Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 116635 July 24, 1997

CONCHITA NOOL and GAUDENCIO ALMOJERA, petitioner,

vs.
COURT OF APPEALS, ANACLETO NOOL and EMILIA
NEBRE, respondents.

PANGANIBAN, J.:

A contract of repurchase arising out of a contract of sale where the seller

did not have any title to the property "sold" is not valid. Since nothing was
sold, then there is also nothing to repurchase.

Statement of the Case

This postulate is explained by this Court as it resolves this petition for

review on certiorari assailing the January 20, 1993 Decision 1 of
Respondent Court of Appeals2 in CA-G.R. CV No. 36473, affirming the
decision3 of the trial court4 which disposed as follows:5

WHEREFORE, judgment is hereby rendered dismissing the

complaint for no cause of action, and hereby:

1. Declaring the private writing, Exhibit "C", to be an

option to sell, not binding and considered validly
withdrawn by the defendants for want of
consideration;

2. Ordering the plaintiffs to return to the defendants

the sum of P30,000.00 plus interest thereon at the
 legal rate, from the time of filing of defendants'
counterclaim until the same is fully paid;

3. Ordering the plaintiffs to deliver peaceful

possession of the two hectares mentioned in
paragraph 7 of the complaint and in paragraph 31 of
defendants' answer (counterclaim);

4. Ordering the plaintiffs to pay reasonable rents on

said two hectares at P5,000.00 per annum or at
P2,500.00 per cropping from the time of judicial
demand mentioned in paragraph 2 of the dispositive
portion of this decision, until the said two hectares
shall have been delivered to the defendants; and

5. To pay the costs.

SO ORDERED.

The Antecedent Facts

The facts, which appear undisputed by the parties, are narrated by the
Court of Appeals as follows:

Two (2) parcels of land are in dispute and litigated upon here.
The first has an area of 1 hectare. It was formerly owned by
Victorino Nool and covered by Transfer Certificate of Title No.
T-74950. With an area of 3.0880 hectares, the other parcel was
previously owned by Francisco Nool under Transfer Certificate
of Title No. T-100945. Both parcel's are situated in San Manuel,
Isabela. The plaintiff spouses, Conchita Nool and Gaudencio
Almojera, now the appellants, seek recovery of the
aforementioned parcels of land from the defendants, Anacleto
Nool, a younger brother of Conchita, and Emilia Nebre, now the
appellees.

In their complaint, plaintiff-appellants alleged inter alia that they

are the owners of subject parcels of land, and they bought the
same from Conchita's other brothers, Victorino Nool and
Francisco Nool; that as plaintiffs were in dire need of money,
they obtained a loan from the Ilagan Branch of the
Development Bank of the Philippines, in Ilagan, Isabela,
secured by a real estate mortgage on said parcels of land,
which were still registered in the names of Victorino Nool and
Francisco Nool, at the time, and for the failure of plaintiffs to
pay the said loan, including interest and surcharges, totaling
P56,000.00, the mortgage was foreclosed; that within the
period of redemption, plaintiffs contacted defendant Anacleto
Nool for the latter to redeem the foreclosed properties from
DBP, which the latter did; and as a result, the titles of the two
(2) parcels of land in question were transferred to Anacleto
Nool; that as part of their arrangement or understanding,
Anacleto Nool agreed to buy from plaintiff Conchita Nool the
two (2) parcels of land under controversy, for a total price of
P100,000.00, P30,000.00 of which price was paid to Conchita,
and upon payment of the balance of P14,000.00, plaintiffs were
to regain possession of the two (2) hectares of land, which
amounts defendants failed to pay, and the same day the said
arrangement6 was made; another covenant7 was entered into
by the parties, whereby defendants agreed to return to plaintiffs
the lands in question, at anytime the latter have the necessary
amount; that plaintiffs asked the defendants to return the same
but despite the intervention of the Barangay Captain of their
place, defendants refused to return the said parcels of land to
plaintiffs; thereby impelling them (plaintiffs) to come to court for
relief.

