Professional Documents
Culture Documents
For
this purpose, we are enclosing
[G.R. No. 137290. July 31, 2000] herewith the sum of P1,000,000.00
representing earnest-deposit money,
SAN MIGUEL PROPERTIES PHILIPPINES, subject to the following conditions.
INC., petitioner, vs. SPOUSES ALFREDO HUANG and
GRACE HUANG, respondents. 1. We will be given the exclusive
option to purchase the property
DECISION within the 30 days from date of your
acceptance of this offer.
MENDOZA, J.:
2. During said period, we will
This is a petition for review of the decision,[1] dated negotiate on the terms and
April 8, 1997, of the Court of Appeals which reversed conditions of the purchase; SMPPI
the decision of the Regional Trial Court, Branch 153, will secure the necessary
Pasig City dismissing the complaint brought by Management and Board approvals;
respondents against petitioner for enforcement of a and we initiate the documentation if
contract of sale. there is mutual agreement between
us.
The facts are not in dispute.
3. In the event that we do not come
Petitioner San Miguel Properties Philippines, Inc. is to an agreement on this transaction,
a domestic corporation engaged in the purchase the said amount of P1,000,000.00
and sale of real properties. Part of its inventory are shall be refundable to us in full upon
two parcels of land totalling 1, 738 square meters at demand. . . .
the corner of Meralco Avenue and General Capinpin
Street, Barrio Oranbo, Pasig City, which are covered Isidro A. Sobrecarey, petitioners vice-president and
by TCT Nos. PT-82395 and PT-82396 of the Register operations manager for corporate real estate,
of Deeds of Pasig City. indicated his conformity to the offer by affixing his
signature to the letter and accepted the "earnest-
On February 21, 1994, the properties were offered deposit" of P1 million. Upon request of respondent
for sale for P52,140,000.00 in cash. The offer was spouses, Sobrecarey ordered the removal of the
made to Atty. Helena M. Dauz who was acting for "FOR SALE" sign from the properties.
respondent spouses as undisclosed principals. In a
letter[2] dated March 24, 1994, Atty. Dauz signified Atty. Dauz and Sobrecarey then commenced
her clients interest in purchasing the properties for negotiations. During their meeting on April 8, 1994,
the amount for which they were offered by Sobrecarey informed Atty. Dauz that petitioner was
petitioner, under the following terms: the sum willing to sell the subject properties on a 90-day
of P500,000.00 would be given as earnest money term. Atty. Dauz countered with an offer of six
and the balance would be paid in eight equal months within which to pay.
monthly installments from May to December, 1994.
However, petitioner refused the counter-offer. On April 14, 1994, the parties again met during
which Sobrecarey informed Atty. Dauz that
On March 29, 1994, Atty. Dauz wrote another petitioner had not yet acted on her counter-offer.
letter[3] proposing the following terms for the This prompted Atty. Dauz to propose a four-month
purchase of the properties, viz: period of amortization.
This is to express our interest to buy On April 25, 1994, Atty. Dauz asked for an extension
your-above-mentioned property of 45 days from April 29, 1994 to June 13, 1994
within which to exercise her option to purchase the had already been accepted by petitioner. The court
property, adding that within that period, "[we] hope cited Art. 1482 of the Civil Code which provides that
to finalize [our] agreement on the matter."[4] Her "[w]henever earnest money is given in a contract of
request was granted. sale, it shall be considered as part of the price and
as proof of the perfection of the contract." The fact
On July 7, 1994, petitioner, through its president the parties had not agreed on the mode of payment
and chief executive officer, Federico Gonzales, did not affect the contract as such is not an essential
wrote Atty. Dauz informing her that because the element for its validity. In addition, the court found
parties failed to agree on the terms and conditions that Sobrecarey had authority to act in behalf of
of the sale despite the extension granted by petitioner for the sale of the properties.[7]
petitioner, the latter was returning the amount
of P1 million given as "earnest-deposit."[5] Petitioner moved for reconsideration of the trial
courts decision, but its motion was denied. Hence,
On July 20, 1994, respondent spouses, through this petition.
counsel, wrote petitioner demanding the execution
within five days of a deed of sale covering the Petitioner contends that the Court of Appeals erred
properties. Respondents attempted to return the in finding that there was a perfected contract of sale
"earnest-deposit" but petitioner refused on the between the parties because the March 29, 1994
ground that respondents option to purchase had letter of respondents, which petitioner accepted,
already expired. merely resulted in an option contract, albeit it was
unenforceable for lack of a distinct consideration.
On August 16, 1994, respondent spouses filed a Petitioner argues that the absence of agreement as
complaint for specific performance against to the mode of payment was fatal to the perfection
petitioner before the Regional Trial Court, Branch of the contract of sale. Petitioner also disputes the
133, Pasig City where it was docketed as Civil Case appellate courts ruling that Isidro A. Sobrecarey had
No. 64660. authority to sell the subject real properties.[8]
Within the period for filing a responsive pleading, Respondents were required to comment within ten
petitioner filed a motion to dismiss the complaint (10) days from notice. However, despite 13
alleging that (1) the alleged "exclusive option" of extensions totalling 142 days which the Court had
respondent spouses lacked a consideration given to them, respondents failed to file their
separate and distinct from the purchase price and comment. They were thus considered to have
was thus unenforceable and (2) the complaint did waived the filing of a comment.
not allege a cause of action because there was no
"meeting of the minds" between the parties and, The petition is meritorious.
therefore, no perfected contract of sale. The motion
was opposed by respondents. In holding that there is a perfected contract of sale,
the Court of Appeals relied on the following
On December 12, 1994, the trial court granted findings: (1) earnest money was allegedly given by
petitioners motion and dismissed the action. respondents and accepted by petitioner through its
Respondents filed a motion for reconsideration, but vice-president and operations manager, Isidro A.
it was denied by the trial court. They then appealed Sobrecarey; and (2) the documentary evidence in
to the Court of Appeals which, on April 8, 1997, the records show that there was a perfected
rendered a decision[6] reversing the judgment of the contract of sale.
