G.R. No.
120820 August 1, 2000 however, failed to pay the remaining balance of the loan because they
SPS. FORTUNATO SANTOS and ROSALINDA R SANTOS,
petitioners,
vs.
COURT OF APPEALS, SPS. MARIANO R. CASEDA and CARMEN
CASEDA, respondents.
QUISUMBING, J.:
For review on certiorari is the decision of the Court of Appeals, dated
March 28, 1995, in CA-G.R. CV No. 30955, which reversed and set
aside the judgment of the Regional Trial Court of Makati, Branch 133, in
Civil Case No. 89-4759. Petitioners (the Santoses) were the owners of
a house and lot informally sold, with conditions, to herein private
respondents (the Casedas). In the trial court, the Casedas had
complained that the Santoses refused to deliver said house and lot
despite repeated demands. The trial court dismissed the complaint for
specific performance and damages, but in the Court of Appeals, the
dismissal was reversed, as follows:
"WHEREFORE, in view of the foregoing, the decision
appealed from is hereby REVERSED and SET ASIDE and a
new one entered:
"1. GRANTING plaintiffs-appellants a period of NINETY (90)
DAYS from the date of the finality of judgment within which to
pay the balance of the obligation in accordance with their
agreement;
"2. Ordering appellees to restore possession of the subject
house and lot to the appellants upon receipt of the full amount
of the balance due on the purchase price; and
"3. No pronouncement as to costs.
"SO ORDERED."1
The undisputed facts of this case are as follows:
The spouses Fortunato and Rosalinda Santos owned the house and lot
consisting of 350 square meters located at Lot 7, Block 8, Better Living
Subdivision, Parañaque, Metro Manila, as evidenced by TCT (S-11029)
28005 of the Register of Deeds of Parañaque. The land together with
the house, was mortgaged with the Rural Bank of Salinas, Inc., to secure
a loan of P150,000.00 maturing on June 16, 1987.
Sometime in 1984, Rosalinda Santos met Carmen Caseda, a fellow
market vendor of hers in Pasay City and soon became very good friends
with her. The duo even became kumadres when Carmen stood as a
wedding sponsor of Rosalinda's nephew.
On June 16, 1984, the bank sent Rosalinda Santos a letter demanding
payment of P16,915.84 in unpaid interest and other charges. Since the
Santos couple had no funds, Rosalinda offered to sell the house and lot
to Carmen. After inspecting the real property, Carmen and her husband
agreed.
Sometime that month of June, Carmen and Rosalinda signed
a document, which reads:
"Received the amount of P54,100.00 as a partial payment of
Mrs. Carmen Caseda to the (total) amount of 350,000.00
(house and lot) that is own (sic) by Mrs. Rosalinda R. Santos.
(Sgd.) Carmen H. Caseda
direct buyer
Mrs. Carmen Caseda
"(Sgd.) Rosalinda Del R. Santos
Owner
Mrs. Rosalinda R. Santos
House and Lot
Better Living Subd. Parañaque, Metro Manila
Section V Don Bosco St."2
The other terms and conditions that the parties agreed upon were for
the Caseda spouses to pay: (1) the balance of the mortgage loan with
the Rural bank amounting to P135,385.18; (2) the real estate taxes; (3)
the electric and water bills; and (4) the balance of the cash price to be
paid not later than June 16, 1987, which was the maturity date of the
loan.3
The Casedas gave an initial payment of P54,100.00 and immediately
took possession of the property, which they then leased out. They also
paid in installments, P81,696.84 of the mortgage loan. The Casedas,
suffered bankruptcy in 1987. Notwithstanding the state of their finances,
Carmen nonetheless paid in March 1990, the real estate taxes on the
property for 1981-1984. She also settled the electric bills from December
12, 1988 to July 12, 1989. All these payments were made in the name
of Rosalinda Santos.
In January 1989, the Santoses, seeing that the Casedas lacked the
means to pay the remaining installments and/or amortization of the loan,
repossessed the property. The Santoses then collected the rentals from
the tenants.
In February 1989, Carmen Caseda sold her fishpond in Batangas. She
then approached petitioners and offered to pay the balance of the
purchase price for the house and lot. The parties, however, could not
agree, and the deal could not push through because the Santoses
wanted a higher price. For understandably, the real estate boom in
Metro Manila at this time, had considerably jacked up realty values. On
August 11, 1989, the Casedas filed Civil Case No. 89-4759, with the
RTC of Makati, to have the Santoses execute the final deed of
conveyance over the property, or in default thereof, to reimburse the
amount of P180,000.00 paid in cash and P249,900.00 paid to the rural
bank, plus interest, as well as rentals for eight months amounting to
P32,000.00, plus damages and costs of suit.1âwphi1.nêt
After trial on the merits, the lower court disposed of the case as follows:
"WHEREFORE, judgment is hereby ordered:
(a) dismissing plaintiff's (Casedas') complaint; and
(b) declaring the agreement; marked as Annex "C" of the
complaint rescinded. Costs against plaintiffs.
"SO ORDERED."4
Said judgment of dismissal is mainly based on the trial court's finding
that:
"Admittedly, the purchase price of the house and lot was
P485,385.18, i.e. P350,000.00 as cash payment and
P135,385.18, assumption of mortgage. Of it plaintiffs
[Casedas] paid the following: (1) P54,100.00 down payment;
and (2) P81,694.64 installment payments to the bank on the
loan (Exhs. E to E-19) or a total of P135,794.64. Thus,
plaintiffs were short of the purchase price. They cannot,
therefore, demand specific performance."5
The trial court further held that the Casedas were not entitled to
reimbursement of payments already made, reasoning that:
"As earlier mentioned, plaintiffs made a total payment of
P135,794.64 out of the purchase price of P485,385.18. The
property was in plaintiffs' possession from June 1984 to
January 1989 or a period of fifty-five months. During that time,
plaintiffs leased the property. Carmen said the property was
rented for P25.00 a day or P750.00 a month at the start and
in 1987 it was increased to P2,000.00 and P4,000 a month.
But the evidence is not precise when the different amounts of
rental took place. Be that as it may, fairness demands that
plaintiffs must pay defendants for the exercise of dominical
rights over the property by renting it to others. The amount of
P2,000.00 a month would be reasonable based on the
average of P750.00, P2,000.00, P4,000.00 lease-rentals
charged. Multiply P2,000 by 55 months, the plaintiffs must pay
defendants P110,000 for the use of the property. Deducting
this amount from the P135,794.64 payment of the plaintiffs on
the property the difference is P25,794.64. Should the plaintiffs
be entitled to a reimbursement of this amount? The answer is
in the negative. Because of failure of plaintiffs to liquidated the
mortgage loan on time, it had ballooned from its original figure
of P135,384.18 as of June 1984 to P337,280.78 as of
December 31, 1988. Defendants [Santoses] had to pay the
last amount to the bank to save the property from foreclosure.
Logically, plaintiffs must share in the burden arising from their
failure to liquidate the loan per their contractual commitment.
Hence, the amount of P25,794.64 as their share in the
defendants' damages in the form of increased loan-amount,
is reasonable."6
On appeal, the appellate court, as earlier noted, reversed the lower
court. The appellate court held that rescission was not justified under the
circumstances and allowed the Caseda spouses a period of ninety days
within which to pay the balance of the agreed purchase price.
Hence, this instant petition for review on certiorari filed by the Santoses.
Petitioners now submit the following issues for our consideration:
WHETHER OR NOT THE COURT OF APPEALS, HAS
JURISDICTION TO DECIDE PRIVATE RESPONDENT'S
APPEAL INTERPOSING PURELY QUESTIONS OF LAW.
WHETHER THE SUBJECT TRANSACTION IS NOT A
CONTRACT OF ABSOLUTE SALE BUT A MERE ORAL
CONTRACT TO SELL IN WHICH CASE JUDICIAL DEMAND
FOR RESCISSION (ART. 1592,7 CIVIL CODE) IS NOT
APPLICABLE.
ASSUMING ARGUENDO THAT A JUDICIAL DEMAND FOR
RESCISSION IS REQUIRED, WHETHER PETITIONERS'
DEMAND AND PRAYER FOR RESCISSION CONTAINED IN
THEIR ANSWER FILED BEFORE THE TRIAL SATISFIED
THE SAID REQUIREMENT.
WHETHER OR NOT THE NON-PAYMENT OF MORE THAN
HALF OF THE ENTIRE PURCHASE PRICE INCLUDING
THE NON-COMPLIANCE WITH THE STIPULATION TO
LIQUIDATE THE MORTGAGE LOAN ON TIME WHICH
CAUSED GRAVE DAMAGE AND PREJUDICE TO
PETITIONERS, CONSTITUTE SUBSTANTIAL BREACH TO
JUSTIFY RESCISSION OF A CONTRACT TO SELL UNDER
ARTICLE 1191 8(CIVIL CODE).
On the first issue, petitioners argue that, since both the parties and the
apellate court adopted the findings of trial court,9 no questions of fact
were raised before the Court of Appeals. According to petitioners, CA-
G.R. CV No. 30955, involved only pure questions of law. They aver that
the court a quo had no jurisdiction to hear, much less decide, CA-G.R.
CV No. 30955, without running afoul of Supreme Court Circular No. 290
(4) [c].10
There is a question of law in a given case when the doubt or difference
arises as to how the law is on a certain set of facts, and there is a
question of fact when the doubt or difference arises as to the truth or
falsehood of the alleged facts.11 But we note that the first assignment of
error submitted by respondents for consideration by the appellate court
dealt with the trial court's finding that herein petitioners got back the
property in question because respondents did not have the means to
pay the installments and/or amortization of the loan. 12 The resolution of
this question involved an evaluation of proof, and not only a
consideration of the applicable statutory and case laws. Clearly, C.A.-
G.R. CV No. 30955 did not involve pure questions of law, hence the
Court of Appeals had jurisdiction and there was no violation of our
Circular No. 2-90.
Moreover, we find that petitioners took an active part in the proceedings
before the Court of Appeals, yet they did not raise there the issue of
jurisdiction. They should have raised this issue at the earliest opportunity
before the Court of Appeals. A party taking part in the proceedings
before the appellate court and submitting his case for its decision ought
not to later on attack the court's decision for want of jurisdiction because
the decision turns out to be adverse to him.13
The second and third issues deal with the question: Did the Court of
Appeals err in holding that a judicial rescission of the agreement was
necessary? In resolving both issues, we must first make a preliminary
determination of the nature of the contract in question: Was it a contract
of sale, as insisted by the respondents or a mere contract to sell, as
contended by petitioners?
Petitioners argue that the transaction between them and respondents
was a mere contract to sell, and not a contract of sale, since the sole
documentary evidence (Exh. D, receipt) referring to their agreement
clearly showed that they did not transfer ownership of the property in
question simultaneous with its delivery and hence remained its owners,
pending fulfillment of the other suspensive conditions, i.e. full payment
of the balance of the purchase price and the loan amortizations.
Petitioners point to Manuel v. Rodriguez, 109 Phil. 1 (1960) and Luzon
Brokerage Co., Inc. v. Maritime Building Co., Inc., 43 SCRA 93 (1972),
where he held that article 1592 of the Civil Code is inapplicable to a
contract to sell. They charge the court a quo with reversible error in
holding that petitioners should have judicially rescinded the agreement
with respondents when the latter failed to pay the amortizations on the
bank loan.
Respondents insist that there was a perfected contract of sale, since
upon their partial payment of the purchase price, they immediately took
possession of the property as vendees, and subsequently leased it, thus
exercising all the rights of ownership over the property. This showed that
transfer of ownership was simultaneous with the delivery of the realty
sold, according to respondents.
It must be emphasized from the outset that a contract is what the law
defines it to be, taking into consideration its essential elements, and not
what the contracting parties call it.14 Article 145815 of the Civil Code
defines a contract of sale. Note that the said article expressly obliges the
vendor to transfer the ownership of the thing sold as an essential
element of a contract of sale.16 We have carefully examined the contents
of the unofficial receipt, Exh. D, with the terms and conditions informally
agreed upon by the parties, as well as the proofs submitted to support
their respective contentions. We are far from persuaded that there was
a transfer of ownership simultaneously with the delivery of the property
purportedly sold. The records clearly show that, notwithstanding the fact
that the Casedas first took then lost possession of the disputed house
and lot, the title to the property, TCT No. 28005 (S-11029) issued by the
Register of Deeds of Parañaque, has remained always in the name of
Rosalinda Santos.17 Note further that although the parties agreed that
the Casedas would assume the mortgage, all amortization payments
made by Carmen Caseda to the bank were in the name of Rosalinda
Santos.18 We likewise find that the bank's cancellation and discharge of
mortgage dated January 20, 1990, was made in favor of Rosalinda
Santos.19 The foregoing circumstances categorically and clearly show
that no valid transfer of ownership was made by the Santoses to the
Casedas. Absent this essential element, their agreement cannot be
deemed a contract of sale. We agree with petitioner's averment that the
agreement between Rosalinda Santos and Carmen Caseda is a
contract to sell. In contracts to sell, ownership is reserved the by the
vendor and is not to pass until full payment of the purchase price. This
we find fully applicable and understandable in this case, given that the
property involved is a titled realty under mortgage to a bank and would
require notarial and other formalities of law before transfer thereof could
be validly effected.
In view of our finding in the present case that the agreement between
the parties is a contract to sell, it follows that the appellate court erred
when it decreed that a judicial rescission of said agreement was
necessary. This is because there was no rescission to speak of in the
first place. As we earlier pointed, in a contract to sell, title remains with
the vendor and does not pass on to the vendee until the purchase price
is paid in full, Thus, in contract to sell, the payment of the purchase price
is a positive suspensive condition. Failure to pay the price agreed upon
is not a mere breach, casual or serious, but a situation that prevents the
obligation of the vendor to convey title from acquiring an obligatory
force.20 This is entirely different from the situation in a contract of sale,
where non-payment of the price is a negative resolutory condition. The
effects in law are not identical. In a contract of sale, the vendor has lost
ownership of the thing sold and cannot recover it, unless the contract of
sale is rescinded and set aside.21 In a contract to sell, however, the
vendor remains the owner for as long as the vendee has not complied
fully with the condition of paying the purchase. If the vendor should eject
the vendee for failure to meet the condition precedent, he is enforcing
the contract and not rescinding it. When the petitioners in the instant
case repossessed the disputed house and lot for failure of private
respondents to pay the purchase price in full, they were merely enforcing
the contract and not rescinding it. As petitioners correctly point out the
Court of Appeals erred when it ruled that petitioners should have
judicially rescinded the contract pursuant to Articles 1592 and 1191 of
the Civil Code. Article 1592 speaks of non-payment of the purchase
price as a resolutory condition. It does not apply to a contract to sell. 22As
to Article 1191, it is subordinated to the provisions of Article 1592 when
applied to sales of immovable property.23Neither provision is applicable
in the present case.
As to the last issue, we need not tarry to make a determination of
whether the breach of contract by private respondents is so substantial
as to defeat the purpose of the parties in entering into the agreement
and thus entitle petitioners to rescission. Having ruled that there is no
rescission to speak of in this case, the question is moot.
WHEREFORE, the instant petition is GRANTED and the assailed
decision of the Court of Appeals in CA-G.R. CV No. 30955
is REVERSED and SET ASIDE. The judgment of the Regional Trial
Court of Makati, Branch 133, with respect to the DISMISSAL of the
complaint in Civil Case No. 89-4759, is hereby REINSTATED. No
pronouncement as to costs.1âwphi1.nêt
SO ORDERED.
G.R. No. 103577 October 7, 1996
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A.
CORONEL, ANNABELLE C. GONZALES (for herself and on behalf
of Florida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL,
FLORAIDA A. ALMONTE, and CATALINA BALAIS
MABANAG, petitioners,
vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and
RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as
attorney-in-fact, respondents.
MELO, J.:p
The petition before us has its roots in a complaint for specific
performance to compel herein petitioners (except the last named,
Catalina Balais Mabanag) to consummate the sale of a parcel of land
with its improvements located along Roosevelt Avenue in Quezon City
entered into by the parties sometime in January 1985 for the price of
P1,240,000.00.
The undisputed facts of the case were summarized by respondent court
in this wise:
On January 19, 1985, defendants-appellants
Romulo Coronel, et al. (hereinafter referred to as
Coronels) executed a document entitled "Receipt of
Down Payment" (Exh. "A") in favor of plaintiff
Ramona Patricia Alcaraz (hereinafter referred to as
Ramona) which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 — Total amount
50,000 — Down payment
———————————
P1,190,000.00 — Balance
Received from Miss Ramona Patricia Alcaraz of
146 Timog, Quezon City, the sum of Fifty Thousand
Pesos purchase price of our inherited house and
lot, covered by TCT No. 119627 of the Registry of
Deeds of Quezon City, in the total amount of
P1,240,000.00.
We bind ourselves to effect the transfer in our
names from our deceased father, Constancio P.
Coronel, the transfer certificate of title immediately
upon receipt of the down payment above-stated.
On our presentation of the TCT already in or name,
We will immediately execute the deed of absolute
sale of said property and Miss Ramona Patricia
Alcaraz shall immediately pay the balance of the
P1,190,000.00.
Clearly, the conditions appurtenant to the sale are
the following:
1. Ramona will make a down payment of Fifty
Thousand (P50,000.00) Pesos upon execution of
the document aforestated;
2. The Coronels will cause the transfer in their
names of the title of the property registered in the
name of their deceased father upon receipt of the
Fifty Thousand (P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject
property, the Coronels will execute the deed of
absolute sale in favor of Ramona and the latter will
pay the former the whole balance of One Million
One Hundred Ninety Thousand (P1,190,000.00)
Pesos.
On the same date (January 15, 1985), plaintiff-
appellee Concepcion D. Alcaraz (hereinafter
referred to as Concepcion), mother of Ramona,
paid the down payment of Fifty Thousand
(P50,000.00) Pesos (Exh. "B", Exh. "2").
On February 6, 1985, the property originally
registered in the name of the Coronels' father was
transferred in their names under TCT
No. 327043 (Exh. "D"; Exh. "4")
On February 18, 1985, the Coronels sold the
property covered by TCT No. 327043 to intervenor-
appellant Catalina B. Mabanag (hereinafter referred
to as Catalina) for One Million Five Hundred Eighty
Thousand (P1,580,000.00) Pesos after the latter
has paid Three Hundred Thousand (P300,000.00)
Pesos (Exhs. "F-3"; Exh. "6-C")
For this reason, Coronels canceled and rescinded
the contract (Exh. "A") with Ramona by depositing
the down payment paid by Concepcion in the
bank in trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et al., filed a
complaint for specific performance against the
Coronels and caused the annotation of a notice
of lis pendens at the back of TCT No. 327403 (Exh.
"E"; Exh. "5").
On April 2, 1985, Catalina caused the annotation of
a notice of adverse claim covering the same
property with the Registry of Deeds of Quezon City
(Exh. "F"; Exh. "6").
On April 25, 1985, the Coronels executed a Deed
of Absolute Sale over the subject property in favor
of Catalina (Exh. "G"; Exh. "7").
On June 5, 1985, a new title over the subject
property was issued in the name of Catalina under
TCT No. 351582 (Exh. "H"; Exh. "8").
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch 83, RTC,
Quezon City) the parties agreed to submit the case for decision solely
on the basis of documentary exhibits. Thus, plaintiffs therein (now
private respondents) proffered their documentary evidence accordingly
marked as Exhibits "A" through "J", inclusive of their corresponding
submarkings. Adopting these same exhibits as their own, then
defendants (now petitioners) accordingly offered and marked them as
Exhibits "1" through "10", likewise inclusive of their corresponding
submarkings. Upon motion of the parties, the trial court gave them thirty
(30) days within which to simultaneously submit their respective
memoranda, and an additional 15 days within which to submit their
corresponding comment or reply thereof, after which, the case would be
deemed submitted for resolution.
On April 14, 1988, the case was submitted for resolution before Judge
Reynaldo Roura, who was then temporarily detailed to preside over
Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was
handed down by Judge Roura from his regular bench at Macabebe,
Pampanga for the Quezon City branch, disposing as follows:
WHEREFORE, judgment for specific performance
is hereby rendered ordering defendant to execute
in favor of plaintiffs a deed of absolute sale covering
that parcel of land embraced in and covered by
 Transfer Certificate of Title No. 327403 (now TCT
No. 331582) of the Registry of Deeds for Quezon
City, together with all the improvements existing
thereon free from all liens and encumbrances, and
once accomplished, to immediately deliver the said
document of sale to plaintiffs and upon receipt
thereof, the said document of sale to plaintiffs and
upon receipt thereof, the plaintiffs are ordered to
pay defendants the whole balance of the purchase
price amounting to P1,190,000.00 in cash. Transfer
Certificate of Title No. 331582 of the Registry of
Deeds for Quezon City in the name of intervenor is
hereby canceled and declared to be without force
and effect. Defendants and intervenor and all other
persons claiming under them are hereby ordered to
vacate the subject property and deliver possession
thereof to plaintiffs. Plaintiffs' claim for damages
and attorney's fees, as well as the counterclaims of
defendants and intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1,
1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioner before the new
presiding judge of the Quezon City RTC but the same was denied by
Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to
annul the decision and to render anew decision by
the undersigned Presiding Judge should be denied
for the following reasons: (1) The instant case
became submitted for decision as of April 14, 1988
when the parties terminated the presentation of
their respective documentary evidence and when
the Presiding Judge at that time was Judge
Reynaldo Roura. The fact that they were allowed to
file memoranda at some future date did not change
the fact that the hearing of the case was terminated
before Judge Roura and therefore the same should
be submitted to him for decision; (2) When the
defendants and intervenor did not object to the
authority of Judge Reynaldo Roura to decide the
case prior to the rendition of the decision, when they
met for the first time before the undersigned
Presiding Judge at the hearing of a pending
incident in Civil Case No. Q-46145 on November
11, 1988, they were deemed to have acquiesced
thereto and they are now estopped from
questioning said authority of Judge Roura after they
received the decision in question which happens to
be adverse to them; (3) While it is true that Judge
Reynaldo Roura was merely a Judge-on-detail at
this Branch of the Court, he was in all respects the
Presiding Judge with full authority to act on any
pending incident submitted before this Court during
his incumbency. When he returned to his Official
Station at Macabebe, Pampanga, he did not lose
his authority to decide or resolve such cases
submitted to him for decision or resolution because
he continued as Judge of the Regional Trial Court
and is of co-equal rank with the undersigned
Presiding Judge. The standing rule and supported
by jurisprudence is that a Judge to whom a case is
submitted for decision has the authority to decide
the case notwithstanding his transfer to another
branch or region of the same court (Sec. 9, Rule
135, Rule of Court).
Coming now to the twin prayer for reconsideration
of the Decision dated March 1, 1989 rendered in the
instant case, resolution of which now pertains to the
undersigned Presiding Judge, after a meticulous
examination of the documentary evidence
presented by the parties, she is convinced that the
Decision of March 1, 1989 is supported by evidence
and, therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the "Motion for
Reconsideration and/or to Annul Decision and
Render Anew Decision by the Incumbent Presiding
Judge" dated March 20, 1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991,
the Court of Appeals (Buena, Gonzaga-Reyes, Abad Santos (P), JJ.)
rendered its decision fully agreeing with the trial court.
Hence, the instant petition which was filed on March 5, 1992. The last
pleading, private respondents' Reply Memorandum, was filed on
September 15, 1993. The case was, however, re-raffled to
undersigned ponente only on August 28, 1996, due to the voluntary
inhibition of the Justice to whom the case was last assigned.
While we deem it necessary to introduce certain refinements in the
disquisition of respondent court in the affirmance of the trial court's
decision, we definitely find the instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution
of the other issues in the case at bar is the precise determination of the
legal significance of the document entitled "Receipt of Down Payment"
which was offered in evidence by both parties. There is no dispute as to
the fact that said document embodied the binding contract between
Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio
P. Coronel on the other, pertaining to a particular house and lot covered
by TCT No. 119627, as defined in Article 1305 of the Civil Code of the
Philippines which reads as follows:
Art. 1305. A contract 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.
While, it is the position of private respondents that the "Receipt of Down
Payment" embodied a perfected contract of sale, which perforce, they
seek to enforce by means of an action for specific performance,
petitioners on their part insist that what the document signified was a
mere executory contract to sell, subject to certain suspensive conditions,
and because of the absence of Ramona P. Alcaraz, who left for the
United States of America, said contract could not possibly ripen into a
contract absolute sale.
Plainly, such variance in the contending parties' contentions is brought
about by the way each interprets the terms and/or conditions set forth in
said private instrument. Withal, based on whatever relevant and
admissible evidence may be available on record, this, Court, as were
the courts below, is now called upon to adjudge what the real intent of
the parties was at the time the said document was executed.
The Civil Code defines a contract of sale, thus:
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.
Sale, by its very nature, is a consensual contract because it is perfected
by mere consent. The essential elements of a contract of sale are the
following:
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.
Under this definition, a Contract to Sell may not be considered as a
Contract of Sale because the first essential element is lacking. In a
contract to sell, the prospective seller explicity reserves the transfer of
title to the prospective buyer, meaning, the prospective seller does not
as yet agree or consent to transfer ownership of the property subject of
the contract to sell until the happening of an event, which for present
purposes we shall take as the full payment of the purchase price. What
the seller agrees or obliges himself to do is to fulfill is promise to sell the
subject property when the entire amount of the purchase price is
delivered to him. In other words 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.
In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to
rule:
Hence, We hold that the contract between the
petitioner and the respondent was a contract to sell
where the ownership or title is retained by the seller
and is not to pass until the full payment of the price,
such payment being a positive suspensive
condition and 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.
Stated positively, upon the fulfillment of the suspensive condition which
is the full payment of the purchase price, the prospective seller's
obligation to sell the subject property by entering into a contract of sale
with the prospective buyer becomes demandable as provided in Article
1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon
the promissor if the promise is supported by a
consideration distinct from the price.
A contract to sell may thus be defined as 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.
A contract to sell as defined hereinabove, may not even be considered
as a conditional contract of sale where the seller may likewise reserve
title to the property subject of the sale until the fulfillment of a suspensive
condition, because in a conditional contract of sale, the first element of
consent is present, although it is conditioned upon the happening of a
contingent event which may or may not occur. If the suspensive
condition is not fulfilled, the perfection of the contract of sale is
completely abated (cf. Homesite and housing Corp. vs. Court of
Appeals, 133 SCRA 777 [1984]). However, 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 automatically transfers to the buyer by
operation of law without any further act having to be performed by the
seller.
In a contract to sell, upon the fulfillment of the suspensive condition
which is the full payment of the purchase price, 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.
It is essential to distinguish between a contract to sell and a conditional
contract of sale specially in cases where the subject property is sold by
the owner not to the party the seller contracted with, but to a third person,
as in the case at bench. 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-seller's title per se, but the latter, of course, may be used for
damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the
suspensive condition, the sale becomes absolute and this will definitely
affect the seller's title thereto. In fact, if there had been previous delivery
of the subject property, the seller's ownership or title to the property is
automatically transferred to the buyer such that, the seller will no longer
have any title to transfer to any third person. Applying Article 1544 of the
Civil Code, such second buyer of the property who may have had actual
or constructive knowledge of such defect in the seller's title, or at least
was charged with the obligation to discover such defect, cannot be a
registrant in good faith. Such second buyer cannot defeat the first
buyer's title. In case a title is issued to the second buyer, the first buyer
may seek reconveyance of the property subject of the sale.
With the above postulates as guidelines, we now proceed to the task of
deciphering the real nature of the contract entered into by petitioners
and private respondents.
It is a canon in the interpretation of contracts that the words used therein
should be given their natural and ordinary meaning unless a technical
meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586
[1992]). Thus, when petitioners declared in the said "Receipt of Down
Payment" that they —
Received from Miss Ramona Patricia Alcaraz of
146 Timog, Quezon City, the sum of Fifty Thousand
Pesos purchase price of our inherited house and
lot, covered by TCT No. 1199627 of the Registry of
Deeds of Quezon City, in the total amount of
P1,240,000.00.
without any reservation of title until full payment of the entire
purchase price, the natural and ordinary idea conveyed is that
they sold their property.
When the "Receipt of Down Payment" is considered in its entirety, it
becomes more manifest that there was a clear intent on the part of
petitioners to transfer title to the buyer, but since the transfer certificate
of title was still in the name of petitioner's father, they could not fully
effect such transfer although the buyer was then willing and able to
immediately pay the purchase price. Therefore, petitioners-sellers
undertook upon receipt of the down payment from private respondent
Ramona P. Alcaraz, to cause the issuance of a new certificate of title in
their names from that of their father, after which, they promised to
present said title, now in their names, to the latter and to execute the
deed of absolute sale whereupon, the latter shall, in turn, pay the entire
balance of the purchase price.
The agreement could not have been a contract to sell because the
sellers herein made no express reservation of ownership or title to the
subject parcel of land. Furthermore, the circumstance which prevented
the parties from entering into an absolute contract of sale pertained to
the sellers themselves (the certificate of title was not in their names) and
not the full payment of the purchase price. Under the established facts
and circumstances of the case, the Court may safely presume that, had
the certificate of title been in the names of petitioners-sellers at that time,
there would have been no reason why an absolute contract of sale could
not have been executed and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did
not merely promise to sell the properly to private respondent upon the
fulfillment of the suspensive condition. On the contrary, having already
agreed to sell the subject property, they undertook to have the certificate
of title changed to their names and immediately thereafter, to execute
the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the
sellers, after compliance by the buyer with certain terms and conditions,
promised to sell the property to the latter. What may be perceived from
the respective undertakings of the parties to the contract is that
petitioners had already agreed to sell the house and lot they inherited
from their father, completely willing to transfer full ownership of the
subject house and lot to the buyer if the documents were then in order.
It just happened, however, that the transfer certificate of title was then
still in the name of their father. It was more expedient to first effect the
change in the certificate of title so as to bear their names. That is why
they undertook to cause the issuance of a new transfer of the certificate
of title in their names upon receipt of the down payment in the amount
of P50,000.00. As soon as the new certificate of title is issued in their
names, petitioners were committed to immediately execute the deed of
absolute sale. Only then will the obligation of the buyer to pay the
remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is most commonly
entered into so as to protect the seller against a buyer who intends to
buy the property in installment by withholding ownership over the
property until the buyer effects full payment therefor, in the contract
entered into in the case at bar, the sellers were the one who were unable
to enter into a contract of absolute sale by reason of the fact that the
certificate of title to the property was still in the name of their father. It
was the sellers in this case who, as it were, had the impediment which
prevented, so to speak, the execution of an contract of absolute sale.
What is clearly established by the plain language of the subject
document is that when the said "Receipt of Down Payment" was
prepared and signed by petitioners Romeo A. Coronel, et al., the parties
had agreed to a conditional contract of sale, consummation of which is
subject only to the successful transfer of the certificate of title from the
name of petitioners' father, Constancio P. Coronel, to their names.
The Court significantly notes this suspensive condition was, in fact,
fulfilled on February 6, 1985 (Exh. "D"; Exh. "4"). Thus, on said date, the
conditional contract of sale between petitioners and private respondent
Ramona P. Alcaraz became obligatory, the only act required for the
consummation thereof being the delivery of the property by means of
the execution of the deed of absolute sale in a public instrument, which
petitioners unequivocally committed themselves to do as evidenced by
the "Receipt of Down Payment."
Article 1475, in correlation with Article 1181, both of the Civil Code,
plainly applies to the case at bench. Thus,
Art. 1475. The contract of sale is perfected at the
moment there is a meeting of minds upon the thing
which is the object of the contract and upon the
price.
From the moment, the parties may reciprocally
demand performance, subject to the provisions of
the law governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition
of rights, as well as the extinguishment or loss of
those already acquired, shall depend upon the
happening of the event which constitutes the
condition.
Since the condition contemplated by the parties which is the issuance of
a certificate of title in petitioners' names was fulfilled on February 6,
1985, the respective obligations of the parties under the contract of sale
became mutually demandable, that is, petitioners, as sellers, were
obliged to present the transfer certificate of title already in their names
to private respondent Ramona P. Alcaraz, the buyer, and to immediately
execute the deed of absolute sale, while the buyer on her part, was
obliged to forthwith pay the balance of the purchase price amounting to
P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their
petition, petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound
themselves "to effect the transfer in our names from
our deceased father Constancio P. Coronel, the
transfer certificate of title immediately upon receipt
of the downpayment above-stated". The sale was
still subject to this suspensive condition. (Emphasis
supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of
sale subject to a suspensive condition. Only, they contend, continuing in
the same paragraph, that:
. . . Had petitioners-sellers not complied with this
condition of first transferring the title to the property
under their names, there could be no perfected
contract of sale. (Emphasis supplied.)
(Ibid.)
not aware that they set their own trap for themselves, for
Article 1186 of the Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled
when the obligor voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more
controlling than these mere hypothetical arguments is the fact that
the condition herein referred to was actually and indisputably fulfilled on
February 6, 1985, when a new title was issued in the names of
petitioners as evidenced by TCT No. 327403 (Exh. "D"; Exh. "4").
The inevitable conclusion is that on January 19, 1985, as evidenced by
the document denominated as "Receipt of Down Payment" (Exh. "A";
Exh. "1"), the parties entered into a contract of sale subject only to the
suspensive condition that the sellers shall effect the issuance of new
certificate title from that of their father's name to their names and that,
on February 6, 1985, this condition was fulfilled (Exh. "D"; Exh. "4").
We, therefore, hold that, in accordance with Article 1187 which
pertinently provides —
Art. 1187. The effects of conditional obligation to
give, once the condition has been fulfilled, shall
retroact to the day of the constitution of the
obligation . . .
In obligation to do or not to do, the courts shall
determine, in each case, the retroactive effect of the
condition that has been complied with.
the rights and obligations of the parties with respect to the
perfected contract of sale became mutually due and
demandable as of the time of fulfillment or occurrence of the
suspensive condition on February 6, 1985. As of that point in
time, reciprocal obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on
January 19, 1985 because they were then not yet the absolute owners
of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of
transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by
virtue of which the property, rights and obligations
to be extent and value of the inheritance of a person
are transmitted through his death to another or
others by his will or by operation of law.
Petitioners-sellers in the case at bar being the sons and
daughters of the decedent Constancio P. Coronel are
compulsory heirs who were called to succession by operation
of law. Thus, at the point their father drew his last breath,
petitioners stepped into his shoes insofar as the subject
property is concerned, such that any rights or obligations
pertaining thereto became binding and enforceable upon
them. It is expressly provided that rights to the succession are
transmitted from the moment of death of the decedent (Article
777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners' claim that succession may not be
declared unless the creditors have been paid is rendered moot by the
fact that they were able to effect the transfer of the title to the property
from the decedent's name to their names on February 6, 1985.
Aside from this, petitioners are precluded from raising their supposed
lack of capacity to enter into an agreement at that time and they cannot
be allowed to now take a posture contrary to that which they took when
they entered into the agreement with private respondent Ramona P.
Alcaraz. The Civil Code expressly states that:
Art. 1431. Through estoppel an admission or
representation is rendered conclusive upon the
person making it, and cannot be denied or
disproved as against the person relying thereon.
Having represented themselves as the true owners of the
subject property at the time of sale, petitioners cannot claim
 now that they were not yet the absolute owners thereof at that
time.
Petitioners also contend that although there was in fact a perfected
contract of sale between them and Ramona P. Alcaraz, the latter
breached her reciprocal obligation when she rendered impossible the
consummation thereof by going to the United States of America, without
leaving her address, telephone number, and Special Power of Attorney
(Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the
Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners
conclude, they were correct in unilaterally rescinding rescinding the
contract of sale.
We do not agree with petitioners that there was a valid rescission of the
contract of sale in the instant case. We note that these supposed
grounds for petitioners' rescission, are mere allegations found only in
their responsive pleadings, which by express provision of the rules, are
deemed controverted even if no reply is filed by the plaintiffs (Sec. 11,
Rule 6, Revised Rules of Court). The records are absolutely bereft of
any supporting evidence to substantiate petitioners' allegations. We
have stressed time and again that allegations must be proven by
sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961];
Recaro vs. Embisan, 2 SCRA 598 [1961]. Mere allegation is not an
evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United
States of America on February 6, 1985, we cannot justify petitioner-
sellers' act of unilaterally and extradicially rescinding the contract of sale,
there being no express stipulation authorizing the sellers to
extarjudicially rescind the contract of sale. (cf. Dignos vs. CA, 158 SCRA
375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of
Ramona P. Alcaraz because although the evidence on record shows
that the sale was in the name of Ramona P. Alcaraz as the buyer, the
sellers had been dealing with Concepcion D. Alcaraz, Ramona's mother,
who had acted for and in behalf of her daughter, if not also in her own
behalf. Indeed, the down payment was made by Concepcion D. Alcaraz
with her own personal check (Exh. "B"; Exh. "2") for and in behalf of
Ramona P. Alcaraz. There is no evidence showing that petitioners ever
questioned Concepcion's authority to represent Ramona P. Alcaraz
when they accepted her personal check. Neither did they raise any
objection as regards payment being effected by a third person.
Accordingly, as far as petitioners are concerned, the physical absence
of Ramona P. Alcaraz is not a ground to rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default,
insofar as her obligation to pay the full purchase price is concerned.
Petitioners who are precluded from setting up the defense of the
physical absence of Ramona P. Alcaraz as above-explained offered no
proof whatsoever to show that they actually presented the new transfer
certificate of title in their names and signified their willingness and
readiness to execute the deed of absolute sale in accordance with their
agreement. Ramona's corresponding obligation to pay the balance of
the purchase price in the amount of P1,190,000.00 (as buyer) never
became due and demandable and, therefore, she cannot be deemed to
have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving
reciprocal obligations may be considered in default, to wit:
Art. 1169. Those obliged to deliver or to do
something, incur in delay from the time the obligee
judicially or extrajudicially demands from them the
fulfillment of their obligation.
xxx xxx xxx
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 fulfill
his obligation, delay by the other begins. (Emphasis
supplied.)
There is thus neither factual nor legal basis to rescind the contract of
sale between petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina
B. Mabanag, gave rise to a case of double sale where Article 1544 of
the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold
to different vendees, the ownership shall be
transferred to the person who may have first taken
possession thereof in good faith, if it should be
movable property.
Should if be immovable property, the ownership
shall belong to the person acquiring it who in good
faith first recorded it in Registry of Property.
Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in
the possession; and, in the absence thereof to the
person who presents the oldest title, provided there
is good faith.
The record of the case shows that the Deed of Absolute Sale dated April
25, 1985 as proof of the second contract of sale was registered with the
Registry of Deeds of Quezon City giving rise to the issuance of a new
certificate of title in the name of Catalina B. Mabanag on June 5, 1985.
