HEIRS OF JESUS M. MASCUANA, represented by JOSE MA. R.
separate Certificate of Title in the name of the VENDEE shall have
MASCUANA, petitioners, vs. COURT OF APPEALS, AQUILINO
BARTE, and SPOUSES RODOLFO and CORAZON LAYUMAS,
respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision[1] of the
Court of Appeals (CA) in CA-G.R. CV No. 53117 affirming the
Decision[2] of the Regional Trial Court (RTC) of San Carlos City,
Negros Occidental, which ordered the dismissal of the petitioners
complaint for recovery of possession and damages.
The Antecedents
Gertrudis Wuthrich and her six other siblings were the co-owners of
a parcel of land identified as Lot No. 124 of the San Carlos City,
Negros Occidental Cadastre, with an area of 1,729 square meters
and covered by Transfer Certificate of Title (TCT) No. 1453-R (T-
29937)-38.[3] Over time, Gertrudis and two other co-owners sold
each of their one-seventh (1/7) shares, or a total area of 741 square
meters, to Jesus Mascuana. The latter then sold a portion of his
140-square-meter undivided share of the property to Diosdado
Sumilhig. Mascuana later sold an additional 160-square-meter
portion to Sumilhig on April 7, 1961. However, the parties agreed to
revoke the said deed of sale and, in lieu thereof, executed a Deed of
Absolute Sale on August 12, 1961. In the said deed, Mascuana, as
vendor, sold an undivided 469-square-meter portion of the property
for P4,690.00, with P3,690.00 as down payment, and under the
following terms of payment:
That the balance of ONE THOUSAND PESOS (P1,000.00) shall be
paid by the VENDEE unto the VENDOR as soon as the above-
portions of Lot 124 shall have been surveyed in the name of the
VENDEE and all papers pertinent and necessary to the issuance of a
been prepared.[4]
On December 31, 1961, Mascuana and Jose G. Estabillo executed a
Deed of Exchange and Absolute Sale of Real Estate,[5] in which
Estabillo deeded to Mascuana a portion of his property abutting
that of Sumilhig on the southeast.
In the meantime, a survey was conducted for the co-owners of Lot
No. 124 on July 9, 1962. The subdivision plan of the said lot was
approved by the Director of Lands on August 2, 1962. The portion of
the property deeded to Sumilhig was identified in the said plan as
Lot No. 124-B.[6]
Meanwhile, Mascuana died intestate on April 20, 1965 and was
survived by his heirs, Eva M. Ellisin, Renee Hewlett, Carmen Vda. de
Opea, Marilou Dy and Jose Ma. R. Mascuana.
On April 24, 1968, Sumilhig executed a Deed of Sale of Real
Property[7] on a portion of Lot No. 124-B with an area of 469 square
meters and the improvements thereon, in favor of Corazon
Layumas, the wife of Judge Rodolfo Layumas, for the price of
P11,000.00. The spouses Layumas then had the property subdivided
into two lots: Lot No. 124-B-2 with an area of 71 square meters
under the name of Jesus Mascuana, and Lot No. 124-B-1, with an
area of 469 square meters under their names.[8] The spouses
Layumas took possession of the property and caused the cutting of
tall grasses thereon. Upon the plea of a religious organization, they
allowed a chapel to be constructed on a portion of the property.[9]
In January 1985, the spouses Layumas allowed Aquilino Barte to
stay on a portion of the property to ward off squatters.[10] Barte
and his kin, Rostom Barte, then had their houses constructed on the
property.
On October 1, 1985, the spouses Layumas received a Letter[11]
from the counsel of Renee Tedrew, offering to buy their share of
the property for US$1,000.00. For her part, Corazon Layumas wrote
Pepito Mascuana, offering to pay the amount of P1,000.00, the
balance of the purchase price of the property under the deed of
absolute sale executed by Mascuana and Sumilhig on August 12,
1961.[12] However, the addressee refused to receive the mail
matter.[13]
Unknown to the spouses Layumas, TCT No. 8986[14] was issued
over Lot No. 124-B in the name of Jesus Mascuana on March 17,
1986.
On November 17, 1986, the heirs of Mascuana filed a Complaint[15]
for recovery of possession of Lot No. 124-B and damages with a writ
of preliminary injunction, alleging that they owned the subject lot
by virtue of successional rights from their deceased father. They
averred that Barte surreptitiously entered the premises, fenced the
area and constructed a house thereon without their consent.
Attached as annexes to the complaint were TCT No. 8986 and a
certification[16] from the Office of the City Treasurer, Land Tax
Division, vouching that the property in question was owned by the
petitioners and that they had paid the taxes thereon until 1992.
In his answer to the complaint, Barte admitted having occupied a
portion of Lot No. 124-B, but claimed that he secured the
permission of Rodolfo Layumas, the owner of the subject property.
He added that he did not fence the property, and that the
petitioners did not use the same as a passageway in going to Broce
Street from their house. Barte raised the following special defenses:
(a) the petitioners were estopped from asserting ownership over
the lot in question because they did not object when he occupied
the said portion of the lot; (b) neither did the petitioners protest
when a church was built on the property, or when residential
houses were constructed thereon; (c) the petitioners still asked
Barte and the other occupants whether they had notified Rodolfo
Layumas of the constructions on the property; and (d) the heirs of
Mascuana, through the lawyer of Mrs. Renee M. Tedrew, even
wrote a letter[17] to Rodolfo Layumas on October 1, 1985,
expressing her willingness to buy the subject property for
US$1,000.00.
On April 8, 1991, the spouses Layumas filed a Motion for Leave to
Intervene,[18] alleging therein that they had a legal interest in Lot
No. 124-B-1 as its buyers from Sumilhig, who in turn purchased the
same from Mascuana. In their answer in intervention,[19] the
spouses Layumas alleged that they were the true owners of the
subject property and that they had wanted to pay the taxes
thereon, but the Land Tax clerk refused to receive their payments
on account that the petitioners had already made such payment.
The spouses Layumas further maintained that the petitioners had
no cause of action against Barte, as they had authorized him to
occupy a portion of Lot No. 124-B-1. The spouses Layumas also
averred that the petitioners were estopped from denying their right
of ownership and possession of the subject lot, as one of them had
even offered to repurchase a portion of Lot No. 124-B via letter. The
said spouses interposed a counterclaim for damages, claiming
ownership over the property, and prayed, thus:
WHEREFORE, it is most respectfully prayed that this HONORABLE
COURT render judgment in favor of the Intervenors and the
defendant Aquilino Barte, ordering:
1. That the complaint against Aquilino Barte be dismissed with costs
against the plaintiff;
2. That the Intervenors spouses Judge Rodolfo S. Layumas and
Corazon A. Layumas be declared as the legal and true owners of Lot
124-B;
3. That the plaintiffs should deliver immediately to the Intervenors,
TCT No. 8986 which is in their possession;
4. That the plaintiffs be made to pay to the Intervenors the sum of
THIRTY THOUSAND (P30,000.00) PESOS moral damages; TEN
THOUSAND (P10,000.00) PESOS attorneys fees plus THREE
HUNDRED (P300.00) PESOS as appearance fee per hearing.
Intervenors pray for such other relief and remedies as may be
deemed by this Honorable Court as just and equitable in the
premises.
At the trial, intervenor Rodolfo Layumas testified that he and his
wife bought the subject property in 1968, and that nobody objected
to their possession of the land, including the petitioners. In 1970, a
religious organization asked his permission to construct a chapel on
the disputed lot; he allowed the construction since the same would
be used for the fiesta. He further declared that part of the chapel
still stood on the property. In 1985, a fire razed the towns public
market, thereby dislocating numerous people. Barte was one of the
fire victims, who also happened to be a good friend and political
supporter of Rodolfo. Out of goodwill, Barte was allowed to occupy
a portion of the said lot, along with some other fire victims. Rodolfo
clarified that the others were to stay there only on a temporary
basis, but admitted that Bartes children also stayed in the subject
property.[20]
Rodolfo Layumas further narrated that in 1987, Corazon wrote one
of the petitioners-heirs, Pepito Mascuana, requesting that the title
of the lot be transferred in Sumilhigs name so that they could
likewise arrange for the conveyance of the title in their names.
Pepito failed to claim the letter, and thereafter, filed a case of
ejectment against Barte and Rodolfo Layumas brother-in-law,
Pepito Antonio. The case, the witness added, was dismissed as
against the two parties. Offered in evidence were the following: a
Sworn Statement on the Current and Fair Market Value of the Real
Property issued in 1973 as required by Presidential Decree No. 76,
and tax receipts.[21]
Rodolfo Layumas admitted on cross-examination that at the time
they bought the property from Sumilhig, the title was still in the
possession of the Wuthrich family. He added that he filed an
adverse claim before the Register of Deeds of San Carlos City,
Negros Occidental, on Lot No. 124-B in January 1986, or after the
case had already been filed in court. Lastly, the witness deposed
that he did not fence the property after buying the same, but that
his brother-in-law constructed a coco-lumber yard thereon upon his
authority.[22]
On January 30, 1996, the trial court rendered judgment in favor of
Barte and the spouses Layumas. The fallo of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of Intervenors-counterclaimants and defendant and against
plaintiffs-counterclaim defendants ordering as follows:
1. The dismissal of the plaintiffs complaint with costs against them;
2. The plaintiffs to jointly pay Intervenors-counterclaimants now
RTC Judge Rodolfo S. Layumas and Corazon A. Layumas:
(a) P10,000.00 for attorneys fees; and
(b) P30,000.00 as moral damages;
3. The plaintiffs, as counterclaim defendants, to comply with the
above-stated obligation of their late father, Mr. Jesus Mascuana,
under the Deed of Absolute Sale, Exh. 3, pp. 92-93, Exp., thru
plaintiff Mr. Jose Mascuana, including the desegragation (sic) survey
to desegregate the 469-square-meter portion of said Lot No. 124-B,
San Carlos Cadastre, this province, sold to the late Diosdado
Sumilhig, if the same has not yet been done despite what has been
said herein earlier to said effect, and the execution of the Final
Deed of Sale in their capacity as the heirs and successors-in-interest
of the late Mr. Jesus Mascuana, thru Mr. Jose Mascuana, covering
the 469-square-meter desegregated portion of said Lot No. 124-B,
within sixty (60) days counted from the finality of this Decision, in
favor of the Intervenors-spouses, after which the said Intervenors-
spouses shall pay them, thru Mr. Jose Mascuana, the P1,000.00
balance due to them as successors-in-interest of the late Mr. Jesus
Mascuana;
4. In case plaintiffs fail to comply with what are herein ordered for
them to do, the Clerk of Court V of this Court to do all that they
were to do as herein ordered in the text and dispositive portion
hereof, at the expense of Intervenors spouses to be later
reimbursed by plaintiffs, including the desegragation (sic) survey of
said 469-square-meter portion of said Lot [No.] 124-B, San Carlos
Cadastre, Negros Occidental, if the same has not yet been done and
the execution of the Final Deed of Sale on behalf of all the plaintiffs
as heirs and successors-in-interest of the late Mr. Jesus Mascuana
covering the said desegregated portion of 469 square meters of the
aforesaid lot, in favor of Intervenors spouses, to the end that
separate title therefor may be issued in their names, after they shall
have paid the P1,000.00 balance due plaintiffs under said Deed of
Absolute Sale, Exh. 3.
SO ORDERED.[23]
Forthwith, the petitioners appealed the case to the CA, raising the
following issues of fact and law:
a. Whether or not the contract of alienation of Lot No. 124-B in
favor of Diosdado Sumilhig in 1961 was a contract to sell or a
contract of sale;
b. Whether or not Diosdado Sumilhig had any right to sell Lot No.
124-B in favor of intervenor Corazon Layumas in 1968.[24]
On May 5, 2003, the CA affirmed the decision of the trial court. It
ruled that the contract between the petitioners father and Sumilhig
was one of sale. Foremost, the CA explained, the contract was
denominated as a Deed of Absolute Sale. The stipulations in the
contract likewise revealed the clear intention on the part of the
vendor (Mascuana) to alienate the property in favor of the vendee
(Sumilhig). In three various documents, the late Mascuana even
made declarations that Sumilhig was already the owner of the
disputed land. The CA added that the admission may be given in
evidence against Mascuana and his predecessors-in-interest under
Section 26, Rule 130 of the Revised Rules on Evidence. As to the
argument that the contract between Mascuana and Sumilhig was
not effective because it was subject to a suspensive condition that
did not occur, the CA ruled that the condition referred to by the
petitioners refers only to the payment of the balance of the
purchase price and not to the effectivity of the contract.
As to the petitioners contention that even if the contract were one
of sale, ownership cannot be transferred to Sumilhig because
Mascuana was not yet the owner of the lot at the time of the
alleged sale, the appellate court ruled that the registration of the
land to be sold is not a prerequisite to a contract of sale.
The Present Petition
Aggrieved, the petitioners filed the instant petition for review on
certiorari with this Court, where the following lone legal issue was
raised:
WAS THE SALE OF LOT NO. 124-B MADE BY JESUS M. MASCUANA IN
FAVOR OF DIOSDADO SUMILHIG A CONTRACT TO SELL OR
CONTRACT OF SALE?[25]
We note that the original action of the petitioners against Aquilino
Barte was one for recovery of possession of Lot No. 124-B. With the
intervention of the respondents Rodolfo and Corazon Layumas who
claimed ownership over the property, and the acquiescence of the
parties, evidence was adduced to prove who, between the
petitioners (as plaintiffs) and the respondents (as defendants-
intervenors) were the lawful owners of the subject property and
entitled to its possession.
The petitioners resolutely contend that the Deed of Absolute Sale
dated August 12, 1961 between their father and Sumilhig was a
mere contract to sell because at the time of the said sale, the late
Mascuana was not yet the registered owner of Lot No. 124 or any of
its portions. They assert that Sumilhig could not have acquired any
rights over the lot due to the fact that a person can only sell what
he owns or is authorized to sell, and the buyer can acquire no more
than what the seller can transfer legally. Finally, the petitioners
insist that the document in controversy was subject to a suspensive
condition, not a resolutory condition, which is a typical attribute of
a contract of sale.
The petition is denied for lack of merit.
The issues raised by the petitioners in this case are factual, and
under Rule 45 of the Rules of Court, only questions of law may be
raised in this Court, the reason being that this Court is not a trier of
facts. It is not to re-examine the evidence on record and to calibrate
the same. Moreover, the findings and conclusions of the trial court
as affirmed by the CA are conclusive on the Court, absent of any
evidence that the trial court, as well as the CA ignored,
misinterpreted and misconstrued facts and circumstances of
substance which, if considered, would alter or reverse the outcome
of the case.[26]
We have reviewed the records and find no justification for a
reversal or even a modification of the assailed decision of the CA.
Even on the merits of the petition, the Court finds that the decision
of the trial court as well as the ruling of the CA are based on the
evidence on record and the applicable law.
The petitioners reiterated their pose that the deed of absolute sale
over the property executed by their father, Jesus Mascuana, as
vendor, and Diosdado Sumilhig as vendee, was a contract to sell and
not a contract of sale. They assert that on its face, the contract
appears to be a contract to sell, because the payment of the
P1,000.00 balance of the purchase price was subject to a suspensive
condition: the survey of the property, the segregation of the portion
thereof subject of the sale, and the completion of the documents
necessary for the issuance of a Torrens title over the property to
and in the name of Sumilhig who was the vendee. The petitioners
assert that Sumilhig never paid the aforesaid amount to the vendor;
hence, the obligation of the latter and his predecessors-in-interest
(herein petitioners) to execute a final deed of sale never arose. As
such, they aver, title to the property remained reserved in the
vendor and his heirs even after his death. There was no need for the
vendor to rescind the deed or collect the said amount of P1,000.00
under Article 1191 of the New Civil Code because such a remedy
applies only to contracts of sale. The petitioners insist that Sumilhig
never acquired title over the property; he could not have
transferred any title to the respondents. Sumilhig could not have
transferred that which he did not own.
The petitioners contention has no factual and legal bases.
The deed of absolute sale executed by Jesus Mascuana and
Sumilhig, provides, thus:
That the VENDOR is the true and absolute owner of a parcel of land
known as Lot No. 124 of the Cadastral Survey of San Carlos, situated
at Broce Street and is free from liens and encumbrances, and
covered by O.C.T. No. T-299[3]7 (R-1453) of Reg. of Deeds, Negros
Occ.
That for and in consideration of the sum of FOUR THOUSAND SIX
HUNDRED NINETY PESOS (P4,690.00), Philippine Currency, to be
paid by the VENDEE in the manner hereinafter stated, the VENDOR
does hereby sell, transfer, cede and convey, a portion of the above-
described property containing an area of 469 square meters, the
sketch of which can be found at the back of this document and
having a frontage at Broce Street of around 14 meters, and from the
Broce Street to the interior on its Southwest side with a length of
30.9 meters, with a length of 24.8 meters on its Northeast side
where it turned to the right with a length of 2.8 meters and
continuing to Northwest with a length of 6.72 meters, the backyard
dimension is 17.5 meters to the Northwest, unto the VENDEE, his
heirs and assigns, by way of Absolute Sale, upon the receipt of the
down payment of THREE THOUSAND SIX HUNDRED NINETY PESOS
(P3,690.00), which is hereby acknowledged by the VENDOR as
received by him.
That the balance of ONE THOUSAND PESOS (P1,000.00) shall be
paid by the VENDEE unto the VENDOR as soon as the above-
portions of Lot 124 shall have been surveyed in the name of the
VENDEE and all papers pertinent and necessary to the issuance of a
separate Certificate of Title in the name of the VENDEE shall have
been prepared.
The evidence on record shows that during the lifetime of vendor
Jesus Mascuana, and even after his death, his heirs, the petitioners
herein, unequivocably declared that Diosdado Sumilhig was the
owner of the property subject of this case, and that the respondents
acquired title over the property, having purchased the same via a
deed of absolute sale from Diosdado Sumilhig. Thus, on December
31, 1961, Jesus Mascuana and Jose Estabillo executed a Deed of
Exchange and Absolute Sale of Real Estate, in which both parties
declared that they were co-owners of portions of Lot No. 124
abutted by the property owned by Diosdado Sumilhig.[27]
In the subdivision plan of Lot No. 124, signed by Ricardo Quilop,
Private Land Surveyor, following his survey of Lot No. 124 on July 9,
1962 for and in behalf of Jesus Mascuana, et al., it appears that Lot
No. 124-B with an area of 540 square meters belonged to Diosdado
Sumilhig,[28] which is abutted by Lot No. 124-C, owned by Jesus
Mascuana.
On October 1, 1985, long after the death of Jesus Mascuana, one of
his heirs, petitioner Renee Tedrew, through counsel, wrote
respondent Rodolfo Layumas offering to buy the property occupied
by his overseer Aquilino Barte for US$1,000.00:
ATTY. RODOLFO S. LAYUMAS
San Carlos City
Negros Occidental
Dear Atty. Layumas:
This has reference to the lot located at Broce Street, portions of
which are presently occupied by Mr. Barte.
Mrs. Renee Tedrew (nee Agapuyan), who is now in the United
States, would like to offer the amount of $1,000.00 to buy your
share of the said lot.
If you are amenable, kindly inform the undersigned for him to
communicate [with] Mrs. Tedrew in California.
Very truly yours,
(Sgd.)
