G.R. No. 38498 August 10, 1989
ISAAC BAGNAS, ENCARNACION BAGNAS, SILVESTRE BAGNAS, MAXIMINA BAGNAS, SIXTO BAGNAS and AGATONA ENCARNACION, petitioners, vs. HON. COURT OF APPEALS, ROSA L. RETONIL, TEOFILO ENCARNACION, and JOSE B. NAMBAYAN, respondents.

FACTS

Hilario Mateum died intestate in 1964, survived only by collateral relatives. The petitioners, his first cousins, were his nearest kin. Mateum’s estate included twenty-nine parcels of land. Prior to his death, Mateum executed two deeds of sale in favor of the private respondents, who are more remote collateral relatives. The deeds, written in Tagalog, conveyed ten parcels for a stated consideration of “ONE PESO (P1.00) … and services rendered, being rendered and to be rendered for my benefit.” These deeds were registered after Mateum’s death.
The petitioners, claiming to be intestate heirs, filed a suit for annulment of the deeds. They alleged the sales were fictitious, fraudulent, or, alternatively, donations void for lack of a public instrument of acceptance. The respondents defended the sales as valid for a valuable consideration consisting of services rendered to Mateum. After the petitioners presented their evidence, the respondents filed a demurrer to the evidence. The trial court dismissed the case, ruling that the petitioners, as mere collateral relatives and not forced heirs, had no legal right to impugn the dispositions. The Court of Appeals affirmed this decision.

ISSUE

Whether the petitioners, as collateral heirs, have the legal standing to seek the annulment of the subject deeds of sale executed by their deceased relative.

RULING

Yes. The Supreme Court reversed the lower courts. The legal logic centers on the nature of the contracts. The Court distinguished between voidable contracts and void or inexistent contracts. A voidable contract is valid until annulled, and the action for annulment can generally only be brought by parties obliged thereunder or their heirs. However, a void or inexistent contract produces no effect whatsoever and can be impugned by anyone with a material and direct interest.
The Court found the deeds in question to be void ab initio for lack of consideration. The stated price of one peso was nominal and the “services” were unspecified and unvalued, rendering the consideration illusory. Under Article 1353 of the Civil Code, a contract where the consideration is false or illusory is inexistent and void. Since the contracts were void from the beginning, they conferred no rights. Consequently, the properties purportedly sold remained part of Mateum’s estate upon his death. As his intestate heirs, the petitioners had a direct and material interest in recovering these properties for the estate, giving them the legal personality to sue for their declaration of nullity. The respondents, having opted for a demurrer to evidence and lost, forfeited their right to present evidence to prove a lawful consideration. The deeds were declared void, and the respondents were ordered to return the properties and account for their fruits.