Thus, the second paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or ownership to
pass to the first buyer, the exceptions being: (a) when the second buyer,
in good faith, registers the sale ahead of the first buyer, and (b) should
there be no inscription by either of the two buyers, when the second
buyer, in good faith, acquires possession of the property ahead of the
first buyer. Unless, the second buyer satisfies these requirements, title
or ownership will not transfer to him to the prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the
subject, now a distinguished member of the Court, Justice Jose C. Vitug,
explains:
The governing principle is prius tempore, potior
jure (first in time, stronger in right). Knowledge by
the first buyer of the second sale cannot defeat the
first buyer's rights except when the second buyer
first registers in good faith the second sale (Olivares
vs. Gonzales, 159 SCRA 33). Conversely,
knowledge gained by the second buyer of the first
sale defeats his rights even if he is first to register,
since knowledge taints his registration with bad
faith (see also Astorga vs. Court of Appeals, G.R.
No. 58530, 26 December 1984). In Cruz
vs. Cabana (G.R. No. 56232, 22 June 1984, 129
SCRA 656), it has held that it is essential, to merit
the protection of Art. 1544, second paragraph, that
the second realty buyer must act in good faith in
registering his deed of sale (citing Carbonell vs.
Court of Appeals, 69 SCRA 99, Crisostomo vs. CA,
G.R. No. 95843, 02 September 1992).
(J. Vitug Compendium of Civil Law and
Jurisprudence, 1993 Edition, p. 604).
Petitioner point out that the notice of lis pendens in the case at bar was
annoted on the title of the subject property only on February 22, 1985,
whereas, the second sale between petitioners Coronels and petitioner
Mabanag was supposedly perfected prior thereto or on February 18,
1985. The idea conveyed is that at the time petitioner Mabanag, the
second buyer, bought the property under a clean title, she was unaware
of any adverse claim or previous sale, for which reason she is buyer in
good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not
whether or not the second buyer was a buyer in good faith but whether
or not said second buyer registers such second sale in good faith, that
is, without knowledge of any defect in the title of the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag
could not have in good faith, registered the sale entered into on February
18, 1985 because as early as February 22, 1985, a notice of lis
pendens had been annotated on the transfer certificate of title in the
names of petitioners, whereas petitioner Mabanag registered the said
sale sometime in April, 1985. At the time of registration, therefore,
petitioner Mabanag knew that the same property had already been
previously sold to private respondents, or, at least, she was charged with
knowledge that a previous buyer is claiming title to the same property.
Petitioner Mabanag cannot close her eyes to the defect in petitioners'
title to the property at the time of the registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers that sale after
he has acquired knowledge that there was a
previous sale of the same property to a third party
or that another person claims said property in a
pervious sale, the registration will constitute a
registration in bad faith and will not confer upon him
any right. (Salvoro vs. Tanega, 87 SCRA 349
[1978]; citing Palarca vs. Director of Land, 43 Phil.
146; Cagaoan vs. Cagaoan, 43 Phil. 554;
Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and
Ramona P. Alcaraz, perfected on February 6, 1985, prior to that
between petitioners and Catalina B. Mabanag on February 18, 1985,
was correctly upheld by both the courts below.
Although there may be ample indications that there was in fact an
agency between Ramona as principal and Concepcion, her mother, as
agent insofar as the subject contract of sale is concerned, the issue of
whether or not Concepcion was also acting in her own behalf as a co-
buyer is not squarely raised in the instant petition, nor in such
assumption disputed between mother and daughter. Thus, We will not
touch this issue and no longer disturb the lower courts' ruling on this
point.
WHEREFORE, premises considered, the instant petition is hereby
DISMISSED and the appealed judgment AFFIRMED.
SO ORDERED.
G.R. No. L-21489 and L-21628 May 19, 1966
MIGUEL MAPALO, ET AL., petitioners,
vs.
MAXIMO MAPALO, ET AL., respondents.
Pedro P. Tuason for petitioners.
Primicias and Del Castillo for 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. 155943 August 19, 2013
PILAR DEVELOPMENT CORPORATION, PETITIONER,
vs.
THE HON. COURT OF APPEALS, SPOUSES PEPITO L. NG AND
VIOLETA N. NG, AND SPOUSES ANTONIO V. MARTEL, JR. AND
JULIANA TICSON, RESPONDENTS.
DECISION
SERENO, CJ.:
This case involves a 6.7905-hectare property located in Sitio Caballero,
Almanza, Las Piñas City. The ownership of the property and the validity
of the titles covering it have already been questioned and resolved in
numerous cases filed before several regional trial courts (RTCs), the
Court of Appeals (CA), and the Supreme Court. The present petition
stems from one of those cases.
Pilar Development Corporation (petitioner), through the instant Petition
for Review,1 is before this Court praying for the reversal of the CA
Decision2 dated 12 July 2002 and Resolution3 dated 14 November 2002.
The CA affirmed the Order of the RTC of Las Piñas City dated 9
February 1998 granting the Motion to Dismiss filed by respondent
spouses Pepito L. Ng and Violeta N. Ng (Sps. Ng) and spouses Antonio
V. Martel, Jr. and Juliana Ticson (Sps. Martel) against petitioner’s
Complaint for Quieting of Title.
FACTUAL BACKGROUND:
G.R. No. 91413: Lilia Mayuga- Fusilero v. The Honorable Court of
Appeals, Benito J. Lopez, and Pepito Ng
Spouses Benito and Corazon Lopez (Sps. Lopez) and Sps. Ng acquired
a 185,317 sq.m. property located in Almanza, Las Piñas City, from a
certain Philip Dumbrique (Dumbrique) on 7 February 1977. Thereafter,
the latter’s Transfer Certificate of Title (TCT) No. S-50432 was
cancelled. On 6 January 1978, TCT No. 61176 was issued in the name
of Sps. Lopez, and TCT No. 61177 in the name of Sps. Ng.
In May 1978—after the property had been transferred to and registered
in the names of Sps. Ng and Sps. Lopez—a claim adverse to theirs and
Dumbrique’s cropped up. Lilia Mayuga-Fusilero (Fusilero) filed a
Complaint against them with the Court of First Instance (CFI), where the
case was docketed as Civil Case No. Pq-6381-P (Fusilero case).
The CFI ruled in favor of the Lopezes and the Ngs. Fusilero appealed
the case to the CA, which in CA-G.R. CV No. 14618 affirmed the CFI’s
Decision. She appealed to this Court, but her appeal was also denied
through a 2 July 1990 Resolution in G.R. No. 91413. We ruled that the
CA did not err in affirming the CFI’s Decision.
Eventually, Sps. Lopez sold their property to respondent Sps. Martel,
resulting in the cancellation of the former’s title and the issuance of TCT
No. T-57471 in the latter’s names.
LRC No. N-9049
While the Fusilero case was pending, Enrique, Narciso, Reuben, Mario,
Teodorica, Beatriz, Ricardo, and Rolando —all surnamed Factor—
executed a Deed of Sale of Unregistered Lands dated 21 January 1975
in favor of petitioner.4
After the purchase of the property, petitioner enclosed it with a fence
made of cement hollow blocks.5 It subdivided and developed the
property into what is now known as "Pilar Village."
On 9 December 1975, the Factors filed an Application for Registration
and Confirmation of Title to Parcels of Land with the Court of First
Instance (CFI) of Rizal, where the case was docketed as LRC No. N-
9049 (Case 1).6
The Factors claimed that they were the owners of the land subject of the
present cases; and that they had inherited it from their parents,
Constantino Factor and Maura Mayuga. They also claimed to have been
in actual possession of the property for more than 30 years prior to the
filing of their application for registration.
As previously mentioned, pending the resolution of Case 1 by the CFI,
specifically on 6 January 1978, TCT Nos. 61176 and 61177 were issued
in the names of respondent Sps. Lopez and Sps. Ng, respectively.
These titles covered a big parcel of land, which included the 6.7905
hectares sold by the Factors to petitioner.7
On 31 January 1976, the CFI in Case 1 rendered its Decision declaring
the Factors as the rightful owners of the subject property. Consequently,
it ordered the issuance of the decrees of registration and the
corresponding certificates of title. In compliance with the Order, TCTs in
the names of the Factors were issued on 13 December 1994.
After the issuance of their TCTs, respondents filed a Petition to Reopen,
Review, and Set Aside the Decision of the CFI in Case 1. Soon
thereafter, the Factors informed petitioner of respondents’ claim over the
property.
According to petitioner, since it took possession of the property in 1975
up until 19 years thereafter, or on 30 May 1995—which was also the day
when the Factors informed it of respondents’ Petition to Reopen—it had
no knowledge of any third party having any claim on the property.8
On 8 December 1994, the RTC issued its Decision granting
respondents’ Petition to Reopen. It set aside its earlier Decision
awarding the property to the Factors and ordered the issuance of the
decree of registration and the corresponding certificates of title in
respondents’ favor.9
Neither of the parties appealed the RTC Decision.
G.R. No. 132334: De Leon v. Imperio; G.R. Nos. 133956-58: Factor v.
Court of Appeals; and the present Petition.
Instead of appealing the 8 December 1994 Decision of the RTC, the
Factors filed anew a Complaint for Annulment of Title. Alleging that TCT
Nos. 61176 and 61177 were spurious and could not be used as basis
for any claim of title, they prayed that the RTC order the Registrar of
Deeds to cancel these titles. The case was docketed as Civil Case No.
94-3158 (Case 2).10
On 15 May 1995, Sps. Lopez and Sps. Ng filed a Motion to Dismiss
Case 2, alleging that the cause of action of the Factors was barred by
prior judgment and res judicata.
The Lopezes and the Ngs narrated that they had purchased the property
from Dumbrique in 1977. Supposedly, they were only made aware of the
controversy surrounding it when, on 17 November 1987, the Heirs of
Irene Garcia filed with the RTC a Complaint for annulment and/or
cancellation of title and reconveyance with preliminary injunction against
Philip Dumbrique, Sps. Lopez, and respondent Sps. Ng in Civil Case
No. 18349. This case eventually reached the present Court. In a
Resolution dated 15 January 1997,11 this Court ruled that the CA
committed no error in affirming the RTC’s dismissal of the Complaint,
since Sps. Lopez and Sps. Ng were innocent buyers in good faith and
for value. The Court likewise affirmed the CA’s pronouncement that the
Complaint should be dismissed, as the issue had already been settled
by this Court’s Decision in the Fusilero case.
On 8 September 1995, the RTC in Case 2 issued an Order granting the
Motion to Dismiss. The Factors filed a Motion for Reconsideration, but it
was denied through an Order dated 23 November 1995. They then
appealed to the CA, but the latter, in CA-G.R. CV No. 52037, ruled that
the dismissal of their Application for Registration of Confirmation of Title
in Case 1 had made their Complaint for the annulment of TCT Nos.
61176 and 61177 moot and academic.12 Thus, the CA affirmed the RTC
Decision and dismissed the appeal of the Factors. The latter filed a
Motion for Reconsideration, but it was likewise denied by the CA on 23
November 1995.
The Factors then filed a Petition for Review with this Court, where the
case was docketed as G.R. No. 132334. At the same time, petitioner
filed with the RTC of Las Piñas City, on 15 July 1997, a Complaint for
Quieting of Title and Declaration of Nullity of respondents’ title (Case
3).13 The present Petition stems from that Complaint.
Respondents filed a Motion to Dismiss the Complaint for Quieting of Title
dated 8 September 1997. They argued that petitioner had no cause of
action against them, and that whatever cause of action it may claim to
have was already barred by prior judgment and the statute of limitations.
In its Opposition to the Motion to Dismiss, petitioner pointed out that it
had acquired ownership of the property in 1975, ahead of respondents’
predecessor-in-interest, Dumbrique, who acquired it only in 1977. It also
accused respondents of being guilty of laches for their failure to assert
their proprietary rights for an unreasonable length of time in spite of their
knowledge of its actual, open, continuous, and adverse possession of
the subject property.
In an Order dated 9 February 1998, the RTC granted respondents’
Motion to Dismiss.
As to the Petition for Review filed by the Factors in Case 2, it was denied
through this Court’s Resolution dated 22 February 1999. They filed a
Motion for Reconsideration, but the Court, through its 21 April 1999
Resolution,14denied the motion with finality.
With respect to the RTC’s dismissal of the Complaint for Quieting of Title
in Case 3, petitioner appealed this Order to the CA, but the latter
affirmed the RTC Order. Petitioner filed a Motion for Reconsideration,
which was likewise denied by the appellate court.
Petitioner now comes before this Court through a Petition for Review on
Certiorari, alleging that the CA, in Case 3, erred in holding that the
equitable principle of laches cannot be applied against respondents,
who are holders of a Certificate of Title.15 Petitioner further avers that
the CA erroneously applied the principle of stare decisis and the rule on
res judicata.16
In Case 3 the CA ruled that the validity of TCT Nos. 61176 and 61177
had already been questioned before and affirmed by this Court several
times.17
The CA held then that petitioner was bound by the ruling of this Court in
the latter’s 22 February 1999 Resolution in Case 2. That Resolution
affirmed the Decision in CA-G.R. CV No. 52037 denying the Factors’
Petition for the annulment of titles issued in favor of respondents.
In affirming the RTC Decision granting respondent’s Motion to Dismiss
petitioner’s Complaint for Quieting of Title, the CA ruled that the validity
of TCT Nos. 61176 and 61177 had already been upheld by this Court in
Case 2.
We agree with the CA.
The facts of this case clearly show that petitioner’s cause of action is
already barred by the prior judgments of the RTC in its Decision dated
8 December 1994 in Case 1 and of this Court in Case 2.
If an action has been dismissed and the order of dismissal has become
final, a prior judgment bars the institution of another action involving the
same parties, subject matter, and cause of action as in the earlier case. 18
The fundamental principle behind the doctrine of res judicata is that
parties ought not to be permitted to litigate the same issue more than
once. That is, when a right or a fact has been judicially tried and
determined by a court of competent jurisdiction, or an opportunity for
such trial has been given, the judgment of the court—so long as it
remains unreversed— should be conclusive upon the parties and those
in privity with them in law or estate.19
Petitioner insists that the CA erred in blindly applying the rule of res
judicata to the present case.20 This Court finds, however, that all the
requisites for the application of that rule are present in this case.
In order that there may be res judicata, it is requisite (a) that the former
judgment is final; (b) that it has been rendered by a court of competent
jurisdiction; (c) that it is a judgment on the merits; and (d) that, between
the first and the second actions, there is identity of parties, subject-
matter, and cause of action.21
The Decisions of the RTC in Case 1 and of this Court in Case 2— both
of which ruled that respondents are the rightful owners of the property in
question—have all become final and unappealable. In Case 2, this Court
had jurisdiction over the subject matter and over the parties; the
judgments were issued on the merits; and there was a similarity of
parties, subject matter, and cause of action.
The question of who has a better right to the property was already
resolved by the RTC when it granted respondents’ Petition to set aside
the CFI’s Decision granting the Factors’ Application for Registration and
Confirmation of Title. Since neither of the parties appealed from this RTC
Decision, it became final and unappealable. Hence, this Court ruled in
Case 2 that the CA correctly affirmed the trial court’s Decision to grant
respondents’ Motion to Dismiss. The cause of action of the Factors in
their Complaint for Annulment of Title was, even then, already barred by
the prior judgment in Case 1.
Concomitantly, the issue of whether or not TCT Nos. 61176 and 61177
are valid titles has already been resolved in Case 1 and subsequently in
Case 2. Both cases already involved the Factors and the predecessors-
in-interest of herein petitioner and respondents. The subject matter in
the foregoing cases is the same property that is the subject of the instant
Petition. Lastly, the prayers in both cases are the same. It must be kept
in mind that the principle of res judicata does not require absolute but
only substantial identity of parties, subject matter, and issues.22
We rule that there is identity of causes of action, the test for which is to
look into the facts or evidence necessary to maintain the two actions, to
wit:
Hornbook is the rule that identity of causes of action does not mean
absolute identity.1âwphi1 Otherwise, a party could easily escape the
operation of res judicata by changing the form of the action or the relief
sought. The test to determine whether the causes of action are identical
is to ascertain whether the same evidence will sustain both actions, or
whether there is an identity in the facts essential to the maintenance of
the two actions. If the same facts or evidence would sustain both, the
two actions are considered the same, and a judgment in the first case is
a bar to the subsequent action.23
We have already ruled in Stilianopulos v. The City of Legaspi24 that the
evidence or set of facts used in a complaint for quieting of title is the
same as that which is necessary in a case for annulment of title, viz:
The underlying objectives or reliefs sought in both the quieting-of-title
and the annulment-of-title cases are essentially the same —
adjudication of the ownership of the disputed lot and nullification of one
of the two certificates of title. Thus, it becomes readily apparent that the
same evidence or set of facts as those considered in the quieting-of-title
case would also be used in this Petition. The difference in form and
nature of the two actions is immaterial and is not a reason to exempt
petitioner from the effects of res judicata. The philosophy behind this rule
prohibits the parties from litigating the same issue more than once.
When a right or fact has been judicially tried and determined by a court
of competent jurisdiction or an opportunity for such trial has been given,
the judgment of the court, as long as it remains unreversed, should be
conclusive upon the parties and those in privity with them. Verily, there
should be an end to litigation by the same parties and their privies over
a subject, once it is fully and fairly adjudicated.
This Court has already denied with finality the Factors’ Complaint
praying for the annulment of the titles issued in respondents’ names. In
Case 2, it has determined that respondents have a better right to the
property than the Factors. Since it is to the Factors that petitioner traces
its title to the property, then the declaration made by this Court on who
has the better right thereto is binding on petitioner.
Thus, the CA did not err in affirming the RTC’s Decision to grant
respondents’ Motion to Dismiss. The cause of action in petitioner’s
Complaint for Quieting of Title is already barred by this Court’s prior
judgment declaring the validity of the titles issued in respondents’
names.
Petitioner further argues that the CA erred when it overlooked or
disregarded the rule that even registered landowners may lose their right
to recover possession of their registered property by reason of
laches.25 Suffice it to say that this issue should have been raised at the
earliest opportunity possible. Rule 39, Section 47(b) of the Rules on Civil
Procedure provides that with respect to any matter that could have been
raised in relation to the matter directly adjudged, the judgment or final
order on the latter is considered "conclusive between the parties and
their successors in interest by title subsequent to the commencement of
the action or special proceeding, litigating for the same thing and under
the same title and in the same capacity." Thus, for their failure to assert
this argument in either LRC No. N-9049 or G.R. No. 132334 or for the
denial of the argument after it has been raised, the aforementioned
cases are considered conclusive between the parties. This Court may
no longer rule on this matter, as any pronouncement thereon would
result in res judicata.
Lastly, it must be stressed that petitioner’s act of filing multiple suits
involving the same parties and the same cause of action for the purpose
of obtaining a favorable judgment amounts to forum-shopping, which by
itself is already a valid ground to deny the instant Petition.
WHEREFORE, the instant petition is DENIED. The Decision of the Court
Appeals dated 12 July 2002 and its subsequent Resolution in CA-G.R.
CV No. 60437 dated 14 November 2002 are AFFIRMED.
SO ORDERED.
G.R. No. L-22487 May 21, 1969
ASUNCION ATILANO, CRISTINA ATILANO, ROSARIO ATILANO,
assisted by their respective husbands, HILARIO ROMANO, FELIPE
BERNARDO, and MAXIMO LACANDALO, ISABEL ATILANO and
GREGORIO ATILANO, plaintiffs-appellees,
vs.
LADISLAO ATILANO and GREGORIO M. ATILANO, defendants-
appellants.
Climaco and Azcarraga for plaintiff-appellee.
T. de los Santos for defendants-appellants.
MAKALINTAL, J.:
In 1916 Eulogio Atilano I acquired, by purchase from one Gerardo
Villanueva, lot No. 535 of the then municipality of Zamboanga cadastre.
The vendee thereafter obtained transfer certificate of title No. 1134 in
his name. In 1920 he had the land subdivided into five parts, identified
as lots Nos. 535-A, 535-B, 535-C, 535-D and 535-E, respectively. On
May 18 of the same year, after the subdivision had been effected,
Eulogio Atilano I, for the sum of P150.00, executed a deed of sale
covering lot No. 535-E in favor of his brother Eulogio Atilano II, who
thereupon obtained transfer certificate of title No. 3129 in his name.
Three other portions, namely lots Nos. 535-B, 535-C and 535-D, were
likewise sold to other persons, the original owner, Eulogio Atilano I,
retaining for himself only the remaining portion of the land, presumably
covered by the title to lot No. 535-A. Upon his death the title to this lot
passed to Ladislao Atilano, defendant in this case, in whose name the
corresponding certificate (No. T-5056) was issued.
On December 6, 1952, Eulogio Atilano II having become a widower upon
the death of his wife Luisa Bautista, he and his children obtained transfer
certificate of title No. 4889 over lot No. 535-E in their names as co-
owners. Then, on July 16, 1959, desiring to put an end to the co-
ownership, they had the land resurveyed so that it could properly be
subdivided; and it was then discovered that the land they were actually
occupying on the strength of the deed of sale executed in 1920 was lot
No. 535-A and not lot 535-E, as referred to in the deed, while the land
which remained in the possession of the vendor, Eulogio Atilano I, and
which passed to his successor, defendant Ladislao Atilano, was lot No.
535-E and not lot No. 535-A.
On January 25, 1960, the heirs of Eulogio Atilano II, who was by then
also deceased, filed the present action in the Court of First Instance of
Zamboanga, alleging, inter alia, that they had offered to surrender to the
defendants the possession of lot No. 535-A and demanded in return the
possession of lot No. 535-E, but that the defendants had refused to
accept the exchange. The plaintiffs' insistence is quite understandable,
since lot No. 535-E has an area of 2,612 square meters, as compared
to the 1,808 square-meter area of lot No. 535-A.
In their answer to the complaint the defendants alleged that the
reference to lot No. 535-E in the deed of sale of May 18, 1920 was an
involuntary error; that the intention of the parties to that sale was to
convey the lot correctly identified as lot No. 535-A; that since 1916, when
he acquired the entirety of lot No. 535, and up to the time of his death,
Eulogio Atilano I had been possessing and had his house on the portion
designated as lot No. 535-E, after which he was succeeded in such
possession by the defendants herein; and that as a matter of fact
Eulogio Atilano I even increased the area under his possession when on
June 11, 1920 he bought a portion of an adjoining lot, No. 536, from its
owner Fruto del Carpio. On the basis of the foregoing allegations the
defendants interposed a counterclaim, praying that the plaintiffs be
ordered to execute in their favor the corresponding deed of transfer with
respect to lot No. 535-E.
The trial court rendered judgment for the plaintiffs on the sole ground
that since the property was registered under the Land Registration Act
the defendants could not acquire it through prescription. There can be,
of course, no dispute as to the correctness of this legal proposition; but
the defendants, aside from alleging adverse possession in their answer
and counterclaim, also alleged error in the deed of sale of May 18, 1920,
thus: "Eulogio Atilano 1.o, por equivocacion o error involuntario, cedio y
traspaso a su hermano Eulogio Atilano 2.do el lote No. 535-E en vez del
Lote No. 535-A."lawphi1.ñet
The logic and common sense of the situation lean heavily in favor of the
defendants' contention. When one sells or buys real property — a piece
of land, for example — one sells or buys the property as he sees it, in
its actual setting and by its physical metes and bounds, and not by the
mere lot number assigned to it in the certificate of title. In the particular
case before us, the portion correctly referred to as lot No. 535-A was
already in the possession of the vendee, Eulogio Atilano II, who had
constructed his residence therein, even before the sale in his favor even
before the subdivision of the entire lot No. 535 at the instance of its
owner, Eulogio Atillano I. In like manner the latter had his house on the
portion correctly identified, after the subdivision, as lot No. 535-E, even
adding to the area thereof by purchasing a portion of an adjoining
property belonging to a different owner. The two brothers continued in
possession of the respective portions the rest of their lives, obviously
ignorant of the initial mistake in the designation of the lot subject of the
1920 until 1959, when the mistake was discovered for the first time.
The real issue here is not adverse possession, but the real intention of
the parties to that sale. From all the facts and circumstances we are
convinced that the object thereof, as intended and understood by the
parties, was that specific portion where the vendee was then already
residing, where he reconstructed his house at the end of the war, and
where his heirs, the plaintiffs herein, continued to reside thereafter:
namely, lot No. 535-A; and that its designation as lot No. 535-E in the
deed of sale was simple mistake in the drafting of the
document.1âwphi1.ñet The mistake did not vitiate the consent of the
parties, or affect the validity and binding effect of the contract between
them. The new Civil Code provides a remedy for such a situation by
means of reformation of the instrument. This remedy is available when,
there having been a meeting of the funds of the parties to a contract,
their true intention is not expressed in the instrument purporting to
embody the agreement by reason of mistake, fraud, inequitable conduct
on accident (Art. 1359, et seq.) In this case, the deed of sale executed
in 1920 need no longer reformed. The parties have retained possession
of their respective properties conformably to the real intention of the
parties to that sale, and all they should do is to execute mutual deeds of
conveyance.
WHEREFORE, the judgment appealed from is reversed. The plaintiffs
are ordered to execute a deed of conveyance of lot No. 535-E in favor
of the defendants, and the latter in turn, are ordered to execute a similar
document, covering lot No. 595-A, in favor of the plaintiffs. Costs against
the latter.
G.R. No. 74470 March 8, 1989
NATIONAL GRAINS AUTHORITY and WILLLAM CABAL, petitioners
vs.
THE INTERMEDIATE APPELLATE COURT and LEON
SORIANO, respondents.
Cordoba, Zapanta, Rola & Garcia for petitioner National Grains
Authority.
Plaridel Mar Israel for respondent Leon Soriano.
MEDIALDEA, J.:
This is a petition for review of the decision (pp. 9-21, Rollo) of the
Intermediate Appellate Court (now Court of Appeals) dated December
23, 1985 in A.C. G.R. CV No. 03812 entitled, "Leon Soriano, Plaintiff-
Appellee versus National Grains Authority and William Cabal,
Defendants Appellants", which affirmed the decision of the Court of First
Instance of Cagayan, in Civil Case No. 2754 and its resolution (p. 28,
Rollo) dated April 17, 1986 which denied the Motion for Reconsideration
filed therein.
The antecedent facts of the instant case are as follows:
Petitioner National Grains Authority (now National Food Authority, NFA
for short) is a government agency created under Presidential Decree
No. 4. One of its incidental functions is the buying of palay grains from
qualified farmers.
On August 23, 1979, private respondent Leon Soriano offered to sell
palay grains to the NFA, through William Cabal, the Provincial Manager
of NFA stationed at Tuguegarao, Cagayan. He submitted the documents
required by the NFA for pre-qualifying as a seller, namely: (1) Farmer's
Information Sheet accomplished by Soriano and certified by a Bureau of
Agricultural Extension (BAEX) technician, Napoleon Callangan, (2)
Xerox copies of four (4) tax declarations of the riceland leased to him
and copies of the lease contract between him and Judge Concepcion
Salud, and (3) his Residence Tax Certificate. Private respondent
Soriano's documents were processed and accordingly, he was given a
quota of 2,640 cavans of palay. The quota noted in the Farmer's
Information Sheet represented the maximum number of cavans of palay
that Soriano may sell to the NFA.
In the afternoon of August 23, 1979 and on the following day, August 24,
1979, Soriano delivered 630 cavans of palay. The palay delivered during
these two days were not rebagged, classified and weighed. when
Soriano demanded payment of the 630 cavans of palay, he was
informed that its payment will be held in abeyance since Mr. Cabal was
still investigating on an information he received that Soriano was not a
bona tide farmer and the palay delivered by him was not produced from
his farmland but was taken from the warehouse of a rice trader, Ben de
Guzman. On August 28, 1979, Cabal wrote Soriano advising him to
withdraw from the NFA warehouse the 630 cavans Soriano delivered
stating that NFA cannot legally accept the said delivery on the basis of
the subsequent certification of the BAEX technician, Napoleon
Callangan that Soriano is not a bona fide farmer.
Instead of withdrawing the 630 cavans of palay, private respondent
Soriano insisted that the palay grains delivered be paid. He then filed a
complaint for specific performance and/or collection of money with
damages on November 2, 1979, against the National Food Authority and
Mr. William Cabal, Provincial Manager of NFA with the Court of First
Instance of Tuguegarao, and docketed as Civil Case No. 2754.
Meanwhile, by agreement of the parties and upon order of the trial court,
the 630 cavans of palay in question were withdrawn from the warehouse
of NFA. An inventory was made by the sheriff as representative of the
Court, a representative of Soriano and a representative of NFA (p. 13,
Rollo).
On September 30, 1982, the trial court rendered judgment ordering
petitioner National Food Authority, its officers and agents to pay
respondent Soriano (as plaintiff in Civil Case No. 2754) the amount of P
47,250.00 representing the unpaid price of the 630 cavans of palay plus
legal interest thereof (p. 1-2, CA Decision). The dispositive portion reads
as follows:
WHEREFORE, the Court renders judgment in favor
of the plaintiff and against the defendants National
Grains Authority, and William Cabal and hereby
orders:
1. The National Grains Authority, now the National
Food Authority, its officers and agents, and Mr.
William Cabal, the Provincial Manager of the
National Grains Authority at the time of the filing of
this case, assigned at Tuguegarao, Cagayan,
whomsoever is his successors, to pay to the plaintiff
Leon T. Soriano, the amount of P47,250.00,
representing the unpaid price of the palay deliveries
made by the plaintiff to the defendants consisting of
630 cavans at the rate Pl.50 per kilo of 50 kilos per
cavan of palay;
2. That the defendants National Grains Authority,
now National Food Authority, its officer and/or
agents, and Mr. William Cabal, the Provincial
Manager of the National Grains Authority, at the
time of the filing of this case assigned at
Tuguegarao, Cagayan or whomsoever is his
successors, are likewise ordered to pay the plaintiff
Leon T. Soriano, the legal interest at the rate of
TWELVE (12%) percent per annum, of the amount
of P 47,250.00 from the filing of the complaint on
November 20, 1979, up to the final payment of the
price of P 47,250.00;
3. That the defendants National Grains Authority,
now National Food Authority, or their agents and
duly authorized representatives can now withdraw
the total number of bags (630 bags with an excess
of 13 bags) now on deposit in the bonded
warehouse of Eng. Ben de Guzman at Tuguegarao,
Cagayan pursuant to the order of this court, and as
appearing in the written inventory dated October
10, 1980, (Exhibit F for the plaintiff and Exhibit 20
for the defendants) upon payment of the price of P
47,250.00 and TWELVE PERCENT (12%) legal
interest to the plaintiff,
4. That the counterclaim of the defendants is
hereby dismissed;
5. That there is no pronouncement as to the award
of moral and exemplary damages and attorney's
fees; and
6. That there is no pronouncement as to costs.
SO ORDERED (pp. 9-10, Rollo)
Petitioners' motion for reconsideration of the decision was denied on
December 6, 1982.
Petitioners' appealed the trial court's decision to the Intermediate
Appellate Court. In a decision promulgated on December 23, 1986 (pp.
9-21, Rollo) the then Intermediate Appellate Court upheld the findings of
the trial court and affirmed the decision ordering NFA and its officers to
pay Soriano the price of the 630 cavans of rice plus interest. Petitioners'
motion for reconsideration of the appellate court's decision was denied
in a resolution dated April 17, 1986 (p. 28, Rollo).
Hence, this petition for review filed by the National Food Authority and
Mr. William Cabal on May 15, 1986 assailing the decision of the
Intermediate Appellate Court on the sole issue of whether or not there
was a contract of sale in the case at bar.
Petitioners contend that the 630 cavans of palay delivered by Soriano
on August 23, 1979 was made only for purposes of having it offered for
sale. Further, petitioners stated that the procedure then prevailing in
matters of palay procurement from qualified farmers were: firstly, there
is a rebagging wherein the palay is transferred from a private sack of a
farmer to the NFA sack; secondly, after the rebagging has been
undertaken, classification of the palay is made to determine its variety;
thirdly, after the determination of its variety and convinced that it passed
the quality standard, the same will be weighed to determine the number
of kilos; and finally, it will be piled inside the warehouse after the
preparation of the Warehouse Stock Receipt (WSP) indicating therein
the number of kilos, the variety and the number of bags. Under this
procedure, rebagging is the initial operative act signifying acceptance,
and acceptance will be considered complete only after the preparation
of the Warehouse Stock Receipt (WSR). When the 630 cavans of palay
were brought by Soriano to the Carig warehouse of NFA they were only
offered for sale. Since the same were not rebagged, classified and
weighed in accordance with the palay procurement program of NFA,
there was no acceptance of the offer which, to petitioners' mind is a clear
case of solicitation or an unaccepted offer to sell.
The petition is not impressed with merit.
Article 1458 of the Civil Code of the Philippines defines sale as a
contract whereby one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the
other party to pay therefore a price certain in money or its equivalent. A
contract, on the other hand, is a meeting of minds between two (2)
persons whereby one binds himself, with respect to the other, to give
something or to render some service (Art. 1305, Civil Code of the
Philippines). The essential requisites of contracts are: (1) consent of the
contracting parties, (2) object certain which is the subject matter of the
contract, and (3) cause of the obligation which is established (Art. 1318,
Civil Code of the Philippines.
In the case at bar, Soriano initially offered to sell palay grains produced
in his farmland to NFA. When the latter accepted the offer by noting in
Soriano's Farmer's Information Sheet a quota of 2,640 cavans, there
was already a meeting of the minds between the parties. The object of
the contract, being the palay grains produced in Soriano's farmland and
the NFA was to pay the same depending upon its quality. The fact that
the exact number of cavans of palay to be delivered has not been
determined does not affect the perfection of the contract. Article 1349 of
the New Civil Code provides: ". . .. The fact that the quantity is not
determinate shall not be an obstacle to the existence of the contract,
provided it is possible to determine the same, without the need of a new
contract between the parties." In this case, there was no need for NFA
and Soriano to enter into a new contract to determine the exact number
of cavans of palay to be sold. Soriano can deliver so much of his produce
as long as it does not exceed 2,640 cavans.
In its memorandum (pp. 66-71, Rollo) dated December 4, 1986,
petitioners further contend that there was no contract of sale because of
the absence of an essential requisite in contracts, namely, consent. It
cited Section 1319 of the Civil Code which states: "Consent is
manifested by the meeting of the offer and the acceptance of the thing
and the cause which are to constitute the contract. ... " Following this
line, petitioners contend that there was no consent because there was
no acceptance of the 630 cavans of palay in question.
The above contention of petitioner is not correct Sale is a consensual
contract, " ... , there is perfection when there is consent upon the subject
matter and price, even if neither is delivered." (Obana vs. C.A., L-36249,
March 29, 1985, 135 SCRA 557, 560) This is provided by Article 1475
of the Civil Code which states:
Art. 1475. The contract of sale is perfected at the
moment there is a meeting of minds upon the thing
which is the object of the contract and upon the
price.
xxx
The acceptance referred to which determines consent is the acceptance
of the offer of one party by the other and not of the goods delivered as
contended by petitioners.
From the moment the contract of sale is perfected, it is incumbent upon
the parties to comply with their mutual obligations or "the parties may
reciprocally demand performance" thereof. (Article 1475, Civil Code,
2nd par.).
The reason why NFA initially refused acceptance of the 630 cavans of
palay delivered by Soriano is that it (NFA) cannot legally accept the said
delivery because Soriano is allegedly not a bona fide farmer. The trial
court and the appellate court found that Soriano was a bona fide farmer
and therefore, he was qualified to sell palay grains to NFA.
Both courts likewise agree that NFA's refusal to accept was without just
cause. The above factual findings which are supported by the record
should not be disturbed on appeal.
ACCORDINGLY, the instant petition for review is DISMISSED. The
assailed decision of the then Intermediate Appellate Court (now Court
of Appeals) is affirmed. No costs.
SO ORDERED.
.R. No. L-26278 August 4, 1927
LEON SIBAL , plaintiff-appellant,
vs.
EMILIANO J. VALDEZ ET AL., defendants.
EMILIANO J. VALDEZ, appellee.
J. E. Blanco for appellant.
Felix B. Bautista and Santos and Benitez for appellee.
JOHNSON, J.:
The action was commenced in the Court of First Instance of the Province
of Tarlac on the 14th day of December 1924. The facts are about as
conflicting as it is possible for facts to be, in the trial causes.
As a first cause of action the plaintiff alleged that the defendant Vitaliano
Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of
execution issued by the Court of First Instance of Pampanga, attached
and sold to the defendant Emiliano J. Valdez the sugar cane planted by
the plaintiff and his tenants on seven parcels of land described in the
complaint in the third paragraph of the first cause of action; that within
one year from the date of the attachment and sale the plaintiff offered to
redeem said sugar cane and tendered to the defendant Valdez the
amount sufficient to cover the price paid by the latter, the interest
thereon and any assessments or taxes which he may have paid thereon
after the purchase, and the interest corresponding thereto and that
Valdez refused to accept the money and to return the sugar cane to the
plaintiff.
As a second cause of action, the plaintiff alleged that the defendant
Emiliano J. Valdez was attempting to harvest the palay planted in four
of the seven parcels mentioned in the first cause of action; that he had
harvested and taken possession of the palay in one of said seven
parcels and in another parcel described in the second cause of action,
amounting to 300 cavans; and that all of said palay belonged to the
plaintiff.
Plaintiff prayed that a writ of preliminary injunction be issued against the
defendant Emiliano J. Valdez his attorneys and agents, restraining them
(1) from distributing him in the possession of the parcels of land
described in the complaint; (2) from taking possession of, or harvesting
the sugar cane in question; and (3) from taking possession, or
harvesting the palay in said parcels of land. Plaintiff also prayed that a
judgment be rendered in his favor and against the defendants ordering
them to consent to the redemption of the sugar cane in question, and
that the defendant Valdez be condemned to pay to the plaintiff the sum
of P1,056 the value of palay harvested by him in the two parcels above-
mentioned ,with interest and costs.
On December 27, 1924, the court, after hearing both parties and upon
approval of the bond for P6,000 filed by the plaintiff, issued the writ of
preliminary injunction prayed for in the complaint.
The defendant Emiliano J. Valdez, in his amended answer, denied
generally and specifically each and every allegation of the complaint and
step up the following defenses:
(a) That the sugar cane in question had the nature of personal
property and was not, therefore, subject to redemption;
(b) That he was the owner of parcels 1, 2 and 7 described in
the first cause of action of the complaint;
(c) That he was the owner of the palay in parcels 1, 2 and 7;
and
(d) That he never attempted to harvest the palay in parcels 4
and 5.