SAMUEL SM LEZAMA[29]
It was only after the respondents rejected the proposal of petitioner
Renee Tedrew that the petitioners secured title over the property
on March 17, 1986 in the name of Jesus Mascuana (already
deceased at the time), canceling TCT No. 967 issued on July 6, 1962
under the name of Jesus Mascuana, who appears to be a co-owner
of Lot No. 124 with an undivided two-seventh (2/7) portion
thereof.[30]
While it is true that Jesus Mascuana executed the deed of absolute
sale over the property on August 12, 1961 in favor of Diosdado
Sumilhig for P4,690.00, and that it was only on July 6, 1962 that TCT
No. 967 was issued in his name as one of the co-owners of Lot No.
124, Diosdado Sumilhig and the respondents nevertheless acquired
ownership over the property. The deed of sale executed by Jesus
Mascuana in favor of Diosdado Sumilhig on August 12, 1961 was a
perfected contract of sale over the property. It is settled that a
perfected contract of sale cannot be challenged on the ground of
the non-transfer of ownership of the property sold at that time of
the perfection of the contract, since it is consummated upon
delivery of the property to the vendee. It is through tradition or
delivery that the buyer acquires ownership of the property sold. As
provided in Article 1458 of the New Civil Code, when the sale is
made through a public instrument, the execution thereof is
equivalent to the delivery of the thing which is the object of the
contract, unless the contrary appears or can be inferred. The record
of the sale with the Register of Deeds and the issuance of the
certificate of title in the name of the buyer over the property merely
bind third parties to the sale. As between the seller and the buyer,
the transfer of ownership takes effect upon the execution of a
public instrument covering the real property.[31] Long before the
petitioners secured a Torrens title over the property, the
respondents had been in actual possession of the property and had
designated Barte as their overseer.
Article 1458 of the New Civil Code provides:
By the contract of sale, one of the contracting parties obligates
himself to transfer the ownership of and to deliver a determinate
thing, and the other to pay therefor a price certain in money or its
equivalent.
A contract of sale may be absolute or conditional.
Thus, there are three essential elements of sale, to wit:
a) Consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.[32]
In this case, there was a meeting of the minds between the vendor
and the vendee, when the vendor undertook to deliver and transfer
ownership over the property covered by the deed of absolute sale
to the vendee for the price of P4,690.00 of which P3,690.00 was
paid by the vendee to the vendor as down payment. The vendor
undertook to have the property sold, surveyed and segregated and
a separate title therefor issued in the name of the vendee, upon
which the latter would be obliged to pay the balance of P1,000.00.
There was no stipulation in the deed that the title to the property
remained with the vendor, or that the right to unilaterally resolve
the contract upon the buyers failure to pay within a fixed period
was given to such vendor. Patently, the contract executed by the
parties is a deed of sale and not a contract to sell. As the Court ruled
in a recent case:
In Dignos v. Court of Appeals (158 SCRA 375), we have said that,
although denominated a Deed of Conditional Sale, a sale is still
absolute where the contract is devoid of any proviso that title is
reserved or the right to unilaterally rescind is stipulated, e.g., until
or unless the price is paid. Ownership will then be transferred to the
buyer upon actual or constructive delivery (e.g. by the execution of
a public document) of the property sold. Where the condition is
imposed upon the perfection of the contract itself, the failure of the
condition would prevent such perfection. If the condition is imposed
on the obligation of a party which is not fulfilled, the other party
may either waive the condition or refuse to proceed with the sale.
(Art. 1545, Civil Code)
Thus, in one case, when the sellers declared in a Receipt of Down
Payment that they received an amount as purchase price for a
house and lot without any reservation of title until full payment of
the entire purchase price, the implication was that they sold their
property. In Peoples Industrial and Commercial Corporation v. Court
of Appeals, it was stated:
A deed of sale is considered absolute in nature where there is
neither a stipulation in the deed that title to the property sold is
reserved in the seller until full payment of the price, nor one giving
the vendor the right to unilaterally resolve the contract the moment
the buyer fails to pay within a fixed period.
Applying these principles to this case, it cannot be gainsaid that the
contract of sale between the parties is absolute, not conditional.
There is no reservation of ownership nor a stipulation providing for
a unilateral rescission by either party. In fact, the sale was
consummated upon the delivery of the lot to respondent. Thus, Art.
1477 provides that the ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive delivery
thereof.[33]
The condition in the deed that the balance of P1,000.00 shall be
paid to the vendor by the vendee as soon as the property sold shall
have been surveyed in the name of the vendee and all papers
pertinent and necessary to the issuance of a separate certificate of
title in the name of the vendee shall have been prepared is not a
condition which prevented the efficacy of the contract of sale. It
merely provides the manner by which the total purchase price of
the property is to be paid. The condition did not prevent the
contract from being in full force and effect:
The stipulation that the payment of the full consideration based on
a survey shall be due and payable in five (5) years from the
execution of a formal deed of sale is not a condition which affects
the efficacy of the contract of sale. It merely provides the manner
by which the full consideration is to be computed and the time
within which the same is to be paid. But it does not affect in any
manner the effectivity of the contract. [34]
In a contract to sell, ownership is retained by a seller and is not to
be transferred to the vendee until full payment of the price. Such
payment is a positive suspensive condition, the failure of which is
not a breach of contract but simply an event that prevented the
obligation from acquiring binding force.[35]
It bears stressing that in a contract of sale, the non-payment of the
price is a resolutory condition which extinguishes the transaction
that, for a time, existed and discharges the obligation created under
the transaction.[36] A seller cannot unilaterally and extrajudicially
rescind a contract of sale unless there is an express stipulation
authorizing it. In such case, the vendor may file an action for specific
performance or judicial rescission.[37]
Article 1169 of the New Civil Code provides that in reciprocal
obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is
incumbent upon him; from the moment one of the parties fulfills his
obligation, delay by the other begins. In this case, the vendor (Jesus
Mascuana) failed to comply with his obligation of segregating Lot
No. 124-B and the issuance of a Torrens title over the property in
favor of the vendee, or the latters successors-in-interest, the
respondents herein. Worse, petitioner Jose Mascuana was able to
secure title over the property under the name of his deceased
father.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of
merit. Costs against the petitioners.
SO ORDERED.
WINIFREDA URSAL, Petitioner vs. AUSTRIA-MARTINEZ, CALLEJO,
SR., TINGA, and CHICO-NAZARIO, JJ. COURT OF APPEALS, THE
RURAL BANK OF LARENA (SIQUIJOR), INC. and SPOUSES JESUS
MONESET and CRISTITA MONESET,
Promulgated:
October 14, 2005
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the
Rules of Court seeking the reversal of the Decision[1] of the Court of
Appeals (CA) dated June 28, 1999 and the Resolution dated January
31, 2000 denying petitioners motion for reconsideration.[2]
The spouses Jesus and Cristita Moneset (Monesets) are the
registered owners of a 333-square meter land together with a
house thereon situated at Sitio Laguna, Basak, Cebu City covered by
Transfer Certificate of Title No. 78374.[3] On January 9, 1985, they
executed a Contract to Sell Lot & House in favor of petitioner
Winifreda Ursal (Ursal), with the following terms and conditions:
That the VENDOR (Cristita R. Moneset) offers to SELL and the
VENDEE accepts to BUY at the agreed lump sum price of
P130,000.00 payable on the installment basis as follows:
1. That on the date of the signing of this agreement, the VENDEE
will tender an earnest money or downpayment of P50,000.00 to the
VENDOR, and by these presents, the latter hereby acknowledges
receipt of said amount from the former;
2. That the balance of the selling price of P80,000.00 shall be paid
by the VENDEE to the VENDOR in equal monthly installments of
P3,000.00 starting the month of February, 1985, until said balance
of the selling price shall be fully paid;
3. That if the VENDEE shall fail or in default to pay six (6) monthly
installments to the VENDOR the herein agreement is deemed
cancelled, terminated and/or rescinded and in such event, the
VENDEE (sic) binds to refund to the VENDOR (sic) the deposit of
P50,000.00 and with the latters (sic) obligation to pay the former
(sic) as a corresponding refund for cost of improvements made in
the premises by VENDEE;
4. That on the date of receipt of the downpayment of P50,000.00
by the VENDOR, it is mutually agreed for VENDEE to occupy and
take physical possession of the premises as well as for the latter
(VENDEE) to keep and hold in possession the corresponding transfer
certificate of title No. ______ of the land in question which is the
subject of this agreement;
5. That on the date of final payment by the VENDEE to the
VENDOR, the latter shall execute at her expense the corresponding
document of DEED OF ABSOLUTE SALE for the former as well as the
payment of realty clearances, BIR Capital Gain Tax, sales tax or
transfer fees and attorneys fees; that, for the issuance of title in
VENDEEs name shall be the exclusive account of said VENDEE.[4]
Petitioner paid the down payment and took possession of the
property. She immediately built a concrete perimeter fence and an
artesian well, and planted fruit bearing trees and flowering plants
thereon which all amounted to P50,000.00. After paying six monthly
installments, petitioner stopped paying due to the Monesets failure
to deliver to her the transfer certificate of title of the property as
per their agreement; and because of the failure of the Monesets to
turn over said title, petitioner failed to have the contract of sale
annotated thereon.[5]
Unknown to petitioner, the Monesets executed on November 5,
1985 an absolute deed of sale in favor of Dr. Rafael Canora, Jr. over
the said property for P14,000.00.[6] On September 15, 1986, the
Monesets executed another sale, this time with pacto de retro with
Restituto Bundalo.[7] On the same day, Bundalo, as attorney-in-fact
of the Monesets, executed a real estate mortgage over said
property with Rural Bank of Larena (hereafter Bank) located in
Siquijor for the amount of P100,000.00.[8] The special power of
attorney made by the Monesets in favor of Bundalo as well as the
real estate mortgage was then annotated on the title on September
16, 1986.[9] For the failure of the Monesets to pay the loan, the
Bank served a notice of extrajudicial foreclosure dated January 27,
1988 on Bundalo.[10]
On September 30, 1989, Ursal filed an action for declaration of non-
effectivity of mortgage and damages against the Monesets, Bundalo
and the Bank. She claimed that the defendants committed fraud
and/or bad faith in mortgaging the property she earlier bought from
the Monesets with a bank located in another island, Siquijor; and
the Bank acted in bad faith since it granted the real estate mortgage
in spite of its knowledge that the property was in the possession of
petitioner.[11]
The Monesets answered that it was Ursal who stopped paying the
agreed monthly installments in breach of their agreement.[12] The
Bank, on the other hand, averred that the title of the property was
in the name of Cristita Radaza Moneset married to Jesus Moneset
and did not show any legal infirmity.[13]
Bundalo, meanwhile, was not served summons because he could no
longer be found at his given address.[14]
Trial on the merits proceeded. Thereafter, the Regional Trial Court
of Cebu City, Branch 24, rendered its decision finding that Ursal is
more credible than the Monesets and that the Monesets are liable
for damages for fraud and breach of the contract to sell:
The evidence of [Ursal] show that she was the first to acquire a
substantial interest over the lot and house by virtue of the
execution of the Contract to Sell (Exh. A). After the execution of Exh.
A plaintiff took possession of the questioned lot and houseafter she
made a downpayment of P50,000.00. [S]he paid the installments for
six (6) months without fail. [However] plaintiff (stopped) paying the
installment because defendant spouses failed to give her the
Transfer Certificate of Title over the lot and house despite repeated
demands. It is evident then that the first to violate the conditions of
Exh. A were the defendants Spouses Moneset. This is the reason
why plaintiff was not able to annotate Exh. A on the TCT. The
evidence of plaintiff show that there was no intention on her part to
discontinue paying the installments. In a reciprocal obligation, one
cannot be compelled to do if the other party fails to do his part (Art.
1169, New Civil Code).
The acts of defendant Spouses Moneset in selling again the lot and
house in question to Dr. Canora by executing a Deed of Absolute
Sale; in selling the same on pacto de retro to defendant Bundalo;
and in mortgaging the same to defendant Rural Bank of Larena are
plainly and clearly fraudulent because they were done while Exh. A
was still existing and the transaction was done without notice to the
plaintiff. As provided in Art. 1170 of the New Civil Code, those who
are guilty of fraud in the performance of their obligation --- and
those who in any manner contravene the tenor thereof, are liable
for damages.
Another ground for liability under this article is when there is
fraud/deceit. In the instant case, there was fraud/deceit on the part
of the defendant spouses Moneset when they executed the Deed of
Sale to Dr. Canora; the Deed of Sale with Pacto de Retro to Bundalo
and the Special Power of Attorney for Bundalo to execute for and in
their behalf the Real Estate Mortgage with the Rural Bank of Larena
knowing fully well that the Contract to Sell house and lot, Exh. A was
still existing notwithstanding their violation to the provisions
thereto. It is therefore crystal clear that defendant spouses
Moneset are liable for damages.[15]
As to the real estate mortgage, the trial court held that the same
was valid and the Bank was not under any obligation to look beyond
the title, although the present controversy could have been avoided
had the Bank been more astute in ascertaining the nature of
petitioners possession of the property, thus:
The Real Estate Mortgage and the Foreclosure Proceedings cannot
be considered null and void in the sense that per se the formalities
required by law were complied with except for the fact that behind
their execution there was fraud, deceit and bad faith on the part of
defendant spouses Moneset and Bundalo.
The defendant Rural Bank of Larena for its part could have avoided
this situation if the bank appraiser who made the ocular inspection
of the subject house and lot went deeper and investigated further
when he learned that the owner is not the actual occupant. He was
however told by Moneset that the actual occupant was only a
lessee. Banking on this information that the actual occupant was
only a lessee with no other right over and above such, the bank
approved a loan of P100,000.00 in favor of Moneset through
Bundalo their attorney-in-fact.
Likewise the Rural Bank of Larena had the right to rely on what
appeared on the certificate of title of the Monesets and it was
under no obligation to look beyond the certificate and investigate
the title of the mortgagor appearing on the face of the certificate.
The approval of the P100,000.00 loan from the Rural Bank of Larena
was made possible through the deception and bad faith of
defendant spouses Moneset and Bundalo but the pertinent
documents were per se in order. The court is of the honest belief
that the case against the defendant bank be dismissed for lack of
merit. The court however believes that for reasons of equity the
bank should give the plaintiff Ursal the preferential right to redeem
the subject house and lot.[16]
The trial court then disposed of the case as follows:
Wherefore premises considered, judgment is hereby rendered in
favor of the defendant Rural Bank of Larena dismissing the
complaint against it for lack of merit and against the defendant
spouses Moneset ordering them to:
1. reimburse to plaintiff Ursal the following:
a.) downpayment of P50,000.00
b.) monthly installments for six months at P3,000.00 per month ---
P18,000.00
c.) expenses improvements P61, 676.52
2. pay to plaintiff the following:
a.) moral damages ----------------- P30,000.00
b.) exemplary damages ----------- P20,000.00
c.) litigation expenses------------- P 5,000.00
d.) attorneys fees ----------------- P10,000.00
e.) costs
3. order the defendant Rural Bank of Larena to give the plaintiff
the preferential right to redeem the subject house and lot.
SO ORDERED.[17]
Both Ursal and the Monesets appealed the decision to the CA. Ursal
alleged that the Bank was guilty of bad faith for not investigating
the presence of Ursal on the property in question, while the
Monesets claimed that the trial court erred in giving preferential
right to Ursal to redeem the property and in ordering them to pay
damages.[18]
The CA affirmed in toto the decision of the trial court. It held that
the Bank did not have prior knowledge of the contract to sell the
house and lot and the Monesets acted fraudulently thus they
cannot be given preferential right to redeem the property and were
therefore correctly ordered to pay damages.[19]
The Monesets filed a motion for reconsideration which was denied
outright for having been filed out of time.[20] Ursals motion for
reconsideration was denied by the CA on January 31, 2000 for lack
of merit.[21]
Hence, the present petition raising the sole error:
That with grave abuse of discretion amounting to excess of
jurisdiction, the Honorable Court of Appeals erred in rendering a
decision and Resolution NOT in accordance with law and the
applicable rulings of the Supreme Court.[22]
Petitioner claims that: the Bank was duly informed through its
appraiser that the house and lot to be mortgaged by Monesets
were in the possession of a lessee; the Bank should have taken this
as a cue to investigate further the Monesets right over the same;
the case of Embrado vs. Court of Appeals (233 SCRA 335) held that
where a purchaser neglects to make the necessary inquiry and
closes his eyes to facts which should put a reasonable man on his
guard to the possibility of the existence of a defect in his vendors
title, he cannot claim that he is a purchaser in good faith; Sec. 50 of
Act 496 provides that where a party has knowledge of a prior
existing interest which is unregistered at the time he acquired the
land, his knowledge of that prior unregistered interest has the effect
of registration as to him and the Torrens system cannot be used as a
shield against fraud; following Art. 2176 of the Civil Code,
respondent Bank is obliged to pay for the damage done.[23]
Petitioner then prayed that the Deed of Real Estate Mortgage be
declared as non-effective and non-enforceable as far as petitioner is
concerned; that she be declared as the absolute owner of the house
and lot in question; that the Monesets be ordered to execute a
deed of absolute sale covering the subject property; and that the
Bank be ordered to direct the collection or payment of the loan of
P100,000.00 plus interest from the Monesets for they were the
ones who received and enjoyed the said loan.[24]
On the other hand, respondent Bank in its Comment argues that: its
interest in the property was only that of mortgagee and not a
purchaser thus its interest is limited only to ascertaining that the
mortgagor is the registered owner; the case cited is inapplicable at
bar since it involves the purchase of real property; Ursal was
purportedly only a lessee of the property, thus as mortgagor who is
not entitled to possess the mortgaged property, they no longer
considered the lease in the processing and approval of the loan;
Sec. 50 of Act No. 496 is also inapplicable since the alleged prior
existing interest was only that of a lessee; in any case, it was the
Monesets who lied to the Bank anent the real nature of the
encumbrance, thus, it is the Monesets who are guilty of fraud and
not the Bank.[25]
In her Rejoinder,[26] petitioner argued that: under the law on
mortgage, the mortgagor must be the owner of the property he
offers as security of his loan; the mortgagee like herein Bank which
neglects to verify the ownership of the property offered as security
of the loan runs the risk of his folly; the Banks negligence is not
excusable because an adverse claim and notice of lis pendens were
already annotated on the certificate of title when the mortgage was
constituted or when the deed of real estate mortgage was
annotated; it would be unfair to put the blame on petitioner who
was innocent of the transaction; the trial court found that the Bank
even provided its appraiser the amount of P15,000.00 to redeem
the pacto de retro sale allegedly executed in favor of Dr. Canora;
this should have aroused the Banks suspicion and prompted it to
investigate further the property; the trial court recognized the bad
faith committed by the Monesets and ordered them to pay the sum
of P126,676.52 in damages but exonerated the Bank who is equally
guilty of bad faith; the Monesets cannot pay the damages as they
have no money and property thus if the decision of the trial court as
affirmed by the CA is to be enforced, they will only be holding an
empty bag while the Bank which is equally guilty will go free; what
would be fair is to let the two respondents bear jointly and severally
the consequences of their transaction and let the innocent
petitioner ultimately own the house and lot in question.[27]
The petitioner, in her Memorandum dated July 31, 2005, raised the
issues of: (1) Whether or not the document captioned: Contract to
Sell Lot and House (Exh. A) is valid and binding so much so that the
herein Petitioner who is the Vendee is the lawful and true owner of
the lot and house in question; (2) Whether or not the herein
respondents spouses Jesus Moneset and Cristita Moneset who were
the vendors and/or mortgagors together with respondent Restituto
Bundalo were conniving and acting in bad faith; and (3) Whether or
not respondent Rural Bank of Larena measured up to the strict
requirement of making a thorough investigation of the property
offered as collateral before granting a loan and be considered as
innocent mortgagee and entitled to the protection of the law.[28]
Petitioner reiterated her arguments in support of the first and third
issues raised in the Memorandum while she merely adopted the CA
findings in support of the second issue, i.e., when the Monesets
encumbered the Transfer Certificate of Title (TCT) to Dr. Canora and
thereafter to Bundalo, they committed bad faith or fraud since the
contract to sell with Ursal was still valid and subsisting.[29]
Respondent Bank, in its Memorandum dated July 20, 2005,
reiterated the arguments it made in its Comment that: the case
cited by petitioner requiring extra ordinary diligence is inapplicable
in this case since what is involved here is mortgage and not sale; as
mortgagee, its interest is limited only to determining whether the
mortgagor is the registered owner of the property whose certificate
of title showed that there were no existing encumbrances thereon;
and even with unregistered encumbrances, the Bank has priority by
the registration of the loan documents.[30]
No memorandum is filed by respondent Monesets.