In their Answer, defendants-appellees theorized that they

acquired the lands in question from the Development Bank of
the Philippines, through negotiated sale, and were misled by
plaintiffs when defendant Anacleto Nool signed the private
writing, agreeing to return subject lands when plaintiffs have the
money to redeem the same; defendant Anacleto having been
made to believe, then, that his sister, Conchita, still had the
right to redeem the said properties.

The pivot of inquiry here, as aptly observed below, is the nature

and significance of the private document, marked Exhibit "D" for
plaintiffs, which document has not been denied by the
defendants, as defendants even averred in their Answer that
they gave an advance payment of P30,000.00 therefor, and
 acknowledged that they had a balance of P14,000.00 to
complete their payment. On this crucial issue, the lower court
adjudged the said private writing (Exhibit "D") as an option to
sell not binding upon and considered the same validly
withdrawn by defendants for want of consideration; and decided
the case in the manner above-mentioned.

There is no quibble over the fact that the two (2) parcels of land
in dispute were mortgaged to the Development Bank of the
Philippines, to secure a loan obtained by plaintiffs from DBP
(Ilagan Branch), Ilagan, Isabela. For the non-payment of said
loan, the mortgage was foreclosed and in the process,
ownership of the mortgaged lands was consolidated in DBP
(Exhibits 3 and 4 for defendants). After DBP became the
absolute owner of the two parcels of land, defendants
negotiated with DBP and succeeded in buying the same. By
virtue of such sale by DBP in favor of defendants, the titles of
DBP were cancelled and the corresponding Transfer
Certificates of Title (Annexes "C" and "D" to the Complaint)
issued to the defendants.8

It should be stressed that Manuel S. Mallorca, authorized officer of DBP,

certified that the one-year redemption period was from March 16, 1982 up
to March 15, 1983 and that the mortgagors' right of redemption was not
exercised within this period.9 Hence, DBP became the absolute owner of
said parcels of land for which it was issued new certificates of title, both
entered on May 23, 1983 by the Registry of Deeds for the Province of
Isabela. 10 About two years thereafter, on April 1, 1985, DBP entered into a
Deed of Conditional Sale 11 involving the same parcels of land with Private
Respondent Anacleto Nool as vendee. Subsequently, the latter was issued
new certificates of title on February 8, 1988. 12

The Court of Appeals ruled: 13

WHEREFORE, finding no reversible error infirming it, the

appealed Judgment is hereby AFFIRMED in toto. No
pronouncement as to costs.

The Issues

Petitioners impute to Respondent Court the following alleged "errors":

 1. The Honorable Court of Appeals, Second Division has
misapplied the legal import or meaning of Exhibit "C" in a way
contrary to law and existing jurisprudence in stating that it has
no binding effect between the parties and considered validly
withdrawn by defendants-appellees for want of consideration.

2. The Honorable Court of Appeals, Second Division has

miserably failed to give legal significance to the actual
possession and cultivation and appropriating exclusively the
palay harvest of the two (2) hectares land pending the payment
of the remaining balance of fourteen thousand pesos
(P14,000.00) by defendants-appellees as indicated in Exhibit
"C".

3. The Honorable Court of Appeals has seriously erred in

affirming the decision of the lower court by awarding the
payment of rents per annum and the return of P30,000.00 and
not allowing the plaintiffs-appellants to re-acquire the four (4)
hectares, more or less upon payment of one hundred thousand
pesos (P100,000.00) as shown in Exhibit "D". 14

The Court's Ruling

The petition is bereft of merit.

First Issue: Are Exhibits "C" and "D" Valid and Enforceable?