The defendant Emiliano J. Valdez by way of counterclaim, alleged that
by reason of the preliminary injunction he was unable to gather the sugar
cane, sugar-cane shoots (puntas de cana dulce) palay in said parcels of
land, representing a loss to him of P8,375.20 and that, in addition
thereto, he suffered damages amounting to P3,458.56. He prayed, for a
judgment (1) absolving him from all liability under the complaint; (2)
declaring him to be the absolute owner of the sugar cane in question
and of the palay in parcels 1, 2 and 7; and (3) ordering the plaintiff to
pay to him the sum of P11,833.76, representing the value of the sugar
cane and palay in question, including damages.
Upon the issues thus presented by the pleadings the cause was brought
on for trial. After hearing the evidence, and on April 28, 1926, the
Honorable Cayetano Lukban, judge, rendered a judgment against the
plaintiff and in favor of the defendants —
(1) Holding that the sugar cane in question was personal
property and, as such, was not subject to redemption;
(2) Absolving the defendants from all liability under the
complaint; and
(3) Condemning the plaintiff and his sureties Cenon de la
Cruz, Juan Sangalang and Marcos Sibal to jointly and
severally pay to the defendant Emiliano J. Valdez the sum of
P9,439.08 as follows:
(a) P6,757.40, the value of the sugar cane;
(b) 1,435.68, the value of the sugar-cane shoots;
(c) 646.00, the value of palay harvested by plaintiff;
(d) 600.00, the value of 150 cavans of palay which
the defendant was not able to raise by reason of the
injunction, at P4 cavan. 9,439.08 From that
judgment the plaintiff appealed and in his
assignments of error contends that the lower court
erred: (1) In holding that the sugar cane in question
was personal property and, therefore, not subject to
redemption;
(2) In holding that parcels 1 and 2 of the complaint belonged
to Valdez, as well as parcels 7 and 8, and that the palay
therein was planted by Valdez;
(3) In holding that Valdez, by reason of the preliminary
injunction failed to realized P6,757.40 from the sugar cane
and P1,435.68 from sugar-cane shoots (puntas de cana
dulce);
(4) In holding that, for failure of plaintiff to gather the sugar
cane on time, the defendant was unable to raise palay on the
land, which would have netted him the sum of P600; and.
(5) In condemning the plaintiff and his sureties to pay to the
defendant the sum of P9,439.08.
It appears from the record:
(1) That on May 11, 1923, the deputy sheriff of the Province
of Tarlac, by virtue of writ of execution in civil case No. 20203
of the Court of First Instance of Manila (Macondray & Co.,
Inc. vs. Leon Sibal),levied an attachment on eight parcels of
land belonging to said Leon Sibal, situated in the Province of
 Tarlac, designated in the second of attachment as parcels 1,
2, 3, 4, 5, 6, 7 and 8 (Exhibit B, Exhibit 2-A).
(2) That on July 30, 1923, Macondray & Co., Inc., bought said
eight parcels of land, at the auction held by the sheriff of the
Province of Tarlac, for the sum to P4,273.93, having paid for
the said parcels separately as follows (Exhibit C, and 2-A):
Parcel
1 certificate of the sheriff as parcels 2, 12, and 13, were
.......................................................
..............
2 sold and conveyed to Emilio J. Valdez for P2,579.97 all of its
.......................................................
..............
3 Instance of Manila, as stated above. Said amount represented
.......................................................
..............
4 above. (Exhibit C and 2).
.......................................................
..............
5 cause of action of the complaint at public auction on May 9
.......................................................
..............
6
.......................................................
..............
7 with the house thereon
..........................
8 of the rights and interest which Leon Sibal had or might have
.......................................................
..............
4,273.93
(3) That within one year from the sale of said parcel of land,
and on the 24th day of September, 1923, the judgment debtor,
Leon Sibal, paid P2,000 to Macondray & Co., Inc., for the
account of the redemption price of said parcels of land,
without specifying the particular parcels to which said amount
was to applied. The redemption price said eight parcels was
reduced, by virtue of said transaction, to P2,579.97 including
interest (Exhibit C and 2).
The record further shows:
(1) That on April 29, 1924, the defendant Vitaliano Mamawal,
deputy sheriff of the Province of Tarlac, by virtue of a writ of
execution in civil case No. 1301 of the Province of Pampanga
(Emiliano J. Valdez vs. Leon Sibal 1.º — the same parties in
the present case), attached the personal property of said Leon
Sibal located in Tarlac, among which was included the sugar
cane now in question in the seven parcels of land described
in the complaint (Exhibit A).
(2) That on May 9 and 10, 1924, said deputy sheriff sold at
public auction said personal properties of Leon Sibal,
including the sugar cane in question to Emilio J. Valdez, who
paid therefor the sum of P1,550, of which P600 was for the
sugar cane (Exhibit A).
(3) That on April 29,1924, said deputy sheriff, by virtue of said
writ of execution, also attached the real property of said Leon
Sibal in Tarlac, including all of his rights, interest and
participation therein, which real property consisted of eleven
parcels of land and a house and camarin situated in one of
said parcels (Exhibit A).
(4) That on June 25, 1924, eight of said eleven parcels,
including the house and the camarin, were bought by Emilio
J. Valdez at the auction held by the sheriff for the sum of
P12,200. Said eight parcels were designated in the certificate
of sale as parcels 1, 3, 4, 5, 6, 7, 10 and 11. The house and
camarin were situated on parcel 7 (Exhibit A).
(5) That the remaining three parcels, indicated in the
P1.00 released from the attachment by virtue of claims presented by
Agustin Cuyugan and Domiciano Tizon (Exhibit A).
(6) That on the same date, June 25, 1924, Macondray & Co.
2,000.00 rights and interest in the eight parcels of land acquired by it at
public auction held by the deputy sheriff of Tarlac in
connection with civil case No. 20203 of the Court of First
120.93 the unpaid balance of the redemption price of said eight
parcels, after payment by Leon Sibal of P2,000 on September
24, 1923, fro the account of the redemption price, as stated
1,000.00 The foregoing statement of facts shows:
(1) The Emilio J. Valdez bought the sugar cane in question,
located in the seven parcels of land described in the first
1.00 and 10, 1924, for P600.
(2) That on July 30, 1923, Macondray & Co. became the
owner of eight parcels of land situated in the Province of
Tarlac belonging to Leon Sibal and that on September 24,
1.00
1923, Leon Sibal paid to Macondray & Co. P2,000 for the
account of the redemption price of said parcels.
(3) That on June 25, 1924, Emilio J. Valdez acquired from
150.00 Macondray & Co. all of its rights and interest in the said eight
parcels of land.
(4) That on June 25, 1924, Emilio J. Valdez also acquired all
1,000.00
had on said eight parcels by virtue of the P2,000 paid by the
========
latter to Macondray.
==
(5) That Emilio J. Valdez became the absolute owner of said
eight parcels of land.
The first question raised by the appeal is, whether the sugar cane in
question is personal or real property. It is contended that sugar cane
comes under the classification of real property as "ungathered products"
in paragraph 2 of article 334 of the Civil Code. Said paragraph 2 of article
334 enumerates as real property the following: Trees, plants, and
ungathered products, while they are annexed to the land or form an
integral part of any immovable property." That article, however, has
received in recent years an interpretation by the Tribunal Supremo de
España, which holds that, under certain conditions, growing crops may
be considered as personal property. (Decision of March 18, 1904, vol.
97, Civil Jurisprudence of Spain.)
Manresa, the eminent commentator of the Spanish Civil Code, in
discussing section 334 of the Civil Code, in view of the recent decisions
of the supreme Court of Spain, admits that growing crops are sometimes
considered and treated as personal property. He says:
No creemos, sin embargo, que esto excluya la excepcionque
muchos autores hacen tocante a la venta de toda cosecha o
de parte de ella cuando aun no esta cogida (cosa frecuente
con la uvay y la naranja), y a la de lenas, considerando ambas
como muebles. El Tribunal Supremo, en sentencia de 18 de
marzo de 1904, al entender sobre un contrato de
arrendamiento de un predio rustico, resuelve que su
terminacion por desahucio no extingue los derechos del
arrendario, para recolectar o percibir los frutos
correspondientes al año agricola, dentro del que nacieron
aquellos derechos, cuando el arrendor ha percibido a su vez
el importe de la renta integra correspondiente, aun cuando lo
 haya sido por precepto legal durante el curso del juicio,
fundandose para ello, no solo en que de otra suerte se daria
al desahucio un alcance que no tiene, sino en que, y esto es
lo interesante a nuestro proposito, la consideracion de
inmuebles que el articulo 334 del Codigo Civil atribuge a los
frutos pendientes, no les priva del caracter de productos
pertenecientes, como tales, a quienes a ellos tenga derecho,
Ilegado el momento de su recoleccion.
xxx xxx xxx
Mas actualmente y por virtud de la nueva edicion de la Ley
Hipotecaria, publicada en 16 de diciembre de 1909, con las
reformas introducidas por la de 21 de abril anterior, la
hipoteca, salvo pacto expreso que disponga lo contrario, y
cualquiera que sea la naturaleza y forma de la obligacion que
garantice, no comprende los frutos cualquiera que sea la
situacion en que se encuentre. (3 Manresa, 5. edicion, pags.
22, 23.)
From the foregoing it appears (1) that, under Spanish authorities,
pending fruits and ungathered products may be sold and transferred as
personal property; (2) that the Supreme Court of Spain, in a case of
ejectment of a lessee of an agricultural land, held that the lessee was
entitled to gather the products corresponding to the agricultural year,
because said fruits did not go with the land but belonged separately to
the lessee; and (3) that under the Spanish Mortgage Law of 1909, as
amended, the mortgage of a piece of land does not include the fruits and
products existing thereon, unless the contract expressly provides
otherwise.
An examination of the decisions of the Supreme Court of Louisiana may
give us some light on the question which we are discussing. Article 465
of the Civil Code of Louisiana, which corresponds to paragraph 2 of
article 334 of our Civil Code, provides: "Standing crops and the fruits of
trees not gathered, and trees before they are cut down, are likewise
immovable, and are considered as part of the land to which they are
attached."
The Supreme Court of Louisiana having occasion to interpret that
provision, held that in some cases "standing crops" may be considered
and dealt with as personal property. In the case of Lumber Co. vs.
Sheriff and Tax Collector (106 La., 418) the Supreme Court said: "True,
by article 465 of the Civil Code it is provided that 'standing crops and the
fruits of trees not gathered and trees before they are cut down . . . are
considered as part of the land to which they are attached, but the
immovability provided for is only one in abstracto and without reference
to rights on or to the crop acquired by others than the owners of the
property to which the crop is attached. . . . The existence of a right on
the growing crop is a mobilization by anticipation, a gathering as it were
in advance, rendering the crop movable quoad the right acquired
therein. Our jurisprudence recognizes the possible mobilization of the
growing crop." (Citizens' Bank vs. Wiltz, 31 La. Ann., 244;
Porche vs. Bodin, 28 La., Ann., 761; Sandel vs. Douglass, 27 La. Ann.,
629; Lewis vs. Klotz, 39 La. Ann., 267.)
"It is true," as the Supreme Court of Louisiana said in the case of Porche
vs. Bodin (28 La. An., 761) that "article 465 of the Revised Code says
that standing crops are considered as immovable and as part of the land
to which they are attached, and article 466 declares that the fruits of an
immovable gathered or produced while it is under seizure are
considered as making part thereof, and incurred to the benefit of the
person making the seizure. But the evident meaning of these articles, is
where the crops belong to the owner of the plantation they form part of
the immovable, and where it is seized, the fruits gathered or produced
inure to the benefit of the seizing creditor.
A crop raised on leased premises in no sense forms part of
the immovable. It belongs to the lessee, and may be sold by
him, whether it be gathered or not, and it may be sold by his
judgment creditors. If it necessarily forms part of the leased
premises the result would be that it could not be sold under
execution separate and apart from the land. If a lessee obtain
supplies to make his crop, the factor's lien would not attach to
the crop as a separate thing belonging to his debtor, but the
land belonging to the lessor would be affected with the
recorded privilege. The law cannot be construed so as to
result in such absurd consequences.
In the case of Citizen's Bank vs. Wiltz (31 La. Ann., 244)the court said:
If the crop quoad the pledge thereof under the act of 1874 was
an immovable, it would be destructive of the very objects of
the act, it would render the pledge of the crop objects of the
act, it would render the pledge of the crop impossible, for if the
crop was an inseparable part of the realty possession of the
latter would be necessary to that of the former; but such is not
the case. True, by article 465 C. C. it is provided that "standing
crops and the fruits of trees not gathered and trees before they
are cut down are likewise immovable and are considered as
part of the land to which they are attached;" but the
immovability provided for is only one in abstracto and without
reference to rights on or to the crop acquired by other than the
owners of the property to which the crop was attached. The
immovability of a growing crop is in the order of things
temporary, for the crop passes from the state of a growing to
that of a gathered one, from an immovable to a movable. The
existence of a right on the growing crop is a mobilization by
anticipation, a gathering as it were in advance, rendering the
crop movable quoad the right acquired thereon. The provision
of our Code is identical with the Napoleon Code 520, and we
may therefore obtain light by an examination of the
jurisprudence of France.
The rule above announced, not only by the Tribunal Supremo de
España but by the Supreme Court of Louisiana, is followed in practically
every state of the Union.
From an examination of the reports and codes of the State of California
and other states we find that the settle doctrine followed in said states in
connection with the attachment of property and execution of judgment
is, that growing crops raised by yearly labor and cultivation are
considered personal property. (6 Corpuz Juris, p. 197; 17 Corpus Juris,
p. 379; 23 Corpus Juris, p. 329: Raventas vs. Green, 57 Cal., 254;
Norris vs. Watson, 55 Am. Dec., 161; Whipple vs. Foot, 3 Am. Dec.,
442; 1 Benjamin on Sales, sec. 126; McKenzie vs. Lampley, 31 Ala.,
526; Crine vs. Tifts and Co., 65 Ga., 644; Gillitt vs. Truax, 27 Minn., 528;
Preston vs. Ryan, 45 Mich., 174; Freeman on Execution, vol. 1, p. 438;
Drake on Attachment, sec. 249; Mechem on Sales, sec. 200 and 763.)
Mr. Mechem says that a valid sale may be made of a thing, which though
not yet actually in existence, is reasonably certain to come into existence
as the natural increment or usual incident of something already in
existence, and then belonging to the vendor, and then title will vest in
the buyer the moment the thing comes into existence.
(Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers
Exchange, 21 Am. St. Rep., 63.) Things of this nature are said to have
a potential existence. A man may sell property of which he is potentially
and not actually possessed. He may make a valid sale of the wine that
a vineyard is expected to produce; or the gain a field may grow in a given
time; or the milk a cow may yield during the coming year; or the wool
that shall thereafter grow upon sheep; or what may be taken at the next
cast of a fisherman's net; or fruits to grow; or young animals not yet in
existence; or the good will of a trade and the like. The thing sold,
however, must be specific and identified. They must be also owned at
the time by the vendor. (Hull vs. Hull, 48 Conn., 250 [40 Am. Rep., 165].)
It is contended on the part of the appellee that paragraph 2 of article 334
of the Civil Code has been modified by section 450 of the Code of Civil
Procedure as well as by Act No. 1508, the Chattel Mortgage Law. Said
section 450 enumerates the property of a judgment debtor which may
be subjected to execution. The pertinent portion of said section reads as
follows: "All goods, chattels, moneys, and other property, both real and
personal, * * * shall be liable to execution. Said section 450 and most of
the other sections of the Code of Civil Procedure relating to the
execution of judgment were taken from the Code of Civil Procedure of
California. The Supreme Court of California, under section 688 of the
Code of Civil Procedure of that state (Pomeroy, p. 424) has held, without
variation, that growing crops were personal property and subject to
execution.
Act No. 1508, the Chattel Mortgage Law, fully recognized that growing
crops are personal property. Section 2 of said Act provides: "All personal
property shall be subject to mortgage, agreeably to the provisions of this
Act, and a mortgage executed in pursuance thereof shall be termed a
chattel mortgage." Section 7 in part provides: "If growing crops be
mortgaged the mortgage may contain an agreement stipulating that the
mortgagor binds himself properly to tend, care for and protect the crop
while growing.
It is clear from the foregoing provisions that Act No. 1508 was enacted
on the assumption that "growing crops" are personal property. This
consideration tends to support the conclusion hereinbefore stated, that
paragraph 2 of article 334 of the Civil Code has been modified by section
450 of Act No. 190 and by Act No. 1508 in the sense that "ungathered
products" as mentioned in said article of the Civil Code have the nature
of personal property. In other words, the phrase "personal property"
should be understood to include "ungathered products."
At common law, and generally in the United States, all annual
crops which are raised by yearly manurance and labor, and
essentially owe their annual existence to cultivation by man, .
may be levied on as personal property." (23 C. J., p. 329.) On
this question Freeman, in his treatise on the Law of
Executions, says: "Crops, whether growing or standing in the
field ready to be harvested, are, when produced by annual
cultivation, no part of the realty. They are, therefore, liable to
voluntary transfer as chattels. It is equally well settled that they
may be seized and sold under execution. (Freeman on
Executions, vol. p. 438.)
We may, therefore, conclude that paragraph 2 of article 334 of the Civil
Code has been modified by section 450 of the Code of Civil Procedure
and by Act No. 1508, in the sense that, for the purpose of attachment
and execution, and for the purposes of the Chattel Mortgage Law,
"ungathered products" have the nature of personal property. The lower
court, therefore, committed no error in holding that the sugar cane in
question was personal property and, as such, was not subject to
redemption.
All the other assignments of error made by the appellant, as above
stated, relate to questions of fact only. Before entering upon a discussion
of said assignments of error, we deem it opportune to take special notice
of the failure of the plaintiff to appear at the trial during the presentation
of evidence by the defendant. His absence from the trial and his failure
to cross-examine the defendant have lent considerable weight to the
evidence then presented for the defense.
Coming not to the ownership of parcels 1 and 2 described in the first
cause of action of the complaint, the plaintiff made a futile attempt to
show that said two parcels belonged to Agustin Cuyugan and were the
identical parcel 2 which was excluded from the attachment and sale of
real property of Sibal to Valdez on June 25, 1924, as stated above. A
comparison of the description of parcel 2 in the certificate of sale by the
sheriff (Exhibit A) and the description of parcels 1 and 2 of the complaint
will readily show that they are not the same.
The description of the parcels in the complaint is as follows:
1. La caña dulce sembrada por los inquilinos del ejecutado
Leon Sibal 1.º en una parcela de terreno de la pertenencia del
citado ejecutado, situada en Libutad, Culubasa, Bamban,
Tarlac, de unas dos hectareas poco mas o menos de
superficie.
2. La caña dulce sembrada por el inquilino del ejecutado Leon
Sibal 1.º, Ilamado Alejandro Policarpio, en una parcela de
terreno de la pertenencia del ejecutado, situada en Dalayap,
Culubasa, Bamban, Tarlac de unas dos hectareas de
superficie poco mas o menos." The description of parcel 2
given in the certificate of sale (Exhibit A) is as follows:
2a. Terreno palayero situado en Culubasa, Bamban, Tarlac,
de 177,090 metros cuadrados de superficie, linda al N. con
Canuto Sibal, Esteban Lazatin and Alejandro Dayrit; al E. con
Francisco Dizon, Felipe Mañu and others; al S. con Alejandro
Dayrit, Isidro Santos and Melecio Mañu; y al O. con Alejandro
Dayrit and Paulino Vergara. Tax No. 2854, vador amillarado
P4,200 pesos.
On the other hand the evidence for the defendant purported to show that
parcels 1 and 2 of the complaint were included among the parcels
bought by Valdez from Macondray on June 25, 1924, and corresponded
to parcel 4 in the deed of sale (Exhibit B and 2), and were also included
among the parcels bought by Valdez at the auction of the real property
of Leon Sibal on June 25, 1924, and corresponded to parcel 3 in the
certificate of sale made by the sheriff (Exhibit A). The description of
parcel 4 (Exhibit 2) and parcel 3 (Exhibit A) is as follows:
Parcels No. 4. — Terreno palayero, ubicado en el barrio de
Culubasa,Bamban, Tarlac, I. F. de 145,000 metros cuadrados
de superficie, lindante al Norte con Road of the barrio of
Culubasa that goes to Concepcion; al Este con Juan Dizon;
al Sur con Lucio Maño y Canuto Sibal y al Oeste con Esteban
Lazatin, su valor amillarado asciende a la suma de P2,990.
Tax No. 2856.
As will be noticed, there is hardly any relation between parcels 1 and 2
of the complaint and parcel 4 (Exhibit 2 and B) and parcel 3 (Exhibit A).
But, inasmuch as the plaintiff did not care to appear at the trial when the
defendant offered his evidence, we are inclined to give more weight to
the evidence adduced by him that to the evidence adduced by the
plaintiff, with respect to the ownership of parcels 1 and 2 of the
compliant. We, therefore, conclude that parcels 1 and 2 of the complaint
belong to the defendant, having acquired the same from Macondray &
Co. on June 25, 1924, and from the plaintiff Leon Sibal on the same
date.
It appears, however, that the plaintiff planted the palay in said parcels
and harvested therefrom 190 cavans. There being no evidence of bad
faith on his part, he is therefore entitled to one-half of the crop, or 95
cavans. He should therefore be condemned to pay to the defendant for
95 cavans only, at P3.40 a cavan, or the sum of P323, and not for the
total of 190 cavans as held by the lower court.
As to the ownership of parcel 7 of the complaint, the evidence shows
that said parcel corresponds to parcel 1 of the deed of sale of Macondray
& Co, to Valdez (Exhibit B and 2), and to parcel 4 in the certificate of
sale to Valdez of real property belonging to Sibal, executed by the sheriff
as above stated (Exhibit A). Valdez is therefore the absolute owner of
said parcel, having acquired the interest of both Macondray and Sibal in
said parcel.
With reference to the parcel of land in Pacalcal, Tarlac, described in
paragraph 3 of the second cause of action, it appears from the testimony
of the plaintiff himself that said parcel corresponds to parcel 8 of the
deed of sale of Macondray to Valdez (Exhibit B and 2) and to parcel 10
in the deed of sale executed by the sheriff in favor of Valdez (Exhibit A).
Valdez is therefore the absolute owner of said parcel, having acquired
the interest of both Macondray and Sibal therein.
In this connection the following facts are worthy of mention:
Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of
land were attached under said execution. Said parcels of land were sold
to Macondray & Co. on the 30th day of July, 1923. Rice paid P4,273.93.
On September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000
on the redemption of said parcels of land. (See Exhibits B and C ).
Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal
was attached, including the sugar cane in question. (Exhibit A) The said
personal property so attached, sold at public auction May 9 and 10,
1924. April 29, 1924, the real property was attached under the execution
in favor of Valdez (Exhibit A). June 25, 1924, said real property was sold
and purchased by Valdez (Exhibit A).
June 25, 1924, Macondray & Co. sold all of the land which they had
purchased at public auction on the 30th day of July, 1923, to Valdez.
As to the loss of the defendant in sugar cane by reason of the injunction,
the evidence shows that the sugar cane in question covered an area of
22 hectares and 60 ares (Exhibits 8, 8-b and 8-c); that said area would
have yielded an average crop of 1039 picos and 60 cates; that one-half
of the quantity, or 519 picos and 80 cates would have corresponded to
the defendant, as owner; that during the season the sugar was selling
at P13 a pico (Exhibit 5 and 5-A). Therefore, the defendant, as owner,
would have netted P 6,757.40 from the sugar cane in question. The
evidence also shows that the defendant could have taken from the sugar
cane 1,017,000 sugar-cane shoots (puntas de cana) and not 1,170,000
as computed by the lower court. During the season the shoots were
selling at P1.20 a thousand (Exhibits 6 and 7). The defendant therefore
would have netted P1,220.40 from sugar-cane shoots and not
P1,435.68 as allowed by the lower court.
As to the palay harvested by the plaintiff in parcels 1 and 2 of the
complaint, amounting to 190 cavans, one-half of said quantity should
belong to the plaintiff, as stated above, and the other half to the
defendant. The court erred in awarding the whole crop to the defendant.
The plaintiff should therefore pay the defendant for 95 cavans only, at
P3.40 a cavan, or P323 instead of P646 as allowed by the lower court.
The evidence also shows that the defendant was prevented by the acts
of the plaintiff from cultivating about 10 hectares of the land involved in
the litigation. He expected to have raised about 600 cavans of palay,
300 cavans of which would have corresponded to him as owner. The
lower court has wisely reduced his share to 150 cavans only. At P4 a
cavan, the palay would have netted him P600.
In view of the foregoing, the judgment appealed from is hereby modified.
The plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and
Marcos Sibal are hereby ordered to pay to the defendant jointly and
severally the sum of P8,900.80, instead of P9,439.08 allowed by the
lower court, as follows:
P6,757.40 for the sugar cane;
1,220.40 for the sugar cane shoots;
for the palay harvested by plaintiff in
323.00
parcels 1 and 2;
for the palay which defendant could
600.00
have raised.
8,900.80
============
In all other respects, the judgment appealed from is hereby affirmed,
with costs. So ordered.
Street, Malcolm, Villamor, Romualdez and Villa-Real., JJ., concur.
G.R. No. L-38498 August 10, 1989
ISAAC BAGNAS, ENCARNACION BAGNAS, SILVESTRE BAGNAS
MAXIMINA BAGNAS, SIXTO BAGNAS and AGATONA
ENCARNACION, petitioners,
vs.
HON. COURT OF APPEALS, ROSA L. RETONIL TEOFILO
ENCARNACION, and JOSE B. NAMBAYAN respondents.
Beltran, Beltran & Beltran for petitioners.
Jose M. Legaspi for private respondents.
NARVASA, J.:
The facts underlying this appeal by certiorari are not in dispute. Hilario
Mateum of Kawit, Cavite, died on March 11, 1964, single, without
ascendants or descendants, and survived only by collateral relatives, of
whom petitioners herein, his first cousins, were the nearest. Mateum left
no will, no debts, and an estate consisting of twenty-nine parcels of land
in Kawit and Imus, Cavite, ten of which are involved in this appeal. 1
On April 3, 1964, the private respondents, themselves collateral
relatives of Mateum though more remote in degree than the
petitioners, 2 registered with the Registry of Deeds for the Province of
Cavite two deeds of sale purportedly executed by Mateum in their
(respondents') favor covering ten parcels of land. Both deeds were in
Tagalog, save for the English descriptions of the lands conveyed under
one of them; and each recited the reconsideration of the sale to be" ...
halagang ISANG PISO (Pl.00), salaping Pilipino, at mga naipaglingkod,
ipinaglilingkod sa aking kapakanan ..." ("the sum of ONE PESO Pl.00),
Philippine Currency, and services rendered, being rendered and to be
rendered for my benefit"). One deed was dated February 6,1963 and
covered five parcels of land, and the other was dated March 4, 1963,
covering five other parcels, both, therefore, antedating Mateum's death
by more than a year. 3 It is asserted by the petitioners, but denied by the
respondents, that said sales notwithstanding, Mateum continued in the
possession of the lands purportedly conveyed until his death, that he
remained the declared owner thereof and that the tax payments thereon
continued to be paid in his name. 4 Whatever the truth, however, is not
crucial. What is not disputed is that on the strength of the deeds of sale,
the respondents were able to secure title in their favor over three of the
ten parcels of land conveyed thereby. 5
On May 22,1964 the petitioners commenced suit against the
respondents in the Court of First Instance of Cavite, seeking annulment
of the deeds of sale as fictitious, fraudulent or falsified, or, alternatively,
as donations void for want of acceptance embodied in a public
instrument. Claiming ownership pro indiviso of the lands subject of the
deeds by virtue of being intestate heirs of Hilario Mateum, the petitioners
prayed for recovery of ownership and possession of said lands,
accounting of the fruits thereof and damages. Although the complaint
originally sought recovery of all the twenty-nine parcels of land left by
Mateum, at the pre-trial the parties agreed that the controversy be
limited to the ten parcels subject of the questioned sales, and the Trial
Court ordered the exclusion of the nineteen other parcels from the
action. 6 Of the ten parcels which remained in litigation, nine were
assessed for purposes of taxation at values aggregating P10,500 00.
The record does not disclose the assessed value of the tenth parcel,
which has an area of 1,443 square meters. 7
In answer to the complaint, the defendants (respondents here) denied
the alleged fictitious or fraudulent character of the sales in their favor,
asserting that said sales were made for good and valuable
consideration; that while "... they may have the effect of donations, yet
the formalities and solemnities of donation are not required for their
validity and effectivity, ... that defendants were collateral relatives of
Hilario Mateum and had done many good things for him, nursing him in
his last illness, which services constituted the bulk of the consideration
of the sales; and (by way of affirmative defense) that the plaintiffs could
not question or seek annulment of the sales because they were mere
collateral relatives of the deceased vendor and were not bound,
principally or subsidiarily, thereby. 8
After the plaintiffs had presented their evidence, the defendants filed a
motion for dismissal in effect, a demurrer to the evidence reasserting the
defense set up in their answer that the plaintiffs, as mere collateral
relatives of Hilario Mateum, had no light to impugn the latter's disposition
of his properties by means of the questioned conveyances and
submitting, additionally, that no evidence of fraud maintaining said
transfers had been presented. 9
The Trial Court granted the motion to dismiss, holding (a) on the
authority of Armentia vs. Patriarca, 10 that the plaintiffs, as mere
collateral relatives, not forced heirs, of Hilario Mateum, could not legally
question the disposition made by said deceased during his lifetime,
regardless of whether, as a matter of objective reality, said dispositions
were valid or not; and (b) that the plaintiffs evidence of alleged fraud was
insufficient, the fact that the deeds of sale each stated a consideration
of only Pl.00 not being in itself evidence of fraud or simulation. 11
On appeal by the plaintiffs to the Court of Appeals, that court affirmed,
adverting with approval to the Trial Court's reliance on
the Armentia ruling which, it would appear, both courts saw as denying,
without exception, to collaterals, of a decedent, not forced heirs, the right
to impugn the latter's dispositions inter vivos of his property. The
Appellate Court also analyzed the testimony of the plaintiffs' witnesses,
declared that it failed to establish fraud of any kind or that Mateum had
continued paying taxes on the lands in question even after executing the
deeds conveying them to the defendants, and closed with the statement
that "... since in duly notarized and registered deeds of sale
consideration is presumed, we do not and it necessary to rule on the
alternative allegations of the appellants that the said deed of sale were
(sic) in reality donations. 12
One issue clearly predominates here. It is whether, in view of the fact
that, for properties assuredly worth in actual value many times over their
total assessed valuation of more than P10,000.00, the questioned deeds
of sale each state a price of only one peso (P1.00) plus unspecified past,
present and future services to which no value is assigned, said deeds
were void or inexistent from the beginning ("nulo") or merely voidable,
that is, valid until annulled. If they were only voidable, then it is a correct
proposition that since the vendor Mateum had no forced heirs whose
legitimes may have been impaired, and the petitioners, his collateral
relatives, not being bound either principally or subsidiarily to the terms
of said deeds, the latter had and have no actionable right to question
those transfers.
On the other hand, if said deeds were void ab initio because to all intents
and purposes without consideration, then a different legal situation
arises, and quite another result obtains, as pointed out by the eminent
civil law authority, Mr. Justice J.B.L. Reyes who, in his concurring
opinion in Armentia, said:
I ... cannot bring myself to agree to the proposition
that the heirs intestate would have no legal standing
to contest the conveyance made by the deceased
if the same were made without any consideration,
or for a false and fictitious consideration. For under
the Civil Code of the Philippines, Art. 1409, par. 3,
contracts with a cause that did not exist at the time
of the transaction are inexistent and void from the
beginning. The same is true of contracts stating a
false cause (consideration) unless the persons
interested in upholding the contract should prove
that there is another true and lawful consideration
therefor. (lbid., Art. 1353).
If therefore the contract has no causa or
consideration, or the causa is false and fictitious
(and no true hidden causa is proved) the property
allegedly conveyed never really leaves the
patrimony of the transferor, and upon the latter's
death without a testament, such property would
pass to the transferor's heirs intestate and be
recoverable by them or by the Administrator of the
transferor's estate. In this particular regard, I think
Concepcion vs. Sta. Ana, 87 Phil. 787 and Sobs vs.
Chua Pua Hermanos, 50 Phil. 536, do not correctly
state the present law, and must be clarified.
To be sure the quoted passage does not reject and is not to be construed
as rejecting the Concepcion and Solisrulings 13 as outrightly erroneous,
far from it. On the contrary, those rulings undoubtedly read and applied
correctly the law extant in their time: Art. 1276 of the Civil Code of 1889
under which the statement of a false cause in a contract rendered it
voidable only, not void ab initio. In observing that they "... do not correctly
state the present law and must be clarified," Justice Reyes clearly had
in mind the fact that the law as it is now (and already was in the time
Armentia) no longer deems contracts with a false cause, or which are
absolutely simulated or fictitious, merely voidable, but declares them
void, i.e., inexistent ("nulo") unless it is shown that they are supported
by another true and lawful cause or consideration. 14 A logical
consequence of that change is the juridical status of contracts without,
or with a false, cause is that conveyances of property affected with such
a vice cannot operate to divest and transfer ownership, even if
unimpugned. If afterwards the transferor dies the property descends to
his heirs, and without regard to the manner in which they are called to
the succession, said heirs may bring an action to recover the property
from the purported transferee. As pointed out, such an action is not
founded on fraud, but on the premise that the property never leaves the
estate of the transferor and is transmitted upon his death to heirs, who
would labor under no incapacity to maintain the action from the mere
fact that they may be only collateral relatives and bound neither
principally or subsidiarily under the deed or contract of conveyance.
In Armentia the Court determined that the conveyance questioned was
merely annullable not void ab initio, and that the plaintiff s action was
based on fraud vitiating said conveyance. The Court said:
Hypothetically admitting the truth of these
allegations (of plaintiffs complaint), the conclusion
is irresistible that the sale is merely voidable.
Because Marta Armentia executed the document,
and this is not controverted by plaintiff. Besides, the
fact that the vendees were minors, makes the
contract, at worst, annullable by them, Then again,
inadequacy of consideration does not imply total
want of consideration. Without more, the parted
acts of Marta Armentia after the sale did not indicate
that the said sale was void from the being.
The sum total of all these is that, in essence,
plaintiffs case is bottomed on fraud, which renders
the contract voidable.
It therefore seems clear that insofar as it may be considered as setting
or reaffirming precedent, Armentia only ruled that transfers made by a
decedent in his lifetime, which are voidable for having been fraudulently
made or obtained, cannot be posthumously impugned by collateral
relatives succeeding to his estate who are not principally or subsidiarily
bound by such transfers. For the reasons already stated, that ruling is
not extendible to transfers which, though made under closely similar
circumstances, are void ab initio for lack or falsity of consideration.
The petitioners here argue on a broad front that the very recitals of the
questioned deeds of sale reveal such want or spuriousness of
consideration and therefore the void character of said sales. They:
1. advert to a decision of the Court of Appeals in Montinola vs.
Herbosa (59 O.G. No. 47, pp, 8101, 8118) holding that a price of P l.00
for the sale of things worth at least P20,000.00 is so insignificant as to
amount to no price at all, and does not satisfy the law which, while not
requiring for the validity of a sale that the price be adequate, prescribes
that it must be real, not fictitious, stressing the obvious parallel between
that case and the present one in stated price and actual value of the
property sold;
2. cite Manresa to the same effect: that true price, which is essential to
the validity of a sale, means existent, real and effective price, that which
does not consist in an insignificant amount as, say, P.20 for a house;
that it is not the same as the concept of a just price which entails
weighing and measuring, for economic equivalence, the amount of price
against all the factors that determine the value of the thing sold; but that
there is no need of such a close examination when the immense
disproportion between such economic values is patent a case of
insignificant or ridiculous price, the unbelievable amount of which at
once points out its inexistence; 15
3. assert that Art. 1458 of the Civil Code, in prescribing that a sale be for
a ... price certain in money or its equivalent ... requires that "equivalent"
be something representative of money, e.g., a check or draft, again
citing Manresa 16 to the effect that services are not the equivalent of
money insofar as said requirement is concerned and that a contract is
not a true sale where the price consists of services or prestations;
4. once more citing Manresa 17 also point out that the "services"
mentioned in the questioned deeds of sale are not only vague and
uncertain, but are unknown and not susceptible of determination without
the necessity of a new agreement between the parties to said deeds.
Without necessarily according all these assertions its full concurrence,
but upon the consideration alone that the apparent gross, not to say
enormous, disproportion between the stipulated price (in each deed) of
P l.00 plus unspecified and unquantified services and the undisputably
valuable real estate allegedly sold worth at least P10,500.00 going only
by assessments for tax purposes which, it is well-known, are notoriously
low indicators of actual value plainly and unquestionably demonstrates
that they state a false and fictitious consideration, and no other true and
lawful cause having been shown, the Court finds both said deeds,
insofar as they purport to be sales, not merely voidable, but void ab
initio.
Neither can the validity of said conveyances be defended on the theory
that their true causa is the liberality of the transferor and they may be
considered in reality donations 18 because the law 19 also prescribes that
donations of immovable property, to be valid, must be made and
accepted in a public instrument, and it is not denied by the respondents
that there has been no such acceptance which they claim is not
required. 20
The transfers in question being void, it follows as a necessary
consequence and conformably to the concurring opinion
in Armentia, with which the Court fully agrees, that the properties
purportedly conveyed remained part of the estate of Hilario Mateum,
said transfers notwithstanding, recoverable by his intestate heirs, the
petitioners herein, whose status as such is not challenged.
The private respondents have only themselves to blame for the lack of
proof that might have saved the questioned transfers from the taint of
invalidity as being fictitious and without ilicit cause; proof, to be brief, of
the character and value of the services, past, present, and future,
constituting according to the very terms of said transfers the principal
consideration therefor. The petitioners' complaint (par. 6) 21 averred that
the transfers were "... fraudulent, fictitious and/or falsified and (were) ...
in reality donations of immovables ...," an averment that the private
respondents not only specifically denied, alleging that the transfers had
been made "... for good and valuable consideration ...," but to which they
also interposed the affirmative defenses that said transfers were "...
valid, binding and effective ...," and, in an obvious reference to the
services mentioned in the deeds, that they "... had done many good
things to (the transferor) during his lifetime, nursed him during his ripe
years and took care of him during his previous and last illness ...," (pars.