The crux of petitioners contention is that the Bank failed to look
beyond the transfer certificate of title of the property for which it
must be held liable.
We agree. Banks cannot merely rely on certificates of title in
ascertaining the status of mortgaged properties; as their business is
impressed with public interest, they are expected to exercise more
care and prudence in their dealings than private individuals.[31]
Indeed, the rule that persons dealing with registered lands can rely
solely on the certificate of title does not apply to banks.[32]
As enunciated in Cruz vs. Bancom:[33]
Respondent is not an ordinary mortgagee; it is a mortgagee-bank.
As such, unlike private individuals, it is expected to exercise greater
care and prudence in its dealings, including those involving
registered lands. A banking institution is expected to exercise due
diligence before entering into a mortgage contract. The
ascertainment of the status or condition of a property offered to it
as security for a loan must be a standard and indispensable part of
its operations.[34]
Our agreement with petitioner on this point of law,
notwithstanding, we are constrained to refrain from granting the
prayers of her petition, to wit: that the Deed of Real Estate
Mortgage be declared as non-effective and non-enforceable as far
as petitioner is concerned; that she be declared as the absolute
owner of the house and lot in question; that the Monesets be
ordered to execute a deed of absolute sale covering the subject
property; and that the Bank be ordered to direct the collection or
payment of the loan of P100,000.00 plus interest from the
Monesets for they were the ones who received and enjoyed the
said loan.[35]
The reason is that, the contract between petitioner and the
Monesets being one of Contract to Sell Lot and House, petitioner,
under the circumstances, never acquired ownership over the
property and her rights were limited to demand for specific
performance from the Monesets, which at this juncture however is
no longer feasible as the property had already been sold to other
persons.
A contract to sell is a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the subject
property despite delivery thereof to the prospective buyer, binds
himself to sell the said property exclusively to the prospective buyer
upon fulfillment of the condition agreed upon, that is, full payment
of the purchase price.[36]
In such contract, the prospective seller expressly reserves the
transfer of title to the prospective buyer, until the happening of an
event, which in this case is the full payment of the purchase price.
What the seller agrees or obligates himself to do is to fulfill his
promise to sell the subject property when the entire amount of the
purchase price is delivered to him. Stated differently, the full
payment of the purchase price partakes of a suspensive condition,
the non-fulfillment of which prevents the obligation to sell from
arising and thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer.[37]
It is different from contracts of sale, since ownership in contracts to
sell is reserved by the vendor and is not to pass to the vendee until
full payment of the purchase price, while in contracts of sale, title to
the property passess to the vendee upon the delivery of the thing
sold. In contracts of sale the vendor loses ownership over the
property and cannot recover it unless and until the contract is
resolved or rescinded, while in contracts to sell, title is retained by
the vendor until full payment of the price.[38] In contracts to sell,
full payment is a positive suspensive condition while in contracts of
sale, non-payment is a negative resolutory condition.[39]
A contract to sell may further be distinguished from a conditional
contract of sale, in that, the fulfillment of the suspensive condition,
which is the full payment of the purchase price, will not
automatically transfer ownership to the buyer although the
property may have been previously delivered to him. The
prospective vendor still has to convey title to the
prospective buyer by entering into a contract of absolute sale.
While in a conditional contract of sale, the fulfillment of the
suspensive condition renders the sale absolute and affects the
sellers title thereto such that if there was previous delivery of the
property, the sellers ownership or title to the property is
automatically transferred to the buyer. [40]
Indeed, in contracts to sell the obligation of the seller to sell
becomes demandable only upon the happening of the suspensive
condition, that is, the full payment of the purchase price by the
buyer. It is only upon the existence of the contract of sale that the
seller becomes obligated to transfer the ownership of the thing sold
to the buyer. Prior to the existence of the contract of sale, the seller
is not obligated to transfer the ownership to the buyer, even if there
is a contract to sell between them. [41]
In this case, the parties not only titled their contract as Contract to
Sell Lot and House but specified in their agreement that the vendor
shall only execute a deed of absolute sale on the date of the final
payment by vendee.[42] Such provision signifies that the parties
truly intended their contract to be that of contract to sell.[43]
Since the contract in this case is a contract to sell, the ownership of
the property remained with the Monesets even after petitioner has
paid the down payment and took possession of the property. In
Flancia vs. Court of Appeals,[44] where the vendee in the contract
to sell also took possession of the property, this Court held that the
subsequent mortgage constituted by the owner over said property
in favor of another person was valid since the vendee retained
absolute ownership over the property.[45] At most, the vendee in
the contract to sell was entitled only to damages.[46]
Petitioner attributes her decision to stop paying installments to the
failure of the Monesets to comply with their agreement to deliver
the transfer certificate of title after the down payment of
P50,000.00. On this point, the trial court was correct in holding that
for such failure, the Monesets are liable to pay damages pursuant to
Art. 1169 of the Civil Code on reciprocal obligations.[47]
The vendors breach of the contract, notwithstanding, ownership
still remained with the Monesets and petitioner cannot justify her
failure to complete the payment.
In Pangilinan vs. Court of Appeals,[48] the vendees contended that
their failure to pay the balance of the total contract price was
because the vendor reneged on its obligation to improve the
subdivision and its facilities. In said case, the Court held that the
vendees were barred by laches from asking for specific performance
eight years from the date of last installment. The Court held that:
(the vendees) instead of being vigilant and diligent in asserting their
rights over the subject property had failed to assert their rights
when the law requires them to act. Laches or stale demands is
based upon grounds of public policy which requires, for the peace
of society, the discouragement of stale claims and unlike the statute
of limitations, is not a mere question of time but is principally a
question of the inequity or unfairness of permitting a right or claim
to be enforced or asserted.
The legal adage finds application in the case at bar. Tempus enim
modus tollendi obligations et actiones, quia tempus currit contra
desides et sui juris contemptoresFor time is a means of dissipating
obligations and actions, because time runs against the slothful and
careless of their own rights.[49]
In this case, petitioner instituted an action for Declaration of Non-
Effectivity of Mortgage with Damages four years from the date of
her last installment and only as a reaction to the foreclosure
proceedings instituted by respondent Bank. After the Monesets
failed to deliver the TCT, petitioner merely stopped paying
installments and did not institute an action for specific
performance, neither did she consign payment of the remaining
balance as proof of her willingness and readiness to comply with her
part of the obligation. As we held in San Lorenzo Development Corp.
vs. Court of Appeals,[50] the perfected contract to sell imposed on
the vendee the obligation to pay the balance of the purchase price.
There being an obligation to pay the price, the vendee should have
made the proper tender of payment and consignation of the price in
court as required by law. Consignation of the amounts due in court
is essential in order to extinguish the vendees obligation to pay the
balance of the purchase price.[51] Since there is no indication in the
records that petitioner even attempted to make the proper
consignation of the amounts due, the obligation on the part of the
Monesets to transfer ownership never acquired obligatory force.
In other words, petitioner did not acquire ownership over the
subject property as she did not pay in full the equal price of the
contract to sell. Further, the Monesets breach did not entitle
petitioner to any preferential treatment over the property
especially when such property has been sold to other persons.
As explained in Coronel vs. Court of Appeals:[52]
In a contract to sell, there being no previous sale of the property, a
third person buying such property despite the fulfillment of the
suspensive condition such as the full payment of the purchase price,
for instance, cannot be deemed a buyer in bad faith and the
prospective buyer cannot seek the relief of reconveyance of the
property. There is no double sale in such case. Title to the property
will transfer to the buyer after registration because there is no
defect in the owner-sellers title per se, but the latter, of course, may
be sued for damages by the intending buyer.[53] (Emphasis
supplied)
In this case, the lower courts found that the property was sold to Dr.
Canora and then to Bundalo who in turn acted as attorney-in-fact
for the Monesets in mortgaging the property to respondent Bank.
The trial court and the CA erred in giving petitioner the preferential
right to redeem the property as such would prejudice the rights of
the subsequent buyers who were not parties in the proceedings
below. While the matter of giving petitioner preferential right to
redeem the property was not put in issue before us, in the exercise
of our discretionary power to correct manifest and palpable error,
we deem it proper to delete said portion of the decision for being
erroneous.[54]
Petitioners rights were limited to asking for specific performance
and damages from the Monesets. Specific performance, however, is
no longer feasible at this point as explained above. This being the
case, it follows that petitioner never had any cause of action against
respondent Bank. Having no cause of action against the bank and
not being an owner of the subject property, petitioner is not
entitled to redeem the subject property.
Petitioner had lost her right to demand specific performance when
the Monesets executed a Deed of Absolute Sale in favor of Dr.
Canora. Contrary to what she claims, petitioner had no vested right
over the property.
Indeed, it is the Monesets who first breached their obligation
towards petitioner and are guilty of fraud against her. It cannot be
denied however that petitioner is also not without fault. She sat on
her rights and never consigned the full amount of the property. She
therefore cannot ask to be declared the owner of the property, this
late, especially since the same has already passed hands several
times, neither can she question the mortgage constituted on the
property years after title has already passed to another person by
virtue of a deed of absolute sale.
At this point, let it be stated that the courts below and even this
Court have no jurisdiction to resolve the issue whether there was
bad faith among the Monesets, Canora and Bundalo. Canora was
never impleaded. Bundalo has not been served with summons.
WHEREFORE, the petition is DENIED. The decision of the Regional
Trial Court of Cebu City, Branch 24, promulgated on February 5,
1993 and the decision of the Court of Appeals dated June 28, 1999
are hereby AFFIRMED. However, in the higher interest of substantial
justice, the Court MODIFIES the same to the effect that the portion
ordering the Rural Bank of Larena (Siquijor), Inc. to give petitioner
the preferential right to redeem the house and lot covered by
Transfer Certificate of Title No. 78374 is DELETED for lack of legal
basis.
No costs.
SO ORDERED.
Winifreda Ursal vs Court of Appeals, et al (Case Digest)
Facts: In January 1985, Winifreda Ursal and spouses Jesus and
Cristita Moneset entered into a “Contract to Sell Lot & House”. The
amount agreed upon was P130,000.00. Ursal is to pay P50k as down
payment and will continue to pay P3k monthly starting the next
month until the balance is paid off. After 6 months, Ursal stopped
paying the Monesets for the latter failed to give her the transfer of
certificate title. In November 1985, the Monesets executed an
absolute deed of sale with one Dr. Canora. In September 1986, the
Monesets mortgaged the same property to the Rural Bank of Larena
for P100k. The Monesets failed to pay the P100k hence the bank
filed for foreclosure.
Trial ensued and the RTC ruled in favor of Ursal. The trial court ruled
that there was fraud on the part of the Monesets for executing
multiple sales contracts. That the bank is not liable for fraud but
preference to redeem should be given to Ursal. The Monesets are
ordered to reimburse Ursal plus to pay damages and fees. Ursal was
not satisfied as she believed that the bank was also at fault.
ISSUE: Whether or not the Contract to Sell vested ownership in
Ursal.
HELD: No. There should be no special preference granted to Ursal in
redeeming the property. What she had with the Monesets was
contract to sell in which case ownership was not transferred to her
due the suspensive condition of full payment. Further, the property
was sold to other properties already.
A contract to sell is a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the subject
property despite delivery thereof to the prospective buyer, binds
himself to sell the said property exclusively to the prospective buyer
upon fulfillment of the condition agreed upon, that is, full payment
of the purchase price.
In such contract, the prospective seller expressly reserves the
transfer of title to the prospective buyer, until the happening of an
event, which in this case is the full payment of the purchase price.
What the seller agrees or obligates himself to do is to fulfill his
promise to sell the subject property when the entire amount of the
purchase price is delivered to him. Stated differently, the full
payment of the purchase price partakes of a suspensive condition,
the non-fulfillment of which prevents the obligation to sell from
arising and thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer.
Since the contract in this case is a contract to sell, the ownership of
the property remained with the Monesets even after petitioner has
paid the down payment and took possession of the property.
FERNANDO CARRASCOSO, JR.,Petitioner, vs. THE HONORABLE
COURT OF APPEALS, LAURO LEVISTE, as Director and Minority
Stockholder and On Behalf of Other Stockholders of El Dorado
Plantation, Inc. and EL DORADO PLANTATION, INC., represented
by one of its minority stockholders, Lauro P. Leviste,Respondents.
DECISION
CARPIO MORALES, J.:
El Dorado Plantation, Inc. (El Dorado) was the registered owner of a
parcel of land (the property) with an area of approximately 1,825
hectares covered by Transfer Certificate of Title (TCT) No. T-93[1]
situated in Sablayan, Occidental Mindoro.
On February 15, 1972, at a special meeting of El Dorados Board of
Directors, a Resolution[2] was passed authorizing Feliciano Leviste,
then President of El Dorado, to negotiate the sale of the property
and sign all documents and contracts bearing thereon.
On March 23, 1972, by a Deed of Sale of Real Property,[3] El
Dorado, through Feliciano Leviste, sold the property to Fernando O.
Carrascoso, Jr. (Carrascoso).
The pertinent provisions of the Deed of Sale read:
NOW, THEREFORE, for and in consideration of the sum of ONE
MILLION EIGHT HUNDRED THOUSAND (1,800,000.00) PESOS,
Philippine Currency, the Vendor hereby sells, cedes, and transfer
(sic) unto the herein VENDEE, his heirs, successors and assigns, the
above-described property subject to the following terms and
consitions (sic):
1. Of the said sum of P1,800,000.00 which constitutes the full
consideration of this sale, P290,000.00 shall be paid, as it is hereby
paid, to the Philippines (sic) National Bank, thereby effecting the
release and cancellation fo (sic) the present mortgage over the
above-described property.
2. That the sum of P210,000.00 shall be paid, as it is hereby paid by
the VENDEE to the VENDOR, receipt of which amount is hereby
acknowledged by the VENDOR.
3. The remaining balance of P1,300,000.00 plus interest thereon at
the rate of 10% per annum shall be paid by the VENDEE to the
VENDOR within a period of three (3) years, as follows:
(a) One (1) year from the date of the signing of this agreement, the
VENDEE shall pay to the VENDOR the sum of FIVE HUNDRED
NINETEEN THOUSAND EIGHT HUNDRED THIRTY THREE & 33/100
(P519,833.33) PESOS.
(b) Two (2) years from the date of signing of this agreement, the
VENDEE shall pay to the VENDOR the sum of FIVE HUNDRED
NINETTEN (sic) THOUSAND EIGHT HUNDRED AND THIRTY-THREE &
33/100 (P519,833.33) PESOS.
(c) Three (3) years from the date of signing of this agreement, the
VENDEE shall pay to the VENDOR the sum of FIVE Hundred
NINETEEN THOUSAND EIGHT HUNDRED AND THIRTY-THREE &
33/100 (P519,833.33) PESOS.
4. The title of the property, subject of this agreement, shall pass and
be transferred to the VENDEE who shall have full authority to
register the same and obtain the corresponding transfer certificate
of title in his name.
6. THE VENDOR certifies and warrants that the property above-
described is not being cultivated by any tenant and is therefore not
covered by the provisions of the Land Reform Code. If, therefore,
the VENDEE becomes liable under the said law, the VENDOR shall
reimburse the VENDEE for all expenses and damages he may incur
thereon.[4] (Underscoring supplied)
From the above-quoted provisions of the Deed of Sale, Carrascoso
was to pay the full amount of the purchase price on March 23,
1975.
On even date, the Board of Directors of El Dorado passed a
Resolution reading:
RESOLVED that by reason of the sale of that parcel of land covered
by TCT No. T-93 to Dr. FERNANDO O. CARRASCOSO, JR., the
corporation interposes no objection to the property being mortgage
(sic) by Dr. FERNANDO O. CARRASCOSO, JR. to any bank of his
choice as long as the balance on the Deed of Sale shall be
recognized by Dr. FERNANDO O. CARRASCOSO, JR.;
RESOLVED, FURTHER, that the corporation authorizes the prefered
(sic) claim on the property to be subordinated to any mortgage that
may be constituted by Dr. FERNANDO O. CARRASCOSO, JR.;
RESOLVED, FINALLY, that in case of any mortgage on the property,
the corporation waives the preference of any vendors lien on the
property.[5] (Emphasis and underscoring supplied)
Feliciano Leviste also executed the following affidavit on the same
day:
1. That by reason of the sale of that parcel of land covered by
Transfer Certificate of Title T-93 as evidenced by the Deed of Sale
attached hereto as Annex A and made an integral part hereof, the El
Dorado Plantation, Inc. has no objection to the aforementioned
property being mortgaged by Dr. Fernando O. Carrascoso, Jr. to any
bank of his choice, as long as the payment of the balance due the El
Dorado Plantation, Inc. under the Deed of Sale, Annex A hereof,
shall be recognized by the vendee therein, Dr. Fernando O.
Carrascoso, Jr. though subordinated to the preferred claim of the
mortgagee bank.
2. That in case of any mortgage on the property, the vendor hereby
waives the preference of any vendors lien on the property, subject
matter of the deed of sale.
3. That this affidavit is being executed to avoid any question on the
authority of Dr. Fernando O. Carrascoso, Jr. to mortgage the
property subject of the Deed of Sale, Annex A hereof, where the
purchase price provided therein has not been fully paid.
4. That this affidavit has been executed pursuant to a board
resolution of El Dorado Plantation, Inc.[6] (Emphasis and
underscoring supplied)On the following day, March 24, 1972,
Carrascoso and his wife Marlene executed a Real Estate
Mortgage[7] over the property in favor of Home Savings Bank (HSB)
to secure a loan in the amount of P1,000,000.00. Of this amount,
P290,000.00 was paid to Philippine National Bank to release the
mortgage priorly constituted on the property and P210,000.00 was
paid to El Dorado pursuant to above-quoted paragraph Nos. 1 and 2
of the terms and conditions of the Deed of Sale.[8]
The March 23, 1972 Deed of Sale of Real Property was registered
and annotated on El Dorados TCT No. T-93 as Entry No. 15240[9] on
April 5, 1972. On even date, TCT No. T-93 covering the property was
cancelled and TCT No. T-6055[10] was in its stead issued by the
Registry of Deeds of Occidental Mindoro in the name of Carrascoso
on which the real estate mortgage in favor of HSB was annotated as
Entry No. 15242.[11]
On May 18, 1972, the real estate mortgage in favor of HSB was
amended to include an additional three year loan of P70,000.00 as
requested by the spouses Carrascoso.[12] The Amendment of Real
Estate Mortgage was also annotated on TCT No. T-6055 as Entry No.
