G.R. No.
146839 March 23, 2011 Sell was purportedly "upgraded" into a Conditional
ROLANDO T. CATUNGAL, JOSE T. CATUNGAL,
JR., CAROLYN T. CATUNGAL and ERLINDA
CATUNGAL-WESSEL, Petitioners,
vs.
ANGEL S. RODRIGUEZ, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
Before the Court is a Petition for Review on Certiorari,
assailing the following issuances of the Court of
Appeals in CA-G.R. CV No. 40627 consolidated with
CA-G.R. SP No. 27565: (a) the August 8, 2000
Decision,1 which affirmed the Decision2 dated May 30,
1992 of the Regional Trial Court (RTC), Branch 27 of
Lapu-lapu City, Cebu in Civil Case No. 2365-L, and
(b) the January 30, 2001 Resolution,3 denying herein
petitioners’ motion for reconsideration of the August 8,
2000 Decision.
The relevant factual and procedural antecedents of
this case are as follows:
This controversy arose from a Complaint for
Damages and Injunction with Preliminary
Injunction/Restraining Order4filed on December 10,
1990 by herein respondent Angel S. Rodriguez
(Rodriguez), with the RTC, Branch 27, Lapu-lapu City,
Cebu, docketed as Civil Case No. 2365-L against the
spouses Agapita and Jose Catungal (the spouses
Catungal), the parents of petitioners.
In the said Complaint, it was alleged that Agapita T.
Catungal (Agapita) owned a parcel of land (Lot
10963) with an area of 65,246 square meters,
covered by Original Certificate of Title (OCT) No.
1055 in her name situated in the Barrio of Talamban,
Cebu City. The said property was allegedly the
exclusive paraphernal property of Agapita.
On April 23, 1990, Agapita, with the consent of her
husband Jose, entered into a Contract to Sell6 with
respondent Rodriguez. Subsequently, the Contract to
Deed of Sale7 dated July 26, 1990 between the same
parties. Both the Contract to Sell and the Conditional
Deed of Sale were annotated on the title.
The provisions of the Conditional Deed of Sale
pertinent to the present dispute are quoted below:
1. The VENDOR for and in consideration of the sum
of TWENTY[-]FIVE MILLION PESOS
(₱25,000,000.00) payable as follows:
a. FIVE HUNDRED THOUSAND PESOS
(₱500,000.00) downpayment upon the
signing of this agreement, receipt of which
sum is hereby acknowledged in full from the
VENDEE.
b. The balance of TWENTY[-]FOUR
MILLION FIVE HUNDRED THOUSAND
PESOS (₱24,500,000.00) shall be payable
in five separate checks, made to the order of
JOSE Ch. CATUNGAL, the first check shall
be for FOUR MILLION FIVE HUNDRED
THOUSAND PESOS (₱4,500,000.00) and
the remaining balance to be paid in four
checks in the amounts of FIVE MILLION
PESOS (₱5,000,000.00) each after the
VENDEE have (sic) successfully negotiated,
secured and provided a Road Right of Way
consisting of 12 meters in width cutting
across Lot 10884 up to the national road,
either by widening the existing Road Right of
Way or by securing a new Road Right of
Way of 12 meters in width. If however said
Road Right of Way could not be negotiated,
the VENDEE shall give notice to the
VENDOR for them to reassess and solve the
problem by taking other options and should
the situation ultimately prove futile, he shall
take steps to rescind or cancel the herein
Conditional Deed of Sale.
c. That the access road or Road Right of
Way leading to Lot 10963 shall be the
responsibility of the VENDEE to secure and
any or all cost relative to the acquisition
thereof shall be borne solely by the
VENDEE. He shall, however, be accorded
with enough time necessary for the success
of his endeavor, granting him a free hand in
negotiating for the passage.
BY THESE PRESENTS, the VENDOR do hereby
agree to sell by way of herein CONDITIONAL DEED
OF SALE to VENDEE, his heirs, successors and
assigns, the real property described in the Original
Certificate of Title No. 105 x x x.
xxxx
5. That the VENDEE has the option to rescind the
sale. In the event the VENDEE exercises his option to
rescind the herein Conditional Deed of Sale, the
VENDEE shall notify the VENDOR by way of a written
notice relinquishing his rights over the property. The
VENDEE shall then be reimbursed by the VENDOR
the sum of FIVE HUNDRED THOUSAND PESOS
(₱500,000.00) representing the downpayment,
interest free, payable but contingent upon the event
that the VENDOR shall have been able to sell the
property to another party.8
In accordance with the Conditional Deed of Sale,
Rodriguez purportedly secured the necessary surveys
and plans and through his efforts, the property was
reclassified from agricultural land into residential land
which he claimed substantially increased the
property’s value. He likewise alleged that he actively
negotiated for the road right of way as stipulated in
the contract.9
Rodriguez further claimed that on August 31, 1990
the spouses Catungal requested an advance of
₱5,000,000.00 on the purchase price for personal
reasons. Rodriquez allegedly refused on the ground
that the amount was substantial and was not due
under the terms of their agreement. Shortly after his
refusal to pay the advance, he purportedly learned
that the Catungals were offering the property for sale
to third parties.10
Thereafter, Rodriguez received letters dated October
22, 1990,11 October 24, 199012 and October 29,
1
1990,13 all signed by Jose Catungal who was a
lawyer, essentially demanding that the former make
up his mind about buying the land or exercising his
"option" to buy because the spouses Catungal
allegedly received other offers and they needed
money to pay for personal obligations and for
investing in other properties/business ventures.
Should Rodriguez fail to exercise his option to buy the
land, the Catungals warned that they would consider
the contract cancelled and that they were free to look
for other buyers.
In a letter dated November 4, 1990,14 Rodriguez
registered his objections to what he termed the
Catungals’ unwarranted demands in view of the terms
of the Conditional Deed of Sale which allowed him
sufficient time to negotiate a road right of way and
granted him, the vendee, the exclusive right to rescind
the contract. Still, on November 15, 1990, Rodriguez
purportedly received a letter dated November 9,
199015 from Atty. Catungal, stating that the contract
had been cancelled and terminated.
Contending that the Catungals’ unilateral rescission of
the Conditional Deed of Sale was unjustified, arbitrary
and unwarranted, Rodriquez prayed in his Complaint,
that:
1. Upon the filing of this complaint, a
restraining order be issued enjoining
defendants [the spouses Catungal], their
employees, agents, representatives or other
persons acting in their behalf from offering
the property subject of this case for sale to
third persons; from entertaining offers or
proposals by third persons to purchase the
said property; and, in general, from
performing acts in furtherance or
implementation of defendants’ rescission of
their Conditional Deed of Sale with plaintiff
[Rodriguez].
2. After hearing, a writ of preliminary
injunction be issued upon such reasonable
bond as may be fixed by the court enjoining
defendants and other persons acting in their
behalf from performing any of the acts
mentioned in the next preceding paragraph.
3. After trial, a Decision be rendered:
a) Making the injunction permanent;
b) Condemning defendants to pay
to plaintiff, jointly and solidarily:
Actual damages in the amount of ₱400,000.00 for
their unlawful rescission of the Agreement and their
performance of acts in violation or disregard of the
said Agreement;
Moral damages in the amount of ₱200,000.00;
Exemplary damages in the amount of ₱200,000.00;
Expenses of litigation and attorney’s fees in the
amount of ₱100,000.00; and
Costs of suit.16
On December 12, 1990, the trial court issued a
temporary restraining order and set the application for
a writ of preliminary injunction for hearing on
December 21, 1990 with a directive to the spouses
Catungal to show cause within five days from notice
why preliminary injunction should not be granted. The
trial court likewise ordered that summons be served
on them.17
Thereafter, the spouses Catungal filed their
opposition18 to the issuance of a writ of preliminary
injunction and later filed a motion to dismiss 19 on the
ground of improper venue. According to the
Catungals, the subject property was located in Cebu
City and thus, the complaint should have been filed in
Cebu City, not Lapu-lapu City. Rodriguez opposed the
motion to dismiss on the ground that his action was a
personal action as its subject was breach of a
contract, the Conditional Deed of Sale, and not title to,
or possession of real property.20
In an Order dated January 17, 1991,21 the trial court
denied the motion to dismiss and ruled that the
complaint involved a personal action, being merely for
damages with a prayer for injunction.
Subsequently, on January 30, 1991, the trial court
ordered the issuance of a writ of preliminary injunction
upon posting by Rodriguez of a bond in the amount of
₱100,000.00 to answer for damages that the
defendants may sustain by reason of the injunction.
On February 1, 1991, the spouses Catungal filed their
Answer with Counterclaim22 alleging that they had the
right to rescind the contract in view of (1) Rodriguez’s
failure to negotiate the road right of way despite the
lapse of several months since the signing of the
contract, and (2) his refusal to pay the additional
amount of ₱5,000,000.00 asked by the Catungals,
which to them indicated his lack of funds to purchase
the property. The Catungals likewise contended that
Rodriguez did not have an exclusive right to rescind
the contract and that the contract, being reciprocal,
meant both parties had the right to rescind.23 The
spouses Catungal further claimed that it was
Rodriguez who was in breach of their agreement and
guilty of bad faith which justified their rescission of the
contract.24 By way of counterclaim, the spouses
Catungal prayed for actual and consequential
damages in the form of unearned interests from the
balance (of the purchase price in the amount) of
₱24,500,000.00, moral and exemplary damages in
the amount of ₱2,000,000.00, attorney’s fees in the
amount of ₱200,000.00 and costs of suits and
litigation expenses in the amount of
₱10,000.00.25 The spouses Catungal prayed for the
dismissal of the complaint and the grant of their
counterclaim.
The Catungals amended their Answer
twice,26 retaining their basic allegations but amplifying
their charges of contractual breach and bad faith on
the part of Rodriguez and adding the argument that in
view of Article 1191 of the Civil Code, the power to
rescind reciprocal obligations is granted by the law
itself to both parties and does not need an express
stipulation to grant the same to the injured party. In
the Second Amended Answer with Counterclaim, the
spouses Catungal added a prayer for the trial court to
order the Register of Deeds to cancel the annotations
of the two contracts at the back of their OCT.27
On October 24, 1991, Rodriguez filed an Amended
Complaint,28 adding allegations to the effect that the
2
Catungals were guilty of several misrepresentations
which purportedly induced Rodriguez to buy the
property at the price of ₱25,000,000.00. Among
others, it was alleged that the spouses Catungal
misrepresented that their Lot 10963 includes a flat
portion of land which later turned out to be a separate
lot (Lot 10986) owned by Teodora Tudtud who sold
the same to one Antonio Pablo. The Catungals also
allegedly misrepresented that the road right of way
will only traverse two lots owned by Anatolia Tudtud
and her daughter Sally who were their relatives and
who had already agreed to sell a portion of the said
lots for the road right of way at a price of ₱550.00 per
square meter. However, because of the Catungals’
acts of offering the property to other buyers who
offered to buy the road lots for ₱2,500.00 per square
meter, the adjacent lot owners were no longer willing
to sell the road lots to Rodriguez at ₱550.00 per
square meter but were asking for a price of ₱3,500.00
per square meter. In other words, instead of assisting
Rodriguez in his efforts to negotiate the road right of
way, the spouses Catungal allegedly intentionally and
maliciously defeated Rodriguez’s negotiations for a
road right of way in order to justify rescission of the
said contract and enable them to offer the property to
other buyers.
Despite requesting the trial court for an extension of
time to file an amended Answer,29 the Catungals did
not file an amended Answer and instead filed an
Urgent Motion to Dismiss30 again invoking the ground
of improper venue. In the meantime, for failure to file
an amended Answer within the period allowed, the
trial court set the case for pre-trial on December 20,
1991.
During the pre-trial held on December 20, 1991, the
trial court denied in open court the Catungals’ Urgent
Motion to Dismiss for violation of the rules and for
being repetitious and having been previously
denied.31 However, Atty. Catungal refused to enter
into pre-trial which prompted the trial court to declare
the defendants in default and to set the presentation
of the plaintiff’s evidence on February 14, 1992.32
On December 23, 1991, the Catungals filed a motion
for reconsideration33 of the December 20, 1991 Order
denying their Urgent Motion to Dismiss but the trial
court denied reconsideration in an Order dated
February 3, 1992.34Undeterred, the Catungals
subsequently filed a Motion to Lift and to Set Aside
Order of Default35 but it was likewise denied for being
in violation of the rules and for being not
meritorious.36 On February 28, 1992, the Catungals
filed a Petition for Certiorari and Prohibition37 with the
Court of Appeals, questioning the denial of their
motion to dismiss and the order of default. This was
docketed as CA-G.R. SP No. 27565.
Meanwhile, Rodriguez proceeded to present his
evidence before the trial court.
In a Decision dated May 30, 1992, the trial court ruled
in favor of Rodriguez, finding that: (a) under the
contract it was complainant (Rodriguez) that had the
option to rescind the sale; (b) Rodriguez’s obligation
to pay the balance of the purchase price arises only
upon successful negotiation of the road right of way;
(c) he proved his diligent efforts to negotiate the road
right of way; (d) the spouses Catungal were guilty of
misrepresentation which defeated Rodriguez’s efforts
to acquire the road right of way; and (e) the
Catungals’ rescission of the contract had no basis and
was in bad faith. Thus, the trial court made the
injunction permanent, ordered the Catungals to
reduce the purchase price by the amount of
acquisition of Lot 10963 which they misrepresented
was part of the property sold but was in fact owned by
a third party and ordered them to pay ₱100,000.00 as
damages, ₱30,000.00 as attorney’s fees and costs.
The Catungals appealed the decision to the Court of
Appeals, asserting the commission of the following
errors by the trial court in their appellants’
brief38 dated February 9, 1994:
I
THE COURT A QUO ERRED IN NOT DISMISSING
OF (SIC) THE CASE ON THE GROUNDS OF
IMPROPER VENUE AND LACK OF JURISDICTION.
II
THE COURT A QUO ERRED IN CONSIDERING
THE CASE AS A PERSONAL AND NOT A REAL
ACTION.
III
GRANTING WITHOUT ADMITTING THAT VENUE
WAS PROPERLY LAID AND THE CASE IS A
PERSONAL ACTION, THE COURT A QUO ERRED
IN DECLARING THE DEFENDANTS IN DEFAULT
DURING THE PRE-TRIAL WHEN AT THAT TIME
THE DEFENDANTS HAD ALREADY FILED THEIR
ANSWER TO THE COMPLAINT.
IV
THE COURT A QUO ERRED IN CONSIDERING
THE DEFENDANTS AS HAVING LOST THEIR
LEGAL STANDING IN COURT WHEN AT MOST
THEY COULD ONLY BE CONSIDERED AS IN
DEFAULT AND STILL ENTITLED TO NOTICES OF
ALL FURTHER PROCEEDINGS ESPECIALLY
AFTER THEY HAD FILED THE MOTION TO LIFT
THE ORDER OF DEFAULT.
V
THE COURT A QUO ERRED IN ISSUING THE WRIT
[OF] PRELIMINARY INJUNCTION RESTRAINING
THE EXERCISE OF ACTS OF OWNERSHIP AND
OTHER RIGHTS OVER REAL PROPERTY
OUTSIDE OF THE COURT’S TERRITORIAL
JURISDICTION AND INCLUDING PERSONS WHO
WERE NOT BROUGHT UNDER ITS JURISDICTION,
THUS THE NULLITY OF THE WRIT.
VI
THE COURT A QUO ERRED IN NOT RESTRAINING
ITSELF MOTU PROP[R]IO FROM CONTINUING
WITH THE PROCEEDINGS IN THE CASE AND IN
RENDERING DECISION THEREIN IF ONLY FOR
REASON OF COURTESY AND FAIRNESS BEING
MANDATED AS DISPENSER OF FAIR AND EQUAL
JUSTICE TO ALL AND SUNDRY WITHOUT FEAR
OR FAVOR IT HAVING BEEN SERVED EARLIER
3
WITH A COPY OF THE PETITION FOR
CERTIORARI QUESTIONING ITS VENUE AND
JURISDICTION IN CA-G.R. NO. SP 27565 IN FACT
NOTICES FOR THE FILING OF COMMENT
THERETO HAD ALREADY BEEN SENT OUT BY
THE HONORABLE COURT OF APPEALS, SECOND
DIVISION, AND THE COURT A QUO WAS
FURNISHED WITH COPY OF SAID NOTICE.
VII
THE COURT A QUO ERRED IN DECIDING THE
CASE IN FAVOR OF THE PLAINTIFF AND
AGAINST THE DEFENDANTS ON THE BASIS OF
EVIDENCE WHICH ARE IMAGINARY,
FABRICATED, AND DEVOID OF TRUTH, TO BE
STATED IN DETAIL IN THE DISCUSSION OF THIS
PARTICULAR ERROR, AND, THEREFORE, THE
DECISION IS REVERSIBLE.39
On August 31, 1995, after being granted several
extensions, Rodriguez filed his appellee’s
brief,40 essentially arguing the correctness of the trial
court’s Decision regarding the foregoing issues raised
by the Catungals. Subsequently, the Catungals filed a
Reply Brief41 dated October 16, 1995.
From the filing of the appellants’ brief in 1994 up to
the filing of the Reply Brief, the spouses Catungal
were represented by appellant Jose Catungal himself.
However, a new counsel for the Catungals, Atty.
Jesus N. Borromeo (Atty. Borromeo), entered his
appearance before the Court of Appeals on
September 2, 1997.42 On the same date, Atty.
Borromeo filed a Motion for Leave of Court to File
Citation of Authorities43 and a Citation of
Authorities.44 This would be followed by Atty.
Borromeo’s filing of an Additional Citation of Authority
and Second Additional Citation of Authority both on
November 17, 1997.45
During the pendency of the case with the Court of
Appeals, Agapita Catungal passed away and thus,
her husband, Jose, filed on February 17, 1999 a
motion for Agapita’s substitution by her surviving
children.46
On August 8, 2000, the Court of Appeals rendered a
Decision in the consolidated cases CA-G.R. CV No.
40627 and CA-G.R. SP No. 27565,47 affirming the trial
court’s Decision.
In a Motion for Reconsideration dated August 21,
2000,48 counsel for the Catungals, Atty. Borromeo,
argued for the first time that paragraphs 1(b) and
549 of the Conditional Deed of Sale, whether taken
separately or jointly, violated the principle of mutuality
of contracts under Article 1308 of the Civil Code and
thus, said contract was void ab initio. He adverted to
the cases mentioned in his various citations of
authorities to support his argument of nullity of the
contract and his position that this issue may be raised
for the first time on appeal.
Meanwhile, a Second Motion for Substitution50 was
filed by Atty. Borromeo in view of the death of Jose
Catungal.
In a Resolution dated January 30, 2001, the Court of
Appeals allowed the substitution of the deceased
Agapita and Jose Catungal by their surviving heirs
and denied the motion for reconsideration for lack of
merit
Hence, the heirs of Agapita and Jose Catungal filed
on March 27, 2001 the present petition for
review,51 which essentially argued that the Court of
Appeals erred in not finding that paragraphs 1(b)
and/or 5 of the Conditional Deed of Sale, violated the
principle of mutuality of contracts under Article 1308
of the Civil Code. Thus, said contract was supposedly
void ab initio and the Catungals’ rescission thereof
was superfluous.
In his Comment,52 Rodriguez highlighted that (a)
petitioners were raising new matters that cannot be
passed upon on appeal; (b) the validity of the
Conditional Deed of Sale was already admitted and
petitioners cannot be allowed to change theories on
appeal; (c) the questioned paragraphs of the
Conditional Deed of Sale were valid; and (d)
petitioners were the ones who committed fraud and
breach of contract and were not entitled to relief for
not having come to court with clean hands.
The Court gave due course to the Petition53 and the
parties filed their respective Memoranda.
The issues to be resolved in the case at bar can be
summed into two questions:
I. Are petitioners allowed to raise their theory
of nullity of the Conditional Deed of Sale for
the first time on appeal?
II. Do paragraphs 1(b) and 5 of the
Conditional Deed of Sale violate the principle
of mutuality of contracts under Article 1308
of the Civil Code?
On petitioners’ change of theory
Petitioners claimed that the Court of Appeals should
have reversed the trial courts’ Decision on the ground
of the alleged nullity of paragraphs 1(b) and 5 of the
Conditional Deed of Sale notwithstanding that the
same was not raised as an error in their appellants’
brief. Citing Catholic Bishop of Balanga v. Court of
Appeals,54 petitioners argued in the Petition that this
case falls under the following exceptions:
(3) Matters not assigned as errors on appeal
but consideration of which is necessary in
arriving at a just decision and complete
resolution of the case or to serve the interest
of justice or to avoid dispensing piecemeal
justice;
(4) Matters not specifically assigned as
errors on appeal but raised in the trial court
and are matters of record having some
bearing on the issue submitted which the
parties failed to raise or which the lower
court ignored;
(5) Matters not assigned as errors on appeal
but closely related to an error assigned; and
(6) Matters not assigned as errors but upon
which the determination of a question
properly assigned is dependent.55
4
We are not persuaded.
This is not an instance where a party merely failed to
assign an issue as an error in the brief nor failed to
argue a material point on appeal that was raised in
the trial court and supported by the record. Neither is
this a case where a party raised an error closely
related to, nor dependent on the resolution of, an
error properly assigned in his brief. This is a situation
where a party completely changes his theory of the
case on appeal and abandons his previous
assignment of errors in his brief, which plainly should
not be allowed as anathema to due process.
Petitioners should be reminded that the object of
pleadings is to draw the lines of battle between the
litigants and to indicate fairly the nature of the claims
or defenses of both parties.56 In Philippine National
Construction Corporation v. Court of Appeals,57 we
held that "[w]hen a party adopts a certain theory in the
trial court, he will not be permitted to change his
theory on appeal, for to permit him to do so would not
only be unfair to the other party but it would also be
offensive to the basic rules of fair play, justice and
due process."58
We have also previously ruled that "courts of justice
have no jurisdiction or power to decide a question not
in issue. Thus, a judgment that goes beyond the
issues and purports to adjudicate something on which
the court did not hear the parties, is not only irregular
but also extrajudicial and invalid. The rule rests on the
fundamental tenets of fair play."59
During the proceedings before the trial court, the
spouses Catungal never claimed that the provisions in
the Conditional Deed of Sale, stipulating that the
payment of the balance of the purchase price was
contingent upon the successful negotiation of a road
right of way (paragraph 1[b]) and granting Rodriguez
the option to rescind (paragraph 5), were void for
allegedly making the fulfillment of the contract
dependent solely on the will of Rodriguez.
On the contrary, with respect to paragraph 1(b), the
Catungals did not aver in the Answer (and its
amended versions) that the payment of the purchase
price was subject to the will of Rodriguez but rather
they claimed that paragraph 1(b) in relation to 1(c)
only presupposed a reasonable time be given to
Rodriguez to negotiate the road right of way.
However, it was petitioners’ theory that more than
sufficient time had already been given Rodriguez to
negotiate the road right of way. Consequently,
Rodriguez’s refusal/failure to pay the balance of the
purchase price, upon demand, was allegedly
indicative of lack of funds and a breach of the contract
on the part of Rodriguez.
Anent paragraph 5 of the Conditional Deed of Sale,
regarding Rodriguez’s option to rescind, it was
petitioners’ theory in the court a quo that
notwithstanding such provision, they retained the right
to rescind the contract for Rodriguez’s breach of the
same under Article 1191 of the Civil Code.
Verily, the first time petitioners raised their theory of
the nullity of the Conditional Deed of Sale in view of
the questioned provisions was only in their Motion for
Reconsideration of the Court of Appeals’ Decision,
affirming the trial court’s judgment. The previous filing
of various citations of authorities by Atty. Borromeo
and the Court of Appeals’ resolutions noting such
citations were of no moment. The citations of
authorities merely listed cases and their main rulings
without even any mention of their relevance to the
present case or any prayer for the Court of Appeals to
consider them.1âwphi1 In sum, the Court of Appeals
did not err in disregarding the citations of authorities
or in denying petitioners’ motion for reconsideration of
the assailed August 8, 2000 Decision in view of the
proscription against changing legal theories on
appeal.
Ruling on the questioned provisions of the Conditional
Deed of Sale
Even assuming for the sake of argument that this
Court may overlook the procedural misstep of
petitioners, we still cannot uphold their belatedly
proffered arguments.
At the outset, it should be noted that what the parties
entered into is a Conditional Deed of Sale, whereby
the spouses Catungal agreed to sell and Rodriguez
agreed to buy Lot 10963 conditioned on the payment
of a certain price but the payment of the purchase
price was additionally made contingent on the
successful negotiation of a road right of way. It is
elementary that "[i]n conditional obligations, the
acquisition of rights, as well as the extinguishment or
loss of those already acquired, shall depend upon the
happening of the event which constitutes the
condition."60
Petitioners rely on Article 1308 of the Civil Code to
support their conclusion regarding the claimed nullity
of the aforementioned provisions. Article 1308 states
that "[t]he contract must bind both contracting parties;
its validity or compliance cannot be left to the will of
one of them."
Article 1182 of the Civil Code, in turn, provides:
Art. 1182. When the fulfillment of the condition
depends upon the sole will of the debtor, the
conditional obligation shall be void. If it depends upon
chance or upon the will of a third person, the
obligation shall take effect in conformity with the
provisions of this Code.
In the past, this Court has distinguished between a
condition imposed on the perfection of a contract and
a condition imposed merely on the performance of an
obligation. While failure to comply with the first
condition results in the failure of a contract, failure to
comply with the second merely gives the other party
the option to either refuse to proceed with the sale or
to waive the condition.61 This principle is evident in
Article 1545 of the Civil Code on sales, which
provides in part:
Art. 1545. Where the obligation of either party to a
contract of sale is subject to any condition which is
not performed, such party may refuse to proceed with
the contract or he may waive performance of the
condition x x x.
Paragraph 1(b) of the Conditional Deed of Sale,
stating that respondent shall pay the balance of the
purchase price when he has successfully negotiated
5
and secured a road right of way, is not a condition on
the perfection of the contract nor on the validity of the
entire contract or its compliance as contemplated in
Article 1308. It is a condition imposed only on
respondent’s obligation to pay the remainder of the
purchase price. In our view and applying Article 1182,
such a condition is not purely potestative as
petitioners contend. It is not dependent on the sole
will of the debtor but also on the will of third persons
who own the adjacent land and from whom the road
right of way shall be negotiated. In a manner of
speaking, such a condition is likewise dependent on
chance as there is no guarantee that respondent and
the third party-landowners would come to an
agreement regarding the road right of way. This type
of mixed condition is expressly allowed under Article
1182 of the Civil Code.
Analogous to the present case is Romero v. Court of
Appeals,62 wherein the Court interpreted the legal
effect of a condition in a deed of sale that the balance
of the purchase price would be paid by the vendee
when the vendor has successfully ejected the informal
settlers occupying the property. In Romero, we found
that such a condition did not affect the perfection of
the contract but only imposed a condition on the
fulfillment of the obligation to pay the balance of the
purchase price, to wit:
From the moment the contract is perfected, the
parties are bound not only to the fulfillment of what
has been expressly stipulated but also to all the
consequences which, according to their nature, may
be in keeping with good faith, usage and law. Under
the agreement, private respondent is obligated to
evict the squatters on the property. The ejectment of
the squatters is a condition the operative act of which
sets into motion the period of compliance by petitioner
of his own obligation, i.e., to pay the balance of the
purchase price. Private respondent's failure "to
remove the squatters from the property" within the
stipulated period gives petitioner the right to either
refuse to proceed with the agreement or waive that
condition in consonance with Article 1545 of the Civil
Code. This option clearly belongs to petitioner and not
to private respondent.
We share the opinion of the appellate court that the
undertaking required of private respondent does not
constitute a "potestative condition dependent solely
on his will" that might, otherwise, be void in
accordance with Article 1182 of the Civil Code but a
"mixed" condition "dependent not on the will of the
vendor alone but also of third persons like the
squatters and government agencies and personnel
concerned." We must hasten to add, however, that
where the so-called "potestative condition" is imposed
not on the birth of the obligation but on its fulfillment,
only the condition is avoided, leaving unaffected the
obligation itself.63 (Emphases supplied.)
From the provisions of the Conditional Deed of Sale
subject matter of this case, it was the vendee
(Rodriguez) that had the obligation to successfully
negotiate and secure the road right of way. However,
in the decision of the trial court, which was affirmed by
the Court of Appeals, it was found that respondent
Rodriguez diligently exerted efforts to secure the road
right of way but the spouses Catungal, in bad faith,
contributed to the collapse of the negotiations for said
road right of way. To quote from the trial court’s
decision:
It is therefore apparent that the vendee’s obligations
(sic) to pay the balance of the purchase price arises
only when the road-right-of-way to the property shall
have been successfully negotiated, secured and
provided. In other words, the obligation to pay the
balance is conditioned upon the acquisition of the
road-right-of-way, in accordance with paragraph 2 of
Article 1181 of the New Civil Code. Accordingly, "an
obligation dependent upon a suspensive condition
cannot be demanded until after the condition takes
place because it is only after the fulfillment of the
condition that the obligation arises." (Javier v[s] CA
183 SCRA) Exhibits H, D, P, R, T, FF and JJ show
that plaintiff [Rodriguez] indeed was diligent in his
efforts to negotiate for a road-right-of-way to the
property. The written offers, proposals and follow-up
of his proposals show that plaintiff [Rodriguez] went
all out in his efforts to immediately acquire an access
road to the property, even going to the extent of
offering ₱3,000.00 per square meter for the road lots
(Exh. Q) from the original ₱550.00 per sq. meter. This
Court also notes that defendant (sic) [the Catungals]
made misrepresentation in the negotiation they have
entered into with plaintiff [Rodriguez]. (Exhs. F and G)
The misrepresentation of defendant (sic) [the
Catungals] as to the third lot (Lot 10986) to be part
and parcel of the subject property [(]Lot 10963)
contributed in defeating the plaintiff’s [Rodriguez’s]
effort in acquiring the road-right-of-way to the
property. Defendants [the Catungals] cannot now
invoke the non-fulfillment of the condition in the
contract as a ground for rescission when defendants
[the Catungals] themselves are guilty of preventing
the fulfillment of such condition.
From the foregoing, this Court is of the considered
view that rescission of the conditional deed of sale by
the defendants is without any legal or factual
basis.64 x x x. (Emphases supplied.)
In all, we see no cogent reason to disturb the
foregoing factual findings of the trial court.
Furthermore, it is evident from the language of
paragraph 1(b) that the condition precedent (for
respondent’s obligation to pay the balance of the
purchase price to arise) in itself partly involves an
obligation to do, i.e., the undertaking of respondent to
negotiate and secure a road right of way at his own
expense.65 It does not escape our notice as well, that
far from disclaiming paragraph 1(b) as void, it was the
Catungals’ contention before the trial court that said
provision should be read in relation to paragraph 1(c)
which stated:
c. That the access road or Road Right of Way leading
to Lot 10963 shall be the responsibility of the
VENDEE to secure and any or all cost relative to the
acquisition thereof shall be borne solely by the
VENDEE. He shall, however, be accorded with
enough time necessary for the success of his
endeavor, granting him a free hand in negotiating for
the passage.66 (Emphasis supplied.)
The Catungals’ interpretation of the foregoing
stipulation was that Rodriguez’s obligation to
negotiate and secure a road right of way was one with
a period and that period, i.e., "enough time" to
negotiate, had already lapsed by the time they
6
demanded the payment of ₱5,000,000.00 from
respondent. Even assuming arguendo that the
Catungals were correct that the respondent’s
obligation to negotiate a road right of way was one
with an uncertain period, their rescission of the
Conditional Deed of Sale would still be unwarranted.
Based on their own theory, the Catungals had a
remedy under Article 1197 of the Civil Code, which
mandates:
Art. 1197. If the obligation does not fix a period, but
from its nature and the circumstances it can be
inferred that a period was intended, the courts may fix
the duration thereof.
The courts shall also fix the duration of the period
when it depends upon the will of the debtor.
In every case, the courts shall determine such period
as may under the circumstances have been probably
contemplated by the parties. Once fixed by the courts,
the period cannot be changed by them.
What the Catungals should have done was to first file
an action in court to fix the period within which
Rodriguez should accomplish the successful
negotiation of the road right of way pursuant to the
above quoted provision. Thus, the Catungals’ demand
for Rodriguez to make an additional payment of
₱5,000,000.00 was premature and Rodriguez’s failure
to accede to such demand did not justify the
rescission of the contract.
With respect to petitioners’ argument that paragraph 5
of the Conditional Deed of Sale likewise rendered the
said contract void, we find no merit to this theory.
Paragraph 5 provides:
5. That the VENDEE has the option to rescind the
sale. In the event the VENDEE exercises his option to
rescind the herein Conditional Deed of Sale, the
VENDEE shall notify the VENDOR by way of a written
notice relinquishing his rights over the property. The
VENDEE shall then be reimbursed by the VENDOR
the sum of FIVE HUNDRED THOUSAND PESOS
(₱500,000.00) representing the downpayment,
interest free, payable but contingent upon the event
that the VENDOR shall have been able to sell the
property to another party.67
Petitioners posited that the above stipulation was the
"deadliest" provision in the Conditional Deed of Sale
for violating the principle of mutuality of contracts
since it purportedly rendered the contract subject to
the will of respondent.
We do not agree.
It is petitioners’ strategy to insist that the Court
examine the first sentence of paragraph 5 alone and
resist a correlation of such sentence with other
provisions of the contract. Petitioners’ view, however,
