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446 Phil. 32

SECOND DIVISION

[ G.R. No. 150913, February 20, 2003 ]

SPOUSES TEOFILO AND SIMEONA RAYOS, AND GEORGE RAYOS, PETITIONERS, VS. DONATO REYES, SATURNINO REYES, TOMASA R. BUSTAMANTE AND TORIBIA R. CAMELO, RESPONDENTS.

D E C I S I O N

BELLOSILLO, J.:

AT STAKE IN THIS PETITION FOR REVIEW is the ownership of three (3) parcels of unregistered land with an area of approximately 130,947 square meters situated in Brgy. Sapa, Burgos, Pangasinan, the identities of which are not disputed.

The three (3) parcels were formerly owned by the spouses Francisco and Asuncion Tazal who on 1 September 1957 sold them for P724.00 to respondents’ predecessor-in-interest, one Mamerto Reyes, with right to repurchase within two (2) years from date thereof by paying to the vendee the purchase price and all expenses incident to their reconveyance. After the sale the vendee a retro took physical possession of the properties and paid the taxes thereon.[1]

The otherwise inconsequential sale became controversial when two (2) of the three (3) parcels were again sold on 24 December 1958 by Francisco Tazal for P420.00 in favor of petitioners’ predecessor-in-interest Blas Rayos without first availing of his right to repurchase the properties.

In the meantime, on 1 September 1959 the conventional right of redemption in favor of spouses Francisco and Asuncion Tazal expired without the right being exercised by either the Tazal spouses or the vendee Blas Rayos.

After the expiration of the redemption period, Francisco Tazal attempted to repurchase the properties from Mamerto Reyes by asserting that the 1 September 1957 deed of sale with right of repurchase was actually an equitable mortgage and offering the amount of P724.00 to pay for the alleged debt.[2] But Mamerto Reyes refused the tender of payment and vigorously claimed that their agreement was not an equitable mortgage.[3]

On 9 May 1960 Francisco Tazal filed a complaint with the Court of First Instance of Pangasinan against Mamerto Reyes, docketed as Civil Case No. A-245, for the declaration of the 1 September 1957 transaction as a contract of equitable mortgage. He also prayed for an order requiring defendant Mamerto Reyes to accept the amount of P724.00 which he had deposited on 31 May 1960 with the trial court as full payment for his debt, and canceling the supposed mortgage on the three (3) parcels of land with the execution of the corresponding documents of reconveyance in his favor.[4] Defendant denied plaintiff’s allegations and maintained that their contract was a sale with right of repurchase that had long expired.

On 22 June 1961 Francisco Tazal again sold the third parcel of land previously purchased by Mamerto Reyes to petitioner-spouses Teofilo and Simeona Rayos for P400.00. On 1 July 1961 petitioner-spouses bought from Blas Rayos for P400.00 the two (2) lots that Tazal had sold at the first instance to Mamerto Reyes and thereafter to Blas Rayos. Curiously, these contracts of sale in favor of petitioner-spouses were perfected while Civil Case No. A-245 was pending before the trial court.

On 26 September 1962 the parties in Civil Case No. A-245 submitted a stipulation of facts upon which the Court of First Instance would decide the case. They admitted the genuineness and due execution of the 1 September 1957 deed of sale with right of repurchase although they were in disagreement as to its true character. They also acknowledged the consignation of P724.00 in the Court of First Instance on 31 May 1960 and the payment of taxes by Mamerto Reyes on the three (3) parcels of land from 1958 to 1962.[5]

On 5 January 1963 the trial court in Civil Case No. A-245 rejected the contention of Francisco Tazal that the deed of sale executed on 1 September 1957 was an equitable mortgage but held that Tazal could nonetheless redeem the three (3) parcels of land within thirty (30) days from finality of judgment by paying to Mamerto Reyes the purchase price of P724.00 and all expenses to execute the reconveyance, i.e., the expenses of the contract and the necessary and useful expenses made on the properties as required by Art. 1616 of the Civil Code. The dispositive portion of the trial court’s decision reads -
WHEREFORE, the Court, hereby renders judgment declaring the contract x x x entered into by the plaintiffs and the defendant and captioned ‘Deed of Sale with Right to Repurchase’ as a true sale with right to repurchase x x x and not an equitable mortgage x x x and declaring the plaintiffs entitled to repurchase the property in question within thirty (30) days from finality of this decision, without pronouncement as to cost.[6]
Mamerto Reyes appealed the Decision to the Court of Appeals,[7] which in turn elevated the appeal to this Court[8] since only questions of law were involved.[9] When Mamerto Reyes died in 1986, petitioner-spouses Teofilo and Simeona Rayos wrested physical possession of the disputed properties from Reyes’s heirs.