4, 6, 16 and 17, their answer).lâwphî1.ñèt 22 The onus, therefore, of
showing the existence of valid and illicit consideration for the questioned
conveyances rested on the private respondents. But even on a contrary
assumption, and positing that the petitioners initially had the burden of
showing that the transfers lacked such consideration as they alleged in
their complaint, that burden was shifted to the private respondents when
the petitioners presented the deeds which they claimed showed that
defect on their face and it became the duty of said respondents to offer
evidence of existent lawful consideration.
As the record clearly demonstrates, the respondents not only failed to
offer any proof whatsoever, opting to rely on a demurrer to the
petitioner's evidence and upon the thesis, which they have maintained
all the way to this Court, that petitioners, being mere collateral relatives
of the deceased transferor, were without right to the conveyances in
question. In effect, they gambled their right to adduce evidence on a
dismissal in the Trial Court and lost, it being the rule that when a
dismissal thus obtained is reversed on appeal, the movant loses the right
to present evidence in his behalf. 23
WHEREFORE, the appealed Decision of the Court of Appeals is
reversed. The questioned transfers are declared void and of no force or
effect. Such certificates of title as the private respondents may have
obtained over the properties subject of said transfers are hereby
annulled, and said respondents are ordered to return to the petitioners
possession of an the properties involved in tills action, to account to the
petitioners for the fruits thereof during the period of their possession, and
to pay the costs. No damages, attorney's fees or litigation expenses are
awarded, there being no evidence thereof before the Court.
SO ORDERED.
Cruz, Gancayco, Griñ;o-Aquino and Medialdea, JJ., concur.
G.R. No. 143513 November 14, 2001
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES, petitioner,
vs.
COURT OF APPEALS and FIRESTONE CERAMICS,
INC., respondents.
x---------------------------------------------------------x
G.R. No. 143590 November 14, 2001
NATIONAL DEVELOPMENT CORPORATION, petitioner,
vs.
FIRESTONE CERAMICS, INC., respondents.
BELLOSILLO, J.:
A litigation is not simply a contest of litigants before the bar of public
opinion; more than that, it is a pursuit of justice through legal and
equitable means. To prevent the search for justice from evolving into a
competition for public approval, society invests the judiciary with
complete independence thereby insulating it from demands expressed
through any medium, the press not excluded. Thus, if the court would
merely reflect, and worse, succumb to the great pressures of the day,
the end result, it is feared, would be a travesty of justice.
In the early sixties, petitioner National Development Corporation (NDC),
a government owned and controlled corporation created under CA 182
as amended by CA 311 and PD No. 668, had in its disposal a ten (10)-
hectare property located along Pureza St., Sta. Mesa, Manila. The
estate was popularly known as the NDC compound and covered by
Transfer Certificates of Title Nos. 92885, 110301 and 145470.
Sometime in May 1965 private respondent Firestone Ceramics Inc.
(FIRESTONE) manifested its desire to lease a portion of the property for
its ceramic manufacturing business. On 24 August 1965 NDC and
FIRESTONE entered into a contract of lease denominated as Contract
No. C-30-65 covering a portion of the property measured at 2.90118
hectares for use as a manufacturing plant for a term of ten (10) years,
renewable for another ten (10) years under the same terms and
conditions.1 In consequence of the agreement, FIRESTONE
constructed on the leased premises several warehouses and other
improvements needed for the fabrication of ceramic products.
Three and a half (3-1/2) years later, or on 8 January 1969, FIRESTONE
entered into a second contract of lease with NDC over the latter's four
(4)-unit pre-fabricated reparation steel warehouse stored in Daliao,
Davao. FIRESTONE agreed to ship the warehouse to Manila for
eventual assembly within the NDC compound. The second contract,
denominated as Contract No. C-26-68, was for similar use as a ceramic
manufacturing plant and was agreed expressly to be "co-extensive with
the lease of LESSEE with LESSOR on the 2.60 hectare-lot."2
On 31 July 1974 the parties signed a similar contract concerning a six
(6)-unit pre-fabricated steel warehouse which, as agreed upon by the
parties, would expire on 2 December 1978.3 Prior to the expiration of the
aforementioned contract, FIRESTONE wrote NDC requesting for an
extension of their lease agreement. Consequently on 29 November
1978 the Board of Directors of NDC adopted Resolution No. 11-78-117
extending the term of the lease, subject to several conditions among
which was that in the event NDC "with the approval of higher authorities,
decide to dispose and sell these properties including the lot, priority
should be given to the LESSEE"4 (underscoring supplied). On 22
December 1978, in pursuance of the resolution, the parties entered into
a new agreement for a ten-year lease of the property, renewable for
another ten (10) years, expressly granting FIRESTONE the first option
to purchase the leased premises in the event that it decided "to dispose
and sell these properties including the lot . . . . "5
The contracts of lease conspicuously contain an identically worded
provision requiring FIRESTONE to construct buildings and other
improvements within the leased premises worth several hundred
thousands of pesos.6
The parties' lessor-lessee relationship went smoothly until early 1988
when FIRESTONE, cognizant of the impending expiration of their lease
agreement with NDC, informed the latter through several letters and
telephone calls that it was renewing its lease over the property. While its
letter of 17 March 1988 was answered by Antonio A. Henson, General
Manager of NDC, who promised immediate action on the matter, the rest
of its communications remained unacknowledged.7 FIRESTONE's
predicament worsened when rumors of NDC's supposed plans to
dispose of the subject property in favor of petitioner Polytechnic
University of the Philippines (PUP) came to its knowledge. Forthwith,
FIRESTONE served notice on NDC conveying its desire to purchase the
property in the exercise of its contractual right of first refusal.
Apprehensive that its interest in the property would be disregarded,
FIRESTONE instituted an action for specific performance to compel
NDC to sell the leased property in its favor. FIRESTONE averred that it
was pre-empting the impending sale of the NDC compound to petitioner
PUP in violation of its leasehold rights over the 2.60-hectare8property
and the warehouses thereon which would expire in 1999. FIRESTONE
likewise prayed for the issuance of a writ of preliminary injunction to
enjoin NDC from disposing of the property pending the settlement of the
controversy.9
In support of its complaint, FIRESTONE adduced in evidence a letter of
Antonio A. Henson dated 15 July 1988 addressed to Mr. Jake C.
Lagonera, Director and Special Assistant to Executive Secretary
Catalino Macaraeg, reviewing a proposed memorandum order
submitted to then President Corazon C. Aquino transferring the whole
NDC compound, including the leased property, in favor of petitioner
PUP. Attached to the letter was a draft of the proposed memorandum
order as well as a summary of existing leases on the subject property.
The survey listed FIRESTONE as lessee of a portion of the property,
placed at 29,00010 square meters, whose contract with NDC was set to
expire on 31 December 198911 renewable for another ten (10) years at
the option of the lessee. The report expressly recognized FIRESTONE's
right of first refusal to purchase the leased property "should the lessor
decide to sell the same."12
Meanwhile, on 21 February 1989 PUP moved to intervene and asserted
its interest in the subject property, arguing that a "purchaser pendente
lite of property which is subject of a litigation is entitled to intervene in
the proceedings."13 PUP referred to Memorandum Order No. 214 issued
by then President Aquino ordering the transfer of the whole NDC
compound to the National Government, which in turn would convey the
aforementioned property in favor of PUP at acquisition cost. The
issuance was supposedly made in recognition of PUP's status as the
"Poor Man's University" as well as its serious need to extend its campus
in order to accommodate the growing student population. The order of
conveyance of the 10.31-hectare property would automatically result in
the cancellation of NDC's total obligation in favor of the National
Government in the amount of P57,193,201.64.
Convinced that PUP was a necessary party to the controversy that ought
to be joined as party defendant in order to avoid multiplicity of suits, the
trial court granted PUP's motion to intervene. FIRESTONE moved for
reconsideration but was denied. On certiorari, the Court of Appeals
affirmed the order of the trial court. FIRESTONE came to us on review
but in a Resolution dated 11 July 1990 we upheld PUP's inclusion as
party-defendant in the present controversy.
Following the denial of its petition, FIRESTONE amended its complaint
to include PUP and Executive Secretary Catalino Macaraeg, Jr., as
party-defendants, and sought the annulment of Memorandum Order No.
214. FIRESTONE alleged that although Memorandum Order No.
214 was issued "subject to such liens/leases existing [on the subject
property]," PUP disregarded and violated its existing lease by increasing
the rental rate at P200,000.00 a month while demanding that it vacated
the premises immediately.14 FIRESTONE prayed that in the
event Memorandum Order No. 214 was not declared unconstitutional,
the property should be sold in its favor at the price for which it was sold
to PUP - P554.74 per square meter or for a total purchase price
of P14,423,240.00.15
Petitioner PUP, in its answer to the amended complaint, argued in
essence that the lease contract covering the property had expired long
before the institution of the complaint, and that further, the right of first
refusal invoked by FIRESTONE applied solely to the six-unit pre-
fabricated warehouse and not the lot upon which it stood.
After trial on the merits, judgment was rendered declaring the contracts
of lease executed between FIRESTONE and NDC covering the 2.60-
hectare property and the warehouses constructed thereon valid and
existing until 2 June 1999. PUP was ordered and directed to sell to
FIRESTONE the "2.6 hectare leased premises or as may be determined
by actual verification and survey of the actual size of the leased
properties where plaintiff's fire brick factory is located" at P1,500.00 per
square meter considering that, as admitted by FIRESTONE, such was
the prevailing market price thereof.
The trial court ruled that the contracts of lease executed between
FIRESTONE and NDC were interrelated and inseparable because
"each of them forms part of the integral system of plaintiff's brick
manufacturing plant x x x if one of the leased premises will be taken
apart or otherwise detached from the two others, the purpose of the
lease as well as plaintiff's business operations would be rendered
useless and inoperative."16 It thus decreed that FIRESTONE could
exercise its option to purchase the property until 2 June 1999 inasmuch
as the 22 December 1978 contract embodied a covenant to renew the
lease for another ten (10) years at the option of the lessee as well as an
agreement giving the lessee the right of first refusal.
The trial court also sustained the constitutionality of Memorandum Order
No. 214 which was not per se hostile to FIRESTONE's property rights,
but deplored as prejudicial thereto the "very manner with which
defendants NDC and PUP interpreted and applied the same, ignoring in
the process that plaintiff has existing contracts of lease protectable by
express provisions in the Memorandum No. 214 itself."17 It further
explained that the questioned memorandum was issued "subject to such
liens/leases existing thereon"18 and petitioner PUP was under express
instructions "to enter, occupy and take possession of the transferred
property subject to such leases or liens and encumbrances that may be
existing thereon"19 (italics supplied).
Petitioners PUP, NDC and the Executive Secretary separately filed
their Notice of Appeal, but a few days thereafter, or on 3 September
1996, perhaps realizing the groundlessness and the futility of it all, the
Executive Secretary withdrew his appeal.20
Subsequently, the Court of Appeals affirmed the decision of the trial
court ordering the sale of the property in favor of FIRESTONE but
deleted the award of attorney's fees in the amount of Three Hundred
Thousand Pesos (P300,000.00). Accordingly, FIRESTONE was given a
grace period of six (6) months from finality of the court's judgment within
which to purchase the property in questioned in the exercise of its right
of first refusal. The Court of Appeals observed that as there was a sale
of the subject property, NDC could not excuse itself from its obligation
TO OFFER THE PROPERTY FOR SALE FIRST TO FIRESTONE
BEFORE IT COULD TO OTHER PARTIES. The Court of Appeals held:
"NDC cannot look to Memorandum Order No. 214 to excuse or shield it
from its contractual obligations to FIRESTONE. There is nothing therein
that allows NDC to disavow or repudiate the solemn engagement that it
freely and voluntarily undertook, or agreed to undertake."21
PUP moved for reconsideration asserting that in ordering the sale of the
property in favor of FIRESTONE the courts a quo unfairly created a
contract to sell between the parties. It argued that the "court cannot
substitute or decree its mind or consent for that of the parties in
determining whether or not a contract (has been) perfected between
PUP and NDC."22 PUP further contended that since "a real property
located in Sta. Mesa can readily command a sum of P10,000.00 per
square (meter)," the lower court gravely erred in ordering the sale of the
property at only P1,500.00 per square meter. PUP also advanced the
theory that the enactment of Memorandum Order No. 214 amounted to
a withdrawal of the option to purchase the property granted to
FIRESTONE. NDC, for its part, vigorously contended that the contracts
of lease executed between the parties had expired without being
renewed by FIRESTONE; consequently, FIRESTONE was no longer
entitled to any preferential right in the sale or disposition of the leased
property.
We do not see it the way PUP and NDC did. It is elementary that a party
to a contract cannot unilaterally withdraw a right of first refusal that
stands upon valuable consideration. That principle was clearly upheld
by the Court of Appeals when it denied on 6 June 2000 the twin motions
for reconsideration filed by PUP and NDC on the ground that the
appellants failed to advance new arguments substantial enough to
warrant a reversal of the Decision sought to be reconsidered. 23 On 28
June 2000 PUP filed an urgent motion for an additional period of fifteen
(15) days from 29 June 2000 or until 14 July 2000 within which to file
a Petition for Review on Certiorari of the Decision of the Court of
Appeals.
On the last day of the extended period PUP filed its Petition for Review
on Certiorari assailing the Decision of the Court of Appeals of 6
December 1999 as well as the Resolution of 6 June 2000 denying
reconsideration thereof. PUP raised two issues: (a) whether the courts a
quo erred when they "conjectured" that the transfer of the leased
property from NDC to PUP amounted to a sale; and, (b) whether
FIRESTONE can rightfully invoke its right of first refusal. Petitioner
posited that if we were to place our imprimatur on the decisions of the
courts a quo, "public welfare or specifically the constitutional priority
accorded to education" would greatly be prejudiced. 24
Paradoxically, our paramount interest in education does not license us,
or any party for that matter, to destroy the sanctity of binding obligations.
Education may be prioritized for legislative or budgetary purposes, but
we doubt if such importance can be used to confiscate private property
such as FIRESTONE's right of first refusal.
On 17 July 2000 we denied PUP's motion for extension of fifteen (15)
days within which to appeal inasmuch as the aforesaid pleading lacked
an affidavit of service of copies thereof on the Court of Appeals and the
adverse party, as well as written explanation for not filing and serving
the pleading personally.25
Accordingly, on 26 July 2000 we issued a Resolution dismissing
PUP's Petition for Review for having been filed out of time. PUP moved
for reconsideration imploring a resolution or decision on the merits of its
petition. Strangely, about the same time, several articles came out in the
newspapers assailing the denial of the petition. The daily papers
reported that we unreasonably dismissed PUP's petition on technical
grounds, affirming in the process the decision of the trial court to sell the
disputed property to the prejudice of the government in the amount
of P1,000,000,000.00.26 Counsel for petitioner PUP, alleged that the trial
court and the Court of Appeals "have decided a question of substance
in a way definitely not in accord with law or jurisprudence."27
At the outset, let it be noted that the amount of P1,000,000,000.00 as
reported in the papers was way too exaggerated, if not fantastic. We
stress that NDC itself sold the whole 10.31-hectare property to PUP at
only P57,193,201.64 which represents NDC's obligation to the national
government that was, in exchange, written off. The price offered per
square meter of the property was pegged at P554.74. FIRESTONE's
leased premises would therefore be worth only P14,423,240.00. From
any angle, this amount is certainly far below the ballyhooed price
of P1,000,000,000.00.
On 4 October 2000 we granted PUP's Motion for Reconsideration to
give it a chance to ventilate its right, if any it still had in the leased
premises, thereby paving the way for a reinstatement of its Petition for
Review.28 In its appeal, PUP took to task the courts a quo for supposedly
"substituting or decreeing its mind or consent for that of the parties
(referring to NDC and PUP) in determining whether or not a contract of
sale was perfected." PUP also argued that inasmuch as "it is the parties
alone whose minds must meet in reference to the subject matter and
cause," it concluded that it was error for the lower courts to have decreed
the existence of a sale of the NDC compound thus allowing FIRESTONE
to exercise its right of first refusal.
On the other hand, NDC separately filed its own Petition for Review and
advanced arguments which, in fine, centered on whether or not the
transaction between petitioners NDC and PUP amounted to a sale
considering that "ownership of the property remained with the
government."29 Petitioner NDC introduced the novel proposition that if
the parties involved are both government entities the transaction cannot
be legally called a sale.
In due course both petitions were consolidated. 30
We believe that the courts a quo did not hypothesize, much less conjure,
the sale of the disputed property by NDC in favor of petitioner PUP.
Aside from the fact that the intention of NDC and PUP to enter into a
contract of sale was clearly expressed in the Memorandum Order No.
214,31 a close perusal of the circumstances of this case strengthens the
theory that the conveyance of the property from NDC to PUP was one
of absolute sale, for a valuable consideration, and not a mere paper
transfer as argued by petitioners.
A contract of sale, as defined in the Civil Code, is a contract where one
of the parties obligates himself to transfer the ownership of and to deliver
a determinate thing to the other or others who shall pay therefore a sum
certain in money or its equivalent.32 It is therefore a general requisite for
the existence of a valid and enforceable contract of sale that it be
mutually obligatory, i.e., there should be a concurrence of the promise
of the vendor to sell a determinate thing and the promise of the vendee
to receive and pay for the property so delivered and transferred. The
Civil Code provision is, in effect, a "catch-all" provision which effectively
brings within its grasp a whole gamut of transfers whereby ownership of
a thing is ceded for a consideration.
Contrary to what petitioners PUP and NDC propose, there is not just one
party involved in the questioned transaction. Petitioners NDC and PUP
have their respective charters and therefore each possesses a separate
and distinct individual personality.33 The inherent weakness of NDC's
proposition that there was no sale as it was only the government which
was involved in the transaction thus reveals itself. Tersely put, it is not
necessary to write an extended dissertation on government owned and
controlled corporations and their legal personalities. Beyond cavil, a
government owned and controlled corporation has a personality of its
own, distinct and separate from that of the government. 34 The
intervention in the transaction of the Office of the President through the
Executive Secretary did not change the independent existence of these
entities. The involvement of the Office of the President was limited to
brokering the consequent relationship between NDC and PUP. But the
withdrawal of the appeal by the Executive Secretary is considered
significant as he knew, after a review of the records, that the transaction
was subject to existing liens and encumbrances, particularly the priority
to purchase the leased premises in favor of FIRESTONE.
True that there may be instances when a particular deed does not
disclose the real intentions of the parties, but their action may
nevertheless indicate that a binding obligation has been undertaken.
Since the conduct of the parties to a contract may be sufficient to
establish the existence of an agreement and the terms thereof, it
becomes necessary for the courts to examine the contemporaneous
behavior of the parties in establishing the existence of their contract.
The preponderance of evidence shows that NDC sold to PUP the whole
NDC compound, including the leased premises, without the knowledge
much less consent of private respondent FIRESTONE which had a valid
and existing right of first refusal.
All three (3) essential elements of a valid sale, without which there can
be no sale, were attendant in the "disposition" and "transfer" of the
property from NDC to PUP - consent of the parties, determinate subject
matter,and consideration therefor.
Consent to the sale is obvious from the prefatory clauses
of Memorandum Order No. 214 which explicitly states the acquiescence
of the parties to the sale of the property -
WHEREAS, PUP has expressed its willingness to acquire
said NDC properties and NDC has expressed its willingness
to sell the properties to PUP (underscoring supplied).35
Furthermore, the cancellation of NDC's liabilities in favor of the National
Government in the amount of P57,193,201.64 constituted the
"consideration" for the sale. As correctly observed by the Court of
Appeals-
The defendants-appellants' interpretation that there was a
mere transfer, and not a sale, apart from being specious
sophistry and a mere play of words, is too strained and
hairsplitting. For it is axiomatic that every sale imposes upon
the vendor the obligation to transfer ownership as an essential
element of the contract. Transfer of title or an agreement to
transfer title for a price paid, or promised to be paid, is the very
essence of sale (Kerr & Co. v. Lingad, 38 SCRA 524; Schmid
& Oberly, Inc., v. RJL Martinez Fishing Corp., 166 SCRA 493).
At whatever legal angle we view it, therefore, the inescapable
fact remains that all the requisites of a valid sale were
attendant in the transaction between co-defendants-
appellants NDC and PUP concerning the realities subject of
the present suit.36
What is more, the conduct of petitioner PUP immediately after the
transaction is in itself an admission that there was a sale of the NDC
compound in its favor. Thus, after the issuance of Memorandum Order
No. 214 petitioner PUP asserted its ownership over the property by
posting notices within the compound advising residents and occupants
to vacate the premises.37 In its Motion for Intervention petitioner
PUP also admitted that its interest as a "purchaser pendente lite" would
be better protected if it was joined as party-defendant in the controversy
thereby confessing that it indeed purchased the property.
In light of the foregoing disquisition, we now proceed to determine
whether FIRESTONE should be allowed to exercise its right of first
refusal over the property. Such right was expressly stated by NDC and
FIRESTONE in par. XV of their third contract denominated as A-10-78
executed on 22 December 1978 which, as found by the courts a quo,
was interrelated to and inseparable from their first contract denominated
as C-30-65 executed on 24 August 1965 and their second contract
denominated as C-26-68 executed on 8 January 1969. Thus -
Should the LESSOR desire to sell the leased premises during the term
of this Agreement, or any extension thereof, the LESSOR shall first give
to the LESSEE, which shall have the right of first option to purchase the
leased premises subject to mutual agreement of both parties. 38
In the instant case, the right of first refusal is an integral and indivisible
part of the contract of lease and is inseparable from the whole contract.
The consideration for the right is built into the reciprocal obligations of
the parties. Thus, it is not correct for petitioners to insist that there was
no consideration paid by FIRESTONE to entitle it to the exercise of the
right, inasmuch as the stipulation is part and parcel of the contract of
lease making the consideration for the lease the same as that for the
option.
It is a settled principle in civil law that when a lease contract contains a
right of first refusal, the lessor is under a legal duty to the lessee not to
sell to anybody at any price until after he has made an offer to sell to the
latter at a certain price and the lessee has failed to accept it. 39 The
lessee has a right that the lessor's first offer shall be in his favor.
The option in this case was incorporated in the contracts of lease by
NDC for the benefit of FIRESTONE which, in view of the total amount of
its investments in the property, wanted to be assured that it would be
given the first opportunity to buy the property at a price for which it would
be offered. Consistent with their agreement, it was then implicit for NDC
to have first offered the leased premises of 2.60 hectares to
FIRESTONE prior to the sale in favor of PUP. Only if FIRESTONE failed
to exercise its right of first priority could NDC lawfully sell the property to
petitioner PUP.
It now becomes apropos to ask whether the courts a quo were correct
in fixing the proper consideration of the sale at P1,500.00 per square
meter. In contracts of sale, the basis of the right of first refusal must be
the current offer of the seller to sell or the offer to purchase of the
prospective buyer. Only after the lessee-grantee fails to exercise its right
under the same terms and within the period contemplated can the owner
validly offer to sell the property to a third person, again, under the same
terms as offered to the grantee.40 It appearing that the whole NDC
compound was sold to PUP for P554.74 per square meter, it would have
been more proper for the courts below to have ordered the sale of the
property also at the same price. However, since FIRESTONE never
raised this as an issue, while on the other hand it admitted that the value
of the property stood at P1,500.00 per square meter, then we see no
compelling reason to modify the holdings of the courts a quo that the
leased premises be sold at that price.
Our attention is invited by petitioners to Ang Yu Asuncion v. CA41 in
concluding that if our holding in Ang Yu would be applied to the facts of
this case then FIRESTONE's "option, if still subsisting, is not
enforceable," the option being merely a preparatory contract which
cannot be enforced.
The contention has no merit. At the heels of Ang Yu came Equatorial
Realty Development, Inc., v. Mayfair Theater, Inc.,42 where after much
deliberation we declared, and so we hold, that a right of first refusal is
neither "amorphous nor merely preparatory" and can be enforced and
executed according to its terms. Thus, in Equatorial we ordered the
rescission of the sale which was made in violation of the lessee's right
of first refusal and further ordered the sale of the leased property in favor
of Mayfair Theater, as grantee of the right. Emphatically, we held that
"(a right of first priority) should be enforced according to the law on
contracts instead of the panoramic and indefinite rule on human
relations." We then concluded that the execution of the right of first
refusal consists in directing the grantor to comply with his obligation
according to the terms at which he should have offered the property in
favor of the grantee and at that price when the offer should have been
made.
One final word. Petitioner PUP should be cautioned against bidding for
public sympathy by bewailing the dismissal of its petition before the
press. Such advocacy is not likely to elicit the compassion of this Court
or of any court for that matter. An entreaty for a favorable disposition of
a case not made directly through pleadings and oral arguments before
the courts do not persuade us, for as judges, we are ruled only by our
forsworn duty to give justice where justice is due.
WHEREFORE, the petitions in G.R. No. 143513 and G.R. No. 143590
are DENIED. Inasmuch as the first contract of lease fixed the area of the
leased premises at 2.90118 hectares while the second contract placed
it at 2.60 hectares, let a ground survey of the leased premises be
immediately conducted by a duly licensed, registered surveyor at the
expense of private respondent FIRESTONE CERAMICS, INC., within
two (2) months from finality of the judgment in this case. Thereafter,
private respondent FIRESTONE CERAMICS, INC., shall have six (6)
months from receipt of the approved survey within which to exercise its
right to purchase the leased property at P1,500.00 per square meter,
and petitioner Polytechnic University of the Philippines is ordered to
reconvey the property to FIRESTONE CERAMICS, INC., in the exercise
of its right of first refusal upon payment of the purchase price thereof.
SO ORDERED.
.R. No. L-116650 May 23, 1995
TOYOTA SHAW, INC., petitioner,
vs.
COURT OF APPEALS and LUNA L. SOSA, respondents.
DAVIDE, JR., J.:
At the heart of the present controversy is the document marked Exhibit
"A" 1 for the private respondent, which was signed by a sales
representative of Toyota Shaw, Inc. named Popong Bernardo. The
document reads as follows:
AGREEMENTS BETWEEN MR. SOSA
& POPONG BERNARDO OF TOYOTA
SHAW, INC.
1. all necessary documents will be submitted to
TOYOTA SHAW, INC. (POPONG BERNARDO) a
week after, upon arrival of Mr. Sosa from the
Province (Marinduque) where the unit will be used
on the 19th of June.
2. the downpayment of P100,000.00 will be paid by
Mr. Sosa on June 15, 1989.
3. the TOYOTA SHAW, INC. LITE ACE yellow, will
be pick-up [sic] and released by TOYOTA SHAW,
INC. on the 17th of June at 10 a.m.

Was this document, executed and signed by the petitioner's sales
representative, a perfected contract of sale, binding upon the petitioner,
breach of which would entitle the private respondent to damages and
attorney's fees? The trial court and the Court of Appeals took the
affirmative view. The petitioner disagrees. Hence, this petition for review
on certiorari.
The antecedents as disclosed in the decisions of both the trial court and
the Court of Appeals, as well as in the pleadings of petitioner Toyota
Shaw, Inc. (hereinafter Toyota) and respondent Luna L. Sosa
(hereinafter Sosa) are as follows. Sometime in June of 1989, Luna L.
Sosa wanted to purchase a Toyota Lite Ace. It was then a seller's market
and Sosa had difficulty finding a dealer with an available unit for sale.
But upon contacting Toyota Shaw, Inc., he was told that there was an
available unit. So on 14 June 1989, Sosa and his son, Gilbert, went to
the Toyota office at Shaw Boulevard, Pasig, Metro Manila. There they
met Popong Bernardo, a sales representative of Toyota.
Sosa emphasized to Bernardo that he needed the Lite Ace not later than
17 June 1989 because he, his family, and a balikbayan guest would use
it on 18 June 1989 to go to Marinduque, his home province, where he
would celebrate his birthday on the 19th of June. He added that if he
does not arrive in his hometown with the new car, he would become a
"laughing stock." Bernardo assured Sosa that a unit would be ready for
pick up at 10:00 a.m. on 17 June 1989. Bernardo then signed the
aforequoted "Agreements Between Mr. Sosa & Popong Bernardo of
Toyota Shaw, Inc." It was also agreed upon by the parties that the
balance of the purchase price would be paid by credit financing through
B.A. Finance, and for this Gilbert, on behalf of his father, signed the
documents of Toyota and B.A. Finance pertaining to the application for
financing.
The next day, 15 June 1989, Sosa and Gilbert went to Toyota to deliver
the downpayment of P100,000.00. They met Bernardo who then
accomplished a printed Vehicle Sales Proposal (VSP) No. 928, 2 on
which Gilbert signed under the subheading CONFORME. This
document shows that the customer's name is "MR. LUNA SOSA" with
home address at No. 2316 Guijo Street, United Parañaque II; that the
model series of the vehicle is a "Lite Ace 1500" described as "4 Dr
minibus"; that payment is by "installment," to be financed by
"B.A.," 3 with the initial cash outlay of P100,000.00 broken down as
follows:
a) downpayment — P 53,148.00
b) insurance — P 13,970.00
c) BLT registration fee — P 1,067.00
CHMO fee — P 2,715.00
service fee — P 500.00
accessories — P 29,000.00
(
S
and that the "BALANCE TO BE FINANCED" g is "P274,137.00." The
spaces provided for "Delivery Terms" were d not filled-up. It also contains
the following pertinent provisions: .
CONDITIONS OF SALES )
1. This sale is subject P to availability of unit.
2. Stated Price is subject
O to change without prior
notice, Price prevailing P and in effect at time of
selling will apply. . . .O
Rodrigo Quirante, the Sales Supervisor N of Bernardo, checked and
approved the VSP. G
On 17 June 1989, at around 9:30 a.m., Bernardo B called Gilbert to inform
him that the vehicle would not be readyEfor pick up at 10:00 a.m. as
previously agreed upon but at 2:00 p.m.Rthat same day. At 2:00 p.m.,
Sosa and Gilbert met Bernardo at the latter's N office. According to Sosa,
Bernardo informed them that the Lite Ace A was being readied for delivery.
After waiting for about an hour, Bernardo R told them that the car could not
be delivered because "nasulot ang unit ng D ibang malakas."
Toyota contends, however, that the Lite Ace O was not delivered to Sosa
because of the disapproval by B.A. Finance . of the credit financing
application of Sosa. It further alleged that a particular unit had already
been reserved and earmarked for Sosa but could not be released due
to the uncertainty of payment of the balance of the purchase price.
Toyota then gave Sosa the option to purchase the unit by paying the full
purchase price in cash but Sosa refused.
After it became clear that the Lite Ace would not be delivered to him,
Sosa asked that his downpayment be refunded. Toyota did so on the
very same day by issuing a Far East Bank check for the full amount of
P100,000.00, 4 the receipt of which was shown by a check voucher of
Toyota,5 which Sosa signed with the reservation, "without prejudice to
our future claims for damages."
Thereafter, Sosa sent two letters to Toyota. In the first letter, dated 27
June 1989 and signed by him, he demanded the refund, within five days
from receipt, of the downpayment of P100,000.00 plus interest from the
time he paid it and the payment of damages with a warning that in case
of Toyota's failure to do so he would be constrained to take legal
action. 6 The second, dated 4 November 1989 and signed by M. O.
Caballes, Sosa's counsel, demanded one million pesos representing
interest and damages, again, with a warning that legal action would be
taken if payment was not made within three days.7 Toyota's counsel
answered through a letter dated 27 November 1989 8 refusing to accede
to the demands of Sosa. But even before this answer was made and
received by Sosa, the latter filed on 20 November 1989 with Branch 38
of the Regional Trial Court (RTC) of Marinduque a complaint against
Toyota for damages under Articles 19 and 21 of the Civil Code in the
total amount of P1,230,000.00.9 He alleges, inter alia, that:
9. As a result of defendant's failure and/or refusal to
deliver the vehicle to plaintiff, plaintiff suffered
embarrassment, humiliation, ridicule, mental
anguish and sleepless nights because: (i) he and
his family were constrained to take the public
transportation from Manila to Lucena City on their
way to Marinduque; (ii) his balikbayan-guest
canceled his scheduled first visit to Marinduque in
order to avoid the inconvenience of taking public
transportation; and (iii) his relatives, friends,
neighbors and other provincemates, continuously
irked him about "his Brand-New Toyota Lite Ace —
that never was." Under the circumstances,
defendant should be made liable to the plaintiff for
moral damages in the amount of One Million Pesos
(P1,000,000.00). 10
In its answer to the complaint, Toyota alleged that no sale was entered
into between it and Sosa, that Bernardo had no authority to sign Exhibit
"A" for and in its behalf, and that Bernardo signed Exhibit "A" in his
personal capacity. As special and affirmative defenses, it alleged that:
the VSP did not state date of delivery; Sosa had not completed the
documents required by the financing company, and as a matter of policy,
the vehicle could not and would not be released prior to full compliance
with financing requirements, submission of all documents, and
execution of the sales agreement/invoice; the P100,000.00 was
returned to and received by Sosa; the venue was improperly laid; and
Sosa did not have a sufficient cause of action against it. It also
interposed compulsory counterclaims.
After trial on the issues agreed upon during the pre-trial session, 11 the
trial court rendered on 18 February 1992 a decision in favor of Sosa. 12 It
ruled that Exhibit "A," the "AGREEMENTS BETWEEN MR. SOSA AND
POPONG BERNARDO," was a valid perfected contract of sale between
Sosa and Toyota which bound Toyota to deliver the vehicle to Sosa, and
further agreed with Sosa that Toyota acted in bad faith in selling to
another the unit already reserved for him.
As to Toyota's contention that Bernardo had no authority to bind it
through Exhibit "A," the trial court held that the extent of Bernardo's
authority "was not made known to plaintiff," for as testified to by
Quirante, "they do not volunteer any information as to the company's
sales policy and guidelines because they are internal
matters." 13 Moreover, "[f]rom the beginning of the transaction up to its
consummation when the downpayment was made by the plaintiff, the
defendants had made known to the plaintiff the impression that Popong
Bernardo is an authorized sales executive as it permitted the latter to do
acts within the scope of an apparent authority holding him out to the
public as possessing power to do these acts." 14 Bernardo then "was an
agent of the defendant Toyota Shaw, Inc. and hence bound the
defendants." 15
The court further declared that "Luna Sosa proved his social standing in
the community and suffered besmirched reputation, wounded feelings
and sleepless nights for which he ought to be
compensated." 16 Accordingly, it disposed as follows:
WHEREFORE, viewed from the above findings,
judgment is hereby rendered in favor of the plaintiff
and against the defendant:
1. ordering the defendant to
pay to the plaintiff the sum of
P75,000.00 for moral
damages;
2. ordering the defendant to
pay the plaintiff the sum of
P10,000.00 for exemplary
damages;
3. ordering the defendant to
pay the sum of P30,000.00
attorney's fees plus P2,000.00
lawyer's transportation fare per
trip in attending to the hearing
of this case;
4. ordering the defendant to
pay the plaintiff the sum of
P2,000.00 transportation fare
per trip of the plaintiff in
attending the hearing of this
case; and
5. ordering the defendant to
pay the cost of suit.
SO ORDERED.
Dissatisfied with the trial court's judgment, Toyota appealed to the Court
of Appeals. The case was docketed as CA-G.R. CV No. 40043. In its
decision promulgated on 29 July 1994,17 the Court of Appeals
affirmed in toto the appealed decision.
Toyota now comes before this Court via this petition and raises the core
issue stated at the beginning of the ponenciaand also the following
related issues: (a) whether or not the standard VSP was the true and
documented understanding of the parties which would have led to the
ultimate contract of sale, (b) whether or not Sosa has any legal and
demandable right to the delivery of the vehicle despite the non-payment
of the consideration and the non-approval of his credit application by
B.A. Finance, (c) whether or not Toyota acted in good faith when it did
not release the vehicle to Sosa, and (d) whether or not Toyota may be
held liable for damages.
We find merit in the petition.
Neither logic nor recourse to one's imagination can lead to the
conclusion that Exhibit "A" is a perfected contract of sale.
Article 1458 of the Civil Code defines a contract of sale as follows:
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.
and Article 1475 specifically provides when it is deemed perfected:
Art. 1475. The contract of sale is perfected at the
moment there is a meeting of minds upon the thing
which is the object of the contract and upon the
price.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of
the law governing the form of contracts.
What is clear from Exhibit "A" is not what the trial court and the Court of
Appeals appear to see. It is not a contract of sale. No obligation on the
part of Toyota to transfer ownership of a determinate thing to Sosa and
no correlative obligation on the part of the latter to pay therefor a price
certain appears therein. The provision on the downpayment of
P100,000.00 made no specific reference to a sale of a vehicle. If it was
intended for a contract of sale, it could only refer to a sale on installment
basis, as the VSP executed the following day confirmed. But nothing
was mentioned about the full purchase price and the manner the
installments were to be paid.
This Court had already ruled that a definite agreement on the manner of
payment of the price is an essential element in the formation of a binding
and enforceable contract of sale. 18 This is so because the agreement
as to the manner of payment goes into the price such that a
disagreement on the manner of payment is tantamount to a failure to
agree on the price. Definiteness as to the price is an essential element
of a binding agreement to sell personal property. 19
Moreover, Exhibit "A" shows the absence of a meeting of minds between
Toyota and Sosa. For one thing, Sosa did not even sign it. For another,
Sosa was well aware from its title, written in bold letters, viz.,
AGREEMENTS BETWEEN
MR. SOSA & POPONG
BERNARDO OF TOYOTA
SHAW, INC.
that he was not dealing with Toyota but with Popong Bernardo and that
the latter did not misrepresent that he had the authority to sell any
Toyota vehicle. He knew that Bernardo was only a sales
representative of Toyota and hence a mere agent of the latter. It was
incumbent upon Sosa to act with ordinary prudence and reasonable
diligence to know the extent of Bernardo's authority as an
agent20 in respect of contracts to sell Toyota's vehicles. A person dealing
with an agent is put upon inquiry and must discover upon his peril the
authority of the agent.21
At the most, Exhibit "A" may be considered as part of the initial phase of
the generation or negotiation stage of a contract of sale. There are three
stages in the contract of sale, namely:
(a) preparation, conception, or generation, which is
the period of negotiation and bargaining, ending at
the moment of agreement of the parties;
(b) perfection or birth of the contract, which is the
moment when the parties come to agree on the
terms of the contract; and
 (c) consummation or death, which is the fulfillment
or performance of the terms agreed upon in the
contract.22
The second phase of the generation or negotiation stage in this case
was the execution of the VSP. It must be emphasized that thereunder,
the downpayment of the purchase price was P53,148.00 while the
balance to be paid on installment should be financed by B.A. Finance
Corporation. It is, of course, to be assumed that B.A. Finance Corp. was
acceptable to Toyota, otherwise it should not have mentioned B.A.
