Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
134971
On August 19, 1996, the petitioner filed a complaint with the Regional
Trial Court of San Fernando, Pampanga, Branch 44, against the
defendants-tenants, as well as the respondents, for the court to fix a
period within which to pay the agreed purchase price of P50.00 per
square meter to the defendants, as provided for in the Deeds of
Assignment. The petitioner also prayed for a writ of preliminary
injunction against the defendants and the respondents therein.10 The
case was docketed as Civil Case No. 10910.
In his complaint, the petitioner alleged, inter alia, the following:
4. That defendants Julio Tiamson, Renato Gozun, Rosita
Hernandez, Bienvenido Tongol, Alfonso Flores, Norma
Quiambao, Rosita Tolentino, Jose Sosa, Francisco Tolentino,
Sr., Emiliano Laxamana, Ruben Torres, Meliton Allanigue,
Dominga Laxamana, Felicencia de Leon, Emiliano Ramos
are original farmers or direct tillers of landholdings over
parcels of lands covered by Transfer Certificate of Title Nos.
35922-R, 35923-R and 35925-R which are registered in the
names of defendants LACSONS; while defendants Felino G.
Tolentino, Rica Gozun, Perla Gozun, Benigno Tolentino,
Rodolfo Quiambao, Roman Laxamana, Eddie San Luis,
Alfredo Gozun, Jose Tiamson, Augusto Tolentino, Sixto
Hernandez, Alex Quiambao, Isidro Tolentino, Ceferino de
Leon, Alberto Hernandez, and Aurelio Flores are sub-tenants
over the same parcel of land.
5. That on March 17, 1996 the defendants TIAMSON, et al.,
entered into Deeds of Assignment with the plaintiff by which
the defendants assigned all their rights and interests on their
landholdings to the plaintiff and that on the same date
(March 17, 1996), the defendants received from the plaintiff
partial payments in the amounts corresponding to their
names. Subsequent payments were also received:
1st
PAYMENT
1.Julio
Tiamson - - ---
2nd
PAYMENT
CHECK
NO.
TOTAL
P 20,000
P
10,621.54
P 10,000
96,000
P 5,000
14,374.24
231274
P 10,000
14,465.90
231285
24,465.90
5. Alfonso
Flores - - - --
P 30,000
26,648.40
231271
56,648.40
6. Norma
Quiambao ---
P 10,000
41,501.10
231279
51,501.10
7. Rosita
Tolentino - ---
P 10,000
22,126.08
231284
32,126.08
8. Jose
Sosa - - - - ----
P 10,000
14,861.31
231291
24,861.31
2. Renato
Gozun - - - -[son of Felix
Gozun
(deceased)]
3. Rosita
Hernandez --4.
Bienvenido
Tongol - - [Son of
Abundio
Tongol
(deceased)]
231281
P 30,621.54
106,000.00
P 19,374.24
9. Francisco
Tolentino,
Sr.
P 10,000
24,237.62
231283
34,237.62
34. Orlando
Florez
10,000
------
------
------
35. Aurelio
Flores
10,000
------
------
------
10. Emiliano
Laxamana -
P 10,000
11. Ruben
Torres - - - -[Son of
Mariano
Torres
(deceased)]
P 10,000
12. Meliton
Allanigue
P 10,000
12,944.77
231269
P
22,944.77
P 5,000
22,269.02
231275
27,269.02
10,000
------
------
------
15. Emiliano
Ramos
5,000
18,869.60
231280
23,869.60
16. Felino G.
Tolentino
10,000
------
------
------
17. Rica
Gozun
5,000
------
------
------
18. Perla
Gozun
10,000
------
------
------
19. Benigno
Tolentino
10,000
------
------
------
20. Rodolfo
Quiambao
10,000
------
------
------
21. Roman
Laxamana
10,000
------
------
------
22. Eddie
San Luis
10,000
------
------
------
23. Ricardo
Hernandez
10,000
------
------
------
24.
Nicenciana
Miranda
10,000
------
------
------
25. Jose
Gozun
10,000
------
------
------
5,000
------
------
------
10,000
------
------
------
28. Augusto
Tolentino
5,000
------
------
------
29. Sixto
Hernandez
10,000
------
------
------
30. Alex
Quiambao
10,000
------
------
------
31. Isidro
Tolentino
10,000
------
------
------
------
11,378.70
231270
------
10,000
------
------
------
13. Dominga
Laxamana
14.
Felicencia
de Leon
26. Alfredo
Sosa
27. Jose
Tiamson
32. Ceferino
de Leon
33. Alberto
Hernandez
------
P
33,587.31
------
------
------
P
43,587.31
New Civil Code, the respondents may enter into contracts covering
their property with another under such terms and conditions as they
may deem beneficial provided they are not contrary to law, morals,
good conduct, public order or public policy.
The respondents cannot be enjoined from selling or encumbering their
property simply and merely because they had executed Deeds of
Assignment in favor of the petitioner, obliging themselves to assign and
transfer their rights or interests as agricultural farmers/laborers/subtenants over the landholding, and granting the petitioner the exclusive
right to buy the property subject to the occurrence of certain conditions.
The respondents were not parties to the said deeds. There is no
evidence that the respondents agreed, expressly or impliedly, to the
said deeds or to the terms and conditions set forth therein. Indeed,
they assailed the validity of the said deeds on their claim that the same
were contrary to the letter and spirit of P.D. No. 27 and Rep. Act No.
6657. The petitioner even admitted when he testified that he did not
know any of the respondents, and that he had not met any of them
before he filed his complaint in the RTC. He did not even know that
one of those whom he had impleaded as defendant, Angelica Vda. de
Lacson, was already dead.
ATTY. OCAMPO:
COURT:
WITNESS:
said defendants-tenants did not want to have any problem with the
respondents who could cause their eviction for executing with the
petitioner the deeds of assignment as the said deeds are in violation of
P.D. No. 27 and Rep. Act No. 6657.49 The defendants-tenants did not
allege therein that the respondents induced them to breach their
contracts with the petitioner. The petitioner himself admitted when he
testified that his claim that the respondents induced the defendantsassignees to violate contracts with him was based merely on what "he
heard," thus:
Q: Going to your last statement that the Lacsons induces
(sic) the defendants, did you see that the Lacsons were
inducing the defendants?
A: I heard and sometime in [the] first week of August, sir,
they went in the barrio (sic). As a matter of fact, that is the
reason why they sent me letter that they will sell it to the
Lacsons.
Q: Incidentally, do you knew (sic) these Lacsons
individually?
A: No, sir, it was only Mr. Espinosa who I knew (sic)
personally, the alleged negotiator and has the authority to
sell the property.50
Even if the respondents received an offer from the defendants-tenants
to assign and transfer their rights and interests on the landholding, the
respondents cannot be enjoined from entertaining the said offer, or
even negotiating with the defendants-tenants. The respondents could
not even be expected to warn the defendants-tenants for executing the
said deeds in violation of P.D. No. 27 and Rep. Act No. 6657. Under
Section 22 of the latter law, beneficiaries under P.D. No. 27 who have
culpably sold, disposed of, or abandoned their land, are disqualified
from becoming beneficiaries.
From the pleadings of the petitioner, it is quite evident that his purpose
in having the defendants-tenants execute the Deeds of Assignment in
his favor was to acquire the landholding without any tenants thereon, in
the event that the respondents agreed to sell the property to him. The
petitioner knew that under Section 11 of Rep. Act No. 3844, if the
respondents agreed to sell the property, the defendants-tenants shall
have preferential right to buy the same under reasonable terms and
conditions:
SECTION 11. Lessees Right of Pre-emption. In case the agricultural
lessor desires to sell the landholding, the agricultural lessee shall have
the preferential right to buy the same under reasonable terms and
conditions: Provided, That the entire landholding offered for sale must
be pre-empted by the Land Authority if the landowner so desires,
unless the majority of the lessees object to such acquisition: Provided,
further, That where there are two or more agricultural lessees, each
shall be entitled to said preferential right only to the extent of the area
actually cultivated by him. 51
Under Section 12 of the law, if the property was sold to a third person
without the knowledge of the tenants thereon, the latter shall have the
right to redeem the same at a reasonable price and consideration. By
assigning their rights and interests on the landholding under the deeds
of assignment in favor of the petitioner, the defendants-tenants thereby
waived, in favor of the petitioner, who is not a beneficiary under
Section 22 of Rep. Act No. 6657, their rights of preemption or
redemption under Rep. Act No. 3844. The defendants-tenants would
then have to vacate the property in favor of the petitioner upon full
payment of the purchase price. Instead of acquiring ownership of the
portions of the landholding respectively tilled by them, the defendantstenants would again become landless for a measly sum of P50.00 per
square meter. The petitioners scheme is subversive, not only of public
policy, but also of the letter and spirit of the agrarian laws. That the
scheme of the petitioner had yet to take effect in the future or ten years
hence is not a justification. The respondents may well argue that the
agrarian laws had been violated by the defendants-tenants and the
petitioner by the mere execution of the deeds of assignment. In fact,
the petitioner has implemented the deeds by paying the defendantstenants amounts of money and even sought their immediate
2. On July 28, 1988, Jose and Dominador Jimenez sold their share
consisting of one-half of said parcel of land, specifically the eastern
portion thereof, to herein petitioner pursuant to a "Kasulatan sa Bilihan
ng Lupa." 3Subsequently, a "Confirmatory Extrajudicial Partition
Agreement" 4 was executed by the Jimenezes, wherein the eastern
portion of the subject lot, with an area of 8,855 square meters was
adjudicated to Jose and Dominador Jimenez, while the western portion
was allocated to herein private respondents.
3. Thereafter, herein petitioner expressed interest in buying the
western portion of the property from private respondents. Accordingly,
on November 25, 1989, an "Exclusive Option to Purchase" 5 was
executed between petitioner and private respondents, under the
following terms and conditions:
1. The selling price of said 8,655 square meters of
the subject property is TWO MILLION EIGHT
HUNDRED FIFTY SIX THOUSAND ONE
HUNDRED FIFTY PESOS ONLY (P2,856,150.00)
2. The sum of P50,000.00 which we received from
ADELFA PROPERTIES, INC. as an option money
shall be credited as partial payment upon the
consummation of the sale and the balance in the
sum of TWO MILLION EIGHT HUNDRED SIX
THOUSAND ONE HUNDRED FIFTY PESOS
(P2,806,150.00) to be paid on or before November
30, 1989;
3. In case of default on the part of ADELFA
PROPERTIES, INC. to pay said balance in
accordance with paragraph 2 hereof, this option
shall be cancelled and 50% of the option money to
be forfeited in our favor and we will refund the
remaining 50% of said money upon the sale of
said property to a third party;
REGALADO, J.:
The main issues presented for resolution in this petition for review
on certiorari of the judgment of respondent Court of appeals, dated
April 6, 1993, in CA-G.R. CV No. 34767 1 are (1) whether of not the
"Exclusive Option to Purchase" executed between petitioner Adelfa
Properties, Inc. and private respondents Rosario Jimenez-Castaeda
and Salud Jimenez is an option contract; and (2) whether or not there
was a valid suspension of payment of the purchase price by said
petitioner, and the legal effects thereof on the contractual relations of
the parties.
The records disclose the following antecedent facts which culminated
in the present appellate review, to wit:
1. Herein private respondents and their brothers, Jose and Dominador
Jimenez, were the registered co-owners of a parcel of land consisting
of 17,710 square meters, covered by Transfer Certificate of Title (TCT)
No. 309773, 2situated in Barrio Culasi, Las Pias, Metro Manila.
the owner of the property the right to sell or demand a sale. It is also
sometimes called an "unaccepted offer." An option is not of itself a
purchase, but merely secures the privilege to buy. 22 It is not a sale of
property but a sale of property but a sale of the right to purchase. 23 It
is simply a contract by which the owner of property agrees with another
person that he shall have the right to buy his property at a fixed price
within a certain time. He does not sell his land; he does not then agree
to sell it; but he does sell something, that it is, the right or privilege to
buy at the election or option of the other party. 24 Its distinguishing
characteristic is that it imposes no binding obligation on the person
holding the option, aside from the consideration for the offer. Until
acceptance, it is not, properly speaking, a contract, and does not vest,
transfer, or agree to transfer, any title to, or any interest or right in the
subject matter, but is merely a contract by which the owner of property
gives the optionee the right or privilege of accepting the offer and
buying the property on certain terms. 25
On the other hand, a contract, like a contract to sell, involves a meeting
of minds two persons whereby one binds himself, with respect to the
other, to give something or to render some service. 26 Contracts, in
general, are perfected by mere consent, 27 which is manifested by the
meeting of the offer and the acceptance upon the thing and the cause
which are to constitute the contract. The offer must be certain and the
acceptance absolute. 28
The distinction between an "option" and a contract of sale is that an
option is an unaccepted offer. It states the terms and conditions on
which the owner is willing to sell the land, if the holder elects to accept
them within the time limited. If the holder does so elect, he must give
notice to the other party, and the accepted offer thereupon becomes a
valid and binding contract. If an acceptance is not made within the time
fixed, the owner is no longer bound by his offer, and the option is at an
end. A contract of sale, on the other hand, fixes definitely the relative
rights and obligations of both parties at the time of its execution. The
offer and the acceptance are concurrent, since the minds of the
contracting parties meet in the terms of the agreement. 29
A perusal of the contract in this case, as well as the oral and
documentary evidence presented by the parties, readily shows that
there is indeed a concurrence of petitioner's offer to buy and private
respondents' acceptance thereof. The rule is that except where a
formal acceptance is so required, although the acceptance must be
affirmatively and clearly made and must be evidenced by some acts or
conduct communicated to the offeror, it may be made either in a formal
or an informal manner, and may be shown by acts, conduct, or words
of the accepting party that clearly manifest a present intention or
determination to accept the offer to buy or sell. Thus, acceptance may
be shown by the acts, conduct, or words of a party recognizing the
existence of the contract of sale. 30
The records also show that private respondents accepted the offer of
petitioner to buy their property under the terms of their contract. At the
time petitioner made its offer, private respondents suggested that their
transfer certificate of title be first reconstituted, to which petitioner
agreed. As a matter of fact, it was petitioner's counsel, Atty. Bayani L.
Bernardo, who assisted private respondents in filing a petition for
reconstitution. After the title was reconstituted, the parties agreed that
petitioner would pay either in cash or manager's check the amount of
P2,856,150.00 for the lot. Petitioner was supposed to pay the same on
November 25, 1989, but it later offered to make a down payment of
P50,000.00, with the balance of P2,806,150.00 to be paid on or before
November 30, 1989. Private respondents agreed to the counter-offer
made by petitioner. 31 As a result, the so-called exclusive option to
purchase was prepared by petitioner and was subsequently signed by
private respondents, thereby creating a perfected contract to sell
between them.
It cannot be gainsaid that the offer to buy a specific piece of land was
definite and certain, while the acceptance thereof was absolute and
without any condition or qualification. The agreement as to the object,
the price of the property, and the terms of payment was clear and welldefined. No other significance could be given to such acts that than
they were meant to finalize and perfect the transaction. The parties
even went beyond the basic requirements of the law by stipulating that
"all expenses including the corresponding capital gains tax, cost of
documentary stamps are for the account of the vendors, and expenses
for the registration of the deed of sale in the Registry of Deeds are for
the account of Adelfa properties, Inc." Hence, there was nothing left to
be done except the performance of the respective obligations of the
parties.
We do not subscribe to private respondents' submission, which was
upheld by both the trial court and respondent court of appeals, that the
offer of petitioner to deduct P500,000.00, (later reduced to
P300,000.00) from the purchase price for the settlement of the civil
case was tantamount to a counter-offer. It must be stressed that there
already existed a perfected contract between the parties at the time the
alleged counter-offer was made. Thus, any new offer by a party
becomes binding only when it is accepted by the other. In the case of
private respondents, they actually refused to concur in said offer of
petitioner, by reason of which the original terms of the contract
continued to be enforceable.
At any rate, the same cannot be considered a counter-offer for the
simple reason that petitioner's sole purpose was to settle the civil case
in order that it could already comply with its obligation. In fact, it was
even indicative of a desire by petitioner to immediately comply
therewith, except that it was being prevented from doing so because of
the filing of the civil case which, it believed in good faith, rendered
compliance improbable at that time. In addition, no inference can be
drawn from that suggestion given by petitioner that it was totally
abandoning the original contract.
More importantly, it will be noted that the failure of petitioner to pay the
balance of the purchase price within the agreed period was attributed
by private respondents to "lack of word of honor" on the part of the
former. The reason of "lack of word of honor" is to us a clear indication
that private respondents considered petitioner already bound by its
obligation to pay the balance of the consideration. In effect, private
respondents were demanding or exacting fulfillment of the obligation
from herein petitioner. with the arrival of the period agreed upon by the
parties, petitioner was supposed to comply with the obligation
incumbent upon it to perform, not merely to exercise an option or a
right to buy the property.
The obligation of petitioner on November 30, 1993 consisted of an
obligation to give something, that is, the payment of the purchase
price. The contract did not simply give petitioner the discretion to pay
for the property. 32It will be noted that there is nothing in the said
contract to show that petitioner was merely given a certain period
within which to exercise its privilege to buy. The agreed period was
intended to give time to herein petitioner within which to fulfill and
comply with its obligation, that is, to pay the balance of the purchase
price. No evidence was presented by private respondents to prove
otherwise.
The test in determining whether a contract is a "contract of sale or
purchase" or a mere "option" is whether or not the agreement could be
specifically enforced. 33 There is no doubt that the obligation of
petitioner to pay the purchase price is specific, definite and certain, and
consequently binding and enforceable. Had private respondents
chosen to enforce the contract, they could have specifically compelled
petitioner to pay the balance of P2,806,150.00. This is distinctly made
manifest in the contract itself as an integral stipulation, compliance with
MEDIALDEA, J.:p
This is a petition for review on certiorari of the decision of the Court of
Appeals in CA-G.R. No. 24176 entitled, "Spouses Julio Villamor and
Marina Villamor, Plaintiffs-Appellees, versus Spouses Macaria Labingisa Reyes and Roberto Reyes, Defendants-Appellants," which
reversed the decision of the Regional Trial Court (Branch 121) at
Caloocan City in Civil Case No. C-12942.
DEED OF OPTION
With My Conformity:
WITNESSETH
Under Article 1144 (1) of the Civil Code, actions upon written contract
must be brought within ten (10) years. The Deed of Option was
executed on November 11, 1971. The acceptance, as already
mentioned, was also accepted in the same instrument. The complaint
in this case was filed by the petitioners on July 13, 1987, seventeen
(17) years from the time of the execution of the contract. Hence, the
right of action had prescribed. There were allegations by the petitioners
that they demanded from the private respondents as early as 1984 the
enforcement of their rights under the contract. Still, it was beyond the
ten (10) years period prescribed by the Civil Code. In the case
of Santos v. Ganayo,
L-31854, September 9, 1982, 116 SCRA 431, this Court affirming and
subscribing to the observations of the courta quo held, thus:
... Assuming that Rosa Ganayo, the oppositor
herein, had the right based on the Agreement to
Convey and Transfer as contained in Exhibits '1'
and '1-A', her failure or the abandonment of her
right to file an action against Pulmano Molintas
when he was still a co-owner of the on-half (1/2)
portion of the 10,000 square meters is now barred
by laches and/or prescribed by law because she
failed to bring such action within ten (10) years
from the date of the written agreement in 1941,
pursuant to Art. 1144 of the New Civil Code, so
that when she filed the adverse claim through her
counsel in 1959 she had absolutely no more right
whatsoever on the same, having been barred by
laches.
It is of judicial notice that the price of real estate in Metro Manila is
continuously on the rise. To allow the petitioner to demand the delivery
of the property subject of this case thirteen (13) years or seventeen
(17) years after the execution of the deed at the price of only P70.00
per square meter is inequitous. For reasons also of equity and in
consideration of the fact that the private respondents have no other
decent place to live, this Court, in the exercise of its equity jurisdiction
is not inclined to grant petitioners' prayer.
ACCORDINGLY, the petition is DENIED. The decision of respondent
appellate court is AFFIRMED for reasons cited in this decision.
Judgement is rendered dismissing the complaint in Civil Case No. C12942 on the ground of prescription and laches.
SO ORDERED.
G.R. No. L-25494 June 14, 1972
NICOLAS SANCHEZ, plaintiff-appellee,
vs.
SEVERINA RIGOS, defendant-appellant.
Santiago F. Bautista for plaintiff-appellee.
Jesus G. Villamar for defendant-appellant.
CONCEPCION, C.J.:p
Appeal from a decision of the Court of First Instance of Nueva Ecija to
the Court of Appeals, which certified the case to Us, upon the ground
that it involves a question purely of law.
The record shows that, on April 3, 1961, plaintiff Nicolas Sanchez and
defendant Severina Rigos executed an instrument entitled "Option to
Purchase," whereby Mrs. Rigos "agreed, promised and committed ... to
sell" to Sanchez the sum of P1,510.00, a parcel of land situated in the
barrios of Abar and Sibot, municipality of San Jose, province of Nueva
Ecija, and more particularly described in Transfer Certificate of Title
No. NT-12528 of said province, within two (2) years from said date with
the understanding that said option shall be deemed "terminated and
elapsed," if "Sanchez shall fail to exercise his right to buy the property"
within the stipulated period. Inasmuch as several tenders of payment
of the sum of Pl,510.00, made by Sanchez within said period, were
rejected by Mrs. Rigos, on March 12, 1963, the former deposited said
amount with the Court of First Instance of Nueva Ecija and
commenced against the latter the present action, for specific
performance and damages.
After the filing of defendant's answer admitting some allegations of
the complaint, denying other allegations thereof, and alleging, as
special defense, that the contract between the parties "is a unilateral
promise to sell, and the same being unsupported by any valuable
consideration, by force of the New Civil Code, is null and void" on
February 11, 1964, both parties, assisted by their respective counsel,
jointly moved for a judgment on the pleadings. Accordingly, on
February 28, 1964, the lower court rendered judgment for Sanchez,
ordering Mrs. Rigos to accept the sum judicially consigned by him and
to execute, in his favor, the requisite deed of conveyance. Mrs. Rigos
was, likewise, sentenced to pay P200.00, as attorney's fees, and other
costs. Hence, this appeal by Mrs. Rigos.
This case admittedly hinges on the proper application of Article 1479 of
our Civil Code, which provides:
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.
In his complaint, plaintiff alleges that, by virtue of the option under
consideration, "defendant agreed and committed to sell" and "the
plaintiff agreed and committed to buy" the land described in the option,
copy of which was annexed to said pleading as Annex A thereof and is
quoted on the margin. 1 Hence, plaintiff maintains that the promise
contained in the contract is "reciprocally demandable," pursuant to the
first paragraph of said Article 1479. Although defendant had really
"agreed, promised and committed" herself to sell the land to the
plaintiff, it is not true that the latter had, in turn, "agreed and committed
himself " to buy said property. Said Annex A does not bear out plaintiff's
allegation to this effect. What is more, since Annex A has been made
"an integral part" of his complaint, the provisions of said instrument
form part "and parcel" 2 of said pleading.
The option did not impose upon plaintiff the obligation to
purchase defendant's property. Annex A is not a "contract to buy and
sell." It merely granted plaintiff an "option" to buy. And both parties so
understood it, as indicated by the caption, "Option to Purchase," given
by them to said instrument. Under the provisions thereof, the
defendant "agreed, promised and committed" herself to sell the land
therein described to the plaintiff for P1,510.00, but there is nothing in
the contract to indicate that her aforementioned agreement, promise
and undertaking is supported by a consideration "distinct from the
price" stipulated for the sale of the land.
IT IS SO ORDERED.
G.R. No. 126454
DECISION
AZCUNA, J.:
This petition for review on certiorari seeks to annul the Decision1 dated
August 7, 1996, of the Court of Appeals in CA-G.R. CV No. 45956, and
its Resolution2 dated September 12, 1996, denying reconsideration of
the decision. In the questioned issuances, the Court of Appeals
affirmed the Decision3 dated June 8, 1993, of the Regional Trial Court
of Manila, Branch 3, in Civil Case No. 90-55437.
The antecedents are:
On June 7, 1985, the Bible Baptist Church (petitioner Baptist Church)
entered into a contract of lease4 with Mr. & Mrs. Elmer Tito Medina
Villanueva (respondent spouses Villanueva). The latter are the
registered owners of a property located at No. 2436 (formerly 2424)
Leon Guinto St., Malate, Manila. The pertinent stipulations in the lease
contract were:
1. That the LESSOR lets and leases to the LESSEE a store
space known as 2424 Leon Guinto Sr. St., Malate, Manila, of
which property the LESSOR is the registered owner in
accordance with the Land Registration Act.
2. That the lease shall take effect on June 7, 1985 and shall
be for the period of Fifteen (15) years.
3. That LESSEE shall pay the LESSOR within five (5) days
of each calendar month, beginning Twelve (12) months from
the date of this agreement, a monthly rental of Ten Thousand
Pesos (P10,000.00) Philippine Currency, plus 10%
escalation clause per year starting on June 7, 1988.
4. That upon signing of the LEASE AGREEMENT, the
LESSEE shall pay the sum of Eighty Four Thousand Pesos
(P84,000.00) Philippine Currency. Said sum is to be paid
directly to the Rural Bank, Valenzuela, Bulacan for the
purpose of redemption of said property which is mortgaged
by the LESSOR.
5. That the title will remain in the safe keeping of the Bible
Baptist Church, Malate, Metro Manila until the expiration of
the lease agreement or the leased premises be purchased
by the LESSEE, whichever comes first. In the event that the
said title will be lost or destroyed while in the possession of
the LESSEE, the LESSEE agrees to pay all costs involved
for the re-issuance of the title.
6. That the leased premises may be renovated by the
LESSEE, to the satisfaction of the LESSEE to be fit and
usable as a Church.
7. That the LESSOR will remove all other tenants from the
leased premises no later than March 15, 1986. It is further
agreed that if those tenants are not vacated by June 1, 1986,
the rental will be lowered by the sum of Three Thousand
Pesos (P3,000.00) per month until said tenants have left the
leased premises.
8. That the LESSEE has the option to buy the leased
premises during the Fifteen (15) years of the lease. If the
LESSEE decides to purchase the premises the terms will be:
A) A selling Price of One Million Eight Hundred Thousand
Pesos (P1.8 million), Philippine Currency. B) A down
payment agreed upon by both parties. C) The balance of the
selling price may be paid at the rate of One Hundred Twenty
Thousand Pesos (P120,000.00), Philippine Currency, per
year.
x x x.5
The foregoing stipulations of the lease contract are the subject of the
present controversy.
Although the same lease contract resulted in several cases6 filed
between the same parties herein, petitioner submits, for this Court's
review, only the following errors allegedly committed by the Court of
Appeals:
a) Respondent Court of Appeals erred in finding that the
option to buy granted the petitioner Baptist Church under its
contract of lease with the Villanuevas did not have a
consideration and, therefore, did not bind the latter;
b) [R]espondent court again also erred in finding that the
option to buy did not have a fixed price agreed upon by the
parties for the purchase of the property; and
c) [F]inally, respondent court erred in not awarding
petitioners Baptist Church and its pastor attorney's fees.7
In sum, this Court has three issues to resolve: 1) Whether or not the
option to buy given to the Baptist Church is founded upon a
consideration; 2) Whether or not by the terms of the lease agreement,
a price certain for the purchase of the land had been fixed; and 3)
Whether or not the Baptist Church is entitled to an award for attorney's
fees.
The stipulation in the lease contract which purportedly gives the lessee
an option to buy the leased premises at any time within the duration of
the lease, is found in paragraph 8 of the lease contract, viz:
8. That the LESSEE has the option to buy the leased
premises during the Fifteen (15) years of the lease. If the
LESSEE decides to purchase the premises the terms will be:
A) A selling Price of One Million Eight Hundred Thousand
Pesos (P1.8 million), Philippine Currency. B) A down
payment agreed upon by both parties. C) The balance of the
selling price may be paid at the rate of One Hundred Twenty
Thousand Pesos (P120,000.00), Philippine Currency, per
year.
Under Article 1479 of the Civil Code, it is provided:
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.
The second paragraph of Article 1479 provides for the definition and
consequent rights and obligations under an option contract. For an
This Court also notes that in the present case both the Regional Trial
Court and the Court of Appeals agree that the option was not founded
upon a separate and distinct consideration and that, hence,
respondents Villanuevas cannot be compelled to sell their property to
petitioner Baptist Church.
The Regional Trial Court found that "[a]ll payments made under the
contract of lease were for rentals. No money [was] ever exchanged for
and in consideration of the option." Hence, the Regional Trial Court
found the action of the Baptist Church to be "premature and without
basis to compel the defendant to sell the leased premises." The
Regional Trial Court consequently ruled:
It can be seen that the Court found that the buyer/optionee had parted
with something of value, which was the amount he paid over and
above the actual prevailing price of the land. Such amount, different
from the price of the land subject of the option, was deemed sufficient
and distinct consideration supporting the option contract. Moreover, the
parties stated the same in their contract.
Villamor is distinct from the present case because, First, this Court
cannot find that petitioner Baptist Church parted with anything of value,
aside from the amount of P84,000 which was in fact eventually utilized
as rental payments. Second, there is no document that contains an
agreement between the parties that petitioner Baptist Church's
supposed rescue of the mortgaged property was the consideration
which the parties contemplated in support of the option clause in the
contract. As previously stated, the amount advanced had been fully
utilized as rental payments over a period of one year. While the
Villanuevas may have them to thank for extending the payment at a
time of need, this is not the separate consideration contemplated by
law.
Noting that the option clause was part of a lease contract, this Court
looked into its previous ruling in the early case of Vda. De Quirino v.
Palarca,17 where the Court did say that "in reciprocal contracts, like the
one in question,18 the obligation or promise of each party is the
consideration for that of the other."19 However, it must be noted that in
that case, it was also expressly stated in the deed that should there be
failure to exercise the option to buy the property, the optionee
undertakes to sell the building and/or improvements he has made on
the premises. In addition, the optionee had also been paying an
amount of rent that was quite high and in fact turned out to be too
burdensome that there was a subsequent agreement to reduce said
rentals. The Court found that "the amount of rentals agreed upon x x x
which amount turned out to be so burdensome upon the lessee, that
the lessor agreed, five years later, to reduce it as well as the building
and/or improvements contemplated to be constructed and/or
introduced by the lessee, were, undoubtedly, part of the consideration
for his option to purchase the leased premises."20
Again, this Court notes that the parties therein clearly stipulated in their
contract that there was an undertaking on the part of the optionee to
sell the improvements made on the property if the option was not
exercised. Such is a valuable consideration that could support the
option contract. Moreover, there was the excessive rental payments
that the optionee paid for five years, which the Court also took into
account in deciding that there was a separate consideration supporting
the option.
To summarize the rules, an option contract needs to be supported by a
separate consideration. The consideration need not be monetary but
could consist of other things or undertakings. However, if the
consideration is not monetary, these must be things or undertakings of
value, in view of the onerous nature of the contract of option.
Furthermore, when a consideration for an option contract is not
monetary, said consideration must be clearly specified as such in the
option contract or clause.
On appeal, the Court of Appeals agreed with the Regional Trial Court
and found that the option to buy the leased premises was not binding
upon the Villanuevas for non-compliance with Article 1479. It found that
said option was not supported by a consideration as "no money was
ever really exchanged for and in consideration of the option." In
addition, the appellate court determined that in the instant case, "the
price for the object is not yet certain." Thus, the Court of Appeals
affirmed the Regional Trial Court decision and dismissed the appeal for
lack of merit.22
Having found that the option to buy granted to the petitioner Baptist
Church was not founded upon a separate consideration, and hence,
not enforceable against respondents, this Court finds no need to
discuss whether a price certain had been fixed as the purchase price.
Anent the claim for attorney's fees, it is stipulated in paragraph 13 of
the lease agreement that in the event of failure of either of the parties
to comply with any of the conditions of the agreement, the aggrieved
party can collect reasonable attorney's fees.23
In view of this Court's finding that the option contract is not enforceable
for being without consideration, the respondents Villanueva spouses'
refusal to comply with it cannot be the basis of a claim for attorney's
fees.
Hence, this Court agrees with as the Court of Appeals, which affirmed
the findings of the Regional Trial Court, that such claim is to be
dismissed for lack of factual and legal basis.
WHEREFORE, the Decision and Resolution of the Court of Appeals
subject of the petition are hereby AFFIRMED.
No costs.
SO ORDERED.
The Court of Appeals, applying the principles laid down in the case of
Sanchez v. Rigos, 45 SCRA 368 [1972] decided in favor of the private
respondents.
In the Sanchez case, plaintiff-appellee Nicolas Sanchez and
defendant-appellant Severino Rigos executed a document entitled
"Option to Purchase," whereby Mrs. Rigos "agreed, promised and
committed . . . to sell" to Sanchez for the sum of P1,510.00, a
registered parcel of land within 2 years from execution of the document
with the condition that said option shall be deemed "terminated and
lapsed," if "Sanchez shall fail to exercise his right to buy the property"
within the stipulated period. In the same document,
Sanchez" . . . hereby agree and conform with all the conditions set
forth in the option to purchase executed in my favor, that I bind myself
with all the terms and conditions." (Emphasis supplied) The notarized
document was signed both by Sanchez and Rigos.
Furthermore, an option is
unilateral: a promise to sell at
the price fixed whenever the
offeree should decide to
exercise his option within the
specified time. After accepting
the promise and before he
exercises his option, the
holder of the option is not
bound to buy. He is free either
to buy or not to buy later. In
this case however, upon
accepting herein petitioner's
offer a bilateral promise to sell
and to buy ensued, and the
respondent ipso
facto assumed the obligation
of a purchaser. He did not just
get the right subsequently to
buy or not to buy. It was not a
mere option then; it was
bilateral contract of sale.
Therefore, in order that the Sanchez case can be applied, the evidence
must show that the private respondents accepted the right to
repurchase.
The record, however, does not show that the private respondents
accepted the "Right to Repurchase" the land in question. We disagree
with the appellate court's finding that the private respondents accepted
the "right to repurchase" under the following circumstances: . . as
evidenced by the annotation and registration of the same on the back
of the transfer of certificate of title in the name of appellants. As vividly
appearing therein, it was signed by appellant himself and witnessed by
his wife so that for all intents and purposes the Vasquez spouses are
estopped from disregarding its obvious purpose and intention."
The annotation and registration of the right to repurchase at the back
of the certificate of title of the petitioners can not be considered
as acceptance of the right to repurchase. Annotation at the back of the
certificate of title of registered land is for the purpose
of binding purchasers of such registered land. Thus, we ruled in the
case of Bel Air Village Association, Inc. v. Dionisio (174 SCRA 589
[1989]), citing Tanchoco v. Aquino (154 SCRA 1 [1987]),
and Constantino v. Espiritu (45 SCRA 557 [1972]) that purchasers of a
registered land are bound by the annotations found at the back of the
certificate of title covering the subject parcel of land. In effect, the
annotation of the right to repurchase found at the back of the certificate
of title over the subject parcel of land of the private respondents only
served as notice of the existence of such unilateral promise of the
petitioners to resell the same to the private respondents. This,
however, can not be equated with acceptance of such right to
repurchase by the private respondent.
Neither can the signature of the petitioners in the document called
"right to repurchase" signify acceptance of the right to repurchase. The
respondents did not sign the offer. Acceptance should be made by the
promisee, in this case, the private respondents and not the promisors,
the petitioners herein. It would be absurd to require the promisor of an
option to buy to accept his own offer instead of the promisee to whom
the option to buy is given.
Furthermore, the actions of the private respondents (a) filing a
complaint to compel re-sale and their demands for resale prior to filing
of the complaint cannot be considered acceptance. As stated in Vda.
de Zulueta v. Octaviano (121 SCRA 314 [1983]):
And even granting, arguendo that the sale was
a pacto de retro sale, the evidence shows that
Olimpia, through her lawyer, opted to repurchase
the land only on 16 February 1962, approximately
two years beyond the stipulated period, that is not
later than May, 1960.
If Olimpia could not locate Aurelio, as she
contends, and based on her allegation that the
contract between her was one of sale with right to
repurchase, neither, however, did she tender the
redemption price to private respondent Isauro, but
merely wrote him letters expressing her readiness
to repurchase the property.
It is clear that the mere sending of letters by the
vendor expressing his desire to repurchase the
property without accompanying tender of the
redemption price fell short of the requirements of
law. (Lee v. Court of Appeals, 68 SCRA 197
[1972])
bill of attainder. In the alternative, should the trial court adjudge the
memorandum order as valid, GHRC contended that its existing right
must still be respected by allowing it to purchase the leased
premises.13
On June 13, 1988, before the expiration of the ten (10)-year period
under the second lease contract, GHRC wrote a letter to NDC
indicating its exercise of the option to renew the lease for another ten
(10) years. As no response was received from NDC, GHRC sent
another letter on August 12, 1988, reiterating its desire to renew the
contract and also requesting for priority to negotiate for its purchase
should NDC opt to sell the leased premises.6 NDC still did not reply but
continued to accept rental payments from GHRC and allowed the latter
to remain in possession of the property.
Pre-trial was set but was suspended upon agreement of the parties to
await the final resolution of a similar case involving NDC, PUP and
another lessee of NDC, Firestone Ceramics, Inc. (Firestone), then
pending before the RTC of Pasay City.14
WHEREFORE, the petitions in G.R. No. 143513 and G.R. No. 143590
are DENIED. Inasmuch as the first contract of lease fixed the area of
the leased premises at 2.90118 hectares while the second contract
placed it at 2.60 hectares, let a ground survey of the leased premises
be immediately conducted by a duly licensed, registered surveyor at
the expense of private respondent FIRESTONE CERAMICS, INC.,
within two (2) months from the finality of the judgment in this case.
Thereafter, private respondent FIRESTONE CERAMICS, INC., shall
have six (6) months from receipt of the approved survey within which
to exercise its right to purchase the leased property at P1,500.00 per
square meter, and petitioner Polytechnic University of the Philippines is
ordered to reconvey the property to FIRESTONE CERAMICS, INC., in
the exercise of its right of first refusal upon payment of the purchase
price thereof.
SO ORDERED.16
The RTC resumed the proceedings and when mediation and pre-trial
failed to settle the case amicably, trial on the merits ensued.17
On November 25, 2004, the RTC rendered its decision upholding the
right of first refusal granted to GHRC under its lease contract with NDC
and ordering PUP to reconvey the said portion of the property in favor
of GHRC. The dispositive portion reads:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiff and against the defendants ordering the plaintiff to
cause immediate ground survey of the premises subject of the leased
contract under Lease Contract No. C-33-77 and C-12-78 measuring
2,407 and 3,222.8 square meters respectively, by a duly licensed and
registered surveyor at the expense of the plaintiff within two months
from receipt of this Decision and thereafter, the plaintiff shall have six
(6) months from receipt of the approved survey within which to
exercise its right to purchase the leased property at P554.74 per
square meter. And finally, the defendant PUP, in whose name the
property is titled, is hereby ordered to reconvey the aforesaid property
to the plaintiff in the exercise of its right of its option to buy or first
refusal upon payment of the purchase price thereof.
The defendant NDC is hereby further ordered to pay the plaintiff
attorneys fees in the amount of P100,000.00.
The case against defendant Executive Secretary is dismissed and this
decision shall bind defendant Metropolitan Trial Court, Branch 20 of
Manila.
With costs against defendants NDC and PUP.
SO ORDERED.18
NDC and PUP separately appealed the decision to the CA.19 By
Decision of June 25, 2008, the CA affirmed in toto the decision of the
RTC.20
Both the RTC and the CA applied this Courts ruling in Polytechnic
University of the Philippines v. Court of Appeals (supra), considering
that GHRC is similarly situated as a lessee of NDC whose right of first
refusal under the lease contract was violated by the sale of the
property to PUP without NDC having first offered to sell the same to
GHRC despite the latters request for the renewal of the lease and/or
to purchase the leased premises prior to the expiration of the second
lease contract. The CA further agreed with the RTCs finding that there
was an implied renewal of the lease upon the failure of NDC to act on
GHRCs repeated requests for renewal of the lease contract, both
verbal and written, and continuing to accept monthly rental payments
from GHRC which was allowed to continue in possession of the leased
premises.
The CA also rejected the argument of NDC and PUP that even
assuming that GHRC had the right of first refusal, said right pertained
only to the second lease contract, C-12-78 covering 3,222.80 square
meters, and not to the first lease contract, C-33-77 covering 2,407
square meters, which had already expired. It sustained the RTCs
finding that the two (2) lease contracts were interrelated because each
formed part of GHRCs industrial complex, such that business
operations would be rendered useless and inoperative if the first
contract were to be detached from the other, as similarly held in the
afore-mentioned case of Polytechnic University of the Philippines v.
Court of Appeals.
Petitioner PUP argues that respondents right to exercise the option to
purchase had expired with the termination of the original contract of
lease and was not carried over to the subsequent implied new lease
between respondent and petitioner NDC. As testified to by their
witnesses Leticia Cabantog and Atty. Rhoel Mabazza, there was no
agreement or document to the effect that respondents request for
extension or renewal of the subject contracts of lease for another ten
(10) years was approved by NDC. Hence, respondent can no longer
exercise the option to purchase the leased premises when the same
were conveyed to PUP pursuant to Memorandum Order No. 214 dated
January 6, 1989, long after the expiration of C-33-77 and C-12-78 in
September 1988.21
Petitioner PUP further contends that while it is conceded that there
was an implied new lease between respondent and petitioner NDC
after the expiration of the lease contracts, the same did not include the
right of first refusal originally granted to respondent. The CA should
have applied the ruling in Dizon v. Magsaysay22 that the lessee cannot
any more exercise its option to purchase after the lapse of the one (1)year period of the lease contract. With the implicit renewal of the lease
on a monthly basis, the other terms of the original contract of lease
which are revived in the implied new lease under Article 1670 of
the Civil Code are only those terms which are germane to the lessees
right of continued enjoyment of the property leased. The provision
entitling the lessee the option to purchase the leased premises is not
deemed incorporated in the impliedly renewed contract because it is
alien to the possession of the lessee. Consequently, as in this case,
respondents right of option to purchase the leased premises was not
violated despite the impliedly renewed contract of lease with NDC.
Respondent cannot favorably invoke the decision in G.R. Nos. 143513
and 143590 (Polytechnic University of the Philippines v. Court of
Appeals) for the simple reason, among others, that unlike in said
cases, the contracts of lease of respondent with NDC were not
mutually extended or renewed for another ten (10) years. Thus, when
the leased premises were conveyed to PUP, respondent did not any
more have any right of first refusal, which incidentally appears only in
the second lease contract and not in the first lease contract.23
On its part, petitioner NDC assails the CA in holding that the contracts
of lease were impliedly renewed for another ten (10)-year period. The
provisions of C-33-77 and C-12-78 clearly state that the lessee is
granted the option "to renew for another ten (10) years with the mutual
consent of both parties." As regards the continued receipt of rentals by
NDC and possession by the respondent of the leased premises, the
impliedly renewed lease was only month-to-month and not ten (10)
years since the rentals are being paid on a monthly basis, as held
inDizon v. Magsaysay.24
Petitioner NDC further faults the CA in sustaining the RTCs decision
which erroneously granted respondent the option to purchase the
leased premises at the rate of P554.74 per square meter, the same
rate for which NDC sold the property to petitioner PUP and/or the
National Government, which is the mere acquisition cost thereof. It
must be noted that such consideration or rate was imposed by
Memorandum Order No. 214 under the premise that it shall, in effect,
be a sale and/or purchase from one (1) government agency to another.
It was intended merely as a transfer of one (1) user of the National
Government to another, with the beneficiary, PUP in this case, merely
returning to the petitioner/transferor the cost of acquisition thereof, as
appearing on its accounting books. It does not in any way reflect the
true and fair market value of the property, nor was it a price a "willing
seller" would demand and accept for parting with his real property.
Such benefit, therefore, cannot be extended to respondent as a private
entity, as the latter does not share the same pocket, so to speak, with
the National Government.25
The issue to be resolved is whether or not our ruling in Polytechnic
University of the Philippines v. Court of Appeals applies in this case
involving another lessee of NDC who claimed that the option to
purchase the portion leased to it was similarly violated by the sale of
the NDC Compound in favor of PUP pursuant to Memorandum Order
No. 214.
We rule in the affirmative.
The second lease contract contained the following provision:
III. It is mutually agreed by the parties that this Contract of Lease shall
be in full force and effect for a period of ten (10) years counted from
the effectivity of the payment of rental as provided under subparagraph (b) of Article I, with option to renew for another ten (10)
years with the mutual consent of both parties. In no case should the
rentals be increased by more than 100% of the original amount fixed.
Lessee shall also have the option to purchase the area leased, the
price to be negotiated and determined at the time the option to
purchase is exercised. [emphasis supplied]
An option is a contract by which the owner of the property agrees with
another person that the latter shall have the right to buy the formers
property at a fixed price within a certain time. It is a condition offered or
contract by which the owner stipulates with another that the latter shall
have the right to buy the property at a fixed price within a certain time,
or under, or in compliance with certain terms and conditions; or which
gives to the owner of the property the right to sell or demand a sale. 26 It
binds the party, who has given the option, not to enter into the principal
contract with any other person during the period designated, and,
within that period, to enter into such contract with the one to whom the
option was granted, if the latter should decide to use the
option.271avvphi1
Upon the other hand, a right of first refusal is a contractual grant, not of
the sale of a property, but of the first priority to buy the property in the
event the owner sells the same.28 As distinguished from an option
contract, in a right of first refusal, while the object might be made
determinate, the exercise of the right of first refusal would be
dependent not only on the owners eventual intention to enter into a
binding juridical relation with another but also on terms, including the
price, that are yet to be firmed up.29
When a lease contract contains a right of first refusal, the lessor has
the legal duty to the lessee not to sell the leased property to anyone at
any price until after the lessor has made an offer to sell the property to
the lessee and the lessee has failed to accept it. Only after the lessee
has failed to exercise his right of first priority could the lessor sell the
property to other buyers under the same terms and conditions offered
to the lessee, or under terms and conditions more favorable to the
lessor.30
Records showed that during the hearing on the application for a writ of
preliminary injunction, respondent adduced in evidence a letter of
Antonio A. Henson dated 15 July 1988 addressed to Mr. Jake C.
Lagonera, Director and Special Assistant to Executive Secretary
Catalino Macaraeg, reviewing a proposed memorandum order
submitted to President Corazon C. Aquino transferring the whole NDC
Compound, including the premises leased by respondent, in favor of
petitioner PUP. This letter was offered in evidence by respondent to
prove the existence of documents as of that date and even prior to the
expiration of the second lease contract or the lapse of the ten (10)-year
period counted from the effectivity of the rental payment -- that is, one
hundred and fifty (150) days from the signing of the contract (May 4,
1978), as provided in Art. I, paragraph (b) of C-12-78, or on October 1,
1988.
Respondent thus timely exercised its option to purchase on August 12,
1988. However, considering that NDC had been negotiating through
the National Government for the sale of the property in favor of PUP as
early as July 15, 1988 without first offering to sell it to respondent and
even when respondent communicated its desire to exercise the option
to purchase granted to it under the lease contract, it is clear that NDC
violated respondents right of first refusal. Under the premises, the
matter of the right of refusal not having been carried over to the
impliedly renewed month-to-month lease after the expiration of the
second lease contract on October 21, 1988 becomes irrelevant since
at the time of the negotiations of the sale to a third party, petitioner
PUP, respondents right of first refusal was still subsisting.
Petitioner NDC in its memorandum contended that the CA erred in
applying the ruling in Polytechnic University of the Philippines v. Court
Perusal of the letter dated August 12, 1988, however, belies such claim
of petitioner NDC that it was merely informative, thus:
sell to anybody at any price until after he has made an offer to sell to
the latter at a certain price and the lessee has failed to accept it. The
lessee has a right that the lessors first offer shall be in his favor.
The option in this case was incorporated in the contracts of lease
by NDC for the benefit of FIRESTONE which, in view of the total
amount of its investments in the property, wanted to be assured
that it would be given the first opportunity to buy the property at a
price for which it would be offered. Consistent with their
agreement, it was then implicit for NDC to have first offered the
leased premises of 2.60 hectares to FIRESTONE prior to the sale
in favor of PUP. Only if FIRESTONE failed to exercise its right of
first priority could NDC lawfully sell the property to petitioner
PUP.37 [emphasis supplied]
As we further ruled in the afore-cited case, the contractual grant of a
right of first refusal is enforceable, and following an earlier ruling
in Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.,38 the
execution of such right consists in directing the grantor to comply with
his obligation according to the terms at which he should have offered
the property in favor of the grantee and at that price when the offer
should have been made. We then determined the proper rate at which
the leased portion should be reconveyed to respondent by PUP, to
whom the lessor NDC sold it in violation of respondent lessees right of
first refusal, as follows:
It now becomes apropos to ask whether the courts a quo were correct
in fixing the proper consideration of the sale at P1,500.00 per square
meter. In contracts of sale, the basis of the right of first refusal must be
the current offer of the seller to sell or the offer to purchase of the
prospective buyer. Only after the lessee-grantee fails to exercise its
right under the same terms and within the period contemplated can the
owner validly offer to sell the property to a third person, again, under
the same terms as offered to the grantee. It appearing that the whole
NDC compound was sold to PUP for P554.74 per square meter, it
would have been more proper for the courts below to have ordered the
sale of the property also at the same price. However, since
FIRESTONE never raised this as an issue, while on the other hand
it admitted that the value of the property stood at P1,500.00 per
square meter, then we see no compelling reason to modify the
holdings of the courts a quo that the leased premises be sold at
that price.39 [emphasis supplied]
In the light of the foregoing, we hold that respondent, which did not
offer any amount to petitioner NDC, andneither disputed the P1,500.00
per square meter actual value of NDCs property at that time it was
sold to PUP atP554.74 per square meter, as duly considered by this
Court in the Firestone case, should be bound by such determination.
Accordingly, the price at which the leased premises should be sold to
respondent in the exercise of its right of first refusal under the lease
contract with petitioner NDC, which was pegged by the RTC
at P554.74 per square meter, should be adjusted to P1,500.00 per
square meter, which more accurately reflects its true value at that time
of the sale in favor of petitioner PUP.