15486 on May 24, 1972.[13]
The 3-year period for Carrascoso to fully pay for the property on
March 23, 1975 passed without him having complied therewith.
In the meantime, on July 11, 1975, Carrascoso and the Philippine
Long Distance Telephone Company (PLDT), through its President
Ramon Cojuangco, executed an Agreement to Buy and Sell[14]
whereby the former agreed to sell 1,000 hectares of the property to
the latter at a consideration of P3,000.00 per hectare or a total of
P3,000,000.00.
The July 11, 1975 Agreement to Buy and Sell was not registered and
annotated on Carrascosos TCT No. T-6055.
Lauro Leviste (Lauro), a stockholder and member of the Board of
Directors of El Dorado, through his counsel, Atty. Benjamin Aquino,
by letter[15] dated December 27, 1976, called the attention of the
Board to Carrascosos failure to pay the balance of the purchase
price of the property amounting to P1,300,000.00. And Lauros
lawyer manifested that:
Because of the default for a long time of Mr. Carrascoso to pay the
balance of the consideration of the sale, Don Lauro Leviste, in his
behalf and in behalf of the other shareholders similarly situated like
him, want a rescission of the sale made by the El Dorado Plantation,
Inc. to Mr. Carrascoso. He desires that the Board of Directors take
the corresponding action for rescission.[16]
Lauros desire to rescind the sale was reiterated in two other
letters[17] addressed to the Board dated January 20, 1977 and
March 3, 1977.
Jose P. Leviste, as President of El Dorado, later sent a letter of
February 21, 1977[18] to Carrascoso informing him that in view of
his failure to pay the balance of the purchase price of the property,
El Dorado was seeking the rescission of the March 23, 1972 Deed of
Sale of Real Property.
The pertinent portions of the letter read:
I regret to inform you that the balance of P1,300,000.00 and the
interest thereon have long been due and payable, although you
have mortgaged said property with the Home Savings Bank for
P1,000,000.00 on March 24, 1972, which was subsequently
increased to P1,070,000.00 on May 18, 1972.
You very well know that the El Dorado Plantation, Inc., is a close
family corporation, owned exclusively by the members of the
Leviste family and I am one of the co-owners of the land. As nothing
appears to have been done on your part after our numerous
requests for payment of the said amount of P1,300,000.00 and the
interest of 10% per annum due thereon, please be advised that we
would like to rescind the contract of sale of the land.[19]
(Underscoring supplied)
Jose Leviste, by letter[20] dated March 10, 1977, informed Lauros
counsel Atty. Aquino of his (Joses) February 21, 1977 letter to
Carrascoso, he lamenting that Carrascoso has not deemed it fit to
give [his] letter the courtesy of a reply and advis[ing] that some of
the Directors of [El Dorado] could not see their way clear in
complying with the demands of your client [Lauro] and have failed
to reach a consensus to bring the corresponding action for
rescission of the contract against . . . Carrascoso.[21]
Lauro and El Dorado finally filed on March 15, 1977 a complaint[22]
for rescission of the March 23, 1972 Deed of Sale of Real Property
between El Dorado and Carrascoso with damages before the Court
of First Instance (CFI) of Occidental Mindoro, docketed as Civil Case
No. R-226.
Lauro and El Dorado also sought the cancellation of TCT No. T-6055
in the name of Carrascoso and the revival of TCT No. T-93 in the
name of El Dorado, free from any liens and encumbrances.
Furthermore, the two prayed for the issuance of an order for
Carrascoso to: (1) reconvey the property to El Dorado upon return
to him of P500,000.00, (2) secure a discharge of the real estate
mortgage constituted on the property from HSB, (3) submit an
accounting of the fruits of the property from March 23, 1972 up to
the return of possession of the land to El Dorado, (4) turn over said
fruits or the equivalent value thereof to El Dorado and (5) pay the
amount of P100,000.00 for attorneys fees and other damages.[23]
Also on March 15, 1977, Lauro and El Dorado caused to be
annotated on TCT No. T-6055 a Notice of Lis Pendens, inscribed as
Entry No. 39737.[24]
In the meantime, Carrascoso, as vendor and PLDT, as vendee forged
on April 6, 1977 a Deed of Absolute Sale[25] over the 1,000 hectare
portion of the property subject of their July 11, 1975 Agreement to
Buy and Sell. The pertinent portions of the Deed are as follows:
WHEREAS, the VENDOR and the VENDEE entered into an agreement
To Buy and Sell on July 11, 1975, which is made a part hereof by
reference;
WHEREAS, the VENDOR and the VENDEE are now decided to
execute the Deed of Absolute Sale referred to in the
aforementioned agreement to Buy and Sell;
WHEREFORE, for and in consideration of the foregoing premises and
the terms hereunder stated, the VENDOR and the VENDEE have
agreed as follows:
1. For and in consideration of the sum of THREE MILLION PESOS
(P3,000,000.00), Philippine currency, of which ONE HUNDRED
TWENTY THOUSAND PESOS P120,000.00 have (sic) already been
received by the VENDOR, the VENDOR hereby sells, transfers and
conveys unto the VENDEE one thousand hectares (1,000 has.) of his
parcel of land covered by T.C.T. No. T-6055 of the Registry of Deeds
of Mindoro, delineated as Lot No. 3-B-1 in the subdivision survey
plan
2. The VENDEE shall pay to the VENDOR upon the signing of this
agreement, the sum of TWO MILLION FIVE HUNDRED THOUSAND
PESOS (P2,500,000.00) in the following manner:
a) The sum of TWO MILLION THREE HUNDRED THOUSAND PESOS
(P2,300,000.00) to Home Savings Bank in full payment of the
VENDORs mortgaged obligation therewith;
b) The sum of TWO HUNDRED THOUSAND PESOS (P200,000.00) to
VENDOR;
The remaining balance of the purchase price in the sum of THREE
HUNDRED EIGHTY THOUSAND PESOS (P380,000.00), less such
expenses which may be advanced by the VENDEE but which are for
the account of the VENDOR under Paragraph 6 of the Agreement to
Buy and Sell, shall be paid by the VENDEE to the VENDOR upon
issuance of title to the VENDEE.[26] (Underscoring supplied)
In turn, PLDT, by Deed of Absolute Sale[27] dated May 30, 1977,
conveyed the aforesaid 1,000 hectare portion of the property to its
subsidiary, PLDT Agricultural Corporation (PLDTAC), for a
consideration of P3,000,000.00, the amount of P2,620,000.00 of
which was payable to PLDT upon signing of said Deed, and
P380,000.00 to Carrascoso upon issuance of title to PLDTAC.
In the meantime, on October 19, 1977, the El Dorado Board of
Directors, by a special meeting,[28] adopted and approved a
Resolution ratifying and conferring the prosecution of Civil Case No.
R-226 of the Court of First Instance of Occidental Mindoro, entitled
Lauro P. Leviste vs. Fernando Carascoso (sic), etc. initiated by
stockholder Mr. Lauro P. Leviste.[29]
In his Answer with Compulsory Counterclaim,[30] Carrascoso
alleged that: (1) he had not paid his remaining P1,300,000.00
obligation under the March 23, 1972 Deed of Sale of Real Property
in view of the extensions of time to comply therewith granted him
by El Dorado; (2) the complaint suffered from fatal defects, there
being no showing of compliance with the condition precedent of
exhaustion of intra-corporate remedies and the requirement that a
derivative suit instituted by a complaining stockholder be verified
under oath; (3) El Dorado committed a gross misrepresentation
when it warranted that the property was not being cultivated by
any tenant to take it out of the coverage of the Land Reform Code;
and (4) he suffered damages due to the premature filing of the
complaint for which Lauro and El Dorado must be held liable.
On February 21, 1978, the April 6, 1977 and May 30, 1977 Deeds of
Absolute Sale and the respective Articles of Incorporation of PLDT
and PLDTAC were annotated on TCT No. T-6055 as Entry Nos.
24770,[31] 42774,[32] 42769[33] and 24772,[34] respectively. On
even date, Carrascosos TCT No. T-6055 was cancelled and TCT No. T-
12480[35] covering the 1,000 hectare portion of the property was
issued in the name of PLDTAC. The March 15, 1977 Notice of Lis
Pendens was carried over to TCT No. T-12480.
On July 31, 1978, PLDT and PLDTAC filed an Urgent Motion for
Intervention[36] which was granted by the trial court by Order[37]
of September 7, 1978.
PLDT and PLDTAC thereupon filed their Answer In Intervention with
Compulsory Counterclaim and Crossclaim[38] against Carrascoso on
November 13, 1978, alleging that: (1) when Carrascoso executed
the April 6, 1977 Deed of Absolute Sale in favor of PLDT, PLDT was
not aware of any litigation involving the 1,000 hectare portion of
the property or of any flaw in his title, (2) PLDT is a purchaser in
good faith and for value; (3) when PLDT executed the May 30, 1977
Deed of Absolute Sale in favor of PLDTAC, they had no knowledge of
any pending litigation over the property and neither were they
aware that a notice of lis pendens had been annotated on
Carrascosos title; and (4) Lauro and El Dorado knew of the sale by
Carrascoso to PLDT and PLDTs actual possession of the 1,000
hectare portion of the property since June 30, 1975 and of its
exercise of exclusive rights of ownership thereon through
agricultural development.[39]
By Decision[40] of January 28, 1991, Branch 45 of the San Jose
Occidental Mindoro Regional Trial Court to which the CFI has been
renamed, dismissed the complaint on the ground of prematurity,
disposing as follows, quoted verbatim:
WHEREFORE, in view of all the foregoing considerations, judgment
is hereby rendered:
1. Dismissing the plaintiffs complaint against the defendant on the
ground of prematurity;
2. Ordering the plaintiffs to pay to the defendant the sum of
P2,980,000.00 as actual and compensatory damages, as well as the
sum of P100,000.00 as and for attorneys fees; provided, however,
that the aforesaid amounts must first be set off from the latters
unpaid balance to the former;
3. Dismissing the defendants-intervenors counterclaim and cross-
claim; and
4. Ordering the plaintiffs to pay to (sic) the costs of suit.
SO ORDERED.[41] (Underscoring supplied)
Carrascoso, PLDT and PLDTAC filed their respective appeals to the
Court of Appeals.
By Decision[42] of January 31, 1996, the appellate court reversed
the decision of the trial court, disposing as follows, quoted
verbatim:
WHEREFORE, not being meritorious, PLDTs/PLDTACs appeal is
hereby DISMISSED and finding El Dorados appeal to be impressed
with merit, We REVERSE the appealed Decision and render the
following judgment:
1. The Deed of Sale of Real Property (Exhibit C) is hereby rescinded
and TCT No. T-12480 (Exhibit Q) is cancelled while TCT No. T-93
(Exhibit A), is reactivated.
2. Fernando Carrascoso, Jr. is commanded to:
2.1. return the possession of the 825 [hectare-] remaining portion of
the land to El Dorado Plantation, Inc. without prejudice to the
landholdings of legitimate tenants thereon;
2.2. return the net fruits of the land to El Dorado Plantation, Inc.
from March 23, 1972 to July 11, 1975, and of the 825-hectare-
remaining portion minus the tenants landholdings, from July 11,
1975 up to its delivery to El Dorado Plantation, Inc. including
whatever he may have received from the tenants if any by way of
compensation under the Operation Land Transfer or under any
other pertinent agrarian law;
2.3 Pay El Dorado Plantation, Inc. an attorneys fee of P20,000.00
and litigation expenses of P30,000.00;
2.4 Return to Philippine Long Distance Telephone Company/PLDT
Agricultural Corporation P3,000,000.00 plus legal interest from April
6, 1977 until fully paid;
3. PLDT Agricultural Corporation is ordered to surrender the
possession of the 1000-hectare Farm to El Dorado Plantation, Inc.;
4. El Dorado Plantation, Inc. is directed to return the P500,000.00 to
Fernando Carrascoso, Jr. plus legal interest from March 23, 1972
until fully paid. The performance of this obligation will however
await the full compliance by Fernando Carrascoso, Jr. of his
obligation to account for and deliver the net fruits of the land
mentioned above to El Dorado Plantation, Inc.
5. To comply with paragraph 2.2 herein, Carrascoso is directed to
submit in (sic) the court a quo a full accounting of the fruits of the
land during the period mentioned above for the latters approval,
after which the net fruits shall be delivered to El Dorado, Plantation,
Inc.
6. El Dorado Plantation, Inc. should inform Philippine Long Distance
Telephone Co. and PLDT Agricultural Corporation in writing within
ten (10) days after finality of this decision regarding the exercise of
its option under Art. 448 of the Civil Code.
SO ORDERED.[43] (Underscoring supplied)
PLDT and PLDTAC filed on February 22, 1996, a Motion for
Reconsideration[44] of the January 31, 1996 CA Decision, while
Carrascoso went up this Court by filing on March 25, 1996 a petition
for review,[45] docketed as G.R. No. 123672, assailing the January
31, 1996 CA Decision and seeking the reinstatement of the January
28, 1991 Decision of the trial court except with respect to its finding
that the acquisition of PLDT and PLDTAC of the 1,000 hectare
portion of the property was subject to the notice of lis pendens.
Lauro, in the meantime, died, hence, on April 16, 1996, a Motion for
Substitution of Party[46] was filed praying that his heirs,
represented by Conrad C. Leviste, be substituted as respondents.
The Motion was granted by Resolution[47] of July 10, 1996.
PLDT and PLDTAC filed their Comment[48] to Carrascosos petition
and prayed that judgment be rendered finding them to be
purchasers in good faith to thus entitle them to possession and
ownership of the 1,000 hectare portion of the property, together
with all the improvements they built thereon. Reiterating that they
were not purchasers pendente lite, they averred that El Dorado and
Lauro had actual knowledge of their interests in the said portion of
the property prior to the annotation of the notice of lis pendens to
thereby render said notice ineffective.
El Dorado and the heirs of Lauro, both represented by Conrad C.
Leviste, also filed their Comment[49] to Carrascosos petition,
praying that it be dismissed for lack of merit and that paragraph 6 of
the dispositive portion of the January 31, 1996 CA Decision be
modified to read as follows:
6. El Dorado Plantation, Inc. should inform Philippine Long Distance
Telephone Co. and PLDT Agricultural Corporation in writing within
ten (10) days after finality of this decision regarding the exercise of
its option under Arts. 449 and 450 of the Civil Code, without right to
indemnity on the part of the latter should the former decide to keep
the improvements under Article 449.[50] (Underscoring supplied)
Carrascoso filed on November 13, 1996 his Reply[51] to the
Comment of El Dorado and the heirs of Lauro.
In the meantime, as the February 22, 1996 Motion for
Reconsideration filed by PLDT and PLDTAC of the CA decision had
remained unresolved, this Court, by Resolution[52] of June 30,
2003, directed the appellate court to resolve the same.
By Resolution[53] of July 8, 2004, the CA denied PLDT and PLDTACs
Motion for Reconsideration for lack of merit.
PLDT[54] thereupon filed on September 2, 2004 a petition for
review[55] before this Court, docketed as G.R. No. 164489, seeking
to reverse and set aside the January 31, 1996 Decision and the July
8, 2004 Resolution of the appellate court. It prayed that judgment
be rendered upholding its right, interest and title to the 1,000
hectare portion of the property and that it and its successors-in-
interest be declared owners and legal possessors thereof, together
with all improvements built, sown and planted thereon.
By Resolution[56] of August 25, 2004, G.R. No. 164489 was
consolidated with G.R. No. 123672.
In his petition, Carrascoso faults the CA as follows:
I PENDENS.[58] (Underscoring supplied)
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION
AND COMMITTED A MISTAKE OF LAW IN NOT DECLARING THAT THE
ACTION FOR RESCISSION WAS PREMATURELY FILED.
II
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION
AND COMMITTED A MISTAKE OF LAW IN DISREGARDING THE
CRUCIAL SIGNIFICANCE OF THE WARRANTY OF NON-TENANCY
EXPRESSLY STIPULATED IN THE CONTRACT OF SALE.
III
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION
IN REVERSING THE DECISION OF THE TRIAL COURT.[57]
(Underscoring supplied)
PLDT, on the other hand, faults the CA as follows:
I
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
HOLDING THAT PETITIONER AND PLTAC (sic) TOOK THEIR RIGHT,
INTEREST AND TITLE TO THE FARM SUBJECT TO THE NOTICE OF LIS
PENDENS, THE SAME IN DISREGARD OF THE PROTECTION
ACCORDED THEM UNDER ARTICLES 1181 AND 1187 OF THE NEW
CIVIL CODE.
II
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
HOLDING THAT PETITIONER AND PLDTAC TOOK THEIR RIGHT,
INTEREST AND TITLE TO THE FARM SUBJECT TO THE NOTICE OF LIS
PENDENS, THE SAME IN DISREGARD OF THE LEGAL PRINCIPLE THAT
RESPONDENTS EL DORADO ET AL.s PRIOR, ACTUAL KNOWLEDGE OF
PETITIONER PLDTS AGREEMENT TO BUY AND SELL WITH
RESPONDENT CARRASCOSO RESULTING IN THE DELIVERY TO, AND
POSSESSION, OCCUPATION AND DEVELOPMENT BY, SAID
PETITIONER OF THE FARM, IS EQUIVALENT TO REGISTRATION OF
SUCH RIGHT, INTEREST AND TITLE AND, THEREFORE, A PRIOR
REGISTRATION NOT AFFECTED BY THE LATER NOTICE OF LIS
Carrascoso posits that in the El Dorado Board Resolution and the
Affidavit of Feliciano Leviste, both dated March 23, 1972, no
objection was interposed to his mortgaging of the property to any
bank provided that the balance of the purchase price of the
property under the March 23, 1972 Deed of Sale of Real Property is
recognized, hence, El Dorado could collect the unpaid balance of
P1,300,000.00 only after the mortgage in favor of HSB is paid in full;
and the filing of the complaint for rescission with damages on
March 15, 1977 was premature as he fully paid his obligation to HSB
only on April 5, 1977 as evidenced by the Cancellation of
Mortgage[59] signed by HSB President Gregorio B. Licaros.
Carrascoso further posits that extensions of the period to pay El
Dorado were verbally accorded him by El Dorados directors and
officers, particularly Jose and Angel Leviste.
Article 1191 of the Civil Code provides:
Art. 1191. The power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is
incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with Articles
1385 and 1388 and the Mortgage Law.
Reciprocal obligations are those which arise from the same cause,
and in which each party is a debtor and a creditor of the other, such
that the obligation of one is dependent upon the obligation of the
other.[60] They are to be performed simultaneously such that the
performance of one is conditioned upon the simultaneous
fulfillment of the other.[61]
The right of rescission of a party to an obligation under Article 1191
is predicated on a breach of faith by the other party who violates
the reciprocity between them.[62]
A contract of sale is a reciprocal obligation. The seller obligates itself
to transfer the ownership of and deliver a determinate thing, and
the buyer obligates itself to pay therefor a price certain in money or
its equivalent.[63] The non-payment of the price by the buyer is a
resolutory condition which extinguishes the transaction that for a
time existed, and discharges the obligations created
thereunder.[64] Such failure to pay the price in the manner
prescribed by the contract of sale entitles the unpaid seller to sue
for collection or to rescind the contract.[65]
In the case at bar, El Dorado already performed its obligation
through the execution of the March 23, 1972 Deed of Sale of Real
Property which effectively transferred ownership of the property to
Carrascoso. The latter, on the other hand, failed to perform his
correlative obligation of paying in full the contract price in the
manner and within the period agreed upon.
