 52-56.

^[4]               Transfer Certificate of Title, Annex “C,” id. at 57.

^[5]               TSN, 8 December 2000, pp. 4-6.

^[6]               Petition.  Rollo, p. 10.

^[7]               Brief for the Appellant.  CA rollo, p.72

^[8]               Id.

^[9]               Id.

^[10]             Id.

^[11]             Rollo, p. 58.

^[12]             Id. at 59.

^[13]             Id. at 60-62.

^[14]             Id. at 63-68.

^[15]             Just Compensation = (Area of land) * (Value per m²)

^[16]             Rollo, p. 67.

^[17]             Revocation of Special Power of Attorney, Annex “I.” Id. at 69-70.

^[18]             Order of Judge Voltaire Rosales, Branch 83.  Id. at 74.

^[19]             Petition.  Id. at 14.

^[20]             Id.

^[21]             Id. at 81-82.

^[22]             TSN, 8 December 2000, p. 10.

^[23]             Id. at 12-13.

^[24]             Id. at 13.

^[25]             Rollo, pp. 83-84.

^[26]             Complaint, Annex “O,” id. at 85-90.

^[27]             Id. at 15.

^[28]             Id. at 56.

^[29]             Decision of the Court of Appeals in CA G.R. CV. No. 70184, id. at 50.

^[30]             Id. at 18.

^[31]             Petition – Arguments and Discussion.  Id. at 66.

^[32]             Decision, RTC Branch 83.  Id. at 121.

^[33]             Art. 1868, Civil Code.

^[34]             Brief for the Appellant (Cecilio), CA rollo, p. 73.

^[35]             Art. 1330, Civil Code.

^[36]             TOLENTINO, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. IV, 1991, Art. 1330, p. 475 citing Transporte v. Beltran, 51 Off. Gaz. 1434, March, 1955.

^[37]             Art. 1331, Civil Code.

^[38]             Sec. 4, Rule 67 of the Rules of Court.

^[39]             Decision, RTC Branch 83, Tanauan Batangas in Civil Case No. C-023.  Rollo, p. 65.

^[40]             The computation herein is the correct application of the formula in the service contract. There was an error in the computation made by Cecilio in its Appellant’s Brief (CArollo, p. 172).  

^[41]             Thomas v. Pineda, G.R. No. L-2411, 28 June 1951, citing Severino v. Severino, 44 Phil. 343.

^[42]             Roget’s Thesaurus, Fourth ed., 2001, adj.: impartial, unbiased, neutral, free from bias, unprejudiced, fair, impersonal, outside, uninvolved, dispassionate, free from self-interest.

^[43]             Petition.  Rollo, p. 22.

^[44]             Decision, RTC Branch 83 in Civil Case No. C-023.  Rollo, p. 67.

^[45]             G.R. No. 97412, 12 July 1994, 234 SCRA 78, 96-97.

LEGAL NOTE 0054: WHEN QUITCLAIM IS DECLARED VOID.

 SOURCE: CORNELIA M. HERNANDEZ VS. CECILIO F. HERNANDEZ (G.R. NO. 158576, 9 MARCH 2011, PEREZ, J.) SUBJECTS: QUITCLAIM; WHEN CONSENT IN CONTRACT IS VOIDABLE. (BRIEF TITLE: HERNANDEZ VS. HERNANDEZ).

STORY OF THE CASE:

DPWH NEGOTIATED WITH THE HERNANDEZ FAMILY TO PURCHASE PORTION OF THEIR LAND FOR EXPANSION OF SLEX. PRICE OFFERED WITH P35.00 PER SQ.M. RAISED TO P70.00 PER SQ.M.. HERANDEZES DID NOT AGREE. DPWH FILED EXPROPRIATION CASE. THE HERNANDEZES BY WAY OF LETTER APPOINTED CECILIO TO REPRESENT THEM AND AS COMPENSATION HE GETS 20% OF THE PRICE AND THE EXCESS BEYOND THE PRICE OF P300.00 PER SQ.M. LATER THE HERNANDEZES EXECUTED AN IRREVOCABLE SPA IN FAVOR OF CECILIO.  DURING THE PROCEEDINGS, CECILIO WAS APPOINTED AS ONE OF THE COMMISSIONERS TO DETERMINE JUST COMPENSATION. RTC FIXED THE PRICE AT P1,500.00 PER SQ.M. SHARE OF CORNELIA HERNANDEZ  WAS P7,321,500.00.  CORNELIA ASKED FOR AN ACCOUNTING. CECILIO, INSTEAD OF GIVING AN ACCOUNTING GAVE CORNELIA CHECK FOR P1,123,000.00 AND WAIVER AND QUITCLAIM.  CORNELIA SIGNED THE WAIVER AND QUITCLAIM AND RECEIVED THE CHECK BECAUSE SHE BADLY NEEDED THE MONEY FOR  medical expenses due to her frail condition. SHE THEN FILED THIS CASE AGAINST CECILIO FOR ANNULMENT OF QUITCLAIM AND TO RECOVER HER JUST SHARE FROM CECILIO. RTC RULED IN CORNELIA’S FAVOR BECAUSE CECILIO WAS IN DEFAULT FOR NOT FILING AN ANSWER ON TIME. CA REVERSED RTC DECISION.

