G.R. No. 179965 February 20, 2013 NICOLAS P. DIEGO, Petitioner, vs.
insistence that he has since rescinded their agreement in 1997 proved the
RODOLFO P. DIEGO and EDUARDO P. DIEGO, Respondents.
Facts: In 1993, petitioner Nicolas P. Diego (Nicolas) and his brother
Rodolfo, respondent herein, entered into an oral contract to sell covering Nicolass
share, fixed at 500,000.00, as co-owner of the familys Diego Building situated
in Dagupan City. Rodolfo made a downpayment of 250,000.00. It was agreed
that the deed of sale shall be executed upon payment of the remaining balance of
250,000.00. However, Rodolfo failed to pay the remaining balance.
Meanwhile, the building was leased out to third parties, but Nicolass share
in the rents were not remitted to him by herein respondent Eduardo, another
brother of Nicolas and designated administrator of the Diego Building. Instead,
Eduardo gave Nicolass monthly share in the rents to Rodolfo. Despite demands
and protestations by Nicolas, Rodolfo and Eduardo failed to render an accounting
and remit his share in the rents and fruits of the building, and Eduardo continued
to hand them over to Rodolfo.
Thus, on May 17, 1999, Nicolas filed a Complaint against respondents
where Nicolas prayed that Eduardo be ordered to render an accounting of all the
transactions over the Diego Building; that Eduardo and Rodolfo be ordered to
deliver to Nicolas his share in the rents; and that Eduardo and Rodolfo be held
solidarily liable for attorneys fees and litigation expenses.
Rodolfo and Eduardo filed their Answer with Counterclaim for damages
and attorneys fees. They argued that Nicolas had no more claim in the rents in
the Diego Building since he had already sold his share to Rodolfo. Rodolfo
admitted having remitted only 250,000.00 to Nicolas. He asserted that he would
pay the balance of the purchase price to Nicolas only after the latter shall have
executed a deed of absolute sale.
Ruling of the Regional Trial Court
After trial on the merits the RTC dismissed the case for lack of merit and
ordering Nicolas to execute a deed of absolute sale in favor of Rodolfo upon
payment by the latter of the 250,000.00 balance of the agreed purchase price.
To summarize, the trial court ruled that as early as 1993, Nicolas was no
longer entitled to the fruits of his aliquot share in the Diego Building because he
had "ceased to be a co-owner" thereof. The trial court held that when Nicolas
received the 250,000.00 downpayment, a "contract of sale" was perfected.
Consequently, Nicolas is obligated to convey such share to Rodolfo, without right
of rescission. Finally, the RTC held that the 250,000.00 balance from Rodolfo
will only be due and demandable when Nicolas executes an absolute deed of sale.
Ruling of the Court of Appeals
Nicolas appealed to the CA which sustained the trial courts Decision in
toto. The CA held that there was a perfected contract of sale. Besides, Nicolass
existence of a perfected sale. It added that Nicolas could not validly rescind the
contract because: "1) Rodolfo ha[d] already made a partial payment; 2) Nicolas
ha[d] already partially performed his part regarding the contract; and 3) Rodolfo
opposes the rescission." Reconsideration was denied.
The CA then proceeded to rule that since no period was stipulated within
which Rodolfo shall deliver the balance of the purchase price, it was incumbent
upon Nicolas to have filed a civil case to fix the same. But because he failed to do
so, Rodolfo cannot be considered to be in delay or default.
Finally, the CA made another interesting pronouncement, that by virtue of
the agreement Nicolas entered into with Rodolfo, he had already transferred his
ownership over the subject property and as a consequence, Rodolfo is legally
entitled to collect the fruits thereof in the form of rentals. Nicolas remaining right
is to demand payment of the balance of the purchase price, provided that he first
executes a deed of absolute sale in favor of Rodolfo.
Petitioners Arguments
In his Petition, the Supplement thereon, and Reply, Nicolas argues that,
contrary to what the CA found, there was no perfected contract of sale even
though Rodolfo had partially paid the price; that in the absence of the third element
in a sale contract the price there could be no perfected sale; that failing to pay
the required price in full, Nicolas had the right to rescind the agreement as an
unpaid seller.
Nicolas likewise takes exception to the CA finding that Rodolfo was not in
default or delay in the payment of the agreed balance for his (Nicolass) failure to
file a case to fix the period within which payment of the balance should be made.
He believes that Rodolfos failure to pay within a reasonable time was a
substantial and material breach of the agreement which gave him the right to
unilaterally and extrajudicially rescind the agreement and be discharged of his
obligations as seller; and that his repeated written demands upon Rodolfo to pay
the balance granted him such rights.
Nicolas further claims that based on his agreement with Rodolfo, there
was to be no transfer of title over his share in the building until Rodolfo has
effected full payment of the purchase price, thus, giving no right to the latter to
collect his share in the rentals.
Finally, Nicolas bewails the CAs failure to award damages, attorneys fees
and litigation expenses for what he believes is a case of unjust enrichment at his
expense.
Respondents Arguments
Apart from echoing the RTC and CA pronouncements, respondents
accuse the petitioner of "cheating" them, claiming that after the latter received the
Alan Vincent S. Fontanosa II 1
250,000.00 downpayment, he "vanished like thin air and hibernated in the USA,
he being an American citizen," only to come back claiming that the said amount
was a mere loan.
They add that the Petition is a mere rehash and reiteration of the
petitioners arguments below, which are deemed to have been sufficiently passed
upon and debunked by the appellate court.
Issue: Whether or not there was a perfected contract of sale which
disqualifies Nicholas from sharing in the rentals and other fruits.
Ruling: No. The contract was merely a contract to sell.
a) The stipulation to execute a deed of sale upon full payment of the
purchase price is a unique and distinguishing characteristic of a contract to sell. It
also shows that the vendor reserved title to the property until full payment.
Explicitly stated, the Court ruled that the agreement to execute a deed of
sale upon full payment of the purchase price "shows that the vendors reserved
title to the subject property until full payment of the purchase price."
b) The acknowledgement receipt signed by Nicolas as well as the
contemporaneous acts of the parties show that they agreed on a contract to sell,
not of sale. The absence of a formal deed of conveyance is indicative of a contract
to sell.
In San Lorenzo Development Corporation v. Court of Appeals, to prove his
allegation that there was a perfected contract of sale between him and Lu, Pablo
presented a receipt signed by Lu acknowledging receipt of 50,000.00 as partial
payment. However, when the case reached this Court, it was ruled that the
transaction entered into by Pablo and Lu was only a contract to sell, not a contract
of sale. The Court held thus:
The receipt signed by Pacita Lu merely states that she accepted
the sum of fifty thousand pesos (50,000.00) from Babasanta as partial
payment of 3.6 hectares of farm lot situated in Sta. Rosa, Laguna. While
there is no stipulation that the seller reserves the ownership of the property
until full payment of the price which is a distinguishing feature of a contract
to sell, the subsequent acts of the parties convince us that the Spouses Lu
never intended to transfer ownership to Babasanta except upon full
payment of the purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated
therein that despite his repeated requests for the execution of the final
deed of sale in his favor so that he could effect full payment of the price,
Pacita Lu allegedly refused to do so. In effect, Babasanta himself
recognized that ownership of the property would not be transferred to him
until such time as he shall have effected full payment of the price.
Moreover, had the sellers intended to transfer title, they could have easily
executed the document of sale in its required form simultaneously with
their acceptance of the partial payment, but they did not.
In addition, Eduardo admitted that he and Rodolfo repeatedly asked
Nicolas to sign the deed of sale but the latter refused because he was not yet paid
the full amount. As we have ruled in San Lorenzo Development Corporation v.
Court of Appeals, the fact that Eduardo and Rodolfo asked Nicolas to execute a
deed of sale is a clear recognition on their part that the ownership over the
property still remains with Nicolas. The parties agreement was likewise embodied
only in a receipt, but Nicolas did not want to sign the deed of sale unless he is fully
paid. On the other hand, Rodolfo did not want to pay unless a deed of sale is duly
executed in his favor.
This Court cannot subscribe to the appellate courts view that Nicolas
should first execute a deed of absolute sale in favor of Rodolfo, before the latter
can be compelled to pay the balance of the price. This is patently ridiculous, and
goes against every rule in the book. This pronouncement virtually places the
prospective seller in a contract to sell at the mercy of the prospective buyer, and
sustaining this point of view would place all contracts to sell in jeopardy of being
rendered ineffective by the act of the prospective buyers, who naturally would
demand that the deeds of absolute sale be first executed before they pay the
balance of the price. Surely, no prospective seller would accommodate.
c) Nicolas did not surrender or deliver title or possession to Rodolfo.
Moreover, there could not even be a surrender or delivery of title or
possession to the prospective buyer Rodolfo. This was made clear by the nature
of the agreement, by Nicolass repeated demands for the return of all rents
unlawfully and unjustly remitted to Rodolfo by Eduardo, and by Rodolfo and
Eduardos repeated demands for Nicolas to execute a deed of sale which, as we
said before, is a recognition on their part that ownership over the subject property
still remains with Nicolas.
It is also quite understandable why Nicolas belatedly demanded the
payment of the rentals. Records show that the structural integrity of the Diego
Building was severely compromised when an earthquake struck Dagupan City in
1990. In order to rehabilitate the building, the co-owners obtained a loan from a
bank. Starting May 1994, the property was leased to third parties and the rentals
received were used to pay off the loan. It was only in 1996, or after payment of
the loan that the co-owners started receiving their share in the rentals. During this
time, Nicolas was in the USA but immediately upon his return he demanded for
the payment of his share in the rentals which Eduardo remitted to Rodolfo.
In other words, the full payment of the purchase price partakes of a
suspensive condition, the nonfulfillment of which prevents the obligation to sell
from arising and thus, ownership is retained by the prospective seller without
Alan Vincent S. Fontanosa II 2
further remedies by the prospective buyer. It does not, by itself, transfer ownership
to the buyer."
The contract to sell is terminated or cancelled.
The remedy of rescission is not available in contracts to sell. As explained
in Spouses Santos v. Court of Appeals:
xx If the vendor should eject the vendee for failure to meet the condition
precedent, he is enforcing the contract and not rescinding it. When the petitioners
in the instant case repossessed the disputed house and lot for failure of private
respondents to pay the purchase price in full, they were merely enforcing the
contract and not rescinding it. As petitioners correctly point out, the Court of
Appeals erred when it ruled that petitioners should have judicially rescinded the
contract pursuant to Articles 1592 and 1191 of the Civil Code. Article 1592 speaks
of non-payment of the purchase price as a resolutory condition. It does not apply
to a contract to sell. As to Article 1191, it is subordinated to the provisions of Article
1592 when applied to sales of immovable property. Neither provision is applicable
in the present case.
Similarly, we held in Chua v. Court of Appeals that "Article 1592 of the Civil
Code permits the buyer to pay, even after the expiration of the period, as long as
no demand for rescission of the contract has been made upon him either judicially
or by notarial act. However, Article 1592 does not apply to a contract to sell where
the seller reserves the ownership until full payment of the price," as in this case.
We hold that when Rodolfo failed to fully pay the purchase price, the
contract to sell was deemed terminated or cancelled. Rodolfo has no right to
compel Nicolas to transfer ownership to him because he failed to pay in full the
purchase price. Correlatively, Nicolas has no obligation to transfer his ownership
over his share in the Diego Building to Rodolfo.
