G.R. No. 144225. June 17, 2003] SPOUSES GODOFREDO ALFREDO and CARMEN LIMON ALFREDO, SPOUSES ARNULFO SAVELLANO and EDITHA B. SAVELLANO, DANTON D. MATAWARAN, SPOUSES DELFIN F. ESPIRITU, JR. and ESTELA S. ESPIRITU and ELIZABETH TUAZON, petitioners, vs.SPOUSES ARMANDO BORRAS and ADELIA LOBATON BORRAS, respondents. D E C I S I O N CARPIO, J.: The Case Before us is a petition for review assailing the Decision [1] of the Court of Appeals dated 26 November 1999 affirming the decision [2] of the Regional Trial Court of Bataan, Branch 4, in Civil Case No. DH-256-94. Petitioners also question the Resolution of the Court of Appeals dated 26 July 2000 denying petitioners’ motion for reconsideration. The Antecedent Facts A parcel of land measuring 81,524 square meters (“Subject Land”) in Barrio Culis, Mabiga, Hermosa, Bataan is the subject of controversy in this case. The registered owners of the Subject Land were petitioner spouses, Godofredo Alfredo (“Godofredo”) and Carmen Limon Alfredo (“Carmen”). The Subject Land is covered by Original Certificate of Title No. 284 (“OCT No. 284”) issued to Godofredo and Carmen under Homestead Patent No. V-69196. On 7 March 1994, the private respondents, spouses Armando Borras (“Armando”) and Adelia Lobaton Borras (“Adelia”), filed a complaint for specific performance against Godofredo and Carmen before the Regional Trial Court of Bataan, Branch 4. The case was docketed as Civil Case No. DH-256-94.
Transcript
G.R. No. 144225. June 17, 2003]
SPOUSES GODOFREDO ALFREDO and CARMEN LIMON ALFREDO, SPOUSES ARNULFO SAVELLANO and EDITHA B. SAVELLANO, DANTON D. MATAWARAN, SPOUSES DELFIN F. ESPIRITU, JR. and ESTELA S. ESPIRITU and ELIZABETH TUAZON, petitioners, vs.SPOUSES ARMANDO BORRAS and ADELIA LOBATON BORRAS, respondents.
D E C I S I O NCARPIO, J.:
The Case
Before us is a petition for review assailing the Decision[1] of the Court of Appeals dated 26 November 1999 affirming the decision[2] of the Regional Trial Court of Bataan, Branch 4, in Civil Case No. DH-256-94. Petitioners also question the Resolution of the Court of Appeals dated 26 July 2000 denying petitioners’ motion for reconsideration.
The Antecedent Facts
A parcel of land measuring 81,524 square meters (“Subject Land”) in Barrio Culis, Mabiga, Hermosa, Bataan is the subject of controversy in this case. The registered owners of the Subject Land were petitioner spouses, Godofredo Alfredo (“Godofredo”) and Carmen Limon Alfredo (“Carmen”). The Subject Land is covered by Original Certificate of Title No. 284 (“OCT No. 284”) issued to Godofredo and Carmen under Homestead Patent No. V-69196.
On 7 March 1994, the private respondents, spouses Armando Borras (“Armando”) and Adelia Lobaton Borras (“Adelia”), filed a complaint for specific performance against Godofredo and Carmen before the Regional Trial Court of Bataan, Branch 4. The case was docketed as Civil Case No. DH-256-94.
Armando and Adelia alleged in their complaint that Godofredo and Carmen mortgaged the Subject Land for P7,000.00 with the Development Bank of the Philippines (“DBP”). To pay the debt, Carmen and Godofredo sold the Subject Land to Armando and Adelia for P15,000.00, the buyers to pay the DBP loan and its accumulated interest, and the balance to be paid in cash to the sellers.
Armando and Adelia gave Godofredo and Carmen the money to pay the loan to DBP which signed the release of mortgage and returned the owner’s duplicate copy of OCT No. 284 to Godofredo and Carmen. Armando and Adelia subsequently paid the balance of the purchase price of the Subject Land for which Carmen issued a receipt dated 11 March 1970. Godofredo and Carmen then delivered to Adelia the owner’s duplicate copy of OCT No. 284, with the document of cancellation of mortgage, official receipts of realty tax payments, and tax declaration in the name of Godofredo. Godofredo and Carmen introduced Armando and Adelia, as the new owners of the Subject Land, to the Natanawans, the old tenants of the Subject Land. Armando and Adelia then took possession of the Subject Land.
In January 1994, Armando and Adelia learned that hired persons had entered the Subject Land and were cutting trees under instructions of allegedly new owners of the Subject Land. Subsequently, Armando and Adelia discovered that Godofredo and Carmen had re-sold portions of the Subject Land to several persons.
On 8 February 1994, Armando and Adelia filed an adverse claim with the Register of Deeds of Bataan. Armando and Adelia discovered that Godofredo and Carmen had secured an owner’s duplicate copy of OCT No. 284 after filing a petition in court for the issuance of a new copy. Godofredo and Carmen claimed in their petition that they lost their owner’s duplicate copy. Armando and Adelia wrote Godofredo and Carmen complaining about their acts, but the latter did not reply. Thus, Armando and Adelia filed a complaint for specific performance.
On 28 March 1994, Armando and Adelia amended their complaint to include the following persons as additional defendants: the spouses Arnulfo Savellano and Editha B. Savellano, Danton D. Matawaran, the spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu, and Elizabeth Tuazon (“Subsequent Buyers”). The Subsequent Buyers, who are also petitioners in this case, purchased from Godofredo and Carmen the subdivided portions of the Subject Land. The Register of Deeds of Bataan issued to the Subsequent Buyers transfer certificates of title to the lots they purchased.