The terms of the Deed are clear and unequivocal: Carrascoso was to
pay the balance of the purchase price of the property amounting to
P1,300,000.00 plus interest thereon at the rate of 10% per annum
within a period of three (3) years from the signing of the contract on
March 23, 1972. When Jose Leviste informed him that El Dorado
was seeking rescission of the contract by letter of February 21,
1977, the period given to him within which to fully satisfy his
obligation had long lapsed.
The El Dorado Board Resolution and the Affidavit of Jose Leviste
interposing no objection to Carrascosos mortgaging of the property
to any bank did not have the effect of suspending the period to fully
pay the purchase price, as expressly stipulated in the Deed, pending
full payment of any mortgage obligation of Carrascoso.
As the CA correctly found:
The adverted resolution (Exhibit 2) does not say that the obligation
of Carrascoso to pay the balance was extended. Neither can We see
in it anything that can logically infer said accommodation.
A partially unpaid seller can agree to the buyers mortgaging the
subject of the sale without changing the time fixed for the payment
of the balance of the price. The two agreements are not
incompatible with each other such that when one is to be
implemented, the other has to be suspended. In the case at bench,
there was no impediment for Carrascoso to pay the balance of the
price after mortgaging the land.
Also, El Dorados subordinating its preferred claim or waiving its
superior vendors lien over the land in favor of the mortgagee of said
property only means that in a situation where the unpaid price of
the Land and loan secured by the mortgage over the Land both
become due and demandable, the mortgagee shall have
precedence in going after the Land for the satisfaction of the loan.
Such accommodations do not necessarily imply the modification of
the period fixed in the contract of sale for the payment by
Carrascoso of the balance.
The palpable purpose of El Dorado in not raising any objection to
Carrascosos mortgaging the land was to eliminate any legal
impediment to such a contract. That was so succinctly expressed in
the Affidavit (Exhibit 2-A) of President Feleciano (sic) Leviste. El
Dorados yielding its superior lien over the land in favor of the
mortgagee was plainly intended to overcome the natural reluctance
of lending institutions to accept a land whose price has not yet been
fully paid as collateral of a loan.[66] (Underscoring supplied)
Respecting Carrascosos insistence that he was granted verbal
extensions within which to pay the balance of the purchase price of
the property by El Dorados directors and officers Jose and Angel
Leviste, this Court finds the same unsubstantiated by the evidence
on record.
It bears recalling that Jose Leviste wrote Carrascoso, by letter of
February 21, 1977, calling his attention to his failure to comply,
despite numerous requests, with his obligation to pay the amount
of P1,300,000.00 and 10% annual interest thereon, and advising him
that we would like to rescind the contract of sale. This letter
reiterated the term of payment agreed upon in the March 23, 1972
Deed of Sale of Real Property and Carrascososs non-compliance
therewith.
Carrascoso, harping on Jose Levistes March 10, 1977 letter to Lauros
counsel wherein he (Jose Leviste) stated that some of the Directors
of the corporation could not see their way clear in complying with
the demands of [Lauro] and have failed to reach a consensus to
bring the corresponding action for rescission of the contract against
Dr. Fernando Carrascoso, argues that the extensions priorly given to
him no doubt lead to the logical conclusion on some of the directors
inability to file suit against him.[67]
The argument is specious. As the CA found, even if some officers of
El Dorado were initially reluctant to file suit against him, the same
should not be interpreted to mean that this was brought about by a
prior extension of the period to pay the balance of the purchase
price of the property as such reluctance could have been due to a
myriad of reasons totally unrelated to the period of payment of the
balance.
The bottomline however is, if El Dorado really intended to extend
the period of payment of the balance there was absolutely no
reason why it did not do it in writing in clear and unmistakable
terms. That there is no such writing negates all the speculations of
the court a quo and pretensions of Carrascoso.
The unalterable fact here remains that on March 23, 1973, with or
without demand, the obligation of Carrascoso to pay P519,933.33
became due. The same was true on March 23, 1974 and on March
23, 1975 for equal amounts. Since he did not perform his obligation
under the contract of sale, he, therefore, breached it. Having
breached the contract, El Dorados cause of action for rescission of
that contract arose.[68] (Underscoring supplied)
Carrascoso goes on to argue that the appellate court erred in
ignoring the import of the warranty of non-tenancy expressly
stipulated in the March 23, 1972 Deed of Sale of Real Property. He
alleges that on March 8, 1972 or two weeks prior to the execution
of the Deed of Sale, he discovered, while inspecting the property on
board a helicopter, that there were people and cattle in the area;
when he confronted El Dorado about it, he was told that the
occupants were caretakers of cattle who would soon leave;[69] four
months after the execution of the Deed of Sale, upon inquiry with
the Bureau of Lands and the Bureau of Soils, he was informed that
there were people claiming to be tenants in certain portions of the
property;[70] and he thus brought the matter again to El Dorado
which informed him that the occupants were not tenants but
squatters.[71]
Carrascoso now alleges that as a result of what he concludes to be a
breach of the warranty of non-tenancy committed by El Dorado, he
incurred expenses in the amount of P2,890,000.00 for which he
should be reimbursed, his unpaid obligation to El Dorado amounting
to P1,300,000.00 to be deducted therefrom.[72]
The breach of an express warranty makes the seller liable for
damages.[73] The following requisites must be established in order
that there be an express warranty in a contract of sale: (1) the
express warranty must be an affirmation of fact or any promise by
the seller relating to the subject matter of the sale; (2) the natural
tendency of such affirmation or promise is to induce the buyer to
purchase the thing; and (3) the buyer purchases the thing relying on
such affirmation or promise thereon.[74]
Under the March 23, 1972 Deed of Sale of Real Property, El Dorado
warranted that the property was not being cultivated by any tenant
and was, and therefore, not covered by the provisions of the Land
Reform Code. If Carrascoso would become liable under the said law,
he would be reimbursed for all expenses and damages incurred
thereon.
Carrascoso claims to have incurred expenses in relocating persons
found on the property four months after the execution of the Deed
of Sale. Apart from such bare claim, the records are bereft of any
proof that those persons were indeed tenants.[75] The fact of
tenancy[76] not having been priorly established,[77] El Dorado may
not be held liable for actual damages.
Carrascoso further argues that both the trial and appellate courts
erred in holding that the sale of the 1,000 hectare portion of the
property to PLDT, as well as its subsequent sale to PLDTAC, is
subject to the March 15, 1977 Notice of Lis Pendens.
PLDT additionally argues that the CA incorrectly ignored the
Agreement to Buy and Sell which it entered into with Carrascoso on
July 11, 1975, positing that the efficacy of its purchase from
Carrascoso, upon his fulfillment of the condition it imposed
resulting in its decision to formalize their transaction and execute
the April 6, 1977 Deed of Sale, retroacted to July 11, 1975 or before
the annotation of the Notice of Lis Pendens.[78]
The pertinent portions of the July 11, 1975 Agreement to Buy and
Sell between PLDT and Carrascoso read:
2. That the VENDOR hereby agrees to sell to the VENDEE and the
latter hereby agrees to purchase from the former, 1,000 hectares of
the above-described parcel of land as shown in the map hereto
attached as Annex A and made an integral part hereof and as
hereafter to be more particularly determined by the survey to be
conducted by Certeza & Co., at the purchase price of P3,000.00 per
hectare or for a total consideration of Three Million Pesos
(P3,000,000.00) payable in cash.
3. That this contract shall be considered rescinded and cancelled
and of no further force and effect, upon failure of the VENDOR to
clear the aforementioned 1,000 hectares of land of all the
occupants therein located, within a period of one (1) year from the
date of execution of this Agreement. However, the VENDEE shall
have the option to extend the life of this Agreement by another six
months, during which period the VENDEE shall definitely inform the
VENDOR of its decision on whether or not to finalize the deed of
absolute sale for the aforementioned 1,000 hectares of land.
The VENDOR agrees that the amount of P500.00 per family within
the aforementioned 1,000 hectares of land shall be spent by him for
relocation purposes, which amount however shall be advanced by
the VENDEE and which shall not exceed the total amount of
P120,000.00, the same to be thereafter deducted by the VENDEE
from the aforementioned purchase price of P3,000,000.00
The aforementioned advance of P120,000.00 shall be remitted by
the VENDEE to the VENDOR upon the signing of this Agreement.
It is likewise further agreed that the VENDEE shall have the right to
enter into any part of the aforementioned 1,000 hectares at any
time within the period of this Agreement for purposes of
commencing the development of the same.
5. Title to the aforementioned land shall also be cleared of all liens
or encumbrances and if there are any unpaid taxes, existing
mortgages, liens and encumbrances on the land, the payments to
be made by the VENDEE to the VENDOR of the purchase price shall
first be applied to liquidate said mortgages, liens and/or
encumbrances, such that said payments shall be made directly to
the corresponding creditors. Thus, the balance of the purchase price
will be paid to the VENDOR after the title to the land is cleared of all
such liens and encumbrances.
7. The VENDOR agrees that, during the existence of this Agreement
and without the previous written permission from the VENDEE, he
shall not sell, cede, assign and/or transfer the parcel of land subject
of this Agreement.[79]
A notice of lis pendens is an announcement to the whole world that
a particular real property is in litigation, and serves as a warning
that one who acquires an interest over said property does so at his
own risk, or that he gambles on the result of the litigation over said
property.[80]
Once a notice of lis pendens has been duly registered, any
cancellation or issuance of title over the land involved as well as any
subsequent transaction affecting the same would have to be subject
to the outcome of the suit. In other words, a purchaser who buys
registered land with full notice of the fact that it is in litigation
between the vendor and a third party stands in the shoes of his
vendor and his title is subject to the incidents and result of the
pending litigation.[81]
Notice of lis pendens has been conceived and, more often than not,
availed of, to protect the real rights of the registrant while the case
involving such rights is pending resolution or decision. With the
notice of lis pendens duly recorded, and while it remains
uncancelled, the registrant could rest secure that he would not lose
the property or any part of it during the litigation.
The filing of a notice of lis pendens in effect (1) keeps the subject
matter of litigation within the power of the court until the entry of
the final judgment so as to prevent the defeat of the latter by
successive alienations; and (2) binds a purchaser of the land subject
of the litigation to the judgment or decree that will be promulgated
thereon whether such a purchaser is a bona fide purchaser or not;
but (3) does not create a non-existent right or lien.
The doctrine of lis pendens is founded upon reason of public policy
and necessity, the purpose of which is to keep the subject matter of
the litigation within the power of the court until the judgment or
decree shall have been entered; otherwise by successive alienations
pending the litigation, its judgment or decree shall be rendered
abortive and impossible of execution. The doctrine of lis pendens is
based on considerations of public policy and convenience, which
forbid a litigant to give rights to others, pending the litigation, so as
to affect the proceedings of the court then progressing to enforce
those rights, the rule being necessary to the administration of
justice in order that decisions in pending suits may be binding and
may be given full effect, by keeping the subject matter in
controversy within the power of the court until final adjudication,
that there may be an end to litigation, and to preserve the property
that the purpose of the pending suit may not be defeated by
successive alienations and transfers of title.[82] (Italics in the
original)
In ruling against PLDT and PLDTAC, the appellate court held:
PLDT and PLDTAC argue that in reality the Farm was bought by the
former on July 11, 1975 when Carrascoso and it entered into the
Agreement to Buy and Sell (Exhibit 15). How can an agreement to
buy and sell which is a preparatory contract be the same as a
contract of sale which is a principal contract? If PLDTs contention is
correct that it bought the Farm on July 11, 1975, why did it buy the
same property again on April 6, 1977? There is simply no way PLDT
and PLDTAC can extricate themselves from the effects of said Notice
of Lis Pendens. It is admitted that PLDT took possession of the Farm
on July 11, 1975 after the execution of the Agreement to Buy and
Sell but it did so not as owner but as prospective buyer of the
property. As prospective buyer which had actual on (sic)
constructive notice of the lis pendens, why did it pursue and go
through with the sale if it had not been willing to gamble with the
result of this case?[83] (Underscoring supplied)
Further, in its July 8, 2004 Resolution, the CA held:
PLDT cannot shield itself from the notice of lis pendens because all
that it had at the time of its inscription was an Agreement to Buy
and Sell with CARRASCOSO, which in effect is a mere contract to sell
that did not pass to it the ownership of the property.
Ownership was retained by CARRASCOSO which EL DORADO may
very well recover through its action for rescission.
PLDTs possession at the time the notice of lis pendens was
registered not being a legal possession based on ownership but a
mere possession in fact and the Agreement to Buy and Sell under
which it supposedly took possession not being registered, it is not
protected from an adverse judgment that may be rendered in the
case subject of the notice of lis pendens.[84] (Underscoring
supplied)
In a contract of sale, the title passes to the vendee upon the
delivery of the thing sold; whereas in a contract to sell, ownership is
not transferred upon delivery of the property but upon full payment
of the purchase price.[85] In the former, the vendor has lost and
cannot recover ownership until and unless the contract is resolved
or rescinded; whereas in the latter, title is retained by the vendor
until the full payment of the price, such payment being a positive
suspensive condition and failure of which is not a breach but an
event that prevents the obligation of the vendor to convey title
from becoming effective.[86]
PLDT argues that the July 11, 1975 Agreement to Buy and Sell is a
conditional contract of sale, thus calling for the application of
Articles 1181[87] and 1187[88] of the Civil Code as held in Coronel
v. Court of Appeals.[89]
The Court is not persuaded.
For in a conditional contract of sale, if the suspensive condition is
fulfilled, the contract of sale is thereby perfected, such that if there
had already been previous delivery of the property subject of the
sale to the buyer, ownership thereto automatically transfers to the
buyer by operation of law without any further act having to be
performed by the seller.[90] Whereas in a contract to sell, upon
fulfillment of the suspensive condition, ownership will not
automatically transfer to the buyer although the property may have
been previously delivered to him. The prospective seller still has to
convey title to the prospective buyer by entering into a contract of
absolute sale.[91]
A perusal of the contract[92] adverted to in Coronel reveals marked
differences from the Agreement to Buy and Sell in the case at bar. In
the Coronel contract, there was a clear intent on the part of the
therein petitioners-sellers to transfer title to the therein
respondent-buyer. In the July 11, 1975 Agreement to Buy and Sell,
PLDT still had to definitely inform Carrascoso of its decision on
whether or not to finalize the deed of absolute sale for the 1,000
hectare portion of the property, such that in the April 6, 1977 Deed
of Absolute Sale subsequently executed, the parties declared that
they are now decided to execute such deed, indicating that the
Agreement to Buy and Sell was, as the appellate court held, merely
a preparatory contract in the nature of a contract to sell. In fact, the
parties even had to stipulate in the said Agreement to Buy and Sell
that Carrascoso, during the existence of the Agreement, shall not
sell, cede, assign and/or transfer the parcel of land, which provision
this Court has held to be a typical characteristic of a contract to
sell.[93]
Being a contract to sell, what was vested by the July 11, 1975
Agreement to Buy and Sell to PLDT was merely the beneficial title to
the 1,000 hectare portion of the property.
The right of Daniel Jovellanos to the property under the contract [to
sell] with Philamlife was merely an inchoate and expectant right
which would ripen into a vested right only upon his acquisition of
ownership which, as aforestated, was contingent upon his full
payment of the rentals and compliance with all his contractual
obligations thereunder. A vested right is an immediate fixed right of
present and future enjoyment. It is to be distinguished from a right
that is expectant or contingent. It is a right which is fixed,
unalterable, absolute, complete and unconditional to the exercise
of which no obstacle exists, and which is perfect in itself and not
dependent upon a contingency. Thus, for a property right to be
vested, there must be a transition from the potential or contingent
to the actual, and the proprietary interest must have attached to a
thing; it must have become fixed or established and is no longer
open to doubt or controversy.[94] (Underscoring supplied)
In the case at bar, the July 11, 1975 Agreement to Buy and Sell was
not registered, which act of registration is the operative act to
convey and affect the land.
An agreement to sell is a voluntary instrument as it is a willful act of
the registered owner. As such voluntary instrument, Section 50 of
Act No. 496 [now Section 51 of PD 1529] expressly provides that the
act of registration shall be the operative act to convey and affect
the land. And Section 55 of the same Act [now Section 53 of PD
1529] requires the presentation of the owners duplicate certificate
of title for the registration of any deed or voluntary instrument. As
the agreement to sell involves an interest less than an estate in fee
simple, the same should have been registered by filing it with the
Register of Deeds who, in turn, makes a brief memorandum thereof
upon the original and owners duplicate certificate of title. The
reason for requiring the production of the owners duplicate
certificate in the registration of a voluntary instrument is that, being
a willful act of the registered owner, it is to be presumed that he is
interested in registering the instrument and would willingly
surrender, present or produce his duplicate certificate of title to the
Register of Deeds in order to accomplish such registration.
However, where the owner refuses to surrender the duplicate
certificate for the annotation of the voluntary instrument, the
grantee may file with the Register of Deeds a statement setting
forth his adverse claim, as provided for in Section 110 of Act No.
496. xxx[95] (Underscoring supplied)
In Valley Golf Club, Inc. v. Salas,[96] where a Deed of Absolute Sale
covering a parcel of land was executed prior to the annotation of a
notice of lis pendens by the original owner thereof but which Deed
was registered after such annotation, this Court held:
The advance payment of P15,000.00 by the CLUB on October 18,
1960 to ROMERO, and the additional payment by the CLUB of
P54,887.50 as full payment of the purchase price on October 26,
1960, also to ROMERO, cannot be held to be the dates of sale such
as to precede the annotation of the adverse claim by the SISTERS on
October 25, 1960 and the lis pendens on October 27, 1960. It is
basic that it is the act of registration of the sale that is the operative
act to convey and affect the land. That registration was not effected
by the CLUB until December 4, 1963, or three (3) years after it had
made full payment to ROMERO. xxx
As matters stand, therefore, in view of the prior annotations of the
adverse claim and lis pendens, the CLUB must be legally held to
have been aware of the flaws in the title. By virtue of the lis
pendens, its acquisition of the property was subject to whatever
judgment was to be rendered in Civil Case No. 6365. xxx The CLUBs
cause of action lies, not against the SISTERS, to whom the property
had been adjudged by final judgment in Civil Case No. 6365, but
against ROMERO who was found to have had no right to dispose of
the land.[97] (Underscoring supplied)
PLDT further argues that El Dorados prior, actual knowledge of the
July 11, 1975 Agreement to Buy and Sell is equivalent to prior
registration not affected by the Notice of Lis Pendens. As such, it
concludes that it was not a purchaser pendente lite nor a purchaser
in bad faith.
PLDT anchors its argument on the testimony of Lauro and El
Dorados counsel Atty. Aquino from which it infers that Atty. Aquino
filed the complaint for rescission and caused the notice of lis
pendens to be annotated on Carrascosos title only after reading
newspaper reports on the sale to PLDT of the 1,000 hectare portion
of the property.