Thus, it was erroneous for the CA to rule that Nicolas should have filed a
case to fix the period for Rodolfos payment of the balance of the purchase price.
It was not Nicolass obligation to compel Rodolfo to pay the balance; it was
Rodolfos duty to remit it.
It would appear that after Nicolas refused to sign the deed as there was
yet no full payment, Rodolfo and Eduardo hired the services of the Daroya
Accounting Office "for the purpose of estimating the amount to which [Nicolas] still
owes [Rodolfo] as a consequence of the unconsummated verbal agreement
regarding the formers share in the co-ownership of [Diego Building] in favor of the
latter." According to the accountants report, after Nicolas revoked his agreement
with Rodolfo due to non-payment, the downpayment of 250,000.00 was
considered a loan of Nicolas from Rodolfo. The accountant opined that the
250,000.00 should earn interest at 18%. Nicolas however objected as regards
the imposition of interest as it was not previously agreed upon. Notably, the
contents of the accountants report were not disputed or rebutted by the
respondents. In fact, it was stated therein that "[a]ll the bases and assumptions
made particularly in the fixing of the applicable rate of interest have been
discussed with [Eduardo]."
We find it irrelevant and immaterial that Nicolas described the termination
or cancellation of his agreement with Rodolfo as one of rescission. Being a layman,
he is understandably not adept in legal terms and their implications. Besides, this
Court should not be held captive or bound by the conclusion reached by the
parties. The proper characterization of an action should be based on what the law
says it to be, not by what a party believed it to be. "A contract is what the law
defines it to be x x x and not what the contracting parties call it."
On the other hand, the respondents additional submission that Nicolas
cheated them by "vanishing and hibernating" in the USA after receiving Rodolfos
250,000.00 downpayment, only to come back later and claim that the amount he
received was a mere loan cannot be believed. How the respondents could have
been cheated or disadvantaged by Nicolass leaving is beyond comprehension. If
there was anybody who benefited from Nicolass perceived "hibernation", it was
the respondents, for they certainly had free rein over Nicolass interest in the
Diego Building. Rodolfo put off payment of the balance of the price, yet, with the
aid of Eduardo, collected and appropriated for himself the rents which belonged
to Nicolas.
Eduardo is solidarily liable with Rodolfo as regards the share of Nicolas in
the rents.
For his complicity, bad faith and abuse of authority as the Diego Building
administrator, Eduardo must be held solidarily liable with Rodolfo for all that
Nicolas should be entitled to from 1993 up to the present, or in respect of actual
damages suffered in relation to his interest in the Diego Building.
The Court further decrees the following:
1. The oral contract to sell between petitioner Nicolas P. Diego and
respondent Rodolfo P. Diego is DECLARED terminated/cancelled;
2. Respondents Rodolfo P. Diego and Eduardo P. Diego
are ORDERED to surrender possession and control, as the case may be,
of Nicolas P. Diegos share in the Diego Building. Respondents are further
commanded to return or surrender to the petitioner the documents of title,
receipts, papers, contracts, and all other documents in any form or manner
pertaining to the latters share in the building, which are deemed to be in
their unauthorized and illegal possession;
3. Respondents Rodolfo P. Diego and Eduardo P. Diego
are ORDERED to immediately render an accounting of all the transactions,
from the period beginning 1993 up to the present, pertaining to Nicolas P.
Alan Vincent S. Fontanosa II 3
 Diegos share in the Diego Building, and thereafter commanded to jointly
and severally remit to the petitioner all rents, monies, payments and
benefits of whatever kind or nature pertaining thereto, which are hereby
deemed received by them during the said period, and made to them or are
due, demandable and forthcoming during the said period and from the date
of this Decision, with legal interest from the filing of the Complaint;
4. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED,
immediately and without further delay upon receipt of this Decision, to
solidarily pay the petitioner attorneys fees in the amount of 50,000.00;
litigation expenses in the amount of 20,000.00 and the sum of 1,000.00
per counsel for each court appearance by his lawyer or lawyers;
5. The payment of 250,000.00 made by respondent Rodolfo P. Diego,
with legal interest from the filing of the Complaint, shall be APPLIED, by
way of compensation, to his liabilities to the petitioner and to answer for all
damages and other awards and interests which are owing to the latter
under this Decision; and
6. Respondents counterclaim is DISMISSED.
G.R. No. 167615 SPOUSES ALEXANDER AND JULIE LAM, Doing Business
Under the Name and Style "COLORKWIK LABORATORIES" AND
"COLORKWIK PHOTO SUPPLY", Petitioners, vs. KODAK PHILIPPINES,
LTD., Respondent.
Facts: On January 8, 1992, the Lam Spouses and Kodak Philippines, Ltd.
entered into an agreement (Letter Agreement) for the sale of three (3) units of the
Kodak Minilab System 22XL (Minilab Equipment) in the amount of 1,796,000.00
per unit, with the following terms:
1. Said Minilab Equipment packages will avail a total of 19% multiple order
discount based on prevailing equipment price provided said equipment
packages will be purchased not later than June 30, 1992.
2. 19% Multiple Order Discount shall be applied in the form of merchandise
and delivered in advance immediately after signing of the contract.
* Also includes start-up packages worth P61,000.00.
3. NO DOWNPAYMENT.
4. Minilab Equipment Package shall be payable in 48 monthly installments
at THIRTY FIVE THOUSAND PESOS (P35,000.00) inclusive of 24%
interest rate for the first 12 months; the balance shall be re-amortized for
the remaining 36 months and the prevailing interest shall be applied.
5. Prevailing price of Kodak Minilab System 22XL as of January 8, 1992 is
at ONE MILLION SEVEN HUNDRED NINETY SIX THOUSAND PESOS.
6. Price is subject to change without prior notice.
*Secured with PDCs; 1st monthly amortization due 45 days after
installation[.]
On January 15, 1992, Kodak Philippines, Ltd. delivered one (1) unit of the
Minilab Equipment, and was installed by Noritsu representatives on March 9,
1992. The Lam Spouses issued postdated checks amounting to 35,000.00 each
for 12 months as payment for the first delivered unit, with the first check due on
March 31, 1992.
The Lam Spouses requested that Kodak Philippines, Ltd. not negotiate the
check dated March 31, 1992 allegedly due to insufficiency of funds. The same
request was made for the check due on April 30, 1992. However, both checks
were negotiated by Kodak Philippines, Ltd. and were honored by the depository
bank. The 10 other checks were subsequently dishonored after the Lam Spouses
ordered the depository bank to stop payment.
Kodak Philippines, Ltd. cancelled the sale and demanded that the Lam
Spouses return the unit it delivered together with its accessories. The Lam
Spouses ignored the demand but also rescinded the contract through the letter
dated November 18, 1992 on account of Kodak Philippines, Ltd.s failure to deliver
the two (2) remaining Minilab Equipment units.
On November 25, 1992, Kodak Philippines, Ltd. filed a Complaint for
replevin and/or recovery of sum of money. The Lam Spouses failed to appear
during the pre-trial conference and submit their pre-trial brief despite being given
extensions. Thus, on July 30, 1993, they were declared in default. Kodak
Philippines, Ltd. presented evidence ex-parte.
The trial court issued the Decision in favor of Kodak Philippines,
Ltd. Based on this Decision, Kodak Philippines, Ltd. was able to obtain a writ of
seizure which was enforced on December 21, 1992, and Kodak Philippines, Ltd.
gained possession of the Minilab Equipment unit, accessories, and the generator
set.
The Lam Spouses then filed before the Court of Appeals a Petition to Set
Aside the Orders issued by the trial court dated July 30, 1993 and August 13,
1993. These Orders were subsequently set aside by the Court of Appeals Ninth
Division, and the case was remanded to the trial court for pre-trial.
On September 12, 1995, an Urgent Motion for Inhibition was filed against
Judge Fernando V. Gorospe, Jr., who had issued the writ of seizure. The ground
for the motion for inhibition was not provided. Nevertheless, Judge Fernando V.
Gorospe Jr. inhibited himself, and the case was reassigned.
In the Decision dated February 26, 1999, the Regional Trial Court found
that Kodak Philippines, Ltd. defaulted in the performance of its obligation under
its Letter Agreement with the Lam Spouses. It held that Kodak Philippines, Ltd.s
failure to deliver two (2) out of the three (3) units of the Minilab Equipment caused
Alan Vincent S. Fontanosa II 4
the Lam Spouses to stop paying for the rest of the installments. The trial court
noted that while the Letter Agreement did not specify a period within which the
delivery of all units was to be made, the Civil Code provides "reasonable time" as
the standard period for compliance:
The second paragraph of Article 1521 of the Civil Code provides:
Where by a contract of sale the seller is bound to send the goods
to the buyer, but no time for sending them is fixed, the seller is bound to
send them within a reasonable time.
What constitutes reasonable time is dependent on the circumstances
availing both on the part of the seller and the buyer. In this case, delivery of the
first unit was made five (5) days after the date of the agreement. Delivery of the
other two (2) units, however, was never made despite the lapse of at least three
(3) months. Kodak Philippines, Ltd. failed to give a sufficient explanation for its
failure to deliver all three (3) purchased units within a reasonable time.
The trial court found:
Kodak would have the court believe that it did not deliver the other
two (2) units due to the failure of defendants to make good the installments
subsequent to the second. The court is not convinced. First of all, there
should have been simultaneous delivery on account of the circumstances
surrounding the transaction. . . . Even after the first delivery . . . no delivery
was made despite repeated demands from the defendants and despite the
fact no installments were due. Then in March and in April (three and four
months respectively from the date of the agreement and the first delivery)
when the installments due were both honored, still no delivery was made.
Second, although it might be said that Kodak was testing the waters with
just one delivery - determining first defendants capacity to pay - it was not at
liberty to do so. It is implicit in the letter agreement that delivery within a
reasonable time was of the essence and failure to so deliver within a reasonable
time and despite demand would render the vendor in default.
Third, at least two (2) checks were honored. If indeed Kodak refused
delivery on account of defendants inability to pay, non-delivery during the two (2)
months that payments were honored is unjustified.
On the other hand, defendants accepted delivery of one (1) unit. Under
Article 1522 of the Civil Code, in the event the buyer accepts incomplete delivery
and uses the goods so delivered, not then knowing that there would not be any
further delivery by the seller, the buyer shall be liable only for the fair value to him
of the goods received. However, the trial court held that since Kodak Philippines,
Ltd. had elected to cancel the sale and retrieve the delivered unit, it could no
longer seek payment for any deterioration that the unit may have suffered while
under the custody of the Lam Spouses.
As to the generator set, the trial court ruled that Kodak Philippines, Ltd.
attempted to mislead the court by claiming that it had delivered the generator set
with its accessories to the Lam Spouses, when the evidence showed that the Lam
Spouses had purchased it from Davao Ken Trading, not from Kodak Philippines,
Ltd. Thus, the generator set that Kodak Philippines, Ltd. wrongfully took from the
Lam Spouses should be replaced.
Both parties filed an appeal. However, the Court of Appeals dismissed
Kodaks appeal on December 16, 2002 for failure to file its appellants brief,
without prejudice to the continuation of the Lam Spouses appeal. The Court of
Appeals December 16, 2002 Resolution denying Kodak Philippines, Ltd.s appeal
became final and executory on January 4, 2003.
The Court of Appeals agreed with the trial courts Decision, but extensively
discussed the basis for the modification of the dispositive portion.