Finance in the VSP.
Financing companies are defined in Section 3(a) of R.A. No. 5980, as
amended by P.D. No. 1454 and P.D. No. 1793, as "corporations or
partnerships, except those regulated by the Central Bank of the
Philippines, the Insurance Commission and the Cooperatives
Administration Office, which are primarily organized for the purpose of
extending credit facilities to consumers and to industrial, commercial, or
agricultural enterprises, either by discounting or factoring commercial
papers or accounts receivables, or by buying and selling contracts,
leases, chattel mortgages, or other evidence of indebtedness, or by
leasing of motor vehicles, heavy equipment and industrial machinery,
business and office machines and equipment, appliances and other
movable property." 23
Accordingly, in a sale on installment basis which is financed by a
financing company, three parties are thus involved: the buyer who
executes a note or notes for the unpaid balance of the price of the thing
purchased on installment, the seller who assigns the notes or discounts
them with a financing company, and the financing company which is
subrogated in the place of the seller, as the creditor of the installment
buyer. 24 Since B.A. Finance did not approve Sosa's application, there
was then no meeting of minds on the sale on installment basis.
We are inclined to believe Toyota's version that B.A. Finance
disapproved Sosa's application for which reason it suggested to Sosa
that he pay the full purchase price. When the latter refused, Toyota
cancelled the VSP and returned to him his P100,000.00. Sosa's version
that the VSP was cancelled because, according to Bernardo, the vehicle
was delivered to another who was "mas malakas" does not inspire belief
and was obviously a delayed afterthought. It is claimed that Bernardo
said, "Pasensiya kayo, nasulot ang unit ng ibang malakas," while the
Sosas had already been waiting for an hour for the delivery of the vehicle
in the afternoon of 17 June 1989. However, in paragraph 7 of his
complaint, Sosa solemnly states:
On June 17, 1989 at around 9:30 o'clock in the
morning, defendant's sales representative, Mr.
Popong Bernardo, called plaintiff's house and
informed the plaintiff's son that the vehicle will not
be ready for pick-up at 10:00 a.m. of June 17, 1989
but at 2:00 p.m. of that day instead. Plaintiff and his
son went to defendant's office on June 17 1989 at
2:00 p.m. in order to pick-up the vehicle but the
defendant for reasons known only to its
representatives, refused and/or failed to release the
vehicle to the plaintiff. Plaintiff demanded for an
explanation, but nothing was given; . . . (Emphasis
supplied). 25
The VSP was a mere proposal which was aborted in lieu of subsequent
events. It follows that the VSP created no demandable right in favor of
Sosa for the delivery of the vehicle to him, and its non-delivery did not
cause any legally indemnifiable injury.
The award then of moral and exemplary damages and attorney's fees
and costs of suit is without legal basis. Besides, the only ground upon
which Sosa claimed moral damages is that since it was known to his
friends, townmates, and relatives that he was buying a Toyota Lite Ace
which they expected to see on his birthday, he suffered humiliation,
shame, and sleepless nights when the van was not delivered. The van
became the subject matter of talks during his celebration that he may
not have paid for it, and this created an impression against his business
standing and reputation. At the bottom of this claim is nothing but
misplaced pride and ego. He should not have announced his plan to buy
a Toyota Lite Ace knowing that he might not be able to pay the full
purchase price. It was he who brought embarrassment upon himself by
bragging about a thing which he did not own yet.
Since Sosa is not entitled to moral damages and there being no award
for temperate, liquidated, or compensatory damages, he is likewise not
entitled to exemplary damages. Under Article 2229 of the Civil Code,
exemplary or corrective damages are imposed by way of example or
correction for the public good, in addition to moral, temperate, liquidated,
or compensatory damages.
Also, it is settled that for attorney's fees to be granted, the court must
explicitly state in the body of the decision, and not only in the dispositive
portion thereof, the legal reason for the award of attorney's fees. 26 No
such explicit determination thereon was made in the body of the decision
of the trial court. No reason thus exists for such an award.
WHEREFORE, the instant petition is GRANTED. The challenged
decision of the Court of Appeals in CA-G.R. CV NO. 40043 as well as
that of Branch 38 of the Regional Trial Court of Marinduque in Civil Case
No. 89-14 are REVERSED and SET ASIDE and the complaint in Civil
Case No. 89-14 is DISMISSED. The counterclaim therein is likewise
DISMISSED.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 142013 October 15, 2002
BIÑAN STEEL CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS, MYLENE C. GARCIA and MYLA C.
GARCIA, respondents.
-----------------------------
G.R. No. 148430 October 15, 2002
MYLENE C. GARCIA and MYLA C. GARCIA, petitioners,
vs.
HON. ENRICO A. LANZANAS, Presiding Judge, RTC, Branch 7,
Manila and
RUFO J. BERNARDO, Sheriff-In-Charge, for the Ex-Officio Sheriff
of Manila, respondents.
DECISION
CORONA, J.:
Before us are two consolidated petitions: (1) G.R. No. 142013, a special
civil action for certiorari and mandamus seeking to annul and set aside
the Resolutions1 of the Court of Appeals dated October 21, 1999 and
January 31, 2000, denying petitioner Biñan Steel Corporation’s motion
for intervention and motion for reconsideration, and (2) G.R. No. 148430,
seeking to set aside the decision2 and resolution of the Court of Appeals
dated February 10, 2000 and May 31, 2001, respectively, dismissing the
petition of petitioners Mylene C. Garcia and Myla C. Garcia for violating
the rules on forum-shopping.
Stripped of the non-essentials, the facts of the case are as follows:
On July 22, 1998, Biñan Steel Corporation (BSC) filed with the Regional
Trial Court of Manila a complaint against Joenas Metal Corporation and
spouses Ng Ley Huat and Leticia Dy Ng (the spouses Ng) for collection
of a sum of money with damages, docketed as Civil Case No. 98-89831.
On July 24, 1998, the trial court3 issued a Writ of Preliminary Attachment
after BSC filed an attachment bond. Pursuant thereto, on July 27, 1998,
the sheriff of Branch 7 of the RTC of Manila, Manuelito P. Viloria, levied
on the property registered in the names of the spouses Ng and covered
by TCT No. 11387 of the Registry of Deeds of Quezon City. This
property under preliminary attachment was in fact mortgaged to the Far
East Bank and Trust Company (FEBTC), now Bank of the Philippine
Islands (BPI), and consisted of a 268-square-meter lot located at 14
Tulip Road, Gardenville Town and Country Homes, Congressional
Avenue, Project 8, Quezon City.
On August 5, 1998, a sheriff’s return was filed by Viloria, stating that, as
of that date, summons was not served upon the defendant spouses Ng
because they could not be located. BSC caused the filing of a motion to
serve the summons by publication which was granted. Summons by
publication thereafter ensued.
In the meantime, defendant-spouses Ng sold the property to petitioners
(in G.R. No. 148430) Mylene and Myla Garcia by means of a deed of
sale dated June 29, 1998. Said transaction was registered only about a
month-and-a-half later, on August 12, 1998, after the mortgagee FEBTC
gave its approval to the sale. On August 19, 1998, TCT No. 11387 in the
name of the spouses Ng was cancelled and, in lieu thereof, TCT No.
194226 in the names of Mylene and Myla Garcia was issued. The
annotation of the preliminary attachment made earlier on July 27, 1998
by sheriff Viloria on the old title, TCT No. 11387, was transferred to TCT
No. 194226.
On August 28, 1998, the Garcias filed a complaint-in-intervention in Civil
Case No. 98-89831 pending at Branch 7 of the Manila RTC, alleging that
they were the registered owners of the property covered by TCT No.
194226 which was the subject of BSC’s writ of preliminary attachment.
Said complaint-in-intervention was denied by the trial court for lack of
merit.
On April 14, 1999, the trial court rendered judgment by default in favor
of BSC, the dispositive portion of which was:
WHEREFORE, decision is hereby rendered in favor of plaintiff Biñan
Steel Corporation, and against defendants Joenas Metal Corporation,
Ng Ley Huat and Leticia Dy Ng, ordering the latter to jointly and
severally:
1. pay the plaintiff the amount of FIVE MILLION EIGHT
HUNDRED FIFTY SIX THOUSAND PESOS (P5,856,000.00)
as actual damages;
2. pay the plaintiff the amount of ONE MILLION PESOS
(P1,000,000.00) as and for consequential damages;
3. pay the plaintiff the amount equivalent to 25% of the total
amount due the plaintiff from the defendant as and for
attorney’s fees; and
4. to pay the costs of suit.
SO ORDERED.4
On June 14, 1999, a Notice of Sale of Execution on Real Property was
issued by respondent sheriff Rufo J. Bernardo. It scheduled the public
auction of the property on July 7, 1999.
Meanwhile, on February 18, 1999, in view of the dismissal of their
complaint-in-intervention, the Garcias filed an action against BSC,
sheriff Manuelito P. Viloria, the Register of Deeds of Quezon City and
FEBTC (now BPI) for cancellation of the notice of levy annotated on TCT
No. 194226 before Branch 98 of the Regional Trial Court of Quezon
City,5 docketed as Civil Case No. 99-36804. The Garcias claimed that
they were the registered owners of the property in dispute, having
acquired the same on June 29, 1998 by means of a deed of sale with
assumption of mortgage from spouses Ng Ley Huat and Leticia Dy Ng.
In said case in the Quezon City RTC, the Garcias were able to secure a
temporary restraining order enjoining sheriff Rufo J. Bernardo or any
person acting in his behalf from continuing with the public auction sale
of the subject property initially scheduled on July 7, 1999. This TRO was
disregarded by the Manila RTC.
Acting on the ex-parte manifestation with motion to proceed with the
execution sale filed by BSC, Judge Enrico Lanzanas of Branch 7, RTC,
Manila affirmed, on July 8, 1999, his previous order and directed the
public auction of the attached property, unless otherwise enjoined by the
Court of Appeals or this Court. Thereafter, the public auction was
rescheduled from July 7, 1999 to August 6, 1999.
On August 4, 1999, the Garcias filed another case with the Court of
Appeals for the issuance of a writ of preliminary injunction with prayer
for temporary restraining order which sought to perpetually enjoin Judge
Lanzanas and sheriff Bernardo from proceeding with the public auction
on August 6, 1999. Their petition did not implead BSC as private
respondent.
In a resolution dated August 5, 1999, the Third Division of the Court of
Appeals6 temporarily restrained public respondents Judge Lanzanas
and Bernardo from proceeding with the public auction of the subject
property. Hence, the scheduled public sale on August 6, 1999 did not
transpire. This prompted petitioner BSC to file a motion for intervention
on August 16, 1999, praying that it be allowed to intervene and be heard
in the case as private respondent, and to comment and oppose the
petition filed by the Garcias. Likewise, said motion sought to oppose the
prayer for preliminary injunction with urgent request for the issuance of
the temporary restraining order.
On October 21, 1999, the First Division of the Court of Appeals, in its
resolution,7 denied BSC’s motion for intervention on the ground that its
rights could be protected in a separate proceeding, particularly in the
cancellation case filed by the Garcias. BSC's motion for reconsideration
was likewise denied on January 31, 2000. Thus, on March 13, 2000,
BSC filed with this Court a special civil action for certiorari and
mandamus, docketed as G.R. No. 142013, seeking to annul and set
aside the Resolutions of the Court of Appeals dated October 21, 1999
and January 31, 2000. BSC is invoking the following issues:
I
THE RESPONDENT HONORABLE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT TO
LACK OR EXCESS OF JURISDICTION IN DENYING PETITIONER’S
MOTION FOR INTERVENTION FOR BEING IMPROPER AS
INTERVENOR’S RIGHTS MAY BE PROTECTED IN A SEPARATE
PROCEEDING IN CIVIL CASE NO. 99-36804 OF THE RTC, BRANCH
98, QUEZON CITY, FOR CANCELLATION OF THE NOTICE OF LEVY
ANNOTATED ON TCT NO. 194226.
II
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE
ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF
JURISDICTION IN HOLDING THAT TO ENTERTAIN PETITIONER’S
INTERVENTION WOULD NECESSARY (SIC) PRE-EMPT THE
ADJUDICATION OF ISSUES IN CIVIL CASE NO. 99-36804 BECAUSE
EVIDENCE AND COUNTER-EVIDENCE WILL BE PRODUCED BY
THE PARTIES IN THE INJUNCTION SUIT, AND THIS WILL UNDULY
DELAY OR PREJUDICE THE ADJUDICATION OF THE RIGHTS OF
THE PRINCIPAL PARTIES.
III
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE
ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF
JURISDICTION IN RULING THAT THE ALLOWANCE OR
DISALLOWANCE OF A MOTION TO INTERVENE IS ADDRESSED TO
THE SOUND DISCRETION OF THE COURT, OVERLOOKING THE
FACT THAT IN THE INSTANT CASE, THE APPELLATE COURT DID
NOT EXERCISE WISELY ITS SOUND DISCRETION WHEN IT
DENIED PETITIONER’S MOTION FOR INTERVENTION.
Similarly, the Fifteenth Division of the Court of Appeals, in its
decision8 dated February 10, 2000, dismissed the petition of the Garcias
for violating the rules on forum-shopping. It denied their motion for
reconsideration on May 31, 2001.
The Garcias thus filed with this Court a petition for review on certiorari,
docketed as G.R. No. 148430, seeking to set aside the February 10,
2000 decision of the Court of Appeals as well as its resolution dated May
31, 2001 denying their motion for reconsideration, raising the following
errors:
I
WHETHER OR NOT PETITIONERS WERE GUILTY OF VIOLATING
THE RULES ON FORUM-SHOPPING.
II
WHETHER OR NOT PETITIONERS ARE ENTITLED TO THE
ISSUANCE OF A WRIT OF INJUNCTION.
Subsequently, G.R. No. 142013 and G.R. No. 148430 were
consolidated pursuant to this Court's Resolution dated February 27,
2002.
In the meantime, on August 4, 2001, the Garcias were again served by
the sheriff of the Manila RTC with a notice of sale of execution of the
disputed property scheduled for August 7, 2001. Because no TRO was
issued by this Court, the public auction ordered by the Manila RTC was
held as scheduled and the property was awarded to BSC as the highest
bidder.
On August 15, 2001, a little too late, this Court9 issued the TRO sought
by the Garcias in a resolution which partially stated that:
Acting on the Petitioners’ Urgent Motion for the Issuance of a temporary
restraining order and/or writ of preliminary injunction dated August 6,
2001, praying that public respondents be enjoined from proceeding with
the conduct of the public auction sale involving Petitioners’ property,
registered under TCT No. 194226 of the Registry of Deeds of Quezon
City, the Court Resolved to ISSUE the TEMPORARY RESTRAINING
ORDER prayed for, effective immediately until further orders from this
Court.10
A year after the public auction, on August 6, 2002, the Garcias, fearful
of the impending consolidation of title in favor of BSC, filed before this
Court an urgent ex-parte motion for the issuance of an order maintaining
the status quo ante. They wanted to prevent the consolidation of the title
and possession by BSC until such time as the rights and interests of
both sets of petitioners in the two cases before us shall have been
determined and finally resolved.
Acting on the said motion, on August 9, 2002, the Court11 resolved to
grant the motion and directed the parties to maintain the status quo as
of August 6, 2002.
Going over the merits of the petitions, the Court deems it essential to
resolve two pivotal issues: (1) who, between BSC and the Garcias, has
a better right to the disputed property, and (2) whether the Garcias
violated the rule against forum- shopping.
It should be noted that, at the time of the attachment of the property on
July 27, 1998, the spouses Ng were still the registered owners of said
property. It should also be observed that the preliminary attachment in
favor of petitioner BSC was annotated and recorded in the Registry of
Deeds of Quezon City on July 27, 1998 in accordance with the
provisions of the Property Registration Decree (PD 1529). This
annotation produced all the effects which the law gives to its registration
or inscription.12
This Court has always held that attachment is a proceeding in rem. It is
against the particular property, enforceable against the whole world. The
attaching creditor acquires a specific lien on the attached property which
ripens into a judgment against the res when the order of sale is made.
Such a proceeding in effect means that the property attached is an
indebted thing and a virtual condemnation of it to pay the owner’s
debt.13 This doctrine was validated by this Court in the more recent case
of Republic vs. Saludares14:
x x x.
The law does not provide the length of time an attachment lien shall
continue after the rendition of the judgment, and it must therefore
necessarily continue until the debt is paid, or sale is had under execution
issued on the judgment, or until the judgment is satisfied, or the
attachment discharged or vacated in some manner provided by law.
Thus, if the property attached is subsequently sold, the purchaser of the
attached property acquires it subject to an attachment legally and validly
levied thereon.
x x x.
In the instant case, the records reveal that the levy on attachment
covering the subject property was annotated on TCT No. 11387 on July
27, 1998. The deed of sale executed on June 29, 1998 in favor of the
Garcias was approved by FEBTC only on August 12, 1998 which was
also the date when the sale was registered. From the foregoing, it can
be seen that, when the Garcias purchased the property in question, it
was already under a duly registered preliminary attachment. In other
words, there was already notice to said purchasers (and the whole
world) of the impending acquisition by BSC, as the judgment creditor, of
a legal lien on the title of the Ng spouses as judgment debtors — in case
BSC won its case in the Manila RTC.
The Garcias claim they acquired the subject property by means of a
deed of sale with assumption of mortgage dated June 29, 1998,
meaning, they purchased the property ahead of the inscription of the
levy on attachment thereon on July 27, 1998. But, even if consensual,
not all contracts of sale became automatically and immediately
effective.15 In Ramos vs. Court of Appeals16 we held:
In sales with assumption of mortgage, the assumption of mortgage is a
condition precedent to the seller’s consent and therefore, without
approval of the mortgagee, the sale is not perfected.
Apart therefrom, notwithstanding the approval of the sale by mortgagee
FEBTC (BPI), there was yet another step the Garcias had to take and it
was the registration of the sale from the Ngs to them. Insofar as third
persons are concerned, what validly transfers or conveys a person's
interest in real property is the registration of the deed.17
Thus, when the Garcias bought the property on June 29, 1998, it was,
at that point, no more than a private transaction between them and the
Ngs. It needed to be registered before it could become binding on all
third parties, including BSC. It turned out that the Garcias registered it
only on August 12, 1998, after FEBTC (now BPI) approved the sale. It
was too late by then because, on July 27, 1998, the levy in favor of BSC,
pursuant to the preliminary attachment ordered by the Manila RTC, had
already been annotated on the original title on file with the Registry of
Deeds. This registration of levy (or notice, in layman’s language) now
became binding on the whole world, including the Garcias. The rights
which had already accrued in favor of BSC by virtue of the levy on
attachment over the property were never adversely affected by the
unregistered transfer from the spouses Ng to the Garcias.
We sympathize with the Garcias but, had they only bothered to check
first with the Register of Deeds of Quezon City before buying the
property — as a prudent buyer would have done — they would have
seen the warning about BSC’s superior rights over it. This alone should
have been sufficient reason for them to back out of the deal.
It is doctrinal that a levy on attachment, duly registered, has preference
over a prior unregistered sale and, even if the prior unregistered sale is
subsequently registered before the sale on execution but after the levy
is made, the validity of the execution sale should be upheld because it
retroacts to the date of levy. The priority enjoyed by the levy on
attachment extends, with full force and effect, to the buyer at the auction
sale conducted by virtue of such levy.18 The sale between the spouses
Ng and the Garcias was undoubtedly a valid transaction between them.
However, in view of the prior levy on attachment on the same property,
the Garcias took the property subject to the attachment. The Garcias, in
buying registered land, stood exactly in the shoes of their vendors, the
Ngs, and their title ipso facto became subject to the incidents or results
of the pending litigation19 between the Ngs and BSC.
Even the alleged lack of actual and personal knowledge of the existence
of the levy on attachment over the subject property by the Garcias
cannot be sustained by this Court on the ground that one who deals with
registered land is charged with notice of the burdens on the property
which are duly noted on the certificate of title. On this specific point, we
are concerned not with actual or personal knowledge but constructive
notice through registration in the Registry of Deeds. Otherwise stated,
what we should follow is the annotation (or lack thereof) on the original
title on file with the Registry of Deeds, not on the duplicate title in the
hands of the private parties.
When a conveyance has been properly recorded, such record is
constructive notice of its contents and all interests, legal and equitable,
included therein. Under the rule on notice, it is presumed that the
purchaser has examined every instrument on record affecting the title.
Such presumption is irrefutable and cannot be overcome by any claim
of innocence or good faith. Therefore, such presumption cannot be
defeated by proof of lack of knowledge of what the public record contains
any more than one may be permitted to show that he was ignorant of
the provisions of the law. The rule that all persons must take notice of
the facts which the public record contains is a rule of law. The rule must
be absolute. Any variation would lead to endless confusion and useless
litigation.20 Otherwise, the very purpose and object of the law requiring
public registration would be for naught.
Pertinent to the matter at hand is Article 1544 of the New Civil Code
which provides:
If the same thing should have been sold to different vendees, x x x
should it be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in the Registry of
Property. x x x
Because of the principle of constructive notice to the whole world, one
who deals with registered property which is the subject of an annotated
levy on attachment cannot invoke the rights of a purchaser in good faith.
As between two purchasers, the one who registers the sale in his favor
has a preferred right over the other who has not registered his title even
if the latter is in actual possession of the immovable property. 21 And, as
between two purchasers who both registered the respective sales in
their favor, the one who registered his sale ahead of the other would
have better rights than the other who registered later.
Applying said provision of the law and settled jurisprudence to the instant
case, when the disputed property was consequently sold on execution
to BSC, this auction sale retroacted to the date of inscription of BSC's
notice of attachment on July 27, 1998. The earlier registration thus gave
BSC superior and preferential rights over the attached property as
against the Garcias22 who registered their purchase of the property at a
later date. Notably, the Garcias were not purchasers for value in view of
the fact that they acquired the property in payment of the loan earlier
obtained from them by the Spouses Ng.23
All told, the purchaser of a property subject to an attachment legally and
validly levied thereon is merely subrogated to the rights of the vendor
and acquires the property subject to the rights of the attachment creditor.
An attaching creditor who registers the order of attachment and the sale
by public auction of the property to him as the highest bidder acquires a
superior title to the property as against a vendee who previously bought
the same property from the registered owner but who failed to register
his deed of sale.24
Petitioners Garcias failed to show that BSC acted in bad faith which
would have impelled this Court to rule otherwise.
The foregoing considerations show that the Garcias are not entitled to
the issuance of a writ of preliminary injunction from this Court. For the
issuance of the writ to be proper, it must be shown that the invasion of
the right sought to be protected is material and substantial, that the right
of the Garcias is clear and unmistakable and that there is an urgent and
paramount necessity for the writ to prevent serious damage. 25 Such
requirements are all wanting in the case at bar. Thus, in view of the clear
and unmistakable absence of any legal basis for the issuance thereof,
the same must be denied.
On the second question — whether the Garcias violated the rule against
forum-shopping — we answer in the affirmative.
The Court of Appeals, in dismissing the Garcias' petition on the ground
of forum-shopping, explained:
A party is guilty of forum-shopping where he repetitively availed of
several judicial remedies in different courts, simultaneously or
successively, all substantially founded on the same transactions and the
same essential facts and circumstances, and all raising substantially the
same issues either pending in, or already resolved adversely by some
other court (Gatmaytan vs. Court of Appeals, 267 SCRA 487).
The test to determine whether a party violated the rule against forum-
shopping is where the elements of litis pendentia are present or where
a final judgment in one case will amount to res judicata in another (Solid
Homes, Inc. vs. Court of Appeals, 271 SCRA 157).
What is truly important to consider in determining whether forum-
shopping exists or not is the vexation caused the courts and parties-
litigants by a party who asks different courts and/or administrative
agencies to rule on the same or related causes and/or grant the same
or substantially the same reliefs, in the process creating possibility of
conflicting decisions being rendered by the different fora upon the same
issues (Golangco vs. Court of Appeals, 283 SCRA 493).
The above jurisprudence instructs us the various indicia of forum-
shopping. The more important of these are: when the final judgment in
one case will amount to res judicata in another, or where the cases filed
are substantially founded on the same transactions and the same
essential facts and circumstances, or raising substantially the same
issues, or more importantly, where there exists the possibility of
conflicting decisions being rendered by different fora upon the same
issues.
If we take a look closely on the instant Petition for Injunction, forum-
shopping is evident. In Civil Case No. 99-36804 raffled to Branch 98 of
RTC- Quezon City, petitioners therein prayed for the cancellation of the
notice of levy in their title. They are claiming that the controverted
property is owned by them such that the respondent therein has no right
to levy on their property, petitioners not being the respondent’s debtor.
In the present petition, petitioners seek that the scheduled auction sale
of the same property be perpetually enjoined, claiming that the property
is owned by them and that the same is erroneously made to answer for
liability not owing by them. Ultimately, the two actions involve the same
essential facts and circumstances, and are raising the same issues.
x x x The propriety of the issuance of injunction would depend on the
finding that the petitioners have a clear legal right over the property - a
right in esse or the existence of a right to be protected. Thus, this court
must make a categorical finding of fact. This very same issue of fact –
who as between the two contending parties have a better right to the
property – is the very issue presented before the RTC of Quezon City.
Clearly therefore, this Court and that of RTC – Quezon City are called
upon to decide on the same issues based on the same essential facts
and circumstances. Hence, the possibility of these two courts rendering
or coming up with different or conflicting decisions is very much real.
Needless to say, the decision in one case would constitute res judicata
in the other. The instant petition for injunction obviously violates the rule
on forum-shopping.
We agree with the Court of Appeals.
As clearly demonstrated, the willful attempt by the Garcias to obtain a
preliminary injunction in another court (the Court of Appeals) after they
filed a case seeking the same relief from the original court (the Quezon
City RTC) constitutes grave abuse of the judicial process. Such
contemptuous act is penalized by the summary dismissal of both actions
as mandated by paragraph 17 of the Interim Rules and Guidelines
issued by this Court on January 11, 1983 and Supreme Court Circular
No. 28-91, to wit:
xxx
SUBJECT: ADDITIONAL REQUISITES FOR PETITIONS FILED WITH
THE SUPREME COURT AND THE COURT OF APPEALS TO
PREVENT FORUM-SHOPPING OR MULTIPLE FILING OF
PETITIONS AND COMPLAINTS.
The attention of the Court has been called to the filing of multiple
petitions and complaints involving the same issues in the Supreme
Court, the Court of Appeals or different Divisions thereof, or any other
tribunal or agency, with the result that said tribunals or agency have to
resolve the same issues.
x x x.
3. Penalties.
(a) Any violation of this Circular shall be a cause for the summary
dismissal of the multiple petition or complaint;
x x x.
In Bugnay Construction & Development Corporation vs. Laron, 26 we
declared:
Forum-shopping, an act of malpractice, is proscribed and condemned
as trifling with the courts and abusing their processes. It is improper
conduct that degrades the administration of justice. The rule has been
formalized in Paragraph 17 of the Interim Rules and Guidelines issued
by this Court of January 11, 1983, in connection with the implementation
of the Judiciary Reorganization Act x x x. The Rule ordains that (a)
violation of the rule shall constitute a contempt of court and shall be a
cause for the summary dismissal of both petitions, without prejudice to
the taking of appropriate action against the counsel or party concerned.
The rule against forum-shopping has been further strengthened by the
issuance of Supreme Court Administrative Circular No. 04-94. Said
circular formally established the rule that the deliberate filing of multiple
complaints to obtain favorable action constitutes forum-shopping and
shall be a ground for summary dismissal thereof.
Accordingly, the Garcias cannot pursue simultaneous remedies in two
different fora. This is a practice which degrades the judicial process,
messes up the orderly rules of procedure and is vexatious and unfair to
the other party in the case.
We rule therefore that the execution sale in favor of BSC was superior
to the sale of the same property by the Ngs to the Garcias on August 12,
1998. The right of petitioner BSC to the ownership and possession of
the property, the surrender of the owner's duplicate copy of TCT No.
194226 covering the subject property for inscription of the certificate of
sale, the cancellation of TCT No. 194226 and the issuance of a new title
in favor of BSC, is affirmed without prejudice to the right of the Garcias
to seek reimbursement from the spouses Ng.
In view of our disposition of the first issue resulting in the denial of the
Garcias’ petition, the petition of BSC praying that it be allowed to
intervene therein has been rendered moot. The Court thus finds it
unnecessary to discuss it.
WHEREFORE, the petitions are DENIED. The Resolution dated August
9, 2002 issued by this Court directing the parties to maintain the status
quo as of August 6, 2002 is hereby lifted and set aside. The Registry of
Deeds of Quezon City is hereby ordered to cancel TCT No. 194226 in
the names of Myla and Mylene Garcia and issue a new title in favor of
BSC without further delay.
SO ORDERED.
G.R. No. 166862 December 20, 2006
MANILA METAL CONTAINER CORPORATION, petitioner,
REYNALDO C. TOLENTINO, intervenor,
vs.
PHILIPPINE NATIONAL BANK, respondent,
DMCI-PROJECT DEVELOPERS, INC., intervenor.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision1 of the
Court of Appeals (CA) in CA-G.R. No. 46153 which affirmed the
decision2 of the Regional Trial Court (RTC), Branch 71, Pasig City, in
Civil Case No. 58551, and its Resolution3 denying the motion for
reconsideration filed by petitioner Manila Metal Container Corporation
(MMCC).
The Antecedents
Petitioner was the owner of a 8,015 square meter parcel of land located
in Mandaluyong (now a City), Metro Manila. The property was covered
by Transfer Certificate of Title (TCT) No. 332098 of the Registry of
Deeds of Rizal. To secure a P900,000.00 loan it had obtained from
respondent Philippine National Bank (PNB), petitioner executed a real
estate mortgage over the lot. Respondent PNB later granted petitioner
a new credit accommodation of P1,000,000.00; and, on November 16,
1973, petitioner executed an Amendment4 of Real Estate Mortgage over
its property. On March 31, 1981, petitioner secured another loan
of P653,000.00 from respondent PNB, payable in quarterly installments
of P32,650.00, plus interests and other charges.5
On August 5, 1982, respondent PNB filed a petition for extrajudicial
foreclosure of the real estate mortgage and sought to have the property
sold at public auction for P911,532.21, petitioner's outstanding
obligation to respondent PNB as of June 30, 1982, 6 plus interests and
attorney's fees.
After due notice and publication, the property was sold at public auction
on September 28, 1982 where respondent PNB was declared the
winning bidder for P1,000,000.00. The Certificate of Sale7 issued in its
favor was registered with the Office of the Register of Deeds of Rizal,
and was annotated at the dorsal portion of the title on February 17, 1983.
Thus, the period to redeem the property was to expire on February 17,
1984.
Petitioner sent a letter dated August 25, 1983 to respondent PNB,
requesting that it be granted an extension of time to redeem/repurchase
the property.8 In its reply dated August 30, 1983, respondent PNB
informed petitioner that the request had been referred to its Pasay City
Branch for appropriate action and recommendation.9
In a letter10 dated February 10, 1984, petitioner reiterated its request for
a one year extension from February 17, 1984 within which to
redeem/repurchase the property on installment basis. It reiterated its
request to repurchase the property on installment.11 Meanwhile, some
PNB Pasay City Branch personnel informed petitioner that as a matter
of policy, the bank does not accept "partial redemption."12
Since petitioner failed to redeem the property, the Register of Deeds
cancelled TCT No. 32098 on June 1, 1984, and issued a new title in
favor of respondent PNB.13 Petitioner's offers had not yet been acted
upon by respondent PNB.
Meanwhile, the Special Assets Management Department (SAMD) had
prepared a statement of account, and as of June 25, 1984 petitioner's
obligation amounted to P1,574,560.47. This included the bid price
of P1,056,924.50, interest, advances of insurance premiums, advances
on realty taxes, registration expenses, miscellaneous expenses and
publication cost.14 When apprised of the statement of account, petitioner
remitted P725,000.00 to respondent PNB as "deposit to repurchase,"
and Official Receipt No. 978191 was issued to it.15
In the meantime, the SAMD recommended to the management of
respondent PNB that petitioner be allowed to repurchase the property
for P1,574,560.00. In a letter dated November 14, 1984, the PNB
management informed petitioner that it was rejecting the offer and the
recommendation of the SAMD. It was suggested that petitioner
purchase the property for P2,660,000.00, its minimum market value.
Respondent PNB gave petitioner until December 15, 1984 to act on the
proposal; otherwise, its P725,000.00 deposit would be returned and the
property would be sold to other interested buyers.16
Petitioner, however, did not agree to respondent PNB's proposal.
Instead, it wrote another letter dated December 12, 1984 requesting for
a reconsideration. Respondent PNB replied in a letter dated December
28, 1984, wherein it reiterated its proposal that petitioner purchase the
property for P2,660,000.00. PNB again informed petitioner that it would
return the deposit should petitioner desire to withdraw its offer to
purchase the property.17 On February 25, 1985, petitioner, through
counsel, requested that PNB reconsider its letter dated December 28,
1984. Petitioner declared that it had already agreed to the SAMD's offer
to purchase the property for P1,574,560.47, and that was why it had
paid P725,000.00. Petitioner warned respondent PNB that it would seek
judicial recourse should PNB insist on the position. 18
On June 4, 1985, respondent PNB informed petitioner that the PNB
Board of Directors had accepted petitioner's offer to purchase the
property, but for P1,931,389.53 in cash less the P725,000.00 already
deposited with it.19 On page two of the letter was a space above the
typewritten name of petitioner's President, Pablo Gabriel, where he was
to affix his signature. However, Pablo Gabriel did not conform to the
letter but merely indicated therein that he had received it.20 Petitioner did
not respond, so PNB requested petitioner in a letter dated June 30, 1988
to submit an amended offer to repurchase.
Petitioner rejected respondent's proposal in a letter dated July 14, 1988.
It maintained that respondent PNB had agreed to sell the property
for P1,574,560.47, and that since its P725,000.00 downpayment had
been accepted, respondent PNB was proscribed from increasing the
purchase price of the property.21 Petitioner averred that it had a net
balance payable in the amount of P643,452.34. Respondent PNB,
however, rejected petitioner's offer to pay the balance of P643,452.34 in
a letter dated August 1, 1989.22
On August 28, 1989, petitioner filed a complaint against respondent PNB
for "Annulment of Mortgage and Mortgage Foreclosure, Delivery of Title,
or Specific Performance with Damages." To support its cause of action
for specific performance, it alleged the following:
34. As early as June 25, 1984, PNB had accepted the down
payment from Manila Metal in the substantial amount
of P725,000.00 for the redemption/repurchase price
of P1,574,560.47 as approved by its SMAD and considering
the reliance made by Manila Metal and the long time that has
elapsed, the approval of the higher management of the Bank
to confirm the agreement of its SMAD is clearly a potestative
condition which cannot legally prejudice Manila Metal which
has acted and relied on the approval of SMAD. The Bank
cannot take advantage of a condition which is entirely
dependent upon its own will after accepting and benefiting
from the substantial payment made by Manila Metal.
35. PNB approved the repurchase price of P1,574,560.47 for
which it accepted P725,000.00 from Manila Metal. PNB
cannot take advantage of its own delay and long inaction in
demanding a higher amount based on unilateral computation
of interest rate without the consent of Manila Metal.
Petitioner later filed an amended complaint and supported its claim for
damages with the following arguments:
36. That in order to protect itself against the wrongful and
malicious acts of the defendant Bank, plaintiff is constrained
to engage the services of counsel at an agreed fee
of P50,000.00 and to incur litigation expenses of at
least P30,000.00, which the defendant PNB should be
condemned to pay the plaintiff Manila Metal.
37. That by reason of the wrongful and malicious actuations
of defendant PNB, plaintiff Manila Metal suffered besmirched
reputation for which defendant PNB is liable for moral
damages of at least P50,000.00.
38. That for the wrongful and malicious act of defendant PNB
which are highly reprehensible, exemplary damages should
be awarded in favor of the plaintiff by way of example or
correction for the public good of at least P30,000.00.23
Petitioner prayed that, after due proceedings, judgment be rendered in
its favor, thus:
a) Declaring the Amended Real Estate Mortgage (Annex "A")
null and void and without any legal force and effect.
b) Declaring defendant's acts of extra-judicially foreclosing the
mortgage over plaintiff's property and setting it for auction sale
null and void.
c) Ordering the defendant Register of Deeds to cancel the
new title issued in the name of PNB (TCT NO. 43792)
covering the property described in paragraph 4 of the
Complaint, to reinstate TCT No. 37025 in the name of Manila
Metal and to cancel the annotation of the mortgage in question
at the back of the TCT No. 37025 described in paragraph 4 of
this Complaint.
d) Ordering the defendant PNB to return and/or deliver
physical possession of the TCT No. 37025 described in
paragraph 4 of this Complaint to the plaintiff Manila Metal.
e) Ordering the defendant PNB to pay the plaintiff Manila
Metal's actual damages, moral and exemplary damages in the
aggregate amount of not less than P80,000.00 as may be
warranted by the evidence and fixed by this Honorable Court
in the exercise of its sound discretion, and attorney's fees
of P50,000.00 and litigation expenses of at least P30,000.00
as may be proved during the trial, and costs of suit.
Plaintiff likewise prays for such further reliefs which may be
deemed just and equitable in the premises.24
In its Answer to the complaint, respondent PNB averred, as a special
and affirmative defense, that it had acquired ownership over the property
after the period to redeem had elapsed. It claimed that no contract of
sale was perfected between it and petitioner after the period to redeem
the property had expired.
During pre-trial, the parties agreed to submit the case for decision,
based on their stipulation of facts.25 The parties agreed to limit the issues
to the following:
1. Whether or not the June 4, 1985 letter of the defendant
approving/accepting plaintiff's offer to purchase the property
is still valid and legally enforceable.
2. Whether or not the plaintiff has waived its right to purchase
the property when it failed to conform with the conditions set
forth by the defendant in its letter dated June 4, 1985.
3. Whether or not there is a perfected contract of sale between
the parties.26
While the case was pending, respondent PNB demanded, on
September 20, 1989, that petitioner vacate the property within 15 days
from notice,27 but petitioners refused to do so.
On March 18, 1993, petitioner offered to repurchase the property
for P3,500,000.00.28 The offer was however rejected by respondent
PNB, in a letter dated April 13, 1993. According to it, the prevailing
market value of the property was approximately P30,000,000.00, and as
a matter of policy, it could not sell the property for less than its market
value.29 On June 21, 1993, petitioner offered to purchase the property
for P4,250,000.00 in cash.30 The offer was again rejected by respondent
PNB on September 13, 1993.31
On May 31, 1994, the trial court rendered judgment dismissing the
amended complaint and respondent PNB's counterclaim. It ordered
respondent PNB to refund the P725,000.00 deposit petitioner had
made.32 The trial court ruled that there was no perfected contract of sale
between the parties; hence, petitioner had no cause of action for specific
performance against respondent. The trial court declared that
respondent had rejected petitioner's offer to repurchase the property.