trial court. The appellate court held that all the
requisites of a perfected contract of sale had been With regard to the alleged payment and acceptance
complied with as the offer made on March 29, 1994, of earnest money, the Court holds that respondents
in connection with which the earnest money in the did not give the P1 million as "earnest money" as
amount of P1 million was tendered by respondents, provided by Art. 1482 of the Civil Code. They
presented the amount merely as a deposit of what secure the necessary approvals while respondents
would eventually become the earnest money or would handle the documentation.
downpayment should a contract of sale be made by
them. The amount was thus given not as a part of The first condition for an option period of 30 days
the purchase price and as proof of the perfection of sufficiently shows that a sale was never perfected.
the contract of sale but only as a guarantee that As petitioner correctly points out, acceptance of this
respondents would not back out of the sale. condition did not give rise to a perfected sale but
Respondents in fact described the amount as an merely to an option or an accepted unilateral
"earnest-deposit." In Spouses Doromal, Sr. v. Court promise on the part of respondents to buy the
of Appeals,[9] it was held: subject properties within 30 days from the date of
acceptance of the offer. Such option giving
. . . While the P5,000 might have respondents the exclusive right to buy the
indeed been paid to Carlos in properties within the period agreed upon is
October, 1967, there is nothing to separate and distinct from the contract of sale
show that the same was in the which the parties may enter.[11] All that respondents
concept of the earnest money had was just the option to buy the properties which
contemplated in Art. 1482 of the Civil privilege was not, however, exercised by them
Code, invoked by petitioner, as because there was a failure to agree on the terms of
signifying perfection of the payment. No contract of sale may thus be enforced
sale. Viewed in the backdrop of the by respondents.
factual milieu thereof extant in the
record, We are more inclined to Furthermore, even the option secured by
believe that the said P5,000.00 were respondents from petitioner was fatally defective.
paid in the concept of earnest money Under the second paragraph of Art. 1479, an
as the term was understood under accepted unilateral promise to buy or sell a
the Old Civil Code, that is, as a determinate thing for a price certain is binding upon
guarantee that the buyer would not the promisor only if the promise is supported by a
back out, considering that it is not distinct consideration. Consideration in an option
clear that there was already a contract may be anything of value, unlike in sale
definite agreement as to the where it must be the price certain in money or its
price then and that petitioners were equivalent. There is no showing here of any
decided to buy 6/7 only of the consideration for the option. Lacking any proof of
property should respondent such consideration, the option is unenforceable.
Javellana refuse to agree to part with
her 1/7 share.[10] Equally compelling as proof of the absence of a
perfected sale is the second condition that, during
In the present case, the P1 million "earnest-deposit" the option period, the parties would negotiate the
could not have been given as earnest money as terms and conditions of the purchase. The stages of
contemplated in Art. 1482 because, at the time a contract of sale are as follows: (1) negotiation,
when petitioner accepted the terms of respondents covering the period from the time the prospective
offer of March 29, 1994, their contract had not yet contracting parties indicate interest in the contract
been perfected. This is evident from the following to the time the contract is perfected; (2) perfection,
conditions attached by respondents to their letter, which takes place upon the concurrence of the
to wit: (1) that they be given the exclusive option to essential elements of the sale which are the meeting
purchase the property within 30 days from of the minds of the parties as to the object of the
acceptance of the offer; (2) that during the option contract and upon the price; and (3) consummation,
period, the parties would negotiate the terms and which begins when the parties perform their
conditions of the purchase; and (3) petitioner would respective undertakings under the contract of sale,
culminating in the extinguishment thereof.[12] In the
present case, the parties never got past the petitioners delivered to the
negotiation stage. The alleged "indubitable respondent the sum of P10,000 as
evidence"[13] of a perfected sale cited by the part of the down-payment that they
appellate court was nothing more than offers and had to pay cannot be considered as
counter-offers which did not amount to any final sufficient proof of the perfection of
arrangement containing the essential elements of a any purchase and sale agreement
contract of sale. While the parties already agreed on between the parties herein under
the real properties which were the objects of the Art. 1482 of the new Civil Code, as
sale and on the purchase price, the fact remains that the petitioners themselves admit
they failed to arrive at mutually acceptable terms of that some essential matter - the
payment, despite the 45-day extension given by terms of the payment - still had to be
petitioner. mutually covenanted.[18]
The appellate court opined that the failure to agree Thus, it is not the giving of earnest money, but the
on the terms of payment was no bar to the proof of the concurrence of all the essential
perfection of the sale because Art. 1475 only elements of the contract of sale which establishes
requires agreement by the parties as to the price of the existence of a perfected sale.
the object. This is error. In Navarro v. Sugar
Producers Cooperative Marketing Association, In the absence of a perfected contract of sale, it is
Inc.,[14] we laid down the rule that the manner of immaterial whether Isidro A. Sobrecarey had the
payment of the purchase price is an essential authority to enter into a contract of sale in behalf of
element before a valid and binding contract of sale petitioner. This issue, therefore, needs no further
can exist. Although the Civil Code does not expressly discussion.
state that the minds of the parties must also meet
on the terms or manner of payment of the price, the WHEREFORE, the decision of the Court of Appeals is
same is needed, otherwise there is no sale. As held REVERSED and respondents complaint is
in Toyota Shaw, Inc. v. Court of DISMISSED.
[15]
Appeals, agreement on the manner of payment
goes into the price such that a disagreement on the SO ORDERED.
manner of payment is tantamount to a failure to
agree on the price.[16] In Velasco v. Court of Quisumbing, Buena, and De Leon, Jr., JJ., concur.