In their answer, Godofredo and Carmen and the Subsequent Buyers (collectively “petitioners”) argued that the action is unenforceable under the Statute of Frauds. Petitioners pointed out that there is no written instrument evidencing the alleged contract of sale over the Subject Land in favor of Armando and Adelia. Petitioners objected to whatever parole evidence Armando and Adelia introduced or offered on the alleged sale unless the same was in writing and subscribed by Godofredo. Petitioners asserted that the Subsequent Buyers were buyers in good faith and for value. As counterclaim, petitioners sought payment of attorney’s fees and incidental expenses.
Trial then followed. Armando and Adelia presented the following witnesses: Adelia, Jesus Lobaton, Roberto Lopez, Apolinario Natanawan, Rolando Natanawan, Tomas Natanawan, and Mildred Lobaton. Petitioners presented two witnesses, Godofredo and Constancia Calonso.
On 7 June 1996, the trial court rendered its decision in favor of Armando and Adelia. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs, the spouses Adelia Lobaton Borras and Armando F. Borras, and against the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo, spouses Arnulfo Sabellano and Editha B. Sabellano, spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu, Danton D. Matawaran and Elizabeth Tuazon, as follows:
1. Declaring the Deeds of Absolute Sale of the disputed parcel of land (covered by OCT No. 284) executed by the spouses Godofredo Alfredo and Camen Limon Alfredo in favor of spouses Arnulfo Sabellano and Editha B. Sabellano, spouses Delfin F. Espiritu, Danton D. Matawaran and Elizabeth Tuazon, as null and void;
2. Declaring the Transfer Certificates of Title Nos. T-163266 and T-163267 in the names of spouses Arnulfo Sabellano and Editha B. Sabellano; Transfer Certificates of Title Nos. T-163268 and 163272 in the names of spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu; Transfer Certificates of Title Nos. T-163269 and T-163271 in the name of Danton D. Matawaran; and Transfer Certificate of Title No. T-163270 in the name of Elizabeth Tuazon, as null and void and that the Register of Deeds of Bataan is hereby ordered to cancel said titles;
3. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to execute and deliver a good and valid Deed of Absolute Sale of the disputed parcel of land (covered by OCT No. 284) in favor of the spouses Adelia Lobaton Borras and Armando F. Borras within a period of ten (10) days from the finality of this decision;
4. Ordering defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to surrender their owner’s duplicate copy of OCT No. 284 issued to them by virtue of the Order dated May 20, 1992 of the Regional Trial Court of Bataan, Dinalupihan Branch, to the Registry of Deeds of Bataan within ten (10) days from the finality of this decision, who, in turn, is directed to cancel the same as there exists in the possession of herein plaintiffs of the owner’s duplicate copy of said OCT No. 284 and, to restore and/or reinstate OCT No. 284 of the Register of Deeds of Bataan to its full force and effect;
5. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to restitute and/or return the amount of the respective purchase prices and/or
consideration of sale of the disputed parcels of land they sold to their co-defendants within ten (10) days from the finality of this decision with legal interest thereon from date of the sale;
6. Ordering the defendants, jointly and severally, to pay plaintiff-spouses the sum of P20,000.00 as and for attorney’s fees and litigation expenses; and
7. Ordering defendants to pay the costs of suit.
Defendants’ counterclaims are hereby dismissed for lack of merit.
SO ORDERED.[3]
Petitioners appealed to the Court of Appeals.On 26 November 1999, the Court of Appeals issued its Decision
affirming the decision of the trial court, thus:
WHEREFORE, premises considered, the appealed decision in Civil Case No. DH-256-94 is hereby AFFIRMED in its entirety. Treble costs against the defendants-appellants.
SO ORDERED.[4]
On 26 July 2000, the Court of Appeals denied petitioners’ motion for reconsideration.
The Ruling of the Trial Court
The trial court ruled that there was a perfected contract of sale between the spouses Godofredo and Carmen and the spouses Armando and Adelia. The trial court found that all the elements of a contract of sale were present in this case. The object of the sale was specifically identified as the 81,524-square meter lot in Barrio Culis, Mabigas, Hermosa, Bataan, covered by OCT No. 284 issued by the Registry of Deeds of Bataan. The purchase price was fixed at P15,000.00, with the buyers assuming to pay the sellers’ P7,000.00 DBP mortgage loan including its accumulated interest. The balance of the purchase price was to be paid in cash to the sellers. The last payment of P2,524.00 constituted the full settlement of the purchase price and this was paid on 11 March 1970 as evidenced by the receipt issued by Carmen.
The trial court found the following facts as proof of a perfected contract of sale: (1) Godofredo and Carmen delivered to Armando and Adelia the Subject Land; (2) Armando and Adelia treated as their own tenants the tenants of Godofredo and Carmen; (3) Godofredo and Carmen turned over to
Armando and Adelia documents such as the owner’s duplicate copy of the title of the Subject Land, tax declaration, and the receipts of realty tax payments in the name of Godofredo; and (4) the DBP cancelled the mortgage on the Subject Property upon payment of the loan of Godofredo and Carmen. Moreover, the receipt of payment issued by Carmen served as an acknowledgment, if not a ratification, of the verbal sale between the sellers and the buyers. The trial court ruled that the Statute of Frauds is not applicable because in this case the sale was perfected.