Indeed, basic is the rule that a party to a contract cannot unilaterally
withdraw a right of first refusal that stands upon valuable
consideration.40 We have categorically ruled that it is not correct to say
that there is no consideration for the grant of the right of first refusal if
such grant is embodied in the same contract of lease. Since the
stipulation forms part of the entire lease contract, the consideration for
the lease includes the consideration for the grant of the right of first
refusal. In entering into the contract, the lessee is in effect stating that
it consents to lease the premises and to pay the price agreed upon
provided the lessor also consents that, should it sell the leased
property, then, the lessee shall be given the right to match the offered
purchase price and to buy the property at that price.41
We have further stressed that not even the avowed public welfare or
the constitutional priority accorded to education, invoked by petitioner
PUP in the Firestone case, would serve as license for us, and any
party for that matter, to destroy the sanctity of binding obligations.
While education may be prioritized for legislative and budgetary
purposes, it is doubtful if such importance can be used to confiscate
private property such as the right of first refusal granted to a lessee of
petitioner NDC.42 Clearly, no reversible error was committed by the CA
in sustaining respondents contractual right of first refusal and ordering
the reconveyance of the leased portion of petitioner NDCs property in
its favor.
WHEREFORE, the petitions are DENIED. The Decision dated
November 25, 2004 of the Regional Trial Court of Makati City, Branch
144 in Civil Case No. 88-2238, as affirmed by the Court of Appeals in
its Decision dated June 25, 2008 in CA-G.R. CV No. 84399, is
hereby AFFIRMED with MODIFICATION in that the price to be paid by
respondent Golden Horizon Realty Corporation for the leased portion
of the NDC Compound under Lease Contract Nos. C-33-77 and C-1278 is hereby increased to P1,500.00 per square meter.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 109125 December 2, 1994
ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners,
vs.
THE HON. COURT OF APPEALS and BUEN REALTY
DEVELOPMENT CORPORATION, respondents.
Antonio M. Albano for petitioners.
Umali, Soriano & Associates for private respondent.
VITUG, J.:
Assailed, in this petition for review, is the decision of the Court of
Appeals, dated 04 December 1991, in CA-G.R. SP No. 26345 setting
aside and declaring without force and effect the orders of execution of
the trial court, dated 30 August 1991 and 27 September 1991, in Civil
Case No. 87-41058.
The antecedents are recited in good detail by the appellate court
thusly:
On July 29, 1987 a Second Amended Complaint for Specific
Performance was filed by Ang Yu Asuncion and Keh Tiong, et al.,
against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before
the Regional Trial Court, Branch 31, Manila in Civil Case No. 8741058, alleging, among others, that plaintiffs are tenants or
lessees of residential and commercial spaces owned by
defendants described as Nos. 630-638 Ongpin Street, Binondo,
Manila; that they have occupied said spaces since 1935 and have
been religiously paying the rental and complying with all the
conditions of the lease contract; that on several occasions before
October 9, 1986, defendants informed plaintiffs that they are
offering to sell the premises and are giving them priority to acquire
the same; that during the negotiations, Bobby Cu Unjieng offered
a price of P6-million while plaintiffs made a counter offer of P5million; that plaintiffs thereafter asked the defendants to put their
offer in writing to which request defendants acceded; that in reply
of the essential elements thereof, viz: (a) The vinculum juris or juridical
tie which is the efficient cause established by the various sources of
obligations (law, contracts, quasi-contracts, delicts and quasi-delicts);
(b) the object which is the prestation or conduct; required to be
observed (to give, to do or not to do); and (c) the subject-persons who,
viewed from the demandability of the obligation, are the active
(obligee) and the passive (obligor) subjects.
It is likewise quite obvious to us that the decision in Civil Case No. 8741058 could not have decreed at the time the execution of any deed of
sale between the Cu Unjiengs and petitioners.
WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting
aside the questioned Orders, dated 30 August 1991 and 27 September
1991, of the court a quo. Costs against petitioners.
SO ORDERED.
G.R. No. 111538 February 26, 1997
PARAAQUE KINGS ENTERPRISES, INCORPORATED, petitioner,
vs.
COURT OF APPEALS, CATALINA L. SANTOS, represented by her
attorney-in-fact, LUZ B. PROTACIO, and DAVID A.
RAYMUNDO, respondents.
PANGANIBAN, J.:
Do allegations in a complaint showing violation of a contractual right of
"first option or priority to buy the properties subject of the lease"
constitute a valid cause of action? Is the grantee of such right entitled
to be offered the same terms and conditions as those given to a third
party who eventually bought such properties? In short, is such right of
first refusal enforceable by an action for specific performance?
These questions are answered in the affirmative by this Court in
resolving this petition for review under Rule 45 of the Rules of Court
challenging the Decision 1 of the Court of Appeals 2 promulgated on
March 29, 1993, in CA-G.R. CV No. 34987 entitled "Paraaque Kings
Enterprises, Inc. vs. Catalina L. Santos, et al.," which affirmed the
order 3 of September 2, 1991, of the Regional Trial Court of Makati,
Branch 57, 4 dismissing Civil Case No. 91-786 for lack of a valid cause
of action.
Facts of the Case
On March 19, 1991, herein petitioner filed before the Regional Trial
Court of Makati a complaint, 5 which is reproduced in full below:
Plaintiff, by counsel, respectfully states that:
1. Plaintiff is a private corporation organized and
existing under and by virtue of the laws of the
Philippines, with principal place of business of (sic)
Dr. A. Santos Avenue, Paraaque, Metro Manila,
while defendant Catalina L. Santos, is of legal age,
widow, with residence and postal address at 444
Plato Street, Ct., Stockton, California, USA,
represented in this action by her attorney-in-fact,
Luz B. Protacio, with residence and postal address
at No, 12, San Antonio Street, Magallanes Village,
Makati, Metro Manila, by virtue of a general power
of attorney. Defendant David A. Raymundo, is of
legal age, single, with residence and postal
address at 1918 Kamias Street, Damarias
Village, Makati, Metro Manila, where they (sic)
may be served with summons and other court
processes. Xerox copy of the general power of
attorney is hereto attached as Annex "A".
PRAYER
could the owner validly offer to sell the property to a third person,
again, under the same terms as offered to the optionee.
This principle was reiterated in the very recent case of Equatorial
Realty vs. Mayfair Theater, Inc. 17 which was decided en banc. This
Court upheld the right of first refusal of the lessee Mayfair, and
rescinded the sale of the property by the lessor Carmelo to Equatorial
Realty "considering that Mayfair, which had substantial interest over
the subject property, was prejudiced by its sale to Equatorial without
Carmelo conferring to Mayfair every opportunity to negotiate within the
30-day stipulated period" (emphasis supplied).
In that case, two contracts of lease between Carmelo and Mayfair
provided "that if the LESSOR should desire to sell the leased
premises, the LESSEE shall be given 30 days exclusive option to
purchase the same." Carmelo initially offered to sell the leased
property to Mayfair for six to seven million pesos. Mayfair indicated
interest in purchasing the property though it invoked the 30-day period.
Nothing was heard thereafter from Carmelo. Four years later, the latter
sold its entire Recto Avenue property, including the leased premises, to
Equatorial for P11,300,000.00 without priorly informing Mayfair. The
Court held that both Carmelo and Equatorial acted in bad faith:
Carmelo for knowingly violating the right of first option of Mayfair, and
Equatorial for purchasing the property despite being aware of the
contract stipulation. In addition to rescission of the contract of sale, the
Court ordered Carmelo to allow Mayfair to buy the subject property at
the same price of P11,300,000.00.
No cause of action
under P.D. 1517
Petitioner also invokes Presidential Decree No. 1517, or the Urban
Land Reform Law, as another source of its right of first refusal. It
claims to be covered under said law, being the "rightful occupant of the
land and its structures" since it is the lawful lessee thereof by reason of
contract. Under the lease contract, petitioner would have occupied the
property for fourteen (14) years at the end of the contractual period.
Without probing into whether petitioner is rightfully a beneficiary under
said law, suffice it to say that this Court has previously ruled that under
Section 6 18 of P.D. 1517, "the terms and conditions of the sale in the
exercise of the lessee's right of first refusal to purchase shall be
determined by the Urban Zone Expropriation and Land Management
Committee. Hence, . . . . certain prerequisites must be complied with
by anyone who wishes to avail himself of the benefits of the
decree." 19 There being no allegation in its complaint that the
prerequisites were complied with, it is clear that the complaint did fail to
state a cause of action on this ground.
Deed of Assignment included
the option to purchase
Neither do we find merit in the contention of respondent Santos that
the assignment of the lease contract to petitioner did not include the
option to purchase. The provisions of the deeds of assignment with
regard to matters assigned were very clear. Under the first assignment
between Frederick Chua as assignor and Lee Ching Bing as assignee,
it was expressly stated that:
. . . . the ASSIGNOR hereby CEDES,
TRANSFERS and ASSIGNS to herein ASSIGNEE,
all his rights, interest and participation over said
premises afore-described, . . . . 20 (emphasis
supplied)
SO ORDERED.
G.R. No. 140479 March 8, 2001
ROSENCOR DEVELOPMENT CORPORATION and RENE
JOAQUIN, petitioners,
vs.
PATERNO INQUING, IRENE GUILLERMO, FEDERICO BANTUGAN,
FERNANDO MAGBANUA and LIZZA TIANGCO, respondents.
GONZAGA-REYES, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking reversal of the Decision1 of the Court of Appeals dated
June 25, 1999 in CA-G.R. CV No. 53963. The Court of Appeals
decision reversed and set aside the Decision2 dated May 13, 1996 of
Branch 217 of the Regional Trial Court of Quezon City in Civil Case
No. Q-93-18582.1wphi1.nt
The case was originally filed on December 10, 1993 by Paterno
Inquing, Irene Guillermo and Federico Bantugan, herein respondents,
against Rosencor Development Corporation (hereinafter "Rosencor"),
Rene Joaquin, and Eufrocina de Leon. Originally, the complaint was
one for annulment of absolute deed of sale but was later amended to
one for rescission of absolute deed of sale. A complaint-for intervention
was thereafter filed by respondents Fernando Magbanua and Danna
Lizza Tiangco. The complaint-in-intervention was admitted by the trial
court in an Order dated May 4, 1994.3
The facts of the case, as stated by the trial court and adopted by the
appellate court, are as follows:
"This action was originally for the annulment of the Deed of
Absolute Sale dated September 4, 1990 between
defendants Rosencor and Eufrocina de Leon but later
amended (sic) praying for the rescission of the deed of sale.
Plaintiffs and plaintiffs-intervenors averred that they are the
lessees since 1971 of a two-story residential apartment
located at No. 150 Tomas Morato Ave., Quezon City covered
by TCT No. 96161 and owned by spouses Faustino and
Cresencia Tiangco. The lease was not covered by any
contract. The lessees were renting the premises then for
P150.00 a month and were allegedly verbally granted by the
lessors the pre-emptive right to purchase the property if ever
they decide to sell the same.
Upon the death of the spouses Tiangcos in 1975, the
management of the property was adjudicated to their heirs
who were represented by Eufrocina de Leon. The lessees
were allegedly promised the same pre-emptive right by the
heirs of Tiangcos since the latter had knowledge that this
right was extended to the former by the late spouses
Tiangcos. The lessees continued to stay in the premises and
allegedly spent their own money amounting from P50,000.00
to P100,000.00 for its upkeep. These expenses were never
deducted from the rentals which already increased to
P1,000.00.
In June 1990, the lessees received a letter from Atty. Erlinda
Aguila demanding that they vacate the premises so that the
demolition of the building be undertaken. They refused to
leave the premises. In that same month, de Leon refused to
accept the lessees rental payment claiming that they have
run out of receipts and that a new collector has been
assigned to receive the payments. Thereafter, they received
SO ORDERED."6
Not satisfied with the decision of the trial court, respondents herein
filed a Notice of Appeal dated June 3, 1996. On the same date, the trial
court issued an Order for the elevation of the records of the case to the
Court of Appeals. On August 8, 1997, respondents filed their appellate
brief before the Court of Appeals.
On June 25, 1999, the Court of Appeals rendered its
decision7 reversing the decision of the trial court. The dispositive
portion of the June 25, 1999 decision is as follows:
"WHEREFORE, premises considered, the appealed decision
(dated May 13, 1996) of the Regional Trial Court (Branch
217) in Quezon City in Case No. Q-93-18582 is hereby
REVERSED and SET ASIDE. In its stead, a new one is
rendered ordering:
(1) The rescission of the Deed of Absolute Sale
executed between the appellees on September 4,
1990;
(2) The reconveyance of the subject premises to
appellee Eufrocina de Leon;
(3) The heirs of Faustino and Crescencia Tiangco,
thru appellee Eufrocina de Leon, to afford the
appellants thirty days within which to exercise their
right of first refusal by paying the amount of ONE
MILLION PESOS (P1,000,000.00) for the subject
property; and
(4) The appellants to, in turn, pay the appellees
back rentals from May 1990 up to the time this
decision is promulgated.
No pronouncement as to costs.
SO ORDERED".8
Petitioners herein filed a Motion for Reconsideration of the decision of
the Court of Appeals but the same was denied in a Resolution dated
October 15, 1999.9
Hence, this petition for review on certiorari where petitioners Rosencor
Development Corporation and Rene Joaquin raise the following
assignment of errors10:
I.
THE COURT OF APPEALS GRAVELY ERRED WHEN IT
ORDERED THE RESCISSION OF THE ABSOLUTE DEED
OF SALE BETWEEN EUFROCINA DE LEON AND
PETITIONER ROSENCOR.
II.
THE COURT OF APPEALS COMMTITED MANIFEST
ERROR IN MANDATING THAT EUFROCINA DE LEON
AFFORD RESPONDENTS THE OPPORTUNITY TO
EXERCISE THEIR RIGHT OF FIRST REFUSAL.
III.
XXX
XXX
development plan within three (3) years from the date of this
Agreement. x x x"
5.15. The BUYER agrees to give the SELLERS a first option
to purchase four developed lots next to the "Retained Area"
at the prevailing market price at the time of the purchase."
The parties are agreed that the development plan referred to
in paragraph 5.7 is not Conduit's development plan, but
Ayala's amended development plan which was still to be
formulated as of the time of the MOA. While in the Conduit
plan, the 4 lots to be offered for sale to the Vasquez Spouses
were in the first phase thereof or Village 1, in the Ayala plan
which was formulated a year later, it was in the third phase,
or Phase II-c.
Under the MOA, the Vasquez spouses made several
express warranties, as follows:
DECISION
TINGA, J.:
The rise in value of four lots in one of the country's prime residential
developments, Ayala Alabang Village in Muntinlupa City, over a period
of six (6) years only, represents big money. The huge price difference
lies at the heart of the present controversy. Petitioners insist that the
lots should be sold to them at 1984 prices while respondent maintains
that the prevailing market price in 1990 should be the selling price.
xxx
D. A list of all persons and/or entities with whom the
Company has pending contracts, if any.
xxx
Dr. Daniel Vazquez and Ma. Luisa Vazquez filed this Petition for
Review on Certiorari2 dated October 11, 2001 assailing the Decision3 of
the Court of Appeals dated September 6, 2001 which reversed the
Decision4 of the Regional Trial Court (RTC) and dismissed their
complaint for specific performance and damages against Ayala
Corporation.
Despite their disparate rulings, the RTC and the appellate court agree
on the following antecedents:5
On April 23, 1981, spouses Daniel Vasquez and Ma. Luisa
M. Vasquez (hereafter, Vasquez spouses) entered into a
Memorandum of Agreement (MOA) with Ayala Corporation
(hereafter, AYALA) with AYALA buying from the Vazquez
spouses, all of the latter's shares of stock in Conduit
Development, Inc. (hereafter, Conduit). The main asset of
Conduit was a 49.9 hectare property in Ayala Alabang,
Muntinlupa, which was then being developed by Conduit
under a development plan where the land was divided into
Villages 1, 2 and 3 of the "Don Vicente Village." The
development was then being undertaken for Conduit by G.P.
Construction and Development Corp. (hereafter, GP
Construction).
xxx
of the case. Likewise, the letter dated March 4, 1984 was merely an
inquiry as to the date when the development of Phase 1 will be
completed. More importantly, their letter dated June 27, 1988 through
Engr. Eduardo Turla expressed petitioners' expectation that Phase 1
will be completed by February 19, 1990.
In the instant Petition, petitioners allege that the appellate court erred
in ruling that they violated their warranties under the MOA; that Ayala
Corporation was not obliged to develop the "Remaining Property"
within three (3) years from the execution of the MOA; that Ayala was
not in delay; and that paragraph 5.15 of the MOA is a mere right of first
refusal. Additionally, petitioners insist that the Court should review the
factual findings of the Court of Appeals as they are in conflict with
those of the trial court.
Petitioners filed their Reply11 dated August 15, 2002 reiterating the
arguments in their Petition and contending further that they did not
violate their warranties under the MOA because the case was filed by
Lancer only on April 1, 1982, eleven (11) months and eight (8) days
after the signing of the MOA on April 23, 1981. Ayala Corporation
admitted that it received Lancer's claim before the "Closing" date. It
therefore had all the time to rescind the MOA. Not having done so, it
can be concluded that Ayala Corporation itself did not consider the
matter a violation of petitioners' warranty.
Moreover, petitioners submitted the Audited Financial Statements of
Conduit and allowed an acquisition audit to be conducted by Ayala
Corporation. Thus, the latter bought Conduit with "open eyes."
Petitioners also maintain that they had no knowledge of the impending
case against Conduit at the time of the execution of the MOA. Further,
the MOA makes Ayala Corporation liable for the payment of all billings
of GP Construction. Since Lancer's claim was actually a claim against
GP Construction being its sub-contractor, it is Ayala Corporation and
not petitioners which is liable.
Likewise, petitioners aver that although Ayala Corporation may change
the sequence of its development plan, it is obliged under the MOA to
develop the entire area where the subject lots are located in three (3)
years.
They also assert that demand was made on Ayala Corporation to
comply with their obligation under the MOA. Apart from their reminder
letters dated January 24, February 18 and March 5, 1984, they also
sent a letter dated March 4, 1984 which they claim is a categorical
demand for Ayala Corporation to comply with the provisions of the
MOA.
The parties were required to submit their respective memoranda in the
Resolution12 dated November 18, 2002. In compliance with this
directive, petitioners submitted their Memorandum13 dated February
14, 2003 on even date, while Ayala Corporation filed its
Memorandum14 dated February 14, 2003 on February 17, 2003.
We shall first dispose of the procedural question raised by the instant
petition.
It is well-settled that the jurisdiction of this Court in cases brought to it
from the Court of Appeals by way of petition for review under Rule 45
is limited to reviewing or revising errors of law imputed to it, its findings
of fact being conclusive on this Court as a matter of general principle.
However, since in the instant case there is a conflict between the
factual findings of the trial court and the appellate court, particularly as
regards the issues of breach of warranty, obligation to develop and
incurrence of delay, we have to consider the evidence on record and
resolve such factual issues as an exception to the general rule.15 In any
event, the submitted issue relating to the categorization of the right to
purchase granted to petitioners under the MOA is legal in character.
The next issue that presents itself is whether petitioners breached their
warranties under the MOA when they failed to disclose the Lancer
claim. The trial court declared they did not; the appellate court found
otherwise.
Ayala Corporation summarizes the clauses of the MOA which
petitioners allegedly breached when they failed to disclose the Lancer
claim:
ATTY. BLANCO
Don't talk about standard.
WITNESS
A Well, the word intent here, your Honor, was used to
emphasize the tentative character of the period of
development because it will be noted that the sentence
refers to and I quote "to complete the first phase under its
amended development plan within three (3) years from the
date of this agreement, at the time of the execution of this
agreement, your Honor." That amended development plan
was not yet in existence because the buyer had manifested
to the seller that the buyer could amend the subdivision plan
originally belonging to the seller to conform with its own
standard of development and second, your Honor,
(interrupted)31
It is thus unmistakable that this paragraph merely expresses an
intention on Ayala Corporation's part to complete the first phase under
its amended development plan within three (3) years from the
execution of the MOA. Indeed, this paragraph is so plainly worded that
to misunderstand its import is deplorable.
More focal to the resolution of the instant case is paragraph 5.7's clear
reference to the first phase of Ayala Corporation's amended
development plan as the subject of the three (3)-year intended
timeframe for development. Even petitioner Daniel Vazquez admitted
on cross-examination that the paragraph refers not to Conduit's but to
Ayala Corporation's development plan which was yet to be formulated
when the MOA was executed:
relation with another but also on terms, including the price, that are yet
to be firmed up.45
Applied to the instant case, paragraph 5.15 is obviously a mere right of
first refusal and not an option contract. Although the paragraph has a
definite object, i.e., the sale of subject lots, the period within which they
will be offered for sale to petitioners and, necessarily, the price for
which the subject lots will be sold are not specified. The phrase "at the
prevailing market price at the time of the purchase" connotes that there
is no definite period within which Ayala Corporation is bound to reserve
the subject lots for petitioners to exercise their privilege to purchase.
Neither is there a fixed or determinable price at which the subject lots
will be offered for sale. The price is considered certain if it may be
determined with reference to another thing certain or if the
determination thereof is left to the judgment of a specified person or
persons.46
Further, paragraph 5.15 was inserted into the MOA to give petitioners
the first crack to buy the subject lots at the price which Ayala
Corporation would be willing to accept when it offers the subject lots for
sale. It is not supported by an independent consideration. As such it is
not governed by Articles 1324 and 1479 of the Civil Code, viz:
Art. 1324. When the offeror has allowed the offeree a certain
period to accept, the offer may be withdrawn at any time
before acceptance by communicating such withdrawal,
except when the option is founded upon a consideration, as
something paid or promised.
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.
Consequently, the "offer" may be withdrawn anytime by communicating
the withdrawal to the other party.47
In this case, Ayala Corporation offered the subject lots for sale to
petitioners at the price of P6,500.00/square meter, the prevailing
market price for the property when the offer was made on June 18,
1990.48 Insisting on paying for the lots at the prevailing market price in
1984 of P460.00/square meter, petitioners rejected the offer. Ayala
Corporation reduced the price to P5,000.00/square meter but again,
petitioners rejected the offer and instead made a counter-offer in the
amount of P2,000.00/square meter.49 Ayala Corporation rejected
petitioners' counter-offer. With this rejection, petitioners lost their right
to purchase the subject lots.
Furthermore, we resolved:
refusal, Fausto has the legal duty to petitioner not to sell the property
to anybody, even her relatives, at any price until after she has made an
offer to sell to petitioner at a certain price and said offer was rejected
by petitioner. Pursuant to their contract, it was essential that Fausto
should have first offered the property to petitioner before she sold it to
respondent. It was only after petitioner failed to exercise its right of first
priority could Fausto then lawfully sell the property to respondent.
The rule is that a sale made in violation of a right of first refusal is valid.
However, it may be rescinded, or, as in this case, may be the subject of
an action for specific performance.22 In Riviera Filipina, Inc. vs. Court
of Appeals,23 the Court discussed the concept and interpretation of the
right of first refusal and the consequences of a breach thereof, to wit:
. . . It all started in 1992 with Guzman, Bocaling & Co. v.
Bonnevie where the Court held that a lease with a proviso granting the
lessee the right of first priority "all things and conditions being equal"
meant that there should be identity of the terms and conditions to be
offered to the lessee and all other prospective buyers, with the lessee
to enjoy the right of first priority. A deed of sale executed in favor of a
third party who cannot be deemed a purchaser in good faith, and which
is in violation of a right of first refusal granted to the lessee is not
voidable under the Statute of Frauds but rescissible under Articles
1380 to 1381 (3) of the New Civil Code.
Subsequently in 1994, in the case of Ang Yu Asuncion v. Court of
Appeals, the Court en banc departed from the doctrine laid down
in Guzman, Bocaling & Co. v. Bonnevie and refused to rescind a
contract of sale which violated the right of first refusal. The Court held
that the so-called "right of first refusal" cannot be deemed a perfected
contract of sale under Article 1458 of the New Civil Code and, as such,
a breach thereof decreed under a final judgment does not entitle the
aggrieved party to a writ of execution of the judgment but to an action
for damages in a proper forum for the purpose.
In the 1996 case of Equatorial Realty Development, Inc. v. Mayfair
Theater, Inc., the Court en banc reverted back to the doctrine
in Guzman Bocaling & Co. v. Bonnevie stating that rescission is a
relief allowed for the protection of one of the contracting parties and
even third persons from all injury and damage the contract may cause
or to protect some incompatible and preferred right by the contract.
Thereafter in 1997, in Paraaque Kings Enterprises, Inc. v. Court of
Appeals, the Court affirmed the nature of and the concomitant rights
and obligations of parties under a right of first refusal. The Court,
summarizing the rulings in Guzman, Bocaling & Co. v. Bonnevie and
Equatorial Realty Development, Inc. v. Mayfair Theater, Inc., held
that in order to have full compliance with the contractual right granting
petitioner the first option to purchase, the sale of the properties for the
price for which they were finally sold to a third person should have
likewise been first offered to the former. Further, there should be
identity of terms and conditions to be offered to the buyer holding a
right of first refusal if such right is not to be rendered illusory. Lastly,
the basis of the right of first refusal must be the current offer to sell of
the seller or offer to purchase of any prospective buyer.
The prevailing doctrine therefore, is that a right of first refusal means
identity of terms and conditions to be offered to the lessee and all other
prospective buyers and a contract of sale entered into in violation of a
right of first refusal of another person, while valid, is rescissible. 24
It was also incorrect for the CA to rule that it would be useless to annul
the sale between Fausto and respondent because the property would
still remain with respondent after the death of her mother by virtue of
succession, as in fact, Fausto died in March 1996, and the property
now belongs to respondent, being Faustos heir.25
For one, Fausto was bound by the terms and conditions of the lease
contract. Under the right of first refusal clause, she was obligated to
offer the property first to petitioner before selling it to anybody else.
When she sold the property to respondent without offering it to
petitioner, the sale while valid is rescissible so that petitioner may
exercise its option under the contract.
With the death of Fausto, whatever rights and obligations she had over
the property, including her obligation under the lease contract, were
transmitted to her heirs by way of succession, a mode of acquiring the
property, rights and obligation of the decedent to the extent of the
value of the inheritance of the heirs. Article 1311 of the Civil Code
provides:
ART. 1311. Contracts take effect only between the parties, their
assigns and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature, or by
stipulation or by provision of law. The heir is not liable beyond the
value of the property he received from the decedent.
A lease contract is not essentially personal in character.26 Thus, the
rights and obligations therein are transmissible to the heirs. The
general rule is that heirs are bound by contracts entered into by their
predecessors-in-interest except when the rights and obligations arising
therefrom are not transmissible by (1) their nature, (2) stipulation or (3)
provision of law.27
In this case, the nature of the rights and obligations are, by their
nature, transmissible. There is also neither contractual stipulation nor
provision of law that makes the rights and obligations under the lease
contract intransmissible. The lease contract between petitioner and
Fausto is a property right, which is a right that passed on to respondent
and the other heirs, if any, upon the death of Fausto.
In DKC Holdings Corporation vs. Court of Appeals,28 the Court held
that the Contract of Lease with Option to Buy entered into by the late
Encarnacion Bartolome with DKC Holdings Corporation was binding
upon her sole heir, Victor, even after her demise and it subsists even
after her death. The Court ruled that:
. . . Indeed, being an heir of Encarnacion, there is privity of interest
between him and his deceased mother. He only succeeds to what
rights his mother had and what is valid and binding against her is
also valid and binding as against him. This is clear from Paraaque
Kings Enterprises vs. Court of Appeals, where this Court rejected a
similar defenseWith respect to the contention of respondent Raymundo that he is not
privy to the lease contract, not being the lessor nor the lessee referred
to therein, he could thus not have violated its provisions, but he is
nevertheless a proper party. Clearly, he stepped into the shoes of the
owner-lessor of the land as, by virtue of his purchase, he assumed all
the obligations of the lessor under the lease contract. Moreover, he
received benefits in the form of rental payments. Furthermore, the
complaint, as well as the petition, prayed for the annulment of the sale
of the properties to him. Both pleadings also alleged collusion between
him and respondent Santos which defeated the exercise by petitioner
of its right of first refusal.
In order then to accord complete relief to petitioner, respondent
Raymundo was a necessary, if not indispensable, party to the case. A
favorable judgment for the petitioner will necessarily affect the rights of
respondent Raymundo as the buyer of the property over which
petitioner would like to assert its right of first option to buy.29(Emphasis
supplied)
Likewise in this case, the contract of lease, with all its concomitant
provisions, continues even after Faustos death and her heirs merely
stepped into her shoes.30 Respondent, as an heir of Fausto, is
therefore bound to fulfill all its terms and conditions.
There is no personal act required from Fausto such that respondent
cannot perform it. Faustos obligation to deliver possession of the
property to petitioner upon the exercise by the latter of its right of first
refusal may be performed by respondent and the other heirs, if any.
Similarly, nonperformance is not excused by the death of the party
when the other party has a property interest in the subject matter of the
contract.31
The CA likewise found that petitioner acknowledged the legitimacy of
the sale to respondent and it is now barred from exercising its right of
first refusal. According to the appellate court:
Second, when TRCDC, in a letter to Fausto, signified its intention to
renew the lease contract, it was Pacunayen who answered the letter
on June 19, 1991. In that letter Pacunayen demanded that TRCDC
vacate the leased premises within sixty (60) days and informed it of her
ownership of the leased premises. The pertinent portion of the letter
reads:
Furtherly, please be advised that the land is no longer under the
absolute ownership of my mother and the undersigned is now the real
and absolute owner of the land.
Instead of raising a howl over the contents of the letter, as would be its
expected and natural reaction under the circumstances, TRCDC
surprisingly kept silent about the whole thing. As we mentioned in the
factual antecedents of this case, it even invited Pacunayen to its
special board meeting particularly to discuss with her the renewal of
the lease contract. Again, during that meeting, TRCDC did not mention
anything that could be construed as challenging Pacunayens
ownership of the leased premises. Neither did TRCDC assert its
priority right to purchase the same against Pacunayen.32
The essential elements of estoppel are: (1) conduct of a party
amounting to false representation or concealment of material facts or
at least calculated to convey the impression that the facts are
otherwise than, and inconsistent with, those which the party
subsequently attempts to assert; (2) intent, or at least expectation, that
this conduct shall be acted upon by, or at least influence, the other
party; and (3) knowledge, actual or constructive, of the real facts.33
The records are bereft of any proposition that petitioner waived its right
of first refusal under the contract such that it is now estopped from
exercising the same. In a letter dated June 17, 1991, petitioner wrote
to Fausto asking for a renewal of the term of lease.34 Petitioner cannot
be faulted for merely seeking a renewal of the lease contract because
obviously, it was working on the assumption that title to the property is
still in Faustos name and the latter has the sole authority to decide on
the fate of the property. Instead, it was respondent who replied,
advising petitioner to remove all the improvements on the property, as
the lease is to expire on the 1st of August 1991. Respondent also
informed petitioner that her mother has already sold the property to
her.35 In order to resolve the matter, a meeting was called among
petitioners stockholders, including respondent, on July 27, 1991,
where petitioner, again, proposed that the lease be renewed.
Respondent, however, declined. While petitioner may have sought the
renewal of the lease, it cannot be construed as a relinquishment of its
right of first refusal. Estoppel must be intentional and unequivocal. 36
Also, in the excerpts from the minutes of the special meeting, it was
further stated that the possibility of a sale was likewise
considered.37 But respondent also refused to sell the land, while the
decision. After the present decision becomes final and executory, the
rate of interest shall increase to twelve percent (12%) per annum from
such finality until its satisfaction, this interim period being deemed to be
equivalent to a forbearance of credit.52 This is in accord with the
guidelines laid down by the Court in Eastern Shipping Lines, Inc. vs.
Court of Appeals,53 regarding the manner of computing legal
interest, viz.:
that there has been such loss. For instance, injury to one's commercial
credit or to the goodwill of a business firm is often hard to show
certainty in terms of money. Should damages be denied for that
reason? The judge should be empowered to calculate moderate
damages in such cases, rather than that the plaintiff should suffer,
without redress from the defendant's wrongful act. (Araneta v. Bank of
America, 40 SCRA 144, 145)57
(3) Transfer Certificate of Title No. M-35468 shall remain in the name
of respondent Anunciacion Fausto Pacunayen, which shall be
cancelled in the event petitioner successfully purchases the subject
property;
HEIRS OF FAUSTO C. IGNACIO, namely MARFEL D. IGNACIOMANALO, MILFA D. IGNACIO-MANALO AND FAUSTINO D.
IGNACIO, Petitioners,
vs.
HOME BANKERS SAVINGS AND TRUST COMPANY, SPOUSES
PHILLIP AND THELMA RODRIGUEZ, CATHERINE, REYNOLD &
JEANETTE, all surnamed ZUNIGA, Respondents.
DECISION
VILLARAMA, JR., J.:
Before the Court is a Petition for Review on Certiorari under Rule 45
assailing the Decision1 dated July 18, 2006 and Resolution2 dated May
2, 2007 of the Court of Appeals (CA) in CA-G.R. CV No. 73551. The
CA reversed the Decision3 dated June 15, 1999 of the Regional Trial
Court (RTC) of Pasig City, Branch 151 in Civil Case No. 58980.
The factual antecedents:
In August 1981, petitioner Fausto C. Ignacio mortgaged two parcels of
land to Home Savings Bank and Trust Company, the predecessor of
respondent Home Bankers Savings and Trust Company, as security for
theP500,000.00 loan extended to him by said bank. These properties
which are located in Cabuyao, Laguna are covered by Transfer
Certificate of Title Nos. (T-40380) T-8595 and (T-45804) T-8350
containing an area of 83,303 square meters and 120,110 square
meters, respectively.4
When petitioner defaulted in the payment of his loan obligation,
respondent bank proceeded to foreclose the real estate mortgage. At
the foreclosure sale held on January 26, 1983, respondent bank was
the highest bidder for the sum of P764,984.67. On February 8, 1983,
the Certificate of Sale issued to respondent bank was registered with
the Registry of Deeds of Calamba, Laguna. With the failure of
petitioner to redeem the foreclosed properties within one year from
Prior to the annotation of the adverse claim, on August 24, 1989, the
property covered by TCT No. 154658 was sold by respondent bank to
respondent spouses Phillip and Thelma Rodriguez, without informing
the petitioner. On October 6, 1989, again without petitioner's
knowledge, respondent bank sold the property covered by TCT No T111058 to respondents Phillip and Thelma Rodriguez, Catherine M.
Zuiga, Reynold M. Zuiga and Jeannette M. Zuiga.9
On December 27, 1989, petitioner filed an action for specific
performance and damages in the RTC against the respondent bank.
As principal relief, petitioner sought in his original complaint the
reconveyance of the subject properties after his payment
of P600,000.00.10 Respondent bank filed its Answer denying the
allegations of petitioner and asserting that it was merely exercising its
right as owner of the subject properties when the same were sold to
third parties.
For failure of respondent bank to appear during the pre-trial
conference, it was declared as in default and petitioner was allowed to
present his evidence ex parte on the same date (September 3, 1990).
Petitioner simultaneously filed an "Ex-Parte Consignation" tendering
the amount of P235,000.00 as balance of the repurchase price.11 On
September 7, 1990, the trial court rendered judgment in favor of
petitioner. Said decision, as well as the order of default, were
subsequently set aside by the trial court upon the filing of a motion for
reconsideration by the respondent bank.12
In its Order dated November 19, 1990, the trial court granted the
motion for intervention filed by respondents Phillip and Thelma
Rodriguez, Catherine Zuiga, Reynold Zuiga and Jeannette Zuiga.
Said intervenors asserted their status as innocent purchasers for value
who had no notice or knowledge of the claim or interest of petitioner
when they bought the properties already registered in the name of
respondent bank. Aside from a counterclaim for damages against the
petitioner, intervenors also prayed that in the event respondent bank is
ordered to reconvey the properties, respondent bank should be
adjudged liable to the intervenors and return all amounts paid to it. 13
On July 8, 1991, petitioner amended his complaint to include as
alternative relief under the prayer for reconveyance the payment by
respondent bank of the prevailing market value of the subject
properties "less whatever remaining obligation due the bank by reason
of the mortgage under the terms of the compromise agreement.14
On June 15, 1999, the trial court rendered its Decision, the dispositive
portion of which reads:
WHEREFORE, findings [sic] the facts aver[r]ed in the complaint
supported by preponderance of evidences adduced, judgment is
hereby rendered in favor of the plaintiff and against the defendant and
intervenors by:
1. Declaring the two Deeds of Sale executed by the
defendant in favor of the intervenors as null and void and the
Register of Deeds in Calamba, Laguna is ordered to cancel
and/or annul the two Transfer Certificate of Titles No. T154658 and TCT No. T-111058 issued to the intervenors.
2. Ordering the defendant to refund the amount
of P1,004,250.00 to the intervenors as the consideration of
the sale of the two properties.
3. Ordering the defendant to execute the appropriate Deed
of Reconveyance of the two (2) properties in favor of the
plaintiff after the plaintiff pays in full the amount
of P600,000.00 as balance of the repurchase price.
A.
THE HONORABLE COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION IN REVERSING THE
FINDING OF THE TRIAL COURT THAT THERE WAS A
PERFECTED CONTRACT TO REPURCHASE BETWEEN
PETITIONER AND RESPONDENT-BANK.
B.
THE HONORABLE COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION IN REVERSING THE
FINDING OF THE TRIAL COURT THAT PETITIONER DID
NOT ACT AS BROKER IN THE SALE OF THE
FORECLOSED PROPERTIES AND THUS FAILED TO
CONSIDER THE EXISTENCE OF OFFICIAL RECEIPTS
ISSUED IN THE NAME OF THE PETITIONER THAT ARE
DULY NOTED FOR HIS ACCOUNT.
C.
THE HONORABLE COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION IN REVERSING THE
FINDING OF THE TRIAL COURT THAT RESPONDENTBANK DID NOT HAVE THE RIGHT TO DISPOSE THE
SUBJECT PROPERTIES.
D.
THE HONORABLE COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION IN REVERSING THE
FINDING OF THE TRIAL COURT THAT RESPONDENTSINTERVENORS ARE NOT INNOCENT PURCHASERS FOR
VALUE IN GOOD FAITH.19
The core issue for resolution is whether a contract for the repurchase
of the foreclosed properties was perfected between petitioner and
respondent bank.
The Court sustains the decision of the CA.
Contracts are perfected by mere consent, which is manifested by the
meeting of the offer and the acceptance upon the thing and the cause
which are to constitute the contract.20 The requisite acceptance of the
offer is expressed in Article 1319 of the Civil Code which states:
ART. 1319. Consent is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the
contract. The offer must be certain and the acceptance absolute. A
qualified acceptance constitutes a counter-offer.
In Palattao v. Court of Appeals,21 this Court held that if the acceptance
of the offer was not absolute, such acceptance is insufficient to
generate consent that would perfect a contract. Thus:
Contracts that are consensual in nature, like a contract of sale, are
perfected upon mere meeting of the minds. Once there is concurrence
between the offer and the acceptance upon the subject matter,
consideration, and terms of payment, a contract is produced. The offer
In the early part of February, 1964 there were negotiations for the sale
of the said lots and the improvements thereon between Romeo
Villonco of Villonco Realty Company "and Bormaheco, Inc.,
represented by its president, Francisco N. Cervantes, through the
intervention of Edith Perez de Tagle, a real estate broker".
AQUINO, J.:
This action was instituted by Villonco Realty Company against
Bormaheco, Inc. and the spouses Francisco N. Cervantes and Rosario
N. Cervantes for the specific performance of a supposed contract for
the sale of land and the improvements thereon for one million four
hundred thousand pesos. Edith Perez de Tagle, as agent, intervened in
order to recover her commission. The lower court enforced the sale.
Bormaheco, Inc. and the Cervantes spouses, as supposed vendors,
appealed.
This Court took cognizance of the appeal because the amount involved
is more than P200,000 and the appeal was perfected before Republic
Act No. 5440 took effect on September 9, 1968. The facts are as
follows:
Francisco N. Cervantes and his wife, Rosario P. Navarra-Cervantes,
are the owners of lots 3, 15 and 16 located at 245 Buendia Avenue,
Makati, Rizal with a total area of three thousand five hundred square
meters (TCT Nos. 43530, 43531 and 43532, Exh. A, A-1 and A-2). The
lots were mortgaged to the Development Bank of the Phil (DBP) on
April 21, 1959 as security for a loan of P441,000. The mortgage debt
was fully paid on July 10, 1969.
Cervantes is the president of Bormaheco, Inc., a dealer and importer of
industrial and agricultural machinery. The entire lots are occupied by
the building, machinery and equipment of Bormaheco, Inc. and are
BORMAHECO, INC.
(Sgd.) FRANCISCO CERVANTES
March 4, 1964
The check for P100,000 (Exh. E) mentioned in the foregoing lettercontract was delivered by Edith Perez de Tagle to Bormaheco, Inc. on
March 4, 1964 and was received by Cervantes. In the voucher-receipt
evidencing the delivery the broker indicated in her handwriting that the
earnest money was "subject to the terms and conditions embodied in
Bormaheco's letter" of February 12 and Villonco Realty Company's
letter of March 4, 1964 (Exh. E-1; 14 tsn).
Then, unexpectedly, in a letter dated March 30, 1964, or twenty-six
days after the signing of the contract of sale, Exhibit D, Cervantes
returned the earnest money, with interest amounting to P694.24 (at ten
percent per annum). Cervantes cited as an excuse the circumstance
that "despite the lapse of 45 days from February 12, 1964 there is no
certainty yet" for the acquisition of the Punta property (Exh. F; F-I and
F-2). Villonco Realty Company refused to accept the letter and the
checks of Bormaheco, Inc. Cervantes sent them by registered mail.
When he rescinded the contract, he was already aware that the Punta
lot had been awarded to Bormaheco, Inc. (25-26 tsn).
Edith Perez de Tagle, the broker, in a letter to Cervantes dated March
31, 1964 articulated her shock and surprise at Bormaheco's turnabout.
She reviewed the history of the deal and explained why Romeo
Villonco could not agree to the rescission of the sale (Exh. G).**
for the three lots in question and directing Bormaheco, Inc. (a) to
convey the same lots to Villonco Realty Company, (b) to pay the latter,
as consequential damages, the sum of P10,000 monthly from March
24, 1964 up to the consummation of the sale, (c) to pay Edith Perez de
Tagle the sum of P42,000 as broker's commission and (d) pay P20,000
as to attorney's fees (Civil Case No. 8109).
Bormaheco, Inc. and the Cervantes spouses appealed. Their principal
contentions are (a) that no contract of sale was perfected because
Cervantes made a supposedly qualified acceptance of the revised offer
contained in Exhibit D, which acceptance amounted to a counter-offer,
and because the condition that Bormaheco, inc. would acquire the
Punta land within the forty-five-day period was not fulfilled; (2) that
Bormaheco, Inc. cannot be compelled to sell the land which belongs to
the Cervantes spouses and (3) that Francisco N. Cervantes did not
bind the conjugal partnership and his wife when, as president of
Bormaheco, Inc., he entered into negotiations with Villonco Realty
Company regarding the said land.
We hold that the appeal, except as to the issue of damages, is devoid
of merit.
"By the contract of sale one of the contracting parties obligates himself
to transfer the ownership of and to deliver a determining thing, and the
other to pay therefor a price certain in money or its equivalent. A
contract of sale may be absolute or conditional" (Art. 1458, Civil Code).
"The contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the
price. From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the form of
contracts" (Art. 1475, Ibid.).
"Contracts are perfected by mere consent, and from that moment the
parties are bound not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which, according to their
nature, may be in keeping with good faith, usage and law" (Art. 1315,
Civil Code).
"Consent is manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the contract. The
offer must be certain and the acceptance absolute. A qualified
acceptance constitutes a counter-offer" (Art. 1319, Civil Code). "An
acceptance may be express or implied" (Art. 1320, Civil Code).
Bormaheco's acceptance of Villonco Realty Company's offer to
purchase the Buendia Avenue property, as shown in Teofilo Villonco's
letter dated March 4, 1964 (Exh. D), indubitably proves that there was
a meeting of minds upon the subject matter and consideration of the
sale. Therefore, on that date the sale was perfected. (Compare with
McCullough vs. Aenlle & Co., 3 Phil. 285; Goyena vs. Tambunting, 1
Phil. 490). Not only that Bormaheco's acceptance of the part payment
of one hundred ,thousand pesos shows that the sale was conditionally
consummated or partly executed subject to the purchase by
Bormaheco, Inc. of the Punta property. The nonconsummation of that
purchase would be a negative resolutory condition (Taylor vs. Uy Tieng
Piao, 43 Phil. 873).
On February 18, 1964 Bormaheco's bid for the Punta property was
already accepted by the Nassco which had authorized its General
Manager to sign the corresponding deed of sale. What was necessary
only was the approval of the sale by the Economic Coordinator and a
request for that approval was already pending in the office of that
functionary on March 4, 1964.
Bormaheco, Inc. and the Cervantes spouses contend that the sale was
not perfected because Cervantes allegedly qualified his acceptance of
Villonco's revised offer and, therefore, his acceptance amounted to a
counter-offer which Villonco Realty Company should accept but no
such acceptance was ever transmitted to Bormaheco, Inc. which,
therefore, could withdraw its offer.
What the record reveals is that the broker, Miss Tagle, acted as
intermediary between the parties. It is safe to assume that the alleged
changes or qualifications made by Cervantes were approved by
Villonco Realty Company and that such approval was duly
communicated to Cervantes or Bormaheco, Inc. by the broker as
shown by the fact that Villonco Realty Company paid, and Bormaheco,
Inc. accepted, the sum of P100,000 as earnest money or down
payment. That crucial fact implies that Cervantes was aware that
Villonco Realty Company had accepted the modifications which he had
made in Villonco's counter-offer. Had Villonco Realty Company not
assented to those insertions and annotations, then it would have
stopped payment on its check for P100,000. The fact that Villonco
Realty Company allowed its check to be cashed by Bormaheco, Inc.
signifies that the company was in conformity with the changes made by
Cervantes and that Bormaheco, Inc. was aware of that conformity. Had
those insertions not been binding, then Bormaheco, Inc. would not
have paid interest at the rate of ten percent per annum, on the earnest
money of P100,000.
The truth is that the alleged changes or qualifications in the revised
counter offer (Exh. D) are not material or are mere clarifications of
what the parties had previously agreed upon.
Thus, Cervantes' alleged insertion in his handwriting of the figure and
the words "12th and" in Villonco's counter-offer is the same as the
statement found in the voucher-receipt for the earnest money, which
reads: "subject to the terms and conditions embodied in Bormaheco's
letter of Feb. 12, 1964 and your letter of March 4, 1964" (Exh. E-1).
Cervantes allegedly crossed out the word "Nassco" in paragraph 3 of
Villonco's revised counter-offer and substituted for it the word "another"
so that the original phrase, "Nassco's property in Sta. Ana", was made
to read as "another property in Sta. Ana". That change is trivial. What
Cervantes did was merely to adhere to the wording of paragraph 3 of
Bormaheco's original offer (Exh. B) which mentions "another property
located at Sta. Ana." His obvious purpose was to avoid jeopardizing his
negotiation with the Nassco for the purchase of its Sta. Ana property by
unduly publicizing it.
It is noteworthy that Cervantes, in his letter to the broker dated April 6,
1964 (Annex 1) or after the Nassco property had been awarded to
Bormaheco, Inc., alluded to the "Nassco property". At that time, there
was no more need of concealing from the public that Bormaheco, Inc.
was interested in the Nassco property.
Similarly, Cervantes' alleged insertion of the letters "PA" ( per annum)
after the word "interest" in that same paragraph 3 of the revised
counter-offer (Exh. D) could not be categorized as a major alteration of
that counter-offer that prevented a meeting of the minds of the parties.
It was understood that the parties had contemplated a rate of ten
percent per annum since ten percent a month or semi-annually would
be usurious.
The controlling fact is that there was agreement between the parties on
the subject matter, the price and the mode of payment and that part of
the price was paid. "Whenever earnest money is given in a contract of
sale, it shall be considered as part of the price and as proof of the
perfection of the contract" (Art. 1482, Civil Code).
"It is true that an acceptance may contain a request for certain
changes in the terms of the offer and yet be a binding acceptance. 'So
long as it is clear that the meaning of the acceptance is positively and
unequivocally to accept the offer, whether such request is granted or
not, a contract is formed.' " (Stuart vs. Franklin Life Ins. Co., 165 Fed.
2nd 965, citing Sec. 79, Williston on Contracts).
Thus, it was held that the vendor's change in a phrase of the offer to
purchase, which change does not essentially change the terms of the
offer, does not amount to a rejection of the offer and the tender of a
counter-offer (Stuart vs. Franklin Life Ins. Co., supra).
The instant case is not governed by the rulings laid down in Beaumont
vs. Prieto, 41 Phil. 670, 985, 63 L. Ed. 770, and Zayco vs. Serra, 44
Phil. 326. In those two cases the acceptance radically altered the offer
and, consequently, there was no meeting of the minds of the parties.
Thus, in the Zayco case, Salvador Serra offered to sell to Lorenzo
Zayco his sugar central for P1,000,000 on condition that the price be
paid in cash, or, if not paid in cash, the price would be payable within
three years provided security is given for the payment of the balance
within three years with interest. Zayco, instead of unconditionally
accepting those terms, countered that he was going to make a down
payment of P100,000, that Serra's mortgage obligation to the
Philippine National Bank of P600,000 could be transferred to Zayco's
account and that he (plaintiff) would give a bond to secure the payment
of the balance of the price. It was held that the acceptance was
conditional or was a counter-offer which had to be accepted by Serra.
There was no such acceptance. Serra revoked his offer. Hence, there
was no perfected contract.
In the Beaumont case, Benito Valdes offered to sell to W Borck the
Nagtahan Hacienda owned by Benito Legarda, who had empowered
Valdes to sell it. Borck was given three months from December 4, 1911
to buy the hacienda for P307,000. On January 17, 1912 Borck wrote to
Valdes, offering to purchase the hacienda for P307,000 payable on
May 1, 1912. No reply was made to that letter. Borck wrote other
letters modifying his proposal. Legarda refused to convey the property.
