SECOND DIVISION
[ G.R. No. 180665, August 11, 2010 ]
HEIRS OF PAULINO ATIENZA, NAMELY, RUFINA L. ATIENZA, ANICIA A. IGNACIO, ROBERTO ATIENZA, MAURA A. DOMINGO, AMBROCIO ATIENZA, MAXIMA ATIENZA, LUISITO ATIENZA, CELESTINA A. GONZALES, REGALADO ATIENZA AND MELITA A. DELA CRUZ PETITIONERS, VS. DOMINGO P. ESPIDOL, RESPONDENT.
D E C I S I O N
ABAD, J.:
This case is about the legal consequences when a buyer in a contract to sell on installment fails to make the next payments that he promised.
The Facts and the Case
Petitioner Heirs of Paulino Atienza, namely, Rufina L. Atienza, Anicia A. Ignacio, Roberto Atienza, Maura A. Domingo, Ambrocio Atienza, Maxima Atienza, Luisito Atienza, Celestina A. Gonzales, Regalado Atienza and Melita A. Dela Cruz (collectively, the Atienzas)[1] own a 21,959 square meters of registered agricultural land at Valle Cruz, Cabanatuan City.[2] They acquired the land under an emancipation patent[3] through the government's land reform program.[4]
On August 12, 2002 the Atienzas and respondent Domingo P. Espidol entered into a contract called Kasunduan sa Pagbibili ng Lupa na may Paunang-Bayad (contract to sell land with a down payment) covering the property.[5] They agreed on a price of P130.00 per square meter or a total of P2,854,670.00, payable in three installments: P100,000.00 upon the signing of the contract; P1,750,000.00 in December 2002, and the remaining P974,670.00 in June 2003. Respondent Espidol paid the Atienzas P100,000.00 upon the execution of the contract and paid P30,000.00 in commission to the brokers.
When the Atienzas demanded payment of the second installment of P1,750,000.00 in December 2002, however, respondent Espidol could not pay it. He offered to pay the Atienzas P500.000.00 in the meantime,[6] which they did not accept. Claiming that Espidol breached his obligation, on February 21, 2003 the Atienzas filed a complaint[7] for the annulment of their agreement with damages before the Regional Trial Court (RTC) of Cabanatuan City in Civil Case 4451.
In his answer,[8] respondent Espidol admitted that he was unable to pay the December 2002 second installment, explaining that he lost access to the money which he shared with his wife because of an injunction order issued by an American court in connection with a domestic violence case that she filed against him.[9] In his desire to abide by his obligation, however, Espidol took time to travel to the Philippines to offer P800,000.00 to the Atienzas.
Respondent Espidol also argued that, since their contract was one of sale on installment, his failure to pay the installment due in December 2002 did not amount to a breach. It was merely an event that justified the Atienzas' not to convey the title to the property to him. The non-payment of an installment is not a legal ground for annulling a perfected contract of sale. Their remedy was to bring an action for specific performance. Moreover, Espidol contended that the action was premature since the last payment was not due until June 2003.
In a decision[10] dated January 24, 2005, the RTC ruled that, inasmuch as the non-payment of the purchase price was not considered a breach in a contract to sell on installment but only an event that authorized the vendor not to convey title, the proper issue was whether the Atienzas were justified in refusing to accept respondent Espidol's offer of an amount lesser than that agreed upon on the second installment.
The trial court held that, although respondent's legal problems abroad cannot justify his failure to comply with his contractual obligation to pay an installment, it could not be denied that he made an honest effort to pay at least a portion of it. His traveling to the Philippines from America showed his willingness and desire to make good on his obligation. His good faith negated any notion that he intended to renege on what he owed. The Atienzas brought the case to court prematurely considering that the last installment was not then due.
Furthermore, said the RTC, any attempt by the Atienzas to cancel the contract would have to comply with the provisions of Republic Act (R.A.) 6552 or the Realty Installment Buyer Protection Act (R.A. 6552), particularly the giving of the required notice of cancellation, that they omitted in this case. The RTC thus declared the contract between the parties valid and subsisting and ordered the parties to comply with its terms and conditions.
On appeal,[11] the Court of Appeals (CA) affirmed the decision of the trial court.[12] Not satisfied, the Atienzas moved for reconsideration.[13] They argued that R.A. 6552 did not apply to the case because the land was agricultural and respondent Espidol had not paid two years worth of installment that the law required for coverage. And, in an apparent shift of theory, the Atienzas now also impugn the validity of their contract to sell, claiming that, since the property was covered by an emancipation patent, its sale was prohibited and void. But the CA denied the motion for reconsideration, hence, the present petition.[14]
Questions Presented
The questions presented for resolution are:
1. Whether or not the Atienzas could validly sell to respondent Espidol the subject land which they acquired through land reform under Presidential Decree 27[15] (P.D. 27);
2. Whether or not the Atienzas were entitled to the cancellation of the contract to sell they entered into with respondent Espidol on the ground of the latter's failure to pay the second installment when it fell due; and
3. Whether or not the Atienzas' action for cancellation of title was premature absent the notarial notice of cancellation required by R.A. 6552.
The Court's Rulings
One. That the Atienzas brought up the illegality of their sale of subject land only when they filed their motion for reconsideration of the CA decision is not lost on this Court. As a rule, no question will be entertained on appeal unless it was raised before the court below. This is but a rule of fairness.[16]
Nonetheless, in order to settle a matter that would apparently undermine a significant policy adopted under the land reform program, the Court cannot simply shirk from the issue. The Atienzas' title shows on its face that the government granted title to them on January 9, 1990 by virtue of P.D. 27. This law explicitly prohibits any form of transfer of the land granted under it except to the government or by hereditary succession to the successors of the farmer beneficiary.
Upon the enactment of Executive Order 228[17] in 1987, however, the restriction ceased to be absolute. Land reform beneficiaries were allowed to transfer ownership of their lands provided that their amortizations with the Land Bank of the Philippines (Land Bank) have been paid in full.[18] In this case, the Atienzas' title categorically states that they have fully complied with the requirements for the final grant of title under P.D. 27. This means that they have completed payment of their amortization with Land Bank. Consequently, they could already legally transfer their title to another.
Two. 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.[19] 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.[20]
Admittedly, Espidol was unable to pay the second installment of P1,750,000.00 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. And this is correct so far. Unfortunately, the RTC and the CA concluded that should Espidol eventually pay the price of the land, though not on time, the Atienzas were bound to comply with their obligation to sell the same to him.
But this is error. In the first place, since Espidol failed to pay the installment on a day certain fixed in their agreement, the Atienzas can afterwards validly cancel and ignore the contract to sell because their obligation to sell under it did not arise. Since the suspensive condition did not arise, the parties stood as if the conditional obligation had never existed.[21]
Secondly, it was not a pure suspensive condition in the sense that the Atienzas made no undertaking while the installments were not yet due. Mr. Justice Edgardo L. Paras gave a fitting example of suspensive condition: "I'll buy your land for P1,000.00 if you pass the last bar examinations." This he said was suspensive for the bar examinations results will be awaited. Meantime the buyer is placed under no immediate obligation to the person who took the examinations.[22]
Here, however, although the Atienzas had no obligation as yet to turn over title pending the occurrence of the suspensive condition, it was implicit that they were under immediate obligation not to sell the land to another in the meantime. When Espidol failed to pay within the period provided in their agreement, the Atienzas were relieved of any obligation to hold the property in reserve for him.
The ruling of the RTC and the CA that, despite the default in payment, the Atienzas remained bound to this day to sell the property to Espidol once he is able to raise the money and pay is quite unjustified. The total price was P2,854,670.00. The Atienzas decided to sell the land because petitioner Paulino Atienza urgently needed money for the treatment of his daughter who was suffering from leukemia.[23] Espidol paid a measly P100,000.00 in down payment or about 3.5% of the total price, just about the minimum size of a broker's commission. Espidol failed to pay the bulk of the price, P1,750,000.00, when it fell due four months later in December 2002. Thus, it was not such a small default as to justify the RTC and the CA's decision to continue to tie up the Atienzas to the contract to sell upon the excuse that Espidol tried his honest best to pay.
Although the Atienzas filed their action with the RTC on February 21, 2003, four months before the last installment of P974,670.00 fell due in June 2003, it cannot be said that the action was premature. Given Espidol's failure to pay the second installment of P1,750,000.00 in December 2002 when it was due, the Atienzas' obligation to turn over ownership of the property to him may be regarded as no longer existing.[24] The Atienzas had the right to seek judicial declaration of such non-existent status of that contract to relieve themselves of any liability should they decide to sell the property to someone else. Parenthetically, Espidol never offered to settle the full amount of the price in June 2003, when the last installment fell due, or during the whole time the case was pending before the RTC.
Three. Notice of cancellation by notarial act need not be given before the contract between the Atienzas and respondent Espidol may be validly declare non-existent. R.A. 6552 which mandated the giving of such notice does not apply to this case. The cancellation envisioned in that law pertains to extrajudicial cancellation or one done outside of court,[25] which is not the mode availed of here. The Atienzas came to court to seek the declaration of its obligation under the contract to sell cancelled. Thus, the absence of that notice does not bar the filing of their action.
Since the contract has ceased to exist, equity would, of course, demand that, in the absence of stipulation, the amount paid by respondent Espidol be returned, the purpose for which it was given not having been attained;[26] and considering that the Atienzas have consistently expressed their desire to refund the P130,000.00 that Espidol paid.[27]
WHEREFORE, the Court GRANTS the petition and REVERSES and SETS ASIDE the August 31, 2007 decision and November 5, 2007 resolution of the Court of Appeals in CA-G.R. CV 84953. The Court declares the Kasunduan sa Pagbibili ng Lupa na may Paunang-Bayad between petitioner Heirs of Paulino Atienza and respondent Domingo P. Espidol dated August 12, 2002 cancelled and the Heirs' obligation under it non-existent. The Court directs petitioner Heirs of Atienza to reimburse the P130,000.00 down payment to respondent Espidol.
SO ORDERED.
Carpio, (Chairperson), Nachura, Peralta, and Mendoza, JJ., concur.
[1] Petitioners are the heirs of Paulino Atienza, the original plaintiff in this case, who died on September 7, 2007. Please see: Certificate of Death, rollo, p. 84 and October 13, 2008 Resolution of this Court, id. at 97.
[2] Covered by Transfer Certificate of Title T-3971.
[3] Emancipation Patent 416698.
[4] Records, pp. 73-74.
[5] Id. at 5-7.
[6] Respondent claimed that the amount offered was P800,000.00.
[7] Rollo, pp. 56-59.
[8] Id. at 60-66.
[9] TSN, June 4, 2004, pp. 7-8.
[10] Rollo, pp. 70-79.
[11] Docketed as CA-G.R. CV 84953.
[12] Rollo, pp. 34-44. Penned by Associate Justice Myrna Dimaranan Vidal, with Associate Justices Jose L. Sabio, Jr. and Jose C. Reyes, Jr. concurring.
[13] Id. at 45-51.
[14] Id. at 9-33.
[15] Decreeing the Emancipation of Tenants From the Bondage of the Soil, Transferring to Them the Ownership of the Land They Till and Providing the Instruments and Mechanism Therefor.
[16] Bacsasar v. Civil Service Commission, G.R. No. 180853, January 20, 2009, 576 SCRA 787, 793; Jacot v. Dal, G.R. No. 179848, November 27, 2008, 572 SCRA 295, 311.
[17] Declaring Full Land Ownership to Qualified Farmer Beneficiaries Covered by P.D. 27: Determining the Value of Remaining Unvalued Rice and Corn Lands Subject to P.D. 27; and Providing for the Manner of Payment by the Farmer Beneficiary and Mode of Compensation to the Landowner, issued on July 17, 1987.
[18] Section 6, E.O. 228.
[19] Lim v. Court of Appeals, G.R. No. 85733, February 23, 1990, 182 SCRA 564, 570, citing Sing Yee v. Santos, 47 O.G. 6372; Chua v. Court of Appeals, 449 Phil. 25, 41-42 (2003).
[20] Rollo, p. 67.
[21] See: Valenzuela v. Kalayaan Development & Industrial Corporation, G.R. No. 163244, June 22, 2009, 590 SCRA 380, 389-390; Ayala Life Assurance, Inc. v. Ray Burton Development Corporation, G.R. No. 163075, January 23, 2006, 479 SCRA 462, 470.
[22] Paras IV, CIVIL CODE OF THE PHILIPPINES ANNOTATED, 179-180 (1994 Edition).
[23] TSN, December 16, 2003, p. 36.
[24] See: Ong v. Court of Appeals, 369 Phil. 243, 253-254 (1999); Cordero v. F.S. Management & Development Corporation, G.R. No. 167213, October 31, 2006, 506 SCRA 451, 463.
[25] Pagtalunan v. Dela Cruz Vda. de Manzano, G.R. No. 147695, September 13, 2007, 533 SCRA 242, 249, 253.
[26] See: Manuel v. Rodriguez, Sr., 109 Phil. 1, 12 (1960).
[27] Rollo, pp. 17, 29; CA rollo, p. 26.
Source: Supreme Court E-Library | Date created: 2010-08-27 10:33:40
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FIRST DIVISION
[ G.R. No. 140468, January 16, 2003 ]
OLYMPIA HOUSING, INC., PETITIONER, VS. PANASIATIC TRAVEL CORPORATION AND MA. NELIDA GALVEZ-YCASIANO, RESPONDENTS.
D E C I S I O N
VITUG, J.:
The petition for review on certiorari before the Court assails the decision, promulgated on 11 June 1999, and the resolution, promulgated on 14 October 1999, of the Court of Appeals in CA-G.R. CV Case No. 53516.
The case originated from a complaint for Recovery of Possession (Accion Publiciana) filed by Olympia Housing, Inc., against Panasiatic Travel Corporation, Maria Nelida Ycasiano and the latter’s husband. The object in litigation is a condominium unit sold at the price of P2,340,000.00 payable on installments at the rate of P33,657.40 per month.
On the basis of the facts encapsulated by the trial court, it would appear that –
”On August 8, 1984, plaintiff and defendant Ma. Nelida Galvez-Ycasiano entered into a Contract to Sell, whereby the former agreed to sell to the latter condominium unit no. D-12, comprising an area of 160.50 square meters, more or less, situated on the ground floor of Olympia Condominium located at Makati, Metro Manila, covered by Condominium Certificate of Title No. 6711, for the agreed price of P2,340,000.00 payable in installments of P33,657.40 per month.
“The schedule of payments [were] as follows:
| Date | Particulars | Amount |
| July 17, 1984 | Reservation/Deposit | P100,000.00 |
| July 19, 1984 | 50% Down payment | P1,070,000.00 |
“Balance of 50% payable in sixty (60) monthly installments at 24% per annum base on diminishing balance.
“Monthly amortization to commence on Sept. 17,
1984......................................……………………………………...P33,657.40/month
“Interest of 2% is included in regular monthly amortization, past due amortization shall bear interest of 2% per month plus penalty charge of 2% per month.
“Pursuant to the Contract to Sell, defendant Ma. Nelida Galvez-Ycasiano made a reservation/deposit in the amount of P100,000.00 on July 17, 1984 and 50% down payment in the amount of P1,070,000.00 on July 19, 1984.
“Defendants made several payments in cash and thru credit memos issued by plaintiff representing plane tickets bought by plaintiff from defendant Panasiatic Travel Corp., which is owned by defendant Ma. Nelida Galvez-Ycasiano, who credited/offset the amount of the said plane tickets to defendant’s account due to plaintiff.
“Plaintiff alleged that far from complying with the terms and conditions of said Contract to Sell, defendants failed to pay the corresponding monthly installments which as of June 2, 1988 amounted to P1,924,345.52. Demand to pay the same was sent to defendant Ma. Nelida Galvez-Ycasiano, but the latter failed to settle her obligation.
“For failure of defendant to pay her obligation plaintiff allegedly rescinded the contract by a Notarial Act of Rescission.
“At present, the subject condominium unit is being occupied by defendant Panasiatic Travel Corp., hence the suit for Recovery of Possession (Accion Publiciana) with prayer for attorney’s fees, exemplary damages and reasonable rentals for the unit from July 28,1988 at the rate of P32,100.00 per month until the condominium unit is finally vacated.
“Defendant Ma. Nelida Galvez-Ycasiano, while admitting the existence of the contract to sell, interposed the defense that she has made substantial payments of the purchase price of the subject condominium unit amounting to P1,964,452.82 in accordance with the provisions of the contract to sell; that she decided to stop payment of the purchase price in the meantime because of substantial differences between her and the plaintiff in the computation of the balance of the purchase price.
“xxx xxx xxx
“Evidence adduced by plaintiff such as the statement of account of defendant Ma. Nelida Galvez-Ycasiano (Exh. ‘C’) has been established by plaintiff’s witness, Mrs. Isabelita Rivera, which indeed shows that on several occasions defendant either failed to pay on time or was completely in default in the payment of the monthly installment of the subject condominium unit.
“It can be deduced from said documentary evidence that defendant should start paying the installment on September 17, 1984, but defendant paid on September 21, 1984 the amount of P51,238.00 thru credit memo. Witness claimed that a credit memo is a document issued by Olympia Housing Inc. to Panasiatic Travel Corp. for the amount of ticket purchased instead of paying in cash they just issued credit memo in order that it would be offset on the monthly amortization due to Olympia Housing Corp. She claimed that they based it on the invoice that they [were] sending them.
“Witness further claimed that since the amount due was only P33,657.40 what she did to the excess of P51,238.00 was to apply it to the next installment. The next installment was due on October 12, 1984 in the amount of P26,158.00 representing the excess. It was paid thru credit memo no. 031 on October 17, 1984. In fact, there was still an excess of P10,081.20. The third installment was due on November 17, 1984. Defendant made partial payment because the excess payment of P10,081.20 was applied to the third installment. The 4th installment was due on December 17, 1984; the defendant did not pay instead she paid On January 9, 1985 the amount of P51,619.08 in cash per O.R. No. 295. Before this payment on January 9, 1985 defendant owed plaintiff P59,931.81 based on the amortization. The basis [was] the unpaid amortization due and payable plus 2% interest and 2% penalty charges per month. After payment, the amount due was P8,312.73. The 5th installment was due on January 17, 1985. No payment was made on the 6th, 7th 8th installments which were due on January, February, March, April 17, 1985 respectively. The 9th installment was due on May 17, 1985, it was not paid. Defendant made a payment on June 1985 for P33,231.90 in cash per O.R. No. 439. The next payment was made on June 8, 1985 for P25,574.59. After these two payments, there was still an outstanding amount due of P32,552.44. No payment was made on the 10th and 11th installments. The next payment was made on July 24, 1985 for P60,000.00. After this payment the outstanding amount due was P43,881.76. She made payment on August 16, 1985 for P30,067.00 thru credit memo no. 045. After this payment the outstanding amount due was P15,160.46. She did not on the 12th installment, instead she paid on August 28, 1985 for P26,043.00 thru credit memo no. 046. After this payment the outstanding amount due was P23,511.07. She did not pay on the 13th installment, instead she paid on October 10, 1985 for P20,830.00 thru credit memo no. 006. After this payment the outstanding amount due was P38,728.61. She did not pay on the 14th installment, instead payment was made on November 10, 1985 for P16,212.00 thru credit memo no. 010. After this payment the outstanding amount due was P58,851.83. No payments were made on the 15th, 16th and 17th installments. She paid on January 30, 1986 for P33,657.40 in cash per O.R. No. 842. After this payment the outstanding balance was P138,233.23. No payment was made on the 18th and 19th installment which fell due on February 17 and March 17, 1986. The next payment was made on April 15, 1986 for P25,263.23. After this payment the outstanding balance was P198,425.88. She did not pay for six (6) consecutive months from April 17 to September 17, 1986 corresponding to the 20th up to the 25th installment. The next payment was made on October 14, 1986 for P82,780.33 in cash per O.R. No. 1628. After this payment the outstanding amount due was P350,712.73. The 26th and 27th installments were not paid. She paid on November 24, 1986 for P134,629.60. After this payment the outstanding balance was P306,306.66. Witness claimed that the basis for the computation was the unpaid amortization due payable for the particular period plus 2% interest and 2% penalty charge per month. In computing the interest she used the simple method. The 28th up to the 31st installments were not paid. The next payment was made on April 30, 1987 for P22,213.00 thru credit memo no. 134. After this payment the outstanding balance was P471,317.60. The basis for this computation is the unpaid amortization due plus 2% interest and 2% penalty charge per month. The 33rd, 34th and 35th installments were not paid. The next payment was made on July 22, 1987 for P19,752.00 thru credit memo no. 146. After this payment the outstanding balance was P664,822.78. The 36th and 37th installments were not paid.”[1]
On 31 January 1995, the Regional Trial Court, Branch V, of Makati City ruled thusly-
“WHEREFORE, premises considered, judgment is hereby rendered as follows:
| "1. | As the complaint has been prematurely filed without complying with the mandate of Republic Act No. 6552, the complaint is hereby dismissed; |
| “2. | That the obligation of defendant Maria Nelida Galvez Ycasiano has now become due and demandable, said defendant is hereby ordered to pay the sum of P4,007,473.49 as of November 30, 1994 plus 18% interest per annum, computed from 1 December 1994, but within sixty days from receipt of a copy of this decision; |
| “3. | Upon payment thereof, for plaintiff to issue the corresponding certificate of title in favor of defendant; |
| “4. | In the event that said amount in full is not paid including the current amount due including the interest sans penalties, then immediately thereafter, without necessity of demand, the defendants must vacate the premises and all payments will be charged as rentals to the property. |
“No award of damages and attorney’s fees for any parties is being adjudged.
“No costs.”[2]
Thereupon, respondents tendered the amount of P4,304,026.53 to petitioner via Metrobank Cashier’s Check No. CC008857. Petitioner refused to accept the payment, constraining respondents to consign at the disposal of the court a quo the check on 26 April 1995. In an order, dated 05 June 1996, the check was allowed to be substituted by another cashier’s check payable to the Clerk of Court of the Makati Regional Trial Court. Complying with yet another court order of 04 January 1996, respondents deposited the amount of P4,304,026.53 with the Land Bank of the Philippines and subsequently submitted to the court the corresponding bank book as well as the bank’s verification.
Meanwhile, both parties appealed the judgment of the trial court. In its now questioned decision of 11 June 1999, the appellate court sustained the trial court.
The denial of the motion for reconsideration prompted petitioner to file the instant petition for review on certiorari, raising the following assignment of errors, to wit:
“I
“THE COURT OF APPEALS ACTED IN A MANNER NOT IN ACCORD WITH LAW AND APPLICABLE JURISPRUDENCE OF THE SUPREME COURT WHEN IT FAILED AND/OR REFUSED TO RULE UPON THE EFFECT OF THE FILING OF THE COMPLAINT AND THE NOTARIAL ACT OF RESCISSION ATTACHED THERETO VIS-À-VIS THE REQUIREMENTS OF R.A. 6552.
“II
“THE COURT OF APPEALS ACTED IN A MANNER NOT IN ACCORD WITH LAW AND APPLICABLE JURISPRUDENCE OF THE SUPREME COURT IN REFUSING TO DECREE THE RESCISSION OF THE SUBJECT CONTRACT TO SELL ON THE GROUND THAT PETITIONER FAILED TO PAY THE CASH SURRENDER VALUE PRIOR TO THE FILING OF THE COMPLAINT.
“III
“THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT’S DECISION ALLOWING RESPONDENT YCASIANO TO PAY ON HER ALREADY-DEFAULTED OBLIGATIONS AND, UPON SUCH PAYMENT, ORDERING PETITIONER TO ISSUE THE CERTIFICATE OF TITLE TO HER.”[3]
Respondents, upon the other hand, would insist that the petition should be held devoid of merit considering that: first, the issues raised in the petition would strike at fundamentally factual questions beyond the province of a petition for review on certiorari with this Court; second, there was no valid rescission of the contract to sell on account of the failure of petitioner to give notice of rescission by notarial act, a requisite laid down in Republic Act No. 6552; third, the oft-invoked Layug vs. IAC[4] case would scarcely find application, it being a case for annulment of contract, not one for the recovery of possession; fourth, no effective rescission had taken place on account of the failure of petitioner to pay the cash surrender value, conformably with the terms of the law; and fifth, there being no valid rescission, the contract remained valid and subsisting, still thereby obligating respondents to pay the outstanding balance of the purchase price.
In its Reply Brief, petitioner asseverated that, while not categorically made, the Court, in Layug,[5] had held to be sufficiently anchored, nevertheless, an action for judicial rescission even if no notarial act of rescission was priorly executed and the non-payment of the cash surrender value before the filing of the complaint.[6] Moreover, petitioner argued that while the complaint before the trial court was denominated as one for “recovery of possession,” the suit could still be considered as a case for judicial rescission considering that the issue of whether or not it was entitled to recover possession over the property subject matter of the contract to sell would require, for its resolution, passing upon the initial issue of whether or not the contract was in fact rescinded by virtue of a notarial act.[7]
The petition must be denied.