Petitioner, in turn, rejected the terms and conditions contained in the
June 4, 1985 letter of the SAMD. While petitioner had offered to
repurchase the property per its letter of July 14, 1988, the amount
of P643,422.34 was way below the P1,206,389.53 which respondent
PNB had demanded. It further declared that the P725,000.00 remitted
by petitioner to respondent PNB on June 4, 1985 was a "deposit," and
not a downpayment or earnest money.
On appeal to the CA, petitioner made the following allegations:
I
THE LOWER COURT ERRED IN RULING THAT
DEFENDANT-APPELLEE'S LETTER DATED 4 JUNE 1985
APPROVING/ACCEPTING PLAINTIFF-APPELLANT'S
OFFER TO PURCHASE THE SUBJECT PROPERTY IS NOT
VALID AND ENFORCEABLE.
II
THE LOWER COURT ERRED IN RULING THAT THERE
WAS NO PERFECTED CONTRACT OF SALE BETWEEN
PLAINTIFF-APPELLANT AND DEFENDANT-APPELLEE.
III
THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-
APPELLLANT WAIVED ITS RIGHT TO PURCHASE THE
SUBJECT PROPERTY WHEN IT FAILED TO CONFORM
WITH CONDITIONS SET FORTH BY DEFENDANT-
APPELLEE IN ITS LETTER DATED 4 JUNE 1985.
IV
THE LOWER COURT ERRED IN DISREGARDING THE
FACT THAT IT WAS THE DEFENDANT-APPELLEE WHICH
RENDERED IT DIFFICULT IF NOT IMPOSSIBLE FOR
PLAINTIFF-APPELLANT TO COMPLETE THE BALANCE
OF THEIR PURCHASE PRICE.
V
THE LOWER COURT ERRED IN DISREGARDING THE
FACT THAT THERE WAS NO VALID RESCISSION OR
CANCELLATION OF SUBJECT CONTRACT OF
REPURCHASE.
VI
THE LOWER COURT ERRED IN DECLARING THAT
PLAINTIFF FAILED AND REFUSED TO SUBMIT THE
AMENDED REPURCHASE OFFER.
VII
THE LOWER COURT ERRED IN DISMISSING THE
AMENDED COMPLAINT OF PLAINTIFF-APPELLANT.
VIII
THE LOWER COURT ERRED IN NOT AWARDING
PLAINTIFF-APPELLANT ACTUAL, MORAL AND
EXEMPLARY DAMAGES, ATTOTRNEY'S FEES AND
LITIGATION EXPENSES.33
Meanwhile, on June 17, 1993, petitioner's Board of Directors approved
Resolution No. 3-004, where it waived, assigned and transferred its
rights over the property covered by TCT No. 33099 and TCT No. 37025
in favor of Bayani Gabriel, one of its Directors.34 Thereafter, Bayani
Gabriel executed a Deed of Assignment over 51% of the ownership and
management of the property in favor of Reynaldo Tolentino, who later
moved for leave to intervene as plaintiff-appellant. On July 14, 1993, the
CA issued a resolution granting the motion,35 and likewise granted the
motion of Reynaldo Tolentino substituting petitioner MMCC, as plaintiff-
appellant, and his motion to withdraw as intervenor.36
The CA rendered judgment on May 11, 2000 affirming the decision of
the RTC.37 It declared that petitioner obviously never agreed to the
selling price proposed by respondent PNB (P1,931,389.53) since
petitioner had kept on insisting that the selling price should be lowered
to P1,574,560.47. Clearly therefore, there was no meeting of the minds
between the parties as to the price or consideration of the sale.
The CA ratiocinated that petitioner's original offer to purchase the
subject property had not been accepted by respondent PNB. In fact, it
made a counter-offer through its June 4, 1985 letter specifically on the
selling price; petitioner did not agree to the counter-offer; and the
negotiations did not prosper. Moreover, petitioner did not pay the
balance of the purchase price within the sixty-day period set in the June
4, 1985 letter of respondent PNB. Consequently, there was no perfected
contract of sale, and as such, there was no contract to rescind.
According to the appellate court, the claim for damages and the
counterclaim were correctly dismissed by the court a quo for no
evidence was presented to support it. Respondent PNB's letter dated
June 30, 1988 cannot revive the failed negotiations between the parties.
Respondent PNB merely asked petitioner to submit an amended offer
to repurchase. While petitioner reiterated its request for a lower selling
price and that the balance of the repurchase be reduced, however,
respondent rejected the proposal in a letter dated August 1, 1989.
Petitioner filed a motion for reconsideration, which the CA likewise
denied.
Thus, petitioner filed the instant petition for review on certiorari, alleging
that:
I. THE COURT OF APPEALS ERRED ON A QUESTION OF
LAW WHEN IT RULED THAT THERE IS NO PERFECTED
CONTRACT OF SALE BETWEEN THE PETITIONER AND
RESPONDENT.
II. THE COURT OF APPEALS ERRED ON A QUESTION OF
LAW WHEN IT RULED THAT THE AMOUNT OF
PHP725,000.00 PAID BY THE PETITIONER IS NOT AN
EARNEST MONEY.
III. THE COURT OF APPEALS ERRED ON A QUESTION OF
LAW WHEN IT RULED THAT THE FAILURE OF THE
PETITIONER-APPELLANT TO SIGNIFY ITS CONFORMITY
TO THE TERMS CONTAINED IN PNB'S JUNE 4, 1985
LETTER MEANS THAT THERE WAS NO VALID AND
LEGALLY ENFORCEABLE CONTRACT OF SALE
BETWEEN THE PARTIES.
IV. THE COURT OF APPEALS ERRED ON A QUESTION OF
LAW THAT NON-PAYMENT OF THE PETITIONER-
APPELLANT OF THE BALANCE OF THE OFFERED PRICE
IN THE LETTER OF PNB DATED JUNE 4, 1985, WITHIN
SIXTY (60) DAYS FROM NOTICE OF APPROVAL
CONSTITUTES NO VALID AND LEGALLY ENFORCEABLE
CONTRACT OF SALE BETWEEN THE PARTIES.
V. THE COURT OF APPEALS SERIOUSLY ERRED WHEN
IT HELD THAT THE LETTERS OF PETITIONER-
APPELLANT DATED MARCH 18, 1993 AND JUNE 21, 1993,
OFFERING TO BUY THE SUBJECT PROPERTY AT
DIFFERENT AMOUNT WERE PROOF THAT THERE IS NO
PERFECTED CONTRACT OF SALE.38
The threshold issue is whether or not petitioner and respondent PNB
had entered into a perfected contract for petitioner to repurchase the
property from respondent.
Petitioner maintains that it had accepted respondent's offer made
through the SAMD, to sell the property for P1,574,560.00. When the
acceptance was made in its letter dated June 25, 1984; it then
deposited P725,000.00 with the SAMD as partial payment, evidenced
by Receipt No. 978194 which respondent had issued. Petitioner avers
that the SAMD's acceptance of the deposit amounted to an acceptance
of its offer to repurchase. Moreover, as gleaned from the letter of SAMD
dated June 4, 1985, the PNB Board of Directors had approved
petitioner's offer to purchase the property. It claims that this was the
suspensive condition, the fulfillment of which gave rise to the contract.
Respondent could no longer unilaterally withdraw its offer to sell the
property for P1,574,560.47, since the acceptance of the offer resulted in
a perfected contract of sale; it was obliged to remit to respondent the
balance of the original purchase price of P1,574,560.47, while
respondent was obliged to transfer ownership and deliver the property
to petitioner, conformably with Article 1159 of the New Civil Code.
Petitioner posits that respondent was proscribed from increasing the
interest rate after it had accepted respondent's offer to sell the property
for P1,574,560.00. Consequently, respondent could no longer validly
make a counter-offer of P1,931,789.88 for the purchase of the property.
It likewise maintains that, although the P725,000.00 was considered as
"deposit for the repurchase of the property" in the receipt issued by the
SAMD, the amount constitutes earnest money as contemplated in
Article 1482 of the New Civil Code. Petitioner cites the rulings of this
Court in Villonco v. Bormaheco39 and Topacio v. Court of Appeals.40
Petitioner avers that its failure to append its conformity to the June 4,
1984 letter of respondent and its failure to pay the balance of the price
as fixed by respondent within the 60-day period from notice was to
protest respondent's breach of its obligation to petitioner. It did not
amount to a rejection of respondent's offer to sell the property since
respondent was merely seeking to enforce its right to pay the balance
of P1,570,564.47. In any event, respondent had the option either to
accept the balance of the offered price or to cause the rescission of the
contract.
Petitioner's letters dated March 18, 1993 and June 21, 1993 to
respondent during the pendency of the case in the RTC were merely to
compromise the pending lawsuit, they did not constitute separate offers
to repurchase the property. Such offer to compromise should not be
taken against it, in accordance with Section 27, Rule 130 of the Revised
Rules of Court.
For its part, respondent contends that the parties never graduated from
the "negotiation stage" as they could not agree on the amount of the
repurchase price of the property. All that transpired was an exchange of
proposals and counter-proposals, nothing more. It insists that a definite
agreement on the amount and manner of payment of the price are
essential elements in the formation of a binding and enforceable contract
of sale. There was no such agreement in this case. Primarily, the
concept of "suspensive condition" signifies a future and uncertain event
upon the fulfillment of which the obligation becomes effective. It clearly
presupposes the existence of a valid and binding agreement, the
effectivity of which is subordinated to its fulfillment. Since there is no
perfected contract in the first place, there is no basis for the application
of the principles governing "suspensive conditions."
According to respondent, the Statement of Account prepared by SAMD
as of June 25, 1984 cannot be classified as a counter-offer; it is simply
a recital of its total monetary claims against petitioner. Moreover, the
amount stated therein could not likewise be considered as the counter-
offer since as admitted by petitioner, it was only recommendation which
was subject to approval of the PNB Board of Directors.
Neither can the receipt by the SAMD of P725,000.00 be regarded as
evidence of a perfected sale contract. As gleaned from the
parties' Stipulation of Facts during the proceedings in the court a quo,
the amount is merely an acknowledgment of the receipt of P725,000.00
as deposit to repurchase the property. The deposit of P725,000.00 was
accepted by respondent on the condition that the purchase price would
still be approved by its Board of Directors. Respondent maintains that
its acceptance of the amount was qualified by that condition, thus not
absolute. Pending such approval, it cannot be legally claimed that
respondent is already bound by any contract of sale with petitioner.
According to respondent, petitioner knew that the SAMD has no capacity
to bind respondent and that its authority is limited to administering,
managing and preserving the properties and other special assets of
PNB. The SAMD does not have the power to sell, encumber, dispose
of, or otherwise alienate the assets, since the power to do so must
emanate from its Board of Directors. The SAMD was not authorized by
respondent's Board to enter into contracts of sale with third persons
involving corporate assets. There is absolutely nothing on record that
respondent authorized the SAMD, or made it appear to petitioner that it
represented itself as having such authority.
Respondent reiterates that SAMD had informed petitioner that its offer
to repurchase had been approved by the Board subject to the condition,
among others, "that the selling price shall be the total bank's claim as of
documentation date x x x payable in cash (P725,000.00 already
deposited)
within 60 days from notice of approval." A new Statement of Account
was attached therein indicating the total bank's claim to
be P1,931,389.53 less deposit of P725,000.00, or P1,206,389.00.
Furthermore, while respondent's Board of Directors accepted
petitioner's offer to repurchase the property, the acceptance was
qualified, in that it required a higher sale price and subject to specified
terms and conditions enumerated therein. This qualified acceptance
was in effect a counter-offer, necessitating petitioner's acceptance in
return.
The Ruling of the Court
The ruling of the appellate court that there was no perfected contract of
sale between the parties on June 4, 1985 is correct.
A contract 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.41 Under Article 1318 of the New Civil Code, there is no
contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
Contracts are perfected by mere consent which is manifested by the
meeting of the offer and the acceptance upon the thing and the cause
which are to constitute the contract.42 Once perfected, they bind other
contracting parties and the obligations arising therefrom have the form
of law between the parties and should be complied with in good faith.
The parties are bound not only to the fulfillment of what has been
expressly stipulated but also to the consequences which, according to
their nature, may be in keeping with good faith, usage and law.43
By the contract of sale, one of the contracting parties obligates himself
to transfer the ownership of and deliver a determinate thing, and the
other to pay therefor a price certain in money or its equivalent. 44 The
absence of any of the essential elements will negate the existence of a
perfected contract of sale. As the Court ruled in Boston Bank of the
Philippines v. Manalo:45
A definite agreement as to the price is an essential element of
a binding agreement to sell personal or real property because
it seriously affects the rights and obligations of the parties.
Price is an essential element in the formation of a binding and
enforceable contract of sale. The fixing of the price can never
be left to the decision of one of the contracting parties. But a
price fixed by one of the contracting parties, if accepted by the
other, gives rise to a perfected sale.46
A contract of sale is consensual in nature and is perfected upon mere
meeting of the minds. When there is merely an offer by one party without
acceptance of the other, there is no contract.47 When the contract of sale
is not perfected, it cannot, as an independent source of obligation, serve
as a binding juridical relation between the parties.48
In San Miguel Properties Philippines, Inc. v. Huang,49 the Court ruled
that the stages of a contract of sale are as follows: (1) negotiation,
covering the period from the time the prospective contracting parties
indicate interest in the contract to the time the contract is perfected;
(2) perfection, which takes place upon the concurrence of the essential
elements of the sale which are the meeting of the minds of the parties
as to the object of the contract and upon the price; and
(3) consummation, which begins when the parties perform their
respective undertakings under the contract of sale, culminating in the
extinguishment thereof.
A negotiation is formally initiated by an offer, which, however, must be
certain.50 At any time prior to the perfection of the contract, either
negotiating party may stop the negotiation. At this stage, the offer may
be withdrawn; the withdrawal is effective immediately after its
manifestation. To convert the offer into a contract, the acceptance must
be absolute and must not qualify the terms of the offer; it must be plain,
unequivocal, unconditional and without variance of any sort from the
proposal. In Adelfa Properties, Inc. v. Court of Appeals,51 the Court ruled
that:
x x x The rule is that except where a formal acceptance is so
required, although the acceptance must be affirmatively and
clearly made and must be evidenced by some acts or conduct
communicated to the offeror, it may be shown by acts,
conduct, or words of the accepting party that clearly manifest
a present intention or determination to accept the offer to buy
or sell. Thus, acceptance may be shown by the acts, conduct,
or words of a party recognizing the existence of the contract
of sale.52
A qualified acceptance or one that involves a new proposal constitutes
a counter-offer and a rejection of the original offer. A counter-offer is
considered in law, a rejection of the original offer and an attempt to end
the negotiation between the parties on a different basis.53 Consequently,
when something is desired which is not exactly what is proposed in the
offer, such acceptance is not sufficient to guarantee consent because
any modification or variation from the terms of the offer annuls the
offer.54 The acceptance must be identical in all respects with that of the
offer so as to produce consent or meeting of the minds.
In this case, petitioner had until February 17, 1984 within which to
redeem the property. However, since it lacked the resources, it
requested for more time to redeem/repurchase the property under such
terms and conditions agreed upon by the parties. 55 The request, which
was made through a letter dated August 25, 1983, was referred to the
respondent's main branch for appropriate action.56 Before respondent
could act on the request, petitioner again wrote respondent as follows:
1. Upon approval of our request, we will pay your goodselves
ONE HUNDRED & FIFTY THOUSAND PESOS
(P150,000.00);
2. Within six months from date of approval of our request, we
will pay another FOUR HUNDRED FIFTY THOUSAND
PESOS (P450,000.00); and
3. The remaining balance together with the interest and other
expenses that will be incurred will be paid within the last six
months of the one year grave period requested for.57
When the petitioner was told that respondent did not allow "partial
redemption,"58 it sent a letter to respondent's President reiterating its
offer to purchase the property.59 There was no response to petitioner's
letters dated February 10 and 15, 1984.
The statement of account prepared by the SAMD stating that the net
claim of respondent as of June 25, 1984 was P1,574,560.47 cannot be
considered an unqualified acceptance to petitioner's offer to purchase
the property. The statement is but a computation of the amount which
petitioner was obliged to pay in case respondent would later agree to
sell the property, including interests, advances on insurance premium,
advances on realty taxes, publication cost, registration expenses and
miscellaneous expenses.
There is no evidence that the SAMD was authorized by respondent's
Board of Directors to accept petitioner's offer and sell the property
for P1,574,560.47. Any acceptance by the SAMD of petitioner's offer
would not bind respondent. As this Court ruled in AF Realty
Development, Inc. vs. Diesehuan Freight Services, Inc.:60
Section 23 of the Corporation Code expressly provides that
the corporate powers of all corporations shall be exercised by
the board of directors. Just as a natural person may authorize
another to do certain acts in his behalf, so may the board of
directors of a corporation validly delegate some of its
functions to individual officers or agents appointed by it. Thus,
contracts or acts of a corporation must be made either by the
board of directors or by a corporate agent duly authorized by
the board. Absent such valid delegation/authorization, the rule
is that the declarations of an individual director relating to the
affairs of the corporation, but not in the course of, or
connected with the performance of authorized duties of such
director, are held not binding on the corporation.
Thus, a corporation can only execute its powers and transact its
business through its Board of Directors and through its officers and
agents when authorized by a board resolution or its by-laws.61
It appears that the SAMD had prepared a recommendation for
respondent to accept petitioner's offer to repurchase the property even
beyond the one-year period; it recommended that petitioner be allowed
to redeem the property and pay P1,574,560.00 as the purchase price.
Respondent later approved the recommendation that the property be
sold to petitioner. But instead of the P1,574,560.47 recommended by
the SAMD and to which petitioner had previously conformed,
respondent set the purchase price at P2,660,000.00. In fine,
respondent's acceptance of petitioner's offer was qualified, hence can
be at most considered as a counter-offer. If petitioner had accepted this
counter-offer, a perfected contract of sale would have arisen; as it turns
out, however, petitioner merely sought to have the counter-offer
reconsidered. This request for reconsideration would later be rejected
by respondent.
We do not agree with petitioner's contention that the P725,000.00 it had
remitted to respondent was "earnest money" which could be considered
as proof of the perfection of a contract of sale under Article 1482 of the
New Civil Code. The provision reads:
ART. 1482. 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.
This contention is likewise negated by the stipulation of facts which the
parties entered into in the trial court:
8. On June 8, 1984, the Special Assets Management
Department (SAMD) of PNB prepared an updated Statement
of Account showing MMCC's total liability to PNB as of June
25, 1984 to be P1,574,560.47 and recommended this amount
as the repurchase price of the subject property.
9. On June 25, 1984, MMCC paid P725,000.00 to PNB as
deposit to repurchase the property. The deposit of P725,000
was accepted by PNB on the condition that the purchase
price is still subject to the approval of the PNB Board.62
Thus, the P725,000.00 was merely a deposit to be applied as part of the
purchase price of the property, in the event that respondent would
approve the recommendation of SAMD for respondent to accept
petitioner's offer to purchase the property for P1,574,560.47. Unless and
until the respondent accepted the offer on these terms, no perfected
contract of sale would arise. Absent proof of the concurrence of all the
essential elements of a contract of sale, the giving of earnest money
cannot establish the existence of a perfected contract of sale. 63
It appears that, per its letter to petitioner dated June 4, 1985, the
respondent had decided to accept the offer to purchase the property
for P1,931,389.53. However, this amounted to an amendment of
respondent's qualified acceptance, or an amended counter-offer,
because while the respondent lowered the purchase price, it still
declared that its acceptance was subject to the following terms and
conditions:
1. That the selling price shall be the total Bank's claim as of
documentation date (pls. see attached statement of account
as of 5-31-85), payable in cash (P725,000.00 already
deposited) within sixty (60) days from notice of approval;
2. The Bank sells only whatever rights, interests and
participation it may have in the property and you are charged
with full knowledge of the nature and extent of said rights,
interests and participation and waive your right to warranty
against eviction.
3. All taxes and other government imposts due or to become
due on the property, as well as expenses including costs of
documents and science stamps, transfer fees, etc., to be
incurred in connection with the execution and registration of
all covering documents shall be borne by you;
4. That you shall undertake at your own expense and account
the ejectment of the occupants of the property subject of the
sale, if there are any;
5. That upon your failure to pay the balance of the purchase
price within sixty (60) days from receipt of advice accepting
your offer, your deposit shall be forfeited and the Bank is
thenceforth authorized to sell the property to other interested
parties.
6. That the sale shall be subject to such other terms and
conditions that the Legal Department may impose to protect
the interest of the Bank.64
It appears that although respondent requested petitioner to conform to
its amended counter-offer, petitioner refused and instead requested
respondent to reconsider its amended counter-offer. Petitioner's request
was ultimately rejected and respondent offered to refund
its P725,000.00 deposit.
In sum, then, there was no perfected contract of sale between petitioner
and respondent over the subject property.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED.
The assailed decision is AFFIRMED. Costs against petitioner Manila
Metal Container Corporation.
SO ORDERED.
G.R. No. 156437 March 1, 2004
NATIONAL HOUSING AUTHORITY, petitioner,
vs.
GRACE BAPTIST CHURCH and the COURT OF
APPEALS, respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the Rules of Court, seeking
to reverse the Decision of the Court of Appeals dated February 26,
2001,1 and its Resolution dated November 8, 2002,2 which modified the
decision of the Regional Trial Court of Quezon City, Branch 90, dated
February 25, 1997.3
On June 13, 1986, respondent Grace Baptist Church (hereinafter, the
Church) wrote a letter to petitioner National Housing Authority (NHA),
manifesting its interest in acquiring Lots 4 and 17 of the General Mariano
Alvarez Resettlement Project in Cavite.4 In its letter-reply dated July 9,
1986, petitioner informed respondent:
In reference to your request letter dated 13 June 1986,
regarding your application for Lots 4 and 17, Block C-3-CL,
we are glad to inform you that your request was granted and
you may now visit our Project Office at General Mariano
Alvarez for processing of your application to purchase said
lots.
We hereby advise you also that prior to approval of such application and
in accordance with our existing policies and guidelines, your other
accounts with us shall be maintained in good standing.5
Respondent entered into possession of the lots and introduced
improvements thereon.6
On February 22, 1991, the NHA’s Board of Directors passed Resolution
No. 2126, approving the sale of the subject lots to respondent Church at
the price of P700.00 per square meter, or a total price of
P430,500.00.7 The Church was duly informed of this Resolution through
a letter sent by the NHA.8
On April 8, 1991, the Church tendered to the NHA a manager’s check in
the amount of P55,350.00, purportedly in full payment of the subject
properties.9 The Church insisted that this was the price quoted to them
by the NHA Field Office, as shown by an unsigned piece of paper with
a handwritten computation scribbled thereon.10 Petitioner NHA returned
the check, stating that the amount was insufficient considering that the
price of the properties have changed. The Church made several
demands on the NHA to accept their tender of payment, but the latter
refused. Thus, the Church instituted a complaint for specific
performance and damages against the NHA with the Regional Trial
Court of Quezon City,11 where it was docketed as Civil Case No. Q-91-
9148.
On February 25, 1997, the trial court rendered its decision, the
dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby
rendered as follows:
1. Ordering the defendant to reimburse to the
plaintiff the amount of P4,290.00 representing the
overpayment made for Lots 1, 2, 3, 18, 19 and 20;
 2. Declaring that there was no perfected contract of
sale with respect to Lots 4 and 17 and ordering the
plaintiff to return possession of the property to the
defendant and to pay the latter reasonable rental for
the use of the property at P200.00 per month
computed from the time it took possession thereof
until finally vacated. Costs against defendant.
SO ORDERED.12
On appeal, the Court of Appeals, affirmed the trial court’s finding that
there was indeed no contract of sale between the parties. However,
petitioner was ordered to execute the sale of the lots to Grace Baptist
Church at the price of P700.00 per square meter, with 6% interest per
annum from March 1991. The dispositive portion of the Court of Appeals’
decision, dated February 26, 2001, reads:
WHEREFORE, the appealed Decision is hereby AFFIRMED
with the MODIFICATION that defendant-appellee NHA is
hereby ordered to sell to plaintiff-appellant Grace Baptist
Church Lots 4 and 17 at the price of P700.00 per square
meter, or a total cost P430,000.00 with 6% interest per annum
from March, 1991 until full payment in cash.
SO ORDERED.13
The appellate court ruled that the NHA’s Resolution No. 2126, which
earlier approved the sale of the subject lots to Grace Baptist Church at
the price of P700.00 per square meter, has not been revoked at any time
and was therefore still in effect. As a result, the NHA was estopped from
fixing a different price for the subject properties. Considering further that
the Church had been occupying the subject lots and even introduced
improvements thereon, the Court of Appeals ruled that, in the interest of
equity, it should be allowed to purchase the subject properties. 14
Petitioner NHA filed a Motion for Reconsideration which was denied in
a Resolution dated November 8, 2002. Hence, the instant petition for
review on the sole issue of: Can the NHA be compelled to sell the subject
lots to Grace Baptist Church in the absence of any perfected contract of
sale between the parties?
Petitioner submits that the Court cannot compel it to sell the subject
property to Grace Baptist Church without violating its freedom to
contract.15 Moreover, it contends that equity should be applied only in
the absence of any law governing the relationship between the parties,
and that the law on sales and the law on contracts in general apply to
the present case.16
We find merit in petitioner’s submission.
Petitioner NHA is not estopped from selling the subject lots at a price
equal to their fair market value, even if it failed to expressly revoke
Resolution No. 2126. It is, after all, hornbook law that the principle of
estoppel does not operate against the Government for the act of its
agents,17 or, as in this case, their inaction.
On the application of equity, it appears that the crux of the controversy
involves the characterization of equity in the context of contract law.
Preliminarily, we reiterate that this Court, while aware of its equity
jurisdiction, is first and foremost, a court of law. While equity might tilt on
the side of one party, the same cannot be enforced so as to overrule
positive provisions of law in favor of the other. 18 Thus, before we can
pass upon the propriety of an application of equitable principles in the
case at bar, we must first determine whether or not positive provisions
of law govern.
It is a fundamental rule that contracts, once perfected, bind both
contracting parties, and obligations arising therefrom have the force of
law between the parties and should be complied with in good
faith.19 However, it must be understood that contracts are not
the only source of law that govern the rights and obligations between the
parties. More specifically, no contractual stipulation may contradict law,
morals, good customs, public order or public policy. 20 Verily, the
mere inexistence of a contract, which would ordinarily serve as the law
between the parties, does not automatically authorize disposing of a
controversy based on equitable principles alone. Notwithstanding the
absence of a perfected contract between the parties, their relationship
may be governed by other existing lawswhich provide for their reciprocal
rights and obligations.
It must be remembered that contracts in which the Government is a party
are subject to the same rules of contract law which govern the validity
and sufficiency of contract between individuals. All the essential
elements and characteristics of a contract in general must be present in
order to create a binding and enforceable Government contract. 21
It appearing that there is no dispute that this case involves an
unperfected contract, the Civil Law principles governing contracts
should apply. In Vda. de Urbano v. Government Service Insurance
System,22 it was ruled that a qualified acceptance constitutes a counter-
offer as expressly stated by Article 1319 of the Civil Code. In said case,
petitioners offered to redeem mortgaged property and requested for an
extension of the period of redemption. However, the offer was not
accepted by the GSIS. Instead, it made a counter-offer, which petitioners
did not accept. Petitioners again offer to pay the redemption price on
staggered basis. In deciding said case, it was held that when there is
absolutely no acceptance of an offer or if the offer is expressly rejected,
there is no meeting of the minds. Since petitioners’ offer was denied
twice by GSIS, it was held that there was clearly no meeting of the minds
and, thus, no perfected contract. All that is established was a counter-
offer.23
In the case at bar, the offer of the NHA to sell the subject property, as
embodied in Resolution No. 2126, was similarly not accepted by the
respondent.24 Thus, the alleged contract involved in this case should be
more accurately denominated as inexistent. There being no
concurrence of the offer and acceptance, it did not pass the stage of
generation to the point of perfection.25 As such, it is without force and
effect from the very beginning or from its incipiency, as if it had never
been entered into, and hence, cannot be validated either by lapse of
time or ratification.26 Equity can not give validity to a void contract,27 and
this rule should apply with equal force to inexistent contracts.
We note from the records, however, that the Church, despite knowledge
that its intended contract of sale with the NHA had not been perfected,
proceeded to introduce improvements on the disputed land. On the other
hand, the NHA knowingly granted the Church temporary use of the
subject properties and did not prevent the Church from making
improvements thereon. Thus, the Church and the NHA, who both acted
in bad faith, shall be treated as if they were both in good faith.28 In this
connection, Article 448 of the Civil Code provides:
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 and if its value is
considerably more than that of the building or trees. In such
case, he shall pay reasonable rent, if the owner of the land
does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of
the lease and in case of disagreement, the court shall fix the
terms thereof.
Pursuant to our ruling in Depra v. Dumlao,29 there is a need to remand
this case to the trial court, which shall conduct the appropriate
proceedings to assess the respective values of the improvements and
of the land, as well as the amounts of reasonable rentals and indemnity,
fix the terms of the lease if the parties so agree, and to determine other
matters necessary for the proper application of Article 448, in relation to
Articles 546 and 548, of the Civil Code.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The
Court of Appeals’ Decision dated February 26, 2001 and Resolution
dated November 8, 2002 are REVERSED and SET ASIDE. The
Decision of the Regional Trial Court of Quezon City-Branch 90, dated
February 25, 1997, is REINSTATED. This case is REMANDED to the
Regional Trial Court of Quezon City, Branch 90, for further proceedings
consistent with Articles 448 and 546 of the Civil Code.
No costs.
SO ORDERED.
G.R. No. 126083 July 12, 2006
ANTONIO R. CORTES (in his capacity as Administrator of the
estate of Claro S. Cortes), petitioner,
vs.
HON. COURT OF APPEALS and VILLA ESPERANZA
DEVELOPMENT CORPORATION, respondents.
DECISION
YNARES-SANTIAGO, J.:
The instant petition for review seeks the reversal of the June 13, 1996
Decision1 of the Court of Appeals in CA-G.R. CV No. 47856, setting
aside the June 24, 1993 Decision2 of the Regional Trial Court of Makati,
Branch 138, which rescinded the contract of sale entered into by
petitioner Antonio Cortes (Cortes) and private respondent Villa
Esperanza Development Corporation (Corporation).
The antecedents show that for the purchase price of P3,700,000.00, the
Corporation as buyer, and Cortes as seller, entered into a contract of
sale over the lots covered by Transfer Certificate of Title (TCT) No.
31113-A, TCT No. 31913-A and TCT No. 32013-A, located at Baclaran,
Parañaque, Metro Manila. On various dates in 1983, the Corporation
advanced to Cortes the total sum of P1,213,000.00. Sometime in
September 1983, the parties executed a deed of absolute sale
containing the following terms:3
1. Upon execution of this instrument, the Vendee shall pay
unto the Vendor sum of TWO MILLION AND TWO HUNDRED
THOUSAND (P2,200,000.00) PESOS, Philippine Currency,
less all advances paid by the Vendee to the Vendor in
connection with the sale;
2. The balance of ONE MILLION AND FIVE HUNDRED
THOUSAND [P1,500,000.00] PESOS, Phil. Currency shall be
payable within ONE (1) YEAR from date of execution of this
instrument, payment of which shall be secured by an
irrevocable standby letter of credit to be issued by any
reputable local banking institution acceptable to the Vendor.
xxxx
4. All expense for the registration of this document with the
Register of Deeds concerned, including the transfer tax, shall
be divided equally between the Vendor and the Vendee.
Payment of the capital gains shall be exclusively for the
account of the Vendor; 5% commission of Marcosa Sanchez
to be deducted upon signing of sale.4
Said Deed was retained by Cortes for notarization.
On January 14, 1985, the Corporation filed the instant case5 for specific
performance seeking to compel Cortes to deliver the TCTs and the
original copy of the Deed of Absolute Sale. According to the Corporation,
despite its readiness and ability to pay the purchase price, Cortes
refused delivery of the sought documents. It thus prayed for the award
of damages, attorney's fees and litigation expenses arising from Cortes'
refusal to deliver the same documents.
In his Answer with counterclaim,6 Cortes claimed that the owner's
duplicate copy of the three TCTs were surrendered to the Corporation
and it is the latter which refused to pay in full the agreed down payment.
He added that portion of the subject property is occupied by his lessee
who agreed to vacate the premises upon payment of disturbance fee.
However, due to the Corporation's failure to pay in full the sum of
P2,200,000.00, he in turn failed to fully pay the disturbance fee of the
lessee who now refused to pay monthly rentals. He thus prayed that the
Corporation be ordered to pay the outstanding balance plus interest and
in the alternative, to cancel the sale and forfeit the P1,213,000.00 partial
down payment, with damages in either case.
On June 24, 1993, the trial court rendered a decision rescinding the sale
and directed Cortes to return to the Corporation the amount of
P1,213,000.00, plus interest. It ruled that pursuant to the contract of the
parties, the Corporation should have fully paid the amount of
P2,200,000.00 upon the execution of the contract. It stressed that such
is the law between the parties because the Corporation failed to present
evidence that there was another agreement that modified the terms of
payment as stated in the contract. And, having failed to pay in full the
amount of P2,200,000.00 despite Cortes' delivery of the Deed of
Absolute Sale and the TCTs, rescission of the contract is proper.
In its motion for reconsideration, the Corporation contended that the trial
court failed to consider their agreement that it would pay the balance of
the down payment when Cortes delivers the TCTs. The motion was,
however, denied by the trial court holding that the rescission should
stand because the Corporation did not act on the offer of Cortes' counsel
to deliver the TCTs upon payment of the balance of the down payment.
Thus:
The Court finds no merit in the [Corporation's] Motion for
Reconsideration. As stated in the decision sought to be
reconsidered, [Cortes'] counsel at the pre-trial of this case,
proposed that if [the Corporation] completes the down
payment agreed upon and make arrangement for the
payment of the balances of the purchase price, [Cortes] would
sign the Deed of Sale and turn over the certificate of title to
the [Corporation]. [The Corporation] did nothing to comply
with its undertaking under the agreement between the parties.
WHEREFORE, in view of the foregoing considerations, the
Motion for Reconsideration is hereby DENIED.
SO ORDERED.7
On appeal, the Court of Appeals reversed the decision of the trial court
and directed Cortes to execute a Deed of Absolute Sale conveying the
properties and to deliver the same to the Corporation together with the
TCTs, simultaneous with the Corporation's payment of the balance of
the purchase price of P2,487,000.00. It found that the parties agreed
that the Corporation will fully pay the balance of the down payment upon
Cortes' delivery of the three TCTs to the Corporation. The records show
that no such delivery was made, hence, the Corporation was not remiss
in the performance of its obligation and therefore justified in not paying
the balance. The decretal portion thereof, provides:
WHEREFORE, premises considered, [the Corporation's]
appeal is GRANTED. The decision appealed from is hereby
REVERSED and SET ASIDE and a new judgment rendered
ordering [Cortes] to execute a deed of absolute sale
conveying to [the Corporation] the parcels of land subject of
and described in the deed of absolute sale, Exhibit D.
Simultaneously with the execution of the deed of absolute
sale and the delivery of the corresponding owner's duplicate
copies of TCT Nos. 31113-A, 31931-A and 32013-A of the
Registry of Deeds for the Province of Rizal, Metro Manila,
District IV, [the Corporation] shall pay [Cortes] the balance of
the purchase price of P2,487,000.00. As agreed upon in
paragraph 4 of the Deed of Absolute Sale, Exhibit D, under
terms and conditions, "All expenses for the registration of this
document (the deed of sale) with the Register of Deeds
concerned, including the transfer tax, shall be divided equally
between [Cortes and the Corporation]. Payment of the capital
gains shall be exclusively for the account of the Vendor; 5%
commission of Marcosa Sanchez to be deducted upon signing
of sale." There is no pronouncement as to costs.
SO ORDERED.8
Cortes filed the instant petition praying that the decision of the trial court
rescinding the sale be reinstated.
There is no doubt that the contract of sale in question gave rise to a
reciprocal obligation of the parties. Reciprocal obligations are those
which arise from the same cause, and 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. They are to be performed simultaneously, so
that the performance of one is conditioned upon the simultaneous
fulfillment of the other.9
Article 1191 of the Civil Code, states:
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.
xxxx
As to when said failure or delay in performance arise, Article 1169 of the
same Code provides that –
ART. 1169
xxxx
 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. (Emphasis supplied)
The issue therefore is whether there is delay in the performance of the
parties' obligation that would justify the rescission of the contract of sale.
To resolve this issue, we must first determine the true agreement of the
parties.
The settled rule is that the decisive factor in evaluating an agreement is
the intention of the parties, as shown not necessarily by the terminology
used in the contract but by their conduct, words, actions and deeds prior
to, during and immediately after executing the agreement. As such,
therefore, documentary and parol evidence may be submitted and
admitted to prove such intention.10
In the case at bar, the stipulation in the Deed of Absolute Sale was that
the Corporation shall pay in full the P2,200,000.00 down payment upon
execution of the contract. However, as correctly noted by the Court of
Appeals, the transcript of stenographic notes reveal Cortes' admission
that he agreed that the Corporation's full payment of the sum of
P2,200,000.00 would depend upon his delivery of the TCTs of the three
lots. In fact, his main defense in the Answer is that, he performed what
is incumbent upon him by delivering to the Corporation the TCTs and
the carbon duplicate of the Deed of Absolute Sale, but the latter refused
to pay in full the down payment.11 Pertinent portion of the transcript,
reads:
[Q] Now, why did you deliver these three titles to the plaintiff
despite the fact that it has not been paid in full the agreed
down payment?
A Well, the broker told me that the down payment will be given
if I surrender the titles.
Q Do you mean to say that the plaintiff agreed to pay in full
the down payment of P2,200,000.00 provided you surrender
or entrust to the plaintiff the titles?
A Yes, sir.12
What further confirmed the agreement to deliver the TCTs is the
testimony of Cortes that the title of the lots will be transferred in the name
of the Corporation upon full payment of the P2,200,000.00 down
payment. Thus –
ATTY. ANTARAN
Q Of course, you have it transferred in the name of the
plaintiff, the title?