Appeals,[17] the parties to a proposed sale had
already agreed on the object of sale and on the Bellosillo, (Chairman), J., on leave.
purchase price. By the buyers own admission,
however, the parties still had to agree on how and
when the downpayment and the installments were
to be paid. It was held:
G.R. No. L-36902 January 30, 1982 That the delivery of the subject
matter of the Deed of Sale shall be
LUIS PICHEL, petitioner, from time to time and at the expense
vs. of the VENDEE who shall do the
PRUDENCIO ALONZO, respondent. harvesting and gathering of the
fruits;
This case originated in the lower Court as an action After the pre-trial conference, the Court a quo
for the annulment of a "Deed of Sale" dated August issued an Order dated November 9, 1972 which in
14, 1968 and executed by Prudencio Alonzo, as part read thus:
vendor, in favor of Luis Pichel, as vendee, involving
property awarded to the former by the Philippine The following facts are admitted by
Government under Republic Act No. 477. Pertinent the parties:
portions of the document sued upon read as
follows: Plaintiff Prudencio Alonzo was
awarded by the Government that
That the VENDOR for and in parcel of land designated as Lot No.
consideration of the sum of FOUR 21 of Subdivision Plan Psd 32465 of
THOUSAND TWO HUNDRED PESOS Balactasan, Lamitan, Basilan City in
(P4,200.00), Philippine Currency, in accordance with Republic Act No.
hand paid by the VENDEE to the 477. The award was cancelled by the
entire satisfaction of the VENDOR, Board of Liquidators on January 27,
the VENDOR hereby sells transfers, 1965 on the ground that, previous
and conveys, by way of absolute sale, thereto, plaintiff was proved to have
all the coconut fruits of his coconut alienated the land to another, in
land, designated as Lot No. 21 - violation of law. In 197 2, plaintiff's
Subdivision Plan No. Psd- 32465, rights to the land were reinstated.
situated at Balactasan Plantation,
Lamitan, Basilan City, Philippines; On August 14, 1968, plaintiff and his
wife sold to defendant an the fruits
That for the herein sale of the of the coconut trees which may be
coconut fruits are for all the fruits on harvested in the land in question for
the aforementioned parcel of land the period, September 15, 1968 to
presently found therein as well as for January 1, 1976, in consideration of
P4,200.00. Even as of the date of vendor's land, it actually is, for all legal intents and
sale, however, the land was still purposes, a contract of lease of the land itself.
under lease to one, Ramon Sua, and According to the Court:
it was the agreement that part of the
consideration of the sale, in the sum ... the sale aforestated has given
of P3,650.00, was to be paid by defendant complete control and
defendant directly to Ramon Sua so enjoyment of the improvements of
as to release the land from the the land. That the contract is
clutches of the latter. Pending said consensual; that its purpose is to
payment plaintiff refused to snow allow the enjoyment or use of a
the defendant to make any harvest. thing; that it is onerous because rent
or price certain is stipulated; and that
In July 1972, defendant for the first the enjoyment or use of the thing
time since the execution of the deed certain is stipulated to be for a
of sale in his favor, caused the certain and definite period of time,
harvest of the fruit of the coconut are characteristics which admit of no
trees in the land. other conclusion. ... The provisions of
the contract itself and its
xxx xxx xxx characteristics govern its nature. 4
Considering the foregoing, two issues The Court, therefore, concluded that the deed of
appear posed by the complaint and sale in question is an encumbrance prohibited by
the answer which must needs be Republic Act No. 477 which provides thus:
tested in the crucible of a trial on the
merits, and they are: Sec. 8. Except in favor of the
Government or any of its branches,
First.— Whether or nor defendant units, or institutions, land acquired
actually paid to plaintiff the full sum under the provisions of this Act or
of P4,200.00 upon execution of the any permanent improvements
deed of sale. thereon shall not be thereon and for
a term of ten years from and after
Second.— Is the deed of sale, Exhibit the date of issuance of the certificate
'A', the prohibited encumbrance of title, nor shall they become liable
contemplated in Section 8 of to the satisfaction of any debt
Republic Act No. 477? 2 contracted prior to the expiration of
such period.
Anent the first issue, counsel for plaintiff Alonzo
subsequently 'stipulated and agreed that his client Any occupant or applicant of lands
... admits fun payment thereof by defendant. 3 The under this Act who transfers
remaining issue being one of law, the Court below whatever rights he has acquired on
considered the case submitted for summary said lands and/or on the
judgment on the basis of the pleadings of the improvements thereon before the
parties, and the admission of facts and documentary date of the award or signature of the
evidence presented at the pre-trial conference. contract of sale, shall not be entitled
to apply for another piece of
The lower court rendered its decision now under agricultural land or urban, homesite
review, holding that although the agreement in or residential lot, as the case may be,
question is denominated by the parties as a deed of from the National Abaca and Other
sale of fruits of the coconut trees found in the
Fibers Corporation; and such transfer announced in the above-cited Ras case, therefore,
shall be considered null and void. 5 herein respondent is not deemed to have lost any of
his rights as grantee of Lot No. 21 under Republic Act
The dispositive portion of the lower Court's decision No. 477 during the period material to the case at
states: bar, i.e., from the cancellation of the award in 1965
to its reinstatement in 1972. Within said period,
WHEREFORE, it is the judgment of respondent could exercise all the rights pertaining
this Court that the deed of sale, to a grantee with respect to Lot No. 21.
Exhibit 'A', should be, as it is, hereby
declared nun and void; that plaintiff This brings Us to the issues raised by the instant
be, as he is, ordered to pay back to Petition. In his Brief, petitioner contends that the
defendant the consideration of the lower Court erred:
sale in the sum of P4,200.00 the
same to bear legal interest from the 1. In resorting to construction and
date of the filing of the complaint interpretation of the deed of sale in
until paid; that defendant shall pay to question where the terms thereof
the plaintiff the sum of P500.00 as are clear and unambiguous and leave
attorney's fees. no doubt as to the intention of the
parties;
Costs against the defendant. 6
2. In declaring — granting without
Before going into the issues raised by the instant admitting that an interpretation is
Petition, the matter of whether, under the admitted necessary — the deed of sale in
facts of this case, the respondent had the right or question to be a contract of lease
authority to execute the "Deed of Sale" in 1968, his over the land itself where the
award over Lot No. 21 having been cancelled respondent himself waived and
previously by the Board of Liquidators on January abandoned his claim that said deed
27, 1965, must be clarified. The case in point is Ras did not express the true agreement
vs. Sua 7 wherein it was categorically stated by this of the parties, and on the contrary,
Court that a cancellation of an award granted respondent admitted at the pre-trial
pursuant to the provisions of Republic Act No. 477 that his agreement with petitioner
does not automatically divest the awardee of his was one of sale of the fruits of the
rights to the land. Such cancellation does not result coconut trees on the land;
in the immediate reversion of the property subject
of the award, to the State. Speaking through Mr. 3. In deciding a question which was
Justice J.B.L. Reyes, this Court ruled that "until and not in issue when it declared the
unless an appropriate proceeding for reversion is deed of sale in question to be a
instituted by the State, and its reacquisition of the contract of lease over Lot 21;
ownership and possession of the land decreed by a
competent court, the grantee cannot be said to 4. In declaring furthermore the deed
have been divested of whatever right that he may of sale in question to be a contract of
have over the same property." 8 lease over the land itself on the basis
of facts which were not proved in
There is nothing in the record to show that at any evidence;
time after the supposed cancellation of herein
respondent's award on January 27, 1965, reversion 5. In not holding that the deed of
proceedings against Lot No. 21 were instituted by sale, Exhibit "A" and "2", expresses a
the State. Instead, the admitted fact is that the valid contract of sale;
award was reinstated in 1972. Applying the doctrine
6. In not deciding squarely and to the expresses a valid contract of sale. It has the essential
point the issue as to whether or not elements of a contract of sale as defined under
the deed of sale in question is an Article 1485 of the New Civil Code which provides
encumbrance on the land and its thus:
improvements prohibited by Section
8 of Republic Act 477; and Art. 1458. By the contract of sale one
of the contracting parties obligates
7. In awarding respondent attorney's himself to transfer the ownership of
fees even granting, without and to deliver a determinate thing,
admitting, that the deed of sale in and the other to pay therefor a price
question is violative of Section 8 of certain in money or its equivalent.