The action for reconveyance filed by petitioner was predicated on an assumption that its contract to sell executed in favor of respondent buyer had been validly cancelled or rescinded. The records would show that, indeed, no such cancellation took place at any time prior to the institution of the action for reconveyance. What had been sent by petitioner to respondent was a letter, dated 02 June 1988, that read:
“02 June 1988
“MS. NELIDA GALVEZ
Pan Asiatic Travel Corp.
3rd Floor, S & L Building
Roxas Boulevard, Manila
“Dear Ms. Galvez:
“We have sent you many letters in the past asking you to update your payments in accordance with the terms of our Contract to Sell dated August 25, 1984 as follows:
| Purchase Price, Unit No. D-12 | P2,340,000.00 | ||
| Terms of Payment: | |||
| - | July 17, 1984, Reservation/ | ||
| Deposit | 100,000.00 | ||
| - | July 19, 1984, 50% | ||
| Down payment | 1,070,000.00 | ||
| - | balance payable in 60 monthly installments | ||
| Monthly payments to commence | 33,657.04/month | ||
| Note: Past due payments to bear interest of 2% per month plus penalty charge of 2% per month. | |||
“You are in default and your overdue account now stands as follows:
| Purchase Price | P2,340,000.00 | ||
| Add: | Interest on monthly Amortizations | 849,444.00 | |
| P3,189,444.00 | |||
| Add: | Interest and penalties on overdues (Refer to Exh. ‘A’) | 679,002.34 | |
| P3,868,446.34 | |||
| Less: | Payments (Refer To Exh. ‘B’) | 1,944,100.82 | |
| TOTAL DUE AND DEMANDABLE | P1,924,345.52 | ||
| =========== | |||
“Unless we receive payment in full within 30 days after service of this notice upon you, our Contract to Sell shall be cancelled and/or rescinded.
“Please give this matter its due attention.
“Very truly yours,
“(Sgd.) Illegible
(Type) FELIX H. LIMCAOCO, JR.
President”[8]
As so aptly observed by the courts below, the foregoing communication to the buyer merely demanded payment within thirty (30) days from receipt thereof with the threat that if the demand were not heeded, the contract would forthwith be cancelled or rescinded. Nor did the appellate court erroneously ignore the “notarial rescission” attached to the complaint for reconveyance. Apparently, the so-called “notarial rescission” was not sent to respondents prior to the institution of the case for reconveyance but merely served on respondents by way of an attachment to the complaint. In any case, a notarial rescission, standing alone, could not have invalidly effected, in this case, the cancellation of the contract.
As the trial court elaborated in this case:
“A careful study of the evidence presented does not show a notice of cancellation or the demand for rescission of the contract by a notarial act. The plaintiff appears to be claiming that the June 2, 1988 letter is a notice of cancellation or a demand for rescission of the contract by a notarial act. This could not be what the law contemplates. It should be a notice of cancellation or demand for rescission of the contract by notarial act.
“Further, the law requires also full payment of the cash surrender value to the buyer but there is no evidence adduced by the plaintiff that they delivered to the defendant the cash surrender value. Admittedly, no such full payment of the cash surrender value to the defendant was made. A mere promise to return is not what the law contemplates.”[9]
The governing law is Republic Act No. 6552, otherwise known as the “Realty Installment Buyer Protection Act,” which has become effective since 16 September 1972. Republic Act No. 6552 is a special law governing transactions that involve, subject to certain exceptions, the sale on installment basis of real property.[10] The law has been enacted mainly “to protect buyers of real estate on installment payments against onerous and oppressive conditions.”[11] Section 3 of the statute provides:
“Sec. 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act Number Thirty-eight hundred forty-four as amended by Republic Act Numbered Sixty three hundred eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments:
| “a) | To pay without additional interest, the unpaid installments due within the total grace period earned by him, which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any. |
| “b) | If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer. |
“Down payments, deposits or options on the contract shall be included in the computation of the total number of installments made.”
The enactment recognizes the right of the seller to cancel the contract but any such cancellation must be done in conformity with the requirements therein prescribed.[12] In addition to the notarial act of rescission, the seller is required to refund to the buyer the cash surrender value of the payments on the property.[13] The actual cancellation of the contract can only be deemed to take place upon the expiry of a 30-day period following the receipt by the buyer of the notice of cancellation or demand for rescission by a notarial act and the full payment of the cash surrender value.
The Court agrees with petitioner that it is not precluded from going to the court to demand judicial rescission in lieu of a notarial act of rescission. This much must be recognized. Thus, in Layug vs. Intermediate Appellate Court[14] the Court has ruled that a demand for rescission by notarial act would appear to be merely circuitous, consequently superfluous, with the filing by the seller of an action for annulment of contract and for recovery of damages. Unfortunately for petitioner, it would be incorrect to apply Layug to the instant case. Layug is basically an action for annulment of contract, a kindred concept of rescission, whereas the instant case before the Court is one for recovery of possession on the thesis of a prior rescission of the contract covering the property.[15] Not only is an action for reconveyance conceptually different from an action for rescission but that, also, the effects that flow from an affirmative judgment in either case would be materially dissimilar in various respects. The judicial resolution of a contract gives rise to mutual restitution which is not necessarily the situation that can arise in an action for reconveyance. Additionally, in an action for rescission (also often termed as resolution), unlike in an action for reconveyance predicated on an extrajudicial rescission (rescission by notarial act), the Court, instead of decreeing rescission, may authorize for a just cause the fixing of a period.[16]
Nor should a party in litigation be permitted to freely and substantially change the theory or the cause of action of his case[17] that, otherwise, can put to undue disadvantage the other party by not being accurately and timely apprised of what he is up against. The character of an action is determined from the issues raised by the complaint, from the nature of the right or grievance asserted, and from the relief sought in the complaint.[18] A change of theory can result in grave alteration of the stand theretofore taken by the parties, and a court must not thereafter take it upon itself to assume its own position on, or the factual and legal considerations of, the case.
WHEREFORE, all premises considered, the instant petition is DENIED and the appealed decision is AFFIRMED. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.
[1] Rollo, pp. 179-184.
[2] Rollo, p. 193.
[3] Rollo, pp. 29-30.
[4] 167 SCRA 627.
[5] Ibid.
[6] Rollo, p. 429.
[7] Rollo, p. 32.
[8] Rollo, p. 59.
[9] Rollo, p. 191.
[10] Layug vs. IAC, supra.
[11] Sec. 2, R.A. No. 6552.
[12] Leano vs. Court of Appeals, G.R. No. 129018,15 November 2001.
[13] Rillo vs. Court of Appeals, 274 SCRA 461.
[14] Supra.
[15] Paragraph 5 of the complaint alleged that “for failure of Defendants to pay their unpaid installments to Plaintiff within the grace period of 30 days as mandated by Republic Act 6552, otherwise known as the Maceda Act, Plaintiff rescinded said contract by a Notarial Act of Rescission.”
[16] Article 1191, Civil Code.
[17] See Arroyo vs. HRET, 246 SCRA 384.
[18] Ft. Smith & W.P. Co. vs. Ford, 34 Okla 575, 126 P 745.
Source: Supreme Court E-Library | Date created: 2008-11-25 15:45:59
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FIRST DIVISION
[ G.R. No. 93394, December 20, 1990 ]
FNCB FINANCE, PETITIONER, VS. NAPOLEON ESTAVILLO, RESPONDENT.
D E C I S I O N
CRUZ, J.:
Installment sales and financing arrangements have become part of the modern way of life, especially in the metropolitan areas. By such transactions, persons who do not have the ready cash for the total purchase price may make a small down payment, leaving the balance to be "financed," or amortized over a stipulated period with interests and other charges added. The resultant total payments are way above the original cost. Nevertheless, the buyer agrees to the onerous terms, albeit not without a little misgiving, as he would otherwise be unable to make the purchase at all.
In the case of Napoleon Estavillo, the subject of the sale was a brand-new Ford Fiera. He bought it from World Cars, Inc. on April 22, 1982, for the list price of P63,340.00 and made a down payment of P15,340.00, leaving a balance of P48,000.00. This was to be paid under a 2-year financing scheme at the rate of P2,946.00 monthly from June 14, 1982 to May 14, 1984, bloating the balance to P70,704.00. In the promissory note he signed, Estavillo agreed to pay a 2.5% penalty in case of late payment. The instrument also contained an acceleration clause. To secure payment of the loan, he and his wife had to execute a chattel mortgage on May 14, 1982, on the purchased vehicle in favor of World Cars, Inc. On that same day, the Ford Fiera was delivered to Estavillo, and World Cars Inc. assigned its credit against him to FNCB Finance, the herein petitioner.
On February 28, 1984, the vehicle was seized in San Mateo, Isabela, by two employees of the petitioner, Jun Cruz and Jun Cunanan, together with John Ramos, deputy sheriff of the Regional Trial Court of Isabela, who took it to Echague, in the same province. Estavillo immediately saw Andy Cacho, manager of FNCB in that branch, and demanded the reason for the confiscation of the car. He was told he was in arrears for two months. Estavillo denied this, insisting he paid P9,390.00 to Jun Cunanan on August 26, 1983. The petitioner nevertheless refused to return the Ford Fiera, prompting the private respondent to send a letter of demand through counsel on March 27, 1984. Cacho relented and promised to return the vehicle as long as Estavillo continued paying his installments. However, that promise was never fulfilled. The vehicle was sold at public auction and delivered to FNCB as the highest bidder, then taken by it to Cabanatuan City and thence to Manila, where it was ultimately resold.
Estavillo sued. FNCB countered that the repossession of the car was legal because he was in arrears. After trial, the plaintiff was sustained by the Regional Trial Court of Isabela,[1] which held the seizure of the car was not warranted because Estavillo was not delinquent in his installment payments. The dispositive portion of the decision read:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the plaintiff and against the defendant ordering the defendant to pay to the plaintiff the amount of P64,895.00 representing the payments made by the purchase of the vehicle which it confiscated with interest at 10% from February 28, 1984; P5,000.00 as nominal damages and P10,000.00 as exemplary damages. Costs against the defendant.
On appeal, the decision was affirmed in toto by the respondent court,[2] which is now the subject of this petition. It is alleged that:
1. In affirming the decision of the lower court that respondent was not in default on his account, the Court of Appeals erred in disregarding facts and evidence showing that respondent was in fact, in default;
2. The Court of Appeals erred in affirming the lower court's decision that payment made to petitioner's employee evidenced by a private receipt (not official company receipt) may be deemed as payment to the company;
3. The Court of Appeals erred in affirming the lower court's decision ordering the petitioner to return all the payments made by respondent on his installment account;
4. The Court of Appeals erred in affirming the lower court's decision ordering the petitioner to pay the respondent nominal damages;
5. The Court of Appeals erred in affirming the lower court's decision ordering the petitioner to pay the respondent exemplary damages.
On the first issue, we restate at the outset the well-established principle that this Court is not a trier of facts. In an appeal by certiorari under Rule 45 of the Rules of Court, "only questions of law may be raised," as the Rule itself says. The resolution of factual issues is the function of the lower courts, whose findings on these matters are received with respect and are in fact binding on this Court except only where the case is shown as coming under the accepted exceptions. There is no such showing here. Consequently, we accept the ruling of the trial court, as reviewed and affirmed by the respondent court, that the private respondent was up-to-date in his installment payments at the time of the seizure of the subject vehicle.
It need only be added that the petitioner's statement of accounts (Exh. 4) was correctly rejected by the trial court for the several discrepancies therein that showed it could not be relied upon to show, as urged by the petitioner, that the private respondent was in default. As the trial court observed:
Moreover, the statement of account (Exh. 4) cannot be given full faith and credit, since it does not record all the payments made by plaintiff-appellee. Thus, it does not reflect the correct unpaid balance of appellee at the time of the seizure of the vehicle. Notably, the payments on January 6, 1982 in the amount of P2,500.00 (Exh. N); and in August, 1983, in the amount of P9,390.00 (Exh. C) are not recorded in Exhibit 4. On May 3, 1983, appellee paid the amount of P1,800.00 (Exh. S) but only P1,000.00 appears in Exhibit 4. Nonetheless, the statement of account is an admission by appellant that appellee paid those amounts stated therein. Hence, together with the receipts of payments presented by appellee (Exhs. M, N, O, P, Q, R, G, S, T, U, H, I, J, V, W, C, X, Y, M, K and L), these form a basis for an analysis to determine whether appellee was in default in the payment of his obligation when the vehicle was seized on February 28, 1984.
The second issue must also be resolved in favor of the respondent. Estavillo proved that on August 26, 1983, he paid P9,390.00 to FNCB through its employee, Jun Cunanan, who acknowledged the payment in a private receipt to be followed by the official receipt. Cunanan had previously received similar installment payments from Estavillo and appeared authorized to do so as evidenced by the subsequent official receipts for such payments issued by the petitioner. The petitioner does not deny that Cunanan was its employee at the time the payment was received by him and in fact was one of the persons who seized the vehicle from the private respondent's driver. It simply argues that Cunanan was acting in an unofficial capacity when he collected the payment, which should therefore not be charged against it. That is a pallid excuse. If the payment was not delivered by Cunanan, FNCB should claim it from him and not Estavillo. Estavillo's payment to Cunanan, as the authorized collector of FNCB, was a valid payment to FNCB.
Finding from its computations that the private respondent had paid the petitioner the total amount of P64,895.00, the lower courts ordered the sum returned to him in lieu of the car, which could no longer be restored. The petitioner does not question the refund itself but only the amount of the payments, contending that it should not include the P15,340.00 directly paid by Estavillo to World Cars, Inc. We do not see why this sum should be excluded. That was part of the consideration he paid for the car, which he can no longer recover. That would represent part of the damages he sustained as a result of the illegal act of the petitioner in depriving him of the vehicle despite his legal right to it.
The down payment could be an issue between World Cars, Inc. and FNCB, but it should not affect Estavillo. As far as he is concerned, he is entitled to full reimbursement of the amount he has paid for the Ford Fiera which the petitioner is unable to return to him. The petitioner cannot claim Estavillo should recover the down payment from World Cars, Inc., because the latter had nothing to do with the seizure and subsequent sale of the car. Estavillo's cause of action was against FNCB alone.
In this connection, the Court notes that the interest fixed for the refund by the trial and respondent courts was only 10%. This must be increased to 12%, in accordance with Reformina v. Tomol,[3] where we held:
x x x the Monetary Board increased the rate of legal interest from that of six (6%) percent per annum originally allowed under Section 1 of Act No. 2655 to twelve (12%) percent per annum.
It will be noted that Act No. 2655 deals with interest on (1) loans; (2) forbearances of any money, goods or credits; and (3) rate allowed in judgments.
x x x
The judgments spoken of and referred to are judgments in litigations involving loans or forbearance of any money, goods or credits. Any other kind of monetary judgment which has nothing to do with, nor involving loans or forbearance of any money, goods or credits does not fall within the coverage of the said law for it is not within the ambit of the authority granted to the Central Bank.
Finally, we find the award of nominal and exemplary damages justified under the following provisions of the Civil Code:
Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.
Art. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.
The petitioner was less than fair in its treatment of the private respondent, who suffered not only actual damages but also humiliation and mental anguish over the unwarranted confiscation of the vehicle he cherished and for which he had already made substantial payments. The seizure was clearly reckless and without regard for his feelings and reputation. On top of this, the petitioner deliberately submitted a false statement of accounts which, when closely analyzed by the trial court, was found to have omitted a number of payments for which Estavillo produced the corresponding receipts. It is clear that Estavillo is entitled to redress in the form of nominal and exemplary damages, in addition to the refund of the payments made by him, for all these thoughtless if not malicious acts of the petitioner.
WHEREFORE, the challenged decision is AFFIRMED except for the modification of the imposed interest, which is increased to 12%. Costs against the petitioner.
SO ORDERED.
Narvasa, (Chairman), Gancayco, Griño-Aquino, and Medialdea, JJ., concur.
[1] Decided by Judge Henedino P. Eduarte.
[2] Penned by Martinez, A., J., with Melo and Lapeña, JJ., concurring.
[3] 139 SCRA 260.
Source: Supreme Court E-Library | Date created: January 19, 2010
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FIRST DIVISION
[ G.R. NO. 145330, October 14, 2005 ]
SPOUSES GOMER AND LEONOR RAMOS, PETITIONERS, VS. SPOUSES SANTIAGO AND MINDA HERUELA, AND SPOUSES CHERRY AND RAYMOND PALLORI, RESPONDENTS.
D E C I S I O N
CARPIO, J.:
The Case
Before the Court is a petition for review[1] assailing the Decision[2] dated 23 August 2000 and the Order dated 20 September 2000 of the Regional Trial Court ("trial court") of Misamis Oriental, Branch 21, in Civil Case No. 98-060. The trial court dismissed the plaintiffs' action for recovery of ownership with damages.
The Antecedent Facts
The spouses Gomer and Leonor Ramos ("spouses Ramos") own a parcel of land, consisting of 1,883 square meters, covered by Transfer Certificate of Title ("TCT") No. 16535 of the Register of Deeds of Cagayan de Oro City. On 18 February 1980, the spouses Ramos made an agreement with the spouses Santiago and Minda Heruela ("spouses Heruela")[3] covering 306 square meters of the land ("land"). According to the spouses Ramos, the agreement is a contract of conditional sale. The spouses Heruela allege that the contract is a sale on installment basis.
On 27 January 1998, the spouses Ramos filed a complaint for Recovery of Ownership with Damages against the spouses Heruela. The case was docketed as Civil Case No. 98-060. The spouses Ramos allege that out of the P15,300[4] consideration for the sale of the land, the spouses Heruela paid only P4,000. The last installment that the spouses Heruela paid was on 18 December 1981. The spouses Ramos assert that the spouses Heruela's unjust refusal to pay the balance of the purchase price caused the cancellation of the Deed of Conditional Sale. In June 1982, the spouses Ramos discovered that the spouses Heruela were already occupying a portion of the land. Cherry and Raymond Pallori ("spouses Pallori"), daughter and son-in-law, respectively, of the spouses Heruela, erected another house on the land. The spouses Heruela and the spouses Pallori refused to vacate the land despite demand by the spouses Ramos.
The spouses Heruela allege that the contract is a sale on installment basis. They paid P2,000 as down payment and made the following installment payments:
| 31 March 1980 | P200 | |
| 2 May 1980 | P400 | (for April and May 1980) |
| 20 June 1980 | P200 | (for June 1980) |
| 8 October 1980 | P500 | (for July, August and part of September 1980) |
| 5 March 1981 | P400 | (for October and November 1980) |
| 18 December 1981 | P300 | (for December 1980 and part of January 1981) |
The spouses Heruela further allege that the 306 square meters specified in the contract was reduced to 282 square meters because upon subdivision of the land, 24 square meters became part of the road. The spouses Heruela claim that in March 1982, they expressed their willingness to pay the balance of P11,300 but the spouses Ramos refused their offer.
The Ruling of the Trial Court
In its Decision[5] dated 23 August 2000, the trial court ruled that the contract is a sale by installment. The trial court ruled that the spouses Ramos failed to comply with Section 4 of Republic Act No. 6552 ("RA 6552"),[6] as follows:
SEC. 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.
The dispositive portion of the Decision reads:
WHEREFORE, the complaint is hereby dismissed and plaintiff[s] are ordered to execute the corresponding Deed of Sale in favor of defendants after the latter have paid the remaining balance of Eleven Thousand and Three Hundred Pesos (P11,300.00).
Plaintiffs are further ordered to pay defendants the sum of P20,000.00, as Attorney's fees and P10,000.00 as litigation expenses.
SO ORDERED.[7]
In an Order[8] dated 20 September 2000, the trial court denied the spouses Ramos' motion for reconsideration.
Hence, this petition.
The Issues
The spouses Ramos raise the following issues:
I. Whether RA 6552 is applicable to an absolute sale of land;
II. Whether Articles 1191 and 1592 of the Civil Code are applicable to the present case;
III. Whether the spouses Ramos have a right to cancel the sale;
IV. Whether the spouses Heruela have a right to damages.[9]
The Ruling of the Court
The petition is partly meritorious.
The Agreement is a Contract to Sell
In its Decision, the trial court ruled on whether the contract made by the parties is a conditional sale or a sale on installment. The spouses Ramos' premise is that since the trial court ruled that the contract is a sale on installment, the trial court also in effect declared that the sale is an absolute sale. The spouses Ramos allege that RA 6552 is not applicable to an absolute sale.
Article 1458 of the Civil Code provides that a contract of sale may be absolute or conditional. A contract of sale is absolute when title to the property passes to the vendee upon delivery of the thing sold.[10] A deed of sale is absolute when there is no stipulation in the contract that title to the property remains with the seller until full payment of the purchase price.[11] The sale is also absolute if there is no stipulation giving the vendor the right to cancel unilaterally the contract the moment the vendee fails to pay within a fixed period.[12] In a conditional sale, as in a contract to sell, ownership remains with the vendor and does not pass to the vendee until full payment of the purchase price.[13] The full payment of the purchase price partakes of a suspensive condition, and non-fulfillment of the condition prevents the obligation to sell from arising.[14]
In this case, the agreement of the parties is embodied in a one-page, handwritten document.[15] The document does not contain the usual terms and conditions of a formal deed of sale. The original document, elevated to this Court as part of the Records, is torn in part. Only the words "LMENT BASIS" is legible on the title. The names and addresses of the parties and the identity of the property cannot be ascertained. The agreement only provides for the following terms of the sale:
| TERM[S] OF SALE: | |
| PRICE PER SQM P50.00 X 306 SQM | P 15,300.00 |
| DOWN PAYMENT (TWO THOUSAND PESOS) |
|
| BALANCE PAYABLE AT MINIMUM OF P200.00 |
|
| PER MONTH UNTIL FULLY PAID | ======= |
In Manuel v. Rodriguez, et al.,[16] the Court ruled that to be a written contract, all the terms must be in writing, so that a contract partly in writing and partly oral is in legal effect an oral contract. The Court reiterated the Manuel ruling in Alfonso v. Court of Appeals:[17]
xxx In Manuel, "only the price and the terms of payment were in writing," but the most important matter in the controversy, the alleged transfer of title was never "reduced to any written document.["] It was held that the contract should not be considered as a written but an oral one; not a sale but a promise to sell; and that "the absence of a formal deed of conveyance" was a strong indication "that the parties did not intend immediate transfer of title, but only a transfer after full payment of the price." Under these circumstances, the Court ruled Article 1504 of the Civil Code of 1889 (Art. 1592 of the present Code) to be inapplicable to the contract in controversy " a contract to sell or promise to sell " "where title remains with the vendor until fulfillment of a positive suspensive condition, such as full payment of the price x x [x].
The records show that the spouses Heruela did not immediately take actual, physical possession of the land. According to the spouses Ramos, in March 1981, they allowed the niece of the spouses Heruela to occupy a portion of the land. Indeed, the spouses Ramos alleged that they only discovered in June 1982 that the spouses Heruela were already occupying the land. In their answer to the complaint, the spouses Heruela and the spouses Pallori alleged that their occupation of the land is lawful because having made partial payments of the purchase price, "they already considered themselves owners' of the land.[18] Clearly, there was no transfer of title to the spouses Heruela. The spouses Ramos retained their ownership of the land. This only shows that the parties did not intend the transfer of ownership until full payment of the purchase price.
RA 6552 is the Applicable Law
The trial court did not err in applying RA 6552 to the present case.
Articles 1191[19] and 1592[20] of the Civil Code are applicable to contracts of sale. In contracts to sell, RA 6552 applies. In Rillo v. Court of Appeals,[21] the Court declared:
xxx Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon non-payment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. It also provides the right of the buyer on installments in case he defaults in the payment of succeeding installments xxx.
Sections 3 and 4 of RA 6552 provide:
Sec. 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act Numbered Thirty-eight hundred forty-four as amended by Republic Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments:
(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him, which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any.
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.
Down payments, deposits or options on the contract shall be included in the computation of the total number of installments made.
Sec. 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.
In this case, the spouses Heruela paid less than two years of installments. Thus, Section 4 of RA 6552 applies. However, there was neither a notice of cancellation nor demand for rescission by notarial act to the spouses Heruela. In Olympia Housing, Inc. v. Panasiatic Travel Corp.,[22] the Court ruled that the vendor could go to court to demand judicial rescission in lieu of a notarial act of rescission. However, an action for reconveyance is not an action for rescission. The Court explained in Olympia:
The action for reconveyance filed by petitioner was predicated on an assumption that its contract to sell executed in favor of respondent buyer had been validly cancelled or rescinded. The records would show that, indeed, no such cancellation took place at any time prior to the institution of the action for reconveyance. xxx
xxx
xxx Not only is an action for reconveyance conceptually different from an action for rescission but that, also, the effects that flow from an affirmative judgment in either case would be materially dissimilar in various respects. The judicial resolution of a contract gives rise to mutual restitution which is not necessarily the situation that can arise in an action for reconveyance. Additionally, in an action for rescission (also often termed as resolution), unlike in an action for reconveyance predicated on an extrajudicial rescission (rescission by notarial act), the Court, instead of decreeing rescission, may authorize for a just cause the fixing of a period.[23]
In the present case, there being no valid rescission of the contract to sell, the action for reconveyance is premature. Hence, the spouses Heruela have not lost the statutory grace period within which to pay. The trial court should have fixed the grace period to sixty days conformably with Section 4 of RA 6552.