CAN THE  QUITCLAIM EXECUTED BY CORNELIA BE ANNULLED AND CAN CORNELIA RECOVER HER SHARE FROM CECILIO?

THE QUITCLAIM CAN BE ANNULLED.  CONSENT TO THE QUITCLAIM IS VITIATED BY THE CONDUCT OF THE PARTIES AT THE TIME OF THE MAKING OF THE CONTRACT AND SUBSEQUENT THERETO. CORNELIA CANNOT BE SAID TO HAVE VOLUNTARILY AGREED TO THE QUITCLAIM BECAUSE SHE SIGNED THE  SAME ONLY BECAUSE OF HER DESPERATE CONDITION.

CORNELIA CAN RECOVER HER SHARE. THE BASIS OF CECILIO THAT HE IS ENTITLED TO THE BALANCE OF 83.07% OF CORNELIA’S SHARE ARE: THE LETTER-AGREEMENT, THE QUITCLAIM AND THE SPA. CONSENT TO THE LETTER AGREEMENT WAS GIVEN BY MISTAKE. THERE WAS NOTHING IN THE CIRCUMSTANCES TO SHOW THAT CORNELIA COULD HAVE AGREED TO PART WITH 83.07% OF HER SHARE AT P1,500.00 PER SQ.M. THE QUITCLAIM WAS FRAUDULENT, THEREFORE VOID. AS AGENT CECILIO SHOULD HAVE PRESENTED AN ACCOUNTING AS REQUESTED BY HIS PRINCIPAL. INSTEAD HE PRESENTED A QUITCLAIM. THE SPA IS IMPROPER. FIRST, IT DID NOT SPECIFY THE COMPENSATION OF CECILIO. SECOND IT WAS EXECUTED AFTER CECILIO WAS APPOINTED AS COMMISSIONER. CECILIO  COULD NOT HAVE BEEN A HEARING OFFICER  AND ACT FOR THE  DEFENDANT AT THE SAME TIME.  CECILIO FOISTED FRAUD ON BOTH THE COURT AND THE HERNANDEZES WHEN, AFTER HIS APPOINTMENT AS COMMISSIONER, HE ACCEPTED THE APPOINTMENT BY THE HERNANDEZES TO “REPRESENT” AND “SUE FOR” THEM.

THE RULING OF THE COURT:

 The compensation scheme of 20% of any amount over P70.00 per square meter and everything above P300.00 per square meter was granted in favor of Cecilio by the Hernandezes on 11 November 1993.  At that time, the Hernandezes had just rejected the government’s offer of P35.00 per square meter, which offer last stood at P70.00 per square meter.  It was the rejection likewise of the last offer that led to the filing of the expropriation case on 9 August 1993.  It was in this case, and for Cecilio’s representation in it of the Hernandezes, that he was granted the compensation scheme.  Clear as day, the conditions that moved the parties to the contract were the base price at P70.00 per square meter, the increase of which would be compensated by 20% of whatever may be added to the base price; and the ceiling price of P300.00 per square meter, which was considerably high reckoned from the base atP70.00, which would therefore, allow Cecilio to get all that which would be in excess of the elevated ceiling.  The ceiling was, from the base, extraordinarily high, justifying the extraordinary grant to Cornelio of all that would exceed the ceiling.

          It was on these base and ceiling prices, conditions which principally moved both parties to enter into the agreement on the scheme of compensation, that an obvious mistake was made.  The trial court, deviating from the principle that just compensation is determined by the value of the land at the time either of the taking or filing,^[38] which was in 1993, determined the compensation as the 1998 value of P1,500.00 per square meter. The trial court ratiocinated that the 1998 value was considered for the reason, among others that:

3.  It is common knowledge that prices of real estate in Batangas, including and/or particularly in Sto.Tomas and Tanauan have skyrocketed in the past two years;^[39] (Emphasis ours).

