Sarsosa Vda. de Barsobia vs. Cuenco

A Filipino vendor who sold private agricultural land to a disqualified alien cannot recover the property once it has passed into the hands of a naturalized Filipino citizen constitutionally qualified to own it, and her claim is in any event barred by laches where she slept on her rights for twenty-six years.

The litigated property is a one-half portion, on the northern side, of two adjoining parcels of coconut land in Barrio Mancapagao, Sagay, Camiguin, Misamis Oriental, with an aggregate area of 29,150 square meters. The entire land was originally owned by Leocadia Balisado, who sold it to the spouses Patricio Barsobia and Epifania Sarsosa, both Filipino citizens; after Patricio's death, Epifania held the land as a widow. The constitutional backdrop is Section 5, Article XIII of the 1935 Constitution, which reserved the acquisition of private agricultural land to individuals, corporations, or associations qualified to hold lands of the public domain, save in cases of hereditary succession.

The land in controversy is a one-half portion, on the northern side, of two adjoining parcels of coconut land situated at Barrio Mancapagao, Sagay, Camiguin, Misamis Oriental (now Camiguin province), with an area of 29,150 square meters, more or less. The entire land was previously owned by Leocadia Balisado, who sold it to the spouses Patricio Barsobia and Epifania Sarsosa, one of the petitioners and a Filipino citizen. After Patricio's death, Epifania held the property as a widow.

On September 5, 1936, Epifania sold the land in controversy to Ong King Po, a Chinese national, for the sum of P1,050.00, as evidenced by Exhibit "B." Ong King Po thereupon took actual possession of the property and enjoyed its fruits.

On August 5, 1961, Ong King Po sold the litigated property to Victoriano T. Cuenco, a naturalized Filipino, for the sum of P5,000.00, as evidenced by Exhibit "A." Cuenco immediately took actual possession and harvested the fruits therefrom.

On March 6, 1962, Epifania "usurped" the controverted property. On July 26, 1962, acting through her only daughter and child, Emeteria Barsobia, Epifania sold a one-half portion of the land to Pacita W. Vallar, the other petitioner, under Exhibit "2." Epifania claimed that she had never intended to sell the land to Ong King Po and that she had signed the document of sale merely to evidence her indebtedness to him in the amount of P1,050.00. She remained in possession of the property ever since, except for the portion sold to Pacita.

Respondent Cuenco first sought to recover the land through a forcible entry case filed against Epifania on September 19, 1962 before the Municipal Court of Sagay, Camiguin, but that case was dismissed for lack of jurisdiction, since under the laws then in force the question of possession could not be properly determined without first settling ownership. On December 27, 1966, Cuenco instituted before the Court of First Instance of Misamis Oriental a complaint for recovery of possession and ownership of the litigated land against Epifania and Pacita Vallar. In their answer, the petitioners insisted that they were the owners and possessors of the land; that its sale to Ong King Po, a Chinese, was inexistent and void ab initio; and that the deed of sale between Epifania and Ong King Po was merely evidence of her indebtedness to him.

The trial court dismissed the complaint, declared the two deeds of sale, Exhibits A and B, inexistent and void from the beginning, and declared Pacita W. Vallar the lawful owner and possessor of the portion she had bought from Emeteria Barsobia. On appeal, the Court of Appeals reversed and declared Cuenco the absolute owner of the land with the right of possession, ordering the petitioners to restore possession to him and to pay P10,000.00 representing his share in the sale of copra from March 1962, plus legal interest, and P2,000.00 in expenses and attorney's fees, with costs. On the factual side, the appellate court fixed respondent's share of the copra sales at P10,000.00 for eight years at four harvests a year, a finding whose accuracy was not disputed, and the Supreme Court thereafter held that, absent contrary proof, Pacita Vallar must likewise be considered a vendee in good faith.

• Pacita Vallar's Ownership: Petitioners argued that the Court of Appeals erred in reversing the trial court's judgment declaring petitioner Pacita W. Vallar the lawful possessor and owner of the portion of land she purchased from Emeteria Barsobia, who was not a party to the case, there being no evidence against her.
• Pacita Vallar's Liability for Damages: Petitioners argued that the Court of Appeals erred in including Pacita W. Vallar in the award of P10,000.00 with legal interest from the filing of the complaint, representing respondent's share in the harvest, and in imposing costs upon her, there being no evidence against her.
• Attorney's Fees and Litigation Expenses: Petitioners argued that the Court of Appeals erred in condemning them to pay P2,000.00 representing expenses and attorney's fees, there being no factual, legal, and equitable justification for the award.
• Pari Delicto and Lui She: Petitioners argued that the Court of Appeals erred in not applying the rule on pari delicto to the facts of the case, or the doctrine enunciated in Philippine Banking Corporation vs. Lui She, L-17587, September 12, 1967, to petitioner Epifania Sarsosa Vda. de Barsobia.
• Denial of Reconsideration: Petitioners argued that the Court of Appeals erred in denying, for lack of sufficient merits, their motion for rehearing or reconsideration of its decision.