Republic Act 477.
A contract of sale may be absolute or
The first five assigned errors are interrelated, hence, conditional.
We shall consider them together. To begin with, We
agree with petitioner that construction or The subject matter of the contract of sale in
interpretation of the document in question is not question are the fruits of the coconut trees on the
called for. A perusal of the deed fails to disclose any land during the years from September 15, 1968 up
ambiguity or obscurity in its provisions, nor is there to January 1, 1976, which subject matter is a
doubt as to the real intention of the contracting determinate thing. Under Article 1461 of the New
parties. The terms of the agreement are clear and Civil Code, things having a potential existence may
unequivocal, hence the literal and plain meaning be the object of the contract of sale. And in Sibal vs.
thereof should be observed. Such is the mandate of Valdez, 50 Phil. 512, pending crops which have
the Civil Code of the Philippines which provides that: potential existence may be the subject matter of the
sale. Here, the Supreme Court, citing Mechem on
Art. 1370. If the terms of a contract Sales and American cases said which have potential
are clear and leave no doubt upon existence may be the subject matter of sale. Here,
the intention of the contracting the Supreme Court, citing Mechem on Sales and
parties, the literal meaning of its American cases said:
stipulation shall control ... .
Mr. Mechem says that a valid sale
Pursuant to the afore-quoted legal provision, the may be made of a thing, which
first and fundamental duty of the courts is the though not yet actually in existence,
application of the contract according to its express is reasonably certain to come into
terms, interpretation being resorted to only when existence as the natural increment or
such literal application is impossible. 9 usual incident of something already
in existence, and then belonging to
Simply and directly stated, the "Deed of Sale dated the vendor, and the title will vest in
August 14, 1968 is precisely what it purports to be. the buyer the moment the thing
It is a document evidencing the agreement of herein comes into existence. (Emerson vs.
parties for the sale of coconut fruits of Lot No. 21, European Railway Co., 67 Me., 387;
and not for the lease of the land itself as found by Cutting vs. Packers Exchange, 21 Am.
the lower Court. In clear and express terms, the St. Rep. 63) Things of this nature are
document defines the object of the contract thus: said to have a potential existence. A
"the herein sale of the coconut fruits are for an the man may sell property of which he is
fruits on the aforementioned parcel of land during potentially and not actually possess.
the years ...(from) SEPTEMBER 15, 1968; up to He may make a valid sale of the wine
JANUARY 1, 1976." Moreover, as petitioner that a vineyard is expected to
correctly asserts, the document in question produce; or the grain a field may
grow in a given time; or the milk a thing is capable. (104 Jurisprudencia
cow may yield during the coming Civil, 443)
year; or the wool that shall thereafter
grow upon sheep; or what may be In concluding that the possession and enjoyment of
taken at the next case of a the coconut trees can therefore be said to be the
fisherman's net; or fruits to grow; or possession and enjoyment of the land itself because
young animals not yet in existence; the defendant-lessee in order to enjoy his right
or the goodwill of a trade and the under the contract, he actually takes possession of
like. The thing sold, however, must the land, at least during harvest time, gather all of
be specific and Identified. They must the fruits of the coconut trees in the land, and gain
be also owned at the time by the exclusive use thereof without the interference or
vendor. (Hull vs. Hull 48 Conn. 250 intervention of the plaintiff-lessor such that said
(40 Am. Rep., 165) (pp. 522-523). plaintiff-lessor is excluded in fact from the land
during the period aforesaid, the trial court erred.
We do not agree with the trial court that the The contract was clearly a "sale of the coconut
contract executed by and between the parties is fruits." The vendor sold, transferred and conveyed
"actually a contract of lease of the land and the "by way of absolute sale, all the coconut fruits of his
coconut trees there." (CFI Decision, p. 62, Records). land," thereby divesting himself of all ownership or
The Court's holding that the contract in question fits dominion over the fruits during the seven-year
the definition of a lease of things wherein one of the period. The possession and enjoyment of the
parties binds himself to give to another the coconut trees cannot be said to be the possession
enjoyment or use of a thing for a price certain and and enjoyment of the land itself because these
for a period which may be definite or indefinite (Art. rights are distinct and separate from each other, the
1643, Civil Code of the Philippines) is erroneous. The first pertaining to the accessory or improvements
essential difference between a contract of sale and (coconut trees) while the second, to the principal
a lease of things is that the delivery of the thing sold (the land). A transfer of the accessory or
transfers ownership, while in lease no such transfer improvement is not a transfer of the principal. It is
of ownership results as the rights of the lessee are the other way around, the accessory follows the
limited to the use and enjoyment of the thing principal. Hence, the sale of the nuts cannot be
leased. interpreted nor construed to be a lease of the trees,
much less extended further to include the lease of
In Rodriguez vs. Borromeo, 43 Phil. 479, 490, the the land itself.