The Court of Appeals ruled that the Letter Agreement executed by the
parties showed that their obligations were susceptible of partial performance.
Under Article 1225 of the New Civil Code, their obligations are divisible:
In determining the divisibility of an obligation, the following factors
may be considered, to wit: (1) the will or intention of the parties, which may
be expressed or presumed; (2) the objective or purpose of the stipulated
prestation; (3) the nature of the thing; and (4) provisions of law affecting
the prestation.
Applying the foregoing factors to this case, we found that the intention of
the parties is to be bound separately for each Minilab Equipment to be delivered
as shown by the separate purchase price for each of the item, by the acceptance
of Sps. Lam of separate deliveries for the first Minilab Equipment and for those of
the remaining two and the separate payment arrangements for each of the
equipment. Under this premise, Sps. Lam shall be liable for the entire amount of
the purchase price of the Minilab
Third, it is also evident that the contract is one that is severable in
character as demonstrated by the separate purchase price for each of the minilab
equipment. If the part to be performed by one party consists in several distinct and
separate items and the price is apportioned to each of them, the contract will
generally be held to be severable. In such case, each distinct stipulation relating
to a separate subject matter will be treated as a separate contract. Considering
this, Kodak's breach of its obligation to deliver the other two (2) equipment cannot
bar its recovery for the full payment of the equipment already delivered. As far as
Kodak is concerned, it had already fully complied with its separable obligation to
deliver the first unit of Minilab Equipment.
Alan Vincent S. Fontanosa II 5
 The Court of Appeals held that the issuance of a writ of replevin is proper
insofar as the delivered Minilab Equipment unit and its standard accessories are
concerned, since Kodak Philippines, Ltd. had the right to possess it:
The Court of Appeals noted that Kodak Philippines, Ltd. sought the
rescission of its contract with the Lam Spouses in the letter dated October 14,
1992. The rescission was based on Article 1191 of the New Civil Code, which
provides: "The power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him." In its
letter, Kodak Philippines, Ltd. demanded that the Lam Spouses surrender the lone
delivered unit of Minilab Equipment along with its standard accessories.
The Court of Appeals likewise noted that the Lam Spouses rescinded the
contract through its letter dated November 18, 1992 on account of Kodak
Philippines, Inc.s breach of the parties agreement to deliver the two (2) remaining
units. As a result of this rescission under Article 1191, the Court of Appeals ruled
that "both parties must be restored to their original situation, as far as practicable,
as if the contract was never entered into."
Issue: Whether or not the contract between the parties are severable,
divisible, and susceptible of partial performance.
Whether or not the remedy of rescission is availing.
Ruling: No, the Letter Agreement contained an indivisible obligation.
Yes, with both parties opting for rescission of the contract under
Article 1191, the Court of Appeals correctly ordered for restitution
Petitioners assert that the obligations of the parties were not susceptible
of partial performance since the Letter Agreement was for a package deal
consisting of three (3) units. For the delivery of these units, petitioners were
obliged to pay 48 monthly payments, the total of which constituted one debt. The
postdated checks were also intended as initial payment for the whole package.
The separate purchase price for each item was merely intended to particularize
the unit prices, not to negate the indivisible nature of their transaction. As to the
issue of delivery, petitioners claim that their acceptance of separate deliveries of
the units was solely due to the constraints faced by respondent, who had sole
control over delivery matters.
Respondent argues that the parties Letter Agreement contained divisible
obligations susceptible of partial performance as defined by Article 1225 of the
New Civil Code. In respondents view, it was the intention of the parties to be
bound separately for each individually priced Minilab Equipment unit to be
delivered to different outlets. Respondent also argues that petitioners benefited
from the use of the Minilab Equipment for 10 monthsfrom March to December
1992 despite having paid only two (2) monthly installments.
Based on the Letter Agreement, the intention of the parties is for there to
be a single transaction covering all three (3) units of the Minilab Equipment.
Respondents obligation was to deliver all products purchased under a "package,"
and, in turn, petitioners obligation was to pay for the total purchase price, payable
in installments.
The intention of the parties to bind themselves to an indivisible obligation
can be further discerned through their direct acts in relation to the package deal.
There was only one agreement covering all three (3) units of the Minilab
Equipment and their accessories. The Letter Agreement specified only one
purpose for the buyer, which was to obtain these units for three different outlets.
If the intention of the parties were to have a divisible contract, then separate
agreements could have been made for each Minilab Equipment unit instead of
covering all three in one package deal. Furthermore, the 19% multiple order
discount, and no downpayment as contained in the Letter Agreement was
applied to all three acquired units. Lastly, the fourth clause of the Letter
Agreement clearly referred to the object of the contract as "Minilab Equipment
Package."
In ruling that the contract between the parties intended to cover divisible
obligations, the Court of Appeals highlighted: (a) the separate purchase price of
each item; (b) petitioners acceptance of separate deliveries of the units; and (c)
the separate payment arrangements for each unit. However, through the specified
terms and conditions, the tenor of the Letter Agreement indicated an intention for
a single transaction. This intent must prevail even though the articles involved are
physically separable and capable of being paid for and delivered individually,
consistent with Article 1225 of the New Civil Code. Though the object or service
may be physically divisible, an obligation is indivisible if so provided by law or
intended by the parties.
In Nazareno v. Court of Appeals, the indivisibility of an obligation is tested
against whether it can be the subject of partial performance:
An obligation is indivisible when it cannot be validly performed in
parts, whatever may be the nature of the thing which is the object thereof.
The indivisibility refers to the prestation and not to the object thereof. In
the present case, the Deed of Sale of January 29, 1970 supposedly
conveyed the six lots to Natividad. The obligation is clearly indivisible
because the performance of the contract cannot be done in parts,
otherwise the value of what is transferred is diminished. Petitioners are
therefore mistaken in basing the indivisibility of a contract on the number
of obligors.
The Court of Appeals correctly noted that respondent had rescinded the
parties Letter Agreement through the letter dated October 14, 1992. It likewise
Alan Vincent S. Fontanosa II 6
noted petitioners rescission through the letter dated November 18, 1992.This
rescission from both parties is founded on Article 1191 of the New Civil Code:
The power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent upon
him.
Rescission creates the obligation to return the object of the contract. It can
be carried out only when the one who demands rescission can return whatever
he may be obliged to restore. To rescind is to declare a contract void at its
inception and to put an end to it as though it never was. It is not merely to terminate
it and release the parties from further obligations to each other, but to abrogate it
from the beginning and restore the parties to their relative positions as if no
contract has been made.
The Court of Appeals correctly ruled that both parties must be restored to
their original situation as far as practicable, as if the contract was never entered
into. Petitioners must relinquish possession of the delivered Minilab Equipment
unit and accessories, while respondent must return the amount tendered by
petitioners as partial payment for the unit received. Further, respondent cannot
claim that the two (2) monthly installments should be offset against the amount
awarded by the Court of Appeals to petitioners because the effect of rescission
under Article 1191 is to bring the parties back to their original positions before the
contract was entered into. Also in Velarde:
When rescission is sought under Article 1191 of the Civil Code, it need not
be judicially invoked because the power to resolve is implied in reciprocal
obligations. When a party fails to comply with his or her obligation, the other partys
right to resolve the contract is triggered. The resolution immediately produces
legal effects if the non-performing party does not question the resolution. Court
intervention only becomes necessary when the party who allegedly failed to
comply with his or her obligation disputes the resolution of the contract. Since both
parties in this case have exercised their right to resolve under Article 1191, there
is no need for a judicial decree before the resolution produces effects.
G.R. No. 119255 April 9, 2003 TOMAS K. CHUA, petitioner, vs. COURT OF
APPEALS and ENCARNACION VALDES-CHOY, respondents.
Facts: Valdes-Choy advertised for sale her paraphernal house and lot
("Property") with an area of 718 square meters located at No. 40 Tampingco Street
corner Hidalgo Street, San Lorenzo Village, Makati City. After several meetings,
Chua and Valdes-Choy agreed on a purchase price of P10,800,000.00 payable in
cash.
On 30 June 1989, Valdes-Choy received from Chua a check for
P100,000.00. The receipt ("Receipt") evidencing the transaction, signed by
Valdes-Choy as seller, and Chua as buyer, reads:
RECEIVED from MR. TOMAS K. CHUA PBCom Check No.
206011 in the amount of ONE HUNDRED THOUSAND PESOS ONLY
(P100,000.00) as EARNEST MONEY for the sale of the property located
at 40 Tampingco cor. Hidalgo, San Lorenzo Village, Makati, Metro Manila
(Area : 718 sq. meters).
The balance of TEN MILLION SEVEN HUNDRED THOUSAND
(P10,700,000.00) is payable on or before 15 July 1989. Capital Gains Tax
for the account of the seller. Failure to pay balance on or before 15 July
1989 forfeits the earnest money. This provided that all papers are in proper
order.
In the morning of 13 July 1989, Chua secured from Philippine Bank of
Commerce ("PBCom") a manager's check for P480,000.00. Strangely, after
securing the manager's check, Chua immediately gave PBCom a verbal stop
payment order claiming that this manager's check for P480,000.00 "was lost
and/or misplaced."
In the afternoon of 13 July 1989, Chua and Valdes-Choy met with their
respective counsels to execute the necessary documents and arrange the
payments. Valdes-Choy as vendor and Chua as vendee signed two Deeds of
Absolute Sale ("Deeds of Sale"). The first Deed of Sale covered the house and lot
for the purchase price of P8,000,000.00. The second Deed of Sale covered the
furnishings, fixtures and movable properties contained in the house for the
purchase price of P2,800,000.00. The parties also computed the capital gains tax
to amount to P485,000.00.
On 14 July 1989, the parties met again at the office of Valdes-Choy's
counsel. Chua handed to Valdes-Choy the PBCom manager's check for
P485,000.00 as partial payment so Valdes-Choy could pay the capital gains tax
as she did not have sufficient funds to pay the tax. Valdes-Choy issued a receipt
showing that Chua had a remaining balance of P10,215,000.00 after deducting
the advances made by Chua.
On the same day, 14 July 1989, Valdes-Choy, accompanied by Chua,
deposited the P485,000.00 manager's check to her account with Traders Royal
Bank. She then purchased a Traders Royal Bank manager's check for
P480,000.00 payable to the Commissioner of Internal Revenue for the capital
gains tax. Valdes-Choy and Chua returned to the office of Valdes-Choy's counsel
and handed the Traders Royal Bank check to the counsel who undertook to pay
the capital gains tax. It was then also that Chua showed to Valdes-Choy a PBCom
manager's check for P10,215,000.00 representing the balance of the purchase
Alan Vincent S. Fontanosa II 7
price. Chua, however, did not give this PBCom manager's check to Valdes-Choy
because the TCT was still registered in the name of Valdes-Choy. Chua required
that the Property be registered first in his name before he would turn over the
check to Valdes-Choy. This angered Valdes-Choy who tore up the Deeds of Sale,
claiming that what Chua required was not part of their agreement.
On the same day, 14 July 1989, Chua confirmed his stop payment order
by submitting to PBCom an affidavit of loss of the PBCom Manager's Check for
P480,000.00. PBCom Assistant Vice-President Pe, however, testified that the
manager's check was nevertheless honored because Chua subsequently verbally
advised the bank that he was lifting the stop-payment order due to his "special
arrangement" with the bank.