It was held that Borck's January 17th letter plainly departed from the
terms of the offer as to the time of payment and was a counter-offer
which amounted to a rejection of Valdes' original offer. A subsequent
unconditional acceptance could not revive that offer.
The instant case is different from Laudico and Harden vs. Arias
Rodriguez, 43 Phil. 270 where the written offer to sell was revoked by
the offer or before the offeree's acceptance came to the offeror's
knowledge.
Sta. Ana, Manila within forty-five days from the date hereof ." He could
have also specified that period in his "conforme" to Villonco's counteroffer of March 4, 1964 (Exh. D) so that instead of merely stating "that
this sale shall be subject to favorable consummation of a property in
Sta. Ana we are negotiating" he could have said: "That this sale shall
be subject to favorable consummation within forty-five days from
February 12, 1964 of a property in Sta. Ana we are negotiating".
No such specification was made. The term of forty-five days was not a
part of the condition that the Nassco property should be acquired. It is
clear that the statement "that final negotiations on both property can be
definitely known after 45 days" does not and cannot mean that
Bormaheco, Inc. should acquire the Nassco property within forty-five
days from February 12, 1964 as pretended by Cervantes. It is simply a
surmise that after forty-five days (in fact when the forty-five day period
should be computed is not clear) it would be known whether
Bormaheco, Inc. would be able to acquire the Nassco property and
whether it would be able to sell the Buendia property. That
aforementioned paragraph 5 does not even specify how long after the
forty-five days the outcome of the final negotiations would be known.
It is interesting to note that in paragraph 6 of Bormaheco's answer to
the amended complaint, which answer was verified by Cervantes, it
was alleged that Cervantes accepted Villonco's revised counter-offer of
March 4, 1964 subject to the condition that "the final negotiations
(acceptance) will have to be made by defendant within 45 daysfrom
said acceptance" (31 Record on Appeal). If that were so, then the
consummation of Bormaheco's purchase of the Nassco property would
be made within forty-five days from March 4, 1964.
What makes Bormaheco's stand more confusing and untenable is that
in its three answers it invariably articulated the incoherent and vague
affirmative defense that its acceptance of Villonco's revised counteroffer was conditioned on the circumstance "that final acceptance or not
shall be made after 45 days" whatever that means. That affirmative
defense is inconsistent with the other aforequoted incoherent
statement in its third answer that "the final negotiations (acceptance)
will have to be made by defendant within 45 days from said
acceptance" (31 Record on Appeal).1wph1.t
Thus, Bormaheco's three answers and paragraph 5 of his offer of
February 12, 1964 do not sustain at all its theory that the Nassco
property should be acquired on or before March 28, 1964. Its
rescission or revocation of its acceptance cannot be anchored on that
theory which, as articulated in its pleadings, is quite equivocal and
unclear.
It should be underscored that the condition that Bormaheco, Inc.
should acquire the Nassco property was fulfilled. As admitted by the
appellants, the Nassco property was conveyed to Bormaheco, Inc. on
June 26, 1964. As early as January 17, 1964 the property was
awarded to Bormaheco, Inc. as the highest bidder. On February 18,
1964 the Nassco Board authorized its General Manager to sell the
property to Bormaheco, Inc. (Exh. H). The Economic Coordinator
approved the award on March 24, 1964. It is reasonable to assume
that had Cervantes been more assiduous in following up the
transaction, the Nassco property could have been transferred to
Bormaheco, Inc. on or before March 28, 1964, the supposed last day
of the forty-five-day period.
The appellants, in their fifth assignment of error, argue that
Bormaheco, Inc. cannot be required to sell the three lots in question
because they are conjugal properties of the Cervantes spouses. They
aver that Cervantes in dealing with the Villonco brothers acted as
president of Bormaheco, Inc. and not in his individual capacity and,
therefore, he did not bind the conjugal partnership nor Mrs. Cervantes
who was allegedly opposed to the sale.
It was only during the trial on May 17, 1965 that Cervantes declared on
the witness stand that his wife was opposed to the sale of the three
lots, a defense which, as already stated, was never interposed in the
three answers of Bormaheco, Inc. and in the separate answer of the
Cervantes spouses. That same viewpoint was adopted in defendants'
motion for reconsideration dated November 20, 1965.
But that defense must have been an afterthought or was evolved post
litem motam since it was never disclosed in Cervantes' letter of
rescission and in his letter to Miss Tagle (Exh. F and Annex 1).
Moreover, Mrs. Cervantes did not testify at the trial to fortify that
defense which had already been waived for not having been pleaded
(See sec. 2, Rule 9, Rules of Court).
Taking into account the situation of Cervantes vis-a-vis Bormaheco,
Inc. and his wife and the fact that the three lots were entirely occupied
by Bormaheco's building, machinery and equipment and were
mortgaged to the DBP as security for its obligation, and considering
that appellants' vague affirmative defenses do not include Mrs.
Cervantes' alleged opposition to the sale, the plea that Cervantes had
no authority to sell the lots strains the rivets of credibility (Cf. Papa and
Delgado vs. Montenegro, 54 Phil. 331; Riobo vs. Hontiveros, 21 Phil.
31).
"Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith" (Art.
1159, Civil Code). Inasmuch as the sale was perfected and even partly
executed, Bormaheco, Inc., and the Cervantes spouses, as a matter of
justice and good faith, are bound to comply with their contractual
commitments.
Parenthetically, it may be observed that much misunderstanding could
have been avoided had the broker and the buyer taken the trouble of
making some research in the Registry of Deeds and availing
themselves of the services of a competent lawyer in drafting the
contract to sell.
Bormaheco, Inc. and the Cervantes spouses in their sixth assignment
of error assail the trial court's award to Villonco Realty Company of
consequential damage amounting to ten thousand pesos monthly from
March 24, 1964 (when the Economic Coordinator approved the award
of the Nassco property to Bormaheco, Inc.) up to the consummation of
the sale. The award was based on paragraph 18 of the stipulation of
facts wherein Villonco Realty Company "submits that the delay in the
consummation of the sale" has caused it to suffer the aforementioned
damages.
The appellants contend that statement in the stipulation of facts simply
means that Villonco Realty Company speculates that it has suffered
damages but it does not mean that the parties have agreed that
Villonco Realty Company is entitled to those damages.
Appellants' contention is correct. As rightly observed by their counsel,
the damages in question were not specifically pleaded and proven and
were "clearly conjectural and speculative".
However, appellants' view in their seventh assignment of error that the
trial court erred in ordering Bormaheco, Inc. to pay Villonco Realty
Company the sum of twenty thousand pesos as attorney's fees is not
tenable. Under the facts of the case, it is evident that Bormaheco, Inc.
acted in gross and evident bad faith in refusing to satisfy the valid and
just demand of Villonco Realty Company for specific performance. It
compelled Villonco Realty Company to incure expenses to protect its
interest. Moreover, this is a case where it is just and equitable that the
plaintiff should recover attorney's fees (Art. 2208, Civil Code).
The appellants in their eighth assignment of error impugn the trial
court's adjudication of forty-two thousand pesos as three percent
broker's commission to Miss Tagle. They allege that there is no
evidence that Bormaheco, Inc. engaged her services as a broker in the
projected sale of the three lots and the improvements thereon. That
allegation is refuted by paragraph 3 of the stipulation of facts and by
the documentary evidence. It was stipulated that Miss Tagle intervened
in the negotiations for the sale of the three lots. Cervantes in his
original offer of February 12, 1964 apprised Villonco Realty Company
that the earnest money should be delivered to Miss Tagle, the bearer
of the letter-offer. See also Exhibit G and Annex I of the stipulation of
facts.
February 5, 2007
We hold that the trial court did not err in adjudging that Bormaheco,
Inc. should pay Miss Tagle her three percent commission.
WHEREFORE, the trial court's decision is modified as follows:
1. Within ten (10) days from the date the defendants-appellants receive
notice from the clerk of the lower court that the records of this case
have been received from this Court, the spouses Francisco N.
Cervantes and Rosario P. Navarra-Cervantes should execute a deed
conveying to Bormaheco, Inc. their three lots covered by Transfer
Certificate of Title Nos. 43530, 43531 and 43532 of the Registry of
Deeds of Rizal.
2. Within five (5) days from the execution of such deed of conveyance,
Bormaheco, Inc. should execute in favor of Villonco Realty Company,
V. R. C. Building, 219 Buendia Avenue, Makati, Rizal a registerable
deed of sale for the said three lots and all the improvements thereon,
free from all lien and encumbrances, at the price of four hundred pesos
per square meter, deducting from the total purchase price the sum of
P100,000 previously paid by Villonco Realty Company to Bormaheco,
Inc.
3. Upon the execution of such deed of sale, Villonco Realty Company
is obligated to pay Bormaheco, Inc. the balance of the price in the sum
of one million three hundred thousand pesos (P1,300,000).
In the case at bar, the Contract to Sell was perfected when the
petitioners consented to the sale to the respondent of their shares in
the subject parcels of land by affixing their signatures on the said
contract. Such signatures show their acceptance of what has been
stipulated in the Contract to Sell and such acceptance was made
known to respondent corporation when the duplicate copy of the
Contract to Sell was returned to the latter bearing petitioners
signatures.
As to petitioner Enriquetas claim that she merely signed as a witness
to the said contract, the contract itself does not say so. There was no
single indication in the said contract that she signed the same merely
as a witness. The fact that her signature appears on the right-hand
margin of the Contract to Sell is insignificant. The contract indisputably
referred to the "Heirs of Bibiano and Encarnacion Oesmer," and since
there is no showing that Enriqueta signed the document in some other
capacity, it can be safely assumed that she did so as one of the parties
to the sale.
Emphasis should also be given to the fact that petitioners Ernesto and
Enriqueta concurrently signed the Contract to Sell. As the Court of
Appeals mentioned in its Decision,14 the records of the case speak of
the fact that petitioner Ernesto, together with petitioner Enriqueta, met
with the representatives of the respondent in order to finalize the terms
and conditions of the Contract to Sell. Enriqueta affixed her signature
on the said contract when the same was drafted. She even admitted
that she understood the undertaking that she and petitioner Ernesto
made in connection with the contract. She likewise disclosed that
pursuant to the terms embodied in the Contract to Sell, she updated
the payment of the real property taxes and transferred the Tax
Declarations of the questioned properties in her name.15 Hence, it
cannot be gainsaid that she merely signed the Contract to Sell as a
witness because she did not only actively participate in the negotiation
and execution of the same, but her subsequent actions also reveal an
attempt to comply with the conditions in the said contract.
With respect to the other petitioners assertion that they did not
understand the importance and consequences of their action because
of their low degree of education and because the contents of the
aforesaid contract were not read nor explained to them, the same
cannot be sustained.
We only have to quote the pertinent portions of the Court of Appeals
Decision, clear and concise, to dispose of this issue. Thus,
First, the Contract to Sell is couched in such a simple language which
is undoubtedly easy to read and understand. The terms of the
Contract, specifically the amount of P100,000.00 representing the
option money paid by [respondent] corporation, the purchase price
of P60.00 per square meter or the total amount ofP3,316,560.00 and a
brief description of the subject properties are well-indicated thereon
that any prudent and mature man would have known the nature and
extent of the transaction encapsulated in the document that he was
signing.
Second, the following circumstances, as testified by the witnesses and
as can be gleaned from the records of the case clearly indicate the
[petitioners] intention to be bound by the stipulations chronicled in the
said Contract to Sell.
As to [petitioner] Ernesto, there is no dispute as to his intention to
effect the alienation of the subject property as he in fact was the one
who initiated the negotiation process and culminated the same by
affixing his signature on the Contract to Sell and by taking receipt of
the amount of P100,000.00 which formed part of the purchase price.
xxxx
The final arguments of petitioners state that the Contract to Sell is void
altogether considering that respondent itself did not sign it as to
indicate its consent to be bound by its terms; and moreover, the
Contract to Sell is really a unilateral promise to sell without
consideration distinct from the price, and hence, again, void. Said
arguments must necessarily fail.
The Contract to Sell is not void merely because it does not bear the
signature of the respondent corporation. Respondent corporations
consent to be bound by the terms of the contract is shown in the
uncontroverted facts which established that there was partial
performance by respondent of its obligation in the said Contract to Sell
when it tendered the amount of P100,000.00 to form part of the
DECISION
NACHURA, J.:
This petition seeks a review of the Court of Appeals (CA)
Decision1 dated September 13, 2002 and Resolution2dated September
24, 2003 which upheld the contract of sale executed by petitioners
predecessor, Roque Naranja, during his lifetime, over two real
properties.
Roque Naranja was the registered owner of a parcel of land,
denominated as Lot No. 4 in Consolidation-Subdivision Plan (LRC)
Pcs-886, Bacolod Cadastre, with an area of 136 square meters and
covered by Transfer Certificate of Title (TCT) No. T-18764. Roque was
also a co-owner of an adjacent lot, Lot No. 2, of the same subdivision
plan, which he co-owned with his brothers, Gabino and Placido
Naranja. When Placido died, his one-third share was inherited by his
children, Nenita, Nazareto, Nilda, Naida and Neolanda, all surnamed
Naranja, herein petitioners. Lot No. 2 is covered by TCT No. T-18762
in the names of Roque, Gabino and the said children of Placido. TCT
No. T-18762 remained even after Gabino died. The other petitioners
Serafin Naranja, Raul Naranja, and Amelia Naranja-Rubinos are the
children of Gabino.3
The two lots were being leased by Esso Standard Eastern, Inc. for 30
years from 1962-1992. For his properties, Roque was being
paid P200.00 per month by the company.4
In 1976, Roque, who was single and had no children, lived with his half
sister, Lucilia P. Belardo (Belardo), in Pontevedra, Negros Occidental.
At that time, a catheter was attached to Roques body to help him
urinate. But the catheter was subsequently removed when Roque was
already able to urinate normally. Other than this and the influenza prior
to his death, Roque had been physically sound.5
Roque had no other source of income except for the P200.00 monthly
rental of his two properties. To show his gratitude to Belardo, Roque
sold Lot No. 4 and his one-third share in Lot No. 2 to Belardo on
August 21, 1981, through a Deed of Sale of Real Property which was
duly notarized by Atty. Eugenio Sanicas. The Deed of Sale reads:
I, ROQUE NARANJA, of legal age, single, Filipino and a resident of
Bacolod City, do hereby declare that I am the registered owner of Lot
No. 4 of the Cadastral Survey of the City of Bacolod, consisting of 136
square meters, more or less, covered by Transfer Certificate of Title
No. T-18764 and a co-owner of Lot No. 2, situated at the City of
Bacolod, consisting of 151 square meters, more or less, covered by
Transfer Certificate of Title No. T-18762 and my share in the aforesaid
Lot No. 2 is one-third share.
That for and in consideration of the sum of TEN THOUSAND PESOS
(P10,000.00), Philippine Currency, and other valuable consideration,
receipt of which in full I hereby acknowledge to my entire satisfaction,
by these presents, I hereby transfer and convey by way of absolute
sale the above-mentioned Lot No. 4 consisting of 136 square meters
covered by Transfer Certificate of Title No. T-18764 and my one-third
share in Lot No. 2, covered by Transfer Certificate of Title No. T-18762,
in favor of my sister LUCILIA P. BELARDO, of legal age, Filipino
citizen, married to Alfonso D. Belardo, and a resident of Pontevedra,
Negros Occidental, her heirs, successors and assigns.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of
August, 1981 at Bacolod City, Philippines.
(SGD.)
ROQUE NARANJA6
Roques copies of TCT No. T-18764 and TCT No. T-18762 were
entrusted to Atty. Sanicas for registration of the deed of sale and
transfer of the titles to Belardo. But the deed of sale could not be
registered because Belardo did not have the money to pay for the
registration fees.7
Belardos only source of income was her store and coffee shop.
Sometimes, her children would give her money to help with the
household expenses, including the expenses incurred for Roques
support. At times, she would also borrow money from Margarita Demaala, a neighbor.8 When the amount of her loan reached P15,000.00,
Dema-ala required a security. On November 19, 1983, Roque
executed a deed of sale in favor of Dema-ala, covering his two
properties in consideration of the P15,000.00 outstanding loan and an
additional P15,000.00, for a total ofP30,000.00. Dema-ala explained
that she wanted Roque to execute the deed of sale himself since the
properties were still in his name. Belardo merely acted as a witness.
The titles to the properties were given to Dema-ala for safekeeping.9
Three days later, or on December 2, 1983, Roque died of influenza.
The proceeds of the loan were used for his treatment while the rest
was spent for his burial.10
In 1985, Belardo fully paid the loan secured by the second deed of
sale. Dema-ala returned the certificates of title to Belardo, who, in turn,
gave them back to Atty. Sanicas.11
annotation of the Deed of Sale on TCT No. T-18762. This case was
docketed as Civil Case No. 7214.
On March 5, 1997, the RTC rendered a Decision in the consolidated
cases in favor of petitioners. The trial court noted that the Deed of Sale
was defective in form since it did not contain a technical description of
the subject properties but merely indicated that they were Lot No. 4,
covered by TCT No. T-18764 consisting of 136 square meters, and
one-third portion of Lot No. 2 covered by TCT No. T-18762. The trial
court held that, being defective in form, the Deed of Sale did not vest
title in private respondent. Full and absolute ownership did not pass to
private respondent because she failed to register the Deed of Sale.
She was not a purchaser in good faith since she acted as a witness to
the second sale of the property knowing that she had already
purchased the property from Roque. Whatever rights private
respondent had over the properties could not be superior to the rights
of petitioners, who are now the registered owners of the parcels of
land. The RTC disposed, thus:
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered:
1. Dismissing Civil Case No. 7144.
2. Civil Case No. 7214.
a) Declaring the Deed of Sale dated August 21,
1981, executed by Roque Naranja, covering his
one-third (1/3) share of Lot 2 of the consolidationsubdivision plan (LRC) Pcs-886, being a portion of
the consolidation of Lots 240-A, 240-B, 240-C and
240-D, described on plan, Psd-33443 (LRC)
GLRO Cad. Rec. No. 55 in favor of Lucilia
Belardo, and entered as Doc. No. 80, Page 17,
Book No. XXXVI, Series of 1981 of Notary Public
Eugenio Sanicas of Bacolod City, as null and void
and of no force and effect;
In 1987, Belardo decided to register the Deed of Sale dated August 21,
1981. With no title in hand, she was compelled to file a petition with the
RTC to direct the Register of Deeds to annotate the deed of sale even
without a copy of the TCTs. In an Order dated June 18, 1987, the RTC
granted the petition. But she only succeeded in registering the deed of
sale in TCT No. T-18762 because TCT No. T-18764 had already been
cancelled.14
On December 11, 1989, Atty. Sanicas prepared a certificate of
authorization, giving Belardos daughter, Jennelyn P. Vargas, the
authority to collect the payments from Esso Standard Eastern, Inc. But
it appeared from the companys Advice of Fixed Payment that payment
of the lease rental had already been transferred from Belardo to Amelia
Naranja-Rubinos because of the Extrajudicial Settlement Among Heirs.
On June 23, 1992, Belardo,15 through her daughter and attorney-infact, Rebecca Cordero, instituted a suit for reconveyance with
damages. The complaint prayed that judgment be rendered declaring
Belardo as the sole legal owner of Lot No. 4, declaring null and void
the Extrajudicial Settlement Among Heirs, and TCT No. T-140184, and
ordering petitioners to reconvey to her the subject property and to pay
damages. The case was docketed as Civil Case No. 7144.
Subsequently, petitioners also filed a case against respondent for
annulment of sale and quieting of title with damages, praying, among
others, that judgment be rendered nullifying the Deed of Sale, and
ordering the Register of Deeds of Bacolod City to cancel the
c) Ordering Lucilia Belardo or her successors-ininterest to pay plaintiffs the sum of P20,000.00 as
attorneys fees, the amount of P500.00 as
appearance fees.
Counterclaims in both Civil Cases Nos. 7144 and 7214 are hereby
DISMISSED.
SO ORDERED.16
On September 13, 2002, the CA reversed the RTC Decision. The CA
held that the unregisterability of a deed of sale will not undermine its
validity and efficacy in transferring ownership of the properties to
private respondent. The CA noted that the records were devoid of any
proof evidencing the alleged vitiation of Roques consent to the sale;
hence, there is no reason to invalidate the sale. Registration is only
necessary to bind third parties, which petitioners, being the heirs of
Roque Naranja, are not. The trial court erred in applying Article 1544 of
the Civil Code to the case at bar since petitioners are not purchasers of
the said properties. Hence, it is not significant that private respondent
failed to register the deed of sale before the extrajudicial settlement
among the heirs. The dispositive portion of the CA Decision reads:
a valid contract of sale under Article 1458 of the Civil Code are: (1)
consent or meeting of the minds; (2) determinate subject matter; and
(3) price certain in money or its equivalent.
The failure of the parties to specify with absolute clarity the object of a
contract by including its technical description is of no moment. What is
important is that there is, in fact, an object that is determinate or at
least determinable, as subject of the contract of sale. The form of a
deed of sale provided in Section 127 of Act No. 496 is only a
suggested form. It is not a mandatory form that must be strictly
followed by the parties to a contract.
In the instant case, the deed of sale clearly identifies the subject
properties by indicating their respective lot numbers, lot areas, and the
certificate of title covering them. Resort can always be made to the
technical description as stated in the certificates of title covering the
two properties.
On the alleged nullity of the deed of sale, we hold that petitioners failed
to submit sufficient proof to show that Roque executed the deed of sale
under the undue influence of Belardo or that the deed of sale was
simulated or without consideration.1avvphi1
A notarized document carries the evidentiary weight conferred upon it
with respect to its due execution, and documents acknowledged before
a notary public have in their favor the presumption of regularity. It must
be sustained in full force and effect so long as he who impugns it does
not present strong, complete, and conclusive proof of its falsity or
nullity on account of some flaws or defects provided by law.23
Petitioners allege that Belardo unduly influenced Roque, who was
already physically weak and senile at that time, into executing the deed
of sale. Belardo allegedly took advantage of the fact that Roque was
living in her house and was dependent on her for support.
There is undue influence when a person takes improper advantage of
his power over the will of another, depriving the latter of a reasonable
freedom of choice.24 One who alleges any defect, or the lack of
consent to a contract by reason of fraud or undue influence, must
establish by full, clear and convincing evidence, such specific acts that
vitiated the partys consent; otherwise, the latters presumed consent to
the contract prevails.25 For undue influence to be present, the influence
exerted must have so overpowered or subjugated the mind of a
contracting party as to destroy his free agency, making him express
the will of another rather than his own.26
Petitioners adduced no proof that Roque had lost control of his mental
faculties at the time of the sale. Undue influence is not to be inferred
from age, sickness, or debility of body, if sufficient intelligence
remains.27 The evidence presented pertained more to Roques physical
condition rather than his mental condition. On the contrary, Atty.
Sanicas, the notary public, attested that Roque was very healthy and
mentally sound and sharp at the time of the execution of the deed of
sale. Atty. Sanicas said that Roque also told him that he was a Law
graduate.28
Neither was the contract simulated. The late registration of the Deed of
Sale and Roques execution of the second deed of sale in favor of
Dema-ala did not mean that the contract was simulated. We are
convinced with the explanation given by respondents witnesses that
the deed of sale was not immediately registered because Belardo did
not have the money to pay for the fees. This explanation is, in fact,
plausible considering that Belardo could barely support herself and her
brother, Roque. As for the second deed of sale, Dema-ala, herself,
attested before the trial court that she let Roque sign the second deed
of sale because the title to the properties were still in his name.
Finally, petitioners argue that the Deed of Sale was not supported by a
consideration since no receipt was shown, and it is incredulous that
Roque, who was already weak, would travel to Bacolod City just to be
able to execute the Deed of Sale.
The Deed of Sale which states "receipt of which in full I hereby
acknowledge to my entire satisfaction" is an acknowledgment receipt in
itself. Moreover, the presumption that a contract has sufficient
consideration cannot be overthrown by a mere assertion that it has no
consideration.29
Heirs are bound by contracts entered into by their predecessors-ininterest.30 As heirs of Roque, petitioners are bound by the contract of
sale that Roque executed in favor of Belardo. Having been sold
already to Belardo, the two properties no longer formed part of
Roques estate which petitioners could have inherited. The deed of
extrajudicial settlement that petitioners executed over Lot No. 4 is,
therefore, void, since the property subject thereof did not become part
of Roques estate.
MEDIALDEA, J.:
This is a petition to annul and set aside the decision of the Court of
Appeals rendered on May 26, 1987, upholding the validity of the sale
of a parcel of land by petitioner Segundo Dalion (hereafter, "Dalion") in
favor of private respondent Ruperto Sabesaje, Jr. (hereafter,
"Sabesaje"), described thus:
A parcel of land located at Panyawan, Sogod,
Southern Leyte, declared in the name of Segundo
Dalion, under Tax Declaration No. 11148, with an
area of 8947 hectares, assessed at P 180.00, and
bounded on the North, by Sergio Destriza and
Titon Veloso, East, by Feliciano Destriza, by
Barbara Bonesa (sic); and West, by Catalino
Espina. (pp. 36-37, Rollo)
The decision affirms in toto the ruling of the trial court 1 issued on
January 17, 1984, the dispositive portion of which provides as follows:
WHEREFORE, IN VIEW OF THE FOREGOING,
the Court hereby renders judgment.
We see no reason for deviating from the appellate court's ruling (p. 44,
Rollo) as we reiterate that
SO ORDERED.
-----------------------G.R. No. 118509 March 29, 1996
LIMKETKAI SONS MILLING INC., petitioner,
vs.
COURT OF APPEALS, ET AL., respondents.
RESOLUTION
Gentlemen:
This will serve as your authority to sell on an "as is" "where
is" basis the property located at Pasig Blvd., Bagong Ilog,
Pasig, Metro Manila, under the following details and basic
terms and conditions:
TCT No. : 493122 in the name of BPI as trustee of
Philippine Remnants Co., Inc.
FRANCISCO, J.:p
In this motion for reconsideration, the Court * is called upon to take a
second hard look on its December 1, 1995 decision reversing and
setting aside respondent Court of Appeals' judgment of August 12,
1994 that dismissed petitioner Limketkai Sons Milling Inc.'s complaint
COURT:
Go ahead, that has been already overruled.
ATTY. VARGAS:
So may we reiterate our objection with regards to all other
portions of the affidavit which deal on the verbal contract. (TSN,
Feb. 28, 1989, pp. 3-5: Emphasis supplied.) 26
xxx xxx xxx
ATTY. CORNAGO:
Before we proceed, we would like to make of record our
continuing objection in so far as questions and answers
propounded to Pedro Revilla dated February 27, 1989, in so far
as questions would illicit (sic) answers which would be violative
of the best evidence rule in relation to Art. 1403. I refer to
questions nos. 8, 13, 16 and 19 of the affidavit of this witness
which is considered as his direct testimony. (T.S.N., June 29,
1990, p. 2)
ATTY. CORNAGO:
May we make of record our continued objection on the testimony
which is violative of the best evidence rule in relation to Art. 1403
as contained in the affidavit particularly questions Nos. 12, 14 19
and 20 of the affidavit of Alfonso Lim executed on February 24,
1989. . . . (T.S.N., June 28, 1990, p. 8). 27
Counsels should not be blamed and, worst, penalized for taking
the path of prudence by choosing to cross-examine the
witnesses instead of keeping mum and letting the inadmissible
testimony in "affidavit form" pass without challenge. We thus
quote with approval the observation of public respondent Court
of Appeals on this point:
As a logical consequence of the above findings, it follows
that the court a quo erred in allowing the appellee to introduce
parol evidence to prove the existence of a perfected contract of
sale over and above the objection of the counsel for the
defendant-appellant. The records show that the court a quo
allowed the direct testimony of the witnesses to be in affidavit
form subject to cross-examination by the opposing counsel. If
the purpose thereof was to prevent the opposing counsel from
objecting timely to the direct testimony, the scheme failed for as
early as the first hearing of the case on February 28, 1989
during the presentation of the testimony in affidavit form of
Pedro Revilla, Jr., plaintiff-appellee's first witness, the
presentation of such testimony was already objected to as
inadmissible. 28
[Emphasis supplied.]
WHEREFORE, in view of the foregoing premises, the Court hereby
GRANTS the motion for reconsideration, and SETS ASIDE its
December 1, 1995 decision. Accordingly, the petition is DENIED and
the Court of Appeals' decision dated August 12, 1994, appealed from is
AFFIRMED in toto.
SO ORDERED.
G.R. No. 105647*
Given the contrary findings of the trial court and the respondent court,
there is a need to re-examine the evidence altogether. After a careful
study, we are inclined to agree with the findings and conclusions of the
respondent court as they are more in accord with the law and evidence
on record.
As to the authenticity of the deed of sale, we subscribe to the Court of
Appeals' appreciation of evidence that private respondent has
substantially proven that Soledad Biona indeed signed the deed of sale
of the subject property in his favor. His categorical statement in the trial
court that he himself saw Soledad Estrobillo affix her signature on the
deed of sale lends credence. This was corroborated by another
witness, Mamerto Famular. Although the petitioners consider such
testimony as self-serving and biased,6 it can not, however, be denied
that private respondent has shown by competent proof that a contract
of sale where all the essential elements are present for its validity was
executed between the parties.7 The burden is on the petitioners to
prove the contrary which they have dismally failed to do. As aptly
stated by the Court of Appeals:
Having established the due execution of the subject deed of
sale and the receipt evidencing payment of the
consideration, the burden now shifted to plaintiffs-appellees
to prove by contrary evidence that the property was not so
transferred. They were not able to do this since the very
person who could deny the due execution of the document,
Soledad Biona, did not testify. She similarly failed to take the
witness stand in order to deny her signatures on Exhs. 2 and
3. Admitting as true that she was under medication in Manila
while the hearing of the case was underway, it was easy
enough to get her deposition. Her non-presentation gives
rise to the presumption that if her testimony was taken, the
same would be adverse to the claim by plaintiffsappellees.1wphi1.nt
It must also be noted that under Sec. 22 Rule 132 of our
procedural law, evidence respecting handwriting may also be
given by a comparison, made by the witness or the court,
with writings admitted or treated as genuine by the party
against whom the evidence is offered. Our own close
scrutiny of the signature of Soledad Biona appearing on Exh.
1, the document admitted by the contending parties, reveals
that it is the same as the signatures appearing on Exhs. 2
and 3, the documents in dispute. Admittedly, as was pointed
out by the trial court, the "S" in Exhs. 2 and 3 were written in
printed type while that in Exh. 1 is in handwriting type. But a
careful look at the text of Exh. 2 would reveal that Soledad
Biona alternately wrote the letter "S" in longhand and printed
form. Thus, the words "Sum" and "Sept.," found in the
penultimate and last paragraphs of the document,
respectively, were both written in longhand, while her name
appearing on first part of the document, as well as the
erased word "Sept." in the last paragraph thereof were
written in printed form. Moreover, all doubts about the
genuineness of Soledad Biona's signatures on Exhs. 2 and 3
are removed upon their comparison to her signature
appearing on the special power of attorney (Exh. A)
presented in evidence by plaintiffs-appellees during trial. In
said document, Soledad Biona signed her name using the
same fact that Soledad Estrobillo Biona wrote her entire
name on Exh. 2 while she merely affixed her maiden name
on the other two documents may have been due to the
lesser options left to her when the lawyers who drafted the
two documents (Exhs. 2 and 3) already had typewritten the
names "SOLEDAD ESTROBILLO" thereon whereas in Exh.
2, it was Soledad Biona herself who printed and signed her
own name. Thus, in the special power of attorney (Exh. A),
Soledad Biona signed her name in the same manner it was
typewritten on the document.8
We agree with the private respondent that all the requisites for a valid
contract of sale are present in the instant case. For a valuable
consideration of P4,500.00, Soledad Biona agreed to sell and actually
conveyed the subject property to private respondent. The fact that the
deed of sale was not notarized does not render the agreement null and
void and without any effect. The provision of Article 1358 of the Civil
Code9 on the necessity of a public document is only for convenience,
person and his heirs may lose their right to recover back the
possession of such property and title thereto by reason of
laches. (Victoriano v. Court of Appeals, 194 SCRA 19; Lola v.
CA, 145 SCRA 439, 449). Indeed, it has been ruled in the
case of Miguel v. Catalino, 26 SCRA 234, 239, that:
'Courts can not look with favor at parties who, by
their silence, delay and inaction, knowingly induce
another to spend time, effort and expense in
cultivating the land, paying taxes and making
improvements thereof for 30 long years, only to
spring from ambush and claim title when the
possessor's efforts and the rise of land values
offer an opportunity to make easy profit at his
expense.'
Thus, notwithstanding the invalidity of the sale with respect
to the share of plaintiffs-appellees, the daughters of the late
Ernesto Biona, they [allowed] the vendee, defendantappellant herein, to enter, occupy and possess the property
in the concept of an owner without demurrer and molestation
for a long period of time, never claiming the land as their
own until 1985 when the property has greatly appreciated in
value. Vigilantibus non dormientibus sequitas subvenit.14
WHEREFORE, the Petition is DENIED and the assailed Decision of
the Court of Appeals is AFFIRMED.
xxx
xxx
SO ORDERED.
G.R. No. 136021
AGREEMENT OF PARTITION
I, MAXIMA CABALLERO, Filipina, of legal age, married to
Rafael Cario, now residing and with postal address in the
Municipality of Dumaguete, Oriental Negros, depose the
following and say:
1. That I am the applicant of vacant lot No. 5679 of the
Talisay-Minglanilla Estate and the said application has
already been indorsed by the District Land Officer, Talisay,
Cebu, for private sale in my favor;
2. That the said Lot 5679 was formerly registered in the
name of Felix Abad y Caballero and the sale certificate of
which has already been cancelled by the Hon. Secretary of
Agriculture and Commerce;
3. That for and in representation of my brother, Luis
Caballero, who is now the actual occupant of said lot I deem
it wise to have the said lot paid by me, as Luis Caballero has
no means o[r] any way to pay the government;
4. That as soon as the application is approved by the
Director of Lands, Manila, in my favor, I hereby bind myself
to transfer the one-third (l/3) portion of the above mentioned
lot in favor of my aunt, Paciencia Sabellana y Caballero, of
legal age, single, residing and with postal address in
Tungkop, Minglanilla, Cebu. Said portion of one-third (1/3)
will be subdivided after the approval of said application and
the same will be paid by her to the government [for] the
corresponding portion.
5. That the said portion of one-third (1/3) will be located
adjoining the municipal road;
6. I, Paciencia Sabellana y Caballero, hereby accept and
take the portion herein adjudicated to me by Mrs. Maxima
Caballero of Lot No. 5679 Talisay-Minglanilla Estate and will
pay the corresponding portion to the government after the
subdivision of the same;
IN WITNESS WHEREOF, we have hereunto set our hands
this 5th day of January, 1988, at Talisay, Cebu."12
Trust is the right to the beneficial enjoyment of property, the legal title
to which is vested in another. It is a fiduciary relationship that obliges
the trustee to deal with the property for the benefit of the
beneficiary.13 Trust relations between parties may either be express or
implied. An express trust is created by the intention of the trustor or of
the parties. An implied trust comes into being by operation of law.14
The present Agreement of Partition involves an express trust. Under
Article 1444 of the Civil Code, "[n]o particular words are required for
the creation of an express trust, it being sufficient that a trust is clearly
intended." That Maxima Caballero bound herself to give one third of
Lot No. 5629 to Paciencia Sabellona upon the approval of the former's
BARREDO, J.:1wph1.t
Petition for certiorari and prohibition to declare void for being in grave
abuse of discretion the orders of respondent judge dated November 2,
1978 and August 29, 1980, in Civil Case No. 5759 of the Court of First
Instance of Leyte, which denied the motion filed by petitioners to
dismiss the complaint of private respondents for specific performance
of an alleged agreement of sale of real property, the said motion being
based on the grounds that the respondents' complaint states no cause
of action and/or that the claim alleged therein is unenforceable under
the Statute of Frauds.
Finding initially prima facie merit in the petition, We required
respondents to answer and We issued a temporary restraining order
on October 7, 1980 enjoining the execution of the questioned orders.
In essence, the theory of petitioners is that while it is true that they did
express willingness to sell to private respondents the subject property
for P6,500,000 provided the latter made known their own decision to
buy it not later than July 31, 1978, the respondents' reply that they
were agreeable was not absolute, so much so that when ultimately
petitioners' representative went to Cebu City with a prepared and duly
signed contract for the purpose of perfecting and consummating the
transaction, respondents and said representative found variance
between the terms of payment stipulated in the prepared document
and what respondents had in mind, hence the bankdraft which
respondents were delivering to petit loners' representative was
returned and the document remained unsigned by respondents. Hence
the action below for specific performance.
To be more specific, the parties do not dispute that on July 12, 1978,
petitioners, thru a certain Pedro C. Gamboa, sent to respondents the
following letter:
Tacloban City
Dear Mr. Yao: 1wph1.t
This refers to the Sotto property (land and
building) situated at Tacloban City. My clients are
willing to sell them at a total price of
P6,500,000.00.
While there are other parties who are interested to
buy the property, I am giving you and the other
occupants the preference, but such priority has to
be exercised within a given number of days as I do
not want to lose the opportunity if you are not
interested. I am therefore gluing you and the rest
of the occupants until July 31, 1978 within it which
to decide whether you want to buy the property. If I
do not hear from you by July 31, I will offer or
close the deal with the other interested buyer.
Thank you so much for the hospitality extended to
me during my last trip to Tacloban, and I hope to
hear from you very soon. 1wph1.tVery truly
yours,Pedro C. Gamboa 1
(Page 9, Record.)
Reacting to the foregoing letter, the following
telegram was sent by "Yao King Ong & tenants" to
Atty. Pedro Gamboa in Cebu City:
Atty. Pedro Gamboa
Room 314, Maria Cristina Bldg.
Osmea Boulevard, Cebu City
Reurlet dated July 12 inform Dra. Yuvienco we
agree to buy property proceed Tacloban to
negotiate details 1wph1.tYao King Ong &
tenants
(Page 10, Record.)
Likewise uncontroverted is the fact that under date
of July 27, 1978, Atty. Gamboa wired Yao King
Ong in Tacloban City as follows:
NLT
YAO KING ONG
LIFE BAKERY
TACLOBAN CITY
anyone to read in the telegram of Yao that they accepted the price of
P6,500,000.00 would be an inference not necessarily warranted by the
words "we agree to buy" and "proceed Tacloban to negotiate details". If
indeed the details being left by them for further negotiations were
merely accidental or formal ones, what need was there to say in the
telegram that they had still "to negotiate (such) details", when, being
unessential per their contention, they could have been just easily
clarified and agreed upon when Atty. Gamboa would reach Tacloban?
Anent the telegram of Atty. Gamboa of July 27, 1978, also quoted
earlier above, We gather that it was in answer to the telegram of Yao.
Considering that Yao was in Tacloban then while Atty. Gamboa was in
Cebu, it is difficult to surmise that there was any communication of any
kind between them during the intervening period, and none such is
alleged anyway by respondents. Accordingly, the claim of respondents
in paragraph 8 of their complaint below that there was an agreement of
a down payment of P2 M, with the balance of P4.5M to be paid within
90 days afterwards is rather improbable to imagine to have actually
happened.
Respondents maintain that under existing jurisprudence relative to a
motion to dismiss on the ground of failure of the complaint to state a
cause of action, the movant-defendant is deemed to admit the factual
allegations of the complaint, hence, petitioners cannot deny, for
purposes of their motion, that such terms of payment had indeed been
agreed upon.
While such is the rule, those allegations do not detract from the fact
that under Article 1319 of the Civil Code above-quoted, and judged in
the light of the telegram-reply of Yao to Atty. Gamboa's letter of July 12,
1978, there was not an absolute acceptance, hence from that point of
view, petitioners' contention that the complaint of respondents state no
cause of action is correct.
Nonetheless, the alleged subsequent agreement about the P2 M down
and P4.5 M in 90 days may at best be deemed as a distinct cause of
action. And placed against the insistence of petitioners, as
demonstrated in the two deeds of sale taken by Atty. Gamboa to
Tacloban, Annexes 9 and 10 of the answer of herein respondents, that
there was no agreement about 90 days, an issue of fact arose, which
could warrant a trial in order for the trial court to determine whether or
not there was such an agreement about the balance being payable in
90 days instead of the 30 days stipulated in Annexes 9 and 10 abovereferred to. Our conclusion, therefore, is that although there was no
perfected contract of sale in the light of the letter of Atty. Gamboa of
July 12, 1978 and the letter-reply thereto of Yao; it being doubtful
whether or not, under Article 1319 of the Civil Code, the said letter may
be deemed as an offer to sell that is "certain", and more, the Yao
telegram is far from being an "absolute" acceptance under said article,
still there appears to be a cause of action alleged in Paragraphs 8 to
12 of the respondents' complaint, considering it is alleged therein that
subsequent to the telegram of Yao, it was agreed that the petitioners
would sell the property to respondents for P6.5 M, by paving P2 M
down and the balance in 90 days and which agreement was allegedly
violated when in the deeds prepared by Atty. Gamboa and taken to
Tacloban, only 30 days were given to respondents.
But the foregoing conclusion is not enough to carry the day for
respondents. It only brings Us to the question of whether or not the
claim for specific performance of respondents is enforceable under the
Statute of Frauds. In this respect, We man, view the situation at hand
from two angles, namely, (1) that the allegations contained in
paragraphs 8 to 12 of respondents' complaint should be taken together
with the documents already aforementioned and (2) that the said
allegations constitute a separate and distinct cause of action. We hold
that either way We view the situation, the conclusion is inescapable e
that the claim of respondents that petitioners have unjustifiably refused
object of the contract and upon the price", the Statute would no longer
apply as long as the total price or consideration is mentioned in some
note or memorandum and there is no need of any indication of the
manner in which such total price is to be paid.
We cannot agree. In the reality of the economic world and the exacting
demands of business interests monetary in character, payment on
installments or staggered payment of the total price is entirely a
different matter from cash payment, considering the unpredictable
trends in the sudden fluctuation of the rate of interest. In other words, it
is indisputable that the value of money - varies from day to day, hence
the indispensability of providing in any sale of the terms of payment
when not expressly or impliedly intended to be in cash.
Thus, We hold that in any sale of real property on installments, the
Statute of Frauds read together with the perfection requirements of
Article 1475 of the Civil Code must be understood and applied in the
sense that the idea of payment on installments must be in the requisite
of a note or memorandum therein contemplated. Stated otherwise, the
inessential elements" mentioned in the case of Parades vs. Espino, 22
SCRA 1000, relied upon by respondent judge must be deemed to
include the requirement just discussed when it comes to installment
sales. There is nothing in the monograph re the Statute of Frauds
appearing in 21 SCRA 250 also cited by His Honor indicative of any
contrary view to this ruling of Ours, for the essence and thrust of the
said monograph refers only to the form of the note or memorandum
which would comply with the Statute, and no doubt, while such note or
memorandum need not be in one single document or writing and it can
be in just sufficiently implicit tenor, imperatively the separate notes
must, when put together', contain all the requisites of a perfected
contract of sale. To put it the other way, under the Statute of Frauds,
the contents of the note or memorandum, whether in one writing or in
separate ones merely indicative for an adequate understanding of all
the essential elements of the entire agreement, may be said to be the
contract itself, except as to the form.
Secondly, We are of the considered opinion that under the rules on
proper pleading, the ruling of the trial court that, even if the allegation
of the existence of a sale of real property in a complaint is challenged
as barred from enforceability by the Statute of Frauds, the plaintiff may
simply say there are documents, notes or memoranda without either
quoting them in or annexing them to the complaint, as if holding an ace
in the sleeves is not correct. To go directly to the point, for Us to
sanction such a procedure is to tolerate and even encourage undue
delay in litigation, for the simple reason that to await the stage of trial
for the showing or presentation of the requisite documentary proof
when it already exists and is asked to be produced by the adverse
party would amount to unnecessarily postponing, with the concomitant
waste of time and the prolongation of the proceedings, something that
can immediately be evidenced and thereby determinable with
decisiveness and precision by the court without further delay.
In this connection, Moran observes that unlike when the ground of
dismissal alleged is failure of the complaint to state a cause of action, a
motion to dismiss invoking the Statute of Frauds may be filed even if
the absence of compliance does not appear an the face of the
complaint. Such absence may be the subject of proof in the motion
stage of the proceedings. (Moran, Comment on the Rules of Court,
Vol. 1, p. 494, 1979 ed.) It follows then that when such a motion is filed
and all the documents available to movant are before the court, and
they are insufficient to comply with the Statute, it becomes incumbent
upon the plaintiff, for the reasons of policy We have just' indicated
regarding speedy administration of justice, to bring out what note or
memorandum still exists in his possession in order to enable the court
to expeditiously determine then and there the need for further
proceedings. In other words, it would be inimical to the public interests
in speedy justice for plaintiff to play hide and seek at his own
convenience, particularly, when, as is quite apparent as in the instant
case that chances are that there are no more writings, notes or
memoranda of the installment agreement alleged by respondents. We
cannot divine any reason why any such document would be withheld if
they existed, except the unpermissible desire of the respondents to
force the petitioners to undergo the ordeals, time, effort and expenses
of a futile trial.
In the foregoing premises, We find no alternative than to render
judgment in favor of petitioners in this certiorari and prohibition case. If
at all, appeal could be available if the petitioners subjected themselves
to the trial ruled to be held by the trial court. We foresee even at this
point, on the basis of what is both extant and implicit in the records,
that no different result can be probable. We consider it as sufficiently a
grave abuse of discretion warranting the special civil actions herein the
failure of respondent judge to properly apply the laws on perfection of
contracts in relation to the Statute of Frauds and the pertinent rules of
pleading and practice, as We have discussed above.
ACCORDINGLY, the impugned orders of respondent judge of
November 2, 1978 and August 29, 1980 are hereby set aside and
private respondents' amended complaint, Annex A of the petition, is
hereby ordered dismissed and the restraining order heretofore issued
by this Court on October 7, 1980 is declared permanent. Costs against
respondents.
G.R. No. 85240 July 12, 1991
HEIRS OF CECILIO (also known as BASILIO) CLAUDEL, namely,
MODESTA CLAUDEL, LORETA HERRERA, JOSE CLAUDEL,
BENJAMIN CLAUDEL, PACITA CLAUDEL, CARMELITA CLAUDEL,
MARIO CLAUDEL, ROBERTO CLAUDEL, LEONARDO CLAUDEL,
ARSENIA VILLALON, PERPETUA CLAUDEL and FELISA
CLAUDEL, petitioners,
vs.
HON. COURT OF APPEALS, HEIRS OF MACARIO, ESPERIDIONA,
RAYMUNDA and CELESTINA, all surnamed
CLAUDEL, respondents.
Ricardo L. Moldez for petitioners.
Juan T. Aquino for private respondents
SARMIENTO, J.:p
This petition for review on certiorari seeks the reversal of the decision
rendered by the Court of Appeals in CA-G.R. CV No. 04429 1 and the
reinstatement of the decision of the then Court of First Instance (CFI)
of Rizal, Branch CXI, in Civil Case No. M-5276-P, entitled. "Heirs of
Macario Claudel, et al. v. Heirs of Cecilio Claudel, et al.," which
dismissed the complaint of the private respondents against the
petitioners for cancellation of titles and reconveyance with damages. 2
As early as December 28, 1922, Basilio also known as "Cecilio"
Claudel, acquired from the Bureau of Lands, Lot No. 1230 of the
Muntinlupa Estate Subdivision, located in the poblacion of Muntinlupa,
Rizal, with an area of 10,107 square meters; he secured Transfer
Certificate of Title (TCT) No. 7471 issued by the Registry of Deeds for
the Province of Rizal in 1923; he also declared the lot in his name, the
latest Tax Declaration being No. 5795. He dutifully paid the real estate
taxes thereon until his death in 1937. 3 Thereafter, his widow "Basilia"
and later, her son Jose, one of the herein petitioners, paid the taxes.
The rest of the land, lots 1230-E and 1230-F, with an area of 598 and
6,927 square meters, respectively would go to Cecilio or his heirs, the
herein petitioners. Beyond these apportionments, the HEIRS OF
CECILIO would not receive anything else.
The crux of the entire litigation is whether or not the Court of Appeals
committed a reversible error in disposing the question of the true
ownership of the lots.
And the real issues are:
1. Whether or not a contract of sale of land may be
proven orally:
2. Whether or not the prescriptive period for filing
an action for cancellation of titles and
reconveyance with damages (the action filed by
the SIBLINGS OF CECILIO) should be counted
from the alleged sale upon which they claim their
ownership (1930) or from the date of the issuance
of the titles sought to be cancelled in favor of the
HEIRS OF CECILIO (1976).
TUAZON, Petitioners,
vs.
SPOUSES ARMANDO BORRAS and ADELIA LOBATON
BORRAS, Respondents.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review assailing the Decision1 of the Court of
Appeals dated 26 November 1999 affirming the decision2 of the
Regional Trial Court of Bataan, Branch 4, in Civil Case No. DH-256-94.
Petitioners also question the Resolution of the Court of Appeals dated
26 July 2000 denying petitioners motion for reconsideration.
The Antecedent Facts
A parcel of land measuring 81,524 square meters ("Subject Land") in
Barrio Culis, Mabiga, Hermosa, Bataan is the subject of controversy in
this case. The registered owners of the Subject Land were petitioner
spouses, Godofredo Alfredo ("Godofredo") and Carmen Limon Alfredo
("Carmen"). The Subject Land is covered by Original Certificate of Title
No. 284 ("OCT No. 284") issued to Godofredo and Carmen under
Homestead Patent No. V-69196.
On 7 March 1994, the private respondents, spouses Armando Borras
("Armando") and Adelia Lobaton Borras ("Adelia"), filed a complaint for
specific performance against Godofredo and Carmen before the
Regional Trial Court of Bataan, Branch 4. The case was docketed as
Civil Case No. DH-256-94.
Armando and Adelia alleged in their complaint that Godofredo and
Carmen mortgaged the Subject Land forP7,000.00 with the
Development Bank of the Philippines ("DBP"). To pay the debt,
Carmen and Godofredo sold the Subject Land to Armando and Adelia
for P15,000.00, the buyers to pay the DBP loan and its accumulated
interest, and the balance to be paid in cash to the sellers.