The pertinent portions of Atty. Aquinos testimony are reproduced
hereunder:
Q: Do you know, Atty. Aquino, what you did after the filing of the
complaint in the instant case of Dr. Carrascoso?
A: Yes, I asked my associates to go to Mamburao and had the notice
of Lis Pendens covering the property as a result of the filing of the
instant complaint.
Q: Do you know the notice of Lis Pendens?
A: Yes, it is evidenced by a [Transfer] Certificate Copy of Title of Dr.
Carrascoso entitled Notice of Lis Pendens.
Q: As a consequence of the filing of the complaint which was
annotated, you have known that?
A: Yes.
Q: After the annotation of the notice of Lis Pendens, do you know, if
any further transaction was held on the property?
A: As we have read in the newspaper, that Dr. Carrascoso had sold
the property in favor of the PLDT, Co.
Q: And what did you do?
A: We verified the portion of the property having recorded under
entry No. 24770 xxx and we also discovered that the articles
incorporated (sic) and other corporate matters had been organized
and established of the PLDT, Co., and had been annotated.
Q: Do you know what happened to the property?
A: It was sold by the PLDT to its sub-PLDT Agitating (sic) Co. when at
that time there was already notice of Lis Pendens.
Q: In your testimony, you mentioned that you had come cross- (sic)
reading the sale of the subject litigation (sic) between Dr. Fernando
Carrascoso, the defendant herein and the PLDT, one of defendants-
intervenor, may I say when?
A: I cannot remember now, but it was in the newspaper where it
was informed or mentioned of the sold property to PLDT.
Q: Will you tell to the Honorable Court what newspaper was that?
A: Well, I cannot remember what is that newspaper. That is only a
means of [confirming] the transaction. What was [confirmed] to us
is whether there was really transaction (sic) and we found out that
there was in the Register of Deeds and that was the reason why we
obtained the case.
Q: Well, may I say, is there any reason, the answer is immaterial.
The question is as regard the matter of time when counsel is being
able (sic) to read the newspaper allegedly (interrupted)
Q: The idea of the question, your Honor, is to establish and ask
further the notice of [lis pendens] with regards (sic) to the transfer
of property to PLDT, would have been accorded prior to the
pendency of the case.
A: I cannot remember.[98]
PLDT also relies on the following testimony of Carrascoso:
Q: You mentioned Doctor a while ago that you mentioned to the
late Governor Feliciano Leviste regarding your transaction with the
PLDT in relation to the subject property you allegedly mention (sic)
your intention to sell with the PLDT?
A: It was Dr. Jose Leviste and Dr. Angel Leviste that was constantly
in touched (sic) with me with respect to my transaction with the
PLDT, sir.
Q: Any other officer of the corporation who knows with instruction
aside from Dr. Angel Leviste and Dr. Jose Leviste?
A: Yes, sir. It was Trinidad Andaya Leviste and Assemblyman
Expedito Leviste.
Q: What is the position of Mrs. Trinidad Andaya Leviste with the
plaintiff-corporation?
A: One of the stockholders and director of the plaintiff-corporation,
sir.
Q: Will you please tell us the other officers?
A: Expedito Leviste, sir.
A: Will you tell the position of Expedito Leviste?
A: He was the corporate secretary, sir.
Q: If you know, was Dr. Jose Leviste also a director at that time?
A: Yes, sir.[99]
On the other hand, El Dorado asserts that it had no knowledge of
the July 11, 1975 Agreement to Buy and Sell prior to the filing of the
complaint for rescission against Carrascoso and the annotation of
the notice of lis pendens on his title. It further asserts that it always
acted in good faith:
The contract to sell between the Petitioner [Carrascoso] and PLDT
was executed in July 11, 1975. There is no evidence that El Dorado
was notified of this contract. The property is located in Mindoro, El
Dorado is based in Manila. The land was planted to rice. This was
not an unusual activity on the land, thus it could have been the
Petitioner who was using the land. Not having been notified of this
sale, El Dorado could not have stopped PLDT from developing the
land.
The absolute sale of the land to PLDT took place on April 6, 1977, or
AFTER the filing of this case on March 15, 1977 and the annotation
of a notice of lis pendens on March 16, 1977. Inspite of the notice of
lis pendens, PLDT then PLDTAC persisted not only in buying the land
but also in putting up improvements on the property such as
buildings, roads, irrigation systems and drainage. This was done
during the pendency of this case, where PLDT and PLDTAC actively
participated as intervenors. They were not innocent bystanders.
xxx[100]
This Court finds the above-quoted testimony of Atty. Aquino to be
susceptible of conflicting interpretations. As such, it cannot be the
basis for inferring that El Dorado knew of the July 11, 1975
Agreement to Buy and Sell prior to the annotation of the notice of
lis pendens on Carrascosos title.
Respecting Carrascosos allegation that some of the directors and
officers of El Dorado had knowledge of his dealings with PLDT, it is
true that knowledge of facts acquired or possessed by an officer or
agent of a corporation in the course of his employment, and in
relation to matters within the scope of his authority, is notice to the
corporation, whether he communicates such knowledge or
not.[101] In the case at bar, however, apart from Carrascosos claim
that he in fact notified several of the directors about his intention to
sell the 1,000 hectare portion of the property to PLDT, no evidence
was presented to substantiate his claim. Such self-serving,
uncorroborated assertion is indubitably inadequate to prove that El
Dorado had notice of the July 11, 1975 Agreement to Buy and Sell
before the annotation of the notice of lis pendens on his title.
PLDT is, of course, not without recourse. As held by the CA:
Between Carrascoso and PLDT/PLDTAC, the former acted in bad
faith while the latter acted in good faith. This is so because it was
Carrascosos refusal to pay his just debt to El Dorado that caused
PLDT/PLDTAC to suffer pecuniary losses. Therefore, Carrascoso
should return to PLDT/PLDTAC the P3,000,000.00 price of the farm
plus legal interest from receipt thereof until paid.[102]
(Underscoring supplied)
The appellate courts decision ordering the rescission of the March
23, 1972 Deed of Sale of Real Property between El Dorado and
Carrascoso being in order, mutual restitution follows to put back the
parties to their original situation prior to the consummation of the
contract.
The exercise of the power to rescind extinguishes the obligatory
relation as if it had never been created, the extinction having a
retroactive effect. The rescission is equivalent to invalidating and
unmaking the juridical tie, leaving things in their status before the
celebration of the contract.
Where a contract is rescinded, it is the duty of the court to require
both parties to surrender that which they have respectively
received and to place each other as far as practicable in his original
situation, the rescission has the effect of abrogating the contract in
all parts.[103] (Underscoring supplied)
The April 6, 1977 and May 30, 1977 Deeds of Absolute Sale being
subject to the notice of lis pendens, and as the Court affirms the
declaration by the appellate court of the rescission of the Deed of
Sale executed by El Dorado in favor of Carrascoso, possession of the
1,000 hectare portion of the property should be turned over by
PLDT to El Dorado.
As regards the improvements introduced by PLDT on the 1,000
hectare portion of the property, a distinction should be made
between those which it built prior to the annotation of the notice of
lis pendens and those which it introduced subsequent thereto.
When a person builds in good faith on the land of another, Article
448 of the Civil Code governs:
Art. 448. The owner of the land on which anything has been built,
sown or planted in good faith, shall have the right to appropriate as
his own the works, sowing or planting, after payment of the
indemnity provided for in Articles 546 and 548, or to oblige the one
who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be
obliged to buy the land if its value is considerably more than that of
the building or trees. In such a case, he shall pay reasonable rent, if
the owner of the land does not choose to appropriate the building
or trees after the proper indemnity. The parties shall agree upon
the terms of the lease and in case of disagreement, the court shall
fix the terms thereof.
The above provision covers cases in which the builders, sowers or
planters believe themselves to be owners of the land or, at least, to
have a claim of title thereto.[104] Good faith is thus identified by
the belief that the land is owned; or that by some title one has the
right to build, plant, or sow thereon.[105]
The owner of the land on which anything has been built, sown or
planted in good faith shall have the right to appropriate as his own
the building, planting or sowing, after payment to the builder,
planter or sower of the necessary and useful expenses,[106] and in
the proper case, expenses for pure luxury or mere pleasure.[107]
The owner of the land may also oblige the builder, planter or sower
to purchase and pay the price of the land.
If the owner chooses to sell his land, the builder, planter or sower
must purchase the land, otherwise the owner may remove the
improvements thereon. The builder, planter or sower, however, is
not obliged to purchase the land if its value is considerably more
than the building, planting or sowing. In such case, the builder,
planter or sower must pay rent to the owner of the land.
If the parties cannot come to terms over the conditions of the lease,
the court must fix the terms thereof.
The right to choose between appropriating the improvement or
selling the land on which the improvement of the builder, planter or
sower stands, is given to the owner of the land.[108]
On the other hand, when a person builds in bad faith on the land of
another, Articles 449 and 450 govern:
Art. 449. He who builds, plants or sows in bad faith on the land of
another, loses what is built, planted or sown without right to
indemnity.
Art. 450. The owner of the land on which anything has been built,
planted or sown in bad faith may demand the demolition of the
work, or that the planting or sowing be removed, in order to replace
things in their former condition at the expense of the person who
built, planted or sowed; or he may compel the builder or planter to
pay the price of the land, and the sower the proper rent.
In the case at bar, it is undisputed that PLDT commenced
construction of improvements on the 1,000 hectare portion of the
property immediately after the execution of the July 11, 1975
Agreement to Buy and Sell with the full consent of Carrascoso.[109]
Thus, until March 15, 1977 when the Notice of Lis Pendens was
annotated on Carrascosos TCT No. T-6055, PLDT is deemed to have
been in good faith in introducing improvements on the 1,000
hectare portion of the property.
After March 15, 1977, however, PLDT could no longer invoke the
rights of a builder in good faith.
Should El Dorado then opt to appropriate the improvements made
by PLDT on the 1,000 hectare portion of the property, it should only
be made to pay for those improvements at the time good faith
existed on the part of PLDT or until March 15, 1977,[110] to be
pegged at its current fair market value.[111]
The commencement of PLDTs payment of reasonable rent should
start on March 15, 1977 as well, to be paid until such time that the
possession of the 1,000 hectare portion is delivered to El Dorado,
subject to the reimbursement of expenses as aforestated, that is, if
El Dorado opts to appropriate the improvements.[112]
If El Dorado opts for compulsory sale, however, the payment of rent
should continue up to the actual transfer of ownership.[113]
WHEREFORE, the petitions are DENIED. The Decision dated January
13, 1996 and Resolution dated July 8, 2004 of the Court of Appeals
are AFFIRMED with MODIFICATION in that
1) the Regional Trial Court of San Jose, Occidental Mindoro, Branch
45 is further directed to:
a. determine the present fair price of the 1,000 hectare portion of
the property and the amount of the expenses actually spent by
PLDT for the improvements thereon as of March 15, 1977;
b. include for determination the increase in value (plus value) which
the 1,000 hectare portion may have acquired by reason of the
existence of the improvements built by PLDT before March 15, 1977
and the current fair market value of said improvements;
2. El Dorado is ordered to exercise its option under the law, whether
to appropriate the improvements, or to oblige PLDT to pay the price
of the land, and
3) PLDT shall pay El Dorado the amount of Two Thousand Pesos
(P2,000.00) per month as reasonable compensation for its
occupancy of the 1,000 hectare portion of the property from the
time that its good faith ceased to exist until such time that
possession of the same is delivered to El Dorado, subject to the
reimbursement of the aforesaid expenses in favor of PLDT or until
such time that the payment of the purchase price of the 1,000
hectare portion is made by PLDT in favor of El Dorado in case the
latter opts for its compulsory sale.
Costs against petitioners.
SO ORDERED.
Carrasoco Jr. v. Court of Appeals
Facts: In March 1972, El Dorado Plantation, Inc. (El Dorado), through
its board member Lauro Leviste, executed a Deed of Sale with
Fernando Carrascoso, Jr. The subject of the sale was a 1,825 hectare
of land. It was agreed that Carrascoso was to pay P1.8M.; that
P290K would be paid by Carrascoso to PNB to settle the mortgage
upon the said land. P210k would be paid directly to Leviste. The
balance of P1.3M plus 10% interest would be paid over the next 3
years at P519k every 25th of March. Leviste also assured that there
were no tenants hence the land does not fall under the Land
Reform Code. Leviste allowed Carrascoso to mortgage the land
which the latter did.
Carrascoso obtained a total of P1.07M as mortgage and he used the
same to pay the down payment agreed upon in the contract.
Carrascoso defaulted from his obligation which was supposed to be
settled on March 25, 1975. Leviste then sent him letters to make
good his end of the contract otherwise he will be litigated.
In 1977, Carrascoso executed a Buy and Sell Contract with PLDT. The
subject of the sale was the same land sold to Carrascoso by Leviste
but it was only the 1000 sq. m. portion thereof. The land is to be
sold at P3M. Part of the terms and conditions agreed upon was that
Carrascoso is to remove all tenants from the land within one year.
He was also being given a 6-month extension in case he’ll need one.
Thereafter, PLDT will notify Carrascoso if whether or not PLDt will
finalize the sale. Eventually, PLDT gained possession of the land.
Meanwhile, El Dorado filed a civil case against Carrascoso. PLDT
intervened averring that it was a buyer in good faith. The Regional
Trial Court (RTC) ruled in favor of Carrascoso. The Court of Appeals
(CA) reversed the RTC ruling.
ISSUE: What is the nature of each contract?
HELD: The contract executed between El Dorado and Carrascoso
was a contract of sale. It was perfected by their meeting of the
minds and was consummated by the delivery of the property to
Carrascoso. However, El Dorado has the right to rescind the
contract by reason of Carrascoso’s failure to perform his obligation.
A contract of sale is a reciprocal obligation. The seller obligates
itself to transfer the ownership of and deliver a determinate thing,
and the buyer obligates itself to pay therefor a price certain in
money or its equivalent. The non-payment of the price by the buyer
is a resolutory condition which extinguishes the transaction that for
a time existed, and discharges the obligations created thereunder.
Such failure to pay the price in the manner prescribed by the
contract of sale entitles the unpaid seller to sue for collection or to
rescind the contract.
On the other hand, the contract between Carrascoso and PLDT is a
contract to sell. This is evidenced by the terms and conditions that
they have agreed upon that after fulfillment of Carrascoso’s
obligation PLDT has “to notify Carrascoso of its decision whether or
not to finalize the sale.”
Side Issue: Carrascoso also averred that there was a breach on El
Dorado’s part when it comes to warranty. Carrascoso claimed that
there were tenants on the land and he spent about P2.9M
relocating them. The SC ruled that Carrascoso merely had a bare
claim without additional proof to support it.
Requisites of Express warranty in a Contract of Sale
(1) the express warranty must be an affirmation of fact or any
promise by the seller relating to the subject matter of the sale;
(2) the natural tendency of such affirmation or promise is to induce
the buyer to purchase the thing; and
(3) the buyer purchases the thing relying on such affirmation or
promise thereon.
Sacobia Hills Dev’t. Corp. vs. TY
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari[1] assails the August 19, 2004
decision of the Court of Appeals in CA-G.R. CV No. 76987,[2] which
reversed and set aside the November 29, 2002 decision[3] of the
Regional Trial Court of Manila, Branch 46, and its October 28, 2004
resolution[4] denying reconsideration thereof.
The antecedent facts show that petitioner Sacobia Hills
Development Corporation (Sacobia) is the developer of True North
Golf and Country Club (True North) located inside the Clark Special
Economic Zone in Pampanga which boasts of amenities that include
a golf course, clubhouse, sports complex and several vacation villas.
On February 12, 1997, respondent Allan U. Ty wrote to Sacobia a
letter expressing his intention to acquire one (1) Class A share of
True North and accordingly paid the reservation fee of P180,000.00
as evidenced by PCI Bank Check No. 0038053.[5]
Through letters dated May 28, 1997 and July 4, 1997, Sacobia
assured its shareholders that the development of True North was
proceeding on schedule; that the golf course would be playable by
October 1999; that the Environmental Clearance Certificate (ECC) by
the Department of Environment and Natural Resources (DENR) as
well as the Permit to Sell from the Securities and Exchange
Commission (SEC) should have been released by October 1997; and
that their registration deposits remained intact in an escrow
account.[6]
On September 1, 1997, Sacobia approved the purchase application
and membership of respondent for P600,000.00, subject to certain
terms and conditions. The notice of approval provided, inter alia:[7]
Terms and Conditions
1. Approval of an application to purchase golf/country club shares is
subjected to the full payment of the total purchase price. Should the
buyer opt for the deferred payment scheme, approval is subject to
our receipt of a down payment of at least 30% and the balance
payable in installments over a maximum of eleven (11) months from
the date of application, and covered by postdated cheques.
2. Your reserved share shall be considered withdrawn and may be
deemed cancelled should you fail to settle your obligation within
fifteen (15) days from due date, or failure to cover the value of the
postdated cheques upon their maturity, or your failure to issue the
required postdated cheques. In which case, we shall reserve the
right to offer the said shares to other interested parties. This also
means forfeiture of 50% of the total amount you have already paid.
3. We will undertake to execute the corresponding sales
documents/ Deed of Absolute Sale covering the reserved shares
upon full payment of the total purchase price. The Certificate of
Membership shall be issued thereafter.
However, on January 12, 1998, respondent notified Sacobia that he
is rescinding the contract and sought refund of the payments
already made due to the latters failure to complete the project on
time as represented.
In an effort to assure the respondent that the project would soon be
operational, Sacobia wrote him a letter dated March 10, 1998,
stating that the DENR had issued the required ECC only on March 5,
1998, and that the golf course would be ready for use by end of
1998.[8]
On April 3, 1998, Sacobia again wrote the respondent advising him
that the 18-hole golf course would be fully operational by summer
of 1999. Sacobia also sought to collect from respondent the latters
outstanding balance of P190,909.08 which was covered by five (5)
post dated checks.
Notwithstanding, respondent notified Sacobia on April 17, 1998 that
he had stopped payment on the five (5) post dated checks and
reiterated his demand for the refund of his payments which
amounted to P409,090.92.
On June 16, 1999, respondent sent Sacobia a letter formally
rescinding the contract and demanding for the refund of the
P409,090.92 thus far paid by him.
By way of reply, Sacobia informed respondent that it had a no-
refund policy, and that it had endorsed respondent to Century
Properties, Inc. for assistance on the resale of his share to third
persons.
Thus, on July 21, 1999, respondent filed a complaint for rescission
and damages before the SEC but the case was eventually
transferred to the Regional Trial Court of Manila, Branch 46,
pursuant to Administrative Circular AM No. 00-11-03.[9]
On April 13, 2002, the trial court personnel conducted an on-site
ocular inspection and in their report, they made the following
observations:
We went up and down the hills on board the golf cart, and have
seen the entire golf course. The 9 holes area are already operational
and playable, we have seen the tee bank (mount soil) color coded
flags, blue for regular golfers, white for senior golfers and red for
ladies golfers. We have seen all their playing areas which all
appeared in order except the main clubhouse which is undergoing
finishing touches. Likewise the road leading to the clubhouse area is
undergoing pavement works and concreting.
We learned from our tour guide Mr. Gerry Zoleta, Site Supervisor,
that the timetable in finishing all remaining things (eg. Clubhouse
and the road leading to it) to be done, are influenced or rather,
hampered by the prevailing weather condition. Such that when it
rain, (which often happens in the area during afternoon or early
morning) they cannot really push thru with the construction due to
the soil condition (easily eroded) and sloping terrain of the place.
