against the Philippine Tourism Authority "with the full assistance of Castillo.

"
CASES: LAW ON SALES Paragraph C of the deed of conditional sale provides:

G.R. No. 196251 July 9, 2014 C. Olivarez Realty Corporation assumes the responsibility of taking
OLIVAREZ REALTY CORPORATION and DR. PABLO R. OLIVAREZ, Petitioner, necessary legal action thru Court to have the claim/title TCT T-18493 of
vs. Philippine Tourism Authority over the above-described property be nullified
BENJAMIN CASTILLO, Respondent. and voided; with the full assistance of Castillo.
Should the action against the Philippine Tourism Authority be
Trial may be dispensed with and a summary judgment rendered if denied, Castillo agreed to reimburse all the amounts paid by Olivarez Realty
the case can be resolved judiciously by plain resort to the pleadings, Corporation. Paragraph D of the deed of conditional sale provides:
affidavits, depositions, and other papers filed by the parties. D. In the event that the Court denies the petition against the
This is a petition for review on certiorari1 of the Court of Appeals' Philippine Tourism Authority, all sums received by Castillo shall be
decision2 dated July 20, 2010 and resolution3 dated March 18, 2011 in reimbursed to Olivarez Realty Corporation] without interest.
CAG.R. CV No. 91244. As to the "legitimate tenants" occupying the property, Olivarez
The facts as established from the pleadings of the parties are as Realty Corporation undertook to pay them "disturbance compensation,"
follows: while Castillo undertook to clear the land of the tenants within six months
Benjamin Castillo was the registered owner of a 346,918- from the signing of the deed of conditional sale. Should Castillo fail to clear
squaremeter parcel of land located in Laurel, Batangas, covered by Transfer the land within six months, Olivarez Realty Corporation may suspend its
Certificate of Title No. T-19972. The Philippine Tourism Authority allegedly monthly down payment until the tenants vacate the property. Paragraphs E
claimed ownership of the same parcel of land based on Transfer Certificate and F of the deed of conditional sale provide: E. That Olivarez Realty
of Title No. T-18493.5 On April 5, 2000, Castillo and Olivarez Realty Corporation shall pay the disturbance compensation to legitimate
Corporation, represented by Dr. Pablo R. Olivarez, entered into a contract of agricultural tenants and fishermen occupants which in no case shall exceed
conditional sale6 over the property. Under the deed of conditional sale, ONE MILLION FIVE HUNDRED THOUSAND (₱1,500,000.00) PESOS. Said
Castillo agreed to sell his property to Olivarez Realty Corporation for amount shall not form part of the purchase price. In excess of this amount,
₱19,080,490.00. Olivarez Realty Corporation agreed to a down payment of all claims shall be for the account of Castillo;
₱5,000,000.00, to be paid according to the following schedule: F. That Castillo shall clear the land of the legitimate tenants within a
DATE AMOUNT period of six (6) months upon signing of this Contract, and in case Castillo
April 8, 2000 500,000.00 fails, Olivarez Realty Corporation] shall have the right to suspend the monthly
May 8, 2000 500,000.00 down payment until such time that the tenants move out of the land.
May 16, 2000 500,000.00 The parties agreed that Olivarez Realty Corporation may immediately
June 8, 2000 1,000,000.00 occupy the property upon signing of the deed of conditional sale. Should the
July 8, 2000 500,000.00 contract be cancelled, Olivarez Realty Corporation agreed to return the
August 8, 2000 500,000.00 property’s possession to Castillo and forfeit all the improvements it may have
September 8, 2000 500,000.00 introduced on the property. Paragraph I of the deed of conditional sale
October 8, 2000 500,000.00 states:
November 8, 2000 500,000.00 I. Immediately upon signing this Contract, Olivarez Realty
As to the balance of ₱14,080,490.00, Olivarez Realty Corporation Corporation shall be entitled to occupy, possess and develop the subject
agreed to pay in 30 equal monthly installments every eighth day of the property. In case this Contract is canceled, any improvement introduced by
month beginning in the month that the parties would receive a decision the corporation on the property shall be forfeited in favor of Castillo.
voiding the Philippine Tourism Authority’s title to the property. Under the On September 2, 2004, Castillo filed a complaint against Olivarez
deed of conditional sale, Olivarez Realty Corporation shall file the action Realty Corporation and Dr. Olivarez with the Regional Trial Court of Tanauan
City, Batangas.
 Castillo alleged that Dr. Olivarez convinced him into selling his
property to Olivarez Realty Corporation on the representation that the
corporation shall be responsible in clearing the property of the tenants and
in paying them disturbance compensation. He further alleged that Dr.
Olivarez solely prepared the deed of conditional sale and that he was made
to sign the contract with its terms "not adequately explained to him in
Tagalog."
After the parties had signed the deed of conditional sale, Olivarez
Realty Corporation immediately took possession of the property. However,
the corporation only paid 2,500,000.00 of the purchase price. Contrary to the
agreement, the corporation did not file any action against the Philippine
Tourism Authority to void the latter’s title to the property. The corporation
neither cleared the land of the tenants nor paid them disturbance
compensation. Despite demand, Olivarez Realty Corporation refused to fully
pay the purchase price.
Arguing that Olivarez Realty Corporation committed substantial
breach of the contract of conditional sale and that the deed of conditional
sale was a contract of adhesion, Castillo prayed for rescission of contract
under Article 1191 of the Civil Code of the Philippines. He further prayed that
Olivarez Realty Corporation and Dr. Olivarez be made solidarily liable for
moral damages, exemplary damages, attorney’s fees, and costs of suit.
In their answer, Olivarez Realty Corporation and Dr. Olivarez
admitted that the corporation only paid ₱2,500,000.00 of the purchase price.
In their defense, defendants alleged that Castillo failed to "fully assist" the
corporation in filing an action against the Philippine Tourism Authority.
Neither did Castillo clear the property of the tenants within six months from
the signing of the deed of conditional sale. Thus, according to defendants,
the corporation had "all the legal right to withhold the subsequent payments
to fully pay the purchase price."
Olivarez Realty Corporation and Dr. Olivarez prayed that Castillo’s
complaint be dismissed. By way of compulsory counterclaim, they prayed for
₱100,000.00 litigation expenses and ₱50,000.00 attorney’s fees.
Castillo replied to the counterclaim, arguing that Olivarez Realty
Corporation and Dr. Olivarez had no right to litigation expenses and
attorney’s fees. According to Castillo, the deed of conditional sale clearly
states that the corporation "assumed the responsibility of taking necessary
legal action" against the Philippine Tourism Authority, yet the corporation
did not file any case. Also, the corporation did not pay the tenants
disturbance compensation. For the corporation’s failure to fully pay the
purchase price, Castillo claimed that he had "all the right to pray for the
rescission of the contract," and he "should not be held liable . . . for any
alleged damages by way of litigation expenses and attorney’s fees."
On January 10, 2005, Castillo filed a request for admission,
requesting Dr. Olivarez to admit under oath the genuineness of the deed of
conditional sale and Transfer Certificate of Title No. T-19972. He likewise
requested Dr. Olivarez to admit the truth of the following factual allegations:
1. That Dr. Olivarez is the president of Olivarez Realty Corporation;
2. That Dr. Olivarez offered to purchase the parcel of land from Castillo and
that he undertook to clear the property of the tenants and file the court
action to void the Philippine Tourism Authority’s title to the property;
3. That Dr. Olivarez caused the preparation of the deed of conditional sale;
4. That Dr. Olivarez signed the deed of conditional sale for and on behalf of
Olivarez Realty Corporation;
5. That Dr. Olivarez and the corporation did not file any action against the
Philippine Tourism Authority;
6. That Dr. Olivarez and the corporation did not pay the tenants disturbance
compensation and failed to clear the property of the tenants; and
7. That Dr. Olivarez and the corporation only paid ₱2,500,000.00 of the
agreed purchase price.
On January 25, 2005, Dr. Olivarez and Olivarez Realty Corporation
filed their objections to the request for admission, stating that they
"reiterated the allegations and denials in their answer."
The trial court conducted pre-trial conference on December 17,
2005.
On March 8, 2006, Castillo filed a motion for summary judgment
and/or judgment on the pleadings. He argued that Olivarez Realty
Corporation and Dr. Olivarez "substantially admitted the material allegations
of his complaint," specifically:
1. That the corporation failed to fully pay the purchase price for his property;
2. That the corporation failed to file an action to void the Philippine Tourism
Authority’s title to his property; and
3. That the corporation failed to clear the property of the tenants and pay
them disturbance compensation.
Should judgment on the pleadings be improper, Castillo argued that
summary judgment may still be rendered as there is no genuine issue as to
any material fact. He cited Philippine National Bank v. Noah’s Ark Sugar
Refinery as authority.
Castillo attached to his motion for summary judgment and/or
judgment on the pleadings his affidavit37 and the affidavit of a Marissa
Magsino attesting to the truth of the material allegations of his complaint.
Olivarez Realty Corporation and Dr. Olivarez opposed the motion for
summary judgment and/or judgment on the pleadings, arguing that the
motion was "devoid of merit." They reiterated their claim that the
corporation withheld further payments of the purchase price because "there
had been no favorable decision voiding the title of the Philippine Tourism
Authority." They added that Castillo sold the property to another person and
that the sale was allegedly litigated in Quezon City.
Considering that a title adverse to that of Castillo’s existed, Olivarez
Realty Corporation and Dr. Olivarez argued that the case should proceed to
trial and Castillo be required to prove that his title to the property is "not
spurious or fake and that he had not sold his property to another person."
In reply to the opposition to the motion for summary judgment
and/or judgment on the pleadings, Castillo maintained that Olivarez Realty
Corporation was responsible for the filing of an action against the Philippine
Tourism Authority. Thus, the corporation could not fault Castillo for not suing
the Philippine Tourism Authority. The corporation illegally withheld
payments of the purchase price.
As to the claim that the case should proceed to trial because a title
adverse to his title existed, Castillo argued that the Philippine Tourism
Authority’s title covered another lot, not his property.
During the hearing on August 3, 2006, Olivarez Realty Corporation
and Dr. Olivarez prayed that they be given 30 days to file a supplemental
memorandum on Castillo’s motion for summary judgment and/or judgment
on the pleadings.
The trial court granted the motion. It gave Castillo 20 days to reply to
the memorandum and the corporation and Dr. Olivarez 15 days to respond
to Castillo’s reply.
In their supplemental memorandum, Olivarez Realty Corporation and
Dr. Olivarez argued that there was "an obvious ambiguity" as to which should
occur first — the payment of disturbance compensation to the tenants or the
clearing of the property of the tenants. This ambiguity, according to
defendants, is a genuine issue and "ought to be threshed out in a full blown
trial."
Olivarez Realty Corporation and Dr. Olivarez added that Castillo
prayed for irreconcilable reliefs of reformation of instrument and rescission
of contract. Thus, Castillo’s complaint should be dismissed.
Castillo replied to the memorandum, arguing that there was no
genuine issue requiring trial of the case. According to Castillo, "common
sense dictates . . . that the legitimate tenants of the property shall not vacate
the premises without being paid any disturbance compensation . . ." Thus,
the payment of disturbance compensation should occur first before clearing
the property of the tenants.
With respect to the other issues raised in the supplemental
memorandum, specifically, that Castillo sold the property to another person,
he argued that these issues should not be entertained for not having been
presented during pre-trial.
In their comment on the reply memorandum, Olivarez Realty
Corporation and Dr. Olivarez reiterated their arguments that certain
provisions of the deed of conditional sale were ambiguous and that the
complaint prayed for irreconcilable reliefs.
As to the additional issues raised in the supplemental memorandum,
defendants argued that issues not raised and evidence not identified and
pre-marked during pre-trial may still be raised and presented during trial for
good cause shown. Olivarez Realty Corporation and Dr. Olivarez prayed that
Castillo’s complaint be dismissed for lack of merit.
Ruling of the trial court
The trial court found that Olivarez Realty Corporation and Dr.
Olivarez’s answer "substantially admitted the material allegations of
Castillo’s complaint and did not . . . raise any genuine issue as to any material
fact."
Defendants admitted that Castillo owned the parcel of land covered
by Transfer Certificate of Title No. T-19972. They likewise admitted the
genuineness of the deed of conditional sale and that the corporation only
paid ₱2,500,000.00 of the agreed purchase price.
According to the trial court, the corporation was responsible for
suing the Philippine Tourism Authority and for paying the tenants
disturbance compensation. Since defendant corporation neither filed any
case nor paid the tenants disturbance compensation, the trial court ruled
that defendant corporation had no right to withhold payments from Castillo.
As to the alleged ambiguity of paragraphs E and F of the deed of
conditional sale, the trial court ruled that Castillo and his witness, Marissa
Magsino, "clearly established" in their affidavits that the deed of conditional
sale was a contract of adhesion. The true agreement between the parties
was that the corporation would both clear the land of the tenants and pay
them disturbance compensation.
With these findings, the trial court ruled that Olivarez Realty
Corporation breached the contract of conditional sale. In its decision dated
April 23, 2007, the trial court ordered the deed of conditional sale rescinded
and the ₱2,500,000.00 forfeited in favor of Castillo "as damages under Article
1191 of the Civil Code."
The trial court declared Olivarez Realty Corporation and Dr. Olivarez
solidarily liable to Castillo for 500,000.00 as moral damages, ₱50,000.00 as
exemplary damages, and ₱50,000.00 as costs of suit.
Ruling of the Court of Appeals
 Olivarez Realty Corporation and Dr. Olivarez appealed to the Court of
Appeals.
In its decision dated July 20, 2010, the Court of Appeals affirmed in
toto the trial court’s decision. According to the appellate court, the trial court
"did not err in its finding that there is no genuine controversy as to the facts
involved in this case." The trial court, therefore, correctly rendered summary
judgment.
As to the trial court’s award of damages, the appellate court ruled
that a court may award damages through summary judgment "if the parties’
contract categorically stipulates the respective obligations of the parties in
case of default." As found by the trial court, paragraph I of the deed of
conditional sale categorically states that "in case the deed of conditional sale
is cancelled, any improvement introduced by Olivarez Realty Corporation on
the property shall be forfeited in favor of Castillo." Considering that Olivarez
Realty Corporation illegally retained possession of the property, Castillo
forewent rent to the property and "lost business opportunities." The
₱2,500,000.00 down payment, according to the appellate court, should be
forfeited in favor of Castillo. Moral and exemplary damages and costs of suit
were properly awarded.
On August 11, 2010, Olivarez Realty Corporation and Dr. Olivarez
filed their motion for reconsideration, arguing that the trial court exceeded
its authority in forfeiting the ₱2,500,000.00 down payment and awarding
₱500,000.00 in moral damages to Castillo. They argued that Castillo only
prayed for a total of ₱500,000.00 as actual and moral damages in his
complaint. Appellants prayed that the Court of Appeals "take a second hard
look" at the case and reconsider its decision.
In the resolution dated March 18, 2011, the Court of Appeals denied
the motion for reconsideration.
Proceedings before this court
Olivarez Realty Corporation and Dr. Olivarez filed their petition for
review on certiorari78 with this court. Petitioners argue that the trial court
and the Court of Appeals erred in awarding damages to Castillo. Under
Section 3, Rule 35 of the 1997 Rules of Civil Procedure, summary judgment
may be rendered except as to the amount of damages. Thus, the Court of
Appeals "violated the procedural steps in rendering summary judgment."
Petitioners reiterate that there are genuine issues of material fact to
be resolved in this case. Thus, a full-blown trial is required, and the trial court
prematurely decided the case through summary judgment. They cite Torres
v. Olivarez Realty Corporation and Dr. Pablo Olivarez, a case decided by the
Ninth Division of the Court of Appeals.
In Torres, Rosario Torres was the registered owner of a parcel of land
covered by Transfer Certificate of Title No. T-19971. Under a deed of
conditional sale, she sold her property to Olivarez Realty Corporation for
₱17,345,900.00. When the corporation failed to fully pay the purchase price,
she sued for rescission of contract with damages. In their answer, the
corporation and Dr. Olivarez argued that they discontinued payment because
Rosario Torres failed to clear the land of the tenants.
Similar to Castillo, Torres filed a motion for summary judgment,
which the trial court granted. On appeal, the Court of Appeals set aside the
trial court’s summary judgment and remanded the case to the trial court for
further proceedings. The Court of Appeals ruled that the material allegations
of the complaint "were directly disputed by the corporation and Dr. Olivarez
in their answer" when they argued that they refused to pay because Torres
failed to clear the land of the tenants.
With the Court of Appeals’ decision in Torres, Olivarez Realty
Corporation and Dr. Olivarez argue that this case should likewise be
remanded to the trial court for further proceedings under the equipoise rule.
Petitioners maintain that Castillo availed himself of the irreconcilable
reliefs of reformation of instrument and rescission of contract. Thus, the trial
court should have dismissed the case outright.
Petitioners likewise argue that the trial court had no jurisdiction to
decide the case as Castillo failed to pay the correct docket fees. Petitioners
argue that Castillo should have paid docket fees based on the property’s fair
market value since Castillo’s complaint is a real action.
In his comment, Castillo maintains that there are no genuine issues
as to any material fact in this case. The trial court, therefore, correctly
rendered summary judgment.
As to petitioners’ claim that the trial court had no jurisdiction to
decide the case, Castillo argues that he prayed for rescission of contract in his
complaint. This action is incapable of pecuniary estimation, and the Clerk of
Court properly computed the docket fees based on this prayer.87 Olivarez
Realty Corporation and Dr. Olivarez replied, reiterating their arguments in
the petition for review on certiorari.
The issues for our resolution are the following:
I. Whether the trial court erred in rendering summary judgment;
II. Whether proper docket fees were paid in this case.
The petition lacks merit.
I
The trial court correctly rendered summary judgment, as there were no
genuine issues of material fact in this case
 Trial "is the judicial examination and determination of the issues
between the parties to the action." During trial, parties "present their
respective evidence of their claims and defenses." Parties to an action have
the right "to a plenary trial of the case" to ensure that they were given a right
to fully present evidence on their respective claims.
There are instances, however, when trial may be dispensed with.
Under Rule 35 of the 1997 Rules of Civil Procedure, a trial court may dispense
with trial and proceed to decide a case if from the pleadings, affidavits,
depositions, and other papers on file, there is no genuine issue as to any
material fact. In such a case, the judgment issued is called a summary
judgment.
A motion for summary judgment is filed either by the claimant or the
defending party. The trial court then hears the motion for summary
judgment. If indeed there are no genuine issues of material fact, the trial
court shall issue summary judgment. Section 3, Rule 35 of the 1997 Rules of
Civil Procedure provides:
SEC. 3. Motion and proceedings thereon. – The motion shall be
served at least ten (10) days before the time specified for the hearing. The
adverse party may serve opposing affidavits, depositions, or admission at
least three (3) days before the hearing. After the hearing, the judgment
sought shall be rendered forthwith if the pleadings, supporting affidavits,
depositions, and admissions on file, show that, except as to the amount of
damages, there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.