The petitioner-spouses plead for the enforcement of their agreement with

private respondents as contained in Exhibits "C" and "D," and seek
damages for the latter's alleged breach thereof. In Exhibit C, which was a
private handwritten document labeled by the parties as Resibo ti
Katulagan or Receipt of Agreement, the petitioners appear to have "sold" to
private respondents the parcels of land in controversy covered by TCT No.
T-74950 and TCT No. T-100945. On the other hand, Exhibit D, which was
also a private handwritten document in Ilocano and labeled
as Kasuratan, private respondents agreed that Conchita Nool "can acquire
back or repurchase later on said land when she has the money." 15

In seeking to enforce her alleged right to repurchase the parcels of land,

Conchita (joined by her co-petitioner-husband) invokes Article 1370 of the
Civil Code which mandates that "(i)f the terms of a contract are clear and
leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control." Hence, petitioners contend that
the Court of Appeals erred in affirming the trial court's finding and
conclusion that said Exhibits C and D were "not merely voidable but utterly
void and inexistent."

We cannot sustain petitioners' view. Article 1370 of the Civil Code is

applicable only to valid and enforceable contracts. The Regional Trial Court
and the Court of Appeals ruled that the principal contract of sale contained
in Exhibit C and the auxiliary contract of repurchase in Exhibit D are both
void. This conclusion of the two lower courts appears to find support
in Dignos vs. Court of Appeals, 16 where the Court held:

Be that as it may, it is evident that when petitioners sold said

land to the Cabigas spouses, they were no longer owners of the
same and the sale is null and void.

In the present case, it is clear that the sellers no longer had any title to the
parcels of land at the time of sale. Since Exhibit D, the alleged contract of
repurchase, was dependent on the validity of Exhibit C, it is itself void. A
void contract cannot give rise to a valid one. 17 Verily, Article 1422 of the
Civil Code provides that "(a) contract which is the direct result of a previous
illegal contract, is also void and inexistent."

We should however add that Dignos did not cite its basis for ruling that a
"sale is null and void" where the sellers "were no longer the owners" of the
property. Such a situation (where the sellers were no longer owners) does
not appear to be one of the void contracts enumerated in Article 1409 of
the Civil Code. 18 Moreover, the Civil Code 19 itself recognizes a sale where
the goods are to be "acquired . . . by the seller after the perfection of the
contract of sale," clearly implying that a sale is possible even if the seller
was not the owner at the time of sale, provided he acquires title to the
property later on.

In the present case however, it is likewise clear that the sellers can no
longer deliver the object of the sale to the buyers, as the buyers
themselves have already acquired title and delivery thereof from the rightful
owner, the DBP. Thus, such contract may be deemed to be
inoperative 20 and may thus fall, by analogy, under item no. 5 of Article
1409 of the Civil Code: "Those which contemplate an impossible service."
Article 1459 of the Civil Code provides that "the vendor must have a right to
transfer the ownership thereof [object of the sale] at the time it is delivered."
Here, delivery of ownership is no longer possible. It has become
impossible.

Furthermore, Article 1505 of the Civil Code provides that "where goods are
sold by a person who is not the owner thereof, and who does not sell them
under authority or with consent of the owner, the buyer acquires no better
title to the goods than the seller had, unless the owner of the goods is by
his conduct precluded from denying the seller's authority to sell." Here,
there is no allegation at all that petitioners were authorized by DBP to sell
the property to the private respondents. Jurisprudence, on the other hand,
teaches us that "a person can sell only what he owns or is authorized to
sell; the buyer can as a consequence acquire no more than what the seller
can legally transfer." 21 No one can give what he does not have — nono dat
quod non habet. On the other hand, Exhibit D presupposes that petitioners
could repurchase the property that they "sold" to private respondents. As
petitioners "sold" nothing, it follows that they can also "repurchase" nothing.
Nothing sold, nothing to repurchase. In this light, the contract of repurchase
is also inoperative — and by the same analogy, void.