Armando and Adelia gave Godofredo and Carmen the money to pay
the loan to DBP which signed the release of mortgage and returned
the owners duplicate copy of OCT No. 284 to Godofredo and Carmen.
Armando and Adelia subsequently paid the balance of the purchase
price of the Subject Land for which Carmen issued a receipt dated 11
March 1970. Godofredo and Carmen then delivered to Adelia the
owners duplicate copy of OCT No. 284, with the document of
cancellation of mortgage, official receipts of realty tax payments, and
tax declaration in the name of Godofredo. Godofredo and Carmen
introduced Armando and Adelia, as the new owners of the Subject
Land, to the Natanawans, the old tenants of the Subject Land.
Armando and Adelia then took possession of the Subject Land.
In January 1994, Armando and Adelia learned that hired persons had
entered the Subject Land and were cutting trees under instructions of
allegedly new owners of the Subject Land. Subsequently, Armando
and Adelia discovered that Godofredo and Carmen had re-sold
portions of the Subject Land to several persons.
On 8 February 1994, Armando and Adelia filed an adverse claim with
the Register of Deeds of Bataan. Armando and Adelia discovered that
Godofredo and Carmen had secured an owners duplicate copy of
OCT No. 284 after filing a petition in court for the issuance of a new
copy. Godofredo and Carmen claimed in their petition that they lost
their owners duplicate copy. Armando and Adelia wrote Godofredo and
Carmen complaining about their acts, but the latter did not reply. Thus,
Armando and Adelia filed a complaint for specific performance.
On 28 March 1994, Armando and Adelia amended their complaint to
include the following persons as additional defendants: the spouses
Arnulfo Savellano and Editha B. Savellano, Danton D. Matawaran, the
spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu, and Elizabeth
Tuazon ("Subsequent Buyers"). The Subsequent Buyers, who are also
petitioners in this case, purchased from Godofredo and Carmen the
subdivided portions of the Subject Land. The Register of Deeds of
Bataan issued to the Subsequent Buyers transfer certificates of title to
the lots they purchased.
In their answer, Godofredo and Carmen and the Subsequent Buyers
(collectively "petitioners") argued that the action is unenforceable
under the Statute of Frauds. Petitioners pointed out that there is no
written instrument evidencing the alleged contract of sale over the
Subject Land in favor of Armando and Adelia. Petitioners objected to
whatever parole evidence Armando and Adelia introduced or offered
on the alleged sale unless the same was in writing and subscribed by
Godofredo. Petitioners asserted that the Subsequent Buyers were
buyers in good faith and for value. As counterclaim, petitioners sought
payment of attorneys fees and incidental expenses.
Trial then followed. Armando and Adelia presented the following
witnesses: Adelia, Jesus Lobaton, Roberto Lopez, Apolinario
Natanawan, Rolando Natanawan, Tomas Natanawan, and Mildred
Lobaton. Petitioners presented two witnesses, Godofredo and
Constancia Calonso.
On 7 June 1996, the trial court rendered its decision in favor of
Armando and Adelia. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of plaintiffs, the spouses Adelia Lobaton Borras and Armando F.
Borras, and against the defendant-spouses Godofredo Alfredo and
Carmen Limon Alfredo, spouses Arnulfo Sabellano and Editha B.
Sabellano, spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu, Danton
D. Matawaran and Elizabeth Tuazon, as follows:
1. Declaring the Deeds of Absolute Sale of the disputed
parcel of land (covered by OCT No. 284) executed by the
spouses Godofredo Alfredo and Camen Limon Alfredo in
favor of spouses Arnulfo Sabellano and Editha B. Sabellano,
spouses Delfin F. Espiritu, Danton D. Matawaran and
Elizabeth Tuazon, as null and void;
2. Declaring the Transfer Certificates of Title Nos. T-163266
and T-163267 in the names of spouses Arnulfo Sabellano
and Editha B. Sabellano; Transfer Certificates of Title Nos. T163268 and 163272 in the names of spouses Delfin F.
Espiritu, Jr. and Estela S. Espiritu; Transfer Certificates of
Title Nos. T-163269 and T-163271 in the name of Danton D.
Matawaran; and Transfer Certificate of Title No. T-163270 in
the name of Elizabeth Tuazon, as null and void and that the
Register of Deeds of Bataan is hereby ordered to cancel
said titles;
3. Ordering the defendant-spouses Godofredo Alfredo and
Carmen Limon Alfredo to execute and deliver a good and
valid Deed of Absolute Sale of the disputed parcel of land
(covered by OCT No. 284) in favor of the spouses Adelia
Lobaton Borras and Armando F. Borras within a period of ten
(10) days from the finality of this decision;
receipts of realty tax payments in the name of Godofredo; and (4) the
DBP cancelled the mortgage on the Subject Property upon payment of
the loan of Godofredo and Carmen. Moreover, the receipt of payment
issued by Carmen served as an acknowledgment, if not a ratification,
of the verbal sale between the sellers and the buyers. The trial court
ruled that the Statute of Frauds is not applicable because in this case
the sale was perfected.
The trial court concluded that the Subsequent Buyers were not
innocent purchasers. Not one of the Subsequent Buyers testified in
court on how they purchased their respective lots. The Subsequent
Buyers totally depended on the testimony of Constancia Calonso
("Calonso") to explain the subsequent sale. Calonso, a broker,
negotiated with Godofredo and Carmen the sale of the Subject Land
which Godofredo and Carmen subdivided so they could sell anew
portions to the Subsequent Buyers.
Calonso admitted that the Subject Land was adjacent to her own lot.
The trial court pointed out that Calonso did not inquire on the nature of
the tenancy of the Natanawans and on who owned the Subject Land.
Instead, she bought out the tenants for P150,000.00. The buy out was
embodied in a Kasunduan. Apolinario Natanawan ("Apolinario")
testified that he and his wife accepted the money and signed the
Kasunduan because Calonso and the Subsequent Buyers threatened
them with forcible ejectment. Calonso brought Apolinario to the
Agrarian Reform Office where he was asked to produce the documents
showing that Adelia is the owner of the Subject Land. Since Apolinario
could not produce the documents, the agrarian officer told him that he
would lose the case. Thus, Apolinario was constrained to sign the
Kasunduan and accept the P150,000.00.
Another indication of Calonsos bad faith was her own admission that
she saw an adverse claim on the title of the Subject Land when she
registered the deeds of sale in the names of the Subsequent Buyers.
Calonso ignored the adverse claim and proceeded with the registration
of the deeds of sale.
The trial court awarded P20,000.00 as attorneys fees to Armando and
Adelia. In justifying the award of attorneys fees, the trial court invoked
Article 2208 (2) of the Civil Code which allows a court to award
attorneys fees, including litigation expenses, when it is just and
equitable to award the same. The trial court ruled that Armando and
Adelia are entitled to attorneys fees since they were compelled to file
this case due to petitioners refusal to heed their just and valid demand.
The Ruling of the Court of Appeals
The Court of Appeals found the factual findings of the trial court well
supported by the evidence. Based on these findings, the Court of
Appeals also concluded that there was a perfected contract of sale and
the Subsequent Buyers were not innocent purchasers.
The Court of Appeals ruled that the handwritten receipt dated 11 March
1970 is sufficient proof that Godofredo and Carmen sold the Subject
Land to Armando and Adelia upon payment of the balance of the
purchase price. The Court of Appeals found the recitals in the receipt
as "sufficient to serve as the memorandum or note as a writing under
the Statute of Frauds."5 The Court of Appeals then reiterated the ruling
of the trial court that the Statute of Frauds does not apply in this case.
The Court of Appeals gave credence to the testimony of a witness of
Armando and Adelia, Mildred Lobaton, who explained why the title to
the Subject Land was not in the name of Armando and Adelia. Lobaton
testified that Godofredo was then busy preparing to leave for Davao.
Godofredo promised that he would sign all the papers once they were
ready. Since Armando and Adelia were close to the family of Carmen,
they trusted Godofredo and Carmen to honor their commitment.
Armando and Adelia had no reason to believe that their contract of sale
was not perfected or validly executed considering that they had
received the duplicate copy of OCT No. 284 and other relevant
documents. Moreover, they had taken physical possession of the
Subject Land.
The Court of Appeals held that the contract of sale is not void even if
only Carmen signed the receipt dated 11 March 1970. Citing Felipe v.
Heirs of Maximo Aldon,6 the appellate court ruled that a contract of sale
made by the wife without the husbands consent is not void but merely
voidable. The Court of Appeals further declared that the sale in this
case binds the conjugal partnership even if only the wife signed the
receipt because the proceeds of the sale were used for the benefit of
the conjugal partnership. The appellate court based this conclusion on
Article 1617 of the Civil Code.
The Subsequent Buyers of the Subject Land cannot claim that they are
buyers in good faith because they had constructive notice of the
adverse claim of Armando and Adelia. Calonso, who brokered the
subsequent sale, testified that when she registered the subsequent
deeds of sale, the adverse claim of Armando and Adelia was already
annotated on the title of the Subject Land. The Court of Appeals
believed that the act of Calonso and the Subsequent Buyers in forcibly
ejecting the Natanawans from the Subject Land buttresses the
conclusion that the second sale was tainted with bad faith from the
very beginning.
Finally, the Court of Appeals noted that the issue of prescription was
not raised in the Answer. Nonetheless, the appellate court explained
that since this action is actually based on fraud, the prescriptive period
is four years, with the period starting to run only from the date of the
discovery of the fraud. Armando and Adelia discovered the fraudulent
sale of the Subject Land only in January 1994. Armando and Adelia
lost no time in writing a letter to Godofredo and Carmen on 2 February
1994 and filed this case on 7 March 1994. Plainly, Armando and Adelia
did not sleep on their rights or lose their rights by prescription.
The Court of Appeals sustained the award of attorneys fees and
imposed treble costs on petitioners.
The Issues
Petitioners raise the following issues:
I
Whether the alleged sale of the Subject Land in favor of Armando and
Adelia is valid and enforceable, where (1) it was orally entered into and
not in writing; (2) Carmen did not obtain the consent and authority of
her husband, Godofredo, who was the sole owner of the Subject Land
in whose name the title thereto (OCT No. 284) was issued; and (3) it
was entered into during the 25-year prohibitive period for alienating the
Subject Land without the approval of the Secretary of Agriculture and
Natural Resources.
II
Whether the action to enforce the alleged oral contract of sale brought
after 24 years from its alleged perfection had been barred by
prescription and by laches.
III
Whether the deeds of absolute sale and the transfer certificates of title
over the portions of the Subject Land issued to the Subsequent
IV
V
Whether petitioners are entitled to the counterclaim for attorneys fees
and litigation expenses, where they have sustained such expenses by
reason of institution of a clearly malicious and unfounded action by
Armando and Adelia.8
The Courts Ruling
The petition is without merit.
In a petition for review on certiorari under Rule 45, this Court reviews
only errors of law and not errors of facts.9The factual findings of the
appellate court are generally binding on this Court.10 This applies with
greater force when both the trial court and the Court of Appeals are in
complete agreement on their factual findings.11 In this case, there is no
reason to deviate from the findings of the lower courts. The facts relied
upon by the trial and appellate courts are borne out by the record. We
agree with the conclusions drawn by the lower courts from these facts.
Validity and Enforceability of the Sale
The contract of sale between the spouses Godofredo and Carmen and
the spouses Armando and Adelia was a perfected contract. A contract
is perfected once there is consent of the contracting parties on the
object certain and on the cause of the obligation.12 In the instant case,
the object of the sale is the Subject Land, and the price certain
is P15,000.00. The trial and appellate courts found that there was a
meeting of the minds on the sale of the Subject Land and on the
purchase price of P15,000.00. This is a finding of fact that is binding on
this Court. We find no reason to disturb this finding since it is
supported by substantial evidence.
The contract of sale of the Subject Land has also been consummated
because the sellers and buyers have performed their respective
obligations under the contract. In a contract of sale, the seller obligates
himself to transfer the ownership of the determinate thing sold, and to
deliver the same, to the buyer who obligates himself to pay a price
certain to the seller.13 In the instant case, Godofredo and Carmen
delivered the Subject Land to Armando and Adelia, placing the latter in
actual physical possession of the Subject Land. This physical delivery
of the Subject Land also constituted a transfer of ownership of the
Subject Land to Armando and Adelia.14Ownership of the thing sold is
transferred to the vendee upon its actual or constructive
delivery.15 Godofredo and Carmen also turned over to Armando and
Adelia the documents of ownership to the Subject Land, namely the
owners duplicate copy of OCT No. 284, the tax declaration and the
receipts of realty tax payments.
On the other hand, Armando and Adelia paid the full purchase price as
evidenced by the receipt dated 11 March 1970 issued by Carmen.
Armando and Adelia fulfilled their obligation to provide the P7,000.00 to
pay the Dir obliagtion rmen. rchase pricend Adelia . fredo and Carmen
do not deny the existence of the cBP loan of Godofredo and Carmen,
and to pay the latter the balance of P8,000.00 in cash. The P2,524.00
paid under the receipt dated 11 March 1970 was the last installment to
The trial and appellate courts correctly refused to apply the Statute of
Frauds to this case. The Statute of Frauds16 provides that a contract for
the sale of real property shall be unenforceable unless the contract or
some note or memorandum of the sale is in writing and subscribed by
the party charged or his agent. The existence of the receipt dated 11
March 1970, which is a memorandum of the sale, removes the
transaction from the provisions of the Statute of Frauds.
never raised this issue before the trial court or the Court of Appeals.
Litigants cannot raise an issue for the first time on appeal, as this
would contravene the basic rules of fair play, justice and due
process.28 However, we will address this new issue to finally put an end
to this case.
The sale of the Subject Land cannot be annulled on the ground that
the Secretary did not approve the sale, which was made within 25
years from the issuance of the homestead title. Section 118 of the
Public Land Act (Commonwealth Act No. 141) reads as follows:
SEC. 118. Except in favor of the Government or any of its branches,
units, or institutions or legally constituted banking corporation, lands
acquired under free patent or homestead provisions shall not be
subject to encumbrance or alienation from the date of the approval of
the application and for a term of five years from and after the date of
the issuance of the patent or grant.
xxx
No alienation, transfer, or conveyance of any homestead after 5 years
and before twenty-five years after the issuance of title shall be valid
without the approval of the Secretary of Agriculture and Commerce,
which approval shall not be denied except on constitutional and legal
grounds.
A grantee or homesteader is prohibited from alienating to a private
individual a land grant within five years from the time that the patent or
grant is issued.29 A violation of this prohibition renders a sale
void.30 This prohibition, however, expires on the fifth year. From then on
until the next 20 years31 the land grant may be alienated provided the
Secretary of Agriculture and Natural Resources approves the
alienation. The Secretary is required to approve the alienation unless
there are "constitutional and legal grounds" to deny the approval. In
this case, there are no apparent constitutional or legal grounds for the
Secretary to disapprove the sale of the Subject Land.
The failure to secure the approval of the Secretary does not ipso facto
make a sale void.32 The absence of approval by the Secretary does not
nullify a sale made after the expiration of the 5-year period, for in such
event the requirement of Section 118 of the Public Land Act becomes
merely directory33 or a formality.34 The approval may be secured later,
producing the effect of ratifying and adopting the transaction as if the
sale had been previously authorized.35 As held in Evangelista v.
Montano:36
Section 118 of Commonwealth Act No. 141, as amended, specifically
enjoins that the approval by the Department Secretary "shall not be
denied except on constitutional and legal grounds." There being no
allegation that there were constitutional or legal impediments to the
sales, and no pretense that if the sales had been submitted to the
Secretary concerned they would have been disapproved, approval was
a ministerial duty, to be had as a matter of course and demandable if
refused. For this reason, and if necessary, approval may now be
applied for and its effect will be to ratify and adopt the transactions as if
they had been previously authorized. (Emphasis supplied)
Action Not Barred by Prescription and Laches
Petitioners insist that prescription and laches have set in. We disagree.
The Amended Complaint filed by Armando and Adelia with the trial
court is captioned as one for Specific Performance. In reality, the
ultimate relief sought by Armando and Adelia is the reconveyance to
them of the Subject Land. An action for reconveyance is one that
seeks to transfer property, wrongfully registered by another, to its
xxx
xxx
3. Within four years: xxx An action for relief on the ground of fraud, but
the right of action in such case shall not be deemed to have accrued
until the discovery of the fraud;
xxx
xxx
xxx
xxx
xxx
(Emphasis supplied).
An action for reconveyance based on an implied or constructive
trust must perforce prescribe in ten years and not otherwise. A
long line of decisions of this Court, and of very recent vintage at that,
illustrates this rule. Undoubtedly, it is now well-settled that an
action for reconveyance based on an implied or constructive trust
prescribes in ten years from the issuance of the Torrens title over
the property. The only discordant note, it seems, is Balbin vs. Medalla
which states that the prescriptive period for a reconveyance action is
four years. However, this variance can be explained by the erroneous
reliance on Gerona vs. de Guzman. But in Gerona, the fraud was
discovered on June 25,1948, hence Section 43(3) of Act No. 190, was
applied, the new Civil Code not coming into effect until August 30,
1950 as mentioned earlier. It must be stressed, at this juncture, that
article 1144 and article 1456, are new provisions. They have no
counterparts in the old Civil Code or in the old Code of Civil Procedure,
the latter being then resorted to as legal basis of the four-year
prescriptive period for an action for reconveyance of title of real
property acquired under false pretenses.
An action for reconveyance has its basis in Section 53, paragraph 3 of
Presidential Decree No. 1529, which provides:
In all cases of registration procured by fraud, the owner may pursue all
his legal and equitable remedies against the parties to such fraud
without prejudice, however, to the rights of any innocent holder of the
decree of registration on the original petition or application, xxx
This provision should be read in conjunction with Article 1456 of the
Civil Code, which provides:
Article 1456. If property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the property
comes.
The law thereby creates the obligation of the trustee to reconvey the
property and the title thereto in favor of the true owner. Correlating
Section 53, paragraph 3 of Presidential Decree No. 1529 and Article
1456 of the Civil Code with Article 1144(2) of the Civil Code, supra, the
prescriptive period for the reconveyance of fraudulently registered real
property is ten (10) years reckoned from the date of the issuance of the
certificate of title xxx (Emphasis supplied)46
Following Caro, we have consistently held that an action for
reconveyance based on an implied trust prescribes in ten years.47 We
went further by specifying the reference point of the ten-year
prescriptive period as the date of the registration of the deed or the
issuance of the title.48
Had Armando and Adelia remained in possession of the Subject Land,
their action for reconveyance, in effect an action to quiet title to
property, would not be subject to prescription. Prescription does not
run against the plaintiff in actual possession of the disputed land
because such plaintiff has a right to wait until his possession is
disturbed or his title is questioned before initiating an action to
vindicate his right.49 His undisturbed possession gives him the
continuing right to seek the aid of a court of equity to determine the
nature of the adverse claim of a third party and its effect on his title. 50
Armando and Adelia lost possession of the Subject Land when the
Subsequent Buyers forcibly drove away from the Subject Land the
Natanawans, the tenants of Armando and Adelia.51 This created an
actual need for Armando and Adelia to seek reconveyance of the
Subject Land. The statute of limitation becomes relevant in this case.
The ten-year prescriptive period started to run from the date the
Subsequent Buyers registered their deeds of sale with the Register of
Deeds.
The Subsequent Buyers bought the subdivided portions of the Subject
Land on 22 February 1994, the date of execution of their deeds of sale.
The Register of Deeds issued the transfer certificates of title to the
Subsequent Buyers on 24 February 1994. Armando and Adelia filed
the Complaint on 7 March 1994. Clearly, prescription could not have
set in since the case was filed at the early stage of the ten-year
prescriptive period.
Neither is the action barred by laches. We have defined laches as the
failure or neglect, for an unreasonable time, to do that which, by the
exercise of due diligence, could or should have been done earlier.52 It
is negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it.53 Armando and Adelia discovered
in January 1994 the subsequent sale of the Subject Land and they filed
this case on 7 March 1994. Plainly, Armando and Adelia did not sleep
on their rights.
Validity of Subsequent Sale of Portions of the Subject Land
Petitioners maintain that the subsequent sale must be upheld because
the Subsequent Buyers, the co-petitioners of Godofredo and Carmen,
purchased and registered the Subject Land in good faith. Petitioners
argue that the testimony of Calonso, the person who brokered the
second sale, should not prejudice the Subsequent Buyers. There is no
evidence that Calonso was the agent of the Subsequent Buyers and
that she communicated to them what she knew about the adverse
claim and the prior sale. Petitioners assert that the adverse claim
registered by Armando and Adelia has no legal basis to render
defective the transfer of title to the Subsequent Buyers.
We are not persuaded. Godofredo and Carmen had already sold the
Subject Land to Armando and Adelia. The settled rule is when
ownership or title passes to the buyer, the seller ceases to have any
title to transfer to any third person.54 If the seller sells the same land to
another, the second buyer who has actual or constructive knowledge of
the prior sale cannot be a registrant in good faith.55 Such second buyer
cannot defeat the first buyers title.56 In case a title is issued to the
second buyer, the first buyer may seek reconveyance of the property
subject of the sale.57
Thus, to merit protection under the second paragraph of Article
154458 of the Civil Code, the second buyer must act in good faith in
registering the deed.59 In this case, the Subsequent Buyers good faith
hinges on whether they had knowledge of the previous sale.
Petitioners do not dispute that Armando and Adelia registered their
adverse claim with the Registry of Deeds of Bataan on 8 February
1994. The Subsequent Buyers purchased their respective lots only on
22 February 1994 as shown by the date of their deeds of sale.
Consequently, the adverse claim registered prior to the second sale
charged the Subsequent Buyers with constructive notice of the defect
in the title of the sellers,60 Godofredo and Carmen.
It is immaterial whether Calonso, the broker of the second sale,
communicated to the Subsequent Buyers the existence of the adverse
claim. The registration of the adverse claim on 8 February 1994
constituted, by operation of law, notice to the whole world.61 From that
date onwards, the Subsequent Buyers were deemed to have
October 2, 2001
not only by receiving the monthly rentals, but also by paying the realty
taxes. Also, Rosalia kept the owner's duplicate copy of the title even
after it was already in the name of Salvador. Further, the spouses had
no compelling reason in 1959 to sell the property and Salvador was not
financially capable to purchase it. The deeds of sale were therefore
fictitious. Hence, the action to assail the same does not prescribe. 4
Upon appeal, the Court of Appeals affirmed the trial court's decision
dated March 10, 1998. It held that in order for the execution of a public
instrument to effect tradition, as provided in Article 1498 of the Civil
Code,5 the vendor shall have had control over the thing sold, at the
moment of sale. It was not enough to confer upon the purchaser the
ownership and the right of possession. The thing sold must be placed
in his control. The subject deeds of sale did not confer upon Salvador
the ownership over the subject property, because even after the sale,
the original vendors remained in dominion, control, and possession
thereof. The appellate court further said that if the reason for
Salvador's failure to control and possess the property was due to his
acquiescence to his mother, in deference to Filipino custom, petitioner,
at least, should have shown evidence to prove that her husband
declared the property for tax purposes in his name or paid the land
taxes, acts which strongly indicate control and possession. The
appellate court disposed:
WHEREFORE, finding no reversible error in the decision
appealed from, the same is hereby AFFIRMED. No
pronouncement as to costs.
SO ORDERED.6
Hence, this petition where petitioner avers that the Court of Appeals
erred in:
I.
HOLDING THAT THE OWNERSHIP OVER THE
LITIGATED PROPERTY BY THE LATE HUSBAND OF
DEFENDANT-APPELLANT WAS AFFECTED BY HIS
FAILURE TO EXERCISE CERTAIN ATTRIBUTES OF
OWNERSHIP.
II.
HOLDING THAT DUE EXECUTION OF A PUBLIC
INSTRUMENT IS NOT EQUIVALENT TO DELIVERY OF
THE LAND IN DISPUTE.
III.
NOT FINDING THAT THE CAUSE OF ACTION OF
ROSALIA SANTOS HAD PRESCRIBED AND/OR BARRED
BY LACHES.
IV.
IGNORING PETITIONER'S ALLEGATION TO THE
EFFECT THAT PLAINTIFF DR. ROSA [S.] CARREON IS
NOT DISQUALIFIED TO TESTIFY AS TO THE
QUESTIONED DEEDS OF SALE CONSIDERING THAT
SALVADOR SANTOS HAS LONG BEEN DEAD.7
In this petition, we are asked to resolve the following:
1. Are payments of realty taxes and retention of possession
indications of continued ownership by the original owners?
As found by both the trial and appellate courts and amply supported by
the evidence on record, Salvador was never placed in control of the
property. The original sellers retained their control and possession.
Therefore, there was no real transfer of ownership.
Moreover, in Norkis Distributors, Inc. vs. CA, 193 SCRA 694, 698-699
(1991), citing the land case of Abuan vs. Garcia, 14 SCRA 759 (1965),
we held that the critical factor in the different modes of effecting
delivery, which gives legal effect to the act is the actual intention of the
vendor to deliver, and its acceptance by the vendee. Without that
intention, there is no tradition. In the instant case, although the
spouses Jesus and Rosalia executed a deed of sale, they did not
deliver the possession and ownership of the property to Salvador and
Rosa. They agreed to execute a deed of sale merely to accommodate
Salvador to enable him to generate funds for his business venture.
On the third issue, petitioner argues that from the date of the sale from
Rosa to Salvador on November 20, 1973, up to his death on January
9, 1985, more or less twelve years had lapsed, and from his death up
to the filing of the case for reconveyance in the court a quo on January
5, 1989, four years had lapsed. In other words, it took respondents
about sixteen years to file the case below. Petitioner argues that an
action to annul a contract for lack of consideration prescribes in ten
years and even assuming that the cause of action has not prescribed,
respondents are guilty of laches for their inaction for a long period of
time.
Has respondents' cause of action prescribed? In Lacsamana vs. CA,
288 SCRA 287, 292 (1998), we held that the right to file an action for
reconveyance on the ground that the certificate of title was obtained by
means of a fictitious deed of sale is virtually an action for the
declaration of its nullity, which does not prescribe. This applies
squarely to the present case. The complaint filed by respondent in the
court a quo was for the reconveyance of the subject property to the
estate of Rosalia since the deeds of sale were simulated and fictitious.
The complaint amounts to a declaration of nullity of a void contract,
which is imprescriptible. Hence, respondents' cause of action has not
prescribed.
Neither is their action barred by laches. The elements of laches are: 1)
conduct on the part of the defendant, or of one under whom he claims,
giving rise to the situation of which the complaint seeks a remedy; 2)
delay in asserting the complainant's rights, the complainant having had
knowledge or notice of the defendant's conduct as having been
afforded an opportunity to institute a suit; 3) lack of knowledge or
notice on the part of the defendant that the complainant would assert
the right in which he bases his suit; and 4) injury or prejudice to the
defendant in the event relief is accorded to the complainant, or the suit
is not held barred.18 These elements must all be proved positively. The
conduct which caused the complaint in the court a quo was petitioner's
assertion of right of ownership as heir of Salvador. This started in
December 1985 when petitioner demanded payment of the lease
rentals from Antonio Hombrebueno, the tenant of the apartment units.
From December 1985 up to the filing of the complaint for
reconveyance on January 5, 1989, only less than four years had
lapsed which we do not think is unreasonable delay sufficient to bar
respondents' cause of action. We likewise find the fourth element
lacking. Neither petitioner nor her husband made considerable
investments on the property from the time it was allegedly transferred
to the latter. They also did not enter into transactions involving the
property since they did not claim ownership of it until December 1985.
Petitioner stood to lose nothing. As we held in the same case
of Lacsamana vs. CA, cited above, the concept of laches is not
concerned with the lapse of time but only with the effect of unreasonble
lapse. In this case, the alleged 16 years of respondents' inaction has
August 3, 1918
A. A. ADDISON, plaintiff-appellant,
vs.
MARCIANA FELIX and BALBINO TIOCO, defendants-appellees.
Thos. D. Aitken for appellant.
Modesto Reyes and Eliseo Ymzon for appellees.
FISHER, J.:
By a public instrument dated June 11, 1914, the plaintiff sold to the
defendant Marciana Felix, with the consent of her husband, the
defendant Balbino Tioco, four parcels of land, described in the
instrument. The defendant Felix paid, at the time of the execution of
the deed, the sum of P3,000 on account of the purchase price, and
bound herself to pay the remainder in installments, the first of P2,000
on July 15, 1914, and the second of P5,000 thirty days after the
issuance to her of a certificate of title under the Land Registration Act,
and further, within ten years from the date of such title P10, for each
coconut tree in bearing and P5 for each such tree not in bearing, that
might be growing on said four parcels of land on the date of the
issuance of title to her, with the condition that the total price should not
exceed P85,000. It was further stipulated that the purchaser was to
deliver to the vendor 25 per centum of the value of the products that
she might obtain from the four parcels "from the moment she takes
possession of them until the Torrens certificate of title be issued in her
favor."
It was also covenanted that "within one year from the date of the
certificate of title in favor of Marciana Felix, this latter may rescind the
present contract of purchase and sale, in which case Marciana Felix
shall be obliged to return to me, A. A. Addison, the net value of all the
products of the four parcels sold, and I shall obliged to return to her,
Marciana Felix, all the sums that she may have paid me, together with
interest at the rate of 10 per cent per annum."
In January, 1915, the vendor, A. A. Addison, filed suit in Court of First
Instance of Manila to compel Marciana Felix to make payment of the
first installment of P2,000, demandable in accordance with the terms of
the contract of sale aforementioned, on July 15, 1914, and of the
interest in arrears, at the stipulated rate of 8 per cent per annum. The
defendant, jointly with her husband, answered the complaint and
alleged by way of special defense that the plaintiff had absolutely failed
to deliver to the defendant the lands that were the subject matter of the
sale, notwithstanding the demands made upon him for this purpose.
She therefore asked that she be absolved from the complaint, and that,
them to the purchaser; and as regards the other two, more than twothirds of their area was in the hostile and adverse possession of a third
person.
The Code imposes upon the vendor the obligation to deliver the thing
sold. The thing is considered to be delivered when it is placed "in the
hands and possession of the vendee." (Civ. Code, art. 1462.) It is true
that the same article declares that the execution of a public
instruments is equivalent to the delivery of the thing which is the object
of the contract, but, in order that this symbolic delivery may produce
the effect of tradition, it is necessary that the vendor shall have had
such control over the thing sold that, at the moment of the sale, its
material delivery could have been made. It is not enough to confer
upon the purchaser the ownership and theright of possession. The
thing sold must be placed in his control. When there is no impediment
whatever to prevent the thing sold passing into the tenancy of the
purchaser by the sole will of the vendor, symbolic delivery through the
execution of a public instrument is sufficient. But if, notwithstanding the
execution of the instrument, the purchaser cannot have the enjoyment
and material tenancy of the thing and make use of it himself or through
another in his name, because such tenancy and enjoyment are
opposed by the interposition of another will, then fiction yields to reality
the delivery has not been effected.
As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his commentaries
on article 1604 of the French Civil code, "the word "delivery" expresses
a complex idea . . . the abandonment of the thing by the person who
makes the delivery and the taking control of it by the person to whom
the delivery is made."
The execution of a public instrument is sufficient for the purposes of
the abandonment made by the vendor; but it is not always sufficient to
permit of the apprehension of the thing by the purchaser.
The supreme court of Spain, interpreting article 1462 of the Civil Code,
held in its decision of November 10, 1903, (Civ. Rep., vol. 96, p. 560)
that this article "merely declares that when the sale is made through
the means of a public instrument, the execution of this latter is
equivalent to the delivery of the thing sold: which does not and cannot
mean that this fictitious tradition necessarily implies the real tradition of
the thing sold, for it is incontrovertible that, while its ownership still
pertains to the vendor (and with greater reason if it does not), a third
person may be in possession of the same thing; wherefore, though, as
a general rule, he who purchases by means of a public instrument
should be deemed . . . to be the possessor in fact, yet this presumption
gives way before proof to the contrary."
It is evident, then, in the case at bar, that the mere execution of the
instrument was not a fulfillment of the vendors' obligation to deliver the
thing sold, and that from such non-fulfillment arises the purchaser's
right to demand, as she has demanded, the rescission of the sale and
the return of the price. (Civ. Code, arts. 1506 and 1124.)
Of course if the sale had been made under the express agreement of
imposing upon the purchaser the obligation to take the necessary
steps to obtain the material possession of the thing sold, and it were
proven that she knew that the thing was in the possession of a third
person claiming to have property rights therein, such agreement would
be perfectly valid. But there is nothing in the instrument which would
indicate, even implicitly, that such was the agreement. It is true, as the
appellant argues, that the obligation was incumbent upon the
defendant Marciana Felix to apply for and obtain the registration of the
land in the new registry of property; but from this it cannot be
concluded that she had to await the final decision of the Court of Land
Registration, in order to be able to enjoy the property sold. On the
contrary, it was expressly stipulated in the contract that the purchaser
should deliver to the vendor one-fourth "of the products ... of the
aforesaid four parcels from the moment when she takes possession of
them until the Torrens certificate of title be issued in her favor." This
obviously shows that it was not forseen that the purchaser might be
deprived of her possession during the course of the registration
proceedings, but that the transaction rested on the assumption that
she was to have, during said period, the material possession and
enjoyment of the four parcels of land.
Inasmuch as the rescission is made by virtue of the provisions of law
and not by contractual agreement, it is not the conventional but the
legal interest that is demandable.
It is therefore held that the contract of purchase and sale entered into
by and between the plaintiff and the defendant on June 11, 1914, is
rescinded, and the plaintiff is ordered to make restitution of the sum of
P3,000 received by him on account of the price of the sale, together
with interest thereon at the legal rate of 6 per annum from the date of
the filing of the complaint until payment, with the costs of both
instances against the appellant. So ordered.
G.R. No. L-69970 November 28, 1988
FELIX DANGUILAN, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, APOLONIA MELAD, assisted
by her husband, JOSE TAGACAY,respondents.
Pedro R. Perez, Jr. for petitioner.
Teodoro B. Mallonga for private respondent.
CRUZ, J.:
The subject of this dispute is the two lots owned by Domingo Melad
which is claimed by both the petitioner and the respondent. The trial
court believed the petitioner but the respondent court, on appeal,
upheld the respondent. The case is now before us for a resolution of
the issues once and for all.
On January 29, 1962, the respondent filed a complaint against the
petitioner in the then Court of First Instance of Cagayan for recovery of
a farm lot and a residential lot which she claimed she had purchased
from Domingo Melad in 1943 and were now being unlawfully withheld
by the defendant. 1 In his answer, the petitioner denied the allegation
and averred that he was the owner of the said lots of which he had
been in open, continuous and adverse possession, having acquired
them from Domingo Melad in 1941 and 1943. 2 The case was
dismissed for failure to prosecute but was refiled in 1967. 3
At the trial, the plaintiff presented a deed of sale dated December 4,
1943, purportedly signed by Domingo Melad and duly notarized, which
conveyed the said properties to her for the sum of P80.00. 4 She said
the amount was earned by her mother as a worker at the Tabacalera
factory. She claimed to be the illegitimate daughter of Domingo Melad,
with whom she and her mother were living when he died in 1945. She
moved out of the farm only when in 1946 Felix Danguilan approached
her and asked permission to cultivate the land and to stay therein. She
had agreed on condition that he would deliver part of the harvest from
the farm to her, which he did from that year to 1958. The deliveries
having stopped, she then consulted the municipal judge who advised
her to file the complaint against Danguilan. The plaintiff 's mother, her
only other witness, corroborated this testimony. 5
For his part, the defendant testified that he was the husband of Isidra
Melad, Domingo's niece, whom he and his wife Juana Malupang had
taken into their home as their ward as they had no children of their
own. He and his wife lived with the couple in their house on the
residential lot and helped Domingo with the cultivation of the farm.
Domingo Melad signed in 1941 a private instrument in which he gave
the defendant the farm and in 1943 another private instrument in which
he also gave him the residential lot, on the understanding that the latter
would take care of the grantor and would bury him upon his
death. 6 Danguilan presented three other witnesses 7 to corroborate his
statements and to prove that he had been living in the land since his
marriage to Isidra and had remained in possession thereof after
Domingo Melad's death in 1945. Two of said witnesses declared that
neither the plaintiff nor her mother lived in the land with Domingo
Melad. 8
The decision of the trial court was based mainly on the issue of
possession. Weighing the evidence presented by the parties, the
judge 9 held that the defendant was more believable and that the
plaintiff's evidence was "unpersuasive and unconvincing." It was held
that the plaintiff's own declaration that she moved out of the property in
1946 and left it in the possession of the defendant was contradictory to
her claim of ownership. She was also inconsistent when she testified
first that the defendant was her tenant and later in rebuttal that he was
her administrator. The decision concluded that where there was doubt
as to the ownership of the property, the presumption was in favor of the
one actually occupying the same, which in this case was the
defendant. 10
The review by the respondent court 11 of this decision was manifestly
less than thorough. For the most part it merely affirmed the factual
findings of the trial court except for an irrelevant modification, and it
was only toward the end that it went to and resolved what it considered
the lone decisive issue.
The respondent court held that Exhibits 2-b and 3-a, by virtue of which
Domingo Melad had conveyed the two parcels of land to the petitioner,
were null and void. The reason was that they were donations of real
property and as such should have been effected through a public
instrument. It then set aside the appealed decision and declared the
respondents the true and lawful owners of the disputed property.
The said exhibits read as follows:
EXHIBIT 2-b is quoted as follows: 12
I, DOMINGO MELAD, of legal age, married, do
hereby declare in this receipt the truth of my giving
to Felix Danguilan, my agricultural land located at
Barrio Fugu-Macusi, Penablanca, Province of
Cagayan, Philippine Islands; that this land is
registered under my name; that I hereby declare
and bind myself that there is no one to whom I will
deliver this land except to him as he will be the
one responsible for me in the event that I will die
and also for all other things needed and necessary
for me, he will be responsible because of this land
I am giving to him; that it is true that I have nieces
and nephews but they are not living with us and
there is no one to whom I will give my land except
to Felix Danguilan for he lives with me and this is
the length175 m. and the width is 150 m.
IN WITNESS WHEREOF, I hereby sign my name
below and also those present in the execution of
this receipt this 14th day of September 1941.
August 1, 2000
The spouses Fortunato and Rosalinda Santos owned the house and
lot consisting of 350 square meters located at Lot 7, Block 8, Better
Living Subdivision, Paraaque, Metro Manila, as evidenced by TCT (S11029) 28005 of the Register of Deeds of Paraaque. The land
together with the house, was mortgaged with the Rural Bank of
Salinas, Inc., to secure a loan of P150,000.00 maturing on June 16,
1987.
Sometime in 1984, Rosalinda Santos met Carmen Caseda, a fellow
market vendor of hers in Pasay City and soon became very good
friends with her. The duo even became kumadres when Carmen stood
as a wedding sponsor of Rosalinda's nephew.
On June 16, 1984, the bank sent Rosalinda Santos a letter demanding
payment of P16,915.84 in unpaid interest and other charges. Since the
Santos couple had no funds, Rosalinda offered to sell the house and
lot to Carmen. After inspecting the real property, Carmen and her
husband agreed.
Sometime that month of June, Carmen and Rosalinda
signed a document, which reads:
"Received the amount of P54,100.00 as a partial payment of
Mrs. Carmen Caseda to the (total) amount of 350,000.00
(house and lot) that is own (sic) by Mrs. Rosalinda R.
Santos.
(Sgd.) Carmen H. Caseda
direct buyer
Mrs. Carmen Caseda
"(Sgd.) Rosalinda Del R. Santos
Owner
Mrs. Rosalinda R. Santos
House and Lot
Better Living Subd. Paraaque, Metro Manila
Section V Don Bosco St."2
The other terms and conditions that the parties agreed upon were for
the Caseda spouses to pay: (1) the balance of the mortgage loan with
the Rural bank amounting to P135,385.18; (2) the real estate taxes; (3)
the electric and water bills; and (4) the balance of the cash price to be
paid not later than June 16, 1987, which was the maturity date of the
loan.3
The Casedas gave an initial payment of P54,100.00 and immediately
took possession of the property, which they then leased out. They also
paid in installments, P81,696.84 of the mortgage loan. The Casedas,
however, failed to pay the remaining balance of the loan because they
suffered bankruptcy in 1987. Notwithstanding the state of their
finances, Carmen nonetheless paid in March 1990, the real estate
taxes on the property for 1981-1984. She also settled the electric bills
from December 12, 1988 to July 12, 1989. All these payments were
made in the name of Rosalinda Santos.
In January 1989, the Santoses, seeing that the Casedas lacked the
means to pay the remaining installments and/or amortization of the
"SO ORDERED."4
Said judgment of dismissal is mainly based on the trial court's finding
that:
"Admittedly, the purchase price of the house and lot was
P485,385.18, i.e. P350,000.00 as cash payment and
P135,385.18, assumption of mortgage. Of it plaintiffs
[Casedas] paid the following: (1) P54,100.00 down payment;
and (2) P81,694.64 installment payments to the bank on the
loan (Exhs. E to E-19) or a total of P135,794.64. Thus,
plaintiffs were short of the purchase price. They cannot,
therefore, demand specific performance."5
The trial court further held that the Casedas were not entitled to
reimbursement of payments already made, reasoning that:
"As earlier mentioned, plaintiffs made a total payment of
P135,794.64 out of the purchase price of P485,385.18. The
property was in plaintiffs' possession from June 1984 to
January 1989 or a period of fifty-five months. During that
time, plaintiffs leased the property. Carmen said the property
was rented for P25.00 a day or P750.00 a month at the start
and in 1987 it was increased to P2,000.00 and P4,000 a
month. But the evidence is not precise when the different
amounts of rental took place. Be that as it may, fairness
demands that plaintiffs must pay defendants for the exercise
of dominical rights over the property by renting it to others.
The amount of P2,000.00 a month would be reasonable
based on the average of P750.00, P2,000.00, P4,000.00
lease-rentals charged. Multiply P2,000 by 55 months, the
plaintiffs must pay defendants P110,000 for the use of the
property. Deducting this amount from the P135,794.64
payment of the plaintiffs on the property the difference is
P25,794.64. Should the plaintiffs be entitled to a
reimbursement of this amount? The answer is in the
negative. Because of failure of plaintiffs to liquidated the
mortgage loan on time, it had ballooned from its original
figure of P135,384.18 as of June 1984 to P337,280.78 as of
December 31, 1988. Defendants [Santoses] had to pay the
the issue of jurisdiction. They should have raised this issue at the
earliest opportunity before the Court of Appeals. A party taking part in
the proceedings before the appellate court and submitting his case for
its decision ought not to later on attack the court's decision for want of
jurisdiction because the decision turns out to be adverse to him.13
The second and third issues deal with the question: Did the Court of
Appeals err in holding that a judicial rescission of the agreement was
necessary? In resolving both issues, we must first make a preliminary
determination of the nature of the contract in question: Was it a
contract of sale, as insisted by the respondents or a mere contract to
sell, as contended by petitioners?
Petitioners argue that the transaction between them and respondents
was a mere contract to sell, and not a contract of sale, since the sole
documentary evidence (Exh. D, receipt) referring to their agreement
clearly showed that they did not transfer ownership of the property in
question simultaneous with its delivery and hence remained its owners,
pending fulfillment of the other suspensive conditions, i.e. full payment
of the balance of the purchase price and the loan amortizations.
Petitioners point to Manuel v. Rodriguez, 109 Phil. 1 (1960) and Luzon
Brokerage Co., Inc. v. Maritime Building Co., Inc., 43 SCRA 93 (1972),
where he held that article 1592 of the Civil Code is inapplicable to a
contract to sell. They charge the court a quo with reversible error in
holding that petitioners should have judicially rescinded the agreement
with respondents when the latter failed to pay the amortizations on the
bank loan.
Respondents insist that there was a perfected contract of sale, since
upon their partial payment of the purchase price, they immediately took
possession of the property as vendees, and subsequently leased it,
thus exercising all the rights of ownership over the property. This
showed that transfer of ownership was simultaneous with the delivery
of the realty sold, according to respondents.
It must be emphasized from the outset that a contract is what the law
defines it to be, taking into consideration its essential elements, and
not what the contracting parties call it.14 Article 145815 of the Civil Code
defines a contract of sale. Note that the said article expressly obliges
the vendor to transfer the ownership of the thing sold as an essential
element of a contract of sale.16 We have carefully examined the
contents of the unofficial receipt, Exh. D, with the terms and conditions
informally agreed upon by the parties, as well as the proofs submitted
to support their respective contentions. We are far from persuaded that
there was a transfer of ownership simultaneously with the delivery of
the property purportedly sold. The records clearly show that,
notwithstanding the fact that the Casedas first took then lost
possession of the disputed house and lot, the title to the property, TCT
No. 28005 (S-11029) issued by the Register of Deeds of Paraaque,
has remained always in the name of Rosalinda Santos.17 Note further
that although the parties agreed that the Casedas would assume the
mortgage, all amortization payments made by Carmen Caseda to the
bank were in the name of Rosalinda Santos.18 We likewise find that the
bank's cancellation and discharge of mortgage dated January 20,
1990, was made in favor of Rosalinda Santos.19 The foregoing
circumstances categorically and clearly show that no valid transfer of
ownership was made by the Santoses to the Casedas. Absent this
essential element, their agreement cannot be deemed a contract of
sale. We agree with petitioner's averment that the agreement between
Rosalinda Santos and Carmen Caseda is a contract to sell. In
contracts to sell, ownership is reserved the by the vendor and is not to
pass until full payment of the purchase price. This we find fully
applicable and understandable in this case, given that the property
involved is a titled realty under mortgage to a bank and would require
notarial and other formalities of law before transfer thereof could be
validly effected.
In view of our finding in the present case that the agreement between
the parties is a contract to sell, it follows that the appellate court erred
when it decreed that a judicial rescission of said agreement was
necessary. This is because there was no rescission to speak of in the
first place. As we earlier pointed, in a contract to sell, title remains with
the vendor and does not pass on to the vendee until the purchase
price is paid in full, Thus, in contract to sell, the payment of the
purchase price is a positive suspensive condition. Failure to pay the
price agreed upon is not a mere breach, casual or serious, but a
situation that prevents the obligation of the vendor to convey title from
acquiring an obligatory force.20 This is entirely different from the
situation in a contract of sale, where non-payment of the price is a
negative resolutory condition. The effects in law are not identical. In a
contract of sale, the vendor has lost ownership of the thing sold and
cannot recover it, unless the contract of sale is rescinded and set
aside.21 In a contract to sell, however, the vendor remains the owner for
as long as the vendee has not complied fully with the condition of
paying the purchase. If the vendor should eject the vendee for failure
to meet the condition precedent, he is enforcing the contract and not
rescinding it. When the petitioners in the instant case repossessed the
disputed house and lot for failure of private respondents to pay the
purchase price in full, they were merely enforcing the contract and not
rescinding it. As petitioners correctly point out the Court of Appeals
erred when it ruled that petitioners should have judicially rescinded the
contract pursuant to Articles 1592 and 1191 of the Civil Code. Article
1592 speaks of non-payment of the purchase price as a resolutory
condition. It does not apply to a contract to sell.22 As to Article 1191, it
is subordinated to the provisions of Article 1592 when applied to sales
of immovable property.23 Neither provision is applicable in the present
case.
As to the last issue, we need not tarry to make a determination of
whether the breach of contract by private respondents is so substantial
as to defeat the purpose of the parties in entering into the agreement
and thus entitle petitioners to rescission. Having ruled that there is no
rescission to speak of in this case, the question is moot.
WHEREFORE, the instant petition is GRANTED and the assailed
decision of the Court of Appeals in CA-G.R. CV No. 30955
is REVERSED and SET ASIDE. The judgment of the Regional Trial
Court of Makati, Branch 133, with respect to the DISMISSAL of the
complaint in Civil Case No. 89-4759, is hereby REINSTATED. No
pronouncement as to costs.1wphi1.nt
SO ORDERED.
G.R. No. 168499
July 21, 1994, the spouses Villamor, Sr. sold the land to the petitioners
for P150,000.00.13
After the respondents and Catalina refused the petitioners demand to
vacate the land, the petitioners filed on October 20, 1994 a complaint
for quieting of title and recovery of possession against the
respondents.14 This is the case that is now before us.
The respondents and Catalina assailed the San Jacinto Banks
execution of the deed of sale in favor of Domingo, Sr., claiming that the
respondents and Catalina made the installment payments on their own
behalf.15
In its May 28, 1997 decision,16 the RTC declared the petitioners as the
legal and absolute owners of the land, finding that the petitioners were
purchasers in good faith; the spouses Villamor, Sr.s execution of the
July 21, 1994 notarized deed of sale in favor of the petitioners resulted
in the constructive delivery of the land. Thus, it ordered the
respondents to vacate and to transfer possession of the land to the
petitioners, and to pay P10,000.00 as moral damages.17
On appeal, the CA, in its August 10, 2004 decision, found that the
petitioners action to quiet title could not prosper because the
petitioners failed to prove their legal or equitable title to the land. It
noted that there was no real transfer of ownership since neither the
spouses Villamor, Sr. nor the petitioners were placed in actual
possession and control of the land after the execution of the deeds of
sale. It also found that the petitioners failed to show that the
respondents and Catalinas title or claim to the land was invalid or
inoperative, noting the pendency of the specific performance case, at
that time on appeal with the CA. Thus, it set aside the RTC decision
and ordered the dismissal of the complaint, without prejudice to the
outcome of the specific performance case.18
When the CA denied19 the motion for reconsideration20 that followed,
the petitioners filed the present Rule 45 petition.
THE PETITION
The petitioners argue that the spouses Villamor, Sr.s execution of the
July 21, 1994 deed of sale in the petitioners favor was equivalent to
delivery of the land under Article 1498 of the Civil Code; the petitioners
are purchasers in good faith since they had no knowledge of the
supposed transaction between the San Jacinto Bank and the
respondents and Catalina; and the respondents and Catalinas
possession of the land should not be construed against them
(petitioners) since, by tradition and practice in San Jacinto, Masbate,
the children use their parents property.
