G.R. No.
L-26872 July 25, 1975 If the above terms is (are) acceptable to your Board, please issue out the said
VILLONCO REALTY COMPANY, plaintiff-appellee and EDITH PEREZ DE
TAGLE, intervenor-appellee, vs. BORMAHECO, INC., FRANCISCO N. CERVANTES
and ROSARIO N. CERVANTES, defendants-appellants. Meer, Meer & Meer
for plaintiff-appellee.
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 adjacent to the
property of Villonco Realty Company situated at 219 Buendia Avenue.
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".
In the course of the negotiations, the brothers Romeo Villonco and
Teofilo Villonco conferred with Cervantes in his office to discuss the price and
terms of the sale. Later, Cervantes "went to see Villonco for the same reason
until some agreement" was arrived at. On a subsequent occasion, Cervantes,
accompanied by Edith Perez de Tagle, discussed again the terms of the sale with
Villonco.
During the negotiations, Villonco Realty Company assumed that the
lots belonged to Bormaheco, Inc. and that Cervantes was duly authorized to sell
the same. Cervantes did not disclose to the broker and to Villonco Realty
Company that the lots were conjugal properties of himself and his wife and that
they were mortgaged to the DBP.
Bormaheco, Inc., through Cervantes, made a written offer dated
February 12, 1964, to Romeo Villonco for the sale of the property. The offer
reads (Exh. B):
BORMAHECO, INC.
February 12,1964
Mr. Romeo Villonco
Villonco Building Buendia Avenue
Makati, Rizal.
Dear Mr. Villonco:
This is with reference to our telephone conversation this noon on the matter
of the sale of our property located at Buendia Avenue, with a total area of 3,500
sq. m., under the following conditions:
(1) That we are offering to sell to you the above property at the price of
P400.00 per square meter;
(2) That a deposit of P100,000.00 must be placed as earnest money on
the purchase of the above property which will become part payment of
the property in the event that the sale is consummated;
(3) That this sale is to be consummated only after I shall have also
consummated my purchase of another property located at Sta. Ana,
Manila;
(4) That if my negotiations with said property will not be consummated
by reason beyond my control, I will return to you your deposit of
P100,000 and the sale of my property to you will not also be
consummated; and
(5) That final negotiations on both properties can be definitely known
after 45 days.
earnest money in favor of Bormaheco, Inc., and deliver the same thru the
bearer, Miss Edith Perez de Tagle.
Very truly yours,
SGD. FRANCISCO N. CERVANTES
President
The property mentioned in Bormaheco's letter was the land of the
National Shipyards & Steel Corporation (Nassco), with an area of twenty
thousand square meters, located at Punta, Sta. Ana, Manila. At the bidding held
on January 17, 1964 that land was awarded to Bormaheco, Inc., the highest
bidder, for the price of P552,000. The Nassco Board of Directors in its resolution
of February 18, 1964 authorized the General Manager to sign the necessary
contract (Exh. H).
On February 28, 1964, the Nassco Acting General Manager wrote a
letter to the Economic Coordinator, requesting approval of that resolution. The
Acting Economic Coordinator approved the resolution on March 24, 1964 (Exh.
1).
In the meanwhile, Bormaheco, Inc. and Villonco Realty Company
continued their negotiations for the sale of the Buendia Avenue property.
Cervantes and Teofilo Villonco had a final conference on February 27, 1964. As
a result of that conference Villonco Realty Company, through Teofilo Villonco,
in its letter of March 4, 1964 made a revised counter- offer (Romeo Villonco's
first counter-offer was dated February 24, 1964, Exh. C) for the purchase of the
property. The counter-offer was accepted by Cervantes as shown in Exhibit D,
which is quoted below:
VILLONCO REALTY COMPANY
V. R. C. Building
219 Buendia Avenue, Makati,
Rizal, Philippines
March 4, 1964
Mr. Francisco Cervantes.
Bormaheco, Inc.
245 Buendia Avenue
Makati, Rizal
Dear Mr. Cervantes:
In reference to the letter of Miss E. Perez de Tagle dated February 12th and 26,
1964 in respect to the terms and conditions on the purchase of your property
located at Buendia Ave., Makati, Rizal, with a total area of 3,500 sq. meters., we
hereby revise our offer, as follows:
1. That the price of the property shall be P400.00 per sq. m., including
the improvements thereon;
2. That a deposit of P100,000.00 shall be given to you as earnest money
which will become as part payment in the event the sale is
consummated;
3. This sale shall be cancelled, only if your deal with another property in
Sta. Ana shall not be consummated and in such case, the P100,000-00
earnest money will be returned to us with a 10% interest p.a. However,
if our deal with you is finalized, said P100,000.00 will become as part
payment for the purchase of your property without interest:
4. The manner of payment shall be as follows:
a. P100,000.00 earnest money and 650,000.00 as part of the down
payment, or P750,000.00 as total down payment
b. The balance is payable as follows: P100,000.00 after 3 months
125,000.00 -do-
212,500.00 -do-
P650,000.00 Total
As regards to the other conditions which we have discussed during
our last conference on February 27, 1964, the same shall be finalized upon
preparation of the contract to sell.*
If the above terms and conditions are acceptable to you, kindly sign
your conformity hereunder. Enclosed is our check for ONE HUNDRED
THOUSAND (P100,000.00) PESOS, MBTC Check No. 448314, as earnest money.
Very truly yours,
VILLONCO REALTY COMPANY
(Sgd.) TEOFILO VILLONCO
CONFORME:
BORMAHECO, INC.
(Sgd.) FRANCISCO CERVANTES
That this sale shall be subject to favorable consummation of a property in Sta.
Ana we are negotiating.
(Sgd.) FRANCISCO CERVANTES
The check for P100,000 (Exh. E) mentioned in the foregoing letter-
contract 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).**
Cervantes in his letter of April 6, 1964, a reply to Miss Tagle's letter,
alleged that the forty-five day period had already expired and the sale to
Bormaheco, Inc. of the Punta property had not been consummated. Cervantes
said that his letter was a "manifestation that we are no longer interested to sell"
the Buendia Avenue property to Villonco Realty Company (Annex I of
Stipulation of Facts). The latter was furnished with a copy of that letter.
In a letter dated April 7, 1964 Villonco Realty Company returned the
two checks to Bormaheco, Inc., stating that the condition for the cancellation
of the contract had not arisen and at the same time announcing that an action
for breach of contract would be filed against Bormaheco, Inc. (Annex G of
Stipulation of Facts).
On that same date, April 7, 1964 Villonco Realty Company filed the
complaint (dated April 6) for specific performance against Bormaheco, Inc. Also
on that same date, April 7, at eight-forty-five in the morning, a notice of lis
pendens was annotated on the titles of the said lots.
Bormaheco, Inc. in its answers dated May 5 and 25, 1964 pleaded
the defense that the perfection of the contract of sale was subject to the
conditions (a) "that final acceptance or not shall be made after 45 days" (sic)
and (b) that Bormaheco, Inc. "acquires the Sta. Ana property".
On June 2, 1964 or during the pendency of this case, the Nassco
Acting General Manager wrote to Bormaheco, Inc., advising it that the Board of
Directors and the Economic Coordinator had approved the sale of the Punta lot
to Bormaheco, Inc. and requesting the latter to send its duly authorized
representative to the Nassco for the signing of the deed of sale (Exh. 1).
The deed of sale for the Punta land was executed on June 26, 1964.
Bormaheco, Inc. was represented by Cervantes (Exh. J. See Bormaheco, Inc. vs.
Abanes, L-28087, July 31, 1973, 52 SCRA 73).
In view of the disclosure in Bormaheco's amended answer that the
three lots were registered in the names of the Cervantes spouses and not in the
name of Bormaheco, Inc., Villonco Realty Company on July 21, 1964 filed an
amended complaint impleading the said spouses as defendants. Bormaheco,
Inc. and the Cervantes spouses filed separate answers.
As of January 15, 1965 Villonco, Realty Company had paid to the
Manufacturers' Bank & Trust Company the sum of P8,712.25 as interests on the
overdraft line of P100,000 and the sum of P27.39 as interests daily on the same
loan since January 16, 1965. (That overdraft line was later settled by Villonco
Realty Company on a date not mentioned in its manifestation of February 19,
1975).
Villonco Realty Company had obligated itself to pay the sum of
P20,000 as attorney's fees to its lawyers. It claimed that it was damaged in the
sum of P10,000 a month from March 24, 1964 when the award of the Punta lot
to Bormaheco, Inc. was approved. On the other hand, Bormaheco, Inc. claimed
that it had sustained damages of P200,000 annually due to the notice of lis
pendens which had prevented it from constructing a multi-story building on the
three lots. (Pars. 18 and 19, Stipulation of Facts).1äwphï1.ñët
Miss Tagle testified that for her services Bormaheco, Inc., through
Cervantes, obligated itself to pay her a three percent commission on the price
of P1,400,000 or the amount of forty-two thousand pesos (14 tsn).
After trial, the lower court rendered a decision ordering the Cervantes spouses
to execute in favor of Bormaheco, Inc. a deed of conveyance 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.
That contention is not well-taken. It should be stressed that there is
no evidence as to what changes were made by Cervantes in Villonco's revised
offer. And there is no evidence that Villonco Realty Company did not assent to
the supposed changes and that such assent was never made known to
Cervantes.
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.
Appellants Bormaheco, Inc. and Cervantes further contend that
Cervantes, in clarifying in the voucher for the earnest money of P100,000 that
Bormaheco's acceptance thereof was subject to the terms and conditions
embodied in Bormaheco's letter of February 12, 1964 and your (Villonco's)
letter of March 4, 1964" made Bormaheco's acceptance "qualified and
conditional".
That contention is not correct. There is no incompatibility between
Bormaheco's offer of February 12, 1964 (Exh. B) and Villonco's counter-offer of
March 4, 1964 (Exh. D). The revised counter-offer merely amplified
Bormaheco's original offer.
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.
Appellants' next contention is that the contract was not perfected because the
condition that Bormaheco, Inc. would acquire the Nassco land within forty-five
days from February 12, 1964 or on or before March 28, 1964 was not fulfilled.
This contention is tied up with the following letter of Bormaheco, Inc. (Exh. F):
BORMAHECO, INC.
March 30, 1964
Villonco Realty Company
V.R.C. Building
219 Buendia Ave.,
Makati, Rizal
Gentlemen:
We are returning herewith your earnest money together with interest thereon
at 10% per annum. Please be informed that despite the lapse of the 45 days
from February 12, 1964 there is no certainty yet for us to acquire a substitute
property, hence the return of the earnest money as agreed upon.
Very truly yours,
SGD. FRANCISCO N. CERVANTES
President
Encl.: P.N.B. Check No. 112994 J
P.N.B. Check No. 112996J
That contention is predicated on the erroneous assumption that Bormaheco,
Inc. was to acquire the Nassco land within forty-five days or on or before March
28, 1964.
The trial court ruled that the forty-five-day period was merely an estimate or a
forecast of how long it would take Bormaheco, Inc. to acquire the Nassco
property and it was not "a condition or a deadline set for the defendant
corporation to decide whether or not to go through with the sale of its Buendia
property".
The record does not support the theory of Bormaheco, Inc. and the Cervantes
spouses that the forty-five-day period was the time within which (a) the Nassco
property and two Pasong Tamo lots should be acquired, (b) when Cervantes
would secure his wife's consent to the sale of the three lots and (c) when
Bormaheco, Inc. had to decide what to do with the DBP encumbrance.
Cervantes in paragraph 3 of his offer of February 12, 1964 stated that the sale
of the Buendia lots would be consummated after he had consummated the
purchase of the Nassco property. Then, in paragraph 5 of the same offer he
stated "that final negotiations on both properties can be definitely
known after forty-five days" (See Exh. B).
It is deducible from the tenor of those statements that the
consummation of the sale of the Buendia lots to Villonco Realty Company was
conditioned on Bormaheco's acquisition of the Nassco land. But it was not
spelled out that such acquisition should be effected within forty-five days from
February 12, 1964. Had it been Cervantes' intention that the forty-five days
would be the period within which the Nassco land should be acquired by
Bormaheco, then he would have specified that period in paragraph 3 of his offer
so that paragraph would read in this wise: "That this sale is to be consummated
only after I shall have consummated my purchase of another property located
at Sta. Ana, Manila within forty-five days from the date hereof ." He could have
also specified that period in his "conforme" to Villonco's counter-offer 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 counter-offer 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).1äwphï1.ñët
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.
Those arguments are not sustainable. It should be remembered that
Cervantes, in rescinding the contract of sale and in returning the earnest
money, cited as an excuse the circumstance that there was no certainty in
Bormaheco's acquisition of the Nassco property (Exh. F and Annex 1). He did
not say that Mrs. Cervantes was opposed to the sale of the three lots. He did
not tell Villonco Realty Company that he could not bind the conjugal
partnership. In truth, he concealed the fact that the three lots were registered
"in the name of FRANCISCO CERVANTES, Filipino, of legal age, married to
Rosario P. Navarro, as owner thereof in fee simple". He certainly led the
Villonco brothers to believe that as president of Bormaheco, Inc. he could
dispose of the said lots. He inveigled the Villoncos into believing that he had
untrammelled control of Bormaheco, Inc., that Bormaheco, Inc. owned the lots
and that he was invested with adequate authority to sell the same.
Thus, in Bormaheco's offer of February 12, 1964, Cervantes first
identified the three lots as "our property" which "we are offering to sell ..."
(Opening paragraph and par. 1 of Exh. B). Whether the prounoun "we" refers
to himself and his wife or to Bormaheco, Inc. is not clear. Then, in paragraphs 3
and 4 of the offer, he used the first person and said: "I shall have consummated
my purchase" of the Nassco property; "... my negotiations with said property"
and "I will return to you your deposit". Those expressions conveyed the
impression and generated the belief that the Villoncos did not have to deal with
Mrs. Cervantes nor with any other official of Bormaheco, Inc.
The pleadings disclose that Bormaheco, Inc. and Cervantes deliberately and
studiously avoided making the allegation that Cervantes was not authorized by
his wife to sell the three lots or that he acted merely as president of Bormaheco,
Inc. That defense was not interposed so as not to place Cervantes in the
ridiculous position of having acted under false pretenses when he negotiated
with the Villoncos for the sale of the three lots.
Villonco Realty Company, in paragraph 2 of its original complaint,
alleged that "on February 12, 1964, after some prior negotiations, the
defendant (Bormaheco, Inc.) made a formal offer to sell to the plaintiff
the property of the said defendant situated at the abovenamed address along
Buendia Avenue, Makati, Rizal, under the terms of the letter-offer, a copy of
which is hereto attached as Annex A hereof", now Exhibit B (2 Record on
Appeal).
That paragraph 2 was not, repeat, was not denied by Bormaheco,
Inc. in its answer dated May 5, 1964. It did not traverse that paragraph 2.
Hence, it was deemed admitted. However, it filed an amended answer dated
May 25, 1964 wherein it denied that it was the owner of the three lots. It
revealed that the three lots "belong and are registered in the names of the
spouses Francisco N. Cervantes and Rosario N. Cervantes."
The three answers of Bormaheco, Inc. contain the following affirmative
defense:
13. That defendant's insistence to finally decide on the proposed
sale of the land in question after 45 days had not only for its purpose the
determination of its acquisition of the said Sta. Ana (Nassco) property during
the said period, but also to negotiate with the actual and registered owner of
the parcels of land covered by T.C.T. Nos. 43530, 43531 and 43532 in question
which plaintiff was fully aware that the same were not in the name of the
defendant (sic; Par. 18 of Answer to Amended Complaint, 10, 18 and 34, Record
on Appeal).
In that affirmative defense, Bormaheco, Inc. pretended that it
needed forty- five days within which to acquire the Nassco property and "to
negotiate" with the registered owner of the three lots. The absurdity of that
pretension stands out in bold relief when it is borne in mind that the answers
of Bormaheco, Inc. were verified by Cervantes and that the registered owner of
the three lots is Cervantes himself. That affirmative defense means that
Cervantes as president of Bormaheco, Inc. needed forty-five days in order to
"negotiate" with himself (Cervantes).
The incongruous stance of the Cervantes spouses is also patent in
their answer to the amended complaint. In that answer they disclaimed
knowledge or information of certain allegations which were well-known to
Cervantes as president of Bormaheco, Inc. and which were admitted in
Bormaheco's three answers that were verified by Cervantes.
It is significant to note that Bormaheco, Inc. in its three answers,
which were verified by Cervantes, never pleaded as an affirmative defense that
Mrs. Cervantes opposed the sale of the three lots or that she did not authorize
her husband to sell those lots. Likewise, it should be noted that in their separate
answer the Cervantes spouses never pleaded as a defense that Mrs. Cervantes
was opposed to the sale of three lots or that Cervantes could not bind the
conjugal partnership. The appellants were at first hesitant to make it appear
that Cervantes had committed the skullduggery of trying to sell property which
he had no authority to alienate.
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.
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).
4. Bormaheco, Inc. is ordered (a) to pay Villonco Realty Company twenty
thousand pesos (P20,000) as attorney's fees and (b) to pay Edith Perez de Tagle
the sum of forty-two thousand pesos (P42,000) as commission. Costs against
the defendants-appellants.
SO ORDERED.
Makalintal, C.J, Castro. Fernando, Makasiar, Antonio, Esguerra, Muñoz Palma,
Concepcion Jr. and Martin, JJ., concur.
Teehankee, J., is on leave.
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.
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. 87-41058, 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 P5-million; that plaintiffs
thereafter asked the defendants to put their offer in writing to which request
defendants acceded; that in reply to defendant's letter, plaintiffs wrote them
on October 24, 1986 asking that they specify the terms and conditions of the
offer to sell; that when plaintiffs did not receive any reply, they sent another
letter dated January 28, 1987 with the same request; that since defendants
failed to specify the terms and conditions of the offer to sell and because of
information received that defendants were about to sell the property, plaintiffs
were compelled to file the complaint to compel defendants to sell the property
to them.
Defendants filed their answer denying the material allegations of
the complaint and interposing a special defense of lack of cause of action.
After the issues were joined, defendants filed a motion for summary
judgment which was granted by the lower court. The trial court found that
defendants' offer to sell was never accepted by the plaintiffs for the reason that
the parties did not agree upon the terms and conditions of the proposed sale,
hence, there was no contract of sale at all. Nonetheless, the lower court ruled
that should the defendants subsequently offer their property for sale at a price
of P11-million or below, plaintiffs will have the right of first refusal. Thus the
dispositive portion of the decision states:
WHEREFORE, judgment is hereby rendered in favor of the
defendants and against the plaintiffs summarily dismissing the complaint
subject to the aforementioned condition that if the defendants subsequently
decide to offer their property for sale for a purchase price of Eleven Million
Pesos or lower, then the plaintiffs has the option to purchase the property or
of first refusal, otherwise, defendants need not offer the property to the
plaintiffs if the purchase price is higher than Eleven Million Pesos.
SO ORDERED.
Aggrieved by the decision, plaintiffs appealed to this Court in
CA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990
(penned by Justice Segundino G. Chua and concurred in by Justices Vicente V.
Mendoza and Fernando A. Santiago), this Court affirmed with modification the
lower court's judgment, holding:
In resume, there was no meeting of the minds between the parties
concerning the sale of the property. Absent such requirement, the claim for
specific performance will not lie. Appellants' demand for actual, moral and
exemplary damages will likewise fail as there exists no justifiable ground for its
award. Summary judgment for defendants was properly granted. Courts may
render summary judgment when there is no genuine issue as to any material
fact and the moving party is entitled to a judgment as a matter of law (Garcia
vs. Court of Appeals, 176 SCRA 815). All requisites obtaining, the decision of the
court a quo is legally justifiable.
WHEREFORE, finding the appeal unmeritorious, the judgment
appealed from is hereby AFFIRMED, but subject to the following modification:
The court a quo in the aforestated decision gave the plaintiffs-appellants the
right of first refusal only if the property is sold for a purchase price of Eleven
Million pesos or lower; however, considering the mercurial and uncertain
forces in our market economy today. We find no reason not to grant the same
right of first refusal to herein appellants in the event that the subject property
is sold for a price in excess of Eleven Million pesos. No pronouncement as to
costs.
SO ORDERED.
The decision of this Court was brought to the Supreme Court by
petition for review on certiorari. The Supreme Court denied the appeal on May
6, 1991 "for insufficiency in form and substances" (Annex H, Petition).
On November 15, 1990, while CA-G.R. CV No. 21123 was pending
consideration by this Court, the Cu Unjieng spouses executed a Deed of Sale
(Annex D, Petition) transferring the property in question to herein petitioner
Buen Realty and Development Corporation, subject to the following terms and
conditions:
1. That for and in consideration of the sum of FIFTEEN MILLION PESOS
(P15,000,000.00), receipt of which in full is hereby acknowledged, the
VENDORS hereby sells, transfers and conveys for and in favor of the VENDEE,
his heirs, executors, administrators or assigns, the above-described property
with all the improvements found therein including all the rights and interest in
the said property free from all liens and encumbrances of whatever nature,
except the pending ejectment proceeding;
2. That the VENDEE shall pay the Documentary Stamp Tax, registration fees for
the transfer of title in his favor and other expenses incidental to the sale of
above-described property including capital gains tax and accrued real estate
taxes.
As a consequence of the sale, TCT No. 105254/T-881 in the name of
the Cu Unjieng spouses was cancelled and, in lieu thereof, TCT No. 195816 was
issued in the name of petitioner on December 3, 1990.
On July 1, 1991, petitioner as the new owner of the subject property wrote a
letter to the lessees demanding that the latter vacate the premises.
On July 16, 1991, the lessees wrote a reply to petitioner stating that
petitioner brought the property subject to the notice of lis pendens regarding
Civil Case No. 87-41058 annotated on TCT No. 105254/T-881 in the name of
the Cu Unjiengs.
The lessees filed a Motion for Execution dated August 27, 1991 of
the Decision in Civil Case No. 87-41058 as modified by the Court of Appeals in
CA-G.R. CV No. 21123.
On August 30, 1991, respondent Judge issued an order (Annex A,
Petition) quoted as follows:
Presented before the Court is a Motion for Execution filed by
plaintiff represented by Atty. Antonio Albano. Both defendants Bobby Cu
Unjieng and Rose Cu Unjieng represented by Atty. Vicente Sison and Atty.
Anacleto Magno respectively were duly notified in today's consideration of the
motion as evidenced by the rubber stamp and signatures upon the copy of the
Motion for Execution.
The gist of the motion is that the Decision of the Court dated
September 21, 1990 as modified by the Court of Appeals in its decision in CA
G.R. CV-21123, and elevated to the Supreme Court upon the petition for review
and that the same was denied by the highest tribunal in its resolution dated
May 6, 1991 in G.R. No. L-97276, had now become final and executory. As a
consequence, there was an Entry of Judgment by the Supreme Court as of June
6, 1991, stating that the aforesaid modified decision had already become final
and executory.
It is the observation of the Court that this property in dispute was
the subject of the Notice of Lis Pendens and that the modified decision of this
Court promulgated by the Court of Appeals which had become final to the
effect that should the defendants decide to offer the property for sale for a
price of P11 Million or lower, and considering the mercurial and uncertain
forces in our market economy today, the same right of first refusal to herein
plaintiffs/appellants in the event that the subject property is sold for a price in
excess of Eleven Million pesos or more.
WHEREFORE, defendants are hereby ordered to execute the
necessary Deed of Sale of the property in litigation in favor of plaintiffs Ang Yu
Asuncion, Keh Tiong and Arthur Go for the consideration of P15 Million pesos
in recognition of plaintiffs' right of first refusal and that a new Transfer
Certificate of Title be issued in favor of the buyer.
All previous transactions involving the same property
notwithstanding the issuance of another title to Buen Realty Corporation, is
hereby set aside as having been executed in bad faith.
SO ORDERED.
On September 22, 1991 respondent Judge issued another order, the
dispositive portion of which reads:
WHEREFORE, let there be Writ of Execution issue in the above-
entitled case directing the Deputy Sheriff Ramon Enriquez of this Court to
implement said Writ of Execution ordering the defendants among others to
comply with the aforesaid Order of this Court within a period of one (1) week
from receipt of this Order and for defendants to execute the necessary Deed of
Sale of the property in litigation in favor of the plaintiffs Ang Yu Asuncion, Keh
Tiong and Arthur Go for the consideration of P15,000,000.00 and ordering the
Register of Deeds of the City of Manila, to cancel and set aside the title already
issued in favor of Buen Realty Corporation which was previously executed
between the latter and defendants and to register the new title in favor of the
aforesaid plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go.
SO ORDERED.
On the same day, September 27, 1991 the corresponding writ of
execution (Annex C, Petition) was issued.1
On 04 December 1991, the appellate court, on appeal to it by
private respondent, set aside and declared without force and effect the above
questioned orders of the court a quo.
In this petition for review on certiorari, petitioners contend that
Buen Realty can be held bound by the writ of execution by virtue of the notice
of lis pendens, carried over on TCT No. 195816 issued in the name of Buen
Realty, at the time of the latter's purchase of the property on 15 November
1991 from the Cu Unjiengs.
We affirm the decision of the appellate court.
A not too recent development in real estate transactions is the
adoption of such arrangements as the right of first refusal, a purchase option
and a contract to sell. For ready reference, we might point out some
fundamental precepts that may find some relevance to this discussion.
An obligation is a juridical necessity to give, to do or not to do (Art.
1156, Civil Code). The obligation is constituted upon the concurrence 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.
Among the sources of an obligation is a contract (Art. 1157, Civil
Code), which is a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service
(Art. 1305, Civil Code). A contract undergoes various stages that include its
negotiation or preparation, its perfection and, finally, its
consummation. Negotiation covers the period from the time the prospective
contracting parties indicate interest in the contract to the time the contract is
concluded (perfected). The perfection of the contract takes place upon the
concurrence of the essential elements thereof. A contract which
is consensual as to perfection is so established upon a mere meeting of minds,
i.e., the concurrence of offer and acceptance, on the object and on the cause
thereof. A contract which requires, in addition to the above, the delivery of the
object of the agreement, as in a pledge or commodatum, is commonly referred
to as a real contract. In a solemn contract, compliance with certain formalities
prescribed by law, such as in a donation of real property, is essential in order to
make the act valid, the prescribed form being thereby an essential element
thereof. The stage of consummation begins when the parties perform their
respective undertakings under the contract culminating in the extinguishment
thereof.
Until the contract is perfected, it cannot, as an independent source
of obligation, serve as a binding juridical relation. In sales, particularly, to which
the topic for discussion about the case at bench belongs, the contract is
perfected when a person, called the seller, obligates himself, for a price certain,
to deliver and to transfer ownership of a thing or right to another, called the
buyer, over which the latter agrees. Article 1458 of the Civil Code provides:
Art. 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a determinate
thing, and the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
When the sale is not absolute but conditional, such as in a "Contract
to Sell" where invariably the ownership of the thing sold is retained until the
fulfillment of a positive suspensive condition (normally, the full payment of the
purchase price), the breach of the condition will prevent the obligation to
convey title from acquiring an obligatory force.2 In Dignos vs. Court of
Appeals (158 SCRA 375), we have said that, although denominated a "Deed of
Conditional Sale," a sale is still absolute where the contract is devoid of
any proviso that title is reserved or the right to unilaterally rescind is stipulated,
e.g., until or unless the price is paid. Ownership will then be transferred to the
buyer upon actual or constructive delivery (e.g., by the execution of a public
document) of the property sold. Where the condition is imposed upon the
perfection of the contract itself, the failure of the condition would prevent such
perfection.3 If the condition is imposed on the obligation of a party which is not
fulfilled, the other party may either waive the condition or refuse to proceed
with the sale (Art. 1545, Civil Code).4
An unconditional mutual promise to buy and sell, as long as the
object is made determinate and the price is fixed, can be obligatory on the
parties, and compliance therewith may accordingly be exacted.5
An accepted unilateral promise which specifies the thing to be sold
and the price to be paid, when coupled with a valuable consideration
distinct and separate from the price, is what may properly be termed a
perfected contract of option. This contract is legally binding, and in sales, it
conforms with the second paragraph of Article 1479 of the Civil Code, viz:
Art. 1479. . . .
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. (1451a)6
Observe, however, that the option is not the contract of sale
itself.7 The optionee has the right, but not the obligation, to buy. Once the
option is exercised timely, i.e., the offer is accepted before a breach of the
option, a bilateral promise to sell and to buy ensues and both parties are then
reciprocally bound to comply with their respective undertakings.8
Let us elucidate a little. A negotiation is formally initiated by an offer.
An imperfect promise (policitacion) is merely an offer. Public advertisements or
solicitations and the like are ordinarily construed as mere invitations to make
offers or only as proposals. These relations, until a contract is perfected, are
not considered binding commitments. Thus, at any time prior to the perfection
of the contract, either negotiating party may stop the negotiation. The offer, at
this stage, may be withdrawn; the withdrawal is effective immediately after its
manifestation, such as by its mailing and not necessarily when the offeree
learns of the withdrawal (Laudico vs. Arias, 43 Phil. 270). Where a period is
given to the offeree within which to accept the offer, the following rules
generally govern:
(1) If the period is not itself founded upon or supported by a consideration, the
offeror is still free and has the right to withdraw the offer before its acceptance,
or, if an acceptance has been made, before the offeror's coming to know of
such fact, by communicating that withdrawal to the offeree (see Art. 1324, Civil
Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is
applicable to a unilateral promise to sell under Art. 1479, modifying the
previous decision in South Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see
also Art. 1319, Civil Code; Rural Bank of Parañaque, Inc., vs. Remolado, 135
SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw, however,
must not be exercised whimsically or arbitrarily; otherwise, it could give rise to
a damage claim under Article 19 of the Civil Code which ordains that "every
person must, in the exercise of his rights and in the performance of his duties,
act with justice, give everyone his due, and observe honesty and good faith."
(2) If the period has a separate consideration, a contract of "option" is
deemed perfected, and it would be a breach of that contract to withdraw the
offer during the agreed period. The option, however, is an independent
contract by itself, and it is to be distinguished from the projected main
agreement (subject matter of the option) which is obviously yet to be
concluded. If, in fact, the optioner-offeror withdraws the offer before its
acceptance (exercise of the option) by the optionee-offeree, the latter may not
sue for specific performance on the proposed contract ("object" of the option)
since it has failed to reach its own stage of perfection. The optioner-offeror,
however, renders himself liable for damages for breach of the option. In these
cases, care should be taken of the real nature of the consideration given, for if,
in fact, it has been intended to be part of the consideration for the main
contract with a right of withdrawal on the part of the optionee, the main
contract could be deemed perfected; a similar instance would be an "earnest
money" in a contract of sale that can evidence its perfection (Art. 1482, Civil
Code).
In the law on sales, the so-called "right of first refusal" is an innovative juridical
relation. Needless to point out, it cannot be deemed a perfected contract of
sale under Article 1458 of the Civil Code. Neither can the right of first refusal,
understood in its normal concept, per se be brought within the purview of an
option under the second paragraph of Article 1479, aforequoted, or possibly of
an offer under Article 13199 of the same Code. An option or an offer would
require, among other things,10 a clear certainty on both the object and the
cause or consideration of the envisioned contract. In a right of first refusal,
while the object might be made determinate, the exercise of the right,
however, would be dependent not only on the grantor's eventual intention to
enter into a binding juridical relation with another but also on terms, including
the price, that obviously are yet to be later firmed up. Prior thereto, it can at
best be so described as merely belonging to a class of preparatory juridical
relations governed not by contracts (since the essential elements to establish
the vinculum juris would still be indefinite and inconclusive) but by, among
other laws of general application, the pertinent scattered provisions of the Civil
Code on human conduct.
Even on the premise that such right of first refusal has been decreed
under a final judgment, like here, its breach cannot justify correspondingly an
issuance of a writ of execution under a judgment that merely recognizes its
existence, nor would it sanction an action for specific performance without
thereby negating the indispensable element of consensuality in the perfection
of contracts.11 It is not to say, however, that the right of first refusal would be
inconsequential for, such as already intimated above, an unjustified disregard
thereof, given, for instance, the circumstances expressed in Article 1912 of the
Civil Code, can warrant a recovery for damages.
The final judgment in Civil Case No. 87-41058, it must be stressed,
has merely accorded a "right of first refusal" in favor of petitioners. The
consequence of such a declaration entails no more than what has heretofore
been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved
by the failure of private respondents to honor the right of first refusal, the
remedy is not a writ of execution on the judgment, since there is none to
execute, but an action for damages in a proper forum for the purpose.
Furthermore, whether private respondent Buen Realty
Development Corporation, the alleged purchaser of the property, has acted in
good faith or bad faith and whether or not it should, in any case, be considered
bound to respect the registration of the lis pendens in Civil Case No. 87-41058
are matters that must be independently addressed in appropriate proceedings.
Buen Realty, not having been impleaded in Civil Case No. 87-41058, cannot be
held subject to the writ of execution issued by respondent Judge, let alone
ousted from the ownership and possession of the property, without first being
duly afforded its day in court.
We are also unable to agree with petitioners that the Court of
Appeals has erred in holding that the writ of execution varies the terms of the
judgment in Civil Case No. 87-41058, later affirmed in CA-G.R. CV-21123. The
Court of Appeals, in this regard, has observed:
Finally, the questioned writ of execution is in variance with the
decision of the trial court as modified by this Court. As already stated, there
was nothing in said decision 13 that decreed the execution of a deed of sale
between the Cu Unjiengs and respondent lessees, or the fixing of the price of
the sale, or the cancellation of title in the name of petitioner (Limpin vs. IAC,
147 SCRA 516; Pamantasan ng Lungsod ng Maynila vs. IAC, 143 SCRA 311; De
Guzman vs. CA, 137 SCRA 730; Pastor vs. CA, 122 SCRA 885).
It is likewise quite obvious to us that the decision in Civil Case No. 87-41058
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. 133638. April 15, 2005]
PERPETUA VDA. DE APE, petitioner, vs. THE HONORABLE COURT OF APPEALS
and GENOROSA CAWIT VDA. DE LUMAYNO, respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a petition for review on certiorari of the Decision[1] of
the Court of Appeals in CA-G.R. CV No. 45886 entitled, Generosa Cawit de
Lumayno, accompanied by her husband Braulio Lumayno v. Fortunato Ape,
including his wife Perpetua de Ape.
The pertinent facts are as follows:
Cleopas Ape was the registered owner of a parcel of land particularly known as
Lot No. 2319 of the Escalante Cadastre of Negros Occidental and covered by
Original Certificate of Title (OCT) No. RP 1379 (RP-154 [300]).[2] Upon Cleopas
Apes death sometime in 1950, the property passed on to his wife, Maria Ondoy,
and their eleven (11) children, namely: Fortunato, Cornelio, Bernalda,
Bienvenido, Encarnacion, Loreta, Lourdes, Felicidad, Adela, Dominador, and
Angelina, all surnamed Ape.
On 15 March 1973, Generosa Cawit de Lumayno (private
respondent herein), joined by her husband, Braulio,[3] instituted a case for
Specific Performance of a Deed of Sale with Damages against Fortunato and his
wife Perpetua (petitioner herein) before the then Court of First Instance of
Negros Occidental. It was alleged in the complaint that on 11 April 1971, private
respondent and Fortunato entered into a contract of sale of land under which
for a consideration of P5,000.00, Fortunato agreed to sell his share in Lot No.
2319 to private respondent. The agreement was contained in a receipt
prepared by private respondents son-in-law, Andres Flores, at her behest. Said
receipt was attached to the complaint as Annex A thereof and later marked as
Exhibit G for private respondent. The receipt states:
April 11, 1971
TO WHOM IT MAY CONCERN:
This date received from Mrs. Generosa Cawit de Lumayno the sum of THIRTY
PESOS ONLY as Advance Payment of my share in Land Purchased, for FIVE
THOUSAND PESOS LOT #2319.
(Signed)
FORTUNATO APE
P30.00 WITNESS:
(Illegible) [4]
As private respondent wanted to register the claimed sale
transaction, she supposedly demanded that Fortunato execute the
corresponding deed of sale and to receive the balance of the consideration.
However, Fortunato unjustifiably refused to heed her demands. Private
respondent, therefore, prayed that Fortunato be ordered to execute and
deliver to her a sufficient and registrable deed of sale involving his one-eleventh
(1/11) share or participation in Lot No. 2319 of the Escalante Cadastre; to pay
P5,000.00 in damages; P500.00 reimbursement for litigation expenses as well
as additional P500.00 for every appeal made; P2,000.00 for attorneys fees; and
to pay the costs.[5]
Fortunato and petitioner denied the material allegations of the
complaint and claimed that Fortunato never sold his share in Lot No. 2319 to
private respondent and that his signature appearing on the purported receipt
was forged. By way of counterclaim, the defendants below maintained having
entered into a contract of lease with respondent involving Fortunatos portion
of Lot No. 2319. This purported lease contract commenced in 1960 and was
supposed to last until 1965 with an option for another five (5) years. The annual
lease rental was P100.00 which private respondent and her husband allegedly
paid on installment basis. Fortunato and petitioner also assailed private
respondent and her husbands continued possession of the rest of Lot No. 2319
alleging that in the event they had acquired the shares of Fortunatos co-owners
by way of sale, he was invoking his right to redeem the same. Finally, Fortunato
and petitioner prayed that the lease contract between them and respondent
be ordered annulled; and that respondent be ordered to pay them attorneys
fees; moral damages; and exemplary damages.[6]
In their reply,[7] the private respondent and her husband alleged
that they had purchased from Fortunatos co-owners, as evidenced by various
written instruments,[8] their respective portions of Lot No. 2319. By virtue of
these sales, they insisted that Fortunato was no longer a co-owner of Lot No.
2319 thus, his right of redemption no longer existed.
Prior to the resolution of this case at the trial court level, Fortunato
died and was substituted in this action by his children named Salodada, Clarita,
Narciso, Romeo, Rodrigo, Marieta, Fortunato, Jr., and Salvador, all surnamed
Ape.[9]
During the trial, private respondent testified that she and her
husband acquired the various portions of Lot No. 2319 belonging to Fortunatos
co-owners. Thereafter, her husband caused the annotation of an adverse claim
on the certificate of title of Lot No. 2319.[10]The annotation states:
Entry No. 123539 Adverse claim filed by Braulio Lumayno. Notice of
adverse claim filed by Braulio Lumayno affecting the lot described in this title
to the extent of 77511.93 square meters, more or less, the aggregate area of
shares sold to him on the basis of (alleged) sales in his possession. Doc. No. 157,
Page No. 33, Book No. XI, Series of 1967 of Alexander Cawit of Escalante, Neg.
Occ. Date of instrument. June 22, 1967 at 8:30 a.m. (SGD) FEDENCIORRAZ, Actg.
Register of Deeds.[11]
In addition, private respondent claimed that after the acquisition of
those shares, she and her husband had the whole Lot No. 2319 surveyed by a
certain Oscar Mascada who came up with a technical description of said piece
of land.[12] Significantly, private respondent alleged that Fortunato was present
when the survey was conducted.[13]
Also presented as evidence for private respondent were pictures
taken of some parts of Lot No. 2319 purportedly showing the land belonging to
Fortunato being bounded by a row of banana plants thereby separating it from
the rest of Lot No. 2319.[14]
As regards the circumstances surrounding the sale of Fortunatos
portion of the land, private respondent testified that Fortunato went to her
store at the time when their lease contract was about to expire. He allegedly
demanded the rental payment for his land but as she was no longer interested
in renewing their lease agreement, they agreed instead to enter into a contract
of sale which Fortunato acceded to provided private respondent bought his
portion of Lot No. 2319 for P5,000.00. Thereafter, she asked her son-in-law
Flores to prepare the aforementioned receipt. Flores read the document to
Fortunato and asked the latter whether he had any objection thereto.
Fortunato then went on to affix his signature on the receipt.
For her part, petitioner insisted that the entire Lot No. 2319 had not
yet been formally subdivided;[15] that on 11 April 1971 she and her husband
went to private respondents house to collect past rentals for their land then
leased by the former, however, they managed to collect only thirty
pesos;[16] that private respondent made her (petitioners) husband sign a receipt
acknowledging the receipt of said amount of money;[17] and that the contents
of said receipt were never explained to them.[18] She also stated in her
testimony that her husband was an illiterate and only learned how to write his
name in order to be employed in a sugar central.[19] As for private respondents
purchase of the shares owned by Fortunatos co-owners, petitioner maintained
that neither she nor her husband received any notice regarding those sales
transactions.[20] The testimony of petitioner was later on corroborated by her
daughter-in-law, Marietta Ape Dino.[21]
After due trial, the court a quo rendered a decision[22] dismissing both the
complaint and the counterclaim. The trial court likewise ordered that deeds or
documents representing the sales of the shares previously owned by
Fortunatos co-owners be registered and annotated on the existing certificate
of title of Lot No. 2319. According to the trial court, private respondent failed
to prove that she had actually paid the purchase price of P5,000.00 to
Fortunato and petitioner. Applying, therefore, the provision of Article 1350 of
the Civil Code,[23] the trial court concluded that private respondent did not have
the right to demand the delivery to her of the registrable deed of sale over
Fortunatos portion of the Lot No. 2319.
The trial court also rejected Fortunato and petitioners claim that
they had the right of redemption over the shares previously sold to private
respondent and the latters husband, reasoning as follows:
Defendants in their counterclaim invoke their right of legal
redemption under Article 1623 of the New Civil Code in view of the alleged sale
of the undivided portions of the lot in question by their co-heirs and co-owners
as claimed by the plaintiffs in their complaint. They have been informed by the
plaintiff about said sales upon the filing of the complaint in the instant case as
far back as March 14, 1973. Defendant themselves presented as their very own
exhibits copies of the respective deeds of sale or conveyance by their said co-
heirs and co-owners in favor of the plaintiffs or their predecessors-in-interest
way back on January 2, 1992 when they formally offered their exhibits in the
instant case; meaning, they themselves acquired possession of said
documentary exhibits even before they formally offered them in evidence.
Under Art. 1623 of the New Civil Code, defendants have only THIRTY (30) DAYS
counted from their actual knowledge of the exact terms and conditions of the
deeds of sale or conveyance of their co-heirs and co-owners share within which
to exercise their right of legal redemption.[24]
Within the reglementary period, both parties filed their respective
notices of appeal before the trial court with petitioner and her children taking
exception to the finding of the trial court that the period within which they
could invoke their right of redemption had already lapsed.[25] For her part,
private respondent raised as errors the trial courts ruling that there was no
contract of sale between herself and Fortunato and the dismissal of their
complaint for specific performance.[26]
The Court of Appeals, in the decision now assailed before us,
reversed and set aside the trial courts dismissal of the private respondents
complaint but upheld the portion of the court a quos decision ordering the
dismissal of petitioner and her childrens counterclaim. The dispositive portion
of the appellate courts decision reads:
WHEREFORE, the decision dated March 11, 1994, is hereby
REVERSED and SET ASIDE insofar as the dismissal of plaintiffs-appellants
complaint is concerned, and another one is entered ordering the defendant-
appellant Fortunato Ape and/or his wife Perpetua de Ape and successors-in-
interest to execute in favor of plaintiff-appellant Generosa Cawit de Lumayno a
Deed of Absolute Sale involving the one-eleventh (1/11) share or participation
of Fortunato Ape in Lot No. 2319, Escalante Cadastre, containing an area of
12,527.19 square meters, more or less, within (30) days from finality of this
decision, and in case of non-compliance with this Order, that the Clerk of Court
of said court is ordered to execute the deed on behalf of the vendor. The
decision is AFFIRMED insofar as the dismissal of defendants-appellants
counterclaim is concerned.
Without pronouncement as to costs.[27]
The Court of Appeals upheld private respondents position that
Exhibit G had all the earmarks of a valid contract of sale, thus:
Exhibit G is the best proof that the P5,000.00 representing the purchase price
of the 1/11th share of Fortunato Ape was not paid by the vendee on April 11,
1971, and/or up to the present, but that does not affect the binding force and
effect of the document. The vendee having paid the vendor an advance
payment of the agreed purchase price of the property, what the vendor can
exact from the vendee is full payment upon his execution of the final deed of
sale. As is shown, the vendee precisely instituted this action to compel the
vendor Fortunato Ape to execute the final document, after she was informed
that he would execute the same upon arrival of his daughter Bala from
Mindanao, but afterwards failed to live up to his contractual obligation (TSN,
pp. 11-13, June 10, 1992).
 It is not right for the trial court to expect plaintiff-appellant to pay
the balance of the purchase price before the final deed is executed, or for her
to deposit the equivalent amount in court in the form of consignation.
Consignation comes into fore in the case of a creditor to
whom tender of paymenthas been made and refuses without just cause to
accept it (Arts. 1256 and 1252, N.C.C.; Querino vs. Pelarca, 29 SCRA 1). As
vendee, plaintiff-appellant Generosa Cawit de Lumayno does not fall within the
purview of a debtor.
We, therefore, find and so hold that the trial court should have
found that exhibit G bears all the earmarks of a private deed of sale which is
valid, binding and enforceable between the parties, and that as a consequence
of the failure and refusal on the part of the vendor Fortunato Ape to live up to
his contractual obligation, he and/or his heirs and successors-in-interest can be
compelled to execute in favor of, and to deliver to the vendee, plaintiff-
appellant Generosa Cawit de Lumayno a registerable deed of absolute sale
involving his one-eleventh (1/11th) share or participation in Lot No. 2319,
Escalante Cadastre, containing an area of 12,527.19 square meters, more or
less, within 30 days from finality of this decision, and, in case of non-compliance
within said period, this Court appoints the Clerk of Court of the trial court to
execute on behalf of the vendor the said document.[28]
The Court of Appeals, however, affirmed the trial courts ruling on
the issue of petitioner and her childrens right of redemption. It ruled that
Fortunatos receipt of the Second Owners Duplicate of OCT (RP) 1379 (RP-154
([300]), containing the adverse claim of private respondent and her husband,
constituted a sufficient compliance with the written notice requirement of
Article 1623 of the Civil Code and the period of redemption under this provision
had long lapsed.
Aggrieved by the decision of the appellate court, petitioner is now
before us raising, essentially, the following issues: whether Fortunato was
furnished with a written notice of sale of the shares of his co-owners as
required by Article 1623 of the Civil Code; and whether the receipt signed by
Fortunato proves the existence of a contract of sale between him and private
respondent.
In her memorandum, petitioner claimed that the Court of Appeals
erred in sustaining the court a quos pronouncement that she could no longer
redeem the portion of Lot No. 2319 already acquired by private respondent for
no written notice of said sales was furnished them. According to her, the Court
of Appeals unduly expanded the scope of the law by equating Fortunatos
receipt of Second Owners Duplicate of OCT (RP) 1379 (RP-154 ([300]) with the
written notice requirement of Article 1623. In addition, she argued that Exhibit
G could not possibly be a contract of sale of Fortunatos share in Lot No. 2319
as said document does not contain (a) definite agreement on the manner of
payment of the price.[29] Even assuming that Exhibit G is, indeed, a contract of
sale between private respondent and Fortunato, the latter did not have the
obligation to deliver to private respondent a registrable deed of sale in view of
private respondents own failure to pay the full purchase price of Fortunatos
portion of Lot No. 2319. Petitioner is also of the view that, at most, Exhibit G
merely contained a unilateral promise to sell which private respondent could
not enforce in the absence of a consideration distinct from the purchase price
of the land. Further, petitioner reiterated her claim that due to the illiteracy of
her husband, it was incumbent upon private respondent to show that the
contents of Exhibit G were fully explained to him. Finally, petitioner pointed out
that the Court of Appeals erred when it took into consideration the same
exhibit despite the fact that only its photocopy was presented before the court.
On the other hand, private respondent argued that the annotation
on the second owners certificate over Lot No. 2319 constituted constructive
notice to the whole world of private respondents claim over the majority of said
parcel of land. Relying on our decision in the case of Cabrera v.
Villanueva,[30] private respondent insisted that when Fortunato received a copy
of the second owners certificate, he became fully aware of the contracts of sale
entered into between his co-owners on one hand and private respondent and
her deceased husband on the other.
Private respondent also averred that although (Lot No. 2319) was
not actually partitioned in a survey after the death of Cleopas Ape, the land was
partitioned in a hantal-hantal manner by the heirs. Each took and possessed
specific portion or premises as his/her share in land, farmed their respective
portion or premises, and improved them, each heir limiting his/her
improvement within the portion or premises which were his/her respective
share.[31] Thus, when private respondent and her husband purchased the other
parts of Lot No. 2319, it was no longer undivided as petitioner claims.
The petition is partly meritorious.
Article 1623 of the Civil Code provides:
The right of legal pre-emption or redemption shall not be exercised
except within thirty days from the notice in writing by the prospective vendor,
or by the vendor, as the case may be. The deed of sale shall not be recorded in
the Registry of Property, unless accompanied by an affidavit of the vendor that
he has given written notice thereof to all possible redemptioners.
Despite the plain language of the law, this Court has, over the years,
been tasked to interpret the written notice requirement of the above-quoted
provision. In the case Butte v. Manuel Uy & Sons, Inc.,[32] we declared that
In considering whether or not the offer to redeem was timely, we
think that the notice given by the vendee (buyer) should not be taken into
account. The text of Article 1623 clearly and expressly prescribes that the thirty
days for making the redemption are to be counted from notice in writing by the
vendor. Under the old law (Civ. Code of 1889, Art. 1524), it was immaterial who
gave the notice; so long as the redeeming co-owner learned of the alienation
in favor of the stranger, the redemption period began to run. It is thus apparent
that the Philippine legislature in Article 1623 deliberately selected a particular
method of giving notice, and that method must be deemed exclusive. (39 Am.
Jur., 237; Payne vs. State, 12 S.W. 2(d) 528). As ruled in Wampler vs. Lecompte,
150 Atl. 458 (affd. in 75 Law Ed. [U.S.] 275)
why these provisions were inserted in the statute we are not informed, but we
may assume until the contrary is shown, that a state of facts in respect thereto
existed, which warranted the legislature in so legislating.
The reasons for requiring that the notice should be given by the
seller, and not by the buyer, are easily divined. The seller of an undivided
interest is in the best position to know who are his co-owners that under the
law must be notified of the sale. Also, the notice by the seller removes all
doubts as to fact of the sale, its perfection; and its validity, the notice being a
reaffirmation thereof, so that the party notified need not entertain doubt that
the seller may still contest the alienation. This assurance would not exist if the
notice should be given by the buyer.[33]
The interpretation was somehow modified in the case of De
Conejero, et al. v. Court of Appeals, et al.[34] wherein it was pointed out that
Article 1623 does not prescribe a particular form of notice, nor any distinctive
method for notifying the redemptioner thus, as long as the redemptioner was
notified in writing of the sale and the particulars thereof, the redemption
period starts to run. This view was reiterated in Etcuban v. The Honorable Court
of Appeals, et al.,[35] Cabrera v. Villanueva,[36] Garcia, et al. v. Calaliman, et
al.,[37]Distrito, et al. v. The Honorable Court of Appeals, et al.,[38] and Mariano, et
al. v. Hon. Court of Appeals, et al.[39]
However, in the case of Salatandol v. Retes,[40] wherein the plaintiffs
were not furnished any written notice of sale or a copy thereof by the vendor,
this Court again referred to the principle enunciated in the case of Butte. As
observed by Justice Vicente Mendoza, such reversion is only sound, thus:
Art. 1623 of the Civil Code is clear in requiring that the written
notification should come from the vendor or prospective vendor, not from any
other person. There is, therefore, no room for construction. Indeed, the
principal difference between Art. 1524 of the former Civil Code and Art. 1623
of the present one is that the former did not specify who must give the notice,
whereas the present one expressly says the notice must be given by the vendor.
Effect must be given to this change in statutory language. [41]
In this case, the records are bereft of any indication that Fortunato
was given any written notice of prospective or consummated sale of the
portions of Lot No. 2319 by the vendors or would-be vendors. The thirty (30)-
day redemption period under the law, therefore, has not commenced to run.
Despite this, however, we still rule that petitioner could no longer invoke her
right to redeem from private respondent for the exercise of this right
presupposes the existence of a co-ownership at the time the conveyance is
made by a co-owner and when it is demanded by the other co-owner or co-
owners.[42] The regime of co-ownership exists when ownership of an undivided
thing or right belongs to different persons.[43] By the nature of a co-ownership,
a co-owner cannot point to specific portion of the property owned in common
as his own because his share therein remains intangible.[44] As legal redemption
is intended to minimize co-ownership,[45] once the property is subdivided and
distributed among the co-owners, the community ceases to exist and there is
no more reason to sustain any right of legal redemption.[46]
In this case, records reveal that although Lot No. 2319 has not yet been formally
subdivided, still, the particular portions belonging to the heirs of Cleopas Ape
had already been ascertained and they in fact took possession of their
respective parts. This can be deduced from the testimony of petitioner herself,
thus:
Q When the plaintiffs leased the share of your husband, were there any metes
and bounds?
A It was not formally subdivided. We have only a definite portion. (hantal-
hantal)
Q This hantal-hantal of your husband, was it also separate and distinct from
the hantal-hantal or the share of the brothers and sisters of your husband?
A Well, this property in question is a common property.
Q To the north, whose share was that which is adjacent to your husbands
assumed partition?
A I do not know what [does] this north [mean].
COURT
(To Witness)
Q To the place from where the sun rises, whose share was that?
A The shares of Cornelia, Loreta, Encarnacion and Adela.
Q How could you determine their own shares?
A They were residing in their respective assumed portions.
Q How about determining their respective boundaries?
A It could be determined by stakes and partly a row of banana plantations
planted by my son-in-law.
Q Who is this son-in-law you mentioned?
A Narciso Ape.
ATTY. CAWIT
(Continuing)
Q You said that there were stakes to determine the hantal-hantal of your
husband and the hantal-hantal of the other heirs, did I get you right?
ATTY. TAN
Admitted, Your Honor.
ATTY. CAWIT
Q Mrs. Ape, in 1960, Cleopas Ape was already dead, is that correct?
A Certainly, since he died in 1950.
Q By the manifestation of your counsel that the entire land (13 hectares) of
your father-in-law, Cleopas Ape, was leased to Generosa Lumayno, is this
correct?
A No, it is only the assumed portion of my husband [which] was leased to
Generosa Lumayno.
Q For clarification, it was only the share of your husband [which] was leased to
Generosa Cawit Lumayno?
A Yes.[47]
ATTY. CAWIT
Q My question: is that portion which you said was leased by your husband to
the Lumayno[s] and which was included to the lease by your mother-in-law to
the Lumayno[s], when the Lumayno[s] returned your husband[s] share, was
that the same premises that your husband leased to the Lumayno[s]?
A The same.
Q In re-possessing this portion of the land corresponding to the share of your
husband, did your husband demand that they should re-possess the land from
the Lumayno[s] or did the Lumayno[s] return them to your husband
voluntarily?
A They just returned to us without paying the rentals.
COURT
Q Was the return the result of your husbands request or just voluntarily they
returned it to your husband?
A No, sir, it was just returned voluntarily, and they abandoned the area but my
husband continued farming.[48]
Similarly telling of the partition is the stipulation of the parties
during the pre-trial wherein it was admitted that Lot No. 2319 had not been
subdivided nevertheless, Fortunato Ape had possessed a specific portion of the
land ostensibly corresponding to his share.[49]
From the foregoing, it is evident that the partition of Lot No. 2319
had already been effected by the heirs of Cleopas Ape. Although the partition
might have been informal is of no moment for even an oral agreement of
partition is valid and binding upon the parties.[50]Likewise, the fact that the
respective shares of Cleopas Apes heirs are still embraced in one and the same
certificate of title and have not been technically apportioned does not make
said portions less determinable and identifiable from one another nor does it,
in any way, diminish the dominion of their respective owners.[51]
Turning now to the second issue of the existence of a contract of
sale, we rule that the records of this case betray the stance of private
respondent that Fortunato Ape entered into such an agreement with her.
A contract of sale is a consensual contract, thus, it is perfected by
mere consent of the parties. It is born from the moment there is a meeting of
minds upon the thing which is the object of the sale and upon the price.[52] Upon
its perfection, the parties may reciprocally demand performance, that is, the
vendee may compel the transfer of the ownership and to deliver the object of
the sale while the vendor may demand the vendee to pay the thing sold.[53] For
there to be a perfected contract of sale, however, the following elements must
be present: consent, object, and price in money or its equivalent. In the case
of Leonardo v. Court of Appeals, et al.,[54] we explained the element of consent,
to wit:
The essence of consent is the agreement of the parties on the terms
of the contract, the acceptance by one of the offer made by the other. It is the
concurrence of the minds of the parties on the object and the cause which
constitutes the contract. The area of agreement must extend to all points that
the parties deem material or there is no consent at all.
To be valid, consent must meet the following requisites: (a) it should
be intelligent, or with an exact notion of the matter to which it refers; (b) it
should be free and (c) it should be spontaneous. Intelligence in consent is
vitiated by error; freedom by violence, intimidation or undue influence;
spontaneity by fraud.[55]
In this jurisdiction, the general rule is that he who alleges fraud or
mistake in a transaction must substantiate his allegation as the presumption is
that a person takes ordinary care for his concerns and that private dealings have
been entered into fairly and regularly.[56] The exception to this rule is provided
for under Article 1332 of the Civil Code which provides that [w]hen one of the
parties is unable to read, or if the contract is in a language not understood by
him, and mistake or fraud is alleged, the person enforcing the contract must
show that the terms thereof have been fully explained to the former.
In this case, as private respondent is the one seeking to enforce the
claimed contract of sale, she bears the burden of proving that the terms of the
agreement were fully explained to Fortunato Ape who was an illiterate. This she
failed to do. While she claimed in her testimony that the contents of the receipt
were made clear to Fortunato, such allegation was debunked by Andres Flores
himself when the latter took the witness stand. According to Flores:
ATTY. TAN
Q Mr. Witness, that receipt is in English, is it not?
A Yes, sir.
Q When you prepared that receipt, were you aware that Fortunato Ape doesnt
know how to read and write English?
A Yes, sir, I know.
Q Mr. Witness, you said you were present at the time of the signing of that
alleged receipt of P30.00, correct?
A Yes, sir.
Q Where, in what place was this receipt signed?
A At the store.
Q At the time of the signing of this receipt, were there other person[s] present
aside from you, your mother-in-law and Fortunato Ape?
A In the store, yes, sir.
Q When you signed that document of course you acted as witness upon request
of your mother-in-law?
A No, this portion, I was the one who prepared that document.
Q Without asking of (sic) your mother-in-law, you prepared that document or
it was your mother-in-law who requested you to prepare that document and
acted as witness?
A She requested me to prepare but does not instructed (sic) me to act as
witness. It was our opinion that whenever I prepared the document, I signed it
as a witness.
Q Did it not occur to you to ask other witness to act on the side of Fortunato
Ape who did not know how to read and write English?
A It occurred to me.
Q But you did not bother to request a person who is not related to your mother-
in-law, considering that Fortunato Ape did not know how to read and write
English?
A The one who represented Fortunato Ape doesnt know also how to read and
write English. One a maid.
Q You mentioned that there [was another] person inside the store, under your
previous statement, when the document was signed, there [was another]
person in the store aside from you, your mother-in-law and Fortunato Ape, is
not true?
A That is true, there is one person, but that person doesnt know how to read
also.
Q Of course, Mr. Witness, since it occurred to you that there was need for other
witness to sign that document for Fortunato Ape, is it not a fact that the
Municipal Building is very near your house?
A Quite (near).
Q But you could readily proceed to the Municipal Building and request one who
is knowledgeable in English to act as witness?
A I think there is no need for that small receipt. So I dont bother myself to go.
Q You did not consider that receipt very important because you said that small
receipt?
A Yes, I know.[57]
As can be gleaned from Floress testimony, while he was very much
aware of Fortunatos inability to read and write in the English language, he did
not bother to fully explain to the latter the substance of the receipt (Exhibit G).
He even dismissed the idea of asking somebody else to assist Fortunato
considering that a measly sum of thirty pesos was involved. Evidently, it did not
occur to Flores that the document he himself prepared pertains to the transfer
altogether of Fortunatos property to his mother-in-law. It is precisely in
situations such as this when the wisdom of Article 1332 of the Civil Code readily
becomes apparent which is to protect a party to a contract disadvantaged by
illiteracy, ignorance, mental weakness or some other handicap.[58]
In sum, we hold that petitioner is no longer entitled to the right of
redemption under Article 1632 of the Civil Code as Lot No. 2319 had long been
partitioned among its co-owners. This Court likewise annuls the contract of sale
between Fortunato and private respondent on the ground of vitiated consent.
WHEREFORE, premises considered, the decision dated 25 March
1998 of the Court of Appeals is hereby REVERSED and SET ASIDE and the
decision dated 11 March 1994 of the Regional Trial Court, Branch 58, San Carlos
City, Negros Occidental, dismissing both the complaint and the counterclaim, is
hereby REINSTATED. No costs.
SO ORDERED.
G.R. No. L-11827 July 31, 1961
FERNANDO A. GAITE, vs. ISABELO FONACIER, GEORGE KRAKOWER, LARAP
MINES & SMELTING CO., INC., SEGUNDINA VIVAS, FRNACISCO DANTE,
PACIFICO ESCANDOR and FERNANDO TY, defendants-appellants.
REYES, J.B.L., J.:
This appeal comes to us directly from the Court of First Instance
because the claims involved aggregate more than P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner and/or holder,
either by himself or in a representative capacity, of 11 iron lode mineral claims,
known as the Dawahan Group, situated in the municipality of Jose Panganiban,
province of Camarines Norte.
By a "Deed of Assignment" dated September 29, 1952(Exhibit "3"),
Fonacier constituted and appointed plaintiff-appellee Fernando A. Gaite as his
true and lawful attorney-in-fact to enter into a contract with any individual or
juridical person for the exploration and development of the mining claims
aforementioned on a royalty basis of not less than P0.50 per ton of ore that
might be extracted therefrom. On March 19, 1954, Gaite in turn executed a
general assignment (Record on Appeal, pp. 17-19) conveying the development
and exploitation of said mining claims into the Larap Iron Mines, a single
proprietorship owned solely by and belonging to him, on the same royalty basis
provided for in Exhibit "3". Thereafter, Gaite embarked upon the development
and exploitation of the mining claims in question, opening and paving roads
within and outside their boundaries, making other improvements and installing
facilities therein for use in the development of the mines, and in time extracted
therefrom what he claim and estimated to be approximately 24,000 metric tons
of iron ore.
For some reason or another, Isabelo Fonacier decided to revoke the
authority granted by him to Gaite to exploit and develop the mining claims in
question, and Gaite assented thereto subject to certain conditions. As a result,
a document entitled "Revocation of Power of Attorney and Contract" was
executed on December 8, 1954 (Exhibit "A"),wherein Gaite transferred to
Fonacier, for the consideration of P20,000.00, plus 10% of the royalties that
Fonacier would receive from the mining claims, all his rights and interests on all
the roads, improvements, and facilities in or outside said claims, the right to
use the business name "Larap Iron Mines" and its goodwill, and all the records
and documents relative to the mines. In the same document, Gaite transferred
to Fonacier all his rights and interests over the "24,000 tons of iron ore, more
or less" that the former had already extracted from the mineral claims, in
consideration of the sum of P75,000.00, P10,000.00 of which was paid upon
the signing of the agreement, and
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00) will be paid from
and out of the first letter of credit covering the first shipment of iron ores and
of the first amount derived from the local sale of iron ore made by the Larap
Mines & Smelting Co. Inc., its assigns, administrators, or successors in interests.
To secure the payment of the said balance of P65,000.00, Fonacier
promised to execute in favor of Gaite a surety bond, and pursuant to the
promise, Fonacier delivered to Gaite a surety bond dated December 8, 1954
with himself (Fonacier) as principal and the Larap Mines and Smelting Co. and
its stockholders George Krakower, Segundina Vivas, Pacifico Escandor,
Francisco Dante, and Fernando Ty as sureties (Exhibit "A-1"). Gaite testified,
however, that when this bond was presented to him by Fonacier together with
the "Revocation of Power of Attorney and Contract", Exhibit "A", on December
8, 1954, he refused to sign said Exhibit "A" unless another bond under written
by a bonding company was put up by defendants to secure the payment of the
P65,000.00 balance of their price of the iron ore in the stockpiles in the mining
claims. Hence, a second bond, also dated December 8, 1954 (Exhibit "B"),was
executed by the same parties to the first bond Exhibit "A-1", with the Far
Eastern Surety and Insurance Co. as additional surety, but it provided that the
liability of the surety company would attach only when there had been an
actual sale of iron ore by the Larap Mines & Smelting Co. for an amount of not
less then P65,000.00, and that, furthermore, the liability of said surety company
would automatically expire on December 8, 1955. Both bonds were attached
to the "Revocation of Power of Attorney and Contract", Exhibit "A", and made
integral parts thereof.