The trial court concluded that the Subsequent Buyers were not innocent purchasers. Not one of the Subsequent Buyers testified in court on how they purchased their respective lots. The Subsequent Buyers totally depended on the testimony of Constancia Calonso (“Calonso”) to explain the subsequent sale. Calonso, a broker, negotiated with Godofredo and Carmen the sale of the Subject Land which Godofredo and Carmen subdivided so they could sell anew portions to the Subsequent Buyers.
Calonso admitted that the Subject Land was adjacent to her own lot. The trial court pointed out that Calonso did not inquire on the nature of the tenancy of the Natanawans and on who owned the Subject Land. Instead, she bought out the tenants for P150,000.00. The buy out was embodied in a Kasunduan. Apolinario Natanawan (“Apolinario”) testified that he and his wife accepted the money and signed the Kasunduan because Calonso and the Subsequent Buyers threatened them with forcible ejectment. Calonso brought Apolinario to the Agrarian Reform Office where he was asked to produce the documents showing that Adelia is the owner of the Subject Land. Since Apolinario could not produce the documents, the agrarian officer told him that he would lose the case. Thus, Apolinario was constrained to sign the Kasunduan and accept the P150,000.00.
Another indication of Calonso’s bad faith was her own admission that she saw an adverse claim on the title of the Subject Land when she registered the deeds of sale in the names of the Subsequent Buyers. Calonso ignored the adverse claim and proceeded with the registration of the deeds of sale.
The trial court awarded P20,000.00 as attorney’s fees to Armando and Adelia. In justifying the award of attorney’s fees, the trial court invoked Article 2208 (2) of the Civil Code which allows a court to award attorney’s fees, including litigation expenses, when it is just and equitable to award the same. The trial court ruled that Armando and Adelia are entitled to attorney’s fees since they were compelled to file this case due to petitioners’ refusal to heed their just and valid demand.
The Ruling of the Court of Appeals
The Court of Appeals found the factual findings of the trial court well supported by the evidence. Based on these findings, the Court of Appeals also concluded that there was a perfected contract of sale and the Subsequent Buyers were not innocent purchasers.
The Court of Appeals ruled that the handwritten receipt dated 11 March 1970 is sufficient proof that Godofredo and Carmen sold the Subject Land to Armando and Adelia upon payment of the balance of the purchase price. The Court of Appeals found the recitals in the receipt as “sufficient to serve as the memorandum or note as a writing under the Statute of Frauds.”[5] The Court of Appeals then reiterated the ruling of the trial court that the Statute of Frauds does not apply in this case.
The Court of Appeals gave credence to the testimony of a witness of Armando and Adelia, Mildred Lobaton, who explained why the title to the Subject Land was not in the name of Armando and Adelia. Lobaton testified that Godofredo was then busy preparing to leave for Davao. Godofredo promised that he would sign all the papers once they were ready. Since Armando and Adelia were close to the family of Carmen, they trusted Godofredo and Carmen to honor their commitment. Armando and Adelia had no reason to believe that their contract of sale was not perfected or validly executed considering that they had received the duplicate copy of OCT No. 284 and other relevant documents. Moreover, they had taken physical possession of the Subject Land.
The Court of Appeals held that the contract of sale is not void even if only Carmen signed the receipt dated 11 March 1970. Citing Felipe v. Heirs of Maximo Aldon,[6] the appellate court ruled that a contract of sale made by the wife without the husband’s consent is not void but merely voidable. The Court of Appeals further declared that the sale in this case binds the conjugal partnership even if only the wife signed the receipt because the proceeds of the sale were used for the benefit of the conjugal partnership. The appellate court based this conclusion on Article 161[7] of the Civil Code.
The Subsequent Buyers of the Subject Land cannot claim that they are buyers in good faith because they had constructive notice of the adverse claim of Armando and Adelia. Calonso, who brokered the subsequent sale, testified that when she registered the subsequent deeds of sale, the adverse claim of Armando and Adelia was already annotated on the title of the Subject Land. The Court of Appeals believed that the act of Calonso and the Subsequent Buyers in forcibly ejecting the Natanawans from the Subject Land buttresses the conclusion that the second sale was tainted with bad faith from the very beginning.
Finally, the Court of Appeals noted that the issue of prescription was not raised in the Answer. Nonetheless, the appellate court explained that since this action is actually based on fraud, the prescriptive period is four years, with the period starting to run only from the date of the discovery of the fraud. Armando and Adelia discovered the fraudulent sale of the Subject Land only in January 1994. Armando and Adelia lost no time in writing a letter to Godofredo and Carmen on 2 February 1994 and filed this case on 7 March 1994. Plainly, Armando and Adelia did not sleep on their rights or lose their rights by prescription.
The Court of Appeals sustained the award of attorney’s fees and imposed treble costs on petitioners.
Whether the alleged sale of the Subject Land in favor of Armando and Adelia is valid and enforceable, where (1) it was orally entered into and not in writing; (2) Carmen did not obtain the consent and authority of her husband, Godofredo, who was the sole owner of the Subject Land in whose name the title thereto (OCT No. 284) was issued; and (3) it was entered into during the 25-year prohibitive period for alienating the Subject Land without the approval of the Secretary of Agriculture and Natural Resources.
II
Whether the action to enforce the alleged oral contract of sale brought after 24 years from its alleged perfection had been barred by prescription and by laches.