On 15 July 1989, the deadline for the payment of the balance of the
purchase price, Valdes-Choy suggested to her counsel that to break the impasse
Chua should deposit in escrow the P10,215,000.00 balance. Upon such deposit,
Valdes-Choy was willing to cause the issuance of a new TCT in the name of Chua
even without receiving the balance of the purchase price. Valdes-Choy believed
this was the only way she could protect herself if the certificate of title is transferred
in the name of the buyer before she is fully paid. Valdes-Choy's counsel promised
to relay her suggestion to Chua and his counsel, but nothing came out of it.
On 17 July 1989, Chua filed a complaint for specific performance against
Valdes-Choy which the trial court dismissed on 22 November 1989. On 29
November 1989, Chua re-filed his complaint for specific performance with
damages. After trial in due course, the trial court rendered judgment in favor of
Chua. Valdes-Choy appealed to the Court of Appeals which reversed the decision
of the trial court.
The trial court found that the transaction reached an impasse when
Valdes-Choy wanted to be first paid the full consideration before a new TCT
covering the Property is issued in the name of Chua. On the other hand, Chua did
not want to pay the consideration in full unless a new TCT is first issued in his
name. The trial court faulted Valdes-Choy for this impasse, and held that Chua's
non-payment of the balance of P10,215,000.00 on the agreed date was due to
Valdes-Choy's fault.
In reversing the trial court, the Court of Appeals ruled that Chua's stance
to pay the full consideration only after the Property is registered in his name was
not the agreement of the parties. The Court of Appeals noted that there is a whale
of difference between the phrases "all papers are in proper order" as written on
the Receipt, and "transfer of title" as demanded by Chua.
Contrary to the findings of the trial court, the Court of Appeals found that
all the papers were in order and that Chua had no valid reason not to pay on the
agreed date. Valdes-Choy was in a position to deliver the owner's duplicate copy
of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty
tax receipt. The Property was also free from all liens and encumbrances.
The Court of Appeals declared that the trial court erred in considering
Chua's showing to Valdes-Choy of the PBCom manager's check for
P10,215,000.00 as compliance with Chua's obligation to pay on or before 15 July
1989. The Court of Appeals pointed out that Chua did not want to give up the
check unless "the property was already in his name." Although Chua
demonstrated his capacity to pay, this could not be equated with actual payment
which he refused to do.
The Court of Appeals did not consider the non-payment of the capital gains
tax as failure by Valdes-Choy to put the papers "in proper order." The Court of
Appeals explained that the payment of the capital gains tax has no bearing on the
validity of the Deeds of Sale. It is only after the deeds are signed and notarized
can the final computation and payment of the capital gains tax be made.
Issue: Whether or not there is a perfected contract of sale.
Ruling: No. There is no dispute that Valdes-Choy is the absolute owner
of the Property which is registered in her name under TCT No.162955, free from
all liens and encumbrances. She was ready, able and willing to deliver to Chua
the owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax
declarations, and the latest realty tax receipt. There is also no dispute that on 13
July 1989, Valdes-Choy received PBCom Check No. 206011 for P100,000.00 as
earnest money from Chua. Likewise, there is no controversy that the Receipt for
the P100,000.00 earnest money embodied the terms of the binding contract
between Valdes-Choy and Chua.
Further, there is no controversy that as embodied in the Receipt, Valdes-
Choy and Chua agreed on the following terms: (1) the balance of P10,215,000.00
is payable on or before 15 July 1989; (2) the capital gains tax is for the account of
Valdes-Choy; and (3) if Chua fails to pay the balance of P10,215,000.00 on or
before 15 July 1989, Valdes-Choy has the right to forfeit the earnest money,
provided that "all papers are in proper order." On 13 July 1989, Chua gave Valdes-
Choy the PBCom manager's check for P485,000.00 to pay the capital gains tax.
Both the trial and appellate courts found that the balance of
P10,215,000.00 was not actually paid to Valdes-Choy on the agreed date. On 13
July 1989, Chua did show to Valdes-Choy the PBCom manager's check for
P10,215,000.00, with Valdes-Choy as payee. However, Chua refused to give this
check to Valdes-Choy until a new TCT covering the Property is registered in
Chua's name. Or, as the trial court put it, until there is proof of payment of the
capital gains tax which is a pre-requisite to the issuance of a new certificate of title.
Chua has consistently characterized his agreement with Valdez-Choy, as
evidenced by the Receipt, as a contract to sell and not a contract of sale. This has
Alan Vincent S. Fontanosa II 8
been Chua's persistent contention in his pleadings before the trial and appellate
courts. Chua now pleads for the first time that there is a perfected contract of sale
rather than a contract to sell.
Chua's new theory is not well taken in light of well-settled jurisprudence.
An issue not raised in the court below cannot be raised for the first time on appeal,
as this is offensive to the basic rules of fair play, justice and due process. In
addition, when a party deliberately adopts a certain theory, and the case is tried
and decided on that theory in the court below, the party will not be permitted to
change his theory on appeal.
Nevertheless, in order to put to rest all doubts on the matter, we hold that
the agreement between Chua and Valdes-Choy, as evidenced by the Receipt, is
a contract to sell and not a contract of sale. The distinction between a contract of
sale and contract to sell is well-settled:
In a contract of sale, the title to the property passes to the vendee
upon the delivery of the thing sold; in a contract to sell, ownership is, by
agreement, reserved in the vendor and is not to pass to the vendee until
full payment of the purchase price. Otherwise stated, in a contract of sale,
the vendor loses ownership over the property and cannot recover it until
and unless the contract is resolved or rescinded; whereas, in a contract to
sell, title is retained by the vendor until full payment of the price. In the
latter contract, payment of the price is a positive suspensive condition,
failure of which is not a breach but an event that prevents the obligation of
the vendor to convey title from becoming effective.
First, the Receipt provides that the earnest money shall be forfeited in case
the buyer fails to pay the balance of the purchase price on or before 15 July 1989.
In such event, Valdes-Choy can sell the Property to other interested parties. There
is in effect a right reserved in favor of Valdes-Choy not to push through with the
sale upon Chua's failure to remit the balance of the purchase price before the
deadline. This is in the nature of a stipulation reserving ownership in the seller
until full payment of the purchase price. This is also similar to giving the seller the
right to rescind unilaterally the contract the moment the buyer fails to pay within a
fixed period.
Second, the agreement between Chua and Valdes-Choy was embodied
in a receipt rather than in a deed of sale, ownership not having passed between
them. The signing of the Deeds of Sale came later when Valdes-Choy was under
the impression that Chua was about to pay the balance of the purchase price. The
absence of a formal deed of conveyance is a strong indication that the parties did
not intend immediate transfer of ownership, but only a transfer after full payment
of the purchase price.
Third, Valdes-Choy retained possession of the certificate of title and all
other documents relative to the sale. When Chua refused to pay Valdes-Choy the
balance of the purchase price, Valdes-Choy also refused to turn-over to Chua
these documents. These are additional proof that the agreement did not transfer
to Chua, either by actual or constructive delivery, ownership of the Property.
In this case, the earnest money was given in a contract to sell. The Receipt
evidencing the contract to sell stipulates that the earnest money is a forfeitable
deposit, to be forfeited if the sale is not consummated should Chua fail to pay the
balance of the purchase price. The earnest money forms part of the consideration
only if the sale is consummated upon full payment of the purchase price. Chua
has the right to walk away from the transaction, with no obligation to pay the
balance, although he will forfeit the earnest money.
There is a variance of interpretation on the phrase "all papers are in proper
order" as written in the Receipt. There is no dispute though, that as long as the
papers are "in proper order," Valdes-Choy has the right to forfeit the earnest
money if Chua fails to pay the balance before the deadline.
The trial court interpreted the phrase to include payment of the capital
gains tax, with the Bureau of Internal Revenue receipt as proof of payment. The
Court of Appeals held otherwise. We quote verbatim the ruling of the Court of
Appeals on this matter:
The trial court made much fuss in connection with the payment of
the capital gains tax, of which Section 33 of the National Internal Revenue
Code of 1977, is the governing provision insofar as its computation is
concerned. The trial court failed to consider Section 34-(a) of the said
Code, the last sentence of which provides, that "[t]he amount realized from
the sale or other disposition of property shall be the sum of money
received plus the fair market value of the property (other than money)
received;" and that the computation of the capital gains tax can only be
finally assessed by the Commission on Internal Revenue upon the
presentation of the Deeds of Absolute Sale themselves, without which any
premature computation of the capital gains tax becomes of no moment. At
any rate, the computation and payment of the capital gains tax has no
bearing insofar as the validity and effectiveness of the deeds of sale in
question are concerned, because it is only after the contracts of sale are
finally executed in due form and have been duly notarized that the final
computation of the capital gains tax can follow as a matter of course.
Indeed, exhibit D, the PBC Check No. 325851, dated July 13, 1989, in the
amount of P485,000.00, which is considered as part of the consideration
of the sale, was deposited in the name of appellant, from which she in turn,
purchased the corresponding check in the amount representing the sum
Alan Vincent S. Fontanosa II 9
 to be paid for capital gains tax and drawn in the name of the Commissioner
of Internal Revenue, which then allayed any fear or doubt that that amount
would not be paid to the Government after all.
We see no reason to disturb the ruling of the Court of Appeals.
It is only upon the existence of the contract of sale that the seller becomes
obligated to transfer the ownership of the thing sold to the buyer. Article 1458 of
the Civil Code defines a contract of sale as follows:
Art. 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a determinate
thing, and the other to pay therefor a price certain in money or its
equivalent. x x x. (Emphasis supplied)
Prior to the existence of the contract of sale, the seller is not obligated to
transfer ownership to the buyer, even if there is a contract to sell between them.
It is also upon the existence of the contract of sale that the buyer is obligated to
pay the purchase price to the seller. Since the transfer of ownership is in exchange
for the purchase price, these obligations must be simultaneously fulfilled at the
time of the execution of the contract of sale, in the absence of a contrary stipulation.
In a contract of sale, the obligations of the seller are specified in Article 1495 of
the Civil Code, as follows:
Art. 1495. The vendor is bound to transfer the ownership of and
deliver, as well as warrant the thing which is the object of the sale.
In the sale of real property, the seller is not obligated to transfer in the
name of the buyer a new certificate of title, but rather to transfer ownership of the
real property. There is a difference between transfer of the certificate of title in the
name of the buyer, and transfer of ownership to the buyer. The buyer may become
the owner of the real property even if the certificate of title is still registered in the
name of the seller. As between the seller and buyer, ownership is transferred not
by the issuance of a new certificate of title in the name of the buyer but by the
execution of the instrument of sale in a public document.
In a contract of sale, ownership is transferred upon delivery of the thing
sold. As the noted civil law commentator Arturo M. Tolentino explains it, -
Delivery is not only a necessary condition for the enjoyment of the
thing, but is a mode of acquiring dominion and determines the
transmission of ownership, the birth of the real right. The delivery of the
thing constitutes an indispensable requisite for the purpose of acquiring
ownership. Our law does not admit the doctrine of transfer of property by
mere consent; the ownership, the property right, is derived only from
delivery of the thing.
In a contract of sale of real property, delivery is effected when the
instrument of sale is executed in a public document. When the deed of absolute
sale is signed by the parties and notarized, then delivery of the real property is
deemed made by the seller to the buyer. Article 1498 of the Civil Code provides
that
Art. 1498. When the sale is made through a public instrument, the
execution thereof shall be equivalent to the delivery of the thing which is
the object of the contract, if from the deed the contrary does not appear or
cannot clearly be inferred.