Contract of Repurchase
Dependent on Validity of Sale

As borne out by the evidence on record, the private respondents bought

the two parcels of land directly from DBP on April 1, 1985 after discovering
that petitioners did not own said property, the subject of Exhibits C and D
executed on November 30, 1984. Petitioners, however, claim that they can
exercise their alleged right to "repurchase" the property, after private
respondents had acquired the same from DBP. 22 We cannot accede to
this, for it clearly contravenes the intention of the parties and the nature of
their agreement. Exhibit D reads:

WRITING

Nov. 30,
1984

That I, Anacleto Nool have bought from my sister Conchita Nool

a land an area of four hectares (4 has.) in the value of One
Hundred Thousand (100,000.00) Pesos. It is our agreement as
 brother and sister that she can acquire back or repurchase later
on said land when she has the money. [Emphasis supplied].

As proof of this agreement we sign as brother and sister this

written document this day of Nov. 30, 1984, at District 4, San
Manuel, Isabela.

Sgd ANAC
LETO
NOOL

Anacleto No

Sgd Emilio Paron

Witness

Sgd Conchi
ta Nool

Conchita No

One "repurchases" only what one has previously sold. In other words, the
right to repurchase presupposes a valid contract of sale between
the same parties. Undisputedly, private respondents acquired title to the
property from DBP, and not from petitioners.

Assuming arguendo that Exhibit D is separate and distinct from Exhibit C

and is not affected by the nullity of the latter, still petitioners do not thereby
acquire a right to repurchase the property. In that scenario, Exhibit D
ceases to be a "right to repurchase" ancillary and incidental to the contract
of sale; rather, it becomes an accepted unilateral promise to sell. Article
1479 of the Civil Code, however, provides that "an accepted unilateral
promise to buy or sell a determinate thing for a price certain is binding upon
the promissor if the promise is supported by a consideration distinct from
the price." In the present case, the alleged written contract of repurchase
contained in Exhibit D is bereft of any consideration distinct from the price.
Accordingly, as an independent contract, it cannot bind private
respondents. The ruling in Diamante vs. CA 24 supports this. In that case,
the Court through Mr. Justice Hilario G. Davide, Jr. explained:
Article 1601 of the Civil Code provides:

Conventional redemption shall take place when the vendor

reserves the right to repurchase the thing sold, with the
obligation to comply with the provisions of article 1616 and
other stipulations which may have been agreed upon.

In Villarica, et al. Vs. Court of Appeals, et al., decided on 29

November 1968, or barely seven (7) days before the
respondent Court promulgated its decisions in this case, this
Court, interpreting the above Article, held:

The right of repurchase is not a right granted the vendor by the

vendee in a subsequent instrument, but is a right reserved by
the vendor in the same instrument of sale as one of the
stipulations of the contract. Once the instrument of absolute
sale is executed, the vendor can not longer reserve the right to
repurchase, and any right thereafter granted the vendor by the
vendee in a separate instrument cannot be a right of
repurchase but some other right like the option to buy in the
instant case. . . .

In the earlier case of Ramos, et al. vs. Icasiano, et al., decided

in 1927, this Court had already ruled that "an agreement to
repurchase becomes a promise to sell when made after the
sale, because when the sale is made without such an
agreement, the purchaser acquires the thing sold absolutely,
and if he afterwards grants the vendor the right to purchase, it
is a new contract entered into by the purchaser, as absolute
owner already of the object. In that case the vendor has nor
reserved to himself the right to repurchase.

In Vda. De Cruzo, et al. vs. Carriaga, et al. this Court found

another occasion to apply the foregoing principle.

Hence, the Option to Repurchase executed by private

respondent in the present case, was merely a promise to sell,
which must be governed by Article 1479 of the Civil Code which
reads as follows:
 Art. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate

thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.