The spouses Heruela are not entirely fault-free. They have been remiss in performing their obligation. The trial court found that the spouses Heruela offered once to pay the balance of the purchase price. However, the spouses Heruela did not consign the payment during the pendency of the case. In the meanwhile, the spouses Heruela enjoyed the use of the land.
For the breach of obligation, the court, in its discretion, and applying Article 2209 of the Civil Code,[24] may award interest at the rate of 6% per annum on the amount of damages.[25] The spouses Heruela have been enjoying the use of the land since 1982. In 1995, they allowed their daughter and son-in-law, the spouses Pallori, to construct a house on the land. Under the circumstances, the Court deems it proper to award interest at 6% per annum on the balance of the purchase price.
The records do not show when the spouses Ramos made a demand from the spouses Heruela for payment of the balance of the purchase price. The complaint only alleged that the spouses Heruela's "unjust refusal to pay in full the purchase price xxx has caused the Deed of Conditional Sale to be rescinded, revoked and annulled."[26] The complaint did not specify when the spouses Ramos made the demand for payment. For purposes of computing the legal interest, the reckoning period should be the filing on 27 January 1998 of the complaint for reconveyance, which the spouses Ramos erroneously considered an action for rescission of the contract.
The Court notes the reduction of the land area from 306 square meters to 282 square meters. Upon subdivision of the land, 24 square meters became part of the road. However, Santiago Heruela expressed his willingness to pay for the 306 square meters agreed upon despite the reduction of the land area.[27] Thus, there is no dispute on the amount of the purchase price even with the reduction of the land area.
On the Award of Attorney's Fees and Litigation Expenses
The trial court ordered the spouses Ramos to pay the spouses Heruela and the spouses Pallori the amount of P20,000 as attorney's fees and P10,000 as litigation expenses. Article 2208[28] of the Civil Code provides that subject to certain exceptions, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered in the absence of stipulation. None of the enumerated exceptions applies to this case. Further, the policy of the law is to put no premium on the right to litigate.[29] Hence, the award of attorney's fees and litigation expenses should be deleted.
WHEREFORE, we AFFIRM the Decision dated 23 August 2000 of the Regional Trial Court of Misamis Oriental, Branch 21, dismissing the complaint for Recovery of Ownership with Damages, with the following MODIFICATION:
- The spouses Heruela shall pay the spouses Ramos P11,300 as balance of the purchase price plus interest at 6% per annum from 27 January 1998. The spouses Heruela shall pay within 60 days from finality of this Decision;
- Upon payment, the spouses Ramos shall execute a deed of absolute sale of the land and deliver the certificate of title in favor of the spouses Heruela;
- In case of failure to thus pay within 60 days from finality of this Decision, the spouses Heruela and the spouses Pallori shall immediately vacate the premises without need of further demand, and the down payment and installment payments of P4,000 paid by the spouses Heruela shall constitute rental for the land;
- The award of P20,000 as attorney's fees and P10,000 as litigation expenses in favor of the spouses Heruela and the spouses Pallori is deleted.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago, and Azcuna, JJ., concur.
[1] Under Rule 45 of the 1997 Rules of Civil Procedure.
[2] Penned by Judge Arcadio D. Fabria.
[3] The spouses Ramos and the spouses Heruela are collectively referred to in this Decision as "the parties."
[4] P50 per square meter.
[5] Rollo, pp. 15-24.
[6] Otherwise known as the "Realty Installment Buyer Protection Act."
[7] Rollo, pp. 23-24.
[8] Ibid., p. 25.
[9] Ibid., p. 126.
[10] Universal Robina Sugar Milling Corp. v. Heirs of Teves, 438 Phil. 26 (2002).
[11] Adelfa Properties, Inc. v. CA, 310 Phil. 623 (1995).
[12] Ibid.
[13] Ibid.
[14] Chua v. Court of Appeals, 449 Phil. 25 (2003).
[15] Records, p. 178.
[16] 109 Phil. 1 (1960).
[17] G.R. No. 63745, 8 June 1990, 186 SCRA 400.
[18] Records, p. 24.
[19] Article 1191 provides:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law.
[20] Article 1592 provides:
Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term.
[21] G.R. No. 125347, 19 June 1997, 274 SCRA 461, citing the Resolution on Second Motion for Reconsideration, Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., No. L-25885, 16 November 1978, 86 SCRA 305.
[22] 443 Phil. 385 (2003).
[23] Ibid.
[24] Article 2209 provides:
Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.
[25] Consing v. Court of Appeals, G.R. No. 143584, 10 March 2004, 425 SCRA 192; Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, 12 July 1994, 234 SCRA 78.
[26] Records, p. 4.
[27] TSN, 8 February 2000, p. 20.
[28] Article 2208 provides:
Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen's compensation and employer's liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered.
In all cases, the attorney's fees and expenses of litigation must be reasonable.
[29] Liu v. Loy, Jr., 453 Phil. 232 (2003).
Source: Supreme Court E-Library | Date created: 2008-09-23 13:43:10
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THIRD DIVISION
[ G.R. No. 175399, October 27, 2009 ]
OPHELIA L. TUATIS, PETITIONER, VS. SPOUSES ELISEO ESCOL AND VISMINDA ESCOL; HONORABLE COURT OF APPEALS, 22ND DIVISION, CAGAYAN DE ORO CITY; REGIONAL TRIAL COURT, BRANCH 11, SINDANGAN, ZAMBOANGA DEL NORTE; AND THE SHERIFF OF RTC, BRANCH 11, SINDANGAN, ZAMBOANGA DEL NORTE, RESPONDENTS.
D E C I S I O N
CHICO-NAZARIO, J.:
This Petition for Certiorari and Mandamus[1] under Rule 65 of the Rules of Court seeks the annulment of the following Resolutions of the Court of Appeals in CA-G.R. SP No. 00737-MIN: (a) Resolution[2] dated 10 February 2006 dismissing the Petition for Certiorari, Prohibition and Mandamus with Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction of herein petitioner Ophelia L. Tuatis (Tuatis); (b) Resolution[3] dated 25 July 2006 denying Tuatis' Motion for Reconsideration of the Resolution dated 10 February 2006; and (c) Resolution[4] dated 9 October 2006 denying Tuatis' Motion for Leave to File a Second Motion for Reconsideration. The instant Petition further prays for the annulment of the Order[5] dated 26 September 2005 of the Regional Trial Court (RTC) of Sindangan, Zamboanga del Norte, Branch 11, in Civil Case No. S-618, ordering the Sheriff to immediately serve the Writ of Execution issued on 7 March 2002.
The dispute arose from the following factual and procedural antecedents:
On 18 June 1996, Tuatis filed a Complaint for Specific Performance with Damages[6] against herein respondent Visminda Escol (Visminda) before the RTC, docketed as Civil Case No. S-618.
Tuatis alleged in her Complaint that sometime in November 1989, Visminda, as seller, and Tuatis, as buyer, entered into a Deed of Sale of a Part of a Registered Land by Installment[7] (Deed of Sale by Installment). The subject matter of said Deed was a piece of real property situated in Poblacion, Sindangan, Zamboanga del Norte and more particularly described as "[a] part of a registered land being known as Lot No. 251, Pls-66 covered under OCT [Original Certificate of Title] No. P-5421; x x x with an area of THREE HUNDRED (300) square meters, more or less" (subject property).
The significant portions of the Deed of Sale by Installment stated:
That for and in consideration of the sum of TEN THOUSAND PESOS (P10,000.00), Philippine currency, the SELLER [Visminda[8]] hereby SELLS to the BUYER [Tuatis], the above-described parcel of land under the following terms and conditions:
- That the BUYER [Tuatis] shall pay to the SELLER [Visminda] the amount of THREE THOUSAND PESOS (P3,000.00), as downpayment;
- That the BUYER [Tuatis] shall pay to the SELLER [Visminda] the amount of FOUR THOUSAND PESOS (P4,000.00), on or before December 31, 1989;
- That the remaining balance of THREE THOUSAND PESOS (P3,000.00) shall be paid by the BUYER [Tuatis] to the SELLER [Visminda] on or before January 31, 1990;
- That failure of the BUYER [Tuatis] to pay the remaining balance within the period of three months from the period stipulated above, then the BUYER [Tuatis] shall return the land subject of this contract to the SELLER [Visminda] and the SELLER [Visminda] [shall] likewise return all the amount paid by the BUYER [Tuatis].[9]
Tuatis claimed that of the entire purchase price of P10,000.00, she had paid Visminda P3,000.00 as downpayment. The exact date of said payment was not, however, specified. Subsequently, Tuatis paid P3,000.00 as installment on 19 December 1989, and another P1,000.00 installment on 17 February 1990. Tuatis averred that she paid Visminda the remaining P3,000.00 on 27 February 1990 in the presence of Eric Selda (Eric), a clerk in the law office of one Atty. Alanixon Selda. In support of this averment, Tuatis attached to her Complaint a certification[10] executed by Eric on 27 May 1996.
In the meantime, Tuatis already took possession of the subject property and constructed a residential building thereon.
In 1996, Tuatis requested Visminda to sign a prepared absolute deed of sale covering the subject property, but the latter refused, contending that the purchase price had not yet been fully paid. The parties tried to amicably settle the case before the Lupon Barangay, to no avail.[11]
Tuatis contended that Visminda failed and refused to sign the absolute deed of sale without any valid reason. Thus, Tuatis prayed that the RTC order Visminda to do all acts for the consummation of the contract sale, sign the absolute deed of sale and pay damages, as well as attorney's fees.
In her Answer,[12] Visminda countered that, except for the P3,000.00 downpayment and P1,000.00 installment paid by Tuatis on 19 December 1989 and 17 February 1990,[13] respectively, Tuatis made no other payment to Visminda. Despite repeated verbal demands, Tuatis failed to comply with the conditions that she and Visminda agreed upon in the Deed of Sale by Installment for the payment of the balance of the purchase price for the subject property. Visminda asked that the RTC dismiss Tuatis' Complaint, or in the alternative, order Tuatis to return the subject property to Visminda after Visminda's reimbursement of the P4,000.00 she had received from Tuatis.
After trial, the RTC rendered a Decision[14] on 29 April 1999 in Civil Case No. S-618 in Visminda's favor. The RTC concluded:
Under the facts and circumstances, the evidence for [Tuatis] has not established by satisfactory proof as to (sic) her compliance with the terms and conditions setforth (sic) in [the Deed of Sale by Installment] x x x.
x x x x
In contracts to sell, where ownership is retained by the seller and is not to pass until the full payment, such payment, as we said, is a positive suspensive condition, the failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force x x x.
x x x x
As the contract x x x is clear and unmistakable and the terms employed therein have not been shown to belie or otherwise fail to express the true intention of the parties, and that the deed has not been assailed on the ground of mutual mistake which would require its reformation, [the] same should be given its full force and effect.
EVIDENCE (sic) at hand points of no full payment of the price, hence No. 4 of the stipulation applies[,] which provides:
"That failure (sic) of the Buyer [Tuatis] to pay the remaining balance within the period of three months from the period stipulated above, then the Buyer [Tuatis] shall return the land subject of this Contract to the Seller [Visminda] and the Seller [Visminda] [shall] likewise return all the (sic) amount paid by the Buyer [Tuatis]."
This stipulation is the law between the [Buyer] and [Seller], and should be complied with in good faith x x x.
[Tuatis] constructed the building x x x in bad faith for, (sic) she had knowledge of the fact that the Seller [Visminda] is still the absolute owner of the subject land. There was bad faith also on the part of [Visminda] in accordance with the express provisions of Article 454 [of the New Civil Code][15] since [she] allowed [Tuatis] to construct the building x x x without any opposition on [her] part and so occupy it. The rights of the parties must, therefore, be determined as if they both had acted in bad faith. Their rights in such cases are governed by Article 448 of the New Civil Code of the Philippines.[16]
The RTC decreed the dismissal of Tuatis' Complaint for lack of merit, the return by Tuatis of physical possession of the subject property to Visminda, and the return by Visminda of the P4,000.00 she received from Tuatis.
Tuatis filed an appeal with the Court of Appeals, docketed as CA-G.R. CV No. 65037. In a Resolution[17] dated 29 August 2000, however, the appellate court dismissed the appeal for failure of Tuatis to serve and file her appellant's brief within the second extended period for the same. An Entry of Judgment[18] was made in CA-G.R. CV No. 65037 on 29 September 2000, as a result of which, the appealed RTC Decision dated 29 April 1999 in Civil Case No. S-618 became final and executory.
Visminda filed a Motion for Issuance of a Writ of Execution[19] before the RTC on 14 January 2002. The RTC granted Visminda's Motion in a Resolution dated 21 February 2002, and issued the Writ of Execution[20] on 7 March 2002.
Tuatis thereafter filed before the RTC on 22 April 2002 a Motion to Exercise Right under Article 448 of the Civil Code of the Philippines.[21] Tuatis moved that the RTC issue an order allowing her to buy the subject property from Visminda. While Tuatis indeed had the obligation to pay the price of the subject property, she opined that such should not be imposed if the value of the said property was considerably more than the value of the building constructed thereon by Tuatis. Tuatis alleged that the building she constructed was valued at P502,073.00,[22] but the market value of the entire piece of land measuring 4.0144 hectares, of which the subject property measuring 300 square meters formed a part, was only about P27,000.00.[23] Tuatis maintained that she then had the right to choose between being indemnified for the value of her residential building or buying from Visminda the parcel of land subject of the case. Tuatis stated that she was opting to exercise the second option.
On 20 December 2004, Visminda deposited the amount of P4,000.00 to the office of the Clerk of Court of the RTC, pursuant to the Decision of the trial court dated 29 April 1999.[24]
In the intervening time, the Writ of Execution issued on 7 March 2002 was yet to be served or implemented by the Sheriff. This prompted Visminda to write a letter to the Office of the Court Administrator (OCA) to complain about the said delay. The OCA endorsed the letter to the RTC.
On 26 September 2005, the RTC issued an Order[25] directing the Sheriff to immediately serve or enforce the Writ of Execution previously issued in Civil Case No. S-618, and to make a report and/or return on the action taken thereon within a period of fifteen (15) days from receipt of the order.
On 10 October 2005, Tuatis filed before the RTC a Motion for Reconsideration[26] of the Order dated 26 September 2005, praying that the same be set aside in view of the pendency of her previous Motion to Exercise Right under Article 448 of the Civil Code of the Philippines. However, before the RTC could rule upon Tuatis' Motion for Reconsideration, the Sheriff enforced the Writ of Execution on 27 October 2005 and submitted his Return to the RTC on 2 November 2005, reporting that the subject writ was fully satisfied.
Tuatis immediately filed with the Court of Appeals a Petition for Certiorari, Prohibition and Mandamus with Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction,[27] which was docketed as CA-G.R. No. 00737-MIN. Tuatis sought in said Petition the annulment of the RTC Order dated 26 September 2005, as well as the issuance of an order commanding the RTC and the Sheriff to desist from undertaking any further proceedings in Civil Case No. S-618, and an order directing the RTC to determine the rights of the parties under Article 448 of the Civil Code.
In a Resolution[28] dated 10 February 2006, the Court of Appeals dismissed outright Tuatis' Petition for failure to completely pay the required docket fees, to attach a certified true or authenticated copy of the assailed RTC Order dated 26 September 2005, and to indicate the place of issue of her counsel's IBP and PTR Official Receipts.
Tuatis filed a Motion for Reconsideration[29] of the Resolution dated 10 February 2006, but said Motion was denied by the appellate court in another Resolution dated 25 July 2006 on the ground that Tuatis had not taken any action to rectify the infirmities of her Petition.
Tuatis subsequently filed a Motion for Leave to File a Second Motion for Reconsideration,[30] but it was similarly denied by the Court of Appeals in a Resolution dated 9 October 2006, as Section 2, Rule 52[31] of the Rules of Court proscribes the filing of a second motion for reconsideration.
Hence, Tuatis filed the instant Petition, principally arguing that Article 448 of the Civil Code must be applied to the situation between her and Visminda.
According to Tuatis, grave abuse of discretion, amounting to lack or excess of their jurisdiction, was committed by the RTC in issuing the Order dated 26 September 2005, and by the Sheriff in enforcing the Writ of Execution on 27 October 2005. Tuatis insists that the Motion for Reconsideration of the Order dated 26 September 2005 that she filed on 10 October 2005 legally prevented the execution of the RTC Decision dated 29 April 1999, since the rights of the parties to the case had yet to be determined pursuant to Article 448 of the Civil Code.[32] Tuatis reiterates that the building she constructed is valued at P502,073.00, per assessment of the Municipal Assessor of Sindangan, Zamboanga del Norte; while the entire piece of land, which includes the subject property, has a market value of only about P27,000.00, based on Tax Declaration No. 12464 issued in the year 2000.[33] Such being the case, Tuatis posits that she is entitled to buy the land at a price to be determined by the Court or, alternatively, she is willing to sell her house to Visminda in the amount of P502,073.00.
In addition, Tuatis attributes grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the Court of Appeals for dismissing outright her Petition for Certiorari, Prohibition and Mandamus with Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction, and subsequently denying her Motion for Reconsideration and Motion for Leave to File a Second Motion for Reconsideration.
The Court grants the present Petition but for reasons other than those proffered by Tuatis.
Procedural deficiencies of Tuatis' Petition before the Court of Appeals
It is true that Tuatis committed several procedural faux pas that would have, ordinarily, warranted the dismissal of her Petition in CA-G.R. No. 00737-MIN before the Court of Appeals.
In its Resolution dated 10 February 2006, the Court of Appeals dismissed outright the Petition for Certiorari, Prohibition and Mandamus with Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction filed by Tuatis for failure to comply with the following requirements for such a petition: (a) to completely pay the required docket fees, (b) to attach a certified true or authenticated copy of the assailed RTC Order dated 26 September 2005, and (c) to indicate the place of issue of her counsel's IBP and PTR Official Receipts.
Section 3, Rule 46 of the Rules of Court lays down the requirements for original cases filed before the Court of Appeals and the effect of non-compliance therewith, relevant portions of which are reproduced below:
SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. - x x x.
x x x x
It shall be filed in seven (7) clearly legible copies together with proof of service thereof on the respondent with the original copy intended for the court indicated as such by the petitioner, and shall be accompanied by a clearly legible duplicate original or certified true copy of the judgment, order, resolution, or ruling subject thereof, such material portions of the record as are referred to therein, and other documents relevant or pertinent thereto. The certification shall be accomplished by the proper clerk of court or by his duly authorized representative, or by the proper officer of the court, tribunal, agency or office involved or by his duly authorized representative. The other requisite number of copies of the petition shall be accompanied by clearly legible plain copies of all documents attached to the original.
x x x x
The petitioner shall pay the corresponding docket and other lawful fees to the clerk of court and deposit the amount of P500.00 for costs at the time of the filing of the petition.
The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the dismissal of the petition. (Emphases ours.)
The sound reason behind the policy of the Court in requiring the attachment to the petition for certiorari, prohibition, mandamus, or quo warranto of a clearly legible duplicate original or certified true copy of the assailed judgment or order, is to ensure that the said copy submitted for review is a faithful reproduction of the original, so that the reviewing court would have a definitive basis in its determination of whether the court, body, or tribunal which rendered the assailed judgment or order committed grave abuse of discretion.[34] Also, the Court has consistently held that payment of docket fees within the prescribed period is jurisdictional and is necessary for the perfection of an appeal.[35]
Indeed, the last paragraph of Section 3, Rule 46 states that non-compliance with any of the requirements stated therein shall constitute sufficient ground for the dismissal of the petition. However, the Court, in several cases,[36] also declared that said provision must not be taken to mean that the petition shall be automatically dismissed in every instance of non-compliance. The power conferred upon the Court of Appeals to dismiss an appeal, or even an original action, as in this case, is discretionary and not merely ministerial. With that affirmation comes the caution that such discretion must be a sound one, to be exercised in accordance with the tenets of justice and fair play, having in mind the circumstances obtaining in each case.[37]
It must be borne in mind that the rules of procedure are intended to promote, rather than frustrate, the ends of justice, and while the swift unclogging of court dockets is a laudable objective, it, nevertheless, must not be met at the expense of substantial justice. Technical and procedural rules are intended to help secure, not suppress, the cause of justice; and a deviation from the rigid enforcement of the rules may be allowed to attain that prime objective for, after all, the dispensation of justice is the core reason for the existence of courts.[38]
Hence, technicalities must be avoided. The law abhors technicalities that impede the cause of justice. The court's primary duty is to render or dispense justice. A litigation is not a game of technicalities. Lawsuits, unlike duels, are not to be won by a rapier's thrust. Technicality, when it deserts its proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts. Litigations must be decided on their merits and not on technicality. Every party-litigant must be afforded the amplest opportunity for the proper and just determination of his cause, free from the unacceptable plea of technicalities. Thus, dismissal of appeals purely on technical grounds is frowned upon where the policy of the court is to encourage hearings of appeals on their merits and the rules of procedure ought not to be applied in a very rigid, technical sense; rules of procedure are used only to help secure, not override, substantial justice. It is a far better and more prudent course of action for the court to excuse a technical lapse and afford the parties a review of the case on appeal to attain the ends of justice rather than dispose of the case on technicality and cause a grave injustice to the parties, giving a false impression of speedy disposal of cases while actually resulting in more delay, if not a miscarriage, of justice.[39]
In this case, the Court finds that the Court of Appeals committed grave abuse of discretion in focusing on the procedural deficiencies of Tuatis' Petition and completely turning a blind eye to the merits of the same. The peculiar circumstances of the present case and the interest of substantial justice justify the setting aside, pro hac vice, of the procedural defects of Tuatis' Petition in CA-G.R. No. 00737-MIN.
Perusal of the RTC Decision dated
29 April 1999
The RTC, in the body of its Decision dated 29 April 1999 in Civil Case No. S-618, found that Tuatis breached the conditions stipulated in the Deed of Sale by Installment between her and Visminda; but since both Tuatis and Visminda were guilty of bad faith, "[t]heir rights in such cases are governed by Article 448 of the New Civil Code of the Philippines."[40]
Article 448 of the Civil Code, referred to by the RTC, provides:
ART. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof. (Emphases supplied.)
According to the aforequoted provision, the landowner can choose between appropriating the building by paying the proper indemnity for the same, as provided for in Articles 546[41] and 548[42] of the Civil Code; or obliging the builder to pay the price of the land, unless its value is considerably more than that of the structures, in which case the builder in good faith shall pay reasonable rent.[43]
The Court notes, however, that the RTC, in the dispositive portion of its 29 April 1999 Decision, which exactly reads -
WHEREFORE, premises studiedly considered, judgment is hereby rendered as follows:
(1) DISMISSING the Complaint for lack of merit;
(2) ORDERING [Tuatis] to return the physical possession of the land in question to [Visminda]; and,
(3) ORDERING [Visminda] to return the P4,000.00 she received as evidenced by Exhibit "B" and Exhibit "C" [44] to [Tuatis].[45]
utterly failed to make an adjudication on the rights of Tuatis and Visminda under Article 448 of the Civil Code. It would seem that the decretal part of said RTC judgment was limited to implementing the following paragraph in the Deed of Sale by Installment:
- That failure of the BUYER [Tuatis] to pay the remaining balance within the period of three months from the period stipulated above, then the BUYER [Tuatis] shall return the land subject of this contract to the SELLER [Visminda] and the SELLER [Visminda] [shall] likewise return all the amount paid by the BUYER [Tuatis].[46]
without considering the effects of Article 448 of the Civil Code.
It was this apparent incompleteness of the fallo of the RTC Decision dated 29 April 1999 that resulted in the present controversy, and that this Court is compelled to address for a just and complete settlement of the rights of the parties herein.
Finality of the RTC Decision dated
19 April 1999
The Court has not lost sight of the fact that the RTC Decision dated 29 April 1999 in Civil Case No. S-618 already became final and executory in view of the dismissal by the appellate court of Tuatis' appeal in CA-G.R. CV No. 650307 and the entry of judgment made on 29 September 2000.