Supreme Court held:
The real and pivotal issue of this case which is taken
Since according to article 1543 of the up in petitioner's sixth assignment of error and as
same Code the contract of lease is already stated above, refers to the validity of the
defined as the giving or the "Deed of Sale", as such contract of sale, vis-a-vis the
concession of the enjoyment or use provisions of Sec. 8, R.A. No. 477. The lower Court
of a thing for a specified time and did not rule on this question, having reached the
fixed price, and since such contract is conclusion that the contract at bar was one of lease.
a form of enjoyment of the property, It was from the context of a lease contract that the
it is evident that it must be regarded Court below determined the applicability of Sec. 8,
as one of the means of enjoyment R.A. No. 477, to the instant case.
referred to in said article 398,
inasmuch as the terms enjoyment, Resolving now this principal issue, We find after a
use, and benefit involve the same close and careful examination of the terms of the
and analogous meaning relative to first paragraph of Section 8 hereinabove quoted,
the general utility of which a given that the grantee of a parcel of land under R.A. No.
477 is not prohibited from alienating or disposing of
the natural and/or industrial fruits of the land annual installments on the land. We agree with
awarded to him. What the law expressly disallows is herein petitioner that it could not have been the
the encumbrance or alienation of the land itself or intention of the legislature to prohibit the grantee
any of the permanent improvements thereon. from selling the natural and industrial fruits of his
Permanent improvements on a parcel of land are land, for otherwise, it would lead to an absurd
things incorporated or attached to the property in a situation wherein the grantee would not be able to
fixed manner, naturally or artificially. They include receive and enjoy the fruits of the property in the
whatever is built, planted or sown on the land which real and complete sense.
is characterized by fixity, immutability or
immovability. Houses, buildings, machinery, animal Respondent through counsel, in his Answer to the
houses, trees and plants would fall under the Petition contends that even granting arguendo that
category of permanent improvements, the he executed a deed of sale of the coconut fruits, he
alienation or encumbrance of which is prohibited by has the "privilege to change his mind and claim it as
R.A. No. 477. While coconut trees are permanent (an) implied lease," and he has the "legitimate right"
improvements of a land, their nuts are natural or to file an action for annulment "which no law can
industrial fruits which are meant to be gathered or stop." He claims it is his "sole construction of the
severed from the trees, to be used, enjoyed, sold or meaning of the transaction that should prevail and
otherwise disposed of by the owner of the land. not petitioner. (sic). 10 Respondent's counsel either
Herein respondents, as the grantee of Lot No. 21 misapplies the law or is trying too hard and going
from the Government, had the right and prerogative too far to defend his client's hopeless cause. Suffice
to sell the coconut fruits of the trees growing on the it to say that respondent-grantee, after having
property. received the consideration for the sale of his
coconut fruits, cannot be allowed to impugn the
By virtue of R.A. No. 477, bona fide occupants, validity of the contracts he entered into, to the
veterans, members of guerilla organizations and prejudice of petitioner who contracted in good faith
other qualified persons were given the opportunity and for a consideration.
to acquire government lands by purchase, taking
into account their limited means. It was intended for The issue raised by the seventh assignment of error
these persons to make good and productive use of as to the propriety of the award of attorney's fees
the lands awarded to them, not only to enable them made by the lower Court need not be passed upon,
to improve their standard of living, but likewise to such award having been apparently based on the
help provide for the annual payments to the erroneous finding and conclusion that the contract
Government of the purchase price of the lots at bar is one of lease. We shall limit Ourselves to the
awarded to them. Section 8 was included, as stated question of whether or not in accordance with Our
by the Court a quo, to protect the grantees from ruling in this case, respondent is entitled to an
themselves and the incursions of opportunists who award of attorney's fees. The Civil Code provides
prey on their misery and poverty." It is there to that:
insure that the grantees themselves benefit from
their respective lots, to the exclusion of other Art. 2208. In the absence of
persons. stipulation, attorney's fees and
expenses of litigation, other than
The purpose of the law is not violated when a judicial costs, cannot be recovered,
grantee sells the produce or fruits of his land. On the except:
contrary, the aim of the law is thereby achieved, for
the grantee is encouraged and induced to be more (1) When exemplary damages are
industrious and productive, thus making it possible awarded;
for him and his family to be economically self-
sufficient and to lead a respectable life. At the same (2) When the defendant's act or
time, the Government is assured of payment on the omission has compelled the plaintiff
to litigate with third persons or to IN VIEW OF THE FOREGOING, the judgment of the
incur expenses to protect his lower Court is hereby set aside and another one is
interest; entered dismissing the Complaint. Without costs.
3. That there will be a lease Under the Deed of Conditional Sale of Real
for fifteen (15) years in favor of the Properties with Assumption of Mortgage,
plaintiff over the space for drugstore
respondent was bound to pay the petitioner a lump
and cosmetics store at a monthly
rental of only ₱8,000.00 after full sum of ₱1.2 million pesos without interest as part of
payment of the stipulated the purchase price in three (3) fixed installments as
installment payments are made by follows:
the defendant;
Since December 1990, respondent had taken Petitioners claim for the balance of the
possession of the subject real properties and had purchase price of the subject real properties was
been continuously collecting and receiving monthly baseless and unwarranted because the full amount
rental income from the tenants of the buildings and of the purchase price had already been paid, as she
vendors of the sidewalk fronting the RBJ building did pay more than ₱4,200,000.00, the agreed
without sharing it with petitioner. purchase price of the subject real properties, and
she had even introduced improvements thereon
On September 2, 1992, respondent offered worth more than ₱4,800,000.00. As the parties
the amount of ₱751,000.00 only payable could no longer be restored to their original
on September 7, 1992, as full payment of the positions, rescission could not be resorted to.