III
Whether the deeds of absolute sale and the transfer certificates of title over the portions of the Subject Land issued to the Subsequent Buyers, innocent purchasers in good faith and for value whose individual titles to their respective lots are absolute and indefeasible, are valid.
IV
Whether petitioners are liable to pay Armando and Adelia P20,0000.00 as attorney’s fees and litigation expenses and the treble costs, where the claim of Armando and Adelia is clearly unfounded and baseless.
V
Whether petitioners are entitled to the counterclaim for attorney’s fees and litigation expenses, where they have sustained such expenses by reason of institution of a clearly malicious and unfounded action by Armando and Adelia.[8]
In a petition for review on certiorari under Rule 45, this Court reviews only errors of law and not errors of facts.[9] The factual findings of the appellate court are generally binding on this Court.[10] This applies with greater force when both the trial court and the Court of Appeals are in complete agreement on their factual findings.[11] In this case, there is no reason to deviate from the findings of the lower courts. The facts relied upon by the trial and appellate courts are borne out by the record. We agree with the conclusions drawn by the lower courts from these facts.
Validity and Enforceability of the Sale
The contract of sale between the spouses Godofredo and Carmen and the spouses Armando and Adelia was a perfected contract. A contract is perfected once there is consent of the contracting parties on the object certain and on the cause of the obligation.[12] In the instant case, the object of the sale is the Subject Land, and the price certain is P15,000.00. The trial and appellate courts found that there was a meeting of the minds on the sale of the Subject Land and on the purchase price of P15,000.00. This is a finding of fact that is binding on this Court. We find no reason to disturb this finding since it is supported by substantial evidence.
The contract of sale of the Subject Land has also been consummated because the sellers and buyers have performed their respective obligations under the contract. In a contract of sale, the seller obligates himself to transfer the ownership of the determinate thing sold, and to deliver the same, to the buyer who obligates himself to pay a price certain to the seller.[13] In the instant case, Godofredo and Carmen delivered the Subject Land to Armando and Adelia, placing the latter in actual physical possession of the Subject Land. This physical delivery of the Subject Land also constituted a transfer of ownership of the Subject Land to Armando and Adelia.[14] Ownership of the thing sold is transferred to the vendee upon its actual or constructive delivery.[15] Godofredo and Carmen also turned over to Armando and Adelia the documents of ownership to the Subject Land, namely the owner’s duplicate copy of OCT No. 284, the tax declaration and the receipts of realty tax payments.
On the other hand, Armando and Adelia paid the full purchase price as evidenced by the receipt dated 11 March 1970 issued by Carmen. Armando and Adelia fulfilled their obligation to provide the P7,000.00 to pay the DBP loan of Godofredo and Carmen, and to pay the latter the balance of P8,000.00 in cash. The P2,524.00 paid under the receipt dated 11 March 1970 was the last installment to settle fully the purchase price. Indeed, upon payment to DBP of the P7,000.00 and the accumulated interests, the DBP cancelled the mortgage on the Subject Land and returned the owner’s duplicate copy of OCT No. 284 to Godofredo and Carmen.
The trial and appellate courts correctly refused to apply the Statute of Frauds to this case. The Statute of Frauds[16] provides that a contract for the sale of real property shall be unenforceable unless the contract or some note
or memorandum of the sale is in writing and subscribed by the party charged or his agent. The existence of the receipt dated 11 March 1970, which is a memorandum of the sale, removes the transaction from the provisions of the Statute of Frauds.
The Statute of Frauds applies only to executory contracts and not to contracts either partially or totally performed.[17] Thus, where one party has performed one’s obligation, oral evidence will be admitted to prove the agreement.[18] In the instant case, the parties have consummated the sale of the Subject Land, with both sellers and buyers performing their respective obligations under the contract of sale. In addition, a contract that violates the Statute of Frauds is ratified by the acceptance of benefits under the contract.[19] Godofredo and Carmen benefited from the contract because they paid their DBP loan and secured the cancellation of their mortgage using the money given by Armando and Adelia. Godofredo and Carmen also accepted payment of the balance of the purchase price.
Godofredo and Carmen cannot invoke the Statute of Frauds to deny the existence of the verbal contract of sale because they have performed their obligations, and have accepted benefits, under the verbal contract. [20] Armando and Adelia have also performed their obligations under the verbal contract. Clearly, both the sellers and the buyers have consummated the verbal contract of sale of the Subject Land. The Statute of Frauds was enacted to prevent fraud.[21] This law cannot be used to advance the very evil the law seeks to prevent.
Godofredo and Carmen also claim that the sale of the Subject Land to Armando and Adelia is void on two grounds. First, Carmen sold the Subject Land without the marital consent of Godofredo. Second, the sale was made during the 25-year period that the law prohibits the alienation of land grants without the approval of the Secretary of Agriculture and Natural Resources.
These arguments are without basis.The Family Code, which took effect on 3 August 1988, provides that any
alienation or encumbrance made by the husband of the conjugal partnership property without the consent of the wife is void. However, when the sale is made before the effectivity of the Family Code, the applicable law is the Civil Code.[22]
Article 173 of the Civil Code provides that the disposition of conjugal property without the wife’s consent is not void but merely voidable. Article 173 reads:
The wife may, during the marriage, and within ten years from the transaction questioned, ask the courts for the annulment of any contract of the husband entered into without her consent, when such consent is required, or any act or contract of the husband which tends to defraud her or impair her interest in the conjugal partnership property. Should the wife fail to exercise this right, she or her heirs, after the dissolution of the marriage, may demand the value of property fraudulently alienated by the husband.