An issue of material fact exists if the answer or responsive pleading
filed specifically denies the material allegations of fact set forth in the
complaint or pleading. If the issue of fact "requires the presentation of
evidence, it is a genuine issue of fact." However, if the issue "could be
resolved judiciously by plain resort" to the pleadings, affidavits, depositions,
and other papers on file, the issue of fact raised is sham, and the trial court
may resolve the action through summary judgment.
A summary judgment is usually distinguished from a judgment on the
pleadings. Under Rule 34 of the 1997 Rules of Civil Procedure, trial may
likewise be dispensed with and a case decided through judgment on the
pleadings if the answer filed fails to tender an issue or otherwise admits the
material allegations of the claimant’s pleading.
Judgment on the pleadings is proper when the answer filed fails to
tender any issue, or otherwise admits the material allegations in the
complaint. On the other hand, in a summary judgment, the answer filed
tenders issues as specific denials and affirmative defenses are pleaded, but
the issues raised are sham, fictitious, or otherwise not genuine.
In this case, Olivarez Realty Corporation admitted that it did not fully
pay the purchase price as agreed upon in the deed of conditional sale. As to
why it withheld payments from Castillo, it set up the following affirmative
defenses: First, Castillo did not file a case to void the Philippine Tourism
Authority’s title to the property; second, Castillo did not clear the land of the
tenants; third, Castillo allegedly sold the property to a third person, and the
subsequent sale is currently being litigated before a Quezon City court.
Considering that Olivarez Realty Corporation and Dr. Olivarez’s
answer tendered an issue, Castillo properly availed himself of a motion for
summary judgment.
However, the issues tendered by Olivarez Realty Corporation and Dr.
Olivarez’s answer are not genuine issues of material fact. These are issues
that can be resolved judiciously by plain resort to the pleadings, affidavits,
depositions, and other papers on file; otherwise, these issues are sham,
fictitious, or patently unsubstantial.
Petitioner corporation refused to fully pay the purchase price
because no court case was filed to void the Philippine Tourism Authority’s
title on the property. However, paragraph C of the deed of conditional sale is
clear that petitioner Olivarez Realty Corporation is responsible for initiating
court action against the Philippine Tourism Authority:
C. Olivarez Realty Corporation assumes the responsibility of taking
necessary legal action thru Court to have the claim/title TCT T-18493 of
Philippine Tourism Authority over the above-described property be nullified
and voided; with the full assistance of Castillo.
Castillo’s alleged failure to "fully assist" the corporation in filing the
case is not a defense. As the trial court said, "how can Castillo assist the
corporation when the latter did not file the action in the first place?"
Neither can Olivarez Realty Corporation argue that it refused to fully
pay the purchase price due to the Philippine Tourism Authority’s adverse
claim on the property. The corporation knew of this adverse claim when it
entered into a contract of conditional sale. It even obligated itself under
paragraph C of the deed of conditional sale to sue the Philippine Tourism
Authority. This defense, therefore, is sham.
Contrary to petitioners’ claim, there is no "obvious ambiguity" as to
which should occur first — the payment of the disturbance compensation or
the clearing of the land within six months from the signing of the deed of
conditional sale. The obligations must be performed simultaneously. In this
case, the parties should have coordinated to ensure that tenants on the
property were paid disturbance compensation and were made to vacate the
property six months after the signing of the deed of conditional sale.
On one hand, pure obligations, or obligations whose performance do
not depend upon a future or uncertain event, or upon a past event unknown
to the parties, are demandable at once.102 On the other hand, obligations
with a resolutory period also take effect at once but terminate upon arrival
of the day certain.
Olivarez Realty Corporation’s obligation to pay disturbance
compensation is a pure obligation. The performance of the obligation to pay
disturbance compensation did not depend on any condition. Moreover, the
deed of conditional sale did not give the corporation a period to perform the
obligation. As such, the obligation to pay disturbance compensation was
demandable at once. Olivarez Realty Corporation should have paid the
tenants disturbance compensation upon execution of the deed of conditional
sale.
With respect to Castillo’s obligation to clear the land of the tenants
within six months from the signing of the contract, his obligation was an
obligation with a resolutory period. The obligation to clear the land of the
tenants took effect at once, specifically, upon the parties’ signing of the deed
of conditional sale. Castillo had until October 2, 2000, six months from April
5, 2000 when the parties signed the deed of conditional sale, to clear the
land of the tenants.
Olivarez Realty Corporation, therefore, had no right to withhold
payments of the purchase price. As the trial court ruled, Olivarez Realty
Corporation "can only claim non-compliance [of the obligation to clear the
land of the tenants in October 2000."104 It said:
. . . it is clear that defendant [Olivarez Realty Corporation] should
have paid the installments on the ₱5 million down payment up to October 8,
2000, or a total of ₱4,500,000.00. That is the agreement because the only
time that defendant [corporation] can claim non-compliance of the condition
is after October, 2000 and so it has the clear obligation to pay up to the
October 2000 the agreed installments. Since it paid only 2,500,000.00, then a
violation of the contract has already been committed.
The claim that Castillo sold the property to another is fictitious and
was made in bad faith to prevent the trial court from rendering summary
judgment. Petitioners did not elaborate on this defense and insisted on
revealing the identity of the buyer only during trial. Even in their petition for
review on certiorari, petitioners never disclosed the name of this alleged
buyer. Thus, as the trial court ruled, this defense did not tender a genuine
issue of fact, with the defense "bereft of details."
Castillo’s alleged prayer for the irreconcilable reliefs of rescission of
contract and reformation of instrument is not a ground to dismiss his
complaint. A plaintiff may allege two or more claims in the complaint
alternatively or hypothetically, either in one cause of action or in separate
causes of action per Section 2, Rule 8 of the 1997 Rules of Civil Procedure. It
is the filing of two separate cases for each of the causes of action that is
prohibited since the subsequently filed case may be dismissed under Section
4, Rule 2 of the 1997 Rules of Civil Procedure109 on splitting causes of action.
As demonstrated, there are no genuine issues of material fact in this
case. These are issues that can be resolved judiciously by plain resort to the
pleadings, affidavits, depositions, and other papers on file. As the trial court
found, Olivarez Realty Corporation illegally withheld payments of the
purchase price. The trial court did not err in rendering summary judgment.
II
Castillo is entitled to cancel the contract of conditional sale
Since Olivarez Realty Corporation illegally withheld payments of the
purchase price, Castillo is entitled to cancel his contract with petitioner
corporation. However, we properly characterize the parties’ contract as a
contract to sell, not a contract of conditional sale.
In both contracts to sell and contracts of conditional sale, title to the
property remains with the seller until the buyer fully pays the purchase price.
Both contracts are subject to the positive suspensive condition of the buyer’s
full payment of the purchase price.
In a contract of conditional sale, the buyer automatically acquires
title to the property upon full payment of the purchase price. This transfer of
title is "by operation of law without any further act having to be performed
by the seller." In a contract to sell, transfer of title to the prospective buyer is
not automatic. "The prospective seller must convey title to the property
through a deed of conditional sale."
The distinction is important to determine the applicable laws and
remedies in case a party does not fulfill his or her obligations under the
contract. In contracts of conditional sale, our laws on sales under the Civil
Code of the Philippines apply. On the other hand, contracts to sell are not
governed by our law on sales but by the Civil Code provisions on conditional
obligations.
Specifically, Article 1191 of the Civil Code on the right to rescind
reciprocal obligations does not apply to contracts to sell. As this court
explained in Ong v. Court of Appeals, failure to fully pay the purchase price in
contracts to sell is not the breach of contract under Article 1191. Failure to
fully pay the purchase price is "merely an event which prevents the seller’s
obligation to convey title from acquiring binding force." This is because
"there can be no rescission of an obligation that is still nonexistent, the
suspensive condition not having happened."
In this case, Castillo reserved his title to the property and undertook
to execute a deed of absolute sale upon Olivarez Realty Corporation’s full
payment of the purchase price. Since Castillo still has to execute a deed of
absolute sale to Olivarez Realty Corporation upon full payment of the
purchase price, the transfer of title is not automatic. The contract in this case
is a contract to sell.
As this case involves a contract to sell, Article 1191 of the Civil Code
of the Philippines does not apply. The contract to sell is instead cancelled,
and the parties shall stand as if the obligation to sell never existed.
Olivarez Realty Corporation shall return the possession of the
property to Castillo. Any improvement that Olivarez Realty Corporation may
have introduced on the property shall be forfeited in favor of Castillo per
paragraph I of the deed of conditional sale:
I. Immediately upon signing this Contract, Olivarez Realty
Corporation shall be entitled to occupy, possess and develop the subject
property. In case this Contract is cancelled, any improvement introduced by
Olivarez Realty Corporation on the property shall be forfeited in favor of
Castillo.
As for prospective sellers, this court generally orders the
reimbursement of the installments paid for the property when setting aside
contracts to sell. This is true especially if the property’s possession has not
been delivered to the prospective buyer prior to the transfer of title.
In this case, however, Castillo delivered the possession of the
property to Olivarez Realty Corporation prior to the transfer of title. We
cannot order the reimbursement of the installments paid.
In Gomez v. Court of Appeals, the City of Manila and Luisa Gomez
entered into a contract to sell over a parcel of land. The city delivered the
property’s possession to Gomez. She fully paid the purchase price for the
property but violated the terms of the contract to sell by renting out the
property to other persons. This court set aside the contract to sell for her
violation of the terms of the contract to sell. It ordered the installments paid
forfeited in favor of the City of Manila "as reasonable compensation for
Gomez’s use of the property" for eight years.
In this case, Olivarez Realty Corporation failed to fully pay the
purchase price for the property. It only paid ₱2,500,000.00 out of the
₱19,080,490.00 agreed purchase price. Worse, petitioner corporation has
been in possession of Castillo’s property for 14 years since May 5, 2000 and
has not paid for its use of the property.
Similar to the ruling in Gomez, we order the ₱2,500,000.00 forfeited
in favor of Castillo as reasonable compensation for Olivarez Realty
Corporation’s use of the property.
III
Olivarez Realty Corporation is liable for moral and exemplary damages and
attorney’s fees
We note that the trial court erred in rendering summary judgment
on the amount of damages. Under Section 3, Rule 35 of the 1997 Rules of
Civil Procedure, summary judgment may be rendered, except as to the
amount of damages.
In this case, the trial court erred in forfeiting the ₱2,500,000.00 in
favor of Castillo as damages under Article 1191 of the Civil Code of the
Philippines. As discussed, there is no breach of contract under Article 1191 in
this case.
The trial court likewise erred in rendering summary judgment on the
amount of moral and exemplary damages and attorney’s fees.
Nonetheless, we hold that Castillo is entitled to moral damages,
exemplary damages, and attorney’s fees.
Moral damages may be awarded in case the claimant experienced
physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar
injury.
As for exemplary damages, they are awarded in addition to moral
damages by way of example or correction for the public good. Specifically in
contracts, exemplary damages may be awarded if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent manner.
Under the deed of conditional sale, Olivarez Realty Corporation may
only suspend the monthly down payment in case Castillo fails to clear the
land of the tenants six months from the signing of the instrument. Yet, even
before the sixth month arrived, Olivarez Realty Corporation withheld
payments for Castillo’s property. It even used as a defense the fact that no
case was filed against the Philippine Tourism Authority when, under the deed
of conditional sale, Olivarez Realty Corporation was clearly responsible for
initiating action against the Philippine Tourism Authority. These are
oppressive and malevolent acts, and we find Castillo entitled to ₱500,000.00
moral damages and ₱50,000.00 exemplary damages:
Plaintiff Castillo is entitled to moral damages because of the evident
bad faith exhibited by defendants in dealing with him regarding the sale of
his lot to defendant Olivarez Realty Corporation. He suffered much prejudice
due to the failure of defendants to pay him the balance of purchase price
which he expected to use for his needs which caused him wounded feelings,
sorrow, mental anxiety and sleepless nights for which defendants should pay
₱500,000.00 as moral damages more than six (6) years had elapsed and
defendants illegally and unfairly failed and refused to pay their legal
obligations to plaintiff, unjustly taking advantage of a poor uneducated man
like plaintiff causing much sorrow and financial difficulties. Moral damages in
favor of plaintiff is clearly justified . . . Castillo is also entitled to ₱50,000.00
as exemplary damages to serve as a deterrent to other parties to a contract
to religiously comply with their prestations under the contract.
We likewise agree that Castillo is entitled to attorney’s fees in
addition to the exemplary damages.132 Considering that Olivarez Realty
Corporation refused to satisfy Castillo’s plainly valid, just, and demandable
claim, the award of ₱50,000.00 as attorney’s fees is in order. However, we
find that Dr. Pablo R. Olivarez is not solidarily liable with Olivarez Realty
Corporation for the amount of damages.
Under Article 1207 of the Civil Code of the Philippines, there is
solidary liability only when the obligation states it or when the law or the
nature of the obligation requires solidarity. In case of corporations, they are
solely liable for their obligations. The directors or trustees and officers are
not liable with the corporation even if it is through their acts that the
corporation incurred the obligation. This is because a corporation is separate
and distinct from the persons comprising it.
As an exception to the rule, directors or trustees and corporate
officers may be solidarily liable with the corporation for corporate obligations
if they acted "in bad faith or with gross negligence in directing the corporate
affairs."
In this case, we find that Castillo failed to prove with preponderant
evidence that it was through Dr. Olivarez’s bad faith or gross negligence that
Olivarez Realty Corporation failed to fully pay the purchase price for the
property. Dr. Olivarez’s alleged act of making Castillo sign the deed of
conditional sale without explaining to the latter the deed’s terms in Tagalog
is not reason to hold Dr. Olivarez solidarily liable with the corporation.
Castillo had a choice not to sign the deed of conditional sale. He could have
asked that the deed of conditional sale be written in Tagalog. Thus, Olivarez
Realty Corporation issolely liable for the moral and exemplary damages and
attorney’s fees to Castillo.
IV
The trial court acquired jurisdiction over Castillo’s action as he paid the
correct docket fees
Olivarez Realty Corporation and Dr. Olivarez claimed that the trial
court had no jurisdiction to take cognizance of the case. In the reply/motion
to dismiss the complaint they filed with the Court of Appeals, petitioners
argued that Castillo failed to pay the correct amount of docket fees. Stating
that this action is a real action, petitioners argued that the docket fee Castillo
paid should have been based on the fair market value of the property. In this
case, Castillo only paid 4,297.00, which is insufficient "if the real nature of
the action was admitted and the fair market value of the property was
disclosed and made the basis of the amount of docket fees to be paid to the
court."139 Thus, according to petitioners, the case should be dismissed for
lack of jurisdiction.
Castillo countered that his action for rescission is an action incapable
of pecuniary estimation. Thus, the Clerk of Court of the Regional Trial Court
of Tanauan City did not err in assessing the docket fees based on his prayer.
We rule for Castillo. In De Leon v. Court of Appeals, this court held
that an action for rescission of contract of sale of real property is an action
incapable of pecuniary estimation. In De Leon, the action involved a real
property. Nevertheless, this court held that "it is the nature of the action as
one for rescission of contract which is controlling." Consequently, the docket
fees to be paid shall be for actions incapable of pecuniary estimation,
regardless if the claimant may eventually recover the real property. This
court said:
. . . the Court in Bautista v. Lim, held that an action for rescission of
contract is one which cannot be estimated and therefore the docket fee for
its filing should be the flat amount of ₱200.00 as then fixed in the former
Rule 141, §141, §5(10). Said this Court:
We hold that Judge Dalisay did not err in considering Civil Case No. V-
144 as basically one for rescission or annulment of contract which is not
susceptible of pecuniary estimation (1 Moran's Comments on the Rules of
Court, 1970 Ed, p. 55; Lapitan vs. Scandia, Inc., L-24668, July 31, 1968, 24
SCRA 479, 781-483).
Consequently, the fee for docketing it is ₱200, an amount already
paid by plaintiff, now respondent Matilda Lim. (She should pay also the two
pesos legal research fund fee, if she has not paid it, as required in Section 4
of Republic Act No. 3870, the charter of the U.P. Law Center).
Thus, although eventually the result may be the recovery of land, it is
the nature of the action as one for rescission of contract which is controlling.
The Court of Appeals correctly applied these cases to the present one. As it
said:
We would like to add the observations that since the action of
petitioners private respondents] against private respondents petitioners is
solely for annulment or rescission which is not susceptible of pecuniary
estimation, the action should not be confused and equated with the "value
of the property" subject of the transaction; that by the very nature of the
case, the allegations, and specific prayer in the complaint, sans any prayer for
recovery of money and/or value of the transaction, or for actual or
compensatory damages, the assessment and collection of the legal fees
should not be intertwined with the merits of the case and/or what may be its
end result; and that to sustain private respondents' petitioners' position on
what the respondent court may decide after all, then the assessment should
be deferred and finally assessed only after the court had finally decided the
case, which cannot be done because the rules require that filing fees should
be based on what is alleged and prayed for in the face of the complaint and
paid upon the filing of the complaint.
Although we discussed that there is no rescission of contract to
speak of in contracts of conditional sale, we hold that an action to cancel a
contract to sell, similar to an action for rescission of contract of sale, is an
action incapable of pecuniary estimation. Like any action incapable of
pecuniary estimation, an action to cancel a contract to sell "demands an
inquiry into other factors" aside from the amount of money to be awarded to
the claimant. Specifically in this case, the trial court principally determined
whether Olivarez Realty Corporation failed to pay installments of the
property’s purchase price as the parties agreed upon in the deed of
conditional sale. The principal nature of Castillo’s action, therefore, is
incapable of pecuniary estimation.
All told, there is no issue that the parties in this case entered into a
contract to sell a parcel of land and that Olivarez Realty Corporation failed to
fully pay the installments agreed upon. Consequently, Castillo is entitled to
cancel the contract to sell.
WHEREFORE, the petition for review on certiorari is DENIED. The
Court of Appeals’ decision dated July 20, 2010 and in CA-G.R. CV No. 91244 is
AFFIRMED with MODIFICATION.
The deed of conditional sale dated April 5, 2000 is declared
CANCELLED. Petitioner Olivarez Realty Corporation shall RETURN to
respondent Benjamin Castillo the possession of the property covered by
Transfer Certificate of Title No. T-19972 together with all the improvements
that petitioner corporation introduced on the property. The amount of
₱2,500,000.00 is FORFEITED in favor of respondent Benjamin Castillo as
reasonable compensation for the use of petitioner Olivarez Realty
Corporation of the property.
Petitioner Olivarez Realty Corporation shall PAY respondent
Benjamin Castillo ₱500,000.00 as moral damages, ₱50,000.00 as exemplary
damages, and ₱50,000.00 as attorney's fees with interest at 6% per annum
from the time this decision becomes final and executory until petitioner
corporation fully pays the amount of damages.