Except, the clubhouse, all seem prim and proper for golf playing. In
fact, according to Mr. Zoleta, the site has been operational since
January 2002. The first tournament was conducted on October 2000
and there were three tournaments already took place in the area.
In summary, we found nothing amiss for one not to be able to play
and enjoy golf to the fullest, except as earlier said the
clubhouse.[10]On November 29, 2002, the trial court rendered
judgment in favor of petitioners, the decretal portion of which
reads:
WHEREFORE, the complaint is hereby dismissed without
pronouncement as to costs.
If the plaintiff desires to continue with the acquisition of the share,
he may do so by paying the balance of the acquisition price of One
Hundred Ninety Thousand Ninety Pesos and Ten Centavos
(P190,090.10) without interest within thirty (30) days from the
finality of this decision, otherwise, he forfeits his payments.
IT IS SO ORDERED.[11]
The trial court found that the contract between the parties did not
warrant that the golf course and clubhouse would be completed
within a certain period of time to entitle respondent to rescind. It
also noted that the completion of the project was subject to the
issuance of an ECC and the approval by the SEC of the registration of
non-proprietary golf club shares, which is beyond Sacobias control.
he appellate court, in its decision dated August 19, 2004, disposed
of the appeal as follows:
WHEREFORE, the appealed November 29, 2002 decision of the
Regional Trial Court of Manila, Branch 46, is hereby REVERSED and
SET ASIDE, and a new one is hereby entered with this Court hereby
CONFIRMING the RESCISSION of the contract of purchase of one (1)
Class A proprietary share of True North Golf and Country Club as
elected choice by plaintiff-appellant Ty, the aggrieved party, and
hereby DIRECTING defendant-appellee SACOBIA to:
1) Refund to the plaintiff-appellant Allan U. Ty the amount of
P409,090.20 and all payments made by him thus far on the TRUE
NORTH share, with legal interest of 12% per annum from July 21,
1999, the date of the filing of the complaint with the SEC, until fully
paid;
2) Return the five post-dated checks of the plaintiff-appellant
amounting to P190,908.08;
3) Pay costs of the suit.
SO ORDERED.[12]
The Court of Appeals agreed with the trial court that Sacobia was in
delay in the performance of its obligation to respondent. As such, Ty
could properly rescind the contract, or demand specific
performance with damages, or demand for damages alone. It held
though that the failure of the DENR to issue the ECC on time is a
valid ground to reduce the damages claimed by Ty. It also ruled that
Sacobia is estopped from asserting that there was no completion
date for the project as no less than its chairman announced the
projected completion dates.
Petitioners motion for reconsideration was denied, hence the
instant petition for review on certiorari which raises the issue of
whether the contract entered into by the parties may be validly
rescinded under Article 1191 of the Civil Code.
Sacobia contends that it was not in breach of the contract as the
Intent to Purchase, the Contract of Purchase, and the Notice of
Approval to Purchase Shares of True North, do not contain any
specific date as to when the golf course and country club would be
completed. It argues that respondent should have known the risks
involved in this kind of project; the construction being contingent
on the issuance of the ECC by the DENR and the payment of the
buyers of their share.
On the other hand, respondent claims that Sacobias arguments
raise new matters which would warrant the reversal of the decision
rendered by the Court of Appeals. He insists that Sacobia failed to
complete the project on time which entitles him to rescind the
contract in accordance with Article 1191 of the Civil Code. He
further argues that the delay in the completion of the project is
clearly established by the fact that there have been no substantial
work done on the site, particularly on the clubhouse, despite the
lapse of nearly 4-years from the issuance of the ECC on March 5,
1998.
The petition is meritorious.
In resolving the present controversy, the lower courts merely
assumed that the delay in the completion of the golf course was the
decisive factor in determining the propriety or impropriety of
rescinding the contract. Yet, confusion could have been avoided had
there been a more thorough scrutiny of the nature of the contract
entered into by the contending parties.
In the notice of approval, which embodies the terms and conditions
of the agreement, Sacobia signified its intent to retain the
ownership of the property until such time that the respondent has
fully paid the purchase price. This condition precedent is
characteristic of a contract to sell. The intention of the contracting
parties is inferable from the following provisions, to wit:
TERMS AND CONDITIONS
1. Approval of an application to purchase golf/country club shares is
subjected to the full payment of the total purchase price. Should the
buyer opt for the deferred payment scheme, approval is subject to
our receipt of a down payment of at least 30% and the balance
payable in installments over a maximum of eleven (11) months from
the date of application, and covered by postdated cheques.
2. Your reserved share shall be considered withdrawn and may be
deemed cancelled should you fail to settle your obligation within
fifteen (15) days from due date, or failure to cover the value of the
postdated cheques upon their maturity, or your failure to issue the
required postdated cheques. In which case, we shall reserve the
right to offer the said shares to other interested parties. This also
means forfeiture of 50% of the total amount you have already paid.
3. We shall undertake to execute the corresponding sales
documents/Deed of Absolute Sale covering the reserved shares
upon full payment of the total purchase price. The Certificate of
Membership shall be issued thereafter.
Clearly, the approval of the application hinged on the full payment
of the total purchase price. In fact, Sacobia explicitly reserved the
right to retain title over the share pending full satisfaction of the
purchase price.
The notice of approval likewise stipulated that the reservation shall
be deemed withdrawn or cancelled in case respondent fails to settle
his obligation within 15 days from the due date or cover the value of
the checks upon their maturity. Thus, Sacobia reserved the right to
unilaterally rescind the contract in the event the respondent fails to
comply with his obligation of remitting the full purchase price within
the deadline. In fact, Sacobia, after having cancelled the agreement,
can offer the share to other interested parties.
In addition, the execution of the deed of absolute sale and other
pertinent documents shall be made only upon full payment of the
purchase price. The terms of the agreement between Sacobia and
Ty can be deduced, not on a formal document like a deed of sale,
but from a series of correspondence and acts signifying the parties
intention to enter into a contract. The absence of a formal deed of
conveyance is a strong indication that Sacobia did not intend to
transfer title until respondent shall have completely complied with
his correlative obligation of paying the contact price.
Since the agreement between Sacobia and Ty is a contract to sell,
the full payment of the purchase price partakes of a suspensive
condition, the non-fulfillment of which prevents the obligation to
sell from arising and ownership is retained by the seller without
further remedies by the buyer. In Cheng v. Genato,[13] we
explained the nature of a contract to sell and its legal implications in
this wise:
In a Contract to Sell, the payment of the purchase price is a positive
suspensive condition, the failure of which is not a breach, casual or
serious, but a situation that prevents the obligation of the vendor to
convey title from acquiring an obligatory force. It is one where the
happening of the event gives rise to an obligation. Thus, for its non-
fulfillment there will be no contract to speak of, the obligor having
failed to perform the suspensive condition which enforces a juridical
relation. In fact with this circumstance, there can be no rescission of
an obligation that is still non-existent, the suspensive condition not
having occurred as yet. Emphasis should be made that the breach
contemplated in Article 1191 of the New Civil Code is the obligors
failure to comply with an obligation already extant, not a failure of a
condition to render binding that obligation.
In a contract to sell, the prospective seller does not consent to
transfer ownership of the property to the buyer until the happening
of an event, which for present purposes, is the full payment of the
purchase price. What the seller agrees or obliges himself to do is to
fulfill his promise to sell the subject property when the entire
amount of the purchase price is delivered to him. Upon the
fulfillment of the suspensive condition, ownership will not
automatically transfer to the buyer although the property may have
been previously delivered to him. The prospective seller still has to
convey title to the prospective buyer by entering into a contract of
absolute sale.[14]
According to True North Payment Schedule,[15] respondents checks
dated from October 12, 1997 until January 12, 1998 were marked as
stale. His failure to cover the value of the checks and by issuing a
stop payment order effectively abated the perfection of the
contract. For it is understood that when a sale is made subject to a
suspensive condition, perfection is had only from the moment the
condition is fulfilled.[16]
As shown, Ty did not pay the full purchase price which is his
obligation under the contract to sell, therefore, it cannot be said
that Sacobia breached its obligation. No obligations arose on its part
because respondents non-fulfillment of the suspensive condition
rendered the contract to sell ineffective and unperfected. Indeed,
there can be no rescission under Article 1191[17] of the Civil Code
because until the happening of the condition, i.e. full payment of
the contract price, Sacobias obligation to deliver the title and object
of the sale is not yet extant. A non-existent obligation cannot be
subject of rescission. Article 1191 speaks of obligations already
existing, which may be rescinded in case one of the obligors fails to
comply with what is incumbent upon him.
As earlier discussed, the payment by Ty of the reservation fee as
well as the issuance of the postdated checks is subject to the
condition that Sacobia was reserving title until full payment, which
is the essence of a contract to sell. The perfection of this kind of
contract would give rise to two distinct obligations, namely, 1) the
buyers obligation to fulfill the suspensive condition, i.e. the full
payment of the contract price as in the instant case, and, 2) the
correlative obligation of the seller to convey ownership upon
compliance of the suspensive condition.
In the present case, respondents failure to fulfill this suspensive
condition prevented the perfection of the contract to sell. With an
ineffective contract, Ty had not acquired the status of a shareholder
but remained, at most, a prospective investor. In the absence of a
juridical tie between the parties, Ty cannot claim the rights and
privileges accorded to Sacobias full-fledged members and
shareowners, including the full enjoyment of the amenities being
offered. Unfortunately for Ty, he cannot avail of rescission as
envisioned by Article 1191 of the Civil Code. However, he can
withdraw his investment subject to the restrictions under the terms
and conditions pertinent to a reneging investor.
Even assuming arguendo that the delay in the completion of the
golf course and clubhouse was attributable to Sacobia, respondent
had not refuted to this Courts satisfaction the trial courts denial of
such claim upon its finding that, among other things, the parties did
not warrant the completion of the project within a certain period of
time.
As early as January 12, 1998, respondent had notified Sacobia of his
intention to rescind the contract on the ground that there was
unreasonable delay in the completion of the golf course and
clubhouse. Yet, evidence shows that even prior thereto, or on May
28, 1997, Sacobia already informed its investors, including the
respondent, that the full completion of the project was expected by
mid-1999. Patently, respondents claim is premature by one year
and a half, if reckoned from the expected time of completion as
foreseen by Sacobia. Moreover, respondent was well aware of the
risk of delay in the completion of the project considering that he
was apprised beforehand of such delay due to the belated issuance
of the proper documents.
It appears, however, that Sacobia is not really intent on cancelling
Tys reservation. Even after it was notified by Ty that he was
intending to rescind the contract, and had in fact issued a stop-
payment order, Sacobia merely deferred the deposit of Tys checks
in an effort to resolve the issue, instead of cancelling the
reservation in accordance with the terms of the notice of approval.
Subsequently, it sought to collect from Ty his remaining obligations.
It also referred Ty to its marketing arm if Ty is so minded to sell his
rights to third parties. To this extent, the trial court correctly
ordered Ty to pay the remaining balance if he so desires, otherwise,
he forfeits half of his payments, pursuant to the terms of the notice
of approval.
WHEREFORE, the petition is GRANTED. The decision dated August
19, 2004 of the Court of Appeals in CA-G.R. CV No. 76987 and its
resolution dated October 28, 2004, are REVERSED and SET ASIDE.
Respondents complaint for rescission of contract and damages in
Civil Case No. 01-99696 is DISMISSED. He is ORDERED to PAY to
Sacobia Hills Development Corporation the amount of Pesos: One
Hundred Ninety Thousand Nine Hundred Nine and Eight Centavos
(P190,909.08) without interest within thirty (30) days from finality
of this decision; otherwise, fifty percent (50%) of his total payments
shall be forfeited.
SO ORDERED.
Sacobia Hills Dev’t. Corp. vs. Ty (case digest)
Facts: Petitioner Sacobia Hills Development Corporation (Sacobia) is
the developer of True North Golf and Country Club which boasts of
amenities that include a golf course, clubhouse, sports complex and
several vacation villas. Respondent Allan U. Ty wrote to Sacobia a
letter expressing his intention to acquire one Class A share of True
North and accordingly paid the reservation fee of P180,000.00 as
evidenced by PCI Bank Check No. 0038053. Sacobia assured its
prospective shareholders that the development of True North was
proceeding on schedule; that the golf course would be playable by
October 1999; that the Environmental Clearance Certificate (ECC) by
the Department of Environment and Natural Resources (DENR) as
well as the Permit to Sell from the Securities and Exchange
Commission (SEC) should have been released by October 1997; and
that their registration deposits remained intact in an escrow
account. Sacobia then approved the purchase application and
membership of Ty for P600,000.00, subject to certain terms and
conditions. The notice of approval provided the following:
Terms and Conditions
1. Approval of an application to purchase golf/country club
shares is subjected to the full payment of the total purchase price.
Should the buyer opt for the deferred payment scheme, approval is
subject to our receipt of a down payment of at least 30% and the
balance payable in installments over a maximum of eleven (11)
months from the date of application, and covered by postdated
cheques.
2. Your reserved share shall be considered withdrawn and may
be deemed cancelled should you fail to settle your obligation within
fifteen (15) days from due date, or failure to cover the value of the
postdated cheques upon their maturity, or your failure to issue the
required postdated cheques. In which case, we shall reserve the
right to offer the said shares to other interested parties. This also
means forfeiture of 50% of the total amount you have already paid.
3. We will undertake to execute the corresponding sales
documents/ Deed of Absolute Sale covering the reserved shares
upon full payment of the total purchase price. The Certificate of
Membership shall be issued thereafter.
However, on January 12, 1998, Ty notified Sacobia that he is
rescinding the contract and sought refund of the payments already
made due to the latter’s failure to complete the project on time as
promised (supposedly October 1997). Sacobia wrote him a letter,
stating that the DENR had issued the required ECC only on March 5,
1998, and that the golf course would be ready for use by end of
1998( in fact ahead of promised date which is October 1999).
Sacobia again wrote the respondent advising him that the 18-hole
golf course would be fully operational by summer of 1999. Sacobia
also sought to collect from respondent the latter’s outstanding
balance of P190,909.08 which was covered by five (5) post dated
checks. However, Ty notified Sacobia that he had stopped payment
on the five (5) post dated checks and reiterated his demand for the
refund of his payments which amounted to P409,090.92. Sacobia
denied his request thus Ty filed a complaint for rescission and
damages.
Issue: Whether or not respondent Ty can rescind the contract and
demand for damages from Sacobia Hills for breach of contract
Held: No, Ty cannot rescind the contract and demand for damages
from Sacobia Hills for breach of contract because the contract to sell
between them has not yet been perfected for failure by Ty to pay
the full purchase price. The Supreme Court ruled as follows:
1. The terms of the agreement between Sacobia and Ty can be
deduced, not on a formal document like a deed of sale, but from a
series of correspondence and acts signifying the parties’ intention to
enter into a contract. The absence of a formal deed of conveyance is
a strong indication that Sacobia did not intend to transfer title until
respondent shall have completely complied with his correlative
obligation of paying the contact price.
2. In a Contract to Sell, the payment of the purchase price is a
positive suspensive condition, the failure of which is not a breach,
casual or serious, but a situation that prevents the obligation of the
vendor to convey title from acquiring an obligatory force. It is one
where the happening of the event gives rise to an obligation. Thus,
for its non-fulfillment there will be no contract to speak of, the
obligor having failed to perform the suspensive condition which
enforces a juridical relation. In fact with this circumstance, there can
be no rescission of an obligation that is still non-existent, the
suspensive condition not having occurred as yet. Emphasis should
be made that the breach contemplated in Article 1191 of the New
Civil Code is the obligor’s failure to comply with an obligation
already extant, not a failure of a condition to render binding that
obligation.
3. Ty did not pay the full purchase price which is his obligation
under the contract to sell, therefore, it cannot be said that Sacobia
breached its obligation. No obligations arose on its part because
respondent’s non-fulfillment of the suspensive condition rendered
the contract to sell ineffective and unperfected. Indeed, there can
be no rescission under Article 1191of the Civil Code because until
the happening of the condition, i.e. full payment of the contract
price, Sacobia’s obligation to deliver the title and object of the sale
is not yet extant. A non-existent obligation cannot be subject of
rescission. Article 1191 speaks of obligations already existing, which
may be rescinded in case one of the obligors fails to comply with
what is incumbent upon him.
4. In the present case, respondent’s failure to fulfill this suspensive
condition prevented the perfection of the contract to sell. With an
ineffective contract, Ty had not acquired the status of a shareholder
but remained, at most, a prospective investor. In the absence of a
juridical tie between the parties, Ty cannot claim the rights and
privileges accorded to Sacobia’s full-fledged members and
shareowners, including the full enjoyment of the amenities being
offered. Unfortunately for Ty, he cannot avail of rescission as
envisioned by Article 1191 of the Civil Code. However, he can
withdraw his investment subject to the restrictions under the terms
and conditions pertinent to a reneging investor.
5. Tys complaint for rescission of contract and damages in Civil Case
No. 01-99696 is dismissed He is ordered to pay to Sacobia Hills
Development Corporation the amount of Pesos: One Hundred
Ninety Thousand Nine Hundred Nine and Eight Centavos
(P190,909.08) without interest within thirty (30) days from finality
of this decision; otherwise, fifty percent (50%) of his total payments
shall be forfeited.
Keppel Bank v. Adao
DECISION
QUISUMBING, J.:
On appeal is the Decision[1] dated April 30, 2003 of the Court of
Appeals in CA G.R. SP No. 71477. The Court of Appeals affirmed the
Decision of the Regional Trial Court which had earlier sustained the
Decision of the Metropolitan Trial Court, dismissing the ejectment
case against respondent Philip Adao.
The case stemmed from the court-approved Compromise
Agreement between petitioner Keppel Bank and Project Movers
Realty and Development Corporation (PMRDC).[2] By virtue of the
agreement, PMRDC through its President Mario P. Villamor
assigned, transferred and conveyed to petitioner, by way of dacion
en pago,[3] twenty-five properties consisting of townhouses,
condominium units and vacant lots, as partial settlement of their
two hundred million pesos (P200,000,000) outstanding obligation.
Pursuant thereto, petitioner secured Condominium Certificates of
Title over the units.
Upon inspection, petitioner found respondent Philip Adao
occupying Unit 4 of the Luxor Villas Townhouse, one of the 25
properties above-mentioned. On February 18, 2000, petitioner sent
a written demand to respondent to vacate the unit within 30 days
from receipt of the notice. Respondent refused and, instead,
offered to purchase the unit. However, the parties failed to reach an
agreement on the matter.
On October 19, 2000, petitioner sent respondent a final demand to
vacate. Since the demand was not heeded, petitioner filed a civil
case for ejectment docketed as Civil Case No. 8911 against
respondent.