Nothing is more settled in law than that when a final judgment is executory, it thereby becomes immutable and unalterable. The judgment may no longer be modified in any respect, even if the modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and regardless of whether the modification is attempted to be made by the court rendering it or by the highest Court of the land. The doctrine is founded on considerations of public policy and sound practice that, at the risk of occasional errors, judgments must become final at some definite point in time. The only recognized exceptions are the corrections of clerical errors or the making of the so-called nunc pro tunc entries, in which case there is no prejudice to any party, and, of course, where the judgment is void.[47]
Equally well-settled is the rule that the operative part in every decision is the dispositive portion or the fallo, and where there is conflict between the fallo and the body of the decision, the fallo controls. This rule rests on the theory that the fallo is the final order, while the opinion in the body is merely a statement, ordering nothing.[48]
Jurisprudence also provides, however, that where there is an ambiguity caused by an omission or a mistake in the dispositive portion of the decision, the Court may clarify such an ambiguity by an amendment even after the judgment has become final. In doing so, the Court may resort to the pleadings filed by the parties and the findings of fact and the conclusions of law expressed in the text or body of the decision.[49] Therefore, even after the RTC Decision dated 29 April 1999 had already become final and executory, this Court cannot be precluded from making the necessary amendment thereof, so that the fallo will conform to the body of the said decision.
If the Court does not act upon the instant Petition, Tuatis loses ownership over the building she constructed, and in which she has been residing, allegedly worth P502,073.00, without any recompense therefor whatsoever; while Visminda, by returning Tuatis' previous payments totaling P4,000.00, not just recovers the subject property, but gains the entire building without paying indemnity for the same. Hence, the decision of the Court to give due course to the Petition at bar, despite the finality of the RTC Decision dated 29 April 1999, should not be viewed as a denigration of the doctrine of immutability of final judgments, but a recognition of the equally sacrosanct doctrine that a person should not be allowed to profit or enrich himself inequitably at another's expense.
Furthermore, the Court emphasizes that it is not even changing or reversing any of the findings of fact and law of the RTC in its Decision dated 29 April 1999. This Court is still bound by said RTC judgment insofar as it found that Tuatis failed to fully pay for the price of the subject property; but since both Tuatis and Visminda were in bad faith, Article 448 of the Civil Code would govern their rights. The Court herein is simply clarifying or completing the obviously deficient decretal portion of the decision, so that said portion could effectively order the implementation of the actual ruling of the RTC, as clearly laid down in the rationale of the same decision.
Applying Article 448 and other
related provisions of the Civil Code
Taking into consideration the provisions of the Deed of Sale by Installment and Article 448 of the Civil Code, Visminda has the following options:
Under the first option, Visminda may appropriate for herself the building on the subject property after indemnifying Tuatis for the necessary[50] and useful expenses[51] the latter incurred for said building, as provided in Article 546 of the Civil Code.
It is worthy to mention that in Pecson v. Court of Appeals,[52] the Court pronounced that the amount to be refunded to the builder under Article 546 of the Civil Code should be the current market value of the improvement, thus:
The objective of Article 546 of the Civil Code is to administer justice between the parties involved. In this regard, this Court had long ago stated in Rivera vs. Roman Catholic Archbishop of Manila [40 Phil. 717 (1920)] that the said provision was formulated in trying to adjust the rights of the owner and possessor in good faith of a piece of land, to administer complete justice to both of them in such a way as neither one nor the other may enrich himself of that which does not belong to him. Guided by this precept, it is therefore the current market value of the improvements which should be made the basis of reimbursement. A contrary ruling would unjustly enrich the private respondents who would otherwise be allowed to acquire a highly valued income-yielding four-unit apartment building for a measly amount. Consequently, the parties should therefore be allowed to adduce evidence on the present market value of the apartment building upon which the trial court should base its finding as to the amount of reimbursement to be paid by the landowner. (Emphasis ours.)
Until Visminda appropriately indemnifies Tuatis for the building constructed by the latter, Tuatis may retain possession of the building and the subject property.
Under the second option, Visminda may choose not to appropriate the building and, instead, oblige Tuatis to pay the present or current fair value of the land.[53] The P10,000.00 price of the subject property, as stated in the Deed of Sale on Installment executed in November 1989, shall no longer apply, since Visminda will be obliging Tuatis to pay for the price of the land in the exercise of Visminda's rights under Article 448 of the Civil Code, and not under the said Deed. Tuatis' obligation will then be statutory, and not contractual, arising only when Visminda has chosen her option under Article 448 of the Civil Code.
Still under the second option, if the present or current value of the land, the subject property herein, turns out to be considerably more than that of the building built thereon, Tuatis cannot be obliged to pay for the subject property, but she must pay Visminda reasonable rent for the same. Visminda and Tuatis must agree on the terms of the lease; otherwise, the court will fix the terms.
Necessarily, the RTC should conduct additional proceedings before ordering the execution of the judgment in Civil Case No. S-618. Initially, the RTC should determine which of the aforementioned options Visminda will choose. Subsequently, the RTC should ascertain: (a) under the first option, the amount of indemnification Visminda must pay Tuatis; or (b) under the second option, the value of the subject property vis-Ã -vis that of the building, and depending thereon, the price of, or the reasonable rent for, the subject property, which Tuatis must pay Visminda.
The Court highlights that the options under Article 448 are available to Visminda, as the owner of the subject property. There is no basis for Tuatis' demand that, since the value of the building she constructed is considerably higher than the subject property, she may choose between buying the subject property from Visminda and selling the building to Visminda for P502,073.00. Again, the choice of options is for Visminda, not Tuatis, to make. And, depending on Visminda's choice, Tuatis' rights as a builder under Article 448 are limited to the following: (a) under the first option, a right to retain the building and subject property until Visminda pays proper indemnity; and (b) under the second option, a right not to be obliged to pay for the price of the subject property, if it is considerably higher than the value of the building, in which case, she can only be obliged to pay reasonable rent for the same.
The rule that the choice under Article 448 of the Civil Code belongs to the owner of the land is in accord with the principle of accession, i.e., that the accessory follows the principal and not the other way around. Even as the option lies with the landowner, the grant to him, nevertheless, is preclusive.[54] The landowner cannot refuse to exercise either option and compel instead the owner of the building to remove it from the land.[55]
The raison d'etre for this provision has been enunciated thus: Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In view of the impracticability of creating a state of forced co-ownership, the law has provided a just solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity, or to oblige the builder or planter to pay for the land and the sower the proper rent. He cannot refuse to exercise either option. It is the owner of the land who is authorized to exercise the option, because his right is older, and because, by the principle of accession, he is entitled to the ownership of the accessory thing.[56]
Visminda's Motion for Issuance of Writ of Execution cannot be deemed as an expression of her choice to recover possession of the subject property under the first option, since the options under Article 448 of the Civil Code and their respective consequences were also not clearly presented to her by the 19 April 1999 Decision of the RTC. She must then be given the opportunity to make a choice between the options available to her after being duly informed herein of her rights and obligations under both.
As a final note, the directives given by the Court to the trial court in Depra v. Dumlao[57] may prove useful as guidelines to the RTC herein in ensuring that the additional proceedings for the final settlement of the rights of the parties under Article 448 of the Civil Code shall be conducted as thoroughly and promptly as possible.
WHEREFORE, premises considered, the Court:
(1) GRANTS the instant Petition;
(2) ANNULS AND SETS ASIDE (a) the Resolution dated 21 February 2002 of the Regional Trial Court of Sindangan, Zamboanga del Norte, Branch 11, ordering the issuance of a writ for the execution of the Decision dated 19 April 1999 of the said trial court in Civil Case No. S-618; (b) the Writ of Execution issued on 7 March 2002; and (c) the actions undertaken by the Sheriff to enforce the said Writ of Execution;
(3) DIRECTS the Regional Trial Court of Sindangan, Zamboanga del Norte, Branch 11, to conduct further proceedings to determine with deliberate dispatch: (a) the facts essential to the proper application of Article 448 of the Civil Code, and (b) respondent Visminda Escol's choice of option under the same provision; and
(4) Further DIRECTS the Regional Trial Court of Sindangan, Zamboanga del Norte, Branch 11, to undertake the implementation of respondent Visminda Escol's choice of option under Article 448 of the Civil Code, as soon as possible.
No costs.
SO ORDERED.
Quisumbing,* Carpio, (Chairperson), Peralta, and Abad,** JJ., concur.
* Per Special Order No. 755, dated 12 October 2009, signed by Chief Justice Reynato S. Puno designating Associate Justice Leonardo A. Quisumbing to replace Associate Justice Antonio Eduardo B. Nachura, who is on official leave.
** Per Special Order No. 753, dated 12 October 2009, signed by Chief Justice Reynato S. Puno designating Associate Justice Roberto A. Abad to replace Associate Justice Presbitero J. Velasco, Jr., who is on official leave.
[1] Rollo, pp. 4-22.
[2] Penned by Associate Justice Ricardo R. Rosario with Associate Justices Romulo V. Borja and Myrna Dimaranan-Vidal, concurring; rollo, pp. 38-39.
[3] Rollo, pp. 45-46.
[4] Id. at 58.
[5] Id. at 55.
[6] CA rollo, pp. 17-20.
[7] Id. at 21.
[8] In the Deed of Sale of a Part of a Registered Land by Installment, Visminda was referred to as "Visminda Crampatanta, x x x married to Eliseo Escol x x x."
[9] CA rollo, p. 21.
[10] Id. at 22A-23.
[11] Id. at 24.
[12] Id. at 25-29.
[13] The payments were each evidenced by a certification signed by Visminda that she received the aforesaid amounts from Tuatis, which were marked as Exhibits B and C, respectively, in the proceedings before the RTC; CA rollo, p. 22.
[14] Penned by Judge Wilfredo G. Ochotorena; CA rollo, pp. 30-54.
[15] Although the Decision mentioned Article 454 of the New Civil Code, the same was apparently erroneous since the applicable provision was Article 453 of the said code, which provides:
ART. 453. If there was bad faith, not only on the part of the person who built, planted or sowed on the land of another, but also on the part of the owner of such land, the rights of one and the other shall be the same as though both had acted in good faith.
It is understood that there is bad faith on the part of the landowner whenever the act was done with his knowledge and without opposition on his part.
[16] CA rollo, pp. 49-54.
[17] Penned by Associate Justice B.A. Adefuin-De la Cruz with Associate Justices Cancio C. Garcia and Renato C. Dacudao, concurring. Records, p. 123.
[18] Records, p. 124.
[19] Id. at 125-126.
[20] CA rollo, pp. 76-77.
[21] Id. at 55-59.
[22] Id. at 60-61.
[23] This amount was derived from Tax Declaration No. 12464, covering the subject property. (CA rollo, p. 62.)
[24] Records, p. 176.
[25] CA rollo, p. 66.
[26] Id. at 67-75.
[27] Impleaded therein were the spouses Eliseo and Visminda Escol, the RTC of Sindangan, Zamboanga del Norte, Branch 11 and the Sheriff of the said trial court. (CA rollo, pp. 1-16.)
[28] CA rollo, pp. 81-82.
[29] Id. at 85-89.
[30] Id. at 94-106.
[31] Section 2, Rule 52 of the Rules of Court provides:
SEC. 2. Second motion for reconsideration. - No second motion for reconsideration of a judgment or final resolution by the same party shall be entertained.
[32] ART. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof.
[33] CA rollo, p. 62.
[34] Durban Apartments Corporation v. Catacutan, G.R. No. 167136, 14 December 2005, 477 SCRA 801, 808; Quintano v. National Labor Relations Commission, G.R. No. 144517, 13 December 2004, 446 SCRA 193, 202-203.
[35] Carlos v. Court of Appeals, G.R. No. 134473, 30 March 2006, 485 SCRA 578, 583.
[36] In Garcia v. Philippine Airlines, Inc. (G.R. No. 160798, 8 June 2005, 459 SCRA 768, 780), the Court held that "if, upon its initial review of the petition, the Court of Appeals is of the view that additional pleadings, documents or order should have been submitted and appended to the petition, it has the following options: (a) dismiss the petition under the last paragraph of [Section 3,] Rule 46 of the Rules of Court; (b) order the petitioner to submit the required additional pleadings, documents, or order within a specific period of time; or (c) order the petitioner to file an amended petition appending thereto the required pleadings, documents or order within a fixed period." (See also Lao v. Court of Appeals [382 Phil. 583, 604 (2000)]; Paras v. Judge Baldado [406 Phil. 589, 596 (2001)]; Hilario v. People [G.R. No. 161070,14 April 2008, 551 SCRA 191, 201].)
Similarly, in La Salette College v. Pilotin (463 Phil. 785, 794 [2003]), the Court recognized that, notwithstanding the mandatory nature of the requirement of payment of appellate docket fees, its strict application is qualified by the following: first, failure to pay those fees within the reglementary period allows only discretionary, not automatic, dismissal; second, such power should be used by the court in conjunction with its exercise of sound discretion in accordance with the tenets of justice and fair play, as well as with a great deal of circumspection in consideration of all attendant circumstances. (See also Public Estates Authority v. Yujuico [404 Phil. 91, 101 (2001); Jose v. Court of Appeals [447 Phil. 159, 165 (2003); Villamor v. Court of Appeals [478 Phil. 728, 735-736 (2004), citing Buenaflor v. Court of Appeals [400 Phil. 395, 401-402 (2000)].)
[37] Philippine Merchant Marine School, Inc. v. Court of Appeals, 432 Phil. 733, 741-742 (2002).
[38] General Milling Corporation v. National Labor Relations Commission, 442 Phil. 425, 428 (2002).
[39] Aguam v. Court of Appeals, 388 Phil. 587, 595 (2000).
[40] In accordance with Article 453 of the Civil Code which provides:
ART. 453. If there was bad faith, not only on the part of the person who built, planted or sowed on the land of another, but also on the part of the owner of such land, the rights of one and the other shall be the same as though both had acted in good faith.
It is understood that there is bad faith on the part of the landowner whenever the act was done with his knowledge and without opposition on his part. (Emphasis ours.)
[41] ART. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof.
[42] ART. 548. Expenses for pure luxury or mere pleasure shall not be refunded to the possessor in good faith; but he may remove the ornaments with which he has embellished the principal thing if it suffers no injury thereby, and if his successor in the possession does not prefer to refund the amount expended.
[43] Macasaet v. Macasaet, 482 Phil. 853, 874 (2004).
[44] Exhibits B and C are the certifications signed by Visminda, stating that she indeed received the amounts of P3,000.00 and P1,000.00 from Tuatis on 19 December 1989 and 17 February 1990, respectively.
[45] CA rollo, p. 54.
[46] Id. at 21.
[47] Mayon Estate Corporation v. Altura, G.R. No. 134462, 18 October 2004, 440 SCRA 377, 386.
[48] Mendoza, Jr. v. San Miguel Foods, Inc., G.R. No. 158684, May 16, 2005, 458 SCRA 664, 676-677, cited in Florentino v. Rivera, G.R. No. 167968, 23 January 2006, 479 SCRA 522, 528-529.
[49] Partosa-Jo v. Court of Appeals, G.R. No. 82606, 18 December 1992, 216 SCRA 692, 697.
[50] Necessary expenses have been variously described by the Spanish commentators as those made for the preservation of the thing (4 Manresa's Comentarios al Codigo Civil, p. 258); as those without which the thing would deteriorate or be lost (Scaevola's Comentarios al Codigo Civil, p. 408); as those that augment the income of the things upon which they are expanded (4 Manresa's Comentarios al Codigo Civil, p. 261; 8 Scaevola's Comentarios al Codigo Civil, p. 416). Among the necessary expenditures are those incurred for cultivation, production, upkeep, etc. (4 Manresa's Comentarios al Codigo Civil, p. 257). (Mendoza v. De Guzman, 52 Phil. 164, 171 [1928].)
[51] Useful expenses are incurred to give greater utility or productivity to the thing. (Tolentino, Civil Code, Vol. II (1992 ed.), p. 294.
[52] 314 Phil. 313, 324-325 (1995).
[53] See Depra v. Dumlao, G.R. No. L-57348, 16 May 1985, 136 SCRA 475.
[54] Philippine National Bank v. De Jesus, 458 Phil. 454, 459 (2003).
[55] Technogas Philippines Manufacturing Corporation v. Court of Appeals, 335 Phil. 471, 482 (1997).
[56] Depra v. Dumlao, supra note 53 at 483.
[57] The fallo in Depra v. Dumlao (ibid.) reads:
WHEREFORE, the judgment of the trial Court is hereby set aside, and this case is hereby ordered remanded to the Regional Trial Court of Iloilo for further proceedings consistent with Articles 448 and 546 of the Civil Code, as follows:
- The trial Court shall determine
| a) | the present fair price of DEPRA's 34 square-meter area of land; |
| b) | the amount of the expenses spent by DUMLAO for the building of the kitchen; |
| c) | the increase in value ("plus value") which the said area of 34 square meters may have acquired by reason thereof, and |
| d) | whether the value of said area of land is considerably more than that of the kitchen built thereon. |
- After said amounts shall have been determined by competent evidence, the Regional Trial Court shall render judgment, as follows:
| a) | The trial Court shall grant DEPRA a period of fifteen (15) days within which to exercise his option under the law (Article 448, Civil Code), whether to appropriate the kitchen as his own by paying to DUMLAO either the amount of the expenses spent by DUMLAO for the building of the kitchen, or the increase in value ("plus value") which the said area of 34 square meters may have acquired by reason thereof, or to oblige DUMLAO to pay the price of said area. The amounts to be respectively paid by DUMLAO and DEPRA, in accordance with the option thus exercised by written notice of the other party and to the Court, shall be paid by the obligor within fifteen (15) days from such notice of the option by tendering the amount to the Court in favor of the party entitled to receive it; |
| b) | The trial Court shall further order that if DEPRA exercises the option to oblige DUMLAO to pay the price of the land but the latter rejects such purchase because, as found by the trial Court, the value of the land is considerably more than that of the kitchen, DUMLAO shall give written notice of such rejection to DEPRA and to the Court within fifteen (15) days from notice of DEPRA's option to sell the land. In that event, the parties shall be given a period of fifteen (15) days from such notice of rejection within which to agree upon the terms of the lease, and give the Court formal written notice of such agreement and its provisos. If no agreement is reached by the parties, the trial Court, within fifteen (15) days from and after the termination of the said period fixed for negotiation, shall then fix the terms of the lease, provided that the monthly rental to be fixed by the Court shall not be less than Ten Pesos (P10.00) per month, payable within the first five (5) days of each calendar month. The period for the forced lease shall not be more than two (2) years, counted from the finality of the judgment, considering the long period of time since 1952 that DUMLAO has occupied the subject area. The rental thus fixed shall be increased by ten percent (10%) for the second year of the forced lease. DUMLAO shall not make any further constructions or improvements on the kitchen. Upon expiration of the two-year period, or upon default by DUMLAO in the payment of rentals for two (2) consecutive months, DEPRA shall be entitled to terminate the forced lease, to recover his land, and to have the kitchen removed by DUMLAO or at the latter's expense. The rentals herein provided shall be tendered by DUMLAO to the Court for payment to DEPRA, and such tender shall constitute evidence of whether or not compliance was made within the period fixed by the Court. |
| c) | In any event, DUMLAO shall pay DEPRA an amount computed at Ten Pesos (P10.00) per month as reasonable compensation for the occupancy of DEPRA's land for the period counted from 1952, the year DUMLAO occupied the subject area, up to the commencement date of the forced lease referred to in the preceding paragraph; |
| d) | The periods to be fixed by the trial Court in its Decision shall be inextendible, and upon failure of the party obliged to tender to the trial Court the amount due to the obligee, the party entitled to such payment shall be entitled to an order of execution for the enforcement of payment of the amount due and for compliance with such other acts as may be required by the prestation due the obligee. |
No costs.
Source: Supreme Court E-Library | Date created: 2009-11-11 10:13:26
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FIRST DIVISION
[ G.R. No. 141205, May 09, 2002 ]
ACTIVE REALTY & DEVELOPMENT CORPORATION, PETITIONER, VS. NECITA G. DAROYA, REPRESENTED BY ATTORNEY-IN-FACT SHIRLEY DAROYA-QUINONES, RESPONDENTS.
DECISION
PUNO, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court which seeks to reverse and set aside the Resolution of the Court of Appeals, dated August 3, 1999, denying due course to petitioner’s appeal for insufficiency of form and substance.
Petitioner ACTIVE REALTY & DEVELOPMENT CORPORATION is the owner and developer of Town & Country Hills Executive Village in Antipolo, Rizal. On January 2, 1985, it entered into a Contract to Sell[1] with respondent NECITA DAROYA, a contract worker in the Middle East, whereby the latter agreed to buy a 515 sq. m. lot for P224,025.00 in petitioner’s subdivision.
The contract to sell stipulated that the respondent shall pay the initial amount of P53,766.00 upon execution of the contract and the balance of P170,259.00 in sixty (60) monthly installments of P4,893.35. Adding the down payment and installment payments, it would appear that the total amount is P346,367.00, a figure higher than that stated as the contract price.
On May 5, 1989, petitioner accepted respondent’s amortization in the amount of P40,000.00. By August 8, 1989, respondent was in default of P15,282.85 representing three (3) monthly amortizations. Petitioner sent respondent a notice of cancellation[2] of their contract to sell, to take effect thirty (30) days from receipt of the letter. It does not appear from the records, however, when respondent received the letter. Nonetheless, when respondent offered to pay for the balance of the contract price, petitioner refused as it has allegedly sold the lot to another buyer.
On August 26, 1991, respondent filed a complaint for specific performance and damages[3] against petitioner before the Arbitration Branch of the Housing and Land Use Regulatory Board (HLURB). It sought to compel the petitioner to execute a final Deed of Absolute Sale in respondent’s favor after she pays any balance that may still be due from her. Respondent claimed that she is entitled to the final deed of sale after she offered to pay the balance of P24,048.47, considering that she has already paid the total sum of P314,816.76, which amount is P90,835.76 more than the total contract price of P224,025.00.
On June 14, 1993, HLURB Arbiter Alfredo M. Tan II found for the respondent. He ruled that the cancellation of the contract to sell was void as petitioner failed to pay the cash surrender value to respondent as mandated by law. However, as the subject lot was already sold to a third party and the respondent had agreed to a full refund of her installment payments, petitioner was ordered to refund to respondent all her payments in the amount of P314,816.70, with 12% interest per annum from August 26, 1991 (the date of the filing of the complaint) until fully paid and to pay P10,000.00 as attorney’s fees.[4]
On appeal, the HLURB Board of Commissioners set aside the Arbiter’s Decision. The Board refused to apply the remedies provided under the Maceda Law and instead deemed it fit to formulate an “equitable” solution to the case. It ruled that, as both parties were at fault, i.e., respondent incurred in delay in her installment payments and respondent failed to send a notarized notice of cancellation, petitioner was ordered to refund to the respondent one half of the total amount she has paid or P157,408.35, which was allegedly akin to the remedy provided under the Maceda Law.[5]
Respondent appealed to the Office of the President. On June 2, 1998, then Chief Presidential Counsel Renato C. Corona, acting by authority of the President, modified the Decision of the HLURB as he found that it was not in accord with the provisions of the Maceda Law. He held that as petitioner did not comply with the legal requisites for a valid cancellation of the contract, the contract to sell between the parties subsisted and concluded that respondent was entitled to the lot after payment of her outstanding balance. However, as the petitioner disclosed that the lot was already sold to another person and that the actual value of the lot as of the date of the contract was P1,700.00 per square meter, petitioner was ordered to refund to the respondent the amount of P875,000.00, the true and actual value of the lot as of the date of the contract, with interest at 12% per annum computed from August 26, 1991 until fully paid, or to deliver a substitute lot at the choice of respondent.[6]
Upon denial of its motion for reconsideration, petitioner assailed the Decision in the Court of Appeals. However, its petition for review[7] was denied due course for insufficiency in form and substance,[8] because: 1) no affidavit of service was attached to the petition; 2) except for certified true copies of the decision and resolution of the Office of the President, no other material portions of the record, as would support the allegations in the petition, were attached; and, 3) the certification of forum-shopping was signed by the head counsel and vice-president of the petitioner corporation who was not authorized by a Board Resolution to represent petitioner.
Petitioner moved for reconsideration. The Court of Appeals denied it on an entirely new ground, i.e., for untimely filing of the petition for review.[9]
Petitioner now impugns the decision of the Court of Appeals and raises the following procedural issues:
I
THE HONORABLE COURT OF APPEALS GROSSLY ERRED IN RELYING TOO MUCH ON FORM RATHER THAN ON THE MERITS OF THE PETITION THEREBY DENYING PETITIONER OF ITS RIGHT TO DUE PROCESS.
II
THE HONORABLE COURT OF APPEALS ANCHORED THE DENIAL OF PETITIONER’S MOTION FOR RECONSIDERATION ON INCONSISTENT AND CONFLICTING RULINGS NOT BORNE BY THE FACTS AND THE RECORDS OF THE CASE.
On the procedural points raised, we find for the petitioner.