SO ORDERED.
_____________________________________________________________
G.R. No. 167213 October 31, 2006
DARREL CORDERO, EGMEDIO BAUTISTA, ROSEMAY BAUTISTA, MARION
BAUTISTA, DANNY BOY CORDERO, LADYLYN CORDERO and BELEN
CORDERO, petitioners,
vs.
F.S. MANAGEMENT & DEVELOPMENT CORPORATION, respondent.
Assailed via petition for review are issuances of the Court of Appeals
in CA-G.R. CV No. 66198, Decision dated April 29, 2004 which set aside the
decision of Branch 260 of the Regional Trial Court (RTC) of Parañaque in Civil
Case No. 97-067, and Resolution dated February 21, 2005 denying
petitioners’ motion for reconsideration.
On or about October 27, 1994, petitioner Belen Cordero (Belen), in
her own behalf and as attorney-in-fact of her co-petitioners Darrel Cordero,
Egmedio Bautista, Rosemay Bautista, Marion Bautista, Danny Boy Cordero
and Ladylyn Cordero, entered into a contract to sell3 with respondent, F.S.
Management and Development Corporation, through its chairman Roberto
P. Tolentino over five (5) parcels of land located in Nasugbu, Batangas
described in and covered by TCT Nos. 62692, 62693, 62694, 62695 and
20987. The contract to sell contained the following terms and conditions:
1. That the BUYER will buy the whole lots above described from the
OWNER consisting of 50 hectares more or less at P25/sq.m. or with a total
price of P12,500,000.00;
2. That the BUYER will pay the OWNER the sum of P500,000.00 as
earnest money which will entitle the latter to enter the property and relocate
the same, construct the necessary paths and roads with the help of the
necessary parties in the area;
3. The BUYER will pay the OWNER the sum of THREE MILLION FIVE
HUNDRED THOUSAND PESOS ONLY (P3,500,000.00) on or before April 30,
1995 and the remaining balance will be paid within 18 mons. (sic) from the
date of payment of P3.5 Million pesos in 6 equal quarterly payments or
P1,411,000.00 every quarter;
4. The title will be transferred by the OWNER to the BUYER upon
complete payment of the agreed purchase price. Provided that any
obligation by the OWNER brought about by encumbrance or mortgage with
any bank shall be settled by the OWNER or by the BUYER which shall be
deducted the total purchase price;
5. Provided, the OWNER shall transfer the titles to the BUYER even
before the complete payment if the BUYER can provide postdated checks
which shall be in accordance with the time frame of payments as above
stated and which shall be guaranteed by a reputable bank;
6. Upon the payment of the earnest money and the down payment
of 3.5 Million pesos the BUYER can occupy and introduce improvements in
the properties as owner while owner is guaranteeing that the properties will
have no tenants or squatters in the properties and cooperate in the
development of any project or exercise of ownerships by the BUYER;
7. Delay in the payment by the BUYER in the agreed due date will
entitle the SELLER for the legal interest.
Pursuant to the terms and conditions of the contract to sell,
respondent paid earnest money in the amount of P500,000 on October 27,
1994. She likewise paid P1,000,000 on June 30, 1995 and another P1,000,000
on July 6, 1995. No further payments were made thereafter.
Petitioners thus sent respondent a demand letter dated November
28, 1996 informing her that they were revoking/canceling the contract to sell
and were treating the payments already made as payment for damages
suffered as a result of the breach of contract, and demanding the payment of
the amount of P10 Million Pesos for actual damages suffered due to loss of
income by reason thereof. Respondent ignored the demand, however.
Hence, on February 21, 1997, petitioner Belen, in her own behalf and
as attorney-in-fact of her co-petitioners, filed before the RTC of Parañaque a
complaint for rescission of contract with damages alleging that respondent
failed to comply with its obligations under the contract to sell, specifically its
obligation to pay the down payment of P3.5 Million by April 30, 1995, and
the balance within 18 months thereafter; and that consequently petitioners
are entitled to rescind the contract to sell as well as demand the payment of
damages.
In its Answer, respondent alleged that petitioners have no cause of
action considering that they were the first to violate the contract to sell by
preventing access to the properties despite payment of P2.5 Million Pesos;
petitioners prevented it from complying with its obligation to pay in full by
refusing to execute the final contract of sale unless additional payment of
legal interest is made; and petitioners’ refusal to execute the final contract of
sale was due to the willingness of another buyer to pay a higher price.
In its Pre-trial Order10 of June 9, 1997, the trial court set the pre-trial
conference on July 8, 1997 during which neither respondent’s representative
nor its counsel failed to appear. And respondent did not submit a pre-trial
brief, hence, it was declared as in default by the trial court which allowed the
presentation of evidence ex parte by petitioners.
Petitioners presented as witnesses petitioner Belen and one Ma.
Cristina Cleofe. Belen testified on the execution of the contract to sell; the
failure of respondent to make the necessary payments in compliance with
the contract; the actual and moral damages sustained by petitioners as a
result of the breach, including the lost opportunity to sell the properties for a
higher price to another buyer, Ma. Cristina Cleofe; and the attorney’s fees
incurred by petitioners as a result of the suit. Ma. Cristina Cleofe, on the
other hand, testified on the offer she made to petitioners to buy the
properties at P35.00/sq.m. which was, however, turned down in light of the
contract to sell executed by petitioners in favor of the respondent.
Respondent filed a motion to set aside the order of default15 which
was denied by the trial court by Order dated September 12, 1997. Via
petition for certiorari, respondent challenged the said order, but it was
denied by the Court of Appeals.
Meanwhile, the trial court issued its decision18 on November 18,
1997, finding for petitioners and ordering respondent to pay damages and
attorney’s fees. The dispositive portion of the decision reads:
WHEREFORE, premises considered, the contract to sell between the
Plaintiffs and the Defendant is hereby declared as rescinded and the
defendant is likewise ordered to pay the plaintiff:
(1) P4,500,000.00 computed as follows: P5,000,000.00 in actual
damages and P2,000,000.00 in moral and exemplary damages, less
defendant’s previous payment of P2,500,000.00 under the contract to sell;
and
(2) P800,000.00 by way of attorney’s fees as well as the costs of suit.
SO ORDERED. (Underscoring supplied)
Before the Court of Appeals to which respondent appealed the trial
court’s decision, it raised the following errors:
3.01. The Regional Trial Court erred when it awarded plaintiffs-
appellees Five Million Pesos (P5,000,000.00) as actual damages. Corollary
thereto, the Regional Trial Court erred in declaring defendant-appellant to
have acted in wanton disregard of its obligations under the Contract to Sell.
3.02. The Regional Trial Court erred when it awarded plaintiffs-
appellees Two Million Pesos (P2,000,000.00) as moral and exemplary
damages.
3.03. The Regional Trial Court erred when it awarded plaintiffs-
appellees Eight Hundred Thousand Pesos (P800,000.00) as attorney’s fees.
In the assailed decision, the Court of Appeals set aside the contract
to sell, it finding that petitioners’ obligation thereunder did not arise for
failure of respondent to pay the full purchase price. It also set aside the
award to petitioners of damages for not being duly proven. And it ordered
petitioners to return "the amount received from [respondent]." Thus the
dispositive portion of the appellate court’s decision reads:
WHEREFORE, the Decision dated 18 November 1997 of the Regional
Trial Court, Branch 260 of Parañaque City in Civil Case No. 97-067 is hereby
VACATED. A NEW DECISION is ENTERED ordering the SETTING-ASIDE of the
Contract to Sell WITHOUT payment of damages. Plaintiffs-appellees are
further ORDERED TO RETURN THE AMOUNTS RECEIVED from defendant-
appellant. (Underscoring supplied)
SO ORDERED.
Their motion for reconsideration having been denied, petitioners
filed the present petition for review which raises the following issues:
1. Whether the Court of Appeals erred in ruling on the nature of the contract
despite the fact that it was not raised on appeal.
2. Whether or not a contract to sell may be subject to rescission under Article
1191 of the Civil Code.
3. Whether or not the Court of Appeals erred in setting aside the award of
damages.
Petitioners contend that the Court of Appeals erred in ruling on the
nature of the contract to sell and the propriety of the remedy of rescission
under Article 1191 of the Civil Code, these matters not having been raised by
respondents in the assigned errors. In any event, petitioners claim that the
contract to sell involves reciprocal obligations, hence, it falls within the ambit
of Article 1191.
While a party is required to indicate in his brief an assignment of
errors and only those assigned shall be considered by the appellate court in
deciding the case, appellate courts have ample authority to rule on matters
not assigned as errors in an appeal if these are indispensable or necessary to
the just resolution of the pleaded issues.22 Thus this Court has allowed the
consideration of other grounds or matters not raised or assigned as errors, to
wit: 1) grounds affecting jurisdiction over the subject matter; 2) matters
which are evidently plain or clerical errors within the contemplation of the
law; 3) matters the consideration of which is necessary in arriving at a just
decision and complete resolution of the case or to serve the interest of
justice or to avoid dispensing piecemeal justice; 4) matters of record which
were raised in the trial court and which have some bearing on the issue
submitted which the parties failed to raise or which the lower court ignored;
5) matters closely related to an error assigned; and 6) matters upon which
the determination of a question properly assigned is dependent.
In the present case, the nature as well as the characteristics of a
contract to sell is determinative of the propriety of the remedy of rescission
and the award of damages. As will be discussed shortly, the trial court
committed manifest error in applying Article 1191 of the Civil Code to the
present case, a fundamental error which "lies at the base and foundation of
the proceeding, affecting the judgment necessarily," or, as otherwise
expressed, "such manifest error as when removed destroys the foundation of
the judgment." Hence, the Court of Appeals correctly ruled on these matters
even if they were not raised in the appeal briefs.
Under a contract to sell, the seller retains title to the thing to be sold
until the purchaser fully pays the agreed purchase price. The full payment is a
positive suspensive condition, the non-fulfillment of which is not a breach of
contract but merely an event that prevents the seller from conveying title to
the purchaser. The non-payment of the purchase price renders the contract
to sell ineffective and without force and effect.
Since the obligation of petitioners did not arise because of the failure
of respondent to fully pay the purchase price, Article 1191 of the Civil Code
would have no application.
Rayos v. Court of Appeals26 explained:
Construing the contracts together, it is evident that the parties
executed a contract to sell and not a contract of sale. The petitioners
retained ownership without further remedies by the respondents until the
payment of the purchase price of the property in full. Such payment is a
positive suspensive condition, failure of which is not really a breach, serious
or otherwise, but an event that prevents the obligations of the petitioners to
convey title from arising, in accordance with Article 1184 of the Civil Code. x
xx
The non-fulfillment by the respondent of his obligation to pay, which
is a suspensive condition to the obligation of the petitioners to sell and
deliver the title to the property, rendered the contract to sell ineffective and
without force and effect. The parties stand as if the conditional obligation
had never existed. Article 1191 of the New Civil Code will not apply because
it presupposes an obligation already extant. There can be no rescission of an
obligation that is still non-existing, the suspensive condition not having
happened.
The subject contract to sell clearly states that "title will be
transferred by the owner (petitioners) to the buyer (respondent) upon
complete payment of the agreed purchase price." Since respondent failed to
fully pay the purchase price, petitioners’ obligation to convey title to the
properties did not arise. While rescission does not apply in this case,
petitioners may nevertheless cancel the contract to sell, their obligation not
having arisen. This brings this Court to Republic Act No. 6552 (THE REALTY
INSTALLMENT BUYER PROTECTION ACT). In Ramos v. Heruela this Court held:
Articles 1191 and 1592 of the Civil Code are applicable to contracts of
sale. In contracts to sell, RA 6552 applies. In Rillo v. Court of Appeals,30 the
Court declared:
x x x Known as the Maceda Law, R.A. No. 6552 recognizes in
conditional sales of all kinds of real estate (industrial, commercial,
residential) the right of the seller to cancel the contract upon non-payment
of an installment by the buyer, which is simply an event that prevents the
obligation of the vendor to convey title from acquiring binding force. It also
provides the right of the buyer on installments in case he defaults in the
payment of succeeding installments x x x.
The properties subject of the contract having been intended for
commercial, and not for residential, purposes,31 petitioners are entitled to
retain the payments already made by respondent. RA 6552 expressly
recognizes the vendor’s right to cancel contracts to sell on installment basis
industrial and commercial properties with full retention of previous
payments.32 But even assuming that the properties were not intended for
commercial or industrial purpose, since respondent paid less than two years
of installments, it is not entitled to any refund.33 It is on this score that a
modification of the challenged issuances of the appellate court is in order.
Respecting petitioners’ claim for damages, failure to make full
payment of the purchase price in a contract to sell is not really a breach,
serious or otherwise, but, as priorly stated, an event that prevents the
obligation of the vendor to convey title to the property from arising.
Consequently, the award of damages is not warranted in this case.
With regard to attorney’s fees, Article 220835 of the Civil Code
provides that subject to certain exceptions, attorney’s fees and expenses of
litigation, other than judicial costs, cannot be recovered in the absence of
stipulation. None of the enumerated exceptions in Article 2208 is present in
this case. It bears stressing that the policy of the law is to put no premium on
the right to litigate.
WHEREFORE, the assailed Court of Appeals Decision dated April 29,
2004 and the Resolution dated February 21, 2005 in CA-G.R. CV No. 66198
are AFFIRMED with the MODIFICATION that petitioners are entitled to retain
the payments already received from respondent.
SO ORDERED.
_____________________________________________________________
G.R. No. 163075 January 23, 2006
AYALA LIFE ASSURANCE, INC., Petitioner,
vs.
RAY BURTON DEVELOPMENT CORPORATION, Respondent.
Before us for resolution is the petition for review on certiorari
assailing the Decision dated January 21, 2004 of the Court of Appeals in CA-
G.R. CV No. 74635, as well as its Resolution dated April 2, 2004 denying
petitioner’s motion for reconsideration.
The facts are:
On December 22, 1995, Ayala Life Assurance, Inc., petitioner, and
Ray Burton Development Corporation, respondent, entered into a contract
denominated as a "Contract to Sell," with a "Side Agreement" of even date.
In these contracts, petitioner agreed to sell to respondent a parcel of land,
with an area of 1,691 square meters, situated at Madrigal Business Park,
Ayala Alabang Village, Muntinlupa City, covered by Transfer Certificate of
Title No. 186485 of the Registry of Deeds of Makati City. The purchase price
of the land is P55,000.00 per square meter or a total of P93,005,000.00,
payable as follows:
(a) On contract date – P24,181,300.00 representing 26 percent of the
purchase price, inclusive of the P1,000,000.00 option money;
(b) Not later than January 6, 1996 – P3,720,200.00 representing 4
percent of the purchase price to complete 30 percent down payment; and
(c) In consecutive quarterly installments for a period of 5 years from
December 22, 1995 – P65,103,500.00 representing the 70 percent balance of
the purchase price. - -
The contract contains a stipulation in paragraphs 3 and 3.1 for an
"Event of Default." It provides that in case the purchaser (respondent) fails to
pay any installment for any reason not attributable to the seller (petitioner),
the latter has the right to assess the purchaser a late penalty interest on the
unpaid installment at two (2%) percent per month, computed from the date
the amount became due until full payment thereof. And if such default
continues for a period of six (6) months, the seller has the right to cancel the
contract without need of court declaration by giving the purchaser a written
notice of cancellation. In case of such cancellation, the seller shall return to
the purchaser the amount he received, less penalties, unpaid charges and
dues on the property.
Respondent paid thirty (30%) down payment and the quarterly
amortization, including the one that fell due on June 22, 1998.
However, on August 12, 1998, respondent notified petitioner in
writing that it will no longer continue to pay due to the adverse effects of the
economic crisis to its business. Respondent then asked for the immediate
cancellation of the contract and for a refund of its previous payments as
provided in the contract.
Petitioner refused to cancel the contract to sell. Instead, on
November 25, 1999, it filed with the Regional Trial Court, Branch 66, Makati
City, a complaint for specific performance against respondent, docketed as
Civil Case No. 99-2014, demanding from the latter the payment of the
remaining unpaid quarterly installments beginning September 21, 1999 in
the total sum of P33,242,382.43, inclusive of interest and penalties.
Respondent, in its answer, denied any further obligation to
petitioner, asserting that on August 12, 1998, it (respondent) notified the
latter of its inability to pay the remaining installments. Respondent invoked
the provisions of paragraphs 3 and 3.1 of the contract to sell providing for
the refund to it of the amounts paid, less interest and the sum of 25% of all
sums paid as liquidated damages.
After pre-trial, petitioner moved for a summary judgment on the
ground that respondent’s answer failed to tender any genuine issue as to any
material fact, except as to the amount of damages. The trial court granted
the motion and ordered the parties to submit their memoranda.
On December 10, 2001, the trial court rendered a Decision holding
that respondent transgressed the law in obvious bad faith. The dispositive
portion reads:
WHEREFORE, defendant (now respondent) is hereby sentenced and
ordered to pay plaintiff (now petitioner) the sum of P33,242,383.43,
representing the unpaid balance of the principal amount owing under the
contract, interest agreed upon, and penalties. Defendant is further ordered
to pay plaintiff the sum of P200,000.00 as attorney’s fees and the costs of
suit.
Upon full payment of the aforementioned amounts by defendant,
plaintiff shall, as it is hereby ordered, execute the appropriate deed of
absolute sale conveying and transferring full title and ownership of the parcel
of land subject of the sale to and in favor of defendant.
On appeal, the Court of Appeals rendered a Decision dated January
21, 2004 in CA-G.R. CV No. 74635, reversing the trial court’s Decision, thus:
WHEREFORE, the decision appealed from is hereby REVERSED and
SET ASIDE. Ayala Life is hereby ordered to refund all sums paid under the
Contract to Sell, with interest of twelve percent (12%) per annum from 12
August 1998 until fully paid, less the amount equivalent to 25% of the total
amount paid as liquidated damages.
SO ORDERED.
The Court of Appeals ruled that the parties’ transaction in question is
in the nature of a contract to sell, as distinguished from a contract of sale.
Under their contract, ownership of the land is retained by petitioner until
respondent shall have fully paid the purchase price. Its failure to pay the
price in full is not a breach of contract but merely an event that prevents
petitioner from conveying the title to respondent. Under such a situation, a
cause of action for specific performance does not arise. What should govern
the parties’ relation are the provisions of their contract on the "Event of
Default" stated earlier.
Hence, the instant petition for review on certiorari.
Petitioner contends that the Court of Appeals committed a reversible
error in holding that: (a) the remedy of specific performance is not available
in a contract to sell, such as the one at bar; and (b) petitioner is liable to
refund respondent all the sums the latter paid under the contract to sell,
with interest at 12% per annum from August 12, 1998 until fully paid, less the
amount equivalent to 25% of the total amount paid as liquidated damages.