THE CASE FOR THE RESPONDENTS
The respondents and respondent John submit that they hold legal title
to the land since they perfected the sale with the San Jacinto Bank as
early as November 4, 1991, the first installment payment, and are in
actual possession of the land; the petitioners are not purchasers in
good faith since they failed to ascertain why the respondents were in
possession of the land.
THE ISSUE
The case presents to us the issue of whether the CA committed a
reversible error when it set aside the RTC decision and dismissed the
petitioners complaint for quieting of title and recovery of possession.
OUR RULING
The petitioners anchor their claim over the disputed land on the July
21, 1994 notarized deed of sale executed in their favor by the spouses
Villamor, Sr. who in turn obtained a July 19, 1994 notarized deed of
sale from the San Jacinto Bank. On the other hand, the respondents
and respondent John claim title by virtue of their installment payments
to the San Jacinto Bank from November 4, 1991 to June 8, 1994 and
their actual possession of the disputed land.
SO ORDERED.
Article 1477 of the Civil Code recognizes that the "ownership of the
thing sold shall be transferred to the vendee upon the actual or
constructive delivery thereof." Related to this article is Article 1497
which provides that "the thing sold shall be understood as delivered,
when it is placed in the control and possession of the vendee."
With respect to incorporeal property, Article 1498 of the Civil Code lays
down the general rule: the execution of a public instrument "shall be
equivalent to the delivery of the thing which is the object of the
contract, if from the deed the contrary does not appear or cannot
clearly be inferred." However, the execution of a public instrument
gives rise only to a prima facie presumption of delivery, which is
negated by the failure of the vendee to take actual possession of the
land sold.24 "A person who does not have actual possession of the
thing sold cannot transfer constructive possession by the execution
and delivery of a public instrument."25
In this case, no constructive delivery of the land transpired upon the
execution of the deed of sale since it was not the spouses Villamor, Sr.
but the respondents who had actual possession of the land. The
presumption of constructive delivery is inapplicable and must yield to
the reality that the petitioners were not placed in possession and
control of the land.
The petitioners are not purchasers in
good faith.
The petitioners can hardly claim to be purchasers in good faith.
"A purchaser in good faith is one who buys property without notice that
some other person has a right to or interest in such property and pays
its fair price before he has notice of the adverse claims and interest of
another person in the same property."26 However, where the land sold
is in the possession of a person other than the vendor, the purchaser
must be wary and must investigate the rights of the actual possessor;
without such inquiry, the buyer cannot be said to be in good faith and
cannot have any right over the property.27
In this case, the spouses Villamor, Sr. were not in possession of the
land.1wphi1 The petitioners, as prospective vendees, carried the
After the reading of the proposal and the discussion of terms, David
instructed his then secretary and bookkeeper, Ellen M. Wong, to type
the names of Engr. Rada and Jimenez at the end of the proposal. Both
signed the document under the word "conforme." The board resolution
was thereafter attached to the proposal.
As stated in the proposal, the subject transformer, together with the
basic accessories, was valued at P5,200,000.00. It was also stipulated
therein that 50% of the purchase price should be paid as
downpayment and the remaining balance to be paid upon delivery.
Freight handling, insurance, customs duties, and incidental expenses
were for the account of the buyer.
The Board Resolution, on the other hand, stated that the purchase of
the said transformer was to be financed through a loan from the
National Electrification Administration (NEA). As there was no
immediate action on the loan application, Engr. Rada returned to
Manila in early December 1992 and requested David to deliver the
transformer to them even without the required downpayment. David
granted the request provided that MOELCI would pay interest at 24%
per annum. Engr. Rada acquiesced to the condition. On December 17,
1992, the goods were shipped to Ozamiz City via William Lines. In the
Bill of Lading, a sales invoice was included which stated the agreed
interest rate of 24% per annum.
When nothing was heard from MOELCI for sometime after the
shipment, Emanuel Medina (Medina), Davids Marketing Manager,
went to Ozamiz City to check on the shipment. Medina was able to
confer with Engr. Rada who told him that the loan was not yet released
and asked if it was possible to withdraw the shipped items. Medina
agreed.
When no payment was made after several months, Medina was
constrained to send a demand letter, dated September 15, 1993, which
MOELCI duly received. Engr. Rada replied in writing that the goods
were still in the warehouse of William Lines again reiterating that the
loan had not been approved by NEA. This prompted Medina to head
back to Ozamiz City where he found out that the goods had already
been released to MOELCI evidenced by the shipping companys copy
of the Bill of Lading which was stamped "Released," and with the
notation that the arrastre charges in the amount of P5,095.60 had been
paid. This was supported by a receipt of payment with the
corresponding cargo delivery receipt issued by the Integrated Port
Services of Ozamiz, Inc.
Subsequently, demand letters were sent to MOELCI demanding the
payment of the whole amount plus the balance of previous purchases
of other electrical hardware. Aside from the formal demand letters,
David added that several statements of accounts were regularly sent
through the mails by the company and these were never disputed by
MOELCI.
I.
On the issue as to whether or not there was a perfected contract of
sale, this Court is required to delve into the evidence of the case. In a
petition for review on certiorari under Rule 45 of the Rules of Court, the
issues to be threshed out are generally questions of law only, and not
of fact.
This was reiterated in the case of Buenaventura v. Pascual,5 where it
was written:
Time and again, this Court has stressed that its jurisdiction in a petition
for review on certiorari under Rule 45 of the Rules of Court is limited to
reviewing only errors of law, not of fact, unless the findings of fact
complained of are devoid of support by the evidence on record, or the
assailed judgment is based on the misapprehension of facts. The trial
court, having heard the witnesses and observed their demeanor and
manner of testifying, is in a better position to decide the question of
their credibility. Hence, the findings of the trial court must be accorded
the highest respect, even finality, by this Court.
That being said, the Court is not unmindful, however, of the recognized
exceptions well-entrenched in jurisprudence. It has always been
stressed that when supported by substantial evidence, the findings of
fact of the CA are conclusive and binding on the parties and are not
reviewable by this Court, unless the case falls under any of the
following recognized exceptions:
In other words, the CA was of the position that Exhibit A was at best a
contract to sell.
SO ORDERED.
G.R. No. L-22537
December 8, 1924
OSTRAND, J.:
There is particularly no dispute as to the facts in this case. On January
23, 1917, Behn, Meyer & Co., Ltd., a foreign corporation with a branch
in the Philippine Islands, brought an action against the Collector of
Customs to recover the possession of certain merchandise imported
into the Islands and then in the hands of the Collector. A.N. Jureidini &
Bros. intervened in the case and claimed title to the merchandise
under a sale of the same ordered by the British Admiralty Court of
Alexandria, Egypt, in prize court proceedings.
The Court of First Instance on February 28, 1918, rendered judgment
in favor of Behn, Meyer & Co., on the ground that the title to the
merchandise originally rested in Behn, Meyer & Co., Ltd., and that no
record on the prize court proceedings showing that Behn, Meyer & Co.,
Ltd., had been divested of the title had been presented in evidence. On
appeal to the Supreme Court the judgment was reversed and the case
remanded to the court below with instructions to allow Jureidini & Bros.
a reasonable time within which to obtain a duly certified copy of the
decision of the Admiralty Court of Alexandria, in which the court
declared that the merchandise constituted lawful prize. 1 A new trial
was held on February 24, 1922, after which a judgment was entered in
favor of A.N. Jureidini & Bros. and against Behn, Meyer & Co., Ltd., for
the sum of P1,988 in damages for the further sum of P1,988 for the
value of the merchandise in default of delivery to Jureidini & Bros.
In the meantime, on the 16th day of February, 1918, all the business,
property, and assets of every nature of the firm of Behn, Meyer & Co.,
Ltd., were taken over by the Alien Property Custodian of the United
States under the provisions of the Trading with the Enemy Act and by
direction of the said Alien Property Custodian, one W.D. Pemberton
was appointed receiver and placed in full charge of the business and
assets of the firm.
During the month of January, 1919, the business of the Philippine
branch of Behn, Meyer & Co., Ltd., was liquidated and the property
and assets of the corporation in the Philippine Islands, including the
Upon hearing, the Court of First Instance, under date of September 26,
1923, entered an order, the dispositive part of which reads as follows:
For the foregoing and the interests of J.M. Menzi, John
Bordman and the Bank of the Philippine Islands in this
proceeding having, in the opinion of the court, been shown,
that of Bordman consisting in his having in his acquired
through purchase for the sum of P660,000 all the interests,
rights, choses in action, books, vouchers of the herein
plaintiff; that of J.M. Menzi in his having been designated by
said Bordman to take charge of said properties and books in
his name; and that of the Bank of the Philippine Islands in its
having furnished the sum of money with which said Bordman
made the purchase, it is hereby adjudged to permit said
parties, as they are hereby permitted and authorized, to
intervene in this case; and the court having reached the
conclusion that it has not, and did not have, any jurisdiction
to appoint a receiver in view of the fact that all of the
properties of the said plaintiff had been sold by the Alien
Property Custodian in accordance with the Act of Congress
hereinbefore mentioned; it is hereby adjudged that the order
of this court of August 10, 1922, appointing Lazarus G.
Joseph, receiver, should be, as it hereby is, set aside. Let
the bond given by said receiver to secure the faithful
performance of his duties be cancelled, and J.M. Menzi is
held to be under no obligation to deliver to the aforesaid
Lazarus G. Joseph, the books under said Menzi's charge
which formerly belonged to the plaintiff Behn, Meyer & Co.,
Ltd.
No exception was taken to this order neither by the receiver nor by
Jureidini Bros., but on October 1, 1923, their counsel filed the following
motion for reconsideration:
Come now the Receiver and A.N. Jureidini & Bros. in the
above entitled case and move this court that the court
reconsider the resolution of this court dated September 26,
1923, and, thereafter order the delivery of the books to the
said receiver.
On December 3, 1923, the motion for reconsideration was denied,
exception duly taken and the case is now before us upon appeal from
the two orders last mentioned.
The appellants contend that the court below erred in permitting the
appellees to intervene inasmuch as (a) a final judgment had been
entered in the case and (b) the appellees had no legal interest in the
matter in litigation. Neither of these points is, in our opinion, well taken.
The appellees intervene only in the receivership proceedings which still
were an open issue and did not attempt to interfere in the part of the
case which was covered by the final judgment. They claimed no
interest in the controversy between Jureidini & Bros., and Behn, Meyer
& Co., Ltd., but that Bordman and the Bank of the Philippine Islands
had a vital interest in the subsequent receivership is clearly shown by
the fact that one of the first actions of the receiver appears to have
been the institution of an action against them to annul the sale made
by the Alien Property Custodian to Bordman, thus disturbing the latter
in his ' property rights and threatening the lien held by the bank upon
the property sold. As to the appellee Menzi, it is sufficient to say that he
was brought into the present case by the receiver himself on the order
to show cause why he did not turn over and deliver to said receiver the
books of account of Behn, Meyer & Co., Ltd. We fail to find any error or
abuse of discretion on the part of the court below in permitting the
intervention.
Appellants further maintain that the court erred in holding that the
appointment of the receiver was in excess of its jurisdiction. This
contention is also untenable. As soon as Behn, Meyer & Co., Ltd., was
an "enemy not holding a license granted by the President of the United
States," it became the duty of the Alien Property Custodian to take
possession of its business and all its assets within United States
territory, and we must presume that this duty was duly performed and
that all such assets are now either actually or constructively in the
possession of the Alien Property Custodian and under his control. If so,
they are beyond the jurisdiction and control of the Philippine Courts.
Section 7 of the Trading with Enemy Act as amended provides as
follows:
"The sole relief and remedy of any person having any claim
to any money or other property heretofore or hereafter
conveyed, transferred, assigned, delivered, or paid over to
the Alien Property Custodian, or required so to be, or seized
by him shall be that provided by the terms of this Act, and in
the event of sale or other disposition of such property by the
Alien Property Custodian, shall be limited to and enforced
against the net proceeds received therefrom and held by the
Alien Property Custodian or by the Treasurer of the United
States."lawphi1.net
Section 9 of the Act provides that anyone "not an enemy or ally of
enemy claiming any interest, right, or title in any money of other
property so requested and held, may give notice of his claim and
institute a suit in equity against the Custodian or the Treasurer, as the
case may be, to establish and enforce his claim, and where suit is
brought, the money or property is to be retained by the Custodian or in
the Treasury, to abide the final decree. The same section further
provides:
Except as herein provided, the money or other property
conveyed, transferred, assigned, delivered, or paid to the
Alien Property Custodian shall not be liable to lien,
attachment, garnishment, trustee, process, or execution,
or subject to any order to decree of any court.
Section 17 of the same Act provides:
That the district courts of the United States are hereby given
jurisdiction to make and enter all such rules as to notice and
otherwise, and all such orders and decrees, and to issue
such process as may be necessary and proper in the
premises to enforce the provisions of this Act, with a right of
appeal from the final order or decree of such court as
provided in sections one hundred and twenty-eight and two
hundred and thirty-eight of the Act of March third, nineteen
hundred and eleven, entitled "An Act to codify, revise, and
amend the laws relating to the judiciary."
The only jurisdiction given to the Courts of First Instance of the
Philippine Islands is in regard to criminal offenses under said Act, as
shown by section 18 thereof. Had it been the intention of Congress to
give the Philippine courts jurisdiction over civil litigation in regard to
property under the control of the Alien Property Custodian, the Act
would, of course, have so stated.
The orders appealed from are affirmed, with the costs against the
appellants. So ordered.
G.R. No. L-24069
xxx
xxx
xxx
xxx
Actions arising from the provisions of the preceding ten articles shall
be barred after six months, from the delivery of the thing sold.
xxx
xxx
xxx
Among the "ten articles" referred to in this provision, are Articles 1566
and 1567, reading:
Art. 1566. The vendor is responsible to the vendee for any
hidden faults or defects in the thing sold, even though he
was not aware thereof. ."This provision shall not apply if the
contrary has been stipulated, and the vendor was not aware
of the hidden faults or defects in the thing sold.
Art. 1567. In the cases of articles 1561, 1562, 1564, 1565
and 1566, the vendee may elect between withdrawing from
the contract and demanding a proportionate reduction of the
price, with damages in either case.
xxx
xxx
xxx
Pursuant to these two (2) articles, if the thing sold has hidden faults or
defects as the conveyors are claimed to have the vendor in
the case at bar, the plaintiff shall be responsible therefor and the
vendee or La Fuerza, in the present case "may elect
between withdrawing from the contract and demanding a proportional
reduction of the price, with damages in either case." In the exercise of
this right of election, La Fuerza had chosen to withdraw from the
contract, by praying for its rescission; but the action therefor in the
language of Art. 1571 "shall be barred after six months, from the
delivery of the thing sold." The period of four (4) years, provided in Art.
1389 of said Code, for "the action to claim rescission," applies to
contracts, in general, and must yields, in the instant case, to said Art.
1571, which refers to sales in particular.
Indeed, in contracts of the latter type, especially when goods,
merchandise, machinery or parts or equipment thereof are involved, it
is obviously wise to require the parties to define their position, in
relation thereto, within the shortest possible time. Public interest
demands that the status of the relations between the vendor and the
vendee be not left in a condition of uncertainty for an unreasonable
length of time, which would be the case, if the lifetime of the vendee's
right of rescission were four (4) years.
WHEREFORE, the appealed resolution of the Court of Appeals is
hereby affirmed, with costs against appellant, La Fuerza, Inc. It is so
ordered.
G.R. No. L-29972 January 26, 1976
ROSARIO CARBONELL, petitioner,
vs.
HONORABLE COURT OF APPEALS, JOSE PONCIO, EMMA
INFANTE and RAMON INFANTE, respondents.
MAKASIAR, J.
Petitioner seeks a review of the resolution of the Court of Appeals
(Special Division of Five) dated October 30, 1968, reversing its
decision of November 2, 1967 (Fifth Division), and its resolution of
December 6, 1968 denying petitioner's motion for reconsideration.
Without costs.
The facts of the case as follows:
Prior to January 27, 1955, respondent Jose Poncio, a native of the
Batanes Islands, was the owner of the parcel of land herein involve
with improvements situated at 179 V. Agan St., San Juan, Rizal, having
an area of some one hundred ninety-five (195) square meters, more or
less, covered by TCT No. 5040 and subject to mortgage in favor of the
Republic Savings Bank for the sum of P1,500.00. Petitioner Rosario
Carbonell, a cousin and adjacent neighbor of respondent Poncio, and
also from the Batanes Islands, lived in the adjoining lot at 177 V. Agan
Street.
Both petitioners Rosario Carbonell and respondent Emma Infante
offered to buy the said lot from Poncio (Poncio's Answer, p. 38, rec. on
appeal).
Respondent Poncio, unable to keep up with the installments due on
the mortgage, approached petitioner one day and offered to sell to the
latter the said lot, excluding the house wherein respondent lived.
Petitioner accepted the offer and proposed the price of P9.50 per
square meter. Respondent Poncio, after having secured the consent of
his wife and parents, accepted the price proposed by petitioner, on the
condition that from the purchase price would come the money to be
paid to the bank.
Petitioner and respondent Jose Poncio then went to the Republic
Savings Bank and secured the consent of the President thereof for her
to pay the arrears on the mortgage and to continue the payment of the
installments as they fall due. The amount in arrears reached a total
sum of P247.26. But because respondent Poncio had previously told
her that the money, needed was only P200.00, only the latter amount
was brought by petitioner constraining respondent Jose Poncio to
withdraw the sum of P47.00 from his bank deposit with Republic
Savings Bank. But the next day, petitioner refunded to Poncio the sum
of P47.00.
On January 27, 1955, petitioner and respondent Poncio, in the
presence of a witness, made and executed a document in the Batanes
dialect, which, translated into English, reads:
CONTRACT FOR ONE HALF LOT WHICH I
BOUGHT FROM
JOSE PONCIO
Beginning today January 27, 1955, Jose Poncio
can start living on the lot sold by him to me,
Rosario Carbonell, until after one year during
which time he will not pa anything. Then if after
said one can he could not find an place where to
move his house, he could still continue occupying
the site but he should pay a rent that man, be
agreed. (Sgd) JOSE PONCIO
(Sgd.) ROSARIO CARBONELL
Infante be declared null and void, and that respondent Jose Poncio be
ordered to execute the corresponding deed of conveyance of said land
in her favor and for damages and attorney's fees (pp. 1-7, rec. on
appeal in the C.A.).
Respondents first moved to dismiss the complaint on the ground,
among others, that petitioner's claim is unenforceable under the
Statute of Frauds, the alleged sale in her favor not being evidenced by
a written document (pp. 7-13, rec. on appeal in the C.A.); and when
said motion was denied without prejudice to passing on the question
raised therein when the case would be tried on the merits (p. 17, ROA
in the C.A.), respondents filed separate answers, reiterating the
grounds of their motion to dismiss (pp. 18-23, ROA in the C.A.).
During the trial, when petitioner started presenting evidence of the sale
of the land in question to her by respondent Poncio, part of which
evidence was the agreement written in the Batanes dialect
aforementioned, respondent Infantes objected to the presentation by
petitioner of parole evidence to prove the alleged sale between her and
respondent Poncio. In its order of April 26, 1966, the trial court
sustained the objection and dismissed the complaint on the ground
that the memorandum presented by petitioner to prove said sale does
not satisfy the requirements of the law (pp. 31-35, ROA in the C.A.).
From the above order of dismissal, petitioner appealed to the Supreme
Court (G.R. No. L-11231) which ruled in a decision dated May 12,
1958, that the Statute of Frauds, being applicable only to executory
contracts, does not apply to the alleged sale between petitioner and
respondent Poncio, which petitioner claimed to have been partially
performed, so that petitioner is entitled to establish by parole evidence
"the truth of this allegation, as well as the contract itself." The order
appealed from was thus reversed, and the case remanded to the
court a quo for further proceedings (pp. 26-49, ROA in the C.A.).
After trial in the court a quo; a decision was, rendered on December 5,
1962, declaring the second sale by respondent Jose Poncio to his corespondents Ramon Infante and Emma Infante of the land in question
null and void and ordering respondent Poncio to execute the proper
deed of conveyance of said land in favor of petitioner after compliance
by the latter of her covenants under her agreement with respondent
Poncio (pp. 5056, ROA in the C.A.).
On January 23, 1963, respondent Infantes, through another counsel,
filed a motion for re-trial to adduce evidence for the proper
implementation of the court's decision in case it would be affirmed on
appeal (pp. 56-60, ROA in the C.A.), which motion was opposed by
petitioner for being premature (pp. 61-64, ROA in the C.A.). Before
their motion for re-trial could be resolved, respondent Infantes, this
time through their former counsel, filed another motion for new trial,
claiming that the decision of the trial court is contrary to the evidence
and the law (pp. 64-78, ROA in the C.A.), which motion was also
opposed by petitioner (pp. 78-89, ROA in the C.A.).
The trial court granted a new trial (pp. 89-90, ROA in the C.A.), at
which re-hearing only the respondents introduced additional evidence
consisting principally of the cost of improvements they introduced on
the land in question (p. 9, ROA in the C.A.).
After the re-hearing, the trial court rendered a decision, reversing its
decision of December 5, 1962 on the ground that the claim of the
respondents was superior to the claim of petitioner, and dismissing the
complaint (pp. 91-95, ROA in the C.A.), From this decision, petitioner
Rosario Carbonell appealed to the respondent Court of Appeals (p. 96,
ROA in the C.A.).
On November 2, 1967, the Court of Appeals (Fifth Division composed
of Justices Magno Gatmaitan, Salvador V. Esguerra and Angle H.
January 31, 1955 of his second sale of the same lot to Infante.
Because of that information, Carbonell wanted an audience with
Infante, which desire underscores Carbonell's good faith. With an
aristocratic disdain unworthy of the good breeding of a good Christian
and good neighbor, Infante snubbed Carbonell like a leper and refused
to see her. So Carbonell did the next best thing to protect her right
she registered her adversed claim on February 8, 1955. Under the
circumstances, this recording of her adverse claim should be deemed
to have been done in good faith and should emphasize Infante's bad
faith when she registered her deed of sale four (4) days later on
February 12, 1955.
have told her that Poncio already sold the lot to Carbonell who thereby
assumed the mortgage indebtedness of Poncio and to whom Poncio
delivered his mortgage passbook. Hoping to give a semblance of truth
to her pretended good faith, Infante snubbed Carbonell's request to
talk to her about the prior sale to her b Poncio of the lot. As
aforestated, this is not the attitude expected of a good neighbor
imbued with Christian charity and good will as well as a clear
conscience.
Bad faith arising from previous knowledge by Infante of the prior sale
to Carbonell is shown by the following facts, the vital significance and
evidenciary effect of which the respondent Court of Appeals either
overlooked of failed to appreciate:
(1) Mrs. Infante refused to see Carbonell, who wanted to see Infante
after she was informed by Poncio that he sold the lot to Infante but
several days before Infante registered her deed of sale. This indicates
that Infante knew from Poncio and from the bank of the prior sale
of the lot by Poncio to Carbonell. Ordinarily, one will not refuse to see a
neighbor. Infante lives just behind the house of Carbonell. Her refusal
to talk to Carbonell could only mean that she did not want to listen to
Carbonell's story that she (Carbonell) had previously bought the lot
from Poncio.
(3) The fact that Poncio was no longer in possession of his mortgage
passbook and that the said mortgage passbook was already in
possession of Carbonell, should have compelled Infante to inquire from
Poncio why he was no longer in possession of the mortgage passbook
and from Carbonell why she was in possession of the same (Paglago,
et. al vs. Jara et al 22 SCRA 1247, 1252-1253). The only plausible and
logical reason why Infante did not bother anymore to make such
injury , w because in the ordinary course of business the bank must
for One-half Lot which I Bought from Jose Poncio," was not such a
memorandum in writing within the purview of the Statute of Frauds, the
trial judge himself recognized the fact of the prior sale to Carbonell
when he stated that "the memorandum in question merely states that
Poncio is allowed to stay in the property which he had sold to the
plaintiff. There is no mention of the reconsideration, a description of the
property and such other essential elements of the contract of sale.
There is nothing in the memorandum which would tend to show even
in the slightest manner that it was intended to be an evidence of
contract sale. On the contrary, from the terms of the memorandum, it
tends to show that the sale of the property in favor of the plaintiff is
already an accomplished act.By the very contents of the memorandum
itself, it cannot therefore, be considered to be the memorandum which
would show that a sale has been made by Poncio in favor of the
plaintiff" (p. 33, ROA, emphasis supplied). As found by the trial court, to
repeat the said memorandum states "that Poncio is allowed to stay in
the property which he had sold to the plaintiff ..., it tends to show that
the sale of the property in favor of the plaintiff is already an
accomplished act..."
(2) When the said order was appealed to the Supreme Court by
Carbonell in the previous case of Rosario Carbonell vs. Jose Poncio,
Ramon Infante and Emma Infante
(L-11231, supra), Chief Justice Roberto Concepcion, then Associate
Justice, speaking for a unanimous Court, reversed the aforesaid order
of the trial court dismissing the complaint, holding that because the
complaint alleges and the plaintiff claims that the contract of sale was
partly performed, the same is removed from the application of the
Statute of Frauds and Carbonell should be allowed to establish by
parol evidence the truth of her allegation of partial performance of the
contract of sale, and further stated:
Apart from the foregoing, there are in the case at
bar several circumstances indicating that plaintiff's
claim might not be entirely devoid of factual basis.
Thus, for instance, Poncio admitted in his answer
that plaintiff had offered several times to purchase
his land.
Again, there is Exhibit A, a document signed by
the defendant. It is in the Batanes dialect, which,
according to plaintiff's uncontradicted evidence, is
the one spoken by Poncio, he being a native of
said region. Exhibit A states that Poncio would
stay in the land sold by him to plaintiff for one year,
from January 27, 1955, free of charge, and that, if
he cannot find a place where to transfer his house
thereon, he may remain upon. Incidentally, the
allegation in Poncio's answer to the effect that he
signed Exhibit A under the belief that it "was a
permit for him to remain in the premises in the"
that "he decided to sell the property" to the plaintiff
at P20 a sq. m." is, on its face, somewhat difficult
to believe. Indeed, if he had not decided as yet to
sell the land to plaintiff, who had never increased
her offer of P15 a square meter, there was no
reason for Poncio to get said permit from
her. Upon the other hand, if plaintiff intended to
mislead Poncio, she would have caused Exhibit A
to be drafted, probably, in English , instead of
taking the trouble of seeing to it that it was written
precisely in his native dialect, the Batanes.
Moreover, Poncio's signature on Exhibit A
suggests that he is neither illiterate nor so ignorant
as to sign document without reading its contents,
apart from the fact that Meonada had read Exhibit
A to him and given him a copy thereof, before he
(5) In the first decision of November 2, 1967 of the Fifth Division of the
Court of Appeals composed of Justices Esguerra (now Associate
Justice of the Supreme Court), Gatmaitan and Mojica, penned by
Justice Gatmaitan, the Court of Appeals found that:
... the testimony of Rosario Carbonell not having
at all been attempted to be disproved by
defendants, particularly Jose Poncio, and
corroborated as it is by the private document in
Batanes dialect, Exhibit A, the testimony being to
the effect that between herself and Jose there had
been celebrated a sale of the property excluding
the house for the price of P9.50 per square meter,
so much so that on faith of that, Rosario had
advanced the sum of P247.26 and binding herself
to pay unto Jose the balance of the purchase
price after deducting the indebtedness to the Bank
and since the wording of Exhibit A, the private
document goes so far as to describe their
transaction as one of sale, already consummated
between them, note the part tense used in the
phrase, "the lot sold by him to me" and going so
far even as to state that from that day
onwards, vendor would continue to live therein, for
one year, 'during which time he will not pay
anything' this can only mean that between Rosario
and Jose, there had been a true contract of sale,
consummated by delivery constitutum
possession, Art. 1500, New Civil Code; vendor's
possession having become converted from then
on, as a mere tenant of vendee, with the special
privilege of not paying rental for one year, it is
true that the sale by Jose Poncio to Rosario
Carbonell corroborated documentarily only by
Exhibit A could not have been registered at all, but
it was a valid contract nonetheless, since under
our law, a contract sale is consensual, perfected
by mere consent, Couto v. Cortes, 8 Phil 459, so
much so that under the New Civil Code, while a
sale of an immovable is ordered to be reduced to
a public document, Art. 1358, that mandate does
not render an oral sale of realty invalid, but merely
incapable of proof, where still executory and action
is brought and resisted for its performance, 1403,
par. 2, 3; but where already wholly or partly
executed or where even if not yet, it is evidenced
by a memorandum, in any case where evidence to
further demonstrate is presented and admitted as
the case was here, then the oral sale becomes
perfectly good, and becomes a good cause of
action not only to reduce it to the form of a public
document, but even to enforce the contract in its
entirety, Art. 1357; and thus it is that what we now
have is a case wherein on the one hand Rosario
Carbonell has proved that she had an anterior
sale, celebrated in her favor on 27 January,
1955, Exhibit A,annotated as an adverse claim on
8 February, 1955, and on other, a sale is due form
in favor of Emma L. Infante on 2 February, 1955,
Exhibit 3-Infante, and registered in due form with
title unto her issued on 12 February, 1955; the vital
question must now come on which of these two
sales should prevail; ... (pp. 74-76, rec., emphasis
supplied).
(6) In the resolution dated October 30, 1968 penned by then Court of
Appeals Justice Esguerra (now a member of this Court), concurred in
by Justices Villamor and Nolasco, constituting the majority of a Special
Division of Five, the Court of Appeals, upon motion of the Infantes,
Infantes had less justification to erect a building thereon since their title
to said lot is seriously disputed by Carbonell on the basis of a prior sale
to her.
With respect to the claim of Poncio that he signed the document
Exhibit "A" under the belief that it was a permit for him to remain in the
premises in ease he decides to sell the property to Carbonell at P20.00
per square meter, the observation of the Supreme Court through Mr.
Chief Justice Concepcion in G.R. No. L-11231, supra, bears repeating:
... Incidentally, the allegation in Poncio's answer to
the effect that he signed Exhibit A under the belief
that it 'was a permit for him to remain in the
premises in the event that 'he decided to sell the
property' to the plaintiff at P20.00 a sq. m is, on its
face, somewhat difficult to believe. Indeed, if he
had not decided as yet to sell that land to plaintiff,
who had never increased her offer of P15 a
square meter, there as no reason for Poncio to get
said permit from her. Upon the they if plaintiff
intended to mislead Poncio, she would have
Exhibit A to be drafted, probably, in English,
instead of taking the trouble of seeing to it that it
was written precisely in his native dialect, the
Batanes. Moreover, Poncio's signature on Exhibit
A suggests that he is neither illiterate nor so
ignorant as to sign a document without reading its
contents, apart from the fact that Meonada had
read Exhibit A to him-and given him a copy
thereof, before he signed thereon, according to
Meonada's uncontradicted testimony. (pp. 46-47,
ROA).
As stressed by Justice Gatmaitan in his first decision of November 2,
1965, which he reiterated in his dissent from the resolution of the
majority of the Special Division. of Five on October 30, 1968, Exhibit A,
the private document in the Batanes dialect, is a valid contract of sale
between the parties, since sale is a consensual contract and is
perfected by mere consent (Couto vs. Cortes, 8 Phil. 459). Even an
oral contract of realty is all between the parties and accords to the
vendee the right to compel the vendor to execute the proper public
document As a matter of fact, Exhibit A, while merely a private
document, can be fully or partially performed, to it from the operation of
the statute of frauds. Being a all consensual contract, Exhibit A
effectively transferred the possession of the lot to the vendee
Carbonell by constitutum possessorium (Article 1500, New Civil Code);
because thereunder the vendor Poncio continued to retain physical
possession of the lot as tenant of the vendee and no longer as knew
thereof. More than just the signing of Exhibit A by Poncio and
Carbonell with Constancio Meonada as witness to fact the contract of
sale, the transition was further confirmed when Poncio agreed to the
actual payment by at Carbonell of his mortgage arrearages to the bank
on January 27, 1955 and by his consequent delivery of his own
mortgage passbook to Carbonell. If he remained owner and mortgagor,
Poncio would not have surrendered his mortgage passbook to'
Carbonell.
IV
IDENTIFICATION AND DESCRIPTION OF THE DISPUTED LOT IN
THE MEMORANDUM EXHIBIT "A"
The claim that the memorandum Exhibit "A" does not sufficiently
describe the disputed lot as the subject matter of the sale, was
correctly disposed of in the first decision of the trial court of December
5, 1962, thus: "The defendant argues that there is even no description
of the lot referred to in the note (or memorandum), especially when the
note refers to only one-half lot. With respect to the latter argument of
the defendant, plaintiff points out that one- half lot was mentioned in
Exhibit 'A' because the original description carried in the title states that
it was formerly part of a bigger lot and only segregated later. The
explanation is tenable, in (sic) considering the time value of the
contents of Exh. 'A', the court has arrived at the conclusion that there is
sufficient description of the lot referred to in Exh. As none other than
the parcel of lot occupied by the defendant Poncio and where he has
his improvements erected. The Identity of the parcel of land involved
herein is sufficiently established by the contents of the note Exh. 'A'.
For a while, this court had that similar impression but after a more and
through consideration of the context in Exh. 'A' and for the reasons
stated above, the court has arrived to (sic) the conclusion stated
earlier" (pp. 53-54, ROA).
Moreover, it is not shown that Poncio owns another parcel with the
same area, adjacent to the lot of his cousin Carbonell and likewise
mortgaged by him to the Republic Savings Bank. The transaction
therefore between Poncio and Carbonell can only refer and does refer
to the lot involved herein. If Poncio had another lot to remove his
house, Exhibit A would not have stipulated to allow him to stay in the
sold lot without paying any rent for one year and thereafter to pay
rental in case he cannot find another place to transfer his house.
While petitioner Carbonell has the superior title to the lot, she must
however refund to respondents Infantes the amount of P1,500.00,
which the Infantes paid to the Republic Savings Bank to redeem the
mortgage.
It appearing that the Infantes are possessors in bad faith, their rights to
the improvements they introduced op the disputed lot are governed by
Articles 546 and 547 of the New Civil Code. Their expenses consisting
of P1,500.00 for draining the property, filling it with 500 cubic meters of
garden soil, building a wall around it and installing a gate and
P11,929.00 for erecting a b ' bungalow thereon, are useful
expenditures, for they add to the value of the property (Aringo vs.
Arenas, 14 Phil. 263; Alburo vs. Villanueva, 7 Phil. 277; Valencia vs.
Ayala de Roxas, 13 Phil. 45).
Under the second paragraph of Article 546, the possessor in good faith
can retain the useful improvements unless the person who defeated
him in his possession refunds him the amount of such useful expenses
or pay him the increased value the land may have acquired by reason
thereof. Under Article 547, the possessor in good faith has also the
right to remove the useful improvements if such removal can be done
without damage to the land, unless the person with the superior right
elects to pay for the useful improvements or reimburse the expenses
therefor under paragraph 2 of Article 546. These provisions seem to
imply that the possessor in bad faith has neither the right of retention of
useful improvements nor the right to a refund for useful expenses.
But, if the lawful possessor can retain the improvements introduced by
the possessor in bad faith for pure luxury or mere pleasure only by
paying the value thereof at the time he enters into possession (Article
549 NCC), as a matter of equity, the Infantes, although possessors in
bad faith, should be allowed to remove the aforesaid improvements,
unless petitioner Carbonell chooses to pay for their value at the time
the Infantes introduced said useful improvements in 1955 and 1959.
The Infantes cannot claim reimbursement for the current value of the
said useful improvements; because they have been enjoying such
improvements for about two decades without paying any rent on the
land and during which period herein petitioner Carbonell was deprived
of its possession and use.
WHEREFORE, THE DECISION OF THE SPECIAL DIVISION OF FIVE
OF THE COURT OF APPEALS OF OCTOBER 30, 1968 IS HEREBY
REVERSED; PETITIONER ROSARIO CARBONELL IS HEREBY
May 8, 2009
to Antonio Cereso on May 11, 1925. Cereso in turn sold the land to the
siblings with the surname Antipolo on September 23, 1943. The
Antipolos sold the property to Agaton Pagaduan, father of petitioners,
on March 24, 1961. All the dispositions in this line were not registered
and did not result in the issuance of new certificates of title in the name
of the purchasers.
The Court of Appeals ruled that while the registration of the southern
portion in the name of respondents had created an implied trust in
favor of Agaton Pagaduan, petitioners, however, failed to show that
they had taken possession of the said portion. Hence, the appellate
court concluded that prescription had set in, thereby precluding
petitioners recovery of the disputed portion.
The Court of Appeals decision must be reversed and set aside, hence
the petition succeeds.
An action for reconveyance respects the decree of registration as
incontrovertible but seeks the transfer of property, which has been
wrongfully or erroneously registered in other persons' names, to its
rightful and legal owners, or to those who claim to have a better right.
However, contrary to the positions of both the appellate and trial
courts, no trust was created under Article 1456 of the new Civil Code
which provides:
Art. 1456. If property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an implied trust
for the benefit of the person from whom the property comes.
(Emphasis supplied)
The property in question did not come from the petitioners. In fact that
property came from Eugenia Reyes. The title of the Ocumas can be
traced back from Eugenia Reyes to Ruperta Asuncion to the original
owner Nicolas Cleto. Thus, if the respondents are holding the property
in trust for anyone, it would be Eugenia Reyes and not the
petitioners.1a v v p h i 1
Moreover, as stated in Berico v. Court of Appeals,10 Article 1456 refers
to actual or constructive fraud. Actual fraud consists in deception,
intentionally practiced to induce another to part with property or to
surrender some legal right, and which accomplishes the end
designed. Constructive fraud, on the other hand, is a breach of legal or
equitable duty which the law declares fraudulent irrespective of the
moral guilt of the actor due to the tendency to deceive others, to violate
public or private confidence, or to injure public interests. The latter
proceeds from a breach of duty arising out of a fiduciary or confidential
relationship. In the instant case, none of the elements of actual or
constructive fraud exists. The respondents did not deceive Agaton
Pagaduan to induce the latter to part with the ownership or deliver the
possession of the property to them. Moreover, no fiduciary relations
existed between the two parties.
This lack of a trust relationship does not inure to the benefit of the
respondents. Despite a host of jurisprudence that states a certificate of
title is indefeasible, unassailable and binding against the whole world,
it merely confirms or records title already existing and vested, and it
cannot be used to protect a usurper from the true owner, nor can it be
used for the perpetration of fraud; neither does it permit one to enrich
himself at the expense of others.11
Rather, after a thorough scrutiny of the records of the instant case, the
Court finds that this is a case of double sale under article 1544 of the
Civil Code which reads:
ART. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who may
have first 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 possession; and, in the absence
thereof; to the person who presents the oldest title, provided there is
good faith.
Otherwise stated, where it is an immovable property that is the subject
of a double sale, ownership shall be transferred: (1) to the person
acquiring it who in good faith first recorded it in the Registry of
Property; (2) in default thereof, to the person who in good faith was first
in possession; and (3) in default thereof, to the person who presents
the oldest title, provided there is good faith. The requirement of the law
then is two-fold: acquisition in good faith and registration in good
faith.12
In this case there was a first sale by Eugenia Reyes to Agaton
Pagaduan and a second sale by Eugenia Reyes to the
respondents.13 For a second buyer like the respondents to successfully
invoke the second paragraph, Article 1544 of the Civil Code, it must
possess good faith from the time of the sale in its favor until the
registration of the same. Respondents sorely failed to meet this
requirement of good faith since they had actual knowledge of
Eugenias prior sale of the southern portion property to the petitioners,
a fact antithetical to good faith. This cannot be denied by respondents
since in the same deed of sale that Eugenia sold them the northern
portion to the respondents for P1,500.00, Eugenia also sold the
southern portion of the land to Agaton Pagaduan forP500.00.14
It is to be emphasized that the Agaton Pagaduan never parted with the
ownership and possession of that portion of Lot No. 785 which he had
purchased from Eugenia Santos. Hence, the registration of the deed of
sale by respondents was ineffectual and vested upon them no
preferential rights to the property in derogation of the rights of the
petitioners.
Respondents had prior knowledge of the sale of the questioned portion
to Agaton Pagaduan as the same deed of sale that conveyed the
northern portion to them, conveyed the southern portion to Agaton
Pagaduan.15 Thus the subsequent issuance of TCT No. T-5425, to the
extent that it affects the Pagaduans portion, conferred no better right
than the registration which was the source of the authority to issue the
said title. Knowledge gained by respondents of the first sale defeats
their rights even if they were first to register the second sale.
Knowledge of the first sale blackens this prior registration with bad
faith.16 Good faith must concur with the registration.17Therefore,
because the registration by the respondents was in bad faith, it
amounted to no registration at all.
As the respondents gained no rights over the land, it is petitioners who
are the rightful owners, having established that their successor-ininterest Agaton Pagaduan had purchased the property from Eugenia
Reyes on November 26, 1961 and in fact took possession of the said
property. The action to recover the immovable is not barred by
prescription, as it was filed a little over 27 years after the title was
registered in bad faith by the Ocumas as per Article 1141 of the Civil
Code.18
WHEREFORE, the petition is GRANTED. The Decision of the Court of
Appeals dated January 25, 2006 and itsResolution dated May 5, 2006
are hereby REVERSED and SET ASIDE. The Decision of the Regional
Trial Court is hereby REINSTATED.
SO ORDERED.
G.R. No. 124242
the prior sale to him but the latter failed to do so. SLDC pointed out
that the notice of lis pendens was annotated only on 2 June 1989 long
after the sale of the property to it was consummated on 3 May
1989.1awphi1.nt
On the other hand, respondent Babasanta argued that SLDC could not
have acquired ownership of the property because it failed to comply
with the requirement of registration of the sale in good faith. He
emphasized that at the time SLDC registered the sale in its favor on 30
June 1990, there was already a notice of lis pendens annotated on the
titles of the property made as early as 2 June 1989. Hence, petitioners
registration of the sale did not confer upon it any right. Babasanta
further asserted that petitioners bad faith in the acquisition of the
property is evident from the fact that it failed to make necessary inquiry
regarding the purpose of the issuance of the two hundred thousand
pesos (P200,000.00) managers check in his favor.
The core issue presented for resolution in the instant petition is who
between SLDC and Babasanta has a better right over the two parcels
of land subject of the instant case in view of the successive
transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta
presented a document signed by Pacita Lu acknowledging receipt of
the sum of fifty thousand pesos (P50,000.00) as partial payment for 3.6
hectares of farm lot situated at Barangay Pulong, Sta. Cruz, Sta. Rosa,
Laguna.17 While the receipt signed by Pacita did not mention the price
for which the property was being sold, this deficiency was supplied by
Pacita Lus letter dated 29 May 198918 wherein she admitted that she
agreed to sell the 3.6 hectares of land to Babasanta for fifteen pesos
(P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence
presented by the parties, irresistibly leads to the conclusion that the
agreement between Babasanta and the Spouses Lu is a contract to
sell and not a contract of sale.
Contracts, in general, are perfected by mere consent,19 which is
manifested by the meeting of the offer and the acceptance upon the
thing which are to constitute the contract. The offer must be certain and
the acceptance absolute.20 Moreover, contracts shall be obligatory in
whatever form they may have been entered into, provided all the
essential requisites for their validity are present.21
The receipt signed by Pacita Lu merely states that she accepted the
sum of fifty thousand pesos (P50,000.00) from Babasanta as partial
payment of 3.6 hectares of farm lot situated in Sta. Rosa, Laguna.
While there is no stipulation that the seller reserves the ownership of
the property until full payment of the price which is a distinguishing
feature of a contract to sell, the subsequent acts of the parties
convince us that the Spouses Lu never intended to transfer ownership
to Babasanta except upon full payment of the purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated
therein that despite his repeated requests for the execution of the final
deed of sale in his favor so that he could effect full payment of the
price, Pacita Lu allegedly refused to do so. In effect, Babasanta himself
recognized that ownership of the property would not be transferred to
him until such time as he shall have effected full payment of the price.
Moreover, had the sellers intended to transfer title, they could have
easily executed the document of sale in its required form
simultaneously with their acceptance of the partial payment, but they
the delivery of the keys of the place where the movable sold is being
kept;33 traditio longa manu or by mere consent or agreement if the
movable sold cannot yet be transferred to the possession of the buyer
at the time of the sale;34 traditio brevi manu if the buyer already had
possession of the object even before the sale;35 and traditio
constitutum possessorium, where the seller remains in possession of
the property in a different capacity.36
Following the above disquisition, respondent Babasanta did not
acquire ownership by the mere execution of the receipt by Pacita Lu
acknowledging receipt of partial payment for the property. For one, the
agreement between Babasanta and the Spouses Lu, though valid, was
not embodied in a public instrument. Hence, no constructive delivery of
the lands could have been effected. For another, Babasanta had not
taken possession of the property at any time after the perfection of the
sale in his favor or exercised acts of dominion over it despite his
assertions that he was the rightful owner of the lands. Simply stated,
there was no delivery to Babasanta, whether actual or constructive,
which is essential to transfer ownership of the property. Thus, even on
the assumption that the perfected contract between the parties was a
sale, ownership could not have passed to Babasanta in the absence of
delivery, since in a contract of sale ownership is transferred to the
vendee only upon the delivery of the thing sold.37
However, it must be stressed that the juridical relationship between the
parties in a double sale is primarily governed by Article 1544 which
lays down the rules of preference between the two purchasers of the
same property. It provides:
Art. 1544. 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.
The principle of primus tempore, potior jure (first in time, stronger in
right) gains greater significance in case of double sale of immovable
property. When the thing sold twice is an immovable, the one who
acquires it and first records it in the Registry of Property, both made in
good faith, shall be deemed the owner.38 Verily, the act of registration
must be coupled with good faith that is, the registrant must have no
knowledge of the defect or lack of title of his vendor or must not have
been aware of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects in
the title of his vendor.39
Explicitly, the law provides that the ownership of the thing sold is
acquired by the vendee from the moment it is delivered to him in any of
the ways specified in Article 1497 to 1501.30 The word "delivered"
should not be taken restrictively to mean transfer of actual physical
possession of the property. The law recognizes two principal modes of
delivery, to wit: (1) actual delivery; and (2) legal or constructive
delivery.
Admittedly, SLDC registered the sale with the Registry of Deeds after it
had acquired knowledge of Babasantas claim. Babasanta, however,
strongly argues that the registration of the sale by SLDC was not
sufficient to confer upon the latter any title to the property since the
registration was attended by bad faith. Specifically, he points out that at
the time SLDC registered the sale on 30 June 1990, there was already
a notice of lis pendens on the file with the Register of Deeds, the same
having been filed one year before on 2 June 1989.
Actual delivery consists in placing the thing sold in the control and
possession of the vendee.31 Legal or constructive delivery, on the other
hand, may be had through any of the following ways: the execution of
a public instrument evidencing the sale;32 symbolical tradition such as
Did the registration of the sale after the annotation of the notice of lis
pendens obliterate the effects of delivery and possession in good faith
which admittedly had occurred prior to SLDCs knowledge of the
transaction in favor of Babasanta?
Babasanta for what they attest to is that the amount was supposed to
pay off the advances made by Babasanta to Pacita Lu. In any event,
the incident took place after the Spouses Lu had already executed
the Deed of Absolute Sale with Mortgage in favor of SLDC and
therefore, as previously explained, it has no effect on the legal position
of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the sale had
been tainted by the prior notice of lis pendens and assuming further for
the same nonce that this is a case of double sale, still Babasantas
claim could not prevail over that of SLDCs. In Abarquez v. Court of
Appeals,46 this Court had the occasion to rule that if a vendee in a
double sale registers the sale after he has acquired knowledge of a
previous sale, the registration constitutes a registration in bad faith and
does not confer upon him any right. If the registration is done in bad
faith, it is as if there is no registration at all, and the buyer who has
taken possession first of the property in good faith shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and
registered only after the second vendee, Abarquez, registered their
deed of sale with the Registry of Deeds, but the Israels were first in
possession. This Court awarded the property to the Israels because
registration of the property by Abarquez lacked the element of good
faith. While the facts in the instant case substantially differ from that
in Abarquez, we would not hesitate to rule in favor of SLDC on the
basis of its prior possession of the property in good faith. Be it noted
that delivery of the property to SLDC was immediately effected after
the execution of the deed in its favor, at which time SLDC had no
knowledge at all of the prior transaction by the Spouses Lu in favor of
Babasanta.1a\^/phi1.net
The law speaks not only of one criterion. The first criterion is priority of
entry in the registry of property; there being no priority of such entry,
the second is priority of possession; and, in the absence of the two
priorities, the third priority is of the date of title, with good faith as the
common critical element. Since SLDC acquired possession of the
property in good faith in contrast to Babasanta, who neither registered
nor possessed the property at any time, SLDCs right is definitely
superior to that of Babasantas.
At any rate, the above discussion on the rules on double sale would be
purely academic for as earlier stated in this decision, the contract
between Babasanta and the Spouses Lu is not a contract of sale but
merely a contract to sell. In Dichoso v. Roxas,47 we had the occasion to
rule that Article 1544 does not apply to a case where there was a sale
to one party of the land itself while the other contract was a mere
promise to sell the land or at most an actual assignment of the right to
repurchase the same land. Accordingly, there was no double sale of
the same land in that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision
of the Court of Appeals appealed from is REVERSED and SET ASIDE
and the decision of the Regional Trial Court, Branch 31, of San Pedro,
Laguna is REINSTATED. No costs.
SO ORDERED.
G.R. No. 103577 October 7, 1996
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A.
CORONEL, ANNABELLE C. GONZALES (for herself and on behalf
of Florida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL,
FLORAIDA A. ALMONTE, and CATALINA BALAIS
MABANAG, petitioners,
vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and
MELO, J.:p
The petition before us has its roots in a complaint for specific
performance to compel herein petitioners (except the last named,
Catalina Balais Mabanag) to consummate the sale of a parcel of land
with its improvements located along Roosevelt Avenue in Quezon City
entered into by the parties sometime in January 1985 for the price of
P1,240,000.00.