ignores a basic rule in the interpretation of contracts –
that the contract should be taken as a whole.
Article 1374 of the Civil Code provides that "[t]he
various stipulations of a contract shall be interpreted
together, attributing to the doubtful ones that sense
which may result from all of them taken jointly." The
same Code further sets down the rule that "[i]f some
stipulation of any contract should admit of several
meanings, it shall be understood as bearing that
import which is most adequate to render it effectual." 68
Similarly, under the Rules of Court it is prescribed that
"[i]n the construction of an instrument where there are
several provisions or particulars, such a construction
is, if possible, to be adopted as will give effect to
all"69 and "for the proper construction of an
instrument, the circumstances under which it was
made, including the situation of the subject thereof
and of the parties to it, may be shown, so that the
judge may be placed in the position of those whose
language he is to interpret."70
Bearing in mind the aforementioned interpretative
rules, we find that the first sentence of paragraph 5
must be taken in relation with the rest of paragraph 5
and with the other provisions of the Conditional Deed
of Sale.
Reading paragraph 5 in its entirety will show that
Rodriguez’s option to rescind the contract is not
absolute as it is subject to the requirement that there
should be written notice to the vendor and the vendor
shall only return Rodriguez’s downpayment of
₱500,000.00, without interest, when the vendor shall
have been able to sell the property to another party.
That what is stipulated to be returned is only the
downpayment of ₱500,000.00 in the event that
Rodriguez exercises his option to rescind is
significant. To recall, paragraph 1(b) of the contract
clearly states that the installments on the balance of
the purchase price shall only be paid upon successful
negotiation and procurement of a road right of way. It
is clear from such provision that the existence of a
road right of way is a material consideration for
Rodriguez to purchase the property. Thus, prior to
him being able to procure the road right of way, by
express stipulation in the contract, he is not bound to
make additional payments to the Catungals. It was
further stipulated in paragraph 1(b) that: "[i]f however
said road right of way cannot be negotiated, the
VENDEE shall give notice to the VENDOR for them to
reassess and solve the problem by taking other
options and should the situation ultimately prove
futile, he [Rodriguez] shall take steps to rescind or
[cancel] the herein Conditional Deed of Sale." The
intention of the parties for providing subsequently in
paragraph 5 that Rodriguez has the option to rescind
the sale is undeniably only limited to the contingency
that Rodriguez shall not be able to secure the road
right of way. Indeed, if the parties intended to give
Rodriguez the absolute option to rescind the sale at
any time, the contract would have provided for the
return of all payments made by Rodriguez and not
only the downpayment. To our mind, the reason only
the downpayment was stipulated to be returned is that
the vendee’s option to rescind can only be exercised
in the event that no road right of way is secured and,
thus, the vendee has not made any additional
payments, other than his downpayment.
In sum, Rodriguez’s option to rescind the contract is
not purely potestative but rather also subject to the
same mixed condition as his obligation to pay the
balance of the purchase price – i.e., the negotiation of
a road right of way. In the event the condition is
fulfilled (or the negotiation is successful), Rodriguez
must pay the balance of the purchase price. In the
event the condition is not fulfilled (or the negotiation
fails), Rodriguez has the choice either (a) to not
proceed with the sale and demand return of his
7
downpayment or (b) considering that the condition
was imposed for his benefit, to waive the condition
and still pay the purchase price despite the lack of
road access. This is the most just interpretation of the
parties’ contract that gives effect to all its provisions.
In any event, even if we assume for the sake of
argument that the grant to Rodriguez of an option to
rescind, in the manner provided for in the contract, is
tantamount to a potestative condition, not being a
condition affecting the perfection of the contract, only
the said condition would be considered void and the
rest of the contract will remain valid. In Romero, the
Court observed that "where the so-called ‘potestative
condition’ is imposed not on the birth of the obligation
but on its fulfillment, only the condition is avoided,
leaving unaffected the obligation itself."71
It cannot be gainsaid that "contracts have the force of
law between the contracting parties and should be
complied with in good faith."72 We have also
previously ruled that "[b]eing the primary law between
the parties, the contract governs the adjudication of
their rights and obligations. A court has no alternative
but to enforce the contractual stipulations in the
manner they have been agreed upon and
written."73 We find no merit in petitioners’ contention
that their parents were merely "duped" into accepting
the questioned provisions in the Conditional Deed of
Sale. We note that although the contract was between
Agapita Catungal and Rodriguez, Jose Catungal
nonetheless signed thereon to signify his marital
consent to the same. We concur with the trial court’s
finding that the spouses Catungals’ claim of being
misled into signing the contract was contrary to
human experience and conventional wisdom since it
was Jose Catungal who was a practicing lawyer while
Rodriquez was a non-lawyer.74 It can be reasonably
presumed that Atty. Catungal and his wife reviewed
the provisions of the contract, understood and
accepted its provisions before they affixed their
signatures thereon.
After thorough review of the records of this case, we
have come to the conclusion that petitioners failed to
demonstrate that the Court of Appeals committed any
reversible error in deciding the present controversy.
However, having made the observation that it was
desirable for the Catungals to file a separate action to
fix the period for respondent Rodriguez’s obligation to
negotiate a road right of way, the Court finds it
necessary to fix said period in these proceedings. It is
but equitable for us to make a determination of the
issue here to obviate further delay and in line with the
judicial policy of avoiding multiplicity of suits.
If still warranted, Rodriguez is given a period of thirty
(30) days from the finality of this decision to negotiate
a road right of way. In the event no road right of way
is secured by Rodriquez at the end of said period, the
parties shall reassess and discuss other options as
stipulated in paragraph 1(b) of the Conditional Deed
of Sale and, for this purpose, they are given a period
of thirty (30) days to agree on a course of action.
Should the discussions of the parties prove futile after
the said thirty (30)-day period, immediately upon the
expiration of said period for discussion, Rodriguez
may (a) exercise his option to rescind the contract,
subject to the return of his downpayment, in
accordance with the provisions of paragraphs 1(b)
and 5 of the Conditional Deed of Sale or (b) waive the
road right of way and pay the balance of the deducted
purchase price as determined in the RTC Decision
dated May 30, 1992.
WHEREFORE, the Decision dated August 8, 2000
and the Resolution dated January 30, 2001 of the
Court of Appeals in CA-G.R. CV No. 40627
consolidated with CA-G.R. SP No. 27565 are
AFFIRMED with the following modification:
If still warranted, respondent Angel S. Rodriguez is
given a period of thirty (30) days from the finality of
this Decision to negotiate a road right of way. In the
event no road right of way is secured by respondent
at the end of said period, the parties shall reassess
and discuss other options as stipulated in paragraph
1(b) of the Conditional Deed of Sale and, for this
purpose, they are given a period of thirty (30) days to
agree on a course of action. Should the discussions
of the parties prove futile after the said thirty (30)-day
period, immediately upon the expiration of said period
for discussion, Rodriguez may (a) exercise his option
to rescind the contract, subject to the return of his
downpayment, in accordance with the provisions of
paragraphs 1(b) and 5 of the Conditional Deed of
Sale or (b) waive the road right of way and pay the
balance of the deducted purchase price as
determined in the RTC Decision dated May 30, 1992.
No pronouncement as to costs.
SO ORDERED.
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
G.R. No. 151369 March 23, 2011
ANITA MONASTERIO-PE and the SPOUSES
ROMULO TAN and EDITHA PE-TAN, Petitioners,
vs.
JOSE JUAN TONG, herein represented by his
Attorney-in-Fact, JOSE Y. ONG, Respondent.
DECISION
PERALTA, J.:
Before the Court is a petition for review
on certiorari under Rule 45 of the Rules of Court
seeking the reversal and nullification of the
Decision1 and Order,2 respectively dated October 24,
2001 and January 18, 2002, of the Regional Trial
Court (RTC) of Iloilo City, Branch 24.
The instant petition stemmed from an action for
ejectment filed by herein respondent Jose Juan Tong
(Tong) through his representative Jose Y. Ong (Ong)
against herein petitioners Anita Monasterio-Pe (Anita)
and the spouses Romulo Tan and Editha Pe-Tan
(Spouses Tan). The suit was filed with the Municipal
Trial Court in Cities (MTCC), Branch 3, Iloilo City and
docketed as Civil Case No. 2000(92).
In the Complaint, it was alleged that Tong is the
registered owner of two parcels of land known as Lot
Nos. 40 and 41 and covered by Transfer Certificate of
Title (TCT) Nos. T-9699 and T-9161, together with the
improvements thereon, located
at Barangay Kauswagan, City Proper, Iloilo City;
herein petitioners are occupying the house standing
8
on the said parcels of land without any contract of
lease nor are they paying any kind of rental and that
their occupation thereof is simply by mere tolerance of
Tong; that in a letter dated December 1, 1999, Tong
demanded that respondents vacate the house they
are occupying, but despite their receipt of the said
letter they failed and refused to vacate the same;
Tong referred his complaint to the Lupon of Barangay
Kauswagan, to no avail.3
In their Answer with Defenses and Counterclaim,
herein petitioners alleged that Tong is not the real
owner of the disputed property, but is only a dummy
of a certain alien named Ong Se Fu, who is not
qualified to own the said lot and, as such, Tong's
ownership is null and void; petitioners are the true and
lawful owners of the property in question and by
reason thereof they need not lease nor pay rentals to
anybody; a case docketed as CA-G.R. CV No. 52676
(RTC Civil Case No. 20181) involving herein
petitioner Pe and respondent is pending before the
Court of Appeals (CA) where the ownership of the
subject property is being litigated; respondent should
wait for the resolution of the said action instead of
filing the ejectment case; petitioners also claimed that
there was, in fact, no proper barangay conciliation as
Tong was bent on filing the ejectment case before
conciliation proceedings could be validly made.4
On March 19, 2001, the MTCC rendered judgment in
favor of herein respondent, the dispositive portion of
which reads as follows:
WHEREFORE, judgment is rendered, finding the
defendants Anita Monasterio-Pe, and Spouses
Romulo Tan and Editha Pe-Tan to be unlawfully
withholding the property in litigation, i.e., Lot. Nos. 40
and 41 covered by TCT Nos. T-9699 and 9161,
respectively, together with the buildings thereon,
located at Brgy. Kauswagan, Iloilo City Proper, and
they are hereby ordered together with their families
and privies, to vacate the premises and deliver
possession to the plaintiff and/or his representative.
The defendants are likewise ordered to pay plaintiff
reasonable compensation for the use and occupancy
of the premises in the amount of ₱15,000.00 per
month starting January, 2000 until they actually
vacate and deliver possession to the plaintiff and
attorney's fees in the amount of ₱20,000.00.
Costs against the defendants.
SO DECIDED.5
Aggrieved by the above-quoted judgment, petitioners
appealed the decision of the MTCC with the RTC of
Iloilo City.
In its presently assailed Decision, the RTC of Iloilo
City, Branch 24 affirmed in its entirety the appealed
decision of the MTCC.
Hence, the instant petition for review on certiorari.
At the outset, it bears emphasis that in a petition for
review on certiorari under Rule 45 of the Rules of
Court, only questions of law may be raised by the
parties and passed upon by this Court.6 It is a settled
rule that in the exercise of this Court's power of
review, it does not inquire into the sufficiency of the
evidence presented, consistent with the rule that this
Court is not a trier of facts.7 In the instant case, a
perusal of the errors assigned by petitioners would
readily show that they are raising factual issues the
resolution of which requires the examination of
evidence. Certainly, issues which are being raised in
the present petition, such as the questions of whether
the issue of physical possession is already included
as one of the issues in a case earlier filed by
petitioner Anita and her husband, as well as whether
respondent complied with the law and rules
on barangay conciliation, are factual in nature.
Moreover, the appeal under Rule 45 of the said Rules
contemplates that the RTC rendered the judgment,
final order or resolution acting in its original
jurisdiction.8 In the present case, the assailed
Decision and Order of the RTC were issued in the
exercise of its appellate jurisdiction.
Thus, petitioners pursued the wrong mode of appeal
when they filed the present petition for review
on certiorari with this Court. Instead, they should have
filed a petition for review with the CA pursuant to the
provisions of Section 1,9Rule 42 of the Rules of Court.
On the foregoing bases alone, the instant petition
should be denied.
In any case, the instant petition would still be denied
for lack of merit, as discussed below.
In their first assigned error, petitioners contend that
the RTC erred in holding that the law authorizes an
attorney-in-fact to execute the required certificate
against forum shopping in behalf of his or her
principal. Petitioners argue that Tong himself, as the
principal, and not Ong, should have executed the
certificate against forum shopping.
The Court is not persuaded.
It is true that the first paragraph of Section 5,10 Rule 7
of the Rules of Court, requires that the certification
should be signed by the "petitioner or principal party"
himself. The rationale behind this is because only the
petitioner himself has actual knowledge of whether or
not he has initiated similar actions or proceedings in
different courts or agencies.11 However, the rationale
does not apply where, as in this case, it is the
attorney-in-fact who instituted the action.12 Such
circumstance constitutes reasonable cause to allow
the attorney-in-fact to personally sign the Certificate of
Non-Forum Shopping. Indeed, the settled rule is that
the execution of the certification against forum
shopping by the attorney-in-fact is not a violation of
the requirement that the parties must personally sign
the same.13 The attorney-in-fact, who has authority to
file, and who actually filed the complaint as the
representative of the plaintiff, is a party to the
ejectment suit.14 In fact, Section 1,15 Rule 70 of the
Rules of Court includes the representative of the
owner in an ejectment suit as one of the parties
authorized to institute the proceedings. In the present
case, there is no dispute that Ong is respondent's
attorney-in-fact. Hence, the Court finds that there has
been substantial compliance with the rules proscribing
forum shopping.
9
Petitioners also aver that the certificate against forum
shopping attached to the complaint in Civil Case No.
2000(92) falsely stated that there is no other case
pending before any other tribunal involving the same
issues as those raised therein, because at the time
the said complaint was filed, Civil Case No. 20181
was, in fact, still pending with the CA (CA-G.R. CV
No. 52676), where the very same issues of ejectment
and physical possession were already included.
Corollarily, petitioners claim that the MTCC has no
jurisdiction over Civil Case No. 2000(92) on the
ground that the issue of physical possession raised
therein was already included by agreement of the
parties in Civil Case No. 20181. As such, petitioners
assert that respondent is barred from filing the
ejectment case, because in doing so he splits his
cause of action and indirectly engages in forum
shopping.
The Court does not agree.
The Court takes judicial notice of the fact that the
disputed properties, along with three other parcels of
land, had been the subject of two earlier cases filed
by herein petitioner Anita and her husband Francisco
against herein respondent and some other persons.
The first case is for specific performance and/or
rescission of contract and reconveyance of property
with damages. It was filed with the then Court of First
Instance (CFI) of Iloilo City and docketed as Civil
Case No. 10853. The case was dismissed by the CFI.
On appeal, the Intermediate Appellate Court (IAC)
upheld the decision of the trial court. When the case
was brought to this Court,16 the decision of the IAC
was affirmed. Subsequently, the Court's judgment in
this case became final and executory per Entry of
Judgment issued on May 27, 1991.
Subsequently, in 1992, the Spouses Pe filed a case
for nullification of contract, cancellation of titles,
reconveyance and damages with the RTC of Iloilo
City. This is the case presently cited by petitioners.
Eventually, the case, docketed as Civil Case No.
20181, was dismissed by the lower court on the
ground of res judicata. The RTC held that Civil Case
No. 10853 serves as a bar to the filing of Civil Case
No. 20181, because both cases involve the same
parties, the same subject matter and the same cause
of action. On appeal, the CA affirmed the dismissal of
Civil Case No. 20181. Herein petitioner Anita assailed
the judgment of the CA before this Court, but her
petition for review on certiorari was denied via a
Resolution17 dated January 22, 2003. On June 25,
2003, the said Resolution became final and
executory. The Court notes that the case was
disposed with finality without any showing that the
issue of ejectment was ever raised. Hence,
respondent is not barred from filing the instant action
for ejectment.
In any case, it can be inferred from the judgments of
this Court in the two aforementioned cases that
respondent, as owner of the subject lots, is entitled to
the possession thereof. Settled is the rule that the
right of possession is a necessary incident of
ownership.18 Petitioners, on the other hand, are
consequently barred from claiming that they have the
right to possess the disputed parcels of land, because
their alleged right is predicated solely on their claim of
ownership, which is already effectively debunked by
the decisions of this Court affirming the validity of the
deeds of sale transferring ownership of the subject
properties to respondent.
Petitioners also contend that respondent should have
filed an accion publiciana and not an unlawful
detainer case, because the one-year period to file a
case for unlawful detainer has already lapsed.
The Court does not agree.
Sections 1 and 2, Rule 70 of the Rules of Court
provide:
Section 1. Who may institute proceedings and when.
– Subject to the provisions of the next succeeding
section, a person deprived of the possession of any
land or building by force, intimidation, threat, strategy,
or stealth, or a lessor, vendor, vendee, or other
person against whom the possession of any land or
building is unlawfully withheld after the expiration or
termination of the right to hold possession, by virtue of
any contract, express or implied, or the legal
representatives or assigns of any such lessor, vendor,
vendee, or other person, may, at any time within one
(1) year after such unlawful deprivation or withholding
of possession, bring an action in the proper Municipal
Trial Court against the person or persons unlawfully
withholding or depriving of possession, or any person
or persons claiming under them, for the restitution of
such possession, together with damages and costs.
Section 2. Lessor to proceed against lessee only after
demand. – Unless otherwise stipulated, such action
by the lessor shall be commenced only after demand
to pay or comply with the conditions of the lease and
to vacate is made upon the lessee, or by serving
written notice of such demand upon the person found
on the premises, or by posting such notice on the
premises if no person be found thereon, and the
lessee fails to comply therewith after fifteen (15) days
in the case of land or five (5) days in the case of
buildings.
Respondent alleged in his complaint that petitioners
occupied the subject property by his mere tolerance.
While tolerance is lawful, such possession becomes
illegal upon demand to vacate by the owner and the
possessor by tolerance refuses to comply with such
demand.19 Respondent sent petitioners a demand
letter dated December 1, 1999 to vacate the subject
property, but petitioners did not comply with the
demand. A person who occupies the land of another
at the latter's tolerance or permission, without any
contract between them, is necessarily bound by an
implied promise that he will vacate upon demand,
failing which a summary action for ejectment is the
proper remedy against him.20 Under Section 1, Rule
70 of the Rules of Court, the one-year period within
which a complaint for unlawful detainer can be filed
should be counted from the date of demand, because
only upon the lapse of that period does the
possession become unlawful.21 Respondent filed the
ejectment case against petitioners on March 29,
2000, which was less than a year from December 1,
1999, the date of formal demand. Hence, it is clear
that the action was filed within the one-year period
prescribed for filing an ejectment or unlawful detainer
case.1avvphi1
Neither is the Court persuaded by petitioners'
argument that respondent has no cause of action to
10
recover physical possession of the subject properties
on the basis of a contract of sale because the thing
sold was never delivered to the latter.
It has been established that petitioners validly
executed a deed of sale covering the subject parcels
of land in favor of respondent after the latter paid the
outstanding account of the former with the Philippine
Veterans Bank.
Article 1498 of the Civil Code provides that when the
sale is made through a public instrument, the
execution thereof shall be equivalent to the delivery of
the thing which is the object of the contract, if from the
deed the contrary does not appear or cannot clearly
be inferred. In the instant case, petitioners failed to
present any evidence to show that they had no
intention of delivering the subject lots to respondent
when they executed the said deed of sale. Hence,
petitioners' execution of the deed of sale is
tantamount to a delivery of the subject lots to
respondent. The fact that petitioners remained in
possession of the disputed properties does not prove
that there was no delivery, because as found by the
lower courts, such possession is only by respondent's
mere tolerance.
Lastly, the Court does not agree with petitioners'
assertion that the filing of the unlawful detainer case
was premature, because respondent failed to comply
with the provisions of the law
on barangay conciliation. As held by the
RTC, Barangay Kauswagan City Proper, through
its Pangkat Secretary and Chairman, issued not one
but two certificates to file action after herein
petitioners and respondent failed to arrive at an
amicable settlement. The Court finds no error in the
pronouncement of both the MTCC and the RTC that
any error in the previous conciliation proceedings
leading to the issuance of the first certificate to file
action, which was alleged to be defective, has already
been cured by the MTCC's act of referring back the
case to the Pangkat Tagapagkasundo of
BarangayKauswagan for proper conciliation and
mediation proceedings. These subsequent
proceedings led to the issuance anew of a certificate
to file action.
WHEREFORE, the instant petition is DENIED. The
assailed Decision and Order of the Regional Trial
Court of Iloilo City, Branch 24, are AFFIRMED.
SO ORDERED.
G.R. No. 190823 April 4, 2011
DOMINGO CARABEO, Petitioner,
vs.
SPOUSES NORBERTO and SUSAN
DINGCO, Respondents.
DECISION
CARPIO MORALES, J.:
On July 10, 1990, Domingo Carabeo (petitioner)
entered into a contract denominated as "Kasunduan
sa Bilihan ng Karapatan sa Lupa"1 (kasunduan) with
Spouses Norberto and Susan Dingco (respondents)
whereby petitioner agreed to sell his rights over a 648
square meter parcel of unregistered land situated in
Purok III, Tugatog, Orani, Bataan to respondents for
₱38,000.
Respondents tendered their initial payment of
₱10,000 upon signing of the contract, the remaining
balance to be paid on September 1990.
Respondents were later to claim that when they were
about to hand in the balance of the purchase price,
petitioner requested them to keep it first as he was yet
to settle an on-going "squabble" over the land.
Nevertheless, respondents gave petitioner small
sums of money from time to time which totaled
₱9,100, on petitioner’s request according to them;
due to respondents’ inability to pay the amount of the
remaining balance in full, according to petitioner.
By respondents’ claim, despite the alleged problem
over the land, they insisted on petitioner’s acceptance
of the remaining balance of ₱18,900 but petitioner
remained firm in his refusal, proffering as reason
therefor that he would register the land first.
Sometime in 1994, respondents learned that the
alleged problem over the land had been settled and
that petitioner had caused its registration in his name
on December 21, 1993 under Transfer Certificate of
Title No. 161806. They thereupon offered to pay the
balance but petitioner declined, drawing them to file a
complaint before the Katarungan Pambarangay. No
settlement was reached, however, hence, respondent
filed a complaint for specific performance before the
Regional Trial Court (RTC) of Balanga, Bataan.
Petitioner countered in his Answer to the Complaint
that the sale was void for lack of object certain, the
kasunduan not having specified the metes and
bounds of the land. In any event, petitioner alleged
that if the validity of the kasunduan is upheld,
respondents’ failure to comply with their reciprocal
obligation to pay the balance of the purchase price
would render the action premature. For, contrary to
respondents’ claim, petitioner maintained that they
failed to pay the balance of ₱28,000 on September
1990 to thus constrain him to accept installment
payments totaling ₱9,100.
After the case was submitted for decision or on
January 31, 2001,2 petitioner passed away. The
records do not show that petitioner’s counsel informed
Branch 1 of the Bataan RTC, where the complaint
was lodged, of his death and that proper substitution
was effected in accordance with Section 16, Rule 3,
Rules of Court.3
By Decision of February 25, 2001,4 the trial court
ruled in favor of respondents, disposing as follows:
WHEREFORE, premises considered, judgment is
hereby rendered ordering:
1. The defendant to sell his right over 648
square meters of land pursuant to the
contract dated July 10, 1990 by executing a
Deed of Sale thereof after the payment of
P18,900 by the plaintiffs;
2. The defendant to pay the costs of the suit.
SO ORDERED.5
11
Petitioner’s counsel filed a Notice of Appeal on March
20, 2001.
By the herein challenged Decision dated July 20,
2009,6 the Court of Appeals affirmed that of the trial
court.
Petitioner’s motion for reconsideration having been
denied by Resolution of January 8, 2010, the present
petition for review was filed by Antonio Carabeo,
petitioner’s son,7 faulting the appellate court:
(A)
… in holding that the element of a contract,
i.e., an object certain is present in this case.
(B)
… in considering it unfair to expect
respondents who are not lawyers to make
judicial consignation after herein petitioner
allegedly refused to accept payment of the
balance of the purchase price.
(C)
… in upholding the validity of the contract,
"Kasunduan sa Bilihan ng Karapatan sa
Lupa," despite the lack of spousal consent,
(underscoring supplied)
and proffering that
(D)
[t]he death of herein petitioner causes the
dismissal of the action filed by
respondents; respondents’ cause of action
being an action in personam. (underscoring
supplied)
The petition fails.
The pertinent portion of the kasunduan reads:8
xxxx
Na ako ay may isang partial na lupa na matatagpuan
sa Purok 111, Tugatog, Orani Bataan, na may sukat
na 27 x 24 metro kuwadrado, ang nasabing lupa ay
may sakop na dalawang punong santol at isang
punong mangga, kaya’t ako ay nakipagkasundo sa
mag-asawang Norby Dingco at Susan Dingco na
ipagbili sa kanila ang karapatan ng nasabing lupa sa
halagang ₱38,000.00.
x x x x (underscoring supplied)
That the kasunduan did not specify the technical
boundaries of the property did not render the sale a
nullity. The requirement that a sale must have for its
object a determinate thing is satisfied as long as, at
the time the contract is entered into, the object of the
sale is capable of being made determinate without the
necessity of a new or further agreement between the
parties.9 As the above-quoted portion of the
kasunduan shows, there is no doubt that the object of
the sale is determinate.
Clutching at straws, petitioner proffers lack of spousal
consent. This was raised only on appeal, hence, will
not be considered, in the present case, in the interest
of fair play, justice and due process.10
Respecting the argument that petitioner’s death
rendered respondents’ complaint against him
dismissible, Bonilla v. Barcena11 enlightens:
The question as to whether an action survives or not
depends on the nature of the action and the damage
sued for. In the causes of action which survive, the
wrong complained [of] affects primarily and
principally property and property rights, the injuries to
the person being merely incidental, while in the
causes of action which do not survive, the injury
complained of is to the person, the property and rights
of property affected being incidental. (emphasis and
underscoring supplied)
In the present case, respondents are pursuing a
property right arising from the kasunduan, whereas
petitioner is invoking nullity of the kasunduan to
protect his proprietary interest. Assuming arguendo,
however, that the kasunduan is deemed void, there is
a corollary obligation of petitioner to return the money
paid by respondents, and since the action involves
property rights,12 it survives.1avvphi1
It bears noting that trial on the merits was already
concluded before petitioner died. Since the trial court
was not informed of petitioner’s death, it may not be
faulted for proceeding to render judgment without
ordering his substitution. Its judgment is thus valid
and binding upon petitioner’s legal representatives or
successors-in-interest, insofar as his interest in the
property subject of the action is concerned.13
In another vein, the death of a client immediately
divests the counsel of authority.14 Thus, in filing a
Notice of Appeal, petitioner’s counsel of record had
no personality to act on behalf of the already
deceased client who, it bears reiteration, had not
been substituted as a party after his death. The trial
court’s decision had thereby become final and
executory, no appeal having been perfected.
WHEREFORE, the petition is DENIED.
SO ORDERED.
CONCHITA CARPIO MORALES
G.R. No. 188064 June 1, 2011
MILA A. REYES, Petitioner,
vs.
VICTORIA T. TUPARAN, Respondent.
DECISION
MENDOZA, J.:
Subject of this petition for review is the February 13,
2009 Decision1 of the Court of Appeals (CA) which
affirmed with modification the February 22, 2006
12
Decision2 of the Regional Trial Court, Branch 172,
Valenzuela City (RTC), in Civil Case No. 3945-V-92,
an action for Rescission of Contract with Damages.
On September 10, 1992, Mila A. Reyes (petitioner)
filed a complaint for Rescission of Contract with
Damages against Victoria T. Tuparan (respondent)
before the RTC. In her Complaint, petitioner alleged,
among others, that she was the registered owner of a
1,274 square meter residential and commercial lot
located in Karuhatan, Valenzuela City, and covered
by TCT No. V-4130; that on that property, she put up
a three-storey commercial building known as RBJ
Building and a residential apartment building; that
since 1990, she had been operating a drugstore and
cosmetics store on the ground floor of RBJ Building
where she also had been residing while the other
areas of the buildings including the sidewalks were
being leased and occupied by tenants and street
vendors.
In December 1989, respondent leased from petitioner
a space on the ground floor of the RBJ Building for
her pawnshop business for a monthly rental of
₱4,000.00. A close friendship developed between the
two which led to the respondent investing thousands
of pesos in petitioner’s financing/lending business
from February 7, 1990 to May 27, 1990, with interest
at the rate of 6% a month.
On June 20, 1988, petitioner mortgaged the subject
real properties to the Farmers Savings Bank and
Loan Bank, Inc. (FSL Bank) to secure a loan of
₱2,000,000.00 payable in installments. On November
15, 1990, petitioner’s outstanding account on the
mortgage reached ₱2,278,078.13. Petitioner then
decided to sell her real properties for at least
₱6,500,000.00 so she could liquidate her bank loan
and finance her businesses. As a gesture of
friendship, respondent verbally offered to conditionally
buy petitioner’s real properties for ₱4,200,000.00
payable on installment basis without interest and to
assume the bank loan. To induce the petitioner to
accept her offer, respondent offered the following
conditions/concessions:
1. That the conditional sale will be cancelled
if the plaintiff (petitioner) can find a buyer of
said properties for the amount of
₱6,500,000.00 within the next three (3)
months provided all amounts received by the
plaintiff from the defendant (respondent)
including payments actually made by
defendant to Farmers Savings and Loan
Bank would be refunded to the defendant
with additional interest of six (6%) monthly;
2. That the plaintiff would continue using the
space occupied by her and drugstore and
cosmetics store without any rentals for the
duration of the installment payments;
3. That there will be a lease for fifteen (15)
years in favor of the plaintiff over the space
for drugstore and cosmetics store at a
monthly rental of only ₱8,000.00 after full
payment of the stipulated installment
payments are made by the defendant;
4. That the defendant will undertake the
renewal and payment of the fire insurance
policies on the two (2) subject buildings
following the expiration of the then existing
fire insurance policy of the plaintiff up to the
time that plaintiff is fully paid of the total
purchase price of ₱4,200,000.00.3
After petitioner’s verbal acceptance of all the
conditions/concessions, both parties worked together
to obtain FSL Bank’s approval for respondent to
assume her (petitioner’s) outstanding bank account.
The assumption would be part of respondent’s
purchase price for petitioner’s mortgaged real
properties. FSL Bank approved their proposal on the
condition that petitioner would sign or remain as co-
maker for the mortgage obligation assumed by
respondent.
On November 26, 1990, the parties and FSL Bank
executed the corresponding Deed of Conditional Sale
of Real Properties with Assumption of Mortgage. Due
to their close personal friendship and business
relationship, both parties chose not to reduce into
writing the other terms of their agreement mentioned
in paragraph 11 of the complaint. Besides, FSL Bank
did not want to incorporate in the Deed of Conditional
Sale of Real Properties with Assumption of Mortgage
any other side agreement between petitioner and
respondent.
Under the Deed of Conditional Sale of Real
Properties with Assumption of Mortgage, respondent
was bound to pay the petitioner a lump sum of ₱1.2
million pesos without interest as part of the purchase