Petitioner argues that by virtue of the contract to sell, it has the right
to choose between fulfillment and rescission of the contract, with damages
in either case. Thus, it is immaterial to determine whether the parties’
subject agreement is a contract to sell or a contract of sale.
In its comment, respondent disputed petitioner’s allegations and
prayed that the petition be denied for lack of merit.
The issues are:
1. Whether respondent’s non-payment of the balance of the purchase price
gave rise to a cause of action on the part of petitioner to demand full
payment of the purchase price; and
2. Whether petitioner should refund respondent the amount the latter paid
under the contract to sell.
At the outset, it is significant to note that petitioner does not dispute
that its December 22, 1995 transaction with respondent is a contract to sell.
It bears stressing that the exact nature of the parties’ contract determines
whether petitioner has the remedy of specific performance.
It is thus imperative that we first determine the nature of the parties’
contract.
The real nature of a contract may be determined from the express
terms of the written agreement and from the contemporaneous and
subsequent acts of the contracting parties. In the construction or
interpretation of an instrument, the intention of the parties is primordial and
is to be pursued. If the terms of the contract are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of its
stipulations shall control. If the words appear to be contrary to the evident
intention of the parties, the latter shall prevail over the former. The
denomination or title given by the parties in their contract is not conclusive
of the nature of its contents.
Here, the questioned agreement clearly indicates that it is a contract
to sell, not a contract of sale. Paragraph 4 of the contract provides:
4. TITLE AND OWNERSHIP OF THE PROPERTY. – The title to the
property shall transfer to the PURCHASER upon payment of the balance of
the Purchase Price and all expenses, penalties and other costs which shall be
due and payable hereunder or which may have accrued thereto. Thereupon,
the SELLER shall execute a Deed of Absolute Sale in favor of the PURCHASER
conveying all the SELLER’S rights, title and interest in and to the Property to
the PURCHASER.
 As correctly stated by the Court of Appeals in its assailed Decision,
"The ruling of the Supreme Court in Lim v. Court of Appeals (182 SCRA 564
[1990]) is most illuminating. In the said case, a contract to sell and a contract
of sale were clearly and thoroughly distinguished from each other, with the
High Tribunal stressing that in a contract of sale, the title passes to the buyer
upon the delivery of the thing sold. In a contract to sell, the ownership is
reserved in the seller and is not to pass until the full payment of the purchase
price is made. In the first case, non-payment of the price is a negative
resolutory condition; in the second case, full payment is a positive suspensive
condition. In the first case, the vendor has lost and cannot recover the
ownership of the property until and unless the contract of sale is itself
resolved and set aside. In the second case, the title remains in the vendor if
the vendee does not comply with the condition precedent of making
payment at the time specified in the contract."
Considering that the parties’ transaction is a contract to sell, can
petitioner, as seller, demand specific performance from respondent, as
buyer?
Black’s Law Dictionary defined specific performance as "(t)he remedy
of requiring exact performance of a contract in the specific form in which it
was made, or according to the precise terms agreed upon. The actual
accomplishment of a contract by a party bound to fulfill it."
Evidently, before the remedy of specific performance may be availed
of, there must be a breach of the contract.
Under a contract to sell, the title of the thing to be sold is retained by
the seller until the purchaser makes full payment of the agreed purchase
price. Such payment is a positive suspensive condition, the non-fulfillment of
which is not a breach of contract but merely an event that prevents the seller
from conveying title to the purchaser. The non-payment of the purchase
price renders the contract to sell ineffective and without force and effect.
Thus, a cause of action for specific performance does not arise.
In Rayos v. Court of Appeals,12 we held:
x x x. Under the two contracts, the petitioners bound and obliged
themselves to execute a deed of absolute sale over the property and transfer
title thereon to the respondents after the payment of the full purchase price
of the property, inclusive of the quarterly installments due on the
petitioners’ loan with the PSB:
Construing the contracts together, it is evident that the parties
executed a contract to sell and not a contract of sale. The petitioners
retained ownership without further remedies by the respondents until the
payment of the purchase price of the property in full. Such payment is a
positive suspensive condition, failure of which is not really a breach, serious
or otherwise, but an event that prevents the obligation of the petitioners to
convey title from arising, in accordance with Article 1184 of the Civil Code
(Leano v. Court of Appeals, 369 SCRA 36 [2001]; Lacanilao v. Court of
Appeals, 262 SCRA 486 [1996]).
The non-fulfillment by the respondent of his obligation to pay, which
is a suspensive condition to the obligation of the petitioners to sell and
deliver the title to the property, rendered the contract to sell ineffective and
without force and effect (Agustin v. Court of Appeals, 186 SCRA 375 [1990]).
The parties stand as if the conditional obligation had never existed. Article
119113 of the New Civil Code will not apply because it presupposes an
obligation already extant (Padilla v. Posadas, 328 SCRA 434 [2001]. There can
be no rescission of an obligation that is still non-existing, the suspensive
condition not having happened (Rillo v. Court of Appeals, 274 SCRA 461
[1997]).
Here, the provisions of the contract to sell categorically indicate that
respondent’s default in the payment of the purchase price is considered
merely as an "event," the happening of which gives rise to the respective
obligations of the parties mentioned therein, thus:
3. EVENT OF DEFAULT. The following event shall constitute an Event
of Default under this contract: the PURCHASER fails to pay any installment on
the balance, for any reason not attributable to the SELLER, on the date it is
due, provided, however, that the SELLER shall have the right to charge the
PURCHASER a late penalty interest on the said unpaid interest at the rate of
2% per month computed from the date the amount became due and payable
until full payment thereof.
3.1. If the Event of Default shall have occurred, then at any time
thereafter, if any such event shall then be continuing for a period of six (6)
months, the SELLER shall have the right to cancel this Contract without need
of court declaration to that effect by giving the PURCHASER a written notice
of cancellation sent to the address of the PURCHASER as specified herein by
registered mail or personal delivery. Thereafter, the SELLER shall return to
the PURCHASER the aggregate amount that the SELLER shall have received as
of the cancellation of this Contract, less: (i) penalties accrued as of the date
of such cancellation, (ii) an amount equivalent to twenty five percent (25%)
of the total amount paid as liquidated damages, and (iii) any unpaid charges
and dues on the Property. Any amount to be refunded to the PURCHASER
shall be collected by the PURCHASER at the office of the SELLER. Upon notice
to the PURCHASER of such cancellation, the SELLER shall be free to dispose of
the Property covered hereby as if this Contract had not been executed.
Notice to the PURCHASER sent by registered mail or by personal delivery to
its address stated in this Contract shall be considered as sufficient
compliance with all requirements of notice for purposes of this Contract.
 Therefore, in the event of respondent’s default in payment,
petitioner, under the above provisions of the contract, has the right to retain
an amount equivalent to 25% of the total payments. As stated by the Court
of Appeals, petitioner having been informed in writing by respondent of its
intention not to proceed with the contract on August 12, 1998, or prior to
incurring delay in payment of succeeding installments,15 the provisions in
the contract relative to penalties and interest find no application.
The Court of Appeals further held that with respect to the award of
interest, petitioner is liable to pay interest of 12% per annum upon the net
refundable amount due from the time respondent made the extrajudicial
demand upon it on August 12, 1998 to refund payment under the Contract to
Sell, pursuant to our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals.
In sum, we find that the Court of Appeals, in rendering the assailed
Decision and Resolution, did not commit any reversible error.
WHEREFORE, the petition is DENIED. The assailed Decision and
Resolution of the Court of Appeals are AFFIRMED. Costs against petitioner.
SO ORDERED.
_____________________________________________________________
G.R. No. 135528 July 14, 2004
SPOUSES ORLANDO A. RAYOS and MERCEDES T. RAYOS, petitioners,
vs.
THE COURT OF APPEALS and SPOUSES ROGELIO and VENUS MIRANDA,
respondents.
This is a petition for review on certiorari of the Decision of the Court
of Appeals in CA-G.R. CV No. 46727 which affirmed the Decision3 of the
Regional Trial Court of Makati, Branch 62, in Civil Case No. 15639 for specific
performance and damages, and Civil Case No. 15984 for sum of money and
damages.
The two (2) cases stemmed from the following antecedent facts:
On December 24, 1985, petitioner Orlando A. Rayos, a practicing
lawyer, and his wife, petitioner Mercedes T. Rayos, secured a short-term loan
from the Philippine Savings Bank (PSB) payable within a period of one (1)
year in quarterly installments of P29,190.28, the first quarterly payment to
start on March 24, 1986. The loan was evidenced by a promissory note which
the petitioners executed on December 24, 1985. To secure the payment of
the loan, the petitioners-spouses executed, on the same date, a Real Estate
Mortgage over their property covered by Transfer Certificate of Title (TCT)
No. 100156 located in Las Piñas, Metro Manila.
On December 26, 1985, the petitioners, as vendors, and the
respondents, Spouses Miranda, as vendees, executed a Deed of Sale with
Assumption of Mortgage over the subject property for the price of
P214,000.00. However, on January 29, 1986, the petitioners-spouses,
likewise, executed a Contract to Sell the said property in favor of the
respondents for P250,000.00 with the following condition:
3. That upon full payment of the consideration hereof, the SELLER
shall execute a Deed of Absolute Sale in favor of the BUYER that the payment
of capital gains tax shall be for the account of the SELLER and that
documentary stamps, transfer tax, registration expenses for the transfer of
title including the notarization and preparation of this Contract and
subsequent documents if any are to be executed, real estate taxes from
January 1, 1986 and other miscellaneous expenses shall be for the account of
the BUYER; the SELLER hereby represents that all association dues has been
paid but that subsequent to the execution of this Contract the payment of
the same shall devolve upon the BUYER.
The petitioners obliged themselves to execute a deed of absolute
sale over the property in favor of the respondents upon the full payment of
the purchase price thereof.
Respondent Rogelio Miranda filed an application dated May 4, 1986
with the PSB to secure the approval of his assumption of the petitioners'
obligation on the loan, and appended thereto a General Information sheet.
Respondent Rogelio Miranda stated therein that he was the Acting Municipal
Treasurer of Las Piñas and had an unpaid account with the Manila Banking
Corporation in the amount of P18,777.31. The PSB disapproved his
application. Nevertheless, respondent Rogelio Miranda paid the first
quarterly installment on the petitioners' loan on March 21, 1986 in the
amount of P29,190.28. The said amount was paid for the account of the
petitioners. Respondent Rogelio Miranda, likewise, paid the second quarterly
installment in the amount of P29,459.00 on June 23, 1986, also for the
account of the petitioners.
In the meantime, respondent Rogelio Miranda secured the services
of petitioner Orlando Rayos as his counsel in a suit he filed against the Manila
Banking Corporation, relative to a loan from the bank in the amount of
P100,000.00. Both parties agreed to the payment of attorney's fees, as
follows:
Our agreement is as follows:
1. You will pay me P700.00 as filing fee and other miscellaneous expenses
which I personally received from you this morning;
2. Award to you of any amount in terms of moral, exemplary or actual and
other forms of damages shall accrue to you in the amount of 70% thereof;
3. 30% of the award to you in the concept of No. 2 hereof shall pertain to me
as my contingent fee;
4. All attorney's fees that the court shall award to me or by the management
of TMBC if they agree to extrajudicially settle shall pertain exclusively to me;
5. Execution of judgment expenses shall be for your account;
6. Should the case be appealed, my contingent fee shall increase by 10% if
the appeal is to the Intermediate Appellate Court on questions of facts and
law, and if appealed from there to the Supreme Court, then another 10%
shall accrue to me.
On May 14, 1986, petitioner Orlando Rayos filed respondent Rogelio
Miranda's complaint against the bank with the Regional Trial Court of Makati,
docketed as Civil Case No. 13670.10 In the meantime, the latter paid the
third quarterly installment on the PSB loan account amounting to
P29,215.66, for which the bank issued a receipt for the account of the
petitioners.
The parties executed a Compromise Agreement in Civil Case No.
13670 in which they agreed that each party shall pay for the respective fees
of their respective counsels. The trial court rendered judgment on October
23, 1986 based on the said compromise agreement. Petitioner Orlando Rayos
demanded the payment of attorney's fees in the amount of P5,631.93, but
respondent Rogelio Miranda refused to pay.
On November 12, 1986, petitioner Orlando Rayos wrote to
respondent Rogelio Miranda and enclosed a copy of his motion in Civil Case
No. 13670 for the annotation of his attorney's lien at the dorsal portion of
the latter's title used as security for the loan with the Manila Banking
Corporation. The respondent opposed the motion, claiming that the
petitioner agreed to render professional services on a contingent basis.
Petitioner Orlando Rayos again wrote respondent Rogelio Miranda
on November 30, 1986, reminding the latter of the last quarterly payment of
his loan with the PSB. He also advised the respondent to thereafter request
the bank for the cancellation of the mortgage on his property and to receive
the owner's duplicate of his title over the same. Petitioner Orlando Rayos
also wrote that their dispute over his attorney's fees in Civil Case No. 13670
should be treated differently.
Petitioner Orlando Rayos then received a Letter dated November 27,
1986 from the PSB, reminding him that his loan with the bank would mature
on December 24, 1986, and that it expected him to pay his loan on or before
the said date. Fearing that the respondents would not be able to pay the
amount due, petitioner Orlando Rayos paid P27,981.41 to the bank on
December 12, 1986, leaving the balance of P1,048.04. In a Letter dated
December 18, 1986, the petitioner advised the PSB not to turn over to the
respondents the owner's duplicate of the title over the subject property,
even if the latter paid the last quarterly installment on the loan, as they had
not assumed the payment of the same.
On December 24, 1986, respondent Rogelio Miranda arrived at the
PSB to pay the last installment on the petitioners' loan in the amount of
P29,223.67. He informed the bank that the petitioners had executed a deed
of sale with assumption of mortgage in their favor, and that he was paying
the balance of the loan, conformably to said deed. On the other hand, the
bank informed the respondent that it was not bound by said deed, and
showed petitioner Orlando Rayos' Letter dated December 18, 1986. The
respondent was also informed that the petitioners had earlier paid the
amount of P27,981.41 on the loan. The bank refused respondent Rogelio
Miranda's offer to pay the loan, and confirmed its refusal in a Letter dated
December 24, 1986.
On even date, respondent Rogelio Miranda wrote the PSB, tendering
the amount of P29,223.67 and enclosed Interbank Check No. 01193344
payable to PSB. Thereafter, on December 29, 1986, the petitioners paid the
balance of their loan with the bank in the amount of P1,081.39 and were
issued a receipt therefor. On January 2, 1987, the PSB wrote respondent
Rogelio Miranda that it was returning his check.
On January 2, 1987, respondent Rogelio Miranda filed a complaint
against the petitioners and the PSB for damages with a prayer for a writ of
preliminary attachment with the RTC of Makati. The case was docketed as
Civil Case No. 15639 and raffled to Branch 61 of the court. The respondent
alleged inter alia that the petitioners and the PSB conspired to prevent him
from paying the last quarterly payment of the petitioners' loan with the
bank, despite the existence of the deed of sale with assumption of mortgage
executed by him and the petitioners, and in refusing to turn over the owner's
duplicate of TCT No. 100156, thereby preventing the transfer of the title to
the property in his name. Respondent Rogelio Miranda prayed that:
WHEREFORE, it is respectfully prayed that judgment be rendered in
favor of plaintiff and against defendants, ordering the latter, jointly and
severally, as follows:
(a) To pay to plaintiff the sum of P267,197.33, with legal interest from date
of demand, as actual or compensatory damages representing the unreturned
price of the land;
(b) To pay to plaintiff the sum of P500,000.00 as consequential damages;
(c) To pay to plaintiff the sum of P1,000,000.00 as moral damages;
(d) To pay to plaintiff the sum of P100,000.00 as exemplary damages by way
of example or correction for the public good;
(e) To pay to plaintiff the sum of P100,000.00 for and as attorney's fees;
(f) To pay for the costs of suit; and
(g) That a Writ of Attachment be issued against the properties of defendant
Rayos spouses as security for the satisfaction of any judgment that may be
recovered.
 PLAINTIFF FURTHER PRAYS for such other remedies and relief as are
just or equitable in the premises.
The trial court granted the respondent's plea for a writ of preliminary
attachment on a bond of P260,000.00. After posting the requisite bond, the
respondent also filed a criminal complaint against petitioner Orlando Rayos
for estafa with the Office of the Provincial Prosecutor of Makati, docketed as
I.S. No. 87-150. He, likewise, filed a complaint for disbarment in this Court
against petitioner Orlando Rayos, docketed as Administrative Case No. 2974.
Unaware of the said complaint, the petitioner wrote the respondent on
January 3, 1986 that as soon as his payment to the PSB of P29,223.67 was
refunded, the owner's duplicate of the title would be released to him.24 On
January 5, 1986, petitioner Orlando Rayos wrote respondent Rogelio
Miranda, reiterating that he would release the title in exchange for his cash
settlement of P29,421.41.25 The respondent failed to respond.
In the meantime, the PSB executed on January 8, 1987 a Release of
Real Estate Mortgage in favor of the petitioners,26 and released the owner's
duplicate of title of TCT No. 100156.27 On January 17, 1987, petitioner
Orlando Rayos wrote respondent Rogelio Miranda, reiterating his stance in
his Letters of January 3 and 5, 1987.
In the meantime, the petitioners received the complaint in Civil Case
No. 15639 and filed their Answer with Counterclaim in which they alleged
that:
14. That plaintiff has no cause of action against defendants Rayos,
the latter are willing to deliver the title sought by plaintiff under the terms
set out in their letters dated January 3, 5, 17, and 20, hereto marked as
Annexes "1," "1-A," "1-B" and "1-C;"
Petitioner Orlando Rayos filed a complaint on February 1, 1987
against respondent Rogelio Miranda with the Regional Trial Court of Makati,
docketed as Civil Case No. 15984 for Specific Performance with Damages for
the collection of the amount of P29,223.67 which he had paid to the PSB on
December 12 and 19, 1986, and his attorney's fees in Civil Case No. 13670.
The trial court consolidated the cases in Branch 62 of the RTC.
Respondent Rogelio Miranda filed an Amended Complaint in Civil
Case No. 15639 for specific performance with damages, impleading the
officers of the PSB as parties-defendants. He alleged that of the purchase
price of the property of P214,000.00, he had paid the entirety thereof to the
petitioners, and that petitioner Orlando Rayos acted unethically in trying to
collect P5,631.93 from him as his attorney's fees in Civil Case No. 13670, and
in having such claim annotated at the dorsal portion of his title over the
property he mortgaged to the Manila Banking Corporation.