Right to Repurchase Based on

Homestead or Trust Non-Existent

Petitioners also base their alleged right to repurchase on (1) Sec. 119 of
the Public Land Act 25 and (2) an implied trust relation as "brother and
sister." 26

The Court notes that Victorino Nool and Francisco Nool mortgaged the land
to DBP. The brothers, together with Conchita Nool and Anacleto Nool, were
all siblings and heirs qualified to repurchase the two parcels of land under
Sec. 119 of the Public Land Act which provides that "(e)very conveyance of
land acquired under the free patent or homestead provisions, when proper,
shall be subject to repurchase by the applicant, his widow or legal heirs,
within a period of five years from the date of conveyance." Assuming the
applicability of this statutory provision to the case at bar, it is indisputable
that Private Respondent Anacleto Nool already repurchased from DBP the
contested properties. Hence, there was no more right of repurchase that
his sister Conchita or brothers Victorino and Francisco could exercise. The
properties were already owned by an heir of the homestead grantee and
the rationale of the provision to keep homestead lands within the family of
the grantee was thus fulfilled. 27

The claim of a trust relation is likewise without merit. The records show that
private respondents did not purchase the contested properties from DBP in
trust for petitioners. The former, as previously mentioned, in fact bought the
land from DBP upon realization that the latter could not validly sell the
same. Obviously, petitioners bought it for themselves. There is no evidence
at all in the records that they bought the land in trust for private
respondents. The fact that Anacleto Nool was the younger brother of
Conchita Nool and that they signed a contract of repurchase, which as
discussed earlier was void, does not prove the existence of an implied trust
in favor of petitioners.
 Second Issue: No Estoppel in Impugning the
Validity of Void Contracts

Petitioners argue that "when Anacleto Nool took the possession of the two
hectares, more or less, and let the other two hectares to be occupied and
cultivated by plaintiffs-appellant, Anacleto Nool cannot later on disclaim the
terms or contions (sic) agreed upon and his actuation is within the ambit of
estoppel . . . 28 We disagree. The private respondents cannot be estopped
from raising the defense of nullity of contract, specially in this case where
they acted in good faith, believing that indeed petitioners could sell the two
parcels of land in question. Article 1410 of the Civil Code mandates that
"(t)he action or defense for the declaration of the inexistence of a contract
does not prescribe." It is a well-settled doctrine that "as between parties to
a contract, validity cannot be given to it by estoppel if it is prohibited by law
or it is against public policy (19 Am. Jur. 802). It is not within the
competence of any citizen to barter away what public policy by law seeks to
preserve." 29 Thus, it is immaterial that private respondents initially acted to
implement the contract of sale, believing in good faith that the same was
valid. We stress that a contract void at inception cannot be validated by
ratification or prescription and certainly cannot be binding on or enforceable
against private respondents. 30

Third Issue: Return of P30,000.00 with Interest

and Payment of Rent

Petitioners further argue that it would be a "miscarriage of justice" to order

them (1) to return the sum of P30,000.00 to private respondents when
allegedly it was Private Respondent Anacleto Nool who owed the former a
balance of P14,000.00 and (2) to order petitioners to pay rent when they
"were allowed to cultivate the said two hectares." 31

We are not persuaded. Based on the previous discussion, the balance of

P14,000.00 under the void contract of sale may not be enforced.
Petitioners are the ones who have an obligation to return what they unduly
and improperly received by reason of the invalid contract of sale. Since
they cannot legally give title to what they "sold," they cannot keep the
money paid for the object of the sale. It is basic that "(e)very person who
through an act of performance by another, or any other means, acquires or
comes into possession of something at the expense of the latter without
just or legal ground, shall return the same." 32 Thus, if a void contract has
already "been performed, the restoration of what has been given is in
order." 33 Corollarily and as aptly ordered by respondent appellate court,
interest thereon will run only from the time of private respondents' demand
for the return of this amount in their counterclaim. 34 In the same vein,
petitioners' possession and cultivation of the two hectares are anchored on
private respondents' tolerance. Clearly, the latter's tolerance ceased upon
their counterclaim and demand on the former to vacate. Hence, their right
to possess and cultivate the land ipso facto ceased.

WHEREFORE, the petition is DENIED and the assailed Decision of the

Court of Appeals affirming that of the trial court is hereby AFFIRMED.

SO ORDERED.

Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.

Footnotes