Our perusal of the record reveals that petitioner substantially complied with the formal requirements of Rule 43 of the Rules of Court.[10] First, as to the non-attachment of the affidavit of service, the records bear that the petition was accompanied by the original registry receipts issued by the post office, showing that the petition and its annexes were served upon the parties. Moreover, respondent’s counsel of record, Atty. Sergio Guadiz, actually received a copy of the petition.[11] Second, petitioner likewise complied with Section 6 (c) of Rule 43 requiring the submission of copies of the award, judgment, final order and resolution appealed from. Its petition was accompanied by the duplicate original of the appealed Decision of the Chief Presidential Legal Counsel and his Resolution denying petitioner’s motion for reconsideration, the Decision of the HLURB Board of Commissioners and that of the HLURB arbiter. A perusal of these documents will reveal that they contained all the relevant facts of the case from which the appellate body can form its own decision. Its failure to submit the other documents, like the Complaint, Answer, Position Papers and Appeal Memoranda of the parties before the HLURB, was due to the refusal of the Office of the President to give them a certified true copy of these documents which were submitted with said Office. Third, as to the lack of Board Resolution by petitioner corporation authorizing Atty. Rene Katigbak, its Chief Legal Counsel and Vice-President for Legal Affairs, to represent it in the filing of the appeal, petitioner admits that this was due to its honest belief that such authority is not required as it was not mentioned in Section 6(c) of Rule 43.[12] To make up for such omission, petitioner submitted a Secretary’s Certificate[13] confirming and ratifying the authority of Atty. Katigbak to represent petitioner. Finally, we find that the Court of Appeals erred in denying petitioner’s motion for reconsideration due to untimely filing as the records clearly show that it was filed on June 25, 1999, a day before the expiration of the period to appeal granted by the Court of Appeals.[14]
In denying due course to the petition, the appellate court gave premium to form and failed to consider the important rights of the parties in the case at bar.[15] At the very least, petitioner substantially complied with the procedural requirements for appeal, hence, it is best to give due course to the petition at bar to clarify the rights and duties of a buyer in contracts to sell real estate on installment basis.
The issue to be resolved is whether or not the petitioner can be compelled to refund to the respondent the value of the lot or to deliver a substitute lot at respondent’s option.
We find for the respondent and rule in the affirmative.
The contract to sell in the case at bar is governed by Republic Act No. 6552 -- “The Realty Installment Buyer Protection Act,” or more popularly known as the Maceda Law -- which came into effect in September 1972. Its declared public policy is to protect buyers of real estate on installment basis against onerous and oppressive conditions.[16] The law seeks to address the acute housing shortage problem in our country that has prompted thousands of middle and lower class buyers of houses, lots and condominium units to enter into all sorts of contracts with private housing developers involving installment schemes. Lot buyers, mostly low income earners eager to acquire a lot upon which to build their homes, readily affix their signatures on these contracts, without an opportunity to question the onerous provisions therein as the contract is offered to them on a “take it or leave it” basis.[17] Most of these contracts of adhesion, drawn exclusively by the developers, entrap innocent buyers by requiring cash deposits for reservation agreements which oftentimes include, in fine print, onerous default clauses where all the installment payments made will be forfeited upon failure to pay any installment due even if the buyers had made payments for several years.[18] Real estate developers thus enjoy an unnecessary advantage over lot buyers who they often exploit with iniquitous results. They get to forfeit all the installment payments of defaulting buyers and resell the same lot to another buyer with the same exigent conditions. To help especially the low income lot buyers, the legislature enacted R.A. No. 6552 delineating the rights and remedies of lot buyers and protect them from one-sided and pernicious contract stipulations.
More specifically, Section 3 of R.A. No. 6552 provided for the rights of the buyer in case of default in the payment of succeeding installments, where he has already paid at least two (2) years of installments, thus:
“(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him, which is hereby fixed at the rate of one month grace period for every one year of installment payments made; x x x
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made; provided, that the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.”
In this case, respondent has already paid in four (4) years a total of P314,860.76 or P90,835.76 more than the contract price of P224,035.00. In April 1989, petitioner decided to cancel the contract when the respondent incurred in delay in the payment of P15,282.85, representing three (3) monthly amortizations. Petitioner refused to accept respondent’s subsequent tender of payment of the outstanding balance alleging that it has already cancelled the contract and sold the subject lot to another buyer. However, the records clearly show that the petitioner failed to comply with the mandatory twin requirements for a valid and effective cancellation under the law,[19] i.e., he failed to send a notarized notice of cancellation and refund the cash surrender value. At no time, from the date it gave a notice of cancellation up to the time immediately before the respondent filed the case against petitioner, did the latter exert effort to pay the cash surrender value. In fact, the records disclose that it was only during the preliminary hearing of the case before the HLURB arbiter when petitioner offered to pay the cash surrender value. Petitioner justifies its inaction on the ground that the respondent was always out of the country. Even then, the records are bereft of evidence to show that petitioner attempted to pay the cash surrender value to respondent through her last known address. The omission is surprising considering that even during the times respondent was out of the country, petitioner has been sending her written notices to remind her to pay her installment arrears through her last known address. Clearly, had respondent not filed a case demanding a final deed of sale in her favor, petitioner would not have lifted a finger to give respondent what was due her – actual payment of the cash surrender value, among others. In disregard of basic equitable principles, petitioner’s stance would enable it to resell the property, keep respondent’s installment payments, not to mention the cash surrender value which it was obligated to return. The Layug[20] case cited by petitioner is inapropos. In Layug, the lot buyer did not pay for the outstanding balance of his account and the Court found that notarial rescission or cancellation was no longer necessary as the seller has already filed in court a case for rescission of the contract to sell. In the case at bar, respondent offered to pay for her outstanding balance of the contract price but respondent refused to accept it. Neither did petitioner adduce proof that the respondent’s offer to pay was made after the effectivity date stated in its notice of cancellation. Moreover, there was no formal notice of cancellation or court action to rescind the contract. Given the circumstances, we find it illegal and iniquitous that petitioner, without complying with the mandatory legal requirements for canceling the contract, forfeited both respondent’s land and hard-earned money after she has paid for, not just the contract price, but more than the consideration stated in the contract to sell.
Thus, for failure to cancel the contract in accordance with the procedure provided by law, we hold that the contract to sell between the parties remains valid and subsisting. Following Section 3(a) of R.A. No. 6552, respondent has the right to offer to pay for the balance of the purchase price, without interest, which she did in this case. Ordinarily, petitioner would have had no other recourse but to accept payment. However, respondent can no longer exercise this right as the subject lot was already sold by the petitioner to another buyer which lot, as admitted by the petitioner, was valued at P1,700.00 per square meter. As respondent lost her chance to pay for the balance of the P875,000.00 lot, it is only just and equitable that the petitioner be ordered to refund to respondent the actual value of the lot resold, i.e., P875,000.00, with 12% interest per annum computed from August 26, 1991 until fully paid or to deliver a substitute lot at the option of the respondent.
On a final note, it would not be amiss to stress that the HLURB Board Decision ordering petitioner to refund to respondent one half of her total payments is not an equitable solution as it punished the respondent for her delinquent payments but totally disregarded petitioner’s failure to comply with the mandatory requisites for a valid cancellation of the contract to sell. The Board failed to consider that the Maceda law was enacted to remedy the plight of low and middle-income lot buyers, save them from the exacting default clauses in real estate sales and assure them of a home they can call their own. Neither would the Decision of the HLURB Arbiter ordering a full refund of the installment payments of respondent in the amount of P314,816.70 be justified as, under the law, respondent is entitled to the lot she purchased after payment of her outstanding balance which she was ready and willing to do. Thus, to penalize the petitioner for failing in its obligation to deliver the subject lot and to give the respondent what is rightly hers, the petitioner was correctly ordered to refund to the respondent the actual value of the land (P875,000.00) she lost to another buyer, plus interest at the rate of 12% per annum from August 26, 1991 until fully paid or to deliver a substitute lot at the choice of the respondent.
IN VIEW WHEREOF, the Decision of then Chief Presidential Legal Assistant Renato Corona, Office of the President, dated June 2, 1998, is AFFIRMED in toto. Costs against petitioner.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan, Ynares-Santiago, and Austria-Martinez, JJ., concur.
[1] Rollo, pp. 28-31.
[2] Ibid., p. 32.
[3] Ibid., pp. 33-38.
[4] See Decision, Rollo, pp. 39-42.
[5] Decision, dated August 10, 1994, penned by Commissioner and Chief Executive Officer Ernesto C. Mendiola and concurred in by DPWH Asst. Secretary Jose L. Altea and Commissioner Luis T. Tungpalan; Rollo, pp. 44-48.
[6] Decision, dated June 2, 1998; Rollo, pp. 49–56.
[7] Rollo, pp. 62-73.
[8] Resolution, dated August 3, 1999; Rollo, 59-60.
[9] Rollo, p. 61.
[10] Appeals from quasi-judicial agencies to the Court of Appeals.
[11] Certification of Postmaster Cipriano Pagaduan; Rollo, p. 76.
[12] “SEC. 6. Contents of the petition. – The petition for review shall (a) state the full names of the parties to the case, without impleading the court or agencies either as petitioners or respondents; (b) contain a concise statement of the facts and issues involved and the grounds relied upon for the review; (c) be accompanied by a clearly legible duplicate original or a certified true copy of the award, judgment, final order or resolution appealed from, together with certified true copies of such material portions of the record referred to therein and other supporting papers; and (d) contain a sworn certification against forum shopping as provided in the last paragraph of section 2, Rule 42. The petition shall state the specific material dates showing that it was filed within the period fixed herein.”
[13] Rollo, p. 78.
[14] See Annex “N”, Resolution of the Court of Appeals extending the time to file its petition for review; Rollo, pp. 79-80.
[15] Yao vs. Court of Appeals, 344 SCRA 202 (2000).
[16] Section 3, R.A. 6552.
[17] Angeles vs. Calsanz, 135 SCRA 323 (1985).
[18] Realty Exchange Venture Corporation vs. Sendino, 233 SCRA 665, 668 (1994).
[19] Section 3 (b), R.A. 6552; Siska Development Corporation vs. Office of the President of the Philippines, 231 SCRA 674 (1994); Jison vs. Court of Appeals, 164 SCRA 339, 345 (1988).
[20] 167 SCRA 227 (1988).
Source: Supreme Court E-Library | Date created: 2009-12-23 09:54:59
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EN BANC
[ G.R. No. 50444, August 31, 1987 ]
ANTIPOLO REALTY CORPORATION, PETITIONER, VS. THE NATIONAL HOUSING AUTHORITY, HON. G.V. TOBIAS, IN HIS CAPACITY AS GENERAL MANAGER OF THE NATIONAL HOUSING AUTHORITY, THE HON. JACOBO C. CLAVE, IN HIS CAPACITY AS PRESIDENTIAL EXECUTIVE ASSISTANT AND VIRGILIO A. YUSON, RESPONDENTS.
D E C I S I O N
FELICIANO, J.:
By virtue of a Contract to Sell dated 18 August 1970. Jose Hernando acquired prospective and beneficial ownership over Lot No. 15, Block IV of the Ponderosa Heights Subdivision in Antipolo, Rizal, from the petitioner Antipolo Realty Corporation.
On 28 August 1974, Mr. Hernando transferred his rights over Lot No. 15 to private respondent Virgilio Yuson. The transfer was embodied in a Deed of Assignment and Substitution of Obligor (Delegacion), executed with the consent of Antipolo Realty, in which Mr. Yuson assumed the performance of the vendee's obligations under the original contract, including payment of his predecessor's installments in arrears. However, for failure of Antipolo Realty to develop the subdivision project in accordance with its undertaking under Clause 17 of the Contract to Sell, Mr. Yuson paid only the arrearages pertaining to the period up to, and including, the month of August 1972 and stopped all monthly installment payments falling due thereafter. Clause 17 reads:
"Clause 17. -- SUBDIVISION BEAUTIFICATION. To insure the beauty of the subdivision in line with the modern trend of urban development, the SELLER hereby obligates itself to provide the subdivision with:
a) Concrete curbs and gutters
b) Underground drainage system
c) Asphalt paved roads
d) Independent water system
e) Electrical installation with concrete posts
f) Landscaping and concrete sidewalks
g) Developed park or amphitheatre
h) 24-hour security guard service
These improvements shall be complete within a period of two (2) years from date of this contract. Failure by the SELLER shall permit the BUYER to suspend his monthly installments without any penalties or interest charges until such time that such improvements shall have been completed."[1]
On 14 October 1976, the president of Antipolo Realty sent a notice to private respondent Yuson advising that the required improvements in the subdivision had already been completed, and requesting resumption of payment of the monthly installments on Lot No. 15. For his part, Mr. Yuson replied that he would conform with the request as soon as he was able to verify the truth of the representation in the notice.
In a second letter dated 27 November 1976, Antipolo Realty reiterated its request that Mr. Yuson resume payment of his monthly installments, citing the decision rendered by the National Housing Authority (NHA) on 25 October 1976 in Case No. 252 (entitled "Jose B. Viado Jr., complainant vs. Conrado S. Reyes, respondent") declaring Antipolo Realty to have "substantially complied with its commitment to the lot buyers pursuant to the Contract to Sell, executed by and between the lot buyers and the respondent". In addition, a formal demand was made for full and immediate payment of the amount of P16,994.73, representing installments which, Antipolo Realty alleged, had accrued during the period while the improvements were being completed -- i.e., between September 1972 and October 1976.
Mr. Yuson refused to pay the September 1972 - October 1976 monthly installments but agreed to pay the post October 1976 installments. Antipolo Realty responded by rescinding the Contract to Sell, and claiming the forfeiture of all installment payments previously made by Mr. Yuson.
Aggrieved by the rescission of the Contract to Sell, Mr. Yuson brought his dispute with Antipolo Realty before public respondent NHA through a letter-complaint dated 10 May 1977 which complaint was docketed in NHA as Case No. 2123.
Antipolo Realty filed a Motion to Dismiss which was heard on 2 September 1977. Antipolo Realty, without presenting any evidence, moved for the consolidation of Case No. 2123 with several other cases filed against it by other subdivision lot buyers, then pending before the NHA. In an Order issued on 7 February 1978, the NHA denied the motion to dismiss and scheduled Case No. 2123 for hearing.
After hearing, the NHA rendered a decision on 9 March 1978 ordering the reinstatement of the Contract to Sell under the following conditions:
"1) Antipolo Realty Corporation shall sent [sic] to Virgilio Yuzon a statement of account for the monthly amortizations from November 1976 to the present;
2) No penalty interest shall be charged for the period from November 1976 to the date of the statement of account; and
3) Virgilio Yuzon shall be given sixty (60) days to pay the arrears shown in the statement of account."[2]
Antipolo Realty filed a Motion for Reconsideration asserting: (a) that it had been denied due process of law since it had not been served with notice of the scheduled hearing; and (b) that the jurisdiction to hear and decide Mr. Yuson's complaint was lodged in the regular courts, not in the NHA, since that complaint involved the interpretation and application of the Contract to Sell.
The motion for reconsideration was denied on 28 June 1978 by respondent NHA General Manager G.V. Tobias, who sustained the jurisdiction of the NHA to hear and decide the Yuson complaint. He also found that Antipolo Realty had in fact been served with notice of the date of the hearing, but that its counsel had failed to attend the hearing.[3] The case was submitted for decision, and eventually decided, solely on the evidence presented by the complainant.
On 2 October 1978, Antipolo Realty came to this Court with a Petition for Certiorari and Prohibition with Writ of Preliminary Injunction, which was docketed as G.R. No. L-49051. Once more, the jurisdiction of the NHA was assailed. Petitioner further asserted that, under Clause 7 of the Contract to Sell, it could validly terminate its agreement with Mr. Yuson and, as a consequence thereof, retain all the prior installment payments made by the latter[4].
This Court denied certiorari in a minute resolution issued on 11 December 1978, "without prejudice to petitioner's pursuing the administrative remedy."[5] A motion for reconsideration was denied on 29 January 1979.
Thereafter, petitioner interposed an appeal from the NHA decision with the Office of the President which, on 9 March 1979, dismissed the same through public respondent Presidential Executive Assistant Jacobo C. Clave.[6]
In the present petition, Antipolo Realty again asserts that, in hearing the complaint of private respondent Yuson and in ordering the reinstatement of the Contract to Sell between the parties, the NHA had not only acted on a matter beyond its competence, but had also, in effect, assumed the performance of judicial or quasi-judicial functions which the NHA was not authorized to perform.
We find the petitioner's arguments lacking in merit.
It is by now commonplace learning that many administrative agencies exercise and perform adjudicatory powers and functions, though to a limited extent only. Limited delegation of judicial or quasi-judicial authority to administrative agencies (e.g., the Securities and Exchange Commission and the National Labor Relations Commission) is well recognized in our jurisdiction,[7] basically because the need for special competence and experience has been recognized as essential in the resolution of questions of complex or specialized character and because of a companion recognition that the dockets of our regular courts have remained crowded and clogged. In Spouses Jose Abejo and Aurora Abejo, et al., vs. Hon. Rafael dela Cruz, etc., et. al.,[8] the Court, through Mr. Chief Justice Teehankee, said:
"In the fifties, the Court taking cognizance of the move to vest jurisdiction in administrative commissions and boards the power to resolve specialized disputes in the field of labor (as in corporations, public transportation and public utilities) ruled that Congress in requiring the Industrial Court's intervention in the resolution of labor-management controversies likely to cause strikes or lockouts meant such jurisdiction to be exclusive, although it did not so expressly state in the law. The Court held that under the 'sense-making and expeditious doctrine of primary jurisdiction ... the courts cannot or will not determine a controversy involving a question which is within the jurisdiction of an administrative tribunal, where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience, and services of the administrative tribunal to determine technical and intricate matters of fact, and a uniformity of ruling is essential to comply with the purposes of the regulatory statute administered' (Pambujan Sur United Mine Workers v. Samar Mining Co., Inc., 94 Phil. 932, 941 [1954)].
In this era of clogged court dockets, the need for specialized administrative boards or commissions with the special knowledge, experience and capability to hear and determine promptly disputes on technical matters or essentially factual matters, subject to judicial review in case of grave abuse of discretion, has become well high indispensable. Thus, in 1984, the Court noted that 'between the power lodged in an administrative body and a court, the unmistakeable trend has been to refer it to the former. "Increasingly, this Court has been committed to the view that unless the law speaks clearly and unequivocably, the choice should fall on [an administrative agency]"' (NFL v. Eisma, 127 SCRA 419, 428, citing precedents). The Court in the earlier case of Ebon vs De Guzman (113 SCRA 52, 56 [1982]), noted that the lawmaking authority, in restoring to the labor arbiters and the NLRC their jurisdiction to award all kinds of damages in labor cases, as against the previous P.D. amendment splitting their jurisdiction with the regular courts, 'evidently, . . . had second thoughts about depriving the Labor Arbiters and the NLRC of the jurisdiction to award damages in labor cases because that setup would mean duplicity of suits, splitting the cause of action and possible conflicting findings and conclusions by two tribunals on one and the same claim.' "
In an even more recent case, Tropical Homes, Inc. vs, National Housing Authority, et al.,[9] Mr. Justice Gutierrez, speaking for the Court, observed that:
"There is no question that a statute may vest exclusive original jurisdiction in an administrative agency over certain disputes and controversies falling within the agency's special expertise. The very definition of an administrative agency includes its being vested with quasi-judicial powers. The ever increasing variety of powers and functions given to administrative agencies recognizes the need for the active intervention of administrative agencies in matters calling for technical knowledge and speed in countless controversies which cannot possibly be handled by regular courts."
In general, the quantum of judicial or quasi-judicial powers which an administrative agency may exercise is defined in the enabling act of such agency. In other words, the extent to which an administrative entity may exercise such powers depends largely, if not wholly, on the provisions of the statute creating or empowering such agency.[10] In the exercise of such powers, the agency concerned must commonly interpret and apply contracts and determine the rights of private parties under such contracts. One thrust of the multiplication of administrative agencies is that the interpretation of contracts and the determination of private rights thereunder is no longer a uniquely judicial function, exercisable only by our regular courts.
Thus, the extent to which the NHA has been vested with quasi-judicial authority must be determined by referring to the terms of Presidential Decree No. 957, known as "The Subdivision and Condominium Buyers' Decree".[11] Section 3 of this statute provides as follows:
"National Housing Authority. - The National Housing Authority shall have exclusive jurisdiction to regulate the real estate trade and business in accordance with the provisions of this decree." (Underscoring supplied)
The need for and therefore the scope of the regulatory authority thus lodged in the NHA are indicated in the second and third preambular paragraphs of the statute which provide:
"WHEREAS, numerous reports reveal that many real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems and other similar basic requirements, thus endangering the health and safety of home and lot buyers;
WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers or titles free from liens and encumbrances, and to pay real estate taxes, and fraudulent sales of the same subdivision lots to different innocent purchasers for value - - -" (Underscoring supplied)
Presidential Decree No. 1344[12] clarified and spelled out the quasi-judicial dimensions of the grant of regulatory authority to the NHA in the following quite specific terms:
"SECTION 1. In the exercise of its functions to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and decide cases of the following nature:
A. Unsound real estate business practices:
B. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and
C. Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lots or condominium units against the owner, developer, dealer, broker or salesman." (Underscoring supplied.)
The substantive provisions being applied and enforced by the NHA in the instant case are found in Section 23 of Presidential Decree No. 957 which reads:
"Sec. 23. -- Non-Forfeiture of Payments. -- No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization and interests but excluding delinquency interests, with interest thereon at the legal rate." (Underscoring supplied.)
Having failed to comply with its contractual obligation to complete certain specified improvements in the subdivision within the specified period of two years from the date of the execution of the Contract to Sell, petitioner was not entitled to exercise its options under Clause 7 of the Contract. Hence, petitioner could neither rescind the Contract to Sell nor treat the installment payments made by the private respondent as forfeited in its favor. Indeed, under the general Civil Law,[13] in view of petitioner's breach of its contract with private respondent, it is the latter who is vested with the option either to rescind the contract and receive reimbursement of all installment payments (with legal interest) made for the purchase of the subdivision lot in question, or to suspend payment of further purchase installments until such time as the petitioner had fulfilled its obligations to the buyer. The NHA was therefore correct in holding that private respondent's prior installment payments could not be forfeited in favor of petitioner.
Neither did the NHA commit any abuse, let alone a grave abuse, of discretion or act in excess of its jurisdiction when it ordered the reinstatement of the Contract to Sell between the parties. Such reinstatement is no more than a logical consequence of the NHA's correct ruling, just noted, that the petitioner was not entitled to rescind the Contract to Sell. There is, in any case, no question that under Presidential Decree No. 957, the NHA was legally empowered to determine and protect the rights of contracting parties under the law administered by it and under the respective agreements, as well as to ensure that their obligations thereunder are faithfully performed.
We turn to petitioner's assertion that it had been denied the right to due process. This assertion lacks substance. The record shows that a copy of the order denying the Motion to Dismiss and scheduling the hearing of the complaint for the morning of 6 March 1978, was duly served on counsel for petitioner, as evidenced by the annotation appearing at the bottom of said copy indicating that such service had been effected.[14] But even if it be assumed, arguendo, that such notice had not been served on the petitioner, nevertheless the latter was not deprived of due process, for what the fundamental law abhors is not the absence of previous notice but rather the absolute lack of opportunity to be heard.[15] In the instant case petitioner was given ample opportunity to present its side and to be heard on a motion for reconsideration as well, and not just on a motion to dismiss; the claim of denial of due process must hence sound even more hollow.[16]
We turn finally to the question of the amount of P16,994.73 which petitioner insists had accrued during the period from September 1972 to October 1976, when private respondent had suspended payment of his monthly installments on his chosen subdivision lot. The NHA in its 9 March 1978 resolution ruled that the regular monthly installments under the Contract to Sell did not accrue during the September 1972 -- October 1976 period:
"[R]espondent allowed the complainant to suspend payment of his monthly installments until the improvements in the subdivision shall have been completed. Respondent informed complainant on November 1976 that the improvements have been completed. Monthly installments during the period of suspension of payment did not become due and demandable. Neither did they accrue. Such must be the case, otherwise, there is no sense in suspending payments. If the suspension is lifted, the debtor shall resume payments but never did he incur any arrears.
Such being the case, the demand of respondent for complainant to pay the arrears due during the period of suspension of payment is null and void. Consequently, the notice of cancellation based on the refusal to pay the arrears that were not due and demandable is also null and void."[17]
The NHA resolution is probably too terse and in need of clarification and amplification. The NHA correctly held that no installment payments should be considered as having accrued during the period of suspension of payments. Clearly, the critical issue is what happens to the installment payments which would have accrued and fallen due during the period of suspension had no default on the part of the petitioner intervened. To our mind, the NHA resolution is most appropriately read as directing that the original period of payment in the Contract to Sell must be deemed extended by a period of time equal to the period of suspension (i.e., by four (4) years and two (2) months) during which extended time (tacked on to the original contract period) private respondent buyer must continue to pay the monthly installment payments until the entire original contract price shall have been paid. We think that such is the intent of the NHA resolution which directed that "[i]f the suspension is lifted, the debtor shall resume payments" and that such is the most equitable and just reading that may be given to the NHA resolution. To permit Antipolo Realty to collect the disputed amount in a lump sum after it had defaulted on its obligations to its lot buyers, would tend to defeat the purpose of the authorization (under Sec. 23 of Presidential Decree No. 957, supra) to lot buyers to suspend installment payments. As the NHA resolution pointed out, "[s]uch must be the case, otherwise, there is no sense in suspending payments." Upon the other hand, to condone the entire amount that would have become due would be an excessively harsh penalty upon the petitioner and would result in the unjust enrichment of the private respondent at the expense of the petitioner. It should be recalled that the latter had already fulfilled, albeit tardily, its obligations to its lot buyers under their Contracts to Sell. At the same time, the lot buyer should not be regarded as delinquent and as such charged penalty interest. The suspension of installment payments was attributable to the petitioner, not the private respondent. The tacking on of the period of suspension to the end of the original period precisely prevents default on the part of the lot buyer. In the words of the NHA resolution, "never would [the buyer] incur any arrears."