On the same day that Fonacier revoked the power of attorney he
gave to Gaite and the two executed and signed the "Revocation of Power of
Attorney and Contract", Exhibit "A", Fonacier entered into a "Contract of Mining
Operation", ceding, transferring, and conveying unto the Larap Mines and
Smelting Co., Inc. the right to develop, exploit, and explore the mining claims in
question, together with the improvements therein and the use of the name
"Larap Iron Mines" and its good will, in consideration of certain royalties.
Fonacier likewise transferred, in the same document, the complete title to the
approximately 24,000 tons of iron ore which he acquired from Gaite, to the
Larap & Smelting Co., in consideration for the signing by the company and its
stockholders of the surety bonds delivered by Fonacier to Gaite (Record on
Appeal, pp. 82-94).
Up to December 8, 1955, when the bond Exhibit "B" expired with
respect to the Far Eastern Surety and Insurance Company, no sale of the
approximately 24,000 tons of iron ore had been made by the Larap Mines &
Smelting Co., Inc., nor had the P65,000.00 balance of the price of said ore been
paid to Gaite by Fonacier and his sureties payment of said amount, on the
theory that they had lost right to make use of the period given them when their
bond, Exhibit "B" automatically expired (Exhibits "C" to "C-24"). And when
Fonacier and his sureties failed to pay as demanded by Gaite, the latter filed
the present complaint against them in the Court of First Instance of Manila (Civil
Case No. 29310) for the payment of the P65,000.00 balance of the price of the
ore, consequential damages, and attorney's fees.
All the defendants except Francisco Dante set up the uniform
defense that the obligation sued upon by Gaite was subject to a condition that
the amount of P65,000.00 would be payable out of the first letter of credit
covering the first shipment of iron ore and/or the first amount derived from the
local sale of the iron ore by the Larap Mines & Smelting Co., Inc.; that up to the
time of the filing of the complaint, no sale of the iron ore had been made, hence
the condition had not yet been fulfilled; and that consequently, the obligation
was not yet due and demandable. Defendant Fonacier also contended that only
7,573 tons of the estimated 24,000 tons of iron ore sold to him by Gaite was
actually delivered, and counterclaimed for more than P200,000.00 damages.
At the trial of the case, the parties agreed to limit the presentation
of evidence to two issues:
(1) Whether or not the obligation of Fonacier and his sureties to pay Gaite
P65,000.00 become due and demandable when the defendants failed to renew
the surety bond underwritten by the Far Eastern Surety and Insurance Co., Inc.
(Exhibit "B"), which expired on December 8, 1955; and
(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff Gaite to
defendant Fonacier were actually in existence in the mining claims when these
parties executed the "Revocation of Power of Attorney and Contract", Exhibit
"A."
On the first question, the lower court held that the obligation of the
defendants to pay plaintiff the P65,000.00 balance of the price of the
approximately 24,000 tons of iron ore was one with a term: i.e., that it would
be paid upon the sale of sufficient iron ore by defendants, such sale to be
effected within one year or before December 8, 1955; that the giving of security
was a condition precedent to Gait's giving of credit to defendants; and that as
the latter failed to put up a good and sufficient security in lieu of the Far Eastern
Surety bond (Exhibit "B") which expired on December 8, 1955, the obligation
became due and demandable under Article 1198 of the New Civil Code.
As to the second question, the lower court found that plaintiff Gaite
did have approximately 24,000 tons of iron ore at the mining claims in question
at the time of the execution of the contract Exhibit "A."
Judgment was, accordingly, rendered in favor of plaintiff Gaite
ordering defendants to pay him, jointly and severally, P65,000.00 with interest
at 6% per annum from December 9, 1955 until payment, plus costs. From this
judgment, defendants jointly appealed to this Court.
During the pendency of this appeal, several incidental motions were
presented for resolution: a motion to declare the appellants Larap Mines &
Smelting Co., Inc. and George Krakower in contempt, filed by appellant
Fonacier, and two motions to dismiss the appeal as having become academic
and a motion for new trial and/or to take judicial notice of certain documents,
filed by appellee Gaite. The motion for contempt is unmeritorious because the
main allegation therein that the appellants Larap Mines & Smelting Co., Inc. and
Krakower had sold the iron ore here in question, which allegedly is "property in
litigation", has not been substantiated; and even if true, does not make these
appellants guilty of contempt, because what is under litigation in this appeal is
appellee Gaite's right to the payment of the balance of the price of the ore, and
not the iron ore itself. As for the several motions presented by appellee Gaite,
it is unnecessary to resolve these motions in view of the results that we have
reached in this case, which we shall hereafter discuss.
The main issues presented by appellants in this appeal are:
(1) that the lower court erred in holding that the obligation of appellant
Fonacier to pay appellee Gaite the P65,000.00 (balance of the price of the iron
ore in question)is one with a period or term and not one with a suspensive
condition, and that the term expired on December 8, 1955; and
(2) that the lower court erred in not holding that there were only 10,954.5 tons
in the stockpiles of iron ore sold by appellee Gaite to appellant Fonacier.
The first issue involves an interpretation of the following provision in the
contract Exhibit "A":
7. That Fernando Gaite or Larap Iron Mines hereby transfers to Isabelo F.
Fonacier all his rights and interests over the 24,000 tons of iron ore, more or
less, above-referred to together with all his rights and interests to operate the
mine in consideration of the sum of SEVENTY-FIVE THOUSAND PESOS
(P75,000.00) which the latter binds to pay as follows:
a. TEN THOUSAND PESOS (P10,000.00) will be paid upon the signing
of this agreement.
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00)will be
paid from and out of the first letter of credit covering the first
shipment of iron ore made by the Larap Mines & Smelting Co., Inc.,
its assigns, administrators, or successors in interest.
We find the court below to be legally correct in holding that the
shipment or local sale of the iron ore is not a condition precedent (or
suspensive) to the payment of the balance of P65,000.00, but was only a
suspensive period or term. What characterizes a conditional obligation is the
fact that its efficacy or obligatory force (as distinguished from its demandability)
is subordinated to the happening of a future and uncertain event; so that if the
suspensive condition does not take place, the parties would stand as if the
conditional obligation had never existed. That the parties to the contract Exhibit
"A" did not intend any such state of things to prevail is supported by several
circumstances:
1) The words of the contract express no contingency in the buyer's obligation
to pay: "The balance of Sixty-Five Thousand Pesos (P65,000.00) will be paid out
of the first letter of credit covering the first shipment of iron ores . . ." etc. There
is no uncertainty that the payment will have to be made sooner or later; what
is undetermined is merely the exact date at which it will be made. By the very
terms of the contract, therefore, the existence of the obligation to pay is
recognized; only its maturity or demandability is deferred.
2) A contract of sale is normally commutative and onerous: not only does each
one of the parties assume a correlative obligation (the seller to deliver and
transfer ownership of the thing sold and the buyer to pay the price),but each
party anticipates performance by the other from the very start. While in a sale
the obligation of one party can be lawfully subordinated to an uncertain event,
so that the other understands that he assumes the risk of receiving nothing for
what he gives (as in the case of a sale of hopes or expectations, emptio spei), it
is not in the usual course of business to do so; hence, the contingent character
of the obligation must clearly appear. Nothing is found in the record to evidence
that Gaite desired or assumed to run the risk of losing his right over the ore
without getting paid for it, or that Fonacier understood that Gaite assumed any
such risk. This is proved by the fact that Gaite insisted on a bond a to guarantee
payment of the P65,000.00, an not only upon a bond by Fonacier, the Larap
Mines & Smelting Co., and the company's stockholders, but also on one by a
surety company; and the fact that appellants did put up such bonds indicates
that they admitted the definite existence of their obligation to pay the balance
of P65,000.00.
3) To subordinate the obligation to pay the remaining P65,000.00 to the sale or
shipment of the ore as a condition precedent, would be tantamount to leaving
the payment at the discretion of the debtor, for the sale or shipment could not
be made unless the appellants took steps to sell the ore. Appellants would thus
be able to postpone payment indefinitely. The desireability of avoiding such a
construction of the contract Exhibit "A" needs no stressing.
4) Assuming that there could be doubt whether by the wording of the contract
the parties indented a suspensive condition or a suspensive period (dies ad
quem) for the payment of the P65,000.00, the rules of interpretation would
incline the scales in favor of "the greater reciprocity of interests", since sale is
essentially onerous. The Civil Code of the Philippines, Article 1378, paragraph
1, in fine, provides:
If the contract is onerous, the doubt shall be settled in favor of the
greatest reciprocity of interests.
And there can be no question that greater reciprocity obtains if the
buyer' obligation is deemed to be actually existing, with only its maturity (due
date) postponed or deferred, that if such obligation were viewed as non-
existent or not binding until the ore was sold.
The only rational view that can be taken is that the sale of the ore
to Fonacier was a sale on credit, and not an aleatory contract where the
transferor, Gaite, would assume the risk of not being paid at all; and that the
previous sale or shipment of the ore was not a suspensive condition for the
payment of the balance of the agreed price, but was intended merely to fix the
future date of the payment.
This issue settled, the next point of inquiry is whether appellants,
Fonacier and his sureties, still have the right to insist that Gaite should wait for
the sale or shipment of the ore before receiving payment; or, in other words,
whether or not they are entitled to take full advantage of the period granted
them for making the payment.
We agree with the court below that the appellant have forfeited the
right court below that the appellants have forfeited the right to compel Gaite
to wait for the sale of the ore before receiving payment of the balance of
P65,000.00, because of their failure to renew the bond of the Far Eastern Surety
Company or else replace it with an equivalent guarantee. The expiration of the
bonding company's undertaking on December 8, 1955 substantially reduced
the security of the vendor's rights as creditor for the unpaid P65,000.00, a
security that Gaite considered essential and upon which he had insisted when
he executed the deed of sale of the ore to Fonacier (Exhibit "A"). The case
squarely comes under paragraphs 2 and 3 of Article 1198 of the Civil Code of
the Philippines:
"ART. 1198. The debtor shall lose every right to make use of the period:
(1) . . .
(2) When he does not furnish to the creditor the guaranties or
securities which he has promised.
(3) When by his own acts he has impaired said guaranties or
securities after their establishment, and when through fortuitous
event they disappear, unless he immediately gives new ones equally
satisfactory.
Appellants' failure to renew or extend the surety company's bond
upon its expiration plainly impaired the securities given to the creditor
(appellee Gaite), unless immediately renewed or replaced.
There is no merit in appellants' argument that Gaite's acceptance of
the surety company's bond with full knowledge that on its face it would
automatically expire within one year was a waiver of its renewal after the
expiration date. No such waiver could have been intended, for Gaite stood to
lose and had nothing to gain barely; and if there was any, it could be rationally
explained only if the appellants had agreed to sell the ore and pay Gaite before
the surety company's bond expired on December 8, 1955. But in the latter case
the defendants-appellants' obligation to pay became absolute after one year
from the transfer of the ore to Fonacier by virtue of the deed Exhibit "A.".
All the alternatives, therefore, lead to the same result: that Gaite
acted within his rights in demanding payment and instituting this action one
year from and after the contract (Exhibit "A") was executed, either because the
appellant debtors had impaired the securities originally given and thereby
forfeited any further time within which to pay; or because the term of payment
was originally of no more than one year, and the balance of P65,000.00 became
due and payable thereafter.
Coming now to the second issue in this appeal, which is whether
there were really 24,000 tons of iron ore in the stockpiles sold by appellee Gaite
to appellant Fonacier, and whether, if there had been a short-delivery as
claimed by appellants, they are entitled to the payment of damages, we must,
at the outset, stress two things: first, that this is a case of a sale of a specific
mass of fungible goods for a single price or a lump sum, the quantity of "24,000
tons of iron ore, more or less," stated in the contract Exhibit "A," being a mere
estimate by the parties of the total tonnage weight of the mass; and second,
that the evidence shows that neither of the parties had actually measured of
weighed the mass, so that they both tried to arrive at the total quantity by
making an estimate of the volume thereof in cubic meters and then multiplying
it by the estimated weight per ton of each cubic meter.
The sale between the parties is a sale of a specific mass or iron ore
because no provision was made in their contract for the measuring or weighing
of the ore sold in order to complete or perfect the sale, nor was the price of
P75,000,00 agreed upon by the parties based upon any such measurement.(see
Art. 1480, second par., New Civil Code). The subject matter of the sale is,
therefore, a determinate object, the mass, and not the actual number of units
or tons contained therein, so that all that was required of the seller Gaite was
to deliver in good faith to his buyer all of the ore found in the mass,
notwithstanding that the quantity delivered is less than the amount estimated
by them (Mobile Machinery & Supply Co., Inc. vs. York Oilfield Salvage Co., Inc.
171 So. 872, applying art. 2459 of the Louisiana Civil Code). There is no charge
in this case that Gaite did not deliver to appellants all the ore found in the
stockpiles in the mining claims in questions; Gaite had, therefore, complied
with his promise to deliver, and appellants in turn are bound to pay the lump
price.
But assuming that plaintiff Gaite undertook to sell and appellants
undertook to buy, not a definite mass, but approximately 24,000 tons of ore,
so that any substantial difference in this quantity delivered would entitle the
buyers to recover damages for the short-delivery, was there really a short-
delivery in this case?
We think not. As already stated, neither of the parties had actually
measured or weighed the whole mass of ore cubic meter by cubic meter, or ton
by ton. Both parties predicate their respective claims only upon an estimated
number of cubic meters of ore multiplied by the average tonnage factor per
cubic meter.
Now, appellee Gaite asserts that there was a total of 7,375 cubic
meters in the stockpiles of ore that he sold to Fonacier, while appellants
contend that by actual measurement, their witness Cirpriano Manlañgit found
the total volume of ore in the stockpiles to be only 6.609 cubic meters. As to
the average weight in tons per cubic meter, the parties are again in
disagreement, with appellants claiming the correct tonnage factor to be 2.18
tons to a cubic meter, while appellee Gaite claims that the correct tonnage
factor is about 3.7.
In the face of the conflict of evidence, we take as the most reliable
estimate of the tonnage factor of iron ore in this case to be that made by
Leopoldo F. Abad, chief of the Mines and Metallurgical Division of the Bureau
of Mines, a government pensionado to the States and a mining engineering
graduate of the Universities of Nevada and California, with almost 22 years of
experience in the Bureau of Mines. This witness placed the tonnage factor of
every cubic meter of iron ore at between 3 metric tons as minimum to 5 metric
tons as maximum. This estimate, in turn, closely corresponds to the average
tonnage factor of 3.3 adopted in his corrected report (Exhibits "FF" and FF-1")
by engineer Nemesio Gamatero, who was sent by the Bureau of Mines to the
mining claims involved at the request of appellant Krakower, precisely to make
an official estimate of the amount of iron ore in Gaite's stockpiles after the
dispute arose.
Even granting, then, that the estimate of 6,609 cubic meters of ore
in the stockpiles made by appellant's witness Cipriano Manlañgit is correct, if
we multiply it by the average tonnage factor of 3.3 tons to a cubic meter, the
product is 21,809.7 tons, which is not very far from the estimate of 24,000 tons
made by appellee Gaite, considering that actual weighing of each unit of the
mass was practically impossible, so that a reasonable percentage of error
should be allowed anyone making an estimate of the exact quantity in tons
found in the mass. It must not be forgotten that the contract Exhibit "A"
expressly stated the amount to be 24,000 tons, more or less. (ch. Pine River
Logging & Improvement Co. vs U.S., 279, 46 L. Ed. 1164).
There was, consequently, no short-delivery in this case as would
entitle appellants to the payment of damages, nor could Gaite have been guilty
of any fraud in making any misrepresentation to appellants as to the total
quantity of ore in the stockpiles of the mining claims in question, as charged by
appellants, since Gaite's estimate appears to be substantially correct.
WHEREFORE, finding no error in the decision appealed from, we
hereby affirm the same, with costs against appellants.
Bengzon, C.J., Padilla, Labrador, Concepcion, Barrera, Paredes, Dizon, De Leon
and Natividad, JJ., concur.
[G.R. No. 165420. June 30, 2005]
CONCEPCION R. AINZA, substituted by her legal heirs, DR. NATIVIDAD A.
TULIAO, CORAZON A. JALECO and LILIA A. OLAYON, vs. SPOUSES ANTONIO
PADUA and EUGENIA PADUA, .
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari assails the February 24, 2004
decision of the Court of Appeals in CA-G.R. CV No. 70239,[1] and its September
28, 2004 resolution, denying reconsideration thereof.[2]
In her complaint for partition of real property, annulment of titles
with damages,[3] Concepcion Ainza (Concepcion) alleged that respondent-
spouses Eugenia (Eugenia) and Antonio Padua (Antonio) owned a 216.40 sq. m.
lot with an unfinished residential house located at No. 85-A Durian corner Pajo
Sts., Barangay Quirino 2-C, Project 2, Quezon City, covered by Transfer
Certificate of Title No. 271935. Sometime in April 1987, she bought one-half of
an undivided portion of the property from her daughter, Eugenia and the latters
husband, Antonio, for One Hundred Thousand Pesos (P100,000.00).
No Deed of Absolute Sale was executed to evidence the transaction,
but cash payment was received by the respondents, and ownership was
transferred to Concepcion through physical delivery to her attorney-in-fact and
daughter, Natividad Tuliao (Natividad). Concepcion authorized Natividad and
the latters husband, Ceferino Tuliao (Ceferino) to occupy the premises, and
make improvements on the unfinished building.
Thereafter, Concepcion alleged that without her consent,
respondents caused the subdivision of the property into three portions and
registered it in their names under TCT Nos. N-155122, N-155123 and N-155124
in violation of the restrictions annotated at the back of the title.
On the other hand, Antonio averred that he bought the property in
1980 and introduced improvements thereon. Between 1989 and 1990, he and
his wife, Eugenia, allowed Natividad and Ceferino to occupy the premises
temporarily. In 1994, they caused the subdivision of the property and three (3)
separate titles were issued.
Thereafter, Antonio requested Natividad to vacate the premises but
the latter refused and claimed that Concepcion owned the property. Antonio
thus filed an ejectment suit on April 1, 1999. Concepcion, represented by
Natividad, also filed on May 4, 1999 a civil case for partition of real property
and annulment of titles with damages.
Antonio claimed that his wife, Eugenia, admitted that Concepcion
offered to buy one third (1/3) of the property who gave her small amounts over
several years which totaled P100,000.00 by 1987 and for which she signed a
receipt.
On January 9, 2001, the Regional Trial Court of Quezon City, Branch 85,
rendered judgment[4] in favor of Concepcion, the dispositive portion of which
states:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiff and against the defendants and ordering:
1. the subdivision of the subject property between the said plaintiff
and defendants in equal shares with one-half of the property,
including the portion occupied by the spouses Severino and
Natividad Tuliao to be awarded to the plaintiff;
2. the cancellation of Transfer Certificates of Title Nos. N-155122,
N-155123, N-155124 of the Registry of Deeds of Quezon City;
3. the defendants to pay to the plaintiff P50,000.00 as attorneys
fees.
SO ORDERED.[5]
The trial court upheld the sale between Eugenia and Concepcion. It
ruled that the sale was consummated when both contracting parties complied
with their respective obligations. Eugenia transferred possession by delivering
the property to Concepcion who in turn paid the purchase price. It also declared
that the transfer of the property did not violate the Statute of Frauds because
a fully executed contract does not fall within its coverage.
On appeal by the respondents, the Court of Appeals reversed the
decision of the trial court, and declared the sale null and void. Applying Article
124 of the Family Code, the Court of Appeals ruled that since the subject
property is conjugal, the written consent of Antonio must be obtained for the
sale to be valid. It also ordered the spouses Padua to return the amount of
P100,000.00 to petitioners plus interest.[6]
The sole issue for resolution in this petition for review is whether
there was a valid contract of sale between Eugenia and Concepcion.
A contract of sale is perfected by mere consent, upon a meeting of
the minds on the offer and the acceptance thereof based on subject matter,
price and terms of payment.[7]
 In this case, there was a perfected contract of sale between Eugenia
and Concepcion. The records show that Eugenia offered to sell a portion of the
property to Concepcion, who accepted the offer and agreed to pay
P100,000.00 as consideration. The contract of sale was consummated when
both parties fully complied with their respective obligations. Eugenia delivered
the property to Concepcion, who in turn, paid Eugenia the price of One
Hundred Thousand Pesos (P100,000.00), as evidenced by the receipt which
reads:
RECEIPT
Received the amount of ONE HUNDRED THOUSAND PESOS (P100,000.00) as
payment for the lot on 85-A Durian St., Project 2, Quezon City, from Mrs.
Concepcion R. Ainza, on April, 1987.
_______(Sgd.)______
Mrs.. Eugenia A. Padua[8]
The verbal contract of sale between Eugenia and Concepcion did
not violate the provisions of the Statute of Frauds 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.[9] When a verbal contract has been completed, executed or partially
consummated, as in this case, its enforceability will not be barred by the Statute
of Frauds, which applies only to an executory agreement.[10] Thus, where one
party has performed his obligation, oral evidence will be admitted to prove the
agreement.[11]
In the instant case, the oral contract of sale between Eugenia and
Concepcion was evidenced by a receipt signed by Eugenia. Antonio also stated
that his wife admitted to him that she sold the property to Concepcion.
It is undisputed that the subject property was conjugal and sold by
Eugenia in April 1987 or prior to the effectivity of the Family Code on August 3,
1988, Article 254 of which repealed Title V, Book I of the Civil Code provisions
on the property relations between husband and wife. However, Article 256
thereof limited its retroactive effect only to cases where it would not prejudice
or impair vested or acquired rights in accordance with the Civil Code or other
laws. In the case at bar, vested rights of Concepcion will be impaired or
prejudiced by the application of the Family Code; hence, the provisions of the
Civil Code should be applied.
In Felipe v. Heirs of Aldon, et al.,[12] the legal effect of a sale of
conjugal properties by the wife without the consent of the husband was
clarified, to wit:
The legal ground which deserves attention is the legal effect of a sale of lands
belonging to the conjugal partnership made by the wife without the consent of
the husband.
It is useful at this point to re-state some elementary rules: The
husband is the administrator of the conjugal partnership. (Art. 165, Civil Code)
Subject to certain exceptions, the husband cannot alienate or encumber any
real property of the conjugal partnership without the wifes consent. (Art.
166, Idem.) And the wife cannot bind the conjugal partnership without the
husbands consent, except in cases provided by law. (Art. 172, Idem.).
In the instant case, Gimena, the wife, sold lands belonging to the
conjugal partnership without the consent of the husband and the sale is not
covered by the phrase except in cases provided by law. The Court of Appeals
described the sale as invalid a term which is imprecise when used in relation to
contracts because the Civil Code uses specific names in designating defective
contracts, namely: rescissible (Arts. 1380 et seq.), voidable (Arts. 1390 et
seq.), unenforceable (Arts. 1403, et seq.), and void or inexistent (Arts. 1409 et
seq.).
The sale made by Gimena is certainly a defective contract but of
what category? The answer: it is a voidable contract.
According to Art. 1390 of the Civil Code, among the voidable
contracts are [T]hose where one of the parties is incapable of giving consent to
the contract. (Par. 1.) In the instant case Gimena had no capacity to give
consent to the contract of sale. The capacity to give consent belonged not even
to the husband alone but to both spouses.
The view that the contract made by Gimena is a voidable contract is
supported by the legal provision that contracts entered by the husband without
the consent of the wife when such consent is required, are annullable at her
instance during the marriage and within ten years from the transaction
questioned. (Art. 173, Civil Code).
Gimenas contract is not rescissible for in such a contract all the
essential elements are untainted but Gimenas consent was tainted. Neither can
the contract be classified as unenforceable because it does not fit any of those
described in Art. 1403 of the Civil Code. And finally, the contract cannot be void
or inexistent because it is not one of those mentioned in Art. 1409 of the Civil
Code. By process of elimination, it must perforce be a voidable contract.
The voidable contract of Gimena was subject to annulment by her husband only
during the marriage because he was the victim who had an interest in the
contract. Gimena, who was the party responsible for the defect, could not ask
for its annulment. Their children could not likewise seek the annulment of the
contract while the marriage subsisted because they merely had an inchoate
right to the lands sold. (Emphasis supplied)
The consent of both Eugenia and Antonio is necessary for the sale
of the conjugal property to be valid. Antonios consent cannot be
presumed.[13] Except for the self-serving testimony of petitioner Natividad,
there is no evidence that Antonio participated or consented to the sale of the
conjugal property. Eugenia alone is incapable of giving consent to the contract.
Therefore, in the absence of Antonios consent, the disposition made by Eugenia
is voidable.[14]
The contract of sale between Eugenia and Concepcion being an oral
contract, the action to annul the same must be commenced within six years
from the time the right of action accrued.[15] Eugenia sold the property in April
1987 hence Antonio should have asked the courts to annul the sale on or before
April 1993. No action was commenced by Antonio to annul the sale, hence his
right to seek its annulment was extinguished by prescription.
Even assuming that the ten (10)-year prescriptive period under Art.
173 should apply, Antonio is still barred from instituting an action to annul the
sale because since April 1987, more than ten (10) years had already lapsed
without any such action being filed.
In sum, the sale of the conjugal property by Eugenia without the
consent of her husband is voidable. It is binding unless annulled. Antonio failed
to exercise his right to ask for the annulment within the prescribed period,
hence, he is now barred from questioning the validity of the sale between his
wife and Concepcion.
WHEREFORE, the petition is GRANTED. The decision dated February
24, 2004 of the Court of Appeals in CA-G.R. CV No. 70239 and its resolution
dated September 28, 2004 are REVERSED and SET ASIDE. The decision dated
January 9, 2001 of the Regional Trial Court of Quezon City, Branch 85, in Civil
Case No. Q-99-37529, is REINSTATED.
SO ORDERED.
Davide, Jr., C.J. (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.
G.R. No. 19009 September 26, 1922
E.C. MCCULLOUGH & CO., vs. S. M. BERGER
STATEMENT
For cause of action it is alleged that in the month of February, 1918,
plaintiff and defendant and defendant entered into an agreement by which the
defendant was to deliver plaintiff 501 bales of tobacco of New York City in good
condition. That delivery was made and the plaintiff paid the full purchase price.
That upon an examination later the tobacco was found to be in must condition,
and its value was $12,000 less than it would have been if the tobacco had been
in the condition which defendant agreed that it should be, as a result of which
plaintiff claims damages for P12,000, United States currency, or P24,000,
Philippine currency. That when the condition of the tobacco was discovered,
plaintiff promptly notified the defendant, who ignored the protest. Wherefore,
the plaintiff prays judgment for the amount of P24,000, Philippine currency, for
costs and general relief.
For answer, the defendant denies all the material allegation of the
complaint, and, as a further and separate defense, alleges that on August 15,
1918, he was advised by the plaintiff that the latter was dissatisfied with the
quality of the tobacco, and he made him a formal written offer to repurchase
the tobacco at the original selling price with accrued interest, and that plaintiff
rejected the offer.
That defendant has been ready and willing at all reasonable times
to accept the return of the tobacco and to return the amount of the purchase
price with legal interest, and has a repeatedly tendered to the plaintiff such
purchase price in exchange for the return of the tobacco, and that plaintiff had
refused to return it. That any damages which plaintiff may have suffered have
been wholly due to his willful refusal to return and redeliver the tobacco.
Upon such issues there was a stipulation of facts, and after trial the
lower court rendered judgment against the defendant and in favor of the
plaintiff for the sum of P11,867.98 or P23,735.96 with legal interest from
January 6, 192, and costs, from which, after his motion for a new trial was
overruled, the defendant appeals, claiming that the court erred: First, in finding
that the tobacco was not in good condition when it arrived in New York; second,
in holding that the plaintiff is entitled to maintain an action for breach of
contract after having agreed with the defendant to rescind and to make
restitution of the subject-matter and the price after a violation of the
agreement; third in holding that the plaintiff, having elected to rescind and
notified the defendant of such an election, may now refused it and affirm the
same and recover from the alleged breach of warranty; fourth, in holding that
this action should be maintained, no claim having been made for the alleged
breach of warranty of quality within the statutory period; and, fifth, in
overruling the defendant's motion for a new trial.
JOHNS, J.:
In February, 1918, the defendant met the plaintiff in the city of
Manila and advised him that he had made a shipment of 501 bales of tobacco
to New York City consigned to S. Lowenthal & Sons, who had refused to honor
the draft which was drawn upon them. He asked the plaintiff whether he could
use the tobacco provided it was "perfectly sound." At the plaintiff's request the
defendant made and signed a writing as follows:
Referring to the shipment of 501 bales of tobacco sold you
consisting of 188 200-pound bales of scrap and 313 200-pound bales of booked
tobacco, I beg to confirm my verbal conversation with you in stating that I
guarantee the arrival of the tobacco in New York in good condition, subject, of
course, to conditions arising after its departure from Manila, which
contingencies are covered by adequate insurance. (Stipulation par. 1.)
Upon the strength of this the plaintiff cabled his New York office to
honor the defendant's draft, which was ninety days' sight for $33,109, and was
the same draft and amount which had been refused by S. Lowenthal & Sons.
The draft was honored by his New York office at plaintiff's request. The
shipment consisted of 188 bales of "scrap," invoiced at 28 cents, gold, per
pound, and 313 bales of "striped" and "booked" at 36 cents, gold, per pound,
and was made c.i.f. New York. Before its arrival in New York the plaintiff had
found purchasers for a large portion of it with whom he had made contracts for
sale subject to examination as to condition. The tobacco arrived in two
shipments. The first of 213 bales on April 26, and the second of 288 bales on
May 18, 1918, and it was at once placed in warehouses by plaintiff. With the
exception of four or five bales, it appeared from an examination that the
tobacco was well baled, and to all outward appearances was in good condition
after the shipment. After it was placed in the warehouse, the tobacco itself was
examined as to its condition and quality by the different buyers to whom the
plaintiff had contracted to sell it, and after such physical inspection, they
refused to accept it and complete their purchase because it was "musty." It
appears that the plaintiff had sold 188 bales of the tobacco before its arrival in
New York to a customer in Red Lion, Pennsylvania, to whom he shipped 75 bales
of it after its arrival. This customer refused to receive any of the remaining bales
which he had purchased, and the plaintiff was compelled to again reship it back
to New York. Complying with his agreement, on May 21, 1918, the plaintiff paid
the defendant's draft which he had previously accepted, thus completing his
part of the contract with the defendant.
On May 23, 1918, and as a result of physical inspection, the plaintiff
cabled the defendant that the tobacco was unsatisfactory, and on June 13, he
again cabled that there would likely be a loss. On June 28, 1918, the plaintiff
wrote a letter to the defendant in which, among other things, he says:
. . . The tobacco has a very strong ground smell and somewhat of a
musty smell as though it had been mixed up with must tobacco. In other words,
it appears like this tobacco assorted from bales which were mildewed and this
is that part of the bale which was not mildewed. It does not seem possible that
this odor, or musty smell, could have developed in transit as it seems perfectly
clear that the tobacco was packed in that same condition. In all the bales which
we have examined, which have been considerable, the tobacco seems to be
perfectly dry. In view of that I can see nothing but every indication that the
tobacco was originally a bad lot.
In this letter he also advised the defendant that he was doing
everything he could to sell the tobacco, and that he did not have any
prospective buyer even at a loss of 25 per cent.
August 9, 1918, the defendant acknowledge the receipt of the letter
and cables, saying that he was "not in a position to lose between seventeen and
twenty thousand pesos, and that he would consent to a reduction of four
thousand pesos, if that was acceptable, and, if it was not, to have the bank pay
back the amount of the draft with interest and take charge of the tobacco until
the defendant would arrive in New York." The plaintiff did not receive this cable
until August 21, when he cabled in reply that he would turn the tobacco over
to the defendant, and that he "awaited telegraphic instruction in regard to it.
That at least twenty dealers had passed on the tobacco." At that time the
plaintiff had sold 66 bales of scattered samples from which, with the 75 bales
sold to the Red Lion customer, he realized $9,031.71.
September 5, 1918, the defendant wrote the New York Agency of
the Philippine National Bank in which he said that the plaintiff had advised him
that the tobacco on arrival was satisfactory, and that there would be a loss, and
that the had assured its arrival at destination "in good condition." That he was
taking it back. That the bank should pay plaintiff $33,109 plus interest upon
delivery to it of the 501 bales. That "on no account should they agree to accept
any shortage in the number of bales."
October 18, 1918, without any knowledge of the defendant's
instruction to the bank, the plaintiff wrote him that his proposition to take the
tobacco back was satisfactory in which he said that he had not heard from the
bank "at the time of writing with reference to taking back of the tobacco."
October 30, 1918, the bank wrote the plaintiff that it would take
back the identical 501 bales, and pay him the amount of the draft and interest.
The plaintiff then wrote the bank a complete history of the transaction, and
explained why the identical 501 bales could not be returned. That he had
realized $9,031.71 from 141 bales of it which he had sold, for which he would
account and return the balance of the tobacco which was then unsold and in
the New York warehouse. The $9,031.71 was more than the actual agreed
purchase price of the 141 bales. This offer was cabled to the defendant, who
replied:
The instructions given you in my letter dated September 5, 1918,
will not be modified.
The bank notified the plaintiff of the receipt of this cable, and in turn
notified the plaintiff of the receipt of this cable, and in turn notified the plaintiff
of the receipt of this cable, and in turn notified the defendant that the plaintiff
would sell the tobacco at public auction, and then sue him for the balance of
the purchase price, and later the plaintiff did sell the remainder of the tobacco
upon which there was a net actual loss to him of $11,867.98, over and above
all actual charges and expenses.
Although at the time of the making of the contract between them
the plaintiff and defendant were in Manila, the tobacco involved was on the
high seas in transit to New York. From necessity the plaintiff could not see or
examine it and would not know anything about its grade or quality, and, for that
reason, insisted that the defendant should make and sign the writing above
quoted in which he says:
I guarantee the arrival of the tobacco in New York in good condition,
subject, of course to, to conditions arising after its departure from Manila,
which contingencies are covered by adequate insurance.
The trial court found and the testimony is conclusive that the
tobacco did not arrive in New York "in good condition," and that , as a matter
of fact, it was not "in good condition" when it left Manila.
The plaintiff and defendant had known each other for about ten
years, and had mutual confidence in each other, and were experienced
business men.
Defendant's draft of the tobacco had been dishonored. Plaintiff was
willing to take the tobacco and honor the draft, with the proviso that the
defendant would guarantee its arrival "in good condition."
The evidence shows that in the whole transaction, the plaintiff acted
in good faith and made an earnest effort to protect the defendant and
minimized his loss. Defendant knew that in the very nature of things the plaintiff
bought the tobacco for the purpose of resale, and that in the ordinary course
of business, he would resell it. The record shows that he found purchasers for
portions of it before its arrival in New York. The only reason why plaintiff's sales
were not consummated was because the tobacco did not stand inspection and
was not "in good condition" at the time of its arrival in New York. In other words,
plaintiff bought and paid the defendant for tobacco which was not "in good
condition," and bought it for the purpose of resale. In the very nature of things,
the defendant knew that the plaintiff bought the tobacco for the purpose of
resale, and he also knew that , if the tobacco was not "in good condition," it
was not worth the amount of the purchase price which plaintiff paid.
The defense cites and relies upon articles 336 and 342 of the Code
of Commerce which are as follows:
A purchaser who, at the time of receiving the merchandise, fully
examines the vendor, alleging a defect in the quantity or quality of the
merchandise.
A purchaser shall have a right of action against a vendor for defects in the
quantity or quality of merchandise receive in bales or packages, provided he
brings his action within the four days following it receipt, and that the damage
is not due to accident or to natural defect of the merchandise or to fraud.
In such cases the purchaser may choose between the rescission of
the contract or its fulfillment in accordance with what has been agreed upon,
but always with the payment of the damages he may have suffered by reason
of the defects or faults.
 The vendor may avoid this claim by demanding when making the
delivery that the merchandise be examined by the purchaser for his satisfaction
with regard to the quantity and quality thereof.
Article 342: A purchaser who has not made any claim based on the inherent
defects in the article sold, within the thirty days following its delivery, shall lose
all rights of action against the vendor for such defects.
Whatever may be the rule as to sales which are completed within
the jurisdiction of the Philippine Islands, those sections do not, and were never
intended to, apply to a case founded upon the facts shown in the record.
Although it is true that the contract between the plaintiff and the defendant
was made in Manila, yet at the time it was made the tobacco was on the high
seas, and under the contract, it was to be delivered "in good condition" in the
City of New York, in consideration of which the plaintiff agreed to pay the draft.
That is to say, the transaction was not complete until after the arrival of the
tobacco in New York "in good condition," and the payment of the draft. It must
be conceded that if, for any reason, the tobacco did not arrive in New York, the
defendant could not recover upon the draft from the plaintiff. Hence, it must
follow that the delivery of the tobacco at New York was a condition precedent
which devolved upon the defendant to perform without which he would not
have a cause of action against the plaintiff.
It is true that the writing recites "the shipment of 501 bales of
tobacco sold you." Yet, the fact remains that it was necessary to deliver the
tobacco in New York to complete the sale.
Contracts of this nature should be construed with reference to the
surrounding conditions and the relative situation of the parties.
At the time this contract was made both parties were in Manila, the
tobacco was in transit to New York, and the defendant knew that the plaintiff
entered into the contract for the purpose of a resale. Soon after the contract
was made, the plaintiff left Manila and went to New York where, relying upon
this contract with the defendant, he found purchasers for the tobacco on the
assumption that it was "in good condition."
Although the word "sold" is used in the written contract, the
transaction shows that the sale was not complete until the arrival of the goods
in New York.
The case of Middleton vs. Ballingall (1 Cal., 446), is somewhat in
point, in which the court says:
I think that the fair construction to be put upon the contract is, that
on the arrival of the ship containing the goods, the defendants should deliver
them, and the plaintiffs should pay the contract price. And the authorities hold
that the arrival of the goods, in such case, is a condition precedent, which must
be shown to have taken place before either party can bring suit.
In the instant case, the contract was at least executory as to the delivery of the
tobacco in New York.
Cyc., vol. 35, pp. 274, 275 and 276, says:
In order to pass the title to goods as against the seller or those claiming under
him there must be a valid existing and completed contract of sale. Under a
complete contract of sale the property in the goods passes at once from the
seller to the buyer, at the place where the contract becomes complete, and for
this reason the agreement is frequently called an executed contract. The sale
is, however, an executory contract, if the seller merely promises to transfer the
property at some future day, or the agreement contemplates the performance
of some act or condition necessary to complete the transfer. Under such a
contract until the act is performed or the condition fulfilled which is necessary
to convert the executory into an executed contract, no title passes to the buyer
as against the seller or persons claiming under him. While certain terms and
expressions standing alone import an executed or executory contract, they are
by no means conclusive but must be construed with reference to other
provisions of the contract and according to what appears to have been the real
intention of the parties, and so a mere recital in the writing evidencing the
contract that the article is "sold" or that the buyer has "purchased" it does not
necessarily make the contract executed; while on the other hand a recital that
the seller "agrees to sell" is not conclusive that the title was not intended to
pass immediately.
The trial court found and the evidence sustains the finding that that
plaintiff acted in good faith. The contract was made in February, 1918 the draft
was payable ninety days after date; the first shipment of 213 bales arrived on
April 26, and the second of 288 bales on May 18, and the plaintiff the draft on
May 21 1918, and the transaction between the parties then became complete.
On May 23, he cabled the defendant that the tobacco was unsatisfactory. On
June 13, he cabled that there would be a loss. On June 28, he wrote the letter
above quoted. September 5, the defendant wrote the New York Agency of the
Philippine National Bank that he would take the tobacco back on condition that
there was not any shortage in the number of bales. During all of this time, the
defendant had the use of plaintiff's money. It is true that the defendant offered
to take the tobacco back and refund the money, but this offer was not actually
made to the plaintiff until October , and was upon the condition that the full
amount of the 501 bales should be returned, which was an impossible condition
for the plaintiff to perform. But the plaintiff did offer to account to the
defendant for the tobacco which he had sold and to return all of the unsold
tobacco which was then in his warehouse, and the defendant declined the
offer. As a business man, he knew that the plaintiff has then purchased the
tobacco for the purpose of a resale, and that the tobacco had arrived at New
York about five months before the offer was made, and he also knew that the
plaintiff was using every effort to sell it and convert it into money, and that he
would sell the whole or any part of it if a purchaser could be found at a
reasonable price. At the time the defendant's offer was communicated to the
plaintiff by the bank the plaintiff in turn offered to account to the defendant for
the entire proceeds of the 141 bales which he had already sold, and to deliver
to him all of the unsold tobacco. This was all that the plaintiff could do under
the existing conditions. The fact that the defendant did not accept this offer is
strong evidence that he was seeking an undue advantage, and that his offer to
plaintiff was not made in good faith.
The second shipment arrived in New York on May 18, and the
plaintiff could not be expected to take any final action until the las shipment
arrived. On learning the true condition of the tobacco, the plaintiff cabled the
defendant on May 23 that it was unsatisfactory, and again on June 13, that
there would be a substantial loss, which was followed by the letter of June 28th
above quoted.
The defects in the tobacco were inherent and could not be
ascertained without opening the bales and making a physical examination.
When this was done, the plaintiff promptly cabled the defendant that the
tobacco was not satisfactory. In the nature of things, the plaintiff could not then
render the defendant a statement of the amount of this claim. By the terms of
the contract, the defendant guaranteed the arrival of the tobacco in New York
"in good condition."
Plaintiff's first cable sent ten days after the arrival of the tobacco
advised the defendant that it was unsatisfactory, and the second, twenty-six
days after its arrival, advised him that there would be a loss.
Appellant's attorneys have submitted a very able and adroit brief in
which they severely criticize the evidence on the part of the plaintiff. Upon all
of the material questions of fact, the trial court found for the plaintiff, and, in
our opinion, the evidence sustains the findings.
It must be remembered that during all these times there was about
ten thousand miles of ocean between them.
The plaintiff had parted with his money and honored the draft,
expecting to sell the tobacco and get his money back with a profit.
The testimony is conclusive that the plaintiff in good faith tried to
sell the tobacco, and that he sold the 141 bales at the best obtainable price;
that the only reason why he did not sell the remainder was because the tobacco
was not "in good condition;" and that when he first knew that it was not "in
good condition," he promptly cabled that defendant that it was unsatisfactory.
As we construe the record, after the tobacco was inspected, the
plaintiff promptly advised the defendant that it was unsatisfactory, and that he
would have to sustain a loss, and in goo faith undertook to protect the
defendant and to minimize the loss, and plaintiff's claim is not barred by the
provisions of either article 336 or 342 of the Code of Commerce.
The judgment is affirmed, with costs. So ordered.
Araullo, C.J., Johnson, Malcolm, Avanceña, Villamor, Ostrand and Romualdez,
JJ., concur.
G.R. No. L-17441 July 31, 1962
WELGO DICHOSO, ET AL., vs. LAURA ROXAS, ET AL.,
DIZON, J.:
Appeal from the following decision of the Court of First Instance of
Laguna:
WHEREFORE, the Court renders judgment ordering the plaintiffs to deposit
with the Clerk of this Court for the account of defendant Laura A. Roxas the
amount of P320.00 and, upon the deposit of the said amount, defendant Laura
A. Roxas is ordered to execute a document transferring her rights, title and
interest in the land in controversy to plaintiffs Welgo Dichoso and Emilia
Hernandez within five (5) days from such deposit. In the event that Laura A.
Roxas fails to execute the document within the aforementioned period, the
same shall executed by the Clerk of Court in her behalf.
Defendants Celso Borja and Nelia Alanguilan are order to execute a
deed of re-sale of the land in controversy and the improvements thereon in
favor of plaintiffs Welgo Dichoso and Emilia Hernandez within five (5) days after
the document transfer has been executed by or on behalf of Laura A. Roxas. If
defendants Celso Borja and Nelia Alanguilan fail to do so, the Clerk of Court
shall execute the document in their behalf. At any time after the execution of
the deed of re-sale, defendants Celso Borja and Nelia Alanguilan may withdraw
from the People's Bank and Trust Company of San Pablo City the amount of
P850.00 which had been deposited by plaintiff Welgo Dichoso as repurchase
price and the People's Bank & Tru Company is ordered to deliver the said
amount to the aforementioned defendants.
The Court considers defendants Celso Borja and Nelia Alanguilan as
possessors in good faith and are not required account for the fruits that they
have received from the Ian it controversy up to the time this decision becomes
final.
Laura A. Roxas is ordered to return to defendants Celso Borja and
Nelia Alanguilan the amount of P1,684.00 which she received as additional
purchase price for the land in controversy.
All defendants are jointly and severally ordered to pay the costs.
The complaint alleged, in substance, that on December 13, 1954,
Laura A. Roxas sold to appellants for the sum of P850.00 a parcel of
unregistered coconut land with an area of 16,965 square meters and with 393
coconut trees, situated in Barrio San Diego, San Pablo, Laguna, subject to the
condition, inter alia, that the vendor could repurchase it for the same amount
within five years, but not earlier than three years, from the date of the sale,
which was evidenced by a public document attached to the complaint as Annex
A; that from November 26, 1955 to July 5, 1957, Roxas had received from
appellees several sums of money amounting to P770.00, their agreement being
that after December 13, 1957, Roxas would sell the same property, by absolute
sale, to appellees for the total sum of P2,000.00, the aforesaid sum of P770.00
to be considered as initial or advance payment on the purchase price; that out
of the balance of P1,230.00, appellees would use the sum of P850.00 to
repurchase the property from appellants after December 13, 1954 but within
the five years stipulated for the exercise of Roxas' right to repurchase; that on
October 22, 1957, pursuant to Roxas' request made on July 23, 1957, appellees
sent her a check for the sum of P320.00 "in full payment of the P2,000.00
consideration for the deed of absolute sale" and thereafter they informed
appellants of their readiness to repurchase the property; that on November 29,
1957 Roxas sent them back the check just referred to with the request that they
endorse the same to appellants when they made the repurchase, because it
appeared that, aside from the P850.00 consideration of the pacto de retro sale,
Roxas had received additional sums from appellants; that again, after
December 13, 1957, appellees made representations to appellants that they
were ready to make the repurchase, as well as to Roxas for the latter to be
ready to execute the corresponding deed of absolute sale in their favor after
they had made the repurchase; that notwithstanding these demand and
representations, Roxas and appellants had deliberately failed to execute the
corresponding deed of absolute sale and deed of resale already mentioned.
On January 8, 1958 appellants filed a motion to dismiss the
complaint upon the ground that appellees had no cause of action against them
because their contract was not them but with Laura A. Roxas. After due hearing,
lower court sustained the motion and dismissed the complaint because,
according to the same, "there exists no written contract of assignment of rights
executed by Laura A. Roxas in favor of the herein plaintiffs concerning property
which said Laura A. Roxas sold to her co-defendants under a deed of pacto de
retro sale, and that the purpose of the present action is precisely to compel
Laura A. Roxas to execute the corresponding deed of assignment."
However, on July 31, 1958, over appellants' objection, the lower
court admitted the amended complaint previously filed by appellees. The
principal amendment introduced consisted in the allegation that on July 5,
1957, for sum of P770.00, Laura A. Roxas had ceded to appellees her right to
repurchase the property from appellants; that on November 29, 1957, Roxas
had "ordered and author the said plaintiffs spouses to repurchase the said
parcel land from the defendants vendee-a-retro after the 3 years period, which
would terminate on December 13, 1957," and that on December 13, 1957,
appellees tendered to appellants the required sum with which to effect the
repurchase, but that the latter refused to accept the same, thus compelling
appellees to consign the amount with the Office of Clerk, Court of First Instance
of Laguna.
Upon petition of appellants, the lower court on August 18, 1958,
ordered appellees to furnish, and the latter furnished appellants, with a copy
of the alleged deed of assignment dated July 8, 1958, referred to in paragraph
4 of the amended complaint, which deed reads as follows:
TALASTASIN NG SINO MAN:
Tinangap ko ngayong Julio 5, 1957 ang halagang Pit Dean at Pitong Pong
(P770.00) peso cuartang pang kasal yan sa mag- asawa ni Welgo Dichoso at
Emilia Hernandez, lang paunang bayad sa isang puesto kong lupa humigit
kumulang sa apat na raang tanim na niog.
Ang aming pinagkasondoan pag dating ng dalagang wang libong (P2,000.00)
pesong pagkakautang pate tobos walong daan at limang pong (P850.00) peso
sa pagka pag na mabibiling muli o sanla) sa magasawa ni Celso Borja Nelia
Alanguilan ay mag gagawaan ng documento o kasulatan bilihang toloyan o
bintarial absoluta sa halagang dalawang libong (P2,000.00) peso na nasabe sa
itaas nito.
Ang nasabing lupa ay nakatayo sa Salang lupa kung tawagin Bo. San Diego sakop
ng Ciudad ng San Pablo. Sa katonayan na hinde ako sisira sa pinagusapan ay
lumagda ako ng pangalan at apellido na kaharap ang isang testigo.
(Lgda.) Cosme Punto (Lgda.) Laura A. Roxas
A motion to dismiss the amended complaint was denied by the
lower court for the reason that the grounds relied upon therein did not appear
to be indubitable and their consideration was deferred until after trial on the
merits. Thereafter appellants filed their answer in which, after making specific
denial of some facts averred in the amended complaint, they alleged the
following affirmative defenses:
1. That the alleged transfer of right to repurchase supposedly executed by
defendant Laura A. Roxas in favor of plaintiffs herein is not in any manner a
transfer of right to repurchase but at most a receipt of indebtedness;
2. That even assuming although not admitting that there was a transfer of right
to repurchase made by the defendant Laura A. Roxas in favor of the plaintiffs
regarding the property in question, yet said right to repurchase could not be
exercised by the plaintiffs considering that before December 13, 1957 arrived,
the period within which the repurchase might be made, said land in question
had already become the absolute and exclusive property of the answering
defendants herein.
3. That defendants spouses in the exercise of the rights of dominion over the
property, had since December 13, 1957 harvested and are harvesting the fruits
to date; and paid the taxes therefor; and had attended to the disposition of the
pro. proceeds therefrom;
4. That whatever alleged agreement may have been entered into between
plaintiffs and defendant Laura Roxas cannot in any way affect third persons like
defendants spouses Celso Boria and Nelia Alanguilan, unless the same is in a
public document;
5. That even assuming, although not admitting, that the Plaintiffs tendered into
the answering defendants the repurchase price of the land in question on or
immediately after December 13, 1947, yet the answering defendants have all
the reasons and are justified in refusing to accept the said repurchase price
considering that before said date of December 13, 1957, answering defendants
were already the absolute and exclusive owners of the land in question, subject
to no other conditions.
As counterclaim, appellants alleged in their answer following facts:
1. That the answering defendants incorporate and part hereof paragraph 1 of
the plaintiffs' amended complaint;
2. That before this case was filed, plaintiffs knew f well that the property in
question is already owned absolute by answering defendants; and which
therefore, cannot be subject of repurchase anymore;
3. That plaintiff Welgo Dichoso was the agent who responsible for the
consummation of the sale with right to purchase as a matter of fact he was the
witness to the s document;
4. That a parcel of land abutting this parcel in quest was likewise offered by
plaintiff Welgo Dichoso to defend spouses who acceded to buy the same on the
representation the former Dichoso that inasmuch as answering defendant are
now the owners of the land in question, this smaller if united with the bigger
piece of property here in quest would not only enhance agriculture but would
afford t greater benefits as to two parcels are adjoining to each other.
5. Defendants spouses would not have bought the p property in question if not
for the assurance of Welgo Dichoso t co- defendant would sooner or later sell
same to them by of absolute sale;
6. That in filing this case, plaintiffs have acted w evident bad faith, considering
that this case was only intended to harass answering defendants who are his
first cousins a therefore ore must be required to pay answering defendants
amount of P500.00 as exemplary damages;
7. That because of the unwarranted and unjustified filing this case, the
answering defendants suffered damages in amount of P500.00 and will
continue to suffer the same by of litigation expenses; and at the same time
were compel to retain the services of counsel and are obliged to pay amount
of P1,000.00 in the concept of attorney's fees,
On September 19, 1958, appellees filed a reply in which they alleged, inter alia,
that when they offered to repurchase the property from appellants, on behalf
of La A. Roxas, appellants had not become absolute and exclusive owners of the
property in question; that after the offer to repurchase made on December 13,
1957, appellate became possessors in bad faith and were in duty bound to
account for the fruits of the property; that although the agreement between
appellees, on the ore hand, a Roxas, on the other, was not contained in a public
instrument appellants were bound by it because they knew the agreement.
Appellees also denied the facts alleged in the counterclaim.
On April 1, 1959, appellees filed a supplementary complaint
wherein, on the claim that after July 23, 1958 the price of coconuts had
considerably gone up, they prayed that the judgment for damages they sought
in the amended complaint be increased in amount accordingly.
After trial upon the issues stated above, the lower court rendered
the appealed judgment, from which the Borja spouses appealed claiming that
the court committed the following errors:
1. In not finding defendant-appellants Celso Boria and Nelia Alanguilan as the
true, lawful and absolute owners of the land in question, their title thereto
being evidenced by public and private documents coupled by possession in
good faith and for value.
2. In not finding appellants Celso Borja and Nelia Alanguilan possessors as
absolute owners from December 8, 1957, the date of the execution of the deed
of absolute sale (Exh. "7") in their favor.
3. In not giving weight to the deed of confirmation (Exh. "8"), a public document
executed to cure defects in proof only.
4. In construing Exhibit "I" (a private document) as a document of sale and in
extending its effects to third parties (appellants) who are total strangers to it.
5. In not sustaining the plea of res judicata by the defendant-appellants.
The pertinent portions of the decision appealed from are the
following:
It appears from the evidence that Laura A. Roxas had sold her rights to the land
in controversy to two (2) different parties. The first one was on July 5, 1957, in
favor of the plaintiffs Welgo Dichoso and Emilia Hernandez (Exh. "I"), and the
second one allegedly on December 8, 1957 in favor of defendants Celso Borja
and Nelia Alanguilan (Exh. "7"). The principal question to be determined is
which of these two documents shall prevail. Both the documents in favor of the
plaintiffs Exh. "I" and that in favor of the defendants Exh. "7" are private
documents same not having been acknowledged before a Notary Public.
The Court is of the opinion that the document in favor of the plaintiffs being of
an earlier date than the document in favor of the defendants shall prevail in
accordance with the provisions of paragraph 3 of Article 1544 of the Civil Code
of the Philippines which read as follows:
'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 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. (Emphasis supplied)
While it may be true that the defendants were in possession of the
land in controversy at the time Laura A. Roxas executed the deed of sale in favor
of the plaintiffs, such possession was merely that of a "vendee a retro" and not
as vendee in an absolute sale. It has also been held that with reference to
unregistered lands, an earlier instrument, be it a sale or a mortgage, shall
prevail over a later one, and the registration of any one of them is immaterial
(Nisce vs. Milo, G.R. No. 42546, Jan. 1936; Nota vs. Concepcion, 56 Phil. 712,
cited in Noblejas, Land Titles and Deeds, 1955 ed., p. 207).
The deed of confirmation of sale executed by Laura A. Roxas in favor
of defendants Celso Borja and Nelia Alanguilan on September 5, 1958, Exhibits
"8", cannot in any manner prejudice the rights of the plaintiffs because the said
deed of confirmation was made more than nine (9) months after this case was
filed. If the execution of the said deed of confirmation. It also proves the joint
efforts of all the "I" executed by Laura A. Roxas in plaintiffs' favor.
It is obvious that, in deciding the case, the lower court failed to give
due weight to the private document Exhibit 7 (deed of absolute sale) executed
by Laura A. Roxas in favor of appellants on December 8, 1957 — in effect
superseding the pacto de retro sale mentioned heretofore for a total
consideration of P1,684.00, of which the amount of P850.00 paid as
consideration for the pacto de retro sale was considered as a part. There is no
dispute at all as to the genuineness of this private deed of absolute sale nor as
to its execution on December 8, 1957. that is, five days prior to December 13,
1957, when. according to appellees themselves, they made the first attempt to
repurchase the property in question, and on which occasion appellants refused
to allow the repurchase "because Laura A. Roxas was not with them", according
to the lower court. After December 8, 1957, appellants' rights were no longer
based on the superseded pacto de retro sale but on the aforesaid deed of
absolute sale — which was a perfectly valid contract as between the parties. In
plain words, after that date Laura A. Roxas no longer had any right to
repurchase the property.
Upon the other hand, appellees' contention that appellants were
aware of their agreement with Laura A. Roxas has not been sufficiently
substantiated. Appellees' own evidence shows that appellants became aware
of their claim to the property when they tried, for the first time, to exercise the
right to repurchase on December 18, 1957 five days after the deed of absolute
sale in favor of said appellants. After a careful consideration of the issues and
the evidence, we believe that the lower court also erred in considering Exhibit
I, executed on July 5, 1957, as a deed of sale of the land in question in favor of
appellees.
In the first place, the phraseology employed therein shows that the
contract between the parties was a mere promise to sell, on the part of Roxas,
because the latter merely promised to execute a deed of absolute sale upon
appellees complaining payment to her of the total sum of P2,000.00, of which
the P850.00 to be paid to appellants for the repurchase of the property would
be an integral part. This repurchase had not yet been made on July 5, 1957,
when this Exhibit I was executed. In the second place, an that date all that Roxas
could possibly sell or convey in relation to the property in question was her right
to repurchase the same from appellants. Consequently, the best consideration
that could be given to the private document Exhibit I is that it was an
assignment by Roxas to appellees of her right to repurchase of which —
according to the evidence — appellants had no knowledge until December 13,
1957 when appellees attempted to make the repurchase. Such being its
condition, it could not possibly give rise to the case of one and the same
property having been sold to two different purchasers. The salt — in favor of
appellants was of the property itself, while the one in favor of appellees, if not
a mere promise to assign, was at most an actual assignment of the right to
repurchase the same property. The provisions of paragraph 3, Article 1544 of
the Civil Code of the Philippines do not, therefore, apply.
Having arrived at the above conclusions, we are constrained to hold
that, upon the facts of the case, appellees are not entitled to the reliefs sought
in their amended complaint and that whatever remedy they have is exclusively
against Laura A. Roxas to recover from her, among other things, what they paid
as consideration for the execution of the private document Exhibit I.
WHEREFORE, the decision appealed from is reversed, with the result that this
case is dismissed, with costs, reserving to appellees, however, the right to file a
separate action against Laura A. Roxas to enforce whatever rights they may
have against her in consonance with this decision.
G.R. No. L-25885 January 31, 1972
LUZON BROKERAGE CO., INC., vs. MARITIME BUILDING CO., INC., and MYERS
BUILDING CO., INC.,
REYES, J.B.L., J.:p
Direct appeal (prior to the effectivity of Republic Act 5440) by Maritime Building
Co., Inc. from a decision of the Court of First Instance of Manila (in its Civil Case
No. 47319), the dispositive part of which provides as follows:
FOR ALL THE FOREGOING CONSIDERATIONS, judgment is hereby
rendered declaring that the Myers Building Co., Inc. is entitled to receive the
rentals which the plaintiff has been paying, including those already deposited
in Court, thereby relieving the plaintiff of any obligation to pay the same to any
other party, and ordering the Maritime Building Co., Inc. to pay the commission
fees paid by the Myers Building Co., Inc. to the Clerk of this Court, plus the sum
of P3,000.00 as and for attorney's fees.
On the cross-claim by the Myers Building Co., Inc., the Maritima
Building Co., Inc. is hereby ordered to pay the Myers Building Co., Inc. the sum
of P10,000.00 damages, plus the sum of P30,000.00, representing rentals
wrongfully collected by it from the plaintiff corresponding to the months of
March, April and May, 1961 and the costs hereof.
The antecedents of the litigation are summarized in the appealed judgment
thus:
This is an action for interpleading.
It appears that on April 30, 1949, in the City of Manila, the defendant
Myers Building Co., Inc., owner of three parcels of land in the City of Manila,
together with the improvements thereon, entered into a contract entitled
"Deed of Conditional Sale" in favor of Bary Building Co., Inc., later known as
Maritime Building Co., Inc., whereby the former sold the same to the latter for
P1,000,000.00, Philippine currency. P50,000.00 of this price was paid upon the
execution of the said contract and the parties agreed that the balance of
P950,000.00 was to be paid in monthly installments at the rate of P10,000.00
with interest of 5% per annum until the same was fully paid.
In Par. (O), they agreed that in case of failure on the part of the vendee to pay
any of the installments due and payable, the contract shall be annulled at the
option of the vendor and all payments already made by vendee shall be
forfeited and the vendor shall have right to re-enter the property and take
possession thereof.
Later, the monthly installment of P10,000.00 above-stipulated with
5% interest per annum was amended or decreased to P5,000.00 per month and
the interest was raised to 5-1/2% per annum. The monthly installments under
the contract was regularly paid by the Bary Building Co., Inc. and/or the
Maritime Co., Inc. until the end of February, 1961. It failed to pay the monthly
installment corresponding to the month of March 1961, for which the Vice-
President, George Schedler, of the Maritime Building Co., Inc., wrote a letter to
the President of Myers, Mr. C. Parsons, requesting for a moratorium on the
monthly payment of the installments until the end of the year 1961, for the
reason that the said company was encountering difficulties in connection with
the operation of the warehouse business. However, Mr. C. Parsons, in behalf of
the Myers Estate, answered that the monthly payments due were not payable
to the Myers Estate but to the Myers Building Co., Inc., and that the Board of
Directors of the Myers Co., Inc. refused to grant the request for moratorium for
suspension of payments under any condition.
Notwithstanding the denial of this request for moratorium by the
Myers Board of Directors the Maritime Building Co., Inc. failed to pay the
monthly installments corresponding to the months of March, April and May,
1961. Whereupon, on May 16, 1961, the Myers Building Co., Inc. made a
demand upon the Maritime Building Co., Inc., for the payment of the
installments that had become due and payable, which letter, however, was
returned unclaimed.
Then, on June 5, 1961, the Myers Building Co., Inc. wrote the
Maritime Building Co., Inc. another letter advising it of the cancellation of the
Deed of Conditional Sale entered into between them and demanding the return
of the possession of the properties and holding the Maritime Building Co., Inc.
liable for use and occupation of the said properties at P10,000.00 monthly.
In the meantime, the Myers Building Co., Inc. demanded upon the Luzon
Brokerage Co., Inc. to whom the Maritime Building Co., Inc. leased the
properties, the payment of monthly rentals of P10,000.00 and the surrender of
the same to it. As a consequence, the Luzon Brokerage Co., Inc. found itself in
a payment to the wrong party, filed this action for interpleader against the
Maritime Building Co., Inc.
After the filing of this action, the Myers Building Co., Inc. in its
answer filed a cross-claim against the Maritime Building Co., Inc. praying for the
confirmation of its right to cancel the said contract. In the meantime, the
contract between the Maritime Building Co., Inc. and the Luzon Brokerage Co.,
Inc. was extended by mutual agreement for a period of four (4) more years,
from April, 1964 to March 31, 1968.
The Maritime Building Co., Inc. now contends (1) that the Myers
Building Co., Inc. cannot cancel the contract entered into by them for the
conditional sale of the properties in question extrajudicially and (2) that it had
not failed to pay the monthly installments due under the contract and,
therefore, is not guilty of having violated the same.
It should be further elucidated that the suspension by the appellant
Maritime Building Co., Inc. (hereinafter called Maritime) of the payment of
installments due from it to appellee Myers Building Co., Inc. (hereinafter
designated as Myers Corporation) arose from an award of backwages made by
the Court of Industrial Relations in favor of members of Luzon Labor Union who
served the Fil-American forces in Bataan in early 1942 at the instance of the
employer Luzon Brokerage Co. and for which F. H. Myers, former majority
stockholder of the Luzon Brokerage Co., had allegedly promised to indemnify
E. M. Schedler (who controlled Maritime) when the latter purchased Myers'
stock in the Brokerage Company. Schedler contended that he was being sued
for the backpay award of some P325,000, when it was a liability of Myers, or of
the latter's estate upon his death. In his letter to Myers Corporation (Exhibit
"11", Maritime) dated 7 April 1961 (two months and ten days before the initial
complaint in the case at bar), Schedler claimed the following:
At all times when the F. H. Myers Estate was open in the Philippine
Islands and open in San Francisco, the Myers Estate or heirs assumed the
defense of the Labor Union claims and led us to believe that they would
indemnify us therefrom.
Recently, however, for the first time, and after both the Philippine
and San Francisco F. H. Myers Estates were closed, we have been notified that
the F. H. Myers indemnity on the Labor Union case will not be honored, and in
fact Mrs. Schedler and I have been sued in the Philippines by my successor in
interest, Mr. Wentholt, and have been put to considerable expense.