Similarly, in a contract to sell real property, once the seller is ready, able
and willing to sign the deed of absolute sale before a notary public, the seller is in
a position to transfer ownership of the real property to the buyer. At this point, the
seller complies with his undertaking to sell the real property in accordance with
the contract to sell, and to assume all the obligations of a vendor under a contract
of sale pursuant to the relevant articles of the Civil Code. In a contract to sell, the
seller is not obligated to transfer ownership to the buyer. Neither is the seller
obligated to cause the issuance of a new certificate of title in the name of the buyer.
However, the seller must put all his papers in proper order to the point that he is
in a position to transfer ownership of the real property to the buyer upon the
signing of the contract of sale. This, Valdes-Choy has done.
But by imposing the condition that a new TCT should first be issued in his
name, a condition that is found neither in the law nor in the contract to sell as
evidenced by the Receipt, Chua was not ready, able and willing to pay the full
purchase price which is his obligation under the contract to sell. Chua was also
not in a position to assume the principal obligation of a vendee in a contract of
sale, which is also to pay the full purchase price at the agreed time. Article 1582
of the Civil Code provides that
Art. 1582. The vendee is bound to accept delivery and to pay the
price of the thing sold at the time and place stipulated in the contract.
However, on the agreed date, Chua refused to pay the balance of the
purchase price as required by the contract to sell, the signed Deeds of Sale, and
Article 1582 of the Civil Code. Chua was therefore in default and has only himself
to blame for the rescission by Valdes-Choy of the contract to sell.
Even if measured under existing usage or custom, Valdes-Choy had all
her papers "in proper order." Article 1376 of the Civil Code provides that:
Art. 1376. The usage or custom of the place shall be borne in mind
in the interpretation of the ambiguities of a contract, and shall fill the
omission of stipulations which are ordinarily established.
Customarily, in the absence of a contrary agreement, the submission by
an individual seller to the buyer of the following papers would complete a sale of
real estate: (1) owner's duplicate copy of the Torrens title; (2) signed deed of
absolute sale; (3) tax declaration; and (3) latest realty tax receipt. The buyer can
Alan Vincent S. Fontanosa II 10
retain the amount for the capital gains tax and pay it upon authority of the seller,
or the seller can pay the tax, depending on the agreement of the parties.
The buyer has more interest in having the capital gains tax paid
immediately since this is a pre-requisite to the issuance of a new Torrens title in
his name. Nevertheless, as far as the government is concerned, the capital gains
tax remains a liability of the seller since it is a tax on the seller's gain from the sale
of the real estate. Payment of the capital gains tax, however, is not a pre-requisite
to the transfer of ownership to the buyer. The transfer of ownership takes effect
upon the signing and notarization of the deed of absolute sale.
The recording of the sale with the proper Registry of Deeds and the
transfer of the certificate of title in the name of the buyer are necessary only to
bind third parties to the transfer of ownership. As between the seller and the buyer,
the transfer of ownership takes effect upon the execution of a public instrument
conveying the real estate. Registration of the sale with the Registry of Deeds, or
the issuance of a new certificate of title, does not confer ownership on the buyer.
Such registration or issuance of a new certificate of title is not one of the modes
of acquiring ownership.
Accordingly, since Chua refused to pay the consideration in full on the
agreed date, which is a suspensive condition, Chua cannot compel Valdes-Choy
to consummate the sale of the Property. Article 1181 of the Civil Code provides
that -
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.
Chua acquired no right to compel Valdes-Choy to transfer ownership of
the Property to him because the suspensive condition - the full payment of the
purchase price - did not happen. There is no correlative obligation on the part of
Valdes-Choy to transfer ownership of the Property to Chua. There is also no
obligation on the part of Valdes-Choy to cause the issuance of a new TCT in the
name of Chua since unless expressly stipulated, this is not one of the obligations
of a vendor.
G.R. No. 133895 October 2, 2001 ZENAIDA M. SANTOS, petitioner, vs.
CALIXTO SANTOS, ALBERTO SANTOS, ROSA SANTOS-CARREON and
ANTONIO SANTOS, respondents.
Facts: Petitioner Zenaida M. Santos is the widow of Salvador Santos, a
brother of private respondents Calixto, Alberto, Antonio, all surnamed Santos and
Rosa Santos-Carreon.
The spouses Jesus and Rosalia Santos owned a parcel of land registered
under TCT No. 27571 with an area of 154 square meters, located at Sta. Cruz
Manila. On it was a four-door apartment administered by Rosalia who rented them
out. The spouses had five children, Salvador, Calixto, Alberto, Antonio and Rosa.
On January 19, 1959, Jesus and Rosalia executed a deed of sale of the
properties in favor of their children Salvador and Rosa; Rosa in turn sold her share
to Salvador. Despite the transfer of the property to Salvador, Rosalia continued to
lease receive rentals form the apartment units.
On November 1, 1979, Jesus died. Six years after or on January 9, 1985,
Salvador died, followed by Rosalia who died the following month. Shortly after,
petitioner Zenaida, claiming to be Salvador's heir, demanded the rent from
Antonio Hombrebueno, a tenant of Rosalia. When the latter refused to pay,
Zenaida filed an ejectment suit against him with the Metropolitan Trial Court of
Manila, Branch 24, which eventually decided in Zenaida's favor.
On January 5, 1989, private respondents instituted an action for
reconveyance of property with preliminary injunction against petitioner in the
Regional Trial Court of Manila, where they alleged that the two deeds of sale
executed on January 19, 1959 and November 20, 1973 were simulated for lack of
consideration. They were executed to accommodate Salvador in generation funds
for his business and providing him with greater business flexibility.
The RTC decided in private respondents' favor, thus:
WHEREFORE, viewed from all the foregoing considerations, judgment is
hereby made in favor of the plaintiffs and against the defendants:
a) Declaring Exh. "B", the deed of sale executed by Rosalia Santos and
Jesus Santos on January 19, 1959, as entirely null and void for being
fictitious or stimulated and inexistent and without any legal force and effect:
b) Declaring Exh. "D", the deed of sale executed by Rosa Santos in favor
of Salvador Santos on November 20, 1973, also as entirely null and void
for being likewise fictitious or stimulated and inexistent and without any
legal force and effect;
c) Directing the Register of Deeds of Manila to cancel Transfer Certificate
of Title No. T-113221 registered in the name of Salvador Santos, as well
as, Transfer Certificate of Title No. 60819 in the names of Salvador Santos,
Rosa Santos, and consequently thereafter, reinstating with the same legal
force and effect as if the same was not cancelled, and which shall in all
respects be entitled to like faith and credit; Transfer Certificate of Title No.
T-27571 registered in the name of Rosalia A. Santos, married to Jesus
Santos, the same to be partitioned by the heirs of the said registered
owners in accordance with law; and
d) Making the injunction issued in this case permanent.
Without pronouncement as to costs.
SO OREDERED.
Alan Vincent S. Fontanosa II 11
 The trial court reasoned that notwithstanding the deeds of sale transferring
the property to Salvador, the spouses Rosalia and Jesus continued to possess
the property and to exercise rights of ownership not only by receiving the monthly
rentals, but also by paying the realty taxes. Also, Rosalia kept the owner's
duplicate copy of the title even after it was already in the name of Salvador. Further,
the spouses had no compelling reason in 1959 to sell the property and Salvador
was not financially capable to purchase it. The deeds of sale were therefore
fictitious. Hence, the action to assail the same does not prescribe.
Upon appeal, the Court of Appeals affirmed the trial court's decision dated
March 10, 1998. It held that in order for the execution of a public instrument to
effect tradition, as provided in Article 1498 of the Civil Code, the vendor shall have
had control over the thing sold, at the moment of sale. It was not enough to confer
upon the purchaser the ownership and the right of possession. The thing sold
must be placed in his control. The subject deeds of sale did not confer upon
Salvador the ownership over the subject property, because even after the sale,
the original vendors remained in dominion, control, and possession thereof. The
appellate court further said that if the reason for Salvador's failure to control and
possess the property was due to his acquiescence to his mother, in deference to
Filipino custom, petitioner, at least, should have shown evidence to prove that her
husband declared the property for tax purposes in his name or paid the land taxes,
acts which strongly indicate control and possession.
Issue: Whether or not there was a valid and perfected sale to Salvador.
Ruling: No. Petitioner argues that tax declarations are not conclusive
evidence of ownership when not supported by evidence. She avers that Salvador
allowed his mother to possess the property out of respect to her in accordance
with Filipino values.
It is true that neither tax receipts nor declarations of ownership for taxation
purposes constitute sufficient proof of ownership. They must be supported by
other effective proofs. These requisite proofs we find present in this case. As
admitted by petitioner, despite the sale, Jesus and Rosalia continued to possess
and administer the property and enjoy its fruits by leasing it to third persons. Both
Rosa and Salvador did not exercise any right of ownership over it. Before the
second deed of sale to transfer her share over the property was executed by
Rosa, Salvador still sought the permission of his mother. Further, after Salvador
registered the property in his name, he surrendered the title to his mother. These
are clear indications that ownership still remained with the original owners.
In Serrano vs. CA, 139 SCRA 179, 189 (1985), we held that the continued
collection of rentals from the tenants by the seller of realty after execution of
alleged deed of sale is contrary to the notion of ownership.
Petitioner argues that Salvador, in allowing her mother to use the property
even after the sale, did so out of respect for her and out of generosity, a factual
matter beyond the province of this Court. Significantly, in Alcos vs. IAC 162 SCRA
823, 837 (1988), we noted that the buyer's immediate possession and occupation
of the property corroborated the truthfulness and authenticity of the deed of sale.
Conversely, the vendor's continued possession of the property makes dubious the
contract of sale between the parties.
Is a sale through a public instrument tantamount to delivery of the thing
sold? Petitioner in her memorandum invokes Article 1477 of the Civil Code which
provides that ownership of the thing sold is transferred to the vendee upon its
actual or constructive delivery. Article 1498, in turn, provides that when the sale
is made through a public instrument, its execution is equivalent to the delivery of
the thing subject of the contract. Petitioner avers that applying said provisions to
the case, Salvador became the owner of the subject property by virtue of the two
deeds of sale executed in his favor.
Nowhere in the Civil Code, however, does it provide that execution of a
deed of sale is a conclusive presumption of delivery of possession. The Code
merely said that the execution shall be equivalent to delivery. The presumption
can be rebutted by clear and convincing evidence. Presumptive delivery can be
negated by the failure of the vendee to take actual possession of the land sold.
In Danguilan vs. IAC, 168 SCRA 22, 32 (1988), we held that for the
execution of a public instrument to effect tradition, the purchaser must be placed
in control of the thing sold. When there is no impediment to prevent the thing sold
from converting to tenancy of the purchaser by the sole will of the vendor, symbolic
delivery through the execution of a public instrument is sufficient. But if,
notwithstanding the execution of the instrument, the purchaser cannot have the
enjoyment and material tenancy nor make use of it himself or through another in
his name, then delivery has not been effected. Such as in the present case where
Salvador never took possession or control of the subject parcel of land.