price in three (3) fixed installments as follows:
a) ₱200,000.00 – due January 31, 1991
b) ₱200,000.00 – due June 30, 1991
c) ₱800,000.00 – due December 31, 1991
Respondent, however, defaulted in the payment of
her obligations on their due dates. Instead of paying
the amounts due in lump sum on their respective
maturity dates, respondent paid petitioner in small
amounts from time to time. To compensate for her
delayed payments, respondent agreed to pay
petitioner an interest of 6% a month. As of August 31,
1992, respondent had only paid ₱395,000.00, leaving
a balance of ₱805,000.00 as principal on the unpaid
installments and ₱466,893.25 as unpaid accumulated
interest.
Petitioner further averred that despite her success in
finding a prospective buyer for the subject real
properties within the 3-month period agreed upon,
respondent reneged on her promise to allow the
cancellation of their deed of conditional sale. Instead,
respondent became interested in owning the subject
real properties and even wanted to convert the entire
property into a modern commercial complex.
Nonetheless, she consented because respondent
repeatedly professed friendship and assured her that
all their verbal side agreement would be honored as
shown by the fact that since December 1990, she
(respondent) had not collected any rentals from the
petitioner for the space occupied by her drugstore and
cosmetics store.
On March 19, 1992, the residential building was
gutted by fire which caused the petitioner to lose
13
rental income in the amount of ₱8,000.00 a month
since April 1992. Respondent neglected to renew the
fire insurance policy on the subject buildings.
Since December 1990, respondent had taken
possession of the subject real properties and had
been continuously collecting and receiving monthly
rental income from the tenants of the buildings and
vendors of the sidewalk fronting the RBJ building
without sharing it with petitioner.
On September 2, 1992, respondent offered the
amount of ₱751,000.00 only payable on September 7,
1992, as full payment of the purchase price of the
subject real properties and demanded the
simultaneous execution of the corresponding deed of
absolute sale.
Respondent’s Answer
Respondent countered, among others, that the
tripartite agreement erroneously designated by the
petitioner as a Deed of Conditional Sale of Real
Property with Assumption of Mortgage was actually a
pure and absolute contract of sale with a term period.
It could not be considered a conditional sale because
the acquisition of contractual rights and the
performance of the obligation therein did not depend
upon a future and uncertain event. Moreover, the
capital gains and documentary stamps and other
miscellaneous expenses and real estate taxes up to
1990 were supposed to be paid by petitioner but she
failed to do so.
Respondent further averred that she successfully
rescued the properties from a definite foreclosure by
paying the assumed mortgage in the amount of
₱2,278,078.13 plus interest and other finance
charges. Because of her payment, she was able to
obtain a deed of cancellation of mortgage and secure
a release of mortgage on the subject real properties
including petitioner’s ancestral residential property in
Sta. Maria, Bulacan.
Petitioner’s claim for the balance of the purchase
price of the subject real properties was baseless and
unwarranted because the full amount of the purchase
price had already been paid, as she did pay more
than ₱4,200,000.00, the agreed purchase price of the
subject real properties, and she had even introduced
improvements thereon worth more than
₱4,800,000.00. As the parties could no longer be
restored to their original positions, rescission could
not be resorted to.
Respondent added that as a result of their business
relationship, petitioner was able to obtain from her a
loan in the amount of ₱400,000.00 with interest and
took several pieces of jewelry worth ₱120,000.00.
Petitioner also failed and refused to pay the monthly
rental of ₱20,000.00 since November 16, 1990 up to
the present for the use and occupancy of the ground
floor of the building on the subject real property, thus,
accumulating arrearages in the amount of
₱470,000.00 as of October 1992.
Ruling of the RTC
On February 22, 2006, the RTC handed down its
decision finding that respondent failed to pay in full
the ₱4.2 million total purchase price of the subject
real properties leaving a balance of ₱805,000.00. It
stated that the checks and receipts presented by
respondent refer to her payments of the mortgage
obligation with FSL Bank and not the payment of the
balance of ₱1,200,000.00. The RTC also considered
the Deed of Conditional Sale of Real Property with
Assumption of Mortgage executed by and among the
two parties and FSL Bank a contract to sell, and not a
contract of sale. It was of the opinion that although the
petitioner was entitled to a rescission of the contract,
it could not be permitted because her non-payment in
full of the purchase price "may not be considered as
substantial and fundamental breach of the contract as
to defeat the object of the parties in entering into the
contract."4 The RTC believed that the respondent’s
offer stated in her counsel’s letter dated September 2,
1992 to settle what she thought was her unpaid
balance of ₱751,000.00 showed her sincerity and
willingness to settle her obligation. Hence, it would be
more equitable to give respondent a chance to pay
the balance plus interest within a given period of time.
Finally, the RTC stated that there was no factual or
legal basis to award damages and attorney’s fees
because there was no proof that either party acted
fraudulently or in bad faith.
Thus, the dispositive portion of the RTC Decision
reads:
WHEREFORE, judgment is hereby rendered as
follows:
1. Allowing the defendant to pay the plaintiff
within thirty (30) days from the finality hereof
the amount of ₱805,000.00, representing the
unpaid purchase price of the subject
property, with interest thereon at 2% a month
from January 1, 1992 until fully paid. Failure
of the defendant to pay said amount within
the said period shall cause the automatic
rescission of the contract (Deed of
Conditional Sale of Real Property with
Assumption of Mortgage) and the plaintiff
and the defendant shall be restored to their
former positions relative to the subject
property with each returning to the other
whatever benefits each derived from the
transaction;
2. Directing the defendant to allow the
plaintiff to continue using the space occupied
by her for drugstore and cosmetic store
without any rental pending payment of the
aforesaid balance of the purchase price.
3. Ordering the defendant, upon her full
payment of the purchase price together with
interest, to execute a contract of lease for
fifteen (15) years in favor of the plaintiff over
the space for the drugstore and cosmetic
store at a fixed monthly rental of ₱8,000.00;
and
4. Directing the plaintiff, upon full payment to
her by the defendant of the purchase price
together with interest, to execute the
necessary deed of sale, as well as to pay the
Capital Gains Tax, documentary stamps and
other miscellaneous expenses necessary for
securing the BIR Clearance, and to pay the
14
 real estate taxes due on the subject property
up to 1990, all necessary to transfer
ownership of the subject property to the
defendant.
No pronouncement as to damages, attorney’s fees
and costs.
SO ORDERED.5
Ruling of the CA
On February 13, 2009, the CA rendered its decision
affirming with modification the RTC Decision. The CA
agreed with the RTC that the contract entered into by
the parties is a contract to sell but ruled that the
remedy of rescission could not apply because the
respondent’s failure to pay the petitioner the balance
of the purchase price in the total amount of
₱805,000.00 was not a breach of contract, but merely
an event that prevented the seller (petitioner) from
conveying title to the purchaser (respondent). It
reasoned that out of the total purchase price of the
subject property in the amount of ₱4,200,000.00,
respondent’s remaining unpaid balance was only
₱805,000.00. Since respondent had already paid a
substantial amount of the purchase price, it was but
right and just to allow her to pay the unpaid balance of
the purchase price plus interest. Thus, the decretal
portion of the CA Decision reads:
WHEREFORE, premises considered, the Decision
dated 22 February 2006 and Order dated 22
December 2006 of the Regional Trial Court of
Valenzuela City, Branch 172 in Civil Case No. 3945-
V-92 are AFFIRMED with MODIFICATION in that
defendant-appellant Victoria T. Tuparan is hereby
ORDERED to pay plaintiff-appellee/appellant Mila A.
Reyes, within 30 days from finality of this Decision,
the amount of ₱805,000.00 representing the unpaid
balance of the purchase price of the subject property,
plus interest thereon at the rate of 6% per annum
from 11 September 1992 up to finality of this Decision
and, thereafter, at the rate of 12% per annum until full
payment. The ruling of the trial court on the automatic
rescission of the Deed of Conditional Sale with
Assumption of Mortgage is hereby DELETED. Subject
to the foregoing, the dispositive portion of the trial
court’s decision is AFFIRMED in all other respects.
SO ORDERED.6
After the denial of petitioner’s motion for
reconsideration and respondent’s motion for partial
reconsideration, petitioner filed the subject petition for
review praying for the reversal and setting aside of
the CA Decision anchored on the following
ASSIGNMENT OF ERRORS
A. THE COURT OF APPEALS SERIOUSLY ERRED
AND ABUSED ITS DISCRETION IN DISALLOWING
THE OUTRIGHT RESCISSION OF THE SUBJECT
DEED OF CONDITIONAL SALE OF REAL
PROPERTIES WITH ASSUMPTION OF MORTGAGE
ON THE GROUND THAT RESPONDENT
TUPARAN’S FAILURE TO PAY PETITIONER
REYES THE BALANCE OF THE PURCHASE PRICE
OF ₱805,000.00 IS NOT A BREACH OF CONTRACT
DESPITE ITS OWN FINDINGS THAT PETITIONER
STILL RETAINS OWNERSHIP AND TITLE OVER
THE SUBJECT REAL PROPERTIES DUE TO
RESPONDENT’S REFUSAL TO PAY THE BALANCE
OF THE TOTAL PURCHASE PRICE OF ₱805,000.00
WHICH IS EQUAL TO 20% OF THE TOTAL
PURCHASE PRICE OF ₱4,200,000.00 OR 66% OF
THE STIPULATED LAST INSTALLMENT OF
₱1,200,000.00 PLUS THE INTEREST THEREON. IN
EFFECT, THE COURT OF APPEALS AFFIRMED
AND ADOPTED THE TRIAL COURT’S
CONCLUSION THAT THE RESPONDENT’S NON-
PAYMENT OF THE ₱805,000.00 IS ONLY A SLIGHT
OR CASUAL BREACH OF CONTRACT.
B. THE COURT OF APPEALS SERIOUSLY ERRED
AND ABUSED ITS DISCRETION IN
DISREGARDING AS GROUND FOR THE
RESCISSION OF THE SUBJECT CONTRACT THE
OTHER FRAUDULENT AND MALICIOUS ACTS
COMMITTED BY THE RESPONDENT AGAINST
THE PETITIONER WHICH BY THEMSELVES
SUFFICIENTLY JUSTIFY A DENIAL OF A GRACE
PERIOD OF THIRTY (30) DAYS TO THE
RESPONDENT WITHIN WHICH TO PAY TO THE
PETITIONER THE ₱805,000.00 PLUS INTEREST
THEREON.
C. EVEN ASSUMING ARGUENDO THAT
PETITIONER IS NOT ENTITLED TO THE
RESCISSION OF THE SUBJECT CONTRACT, THE
COURT OF APPEALS STILL SERIOUSLY ERRED
AND ABUSED ITS DISCRETION IN REDUCING THE
INTEREST ON THE ₱805,000.00 TO ONLY "6%
PER ANNUM STARTING FROM THE DATE OF
FILING OF THE COMPLAINT ON SEPTEMBER 11,
1992" DESPITE THE PERSONAL COMMITMENT OF
THE RESPONDENT AND AGREEMENT BETWEEN
THE PARTIES THAT RESPONDENT WILL PAY
INTEREST ON THE ₱805,000.00 AT THE RATE OF
6% MONTHLY STARTING THE DATE OF
DELINQUENCY ON DECEMBER 31, 1991.
D. THE COURT OF APPEALS SERIOUSLY ERRED
AND ABUSED ITS DISCRETION IN THE
APPRECIATION AND/OR MISAPPRECIATION OF
FACTS RESULTING INTO THE DENIAL OF THE
CLAIM OF PETITIONER REYES FOR ACTUAL
DAMAGES WHICH CORRESPOND TO THE
MILLIONS OF PESOS OF RENTALS/FRUITS OF
THE SUBJECT REAL PROPERTIES WHICH
RESPONDENT TUPARAN COLLECTED
CONTINUOUSLY SINCE DECEMBER 1990, EVEN
WITH THE UNPAID BALANCE OF ₱805,000.00 AND
DESPITE THE FACT THAT RESPONDENT DID NOT
CONTROVERT SUCH CLAIM OF THE PETITIONER
AS CONTAINED IN HER AMENDED COMPLAINT
DATED APRIL 22, 2006.
E. THE COURT OF APPEALS SERIOUSLY ERRED
AND ABUSED ITS DISCRETION IN THE
APPRECIATION OF FACTS RESULTING INTO THE
DENIAL OF THE CLAIM OF PETITIONER REYES
FOR THE ₱29,609.00 BACK RENTALS THAT WERE
COLLECTED BY RESPONDENT TUPARAN FROM
THE OLD TENANTS OF THE PETITIONER.
F. THE COURT OF APPEALS SERIOUSLY ERRED
AND ABUSED ITS DISCRETION IN DENYING THE
PETITIONER’S EARLIER "URGENT MOTION FOR
ISSUANCE OF A PRELIMINARY MANDATORY AND
PROHIBITORY INJUNCTION" DATED JULY 7, 2008
AND THE "SUPPLEMENT" THERETO DATED
15
AUGUST 4, 2008 THEREBY CONDONING THE
UNJUSTIFIABLE FAILURE/REFUSAL OF JUDGE
FLORO ALEJO TO RESOLVE WITHIN ELEVEN (11)
YEARS THE PETITIONER’S THREE (3) SEPARATE
"MOTIONS FOR PRELIMINARY INJUNCTION/
TEMPORARY RESTRAINING ORDER,
ACCOUNTING AND DEPOSIT OF RENTAL
INCOME" DATED MARCH 17, 1995, AUGUST 19,
1996 AND JANUARY 7, 2006 THEREBY
PERMITTING THE RESPONDENT TO UNJUSTLY
ENRICH HERSELF BY CONTINUOUSLY
COLLECTING ALL THE RENTALS/FRUITS OF THE
SUBJECT REAL PROPERTIES WITHOUT ANY
ACCOUNTING AND COURT DEPOSIT OF THE
COLLECTED RENTALS/FRUITS AND THE
PETITIONERS "URGENT MOTION TO DIRECT
DEFENDANT VICTORIA TUPARAN TO PAY THE
ACCUMULATED UNPAID REAL ESTATE TAXES
AND SEF TAXES ON THE SUBJECT REAL
PROPERTIES" DATED JANUARY 13, 2007
THEREBY EXPOSING THE SUBJECT REAL
PROPERTIES TO IMMINENT AUCTION SALE BY
THE CITY TREASURER OF VALENZUELA CITY.
G. THE COURT OF APPEALS SERIOUSLY ERRED
AND ABUSED ITS DISCRETION IN DENYING THE
PETITIONER’S CLAIM FOR MORAL AND
EXEMPLARY DAMAGES AND ATTORNEY’S FEES
AGAINST THE RESPONDENT.
In sum, the crucial issue that needs to be resolved is
whether or not the CA was correct in ruling that there
was no legal basis for the rescission of the Deed of
Conditional Sale with Assumption of Mortgage.
Position of the Petitioner
The petitioner basically argues that the CA should
have granted the rescission of the subject Deed of
Conditional Sale of Real Properties with Assumption
of Mortgage for the following reasons:
1. The subject deed of conditional sale is a
reciprocal obligation whose outstanding
characteristic is reciprocity arising from
identity of cause by virtue of which one
obligation is correlative of the other.
2. The petitioner was rescinding – not
enforcing – the subject Deed of Conditional
Sale pursuant to Article 1191 of the Civil
Code because of the respondent’s
failure/refusal to pay the ₱805,000.00
balance of the total purchase price of the
petitioner’s properties within the stipulated
period ending December 31, 1991.
3. There was no slight or casual breach on
the part of the respondent because she
(respondent) deliberately failed to comply
with her contractual obligations with the
petitioner by violating the terms or manner of
payment of the ₱1,200,000.00 balance and
unjustly enriched herself at the expense of
the petitioner by collecting all rental
payments for her personal benefit and
enjoyment.
Furthermore, the petitioner claims that the respondent
is liable to pay interest at the rate of 6% per month on
her unpaid installment of ₱805,000.00 from the date
of the delinquency, December 31, 1991, because she
obligated herself to do so.
Finally, the petitioner asserts that her claim for
damages or lost income as well as for the back
rentals in the amount of ₱29,609.00 has been fully
substantiated and, therefore, should have been
granted by the CA. Her claim for moral and exemplary
damages and attorney’s fees has been likewise
substantiated.
Position of the Respondent
The respondent counters that the subject Deed of
Conditional Sale with Assumption of Mortgage
entered into between the parties is a contract to sell
and not a contract of sale because the title of the
subject properties still remains with the petitioner as
she failed to pay the installment payments in
accordance with their agreement.
Respondent echoes the RTC position that her inability
to pay the full balance on the purchase price may not
be considered as a substantial and fundamental
breach of the subject contract and it would be more
equitable if she would be allowed to pay the balance
including interest within a certain period of time. She
claims that as early as 1992, she has shown her
sincerity by offering to pay a certain amount which
was, however, rejected by the petitioner.
Finally, respondent states that the subject deed of
conditional sale explicitly provides that the installment
payments shall not bear any interest. Moreover,
petitioner failed to prove that she was entitled to back
rentals.
The Court’s Ruling
The petition lacks merit.
The Court agrees with the ruling of the courts below
that the subject Deed of Conditional Sale with
Assumption of Mortgage entered into by and among
the two parties and FSL Bank on November 26, 1990
is a contract to sell and not a contract of sale. The
subject contract was correctly classified as a contract
to sell based on the following pertinent stipulations:
8. That the title and ownership of the subject real
properties shall remain with the First Party until the
full payment of the Second Party of the balance of the
purchase price and liquidation of the mortgage
obligation of ₱2,000,000.00. Pending payment of the
balance of the purchase price and liquidation of the
mortgage obligation that was assumed by the Second
Party, the Second Party shall not sell, transfer and
convey and otherwise encumber the subject real
properties without the written consent of the First and
Third Party.
9. That upon full payment by the Second Party of the
full balance of the purchase price and the assumed
mortgage obligation herein mentioned the Third Party
shall issue the corresponding Deed of Cancellation of
Mortgage and the First Party shall execute the
corresponding Deed of Absolute Sale in favor of the
Second Party.7
Based on the above provisions, the title and
ownership of the subject properties remains with the
16
petitioner until the respondent fully pays the balance
of the purchase price and the assumed mortgage
obligation. Thereafter, FSL Bank shall then issue the
corresponding deed of cancellation of mortgage and
the petitioner shall execute the corresponding deed of
absolute sale in favor of the respondent.
Accordingly, the petitioner’s obligation to sell the
subject properties becomes demandable only upon
the happening of the positive suspensive condition,
which is the respondent’s full payment of the
purchase price. Without respondent’s full payment,
there can be no breach of contract to speak of
because petitioner has no obligation yet to turn over
the title. Respondent’s failure to pay in full the
purchase price is not the breach of contract
contemplated under Article 1191 of the New Civil
Code but rather just an event that prevents the
petitioner from being bound to convey title to the
respondent. The 2009 case of Nabus v. Joaquin &
Julia Pacson8 is enlightening:
The Court holds that the contract entered into by the
Spouses Nabus and respondents was a contract to
sell, not a contract of sale.
A contract of sale is defined in Article 1458 of the Civil
Code, thus:
Art. 1458. By the contract of sale, one of the
contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and
the other to pay therefor a price certain in money or
its equivalent.
xxx
Sale, by its very nature, is a consensual contract
because it is perfected by mere consent. The
essential elements of a contract of sale are the
following:
a) Consent or meeting of the minds, that is,
consent to transfer ownership in exchange
for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be
considered as a Contract of Sale because the first
essential element is lacking. In a contract to sell, the
prospective seller explicitly reserves the transfer of
title to the prospective buyer, meaning, the
prospective seller does not as yet agree or consent to
transfer ownership of the property subject of the
contract to sell until the happening of an event, which
for present purposes we shall take as the full payment
of the purchase price. What the seller agrees or
obliges himself to do is to fulfill his promise to sell the
subject property when the entire amount of the
purchase price is delivered to him. In other words, the
full payment of the purchase price partakes of a
suspensive condition, the non-fulfillment of which
prevents the obligation to sell from arising and, thus,
ownership is retained by the prospective seller without
further remedies by the prospective buyer.
xxx xxx xxx
Stated positively, upon the fulfillment of the
suspensive condition which is the full payment of the
purchase price, the prospective seller’s obligation to
sell the subject property by entering into a contract of
sale with the prospective buyer becomes demandable
as provided in Article 1479 of the Civil Code which
states:
Art. 1479. A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon
the promissor if the promise is supported by a
consideration distinct from the price.
A contract to sell may thus be defined as a bilateral
contract whereby the prospective seller, while
expressly reserving the ownership of the subject
property despite delivery thereof to the prospective
buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of
the condition agreed upon, that is, full payment of the
purchase price.
A contract to sell as defined hereinabove, may not
even be considered as a conditional contract of sale
where the seller may likewise reserve title to the
property subject of the sale until the fulfillment of a
suspensive condition, because in a conditional
contract of sale, the first element of consent is
present, although it is conditioned upon the
happening of a contingent event which may or may
not occur. If the suspensive condition is not fulfilled,
the perfection of the contract of sale is completely
abated. However, if the suspensive condition is
fulfilled, the contract of sale is thereby perfected, such
that if there had already been previous delivery of the
property subject of the sale to the buyer, ownership
thereto automatically transfers to the buyer by
operation of law without any further act having to be
performed by the seller.
In a contract to sell, upon the fulfillment of the
suspensive condition which is the full payment of the
purchase price, ownership will not automatically
transfer to the buyer although the property may have
been previously delivered to him. The prospective
seller still has to convey title to the prospective buyer
by entering into a contract of absolute sale.
Further, Chua v. Court of Appeals, cited this
distinction between a contract of sale and a contract
to sell:
In a contract of sale, the title to the property passes to
the vendee upon the delivery of the thing sold; in a
contract to sell, ownership is, by agreement, reserved
in the vendor and is not to pass to the vendee until full
payment of the purchase price. Otherwise stated, in a
contract of sale, the vendor loses ownership over the
property and cannot recover it until and unless the
contract is resolved or rescinded; whereas, in a
contract to sell, title is retained by the vendor until full
payment of the price. In the latter contract, payment of
the price is a positive suspensive condition, failure of
which is not a breach but an event that prevents the
obligation of the vendor to convey title from becoming
effective.
17
It is not the title of the contract, but its express terms
or stipulations that determine the kind of contract
entered into by the parties. In this case, the contract
entitled "Deed of Conditional Sale" is actually a
contract to sell. The contract stipulated that "as soon
as the full consideration of the sale has been paid by
the vendee, the corresponding transfer documents
shall be executed by the vendor to the vendee for the
portion sold." Where the vendor promises to execute
a deed of absolute sale upon the completion by the
vendee of the payment of the price, the contract is
only a contract to sell." The aforecited stipulation
shows that the vendors reserved title to the subject
property until full payment of the purchase price.
xxx
Unfortunately for the Spouses Pacson, since the
Deed of Conditional Sale executed in their favor was
merely a contract to sell, the obligation of the seller to
sell becomes demandable only upon the happening of
the suspensive condition. The full payment of the
purchase price is the positive suspensive condition,
the failure of which is not a breach of contract, but
simply an event that prevented the obligation of
the vendor to convey title from acquiring binding
force. Thus, for its non-fulfilment, there is no contract
to speak of, the obligor having failed to perform the
suspensive condition which enforces a juridical
relation. With this circumstance, there can be no
rescission or fulfillment 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. [Emphases and
underscoring supplied]
Consistently, the Court handed down a similar ruling
in the 2010 case of Heirs of Atienza v.
Espidol, 9 where it was written:
Regarding the right to cancel the contract for non-
payment of an installment, there is need to initially
determine if what the parties had was a contract of
sale or a contract to sell. In a contract of sale, the title
to the property passes to the buyer upon the delivery
of the thing sold. In a contract to sell, on the other
hand, the ownership is, by agreement, retained by the
seller and is not to pass to the vendee until full
payment of the purchase price. In the contract of sale,
the buyer’s non-payment of the price is a negative
resolutory condition; in the contract to sell, the buyer’s
full payment of the price is a positive suspensive
condition to the coming into effect of the agreement.
In the first case, the seller has lost and cannot recover
the ownership of the property unless he takes action
to set aside the contract of sale. In the second case,
the title simply remains in the seller if the buyer does
not comply with the condition precedent of making
payment at the time specified in the contract. Here, it
is quite evident that the contract involved was one of
a contract to sell since the Atienzas, as sellers, were
to retain title of ownership to the land until respondent
Espidol, the buyer, has paid the agreed price. Indeed,
there seems no question that the parties understood
this to be the case.
Admittedly, Espidol was unable to pay the second
installment of ₱1,750,000.00 that fell due in
December 2002. That payment, said both the RTC
and the CA, was a positive suspensive condition
failure of which was not regarded a breach in the
sense that there can be no rescission of an
obligation (to turn over title) that did not yet exist
since the suspensive condition had not taken
place. x x x. [Emphases and underscoring supplied]
Thus, the Court fully agrees with the CA when it
resolved: "Considering, however, that the Deed of
Conditional Sale was not cancelled by Vendor Reyes
(petitioner) and that out of the total purchase price of
the subject property in the amount of ₱4,200,000.00,
the remaining unpaid balance of Tuparan
(respondent) is only ₱805,000.00, a substantial
amount of the purchase price has already been paid.
It is only right and just to allow Tuparan to pay the
said unpaid balance of the purchase price to
Reyes."10
Granting that a rescission can be permitted under
Article 1191, the Court still cannot allow it for the
reason that, considering the circumstances, there was
only a slight or casual breach in the fulfillment of the
obligation.
Unless the parties stipulated it, rescission is allowed
only when the breach of the contract is substantial
and fundamental to the fulfillment of the obligation.
Whether the breach is slight or substantial is largely
determined by the attendant circumstances.11 In the
case at bench, the subject contract stipulated the
following important provisions:
2. That the purchase price of ₱4,200,000.00 shall be
paid as follows:
a) ₱278,078.13 received in cash by the First
Party but directly paid to the Third Party as
partial payment of the mortgage obligation of
the First Party in order to reduce the amount
to ₱2,000,000.00 only as of November 15,
1990;
b) ₱721,921.87 received in cash by the First
Party as additional payment of the Second
Party;
c) ₱1,200,000.00 to be paid in installments
as follows:
1. ₱200,000.00 payable on or
before January 31, 1991;
2. ₱200,000.00 payable on or
before June 30, 1991;
3. ₱800,000.00 payable on or
before December 31, 1991;
Note: All the installments shall not bear any
interest.
d) ₱2,000,000.00 outstanding balance of the
mortgage obligation as of November 15,
1990 which is hereby assumed by the
Second Party.
xxx
18
3. That the Third Party hereby acknowledges receipts
from the Second Party ₱278,078.13 as partial
payment of the loan obligation of First Party in order
to reduce the account to only ₱2,000,000.00 as of
November 15, 1990 to be assumed by the Second
Party effective November 15, 1990.12
From the records, it cannot be denied that respondent
paid to FSL Bank petitioner’s mortgage obligation in
the amount of ₱2,278,078.13, which formed part of
the purchase price of the subject property. Likewise, it
is not disputed that respondent paid directly to
petitioner the amount of ₱721,921.87 representing the
additional payment for the purchase of the subject
property. Clearly, out of the total price of
₱4,200,000.00, respondent was able to pay the total
amount of ₱3,000,000.00, leaving a balance of
₱1,200,000.00 payable in three (3) installments.
Out of the ₱1,200,000.00 remaining balance,
respondent paid on several dates the first and second
installments of ₱200,000.00 each. She, however,
failed to pay the third and last installment of
₱800,000.00 due on December 31, 1991.
Nevertheless, on August 31, 1992, respondent,
through counsel, offered to pay the amount of
₱751,000.00, which was rejected by petitioner for the
reason that the actual balance was ₱805,000.00
excluding the interest charges.
Considering that out of the total purchase price of
₱4,200,000.00, respondent has already paid the
substantial amount of ₱3,400,000.00, more or less,
leaving an unpaid balance of only ₱805,000.00, it is
right and just to allow her to settle, within a
reasonable period of time, the balance of the unpaid
purchase price. The Court agrees with the courts
below that the respondent showed her sincerity and
willingness to comply with her obligation when she
offered to pay the petitioner the amount of
₱751,000.00.
On the issue of interest, petitioner failed to
substantiate her claim that respondent made a
personal commitment to pay a 6% monthly interest on
the ₱805,000.00 from the date of delinquency,
December 31, 1991. As can be gleaned from the
contract, there was a stipulation stating that: "All the
installments shall not bear interest." The CA was,
however, correct in imposing interest at the rate of 6%
per annum starting from the filing of the complaint on
September 11, 1992.1avvphi1
Finally, the Court upholds the ruling of the courts
below regarding the non-imposition of damages and
attorney’s fees. Aside from petitioner’s self-serving
statements, there is not enough evidence on record to
prove that respondent acted fraudulently and
maliciously against the petitioner. In the case of Heirs
of Atienza v. Espidol,13 it was stated:
Respondents are not entitled to moral damages
because contracts are not referred to in Article 2219
of the Civil Code, which enumerates the cases when
moral damages may be recovered. Article 2220 of the
Civil Code allows the recovery of moral damages in
breaches of contract where the defendant acted
fraudulently or in bad faith. However, this case
involves a contract to sell, wherein full payment of the
purchase price is a positive suspensive condition, the
non-fulfillment of which is not a breach of contract, but
merely an event that prevents the seller from
conveying title to the purchaser. Since there is no
breach of contract in this case, respondents are not
entitled to moral damages.
In the absence of moral, temperate, liquidated or
compensatory damages, exemplary damages cannot
be granted for they are allowed only in addition to any
of the four kinds of damages mentioned.
WHEREFORE, the petition is DENIED.
SO ORDERED.
JOSE CATRAL MENDOZA
G.R. No. 179675 June 8, 2011
SPOUSES JUANITO MAHUSAY and FRANCISCA
MAHUSAY, Petitioners,
vs.
B.E. SAN DIEGO, INC., Respondent.
DECISION
NACHURA, J.:
The instant petition assails the Resolution1 dated
September 11, 2007 of the Court of Appeals (CA),
denying petitioners’ Motion to Delete and Withdraw
Resolution of October 11, 2004, which allegedly
amended and modified the original Decision of the CA
promulgated on December 20, 2001.
The antecedent facts are, as follows:
Petitioner spouses Juanito and Francisca Mahusay
purchased several lots in Aurora Subdivision,
Malabon, Metro Manila, owned by respondent B.E.
San Diego, Inc. The transactions were covered by two
(2) contracts: Contract to Sell No. 831,2 executed on
May 14, 1973, for the total price of ₱33,000.00; and
Contract to Sell No. 8743 dated August 1, 1975, for
the price of ₱197,040.00, plus interest of 12% per
annum, payable in monthly installments. Due to
petitioners’ nonpayment of the monthly amortizations
since October 1978, respondent was constrained to
file a case for cancellation of contracts. The case was
dismissed by the trial court for lack of jurisdiction.
Thereafter, a Compromise Agreement was entered
into by the parties on October 13, 1989, whereby
petitioners agreed to pay respondent the remaining
balance of the purchase price of all the lots in the
manner and under the terms agreed upon by the
parties. Petitioners failed to comply with the terms
embodied in the Compromise Agreement; thus, on
April 18, 1990, respondent filed a Complaint for
Specific Performance with the Regional Trial Court
(RTC), Branch 73, Malabon, docketed as Civil Case
No. 1433-MN.4
On November 29, 1995, the RTC ruled in favor of
respondent, ordering petitioners to comply with the
provisions of the Compromise Agreement, and to pay
the amounts of ₱1,000,000.00 as actual damages
and ₱50,000.00 as attorney’s fees.5
Petitioners appealed the decision to the CA on two
grounds: (1) it was the Housing and Land Use
Regulatory Board and not the RTC which had
19
jurisdiction over the subject matter of the action; and
(2) the Compromise Agreement was unenforceable
because it was only Francisca Mahusay who signed
the Agreement on October 13, 1989, without the
consent of her husband Juanito Mahusay.
In its Decision dated December 20, 2001, the CA
upheld the jurisdiction of the RTC. The CA
ratiocinated that respondent’s action was one for
Specific Performance with Damages, which is in the
nature of ordinary money claims filed by the unpaid
seller against the buyer, that should be litigated in the
regular court. Besides, petitioners were estopped
from questioning the court’s jurisdiction since, by the
act of filing an answer and other pleadings, they were
deemed to have submitted themselves to the
jurisdiction of the court.6 The CA, however, saw merit
in the contention that the Compromise Agreement
dated October 13, 1989 was not valid considering that
it was entered into by petitioner Francisca Mahusay
alone. Since the Agreement involved the conjugal
properties of petitioners, Francisca could not bind her
husband, who never gave his consent to the
Agreement.
But the CA noted that petitioners never denied the
execution of the contracts to sell and they admitted
the debts owing to respondent. Thus, it ruled that
petitioners should pay respondent the unpaid
amortizations for the lots they purchased from it. The
dispositive portion of the CA Decision reads, as
follows:
WHEREFORE, premises considered[,] the appealed
Decision dated November 29, 1995, Regional Trial
Court of Malabon, Branch 73, in Civil Case No. 1433-
MN is hereby AFFIRMED with MODIFICATION,
declaring the Agreement on October 13, 1989 or
Exhibit "C" to be NULL AND VOID AB INITIO and
DELETING the award of actual damages in the
amount of ₱1,000,000.00. Accordingly, Appellants are
hereby ordered to pay Appellee all the unpaid
amortization including amortization yet to be paid until
the expiration of the contract to sell. Costs against
Appellants.7
The CA Decision became final and executory, and
entry of judgment was made in due course on
January 19, 2002.8 Thereafter, in the execution of the
Decision, the parties disagreed, particularly in the
computation of the amount to be paid by petitioners.
On May 6, 2004, respondent filed a Motion for
Clarification of the CA Decision. It prayed for the
inclusion of the penalties and interest in the
computation of unpaid amortizations, which it claimed
is customary in real estate business and compliant
with the Contracts to Sell, for the proper execution
and implementation of the CA Decision.
