PATERNO J. OUANO, petitioner, vs.
COURT OF APPEALS and FRANCISCO B. ECHAVEZ, respondents
G.R. No. 40203, August 21 1990
FACTS:
A
3,710 sq. m. lot identified as Philippine Railway Lot No. 3-A-1 was offered for
sale by public bidding by the Rehabilitation Finance Corporation (RFC) on April
1, 1958. Prior to that bidding, Ouano and Echavez orally agreed that only
Echavez would make a bid, and that if it was accepted, they would divide the
property in proportion to their adjoining properties. They also agreed to
induce the only other party known to be interested in the property, Mrs.
Bonsucan’s group, to desist from presenting a bid.
Two weeks after Echavez won the
bid, a document simply entitled “Agreement” was signed by him and Ouano. The
document was prepared by Echavez in his own handwriting stating that they would
request RFC to have the said lot subdivided into 2 portions and that they would
share proportionately all legal expenses that may be assessed and incurred in
connection with the acquisition of the said lot. However, RFC never approved the sharing agreement
between Echavez and Ouano. Eventually, a Torrens title for the lot was issued
in Echavez’ name only.
ISSUE: W/N the agreement between Echavez and Ouano is valid.
RULING:
Ouano and Echavez had promised
to share in the property in question as a consideration for Ouano’s refraining
from taking part in the public auction, and they had attempted to cause in fact
succeeded in causing another bidder to stay away from the auction in order to
cause reduction of the price of the property auctioned. In doing so, they
committed the felony of machinations in public auctions defined and penalized
in Article 185 of the Revise Penal Code.
The agreement therefore being
criminal in character, the parties not only have no action against each other
but are both liable to prosecution and the things and price of their agreement
subject to disposal according to the provisions of the criminal code. This, in
accordance with the so-called pari delicto principle set out in the Civil Code.
Article 1409 of said Code
declares as “inexistent and void from the beginning” those contracts, among
others, “whose cause, object or purpose is contrary to law, morals good
customs, public order of public policy, or “expressly prohibited x x by law”.
Such contracts “cannot be ratified;” “the right to set up the defense of
illegality (cannot) be waived;” and, Article 1410 adds, the “action or defense
for the declaration of the inexistence x x (thereof) does not prescribe.”
Furthermore, according to the Article 1411 of the same Code –
“x x. When the nullity proceeds from
the illegality of the cause or object of the contract, and the act constitutes
a criminal offense, both parties being in pari delicto, they shall have no
action against each other, and both shall be prosecuted. Moreover, the
provisions of the Penal Code, relative to the disposal of effects or
instruments of a crime shall be applicable to the things or the price of the
contract.”
Article 1411 also dictates the
proper disposition of the land involve, i.e., “the forfeiture of the proceeds
of the crime and the instruments or tools with which it was committed,” as
mandated by the provisions of Article 45 of the Revised Penal Code, this being
obviously the provision “ of the Penal Code relative to the disposal of effects
or instruments of a crime” that Article 1411 makes “applicable to the things or
the price of the contract”.
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