Moreover, in Norkis Distributors, Inc. vs. CA, 193 SCRA 694, 698-699
(1991), citing the land case of Abuan vs. Garcia, 14 SCRA 759 (1965), we held
that the critical factor in the different modes of effecting delivery, which gives legal
effect to the act is the actual intention of the vendor to deliver, and its acceptance
by the vendee. Without that intention, there is no tradition. In the instant case,
although the spouses Jesus and Rosalia executed a deed of sale, they did not
deliver the possession and ownership of the property to Salvador and Rosa. They
agreed to execute a deed of sale merely to accommodate Salvador to enable him
to generate funds for his business venture.
Petitioner further argues that from the date of the sale from Rosa to
Salvador on November 20, 1973, up to his death on January 9, 1985, more or less
Alan Vincent S. Fontanosa II 12
twelve years had lapsed, and from his death up to the filing of the case for
reconveyance in the court a quo on January 5, 1989, four years had lapsed. In
other words, it took respondents about 16 years to file the case below. Petitioner
argues that an action to annul a contract for lack of consideration prescribes in 10
years and even assuming that the cause of action has not prescribed,
respondents are guilty of laches for their inaction for a long period of time.
In Lacsamana vs. CA, 288 SCRA 287, 292 (1998), we held that the right
to file an action for reconveyance on the ground that the certificate of title was
obtained by means of a fictitious deed of sale is virtually an action for the
declaration of its nullity, which does not prescribe. This applies squarely to the
present case. The complaint filed by respondent in the court a quo was for the
reconveyance of the subject property to the estate of Rosalia since the deeds of
sale were simulated and fictitious. The complaint amounts to a declaration of
nullity of a void contract, which is imprescriptible. Hence, respondents' cause of
action has not prescribed.
Neither is their action barred by laches. The elements of laches are: 1)
conduct on the part of the defendant, or of one under whom he claims, giving rise
to the situation of which the complaint seeks a remedy; 2) delay in asserting the
complainant's rights, the complainant having had knowledge or notice of the
defendant's conduct as having been afforded an opportunity to institute a suit; 3)
lack of knowledge or notice on the part of the defendant that the complainant
would assert the right in which he bases his suit; and 4) injury or prejudice to the
defendant in the event relief is accorded to the complainant, or the suit is not held
barred. These elements must all be proved positively. The conduct which caused
the complaint in the court a quo was petitioner's assertion of right of ownership as
heir of Salvador. This started in December 1985 when petitioner demanded
payment of the lease rentals from Antonio Hombrebueno, the tenant of the
apartment units. From December 1985 up to the filing of the complaint for
reconveyance on January 5, 1989, only less than four years had lapsed which we
do not think is unreasonable delay sufficient to bar respondents' cause of action.
We likewise find the fourth element lacking. Neither petitioner nor her husband
made considerable investments on the property from the time it was allegedly
transferred to the latter. They also did not enter into transactions involving the
property since they did not claim ownership of it until December 1985. Petitioner
stood to lose nothing. As we held in the same case of Lacsamana vs. CA, cited
above, the concept of laches is not concerned with the lapse of time but only with
the effect of unreasonble lapse. In this case, the alleged 16 years of respondents'
inaction has no adverse effect on the petitioner to make respondents guilty of
laches.
Lastly, petitioner in her memorandum seeks to expunge the testimony of
Rosa Santos-Carreon before the trial court in view of Sec. 23, Rule 130 of the
Revised Rules of Court, otherwise known as the "Dead Man's Statute." It is too
late for petitioner, however, to invoke said rule. The trial court in its order dated
February 5, 1990, denied petitioner's motion to disqualify respondent Rosa as a
witness. Petitioner did not appeal therefrom. Trial ensued and Rosa testified as a
witness for respondents and was cross-examined by petitioner's counsel. By her
failure to appeal from the order allowing Rosa to testify, she waived her right to
invoke the dean man's statute. Further, her counsel cross-examined Rosa on
matters that occurred during Salvadors' lifetime. In Goi vs. CA, 144 SCRA 222,
231 (1986) we held that protection under the dead man's statute is effectively
waived when a counsel for a petitioner cross-examines a private respondent on
matters occurring during the deceased's lifetime. The Court of appeals cannot be
faulted in ignoring petitioner on Rosa's disqualification.
G.R. Nos. 113472-73 December 20, 1994 ONG CHING PO, YU SIOK LIAN
DAVID ONG and JIMMY ONG, petitioners, vs. COURT OF APPEALS and
SOLEDAD PARIAN, respondents.
Facts: On July 23, 1947, Ong Joi Jong sold a parcel of land located at
Fundidor Street, San Nicolas to private respondent Soledad Parian, the wife of
Ong Yee. The latter, the brother of petitioner Ong Ching Po, died in January 1983;
while petitioner Ong Ching Po died in October 1986. The said sale was evidenced
by a notarized Deed of Sale written in English.
According to private respondent, she entrusted the administration of the
lot and building to petitioner Ong Ching Po when she and her husband settled in
Iloilo. When her husband died, she demanded that the lot be vacated because
she was going to sell it. Unfortunately, petitioners refused to vacate the said
premises.
On March 19, 1984, private respondent filed a case for unlawful detainer
against petitioner Ong Ching Po before the MTC which dismissed her case. RTC
affirmed the decsision. CA affirmed the decision
Petitioners, on the other hand, claimed that on July 23, 1946, petitioner
Ong Ching Po bought the said parcel of land from Ong Joi Jong. The sale was
evidenced by a photocopy of a Deed of Sale written in Chinese with the letter head
"Sincere Trading Co." (Exh. "B"). An English translation of said document (Exh.
"C") read as follows:
Deed of Sale
I, Ong Joi Jong, a party to this Deed of Sale hereby sell in
absolutely (sic) manner a lot located on No. 4 Fundidor Street, San
Nicolas an (sic) area consisting 213 square meters including a one-
Alan Vincent S. Fontanosa II 13
 story house erected thereon unto Mr. Ong Ching Po for the sum of
P6,000.00 the receipt of which is hereby acknowledged by me and
consequently I have executed and signed the government
registered title (sic) the said lot inclusive of the house erected
thereon, now belong (sic) to Mr. Ong Ching Po unequivocally. And
the purpose of this document is to precisely serve as proof of the
sale.
Addendum: I have acceded to the request of Mr. Ong Ching
Po into signing another document in favor of Soledad Parian (She
is the Filipino wife of Ong Yee, brother of Ong Ching Po) for the
purpose of facilitating the issuance of the new title by the City
Register of Deeds and for the reason that he is not yet a Filipino. I
certify to the truthfulness of this fact. (Exhibits for the plaintiff, p. 4)
On December 6, 1983, petitioner Ong Ching Po executed a Deed of
Absolute Sale conveying to his children, petitioners Jimmy and David Ong, the
same property sold by Ong Joi Jong to private respondent in 1947. On December
12 1985, petitioners Ong Ching Po, Jimmy Ong and David Ong filed an action for
reconveyance and damages against private respondent in the RTC.
On July 26, 1986, private respondent filed an action for quieting of title
against petitioners Ong Ching Po and his wife, petitioner Yu Siok Lian. The two
cases were consolidated and on May 30 1990, the RTC rendered a decision in
favor of private respondent. The CA affirmed the decision.
Issue: Whether or not the land was validly conveyed to respondent.
Ruling: Yes. We cannot go along with the claim that petitioner Ong Ching
Po merely used private respondent as a dummy to have the title over the parcel
of land registered in her name because being an alien he was disqualified to own
real property in the Philippines. To sustain such an outrageous contention would
be giving a high premium to a violation of our nationalization laws.
Section 5, Article XIII of the 1935 Constitution provides, as follows:
Save in cases of hereditary succession, no private
agricultural land shall be transferred or assigned except to
individuals, corporations, or associations qualified to acquire or
hold lands of the public domain in the Philippines.
Section 14, Article XIV of the 1973 Constitution provides, as follows:
Save in cases of hereditary succession, no private land
shall be transferred or conveyed except to individuals, corporations,
or associations qualified to acquire or hold lands in the public
domain.
Section 7, Article XII of the 1987 Constitution provides:
Save in cases of hereditary succession, no private lands
shall be transferred or conveyed except to individuals, corporations,
or associations qualified to acquire or hold lands in the public
domain.
The 1935 Constitution reserved the right to participate in the "disposition,
exploitation, development and utilization" of all "lands of the public domain and
other natural resources of the Philippines" for Filipino citizens or corporations at
least sixty percent of the capital of which was owned by Filipinos. Aliens, whether
individuals or corporations, have been disqualified from acquiring public lands;
hence, they have also been disqualified from acquiring private lands.
Petitioner Ong Ching Po was a Chinese citizen; therefore, he was
disqualified from acquiring and owning real property. Assuming that the
genuineness and due execution the Chinese Deed of Sale has been established,
the same is null and void for being contrary to law.
On the other end of the legal spectrum, the English Deed of Sale executed
by Ong Joi Jong in favor of private respondent is a notarized document.
To remove the mantle of validity bestowed by law on said document,
petitioners claim that private respondent admitted that she did not pay anything
as consideration for the purported sale in her favor. In the same breath, petitioners
said that private respondent implied in her deposition that it was her husband who
paid for the property. It appears then, that the sale was financed out of conjugal
funds and that it was her husband who handled the transaction for the purchase
of the property. Such transaction is a common practice in Filipino-family affairs.
It is not correct to say that private respondent never took possession of the
property. Under the law, possession is transferred to the vendee by virtue of the
notarized deed of conveyance. Under Article 1498 of the Civil Code of the
Philippines, "when the sale is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the object of the contract, if from the
deed the contrary does not appear or cannot clearly be inferred." If what
petitioners meant was that private respondent never lived in the building
constructed on said land, it was because her family had settled in Iloilo.
There is no document showing the establishment of an express trust by
petitioner Ong Ching Po as trustor and private respondent as trustee. Not even
Exhibit "B" can be considered as such a document because private respondent,
the registered owner of the property subject of said "deed of sale," was not a party
thereto. The oral testimony to prove the existence of the express trust will not
suffice. Under Article 1443 of the Civil Code of the Philippines, "No express trust
concerning an immovable or any interest therein may be proved by parole
evidence."
Alan Vincent S. Fontanosa II 14
 Undaunted, petitioners argue that if they cannot prove an express trust in
writing, they can prove an implied trust orally. While an implied trust may be
proved orally (Civil Code of the Philippines, Art. 1457), the evidence must be
trustworthy and received by the courts with extreme caution, because such kind
of evidence may be easily fabricated. It cannot be made to rest on vague and
uncertain evidence or on loose, equivocal or indefinite declarations. Petitioners do
not claim that Ong Yee was not in a financial position to acquire the land and to
introduce the improvements thereon. On the other hand, Yu Siok Lian, the wife of
petitioner Ong Ching Po, admitted in her testimony in court that Ong Yee was a
stockholder of Lam Sing Corporation and was engaged in business.
The Court of Appeals did not give any credence the Chinese deed of sale
and its translation because these documents had not been properly authenticated.
Under Section 4, Rule 130 of the Revised Rules of Court:
Secondary Evidence when Original is lost or destroyed.
When the original writing has been lost or destroyed, or cannot be
produced in court, upon proof of its execution and lost or
destruction, or unavailability, its contents may be proved by a copy,
or by a recital of its contents in some authentic document, or by the
recollection of the witnesses.
Secondary evidence is admissible when the original documents were
actually lost or destroyed. But prior to the introduction of such secondary evidence,
the proponent must establish the former existence of the document. The correct
order of proof is as follows: existence; execution; loss; contents. This order may
be changed if necessary in the discretion of the court. Petitioners failed to adduce
evidence as to the genuineness and due execution of the Chinese deed of sale.