Petitioners opposed the motion by way of a Reply
dated May 15, 2004.9
On October 11, 2004, the CA issued a Resolution, as
follows:
Upon consideration of the Motion for Clarification[,]
dated May 6, 2004, of the plaintiff-appellee, and the
Reply of the defendants-appellants dated May 15,
2004, the Court holds by way of clarification of the
dispositive portion of our Decision of December 20,
2001, which reads:
"WHEREFORE, premises considered[,] the appealed
Decision dated November 29, 1995, Regional Trial
Court of Malabon, Branch 73, in Civil Case No. 1433-
MN is hereby AFFIRMED with MODIFICATION,
declaring the Agreement on October 13, 1989 or
Exhibit "C" to be NULL AND VOID AB INITIO and
DELETING the award of actual damages in the
amount of ₱1,000,000.00. Accordingly, Appellants are
hereby ordered to pay Appellee all the unpaid
amortization including amortization yet to be paid until
the expiration of the contract to sell. Costs against
Appellants.
SO ORDERED."
that the said decision includes the payment of all
penalties and interest due on the unpaid
amortizations, under [C]ontract to [S]ell No. 874 dated
August 1, 1975 and [C]ontract to [S]ell No. 831 dated
May 14, 1973, which is customary in the real [e]state
business and in accordance with the provisions of the
contracts.10
On November 9, 2004, petitioners filed a Motion to
Delete and Withdraw the Resolution for the
Amendment and Modification of Original
Decision.11 Petitioners contended that a simple
reading of the Motion for Clarification would show that
it was not intended to clarify but to amend the
Decision to include the payment of 12%
interest/penalty per annum in the payment of the
amortizations. They argued that the inclusion of 12%
interest per annum is a very serious and material
amendment, because under the original Decision,
petitioners would be required to pay onlyP352,992.00,
which is the amount of the unpaid amortizations for
the said lots; while in the Amended Decision, they
would be liable for ₱5,175,688.59, per computation
made by respondent. The motion, ostensibly for
clarification, filed by respondent more than two (2)
years after the receipt of the original Decision, should
not have been granted, according to petitioners.
On July 7, 2005, the CA issued a Resolution denying
the aforesaid Motion to Delete and Withdraw the
Resolution for lack of merit. The appellate court said
that the Decision promulgated on December 20, 2001
has not been amended but only clarified in the
Resolution dated October 11, 2004.12 Undaunted,
petitioners again filed an Amended Motion to Delete
and Withdraw the Resolution for the Amendment and
Modification of the Original Decision on July 14, 2005,
and another motion to delete on July 27, 2005.
Acting on the twin motions, the CA issued the
assailed Resolution on September 11, 2007, denying
the same on the ground that the allegations set forth
by petitioners therein were all considered and passed
upon by the court in its Resolution dated October 11,
2004.13
Aggrieved, petitioners filed the instant petition.
Petitioners claim that respondent’s Motion for
Clarification, which was belatedly filed, does not really
intend to clarify, but to reconsider, alter, and amend
the original Decision of the CA, in contravention of the
principle of immutability of judgments. Thus, they
argue that the CA Resolution of October 11, 2004
unduly expanded and amended its final and executory
20
Decision of December 20, 2001, in gross violation of
this principle.
We disagree.
It is a settled rule is that a judgment which has
acquired finality becomes immutable and unalterable;
hence, it may no longer be modified in any respect
except only to correct clerical errors or
mistakes.14 Clarification after final judgment is,
however, allowed when what is involved is a clerical
error, or not a correction of an erroneous judgment, or
dispositive portion of the Decision.15 Where there is
an ambiguity caused by an omission or mistake in the
dispositive portion, the court may clarify such
ambiguity, mistake, or omission by an amendment;
and in so doing, it may resort to the pleadings filed by
the parties, the court’s findings of facts and
conclusions of law as expressed in the body of the
decision.16
In the case at bar, there is no dispute that, in 1973
and 1975, petitioners entered into two Contracts to
Sell with respondent, respectively for the purchase of
several lots in Aurora Subdivision, Malabon, Metro
Manila. Petitioners’ obligation to pay the purchase
price for the lots was never denied. Accordingly, the
contractual stipulation that petitioners shall pay the
monthly amortizations is binding and enforceable. It is
the law between the parties.
Petitioners stopped paying the amortizations in
October 1978, leaving a total unpaid balance of
₱352,992.00 as of January 30, 1979.17 Since
rescission of the contracts was not an option for
petitioners, the latter negotiated with respondent for a
final chance to pay off their obligations. Thus, a
settlement was arrived at and a Compromise
Agreement was executed, which, unfortunately, was
signed by Francisca Mahusay alone. The terms of the
Compromise Agreement were again breached by
petitioners, prompting respondent to file an action for
Specific Performance. As it turned out, the CA
nullified the Compromise Agreement, but held
petitioners liable for the payment of all the unpaid
amortizations, including amortizations yet to be paid,
until the expiration of the contract. Apparently, the CA
was silent on the payment of the interest/penalty for
the delay in payments, which led to the Motion for
Clarification filed by respondent.lawphi1
Based on the foregoing facts and circumstances, the
Court finds no reversible error in the CA Resolution
dated September 11, 2007, denying the Motion to
Withdraw the Resolution. Likewise, the CA committed
no reversible error in its Resolution dated October 11,
2004, clarifying the original Decision. Respondent’s
Motion for Clarification did not really partake of the
nature of a motion for reconsideration, as to amend
the December 20, 2001 Decision. There was nothing
substantial to vary, considering that the issues
between the parties were deemed resolved and laid
to rest. It is unmistakably clear that petitioners do not
deny the execution of the Contracts to Sell and, in
fact, admit their liability for the unpaid amortizations of
the lots purchased. The persistent violations of the
contracts and the continuous delay in petitioners’
payments cannot simply be overlooked. There was a
compelling reason for the CA to clarify its original
Decision to include the payment of all penalties and
interest due on the unpaid amortizations, as provided
in the contracts. Considering that the validity of the
contracts was never put in question, and there is
nothing on record to suggest that the same may be
contrary to law, morals, public order, or public policy,
there is nothing unlawful in the stipulation requiring
the payment of interest/penalty at the rate agreed
upon in the contract of the parties.18
The Court further notes that petitioners are in
actual/physical possession of the properties and
enjoying the beneficial use thereof, despite the
payment of only ₱133,872.76, as of January 30,
1979.19 It would be grossly unfair for respondent to be
deprived of the amount it would have received from
the sale of their properties, while petitioners benefited
from the use and continued possession of the
properties even if no payments were made by them
since October 1978. It is a basic rule in law that no
one shall unjustly enrich oneself at the expense of
another. Indeed, to allow petitioners to keep the
properties without paying for them in full amounts to
unjust enrichment on their part.20 The fair market
value of the land has tremendously increased over
the past years. It is, therefore, just, fair, and equitable
that petitioners be made to pay interest/penalty for the
delay in their payments.1avvphi1
Finally, the Court notes that this case has dragged on
for many years since 1978. In order to writ finis to this
protracted litigation between the parties, we resolve
the case in accordance with jurisprudence on the
matter. Undeniably, the instant case is a sale of real
property where the purchase price is not paid in full.
The unpaid seller’s remedy is either an action to
collect the balance or to rescind the contract within
the time allowed by law. Since rescission is no longer
an option considering that petitioners have been in
possession of the properties for a considerable period
of time, substantial justice dictates that respondent be
entitled to receive the unpaid balance of the purchase
price, plus legal interest thereon.21 In line with our
ruling in Eastern Shipping Lines, Inc. v. Court of
Appeals,22 the legal interest to be paid on the amount
shall be 12% per annum, which shall commence from
April 18, 1990, when respondent filed the Complaint
for Specific Performance with the RTC, Branch 73,
Malabon, in Civil Case No. 1433-MN, which shall be
considered as judicial demand, until the finality of this
Decision. Another 12% interest per annum shall be
paid on the amount due and owing as of and from the
date of finality of the Decision until full payment.
WHEREFORE, the petition is DENIED. The
Resolution of the Court of Appeals dated September
11, 2007 is AFFIRMED with MODIFICATION. The
trial court is directed to compute the unpaid balance
of the purchase price of each contract (which is the
unpaid amortization including amortizations yet to be
paid until the expiration of the Contracts to Sell) with
dispatch. The legal interest to be paid on said amount
is TWELVE PERCENT (12%) per annum, which shall
commence from April 18, 1990, when judicial demand
was made on petitioners. Another 12% interest per
annum shall be paid on the amount due and owing as
and from the date of finality of this Decision until full
payment would have actually been made.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA
21
G.R. No. 175291 July 27, 2011
THE HEIRS OF NICOLAS S. CABIGAS, NAMELY:
LOLITA ZABATE CABIGAS, ANECITA C. CANQUE,
DIOSCORO CABIGAS, FIDEL CABIGAS, and
RUFINO CABIGAS, Petitioners,
vs.
MELBA L. LIMBACO, LINDA L. LOGARTA, RAMON
C. LOGARTA, HENRY D. SEE, FREDDIE S. GO,
BENEDICT Y. QUE, AWG DEVELOPMENT
CORPORATION, PETROSA DEVELOPMENT
CORPORATION, and UNIVERSITY OF CEBU
BANILAD, INC.,
DECISION
BRION, J.:
We resolve the petition for review on certiorari1 filed
by Lolita Cabigas, Anecita Canque, Dioscoro
Cabigas, Fidel Cabigas, and Rufino Cabigas
(petitioners), heirs of Nicolas S. Cabigas, to reverse
and set aside the resolutions of the Court of Appeals
(CA) in CA-G.R. CV No. 01144 dated May 31,
20062 and October 4, 2006,3 dismissing their ordinary
appeal for being the wrong recourse.
THE FACTS
On February 4, 2003, the petitioners filed a complaint
for the annulment of titles of various parcels of land
registered in the names of Melba Limbaco, Linda
Logarta, Ramon Logarta, Eugenio Amores, New
Ventures Realty Corporation, Henry See, Freddie Go,
Benedict Que, AWG Development Corporation
(AWG), Petrosa Development Corporation (Petrosa),
and University of Cebu Banilad, Inc. (UCB) with the
Regional Trial Court (RTC) of Cebu City, docketed as
Civil Case No. 28585.
The complaint alleged that petitioner Lolita Cabigas
and her late husband, Nicolas Cabigas, purchased
two lots (Lot No. 7424 and Lot No. 9535) from
Salvador Cobarde on January 15, 1980. Cobarde in
turn had purchased these lots from Ines Ouano6 on
February 5, 1948.
Notwithstanding the sale between Ouano and
Cobarde, and because the two lots remained
registered in her name,7Ouano was able to sell these
same lots to the National Airports Corporation on
November 25, 1952 for its airport expansion project.
The National Airports Corporation promptly had the
titles of these properties registered in its name.
When the airport expansion project fell through,
respondents Melba Limbaco, Ramon Logarta, and
Linda Logarta, the legal heirs of Ouano, succeeded in
reclaiming title to the two lots through an action for
reconveyance filed with the lower court;8 the titles
over these lots were thereafter registered in their
names.9 They then subdivided the two lots10 and sold
them to New Ventures Realty Corporation, Eugenio
Amores, Henry See, Freddie Go, Benedict Que,
Petrosa, and AWG. AWG, in turn, sold one of the
parcels of land to UCB. All the buyers registered the
titles over their respective lots in their names.
After the respondents had filed their individual
Answers, respondents Henry See, Freddie Go and
Benedict Que filed a motion to set the case for
hearing on special affirmative defenses on July 8,
2004. On the other hand, respondents AWG, Petrosa,
and UCB filed a motion for summary judgment on
April 13, 2005, admitting as true the facts stated in the
petitioners’ complaint, but claiming that the petitioners
had no legal right to the properties in question.
THE RTC RESOLUTION
On August 23, 2005, the RTC issued a
resolution,11 granting the motion for summary
judgment filed by AWG, Petrosa and UCB, and
dismissing the petitioners’ complaint. According to the
RTC, while the petitioners alleged bad faith and
malice on the part of Ouano when she sold the same
properties to the National Airports Corporation, they
never alleged bad faith on the part of the buyer, the
National Airports Corporation. Since good faith is
always presumed, the RTC concluded that the
National Airports Corporation was a buyer in good
faith and its registration of the properties in its name
effectively transferred ownership over the two lots,
free from all the unrecorded prior transactions
involving these properties, including the prior sale of
the lots to Cobarde.
As the RTC explained, the unregistered sale of the
lots by Ouano to Cobarde was merely an in personam
transaction, which bound only the parties. On the
other hand, the registered sale between Ouano and
the National Airports Corporation, a buyer in good
faith, was an in rem transaction that bound the whole
world. Since Cobarde’s rights to the properties had
already been cut off with their registration in the name
of the National Airports Corporation, he could not sell
any legal interest in these properties to the Cabigas
spouses. Hence, under the Torrens system, the
petitioners are strangers to the lots and they had no
legally recognized interest binding it in rem that the
courts could protect and enforce against the world.12
The petitioners filed a notice of appeal to question the
RTC resolution. In response, respondents AWG,
Petrosa, and UCB filed a motion to dismiss the
appeal, claiming that the petitioners raised only
questions of law in their appeal; thus, they should
have filed an appeal by certiorari with the Supreme
Court, and not an ordinary appeal with the appellate
court.
THE COURT OF APPEALS RESOLUTIONS
In its May 31, 2006 resolution, the CA ruled that the
petitioners should have filed a petition for review on
certiorari under Rule 45 of the Rules of Court with the
Supreme Court instead of an ordinary appeal since
they only raised a question of law, i.e., the propriety of
the summary judgment. Accordingly, insofar as the
respondents who filed the motion for summary
judgment are concerned, namely, AWG, Petrosa, and
UCB, the CA dismissed the petitioners’ appeal.
However, the CA remanded the case to the RTC for
further proceedings on the Motion to Set Case for
Hearing on Special and Affirmative Defenses filed by
respondents Henry See, Freddie Go, and Benedict
Que.
In its October 4, 2006 resolution, the CA resolved the
petitioners’ motion for reconsideration, as well as the
22
Partial Motion for Reconsideration filed by
respondents Henry See, Freddie Go, and Benedict
Que. The CA observed that it did not have jurisdiction
to entertain the appeal since it raised a pure question
of law. Since it dismissed the appeal based on a
technicality, it did not have the jurisdiction to order
that the case be remanded to the RTC.
Furthermore, the trial court had already dismissed the
case in its entirety when it held that the petitioners
had no enforceable right as against the respondents,
since they had no registered legal interest in the
properties. There was thus no need to remand the
case to the RTC.
Hence, the petitioners seek recourse with this Court
via the present petition, raising the following grounds:
(1) The Court of Appeals committed grave
and serious error in dismissing the appeal
and in holding that a summary judgment is
appealable only through a petition for review
on certiorari under Rule 45 to the Supreme
Court.
(2) The paramount and overriding
considerations of substantial justice and
equity justify the reversal and setting aside of
the questioned resolutions.
THE RULING
We AFFIRM the assailed CA resolutions.
Petitioners availed of the wrong mode of appeal
Section 2, Rule 41 of the Rules of Court provides the
three modes of appeal, which are as follows:
Section 2. Modes of appeal. —
(a) Ordinary appeal. — The appeal to the
Court of Appeals in cases decided by the
Regional Trial Court in the exercise of its
original jurisdiction shall be taken by filing a
notice of appeal with the court which
rendered the judgment or final order
appealed from and serving a copy thereof
upon the adverse party. No record on appeal
shall be required except in special
proceedings and other cases of multiple or
separate appeals where the law or these
Rules so require. In such cases, the record
on appeal shall be filed and served in like
manner.
(b) Petition for review. — The appeal to the
Court of Appeals in cases decided by the
Regional Trial Court in the exercise of its
appellate jurisdiction shall be by petition for
review in accordance with Rule 42.
(c) Appeal by certiorari. — In all cases where
only questions of law are raised or involved,
the appeal shall be to the Supreme Court by
petition for review on certiorari in accordance
with Rule 45.
The first mode of appeal, the ordinary appeal under
Rule 41 of the Rules of Court, is brought to the CA
from the RTC, in the exercise of its original
jurisdiction, and resolves questions of fact or mixed
questions of fact and law. The second mode of
appeal, the petition for review under Rule 42 of the
Rules of Court, is brought to the CA from the RTC,
acting in the exercise of its appellate jurisdiction, and
resolves questions of fact or mixed questions of fact
and law. The third mode of appeal, the appeal by
certiorari under Rule 45 of the Rules of Court, is
brought to the Supreme Court and resolves only
questions of law.
Where a litigant files an appeal that raises only
questions of law with the CA, Section 2, Rule 50 of
the Rules of Court expressly mandates that the CA
should dismiss the appeal outright as the appeal is
not reviewable by that court.
There is a question of law when the issue does not
call for an examination of the probative value of the
evidence presented, the truth or falsehood of facts
being admitted, and the doubt concerns the correct
application of law and jurisprudence on the
matter.13 On the other hand, there is a question of fact
when the doubt or controversy arises as to the truth or
falsity of the alleged facts.
While the petitioners never filed their appellants’ brief,
we discern from the petitioners’ submissions to the
CA,14 as well as from their petition with this Court,
their perceived issues with respect to the RTC’s
summary judgment, and they are as follows:
a) Whether or not the National Airports
Corporation acted with good faith when it
purchased the properties from Ouano;
b) Whether the heirs of Ouano acted with
good faith in recovering the properties from
the National Airports Corporation; and
c) Whether the subsequent buyers of the
properties acted with good faith in
purchasing the properties from the heirs of
Ouano.
Given that the question of whether a person acted
with good faith or bad faith in purchasing and
registering real property is a question of fact,15 it
appears, at first glance, that the petitioners raised
factual issues in their appeal and, thus, correctly filed
an ordinary appeal with the CA. After reviewing the
RTC resolution being assailed, however, we find that
the petitioners actually raised only questions of law in
their appeal.
We quote the pertinent portions of the RTC decision:
The main issue to be resolved is who between [the]
plaintiffs and the defendants have a better right to the
subject lots.
In selling the land in favor of the National Airports
Corporation[,] plaintiffs alleged bad faith and malice
on the part of the seller Ine[s] Ouano but have not
pleaded bad faith on the part of the buyer. Since good
faith is always presumed under Article 427 of the Civil
Code, the National Airports Corporation was therefore
a buyer in good faith. Being [a] purchaser in good
23
faith and for value, it is axiomatic that the right of [the]
National Airports Corporation must be upheld and its
titles protected over the claim of the plaintiffs. In the
case of Flordeliza Cabuhat vs. The Honorable Court
of Appeals, G.R. No. 122425, September 28, 2001,
the Supreme Court upheld the validity of the title of an
innocent purchaser in good faith and for value and at
the same time invoked the principle of stability of our
Torrens system and indefeasibility of title
guaranteeing the integrity of land titles once the claim
of ownership is established and recognized.
"However, it is well-settled that even if the
procurement of a certificate of title was tainted with
fraud and misrepresentation, such defective title may
be the source of a completely legal and valid title in
the hands of an innocent purchaser for value. Thus:
where innocent third persons, relying on the
correctness of the certificate of title thus issued,
acquire rights over the property the court cannot
disregard such rights and order the total cancellation
of the certificate. The effect of such an outright
cancellation would be to impair public confidence in
the certificate of title, for everyone dealing with
property registered under [the] Torrens system would
have to inquire in every instance whether the title has
been regularly or irregularly issued. This is contrary to
the evident purpose of the law. Every person dealing
with the registered land may safely rely on the
correctness of the certificate of title issued therefore
and the law will in no way oblige him to go behind the
certificate to determine the condition of the property."
The subject lots being registered land under the
Torrens [s]ystem the recordation of the sale by the
National Airports Corporation, a buyer in good faith
gave National Airports Corporation a title free of all
unrecorded prior transactions, deeds, liens and
encumbrances, and conversely forever erased or cut
off the unrecorded interest of Salvador Cobarde.
Section 50 of Article 496 of the Land Registration Act
(now sec. 51 of PD 1529) reads: "No deed, mortgage,
lease or other voluntary instrument, except a will,
purporting to convey or affect registered land shall
take effect as a conveyance or bind the land xxx. The
act of registration shall be the operative act to convey
and affect [the] land." In the case of National Grains
Authority v. IAC, 157 SCRA 380, the Supreme Court
ruled, thus, the possession by plaintiffs and their
predecessors-in-interest is irrelevant to this case
because possession of registered land can never
ripen into ownership. "No title to registered land in
derogation of the title of the registered owner shall be
acquired by prescription or adverse possession."
(Sec. 46 of Act 496, now Sec. 47 of PD 1529).
In the eyes of the Torrens system, the unregistered
sale of the property by Ine[s] Ouano to Salvador
Cobarde did not bind the land or the whole world in
rem; it bound, in personam, only the parties. On the
other hand, the registered sale by Ine[s] Ouano to
National Airports Corporation, a buyer in good faith,
bound the land in rem, meaning that the whole world
was put on constructive notice that thenceforth the
land belonged to National Airports Corporation free of
all prior transactions, deeds and encumbrances, such
as the claim of Salvador Cobarde, which were at the
very moment National Airports Corporation registered
its title free of prior claims – forever erased or cut off
by operation of law.
xxxx
Salvador Cobarde, whose rights to the property had
been erased or cut off by operation of law, had
nothing or had no legally recognized interest in the
property that he could sell – when he "sold" the
property to Nicolas and Lolita Cabigas. Nicolas and
Lolita Cabigas having bought nothing could transmit
nothing to their successors-in-interest, the plaintiffs
herein. Under the Torrens system, herein plaintiffs are
strangers to the property; they possess no legally
recognized interest binding the property in rem that
courts could protect and enforce against the world.16
As astutely observed by the CA, the RTC resolution
merely collated from the pleadings the facts that were
undisputed, admitted, and stipulated upon by the
parties, and thereafter ruled on the legal issues raised
by applying the pertinent laws and jurisprudence on
the matter. In other words, the RTC did not resolve
any factual issues, only legal ones.
When there is no dispute as to the facts, the question
of whether or not the conclusion drawn from these
facts is correct is a question of law.17 When the
petitioners assailed the summary judgment, they were
in fact questioning the conclusions drawn by the RTC
from the undisputed facts, and raising a question of
law.
In light of the foregoing, jurisdiction over the
petitioners’ appeal properly lay with this Court via an
appeal by certiorari, and the CA was correct in
dismissing the appeal for lack of jurisdiction.
Rendition of summary judgment was proper
Even if we overlook the procedural lapse and resolve
the case on the merits, we still affirm the assailed CA
resolutions.
Under the Rules of Court, a summary judgment may
be rendered where, on motion of a party and after
hearing, the pleadings, supporting affidavits,
depositions and admissions on file show that, "except
as to the amount of damages, there is no genuine
issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law."18 The
Court explained the concept of summary judgment
in Asian Construction and Development Corporation
v. Philippine Commercial International Bank:19
Summary or accelerated judgment is a procedural
technique aimed at weeding out sham claims or
defenses at an early stage of litigation thereby
avoiding the expense and loss of time involved in a
trial.
Under the Rules, summary judgment is appropriate
when there are no genuine issues of fact which call
for the presentation of evidence in a full-blown trial.
Even if on their face the pleadings appear to raise
issues, when the affidavits, depositions and
admissions show that such issues are not genuine,
then summary judgment as prescribed by the Rules
must ensue as a matter of law. The determinative
factor, therefore, in a motion for summary judgment,
is the presence or absence of a genuine issue as to
any material fact. [Emphasis supplied.]
24
The petitioners assert that the RTC erred in rendering
a summary judgment since there were factual issues
that required the presentation of evidence at a trial.
We disagree with the petitioners.
At the outset, we note from the respondents’
pleadings that several respondents20 denied that the
sale between anwhile, missed the information against
all the accused. on in Court, claiming that cutors, who
are his subordinates. Ouano and Cobarde ever
occurred. It would, therefore, appear that a factual
issue existed that required resolution through a formal
trial, and the RTC erred in rendering summary
judgment.
A closer examination of the parties’ submissions,
however, makes it apparent that this is not a genuine
issue of fact because, as will be discussed below, the
petitioners do not have any legally enforceable right to
the properties in question, as their predecessors-in-
interest are not buyers in good faith.
i. Cabigas spouses are not buyers in good faith
A purchaser in good faith is one who buys the
property of another without notice that some other
person has a right to or interest in such property, and
pays a full and fair price for the same at the time of
such purchase or before he has notice of the claim of
another person.21 It is a well-settled rule that a
purchaser cannot close his eyes to facts which should
put a reasonable man upon his guard, and then claim
that he acted in good faith under the belief that there
was no defect in the title of the vendor. His mere
refusal to believe that such defect exists, or his willful
closing of his eyes to the possibility of the existence of
a defect in his vendor’s title, will not make him an
innocent purchaser for value, if it afterwards develops
that the title was in fact defective, and it appears that
he had such notice of the defect as would have led to
its discovery had he acted with that measure of
precaution which may reasonably be required of a
prudent man in a like situation.22
We are dealing with registered land, a fact known to
the Cabigas spouses since they received the
duplicate owner’s certificate of title from Cobarde
when they purchased the land. At the time of the sale
to the Cabigas spouses, however, the land was
registered not in Cobarde’s name, but in Ouano’s
name. By itself, this fact should have put the Cabigas
spouses on guard and prompted them to check with
the Registry of Deeds as to the most recent
certificates of title to discover if there were any liens,
encumbrances, or other attachments covering the lots
in question. As the Court pronounced in Abad v. Sps.
Guimba:23
[The law protects to a greater degree a purchaser
who buys from the registered owner himself.
Corollarily, it] requires a higher degree of prudence
from one who buys from a person who is not the
registered owner, although the land object of the
transaction is registered. While one who buys from
the registered owner does not need to look behind the
certificate of title, one who buys from one who is not
the registered owner is expected to examine not only
the certificate of title but all factual circumstances
necessary for [one] to determine if there are any flaws
in the title of the transferor, or in [the] capacity to
transfer the land. (emphasis supplied)
Instead, the Cabigas spouses relied completely on
Cobarde’s representation that he owned the
properties in question, and did not even bother to
perform the most perfunctory of investigations by
checking the properties’ titles with the Registry of
Deeds. Had the Cabigas spouses only done so, they
would easily have learned that Cobarde had no legal
right to the properties they were acquiring since the
lots had already been registered in the name of the
National Airports Corporation in 1952. Their failure to
exercise the plain common sense expected of real
estate buyers bound them to the consequences of
their own inaction.
ii. No allegation that the National Airports Corporation
registered the lots in bad faith
All the parties to this case trace their ownership to
either of the two persons that Ouano sold the
properties to – either to Cobarde, who allegedly
purchased the land in 1948, or to the National Airports
Corporation, which bought the land in 1952.
Undoubtedly, the National Airports Corporation was
the only party that registered the sale with the
Registry of Deeds. For this registration to be binding,
we now have to determine whether the National
Airports Corporation acted with good faith when it
registered the properties, in accordance with Article
1544 of the Civil Code, which provides:
Article 1544. If the same thing should have been sold
to different vendees, the ownership shall be
transferred to the person who may have first taken
possession thereof in good faith, if it should be
movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is
good faith.1avvphi1
Based on this provision, the overriding consideration
to determine ownership of an immovable property is
the good or bad faith not of the seller, but of the
buyer; specifically, we are tasked to determine who
first registered the sale with the Registry of Property
(Registry of Deeds) in good faith.
As accurately observed by the RTC, the petitioners, in
their submissions to the lower court, never imputed
bad faith on the part of the National Airports
Corporation in registering the lots in its name. This
oversight proves fatal to their cause, as we explained
in Spouses Chu, Sr. v. Benelda Estate Development
Corporation:
In a case for annulment of title, therefore, the
complaint must allege that the purchaser was aware
of the defect in the title so that the cause of action
against him will be sufficient. Failure to do so, as in
the case at bar, is fatal for the reason that the court
cannot render a valid judgment against the purchaser
who is presumed to be in good faith in acquiring the
said property. Failure to prove, much less impute, bad
25
faith on said purchaser who has acquired a title in his CARPIO,* J.,
favor would make it impossible for the court to render - versus - 1,986 square JR.,
VELASCO, meters and 3,454 square meters. The
J., Chairperson,
**
a valid judgment thereon due to the indefeasibility and BRION,
properties were individually covered by tax declaration all
conclusiveness of his title.24 PERALTA, and
*** JJ.
MARILOU LAIGO, PEDRO ROY LAIGO, STELLA in SERENO,
her name.[5] Sometime in 1968, Margaritas son, Roberto
Since the petitioners never alleged that the National BALAGOT and SPOUSES MARIO B. CAMPOS AND Promulgated:
Airports Corporation acted with bad faith when it JULIA S. CAMPOS, Laigo, Jr. (Roberto), applied for a non-immigrant visa to
registered the lots in its name, the presumption of Respondents. August 15, 2011
x---------------------------------------- the United States, and to support his application, he
good faith prevails. Consequently, the National
Airports Corporation, being a registrant in good faith, ----------x
allegedly asked Margarita to transfer the tax declarations of
is recognized as the rightful owner of the lots in
question, and the registration of the properties in its the properties in his name.[6] For said purpose, Margarita,
name cut off any and all prior liens, interests and DECISION
unknown to her other children, executed an Affidavit of
encumbrances, including the alleged prior sale to
Cobarde, that were not recorded on the titles. Transfer of Real Property whereby the subject properties
Cobarde, thus, had no legal rights over the property PERALTA, J.:
that he could have transferred to the Cabigas were transferred by donation to Roberto.[7] Not long after,
spouses.
This Petition for Review under Rule 45 of the Robertos visa was issued and he was able to travel to
Since the Cabigas spouses have no legally the U.S. as a tourist and returned in due time. In 1979, he
Rules of Court assails the October 13, 2006 Decision[1] of
recognizable interest in the lots in question, it follows
that the petitioners, who are subrogated to the rights the Court of Appeals in CA-G.R. CV No. 72371. The adopted respondents Pedro Laigo (Pedro) and Marilou
of the former by virtue of succession, also have no
legally recognizable rights to the properties that could assailed decision affirmed the July 2, 2001 Laigo (Marilou),[8] and then he married respondent Estella
be enforced by law. The petitioners clearly have no Balagot.
cause of action against the respondents, and the RTC judgment[2] rendered by the Regional Trial Court of La
correctly dismissed their complaint for annulment of
Union, Branch 33 in Civil Case No. 1031-BG a complaint
title. In July 1990, Roberto sold the 4,512 sq m
for annulment of sale of real property, recovery of
property in Baccuit to the spouses Mario and Julia Campos
WHEREFORE, premises considered, we DENY the
petition for lack of merit, and AFFIRM the ownership and possession, cancellation of tax declarations
for P23,000.00.[9] Then in August 1992, he sold the 1,986
Resolutions, dated May 31, 2006 and October 4, and damages filed by Margarita Cabacungan,[3] represented
2006, of the Court of Appeals in CA-G.R. CV No. sq m and 3,454 sq m lots in Paringao, respectively, to
01144. No costs. by her daughter, Luz Laigo-Ali against Marilou Laigo and
Marilou for P100,000.00 and to Pedro
Pedro Roy Laigo, respondents herein, and against Estella
SO ORDERED. for P40,000.00.[10] Allegedly, these sales were not known to
Balagot,[4] and the spouses Mario and Julia Campos.
Margarita and her other children.[11]
ARTURO D. BRION
It was only in August 1995, at Robertos wake,
The facts follow.
that Margarita came to know of the sales as told by Pedro