The undisputed facts of the case were summarized by respondent
court in this wise:
On January 19, 1985, defendants-appellants
Romulo Coronel, et al. (hereinafter referred to as
Coronels) executed a document entitled "Receipt
of Down Payment" (Exh. "A") in favor of plaintiff
Ramona Patricia Alcaraz (hereinafter referred to
as Ramona) which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 Total amount
50,000 Down payment
P1,190,000.00 Balance
Received from Miss Ramona Patricia Alcaraz of
146 Timog, Quezon City, the sum of Fifty
Thousand Pesos purchase price of our inherited
house and lot, covered by TCT No. 119627 of the
Registry of Deeds of Quezon City, in the total
amount of P1,240,000.00.
We bind ourselves to effect the transfer in our
names from our deceased father, Constancio P.
Coronel, the transfer certificate of title immediately
upon receipt of the down payment above-stated.
On our presentation of the TCT already in or
name, We will immediately execute the deed of
absolute sale of said property and Miss Ramona
Patricia Alcaraz shall immediately pay the balance
of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are
the following:
1. Ramona will make a down payment of Fifty
Thousand (P50,000.00) Pesos upon execution of
the document aforestated;
2. The Coronels will cause the transfer in their
names of the title of the property registered in the
name of their deceased father upon receipt of the
Fifty Thousand (P50,000.00) Pesos down
payment;
On April 14, 1988, the case was submitted for resolution before Judge
Reynaldo Roura, who was then temporarily detailed to preside over
Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment
was handed down by Judge Roura from his regular bench at
Macabebe, Pampanga for the Quezon City branch, disposing as
follows:
WHEREFORE, judgment for specific performance
is hereby rendered ordering defendant to execute
in favor of plaintiffs a deed of absolute sale
covering that parcel of land embraced in and
covered by Transfer Certificate of Title No. 327403
(now TCT No. 331582) of the Registry of Deeds
for Quezon City, together with all the
improvements existing thereon free from all liens
and encumbrances, and once accomplished, to
immediately deliver the said document of sale to
plaintiffs and upon receipt thereof, the said
document of sale to plaintiffs and upon receipt
thereof, the plaintiffs are ordered to pay
defendants the whole balance of the purchase
price amounting to P1,190,000.00 in cash.
Transfer Certificate of Title No. 331582 of the
Registry of Deeds for Quezon City in the name of
intervenor is hereby canceled and declared to be
without force and effect. Defendants and
intervenor and all other persons claiming under
them are hereby ordered to vacate the subject
property and deliver possession thereof to
plaintiffs. Plaintiffs' claim for damages and
attorney's fees, as well as the counterclaims of
defendants and intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
SO ORDERED.
Macabebe, Pampanga for Quezon City, March 1,
1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioner before the new
presiding judge of the Quezon City RTC but the same was denied by
Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to
annul the decision and to render anew decision by
the undersigned Presiding Judge should be
denied for the following reasons: (1) The instant
case became submitted for decision as of April 14,
1988 when the parties terminated the presentation
of their respective documentary evidence and
when the Presiding Judge at that time was Judge
Reynaldo Roura. The fact that they were allowed
to file memoranda at some future date did not
change the fact that the hearing of the case was
terminated before Judge Roura and therefore the
same should be submitted to him for decision; (2)
When the defendants and intervenor did not object
to the authority of Judge Reynaldo Roura to
decide the case prior to the rendition of the
decision, when they met for the first time before
the undersigned Presiding Judge at the hearing of
a pending incident in Civil Case No. Q-46145 on
November 11, 1988, they were deemed to have
acquiesced thereto and they are now estopped
cannot defeat the first buyer's title. In case a title is issued to the
second buyer, the first buyer may seek reconveyance of the property
subject of the sale.
With the above postulates as guidelines, we now proceed to the task of
deciphering the real nature of the contract entered into by petitioners
and private respondents.
It is a canon in the interpretation of contracts that the words used
therein should be given their natural and ordinary meaning unless a
technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA
586 [1992]). Thus, when petitioners declared in the said "Receipt of
Down Payment" that they
Received from Miss Ramona Patricia Alcaraz of
146 Timog, Quezon City, the sum of Fifty
Thousand Pesos purchase price of our inherited
house and lot, covered by TCT No. 1199627 of the
Registry of Deeds of Quezon City, in the total
amount of P1,240,000.00.
without any reservation of title until full payment of the entire
purchase price, the natural and ordinary idea conveyed is
that they sold their property.
When the "Receipt of Down Payment" is considered in its entirety, it
becomes more manifest that there was a clear intent on the part of
petitioners to transfer title to the buyer, but since the transfer certificate
of title was still in the name of petitioner's father, they could not fully
effect such transfer although the buyer was then willing and able to
immediately pay the purchase price. Therefore, petitioners-sellers
undertook upon receipt of the down payment from private respondent
Ramona P. Alcaraz, to cause the issuance of a new certificate of title in
their names from that of their father, after which, they promised to
present said title, now in their names, to the latter and to execute the
deed of absolute sale whereupon, the latter shall, in turn, pay the entire
balance of the purchase price.
The agreement could not have been a contract to sell because the
sellers herein made no express reservation of ownership or title to the
subject parcel of land. Furthermore, the circumstance which prevented
the parties from entering into an absolute contract of sale pertained to
the sellers themselves (the certificate of title was not in their names)
and not the full payment of the purchase price. Under the established
facts and circumstances of the case, the Court may safely presume
that, had the certificate of title been in the names of petitioners-sellers
at that time, there would have been no reason why an absolute
contract of sale could not have been executed and consummated right
there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did
not merely promise to sell the properly to private respondent upon the
fulfillment of the suspensive condition. On the contrary, having already
agreed to sell the subject property, they undertook to have the
certificate of title changed to their names and immediately thereafter, to
execute the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the
sellers, after compliance by the buyer with certain terms and
conditions, promised to sell the property to the latter. What may be
perceived from the respective undertakings of the parties to the
contract is that petitioners had already agreed to sell the house and lot
they inherited from their father, completely willing to transfer full
ownership of the subject house and lot to the buyer if the documents
were then in order. It just happened, however, that the transfer
certificate of title was then still in the name of their father. It was more
expedient to first effect the change in the certificate of title so as to
bear their names. That is why they undertook to cause the issuance of
a new transfer of the certificate of title in their names upon receipt of
the down payment in the amount of P50,000.00. As soon as the new
certificate of title is issued in their names, petitioners were committed
to immediately execute the deed of absolute sale. Only then will the
obligation of the buyer to pay the remainder of the purchase price
arise.
There is no doubt that unlike in a contract to sell which is most
commonly entered into so as to protect the seller against a buyer who
intends to buy the property in installment by withholding ownership
over the property until the buyer effects full payment therefor, in the
contract entered into in the case at bar, the sellers were the one who
were unable to enter into a contract of absolute sale by reason of the
fact that the certificate of title to the property was still in the name of
their father. It was the sellers in this case who, as it were, had the
impediment which prevented, so to speak, the execution of an contract
of absolute sale.
What is clearly established by the plain language of the subject
document is that when the said "Receipt of Down Payment" was
prepared and signed by petitioners Romeo A. Coronel, et al., the
parties had agreed to a conditional contract of sale, consummation of
which is subject only to the successful transfer of the certificate of title
from the name of petitioners' father, Constancio P. Coronel, to their
names.
The Court significantly notes this suspensive condition was, in fact,
fulfilled on February 6, 1985 (Exh. "D"; Exh. "4"). Thus, on said date,
the conditional contract of sale between petitioners and private
respondent Ramona P. Alcaraz became obligatory, the only act
required for the consummation thereof being the delivery of the
property by means of the execution of the deed of absolute sale in a
public instrument, which petitioners unequivocally committed
themselves to do as evidenced by the "Receipt of Down Payment."
Article 1475, in correlation with Article 1181, both of the Civil Code,
plainly applies to the case at bench. Thus,
Art. 1475. The contract of sale is perfected at the
moment there is a meeting of minds upon the
thing which is the object of the contract and upon
the price.
From the moment, the parties may reciprocally
demand performance, subject to the provisions of
the law governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition
of rights, as well as the extinguishment or loss of
those already acquired, shall depend upon the
happening of the event which constitutes the
condition.
Since the condition contemplated by the parties which is the issuance
of a certificate of title in petitioners' names was fulfilled on February 6,
1985, the respective obligations of the parties under the contract of
sale became mutually demandable, that is, petitioners, as sellers, were
obliged to present the transfer certificate of title already in their names
to private respondent Ramona P. Alcaraz, the buyer, and to
immediately execute the deed of absolute sale, while the buyer on her
part, was obliged to forthwith pay the balance of the purchase price
amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their
petition, petitioners conclusively admitted that:
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of
sale subject to a suspensive condition. Only, they contend, continuing
in the same paragraph, that:
. . . Had petitioners-sellers not complied with this
condition of first transferring the title to the
property under their names, there could be no
perfected contract of sale. (Emphasis supplied.)
(Ibid.)
not aware that they set their own trap for themselves, for
Article 1186 of the Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled
when the obligor voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more
controlling than these mere hypothetical arguments is the fact that
the condition herein referred to was actually and indisputably fulfilled
on February 6, 1985, when a new title was issued in the names of
petitioners as evidenced by TCT No. 327403 (Exh. "D"; Exh. "4").
The inevitable conclusion is that on January 19, 1985, as evidenced by
the document denominated as "Receipt of Down Payment" (Exh. "A";
Exh. "1"), the parties entered into a contract of sale subject only to the
suspensive condition that the sellers shall effect the issuance of new
certificate title from that of their father's name to their names and that,
on February 6, 1985, this condition was fulfilled (Exh. "D"; Exh. "4").
We, therefore, hold that, in accordance with Article 1187 which
pertinently provides
Art. 1187. The effects of conditional obligation to
give, once the condition has been fulfilled, shall
retroact to the day of the constitution of the
obligation . . .
In obligation to do or not to do, the courts shall
determine, in each case, the retroactive effect of
the condition that has been complied with.
the rights and obligations of the parties with respect to the
perfected contract of sale became mutually due and
demandable as of the time of fulfillment or occurrence of the
suspensive condition on February 6, 1985. As of that point in
time, reciprocal obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on
January 19, 1985 because they were then not yet the absolute owners
of the inherited property.
We cannot sustain this argument.
SO ORDERED.
G.R. No. 156405
On May 24, 1997, spouses Jose and Lina Belmes executed a deed of
sale in favor of spouses Dennis and Heide Alindogan, respondents,
over Lot No. 5524-H and the house constructed thereon located in
Rawis, Legazpi City.
Thus, we shall now look into the transaction entered into by the
defendants with the Belmeses, with reference to the intention of the
parties. The Contract to Buy and Sell reads:
"That whereas, the vendor agreed to sell and the vendee agreed to
buy the above-described parcel of land, together with improvements
therein, for the sum of Three Hundred Fifty Thousand Pesos (P350,
000.00), Philippine currency, under the following terms and conditions
xxx"1awphi1.net
Article 1544. 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.
Azalia Salome (Salome) owned a house and lot located at No. 2641
Bonifacio St., Bangkal, Makati City, covered by Transfer Certificate of
Title No. 61772. Salome mortgaged the property to Country Bankers
Insurance and Surety Company to secure a P10,000.00 loan.
On July 1, 1966, Salome sold the property to Rosendo C.
Palabasan.5 Transfer Certificate of Title No. 61772 was cancelled and
a new one, Transfer Certificate of Title No. 167387,6 was issued in the
name of Rosendo C. Palabasan and Bella S. Palabasan.
On April 19, 1989, Leoncio and Enriqueta Barrera (spouses Barrera)
filed with the Regional Trial Court, Makati City, Branch 138, a
complaint7 against Palabasan for reconveyance with damages. They
alleged that they had been in possession of the property since 1962 by
virtue of a Deed of Sale with Assumption of Mortgage which was not
notarized; that Salome executed a notarized Deed of Sale with
proceedings and set aside the decree of registration but only purports
to show that the person who secured the registration of the property in
controversy is not the real owner thereof.17 Fraud may be a ground for
reconveyance. For an action for reconveyance based on fraud to
prosper, the party seeking reconveyance must prove by clear and
convincing evidence his title to the property and the fact of fraud.18
It must be stressed that mere allegations of fraud are not enough.
Intentional acts to deceive and deprive another of his right, or in some
manner, injure him, must be specifically alleged and proved.19 The
burden of proof rests on petitioners; this, the petitioners failed to do.
Petitioners offered no proof that there was misrepresentation or
concealment in the registration of the deed that led to the issuance of
Transfer Certificate of Title No. 167387. With the presumption of
regularity in the performance of official functions, the claim of
petitioners that the issuance of Transfer Certificate of Title No. 167387
was tainted with fraud must fail.
As to proof of title to the property, respondent Palabasan offered the
following: Transfer Certificate of Title No. 167387,20 Tax Declaration No.
03251,21 the Deed of Absolute Sale22 dated June 30, 1966, executed
by Salome in favor of respondent Palabasan, the Contract of
Lease,23 with respondent Palabasan as the lessor and petitioner
Leoncio Barrera as the lessee, and the decision for the court of First
Instance, Pasig, Branch XIX in Civil Case No. 38608,24 finding
respondent Palabasan to be the lawful owner of the property covered
by Transfer Certificate of Title No. 167387.
On the other hand, petitioner spouses Barrera only have the Deed of
Absolute Sale with Assumption of Real Estate Mortgage25 evidencing a
transaction which occurred in 1962, a Deed of Sale with Assumption of
Mortgage26 dated March 31, 1966 and the testimonies of Cenon
Mateo27 and petitioner Leoncio Barrera.28 The spouses Barrera
attempted to offer in evidence the transcript of stenographic notes
taken of the testimony of Salome in Civil Case No.
14009.29 Respondent objected to the offer which opposition the trial
court sustained.30
We find respondent Palabasan to be the owner of the property.
The decision of the then Court of First Instance, Pasig, Branch XIX in
Civil Case No. 38608, promulgated on September 4, 198131 and
reinstated on August 10, 1990,32 finding respondent Palabasan to be
the lawful owner of the property covered by Transfer Certificate of Title
No. 167387 may not be invoked in this case since said decision had
become stale.33
Article 1144 (3) of the Civil Code provides that an action upon a
judgment must be brought within ten years from the time the right of
action accrues.
On the other hand, Section 6, Rule 39, Revised Rules of Court, states:
The issues raised are: whether respondent Palabasan is the owner of
the property in question; and whether there was double sale of an
immovable property covered by Article 1544 of the Civil Code.
The Court's Ruling
The petition is without merit.
An action for reconveyance of a property is the sole remedy of a
landowner whose property has been wrongfully or erroneously
registered in another's name after one year from the date of the decree
so long as the property has not passed to an innocent purchaser for
value.16 The action does not seek to reopen the registration
April 9, 2003
30 June 1989
RECEIPT
RECEIVED from MR. TOMAS K. CHUA PBCom Check No.
206011 in the amount of ONE HUNDRED THOUSAND
PESOS ONLY (P100,000.00) as EARNEST MONEY for the
sale of the property located at 40 Tampingco cor. Hidalgo,
San Lorenzo Village, Makati, Metro Manila (Area : 718 sq.
meters).
The balance of TEN MILLION SEVEN HUNDRED
THOUSAND (P10,700,000.00) is payable on or before
155 July 1989. Capital Gains Tax for the account of the
seller. Failure to pay balance on or before 15 July 1989
forfeits the earnest money. This provided that all papers are
in proper order.6
CONFORME:
ENCARNACION VALDES
Seller
TOMAS K. CHUA
Buyer
BALANCE DUE TO
ENCARNACION VALDEZ-CHOY
x x x.7
In the morning of 13 July 1989, Chua secured from Philippine Bank of
Commerce ("PBCom") a manager's check for P480,000.00. Strangely,
after securing the manager's check, Chua immediately gave PBCom a
verbal stop payment order claiming that this manager's check for
P480,000.00 "was lost and/or misplaced."8 On the same day, after
receipt of Chua's verbal order, PBCom Assistant VicePresident Julie
C. Pe notified in writing9 the PBCom Operations Group of Chua's stop
payment order.
In the afternoon of 13 July 1989, Chua and Valdes-Choy met with their
respective counsels to execute the necessary documents and arrange
the payments.10 Valdes-Choy as vendor and Chua as
vendee signed two Deeds of Absolute Sale ("Deeds of Sale"). The first
Deed of Sale covered the house and lot for the purchase price of
P8,000,000.00.11 The second Deed of Sale covered the furnishings,
fixtures and movable properties contained in the house for the
purchase price of P2,800,000.00.12 The parties also computed the
capital gains tax to amount to P485,000.00.
On 14 July 1989, the parties met again at the office of Valdes-Choy's
counsel. Chua handed to Valdes-Choy the PBCom manager's check
for P485,000.00 so Valdes-Choy could pay the capital gains tax as she
did not have sufficient funds to pay the tax. Valdes-Choy issued a
receipt showing that Chua had a remaining balance of P10,215,000.00
after deducting the advances made by Chua. This receipt reads:
SELLING PRICE
EARNEST MONEY
PARTIAL PAYMENT
x x x.13
On the same day, 14 July 1989, Valdes-Choy, accompanied by Chua,
deposited the P485,000.00 manager's check to her account with
Traders Royal Bank. She then purchased a Traders Royal Bank
manager's check for P480,000.00 payable to the Commissioner of
Internal Revenue for the capital gains tax. Valdes-Choy and Chua
returned to the office of Valdes-Choy's counsel and handed the
Traders Royal Bank check to the counsel who undertook to pay the
capital gains tax. It was then also that Chua showed to Valdes-Choy a
PBCom manager's check for P10,215,000.00 representing the balance
of the purchase price. Chua, however, did not give this PBCom
manager's check to Valdes-Choy because the TCT was still registered
in the name of Valdes-Choy. Chua required that the Property be
registered first in his name before he would turn over the check to
Valdes-Choy. This angered Valdes-Choy who tore up the Deeds of
Sale, claiming that what Chua required was not part of their
agreement.14
On the same day, 14 July 1989, Chua confirmed his stop payment
order by submitting to PBCom an affidavit of loss15 of the PBCom
Manager's Check for P480,000.00. PBCom Assistant Vice-President
Pe, however, testified that the manager's check was nevertheless
honored because Chua subsequently verbally advised the bank that he
was lifting the stop-payment order due to his "special arrangement"
with the bank.16
On 15 July 1989, the deadline for the payment of the balance of the
purchase price, Valdes-Choy suggested to her counsel that to break
the impasse Chua should deposit in escrow the P10,215,000.00
balance.17 Upon such deposit, Valdes-Choy was willing to cause the
issuance of a new TCT in the name of Chua even without receiving the
balance of the purchase price. Valdes-Choy believed this was the only
way she could protect herself if the certificate of title is transferred in
the name of the buyer before she is fully paid. Valdes-Choy's counsel
promised to relay her suggestion to Chua and his counsel, but nothing
came out of it.
On 17 July 1989, Chua filed a complaint for specific performance
against Valdes-Choy which the trial court dismissed on 22 November
1989. On 29 November 1989, Chua re-filed his complaint for specific
performance with damages. After trial in due course, the trial court
rendered judgment in favor of Chua, the dispositive portion of which
reads:
Applying the provisions of Article 1191 of the new Civil Code,
since this is an action for specific performance where the
plaintiff, as vendee, wants to pursue the sale, and in order
that the fears of the defendant may be allayed and still have
the sale materialize, judgment is hereby rendered:
I. 1. Ordering the defendant to deliver to the Court not later
than five (5) days from finality of this decision:
The trial court found that the transaction reached an impasse when
Valdes-Choy wanted to be first paid the full consideration before a new
TCT covering the Property is issued in the name of Chua. On the other
hand, Chua did not want to pay the consideration in full unless a new
TCT is first issued in his name. The trial court faulted Valdes-Choy for
this impasse.
The trial court held that the parties entered into a contract to sell on 30
June 1989, as evidenced by the Receipt for the P100,000.00 earnest
money. The trial court pointed out that the contract to sell was subject
to the following conditions: (1) the balance of P10,700,000.00 was
payable not later than 15 July 1989; (2) Valdes-Choy may stay in the
Property until 13 August 1989; and (3) all papers must be "in proper
order" before full payment is made.
The trial court held that Chua complied with the terms of the contract to
sell. Chua showed that he was prepared to pay Valdes-Choy the
consideration in full on 13 July 1989, two days before the deadline of
15 July 1989. Chua even added P80,000.00 for the documentary
stamp tax. He purchased from PBCom two manager's checks both
payable to Valdes-Choy. The first check for P485,000.00 was to pay
the capital gains tax. The second check for P10,215,000.00 was to pay
the balance of the purchase price. The trial court was convinced that
Chua demonstrated his capacity and readiness to pay the balance on
13 July 1989 with the production of the PBCom manager's check for
P10,215,000.00.
On the other hand, the trial court found that Valdes-Choy did not
perform her correlative obligation under the contract to sell to put all
the papers in order. The trial court noted that as of 14 July 1989, the
capital gains tax had not been paid because Valdes-Choy's counsel
who was suppose to pay the tax did not do so. The trial court declared
that Valdes-Choy was in a position to deliver only the owner's duplicate
copy of the TCT, the signed Deeds of Sale, the tax declarations, and
the latest realty tax receipt. The trial court concluded that these
documents were all useless without the Bureau of Internal Revenue
receipt evidencing full payment of the capital gains tax which is a prerequisite to the issuance of a new certificate of title in Chua's name.
The trial court held that Chua's non-payment of the balance of
P10,215,000.00 on the agreed date was due to Valdes-Choy's fault.
The Court of Appeals' Ruling
In reversing the trial court, the Court of Appeals ruled that Chua's
stance to pay the full consideration only after the Property is registered
in his name was not the agreement of the parties. The Court of
Appeals noted that there is a whale of difference between the phrases
"all papers are in proper order" as written on the Receipt, and "transfer
of title" as demanded by Chua.
Contrary to the findings of the trial court, the Court of Appeals found
that all the papers were in order and that Chua had no valid reason not
to pay on the agreed date. Valdes-Choy was in a position to deliver the
owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax
declarations, and the latest realty tax receipt. The Property was also
free from all liens and encumbrances.
The Court of Appeals declared that the trial court erred in considering
Chua's showing to Valdes-Choy of the PBCom manager's check for
P10,215,000.00 as compliance with Chua's obligation to pay on or
before 15 July 1989. The Court of Appeals pointed out that Chua did
not want to give up the check unless "the property was already in his
name."20 Although Chua demonstrated his capacity to pay, this could
not be equated with actual payment which he refused to do.
The Court of Appeals did not consider the non-payment of the capital
gains tax as failure by Valdes-Choy to put the papers "in proper order."
The Court of Appeals explained that the payment of the capital gains
tax has no bearing on the validity of the Deeds of Sale. It is only after
the deeds are signed and notarized can the final computation and
payment of the capital gains tax be made.
The Issues
In his Memorandum, Chua raises the following issues:
1. WHETHER THERE IS A PERFECTED CONTRACT OF
SALE OF IMMOVABLE PROPERTY;
2. WHETHER VALDES-CHOY MAY RESCIND THE
CONTRACT IN CONTROVERSY WITHOUT OBSERVING
THE PROVISIONS OF ARTICLE 1592 OF THE NEW CIVIL
CODE;
It is true that Article 1482 of the Civil Code provides that "[W]henever
earnest money is given in a contract of sale, it shall be considered as
part of the price and proof of the perfection of the contract." However,
this article speaks of earnest money given in a contract of sale. In this
case, the earnest money was given in a contract to sell. The Receipt
evidencing the contract to sell stipulates that the earnest money is a
forfeitable deposit, to be forfeited if the sale is not consummated
should Chua fail to pay the balance of the purchase price. The earnest
money forms part of the consideration only if the sale is consummated
upon full payment of the purchase price. If there is a contract of sale,
Valdes-Choy should have the right to compel Chua to pay the balance
of the purchase price. Chua, however, has the right to walk away from
the transaction, with no obligation to pay the balance, although he will
forfeit the earnest money. Clearly, there is no contract of sale. The
earnest money was given in a contract to sell, and thus Article 1482,
which speaks of a contract of sale, is not applicable.
Since the agreement between Valdes-Choy and Chua is a mere
contract to sell, the full payment of the purchase price partakes of a
suspensive condition. The non-fulfillment of the condition prevents the
obligation to sell from arising and ownership is retained by the seller
without further remedies by the buyer.30 Article 1592 of the Civil Code
permits the buyer to pay, even after the expiration of the period, as
long as no demand for rescission of the contract has been made upon
him either judicially or by notarial act. However, Article 1592 does not
apply to a contract to sell where the seller reserves the ownership until
full payment of the price.31
Third and Fourth Issues: Withholding of Payment of the
Balance of the Purchase Price and Forfeiture of the Earnest Money
Chua insists that he was ready to pay the balance of the purchase
price but withheld payment because Valdes-Choy did not fulfill her
contractual obligation to put all the papers in "proper order."
Specifically, Chua claims that Valdes-Choy failed to show that the
capital gains tax had been paid after he had advanced the money for
its payment. For the same reason, he contends that Valdes-Choy may
not forfeit the earnest money even if he did not pay on time.
There is a variance of interpretation on the phrase "all papers are in
proper order" as written in the Receipt. There is no dispute though, that
as long as the papers are "in proper order," Valdes-Choy has the right
to forfeit the earnest money if Chua fails to pay the balance before the
deadline.
The trial court interpreted the phrase to include payment of the capital
gains tax, with the Bureau of Internal Revenue receipt as proof of
payment. The Court of Appeals held otherwise. We quote verbatim the
ruling of the Court of Appeals on this matter:
The trial court made much fuss in connection with the
payment of the capital gains tax, of which Section 33 of the
National Internal Revenue Code of 1977, is the governing
provision insofar as its computation is concerned. The trial
court failed to consider Section 34-(a) of the said Code, the
last sentence of which provides, that "[t]he amount realized
from the sale or other disposition of property shall be the
sum of money received plus the fair market value of the
property (other than money) received;" and that the
computation of the capital gains tax can only be finally
assessed by the Commission on Internal Revenue upon the
presentation of the Deeds of Absolute Sale themselves,
without which any premature computation of the capital
gains tax becomes of no moment. At any rate, the
computation and payment of the capital gains tax has no
bearing insofar as the validity and effectiveness of the deeds
of sale in question are concerned, because it is only after the
contracts of sale are finally executed in due form and have
been duly notarized that the final computation of the capital
gains tax can follow as a matter of course. Indeed, exhibit D,
the PBC Check No. 325851, dated July 13, 1989, in the
amount of P485,000.00, which is considered as part of the
consideration of the sale, was deposited in the name of
appellant, from which she in turn, purchased the
corresponding check in the amount representing the sum to
be paid for capital gains tax and drawn in the name of the
The lower court held that Jimenez had the right of ownership
and possession over the car.
Issue: WON Jimenez was a purchaser in good faith and thus entitled
to the ownership and possession of the car. YES
Held:
CRUZ, J.:
The case before us calls for the interpretation of Article 559 of the Civil
Code and raises the particular question of when a person may be
deemed to have been "unlawfully deprived" of movable property in the
hands of another. The article runs in full as follows:
xxx
xxx
xxx
xxx
The above rulings are sound doctrine and reflect our own interpretation
of Article 559 as applied to the case before us.
Actual delivery of the books having been made, Cruz acquired
ownership over the books which he could then validly transfer to the
private respondents. The fact that he had not yet paid for them to
EDCA was a matter between him and EDCA and did not impair the title
acquired by the private respondents to the books.
One may well imagine the adverse consequences if the phrase
"unlawfully deprived" were to be interpreted in the manner suggested
by the petitioner. A person relying on the seller's title who buys a
movable property from him would have to surrender it to another
person claiming to be the original owner who had not yet been paid the
purchase price therefor. The buyer in the second sale would be left
holding the bag, so to speak, and would be compelled to return the
thing bought by him in good faith without even the right to
reimbursement of the amount he had paid for it.
It bears repeating that in the case before us, Leonor Santos took care
to ascertain first that the books belonged to Cruz before she agreed to
purchase them. The EDCA invoice Cruz showed her assured her that
the books had been paid for on delivery. By contrast, EDCA was less
than cautious in fact, too trusting in dealing with the impostor.
Although it had never transacted with him before, it readily delivered
the books he had ordered (by telephone) and as readily accepted his
personal check in payment. It did not verify his identity although it was
easy enough to do this. It did not wait to clear the check of this
unknown drawer. Worse, it indicated in the sales invoice issued to him,
by the printed terms thereon, that the books had been paid for on
delivery, thereby vesting ownership in the buyer.
Surely, the private respondent did not have to go beyond that invoice
to satisfy herself that the books being offered for sale by Cruz
belonged to him; yet she did. Although the title of Cruz was presumed
under Article 559 by his mere possession of the books, these being
movable property, Leonor Santos nevertheless demanded more proof
before deciding to buy them.
It would certainly be unfair now to make the private respondents bear
the prejudice sustained by EDCA as a result of its own
negligence.1wphi1 We cannot see the justice in transferring EDCA's
loss to the Santoses who had acted in good faith, and with proper care,
when they bought the books from Cruz.
While we sympathize with the petitioner for its plight, it is clear that its
remedy is not against the private respondents but against Tomas de la
Pea, who has apparently caused all this trouble. The private
respondents have themselves been unduly inconvenienced, and for
merely transacting a customary deal not really unusual in their kind of
business. It is they and not EDCA who have a right to complain.
WHEREFORE, the challenged decision is AFFIRMED and the petition
is DENIED, with costs against the petitioner.
G.R. No. L-55684 December 19, 1984
CHRYSLER PHILIPPINES CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and SAMBOK MOTORS
CO. (BACOLOD), respondents,
MELENCIO-HERRERA, J:
Subject of this Petition for Review is the Decision of the then Court of
Appeals in CA-G.R. No. 65328-R reversing the judgment of the then
Court of First Instance of Rizal, Branch XX, in Civil Case No. 16624,
and dismissing petitioner Chrysler Philippines Corporation's suit for
Damages against private respondent Sambok Motors Company
(Bacolod) arising from breach of contract.
Petitioner is a domestic corporation engaged in the assembling and
sale of motor vehicles and other automotive products. Respondent
Sambok Motors Co., a general partnership, during the period relevant
to these proceedings, was its dealer for automotive products with
offices at Bacolod (Sambok, Bacolod) and Iloilo (Sambok, Iloilo). The
two offices were run by relatives. Miguel Ng was Assistant Manager for
Sambok, Bacolod, while an elder brother, Pepito Ng, was the
President. 1
On September 7, 1972, petitioner filed with the Court of First Instance
of Rizal, Branch XX, Pasig, Rizal, a Complaint for Damages against
Allied Brokerage Corporation, Negros Navigation Company and
Sambok, Bacolod, alleging that on October 2, 1970, Sambok, Bacolod,
ordered from petitioner various automotive products worth P30,909.61,
payable in 45 days; that on November 25, 1970, petitioner delivered
said products to its forwarding agent, Allied Brokerage Corporation, for
shipment; that Allied Brokerage loaded the goods on board the M/S
Doa Florentina, a vessel owned and operated by Negros Navigation
Company, for delivery to Sambok, Bacolod; that when petitioner tried
to collect from the latter the amount of P31,037.56, representing the
price of the spare parts plus handling charges, Sambok, Bacolod,
refused to pay claiming that it had not received the merchandise; that
petitioner also demanded the return of the merchandise or their value
from Allied Brokerage and Negros Navigation, but both denied any
liability.
In its Answer, Sambok, Bacolod, denied having received from
petitioner or from any of its co-defendants, the automotive products
referred to in the Complaint, and professed no knowledge of having
ordered from petitioner said articles.
Upon a Joint Motion to Dismiss filed by petitioner and Allied Brokerage,
the Trial Court. on October 23, 1975, dismissed the case with prejudice
against Allied Brokerage for lack of cause of action, and also dismissed
the latter's counterclaim against petitioner.
On July 31, 1978, the Trial Court rendered its Decision dismissing the
Complaint against Negros Navigation for lack of cause of action, but
finding Sambok, Bacolod, liable for the claim of petitioner, thus:
PREMISES CONSIDERED, the Court renders
judgment as follows:
(1) The complaint against defendant Negros
Navigation is dismissed for lack of cause of action.
(2) Defendant Sambok Motors Co. (Bacolod) is
ordered to pay plaintiff Chrysler Philippines
Corporation:
MORAN, J.:
On February 9-4, 1938, plaintiff filed a complaint in the Court of First
Instance of Manila, which substantially recites the following facts:
On March 10, 1937, plaintiff Levy Hermanos, Inc., sold to defendant
Lazaro Blas Gervacio, a Packard car. Defendant, after making the
initial payment, executed a promissory note for the balance of P2,400,
payable on or before June 15, 1937, with interest at 12 per cent per
annum, to secure the payment of the note, he mortgaged the car to the
plaintiff. Defendant failed to pay the note it its maturity. Wherefore,
plaintiff foreclosed the mortgage and the car was sold at public auction,
at which plaintiff was the highest bidder for P1,800. The present action
is for the collection of the balance of P1,600 and interest.
Defendant admitted the allegations of the complaint, and with this
admission, the parties submitted the case for decision. The lower court
applied, the provisions of Act No. 4122, inserted as articles 1454-A of
the Civil Code, and rendered judgment in favor of the defendant.
Plaintiff appealed.
SYLLABUS
Article 1454-A of the Civil Code reads as follows:
In a contract for the sale of personal property payable in
installments shall confer upon the vendor the right to cancel
the sale or foreclose the mortgage if one has been given on
the property, without reimbursement to the purchaser of the
installments already paid, if there be an agreement to this
effect.
However, if the vendor has chosen to foreclose the mortgage
he shall have no further action against the purchaser for the
recovery of any unpaid balance owing by the same and any
agreement to the contrary shall be null and void.
In Macondray and Co. vs. De Santos (33 Off. Gaz., 2170), we held that
"in order to apply the provisions of article 1454-A of the Civil Code it
must appear that there was a contract for the sale of personal property
payable in installments and that there has been a failure to pay two or
more installments." The contract, in the instant case, while a sale of
personal property, is not, however, one on installments, but on straight
term, in which the balance, after payment of the initial sum, should be
paid in its totality at the time specified in the promissory note. The
transaction is not is not, therefore, the one contemplated in Act No.
4122 and accordingly the mortgagee is not bound by the prohibition
therein contained as to the right to the recovery of the unpaid balance.
Undoubtedly, the law is aimed at those sales where the price is
payable in several installments, for, generally, it is in these cases that
partial payments consist in relatively small amounts, constituting thus a
great temptation for improvident purchasers to buy beyond their
the creditor chooses one remedy, he cannot avail himself of the other
two.
DECISION
NOCON, J.:
"5. Should BUYER fail to pay any of the monthly installments when
due, or otherwise fail to comply with any of the terms and conditions
herein stipulated, this contract shall automatically become null and void
and all sums so paid by BUYER by reason thereof shall be considered
as rental and the SELLER shall then and there be free to take
possession thereof without liability for trespass or responsibility for any
article left in or attached to the PROPERTY:chanrob1es virtual 1aw
library
x
"7. Should SELLER rescind this contract for any of the reasons
stipulated in the preceding paragraph, the BUYER, by these presents
obligates himself to peacefully deliver the PROPERTY to the SELLER
in case of rescission, and should a suit be brought in court by the
SELLER to seek judicial declaration of rescission and take possession
of the PROPERTY, the BUYER hereby obligates himself to pay all the
expenses to be incurred by reason of such suit and in addition to pay
the sum equivalent to 25% of the remaining unpaid obligation as
damages, penalty and attorneys fees;" 3
Defendants-appellants claim that for the use of the plaintiff-appellees
three air-conditioners, from July 5, 1975 4 to April 11, 1977, 5 or for a
period of about 22 months, they, in effect, paid rentals in the amount of
P6,429,92, 6 or roughly one-third (1/3) of the entire price of said airconditioners which was P19,350.00. They also complain that for the
said period the trial court is ordering them to pay P6,188.29 as the
balance due for the three air-conditioners repossessed. Defendantsappellants were likewise ordered to pay P1,000.00 as attorneys fees
when plaintiff-appellee never sought for attorneys fees in its complaint.
They satirically pointed out that by putting "a few touches here and
there, the same units can be sold again to the next imprudent
customer" 7 by plaintiff-appellee. Thus, enforcement of the Deed of
Conditional Sale will unjustly enrich plaintiff-appellee at the expense of
defendants-appellants.chanrobles law library : red
I
Defendants-appellants cannot complain that their downpayment of
P774.00 and installment payments of P5,655.92 8 were treated as
rentals even though the total amount of P6,429,92 which they had
paid, approximates one-third (1/3) of the cost of the three (3) airconditioners. A stipulation in a contract that the installments paid shall
not be returned to the vendee is valid insofar as the same may not be
unconscionable under the circumstances is sanctioned by Article 1486
of the New Civil Code. 9 The monthly installment payable by
defendants-appellants was P774.00. 10 The P5,655.92 installment
payments correspond only to seven (7) monthly installments. Since
they admit having used the air-conditioners for twenty-two (22) months,
this means that they did not pay fifteen (15) monthly installments on
the said air-conditioners and were thus using the same FREE for said
period to the prejudice of plaintiff-appellee. Under the
circumstances, the treatment of the installment payments as rentals
cannot be said to be unconscionable.
II
The vendor in a sale of personal property payable in installments may
exercise one of three remedies, namely, (1) exact the fulfillment of the
obligation, should the vendee fail to pay; (2) cancel the sale upon the
vendees failure to pay two or more installments; (3) foreclose the
chattel mortgage, if one has been constituted on the property sold,
upon the vendees failure to pay two or more installments. The third
option or remedy, however, is subject to the limitation that the vendor
cannot recover any unpaid balance of the price and any agreement to
the contrary is void (Art. 1484) 11
The three (3) remedies are alternative and NOT cumulative. If the
creditor chooses one remedy, he cannot avail himself of the other
two.chanrobles lawlibrary : rednad
It is not disputed that the plaintiff-appellee had taken possession of the
three air-conditioners, through a writ of replevin when defendantsappellants refused to extra-judicially surrender the same. This was
done pursuant to paragraphs 5 and 7 of its Deed of Conditional Sale
farm implements to the Southern Motors Inc., the latter accepted them,
and had thereby settled their accounts; for that reason, said spouses
did not contest the action in Civil Case No. 2942; and (2) as the
Southern Motors Inc. had repossessed the machines purchased on
installment (and mortgaged) the buyers were thereby relieved from
further responsibility, in view of the Recto Law, now article 1484 of the
New Civil Code.
For answer, the company denied the alleged "settlement and
understanding" during the pendency of civil case No. 2949. It also
denied having repossessed the machineries, the truth being that they
were attached by the sheriff and then deposited by the latter in its shop
for safekeeping, before the sale at public auction.
The case was submitted for decision mostly upon a stipulation of facts.
Additional testimony was offered together with documentary evidence.
Everything considered the court entered judgment, saying in part;
The proceedings in Civil Case No. 2942 above referred to,
were had in the Court of First Instance (Branch 1) of the
Province and of the City of Iloilo. While this court (Branch IV)
sympathizes with plaintiffs, it cannot grant, in this action, the
relief prayed for the complaint because courts of similar
jurisdiction cannot invalidate the judgments and orders of
each other. Plaintiffs have not pursued the proper remedy.
This court is without authority and jurisdiction to declare null
and void the order directing the issuance of aliaswrit of
execution because it was made by another court of equal
rank and category (see Cabiao and Izquierdo vs. Del
Rosario and Lim, 44 Phil., 82-186).
WHEREFORE, judgement is hereby rendered dismissing the
complaint with costs against plaintiffs costs against plaintiffs.
Let the writ of preliminiary injunction issued on August 26,
1954, be lifted.
The plaintiffs reasonably brought the matter to the Court of Appeals,
but the latter forwarded the expediente, being of the opinion that the
appeal involved questions of jurisdiction and/or law
Discussion. Appellants' brief elaborately explains in the nine errors
assigned, their original two theories although their "settlement" idea
appears to be somewhat modified.
"What is being sought in this present action" say appellants "is to
prohibit and forbid the appellee Sheriff of Iloilo from attaching and
selling at public auction sale the real properties of appellants because
that is now forbidden by our law after the chattels that have been
purchased and duly mortgagee had already been repossessed by the
same vendor-mortgagee and later on sold at public auction sale and
purchased by the same at such meager sum of P10,000."
"Our law" provides,
ART. 1484. In a contract of sale of personal property the
price of which is payable in installments, the vendor may
exercise of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail
to pay;
(2) Cancel the sale, should the vendee's failure to pay cover
two or more installments;
Southern Motors Inc. Such decision is binding upon them, unless and
until they manage to set it aside in a proper proceeding and this is
not it.
There are other points involved in the case, such as the authority of the
judge of one branch of a court of first instance to enjoin proceedings in
another branch of the same court. As stated, Judge Pelayo refused to
interfere on that ground. Appellants insist this was error on several
counts. We deem it unnecessary to deal with this procedural aspect,
inasmuch as we find that, on the merits, plaintiffs are not entitled to the
relief demanded.
Judgment. The decision dismissing the complaint, is affirmed, with
costs against appellants. So ordered.
G.R. No. 109966 May 31, 1999
ELISCO TOOL MANUFACTURING CORPORATION, petitioner,
vs.
COURT OF APPEALS, ROLANDO LANTAN, and RINA
LANTAN, respondents.
MENDOZA, J.:
This is a petition for review of the decision 1 of the Court of Appeals
which affirmed in toto the decision of the Regional Trial Court of Pasig,
Branch 51, declaring respondent spouses Rolando Lantan and Rina
Lantan owners of a 1979 model 2-door Colt Lancer car which they had
acquired under a car plan for top employees of the Elizalde group of
companies.
The facts are as follows:
Private respondent Rolando Lantan was employed at the Elisco Tool
Manufacturing Corporation as head of its cash department. On
January 9, 1980, he entered into an agreement with the company
which provided as follows: 2
That, EMPLOYER is the owner of a car Colt
Lancer 2 door, Model 1979, with Serial No. 3403
under LTC Registration Certificate No. 0526558;
That, for and in consideration of a monthly rental
of ONE THOUSAND TEN & 65/100 ONLY
(P1,010.65) Philippine Currency, EMPLOYER
desire to lease and EMPLOYEE accept in lease
the motor vehicle aforementioned for a period of
FIVE (5) years;
That, the EMPLOYEE agree as he hereby agreed
to pay the lease rental thru salary deduction from
his monthly remuneration in the amount as above
specified for a period of FIVE (5) years;
That, for the duration of the lease contract, all
expenses and costs of registration, insurance,
repair and maintenance, gasoline, oil, part
replacement inclusive of all expenses necessary
to maintain the vehicle in top condition shall be for
the account of the EMPLOYEE;
The trial court sustained private respondents' claim that the agreement
in question was one of sale and held that the latter had fully paid the
price of the car having paid the total amount of P61,070.94 aside from
installing accessories in the car worth P15,000.00. Said the trial court:
Plaintiff now comes claiming ownership of the car
in question and has succeeded in repossessing
the same by virtue of the writ of seizure issued in
this case on July 29, 1986. Not content with
recovering possession of the said car, plaintiff still
asks that defendants should pay it the sum of
P39,054.86, allegedly representing the rentals due
on the car from the time of the last payment made
by defendants to its repossession thereof. This is
indeed a classic case of one having his cake and
eating it too! Under the Recto law (Arts. 1484 &
1485, Civil Code), the vendor who repossesses
the goods sold on installments, has no right to sue
the vendee for the unpaid balance thereof.
The Court can take judicial notice of the practice
wherein executives enjoy car plans in progressive
companies. The agreement of January 9, 1980
between the parties is one such car plan. If
defendant Rolando Lantan failed to keep up with
his amortizations on the car in question, it was not
because of his own liking but rather he was
pushed to it by circumstances when his employer
folded up and sent him to the streets. That plaintiff
was giving all the chance to defendants to pay the
value of the car and acquire full ownership thereof
is shown by the delay in instituting the instant
case. . . .
The court likewise found that the amount of P61,070.94 included a 2%
penalty for late payments for which there was no stipulation in the
agreement:
. . . The agreement and defendant Rolando
Lantan's promissory note of January 9, 1980 do
not provide even for interest on the remaining
balance of the purchase price of the car. This
privilege extended by corporations to their top
executives is considered additional emolument to
them. And so the reason for the lack of provision
for interest, much less penalty charges. Therefore,
all payments made by defendant should be
applied to the principal account. Since the
principal was only P60,639.00, the defendants
have made an overpayment of P431.94 which
should be returned to defendant by plaintiff.
For this reason, it ordered petitioner to pay private
respondents the amount of P431.94 as excess payment, as
well as rentals at the rate of P1,000 a month for depriving
private respondents of the use of their car, and moral
damages for the worry, embarrassment, and mental torture
suffered by them on account of the repossession of the car.
The dispositive portion of the trial court's decision reads as follows:
WHEREFORE, judgment is hereby rendered in
favor of defendants and against plaintiff,
dismissing plaintiff's complaint; declaring
defendants the lawful owners of that Colt Lancer
2-door, Model 1979 with Serial No. 3403 under
Registration Certificate No. 0526558; ordering
treated as a sale on
installments, the respondent
Court of Appeals nonetheless
erred in not finding that the
parties have validly agreed
that the petitioner as seller
may [i] cancel the contract
upon the respondent's default
on three or more installments,
[ii] retake possession of the
personality, and [iii] keep the
rents already paid.
First. Petitioner does not deny that private respondent Rolando Lantan
acquired the vehicle in question under a car plan for executives of the
Elizalde group of companies. Under a typical car plan, the company
advances the purchase price of a car to be paid back by the employee
through monthly deductions from his salary. The company retains
ownership of the motor vehicle until it shall have been fully paid
for. 7 However, retention of registration of the car in the company's
name is only a form of a lien on the vehicle in the event that the
employee would abscond before he has fully paid for it. There are also
stipulations in car plan agreements to the effect that should the
employment of the employee concerned be terminated before all
installments are fully paid, the vehicle will be taken by the employer
and all installments paid shall be considered rentals per agreement. 8
This Court has long been aware of the practice of vendors of personal
property of denominating a contract of sale on installment as one of
lease to prevent the ownership of the object of the sale from passing to
the vendee until and unless the price is fully paid. As this Court noted
in Vda. de Jose v. Barrueco: 9
SO ORDERED.
Petitioner appealed to the Court of Appeals. On the other hand, private
respondents filed a motion for execution pending appeal. In its
resolution of March 9, 1989, the Court of Appeals granted private
respondents' motion and, upon the filing of a bond, in the amount of
P70,000.00, it issued a writ of execution, pursuant to which the car was
delivered to private respondents on April 16, 1989. 6
On August 26, 1992, the Court of Appeals rendered its decision,
affirming in toto the decision of the trial court. Hence, the instant
petition for review on certiorari.
Petitioner contends that the Court of Appeals erred
(a) in disregarding the
admission in the pleadings as
to what documents contain
the terms of the parties'
agreement.
(b) in holding that the interest
stipulation in respondents'
Promissory Note was not valid
and binding.
(c) in holding that respondents
had fully paid their obligations.
It further argues that
On the assumption that the
Lease Agreement with option
to buy in this case may be
(
1) Exact fulfillment of the obligation, should the
vendee fail to pay;
(
Petitioner contends that the promissory note provides for such interest
payment. However, as the Court of Appeals held:
The promissory note in which the 2% monthly
interest on delayed payments appears does not
form part of the contract. There is no consideration
for the promissory note. There is nothing to show
that plaintiff advanced the purchase price of the
vehicle for Lantan so as to make the latter
indebted to the former for the amount stated in the
promissory note. Thus, as stated in the complaint:
"That sometime in January, 1980, defendant
Rolando Lantan entered into an agreement with
the plaintiff for the lease of a motor vehicle
supplied by the latter, with the option to purchase
at the end of the period of lease . . . ." In other
words, plaintiff did not buy the vehicle for Rolando
Lantan, advancing the purchase price for that
purpose. There is nothing in the complaint or in
the evidence to show such arrangement.
Therefore, there was no indebtedness secured by
a promissory note to speak of. There being no
consideration for the promissory note, the same,
including the penalty clause contained thereon,
has no binding effect. 21
There is no evidence that private respondents received the amount of
P60,639.00 indicated in the promissory note as its value. What was
proven below is the fact that private respondents received from
petitioner the 2-door Colt Lancer car which was valued at P60,000 and
for which private respondent Rolando Lantan paid monthly
amortizations of P1,010.65 through salary deductions.
Indeed, as already stated, private respondents' default in paying
installments was due to the cessation of operations of Elizalde Steel
Corporation, petitioner's sister company. Petitioner's acceptance of
payments made by private respondents through cash and checks
could have been impelled solely by petitioner's inability to deduct the
amortizations from private respondent Rolando Lantan's salary which
he stopped receiving when his employment was terminated in
September 1982. Apparently, to minimize the adverse consequences
of the termination of private respondent's employment, petitioner
accepted even late payments. That petitioner accepted payments from
private respondent Rolando Lantan more than two (2) years after the
latter's employment had been terminated constitutes a waiver of
petitioner's right to collect interest upon the delayed payments. The 2%
surcharge is not provided for in the agreement. Its collection by the
company would in fact run counter to the purpose of providing "added
emoluments" to its deserving employees. Consequently, the total
amount of P61,070.94 already paid to petitioner should be considered
payment of the full purchase price of the car or the total installments
paid.
Third. Private respondents presented evidence that they "felt bad, were
worried, embarrassed and mentally tortured" by the repossession of
the car. 22 This has not been rebutted by petitioner. There is thus a
factual basis for the award of moral damages. In addition, petitioner
acted in a wanton, fraudulent, reckless and oppressive manner in filing
the instant case, hence, the award of exemplary damages is
justified. 23 The award of attorney's fees is likewise proper considering
that private respondents were compelled to incur expenses to protect
their rights. 24
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with
costs against petitioner.1wphi1.nt
SO ORDERED.
PANGANIBAN, J.:
Art. 1592 of the Civil Code applies only to contracts of sale, and not to
contracts to sell or conditional sales where title passes to the vendee
only upon full payment of the purchase price. Furthermore, in order to
enforce the automatic forfeiture clause in a deed of conditional sale,
the vendors have the burden of proving a contractual breach on the
part of the vendee.