Respondent Rogelio Miranda prayed that, after due proceedings,
judgment be rendered in his favor, thus:
WHEREFORE, it is respectfully prayed that judgment be rendered in
favor of plaintiff and against defendants, as follows:
(a) Ordering defendants spouses Orlando A. Rayos and Mercedes T. Rayos to
deliver forthwith to plaintiff the Owner's Duplicate of Transfer Certificate of
Title No. 100156, Registry of Deeds for Pasay City;
(b) Ordering defendants, jointly and severally, to pay to plaintiff the sum of
P1,000,000.00 as moral damages;
(c) Ordering defendants, jointly and severally, to pay to plaintiff the sum of
P867,197.33 as exemplary damages by way of example or correction for the
public good;
(d) Ordering defendants, jointly and severally, to pay to plaintiff the sum of
P100,000.00 for and as attorney's fees;
(e) Ordering defendants, jointly, to pay the costs of suit; and
(f) Ordering the issuance of a Writ of Attachment against the properties of
defendants Rayos spouses as security for the satisfaction of any judgment
that may be recovered.
PLAINTIFF further prays for such other remedies and relief as are just
or equitable in the premises.
In the meantime, petitioner Orlando Rayos filed an Amended
Complaint in Civil Case No. 15984 impleading his wife and that of respondent
Rogelio Miranda as parties to the case. On March 4, 1987, the trial court
issued an Order granting the petitioners' motion in Civil Case No. 15639 for
the discharge of the attachment on their property. The court also denied the
respondents' motion for reconsideration of the Order of the court. The
respondents, thereafter, filed a petition for review with the Court of Appeals
for the nullification of the said Order.
On July 9, 1987, the public prosecutor dismissed the charge of estafa
against petitioner Orlando Rayos. The respondents appealed the resolution
to the Department of Justice.
On May 26, 1987, the PSB and its officers filed their Answer in Civil
Case No. 15639, and alleged the following by way of special and/or
affirmative defenses, thus:
27. The application for the plaintiff to assume the mortgage loan of the
defendants Spouses Rayos was not approved, and it was NOT even
recommended by the Marketing Group of defendant PSBank for approval by
its Top Management, because the credit standing of the plaintiff was found
out to be not good;
28. The acceptance of the payments made by the plaintiff for three (3)
amortizations on the loan of defendants Spouses Rayos was merely allowed
upon the insistence of the plaintiff, which payments were duly and
accordingly receipted, and said acceptance was in accordance with the terms
of the Real Estate Mortgage executed by the defendants Spouses Rayos in
favor of the defendant PSBank and is also allowed by law;
The parties in Civil Case No. 15639 agreed to submit the case for the
trial court's decision on the basis of their pleadings and their respective
affidavits. In a Resolution dated July 26, 1988, then Undersecretary of Justice
Silvestre Bello III affirmed the Public Prosecutor's resolution in I.S. No. 87-
150.
On January 30, 1989, the petitioners sold the property to Spouses
Mario and Enriqueta Ercia for P144,000.00. The said spouses were not
impleaded as parties-defendants in Civil Case No. 15639. On May 18, 1989,
the petitioners filed an amended complaint in Civil Case No. 15984,
appending thereto a copy of the Contract to Sell in favor of the respondents.
The trial court admitted the said complaint.
On November 15, 1989, this Court rendered its Decision dismissing
the complaint for disbarment against Rayos.
On January 29, 1993, the trial court rendered judgment, the
dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered, as
follows:
I. (a) In Civil Case No. 15639, this Court orders plaintiff Rogelio
Miranda to refund to spouses Orlando and Mercedes T. Rayos the total sum
of P29,069.45, Rayos paid to PS Bank as the last amortization and as release
of mortgage fee, without any interest; and upon receipt of the sum of
P29,069.45 from Rogelio Miranda, Spouses Orlando and Mercedes T. Rayos
shall deliver to Rogelio Miranda Transfer Certificate of Title No. 100156 of
the Registry of Deeds of Pasay City; and, deliver to Rogelio Miranda the
possession of the parcel of land described in the said title;
(b) Dismissing the complaint for damages of Plaintiff Rogelio Miranda
against Spouses Orlando and Remedios (sic) T. Rayos, Philippine Savings
Bank, Jose Araullo, Cesar I. Valenzuela, Dionisio Hernandez, Nestor E.
Valenzuela, Raul T. Totanes, and Belinda Lim, for insufficiency of evidence;
while the counterclaims of PS Bank, Jose Araullo, Cesar Valenzuela, Dionisio
Hernandez, Nestor E. Valenzuela, Raul Totanes, and Belinda Lim, are likewise
dismissed for insufficiency of evidence.
(c) The counterclaims of Spouses Orlando and Mercedes T. Rayos will
be treated in Civil Case No. 15984;
II. In Civil Case No. 15984, this Court orders Defendant Rogelio Miranda to
pay to Plaintiff Orlando Rayos the sum of P4,133.19 at 12% interest per
annum, from the date of the filing of the complaint on Feb. 11, 1987 until
fully paid.
No costs in both cases.
SO ORDERED.
The petitioners appealed the decision to the Court of Appeals contending
that:
I. THE COURT A QUO COMMITTED A GRAVE ERROR IN NOT FINDING THAT
ROGELIO A. MIRANDA COMMITTED A BREACH OF CONTRACT IN NOT PAYING
THE FULL CONTINGENT FEE OF 30% IN WRITING IN THE MANILABANK CASE
AND BECAUSE OF THAT BREACH, HE CANNOT NOW DEMAND SPECIFIC
PERFORMANCE AND THE COURT A QUO SHOULD HAVE LEFT THE PARTIES AS
THEY ARE;
II. THE COURT A QUO SIMILARLY COMMITTED AN ERROR IN NOT FINDING
THAT THE DECISION IN "SEVA VS. ALFREDO BERWIN & CO. & MEDEL" IS
APPLICABLE FOUR SQUARE WHEREBY HE WHO BREACHES HIS CONTRACT IS
NOT ENTITLED TO SPECIFIC PERFORMANCE;36
On July 27, 1998, the Court of Appeals rendered judgment affirming
with modification the decision of the RTC, thus:
WHEREFORE, premises considered, the appealed decision of the
Regional Trial Court of Makati City, is hereby AFFIRMED, with the
modification abovestated.
The petitioners filed the instant petition, and ascribed the following
errors on the appellate court:
I. THE COURT OF APPEALS (CA) COMMITTED AN ERROR IN NOT FINDING
THAT THE PRIVATE RESPONDENT MIRANDA COMMITTED THE FIRST BREACH
FOR FAILURE TO ASSUME THE LOAN THUS HE FAILED TO SURROGATE (sic)
HIMSELF TO PSB.
II. THE CA COMMITTED AN ERROR IN FINDING THAT PETITIONERS PRE-
EMPTED PRIVATE RESPONDENT MIRANDA IN DEPOSITING THE LAST
AMORTIZATION WHEN MIRANDA HAD NO LEGAL STANDING WITH PSB DUE
TO THE LATTER'S NON-APPROVAL OF THE ASSUMPTION OF THE LOAN.
III. THE CA COMMITTED AN ERROR IN FINDING BOTH PARTIES GUILTY OF
FIRST VIOLATING THE OBLIGATIONS INCUMBENT UPON THEM EVEN
INFERRING THAT PETITIONERS COMMITTED THE BREACH FIRST BUT LATER
CONCLUDING THAT THE BREACH WAS COMMITTED BY BOTH PARTIES. IT DID
NOT MAKE A CORRECT ASSESSMENT OF WHO ACTUALLY COMMITTED THE
FIRST BREACH.

IV. THE CA COMMITTED AN ERROR IN NOT ALLOWING THE OFFSET IF ITS
DECISION STOOD OF THE AMOUNT OF P4,133.19 PLUS 12% INT. P.A. FROM
THE FILING OF THE COMPLAINT (CV 15984), THUS, ENTIRELY DISREGARDING
THE DECISION OF THE TRIAL COURT IN SAID CASE ALLOWING ONLY THE
DECISION IN CV 15639.
V. THE CA COMMITTED AN ERROR IN NOT APPLYING THE DECSION (sic) LAID
DOWN IN "SEVA VS. ALFRED BERWIN & CO. AND MEDEL" THAT A PERSON
HIMSELF AT FAULT CANNOT ENFORCE SPECIFIC PERFORMANCE.
The petitioners assert that the Court of Appeals erred in not finding
that the respondents first committed a breach of their contract to sell upon
their failure to pay the amount due for the last quarterly installment of their
loan from the PSB. The petitioners fault the Court of Appeals for not relying
on the resolution of Undersecretary Silvestre Bello III affirming the dismissal
of the criminal complaint for estafa in I.S. No. 87-150, as cited by this Court in
its decision in Miranda v. Rayos,39 where it was also held that petitioner
Orlando Rayos paid the last quarterly installment because he thought that
the respondents would not be able to pay the same. The petitioners argue
that they had no other alternative but to pay the last quarterly installment
due on their loan with the PSB, considering that they received a demand
letter from the bank on November 28, 1986, coupled by its denial of the
respondents' request to assume the payment of the loan. They insist that
they did not block the respondents' payment of the balance of the loan with
the bank. The petitioners contend that even if the parties committed a
breach of their respective obligations under the contract to sell, it behooved
the Court of Appeals to apply Article 1192 of the Civil Code in the instant
case, which reads:
… The power to rescind obligation is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent upon
him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either case. He
may also seek rescission, even after he has chosen fulfillment, if the latter
should become impossible.
The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with articles 1385 and
1388 and the Mortgage Law.
The petition has no merit.
The assailed ruling of the Court of Appeals reads:
After due study, the Court finds that there was no basis in fact and
law for the appellants to usurp the payment of the last amortization on the
mortgage upon the parcel of land it had conveyed to the Mirandas. Even if
the appellants wanted to keep their good credit standing, they should not
have preempted Miranda in paying the final amortization. There is no
sufficient showing that Miranda was in danger of defaulting on the said
payment. In fact, it appears that he approached the bank to tender payment,
but he was refused by the bank, because he was beaten to the draw, so to
speak, by the appellants. Appellants were able to do so because, for some
reasons, the Mirandas' assumption of the mortgage has not been approved
by the bank. In doing so, the appellants had unilaterally cancelled the deed of
sale with assumption of mortgage, without the consent of the Mirandas. This
conduct by the appellants is, to say the least, injudicious as under Article
1308 of the Civil Code, contracts must bind both contracting parties and their
validity or compliance cannot be left to the will of one of them.
Just as nobody can be forced to enter into a contract, in the same
manner, once a contract is entered into, no party can renounce it unilaterally
or without the consent of the other. It is a general principle of law that no
one may be permitted to change his mind or disavow and go back upon his
own acts, or to proceed contrary thereto, to the prejudice of the other party.
In a regime of law and order, repudiation of an agreement validly entered
into cannot be made without any ground or reason in law or in fact for such
repudiation.
In the same way that the Rayos spouses must respect their contract
with the Mirandas for the sale of real property and assumption of mortgage,
Rogelio Miranda has to recognize his obligations under his agreement to pay
contingent attorney's fees to Orlando Rayos.40
The Court of Appeals erred in so ruling.
The findings and disquisitions of the Court of Appeals cannot prevail
over our findings in Miranda v. Rayos,41 a case which involves the same
parties, and where we held that the petitioners cannot be faulted for paying
the amortization due for the last quarterly installment on their loan with the
PSB:
It is difficult to imagine that complainant would be so naïve as to be
totally unaware of the provisions of the original contract between the PSB
and the spouses Rayos. He is a degree holder (A.B. Pre-Law and B.S.C.) and
Acting Municipal Treasurer of Las Piñas. In short, he is not an ordinary
layman. As a buyer with a knowledge of law, it was unnatural for him to read
the provisions of the real estate mortgage wherein it is provided, among
others, that the sale of the property covered by the mortgage does not in any
manner relieve the mortgagor of his obligation but that "on the contrary,
both the vendor and the vendee, or the party in whose favor the alienation
or encumbrance is made shall be, jointly and severally, liable for said
mortgage obligations." There is every reason to believe that it was pursuant
to the said provision in the real estate mortgage that complainant tried to
assume the loan obligation of the Rayoses by filling up and submitted the
loan application (page 30, records) sent by Orland Rayos. By signing the loan
application and the general information sheet (page 31, records) in
connection with said application, complainant showed that he knew that
there was a need to formally apply to the bank in order for him to assume
the mortgage.
We find respondent spouses' version that when complainant's
application to assume the mortgage loan was disapproved he begged that he
be allowed to pay the quarterly amortization credible, owing to the fact that
complainant made the payments for the account of the Rayoses.
Hence, complainant knew that since his application to the PSB was
not approved, there was no substitution of parties and so he had to pay for
the account of respondent spouses as shown by the receipts issued by the
PSB.
As for the charge that Rayos paid the last installment to block
complainant from getting the title and transferring the same to his name,
respondents' version is more satisfactory and convincing. Respondent Orland
Rayos paid the last amortization when it became apparent that complainant
would not be able to give the payment on the due date as he was still trying
to sell his Lancer car. Even if complainant was able to pay the last installment
of the mortgage loan, the title would not be released to him as he knew very
well that his application to assume the mortgage was disapproved and he
had no personality as far as PSB was concerned.
Contrary to the ruling of the Court of Appeals, the petitioners did not
unilaterally cancel their contract to sell with the respondents when they paid
the total amount of P29,062.80 to the PSB in December 1986. In fact, the
petitioners wrote the respondents on January 3, 5 and 17, 1987, that they
were ready to execute the deed of absolute sale and turn over the owner's
duplicate of TCT No. 100156 upon the respondents' remittance of the
amount of P29,223.67. The petitioners reiterated the same stance in their
Answer with Counterclaim in Civil Case No. 15639. The petitioners cannot,
likewise, be faulted for refusing to execute a deed of absolute sale over the
property in favor of the respondents, and in refusing to turn over the owner's
duplicate of TCT No. 100156 unless the respondents refunded the said
amount. The respondents were obliged under the contract to sell to pay the
said amount to the PSB as part of the purchase price of the property. On the
other hand, it cannot be argued by the petitioners that the respondents
committed a breach of their obligation when they refused to refund the said
amount.
It bears stressing that the petitioners and the respondents executed
two interrelated contracts, viz: the Deed of Sale with Assumption of
Mortgage dated December 26, 1985, and the Contract to Sell dated January
29, 1986. To determine the intention of the parties, the two contracts must
be read and interpreted together.44 Under the two contracts, the petitioners
bound and obliged themselves to execute a deed of absolute sale over the
property and transfer title thereon to the respondents after the payment of
the full purchase price of the property, inclusive of the quarterly installments
due on the petitioners' loan with the PSB:
3. That upon full payment of the consideration hereof, the SELLER shall
execute a Deed of Absolute Sale in favor of the BUYER that the payment of
capital gains tax shall be for the account of the SELLER and that documentary
stamps, transfer tax, registration expenses for the transfer of title including
the notarization and preparation of this Contract and subsequent documents
if any are to be executed, real estate taxes from January 1, 1986 and other
miscellaneous expenses shall be for the account of the BUYER; the SELLER
hereby represents that all association dues has been paid but that
subsequent to the execution of this Contract the payment of the same shall
devolve upon the BUYER.
Construing the contracts together, it is evident that the parties
executed a contract to sell and not a contract of sale. The petitioners
retained ownership without further remedies by the respondents46 until the
payment of the purchase price of the property in full. Such payment is a
positive suspensive condition, failure of which is not really a breach, serious
or otherwise, but an event that prevents the obligation of the petitioners to
convey title from arising, in accordance with Article 1184 of the Civil Code.47
In Lacanilao v. Court of Appeals,48 we held that:
It is well established that where the seller promised to execute a
deed of absolute sale upon completion of payment of the purchase price by
the buyer, the agreement is a contract to sell. In contracts to sell, where
ownership is retained by the seller until payment of the price in full, such
payment is a positive suspensive condition, failure of which is not really a
breach but an event that prevents the obligation of the vendor to convey
title in accordance with Article 1184 of the Civil Code.
The non-fulfillment by the respondent of his obligation to pay, which
is a suspensive condition to the obligation of the petitioners to sell and
deliver the title to the property, rendered the contract to sell ineffective and
without force and effect. The parties stand as if the conditional obligation
had never existed. Article 1191 of the New Civil Code will not apply because
it presupposes an obligation already extant. There can be no rescission of an
obligation that is still non-existing, the suspensive condition not having
happened.
However, the respondents may reinstate the contract to sell by
paying the P29,223.67, and the petitioners may agree thereto and accept the
respondents' late payment.52 In this case, the petitioners had decided
before and after the respondents filed this complaint in Civil Case No. 15639
to accept the payment of P29,223.67, to execute the deed of absolute sale
over the property and cause the transfer of the title of the subject property
to the respondents. The petitioners even filed its amended complaint in Civil
Case No. 15984 for the collection of the said amount. The Court of Appeals
cannot, thus, be faulted for affirming the decision of the trial court and
ordering the petitioners to convey the property to the respondents upon the
latter's payment of the amount of P29,223.67, provided that the property
has not been sold to a third-party who acted in good faith.
IN VIEW OF ALL THE FOREGOING, the petition is DENIED DUE
COURSE. The Decision of the Court of Appeals in CA-G.R. CV No. 46727 is
AFFIRMED, except as to the factual finding that the petitioners "usurped the
payment of the last amortization on the mortgage upon the parcel of land."
Costs against the petitioners.
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.
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. 128579 April 29, 1999
The CITY OF CEBU, petitioner,
vs.
HEIRS OF CANDIDO RUBI, namely; MARIA J. RUBI, LINA RUBI BONOAN,
HILDA RUBI BORRES, SYLVIA RUBI MACACHOR, respondents.
This is a petition for review on Certiorari under Rule 45 of the Rules
of Court seeking to set aside the Decision of the Court of Appeals1 dated
October 2, 1996 and the Order denying the Motion for Reconsideration2
dated February 7, 1997 in CA-G.R. CV No. 40098 entitled Heirs of Candido
Rubi, et. al. vs. Mayor Tomas R. Osmeña, et. al.
The following antecedents stated in the decision of the Court of
Appeals are undisputed:
Candido Rubi was a lessor (sic) from the Province of Cebu of a parcel
of land identified as Lot 1141 of the Banilad Estate containing an area of
THIRTY THREE THOUSAND ONE HUNDRED EIGHTY EIGHT (33,188) square
meters, more or less, covered by Transfer Certificate of Title No. RT-5513
(Exh. A).
Paragraph 7 of the contract of lease provides that the lessee shall use
the leased premises for residential and agricultural purposes only and
pursuant to this stipulation, Candido Rubi introduced various improvements,
among which is a residential building constructed in 1961 where he and his
family resided up to the time of his death in 1983.
In 1964, the Province of Cebu conveyed by way of donation to the
City of Cebu two hundred and ten (210) lots among which was Lot 1141
leased to Candido Rubi.
On March 4, 1965, the City Council of Cebu enacted Ordinance No.
522 (Exh. D) authorizing the City Mayor to sell at public auction the 210
province-owned lots donated to defendant City of Cebu, among which was
Lot 1141.
Among the conditions set forth in Ordinance No. 522 (see par. C.)
was that "if the lot is leased, the lessee. . . shall be given the right to equal
the highest bid on the date of the public bidding and if he so equals the
highest bid, he shall be awarded the sale.