On 16 May 1990 this Court considered the case closed and terminated for failure of the parties therein to manifest their interest to further prosecute the case. On 20 June 1990 the judgment in Civil Case No. A-245 became final and executory.

Subsequent to the finality of judgment in Civil Case No. A-245 petitioner-spouses did nothing to repurchase the three (3) parcels of land within the thirty (30) - day grace period from finality of judgment since, according to them, they believed that the consignation of P724.00 in the civil case had perfected the repurchase of the disputed properties.

On 6 July 1992 respondents as heirs of Mamerto Reyes executed an affidavit adjudicating to themselves the ownership of the parcels of land and declared the properties in their names for assessment and collection of real estate taxes. On 19 January 1993 respondents registered the 1 September 1957 deed of sale with right of repurchase with the register of deeds.

On 8 July 1993 respondents filed a complaint for damages and recovery of ownership and possession of the three (3) parcels of land in dispute against herein petitioner-spouses Teofilo and Simeona Rayos and petitioner George Rayos as administrator thereof before the Regional Trial Court of Alaminos, Pangasinan.[10] It was respondents’ theory that neither petitioners nor their predecessors-in-interest Francisco Tazal and Blas Rayos repurchased the properties before buying them in 1958 and 1961 or when the judgment in Civil Case No. A-245 became final and executory in 1990, hence the sale of the three (3) parcels of land to petitioner-spouses did not transfer ownership thereof to them.

Petitioners argued on the other hand that the consignation of P724.00 in Civil Case No. A-245 had the full effect of redeeming the properties from respondents and their predecessor-in-interest, and that respondents were guilty of estoppel and laches since Mamerto Reyes as their predecessor-in-interest did not oppose the sale to Blas Rayos and to petitioner-spouses Teofilo and Simeona Rayos. The parties then filed their respective memoranda after which the case was submitted for decision.

On 15 November 1996 the trial court promulgated its Decision in Civil Case No. A-2032 finding merit in respondents’ claim for damages as well as ownership and possession of the disputed parcels of land from petitioners.[11] The court declared void the separate deeds of absolute sale thereof executed by Francisco Tazal in favor of Blas Rayos and to spouses Teofilo and Simeona Rayos and by Blas Rayos to the same spouses, and ordered herein petitioners and Francisco Tazal to vacate and reconvey the lands to respondents as heirs of Mamerto Reyes and to pay actual damages for litigation expenses in the sum of P20,000.00, attorney’s fees of P10,000.00, and exemplary damages of P50,000.00 plus costs. The court a quo rationalized that petitioners did not present evidence to prove that they and their predecessor-in-interest were able to repurchase the property within the period of redemption set forth by the Court of First Instance in Civil Case No. A-245.[12] Petitioners appealed the Decision to the Court of Appeals.[13]

On 31 May 2001 the appellate court promulgated its Decision affirming in toto the judgment appealed from.[14] The Court of Appeals held that the deposit of P724.00 on 31 May 1960 in Civil Case No. A-245 was done belatedly, i.e., after the two (2) year - period from 1 September 1957, the date of the sale as stated in the deed of sale between the spouses Francisco and Asuncion Tazal and Mamerto Reyes, and did not cover the entire redemption price, i.e., the selling price of P724.00 plus the expenses of executing the contract and the necessary and useful expenses made on the properties. The appellate court further ruled that estoppel and laches did not bar the cause of action of respondents as plaintiffs in Civil Case No. A-2032 since Mamerto Reyes as their predecessor-in-interest actively resisted the claim of Francisco Tazal in Civil Case No. A-245 to treat the 1 September 1957 sale as an equitable mortgage and to authorize the redemption of the parcels of land in dispute beyond the two (2)-year period stipulated in the sale with right to repurchase. Hence, the instant petition for review.