          This 1998 “skyrocketed” price of P1,500.00 per square meter was pounced upon by Cecilio as the amount against which the 1993 ceiling of P300.00 per square meter should be compared, thereby giving him the amount computed^[40] as follows:

CECILIO’S FEES    = (20% of anything over P70.00) + (everything in        excess of P300)

*If the land value is at P1,500.00 per square meter, then,

                                    = (20% of  P230.00) + (P1,500.00 – P300.00)

                                    = P46.00 + P1,200.00

= P1,246.00 per square meter

CORNELIA’S SHARE        = (land value at 1,500 less Cecilio’s fees)

                                                = P254.00 per square meter

*The total expropriated property is at 14,643 m², thus, Cecilio will get a   total of

                                    = P1,246.00 * 14,643

                                    = P18,245,178.00 total compensatinon

*One Third of the above value shows that Cecilio will get, from Cornelia

                             = P6,081,726.00

It must be noted that:

*The Hernandez’ family gets P21,964,500 for 14,643 m², at P1,500.00 per m²

*One-third (1/3) of that is P7,321,500 representing the share of a co-owner like Cornelia

*What will be left of Cornelia’s share if she pays Cecilio will be:

P1,239,774  less: 124,953.60 (Nominal Cost of Litigation as averred by Cecilio)

1,500.00 (Nominal payment for preparation of pleadings)

OVERALL TOTAL AMOUNT CORNELIA WILL RECEIVE:

P 1,113,320.4

As opposed to:

OVERALL TOTAL AMOUNT CECILIO WILL RECEIVE:  P6,081,726.00

          Cecilio’s position would give him 83.07% of the just compensation due Cornelia as a co-owner of the land.  No evidence on record would show that Cornelia agreed, by way of the 11 November 1993 letter, to give Cecilio 83.07% of the proceeds of the sale of her land.

          What is on record is that Cornelia asked for an accounting of the just compensation from Cecilio several times, but the request remained unheeded. Right at that point, it can be already said that Cecilio violated the fiduciary relationship of an agent and a principal. The relation of an agent to his principal is fiduciary and it is elementary that in regard to property subject matter of the agency, an agent is estopped from acquiring or asserting a title adverse to that of the principal. His position is analogous to that of a trustee and he cannot, consistently with the principles of good faith, be allowed to create in himself an interest in opposition to that of his principal or cestui que trust.^[41]

          Instead of an accounting, what Cornelia received was a receipt and quitclaim document that was ready for signing.  As testified to by Cornelia, due to her frail condition and urgent need of money in order to buy medicines, she nevertheless signed the quitclaim in Cornelio’s favor.  Quitclaims are also contracts and can be voided if there was fraud or intimidation that leads to lack of consent.  The facts show that a simple accounting of the proceeds of the just compensation will be enough to satisfy the curiosity of Cornelia.  However, Cecilio did not disclose the truth and instead of coming up with the request of his aunt, he made a contract intended to bar Cornelia from recovering any further sum of money from the sale of her property.

          The preparation by Cecilio of the receipt and quitclaim document which he asked Cornelia to sign, indicate that even Cecilio doubted that he could validly claim 83.07% of the price of Cornelia’s land on the basis of the 11 November 1993 agreement.  Based on the attending circumstances, the receipt and quitclaim document is an act of fraud perpetuated by Cecilio.  Very clearly, both the service contract of 11 November 1993 letter- agreement, and the later receipt and quitclaim document, the first vitiated by mistake and the second being fraudulent, are void.

          Cecilio’s last source of authority to collect payment from the proceeds of the expropriation is the SPA executed on 18 October 1996 by the Hernandezes in favor of Cecilio as their “true and lawful” attorney with respect to the expropriation of the Hernandez property.  At the outset, it must be underscored that the SPA did not specify the compensation of Cecilio as attorney-in-fact of the Hernandezes. 

          The SPA, however, must be appreciated in the light of the fact that Cecilio was appointed and acted as appraisal commissioner in the expropriation case under the provisions of Section 5, Rule 67 of the Rules of Court, which provides:

SEC. 5. Ascertainment of compensation. — Upon the rendition of the order of expropriation, the court shall appoint not more than three (3) competent and disinterested persons as commissioners to ascertain and report to the court the just compensation for the property sought to be taken.   The order of appointment shall designate the time and place of the first session of the hearing to be held by the commissioners and specify the time within which their report shall be submitted to the court. (Emphasis ours).