On August 5, 1965 after the public bidding held on the same day, the
bidding committee wrote Candido Rubi advising him that the highest bid for
Lot 1141 was submitted by Mr. Miguel Kho in the amount P104,556.00 and
that since he "stated" that he is the actual occupant and "going" to equal the
highest bid, he is advised to deposit with the City Treasurer 5% of
P104,556.00 as earnest money and an additional 15% as downpayment, after
which the corresponding contract of sale will be entered into between him
and the City on August 9, 1965 (Exh. E.).
A day after the bidding, however, on August 6, 1965, a writ of
preliminary injunction was issued in Civil Case 238-BC filed by the province of
Cebu from selling or otherwise disposing any of the 210 lots donated by the
province (Lot 1141 included).
 On July 15, 1974, on the basis of a compromise agreement entered
into in Civil Case No. 238-BC, Lot No. 1141, among others, was adjudicated to
defendant City of Cebu. By this time, Lot 1141 had already been subdivided
into Lots 1141-A, 1141-B, 1141-C and 1141-D, the last the lot subject of the
case, containing an area of 11,779 square meters where the house of
Candido Rubi stands.
On September 19, 1974, the City Council of Cebu through Resolution
No. 1747, authorized the City Mayor to advertise the sale of Lots 1141-A and
1141-D (Exh. M-1).
At the public bidding held on October 1, 1974, there was no bidder
for Lot 1141-D (Exh. M-1).
On January 30, 1976, Candido Rubi paid the amount of P4,500.00
under OR No. 9876421 as bidder's cash bond for Lot No. 1141-D (Exh. N).
On February 3, 1976, Candido Rubi wrote the City Mayor of Cebu
stating that he was one of the bidders of Lots 1141-B, 1141-C and 1141-D in a
bidding held January 30, 1976 at 10:00 a.m. at the Office of the City Mayor
and that as lessee of Lot No. 1141-D he is exercising his option of equaling
the highest bid price at P10.00 per square meter on the area that is on level
ground and P8.00 per square meter on the remaining area (Exh. O).
On March 2, 1976, the Committee on Award awarded "Lot 1141-D
consisting of 11,934 square meters at P10.00 per square meter" to Candido
Rubi (Exh. P).
On March 9, 1976, Mayor Eulogio E. Borres furnished Candido Rubi a
copy of the award and instructed him to make the necessary payment for the
land in order that the deed of sale may be executed in his favor (Exh Q).
On April 7, 1976, the City Appraisal Committee, acting upon the 1st
Indorsment dated April 6, 1976 of the City Mayor indorsing Candido Rubi's
letter dated February 3, 1976 (Exh. O) resolved to appraise a portion of Lot
No. 1141-D containing an area of 6,423 square meters at P10.00 per square
meter and the lower area containing an area of 5511 square meters, more or
less, at P8.00 per square meter" (Exh. T).
On April 23, 1976, Mayor Eulogio Borres again wrote Candido Rubi
furnishing him a copy of Resolution No. 7 of the City of Appraisal Committee
and advising him to pay for the lot within 15 days from receipt thereof (Exh.
U).
On May 11, 1976, Candido Rubi wrote the City Mayor a letter
reading:
By reason of circumstances beyond my control, I regret to inform you
that I am unable to complete the payment for Lot 1141-D as required by your
office. For this reason I most respectfully request that I be given an extension
of the time within which to make the said payment (Exh. V.).
In a 2nd Indorsement, dated December 23, 1980, the City
Administrator referred to the City Attorney "for comment and/or legal
advice" all pertinent correspondence relative to the purchaser of Lot 1141-D
by Candido Rubi "considering that as per documents submitted, Mr. Rubi has
not fully paid the total purchase price of the hereinmentioned lot" (Exh. X).
In a 3rd Indorsement, dated January 6, 1981, the City Attorney
replied to the City Administrator's 2nd Indorsement stating that there
appears to be no legal impediment to the request of Mr. Rubi, however, per
the charter of the City of Cebu, the City Mayor must be clothed with the
corresponding authority from the Sangguniang Panglunsod to sell Lot 1141-D
to Candido Rubi at the price approved by the Committee on Award per
Resolution No. 7 of the City Appraisal Committee dated April 7, 1976 (Exh. Y).
Candido Rubi died on February 17, 1983, survived by his wife, Maria
J. Rubi, and children Lina Rubi Bonoan, Hilda Rubi Borres and Sylvia
Machacor, plaintiffs in the case.
On May 17, 1989, plaintiffs filed the complaint at bench for specific
performance (Record, p. 1). On the same day, plaintiffs tendered the amount
of P103,818.00 to the City Treasurer of Ceby City (Exh. 9) and on June 28,
1989, consigned the amount with the Clerk of Court (Exhs. AA, AA-1 to AA-4).
On January 17, 1991, the Court a quo rendered the appealed
decision dismissing the complaint ad "declaring the defendant to have been
released of its obligation to sell the property to the plaintiffs under the terms
and conditions of the award in 1976, stating:
The Court believes, and so holds, that the contract between the
parties was a mere contract to sell on the part of the defendant City of Cebu
in which the full payment of the price was a positive suspensive condition.
Since the latter condition was not met, the seller's obligation to deliver and
transfer ownership of the property never vested.
The acceptance of a unilateral promise to sell must be plain, clear
and unconditional. Therefore, if there is a qualified acceptance, with terms
different from the offer, there is no acceptance, and there is no perfected
sale. (Beaumonth vs. Prieto 41 Phil 670).
As there was no absolute acceptance on the part of Candid Rubi of
the terms of the Award, nor of the condition of the City acting through the
City Mayor, to pay for the property within the period provided, the
transaction between the parties never ripened into a contract of sale.
Consequently, the defendant cannot be compelled to execute the necessary
documents of conveyance to the plaintiffs. (Decision, pp. 8-9; Rollo, pp. 60-
61).
The Court of Appeals reversed the court a quo. It ruled that there
was a perfected contract of sale but Candido Rubi was not able to make
payments thereunder due to circumstances beyond his control. Such failure
of the buyer to pay within a fixed period does not, by itself, bar the transfer
to ownership or possession, much less dissolve the contract of sale; in the
sale of an immovable under Article 1592 of the Civil Code, the vendee is
allowed to pay for the purchase price so long as no demand has been made
for rescission judicially or by a notarial act. The Court added that the fact that
the obligation was already substantially performed in good faith militates
against the unilateral extinguishment/rescission claimed by the City of Cebu.
In seeking the reversal of the Court of Appeals decision, the
petitioner assigns the following errors:
I. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN
CONSIDERING AND DECLARING THAT THERE WAS A PERFECTED CONTRACT
OF SALE BY AND BETWEEN CANDIDO RUBI AND THE CITY OF CEBU OVER LOT
NO. 1141-D.
II. THAT EVEN CONCEDING GRATIA ARGUMENTI THAT A CONTRACT OF
SALE WAS PERFECTED BY MERE REASON OF THE AWARD OF SALE GRANTED
IN FAVOR OF CANDIDO RUBI, RESPONDENTS' LATE PREDECESSOR-IN-
INTEREST, THE HONORABLE COURT OF APPEALS NEVERTHELESS SERIOUSLY
ERRED IN NOT CONSIDERING THAT SAID CANDIDO RUBI, WAS GUILTY OF
UNREASONABLE DELAY AND/OR LACHES IN COMPLYING WITH THE
CONDITIONS OF THE AWARD.
III. EVEN ASSUMING THAT THERE WAS A PERFECTED CONTRACT OF
SALE, THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DECLARING
THAT THERE WAS NO AUTOMATIC RECESSION OF THE CONTRACT,
NOTWITHSTANDING RESPONDENTS' FAILURE TO PAY THE PRICE AT THE TIME
AGREED UPON.
IV. THAT IT IS PATENTLY ERRONEOUS FOR THE HONORABLE COURT OF
APPEALS TO ORDER HEREIN PETITIONER CITY OF CEBU TO EXECUTE THE
NECESSARY DEED OF CONVEYANCE WITHOUT ORDERING RESPONDENTS TO
PAY LEGAL INTEREST ON THE PURCHASE PRICE RECKONED FROM THE DATE
OF AWARD IN 1976 UNTIL ITS CONSIGNATION IN 1989.
The petitioner reiterates its position that the contract entered into by the
petitioner and Candido Rubi was a contract to sell and the failure of Rubi to
make payment caused the automatic rescission of the obligation. Petitioner
bases its claim on two grounds:
1. that title to the remained with the petitioner, City of Cebu, before
the necessary payment of the purchase price of the lot in question was made
by the respondents; and
2. that there was no written contract which makes the contract
unenforceable under the statute of frauds.5
Petitioner also avers that even if the contract was indeed a contract of sale,
the respondents were guilty of laches in exercising and enforcing their rights.
On the other hand, respondents maintain that the contract entered
into by the City and Rubi was a contract of sale. They argue that a contract of
sale can be perfected without a written document since a contract of sale is a
consensual contract, and since it is a contract of sale, respondents could still
tender payment of the purchase price because no demand to rescind the
contract was made by the petitioner, citing Article 1592 of the Civil Code.
They also assert that there was no delay in the performance of the obligation
by the respondents since the City impliedly granted Rubi an extension of time
to pay the purchase price.
We agree with the Court of Appeals that there was a perfected
contract of sale between the parties. A contract of sale is a consensual
contract and is perfected at the moment there is a meeting of the 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. The elements of a
valid contract of sale under Article 1458 of the Civil Code are (1) consent or
meeting of the minds; (2) determine subject matter; and (3) price certain in
money or its equivalent. All three elements are present in the transaction
between the City of Cebu and Candido Rubi. On February 3, 1976, Candido
Rubi wrote the City Mayor that he was one of the bidders of Lot 1141-D in a
bidding held on January 30, 1976 and that he was exercising his option of
equaling the highest bid price of P10.00 per square meter for the area
containing 6,423 square meter and P8.00 per square meter for the area
containing 5,511 square meters. The acceptance by the city was conveyed in
the letter of Mayor Eulogio Borres informing Rubi of the resolution of the
Appraisal Committee appraising Lot 1141-D at P10.00 for the area of 6,423
square meters and advising him to pay for the lot within 15 days from receipt
thereof. There was a perfected agreement between the City of Cebu and
Rubi whereby the City obligated itself to transfer the ownership of and
deliver Lot 1141-D and Rubi to pay the price. The effect of an unqualified
acceptance of the offer or proposal of the bidder is to perfect a contract,
upon notice of the award to the bidder. 10 An agreement presupposes a
meeting of the minds and when that point is reached in the negotiations
between the parties intending to enter into a contract, the purported
contract is deemed perfected and none of them may thereafter disengage
himself therefrom without being liable to the other in an action for specific
performance.
The deed of sale was never formalized, and there is no documents
the terms of which may be interpreted to determine its legal significance,
particularly whether the parties have entered into a contract of sale or a
contract to sell.
 However, there is nothing in the exchange of correspondence
between the parties namely:
1. Exhibit O — the letter of Candido Rubi addressed to the Mayor
where he notified the Mayor that he was exercising his option of equaling
the highest bid price over Lot No. 1141-D;
2. Exhibit P — the award of the Committee on Awards awarding Lot
1141-D to Candido Rubi;
3. Exhibit Q — the latter of Mayor Eulogio E. Borres to Rubi informing
him to pay for Lot 1141-D;
4. Exhibit T — the appraisal made by the City Appraisal Committee
appraising the value of the lot to be P10.00 per square meter for the area
containing 6,423 square meters and P8.00 per square meter for the area
containing 5,511 square meters; and
5. Exhibit U — the second letter of Mayor Borres again informing Rubi
to pay for Lot 1141-D at the price appraised by the City Appraisal Committee.
taken together with the documents of record, from which it can
reasonably be deduced that the parties intended to enter into a contract to
sell, i.e., one whereby the prospective seller would explicitly reserve 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 full payment of the price, such payment
being a positive suspensive condition, the failure of which is not considered a
breach, casual or serious, but simply an event which prevented the obligation
from acquiring any obligatory force. A contract to sell is commonly entered
into so as to protect the seller against a buyer who intends to buy the
property in installments by withholding ownership over the property until
the buyer effects full payment therefor. In this case, the parties intended to
enter into a contract of sale of Lot 1141-D for a cash price of P108,318.00 in
one payment. The advertisement for bids for Lot 1141-D expressly stated
that the "sale shall be for cash" and Rubi's letter exercising the lessee's
option to equal the equal the bid offered a straight bid of P10.00 per square
meter. Mayor Borres' letter of March 9, 1976 informing Rubi of the award
asked Rubi to make the necessary payment, stating that "This must be made
before we have to execute the deed of sale in your favor and the title to the
lot." 16; and a subsequent letter dated April 23, 1976 requested Rubi "to pay
the lot subject of (your) bid, within fifteen days from receipt hereof." The
assumption of both parties that the offer and acceptance was for a bid price
in cash, not in staggered payments taken together with the fact that there
was no expressed or apparent intent to reserve ownership over the lot until
full payment was made leads to no other conclusion that Rubi and the City
entered into a contract of sale.
As stated, no deed of sale was ever formalized but there was
compliance with the requirements of the statute of frauds. Under this law, an
agreement for the sale of real property or of an interest thereon shall be
unenforceable "unless the same or some note or memorandum thereof be in
writing" and subscribed by the party charged or his agent. We hold that the
exchange of written correspondence between the parties, earlier cited,
constitute sufficient writing to evidence the agreement for purposes of
complying with the statute of frauds.
The next issue to be addressed is whether the failure of Rubi to pay
the balance of the purchase price within fifteen days as directed as directed
by the City Mayor is fatal to his right to enforce the agreement and ask the
City of Cebu to execute the deed of sale in his favor.
The rescission of a sale immovable property is specially governed by
Article 1592 of New Civil Code which reads:
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 vendeee 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.
It is not disputed that the City of Cebu did not give notice of
rescission much less make a judicial or notarial demand for rescission. The
only subsequent action taken by petitioner was to send to the respondents a
"Formal Notice" dated March 4, 1989 ordering the latter to vacate the
premises within fifteen days from receipt of notice for the reason that the
occupancy of lot 1141-D is presumed t be illegal as the lot is still registered in
the name of the City of Cebu. 20 This letter did not amount to a demand for
rescission, as indeed there was no reference to the sale much less a
declaration that the sale was being rescinded or abrogated from the
beginning. 21 It was only when the City of Cebu filed its Answer on June 15,
1989 to the instant complaint for specific performance that the city invoked
"automatic rescission" and prayed for relief allowing it to rescind the
contract.
Given that there was no valid demand for rescission made by the City
of Cebu, was Rubi justified in not making full payment or tendering such
payment of the price despite the long lapse of time since the award was a
made in his favor?
The Court notes that the vendee Rubi requested for an extension of
time to pay as he was "prevented by circumstances beyond his control" from
making payment within fifteen days from notice, but this request was not
acted upon. Neither did Rubi follow up his request; he tendered payment
only when he had filed this action for specific performance, which suit was
filed only after he received notice from the petitioner to vacate the premises.
The petitioner admits in its pleadings 22 that an extension was
impliedly given. However, we are not prepared to rule that an implied
extension of time to pay the purchase price was granted when the City of
Cebu did not act on Rubi's request for extension. The general rule is that an
agreement to extend the time of payment, in order to be valid, must be for a
definite time, although it seems that no precise date be fixed, it being
sufficient that the time readily be determined.
We accordingly do not agree with the ruling of the Court of Appeals
that the request for extension was granted by the City of Cebu, as shown by
the "complete silence" on the part of the City of Cebu on Rubi's request for
extension. The fact that the City did not act on the request for what amounts
to an indefinite extension may be construed just as logically as a denial
thereof.
Is the contract of sale still subsisting after the lapse of several years,
during which time neither party took any action to enforce the contract. The
City did not demand compliance or rescission and Rubi did not pursue
enforcement. Petitioner's Amended Answer claims that Rubi was guilty of
unreasonable delay and/or laches, as he brought his action for specific
performance full payment of the price only in 1989. However, the City is no
less guilty of neglect and delay in not reiterating its demand for payment
within a reasonable period from the implied extension which it admittedly
granted. Article 1592 allows the vendee to pay, even after the expiration of
the period agreed upon, as long as no demand for rescission has been made
either judicially or by notarial act, and it was incumbent upon the City to
demand rescission. This conclusion also takes into account the fact that Rubi
had made a partial payment, consisting of the bidder's cash bond which the
was accepted by the City, and also the consideration that the City was
mindful of the need to protect the rights of the actual lessees to the lands
formerly comprising the Friar Lands Estate having granted said lessees the
right to match the offer of the highest bidder in the public auction. Rubi has
been a lessee/occupant of the property since 1957, has introduced
considerable improvements thereon consisting of a90-meter road, a
residential house, water pipes, and fruit trees 24 and has lived in the lot since
1961. 25 He was awarded Lot 1141-D not only once, but twice; the first time
was in 1965, (which did not materialize because of the filing of Civil Case No.
238-BC and the injunction issued therein) and the second time in 1976. The
respondents alleged in the Comment and this is not controverted in
petitioner's reply, that:
After Candido Rubi paid the City the sum of P4,500.00 representing
partial payment of the bid price, he was advised that the balance will be
payable as soon as the Sangguniang Panglunsod approves a resolution
authorizing the City Mayor to sell Lot 1141-D at the price approved by the
Committee on Awards.
After an unreasonable lapse of time without the resolution having
been approved, Candido Rubi repeatedly inquired from the Sangguniang
Panglunsod of Cebu City the reason for the delay.
The matter was endorsed to the Office of the City Attorney for legal
opinion. On January 6, 1981, City Attorney Vicente Varela, Jr. rendered an
opinion to the effect that the agreement between the City of Cebu and the
late Candido Rubi was valid and binding notwithstanding the non-payment of
the full consideration of the sale (Exh. "Y").
In 1981, the Committee on Laws of the Sangguniang Panglunsod to
which the manner was referred, found that all the legal requirements
relative to the purchase of Lot 1141-D (Exh. "BB") was complied with the
recommended the approval of a resolution authorizing the City Mayor to sign
the deed of sale in favor of Candido Rubi (Exhibit "Z").
Verily, Rubi has not slept on his rights. A finding of laches, which is an
equitable doctrine and the application of which is controlled by equitable
considerations, 27 again Rubi would not conform to law nor equity taking
into account the factual milieu of this case.
With respect to the petitioner's claim that the Court of Appeals erred
in not ordering respondents to pay interest due from the time of the award
in 1976 until the time of the consignation of the balance of the purchase
price in 1989, respondents aver that:
petitioner did not raise the issue of interest in the Lower Court.
Neither was the issue raised in their "Appeal Brief" when the case was
elevated to the Court of Appeals. It was only in the "Motion for
Reconsideration of the Decision of the Court of Appeals" that the issue of
legal interest was raised for the first time as an alternative remedy.