Petitioners argue that the consignation of P724.00 in Civil Case No. A-245 provides the best evidence of the repurchase of the three (3) parcels of land; that the consignation was admitted by Mamerto Reyes himself in the stipulation of facts and approved implicitly by the Court of First Instance when it held the 1 September 1957 transaction as a contract of sale with right of repurchase; that respondents failed to prove the existence of other expenses, i.e., the expenses of the contract and the necessary and useful expenses made on the properties, required by Art. 1616 of the Civil Code to be paid in addition to the purchase price of P724.00 so that petitioners may validly exercise the right to repurchase the real estate; that Mamerto Reyes as respondents’ predecessor-in-interest was guilty of estoppel and laches for not seeking the annulment of the contracts of sale in favor of Blas Rayos and petitioner-spouses Teofilo and Simeona Rayos; that petitioner-spouses are buyers in good faith and for value of the three (3) parcels of land; and finally, that there is no legal basis for awarding damages since Civil Case No. A-2032 was decided solely on the basis of the parties’ memoranda and not upon any evidence offered.

It appears that petitioners hinge their arguments upon the validity of the consignation of P724.00 and accept the proposition that if the consignation is declared void the subsequent sales to Blas Rayos and petitioner-spouses would be ineffective to transfer ownership of the disputed parcels and concomitantly would vest respondents with the ownership and possession thereof.

On the other hand, respondents maintain that the absence of an express or at least discernible court approval of the consignation of P724.00 in Civil Case No. A-245 prevented the repurchase of the parcels of land in question; that the deposit of only P724.00 did not cover all the expenses required by Art. 1616 of the Civil Code for a valid repurchase of the properties; that Mamerto Reyes as their predecessor-in-interest was not guilty of estoppel and laches in not filing a complaint to annul the contracts of sale in favor of Blas Rayos and petitioner-spouses Teofilo and Simeona Rayos since during that time Civil Case No. A-245 was pending before the courts; that petitioner-spouses are not buyers in good faith and for value since they knew that the parcels of land had been previously sold to Mamerto Reyes and that, in any event, the rule protecting buyers in good faith and for value applies only to transactions involving registered lands and not to unregistered lands as in the instant case; and finally, that the award of damages is amply supported by their pleadings in the trial court.

We deny the instant petition for review and affirm the decision of the court a quo, except for the sole modification to delete and set aside the award of damages. There is no evidence to prove that petitioners paid at any time the repurchase price for the three (3) parcels of land in dispute except for the deposit of P724.00 in the Court of First Instance which however fell short of all the acts necessary for a valid consignation and discharge of their obligation to respondents.

In order that consignation may be effective the debtor must show that (a) there was a debt due; (b) the consignation of the obligation had been made because the creditor to whom a valid tender of payment was made refused to accept it; (c) previous notice of the consignation had been given to the person interested in the performance of the obligation; (d) the amount due was placed at the disposal of the court; and, (e) after the consignation had been made the person interested was notified thereof.[15]

In the instant case, petitioners failed, first, to offer a valid and unconditional tender of payment; second, to notify respondents of the intention to deposit the amount with the court; and third, to show the acceptance by the creditor of the amount deposited as full settlement of the obligation, or in the alternative, a declaration by the court of the validity of the consignation. The failure of petitioners to comply with any of these requirements rendered the consignation ineffective.[16]

Consignation and tender of payment must not be encumbered by conditions if they are to produce the intended result of fulfilling the obligation.[17] In the instant case, the tender of payment of P724.00 was conditional and void as it was predicated upon the argument of Francisco Tazal that he was paying a debt which he could do at any time allegedly because the 1 September 1957 transaction was a contract of equitable mortgage and not a deed of sale with right to repurchase. The ostensible purposes of offering the amount in connection with a purported outstanding debt were to evade the stipulated redemption period in the deed of sale which had already expired when the tender of payment was made and Civil Case No. A-245 was instituted, and as a corollary, to avail of the thirty (30)-day grace period under Art. 1606 of the Civil Code within which to exercise the right to repurchase.[18] Mamerto Reyes was therefore within his right to refuse the tender of payment offered by petitioners because it was conditional upon his waiver of the two (2)-year redemption period stipulated in the deed of sale with right to repurchase.

