what is the doctrine of in pari delicto with reference to contracts

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Third DIVISION

August 8, 2016

G.R. No. 200765

DESIDERIO RANARA, JR., Petitioner
vs.
ZACARIAS DE LOS ANGELES, JR., Respondent

R Due east Due south O L U T I O N

REYES, J.:

Before the Courtroom is a petition for review on certiorariane under Rule 45 of the Rules of Courtroom assailing the Decision2 dated September 15, 2011 and Resolution3 dated February half dozen, 2012 of the Court of Appeals (CA) in CA-G.R. CV No. 90099, which affirmed the Decision4 dated June 27, 2007 of the Regional Trial Courtroom (RTC) of Naga City, Branch 62, in Civil Case No. RTC 2001-0345, insofar as it denied Desiderio Ranara, Jr. 's (petitioner) reimbursement for the purchase toll and improvements on the land from Zacarias de los Angeles, Jr. (respondent).

Antecedent Facts

Quondam in October 1989, Leonor Parada (Parada) loaned from Zacarias de los Angeles, Sr. (Zacarias, Sr.) money amounting to ₱60,000.00 to finance her migration to Canada. It was .agreed that the loan would exist payable within a period of 10 years. At the aforementioned time, Zacarias, Sr. informed Parada that the coin came from his son, the respondent. As security, Parada mortgaged a package of agricultural country which would eventually exist covered by Original Document of Championship (Oct) No. 10020. Information technology was stipulated that the respondent would take possession of and subcontract the land as payment for the loan interest. Parada, thus, executed a Human activity of Auction with Right to Repurchase dated October 26, 1989, during which time the October had non yet been issued. v

The respondent took possession of the state, paid taxes due and converted the forested portion into irrigated country, without objection from Parada.half dozen

In 1991, OCT No. 10020 was issued in the proper noun of Parada, who brought with her to Canada the original owner'southward duplicate� copy when she left in 1992. Afterwards, Parada gave the owner's indistinguishable to Zacarias Sr. upon reports that someone attempted to enter the land. Parada also requested her tenant from another parcel of state, Salvador Romero, to remit to the respondent her share of the harvest for the years 1992 to 1994. She too sent $250.00 and ₱20,000.00.vii

When Zacarias, Sr. fell ill in 2001, the respondent pleaded with Noel Parada (Noel), Parada's son, to repurchase the property to finance his father's hospital and medical bills. The respondent later wrote a letter to Parada enervating that she repurchase the property. Parada paid ₱twoscore,000.00 delivered personally to Zacarias Sr. by Noel at the hospital. The respondent found the corporeality unacceptable and returned the ₱twoscore,000.00 and along with ₱10,000.008 to Parada. 9

On February xvi, 2001, the respondent sold the land to the petitioner for ₱300,000.00. Two documents of sale were executed: i) for the actual sale cost of ₱300,000.00; and two) for ₱130,000.00 to be used as basis for the computation of taxes, registration of the deed and transfer of ownership. The respondent and then sent Parada a alphabetic character dated July 17, 2001, enforcing the Deed of Sale with Correct of Repurchase giving her 15 days to repurchase the belongings. The Deed of Accented Sale with the purchase price of ₱150,000.00

between the petitioner and the respondent was signed on December ten, 2001. x

Parada insisted, in her response to the letter dated July one 7, 2001, that in that location was no pacto de retro sale and and so tendered ₱sixty,000.00 as payment for the loan, simply it was refused by the respondent. She also learned that the respondent fraudulently registered with the Register of Deeds of Camarines Sur the Deed of Sale with Right to Repurchase, falsified the Affidavit of Seller/Transferor and that the respondent sold the property to the petitioner. 11

Later on exerting all efforts to settle and to no avail, Parada filed a Complaint12 against the petitioner and the respondent for Reformation of Instrument, Consignation, Recovery of Possession with a Prayer for a Writ of Preliminary Mandatory Injunction and Amercement.

In his Answer with Cross-Claim and Counterclaim, 13 the petitioner denied whatever cognition of any defect in the championship of the belongings since the respondent was in the possession of and cultivating the state. The petitioner olaimed that he is an innocent purchaser for value. The petitioner also claimed that aside from paying the purchase cost of ₱300,000.00, he had introduced permanent improvements on the property amounting to ₱150,000.00 consisting of deep-well irrigation facilities and another ₱150,000.00 for levelling portions of the holding and converting the aforementioned to rice land. The petitioner prayed that if the example be resolved in favor of Parada, he be reimbursed past the respondent for his bodily expenses plus the legal rate of interest.