In Felipe v. Aldon,[23] we applied Article 173 in a case where the wife sold some parcels of land belonging to the conjugal partnership without the consent of the husband. We ruled that the contract of sale was voidable subject to annulment by the husband. Following petitioners’ argument that Carmen sold the land to Armando and Adelia without the consent of Carmen’s husband, the sale would only be voidable and not void.
However, Godofredo can no longer question the sale. Voidable contracts are susceptible of ratification.[24] Godofredo ratified the sale when he introduced Armando and Adelia to his tenants as the new owners of the Subject Land. The trial court noted that Godofredo failed to deny categorically on the witness stand the claim of the complainants’ witnesses that Godofredo introduced Armando and Adelia as the new landlords of the tenants.[25] That Godofredo and Carmen allowed Armando and Adelia to enjoy possession of the Subject Land for 24 years is formidable proof of Godofredo’s acquiescence to the sale. If the sale was truly unauthorized, then Godofredo should have filed an action to annul the sale. He did not. The prescriptive period to annul the sale has long lapsed. Godofredo’s conduct belies his claim that his wife sold the Subject Land without his consent.
Moreover, Godofredo and Carmen used most of the proceeds of the sale to pay their debt with the DBP. We agree with the Court of Appeals that the sale redounded to the benefit of the conjugal partnership. Article 161 of the Civil Code provides that the conjugal partnership shall be liable for debts and obligations contracted by the wife for the benefit of the conjugal partnership. Hence, even if Carmen sold the land without the consent of her husband, the sale still binds the conjugal partnership.
Petitioners contend that Godofredo and Carmen did not deliver the title of the Subject Land to Armando and Adelia as shown by this portion of Adelia’s testimony on cross-examination:
Q -- No title was delivered to you by Godofredo Alfredo? A -- I got the title from Julie Limon because my sister told me.[26]
Petitioners raise this factual issue for the first time. The Court of Appeals could have passed upon this issue had petitioners raised this earlier. At any rate, the cited testimony of Adelia does not convincingly prove that Godofredo and Carmen did not deliver the Subject Land to Armando and Adelia. Adelia’s cited testimony must be examined in context not only with her entire testimony but also with the other circumstances.
Adelia stated during cross-examination that she obtained the title of the Subject Land from Julie Limon (“Julie”), her classmate in college and the sister of Carmen. Earlier, Adelia’s own sister had secured the title from the father of Carmen. However, Adelia’s sister, who was about to leave for the United States, gave the title to Julie because of the absence of the other documents. Adelia’s sister told Adelia to secure the title from Julie, and this was how Adelia obtained the title from Julie.
It is not necessary that the seller himself deliver the title of the property to the buyer because the thing sold is understood as delivered when it is placed in the control and possession of the vendee.[27] To repeat, Godofredo
and Carmen themselves introduced the Natanawans, their tenants, to Armando and Adelia as the new owners of the Subject Land. From then on, Armando and Adelia acted as the landlords of the Natanawans. Obviously, Godofredo and Carmen themselves placed control and possession of the Subject Land in the hands of Armando and Adelia.
Petitioners invoke the absence of approval of the sale by the Secretary of Agriculture and Natural Resources to nullify the sale. Petitioners never raised this issue before the trial court or the Court of Appeals. Litigants cannot raise an issue for the first time on appeal, as this would contravene the basic rules of fair play, justice and due process. [28] However, we will address this new issue to finally put an end to this case.
The sale of the Subject Land cannot be annulled on the ground that the Secretary did not approve the sale, which was made within 25 years from the issuance of the homestead title. Section 118 of the Public Land Act (Commonwealth Act No. 141) reads as follows:
SEC. 118. Except in favor of the Government or any of its branches, units, or institutions or legally constituted banking corporation, lands acquired under free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of the issuance of the patent or grant.
xxx
No alienation, transfer, or conveyance of any homestead after 5 years and before twenty-five years after the issuance of title shall be valid without the approval of the Secretary of Agriculture and Commerce, which approval shall not be denied except on constitutional and legal grounds.
A grantee or homesteader is prohibited from alienating to a private individual a land grant within five years from the time that the patent or grant is issued.[29] A violation of this prohibition renders a sale void.[30] This prohibition, however, expires on the fifth year. From then on until the next 20 years[31] the land grant may be alienated provided the Secretary of Agriculture and Natural Resources approves the alienation. The Secretary is required to approve the alienation unless there are “constitutional and legal grounds” to deny the approval. In this case, there are no apparent constitutional or legal grounds for the Secretary to disapprove the sale of the Subject Land.
