Aspectos éticos y legales

ART. 1489. All persons who are authorized in this Code to obligate themselves, may enter into a con- tract of sale, saving the modifications contained in the following articles.

Where necessaries are sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefor. Necessaries are those referred to in article 290. (1457)

Person who may enter into a contract of sale.

As a general rule, all persons, whether natural or juridical, who can bind themselves have also legal capacity to buy and sell. There are exceptions to this rule in those cases when the law determines that a party suffers from either absolute or relative incapacity. Kinds of incapacity.

Such incapacity is absolute in the case of persons who cannot bind themselves; and relative where it exists only with reference to certain persons or a certain class of property. (Wolfson vs. Es- tate of Martinez, 20 Phil. 340 [1911].) Persons who are merely rela- tively incapacitated are mentioned in Articles 1490-1491.

There are no incapacities except those provided by law and such incapacities cannot be extended to other cases by implica- tion for the reason that such construction would be in conflict with the very nature of Article 1489. (Ibid.)

Liability for necessaries of minor or other person without capacity to act.

Necessaries are those things which are needed for sustenance, dwelling, clothing, medical attendance, education and transpor- tation according to the financial capacity of the family of the in- capacitated person. (see Art. 194, Family Code.) Whether the na- ture of the contract is such that it can under any circumstances, be regarded as a contract for necessaries, is a question which de- pends upon the facts of the particular case.

Generally, the contracts entered into by a minor and other incapacitated persons (e.g., insane or demented persons, deaf- mutes who do not know how to write), are voidable. (Arts. 1327, 1390.) However, where necessaries are sold and delivered to him (without the intervention of the parent or guardian), he must pay a reasonable price therefor. (Art. 1489, par. 2.) The contract is, there- fore, valid but the minor has the right to recover any excess above a reasonable value paid by him.

Sale by minors.

The courts have laid down the rule that the sale of real estate effected by minors who have already passed the ages of puberty and adolescence and are now in the adult age, when they pre- tended to have already reached their majority, while in fact they have not, is valid, and they cannot be permitted afterwards to excuse themselves from compliance with the obligations assumed by them or to seek their annulment. (see Mercado and Mercado vs. Espiritu, 37 Phil. 265 [1917].)

The doctrine is entirely in accord with the provisions of the Rules of Court (see Rule 131, Sec. 1.) and the Civil Code (see Art. 1431.) which determine cases of estoppel.

ART. 1490. The husband and the wife cannot sell property to each other, except:

(1) When a separation of property was agreed upon in the marriage settlements; or

(2) When there has been a judicial separation of property under article 191.* (1458a)

Relative incapacity of husband and wife.

(1) The husband and the wife are prohibited by the above article from selling property to each other. A sale between husband and wife in violation of Article 1490 is inexistent and void from the beginning because such contract is expressly prohibited by law. (Art. 1409[7]; Uy Siu Pin vs. Chua Hue vs. Cantollas, 70 Phil. 55 [1940]; Camia de Reyes vs. Reyes de Ilano, 63 Phil. 629 [1936]; Medina vs. Collector of Internal Revenue, 1 SCRA 302 [1961].)

(2) They are also prohibited from making donations to each other during the marriage except moderate gifts on the occasion of any family rejoicing. (Art. 87, Family Code.) However, if there has been a separation of property agreed upon in the marriage settlements, or when there has been a judicial separation of prop- erty decreed between them by the court, the sales between hus- band and wife are allowed. They have, therefore, in the two cases mentioned, capacity to buy from or to sell to each other.

Incidentally, a marriage settlement (also called “ante-nuptial contract”) is an agreement entered into by persons who are about to be united in marriage, and in consideration thereof, for the purpose of fixing the property relations that would be followed by them for the duration of the marriage. (see Arts. 74-80, Ibid.) Reason for prohibition under Article 1490.

The reason for the law is not based so much on the union of the personality of the husband and wife nor on the weakness of the sex and on the possibility that the husband will induce his wife to engage in ruinous operations, but primarily, for the protection of third persons1 _{who, relying upon supposed property of either}

*Now, Art. 135, Family Code.