A Upon full payment.
xxxx
ATTY. SARTE
Q When you said upon full payment, are you referring to the
agreed down payment of P2,200,000.00?
A Yes, sir.13
By agreeing to transfer title upon full payment of P2,200,000.00, Cortes'
impliedly agreed to deliver the TCTs to the Corporation in order to effect
said transfer. Hence, the phrase "execution of this instrument" 14 as
appearing in the Deed of Absolute Sale, and which event would give rise
to the Corporation's obligation to pay in full the amount of
P2,200,000.00, can not be construed as referring solely to the signing
of the deed. The meaning of "execution" in the instant case is not limited
to the signing of a contract but includes as well the performance or
implementation or accomplishment of the parties' agreement.15 With the
transfer of titles as the corresponding reciprocal obligation of payment,
Cortes' obligation is not only to affix his signature in the Deed, but to set
into motion the process that would facilitate the transfer of title of the
lots, i.e., to have the Deed notarized and to surrender the original copy
thereof to the Corporation together with the TCTs.
Having established the true agreement of the parties, the Court must
now determine whether Cortes delivered the TCTs and the original Deed
to the Corporation. The Court of Appeals found that Cortes never
surrendered said documents to the Corporation. Cortes testified that he
delivered the same to Manny Sanchez, the son of the broker, and that
Manny told him that her mother, Marcosa Sanchez, delivered the same
to the Corporation.
Q Do you have any proof to show that you have indeed
surrendered these titles to the plaintiff?
A Yes, sir.
Q I am showing to you a receipt dated October 29, 1983, what
relation has this receipt with that receipt that you have
mentioned?
A That is the receipt of the real estate broker when she
received the titles.
Q On top of the printed name is Manny Sanchez, there is a
signature, do you know who is that Manny Sanchez?
A That is the son of the broker.
xxxx
Q May we know the full name of the real estate broker?
A Marcosa Sanchez
xxxx
Q Do you know if the broker or Marcosa Sanchez indeed
delivered the titles to the plaintiff?
A That is what [s]he told me. She gave them to the plaintiff.
x x x x.16
ATTY. ANTARAN
Q Are you really sure that the title is in the hands of the
plaintiff?
xxxx
Q It is in the hands of the broker but there is no showing that
it is in the hands of the plaintiff?
A Yes, sir.
COURT
Q How do you know that it was delivered to the plaintiff by the
son of the broker?
A The broker told me that she delivered the title to the plaintiff.
ATTY. ANTARAN
Q Did she not show you any receipt that she delivered to [Mr.]
Dragon17 the title without any receipt?
A I have not seen any receipt.
Q So, therefore, you are not sure whether the title has been
delivered to the plaintiff or not. It is only upon the allegation of
the broker?
A Yes, sir.18
However, Marcosa Sanchez's unrebutted testimony is that, she did not
receive the TCTs. She also denied knowledge of delivery thereof to her
son, Manny, thus:
Q The defendant, Antonio Cortes testified during the hearing
on March 11, 1986 that he allegedly gave you the title to the
property in question, is it true?
A I did not receive the title.
Q He likewise said that the title was delivered to your son, do
you know about that?
A I do not know anything about that.19
What further strengthened the findings of the Court of Appeals that
Cortes did not surrender the subject documents was the offer of Cortes'
counsel at the pre-trial to deliver the TCTs and the Deed of Absolute
Sale if the Corporation will pay the balance of the down payment.
Indeed, if the said documents were already in the hands of the
Corporation, there was no need for Cortes' counsel to make such offer.
Since Cortes did not perform his obligation to have the Deed notarized
and to surrender the same together with the TCTs, the trial court erred
in concluding that he performed his part in the contract of sale and that
it is the Corporation alone that was remiss in the performance of its
obligation. Actually, both parties were in delay. Considering that their
obligation was reciprocal, performance thereof must be simultaneous.
The mutual inaction of Cortes and the Corporation therefore gave rise
to a compensation morae or default on the part of both parties because
neither has completed their part in their reciprocal obligation.20 Cortes is
yet to deliver the original copy of the notarized Deed and the TCTs, while
the Corporation is yet to pay in full the agreed down payment of
P2,200,000.00. This mutual delay of the parties cancels out the effects
of default,21 such that it is as if no one is guilty of delay.22
We find no merit in Cortes' contention that the failure of the Corporation
to act on the proposed settlement at the pre-trial must be construed
against the latter. Cortes argued that with his counsel's offer to surrender
the original Deed and the TCTs, the Corporation should have consigned
the balance of the down payment. This argument would have been
correct if Cortes actually surrendered the Deed and the TCTs to the
Corporation. With such delivery, the Corporation would have been
placed in default if it chose not to pay in full the required down payment.
Under Article 1169 of the Civil Code, from the moment one of the parties
fulfills his obligation, delay by the other begins. Since Cortes did not
perform his part, the provision of the contract requiring the Corporation
to pay in full the down payment never acquired obligatory force.
Moreover, the Corporation could not be faulted for not automatically
heeding to the offer of Cortes. For one, its complaint has a prayer for
damages which it may not want to waive by agreeing to the offer of
Cortes' counsel. For another, the previous representation of Cortes that
the TCTs were already delivered to the Corporation when no such
delivery was in fact made, is enough reason for the Corporation to be
more cautious in dealing with him.
The Court of Appeals therefore correctly ordered the parties to perform
their respective obligation in the contract of sale, i.e., for Cortes to,
among others, deliver the necessary documents to the Corporation and
for the latter to pay in full, not only the down payment, but the entire
purchase price. And since the Corporation did not question the Court of
Appeal's decision and even prayed for its affirmance, its payment should
rightfully consist not only of the amount of P987,000.00, representing
the balance of the P2,200,000.00 down payment, but the total amount
of P2,487,000.00, the remaining balance in the P3,700,000.00 purchase
price.
WHEREFORE, the petition is DENIED and the June 13, 1996 Decision
of the Court of Appeals in CA-G.R. CV No. 47856, is AFFIRMED.
SO ORDERED.
[G.R. NO. 169790 : April 30, 2008]
CONGREGATION OF THE RELIGIOUS OF THE VIRGIN
MARY and/or THE SUPERIOR GENERAL OF THE
RELIGIOUS OF THE VIRGIN MARY, represented by The
REVEREND MOTHER MA. CLARITA
BALLEQUE, Petitioner, v. EMILIO Q. OROLA, JOSEPHINE
FATIMA LASERNA OROLA, MYRNA ANGELINE LASERNA
OROLA, MANUEL LASERNA OROLA, MARJORIE MELBA
LASERNA OROLA & ANTONIO LASERNA
OROLA, Respondents.
DECISION
NACHURA, J.:
Challenged in this Petition for Review on Certiorari is the Court
of Appeals (CA) Decision1 in CA-G.R. CV. No. 71406 which
modified the Regional Trial Court (RTC) Decision2 in Civil Case
No. V-7382 ordering the rescission of the contract of sale
between the parties in an action for Specific Performance or
Rescission with Damages filed by respondents Emilio,
Josephine Fatima Laserna, Myrna Angeline Laserna, Manuel
Laserna, Marjorie Melba Laserna, & Antonio Laserna, all
surnamed Orola, (respondents) against petitioner
Congregation of the Religious of the Virgin Mary (RVM).3
The undisputed facts, as found by the CA and adopted by RVM
in its petition, follow.
Sometime in April 1999, [petitioner] Religious of the Virgin
Mary (RVM for brevity), acting through its local unit and
specifically through Sr. Fe Enhenco, local Superior of the St.
Mary's Academy of Capiz and [respondents] met to discuss the
sale of the latter's property adjacent to St. Mary's Academy.
Said property is denominated as Lot 159-B-2 and was still
registered in the name of [respondents'] predecessor-in-
interest, Manuel Laserna.
In May of 1999, [respondent] Josephine Orola went to Manila
to see the Mother Superior General of the RVM, in the person
of Very Reverend Mother Ma. Clarita Balleque [VRM Balleque]
regarding the sale of the property subject of this instant case.
A contract to sell dated June 2, 1999 made out in the names of
herein [petitioner] and [respondents] as parties to the
agreement was presented in evidence pegging the total
consideration of the property at P5,555,000.00 with 10% of the
total consideration payable upon the execution of the contract,
and which was already signed by all the [respondents] and Sr.
Ma. Fe Enhenco, R.V.M. [Sr. Enhenco] as witness.
On June 7, 1999, [respondents] Josephine Orola and Antonio
Orola acknowledged receipt of RCBC Check No. 0005188 dated
June 7, 1999 bearing the amount of P555,500.00 as 10% down
payment for Lot 159-B-2 from the RVM Congregation (St.
Mary's Academy of Cadiz [SMAC]) with the "conforme" signed
by Sister Fe Enginco (sic), Mother Superior, SMAC.
[Respondents] executed an extrajudicial settlement of the
estate of Trinidad Andrada Laserna dated June 21, 1999
adjudicating unto themselves, in pro indiviso shares, Lot 159-
B-2, and which paved the transfer of said lot into their names
under Transfer Certificate of Title No. T-39194 with an entry
date of August 13, 1999.4
Thereafter, respondents, armed with an undated Deed of
Absolute Sale which they had signed, forthwith scheduled a
meeting with VRM Balleque at the RVM Headquarters in Quezon
City to finalize the sale, specifically, to obtain payment of the
remaining balance of the purchase price in the amount
of P4,999,500.00. However, VRM Balleque did not meet with
respondents. Succeeding attempts by respondents to schedule
an appointment with VRM Balleque in order to conclude the sale
were likewise rebuffed.
In an exchange of correspondence between the parties'
respective counsels, RVM denied respondents' demand for
payment because: (1) the purported Contract to Sell was
merely signed by Sr. Enhenco as witness, and not by VRM
Balleque, head of the corporation sole; and (2) as discussed by
counsels in their phone conversations, RVM will only be in a
financial position to pay the balance of the purchase price in
two years time. Thus, respondents filed with the RTC a
complaint with alternative causes of action of specific
performance or rescission.
After trial, the RTC ruled that there was indeed a perfected
contract of sale between the parties, and granted respondents'
prayer for rescission thereof. It disposed of the case, to wit:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of the [respondents] and against the
[petitioner].
1. Dismissing the counterclaim;
2. Ordering the rescission of the Contract to Sell, Exh. "E".
3. Ordering the forfeiture of the downpayment of P555,500 in
favor of the [respondents];
4. Ordering [petitioner] corporation sole, the Superior General
of the Religious of the Virgin Mary, to pay [respondents]:
A. P50,000.00 as exemplary damages;
b. P50,000.00 as attorney's fees.
5. Costs against the [petitioner].
Dissatisfied, both parties filed their respective Notices of
Appeal. The CA dismissed the respondents' appeal because of
their failure to file an Appeal Brief. However, RVM's appeal,
where respondents accordingly filed an Appellee's Brief,
continued. Subsequently, the CA rendered judgment setting
aside the RTC Decision, to wit:
WHEREFORE, with all the foregoing, the decision of the
Regional Trial Court, Branch 15, Roxas City dated March 1,
2001 in [C]ivil [C]ase [N]o. V-7382 for Specific Performance or
Rescission with Damages is hereby SET ASIDE and a new one
entered GRANTING [respondents'] action for specific
performance. [Petitioner RVM] [is] hereby ordered to pay
[respondents] immediately the balance of the total
consideration for the subject property in the amount
of P4,999,500.00 with interest of 6% per annum computed
from June 7, 2000 or one year from the downpayment of the
10% of the total consideration until such time when the whole
obligation has been fully satisfied. In the same way,
[respondents] herein are ordered to immediately deliver the
title of the property and to execute the necessary documents
required for the sale as soon as all requirements aforecited
have been complied by [RVM]. Parties are further ordered to
abide by their reciprocal obligations in good faith.
All other claims and counterclaims are hereby dismissed for
lack of factual and legal basis.
No pronouncement as to cost.
In modifying the RTC Decision, the CA, albeit sustaining the
trial court's finding on the existence of a perfected contract of
sale between the parties, noted that the records and evidence
adduced did not preponderate for either party on the manner
of effecting payment for the subject property. In short, the CA
was unable to determine from the records if the balance of the
purchase price was due in two (2) years, as claimed by RVM,
or, upon transfer of title to the property in the names of
respondents, as they averred. Thus, the CA applied Articles
13835 and 13846 of the Civil Code which pronounce rescission
as a subsidiary remedy covering only the damages caused.
The appellate court then resolved the matter in favor of the
greatest reciprocity of interest pursuant to Article 13787 of the
Civil Code. It found that the 2-year period to purchase the
property, which RVM insisted on, had been mooted considering
the time elapsed from the commencement of this case. Thus,
the CA ordered payment of the balance of the purchase price
with 6% interest per annum computed from June 7, 2000 until
complete satisfaction thereof.
Hence, this recourse.
RVM postulates that the order to pay interest is inconsistent
with the professed adherence by the CA to the greatest
reciprocity of interest between the parties. Since mutual
restitution cannot be had when the CA set aside the rescission
of the contract of sale and granted the prayer for specific
performance, RVM argues that the respondents should pay
rentals for the years they continued to occupy, possess, and
failed to turn over to RVM the subject property.
Effectively, the only issue for our resolution is whether RVM is
liable for interest on the balance of the purchase price.
At the outset, we must distinguish between an action for
rescission as mapped out in Article 1191 of the Civil Code and
that provided by Article 1381 of the same Code. The articles
read:
Art. 1191. The power to rescind obligations is impled 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.
Art. 1381. The following contracts are rescissible:
(1) Those which are entered into by guardians whenever the
wards whom they represent suffer lesion by more than one
fourth of the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the
latter suffer the lesion state in the preceding number;
(3) Those undertaken in fraud of creditors when the latter
cannot in any other manner collect the claims due them;
(4) Those which refer to things under litigation if they have
been entered into by the defendant without the knowledge and
approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject
to rescission.
Article 1191, as presently worded, speaks of the remedy of
rescission in reciprocal obligations within the context of Article
1124 of the Old Civil Code which uses the term "resolution."
The remedy of resolution applies only to reciprocal
obligations8 such that a party's breach thereof partakes of a
tacit resolutory condition which entitles the injured party to
rescission. The present article, as in the Old Civil Code,
contemplates alternative remedies for the injured party who is
granted the option to pursue, as principal actions, either a
rescission or specific performance of the obligation, with
payment of damages in each case. On the other hand,
rescission under Article 1381 of the Civil Code, taken from
Article 1291 of the Old Civil Code, is a subsidiary action, and is
not based on a party's breach of obligation.
The esteemed Mr. Justice J.B.L. Reyes, ingeniously cuts
through the distinction in his concurring opinion in Universal
Food Corporation v. CA:9
I concur with the opinion penned by Mr. Justice Fred Ruiz
Castro, but I would like to add that the argument of petitioner,
that the rescission demanded by the respondent-appellee,
Magdalo Francisco, should be denied because under Article
1383 of the Civil Code of the Philippines[,] rescission can not
be demanded except when the party suffering damage has no
other legal means to obtain reparation, is predicated on a
failure to distinguish between a rescission for breach of
contract under Article 1191 of the Civil Code and a rescission
by reason of lesión or economic prejudice, under Article 1381,
et seq. The rescission on account of breach of stipulations is
not predicated on injury to economic interests of the party
plaintiff but on the breach of faith by the defendant, that
violates the reciprocity between the parties. It is not a
subsidiary action, and Article 1191 may be scanned without
disclosing anywhere that the action for rescission thereunder is
subordinated to anything other than the culpable breach of his
obligations by the defendant. This rescission is a principal
action retaliatory in character, it being unjust that a party be
held bound to fulfill his promises when the other violates his.
As expressed in the old Latin aphorism: "Non servanti
fidem, non est fides servanda." Hence, the reparation of
damages for the breach is purely secondary.
On the contrary, in the rescission by reason of lesión or
economic prejudice, the cause of action is subordinated to the
existence of that prejudice, because it is the raison d' etre as
well as the measure of the right to rescind. Hence, where the
defendant makes good the damages caused, the action cannot
be maintained or continued, as expressly provided in Articles
1383 and 1384. But the operation of these two articles is
limited to the cases of rescission for lesión enumerated in
Article 1381 of the Civil Code of the Philippines, and does not
apply to cases under Article 1191.
It is probable that the petitioner's confusion arose from the
defective technique of the new Code that terms both instances
as "rescission" without distinctions between them; unlike the
previous Spanish Civil Code of 1889, that differentiated
"resolution" for breach of stipulations from "rescission" by
reason of lesión or damage. But the terminological vagueness
does not justify confusing one case with the other, considering
the patent difference in causes and results of either action.
In the case at bench, although the CA upheld the RTC's finding
of a perfected contract of sale between the parties, the former
disagreed with the latter that fraud and bad faith were
attendant in the sale transaction. The appellate court, after
failing to ascertain the parties' actual intention on the terms of
payment for the sale, proceeded to apply Articles 1383 and
1384 of the Civil Code declaring rescission as a subsidiary
remedy that may be availed of only when the injured party has
no other legal means to obtain reparation for the damage
caused. In addition, considering the absence of fraud and bad
faith, the CA felt compelled to arrive at a resolution most
equitable for the parties. The CA's most equitable resolution
granted respondents' prayer for specific performance of the
sale and ordered RVM to pay the remaining balance of the
purchase price, plus interest. It set aside and deleted the RTC's
order forfeiting the downpayment of P555,500.00 in favor of,
and payment of exemplary damages, attorney's fees and costs
of suit to, respondents.
Nonetheless, RVM is displeased. It strenuously objects to the
CA's imposition of interest. RVM latches on to the CA's
characterization of its resolution as most equitable which,
allegedly, is not embodied in the dispositive portion of the
decision ordering the payment of interest. RVM is of the view
that since the CA decreed specific performance of the contract
without a finding of bad faith by either party, and respondents
retained possession of the subject property for the duration of
the litigation, the imposition of interest is not keeping with
equity without simultaneously requiring respondents to pay
rentals for their continued and uninterrupted stay thereon. In
all, RVM phrases the issue in metaphysical terms, i.e., the most
equitable solution.
We completely disagree. The law, as applied to this factual
milieu, leaves no room for equivocation. Thus, we are not wont
to apply equity in this instance.
As uniformly found by the lower courts, we likewise find that
there was a perfected contract of sale between the parties. A
contract of sale carries the correlative duty of the seller to
deliver the property and the obligation of the buyer to pay the
agreed price.10 As there was already a binding contract of sale
between the parties, RVM had the corresponding obligation to
pay the remaining balance of the purchase price upon the
issuance of the title in the name of respondents. The supposed
2-year period within which to pay the balance did not affect the
nature of the agreement as a perfected contract of sale.11 In
fact, we note that this 2-year period is neither reflected in any
of the drafts to the contract,12 nor in the acknowledgment
receipt of the downpayment executed by respondents
Josephine and Antonio with the conformity of Sr. Enhenco.13 In
any event, we agree with the CA's observation that the 2-year
period to effect payment has been mooted by the lapse of time.
However, the CA mistakenly applied Articles 1383 and 1384 of
the Civil Code to this case because respondents' cause of action
against RVM is predicated on Article 1191 of the same code for
breach of the reciprocal obligation. It is evident from the
allegations in respondents' Complaint14 that the instant case
does not fall within the enumerated instances in Article 1381
of the Civil Code. Certainly, the Complaint did not pray for
rescission of the contract based on economic prejudice.
Moreover, contrary to the CA's finding that the evidence did not
preponderate for either party, the records reveal, as embodied
in the trial court's exhaustive disquisition, that RVM committed
a breach of the obligation when it suddenly refused to execute
and sign the agreement and pay the balance of the purchase
price.15 Thus, when RVM refused to pay the balance and
thereby breached the contract, respondents rightfully availed
of the alternative remedies provided in Article 1191.
Accordingly, respondents are entitled to damages regardless of
whichever relief, rescission or specific performance, would be
granted by the lower courts.16
Yet, RVM stubbornly argues that given the CA's factual finding
on the absence of fraud or bad faith by either party, its order
to pay interest is inequitable.
The argument is untenable. The absence of fraud and bad faith
by RVM notwithstanding, it is liable to respondents for interest.
In ruling out fraud and bad faith, the CA correspondingly
ordered the fulfillment of the obligation and deleted the RTC's
order of forfeiture of the downpayment along with payment of
exemplary damages, attorney's fees and costs of suit. But
RVM's contention disregards the common finding by the lower
courts of a perfected contract of sale. As previously adverted
to, RVM breached this contract of sale by refusing to pay the
balance of the purchase price despite the transfer to
respondents' names of the title to the property. The 2-year
period RVM relies on had long passed and expired, yet, it still
failed to pay. It did not even attempt to pay respondents the
balance of the purchase price after the case was filed, to
amicably end this litigation. In fine, despite a clear cut
equitable decision by the CA, RVM refused to lay the matter to
rest by complying with its obligation and paying the balance of
the agreed price for the property.
Lastly, to obviate confusion, the clear language of Article 1191
mandates that damages shall be awarded in either case of
fulfillment or rescission of the obligation.17 In this regard,
Article 2210 of the Civil Code is explicit that "interest may, in
the discretion of the court, be allowed upon damages awarded
for breach of contract." The ineluctable conclusion is that the
CA correctly imposed interest on the remaining balance of the
purchase price to cover the damages caused the respondents
by RVM's breach.
WHEREFORE, premises considered, the petition is DENIED.
The order granting specific performance and payment of the
balance of the purchase price plus six percent (6%) interest
per annum from June 7, 2000 until complete satisfaction is
hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 172446 October 10, 2007
ALEXANDER "ALEX" MACASAET, petitioner,
vs.
R. TRANSPORT CORPORATION, respondent.
DECISION
TINGA, J.:
This petition seeks the reversal of the Decision1 of the Court of Appeals
dated 5 October 2005 in CA G.R. CV No. 70585, as well as its
Resolution2 dated 28 March 2006 denying petitioner's motion for
reconsideration.
First, the factual background.
On 3 January 1996, a Complaint for Recovery of Possession and
Damages3 was filed by herein respondent R. Transport Corporation
against herein petitioner Alexander Macasaet before the Regional Trial
Court (RTC) of Makati, Branch 147. The complaint alleged that R.
Transport was a holder of Certificates of Public Convenience (CPC) to
operate a public utility bus service within Metro Manila and the provinces
whereas New Mindoro Transport Classic (NMTC), represented by
petitioner, operates a transportation company in Oriental Mindoro. On
11 October 1995, and Macasaet entered into a "Deed of Sale with
Assumption of Mortgage" (deed of sale)4 over four (4) passenger
buses5 whereby Macasaet undertook to pay the consideration of twelve
million pesos (P12,000,000.00) and assume the existing mortgage
obligation on the said buses in favor of Phil. Hino Sales Corporation.
Accordingly, R. Transport delivered to Macasaet two (2) passenger
buses.
Despite repeated demands, however, Macasaet failed to pay the
stipulated purchase price. This prompted R. Transport to file a complaint
seeking the issuance of a writ of replevin, praying for judgment declaring
R. Transport as the lawful owner and possessor of the passenger buses
and ordering Macasaet to remit the amount of P660,000.00 representing
the income generated by the two buses from 16 October 1995 to 2
January 1996.6
Prior to the execution of the contract, "Special Trip Contract" was
entered into by the parties on 8 October 1995. 7This contract stipulated
that R. Transport would lease the four buses subject of the deed of sale
to Macasaet for the sum of P10,000.00 a day per bus or a total
of P280,000.00 for the duration of one week, from 15-22 October
1995.8Respondent's finance officer testified that the purpose of the
contract was to support the delivery of the first two buses pending formal
execution of the deed of sale.9
On 8 January 1996, on R. Transport's motion, the trial court issued a
writ of seizure10 ordering the sheriff to take possession of the two buses
in NMTC subject to R. Transport's filing of a bond in the amount
of P12,000,000.00. The sheriff recovered the two buses and delivered
them to R. Transport on 16 January 1996.11
For his defense, petitioner alleged that he had paid respondent the full
consideration of P12,000,000.00 and had agreed to assume the
mortgage obligation in favor of Phil. Hino Sales Corporation. He claimed
ownership over the four passenger buses, including the two buses
already delivered to him. He further contended that he had already
remitted P120,000.00 to respondent as partial payment of the mortgage
obligation. Petitioner admitted that he had been earning at
least P7,000.00 per day on each of the buses.12 For his counterclaim,
he prayed for the return of the bus units seized and the immediate
delivery of the other two units, as well as for payment of damages. 13
In its Decision14 dated 15 February 2001, the RTC upheld the right of
respondent to possess the two buses but dismissed its claim for
recovery of unpaid rentals for the use of the two buses. The dispositive
portion of the decision reads as follows:
WHEREFORE, in view of the foregoing, the Court hereby
renders judgment in favor of the defendant and against
plaintiff, dismissing the Complaint as regards the claim for
recovery of the unpaid rentals of the two (2) passenger buses
which were used by the defendant from October 16, 1995 until
January 16, 1996 for lack of evidence.
SO ORDERED. 15
The trial court observed that there was no basis for the payment of
unpaid rentals because respondent failed to formally offer in evidence
the records of operational expenses incurred by the buses delivered to
petitioner and marked as Exhibits "W," "W-1" to "W-3."16 The trial court
did not bother to give a definitive ruling on the issues related to the
counterclaim for specific performance of the deed of sale on the ground
that the issuance of a writ of replevin effectively disposed of the cause
of action in the principal complaint, which is recovery of possession. The
trial court was likewise silent with respect to the status of the deed of
sale.17
Dissatisfied with the RTC's refusal to award rentals, respondent filed a
petition for review before the Court of Appeals asserting its right as an
owner to the fruits of the two passenger buses, over the fruits
thereof, i.e., the income derived from their use. The Court of Appeals, in
its Decision dated 5 October 2005, sustained the trial court's finding that
ownership over the passenger buses remained with respondent.
Unlike the RTC, the Court of Appeals ruled that the deed of sale was not
perfected, thus, respondent retained ownership over the buses. It further
ordered petitioner to remit the income from the passenger buses in the
amount of P7,000.00 per day for the period between 16 October 1995
and 16 January 1996, deducting therefrom the amount of P120,000.00
which had already been remitted to respondent.18
Macasaet filed a motion for reconsideration which the appellate court
denied.
Hence, the instant petition raising this sole issue: Is Section 34 of Rule
132 of the Rules of Court which states that "the court shall consider no
evidence which has not been formally offered" applicable in the case at
bar?19 However, other interrelated issues have to be looked into to
resolve the controversy.
Petitioner argues in the main that there was no legal and factual basis
for the Court of Appeals to order the remittance of income. He harps on
the fact that there was no lease agreement alleged in respondent's
complaint to support its claim for unpaid rentals. He reiterates the trial
court's finding that the exhibits tending to prove the rentals were not
formally offered in evidence. Moreover, no other competent evidence
was presented to substantiate its claim for unpaid
rentals.20 Respondent, in its comment, merely parrots the ruling of the
Court of Appeals, petitioner notes.21
Crucial to the resolution of the case is the continuing efficacy of the deed
of sale, which in turn is the basis in determining the ownership of the
buses. Respondent, on the other hand, claims that the contract was
never consummated for lack of consideration and because of the
subsequent disapproval of the security finance needed for petitioner to
assume the mortgage obligation. On the other hand, petitioner asserts
ownership over the subject buses by virtue of payment of the stipulated
consideration for the sale.
The appellate court declared that the non-perfection of the deed of sale
precluded petitioner from possessing and enjoying the buses, including
the income thereof. Explained the appellate court:
True, the plaintiff-appellant and the defendant-appellee have
no agreement as to the payment of rentals for the subject
passenger buses, since what was actually agreed upon by the
parties herein, was not the lease, but the sale of the subject
buses to the defendant-appellee in the amount
of P12,000,000.00, with assumption of mortgage, as
evidenced by the Deed of Sale with Assumption of Mortgage.
It was pursuant to this Deed of Sale with Assumption of
Mortgage that the subject two passenger buses were
delivered by the plaintiff-appellant to the defendant-appellee
in October,[sic] 1995. The said contract was the basis of the
defendant-appellee's possession and enjoyment of the
subject property, which includes entitlement to the income
thereof.
However, the aforementioned contract of sale has never been
perfected.
Firstly, the court a quo found that no payment has been made
by the defendant-appellee, for otherwise, it could not have
upheld the plaintiff-appellant's possession over the subject
buses.22
The Court of Appeals erred in stating that the deed of sale was not
perfected, for it was. There was no consummation, though. However,
the rescission or resolution of the deed of sale is in order.
The essential requisites of a contract under Article 1318 of the New Civil
Code are: (1) consent of the contracting parties; (2) object certain which
is the subject matter of the contract; and (3) cause of the obligation
which is established. Thus, contracts, other than real contracts are
perfected by mere consent which is manifested by the meeting of the
offer and the acceptance upon the thing and the cause which are to
constitute the contract. Once perfected, they bind other contracting
parties and the obligations arising therefrom have the force of law
between the parties and should be complied with in good faith. The
parties are bound not only to the fulfillment of what has been expressly
stipulated but also to the consequences which, according to their nature,
may be in keeping with good faith, usage and law.23
Being a consensual contract, 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.24 A perfected contract of sale imposes reciprocal obligations
on the parties whereby the vendor obligates himself to transfer the
ownership of and to deliver a determinate thing to the buyer who, in turn,
is obligated to pay a price certain in money or its equivalent.25 Failure of
either party to comply with his obligation entitles the other to rescission
as the power to rescind is implied in reciprocal obligations.26
Applying these legal precepts to the case at bar, we hold that respondent
has the right to rescind or cancel the deed of sale in view of petitioner's
failure to pay the stipulated consideration. Montecillo v. Reynes,27 cited
by the appellate court, is particularly instructive in distinguishing the legal
effects of "failure to pay consideration" and "lack of consideration:"
x x x Failure to pay the consideration is different from lack of
consideration. The former results in a right to demand the
fulfillment or cancellation of the obligation under an existing
contract, while the latter prevents the existence of a valid
contract.
Where the deed of sale states that the purchase price has
been paid but in fact has never been paid, the deed of sale is
null and void ab initio for lack of consideration. x x x 28
The Court of Appeals however failed to consider that in the instant case,
there was failure on the part of petitioner to pay the purchase price and
to complete the assumption of mortgage. The latter argued before the
lower court that payment was in fact made and counterclaimed for the
immediate delivery of the two other passenger buses and payment of
damages.29 However, this claim remained a claim and was not
substantiated.
While the Court of Appeals relied on the text of the deed of sale which
adverts to payment of the purchase price, 30the non-payment of the
purchase price was no longer an issue at the appellate level.
Respondent presented strong evidence that petitioner did not pay the
purchase price, and that paved the way for the issuance of a writ of
replevin. Petitioner did not challenge the finding of the trial court before
the Court of Appeals and this Court. He did not also controvert the non-
consummation of the assumption of mortgage at any level of the
proceedings.
Non-payment of the purchase price of property constitutes a very good
reason to rescind a sale for it violates the very essence of the contract
of sale.31 While it is preferable that respondent instead should have filed
an action to resolve or cancel the deed as the right to do so must be
invoked judicially,32 this shortcoming was cured when the complaint
itself made out a case for rescission or resolution for failure of petitioner
to comply with his obligation to pay the full purchase price. The
complaint relevantly alleged:
xxxx
3. (a) That on October 11, 1995, the plaintiff and the defendant
entered into and executed a Deed of Sale with Assumption of
Mortgage with plaintiff as Vendor and the defendant as
Vendee covering four (4) units of passenger airconditioned
buses. x x x
3. (b) That the plaintiff and the defendant in said Deed of Sale
with Assumption of Mortgage x x x hereof agreed that the
price of the sale of the above-described motor vehicles is in
the sum of PESOS TWELVE MILLION (P12,000,000.00),
Philippine Currency, with the stipulation that the defendant as
Vendee will assume the existing mortgage of the above-
described motor vehicle with PHIL. HINO SALES
CORPORATION and consequently, will assume the balance
of the remaining obligation due to PHIL. HINO SALES
CORPORATION as agreed upon in the said Deed of Sale with
Assumption of Mortgage;
3. (c) That pursuant to said Deed of Sale with Assumption of
Mortgage, the plaintiff delivered to the defendant at Calapan,
Oriental Mindoro, the first two (2) motor vehicles x x x
withholding the other two (2) passenger buses pending the
payment by the defendant to the plaintiff of the purchase price
of the sale of PESOS TWELVE MILLION (P12,000,000.00),
Philippine currency and assumption of mortgage by said
defendant obligating himself to pay the remaining balance of
the obligation due to the PHIL. HINO SALES CORPORATION
constituted over the above-described motor vehicles;
3. (d) That inspite of repeated demands made by the plaintiff
to the defendant to pay the purchase price of the sale x x x
the defendant, in evident bad faith, refused and failed and
continue to refuse and fail to pay the plaintiff the purchase
price of the said vehicles;
xxxx
4. b.) That the plaintiff-applicant is the owner of the two (2)
buses claimed as above-described and is entitled to the
rightful possession thereof x x x
4. c.) That the above-described two (2) units of passenger
buses are wrongfully detained by the defendant pretending
that he is the owner under the Deed of Sale with Assumption
of Mortgage which pretension is false because the defendant
has not paid the plaintiff any single centavo out of the PESOS
TWELVE MILLION (P12,000,000.00), Philippine currency, the
purchase price of the sale of the four (4) passenger buses, 33
xxxx
As previously noted, petitioner did not pay the full purchase price as
stipulated in the contract whereas respondent complied with its
obligation when it delivered the two buses to petitioner.
A necessary consequence of rescission is restitution with payment of
damages. Article 1191 provides:
xxxx
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.
xxxx
Also, corollary to the rescission of the contract of sale is the recovery of
possession of the object thereof. Thus, petitioner's possession over the
passenger buses became unlawful when upon demand for return, he
wrongfully retained possession over the same.
In ordering petitioner to remit to respondent the income derived from the
passenger buses, the appellate court ratiocinated thus:
Although the parties herein did not agree on the rentals for the
use of the property, the fact that the defendant-appellee was
able to use the two passenger buses for the months of
October, [sic] 1995 to January, [sic] 1996, and has derived
income therefrom, was acknowledged by the court a quo and
the defendant-appellee himself.
Under such circumstances, it is but fair that the defendant-
appellee be made to pay reasonable rentals for the use of the
two passenger buses from the time that they were delivered,
until they were seized from him. It would be against the
equitable proscription against unjust enrichment for the
defendant-appellee to keep the income from a property over
which he has no legal right. It would be unfair to excuse the
defendant-appellee from the payment of reasonable rentals
because he enjoyed and made use of the subject passenger
buses. It is a basic rule in law that no one shall unjustly enrich
himself at the expense of another. Niguno non deue
enriquecerse tortizamente condaño de otro.
Thus, a modification of the decision of the court a quo is in
order.
In view of the plaintiff-appellant's failure to substantiate its
claim for the unpaid rentals amounting to P660,000.00, we
could not grant the same.
However, we deem it just for the defendant-appellee to remit
the plaintiff-appellant the income he derived from the subject
passenger buses in the amount of P7,000.00 per day within
 the period that they were in the defendant-appellant's
possession, that is from October 16, 1997 to January 16,
1995, minus the amount of P120,000.00 which the defendant-
appellee already remitted to the plaintiff-appellant.34
It can be inferred from this decision that the appellate court did not
consider petitioner liable for the unpaid rentals when it noted that
respondent had failed to support its claim over it. Instead, it concluded
that he was liable to respondent for damages, in the form of reasonable
rentals for the use of the passenger buses.
However, with respect to the amount of damages, we differ from the
award of the appellate court. Settled is the rule that actual damages
must be proved with reasonable degree of certainty. A party is entitled
only up to such compensation for the pecuniary loss that he has duly
proven. It cannot be presumed. Absent proof of the amount of actual
damages sustained, the court cannot rely on speculations, conjectures,
or guesswork as to the fact and amount of damages, but must depend
upon competent proof that they have been suffered by the injured party
and on the best obtainable evidence of the actual amount thereof. 35
The appellate court arrived at the amount of P7,000.00 per day as
income for the use of the two passenger buses due to respondent on
the basis of the allegations in the answer of petitioner. 36 The award
cannot be sustained because no evidence was produced to support this
averment made by petitioner. Petitioner did not present any record or
journal that would have evidenced the earnings of the passenger buses
for said period. Bare allegations would not suffice.
Since the amount of damages awarded by the Court of Appeals was
founded merely on speculations, we turn to the provisions of the Special
Trip Contract. In said contract, the rental is fixed at P10,000.00 per day
for each bus. This duly executed contract was presented, marked and
formally offered in evidence. The fact that Macasaet voluntarily signed
the contract evinced his acquiescence to its terms, particularly the
amount of rentals. Therefore, the amount of P1,460,000.00 is deemed
reasonable compensation for the use of the passenger buses, computed
as follows:
Amt of rentals per bus: P10,000.00
x No. of buses: 2 both parties failed to settle the said difference amicably. Apparently, the
Amt of rentals per day: P 20,000.00
x No. of days (16 Oct-2 Jan) 79
P1,580,000.00
- Payment by Macasaet 120,000.00
TOTAL P1,460,000.00
Since the amount awarded as damages in the form of reasonable rentals
is more than the amount of rentals specified in the complaint, additional
filing fees corresponding to the difference between the amount prayed
for in the complaint and the award based on the evidence should be
assessed as a lien on the judgment, as mandated by Section 2, Rule
141 of the Rules of Court, to wit:
SEC. 2. Fees in lien. — Where the court in its final judgment
awards a claim not alleged, or a relief different from, or more
than that claimed in the pleading, the party concerned shall
pay the additional fees which shall constitute a lien on the
judgment in satisfaction of said lien. The clerk of court shall
assess and collect the corresponding fees.37
WHEREFORE, the petition is DENIED. However, the decision of the
Court of Appeals is MODIFIED in that petitioner is ORDERED to pay
respondent damages in the form of reasonable rentals in the amount
of P1,460,000.00 with interest at 12% per annum from the finality of this
decision, with a lien thereon corresponding to the additional filing fees
adverted to above. The Clerk of Court of the Regional Trial Court of
Makati is directed to assess and collect the additional filing fees.
SO ORDERED.
522 Phil. 133
AZCUNA, J.:
Challenged in this petition for review on certiorari[1] is the
Decision[2] dated February 21, 2001 rendered by the Court of Appeals
(CA) in CA-G.R. CV No. 60071 setting aside the decision[3] of the
Regional Trial Court (RTC) of Pasig City, Branch 266, in Civil Case No.
64903 entitled "Romeo R. Cucueco vs. Platinum Philippines Inc., Youth
Educational Plans, Inc., and Ernesto L. Salas."