The failure to secure the approval of the Secretary does not ipso facto make a sale void.[32] The absence of approval by the Secretary does not nullify a sale made after the expiration of the 5-year period, for in such event the requirement of Section 118 of the Public Land Act becomes merely directory[33] or a formality.[34] The approval may be secured later, producing the effect of ratifying and adopting the transaction as if the sale had been previously authorized.[35] As held in Evangelista v. Montano:[36]
Section 118 of Commonwealth Act No. 141, as amended, specifically enjoins that the approval by the Department Secretary "shall not be denied except on constitutional and legal grounds." There being no allegation that there were constitutional or legal impediments to the sales, and no pretense that if the sales had been submitted to the Secretary concerned they would have been disapproved, approval was aministerial duty, to be had as a matter of course and demandable if refused. For this reason, and if necessary, approval may now be applied for and its effect will be to ratify and adopt the transactions as if they had been previously authorized. (Emphasis supplied)
Action Not Barred by Prescription and Laches
Petitioners insist that prescription and laches have set in. We disagree.The Amended Complaint filed by Armando and Adelia with the trial court
is captioned as one for Specific Performance. In reality, the ultimate relief sought by Armando and Adelia is the reconveyance to them of the Subject Land. An action for reconveyance is one that seeks to transfer property, wrongfully registered by another, to its rightful and legal owner.[37] The body of the pleading or complaint determines the nature of an action, not its title or heading.[38] Thus, the present action should be treated as one for reconveyance.[39]
Article 1456 of the Civil Code provides that a person acquiring property through fraud becomes by operation of law a trustee of an implied trust for the benefit of the real owner of the property. The presence of fraud in this case created an implied trust in favor of Armando and Adelia. This gives Armando and Adelia the right to seek reconveyance of the property from the Subsequent Buyers.[40]
To determine when the prescriptive period commenced in an action for reconveyance, plaintiff’s possession of the disputed property is material. An action for reconveyance based on an implied trust prescribes in ten years.[41] The ten-year prescriptive period applies only if there is an actual need to reconvey the property as when the plaintiff is not in possession of the property.[42] However, if the plaintiff, as the real owner of the property also remains in possession of the property, the prescriptive period to recover title and possession of the property does not run against him.[43] In such a case, an action for reconveyance, if nonetheless filed, would be in the nature of a suit for quieting of title, an action that is imprescriptible.[44]
In this case, the appellate court resolved the issue of prescription by ruling that the action should prescribe four years from discovery of the fraud. We must correct this erroneous application of the four-year prescriptive period. In Caro v. Court of Appeals,[45] we explained why an action for reconveyance based on an implied trust should prescribe in ten years. In that case, the appellate court also erroneously applied the four-year prescriptive period. We declared in Caro:
We disagree. The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R. No. L-33261, September 30, 1987,154 SCRA 396 illuminated what used to be a gray area on the prescriptive period for an action to reconvey the title to real property and, corollarily, its point of reference:
xxx It must be remembered that before August 30, 1950, the date of the effectivity of the new Civil Code, the old Code of Civil Procedure (Act No. 190) governed prescription. It provided:
SEC. 43. Other civil actions; how limited.- Civil actions other than for the recovery of real property can only be brought within the following periods after the right of action accrues:
xxx xxx xxx
3. Within four years: xxx An action for relief on the ground of fraud, but the right of action in such case shall not be deemed to have accrued until the discovery of the fraud;
xxx xxx xxx
In contrast, under the present Civil Code, we find that just as an implied or constructive trust is an offspring of the law (Art. 1456, Civil Code), so is the corresponding obligation to reconvey the property and the title thereto in favor of the true owner. In this context, and vis-a-vis prescription, Article 1144 of the Civil Code is applicable.
Article 1144. The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
x x x x x x x x x
(Emphasis supplied).
An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not otherwise. A long line of decisions of this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it is now well-settled that an action for reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the property. The only discordant note, it seems, is Balbin vs. Medalla which states that the prescriptive period for a reconveyance action is four years. However, this variance can be explained by the erroneous reliance on
Gerona vs. de Guzman. But in Gerona, the fraud was discovered on June 25,1948, hence Section 43(3) of Act No. 190, was applied, the new Civil Code not coming into effect until August 30, 1950 as mentioned earlier. It must be stressed, at this juncture, that article 1144 and article 1456, are new provisions. They have no counterparts in the old Civil Code or in the old Code of Civil Procedure, the latter being then resorted to as legal basis of the four-year prescriptive period for an action for reconveyance of title of real property acquired under false pretenses.
An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential Decree No. 1529, which provides:
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the parties to such fraud without prejudice, however, to the rights of any innocent holder of the decree of registration on the original petition or application, xxx
This provision should be read in conjunction with Article 1456 of the Civil Code, which provides:
Article 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.
The law thereby creates the obligation of the trustee to reconvey the property and the title thereto in favor of the true owner. Correlating Section 53, paragraph 3 of Presidential Decree No. 1529 and Article 1456 of the Civil Code with Article 1144(2) of the Civil Code, supra, the prescriptive period for the reconveyance of fraudulently registered real property is ten (10) years reckoned from the date of the issuance of the certificate of title xxx (Emphasis supplied)[46]
Following Caro, we have consistently held that an action for reconveyance based on an implied trust prescribes in ten years. [47] We went further by specifying the reference point of the ten-year prescriptive period as the date of the registration of the deed or the issuance of the title.[48]
Had Armando and Adelia remained in possession of the Subject Land, their action for reconveyance, in effect an action to quiet title to property, would not be subject to prescription. Prescription does not run against the plaintiff in actual possession of the disputed land because such plaintiff has a right to wait until his possession is disturbed or his title is questioned before initiating an action to vindicate his right.[49] His undisturbed possession gives him the continuing right to seek the aid of a court of equity to determine the nature of the adverse claim of a third party and its effect on his title.[50]
Armando and Adelia lost possession of the Subject Land when the Subsequent Buyers forcibly drove away from the Subject Land the Natanawans, the tenants of Armando and Adelia.[51] This created an actual
need for Armando and Adelia to seek reconveyance of the Subject Land. The statute of limitation becomes relevant in this case. The ten-year prescriptive period started to run from the date the Subsequent Buyers registered their deeds of sale with the Register of Deeds.