You are advised that my wife and I, as the owners of the Maritime
Building Company, intend to withhold any further payments to Myers Building
Company or Estate, in order that we can preserve those funds and assets to set
off against the potential liability to which I am now exposed by the failure of
the Myers heirs to honor the indemnity agreement pertaining to the Labor
claims.
The trial court found the position of Schedler indefensible, and that
Maritime, by its failure to pay, committed a breach of the sale contract; that
Myers Company, from and after the breach, became entitled to terminate the
contract, to forfeit the installments paid, as well as to repossess, and collect the
rentals of, the building from its lessee, Luzon Brokerage Co., in view of the
terms of the conditional contract of sale stipulating that:
(d) It is hereby agreed, covenanted and stipulated by and between the parties
hereto that the Vendor will execute and deliver to the Vendee a definite or
absolute deed of sale upon the full payment by the vendee of the unpaid
balance of the purchase price hereinabove stipulated; that should the
Vendee fail to pay any of the monthly installments, when due, or otherwise
fail to comply with any of the terms and conditions herein stipulated, then
this Deed of Conditional Sale shall automatically and without any further
formality, become null and void, and all sums so paid by the Vendee by
reason thereof, shall be considered as rentals and the Vendor shall then and
there be free to enter into the premises, take possession thereof or sell the
properties to any other party.
xxx xxx xxx
(o) In case the Vendee fails to make payment or payments, or any part thereof,
as herein provided, or fails to perform any of the covenants or agreements
hereof, this contract shall, at the option of the Vendor, be annulled and, in
such event, all payments made by the Vendee to the Vendor by virtue of this
contract shall be forfeited and retained by the Vendor in full satisfaction of
the liquidated damages by said Vendor sustained; and the said Vendor shall
have the right to forthwith re-enter, and take possession of, the premises
subject-matter of this contract.
"The remedy of forfeiture stated in the next-preceding paragraph
shall not be exclusive of any other remedy, but the Vendor shall have every
other remedy granted it by virtue of this contract, by law, and by equity."
From the judgment of the court below, the dispositive portion whereof has
been transcribed at the start of this opinion, Myers duly appealed to this Court.
The main issue posed by appellant is that there has been no breach of contract
by Maritime; and assuming that there was one, that the appellee Myers was
not entitled to rescind or resolve the contract without recoursing to judicial
process.
It is difficult to understand how appellant Maritime can seriously
contend that its failure or refusal to pay the P5,000 monthly installments
corresponding to the months of March, April and May, 1961 did not constitute
a breach of contract with Myers, when said agreement (transcribed in the
Record on Appeal, pages 59-71) expressly stipulated that the balance of the
purchase price (P950,000) — shall be paid at the rate of Ten Thousand Pesos
(P10,000) monthly on or before the 10th day of each month with interest at 5%
per annum, this amount to be first applied on the interest, and the balance paid
to the principal thereof; and the failure to pay any installment or interest when
due shall ipso factocause the whole unpaid balance of the principal and interest
to be and become immediately due and payable. (Contract, paragraph b;
Record on Appeal, page 63)
Contrary to appellant Maritime's averments, the default was not
made in good faith. The text of the letter to Myers (Exhibit "11", Maritime),
heretofore quoted, leaves no doubt that the non-payment of the installments
was the result of a deliberate course of action on the part of appellant, designed
to coerce the appellee Myers Corporation into answering for an alleged
promise of the late F. H. MYERS to indemnify E. W. Schedler, the controlling
stock-holder of appellant, for any payments to be made to the members of the
Luzon Labor Union. This is apparent also from appellant's letter to his counsel
(Exhibit "12", Maritime):
... I do not wish to deposit pesos representing the months of March,
April and May, since the Myers refusal to honor the indemnity concerning the
labor claims has caused me to disburse (sic) roughly $10,000.00 to date in fees,
cost and travel expenses. However, if the Myers people will deposit in trust with
Mr. C. Parsons 25,000 pesos to cover my costs to date, I will then deposit with
Mr. Parsons, in trust, 15,000 pesos for March, April and May and will also post
a monthly deposit of 5,000 pesos until the dispute is settled. The dispute won't
be settled in my mind, unless and until:
a) The Myers people indemnify me fully the labor cases;
b) The labor cases are terminated favorably to Luzon Brokerage and
no liability exists;
 c) The Myers people pay any judgment entered on the labor cases
thereby releasing me; or
d) It is finally determined either in San Francisco or in the Philippines
by a court that the Myers heirs must honor the indemnity which Mr.
F. H. Myers promised when I purchased Luzon Brokerage Company.
Yet appellant Maritime (assuming that it had validly acquired the
claims of its president and controlling stockholder, E. M. Schedler) could not
ignore the fact that whatever obligation F. H. Myers or his estate had assumed
in favor of Schedler with respect to the Luzon Brokerage labor case was not,
and could not have been, an obligation of appellee corporation (Myers Building
Company). No proof exists that the board of directors of the Myers Corporation
had agreed to assume responsibility for the debts (if any) that the late Myers
or his heirs had incurred in favor of Schedler. Not only this, but it is apparent
from the letters quoted heretofore that Schedler had allowed the estate
proceedings of the late F. M. Myers to close without providing for any
contingent liability in Schedler's favor; so that by offsetting the alleged debt of
Myers to him, against the balance of the price due under the "Deed of
Conditional Sale", appellant Maritime was in fact attempting to burden the
Myers Building Company with an uncollectible debt, since enforcement thereof
against the estate of F. H. Myers was already barred.
Under the circumstances, the action of Maritime in suspending
payments to Myers Corporation was a breach of contract tainted with fraud or
malice (dolo), as distinguished from mere negligence (culpa), "dolo" being
succinctly defined as a "conscious and intentional design to evade the normal
fulfillment of existing obligations" (Capistrano, Civil Code of the Philippines, Vol.
3, page 38), and therefore incompatible with good faith (Castan, Derecho Civil,
7th Ed., Vol. 3, page 129; Diaz Pairo, Teoria de Obligaciones, Vol. 1, page 116).
Maritime having acted in bad faith, it was not entitled to ask the
court to give it further time to make payment and thereby erase the default or
breach that it had deliberately incurred. Thus the lower court committed no
error in refusing to extend the periods for payment. To do otherwise would be
to sanction a deliberate and reiterated infringement of the contractual
obligations incurred by Maritime, an attitude repugnant to the stability and
obligatory force of contracts.
From another point of view, it is irrelevant whether appellant
Maritime's infringement of its contract was casual or serious, for as pointed out
by this Court in Manuel vs. Rodriguez, 109 Phil. 1, at page 10 —
The contention of plaintiff-appellant that Payatas Subdivision Inc.
had no right to cancel the contract as there was only a "casual breach" is
likewise untenable. In contracts to sell, where ownership is retained by the
seller and is not to pass until the full payment of the price, 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, in accordance with Article
1117 of the Old Civil Code. 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.
But it is argued for Maritime that even if it had really violated the
Contract of Conditional Sale with Myers, the latter could not extrajudicially
rescind or resolve the contract, but must first recourse to the courts. While
recognizing that paragraph (d) of the deed of conditional sale expressly
provides inter alia —that should the Vendee fail to pay any of the monthly
installments when due, or otherwise fail to comply with any of the terms and
conditions herein stipulated, then this Deed of Conditional
Sale shall automatically and without any further formality, become null and
void, and all sums so paid by the Vendee by reason thereof shall be considered
as rentals.. (Emphasis supplied)
herein appellant Maritime avers that paragraph (e) of the deed
contemplates that a suit should be brought in court for a judicial declaration of
rescission. The paragraph relied upon by Maritime is couched in the following,
terms:
(e) It is also hereby agreed, covenanted and stipulated by and
between the parties hereto that should the Vendor rescind this Deed of
Conditional Sale, for any of the reasons stipulated in the preceding paragraph,
the Vendee by these presents obligates itself to peacefully deliver the
properties subject of this contract to the Vendor, and in the event that the
Vendee refuses to peacefully deliver the possession of the properties subject
of this contract to the Vendor in case of rescission, and a suit should be brought
in court by the Vendor to seek judicial declaration of rescission and take
possession of the properties subject of this contract, the Vendee hereby
obligates itself to pay all the expenses to be incurred by reason of such suit and
in addition obligates itself to pay the sum of P10,000.00, in concept of damages,
penalty and attorney's fees.
Correlation of this paragraph (e) with the preceding paragraph (d)
of the Deed of Conditional Sale (quoted in page 5 of this opinion) reveals no
incompatibility between the two; and the suit to "be brought in Court by the
Vendor to seek judicial declaration of rescission" is provided for by paragraph(e)
only in the eventuality that, notwithstanding the automatic annulment of the
deed under paragraph (d), the Vendee "refuses to peacefully deliver the
possession of the properties subject of this contract". The step contemplated
is logical since the Vendor can not, by himself, dispossess the Vendee manu
militari, if the latter should refuse to vacate despite the violation of the
contract, since no party can take the law in his own hands. But the bringing of
such an action in no way contradicts or restricts the automatic termination of
the contract in case the Vendee (i.e., appellant Maritime) should not comply
with the agreement.
Anyway, this Court has repeatedly held that —
Well settled is, however, the rule that a 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" (Lopez vs.
Commissioner of Customs, L-28235, 30 January 1971, 37 SCRA 327, 334,, and
cases cited therein).1 (Emphasis supplied.)
Resort to judicial action for rescission is obviously not
contemplated.... The validity of the stipulation can not be seriously disputed. It
is in the nature of a facultative resolutory condition which in many cases has
been upheld by this Court. (Ponce Enrile vs. Court of Appeals, L-27549, 30 Sept.
1969; 29 SCRA 504).
The obvious remedy of the party opposing the rescission for any reason being
to file the corresponding action to question the rescission and enforce the
agreement, as indicated in our decision in University of the Philippines vs.
Walfrido de los Angeles, L-28602, 29 September 1970, 35 SCRA 107.
Of course, it must be understood that the act of a party in treating
a contract as cancelled or resolved on account of infractions by the other
contracting party must be made known to the other and is always provisional,
being ever subject to scrutiny and review by the proper court. If the other party
denies that rescission is justified, it is free to resort to judicial action in its own
behalf, and bring the matter to court. Then, should the court, after due hearing,
decide that the resolution of the contract was not warranted, the responsible
party will be sentenced to damages; in the contrary case, the resolution will be
affirmed, and the consequent indemnity awarded to the party prejudiced.
In other words, the party who deems the contract violated may
consider it resolved or rescinded, and act accordingly, without previous court
action, but it proceeds at its own risk. For it is only the final judgment of the
corresponding court that will conclusively and finally settle whether the action
taken was or was not correct in law. But the law definitely does not require that
the contracting party who believes itself injured must first file suit and wait for
a judgment before taking extrajudicial steps to protect its interest. Otherwise,
the party injured by the other's breach will have to passively sit and watch its
damages accumulate during the pendency of the suit until the final judgment
of rescission is rendered when the law itself requires that he should exercise
due diligence to minimize its own damages (Civil Code, Article 2203).
Maritime likewise invokes Article 1592 of the Civil Code of the Philippines as
entitling it to pay despite its default:
ART. 1592. In the sale of immovable property, even though it may
have been stipulated that upon failure to pay the price at the time agreed upon
the rescission of the contract shall of right take place, the vendee may 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 a notarial act. After the
demand, the court may not grant him a new term.
Assuming arguendo that Article 1592 is applicable, the cross-claim
filed by Myers against Maritime in the court below constituted a judicial
demand for rescission that satisfies the requirements of said article.
But even if it were not so, appellant overlooks that its contract with
appellee Myers is not the ordinary sale envisaged by Article 1592, transferring
ownership simultaneously with the delivery of the real property sold, but one
in which the vendor retained ownership of the immovable object of the sale,
merely undertaking to convey it provided the buyer strictly complied with the
terms of the contract (see paragraph [d], ante, page 5). In suing to recover
possession of the building from Maritime, appellee Myers is not after the
resolution or setting aside of the contract and the restoration of the parties to
the status quo ante, as contemplated by Article 1592, but precisely enforcing
the provisions of the agreement that it is no longer obligated to part with the
ownership or possession of the property because Maritime failed to comply
with the specified condition precedent, which is to pay the installments as they
fell due.
The distinction between contracts of sale and contract to sell with reserved title
has been recognized by this Court in repeated decisions2 upholding the power
of promisors under contracts to sell in case of failure of the other party to
complete payment, to extrajudicially terminate the operation of the contract,
refuse conveyance and retain the sums or installments already received, where
such rights are expressly provided for, as in the case at bar.
Maritime's appeal that it would be iniquituous that it should be
compelled to forfeit the P973,000 already paid to Myers, as a result of its failure
to make good a balance of only P319,300.65, payable at P5,000 monthly,
becomes unimpressive when it is considered that while obligated to pay the
price of one million pesos at P5,000 monthly, plus interest, Maritime, on the
other hand, had leased the building to Luzon Brokerage, Inc. since 1949; and
Luzon paid P13,000 a month rent, from September, 1951 to August 1956, and
thereafter until 1961, at P10,000 a month, thus paying a total of around one
and a half million pesos in rentals to Maritime. Even adding to Maritime's losses
of P973,000 the P10,000 damages and P3,000 attorneys' fees awarded by the
trial court, it is undeniable that appellant Maritime has come out of the entire
transaction still at a profit to itself.
There remains the procedural objection raised by appellant
Maritime to this interpleader action filed by the Luzon Brokerage Co., the lessee
of the building conditionally sold by Myers to Maritime. It should be recalled
that when Maritime defaulted in its payments to Myers, and the latter notified
the former that it was cancelling the contract of conditional sale, Myers also
notified Luzon Brokerage, Maritime's lessee of the building, of the cancellation
of the sale, and demanded that Luzon should pay to Myers the rentals of the
building beginning from June, 1961, under penalty of ejectment (Record on
Appeal, pages 14-15). In doubt as to who was entitled to the rentals, Luzon filed
this action for interpleader against Myers and Maritime, and deposited the
rentals in court as they fell due. The appellant Maritime moved to dismiss on
the ground that (a) Luzon could not entertain doubts as to whom the rentals
should be paid since Luzon had leased the building from Maritime since 1949,
renewing the contract from time to time, and Myers had no right to cancel the
lease; and (b) that Luzon was not a disinterested party, since it tended to favor
appellee Myers. The court below overruled Maritime's objections and We see
no plausible reason to overturn the order. While Myers was not a party to the
lease, its cancellation of the conditional sale of the premises to Maritime,
Luzon's lessor, could not but raise reasonable doubts as to the continuation of
the lease, for the termination of the lessor's right of possession of the premises
necessarily ended its right to the rentals falling due thereafter. The preceding
portion of our opinion is conclusive that Luzon's doubts were grounded under
the law and the jurisprudence of this Court.
No adequate proof exists that Luzon was favoring any one of the
contending parties. It was interested in being protected against prejudice
deriving from the result of the controversy, regardless of who should win. For
the purpose it was simpler for Luzon to compel the disputants to litigate
between themselves, rather than chance being sued by Myers, and later being
compelled to proceed against Maritime to recoup its losses. In any event,
Maritime ultimately confirmed the act of Luzon in suing for interpleader, by
agreeing to renew Luzon's lease in 1963 during the pendency of the present
action, and authorizing Luzon to continue depositing the rentals in court "until
otherwise directed by a court of competent jurisdiction" (Exhibit "18-
Maritime"). The procedural objection has thus become moot.
PREMISES CONSIDERED, the appealed decision should be, and
hereby is, affirmed, and appellant Maritime Building Co., as well as appellee
Luzon Brokerage Co., are further ordered to surrender the premises to the
appellee Myers Building Co. Costs against appellant.
Concepcion, C.J., Makalintal, Zaldivar, Castro, Teehankee, Barredo, Villamor and
Makasiar, JJ., concur.
Fernando, J., took no part.
G.R. No. 156171 April 22, 2005
Spouses RICARDO and FERMA PORTIC vs ANASTACIA CRISTOBAL,
DECISION
PANGANIBAN, J.:
An agreement in which ownership is reserved in the vendor and is
not to pass to the vendee until full payment of the purchase price is known as
a contract to sell. The absence of full payment suspends the vendors obligation
to convey title. This principle holds true between the parties, even if the sale
has already been registered. Registration does not vest, but merely serves as
evidence of, title to a particular property. Our land registration laws do not give
title holders any better ownership than what they actually had prior to
registration.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court,
challenging the January 29, 2002Decision[2] and the November 18,
2002 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 66393. The
assailed Decision disposed as follows:
WHEREFORE, foregoing considered, the appealed decision is hereby
REVERSED and SET ASIDE. A new one is hereby entered ORDERING defendant-
appellant to pay the unpaid balance of P55,000.00 plus legal interest of 6% per
annum counted from the filing of this case. The ownership of defendant-
appellant over the subject property is hereby confirmed.
No pronouncement as to costs.[4]
In the challenged Resolution,[5] the CA denied petitioners Motion for
Partial Reconsideration.
The Facts
The facts were summarized by the appellate court as follows:
Spouses Clodualdo Alcantara and Candelaria Edrosalam were the
original registered owners of a parcel of land with three-door apartment,
located at No. 9, 1st Street BBB, Marulas, Valenzuela City. Transfer Certificate of
Title No. T-71316 was issued in the names of spouses Clodualdo Alcantara and
Candelaria Edrosalam.
On October 2, 1968, spouses Clodualdo Alcantara and Candelaria
Edrosalam sold the subject property in favor of [petitioners] with the condition
that the latter shall assume the mortgage executed over the subject property
by spouses Clodualdo Alcantara and Candelaria Edrosalam in favor of the Social
Security System.
[Petitioners] defaulted in the payment of the monthly amortizations
due on the mortgage. The Social Security System foreclosed the mortgage and
sold the subject property at public auction with the Social Security System as
the highest bidder.
On May 22, 1984, before the expiration of the redemption period,
[petitioners] sold the subject property in favor of [respondent] in consideration
of P200,025.89. Among others, the parties agreed that [respondent] shall pay
the sum of P45,025.89 as down payment and the balance of P155,000.00 shall
be paid on or before May 22, 1985. The parties further agreed that in case
[respondent] should fail to comply with the conditions, the sale shall be
considered void and [petitioners] shall reimburse [respondent] of whatever
amount already paid.
On the same date, [petitioners] and [respondent] executed a Deed
of Sale with Assumption of Mortgage whereby [petitioners] sold the subject
property in favor of [respondent] in consideration of P80,000.00, P45,000.00
thereof shall be paid to the Social Security System.
On July 30, 1984, spouses Clodualdo Alcantara and Candelaria
Edrosalam, the original owners of the subject property, sold the subject
property in favor of [respondent] for P50,000.00.
On the same date, [respondent] executed a Deed of Mortgage
whereby [respondent] constituted a mortgage over the subject property to
secure a P150,000.00 indebtedness in favor of [petitioners].
[Respondent] paid the indebtedness due over the subject property
to the Social Security System.
On August 6, 1984, Transfer Certificate of Title No. T-71316 in the
names of spouses Clodualdo Alcantara and Candelaria Edrosalam was cancelled
and in lieu thereof Transfer Certificate of Title No. T-113299 was issued in the
name of [respondent].
On May 20, 1996, [petitioners] demanded from [respondent] the
alleged unpaid balance of P55,000.00. [Respondent] refused to pay.
On June 6, 1996, [petitioners] filed this instant civil case against
[respondent] to remove the cloud created by the issuance of TCT No. T-113299
in favor of [respondent]. [Petitioners] claimed that they sold the subject
property to [respondent] on the condition that [respondent] shall pay the
balance on or before May 22, 1985; that in case of failure to pay, the sale shall
be considered void and [petitioners] shall reimburse [respondent] of the
amounts already paid; that [respondent] failed to fully pay the purchase price
within the period; that on account of this failure, the sale of the subject
property by [petitioners] to [respondent] is void; that in spite of this failure,
[respondent] required [petitioners] to sign a lease contract over the apartment
which [petitioners] occupy; that [respondent] should be required to reconvey
back the title to the subject property to [petitioners].
[Respondent] on her part claimed that her title over the subject
property is already indefeasible; that the true agreement of the parties is that
embodied in the Deed of Absolute Sale with Assumption of Mortgage; that
[respondent] had fully paid the purchase price; that [respondent] is the true
owner of the subject property; that [petitioners] claim is already barred by
laches.[6]
 After trial, the Regional Trial Court (RTC) of Valenzuela City rendered
this judgment in favor of petitioners:
WHEREFORE, premises considered, this Court hereby adjudicates
on this case as follows:
1.) The Court hereby orders the quieting of title or removal of cloud over the
[petitioners] parcel of land and three (3) door apartment now covered by
Transfer Certificate of Title No. T-113299 of the Registry of Deeds
for Caloocan City and Tax Declaration Nos. C-018-00235 & C-031-012077
respectively, of Valenzuela City;
2.) The Court hereby orders the [respondent] to reconvey in favor of the
[petitioners] the parcel of land and three (3) door apartment now covered by
Transfer Certificate of Title No. T-113299 of the Registry of Deeds of Caloocan
City after reimbursement by the [petitioners] of the amount actually paid by
the [respondent] in the total amount of P145,025.89;
3.) The Court hereby DENIES damages as claimed by both parties.[7]
Ruling of the Court of Appeals
The Court of Appeals opined that the first Memorandum of Agreement (MOA)
embodied the real agreement between the parties, and that the subsequent
Deeds were executed merely to secure their respective rights over the
property.[8] The MOA stated that Cristobal had not fully paid the purchase price.
Although this statement might have given rise to a cause of action to annul the
Deed of Sale, prescription already set in because the case had been filed
beyond the ten-year reglementary period,[9]as observed by the CA.
Nonetheless, in conformity with the principle of unjust enrichment, the
appellate court ordered respondent to pay petitioners the remaining balance
of the purchase price.[10]
In their Motion for Partial Reconsideration, petitioners contended
that their action was not one for the enforcement of a written contract, but
one for the quieting of title -- an action that was imprescriptible as long as they
remained in possession of the premises.[11] The CA held, however, that the
agreement between the parties was valid, and that respondents title to the
property was amply supported by the evidence.[12] Therefore, their action for
the quieting of title would not prosper, because they failed to show the
invalidity of the cloud on their title. Hence, this Petition.[13]
The Issue
In its Memorandum, petitioners raise the following issues for our
consideration:
(1) Whether or not the [petitioners] cause of action is for quieting of title.
(2) Whether or not the [petitioners] cause of action has prescribed.
The main issue revolves around the characterization of the parties agreement
and the viability of petitioners cause of action.
This Courts Ruling
The Petition has merit.
Main Issue:
Nature of the Action: Quieting of Title or Enforcement of a Written Contract
Petitioners argue that the action they filed in the RTC was for the
quieting of title. Respondents demand that they desist from entering into new
lease agreements with the tenants of the property allegedly attests to the fact
of their possession of the subject premises.[15] Further, they point to the
existence of Civil Case No. 7446, an action for unlawful detainer that
respondent filed against them,[16] as further proof of that fact. Being in
continuous possession of the property, they argue that their action for the
quieting of title has not prescribed.[17]
On the other hand, respondent joins the appellate court in
characterizing the action petitioners filed in the RTC as one for the enforcement
of the MOA. Being based on a written instrument, such action has already
prescribed, respondent claims.[18] She adds that petitioners could not have
been in continuous possession of the subject property because, under a duly
notarized lease agreement, they have been paying her a monthly rental fee
of P500, which was later increased to P800.
Two questions need to be answered to resolve the present case;
namely, (1) whether Cristobals title to the property is valid; and (2) whether the
Portics are in possession of the premises, a fact that would render the action
for quieting of title imprescriptible.
Validity of Title
The CA held that the action for the quieting of title could not
prosper, because Cristobals title to the property was amply supported by
evidence.
Article 476 of the Civil Code provides as follows:
Whenever there is a cloud on title to real property or any interest therein, by
reason of any instrument, record, claim, encumbrance or proceeding which is
apparently valid or effective but is in truth and in fact invalid, ineffective,
voidable, or unenforceable, and may be prejudicial to said title, an action may
be brought to remove such cloud or to quiet the title.
An action may also be brought to prevent a cloud from being cast
upon title to real property or any interest therein.
Suits to quiet title are characterized as proceedings quasi in
rem.[19] Technically, they are neither in rem nor in personam. In an action quasi
in rem, an individual is named as defendant.[20] However, unlike suits in rem,
a quasi in rem judgment is conclusive only between the parties.[21]
Generally, the registered owner of a property is the proper party to
bring an action to quiet title. However, it has been held that this remedy may
also be availed of by a person other than the registered owner because, in the
Article reproduced above, title does not necessarily refer to the original or
transfer certificate of title.[22] Thus, lack of an actual certificate of title to a
property does not necessarily bar an action to quiet title. As will be shown later,
petitioners have not turned over and have thus retained their title to the
property.
On the other hand, the claim of respondent cannot be sustained.
The transfer of ownership of the premises in her favor was subject to the
suspensive condition stipulated by the parties in paragraph 3 of the MOA,
which states as follows:
3. That while the balance of P155,000.00 has not yet been fully paid the FIRST
PARTY OWNERS shall retain the ownership of the above described parcel of
land together with its improvements but the SECOND PARTY BUYER shall have
the right to collect the monthly rentals due on the first door (13-A) of the said
apartment;[23]
The above-cited provision characterizes the agreement between
the parties as a contract to sell, not a contract of sale. Ownership is retained by
the vendors, the Portics; it will not be passed to the vendee, the Cristobals, until
the full payment of the purchase price. Such payment is a positive suspensive
condition, and failure to comply with it is not a breach of obligation; it is merely
an event that prevents the effectivity of the obligation of the vendor to convey
the title.[24] In short, until the full price is paid, the vendor retains ownership.
The mere issuance of the Certificate of Title in favor of Cristobal did
not vest ownership in her. Neither did it validate the alleged absolute purchase
of the lot. Time and time again, this Court has stressed that registration does not
vest, but merely serves as evidence of, title. Our land registration laws do not give
the holders any better title than that which they actually have prior to registration. [25]
Under Article 1544 of the Civil Code, mere registration is not enough
to acquire a new title. Good faith must concur.[26] Clearly, respondent has not
yet fully paid the purchase price. Hence, as long as it remains unpaid, she
cannot feign good faith. She is also precluded from asserting ownership against
petitioners. The appellate courts finding that she had a valid title to the
property must, therefore, be set aside.
Continuous Possession
The issue of whether the Portics have been in actual, continuous
possession of the premises is necessarily a question of fact. Well-entrenched is
the rule that findings of fact of the Court of Appeals, when supported by
substantial evidence, are final and conclusive and may not be reviewed on
appeal.[27] This Court finds no cogent reason to disturb the CAs findings
sustaining those of the trial court, which held that petitioners had been in
continuous possession of the premises. For this reason, the action to quiet title
has not prescribed.
WHEREFORE, the Petition is GRANTED. The challenged Decision and
Resolution of the Court of Appeals are REVERSED and SET ASIDE. The Decision
of the RTC of Valenzuela City in Civil Case No. 4935-V-96, dated September 23,
1999, is hereby REINSTATED. No pronouncement as to costs.
SO ORDERED.
[G.R. No. 158646. June 23, 2005]
HEIRS OF JESUS M. MASCUANA, vs. COURT OF APPEALS
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision[1] of the
Court of Appeals (CA) in CA-G.R. CV No. 53117 affirming the Decision[2] of the
Regional Trial Court (RTC) of San Carlos City, Negros Occidental, which ordered
the dismissal of the petitioners complaint for recovery of possession and
damages.
The Antecedents
Gertrudis Wuthrich and her six other siblings were the co-owners of
a parcel of land identified as Lot No. 124 of the San Carlos City, Negros
Occidental Cadastre, with an area of 1,729 square meters and covered by
Transfer Certificate of Title (TCT) No. 1453-R (T-29937)-38.[3] Over time,
Gertrudis and two other co-owners sold each of their one-seventh (1/7) shares,
or a total area of 741 square meters, to Jesus Mascuana. The latter then sold a
portion of his 140-square-meter undivided share of the property to Diosdado
Sumilhig. Mascuana later sold an additional 160-square-meter portion to
Sumilhig on April 7, 1961. However, the parties agreed to revoke the said deed
of sale and, in lieu thereof, executed a Deed of Absolute Sale on August 12,
1961. In the said deed, Mascuana, as vendor, sold an undivided 469-square-
meter portion of the property for P4,690.00, with P3,690.00 as down payment,
and under the following terms of payment:
That the balance of ONE THOUSAND PESOS (P1,000.00) shall be paid
by the VENDEE unto the VENDOR as soon as the above-portions of Lot 124 shall
have been surveyed in the name of the VENDEE and all papers pertinent and
necessary to the issuance of a separate Certificate of Title in the name of the
VENDEE shall have been prepared.[4]
On December 31, 1961, Mascuana and Jose G. Estabillo executed a Deed of
Exchange and Absolute Sale of Real Estate,[5] in which Estabillo deeded to
Mascuana a portion of his property abutting that of Sumilhig on the southeast.
In the meantime, a survey was conducted for the co-owners of Lot No. 124 on
July 9, 1962. The subdivision plan of the said lot was approved by the Director
of Lands on August 2, 1962. The portion of the property deeded to Sumilhig
was identified in the said plan as Lot No. 124-B.[6]
Meanwhile, Mascuana died intestate on April 20, 1965 and was
survived by his heirs, Eva M. Ellisin, Renee Hewlett, Carmen Vda. de Opea,
Marilou Dy and Jose Ma. R. Mascuana.
On April 24, 1968, Sumilhig executed a Deed of Sale of Real
Property[7] on a portion of Lot No. 124-B with an area of 469 square meters and
the improvements thereon, in favor of Corazon Layumas, the wife of Judge
Rodolfo Layumas, for the price of P11,000.00. The spouses Layumas then had
the property subdivided into two lots: Lot No. 124-B-2 with an area of 71 square
meters under the name of Jesus Mascuana, and Lot No. 124-B-1, with an area
of 469 square meters under their names.[8] The spouses Layumas took
possession of the property and caused the cutting of tall grasses thereon. Upon
the plea of a religious organization, they allowed a chapel to be constructed on
a portion of the property.[9] In January 1985, the spouses Layumas allowed
Aquilino Barte to stay on a portion of the property to ward off
squatters.[10] Barte and his kin, Rostom Barte, then had their houses
constructed on the property.
On October 1, 1985, the spouses Layumas received a Letter[11] from
the counsel of Renee Tedrew, offering to buy their share of the property for
US$1,000.00. For her part, Corazon Layumas wrote Pepito Mascuana, offering
to pay the amount of P1,000.00, the balance of the purchase price of the
property under the deed of absolute sale executed by Mascuana and Sumilhig
on August 12, 1961.[12]However, the addressee refused to receive the mail
matter.[13]
Unknown to the spouses Layumas, TCT No. 8986[14] was issued over Lot No.
124-B in the name of Jesus Mascuana on March 17, 1986.
On November 17, 1986, the heirs of Mascuana filed a
Complaint[15] for recovery of possession of Lot No. 124-B and damages with a
writ of preliminary injunction, alleging that they owned the subject lot by virtue
of successional rights from their deceased father. They averred that Barte
surreptitiously entered the premises, fenced the area and constructed a house
thereon without their consent. Attached as annexes to the complaint were TCT
No. 8986 and a certification[16] from the Office of the City Treasurer, Land Tax
Division, vouching that the property in question was owned by the petitioners
and that they had paid the taxes thereon until 1992.
In his answer to the complaint, Barte admitted having occupied a
portion of Lot No. 124-B, but claimed that he secured the permission of Rodolfo
Layumas, the owner of the subject property. He added that he did not fence
the property, and that the petitioners did not use the same as a passageway in
going to Broce Street from their house. Barte raised the following special
defenses: (a) the petitioners were estopped from asserting ownership over the
lot in question because they did not object when he occupied the said portion
of the lot; (b) neither did the petitioners protest when a church was built on the
property, or when residential houses were constructed thereon; (c) the
petitioners still asked Barte and the other occupants whether they had notified
Rodolfo Layumas of the constructions on the property; and (d) the heirs of
Mascuana, through the lawyer of Mrs. Renee M. Tedrew, even wrote a
letter[17] to Rodolfo Layumas on October 1, 1985, expressing her willingness to
buy the subject property for US$1,000.00.
On April 8, 1991, the spouses Layumas filed a Motion for Leave to
Intervene,[18] alleging therein that they had a legal interest in Lot No. 124-B-1
as its buyers from Sumilhig, who in turn purchased the same from Mascuana.
In their answer in intervention,[19] the spouses Layumas alleged that they were
the true owners of the subject property and that they had wanted to pay the
taxes thereon, but the Land Tax clerk refused to receive their payments on
account that the petitioners had already made such payment. The spouses
Layumas further maintained that the petitioners had no cause of action against
Barte, as they had authorized him to occupy a portion of Lot No. 124-B-1. The
spouses Layumas also averred that the petitioners were estopped from denying
their right of ownership and possession of the subject lot, as one of them had
even offered to repurchase a portion of Lot No. 124-B via letter. The said
spouses interposed a counterclaim for damages, claiming ownership over the
property, and prayed, thus:
WHEREFORE, it is most respectfully prayed that this HONORABLE
COURT render judgment in favor of the Intervenors and the defendant Aquilino
Barte, ordering:
1. That the complaint against Aquilino Barte be dismissed with costs against the
plaintiff;
2. That the Intervenors spouses Judge Rodolfo S. Layumas and Corazon A.
Layumas be declared as the legal and true owners of Lot 124-B;
3. That the plaintiffs should deliver immediately to the Intervenors, TCT No.
8986 which is in their possession;
4. That the plaintiffs be made to pay to the Intervenors the sum of THIRTY
THOUSAND (P30,000.00) PESOS moral damages; TEN THOUSAND (P10,000.00)
PESOS attorneys fees plus THREE HUNDRED (P300.00) PESOS as appearance fee
per hearing.
Intervenors pray for such other relief and remedies as may be
deemed by this Honorable Court as just and equitable in the premises.
At the trial, intervenor Rodolfo Layumas testified that he and his
wife bought the subject property in 1968, and that nobody objected to their
possession of the land, including the petitioners. In 1970, a religious
organization asked his permission to construct a chapel on the disputed lot; he
allowed the construction since the same would be used for the fiesta. He
further declared that part of the chapel still stood on the property. In 1985, a
fire razed the towns public market, thereby dislocating numerous people. Barte
was one of the fire victims, who also happened to be a good friend and political
supporter of Rodolfo. Out of goodwill, Barte was allowed to occupy a portion
of the said lot, along with some other fire victims. Rodolfo clarified that the
others were to stay there only on a temporary basis, but admitted that Bartes
children also stayed in the subject property.[20]
Rodolfo Layumas further narrated that in 1987, Corazon wrote one
of the petitioners-heirs, Pepito Mascuana, requesting that the title of the lot be
transferred in Sumilhigs name so that they could likewise arrange for the
conveyance of the title in their names. Pepito failed to claim the letter, and
thereafter, filed a case of ejectment against Barte and Rodolfo Layumas
brother-in-law, Pepito Antonio. The case, the witness added, was dismissed as
against the two parties. Offered in evidence were the following: a Sworn
Statement on the Current and Fair Market Value of the Real Property issued in
1973 as required by Presidential Decree No. 76, and tax receipts.[21]
Rodolfo Layumas admitted on cross-examination that at the time
they bought the property from Sumilhig, the title was still in the possession of
the Wuthrich family. He added that he filed an adverse claim before the
Register of Deeds of San Carlos City, Negros Occidental, on Lot No. 124-B in
January 1986, or after the case had already been filed in court. Lastly, the
witness deposed that he did not fence the property after buying the same, but
that his brother-in-law constructed a coco-lumber yard thereon upon his
authority.[22]
On January 30, 1996, the trial court rendered judgment in favor of
Barte and the spouses Layumas. The fallo of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of Intervenors-counterclaimants and defendant and against plaintiffs-
counterclaim defendants ordering as follows:
1. The dismissal of the plaintiffs complaint with costs against them;
2. The plaintiffs to jointly pay Intervenors-counterclaimants now RTC Judge
Rodolfo S. Layumas and Corazon A. Layumas:
(a) P10,000.00 for attorneys fees; and
(b) P30,000.00 as moral damages;
3. The plaintiffs, as counterclaim defendants, to comply with the above-stated
obligation of their late father, Mr. Jesus Mascuana, under the Deed of
Absolute Sale, Exh. 3, pp. 92-93, Exp., thru plaintiff Mr. Jose Mascuana,
including the desegragation (sic) survey to desegregate the 469-square-
meter portion of said Lot No. 124-B, San Carlos Cadastre, this province, sold
to the late Diosdado Sumilhig, if the same has not yet been done despite what
has been said herein earlier to said effect, and the execution of the Final Deed
of Sale in their capacity as the heirs and successors-in-interest of the late Mr.
Jesus Mascuana, thru Mr. Jose Mascuana, covering the 469-square-meter
desegregated portion of said Lot No. 124-B, within sixty (60) days counted
 from the finality of this Decision, in favor of the Intervenors-spouses, after
which the said Intervenors-spouses shall pay them, thru Mr. Jose Mascuana,
the P1,000.00 balance due to them as successors-in-interest of the late Mr.
Jesus Mascuana;
4. In case plaintiffs fail to comply with what are herein ordered for them to do,
the Clerk of Court V of this Court to do all that they were to do as herein
ordered in the text and dispositive portion hereof, at the expense of
Intervenors spouses to be later reimbursed by plaintiffs, including the
desegragation (sic) survey of said 469-square-meter portion of said Lot [No.]
124-B, San Carlos Cadastre, Negros Occidental, if the same has not yet been
done and the execution of the Final Deed of Sale on behalf of all the plaintiffs
as heirs and successors-in-interest of the late Mr. Jesus Mascuana covering
the said desegregated portion of 469 square meters of the aforesaid lot, in
favor of Intervenors spouses, to the end that separate title therefor may be
issued in their names, after they shall have paid the P1,000.00 balance due
plaintiffs under said Deed of Absolute Sale, Exh. 3.
SO ORDERED.[23]
Forthwith, the petitioners appealed the case to the CA, raising the
following issues of fact and law:
a. Whether or not the contract of alienation of Lot No. 124-B in favor of
Diosdado Sumilhig in 1961 was a contract to sell or a contract of sale;
b. Whether or not Diosdado Sumilhig had any right to sell Lot No. 124-B in favor
of intervenor Corazon Layumas in 1968.[24]
On May 5, 2003, the CA affirmed the decision of the trial court. It
ruled that the contract between the petitioners father and Sumilhig was one of
sale. Foremost, the CA explained, the contract was denominated as a Deed of
Absolute Sale. The stipulations in the contract likewise revealed the clear
intention on the part of the vendor (Mascuana) to alienate the property in favor
of the vendee (Sumilhig). In three various documents, the late Mascuana even
made declarations that Sumilhig was already the owner of the disputed land.
The CA added that the admission may be given in evidence against Mascuana
and his predecessors-in-interest under Section 26, Rule 130 of the Revised
Rules on Evidence. As to the argument that the contract between Mascuana
and Sumilhig was not effective because it was subject to a suspensive condition
that did not occur, the CA ruled that the condition referred to by the petitioners
refers only to the payment of the balance of the purchase price and not to the
effectivity of the contract.
As to the petitioners contention that even if the contract were one
of sale, ownership cannot be transferred to Sumilhig because Mascuana was
not yet the owner of the lot at the time of the alleged sale, the appellate court
ruled that the registration of the land to be sold is not a prerequisite to a
contract of sale.
The Present Petition
Aggrieved, the petitioners filed the instant petition for review
on certiorari with this Court, where the following lone legal issue was raised:
WAS THE SALE OF LOT NO. 124-B MADE BY JESUS M. MASCUANA IN
FAVOR OF DIOSDADO SUMILHIG A CONTRACT TO SELL OR CONTRACT OF
SALE?[25]
We note that the original action of the petitioners against Aquilino
Barte was one for recovery of possession of Lot No. 124-B. With the
intervention of the respondents Rodolfo and Corazon Layumas who claimed
ownership over the property, and the acquiescence of the parties, evidence
was adduced to prove who, between the petitioners (as plaintiffs) and the
respondents (as defendants-intervenors) were the lawful owners of the subject
property and entitled to its possession.
The petitioners resolutely contend that the Deed of Absolute Sale
dated August 12, 1961 between their father and Sumilhig was a mere contract
to sell because at the time of the said sale, the late Mascuana was not yet the
registered owner of Lot No. 124 or any of its portions. They assert that Sumilhig
could not have acquired any rights over the lot due to the fact that a person
can only sell what he owns or is authorized to sell, and the buyer can acquire
no more than what the seller can transfer legally. Finally, the petitioners insist
that the document in controversy was subject to a suspensive condition, not a
resolutory condition, which is a typical attribute of a contract of sale.
The petition is denied for lack of merit.
The issues raised by the petitioners in this case are factual, and
under Rule 45 of the Rules of Court, only questions of law may be raised in this
Court, the reason being that this Court is not a trier of facts. It is not to re-
examine the evidence on record and to calibrate the same. Moreover, the
findings and conclusions of the trial court as affirmed by the CA are conclusive
on the Court, absent of any evidence that the trial court, as well as the CA
ignored, misinterpreted and misconstrued facts and circumstances of
substance which, if considered, would alter or reverse the outcome of the
case.[26]
We have reviewed the records and find no justification for a reversal
or even a modification of the assailed decision of the CA.
Even on the merits of the petition, the Court finds that the decision
of the trial court as well as the ruling of the CA are based on the evidence on
record and the applicable law.
The petitioners reiterated their pose that the deed of absolute sale
over the property executed by their father, Jesus Mascuana, as vendor, and
Diosdado Sumilhig as vendee, was a contract to sell and not a contract of sale.
They assert that on its face, the contract appears to be a contract to sell,
because the payment of the P1,000.00 balance of the purchase price was
subject to a suspensive condition: the survey of the property, the segregation
of the portion thereof subject of the sale, and the completion of the documents
necessary for the issuance of a Torrens title over the property to and in the
name of Sumilhig who was the vendee. The petitioners assert that Sumilhig
never paid the aforesaid amount to the vendor; hence, the obligation of the
latter and his predecessors-in-interest (herein petitioners) to execute a final
deed of sale never arose. As such, they aver, title to the property remained
reserved in the vendor and his heirs even after his death. There was no need
for the vendor to rescind the deed or collect the said amount of P1,000.00
under Article 1191 of the New Civil Code because such a remedy applies only
to contracts of sale. The petitioners insist that Sumilhig never acquired title over
the property; he could not have transferred any title to the respondents.
Sumilhig could not have transferred that which he did not own.
The petitioners contention has no factual and legal bases.
The deed of absolute sale executed by Jesus Mascuana and
Sumilhig, provides, thus:
That the VENDOR is the true and absolute owner of a parcel of land known as
Lot No. 124 of the Cadastral Survey of San Carlos, situated at Broce Street and
is free from liens and encumbrances, and covered by O.C.T. No. T-299[3]7 (R-
1453) of Reg. of Deeds, Negros Occ.
That for and in consideration of the sum of FOUR THOUSAND SIX
HUNDRED NINETY PESOS (P4,690.00), Philippine Currency, to be paid by the
VENDEE in the manner hereinafter stated, the VENDOR does hereby sell,
transfer, cede and convey, a portion of the above-described property
containing an area of 469 square meters, the sketch of which can be found at
the back of this document and having a frontage at Broce Street of around 14
meters, and from the Broce Street to the interior on its Southwest side with a
length of 30.9 meters, with a length of 24.8 meters on its Northeast side where
it turned to the right with a length of 2.8 meters and continuing to Northwest
with a length of 6.72 meters, the backyard dimension is 17.5 meters to the
Northwest, unto the VENDEE, his heirs and assigns, by way of Absolute Sale,
upon the receipt of the down payment of THREE THOUSAND SIX HUNDRED
NINETY PESOS (P3,690.00), which is hereby acknowledged by the VENDOR as
received by him.
That the balance of ONE THOUSAND PESOS (P1,000.00) shall be paid by the
VENDEE unto the VENDOR as soon as the above-portions of Lot 124 shall have
been surveyed in the name of the VENDEE and all papers pertinent and
necessary to the issuance of a separate Certificate of Title in the name of the
VENDEE shall have been prepared.
The evidence on record shows that during the lifetime of vendor
Jesus Mascuana, and even after his death, his heirs, the petitioners herein,
unequivocably declared that Diosdado Sumilhig was the owner of the property
subject of this case, and that the respondents acquired title over the property,
having purchased the same via a deed of absolute sale from Diosdado Sumilhig.
Thus, on December 31, 1961, Jesus Mascuana and Jose Estabillo executed a
Deed of Exchange and Absolute Sale of Real Estate, in which both parties
declared that they were co-owners of portions of Lot No. 124 abutted by the
property owned by Diosdado Sumilhig.[27]
In the subdivision plan of Lot No. 124, signed by Ricardo Quilop,
Private Land Surveyor, following his survey of Lot No. 124 on July 9, 1962 for
and in behalf of Jesus Mascuana, et al., it appears that Lot No. 124-B with an
area of 540 square meters belonged to Diosdado Sumilhig,[28] which is abutted
by Lot No. 124-C, owned by Jesus Mascuana.
On October 1, 1985, long after the death of Jesus Mascuana, one of
his heirs, petitioner Renee Tedrew, through counsel, wrote respondent Rodolfo
Layumas offering to buy the property occupied by his overseer Aquilino Barte
for US$1,000.00:
ATTY. RODOLFO S. LAYUMAS
San Carlos City
Negros Occidental
Dear Atty. Layumas:
This has reference to the lot located at Broce Street, portions of which are
presently occupied by Mr. Barte.
Mrs. Renee Tedrew (nee Agapuyan), who is now in the United States, would
like to offer the amount of $1,000.00 to buy your share of the said lot.
If you are amenable, kindly inform the undersigned for him to communicate
[with] Mrs. Tedrew in California.
Very truly yours,
(Sgd.)
SAMUEL SM LEZAMA[29]
It was only after the respondents rejected the proposal of petitioner
Renee Tedrew that the petitioners secured title over the property on March 17,
1986 in the name of Jesus Mascuana (already deceased at the time), canceling
TCT No. 967 issued on July 6, 1962 under the name of Jesus Mascuana, who
appears to be a co-owner of Lot No. 124 with an undivided two-seventh (2/7)
portion thereof.[30]
While it is true that Jesus Mascuana executed the deed of absolute
sale over the property on August 12, 1961 in favor of Diosdado Sumilhig
for P4,690.00, and that it was only on July 6, 1962 that TCT No. 967 was issued
in his name as one of the co-owners of Lot No. 124, Diosdado Sumilhig and the
respondents nevertheless acquired ownership over the property. The deed of
sale executed by Jesus Mascuana in favor of Diosdado Sumilhig on August 12,
1961 was a perfected contract of sale over the property. It is settled that a
perfected contract of sale cannot be challenged on the ground of the non-
transfer of ownership of the property sold at that time of the perfection of the
contract, since it is consummated upon delivery of the property to the vendee.
It is through tradition or delivery that the buyer acquires ownership of the
property sold. As provided in Article 1458 of the New Civil Code, when the sale
is made through a public instrument, the execution thereof is equivalent to the
delivery of the thing which is the object of the contract, unless the contrary
appears or can be inferred. The record of the sale with the Register of Deeds
and the issuance of the certificate of title in the name of the buyer over the
property merely bind third parties to the sale. As between the seller and the
buyer, the transfer of ownership takes effect upon the execution of a public
instrument covering the real property.[31] Long before the petitioners secured
a Torrens title over the property, the respondents had been in actual
possession of the property and had designated Barte as their overseer.
Article 1458 of the New Civil Code provides:
By the contract of sale, one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to
pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
Thus, there are three essential elements of sale, to wit:
a) Consent or meeting of the minds, that is, consent to transfer ownership in
exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.[32]
In this case, there was a meeting of the minds between the vendor
and the vendee, when the vendor undertook to deliver and transfer ownership
over the property covered by the deed of absolute sale to the vendee for the
price of P4,690.00 of which P3,690.00 was paid by the vendee to the vendor as
down payment. The vendor undertook to have the property sold, surveyed and
segregated and a separate title therefor issued in the name of the vendee, upon
which the latter would be obliged to pay the balance of P1,000.00. There was
no stipulation in the deed that the title to the property remained with the
vendor, or that the right to unilaterally resolve the contract upon the buyers
failure to pay within a fixed period was given to such vendor. Patently, the
contract executed by the parties is a deed of sale and not a contract to sell. As
the Court ruled in a recent case:
In Dignos v. Court of Appeals (158 SCRA 375), we have said that,
although denominated a Deed of Conditional Sale, a sale is still absolute where
the contract is devoid of any proviso that title is reserved or the right to
unilaterally rescind is stipulated, e.g., until or unless the price is paid.
Ownership will then be transferred to the buyer upon actual or constructive
delivery (e.g. by the execution of a public document) of the property sold.
Where the condition is imposed upon the perfection of the contract itself, the
failure of the condition would prevent such perfection. If the condition is
imposed on the obligation of a party which is not fulfilled, the other party may
either waive the condition or refuse to proceed with the sale. (Art. 1545, Civil
Code)
Thus, in one case, when the sellers declared in a Receipt of Down
Payment that they received an amount as purchase price for a house and lot
without any reservation of title until full payment of the entire purchase price,
the implication was that they sold their property. In Peoples Industrial and
Commercial Corporation v. Court of Appeals, it was stated:
A deed of sale is considered absolute in nature where there is
neither a stipulation in the deed that title to the property sold is reserved in the
seller until full payment of the price, nor one giving the vendor the right to
unilaterally resolve the contract the moment the buyer fails to pay within a
fixed period.
Applying these principles to this case, it cannot be gainsaid that the
contract of sale between the parties is absolute, not conditional. There is no
reservation of ownership nor a stipulation providing for a unilateral rescission
by either party. In fact, the sale was consummated upon the delivery of the lot
to respondent. Thus, Art. 1477 provides that the ownership of the thing sold
shall be transferred to the vendee upon the actual or constructive delivery
thereof.[33]
The condition in the deed that the balance of P1,000.00 shall be
paid to the vendor by the vendee as soon as the property sold shall have been
surveyed in the name of the vendee and all papers pertinent and necessary to
the issuance of a separate certificate of title in the name of the vendee shall
have been prepared is not a condition which prevented the efficacy of the
contract of sale. It merely provides the manner by which the total purchase
price of the property is to be paid. The condition did not prevent the contract
from being in full force and effect:
The stipulation that the payment of the full consideration based on
a survey shall be due and payable in five (5) years from the execution of a formal
deed of sale is not a condition which affects the efficacy of the contract of sale.
It merely provides the manner by which the full consideration is to be
computed and the time within which the same is to be paid. But it does not
affect in any manner the effectivity of the contract. [34]
In a contract to sell, ownership is retained by a seller and is not to be transferred
to the vendee until full payment of the price. Such payment is a positive
suspensive condition, the failure of which is not a breach of contract but simply
an event that prevented the obligation from acquiring binding force.[35]
It bears stressing that in a contract of sale, the non-payment of the price is a
resolutory condition which extinguishes the transaction that, for a time, existed
and discharges the obligation created under the transaction.[36] A seller cannot
unilaterally and extrajudicially rescind a contract of sale unless there is an
express stipulation authorizing it. In such case, the vendor may file an action for
specific performance or judicial rescission.[37]
Article 1169 of the New Civil Code provides that in reciprocal
obligations, neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him; from
the moment one of the parties fulfills his obligation, delay by the other begins.
In this case, the vendor (Jesus Mascuana) failed to comply with his obligation
of segregating Lot No. 124-B and the issuance of a Torrens title over the
property in favor of the vendee, or the latters successors-in-interest, the
respondents herein. Worse, petitioner Jose Mascuana was able to secure title
over the property under the name of his deceased father.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of
merit. Costs against the petitioners.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.
G.R. No. 142411 October 14, 2005
WINIFREDA URSAL VS COURT OF APPEALS
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the
Rules of Court seeking the reversal of the Decision[1] of the Court of Appeals
(CA) dated June 28, 1999 and the Resolution dated January 31, 2000 denying
petitioners motion for reconsideration.[2]
These are the facts:
The spouses Jesus and Cristita Moneset (Monesets) are the registered owners
of a 333-square meter land together with a house thereon situated at Sitio
Laguna, Basak, Cebu City covered by Transfer Certificate of Title No. 78374.[3]
On January 9, 1985, they executed a Contract to Sell Lot & House in favor of
petitioner Winifreda Ursal (Ursal), with the following terms and conditions:
 That the VENDOR (Cristita R. Moneset) offers to SELL and the
VENDEE accepts to BUY at the agreed lump sum price of P130,000.00 payable
on the installment basis as follows
1. That on the date of the signing of this agreement, the VENDEE will tender
an earnest money or downpayment of P50,000.00 to the VENDOR, and by these
presents, the latter hereby acknowledges receipt of said amount from the
former;
2. That the balance of the selling price of P80,000.00 shall be paid by the
VENDEE to the VENDOR in equal monthly installments of P3,000.00 starting the
month of February, 1985, until said balance of the selling price shall be fully
paid;
3. That if the VENDEE shall fail or in default to pay six (6) monthly installments
to the VENDOR the herein agreement is deemed cancelled, terminated and/or
rescinded and in such event, the VENDEE (sic) binds to refund to the VENDOR
(sic) the deposit of P50,000.00 and with the latters (sic) obligation to pay the
former (sic) as a corresponding refund for cost of improvements made in the
premises by VENDEE;
4. That on the date of receipt of the downpayment of P50,000.00 by the
VENDOR, it is mutually agreed for VENDEE to occupy and take physical
possession of the premises as well as for the latter (VENDEE) to keep and hold
in possession the corresponding transfer certificate of title No. ______ of the
land in question which is the subject of this agreement;
5. That on the date of final payment by the VENDEE to the VENDOR, the latter
shall execute at her expense the corresponding document of DEED OF
ABSOLUTE SALE for the former as well as the payment of realty clearances, BIR
Capital Gain Tax, sales tax or transfer fees and attorneys fees; that, for the
issuance of title in VENDEEs name shall be the exclusive account of said
VENDEE. [4]
Petitioner paid the down payment and took possession of the
property. She immediately built a concrete perimeter fence and an artesian
well, and planted fruit bearing trees and flowering plants thereon which all
amounted to P50,000.00. After paying six monthly installments, petitioner
stopped paying due to the Monesets failure to deliver to her the transfer
certificate of title of the property as per their agreement; and because of the
failure of the Monesets to turn over said title, petitioner failed to have the
contract of sale annotated thereon.[5]
Unknown to petitioner, the Monesets executed on November 5,
1985 an absolute deed of sale in favor of Dr. Rafael Canora, Jr. over the said
property for P14,000.00.[6] On September 15, 1986, the Monesets executed
another sale, this time with pacto de retro with Restituto Bundalo.[7] On the
same day, Bundalo, as attorney-in-fact of the Monesets, executed a real estate
mortgage over said property with Rural Bank of Larena (hereafter Bank) located
in Siquijor for the amount of P100,000.00.[8] The special power of attorney
made by the Monesets in favor of Bundalo as well as the real estate mortgage
was then annotated on the title on September 16, 1986.[9] For the failure of
the Monesets to pay the loan, the Bank served a notice of extrajudicial
foreclosure dated January 27, 1988 on Bundalo.[10]
On September 30, 1989, Ursal filed an action for declaration of non-
effectivity of mortgage and damages against the Monesets, Bundalo and the
Bank. She claimed that the defendants committed fraud and/or bad faith in
mortgaging the property she earlier bought from the Monesets with a bank
located in another island, Siquijor; and the Bank acted in bad faith since it
granted the real estate mortgage in spite of its knowledge that the property
was in the possession of petitioner.[11]
The Monesets answered that it was Ursal who stopped paying the
agreed monthly installments in breach of their agreement.[12] The Bank, on
the other hand, averred that the title of the property was in the name of Cristita
Radaza Moneset married to Jesus Moneset and did not show any legal
infirmity.[13]
Bundalo, meanwhile, was not served summons because he could no
longer be found at his given address.[14]
Trial on the merits proceeded. Thereafter, the Regional Trial Court
of Cebu City, Branch 24, rendered its decision finding that Ursal is more credible
than the Monesets and that the Monesets are liable for damages for fraud and
breach of the contract to sell:
The evidence of [Ursal] show that she was the first to acquire a
substantial interest over the lot and house by virtue of the execution of the
Contract to Sell (Exh. A). After the execution of Exh. A plaintiff took possession
of the questioned lot and houseafter she made a downpayment of P50,000.00.
[S]he paid the installments for six (6) months without fail. [However] plaintiff
(stopped) paying the installment because defendant spouses failed to give her
the Transfer Certificate of Title over the lot and house despite repeated
demands. It is evident then that the first to violate the conditions of Exh. A were
the defendants Spouses Moneset. This is the reason why plaintiff was not able
to annotate Exh. A on the TCT. The evidence of plaintiff show that there was no
intention on her part to discontinue paying the installments. In a reciprocal
obligation, one cannot be compelled to do if the other party fails to do his part
(Art. 1169, New Civil Code).
The acts of defendant Spouses Moneset in selling again the lot and
house in question to Dr. Canora by executing a Deed of Absolute Sale; in selling
the same on pacto de retro to defendant Bundalo; and in mortgaging the same
to defendant Rural Bank of Larena are plainly and clearly fraudulent because
they were done while Exh. A was still existing and the transaction was done
without notice to the plaintiff. As provided in Art. 1170 of the New Civil Code,
those who are guilty of fraud in the performance of their obligation --- and
those who in any manner contravene the tenor thereof, are liable for damages.
Another ground for liability under this article is when there is
fraud/deceit. In the instant case, there was fraud/deceit on the part of the
defendant spouses Moneset when they executed the Deed of Sale to Dr.
Canora; the Deed of Sale with Pacto de Retro to Bundalo and the Special Power
of Attorney for Bundalo to execute for and in their behalf the Real Estate
Mortgage with the Rural Bank of Larena knowing fully well that the Contract to
Sell house and lot, Exh. A was still existing notwithstanding their violation to the
provisions thereto. It is therefore crystal clear that defendant spouses Moneset
are liable for damages.[15]
As to the real estate mortgage, the trial court held that the same
was valid and the Bank was not under any obligation to look beyond the title,
although the present controversy could have been avoided had the Bank been
more astute in ascertaining the nature of petitioners possession of the
property, thus:
The Real Estate Mortgage and the Foreclosure Proceedings cannot
be considered null and void in the sense that per se the formalities required by
law were complied with except for the fact that behind their execution there
was fraud, deceit and bad faith on the part of defendant spouses Moneset and
Bundalo.
The defendant Rural Bank of Larena for its part could have avoided
this situation if the bank appraiser who made the ocular inspection of the
subject house and lot went deeper and investigated further when he learned
that the owner is not the actual occupant. He was however told by Moneset
that the actual occupant was only a lessee. Banking on this information that the
actual occupant was only a lessee with no other right over and above such, the
bank approved a loan of P100,000.00 in favor of Moneset through Bundalo
their attorney-in-fact.
Likewise the Rural Bank of Larena had the right to rely on what
appeared on the certificate of title of the Monesets and it was under no
obligation to look beyond the certificate and investigate the title of the
mortgagor appearing on the face of the certificate.
The approval of the P100,000.00 loan from the Rural Bank of Larena
was made possible through the deception and bad faith of defendant spouses
Moneset and Bundalo but the pertinent documents were per se in order. The
court is of the honest belief that the case against the defendant bank be
dismissed for lack of merit. The court however believes that for reasons of
equity the bank should give the plaintiff Ursal the preferential right to redeem
the subject house and lot.[16]
The trial court then disposed of the case as follows:
Wherefore premises considered, judgment is hereby rendered in favor of the
defendant Rural Bank of Larena dismissing the complaint against it for lack of
merit and against the defendant spouses Moneset ordering them to:
1. reimburse to plaintiff Ursal the following:
a.) downpayment of P50,000.00
b.) monthly installments for six months at P3,000.00 per month --
- P18,000.00
c.) expenses improvements P61, 676.52
2. pay to plaintiff the following:
a.) moral damages ----------------- P30,000.00
b.) exemplary damages ----------- P20,000.00
c.) litigation expenses------------- P 5,000.00
d.) attorneys fees ----------------- P10,000.00
e.) costs
3. order the defendant Rural Bank of Larena to give the plaintiff the preferential
right to redeem the subject house and lot.
SO ORDERED.[17]
Both Ursal and the Monesets appealed the decision to the CA. Ursal
alleged that the Bank was guilty of bad faith for not investigating the presence
of Ursal on the property in question, while the Monesets claimed that the trial
court erred in giving preferential right to Ursal to redeem the property and in
ordering them to pay damages.[18]
The CA affirmed in toto the decision of the trial court. It held that
the Bank did not have prior knowledge of the contract to sell the house and lot
and the Monesets acted fraudulently thus they cannot be given preferential
right to redeem the property and were therefore correctly ordered to pay
damages.[19]
The Monesets filed a motion for reconsideration which was denied
outright for having been filed out of time.[20] Ursals motion for reconsideration
was denied by the CA on January 31, 2000 for lack of merit.[21]
Hence, the present petition raising the sole error:
That with grave abuse of discretion amounting to excess of jurisdiction, the
Honorable Court of Appeals erred in rendering a decision and Resolution NOT
in accordance with law and the applicable rulings of the Supreme Court.[22]
Petitioner claims that: the Bank was duly informed through its
appraiser that the house and lot to be mortgaged by Monesets were in the
possession of a lessee; the Bank should have taken this as a cue to investigate
further the Monesets right over the same; the case of Embrado vs. Court of
Appeals (233 SCRA 335) held that where a purchaser neglects to make the
necessary inquiry and closes his eyes to facts which should put a reasonable
man on his guard to the possibility of the existence of a defect in his vendors
title, he cannot claim that he is a purchaser in good faith; Sec. 50 of Act 496
provides that where a party has knowledge of a prior existing interest which is
unregistered at the time he acquired the land, his knowledge of that prior
unregistered interest has the effect of registration as to him and the Torrens
system cannot be used as a shield against fraud; following Art. 2176 of the Civil
Code, respondent Bank is obliged to pay for the damage done.[23]
Petitioner then prayed that the Deed of Real Estate Mortgage be
declared as non-effective and non-enforceable as far as petitioner is
concerned; that she be declared as the absolute owner of the house and lot in
question; that the Monesets be ordered to execute a deed of absolute sale
covering the subject property; and that the Bank be ordered to direct the
collection or payment of the loan of P100,000.00 plus interest from the
Monesets for they were the ones who received and enjoyed the said loan.[24]
On the other hand, respondent Bank in its Comment argues that: its
interest in the property was only that of mortgagee and not a purchaser thus
its interest is limited only to ascertaining that the mortgagor is the registered
owner; the case cited is inapplicable at bar since it involves the purchase of real
property; Ursal was purportedly only a lessee of the property, thus as
mortgagor who is not entitled to possess the mortgaged property, they no
longer considered the lease in the processing and approval of the loan; Sec. 50
of Act No. 496 is also inapplicable since the alleged prior existing interest was
only that of a lessee; in any case, it was the Monesets who lied to the Bank
anent the real nature of the encumbrance, thus, it is the Monesets who are
guilty of fraud and not the Bank.[25]
In her Rejoinder,[26] petitioner argued that: under the law on
mortgage, the mortgagor must be the owner of the property he offers as
security of his loan; the mortgagee like herein Bank which neglects to verify the
ownership of the property offered as security of the loan runs the risk of his
folly; the Banks negligence is not excusable because an adverse claim and
notice of lis pendens were already annotated on the certificate of title when
the mortgage was constituted or when the deed of real estate mortgage was
annotated; it would be unfair to put the blame on petitioner who was innocent
of the transaction; the trial court found that the Bank even provided its
appraiser the amount of P15,000.00 to redeem the pacto de retro sale allegedly
executed in favor of Dr. Canora; this should have aroused the Banks suspicion
and prompted it to investigate further the property; the trial court recognized
the bad faith committed by the Monesets and ordered them to pay the sum of
P126,676.52 in damages but exonerated the Bank who is equally guilty of bad
faith; the Monesets cannot pay the damages as they have no money and
property thus if the decision of the trial court as affirmed by the CA is to be
enforced, they will only be holding an empty bag while the Bank which is equally
guilty will go free; what would be fair is to let the two respondents bear jointly
and severally the consequences of their transaction and let the innocent
petitioner ultimately own the house and lot in question.[27]
The petitioner, in her Memorandum dated July 31, 2005, raised the
issues of: (1) Whether or not the document captioned: Contract to Sell Lot and
House (Exh. A) is valid and binding so much so that the herein Petitioner who is
the Vendee is the lawful and true owner of the lot and house in question; (2)
Whether or not the herein respondents spouses Jesus Moneset and Cristita
Moneset who were the vendors and/or mortgagors together with respondent
Restituto Bundalo were conniving and acting in bad faith; and (3) Whether or
not respondent Rural Bank of Larena measured up to the strict requirement of
making a thorough investigation of the property offered as collateral before
granting a loan and be considered as innocent mortgagee and entitled to the
protection of the law.[28] Petitioner reiterated her arguments in support of the
first and third issues raised in the Memorandum while she merely adopted the
CA findings in support of the second issue, i.e., when the Monesets
encumbered the Transfer Certificate of Title (TCT) to Dr. Canora and thereafter
to Bundalo, they committed bad faith or fraud since the contract to sell with
Ursal was still valid and subsisting.[29]
Respondent Bank, in its Memorandum dated July 20, 2005,
reiterated the arguments it made in its Comment that: the case cited by
petitioner requiring extra ordinary diligence is inapplicable in this case since
what is involved here is mortgage and not sale; as mortgagee, its interest is
limited only to determining whether the mortgagor is the registered owner of
the property whose certificate of title showed that there were no existing
encumbrances thereon; and even with unregistered encumbrances, the Bank
has priority by the registration of the loan documents.[30]
No memorandum is filed by respondent Monesets.