WHEREFORE, the Petition for Certiorari is DISMISSED. The NHA decision appealed from is hereby AFFIRMED and clarified as providing for the lengthening of the original contract period for payment of installments under the Contract to Sell by four (4) years and two (2) months, during which extended time private respondent shall continue to pay the regular monthly installment payments until the entire original contract price shall have been paid. No pronouncement as to costs.
SO ORDERED.
Teehankee, C.J., Yap, Fernan, Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Gancayco, Padilla, Bidin, Sarmiento, and Cortes, JJ., concur.
[1] Rollo, pp. 26-29, Annex "D" of Petition.
[2] Rollo, p. 20, Annex "A" of Petition.
[3] Ibid, pp. 21-22, Annex "B" of Petition.
[4] Clause 7 provides: "In case the BUYER fails to satisfy any monthly installments, or any other payments, herein agreed upon, he is granted a month of grace within which to make the retarded payment, it is understood, however, that should the month of grace herein granted to the BUYER expire, without the payments corresponding to both months having been satisfied, an interest of 12% per annum will be charged on the amounts he should have paid; it is understood further, that should a period of 60 days elapse, to begin from the expiration of the month of grace herein mentioned, and the BUYER has not paid all the amounts he should have paid, with the corresponding interest, up to that date, the SELLER has the right to declare this contract cancelled, ex parte, and of no effect, and as consequence thereof, the SELLER may dispose of the parcel or parcels of land covered by this contract, without notice to the BUYER, in favor of other persons, as if this contract had never been entered into. In case of such cancellation of this contract, all the amounts paid in accordance with this agreement, together with all the improvements made on the premises, shall be considered as rents and charges paid for the use and occupation of the above-mentioned premises, and as payment for the damages suffered by failure of the BUYER to fulfill his part of this agreement, and the BUYER hereby renounces all his right to demand or reclaim the return of the same and obliges himself to peacefully and immediately vacate the premises and deliver the same to the SELLER without delay."
[5] Rollo of G.R. No. 49051, p. 63.
[6] Rollo, pp. 23-25, Annex "C" of Petition.
[7] See, e.g., National Federation of Labor v. Eisma, 127 SCRA 419 (1984) and Philex Mining Corporation v. Reyes, 118 SCRA 602 (1982).
[8] G.R. No. L-63558, promulgated 19 May 1987; underscoring supplied.
[9] G.R. No. L-48672, promulgated 31 July 1987; underscoring supplied.
[10] See, in this connection, DMRC Enterprises v. Este del Sol Mountain Reserve, Inc., 132 SCRA 293 (1984); Union Glass and Container Corporation v. Securities and Exchange Commission, 126 SCRA 31 (1983); and Philex Mining Corporation v. Reyes, supra.
[11] Promulgated on 12 July 1976.
[12] Promulgated on 2 April 1978.
[13] Articles 1191 and 1169, Civil Code.
[14] Rollo of G.R. No. 49051, p. 58; Annex "A" of Comment.
[15] Manuel v. Villena, 37 SCRA 745 (1971) and Asprec v. Itchon, 16 SCRA 921 (1966).
[16] See, BLTB Co. v. Cadiao, 22 SCRA 987 (1968).
[17] Rollo, p. 20; underscoring supplied.
Source: Supreme Court E-Library | Date created: January 18, 2010
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FIRST DIVISION
[ G.R. No. 151298, November 17, 2004 ]
SPOUSES MINIANO AND LETA DELA CRUZ, PETITIONERS, VS. HON. COURT OF APPEALS AND SPOUSES ARCHIMEDES AND MARLYN AGUILA, RESPONDENTS.
DECISION
QUISUMBING, J.:
This is a petition for review on certiorari which seeks to reverse the Decision[1] dated September 28, 2001 in CA-G.R. SP No. 59505, of the Court of Appeals, Sixteenth Division, and its Resolution[2] dated December 11, 2001. The Court of Appeals reversed the Decision[3] dated July 12, 1999, of the Regional Trial Court (RTC) of Antipolo City, Branch 73, which upheld the validity of the compromise agreement of the parties and ordered the issuance of a writ of execution.[4]
The facts as culled from the records are as follows:
On November 24, 1997, petitioners Miniano and Leta dela Cruz and respondents Archimedes and Marlyn Aguila entered into a Contract to Sell of a house on a 171-sq.m. portion of a 347-sq.m. lot covered by TCT No. 305339, located along Cypress Street, Town and Country Executive Village, Antipolo, Rizal.[5]
The parties agreed to the following terms and conditions in the contract:
| a) | The price of the house and lot is P3.3 million payable by installments, the first of which is P1.5 million. |
| b) | The P1.8 million shall then be payable in five years with an interest of 20% per annum, paid through a monthly amortization of P50,000. |
| c) | There shall be an additional interest of 5% on the amount due if there is failure to pay any installment when it falls due. |
| d) | When the contract price is fully paid, the parties shall execute the absolute deed of sale. |
| e) | Failure to pay three or more installments shall be a basis for the sellers to either cancel the contract or consider the whole balance due and demandable.[6] |
Upon payment of the initial amount by respondents, petitioners delivered the keys to the house. Whereupon respondents entered and occupied the property.[7] But, on January 13, 1999, petitioners filed a Complaint docketed as Civil Case No. 99-5123 in the RTC of Antipolo City, Branch 73, for cancellation of the contract to sell, with penalties and damages. Petitioners claimed that despite the delivery of the keys and TCT of the property to the respondents and countless demands to pay the installments, respondents failed to make the subsequent monthly payments. Hence, petitioners sought the cancellation of the contract, the forfeiture of the downpayment, and the payment of the accumulated interests and penalties including attorney’s fees and cost of suit.[8]
Respondents asked for an extension of time to file their Answer, which the trial court granted. But on March 2, 1999, both parties filed a Compromise Agreement[9] instead. The agreement provided:
- That Defendants, upon receipt of the Summons and copy of the Complaint, personally visited Plaintiffs in their residence and explained their financial problem and their inability to pay their obligation. During said visit, Defendants showed to Plaintiffs an incomplete and unsigned xerox copy of a supposed Free Patent being processed, xerox copy of which is herein attached as Annex A and made part hereof.
- That Defendants promised Plaintiffs that they will surrender and apply the above Free Patent once completed, as partial payment to their obligation.
- That Defendants admit the correctness of the allegations in the Complaint and they promised to update their obligation not later than April 30, 1999 and make monthly payment as stipulated in the Contract to Sell until the price is fully paid.
- That Defendants promised and agreed, that once they fail to update their account on or before April 30, 1999, the Contract to Sell shall be considered cancelled and all past payments forfeited in favor of the Plaintiffs.
- That Defendants also promised that once they shall have updated their account on or before April 30, 1999, but fail to pay succeeding amortization, the Contract to Sell shall likewise be cancelled. If such event happens, the Defendants shall have sixty (60) days from notice to vacate to surrender possession of the house and lot, subject matter of the Compromise Agreement, with same effect as stated in paragraph 4 thereof.
On this basis, the trial court ruled as follows:
Finding the compromise agreement not to be contrary to law, good morals, good customs, public order or public policy, the Court with the terms and conditions of said agreement, enjoin[s] the parties to comply with the provisions thereof faithfully and in good faith. Without pronouncement as to costs.
SO ORDERED.[10]
On January 10, 2000, the petitioners filed a Motion for Execution.[11] They alleged that from the time the Compromise Agreement was signed and approved by the court, the respondents had been grossly violating the terms of the Compromise Agreement. They had not paid the agreed amount nor delivered any acceptable property in satisfaction of the balance of the purchase price.
On January 28, 2000, the respondents countered with a Motion to Dismiss. They alleged that the Housing and Land Use Regulatory Board (HLURB) has exclusive jurisdiction over the case under Presidential Decree No. 957.[12] On February 1, 2000, they filed with the HLURB an action for the recovery of the downpayment and the cancellation of the contract.[13]
On February 18, 2000, the trial court issued an Order denying the motion to dismiss, to wit:
Under the Rules, a motion to dismiss may be filed within the time but before filing the answer to the complaint or pleading asserting the claim…. A motion to dismiss after the judgment has become final is highly inappropriate. The case has already been decided and disposed of and there is no more action to be dismissed. For this reason, the defendant’s Motion to Dismiss is hereby DENIED.
The Compromise Agreement is plain and clear. It was voluntarily and knowingly signed by the parties stipulating that upon failure of the defendants to update their account on or before April 30, 1999 and to pay succeeding amortizations, the Contract to Sell shall be cancelled; the subject property shall be vacated, [and] possession thereof to be surrendered to the plaintiffs. This Court, sees no reason why, after the failure of the defendant to comply with it, a motion for execution should not be GRANTED.
Wherefore, let a writ of execution be issued immediately.[14]
The respondents filed a Motion for Reconsideration, which the trial court denied. Hence, they filed a Petition for Certiorari and Prohibition with the Court of Appeals. The appellate court ruled in favor of herein respondents. It granted the respondents’ petition, thus:
WHEREFORE, the petition is GRANTED and the assailed Order dated June 19, 2000 and the Decision dated July 12, 1999 are NULLIFIED and SET ASIDE. No pronouncement as to costs.
SO ORDERED.[15]
The Court of Appeals ruled that the contract is a conditional sale of real estate on installment payment and the applicable laws are Sections 3 and 4 of Republic Act 6552.[16] The first installment of P1.5 million should be deemed equivalent to 30 monthly installments or a period of two years and six months’ worth of installment payments.[17]
According to the Court of Appeals, the contract and the Compromise Agreement were void. It said the respondents should have been given a grace period of at least two months to pay the remaining installments, without additional interest. Furthermore, respondents were entitled by law to a refund of 50% of their total payments in the event the contract is cancelled. Since these were not followed both in the contract and in the Compromise Agreement, the judgment based on these is necessarily null and void as well.[18]
The petitioners filed a Motion for Reconsideration which was denied, thus:
[I]t appearing that the arguments raised in the motion have already been sufficiently discussed and passed upon in the decision sought to be reconsidered, without the respondents having been able to point out any new matter of substance and weight that would justify a modification or reversal of the said decision, the motion is DENIED for lack of merit.[19]
In this petition for review by petitioners, the following errors are attributed to the appellate court:
- THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AND IGNORANCE OF LAW IN ENTERTAINING AND RESOLVING AN IMPERFECT APPEAL BY CERTIORARI UNDER RULE 65, REVISED RULES OF COURT AND ESTABLISHED JURISPRUDENCE.
- THE RESPONDENT COURT OF APPEALS, WITH DUE RESPECT, COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR … EXCESS OF ITS JURISDICTION, WHEN IT STRUCK DOWN THE JUDICIAL COMPROMISE AGREEMENT DESPITE THE ABSENCE OR LACK OF ANY OF THE GROUNDS FOR NULLITY ENUMERATED IN ART. 2038 OF THE CIVIL CODE.
- THE RESPONDENT COURT OF APPEALS, WITH DUE RESPECT, COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO [LACK] OR … EXCESS OF ITS JURISDICTION WHEN IT SET ASIDE THE JUDICIAL COMPROMISE AGREEMENT DESPITE THE FACT THAT THE SAME HAS THE FORCE OF RES JUDICATA BETWEEN THE PARTIES AND IS FINAL AND IMMEDIATELY EXECUTORY.
- THE COURT OF APPEALS, COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OF JURISDICTION IN RESOLVING THAT THE HOUSING AND LAND USE REGULATORY BOARD HAD AUTHORITY TO DECLARE AS NULL AND VOID THE JUDICIAL COMPROMISE AGREEMENT WHICH HAS BECOME FINAL AND EXECUTORY.
- THE COURT OF APPEALS, COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OF JURISDICTION IN RESOLVING THAT THE HOUSING AND LAND USE REGULATORY BOARD HAD JURISDICTION [OVER] THE PETITIONERS AND THE SUBJECT MATTER, CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE.[20]
Briefly we find two issues for resolution: (1) Does the HLURB have jurisdiction over the case? (2) Was the Court of Appeals correct in nullifying the Compromise Agreement?
Petitioners spouses dela Cruz contend that the HLURB does not have jurisdiction. They aver that the HLURB has exclusive jurisdiction only where a party is an owner, developer, dealer, broker or salesman of subdivision lots or condominium units. Petitioners add that they do not belong to any of those classifications. They are ordinary property owners of eleven subdivision lots located in Town and Country Homes Executive Village (TCHEV). These were subdivided by Pasig Properties, Inc., and titled in their behalf by Town and Country Executive Village Homeowners’ Association, Inc. (TCEVHAI).[21]
Respondents spouses Aguila refute petitioners’ assertions. They maintain that the contract to sell involved the purchase on installment of a subdivision house and lot under Rep. Act No. 6552 and P.D. No. 957. Respondents claim that by definition, petitioners are landowners and developers of a subdivision project. Consequently, the trial court had no power to hear the complaint, since jurisdiction lies exclusively with the HLURB. They assert that petitioners also violated numerous provisions of P.D. No. 957, such as the requirement to first secure a license to sell from the HLURB before engaging in the sale of properties.[22]
According to P.D. No. 1344,[23] the National Housing Authority (now the HLURB) shall have exclusive jurisdiction to hear and decide cases of the following nature:
| a) | Unsound real estate business practices; |
| b) | Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and |
| c) | Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman.[24] |
P.D. No. 957 provides that a subdivision owner “shall refer to the registered owner of the land subject of a subdivision or a condominium project.” Also, a subdivision developer “shall mean the person who develops or improves the subdivision project or condominium project for and in behalf of the owner thereof.”[25]
Respondents stress that the petitioners own a huge parcel of land in TCHEV which they subdivided. Furthermore, the property sold to them is one of these subdivided lots on which a house was erected by the petitioners. Hence, petitioners are owners and developers of a subdivision property.
We find in favor of petitioners on the issue of jurisdiction. Respondents’ contention on this point is erroneous and untenable.
The law clearly defines who is considered a subdivision owner or developer, and the petitioners are neither. They are merely owners of a number of lots within the subdivision owned and developed by Pasig Properties, Inc. But even if petitioners were subdivision owners or developers, this would not bar them from seeking redress from the courts. As aptly explained in Roxas v. Court of Appeals:
[T]he mere relationship between the parties, i.e., that of being subdivision owner/developer and subdivision lot buyer, does not automatically vest jurisdiction in the HLURB. For an action to fall within the exclusive jurisdiction of the HLURB, the decisive element is the nature of the action as enumerated in Section 1 of P.D. 1344. On this matter, we have consistently held that the concerned administrative agency, the National Housing Authority (NHA) before and now the HLURB, has jurisdiction over complaints aimed at compelling the subdivision developer to comply with its contractual and statutory obligations.
. . .
Note particularly pars. (b) and (c) as worded, where the HLURB’s jurisdiction concerns cases commenced by subdivision lot or condominium unit buyers. As to par. (a), concerning “unsound real estate practices,” it would appear that the logical complainant would be the buyers and customers against the sellers (subdivision owners and developers or condominium builders and realtors ), and not vice versa.[26]
Moreover, the rule is well settled that the jurisdiction of the court or agency is determined by the allegations in the complaint. It cannot be made to depend on the defenses made by the defendant in his Answer or Motion to Dismiss. If such were the rule, the question of jurisdiction would depend almost entirely on the defendant.[27] The complaint rests its cause of action on the failure of the respondents to pay the stipulated installments in the contract of the parties. As relief, the complaint sought the cancellation of the contract and the payment of interest, penalties and deficient installments. Clearly, the complaint is well within the jurisdiction of the trial court.
In Philippine Aluminum Wheels, Inc. v. FASGI Enterprises, Inc.,[28] this Court ruled that a party should not, after its opportunity to enjoy the benefits of an agreement, be allowed to later disown the arrangement when the terms thereof ultimately would prove to operate against its hopeful expectations. It was error on the part of the Court of Appeals to rule that Rep. Act No. 6552 applied to the present case, because, according to petitioners, said law applies only when the buyer defaults in the payment of succeeding installments. Petitioners insist that the respondents did not pay any installments at all after the initial downpayment of P1.5 million,[29] after respondents had taken possession and occupancy of the house and lot in question.
Respondents claim that the Compromise Agreement is null and void because it contains stipulations that are against Rep. Act No. 6552. These stipulations are the automatic cancellation of the contract without giving any grace period to the buyer and the forfeiture of all installments in favor of the seller.[30] Pursuant to Article 1409,[31] specifically paragraphs 1 and 7, of the Civil Code, the Compromise Agreement should have been declared void by the trial court,[32] according to respondents.
Again, on this point, we rule in favor of the petitioners.
A compromise is an agreement between two or more persons who, aiming to prevent or put an end to a lawsuit, adjust their respective positions by mutual consent. Reciprocal concessions are the very heart and life of every compromise agreement. Each party approximates and concedes a point in the hope of gaining, balanced by the danger of losing, its own advantage. It is, in essence, a contract. It is binding and has the force of law between the parties unless it is a void contract under Article 1409 of the Civil Code, or unless the consent of a party is vitiated (such as by mistake, fraud, violence, intimidation or undue influence) or when there is forgery, or if the terms of the settlement are so palpably unconscionable.[33] It has upon the parties the effect and authority of res judicata,[34] and when the court renders a judgment based on the compromise agreement, the judgment becomes immediately executory, there being an implied waiver of the parties’ right to appeal from the decision.[35]
The contract between the parties is a contract to sell real property. As reflected in the records, the respondents as buyers paid to the petitioners as sellers one installment of P50,000 after the initial downpayment of P1.5 million.[36] But it is not a contract involving a subdivision owner or developer but only between two couples i.e., the original house-owners (petitioners) and the subsequent buyers of the house and lot (respondents).
Nevertheless, even if we apply Rep. Act No. 6552 in this instance, still the Court of Appeals erred in ordering that the downpayment be considered 30 months worth of installment payments. The last paragraph of Section 3, Rep. Act No. 6552,[37] states that downpayments, deposits or options on the contract shall be included in the computation of the total number of installment payments made. Section 3 applies when at least two years of installments have been paid by the buyer. However, in the instant case, only one installment was made, making Section 4[38] the applicable provision. Section 4 is distinct from Section 3 of Rep. Act No. 6552. Neither does Section 4 give to the buyer the right to a fifty percent refund of the payments made as in Section 3[39] of the law.
Under the contract, respondents were obliged to pay a monthly installment beginning January 7, 1998.[40] They failed in that commitment. Petitioners repeatedly demanded for payment. Respondents then made a written promise to pay the entire deficiency within 60 days.[41] But respondents paid only P50,000 on May 19, 1998[42] after which no other installment payments were made. The complaint by petitioners was filed before the trial court on January 13, 1999, or eight months after the cited installment payment was due, way beyond the 60-day grace period required by the law.
Here, we find that it was not necessary for the petitioners to demand the cancellation of the contract by a notarial act. In Olympia Housing, Inc. v. Panasiatic Travel Corporation,[43] we ruled that a seller is not precluded from going to the court to demand judicial rescission in lieu of a notarial act of rescission. In the same vein, it would be superfluous for the petitioners to have demanded the cancellation of the contract via a notarial act, when they have already judicially sought for its cancellation thru the institution of the complaint.
WHEREFORE, the Decision dated September 28, 2001 and the Resolution dated December 11, 2001 of the Court of Appeals in CA-G.R. SP No. 59505, are REVERSED and SET ASIDE. The Compromise Agreement between the parties is valid and binding. The Decision dated July 12, 1999 and Order dated June 19, 2000 of the Regional Trial Court of Antipolo City, Branch 73, are hereby REINSTATED. Costs against respondents.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.
[1] Rollo, pp. 22-34. Penned by Associate Justice Salvador J. Valdez, Jr., with Associate Justices Wenceslao I. Agnir, Jr., and Mariano C. del Castillo concurring.
[2] Id. at 35.
[3] Id. at 41-42.
[4] Id. at 46.
[5] Id. at 24.
[6] CA Rollo, p. 27.
[7] Rollo, p. 25.
[8] Id. at 25-26.
[9] Id. at 181-182.
[10] Id. at 42.
[11] Id. at 43-44.
[12] P.D. No. 957. – Regulating The Sale of Subdivision Lots And Condominiums, Providing Penalties For Violations Thereof.
[13] CA Rollo, pp. 82-83.
[14] Id. at 46.
[15] Rollo, p. 34.
[16] Rep. Act No. 6552, An Act to Provide Protection to Buyers of Real Estate on Installment Payments.
[17] Rollo, pp. 29-30.
[18] Id. at 29-30, 32.
[19] Id. at 35.
[20] Id. at 11-12.
[21] Id. at 142.
[22] Id. at 160-161.
[23] Empowering the National Housing Authority to Issue Writ of Execution in the Enforcement of its Decision Under Presidential Decree No. 957.
[24] Section 1.
[25] P.D. No. 957, Sec. 2 (i & j).
[26] G.R. No. 138955, 29 October 2002, 391 SCRA 351, 359-360. (Emphasis Supplied.)
[27] Atuel v. Valdez, G.R. No. 139561, 10 June 2003, 403 SCRA 517, 528; Supra, note 26 at 361.
[28] G.R. No. 137378, 12 October 2000, 342 SCRA 722, 736.
[29] Rollo, p. 142.
[30] Id. at 152.
[31] Art. 1409. The following contracts are inexistent and void from the beginning:
| 1) | Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; |
| 2) | Those which are absolutely simulated or fictitious; |
| 3) | Those whose cause or object did not exist at the time of the transaction; |
| 4) | Those whose object is outside the commerce of men; |
| 5) | Those which contemplate an impossible service; |
| 6) | Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; |
| 7) | Those expressly prohibited or declared void by law. |
| These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived. |
[32] Rollo, pp. 93-94.
[33] Genova v. De Castro, G.R. Nos. 132076 & 140989, 22 July 2003, 407 SCRA 165, 173.
[34] Civil Code of the Philippines, Article 2037.
[35] De los Reyes v. De Ugarte, No. L-82, 1 December 1945, 75 Phil 505, 507.
[36] See Rollo, p. 38, Complaint; Rollo, p. 177, Annex ‘5’.
[37] Sec. 3…
. . .
Down payments, deposits or options on the contract shall be included in the computation of the total number of installments made.
[38] Rep. Act No. 6552, SEC. 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.
[39] See Rillo v. Court of Appeals, G.R. No. 125347, 19 June 1997, 274 SCRA 461, 468.
[40] See Rollo, p. 175, Contract to Sell.
[41] See CA Rollo, p. 32, Annexes 4 & 5; CA Rollo, pp. 119-120.
[42] Rollo, p. 177.
[43] G.R. No. 140468, 16 January 2003, 395 SCRA 298, 308.
Source: Supreme Court E-Library | Date created: 2008-08-11 14:22:30
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SECOND DIVISION
[ G.R. NO. 158635, December 09, 2005 ]
MAGNA FINANCIAL SERVICES GROUP, INC., PETITIONER, VS. ELIAS COLARINA, RESPONDENT.
D E C I S I O N
CHICO-NAZARIO, J.:
The undisputed facts of this case show that on 11 June 1997, Elias Colarina bought on installment from Magna Financial Services Group, Inc., one (1) unit of Suzuki Multicab, more particularly described as follows:
| MAKE | - SUZUKI MULTICAB |
| MODEL | - ER HT |
| ENGINE NO | - 834963 |
| FRAME NO. | - LTO -067886-RO7-C |
| COLOR | - WHITE[1] |
After making a down payment, Colarina executed a promissory note for the balance of P229,284.00 payable in thirty-six (36) equal monthly installments at P6,369.00 monthly, beginning 18 July 1997. To secure payment thereof, Colarina executed an integrated promissory note and deed of chattel mortgage over the motor vehicle.