1_{The husband cannot alienate or encumber any real property of the conjugal part-}

nership without the wife’s consent. (Art. 166.) An action to annul the questioned trans- action may be instituted by the wife during the marriage and within 10 years from the transaction. (Art. 173.) The lack of consent makes the transaction merely voidable. The

spouse, enters into a contract with either of them only to find out that the property relied upon was transferred to the other spouse. (see 10 Manresa 95-96.)

Persons permitted to question sale.

(1) Although certain transfers between husband and wife are prohibited under Article 1490, such prohibition can be taken ad- vantage of only by persons who bear such relation to the parties making the transfer or to the property itself that such transfer interferes with their rights or interests. Unless such a relationship appears, the transfer cannot be attacked. Thus, the heirs of either spouse, as well as creditors at the time of the transfer, can attack the validity of the sale but not creditors who became such only after the transaction. (Cook vs. McMicking, 27 Phil. 10 [1914].)

(2) The government is always an interested party in all mat- ters involving taxable transactions. It is competent to question their validity or legitimacy whenever necessary to block tax eva- sion. It can impugn sales between husband and wife. (Medina vs. Collector of Internal Revenue, supra.)

ART. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, ei- ther in person or through the mediation of another:

(1) The guardian, the property of the person or persons who may be under his guardianship;

(2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given;

(3) Executors and administrators, the property of the estate under administration;

(4) Public officers and employees, the property of the State or of any subdivision thereof, or of any gov-

legal prohibition against the disposition of conjugal property by one spouse without the consent of the other has been established for the benefit, not of third persons, but only of the other spouse for whom the law desires to save the conjugal partnership from dam- ages that might be caused. (Villaranda vs. Villaranda, 423 SCRA 571 [2004]; Papa vs. Montenegro, 54 Phil. 331 [1930].)

ernment owned or controlled corporation, or institu- tion, the administration of which has been entrusted to them; this provision shall apply to judges and gov- ernment experts who, in any manner whatsoever, take part in the sale;

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of jus- tice, the property and rights in litigation or levied upon an execution before the court within whose jurisdic- tion or territory they exercise their respective func- tions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession;

(6) Any others specially disqualified by law. (1459a)

Incapacity by reason of relation to property.

The above article enumerates the persons who, by reason of the relation of trust with the persons under their charge or their peculiar control over the property, are prohibited from acquiring said property either directly or indirectly and whether in private or public sale. They are the: (1) guardians; (2) agents; (3) execu- tors and administrators; (4) public officers and employees; (5) judicial officers, employees and lawyers; and (6) others especially disqualified by law. (Rubias vs. Batiller, 51 SCRA 120 [1973].)

The persons disqualified to buy referred to in Articles 1490 and 1491 are also disqualified to become lessees of the things mentioned thereon. (Art. 1646.)

Reason for prohibitions under Article 1491.

The disqualifications imposed by Article 1491 on the person enumerated is grounded on public policy considerations which disallow the transactions entered into by them, whether directly

or indirectly, in view of the fiduciary relationship involved or the peculiar control exercised by these individuals over the proper- ties or rights covered. (Mananquil vs. Villegas, 189 SCRA 335 [1990].)

The prohibitions seek to prevent frauds on the part of such persons and minimize temptations to the exertion of undue and improper influence. The fear that greed might get the better of the sentiments of loyalty and disinterestedness is the reason un- derlying Article 1491. The law does not trust human nature to resist the temptations likely to arise out of antagonism between the interest of the seller and buyer. (23 Scaevola 403; Gregorio Araneta, Inc. vs. Tuazon de Paterno, 91 Phil. 786 [1952].)

Prohibition with respect to guardians.

The relation between guardian and ward is so intimate, the dependence so complete and the influence so great that any trans- action between the two parties entered while the relationship exists are, in the highest sense, suspicious and presumptively fraudulent. This influence is presumed to last while the guardi- an’s functions are to any extent still unperformed, while the prop- erty is still under his control and until the accounts have been fi- nally settled. (39 Am. Jur. 2d 160.)