The crux of petitioners contention is that the Bank failed to look beyond the
transfer certificate of title of the property for which it must be held liable.
We agree. Banks cannot merely rely on certificates of title in
ascertaining the status of mortgaged properties; as their business is impressed
with public interest, they are expected to exercise more care and prudence in
their dealings than private individuals.[31] Indeed, the rule that persons dealing
with registered lands can rely solely on the certificate of title does not apply to
banks.[32]
As enunciated in Cruz vs. Bancom:[33]
Respondent is not an ordinary mortgagee; it is a mortgagee-bank. As such,
unlike private individuals, it is expected to exercise greater care and prudence
in its dealings, including those involving registered lands. A banking institution
is expected to exercise due diligence before entering into a mortgage contract.
The ascertainment of the status or condition of a property offered to it as
security for a loan must be a standard and indispensable part of its
operations.[34]
Our agreement with petitioner on this point of law,
notwithstanding, we are constrained to refrain from granting the prayers of her
petition, to wit: that the Deed of Real Estate Mortgage be declared as non-
effective and non-enforceable as far as petitioner is concerned; that she be
declared as the absolute owner of the house and lot in question; that the
Monesets be ordered to execute a deed of absolute sale covering the subject
property; and that the Bank be ordered to direct the collection or payment of
the loan of P100,000.00 plus interest from the Monesets for they were the ones
who received and enjoyed the said loan.[35]
The reason is that, the contract between petitioner and the
Monesets being one of Contract to Sell Lot and House, petitioner, under the
circumstances, never acquired ownership over the property and her rights
were limited to demand for specific performance from the Monesets, which at
this juncture however is no longer feasible as the property had already been
sold to other persons.
A contract to sell is a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the subject property despite
delivery thereof to the prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the condition agreed
upon, that is, full payment of the purchase price.[36]
In such contract, the prospective seller expressly reserves the
transfer of title to the prospective buyer, until the happening of an event, which
in this case is the full payment of the purchase price. What the seller agrees or
obligates himself to do is to fulfill his promise to sell the subject property when
the entire amount of the purchase price is delivered to him. Stated differently,
the full payment of the purchase price partakes of a suspensive condition, the
non-fulfillment of which prevents the obligation to sell from arising and thus,
ownership is retained by the prospective seller without further remedies by the
prospective buyer.[37]
It is different from contracts of sale, since ownership in contracts to
sell is reserved by the vendor and is not to pass to the vendee until full payment
of the purchase price, while in contracts of sale, title to the property passess to
the vendee upon the delivery of the thing sold. In contracts of sale the vendor
loses ownership over the property and cannot recover it unless and until the
contract is resolved or rescinded, while in contracts to sell, title is retained by
the vendor until full payment of the price.[38] In contracts to sell, full payment
is a positive suspensive condition while in contracts of sale, non-payment is a
negative resolutory condition.[39]
A contract to sell may further be distinguished from a conditional
contract of sale, in that, the fulfillment of the suspensive condition, which is the
full payment of the purchase price, will not automatically transfer ownership to
the buyer although the property may have been previously delivered to him.
The prospective vendor still has to convey title to the prospective buyer by
entering into a contract of absolute sale. While in a conditional contract of sale,
the fulfillment of the suspensive condition renders the sale absolute and affects
the sellers title thereto such that if there was previous delivery of the property,
the sellers ownership or title to the property is automatically transferred to the
buyer. [40]
Indeed, in contracts to sell the obligation of the seller to sell
becomes demandable only upon the happening of the suspensive condition,
that is, the full payment of the purchase price by the buyer. It is only upon the
existence of the contract of sale that the seller becomes obligated to transfer
the ownership of the thing sold to the buyer. Prior to the existence of the
contract of sale, the seller is not obligated to transfer the ownership to the
buyer, even if there is a contract to sell between them. [41]
In this case, the parties not only titled their contract as Contract to
Sell Lot and House but specified in their agreement that the vendor shall only
execute a deed of absolute sale on the date of the final payment by vendee.[42]
Such provision signifies that the parties truly intended their contract to be that
of contract to sell.[43]
Since the contract in this case is a contract to sell, the ownership of
the property remained with the Monesets even after petitioner has paid the
down payment and took possession of the property. In Flancia vs. Court of
Appeals,[44] where the vendee in the contract to sell also took possession of
the property, this Court held that the subsequent mortgage constituted by the
owner over said property in favor of another person was valid since the vendee
retained absolute ownership over the property.[45] At most, the vendee in the
contract to sell was entitled only to damages.[46]
Petitioner attributes her decision to stop paying installments to the
failure of the Monesets to comply with their agreement to deliver the transfer
certificate of title after the down payment of P50,000.00. On this point, the trial
court was correct in holding that for such failure, the Monesets are liable to pay
damages pursuant to Art. 1169 of the Civil Code on reciprocal obligations.[47]
The vendors breach of the contract, notwithstanding, ownership
still remained with the Monesets and petitioner cannot justify her failure to
complete the payment.
In Pangilinan vs. Court of Appeals,[48] the vendees contended that
their failure to pay the balance of the total contract price was because the
vendor reneged on its obligation to improve the subdivision and its facilities. In
said case, the Court held that the vendees were barred by laches from asking
for specific performance eight years from the date of last installment. The Court
held that:
(the vendees) instead of being vigilant and diligent in asserting their
rights over the subject property had failed to assert their rights when the law
requires them to act. Laches or stale demands is based upon grounds of public
policy which requires, for the peace of society, the discouragement of stale
claims and unlike the statute of limitations, is not a mere question of time but
is principally a question of the inequity or unfairness of permitting a right or
claim to be enforced or asserted.
The legal adage finds application in the case at bar. Tempus enim
modus tollendi obligations et actiones, quia tempus currit contra desides et sui
juris contemptoresFor time is a means of dissipating obligations and actions,
because time runs against the slothful and careless of their own rights.[49]
In this case, petitioner instituted an action for Declaration of Non-
Effectivity of Mortgage with Damages four years from the date of her last
installment and only as a reaction to the foreclosure proceedings instituted by
respondent Bank. After the Monesets failed to deliver the TCT, petitioner
merely stopped paying installments and did not institute an action for specific
performance, neither did she consign payment of the remaining balance as
proof of her willingness and readiness to comply with her part of the obligation.
As we held in San Lorenzo Development Corp. vs. Court of Appeals,[50] the
perfected contract to sell imposed on the vendee the obligation to pay the
balance of the purchase price. There being an obligation to pay the price, the
vendee should have made the proper tender of payment and consignation of
the price in court as required by law. Consignation of the amounts due in court
is essential in order to extinguish the vendees obligation to pay the balance of
the purchase price.[51] Since there is no indication in the records that
petitioner even attempted to make the proper consignation of the amounts
due, the obligation on the part of the Monesets to transfer ownership never
acquired obligatory force.
In other words, petitioner did not acquire ownership over the
subject property as she did not pay in full the equal price of the contract to sell.
Further, the Monesets breach did not entitle petitioner to any preferential
treatment over the property especially when such property has been sold to
other persons.
As explained in Coronel vs. Court of Appeals:[52]
In a contract to sell, there being no previous sale of the property, a third person
buying such property despite the fulfillment of the suspensive condition such
as the full payment of the purchase price, for instance, cannot be deemed a
buyer in bad faith and the prospective buyer cannot seek the relief of
reconveyance of the property. There is no double sale in such case. Title to the
property will transfer to the buyer after registration because there is no defect
in the owner-sellers title per se, but the latter, of course, may be sued for
damages by the intending buyer.[53] (Emphasis supplied)
In this case, the lower courts found that the property was sold to Dr.
Canora and then to Bundalo who in turn acted as attorney-in-fact for the
Monesets in mortgaging the property to respondent Bank. The trial court and
the CA erred in giving petitioner the preferential right to redeem the property
as such would prejudice the rights of the subsequent buyers who were not
parties in the proceedings below. While the matter of giving petitioner
preferential right to redeem the property was not put in issue before us, in the
exercise of our discretionary power to correct manifest and palpable error, we
deem it proper to delete said portion of the decision for being erroneous.[54]
Petitioners rights were limited to asking for specific performance
and damages from the Monesets. Specific performance, however, is no longer
feasible at this point as explained above. This being the case, it follows that
petitioner never had any cause of action against respondent Bank. Having no
cause of action against the bank and not being an owner of the subject
property, petitioner is not entitled to redeem the subject property.
Petitioner had lost her right to demand specific performance when
the Monesets executed a Deed of Absolute Sale in favor of Dr. Canora. Contrary
to what she claims, petitioner had no vested right over the property.
Indeed, it is the Monesets who first breached their obligation
towards petitioner and are guilty of fraud against her. It cannot be denied
however that petitioner is also not without fault. She sat on her rights and never
consigned the full amount of the property. She therefore cannot ask to be
declared the owner of the property, this late, especially since the same has
already passed hands several times, neither can she question the mortgage
constituted on the property years after title has already passed to another
person by virtue of a deed of absolute sale.
At this point, let it be stated that the courts below and even this
Court have no jurisdiction to resolve the issue whether there was bad faith
among the Monesets, Canora and Bundalo. Canora was never impleaded.
Bundalo has not been served with summons.
WHEREFORE, the petition is DENIED. The decision of the Regional
Trial Court of Cebu City, Branch 24, promulgated on February 5, 1993 and the
decision of the Court of Appeals dated June 28, 1999 are hereby AFFIRMED.
However, in the higher interest of substantial justice, the Court MODIFIES the
same to the effect that the portion ordering the Rural Bank of Larena (Siquijor),
Inc. to give petitioner the preferential right to redeem the house and lot
covered by Transfer Certificate of Title No. 78374 is DELETED for lack of legal
basis.
No costs.
SO ORDERED.
FERNANDO CARRASCOSO, JR., VS THE HONORABLE COURT OF APPEALS
DECISION
CARPIO MORALES, J.:
El Dorado Plantation, Inc. (El Dorado) was the registered owner of a
parcel of land (the property) with an area of approximately 1,825 hectares
covered by Transfer Certificate of Title (TCT) No. T-93[1] situated in Sablayan,
Occidental Mindoro.
On February 15, 1972, at a special meeting of El Dorados Board of
Directors, a Resolution[2] was passed authorizing Feliciano Leviste, then
President of El Dorado, to negotiate the sale of the property and sign all
documents and contracts bearing thereon.
On March 23, 1972, by a Deed of Sale of Real Property,[3] El Dorado,
through Feliciano Leviste, sold the property to Fernando O. Carrascoso, Jr.
(Carrascoso).
The pertinent provisions of the Deed of Sale read:
NOW, THEREFORE, for and in consideration of the sum of ONE MILLION EIGHT
HUNDRED THOUSAND (1,800,000.00) PESOS, Philippine Currency, the Vendor
hereby sells, cedes, and transfer (sic) unto the herein VENDEE, his heirs,
successors and assigns, the above-described property subject to the following
terms and consitions (sic):
1. Of the said sum of P1,800,000.00 which constitutes the full consideration of
this sale, P290,000.00 shall be paid, as it is hereby paid, to the Philippines
(sic) National Bank, thereby effecting the release and cancellation fo (sic) the
present mortgage over the above-described property.
2. That the sum of P210,000.00 shall be paid, as it is hereby paid by the VENDEE
to the VENDOR, receipt of which amount is hereby acknowledged by the
VENDOR.
3. The remaining balance of P1,300,000.00 plus interest thereon at the rate of
10% per annum shall be paid by the VENDEE to the VENDOR within a period
of three (3) years, as follows:
(a) One (1) year from the date of the signing of this agreement, the VENDEE
shall pay to the VENDOR the sum of FIVE HUNDRED NINETEEN THOUSAND
EIGHT HUNDRED THIRTY THREE & 33/100 (P519,833.33) PESOS.
(b) Two (2) years from the date of signing of this agreement, the VENDEE
shall pay to the VENDOR the sum of FIVE HUNDRED NINETTEN (sic)
THOUSAND EIGHT HUNDRED AND THIRTY-THREE & 33/100 (P519,833.33)
PESOS.
(c) Three (3) years from the date of signing of this agreement, the VENDEE
shall pay to the VENDOR the sum of FIVE Hundred NINETEEN THOUSAND
EIGHT HUNDRED AND THIRTY-THREE & 33/100 (P519,833.33) PESOS.
4. The title of the property, subject of this agreement, shall pass and be
transferred to the VENDEE who shall have full authority to register the same
and obtain the corresponding transfer certificate of title in his name.
xxx
6. THE VENDOR certifies and warrants that the property above-described is not
being cultivated by any tenant and is therefore not covered by the provisions
of the Land Reform Code. If, therefore, the VENDEE becomes liable under the
said law, the VENDOR shall reimburse the VENDEE for all expenses and
damages he may incur thereon.[4] (Underscoring supplied)
From the above-quoted provisions of the Deed of Sale, Carrascoso
was to pay the full amount of the purchase price on March 23, 1975.
On even date, the Board of Directors of El Dorado passed a
Resolution reading:
RESOLVED that by reason of the sale of that parcel of land covered by TCT No.
T-93 to Dr. FERNANDO O. CARRASCOSO, JR., the corporation interposes
no objection to the property being mortgage (sic) by Dr. FERNANDO O.
CARRASCOSO, JR. to any bank of his choice as long as the balance on the Deed
of Sale shall be recognized by Dr. FERNANDO O. CARRASCOSO, JR.;
RESOLVED, FURTHER, that the corporation authorizes the prefered
(sic) claim on the property to be subordinated to any mortgage that may be
constituted by Dr. FERNANDO O. CARRASCOSO, JR.;
RESOLVED, FINALLY, that in case of any mortgage on the property,
the corporation waives the preference of any vendors lien on the
property.[5] (Emphasis and underscoring supplied)
Feliciano Leviste also executed the following affidavit on the same day:
1. That by reason of the sale of that parcel of land covered by Transfer
Certificate of Title T-93 as evidenced by the Deed of Sale attached hereto as
Annex A and made an integral part hereof, the El Dorado Plantation, Inc.
has no objection to the aforementioned property being mortgaged by Dr.
Fernando O. Carrascoso, Jr. to any bank of his choice, as long as the payment
of the balance due the El Dorado Plantation, Inc. under the Deed of Sale,
Annex A hereof, shall be recognized by the vendee therein, Dr. Fernando O.
Carrascoso, Jr. though subordinated to the preferred claim of the mortgagee
bank.
2. That in case of any mortgage on the property, the vendor hereby waives the
preference of any vendors lien on the property, subject matter of the deed
of sale.
3. That this affidavit is being executed to avoid any question on the authority of
Dr. Fernando O. Carrascoso, Jr. to mortgage the property subject of the Deed
of Sale, Annex A hereof, where the purchase price provided therein has not
been fully paid.
4. That this affidavit has been executed pursuant to a board resolution of El
Dorado Plantation, Inc.[6] (Emphasis and underscoring supplied)
On the following day, March 24, 1972, Carrascoso and his wife
Marlene executed a Real Estate Mortgage[7] over the property in favor of Home
Savings Bank (HSB) to secure a loan in the amount of P1,000,000.00. Of this
amount, P290,000.00 was paid to Philippine National Bank to release the
mortgage priorly constituted on the property and P210,000.00 was paid to El
Dorado pursuant to above-quoted paragraph Nos. 1 and 2 of the terms and
conditions of the Deed of Sale.[8]
The March 23, 1972 Deed of Sale of Real Property was registered
and annotated on El Dorados TCT No. T-93 as Entry No. 15240[9] on April 5,
1972. On even date, TCT No. T-93 covering the property was cancelled and TCT
No. T-6055[10] was in its stead issued by the Registry of Deeds of Occidental
Mindoro in the name of Carrascoso on which the real estate mortgage in favor
of HSB was annotated as Entry No. 15242.[11]
On May 18, 1972, the real estate mortgage in favor of HSB was
amended to include an additional three year loan of P70,000.00 as requested
by the spouses Carrascoso.[12] The Amendment of Real Estate Mortgage was
also annotated on TCT No. T-6055 as Entry No. 15486 on May 24, 1972.[13]
The 3-year period for Carrascoso to fully pay for the property on
March 23, 1975 passed without him having complied therewith.
In the meantime, on July 11, 1975, Carrascoso and the Philippine
Long Distance Telephone Company (PLDT), through its President Ramon
Cojuangco, executed an Agreement to Buy and Sell[14] whereby the former
agreed to sell 1,000 hectares of the property to the latter at a consideration
of P3,000.00 per hectare or a total of P3,000,000.00.
The July 11, 1975 Agreement to Buy and Sell was not registered and
annotated on Carrascosos TCT No. T-6055.
Lauro Leviste (Lauro), a stockholder and member of the Board of
Directors of El Dorado, through his counsel, Atty. Benjamin Aquino, by
letter[15] dated December 27, 1976, called the attention of the Board to
Carrascosos failure to pay the balance of the purchase price of the property
amounting to P1,300,000.00. And Lauros lawyer manifested that:
Because of the default for a long time of Mr. Carrascoso to pay the
balance of the consideration of the sale, Don Lauro Leviste, in his behalf and in
behalf of the other shareholders similarly situated like him, want a rescission of
the sale made by the El Dorado Plantation, Inc. to Mr. Carrascoso. He desires
that the Board of Directors take the corresponding action for rescission.[16]
Lauros desire to rescind the sale was reiterated in two other
letters[17] addressed to the Board dated January 20, 1977 and March 3, 1977.
Jose P. Leviste, as President of El Dorado, later sent a letter of
February 21, 1977[18] to Carrascoso informing him that in view of his failure to
pay the balance of the purchase price of the property, El Dorado was seeking
the rescission of the March 23, 1972 Deed of Sale of Real Property.
The pertinent portions of the letter read:
xxx
I regret to inform you that the balance of P1,300,000.00 and the
interest thereon have long been due and payable, although you have
mortgaged said property with the Home Savings Bank for P1,000,000.00 on
March 24, 1972, which was subsequently increased to P1,070,000.00 on May
18, 1972.
You very well know that the El Dorado Plantation, Inc., is a close
family corporation, owned exclusively by the members of the Leviste family and
I am one of the co-owners of the land. As nothing appears to have been done
on your part after our numerous requests for payment of the said amount of
P1,300,000.00 and the interest of 10% per annum due thereon, please be
advised that we would like to rescind the contract of sale of the
land.[19] (Underscoring supplied)
Jose Leviste, by letter[20] dated March 10, 1977, informed Lauros
counsel Atty. Aquino of his (Joses) February 21, 1977 letter to Carrascoso, he
lamenting that Carrascoso has not deemed it fit to give [his] letter the courtesy
of a reply and advis[ing] that some of the Directors of [El Dorado] could not see
their way clear in complying with the demands of your client [Lauro] and have
failed to reach a consensus to bring the corresponding action for rescission of
the contract against . . . Carrascoso.[21]
Lauro and El Dorado finally filed on March 15, 1977 a complaint[22] for rescission
of the March 23, 1972 Deed of Sale of Real Property between El Dorado and
Carrascoso with damages before the Court of First Instance (CFI) of Occidental
Mindoro, docketed as Civil Case No. R-226.
Lauro and El Dorado also sought the cancellation of TCT No. T-6055
in the name of Carrascoso and the revival of TCT No. T-93 in the name of El
Dorado, free from any liens and encumbrances. Furthermore, the two prayed
for the issuance of an order for Carrascoso to: (1) reconvey the property to El
Dorado upon return to him of P500,000.00, (2) secure a discharge of the real
estate mortgage constituted on the property from HSB, (3) submit an
accounting of the fruits of the property from March 23, 1972 up to the return
of possession of the land to El Dorado, (4) turn over said fruits or the equivalent
value thereof to El Dorado and (5) pay the amount of P100,000.00 for attorneys
fees and other damages.[23]
Also on March 15, 1977, Lauro and El Dorado caused to be
annotated on TCT No. T-6055 a Notice of Lis Pendens,inscribed as Entry No.
39737.[24]
 In the meantime, Carrascoso, as vendor and PLDT, as vendee forged
on April 6, 1977 a Deed of Absolute Sale[25] over the 1,000 hectare portion of
the property subject of their July 11, 1975 Agreement to Buy and Sell. The
pertinent portions of the Deed are as follows:
WHEREAS, the VENDOR and the VENDEE entered into an agreement
To Buy and Sell on July 11, 1975, which is made a part hereof by reference;
WHEREAS, the VENDOR and the VENDEE are now decided to
execute the Deed of Absolute Sale referred to in the aforementioned
agreement to Buy and Sell;
WHEREFORE, for and in consideration of the foregoing premises and
the terms hereunder stated, the VENDOR and the VENDEE have agreed as
follows:
1. For and in consideration of the sum of THREE MILLION PESOS
(P3,000,000.00), Philippine currency, of which ONE HUNDRED TWENTY
THOUSAND PESOS P120,000.00 have (sic) already been received by the
VENDOR, the VENDOR hereby sells, transfers and conveys unto the VENDEE
one thousand hectares (1,000 has.) of his parcel of land covered by T.C.T. No.
T-6055 of the Registry of Deeds of Mindoro, delineated as Lot No. 3-B-1 in the
subdivision survey plan xxx
2. The VENDEE shall pay to the VENDOR upon the signing of this agreement,
the sum of TWO MILLION FIVE HUNDRED THOUSAND PESOS (P2,500,000.00) in
the following manner:
a) The sum of TWO MILLION THREE HUNDRED THOUSAND PESOS
(P2,300,000.00) to Home Savings Bank in full payment of the
VENDORs mortgaged obligation therewith;
b) The sum of TWO HUNDRED THOUSAND PESOS (P200,000.00) to
VENDOR;
The remaining balance of the purchase price in the sum of THREE
HUNDRED EIGHTY THOUSAND PESOS (P380,000.00), less such expenses which
may be advanced by the VENDEE but which are for the account of the VENDOR
under Paragraph 6 of the Agreement to Buy and Sell, shall be paid by the
VENDEE to the VENDOR upon issuance of title to the VENDEE.[26] (Underscoring
supplied)
In turn, PLDT, by Deed of Absolute Sale[27] dated May 30, 1977,
conveyed the aforesaid 1,000 hectare portion of the property to its subsidiary,
PLDT Agricultural Corporation (PLDTAC), for a consideration of P3,000,000.00,
the amount of P2,620,000.00 of which was payable to PLDT upon signing of said
Deed, and P380,000.00 to Carrascoso upon issuance of title to PLDTAC.
In the meantime, on October 19, 1977, the El Dorado Board of
Directors, by a special meeting,[28] adopted and approved a Resolution ratifying
and conferring the prosecution of Civil Case No. R-226 of the Court of First
Instance of Occidental Mindoro, entitled Lauro P. Leviste vs. Fernando
Carascoso (sic), etc. initiated by stockholder Mr. Lauro P. Leviste.[29]
In his Answer with Compulsory Counterclaim,[30] Carrascoso alleged
that: (1) he had not paid his remaining P1,300,000.00 obligation under the
March 23, 1972 Deed of Sale of Real Property in view of the extensions of time
to comply therewith granted him by El Dorado; (2) the complaint suffered from
fatal defects, there being no showing of compliance with the condition
precedent of exhaustion of intra-corporate remedies and the requirement that
a derivative suit instituted by a complaining stockholder be verified under oath;
(3) El Dorado committed a gross misrepresentation when it warranted that the
property was not being cultivated by any tenant to take it out of the coverage
of the Land Reform Code; and (4) he suffered damages due to the premature
filing of the complaint for which Lauro and El Dorado must be held liable.
On February 21, 1978, the April 6, 1977 and May 30, 1977 Deeds of
Absolute Sale and the respective Articles of Incorporation of PLDT and PLDTAC
were annotated on TCT No. T-6055 as Entry Nos.
24770,[31] 42774,[32] 42769[33] and 24772,[34] respectively. On even date,
Carrascosos TCT No. T-6055 was cancelled and TCT No. T-12480[35] covering the
1,000 hectare portion of the property was issued in the name of PLDTAC. The
March 15, 1977 Notice of Lis Pendens was carried over to TCT No. T-12480.
On July 31, 1978, PLDT and PLDTAC filed an Urgent Motion for
Intervention[36] which was granted by the trial court by Order[37] of September
7, 1978.
PLDT and PLDTAC thereupon filed their Answer In Intervention with
Compulsory Counterclaim and Crossclaim[38]against Carrascoso on November
13, 1978, alleging that: (1) when Carrascoso executed the April 6, 1977 Deed of
Absolute Sale in favor of PLDT, PLDT was not aware of any litigation involving
the 1,000 hectare portion of the property or of any flaw in his title, (2) PLDT is
a purchaser in good faith and for value; (3) when PLDT executed the May 30,
1977 Deed of Absolute Sale in favor of PLDTAC, they had no knowledge of any
pending litigation over the property and neither were they aware that a notice
of lis pendens had been annotated on Carrascosos title; and (4) Lauro and El
Dorado knew of the sale by Carrascoso to PLDT and PLDTs actual possession of
the 1,000 hectare portion of the property since June 30, 1975 and of its exercise
of exclusive rights of ownership thereon through agricultural development.[39]
By Decision[40] of January 28, 1991, Branch 45 of the San Jose
Occidental Mindoro Regional Trial Court to which the CFI has been renamed,
dismissed the complaint on the ground of prematurity, disposing as follows,
quoted verbatim:
WHEREFORE, in view of all the foregoing considerations, judgment
is hereby rendered:
1. Dismissing the plaintiffs complaint against the defendant on the ground of
prematurity;
2. Ordering the plaintiffs to pay to the defendant the sum of P2,980,000.00 as
actual and compensatory damages, as well as the sum of P100,000.00 as and
for attorneys fees; provided, however, that the aforesaid amounts must first be
set off from the latters unpaid balance to the former;
3. Dismissing the defendants-intervenors counterclaim and cross-claim; and
4. Ordering the plaintiffs to pay to (sic) the costs of suit.
SO ORDERED.[41] (Underscoring supplied)
Carrascoso, PLDT and PLDTAC filed their respective appeals to the
Court of Appeals.
By Decision[42] of January 31, 1996, the appellate court reversed the
decision of the trial court, disposing as follows, quoted verbatim:
WHEREFORE, not being meritorious, PLDTs/PLDTACs appeal is
hereby DISMISSED and finding El Dorados appeal to be impressed with merit,
We REVERSE the appealed Decision and render the following judgment:
1. The Deed of Sale of Real Property (Exhibit C) is hereby rescinded and TCT No.
T-12480 (Exhibit Q) is cancelled while TCT No. T-93 (Exhibit A), is reactivated.
2. Fernando Carrascoso, Jr. is commanded to:
2.1. return the possession of the 825 [hectare-] remaining portion
of the land to El Dorado Plantation, Inc. without prejudice to the
landholdings of legitimate tenants thereon;
2.2. return the net fruits of the land to El Dorado Plantation, Inc.
from March 23, 1972 to July 11, 1975, and of the 825-hectare-
remaining portion minus the tenants landholdings, from July 11,
1975 up to its delivery to El Dorado Plantation, Inc. including
whatever he may have received from the tenants if any by way of
compensation under the Operation Land Transfer or under any
other pertinent agrarian law;
2.3 Pay El Dorado Plantation, Inc. an attorneys fee of P20,000.00
and litigation expenses of P30,000.00;
2.4 Return to Philippine Long Distance Telephone Company/PLDT
Agricultural Corporation P3,000,000.00 plus legal interest from April
6, 1977 until fully paid;
3. PLDT Agricultural Corporation is ordered to surrender the possession of the
1000-hectare Farm to El Dorado Plantation, Inc.;
4. El Dorado Plantation, Inc. is directed to return the P500,000.00 to Fernando
Carrascoso, Jr. plus legal interest from March 23, 1972 until fully paid. The
performance of this obligation will however await the full compliance by
Fernando Carrascoso, Jr. of his obligation to account for and deliver the net
fruits of the land mentioned above to El Dorado Plantation, Inc.
5. To comply with paragraph 2.2 herein, Carrascoso is directed to submit in (sic)
the court a quo a full accounting of the fruits of the land during the period
mentioned above for the latters approval, after which the net fruits shall be
delivered to El Dorado, Plantation, Inc.
6. El Dorado Plantation, Inc. should inform Philippine Long Distance Telephone
Co. and PLDT Agricultural Corporation in writing within ten (10) days after
finality of this decision regarding the exercise of its option under Art. 448 of the
Civil Code.
SO ORDERED.[43] (Underscoring supplied)
PLDT and PLDTAC filed on February 22, 1996, a Motion for
Reconsideration[44] of the January 31, 1996 CA Decision, while Carrascoso went
up this Court by filing on March 25, 1996 a petition for review,[45] docketed as
G.R. No. 123672, assailing the January 31, 1996 CA Decision and seeking the
reinstatement of the January 28, 1991 Decision of the trial court except with
respect to its finding that the acquisition of PLDT and PLDTAC of the 1,000
hectare portion of the property was subject to the notice of lis pendens.
Lauro, in the meantime, died, hence, on April 16, 1996, a Motion for
Substitution of Party[46] was filed praying that his heirs, represented by Conrad
C. Leviste, be substituted as respondents. The Motion was granted by
Resolution[47] of July 10, 1996.
PLDT and PLDTAC filed their Comment[48] to Carrascosos petition and prayed
that judgment be rendered finding them to be purchasers in good faith to thus
entitle them to possession and ownership of the 1,000 hectare portion of the
property, together with all the improvements they built thereon. Reiterating
that they were not purchasers pendente lite, they averred that El Dorado and
Lauro had actual knowledge of their interests in the said portion of the property
prior to the annotation of the notice of lis pendens to thereby render said
notice ineffective.
El Dorado and the heirs of Lauro, both represented by Conrad C.
Leviste, also filed their Comment[49] to Carrascosos petition, praying that it be
dismissed for lack of merit and that paragraph 6 of the dispositive portion of
the January 31, 1996 CA Decision be modified to read as follows:
6. El Dorado Plantation, Inc. should inform Philippine Long Distance Telephone
Co. and PLDT Agricultural Corporation in writing within ten (10) days after
finality of this decision regarding the exercise of its option under Arts. 449 and
450 of the Civil Code, without right to indemnity on the part of the latter should
the former decide to keep the improvements under Article
449.[50](Underscoring supplied)
Carrascoso filed on November 13, 1996 his Reply[51] to the Comment
of El Dorado and the heirs of Lauro.
In the meantime, as the February 22, 1996 Motion for
Reconsideration filed by PLDT and PLDTAC of the CA decision had remained
unresolved, this Court, by Resolution[52] of June 30, 2003, directed the appellate
court to resolve the same.
By Resolution[53] of July 8, 2004, the CA denied PLDT and PLDTACs
Motion for Reconsideration for lack of merit.
PLDT[54] thereupon filed on September 2, 2004 a petition for
review[55] before this Court, docketed as G.R. No. 164489, seeking to reverse
and set aside the January 31, 1996 Decision and the July 8, 2004 Resolution of
the appellate court. It prayed that judgment be rendered upholding its right,
interest and title to the 1,000 hectare portion of the property and that it and
its successors-in-interest be declared owners and legal possessors thereof,
together with all improvements built, sown and planted thereon.
By Resolution[56] of August 25, 2004, G.R. No. 164489 was
consolidated with G.R. No. 123672.
In his petition, Carrascoso faults the CA as follows:
I In the case at bar, El Dorado already performed its obligation
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AND
COMMITTED A MISTAKE OF LAW IN NOT DECLARING THAT THE ACTION FOR
RESCISSION WAS PREMATURELY FILED.
II
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AND
COMMITTED A MISTAKE OF LAW IN DISREGARDING THE CRUCIAL
SIGNIFICANCE OF THE WARRANTY OF NON-TENANCY EXPRESSLY STIPULATED
IN THE CONTRACT OF SALE.
III
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION IN
REVERSING THE DECISION OF THE TRIAL COURT.[57] (Underscoring supplied)
PLDT, on the other hand, faults the CA as follows:
I did not have the effect of suspending the period to fully pay the purchase price,
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN HOLDING THAT
PETITIONER AND PLTAC (sic) TOOK THEIR RIGHT, INTEREST AND TITLE TO THE
FARM SUBJECT TO THE NOTICE OF LIS PENDENS, THE SAME IN DISREGARD OF
THE PROTECTION ACCORDED THEM UNDER ARTICLES 1181 AND 1187 OF THE
NEW CIVIL CODE.
II
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN HOLDING THAT
PETITIONER AND PLDTAC TOOK THEIR RIGHT, INTEREST AND TITLE TO THE
FARM SUBJECT TO THE NOTICE OF LIS PENDENS, THE SAME IN DISREGARD OF
THE LEGAL PRINCIPLE THAT RESPONDENTS EL DORADO ET AL.s PRIOR, ACTUAL
KNOWLEDGE OF PETITIONER PLDTS AGREEMENT TO BUY AND SELL WITH
RESPONDENT CARRASCOSO RESULTING IN THE DELIVERY TO, AND
POSSESSION, OCCUPATION AND DEVELOPMENT BY, SAID PETITIONER OF THE
FARM, IS EQUIVALENT TO REGISTRATION OF SUCH RIGHT, INTEREST AND TITLE
AND, THEREFORE, A PRIOR REGISTRATION NOT AFFECTED BY THE LATER
NOTICE OF LIS PENDENS.[58] (Underscoring supplied)
Carrascoso posits that in the El Dorado Board Resolution and the
Affidavit of Feliciano Leviste, both dated March 23, 1972, no objection was
interposed to his mortgaging of the property to any bank provided that the
balance of the purchase price of the property under the March 23, 1972 Deed
of Sale of Real Property is recognized, hence, El Dorado could collect the unpaid
balance of P1,300,000.00 only after the mortgage in favor of HSB is paid in full;
and the filing of the complaint for rescission with damages on March 15, 1977
was premature as he fully paid his obligation to HSB only on April 5, 1977 as
evidenced by the Cancellation of Mortgage[59] signed by HSB President Gregorio
B. Licaros.
Carrascoso further posits that extensions of the period to pay El
Dorado were verbally accorded him by El Dorados directors and officers,
particularly Jose and Angel Leviste.
Article 1191 of the Civil Code provides:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either case. He
may also seek rescission, even after he has chosen fulfillment, if the latter
should become impossible.
The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with Articles 1385 and
1388 and the Mortgage Law.
Reciprocal obligations are those which arise from the same cause,
and in which each party is a debtor and a creditor of the other, such that the
obligation of one is dependent upon the obligation of the other.[60] They are to
be performed simultaneously such that the performance of one is conditioned
upon the simultaneous fulfillment of the other.[61]
The right of rescission of a party to an obligation under Article 1191
is predicated on a breach of faith by the other party who violates the reciprocity
between them.[62]
A contract of sale is a reciprocal obligation. The seller obligates itself
to transfer the ownership of and deliver a determinate thing, and the buyer
obligates itself to pay therefor a price certain in money or its equivalent.[63] The
non-payment of the price by the buyer is a resolutory condition which
extinguishes the transaction that for a time existed, and discharges the
obligations created thereunder.[64] Such failure to pay the price in the manner
prescribed by the contract of sale entitles the unpaid seller to sue for collection
or to rescind the contract.[65]
through the execution of the March 23, 1972 Deed of Sale of Real Property
which effectively transferred ownership of the property to Carrascoso. The
latter, on the other hand, failed to perform his correlative obligation of paying
in full the contract price in the manner and within the period agreed upon.
The terms of the Deed are clear and unequivocal: Carrascoso was to
pay the balance of the purchase price of the property amounting
to P1,300,000.00 plus interest thereon at the rate of 10% per annum within a
period of three (3) years from the signing of the contract on March 23, 1972.
When Jose Leviste informed him that El Dorado was seeking rescission of the
contract by letter of February 21, 1977, the period given to him within which to
fully satisfy his obligation had long lapsed.
The El Dorado Board Resolution and the Affidavit of Jose Leviste
interposing no objection to Carrascosos mortgaging of the property to any bank
as expressly stipulated in the Deed, pending full payment of any mortgage
obligation of Carrascoso.
As the CA correctly found:
The adverted resolution (Exhibit 2) does not say that the obligation
of Carrascoso to pay the balance was extended. Neither can We see in it
anything that can logically infer said accommodation.
A partially unpaid seller can agree to the buyers mortgaging the
subject of the sale without changing the time fixed for the payment of the
balance of the price. The two agreements are not incompatible with each other
such that when one is to be implemented, the other has to be suspended. In
the case at bench, there was no impediment for Carrascoso to pay the balance
of the price after mortgaging the land.
Also, El Dorados subordinating its preferred claim or waiving its
superior vendors lien over the land in favor of the mortgagee of said property
only means that in a situation where the unpaid price of the Land and loan
secured by the mortgage over the Land both become due and demandable, the
mortgagee shall have precedence in going after the Land for the satisfaction of
the loan. Such accommodations do not necessarily imply the modification of
the period fixed in the contract of sale for the payment by Carrascoso of the
balance.
The palpable purpose of El Dorado in not raising any objection to
Carrascosos mortgaging the land was to eliminate any legal impediment to such
a contract. That was so succinctly expressed in the Affidavit (Exhibit 2-A) of
President Feleciano (sic) Leviste. El Dorados yielding its superior lien over the
land in favor of the mortgagee was plainly intended to overcome the natural
reluctance of lending institutions to accept a land whose price has not yet been
fully paid as collateral of a loan.[66] (Underscoring supplied)
Respecting Carrascosos insistence that he was granted verbal
extensions within which to pay the balance of the purchase price of the
property by El Dorados directors and officers Jose and Angel Leviste, this Court
finds the same unsubstantiated by the evidence on record.
It bears recalling that Jose Leviste wrote Carrascoso, by letter of
February 21, 1977, calling his attention to his failure to comply, despite
numerous requests, with his obligation to pay the amount of P1,300,000.00
and 10% annual interest thereon, and advising him that we would like to rescind
the contract of sale. This letter reiterated the term of payment agreed upon in
the March 23, 1972 Deed of Sale of Real Property and Carrascososs non-
compliance therewith.
Carrascoso, harping on Jose Levistes March 10, 1977 letter to Lauros
counsel wherein he (Jose Leviste) stated that some of the Directors of the
corporation could not see their way clear in complying with the demands of
[Lauro] and have failed to reach a consensus to bring the corresponding action
for rescission of the contract against Dr. Fernando Carrascoso, argues that the
extensions priorly given to him no doubt lead to the logical conclusion on some
of the directors inability to file suit against him.[67]
The argument is specious. As the CA found, even if some officers of
El Dorado were initially reluctant to file suit against him, the same should not
be interpreted to mean that this was brought about by a prior extension of the
period to pay the balance of the purchase price of the property as such
reluctance could have been due to a myriad of reasons totally unrelated to the
period of payment of the balance.
The bottomline however is, if El Dorado really intended to extend
the period of payment of the balance there was absolutely no reason why it did
not do it in writing in clear and unmistakable terms. That there is no such
writing negates all the speculations of the court a quo and pretensions of
Carrascoso.
xxx
The unalterable fact here remains that on March 23, 1973, with or
without demand, the obligation of Carrascoso to pay P519,933.33 became due.
The same was true on March 23, 1974 and on March 23, 1975 for equal
amounts. Since he did not perform his obligation under the contract of sale, he,
therefore, breached it. Having breached the contract, El Dorados cause of
action for rescission of that contract arose.[68] (Underscoring supplied)
Carrascoso goes on to argue that the appellate court erred in
ignoring the import of the warranty of non-tenancy expressly stipulated in the
March 23, 1972 Deed of Sale of Real Property. He alleges that on March 8, 1972
or two weeks prior to the execution of the Deed of Sale, he discovered, while
inspecting the property on board a helicopter, that there were people and
cattle in the area; when he confronted El Dorado about it, he was told that the
occupants were caretakers of cattle who would soon leave;[69] four months
after the execution of the Deed of Sale, upon inquiry with the Bureau of Lands
and the Bureau of Soils, he was informed that there were people claiming to be
tenants in certain portions of the property;[70] and he thus brought the matter
again to El Dorado which informed him that the occupants were not tenants
but squatters.[71]
Carrascoso now alleges that as a result of what he concludes to be
a breach of the warranty of non-tenancy committed by El Dorado, he incurred
expenses in the amount of P2,890,000.00 for which he should be reimbursed,
his unpaid obligation to El Dorado amounting to P1,300,000.00 to be deducted
therefrom.[72]
The breach of an express warranty makes the seller liable for
damages.[73] The following requisites must be established in order that there be
an express warranty in a contract of sale: (1) the express warranty must be an
affirmation of fact or any promise by the seller relating to the subject matter of
the sale; (2) the natural tendency of such affirmation or promise is to induce
the buyer to purchase the thing; and (3) the buyer purchases the thing relying
on such affirmation or promise thereon.[74]
Under the March 23, 1972 Deed of Sale of Real Property, El
Dorado warranted that the property was not being cultivated by any tenant and
was, and therefore, not covered by the provisions of the Land Reform Code. If
Carrascoso would become liable under the said law, he would be reimbursed
for all expenses and damages incurred thereon.
Carrascoso claims to have incurred expenses in relocating persons
found on the property four months after the execution of the Deed of Sale.
Apart from such bare claim, the records are bereft of any proof that those
persons were indeed tenants.[75]The fact of tenancy[76] not having been priorly
established,[77] El Dorado may not be held liable for actual damages.
Carrascoso further argues that both the trial and appellate courts
erred in holding that the sale of the 1,000 hectare portion of the property to
PLDT, as well as its subsequent sale to PLDTAC, is subject to the March 15, 1977
Notice of Lis Pendens.
PLDT additionally argues that the CA incorrectly ignored the
Agreement to Buy and Sell which it entered into with Carrascoso on July 11,
1975, positing that the efficacy of its purchase from Carrascoso, upon his
fulfillment of the condition it imposed resulting in its decision to formalize their
transaction and execute the April 6, 1977 Deed of Sale, retroacted to July 11,
1975 or before the annotation of the Notice of Lis Pendens.[78]
The pertinent portions of the July 11, 1975 Agreement to Buy and Sell between
PLDT and Carrascoso read:
2. That the VENDOR hereby agrees to sell to the VENDEE and the latter hereby
agrees to purchase from the former, 1,000 hectares of the above-described
parcel of land as shown in the map hereto attached as Annex A and made an
integral part hereof and as hereafter to be more particularly determined by
the survey to be conducted by Certeza & Co., at the purchase price of
P3,000.00 per hectare or for a total consideration of Three Million Pesos
(P3,000,000.00) payable in cash.
3. That this contract shall be considered rescinded and cancelled and of no
further force and effect, upon failure of the VENDOR to clear the
aforementioned 1,000 hectares of land of all the occupants therein located,
within a period of one (1) year from the date of execution of this Agreement.
However, the VENDEE shall have the option to extend the life of this
Agreement by another six months, during which period the VENDEE shall
definitely inform the VENDOR of its decision on whether or not to finalize the
deed of absolute sale for the aforementioned 1,000 hectares of land.
The VENDOR agrees that the amount of P500.00 per family within
the aforementioned 1,000 hectares of land shall be spent by him for relocation
purposes, which amount however shall be advanced by the VENDEE and which
shall not exceed the total amount of P120,000.00, the same to be thereafter
deducted by the VENDEE from the aforementioned purchase price of
P3,000,000.00.
The aforementioned advance of P120,000.00 shall be remitted by
the VENDEE to the VENDOR upon the signing of this Agreement.
xxx
It is likewise further agreed that the VENDEE shall have the right to enter into
any part of the aforementioned 1,000 hectares at any time within the period of
this Agreement for purposes of commencing the development of the same.
xxx
5. Title to the aforementioned land shall also be cleared of all liens or
encumbrances and if there are any unpaid taxes, existing mortgages, liens and
encumbrances on the land, the payments to be made by the VENDEE to the
VENDOR of the purchase price shall first be applied to liquidate said mortgages,
liens and/or encumbrances, such that said payments shall be made directly to
the corresponding creditors. Thus, the balance of the purchase price will be
paid to the VENDOR after the title to the land is cleared of all such liens and
encumbrances.
xxx
7. The VENDOR agrees that, during the existence of this Agreement and without
the previous written permission from the VENDEE, he shall not sell, cede, assign
and/or transfer the parcel of land subject of this Agreement.[79]
A notice of lis pendens is an announcement to the whole world that
a particular real property is in litigation, and serves as a warning that one who
acquires an interest over said property does so at his own risk, or that he
gambles on the result of the litigation over said property.[80]
Once a notice of lis pendens has been duly registered, any
cancellation or issuance of title over the land involved as well as any subsequent
transaction affecting the same would have to be subject to the outcome of the
suit. In other words, a purchaser who buys registered land with full notice of
the fact that it is in litigation between the vendor and a third party stands in the
shoes of his vendor and his title is subject to the incidents and result of the
pending litigation.[81]
x x x Notice of lis pendens has been conceived and, more often than
not, availed of, to protect the real rights of the registrant while the case
involving such rights is pending resolution or decision. With the notice of lis
pendens duly recorded, and while it remains uncancelled, the registrant could
rest secure that he would not lose the property or any part of it during the
litigation.
The filing of a notice of lis pendens in effect (1) keeps the subject
matter of litigation within the power of the court until the entry of the final
judgment so as to prevent the defeat of the latter by successive alienations;
and (2) binds a purchaser of the land subject of the litigation to the judgment
or decree that will be promulgated thereon whether such a purchaser is a bona
fide purchaser or not; but (3) does not create a non-existent right or lien.
The doctrine of lis pendens is founded upon reason of public policy
and necessity, the purpose of which is to keep the subject matter of the
litigation within the power of the court until the judgment or decree shall have
been entered; otherwise by successive alienations pending the litigation, its
judgment or decree shall be rendered abortive and impossible of execution.
The doctrine of lis pendens is based on considerations of public policy and
convenience, which forbid a litigant to give rights to others, pending the
litigation, so as to affect the proceedings of the court then progressing to
enforce those rights, the rule being necessary to the administration of justice
in order that decisions in pending suits may be binding and may be given full
effect, by keeping the subject matter in controversy within the power of the
court until final adjudication, that there may be an end to litigation, and to
preserve the property that the purpose of the pending suit may not be defeated
by successive alienations and transfers of title.[82] (Italics in the original)
In ruling against PLDT and PLDTAC, the appellate court held:
PLDT and PLDTAC argue that in reality the Farm was bought by the former on
July 11, 1975 when Carrascoso and it entered into the Agreement to Buy and
Sell (Exhibit 15). How can an agreement to buy and sell which is a preparatory
contract be the same as a contract of sale which is a principal contract? If PLDTs
contention is correct that it bought the Farm on July 11, 1975, why did it buy
the same property again on April 6, 1977? There is simply no way PLDT and
PLDTAC can extricate themselves from the effects of said Notice of Lis Pendens.
It is admitted that PLDT took possession of the Farm on July 11, 1975 after the
execution of the Agreement to Buy and Sell but it did so not as owner but as
prospective buyer of the property. As prospective buyer which had actual on
(sic) constructive notice of the lis pendens, why did it pursue and go through
with the sale if it had not been willing to gamble with the result of this
case?[83] (Underscoring supplied)
Further, in its July 8, 2004 Resolution, the CA held:
PLDT cannot shield itself from the notice of lis pendens because all that it had
at the time of its inscription was an Agreement to Buy and Sell with
CARRASCOSO, which in effect is a mere contract to sell that did not pass to it
the ownership of the property.
xxx
Ownership was retained by CARRASCOSO which EL DORADO may
very well recover through its action for rescission.
xxx
PLDTs possession at the time the notice of lis pendens was
registered not being a legal possession based on ownership but a mere
possession in fact and the Agreement to Buy and Sell under which it supposedly
took possession not being registered, it is not protected from an adverse
judgment that may be rendered in the case subject of the notice of lis
pendens.[84] (Underscoring supplied)
In a contract of sale, the title passes to the vendee upon the delivery
of the thing sold; whereas in a contract to sell, ownership is not transferred
upon delivery of the property but upon full payment of the purchase price.[85] In
the former, the vendor has lost and cannot recover ownership until and unless
the contract is resolved or rescinded; whereas in the latter, title is retained by
the vendor until the full payment of the price, such payment being a positive
suspensive condition and failure of which is not a breach but an event that
prevents the obligation of the vendor to convey title from becoming
effective.[86]
PLDT argues that the July 11, 1975 Agreement to Buy and Sell is a
conditional contract of sale, thus calling for the application of Articles
1181[87] and 1187[88] of the Civil Code as held in Coronel v. Court of Appeals.[89]
The Court is not persuaded.
For in a conditional contract of sale, if the suspensive condition is
fulfilled, the contract of sale is thereby perfected, such that if there had already
been previous delivery of the property subject of the sale to the buyer,
ownership thereto automaticallytransfers to the buyer by operation of law
without any further act having to be performed by the seller.[90] Whereas in a
contract to sell, upon fulfillment of the suspensive condition, ownership will not
automatically transfer to the buyer although the property may have been
previously delivered to him. The prospective seller still has to convey title to the
prospective buyer by entering into a contract of absolute sale.[91]
A perusal of the contract[92] adverted to in Coronel reveals marked
differences from the Agreement to Buy and Sell in the case at bar. In
the Coronel contract, there was a clear intent on the part of the therein
petitioners-sellers to transfer title to the therein respondent-buyer. In the July
11, 1975 Agreement to Buy and Sell, PLDT still had to definitely inform
Carrascoso of its decision on whether or not to finalize the deed of absolute
sale for the 1,000 hectare portion of the property, such that in the April 6, 1977
Deed of Absolute Sale subsequently executed, the parties declared that they
are now decided to execute such deed, indicating that the Agreement to Buy
and Sell was, as the appellate court held, merely a preparatory contract in the
nature of a contract to sell. In fact, the parties even had to stipulate in the said
Agreement to Buy and Sell that Carrascoso, during the existence of the
Agreement, shall not sell, cede, assign and/or transfer the parcel of land, which
provision this Court has held to be a typical characteristic of a contract to sell.[93]
Being a contract to sell, what was vested by the July 11, 1975
Agreement to Buy and Sell to PLDT was merely the beneficial title to the 1,000
hectare portion of the property.
The right of Daniel Jovellanos to the property under the contract [to
sell] with Philamlife was merely an inchoate and expectant right which would
ripen into a vested right only upon his acquisition of ownership which, as
aforestated, was contingent upon his full payment of the rentals and
compliance with all his contractual obligations thereunder. A vested right is an
immediate fixed right of present and future enjoyment. It is to be distinguished
from a right that is expectant or contingent. It is a right which is fixed,
unalterable, absolute, complete and unconditional to the exercise of which no
obstacle exists, and which is perfect in itself and not dependent upon a
contingency. Thus, for a property right to be vested, there must be a transition
from the potential or contingent to the actual, and the proprietary interest
must have attached to a thing; it must have become fixed or established and is
no longer open to doubt or controversy.[94] (Underscoring supplied)
In the case at bar, the July 11, 1975 Agreement to Buy and Sell was
not registered, which act of registration is the operative act to convey and
affect the land.
An agreement to sell is a voluntary instrument as it is a willful act of
the registered owner. As such voluntary instrument, Section 50 of Act No. 496
[now Section 51 of PD 1529] expressly provides that the act of registration shall
be the operative act to convey and affect the land. And Section 55 of the same
Act [now Section 53 of PD 1529] requires the presentation of the owners
duplicate certificate of title for the registration of any deed or voluntary
instrument. As the agreement to sell involves an interest less than an estate in
fee simple, the same should have been registered by filing it with the Register
of Deeds who, in turn, makes a brief memorandum thereof upon the original
and owners duplicate certificate of title. The reason for requiring the
production of the owners duplicate certificate in the registration of a voluntary
instrument is that, being a willful act of the registered owner, it is to be
presumed that he is interested in registering the instrument and would willingly
surrender, present or produce his duplicate certificate of title to the Register of
Deeds in order to accomplish such registration. However, where the owner
refuses to surrender the duplicate certificate for the annotation of the
voluntary instrument, the grantee may file with the Register of Deeds a
statement setting forth his adverse claim, as provided for in Section 110 of Act
No. 496. xxx[95] (Underscoring supplied)
In Valley Golf Club, Inc. v. Salas,[96] where a Deed of Absolute Sale
covering a parcel of land was executed prior to the annotation of a notice of lis
pendens by the original owner thereof but which Deed was
registered after such annotation, this Court held:
The advance payment of P15,000.00 by the CLUB on October 18,
1960 to ROMERO, and the additional payment by the CLUB of P54,887.50 as
full payment of the purchase price on October 26, 1960, also to ROMERO,
cannot be held to be the dates of sale such as to precede the annotation of the
adverse claim by the SISTERS on October 25, 1960 and the lis pendens on
October 27, 1960. It is basic that it is the act of registration of the sale that is
the operative act to convey and affect the land. That registration was not
effected by the CLUB until December 4, 1963, or three (3) years after it had
made full payment to ROMERO. xxx
xxx
As matters stand, therefore, in view of the prior annotations of the
adverse claim and lis pendens, the CLUB must be legally held to have been
aware of the flaws in the title. By virtue of the lis pendens, its acquisition of the
property was subject to whatever judgment was to be rendered in Civil Case
No. 6365. xxx The CLUBs cause of action lies, not against the SISTERS, to whom
the property had been adjudged by final judgment in Civil Case No. 6365, but
against ROMERO who was found to have had no right to dispose of the
land.[97] (Underscoring supplied)
PLDT further argues that El Dorados prior, actual knowledge of the
July 11, 1975 Agreement to Buy and Sell is equivalent to prior registration not
affected by the Notice of Lis Pendens. As such, it concludes that it was not a
purchaser pendente lite nor a purchaser in bad faith.
PLDT anchors its argument on the testimony of Lauro and El
Dorados counsel Atty. Aquino from which it infers that Atty. Aquino filed the
complaint for rescission and caused the notice of lis pendens to be annotated
on Carrascosos title only after reading newspaper reports on the sale to PLDT
of the 1,000 hectare portion of the property.
The pertinent portions of Atty. Aquinos testimony are reproduced
hereunder:
Q: Do you know, Atty. Aquino, what you did after the filing of the complaint in
the instant case of Dr. Carrascoso?
A: Yes, I asked my associates to go to Mamburao and had the notice of Lis
Pendens covering the property as a result of the filing of the instant complaint.
Q: Do you know the notice of Lis Pendens?
A: Yes, it is evidenced by a [Transfer] Certificate Copy of Title of Dr. Carrascoso
entitled Notice of Lis Pendens.
Q: As a consequence of the filing of the complaint which was annotated, you
have known that?
A: Yes.
xxx
Q: After the annotation of the notice of Lis Pendens, do you know, if any further
transaction was held on the property?
A: As we have read in the newspaper, that Dr. Carrascoso had sold the property
in favor of the PLDT, Co.
Q: And what did you do?
A: We verified the portion of the property having recorded under entry No.
24770 xxx and we also discovered that the articles incorporated (sic) and other
corporate matters had been organized and established of the PLDT, Co., and
had been annotated.
xxx
Q: Do you know what happened to the property?
A: It was sold by the PLDT to its sub-PLDT Agitating (sic) Co. when at that time
there was already notice of Lis Pendens.
xxx
Q: In your testimony, you mentioned that you had come cross- (sic) reading the
sale of the subject litigation (sic) between Dr. Fernando Carrascoso, the
defendant herein and the PLDT, one of defendants-intervenor, may I say
when?
A: I cannot remember now, but it was in the newspaper where it was informed
or mentioned of the sold property to PLDT.
xxx
Q: Will you tell to the Honorable Court what newspaper was that?
A: Well, I cannot remember what is that newspaper. That is only a means of
[confirming] the transaction. What was [confirmed] to us is whether there was
really transaction (sic) and we found out that there was in the Register of Deeds
and that was the reason why we obtained the case.
Q: Well, may I say, is there any reason, the answer is immaterial. The question
is as regard the matter of time when counsel is being able (sic) to read the
newspaper allegedly (interrupted)
xxx
Q: The idea of the question, your Honor, is to establish and ask further the
notice of [lis pendens] with regards (sic) to the transfer of property to PLDT,
would have been accorded prior to the pendency of the case.
xxx
A: I cannot remember.[98]
PLDT also relies on the following testimony of Carrascoso:
Q: You mentioned Doctor a while ago that you mentioned to the late Governor
Feliciano Leviste regarding your transaction with the PLDT in relation to the
subject property you allegedly mention (sic) your intention to sell with the
PLDT?
A: It was Dr. Jose Leviste and Dr. Angel Leviste that was constantly in touched
(sic) with me with respect to my transaction with the PLDT, sir.
Q: Any other officer of the corporation who knows with instruction aside from
Dr. Angel Leviste and Dr. Jose Leviste?
A: Yes, sir. It was Trinidad Andaya Leviste and Assemblyman Expedito Leviste.
xxx
Q: What is the position of Mrs. Trinidad Andaya Leviste with the plaintiff-
corporation?
A: One of the stockholders and director of the plaintiff-corporation, sir.
Q: Will you please tell us the other officers?
A: Expedito Leviste, sir.
A: Will you tell the position of Expedito Leviste?
A: He was the corporate secretary, sir.
Q: If you know, was Dr. Jose Leviste also a director at that time?
A: Yes, sir.[99]
On the other hand, El Dorado asserts that it had no knowledge of
the July 11, 1975 Agreement to Buy and Sell prior to the filing of the complaint
for rescission against Carrascoso and the annotation of the notice of lis
pendens on his title. It further asserts that it always acted in good faith:
xxx The contract to sell between the Petitioner [Carrascoso] and
PLDT was executed in July 11, 1975. There is no evidence that El Dorado was
notified of this contract. The property is located in Mindoro, El Dorado is based
in Manila. The land was planted to rice. This was not an unusual activity on the
land, thus it could have been the Petitioner who was using the land. Not having
been notified of this sale, El Dorado could not have stopped PLDT from
developing the land.
The absolute sale of the land to PLDT took place on April 6, 1977, or
AFTER the filing of this case on March 15, 1977 and the annotation of a notice
of lis pendens on March 16, 1977. Inspite of the notice of lis pendens, PLDT
then PLDTAC persisted not only in buying the land but also in putting up
improvements on the property such as buildings, roads, irrigation systems and
drainage. This was done during the pendency of this case, where PLDT and
PLDTAC actively participated as intervenors. They were not innocent
bystanders. xxx[100]
This Court finds the above-quoted testimony of Atty. Aquino to be
susceptible of conflicting interpretations. As such, it cannot be the basis for
inferring that El Dorado knew of the July 11, 1975 Agreement to Buy and Sell
prior to the annotation of the notice of lis pendens on Carrascosos title.
Respecting Carrascosos allegation that some of the directors and
officers of El Dorado had knowledge of his dealings with PLDT, it is true that
knowledge of facts acquired or possessed by an officer or agent of a
corporation in the course of his employment, and in relation to matters within
the scope of his authority, is notice to the corporation, whether he
communicates such knowledge or not.[101] In the case at bar, however, apart
from Carrascosos claim that he in fact notified several of the directors about his
intention to sell the 1,000 hectare portion of the property to PLDT, no evidence
was presented to substantiate his claim. Such self-serving, uncorroborated
assertion is indubitably inadequate to prove that El Dorado had notice of the
July 11, 1975 Agreement to Buy and Sell before the annotation of the notice
of lis pendens on his title.
PLDT is, of course, not without recourse. As held by the CA:
Between Carrascoso and PLDT/PLDTAC, the former acted in bad
faith while the latter acted in good faith. This is so because it was Carrascosos
refusal to pay his just debt to El Dorado that caused PLDT/PLDTAC to suffer
pecuniary losses. Therefore, Carrascoso should return to PLDT/PLDTAC the
P3,000,000.00 price of the farm plus legal interest from receipt thereof until
paid.[102](Underscoring supplied)
The appellate courts decision ordering the rescission of the March
23, 1972 Deed of Sale of Real Property between El Dorado and Carrascoso being
in order, mutual restitution follows to put back the parties to their original
situation prior to the consummation of the contract.
The exercise of the power to rescind extinguishes the obligatory
relation as if it had never been created, the extinction having a retroactive
effect. The rescission is equivalent to invalidating and unmaking the juridical
tie, leaving things in their status before the celebration of the contract.
Where a contract is rescinded, it is the duty of the court to
require both parties to surrender that which they have respectively received
and to place each other as far as practicable in his original situation, the
rescission has the effect of abrogating the contract in all
parts.[103] (Underscoring supplied)
The April 6, 1977 and May 30, 1977 Deeds of Absolute Sale being
subject to the notice of lis pendens, and as the Court affirms the declaration by
the appellate court of the rescission of the Deed of Sale executed by El Dorado
in favor of Carrascoso, possession of the 1,000 hectare portion of the property
should be turned over by PLDT to El Dorado.
As regards the improvements introduced by PLDT on the 1,000
hectare portion of the property, a distinction should be made between those
which it built prior to the annotation of the notice of lis pendens and those
which it introduced subsequent thereto.
 When a person builds in good faith on the land of another, Article
448 of the Civil Code governs:
Art. 448. The owner of the land on which anything has been built,
sown or planted in good faith, shall have the right to appropriate as
his own the works, sowing or planting, after payment of the
indemnity provided for in Articles 546 and 548, or to oblige the one
who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be
obliged to buy the land if its value is considerably more than that of
the building or trees. In such a case, he shall pay reasonable rent, if
the owner of the land does not choose to appropriate the building
or trees after the proper indemnity. The parties shall agree upon the
terms of the lease and in case of disagreement, the court shall fix
the terms thereof.
The above provision covers cases in which the builders, sowers or
planters believe themselves to be owners of the land or, at least, to have a claim
of title thereto.[104] Good faith is thus identified by the belief that the land is
owned; or that by some title one has the right to build, plant, or sow
thereon.[105]
The owner of the land on which anything has been built, sown or
planted in good faith shall have the right to appropriate as his own the building,
planting or sowing, after payment to the builder, planter or sower of the
necessary and useful expenses,[106] and in the proper case, expenses for pure
luxury or mere pleasure.[107]
The owner of the land may also oblige the builder, planter or sower
to purchase and pay the price of the land.
If the owner chooses to sell his land, the builder, planter or sower
must purchase the land, otherwise the owner may remove the improvements
thereon. The builder, planter or sower, however, is not obliged to purchase the
land if its value is considerably more than the building, planting or sowing. In
such case, the builder, planter or sower must pay rent to the owner of the land.
If the parties cannot come to terms over the conditions of the lease,
the court must fix the terms thereof.
The right to choose between appropriating the improvement or
selling the land on which the improvement of the builder, planter or sower
stands, is given to the owner of the land.[108]
On the other hand, when a person builds in bad faith on the land of
another, Articles 449 and 450 govern:
Art. 449. He who builds, plants or sows in bad faith on the land of
another, loses what is built, planted or sown without right to
indemnity.
Art. 450. The owner of the land on which anything has been built,
planted or sown in bad faith may demand the demolition of the
work, or that the planting or sowing be removed, in order to replace
things in their former condition at the expense of the person who
built, planted or sowed; or he may compel the builder or planter to
pay the price of the land, and the sower the proper rent.
In the case at bar, it is undisputed that PLDT commenced
construction of improvements on the 1,000 hectare portion of the property
immediately after the execution of the July 11, 1975 Agreement to Buy and Sell
with the full consent of Carrascoso.[109] Thus, until March 15, 1977 when the
Notice of Lis Pendens was annotated on Carrascosos TCT No. T-6055, PLDT is
deemed to have been in good faith in introducing improvements on the 1,000
hectare portion of the property.