Margarita Cabacungan (Margarita) owned three himself.[12] In February 1996, Margarita, represented by her

parcels of unregistered land in Paringao and in Baccuit, daughter, Luz, instituted the instant complaint for the
ESTATE OF MARGARITA D. CABACUNGAN, represented G.R. No. 175073
by LUZ LAIGO-ALI, Petitioner, annulment of said sales and for the recovery of ownership
Bauang, La Union, each measuring 4,512 square meters,
Present:

26
and possession of the subject properties as well as for the
cancellation of Ricardos tax declarations. Margarita
admitted having accommodated Robertos request for the
transfer of the properties to his name, but pointed out that
the arrangement was only for the specific purpose of
supporting his U.S. visa application. She emphasized that
she never intended to divest herself of ownership over the
subject lands and, hence, Roberto had no right to sell them
to respondents and the Spouses Campos. She likewise
alleged that the sales, which were fictitious and simulated
considering the gross inadequacy of the stipulated price,
were fraudulently entered into by Roberto. She imputed
bad faith to Pedro, Marilou and the Spouses Campos as
buyers of the lots, as they supposedly knew all along that
Roberto was not the rightful owner of the
properties.[13] Hence, she principally prayed that the sales
be annulled; that Robertos tax declarations be cancelled;
and that the subject properties be reconveyed to her.[14]
The Spouses Campos advanced that they were
innocent purchasers for value and in good faith, and had
merely relied on Robertos representation that he had the
right to sell the property; and that, hence, they were not
bound by whatever agreement entered by Margarita with
her son. They posited that the alleged gross inadequacy of
the price would not invalidate the sale absent a vitiation of
consent or proof of any other agreement. Further, they
noted that Margaritas claim was already barred by
prescription and laches owing to her long inaction in
recovering the subject properties. Finally, they believed On July 2, 2001, the trial court rendered
that inasmuch as Roberto had already passed away, judgment dismissing the complaint as follows:
Margarita must have, instead, directed her claim against his
WHEREFORE, in view of
estate.[15] the foregoing considerations, the
complaint is DISMISSED.[21]
In much the same way, Marilou and
The trial court ruled that the 1968 Affidavit of
Pedro,[16] who likewise professed themselves to be buyers
Transfer operated as a simple transfer of the subject
in good faith and for value, believed that Margaritas cause
properties from Margarita to Roberto. It found no express
of action had already been barred by laches, and that even
trust created between Roberto and Margarita by virtue
assuming the contrary, the cause of action was nevertheless
merely of the said document as there was no evidence of
barred by prescription as the same had accrued way back in
another document showing Robertos undertaking to return
1968 upon the execution of the affidavit of transfer by
the subject properties. Interestingly, it concluded that,
virtue of which an implied trust had been created. In this
instead, an implied or constructive trust was created
regard, they emphasized that the law allowed only a period
between the parties, as if affirming that there was indeed an
of ten (10) years within which an action to recover
agreement albeit unwritten to have the properties returned
ownership of real property or to enforce an implied trust
to Margarita in due time. [22]
thereon may be brought, but Margarita merely let it pass. [17]
Moreover, the trial court surmised how Margarita
On February 3, 1999, prior to pre-trial, Margarita
could have failed to recover the subject properties from
and the Spouses Campos amicably entered into a settlement
Roberto at any time between 1968, following the execution
whereby they waived their respective claims against each
of the Affidavit of Transfer, and Robertos return from
other.[18] Margarita died two days later and was forthwith
the United States shortly thereafter. Finding Margarita
substituted by her estate.[19] On February 8, 1999, the trial
guilty of laches by such inaction, the trial court barred
court rendered a Partial Decision[20] approving the
recovery from respondents who were found to have
compromise agreement and dismissing the complaint
acquired the properties supposedly in good faith and for
against the Spouses Campos. Forthwith, trial on the merits
value.[23] It also pointed out that recovery could no longer
ensued with respect to Pedro and Marilou.
27
be pursued in this case because Margarita had likewise
exhausted the ten-year prescriptive period for reconveyance
based on an implied trust which had commenced to run in
1968 upon the execution of the Affidavit of
Transfer.[24] Finally, it emphasized that mere inadequacy of
the price as alleged would not be a sufficient ground to
annul the sales in favor of Pedro and Marilou absent any
defect in consent.[25]
Aggrieved, petitioner appealed to the Court of
Appeals which, on October 13, 2006, affirmed the trial
courts disposition. The appellate court dismissed petitioners
claim that Roberto was merely a trustee of the subject
properties as there was no evidence on record supportive of
the allegation that Roberto merely borrowed the properties
from Margarita upon his promise to return the same on his
arrival from the United States. Further, it hypothesized that
granting the existence of an implied trust, still Margaritas
action thereunder had already been circumscribed by
laches. [26]
Curiously, while the appellate court had found no
implied trust relation in the transaction between Margarita
and Roberto, nevertheless, it held that the ten-year
prescriptive period under Article 1144 of the Civil Code, in
relation to an implied trust created under Article 1456, had
already been exhausted by Margarita because her cause of
action had accrued way back in 1968; and that while laches
and prescription as defenses could have availed against confidence in Roberto. Petitioner also refutes the Court of
Roberto, the same would be unavailing against Pedro and Appeals finding that there was a donation of the properties
Marilou because the latter were supposedly buyers in good to Roberto when the truth is that the subject properties were
faith and for value.[27] It disposed of the appeal, thus: all that Margarita possessed and that she could not have
failed to provide for her other children nor for means by
WHEREFORE, the Appeal is
hereby DENIED. The which to support herself. It reiterates that the transfer to
assailed Decision dated 2 July 2001 of
Roberto was only an accommodation so that he could
the Regional Trial Court of Bauang, La
Union, Branch 33 is AFFIRMED. submit proof to support his U.S.visa application.
SO
ORDERED.[28]
On the issue of prescription, petitioner advances
that it runs from the time Roberto, as trustee, has repudiated
Hence, the instant recourse imputing error to the
the trust by selling the properties to respondents in August
Court of Appeals in holding: (a) that the complaint is
15, 1992; that hence, the filing of the instant complaint in
barred by laches and prescription; (b) that the rule on
1996 was well within the prescriptive period. Finally,
innocent purchaser for value applies in this case of sale of
petitioner states that whether a buyer is in good or bad faith
unregistered land; and (c) that there is no evidence to
is a matter that attains relevance in sales of registered land,
support the finding that there is an implied trust created
as corollary to the rule that a purchaser of unregistered land
between Margarita and her son Roberto.[29]
uninformed of the sellers defective title acquires no better
right than such seller.
Petitioner posits that the Court of Appeals should
not have haphazardly applied the doctrine of laches and
Respondents stand by the ruling of the Court of
failed to see that the parties in this case are bound by
Appeals. In their Comment, they theorize that if indeed
familial ties. They assert that laches must not be applied
Margarita and Roberto had agreed to have the subject
when an injustice would result from it. Petitioner believes
properties returned following the execution of the Affidavit
that the existence of such confidential relationship
of Transfer, then there should have been a written
precludes a finding of unreasonable delay on Margaritas
agreement evincing such intention of the parties. They note
part in enforcing her claim, especially in the face of Luzs
that petitioners reliance on the Affidavit of Transfer as well
testimony that she and Margarita had placed trust and
as on the alleged unwritten agreement for the return of the
28
properties must fail, simply because they are not even another person owning the legal title to such property, the form of unconscionable conduct, artifice, concealment of