Prohibition with respect to agents.

The agent’s incapacity to buy his principal’s property rests on the fact that the agent and the principal form one juridical per- son. Like the guardian, the agent stands in a fiduciary relation with his principal. A sale made by an agent to himself, directly or indi- rectly, without the permission of the principal is ineffectual. (see Gregorio Araneta, Inc. vs. Tuazon de Paterno, supra; Barton vs. Leyte Asphalt and Mineral Co., 46 Phil. 938 [1924].) The consent of the principal removes the transaction out of the prohibition contained in Article 1491(2). (Distajo vs. Court of Appeals, 132 SCAD 577, 339 SCRA 52 [2000].)

(1) The incapacity of the agent is only against buying the prop- erty he is required to sell during the existence of the relationship. Therefore, an agent can buy for himself the property after the ter-

mination of the agency (Valera vs. Velasco, 51 Phil. 695 [1928].) or other properties different from those he has been commissioned to sell. (Moreno vs. Villonea, [C.A.] 40 O.G. 2322.)

(2) Of course, the agent may buy property placed in his hands for sale or administration if the principal gives his consent thereto. (Cui vs. Cui, 100 Phil. 913 [1957].)

(3) The prohibition does not apply where the sale of the prop- erty in dispute was made under a special power inserted in or attached to the real estate mortgage pursuant to Section 5 of Act No. 3135, as amended, a special law which governs extra-judicial foreclosure of real estate mortgage. The power to foreclose is not an ordinary agency that contemplates exclusively the representation of the principal by the agent but is primarily an authority con- ferred upon the mortgagee for the latter’s own protection. By vir- tue of the exception, the title of the mortgagee-creditor over the property cannot be impeached or defeated on the ground that the mortgagee cannot be a purchaser at his own sale. (Fiestan vs. Court of Appeals, 185 SCRA 751 [1990].)

Prohibition with respect to executors and administrators.

The prohibition refers only to properties under the adminis- tration of the executor or administrator at the time of the acquisi- tion and does not extend, therefore, to property not falling within this class.

Executors do not administer the hereditary rights of any heir. Such rights do not form part of the property delivered to the ex- ecutor for administration. Consequently, the prohibition in No. (3) of Article 1491 does not apply to a purchase by an executor of such hereditary rights (e.g., 1/10 interest in the estate), even in those cases in which the executor administers the property per- taining to the estate. (Naval vs. Enriquez, 3 Phil. 669 [1904]; see Garcia vs. Rivera, 95 Phil. 831 [1954].)

ILLUSTRATIVE CASE:

Administrator sold certain properties of the estate to his son for a grossly low price.

Facts: S, administrator of the estate of his deceased mother,

was authorized by the court to sell certain described properties of the estate to settle its outstanding obligations at the best price obtainable. The sale was made to B, S’s son, for P75,000. On the same date, B executed a deed of sale of the same property for P80,000 in favor of C. Z, etc., heirs of X, filed an action for the annulment/revocation of the two sales. C claimed that the ac- tual consideration was P225,000 and being a purchaser in good faith and for value, his title to the property is indefeasible pur- suant to law. It appears that S entered into a “mutual agree- ment of promise to sell’’ to spouses H and W the property al- ready sold to C for P220,000 for which they paid P70,000 as earnest money.

H and W alleged that both sales to B and C were simulated and fictitious, made to defraud the estate and other heirs, and that C supplied the consideration of the sale to B who was not gainfully employed. After several hearings, the court allowed all the interested parties to bid for the property. C offered to buy for P280,000. H and W counter-offered at P282,000, spot cash, which was increased to P300,000. Later all the parties, except H and W and B, submitted an amicable settlement seek- ing approval of the two sales and accepting the offer of C. H and W questioned the court’s approval of the amicable settle- ment and the non-acceptance of their offer.

Issue: Did the assent of practically all the heirs to the com-

promise agreement justify its approval by the court?