The Case
Before us is a Petition for Review assailing the June 13, 1997 Decision
of the Court of Appeals (CA) 1 which reversed and set aside the
October 10, 1994 Decision 2 of the Regional Trial Court (RTC) of
Quezon City, Branch 82. The dispositive portion of the assailed CA
Decision reads:
WHEREFORE, the decision appealed from is
REVERSED and SET ASIDE, and a new one is
entered (1) ordering [herein private respondent] to
pay the amount of [o]ne [m]illion [o]ne [h]undred
[n]inety [s]even [t]housand [p]esos
(P1,197,000.00) in favor of [herein petitioners],
with legal interest thereon from December 31,
1992; (2) and directing [herein petitioners] to
execute in favor of [herein respondent], upon
receipt of the aforesaid amount, the final and
absolute deed of sale of the subject property with
all the improvements. 3
Also assailed by petitioners is the August 21, 1997 CA Resolution
denying reconsideration.
The aforementioned RTC Decision, which was reversed and set aside
by the CA, disposed as follows:
WHEREFORE, premises considered, judgment is
hereby rendered declaring the aforesaid Deed of
Conditional Sale as automatically rescinded and
all payments made thereunder by the [private
respondent] to the [petitioners] as forfeited in favor
of the latter, by way of rentals and as liquidated
damages, as well as declaring all improvements
introduced on the property subject to the said
Deed of Condition[al] Sale to belong to the
[petitioners] without any right of reimbursement.
Further, the [private respondent] and all persons
claiming right under her are hereby ordered to
vacate the said property and to turnover
possession thereof to the [petitioners]. FINALLY,
the [private respondent] is hereby ordered to pay
to the [petitioners] the amount of P50,000.00 as
attorney's fees and for expenses of litigation, as
well as to pay the costs of the suit. The Writ of
Preliminary Injunction previously issued is hereby
ordered LIFTED and DISSOLVED, and the bond
posted for its issuance held liable for the
contract did not suffice, for it was not notarized. The CA also observed
that "the alleged breach of contract arising from the failure of the
vendee to pay the monthly installments for October and November
1990 within the stipulated time is rather slight and not substantial, and
to authorize the automatic rescission on account thereof will work
injustice to the other party, who has paid a total of P2,028,000.00 out
of a total obligation of P3,225,000.00. The rule is that rescission cannot
be availed of as to unjustly enrich one party."
The Issues
In their Memorandum before us, petitioners raise the following issues:
[the vendor] to the [vendee]; so that there was to be no actual sale until
and unless full payment was to be no actual sale until and unless full
payment was made."
Main Issue: Enforcement of the
Automatic Forfeiture Clause
As a general rule, a contract is the law between the parties. 15 Thus,
"from the moment the contract is perfected, the parties are bound not
only to the fulfillment of what has been expressly stipulated but also to
all consequences which, according to their nature, may be in keeping
with good faith, usage and law." 16 Also, "the stipulations of the contract
being the law between the parties, courts have no alternative but to
enforce them as they were agreed [upon] and written, there being no
law or public policy against the stipulated forfeiture of payments
already made." 17 However, it must be shown that private respondentvendee failed to perform her obligation, thereby giving petitionersvendors the right to demand the enforcement of the contract.
We concede the validity of the automatic forfeiture clause, which
deems any previous payments forfeited and the contract automatically
rescinded upon the failure of the vendee to pay three successive
monthly installments or any one yearend lump sum payment. However,
petitioners failed to prove the conditions that would warrant the
implementation of this clause.
Both the appellate and the trial courts agree on the following:
1. The Deed of Conditional Sale provided for automatic rescission in
case the vendee failed to pay three (3) successive monthly
installments or any one yearend lump sum payment within the
stipulated period therein.
2. Each monthly installment was due at the end of the month.
3. The installments for October and November 1990 were not paid.
4. The private respondent-vendee, Meden Arellano, went to the house
of the petitioners-vendors on December 30, 1990.
5. Arellano offered to pay P48,000 (total amount of installments due in
October, November, and December 1990) to Mary Gonzales, the
petitioner's maid, but the latter refused to accept it upon instruction of
petitioners.
6. Arellano returned the next day, December 31, 1990, and insisted on
paying, but again the maid refused to accept it.
7. Arellano proceeded to the barangay office around 10:00 a.m. to file
a case against petitioners for their refusal to accept the payments.
8. Four (4) days later, on January 4, 1991, private respondents filed a
Petition for Consignation.
9. Despite the said petition, the money was nevertheless not deposited
in court.
10. Negotiations between both parties went under way, culminating in
the vendee's filing a Motion to Deposit the entire balance due, which
was duly opposed by the vendor, and hence was denied by the trial
court.
No costs.
The Court notes that this case has been pending for more than ten
years. Both parties prayed for other reliefs that are just and equitable
under the premises. Hence, the rights of the parties over the subject
property shall be resolved to finally dispose of that issue in this case.
Considering that the Contract to Sell was not cancelled by the vendor,
Patricio, during his lifetime or by petitioner in accordance with R.A. No.
6552 when petitioner filed this case of unlawful detainer after 22 years
of continuous possession of the property by respondent who has paid
the substantial amount of P12,300 out of the purchase price
of P17,800, the Court agrees with the CA that it is only right and just to
allow respondent to pay her arrears and settle the balance of the
purchase price.
For respondents delay in the payment of the installments, the Court, in
its discretion, and applying Article 220914of the Civil Code, may award
interest at the rate of 6% per annum15 on the unpaid balance
considering that there is no stipulation in the Contract to Sell for such
interest. For purposes of computing the legal interest, the reckoning
period should be the filing of the complaint for unlawful detainer on
April 8, 1997.
Based on respondents evidence16 of payments made, the MTC found
that respondent paid a total of P12,300 out of the purchase price
of P17,800. Hence, respondent still has a balance of P5,500, plus legal
interest at the rate of 6% per annum on the unpaid balance starting
April 8, 1997.
The third issue is disregarded since petitioner assails an inexistent
ruling of the RTC on the lack of jurisdiction of the MTC over a
rescission case when the instant case he filed is for unlawful detainer.
WHEREFORE, the Decision of the Court of Appeals dated October 30,
2000 sustaining the dismissal of the unlawful detainer case by the RTC
is AFFIRMED with the following MODIFICATIONS:
1. Respondent Rufina Dela Cruz Vda. de Manzano shall pay
petitioner Manuel C. Pagtalunan the balance of the purchase
price in the amount of Five Thousand Five Hundred Pesos
(P5,500) plus interest at 6% per annum from April 8, 1997 up
to the finality of this judgment, and thereafter, at the rate of
12% per annum;
2. Upon payment, petitioner Manuel C. Pagtalunan shall
execute a Deed of Absolute Sale of the subject property and
deliver the certificate of title in favor of respondent Rufina
Dela Cruz Vda. de Manzano; and
3. In case of failure to pay within 60 days from finality of this
Decision, respondent Rufina Dela Cruz Vda. de Manzano
shall immediately vacate the premises without need of
further demand, and the downpayment and installment
payments of P12,300 paid by her shall constitute rental for
the subject property.
SO ORDERED.
G.R. No. 172036
DECISION
CARPIO, J.:
G.R. No. 172036 is a petition for review1 assailing the
Decision2 promulgated on 25 January 2006 as well as the
Resolution3 promulgated on 16 March 2006 of the Court of Appeals
(appellate court) in CA-G.R. CV No. 63651. The appellate court
reversed and set aside the decision of Branch 23 of the Regional Trial
Court of Trece Martires City, Cavite (trial court) in Civil Case No. TM622. The appellate court ordered Emerlita Dela Cruz (Dela Cruz) to
return to spouses Faustino and Josefina Garcia, spouses Meliton and
Helen Galvez, and Constancia Arcaira (collectively, petitioners) the
amount in excess of one-half percent of P1,500,000. Dela Cruzs codefendant, Diogenes Bartolome (Bartolome), did not incur any liability.
The appellate court narrated the facts as follows:
On May 28, 1993, plaintiffs spouses Faustino and Josefina Garcia and
spouses Meliton and Helen Galvez (herein appellees) and defendant
Emerlita dela Cruz (herein appellant) entered into a Contract to Sell
wherein the latter agreed to sell to the former, for Three Million One
Hundred Seventy Thousand Two Hundred Twenty (P3,170,220.00)
Pesos, five (5) parcels of land situated at Tanza, Cavite particularly
known as Lot Nos. 47, 2768, 2776, 2767, 2769 and covered by
Transfer Certificate of Title Nos. T-340674, T-340673, T-29028, T29026, T-29027, respectively. At the time of the execution of the said
contract, three of the subject lots, namely, Lot Nos. 2776, 2767, and
2769 were registered in the name of one Angel Abelida from whom
defendant allegedly acquired said properties by virtue of a Deed of
Absolute Sale dated March 31, 1989.
As agreed upon, plaintiffs shall make a down payment of Five Hundred
Thousand (P500,000.00) Pesos upon signing of the contract. The
balance of Two Million Six Hundred Seventy Thousand Two Hundred
Twenty (P2,670,220.00) Pesos shall be paid in three installments, viz:
Five Hundred Thousand (P500,000.00) Pesos on June 30, 1993; Five
Hundred Thousand (P500,000.00) Pesos on August 30, 1993; One
Million Six Hundred Seventy Thousand Two Hundred Twenty
(P1,670,220.00) Pesos on December 31, 1993.
On its due date, December 31, 1993, plaintiffs failed to pay the last
installment in the amount of One Million Six Hundred Seventy
Thousand Two Hundred Twenty (P1,670,220.00) Pesos. Sometime in
July 1995, plaintiffs offered to pay the unpaid balance, which had
already been delayed by one and [a] half year, which defendant
refused to accept. On September 23, 1995, defendant sold the same
parcels of land to intervenor Diogenes G. Bartolome for Seven Million
Seven Hundred Ninety Three Thousand (P7,793,000.00) Pesos.
SO ORDERED.5
Dela Cruz and Bartolome appealed from the judgment of the trial court.
The Decision of the Appellate Court
The appellate court reversed the trial courts decision and dismissed
Civil Case No. TM-622. Dela Cruzs obligation under the Contract to
Sell did not arise because of petitioners undue failure to pay in full the
agreed purchase price on the stipulated date. Moreover, judicial action
for the rescission of a contract is not necessary where the contract
provides that it may be revoked and cancelled for violation of any of its
terms and conditions. The dispositive portion of the appellate courts
decision reads:
WHEREFORE, in view of all the foregoing, the appealed decision of
the Regional Trial Court is hereby REVERSED and SET ASIDE and
Civil Case No. TM-622 is, consequently, DISMISSED. Defendant is
however ordered to return to plaintiffs the amount in excess of one-half
(1/2%) percent of One Million Five Hundred Thousand (P1,500,000.00)
Pesos which was earlier paid by plaintiffs.
SO ORDERED.6
The appellate court likewise resolved to deny petitioners Motion for
Reconsideration for lack of merit.7
Hence, this petition.
Issues
The Court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.
Failure on the part of the vendees to comply with the herein stipulation
as to the terms of payment shall cause the rescission of this contract
and the payments made shall be returned to the vendees subject
however, to forfeiture in favor of the Vendor equivalent to 1/2% of the
total amount paid.
xxx
It is hereby agreed and covenanted that possession shall be retained
by the VENDOR until a Deed of Absolute Sale shall be executed by
her in favor of the Vendees. Violation of this provision shall
authorize/empower the VENDOR [to] demolish any
construction/improvement without need of judicial action or court order.
That upon and after the full payment of the balance, a Deed of
Absolute Sale shall be executed by the Vendor in favor of the Vendees.
That the duplicate original of the owners copy of the Transfer
Certificate of Title of the above subject parcels of land shall remain in
the possession of the Vendor until the execution of the Deed of
Absolute Sale.9
Contracts are law between the parties, and they are bound by its
stipulations. It is clear from the above-quoted provisions that the
parties intended their agreement to be a Contract to Sell: Dela Cruz
retains ownership of the subject lands and does not have the obligation
to execute a Deed of Absolute Sale until petitioners payment of the full
purchase price. Payment of the price is a positive suspensive
condition, failure of which is not a breach but an event that prevents
the obligation of the vendor to convey title from becoming effective.
Strictly speaking, there can be no rescission or resolution of an
obligation that is still non-existent due to the non-happening of the
suspensive condition.10 Dela Cruz is thus not obliged to execute a
Deed of Absolute Sale in petitioners favor because of petitioners
failure to make full payment on the stipulated date.
We ruled thus in Pangilinan v. Court of Appeals:11
Article 1592 of the New Civil Code, requiring demand by suit or by
notarial act in case the vendor of realty wants to rescind does not apply
to a contract to sell but only to contract of sale. In contracts to sell,
where ownership is retained by the seller and is not to pass until the
full payment, such payment, as we said, is a positive suspensive
condition, the failure of which is not a breach, casual or serious, but
simply an event that prevented the obligation of the vendor to convey
title from acquiring binding force. To argue that there was only a casual
breach is to proceed from the assumption that the contract is one of
absolute sale, where non-payment is a resolutory condition, which is
not the case.
The applicable provision of law in instant case is Article 1191 of the
New Civil Code which provides as follows:
Pursuant to the above, the law makes it available to the injured party
alternative remedies such as the power to rescind or enforce fulfillment
of the contract, with damages in either case if the obligor does not
comply with what is incumbent upon him. There is nothing in this law
which prohibits the parties from entering into an agreement that a
violation of the terms of the contract would cause its cancellation even
without court intervention. The rationale for the foregoing is that in
contracts providing for automatic revocation, judicial intervention is
necessary not for purposes of obtaining a judicial declaration
rescinding a contract already deemed rescinded by virtue of an
agreement providing for rescission even without judicial intervention,
but in order to determine whether or not the rescission was proper.
Where such propriety is sustained, the decision of the court will be
merely declaratory of the revocation, but it is not in itself the revocatory
act. Moreover, the vendors right in contracts to sell with reserved title
to extrajudicially cancel the sale upon failure of the vendee to pay the
stipulated installments and retain the sums and installments already
received has long been recognized by the well-established doctrine of
39 years standing. The validity of the stipulation in the contract
providing for automatic rescission upon non-payment cannot be
doubted. It is in the nature of an agreement granting a party the right to
rescind a contract unilaterally in case of breach without need of going
to court. Thus, rescission under Article 1191 was inevitable due to
petitioners failure to pay the stipulated price within the original period
fixed in the agreement.
Petitioners justify the delay in payment by stating that they had notice
that Dela Cruz is not the owner of the subject land, and that they took
pains to rectify the alleged defect in Dela Cruzs title. Be that as it may,
Angel Abelidas (Abelida) affidavit12 confirming the sale to Dela Cruz
only serves to strengthen Dela Cruzs claim that she is the absolute
owner of the subject lands at the time the Contract to Sell between
herself and petitioners was executed. Dela Cruz did not conceal
from petitioners that the title to Lot Nos. 2776, 2767 and 2769 still
remained under Abelidas name, and the Contract to Sell13 even
provided that petitioners should shoulder the attendant expenses
for the transfer of ownership from Abelida to Dela Cruz.
The trial court erred in applying R.A. 6552,14 or the Maceda Law, to the
present case. The Maceda Law applies to contracts of sale of real
estate on installment payments, including residential condominium
apartments but excluding industrial lots, commercial buildings and
sales to tenants. The subject lands, comprising five (5) parcels and
aggregating 69,028 square meters, do not comprise residential real
estate within the contemplation of the Maceda Law.15 Moreover, even if
we apply the Maceda Law to the present case, petitioners offer of
payment to Dela Cruz was made a year and a half after the stipulated
date. This is beyond the sixty-day grace period under Section 4 of the
Maceda Law.16 Petitioners still cannot use the second sentence of
Section 4 of the Maceda Law against Dela Cruz for Dela Cruzs
alleged failure to give an effective notice of cancellation or demand for
rescission because Dela Cruz merely sent the notice to the address
supplied by petitioners in the Contract to Sell.
It is undeniable that petitioners failed to pay the balance of the
purchase price on the stipulated date of the Contract to Sell. Thus,
Dela Cruz is within her rights to sell the subject lands to Bartolome.
Neither Dela Cruz nor Bartolome can be said to be in bad faith.
WHEREFORE, we DENY the petition. We AFFIRM in toto the Court of
Appeals Decision promulgated on 25 January 2006 as well as the
Resolution promulgated on 16 March 2006 in CA-G.R. CV No. 63651.
Costs against petitioners.
SO ORDERED.
G.R. No. 146839
5. That the VENDEE has the option to rescind the sale. In the event
the VENDEE exercises his option to rescind the herein Conditional
Deed of Sale, the VENDEE shall notify the VENDOR by way of a
written notice relinquishing his rights over the property. The VENDEE
shall then be reimbursed by the VENDOR the sum of FIVE HUNDRED
THOUSAND PESOS (P500,000.00) representing the downpayment,
interest free, payable but contingent upon the event that the VENDOR
shall have been able to sell the property to another party.8
In accordance with the Conditional Deed of Sale, Rodriguez
purportedly secured the necessary surveys and plans and through his
efforts, the property was reclassified from agricultural land into
residential land which he claimed substantially increased the propertys
value. He likewise alleged that he actively negotiated for the road right
of way as stipulated in the contract.9
Rodriguez further claimed that on August 31, 1990 the spouses
Catungal requested an advance ofP5,000,000.00 on the purchase
price for personal reasons. Rodriquez allegedly refused on the ground
that the amount was substantial and was not due under the terms of
their agreement. Shortly after his refusal to pay the advance, he
purportedly learned that the Catungals were offering the property for
sale to third parties.10
During the pendency of the case with the Court of Appeals, Agapita
Catungal passed away and thus, her husband, Jose, filed on February
17, 1999 a motion for Agapitas substitution by her surviving children.46
On August 8, 2000, the Court of Appeals rendered a Decision in the
consolidated cases CA-G.R. CV No. 40627 and CA-G.R. SP No.
27565,47 affirming the trial courts Decision.
In a Motion for Reconsideration dated August 21, 2000,48 counsel for
the Catungals, Atty. Borromeo, argued for the first time that paragraphs
1(b) and 549 of the Conditional Deed of Sale, whether taken separately
or jointly, violated the principle of mutuality of contracts under Article
1308 of the Civil Code and thus, said contract was void ab initio. He
adverted to the cases mentioned in his various citations of authorities
to support his argument of nullity of the contract and his position that
this issue may be raised for the first time on appeal.
Meanwhile, a Second Motion for Substitution50 was filed by Atty.
Borromeo in view of the death of Jose Catungal.
In a Resolution dated January 30, 2001, the Court of Appeals allowed
the substitution of the deceased Agapita and Jose Catungal by their
surviving heirs and denied the motion for reconsideration for lack of
merit
Hence, the heirs of Agapita and Jose Catungal filed on March 27, 2001
the present petition for review,51 which essentially argued that the Court
of Appeals erred in not finding that paragraphs 1(b) and/or 5 of the
Conditional Deed of Sale, violated the principle of mutuality of
contracts under Article 1308 of the Civil Code. Thus, said contract was
supposedly void ab initio and the Catungals rescission thereof was
superfluous.
In his Comment,52 Rodriguez highlighted that (a) petitioners were
raising new matters that cannot be passed upon on appeal; (b) the
validity of the Conditional Deed of Sale was already admitted and
petitioners cannot be allowed to change theories on appeal; (c) the
questioned paragraphs of the Conditional Deed of Sale were valid; and
(d) petitioners were the ones who committed fraud and breach of
contract and were not entitled to relief for not having come to court with
clean hands.
The Court gave due course to the Petition53 and the parties filed their
respective Memoranda.
The issues to be resolved in the case at bar can be summed into two
questions:
I. Are petitioners allowed to raise their theory of nullity of the
Conditional Deed of Sale for the first time on appeal?
II. Do paragraphs 1(b) and 5 of the Conditional Deed of Sale
violate the principle of mutuality of contracts under Article
1308 of the Civil Code?
On petitioners change of theory
Petitioners claimed that the Court of Appeals should have reversed the
trial courts Decision on the ground of the alleged nullity of paragraphs
1(b) and 5 of the Conditional Deed of Sale notwithstanding that the
same was not raised as an error in their appellants brief. Citing
Catholic Bishop of Balanga v. Court of Appeals,54 petitioners argued in
the Petition that this case falls under the following exceptions:
rescind the contract for Rodriguezs breach of the same under Article
1191 of the Civil Code.
Verily, the first time petitioners raised their theory of the nullity of the
Conditional Deed of Sale in view of the questioned provisions was only
in their Motion for Reconsideration of the Court of Appeals Decision,
affirming the trial courts judgment. The previous filing of various
citations of authorities by Atty. Borromeo and the Court of Appeals
resolutions noting such citations were of no moment. The citations of
authorities merely listed cases and their main rulings without even any
mention of their relevance to the present case or any prayer for the
Court of Appeals to consider them.1wphi1 In sum, the Court of
Appeals did not err in disregarding the citations of authorities or in
denying petitioners motion for reconsideration of the assailed August
8, 2000 Decision in view of the proscription against changing legal
theories on appeal.
Ruling on the questioned provisions of the Conditional Deed of Sale
Even assuming for the sake of argument that this Court may overlook
the procedural misstep of petitioners, we still cannot uphold their
belatedly proffered arguments.
At the outset, it should be noted that what the parties entered into is a
Conditional Deed of Sale, whereby the spouses Catungal agreed to
sell and Rodriguez agreed to buy Lot 10963 conditioned on the
payment of a certain price but the payment of the purchase price was
additionally made contingent on the successful negotiation of a road
right of way. It is elementary that "[i]n conditional obligations, the
acquisition of rights, as well as the extinguishment or loss of those
already acquired, shall depend upon the happening of the event which
constitutes the condition."60
Petitioners rely on Article 1308 of the Civil Code to support their
conclusion regarding the claimed nullity of the aforementioned
provisions. Article 1308 states that "[t]he contract must bind both
contracting parties; its validity or compliance cannot be left to the will of
one of them."
Article 1182 of the Civil Code, in turn, provides:
Art. 1182. When the fulfillment of the condition depends upon the sole
will of the debtor, the conditional obligation shall be void. If it depends
upon chance or upon the will of a third person, the obligation shall take
effect in conformity with the provisions of this Code.
In the past, this Court has distinguished between a condition imposed
on the perfection of a contract and a condition imposed merely on the
performance of an obligation. While failure to comply with the first
condition results in the failure of a contract, failure to comply with the
second merely gives the other party the option to either refuse to
proceed with the sale or to waive the condition.61 This principle is
evident in Article 1545 of the Civil Code on sales, which provides in
part:
Art. 1545. Where the obligation of either party to a contract of sale is
subject to any condition which is not performed, such party may refuse
to proceed with the contract or he may waive performance of the
condition x x x.
Paragraph 1(b) of the Conditional Deed of Sale, stating that
respondent shall pay the balance of the purchase price when he has
successfully negotiated and secured a road right of way, is not a
condition on the perfection of the contract nor on the validity of the
entire contract or its compliance as contemplated in Article 1308. It is a
condition imposed only on respondents obligation to pay the
remainder of the purchase price. In our view and applying Article 1182,
such a condition is not purely potestative as petitioners contend. It is
not dependent on the sole will of the debtor but also on the will of third
persons who own the adjacent land and from whom the road right of
way shall be negotiated. In a manner of speaking, such a condition is
likewise dependent on chance as there is no guarantee that
respondent and the third party-landowners would come to an
agreement regarding the road right of way. This type of mixed condition
is expressly allowed under Article 1182 of the Civil Code.
Analogous to the present case is Romero v. Court of
Appeals,62 wherein the Court interpreted the legal effect of a condition
in a deed of sale that the balance of the purchase price would be paid
by the vendee when the vendor has successfully ejected the informal
settlers occupying the property. In Romero, we found that such a
condition did not affect the perfection of the contract but only imposed
a condition on the fulfillment of the obligation to pay the balance of the
purchase price, to wit:
From the moment the contract is perfected, the parties are bound not
only to the fulfillment of what has been expressly stipulated but also to
all the consequences which, according to their nature, may be in
keeping with good faith, usage and law. Under the agreement, private
respondent is obligated to evict the squatters on the property. The
ejectment of the squatters is a condition the operative act of which sets
into motion the period of compliance by petitioner of his own
obligation, i.e., to pay the balance of the purchase price. Private
respondent's failure "to remove the squatters from the property" within
the stipulated period gives petitioner the right to either refuse to
proceed with the agreement or waive that condition in consonance with
Article 1545 of the Civil Code. This option clearly belongs to petitioner
and not to private respondent.
We share the opinion of the appellate court that the undertaking
required of private respondent does not constitute a "potestative
condition dependent solely on his will" that might, otherwise, be void in
accordance with Article 1182 of the Civil Code but a "mixed" condition
"dependent not on the will of the vendor alone but also of third persons
like the squatters and government agencies and personnel
concerned." We must hasten to add, however, that where the so-called
"potestative condition" is imposed not on the birth of the obligation but
on its fulfillment, only the condition is avoided, leaving unaffected the
obligation itself.63 (Emphases supplied.)
From the provisions of the Conditional Deed of Sale subject matter of
this case, it was the vendee (Rodriguez) that had the obligation to
successfully negotiate and secure the road right of way. However, in
the decision of the trial court, which was affirmed by the Court of
Appeals, it was found that respondent Rodriguez diligently exerted
efforts to secure the road right of way but the spouses Catungal, in bad
faith, contributed to the collapse of the negotiations for said road right
of way. To quote from the trial courts decision:
It is therefore apparent that the vendees obligations (sic) to pay the
balance of the purchase price arises only when the road-right-of-way to
the property shall have been successfully negotiated, secured and
provided. In other words, the obligation to pay the balance is
conditioned upon the acquisition of the road-right-of-way, in
accordance with paragraph 2 of Article 1181 of the New Civil Code.
Accordingly, "an obligation dependent upon a suspensive condition
cannot be demanded until after the condition takes place because it is
only after the fulfillment of the condition that the obligation arises."
(Javier v[s] CA 183 SCRA) Exhibits H, D, P, R, T, FF and JJ show that
plaintiff [Rodriguez] indeed was diligent in his efforts to negotiate for a
road-right-of-way to the property. The written offers, proposals and
follow-up of his proposals show that plaintiff [Rodriguez] went all out in
his efforts to immediately acquire an access road to the property, even
going to the extent of offering P3,000.00 per square meter for the road
lots (Exh. Q) from the original P550.00 per sq. meter. This Court also
notes that defendant (sic) [the Catungals] made misrepresentation in
the negotiation they have entered into with plaintiff [Rodriguez]. (Exhs.
F and G) The misrepresentation of defendant (sic) [the Catungals] as
to the third lot (Lot 10986) to be part and parcel of the subject property
[(]Lot 10963) contributed in defeating the plaintiffs [Rodriguezs] effort
in acquiring the road-right-of-way to the property. Defendants [the
Catungals] cannot now invoke the non-fulfillment of the condition in the
contract as a ground for rescission when defendants [the Catungals]
themselves are guilty of preventing the fulfillment of such condition.
From the foregoing, this Court is of the considered view that rescission
of the conditional deed of sale by the defendants is without any legal or
factual basis.64 x x x. (Emphases supplied.)
In all, we see no cogent reason to disturb the foregoing factual findings
of the trial court.
Furthermore, it is evident from the language of paragraph 1(b) that the
condition precedent (for respondents obligation to pay the balance of
the purchase price to arise) in itself partly involves an obligation to do,
i.e., the undertaking of respondent to negotiate and secure a road right
of way at his own expense.65 It does not escape our notice as well, that
far from disclaiming paragraph 1(b) as void, it was the Catungals
contention before the trial court that said provision should be read in
relation to paragraph 1(c) which stated:
c. That the access road or Road Right of Way leading to Lot 10963
shall be the responsibility of the VENDEE to secure and any or all cost
relative to the acquisition thereof shall be borne solely by the VENDEE.
He shall, however, be accorded with enough time necessary for the
success of his endeavor, granting him a free hand in negotiating for the
passage.66 (Emphasis supplied.)
The Catungals interpretation of the foregoing stipulation was that
Rodriguezs obligation to negotiate and secure a road right of way was
one with a period and that period, i.e., "enough time" to negotiate, had
already lapsed by the time they demanded the payment
of P5,000,000.00 from respondent. Even assuming arguendo that the
Catungals were correct that the respondents obligation to negotiate a
road right of way was one with an uncertain period, their rescission of
the Conditional Deed of Sale would still be unwarranted. Based on
their own theory, the Catungals had a remedy under Article 1197 of the
Civil Code, which mandates:
Art. 1197. If the obligation does not fix a period, but from its nature and
the circumstances it can be inferred that a period was intended, the
courts may fix the duration thereof.
The courts shall also fix the duration of the period when it depends
upon the will of the debtor.
In every case, the courts shall determine such period as may under the
circumstances have been probably contemplated by the parties. Once
fixed by the courts, the period cannot be changed by them.
What the Catungals should have done was to first file an action in court
to fix the period within which Rodriguez should accomplish the
successful negotiation of the road right of way pursuant to the above
quoted provision. Thus, the Catungals demand for Rodriguez to make
an additional payment of P5,000,000.00 was premature and
Rodriguezs failure to accede to such demand did not justify the
rescission of the contract.
In any event, even if we assume for the sake of argument that the
grant to Rodriguez of an option to rescind, in the manner provided for
in the contract, is tantamount to a potestative condition, not being a
condition affecting the perfection of the contract, only the said condition
would be considered void and the rest of the contract will remain valid.
In Romero, the Court observed that "where the so-called potestative
condition is imposed not on the birth of the obligation but on its
fulfillment, only the condition is avoided, leaving unaffected the
obligation itself."71
It cannot be gainsaid that "contracts have the force of law between the
contracting parties and should be complied with in good faith."72 We
have also previously ruled that "[b]eing the primary law between the
parties, the contract governs the adjudication of their rights and
obligations. A court has no alternative but to enforce the contractual
stipulations in the manner they have been agreed upon and
written."73 We find no merit in petitioners contention that their parents
were merely "duped" into accepting the questioned provisions in the
Conditional Deed of Sale. We note that although the contract was
between Agapita Catungal and Rodriguez, Jose Catungal nonetheless
signed thereon to signify his marital consent to the same. We concur
with the trial courts finding that the spouses Catungals claim of being
misled into signing the contract was contrary to human experience and
conventional wisdom since it was Jose Catungal who was a practicing
lawyer while Rodriquez was a non-lawyer.74 It can be reasonably
presumed that Atty. Catungal and his wife reviewed the provisions of
the contract, understood and accepted its provisions before they
affixed their signatures thereon.
After thorough review of the records of this case, we have come to the
conclusion that petitioners failed to demonstrate that the Court of
Appeals committed any reversible error in deciding the present
controversy. However, having made the observation that it was
desirable for the Catungals to file a separate action to fix the period for
respondent Rodriguezs obligation to negotiate a road right of way, the
Court finds it necessary to fix said period in these proceedings. It is but
equitable for us to make a determination of the issue here to obviate
further delay and in line with the judicial policy of avoiding multiplicity of
suits.
If still warranted, Rodriguez is given a period of thirty (30) days from
the finality of this decision to negotiate a road right of way. In the event
no road right of way is secured by Rodriquez at the end of said period,
BELLOSILLO, J.:
This is a review on certiorari of the Decision of the Court of Appeals
affirming that of the Regional Trial Court of Makati which ordered
petitioner to pay private respondent P32,943.00 as reimbursement for
taxes paid, P7,500.00 as attorney's fees and the costs of suit. 1
Sometime in June of 1987 Harrison Motors Corporation through its
president, Renato Claros, sold two (2) Isuzu Elf trucks to private
respondent Rachel Navarro, owner of RN Freight Lines, a franchise
holder operating and maintaining a fleet of cargo trucks all over Luzon.
Petitioner, a known importer, assembler and manufacturer, assembled
the two (2) trucks using imported component parts. 2 Prior to the sale,
Renato Claros represented to private respondent that all the BIR taxes
and customs duties for the parts used on the two (2) trucks had been
paid for. 3
On 10 September 1987 the Bureau of Internal Revenue (BIR) and the
Land Transportation Office (LTO) entered into a Memorandum of
Agreement (MOA) which provided that prior to registration in the LTO
of any assembled or re-assembled motor vehicle which used imported
It is also quite obvious that as between petitioner, who is the importerassembler/manufacturer, and private respondent, who is merely the
buyer, it is petitioner which has the obligation to pay taxes to the BIR
and the BOC. Petitioner would be unjustly enriched if private
respondent should be denied reimbursement. 24 It would inequitably
amass profits from selling assembled trucks even if it did not pay the
taxes due on its imported spare parts. Imposing the tax burden on
private respondent would only encourage the proliferation of smugglers
who scheme to evade taxes by passing on their tax obligations to their
unsuspecting buyers.
In a last ditch effort to exempt itself from liability, petitioner claims that it
had paid the taxes due on the imported parts otherwise it would not
have been able to obtain their release from the BOC and to register the
vehicles with the LTO.
Non-sequitur. The fact that petitioner was able to secure the release of
the parts from customs and to register the assembled trucks with the
LTO does not necessarily mean that all taxes and customs duties were
legally settled. As a matter of fact, the provisions of the two (2)
Memoranda of Agreement clearly establish that the government is
aware of the widespread registration of assembled motor vehicles with
the LTO even if the taxes due on their imported component parts
remain unpaid. Paragraph 1 of the 10 September 1987 MOA states
The LTO shall make as one of the requirements for the
registration of motor vehicles that were assembled or reassembled using imported parts, the payment to the BIR of
the taxes required under existing laws.
The same requirement shall be imposed with respect to the
renewal of the registration of such motor vehicles had they
been registered or their registration been renewed in the
past without the payment of the required taxes.
While par. 1 of the 16 June 1988 MOA states
The LTO shall make as one of the requirements for the
registration of motor vehicles that were assembled or reassembled by non-BOI licensed assemblers using imported
component parts, the payment to the BIR and the BOC of
taxes and duties required under existing laws, rules and
regulations;
The same requirement shall be imposed with respect to the
renewal of the registration of such motor vehicles even if
they were already registered or their registration had been
renewed in the past without the payment of the required
taxes.
Obviously, the two (2) Memoranda of Agreement were executed to
prevent the anomalous circumstance, as in the case at bar, where
assembled vehicles are registered with the LTO even if taxes and
customs duties remain unpaid.
Besides, petitioner's allegation that it already paid the BIR taxes and
customs duties is highly doubtful. This entire controversy would have
been avoided had petitioner simply furnished private respondent with
the receipts evidencing payment of BIR taxes and customs duties. If
only private respondent had the receipts to prove payment of such
assessments then she would have easily secured the release of her
two (2) Elf trucks. But petitioner arbitrarily and unjustly denied private
respondent's demands. Instead, petitioner obstinately insisted that it
was no longer concerned with the problem involving the two (2) trucks
since it no longer owned the vehicles after the consummation of the
sale.
CUEVAS, J.:
This is a Petition for Review on certiorari of the Decision of the then
Court of Appeals (now the Intermediate Appellate Court) and of its
Resolution denying petitioners' Motion for Reconsideration, in CA G.R.
No. 41953-R, which was an appeal from the judgment of the Court of
First Instance of Rizal in Civil Case No. 9014 entitled "Maria Luisa de
Leon Escaler, et al vs. Jose L. Reynoso and Africa Reynoso."
The complaint among others, alleged that the Order issued in Case
No. 4252 which cancelled the title of Angelina C. Reynoso and all
subsequent Transfer Certificates of Title derived and/or emanating
therefrom and which includes the titles of petitioners, is now final, and
by reason thereof petitioners lost their right over the property sold; and
that in said Case No. 4252, the respondents were summoned and/or
given their day in court at the instance of the petitioners. 3
The respondents, as defendants, filed their answer alleging, among
others, by way of affirmative defenses that "the cause of action, if any,
of plaintiffs against defendants have been fully adjudicated in Case No.
4252 when plaintiffs failed to file a third-party complaint against
defendants." 4
On August 18, 1967, petitioners, as plaintiffs, filed a Motion for
Summary Judgment, alleging the facts already averred in the
complaint, and further alleging that the defendants were summoned
and were given their day in court at the instance of plaintiffs in Case
No. 4252. In support of their said motion, the plaintiffs attached the
affidavit of Atty. Alberto R. Avancea who had represented the plaintiffs
in Case No. 4252 and had filed a joint opposition in behalf of all the
vendees. The pertinent portion of that affidavit, states
4. That he has furnished a copy of said joint
opposition to Africa Reynoso, wife of Jose L.
Reynoso, at her given address at c/o Antipolo
Enterprises, Antipolo, Rizal and the latter had
received the same, as evidenced by the
photostatic copy of the Registry Return Receipt
thereto affixed as Annex "C-l";
Article 1548, in relation to Articles 1558. and 1559 of the New Civil
Code reads as follows:
On September 27, 1967, judgment was rendered by the trial court, the
pertinent portion of which reads
Considering the foregoing motion for summary
judgment and it appearing that the defendants
under a Deed of Absolute Sale (Annex "C") have
expressly warranted their valid title and ownership
of the said parcel of land and further warranted to
defend said property from any and all claims of
any persons whomever in favor of plaintiffs; that
the said warranties were violated when on June
10, 1964, an Order was promulgated by the Court
of First Instance of Rizal in Case No. 4252
(Related to LRC Case No. 1559, LRC Record No.
N13293). In Re: Petition for Cancellation of
Original Registration, etc., covering the parcel of
land in question; that said order of June 10, 1964
has become final and executory there being no
appeal interposed thereto and defendants were
summoned and were given a day in court at the
instance of the plaintiffs in Case No. 4252, the
Court hereby grants the motion for summary
judgment, and hereby orders the defendants to
jointly and severally return to the plaintiffs Maria
Luisa de Leon Escaler and Ernesto Escaler,
Cecilia J. Roxas and Pedro Roxas, the value of
the property sold to them at the time of eviction
which is not to be less than P5,500.00 to
PANGANIBAN, J.:
Is the seller's failure to eject the lessees from a lot that is the subject of
a contract of sale with assumption of mortgage a ground (1) for
rescission of such contract and (2) for a return by the mortgagee of the
amortization payments made by the buyer who assumed such
mortgage?
Petitioner posits an affirmative answer to such question in this petition
for review on certiorari of the March 27, 1995 Decision 1 of the Court of
Appeals, Eighth Division, in CA-G.R. CV Case No. 32298 upholding
the validity of the contract of sale with assumption of mortgage and
absolving the mortgagee from the liability of returning the mortgage
payments already made. 2
The Facts
Petitioner Power Commercial & Industrial Development Corporation,
an industrial asbestos manufacturer, needed a bigger office space and
warehouse for its products. For this purpose, on January 31, 1979, it
entered into a contract of sale with the spouses Reynaldo and Angelita
R. Quiambao, herein private respondents. The contract involved a 612sq. m. parcel of land covered by Transfer Certificate of Title No. S-6686
located at the corner of Bagtican and St. Paul Streets, San Antonio
Village, Makati City. The parties agreed that petitioner would pay
private respondents P108,000.00 as down payment, and the balance
of P295,000.00 upon the execution of the deed of transfer of the title
over the property. Further, petitioner assumed, as part of the purchase
price, the existing mortgage on the land. In full satisfaction thereof, he
paid P79,145.77 to Respondent Philippine National Bank ("PNB" for
brevity).
On March 17, 1982, petitioner filed Civil Case No. 45217 against
respondent spouses for rescission and damages before the Regional
Trial Court of Pasig, Branch 159. Then, in its reply to PNB's letter of
February 19, 1982, petitioner demanded the return of the payments it
made on the ground that its assumption of mortgage was never
approved. On May 31, 1983, 8 while this case was pending, the
mortgage was foreclosed. The property was subsequently bought by
PNB during the public auction. Thus, an amended complaint was filed
impleading PNB as party defendant.
On July 12, 1990, the trial court 9 ruled that the failure of respondent
spouses to deliver actual possession to petitioner entitled the latter to
rescind the sale, and in view of such failure and of the denial of the
latter's assumption of mortgage, PNB was obliged to return the
payments made by the latter. The dispositive portion of said decision
states: 10
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari assailing the
Decision2 dated November 29, 2000 and Resolution3dated April 26,
2001, both issued by the Court of Appeals in CA-G.R. CV No. 40419,
entitled "Filemon Flores vs. Supercars Management & Development
Corporation, Mamerto Catley, Pablito Marquez, and Rizal Commercial
Banking Corporation."
In the second week of December 1988, Filemon Flores, respondent,
purchased from Supercars Management and Development
Corporation, petitioner, an Isuzu Carter Crew Cab for P212,000.00
payable monthly with a down payment equivalent to 30% of the price
or P63,600.00. The balance was to be financed by the Rizal
Commercial Banking Corporation (RCBC). The sale was coursed
through Pablito Marquez, petitioner's salesman.
Upon delivery of the vehicle on December 27, 1988, respondent paid
petitioner the 30% down payment, plus premium for the vehicle's
comprehensive insurance policy amounting to P7,374.80. The RCBC
financed the balance of the purchase price. Its payment was secured
by a chattel mortgage of the same vehicle.
A day after the vehicle was delivered, respondent used it for his
family's trip to Bauang, La Union. While traversing the national highway
in Tarlac, Tarlac, the fan belt of the vehicle snapped. Then its brakes
hardened after several stops and did not function properly; the heater
plug did not also function; the engine could not start; and the fuel
consumption increased.4
Upon their return to Manila in the first week of January 1989,
respondent complained to petitioner about the defects of the vehicle.
Marquez then had the vehicle repaired and returned it to respondent
that same day, assuring the latter that it was already in good condition.
But after driving the vehicle for a few days, the same defects
resurfaced, prompting respondent to send petitioner a letter dated
January 30, 1989 rescinding the contract of sale and returning the
vehicle due to breach of warranty against hidden defects. A copy of the
letter was furnished RCBC.
xxx
"It is with respect to appellants Catley and Marquez' liability
that we are minded to modify the (appealed) Decision. The
two being mere employees (of appellant Supercars
Management and Development Corporation), they cannot be
held liable to refund the amount claimed by Flores. Nor can
they be made liable for damages and attorney's fees, there
being no clear evidence that they had a hand in giving rise
thereto.
x x x"17
It is well within respondent's right to recover damages from petitioner
who committed a breach of warranty against hidden defects. Article
1599 of the Civil Code partly provides:
"Article 1599. Where there is a breach of warranty by the
seller, the buyer may, at his election:
xxx
(4) Rescind the contract of sale and refuse to receive the
goods, or if the goods have already been received, return
them or offer to return them to the seller and recover the
price or any part thereof which has been paid.
When the buyer has claimed and been granted a remedy in
anyone of these ways, no other remedy can thereafter be
granted, without prejudice to the provisions of the second
paragraph of Article 1191.
x x x." (Underscoring supplied)
Petitioner's contention that under Article 1191 of the Civil Code,
rescission can no longer be availed of as the vehicle was already in the
hands of an innocent purchaser for value lacks merit. Rescission is
proper if one of the parties to a contract commits a substantial breach
of its provisions. It creates an obligation to return the object of the
contract. It can be carried out only when the one who demands
rescission can return whatever he may be obliged to restore.
Rescission abrogates the contract from its inception and requires a
mutual restitution of the benefits received.18 Petitioner is thus
mandated by law to give back to respondent the purchase price upon
his return of the vehicle. Records show that at the time respondent
opted to rescind the contract, the vehicle was still in his possession. He
returned it to petitioner who, without objection, accepted it. Accordingly,
the 30% down payment equivalent to P63,600.00, plus the premium for
the comprehensive insurance amounting to P7,374.80 paid by
respondent should be returned by petitioner.
As further stated by the Court of Appeals:
"Appellant's invocation of Article 1191 of the Civil Code in
support of his argument that as the vehicle had been sold to
a third party, rescission can no longer ensue is misplaced.
Date
June 23, 1993
Amount
P 7,260.00
21420
21437
21722
22048
22054
6,990.00 consolidation of the case with Civil Case No. 1026-M-93. On May 13,
1994, the petitioner filed its Answer with Counterclaim, alleging that the
41,510.00 death of the respondents animals was due to the widespread
pestilence in their farm. The petitioner, likewise, maintained that it
45,185.00 received information that the respondents were in an unstable financial
condition and even sold their animals to settle their obligations from
44,540.00 other enraged and insistent creditors. It, moreover, theorized that it
was the respondents who mixed poison to its feeds to make it appear
45,246.00 that the feeds were contaminated.
22186
August 2, 1993
84,900.00
A joint trial thereafter ensued.
Total:
P275,631.00 During the hearing, the petitioner presented Rufino Arenas, Nutrimix
=========== Assistant Manager, as its lone witness. He testified that on the first
week of August 1993, Nutrimix President Efren Bartolome met the
respondents to discuss the possible settlement of their unpaid account.
respondents incurred an aggregate unsettled account with the
The said respondents still pleaded to the petitioner to continue to
petitioner in the amount of P766,151.00. The breakdown of the unpaid
supply them with animal feeds because their livestock were
obligation is as follows:
supposedly suffering from a disease.6
Bank
Check
Number
Due Date
United Coconut
Planters Bank
BTS052084
-do-
BTS052087
-do-
BTS052091
-do-
BTS062721
August 4, 1993
47,860.00 It appears that in the morning of July 26, 1993, three various kinds of
animal feeds, numbering 130 bags, were delivered to the residence of
-doBTS062720
August 5, 1993
43,780.00
the respondents in Sta. Rosa, Marilao, Bulacan. The deliveries came
-doBTS062774
August 6, 1993
15,000.00 at about 10:00 a.m. and were fed to the animals at approximately 1:30
p.m. at the respondents farm in Balasing, Sta. Maria, Bulacan. At
about 8:30 p.m., respondent Maura Evangelista received a radio
September 11,
-doBTS062748
47,180.00 message from a worker in her farm, warning her that the chickens
1993
were dying at rapid intervals. When the respondents arrived at their
September 11,
farm, they witnessed the death of 18,000 broilers, averaging 1.7 kilos
-doBTS062763
48,440.00
1993
in weight, approximately forty-one to forty-five days old. The broilers
then had a prevailing market price of P46.00 per kilo.9
September 18,
-doBTS062766
49,460.00
1993
On July 27, 1993, the respondents received another delivery of 160
bags of animal feeds from the petitioner, some of which were
distributed to the contract growers of the respondents. At that time,
Total:
P490,520.00
respondent Maura Evangelista requested the representative of the
==========
petitioner to notify Mr. Bartolome of the fact that their broilers died after
having been fed with the animal feeds delivered by the petitioner the
previous day. She, likewise, asked that a technician or veterinarian be
When the above-mentioned checks were deposited at the petitioners
sent to oversee the untoward occurrence. Nevertheless, the various
depository bank, the same were, consequently, dishonored because
feeds delivered on that day were still fed to the animals. On July 27,
respondent Maura Evangelista had already closed her account. The
1993, the witness recounted that all of the chickens and hogs
petitioner made several demands for the respondents to settle their
died.10 Efren Evangelista suffered from a heart attack and was
unpaid obligation, but the latter failed and refused to pay their
hospitalized as a consequence of the massive death of their animals in
remaining balance with the petitioner.
the farm. On August 2, 1993, another set of animal feeds were
delivered to the respondents, but the same were not returned as the
On December 15, 1993, the petitioner filed with the Regional Trial
latter were not yet cognizant of the fact that the cause of the death of
Court of Malolos, Bulacan, a complaint, docketed as Civil Case No.
their animals was the polluted feeds of the petitioner.11
1026-M-93, against the respondents for sum of money and damages
with a prayer for issuance of writ of preliminary attachment. In their
When respondent Maura Evangelista eventually met with Mr.
answer with counterclaim, the respondents admitted their unpaid
Bartolome on an undisclosed date, she attributed the improbable
obligation but impugned their liability to the petitioner. They asserted
incident to the animal feeds supplied by the petitioner, and asked Mr.
that the nine checks issued by respondent Maura Evangelista were
Bartolome for indemnity for the massive death of her livestock. Mr.
made to guarantee the payment of the purchases, which was
Bartolome disavowed liability thereon and, thereafter, filed a case
previously determined to be procured from the expected proceeds in
against the respondents.12
the sale of their broilers and hogs. They contended that inasmuch as
the sudden and massive death of their animals was caused by the
contaminated products of the petitioner, the nonpayment of their
After the meeting with Mr. Bartolome, respondent Maura Evangelista
obligation was based on a just and legal ground.
requested Dr. Rolando Sanchez, a veterinarian, to conduct an
inspection in the respondents poultry. On October 20, 1993, the
respondents took ample amounts remaining from the feeds sold by the
On January 19, 1994, the respondents also lodged a complaint for
petitioner and furnished the same to various government agencies for
damages against the petitioner, docketed as Civil Case No. 49-M-94,
laboratory examination.
for the untimely and unforeseen death of their animals supposedly
effected by the adulterated animal feeds the petitioner sold to them.
Within the period to file an answer, the petitioner moved to dismiss the
respondents complaint on the ground of litis pendentia. The trial court
denied the same in a Resolution5 dated April 26, 1994, and ordered the
(b) the defect must exist at the time the sale was made;
Atty. Roxas:
(c) the defect must ordinarily have been excluded from the
contract;
That is misleading.
Atty. Cruz:
Court:
Atty. Cruz:
And when the chickens died, they stopped naturally feeding
it to the chickens.
Atty. Cruz:
Q You mean to say, Madam Witness, that although you
believe (sic) that the chickens were allegedly poisoned, you
used the same for feeding your animals?
A We did not know yet during that time that the feeds
contained poison, only during that time when we learned
about the same after the analysis.
Q Therefore you have known only of the alleged poison in
the Nutrimix Feeds only after you have caused the analysis
of the same?
A Yes, Sir.
Q When was that, Madam Witness?
A I cannot be sure about the exact time but it is within the
months of October to November, Sir.
Q So, before this analysis of about October and November,
you were not aware that the feeds of Nutrimix Feeds
Corporation were, according to you, with poison?