Neither did petitioner refute the above allegation in its Brief. Rather
it invokes "fairness and justice" in seeking payment of interest.
We find the plea unavailing. This Court has had occasion to rule that:
. . . the issue of interest was never raised before and cannot be raised
for the first time on appeal.
. . . petitioner is deemed to have waived such right for his failure to
raise its violation before the trail court . . . In petitions under Rule 45, as
distinguished from an ordinary appeal of criminal cases where the whole
case is opened for review, the appeals is generally limited to the errors
assigned by the petitioner. Issues not raised below cannot be pleaded for the
first time on appeal.
Points of law, theories, issues and arguments not adequately brought
to the attention of the lower court need not be, and ordinarily will not be,
considered by a reviewing court as they cannot be raised for the first time on
appeal. Basic considerations of due process impel this rule.
In view of the foregoing, the petition is denied due course, and the
Decision of the Court of Appeals appealed from is hereby AFFIRMED.
SO ORDERED.
_____________________________________________________________
G.R. No. 165889 September 20, 2005
SACOBIA HILLS DEVELOPMENT CORPORATION and JAIME C. KOA,
- versus -
ALLAN U. TY
This petition for review on certiorari assails the August 19, 2004
decision of the Court of Appeals in CA-G.R. CV No. 76987, which reversed and
set aside the November 29, 2002 decision of the Regional Trial Court of
Manila, Branch 46, and its October 28, 2004 resolution denying
reconsideration thereof.
The antecedent facts show that petitioner Sacobia Hills Development
Corporation (Sacobia) is the developer of True North Golf and Country Club
(True North) located inside the Clark Special Economic Zone in Pampanga
which boasts of amenities that include a golf course, clubhouse, sports
complex and several vacation villas.
On February 12, 1997, respondent Allan U. Ty wrote to Sacobia a
letter expressing his intention to acquire one (1) Class A share of True North
and accordingly paid the reservation fee of P180,000.00 as evidenced by PCI
Bank Check No. 0038053.
Through letters dated May 28, 1997 and July 4, 1997, Sacobia
assured its shareholders that the development of True North was proceeding
on schedule; that the golf course would be playable by October 1999; that
the Environmental Clearance Certificate (ECC) by the Department of
Environment and Natural Resources (DENR) as well as the Permit to Sell from
the Securities and Exchange Commission (SEC) should have been released by
October 1997; and that their registration deposits remained intact in an
escrow account.
On September 1, 1997, Sacobia approved the purchase application
and membership of respondent for P600,000.00, subject to certain terms and
conditions. The notice of approval provided, inter alia:
Terms and Conditions
1. Approval of an application to purchase golf/country club shares is
subjected to the full payment of the total purchase price. Should the buyer
opt for the deferred payment scheme, approval is subject to our receipt of a
down payment of at least 30% and the balance payable in installments over a
maximum of eleven (11) months from the date of application, and covered
by postdated cheques.
2. Your reserved share shall be considered withdrawn and may be deemed
cancelled should you fail to settle your obligation within fifteen (15) days
from due date, or failure to cover the value of the postdated cheques upon
their maturity, or your failure to issue the required postdated cheques. In
which case, we shall reserve the right to offer the said shares to other
interested parties. This also means forfeiture of 50% of the total amount you
have already paid.
3. We will undertake to execute the corresponding sales documents/ Deed of
Absolute Sale covering the reserved shares upon full payment of the total
purchase price. The Certificate of Membership shall be issued thereafter.
However, on January 12, 1998, respondent notified Sacobia that he is
rescinding the contract and sought refund of the payments already made due
to the latter’s failure to complete the project on time as represented.
In an effort to assure the respondent that the project would soon be
operational, Sacobia wrote him a letter dated March 10, 1998, stating that
the DENR had issued the required ECC only on March 5, 1998, and that the
golf course would be ready for use by end of 1998.
On April 3, 1998, Sacobia again wrote the respondent advising him
that the 18-hole golf course would be fully operational by summer of 1999.
Sacobia also sought to collect from respondent the latter’s outstanding
balance of P190,909.08 which was covered by five (5) postdated checks.
Notwithstanding, respondent notified Sacobia on April 17, 1998 that
he had stopped payment on the five (5) postdated checks and reiterated his
demand for the refund of his payments which amounted to P409,090.92.
On June 16, 1999, respondent sent Sacobia a letter formally
rescinding the contract and demanding for the refund of the P409,090.92
thus far paid by him.
By way of reply, Sacobia informed respondent that it had a no-refund
policy, and that it had endorsed respondent to Century Properties, Inc. for
assistance on the resale of his share to third persons.
Thus, on July 21, 1999, respondent filed a complaint for rescission
and damages before the SEC but the case was eventually transferred to the
Regional Trial Court of Manila, Branch 46, pursuant to Administrative Circular
AM No. 00-11-03.
On April 13, 2002, the trial court personnel conducted an on-site
ocular inspection and in their report, they made the following observations:
... We went up and down the hills on board the golf cart, and have
seen the entire golf course. The 9 holes area are already operational and
playable, we have seen the tee bank (mount soil) color coded flags, blue for
regular golfers, white for senior golfers and red for ladies golfers. We have
seen all their playing areas which all appeared in order except the main
clubhouse which is undergoing finishing touches. Likewise the road leading
to the clubhouse area is undergoing pavement works and concreting.
We learned from our tour guide Mr. Gerry Zoleta, Site Supervisor,
that the timetable in finishing all remaining things (eg. Clubhouse and the
road leading to it) to be done, are influenced or rather, hampered by the
prevailing weather condition. Such that when it rain, (which often happens in
the area during afternoon or early morning) they cannot really push thru
with the construction due to the soil condition (easily eroded) and sloping
terrain of the place. Except, the clubhouse, all seem prim and proper for golf
playing. In fact, according to Mr. Zoleta, the site has been operational since
January 2002. The first tournament was conducted on October 2000 and
there were three tournaments already took place in the area.
In summary, we found nothing amiss for one not to be able to play
and enjoy golf to the fullest, except as earlier said the clubhouse.
On November 29, 2002, the trial court rendered judgment in favor of
petitioners, the decretal portion of which reads:
WHEREFORE, the complaint is hereby dismissed without
pronouncement as to costs.
If the plaintiff desires to continue with the acquisition of the share,
he may do so by paying the balance of the acquisition price of One Hundred
Ninety Thousand Ninety Pesos and Ten Centavos (P190,090.10) without
interest within thirty (30) days from the finality of this decision, otherwise, he
forfeits his payments.
IT IS SO ORDERED.
The trial court found that the contract between the parties did not
warrant that the golf course and clubhouse would be completed within a
certain period of time to entitle respondent to rescind. It also noted that the
completion of the project was subject to the issuance of an ECC and the
approval by the SEC of the registration of non-proprietary golf club shares,
which is beyond Sacobias control.
The appellate court, in its decision dated August 19, 2004, disposed
of the appeal as follows:
WHEREFORE, the appealed November 29, 2002 decision of the
Regional Trial Court of Manila, Branch 46, is hereby REVERSED and SET
ASIDE, and a new one is hereby entered with this Court hereby CONFIRMING
the RESCISSION of the contract of purchase of one (1) Class A proprietary
share of True North Golf and Country Club as elected choice by plaintiff-
appellant Ty, the aggrieved party, and hereby DIRECTING defendant-appellee
SACOBIA to:
1) Refund to the plaintiff-appellant Allan U. Ty the amount of P409,090.20
and all payments made by him thus far on the TRUE NORTH share, with legal
interest of 12% per annum from July 21, 1999, the date of the filing of the
complaint with the SEC, until fully paid;
2) Return the five post-dated checks of the plaintiff-appellant amounting to
P190,908.08;
3) Pay costs of the suit.
SO ORDERED.
The Court of Appeals agreed with the trial court that Sacobia was in
delay in the performance of its obligation to respondent. As such, Ty could
properly rescind the contract, or demand specific performance with
damages, or demand for damages alone. It held though that the failure of the
DENR to issue the ECC on time is a valid ground to reduce the damages
claimed by Ty. It also ruled that Sacobia is estopped from asserting that there
was no completion date for the project as no less than its chairman
announced the projected completion dates.
Petitioners motion for reconsideration was denied, hence the instant
petition for review on certiorari which raises the issue of whether the
contract entered into by the parties may be validly rescinded under Article
1191 of the Civil Code.
Sacobia contends that it was not in breach of the contract as the
Intent to Purchase, the Contract of Purchase, and the Notice of Approval to
Purchase Shares of True North, do not contain any specific date as to when
the golf course and country club would be completed. It argues that
respondent should have known the risks involved in this kind of project; the
construction being contingent on the issuance of the ECC by the DENR and
the payment of the buyers of their share.
On the other hand, respondent claims that Sacobias arguments raise
new matters which would warrant the reversal of the decision rendered by
the Court of Appeals. He insists that Sacobia failed to complete the project
on time which entitles him to rescind the contract in accordance with Article
1191 of the Civil Code. He further argues that the delay in the completion of
the project is clearly established by the fact that there have been no
substantial work done on the site, particularly on the clubhouse, despite the
lapse of nearly 4-years from the issuance of the ECC on March 5, 1998.
The petition is meritorious.
In resolving the present controversy, the lower courts merely
assumed that the delay in the completion of the golf course was the decisive
factor in determining the propriety or impropriety of rescinding the contract.
Yet, confusion could have been avoided had there been a more thorough
scrutiny of the nature of the contract entered into by the contending parties.
In the notice of approval, which embodies the terms and conditions
of the agreement, Sacobia signified its intent to retain the ownership of the
property until such time that the respondent has fully paid the purchase
price. This condition precedent is characteristic of a contract to sell. The
intention of the contracting parties is inferable from the following provisions,
to wit:
TERMS AND CONDITIONS
1. Approval of an application to purchase golf/country club shares is
subjected to the full payment of the total purchase price. Should the buyer
opt for the deferred payment scheme, approval is subject to our receipt of a
down payment of at least 30% and the balance payable in installments over a
maximum of eleven (11) months from the date of application, and covered
by postdated cheques.
2. Your reserved share shall be considered withdrawn and may be deemed
cancelled should you fail to settle your obligation within fifteen (15) days
from due date, or failure to cover the value of the postdated cheques upon
their maturity, or your failure to issue the required postdated cheques. In
which case, we shall reserve the right to offer the said shares to other
interested parties. This also means forfeiture of 50% of the total amount you
have already paid.
3. We shall undertake to execute the corresponding sales documents/Deed
of Absolute Sale covering the reserved shares upon full payment of the total
purchase price. The Certificate of Membership shall be issued thereafter.
Clearly, the approval of the application hinged on the full payment of
the total purchase price. In fact, Sacobia explicitly reserved the right to retain
title over the share pending full satisfaction of the purchase price.
The notice of approval likewise stipulated that the reservation shall
be deemed withdrawn or cancelled in case respondent fails to settle his
obligation within 15 days from the due date or cover the value of the checks
upon their maturity. Thus, Sacobia reserved the right to unilaterally rescind
the contract in the event the respondent fails to comply with his obligation of
remitting the full purchase price within the deadline. In fact, Sacobia, after
having cancelled the agreement, can offer the share to other interested
parties.
In addition, the execution of the deed of absolute sale and other
pertinent documents shall be made only upon full payment of the purchase
price. The terms of the agreement between Sacobia and Ty can be deduced,
not on a formal document like a deed of sale, but from a series of
correspondence and acts signifying the parties intention to enter into a
contract. The absence of a formal deed of conveyance is a strong indication
that Sacobia did not intend to transfer title until respondent shall have
completely complied with his correlative obligation of paying the contact
price.
Since the agreement between Sacobia and Ty is a contract to sell, 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
ownership is retained by the seller without further remedies by the buyer. In
Cheng v. Genato,[13] we explained the nature of a contract to sell and its
legal implications in this wise:
In a Contract to Sell, the payment of the purchase price is a positive
suspensive condition, the failure of which is not a breach, casual or serious,
but a situation that prevents the obligation of the vendor to convey title from
acquiring an obligatory force. It is one where the happening of the event
gives rise to an obligation. Thus, for its non-fulfillment there will be no
contract to speak of, the obligor having failed to perform the suspensive
condition which enforces a juridical relation. In fact with this circumstance,
there can be no rescission of an obligation that is still non-existent, the
suspensive condition not having occurred as yet. Emphasis should be made
that the breach contemplated in Article 1191 of the New Civil Code is the
obligors failure to comply with an obligation already extant, not a failure of a
condition to render binding that obligation.
In a contract to sell, the prospective seller does not consent to
transfer ownership of the property to the buyer until the happening of an
event, which for present purposes, is the full payment of the purchase price.
What the seller agrees or obliges himself to do is to fulfill his promise to sell
the subject property when the entire amount of the purchase price is
delivered to him. Upon the fulfillment of the suspensive condition,
ownership will not automatically transfer to the buyer although the property
may have been previously delivered to him. The prospective seller still has to
convey title to the prospective buyer by entering into a contract of absolute
sale.
According to True North Payment Schedule, respondent’s checks
dated from October 12, 1997 until January 12, 1998 were marked as stale.
His failure to cover the value of the checks and by issuing a stop payment
order effectively abated the perfection of the contract. For it is understood
that when a sale is made subject to a suspensive condition, perfection is had
only from the moment the condition is fulfilled.
As shown, Ty did not pay the full purchase price which is his
obligation under the contract to sell, therefore, it cannot be said that Sacobia
breached its obligation. No obligations arose on its part because
respondent’s non-fulfillment of the suspensive condition rendered the
contract to sell ineffective and unperfected. Indeed, there can be no
rescission under Article 1191 of the Civil Code because until the happening of
the condition, i.e. full payment of the contract price, Sacobias obligation to
deliver the title and object of the sale is not yet extant. A non-existent
obligation cannot be subject of rescission. Article 1191 speaks of obligations
already existing, which may be rescinded in case one of the obligors fails to
comply with what is incumbent upon him.
As earlier discussed, the payment by Ty of the reservation fee as well
as the issuance of the postdated checks is subject to the condition that
Sacobia was reserving title until full payment, which is the essence of a
contract to sell. The perfection of this kind of contract would give rise to two
distinct obligations, namely, 1) the buyers obligation to fulfill the suspensive
condition, i.e. the full payment of the contract price as in the instant case,
and, 2) the correlative obligation of the seller to convey ownership upon
compliance of the suspensive condition.
In the present case, respondents failure to fulfill this suspensive
condition prevented the perfection of the contract to sell. With an ineffective
contract, Ty had not acquired the status of a shareholder but remained, at
most, a prospective investor. In the absence of a juridical tie between the
parties, Ty cannot claim the rights and privileges accorded to Sacobias full-
fledged members and shareowners, including the full enjoyment of the
amenities being offered. Unfortunately for Ty, he cannot avail of rescission as
envisioned by Article 1191 of the Civil Code. However, he can withdraw his
investment subject to the restrictions under the terms and conditions
pertinent to a reneging investor.
Even assuming arguendo that the delay in the completion of the golf
course and clubhouse was attributable to Sacobia, respondent had not
refuted to this Courts satisfaction the trial courts denial of such claim upon
its finding that, among other things, the parties did not warrant the
completion of the project within a certain period of time.
As early as January 12, 1998, respondent had notified Sacobia of his
intention to rescind the contract on the ground that there was unreasonable
delay in the completion of the golf course and clubhouse. Yet, evidence
shows that even prior thereto, or on May 28, 1997, Sacobia already informed
its investors, including the respondent, that the full completion of the project
was expected by mid-1999. Patently, respondents claim is premature by one
year and a half, if reckoned from the expected time of completion as
foreseen by Sacobia. Moreover, respondent was well aware of the risk of
delay in the completion of the project considering that he was apprised
beforehand of such delay due to the belated issuance of the proper
documents.
It appears, however, that Sacobia is not really intent on cancelling
Tys reservation. Even after it was notified by Ty that he was intending to
rescind the contract, and had in fact issued a stop-payment order, Sacobia
merely deferred the deposit of Tys checks in an effort to resolve the issue,
instead of cancelling the reservation in accordance with the terms of the
notice of approval. Subsequently, it sought to collect from Ty his remaining
obligations. It also referred Ty to its marketing arm if Ty is so minded to sell
his rights to third parties. To this extent, the trial court correctly ordered Ty
to pay the remaining balance if he so desires, otherwise, he forfeits half of his
payments, pursuant to the terms of the notice of approval.
WHEREFORE, the petition is GRANTED. The decision dated August 19,
2004 of the Court of Appeals in CA-G.R. CV No. 76987 and its resolution
dated October 28, 2004, are REVERSED and SET ASIDE. Respondents
complaint for rescission of contract and damages in Civil Case No. 01-99696
is DISMISSED. He is ORDERED to PAY to Sacobia Hills Development
Corporation the amount of Pesos: One Hundred Ninety Thousand Nine
Hundred Nine and Eight Centavos (P190,909.08) without interest within
thirty (30) days from finality of this decision; otherwise, fifty percent (50%) of
his total payments shall be forfeited.
SO ORDERED.
_____________________________________________________________
G.R. No. 186014 June 26, 2013
ALI AKANG, Petitioner,
vs.
MUNICIPALITY OF ISULAN, SULTAN KUDARA T PROVINCE, represented by
its MUNICIPAL MAYOR AND MUNICIPAL VICE MAYOR AND MUNICIPAL
COUNCILORS/KAGAWADS, Respondent.
This case was originally filed as a petition for certiorari under Rule 65
of the Rules of Court. In the Court's Resolution dated March 9, 2009,
however, the petition was treated as one for review under Rule.45. Assailed
is the Decision dated April 25, 2008 and Resolution dated October 29, 2008
of the Court of Appeals Mindanao Station (CA) in CA-G.R. CV No. 00156,
which reversed the Judgment dated January 14, 2004 of the Regional Trial
Court (RTC) of Isulan, Sultan Kudarat, Branch 19 in Civil Case No. 1007 for
Recovery of Possession of Subject Property and/or Quieting of Title thereon
and Damages.
The Facts
Ali Akang (petitioner) is a member of the national and cultural
community belonging to the Maguindanaon tribe of Isulan, Province of
Sultan Kudarat and the registered owner of Lot 5-B-2-B-14-F (LRC) Psd
1100183 located at Kalawag III, Isulan, Sultan Kudarat, covered by Transfer
Certificate of Title (TCT) No. T-3653, with an area of 20,030 square meters.