For his part, the respondent insisted that the contract he entered with Parada was i of sale. He claimed that he introduced the improvements in the holding and sought reimbursement for the same. Moreover, the respondent claimed that the petitioner failed to pay the full purchase price of the property and still owed him a rest of ₱50,000.00 and took reward of his lack of education and dire need of money. 14

Ruling of the RTC

In its Decision 15 dated June 27, 2007, the RTC ruled in favor of Parada.1�wphi1 Information technology found that Parada and the respondent entered into an equitable mortgage pursuant to Article 1602(6)16 of the Ceremonious Lawmaking. It denied the petitioner and the respondent's claim for reimbursement from Parada. Moreover, the RTC ruled that the petitioner did non have any privity of contract between Parada and the respondent. Article 1616 of the Civil Code specifically provides that the vendor a retro's obligation to reimburse useful and necessary expenses only pertains to the vendee a retro. 17

With respect to the counterclaim and cross-claim of the petitioner, the RTC dismissed the same. It stated that when the petitioner purchased the land from the respondent, he knew of the property's status. He knew that he was dealing with a registered land and the fact that championship to the state reflected Parada equally the owner. The petitioner knew of the risks involved just continued with the auction. The RTC stated that "[h]east who comes to Courtroom must have clean hands. Each of the parties must deport his own loss." xviii It denied the petitioner'southward merits of reimbursement for the improvements he had allegedly introduced in the land because he acquired the belongings in bad faith. 19

Ruling of the CA

In its Decision20 dated September xv, 2011, the CA affirmed the RTC's decision respecting the deprival of the petitioner's counterclaim and cross-claim. Information technology, thus, affirmed that the petitioner was a heir-apparent in bad religion and was not entitled to reimbursement since the water pump that he introduced was a useful expense. Under Commodity 54621 of the Civil Code, only possessors in proficient faith are entitled to reimbursement of useful expenses. In addition, there were no receipts shown to substantiate the claim for the other improvements he allegedly introduced to the land. With respect to the reimbursement of the purchase price, the CA agreed with the RTC when information technology stated that the petitioner did not come up to the court with clean hands and, thus, must bear his ain loss and as such is non entitled to reimbursement of the purchase price.22

Hence, the petitioner filed the present petition asserting that the CA committed an fault and challenge that he is entitled to reimbursement from the respondent.23 He reiterates that he was an innocent purchaser for value. He entered into the contract of sale fully believing that the respondent was the bodily owner of the property and had the legal capacity to dispose of the property. 24 Even bold that he was in bad faith, the respondent was equally in bad faith when he sold the property to him, thus as between them, they should be construed to be in good faith and under the principle of in pari delicto. The petitioner argues that the respondent should be made to reimburse the purchase cost and the value of the improvements he had introduced to the country.25

Ruling of the Court

The Court denies the petition.

More often than not, the question of whether a person is a purchaser in good faith is a factual thing that generally will non exist delved into past the Court as information technology is not a trier of facts. 26 Factual findings of the trial courtroom on the matter, particularly if affirmed by the appellate court, are bounden and conclusive upon the Courtroom salve for specific instances. 27 However, none of the exceptions use to the instant case.

Here, both the RTC and CA have ruled that the petitioner and the respondent are both in bad faith and such finding is binding on the Court since none of the exceptions warranting the Court's review are availing.

In any event, the Court agrees with the courts a quo that the petitioner was in bad religion in purchasing the land since it was his duty to investigate.ane�wphi1 A purchaser of land that is in the actual possession of the seller must make some inquiry in the rights of the possessor of the land. The rule of caveat emptor requires the purchaser to be aware of the supposed title of the vendor and one who buys without checking the vendor'southward title takes all the risks and losses consequent to such failure.28

Likewise, the question of whether the parties are in pari delicto is a factual question and is generally non within the scope of a Rule 45 petition.29 Further, the Court had elaborated on the applicability of the doctrine particularly in the instance of Constantino, et al. v. Heirs of Pedro Constantino, Jr. 30 where information technology stated:

Latin for "in equal error,'' in pari delicto connotes that two or more people are at fault or are guilty of a law-breaking. Neither courts of law nor disinterestedness will interpose to grant relief to the parties, when� an illegal understanding has been made, and both parties stand in pari delicto. Under the pari delicto doctrine, the parties to a controversy are as culpable or guilty, they shall accept no activeness confronting each other, and it shall leave the parties where it finds them. This doctrine finds expression in the maxims "ex dolo malo not oritur actio" and "in pari delicto potior est condition defendentis."

ten 10 ten x

Every bit a doctrine in ceremonious police, the rule on pari delicto is principally governed by Manufactures 1411 and 1412 of the Civil Code, which state that:

Article 1411. When the nullity gain from the illegality of the cause or object of the contract, and the act constitutes a criminal crime, both parties beingness in pari delicto, they shall have no action confronting each other, and both shall be prosecuted.

x x 10 x

Article 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:

x ten x x

1. When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking;

x x x x

The petition at bench does non speak of an illegal cause of contract constituting a criminal offence under Article 1411. Neither can it be said that Article 1412 finds application although such provision which is part of Title 2, Book IV of the Civil Code speaks of contracts in general, also as contracts which are null and void ab initio pursuant to Commodity 1409 of the Civil Code - such as the discipline contracts, which every bit claimed, are violative of the mandatory provision of the police on legitimes.

x x ten x

Finding the inapplicability of the in pari delicto doctrine, Nosotros detect occasion to stress that Commodity 1412 of the Civil Code that breathes life to the doctrine speaks of the rights and obligations of the parties to the contract with an illegal crusade or object which does not constitute a law-breaking. It applies to contracts which are void for illegality of subject field matter and not to contracts rendered void for being simulated, or those in which the parties practise not really intend to be bound thereby. Specifically, in pari delicto situations involve the parties in ane contract who are both at fault, such that neither tin can recover nor have any action confronting each other.31 (Citations omitted and emphasis ours)

Here, there is neither an illegal cause nor unlawful cause which would necessitate the awarding of Articles 1411 and 1412 of the Civil Code.one�wphi1 The petitioner is mistaken in the application of the doctrine of in pari delicto.

The Courtroom agrees with the courts a quo that the petitioner cannot claim reimbursement for whatever expense incurred in the improvements on the lot.

WHEREFORE, the petition is DENIED. The Decision dated September 15, 2011 and Resolution dated February 6, 2012 of the Court of Appeals, in CA-G.R. CV No. 90099, are AFFIRMED.

SO ORDERED.

BIENVENIDO L. REYES
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson

DIOSDADO M. PERALTA Associate Justice

JOSE PORTUGAL PEREZ Associate Justice

FRANCIS H. JARDELEZA
Acquaintance Justice

A T T Due east S T A T I O N

I attest that the conclusions in the above Resolutionhad been reached in consultation before the instance was assigned to the writer of the opinion of the Courtroom�southward Division.

PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson, Tertiary Partitioning

C East R T I F I C A T I O Due north

Pursuant to the Section xiii, Article Eight of the Constitution and the Division Chairperson�s Attestation, I certify that the conclusions in the above Resolution had been reached in consultation before the case was assigned to the writer of the opinion of the Court�due south Division.

MARIA LOURDES P.A. SERENO
Primary Justice

Footnotes

1 Rollo, pp. 8-21.

2 Penned by Associate Justice Franchito N. Diamante, with Associate Justices Josefina Guevara Salonga and Ramon R. Garcia, concurring; id. at 25-38.

3 Id. at 39-twoscore.

4 Rendered by Guess Antonio C. A. Ayo, Jr.; id. at 89-93.

five Id. at 26-27.

half-dozen Id. at 27.

seven Id.

viii Half of the additional P20,000.00 Parada gave to Zacarias Sr. for his son's hymeneals.

nine Rollo, pp. 27-28.

10 Id. at 45.

11 Id. at 28-29.

12 Id. at 46-51.

xiii Id. at 54-58.

xiv Id. at 59-64.

fifteen Id. at 89-93

16 Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the post-obit cases:

x x x x

(half-dozen) In whatever other example where it may be adequately inferred that the existent intention of the parties is that the transaction shall secure the payment of a debt or the performance of whatsoever other obligation.

17 Rollo, p. 92.

18 Id.

19 Id.

20 Id. at 25-38.

21 Fine art. 546. Necessary expenses shall exist refunded to every owner; but only the owner in proficient organized religion may retain the thing until he has been reimbursed therefor.

Useful expenses shall exist refunded only to the owner in skilful faith with the aforementioned right of retention, the person who has defeated him in the possession having the pick of refunding the amount of the expenses or of paying the increase in value which the affair may take acquired past reason thereof.

22 Rollo, p. 32-33.

23 Id. at 16.

24 Id. at 17.

25 Id. at nineteen.

26 Sigaya v. Mayuga, 504 Phil. 600, 611 (2005).

27 Id.

28 Dacasin v. CA, 170 Phil. 175, 182-183 (1977).

29 Menchavez five. Teves, Jr., 490 Phil. 268, 281 (2005).

30 718 Phil. 575 (2013).

31 Id. at 584-587.

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