After March 15, 1977, however, PLDT could no longer invoke the
rights of a builder in good faith.
Should El Dorado then opt to appropriate the improvements made
by PLDT on the 1,000 hectare portion of the property, it should only be made
to pay for those improvements at the time good faith existed on the part of
PLDT or until March 15, 1977,[110] to be pegged at its current fair market
value.[111]
The commencement of PLDTs payment of reasonable rent should
start on March 15, 1977 as well, to be paid until such time that the possession
of the 1,000 hectare portion is delivered to El Dorado, subject to the
reimbursement of expenses as aforestated, that is, if El Dorado opts to
appropriate the improvements.[112]
If El Dorado opts for compulsory sale, however, the payment of rent
should continue up to the actual transfer of ownership.[113]
WHEREFORE, the petitions are DENIED. The Decision dated January
13, 1996 and Resolution dated July 8, 2004 of the Court of Appeals
are AFFIRMED with MODIFICATION in that
1) the Regional Trial Court of San Jose, Occidental Mindoro, Branch 45 is further
directed to:
a. determine the present fair price of the 1,000 hectare portion of the
property and the amount of the expenses actually spent by PLDT for the
improvements thereon as of March 15, 1977;
b. include for determination the increase in value (plus value) which the
1,000 hectare portion may have acquired by reason of the existence of
the improvements built by PLDT before March 15, 1977 and the current
fair market value of said improvements;
2. El Dorado is ordered to exercise its option under the law, whether to
appropriate the improvements, or to oblige PLDT to pay the price of the land,
and
3) PLDT shall pay El Dorado the amount of Two Thousand Pesos (P2,000.00) per
month as reasonable compensation for its occupancy of the 1,000 hectare
portion of the property from the time that its good faith ceased to exist until
such time that possession of the same is delivered to El Dorado, subject to the
reimbursement of the aforesaid expenses in favor of PLDT or until such time
that the payment of the purchase price of the 1,000 hectare portion is made by
PLDT in favor of El Dorado in case the latter opts for its compulsory sale.
Costs against petitioners.
SO ORDERED.
G.R. No. L-11491 August 23, 1918
ANDRES QUIROGA, vs. PARSONS HARDWARE CO.,
AVANCEÑA, J.:
On January 24, 1911, in this city of manila, a contract in the following
tenor was entered into by and between the plaintiff, as party of the first part,
and J. Parsons (to whose rights and obligations the present defendant later
subrogated itself), as party of the second part:
CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J.
PARSONS, BOTH MERCHANTS ESTABLISHED IN MANILA, FOR THE EXCLUSIVE
SALE OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS.
ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the
Visayan Islands to J. Parsons under the following conditions:
(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the
latter's establishment in Iloilo, and shall invoice them at the same price he has
fixed for sales, in Manila, and, in the invoices, shall make and allowance of a
discount of 25 per cent of the invoiced prices, as commission on the sale; and
Mr. Parsons shall order the beds by the dozen, whether of the same or of
different styles.
(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within
a period of sixty days from the date of their shipment.
(C) The expenses for transportation and shipment shall be borne by M. Quiroga,
and the freight, insurance, and cost of unloading from the vessel at the point
where the beds are received, shall be paid by Mr. Parsons.
(D) If, before an invoice falls due, Mr. Quiroga should request its payment, said
payment when made shall be considered as a prompt payment, and as such a
deduction of 2 per cent shall be made from the amount of the invoice.
The same discount shall be made on the amount of any invoice which Mr.
Parsons may deem convenient to pay in cash.
(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of
any alteration in price which he may plan to make in respect to his beds, and
agrees that if on the date when such alteration takes effect he should have any
order pending to be served to Mr. Parsons, such order shall enjoy the
advantage of the alteration if the price thereby be lowered, but shall not be
affected by said alteration if the price thereby be increased, for, in this latter
case, Mr. Quiroga assumed the obligation to invoice the beds at the price at
which the order was given.
(F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga"
beds.
ART. 2. In compensation for the expenses of advertisement which, for the
benefit of both contracting parties, Mr. Parsons may find himself obliged to
make, Mr. Quiroga assumes the obligation to offer and give the preference to
Mr. Parsons in case anyone should apply for the exclusive agency for any island
not comprised with the Visayan group.
ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of
"Quiroga" beds in all the towns of the Archipelago where there are no exclusive
agents, and shall immediately report such action to Mr. Quiroga for his
approval.
ART. 4. This contract is made for an unlimited period, and may be terminated
by either of the contracting parties on a previous notice of ninety days to the
other party.
Of the three causes of action alleged by the plaintiff in his complaint,
only two of them constitute the subject matter of this appeal and both
substantially amount to the averment that the defendant violated the following
obligations: not to sell the beds at higher prices than those of the invoices; to
have an open establishment in Iloilo; itself to conduct the agency; to keep the
beds on public exhibition, and to pay for the advertisement expenses for the
same; and to order the beds by the dozen and in no other manner. As may be
seen, with the exception of the obligation on the part of the defendant to order
the beds by the dozen and in no other manner, none of the obligations imputed
to the defendant in the two causes of action are expressly set forth in the
contract. But the plaintiff alleged that the defendant was his agent for the sale
of his beds in Iloilo, and that said obligations are implied in a contract of
commercial agency. The whole question, therefore, reduced itself to a
determination as to whether the defendant, by reason of the contract
hereinbefore transcribed, was a purchaser or an agent of the plaintiff for the
sale of his beds.
In order to classify a contract, due regard must be given to its essential clauses.
In the contract in question, what was essential, as constituting its cause and
subject matter, is that the plaintiff was to furnish the defendant with the beds
which the latter might order, at the price stipulated, and that the defendant
was to pay the price in the manner stipulated. The price agreed upon was the
one determined by the plaintiff for the sale of these beds in Manila, with a
discount of from 20 to 25 per cent, according to their class. Payment was to be
made at the end of sixty days, or before, at the plaintiff's request, or in cash, if
the defendant so preferred, and in these last two cases an additional discount
was to be allowed for prompt payment. These are precisely the essential
features of a contract of purchase and sale. There was the obligation on the
part of the plaintiff to supply the beds, and, on the part of the defendant, to
pay their price. These features exclude the legal conception of an agency or
order to sell whereby the mandatory or agent received the thing to sell it, and
does not pay its price, but delivers to the principal the price he obtains from
the sale of the thing to a third person, and if he does not succeed in selling it,
he returns it. By virtue of the contract between the plaintiff and the defendant,
the latter, on receiving the beds, was necessarily obliged to pay their price
within the term fixed, without any other consideration and regardless as to
whether he had or had not sold the beds.
It would be enough to hold, as we do, that the contract by and
between the defendant and the plaintiff is one of purchase and sale, in order
to show that it was not one made on the basis of a commission on sales, as the
plaintiff claims it was, for these contracts are incompatible with each other. But,
besides, examining the clauses of this contract, none of them is found that
substantially supports the plaintiff's contention. Not a single one of these
clauses necessarily conveys the idea of an agency. The words commission on
sales used in clause (A) of article 1 mean nothing else, as stated in the contract
itself, than a mere discount on the invoice price. The word agency, also used in
articles 2 and 3, only expresses that the defendant was the only one that could
sell the plaintiff's beds in the Visayan Islands. With regard to the remaining
clauses, the least that can be said is that they are not incompatible with the
contract of purchase and sale.
The plaintiff calls attention to the testimony of Ernesto Vidal, a
former vice-president of the defendant corporation and who established and
managed the latter's business in Iloilo. It appears that this witness, prior to the
time of his testimony, had serious trouble with the defendant, had maintained
a civil suit against it, and had even accused one of its partners, Guillermo
Parsons, of falsification. He testified that it was he who drafted the contract
Exhibit A, and, when questioned as to what was his purpose in contracting with
the plaintiff, replied that it was to be an agent for his beds and to collect a
commission on sales. However, according to the defendant's evidence, it was
Mariano Lopez Santos, a director of the corporation, who prepared Exhibit A.
But, even supposing that Ernesto Vidal has stated the truth, his statement as to
what was his idea in contracting with the plaintiff is of no importance, inasmuch
as the agreements contained in Exhibit A which he claims to have drafted,
constitute, as we have said, a contract of purchase and sale, and not one of
commercial agency. This only means that Ernesto Vidal was mistaken in his
classification of the contract. But it must be understood that a contract is what
the law defines it to be, and not what it is called by the contracting parties.
The plaintiff also endeavored to prove that the defendant had
returned beds that it could not sell; that, without previous notice, it forwarded
to the defendant the beds that it wanted; and that the defendant received its
commission for the beds sold by the plaintiff directly to persons in Iloilo. But all
this, at the most only shows that, on the part of both of them, there was mutual
tolerance in the performance of the contract in disregard of its terms; and it
gives no right to have the contract considered, not as the parties stipulated it,
but as they performed it. Only the acts of the contracting parties, subsequent
to, and in connection with, the execution of the contract, must be considered
for the purpose of interpreting the contract, when such interpretation is
necessary, but not when, as in the instant case, its essential agreements are
clearly set forth and plainly show that the contract belongs to a certain kind and
not to another. Furthermore, the return made was of certain brass beds, and
was not effected in exchange for the price paid for them, but was for other beds
of another kind; and for the letter Exhibit L-1, requested the plaintiff's prior
consent with respect to said beds, which shows that it was not considered that
the defendant had a right, by virtue of the contract, to make this return. As
regards the shipment of beds without previous notice, it is insinuated in the
record that these brass beds were precisely the ones so shipped, and that, for
this very reason, the plaintiff agreed to their return. And with respect to the so-
called commissions, we have said that they merely constituted a discount on
the invoice price, and the reason for applying this benefit to the beds sold
directly by the plaintiff to persons in Iloilo was because, as the defendant
obligated itself in the contract to incur the expenses of advertisement of the
plaintiff's beds, such sales were to be considered as a result of that
advertisement.
In respect to the defendant's obligation to order by the dozen, the
only one expressly imposed by the contract, the effect of its breach would only
entitle the plaintiff to disregard the orders which the defendant might place
under other conditions; but if the plaintiff consents to fill them, he waives his
right and cannot complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by
and between the plaintiff and the defendant was one of purchase and sale, and
that the obligations the breach of which is alleged as a cause of action are not
imposed upon the defendant, either by agreement or by law.
The judgment appealed from is affirmed, with costs against the appellant. So
ordered.
Arellano, C.J., Torres, Johnson, Street and Malcolm, JJ., concur.
G.R. No. L-20871 April 30, 1971
KER & CO., LTD vs. JOSE B. LINGAD
FERNANDO, J.:
Petitioner Ker & Co., Ltd. would have us reverse a decision of the
Court of Tax Appeals, holding it liable as a commercial broker under Section 194
(t) of the National Internal Revenue Code. Its plea, notwithstanding the
vigorous effort of its counsel, is not sufficiently persuasive. An obstacle, well-
nigh insuperable stands in the way. The decision under review conforms to and
is in accordance with the controlling doctrine announced in the recent case
of Commissioner of Internal Revenue v. Constantino.1 The decisive test, as
therein set forth, is the retention of the ownership of the goods delivered to
the possession of the dealer, like herein petitioner, for resale to customers, the
price and terms remaining subject to the control of the firm consigning such
goods. The facts, as found by respondent Court, to which we defer,
unmistakably indicate that such a situation does exist. The juridical
consequences must inevitably follow. We affirm.
It was shown that petitioner was assessed by the then
Commissioner of Internal Revenue Melecio R. Domingo the sum of P20,272.33
as the commercial broker's percentage tax, surcharge, and compromise penalty
for the period from July 1, 1949 to December 31, 1953. There was a request on
the part of petitioner for the cancellation of such assessment, which request
was turned down. As a result, it filed a petition for review with the Court of Tax
Appeals. In its answer, the then Commissioner Domingo maintained his stand
that petitioner should be taxed in such amount as a commercial broker. In the
decision now under review, promulgated on October 19, 1962, the Court of Tax
Appeals held petitioner taxable except as to the compromise penalty of
P500.00, the amount due from it being fixed at P19,772.33.
Such liability arose from a contract of petitioner with the United
States Rubber International, the former being referred to as the Distributor and
the latter specifically designated as the Company. The contract was to apply to
transactions between the former and petitioner, as Distributor, from July 1,
1948 to continue in force until terminated by either party giving to the other
sixty days' notice.2 The shipments would cover products "for consumption in
Cebu, Bohol, Leyte, Samar, Jolo, Negros Oriental, and Mindanao except [the]
province of Davao", petitioner, as Distributor, being precluded from disposing
such products elsewhere than in the above places unless written consent would
first be obtained from the Company.3 Petitioner, as Distributor, is required to
exert every effort to have the shipment of the products in the maximum
quantity and to promote in every way the sale thereof.4 The prices, discounts,
terms of payment, terms of delivery and other conditions of sale were subject
to change in the discretion of the Company.5
Then came this crucial stipulation: "The Company shall from time to
time consign to the Distributor and the Distributor will receive, accept and/or
hold upon consignment the products specified under the terms of this
agreement in such quantities as in the judgment of the Company may be
necessary for the successful solicitation and maintenance of business in the
territory, and the Distributor agrees that responsibility for the final sole of all
goods delivered shall rest with him. All goods on consignment shall remain the
property of the Company until sold by the Distributor to the purchaser or
purchasers, but all sales made by the Distributor shall be in his name, in which
the sale price of all goods sold less the discount given to the Distributor by the
Company in accordance with the provision of paragraph 13 of this agreement,
whether or not such sale price shall have been collected by the Distributor from
the purchaser or purchasers, shall immediately be paid and remitted by the
Distributor to the Company. It is further agreed that this agreement does not
constitute Distributor the agent or legal representative 4 of the Company for
any purpose whatsoever. Distributor is not granted any right or authority to
assume or to create any obligation or responsibility, express or implied, in
behalf of or in the name of the Company, or to bind the Company in any manner
or thing whatsoever."6
All specifications for the goods ordered were subject to acceptance
by the Company with petitioner, as Distributor, required to accept such goods
shipped as well as to clear the same through customs and to arrange for
delivery in its warehouse in Cebu City. Moreover, orders are to be filled in whole
or in part from the stocks carried by the Company's neighboring branches,
subsidiaries or other sources of Company's brands.7 Shipments were to be
invoiced at prices to be agreed upon, with the customs duties being paid by
petitioner, as Distributor, for account of the Company.8 Moreover, all resale
prices, lists, discounts and general terms and conditions of local resale were to
be subject to the approval of the Company and to change from time to time in
its discretion.9 The dealer, as Distributor, is allowed a discount of ten percent
on the net amount of sales of merchandise made under such agreement. 10 On
a date to be determined by the Company, the petitioner, as Distributor, was
required to report to it data showing in detail all sales during the month
immediately preceding, specifying therein the quantities, sizes and types
together with such information as may be required for accounting purposes,
with the Company rendering an invoice on sales as described to be dated as of
the date of inventory and sales report. As Distributor, petitioner had to make
payment on such invoice or invoices on due date with the Company being
privileged at its option to terminate and cancel the agreement forthwith upon
the failure to comply with this obligation. 11 The Company, at its own expense,
was to keep the consigned stock fully insured against loss or damage by fire or
as a result of fire, the policy of such insurance to be payable to it in the event
of loss. Petitioner, as Distributor, assumed full responsibility with reference to
the stock and its safety at all times; and upon request of the Company at any
time, it was to render inventory of the existing stock which could be subject to
change. 12 There was furthermore this equally tell-tale covenant: "Upon the
termination or any cancellation of this agreement all goods held on
consignment shall be held by the Distributor for the account of the Company,
without expense to the Company, until such time as provision can be made by
the Company for disposition." 13
The issue with the Court of Tax Appeals, as with us now, is whether
the relationship thus created is one of vendor and vendee or of broker and
principal. Not that there would have been the slightest doubt were it not for
the categorical denial in the contract that petitioner was not constituted as "the
agent or legal representative of the Company for any purpose whatsoever." It
would be, however, to impart to such an express disclaimer a meaning it should
not possess to ignore what is manifestly the role assigned to petitioner
considering the instrument as a whole. That would be to lose sight altogether
of what has been agreed upon. The Court of Tax Appeals was not misled in the
language of the decision now on appeal: "That the petitioner Ker & Co., Ltd. is,
by contractual stipulation, an agent of U.S. Rubber International is borne out by
the facts that petitioner can dispose of the products of the Company only to
certain persons or entities and within stipulated limits, unless excepted by the
contract or by the Rubber Company (Par. 2); that it merely receives, accepts
and/or holds upon consignment the products, which remain properties of the
latter company (Par. 8); that every effort shall be made by petitioner to
promote in every way the sale of the products (Par. 3); that sales made by
petitioner are subject to approval by the company (Par. 12); that on dates
determined by the rubber company, petitioner shall render a detailed report
showing sales during the month (Par. 14); that the rubber company shall invoice
the sales as of the dates of inventory and sales report (Par. 14); that the rubber
company agrees to keep the consigned goods fully insured under insurance
policies payable to it in case of loss (Par. 15); that upon request of the rubber
company at any time, petitioner shall render an inventory of the existing stock
which may be checked by an authorized representative of the former (Par. 15);
and that upon termination or cancellation of the Agreement, all goods held on
consignment shall be held by petitioner for the account of the rubber company
until their disposition is provided for by the latter (Par. 19). All these
circumstances are irreconcilably antagonistic to the idea of an independent
merchant." 14 Hence its conclusion: "However, upon analysis of the contract, as
a whole, together with the actual conduct of the parties in respect thereto, we
have arrived at the conclusion that the relationship between them is one of
brokerage or agency." 15 We find ourselves in agreement, notwithstanding the
able brief filed on behalf of petitioner by its counsel. As noted at the outset, we
cannot heed petitioner's plea for reversal.
1. According to the National Internal Revenue Code, a commercial broker
"includes all persons, other than importers, manufacturers, producers, or bona
fide employees, who, for compensation or profit, sell or bring about sales or
purchases of merchandise for other persons or bring proposed buyers and
sellers together, or negotiate freights or other business for owners of vessels
or other means of transportation, or for the shippers, or consignors or
consignees of freight carried by vessels or other means of transportation. The
term includes commission merchants." 16 The controlling decision as to the test
to be followed as to who falls within the above definition of a commercial
broker is that of Commissioner of Internal Revenue v. Constantino. 17 In the
language of Justice J. B. L. Reyes, who penned the opinion: "Since the company
retained ownership of the goods, even as it delivered possession unto the
dealer for resale to customers, the price and terms of which were subject to
the company's control, the relationship between the company and the dealer
is one of agency, ... ." 18 An excerpt from Salisbury v. Brooks 19 cited in support
of such a view follows: " 'The difficulty in distinguishing between contracts of
sale and the creation of an agency to sell has led to the establishment of rules
by the application of which this difficulty may be solved. The decisions say the
transfer of title or agreement to transfer it for a price paid or promised is the
essence of sale. If such transfer puts the transferee in the attitude or position
of an owner and makes him liable to the transferor as a debtor for the agreed
price, and not merely as an agent who must account for the proceeds of a
resale, the transaction is a sale; while the essence of an agency to sell is the
delivery to an agent, not as his property, but as the property of the principal,
who remains the owner and has the right to control sales, fix the price, and
terms, demand and receive the proceeds less the agent's commission upon
sales made.' " 20 The opinion relied on the work of Mechem on Sales as well as
Mechem on Agency. Williston and Tiedman both of whom wrote treatises on
Sales, were likewise referred to.
Equally relevant is this portion of the Salisbury opinion: "It is difficult
to understand or appreciate the necessity or presence of these mutual
requirements and obligations on any theory other than that of a contract of
agency. Salisbury was to furnish the mill and put the timber owned by him into
a marketable condition in the form of lumber; Brooks was to furnish the funds
necessary for that purpose, sell the manufactured product, and account
therefor to Salisbury upon the specific terms of the agreement, less the
compensation fixed by the parties in lieu of interest on the money advanced
and for services as agent. These requirements and stipulations are in tent with
any other conception of the contract. If it constitutes an agreement to sell, they
are meaningless. But they cannot be ignored. They were placed there for some
purpose, doubtless as the result of definite antecedent negotiations therefore,
consummated by the final written expression of the agreement." 21 Hence the
Constantino opinion could categorically affirm that the mere disclaimer in a
contract that an entity like petitioner is not "the agent or legal representative
for any purpose whatsoever" does not suffice to yield the conclusion that it is
an independent merchant if the control over the goods for resale of the goods
consigned is pervasive in character. The Court of Tax Appeals decision now
under review pays fealty to such an applicable doctrine.
2. No merit therefore attaches to the first error imputed by petitioner to the
Court of Tax Appeals. Neither did such Court fail to appreciate in its true
significance the act and conduct pursued in the implementation of the contract
by both the United States Rubber International and petitioner, as was
contended in the second assignment of error. Petitioner ought to have been
aware that there was no need for such an inquiry. The terms of the contract, as
noted, speak quite clearly. There is lacking that degree of ambiguity sufficient
to give rise to serious doubt as to what was contemplated by the parties. A
reading thereof discloses that the relationship arising therefrom was not one
of seller and purchaser. If it were thus intended, then it would not have included
covenants which in their totality would negate the concept of a firm acquiring
as vendee goods from another. Instead, the stipulations were so worded as to
lead to no other conclusion than that the control by the United States Rubber
International over the goods in question is, in the language of the Constantino
opinion, "pervasive". The insistence on a relationship opposed to that apparent
from the language employed might even yield the impression that such a mode
of construction was resorted to in order that the applicability of a taxing statute
might be rendered nugatory. Certainly, such a result is to be avoided.
Nor is it to be lost sight of that on a matter left to the discretion of
the Court of Tax Appeals which has developed an expertise in view of its
function being limited solely to the interpretation of revenue laws, this Court is
not prepared to substitute its own judgment unless a grave abuse of discretion
is manifest. It would be to frustrate the objective for which administrative
tribunals are created if the judiciary, absent such a showing, is to ignore their
appraisal on a matter that forms the staple of their specialized competence.
While it is to be admitted that counsel for petitioner did scrutinize with care the
decision under review with a view to exposing what was considered its flaws, it
cannot be said that there was such a failure to apply what the law commands
as to call for its reversal. Instead, what cannot be denied is that the Court of Tax
Appeals reached a result to which the Court in the recent Constantino decision
gave the imprimatur of its approval.
WHEREFORE, the Court of Tax Appeals decision of October 19, 1962
is affirmed. With costs against petitioner.
Concepcion C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Teehankee,
Barredo, Villamor and Makasiar, JJ., concur.
[G.R. No. 153033. June 23, 2005]
DEL MONTE PHILIPPINES, INC., petitioner, vs. NAPOLEON N.ARAGONES
DECISION
CARPIO-MORALES, J.:
The decision in the present Petition for Review on Certiorari hinges
on the nature of the contract denominated Supply Agreement[1]which was
forged between Dynablock Enterprises, represented by its Manager herein
respondent Napoleon N. Aragones (Aragones) and Mega-Engineering Services
in joint venture with WAFF Construction System Corporation (MEGA-WAFF)
whether it was one of sale or for a piece of work.
On September 18, 1988, herein petitioner Del Monte Philippines
Inc. (DMPI) entered into an Agreement[2] with MEGA-WAFF, represented by
Managing Principal Edilberto Garcia (Garcia), whereby the latter undertook the
supply and installation of modular pavement at DMPIs condiments warehouse
at Cagayan de Oro City within 60 calendar days from signing of the agreement.
To source its supply of concrete blocks to be installed on the pavement of the
DMPI warehouse, MEGA-WAFF, as CONTRACTOR represented by Garcia,
entered into a Supply Agreement with Dynablock Enterprises, represented by
herein respondent Aragones, as SUPPLIER, under the following terms:
1. ITEMS TO BE SUPPLIED
The SUPPLIER at its own expense shall provide the CONTRACTOR
with labor and all materials, equipment, tools and supplies necessary and
incident thereto, the required concrete blocks at the contractors specified
casting site, all in accordance with the terms and conditions of this agreement,
as well as the requirements of the project specifications and provisions with
respect to the fabrication of concrete blocks.
2. PRICE
The CONTRACTOR will pay the supplier in consideration for the full
and total performance of the above undertaking, inclusive of all applicable
taxes, the unit price of P7.00 per supplied and accepted piece. This price is
based on the assumption that the cost per bag of premium cement is P54.00
and aggregate at P95.00 per cu. m. Any increase of the above raw materials
shall be to the account of the contractor. All taxes shall be for the account of
the contractor.
3. PLANT/EQUIPMENT
3.1 - The machines for the fabrication/casting of the concrete
blocks, including all necessary equipment and accessories, shall be
provided by the SUPPLIER. The machines and equipment shall be
mobilized and made operational at the specified casting
location/stockpiling yard designated and provided by the
CONTRACTOR.
3.2 - The SUPPLIER shall ensure that all plant facilities/equipment
must, at all times, be accessible for inspection by the
representatives of the CONTRACTOR.
3.3 - The SUPPLIER shall ensure that the plant/casting machines
actual operating capacities shall not be lower than 75,000 pieces
every month. If at any time within the life of this agreement the
plant/casting machines are proven to be operating below the
required minimum capacity as aforesaid, the SUPPLIER shall be
obliged to take the necessary actions to upgrade the plant/casting
machines and/or make the necessary rehabilitation to increase the
capacity to the required level.
4. QUALITY OF MATERIALS
4.1 The SUPPLIER guarantees that all materials supplied to the
CONTRACTOR shall meet the approved specifications (Attached
Annex A) at 5,000 pci.
In this connection, the CONTRACTOR shall assign an inspector at the
casting site to ensure that all items supplied shall conform with the
approved standards.
4.2 The CONTRACTOR may reject any finished product or materials
which do not pass the approved standards.
4.3 There shall be a system of sampling the output of the plant
and/or each casting machine for testing in accordance with the
quality standards specified. Result of such sampling tests shall be
the basis for acceptance or rejection of the finished materials.
4.4 Where the CONTRACTOR has provided materials to the
SUPPLIER to be incorporated into the SUPPLIERs production, as in
the case of cement and aggregates, the cost of such materials which
becomes part of the rejected products due to faulty
batching/mixing/curing shall be for the account of the SUPPLIER.
5. MATERIALS AND OTHER PROVISIONS SUPPLIED BY THE CONTRACTOR
5.1 - All the materials are for the account of the SUPPLIER. The
CONTRACTOR shall, however, provide all the cement and
aggregates requirement for the fabrication of the concrete
blocks, in which the corresponding cost shall be deducted from the
periodical proceeds due to the SUPPLIER.
5.2- The CONTRACTOR shall provide and make available to the
SUPPLIER the following provisions/facilities free of charge:
a) Casting/Fabrication Area
b) Stockpile Area
c) Warehouse for Cement
d) An all-weather working shed for workers
e) Night Watchers
5.3 The CONTRACTOR shall arrange for the installation of electrical
and water facilities for the work in which the cost of electricity and
water actually consumed shall be borne by the SUPPLIER.
5.4 The SUPPLIER shall be responsible for all materials already
turned over by the CONTRACTOR at the casting area. The
responsibility, however, of the SUPPLIER on the finished products
ceases upon loading of the same to the CONTRACTORs truck on way
to the project site.
6. OBLIGATIONS OF SUPPLIER
6.1 To fabricate and provide the required block machines in such
number adequate to cope up with time schedule.
6.2 To provide concrete mixers: one (1) unit of two-bagger, and two
(2) units of one-bagger.
6.3 To provide drying racks, measuring boxes, wheel borrows and
other necessary hand tools.
6.4 To supervise and provide the required manpower for the
operation and production of concrete blocks.
6.5 To undertake the following:
a) mixing and formulation of proper mix.
b) to consolidate, form and compress the blocks.
c) to unload the formed blocks into the drying racks.
d) after initial setting of blocks, to unload and arrange
them to wooden pallets.
e) curing of blocks as per approved standards.
7. OTHER OBLIGATIONS OF CONTRACTOR
7.1 - To provide tarpaulin or canvas or plastic sheets to cover blocks
during the seasoning stage.
7.2 - To provide forklift and wooden pallets.
8. EXCLUSIVITY OF PRODUCTION
8.1 - Effective upon the execution of this agreement, the SUPPLIER
binds itself to devote the entire plant/casting machines and its
accessories for the CONTRACTORs exclusive use and full operation
and production of the required concrete blocks for the intended
project.
 8.2 The SUPPLIER or his agents or representatives shall not, directly
or indirectly, enter into any contract, agreement, concessions or
transactions of whatever nature or kind with the project owner or
of its representative which will affect the rights, interest or
participation of the CONTRACTOR in regard to the execution and
accomplishment of the project.
8.3 In case of violation of this exclusivity clause, utmost fidelity and
good faith being of the essence, the CONTRACTOR shall have the
right to demand reasonable amount of damages or terminate this
agreement upon due notice.
9. CONDITIONS OF PAYMENT
9.1 Upon mobilization of the casting machines, equipments
accessories and making some operational at the casting area by the
SUPPLIER, the CONTRACTOR shall advance to the supplier a
downpayment or mobilization fund of TEN THOUSAND (P10,000.00)
PESOS per machine. Said mobilization fee shall be deducted from
the proceeds of the SUPPLIER at two (2) equal installments
beginning at the first billing.
9.2 - The SUPPLIER shall present its billing every fifteen days based
on the below indicated payment schedule:
a) Billing from 1st/day/month to 15th day payable after
fifteen days from the date the billing is submitted.
b) Billing from the 16th day of the month to the 31st day
of the month, payable after fifteen days from the date
the billing is submitted.
10. EFFECTIVITY OF CONTRACT
This agreement shall be co-terminus with the terms of the contract
for the project and/or upon completion of all requirements therefor;
PROVIDED, However, that if for some reason or another the production of the
concrete blocks is temporarily suspended, this agreement shall remain in force
and effective for a period of fifteen (15) days from the date of the cessation of
production. In case the said grace period expires without the production having
resumed, the CONTRACTOR shall be obliged to pay reasonable compensation
for the period of suspension counted from the expiration of the said grace
period.
11. PERFORMANCE BOND
The SUPPLIER shall post a SURETY/PERFORMANCE BOND in such sums which
may be deemed adequate to secure its faithful compliance of the terms and
conditions of this agreement.
12. PENALTY CLAUSE
In the event the SUPPLIER fails to meet the requirements demanded
in this agreement or when the SUPPLIER is in delay in the performance of its
obligation to the prejudice of the CONTRACTOR, the SUPPLIER shall answer for
the corresponding damages equivalent to one-tenth (1/10) of the rated
monthly production capacity. (Emphasis and underscoring supplied).[3]
Aragones thereupon started assembling the machines for the
fabrication/casting of the concrete blocks which MEGA-WAFF specified to
be hexagonal shaped. MEGA-WAFF, through Garcia, later directed Aragones to
instead fabricate machines for S shaped blocks.
As stated in the Agreement between DMPI and MEGA-WAFF, the
deadline for the installation of the pavement of the warehouse was November
18, 1988, but it was not met. As extended, the installation was finished on or
about February 28, 1989, but MEGA-WAFF was, in accordance with its
agreement with DMPI, penalized for the delay, albeit at a reduced amount.
Aragones, having in the meantime gotten wind of MEGA-WAFF &
DMPIs Agreement, more particularly the imposition of a penalty by DMPI for
the delay in the completion of the installation of the warehouse pavement,
appealed to DMPI, by letter of March 4, 1989,[4]for leniency in the imposition
of the penalty which would affect [him] also although [he] was not a direct party
to the contract, he inviting attention to the intricacy and enormity of the job
involved.
Aragones later failed to collect from MEGA-WAFF the full payment
of the concrete blocks. He thus sent DMPI a letter dated March 10,
1989,[5] received by the latter on March 13, 1989,[6] advising it of MEGA-WAFFs
unpaid obligation and requesting it to earmark and withhold the amount
of P188,652.65 from [MEGA-WAFFs] billing to be paid directly to him [l]est
Garcia collects and fails to pay [him].
DMPI, in the meantime, verbally advised Aragones to secure a court
order directing it to withhold payment of the amount due MEGA-WAFF for, in
the absence of such court order, DMPI was under its agreement with MEGA-
WAFF obliged to release full payment within 30 days from acceptance of the
completed work.
It appears that Aragones reiterated his request to DMPI for direct
payment to him, by letter of March 28, 1989.[7] This was followed by another
letter dated April 6, 1989[8] which was received on April 8, 1989[9] by DMPI, copy
of which it referred to Garcia, by letter of April 27, 1989,[10] for his comment.
By letter of May 3, 1989[11] addressed to DMPI, Garcia, commenting on
Aragones April 6, 1989 letter, stated:
xxx
If there is somebody who have (sic) justifiable ground to complain,
it is MEGA-WAFF against Atty. Aragones for all the miseries and embarrassment
we had suffered due to the factors attributable to Atty. Aragones Dynablock
Enterprises.
For proper evaluation of things and to give both parties a fair
chance, we enclosed (sic) pertinent papers for your perusal.
As contractor and businessman, it is our firm policy not to take advantage of
other people and definitely not to renegade (sic) from
commitments/obligations.
We are willing to pay Atty. Aragones but based on the actual
accomplishment and amount only due to him as per reconciliation furnished to
him. (attached)
We sincerely hope that the facts we had presented will suffice, and
please accept our apology for whatever inconvenience it has caused you and
we pray that this matter of payments be settled soon for the general benefit of
all concerned.
x x x (Underscoring supplied).
It turned out that DMPI had, on or about April 6, 1989, released to
MEGA-WAFF a check dated April 4, 1989 in the amount of P157,863.77
representing DMPIs balance of its obligation to MEGA-WAFF.
Aragones was thus prompted to file on May 25, 1989 a
complaint[12] for sum of money (P188,652.65) with damages against Garcia
and/or MEGA-WAFF and DMPI before the Regional Trial Court (RTC) of Lanao
del Norte which was raffled to Branch 5 thereof.
Aragones impleaded DMPI on the strength of Articles 1729 and 1467 of the Civil
Code, he contending that it was liable to him who put labor upon or furnished
materials for a piece of work.
By his July 14, 1989 Answer,[13] Garcia, without disputing the
amount being collected by Aragones, justified his refusal to satisfy [Aragones]
demand by claiming that Aragones defaulted in his obligation under the Supply
Agreement.
DMPI, by its Answer[14] of June 25, 1989, pleaded that Aragones had no cause
of action against it as it had no privity of contract with him; that it had already
paid MEGA-WAFF the full amount due it; and that it had not committed any
actionable wrong against Aragones.
Aragones later filed an Amended Complaint,[15] with leave of court, to cure
certain formal defects in the original complaint as to the designation of parties
...
DMPI also later filed a Motion for Leave to File an Amended Answer
with Cross-Claim against Garcia and WAFF President Francisco Castro[16] which
the trial court granted. In the Amended Answer with Cross Claim,[17] DMPI
alleged, inter alia, that [i]n the event [Aragones] succeeds in obtaining a
judgment [against] DMPI, that said judgment should be charged to and paid by
the cross-defendants who have collected the full contract price of the
Agreement wherein [Aragones] claims the rights of a subcontractor, plus
consequential damages (underscoring in the original).
The trial court, upon the following issues:
a. Whether or not [Aragones] has still a collectible amount of P188,652.65 from
defendants Garcia and Castro;
b. Whether or not defendant DMPI may also be held accountable for this
unpaid obligation of defendant Garcia/MEGA-WAFF;
c. Whether or not the remaining balance of defendant DMPI account payable
is P188,652.65 insisted by defendant Garcia/MEGA-WAFF or only P157,863.77
insisted by defendant DMPI;
d. Whether or not the parties are entitled to damages pleaded;
e. Whether or not there was delay in the performance of the respective
obligations of either party or both;
f. Assuming that defendant DMPI is liable to plaintiff, whether or not cross
defendant Garcia/MEGA-WAFF shall be liable to DMPI for reimbursement.[18],
found for the plaintiff Aragones in light of the following considerations:
Those who put their labor upon or furnish materials for a piece of
work undertaken by the contractor have an action against the owner up to the
amount owing from the latter to the contractor at the time the claim is made.
However, the following shall not prejudice the laborers, employees and
furnishers of materials:
(1) Payments made by the owner of the contractor before they are due;
(2) Renunciation by the contractor of any amount due him from the owner.
This article is subject to the provisions of special laws (1597a)
(Article 1729, New Civil Code, [emphasis supplied]).
In interpreting the foregoing provision, the Supreme Court made the following
pertinent pronouncement:
Article 1729 is promulgated to protect the laborers and the
materialmen from being taken advantage of by unscrupulous contractors and
from possible connivance between owners and contractors. (Velasco vs. C.A.
95 Phils. (sic) (616-641).
The legal issue that arises is whether or not GSIS is liable to the
petitioners for the cost of the materials and labor furnished by them in
construction of the 63 houses now owned by the GSIS and for the construction
of which no payment has been made on the balance due to petitioners. Our
considered view is and we so hold that even in equity alone, GSIS should pay
the petitioners, without prejudice to its securing indemnity from Laigo Realty
Corp. (Velaso vs. C.A., 95 Phils. (sic) 616-641 [emphasis and underscoring
supplied]).
Moreover, anent this matter another decisional rule, says:
Although there was no privity of contract between plaintiff and
defendant Joven, Inc., there is sufficient evidence showing that he had really
supplied stones and sands to said defendant and also removed dirt and soil
from its construction site. And it is this main point which calls for resolution in
the light of the provisions of Art. 1729 of the New Civil Code, to determine
whether or not defendant corporation is liable for materials supplied and
services rendered by the plaintiff. It is quite clear that the owner of the building,
Joven Inc. is liable for materials and labor furnished to the contractorup to the
amount owing from the latter to the contractor and to enforce such
liability, the law allows the person furnishing labor or materials to bring his right
of action directly against the owner. (Flores vs. Ruelo, CA 52 OG 850, [emphasis
and underscoring supplied]).
Of course, while defendant DMPI is indeed directly liable to pay
plaintiff the cost of the construction material (modular paving blocks) sought
to be collected, this defendant has also a right of recourse against cross
defendant Garcia/MEGA-WAFF for reimbursement of whatever amount it will
be required here to pay plaintiff, otherwise it would result in making defendant
Garcia/MEGA-WAFF enrich itself at the expense of defendant DMPI.
Additionally since the evidence on record shows that plaintiff was compelled to
litigate this matter if only to collect a just and demandable obligation, the
refusal of these defendants to pay their obligation upon demand could not be
justified in law, thus both defendants should be condemned to pay exemplary
damages in the amount of P20,000.00 each and attorneys fees in the amount
of P10,000.00 each, including the cost of this suit. (Underscoring supplied)[19]
The trial court accordingly rendered judgment in favor of Aragones
by decision[20] of September 11, 1992, the dispositive portion of which reads:
WHEREFORE, the foregoing premises considered, the Court finds
that there is ample reason in law and preponderant evidence on record to
sustain the cause of action of plaintiff asserted against both defendants, thus
judgment is now rendered granting the following relief:
a. That the defendants Garcia/MEGA-WAFF and DMPI shall be liable to jointly
and severally pay plaintiff the unpaid cost of the modular paving blocks
construction material which he delivered to defendant DMPI priced
at P188,652.65 and in the event that defendant DMPI will be made to pay the
full amount of this particular obligation, the defendant Garcia MEGA-WAFF
must reimburse said defendant such amount;
b. That this unpaid obligation sought to be collected must bear legal interest of
12% per annum from the time there was an extrajudicial demand made by
plaintiff last March 01, 1989; and
c. Lastly, these defendants are condemned that each pay plaintiff P20,000.00
for exemplary damages and P10,000.00 for attorneys fees, including the cost
of this suit.
SO ORDERED. (Emphasis and underscoring supplied).[21]
On appeal to the Court of Appeals (CA) by only DMPI, upon the
following assigned errors:
I In this connection, while, indeed, Article 1729 refers to the laborers and
THE TRIAL COURT ERRED IN HOLDING THAT PLAINTIFF DID NOT
INCUR DELAY AND VIOLATE ITS SUPPLY AGREEMENT WITH DEFENDANT MEGA-
WAFF;
II
THE TRIAL COURT ERRED IN HOLDING THAT DEFENDANT MEGA-
WAFFS LIABILITY TO PLAINTIFF IS P188,652.65 BECAUSE AS STIPULATED IN THE
SUPPLY AGREEMENT, THE CEMENT AND AGGREGATES USED IN THE
MANUFACTURE OF THE BLOCKS WERE ADVANCED BY MEGA-WAFF, THE COST
OF WHICH WILL BE DEDUCED FROM PLAINTIFFS BILLINGS;
III.
THE TRIAL COURT ERRED IN HOLDING THAT DEFENDANT DMPI IS
ALSO LIABLE TO PLAINTIFF FOR ANY LIABILITY OF MEGA-WAFF UNDER THE
SUPPLY AGREEMENT;
IV.
ASSUMING EX GRATIA ARGUMENTI THAT DMPI IS LIABLE TO
PLAINTIFF'S AID LIABILITY CANNOT EXCEED THE SUM OF P157,863.77 BALANCE
OF THE CONTRACT PRICE BETWEEN DMPI AND MEGA-WAFF, LESS AGREED
PENALTY FOR LATE DELIVERY AS LIQUIDATED DAMAGES;
V.
THE TRIAL COURT ERRED IN HOLDING DEFENDANT DMPI LIABLE TO
PLAINTIFF FOR ATTORNEYS FEES AND COSTS OF COLLECTION CONSIDERING
THAT IT HAD THE RIGHT TO RESIST PAYMENT BECAUSE IT HAS NO PRIVITY OF
CONTRACT BETWEEN PLAINTIFF AND DEFENDANT MEGA-WAFF, (Underscoring
supplied),[22]
the CA, by decision of September 19, 2001[23] subject of the petition at
bar, affirmed the trial courts decision in this wise:
At this juncture it is well to note that the Supply Agreement was in
the nature of a contract for a piece of work. The distinction between a contract
of sale and one for work, labor and materials is tested by inquiry whether the
thing transferred is one not in existence and which never would have existed
but for the order of the party desiring to acquire it, or a thing which would have
existed but has been the subject of sale to some other persons even if the order
had not been given. If the article ordered by the purchaser is exactly such as
the seller makes and keeps on hand for sale to anyone, and no change or
modification of it is made at purchasers request, it is a contract of sale even
though it may be entirely made after, and in consequence of the purchasers
order for it. [Commissioner of Internal Revenue vs. Engineering Equipment and
Supply Company, G.R. No. L-27044, June 30, 1975]
In the case at bench, the modular paving blocks are not exactly what
the plaintiff-appellee makes and keeps on hand for sale to anyone, but with
a modification that the same be S in shape. Hence, the agreement falls within
the ambit of Article 1467 making Article 1729 likewise applicable in the instant
case.
As regard the issue of privity of contracts, We need to add only that
Article 1311 of the New Civil Code which DMPI invokes is not applicable where
the situation contemplated in Article 1729 obtains. The intention of the latter
provision is to protect the laborers and the materialmen from being taken
advantage of by unscrupulous contractors and from possible connivance
between owners and contractors. Thus, a constructive vinculum or contractual
privity is created by this provision, by way of exception to the principle
underlying Article 1311 between the owner, on the one hand, and those who
furnish labor and/or materials, on the other. [Velasco vs. Court of Appeals, G.R.
No. L-47544, January 28, 1980]
As a matter of fact, insofar as the laborers are concerned, by a
special law, Act no. 3959, otherwise known as An Act making it obligatory for
any person, company, firm or corporation owning any work of any kind executed
by contract to require the contractor to furnish a bond guaranteeing the
payment of the laborers. they are given added protection by requiring
contractors to file bonds guaranteeing payment to them.
It is true that defendant-appellant had already fully paid its
obligation to defendant Garcia however, the formers payment to the latter
does not extinguish its legal obligation to plaintiff-appellee because such
payment was irregular. The former should have taken care not to pay to such
contractor the full amount which he is entitled to receive by virtue of the
contract, until he shall have shown that he first paid the wages of the laborer
employed in said work, by means of an affidavit made and subscribed by said
contractor before a notary public or other officer authorized by law to
administer oaths. There is no showing that defendant appellant DMPI, as owner
of the building, complied with this requirement paid down in Act No. 3959.
Hence, under Section 2 of said law, said defendant-appellant is responsible,
jointly and severally with the general contractor, for the payment to plaintiff-
appellee as sub-contractor.
materialmen themselves, under the peculiar circumstances of this case, it is but
fair and just that plaintiff-appellee be deemed as suing for the reimbursement
of what they have already paid the laborers and materialmen, as otherwise he
would be unduly prejudiced while either defendant-appellant DMPI or
defendant Garcia would enrich themselves at plaintiff-appellees expense.
Be that as it may, We so hold that plaintiff-appellee has a lawful claim against
defendant-appellant DMPI, owner of the constructed warehouse since
it disregarded the notice of claim of plaintiff-appellee, at a time when the
amounts owing from defendant-appellant DMPI to defendant GARCIA were
more than sufficient to pay for plaintiff-appellees claim. The least that
defendant-appellant should have done was to withhold payment of the balance
still owing to defendant Garcia as until the claim of plaintiff-appellee was
clarified. (Italics in the original; emphasis and underscoring supplied).[24]
Its Motion for Reconsideration having been denied by the CA, DMPI
(hereinafter referred to as petitioner) lodged the present Petition for Review
on Certiorari, faulting the CA:
I.
. . . IN FINDING THAT DMPI WAS LIABLE TO RESPONDENT
ARAGONES FOR THE UNPAID PRICE OF THE CONCRETE PAVING BLOCKS OWED
BY MEGA-WAFF TO THE LATTER.
A. IN FINDING THAT THE CONTRACT FOR THE SUPPLY OF THE CONCRETE
PAVING BLOCKS WAS NOT A SALE BUT ONE FOR A PIECE OF WORK.
B. IN HOLDING DMPI LIABLE BASED UPON THE PROVISIONS OF ARTICLE 1729
OF THE CIVIL CODE AND ACT 3959, WHICH ARE INAPPLICABLE.
II.
. . . IN FAILING TO AWARD MORAL DAMAGES, ATTORNEYS FEES,
AND LITIGATION EXPENSES TO DMPI ON ITS COUNTERCLAIM.[25]
As reflected above, only petitioner appealed the trial courts decision. MEGA-
WAFF did not appeal. The decision as to it then is final and executory.
Petitioner, in the main, contends that while the CA correctly stated the test in
determining whether a transfer is a sale or one for a piece of work, it failed to
properly apply the same.
Applying the nature of the object test, petitioner insists that the
concrete block to be produced by Aragones under the Supply
Agreement represented by Garcia clearly shows that the contract was one of
sale, advancing the following reasons:
1.4.1 First, the concrete paving blocks were . . . capable of being mass-produced
1.4.2 Second, save for the shape, there was here no consideration of any special
needs or requirements of DMPI taken into account in the design or
manufacture of the concrete paving blocks.[26]
Petitioner cites the following ruling in Commissioner of Internal Revenue v.
Arnoldus Carpentry Shop, Inc.:[27]
x x x As can be clearly seen from the wordings of Art. 1467, what
determines whether the contract is one of work or of sale is whether the thing
has been manufactured specially for the customer and upon his special order.
Thus, if the thing is specially done on the order of another, this is a contract for
a piece of work. If, on the other hand, the thing is manufactured or procured for
the general market in the ordinary course of ones business, it is a contract of
sale. (Italics and emphasis in the original; underscoring supplied),[28]
and argues that given habituality of business and the ability to mass-produce
the article ordered, that customers requires (sic) certain specifications is of no
moment, the transaction remains one of sale.
Petitioner further cites, among other authorities, the following ruling
in Celestino Co. v. Collector of Internal Revenue:[29]
x x x The important thing to remember is that Celestino & Co.
habitually makes sash, windows and doors, as it has represented in its
stationery and advertisements to the public. That it manufactures the same is
practically admitted by appellant itself. The fact that windows and doors are
made by it only when customers place their orders, does not alter the nature
of the establishment of such materials-moulding, frames, panels as it ordinarily
manufactured or was in a position habitually to manufacture.
xxx
That the doors and windows must meet desired specifications is
neither here nor there. If these specifications do not happen to be of the kind
habitually manufactured by appellant special forms of sash, mouldings, panels
it would not accept the order and no sale is made. If they do, the transaction
would be no different from purchaser of manufactured goods held in stock for
sale; they are bought because they meet specifications desired by the
purchaser.
Nobody will say that when a sawmill cuts lumber in accordance with the
peculiar specifications of a customer sizes not previously held in stock for sale
to the public it thereby becomes an employee or servant of the customer, not
the seller of lumber. The same consideration applies to this sash manufacturer.
The Oriental Sash Factory does nothing more than sell the goods that it mass-
produces or habitually makes sash, panels, mouldings, framescutting them to
such sizes and combining them in such forms as its customers may desire.
xxx
x x x Such new form does not divest the Oriental Sash Factory of its
character as manufacturer. Neither does it take the transaction out of the
category of sales under Article 1467 above quoted, because although the
Factory does not, in the ordinary course of its business, manufacture and keep
on stock doors of the kind sold to Teodoro, it could and/or probably had in
stock the sash, mouldings and panels it used therefor (some of them at least).
(Emphasis in the original; underscoring supplied).
Petitioner concludes that as the Supply Agreement between
Aragones and MEGA-WAFF was one of sale to which it (petitioner) was not
privy, it cannot be held liable for any obligation arising therefrom.
Dodging liability for the damages (exemplary and . . . attorneys fees
including the cost of this suit) awarded to Aragones, petitioner claims that it
was in fact the one which was injured by Aragones filing in bad faith of a
complaint bereft of cause of action and at best, [one] barred by full payment of
the amount due to MEGA-WAFF, on account of which it is entitled to moral
damages in the amount of P50,000.00 pursuant to Article 2217 of the Civil
Code, and to attorneys fees and expenses of litigation in the amount of at
least P30,000.00 plus P2,500.00 per hearing pursuant to Article 2208 of the
Civil Code.
The petition fails.
The authorities petitioner cited in fact show that the nature of
the Supply Agreement between Aragones and MEGA-WAFF was one for a piece
of work.
Contrary to petitioners claim that save for the shape, there was no
consideration of any special needs or requirements of DMPI taken into account
in the design or manufacture of the concrete paving blocks, the Supply
Agreement is replete with specifications, terms or conditions showing that it
was one for a piece of work.
As reflected in the highlighted and underscored above-quoted
provisions of the Supply Agreement, as well as other evidence on record, the
machines Aragones was obliged to fabricate were those for casting the
concrete blocks specified by Garcia. Aragones did not have those kind of
machines in his usual business, hence, the special order.
While initially Garcia specified that the machines to be fabricated
should be for hexagon shaped blocks, he later asked Aragones to instead
fabricate machines for casting S shaped blocks.
In accordance with the Supply Agreement, Garcia furnished the
cement and aggregates for the fabrication of the blocks and Aragones
fabricated three (3) machines for S shaped blocks which were delivered at the
casting site on different dates. And the entire plant/casting machines and . . . .
accessories were, as dictated under the Supply Agreement, devoted by
Aragones for [MEGA-WAFF]s exclusive use.
There can be no gainsaying that the specifications/conditions in
the Supply Agreement and the admitted subsequent directive of Garcia for
Aragones to fabricate machines for casting S shaped, instead of hexagon
shaped blocks, show that the concrete blocks were manufactured specifically
for, and upon the special order of Garcia.
That Garcia supplied the cement and aggregates and that the entire
made-to-order casting machines and accessories used in the manufacture of
those unusual shaped blocks were agreed upon to be devoted only for the
exclusive use of MEGA-WAFF should belie petitioners contention that the
concrete blocks were mass-produced and catered to the general market in the
ordinary course of Aragones business.
Under Art. 1467 then of the Civil Code which provides:
ART. 1467. A contract for the delivery at a certain price of an article which the
vendor in the ordinary course of his business manufactures or procures for the
general market, whether the same is on hand at the time or not, is a contract
of sale, but if the goods are to be manufactured specially for the customer
and upon his special order, and not for the general market, it is a contract for a
piece of work. (Emphasis and underscoring supplied),
the Supply Agreement was decidedly a contract for a piece of work.
Following Art. 1729 of the Civil Code which provides:
ART. 1729. Those who put their labor upon or furnish materials for a piece of
work undertaken by the contractor have an action against the owner up to the
amount owing from the latter to the contractor at the time the claim is made.
xxx
x x x (Underscoring supplied),
Aragones having specially fabricated three casting machines and
furnished some materials for the production of the concrete blocks specially
ordered and specified by MEGA-WAFF which were to be and indeed they were
for the exclusive use of MEGA-WAFF, he has a cause of action upon petitioner
up to the amount it owed MEGA-WAFF at the time Aragones made his claim to
petitioner.
As Velasco v. CA[30] explains, the intention of Art. 1729 is to protect
the laborers and materialmen from being taken advantage of by unscrupulous
contractors and from possible connivance between owners and contractors.
Thus, a constructive vinculum or contractual privity is created by this provision,
by way of exception to the principle underlying Article 1311 between the
owner, on the one hand, and those who furnish labor and/or materials, on the
other.
In fine, a constructive vinculum or contractual privity was created
between petitioner and Aragones.
Respecting petitioners disclaimer of liability for damages and its
claim for moral damages, attorneys fees and expenses of litigation, the trial
courts disposition thereof, to wit:
. . . since the evidence on record shows that [Aragones]
was compelled to litigate this matter if only to collect a just and demandable
obligation, the refusal of [DMPI and MEGA-WAFF] to pay their obligation upon
demand could not be justified by law, thus both should be condemned to pay
exemplary damages in the amount of P20,000.00 each and attorneys fees in
the amount of P10,000.00 each including costs of this suit (underscoring
supplied),
merits this Courts approval.
Why should not petitioner be liable for damages. Aragones request,
based on a provision of law, to petitioner for it to pay directly to him his account
receivable from MEGA-WAFF/Garcia out of petitioners account payable to
MEGA-WAFF was made before petitioners obligation to it was due. Yet
petitioner settled such obligation to MEGA-WAFF on or about April 6, 1989
when it released to it its check-payment. For petitioner to harp on its
undertaking under its Agreement with MEGA-WAFF to pay its full obligation
thereunder within 30 days from complete installation of the pavement by
MEGA-WAFF unless a court injunction could be produced by Aragones is too
shallow, under the facts and circumstances surrounding the case, to merit
consideration.
Petitioners referral for comment of Garcia, by letter of April 27,
1989, on Aragones April 6, 1989 reiterative letter for the withholding of the
release of so much amount to MEGA-WAFF even after it (petitioner) had
already released on or about April 6, 1989 its check-full payment to MEGA-
WAFF reflects a futile attempt to cover-up the apparent connivance between it
and contractor MEGA-WAFF to the prejudice of Aragones, leaving him no
option but to litigate.
As for the assailed citation by the appellate court of Act No. 3959
(which requires a person or firm owning any work of any kind executed by
contract to put up a bond guaranteeing the payment of the laborers)
as additional justification to hold petitioner liable to Aragones, indeed, said Act
had been repealed in 1974 by P.D. No. 442 (The Labor Code of the Philippines).
WHEREFORE, in light of the foregoing discussions, the petition is hereby
DENIED.
Costs against petitioner.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.
G.R. No. L-39720 April 4, 1934
In re Intestate of the deceased Mauricia de Guzman. PEDRO RODRIGUEZ, ET
AL., vs. TRINIDAD MACTAL
. we find nothing in the record that would justify this court in reversing that
GODDARD, J.:
This is an appeal from an order of the Court of First Instance of
Nueva Ecija, issued in the intestate proceeding of Mauricia de Guzman,
deceased, denying the motion of the appellants in which they sought to annul
a sale, executed January 23, 1926, by the administratrix Trinidad Mactal, of a
parcel of land to Silverio Choco and a resale of the same land on March 10,
1928, to the administratrix Trinidad Mactal.
The appellants Pedro, Catalina and Benigno Rodriguez, and the
appellee Trinidad Mactal, are all heirs of Mauricia de Guzman whose estate is
under administration in civil case No. 3152 of the Court of First Instance of
Nueva Ecija. At the time the motion in question was filed in that case that
appellants were 24, 19 and 15 years of age. Mauricia de Guzman died on March
22, 1922.
On March 17, 1923, the appellee Trinidad Mactal was appointed and duly
qualified as administratrix of the intestate estate of Mauricia de Guzman. The
committee of claims, on April 16, 1924, submitted a report in which the
following claims against the estate were allowed: Irene de Gonzales and Isidro
Gonzales for the sum of P3,050; Esperanza Fernandez and Fruto Aquino for
P200; and the Philippine National Bank for P200.88, a total of P3,450.88 aside
from the fees of the members of the committee of claims which amounted to
P104. The report of this committee was approved by the court on April 29, 1942
and in this order of approval the court ordered the administratrix "que se
provea de fondos para pagar las deudas admitidas por la Comision de Avaluo y
Reclamaciones y sancionadas por el Juzgado." By reason of this order the
administratrix in a motion dated May 13, 1924, prayed that she be allowed to
sell the only parcel of land belonging to the estate with an area of 19 hectares,
79 ares and 74 centares for the purpose of paying debts. This land was a part
of a parcel of land of 23 hectares, 79 ares and 74 centares, 4 hectares of which
belonged to Teofilo Rodriguez. A copy of this motion was served upon Juliana
del Rosario, the mother and guardian of the appellants, all of whom were
minors and under her care at that time. That Juliana del Rosario was the
guardian of her children is evidenced by the fact that she and Trinidad Mactal
executed on July 6, 1922, a contract of lease of this same land to Timoteo de
Guzman, at an annual rental of P150, in which it appears that Juliana del Rosario
executed the same "en concepto de tutora de sus hijos"
The court authorized the administratrix to sell the land for the sum
of P9,000. Later it was found that no one would buy at that price and the
authorized selling price was reduced to P7,000 and then, as of the
administratix, fixed the selling price at not less than P3,800. Later the land was
sold to Silverio Choco for the sum of P4,000 on January 23, 1926. Juliana del
Rosario received a copy of all motions. On February 16, 1926, the administratrix
paid the approved claim of Irene de Gonzales and Isidro Gonzales of P3,050,
and the claim of Esperanza Fernandez and Fruto Aquino of P200. The claim of
the Philippine National Bank with interest thereon was also paid as were the
fees of the members of the committee of claims amounting to P104, the
surveyor's fee of P120 for the segregation of the four hectares belonging to
Teofilo Rodriguez and the overdue tax on the land amounting to more than
P300.
These payments, all of which were made after the sale in favor of Silverio
Choco, conclusively prove that sale was not fictitious as alleged by the
appellants.
On March 10, 1928, more than two years later, Silverio Choco sold
the same land to the spouses Pio Villar and Trinidad Mactal for the sum of
P4,500, who in turn mortgaged it to the Philippine National Bank for the same
amount. The appellants also allege that this sale was fictitious, that there was
collusion between Silverio Choco and Trinidad Mactal and that the former
never paid the latter the sum of P4,000. As we have seen, immediately after
the sale to Choco, Trinidad Mactal paid out considerable sums of money, which
undoubtedly came out of the P4,000 Choco paid her for the land.
The appellants rely on article 1459 of the Civil Code which reads in
part as follows:
The following persons cannot take by purchase, even at a public or
judicial auction, either in person or through the mediation of another:
xxx xxx xxx
2. An agent, any property of which the management or sale may have been
intrusted to him;
3. Executors, the property intrusted to their care;
xxx xxx xxx
They insist the administratrix bought the land indirectly through the
mediation of Silverio Choco and that both sales should be annulled under the
provisions of the article cited above. The proofs in this case do not substantiate
this claim of the appellants. The lower court refused to annul these sales and
finding. In order to bring the sale in this case within the part of article 1459,
quoted above, it is essential that the proof submitted establish some
agreement between Silverio Choco and Trinidad Mactal to the effect that
Choco should buy the property for the benefit of Mactal. If there was no such
agreement, either express or implied, then the sale can not be set aside. The
evidence before this court does not establish such agreement.
The appellants also allege that the order of the court authorizing the
administrator to sell the land in question is null and void due to the fact the
motion of Trinidad Mactal, praying that she be authorized to sell, was not
accompanied by the written consent of the heirs or their duly authorized
guardian. They rely upon section 714 of the Code of Civil Procedure which,
before it was amended by Act No. 3882, provided that ". . . where a testator
has not otherwise made sufficient provision for the payment of such debts and
charges, the court, on application of the executor or administrator with the
consent and approbation, in writing, of the heirs, devisees, and legatees,
residing in the Philippine Islands, may grant a license to the executor or
administrator to sell, mortgage or otherwise encumber for that purpose real,
in lieu of personal estate, if it clearly appears that such sale, mortgaging or
encumbrance of real state would be beneficial to the persons interested and
will not defeat any devise of land; in which case the assent of the devisee shall
be required."
As amended by Act No. 3882, approved November 14, 1931, section
714 reads:
 Realty may be sold or encumbered. — When there is no personal
estate of the deceased or when, though there be such, its sale
would redound to the detriment of the interests of the participants
in the estate and the deceased has left no testamentary disposition
for the payment of his debts and charges of administration, the
court, on application of the executor or administrator, and on
written notice to the heirs, devisees, and other persons interested,
may grant him a license to sell, mortgage, or otherwise encumber
for that purpose real estate, if it clearly appears that such sale,
mortgaging or encumbrance would be beneficial to the persons
interested and will not defeat any devise of land; in which case the
assent of the devisee shall be required.
The last paragraph of this Act provides that it "shall take effect on
its approval and shall be applicable to all testamentary or intestate proceedings
pending at the time of its approval."
The record in this case shows that the intestate proceeding of
Mauricia de Guzman, deceased, is still pending in the Court of First Instance of
Nueva Ecija.
The appealed order of the lower court is affirmed with costs against
the appellants.
Malcolm, Villa-Real, Hull and Imperial, JJ., concur.
G.R. No. L-35702 May 29, 1973
DOMINGO D. RUBIAS, vs. ISAIAS BATILLER
TEEHANKEE, J.:
In this appeal certified by the Court of Appeals to this Court as
involving purely legal questions, we affirm the dismissal order rendered by the
Iloilo court of first instance after pre-trial and submittal of the pertinent
documentary exhibits.
Such dismissal was proper, plaintiff having no cause of action, since
it was duly established in the record that the application for registration of the
land in question filed by Francisco Militante, plaintiff's vendor and predecessor
interest, had been dismissed by decision of 1952 of the land registration court
as affirmed by final judgment in 1958 of the Court of Appeals and hence, there
was no title or right to the land that could be transmitted by the purported sale
to plaintiff.
As late as 1964, the Iloilo court of first instance had in another case
of ejectment likewise upheld by final judgment defendant's "better right to
possess the land in question . having been in the actual possession thereof
under a claim of title many years before Francisco Militante sold the land to the
plaintiff."
Furthermore, even assuming that Militante had anything to sell, the
deed of sale executed in 1956 by him in favor of plaintiff at a time when plaintiff
was concededly his counsel of record in the land registration case involving the
very land in dispute (ultimately decided adversely against Militante by the Court
of Appeals' 1958 judgment affirming the lower court's dismissal of Militante's
application for registration) was properly declared inexistent and void by the
lower court, as decreed by Article 1409 in relation to Article 1491 of the Civil
Code.
The appellate court, in its resolution of certification of 25 July 1972,
gave the following backgrounder of the appeal at bar:
On August 31, 1964, plaintiff Domingo D. Rubias, a lawyer, filed a
suit to recover the ownership and possession of certain portions of lot under
Psu-99791 located in Barrio General Luna, Barotac Viejo, Iloilo which he bought
from his father-in-law, Francisco Militante in 1956 against its present occupant
defendant, Isaias Batiller, who illegally entered said portions of the lot on two
occasions — in 1945 and in 1959. Plaintiff prayed also for damages and
attorneys fees. (pp. 1-7, Record on Appeal). In his answer with counter-claim
defendant claims the complaint of the plaintiff does not state a cause of action,
the truth of the matter being that he and his predecessors-in-interest have
always been in actual, open and continuous possession since time immemorial
under claim of ownership of the portions of the lot in question and for the
alleged malicious institution of the complaint he claims he has suffered moral
damages in the amount of P 2,000.00, as well as the sum of P500.00 for
attorney's fees. ...
On December 9, 1964, the trial court issued a pre-trial order, after
a pre-trial conference between the parties and their counsel which order reads
as follows..
'When this case was called for a pre-trial conference today, the
plaintiff appeared assisted by himself and Atty. Gregorio M. Rubias. The
defendant also appeared, assisted by his counsel Atty. Vicente R. Acsay.
A. During the pre-trial conference, the parties have agreed that the following
facts are attendant in this case and that they will no longer introduced any
evidence, testimonial or documentary to prove them:
1. That Francisco Militante claimed ownership of a parcel of land located in the
Barrio of General Luna, municipality of Barotac Viejo province of Iloilo, which
he caused to be surveyed on July 18-31, 1934, whereby he was issued a plan
Psu-99791 (Exhibit "B"). (The land claimed contained an area of 171:3561
hectares.)