A We did not know yet that it contained poison but we were
sure that the feeds were the cause of the death of our
animals.34
We find it difficult to believe that the feeds delivered on July 26 and 27,
1993 and fed to the broilers and hogs contained poison at the time
they reached the respondents. A difference of approximately three
months enfeebles the respondents theory that the petitioner is guilty of
breach of warranty by virtue of hidden defects. In a span of three
months, the feeds could have already been contaminated by outside
factors and subjected to many conditions unquestionably beyond the
control of the petitioner. In fact, Dr. Garcia, one of the witnesses for the
respondents, testified that the animal feeds submitted to her for
laboratory examination contained very high level of aflatoxin, possibly
caused by mold (aspergillus flavus).35 We agree with the contention of
the petitioner that there is no evidence on record to prove that the
animal feeds taken to the various governmental agencies for laboratory
examination were the same animal feeds given to the respondents
broilers and hogs for their consumption. Moreover, Dr. Diaz even
admitted that the feeds that were submitted for analysis came from a
sealed bag. There is simply no evidence to show that the feeds given
to the animals on July 26 and 27, 1993 were identical to those
submitted to the expert witnesses in October 1993.
Re-Direct Examination
Atty. Roxas:
Q Now, you mentioned that shortly before July 26 and 27,
1993, various types of Nutrimix feeds were delivered to you
like chicks booster mash, broiler starter mash and hog
finisher or hog grower mash. What is the reason for
simultaneous deliveries of various types of feeds?
A Because we used to mix all those together in one feeding,
Sir.
Q And what is the reason for mixing the chick booster mash
with broiler starter mash?
A So that the chickens will get fat, Sir.
Re-Cross Examination
Atty. Cruz:
Deeds to issue a second owners copy of OCT No. 535 in favor of the
Eniceo heirs and declared the original owners copy of OCT NO. 535
cancelled and considered of no further value. 12
On 6 April 1989, the Registry of Deeds issued a second owners copy
of OCT No. 535 in favor of the Eniceo heirs.13
Petitioner states that as early as 1991, respondent knew of the RTC
decision in LRC Case No. 584-A because respondent filed a criminal
case against Rufina Eniceo and Leonila Bolinas (Bolinas) for giving
false testimony upon a material fact during the trial of LRC Case No.
584-A. 14
Petitioner alleges that sometime in February 1995, Bolinas came to the
office of Alberto Tronio Jr. (Tronio), petitioners general manager, and
offered to sell the Antipolo property. During an on-site inspection,
Tronio saw a house and ascertained that the occupants were Bolinas
relatives. Tronio also went to the Registry of Deeds to verify the
records on file. Tronio ascertained that OCT No. 535 was clean and
had no lien and encumbrances. After the necessary verification,
petitioner decided to buy the Antipolo property. 15
On 14 March 1995, respondent caused the annotation of his adverse
claim in OCT No. 535. 16
On 20 March 1995, the Eniceo heirs executed a deed of absolute sale
in favor of petitioner covering lots 3 and 4 of the Antipolo property
for P500,000. 17
On the same date, Transfer Certificate of Title (TCT) Nos. 277747 and
277120 were issued. TCT No. 277747 covering lots 1 and 5 of the
Antipolo property was registered in the names of Rufina Eniceo,
Ambrosio Eniceo, Rodolfo Calove, Fernando Calove and Leonila
Calove Bolinas. 18 TCT No. 277120 covering lots 3 and 4 of the
Antipolo property was registered in the name of petitioner. 19
On 5 April 1995, the Eniceo heirs executed another deed of sale in
favor of petitioner covering lots 1 and 5 of the Antipolo property
for P1,000,000. TCT No. 278588 was issued in the name of petitioner
and TCT No. 277120 was cancelled. 20
On 17 August 1995, the Secretary of the Department of Environment
and Natural Resources (DENR Secretary) approved the deed of sale
between the Eniceo heirs and respondent. 21
On 16 January 1996, respondent filed a civil complaint with the trial
court against the Eniceo heirs and petitioner. Respondent prayed for
the cancellation of the certificates of title issued in favor of petitioner,
and the registration of the deed of sale and issuance of a new transfer
certificate of title in favor of respondent. 22
On 4 July 2000, the trial court rendered its decision dismissing the
case for lack of legal and factual basis. 23
Respondent appealed to the Court of Appeals (CA). On 20 December
2004, the CA rendered a decision reversing the trial courts
decision. 24 Respondent filed a motion for reconsideration, which the
CA denied in its Resolution dated 10 October 2005.
Aggrieved by the CAs decision and resolution, petitioner elevated the
case before this Court.
The Ruling of the Trial Court
The trial court stated that although respondent claims that the Eniceo
heirs sold to him the Antipolo property, respondent did not testify in
court as to the existence, validity and genuineness of the purported
deed of sale and his possession of the duplicate owners copy of OCT
No. 535. The trial court stated that as owner of a property consisting of
hectares of land, respondent should have come to court to substantiate
his claim and show that the allegations of the Eniceo heirs and
petitioner are mere fabrications. 25
The trial court noticed that respondent did not register the deed of sale
with the Register of Deeds immediately after its alleged execution on
10 September 1973. Further, respondent waited for 22 long years
before he had the sale approved by the DENR Secretary. The trial
court declared that respondent slept on his rights. The trial court
concluded that respondents failure to register the sale and secure the
cancellation of OCT No. 535 militates against his claim of ownership.
The trial court believed that respondent has not established the
preponderance of evidence necessary to justify the relief prayed for in
his complaint. 26
The trial court stated that Bolinas was able to prove that the Eniceo
heirs have remained in actual possession of the land. The filing of a
petition for the issuance of a new owners duplicate copy requires the
posting of the petition in three different places which serves as a notice
to the whole world. Respondents failure to oppose this petition can be
deemed as a waiver of his right, which is fatal to his cause. 27
The trial court noted that petitioner is a buyer in good faith and for
value because petitioner has exercised due diligence in inspecting the
property and verifying the title with the Register of Deeds. 28
The trial court held that even if the court were to believe that the deed
of sale in favor of respondent were genuine, still it could not be
considered a legitimate disposition of property, but merely an equitable
mortgage. The trial court stated that respondent never obtained
possession of the Antipolo property at any given time and a buyer who
does not take possession of a property sold to him is presumed to be a
mortgagee only and not a vendee. 29
The Ruling of the Court of Appeals
The CA ruled that the deed of sale in favor of respondent, being a
notarized document, has in its favor the presumption of regularity and
carries the evidentiary weight conferred upon it with respect to its due
execution. The CA added that whoever asserts forgery has the burden
of proving it by clear, positive and convincing evidence because
forgery can never be presumed. The CA found that petitioner and the
Eniceo heirs have not substantiated the allegation of forgery. 30
The CA pointed out that laches has not set in. One of the requisites of
laches, which is injury or prejudice to the defendant in the event relief
is accorded to the complainant or the suit is not held to be barred, is
wanting in the instant case. The CA added that unrecorded sales of
land brought under the Torrens system are valid between parties
because registration of the instrument is merely intended to bind third
persons. 31
The CA declared that petitioners contention regarding the validity of
the questioned deed on the ground that it was executed without the
approval of the DENR Secretary is untenable. The DENR Secretary
approved the deed of sale on 17 August 1995. However, even
supposing that the sale was not approved, the requirement for the
DENR Secretarys approval is merely directory and its absence does
not invalidate any alienation, transfer or conveyance of the homestead
after 5 years and before 25 years from the issuance of the title which
can be complied with at any time in the future. 32
the lower court will not be permitted to change the theory on appeal. A
theory of the case not brought to the attention of the lower court will not
be considered by a reviewing court, as a new theory cannot be raised
for the first time at such late stage.
Although petitioner raised the defense of equitable mortgage in the
lower court, he cannot claim that the deed was an equitable mortgage
because petitioner was not a privy to the deed of sale dated 10
September 1973. Petitioner merely stepped into the shoes of the
Eniceo heirs. Petitioner, who merely acquired all the rights of its
predecessors, cannot espouse a theory that is contrary to the theory of
the case claimed by the Eniceo heirs.
The Court notes that the Eniceo heirs have not appealed the CAs
decision, hence, as to the Eniceo heirs, the CAs decision that the
contract was a sale and not an equitable mortgage is now final. Since
petitioner merely assumed the rights of the Eniceo heirs, petitioner is
now estopped from questioning the deed of sale dated 10 September
1973.
Petitioner is not a buyer in good faith
Petitioner maintains that the subsequent sale must be upheld because
petitioner is a buyer in good faith, having exercised due diligence by
inspecting the property and the title sometime in February 1995.
In Agricultural and Home Extension Development Group v. Court of
Appeals, 58 a buyer in good faith is defined as "one who buys the
property of another without notice that some other person has a right to
or interest in such property and pays a full and fair price for the same
at the time of such purchase or before he has notice of the claim or
interest of some other person in the property."
In Balatbat v. Court of Appeals, 59 the Court held that in the realm of
double sales, the registration of an adverse claim places any
subsequent buyer of the registered land in bad faith because such
annotation was made in the title of the property before the Register of
Deeds and he could have discovered that the subject property was
already sold. 60 The Court explained further, thus:
A purchaser of a valued piece of property cannot just close his eyes to
facts which should put a reasonable man upon his guard and then
claim that he acted in good faith and under the belief that there were
no defect in the title of the vendor. One who purchases real estate with
knowledge of a defect or lack of title in his vendor cannot claim that he
has acquired title thereto in good faith as against the true owner of the
land or of an interest therein; and the same rule must be applied to one
who has knowledge of facts which should have put him upon such
inquiry and investigation as be necessary to acquaint him with the
defects in the title of his vendor. 61
Petitioner does not dispute that respondent registered his adverse
claim with the Registry of Deeds on 14 March 1995. The registration of
the adverse claim constituted, by operation of law, notice to the whole
world. 62 From that date onwards, subsequent buyers were deemed to
have constructive notice of respondents adverse claim.
Petitioner purchased the Antipolo property only on 20 March 1995 and
5 April 1995 as shown by the dates in the deeds of sale. On the same
dates, the Registry of Deeds issued new TCTs in favor of petitioner
with the annotated adverse claim. Consequently, the adverse claim
registered prior to the second sale charged petitioner with constructive
notice of the defect in the title of Eniceo heirs. Therefore, petitioner
cannot be deemed as a purchaser in good faith when they bought and
registered the Antipolo property.
SO ORDERED.
G.R. No. 171250
July 4, 2007
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Revised
Rules of Court, filed by petitioners Spouses Carlos and Eulalia
Raymundo and Spouses Angelito and Jocelyn Buenaobra seeking the
reversal and setting aside of the Decision1 of the Court of Appeals
dated 26 September 2005 and its Resolution2 dated 24 January 2006
in CA-G.R. CV No. 59557. The Court of Appeals, in its assailed
Decision and Resolution, reversed the Decision3 of the Regional Trial
Court (RTC) dated 28 January 1998, in Civil Case No. C-14980,
declaring the Deed of Sale executed by respondent Dominador
Bandong (Dominador) in favor of petitioner Eulalia Raymundo (Eulalia)
as valid and binding. The dispositive portion of the asailed Court of
Appeals Decision reads:
WHEREFORE, premises considered, we hereby GRANT the appeal.
The January 28, 1998 decision of the RTC, Branch 126, Caloocan City
is hereby REVERSED and SET ASIDE and a new one entered:
1. ANNULLING the Deed of Absolute Sale dated February 3,
1989 as a deed of sale, and considering it instead as a real
estate mortgage of the disputed property to secure the
payment of the P70,000.00 the plaintiffs-appellants spouses
Bandong owe the defendants-appellees spouses
Raymundo. The spouses Bandong are given one (1) year
from the finality of this Decision within which to pay
the P70,000.00 owed to the spouses Raymundo, at 12%
interest per annum computed from July 17, 1991 until its full
payment.
2. ANNULLING the Deed of Absolute Sale dated September
25, 1990, between the spouses Raymundo as vendors and
the spouses Buenaobra as vendees.
3. ORDERING the Register of Deeds of Caloocan City to
issue a new Transfer Certificate of Title covering Lot 18,
Block 2 of the subdivision plan PSD 16599, a portion of Lot
1073 of the Cadastral Survey of Caloocan, in the names of
the spouses Dominador and Rosalia Bandong, after the
cancellation pursuant to this Decision of TCT No. 222871
currently in the names of the spouses Angelito and Jocelyn
Buenaobra; and FURTHER ORDERING the said Register of
Deeds to annotate in the new Transfer Certificate of Title in
the names of the spouses Bandong a real estate mortgage
in favor of the spouses Carlos and Eulalia Raymundo
reflecting the terms of this Decision.
4. AWARDING moral damages in the amount
of P50,000.00; exemplary damages of P20,000.00; and
attorneys fees and expenses of litigation of P20,000.00,
plus P500.00 per proven appearance of the plaintiffsappellants counsel in court all solidarily payable by the
spouses Carlos and Eulalia Raymundo and the spouses
Angelito and Jocelyn Buenaobra, to the spouses Dominador
and Rosalia Bandong.
For her part, Jocelyn maintained that she was a buyer in good faith
and for value for she personally inquired from the Register of Deeds of
the presence of any liens and encumbrances on the TCT of the subject
property and found that the same was completely free therefrom. While
she admitted that she had previous notice that Dominador and a
certain Lourdes Santos (Lourdes) were in possession of the subject
property, Jocelyn claimed that the said possessors already
acknowledged her ownership thereof and even asked for time to
vacate. In the end, though, they refused to leave the premises.
On 28 June 1998, the RTC rendered a Decision10 in Civil Case No. C14980 in favor of Eulalia and Jocelyn by declaring that the Deed of
Sale between Dominador and Eulalia was valid and binding and,
consequently, the subsequent sale between Eulalia and Jocelyn was
also lawful absent any showing that Jocelyn was a buyer in bad faith.
The dispositive portion of the said decision reads:
WHEREFORE, judgment is hereby rendered DISMISSING the
complaint filed by the [Spouses Bandong] and ordering said [Spouses
Bandong] to pay [herein petitioners] spouses Raymundo and
Buenaobra the amount ofP50,000 and P30,000, respectively, as
attorneys fees and costs of the suit.
On appeal in CA-G.R. SP No. 59557, the Court of Appeals reversed
the RTC Decision and found that the transaction entered into by
Dominador and Eulalia was not one of sale but an equitable mortgage
considering that the purchase price was grossly inadequate and the
Spouses Bandong remained as possessors of the subject property
after Eulalias alleged purchase thereof. The appellate court likewise
charged Jocelyn with knowledge that the Spouses Raymundo were not
the absolute owners of the subject property negating the presumption
that she was an innocent purchaser for value.
The Court of Appeals found the Motion for Reconsideration filed by
petitioners unmeritorious and denied the same in its Resolution11 dated
24 January 2006.
Hence, this instant Petition for Review on Certiorari filed by the
petitioners assailing the Decision dated 26 September 2005 and the
Resolution dated 24 January 2006 rendered by the Court of Appeals.
For the resolution of this Court are the following issues:
I.
WHETHER OR NOT THE DEED OF SALE BETWEEN
DOMINADOR AND EULALIA IS VALID AND BINDING.
II.
WHETHER OR NOT JOCELYN IS A BUYER IN GOOD
FAITH.
In arguing that the sale between Dominador and Eulalia is valid,
petitioners posit that gross inadequacy of the price is not sufficient to
invalidate the sale, and granting arguendo that insufficient
consideration may void a sale, it has not been proven that the
consideration of sale between Dominador and Eulalia was grossly
inadequate.
Elaborating, petitioners maintain that the amount of P110,000.00
(which they claimed they have given to Dominador), or even the sum
of P70,000.00 (which respondents admitted receiving), was a
substantial consideration, sufficient to support a sale contract. Mere
inadequacy of the price is not sufficient to invalidate a sale; the price
must be grossly inadequate or utterly shocking to the conscience in
order to avoid a contract of sale.
Petitioners further aver that the alleged market value of the subject
property as submitted by the appraiser, one of respondents witnesses,
would not serve as an objective basis in determining the actual value
of the subject property, much less the supposed amount of its
purchase price, in the absence of any logical and valid basis for its
determination.
Finally, petitioners contend that so long as the contract was voluntarily
entered into by the parties and in the absence of a clear showing that
their consent thereto was vitiated by fraud, mistake, violence or undue
influence, such as in the case at bar, the said contract should be
upheld.
We do not agree.
An equitable mortgage is one that - although lacking in some formality,
forms and words, or other requisites demanded by a statute nevertheless reveals the intention of the parties to charge a real
property as security for a debt and contains nothing impossible or
contrary to law.12
The instances when a contract - regardless of its nomenclature - may
be presumed to be an equitable mortgage are enumerated in the Civil
Code as follows:
Art. 1602. The contract shall be presumed to be an equitable
mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is
unusually inadequate;
(2) When the vendor remains in possession as lessee or
otherwise;
(5) When the vendor binds himself to pay the taxes on the
thing sold.
(6) In any other case where it may be fairly inferred that the
real intention of the parties is that the transaction shall
secure the payment of a debt or the performance of any
other obligation.
Art. 1604. The provisions of Article 1602 shall also apply to a contract
purporting to be an absolute sale.
For Articles 1602 and 1604 to apply, two requisites must concur: one,
the parties entered into a contract denominated as a contract of sale;
and two, their intention was to secure an existing debt by way of an
equitable mortgage.13
There is no question that Dominador and Eulalia entered into a
contract of sale as evidenced by the document denominated as Deed
of Sale14 signed by them. As to whether the parties intended to transfer
ownership of the subject property or merely to constitute a security for
an existing debt is an issue that needs to be addressed by this Court.
put Jocelyn on guard for any possible abuses that Eulalia may commit
with the titles and the deeds of sale in her possession.
Moreover, granting that the purchase price is adequate, the fact that
respondents remain in possession of the subject property after its
supposed sale is sufficient to support our finding that the contract is
one of equitable mortgage and not of sale. To reiterate, the existence
of any one of the conditions under Article 1602, not a
concurrence, or an overwhelming number of such circumstances,
suffices to give rise to the presumption that the contract is an
equitable mortgage.19
The glaring lack of good faith of Jocelyn is more apparent in her own
admission that she was aware that Dominador and a certain Lourdes
were in possession of the subject property. A buyer of real property that
is in the possession of a person other than the seller must be wary. A
buyer who does not investigate the rights of the one in possession can
hardly be regarded as a buyer in good faith.25 Jocelyns self-serving
statement that she personally talked to Dominador and Lourdes about
her acquisition of the subject property and intention to take possession
of the same, and that Dominador and Lourdes even pleaded for time to
vacate the subject property cannot be given credence in light of the
prompt filing by the Spouses Bandong of an action for the annulment
of the sale contract between Dominador and Eulalia after they received
the demand to vacate from Jocelyns lawyer.
Surviving Heirs
Teofilo Jose,
Sr.
Jose, Sr.
On May 21, 1996, the RTC ruled in favor of the respondents, declaring
that Alejandro had acquired ownership of the property in 1965 by
operation of law upon the failure of the petitioners' predecessors to
repurchase the property; that the joint affidavit executed by Alejandro,
Leoncia and Jose, Jr. and Jose, Sr., to extend the period of redemption
was inefficacious, because there was no more period to extend due to
the redemption period having long lapsed by the time of its execution;
and that the action should be dismissed insofar as the heirs of
Potenciana were concerned, considering that Potenciana, who had
predeceased her parents, had no successional rights in the property.
In the CA, the petitioners assailed the RTC's dispositions, except the
dismissal of the complaint as against Potenciana's heirs.
CA Ruling
In its decision dated July 31, 2002, the CA ruled that the transaction
covered by the Kasulatan ng Biling Mabibiling Muli was not a pacto de
retro sale but an equitable mortgage under Article 1602 of the Civil
Code; that even after the deed's execution, Leoncia, Teofilo, Jose, Jr.
and their families had remained in possession of the property and
continued paying realty taxes for the property; that the purported
vendees had not declared the property for taxation purposes under
their own names; and that such circumstances proved that the parties
envisaged an equitable mortgage in the Kasulatan ng Biling Mabibiling
Muli.
The CA observed that the heirs of the Spouses Francia had
themselves admitted in paragraph 5 of the Pagsasa-ayos ng Pag-aari
at Pagsasalin that the property had been mortgaged to their
predecessors-in-interest, viz:
Na, sa oras ng kamatayan ay nakaiwan sila ng isang lagay na lupang
nakasanla sa kanila na makikilala sa kasulatang kalakip nito sa
halagang LIMANG DAANG PISO (P500.00). Ngunit nuong nabubuhay
pa ang magasawang Benedicto Francia at Monica Ajoco ay
nakatanggap na ng halagang P265.00 kay Alejandro Reyes - Filipino,
kasal kay Amanda Salonga, may sapat na gulang at naninirahan sa
Pulilan, Bulacan.21
However, the CA held that the appellants' (petitioners herein) failure to
file an action for the reformation of theKasulatan ng Biling Mabibiling
Muli to reflect the true intention of the parties within ten years from the
xxx
C.
(5) When the vendor binds himself to pay the taxes on the
thing sold;
xxx
The existence of any one of the conditions enumerated
under Article 1602 of the Civil Code, not a concurrence of all
Both the trial court and the CA declared that the Magkasanib na
Salaysay, which extended the redemption period of the mortgaged
property, was inefficacious, because the period to redeem could no
longer be extended after the original redemption period had already
expired.
In contrast, the petitioners submit that disregarding the Magkasanib na
Salaysay made no sense,considering that the respondents'
predecessors-in-interest admitted therein that the petitioners had a
right to redeem the property.
The respondents counter, however, that the Magkasanib na Salaysay,
which acknowledged the other co-owners' right to redeem the property,
was void; that the petitioners could no longer claim to be co-owners
entitled to redeem the property, because the co-ownership had come
to an end by Alejandro having openly repudiated the co-ownership;
that Alejandro's acts of repudiation had consisted of: (a) redeeming the
property from the Spouses Francia; (b) acquiring the property from the
heirs of Spouses Francia by virtue of a deed of assignment
denominated as Pag-aayos ng Pag-aari at Pagsasalin; (c) executing
an affidavit of consolidation of ownership over the property (Kasulatan
ng Pagmeme-ari); (d) applying for the cancellation of the tax
declaration of property in the name of Leoncia, and the subsequent
issuance of a new tax declaration in his name; (e) his continuous
possession of the property from 1955, which possession the
respondents as his heirs had continued up to the present time, or for a
period of almost 50 years already; and (f) the payment of the taxes by
Alejandro and the respondents for more than 30 years without any
contribution from the petitioners; and that such repudiation established
that Alejandro and his successors-in-interest had already acquired sole
title over the property through acquisitive prescription.
The respondents' and the lower courts' positions cannot be sustained.
The provisions of the Civil Code governing equitable mortgages
disguised as sale contracts, like the one herein, are primarily designed
to curtail the evils brought about by contracts of sale with right to
repurchase, particularly the circumvention of the usury law and pactum
commissorium.29 Courts have taken judicial notice of the well-known
fact that contracts of sale with right to repurchase have been frequently
resorted to in order to conceal the true nature of a contract, that is, a
loan secured by a mortgage. It is a reality that grave financial distress
renders persons hard-pressed to meet even their basic needs or to
respond to an emergency, leaving no choice to them but to sign deeds
of absolute sale of property or deeds of sale with pacto de retro if only
to obtain the much-needed loan from unscrupulous money
lenders.30 This reality precisely explains why the pertinent provision of
the Civil Code includes a peculiar rule concerning the period of
redemption, to wit:
Art. 1602. The contract shall be presumed to be an equitable
mortgage, in any of the following cases:
xxx
(3)When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new period
is executed;
xxx
Ostensibly, the law allows a new period of redemption to be agreed
upon or granted even after the expiration of the equitable mortgagor's
right to repurchase, and treats such extension as one of the indicators
that the true agreement between the parties is an equitable mortgage,
not a sale with right to repurchase. It was indubitable, therefore, that
equivocal and ambivalent acts that did not manifest his desire to
repudiate the co-ownership.
The only unequivocal act of repudiation was done by the respondents
when they filed the instant action for quieting of title on September 28,
1994, nearly a year after Alejandro's death on September 2, 1993.
However, their possession could not ripen into ownership considering
that their act of repudiation was not coupled with their exclusive
possession of the property.
G.
The respondents can only demand from the petitioners the partition of
the co-owned property and the reimbursement from their co-owners of
the amount advanced by Alejandro to repay the obligation. They may
also seek from their co-owners the proportional reimbursement of the
realty taxes paid for the property, pursuant to Article 488 of the Civil
Code.39 In the alternative, they may opt to foreclose the equitable
mortgage, considering that the petitioners' period to redeem the
mortgaged property, which was ten years from the execution on
October 17, 1970 of theMagkakasanib na Salaysay, had already long
lapsed. We clarify, however, that the respondents may take these
recourses only through the appropriate actions commenced in court.
H.
The petitioners' counterclaim for damages is dismissed for their failure
to prove their entitlement to it.40
WHEREFORE, we grant the petition for review on certiorari.
The decision dated July 31, 2002 rendered by the Court of Appeals is
reversed and set aside, and another judgment is rendered:
a) Upholding the validity of the Kasulatan ng Biling
Mabibiling Muli (Deed of Sale with Right of Repurchase)
executed on July 9, 1955 by Leoncia Mag-isa Reyes and her
sons Teofilo, Jose, Sr. and Jose, Jr., all surnamed Reyes, in
favor of the late Spouses Benedicto Francia and Monica
Ajoco as well as the Pagsasa-ayos ng Pag-aari at
Pagsasalin (Settlement of Estate and Assignment) executed
on August 11, 1970 by the heirs of the late Spouses
Benedicto Francia and Monica Ajoco in favor of the spouses
Alejandro Reyes and Amanda Salonga;
b) Declaring the Kasulatan ng Biling Mabibili Muli to be an
equitable mortgage, not a contract of sale with right to
repurchase;1avvphi1
c) Finding the Magkakalakip na Salaysay executed on
October 17, 1970 by and among Leoncia Mag-isa Reyes,
Jose Reyes, Sr. and Alejandro Reyes valid and effective;
c) Nullifying the Kasulatan ng Pagmeme-ari executed by
Alejandro M. Reyes on August 21, 1970; and
d) Dismissing the petitioners' counterclaim.
Costs of suit to be paid by the respondents.
SO ORDERED.
G.R. No. 165285
[Signature affixed]
Domes M. Suerte (witness)
[Signature a
Agnes M. Boras
DECISION
[Signature affixed]
Ana Comnad (witness)
BRION, J.:
Before the Court is a petition for review on certiorari filed under Rule
45 of the Rules of Court by Lomises Aludos, through his wife Flora
Aludos (Lomises).1 Lomises seeks the reversal of the decision2 dated
August 29, 2002 of the Court of Appeals (CA) in CA-G.R. CV No.
63113, as well as the resolution3 dated August 17, 2004.
THE FACTS
[Signature a
Dolores Aludo
her consent/w
RECEIPT
P68,000.00
Received from Mr. Lomises Aludos the sum of Sixty-eight thousand
(P68,000.00) Pesos as reimbursement of my money.
Baguio City, October 9, 1985.
[Signature affixed]
JAIME SUERTE
bmark:
[Thumbmark affixed]
LOMISES F. ALUDOS
(Registered Stall Holder)
t of the Wife:
mbmark and/or
ence of:
[Signature affixed]
FLORA MENES
(Wife)
Witnesses
[Illegible signature]
Through a letter dated October 15, 1985, Johnny protested the return
of his money, and insisted on the continuation and enforcement of his
agreement with Lomises. When Lomises refused Johnnys protest,
Johnny filed a complaint against Lomises before the Regional Trial
Court (RTC), Branch 7, Baguio City, for specific performance with
damages, docketed as Civil Case No. 720-R. Johnny prayed that, after
due proceedings, judgment be rendered ordering Lomises to (1)
accept the payment of the balance of P192,000.00; and (2) execute a
final deed of sale and/or transfer the improvements and rights over the
two market stalls in his favor.
In a decision dated November 24, 1998,7 the RTC nullified the
agreement between Johnny and Lomises for failure to secure the
consent of the Baguio City Government to the agreement. The RTC
found that Lomises was a mere lessee of the market stalls, and the
Baguio City Government was the owner-lessor of the stalls. Under
Article 1649 of the Civil Code, "[t]he lessee cannot assign the lease
without the consent of the lessor, unless there is a stipulation to the
contrary." As the permit issued to Lomises did not contain any
provision that the lease of the market stalls could further be assigned,
and in the absence of the consent of the Baguio City Government to
the agreement, the RTC declared the agreement between Lomises
and Johnny null and void. The nullification of the agreement required
the parties to return what had been received under the agreement;
thus, the RTC ordered Lomises to return the down payment made by
Johnny, with interest of 12% per annum, computed from the time the
complaint was filed until the amount is fully paid. It dismissed the
parties claims for damages.
Lomises appealed the RTC decision to the CA, arguing that the real
agreement between the parties was merely one of loan, and not of
sale; he further claimed that the loan had been extinguished upon the
return of theP68,000.00 to Johnnys mother, Domes.
In a decision dated August 29, 2002,8 the CA rejected Lomises claim
that the true agreement was one of loan. The CA found that there were
two agreements entered into between Johnny and Lomises: one was
for the assignment of leasehold rights and the other was for the sale of
the improvements on the market stalls. The CA agreed with the RTC
that the assignment of the leasehold rights was void for lack of consent
of the lessor, the Baguio City Government. The sale of the
improvements, however, was valid because these were Lomises
private properties. For this reason, the CA remanded the case to the
RTC to determine the value of the improvements on the two market
stalls, existing at the time of the execution of the agreement.
are leased by Flora and her daughter who both obtained the lease in
their own right and not as Lomises successors.
Johnny, through his remaining successor Domes (Johnnys mother),
opposed Lomises claim. The receipt dated September 8, 1984 clearly
referred to a contract of sale of the market stalls and not a contract of
loan that Lomises alleges. Although Johnny conceded that the sale of
leasehold rights to the market stalls were void for lack of consent of the
Baguio City Government, he alleged that the sale of the improvements
should be upheld as valid, as the CA did.
THE COURTS RULING
The Court does not find the petition meritorious.
The Nature of the Agreement between the Parties
That Johnny was a mere student when the agreement was executed
does not indicate that he had no financial capacity to pay the purchase
price of P260,000.00. At that time, Johnny was a 26-year old third year
engineering student who operated as a businessman as a sideline
activity and who helped his family sell goods in the Hangar
Market.12 During trial, Johnny was asked where he was to get the funds
to pay the P260,000.00 purchase price, and he said he would get a
loan from his grandfather.13 That he did not have the full amount at the
time the agreement was executed does not necessarily negate his
capacity to pay the purchase price, since he had 16 months to
complete the payment. Apart from Lomises bare claim that it was
Johnnys mother, Domes, who was interested in acquiring his market
stalls, we find no other evidence supporting the claim that Johnny was
merely acting as a dummy for his mother.
Lomises contends that of the P68,000.00 given by Johnny, he only
received P48,000.00, with the remainingP20,000.00 retained by
Johnny as interest on the loan. However, the testimonies of the
witnesses presented during trial, including Lomises himself, negate this
claim. Judge Rodolfo Rodrigo (RTC of Baguio City, Branch VII) asked
Lomises lawyer, Atty. Lockey, if they deny receipt of the P68,000.00;
Atty. Lockey said that they were not denying receipt, and added that
they had in fact returned the same amount.14 Judge Rodrigo accurately
summarized their point by stating that "there is no need to dispute
whether the P68,000.00 was given, because if [Lomises] tried to return
that x x x he had received that."15 Witness Atty. Albert Umaming said he
counted the money before he drafted the October 9, 1985 receipt
evidencing the return; he said that Lomises returnedP68,000.00 in
total.16 Thus, if the transaction was indeed a loan and the P20,000.00
interest was already prepaid by Lomises, the return of the full amount
of P68,000.00 by Lomises to Johnny (through his mother, Domes)
would not make sense.
That Lomises retained possession of the market stalls even after the
execution of his agreement with Johnny is also not an indication that
the true transaction between them was one of loan. Johnny had yet to
complete his payment and, until Lomises decided to forego with their
agreement, had four more months to pay; until then, Lomises retained
ownership and possession of the market stalls.17
Lomises cannot feign ignorance of the import of the terms of the
receipt of September 8, 1984 by claiming that he was an illiterate old
man. A witness (Ana Comnad) testified not only of the fact of the sale,
but also that Lomises daughter, Dolores, translated the terms of the
agreement from English to Ilocano for Lomises benefit;18 Lomises
himself admitted this fact.19 If Lomises believed that the receipt of
September 8, 1984 did not express the parties true intent, he could
have refused to sign it or subsequently requested for a reformation of
its terms. Lomises rejected the agreement only after Johnny sought to
enforce it.
Hence, the CA was correct in characterizing the agreement between
Johnny and Lomises as a sale of improvements and assignment of
leasehold rights.
The Validity of the Agreement
Both the RTC and the CA correctly declared that the assignment of the
leasehold rights over the two market stalls was void since it was made
The CA has already rejected the evidentiary value of the May 1, 1985
lease contract between the Baguio City Government and Lomises, as it
was not formally offered in evidence before the RTC; in fact, the CA
admonished Lomises lawyer, Atty. Lockey, for making it appear that it
was part of the records of the case. Under Section 34, Rule 132 of the
Rules of Court, the court shall consider no evidence which has not
been formally offered. "The offer of evidence is necessary because it is
the duty of the court to rest its findings of fact and its judgment only
and strictly upon the evidence offered by the parties. Unless and until
admitted by the court in evidence for the purpose or purposes for
which such document is offered, the same is merely a scrap of paper
barren of probative weight."22 Although the contract was referred to in
Lomises answer to Johnnys complaint23 and marked as Exhibit "2" in
his pre-trial brief,24 a copy of it was never attached. In fact, a copy of
the May 1, 1985 lease contract "surfaced" only after Lomises filed a
motion for reconsideration of the CA decision. What was formally
offered was the 1969 permit, which only stated that Lomises was
permitted to occupy a stall in the Baguio City market and nothing
else.25 In other words, no evidence was presented and formally offered
showing that any and all improvements in the market stalls shall be
owned by the Baguio City Government.
Likewise unsupported by evidence is Lomises claim that the stalls
themselves were the only improvements. Hence, the CA found it
proper to order the remand of the case for the RTC to determine the
value of the improvements on the market stalls existing as of
September 8, 1984.26 We agree with the CAs order of remand. We
note, however, that Lomises had already returned the P68,000.00 and
receipt of the amount has been duly acknowledged by Johnnys
mother, Domes. Johnny testified on October 6, 1986 that the money
was still with his mother.27 Thus, upon determination by the RTC of the
actual value of the improvements on the market stalls, the heirs of
Johnny Suerte should pay the ascertained value of these
improvements to Lomises, who shall thereafter be required to execute
the deed of sale over the improvements in favor of the heirs of Johnny.
WHEREFORE, under these premises, the Court hereby AFFIRMS the
ruling of the Court of Appeals for the remand of the case to the
Regional Trial Court of Baguio City, Branch 7, for the determination of
the value of the improvements on Stall Nos. 9 and 10 at the
Refreshment Section of the Hangar Market Compound, Baguio City as
of September 8, 1984. After this determination, the Court ORDERS the
heirs of Johnny M. Suerte to pay the amount determined to the heirs of
Lomises Aludos, who shall thereafter execute the deed of sale
covering the improvements in favor of the heirs of Johnny M. Suerte
and deliver the deed to them. Costs against the petitioner.
SO ORDERED.
G.R. No. 122544 January 28, 1999
MARTINEZ, J.:
Two consolidated petitions were filed before us seeking to set aside
and annul the decisions and resolutions of respondent Court of
Appeals. What seemed to be a simple ejectment suit was juxtaposed
with procedural intricacies which finally found its way to this Court.
G.R. No. 122544:
On May 23, 1974, private respondent Overland Express Lines, Inc.
(lessee) entered into a Contract of Lease with Option to Buy with
petitioners 1 (lessors) involving a 1,755.80 square meter parcel of land
situated at corner MacArthur Highway and South "H" Street, Diliman,
Quezon City. The term of the lease was for one (1) year commencing
from May 16, 1974 up to May 15, 1975. During this period, private
respondent was granted an option to purchase for the amount of
P3,000.00 per square meter. Thereafter, the lease shall be on a per
month basis with a monthly rental of P3,000.00.
For failure of private respondent to pay the increased rental of
P8,000.00 per month effective June 1976, petitioners filed an action for
ejectment (Civil Case No. VIII-29155) on November 10, 1976 before
the then City Court (now Metropolitan Trial Court) of Quezon City,
Branch VIII. On November 22, 1982, the City Court rendered
judgment 2 ordering private respondent to vacate the leased premises
and to pay the sum of P624,000.00 representing rentals in arrears
and/or as damages in the form of reasonable compensation for the use
and occupation of the premises during the period of illegal detainer
from June 1976 to November 1982 at the monthly rental of P8,000.00,
less payments made, plus 12% interest per annum from November 18,
1976, the date of filing of the complaint, until fully paid, the sum of
P8,000.00 a month starting December 1982, until private respondent
fully vacates the premises, and to pay P20,000.00 as and by way of
attorney's fees.
Private respondent filed a certiorari petition praying for the issuance of
a restraining order enjoining the enforcement of said judgment and
dismissal of the case for lack of jurisdiction of the City Court.
On September 26, 1984, the then Intermidiate Appellate Court 3 (now
Court of Appeals) rendered a decision 4 stating that:
. . ., the alleged question of whether petitioner was
granted an extension of the option to buy the
property; whether such option, if any, extended the
lease or whether petitioner actually paid the
respondent did not consign to the court the balance of the purchase
price and continued to occupy the subject premises, it had the
obligation to pay the amount of P1,700.00 in monthly rentals until full
payment of the purchase price. The dispositive portion of said decision
reads:
WHEREFORE, the appealed decision in Case No.
46387 is AFFIRMED. The appealed decision in
Case No. 45541 is, on the other hand, ANNULLED
and SET ASIDE. The defendants-appellees are
ordered to execute the deed of absolute sale of
the property in question, free from any lien or
encumbrance whatsoever, in favor of the plaintiffappellant, and to deliver to the latter the said deed
of sale, as well as the owner's duplicate of the
certificate of title to said property upon payment of
the balance of the purchase price by the plaintiffappellant. The plaintiff-appellant is ordered to pay
P1,700.00 per month from June 1976, plus 6%
interest per annum, until payment of the balance
of the purchase price, as previously agreed upon
by the parties.
SO ORDERED.
Upon denial of the motion for partil reconsideration (Civil Case No. Q45541) by respondent Court of Appeals, 10petitioners elevated the
case via petition for certiorari questioning the authority of Alice A. Dizon
as agent of petitioners in receiving private respondent's partial
payment amounting to P300,000.00 pursuant to the Contract of Lease
with Option to Buy. Petitioner also assail the propriety of private
respondent's exercise of the option when it tendered the said amount
on June 20, 1975 which purportedly resulted in a perfected contract of
sale.
G.R. No. 124741:
Petitioners filed with respondent Court of Appeals a motion to remand
the records of Civil Case No. 38-29155 (ejectment case) to the
Metropolitan Trial Court (MTC), then City Court of Quezon City, Branch
38, for execution of the judgment 11 dated November 22, 1982 which
was granted in a resolution dated June 29, 1992. Private respondent
filed a motion to reconsider said resolution which was denied.
Aggrieved, private respondent filed a petition for certiorari, prohibition
with preliminary injunction and/or restraining order with this Court (G.R.
Nos. 106750-51) which was dismissed in a resolution dated
September 16, 1992 on the ground that the same was a refiled case
previously dismissed for lack of merit. On November 26, 1992, entry of
judgment was issued by this Court.
16
by
Civil Code. 18 Where the rentals are paid monthly, the lease, even if
verbal may be deemed to be on a monthly basis, expiring at the end of
every month pursuant to Article 1687, in relation to Article 1673 of the
Civil Code. 19 In such case, a demand to vacate is not even necessary
for judicial action after the expiration of every month. 20
Under Article 1475 of the New Civil Code, "the contract of sale is
perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price. From that
moment, the parties may reciprocally demand performance, subject to
the provisions of the law governing the form of contracts." Thus, the
elements of a contract of sale are consent, object, and price in money
or its equivalent. It bears stressing that the absence of any of these
essential elements negates the existence of a perfected contract of
sale. Sale is a consensual contract and he who alleges it must show its
existence by competent proof. 25
Second. Having failed to exercise the option within the stipulated oneyear period, private respondent cannot enforce its option to purchase
anymore. Moreover, even assuming arguendo that the right to exercise
the option still subsists at the time private respondent tendered the
amount on June 20, 1975, the suit for specific performance to enforce
the option to purchase was filed only on October 7, 1985 or more than
ten (10) years after accrual of the cause of action as provided under
Article 1144 of the New Civil Code. 21
In this case, there was a contract of lease for one (1) year with option
to purchase. The contract of lease expired without the private
respondent, as lessee, purchasing the property but remained in
possession thereof. Hence, there was an implicit renewal of the
contract of lease on a monthly basis. The other terms of the original
contract of lease which are revived in the implied new lease under
Article 1670 of the New Civil Code 22 are only those terms which are
germane to the lessee's right of continued enjoyment of the property
leased. 23 Therefore, an implied new lease does not ipso facto carry
with it any implied revival of private respondent's option to purchase
(as lessee thereof) the leased premises. The provision entitling the
lessee the option to purchase the leased premises is not deemed
incorporated in the impliedly renewed contract because it is alien to the
possession of the lessee. Private respondent's right to exercise the
option to purchase expired with the termination of the original contract
of lease for one year. The rationale of this Court is that:
This is a reasonable construction of the provision,
which is based on the presumption that when the
lessor allows the lessee to continue enjoying
possession of the property for fifteen days after
the expiration of the contract he is willing that such
enjoyment shall be for the entire period
corresponding to the rent which is customarily paid
in this case up to the end of the month because
the rent was paid monthly. Necessarily, if the
presumed will of the parties refers to the
enjoyment of possession the presumption covers
the other terms of the contract related to such
possession, such as the amount of rental, the date
when it must be paid, the care of the property, the
responsibility for repairs, etc. But no such
presumption may be indulged in with respect to
special agreements which by nature are foreign to
the right of occupancy or enjoyment inherent in a
contract of lease. 24
Third. There was no perfected contract of sale between petitioners and
private respondent. Private respondent argued that it delivered the
check of P300,000.00 to Alice A. Dizon who acted as agent of
petitioners pursuant to the supposed authority given by petitioner
Fidela Dizon, the payee thereof. Private respondent further contended
Notwithstanding, BSP and AIB did not heed Sps. Mamaril's demands
for a conference to settle the matter. They therefore prayed that Pea
and Gaddi, together with AIB and BSP, be held liable for: (a) the value
of the subject vehicle and its accessories in the aggregate amount
of P300,000.00; (b) P275.00 representing daily loss of
income/boundary reckoned from the day the vehicle was lost; (c)
exemplary damages; (d) moral damages; (e) attorney's fees; and (f)
cost of suit.
In its Answer,7 BSP denied any liability contending that not only did
Sps. Mamaril directly deal with AIB with respect to the manner by
which the parked vehicles would be handled, but the parking
ticket8 itself expressly stated that the "Management shall not be
responsible for loss of vehicle or any of its accessories or article left
therein." It also claimed that Sps. Mamaril erroneously relied on the
Guard Service Contract. Apart from not being parties thereto, its
provisions cover only the protection of BSP's properties, its officers,
and employees.
In addition to the foregoing defenses, AIB alleged that it has observed
due diligence in the selection, training and supervision of its security
guards while Pea and Gaddi claimed that the person who drove out
the lost vehicle from the BSP compound represented himself as the
owners' authorized driver and had with him a key to the subject
vehicle. Thus, they contended that Sps. Mamaril have no cause of
action against them.
The RTC Ruling
After due proceedings, the RTC rendered a Decision9 dated November
28, 2001 in favor of Sps. Mamaril. The dispositive portion of the RTC
decision reads:
WHEREFORE, judgment is hereby rendered ordering the defendants
Boy Scout of the Philippines and AIB Security Agency, with security
guards Cesario Pena and Vicente Gaddi: 1. To pay the plaintiffs jointly and severally the cost of the
vehicle which is P250,000.00 plus accessories
ofP50,000.00;
2. To pay jointly and severally to the plaintiffs the daily loss of
the income/boundary of the said jeepney to be reckoned
fromits loss up to the final adjudication of the case, which
is P275.00 a day;
3. To pay jointly and severally to the plaintiffs moral damages
in the amount of P50,000.00;
4. To pay jointly and severally to the plaintiffs exemplary
damages in the amount of P50,000.00;
5. To pay jointly and severally the attorney's fees
of P50,000.00 and appearances in court the amount
ofP1,500.00 per appearance; and
6. To pay cost.
SO ORDERED.10
The RTC found that the act of Pea and Gaddi in allowing the entry of
an unidentified person and letting him drive out the subject vehicle in
violation of their internal agreement with Sps. Mamaril constituted
gross negligence, rendering AIB and its security guards liable for the
former's loss. BSP was also adjudged liable because the Guard
On June 11, 2002, the RTC modified its decision reducing the cost of
the stolen vehicle from P250,000.00 toP200,000.00.11
Only BSP appealed the foregoing disquisition before the CA.
IV.
THE HONORABLE COURT OF APPEALS SERIOUSLY
ERRED WHEN IT RULED THAT PETITIONERS ARE NOT
ENTITLED TO DAMAGES AND ATTORNEY'S FEES.14
The CA Ruling
12
In fine, Sps. Mamaril maintain that: (1) BSP should be held liable for
the loss of their vehicle based on the Guard Service Contract and the
parking ticket it issued; and (2) the CA erred in deleting the RTC
awards of damages and attorney's fees.
The Court's Ruling
The petition lacks merit.
Article 20 of the Civil Code provides that every person, who, contrary
to law, willfully or negligently causes damage to another, shall
indemnify the latter for the same. Similarly, Article 2176 of the Civil
Code states:
Art. 2176. Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage done.
Such fault or negligence, if there is no preexisting contractual relation
between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter.
In this case, it is undisputed that the proximate cause of the loss of
Sps. Mamaril's vehicle was the negligent act of security guards Pea
and Gaddi in allowing an unidentified person to drive out the subject
vehicle. Proximate cause has been defined as that cause, which, in
natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury or loss, and without which the
result would not have occurred.15
Moreover, Pea and Gaddi failed to refute Sps. Mamaril's
contention16 that they readily admitted being at fault during the
investigation that ensued.
On the other hand, the records are bereft of any finding of negligence
on the part of BSP. Hence, no reversible error was committed by the
CA in absolving it from any liability for the loss of the subject vehicle
based on fault or negligence.
Neither will the vicarious liability of an employer under Article 2180 17 of
the Civil Code apply in this case. It is uncontested that Pea and Gaddi
were assigned as security guards by AIB to BSP pursuant to the Guard
Service Contract. Clearly, therefore, no employer-employee
relationship existed between BSP and the security guards assigned in
its premises. Consequently, the latter's negligence cannot be imputed
against BSP but should be attributed to AIB, the true employer of Pea
and Gaddi.18
In the case of Soliman, Jr. v. Tuazon,19 the Court enunciated thus:
It is settled that where the security agency, as here, recruits, hires and
assigns the work of its watchmen or security guards, the agency is the
employer of such guards and watchmen. Liability for illegal or harmful
of contracts, they cannot validly claim any rights or favor under the said
agreement.23 As correctly found by the CA:
First, the Guard Service Contract between defendant-appellant BSP
and defendant AIB Security Agency is purely between the parties
therein. It may be observed that although the whereas clause of the
said agreement provides that defendant-appellant desires security and
protection for its compound and all properties therein, as well as for its
officers and employees, while inside the premises, the same should be
correlated with paragraph 3(a) thereof which provides that the security
agency shall indemnify defendant-appellant for all losses and damages
suffered by it attributable to any act or negligence of the former's
guards.
Otherwise stated, defendant-appellant sought the services of
defendant AIB Security Agency for the purpose of the security and
protection of its properties, as well as that of its officers and
employees, so much so that in case of loss of [sic] damage suffered by
it as a result of any act or negligence of the guards, the security
agency would then be held responsible therefor. There is absolutely
nothing in the said contract that would indicate any obligation and/or
liability on the part of the parties therein in favor of third persons such
as herein plaintiffs-appellees.24
Moreover, the Court concurs with the finding of the CA that the contract
between the parties herein was one of lease25 as defined under Article
164326 of the Civil Code. It has been held that the act of parking a
vehicle in a garage, upon payment of a fixed amount, is a lease.27 Even
in a majority of American cases, it has been ruled that where a
customer simply pays a fee, parks his car in any available space in the
lot, locks the car and takes the key with him, the possession and
control of the car, necessary elements in bailment, do not pass to the
parking lot operator, hence, the contractual relationship between the
parties is one of lease.28
In the instant case, the owners parked their six (6) passenger jeepneys
inside the BSP compound for a monthly fee of P300.00 for each unit
and took the keys home with them. Hence, a lessor-lessee relationship
indubitably existed between them and BSP. On this score, Article 1654
of the Civil Code provides that "the lessor (BSP) is obliged: (1) to
deliver the thing which is the object of the contract in such a condition
as to render it fit for the use intended; (2) to make on the same during
the lease all the necessary repairs in order to keep it suitable for the
use to which it has been devoted, unless there is a stipulation to the
contrary; and (3) to maintain the lessee in the peaceful and adequate
enjoyment of the lease for the entire duration of the contract." In
relation thereto, Article 1664 of the same Code states that "the lessor is
not obliged to answer for a mere act of trespass which a third person
may cause on the use of the thing leased; but the lessee shall have a
direct action against the intruder." Here, BSP was not remiss in its
obligation to provide Sps. Mamaril a suitable parking space for their
jeepneys as it even hired security guards to secure the premises;
hence, it should not be held liable for the loss suffered by Sps.
Mamaril.
It bears to reiterate that the subject loss was caused by the negligence
of the security guards in allowing a stranger to drive out plaintiffsappellants' vehicle despite the latter's instructions that only their
authorized drivers may do so. Moreover, the agreement with respect to
the ingress and egress of Sps. Mamaril's vehicles were coordinated
only with AIB and its security guards,29 without the knowledge and
consent of BSP. Accordingly, the mishandling of the parked vehicles
that resulted in herein complained loss should be recovered only from
the tort feasors (Pea and Gaddi) and their employer, AIB; and not
against the lessor, BSP.30