by Nil Jay Perolina
CHAPTER 7 - VOIDABLE CONTRACTS
Art. 1401. The action for annulment of contracts shall be extinguished when the thing which is the object thereof is lost through the fraud or fault of the person who has a right to institute the proceedings.
If the right of action is based upon the incapacity of any one of the contracting parties, the loss of the thing shall not be an obstacle to the success of the action, unless said loss took place through the fraud or fault of the plaintiff. (1314a)
What is the article all about?
It is about the extinguishment of action for annulment.
What is the meaning of this article?
If the person who had the right of action for annulment is unable to restore the thing because the thing is lost through his fault, the right to annul is extinguished.
If the right of action is based upon the incapacity of any one of the contracting parties, the loss of the thing shall not be a bar to the action for annulment, unless said loss took place through the fraud or fault of the plaintiff.
What is the reason behind Article 1401?
No one can come to court with unclean hands.
What is the effect when upon annulment a party cannot restore the thing he is obliged to return?
(1) If the person, who has a right to institute an action for annulment (Art. 1397.), will not be able to restore the thing which he may be obliged to return in case the contract is annulled because such thing is lost through his fraud or fault, his right to have the contract annulled is extinguished. If the loss is not due to his fault or fraud, Article 1402 applies.
The action for annulment shall be extinguished only if the loss is through the fault or fraud of the plaintiff.
(2) Under the second paragraph, the right of action is based upon the incapacity of any one of the contracting parties. Whether the right of action is based upon incapacity or not, the rule is still the same. It is no longer necessary that the fraud or fault on the part of the plaintiff (the incapacitated person) resulting in the loss must have occurred “after having acquired capacity” as under the old Code. This qualification has been deleted in the present article. The deletion has made the second paragraph redundant.
Illustrations/Examples
Illustration 1
If Ivan coerces Lawrence to sell him an iPad, Lawrence can seek annulment. However, if Lawrence takes the iPad apart and destroys the wiring and parts inside intentionally, his right to file the action would be extinguished
Illustration 2
C was forced by B to enter into a contract of barter whereby B exchanges his fountain pen with C’s ring. If the fountain pen is lost due to the fault of C. C’s right of the annulment is extinguished.
Art. 1402. As long as one of the contracting parties does not restore what in virtue of the decree of annulment he is bound to return, the other cannot be compelled to comply with what is incumbent upon him. (1308)
What is the article all about?
This is about the effect where a party cannot restore what he is bound to return.
What is the meaning of this article?
When a contract is annulled, a reciprocal obligation of restitution is created. The return by one party of what he is obliged to restore by the decree of annulment may be regarded as a condition to the fulfillment by the other of what is incumbent upon him. This is true even if the loss is due to a fortuitous event.
What is the reason behind the article?
When a contract is annulled, a reciprocal obligation of restitution is in order. There will be no annulment if the party cannot restore what he is bound to return.
What is the general rule where a party cannot restore what he is bound to return?
If one cannot restore to the other what he has received, such other person cannot be compelled to return what he has received.
What is exemption to general rule?
If one of the parties is incapacitated, he is not obliged to return what he has received except insofar as he has been benefited by the thing or price he received.
Illustration/Example
In a situation where A and B’s contract is annulled but A upon the annulment of contract cannot restore the object of contract to B then B cannot be compelled by A to return his payment for the same object.
Case Digest from Original Case
Citation:
Go Chan v Heirs of Baba 409 SCRA 306 2003
Case Docket:
G.R. No. 138945
Date:
August 19, 2003
Petitioners:
FELIX GOCHAN AND SONS REALTY CORPORATION and STA. LUCIA REALTY AND DEVELOPMENT CORPORATION
Respondents:
HEIRS OF RAYMUNDO BABA, namely, BESTRA BABA, MARICEL BABA, CRESENCIA BABA, ANTONIO BABA, and PETRONILA BABA, represented by Attorney-in-fact VIRGINIA SUMALINOG
Ponente:
YNARES-SANTIAGO, J.
FACTS:
The facts show that Lot No. 3537, a conjugal property of spouses Raymundo Baba and Dorotea Inot, was originally titled under Original Certificate of Title No. RO-0820, 6 in the name of Dorotea. After Raymundo’s demise in 1947, an extrajudicial settlement of his estate, including Lot No. 3537, was executed on December 8, 1966, among the heirs of Raymundo, namely, Dorotea Inot and his 2 children, Victoriano Baba and Gregorio Baba. One-half undivided portion of the 6,326 square meter lot was adjudicated in favor of Dorotea, and the other half divided between Victoriano and Gregorio.
On December 28, 1966, Dorotea, Victoriano and Gregorio, in consideration of the amount of P2,346.70, sold Lot No. 3537 to petitioner Felix Gochan and Sons Realty Corporation (Gochan Realty). Consequently, OCT No. RO-0820 was cancelled and in lieu thereof, Transfer Certificate of Title No. T-1842, dated February 23, 1968 was issued in favor of Gochan Realty. Sometime in 1995, the latter entered into a joint venture agreement with Sta. Lucia Realty and Development Corporation Inc. for the development, among others, of Lot No. 3537, into a subdivision.
On June 13, 1996, respondents Bestra, Maricel, Crecencia, Antonio and Petronila, all surnamed Baba, filed a complaint for quieting of title and reconveyance with damages against petitioners with the RTC of Lapu-Lapu City, Branch 54, docketed as Civil Case No. 4494-L. They alleged that they are among the 7 children of Dorotea Inot and Raymundo Baba; that petitioners connived with Dorotea Inot, Victoriano and Gregorio Baba in executing the extrajudicial settlement and deed of sale which fraudulently deprived them of their hereditary share in Lot No. 3537; and that said transactions are void insofar as their respective shares are concerned because they never consented to the said sale and extrajudicial settlement, which came to their knowledge barely a year prior to the filing of the complaint.
ISSUE:
Whether or not from the allegations of the complaint, there exists a cause of action to declare the inexistence of the contract of sale with respect to the shares of respondents in Lot No. 3537 on the ground of absence of any of the essential requisites of a valid contract.
RULING:
The Court ruled that in view of all the foregoing, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 57080, which ordered that the instant case be REMANDED to the Regional Trial Court of Lapu-Lapu City, Branch 54, for trial and judgment on the merits is AFFIRMED.
Yes, the allegations of the complaint, there exists a cause of action to declare the inexistence of the contract of sale with respect to the shares of respondents in Lot No. 3537 on the ground of absence of any of the essential requisites of a valid contract.
Nemo dat quod non habet — No one can give more than what he has. Assuming that the allegations in respondents’ complaint are true, their claim that the execution of the extrajudicial settlement and the deed of sale involving Lot No. 3537, which led to the issuance of a certificate of title in the name of Gochan Realty, was without their knowledge or consent, gives rise to an imprescriptible cause of action to declare said transactions inexistent on the ground of absence of legal capacity and consent. Hence, the dismissal of respondents’ complaint on the ground of prescription was erroneous.
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