The due execution of the document may be established by the person or
persons who executed it; by the person before whom its execution was
acknowledged; or by any person who was present and saw it executed or who
after its execution, saw it and recognized the signatures; or by a person to whom
the parties to the instrument had previously confessed the execution thereof.
Petitioner Yu Siok Lian testified that she was present when said document
was executed, but the trial court rejected her claim and held:
If it is true that she was present, why did she not sign said
document, even merely as a witness? Her oral testimony is easy
to concoct or fabricate. Furthermore, she was married only on
September 6, 1946 to the plaintiff, Ong Ching Po, in Baguio City
where she apparently resided, or after the deed of sale was
executed. The Court does not believe that she was present during
the execution and signing of the deed of sale involved therein,
notwithstanding her pretensions to the contrary
As to the contention of petitioners that all the tax receipts, tax declaration,
rental receipts, Chinese deed of sale and transfer certificate of title were in their
possession, private respondent explained that she and her husband entrusted
said lot and building to petitioners when they moved to Iloilo.
As observed by the Court of Appeals:
We find, however, that these acts, even if true, are not
necessarily reflective of dominion, as even a mere administrator or
manager may lawfully perform them pursuant to his appointment
or employment.
It is markworthy that all the tax receipts were in the name of private
respondent and her husband. The rental receipts were also in the name of her
husband.
G.R. No. 162873 July 21, 2006 JOSE CAOIBES, JR., MELENCIO CAOIBES
and LOIDA CAOIBES, petitioners, vs. CORAZON CAOIBES-PANTOJA,
assisted by her husband CONRADO PANTOJA, respondent.
Facts: Petitioners as FIRST PARTY, and respondent as SECOND PARTY,
made on May 10, 1982 an agreement entitled "Renunciation and Transfer of
Claims, Rights, and Interests" (the agreement) covering a parcel of land, Lot 2 of
plan Psd-162069 (Lot 2), situated in Calaca, Batangas containing an area of
54,665 sq. m., the pertinent portions of which agreement read:
xxxx
THAT under and by virtue of a court approved document entitled
"Compromise Agreement" entered into by the parties x x x, the FIRST
PARTY are to receive, among others, in full ownership pro indiviso, and
free from all liens and encumbrances, the following described real property,
to wit:
A parcel of land (Lot 2 of plan Psd-162069), situated in the
sitio of Taklang-Anak, Barrio of Calantas, Municipality of Calaca,
Province of Batangas. x x x (Lot 1 of plan Psu-101302). x x x
containing an area of FIFTY-FOUR THOUSAND SIX HUNDRED
SIXTY-FIVE (54,665) square meters.
THAT issuance to the FIRST PARTY of the proper title to the
aforesaid property is presently the subject of a land registration
proceeding LRC No. N-411 pending before the Court of First Instance of
Batangas, Branch VII, acting as a land registration court.
THAT for and in consideration of the payment by the SECOND
PARTY[-herein respondent Corazon Caoibes-Pantoja] of the loan secured
by a real estate mortgage constituted on the property described and
delineated in Transfer Certificate of Title No. P-189 of the Registry of
Alan Vincent S. Fontanosa II 15
 Deeds of Batangas, said loan in the principal amount of NINETEEN
THOUSAND PESOS (P19,000.00) exclusive of accrued interest being
presently outstanding in the name of GUILLERMO C. JAVIER with the
LEMERY SAVINGS AND LOAN ASSOCIATION, Balayan Branch, and the
further undertaking of the SECOND PARTY to forthwith deliver upon
release to the FIRST PARTY aforesaid TCT No. P-189 free from all liens
and encumbrances, the FIRST PARTY hereby RENOUNCE,
RELINQUISH and ABANDON whatever rights, interests, or
claims said FIRST PARTY may have over the real property in
paragraph 1 hereof x x x [illegible] hereby TRANSFER, CEDE, and
CONVEY said rights x x x [illegible] and claims, in a
manner absolute and irrevocable, unto and in favor of the SECOND
PARTY, her heirs, successors and assigns;
THAT by virtue of aforestated renunciation and
transfer, the SECOND PARTY is hereby subrogated and/or
substituted to whatever rights, interests or representations the
FIRST PARTY may have in the prosecution of the proper land
registration proceeding mentioned elsewhere in this instrument.
x x x x (Emphasis and underscoring supplied)
As reflected in the abovequoted agreement of the parties, petitioners, as
FIRST PARTY, renounced, relinquished, abandoned and transferred, ceded and
conveyed whatever rights "[they] may have" over Lot 2 in favor of respondent, as
second party, and on account of the renunciation and transfer, petitioners
transferred "whatever rights . . . [they] may have in the prosecution of the land
registration proceeding," LRC No. N-411.
About 14 years after the execution of the parties above-said agreement
or in 1996, respondent filed a motion to intervene and be substituted as applicant
in LRC Case No. N-411. The motion was opposed by petitioners who denied the
authenticity and due execution of the agreement, they claiming that the same was
without the consent and conformity of their mother, the "usufructuary owner [sic]"
of the land. The land registration court found for petitioners, denied respondents
motion by Order of March 2, 1999.
Respondent thus filed on March 16, 2000 a Complaint for Specific
Performance and Damages against petitioners before the RTC. To the complaint,
petitioners filed a motion to dismiss anchored on prescription, laches and
prematurity of action on account of respondents failure to refer the case to
the barangay lupon for conciliation.
On their defense of prescription, petitioners argued:
It was clearly alleged in the complaint that the purported
RENUNCIATION AND TRANSFER OF CLAIMS, RIGHTS AND
INTERESTS was . . . entered into on or about May 10, 1982 a period of
almost 18 LONG YEARS [BEFORE] THE PRESENT ACTION. Under
Article 1144 (1) of the New Civil Code, it is required that an action founded
upon a written contract must be brought WITHIN TEN (10) YEARS FROM
THE TIME THE RIGHT OF ACTION ACCRUES.
RTC granted petitioners motion in this wise:
The Court is of the view that immediately after the execution of the
RENUNCIATION contract, herein defendants were deemed to have
renounced and transferred their rights or whatever claim they may have
on the subject property and the latter should have at once acted to make
the renunciation effective by having herself substituted to petitioner in the
land registration proceedings. Her failure to make immediately effective
the terms of the said RENUNCIATION was constitutive of what is referred
to as the requisite "cause of action" on the part of the plaintiff.
A cause of action arises when that which should have been done
is not done, or that which should not have been done is done, and in cases
where there is no special provision for such computation, recourse must
be had to the rule that the period must be counted from the day on which
the corresponding action could have been instituted.
The fact, that, from the day immediately following the execution of
the RENUNCIATION contract up to the present, with the defendants still
continuing the land registration proceedings without any substitution of
plaintiff, could only be interpreted as a clear manifestation of defendants
willful violation of the claimed RENUNCIATION contract. It is quite
incorrect, therefore, to say that the violation happened only when the
defendants objected that they be substituted by plaintiff in an intervention
proceedings filed by the latter.
The added fact that plaintiff did not raise this glaring violation earlier
is something that eludes the comprehension of this Court. What separates
the execution of the contract and the filing of this case is a period of almost
EIGHTEEN (18) long years way beyond the prescriptive period set by
law.
The CA reversed the RTCs ruling holding that prescription had not yet set
in. The Court of Appeals reasoned:
x x x It is not from the date of the instrument but from the date of
the breach that the period of prescription of action starts. Since, it was only
in 1996 when plaintiff-appellant moved to intervene and be substituted as
the applicant in the land registration proceeding involving the subject
property that defendants-appellees raised the issue of genuineness and
due execution of the instrument, it is only from this date that the cause of
Alan Vincent S. Fontanosa II 16
 action of plaintiff-appellant accrued. The period should not be made to
retroact to the date of the execution of the instrument on May 10, 1982 as
claimed by the defendants-appellees for at that time, there would be no
way for the plaintiff-appellant to know of the violation of her rights.
The appellate court thus ordered the remand of the case to the trial court
for further proceedings.
Issue: Whether or not the respondent can enforce the agreement for her
to be subrogated and/or substituted as applicant in the land registration
proceeding over Lot 2.
Ruling: No; because it is no longer necessary. By the earlier-quoted
pertinent portions of the agreement, petitioners renounced and transferred
whatever rights, interests, or claims they had over Lot 2 in favor of respondent for
and in consideration of her payment of the therein mentioned loan in the principal
amount of P19,000 which was outstanding in the name of one Guillermo C. Javier.
Articles 1458, 1498 and 1307 of the Civil Code which are pertinent to the
resolution of the petition provide:
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.
xxxx
Art. 1498. When the sale is made through a public instrument, the
execution thereof shall be equivalent to the delivery of the thing which is
the object of the contract, if from the deed the contrary does not appear or
cannot clearly be inferred.
xxxx
Art. 1307. Innominate contracts shall be regulated by the stipulations of
the parties, by the provisions of Title I and II of this Book, by the rules
governing the most analogous nominate contracts, and by the
customs of the place.
(Emphasis and underscoring supplied)
The agreement of the parties is analogous to a deed of sale in favor of
respondent, it having transferred ownership for and in consideration of her
payment of the loan in the principal amount of P19,000 outstanding in the name
of one Guillermo C. Javier. The agreement having been made through a public
instrument, the execution was equivalent to the delivery of the property.
In respondents complaint for specific performance, she seeks to enforce
the agreement for her to be subrogated and/or substituted as applicant in the land
registration proceeding over Lot 2. The agreement is of course in consonance with
Sec. 22 of P.D. 1529 (Property Registration Decree which became effective on
June 11, 1978) reading:
SEC. 22. Dealings with land pending original registration. After
the filing of the application and before the issuance of the decree of
registration, the land therein described may still be the subject of dealings
in whole or in part, in which case the interested party shall present to the
court the pertinent instruments together with the subdivision plan
approved by the Director of Lands in case of transfer of portions thereof,
and the court, after notice to the parties, shall order such land registered
subject to the conveyance or encumbrance created by said instruments,
or order that the decree of registration be issued in the name of the person
to whom the property has been conveyed by said instruments.
(Underscoring supplied)
In Mendoza v. Court of Appeals, this Court, passing on Sec. 29 of Art. No.
496, as amended (Land Registration Act), which is substantially incorporated in
the immediately-quoted Sec. 22 of the Property Registration Decree, held:
The law does not require that the application for registration be
amended by substituting the "buyer" or the "person to whom the property
has been conveyed" for the applicant. Neither does it require that the
"buyer" or the "person to whom the property has been conveyed" be
a party to the case. He may thus be a total stranger to the land
registration proceedings. The only requirements of the law are: (1) that the
instrument be presented to the court by the interested party together with
a motion that the same be considered in relation with the application; and
(2) that prior notice be given to the parties to the case. x x x (Emphasis
supplied)
In light of the law and jurisprudence, the substitution by respondent of
petitioners as applicant in the land registration case over Lot 2 is not even
necessary. All respondent has to do is to comply with the requirements under the
above-quoted Sec. 22 of the Property Registration Decree. Ergo, it was
unnecessary for respondent to file the case for specific performance subject of the
present petition against petitioners to honor their agreement allowing her to be
substituted in their stead as applicant in the land registration proceeding.