purchase price of the subject real properties and
demanded the simultaneous execution of the Respondent added that as a result of their
corresponding deed of absolute sale. business relationship, petitioner was able to obtain
from her a loan in the amount of ₱400,000.00 with
Respondents Answer interest and took several pieces of jewelry worth
₱120,000.00. Petitioner also failed and refused to
pay the monthly rental of ₱20,000.00 Thus, the dispositive portion of the RTC
since November 16, 1990 up to the present for the Decision reads:
use and occupancy of the ground floor of the
building on the subject real property, thus, WHEREFORE, judgment is
hereby rendered as follows:
accumulating arrearages in the amount of
₱470,000.00 as of October 1992. 1. Allowing the defendant to
pay the plaintiff within thirty (30)
Ruling of the RTC days from the finality hereof the
amount of ₱805,000.00,
representing the unpaid purchase
On February 22, 2006, the RTC handed down its price of the subject property, with
decision finding that respondent failed to pay in full interest thereon at 2% a month
the ₱4.2 million total purchase price of the subject from January 1, 1992 until fully paid.
real properties leaving a balance of ₱805,000.00. It Failure of the defendant to pay said
amount within the said period shall
stated that the checks and receipts presented by
cause the automatic rescission of the
respondent refer to her payments of the mortgage contract (Deed of Conditional Sale of
obligation with FSL Bank and not the payment of the Real Property with Assumption of
balance of ₱1,200,000.00. The RTC also considered Mortgage) and the plaintiff and the
defendant shall be restored to their
the Deed of Conditional Sale of Real Property with
former positions relative to the
Assumption of Mortgage executed by and among subject property with each returning
the two parties and FSL Bank a contract to sell, and to the other whatever benefits each
not a contract of sale. It was of the opinion that derived from the transaction;
although the petitioner was entitled to a rescission
2. Directing the defendant to
of the contract, it could not be permitted because
allow the plaintiff to continue using
her non-payment in full of the purchase price may the space occupied by her for
not be considered as substantial and fundamental drugstore and cosmetic store
breach of the contract as to defeat the object of the without any rental pending payment
of the aforesaid balance of the
parties in entering into the contract.[4] The RTC
purchase price.
believed that the respondents offer stated in her
counsels letter dated September 2, 1992 to settle 3. Ordering the defendant,
what she thought was her unpaid balance of upon her full payment of the
purchase price together with
₱751,000.00 showed her sincerity and willingness to
interest, to execute a contract of
settle her obligation. Hence, it would be more lease for fifteen (15) years in favor of
equitable to give respondent a chance to pay the the plaintiff over the space for the
balance plus interest within a given period of time. drugstore and cosmetic store at a
fixed monthly rental of ₱8,000.00;
and
Finally, the RTC stated that there was no factual or
legal basis to award damages and attorneys fees
because there was no proof that either party acted
fraudulently or in bad faith.
4. Directing the plaintiff, upon February 2006 and Order dated 22
full payment to her by the defendant December 2006 of the Regional Trial
of the purchase price together with Court of Valenzuela City, Branch 172
interest, to execute the necessary in Civil Case No. 3945-V-92 are
deed of sale, as well as to pay the AFFIRMED with MODIFICATION in
Capital Gains Tax, documentary that defendant-appellant Victoria T.
stamps and other miscellaneous Tuparan is hereby ORDERED to pay
expenses necessary for securing the plaintiff-appellee/appellant Mila A.
BIR Clearance, and to pay the real Reyes, within 30 days from finality of
estate taxes due on the subject this Decision, the amount
property up to 1990, all necessary to of ₱805,000.00 representing the
transfer ownership of the subject unpaid balance of the purchase price
property to the defendant. of the subject property, plus interest
thereon at the rate of 6% per annum
No pronouncement as to from 11 September 1992 up to
damages, attorneys fees and costs. finality of this Decision and,
thereafter, at the rate of 12% per
SO ORDERED.[5] annum until full payment. The ruling
of the trial court on the automatic
rescission of the Deed of Conditional
Ruling of the CA Sale with Assumption of Mortgage is
hereby DELETED. Subject to the
On February 13, 2009, the CA rendered its decision foregoing, the dispositive portion of
the trial courts decision is AFFIRMED
affirming with modification the RTC Decision. The
in all other respects.
CA agreed with the RTC that the contract entered
into by the parties is a contract to sell but ruled that SO ORDERED.[6]
the remedy of rescission could not apply because
the respondents failure to pay the petitioner the After the denial of petitioners motion for
balance of the purchase price in the total amount of reconsideration and respondents motion for partial
₱805,000.00 was not a breach of contract, but reconsideration, petitioner filed the subject petition
merely an event that prevented the seller for review praying for the reversal and setting aside
(petitioner) from conveying title to the purchaser of the CA Decision anchored on the following
(respondent). It reasoned that out of the total ASSIGNMENT OF ERRORS
purchase price of the subject property in the
amount of ₱4,200,000.00, respondents remaining A. THE COURT OF APPEALS
unpaid balance was only ₱805,000.00. Since SERIOUSLY ERRED AND ABUSED ITS
respondent had already paid a substantial amount DISCRETION IN DISALLOWING THE
of the purchase price, it was but right and just to OUTRIGHT RESCISSION OF THE
SUBJECT DEED OF CONDITIONAL
allow her to pay the unpaid balance of the purchase SALE OF REAL PROPERTIES WITH
price plus interest. Thus, the decretal portion of the ASSUMPTION OF MORTGAGE ON
CA Decision reads: THE GROUND THAT RESPONDENT
TUPARANS FAILURE TO PAY
WHEREFORE, premises PETITIONER REYES THE BALANCE OF
considered, the Decision dated 22 THE PURCHASE PRICE OF
₱805,000.00 IS NOT A BREACH OF COMPLAINT ON SEPTEMBER 11,
CONTRACT DESPITE ITS OWN 1992 DESPITE THE PERSONAL
FINDINGS THAT PETITIONER STILL COMMITMENT OF THE
RETAINS OWNERSHIP AND TITLE RESPONDENT AND AGREEMENT
OVER THE SUBJECT REAL BETWEEN THE PARTIES THAT
PROPERTIES DUE TO RESPONDENTS RESPONDENT WILL PAY INTEREST
REFUSAL TO PAY THE BALANCE OF ON THE ₱805,000.00 AT THE RATE
THE TOTAL PURCHASE PRICE OF OF 6% MONTHLY STARTING THE
₱805,000.00 WHICH IS EQUAL TO DATE OF DELINQUENCY ON
20% OF THE TOTAL PURCHASE PRICE DECEMBER 31, 1991.