2. Before the war with Japan, Francisco Militante filed with the Court of First
Instance of Iloilo an application for the registration of the title of the land
technically described in psu-99791 (Exh. "B") opposed by the Director of Lands,
the Director of Forestry and other oppositors. However, during the war with
Japan, the record of the case was lost before it was heard, so after the war
Francisco Militante petitioned this court to reconstitute the record of the case.
The record was reconstituted on the Court of the First Instance of Iloilo and
docketed as Land Case No. R-695, GLRO Rec. No. 54852. The Court of First
Instance heard the land registration case on November 14, 1952, and after the
trial this court dismissed the application for registration. The appellant,
Francisco Militante, appealed from the decision of this Court to the Court of
Appeals where the case was docketed as CA-GR No. 13497-R..
3. Pending the disposal of the appeal in CA-GR No. 13497-R and more
particularly on June 18, 1956, Francisco Militante sold to the plaintiff, Domingo
Rubias the land technically described in psu-99791 (Exh. "A"). The sale was duly
recorded in the Office of the Register of Deeds for the province of Iloilo as Entry
No. 13609 on July 11, 1960 (Exh. "A-1").
(NOTE: As per deed of sale, Exh. A, what Militante purportedly sold
to plaintiff-appellant, his son-in-law,for the sum of P2,000.00 was "a parcel
of untitled land having an area Of 144.9072 hectares ... surveyed under Psu
99791 ... (and) subject to the exclusions made by me, under (case) CA-i3497,
Land Registration Case No. R-695, G.L.R.O. No. 54852, Court of First Instance of
the province of Iloilo. These exclusions referred to portions of the original area
of over 171 hectares originally claimed by Militante as applicant, but which he
expressly recognized during the trial to pertain to some oppositors, such as the
Bureau of Public Works and Bureau of Forestry and several other individual
occupants and accordingly withdrew his application over the same. This is
expressly made of record in Exh. A, which is the Court of Appeals' decision of 22
September 1958 confirming the land registration court's dismissal of
Militante's application for registration.)
4. On September 22,1958 the Court of appeals in CA-G.R. No. 13497-R
promulgated its judgment confirming the decision of this Court in Land Case
No. R-695, GLRO Rec. No. 54852 which dismissed the application for
Registration filed by Francisco Militante (Exh. "I").
5. Domingo Rubias declared the land described in Exh. 'B' for taxation purposes
under Tax Dec. No. 8585 (Exh. "C") for 1957; Tax Dec. Nos. 9533 (Exh. "C-1")
and 10019 (Exh. "C-3")for the year 1961; Tax Dec. No. 9868 (Exh. "C-2") for the
year 1964, paying the land taxes under Tax Dec. No. 8585 and 9533 (Exh. "D",
"D-1", "G-6").
6. Francisco Militante immediate predecessor-in-interest of the plaintiff, has
also declared the land for taxation purposes under Tax Dec. No. 5172 in 1940
(Exh. "E") for 1945; under Tax Dec. No. T-86 (Exh. "E-1") for 1948; under Tax
Dec. No. 7122 (Exh. "2"), and paid the land taxes for 1940 (Exhs. "G" and "G-
7"), for 1945 46 (Exh. "G-1") for 1947 (Exh. "G-2"), for 1947 & 1948 (Exh. "G-
3"), for 1948 (Exh. "G-4"), and for 1948 and 1949 (Exh. "G-5").
7. Tax Declaration No. 2434 in the name of Liberato Demontaño for the land
described therein (Exh. "F") was cancelled by Tax. Dec. No. 5172 of Francisco
Militante (Exh. "E"). Liberato Demontaño paid the land tax under Tax Dec. No.
2434 on Dec. 20, 1939 for the years 1938 (50%) and 1959 (Exh. "H").
8. The defendant had declared for taxation purposes Lot No. 2 of the Psu-
155241 under Tax Dec. Not. 8583 for 1957 and a portion of Lot No. 2, Psu-
155241, for 1945 under Tax Dec. No. 8584 (Exh. "2-A" Tax No. 8583 (Exh. "2")
was revised by Tax Dec. No. 9498 in the name of the defendant (Exh. "2-B") and
Tax Dec. No. 8584 (Exh. "2-A") was cancelled by Tax Dec. No. 9584 also in the
name of the defendant (Exh. "2-C"). The defendant paid the land taxes for Lot
2, Psu-155241, on Nov. 9, 1960 for the years 1945 and 1946, for the year 1950,
and for the year 1960 as shown by the certificate of the treasurer (Exh. "3").
The defendant may present to the Court other land taxes receipts for the
payment of taxes for this lot.
9. The land claimed by the defendant as his own was surveyed on June 6 and
7,1956, and a plan approved by Director of Land on November 15, 1956 was
issued, identified as Psu 155241 (Exh. "5").
10. On April 22, 1960, the plaintiff filed forcible Entry and Detainer case against
Isaias Batiller in the Justice of the Peace Court of Barotac Viejo Province of Iloilo
(Exh. "4") to which the defendant Isaias Batiller riled his answer on August 29,
1960 (Exh. "4-A"). The Municipal Court of Barotac Viejo after trial, decided the
case on May 10, 1961 in favor of the defendant and against the plaintiff (Exh.
"4-B"). The plaintiff appealed from the decision of the Municipal Court of
Barotac Viejo which was docketed in this Court as Civil Case No. 5750 on June
3, 1961, to which the defendant, Isaias Batiller, on June 13, 1961 filed his
answer (Exh. "4-C"). And this Court after the trial. decided the case on November
26, 1964, in favor of the defendant, Isaias Batiller and against the plaintiff (Exh.
"4-D").
(NOTE: As per Exh. 4-B, which is the Iloilo court of first instance
decision of 26 November 1964 dismissing plaintiff's therein complaint for
ejectment against defendant, the iloilo court expressly found "that plaintiff's
complaint is unjustified, intended to harass the defendant" and "that the
defendant, Isaias Batiller, has a better right to possess the land in question
described in Psu 155241 (Exh. "3"), Isaias Batiller having been in the actual
physical possession thereof under a claim of title many years before Francisco
Militante sold the land to the plaintiff-hereby dismissing plaintiff's complaint
and ordering the plaintiff to pay the defendant attorney's fees ....")
B. During the trial of this case on the merit, the plaintiff will prove by competent
evidence the following:
1. That the land he purchased from Francisco Militante under Exh. "A" was
formerly owned and possessed by Liberato Demontaño but that on September
6, 1919 the land was sold at public auction by virtue of a judgment in a Civil
Case entitled "Edw J. Pflieder plaintiff vs. Liberato Demontaño Francisco
Balladeros and Gregorio Yulo, defendants", of which Yap Pongco was the
purchaser (Exh. "1-3"). The sale was registered in the Office of the Register of
Deeds of Iloilo on August 4, 1920, under Primary Entry No. 69 (Exh. "1"), and a
definite Deed of Sale was executed by Constantino A. Canto, provincial Sheriff
of Iloilo, on Jan. 19, 1934 in favor of Yap Pongco (Exh. "I"), the sale having been
registered in the Office of the Register of Deeds of Iloilo on February 10, 1934
(Exh. "1-1").
2. On September 22, 1934, Yap Pongco sold this land to Francisco Militante as
evidenced by a notarial deed (Exh. "J") which was registered in the Registry of
Deeds on May 13, 1940 (Exh. "J-1").
3. That plaintiff suffered damages alleged in his complaint.
C. Defendants, on the other hand will prove by competent evidence during the
trial of this case the following facts:
1. That lot No. 2 of the Psu-1552 it (Exh. '5') was originally owned and possessed
by Felipe Batiller, grandfather of the defendant Basilio Batiller, on the death of
the former in 1920, as his sole heir. Isaias Batiller succeeded his father , Basilio
Batiller, in the ownership and possession of the land in the year 1930, and since
then up to the present, the land remains in the possession of the defendant,
his possession being actual, open, public, peaceful and continuous in the
concept of an owner, exclusive of any other rights and adverse to all other
claimants.
2. That the alleged predecessors in interest of the plaintiff have never been in
the actual possession of the land and that they never had any title thereto.
3. That Lot No. 2, Psu 155241, the subject of Free Patent application of the
defendant has been approved.
4. The damages suffered by the defendant, as alleged in his counterclaim."'1
The appellate court further related the developments of the case,
as follows:
On August 17, 1965, defendant's counsel manifested in open court
that before any trial on the merit of the case could proceed he would file
a motion to dismiss plaintiff's complaint which he did, alleging thatplaintiff does
not have cause of action against him because the property in dispute which he
(plaintiff) allegedly bought from his father-in-law, Francisco Militante was the
subject matter of LRC No. 695 filed in the CFI of Iloilo, which case was brought
on appeal to this Court and docketed as CA-G.R. No. 13497-R in which aforesaid
case plaintiff was the counsel on record of his father-in-law, Francisco Militante.
Invoking Arts. 1409 and 1491 of the Civil Code which reads:
'Art. 1409. The following contracts are inexistent and void from the beginning:
xxx xxx xxx
(7) Those expressly prohibited by law.
'ART. 1491. The following persons cannot acquire any purchase, even at a public
auction, either in person of through the mediation of another: .
xxx xxx xxx
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts,
and other officers and employees connected with the administration of
justice, the property and rights of in litigation or levied upon an execution
before the court within whose jurisdiction or territory they exercise their
respective functions; this prohibition includes the act of acquiring an
assignment and shall apply to lawyers, with respect to the property and rights
which may be the object of any litigation in which they may take part by virtue
of their profession.'
defendant claims that plaintiff could not have acquired any interest
in the property in dispute as the contract he (plaintiff) had with Francisco
Militante was inexistent and void. (See pp. 22-31, Record on Appeal). Plaintiff
strongly opposed defendant's motion to dismiss claiming that defendant can
not invoke Articles 1409 and 1491 of the Civil Code as Article 1422 of the same
Code provides that 'The defense of illegality of contracts is not available to third
persons whose interests are not directly affected' (See pp. 32-35 Record on
Appeal).
On October 18, 1965, the lower court issued an order disclaiming
plaintiffs complaint (pp. 42-49, Record on Appeal.) In the aforesaid order of
dismissal the lower court practically agreed with defendant's contention that
the contract (Exh. A) between plaintiff and Francism Militante was null and void.
In due season plaintiff filed a motion for reconsideration (pp. 50-56 Record on
Appeal) which was denied by the lower court on January 14, 1966 (p. 57, Record
on Appeal).
Hence, this appeal by plaintiff from the orders of October 18, 1965
and January 14, 1966.
Plaintiff-appellant imputes to the lower court the following errors:
'1. The lower court erred in holding that the contract of sale between the
plaintiff-appellant and his father-in-law, Francisco Militante, Sr., now deceased,
of the property covered by Plan Psu-99791, (Exh. "A") was void, not voidable
because it was made when plaintiff-appellant was the counsel of the latter in
the Land Registration case.
'2. The lower court erred in holding that the defendant-appellee is an interested
person to question the validity of the contract of sale between plaintiff-
appellant and the deceased, Francisco Militante, Sr.
'3. The lower court erred in entertaining the motion to dismiss of the
defendant-appellee after he had already filed his answer, and after the
termination of the pre-trial, when the said motion to dismiss raised a collateral
question.
'4. The lower court erred in dismissing the complaint of the plaintiff-appellant.'
The appellate court concluded that plaintiffs "assignment of errors gives rise to
two (2) legal posers — (1) whether or not the contract of sale between
appellant and his father-in-law, the late Francisco Militante over the property
subject of Plan Psu-99791 was void because it was made when plaintiff was
counsel of his father-in-law in a land registration case involving the property in
dispute; and (2) whether or not the lower court was correct in entertaining
defendant-appellee's motion to dismiss after the latter had already filed his
answer and after he (defendant) and plaintiff-appellant had agreed on some
matters in a pre-trial conference. Hence, its elevation of the appeal to this Court
as involving pure questions of law.
It is at once evident from the foregoing narration that the pre-trial
conference held by the trial court at which the parties with their counsel agreed
and stipulated on the material and relevant facts and submitted their
respective documentary exhibits as referred to in the pre-trial
order, supra,2 practically amounted to a fulldress trial which placed on record
all the facts and exhibits necessary for adjudication of the case.
The three points on which plaintiff reserved the presentation of
evidence at the-trial dealing with the source of the alleged right and title of
Francisco Militante's predecessors, supra,3 actually are already made of record
in the stipulated facts and admitted exhibits. The chain of Militante's alleged
title and right to the land as supposedly traced back to Liberato Demontaño
was actually asserted by Militante (and his vendee, lawyer and son-in-law,
herein plaintiff) in the land registration case and rejected by the Iloilo land
registration court which dismissed Militante's application for registration of the
land. Such dismissal, as already stated, was affirmed by the final judgment in
1958 of the Court of Appeals.4
The four points on which defendant on his part reserved the
presentation of evidence at the trial dealing with his and his ancestors'
continuous, open, public and peaceful possession in the concept of owner of
the land and the Director of Lands' approval of his survey plan
thereof, supra,5 are likewise already duly established facts of record, in the land
registration case as well as in the ejectment case wherein the Iloilo court of first
instance recognized the superiority of defendant's right to the land as against
plaintiff.
No error was therefore committed by the lower court in dismissing
plaintiff's complaint upon defendant's motion after the pre-trial.
1. The stipulated facts and exhibits of record indisputably established plaintiff's
lack of cause of action and justified the outright dismissal of the complaint.
Plaintiff's claim of ownership to the land in question was predicated on the sale
thereof for P2,000.00 made in 1956 by his father-in- law, Francisco Militante,
in his favor, at a time when Militante's application for registration thereof had
already been dismissed by the Iloilo land registration court and was pending
appeal in the Court of Appeals.
With the Court of Appeals' 1958 final judgment affirming
the dismissal of Militante's application for registration, the lack of any rightful
claim or title of Militante to the land was conclusively and decisively judicially
determined. Hence, there was no right or title to the land that could be
transferred or sold by Militante's purported sale in 1956 in favor of plaintiff.
Manifestly, then plaintiff's complaint against defendant, to be declared
absolute owner of the land and to be restored to possession thereof with
damages was bereft of any factual or legal basis.
2. No error could be attributed either to the lower court's holding that the
purchase by a lawyer of the property in litigation from his client is categorically
prohibited by Article 1491, paragraph (5) of the Philippine Civil Code,
reproduced supra;6 and that consequently, plaintiff's purchase of the property
in litigation from his client (assuming that his client could sell the same since as
already shown above, his client's claim to the property was defeated and
rejected) was void and could produce no legal effect, by virtue of Article 1409,
paragraph (7) of our Civil Code which provides that contracts "expressly
prohibited or declared void by law' are "inexistent and that "(T)hese contracts
cannot be ratified. Neither can the right to set up the defense of illegality be
waived."
The 1911 case of Wolfson vs. Estate of Martinez7 relied upon by
plaintiff as holding that a sale of property in litigation to the party litigant's
lawyer "is not void but voidable at the election of the vendor" was correctly
held by the lower court to have been superseded by the later 1929 case
of Director of Lands vs. Abagat.8 In this later case of Abagat, the Court expressly
cited two antecedent cases involving the same transaction of purchase of
property in litigation by the lawyer which was expressly declared invalid under
Article 1459 of the Civil Code of Spain (of which Article 1491 of our Civil Code
of the Philippines is the counterpart) upon challenge thereof not by the vendor-
client but by the adverse parties against whom the lawyer was to enforce his
rights as vendee thus acquired.
These two antecedent cases thus cited in Abagat clearly superseded
(without so expressly stating the previous ruling in Wolfson:
The spouses, Juan Soriano and Vicente Macaraeg, were the owners
of twelve parcels of land. Vicenta Macaraeg died in November, 1909, leaving a
large number of collateral heirs but no descendants. Litigation between the
surviving husband, Juan Soriano, and the heirs of Vicenta immediately arose,
and the herein appellant Sisenando Palarca acted as Soriano's lawyer. On May
2, 1918, Soriano executed a deed for the aforesaid twelve parcels of land in
favor of Sisenando Palarca and on the following day, May 3, 1918, Palarca filed
an application for the registration of the land in the deed. After hearing, the
Court of First Instance declared that the deed was invalid by virtue of the
provisions of article 1459 of the Civil Code, which prohibits lawyers and solicitors
from purchasing property rights involved in any litigation in which they take part
by virtue of their profession. The application for registration was consequently
denied, and upon appeal by Palarca to the Supreme Court, the judgement of the
lower court was affirmed by a decision promulgated November 16,1925. (G.R.
No. 24329, Palarca vs. Director of Lands, not reported.)
In the meantime cadastral case No. 30 of the Province of Tarlac was
instituted, and on August 21, 1923, Eleuteria Macaraeg, as administratrix of the
estate of Vicente Macaraeg, filed claims for the parcels in question.
Buenaventura Lavitoria administrator of the estate of Juan Soriano, did likewise
and so did Sisenando Palarca. In a decision dated June 21, 1927, the Court of
First Instance, Judge Carballo presiding, rendered judgment in favor of Palarea
and ordered the registration of the land in his name. Upon appeal to this court
by the administration of the estates of Juan Soriano and Vicente Macaraeg, the
judgment of the court below was reversed and the land adjudicated to the two
estates as conjugal property of the deceased spouses. (G.R. No. 28226, Director
of Lands vs. Abagat, promulgated May 21, 1928, not reported.)9
In the very case of Abagat itself, the Court, again affirming the
invalidity and nullity of the lawyer's purchase of the land in litigation from his
client, ordered the issuance of a writ of possession for the return of the land by
the lawyer to the adverse parties without reimbursement of the price paid by
him and other expenses, and ruled that "the appellant Palarca is a lawyer and
is presumed to know the law. He must, therefore, from the beginning, have
been well aware of the defect in his title and is, consequently, a possessor in
bad faith."
As already stated, Wolfson and Abagat were decided with relation
to Article 1459 of the Civil Code of Spain then adopted here, until it was
superseded on August 30, 1950 by the Civil Code of the Philippines whose
counterpart provision is Article 1491.
Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil
Code) prohibits in its six paragraphs certain persons, by reason of the relation
of trust or their peculiar control over the property, from acquiring such
property in their trust or control either directly or indirectly and "even at a
public or judicial auction," as follows: (1) guardians; (2) agents; (3)
administrators; (4) public officers and employees; judicial officers and
employees, prosecuting attorneys, and lawyers; and (6) others especially
disqualified by law.
In Wolfson which involved the sale and assignment of a money
judgment by the client to the lawyer, Wolfson, whose right to so purchase the
judgment was being challenged by the judgment debtor, the Court, through
Justice Moreland, then expressly reserved decision on "whether or not the
judgment in question actually falls within the prohibition of the article" and held
only that the sale's "voidability can not be asserted by one not a party to the
transaction or his representative," citing from Manresa 10 that "(C)onsidering
the question from the point of view of the civil law, the view taken by the code,
we must limit ourselves to classifying as void all acts done contrary to the
express prohibition of the statute. Now then: As the code does not recognize
such nullity by the mere operation of law, the nullity of the acts hereinbefore
referred to must be asserted by the person having the necessary legal capacity
to do so and decreed by a competent court." 11
The reason thus given by Manresa in considering such prohibited
acquisitions under Article 1459 of the Spanish Civil Code as merely voidable at
the instance and option of the vendor and not void — "that the Code does not
recognize such nullity de pleno derecho" — is no longer true and applicable to
our own Philippine Civil Code which does recognize the absolute nullity of
contracts "whose cause, object, or purpose is contrary to law, morals, good
customs, public order or public policy" or which are "expressly prohibited or
declared void by law" and declares such contracts "inexistent and void from the
beginning." 12
The Supreme Court of Spain and modern authors have likewise veered from
Manresa's view of the Spanish codal provision itself. In its sentencia of 11 June
1966, the Supreme Court of Spain ruled that the prohibition of Article 1459 of
the Spanish Civil Code is based on public policy, that violation of the prohibition
contract cannot be validated by confirmation or ratification, holding that:
... la prohibicion que el articulo 1459 del C.C. establece respecto a
los administradores y apoderados, la cual tiene conforme a la doctrina de esta
Sala, contendia entre otras, en S. de 27-5-1959, un fundamento de orden moral
lugar la violacion de esta a la nulidad de pleno derecho del acto o negocio
celebrado, ... y prohibicion legal, afectante orden publico, no cabe con efecto
alguno la aludida retification ... 13
The criterion of nullity of such prohibited contracts under Article
1459 of the Spanish Civil Code (Article 1491 of our Civil Code) as a matter of
public order and policy as applied by the Supreme Court of Spain to
administrators and agents in its above cited decision should certainly apply with
greater reason to judges, judicial officers, fiscals and lawyers under paragraph
5 of the codal article.
Citing the same decisions of the Supreme Court of Spain, Gullon
Ballesteros, his "Curso de Derecho Civil, (Contratos Especiales)" (Madrid, 1968)
p. 18, affirms that, with respect to Article 1459, Spanish Civil Code:.
Que caracter tendra la compra que se realice por estas personas?
Porsupuesto no cabe duda de que el caso (art.) 1459, 40 y 50, la nulidad
esabsoluta porque el motivo de la prohibicion es de orden publico. 14
Perez Gonzales in such view, stating that "Dado el caracter
prohibitivo delprecepto, la consequencia de la infraccion es la nulidad radical y
ex lege." 15
Castan, quoting Manresa's own observation that.
"El fundamento do esta prohibicion es clarisimo. No sa trata con
este precepto tan solo de guitar la ocasion al fraude; persiguese, ademasel
proposito de rodear a las personas que intervienen en la administrcionde
justicia de todos los retigios que necesitan pora ejercer su ministerio librandolos
de toda suspecha, que aunque fuere in fundada, redundura endescredito de la
institucion." 16 arrives at the contrary and now accepted view that "Puede
considerace en nuestro derecho inexistente 'o radicalmente nulo el contrato en
los siguentes cases: a) ...; b) cuando el contrato se ha celebrado en violacion de
una prescripcion 'o prohibicion legal, fundada sobre motivos de orden
publico (hipotesis del art. 4 del codigo) ..." 17
It is noteworthy that Caltan's rationale for his conclusion that
fundamental consideration of public policy render void and inexistent such
expressly prohibited purchase (e.g. by public officers and employees of
government property intrusted to them and by justices, judges, fiscals and
lawyers of property and rights in litigation and submitted to or handled by
them, under Article 1491, paragraphs (4) and (5) of our Civil Code) has been
adopted in a new article of our Civil Code, viz, Article 1409 declaring such
prohibited contracts as "inexistent and void from the beginning." 18
Indeed, the nullity of such prohibited contracts is definite and
permanent and cannot be cured by ratification. The public interest and public
policy remain paramount and do not permit of compromise or ratification. In
his aspect, the permanent disqualification of public and judicial officers and
lawyers grounded on public policy differs from the first three cases of
guardians, agents and administrators (Article 1491, Civil Code), as to whose
transactions it had been opined that they may be "ratified" by means of and in
"the form of a new contact, in which cases its validity shall be determined only
by the circumstances at the time the execution of such new contract. The
causes of nullity which have ceased to exist cannot impair the validity of the
new contract. Thus, the object which was illegal at the time of the first contract,
may have already become lawful at the time of the ratification or second
contract; or the service which was impossible may have become possible; or
the intention which could not be ascertained may have been clarified by the
parties. The ratification or second contract would then be valid from its
execution; however, it does not retroact to the date of the first contract." 19
As applied to the case at bar, the lower court therefore properly
acted upon defendant-appellant's motion to dismiss on the ground of nullity of
plaintiff's alleged purchase of the land, since its juridical effects and plaintiff's
alleged cause of action founded thereon were being asserted against
defendant-appellant. The principles governing the nullity of such prohibited
contracts and judicial declaration of their nullity have been well restated by
Tolentino in his treatise on our Civil Code, as follows:
Parties Affected. — Any person may invoke the in existence of the
contract whenever juridical effects founded thereon are asserted against him.
Thus, if there has been a void transfer of property, the transferor can recover
it by the accion reinvindicatoria; and any prossessor may refuse to deliver it to
the transferee, who cannot enforce the contract. Creditors may attach property
of the debtor which has been alienated by the latter under a void contract; a
mortgagee can allege the inexistence of a prior encumbrance; a debtor can
assert the nullity of an assignment of credit as a defense to an action by the
assignee.
Action On Contract. — Even when the contract is void or inexistent,
an action is necessary to declare its inexistence, when it has already been
fulfilled. Nobody can take the law into his own hands; hence, the intervention
of the competent court is necessary to declare the absolute nullity of the
contract and to decree the restitution of what has been given under it. The
judgment, however, will retroact to the very day when the contract was
entered into.
If the void contract is still fully executory, no party need bring an
action to declare its nullity; but if any party should bring an action to enforce it,
the other party can simply set up the nullity as a defense. 20
ACCORDINGLY, the order of dismissal appealed from is hereby
affirmed, with costs in all instances against plaintiff-appellant. So ordered.
Makalintal, Zaldivar, Castro,. Fernando, Barredo, Makasiar, Antonio and
Esguerra, JJ., concur.
G.R. No. L-23072 November 29, 1968
SIMEON B. MIGUEL, ET AL vs. FLORENDO CATALINO,
REYES, J.B.L., J.:
Direct appeal from the judgment in Civil Case No. 1090 of the Court
of First Instance of Baguio, dismissing the plaintiffs' complaint for recovery of
possession of a parcel of land, registered under Act 496, in the name of one
Bacaquio,1 a long-deceased illiterate non-Christian resident of Mountain
Province, and declaring the defendant to be the true owner thereof.
On January 22, 1962, appellants Simeon, Emilia and Marcelina
Miguel, and appellant Grace Ventura brought suit in the Court below against
Florendo Catalino for the recovery of the land above-described, plaintiffs
claiming to be the children and heirs of the original registered owner, and
averred that defendant, without their knowledge or consent, had unlawfully
taken possession of the land, gathered its produce and unlawfully excluded
plaintiffs therefrom. Defendant answered pleading ownership and adverse
possession for 30 years, and counterclaimed for attorney's fees. After trial the
Court dismissed the complaint, declared defendant to be the rightful owner,
and ordered the Register of Deeds to issue a transfer certificate in lieu of the
original. Plaintiffs appealed directly to this Court, assailing the trial Court's
findings of fact and law.
As found by the trial Court, the land in dispute is situated in the
Barrio of San Pascual, Municipality of Tuba, Benguet, Mountain Province and
contains an area of 39,446 square meters, more or less. It is covered by Original
Certificate of Title No. 31, which was issued on 28 December 1927 in the name
of Bacaquio (or Bakakew), a widower. No encumbrance or sale has ever been
annotated in the certificate of title.
The plaintiff-appellant Grace Ventura2 is the only child of Bacaquio
by his first wife, Debsay, and the other plaintiffs-appellants, Simeon, Emilia and
Marcelina, all surnamed "Miguel", are his children by his third wife, Cosamang.
He begot no issue with his second wife, Dobaney. The three successive wives
have all died.
Bacaquio, who died in 1943, acquired the land when his second wife
died and sold it to Catalino Agyapao, father of the defendant Florendo Catalino,
for P300.00 in 1928. Of the purchase price P100.00 was paid and receipted for
when the land was surveyed, but the receipt was lost; the balance was paid
after the certificate of title was issued. No formal deed of sale was executed,
but since the sale in 1928, or for more than 30 years, vendee Catalino Agyapao
and his son, defendant-appellee Florendo Catalino, had been in possession of
the land, in the concept of owner, paying the taxes thereon and introducing
improvements.
On 1 February 1949, Grace Ventura, by herself alone, "sold" (as per
her Transferor's Affidavit, Exhibit "6") anew the same land for P300.00 to
defendant Florendo Catalino.
In 1961, Catalino Agyapao in turn sold the land to his son, the
defendant Florendo Catalino.
This being a direct appeal from the trial court, where the value of
the property involved does not exceed P200,000.00, only the issues of law are
reviewable by the Supreme Court, the findings of fact of the court a quobeing
deemed conceded by the appellant (Jacinto v. Jacinto, 105 Phil. 1218; Del
Castillo v. Guerro, L-11994, 25 July 1960; Abuyo, et al. v. De Suazo, L-21202, 29
Oct. 1966; 18 SCRA 600, 601). We are thus constrained to discard appellant's
second and third assignments of error.
In their first assignment, appellants assail the admission in evidence
over the objection of the appellant of Exhibit "3". This exhibit is a decision in
favor of the defendant-appellee against herein plaintiff-appellant Grace
Ventura, by the council of Barrio of San Pascual, Tuba, Benguet, in its
Administrative Case No. 4, for the settlement of ownership and possession of
the land. The decision is ultra vires because barrio councils, which are not
courts, have no judicial powers (Sec. 1, Art. VIII, Constitution; see Sec. 12, Rep.
Act 2370, otherwise known as the Barrio Charter). Therefore, as contended by
appellants, the exhibit is not admissible in a judicial proceeding as evidence for
ascertaining the truth respecting the fact of ownership and possession (Sec. 1,
Rule 128, Rules of Court).
Appellants are likewise correct in claiming that the sale of the land
in 1928 by Bacaquio to Catalino Agyapao, defendant's father, is null and void ab
initio, for lack of executive approval (Mangayao et al. vs. Lasud, et al., L-19252,
29 May 1964). However, it is not the provisions of the Public Land Act
(particularly Section 118 of Act 2874 and Section 120 of Commonwealth Act
141) that nullify the transaction, for the reason that there is no finding, and the
contending parties have not shown, that the land titled in the name of Bacaquio
was acquired from the public domain (Palad vs. Saito, 55 Phil. 831). The laws
applicable to the said sale are: Section 145(b) of the Administrative Code of
Mindanao and Sulu, providing that no conveyance or encumbrance of real
property shall be made in that department by any non-christian inhabitant of
the same, unless, among other requirements, the deed shall bear indorsed
upon it the approval of the provincial governor or his representative duly
authorized in writing for the purpose; Section 146 of the same Code, declaring
that every contract or agreement made in violation of Section 145 "shall be null
and void"; and Act 2798, as amended by Act 2913, extending the application of
the above provisions to Mountain Province and Nueva Vizcaya.
Since the 1928 sale is technically invalid, Bacaquio remained, in law,
the owner of the land until his death in 1943, when his title passed on, by the
law on succession, to his heirs, the plaintiffs-appellants.
Notwithstanding the errors aforementioned in the appealed
decision, we are of the opinion that the judgment in favor of defendant-
appellee Florendo Catalino must be sustained. For despite the invalidity of his
sale to Catalino Agyapao, father of defendant-appellee, the vendor Bacaquio
suffered the latter to enter, possess and enjoy the land in question without
protest, from 1928 to 1943, when the seller died; and the appellants, in turn,
while succeeding the deceased, also remained inactive, without taking any step
to reivindicate the lot from 1944 to 1962, when the present suit was
commenced in court. Even granting appellants' proposition that no prescription
lies against their father's recorded title, their passivity and inaction for more
than 34 years (1928-1962) justifies the defendant-appellee in setting up the
equitable defense of laches in his own behalf. As a result, the action of plaintiffs-
appellants must be considered barred and the Court below correctly so held.
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 thereon 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. In Mejia de Lucas vs. Gamponia, 100 Phil. 277, 281, this Court laid
down a rule that is here squarely applicable:
Upon a careful consideration of the facts and circumstances, we are
constrained to find, however, that while no legal defense to the action lies, an
equitable one lies in favor of the defendant and that is, the equitable defense
of laches. We hold that the defense of prescription or adverse possession in
derogation of the title of the registered owner Domingo Mejia does not lie, but
that of the equitable defense of laches. Otherwise stated, we hold that while
defendant may not be considered as having acquired title by virtue of his and
his predecessors' long continued possession for 37 years, the original owner's
right to recover back the possession of the property and title thereto from the
defendant has, by the long period of 37 years and by patentee's inaction and
neglect, been converted into a stale demand.
As in the Gamponia case, the four elements of laches are present in
the case at bar, namely: (a) conduct on the part of the defendant, or of one
under whom he claims, giving rise to the situation of which complaint is made
and for which the complaint seeks a remedy; (b) delay in asserting the
complainant's rights, the complainant having had knowledge or notice, of the
defendant's conduct and having been afforded an opportunity to institute a
suit; (c) lack of knowledge or notice on the part of the defendant that the
complainant would assert the right on which he bases his suit; and (d) injury or
prejudice to the defendant in the event relief is accorded to the complainant,
or the suit is not held to be barred. In the case at bar, Bacaquio sold the land in
1928 but the sale is void for lack of the governor's approval. The vendor, and
also his heirs after him, could have instituted an action to annul the sale from
that time, since they knew of the invalidity of the sale, which is a matter of law;
they did not have to wait for 34 years to institute suit. The defendant was made
to feel secure in the belief that no action would be filed against him by such
passivity, and also because he "bought" again the land in 1949 from Grace
Ventura who alone tried to question his ownership; so that the defendant will
be plainly prejudiced in the event the present action is not held to be barred.
The difference between prescription and laches was elaborated in
Nielsen & Co., Inc. vs. Lepanto Consolidated Mining Co., L-21601, 17 December
1966, 18 SCRA p. 1040, as follows:
Appellee is correct in its contention that the defense of laches
applies independently of prescription. Laches is different from the statute of
limitations. Prescription is concerned with the fact of delay, whereas laches is
concerned with the effect of delay. Prescription is a matter of time; laches is
principally a question of inequity of permitting a claim to be enforced, this
inequity being founded on some change in the condition of the property or the
relation of the parties. Prescription is statutory; laches is not. Laches applies in
equity, whereas prescription applies at law. Prescription is based on fixed time
laches is not, (30 C.J.S., p. 522. See also Pomeroy's Equity Jurisprudence, Vol. 2,
5th ed., p. 177) (18 SCRA 1053).
With reference to appellant Grace Ventura, it is well to remark that
her situation is even worse than that of her co-heirs and co-plaintiffs, in view of
her executing an affidavit of transfer (Exh. 6) attesting under oath to her having
sold the land in controversy to herein defendant-appellee, and the lower
Court's finding that in 1949 she was paid P300.00 for it, because she, "being a
smart woman of enterprise, threatened to cause trouble if the defendant failed
to give her P300.00 more, because her stand (of being the owner of the land)
was buttressed by the fact that Original Certificate of Title No. 31 is still in the
name of her father, Bacaquio" (Decision, Record on Appeal, p. 24). This sale,
that was in fact a quitclaim, may not be contested as needing executive
approval; for it has not been shown that Grace Ventura is a non-christian
inhabitant like her father, an essential fact that cannot be assumed (Sale de
Porkan vs. Yatco, 70 Phil. 161, 175).
Since the plaintiffs-appellants are barred from recovery, their
divestiture of all the elements of ownership in the land is complete; and the
Court a quo was justified in ordering that Bacaquio's original certificate be
cancelled, and a new transfer certificate in the name of Florendo Catalino be
issued in lieu thereof by the Register of Deeds.
FOR THE FOREGOING REASONS, the appealed decision is hereby
affirmed, with costs against the plaintiffs-appellants.
Concepcion C.J., Dizon, Makalintal, Zaldivar, Sanchez, Fernando and Capistrano,
JJ., concur.
Castro, J., took no part.
[G.R. NO. 142913 : August 9, 2005]
ESTATE OF SALVADOR SERRA SERRA (SPEC. PROC. NO. 242) AND ESTATE OF
GREGORIO SERRA SERRA (SPEC. PROC. NO. 240), BOTH REPRESENTED BY THE
JUDICIAL CO-ADMINISTRATOR LUIS ISASI, MARGARITA SERRA SERRA, FRANCISCA
TERESA SERRA SERRA and FRANCISCO JOSE SERRA SERRA, v. HEIRS OF PRIMITIVO
HERNAEZ, REPRESENTED BY PRESENTACION HERNAEZ BELBAR, HEIRS OF LUISA
HERNAEZ, REPRESENTED BY WILFREDO GAYARES, LOLITA GAYARES, JULIETA
FORTALEZA AND ROSAURO FORTALEZA, HEIRS OF ROGACIANA HERNAEZ,
REPRESENTED BY LOURDES MONCERA,
DECISION
YNARES-SANTIAGO, J.:
This Petition for Review on Certiorari under Rule 45 of the 1997
Revised Rules of Civil Procedure assails the March 3, 2000 decision of the Court
of Appeals in CA-G.R. SP No. 52817, and its April 17, 2000 resolution denying
reconsideration thereof.
The factual antecedents are as follows:
On December 27, 1967, a petition for reconstitution of alleged lost original
certificates of title (OCT) and owner's duplicate copies in the name of Eleuterio
Hernaez covering Lot No. 1316 of Kabankalan Cadastre and Lot Nos. 2685 and
717 of Ilog Cadastre, in the Province of Negros Occidental, was filed by his
successors-in-interest Primitivo, Rogaciana and Luisa, all surnamed Hernaez
(Hernaez) with then Court of First Instance (CFI) of Bacolod City.
On April 6, 1968, the CFI granted the petition and ordered the
reconstitution of the subject OCTs and its duplicate copies.1 Accordingly, the
Register of Deeds of Negros Occidental issued reconstituted OCT Nos. RO-
10173, RO-10174, and RO-10175, for Lot Nos. 1316, 2685, and 717,
respectively. These reconstituted OCTs were cancelled on May 29, 1969 upon
presentation by Hernaez of a "declaration of heirship" and in lieu thereof,
Transfer Certificate of Title (TCT) Nos. T-51546, T-51547, and T-51548 were
issued in their names.
Upon learning of the existence of the above TCTs, Salvador Serra
Serra, for and in behalf of his co-heirs, registered their adverse claim and moved
for the cancellation of the reconstituted titles. They averred that they are
holders of valid and existing certificates of title over the subject properties and
have been in continuous and actual possession thereof.
The trial court denied petitioners' motion to cancel the
reconstituted titles and granted instead Hernaez' prayer that they be placed in
possession of the subject properties, which petitioners challenged before the
Court of Appeals in a Petition for Certiorari docketed as CA-G.R. No. SP-00139.2
On June 7, 1971, the appellate court issued a writ of preliminary
injunction3 which was ordered lifted in a resolution dated August 3, 1971.
Petitioners' motion for reconsideration was denied, hence they filed before this
Court a Petition for Certiorari, prohibition and mandamus, docketed as G.R. No.
L-34080 and consolidated with G.R. No. L-34693,4 seeking to annul the
resolution lifting the writ of preliminary injunction.
On March 22, 1991, this Court rendered judgment the decretal portion of which
reads:
ACCORDINGLY, the petitions are GRANTED. The questioned order of
the respondent Court of Appeals lifting the writ of preliminary injunction is SET
ASIDE. The writ of possession issued in Cadastral Case No. 17, GLRO Records
No. 163 is declared NULL and VOID. The records of this case and of CA-G.R. No.
00139 are remanded to the trial court for hearing of the motion for cancellation
of the reconstituted titles. Private respondents are ordered to return to
petitioners the possession of the properties in question. The temporary
restraining order issued by this Court on February 15, 1972, enjoining private
respondents from interfering in any manner, with petitioners' right of
possession of the properties in question, shall remain effective until the issue
of ownership and/or possession of the properties is finally settled by a
competent court.
SO ORDERED.5
Pursuant thereto, the trial court heard petitioners' motion for
cancellation of certificates of title and on November 25, 1998, rendered
judgment the dispositive portion of which reads:
WHEREFORE, based on the foregoing premises and considerations,
the court hereby renders judgment in favor of the oppositors and hereby orders
the following:
1) The petition filed by movants Serra Serra dated November 4, 1968 is hereby
DISMISSED for lack of merit;
2) Declaring the Transfer Certificate of Title No. T-27644 covering Lot No. 1316,
Kabankalan Cadastre and Lot No. 2685, Ilog Cadastre, Transfer Certificate of
Title No. T-22344 covering Lot No. 717-A, and Transfer Certificate of Title No.
T-22351, Ilog Cadastre, all issued in the name of movants Serra Serra NULL and
VOID for being issued to foreigners;
3) Declaring the oppositors Hernaez as owners of Lot No. 1316, Kabankalan
Cadastre, covered by Transfer Certificate of Title No. 51546; Lot No. 2685, Ilog
Cadastre, covered by Transfer Certificate of Title No. T-51547; and Lot No. 717,
Ilog Cadastre, covered by Transfer Certiticate of Title No. T-51548; andlibrary
4) Ordering the movants Serra Serra to return possession of said lots to the
oppositors Hernaez.
SO ORDERED.6
Without filing a motion for reconsideration, petitioners assailed the
lower court's decision before the Court of Appeals via a Petition for Certiorari.
On March 3, 2000, the appellate court rendered the herein assailed judgment
which dismissed the petition for lack of merit, pertinent portion of which reads:
In the case at bench, We find no cogent reason to disturb the assailed decision
denying petitioners' motion for cancellation of the reconstituted titles,
especially after the court a quo found that the evidence presented is sufficient
and proper to uphold the reconstituted certificates of title in question. A
perusal of the assailed order shows that the trial court correctly applied the
established legal principle that in cases of annulment and/or reconveyance of
title, a party seeking it should establish not merely by a preponderance of
evidence but by clear and convincing evidence that the land sought to be
reconveyed is his.
Petitioners (Serra Serra), however, as noted by the court a quo in its
Order dated November 25, 1998, failed to present in court as evidence the
original certificates of title of the aforementioned lots, Lot No. 1316, Lot No.
2685 and Lot No. 717. Petitioners were also found to be of Spanish citizenship
and, hence, as aliens, disqualified to acquire lands in the Philippines under
the 1935 Constitution .7
Petitioners' motion for reconsideration was subsequently denied,
hence the instant petition based on the following assigned errors:
I findings of the Court of Appeals are in full agreement with what the trial court
THE COURT OF APPEALS HAS ... DEPARTED FROM THE ACCEPTED
AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR THE EXERCISE
OF THE POWER OF SUPERVISION BY THIS HONORABLE COURT, IN THAT:
THE RULE THAT THE PETITIONER SHOULD HAVE PREVIOUSLY FILED A MOTION
FOR RECONSIDERATION WITH THE LOWER COURT BEFORE HE MAY AVAIL
HIMSELF OF THE WRIT OF CERTIORARI UNDER RULE 65 OF THE RULES OF
COURT IS SUBJECT TO WELL-SETTLED EXCEPTIONS ...
II
THE COURT OF APPEALS ... HAS DECIDED A QUESTION OF
SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW, REPUBLIC ACT
NO. 26, OR WITH THE APPLICABLE DECISION OF THIS HONORABLE COURT IN
SERRA v. COURT OF APPEALS, G.R. NO. L-34080, MARCH 22, 1991.8
Petitioners assail the dismissal of their petition on the ground that
they failed to file a motion for reconsideration with the lower court before filing
a Petition for Certiorari before the Court of Appeals. While admitting
procedural lapse on their part, they argue that the rule is subject to well-settled
exceptions, such as, when the questions raised before the Supreme Court are
the same as those which have been squarely raised and passed upon by the
trial court, or when the petitioner has been deprived of due process of law, or
when the writ is urgent under the circumstances.9
The petition is denied. Other than citing general exceptions to the
rule requiring a motion for reconsideration as a pre-condition to instituting a
Petition for Certiorari, the petitioners did not offer valid reason why their
particular case fall under any of the specified exceptions.
The settled rule is that a motion for reconsideration is a sine qua
noncondition for the filing of a Petition for Certiorari. The purpose is to grant
an opportunity to public respondent to correct any actual or perceived error
attributed to it by the re-examination of the legal and factual circumstances of
the case.10 Petitioners' failure to file a motion for reconsideration deprived the
trial court of the opportunity to rectify an error unwittingly committed or to
vindicate itself of an act unfairly imputed. Besides, a motion for reconsideration
under the present circumstances is the plain, speedy and adequate remedy to
the adverse judgment of the trial court.
Granting arguendo that certiorari is the proper remedy, the Court
of Appeals nevertheless did not err in dismissing the petition.
Both the trial court and the Court of Appeals found that petitioners
are Spanish citizens and as such, disqualified from acquiring lands in the
Philippines. As a rule, only a Filipino citizen can acquire private lands in the
Philippines and the only instances when a foreigner can own private lands are
by hereditary succession and if he was formerly a natural-born Filipino citizen
who lost his Philippine citizenship. The records are bereft of any showing that
petitioners derived their title by any mode which would qualify them to acquire
private lands in the country. Petitioners' bare allegation that they acquired the
subject lots from Salvador Serra Serra has no probative value lacking sufficient
proof that the latter is not disqualified to own or hold private property and was
able to legally transmit to petitioners title thereto.
Petitioners' alleged possession of TCTs and actual possession of the
subject lands, although strong proof of ownership, are not necessarily
conclusive where the assertion of proprietary rights is founded on dubious
claim of ownership. They claimed that their title over the subject properties
emanated from Salvador Serra Serra; yet they failed to present in evidence the
OCT in the name of the latter. Since petitioners impugn the proprietary claim
of Hernaez over the properties, the burden rests on them to establish their
superior right over the latter. To recall, the trial court found that the evidence
they presented have not established superior proprietary rights over the
respondents' on the subject lots. It held that the non-presentation of the OCTs
cast doubt on the veracity of their claim. He who asserts must prove.
It is also undisputed that petitioners are all Spanish citizens. Under
Philippine law, foreigners can acquire private lands only by hereditary
succession or when they were formerly natural-born Filipinos who lost their
Philippine citizenship. In this case, petitioners did not present proof that they
acquired the properties by inheritance. Neither did they claim to be former
natural-born Filipinos. On the contrary, they declare in this petition that they
are all Spanish citizens residing in Mallorca, Spain.
It is axiomatic that factual findings of trial courts, when adopted and
confirmed by the Court of Appeals, are binding and conclusive and will not be
disturbed on appeal. This Court is not a trier of facts. It is not its function to
examine and determine the weight of the evidence supporting the assailed
decision. Moreover, well entrenched is the prevailing jurisprudence that only
errors of law and not of facts are reviewable by this Court in a Petition for
Review on Certiorari under Rule 45 of the Revised Rules of Court, which applies
with greater force to the petition under consideration because the factual
found.11
WHEREFORE, the petition is DENIED. The March 3, 2000 decision and the April
17, 2000 resolution of the Court of Appeals in CA-G.R. SP No. 52817 are
AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.
G.R. No. L-21489 and L-21628 May 19, 1966
MIGUEL MAPALO, ET AL vs. MAXIMO MAPALO, ET AL., respondents.
BENGZON, J.P., J.:
The spouses Miguel Mapalo and Candida Quiba, simple illiterate
farmers, were registered owners, with Torrens title certificate O.C.T. No.
46503, of a 1,635-square-meter residential land in Manaoag, Pangasinan. Said
spouses-owners, out of love and affection for Maximo Mapalo — a brother of
Miguel who was about to get married — decided to donate the eastern half of
the land to him. O.C.T. No. 46503 was delivered. As a result, however, they were
deceived into signing, on October 15, 1936, a deed of absolute sale over
the entire land in his favor. Their signatures thereto were procured by fraud,
that is, they were made to believe by Maximo Mapalo and by the attorney who
acted as notary public who "translated" the document, that the same was a
deed of donation in Maximo's favor covering one-half (the eastern half) of their
land. Although the document of sale stated a consideration of Five Hundred
(P500.00) Pesos, the aforesaid spouses did not receive anything of value for the
land. The attorney's misbehaviour was the subject of an investigation but its
result does not appear on record. However we took note of the fact that during
the hearing of these cases said notary public was present but did not take the
witness stand to rebut the plaintiffs' testimony supporting the allegation of
fraud in the preparation of the document.
Following the execution of the afore-stated document, the spouses
Miguel Mapalo and Candida Quiba immediately built a fence of permanent
structure in the middle of their land segregating the eastern portion from its
western portion. Said fence still exists. The spouses have always been in
continued possession over the western half of the land up to the present.
Not known to them, meanwhile, Maximo Mapalo, on March 15,
1938, registered the deed of sale in his favor and obtained in his name Transfer
Certificate of Title No. 12829 over the entire land. Thirteen years later on
October 20, 1951, he sold for P2,500.00 said entire land in favor of Evaristo,
Petronila Pacifico and Miguel all surnamed Narciso. The sale to the Narcisos
was in turn registered on November 5, 1951 and Transfer Certificate of Title
No. 11350 was issued for the whole land in their names.
 The Narcisos took possession only of the eastern portion of the land
in 1951, after the sale in their favor was made. On February 7, 1952 they filed
suit in the Court of First Instance of Pangasinan (Civil Case No. 1191) to be
declared owners of the entire land, for possession of its western portion; for
damages; and for rentals. It was brought against the Mapalo spouses as well as
against Floro Guieb and Rosalia Mapalo Guieb who had a house on the western
part of the land with the consent of the spouses Mapalo and Quiba.
The Mapalo spouses filed their answer with a counterclaim on
March 17, 1965, seeking cancellation of the Transfer Certificate of Title of the
Narcisos as to the western half of the land, on the grounds that their (Mapalo
spouses) signatures to the deed of sale of 1936 was procured by fraud and that
the Narcisos were buyers in bad faith. They asked for reconveyance to them of
the western portion of the land and issuance of a Transfer Certificate of Title in
their names as to said portion.
In addition, the Mapalo spouses filed on December 16, 1957 their
own complaint in the Court of First Instance of Pangasinan (Civil Case No. U-
133) against the aforestated Narcisos and Maximo Mapalo. They asked that the
deeds of sale of 1936 and of 1951 over the land in question be declared null
and void as to the western half of said land.
Judge Amado Santiago of the Court of First Instance of Pangasinan
located in the municipality of Urdaneta tried the two cases jointly. Said court
rendered judgment on January 18, 1961, as follows:
WHEREFORE, judgment is hereby rendered as follows, to wit:
(a) dismissing the complaint in Civil Case No. 11991;
(b) declaring Exhibit A, plaintiffs in Case No. 11991 and Exhibit 1, defendants in
Case No. U-133 as a donation only over the eastern half portion of the above-
described land, and as null and void with respect to the western half portion
thereof;
(c) declaring as null and void and without legal force and effect Transfer
Certificate of Title No. 12829 issued in favor of Maximo Mapalo as regards the
western half portion of the land covered therein;
(d) declaring as null and void Transfer Certificate of Title No. 11350 in the names
of the Narcisos insofar as the western half portion of the land covered therein
is concerned;
(e) ordering the spouses Mapalo and Quiba and the Narcisos to have the above-
described land be subdivided by a competent land surveyor and that the
expenses incident thereto be borne out by said partiespro rata;
(f) ordering the Register of Deeds of Pangasinan to issue in lieu of Transfer
Certificate of Title No. 11350 two new titles upon completion of the subdivision
plan, one in favor of the spouses Miguel Mapalo and Candida Quiba covering
the western half portion and another for the Narcisos covering the eastern half
portion of the said land, upon payment of the legal fees; meanwhile the right
of the spouses Mapalo and Quiba is hereby ordered to be annotated on the
back of Transfer Certificate of Title No. 11350; and
(g) sentencing Maximo Mapalo and the Narcisos to pay the costs.
IT IS SO ORDERED.
The Narcisos appealed to the Court of Appeals. In its decision on
May 28, 1963, the Court of Appeals reversed the judgment of the Court of First
Instance, solely on the ground that the consent of the Mapalo spouses to the
deed of sale of 1936 having been obtained by fraud, the same was voidable,
not void ab initio, and, therefore, the action to annul the same, within four
years from notice of the fraud, had long prescribed. It reckoned said notice of
the fraud from the date of registration of the sale on March 15, 1938. The Court
of First Instance and the Court of Appeals are therefore unanimous that the
spouses Mapalo and Quiba were definitely the victims of fraud. It was only on
prescription that they lost in the Court of Appeals.
From said decision of the Court of Appeals, the Mapalo spouses
appealed to this Court.
And here appellants press the contention that the document dated
October 15, 1936, purporting to sell the entire land in favor of Maximo Mapalo,
is void, not merely voidable, as to the western portion of the land for being
absolutely simulated or fictitious.
Starting with fundamentals, under the Civil Code, either the old or
the new, for a contract to exist at all, three essential requisites must concur: (1)
consent, (2) object, and (3) cause or consideration.1 The Court of Appeals is
right in that the element of consent is present as to the deed of sale of October
15, 1936. For consent was admittedly given, albeit obtained by fraud.
Accordingly, said consent, although defective, did exist. In such case, the defect
in the consent would provide a ground for annulment of a voidable contract,
not a reason for nullity ab initio.
The parties are agreed that the second element of object is likewise
present in the deed of October 15, 1936, namely, the parcel of land subject
matter of the same.
Not so, however, as to the third element of cause or consideration.
And on this point the decision of the Court of Appeals is silent.
As regards the eastern portion of the land, the Mapalo spouses are
not claiming the same, it being their stand that they have donated and freely
given said half of their land to Maximo Mapalo. And since they did not appeal
from the decision of the trial court finding that there was a valid and effective
donation of the eastern portion of their land in favor of Maximo Mapalo, the
same pronouncement has become final as to them, rendering it no longer
proper herein to examine the existence, validity efficacy of said donation as to
said eastern portion.1äwphï1.ñët
Now, as to the western portion, however, the fact not disputed
herein is that no donation by the Mapalo spouses obtained as to said portion.
Accordingly, we start with the fact that liberality as a cause or consideration
does not exist as regards the western portion of the land in relation to the deed
of 1936; that there was no donation with respect to the same.
It is reduced, then, to the question whether there was an onerous
conveyance of ownership, that is, a sale, by virtue of said deed of October 15,
1936, with respect to said western portion. Specifically, was there a cause or
consideration to support the existence of a contrary of sale?
The rule under the Civil Code, again be it the old or the new, is that
contracts without a cause or consideration produce no effect
whatsoever.2 Nonetheless, under the Old Civil Code, the statement of a false
consideration renders the contract voidable, unless it is proven that it is
supported by another real and licit consideration.3 And it is further provided by
the Old Civil Code that the action for annulment of a contract on the ground of
falsity of consideration shall last four years, the term to run from the date of
the consummation of the contract.4
Accordingly, since the deed of sale of 1936 is governed by the Old
Civil Code, it should be asked whether its case is one wherein there is no
consideration, or one with a statement of a false consideration. If the former, it
is void and inexistent; if the latter, only voidable, under the Old Civil Code. As
observed earlier, the deed of sale of 1936 stated that it had for its consideration
Five Hundred (P500.00) Pesos. In fact, however, said consideration was totally
absent. The problem, therefore, is whether a deed which states a consideration
that in fact did not exist, is a contract without consideration, and therefore
void ab initio, or a contract with a false consideration, and therefore, at least
under the Old Civil Code, voidable.
According to Manresa, what is meant by a contract that states a
false consideration is one that has in fact a real consideration but the same is
not the one stated in the document. Thus he says:
En primer lugar, nor interesa recordar la diferencia entre simulacion
y el contrato con proposito fraudulento. Este aunque ilicito es real; mas el
primero es falso en realidad, aunque se le presente como verdadero. (Manresa,
Codigo Civil, Tomo VIII, Vol. II, p. 354.)
And citing a decision of the Supreme Court of Spain on the matter,
Manresa further clarifies the difference of false cause and no cause, thus:
Insiste en el distingo con mas detenida descripcion la sentencia de 25 de mayo
de 1944, en la que se argumenta:
Si bien es elemento fundamental de todo negocio, la declaracion de
voluntad substracto de una voluntad efectiva, y la existencia de una causa que
leconfiera significado juridico señalando la finalidad que con este se persigue,
no ha de deducirse de esta doctrina, fundamentalmente recogida en el articulo
1.261 y concordantes del Codigo civil, que cualquier falta de adecuacion entre
cualquier incongruencia entre la causa expresada y la verdadera, y, en general,
entre la estructuracion y la finalidad economica; hayan de producir la ineficacia
del negocio, pues por el contrario, puede este ser valido y producir sus efectos
tanto en el caso de la mera disonancia entre el medio juridico adoptado y el fin
practico perseguido, por utilizacion de una via oblicua o combinacion de formas
juridicas entrelazadas que permita la obtencion de un resultado no previsto en
los cuadros de la ley — negocios indirectos y negocios fiduciarlos, validos
cuando no envuelven fraude de ley, como en el caso de la verdadera
disconformidad entre la apariencia del acto y su real contenido, preparada
deliberadamente por las partes — negocio simulado — , ya que, cuando esta
divergencia implica no una ausencia total de voluntad y de acto real, sino mera
ocultacion de un negocio verdadero bajo la falsa apariencia de un negocio
fingido "sirulacion relativa", la ineficacia de la forma externa simulada, no es
obstaculo para la posible validez del negocio disimulado que contiene, en tanto
este ultimo sea licito y reuna no solo los requisitos generales, sino tambien los
que corresponden a su naturaleza especial, doctrina, en obligada aplicacion de
los preceptos de nuestra Ley civil, especialmente en su art. 1.276, que, al
establecer el principio de nulidad de los contratos en los que se hace expresion
de una causa falsa, deja a salvo el caso de que esten fundados en otra verdadera
y licita. (Manresa, Codigo Civil, Tomo VIII, Vol. II pp. 357-358)
Sanchez Roman says:
Ya hemos dicho que la intervencion de causa en los contratos es
necesaria, y que sin ellos son nulos; solo se concibe que un hombre perturbado
en su razon pueda contratar sin causa. ...
Por la misma razon de la necesidad de la intervencion de causa en
el contrato, es preciso que esta sea verdadera y no supuesta, aparente o
figurada. Que la falsedad de la causa vicia el consentimiento y anula el
contrato, es, no solo doctrina indudable de Derecho Cientifico sino tambien de
antiguo Derecho de Castilla, que en multitud de leyes asi lo declararon.
(Sanchez Roman, Derecho Civil, Tomo IV, p. 206.).
In a clearer exposition of the above distinction, Castan states:
2.º. La causa ha de ser verdadera. La causa falsa puede ser erronea o simulada.
Es erronea como dice Giorgi, la causa que tiene por base la credulidad en un
hecho no existente; y simulada la que tiene lugar cuando se hace aparecer
artificiosamente una distinta de la verdadera. La erronea produce siempre la
inexistencia del contrato; la simulada no siempre produce este efecto, porque
puede suceder que la causa oculta, pero verdadera, baste para sostener el
contrato. De acuerdo con esta doctrina, dice el art. 1.276 de nuestro Codigo
que "la expresion de una causa falsa en los contratos dara lugar a la nulidad, si
no se probase que estaban fundados en otra verdadera y licita". (Castan
Derecho Civil Español, Tomo II, pp. 618-619)
From the foregoing it can be seen that where, as in this case, there
was in fact no consideration, the statement of one in the deed will not suffice
to bring it under the rule of Article 1276 of the Old Civil Code as stating a false
consideration. Returning to Manresa:
Figurando en nuestro Derecho positivo la causa, como un elemento
esential del contrato, es consecuencia ineludible, se reputar simulada la
entrega del precio en la compraventa de autos, el que haya que declararla nula
por inexistente haciendose aplicacion indebida de art. 1.276 por el Tribunal
sentenciador al cohonestar la falta de precio admitiendo se pueda tratar de una
donacion, ya que la recta aplicacion del citado precepto exige que los negocios
simulados, o sea con causa falsa, se justifique la verdadera y licita en que se
funda el acto que las partes han querido ocultar y el cumplimiento de las
formalidades impuestas por la Ley y, cual dice la sentencia de 3 de marzo de
1932, esta rigurosa doctrina ha de ser especialmente impuesta en la
donaciones puras y simples; de los que deduce que la sentencia recurrida al no
decretar la nulidad instada por falta de causa, incide en la infraccion de los
articulos 1.261, 1.274, 1.275 y 1.276 del Codigo Civil. (Sentencia de 22 de
febrero de 1940). (Manresa, Codigo Civil, Tomo VIII, Vol. II, p. 356)
In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores,
40 Phil. 921, is squarely applicable herein. In that case we ruled that a contract
of purchase and sale is null and void and produces no effect whatsoever where
the same is without cause or consideration in that the purchase price which
appears thereon as paid has in fact never been paid by the purchaser to the
vendor.
Needless to add, the inexistence of a contract is permanent and
incurable and cannot be the subject of prescription. In the words of Castan: "La
inexistencia es perpetua e insubsanable no pudiendo ser objecto de
confirmacion ni prescripcion (Op. cit., p. 644.) In Eugenio v. Perdido, 97 Phil. 41,
42-43, involving a sale dated 1932, this Court, speaking through Justice Cesar
Bengzon, now Chief Justice, stated:
Under the existing classification, such contract would be "inexisting"
and "the action or defense for declaration" of such inexistence "does not
prescribe". (Art. 1410, New Civil Code). While it is true that this is a new
provision of the New Civil Code, it is nevertheless a principle recognized
since Tipton vs. Velasco, 6 Phil. 67 that "mere lapse of time cannot give efficacy
to contracts that are null and void".
Anent the matter of whether the Narcisos were purchasers in good
faith, the trial court in its decision resolved this issue, thus:
With regard to the second issue, the Narcisos contend that they are
the owners of the above-described property by virtue of the deed of sale (Exh.
B, plaintiffs in 11991 and Exh. 2, defendants in U-133) executed in their favor
by Maximo Mapalo, and further claim that they are purchasers for value and in
good faith. This court, however, cannot also give weight and credit on this
theory of the Narcisos on the following reasons: Firstly, it has been positively
shown by the undisputed testimony of Candida Quiba that Pacifico Narciso and
Evaristo Narciso stayed for some days on the western side (the portion in
question) of the above-described land until their house was removed in 1940
by the spouses Mapalo and Quiba; secondly, Pacifica Narciso admitted in his
testimony in chief that when they bought the property, Miguel Mapalo was still
in the premises in question (western part) which he is occupying and his house
is still standing thereon; and thirdly, said Pacifico Narciso when presented as a
rebuttal and sub-rebuttal witness categorically declared that before buying the
land in question he went to the house of Miguel Mapalo and Candida Quiba
and asked them if they will permit their elder brother Maximo to sell the
property.
Aside from the fact that all the parties in these cases are neighbors,
except Maximo Mapalo the foregoing facts are explicit enough and sufficiently
reveal that the Narcisos were aware of the nature and extent of the interest of
Maximo Mapalo their vendor, over the above-described land before and at the
time the deed of sale in their favor was executed.
Upon the aforestated declaration of Pacifico Narciso the following
question arises: What was the necessity, purpose and reason of Pacifico Narciso
in still going to the spouses Mapalo and asked them to permit their brother
Maximo to dispose of the above-described land? To this question it is safe to
state that this act of Pacifico Narciso is a conclusive manifestation that they (the
Narcisos) did not only have prior knowledge of the ownership of said spouses
over the western half portion in question but that they also have recognized
said ownership. It also conclusively shows their prior knowledge of the want of
dominion on the part of their vendor Maximo Mapalo over the whole land and
also of the flaw of his title thereto. Under this situation, the Narcisos may be
considered purchasers in value but certainly not as purchasers in good faith. ...
(pp. 97-98, Record on Appeal.)
And said finding — which is one of fact — is found by us not a bit
disturbed by the Court of Appeals. Said the Court of Appeals:
In view of the conclusion thus reached, it becomes unnecessary to pass on the
other errors assigned. Suffice it to say that, on the merits the appealed decision
could have been upheld under Article 1332 of the new Civil Code and the
following authorities: Ayola vs. Valderrama Lumber Manufacturers Co., Inc., 49
O.G. 980, 982; Trasporte vs. Beltran, 51 O.G. 1434, 1435; Cortez vs. Cortez, CA-
G.R. No. 18451-R, August 8, 1961; Castillo vs. Laberinto, CA-G.R. No. 18118-R,
December 20, 1961; and 13 C.J. 372-373, as well as the several facts and
circumstances appreciated by the trial court as supporting appellees' case.
thereby in effect sustaining — barring only its ruling on prescription — the
judgment and findings of the trial court, including that of bad faith on the part
of the Narcisos in purchasing the land in question. We therefore see no need
to further remand this case to the Court of Appeals for a ruling on this point, as
appellees request in their brief in the event we hold the contract of 1936 to be
inexistent as regards the western portion of the land.
In view of defendants' bad faith under the circumstances we deem
it just and equitable to award, in plaintiffs' favor, attorneys' fees on appeal, in
the amount of P1,000.00 as prayed for in the counterclaim.
Wherefore, the decision of the Court of Appeals is hereby reversed
and set aside, and another one is hereby rendered affirming in toto the
judgment of the Court of First Instance a quo, with attorney's fees on appeal in
favor of appellants in the amount of P1,000.00, plus the costs, both against the
private appellees. So ordered.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Dizon, Regala,
Makalintal, Zaldivar and Sanchez, JJ., concur.