Colarina failed to pay the monthly amortization beginning January 1999, accumulating an unpaid balance of P131,607.00. Despite repeated demands, he failed to make the necessary payment. On 31 October 2000 Magna Financial Services Group, Inc. filed a Complaint for Foreclosure of Chattel Mortgage with Replevin[2] before the Municipal Trial Court in Cities (MTCC), Branch 2, Legaspi City, docketed as Civil Case No. 4822.[3] Upon the filing of a Replevin Bond, a Writ of Replevin was issued by the MTCC. On 27 December 2000, summons, together with a copy of the Writ of Replevin, was served on Colarina who voluntarily surrendered physical possession of the vehicle to the Sheriff, Mr. Antonio Lozano. On 02 January 2001, the aforesaid motor vehicle was turned over by the sheriff to Magna Financial Services Group, Inc.[4] On 12 July 2001, Colarina was declared in default for having filed his answer after more than six (6) months from the service of summons upon him. Thereupon, the trial court rendered judgment based on the facts alleged in the Complaint. In a decision dated 23 July 2001, it held:[5]
WHEREFORE, judgment is hereby rendered in favor of plaintiff Magna Financial Services Group, Inc. and against the defendant Elias Colarina, ordering the latter:
| a) | to pay plaintiff the principal sum of one hundred thirty one thousand six hundred seven (P131,607.00) pesos plus penalty charges at 4.5% per month computed from January, 1999 until fully paid; |
|
| |
| b) | to pay plaintiff P10,000.00 for attorney's fees; and |
|
| |
| c) | to pay the costs. |
The foregoing money judgment shall be paid within ninety (90) days from the entry of judgment. In case of default in such payment, the one (1) unit of Suzuki Multicab, subject of the writ of replevin and chattel mortgage, shall be sold at public auction to satisfy the said judgment.[6]
Colarina appealed to the Regional Trial Court (RTC) of Legazpi City, Branch 4, where the case was docketed as Civil Case No. 10013. During the pendency of his appeal before the RTC, Colarina died and was substituted in the case by his heirs.[7] In a decision dated 30 January 2002, the RTC affirmed in toto the decision of the MTCC.[8]
Colarina filed a Petition for Review before the Court of Appeals, docketed as CA-G.R. SP No. 69481. On 21 January 2003, the Court of Appeals rendered its decision[9] holding:
. . . We find merit in petitioners' assertion that the MTC and the RTC erred in ordering the defendant to pay the unpaid balance of the purchase price of the subject vehicle irrespective of the fact that the instant complaint was for the foreclosure of its chattel mortgage. The principal error committed by the said courts was their immediate grant, however erroneous, of relief in favor of the respondent for the payment of the unpaid balance without considering the fact that the very prayer it had sought was inconsistent with its allegation in the complaint.
Verily, it is beyond cavil that the complaint seeks the judicial foreclosure of the chattel mortgage. The fact that the respondent had unconscionably sought the payment of the unpaid balance regardless of its complaint for the foreclosure of the said mortgage is glaring proof that it intentionally devised the same to deprive the defendant of his rights. A judgment in its favor will in effect allow it to retain the possession and ownership of the subject vehicle and at the same time claim against the defendant for the unpaid balance of its purchase price. In such a case, the respondent would luckily have its cake and eat it too. Unfortunately for the defendant, the lower courts had readily, probably unwittingly, made themselves abettors to respondent's devise to the detriment of the defendant.
. . .
WHEREFORE, finding error in the assailed decision, the instant petition is hereby GRANTED and the assailed decision is hereby REVERSED AND SET ASIDE. Let the records be remanded to the court of origin. Accordingly, the foreclosure of the chattel mortgage over the subject vehicle as prayed for by the respondent in its complaint without any right to seek the payment of the unpaid balance of the purchase price or any deficiency judgment against the petitioners pursuant to Article 1484 of the Civil Code of the Philippines, is hereby ORDERED.[10]
A Motion for Reconsideration dated 11 February 2003[11] filed by Magna Financial Services Group, Inc., was denied by the Court of Appeals in a resolution dated 22 May 2003.[12] Hence, this Petition for Review on Certiorari based on the sole issue:
WHAT IS THE TRUE NATURE OF A FORECLOSURE OF CHATTEL MORTGAGE, EXTRAJUDICIAL OR JUDICIAL, AS AN EXERCISE OF THE 3RD OPTION UNDER ARTICLE 1484, PARAGRAPH 3 OF THE CIVIL CODE.
In its Memorandum, petitioner assails the decision of the Court of Appeals and asserts that a mortgage is only an accessory obligation, the principal one being the undertaking to pay the amounts scheduled in the promissory note. To secure the payment of the note, a chattel mortgage is constituted on the thing sold. It argues that an action for foreclosure of mortgage is actually in the nature of an action for sum of money instituted to enforce the payment of the promissory note, with execution of the security. In case of an extrajudicial foreclosure of chattel mortgage, the petition must state the amount due on the obligation and the sheriff, after the sale, shall apply the proceeds to the unpaid debt. This, according to petitioner, is the true nature of a foreclosure proceeding as provided under Rule 68, Section 2 of the Rules of Court.[13]
On the other hand, respondent countered that the Court of Appeals correctly set aside the trial court's decision due to the inconsistency of the remedies or reliefs sought by the petitioner in its Complaint where it prayed for the custody of the chattel mortgage and at the same time asked for the payment of the unpaid balance on the motor vehicle.[14]
Article 1484 of the Civil Code explicitly provides:
ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage or the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.
Our Supreme Court in Bachrach Motor Co., Inc. v. Millan[15] held: "Undoubtedly the principal object of the above amendment (referring to Act 4122 amending Art. 1454, Civil Code of 1889) was to remedy the abuses committed in connection with the foreclosure of chattel mortgages. This amendment prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing the suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness."
In its Complaint, Magna Financial Services Group, Inc. made the following prayer:
WHEREFORE, it is respectfully prayed that judgment render ordering defendant:
- To pay the principal sum of P131,607.00 with penalty charges at 4.5% per month from January 1999 until paid plus liquidated damages.
- Ordering defendant to reimburse the plaintiff for attorney's fee at 25% of the amount due plus expenses of litigation at not less than P10,000.00.
- Ordering defendant to surrender to the plaintiff the possession of the Multicab described in paragraph 2 of the complaint.
- Plaintiff prays for other reliefs just and equitable in the premises.
It is further prayed that pendent lite, an Order of Replevin issue commanding the Provincial Sheriff at Legazpi City or any of his deputies to take such multicab into his custody and, after judgment, upon default in the payment of the amount adjudged due to the plaintiff, to sell said chattel at public auction in accordance with the chattel mortgage law.[16]
In its Memorandum before us, petitioner resolutely declared that it has opted for the remedy provided under Article 1484(3) of the Civil Code,[17] that is, to foreclose the chattel mortgage.
It is, however, unmistakable from the Complaint that petitioner preferred to avail itself of the first and third remedies under Article 1484, at the same time suing for replevin. For this reason, the Court of Appeals justifiably set aside the decision of the RTC. Perusing the Complaint, the petitioner, under its prayer number 1, sought for the payment of the unpaid amortizations which is a remedy that is provided under Article 1484(1) of the Civil Code, allowing an unpaid vendee to exact fulfillment of the obligation. At the same time, petitioner prayed that Colarina be ordered to surrender possession of the vehicle so that it may ultimately be sold at public auction, which remedy is contained under Article 1484(3). Such a scheme is not only irregular but is a flagrant circumvention of the prohibition of the law. By praying for the foreclosure of the chattel, Magna Financial Services Group, Inc. renounced whatever claim it may have under the promissory note.[18]
Article 1484, paragraph 3, provides that if the vendor has availed himself of the right to foreclose the chattel mortgage, "he shall have no further action against the purchaser to recover any unpaid balance of the purchase price. Any agreement to the contrary shall be void." In other words, in all proceedings for the foreclosure of chattel mortgages executed on chattels which have been sold on the installment plan, the mortgagee is limited to the property included in the mortgage.[19]
Contrary to petitioner's claim, a contract of chattel mortgage, which is the transaction involved in the present case, is in the nature of a conditional sale of personal property given as a security for the payment of a debt, or the performance of some other obligation specified therein, the condition being that the sale shall be void upon the seller paying to the purchaser a sum of money or doing some other act named.[20] If the condition is performed according to its terms, the mortgage and sale immediately become void, and the mortgagee is thereby divested of his title.[21] On the other hand, in case of non payment, foreclosure is one of the remedies available to a mortgagee by which he subjects the mortgaged property to the satisfaction of the obligation to secure that for which the mortgage was given. Foreclosure may be effected either judicially or extrajudicially, that is, by ordinary action or by foreclosure under power of sale contained in the mortgage. It may be effected by the usual methods, including sale of goods at public auction.[22] Extrajudicial foreclosure, as chosen by the petitioner, is attained by causing the mortgaged property to be seized by the sheriff, as agent of the mortgagee, and have it sold at public auction in the manner prescribed by Section 14 of Act No. 1508, or the Chattel Mortgage Law.[23] This rule governs extrajudicial foreclosure of chattel mortgage.
In sum, since the petitioner has undeniably elected a remedy of foreclosure under Article 1484(3) of the Civil Code, it is bound by its election and thus may not be allowed to change what it has opted for nor to ask for more. On this point, the Court of Appeals correctly set aside the trial court's decision and instead rendered a judgment of foreclosure as prayed for by the petitioner.
The next issue of consequence is whether or not there has been an actual foreclosure of the subject vehicle.
In the case at bar, there is no dispute that the subject vehicle is already in the possession of the petitioner, Magna Financial Services Group, Inc. However, actual foreclosure has not been pursued, commenced or concluded by it.
Where the mortgagee elects a remedy of foreclosure, the law requires the actual foreclosure of the mortgaged chattel. Thus, in Manila Motor Co. v. Fernandez,[24] our Supreme Court said that it is actual sale of the mortgaged chattel in accordance with Sec. 14 of Act No. 1508 that would bar the creditor (who chooses to foreclose) from recovering any unpaid balance.[25] And it is deemed that there has been foreclosure of the mortgage when all the proceedings of the foreclosure, including the sale of the property at public auction, have been accomplished.[26]
That there should be actual foreclosure of the mortgaged vehicle was reiterated in the case of De la Cruz v. Asian Consumer and Industrial Finance Corporation:[27]
It is thus clear that while ASIAN eventually succeeded in taking possession of the mortgaged vehicle, it did not pursue the foreclosure of the mortgage as shown by the fact that no auction sale of the vehicle was ever conducted. As we ruled in Filinvest Credit Corp. v. Phil. Acetylene Co., Inc. (G.R. No. 50449, 30 January 1982, 111 SCRA 421) –
Under the law, the delivery of possession of the mortgaged property to the mortgagee, the herein appellee, can only operate to extinguish appellant's liability if the appellee had actually caused the foreclosure sale of the mortgaged property when it recovered possession thereof (Northern Motors, Inc. v. Sapinoso, 33 SCRA 356 [1970]; Universal Motors Corp. v. Dy Hian Tat, 28 SCRA 161 [1969]; Manila Motors Co., Inc. v. Fernandez, 99 Phil. 782 [1956]).
Be that as it may, although no actual foreclosure as contemplated under the law has taken place in this case, since the vehicle is already in the possession of Magna Financial Services Group, Inc. and it has persistently and consistently avowed that it elects the remedy of foreclosure, the Court of Appeals, thus, ruled correctly in directing the foreclosure of the said vehicle without more.
WHEREFORE, premises considered, the instant petition is DENIED for lack of merit and the decision of the Court of Appeals dated 21 January 2003 is AFFIRMED. Costs against petitioner.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.
[1] Rollo, p. 50.
[2] Annex A, CA Rollo, p. 23.
[3] Annex I, Rollo, p. 50.
[4] CA Rollo, p. 39.
[5] CA Rollo, pp. 40-41.
[6] CA Rollo, p. 41.
[7] CA Rollo, p. 15.
[8] Annex H, CA Rollo, pp. 43-47.
[9] Penned by Associate Justice Josefina Guevara –Salonga with Associate Justices Marina L. Buzon and Danilo B. Pine, concurring; CA Rollo, pp. 66-73.
[10] CA Rollo, pp. 71-73.
[11] Rollo, pp. 27-30.
[12] Rollo, p. 39.
[13] Memorandum for the Petitioner, p. 3; Rollo, p. 87.
Rule 68, Section 2 of the Revised Rules of Court on Foreclosure of Real Estate Mortgage provides:
SEC. 2. Judgment on foreclosure for payment or sale. – If upon the trial in such action the court shall find the facts set forth in the complaint to be true, it shall ascertain the amount due to the plaintiff upon the mortgage debt or obligation, including interest and other charges as approved by the court, and costs, and shall render judgment for the sum so found due and order that the same be paid to the court or to the judgment obligee within a period of not less than ninety (90) days nor more than one hundred twenty (120) days from the entry of judgment, and that in default of such payment the property shall be sold at public auction to satisfy the judgment.
[14] Rejoinder, Rollo, p. 95.
[15] 61 Phil. 409, 415 (1935).
[16] CA Rollo, pp. 24-25.
[17] Rollo, p. 88.
[18] Luneta Motor Co. v. Dimagiba, 113 Phil. 864 (1961).
[19] Macondray and Co., Inc. v. Benito, et al., 62 Phil. 137, 142 (1935).
[20] Act No. 1508 - An Act providing for the Mortgaging of personal property and for the registration of the mortgages so executed.
Section 3. A chattel mortgage is a conditional sale of personal property as security for the payment of a debt, or the performance of some other obligation specified therein, the condition being that the sale shall be void upon the seller's paying to the purchaser a sum of money or doing some other act named. If the condition is performed according to its terms the mortgage and sale immediately become void, and the mortgagee is thereby divested of his title.
[21] Bachrach Motor Co. v. Summers, 42 Phil. 3 (1921).
[22] 59 C.J.S. 482 cited in De Leon Credit Transaction, 1995 Ed., p. 384.
[23] Bataan Hardwood Corporation v. Dy Pac and Co., G.R. No. L- 29492, 29 February 1972, 43 SCRA 450.
Section 14, Act No. 1508 of the Chattel Mortgage Law provides:
SEC. 14 The mortgagee, his executor, administrator, or assign, may, after thirty days from the time of condition broken, cause the mortgaged property, or any part thereof, to be sold at public auction by a public officer at a public place in the municipality where the mortgagor resides, or where the property is situated, provided at least ten days notice of the time, place, and purpose of such sale has been posted at two or more public places in such municipality, and the mortgagee, his executor, administrator, or assign, shall notify the mortgagor or person holding under him and the persons holding subsequent mortgages of the time and place of sale, either by notice in writing directed to him or left at his abode, if within the municipality, or sent by mail if he does not reside in such municipality, at least ten days previous to the sale.
[24] 99 Phil. 782, 786 (1956).
[25] Pacific Commercial Co. v. De la Rama, 72 Phil. 380 (1941).
[26] Macondray & Co., Inc. v. Tan, 38 O.G. 2606; see also Radiowealth, Inc. v. Lavin, L-18563, 27 April 1963, 7 SCRA 804; Vda. De Quiambao, et al. v. Manila Motor Co., Inc., G.R. No. L-17334, 31 October 1961, 3 SCRA 444, 448-449.
[27] G.R. No. 94828, 18 September 1992, 214 SCRA 103, 107.
Source: Supreme Court E-Library | Date created: 2008-09-03 09:24:48
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SECOND DIVISION
[ G.R. No. 135528, July 14, 2004 ]
SPOUSES ORLANDO A. RAYOS AND MERCEDES T. RAYOS, PETITIONERS, VS. THE COURT OF APPEALS AND SPOUSES ROGELIO AND VENUS MIRANDA, RESPONDENTS.
D E C I S I O N
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision[1] of the Court of Appeals[2] in CA-G.R. CV No. 46727 which affirmed the Decision[3] of the Regional Trial Court of Makati, Branch 62, in Civil Case No. 15639 for specific performance and damages, and Civil Case No. 15984 for sum of money and damages.
The two (2) cases stemmed from the following antecedent facts:
On December 24, 1985, petitioner Orlando A. Rayos, a practicing lawyer, and his wife, petitioner Mercedes T. Rayos, secured a short-term loan from the Philippine Savings Bank (PSB) payable within a period of one (1) year in quarterly installments of P29,190.28, the first quarterly payment to start on March 24, 1986. The loan was evidenced by a promissory note which the petitioners executed on December 24, 1985.[4] To secure the payment of the loan, the petitioners-spouses executed, on the same date, a Real Estate Mortgage over their property covered by Transfer Certificate of Title (TCT) No. 100156 located in Las Piñas, Metro Manila.[5]
On December 26, 1985, the petitioners, as vendors, and the respondents, Spouses Miranda, as vendees, executed a Deed of Sale with Assumption of Mortgage over the subject property for the price of P214,000.00. However, on January 29, 1986, the petitioners-spouses, likewise, executed a Contract to Sell the said property in favor of the respondents for P250,000.00 with the following condition:
- That upon full payment of the consideration hereof, the SELLER shall execute a Deed of Absolute Sale in favor of the BUYER that the payment of capital gains tax shall be for the account of the SELLER and that documentary stamps, transfer tax, registration expenses for the transfer of title including the notarization and preparation of this Contract and subsequent documents if any are to be executed, real estate taxes from January 1, 1986 and other miscellaneous expenses shall be for the account of the BUYER; the SELLER hereby represents that all association dues has been paid but that subsequent to the execution of this Contract the payment of the same shall devolve upon the BUYER.[6]
The petitioners obliged themselves to execute a deed of absolute sale over the property in favor of the respondents upon the full payment of the purchase price thereof.
Respondent Rogelio Miranda filed an application dated May 4, 1986 with the PSB to secure the approval of his assumption of the petitioners’ obligation on the loan, and appended thereto a General Information sheet.[7] Respondent Rogelio Miranda stated therein that he was the Acting Municipal Treasurer of Las Piñas and had an unpaid account with the Manila Banking Corporation in the amount of P18,777.31. The PSB disapproved his application. Nevertheless, respondent Rogelio Miranda paid the first quarterly installment on the petitioners’ loan on March 21, 1986 in the amount of P29,190.28. The said amount was paid for the account of the petitioners. Respondent Rogelio Miranda, likewise, paid the second quarterly installment in the amount of P29,459.00 on June 23, 1986, also for the account of the petitioners.[8]
In the meantime, respondent Rogelio Miranda secured the services of petitioner Orlando Rayos as his counsel in a suit he filed against the Manila Banking Corporation, relative to a loan from the bank in the amount of P100,000.00. Both parties agreed to the payment of attorney’s fees, as follows:
Our agreement is as follows:
- You will pay me
P700.00 as filing fee and other miscellaneous expenses which I personally received from you this morning;
- Award to you of any amount in terms of moral, exemplary or actual and other forms of damages shall accrue to you in the amount of 70% thereof;
- 30% of the award to you in the concept of No. 2 hereof shall pertain to me as my contingent fee;
- All attorney’s fees that the court shall award to me or by the management of TMBC if they agree to extrajudicially settle shall pertain exclusively to me;
- Execution of judgment expenses shall be for your account;
- Should the case be appealed, my contingent fee shall increase by 10% if the appeal is to the Intermediate Appellate Court on questions of facts and law, and if appealed from there to the Supreme Court, then another 10% shall accrue to me.[9]
On May 14, 1986, petitioner Orlando Rayos filed respondent Rogelio Miranda’s complaint against the bank with the Regional Trial Court of Makati, docketed as Civil Case No. 13670.[10] In the meantime, the latter paid the third quarterly installment on the PSB loan account amounting to P29,215.66, for which the bank issued a receipt for the account of the petitioners.
The parties executed a Compromise Agreement in Civil Case No. 13670 in which they agreed that each party shall pay for the respective fees of their respective counsels.[11] The trial court rendered judgment on October 23, 1986 based on the said compromise agreement.[12] Petitioner Orlando Rayos demanded the payment of attorney’s fees in the amount of P5,631.93, but respondent Rogelio Miranda refused to pay.
On November 12, 1986, petitioner Orlando Rayos wrote to respondent Rogelio Miranda and enclosed a copy of his motion in Civil Case No. 13670 for the annotation of his attorney’s lien at the dorsal portion of the latter’s title used as security for the loan with the Manila Banking Corporation.[13] The respondent opposed the motion, claiming that the petitioner agreed to render professional services on a contingent basis.[14]
Petitioner Orlando Rayos again wrote respondent Rogelio Miranda on November 30, 1986, reminding the latter of the last quarterly payment of his loan with the PSB. He also advised the respondent to thereafter request the bank for the cancellation of the mortgage on his property and to receive the owner’s duplicate of his title over the same. Petitioner Orlando Rayos also wrote that their dispute over his attorney’s fees in Civil Case No. 13670 should be treated differently.[15]
Petitioner Orlando Rayos then received a Letter dated November 27, 1986 from the PSB, reminding him that his loan with the bank would mature on December 24, 1986, and that it expected him to pay his loan on or before the said date.[16] Fearing that the respondents would not be able to pay the amount due, petitioner Orlando Rayos paid P27,981.41[17] to the bank on December 12, 1986, leaving the balance of P1,048.04. In a Letter dated December 18, 1986, the petitioner advised the PSB not to turn over to the respondents the owner’s duplicate of the title over the subject property, even if the latter paid the last quarterly installment on the loan, as they had not assumed the payment of the same.[18]
On December 24, 1986, respondent Rogelio Miranda arrived at the PSB to pay the last installment on the petitioners’ loan in the amount of P29,223.67. He informed the bank that the petitioners had executed a deed of sale with assumption of mortgage in their favor, and that he was paying the balance of the loan, conformably to said deed. On the other hand, the bank informed the respondent that it was not bound by said deed, and showed petitioner Orlando Rayos’ Letter dated December 18, 1986. The respondent was also informed that the petitioners had earlier paid the amount of P27,981.41 on the loan. The bank refused respondent Rogelio Miranda’s offer to pay the loan, and confirmed its refusal in a Letter dated December 24, 1986.[19]
On even date, respondent Rogelio Miranda wrote the PSB, tendering the amount of P29,223.67 and enclosed Interbank Check No. 01193344 payable to PSB.[20] Thereafter, on December 29, 1986, the petitioners paid the balance of their loan with the bank in the amount of P1,081.39 and were issued a receipt therefor.[21] On January 2, 1987, the PSB wrote respondent Rogelio Miranda that it was returning his check.[22]
On January 2, 1987, respondent Rogelio Miranda filed a complaint against the petitioners and the PSB for damages with a prayer for a writ of preliminary attachment with the RTC of Makati. The case was docketed as Civil Case No. 15639 and raffled to Branch 61 of the court. The respondent alleged inter alia that the petitioners and the PSB conspired to prevent him from paying the last quarterly payment of the petitioners’ loan with the bank, despite the existence of the deed of sale with assumption of mortgage executed by him and the petitioners, and in refusing to turn over the owner’s duplicate of TCT No. 100156, thereby preventing the transfer of the title to the property in his name. Respondent Rogelio Miranda prayed that:
WHEREFORE, it is respectfully prayed that judgment be rendered in favor of plaintiff and against defendants, ordering the latter, jointly and severally, as follows:
- To pay to plaintiff the sum of
P267,197.33, with legal interest from date of demand, as actual or compensatory damages representing the unreturned price of the land;
- To pay to plaintiff the sum of
P500,000.00 as consequential damages;
- To pay to plaintiff the sum of
P1,000,000.00 as moral damages;
- To pay to plaintiff the sum of
P100,000.00 as exemplary damages by way of example or correction for the public good;
- To pay to plaintiff the sum of
P100,000.00 for and as attorney’s fees;
- To pay for the costs of suit; and
- That a Writ of Attachment be issued against the properties of defendant Rayos spouses as security for the satisfaction of any judgment that may be recovered.
PLAINTIFF FURTHER PRAYS for such other remedies and relief as are just or equitable in the premises.[23]
The trial court granted the respondent’s plea for a writ of preliminary attachment on a bond of P260,000.00. After posting the requisite bond, the respondent also filed a criminal complaint against petitioner Orlando Rayos for estafa with the Office of the Provincial Prosecutor of Makati, docketed as I.S. No. 87-150. He, likewise, filed a complaint for disbarment in this Court against petitioner Orlando Rayos, docketed as Administrative Case No. 2974. Unaware of the said complaint, the petitioner wrote the respondent on January 3, 1986 that as soon as his payment to the PSB of P29,223.67 was refunded, the owner’s duplicate of the title would be released to him.[24] On January 5, 1986, petitioner Orlando Rayos wrote respondent Rogelio Miranda, reiterating that he would release the title in exchange for his cash settlement of P29,421.41.[25] The respondent failed to respond.
In the meantime, the PSB executed on January 8, 1987 a Release of Real Estate Mortgage in favor of the petitioners,[26] and released the owner’s duplicate of title of TCT No. 100156.[27] On January 17, 1987, petitioner Orlando Rayos wrote respondent Rogelio Miranda, reiterating his stance in his Letters of January 3 and 5, 1987.
In the meantime, the petitioners received the complaint in Civil Case No. 15639 and filed their Answer with Counterclaim in which they alleged that:
- That plaintiff has no cause of action against defendants Rayos, the latter are willing to deliver the title sought by plaintiff under the terms set out in their letters dated January 3, 5, 17, and 20, hereto marked as Annexes “1,” “1-A,” “1-B” and “1-C;”[28]
Petitioner Orlando Rayos filed a complaint on February 1, 1987 against respondent Rogelio Miranda with the Regional Trial Court of Makati, docketed as Civil Case No. 15984 for Specific Performance with Damages for the collection of the amount of P29,223.67 which he had paid to the PSB on December 12 and 19, 1986, and his attorney’s fees in Civil Case No. 13670. The trial court consolidated the cases in Branch 62 of the RTC.