This case is rooted in the complaint[4] filed by respondent Romeo R.
Cucueco against petitioners Platinum Philippines Inc., Youth
Educational Plans, Inc., and Ernesto L. Salas for specific performance
and damages pursuant to an alleged contract of sale executed by them
for the purchase of a condominium unit[5] in Valle Verde, Pasig City.
The antecedent facts are as follows:
Plaintiff-appellant [herein respondent] alleged in his complaint that
sometime in July 1993, being the lessee and present occupant of the said
condominium unit, he verbally offered to buy the same from the
defendants-appellants [herein petitioners], free from any lien or
encumbrance in two(2) installments of P2,000,000.00.
This was made into a formal offer in writing, the salient conditions of
which are: (1) Plaintiff-appellant will issue a check for P100,000.00 as
earnest money; (2) Plaintiff will also issue a post-dated check for
P1,900,000.00 encashable on 30 September. 1993 on the condition that
he will stop paying rental(s) for the said unit after 30 September 1993;
and (3) That in case the defendants-appellants still had an outstanding
loan (with the said unit as collateral/security) with the bank of less than
P2,000,000.00, as of 31 December 1993, plaintiff-appellant shall
assume the said loan and pay the defendants-appellants the difference
from the remaining P2,000,000.00.
Plaintiff-appellant claims that the defendants-appellants duly accepted
his offer- the checks he issued in favor of the defendants-appellants were
accepted and encashed. However, he was surprised to receive a letter
from the defendants-appellants where the due date for the second
installment was changed to 23 September 1993. Despite earnest efforts,
plaintiff-appellant felt he was on the short end of the bargain since he
stood to forfeit the initial P2,000,000.00 he has paid in favor of the
defendants-appellants as provided in their agreement. The refusal of the
defendants-appellants to return the said initial payment thus prompted
the plaintiff-appellant to file a case for specific performance of the said
sale and claim of damages for the injury he suffered as a result of the
defendants-appellants' unjust refusal to comply with their obligation.
In the main, plaintiff-appellant argued before the lower court that there
was a perfected sale between them, as based on the facts he alleged
Based on such perfected sale, plaintiff-appellant maintains that he may
validly demand of the defendants-appellants to execute the necessary
deed of sale and other documents transferring ownership and title over
the property in his favor.
On the other hand, defendants-appellants denied the substantial
allegations of the plaintiff-appellant and asserted during trial that the
plaintiff-appellant has already forfeited his initial downpayment of
P2,000,000.00 as based on the terms and conditions agreed upon, to
wit:
1. The terms of payment is only for two installments...payable on
1 August 1993 and the balance payable on 30 September 1993.
2. To ensure performance, (the) parties herein further agreed
that in case of non-compliance on the part of the plaintiff, all
installments made shall be forfeited in favor of the
defendants;
3. Ownership over subject property is retained by defendants
and is not to pass until full payment of the purchase price.
Defendants-appellants counter the plaintiff-appellant's contention,
stating they never accepted the plaintiff-appellant's offer to pay the
remaining balance only on 31 December 1993. Their letter of 23
September 1993 undoubtedly contained their non-acceptance of the
plaintiff-appellant's offer. Along with this, they maintain that the very
fact that the plaintiff-appellant went to the defendants-appellants to
negotiate the due date of the final payment belies the plaintiff-
appellant's assertion that there was any sale perfected between them.
They further submit as evidence the want of consent to the plaintiff-
appellant's offer as shown by the absence of their signature of
conformity on the letter sent to them.[6]
The trial court found that under the circumstances, the essential element
of consent to the contract was lacking as indicated by the failure of the
parties to agree on a definite date when full payment of the purchase
price should be made by respondent. As a result, the court ruled against
the existence of a perfected contract of sale between the parties and
ordered petitioners to return the Two Million Pesos (P2,000,000) they
received from respondent as downpayment for the condominium unit
and to likewise pay respondent interest, moral damages and attorney's
fees. For his part, respondent was directed to pay petitioners rentals in
arrears for the use of the unit in the amount of Eighteen Thousand Pesos
(P18,000) per month commencing in July 1993. Unsatisfied, both
parties appealed the decision to the CA.
The CA, on the other hand, differed from the conclusion of the trial court
and ruled that there was, in this instance, a perfected contract of sale
despite the fact that the parties never agreed on the date of payment of
the remaining balance of the purchase price. Accordingly, the CA
reversed and set aside the judgment of the RTC in its Decision dated
February 21, 2001, the dispositive portion of which reads:
WHEREFORE, premises considered, the judgment of the Regional Trial
Court of Pasig City, Branch 226, in Civil Case No. 64903 is hereby
REVERSED and SET ASIDE and a new one is RENDERED as follows:
1. Plaintiff-appellant ROMEO R. CUCUECO is hereby ordered
to pay the defendants-appellants the balance of the purchase
price in the amount of P2,000,000.00 with 6% interest per
annum starting from 21 October 1993 until full payment, for
the sale of Unit 17, Block 3, Casa Verde Townhouse, Valle
Verde, Pasig City as covered by TCT No. PT-80413 registered
with the Registry of Deeds of Pasig City.
2.
Defendants-appellants, PLATINUM PLANS PHILIPPINES,
INC. is hereby ordered to execute and deliver the sufficient
Deed of Sale of the said property in favor of said plaintiff-
appellant, as well as any other pertinent document necessary
for the transfer of ownership and title of the said property to
the plaintiff-appellant, after full payment of the balance
purchase price plus interest has been made by the plaintiff-
appellant in their favor.
SO ORDERED.[7]
Hence, this petition which assigns the following errors:
I.
THE HONORABLE COURT OF APPEALS SERIOUSLY
MISAPPREHENDED THE FACTS OF THE CASE AND GROSSLY
MISAPPRECIATED THE EVIDENCE, AND THUS COMMITTED
PATENT ERROR WHEN IT RULED THAT THERE WAS A
PERFECTED CONTRACT OF SALE OVER THE SUBJECT PROPERTY.
II.
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN
IT FOUND THAT THE PRIVATE RESPONDENT'S BREACH OF THE
CONTRACT WAS NOT SUBSTANTIAL AS TO WARRANT THE
RESCISSION THEREOF.
III.
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN
IT RULED AGAINST THE PETITIONERS' FORFEITURE OF THE
PRIVATE RESPONDENT'S 1ST INSTALLMENT.
IV.
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN
IT REVERSED THE DECISION OF THE REGIONAL TRIAL COURT
INSOFAR AS THE TRIAL COURT'S ORDER DIRECTED THE
PRIVATE RESPONDENT TO PAY BACK RENTALS IN THE AMOUNT
OF PI 8,000.00 PER MONTH COMMENCING FROM JULY 1993
The petition has merit.
The primary issue in this case centers upon a determination of the true
nature of the agreement of the parties concerning the condominium
unit. In brief, petitioners claim that the parties merely entered into a
contract to sell while respondent insists that it was already a perfected
contract of sale. It is therefore critical to ascertain whether the parties
intended to enter into a contract of sale or a contract to sell as these two
contracts produce very different effects under the law.
To begin with, a contract of sale is defined under Article 1458 of the Civil
Code as follows:
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.
In a contract of sale, the vendor cannot recover ownership of the thing
sold until and unless the contract itself is resolved and set aside. [8] On
this score, it is significant to note that the resolution or rescission of a
contract of sale is further circumscribed by Article 1592 of the Civil Code
which provides:
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. (Emphasis supplied.)
The demand mentioned above refers to that made, upon the vendee to
agree to the resolution of the contract. A party who fails to invoke
judicially or by notarial act the resolution of the contract of sale would
be prevented from blocking the consummation of the same in light of
the precept that mere failure to fulfill that contract does not operate ipso
facto as its rescission.[9]
On the other hand, a contract to sell is defined as a bilateral contract
whereby the prospective seller, while expressly reserving the ownership
of the subject property despite its delivery to the prospective buyer,
commits to sell the property exclusively to the prospective buyer upon
fulfillment of the condition agreed upon, that is, full payment of the
purchase price. Full payment in this context is deemed a positive
suspensive condition. It bears stressing that ownership of the property
offered for sale is reserved in the seller and is not to pass to the buyer
until such condition has been fulfilled.
As a result, if the party contracting to sell, because of non-compliance
with the suspensive condition stipulated, seeks to eject the would-be
buyer from the land object of the agreement, the former is enforcing the
contract and not resolving it.[10] The failure to make payment is not a
breach of the contract but an event that prevented the obligation to
convey the title from materializing.[11]
Based on the foregoing distinctions, a contract to sell may not be
considered as a contract of sale because the first essential element of
consent to a transfer of ownership is lacking in the former. Since the
prospective seller in a contract to sell explicitly reserves the transfer of examination on August 12, 1996, to wit:
title to the prospective buyer, the prospective seller does not as yet
unequivocally agree or consent to a transfer ownership of the property Court: Do I understand from you that after all in regard to writing, there
subject of the contract to sell. On the happening of an event, that is, the was no consummated agreement in regards to the terms and period of
full payment of the purchase price, the obligation then arises to execute payment?
a contract of sale that alone will transfer such ownership.
A: None, your Honor.
In its decision, the CA characterized the transaction as a straight sale
and ruled that the failure of the parties to agree with respect to the Court: So there was no definite period when the full payment...
manner of payment did not negate the existence of a perfected contract
of sale between them, explaining as follows: A: No, your honor. There is a definite agreement as to the period of
payment, your Honor, but apparently there is a misunderstanding or
Apparently, the lower court relied upon the time element regarding the both parties alleged different date, that's why...
payment of the balance of the purchase price. We consider, however,
that first, the object and the total amount of the purchase price has been Court: That's why my question is, there was no definite time frame
agreed upon. It was error on the part of the lower court to consider any agreed upon by you and the defendant as to when the last payment of
form or manner of payment since under the present circumstances, and full payment will be made?
based upon the Levy Hermanos' definition of what a sale on installment
is, the agreement between the parties to this case would constitute a A: Based on my letter...
simple "straight sale." Such manner of payment as discussed by the
lower court, to Our mind, would find pertinent application in the realm Court: No, between you ..."yung definite na pinagkasunduan ninyo.
of installment sales. Thus, being a case of straight sale, the manner of Yung proposal n'yo that was rejected by the defendant." My question
payment- which must be construed here as being made in cash- has no is, there was nothing definite in regard to specific date when the full
bearing in the present case. The mode of payment is cash and there is no payment may be made, because your proposal was rejected, isn't it?
subsequent installment to speak of. Being such, the performance of the
contract will not necessarily affect the validity of the perfected contract A: Yes, your Honor, it was rejected.
of sale.[12]
However, the reliance of the CA upon Levy Hermanos, Inc. vs. Court: Alright, to clarify, what was the date you proposed?
Gervacio[13] is misplaced because the factual circumstances as well as the
issues raised therein are not on all fours with those in the present case. A: December 30, your Honor.
Levy Hermanos involved a collection suit to recover the balance of the
purchase price in a sale of personal property after the vendee already Court: What was the counter date made by the defendant?
paid partly in cash and partly on term by way of a promissory note that
was secured with a mortgage over the property. Since the vendee failed A: The last payment, your Honor, they asked me to pay October 19...
to pay the note upon its maturity, the vendor was constrained to October 15 and October 31.
foreclose on the mortgage. The proceeds from the foreclosure sale,
however, were insufficient to discharge the note, prompting the vendor xxx
to seek judicial recourse.
Court: And you did not agree in regard to the dates fixed by defendants?
In Levy Hermanos, there was no question as to the intent and nature of
the agreement entered into by the parties. Clearly, it was a contract of A: Yes, your Honor, I did not agree.
sale which immediately vested unto the vendee the ownership of the
personal property subject of the transaction. The issue posed in that xxx
case, rather, pertained to the applicability of Article 1454-A[14]of the old
Civil Code regarding the right of the vendor to recover the remaining Q: Do you recall having gone to the office of defendant corporation on
balance of the purchase price when such vendor has previously exercised November 4, 1993?
the right to foreclose the subject property. In resolving the issue, this
Court delineated the difference between an installment sale and a A: Yes, ma'm.
"straight" sale and declared that the transaction between the parties in
that case was a "straight" sale not falling within the purview of Section Q: What was the purpose of your visit to the office of defendant
1454-A of the old Civil Code. corporation?

In the present case, it was unnecessary for the CA to distinguish whether A: To remind them of my proposal that the balance. I will only pay it on
the transaction between the parties was an installment sale or a straight December 30.
sale. In the first place, there is no valid and enforceable contract to speak
of. It was error for the appellate court to rely upon Article 1482 of the Q: Was there any negotiation on the payment of the balance of the
Civil Code in concluding that the earnest money given "would be purchase price of the unit?
considered as part of the purchase price and proof of the perfection of
the contract."[15] This Court has emphasized that it is the proof of the A: They insists (sic) on that I will pay it earlier, ma'm.
concurrence of all the essential elements of the contract of sale, and not
the giving of earnest money, which establishes the existence of a Q: But you did not agree to the payment?
perfected sale.[16]
A: Yes, ma'm.
As correctly pointed out by the trial court, the fact that respondent
delivered to petitioners and petitioners accepted part of the Q: Were you not given another period within which you could pay the
downpayment on the price cannot be considered as proof of the balance instead of December 30, 1993?
perfection of the contract as they had not agreed on how and when the
balance was to be paid. Respondent admitted as much during his cross- A: They gave me a period earlier than December 30 but I did not accept.
Q: Are you saying that in the negotiation, you just went to tell the
defendant corporation that you are not acceeding (sic) to their proposal
of an earlier payment?
A: Yes, ma'm.[17] (Emphasis supplied.)
Significantly, neither side has been able to produce any written evidence
documenting the actual terms of their agreement, specifically the date of
full payment of the purchase price. The evidence adduced during the
trial showed that the respective offers and counter-offers made by the
parties were not accepted by the other party. The trial court properly
found that there was no meeting of the minds in this case considering
the acceptance of the offer was not absolute and unconditional.[18] This
further confirmed the absence of the contractual element of consent.
In a number of cases,[19] this Court has held that before a valid and
binding contract of sale can exist, the manner of payment of the
purchase price must first be established. The manner of payment affects
the essential validity of the sale notwithstanding that the object and
purchase price may have previously been agreed upon. Although not an
express statutory requirement, the minds of the parties must meet on
the terms or manner of payment of the price, otherwise, there is no
sale.[20] An agreement on the manner of payment goes into the price such
that a disagreement on the manner of payment is tantamount to a failure
to agree on the price[21]
Secondly, the reservation of the title in the name of petitioners indicates
the intention of the parties to enter, at most, into a contract to sell. The
CA already found that "there was an express stipulation regarding the
reservation of title of the property made by the seller until full payment
of the price agreed upon."[22] Indeed, this finding is supported by the
records of this case and admitted by respondent himself.[23] Both parties
understood that the documents conveying title over the unit shall be
executed only upon completing payment of the purchase price.
Otherwise, even prior to the belated tender by respondent of the
remaining balance, he would have demanded that petitioners draw in
his favor the necessary deed of absolute sale. Where the seller promises
to execute a deed of absolute sale upon completion of payment of the
purchase price by the buyer, the agreement is unequivocally a contract
to sell.[24]
Be that as it may, the intention of the parties to enter into a contract to
sell did not effectively translate into an enforceable obligation in view of
their failure to agree on the contract's actual terms.[25] As in a contract of
sale, it is important that there be a stipulation on the period within which
the payment would become due and demandable, the absence of which
would justify the conclusion that there was no consent to the contract
proposed.
The Court, in this instance, cannot step in to cure the deficiency by fixing
the period of the obligation pursuant to either Article 1191[26] [which,
incidentally, applies only to contracts of sale] or Article 1197[27] of the
Civil Code. In the first place, respondent did not pray for this relief when
he filed his complaint for specific performance seeking to compel
petitioners to receive the balance of the purchase price and to transfer
title of the property in his name. He instead claimed that the parties had
previously fixed the period of the obligation on December 31, 1993.
Secondly, respondent impliedly admits in his pleadings below that he
was in default when he tendered payment on August 4, 1994, or almost
eight months after the above-stated deadline. Even as he acknowledges
that petitioners made several demands upon him to complete payment,
respondent argues that his belated tender of payment was still
acceptable considering that petitioners did not validly rescind by judicial
or notarial act their perfected contract. This, however, applies only to a
contract of sale.
Thirdly, the Court cannot arbitrarily set a period different from the term
probably contemplated by the parties.[28] In the present case, both
parties submit that the due date of the final payment had been sometime
in 1993; they only differ with respect to the exact month and day. For
this reason, the Court would have no basis for granting to respondent an
extension of time within which to pay his outstanding balance well
beyond the contemplated period.
Furthermore, assuming that there was a perfected contract to sell, the
Court would not be inclined to interfere with the decision of petitioners
to extra-judicially terminate the operation of their contract. Article 1592
of the Civil Code which requires that prior demand upon the respondent
be made by judicial or notarial act so as to rescind the contract would be
inapplicable in this case as the provision contemplates only contracts of
sale. Rather, the contract to sell would be rendered ineffective and
without force and effect by the non-fulfillment of respondent's
obligation to pay, which is a suspensive condition to the obligation of
petitioners to sell and deliver the title to the property. The parties stand
as if the conditional obligation had never existed.[29] There can be no
rescission of an obligation that is still non-existent, the suspensive
condition not having as yet occurred.[30]
This is not to say that petitioners can treat the agreement as cancelled
without serving notice to respondent of their decision to do so. The act
of a party in treating a contract as cancelled should be made known to
the other party because this act is subject to scrutiny and review by the
courts in case the alleged defaulter brings the matter for judicial
determination.[31] This point was explained in University of the
Philippines v. De Los Angeles,[32]thus:
It is understood that the act of a party in treating a contract as rescinded
or 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 the 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 extra-judicial 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 [it] should exercise due diligence to
minimize its own damages.
In the present case, petitioners repeatedly reminded respondent in
writing to pay the outstanding balance of the purchase price of the unit,
always with a warning that his failure to do so would result in the
cancellation of their agreement and the forfeiture of the downpayment
already made.[33] Finally, because of respondent's continuing default in
his obligation, petitioners served notice of their decision to rescind the
contract in a letter dated September 23, 1994.[34] Under such
circumstances, the cancellation by petitioners of the purported contract
is reasonable and valid. However, the forfeiture of the downpayment is
unwarranted as respondent never acceded to the same.
Considering that the agreement of the parties did not ripen into a
binding and enforceable contract meaning it did not acquire any
obligatory force either for the transfer of the ownership of the property
or the rendition of payments as part of the purchase price due to the
absence of the essential element of consent, the Court is precluded from
finding any cause of action that would warrant the granting of the reliefs
prayed for in respondent's complaint. Accordingly, the initial payment
of Two Million Pesos (P2,000,000) advanced by respondent should be
returned by petitioners lest the latter unjustly enrich themselves at the
expense of the former. In the same vein, considering that respondent has
been in continuous possession of the subject unit beginning July of 1993,
the award of back rentals in favor of petitioners is likewise proper, but
the award of moral damages and attorney's fees should be deleted for
lack of sufficient basis.
WHEREFORE, the petition is GRANTED and the assailed Decision
dated February 21, 2001 rendered by the Court of Appeals (CA) in CA-
G.R. CV No. 60071 is REVERSED and SET ASIDE. Accordingly, the
Decision dated May 18, 1998 of the Regional Trial Court of Pasig City,
Branch 266, in Civil Case No, 64903 is REINSTATED.
However, moral damages and attorney's fees awarded are DELETED for
lack of basis.
No costs.
SO ORDERED.
G.R. No. 144661 and 144797 June 15, 2005
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
SPOUSES FRANCISCO ONG and LETICIA ONG, respondents.
DECISION
GARCIA, J.:
Appealed to this Court by way of a petition for review on certiorari are
the D E C I S I O N1 dated March 5, 1999 and Resolution dated July
19, 2000 of the Court of Appeals in CA-G.R. CV No. 54919, affirming in
toto an earlier decision of the Regional Trial Court at Cagayan de Oro
City, Branch 23, which ruled in favor of herein respondents,
the Spouses Francisco Ong and Leticia Ong, in a suit for breach of
contract and/or specific performance with prayer for writ of preliminary
injunction and damages thereat commenced by them against
petitioner Development Bank of the Philippines (DBP).
Petitioner filed by registered mail a motion for extension time to submit
petition, paying the corresponding docket fees therefor by money order.
Upon receipt of the motion, the Court docketed the case as G.R. No.
144797. Before actual receipt of said motion, however, petitioner
personally filed its petition, which was docketed with a lower number as
G.R. No. 144661. What then appears to be two (2) cases before us are
actually just one, now the subject of this decision.
The facts are simple and undisputed:
Petitioner’s foreclosed asset, formerly owned by one Enrique Abada
under TCT No. T-4786 and located at Corrales Extension, Cagayan de
Oro City is the subject of this controversy. On May 25, 1988, respondent
Francisco Ong with the conformity of his wife Leticia Ong, addressed a
written offer to petitioner thru its branch manager at Cagayan de Oro
City to buy the subject property on a negotiated sale basis and submitted
his "best and last offer" to purchase2under the following terms:
PURCHASE
₱136,000.00
PRICE……………………………
DOWNPAYMENT
14,000.00
……………………………..
BALANCE …………………………………… P122,000.00
TERM: C A S H MODE OF PAYMENT: Payable upon ejection of
occupants on the property subject of my offer.
I/We am/are depositing the amount of ₱14,000.00 in cash/check to
accompany my/our offer, it being expressly understood, however, that
the same does not bind the DBP to the offer until after my/our receipt of
its approval by the higher authorities of the bank. Should the bank
receive an offer from a third-party buyer higher by more than 5% or at
more advantageous term accompanied by a deposit of at least 10% of
the offered price, or a higher offer from the former-owner for at least the
updated Total Claim of the Bank accompanied by a minimum deposit of
20% of the purchase price, the Bank may favorably consider the higher
offer and thereafter refund my/our deposit within three (3) working days
after the determination of the most advantageous offer.
The foregoing offer was duly "NOTED" by petitioner’s branch head at its
Cagayan de Oro City Branch, Jose Z. Lagrito (Lagrito, for brevity), and
Official Receipt No. 3081947 was issued for the amount of ₱14,000.00
as respondents’ deposit.
In a letter dated October 21, 19883, sent to respondents via registered
mail, Lagrito informed the spouses that the bank recently received an
offer from another interested third-party-buyer of the same property at
the same price and term, "but better and more advantageous to the Bank
considering that the buyer will assume the responsibility at her expense
for the ejectment of present occupants in the said property".
Nonetheless, respondents were given in the same letter three (3) days
within which "to match the said offer", failing in which the Bank "will
immediately award the said property to the other buyer", in which event
respondents’ deposit of ₱14,000.00 shall be refunded to them upon
surrender of O.R. No. 3081947.
In yet another written offer dated October 28, 19884, respondents
matched the said offer of the second interested buyer by assuming the
responsibility "at my/our own expense for the ejection of
squatters/occupants, if any, on the property".
On April 7, 1989, there was a conference between respondents,
together with their counsel, and the bank whereat respondents were
informed why the sale could not be awarded to them. Thereafter, in a
letter dated September 6, 19905, respondents were notified that the
property would instead be offered for public bidding on September 24,
1990 at ten 10:00 o’clock in the morning.
Feeling aggrieved by such turn of events, respondents filed with the
Regional Trial Court at Cagayan de Oro City a complaint for breach of
contract and/or specific performance against petitioner. Thereat, the
complaint was docketed as Civil Case No. 90-422 which was raffled to
Branch 23 of the court.
After pre-trial, the parties agreed to submit the case for judgment based
on the pleadings. Accordingly, the trial court required them to submit
simultaneously their respective memoranda within thirty (30) days. Only
petitioner filed its memorandum.
In a decision6 dated April 25, 1995, the trial court dismissed the
complaint finding that there was "no perfected contract of sale" between
the parties, hence, "there is no breach to speak of since there was no
contract from the very beginning". However, upon respondents’ motion
for reconsideration, the trial court vacated its judgment and set the case
for the reception of evidence. This time, only the respondents adduced
their evidence consisting of the lone testimony of respondent Francisco
Ong and the documents identified by him in the course thereof.
In his testimony, Ong gave the respondents’ version of what supposedly
transpired in their transaction with petitioner. According to him, he and
his wife went to the bank branch at Cabayan de Oro City and looked for
Roy Palasan, a bank clerk thereat and told the latter that they were
interested to buy two (2) lots. Palasan went to talk to Lagrito, the branch
manager. Palasan returned to the spouses and informed them that the
branch manager agreed to sell the property to them. Palasan further told
them that they will be required to pay ten (10%) percent of the purchase
price as downpayment, adding that if they were to pay the purchase
price in cash, they would be entitled to a ten (10%) percent discount.
After some computations, respondents rounded up the purchase price
at ₱136,000.00 and pegged the downpayment therefor at ₱14,000.00.
They were then required by Palasan to sign a bank form supposedly to
express their firm offer to purchase the subject property. But since the
form signed by them contains the statement that the approval of higher
authorities of the bank is required to close the deal, respondents queried
Palasan about it. Palasan, however, told them that the documents were
only for formality purposes, and further assured them that the branch
manager has already agreed to sell the subject property to them.
Having completed the presentation of their evidence, respondents
rested their case. For its part, petitioner no longer adduced any evidence
but merely opted to formally offer its documentary exhibits. Thereafter,
the case was submitted for resolution.
On September 26, 1996, the trial court came out with a new
decision,7 this time rendering judgment for the respondents, as follows:
WHEREFORE, by reason of preponderance of evidence, the Court
hereby finds in favor of the plaintiffs as against the defendant and hereby
orders the defendant:
1. To execute a final sale of the lot subject matter of the
contract of sale at the original agreed price of ₱136,000.00;
2. Defendant to accept the balance of the purchase price from
the plaintiffs;
3. Defendant to pay moral damages in the amount of
₱30,000.00;
4. Defendant to refund the amount of ₱10,000.00 actual
litigation expenses; and to pay attorney’s fees in the amount
of ₱20,000.00.
SO ORDERED.
Therefrom, petitioner went on appeal to the Court of Appeals in CA-G.R.
CV No. 54919, and, on March 5, 1999, the appellate court rendered the
herein assailed decision8 affirming in toto that of the trial court, thus:
ACCORDINGLY, the foregoing premises considered, the appealed
decision is hereby AFFIRMED in toto.
SO ORDERED.
With its motion for reconsideration of the same decision having been
denied by the Court of Appeals in its equally challenged resolution of
July 19, 2000,9 petitioner is now with us thru the present recourse on the
following grounds:
A.
THAT THE RESPONDENTS’ INTRODUCTION OF PAROL EVIDENCE
TO PROVE THE ALLEGED MEETING OF MINDS BETWEEN THE
PARTIES WAS NOT SANCTIONED BY RULE 130, SEC. 9, RULES OF
COURT, CONTRARY TO THE FINDINGS OF THE LOWER COURTS,
CONSIDERING THAT THERE WAS NO WRITTEN CONTRACT THAT
WAS EVER EXECUTED BY THE PARTIES IN THIS CASE, BUT
MERELY UNILATERAL WRITTEN COMMUNICATIONS, AT BEST
CONSTITUTING OFFERS AND COUNTER-OFFERS.
B.
THAT THE QUANTUM OF PROOF IS WANTING TO PROVE THE
ALLEGED PERFECTION OF CONTRACT OF SALE BETWEEN THE
PARTIES BASED ON THE SOLE, UNCORROBORATED, ORAL
TESTIMONY THUS FAR PRESENTED BY THE RESPONDENTS.
C.
THAT THE BURDEN OF PROOF THAT THERE WAS PERFECTION
OF THE CONTRACT OF SALE BETWEEN THE PARTIES BASICALLY
REST WITH THE RESPONDENTS, NOTWITHSTANDING THE NON-
OBJECTION ON THE PART OF HEREIN PETITIONER DURING THE
INTRODUCTION OF THAT "PAROL EVIDENCE"; THE
ADMISSIBILITY OF PETITIONER’S (sic.) PAROL EVIDENCE DOES
NOT AUTOMATICALLY RIPEN THE TESTIMONY AS A TRUTH
RESPECTING A MATTER OF FACT AS ITS CREDIBILITY AND
TRUSTWORTHINESS AND WEIGHT ARE STILL SUBJECT TO
JUDICIAL SCRUTINY AND APPRECIATION.
D.
THAT THERE WAS ACTUALLY OPPOSITION ON THE PART OF THE
PETITIONER TO THE CONTENTS OF THE ORAL TESTIMONY OF
THE RESPONDENT REGARDING THE ALLEGED PERFECTION OF
CONTRACT OF SALE BECAUSE THE PETITIONER HAD ALREADY
INTERPOSED THEIR DEFENSES WHEN IT FILED A MEMORANDUM
ATTACHING THEREIN THE DOCUMENTARY AS WELL AS
DECLARATIONS IN ITS PLEADINGS ON THE NON-PERFECTION OF
SUCH CONTRACT WHEN THE CASE WAS THEN SUBMITTED FOR
JUDGMENT ON THE PLEADINGS, AS AGREED BY THE PARTIES
DURING THE PRE-TRIAL, AND SUCH EVIDENCES WERE ALREADY
PASSED UPON BY THE COURT WHEN IT RENDERED A JUDGMENT
DATED APRIL 25, 1995.
We GRANT the petition.
At the very core of the controversy is the question of whether or not there
actually was a perfected contract of sale between petitioner and
respondents, for which the Court may compel petitioner to issue a board
resolution approving the sale and to execute the final deed of sale in
respondents’ favor, and/or hold petitioner liable for a breach thereof.
Needless to state, without a perfected contract of sale, there could be
no cause of action for specific performance or breach thereof.
The trial court went on one direction by ruling in its earlier decision of
April 25, 1995 that there was no perfected contract, but upon
respondents’ motion for reconsideration, went exactly the opposite path
by completely reversing itself in its herein challenged decision of
September 26, 1996.
Apparently, the trial court’s ruling that there was already a perfected
contract of sale was premised on its following factual findings:
1. That plaintiff [respondents] made a downpayment in a
check that was subsequently encashed by the defendant
[petitioner] bank;
2. That the sister-in-law of plaintiff [respondents] entered into
the same arrangement and was able to buy the property she
wanted to buy from defendant [petitioner] bank;
3. That defendant [petitioner] never presented any witness to
rebut the positive and clear testimony of plaintiff [respondents]
that it was a perfected contract of sale entered into by the
former with the defendant [petitioner] bank.10
Sustaining the foregoing factual findings of the trial court, the appellate
court wrote in its assailed decision of March 5, 1999:
This positive and clear testimony of [respondent] Ong was not objected
to nor rebutted by the [petiotioner]. Notably, the bank personnel involved
in the transaction, namely, Roy Palasan and the Branch Manager of the
[petitioner’s] Cagayan de Oro Branch, Joe Lagrito, were never
presented to refute the testimony of the [respondents] that the bank has
agreed to sell the property to the [respondents]. Suffice it to state that
[respondents] were entitled to rely on the representation of Lagrito who,
after all, is the bank’s manager. Under the premise that a bank is bound
by the obligation contracted by its officers, the contract of sale between
[petitioner] and the [respondents] was perfected when Palasan and
Lagrito communicated the approval of the sale of the lot to the
[respondents].
Significantly, the unrebutted testimony of Francisco Ong reveals that
Norma Silfavan, [respondents’] sister, made a similar offer to the
[petitioner] under the same terms and conditions as to that of the
[respondents], and was likewise assured by the same bank personnel
that her offer, along with the [respondents’] offer was already approved.
Eventually, the transaction resulted in a consummated sale between
Silfavan and DBP. Under these premises, We can not see any reason
why the [petitioner] did not accord the same treatment to the
[respondents] who were similarly situated.
Evidently, the two (2) courts below were convinced that the actuation of
Palasan, a mere bank clerk, upon which respondents relied in believing
that their offer to purchase was already approved by the bank manager,
would bind the bank to a perfected contract of sale between the parties
in this case. The Court of Appeals further added that the acceptance of
the offer to purchase was sufficiently established from the parol
evidence adduced by respondents during the trial.
We do not agree.
Concededly, in petitions for review on certiorari, our task is not to review
once again the factual findings of the Court of Appeals and the trial court,
but to determine if, on the basis of the facts thus found, the conclusions
of law reached are correct or not.
Judging from the findings of the two (2) courts below and the testimony
of respondent Francisco Ong himself, it appears clear to us that the
transaction between the respondents and the petitioner was limited to
Palasan, one of the clerks of petitioner’s branch in Cagayan de Oro City.
Lagrito, the branch manager, had no personal or direct communication
with respondents to express his alleged consent to the sale transaction.
Thus, the undisputed evidence showed that it was Palasan, a mere bank
clerk, and not the branch manager himself who assured respondents
that theirs was a closed deal.
We are very much aware of our pronouncement in Rural Bank of Milaor
vs. Ocfemia,11 involving a mandamus suit where the supposed buyer of
a foreclosed property from a bank sought a court order to compel the
bank to issue the required board resolution confirming the sale between
the parties therein. There, this Court, speaking thru Mr. Justice Artemio
Panganiban, stated:
Notwithstanding the putative authority of the manager to bind the bank
in the Deed of Sale, petitioner has failed to file an answer to the Petition
below within the reglementary period, let alone present evidence
controverting such authority. Indeed, when one of herein respondents,
Marife S. Niño, went to the bank to ask for the board resolution, she was
merely told to bring the receipts. The bank failed to categorically declare
that Tena had no authority. This Court stresses the following:
". . . Corporate transactions would speedily come to a standstill were
every person dealing with a corporation held duty-bound to disbelieve
every act of its responsible officers, no matter how regular they should
appear on their face. This Court has observed in Ramirez vs. Orientalist
Co., 38 Phil. 634, 654-655, that —
‘In passing upon the liability of a corporation in cases of this kind it is
always well to keep in mind the situation as it presents itself to the third
party with whom the contract is made. Naturally he can have little or no
information as to what occurs in corporate meetings; and he must
necessarily rely upon the external manifestation of corporate consent.
The integrity of commercial transactions can only be maintained by
holding the corporation strictly to the liability fixed upon it by its agents
in accordance with law; and we would be sorry to announce a doctrine
which would permit the property of man in the city of Paris to be whisked
out of his hands and carried into a remote quarter of the earth without
recourse against the corporation whose name and authority had been
used in the manner disclosed in this case. As already observed, it is
familiar doctrine that if a corporation knowingly permits one of its officers,
or any other agent, to do acts within the scope of an apparent authority,
and thus holds him out to the public as possessing power to do those
acts, the corporation will, as against any one who has in good faith dealt
with the corporation through such agent, be estopped from denying his
authority; and where it is said 'if the corporation permits this means the
same as 'if the thing is permitted by the directing power of the
corporation.’"12
In this light, the bank is estopped from questioning the authority of the
bank manager to enter into the contract of sale. If a corporation
knowingly permits one of its officers or any other agent to act within the
scope of an apparent authority, it holds the agent out to the public as
possessing the power to do those acts; thus, the corporation will, as
against anyone who has in good faith dealt with it through such agent,
be estopped from denying the agent's authority.13
Unquestionably, petitioner has authorized Tena to enter into the Deed
of Sale. Accordingly, it has a clear legal duty to issue the board
resolution sought by respondents. Having authorized her to sell the
property, it behooves the bank to confirm the Deed of Sale so that the
buyers may enjoy its full use.
There is, however, a striking and very material difference between the
aforecited case and the one at bar. For, unlike in Milaor where it was
the branch manager who approved the sale for and in behalf of the
bank, here, there is absolutely no approval whatsoever by any
responsible bank officer of the petitioner. True it is that the signature of
branch manager Lagrito appears below the typewritten word "NOTED"
at the bottom of respondents’ offer to purchase dated May 25,
1988.14 By no stretch of imagination, however, can the mere "NOTING"
of such an offer be taken to mean an approval of the supposed sale.
Quite the contrary, the very circumstance that the offer to purchase was
merely "NOTED" by the branch manager and not "approved", is a clear
indication that there is no perfected contract of sale to speak of.
The representation of Roy Palasan, a mere clerk at petitioner’s Cagayan
de Oro City branch, that the manager had already approved the sale,
even if true, cannot bind the petitioner bank to a contract of sale with
respondents, it being obvious to us that such a clerk is not among the
bank officers upon whom such putative authority may be reposed by a
third party. There is, thus, no legal basis to bind petitioner into any valid
contract of sale with the respondents, given the absolute absence of any
approval or consent by any responsible officer of petitioner bank.
And because there is here no perfected contract of sale between the
parties, respondents’ action for breach of contract and/or specific
performance is simply without any leg to stand on and must therefore
fall.
We also disagree with the Court of Appeals that the encashment of the
check representing the ₱14,000.00 deposit in relation to respondents’
offer to purchase is an indication or proof of perfection of a contract of
sale. It must be noted that the very documents15 signed by the
respondents as their offer to purchase unmistakably state that the
deposit shall only form part of the purchase price if the offer to purchase
is approved, "it being expressly understood xxx that the same (i.e., the
deposit) does not bind DBP to the offer until my/our receipt of its
approval by higher authorities of the bank". It may be so that the official
receipt issued therefor by the petitioner termed such deposit as a
"downpayment". But the very written offers of the respondents
unequivocably and invariably speak of such amount as "deposit", "above
deposit", "we are depositing the amount of ₱14,000.00". Since there
never was any approval or acceptance by the higher authorities of
petitioner of respondents’ offer to purchase, the encashment of the
check can not in any way represent partial payment of any purchase
price.
With the hard reality that no approval or acceptance of respondents’
offer to buy exists in this case, any independent transaction between
petitioner and another third-party, like the one involving respondents’
sister, would be irrelevant and immaterial insofar as respondents’ own
transaction with the petitioner is concerned. Besides, apart from saying
that respondents’ sister "made a similar offer to the [petitioner] under the
same terms and conditions as to that of the [respondents], and was
likewise assured by the same bank personnel that her offer xxx was
already approved", which eventually resulted into a "consummated sale
between (the sister) and DBP", the Court of Appeals made no finding
that the sister’s transaction with the petitioner was made exactly under
the same circumstances obtaining in the present case. In any event,
petitioner’s favorable action on the offer of respondents’ sister is hardly,
if ever, relevant and determinative in the resolution of the legal issue
presented in this case.
In sum, we cannot, in law, sustain the herein challenged issuances of
the Court of Appeals.
WHEREFORE, the instant petition is GRANTED and the assailed
decision and resolution of the Court of Appeals REVERSED and SET
ASIDE. The complaint filed in this case is accordingly DISMISSED.
No pronouncement as to costs.
SO ORDERED.