G.R. No. L-31271 April 29, 1974
ROMEO MARTINEZ and LEONOR SUAREZ vs. HON. COURT OF APPEALS,
SECRETARY and UNDERSECRETARY OF PUBLIC WORKS & COMMUNICATIONS
ESGUERRA, J.:p
Petition for review by certiorari of the judgment of the Court of
Appeals dated November 17, 1969 in its CA-G.R. 27655-R which reverses the
judgment of the Court of First Instance of Pampanga in favor of petitioners-
appellants against the Secretary and Undersecretary of Public Works &
Communications in the case instituted to annul the order of November 25,
1958 of respondent Secretary of Public Works & Communications directing the
removal by the petitioners of the dikes they had constructed on Lot No. 15856
of the Register of Deeds of Pampanga, which order was issued pursuant to the
provisions of Republic Act No. 2056. The dispositive portion of the judgment of
reversal of the Court of Appeals reads as follows:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the judgment
appealed from is hereby reversed, and another entered: [1] upholding the
validity of the decision reached by the respondent officials in the administrative
case; [2] dissolving the injunction issued by the Court below; and [3] cancelling
the registration of Lot No. 2, the disputed area, and ordering its reconveyance
to the public domain. No costs in this instance.
The background facts are stated by the Court of Appeals as follows:
The spouses Romeo Martinez and Leonor Suarez, now petitioners-appellees,
are the registered owners of two (2) parcels of land located in Lubao,
Pampanga, covered by transfer certificate of title No. 15856 of the Register of
Deeds of the said province. Both parcels of land are fishponds. The property
involved in the instant case is the second parcel mentioned in the above-named
transfer certificate of title.
The disputed property was originally owned by one Paulino
Montemayor, who secured a "titulo real" over it way back in 1883. After the
death of Paulino Montemayor the said property passed to his successors-in-
interest, Maria Montemayor and Donata Montemayor, who in turn, sold it, as
well as the first parcel, to a certain Potenciano Garcia.
Because Potenciano Garcia was prevented by the then municipal
president of Lubao, Pedro Beltran, from restoring the dikes constructed on the
contested property, the former, on June 22, 1914, filed Civil Case No. 1407 with
the Court of First Instance against the said Pedro Beltran to restrain the latter
in his official capacity from molesting him in the possession of said second
parcel, and on even date, applied for a writ of preliminary injunction, which was
issued against said municipal president. The Court, by decision promulgated
June 12, 1916, declared permanent the preliminary injunction, which, decision,
on appeal, was affirmed by the Supreme Court on August 21, 1918. From June
22, 1914, the dikes around the property in question remained closed until a
portion thereof was again opened just before the outbreak of the Pacific War.
On April 17, 1925. Potenciano Garcia applied for the registration of
both parcels of land in his name, and the Court of First Instance of Pampanga,
sitting as land registration court, granted the registration over and against the
opposition of the Attorney-General and the Director of Forestry. Pursuant to
the Court's decision, original certificate of title No. 14318, covering said parcels
1 and 2 was issued to the spouses Potenciano Garcia and Lorenza Sioson.
These parcels of land were subsequently bought by Emilio Cruz de
Dios in whose name transfer certificate of title No. 1421 was first issued on
November 9, 1925.
Thereafter, the ownership of these properties changed hands until
eventually they were acquired by the herein appellee spouses who hold them
by virtue of transfer certificate of title No. 15856.
To avoid any untoward incident, the disputants agreed to refer the
matter to the Committee on Rivers and Streams, by then composed of the
Honorable Pedro Tuason, at that time Secretary of Justice, as chairman, and the
Honorable Salvador Araneta and Vicente Orosa, Secretary of Agriculture and
National Resources and Secretary of Public Works and Communications,
respectively, as members. This committee thereafter appointed a Sub-
Committee to investigate the case and to conduct an ocular inspection of the
contested property, and on March 11, 1954, said Sub-Committee submitted its
report to the Committee on Rivers and Streams to the effect that Parcel No. 2
of transfer certificate of title No. 15856 was not a public river but a private
fishpond owned by the herein spouses.
On July 7, 1954, the Committee on Rivers and Streams rendered its
decision the dispositive part of which reads:
"In view of the foregoing considerations, the spouses Romeo
Martinez and Leonor Suarez should be restored to the exclusive possession, use
and enjoyment of the creek in question which forms part of their registered
property and the decision of the courts on the matter be given full force and
effect."
The municipal officials of Lubao, led by Acting Mayor Mariano
Zagad, apparently refused to recognize the above decision, because on
September 1, 1954, the spouses Romeo Martinez and Leonor Suarez instituted
Civil Case No. 751 before the Court of First Instance of Pampanga against said
Mayor Zagad, praying that the latter be enjoined from molesting them in their
possession of their property and in the construction of the dikes therein. The
writ of preliminary injunction applied for was issued against the respondent
municipal Mayor, who immediately elevated the injunction suit for review to
the Supreme Court, which dismissed Mayor Zagad's petition on September 7,
1953. With this dismissal order herein appellee spouses proceeded to construct
the dikes in the disputed parcel of land.
Some four (4) years later, and while Civil Case No. 751 was still
pending the Honorable Florencio Moreno, then Secretary of Public Works and
Communications, ordered another investigation of the said parcel of land,
directing the appellees herein to remove the dikes they had constructed, on
the strength of the authority vested in him by Republic Act No. 2056, approved
on June 13, 1958, entitled "An Act To Prohibit, Remove and/or Demolish the
Construction of Dams. Dikes, Or Any Other Walls In Public Navigable Waters, Or
Waterways and In Communal Fishing Grounds, To Regulate Works in Such
Waters or Waterways And In Communal Fishing Grounds, And To Provide
Penalties For Its Violation, And For Other Purposes. 1 The said order which gave
rise to the instant proceedings, embodied a threat that the dikes would be
demolished should the herein appellees fail to comply therewith within thirty
(30) days.
The spouses Martinez replied to the order by commencing on
January 2, 1959 the present case, which was decided in their favor by the lower
Court in a decision dated August 10, 1959, the dispositive part of which reads:
"WHEREFORE, in view of the foregoing considerations, the Court
hereby declares the decision, Exhibit S, rendered by the Undersecretary of
Public Works and Communications null and void; declares the preliminary
injunction, hereto for issued, permanent, and forever enjoining both
respondents from molesting the spouses Romeo Martinez and Leonor Suarez
in their possession, use and enjoyment of their property described in Plan Psu-
9992 and referred to in their petition."
"Without pronouncement as to costs."
"SO ORDERED."
As against this judgment respondent officials of the Department of
Public Works and Communications took the instant appeal, contending that the
lower Court erred:
1. In holding that then Senator Rogelio de la Rosa, complainant in the
administrative case, is not an interested party and his letter-complaint dated
August 15, 1958 did not confer jurisdiction upon the respondent
Undersecretary of Public Works and Communications to investigate the said
administrative case;
2. In holding that the duty to investigate encroachments upon public rivers
conferred upon the respondent Secretary under Republic Act No. 7056 cannot
be lawfully delegated by him to his subordinates;
3. In holding that the investigation ordered by the respondent Secretary in this
case is illegal on the ground that the said respondent Secretary has arrogated
unto himself the power, which he does not possess, of reversing, making
nugatory, and setting aside the two lawful decisions of the Court Exhibits K and
I, and even annulling thereby, the one rendered by the highest Tribunal of the
land;
4. In not sustaining respondent's claim that petitioners have no cause of action
because the property in dispute is a public river and in holding that the said
claim has no basis in fact and in law;
5. In not passing upon and disposing of respondent's counterclaim;
6. In not sustaining respondent's claim that the petition should not have been
entertained on the ground that the petitioners have not exhausted
administrative remedies; and
7. In holding that the decision of the respondents is illegal on the ground that
it violates the principles that laws shall have no retroactive effect unless the
contrary is provided and in holding that the said Republic Act No. 2056 is
unconstitutional on the ground that respondents' threat of prosecuting
petitioners under Section 3 thereof for acts done four years before its
enactment renders the said law ex post facto.
The Court of Appeals sustained the above-mentioned assignment of
errors committed by the Court of First Instance of Pampanga and, as previously
stated, reversed the judgment of the latter court. From this reversal this appeal
by certiorari was taken, and before this Court, petitioners-appellants assigned
the following errors allegedly committed by the Court of Appeals:
1. THE COURT OF APPEALS ERRED IN DECLARING IN THE INSTANT CASE THAT
PARCEL NO. 2 OF TRANSFER CERTIFICATE OF TITLE NO. 15856 IS A PUBLIC RIVER
AND ORDERING THE CANCELLATION OF ITS REGISTRATION BECAUSE THIS
CONSTITUTES A COLLATERAL ATTACK ON A TORRENS TITLE IN VIOLATION OF
THE LAW AND THE WELL-SETTLED JURISPRUDENCE ON THE MATTER.
2. THE COURT OF APPEALS ERRED IN REOPENING AND RE-LITIGATING THE
ISSUE AS TO WHETHER OR NOT LOT NO. 2 OF TRANSFER CERTIFICATE OF TITLE
NO. 15856 REGISTER OF DEEDS OF PAMPANGA, IS A PUBLIC RIVER
NOTWITHSTANDING THE FACT THAT THIS ISSUE HAS BEEN LONG RESOLVED
AND SETTLED BY THE LAND REGISTRATION COURT OF PAMPANGA IN LAND
REGISTRATION PROCEEDING NO. 692 AND IS NOW RES JUDICATA.
3. THE COURT OF APPEALS ERRED IN ORDERING THE CANCELLATION OF THE
REGISTRATION OF LOT NO. 2 OF TRANSFER CERTIFICATE OF TITLE NO. 15856
NOTWITHSTANDING THE FACT THAT THE TORRENS TITLE COVERING IT HAS
BEEN VESTED IN THE PETITIONERS WHO ARE THE SEVENTH OF THE SUCCESSIVE
INNOCENT PURCHASERS THEREOF AND WHO IN PURCHASING THE SAME
RELIED ON THE PRINCIPLE THAT THE PERSONS DEALING WITH REGISTERED
LAND NEED NOT GO BEHIND THE REGISTER TO DETERMINE THE CONDITION OF
THE PROPERTY.
The 1st and 2nd assignment of errors, being closely related, will be
taken up together.
The ruling of the Court of Appeals that Lot No. 2 covered by Transfer
Certificate of Title No. 15856 of the petitioners-appellants is a public stream
and that said title should be cancelled and the river covered reverted to public
domain, is assailed by the petitioners-appellants as being a collateral attack on
the indefeasibility of the torrens title originally issued in 1925 in favor of the
petitioners-appellants' predecessor-in-interest, Potenciano Garcia, which is
violative of the rule of res judicata. It is argued that as the decree of registration
issued by the Land Registration Court was not re-opened through a petition for
review filed within one (1) year from the entry of the decree of title, the
certificate of title issued pursuant thereto in favor of the appellants for the land
covered thereby is no longer open to attack under Section 38 of the Land
Registration Act (Act 496) and the jurisprudence on the matter established by
this Tribunal. Section 38 of the Land Registration Act cited by appellants
expressly makes a decree of registration, which ordinarily makes the title
absolute and indefeasible, subject to the exemption stated in Section 39 of the
said Act among which are: "liens, claims or rights arising or existing under the
laws or Constitution of the United States or of the Philippine Islands which the
statute of the Philippine Islands cannot require to appear of record in the
registry."
At the time of the enactment of Section 496, one right recognized
or existing under the law is that provided for in Article 339 of the old Civil Code
which reads as follows:
Property of public ownership is:
1. That destined to the public use, such as roads, canals, rivers, torrents, ports,
and bridges constructed by the State, and banks shores, roadsteads, and that
of a similar character. (Par. 1)
The above-mentioned properties are parts of the public domain
intended for public use, are outside the commerce of men and, therefore, not
subject to private appropriation. ( 3 Manresa, 6th ed. 101-104.)
In Ledesma v. Municipality of Iloilo, 49 Phil. 769, this Court held:
A simple possession of a certificate of title under the Torrens system does not
necessarily make the possessor a true owner of all the property described
therein. If a person obtains title under the Torrens system which includes by
mistake or oversight, lands which cannot be registered under the Torrens
system, he does not by virtue of said certificate alone become the owner of the
land illegally included.
In Mercado v. Municipal President of Macabebe, 59 Phil. 592, it was
also said:
It is useless for the appellant now to allege that she has obtained
certificate of title No. 329 in her favor because the said certificate does not
confer upon her any right to the creek in question, inasmuch as the said creek,
being of the public domain, is included among the various exceptions
enumerated in Section 39 of Act 496 to which the said certificate is subject by
express provision of the law.
The same ruling was laid down in Director of Lands v. Roman
Catholic Bishop of Zamboanga, 61 Phil. 644, as regards public plaza.
In Dizon, et al. v. Rodriguez, et al., G.R. No. L-20300-01 and G.R. No.
L-20355-56, April 30, 1965, 20 SCRA 704, it was held that the incontestable and
indefeasible character of a Torrens certificate of title does not operate when
the land covered thereby is not capable of registration.
It is, therefore, clear that the authorities cited by the appellants as
to the conclusiveness and incontestability of a Torrens certificate of title do not
apply here. The Land Registration Court has no jurisdiction over non-
registerable properties, such as public navigable rivers which are parts of the
public domain, and cannot validly adjudge the registration of title in favor of a
private applicant. Hence, the judgment of the Court of First Instance of
Pampanga as regards the Lot No. 2 of Certificate of Title No. 15856 in the name
of petitioners-appellants may be attacked at any time, either directly or
collaterally, by the State which is not bound by any prescriptive period provided
for by the Statute of Limitations (Article 1108, par. 4, new Civil Code). The right
of reversion or reconveyance to the State of the public properties fraudulently
registered and which are not capable of private appropriation or private
acquisition does not prescribe. (Republic v. Ramona Ruiz, et al., G.R. No. L-
23712, April 29, 1968, 23 SCRA 348; Republic v. Ramos, G.R. No.
L-15484, January 31, 1963, 7 SCRA 47.)
When it comes to registered properties, the jurisdiction of the
Secretary of Public Works & Communications under Republic Act 2056 to order
the removal or obstruction to navigation along a public and navigable creek or
river included therein, has been definitely settled and is no longer open to
question (Lovina v. Moreno, G.R. No L-17821, November 29, 1963, 9 SCRA 557;
Taleon v. Secretary of Public Works & Communications G.R. No. L-24281, May
16, 1961, 20 SCRA 69, 74).
The evidence submitted before the trial court which was passed
upon by the respondent Court of Appeals shows that Lot No. 2 (Plan Psu 992)
of Transfer Certificate of Title No. 15856, is a river of the public domain. The
technical description of both Lots Nos. 1 and 2 appearing in Original Certificate
of Title No. 14318 of the Register of Deeds of Pampanga, from which the
present Transfer Certificate of Title No. 15856 was derived, confirms the fact
that Lot No. 2 embraced in said title is bounded practically on all sides by rivers.
As held by the Court of First Instance of Pampanga in Civil Case No. 1247 for
injunction filed by the petitioners' predecessors-in-interest against the
Municipal Mayor of Lubao and decided in 1916 (Exh. "L"), Lot No. 2 is a branch
of the main river that has been covered with water since time immemorial and,
therefore, part of the public domain. This finding having been affirmed by the
Supreme Court, there is no longer any doubt that Lot No. 2 of Transfer
Certificate of Title No. 15856 of petitioners is a river which is not capable of
private appropriation or acquisition by prescription. (Palanca v. Com. of the
Philippines, 69 Phil. 449; Meneses v. Com. of the Philippines, 69 Phil. 647).
Consequently, appellants' title does not include said river.
II
As regards the 3rd assignment of error, there is no weight in the
appellants' argument that, being a purchaser for value and in good faith of Lot
No. 2, the nullification of its registration would be contrary to the law and to
the applicable decisions of the Supreme Court as it would destroy the stability
of the title which is the core of the system of registration. Appellants cannot be
deemed purchasers for value and in good faith as in the deed of absolute
conveyance executed in their favor, the following appears:
6. Que la segunda parcela arriba descrita y mencionada esta actualmente
abierta, sin malecones y excluida de la primera parcela en virtud de la Orden
Administrative No. 103, tal como fue enmendada, del pasado regimen o
Gobierno.
7. Que los citados compradores Romeo Martinez y Leonor Suarez se encargan
de gestionar de las autoridades correspondientes para que la citada segunda
parcela pueda ser convertida de nuevo en pesqueria, corriendo a cuenta y
cargo de los mismos todos los gastos.
8. Que en el caso de que dichos compradores no pudiesen conseguir sus
propositos de convertir de nuevo en pesquera la citada segunda parcela, los
aqui vendedores no devolveran ninguna cantidad de dinero a los referidos
compradores; este es, no se disminuiriat el precio de esta venta. (Exh. 13-a, p.
52, respondents record of exhibits)
These stipulations were accepted by the petitioners-appellants in
the same conveyance in the following terms:
Romeo Martinez y Leonor Suarez, mayores de edad, filipinos y
residentes en al Barrio de Julo Municipio de Malabon, Provincia de Rizal, por la
presente, declaran que estan enterados del contenido de este documento y lo
aceptan en los precisos terminos en que arriba uedan consignados. (Exh. 13-
a, ibid)
Before purchasing a parcel of land, it cannot be contended that the
appellants who were the vendees did not know exactly the condition of the
land that they were buying and the obstacles or restrictions thereon that may
be put up by the government in connection with their project of converting Lot
No. 2 in question into a fishpond. Nevertheless, they willfully and voluntarily
assumed the risks attendant to the sale of said lot. One who buys something
with knowledge of defect or lack of title in his vendor cannot claim that he
acquired it in good faith (Leung Lee v. Strong Machinery Co., et al., 37 Phil. 664).
The ruling that a purchaser of a registered property cannot go
beyond the record to make inquiries as to the legality of the title of the
registered owner, but may rely on the registry to determine if there is no lien
or encumbrances over the same, cannot be availed of as against the law and
the accepted principle that rivers are parts of the public domain for public use
and not capable of private appropriation or acquisition by prescription.
FOR ALL THE FOREGOING, the judgment of the Court of Appeals
appealed from is in accordance with law, and the same is hereby affirmed with
costs against the petitioners-appellants.
Makalintal, C.J., Castro, Teehankee and Muñoz Palma, JJ., concur.
Makasiar, J., is on leave.
G.R. No. L-24732 April 30, 1968
PIO SIAN MELLIZA vs. CITY OF ILOILO, UNIVERSITY OF THE PHILIPPINES and THE
COURT APPEALS
BENGZON, J.P., J.:
Juliana Melliza during her lifetime owned, among other properties,
three parcels of residential land in Iloilo City registered in her name under
Original Certificate of Title No. 3462. Said parcels of land were known as Lots
Nos. 2, 5 and 1214. The total area of Lot No. 1214 was 29,073 square meters.
On November 27, 1931 she donated to the then Municipality of Iloilo, 9,000
square meters of Lot 1214, to serve as site for the municipal hall. 1 The donation
was however revoked by the parties for the reason that the area donated was
found inadequate to meet the requirements of the development plan of the
municipality, the so-called "Arellano Plan". 2
 Subsequently, Lot No. 1214 was divided by Certeza Surveying Co.,
Inc. into Lots 1214-A and 1214-B. And still later, Lot 1214-B was further divided
into Lots 1214-B-1, Lot 1214-B-2 and Lot 1214-B-3. As approved by the Bureau
of Lands, Lot 1214-B-1 with 4,562 square meters, became known as Lot 1214-
B; Lot 1214-B-2, with 6,653 square meters, was designated as Lot 1214-C; and
Lot 1214-B-13, with 4,135 square meters, became Lot 1214-D.
On November 15, 1932 Juliana Melliza executed an instrument
without any caption containing the following:
Que en consideracion a la suma total de SEIS MIL CUATRO CIENTOS
VEINTIDOS PESOS (P6,422.00), moneda filipina que por la presente declaro
haber recibido a mi entera satisfaccion del Gobierno Municipal de Iloilo, cedo y
traspaso en venta real y difinitiva a dicho Gobierno Municipal de Iloilo los lotes
y porciones de los mismos que a continuacion se especifican a saber: el lote No.
5 en toda su extension; una porcion de 7669 metros cuadrados del lote No. 2,
cuya porcion esta designada como sub-lotes Nos. 2-B y 2-C del piano de
subdivision de dichos lotes preparado por la Certeza Surveying Co., Inc., y una
porcion de 10,788 metros cuadrados del lote No. 1214 — cuya porcion esta
designada como sub-lotes Nos. 1214-B-2 y 1214-B-3 del mismo plano de
subdivision.
Asimismo nago constar que la cesion y traspaso que ariba se mencionan es de
venta difinitiva, y que para la mejor identificacion de los lotes y porciones de
los mismos que son objeto de la presente, hago constar que dichos lotes y
porciones son los que necesita el Gobierno Municipal de Iloilo para la
construccion de avenidas, parques y City Hall site del Municipal Government
Center de iloilo, segun el plano Arellano.
On January 14, 1938 Juliana Melliza sold her remaining interest in
Lot 1214 to Remedios Sian Villanueva who thereafter obtained her own
registered title thereto, under Transfer Certificate of Title No. 18178. Remedios
in turn on November 4, 1946 transferred her rights to said portion of land to
Pio Sian Melliza, who obtained Transfer Certificate of Title No. 2492 thereover
in his name. Annotated at the back of Pio Sian Melliza's title certificate was the
following:
... (a) that a portion of 10,788 square meters of Lot 1214 now
designated as Lots Nos. 1214-B-2 and 1214-B-3 of the subdivision plan belongs
to the Municipality of Iloilo as per instrument dated November 15, 1932....
On August 24, 1949 the City of Iloilo, which succeeded to the Municipality of
Iloilo, donated the city hall site together with the building thereon, to the
University of the Philippines (Iloilo branch). The site donated consisted of Lots
Nos. 1214-B, 1214-C and 1214-D, with a total area of 15,350 square meters,
more or less.
Sometime in 1952, the University of the Philippines enclosed the
site donated with a wire fence. Pio Sian Melliza thereupon made
representations, thru his lawyer, with the city authorities for payment of the
value of the lot (Lot 1214-B). No recovery was obtained, because as alleged by
plaintiff, the City did not have funds (p. 9, Appellant's Brief.)
The University of the Philippines, meanwhile, obtained Transfer
Certificate of Title No. 7152 covering the three lots, Nos. 1214-B, 1214-C and
1214-D.
On December 10, 1955 Pio Sian Melliza filed an action in the Court
of First Instance of Iloilo against Iloilo City and the University of the Philippines
for recovery of Lot 1214-B or of its value.
The defendants answered, contending that Lot 1214-B was included
in the public instrument executed by Juliana Melliza in favor of Iloilo
municipality in 1932. After stipulation of facts and trial, the Court of First
Instance rendered its decision on August 15, 1957, dismissing the complaint.
Said court ruled that the instrument executed by Juliana Melliza in favor of Iloilo
municipality included in the conveyance Lot 1214-B. In support of this
conclusion, it referred to the portion of the instrument stating:
Asimismo hago constar que la cesion y traspaso que arriba se
mencionan es de venta difinitiva, y que para la major identificacion de los lotes
y porciones de los mismos que son objeto de la presente, hago constar que
dichos lotes y porciones son los que necesita el Gobierno municipal de Iloilo
para la construccion de avenidas, parques y City Hall site del Municipal
Government Center de Iloilo, segun el plano Arellano.
and ruled that this meant that Juliana Melliza not only sold Lots
1214-C and 1214-D but also such other portions of lots as were necessary for
the municipal hall site, such as Lot 1214-B. And thus it held that Iloilo City had
the right to donate Lot 1214-B to the U.P.
Pio Sian Melliza appealed to the Court of Appeals. In its decision on
May 19, 1965, the Court of Appeals affirmed the interpretation of the Court of
First Instance, that the portion of Lot 1214 sold by Juliana Melliza was not
limited to the 10,788 square meters specifically mentioned but included
whatever was needed for the construction of avenues, parks and the city hall
site. Nonetheless, it ordered the remand of the case for reception of evidence
to determine the area actually taken by Iloilo City for the construction of
avenues, parks and for city hall site.
The present appeal therefrom was then taken to Us by Pio Sian
Melliza. Appellant maintains that the public instrument is clear that only Lots
Nos. 1214-C and 1214-D with a total area of 10,788 square meters were the
portions of Lot 1214 included in the sale; that the purpose of the second
paragraph, relied upon for a contrary interpretation, was only to better identify
the lots sold and none other; and that to follow the interpretation accorded the
deed of sale by the Court of Appeals and the Court of First Instance would
render the contract invalid because the law requires as an essential element of
sale, a "determinate" object (Art. 1445, now 1448, Civil Code).
Appellees, on the other hand, contend that the present appeal
improperly raises only questions of fact. And, further, they argue that the
parties to the document in question really intended to include Lot 1214-B
therein, as shown by the silence of the vendor after Iloilo City exercised
ownership thereover; that not to include it would have been absurd, because
said lot is contiguous to the others admittedly included in the conveyance, lying
directly in front of the city hall, separating that building from Lots 1214-C and
1214-D, which were included therein. And, finally, appellees argue that the
sale's object was determinate, because it could be ascertained, at the time of
the execution of the contract, what lots were needed by Iloilo municipality for
avenues, parks and city hall site "according to the Arellano Plan", since the
Arellano plan was then already in existence.
The appeal before Us calls for the interpretation of the public
instrument dated November 15, 1932. And interpretation of such contract
involves a question of law, since the contract is in the nature of law as between
the parties and their successors-in-interest.
At the outset, it is well to mark that the issue is whether or not the
conveyance by Juliana Melliza to Iloilo municipality included that portion of Lot
1214 known as Lot 1214-B. If not, then the same was included, in the
instrument subsequently executed by Juliana Melliza of her remaining interest
in Lot 1214 to Remedios Sian Villanueva, who in turn sold what she thereunder
had acquired, to Pio Sian Melliza. It should be stressed, also, that the sale to
Remedios Sian Villanueva — from which Pio Sian Melliza derived title — did not
specifically designate Lot 1214-B, but only such portions of Lot 1214 as were not
included in the previous sale to Iloilo municipality (Stipulation of Facts, par. 5,
Record on Appeal, p. 23). And thus, if said Lot 1214-B had been included in the
prior conveyance to Iloilo municipality, then it was excluded from the sale to
Remedios Sian Villanueva and, later, to Pio Sian Melliza.
The point at issue here is then the true intention of the parties as to
the object of the public instrument Exhibit "D". Said issue revolves on the
paragraph of the public instrument aforequoted and its purpose, i.e., whether
it was intended merely to further describe the lots already specifically
mentioned, or whether it was intended to cover other lots not yet specifically
mentioned.
First of all, there is no question that the paramount intention of the parties was
to provide Iloilo municipality with lots sufficient or adequate in area for the
construction of the Iloilo City hall site, with its avenues and parks. For this
matter, a previous donation for this purpose between the same parties was
revoked by them, because of inadequacy of the area of the lot donated.
Secondly, reading the public instrument in toto, with special
reference to the paragraphs describing the lots included in the sale, shows that
said instrument describes four parcels of land by their lot numbers and area;
and then it goes on to further describe, not only those lots already mentioned,
but the lots object of the sale, by stating that said lots are the ones needed for
the construction of the city hall site, avenues and parks according to the
Arellano plan. If the parties intended merely to cover the specified lots — Lots
2, 5, 1214-C and 1214-D, there would scarcely have been any need for the next
paragraph, since these lots are already plainly and very clearly described by
their respective lot number and area. Said next paragraph does not really add
to the clear description that was already given to them in the previous one.
It is therefore the more reasonable interpretation, to view it as
describing those other portions of land contiguous to the lots
aforementioned that, by reference to the Arellano plan, will be found needed
for the purpose at hand, the construction of the city hall site.
Appellant however challenges this view on the ground that the
description of said other lots in the aforequoted second paragraph of the public
instrument would thereby be legally insufficient, because the object would
allegedly not be determinate as required by law.
Such contention fails on several counts. The requirement of the law
that a sale must have for its object a determinate thing, is fulfilled as long as, at
the time the contract is entered into, the object of the sale is capable of being
made determinate without the necessity of a new or further agreement
between the parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The
specific mention of some of the lots plus the statement that the lots object of
the sale are the ones needed for city hall site, avenues and parks, according to
the Arellano plan, sufficiently provides a basis, as of the time of the execution
of the contract, for rendering determinate said lots without the need of a new
and further agreement of the parties.
The Arellano plan was in existence as early as 1928. As stated, the
previous donation of land for city hall site on November 27, 1931 was revoked
on March 6, 1932 for being inadequate in area under said Arellano plan.
Appellant claims that although said plan existed, its metes and bounds were
not fixed until 1935, and thus it could not be a basis for determining the lots
sold on November 15, 1932. Appellant however fails to consider that
the area needed under that plan for city hall site was then already known; that
the specific mention of some of the lots covered by the sale in effect fixed the
corresponding location of the city hall site under the plan; that, therefore,
considering the said lots specifically mentioned in the public instrument Exhibit
"D", and the projected city hall site, with its area, as then shown in the Arellano
plan (Exhibit 2), it could be determined which, and how much of the portions
of land contiguous to those specifically named, were needed for the
construction of the city hall site.
And, moreover, there is no question either that Lot 1214-B is
contiguous to Lots 1214-C and 1214-D, admittedly covered by the public
instrument. It is stipulated that, after execution of the contract Exhibit "D", the
Municipality of Iloilo possessed it together with the other lots sold. It sits
practically in the heart of the city hall site. Furthermore, Pio Sian Melliza, from
the stipulation of facts, was the notary public of the public instrument. As such,
he was aware of its terms. Said instrument was also registered with the Register
of Deeds and such registration was annotated at the back of the corresponding
title certificate of Juliana Melliza. From these stipulated facts, it can be inferred
that Pio Sian Melliza knew of the aforesaid terms of the instrument or is
chargeable with knowledge of them; that knowing so, he should have examined
the Arellano plan in relation to the public instrument Exhibit "D"; that,
furthermore, he should have taken notice of the possession first by the
Municipality of Iloilo, then by the City of Iloilo and later by the University of the
Philippines of Lot 1214-B as part of the city hall site conveyed under that public
instrument, and raised proper objections thereto if it was his position that the
same was not included in the same. The fact remains that, instead, for twenty
long years, Pio Sian Melliza and his predecessors-in-interest, did not object to
said possession, nor exercise any act of possession over Lot 1214-B. Applying,
therefore, principles of civil law, as well as laches, estoppel, and equity, said lot
must necessarily be deemed included in the conveyance in favor of Iloilo
municipality, now Iloilo City.
WHEREFORE, the decision appealed from is affirmed insofar as it
affirms that of the Court of First Instance, and the complaint in this case is
dismissed. No costs. So ordered.
Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles
and Fernando, JJ., concur.
Concepcion , C.J., is on leave.
G.R. No. L-26872 July 25, 1975
VILLONCO REALTY COMPANY vs. BORMAHECO, INC., FRANCISCO N.
CERVANTES and ROSARIO N. CERVANTES
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 adjacent to the
property of Villonco Realty Company situated at 219 Buendia Avenue.
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".
In the course of the negotiations, the brothers Romeo Villonco and
Teofilo Villonco conferred with Cervantes in his office to discuss the price and
terms of the sale. Later, Cervantes "went to see Villonco for the same reason
until some agreement" was arrived at. On a subsequent occasion, Cervantes,
accompanied by Edith Perez de Tagle, discussed again the terms of the sale with
Villonco.
During the negotiations, Villonco Realty Company assumed that the
lots belonged to Bormaheco, Inc. and that Cervantes was duly authorized to sell
the same. Cervantes did not disclose to the broker and to Villonco Realty
Company that the lots were conjugal properties of himself and his wife and that
they were mortgaged to the DBP.
Bormaheco, Inc., through Cervantes, made a written offer dated
February 12, 1964, to Romeo Villonco for the sale of the property. The offer
reads (Exh. B):
BORMAHECO, INC.
February 12,1964
Mr. Romeo
Villonco Villonco Building
Buendia Avenue
Makati, Rizal.
Dear Mr. Villonco:
This is with reference to our telephone conversation this noon on the matter
of the sale of our propertylocated at Buendia Avenue, with a total area of 3,500
sq. m., under the following conditions:
(1) That we are offering to sell to you the above property at the price of P400.00
per square meter;
(2) That a deposit of P100,000.00 must be placed as earnest money on the
purchase of the above property which will become part payment of the
property in the event that the sale is consummated;
(3) That this sale is to be consummated only after I shall have also
consummated my purchase of another property located at Sta. Ana, Manila;
(4) That if my negotiations with said property will not be consummated by
reason beyond my control, I will return to you your deposit of P100,000 and the
sale of my property to you will not also be consummated; and
(5) That final negotiations on both properties can be definitely known after 45
days.
If the above terms is (are) acceptable to your Board, please issue out the said
earnest money in favor of Bormaheco, Inc., and deliver the same thru the
bearer, Miss Edith Perez de Tagle.
Very truly yours,
SGD. FRANCISCO N. CERVANTES
President
The property mentioned in Bormaheco's letter was the land of the
National Shipyards & Steel Corporation (Nassco), with an area of twenty
thousand square meters, located at Punta, Sta. Ana, Manila. At the bidding held
on January 17, 1964 that land was awarded to Bormaheco, Inc., the highest
bidder, for the price of P552,000. The Nassco Board of Directors in its resolution
of February 18, 1964 authorized the General Manager to sign the necessary
contract (Exh. H).
On February 28, 1964, the Nassco Acting General Manager wrote a
letter to the Economic Coordinator, requesting approval of that resolution. The
Acting Economic Coordinator approved the resolution on March 24, 1964 (Exh.
1).
In the meanwhile, Bormaheco, Inc. and Villonco Realty Company
continued their negotiations for the sale of the Buendia Avenue property.
Cervantes and Teofilo Villonco had a final conference on February 27, 1964. As
a result of that conference Villonco Realty Company, through Teofilo Villonco,
in its letter of March 4, 1964 made a revised counter- offer (Romeo Villonco's
first counter-offer was dated February 24, 1964, Exh. C) for the purchase of the
property. The counter-offer was accepted by Cervantes as shown in Exhibit D,
which is quoted below:
VILLONCO REALTY COMPANY
V. R. C. Building
219 Buendia Avenue, Makati,
Rizal, Philippines
March 4, 1964
Mr. Francisco Cervantes.
Bormaheco, Inc.
245 Buendia Avenue
Makati, Rizal
Dear Mr. Cervantes:
In reference to the letter of Miss E. Perez de Tagle dated
February 12th and 26, 1964 in respect to the terms and conditions on the
purchase of your property located at Buendia Ave., Makati, Rizal, with a total
area of 3,500 sq. meters., we hereby revise our offer, as follows:
1. That the price of the property shall be P400.00 per sq. m., including the
improvements thereon;
2. That a deposit of P100,000.00 shall be given to you as earnest money which
will become as part payment in the event the sale is consummated;
3. This sale shall be cancelled, only if your deal with another property in Sta.
Ana shall not be consummated and in such case, the P100,000-00 earnest
money will be returned to us with a 10% interest p.a. However, if our deal with
you is finalized, said P100,000.00 will become as part payment for the purchase
of your property without interest:
4. The manner of payment shall be as follows:
a. P100,000.00 earnest money and 650,000.00 as part of the down payment,
or P750,000.00 as total down payment
b. The balance is payable as follows:
P100,000.00 after 3 months
125,000.00 -do-
212,500.00 -do-
P650,000.00 Total
As regards to the other conditions which we have discussed during our last
conference on February 27, 1964, the same shall be finalized upon preparation
of the contract to sell.*
If the above terms and conditions are acceptable to you, kindly sign your
conformity hereunder. Enclosed is our check for ONE HUNDRED THOUSAND
(P100,000.00) PESOS, MBTC Check No. 448314, as earnest money.
Very truly yours,
VILLONCO REALTY COMPANY
(Sgd.) TEOFILO VILLONCO
CONFORME:
BORMAHECO, INC.
(Sgd.) FRANCISCO CERVANTES
That this sale shall be subject to favorable consummation of a property in Sta.
Ana we are negotiating.
(Sgd.) FRANCISCO CERVANTES
The check for P100,000 (Exh. E) mentioned in the foregoing letter-
contract 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).**
Cervantes in his letter of April 6, 1964, a reply to Miss Tagle's letter,
alleged that the forty-five day period had already expired and the sale to
Bormaheco, Inc. of the Punta property had not been consummated. Cervantes
said that his letter was a "manifestation that we are no longer interested to sell"
the Buendia Avenue property to Villonco Realty Company (Annex I of
Stipulation of Facts). The latter was furnished with a copy of that letter.
In a letter dated April 7, 1964 Villonco Realty Company returned the
two checks to Bormaheco, Inc., stating that the condition for the cancellation
of the contract had not arisen and at the same time announcing that an action
for breach of contract would be filed against Bormaheco, Inc. (Annex G of
Stipulation of Facts).1äwphï1.ñët
On that same date, April 7, 1964 Villonco Realty Company filed the
complaint (dated April 6) for specific performance against Bormaheco, Inc. Also
on that same date, April 7, at eight-forty-five in the morning, a notice of lis
pendens was annotated on the titles of the said lots.
Bormaheco, Inc. in its answers dated May 5 and 25, 1964 pleaded
the defense that the perfection of the contract of sale was subject to the
conditions (a) "that final acceptance or not shall be made after 45 days" (sic)
and (b) that Bormaheco, Inc. "acquires the Sta. Ana property".
On June 2, 1964 or during the pendency of this case, the Nassco
Acting General Manager wrote to Bormaheco, Inc., advising it that the Board of
Directors and the Economic Coordinator had approved the sale of the Punta lot
to Bormaheco, Inc. and requesting the latter to send its duly authorized
representative to the Nassco for the signing of the deed of sale (Exh. 1).
The deed of sale for the Punta land was executed on June 26, 1964. Bormaheco,
Inc. was represented by Cervantes (Exh. J. See Bormaheco, Inc. vs. Abanes, L-
28087, July 31, 1973, 52 SCRA 73).
In view of the disclosure in Bormaheco's amended answer that the
three lots were registered in the names of the Cervantes spouses and not in the
name of Bormaheco, Inc., Villonco Realty Company on July 21, 1964 filed an
amended complaint impleading the said spouses as defendants. Bormaheco,
Inc. and the Cervantes spouses filed separate answers.
As of January 15, 1965 Villonco Realty Company had paid to the
Manufacturers' Bank & Trust Company the sum of P8,712.25 as interests on the
overdraft line of P100,000 and the sum of P27.39 as interests daily on the same
loan since January 16, 1965. (That overdraft line was later settled by Villonco
Realty Company on a date not mentioned in its manifestation of February 19,
1975).
Villonco Realty Company had obligated itself to pay the sum of
P20,000 as attorney's fees to its lawyers. It claimed that it was damaged in the
sum of P10,000 a month from March 24, 1964 when the award of the Punta lot
to Bormaheco, Inc. was approved. On the other hand, Bormaheco, Inc. claimed
that it had sustained damages of P200,000 annually due to the notice of lis
pendens which had prevented it from constructing a multi-story building on the
three lots. (Pars. 18 and 19, Stipulation of Facts).1äwphï1.ñët
Miss Tagle testified that for her services Bormaheco, Inc., through
Cervantes, obligated itself to pay her a three percent commission on the price
of P1,400,000 or the amount of forty-two thousand pesos (14 tsn).
After trial, the lower court rendered a decision ordering the
Cervantes spouses to execute in favor of Bormaheco, Inc. a deed of conveyance
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.
That contention is not well-taken. It should be stressed that there is
no evidence as to what changes were made by Cervantes in Villonco's revised
offer. And there is no evidence that Villonco Realty Company did not assent to
the supposed changes and that such assent was never made known to
Cervantes.
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.
Appellants Bormaheco, Inc. and Cervantes further contend that
Cervantes, in clarifying in the voucher for the earnest money of P100,000 that
Bormaheco's acceptance thereof was subject to the terms and conditions
embodied in Bormaheco's letter of February 12, 1964 and your (Villonco's)
letter of March 4, 1964" made Bormaheco's acceptance "qualified and
conditional".
That contention is not correct. There is no incompatibility between
Bormaheco's offer of February 12, 1964 (Exh. B) and Villonco's counter-offer of
March 4, 1964 (Exh. D). The revised counter-offer merely amplified
Bormaheco's original offer.
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.
Appellants' next contention is that the contract was not perfected
because the condition that Bormaheco, Inc. would acquire the Nassco land
within forty-five days from February 12, 1964 or on or before March 28, 1964
was not fulfilled. This contention is tied up with the following letter of
Bormaheco, Inc. (Exh. F):
BORMAHECO, INC.
March 30, 1964
Villonco Realty Company
V.R.C. Building
219 Buendia Ave.,
Makati, Rizal
Gentlemen:
We are returning herewith your earnest money together with interest thereon
at 10% per annum. Please be informed that despite the lapse of the 45 days
from February 12, 1964 there is no certainty yet for us to acquire a substitute
property, hence the return of the earnest money as agreed upon.
Very truly yours,
SGD. FRANCISCO N. CERVANTES
President
Encl.: P.N.B. Check No. 112994 J
P.N.B. Check No. 112996J
That contention is predicated on the erroneous assumption that
Bormaheco, Inc. was to acquire the Nassco land within forty-five days or on or
before March 28, 1964.
The trial court ruled that the forty-five-day period was merely an
estimate or a forecast of how long it would take Bormaheco, Inc. to acquire the
Nassco property and it was not "a condition or a deadline set for the defendant
corporation to decide whether or not to go through with the sale of its Buendia
property".
The record does not support the theory of Bormaheco, Inc. and the
Cervantes spouses that the forty-five-day period was the time within which (a)
the Nassco property and two Pasong Tamo lots should be acquired, (b) when
Cervantes would secure his wife's consent to the sale of the three lots and (c)
when Bormaheco, Inc. had to decide what to do with the DBP encumbrance.
Cervantes in paragraph 3 of his offer of February 12, 1964 stated that the sale
of the Buendia lots would be consummated after he had consummated the
purchase of the Nassco property. Then, in paragraph 5 of the same offer he
stated "that final negotiations on both properties can be definitely
known after forty-five days" (See Exh. B).
It is deducible from the tenor of those statements that the
consummation of the sale of the Buendia lots to Villonco Realty Company was
conditioned on Bormaheco's acquisition of the Nassco land. But it was not
spelled out that such acquisition should be effected within forty-five days from
February 12, 1964. Had it been Cervantes' intention that the forty-five days
would be the period within which the Nassco land should be acquired by
Bormaheco, then he would have specified that period in paragraph 3 of his offer
so that paragraph would read in this wise: "That this sale is to be consummated
only after I shall have consummated my purchase of another property located
at Sta. Ana, Manila within forty-five days from the date hereof ." He could have
also specified that period in his "conforme" to Villonco's counter-offer 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 counter-offer 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).1äwphï1.ñët
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.
Those arguments are not sustainable. It should be remembered that
Cervantes, in rescinding the contract of sale and in returning the earnest
money, cited as an excuse the circumstance that there was no certainty in
Bormaheco's acquisition of the Nassco property (Exh. F and Annex 1). He did
not say that Mrs. Cervantes was opposed to the sale of the three lots. He did
not tell Villonco Realty Company that he could not bind the conjugal
partnership. In truth, he concealed the fact that the three lots were registered
"in the name of FRANCISCO CERVANTES, Filipino, of legal age, married to
Rosario P. Navarro, as owner thereof in fee simple". He certainly led the
Villonco brothers to believe that as president of Bormaheco, Inc. he could
dispose of the said lots. He inveigled the Villoncos into believing that he had
untrammelled control of Bormaheco, Inc., that Bormaheco, Inc. owned the lots
and that he was invested with adequate authority to sell the same.
Thus, in Bormaheco's offer of February 12, 1964, Cervantes first
identified the three lots as "our property" which "we are offering to sell ..."
(Opening paragraph and par. 1 of Exh. B). Whether the prounoun "we" refers
to himself and his wife or to Bormaheco, Inc. is not clear. Then, in paragraphs 3
and 4 of the offer, he used the first person and said: "I shall have consummated
my purchase" of the Nassco property; "... my negotiations with said property"
and "I will return to you your deposit". Those expressions conveyed the
impression and generated the belief that the Villoncos did not have to deal with
Mrs. Cervantes nor with any other official of Bormaheco, Inc.
The pleadings disclose that Bormaheco, Inc. and Cervantes
deliberately and studiously avoided making the allegation that Cervantes was
not authorized by his wife to sell the three lots or that he acted merely as
president of Bormaheco, Inc. That defense was not interposed so as not to
place Cervantes in the ridiculous position of having acted under false pretenses
when he negotiated with the Villoncos for the sale of the three lots.
Villonco Realty Company, in paragraph 2 of its original complaint,
alleged that "on February 12, 1964, after some prior negotiations, the
defendant (Bormaheco, Inc.) made a formal offer to sell to the plaintiff
the property of the said defendant situated at the abovenamed address along
Buendia Avenue, Makati, Rizal, under the terms of the letter-offer, a copy of
which is hereto attached as Annex A hereof", now Exhibit B (2 Record on
Appeal).
That paragraph 2 was not, repeat, was not denied by Bormaheco,
Inc. in its answer dated May 5, 1964. It did not traverse that paragraph 2.
Hence, it was deemed admitted. However, it filed an amended answer dated
May 25, 1964 wherein it denied that it was the owner of the three lots. It
revealed that the three lots "belong and are registered in the names of the
spouses Francisco N. Cervantes and Rosario N. Cervantes."
The three answers of Bormaheco, Inc. contain the following affirmative
defense:
13. That defendant's insistence to finally decide on the proposed sale of the
land in question after 45 days had not only for its purpose the determination of
its acquisition of the said Sta. Ana (Nassco) property during the said period, but
also to negotiate with the actual and registered owner of the parcels of land
covered by T.C.T. Nos. 43530, 43531 and 43532 in question which plaintiff was
fully aware that the same were not in the name of the defendant (sic; Par. 18
of Answer to Amended Complaint, 10, 18 and 34, Record on Appeal).
In that affirmative defense, Bormaheco, Inc. pretended that it
needed forty- five days within which to acquire the Nassco property and "to
negotiate" with the registered owner of the three lots. The absurdity of that
pretension stands out in bold relief when it is borne in mind that the answers
of Bormaheco, Inc. were verified by Cervantes and that the registered owner of
the three lots is Cervantes himself. That affirmative defense means that
Cervantes as president of Bormaheco, Inc. needed forty-five days in order to
"negotiate" with himself (Cervantes).
The incongruous stance of the Cervantes spouses is also patent in
their answer to the amended complaint. In that answer they disclaimed
knowledge or information of certain allegations which were well-known to
Cervantes as president of Bormaheco, Inc. and which were admitted in
Bormaheco's three answers that were verified by Cervantes.
 It is significant to note that Bormaheco, Inc. in its three answers,
which were verified by Cervantes, never pleaded as an affirmative defense that
Mrs. Cervantes opposed the sale of the three lots or that she did not authorize
her husband to sell those lots. Likewise, it should be noted that in their separate
answer the Cervantes spouses never pleaded as a defense that Mrs. Cervantes
was opposed to the sale of three lots or that Cervantes could not bind the
conjugal partnership. The appellants were at first hesitant to make it appear
that Cervantes had committed the skullduggery of trying to sell property which
he had no authority to alienate.
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.
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).
4. Bormaheco, Inc. is ordered (a) to pay Villonco Realty Company twenty
thousand pesos (P20,000) as attorney's fees and (b) to pay Edith Perez de Tagle
the sum of forty-two thousand pesos (P42,000) as commission. Costs against
the defendants-appellants.
SO ORDERED.
Makalintal, C.J, Castro. Fernando, Makasiar, Antonio, Esguerra, Muñoz Palma,
Concepcion Jr. and Martin, JJ., concur.
Teehankee, J., is on leave.
[G.R. No. L-36083. September 5, 1975.]
Spouses RAMON DOROMAL, SR., and ROSARIO SALAS, and Spouses RAMON
DOROMAL, JR., and GAUDELIA
VEGA, Petitioners, v. HON. COURT OF APPEALS
SYNOPSIS
The co-owners of a parcel of land sold their 6/7 share thereof to petitioners for
P115,250. The deed of sale, however, stated that the purchase price was only
P30,000. The lower court found that the "consideration of P30,000 only was
placed in the deed of sale to minimize the payment of registration fees, stamps
and sales tax." Private respondent, who was admittedly, a 1/7 co-owner of the
property, was informed of her co-owner’s proposal to sell the land in question,
but was "never notified, least of all, in writing, of the actual execution and
registration of the deed of sale." When private respondent, in the exercise of
her right as legal redemptioner, sought to redeem the property, and tendered
the sum of P30,000 in cash, petitioners refused to accept the payment. Hence,
private respondent filed the instant case. The trial court dismissed the
complaint and further condemned private respondent to pay attorney’s fees,
and moral and exemplary damages. The Court of Appeals reversed the
judgment. On petition for review, the Supreme Court sustained the Court of
Appeals.
SYLLABUS
1. PURCHASE AND SALE; LEGAL REDEMPTION; NOTICE IN WRITING SHOULD BE
NOTICE OF ACTUAL EXECUTION AND DELIVERY OF DEED OF SALE. — For
purposes of the co-owner’s right to redemption granted by Article 1620 of
the Civil Code, the notice in writing which Article 1623 requires to be made
to the other co-owners and from receipt of which the 30-day period to
redeem should be counted is a notice not only of a perfected sale but of the
actual execution and delivery of the deed of sale. This is implied from the
latter portion of Article 1623 which requires that before a register of deeds
can record a sale by a co-owner, there must be presented to him an affidavit
to the effect that the notice of sale had been sent in writing to the other co-
owners. A sale may not be presented to the registrar of deeds for registration
unless it be in the form of a duly executed public instrument. Moreover, the
law prefers that all the terms and conditions of the sale should be definite
and in writing.
2. ID.; ID.; ID.; PERIOD FOR REDEMPTION DOES NOT COMMENCE UNLESS
NOTICE OF DISPOSITION IS MADE AFTER FORMAL DEED OF SALE HAS BEEN
DULY EXECUTED. — Article 1619 of the Civil Code bestows unto a co-owner
the right to redeem and "to be surrogated under the same terms and
conditions stipulated in the contract," and to avoid any controversy as to the
terms and condition under which the right to redeem may be exercised, it is
the best that the period therefor should not be deemed to have commenced
unless the notice of disposition is made after the formal deed of disposal has
 been duly executed. Where it is beyond dispute that the legal redemptioner
has never been notified in writing of the execution of the deed of sale by
which the buyers acquired the subject property and has never been shown a
copy of the deed through a written communication by either any of the
purchasers or any of her co-owners-vendees, it is immaterial when the legal
redemptioner might have actually come to know about said deed.
3. ID.; ID.; LEGAL REDEMPTIONER HAS RIGHT TO BE SUBROGATED UPON THE
SAME TERMS AND CONDITIONS STIPULATED IN THE CONTRACT. — Where
the price actually paid for a parcel of land is P115,250, but "the consideration
of P30,000 only was placed in the deed of sale minimize the payment of
registration fees, stamps and sale tax," the redemption price should be that
stated in the deed of sale. The Supreme Court will not sanction the buyers’
pragmatic posture that the redemption price should be the price actually
paid. Being patently violative of public policy and injurious to public interest,
the seemingly widespread practice of understanding consideration of
transactions for the purpose of evading taxes and fees due to the
government must be condemned and all parties guilty thereof must be made
to suffer the consequences of their ill-advised agreement to defraud the
state.
4. ID.; PARI DELICTO; UNDERSTATING PURCHASE OF PRICE TO EVADE PAYMENT
OF TAXES. — Where the vendors and purchasers understate the purchase
price of the things sold to minimize the payment of registration fees, stamps
and sale tax. They are in pari delicto in committing tax evasion and should
not receive any consideration from any court in respect to the money paid
for the sale. Their situation is similar to that of parties to an illegal contract.
TEEHANKEE, J., concurring:chanrob1es virtual 1aw library
1. PURCHASE AND SALES; LEGAL REDEMPTION; PURCHASER BOUND BY THE
PRICE STATED IN THE CONTRACT OF SALE. — Where it is admitted in the
record that the buyers and sellers had criminally understated and falsified
the contractual price in the deed of sale as registered with the Register of
Deeds to be P30,000 instead of P115,250 as "actually paid" by the buyers,
admittedly for the illegal and criminal purpose "to minimize the payment the
registration fees, stamp and sales tax," the legal (and moral) right of the pro-
indiviso co-owner to exercise the right of legal redemption granted by the
Civil Code is unassailable.
2. ID.; ID.; RIGHT OF LEGAL REDEMPTIONER TO BE SUBROGATED UPON THE
SAME TERMS AND CONDITIONS STIPULATED IN THE CONTRACT. — The
criminal and illegal conduct of the buyers and sellers in understating the
purchase price in no way entitles the buyers to claim callously against the
legal redemptioner who is merely exercising her legal right of redemption "to
be subrogated, upon the same terms and condition stipulated in the
contract, in the place" of the third-person buyers (Article 1619 and 1620, Civil
Code) that she may redeem the property from them by paying the larger
amount that they had actually paid the co-owners for their 6/7 share of the
property. Such criminal tax evasion can, in no way, be abated if the courts
and the law would yet pay heed to the plea of tax evaders that they had
falsely understated the contract price and the courts should order the
redemptioner to pay them — not the contract price — but the larger amount
they had actually paid but illegally understated in order to evade the taxes
justly due to the government. A party to an illegal contract cannot come to
court and ask it to help carry out his illegal objects.
3. ID.; ID.; COURTS WILL NOT SANCTION TAX EVASION. — For the tax evaders
to invoke in the court their very act of tax evasion and to ask the courts to
sanction the same by declaring that the understated stipulated price was only
for purposes of tax evasion but for the exercise of legal redemption, the
redemptioner must be ordered by the courts to pay them the larger amount
they had actually paid, but falsely understated in the deed would be to put a
premium on criminal conduct and rank cynicism in gross derogation to the
law, morals, good custom and public policy.
4. ID.; ID.; PURCHASER TAKES THE RISK OF UNDERSTATING PURCHASE PRICE.
— Where the buyers falsely understated the contractual price of their
purchase from the legal redemptioner’s co-owners, they did so at their own
risk and with full knowledge of redemptioner’s right to redeem the property
for the price stated in the contract.
5. ID.; ID; ID.; PARI DELICTO. — By virtue of the rule of in pari delicto, the buyers
cannot even seek recourse against the co-owners-buyers to refund to them
the difference between the redemption price and the much larger amount
that they actually paid to the co-owners. If, say, there were no question or
redemption but that they had a valid cause for rescission of their purchase
and brought suit therefor (so that the suit were strictly between the buyers
and their sellers), the courts would order the return of only the price as
officially stated in the deed and not the larger amount that they had actually
paid (but understated for tax evasion purpose) since the law will not aid
either party in pari delicto but will leave the parties where it finds them, or
more accurately, where they have placed themselves. Manifestly, the law will
not aid the buyers as against the redemptioners who had no part in their
illegal and criminal conduct.
DECISION
BARREDO, J.:
Petition for review of the decision of the Court of Appeals in CA-G.R.
No. 47945-R entitled Filomena Javellana v. Spouses Ramon Doromal, Sr., Et. Al.
which reversed the decision of the Court of First Instance of Iloilo that had in
turn dismissed herein private respondent Filomena Javellana’s action for
redemption of a certain property sold by her co-owners to herein petitioners
for having been made out of time.
The factual background found by the Court of Appeals and which is
binding on this Court, the same not being assailed by petitioners as being
capricious, is as follows:
"IT RESULTING: That the facts are quite simple; Lot 3504 of the
cadastral survey of Iloilo, situated in the poblacion of La Paz, one of its districts,
with an area of a little more than 2-1/2 hectares was originally decreed in the
name of the late Justice Antonio Horilleno, in 1916, under Original Certificate
of Title No. 1314, Exh. A; but before he died, on a date not particularized in the
record, he executed a last will and testament attesting to the fact that it was a
co-ownership between himself and his brothers and sisters, Exh. C; so that the
truth was that the owners or better stated, the co-owners were; beside Justice
Horilleno, ‘Luis, Soledad, Fe, Rosita, Carlos and Esperanza,’ all surnamed
Horilleno, and since Esperanza had already died, she was succeeded by her only
daughter and heir herein plaintiff. Filomena Javellana, in the proportion of 1/7
undivided ownership each; now then, even though their right had not as yet
been annotated in the title, the co-owners led by Carlos, and as to deceased
Justice Antonio Horilleno, his daughter Mary, sometime since early 1967, had
wanted to sell their shares, or if possible if Filomena Javellana were agreeable,
to sell the entire property, and they hired an acquaintance Cresencia Harder,
to look for buyers, and the latter came to interest defendants, the father and
son, named Ramon Doromal, Sr. and Jr., and in preparation for the execution
of the sale, since the brothers and sisters Horilleno were scattered in various
parts of the country, Carlos in Ilocos Sur, Mary in Baguio, Soledad and Fe, in
Mandaluyong, Rizal, and Rosita in Basilan City, they all executed various powers
of attorney in favor of their niece, Mary H. Jimenez Exh. 1-8, they also caused
preparation of a power of attorney of identical tenor for signature by plaintiff,
Filomena Javellana, Exh. M, and sent it with a letter of Carlos, Exh. 7 dated 18
January, 1968 unto her thru Mrs. Harder, and here, Carlos informed her that
the price was P4.00 a square meter, — although it now turns out according to
Exh. 3 that as early as 22 October, 1967, Carlos had received in check as earnest
money from defendant Ramon Doromal, Jr., the sum of P5,000.00 and the price
therein agreed upon was five (P5.00) pesos a square meter, — as indeed in
another letter also of Carlos to Plaintiff in 5 November, 1967, Exh. 6, he had
told her that the Doromals had given the earnest money of P5,000.00 at P5.00
a square meter, — at any rate, plaintiff not being agreeable, did not sign the
power of attorney, and the rest of the co-owners went ahead with their sale of
their 6/7, Carlos first seeing to it that the deed of sale by their common attorney
in fact, Mary H. Jimenez be signed and ratified as it was signed and ratified in
Candon, Ilocos Sur, on 15 January, 1968, Exh. 2, then brought to Iloilo by Carlos
in the same month, and because the Register of Deeds of Iloilo refused to
register right away, since the original registered owner, Justice Antonio
Horilleno was already dead, Carlos had to ask as he did, hire Atty. Teotimo
Arandela to file a petition within the cadastral case, on 26 February, 1968, for
the purpose, Exh. C, after which Carlos returned to Luzon, and after compliance
with the requisites of publication, hearing and notice, the petition was
approved, and we now see that on 29 April, 1968, Carlos already back in Iloilo
went to the Register of Deeds and caused the registration of the order of the
cadastral court approving the issuance of a new title in the name of the co-
owners, as well as of the deed of sale to the Doromals, as a result of which on
that same date, a new title was issued TCT No. 23152, in the name of the
Horillenos to 6/7 and plaintiff Filomena Javellana to 1/7, Exh. D, only to be
cancelled on the same day under TCT No. 23153, Exh. 2, already in the names
of the vendees Doromals for 6/7 and to herein plaintiff, Filomena Javellana, 1/7,
and the next day 30 April, 1968, the Doromals paid unto Carlos by check, the
sum of P97,000.00 Exh. 1, of Chartered Bank which was later substituted by
check of Phil. National Bank, because there was no Chartered Bank Branch in
Ilocos Sur, but besides this amount paid in check, the Doromals according to
their evidence still paid an additional amount in cash of P18,250.00 since the
agreed price was P5.00 a square meter; and thus was consummated the
transaction, but it is here where complications set in.
On 10 June, 1968, there came to the residence of the Doromals in
Dumangas, Iloilo, plaintiff’s lawyer, Atty. Arturo H. Villanueva, bringing with him
her letter of that date, reading.
‘P.O. Box 189, Bacolod City
June 10, 1968
Mr. & Mrs. Ramon Doromal, Sr.
and Mr. and Mrs. Ramon Doromal, Jr.
Dumangas, Iloilo
Dear Mr. and Mrs. Doromal:
The bearer of this letter is my nephew, Atty. Arturo H. Villanueva, Jr., of this
City. Through him, I am making a formal offer to repurchase or redeem from
you the 6/7 undivided share in Lot No. 3504, of the Iloilo Cadastre, which you
bought from my erstwhile co-owners, the Horillenos, for the sum of
P30,000.00, Atty. Villanueva has with him the sum of P30,000.00 in cash, which
he will deliver to you as soon as you execute the contract of sale in my favor.
Thank you very much for whatever favorable consideration you can give this
request.
Very truly yours,
(SIGNED)
Mrs. FILOMENA JAVELLANA’ p. 26, Exh, ‘J’, Manual of Exhibits.
and then and there said lawyer manifested to the Doromals that he
had the P30,000.00 with him in cash, and tendered it to them, for the exercise
of the legal redemption, the Doromals were aghast, and refused, and the very
next day, as has been said, 11 June, 1968, plaintiff filed this case, and in the
trial, thru oral and documentary proofs, sought to show that as co-owner, she
had the right to redeem at the price stated in the deed of sale, Exh. 2, namely
P30,000.00 of the same; but defendants in answer, and in their evidence, oral
and documentary sought to show that plaintiff had no more right to redeem,
and that if ever she should have, that it should be at the true and real price by
them paid, namely, the total sum of P115,250.00, and trial judge, after hearing
the evidence, believed defendants, that plaintiff had no more right, to redeem,
because,
‘Plaintiff was informed of the intended sale of the 6/7 share
belonging to the Horillenos.’
and that,
‘The plaintiff have every reason to be grateful to Atty. Carlos
Horilleno because in the petition for declaration of heirs of her late uncle
Antonio Horilleno in whose name only the Original Certificate of Title covering
the Lot in question was issued, her uncle Atty. Carlos Horilleno included her as
one of the heirs of said Antonio Horilleno. Instead, she filed this case to redeem
the 6/7 share sold to the Doromals for the simple reason that the consideration
in the deed of sale is the sum of P30,000.00 only instead of P115,250.00
approximately which was actually paid by the defendants to her co-owners,
thus she wants to enrich herself at the expense of her own blood relatives who
are her aunts, uncles and cousins. The consideration of P30,000.00 only was
placed in the deed of sale to minimize the payment of the registration fees,
stamps, and sales tax.’ pp. 77-78, R.A., and dismissed and further condemned
plaintiff to pay attorney’s fees, and moral and exemplary damages as set forth
in few pages back, it is because of this that plaintiff has come here and
contends, that Lower Court erred:
‘I. . . . in denying plaintiff-appellant, as a co-owner of Lot No. 3504,
of the Iloilo Cadastre, the right of legal redemption under Art. 1620, of the Civil
Code.
II. . . . as a consequence of the above error, in refusing to order the
defendants-appellees, the vendees of a portion of the aforesaid Lot No. 3504.
which they bought from the co-owners of the plaintiff-appellant, to reconvey
the portion they purchased to the herein plaintiff-appellant.
III. . . . in admitting extrinsic evidence in the determination of the
consideration of the sale, instead of simply adhering to the purchase price of
‘P30,000.00, set forth in the pertinent Deed of Sale executed by the vendors
and co-owners of the plaintiff-appellant in favor of the defendants-appellees.
IV. . . . in dismissing the complaint filed in this case.’ pp. 1-3,
Appellant’s Brief, which can be reduced to the simple question of whether or
not on the basis of the evidence and the law, the judgment appealed from
should be maintained;" (Pp. 16-22, Record.)
Upon these facts, the Court of Appeals reversed the trial court’s
decision and held that although respondent Javellana was informed of her co-
owners’ proposal to sell the land in question to petitioners she was, however,
"never notified . . . least of all, in writing", of the actual execution and
registration of the corresponding deed of sale, hence, said respondent’s right
to redeem had not yet expired at the time she made her offer for that purpose
thru her letter of June 10, 1968 delivered to petitioners on even date. The
intermediate court further held that the redemption price to be paid by
respondent should be that stated in the deed of sale which is P30,000
notwithstanding that the preponderance of the evidence proves that the actual
price paid by petitioners was P115,250. Thus, in their brief, petitioners assign
the following alleged errors:
I
"IT IS ERROR FOR THE COURT OF APPEALS TO HOLD THAT THE
NOTICE IN WRITING OF THE SALE CONTEMPLATED IN ARTICLE 1623 OF THE
CIVIL CODE REFERS TO A NOTICE IN WRITING AFTER THE EXECUTION AND
REGISTRATION OF THE INSTRUMENT OF SALE, HENCE, OF THE DOCUMENT OF
SALE.