Sometime in 1962, a two-hectare portion of the property was sold by
the petitioner to the Municipality of Isulan, Province of Sultan Kudarat
(respondent) through then Isulan Mayor Datu Ampatuan under a Deed of
Sale executed on July 18, 1962, which states:
"That for and in consideration of the sum of THREE THOUSAND
PESOS ([P]3,000.00), Philippine Currency, value to be paid and deliver to me,
and of which receipt of which shall be acknowledged by me to my full
satisfaction by the MUNICIPAL GOVERNMENT OF ISULAN, represented by the
Municipal Mayor, Datu Sama Ampatuan, hereinafter referred to as the
VENDEE, I hereby sell, transfer, cede, convey and assign as by these presents
do have sold, transferred, ceded, conveyed and assigned, an area of TWO (2)
hectares, more or less, to and in favor of the MUNICIPAL GOVERNMENT OF
ISULAN, her (sic) heirs, assigns and administrators to have and to hold
forevery (sic) and definitely, which portion shall be utilized purposely and
exclusively as a GOVERNMENT CENTER SITE x x x."
The respondent immediately took possession of the property and
began construction of the municipal building.
Thirty-nine (39) years later or on October 26, 2001, the petitioner,
together with his wife, Patao Talipasan, filed a civil action for Recovery of
Possession of Subject Property and/or Quieting of Title thereon and Damages
against the respondent, represented by its Municipal Mayor, et al.
In his complaint, the petitioner alleged, among others, that the
agreement was one to sell, which was not consummated as the purchase
price was not paid.
In its answer, the respondent denied the petitioner’s allegations,
claiming, among others: that the petitioner’s cause of action was already
barred by laches; that the Deed of Sale was valid; and that it has been in
open, continuous and exclusive possession of the property for forty (40)
years.
After trial, the RTC rendered judgment in favor of the petitioner. The
RTC construed the Deed of Sale as a contract to sell, based on the wording of
the contract, which allegedly showed that the consideration was still to be
paid and delivered on some future date – a characteristic of a contract to sell.
In addition, the RTC observed that the Deed of Sale was not determinate as
to its object since it merely indicated two (2) hectares of the 97,163sq m lot,
which is an undivided portion of the entire property owned by the petitioner.
The RTC found that segregation must first be made to identify the parcel of
land indicated in the Deed of Sale and it is only then that the petitioner could
execute a final deed of absolute sale in favor of the respondent.
As regards the payment of the purchase price, the RTC found the
same to have not been made by the respondent. According to the RTC, the
Municipal Voucher is not a competent documentary proof of payment but is
merely evidence of admission by the respondent that on the date of the
execution of the Deed of Sale, the consideration stipulated therein had not
yet been paid. The RTC also ruled that the Municipal Voucher’s validity and
evidentiary value is in question as it suffers infirmities, that is, it was neither
duly recorded, numbered, signed by the Municipal Treasurer nor was it pre-
audited.
The RTC also ruled that the Deed of Sale was not approved pursuant
to Section 145 of the Administrative Code for Mindanao and Sulu or Section
120 of the Public Land Act (PLA), as amended. Resolution No. 70, which was
issued by the respondent, appropriating the amount of ₱3,000.00 as
payment for the property, and Resolution No. 644 of the Provincial Board of
Cotabato, which approved Resolution No. 70, cannot be considered proof of
the sale as said Deed of Sale was not presented for examination and approval
of the Provincial Board. Further, since the respondent’s possession of the
property was not in the concept of an owner, laches cannot be a valid
defense for claiming ownership of the property, which has been registered in
the petitioner’s name under the Torrens System.
The dispositive portion of the RTC Decision18 dated January 14, 2004
reads:
WHEREFORE, upon all the foregoing considerations, judgment is
hereby rendered:
a. Declaring the contract entered into between the plaintiffs and the
defendant, Municipal Government of Isulan, Cotabato (now Sultan Kudarat),
represented by its former Mayor, Datu Suma Ampatuan, dated July 18, 1962,
as a contract to sell, without its stipulated consideration having been paid;
and for having been entered into between plaintiff Ali Akang, an illiterate
non-Christian, and the defendant, Municipal Government of Isulan, in
violation of Section 120 of C.A. No. 141, said contract/agreement is hereby
declared null and void;
b. Declaring the Deed of Sale (Exh. "1"-"E") dated July 18, 1962, null and void
ab initio, for having been executed in violation of Section 145 of the
Administrative Code of Mindanao and Sulu, and of Section 120 of the Public
Land Law, as amended by R.A. No. 3872;
c. Ordering the defendants to pay plaintiffs, the value of the lot in question,
Lot No. 5-B-2-B-14-F (LRC) Psd 110183, containing an area of 20,030 Square
Meters, at the prevailing market value, as may be reflected in its Tax
Declaration, or in the alternative, to agree on the payment of monthly back
rentals, retroactive to 1996, until defendants should decide to buy and pay
the value of said lot as aforestated, with legal interest in both cases;
d. Ordering the defendant, Municipal Government of Isulan, Sultan Kudarat,
to pay plaintiffs, by way of attorney’s fee, the equivalent of 30% of the value
that defendants would pay the plaintiffs for the lot in question; and to pay
plaintiffs the further sum of ₱100,000.00, by way of moral and exemplary
damages;
e. Ordering the defendants, members of the Sangguniang Bayan of Isulan,
Sultan Kudarat, to pass a resolution/ordinance for the appropriation of funds
for the payment of the value of plaintiffs’ Lot 5-B-2-B-14-F (LRC) Psd-110183,
and of the damages herein awarded to the plaintiffs; and
f. Ordering the defendants to pay the costs of suit.
For lack of merit, the counterclaims of the defendants should be, as
it is hereby, dismissed.
IT IS SO ORDERED.
By virtue of said RTC decision, proceedings for the Cancellation of
Certificate of Title No. T-49349 registered under the name of the respondent
was instituted by the petitioner under Miscellaneous Case No. 866 and as a
result, the respondent’s title over the property was cancelled and a new one
issued in the name of the petitioner.
The respondent appealed the RTC Decision dated January 14, 2004
and in the Decision dated April 25, 2008, the CA reversed the ruling of the
RTC and upheld the validity of the sale. The dispositive portion of the CA
Decision provides:
WHEREFORE, the assailed decision dated January 14, 2004 is hereby
REVERSED and a new one entered, upholding the contract of sale executed
on July 18, 1962 between the parties.
SO ORDERED.
The CA sustained the respondent’s arguments and ruled that the
petitioner is not entitled to recover ownership and possession of the
property as the Deed of Sale already transferred ownership thereof to the
respondent. The CA held that the doctrines of estoppel and laches must
apply against the petitioner for the reasons that: (1) the petitioner adopted
inconsistent positions when, on one hand, he invoked the interpretation of
the Deed of Sale as a contract to sell but still demanded payment, and called
for the application of Sections 145 and 146 of the Administrative Code for
Mindanao and Sulu, on the other; and (2) the petitioner did not raise at the
earliest opportunity the nullity of the sale and remained passive for 39 years,
as it was raised only in 2001.
The CA also ruled that the Deed of Sale is not a mere contract to sell
but a perfected contract of sale. There was no express reservation of
ownership of title by the petitioner and the fact that there was yet no
payment at the time of the sale does not affect the validity or prevent the
perfection of the sale.
As regards the issue of whether payment of the price was made, the
CA ruled that there was actual payment, as evidenced by the Municipal
Voucher, which the petitioner himself prepared and signed despite the lack
of approval of the Municipal Treasurer. Even if he was not paid the
consideration, it does not affect the validity of the contract of sale for it is not
the fact of payment of the price that determines its validity.
In addition, the CA noted that there was an erroneous cancellation of
the certificate of title in the name of the respondent and the registration of
the same property in the name of the petitioner in Miscellaneous Case No.
866. According to the CA, this does not affect in any way the ownership of
the respondent over the subject property because registration or issuance of
a certificate of title is not one of the modes of acquiring ownership.
The petitioner sought reconsideration of the CA Decision, which was
denied by the CA in its Resolution26 dated October 29, 2008.
Hence, this petition.
Issue
WHETHER THE PETITIONER IS ENTITLED TO RECOVER OWNERSHIP
AND POSSESSION OF THE PROPERTY IN DISPUTE.
Resolution of the above follows determination of these questions: (1)
whether the Deed of Sale dated July 18, 1962 is a valid and perfected
contract of sale; (2) whether there was payment of consideration by the
respondent; and (3) whether the petitioner’s claim is barred by laches.
The petitioner claims that the acquisition of the respondent was null
and void because: (1) he is an illiterate non-Christian who only knows how to
sign his name in Arabic and knows how to read the Quran but can neither
read nor write in both Arabic and English; (2) the respondent has not paid
the price for the property; (3) the Municipal Voucher is not admissible in
evidence as proof of payment; (4) the Deed of Sale was not duly approved in
accordance with Sections 145 and 146 of the Administrative Code of
Mindanao and Sulu, and Section 120 of the PLA, as amended; and (4) the
property is a registered land covered by a TCT and cannot be acquired by
prescription or adverse possession. The petitioner also explained that the
delayed filing of the civil action with the RTC was due to Martial Law and the
Ilaga-Blackshirt Troubles in the then Province of Cotabato.
The respondent, however, counters that: (1) the petitioner is not an
illiterate non-Christian and he, in fact, was able to execute, sign in Arabic,
and understand the terms and conditions of the Special Power of Attorney
dated July 23, 1996 issued in favor of Baikong Akang (Baikong); (2) the Deed
of Sale is valid as its terms and conditions were reviewed by the Municipal
Council of Isulan and the Provincial Board of Cotabato; and (3) the Deed of
Sale is a contract of sale and not a contract to sell.
Ruling of the Court
The Court finds the petition devoid of merit. Issue Raised for the First Time
on Appeal is Barred by Estoppel
The petitioner asserts that the Deed of Sale was notarized by Atty.
Gualberto B. Baclig who was not authorized to administer the same, hence,
null and void. This argument must be rejected as it is being raised for the first
time only in this petition. In his arguments before the RTC and the CA, the
petitioner focused mainly on the validity and the nature of the Deed of Sale,
and whether there was payment of the purchase price. The rule is settled
that issues raised for the first time on appeal and not raised in the
proceedings in the lower court are barred by estoppel. To consider the
alleged facts and arguments raised belatedly would amount to trampling on
the basic principles of fair play, justice, and due process.30 Accordingly,
thepetitioner’s attack on the validity of the Deed of Sale vis-à-vis its
compliance with the 2004 New Notarial Law must be disregarded.31
The Deed of Sale is a Valid Contract of Sale
The petitioner alleges that the Deed of Sale is merely an agreement
to sell, which was not perfected due to non-payment of the stipulated
consideration.32 The respondent, meanwhile, claims that the Deed of Sale is
a valid and perfected contract of absolute sale.33
A contract of sale is defined under Article 1458 of the Civil Code:
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 therefore a price certain in money or its equivalent.
The elements of a contract of sale are: (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.
A contract to sell, on the other hand, is defined by Article 1479 of the
Civil Code:
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.
In a contract of sale, the title to the property passes to the buyer
upon the delivery of the thing sold, whereas in a contract to sell, the
ownership is, by agreement, retained by the seller and is not to pass to the
vendee until full payment of the purchase price.
The Deed of Sale executed by the petitioner and the respondent is a
perfected contract of sale, all its elements being present. There was mutual
agreement between them to enter into the sale, as shown by their free and
voluntary signing of the contract. There was also an absolute transfer of
ownership of the property by the petitioner to the respondent as shown in
the stipulation: "x x x I petitioner hereby sell, transfer, cede, convey and
assign as by these presents do have sold, transferred, ceded, conveyed and
assigned, x x x." There was also a determine subject matter, that is, the two-
hectare parcel of land as described in the Deed of Sale. Lastly, the price or
consideration is at Three Thousand Pesos (₱3,000.00), which was to be paid
after the execution of the contract. The fact that no express reservation of
ownership or title to the property can be found in the Deed of Sale bolsters
the absence of such intent, and the contract, therefore, could not be one to
sell. Had the intention of the petitioner been otherwise, he could have: (1)
immediately sought judicial recourse to prevent further construction of the
municipal building; or (2) taken legal action to contest the agreement. The
petitioner did not opt to undertake any of such recourses.
Payment of consideration or purchase price
The petitioner’s allegation of non-payment is of no consequence
taking into account the Municipal Voucher presented before the RTC, which
proves payment by the respondent of Three Thousand Pesos (₱3,000.00).
The petitioner, notwithstanding the lack of the Municipal Treasurer’s
approval, admitted that the signature appearing on the Municipal Voucher
was his and he is now estopped from disclaiming payment.
Even assuming, arguendo, that the petitioner was not paid, such
non-payment is immaterial and has no effect on the validity of the contract
of sale. A contract of sale is a consensual contract and what is required is the
meeting of the minds on the object and the price for its perfection and
validity. In this case, the contract was perfected the moment the petitioner
and the respondent agreed on the object of the sale – the two-hectare parcel
of land, and the price – Three Thousand Pesos (₱3,000.00). Non-payment of
the purchase price merely gave rise to a right in favor of the petitioner to
either demand specific performance or rescission of the contract of sale.
Sections 145 and 146 of the Administrative Code of Mindanao and
Sulu, and Section 120 of the PLA, as amended, are not applicable
The petitioner relies on the foregoing laws in assailing the validity of
the Deed of Sale, claiming that the contract lacks executive approval and that
he is an illiterate non-Christian to whom the benefits of Sections 145 and 146
of the Administrative Code of Mindanao and Sulu should apply.
Section 145 of the Administrative Code of Mindanao and Sulu
essentially provides for the requisites of the contracts entered into by a
person with any Moro or other non-Christian inhabitants. Section 146,
meanwhile, provides that contracts entered into in violation of Section 145
are void. These provisions aim to safeguard the patrimony of the less
developed ethnic groups in the Philippines by shielding them against
imposition and fraud when they enter into agreements dealing with realty.
Section 120 of the PLA (Commonwealth Act No. 141) affords the
same protection.43 R.A. No. No. 387244 likewise provides that conveyances
and encumbrances made by illiterate non-Christian or literate non-Christians
where the instrument of conveyance or encumbrance is in a language not
understood by said literate non-Christians shall not be valid unless duly
approved by the Chairman of the Commission on National Integration.
In Jandoc-Gatdula v. Dimalanta,45 however, the Court categorically
stated that while the purpose of Sections 145 and 146 of the Administrative
Code of Mindanao and Sulu in requiring executive approval of contracts
entered into by cultural minorities is indeed to protect them, the Court
cannot blindly apply that law without considering how the parties exercised
their rights and obligations. In this case, Municipality Resolution No. 70,
which approved the appropriation of ₱3,000.00, was, in fact, accepted by the
Provincial Board of Cotabato. In approving the appropriation of ₱3,000.00,
the Municipal Council of Isulan and the Provincial Board of Cotabato,
necessarily, scrutinized the Deed of Sale containing the terms and conditions
of the sale. Moreover, there is nothing on record that proves that the
petitioner was duped into signing the contract, that he was taken advantage
of by the respondent and that his rights were not protected.
The court’s duty to protect the native vendor, however, should not
be carried out to such an extent as to deny justice to the vendee when truth
and justice happen to be on the latter’s side. The law cannot be used to
shield the enrichment of one at the expense of another. More important, the
law will not be applied so stringently as to render ineffective a contract that
is otherwise valid, except for want of approval by the CNI. This principle
holds, especially when the evils sought to be avoided are not obtaining.
The Court must also reject the petitioner’s claim that he did not
understand the import of the agreement.1âwphi1 He alleged that he signed
in Arabic the Deed of Sale, the Joint Affidavit and the Municipal Voucher,
which were all in English, and that he was not able to comprehend its
contents. Records show the contrary. The petitioner, in fact, was able to
execute in favor of Baikong a Special Power of Attorney (SPA) dated July 23,
1996, which was written in English albeit signed by the petitioner in Arabic.
Said SPA authorized Baikong, the petitioner’s sister, to follow-up the
payment of the purchase price. This raises doubt on the veracity of the
petitioner’s allegation that he does not understand the language as he would
not have been able to execute the SPA or he would have prevented its
enforcement.
The Petitioner’s Claim for Recovery of Possession and Ownership is Barred
by Laches
Laches has been defined as the failure or neglect, for an
unreasonable and unexplained length of time, to do that which, by exercising
due diligence could or should have been done earlier. It should be stressed
that laches is not concerned only with the mere lapse of time.
As a general rule, an action to recover registered land covered by the
Torrens System may not be barred by laches. Neither can laches be set up to
resist the enforcement of an imprescriptible legal right. In exceptional cases,
however, the Court allowed laches as a bar to recover a titled property. Thus,
in Romero v. Natividad,51 the Court ruled that laches will bar recovery of the
property even if the mode of transfer was invalid. Likewise, in Vda. de
Cabrera v. CA,52 the Court ruled:
In our jurisdiction, it is an enshrined rule that even a registered
owners of property may be barred from recovering possession of property by
virtue of laches. Under the Land Registration Act (now the Property
Registration Decree), no title to registered land in derogation to that of the
registered owner shall be acquired by prescription or adverse possession.
The same is not true with regard to laches. x x x.
More particularly, laches will bar recovery of a property, even if the
mode of transfer used by an alleged member of a cultural minority lacks
executive approval. Thus, in Heirs of Dicman v. Cariño, the Court upheld the
Deed of Conveyance of Part Rights and Interests in Agricultural Land
executed by Ting-el Dicman in favor of Sioco Cariño despite lack of executive
approval. The Court stated that "despite the judicial pronouncement that the
sale of real property by illiterate ethnic minorities is null and void for lack of
approval of competent authorities, the right to recover possession has
nonetheless been barred through the operation of the equitable doctrine of
laches."56 Similarly in this case, while the respondent may not be considered
as having acquired ownership by virtue of its long and continued possession,
nevertheless, the petitioner’s right to recover has been converted into a stale
demand due to the respondent’s long period of possession and by the
petitioner’s own inaction and neglect.57 The Court cannot accept the
petitioner’s explanation that his delayed filing and assertion of rights was due
to Martial Law and the Cotabato Ilaga-Black Shirt Troubles. The Martial Law
regime was from 1972 to 1986, while the Ilaga-Black Shirt Troubles were
from the 1970s to the 1980s. The petitioner could have sought judicial relief,
or at the very least made his demands to the respondent, as early as the
third quarter of 1962 after the execution of the Deed of Sale and before the
advent of these events. Moreover, even if, as the petitioner claims, access to
courts were restricted during these times, he could have immediately filed
his claim after Martial Law and after the Cotabato conflict has ended. The
petitioner's reliance on the Court's treatment of Martial Law as force
majeure that suspended the running of prescription in Development Bank of
the Philippines v. Pundogar58 is inapplicable because the Court's ruling
therein pertained to prescription and not laches. Consequently, the
petitioner's lengthy inaction sufficiently warrants the conclusion that he
acquiesced or conformed to the sale.
Vigilantibus sed non dormientibus jura subverniunt. The law aids the
vigilant, not those who sleep on their rights. This legal percept finds
application in the petitioner's case.
WHEREFORE, the appeal is DENIED. The Decision dated April 25,
2008 and Resolution dated October 29, 2008 of the Court of Appeals
Mindanao Station in CA-G.R. CV No. 00156 are AFFIRMED.
SO ORDERED.