Moreover, petitioners failed to prove in Civil Cases Nos. A-245 and A-2032 that any form of notice regarding their intention to deposit the amount of P724.00 with the Court of First Instance had been served upon respondents. This requirement is not fulfilled by the notice which could have ensued from the filing of the complaint in Civil Case No. A-245 or the stipulation made between Francisco Tazal and Mamerto Reyes regarding the consignation of P724.00. The latter constitutes the second notice required by law as it already concerns the actual deposit or consignation of the amount and is different from the first notice that makes known the debtor’s intention to deposit the amount, a requirement missing in the instant case.[19] Without any announcement of the intention to resort to consignation first being made to the persons interested in the fulfillment of the obligation, the consignation as a means of payment is void.[20]

It is also futile to argue that the deposit of P724.00 with the Court of First Instance could have perfected the redemption of the three (3) parcels of land because it was not approved by the trial court, much less accepted by Mamerto Reyes or his heirs, herein respondents. The dispositive portion of the Decision in Civil Case No. A-245, which reads “x x x x the Court, hereby renders judgment declaring the contract x x x entered into by the plaintiffs and the defendant and captioned ‘Deed of Sale with Right to Repurchase’ as a true sale with right to repurchase x x x and not an equitable mortgage x x x and declaring the plaintiffs entitled to repurchase the property in question within thirty (30) days from finality of this decision x x x x” plainly rejected the complaint for lack of merit and necessarily also the consignation done pursuant thereto. This conclusion is buttressed by the directive of the trial court in the body of the Decision that Francisco Tazal “may still exercise the right to repurchase the property in question by returning to the [Mamerto Reyes] the purchase price of P724.00 plus all expenses incident to the reconveyance within the period of thirty (30)-days from the time this decision becomes final x x x x[21] The obvious reference of this statement was the stipulation made by the parties therein that “the defendant [Mamerto Reyes] has been paying the taxes on said properties from 1958 to 1969 x x x x[22] where the taxes paid constituted necessary expenses that petitioners had to reimburse to respondents’ predecessor-in-interest aside from the P724.00 earlier deposited by Tazal.

To be sure, while it has been held that approval of the court or the obligee’s acceptance of the deposit is not necessary where the obligor has performed all acts necessary to a valid consignation such that court approval thereof cannot be doubted, Sia v. Court of Appeals[23] clearly advises that this ruling is applicable only where there is unmistakable evidence on record that the prerequisites of a valid consignation are present, especially the conformity of the proffered payment to the terms of the obligation which is to be paid.[24] In the instant case, since there is no clear and preponderant evidence that the consignation of P724.00 satisfied all the requirements for validity and enforceability, and since Mamerto Reyes vehemently contested the propriety of the consignation, petitioners cannot rely upon sheer speculation and unfounded inference to construe the Decision of the Court of First Instance as one impliedly approving the consignation of P724.00 and perfecting the redemption of the three (3) parcels of land.

It should be recalled that one of the requisites of consignation is the filing of the complaint by the debtor against the creditor. Hence it is the judgment on the complaint where the court declares that the consignation has been properly made that will release the debtor from liability. Should the consignation be disapproved by the court and the case dismissed, there is no payment and the debtor is in mora and he shall be liable for the expenses and bear the risk of loss of the thing.[25]

To sanction the argument of petitioners and in the process excuse them from their responsibility of securing from the trial court in Civil Case No. A-245 a categorical declaration that the consignation of P724.00 had complied with all the essential elements for its validity would only dilute the rule requiring absolute compliance with the requisites of consignation.[26] It also disturbs a steady and stable status of proprietary rights, i.e., “x x x el acreedor tan solo, y no el juez, puede autorizar la variacion que para los derechos de aquel suponga la que se intente en el objeto, cuantia o forma de las obligaciones,[27] since parties are left guessing on whether the repurchase of the properties had been effected. In a broader sense, this uncertain state will only depress the market value of the land and virtually paralyze efforts of the landowner to meet his needs and obligations and realize the full value of his land.