II
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
INSCRIPTION OF THE SALE IN THE REGISTRY OF PROPERTY TAKES EFFECT AS
AGAINST THIRD PERSONS INCLUDING CLAIMS OF POSSIBLE REDEMPTIONERS.
ASSUMING, ARGUENDO, THAT PRIVATE RESPONDENT HAS THE
RIGHT TO REDEEM, THE COURT OF APPEALS ERRED IN HOLDING THAT THE
REDEMPTION PRICE SHOULD BE THAT STATED IN THE DEED OF SALE." (Pp. 1-2,
Brief for Petitioner, page 74-Rec.)
We cannot agree with petitioners.
Petitioners do not question respondent’s right to redeem, she being
admittedly a 1/7 co-owner of the property in dispute. The thrust of their first
assignment of error is that for purposes of Article 1623 of the Civil Code which
provides that:
"ART. 1623. The right of legal pre-emption or redemption shall not
be exercised except within thirty days from the notice in writing by the
prospective vendor, or by the vendor, as the case may be. The deed of sale shall
not be recorded in the Registry of Property, unless accompanied by an affidavit
of the vendor that he has given written notice thereof to all possible
redemptioners.
The right of redemption of co-owners excludes that of adjoining
owners."
the letters sent by Carlos Horilleno to respondent and dated January
18, 1968, Exhibit 7, and November 5, 1967, Exhibit 6, constituted the required
notice in writing from which the 30-day period fixed in said provision should be
computed. But to start with, there is no showing that said letters were in fact
received by respondent and when they were actually received. Besides,
petitioners do not pinpoint which of these two letters, their dates being more
than two months apart, is the required notice. In any event, as found by the
appellate court, neither of said letters referred to a consummated sale. As may
be observed, it was Carlos Horilleno alone who signed them, and as of January
18, 1968, powers of attorney from the various co-owners were still to be
secured. Indeed, the later letter of January 18, 1968 mentioned that the price
was P4.00 per square meter whereas in the earlier letter of November 5, 1967
it was P5.00, as in fact, on that basis, as early as October 21, 1967, Carlos had
already received P5,000 from petitioners supposedly as earnest money, of
which, however, mention was made by him to his niece only in the later letter
of January 18, 1968, the explanation being that "at later negotiation it was
increased to P5.00 per square meter." (p. 4 of petitioners’ brief as appellees in
the Court of Appeals quoting from the decision of the trial court.) In other
words, while the letters relied upon by petitioners could convey the idea that
more or less some kind of consensus had been arrived at among the other co-
owners to sell the property in dispute to petitioners, it cannot be said definitely
that such a sale had even been actually perfected. The fact alone that in the
later letter of January 18, 1968 the price indicated was P4.00 per square meter
while in that of November 5, 1967, what was stated was P5.00 per square meter
negatives the possibility that a "price definite" had already been agreed upon.
While P5,000 might have indeed been paid to Carlos in October, 1967, there is
nothing to show that the same was in the concept of the earnest money
contemplated in Article 1482 of the Civil Code, invoked by petitioner, as
signifying perfection of the sale. Viewed in the backdrop of the factual milieu
thereof extant in the record, We are more inclined to believe that the said
P5,000 were paid in the concept of earnest money as the term was understood
under the Old Civil Code, that is, as a guarantee that the buyer would not back
out, considering that it is not clear that there was already a definite agreement
as to the price then and that petitioners were decided to buy 6/7 only of the
property should respondent Javellana refuse to agree to part with her 1/7
share.
In the light of these considerations, it cannot be said that the Court
of Appeals erred in holding that the letters aforementioned sufficed to comply
with the requirement of notice of a sale by co-owners under Article 1623 of the
Civil Code. We are of the considered opinion and so hold that for purposes of
the co-owner’s right of redemption granted by Article 1620 of the Civil Code,
the notice in writing which Article 1623 requires to be made to the other co-
owners and from receipt of which the 30-day period to redeem should be
counted is a notice not only of a perfected sale but of the actual execution and
delivery of the deed of sale. This is implied from the latter portion of Article
1623 which requires that before a register of deeds can record a sale by a co-
owner, there must be presented to him, an affidavit to the effect that the notice
of the sale had been sent in writing to the other co-owners. A sale may not be
presented to the register of deeds for registration unless it be in the form of a
duly executed public instrument. Moreover, the law prefers that all the terms
and conditions of the sale should be definite and in writing. As aptly observed
by Justice Gatmaitan in the decision under review, Article 1619 of the Civil Code
bestows unto a co-owner the right to redeem and "to be subrogated under the
same terms and conditions stipulated in the contract", and to avoid any
controversy as to the terms and conditions under which the right to redeem
may be exercised, it is best that the period therefor should not be deemed to
have commenced unless the notice of the disposition is made after the formal
deed of disposal has been duly executed. And it being beyond dispute that
respondent herein has never been notified in writing of the execution of the
deed of sale by which petitioners acquired the subject property, it necessarily
follows that her tender to redeem the same made on June 10, 1968 was well
within the period prescribed by law. Indeed, it is immaterial when she might
have actually come to know about said deed, it appearing she has never been
shown a copy thereof through a written communication by either any of the
petitioners-purchasers or any of her co-owners-vendees. (Cornejo Et. Al. v. CA
Et. Al., 16 SCRA 775.) cd
The only other pivotal issue raised by petitioners relates to the price
which respondent offered for the redemption in question. In this connection,
from the decision of the Court of Appeals, We gather that there is "decisive
preponderance of evidence" establishing "that the price paid by defendants
was not that stated in the document, Exhibit 2, of P30,000 but much more, at
least P97,000, according to the check, Exhibit 1, if not a total of P115,250.00
because another amount in cash of P18,250 was paid afterwards." It is,
therefore, the contention of petitioners here that considering said finding of
fact of the intermediate court, it erred in holding nevertheless that "the
redemption price should be that stated in the deed of sale." library
Again, petitioners’ contention cannot be sustained. As stated in the
decision under review, the trial court found that "the consideration of P30,000
only was placed in the deed of sale to minimize the payment of the registration
fees, stamps and sales tax." With this undisputed fact in mind, it is impossible
for the Supreme Court to sanction petitioners’ pragmatic but immoral posture.
Being patently violative of public policy and injurious to public interest, the
seemingly wide practice of understating considerations of transactions for the
purpose of evading taxes and fees due to the government must be condemned
and all parties guilty thereof must be made to suffer the consequences of their
ill-advised agreement to defraud the state. Verily, the trial court fell short of its
devotion and loyalty to the Republic in officially giving its stamp of approval to
the stand of petitioners and even berating respondent Javellana as wanting to
enrich herself "at the expense of her own blood relatives who are her aunts,
uncles and cousins." On the contrary, said "blood relatives" should have been
sternly told, as We here hold, that they are in pari-delicto with petitioners in
committing tax evasion and should not receive any consideration from any
court in respect to the money paid for the sale in dispute. Their situation is
similar to that of parties to an illegal contract. 1
Of course, the Court of Appeals was also eminently correct in its
considerations supporting the conclusion that the redemption in controversy
should be only for the price stipulated in the deed, regardless of what might
have been actually paid by petitioners. In that style inimitable and all his own,
Justice Gatmaitan states those considerations thus:
"CONSIDERING: As to this that the evidence has established with
decisive preponderance that the price paid by defendants was not that stated
in the document, Exh. 2 of P30,000.00 but much more, at least P97,000.00
according to the check, Exh. 1 if not a total of P115,250.00 because another
amount in cash of P18,250.00 was paid afterwards, perhaps it would be neither
correct nor just that plaintiff should be permitted to redeem at only
P30,000.00, that at first glance would practically enrich her by the difference,
on the other hand, after some reflection, this Court can not but have to bear in
mind certain definite points.
1st — According to Art. 1619
‘Legal redemption is the right to be subrogated, upon the same
terms and conditions stipulated in the contract, in the place of one who
acquires a thing by purchase or dation in payment, or by any other transaction
whereby ownership is transmitted by onerous title.’ pp. 471-472, New Civil
Code,
and note that redemptioner right is to be subrogated
‘upon the same terms and conditions stipulated in the contract.’
and here, the stipulation in the public evidence of the contract,
made public by both vendors and vendees is that the price was P30,000.00;
2nd — According to Art. 1620,
‘A co-owner of a thing may exercise the right of redemption in case
the share of all the other co-owners or any of them, are sold to a third person.
If the price of the alienation is grossly excessive, the redemptioner shall pay
only a reasonable one.’ p. 472, New Civil Code, from which it is seen that if the
price paid is ‘grossly excessive’ redemptioner is required to pay only a
reasonable one; not that actually paid by the vendee, going to show that the
law seeks to protect redemptioner and converts his position into one not that
of a contractually but of a legally subrogated creditor as to the right of
redemption, if the price is not ‘grossly excessive’, what the law had intended
redemptioner to pay can be read in Art. 1623.
‘The right of a legal pre-emption or redemption shall not be
exercised except within thirty (30) days from the notice in writing by the
prospective vendor, or by the vendor as the case may be. The deed of sale shall
not be recorded in the Registry of Property, unless accompanied by an affidavit
of the vendor that he has given written notice thereof of all possible
redemptioners.’ p. 473, New Civil Code,
if that be so that affidavit must have been intended by the
lawmakers for a definite purpose, to argue that this affidavit has no purpose is
to go against all canons of statutory construction, no law mandatory in
character and worse, prohibitive should be understood to have no purpose at
all, that would be an absurdity, that purpose could not but have been to give a
clear and unmistakable guide to redemptioner, on how much he should pay
and when he should redeem; from this must follow that notice must have been
intended to state the truth and if vendor and vendee should have instead,
decided to state an untruth therein, it is they who should bear the
consequences of having thereby misled the redemptioner who had the right to
rely and act thereon and on nothing else; stated otherwise, all the elements of
equitable estoppel are here since the requirement of the law is to submit the
affidavit of notice to all possible redemptioners, that affidavit to be a condition
precedent to registration of the sale therefore, the law must have intended that
it be by the parties understood that they were there asking a solemn
representation to all possible redemptioners, who upon faith of that are thus
induced to act, and here worse for the parties to the sale, they sought to avoid
compliance with the law and certainly refusal to comply cannot be rewarded
with exception and acceptance of the plea that they cannot be now estopped
by their own representation, and this Court notes that in the trial and to this
appeal, plaintiff earnestly insisted and insists on their estoppel;
3rd — If therefore, here vendors had only attempted to comply with
the law, they would have been obligated to send a copy of the deed of sale unto
Filomena Javellana, — and from that copy, Filomena would have been notified
that she should if she had wanted to redeem, offered no more, no less, that
P30,000.00, within 30 days, it would have been impossible for vendors and
vendees to have inserted in the affidavit that the price was truly P97,000.00
plus P18,250.00 or a total of P115,250.00; in other words, if defendants had
only complied with the law, they would have been obligated to accept the
redemption money of only P30,000.00;
4th — If it be argued that foregoing solution would mean unjust
enrichment for plaintiff, it need only be remembered that plaintiff’s right is not
contractual, but a mere legal one, the exercise of a right granted by the law,
and the law is definite that she can subrogate herself in place of the buyer,
‘upon the same terms and conditions stipulated in the contract,’ in
the words of Art. 1619, and here the price.
‘stipulated in the contract’ was P30,000.00, in other words, if this be
possible enrichment on the part of Filomena, it was not unjust but just
enrichment because permitted by the law; if it still be argued that plaintiff
would thus be enabled to abuse her right, the answer simply is that what she is
seeking to enforce is not an abuse but a mere exercise of a right; if it he stated
that just the same, the effect of sustaining plaintiff would be to promote not
justice but injustice, the answer again simply is that this solution is not unjust
because it only binds the parties to make good their solemn representation to
possible redemptioners on the price of the sale, to what they had solemnly
averred in a public document required by the law to be the only basis for that
exercise of redemption;" (Pp. 24-27, Record.)
WHEREFORE, the decision of the Court of Appeals is affirmed, with
costs against petitioners.
[G.R. No. 126812. November 24, 1998]
GOLDENROD, INC., vs. COURT OF APPEALS, PIO BARRETTO & SONS, INC.,
PIO BARRETTOREALTY DEVELOPMENT, INC., and ANTHONY QUE
DECISION
BELLOSILLO, J.:
In the absence of a specific stipulation, may the seller of real estate keep the
earnest money to answer for damages in the event the sale fails due to the fault
of the prospective buyer?
Pio Barretto and Sons, Inc. (BARRETTO & SONS) owned forty-three (43) parcels
of registered land with a total area of 18,500 square meters located at Carlos
Palanca St., Quiapo, Manila, which were mortgaged with the United Coconut
Planters Bank (UCPB). In 1988, the obligation of the corporation with UCPB
remained unpaid making foreclosure of the mortgage imminent.
Goldenrod, Inc. (GOLDENROD), offered to buy the property from BARRETTO &
SONS. On 25 May 1988, through its president Sonya G. Mathay, petitioner
wrote respondent Anthony Que, President of respondent BARRETTO &
SONS, as follows:
Thank you for your reply to our letter offering to buy your property in Echague
(C. Palanca) Quiapo.
We are happy that you have accepted our offer except the two amendments
concerning the payment of interest which should be monthly instead of semi-
annually and the period to remove the trusses, steel frames etc. which shall be
180 days instead of 90 days only. Please be advised that we agree to your
amendments.
As to your other query, we prefer that the lots be reconsolidated
back to its (sic) mother titles.
Enclosed is the earnest money of P1 million which shall form part of the
purchase price.
Payment of the agreed total consideration shall be effected in
accordance with our offer as you have accepted and upon execution of the
necessary documents of sale to be implemented after the said reconsolidation
of the lots.
Kindly acknowledge receipt of the earnest money.
When the term of existence of BARRETTO & SONS expired, all its
assets and liabilities including the property located in Quiapo were transferred
to respondent Pio Barretto Realty Development, Inc. (BARRETTO
REALTY). Petitioners offer to buy the property resulted in its agreement with
respondent BARRETTO REALTY that petitioner would pay the following
amounts: (a) P24.5 million representing the outstanding obligations of
BARRETTO REALTY with UCPB on 30 June 1988, the deadline set by the bank
for payment; and, (b) P20 million which was the balance of the purchase price
of the property to be paid in installments within a 3-year period with interest
at 18% per annum.
Petitioner did not pay UCPB the P24.5 million loan obligation
of BARRETTO REALTY on the deadline set for payment; instead, it asked for an
extension of one (1) month or up to 31 July 1988 to settle the obligation, which
the bank granted. On 31 July 1988, petitioner requested another extension of
sixty (60) days to pay the loan. This time the bank demurred.
In the meantime BARRETTO REALTY was able to cause the
reconsolidation of the forty-three (43) titles covering the property subject of
the purchase into two (2) titles covering Lots 1 and 2, which were issued on 4
August 1988. The reconsolidation of the titles was made pursuant to the
request of petitioner in its letter to private respondents on 25 May
1988. Respondent BARRETTO REALTY allegedly incurred expenses for the
reconsolidation amounting to P250,000.00.
On 25 August 1988 petitioner sought reconsideration of the denial by the bank
of its request for extension of sixty (60) days by asking for a shorter period of
thirty (30) days. This was again denied by UCPB.
On 30 August 1988 Alicia P. Logarta, President of Logarta Realty and
Development Corporation (LOGARTA REALTY), which acted as agent and broker
of petitioner, wrote private respondent Anthony Que informing him on behalf
of petitioner that it could not go through with the purchase of the property due
to circumstances beyond its fault, i.e., the denial by UCPB of its request for
extension of time to pay the obligation. In the same letter, Logarta also
demanded the refund of the earnest money of P1 million which petitioner gave
to respondent BARRETTO REALTY.
On 31 August 1988 respondent BARRETTO REALTY sold to Asiaworld
Trade Center Phils., Inc. (ASIAWORLD), Lot 2, one of the two (2) consolidated
lots, for the price of P23 million. On 13 October 1988 respondent BARRETTO
REALTY executed a deed transferring by way of dacionthe property
reconsolidated as Lot 1 in favor of UCPB, which in turn sold the property to
ASIAWORLD for P24 million.
On 12 December 1988 Logarta again wrote respondent Que
demanding the return of the earnest money to GOLDENROD. On 7 February
1989 petitioner through its lawyer reiterated its demand, but the same
remained unheeded by private respondents. This prompted petitioner to file a
complaint with the Regional Trial Court of Manila against private respondents
for the return of the amount of P1 million and the payment of damages
including lost interests or profits. In their answer, private respondents
contended that it was the agreement of the parties that the earnest money
of P1 million would be forfeited to answer for losses and damages that might
be suffered by private respondents in case of failure by petitioner to comply
with the terms of their purchase agreement.
On 15 March 1991 the trial court rendered a decision[1] ordering
private respondents jointly and severally to pay petitioner P1,000,000.00 with
legal interest from 9 February 1989 until fully paid, P50,000.00 representing
unrealized profits and P10,000.00 as attorneys fees. The trial court found that
there was no written agreement between the parties concerning forfeiture of
the earnest money if the sale did not push through. It further declared that the
earnest money given by petitioner to respondent BARRETTO REALTY was
intended to form part of the purchase price; thus, the refusal of the latter to
return the money when the sale was not consummated violated Arts. 22 and
23 of the Civil Code against unjust enrichment.
Obviously dissatisfied with the decision of the trial court, private
respondents appealed to the Court of Appeals which reversed the trial court
and ordered the dismissal of the complaint; hence, this petition.
Petitioner alleges that the Court of Appeals erred in disregarding the
finding of the trial court that the earnest money given by petitioner to
respondent BARRETTO REALTY should be returned to the former. The absence
of an express stipulation that the same shall be forfeited in favor of the seller
in case the buyer fails to comply with his obligation is compelling. It argues that
the forfeiture of the money in favor of respondent BARRETTO REALTY would
amount to unjust enrichment at the expense of petitioner.
We sustain petitioner. Under Art. 1482 of the Civil Code, whenever
earnest money is given in a contract of sale, it shall be considered as part of the
purchase price and as proof of the perfection of the contract. Petitioner clearly
stated without any objection from private respondents that the earnest money
was intended to form part of the purchase price. It was an advance payment
which must be deducted from the total price. Hence, the parties could not have
intended that the earnest money or advance payment would be forfeited when
the buyer should fail to pay the balance of the price, especially in the absence
of a clear and express agreement thereon. By reason of its failure to make
payment petitioner, through its agent, informed private respondents that it
would no longer push through with the sale. In other words, petitioner resorted
to extrajudicial rescission of its agreement with private respondents.
In University of the Philippines v. de los Angeles,[2] the right to
rescind contracts is not absolute and is subject to scrutiny and review by the
proper court. We held further, in the more recent case of Adelfa Properties,
Inc. v. Court of Appeals,[3] that rescission of reciprocal contracts may be
extrajudicially rescinded unless successfully impugned in court. If the party
does not oppose the declaration of rescission of the other party, specifying the
grounds therefor, and it fails to reply or protest against it, its silence thereon
suggests an admission of the veracity and validity of the rescinding party's
claim.
Private respondents did not interpose any objection to the
rescission by petitioner of the agreement. As found by the Court of Appeals,
private respondent BARRETTO REALTY even sold Lot 2 of the subject
consolidated lots to another buyer, ASIAWORLD, one day after its President
Anthony Que received the broker's letter rescinding the sale. Subsequently, on
13 October 1988 respondent BARRETTO REALTY also conveyed ownership over
Lot 1 to UCPB which, in turn, sold the same to ASIAWORLD.
Article 1385 of the Civil Code provides that rescission creates the
obligation to return the things which were the object of the contract together
with their fruits and interest. The vendor is therefore obliged to return the
purchase price paid to him by the buyer if the latter rescinds the sale,[4] or when
the transaction was called off and the subject property had already been sold
to a third person, as what obtained in this case.[5] Therefore, by virtue of the
extrajudicial rescission of the contract to sell by petitioner without opposition
from private respondents who, in turn, sold the property to other persons,
private respondent BARRETTO REALTY, as the vendor, had the obligation to
return the earnest money of P1,000,000.00 plus legal interest from the date it
received notice of rescission from petitioner, i.e., 30 August 1988, up to the
date of the return or payment. It would be most inequitable if respondent
BARRETTO REALTY would be allowed to retain petitioners payment
of P1,000,000.00 and at the same time appropriate the proceeds of the second
sale made to another.[6]
WHEREFORE, the Petition is GRANTED. The decision of the Court of
Appeals is REVERSED and SET ASIDE. Private respondent Pio Barretto Realty
Development, Inc. (BARRETTO REALTY), its successors and assigns are ordered
to return to petitioner Goldenrod, Inc. (GOLDENROD), the amount
of P1,000,000.00 with legal interest thereon from 30 August 1988, the date
of notice of extrajudicial rescission, until the amount is fully paid, with costs
against private respondents.
SO ORDERED.
Davide Jr. (Chairman), Vitug, Panganiban, and Quisumbing JJ., concur
[G.R. No. L-30871. December 28, 1970.]
AURORA P. DE LEON, v. HON. SERAFIN SALVADOR, as Judge of Branch XIV of the
Court of First Instance of Rizal (Caloocan City), and EUSEBIO BERNABE, ALBERTO
A. VALINO, Special Deputy Sheriff of the Office of the Provincial Sheriff, Province
of Rizal, and the REGISTER OF DEEDS for Caloocan City, Respondents.
[G.R. No. L-31603. December 28, 1970]
EUSEBIO BERNABE, v. THE HONORABLE JUDGE FERNANDO A. CRUZ
DECISION
TEEHANKEE, J.:
Joint decision of two special civil actions which were ordered
consolidated since they involve the same properties and the common issue of
conflict of jurisdiction of the two Caloocan City branches of the Court of First
Instance of Rizal.
Case L-30871 arose from the following facts: A judgment for
P35,000.00-actual, moral and exemplary damages obtained by Enrique de Leon
against private respondent Eusebio Bernabe in Civil Case No. C-189 of Branch
XII of the Rizal court of first instance, Caloocan City branch presided by Judge
Fernando A. Cruz, having become final and executory, a writ of execution was
issued by said court. Pursuant thereto, the city sheriff, on November 8, 1966
levied on execution on two parcels of land of 682.5 square meters each
registered in the names of Bernabe under T.C.T. Nos. 94985 and 94986 of
Caloocan City. At the execution sale held on February 14, 1967, the city sheriff
sold the said properties to herein petitioner, Aurora (sister of the judgment
creditor) as the highest bidder for the total sum of P30,194.00, (the property
then being subject to an existing mortgage lien in the amount of P120,000.00).
The sheriff executed the corresponding certificate of sale in her favor, which
was duly registered on February 21, 1967 with the Caloocan City register of
deeds.
On February 7, 1968, just about two weeks before the expiration of
the one-year period to redeem the properties sold in execution, the judgment
debtor Bernabe filed a separate civil action docketed as Civil Case No. C-1217
against his judgment creditor Enrique de Leon, herein petitioner Aurora P. de
Leon as purchaser and the sheriff as defendants for the setting aside or
annulment of the execution sale on February 14, 1967 "for being anomalous
and irregular," and for the ordering of a new auction sale. This second case,
instead of being referred to Judge Cruz presiding over Branch XII which had
issued the writ of execution, was assigned to Branch XIV, the other Caloocan
City branch of the Rizal Court of First Instance presided by Judge Serafin
Salvador, who issued on February 19, 1968 a writ of preliminary injunction
enjoining therein defendants, particularly the sheriff to desist "from taking
further proceedings against the properties of the plaintiff [Bernabe] that were
sold at public auction on February 14, 1967, and from issuing a sheriff’s deed
of sale at the expiration of the period of redemption on February 21, 1968 in
favor of defendant Aurora P. de Leon." Aurora moved to dissolve the injunction
and to dismiss this second case on the grounds of laches and lack of jurisdiction
of Judge Salvador’s court to interfere with the execution proceedings pending
in the first case before Judge Cruz’ court which is of equal and co-ordinate
jurisdiction, but Judge Salvador denied the same for not being indubitable and
tried the case, notwithstanding Aurora’s pleas before and after the trial to
resolve the issue of his court’s lack of jurisdiction.
Pending his decision, Judge Salvador issued on May 20, 1969 an
order granting two ex-parte motions of Bernabe of May 12, and May 15, 1969
and ordering the sheriff to allow Bernabe to redeem the two properties sold at
public auction more than two years ago on February 14, 1967 under the writ of
execution issued by Judge Cruz’ court in the first case. On the following day,
May 21, 1969, Bernabe deposited with the sheriff the sum of P33,817.28 as the
redemption price (P15,987,00 per lot plus interests), who issued a certificate of
redemption. Bernabe then registered on the following day, May 22, 1969, the
sheriff’s certificate of redemption with the register of deeds, who in turn
cancelled the entry of the execution sale in favor of Aurora, as well as registered
on one of the properties covered by T.C.T. No. 94986 a deed of first mortgage
executed on May 20, 1969 by Bernabe in favor of one Antonio de Zuzuarregui
to secure a loan of P130,000.00. Aurora’s motion of May 28, 1969 in the second
case to set aside the order and certificate of redemption and registration of
mortgage on the ground of lack of jurisdiction was denied by Judge Salvador,
who ruled in his order of June 23, 1969 that "there is no question that this Court
has jurisdiction to hear and determine this case which questions the regularity
and legality of the auction sale of properties held on February 14, 1967, hence
the authority granted by the Court to redeem said properties within the
redemption period in order to write finis to the pending case." 1 Hence, this
action for certiorari filed by Aurora impleading the sheriff and the register of
deeds for the annulment and setting aside for lack of jurisdiction of the
questioned orders of Judge Salvador’s court as well as of the challenged
actuations of the other respondent officials pursuant thereto. As prayed for,
the Court issued a writ of preliminary injunction enjoining said respondents
from doing or taking any other act in connection with the said properties.
On May 30, 1969, Aurora also filed in the first case before Judge
Cruz’ court a motion with proper notice for consolidation of title and for the
court to order the sheriff to issue in her favor a final deed of sale over the
subject parcels of land. Judge Cruz’ order of September 5, 1969, granting
Aurora’s motion over Bernabe’s opposition that he had redeemed on May 21,
1969 the said properties by virtue of Judge Salvador’s order of May 20, 1969 in
the second case and ordering Bernabe to surrender his owner’s duplicates of
title for transfer to Aurora, in turn gave rise to Case L-31603 filed by Bernabe.
After Bernabe’s motion for reconsideration urging Judge Cruz to hold in
abeyance Aurora’s motion for consolidation of title until this Court’s decision in
Case L-30871 "which will end once and for all the legal controversy" over the
conflict of jurisdiction between the two courts, was denied by Judge Cruz’ order
of January 8, 1970, he filed this action for certiorari, impleading the sheriff, for
the annulment and revocation of the questioned orders of Judge Cruz, on the
ground of the latter’s lack of jurisdiction to issue the same. As prayed for, the
Court also issued a writ of preliminary injunction against the enforcement of
Judge Cruz’ orders, until the conflict between the parties could be finally
resolved.
The decisive issue at bar is a simple one of jurisdiction: which court,
Branch XII presided by Judge Cruz or Branch XIV presided by Judge Salvador has
exclusive jurisdiction to set aside for alleged irregularities the execution sale
held on February 14, 1967 by virtue of the writ for the execution of the final
judgment in the first case (No. C-189) issued by Judge Cruz’ court and to order
a new auction sale — which was the relief sought by the judgment debtor in
the second case (No. C-1217) in Judge Salvador’s court?
It is patent that such exclusive jurisdiction was vested in Judge Cruz’
court. Having acquired jurisdiction over Case No. C-189 and rendered judgment
that had become final and executory, it retained jurisdiction over its judgment,
to the exclusion of all other co-ordinate courts for its execution and all incidents
thereof, and to control, in furtherance of justice, the conduct of its ministerial
officers in connection therewith. 2 Execution of its judgment having been
carried out by the sheriff with the levy and sale of the judgment debtor’s
properties, Eusebio Bernabe as judgment debtor could not in the guise of a new
and separate second action (Case No. 1217) ask another court of coordinate
jurisdiction, Judge Salvador’s court, to interfere by injunction with the
execution proceedings, to set them aside and to order the holding of a new
execution sale — instead of seeking such relief by proper motion and
application from Judge Cruz’ court which had exclusive jurisdiction over the
execution proceedings and the properties sold at the execution sale.
As early as 1922, in Cabigao v. del Rosario, 3 this Court laid down
the doctrine that "no court has power to interfere by injunction with the
judgments or decrees of a court of concurrent or coordinate jurisdiction having
power to grant the relief sought by injunction," pointing out that" (T)he various
branches of the Court of First Instance of Manila are in a sense coordinate
courts and to allow them to interfere with each other’s judgments or decrees
by injunctions would obviously lead to confusion and might seriously hinder the
administration of justice." virtua1aw library
The Court similarly ruled in Hubahib v. Insular Drug Co., Inc., 4 with
reference to Branch II of the Cebu court of first instance having taken
cognizance of an independent action for the annulment of a writ of execution
issued by Branch III of the same court which has rendered the judgment, that
"the institution of said action was not only improper but also absolutely
unjustified, on the ground that the appellant had the remedy of applying to the
same Branch III of the lower court, which issued the orders in question, for
reconsideration thereof . . . or of appealing from said orders or from that
denying his motion in case such order has been issued. The various branches of
a Court of First Instance of a province or city, having as they have the same or
equal authority and exercising as they do concurrent and coordinate
jurisdiction, should not, cannot, and are not permitted to interfere with their
respective cases, much less with their orders or judgments, by means of
injunction."
In National Power Corporation v. De Veyra, 5 the Court, through
former Chief Justice Bengzon, thus explained that the garnishment or levy of
property on execution brings the property into custodia legis of the court
issuing the writ of execution, beyond the interference of all other co-ordinate
courts, thereby avoiding conflicts of power between such courts:" (T)he
garnishment of property to satisfy a writ of execution ‘operates as an
attachment and fastens upon the property a lien by which the property is
brought under the jurisdiction of the court issuing the writ." It is brought into
custodia legis, under the sole control of such court. Property is in the custody
of the court when it has been seized by an officer either under a writ of
attachment on mesne process or under a writ of execution. A court which has
control of such property, exercises exclusive jurisdiction over the same. No
court, except one having a supervisory control or superior jurisdiction in the
premises, has a right to interfere with and change that possession."
The Court in striking down the Baguio court’s issuance of a writ of
preliminary injunction against the Baguio City sheriff’s garnishment of cash
funds of Baguio City deposited in the Baguio branch of the Philippine National
Bank pursuant to a writ of execution issued by the Manila court of first instance
for the satisfaction of a final judgment rendered in favor of the National Power
Corporation, and its assuming cognizance of the separate complaint filed with
it, duly indicated the proper procedure in such cases and the fundamental
reason therefor:" (T)he reason advanced by the respondent court of Baguio City
that it should grant relief when ‘there is apparently an illegal service of the writ’
(the property garnished being allegedly exempt from execution) may not be
upheld, there being a better procedure to follow, i.e., a resort to the Manila
court, wherein the remedy may be obtained, it being the court under whose
authority the illegal levy had been made. Needless to say, an effective ordering
of legal relationships in civil society is possible only when each court is granted
exclusive jurisdiction over the property brought to it." 6
The Court time and again has applied this long established doctrine
admonishing court and litigant alike last year in Luciano v. Provincial Governor
7 that a judge of a branch of a court may not interfere with the proceedings
before a judge of another branch of the same court.
The properties in question were brought into custodia legis of Judge
Cruz court and came under its exclusive jurisdiction when they were levied
upon by the sheriff pursuant to the writ for execution of the judgment rendered
by said court. The levy is the essential act by which the judgment debtor s
property is set apart for the satisfaction of the judgment and taken into custody
of the law, and from such time the court issuing the execution acquires
exclusive jurisdiction over the property and all subsequent claims of other
parties are subordinated thereto, irrespective of the time when the property is
actually sold. 8 The execution sale having been carried out upon order of Judge
Cruz court, any and all questions concerning the validity and regularity of the
sale necessarily had to be addressed to his court which had exclusive
jurisdiction over the properties and were beyond interference by Judge
Salvador s court. Justice Cruz court alone had jurisdiction — subject only to the
supervisory control or appellate jurisdiction of superior courts — to rule upon
the regularity and validity of the sale conducted by its ministerial officers from
the sheriff’s office, and his affirmative ruling thereon could not be interfered
with by injunction of, nor sought to be foreclosed by, the challenged orders of
Judge Salvador’s court.
Bernabe’s contention that "he does not attempt to annul or nullify
the judgment or order issued by (Judge Cruz’ court) . . . If (Judge Salvador’s
Court) finds the allegations of the complaint to be true, then it has the
jurisdiction to order a new auction sale, which has nothing to do with the
judgments or decrees issued by Judge Cruz’ court)" 9 is untenable. As above
stated, the properties upon being levied on and sold by virtue of Judge Cruz’
order of execution were brought into the exclusive custodia legis of Judge Cruz’
court This is but in accordance with the established principle that "A case in
which an execution has been issued is regarded as still pending, so that all
proceedings on the execution are proceedings in the suit" 10 and that" (A)n
execution is the fruit and end of the suit, and is very aptly called the life of the
law. The suit does not terminate with the judgment; and all proceedings on the
execution, are proceedings in the suit, and which are expressly, by the act of
Congress, put under the regulation and control of the Court of which it issues.
It is a power incident to every Court from which process issues, when delivered
to the proper officer, to enforce upon such officer a compliance with his duty."
11 Any and all questions involving the execution sale concerned the
proceedings in Judge Cruz’ court and had to be raised and determined in that
court, subject to review by the higher courts. They could not be improperly
passed upon by another co-ordinate court — behind the back, as it were — of
Judge Cruz’ court.
Judge Salvador’s order of May 20, 1969 granting two ex-parte
motions of the judgment debtor Bernabe and directing the sheriff to allow the
redemption of the properties notwithstanding that the one-year redemption
period had already lapsed more than one year ago on February 21, 1968 (one
year after registration on May 21, 1967 of the sheriff’s sale of May 14, 1967)
was equally untenable. It must be noted that Bernabe’s action in Judge
Salvador’s court filed on February 7, 1968 two weeks before the expiration of
the redemption period sought to set aside the execution sale and to have a new
auction sale ordered, on the grounds that the sheriff had allegedly sold the two
parcels of land jointly instead of separately, and that the total sales price of
P30,194.00 was shocking to the conscience, alleging that the two parcels, if sold
separately, could easily be sold at P235,000.00 and P150,000.00. Pending
decision and without ruling squarely on his court’s lack of jurisdiction over the
properties, Judge Salvador peremptorily issued his redemption order on
Bernabe’s bare manifestation that" (he) has but barely two days left of the one
(1) year period granted by law to redeem" and that" (he) is now ready and
willing to redeem" the properties.
Aside from the basic lack of jurisdiction of Judge Salvador’s court to
issue the redemption order, the order per se suffered from other grave flaws.
Bernabe’s motions in effect amounted to an abandonment of his position on
the alleged irregularity of the execution sale, and the logical consequence
thereof which have been the dismissal of his suit. (Thus, soon after Aurora’s
filing of her action for certiorari in this Court, Bernabe filed his so-called "Urgent
Motion to Dismiss" of August 27, 1969 with Judge Salvador’s court praying for
the dismissal of the very case filed by him on the ground that having redeemed
the properties, "the case can therefore be considered closed and terminated
considering that defendants [Aurora, Et. Al.] did not interpose any appeal" from
the redemption order) But Bernabe’s motions were presented on May 12 and
May 15, 1969 and it was self-evident from the record that the one-year period
for redemption had long expired more than a year ago on February 21, 1968 as
above stated and that Bernabe’s allegations that he had two days left — of the
redemption period was a gratuitous one. Nothing in the record indicates that
Bernabe had ever timely made a valid offer of redemption so as to safeguard
his right thereto prior to his filing his separate action questioning the validity of
the execution sale. It was therefore void and illogical for Judge Salvador to rule,
in denying Aurora’s motion for reconsideration, that "there is no question that
this Court has jurisdiction to hear and determine this case which questions the
regularity and legality of the auction sale of properties held on February 14,
1967, hence the authority granted by the Court to redeem said properties
within the redemption period in order to write finis to the pending case." For
Judge Salvador thereby begged the basic prejudicial questions of his court’s lack
of jurisdiction and the expiration over a year ago of Bernabe’s alleged right of
redemption, not to mention that any grant of such right to redeem could not
be decreed in a summary unreasoned order but would have to be adjudged in
a formal decision reciting the facts and the law on which it is based, and which
may not be immediately executed, without a special order therefor. Under
Judge Salvador’s void orders, all that a judgment debtor whose properties have
been sold at execution sale but who does not have the funds to effect
redemption has to do to unilaterally extend the one-year redemption period
would be to file a separate action before another court of co-ordinate
jurisdiction questioning the regularity of the execution sale and upon his getting
the funds, notwithstanding the expiration of the redemption period, get an
order of redemption and ask the court "to write finis to the pending case" —
which should have been dismissed in the first instance for lack of jurisdiction.
The doctrine cited that a court or a branch thereof may not interfere
with the proceedings before a judge of another court or branch of the same
court since they are all courts of equal and co-ordinate jurisdiction is an
elementary doctrine that has been established with the very system of courts.
Understandable as Bernabe’s plight and financial predicament may be, still it is
incomprehensible why he should futilely resort, as he did, to filing his separate
action with Judge Salvador’s court which patently lacked jurisdiction over the
properties sold in execution instead of questioning the regularity of the
execution sale before Judge Cruz’ court as the court of competent and exclusive
jurisdiction, and properly applying, if he had just grounds, for extension of the
redemption period.
As to the alleged gross inadequacy of the price of P30,194.00 paid
by Aurora when according to Bernabe the properties could have been easily
sold for a total price of P385,000.00, Bernabe has admitted that there was an
existing mortgage lien on the properties in the amount of P120,000,00 which
necessarily affected their value. This question was not raised at all before Judge
Cruz’ court nor did Judge Salvador rule thereupon, since he merely issued his
void order of redemption. Suffice it to state on the basis of the record, however,
that the failure of Bernabe to timely sell the properties for their fair value
through negotiated sales with third persons either before or after the execution
sale in order to be able to discharge his judgment debt or redeem the
properties within the redemption period, or to raise the necessary amount
therefrom to so effect redemption notwithstanding that they have been
collecting the substantial monthly rentals thereof of P2,500.00 monthly even
up to now 12 can be attributed only to his own failings and gross improvidence.
They cannot be cited in law or in equity to defeat the lawful claim of Aurora nor
to give validity to the void orders of Judge Salvador’s court. The applicable rule
on forced sales where the law gives the owner the right of redemption was thus
stated by the Court in Velasquez v. Coronel: 13 "However, while in ordinary
sales for reasons of equity a transaction may be invalidated on the ground of
inadequacy of price, or when such inadequacy shocks one’s conscience as to
justify the courts to interfere, such does not follow when the law gives to the
owner the right to redeem, as when a sale is made at public auction, upon the
theory that the lesser the price the easier it is for the owner to effect the
redemption. And so it was aptly said: ‘When there is the right to redeem,
inadequacy of price should not be material, because the judgment debtor may
reacquire the property or also sell his right to redeem and thus recover the loss
he claims to have suffered by reason of the price obtained at the auction sale.’"
Bernabe’s petition challenging the jurisdiction of Judge Cruz’ court
to issue its orders of September 5, 1969 and January 5, 1970, confirming
Aurora’s acquisition of title to the properties by virtue of the execution sale and
ordering Bernabe to transfer possession thereof to her, because of the separate
civil action filed by him in Judge Salvador’s court, must necessarily fail — since
said orders were within the exclusive competence and jurisdiction of Judge
Cruz’ court.
ACCORDINGLY, in Case L-30871, the writ of certiorari prayed for his
granted; respondent Judge Salvador’s court is declared without jurisdiction
over Civil Case No. C-1217 other than to dismiss the same and the writ of
preliminary injunction of February 19, 1968 therein issued and the orders of
May 20, 1969 and June 23, 1969 therein issued, as well as respondent sheriff’s
certificate of redemption issued on May 21, 1969 are set aside and declared
null and void; and the writ of preliminary injunction issued by the Court on
September 2, 1969, is made permanent. In Case L-31603, the petition
for certiorari is dismissed and the writ of preliminary injunction issued by this
Court on February 11, 1970 is dissolved. No pronouncement as to costs.
Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Barredo, Villamor and
Makasiar, JJ., concur.
Concepcion, C.J., concurs in the result.
Castro, J., did not take part.
G.R. No. L-31018 June 29, 1973
LORENZO VELASCO AND SOCORRO J. VELASCO, vs. COURT OF APPEALS
CASTRO, J.:
This is a petition for certiorari and mandamus filed by Lorenzo
Velasco and Socorro J. Velasco (hereinafter referred to as the petitioners)
against the resolution of the Court of Appeals dated June 28, 1969 in CA-G.R.
42376, which ordered the dismissal of the appeal interposed by the petitioners
from a decision of the Court of First Instance of Quezon City on the ground that
they had failed seasonably to file their printed record on appeal.
Under date of November 3, 1968, the Court of First Instance of
Quezon City, after hearing on the merits, rendered a decision in civil case 7761,
dismissing the complaint filed by the petitioners against the Magdalena Estate,
Inc. (hereinafter referred to as the respondent) for the purpose of compelling
specific performance by the respondent of an alleged deed of sale of a parcel
of residential land in favor of the petitioners. The basis for the dismissal of the
complaint was that the alleged purchase and sale agreement "was not
perfected".
On November 18, 1968, after the perfection of their appeal to the
Court of Appeals, the petitioners received a notice from the said court requiring
them to file their printed record on appeal within sixty (60) days from receipt
of said notice. This 60-day term was to expire on January 17, 1969.
Allegedly under date of January 15, 1969, the petitioners allegedly sent to the
Court of Appeals and to counsel for the respondent, by registered mail allegedly
deposited personally by its mailing clerk, one Juanito D. Quiachon, at the Makati
Post Office, a "Motion For Extension of Time To File Printed Record on Appeal."
The extension of time was sought on the ground "of mechanical failures of the
printing machines, and the voluminous printing jobs now pending with the Vera
Printing Press. ..."
On February 10, 1969, the petitioners filed their printed record on
appeal in the Court of Appeals. Thereafter, the petitioners received from the
respondent a motion filed on February 8, 1969 praying for the dismissal of the
appeal on the ground that the petitioners had failed to file their printed record
on appeal on time. Acting on the said motion to dismiss the appeal, the Court
of Appeals, on February 25, 1969, issued the following resolution:
Upon consideration of the motion of counsel for defendant-appellee praying
on the grounds therein stated that the appeal be dismissed in accordance with
Rules of Court, and of the opposition thereto filed by counsel for plaintiff-
appellants, the Court RESOLVED to DENY the said motion to dismiss.
Upon consideration of the registry-mailed motion of counsel for plaintiffs
appellants praying on the grounds therein stated for an extension of 30 days
from January 15, 1969 within which to file the printed record on appeal, the
Court RESOLVED to GRANT the said motion and the printed record on appeal
which has already been filed is ADMITTED.
On March 11, 1969, the respondent prayed for a reconsideration of
the above-mentioned resolution, averring that the Court of Appeals had been
misled bythe petitioners' "deceitful allegation that they filed the printed record
on appeal within the reglementary period," because according to a certification
issued by the postmaster of Makati, Rizal, the records of the said post office
failed to reveal that on January 15, 1969 — the date when their motion for
extension of time to file the printed record on appeal was supposedly mailed
by the petitioners — there was any letter deposited there by the petitioners'
counsel. The petitioners opposed the motion for reconsideration. They
submitted to the appellate court the registry receipts (numbered 0215 and
0216), both stampled January 15, 1969, which were issued by the receiving
clerk of the registry section of the Makati Post Office covering the mails for the
disputed motion for extension of time to file their printed record on appeal and
the affidavit of its mailing clerk Juanito D. Quiachon, to prove that their motion
for extension was timely filed and served on the Court of Appeals and the
respondent, respectively. After several other pleadings and manifestations
were filed by the parties relative to the issue raised by the respondent's above-
mentioned motion for reconsideration, the Court of Appeals promulgated on
June 28, 1969, its questioned resolution, the dispositive portion of which reads
as follows:
WHEREFORE, the motion for reconsideration filed on March 11,
1969 is granted and appeal interposed by plaintiff-appellants from the
judgment of the court below is hereby dismissed for their failure to file their
printed Record on Appeal within the period authorized by this Court. Atty.
Patrocino R. Corpuz [counsel of the petitioner] is required to show cause within
ten (10) days from notice why he should not be suspended from the practice of
his necessary investigation against Juanito D. Quiachon of the Salonga,
Ordoñez, Yap, Sicat & Associates Law Office, Suite 319 337 Rufino Building,
Ayala Avenue, Makati Post Office, to file the appropriate criminal action against
them as may be warranted in the premises, and to report to this Court within
thirty (30) days the action he has taken thereon.
The foregoing desposition was based on the following findings of the Court of
Appeals:
An examination of the Rollo of this case, particularly the letter
envelope on page 26 thereof, reveals that on January 15, 1969, plaintiffs
supposedly mailed via registered mail from the Post Office of Makati, Rizal their
motion for extension of 30 days from that date to file their printed Record on
Appeal, under registered letter No. 0216. However, in an official certification,
the Postmaster of Makati states that the records of his office disclose: (a) that
there were no registered letters Nos. 0215 and 0216 from the Salonga,
Ordoñez, Yap, Sicat & Associates addressed to Atty. Abraham F. Sarmiento, 202
Magdalena Building, España Ext., Quezon City, and to the Court of Appeals,
Manila, respectively, that were posted in the Post Office of Makati, Rizal, on
January 15, 1969; (b) that there is a registered letter numbered 215 but that
the same was posted on January 3, 1969 by Enriqueta Amada of 7 Angel, Pasillo
F-2, Cartimar, Pasay City, as sender, and Giral Amasan of Barrio Cabuniga-an,
Sto. Niño, Samar, as addressee; and that there is also a registered letter
numbered 216; but that the same was likewise posted on January 3, 1969 with
E.B.A. Construction of 1049 Belbar Building, Metropolitan, Pasong Tamo,
Makati, as sender, and Pres. R. Nakaya of the United Pacific Trading Co., Ltd.,
79, 6 Chamo, Nakatu, Yokohari, Japan, as addressee; (c) that on January 15,
1969, the registered letters posted at the Makati Post Office were numbered
consecutively from 1001-2225, inclusive, and none of these letters was
addressed to Atty. Abraham F. Sarmiento of to the Court of Appeals; (d) that in
Registry Bill Book No. 30 for Quezon City as well as that Manila, corresponding
to February 7, 1969, there are entries covering registered letters Nos. 0215 and
0216 for dispatch to Quezon City and Manila, respectively; however, such
registry book for February 7, 1969 shows no letters with such numbers posted
on the said date.
The Acting Postmaster of the Commercial Center Post Office of
Makati, Rizal, further certifies that "Registry Receipts Nos. 0215 and 0216
addressed to Atty. Abraham F. Sarmiento of the Magdalena Estate, Quezon City
and the Honorable Court of Appeals, respectively, does not appear in our
Registry Record Book which was allegedly posted at this office on January 15,
1969."
From the foregoing, it is immediately apparent that the motion for extension
of time to file their Record on Appeal supposedly mailed by the plaintiffs on
January 15, 1969 was not really mailed on that date but evidently on a date
much later than January 15, 1969. This is further confirmed by the affidavit of
Flaviano Malindog, a letter carrier of the Makati Post Office, which defendant
attached as Annex 1 to its supplemental reply to plaintiffs' opposition to the
motion for reconsideration. In his said affidavit, Malindog swore among others:
'That on February 7, 1969, between 12:00 o'clock noon and 1:00
o'clock in the afternoon, JUANITO D. QUIACHON approached me at the Makati
Post Office and talked to me about certain letters which his employer had asked
him to mail and that I should help him do something about the matter; but I
asked him what they were all about, and he told me that they were letters for
the Court of Appeals and for Atty. Abraham Sarmiento and that his purpose was
to show that they were posted on January 15, 1969; that I inquired further, and
he said that the letters were not so important and that his only concern was to
have them post maker January 15, 1969;
'That believing the word of JUANITO D. QUIACHON that the letters
were not really important I agreed to his request; whereupon, I got two (2)
registry receipts from an old registry receipt booklet which is no longer being
used and I numbered them 0215 for the letter addressed to Atty. Abraham
Sarmiento in Quezon City and 0216 for the letter addressed to the Court of
Appeals, Manila; that I placed the same numbering on the respective envelopes
containing the letters; and that I also post maker them January 15, 1969;
'That to the best of my recollection I wrote the correct date of posting, February
7, 1969, on the back of one or both of the registry receipts above mentioned;
'That the correct date of posting, February 7, 1969 also appears in
the Registry Bill Books for Quezon City and Manila where I entered the subject
registered letters;
Of course, plaintiff's counsel denies the sworn statement of
Malindog and even presented the counter-affidavit of one of his clerk by the
name of Juanito D. Quiachon. But between Malindog, whose sworn statement
is manifestly a declaration against interest since he can be criminally
prosecuted for falsification on the basis thereof, and that of Quiachon, whose
statement is self-serving, we are very much inclined to give greater weight and
credit to the former. Besides, plaintiffs have not refuted the facts disclosed in
the two (2) official certifications above mentioned by the Postmakers of Makati,
Rizal. These two (2) certifications alone, even without to move this Court to
reconsider its resolution of February 25, 1969 and order the dismissal of this
appeal.
On September 5, 1969, after the rendition of the foregoing
resolution, the Court of Appeals promulgated another, denying the motion for
reconsideration of the petitioner, but, at the same time, accepting as
satisfactory the explanation of Atty. Patrocino R. Corpuz why he should not be
suspended from the practice of the legal profession.
On September 20, 1969, the First Assistant Fiscal of Rizal notified
the Court of Appeals that he had found a prima facie case against Flaviano C.
Malindog and would file the corresponding information for falsification of
public documents against him. The said fiscal, however, dismissed the
complaint against Quiachon for lack of sufficient evidence. The information
subsequently filed against Malindog by the first Assistance Fiscal of Rizal reads
as follow:
That on or about the 7th day of February 1969, in the municipality
of Makati, province of Rizal, and a place within the jurisdiction of this Honorable
Court, the above-named accused, conspiring and confederating together and
mutually helping and aiding with John Doe, whose true identity and present
whereabout is still unknown, did then and there willfully, unlawfully and
feloniously falsify two registry receipts which are public documents by reason
of the fact that said registry receipts are printed in accordance with the
standard forms prescribed by the Bureau of Posts, committed as follows: the
above-named accused John Doe, on the date above-mentioned approached
and induced the accused Malindog, a letter-carrier at the Makati Post Office, to
postmark on Abraham Sarmiento in Quezon City, and the other to the Court of
Appeals, Manila, and the accused Malindog, acceding to the inducement of,
and in conspiracy with, his co-accused John Doe, did then and there willfully
and feloniously falsify said registry receipts of the Makati Post Office on January
15, 1969, thereby making it appear that the said sealed envelopes addressed
to Atty. Sarmiento and the Court of Appeals were actually posted, and causing
it to appear that the Postmaster of Makati participated therein by posting said
mail matters on January 15, 1969, when in truth and in fact he did not so
participate.
The petitioner contend that in promulgating its questioned
resolution, the Court of Appeals acted without or in excess of jurisdiction, or
with such whimsical and grave abuse of discretion as to amount to lack of
jurisdiction, because (a) it declared that the motion for extension of time to file
the printed record on appeal was not mailed on January 15, 1969, when, in fact,
it was mailed on the record on appeal was filed only on February 10, 1969,
beyond the time authorized by the appellate court, when the truth is that the
said date of filing was within the 30-day extension granted by it; (c) the adverse
conclusion of the appellate court are not supported by the records of the case,
because the said court ignored the affidavit of the mailing clerk of the
petitioners' counsel, the registry receipts and postmarked envelopes (citing
Henning v. Western Equipment, 62 Phil. 579, and Caltex Phil., Inc. v. Katipunan
Labor Union, 52 O.G. 6209), and, instead, chose to rely upon the affidavit of the
mail carrier Malindog, which affidavit was prepared by counsel for the
respondent at the affiant himself so declared at the preliminary investigation
at the Fiscal's office which absolved the petitioners' counsel mailing clerk
Quiachon from any criminal liability; (d) section 1, Rule 50 of the Rules of Court,
which enumerates the grounds upon which the Court of Appeals may dismiss
an appeal, does not include as a ground the failure to file a printed record on
appeal; (e) the said section does not state either that the mismailing of a motion
to extend the time to file the printed record on appeal, assuming this to be the
case, may be a basis for the dismissal of the appeal; (f) the Court of Appeals has
no jurisdiction to revoke the extention of time to file the printed record on
appeal it had granted to the petitioners based on a ground not specified in
section 1, Rule 50 of the Rules of Court; and (g) the objection to an appeal may
be waived as when the appellee has allowed the record on appeal to be printed
and approved (citing Moran, Vol. II, p. 519).
Some of the objections raised by the petitioners to the questioned
resolution of the Court of Appeals are obviously matters involving the correct
construction of our rules of procedure and, consequently, are proper subjects
of an appeal by way of certiorari under Rule 45 of the Rules of Court, rather
than a special civil action for certiorari under Rule 65. The petitioners, however,
have correctly appreciated the nature of its objections and have asked this
Court to treat the instant petition as an appeal by way of certiorari under Rule
45 "in the event ... that this Honorable Supreme Court should deem that an
appeal is an adequate remedy ..." The nature of the case at bar permits, in our
view, a disquisition of both types of assignments.
We do not share the view of the petitioners that the Court of Appeals acted
without or in excess of jurisdiction or gravely abused its discretion in
promulgating the questioned resolution.
While it is true that stamped on the registry receipts 0215 and 0215
as well as on the envelopes covering the mails in question is the date "January
15, 1969," this, by itself, does not establish an unrebuttable presumption of the
fact of date of mailing. Henning and Caltex, cited by the petitioners, are not in
point because the specific adjective issue resolved in those cases was whether
or not the date of mailing a pleading is to be considered as the date of its filing.
The issue in the case at bar is whether or not the motion of the petitioners for
extension of time to file the printed record on appeal was, in point of fact,
mailed (and, therefore, filed) on January 15, 1969.
In resolving this issue in favor of the respondent, this Court finds,
after a careful study and appraisal of the pleadings, admissions and denials
respectively adduced and made by the parties, that the Court of Appeals did
not gravely abuse its discretion and did not act without or in excess of its
jurisdiction. We share the view of the appellate court that the certifications
issued by the two postmasters of Makati, Rizal and the sworn declaration of the
mail carrier Malindog describing how the said registry receipts came to be
issued, are worthy of belief. It will be observed that the said certifications
explain clearly and in detail how it was improbable that the petitioners' counsel
in the ordinary course of official business, while Malindog's sworn statement,
which constitutes a very grave admission against his own interest, provides
ample basis for a finding that where official duty was not performed it was at
the behest of a person interested in the petitioners' side of the action below.
That at the preliminary investigation at the Fiscal's office, Malindog failed to
identify Quiachon as the person who induced him to issue falsified receipts,
contrary to what he declared in his affidavit, is of no moment since the findings
of the inquest fiscal as reflected in the information for falsification filed against
Malindog indicate that someone did induce Malindog to make and issue false
registry receipts to the counsel for the petitioners.
This Court held in Bello vs. Fernando1 that the right to appeal is nota
natural right nor a part of due process; it is merely a statutory privilege, and
may be exercised only in the manner provided by law. In this connection, the
Rule of Court expressly makes it the duty of an appellant to file a printed record
on appeal with the Court of Appeals within sixty (60) record on appeal approved
by the trial court has already been received by the said court. Thus, section 5
of Rule 46 states:
Sec. 5. Duty of appellant upon receipt of notice. — It shall be the duty of the
appellant within fifteen (15) days from the date of the notice referred to in the
preceding section, to pay the clerk of the Court of Appeals the fee for the
docketing of the appeal, and within sixty (60) days from such notice to submit
to the court forty (40) printed copies of the record on appeal, together with
proof of service of fifteen (15) printed copies thereof upon the appelee.
As the petitioners failed to comply with the above-mentioned duty which the
Rules of Court enjoins, and considering that, as found by the Court of Appeals,
there was a deliberate effort on their part to mislead the said Court in grating
them an extension of time within which to file their printed record on appeal,
it stands to reason that the appellate court cannot be said to have abused its
discretion or to have acted without or in excess of its jurisdiction in ordering
the dismissal of their appeal.
Our jurisprudence is replete with cases in which this Court dismissed
an appeal on grounds not mentioned specifically in Section 1, Rule 50 of the
Rules of Court. (See, for example, De la Cruz vs. Blanco, 73 Phil. 596 (1942);
Government of the Philippines vs. Court of Appeals, 108 Phil. 86 (1960);
Ferinion vs. Sta. Romana, L-25521, February 28, 1966, 16 SCRA 370, 375).
It will likewise be noted that inasmuch as the petitioners' motion for
extension of the period to file the printed record on appeal was belated filed,
then, it is as though the same were non-existent, since as this Court has already
stated in Baquiran vs. Court of Appeals,2 "The motion for extension of the
period for filing pleadings and papers in court must be made before the
expiration of the period to be extended." The soundness of this dictum in
matters of procedure is self-evident. For, were the doctrine otherwise, the
uncertainties that would follow when litigants are left to determine and
redetermine for themselves whether to seek further redress in court forthwith
or take their own sweet time will result in litigations becoming more unreable
than the very grievances they are intended to redness.
The argument raised by the petitioner — that the objection to an
appeal maybe waived, as when the appellee allows the record on appeal to be
printed and approved — is likewise not meritorious considering that the
respondent did file a motion in the Court of Appeals on February 8, 1969
praying for the dismissal of the below of the petitioners had not yet filed their
record on appeal and, therefore, must be considered to have abandoned their
appeal.
In further assailing the questioned resolution of the Court of
Appeals, the petitioners also point out that on the merits the equities of the
instant case are in their favor. A reading of the record, however, persuades us
that the judgment a quo is substantially correct and morally just.
The appealed decision of the court a quo narrates both the alleged
and proven facts of the dispute between the petitioners and the respondent,
as follows:
This is a suit for specific performance filed by Lorenzo Velasco
against the Magdalena Estate, Inc. on the allegation that on November 29, 1962
the plaintiff and the defendant had entered into a contract of sale (Annex A of
the complaint) by virtue of which the defendant offered to sell the plaintiff and
the plaintiff in turn agreed to buy a parcel of land with an area of 2,059 square
meters more particularly described as Lot 15, Block 7, Psd-6129, located at No.
39 corner 6th Street and Pacific Avenue, New Manila, this City, for the total
purchase price of P100,000.00.
It is alleged by the plaintiff that the agreement was that the plaintiff
was to give a down payment of P10,000.00 to be followed by P20,000.00 and
the balance of P70,000.00 would be paid in installments, the equal monthly
amortization of which was to be determined as soon as the P30,000.00 down
payment had been completed. It is further alleged that the plaintiff paid down
payment of P10,000.00 on November 29, 1962 as per receipt No. 207848 (Exh.
"A")and that when on January 8, 1964 he tendered to the defendant the
payment of the additional P20,000.00 to complete the P30,000.00 the
defendant refused to accept and that eventually it likewise refused to execute
a formal deed of sale obviously agreed upon. The plaintiff demands P25,000.00
exemplary damages, P2,000.00 actual damages and P7,000.00 attorney's fees.
The defendant, in its Answer, denies that it has had any direct
dealings, much less, contractual relations with the plaintiff regarding the
property in question, and contends that the alleged contract described in the
document attached to the complaint as Annex A is entirely unenforceable
under the Statute of Frauds; that the truth of the matter is that a portion of the
property in question was being leased by a certain Socorro Velasco who, on
November 29, 1962, went to the office of the defendant indicated her desire
to purchase the lot; that the defendant indicated its willingness to sell the
property to her at the price of P100,000.00 under the condition that a down
payment of P30,000.00 be made, P20,000.00 of which was to be paid on
November 31, 1962, and that the balance of P70,000.00 including interest a 9%
per annum was to be paid on installments for a period of ten years at the rate
of P5,381.32 on June 30 and December of every year until the same shall have
been fully paid; that on November 29, 1962 Socorro Velasco offered to pay
P10,000.00 as initial payment instead of the agreed P20,000.00 but because
the amount was short of the alleged P20,000.00 the same was accepted merely
as deposited and upon request of Socorro Velasco the receipt was made in the
name of her brother-in-law the plaintiff herein; that Socorro Velasco failed to
complete the down payment of P30,000.00 and neither has she paid any
installments on the balance of P70,000.00 up to the present time; that it was
only on January 8, 1964 that Socorro Velasco tendered payment of P20,000.00,
which offer the defendant refused to accept because it had considered the
offer to sell rescinded on account of her failure to complete the down payment
on or before December 31, 1962.
The lone witness for the plaintiff is Lorenzo Velasco, who exhibits
the receipt, Exhibits A, issued in his favor by the Magdalena Estate, Inc., in the
sum of P10,000.00 dated November 29, 1962. He also identifies a letter (Exh.
B)of the Magdalena Estate, Inc. addressed to him and his reply thereto. He
testifies that Socorro Velasco is his sister-in-law and that he had requested her
to make the necessary contacts with defendant referring to the purchase of the
property in question. Because he does not understand English well, he had
authorized her to negotiate with the defendant in her whenever she went to
the office of the defendant, and as a matter of fact, the receipt for the
P10,000.00 down payment was issued in his favor. The plaintiff also depends
on Exhibit A to prove that there was a perfected follows: "Earnest money for
the purchase of Lot 15, Block 7, Psd-6129, Area 2,059 square meters including
improvements thereon — P10,000.00." At the bottom of Exhibit A the following
appears: "Agreed price: P100,000.00, P30,000.00 down payment, bal. in 10
years."
To prove that the Magdalena Estate, Inc. had been dealing all along
with him and not with his sister-in-law and that the Magdalena Estate, Inc. knew
very well that he was the person interested in the lot in question and not his
sister-in-law, the plaintiff offers in evidence five checks all drawn by him in favor
of Magdalena Estate, Inc. for payment of the lease of the property. ....
There does not seem to be any dispute regarding the fact that the
Velasco family was leasing this property from the Magdalena Estate, Inc. since
December 29, 1961; that the Velasco family sometime in 1962 offered to
purchase the lot as a result of which Lorenzo Velasco thru Socorro Velasco
made the P10,000.00 deposit or, in the language of the defendant 'earnest
money or down payment' as evidenced by Exhibit A. The only matter that
remains to be decided is whether the talks between the Magdalena Estate, Inc.
and Lorenzo Velasco either directly or thru his sister-in-law Socorro Velasco
ever ripened into a consummated sale. It is the position of the defendant (1)
that the sale was never consummated and (2) that the contract is
unenforceable under the Statute of Frauds.
The court a quo agreed with the respondent's (defendant therein)
contention that no contract of sale was perfected because the minds of the
parties did not meet "in regard to the manner of payment." The court a quo
appraisal of this aspect of the action below is correct. The material averments
contained in the petitioners' complaint themselves disclose a lack of complete
"agreement in regard to the manner of payment" of the lot in question. The
complaint states pertinently:
4. That plaintiff and defendant further agreed that the total down payment
shall by P30,000.00, including the P10,000.00 partial payment mentioned in
paragraph 3 hereof, and that upon completion of the said down payment of
P30,000.00, the balance of P70,000.00 shall be said by the plaintiff to the
defendant in 10 years from November 29, 1962;
5. That the time within the full down payment of the P30,000.00 was to be
completed was not specified by the parties but the defendant was duly
compensated during the said time prior to completion of the down payment of
P30,000.00 by way of lease rentals on the house existing thereon which was
earlier leased by defendant to the plaintiff's sister-in-law, Socorro J. Velasco,
and which were duly paid to the defendant by checks drawn by plaintiff.
It is not difficult to glean from the aforequoted averments that the
petitioners themselves admit that they and the respondent still had to meet
and agree on how and when the down-payment and the installment payments
were to be paid. Such being the situation, it cannot, therefore, be said that a
definite and firm sales agreement between the parties had been perfected over
the lot in question. Indeed, this Court has already ruled before that a definite
agreement on the manner of payment of the purchase price is an essential
element in the formation of a binding and unforceable contract of sale.3 The
fact, therefore, that the petitioners delivered to the respondent the sum of
P10,000 as part of the down-payment that they had to pay cannot be
considered as sufficient proof of the perfection of any purchase and sale
agreement between the parties herein under article 1482 of the new Civil Code,
as the petitioners themselves admit that some essential matter — the terms of
payment — still had to be mutually covenanted.
ACCORDINGLY, the instant petitioner is hereby denied. No
pronouncement as to costs.

Makalintal, Makasiar and Esguerra, JJ., concur.

Fernando, J., took no part.