The commissioner to be appointed is specifically required to be disinterested.  As defined, such person must be free frombias, prejudice or partiality.^[42]  The record of performance by Cecilio of his duties as commissioner shows: (1) Order dated 13 September 1996 appointing Cecilio and three others as court commissioners; (2) Agreement on the course of action of the commissioners appointed 13 September 1996 whereby respondent Cecilio signed as a court commissioner; (3) Appraisal Commission Report dated 10 January 1997 signed by respondent and his fellow court commissioners; (4) Dissenting Opinion on the Lone Minority Report dated 14 February 1997 signed by respondent and two other court commissioners; and (5) Decision dated 7 February 1997 which sets the fees of the court commissioners.^[43]

When Cecilio accepted the position as commissioner and proceeded to perform the duties of such commissioner until the completion of his mandate as such, he created a barrier that prevented his performance of his duties under the SPA.  Due to the nature of his duties and functions as commissioner, Cecilio became an officer of the court. As stated in Section 5, Rule 67 of the Rules of Court, the commissioner’s duty is to “ascertain and report to the court the just compensation for the property to be taken.” The undertaking of a commissioner is further stated under the rules, to wit:

SEC. 6. Proceedings by commissioners.—Before entering upon the performance of their duties, the commissioners shall take and subscribe an oath that they will faithfully perform their duties as commissioners, which oath shall be filed in court with the other proceedings in the case. Evidence may be introduced by either party before the commissioners who are authorized to administer oaths on hearings before them, and the commissioners shall, unless the parties consent to the contrary, after due notice to the parties to attend, view and examine the property sought to be expropriated and its surroundings, and may measure the same, after which either party may, by himself or counsel, argue the case. The commissioners shall assess the consequential damages to the property not taken and deduct from such consequential damages the consequential benefits to be derived by the owner from the public use or purpose of the property taken, the operation of its franchise by the corporation or the carrying on of the business of the corporation or person taking the property.  But in no case shall the consequential benefits assessed exceed the consequential damages assessed, or the owner be deprived of the actual value of his property so taken.

Cecilio acted for the expropriation court.  He cannot be allowed to consider such action as an act for or in behalf of the defendant in the same case.  Cecilio could not have been a hearing officer and a defendant at the same time.  Indeed, Cecilio foisted fraud on both the Court and the Hernandezes when, after his appointment as commissioner, he accepted the appointment by the Hernandezes to “represent” and “sue for” them.

^[1]               Under Rule 45 of the Rules of Court.

^[2]               Rollo, pp. 37-51.

^[3]               Decision of the RTC Branch 150, id. at 52-56.

^[4]               Transfer Certificate of Title, Annex “C,” id. at 57.

^[5]               TSN, 8 December 2000, pp. 4-6.

^[6]               Petition.  Rollo, p. 10.

^[7]               Brief for the Appellant.  CA rollo, p.72

^[8]               Id.

^[9]               Id.

^[10]             Id.

^[11]             Rollo, p. 58.

^[12]             Id. at 59.

^[13]             Id. at 60-62.

^[14]             Id. at 63-68.

^[15]             Just Compensation = (Area of land) * (Value per m²)

^[16]             Rollo, p. 67.

^[17]             Revocation of Special Power of Attorney, Annex “I.” Id. at 69-70.

^[18]             Order of Judge Voltaire Rosales, Branch 83.  Id. at 74.

^[19]             Petition.  Id. at 14.

^[20]             Id.

^[21]             Id. at 81-82.

^[22]             TSN, 8 December 2000, p. 10.

^[23]             Id. at 12-13.

^[24]             Id. at 13.

^[25]             Rollo, pp. 83-84.

^[26]             Complaint, Annex “O,” id. at 85-90.

^[27]             Id. at 15.

^[28]             Id. at 56.

^[29]             Decision of the Court of Appeals in CA G.R. CV. No. 70184, id. at 50.

^[30]             Id. at 18.

^[31]             Petition – Arguments and Discussion.  Id. at 66.

^[32]             Decision, RTC Branch 83.  Id. at 121.

^[33]             Art. 1868, Civil Code.

^[34]             Brief for the Appellant (Cecilio), CA rollo, p. 73.

^[35]             Art. 1330, Civil Code.

^[36]             TOLENTINO, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. IV, 1991, Art. 1330, p. 475 citing Transporte v. Beltran, 51 Off. Gaz. 1434, March, 1955.

^[37]             Art. 1331, Civil Code.

^[38]             Sec. 4, Rule 67 of the Rules of Court.

^[39]             Decision, RTC Branch 83, Tanauan Batangas in Civil Case No. C-023.  Rollo, p. 65.

^[40]             The computation herein is the correct application of the formula in the service contract. There was an error in the computation made by Cecilio in its Appellant’s Brief (CArollo, p. 172).  

^[41]             Thomas v. Pineda, G.R. No. L-2411, 28 June 1951, citing Severino v. Severino, 44 Phil. 343.

^[42]             Roget’s Thesaurus, Fourth ed., 2001, adj.: impartial, unbiased, neutral, free from bias, unprejudiced, fair, impersonal, outside, uninvolved, dispassionate, free from self-interest.

^[43]             Petition.  Rollo, p. 22.

^[44]             Decision, RTC Branch 83 in Civil Case No. C-023.  Rollo, p. 67.

^[45]             G.R. No. 97412, 12 July 1994, 234 SCRA 78, 96-97.