OF ₱4,200,000.00 OR 66% OF THE
STIPULATED LAST INSTALLMENT OF
₱1,200,000.00 PLUS THE INTEREST D. THE COURT OF APPEALS
THEREON. IN EFFECT, THE COURT OF SERIOUSLY ERRED AND ABUSED ITS
APPEALS AFFIRMED AND ADOPTED DISCRETION IN THE APPRECIATION
THE TRIAL COURTS CONCLUSION AND/OR MISAPPRECIATION OF
THAT THE RESPONDENTS NON- FACTS RESULTING INTO THE DENIAL
PAYMENT OF THE ₱805,000.00 IS OF THE CLAIM OF PETITIONER REYES
ONLY A SLIGHT OR CASUAL BREACH FOR ACTUAL DAMAGES WHICH
OF CONTRACT. CORRESPOND TO THE MILLIONS OF
PESOS OF RENTALS/FRUITS OF THE
SUBJECT REAL PROPERTIES WHICH
B. THE COURT OF APPEALS RESPONDENT TUPARAN COLLECTED
SERIOUSLY ERRED AND ABUSED ITS CONTINUOUSLY SINCE DECEMBER
DISCRETION IN DISREGARDING AS 1990, EVEN WITH THE UNPAID
GROUND FOR THE RESCISSION OF BALANCE OF ₱805,000.00 AND
THE SUBJECT CONTRACT THE OTHER DESPITE THE FACT THAT
FRAUDULENT AND MALICIOUS ACTS RESPONDENT DID NOT
COMMITTED BY THE RESPONDENT CONTROVERT SUCH CLAIM OF THE
AGAINST THE PETITIONER WHICH PETITIONER AS CONTAINED IN HER
BY THEMSELVES SUFFICIENTLY AMENDED COMPLAINT DATED
JUSTIFY A DENIAL OF A GRACE APRIL 22, 2006.
PERIOD OF THIRTY (30) DAYS TO THE
RESPONDENT WITHIN WHICH TO
PAY TO THE PETITIONER THE E. THE COURT OF APPEALS
₱805,000.00 PLUS INTEREST SERIOUSLY ERRED AND ABUSED ITS
THEREON. DISCRETION IN THE APPRECIATION
OF FACTS RESULTING INTO THE
DENIAL OF THE CLAIM OF
C. EVEN ASSUMING PETITIONER REYES FOR THE
ARGUENDO THAT PETITIONER IS ₱29,609.00 BACK RENTALS THAT
NOT ENTITLED TO THE RESCISSION WERE COLLECTED BY RESPONDENT
OF THE SUBJECT CONTRACT, THE TUPARAN FROM THE OLD TENANTS
COURT OF APPEALS STILL OF THE PETITIONER.
SERIOUSLY ERRED AND ABUSED ITS
DISCRETION IN REDUCING THE
INTEREST ON THE ₱805,000.00 TO F. THE COURT OF APPEALS
ONLY 6% PER ANNUM STARTING SERIOUSLY ERRED AND ABUSED ITS
FROM THE DATE OF FILING OF THE DISCRETION IN DENYING THE
PETITIONERS EARLIER URGENT ruling that there was no legal basis for the rescission
MOTION FOR ISSUANCE OF A
of the Deed of Conditional Sale with Assumption of
PRELIMINARY MANDATORY AND
PROHIBITORY INJUNCTION DATED Mortgage.
JULY 7, 2008 AND THE SUPPLEMENT
THERETO DATED AUGUST 4, 2008 Position of the Petitioner
THEREBY CONDONING THE
UNJUSTIFIABLE FAILURE/REFUSAL
OF JUDGE FLORO ALEJO TO RESOLVE The petitioner basically argues that the CA should
WITHIN ELEVEN (11) YEARS THE have granted the rescission of the subject Deed of
PETITIONERS THREE (3) SEPARATE Conditional Sale of Real Properties with Assumption
MOTIONS FOR PRELIMINARY of Mortgage for the following reasons:
INJUNCTION/ TEMPORARY
RESTRAINING ORDER, ACCOUNTING
1. The subject deed of
AND DEPOSIT OF RENTAL INCOME
conditional sale is a reciprocal
DATED MARCH 17, 1995, AUGUST
obligation whose outstanding
19, 1996 AND JANUARY 7, 2006
characteristic is reciprocity arising
THEREBY PERMITTING THE
from identity of cause by virtue of
RESPONDENT TO UNJUSTLY ENRICH
which one obligation is correlative of
HERSELF BY CONTINUOUSLY
the other.
COLLECTING ALL THE
RENTALS/FRUITS OF THE SUBJECT
2. The petitioner was
REAL PROPERTIES WITHOUT ANY
rescinding not enforcing the subject
ACCOUNTING AND COURT DEPOSIT
Deed of Conditional Sale pursuant to
OF THE COLLECTED RENTALS/FRUITS
Article 1191 of the Civil Code because
AND THE PETITIONERS URGENT
of the respondents failure/refusal to
MOTION TO DIRECT DEFENDANT
pay the ₱805,000.00 balance of the
VICTORIA TUPARAN TO PAY THE
total purchase price of the
ACCUMULATED UNPAID REAL
petitioners properties within the
ESTATE TAXES AND SEF TAXES ON
stipulated period ending December
THE SUBJECT REAL PROPERTIES
31, 1991.
DATED JANUARY 13, 2007 THEREBY
EXPOSING THE SUBJECT REAL
3. There was no slight or
PROPERTIES TO IMMINENT
casual breach on the part of the
AUCTION SALE BY THE CITY
respondent because she
TREASURER OF VALENZUELA CITY.
(respondent) deliberately failed to
comply with her contractual
obligations with the petitioner by
G. THE COURT OF APPEALS
violating the terms or manner of
SERIOUSLY ERRED AND ABUSED ITS
payment of the ₱1,200,000.00
DISCRETION IN DENYING THE
balance and unjustly enriched herself
PETITIONERS CLAIM FOR MORAL
at the expense of the petitioner by
AND EXEMPLARY DAMAGES AND
collecting all rental payments for her
ATTORNEYS FEES AGAINST THE
personal benefit and enjoyment.