In his defense, respondent alleged that he has long been occupying
the contested unit by virtue of a Contract to Sell[4] dated February
7, 1995 between him and PMRDC. He stated that to avoid litigation,
he offered to purchase the unit for 2.5 million pesos, in addition to
the 3 million pesos he already paid to PMRDC. He added that had
his pre-agreed marketing services with PMRDC been duly audited to
his credit, the unit would have already been fully paid. Respondent
contended that petitioners remedy is to demand from PMRDC the
immediate replacement of the property as provided in their
Compromise Agreement and Dacion en Pago.[5]
On August 6, 2001, the MeTC dismissed the complaint and held
Adao as the lawful possessor of the property. Petitioner appealed to
the Regional Trial Court, which, on March 4, 2002, affirmed in toto
the MeTC decision.[6] The RTC held that, by virtue of the dacion en
pago, petitioner merely stepped into the shoes of PMRDC. Hence,
petitioner must respect the contract to sell between PMRDC and
respondent. It also held that petitioner failed to show non-payment
by respondent, and that in case of non-payment, the remedy of the
vendor is either rescission with recovery of possession or specific
performance based on breach of contract, but not ejectment.[7]
Petitioner moved for reconsideration but it was denied on June 5,
2002.
Petitioner elevated the case to the Court of Appeals. The appellate
court held that petitioner must respect the contract to sell though
such is not annotated in the certificate of title because petitioner
was not a purchaser in good faith, having failed to exercise due
diligence required of banks. As an unpaid seller, petitioner can only
rescind the contract under Article 1526[8] of the Civil Code which
does not sanction the filing of an action for ejectment. The Court of
Appeals affirmed the RTC decision and, subsequently, denied
reconsideration. It decreed as follows:
WHEREFORE, premises considered, the instant petition is DENIED.
The assailed March 4, 2002 decision of the RTC is hereby AFFIRMED.
SO ORDERED.[9]
Petitioner now comes before us and alleges that the Court of
Appeals seriously erred when:
i. it ruled that the petitioner Bank must respect the terms and
conditions of the Contract to Sell allegedly executed on 07 February
1995 despite the fact that petitioner had no knowledge thereof and
that said Contract to Sell was not annotated on CCT No. 9522-R
prior to the execution of the court-approved Compromise
Agreement and Dacion en Pago between the petitioner and PMRDC.
ii. it affirmed the finding of the RTC that respondent had fully
paid the purchase price under the Contract to Sell on the basis of
respondents unsubstantiated and general allegation in his Answer
with Compulsory Counterclaim and when it shifted the burden of
proof upon petitioner to prove that respondent had not fully paid
the alleged purchase price. Such ruling contravenes the well-settled
legal rule that he who alleges must prove the same.
iii. it affirmed the ruling of the RTC that the complaint for
ejectment filed by petitioner is not the proper remedy.
iii.a The RTCs suggested remedy, as affirmed by the Court of
Appeals, of filing an action for rescission with recovery of possession
based on breach of contract wrongfully presumes that the alleged
Contract to Sell is binding on the petitioner.
iii.b The RTCs suggested remedy, as affirmed by the Court of
Appeals, is contrary to law and jurisprudence because in a contract
to sell, ownership is retained by the seller until the buyer has fully
paid the purchase price;
iv. it affirmed the ruling of the RTC that petitioners recourse must
be against PMRDC and/or its President, Mario P. Villamor.
v. it affirmed the RTCs position that it was not duty-bound to rule
on the issue of ownership to settle the issue of possession and
relied heavily on the alleged Contract to Sell as the basis of
respondents right to possess the Subject Property.[10]
In sum, the issues for our resolution are: (1) Is petitioner bound by
the contract to sell? (2) Is the remedy of ejectment legally available
to the petitioner? and (3) Who is entitled to physical possession of
the property?
Petitioner contends he is not bound by the contract to sell as it was
not annotated in the certificate of title. It maintains that the
contract to sell specifically provides that title shall be transferred to
the respondent only after full payment of the purchase price. Not
having fully paid the price, respondent is not the owner. Petitioner
adds that respondent has the burden of proving payment since
under the rules on evidence, a party must prove his own affirmative
allegation. Petitioner also maintains that PMRDC merely tolerated
the possession by the respondent but such possession became
illegal when, as the new owner, it demanded that respondent
immediately vacate the property.
Respondent counters that an ejectment suit is merely concerned
with possession de facto and the issue of ownership need not be
resolved. He claims to have a better right of possession having fully
paid the purchase price. Further, respondent asserts that petitioner,
being a successor-in-interest of PMRDC, is bound by the Contract to
Sell. Finally, respondent avers that ejectment cases are governed by
the Rules on Summary Procedure which relies merely on affidavits
and position papers submitted. Hence, his Affidavit[11] dated June
25, 2001 was sufficient to prove full payment.
Prefatorily, this case started with a complaint for ejectment filed
with the MeTC. In previous cases, this Court consistently held that
the only issue for resolution in an ejectment case is physical or
material possession of the property involved, independent of any
claim of ownership by any of the party litigants.[12] Ejectment cases
are designed to summarily restore physical possession to one who
has been illegally deprived of such possession, without prejudice to
the settlement of the parties opposing claims of juridical possession
in appropriate proceedings.[13] We also said that the question of
ownership may be provisionally ruled upon for the sole purpose of
determining who is entitled to possession de facto.[14]
Respondent bases his right of possession on the Contract to Sell. On
the other hand, petitioner argues it is not bound by the said
contract since the same is not annotated in the Certificate of Title.
It is true that persons dealing with registered property can rely
solely on the certificate of title and need not go beyond it.[15]
However, as correctly held by the Court of Appeals, this rule does
not apply to banks. Banks are required to exercise more care and
prudence than private individuals in dealing even with registered
properties for their business is affected with public interest.[16] As
master of its business, petitioner should have sent its
representatives to check the assigned properties before signing the
compromise agreement and it would have discovered that
respondent was already occupying one of the condominium units
and that a contract to sell existed between respondent and PMRDC.
In our view, petitioner was not a purchaser in good faith and we are
constrained to rule that petitioner is bound by the contract to sell.
Nonetheless, in this case, the contract to sell does not by itself give
respondent the right to possess the property. Unlike in a contract of
sale, here in a contract to sell, there is yet no actual sale nor any
transfer of title, until and unless, full payment is made. The payment
of the purchase price is a positive suspensive condition, the failure
of which is not a breach, casual or serious, but a situation that
prevents the obligation of the vendor to convey title from acquiring
an obligatory force.[17] Respondent must have fully paid the price
to acquire title over the property and the right to retain possession
thereof. In cases of non-payment, the unpaid seller can avail of the
remedy of ejectment since he retains ownership of the property.
Respondent avers that since ejectment cases are decided merely on
the basis of affidavits and position papers, his affidavit before the
MeTC sufficiently proves his full payment of the purchase price.
Nothing could be more erroneous because even though ejectment
cases are governed by the Rules on Summary Procedure, there is
still need to present substantial evidence to support respondents
claim of full payment. Section 9[18] of the Rules on Summary
Procedure provides that parties shall submit, together with their
position papers, the affidavits of their witnesses and other evidence
on the factual issues defined. His lone affidavit is self-serving, and
cannot be considered as substantial evidence. As a general rule, one
who pleads payment has the burden of proving it. Even where the
petitioner alleged non-payment, the general rule is that the burden
rests on the respondent to prove payment, rather than on the
petitioner to prove non-payment.[19]
Considering that respondent failed to discharge the burden of
proving payment, he cannot claim ownership of the property and
his possession thereof was by mere tolerance. His continued
possession became unlawful upon the owners demand to vacate
the property.[20] We stress, however, that this adjudication, is only
a provisional determination of ownership for the purpose of settling
the issue of possession,[21] and does not bar or prejudice an action
between the same parties involving title to the property.[22]
WHEREFORE, the petition is GRANTED. The Decision dated April 30,
2003 of the Court of Appeals in CA G.R. SP No. 71477 is REVERSED
and SET ASIDE. Respondent is hereby ordered to vacate the
property.
Costs against respondent.
SO ORDERED.
Keppel Bank v. Adao (case digest)
G.R. No. 158227 October 19, 2005, 473 scra 372
Contract to Sell vs Contract of Sale
Facts: Project Movers Realty and Development Corporation
(PMRDC) owe P200M to Keppel Banks.By way of dacion en pago,
PMRDC transferred and conveyed to the bank 25 of its
propertiesconsisting of townhouses and condominiums. One of the
units transferred was occupied byAdao.In Feb 2000, the Bank
demanded Adao to vacate. Adao refused. An ejectment case was
filed.Adao averred that he had a Contract to Sell with PMRDC. He
presented an affidavit showingthat he made full payment thereof.
The MeTC, RTC and CA ruled in favor of Adao. The lower courts
ordered Keppel to respect the contract to sell between Adao and
PMRDC for when theproperties were transferred by way of dacion
en pago, the bank merely stepped on the shoes of PMRDC.
ISSUE: Whether or not Keppel is bound by the contract to sell.
HELD:
No. Though Keppel is not a purchaser in good faith for not looking
into the property(checkingif it was infirm and free from other
claims), the bank is not bound by it.The contract to sell does not by
itself give Adao the right to possess the property. Unlikein a
contract of sale, here in a contract to sell, there is yet no actual sale
nor any transfer of title,until and unless, full payment is made. The
payment of the purchase price is a positivesuspensive condition, the
failure of which is not a breach, casual or serious, but a situation
thatprevents the obligation of the vendor to convey title from
acquiring an obligatory force. Adaomust have fully paid the price to
acquire title over the property and the right to retain
possessionthereof. In cases of non-payment, the unpaid seller can
avail of the remedy of ejectment sincehe retains ownership of the
property.Adao must also, aside from showing an affidavit, show
other proof of full payment madeto PMRDC. Considering that Adao
failed to discharge the burden of proving payment, he cannotclaim
ownership of the property and his possession thereof was by mere
tolerance. Hiscontinued possession became unlawful upon the
owner’s demand to vacate the property.
SPS. ALFREDO R. EDRADA and ROSELLA L. EDRADA vs. SPS.
EDUARDO RAMOS CHICO-NAZARIO, JJ. and CARMENCITA RAMOS,
August 31, 2005
DECISION
TINGA, J.:
In this Petition[1] under Rule 45, petitioner Spouses Alfredo and
Rosella Edrada (petitioners) seek the reversal of the Former Second
Division of the Court of Appeals Decision[2] and Resolution[3] in CA-
G.R. CV No. 66375, which affirmed the Decision of Regional Trial
Court (RTC) of Antipolo City, Branch 71,[4] in Civil Case No. 96-4057,
and denied the Motion for Reconsideration[5] therein.
Respondent spouses Eduardo and Carmencita Ramos (respondents)
are the owners of two (2) fishing vessels, the Lady Lalaine and the
Lady Theresa. On 1 April 1996, respondents and petitioners
executed an untitled handwritten document which lies at the center
of the present controversy. Its full text is reproduced below:
1st April 1996
This is to acknowledge that Fishing Vessels Lady Lalaine and Lady
Theresa owned by Eduardo O. Ramos are now in my possession and
received in good running and serviceable order. As such, the vessels
are now my responsibility.
Documents pertaining to the sale and agreement of payments
between me and the owner of the vessel to follow. The agreed price
for the vessel is Nine Hundred Thousand Only (P900,000.00).
(SGD.) (SGD.)
EDUARDO O. RAMOS ALFREDO R. EDRADA
(Seller) (Purchaser)
CONFORME: CONFORME:
(SGD.) (SGD.)
CARMENCITA RAMOS ROSIE ENDRADA[6]
Upon the signing of the document, petitioners delivered to
respondents four (4) postdated Far East Bank and Trust Company
(FEBTC) checks payable to cash drawn by petitioner Rosella Edrada,
in various amounts totaling One Hundred Forty Thousand Pesos
(P140,000.00). The first three (3) checks were honored upon
presentment to the drawee bank while the fourth check for One
Hundred Thousand Pesos (P100,000.00) was dishonored because of
a stop payment order.
On 3 June 1996, respondents filed an action against petitioners for
specific performance with damages before the RTC, praying that
petitioners be obliged to execute the necessary deed of sale of the
two fishing vessels and to pay the balance of the purchase price. In
their Complaint,[7] respondents alleged that petitioners contracted
to buy the two fishing vessels for the agreed purchase price of Nine
Hundred Thousand Pesos (P900,000.00), as evidenced by the above-
quoted document, which according to them evinced a contract to
buy. However, despite delivery of said vessels and repeated oral
demands, petitioners failed to pay the balance, so respondents
further averred.
Belying the allegations of respondents, in their Answer with
Counterclaim,[8] petitioners averred that the document sued upon
merely embodies an agreement brought about by the loans they
extended to respondents. According to petitioners, respondents
allowed them to manage or administer the fishing vessels as a
business on the understanding that should they find the business
profitable, the vessels would be sold to them for Nine Hundred
Thousand Pesos (P900,000.00). But petitioners decided to call it
quits after spending a hefty sum for the repair and maintenance of
the vessels which were already in dilapidated condition.
After trial, the RTC rendered a Decision[9] dated 22 February 1999,
the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs
and against the defendants and the latter are ordered to pay to the
former the amount of Eight Hundred Sixty Thousand Pesos
(P860,000.00) with legal interests thereon from June 30, 1996 until
fully paid; the amount of P20,000.00 as attorneys fees and the cost
of suit.
The counterclaim of the defendants for moral and exemplary
damages and for attorneys fees is dismissed for lack of merit.
SO ORDERED.[10]
The RTC treated the action as one for collection of a sum of money
and for damages and considered the document as a perfected
contract of sale. On 19 April 1999, petitioners filed a Motion for
Reconsideration which the RTC denied in an Order[11] dated 2 July
1999.
Both parties appealed the RTC Decision. However, finding no
reversible error in the appealed decision, the Court of Appeals, in its
Decision,[12] affirmed the same and dismissed both appeals. Only
petitioners elevated the controversy to this Court.
Petitioners raised the nature of the subject document as the
primary legal issue. They contend that there was no perfected
contract of sale as distinguished from a contract to sell. They
likewise posed as sub-issues the purpose for which the checks were
issued, whether replacement of the crew was an act of ownership
or administration, whether petitioners failed to protest the
dilapidated condition of the vessels, and whether the instances
when the vessels went out to sea proved that the vessels were not
seaworthy.[13] It is also alleged in the petition that the true
agreement as between the parties was that of a loan.
Evidently, the petition hinges on the true nature of the document
dated 1 April 1996. Normally, the Court is bound by the factual
findings of the lower courts, and accordingly, should affirm the
conclusion that the document in question was a perfected contract
of sale. However, we find that both the RTC and the Court of
Appeals gravely misapprehended the nature of the said document,
and a reevaluation of the document is in order.[14] Even if such
reevaluation would lead the court to examine issues not raised by
the parties, it should be remembered that the Court has authority
to review matters even if not assigned as errors in the appeal, if it is
found that their consideration is necessary in arriving at a just
decision of the case.[15]
In doing so, we acknowledge that the contending parties offer vastly
differing accounts as to the true nature of the agreement. Still, we
need not look beyond the document dated 1 April 1996 and the
stipulations therein in order to ascertain what obligations, if any,
have been contracted by the party. The parol evidence rule forbids
any addition to or contradiction of the terms of a written agreement
by testimony or other evidence purporting to show that different
terms were agreed upon by the parties, varying the purport of the
written contract. Whatever is not found in the writing is understood
to have been waived and abandoned.[16]
We disagree with the RTC and the Court of Appeals that the
document is a perfected contract of sale. A contract of sale is
defined as an agreement whereby one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefore a price certain in
money or its equivalent.[17] It must evince the consent on the part
of the seller to transfer and deliver and on the part of the buyer to
pay.[18]
An examination of the document reveals that there is no perfected
contract of sale. The agreement may confirm the receipt by
respondents of the two vessels and their purchase price. However,
there is no equivocal agreement to transfer ownership of the vessel,
but a mere commitment that documents pertaining to the sale and
agreement of payments[are] to follow. Evidently, the document or
documents which would formalize the transfer of ownership and
contain the terms of payment of the purchase price, or the period
when such would become due and demandable, have yet to be
executed. But no such document was executed and no such terms
were stipulated upon.

The fact that there is a stated total purchase price should not lead
to the conclusion that a contract of sale had been perfected. In
numerous cases,[19] the most recent of which is Swedish Match, AB
v. Court of Appeals,[20] we held that before a valid and binding
contract of sale can exist, the manner of payment of the purchase
price must first be established, as such stands as essential to the
validity of the sale. After all, such agreement on the terms of
payment is integral to the element of a price certain, such that a
disagreement on the manner of payment is tantamount to a failure
to agree on the price.
Assuming arguendo that the document evinces a perfected contract
of sale, the absence of definite terms of payment therein would
preclude its enforcement by the respondents through the instant
Complaint. A requisite for the judicial enforcement of an obligation
is that the same is due and demandable. The absence of a stipulated
period by which the purchase price should be paid indicates that at
the time of the filing of the complaint, the obligation to pay was not
yet due and demandable.
Respondents, during trial, did claim the existence of a period.
Respondent Carmencita Ramos, during cross-examination, claimed
that the supposed balance shall be paid on 30 June 1996.[21] But
how do respondents explain why the Complaint was filed on 3 June
1996? Assuming that the 30 June 1996 period was duly agreed upon
by the parties, the filing of the Complaint was evidently premature,
as no cause of action had accrued yet. There could not have been
any breach of obligation because on the date the action was filed,
the alleged maturity date for the payment of the balance had not
yet arrived.
In order that respondents could have a valid cause of action, it is
essential that there must have been a stipulated period within
which the payment would have become due and demandable. If the
parties themselves could not come into agreement, the courts may
be asked to fix the period of the obligation, under Article 1197 of
the Civil Code.[22] The respondents did not avail of such relief prior
to the filing of the instant Complaint; thus, the action should fail
owing to its obvious prematurity.
Returning to the true nature of the document, we neither could
conclude that a contract to sell had been established. A contract to
sell is defined as a bilateral contract whereby the prospective seller,
while expressly reserving the ownership of the subject property
despite delivery thereof to the prospective buyer, binds himself to
sell the said property exclusively to the prospective buyer upon
fulfillment of the condition agreed upon, that is, full payment of the
purchase price.[23]
A contract is perfected when there is concurrence of the wills of the
contracting parties with respect to the object and the cause of the
contract. In this case, the agreement merely acknowledges that a
purchase price had been agreed on by the parties. There was no
mutual promise to buy on the part of petitioners and to sell on the
part of respondents. Again, the aforestated proviso in the
agreement that documents pertaining to the sale and agreement of
payments between the parties will follow clearly manifests lack of
agreement between the parties as to the terms of the contract to
sell, particularly the object and cause of the contract.
The agreement in question does not create any obligatory force
either for the transfer of title of the vessels, or the rendition of
payments as part of the purchase price. At most, this agreement
bares only their intention to enter into either a contract to sell or a
contract of sale.
Consequently, the courts below erred in ordering the enforcement
of a contract of sale that had yet to come into existence. Instead,
the instant Complaint should be dismissed. It prays for three reliefs
arising from the enforcement of the document: execution by the
petitioners of the necessary deed of sale over the vessels, the
payment of the balance of the purchase price, and damages. The
lower courts have already ruled that damages are unavailing. Our
finding that there is no perfected contract of sale precludes the
finding of any cause of action that would warrant the granting of
the first two reliefs. No cause of action arises until there is a breach
or violation thereof by either party.[24] Considering that the
documents create no obligation to execute or even pursue a
contract of sale, but only manifest an intention to eventually
contract one, we find no rights breached or violated that would
warrant any of the reliefs sought in the Complaint.

WHEREFORE, the petition is GRANTED. The assailed Decision and

Resolution of the Court of Appeals are REVERSED and SET ASIDE.
The case before the Regional Trial Court is ordered DISMISSED. No
pronouncement as to costs.SO ORDERED.