parties to it. Be that as it may, the said document had equitable ownership of the former entitling him to the questionable means, or who in any way against equity and

effectively transferred the properties to Roberto who, in performance of certain duties and the exercise of certain good conscience has obtained or holds the legal right to
turn, had acquired the full capacity to sell them, especially powers by the latter.[30] Trusts are either express or property which he ought not, in equity and good

since these properties could well be considered as Robertos implied.[31] Express or direct trusts are created by the direct conscience, hold and enjoy.[36] They are aptly characterized

inheritance from Margarita who, on the contrary, did have and positive acts of the parties, by some writing or deed, or as fraud-rectifying trust,[37] imposed by equity to satisfy the

other existing properties in her name. Moreover, they will, or by oral declaration in words evincing an intention demands of justice[38]and to defeat or prevent the wrongful

believe that the liberal application of the rule on laches to create a trust.[32] Implied trusts also called trusts by act of one of the parties.[39] Constructive trusts are

between family members does not apply in the instant case operation of law, indirect trusts and involuntary trusts arise illustrated in Articles 1450, 1454, 1455 and 1456.[40]

because there is no fiduciary relationship and privity by legal implication based on the presumed intention of the

between them and Margarita. parties or on equitable principles independent of the On the other hand, resulting trusts arise from the

particular intention of the parties.[33] They are those which, nature or circumstances of the consideration involved in a

There is merit in the petition. without being expressed, are deducible from the nature of transaction whereby one person becomes invested with

the transaction as matters of intent or, independently of the legal title but is obligated in equity to hold his title for the

To begin with, the rule is that the latitude of particular intention of the parties, as being inferred from the benefit of another. This is based on the equitable doctrine

judicial review under Rule 45 generally excludes factual transaction by operation of law basically by reason of that valuable consideration and not legal title is

and evidentiary reevaluation, and the Court ordinarily equity.[34] determinative of equitable title or interest and is always
abides by the uniform conclusions of the trial court and the presumed to have been contemplated by the

appellate court. Yet, in the case at bar, while the courts Implied trusts are further classified into constructive trusts parties.[41] Such intent is presumed as it is not expressed in

below have both arrived at the dismissal of petitioners and resulting trusts. Constructive trusts, on the one hand, the instrument or deed of conveyance and is to be found in

complaint, there still remains unsettled the ostensible come about in the main by operation of law and not by the nature of their transaction.[42] Implied trusts of this

incongruence in their respective factual findings. It thus agreement or intention. They arise not by any word or nature are hence describable as intention-enforcing

behooves us to be thorough both in reviewing the records phrase, either expressly or impliedly, evincing a direct trusts.[43] Specific examples of resulting trusts may be

and in appraising the evidence, especially since an opposite intention to create a trust, but one which arises in order to found in the Civil Code, particularly Articles 1448, 1449,

conclusion is warranted and, as will be shown, justified. satisfy the demands of justice.[35] Also known as trusts ex 1451, 1452 and 1453.[44]

maleficio, trusts ex delicto and trusts de son tort, they are

A trust is the legal relationship between one construed against one who by actual or constructive fraud, Articles 1448 to 1456 of the Civil Code

person having an equitable ownership of property and duress, abuse of confidence, commission of a wrong or any enumerate cases of implied trust, but the list according to

29
Article 1447 is not exclusive of others which may be the facts and circumstances accompanying the transaction, We recall that the complaint before the trial court

established by the general law on trusts so long as the particularly the source of the consideration is always an alleged that the 1968 Affidavit of Transfer was executed

limitations laid down in Article 1442 are observed,[45] that element of a resulting trust[52] and may be inferred from the merely to accommodate Robertos request to have the
is, that they be not in conflict with the New Civil Code, the acts or conduct of the parties rather than from direct properties in his name and thereby produce proof of

Code of Commerce, the Rules of Court and special laws.[46] expression of conduct.[53] Certainly, intent as an ownership of certain real properties in the Philippines to

indispensable element, is a matter that necessarily lies in support his U.S. visa application. The agreement, the

While resulting trusts generally arise on failure of the evidence, that is, by evidence, even circumstantial, of complaint further stated, was for Margarita to transfer the

an express trust or of the purpose thereof, or on a statements made by the parties at or before the time title tax declarations of the subject properties to Roberto for the

conveyance to one person upon a consideration from passes.[54] Because an implied trust is neither dependent said purpose and without the intention to divest her of the

another (sometimes referred to as a purchase-money upon an express agreement nor required to be evidenced by rights of ownership and dominion.[58] Margarita, however,

resulting trust), they may also be imposed in other writing,[55] Article 1457[56] of our Civil Code authorizes the died before trial on the merits ensued;[59] yet the allegation

circumstances such that the court, shaping judgment in its admission of parole evidence to prove their existence. was substantiated by the open-court statements of her

most efficient form and preventing a failure of justice, must Parole evidence that is required to establish the existence of daughter, Luz, and of her niece, Hilaria Costales (Hilaria),

decree the existence of such a trust.[47] A resulting trust, for an implied trust necessarily has to be trustworthy and it a disinterested witness.

instance, arises where, there being no fraud or violation of cannot rest on loose, equivocal or indefinite declarations.[57]

the trust, the circumstances indicate intent of the parties In her testimony, Luz, who affirmed under oath

that legal title in one be held for the benefit of another.[48] It Thus, contrary to the Court of Appeals finding her own presence at the execution of the Affidavit of
also arises in some instances where the underlying that there was no evidence on record showing that an Transfer, described the circumstances under which

transaction is without consideration, such as that implied trust relation arose between Margarita and Roberto, Margarita and Roberto entered into the agreement. She

contemplated in Article 1449[49] of the Civil Code. Where we find that petitioner before the trial court, had actually narrated that Roberto had wanted to travel to the U.S and to

property, for example, is gratuitously conveyed for a adduced evidence to prove the intention of Margarita to show the embassy proof of his financial capacity, he asked

particular purpose and that purpose is either fulfilled or transfer to Roberto only the legal title to the properties in to borrow from Margarita the properties involved but upon

frustrated, the court may affirm the resulting trust in favor question, with attendant expectation that Roberto would the condition that he would give them back to her upon his

of the grantor or transferor,[50] where the beneficial interest return the same to her on accomplishment of that specific arrival from the United States. She admitted that Robertos

in property was not intended to vest in the grantee.[51] purpose for which the transaction was entered into. The commitment to return the properties was not put in writing

evidence of course is not documentary, but rather because they placed trust and confidence in him, and that
Intention although only presumed, implied or testimonial. while she had spent most of her time in Mindanao since she

supposed by law from the nature of the transaction or from married in 1956, she would sometimes come to La Union

30
to see her mother but she never really knew whether at one testimony was offered to prove the circumstances merely a depositary of legal title having no duties as to the

point or another her mother had demanded the return of the surrounding its execution the circumstances from which management, control or disposition of the property except

properties from Roberto.[60] She further asserted that even could be derived the unwritten understanding between to make a conveyance when called upon by the cestui que
after Robertos arrival from the United States, it was Roberto and Margarita that by their act, no absolute transfer trust.[63] Hence, the sales he entered into with respondents

Margarita who paid off the taxes on the subject properties of ownership would be effected. Besides, it would be are a wrongful conversion of the trust property and a breach

and that it was only when her health started to deteriorate highly unlikely for Margarita to institute the instant of the trust. The question is: May respondents now be

that Roberto had taken up those obligations.[61] Hilarias complaint if it were indeed her intention to vest in Roberto, compelled to reconvey the subject properties to

testimony ran along the same line. Like Luz, she was by virtue of the Affidavit of Transfer, absolute ownership petitioner? We rule in the affirmative.

admittedly present at the execution of the Affidavit of over the covered properties.

Transfer which took place at the house she shared with Respondents posit that petitioners claim may

Jacinto Costales, the notarizing officer who was her own It is deducible from the foregoing that the never be enforced against them as they had purchased the

brother. She told that Roberto at the time had wanted to inscription of Robertos name in the Affidavit of Transfer as properties from Roberto for value and in good faith. They

travel to the U.S. but did not have properties in the Margaritas transferee is not for the purpose of transferring also claim that, at any rate, petitioners cause of action has

Philippines which he could use to back up his visa ownership to him but only to enable him to hold the accrued way back in 1968 upon the execution of the

application; as accommodation, Margarita lent him the tax property in trust for Margarita. Indeed, in the face of the Affidavit of Transfer and, hence, with the 28 long years

declarations covering the properties but with the credible and straightforward testimony of the two that since passed, petitioners claim had long become stale

understanding that upon his return he would give them witnesses, Luz and Hilaria, the probative value of the not only on account of laches, but also under the rules on
back to Margarita. She professed familiarity with the ownership record forms in the names of respondents, extinctive prescription governing a resulting trust. We do

properties involved because one of them was actually together with the testimony of their witness from the not agree.

sitting close to her own property.[62] municipal assessors office who authenticated said forms,

While indeed at one point at the stand both of are utterly minimal to show Robertos ownership. It suffices First, fundamental is the rule in land registration

Luzs and Hilarias presence at the execution of the affidavit to say that respondents did not bother to offer evidence that law that the issue of whether the buyer of realty is in good

had been put to test in subtle interjections by respondents would directly refute the statements made by Luz and or bad faith is relevant only where the subject of the sale is

counsel to the effect that their names and signatures did not Hilaria in open court on the circumstances underlying the registered land and the purchase was made from the

appear in the Affidavit of Transfer as witnesses, this, to our 1968 Affidavit of Transfer. registered owner whose title to the land is clean, in which

mind, is of no moment inasmuch as they had not been case the purchaser who relies on the clean title of the
called to testify on the fact of, or on the contents of, the As a trustee of a resulting trust, therefore, registered owner is protected if he is a purchaser in good

Affidavit of Transfer or its due execution. Rather, their Roberto, like the trustee of an express passive trust, is faith and for value.[64] Since the properties in question are

31
unregistered lands, respondents purchased the same at their Robertos open court declaration which he made in the 1979 that the parties are connected by ties of blood or marriage

own peril. Their claim of having bought the properties in adoption proceedings involving respondents to the effect tends to excuse an otherwise unreasonable delay.

good faith, i.e., without notice that there is some other that he owned the subject properties,[69] nor even the fact
person with a right to or interest therein, would not protect that he in 1977 had entered into a lease contract on one of Third, there is a fundamental principle in agency

them should it turn out, as it in fact did in this case, that the disputed properties which contract had been subject of a that where certain property entrusted to an agent and

their seller, Roberto, had no right to sell them. 1996 decision of the Court of Appeals.[70] These do not impressed by law with a trust in favor of the principal is

suffice to constitute unequivocal acts in repudiation of the wrongfully diverted, such trust follows the property in the

Second, the invocation of the rules on limitation trust. hands of a third person and the principal is ordinarily

of actions relative to a resulting trust is not on point entitled to pursue and recover it so long as the property can

because the resulting trust relation between Margarita and On the other hand, laches, being rooted in equity, be traced and identified, and no superior equities have

Roberto had been extinguished by the latters death. A trust, is not always to be applied strictly in a way that would intervened. This principle is actually one of trusts, since the

it is said, terminates upon the death of the trustee, obliterate an otherwise valid claim especially between wrongful conversion gives rise to a constructive trust which

particularly where the trust is personal to him.[65] Besides, blood relatives. The existence of a confidential relationship pursues the property, its product or proceeds, and permits

prescription and laches, in respect of this resulting trust based upon consanguinity is an important circumstance for the beneficiary to recover the property or obtain damages

relation, hardly can impair petitioners cause of action. On consideration; hence, the doctrine is not to be applied for the wrongful conversion of the property. Aptly called

the one hand, in accordance with Article 1144[66] of the mechanically as between near relatives.[71] Adaza v. Court the trust pursuit rule, it applies when a constructive or

Civil Code, an action for reconveyance to enforce an of Appeals[72] held that the relationship between the parties resulting trust has once affixed itself to property in a certain
implied trust in ones favor prescribes in ten (10) years from therein, who were siblings, was sufficient to explain and state or form.[74]

the time the right of action accrues, as it is based upon an excuse what would otherwise have been a long delay in

obligation created by law.[67] It sets in from the time the enforcing the claim and the delay in such situation should Hence, a trust will follow the property through all

trustee performs unequivocal acts of repudiation amounting not be as strictly construed as where the parties are changes in its state and form as long as such property, its

to an ouster of the cestui que trust which are made known complete strangers vis-a-vis each other; thus, reliance by products or its proceeds, are capable of identification, even

to the latter.[68] In this case, it was the 1992 sale of the one party upon his blood relationship with the other and the into the hands of a transferee other than a bona

properties to respondents that comprised the act of trust and confidence normally connoted in our culture by fide purchaser for value, or restitution will be enforced at

repudiation which, however, was made known to Margarita that relationship should not be taken against the election of the beneficiary through recourse against the

only in 1995 but nevertheless impelled her to institute the him. Too, Sotto v. Teves[73] ruled that the doctrine of laches trustee or the transferee personally. This is grounded on the
action in 1996 still well within the prescriptive is not strictly applied between near relatives, and the fact principle in property law that ownership continues and can

period. Hardly can be considered as act of repudiation be asserted by the true owner against any withholding of

32
the object to which the ownership pertains, whether such
object of the ownership is found in the hands of an original
owner or a transferee, or in a different form, as long as it
can be identified.[75] Accordingly, the person to whom is
made a transfer of trust property constituting a wrongful
conversion of the trust property and a breach of the trust,
when not protected as a bona fide purchaser for value, is
himself liable and accountable as a constructive
trustee. The liability attaches at the moment of the transfer
of trust property and continues until there is full restoration
to the beneficiary. Thus, the transferee is charged with, and
can be held to the performance of the trust, equally with the
original trustee, and he can be compelled to execute a
reconveyance.[76]
This scenario is characteristic of a constructive
trust imposed by Article 1456[77] of the Civil Code, which
impresses upon a person obtaining property through
mistake or fraud the status of an implied trustee for the
benefit of the person from whom the property
comes. Petitioner, in laying claim against respondents who
are concededly transferees who professed having validly
derived their ownership from Roberto, is in effect enforcing
against respondents a constructive trust relation that arose
by virtue of the wrongful and fraudulent transfer to them of
the subject properties by Roberto.
Aznar Brother Realty Co. v. Aying,[78] citing Buan Vda. de
Esconde v. Court of Appeals,[79] explained this form of
implied trust as follows:
A deeper analysis of Article
1456 reveals that it is not a trust in the
technical sense for in a typical
trust, confidence is reposed in one
person who is named a trustee for the
benefit of another who is called
the cestui que trust, respecting property
which is held by the trustee for the
benefit of the cestui que trust. A
constructive trust, unlike an express
trust, does not emanate from, or
generate a fiduciary relation. While in
an express trust, a beneficiary and a
trustee are linked by confidential or
fiduciary relations, in a constructive
trust, there is neither a promise nor any
fiduciary relation to speak of and the
so-called trustee neither accepts any
trust nor intends holding the property
for the beneficiary.
xxxx
x x x [C]onstructive trusts are created by
the construction of equity in order to
satisfy the demands of justice and
prevent unjust enrichment. They arise
contrary to intention against one who, by
fraud, duress or abuse of confidence,
obtains or holds the legal right to
property which he ought not, in equity
and good conscience, to hold.[80]
It is settled that an action for reconveyance based on a
constructive implied trust prescribes in 10 years likewise
in accordance with Article 1144 of the Civil Code. Yet not
like in the case of a resulting implied trust and an express
trust, prescription supervenes in a constructive implied
trust even if the trustee does not repudiate the
relationship. In other words, repudiation of said trust is not
a condition precedent to the running of the prescriptive
period.[81]
As to when the prescriptive period commences to
run, Crisostomo v. Garcia[82] elucidated as follows:
When property is registered
in another's name, an implied or
constructive trust is created by law in
favor of the true owner. The action for
reconveyance of the title to the rightful
owner prescribes in 10 years from the
issuance of the title. An action for
reconveyance based on implied or
constructive trust prescribes in ten
years from the alleged fraudulent
registration or date of issuance of the
certificate of title over the property.
It is now well settled that the
prescriptive period to recover property
obtained by fraud or mistake, giving
rise to an implied trust under Art. 1456
of the Civil Code, is 10 years pursuant
to Art. 1144. This ten-year
prescriptive period begins to run
from the date the adverse party
repudiates the implied trust, which
repudiation takes place when the
adverse party registers the land.[83]
From the foregoing, it is clear that an action for
reconveyance under a constructive implied trust in
accordance with Article 1456 does not prescribe unless and
until the land is registered or the instrument affecting the
same is inscribed in accordance with law, inasmuch as it is
what binds the land and operates constructive notice to the
33