The Subsequent Buyers bought the subdivided portions of the Subject Land on 22 February 1994, the date of execution of their deeds of sale. The Register of Deeds issued the transfer certificates of title to the Subsequent Buyers on 24 February 1994. Armando and Adelia filed the Complaint on 7 March 1994. Clearly, prescription could not have set in since the case was filed at the early stage of the ten-year prescriptive period.
Neither is the action barred by laches. We have defined laches as the failure or neglect, for an unreasonable time, to do that which, by the exercise of due diligence, could or should have been done earlier.[52] It is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it.[53] Armando and Adelia discovered in January 1994 the subsequent sale of the Subject Land and they filed this case on 7 March 1994. Plainly, Armando and Adelia did not sleep on their rights.
Validity of Subsequent Sale of Portions of the Subject Land
Petitioners maintain that the subsequent sale must be upheld because the Subsequent Buyers, the co-petitioners of Godofredo and Carmen, purchased and registered the Subject Land in good faith. Petitioners argue that the testimony of Calonso, the person who brokered the second sale, should not prejudice the Subsequent Buyers. There is no evidence that Calonso was the agent of the Subsequent Buyers and that she communicated to them what she knew about the adverse claim and the prior sale. Petitioners assert that the adverse claim registered by Armando and Adelia has no legal basis to render defective the transfer of title to the Subsequent Buyers.
We are not persuaded. Godofredo and Carmen had already sold the Subject Land to Armando and Adelia. The settled rule is when ownership or title passes to the buyer, the seller ceases to have any title to transfer to any third person.[54] If the seller sells the same land to another, the second buyer who has actual or constructive knowledge of the prior sale cannot be a registrant in good faith.[55] Such second buyer cannot defeat the first buyer’s title.[56] In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale.[57]
Thus, to merit protection under the second paragraph of Article 1544[58] of the Civil Code, the second buyer must act in good faith in registering the deed.[59] In this case, the Subsequent Buyers’ good faith hinges on whether they had knowledge of the previous sale. Petitioners do not dispute that Armando and Adelia registered their adverse claim with the Registry of Deeds of Bataan on 8 February 1994. The Subsequent Buyers
purchased their respective lots only on 22 February 1994 as shown by the date of their deeds of sale. Consequently, the adverse claim registered prior to the second sale charged the Subsequent Buyers with constructive notice of the defect in the title of the sellers,[60] Godofredo and Carmen.
It is immaterial whether Calonso, the broker of the second sale, communicated to the Subsequent Buyers the existence of the adverse claim. The registration of the adverse claim on 8 February 1994 constituted, by operation of law, notice to the whole world.[61] From that date onwards, the Subsequent Buyers were deemed to have constructive notice of the adverse claim of Armando and Adelia. When the Subsequent Buyers purchased portions of the Subject Land on 22 February 1994, they already had constructive notice of the adverse claim registered earlier.[62] Thus, the Subsequent Buyers were not buyers in good faith when they purchased their lots on 22 February 1994. They were also not registrants in good faith when they registered their deeds of sale with the Registry of Deeds on 24 February 1994.
The Subsequent Buyers’ individual titles to their respective lots are not absolutely indefeasible. The defense of indefeasibility of the Torrens Title does not extend to a transferee who takes the certificate of title with notice of a flaw in his title.[63] The principle of indefeasibility of title does not apply where fraud attended the issuance of the titles as in this case.[64]
Attorney’s Fees and Costs
We sustain the award of attorney’s fees. The decision of the court must state the grounds for the award of attorney’s fees. The trial court complied with this requirement.[65] We agree with the trial court that if it were not for petitioners’ unjustified refusal to heed the just and valid demands of Armando and Adelia, the latter would not have been compelled to file this action.
The Court of Appeals echoed the trial court’s condemnation of petitioners’ fraudulent maneuverings in securing the second sale of the Subject Land to the Subsequent Buyers. We will also not turn a blind eye on petitioners’ brazen tactics. Thus, we uphold the treble costs imposed by the Court of Appeals on petitioners.
WHEREFORE, the petition is DENIED and the appealed decision is AFFIRMED. Treble costs against petitioners.
SO ORDERED.Davide, Jr., C.J., (Chairman), Vitug, Ynares-Santiago, and Azcuna,
SPOUSES GODOFREDO & DOMINICA FLANCIA, petitioners, vs. COURT OF APPEALS & WILLIAM ONG GENATO, respondents.
D E C I S I O NCORONA, J.:
Before us is a petition for review under Rule 45 of the Rules of Court, seeking to set aside the October 6, 2000 decision[1] of the Court of Appeals in CA-G.R. CV No. 56035.
The facts as outlined by the trial court[2] follow.
This is an action to declare null and void the mortgage executed by defendant Oakland Development Resources Corp. xxx in favor of defendant William Ong Genato over the house and lot plaintiffs spouses Godofredo and Dominica Flancia purchased from defendant corporation.
In the complaint, plaintiffs allege that they purchased from defendant corporation a parcel of land known as Lot 12, Blk. 3, Phase III-A containing an area of 128.75 square meters situated in Prater Village Subd. II located at Brgy. Old Balara, Quezon City; that by virtue of the contract of sale, defendant corporation authorized plaintiffs to transport all their personal belongings to their house at the aforesaid lot; that on December 24, 1992, plaintiffs received a copy of the execution foreclosing [the] mortgage issued by the RTC, Branch 98 ordering defendant Sheriff Sula to sell at public auction several lots formerly owned by defendant corporation including subject lot of plaintiffs; that the alleged mortgage of subject lot is null and void as it is not authorized by plaintiffs pursuant to Art. 2085 of the Civil Code which requires that the mortgagor must be the absolute owner of the mortgaged property; that as a consequence of the nullity of said mortgage, the execution foreclosing [the] mortgage is likewise null and void; that plaintiffs advised defendants to exclude subject lot from the auction sale but the latter refused. Plaintiffs likewise prayed for damages in the sum of P50,000.00.