Alan Vincent S. Fontanosa II 17
 G.R. No. 151369 March 23, 2011 ANITA MONASTERIO-PE and the
SPOUSES ROMULO TAN and EDITHA PE-TAN, Petitioners, vs. JOSE JUAN
TONG, herein represented by his Attorney-in-Fact, JOSE Y. ONG,
Respondent.
Facts: The instant petition stemmed from an action for ejectment filed in
the MTCC by herein respondent Jose Juan Tong (Tong) through his
representative Jose Y. Ong (Ong) against herein petitioners Anita Monasterio-Pe
(Anita) and the spouses Romulo Tan and Editha Pe-Tan (Spouses Tan).
In the Complaint, it was alleged that Tong is the registered owner of two
parcels of land known as Lot Nos. 40 and 41 together with the improvements
thereon, located at Barangay Kauswagan, City Proper, Iloilo City; herein
petitioners are occupying the house standing on the said parcels of land without
any contract of lease nor are they paying any kind of rental and that their
occupation thereof is simply by mere tolerance of Tong; that in a letter dated
December 1, 1999, Tong demanded that respondents vacate the house they are
occupying, but despite their receipt of the said letter they failed and refused to
vacate the same; Tong referred his complaint to the Lupon of Barangay
Kauswagan, to no avail.
In their Answer with Defenses and Counterclaim, herein petitioners
alleged that Tong is not the real owner of the disputed property, but is only a
dummy of a certain alien named Ong Se Fu, who is not qualified to own the said
lot and, as such, Tong's ownership is null and void; petitioners are the true and
lawful owners of the property in question and by reason thereof they need not
lease nor pay rentals to anybody; a case involving herein petitioner Pe and
respondent is pending before the Court of Appeals (CA) where the ownership of
the subject property is being litigated; respondent should wait for the resolution of
the said action instead of filing the ejectment case; petitioners also claimed that
there was, in fact, no proper barangay conciliation as Tong was bent on filing the
ejectment case before conciliation proceedings could be validly made.
On March 19, 2001, the MTCC rendered judgment in favor of herein
respondent, the dispositive portion of which reads as follows:
The RTC upheld the decision of the MTCC.
Issue: Whether or not the respondent may validly eject the petitioners.
Ruling: Yes. At the outset, it bears emphasis that in a petition for review
on certiorari under Rule 45 of the Rules of Court, only questions of law may be
raised by the parties and passed upon by this Court. It is a settled rule that in the
exercise of this Court's power of review, it does not inquire into the sufficiency of
the evidence presented, consistent with the rule that this Court is not a trier of
facts. In the instant case, a perusal of the errors assigned by petitioners would
readily show that they are raising factual issues the resolution of which requires
the examination of evidence. Certainly, issues which are being raised in the
present petition, such as the questions of whether the issue of physical
possession is already included as one of the issues in a case earlier filed by
petitioner Anita and her husband, as well as whether respondent complied with
the law and rules on barangay conciliation, are factual in nature.
Moreover, the appeal under Rule 45 of the said Rules contemplates that
the RTC rendered the judgment, final order or resolution acting in its original
jurisdiction. In the present case, the assailed Decision and Order of the RTC were
issued in the exercise of its appellate jurisdiction.
Thus, petitioners pursued the wrong mode of appeal when they filed the
present petition for review on certiorari with this Court. Instead, they should have
filed a petition for review with the CA pursuant to the provisions of Section 1,Rule
42 of the Rules of Court.
On the foregoing bases alone, the instant petition should be denied.
In any case, the instant petition would still be denied for lack of merit, as
discussed below.
In their first assigned error, petitioners contend that the RTC erred in
holding that the law authorizes an attorney-in-fact to execute the required
certificate against forum shopping in behalf of his or her principal. Petitioners
argue that Tong himself, as the principal, and not Ong, should have executed the
certificate against forum shopping. The Court is not persuaded.
It is true that the first paragraph of Section 5, Rule 7 of the Rules of Court,
requires that the certification should be signed by the "petitioner or principal party"
himself. The rationale behind this is because only the petitioner himself has actual
knowledge of whether or not he has initiated similar actions or proceedings in
different courts or agencies. However, the rationale does not apply where, as in
this case, it is the attorney-in-fact who instituted the action. Indeed, the settled rule
is that the execution of the certification against forum shopping by the attorney-in-
fact is not a violation of the requirement that the parties must personally sign the
same. The attorney-in-fact, who has authority to file, and who actually filed the
complaint as the representative of the plaintiff, is a party to the ejectment suit. In
fact, Section 1, Rule 70 of the Rules of Court includes the representative of the
owner in an ejectment suit as one of the parties authorized to institute the
proceedings.
Petitioners also aver that the certificate against forum shopping attached
to the complaint in Civil Case No. 2000(92) falsely stated that there is no other
case pending before any other tribunal involving the same issues as those raised
therein, because at the time the said complaint was filed, Civil Case No. 20181
was, in fact, still pending with the CA (CA-G.R. CV No. 52676), where the very
same issues of ejectment and physical possession were already included.
Alan Vincent S. Fontanosa II 18
 Corollarily, petitioners claim that the MTCC has no jurisdiction over Civil
Case No. 2000(92) on the ground that the issue of physical possession raised
therein was already included by agreement of the parties in Civil Case No. 20181.
As such, petitioners assert that respondent is barred from filing the ejectment case,
because in doing so he splits his cause of action and indirectly engages in forum
shopping. The Court does not agree.
The Court takes judicial notice of the fact that the disputed properties,
along with three other parcels of land, had been the subject of two earlier cases
filed by herein petitioner Anita and her husband Francisco against herein
respondent and some other persons. The first case is for specific performance
and/or rescission of contract and reconveyance of property with damages. The
case was dismissed by the CFI. On appeal, the Intermediate Appellate Court (IAC)
upheld the decision of the trial court. When the case was brought to this Court, the
decision of the IAC was affirmed. Subsequently, the Court's judgment in this case
became final and executory per Entry of Judgment issued on May 27, 1991.
Subsequently, in 1992, the Spouses Pe filed a case for nullification of
contract, cancellation of titles, reconveyance and damages with the RTC of Iloilo
City. This is the case presently cited by petitioners. Eventually, the case, docketed
as Civil Case No. 20181, was dismissed by the lower court on the ground of res
judicata. The RTC held that Civil Case No. 10853 serves as a bar to the filing of
Civil Case No. 20181, because both cases involve the same parties, the same
subject matter and the same cause of action. On appeal, the CA affirmed the
dismissal of Civil Case No. 20181. Herein petitioner Anita assailed the judgment
of the CA before this Court, but her petition for review on certiorari was
denied via a Resolution dated January 22, 2003. On June 25, 2003, the said
Resolution became final and executory. The Court notes that the case was
disposed with finality without any showing that the issue of ejectment was ever
raised.
Hence, respondent is not barred from filing the instant action for ejectment.
In any case, it can be inferred from the judgments of this Court in the two
aforementioned cases that respondent, as owner of the subject lots, is entitled to
the possession thereof. Settled is the rule that the right of possession is a
necessary incident of ownership. Petitioners, on the other hand, are consequently
barred from claiming that they have the right to possess the disputed parcels of
land, because their alleged right is predicated solely on their claim of ownership,
which is already effectively debunked by the decisions of this Court affirming the
validity of the deeds of sale transferring ownership of the subject properties to
respondent.
Petitioners also contend that respondent should have filed an accion
publiciana and not an unlawful detainer case, because the one-year period to file
a case for unlawful detainer has already lapsed. The Court does not agree.
Sections 1 and 2, Rule 70 of the Rules of Court provide:
Section 1. Who may institute proceedings and when. Subject to the provisions
of the next succeeding section, a person deprived of the possession of any land
or building by force, intimidation, threat, strategy, or stealth, or a lessor, vendor,
vendee, or other person against whom the possession of any land or building is
unlawfully withheld after the expiration or termination of the right to hold
possession, by virtue of any contract, express or implied, or the legal
representatives or assigns of any such lessor, vendor, vendee, or other person,
may, at any time within one (1) year after such unlawful deprivation or withholding
of possession, bring an action in the proper Municipal Trial Court against the
person or persons unlawfully withholding or depriving of possession, or any
person or persons claiming under them, for the restitution of such possession,
together with damages and costs.
Section 2. Lessor to proceed against lessee only after demand. Unless
otherwise stipulated, such action by the lessor shall be commenced only after
demand to pay or comply with the conditions of the lease and to vacate is made
upon the lessee, or by serving written notice of such demand upon the person
found on the premises, or by posting such notice on the premises if no person be
found thereon, and the lessee fails to comply therewith after fifteen (15) days in
the case of land or five (5) days in the case of buildings.
Respondent alleged in his complaint that petitioners occupied the subject property
by his mere tolerance. While tolerance is lawful, such possession becomes illegal
upon demand to vacate by the owner and the possessor by tolerance refuses to
comply with such demand. Respondent sent petitioners a demand letter dated
December 1, 1999 to vacate the subject property, but petitioners did not comply
with the demand. A person who occupies the land of another at the latter's
tolerance or permission, without any contract between them, is necessarily bound
by an implied promise that he will vacate upon demand, failing which a summary
action for ejectment is the proper remedy against him. Under Section 1, Rule 70
of the Rules of Court, the one-year period within which a complaint for unlawful
detainer can be filed should be counted from the date of demand, because only
upon the lapse of that period does the possession become unlawful. Respondent
filed the ejectment case against petitioners on March 29, 2000, which was less
than a year from December 1, 1999, the date of formal demand. Hence, it is clear
that the action was filed within the one-year period prescribed for filing an
ejectment or unlawful detainer case.
Alan Vincent S. Fontanosa II 19
 Neither is the Court persuaded by petitioners' argument that respondent
has no cause of action to recover physical possession of the subject properties
on the basis of a contract of sale because the thing sold was never delivered to
the latter.
It has been established that petitioners validly executed a deed of sale
covering the subject parcels of land in favor of respondent after the latter paid the
outstanding account of the former with the Philippine Veterans Bank.
Article 1498 of the Civil Code provides that when the sale is made through
a public instrument, the execution thereof shall be equivalent to the delivery of the
thing which is the object of the contract, if from the deed the contrary does not
appear or cannot clearly be inferred. In the instant case, petitioners failed to
present any evidence to show that they had no intention of delivering the subject
lots to respondent when they executed the said deed of sale. Hence, petitioners'
execution of the deed of sale is tantamount to a delivery of the subject lots to
respondent. The fact that petitioners remained in possession of the disputed
properties does not prove that there was no delivery, because as found by the
lower courts, such possession is only by respondent's mere tolerance.
Lastly, the Court does not agree with petitioners' assertion that the filing of
the unlawful detainer case was premature, because respondent failed to comply
with the provisions of the law on barangay conciliation. As held by the
RTC, Barangay Kauswagan City Proper, through its Pangkat Secretary and
Chairman, issued not one but two certificates to file action after herein petitioners
and respondent failed to arrive at an amicable settlement. The Court finds no error
in the pronouncement of both the MTCC and the RTC that any error in the
previous conciliation proceedings leading to the issuance of the first certificate to
file action, which was alleged to be defective, has already been cured by the
MTCC's act of referring back the case to the Pangkat Tagapagkasundo of
BarangayKauswagan for proper conciliation and mediation proceedings. These
subsequent proceedings led to the issuance anew of a certificate to file action.

Alan Vincent S. Fontanosa II 20