Held: No. (1) Sale is illegal, irregular and fictitious. — As ad-

ministrator, S occupies a position of the highest trust and confi- dence. In the discharge of his functions, an administrator should act with utmost circumspection to preserve the estate and guard against its dissipation so as not to prejudice its creditors and the heirs of the decedent who are entitled to the net residue thereof. In the case at bar, the sale was made necessary “in or- der to settle other existing obligations of the estate, but it was made, of all people, to his son B, and for a grossly low price of only P75,000. B had no income whatsoever, was, in fact, still a dependent of his father, and not a single centavo of the consid- eration was ever accounted for nor reported by B to the pro- bate court. It was only after the sales were questioned in court by H and W that B was compelled to admit that the actual con- sideration of the sale to C was P200,000.

The sale to B was not submitted to the probate court for approval as mandated by the order authorizing S to sell. The sale was indubitably illegal, irregular, and fictitious, and the court’s approval of the assailed compromise agreement violated Article 1409 and “cannot work to ratify a fictitious contract which is non-existent and void from the very beginning.”

(2) Consent of heirs not a ground for court’s approval of sale. — The assent of the parties-signatories “to such an illegal scheme does not legalize the same nor does it impose an obligation upon the court to approve the same to the prejudice not only of the creditors of the estate, and of the government by the non-pay- ment of the correct amount of taxes legally due from the estate.” (3) Offer of H and W more advantageous. — The offer of H and W “is decidedly more beneficial and advantageous not only to the estate, the heirs of the decedent, but more importantly, to its creditors for whose account and benefit the sale was made. No satisfactory and convincing reason appeared given for the rejection and non-acceptance of said offer, thus giving rise to a well-grounded suspicion that a collusion of some sort exists between the administrator and the heirs to defraud the credi- tors and the government.” (Lao vs. Genato, 137 SCRA 77 [1985].)

Prohibition with respect to public officials and employees.

The prohibition refers only to properties: (1) belonging to the State, or of any subdivision thereof, or of any government-owned or -controlled corporation or institution, (2) the administration of which has been entrusted to the public officials or employees. Thus, a provincial governor or treasurer entrusted with the ad- ministration of property belonging to a province cannot buy said property while the school superintendent who has no charge of the same is not within the scope of the prohibition.

Note that the prohibition includes judges and government experts who, in any manner, take part in the sale.

ILLUSTRATIVE CASE:

Land foreclosed by GSIS was sold by it at public auction to the wife of a GSIS official.

Facts: For failure to comply with the conditions of sale, GSIS

property at public auction to T (as the highest bidder), the wife of the Chief, Retirement Division, GSIS. MPC questioned the validity of the sale to T.

Issue: Does the sale fall under the prohibited transactions

under Article 1491?

Held: Yes. (1) GSIS official with influence or authority. — “Pub-

lic officers who hold positions of trust may not bid directly or indirectly to acquire properties foreclosed by their offices and sold at public auction. A division chief of the GSIS is not an ordinary employee without influence or authority. The mere fact that the husband of T exercises ample authority with re- spect to a particular activity, i.e., retirement, shows that his in- fluence cannot be lightly regarded. The point is that he is a public officer and his wife acts for and in his name in any trans- action with the GSIS.

(2) Sale is void. — If he is allowed to participate in the pub- lic bidding of properties foreclosed or confiscated by the GSIS there will always be the suspicion among other bidders and the general public that the insider official has access to infor- mation and connections with his fellow GSIS officials as to al- low him to eventually acquire the property. It is precisely the need to forestall such suspicions and to restore confidence in the public service that the Civil Code declares such transac- tions to be void from the beginning and not merely voidable.

(3) Reasons for prohibition. — The reasons are grounded on public order and public policy.2 _{Assuming the transaction to be}

fair and not tainted with irregularity, it is still looked upon with disfavor because it places the officer in a position which might become antagonistic to his public duty. (Maharlika Broadcasting

Corp. vs. Tagle, 142 SCRA 553 [1986].)

Note: Here, the GSIS official was not entrusted with the ad-

ministration of the property in question.

Prohibition with respect to judges, etc.,