Moreover, we do not think that respondents’ causes of action in Civil Case No. A-2032 are now barred by estoppel and laches. The essence of estoppel and laches is 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 the negligence or omission to assert a right within a reasonable time warranting a presumption that the party entitled to assert it either has abandoned or declined to assert it although there is no absolute rule as to what constitutes staleness of demand as each case is to be determined according to its particular circumstances.[28]

In the instant case, it was prudent and discerning for respondents and their predecessor-in-interest Mamerto Reyes that they deferred any action against petitioners, i.e., Civil Case No. A-2032, to recover ownership and possession of the three (3) pieces of real estate, until the finality of judgment in Civil Case No. A-245. For patiently electing not to inundate our courts of justice with cases the outcome of which may well depend upon the then pending civil suit, respondents cannot now be penalized by barring their complaint in Civil Case No. A-2032 on the equitable grounds of estoppel and laches.

We also find no reason to disturb our findings upon petitioners’ assertion that they were purchasers of the three (3) parcels of land in good faith and for value. As we held in David v. Bandin,the issue of good faith or bad faith of the buyer is relevant only where the subject of the sale is registered land and the purchaser is buying the same from the registered owner whose title to the land is clean x x x in such case the purchaser who relies on the clean title of the registered owner is protected if he is a purchaser in good faith for value.[29] Since the properties in question are unregistered lands, petitioners as subsequent buyers thereof did so at their peril. Their claim of having bought the land in good faith, i.e., without notice that some other person has a right to or interest in the property, would not protect them if it turns out, as it actually did in this case, that their seller did not own the property at the time of the sale.

At any rate, petitioners failed to discharge their burden of proof that they were purchasers of the three (3) parcels of land in good faith. For, as we ruled in Embrado v. Court of Appeals,[30] the burden of proving the status of a purchaser in good faith and for value lies upon him who asserts that status, which is not discharged by simply invoking the ordinary presumption of good faith, i.e., that everyone is presumed to act in good faith, since the good faith that is here essential is integral with the very status which must be established.

In the proceedings a quo, what is evident is the admitted fact of payment made by Mamerto Reyes as respondents’ predecessor-in-interest of the taxes on the properties prior to and at the time when the contracts of sale in favor of petitioner-spouses were perfected, which undoubtedly confirms the precedence of respondents’ possession of the parcels of land in question. This situation should have compelled petitioners to investigate the right of respondents over the properties before buying them, and in the absence of such inquiry, the rule is settled that a buyer in the same circumstances herein involved cannot claim to be a purchaser in good faith.

The absence of good faith on the part of petitioner-spouses Teofilo and Simeona Rayos in purchasing the three (3) parcels of unregistered land precludes the application of the rule on double sales enunciated in Art. 1544 of the Civil Code.[31] In any event, even if we apply Art. 1544, the facts would nonetheless show that respondents and their predecessor-in-interest registered first the source of their ownership and possession, i.e., the 1 September 1957 deed of sale with right to repurchase, held the oldest title, and possessed the real properties at the earliest time. Applying the doctrine of “priority in time, priority in rights” or “prius tempore, potior jure,” respondents are entitled to the ownership and possession of the parcels of land in dispute.

Finally, on the issue of damages, we agree with petitioners that respondents failed to prove their entitlement to actual damages for litigation expenses of P20,000.00, attorney’s fees of P10,000.00 and exemplary damages of P50,000.00 plus costs. No evidence to prove actual damages was offered in Civil Case No. A-2032 since the parties therein submitted the case for decision on the basis of their respective memoranda, hence no actual damages can be awarded.[32] In the same manner, there is no clear and convincing showing that petitioners acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner to warrant the imposition of exemplary damages in respondents’ favor.[33] In any event, exemplary damages cannot be adjudicated in the instant case since there is no award of moral, temperate or compensatory damages.[34]

Similarly, we cannot award attorney’s fees since there is no stipulation to grant the same nor were exemplary damages awarded or were improperly imposed as in the instant case.[35] It is appropriate to stress that the mere filing of a complaint does not ipso facto entitle a party to attorney’s fees since this act is a means sanctioned by law to protect rights and interests even if found subsequently to be unmeritorious.