RESPONDENT.
In sum, the crucial issue that needs to be Furthermore, the petitioner claims that the
resolved is whether or not the CA was correct in respondent is liable to pay interest at the rate of 6%
per month on her unpaid installment of
₱805,000.00 from the date of the The petition lacks merit.
delinquency, December 31, 1991, because she
obligated herself to do so. The Court agrees with the ruling of the
Finally, the petitioner asserts that her claim courts below that the subject Deed of Conditional
for damages or lost income as well as for the back Sale with Assumption of Mortgage entered into by
rentals in the amount of ₱29,609.00 has been fully and among the two parties and FSL Bank
substantiated and, therefore, should have been on November 26, 1990 is a contract to sell and not a
granted by the CA. Her claim for moral and contract of sale. The subject contract was correctly
exemplary damages and attorneys fees has been classified as a contract to sell based on the following
likewise substantiated. pertinent stipulations:
SO ORDERED.
THIRD DIVISION No. T-133026[3] issued by the Register of Deeds of
Metro Manila, District III. Later, petitioners, Spouses
SPOUSES JOSE T. G.R. No. 163244
Jose T. Valenzuela and Gloria Valenzuela (Gloria),
VALENZUELA and Present:
GLORIA VALENZUELA, YNARES-SANTIAGO, J., occupied the said property and introduced several
Petitioners, Chairperson, improvements thereon.
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and When Kalayaan discovered that the lot was
- versus - PERALTA, JJ.
Promulgated: being illegally occupied by the petitioners, it
demanded that they immediately vacate the
June 22, 2009
premises and surrender possession
KALAYAAN thereof. Petitioners then negotiated with Kalayaan
DEVELOPMENT & to purchase the portion of the lot they were
INDUSTRIAL
CORPORATION, occupying. On August 5, 1994, the parties executed
Respondent. a Contract to Sell[4] wherein they stipulated that
II. THE HONORABLE COURT OF demand letters that were previously sent to them
APPEALS SHOULD HAVE APPLIED were for their previous obligation with Kalayaan and
THE APPLICABLE PROVISIONS OF
not for the new agreement between Juliet and
THE LAW VIS--VIS THE
RESCISSION OF CONTRACTS TO Kalayaan to assume payment of the unpaid portion
SELL REAL PROPERTY, of the subject property. Petitioners aver that, for a
SPECIFICALLY THE
REQUIREMENT OF A PRIOR AND demand of rescission to be valid, it is an absolute
VALIDLY NOTARIZED LETTER OF requirement that should be made by way of a duly
DEMAND.
notarized written notice.
III. THE HONORABLE COURT OF
APPEALS FAILED TO APPLY TO
Petitioners likewise claim that there was a
THE INSTANT CASE THE
PERTINENT PROVISIONS OF THE valid novation in the present case. They aver that
NEW CIVIL CODE REGARDING the CA failed to see that the original contract
THE PRINCIPLE OF NOVATION AS
A MODE OF EXTINGUISHING AN between the petitioners and Kalayaan was altered,
OBLIGATION. changed, modified and restructured, as a
IV. THE AWARD, BY THE COURT OF consequence of the change in the person of the
APPEALS, OF ATTORNEYS FEES, principal debtor and the monthly amortization to be
WAS NOT IN ACCORD WITH THE
paid for the subject property. When they agreed to
FACTS AND THE LAW.
a monthly amortization of P10,000.00 per month,
the original contract was changed; and Kalayaan
Petitioners maintain that they should have recognized Juliets capacity to pay, as well as her
been entitled to get at least one-half of the subject designation as the new debtor. The original contract
property, because payment equivalent to its value was novated and the principal obligation to pay for
the remaining half of the subject property was price renders the contract to sell ineffective and
transferred from petitioners to Juliet. When without force and effect.[23] Unlike a contract of
Kalayaan accepted the payments made by the new sale, where the title to the property passes to the
debtor, Juliet, it waived its right to rescind the vendee upon the delivery of the thing sold, in a
previous contract. Thus, the action for rescission contract to sell, ownership is, by agreement,
filed by Kalayaan against them, was unfounded, reserved to the vendor and is not to pass to the
since the contract sought to be rescinded was no vendee until full payment of the purchase
longer in existence. price. Otherwise stated, in a contract of sale, the
Finally, petitioners question the RTCs award vendor loses ownership over the property and
of attorneys fees. They maintain that there was no cannot recover it until and unless the contract is
basis for the RTC to have awarded the same.They resolved or rescinded; whereas, in a contract
claim that Kalayaan was not forced, by their acts, to to sell, title is retained by the vendor until full
litigate, because Juliet was offering to pay the payment of the purchase price. In the latter
installments, but the offer was denied by contract, payment of the price is a positive
Kalayaan. Moreover, since there were no awards for suspensive condition, failure ofwhich is not a breach
moral and exemplary damages, the award of but an event that prevents the obligation of the
attorneys fees would have no basis and should be vendor to convey title from becoming effective.[24]
deleted.
Since the obligation of respondent did not
The petition is devoid of merit. arise because of the failure of petitioners to fully pay
the purchase price, Article 1191[25] of the Civil Code
would have no application.
In the present case, the nature and
characteristics of a contract to sell is determinative
of the propriety of the remedy of rescission and the
Rayos v. Court of Appeals[26] elucidates:
award of attorneys fees.
Construing the contracts
together, it is evident that the parties
Under a contract to sell, the seller retains executed a contract to sell and not a
title to the thing to be sold until the purchaser fully contract of sale. The petitioners
retained ownership without further
pays the agreed purchase price. The full payment is remedies by the respondents until
a positive suspensive condition, the non-fulfillment the payment of the purchase price of
the property in full. Such payment is
of which is not a breach of contract, but merely an
a positive suspensive condition,
event that prevents the seller from conveying title failure of which is not really a
to the purchaser. The non-payment of the purchase breach, serious or otherwise, but an
event that prevents the obligation
breach, serious or otherwise, but an event that
of the petitioners to convey title
from arising, in accordance with prevents the obligation of the seller to convey title
Article 1184 of the Civil Code. x x x from arising.[27] The non-fulfillment by petitioners of