• Ownership of the Litigated Land: Whether the Court of Appeals erred in reversing the trial court and declaring respondent Victoriano T. Cuenco the absolute owner of the land, rather than petitioner Pacita W. Vallar as lawful owner and possessor of the portion she purchased from Emeteria Barsobia.
• Liability of Pacita W. Vallar for Actual Damages: Whether petitioner Pacita W. Vallar may be held solidarily liable for the P10,000.00 actual damages awarded to respondent, there being no evidence against her.
• Award of Attorney's Fees and Litigation Expenses: Whether the award of P2,000.00 as expenses and attorney's fees in respondent's favor is justified.
• Application of the Pari Delicto Rule and Lui She: Whether the rule on pari delicto, or the exception recognized in Philippine Banking Corporation vs. Lui She, entitles petitioner Epifania Sarsosa Vda. de Barsobia to recover the land she had sold to Ong King Po.

• Ownership of the Litigated Land: No. The 1936 sale to Ong King Po was void ab initio under Article 1409(7) of the Civil Code for violating Section 5, Article XIII of the 1935 Constitution, but the property had since passed to a naturalized Filipino constitutionally qualified to own it, and Epifania's 26-year inaction barred her claim under laches.
• Liability of Pacita W. Vallar for Actual Damages: No. Absent contrary proof, Pacita W. Vallar must be considered a vendee in good faith and should not be held liable for the P10,000.00 actual damages.
• Award of Attorney's Fees and Litigation Expenses: Yes. The award of P2,000.00 is in order, both petitioners having compelled respondent to litigate for the protection of his interests, and the amount being reasonable.
• Application of the Pari Delicto Rule and Lui She: No. The exception to pari delicto under Article 1416 of the Civil Code is unavailable because the litigated property is no longer in the hands of a disqualified vendee, and no public policy would be served by allowing recovery.

• Ownership of the Litigated Land: The sale of the land in 1936 by Epifania to Ong King Po was inexistent and void from the beginning under Article 1409(7) of the Civil Code, because it was executed against the mandatory provision of the 1935 Constitution, which expresses the public policy of conserving lands for Filipinos. Had the suit been between Epifania and Ong King Po alone, she could have been declared entitled to the land on the basis of Philippine Banking Corporation vs. Lui She, which recognizes that Article 1416 of the Civil Code permits a party to recover what he has sold or delivered when the agreement is not illegal per se but merely prohibited and the prohibition is designed for the protection of the plaintiff. The factual setup, however, had changed: the litigated property was now in the hands of a naturalized Filipino, no longer owned by a disqualified vendee, and respondent, as a naturalized citizen, was constitutionally qualified to own it. No public policy would be served by allowing Epifania to recover the land, since it was already in the hands of a qualified person; the ruling in Vasquez vs. Giap and Li Seng Giap & Sons was applied by analogy to the effect that the aim of preserving the nation's lands for Filipinos would not be thwarted but achieved by making lawful the acquisition of real estate by aliens who became Filipino citizens by naturalization. Although, strictly speaking, Ong King Po had no rights of ownership to transmit, Epifania had slept on her rights for 26 years, from 1936 to 1962, and by her long inaction or inexcusable neglect she was barred from asserting her claim to the litigated property under Sotto vs. Teves. Laches was defined, following Tijam, et al. vs. Sibonghanoy, et al., as the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. Respondent was therefore declared the rightful owner of the property.
• Liability of Pacita W. Vallar for Actual Damages: The award of actual damages of P10,000.00 in respondent's favor, as well as the award of attorney's fees and expenses of litigation of P2,000.00, was justified, respondent having been deprived of the possession of his land and the enjoyment of its fruits from March 1962. The Court of Appeals fixed respondent's share of the sale of copra at P10,000.00 for eight years at four harvests a year, and the accuracy of this finding was not disputed. However, the assigned error that petitioner Pacita W. Vallar should not also be held liable for actual damages was found meritorious; in the absence of contrary proof, she too must be considered a vendee in good faith of petitioner Epifania.
• Award of Attorney's Fees and Litigation Expenses: The award of attorney's fees and litigation expenses in the sum of P2,000.00 in respondent's favor was in order, considering that both petitioners compelled respondent to litigate for the protection of his interests, and the amount was reasonable. Article 2208 of the Civil Code is cited in support of the award.
• Application of the Pari Delicto Rule and Lui She: The exception to the rule on pari delicto articulated in Philippine Banking Corporation vs. Lui She — that when the agreement is not illegal per se but is merely prohibited, and the prohibition by law is designed for the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he has sold or delivered — could not operate in Epifania's favor because the factual setup had changed. The property was no longer owned by a disqualified vendee but by a naturalized Filipino constitutionally qualified to own it, so that no public policy remained to be served by allowing recovery. The Court applied by analogy the ruling in Vasquez vs. Giap and Li Seng Giap & Sons that the constitutional ban on alien land acquisition is not thwarted but achieved by making lawful the acquisition of real estate by aliens who became Filipino citizens by naturalization. Independently, Epifania's 26-year inaction from 1936 to 1962 constituted laches barring her claim.