world.[84] In the present case, however, the lands involved
are concededly unregistered lands; hence, there is no way
by which Margarita, during her lifetime, could be notified
of the furtive and fraudulent sales made in 1992 by Roberto
in favor of respondents, except by actual notice from Pedro
himself in August 1995. Hence, it is from that date that
prescription began to toll. The filing of the complaint in
February 1996 is well within the prescriptive
period. Finally, such delay of only six (6) months in
instituting the present action hardly suffices to justify a
finding of inexcusable delay or to create an inference that
Margarita has allowed her claim to stale by laches.
WHEREFORE, the Petition is GRANTED. The
October 13, 2006 Decision of the Court of Appeals in CA-
G.R. CV No. 72371, affirming the July 2, 2001 judgment of
the Regional Trial Court of La Union, Branch 33 in Civil
Case No. 1031-BG, is REVERSED and SET ASIDE, and
a new one is entered (a) directing the cancellation of the tax
declarations covering the subject properties in the name of
Roberto D. Laigo and his transferees; (b) nullifying the
deeds of sale executed by Roberto D. Laigo in favor of
respondents Pedro Roy Laigo and Marilou Laigo; and (c)
directing said respondents to execute reconveyance in favor
of petitioner.
SO ORDERED.
G.R. No. 193577 September 7, 2011
ANTONIO FRANCISCO, substituted by his heirs:
NELIA E.S. FRANCISCO, EMILIA F. BERTIZ,
REBECCA E.S. FRANCISCO, ANTONIO E.S.
FRANCISCO, JR., SOCORRO F. FONTANILLA, and
JOVITO E.S. FRANCISCO,Petitioners,
vs.
CHEMICAL BULK CARRIERS,
INCORPORATED, Respondent.
DECISION
CARPIO, J.:
The Case
This is a petition for review1 of the 31 May 2010
Decision2 and 31 August 2010 Resolution3 of the
Court of Appeals in CA G.R. CV No. 63591. In its 31
May 2010 Decision, the Court of Appeals set aside
the 21 August 1998 Decision4 of the Regional Trial of
Pasig City, Branch 71 (trial court), and ordered
petitioner Antonio Francisco (Francisco) to pay
respondent Chemical Bulk Carriers, Incorporated
(CBCI) ₱1,119,905 as actual damages. In its 31
August 2010 Resolution, the Court of Appeals denied
Francisco’s motion for reconsideration.
The Facts
Since 1965, Francisco was the owner and manager of
a Caltex station in Teresa, Rizal. Sometime in March
1993, four persons, including Gregorio Bacsa
(Bacsa), came to Francisco’s Caltex station and
introduced themselves as employees of CBCI. Bacsa
offered to sell to Francisco a certain quantity of
CBCI’s diesel fuel.
After checking Bacsa’s identification card, Francisco
agreed to purchase CBCI’s diesel fuel. Francisco
imposed the following conditions for the purchase: (1)
that Petron Corporation (Petron) should deliver the
diesel fuel to Francisco at his business address which
should be properly indicated in Petron’s invoice; (2)
that the delivery tank is sealed; and (3) that Bacsa
should issue a separate receipt to Francisco.
The deliveries started on 5 April 1993 and lasted for
ten months, or up to 25 January 1994.5 There were 17
deliveries to Francisco and all his conditions were
complied with.
In February 1996, CBCI sent a demand letter to
Francisco regarding the diesel fuel delivered to him
but which had been paid for by CBCI.6 CBCI
demanded that Francisco pay CBCI ₱1,053,527 for
the diesel fuel or CBCI would file a complaint against
him in court. Francisco rejected CBCI’s demand.
On 16 April 1996, CBCI filed a complaint for sum of
money and damages against Francisco and other
unnamed defendants.7 According to CBCI, Petron, on
various dates, sold diesel fuel to CBCI but these were
delivered to and received by Francisco. Francisco
then sold the diesel fuel to third persons from whom
he received payment. CBCI alleged that Francisco
acquired possession of the diesel fuel without
authority from CBCI and deprived CBCI of the use of
the diesel fuel it had paid for. CBCI demanded
payment from Francisco but he refused to pay. CBCI
argued that Francisco should have known that since
only Petron, Shell and Caltex are authorized to sell
and distribute petroleum products in the Philippines,
the diesel fuel came from illegitimate, if not illegal or
criminal, acts. CBCI asserted that Francisco violated
Articles 19,8 20,9 21,10 and 2211 of the Civil Code and
that he should be held liable. In the alternative, CBCI
claimed that Francisco, in receiving CBCI’s diesel
fuel, entered into an innominate contract of do ut
des (I give and you give) with CBCI for which
Francisco is obligated to pay CBCI ₱1,119,905, the
value of the diesel fuel. CBCI also prayed for
exemplary damages, attorney’s fees and other
expenses of litigation.
On 20 May 1996, Francisco filed a Motion to Dismiss
on the ground of forum shopping.12 CBCI filed its
Opposition.13 In an Order dated 15 November 1996,
the trial court denied Francisco’s motion.14
Thereafter, Francisco filed his Answer.15 Francisco
explained that he operates the Caltex station with the
help of his family because, in February 1978, he
completely lost his eyesight due to sickness.
Francisco claimed that he asked Jovito, his son, to
34
look into and verify the identity of Bacsa, who
introduced himself as a radio operator and
confidential secretary of a certain Mr. Inawat (Inawat),
CBCI’s manager for operations. Francisco said he
was satisfied with the proof presented by Bacsa.
When asked to explain why CBCI was selling its fuel,
Bacsa allegedly replied that CBCI was in immediate
need of cash for the salary of its daily paid workers
and for petty cash. Francisco maintained that Bacsa
assured him that the diesel fuel was not stolen
property and that CBCI enjoyed a big credit line with
Petron. Francisco agreed to purchase the diesel fuel
offered by Bacsa on the following conditions:
1) Defendant [Francisco] will not accept any
delivery if it is not company (Petron)
delivered, with his name and address as
shipping point properly printed and indicated
in the invoice of Petron, and that the product
on the delivery tank is sealed; [and]
2) Although the original invoice is sufficient
evidence of delivery and payment, under
ordinary course of business, defendant still
required Mr. Bacsa to issue a separate
receipt duly signed by him acknowledging
receipt of the amount stated in the invoice,
for and in behalf of CBCI.16
During the first delivery on 5 April 1993, Francisco
asked one of his sons to verify whether the delivery
truck’s tank was properly sealed and whether Petron
issued the invoice. Francisco said all his conditions
were complied with. There were 17 deliveries made
from 5 April 1993 to 25 January 1994 and each
delivery was for 10,000 liters of diesel fuel at
₱65,865.17 Francisco maintained that he acquired the
diesel fuel in good faith and for value. Francisco also
filed a counterclaim for exemplary damages, moral
damages and attorney’s fees.
In its 21 August 1998 Decision, the trial court ruled in
Francisco’s favor and dismissed CBCI’s complaint.
The dispositive portion of the trial court’s 21 August
1998 Decision reads:
WHEREFORE, Judgment is hereby rendered:
1. Dismissing the complaint dated March 13,
1996 with costs.
2. Ordering plaintiff (CBCI), on the
counterclaim, to pay defendant the amount
of ₱100,000.00 as moral damages and
₱50,000.00 as and by way of attorney’s fees.
SO ORDERED.18
CBCI appealed to the Court of Appeals.19 CBCI
argued that Francisco acquired the diesel fuel from
Petron without legal ground because Bacsa was not
authorized to deliver and sell CBCI’s diesel fuel. CBCI
added that Francisco acted in bad faith because he
should have inquired further whether Bacsa’s sale of
CBCI’s diesel fuel was legitimate.
In its 31 May 2010 Decision, the Court of Appeals set
aside the trial court’s 21 August 1998 Decision and
ruled in CBCI’s favor. The dispositive portion of the
Court of Appeals’ 31 May 2010 Decision reads:
IN VIEW OF THE FOREGOING, the assailed
decision is hereby REVERSED and SET ASIDE.
Antonio Francisco is ordered to pay Chemical Bulk
Carriers, Incorporated the amount of ₱1,119,905.00
as actual damages.
SO ORDERED.20
On 15 January 2001, Francisco died.21 Francisco’s
heirs, namely: Nelia E.S. Francisco, Emilia F. Bertiz,
Rebecca E.S. Francisco, Antonio E.S. Francisco, Jr.,
Socorro F. Fontanilla, and Jovito E.S. Francisco (heirs
of Francisco) filed a motion for substitution.22 The
heirs of Francisco also filed a motion for
reconsideration.23 In its 31 August 2010 Resolution,
the Court of Appeals granted the motion for
substitution but denied the motion for reconsideration.
Hence, this petition.
The Ruling of the Trial Court
The trial court ruled that Francisco was not liable for
damages in favor of CBCI because the 17 deliveries
were covered by original and genuine invoices. The
trial court declared that Bacsa, as confidential
secretary of Inawat, was CBCI’s authorized
representative who received Francisco’s full payment
for the diesel fuel. The trial court stated that if Bacsa
was not authorized, CBCI should have sued Bacsa
and not Francisco. The trial court also considered
Francisco a buyer in good faith who paid in full for the
merchandise without notice that some other person
had a right to or interest in such diesel fuel. The trial
court pointed out that good faith affords protection to
a purchaser for value. Finally, since CBCI was bound
by the acts of Bacsa, the trial court ruled that CBCI is
liable to pay damages to Francisco.
The Ruling of the Court of Appeals
The Court of Appeals set aside the trial court’s 21
August 1998 Decision and ruled that Bacsa’s act of
selling the diesel fuel to Francisco was his personal
act and, even if Bacsa connived with Inawat, the sale
does not bind CBCI.
The Court of Appeals declared that since Francisco
had been in the business of selling petroleum
products for a considerable number of years, his
blindness was not a hindrance for him to transact
business with other people. With his condition and
experience, Francisco should have verified whether
CBCI was indeed selling diesel fuel and if it had given
Bacsa authority to do so. Moreover, the Court of
Appeals stated that Francisco cannot feign good faith
since he had doubts as to the authority of Bacsa yet
he did not seek confirmation from CBCI and
contented himself with an improvised receipt.
Francisco’s failure to verify Bacsa’s authority showed
that he had an ulterior motive. The receipts issued by
Bacsa also showed his lack of authority because it
was on a plain sheet of bond paper with no letterhead
or any indication that it came from CBCI. The Court of
Appeals ruled that Francisco cannot invoke estoppel
because he was at fault for choosing to ignore the tell-
tale signs of petroleum diversion and for not
exercising prudence.
35
The Court of Appeals also ruled that CBCI was
unlawfully deprived of the diesel fuel which, as
indicated in the invoices, CBCI had already paid for.
Therefore, CBCI had the right to recover the diesel
fuel or its value from Francisco. Since the diesel fuel
can no longer be returned, the Court of Appeals
ordered Francisco to give back the actual amount
paid by CBCI for the diesel fuel.
The Issues
The heirs of Francisco raise the following issues:
I. WHETHER THE COURT OF APPEALS
ERRED IN NOT FINDING THAT
DEFENDANT ANTONIO FRANCISCO
EXERCISED THE REQUIRED DILIGENCE
OF A BLIND PERSON IN THE CONDUCT
OF HIS BUSINESS; and
II. WHETHER ON THE BASIS OF THE
FACTUAL FINDINGS OF THE COURT OF
APPEALS AND THE TRIAL COURT AND
ADMITTED FACTS, IT CAN BE
CONCLUDED THAT THE PLAINTIFF
APPROVED EXPRESSLY OR TACITLY
THE TRANSACTIONS.24
The Ruling of the Court
The petition has no merit.
Required Diligence of a Blind Person
The heirs of Francisco argue that the Court of
Appeals erred when it ruled that Francisco was liable
to CBCI because he failed to exercise the diligence of
a good father of a family when he bought the diesel
fuel. They argue that since Francisco was blind, the
standard of conduct that was required of him was that
of a reasonable person under like disability.
Moreover, they insist that Francisco exercised due
care in purchasing the diesel fuel by doing the
following: (1) Francisco asked his son to check the
identity of Bacsa; (2) Francisco required direct
delivery from Petron; (3) Francisco required that he
be named as the consignee in the invoice; and (4)
Francisco required separate receipts from Bacsa to
evidence actual payment.
Standard of conduct is the level of expected conduct
that is required by the nature of the obligation and
corresponding to the circumstances of the person,
time and place.25 The most common standard of
conduct is that of a good father of a family or that of a
reasonably prudent person.26 To determine the
diligence which must be required of all persons, we
use as basis the abstract average standard
corresponding to a normal orderly person.27
However, one who is physically disabled is required to
use the same degree of care that a reasonably careful
person who has the same physical disability would
use.28 Physical handicaps and infirmities, such as
blindness or deafness, are treated as part of the
circumstances under which a reasonable person must
act. Thus, the standard of conduct for a blind person
becomes that of a reasonable person who is blind.
We note that Francisco, despite being blind, had been
managing and operating the Caltex station for 15
years and this was not a hindrance for him to transact
business until this time. In this instance, however, we
rule that Francisco failed to exercise the standard of
conduct expected of a reasonable person who is
blind. First, Francisco merely relied on the
identification card of Bacsa to determine if he was
authorized by CBCI. Francisco did not do any other
background check on the identity and authority of
Bacsa. Second, Francisco already expressed his
misgivings about the diesel fuel, fearing that they
might be stolen property,29 yet he did not verify with
CBCI the authority of Bacsa to sell the diesel fuel.
Third, Francisco relied on the receipts issued by
Bacsa which were typewritten on a half sheet of plain
bond paper.30 If Francisco exercised reasonable
diligence, he should have asked for an official receipt
issued by CBCI. Fourth, the delivery to Francisco, as
indicated in Petron’s invoice, does not show that
CBCI authorized Bacsa to sell the diesel fuel to
Francisco. Clearly, Francisco failed to exercise the
standard of conduct expected of a reasonable person
who is blind.
Express or Tacit Approval of the Transaction
The heirs of Francisco argue that CBCI approved
expressly or tacitly the transactions. According to
them, there was apparent authority for Bacsa to enter
into the transactions. They argue that even if the
agent has exceeded his authority, the principal is
solidarily liable with the agent if the former allowed the
later to act as though he had full powers.31 They insist
CBCI was not unlawfully deprived of its property
because Inawat gave Bacsa the authority to sell the
diesel fuel and that CBCI is bound by such action.
Lastly, they argue that CBCI should be considered in
estoppel for failure to act during the ten month period
that deliveries were being made to Francisco.
The general principle is that a seller without title
cannot transfer a better title than he has. 32 Only the
owner of the goods or one authorized by the owner to
sell can transfer title to the buyer.33 Therefore, a
person can sell only what he owns or is authorized to
sell and the buyer can, as a consequence, acquire no
more than what the seller can legally transfer.34
Moreover, the owner of the goods who has been
unlawfully deprived of it may recover it even from a
purchaser in good faith.35 Thus, the purchaser of
property which has been stolen from the owner has
been held to acquire no title to it even though he
purchased for value and in good faith.
The exception from the general principle is the
doctrine of estoppel where the owner of the goods is
precluded from denying the seller’s authority to
sell.36 But in order that there may be estoppel, the
owner must, by word or conduct, have caused or
allowed it to appear that title or authority to sell is with
the seller and the buyer must have been misled to his
damage.37 1avvphi1
In this case, it is clear that Bacsa was not the owner
of the diesel fuel.1âwphi1 Francisco was aware of this
but he claimed that Bacsa was authorized by CBCI to
sell the diesel fuel. However, Francisco’s claim that
Bacsa was authorized is not supported by any
evidence except his self-serving testimony. First,
Francisco did not even confirm with CBCI if it was
36
indeed selling its diesel fuel since it is not one of the
oil companies known in the market to be selling
petroleum products. This fact alone should have put
Francisco on guard. Second, it does not appear that
CBCI, by some direct and equivocal act, has clothed
Bacsa with the indicia of ownership or apparent
authority to sell CBCI’s diesel fuel. Francisco did not
state if the identification card presented by Bacsa
indicated that he was CBCI’s agent or a mere
employee. Third, the receipt issued by Bacsa was
typewritten on a half sheet of plain bond paper. There
was no letterhead or any indication that it came from
CBCI. We agree with the Court of Appeals that this
was a personal receipt issued by Bacsa and not an
official receipt issued by CBCI. Consequently, CBCI is
not precluded by its conduct from denying Bacsa’s
authority to sell. CBCI did not hold out Bacsa or allow
Bacsa to appear as the owner or one with apparent
authority to dispose of the diesel fuel.
Clearly, Bacsa cannot transfer title to Francisco as
Bacsa was not the owner of the diesel fuel nor was he
authorized by CBCI to sell its diesel fuel. CBCI did not
commit any act to clothe Bacsa with apparent
authority to sell the diesel fuel that would have misled
Francisco. Francisco, therefore, did not acquire any
title over the diesel fuel. Since CBCI was unlawfully
deprived of its property, it may recover from
Francisco, even if Francisco pleads good faith.
WHEREFORE, we DENY the petition.
We AFFIRM the 31 May 2010 Decision and 31
August 2010 Resolution of the Court of Appeals.
SO ORDERED.
G.R. No. 173038 September 14, 2011
ELENA JANE DUARTE, Petitioner,
vs.
MIGUEL SAMUEL A.E. DURAN, Respondent.
DECISION
DEL CASTILLO, J.:
Preponderance of evidence only requires that
evidence be greater or more convincing than the
opposing evidence.1
Assailed in this Petition for Review
on Certiorari2 under Rule 45 of the Rules of Court are
the October 26, 2005 Decision3 and May 22, 2006
Resolution4 of the Court of Appeals (CA) in CA-G.R.
SP No. 84461.
Factual Antecedents
This petition arose from a suit5 for collection of sum of
money filed by respondent Miguel Samuel A.E.
Duran6against petitioner Elena Jane Duarte with
Branch 5 of the Municipal Trial Court in Cities
(MTCC), Cebu.
According to respondent, on February 14, 2002, he
offered to sell a laptop computer for the sum of
₱15,000.00 to petitioner thru the help of a common
friend, Josephine Dy (Dy).7 Since petitioner was
undecided, respondent left the laptop with petitioner
for two days.8 On February 16, 2002, petitioner told
respondent that she was willing to buy the laptop on
installment.9 Respondent agreed; thus, petitioner
gave ₱5,000.00 as initial payment and promised to
pay ₱3,000.00 on February 18, 2002 and ₱7,000.00
on March 15, 2002.10 On February 18, 2002,
petitioner gave her second installment of ₱3,000.00 to
Dy, who signed the handwritten receipt11 allegedly
made by petitioner as proof of payment.12 But when
Dy returned to get the remaining balance on March
15, 2002, petitioner offered to pay only ₱2,000.00
claiming that the laptop was only worth
₱10,000.00.13 Due to the refusal of petitioner to pay
the remaining balance, respondent thru counsel sent
petitioner a demand letter dated July 29, 2002.14
Petitioner, however, denied writing the receipt dated
February 18, 2002,15 and receiving the demand letter
dated July 29, 2002.16 Petitioner claimed that there
was no contract of sale.17 Petitioner said that Dy
offered to sell respondent’s laptop but because
petitioner was not interested in buying it, Dy asked if
petitioner could instead lend respondent the amount
of ₱5,000.00.18 Petitioner agreed and in turn, Dy left
the laptop with petitioner.19 On February 18, 2002, Dy
came to get the laptop but petitioner refused to give it
back because the loan was not yet paid. 20 Dy then
asked petitioner to lend an additional amount of
₱3,000.00 to respondent who allegedly was in dire
need of money.21 Petitioner gave the money under
agreement that the amounts she lent to respondent
would be considered as partial payments for the
laptop in case she decides to buy it. 22 Sometime in
the first week of March 2002, petitioner informed
respondent that she has finally decided not to buy the
laptop.23 Respondent, however, refused to pay and
insisted that petitioner purchase the laptop instead.24
Ruling of the Municipal Trial Court in Cities
On June 2, 2003, the MTCC rendered a Decision25 in
favor of respondent. It found the receipt dated
February 18, 2002 and the testimonies of respondent
and his witness, Dy, sufficient to prove that there was
a contract of sale between the parties.26 Thus:
WHEREFORE, judgment is hereby rendered in favor
of the plaintiff and against the defendant ordering the
latter to pay plaintiff the following measure of
damages:
(a) Actual damages in the amount of Seven
Thousand (₱7,000.00) Pesos with interest
thereon at 12% per annum from July 29,
2002 until fully paid;
(b) Attorney’s fees in the amount of Five
Thousand (₱5,000.00) Pesos; and
(c) Litigation expenses in the amount of
Three Thousand (₱3,000.00) Pesos.
SO ORDERED.27
Ruling of the Regional Trial Court
On appeal,28 the Regional Trial Court (RTC) of Cebu,
Branch 12, reversed the MTCC Decision. Pertinent
37
portions of the Decision,29 including the dispositive
portion, read:
xxxx
As shown in the records of the case, this Court finds
the alleged receipt issued by the witness Josephine
Dy [in] her own handwriting a mere product of
machination, trickery and self-serving. It shows no
proof of conformity or acknowledgment on the part of
the defendant that indeed she agreed on the
stipulations. Thus, it cannot be given any credence
and ultimately, did not bind her.
xxxx
WHEREFORE, the assailed Decision is REVERSED
and SET ASIDE. The defendant Elena Jane Duarte is
hereby directed to return the computer laptop to
plaintiff Miguel Samuel A.E. Duran and plaintiff is
directed to return the money borrowed from
defendant.
SO ORDERED.30
Respondent moved for reconsideration but the same
was denied by the RTC in an Order31 dated May 13,
2004.
Ruling of the Court of Appeals
On June 1, 2004, respondent filed a Petition for
Review32 with the CA. Finding the petition meritorious,
the CA reversed the RTC Decision and reinstated the
Decision of the MTCC. The CA said that the RTC
erred in not giving weight and credence to the
demand letter dated July 29, 2002 and the receipt
dated February 18, 2002.33 The CA pointed out that
petitioner failed to overturn the presumption that the
demand letter dated July 29, 2002 sent by
respondent’s counsel by registered mail was received
by her.34 Neither was she able to deny under oath the
genuineness and due execution of the receipt dated
February 18, 2002.35 Thus, the fallo of the
36
Decision reads:
WHEREFORE, premises considered, the petition for
review is hereby GRANTED. The decision of the
Regional Trial Court, Branch 12, Cebu City
is REVERSED and the judgment of Municipal Trial
Court in Cities Branch 5, Cebu City is REINSTATED.
No pronouncement as to costs.
SO ORDERED.37
Petitioner filed a Motion for Reconsideration 38 which
the CA denied in a Resolution39 dated May 22, 2006.
Issues
Hence, the present recourse by petitioner raising five
issues, to wit:
I. Whether x x x the [CA] committed grave
error in not resolving the issue as to whether
or not the petition for review that respondent
filed in the said court was filed out of time.
II. Whether x x x the [CA] committed grave
error when it reinstated the judgment of the
[MTCC], Branch 5, Cebu City which awarded
excessive attorney’s fees and litigation
expenses without factual and legal
justification since the awards were merely
stated in the dispositive portion of the
decision and the factual and legal bases
thereof were not discussed in the text
thereof.
III. Whether x x x the [CA] committed grave
error in holding that the denial by the
petitioner of a receipt of the demand letter,
sent through registered mail has not
overturned the principal presumption of
regularity in the performance of duty.
IV. Whether x x x the [CA] committed grave
error in holding that a "receipt" which does
not contain the signature of the petitioner is
an actionable document.
V. Whether x x x the [CA] committed grave
error in holding that the evidence available
confirm the existence of a contract of sale.40
Summed up, the issues boil down to: (1) the
timeliness of the filing of the Petition for Review with
the CA; (2) the existence of a contract of sale; and (3)
respondent’s entitlement to attorney’s fees and
litigation expenses.
Petitioner’s Arguments
Petitioner contends that the filing of the Petition for
Review with the CA on June 1, 2004 was beyond the
reglementary period.41 Records show that respondent
received a copy of the RTC Decision on March 25,
2004, filed a Motion for Reconsideration on April 12,
2004 since April 9 and 10 were holidays and April 11,
2004 was a Sunday, and received a copy of the RTC
Order denying his Motion for Reconsideration on May
27, 2004.42 Thus, he only had one day left from May
27, 2004 within which to file a Petition for Review with
the CA.43
Petitioner likewise denies the existence of a contract
of sale, insisting that the laptop was not sold to her
but was given as a security for respondent’s debt. To
prove that there was no contract of sale, petitioner
calls attention to respondent’s failure to present a
written contract of sale.44 She claims that under the
Statute of Frauds, a contract of sale to be enforceable
must be in writing.45 She also imputes error on the
part of the CA in giving weight and credence to the
receipt dated February 18, 2002 and the demand
letter dated July 29, 2002.46 She claims that the
receipt dated February 18, 2002, which she denies
having written, is not an actionable document; thus,
there was no need for her to deny under oath its
genuineness and due execution.47 Furthermore, she
claims that her denial of the receipt of the demand
letter dated July 29, 2002 shifted the burden upon
respondent to prove that the letter was indeed
received by her.48 As to the attorney’s fees and
litigation expenses, petitioner contends that these
were not discussed in the MTCC Decision but were
only stated in the dispositive portion and that the
amount of ₱5,000.00 is excessive considering that it
38
is 70% of the principal amount claimed by
respondent.49
Respondent’s Arguments
Respondent, on the other hand, argues that his
Petition for Review was timely filed with the CA
because he has 15 days from receipt of the RTC
Order dated May 13, 2004 within which to file a
Petition for Review with the CA under Section 1 50 of
Rule 42 of the Rules of Court.51 Respondent defends
the ruling of the CA by arguing that the receipt dated
February 18, 2002 is an actionable document, and
thus, petitioner’s failure to deny under oath its
genuineness and due execution constitutes an
admission thereof.52 In addition, petitioner’s denial of
the receipt of the demand letter dated July 29, 2002
cannot overcome the presumption that the said letter
was received in the regular course of
mail.53 Respondent likewise points out that the Statute
of Frauds does not apply in the instant case.54 Finally,
respondent claims that the award of attorney’s fees
and litigation expenses are not excessive and that the
factual and legal bases of the award were stated in
the body of MTCC Decision.55
Our Ruling
The Petition lacks merit.
The Petition for Review was timely filed with the
CA
To standardize the appeal periods and afford litigants
fair opportunity to appeal their cases, we ruled in
Neypes v. Court of Appeals56 that litigants must be
given a fresh period of 15 days within which to
appeal, counted from receipt of the order dismissing a
motion for a new trial or motion for reconsideration
under Rules 40, 41, 42, 43 and 45 of the Rules of
Court.57 This ruling, as we have said in Fil-Estate
Properties, Inc. v. Homena-Valencia,58retroactively
applies even to cases pending prior to the
promulgation of Neypes on September 14, 2005,
there being no vested rights in the rules of
procedure.59
Since the instant case was pending in the CA at the
time Neypes was promulgated, respondent is entitled
to a fresh period of 15 days, counted from May 27,
2004, the date respondent received the RTC Order
dated May 13, 2004 denying his motion for
reconsideration of the RTC Decision dated March 19,
2004 or until June 11, 2004, within which to file his
Petition for Review with the CA. Thus, we find that
when he filed the Petition for Review with the CA on
June 1, 2004, his period to appeal had not yet lapsed.
There was a contract of sale between the parties
As to whether there was a contract of sale between
the parties, we hold that there was, and the absence
of a written contract of sale does not mean otherwise.
A contract of sale is perfected the moment the parties
agree upon the object of the sale, the price, and the
terms of payment.60 Once perfected, the parties are
bound by it whether the contract is verbal or in writing
because no form is required.61 Contrary to the view of
petitioner, the Statute of Frauds does not apply in the
present case as this provision applies only to
executory, and not to completed, executed or partially
executed contracts.62 In this case, the contract of sale
had been partially executed because the possession
of the laptop was already transferred to petitioner and
the partial payments had been made by her. Thus,
the absence of a written contract is not fatal to
respondent’s case. Respondent only needed to show
by a preponderance of evidence that there was an
oral contract of sale, which he did by submitting in
evidence his own affidavit, the affidavit of his witness
Dy, the receipt dated February 18, 2002 and the
demand letter dated July 29, 2002.
As regards the receipt dated February 18, 2002, we
agree with petitioner that it is not an actionable
document. Hence, there was no need for her to deny
its genuineness and due execution under oath.
Nonetheless, we find no error on the part of the CA in
giving full weight and credence to it since it
corroborates the testimonies of respondent and his
witness Dy that there was an oral contract of sale
between the parties.
With regard to petitioner’s denial of the receipt of the
demand letter dated July 29, 2002, we believe that
this did not overturn the presumption of regularity that
the letter was delivered and received by the
addressee in the regular course of the mail
considering that respondent was able to present the
postmaster’s certification63 stating that the letter was
indeed sent to the address of petitioner. Bare denial
of receipt of a mail cannot prevail over the certification
of the postmaster, whose official duty is to send
notices of registered mail.64
As we see it then, the evidence submitted by
respondent weigh more than petitioner’s bare denials.
Other than her denials, no other evidence was
submitted by petitioner to prove that the laptop was
not sold but was only given as security for
respondent’s loan. What adds doubt to her story is the
fact that from the first week of March 2002, the time
she allegedly decided not to buy the laptop, up to the
time the instant case was filed against her, she did
not exert any effort to recover from respondent the
payment of the alleged loan. Her inaction leads us to
conclude that the alleged loan was a mere
afterthought.
All told, no error can be attributed to the CA in finding
that there was a contract of sale between the parties
The award for attorney’s fees and litigation
expenses was proper
Neither do we find any error in the award of attorney’s
fees and litigation expenses.
Article 220865 of the Civil Code enumerates the legal
grounds which justify or warrant the grant of
attorney’s fees and expenses of litigation, among
which is when the defendant’s act or omission has
compelled the plaintiff to incur expenses to protect his
interest.66 The reason for the award of attorney’s fees