WHEREFORE, the instant Petition for Review is DENIED. The assailed Decision of the Court of Appeals in CA-G.R. CV No. 55789 affirming in toto the Decision of the Regional Trial Court, Branch 54, Alaminos, Pangasinan in Civil Case No. A-2032, i.e., declaring void the Deeds of Absolute Sale executed by Francisco Tazal in favor of Blas Rayos, and by the latter in favor of Teofilo Rayos, and by Francisco Tazal in favor of Teofilo Rayos dated 22 June 1961, all encompassing the three (3) parcels of land sold under the Deeds of Sale with the Right to Repurchase, insofar as they authorized the transfer of ownership and possession thereof to petitioner-spouses Teofilo and Simeona Rayos; proclaiming respondents Donato Reyes, Saturnino Reyes, Tomasa R. Bustamante and Toribia R. Camelo who are heirs of Mamerto Reyes as absolute owners of the property in question free from all liens and encumbrances; and, ordering petitioner-spouses Teofilo and Simeona Rayos, petitioner George Rayos and Francisco Tazal and/or their agents or representatives to vacate and surrender the parcels of land in favor of respondents Donato Reyes, Saturnino Reyes, Tomasa R. Bustamante and Toribia R. Camelo, are AFFIRMED with the SOLE MODIFICATION that the award of actual damages for litigation expenses, attorney’s fees and exemplary damages plus costs is DELETED and SET ASIDE. No costs.

SO ORDERED.

Mendoza, Quisumbing, Austria-Martinez, and Callejo, Sr., JJ., concur.



[1] Record, p. 111.

[2] Id., p. 162.

[3] Id.

[4] Id., p. 79.

[5] Id., p. 9.

[6] Penned by Judge Gregorio A. Legaspi; id., p. 130.

[7] Docketed as CA-G.R. No. 32778-R.

[8] Docketed as No. L-36487.

[9] Resolution penned by Associate Justice Ramon G. Gaviola Jr. and concurred in by Associate Justices Ruperto G. Martin and Lourdes P. San Diego of the Seventh Division.

[10] Docketed as Civil Case No. A-2032.

[11] Penned by Judge Jules A. Mejia of RTC-Br. 54, Alaminos, Pangasinan.

[12] Record, pp. 168-173.

[13] Docketed as CA-G.R. CV No. 55789.

[14] Penned by then Associate Justice (now Court Administrator) Presbitero J. Velasco Jr. and concurred in by Associate Justices Bienvenido L. Reyes and Juan Q. Enriquez Jr. of the Special Twelfth Division.

[15] Soco v. Militante, 208 Phil. 151 (1983 ).

[16] Ponce De Leon v. Syjuco, 90 Phil. 311 (1951).

[17] Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., No. L-25885, 18 August 1972, 46 SCRA 381; Rustia v. Aguinaldo, 93 Phil. 729 (1953).

[18] The provision reads in part: “However, the vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right to repurchase.”

[19] See RTC Decision in Civil Case No. A-2032.

[20] Limkako v. Teodoro, 74 Phil. 313 (1943).

[21] Record, pp. 11-12.

[22] Id., p. 9.

[23] 92 Phil. 355 (1952).

[24] China Insurance and Surety Co. v. B.K. Berkenkotter, 83 Phil. 459 (1949).

[25] IV E.P. Caguioa, Comments and Cases in Civil Law, 372 (1983).

[26] See RTC Decision in Civil Case No. A-3032.

[27] China Insurance and Surety Co. v. B.K. Berkenkotter, supra at 462.

[28] Reyes v. Court of Appeals, G.R. No. 127608, 30 September 1999, 315 SCRA 626.

[29] G.R. No. 48322, 8 April 1987, 149 SCRA 140, 150-151; Sales v. Court of Appeals, G.R. No. 40145, 29 July 1992, 211 SCRA 858.

[30] G.R. No. 51457, 27 June 1994, 233 SCRA 355.

[31] This provision states: “If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.”

[32] Civil Code, art. 2199.

[33] Id., art. 2232.

[34] Id., art. 2234.

[35] Id., art. 2208.

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