• Void contracts under Article 1409(7) of the Civil Code — Contracts expressly prohibited or declared void by law are inexistent and void from the beginning; they cannot be ratified, and neither can the right to set up the defense of illegality be waived. A sale of private agricultural land by a Filipino to an alien disqualified under the 1935 Constitution falls squarely within this category, the constitutional prohibition being an expression of public policy to conserve lands for Filipinos. The Court so held with respect to the 1936 sale by Epifania to Ong King Po.
• Laches — The failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. The Court applied the doctrine to bar Epifania's claim, she having slept on her rights for 26 years from 1936 to 1962.
• Pari delicto and the Article 1416 exception — Article 1416 of the Civil Code provides an exception to the rule on pari delicto: when the agreement is not illegal per se but is merely prohibited, and the prohibition by the law is designed for the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he has sold or delivered. The Court recognized the exception as stated in Philippine Banking Corporation vs. Lui She but held it inapplicable because the property had passed to a constitutionally qualified owner, leaving no public policy to be enhanced by recovery.
• Public policy and the naturalized Filipino transferee — Where the constitutional ban on alien acquisition of land aims to preserve the nation's lands for future generations of Filipinos, that aim is not thwarted but achieved by making lawful the acquisition of real estate by aliens who became Filipino citizens by naturalization. The Court applied this principle by analogy from Vasquez vs. Giap and Li Seng Giap & Sons to deny recovery to the Filipino vendor.
• Good faith vendee — In the absence of contrary proof, a purchaser of a portion of the litigated land may be considered a vendee in good faith, such that she may not be held liable for actual damages awarded against her co-petitioner. The Court applied this to relieve Pacita W. Vallar of liability for the P10,000.00 actual damages.

• "There should be no question that the sale of the land in question in 1936 by Epifania to Ong King Po was inexistent and void from the beginning (Art. 1409 [7], Civil Code) because it was a contract executed against the mandatory provision of the 1935 Constitution, which is an expression of public policy to conserve lands for the Filipinos." — States the ratio for invalidating the original sale and anchors the entire analysis in Article 1409(7) of the Civil Code and the 1935 Constitution.
• "But the factual set-up has changed. The litigated property is now in the hands of a naturalized Filipino. It is no longer owned by a disqualified vendee." — The pivotal holding that defeats Epifania's claim notwithstanding the void character of the 1936 sale, and the basis for denying the Article 1416 exception to pari delicto.
• "While, strictly speaking, Ong King Po, private respondent's vendor, had no rights of ownership to transmit, it is likewise inescapable that petitioner Epifania had slept on her rights for 26 years from 1936 to 1962. By her long inaction or inexcusable neglect, she should be held barred from asserting her claim to the litigated property (Sotto vs. Teves, 86 SCRA 157 [1978])." — The laches holding, expressly conceding the derivative-title problem yet barring the claim on equitable grounds.
• "Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. (Tijam, et al. vs. Sibonghanoy, et al., No. L-21450, April 15, 1968, 23 SCRA 29, 35). (cited in Sotto vs. Teves, 86 SCRA 154 [1978])." — The canonical formulation of laches adopted by the Court, drawn from Tijam vs. Sibonghanoy as cited in Sotto vs. Teves.

• Philippine Banking Corporation vs. Lui She, 21 SCRA 52 (1967) — Cited for the exception to the rule on pari delicto under Article 1416 of the Civil Code, allowing a party to recover what he has sold or delivered where the agreement is merely prohibited and the prohibition is designed for his protection. The Court acknowledged the doctrine but found it inapplicable because the property was no longer in the hands of a disqualified vendee.
• Vasquez vs. Giap and Li Seng Giap & Sons, 96 Phil. 447 (1955) — Cited and applied by analogy for the principle that the constitutional ban on alien land acquisition is not thwarted but achieved by making lawful the acquisition of real estate by aliens who became Filipino citizens by naturalization.
• Sotto vs. Teves, 86 SCRA 154, 157 (1978) — Cited as authority for barring Epifania's claim by laches and as the source of the definition of laches quoted by the Court.
• Tijam, et al. vs. Sibonghanoy, et al., No. L-21450, April 15, 1968, 23 SCRA 29, 35 — Cited, through Sotto vs. Teves, for the definition of laches as the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier.

• Article 1409(7), Civil Code — Declares inexistent and void from the beginning those contracts expressly prohibited or declared void by law, and provides that such contracts cannot be ratified and that the right to set up the defense of illegality cannot be waived. Applied to void the 1936 sale by Epifania to Ong King Po.
• Article 1416, Civil Code — Provides the exception to the rule on pari delicto where the agreement is not illegal per se but merely prohibited and the prohibition is designed for the protection of the plaintiff. Discussed and found inapplicable because the property had passed to a constitutionally qualified owner.
• Article 2208, Civil Code — Cited in support of the award of attorney's fees and litigation expenses of P2,000.00 in respondent's favor, both petitioners having compelled him to litigate for the protection of his interests.
• Section 5, Article XIII, 1935 Constitution — Provides that, save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain. The 1936 sale to Ong King Po was held to have been executed against this mandatory provision.

Teehankee (Chairman), Makasiar, Fernandez, Guerrero, and Plana, JJ.