and litigation expenses, however, must be set forth in
the decision of the court and not in the dispositive
portion only.67 In this case, the factual and legal bases
for the award were set forth in the body of the MTCC
Decision dated June 2, 2003, to wit:
x x x As the defendant refused to satisfy plaintiff’s just
and valid claim, the latter was compelled to litigate
39
and engage the services of counsel to protect his
interest and in the process, incurred litigation
expenses.68 1avvphi1
The award of attorney’s fees in the amount of
₱5,000.00 is also reasonable and not excessive
considering that this case, a simple collection of a
measly sum of ₱7,000.00, has dragged for almost a
decade and even had to reach this Court only
because petitioner refused to pay. The fact that it is
70% of the principal amount claimed is of no moment
as the amount of attorney’s fees is discretionary upon
the court as long as it is reasonable.69
Finally, although not raised as an issue, we find it
necessary to modify the legal interest rate imposed on
the principal amount claimed. Since the claim involves
an obligation arising from a contract of sale and not a
loan or forbearance of money, the interest rate should
be six percent (6%) per annum of the amount claimed
from July 29, 2002.70 The interest rate of twelve
percent (12%) per annum, however, shall apply from
the finality of judgment until the total amount awarded
is fully paid.71
WHEREFORE, the petition is hereby DENIED. The
assailed October 26, 2005 Decision and May 22,
2006 Resolution of the Court of Appeals in CA-G.R.
SP No. 84461 are hereby AFFIRMED with
MODIFICATION as to the legal interest imposed on
the principal amount claimed. The legal interest shall
be at the rate of six percent (6%) per annum from July
29, 2002 and at the rate of twelve percent (12%) per
annum from the time the judgment of this Court
becomes final and executory until the obligation is
fully satisfied.
SO ORDERED.
MARIANO C. DEL CASTILLO
G.R. No. 157330 November 23, 2011
LINA CALILAP-ASMERON, Petitioner,
vs.
DEVELOPMENT BANK OF THE PHILIPPINES,
PABLO CRUZ,* TRINIDAD CABANTOG,** ENI S.P.
ATIENZA and EMERENCIANA
CABANTOG, Respondents.
DECISION
BERSAMIN, J.:
The petitioner challenges the decision promulgated
on June 21, 2002,1 whereby the Court of Appeals
(CA) affirmed the adverse decision rendered by the
Regional Trial Court, Branch 11, in Malolos, Bulacan
(RTC) in Civil Case No. 50-M-87 entitled Lina Calilap-
Asmeron v. Development Bank of the Philippines,
Pablo Cruz, Trinidad Cabantog, Eni S.P. Atienza, and
Emerenciana Cabantog,2 an action initiated to set
aside the defendant bank’s rescission of a deed of
conditional sale involving foreclosed property, and to
annul the subsequent sales of the property to other
persons.
Antecedents
On March 17, 1975, the petitioner and her brother
Celedonio Calilap constituted a real estate mortgage
over two parcels of land covered by Transfer
Certificate of Title (TCT) No. T-164117 and TCT
No.T-160929, both of the Registry of Deeds of
Bulacan, to secure the performance of their loan
obligation with respondent Development Bank of the
Philippines (DBP).3 With the principal obligation being
ultimately unpaid, DBP foreclosed the mortgage. The
mortgaged parcels of land were then sold to DBP as
the highest bidder. The one-year redemption period
expired on September 1, 1981.4
As to what thereafter transpired, the petitioner and
DBP tendered conflicting versions.
I Version of Petitioner
The thrust of the petitioner’s suit is that DBP accorded
to her a preferential right to repurchase the property
covered by TCT No. 164117.5 Her version follows.
In August 1982, the petitioner negotiated with DBP to
buy back the property covered by TCT No. 164117 by
offering ₱15,000.00 as downpayment. Her offer was
rejected by an executive officer of DBP’s Acquired
Assets Department, who required her to pay the full
purchase price of ₱55,500.00 for the property within
ten days.6 She returned to DBP with the amount, only
to be told that DBP would not sell back only one lot.
Being made to believe that the lot covered by TCT
No. 164117 would be released after paying two
amortizations for the other lot (TCT No. 160929),
however, she signed the deed of conditional sale
covering both lots for the total consideration of
₱157,000.00.7When she later on requested the
release of the property under TCT No. 164117 after
paying two quarterly amortizations, DBP did not
approve the release. She continued paying the
amortizations until she had paid ₱40,000.00 in all, at
which point she sought again the release of the lot
under TCT No. 164117. DBP still denied her request,
warning that it would rescind the contract should her
remaining amortizations be still not paid. On August 7,
1985, DBP rescinded the deed of conditional sale
over her objections.8
On November 25, 1987, DBP sold the lot covered by
TCT No. 164117 to respondent Pablo Cruz via a deed
of absolute sale.9 The petitioner consequently filed a
complaint for the rescission of the sale to Cruz on
January 30, 1987.10 Notwithstanding their knowledge
of her pending suit against Cruz, respondents
Emerenciana Cabantog and Eni S.P. Atienza still
bought the property from Cruz.11 Hence, Cabantog
and Atienza were impleaded as additional defendants
by amendment.
II
Version of Respondents
DBP insisted that the petitioner’s real intention had
been to repurchase the two lots on installment basis.
She manifested her real intention to that effect in
writing through her letter dated September 14, 1981,
thus:
September 14, 1981
40
DEVELOPMENT BANK OF THE PHIL.
Acquired Assests [sic] Department
Makati, Metro Manila
ATTENTION: MR. J.A. SANCHEZ, JR.
Assistant Manager
------------------------------------------------------------
Dear Sir:
I wish to inform your good office that I am interested
to reacquire the mortgage properties consisting of two
(2) parcels of land under TCT Nos. T-160929 and T-
164117 located at Sumapa, Malolos, Bulacan.
I would like to reacquire the above stated properties
under installment basis but I am requesting your
goodselves [sic] to extend an extension of time up to
the first week of November, 1981 for my money is
coming by that time.
Your kind consideration on the above request is most
highly appreciated, I remain.
Very truly yours,
(sgd.)
LINA CALILAP-ASMERON
Co-maker12
The petitioner also sent a telegram on September 15,
1981,13 whereby she similarly expressed to DBP her
interest in reacquiring the properties. On November
16, 1981, DBP received another telegram from
her,14 requesting DBP to put the bidding of the
properties on hold. A year later, she sent a letter
dated August 31, 1982 to reiterate her intention to
repurchase the two properties and to offer to deposit
₱55,500.00 as initial payment, to wit:
August 31, 1982
The Manager
Acquired Assets Management Department
Development Bank of the Philippines
Makati, Metro Manila
Dear Sir:
This has reference to our former properties consisting
of two parcels of land with an aggregate area of
2,082.5 sq.m. covered by TCT Nos. T-160929 and T-
164117 together with all the improvements erected
thereon located at Bo. Sumpang Matanda, Malolos,
Bulacan.
I wish to inform you that in view of my intense desire
to preserve said properties for our family’s use, I am
offering to buy back these properties for P157,000.00,
payable on terms, balance to be paid in five (5) years
on the quarterly amortization plan.
This is my last appeal for your assistance in my wish
to preserve these properties and should I fail to
consummate the sale, I bind myself to whatever rules
and regulations the Bank may impose with regards to
my deposit.
If this offer is acceptable to you, I am willing to deposit
the amount of P55,500.00 on or before September
10, 1982.
May I be advised accordingly?
Thank you.
Very truly yours,
(Sgd.)
LINA CALILAP-ASMERON15
The petitioner subsequently made the downpayment
on September 10, 1992,16 and DBP formally accepted
the offer through its letter dated September 14, 1982,
stating therein the terms and conditions.17 Said terms
and conditions, which were later embodied in the
deed of conditional sale executed on January 21,
1983, included one that bound her to pay the first
amortization of ₱7,304.15 three months from the
execution of the deed, and the remaining
amortizations to be due and payable every three
months thereafter.18
DBP presented the duplicate copies of the receipts
indicating her timely payment for the first quarterly
amortization; however, she incurred delays in her
subsequent installments.19 She made her last
payment amounting to ₱4,500.00 on March 12,
1985,20 leaving five quarterly amortizations unpaid.21
On January 20, 1986, the petitioner sent a
handwritten letter requesting DBP to put on hold any
plans of selling the subject property, viz:
January 20, 1986
Mr. V.M. Macapagal
Executive Officer
Acquired Assets Mgmt. Division
Development Bank of the Philippines
Makati, Metro Manila
Dear Sir:
This is with reference regarding my Sale Acct. No.
617 under the name of my late brother Celedonio R.
Calilap which are located in Sumapa, Malolos,
Bulacan.
In connection with these properties, I have already
made an arrangement that I’m going to pay my whole
obligations through a private financier under your
Incentive Plan, which according to my last
communication with them it was extended so I have to
make an advance notice of four (4) days before
paying so I may know the exact amount.
I wanted it to be formal, so I send [sic] a letter to your
good office for the reason that last January 17, 1986,
your appraiser went to our place and made an
assessment of my properties. May I request again to
please hold any sale of the said property for I’m doing
my best to settle my obligation at the soonest possible
time, for sure after a week or two after the snap
election.
41
Thank you very much for your kind consideration and
hoping for your help regarding my request.
Respectfully yours,
(sgd.)
LINA CALILAP-ASMERON22
DBP replied by its letter dated February 5,
1986,23 demanding payment of the petitioner’s
remaining obligation of ₱121,013.75 in cash,
otherwise, it would be constrained to sell the property.
She responded via telegram,24informing DBP that she
would be arriving on March 4, 1986. The telegram
was followed by a handwritten letter dated March 5,
198625 stating her willingness to pay 10% of her
outstanding obligations.
On March 12, 1986, DBP demanded the immediate
remittance of the promised amount via
telegram.26 When she did not pay the six quarterly
amortizations, DBP rescinded the deed of conditional
sale and applied for a writ of possession on
November 17, 1986 in the RTC (Branch 17) in
Malolos, Bulacan. Its application for the writ of
possession was granted on November 18, 1986.27
Ruling of the RTC
Finding the petitioner’s complaint lacking in merit, the
RTC (Branch 11) rendered its decision on December
28, 1994 dismissing the case.28 It observed that the
stipulations in the deed of conditional sale and the
tenor of the petitioner’s communications to DBP
clearly indicated that she had intended to repurchase
both foreclosed properties, not just the property
covered by TCT No. T-164117, thusly:
Lettered as she is, the plaintiff cannot now seek
refuge on the excuse that what she intends to buy
was only the property covered by TCT No. T-164117.
The contents of her letter to the Manager of the
Acquired Assets Division of DBP dated August 31,
1982 (Exh. 1 and its submarkings) and to Asst.
Manager J.A. Sanchez of the DBP dated September
14, 1981 (Exh. 2) clearly demonstrate in unequivocal
terms that she intended to reacquire both of her
foreclosed properties. Moreso, the telegrams sent by
her (Exhs. 3 & 4) to defendant bank clearly indicates
the same intention.
The aforequoted terms and conditions in the
conditional sale which defendant failed to comply are
clear and not susceptible whatsoever to any other
interpretation as to the intention of the contracting
parties. It is settled and fundamental that if the terms
of the contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning
of the stipulations shall control (Art. 1370, Civil Code;
Filoil Marketing Corp. vs. IAC GR 67115; Mercantile
Ins. Corp. vs.Ysmael GR 43862; Baliuag Transit
Corp. vs. CA GR 80447). In addition, her subsequent
acts of writing DBP and complying with the terms of
the conditional sale bolster the fact of her
acquiescence in the said contract which she
voluntarily entered into and she cannot now take a
contrary position.29
Ruling of the CA
The petitioner appealed, contending that:
I
THE LOWER COURT GROSSLY ERRED IN NOT
ANNULLING THE RESCISSION MADE BY THE
DEVELOPMENT BANK OF THE PHILIPPINES (DBP)
OF THE CONDITIONAL SALE OF JANUARY 4,
1983, APPELLANT HAVING ALREADY PAID A
SUBSTANTIAL AMOUNT OF P100,000.00 OR
ABOUT TWO-THIRDS OF THE PRICE OR
CONSIDERATION.
II
THE LOWER COURT ERRED IN NOT ANNULLING
THE SALE MADE BY DBP TO PABLO CRUZ AS
WELL AS THE SALE MADE BY THE LATTER TO
THE OTHER DEFENDANTS.
Yet, on June 21, 2002, the CA affirmed the
RTC,30 pointing out that the petitioner had not
presented testimonial or documentary evidence to
support or corroborate her claim that she had been
misled into signing the deed of conditional sale. It
ruled that DBP could rescind the contract pursuant to
the terms of the deed of conditional sale itself, and
that DBP exercised its right to rescind only after she
had failed to pay her quarterly amortizations.31
Issues
In her present appeal, the petitioner submits:
I
THE HONORABLE COURT OF APPEALS
COMMITTED SERIOUS AND REVERSIBLE ERROR
WHEN IT DISREGARDED THE TESTIMONIAL
EVIDENCE ADDUCED BY THE PETITIONER,
WHICH CLEARLY DETAILED THE TRUTH
SURROUNDING THE EXECUTION OF THE DEED
OF CONDITIONAL SALE OF THE SUBJECT LOT
TO RESPONDENT CRUZ, AND THE LATTER TO
CO-RESPONDENTS CABANTOG AND ATIENZA
NULL AND VOID
II
THE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT AFFIRMED THE
DECISION OF THE LOWER COURT UPHOLDING
THE RESPONDENT BANK’S RESCISSION OF THE
DEED OF CONDITIONAL SALE CONSIDERING
THAT THE PETITIONER HAD ALREADY PAID A
SUBSTANTIAL AMOUNT OF PHP100,000.00 OR
ABOUT TWO-THIRD OF THE FULL
CONSIDERATION OF PHP157,000.00.
The petitioner avers that her testimonial evidence
sufficiently established the facts behind the execution
of the deed of conditional sale; that she thereby
proved that she had not fully understood the terms
contained in the deed; that DBP could not resort to
rescission because her nonpayment of the
amortizations was only a slight or casual breach; and
that the sale made by DBP to Cruz was tainted with
bad faith, which was also true with the sale from Cruz
to Cabantog and Atienza.
42
DBP counters that the petitioner is raising questions
of fact in her present appeal, which is not allowed
under Rule 45 of the Rules of Court; and that it had
the right to rescind the deed of conditional sale under
Article 1191 of the Civil Code.
On her part, Remedios Lim-Cruz, who had substituted
her deceased husband, argues that the petitioner did
not prove bad faith on the part of her husband in
purchasing the property from DBP; and that her
husband had relied in good faith on the title of DBP as
the registered owner of the property at the time of the
sale.
Ruling
The appeal lacks merit.
I making its findings, went beyond the issues of the
Appeal under Rule 45 is
limited to questions of law only
The petitioner’s submissions, that her testimonial
evidence sufficiently established the facts behind the
execution of the deed of conditional sale, and that she
had not fully understood the terms contained in the
deed of conditional sale, involved questions of fact,
for the consideration and resolution of them would
definitely require the appreciation of evidence. As
such, her petition for review is dismissible for raising
factual issues. Under Rule 45 of the Rules of Court,
only questions of law may be the proper subject of an
appeal in this Court. The version of Section 1 of Rule
45 in force at the time the petitioner commenced her
present recourse on April 28, 2003 expressly so
stated, to wit:
Section 1. Filing of petition with Supreme Court. — A
party desiring to appeal by certiorari from a judgment
or final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other
courts whenever authorized by law, may file with the
Supreme Court a verified petition for review on
certiorari. The petition shall raise only questions of
law which must be distinctly set forth. (1a, 2a)
(emphasis supplied)32
To be sure, we have not lacked in reminding that in
exercising its power of review the Court is not a trier
of facts and does not normally undertake the re-
examination of the evidence presented by the
contending parties during the trial of the case. For that
reason, the findings of facts of the CA are conclusive
and binding on the Court.
It is true that the Court has recognized several
exceptions, in which it has undertaken the review and
re-appreciation of the evidence. Among the
exceptions have been: (a) when the findings of the
CA are grounded entirely on speculation, surmises or
conjectures; (b) when the inference made by the CA
is manifestly mistaken, absurd or impossible; (c) when
there is grave abuse of discretion on the part of the
CA; (d) when the judgment of the CA is based on a
misapprehension of facts; (e) when the findings of
facts of the CA are conflicting; (f) when the CA, in
case, or its findings are contrary to the admissions of
both the appellant and the appellee; (g) when the
findings of the CA are contrary to those of the trial
court; (h) when the findings of the CA are conclusions
without citation of specific evidence on which they are
based; (i) when the facts set forth in the petition as
well as in the petitioner’s main and reply briefs are not
disputed by the respondent; (j) when the findings of
fact of the CA are premised on the supposed absence
of evidence and contradicted by the evidence on
record; and (k) when the CA manifestly overlooked
certain relevant facts not disputed by the parties,
which, if properly considered, would justify a different
conclusion.33
Although the petitioner submits that the CA made
findings of fact not supported by the evidence on
record, this case does not fall under any of the
recognized exceptions. Her claim that she had
established the circumstances to prove her having
been misled into signing the deed of conditional sale
was unfounded, for the findings of fact of the CA
rested on the records, as the following excerpt from
the assailed decision of the CA indicates:
Appellant would like this Court to believe that she was
misled by appellee DBP’s representatives into signing
the Deed of Conditional Sale even if her original
intention was to buy back only one of the properties,
i.e., that which was covered by TCT No. T-164117.
However, a closer scrutiny of the evidence on record
reveals that aside from her bare allegations as to the
circumstances leading to the signing of said Deed of
Conditional Sale, the appellant has not presented
other evidence, testimonial or documentary, to
support or corroborate her claims. On the other hand,
appellee DBP has presented the letter dated August
31, 1982 signed by appellant herself and addressed
to the Manager of the Acquired Assets Management
Department of the appellee DBP, expressing her
intentions to buy back her foreclosed properties. In
fact, she offered therein to pay a total of ₱157,000.00
for the two properties with ₱55,500.00 to be advanced
by her as deposit and the balance to be paid in five
(5) years under a quarterly amortization plan. Said
letter has not been categorically denied by the
appellant as during her testimony she merely feigned
any recollections of its content. Moreover, it is well-
settled that bad faith cannot be presumed and must
be established by clear and convincing
evidence.34 (emphasis supplied)
The petitioner apparently relied solely on her bare
testimony to establish her allegation of having been
misled, and did not present other evidence for the
purpose. She seemingly forgot that, firstly, her bare
allegation of having been misled was not tantamount
to proof, and that, secondly, she, as the party alleging
a disputed fact, carried the burden of proving her
allegation.35 In other words, her main duty was to
establish her allegation by preponderance of
evidence, because her failure to do so would result in
her defeat.36 Alas, she did not discharge her burden.
On the other hand, the records contained clear indicia
of her real intention vis-à-vis her reacquisition of the
two foreclosed properties. The letters and telegrams
she had dispatched to DBP expressed the singular
intention to repurchase both lots, not just the one
covered by TCT No. 164711. That intention even
became more evident and more definite when she set
down the payment terms for the repurchase of both
lots in her letter of August 31, 1982. Given all these,
the CA rightly concluded that her written
communications to DBP had revealed her earnest
desire to re-acquire both foreclosed properties.
43
II
Article 1332 of the Civil Code
did not apply to the petitioner
The petitioner would have us consider that she had
not given her full consent to the deed of conditional
sale on account of her lack of legal and technical
knowledge. In effect, she pleads for the application of
Article 1332 of the Civil Code, which provides:
Article 1332. When one of the parties is unable to
read, or if the contract is in a language not understood
by him, and mistake or fraud is alleged, the person
enforcing the contract must show that the terms
thereof have been fully explained to the former.
We cannot accede to the petitioner’s plea.
The pertinent terms of the deed of conditional sale
read:
NOW THEREFORE for and in consideration of the
foregoing premises and for the total sum of ONE
HUNDRED FIFTY SEVEN THOUSAND PESOS
(₱157,000.00), Philippine Currency, to be fully paid as
hereinafter set forth, the VENDOR agrees to convey
by way of sale and the VENDEE agrees to buy the
above stated properties covered by TCT Nos. T-
160929 and T-164117, more particularly described at
the back hereof under the following terms and
conditions:
That the downpayment shall be ₱55,500 and the
balance of ₱101,500 to be paid in five (5) years on
the quarterly amortization plan at 15% interest per
annum the first amortization of ₱7,304.15 shall be due
and payable 3 mos. from the date of execution of the
Deed of Conditional Sale and all subsequent
amortizations shall be due and payable every three
(3) months thereafter;
That if the vendee fails to sign the sale document
within 15 days from date of receipt of our notice of
approval of the offer, the approval hereof shall be
deemed automatically revoked and the deposit
forfeited in accordance with the rules and regulations
of the Bank.
The Vendee/s may pay the whole or part of the
account under this contract at anytime during the term
hereof; provided, however, that if the vendee/s is in
default in the payment of at least six monthly
amortizations, if payable monthly; two quarterly
amortizations, if payable quarterly; one semi-annual
and annual amortization if payable semi-annually and
annually, the Vendor may, in its option, declare the
whole account due and payable.
xxx
The title to the real estate property and all
improvements thereon shall remain in the name of the
vendor until after the purchase price, advances and
interest shall have been fully paid. The Vendee/s
agrees that in the event of his failure to pay the
amortizations or installments as herein provided for,
the contract shall, at the option of the Vendor, be
deemed and considered annulled, and he shall forfeit,
and by these presents, hereby waives whatever right
he might have acquired to the said property. The
Vendor shall then be at liberty to dispose of same as
if this contract has never been made; and in the event
of such annulment, all sums of money paid under the
contract shall be considered and treated as rentals for
the use of the property, and the Vendee/s waives all
rights to ask or demand the return thereof and he
further agrees to vacate peacefully and quietly said
property, hereby waiving in favor of the Vendor
whatever expenses he may have incurred in the
property in the form of improvement or under any
concept, without any right to reimbursement
whatsoever.
xxx
It is hereby agreed, covenanted and stipulated by and
between the parties hereto that should the Vendor
decide to rescind this contract in view of the failure of
the Vendee/s to pay the amortization/installments,
when due, or otherwise fail/s to comply with any of the
terms and conditions herein stipulated, and the
Vendee/s refuse/s to peacefully deliver the
possession of the property hereinbove mentioned to
the Vendor, thereby obliging the Vendor to file suit in
court with the view to taking possession thereof, the
Vendee/s hereby agree/s to pay all the expenses of
the suit incident thereto, all the damages that may be
incurred thereby, as well as attorney’s fees which it is
hereby agreed, shall be 10% of the total amount due
and outstanding, but in no case shall it be less than
₱100.00.37
It is quite notable that the petitioner did not specify
which of the stipulations of the deed of conditional
sale she had difficulty or deficiency in understanding.
Her generalized averment of having been misled
should, therefore, be brushed aside as nothing but a
last attempt to salvage a hopeless position. Our
impression is that the stipulations of the deed of
conditional sale were simply worded and plain enough
for even one with a slight knowledge of English to
easily understand.
The petitioner was not illiterate. She had appeared to
the trial court to be educated, its cogent observation
of her as "lettered" (supra, at p. 7 hereof) being based
on how she had composed her correspondences to
DBP. Her testimony also revealed that she had no
difficulty understanding English, as the following
excerpt shows:
ATTY. CUISON
Q : Mrs. Witness, last time you identified the
document, captioned as Deed of Conditional Sale
which was executed last January 21, 1983, it was
read in English language, correct?
A : Yes, sir.
Q : And, could you testify in this Court without in need
of interpreter?
A : Yes, sir.
Q : So, you are aware or comfortable with the English
language?
44
A : Yes, sir.38
Nor was the petitioner’s ignorance of the true nature
of the deed of conditional sale probably true. By her
own admission, she had asked the bank officer why
she had been made to sign a deed of conditional sale
instead of an absolute sale, which in itself reflected
her full discernment of the matters subject of her
dealings with DBP, to wit:
COURT:
Q : Now, before you signed this Deed of Conditional
Sale sometime on January 21, 1983, did you read this
document?
A : Yes, your Honor, and I even told the officer of the
Bank, that why it should be a Deed of Probitional Sale
when in fact it should be a Deed of Absolute Sale
because I paid already the full amount of P55,500.00
for the property covered by TCT No. 164117 and they
told me that after a few amortizations on the other
property, they are going to release the property which
was paid in full but did not push through, Your
Honor.39
Thereby revealed was her distinctive ability to
understand written and spoken English, the language
in which the terms of the contract she signed had
been written.
Clearly, Article 1332 of the Civil Code does not apply
to the petitioner. According to Lim v. Court of
Appeals,40 the provision came into being because a
sizeable percentage of the country’s populace had
comprised of illiterates, and the documents at the time
had been written either in English or Spanish, viz:
In calibrating the credibility of the witnesses on this
issue, we take our mandate from Article 1332 of the
Civil Code which provides: "When one of the parties is
unable to read, or if the contract is in a language not
understood by him, and mistake or fraud is alleged,
the person enforcing the contract must show that the
terms thereof have been fully explained to the
former." This substantive law came into being due to
the finding of the Code Commission that there is still a
fairly large number of illiterates in this country, and
documents are usually drawn up in English or
Spanish. It is also in accord with our state policy of
promoting social justice. It also supplements Article
24 of the Civil Code which calls on court to be vigilant
in the protection of the rights of those who are
disadvantaged in life.41 (Emphasis supplied)
III
DBP validly exercised its right to rescind the
deed of conditional sale upon the petitioner’s default
The petitioner argues that despite the right to rescind
due to nonpayment being stipulated in the deed of
conditional sale, DBP could not exercise its right
because her nonpayment of an obligation constituted
only a slight or casual breach that did not warrant
rescission. Moreover, she posits that Article 119142 of
the Civil Code empowers the court to fix the period
within which the obligor may comply with the
obligation.
The petitioner’s argument lacks persuasion.
Firstly, a contract is the law between the parties.
Absent any allegation and proof that the contract is
contrary to law, morals, good customs, public order or
public policy, it should be complied with in good
faith.43 As such, the petitioner, being one of the
parties in the deed of conditional sale, could not be
allowed to conveniently renounce the stipulations that
she had knowingly and freely agreed to.
Secondly, the issue of whether or not DBP validly
exercised the right to rescind is a factual one that the
RTC and the CA already passed upon and
determined. The Court, which is not a trier of facts,
adopts their findings, and sustains the exercise by
DBP of its right to rescind following the petitioner’s
failure to pay her six monthly amortizations, and after
her being given due notice of the notarial
rescission.44 As a consequence of the valid
rescission, DBP had the legal right to thereafter sell
the property to a person other than the petitioner, like
Cruz. In turn, Cruz could validly sell the property to
Cabantog and Trinidad, which he did.1âwphi1
And, thirdly, Article 1191 of the Civil Code did not
prohibit the parties from entering into an agreement
whereby a violation of the terms of the contract would
result to its cancellation. In Pangilinan v. Court of
Appeals,45 the Court upheld the vendor’s right in a
contract to sell to extrajudicially cancel the contract
upon failure of the vendee to pay the installments and
even to retain the sums already paid, holding:
[Article 1191 of the Civil Code] makes it available to
the injured party alternative remedies such as the
power to rescind or enforce fulfillment of the contract,
with damages in either case if the obligor does not
comply with what is incumbent upon him. There is
nothing in this law which prohibits the parties from
entering into an agreement that a violation of the
terms of the contract would cause its cancellation
even without court intervention. The rationale for the
foregoing is that in contracts providing for automatic
revocation, judicial intervention is necessary not for
purposes of obtaining a judicial declaration rescinding
a contract already deemed rescinded by virtue of an
agreement providing for rescission even without
judicial intervention, but in order to determine whether
or not the rescission was proper. Where such
propriety is sustained, the decision of the court will be
merely declaratory of the revocation, but it is not itself
the revocatory act. Moreover, the vendor’s right in
contracts to sell with reserved title to extrajudicially
cancel the sale upon failure of the vendee to pay the
stipulated installments and retain the sums and
installments already received has long been
recognized by the well-established doctrine of 39
years standing. The validity of the stipulation in the
contract providing for automatic rescission upon non-
payment cannot be doubted. It is in the nature of an
agreement granting a party the right to rescind a
contract unilaterally in case of breach without need of
going to court. Thus, rescission under Article 1191
was inevitable due to petitioner’s failure to pay the
stipulated price within the original period fixed in the
agreement.
ACCORDINGLY, the petition for review is DENIED for
lack of merit, and the decision of the Court of Appeals
promulgated on June 21, 2002 is AFFIRMED.
Costs of suit shall be paid by the petitioner.
45