Respondent Rogelio Miranda filed an Amended Complaint in Civil Case No. 15639 for specific performance with damages, impleading the officers of the PSB as parties-defendants. He alleged that of the purchase price of the property of P214,000.00, he had paid the entirety thereof to the petitioners, and that petitioner Orlando Rayos acted unethically in trying to collect P5,631.93 from him as his attorney’s fees in Civil Case No. 13670, and in having such claim annotated at the dorsal portion of his title over the property he mortgaged to the Manila Banking Corporation.
Respondent Rogelio Miranda prayed that, after due proceedings, judgment be rendered in his favor, thus:
WHEREFORE, it is respectfully prayed that judgment be rendered in favor of plaintiff and against defendants, as follows:
- Ordering defendants spouses Orlando A. Rayos and Mercedes T. Rayos to deliver forthwith to plaintiff the Owner’s Duplicate of Transfer Certificate of Title No. 100156, Registry of Deeds for Pasay City;
- Ordering defendants, jointly and severally, to pay to plaintiff the sum of
P1,000,000.00 as moral damages;
- Ordering defendants, jointly and severally, to pay to plaintiff the sum of
P867,197.33 as exemplary damages by way of example or correction for the public good;
- Ordering defendants, jointly and severally, to pay to plaintiff the sum of
P100,000.00 for and as attorney’s fees;
- Ordering defendants, jointly, to pay the costs of suit; and
- Ordering the issuance of a Writ of Attachment against the properties of defendants Rayos spouses as security for the satisfaction of any judgment that may be recovered.
PLAINTIFF further prays for such other remedies and relief as are just or equitable in the premises.[29]
In the meantime, petitioner Orlando Rayos filed an Amended Complaint in Civil Case No. 15984 impleading his wife and that of respondent Rogelio Miranda as parties to the case. On March 4, 1987, the trial court issued an Order granting the petitioners’ motion in Civil Case No. 15639 for the discharge of the attachment on their property.[30] The court also denied the respondents’ motion for reconsideration of the Order of the court. The respondents, thereafter, filed a petition for review with the Court of Appeals for the nullification of the said Order.
On July 9, 1987, the public prosecutor dismissed the charge of estafa against petitioner Orlando Rayos.[31] The respondents appealed the resolution to the Department of Justice.
On May 26, 1987, the PSB and its officers filed their Answer in Civil Case No. 15639, and alleged the following by way of special and/or affirmative defenses, thus:
- The application for the plaintiff to assume the mortgage loan of the defendants Spouses Rayos was not approved, and it was NOT even recommended by the Marketing Group of defendant PSBank for approval by its Top Management, because the credit standing of the plaintiff was found out to be not good;
- The acceptance of the payments made by the plaintiff for three (3) amortizations on the loan of defendants Spouses Rayos was merely allowed upon the insistence of the plaintiff, which payments were duly and accordingly receipted, and said acceptance was in accordance with the terms of the Real Estate Mortgage executed by the defendants Spouses Rayos in favor of the defendant PSBank and is also allowed by law;[32]
The parties in Civil Case No. 15639 agreed to submit the case for the trial court’s decision on the basis of their pleadings and their respective affidavits. In a Resolution dated July 26, 1988, then Undersecretary of Justice Silvestre Bello III affirmed the Public Prosecutor’s resolution in I.S. No. 87-150.[33]
On January 30, 1989, the petitioners sold the property to Spouses Mario and Enriqueta Ercia for P144,000.00. The said spouses were not impleaded as parties-defendants in Civil Case No. 15639. On May 18, 1989, the petitioners filed an amended complaint in Civil Case No. 15984, appending thereto a copy of the Contract to Sell in favor of the respondents. The trial court admitted the said complaint.
On November 15, 1989, this Court rendered its Decision dismissing the complaint for disbarment against Rayos.[34]
On January 29, 1993, the trial court rendered judgment, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered, as follows:
I. (a) In Civil Case No. 15639, this Court orders plaintiff Rogelio Miranda to refund to spouses Orlando and Mercedes T. Rayos the total sum of P29,069.45, Rayos paid to PS Bank as the last amortization and as release of mortgage fee, without any interest; and upon receipt of the sum of P29,069.45 from Rogelio Miranda, Spouses Orlando and Mercedes T. Rayos shall deliver to Rogelio Miranda Transfer Certificate of Title No. 100156 of the Registry of Deeds of Pasay City; and, deliver to Rogelio Miranda the possession of the parcel of land described in the said title;
(b) Dismissing the complaint for damages of Plaintiff Rogelio Miranda against Spouses Orlando and Remedios (sic) T. Rayos, Philippine Savings Bank, Jose Araullo, Cesar I. Valenzuela, Dionisio Hernandez, Nestor E. Valenzuela, Raul T. Totanes, and Belinda Lim, for insufficiency of evidence; while the counterclaims of PS Bank, Jose Araullo, Cesar Valenzuela, Dionisio Hernandez, Nestor E. Valenzuela, Raul Totanes, and Belinda Lim, are likewise dismissed for insufficiency of evidence.
(c) The counterclaims of Spouses Orlando and Mercedes T. Rayos will be treated in Civil Case No. 15984;
II. In Civil Case No. 15984, this Court orders Defendant Rogelio Miranda to pay to Plaintiff Orlando Rayos the sum of P4,133.19 at 12% interest per annum, from the date of the filing of the complaint on Feb. 11, 1987 until fully paid.
No costs in both cases.
SO ORDERED.[35]
The petitioners appealed the decision to the Court of Appeals contending that:
- THE COURT A QUO COMMITTED A GRAVE ERROR IN NOT FINDING THAT ROGELIO A. MIRANDA COMMITTED A BREACH OF CONTRACT IN NOT PAYING THE FULL CONTINGENT FEE OF 30% IN WRITING IN THE MANILABANK CASE AND BECAUSE OF THAT BREACH, HE CANNOT NOW DEMAND SPECIFIC PERFORMANCE AND THE COURT A QUO SHOULD HAVE LEFT THE PARTIES AS THEY ARE;
- THE COURT A QUO SIMILARLY COMMITTED AN ERROR IN NOT FINDING THAT THE DECISION IN “SEVA VS. ALFREDO BERWIN & CO. & MEDEL” IS APPLICABLE FOUR SQUARE WHEREBY HE WHO BREACHES HIS CONTRACT IS NOT ENTITLED TO SPECIFIC PERFORMANCE;[36]
On July 27, 1998, the Court of Appeals rendered judgment affirming with modification the decision of the RTC, thus:
WHEREFORE, premises considered, the appealed decision of the Regional Trial Court of Makati City, is hereby AFFIRMED, with the modification abovestated.[37]
The petitioners filed the instant petition, and ascribed the following errors on the appellate court:
- THE COURT OF APPEALS (CA) COMMITTED AN ERROR IN NOT FINDING THAT THE PRIVATE RESPONDENT MIRANDA COMMITTED THE FIRST BREACH FOR FAILURE TO ASSUME THE LOAN THUS HE FAILED TO SURROGATE (sic) HIMSELF TO PSB.
- THE CA COMMITTED AN ERROR IN FINDING THAT PETITIONERS PRE-EMPTED PRIVATE RESPONDENT MIRANDA IN DEPOSITING THE LAST AMORTIZATION WHEN MIRANDA HAD NO LEGAL STANDING WITH PSB DUE TO THE LATTER’S NON-APPROVAL OF THE ASSUMPTION OF THE LOAN.
- THE CA COMMITTED AN ERROR IN FINDING BOTH PARTIES GUILTY OF FIRST VIOLATING THE OBLIGATIONS INCUMBENT UPON THEM EVEN INFERRING THAT PETITIONERS COMMITTED THE BREACH FIRST BUT LATER CONCLUDING THAT THE BREACH WAS COMMITTED BY BOTH PARTIES. IT DID NOT MAKE A CORRECT ASSESSMENT OF WHO ACTUALLY COMMITTED THE FIRST BREACH.
- THE CA COMMITTED AN ERROR IN NOT ALLOWING THE OFFSET IF ITS DECISION STOOD OF THE AMOUNT OF
P4,133.19 PLUS 12% INT. P.A. FROM THE FILING OF THE COMPLAINT (CV 15984), THUS, ENTIRELY DISREGARDING THE DECISION OF THE TRIAL COURT IN SAID CASE ALLOWING ONLY THE DECISION IN CV 15639.
- THE CA COMMITTED AN ERROR IN NOT APPLYING THE DECSION (sic) LAID DOWN IN “SEVA VS. ALFRED BERWIN & CO. AND MEDEL” THAT A PERSON HIMSELF AT FAULT CANNOT ENFORCE SPECIFIC PERFORMANCE.[38]
The petitioners assert that the Court of Appeals erred in not finding that the respondents first committed a breach of their contract to sell upon their failure to pay the amount due for the last quarterly installment of their loan from the PSB. The petitioners fault the Court of Appeals for not relying on the resolution of Undersecretary Silvestre Bello III affirming the dismissal of the criminal complaint for estafa in I.S. No. 87-150, as cited by this Court in its decision in Miranda v. Rayos,[39] where it was also held that petitioner Orlando Rayos paid the last quarterly installment because he thought that the respondents would not be able to pay the same. The petitioners argue that they had no other alternative but to pay the last quarterly installment due on their loan with the PSB, considering that they received a demand letter from the bank on November 28, 1986, coupled by its denial of the respondents’ request to assume the payment of the loan. They insist that they did not block the respondents’ payment of the balance of the loan with the bank. The petitioners contend that even if the parties committed a breach of their respective obligations under the contract to sell, it behooved the Court of Appeals to apply Article 1192 of the Civil Code in the instant case, which reads:
… The power to rescind obligation is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.
The petition has no merit.
The assailed ruling of the Court of Appeals reads:
After due study, the Court finds that there was no basis in fact and law for the appellants to usurp the payment of the last amortization on the mortgage upon the parcel of land it had conveyed to the Mirandas. Even if the appellants wanted to keep their good credit standing, they should not have preempted Miranda in paying the final amortization. There is no sufficient showing that Miranda was in danger of defaulting on the said payment. In fact, it appears that he approached the bank to tender payment, but he was refused by the bank, because he was beaten to the draw, so to speak, by the appellants. Appellants were able to do so because, for some reasons, the Mirandas’ assumption of the mortgage has not been approved by the bank. In doing so, the appellants had unilaterally cancelled the deed of sale with assumption of mortgage, without the consent of the Mirandas. This conduct by the appellants is, to say the least, injudicious as under Article 1308 of the Civil Code, contracts must bind both contracting parties and their validity or compliance cannot be left to the will of one of them.
Just as nobody can be forced to enter into a contract, in the same manner, once a contract is entered into, no party can renounce it unilaterally or without the consent of the other. It is a general principle of law that no one may be permitted to change his mind or disavow and go back upon his own acts, or to proceed contrary thereto, to the prejudice of the other party. In a regime of law and order, repudiation of an agreement validly entered into cannot be made without any ground or reason in law or in fact for such repudiation.
In the same way that the Rayos spouses must respect their contract with the Mirandas for the sale of real property and assumption of mortgage, Rogelio Miranda has to recognize his obligations under his agreement to pay contingent attorney’s fees to Orlando Rayos.[40]
The Court of Appeals erred in so ruling.
The findings and disquisitions of the Court of Appeals cannot prevail over our findings in Miranda v. Rayos,[41] a case which involves the same parties, and where we held that the petitioners cannot be faulted for paying the amortization due for the last quarterly installment on their loan with the PSB:
It is difficult to imagine that complainant would be so naïve as to be totally unaware of the provisions of the original contract between the PSB and the spouses Rayos. He is a degree holder (A.B. Pre-Law and B.S.C.) and Acting Municipal Treasurer of Las Piñas. In short, he is not an ordinary layman. As a buyer with a knowledge of law, it was unnatural for him to read the provisions of the real estate mortgage wherein it is provided, among others, that the sale of the property covered by the mortgage does not in any manner relieve the mortgagor of his obligation but that “on the contrary, both the vendor and the vendee, or the party in whose favor the alienation or encumbrance is made shall be, jointly and severally, liable for said mortgage obligations.” There is every reason to believe that it was pursuant to the said provision in the real estate mortgage that complainant tried to assume the loan obligation of the Rayoses by filling up and submitted the loan application (page 30, records) sent by Orland Rayos. By signing the loan application and the general information sheet (page 31, records) in connection with said application, complainant showed that he knew that there was a need to formally apply to the bank in order for him to assume the mortgage.
We find respondent spouses’ version that when complainant’s application to assume the mortgage loan was disapproved he begged that he be allowed to pay the quarterly amortization credible, owing to the fact that complainant made the payments for the account of the Rayoses. Hence, complainant knew that since his application to the PSB was not approved, there was no substitution of parties and so he had to pay for the account of respondent spouses as shown by the receipts issued by the PSB.
As for the charge that Rayos paid the last installment to block complainant from getting the title and transferring the same to his name, respondents’ version is more satisfactory and convincing. Respondent Orland Rayos paid the last amortization when it became apparent that complainant would not be able to give the payment on the due date as he was still trying to sell his Lancer car. Even if complainant was able to pay the last installment of the mortgage loan, the title would not be released to him as he knew very well that his application to assume the mortgage was disapproved and he had no personality as far as PSB was concerned.[42]
Contrary to the ruling of the Court of Appeals, the petitioners did not unilaterally cancel their contract to sell with the respondents when they paid the total amount of P29,062.80 to the PSB in December 1986.[43] In fact, the petitioners wrote the respondents on January 3, 5 and 17, 1987, that they were ready to execute the deed of absolute sale and turn over the owner’s duplicate of TCT No. 100156 upon the respondents’ remittance of the amount of P29,223.67. The petitioners reiterated the same stance in their Answer with Counterclaim in Civil Case No. 15639. The petitioners cannot, likewise, be faulted for refusing to execute a deed of absolute sale over the property in favor of the respondents, and in refusing to turn over the owner’s duplicate of TCT No. 100156 unless the respondents refunded the said amount. The respondents were obliged under the contract to sell to pay the said amount to the PSB as part of the purchase price of the property. On the other hand, it cannot be argued by the petitioners that the respondents committed a breach of their obligation when they refused to refund the said amount.
It bears stressing that the petitioners and the respondents executed two interrelated contracts, viz: the Deed of Sale with Assumption of Mortgage dated December 26, 1985, and the Contract to Sell dated January 29, 1986. To determine the intention of the parties, the two contracts must be read and interpreted together.[44] Under the two contracts, the petitioners bound and obliged themselves to execute a deed of absolute sale over the property and transfer title thereon to the respondents after the payment of the full purchase price of the property, inclusive of the quarterly installments due on the petitioners’ loan with the PSB:
- That upon full payment of the consideration hereof, the SELLER shall execute a Deed of Absolute Sale in favor of the BUYER that the payment of capital gains tax shall be for the account of the SELLER and that documentary stamps, transfer tax, registration expenses for the transfer of title including the notarization and preparation of this Contract and subsequent documents if any are to be executed, real estate taxes from January 1, 1986 and other miscellaneous expenses shall be for the account of the BUYER; the SELLER hereby represents that all association dues has been paid but that subsequent to the execution of this Contract the payment of the same shall devolve upon the BUYER.[45]
Construing the contracts together, it is evident that the parties executed a contract to sell and not a contract of sale. The petitioners retained ownership without further remedies by the respondents[46] until the payment of the purchase price of the property in full. Such payment is a positive suspensive condition, failure of which is not really a breach, serious or otherwise, but an event that prevents the obligation of the petitioners to convey title from arising, in accordance with Article 1184 of the Civil Code.[47] In Lacanilao v. Court of Appeals,[48] we held that:
It is well established that where the seller promised to execute a deed of absolute sale upon completion of payment of the purchase price by the buyer, the agreement is a contract to sell. In contracts to sell, where ownership is retained by the seller until payment of the price in full, such payment is a positive suspensive condition, failure of which is not really a breach but an event that prevents the obligation of the vendor to convey title in accordance with Article 1184 of the Civil Code.
The non-fulfillment by the respondent of his obligation to pay, which is a suspensive condition to the obligation of the petitioners to sell and deliver the title to the property, rendered the contract to sell ineffective and without force and effect.[49] The parties stand as if the conditional obligation had never existed. Article 1191 of the New Civil Code will not apply because it presupposes an obligation already extant.[50] There can be no rescission of an obligation that is still non-existing, the suspensive condition not having happened.[51]
However, the respondents may reinstate the contract to sell by paying the P29,223.67, and the petitioners may agree thereto and accept the respondents’ late payment.[52] In this case, the petitioners had decided before and after the respondents filed this complaint in Civil Case No. 15639 to accept the payment of P29,223.67, to execute the deed of absolute sale over the property and cause the transfer of the title of the subject property to the respondents. The petitioners even filed its amended complaint in Civil Case No. 15984 for the collection of the said amount. The Court of Appeals cannot, thus, be faulted for affirming the decision of the trial court and ordering the petitioners to convey the property to the respondents upon the latter’s payment of the amount of P29,223.67, provided that the property has not been sold to a third-party who acted in good faith.
IN VIEW OF ALL THE FOREGOING, the petition is DENIED DUE COURSE. The Decision of the Court of Appeals in CA-G.R. CV No. 46727 is AFFIRMED, except as to the factual finding that the petitioners “usurped the payment of the last amortization on the mortgage upon the parcel of land.” Costs against the petitioners.
SO ORDERED.
Puno, (Chairman), Quisumbing, Austria-Martinez, and Tinga, JJ., concur.
[1] Penned by Associate Justice Rodrigo V. Cosico, with Associate Justices Jainal D. Rasul (retired) and Delilah Vidallon-Magtolis, concurring.
[2] Seventh Division.
[3] Penned by Judge Roberto C. Diokno (retired).
[4] Records, Vol. I, p. 15. (Civil Case No. 15639).
[5] Id. at 14.
[6] Records, Vol. II, p. 832. (Civil Case No. 15639).
[7] Records, Vol. I, pp. 450-451. (Civil Case No. 15639).
[8] Id. at 43.
[9] Id. at 106.
[10] Id. at 107-109.
[11] Records, Vol. II, p. 826. (Civil Case No. 15639).
[12] Records, Vol. I, p. 112. (Civil Case No. 15639).
[13] Id. at 113.
[14] Id. at 116-117.
[15] Id. at 270.
[16] Id. at 21.
[17] Id. at 463.
[18] Id. at 635.
[19] Id. at 19.
[20] Id. at 22-23.
[21] Id. at 464.
[22] Id. at 128.
[23] Id. at 10.
[24] Id. at 182.
[25] Id. at 183.
[26] Id. at 465.
[27] Id. at 466.
[28] Id. at 64.
[29] Records, Vol. I, p. 103. (Civil Case No. 15639).
[30] Id. at 254.
[31] Id. at 471.
[32] Id. at 346-347.
[33] I.S. No. 87-150.
[34] Miranda v. Rayos, 179 SCRA 489 (1989).
[35] Record, Vol. II, pp. 964-965. (Civil Case No. 15639).
[36] CA Rollo, p. 21.
[37] Id. at 19.
[38] Id. at 5-6.
[39] Supra.
[40] Rollo, pp. 17-18.
[41] Supra.
[42] Rollo, pp. 28-29.
[43] See notes 17 and 21.
[44] Golden Diamond, Inc. v. Court of Appeals, 332 SCRA 605 (2000).
[45] Records, Vol. II, p. 832. (Civil Case No. 15639).
[46] Coronel v. Court of Appeals, 263 SCRA 15 (1996).
[47] Leaño v. Court of Appeals, 369 SCRA 36 (2001).
[48] 262 SCRA 486 (1996).
[49] Agustin v. Court of Appeals, 186 SCRA 375 (1990).
[50] Padilla v. Posadas, 328 SCRA 434 (2001).
[51] Rillo v. Court of Appeals, 274 SCRA 461 (1997).
[52] See Leaño v. Court of Appeals, supra.
Source: Supreme Court E-Library | Date created: 2008-07-18 10:07:46
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SECOND DIVISION
[ G.R. No. 188064, June 01, 2011 ]
MILA A. REYES, PETITIONER, VS. VICTORIA T. TUPARAN, RESPONDENT.
D E C I S I O N
MENDOZA, J.:
Subject of this petition for review is the February 13, 2009 Decision[1] of the Court of Appeals (CA) which affirmed with modification the February 22, 2006 Decision[2] 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 P4,000.00. 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 P2,000,000.00 payable in installments. On November 15, 1990, petitioner's outstanding account on the mortgage reached P2,278,078.13. Petitioner then decided to sell her real properties for at least P6,500,000.00 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 P4,200,000.00 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 P6,500,000.00 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 P8,000.00 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 P4,200,000.00.[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 P1.2 million pesos without interest as part of the purchase price in three (3) fixed installments as follows:
a) P200,000.00 - due January 31, 1991
b) P200,000.00 - due June 30, 1991
c) P800,000.00 - 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 P395,000.00, leaving a balance of P805,000.00 as principal on the unpaid installments and P466,893.25 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 rental income in the amount of P8,000.00 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 P751,000.00 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 P2,278,078.13 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 P4,200,000.00, the agreed purchase price of the subject real properties, and she had even introduced improvements thereon worth more than P4,800,000.00. 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 P120,000.00. Petitioner also failed and refused to pay the monthly rental of P20,000.00 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 P470,000.00 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 P4.2 million total purchase price of the subject real properties leaving a balance of P805,000.00. 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 P1,200,000.00. 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 P751,000.00 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 P805,000.00, 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 P8,000.00; 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 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 P805,000.00 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 P4,200,000.00, 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 P805,000.00 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 P805,000.00 WHICH IS EQUAL TO 20% OF THE TOTAL PURCHASE PRICE OF P4,200,000.00 OR 66% OF THE STIPULATED LAST INSTALLMENT OF P1,200,000.00 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 P805,000.00 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 P805,000.00 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 P805,000.00 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 P805,000.00 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 P805,000.00 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 P29,609.00 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 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 P805,000.00 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 P805,000.00 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 P29,609.00 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 P2,000,000.00. 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 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 Pacson[8] 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.
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 P1,750,000.00 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 P4,200,000.00, the remaining unpaid balance of Tuparan (respondent) is only P805,000.00, 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 P4,200,000.00 shall be paid as follows:
a) P278,078.13 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 P2,000,000.00 only as of November 15, 1990;
b) P721,921.87 received in cash by the First Party as additional payment of the Second Party;
c) P1,200,000.00 to be paid in installments as follows:
- P200,000.00 payable on or before January 31, 1991;
- P200,000.00 payable on or before June 30, 1991;
- P800,000.00 payable on or before December 31, 1991;
Note: All the installments shall not bear any interest.
d) P2,000,000.00 outstanding balance of the mortgage obligation as of November 15, 1990 which is hereby assumed by the Second Party.
x x x
3. That the Third Party hereby acknowledges receipts from the Second Party P278,078.13 as partial payment of the loan obligation of First Party in order to reduce the account to only P2,000,000.00 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 P2,278,078.13, 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 P721,921.87 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 P3,000,000.00, leaving a balance of ?1,200,000.00 payable in three (3) installments.
Out of the P1,200,000.00 remaining balance, respondent paid on several dates the first and second installments of P200,000.00 each. She, however, failed to pay the third and last installment of P800,000.00 due on December 31, 1991. Nevertheless, on August 31, 1992, respondent, through counsel, offered to pay the amount of P751,000.00, which was rejected by petitioner for the reason that the actual balance was P805,000.00 excluding the interest charges.
Considering that out of the total purchase price of P4,200,000.00, respondent has already paid the substantial amount of P3,400,000.00, more or less, leaving an unpaid balance of only P805,000.00, 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 P751,000.00.
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 P805,000.00 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.
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.
Carpio, (Chairperson), Nachura, Peralta, and Abad, JJ., concur.
[1] Rollo, pp. 72-102; penned by Associate Justice Celia C. Librea-Leagogo and concurred in by Associate Justice Juan Q. Enriquez, Jr. and Associate Justice Normandie B. Pizarro.
[2] Id. at 147-162.
[3] Paragraph 11 of the Complaint, id. at 176.
[4] Id. at 160.
[5] Id. at 162.
[6] Id. at 101-102.
[7] Memorandum for Respondent, id. at 395.
[8] G.R. No. 161318, November 25, 2009, 605 SCRA 334, 348-353.
[9] G.R. No. 180665, August 11, 2010, 628 SCRA 256, 262-263.
[10] CA Decision, rollo, p. 100.
[11] GG Sportswear Mfg. Corp. v. World Class Properties, Inc., G.R. No. 182720, March 2, 2010, 614 SCRA 75, 87.
[12] Rollo, pp. 25-26.
[13] Supra note 9.
Source: Supreme Court E-Library | Date created: July 26, 2011
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