Defendant William Ong Genato filed a motion to dismiss the complaint which was opposed by the plaintiffs and denied by the Court in its Order dated February 16, 1993.
Defendant Genato, then filed his answer averring that on May 19, 1989 co-defendant Oakland Development Resources Corporation mortgaged to Genato two (2) parcels of land covered by TCT Nos. 356315 and 366380 as security and guaranty for the payment of a loan in the sum of P2,000,000.00; that it appears in the complaint that the subject parcel of land is an unsubdivided portion of the aforesaid TCT No. 366380 which covers an area of 4,334 square meters more or less; that said real estate mortgage has been duly annotated at the back of TCT No. 366380 on May 22, 1989; that for non-payment of the loan of P2,000,000.00 defendant Genato filed an action for foreclosure of real estate mortgage against co-defendant corporation;
that after [trial], a decision was rendered by the Regional Trial Court of Quezon City, Branch 98 against defendant corporation which decision was affirmed by the Honorable Court of Appeals; that the decision of the Court of Appeals has long become final and thus, the Regional Trial Court, Brach 98 of Quezon City issued an Order dated December 7, 1992 ordering defendant Sheriff Ernesto Sula to cause the sale at public auction of the properties covered by TCT No. 366380 for failure of defendant corporation to deposit in Court the money judgment within ninety (90) days from receipt of the decision of the Court of Appeals; that plaintiffs have no cause of action against defendant Genato; that the alleged plaintiffs’ Contract to Sell does not appear to have been registered with the Register of Deeds of Quezon City to affect defendant Genato and the latter is thus not bound by the plaintiffs’ Contract to Sell; that the registered mortgage is superior to plaintiffs’ alleged Contract to Sell and it is sufficient for defendant Genato as mortgagee to know that the subject TCT No. 366380 was clean at the time of the execution of the mortgage contract with defendant corporation and defendant Genato is not bound to go beyond the title to look for flaws in the mortgagor’s title; that plaintiffs’ alleged Contract to Sell is neither a mutual promise to buy and sell nor a Contract of Sale. Ownership is retained by the seller, regardless of delivery and is not to pass until full payment of the price; that defendant Genato has not received any advice from plaintiffs to exclude the subject lot from the auction sale, and by way of counterclaim, defendant Genato prays for P150,000.00 moral damages and P20,000.00 for attorney’s fees.
On the other hand, defendant Oakland Development Resources Corporation likewise filed its answer and alleged that the complaint states no cause of action; xxx Defendant corporation also prays for attorney’s fees of P20,000.00 in its counterclaim.[3]
After trial, the assisting judge[4] of the trial court rendered a decision dated August 16, 1996, the decretal portion of which provided:
Wherefore, premises considered, judgment is hereby rendered.
1) Ordering defendant Oakland Dev’t. Resources Corporation to pay plaintiffs:a) the amount of P10,000.00 representing payment for the
‘option to purchase lot’;b) the amount of P140,000.00 representing the first
downpayment of the contract price;c) the amount of P20,520.80 representing five monthly
amortizations for February, March, April, May and June 1990;d) the amount of P3,000.00 representing amortization for
November 1990; all plus legal interest from the constitution of the mortgage up to the time the instant case was filed.
2) Ordering said defendant corporation to pay further to plaintiffs the sum of P30,000.00 for moral damages, P10,000.00 for
On motion for reconsideration, the regular presiding judge set aside the judgment of the assisting judge and rendered a new one on November 27, 1996, the decretal portion of which read:
WHEREFORE, premises considered, the Motion for Reconsideration is hereby GRANTED. The decision dated August 16, 1996 is hereby set aside and a new one entered in favor of the plaintiffs, declaring the subject mortgage and the foreclosure proceedings held thereunder as null and void insofar as they affect the superior right of the plaintiffs over the subject lot, and ordering as follows:
1. Defendant Oakland Development Resources to pay to plaintiffs the amount of P20,000.00 for litigation-related expenses;
2. Ordering defendant Sheriff Ernesto L. Sula to desist from conducting further proceedings in the extra-judicial foreclosure insofar as they affect the plaintiffs, or, in the event that title has been consolidated in the name of defendant William O. Genato, ordering said defendant to reconvey to plaintiffs the title corresponding to Lot 12, Blk. 3, Phase III-A of Prater Village [Subd. II], located in Old Balara, Quezon City, containing an area of 128.75 square meters; and
3. Dismissing the counterclaims of defendants Oakland and Genato and with costs against them.[6]
On appeal, the Court of Appeals issued the assailed order:
Wherefore, foregoing premises considered, the appeal having merit in fact and in law is hereby GRANTED and the decision of the Trial Court dated 27 November 1996 hereby SET ASIDE andREVERSED, and its judgment dated August 16, 1996 REINSTATED and AFFIRMED IN TOTO. No Costs.
SO ORDERED.[7]
Hence, this petition.For resolution before us now are the following issues:(1) whether or not the registered mortgage constituted over the
property was valid;(2) whether or not the registered mortgage was superior to the
(3) whether or not the mortgagee was in good faith.Under the Art. 2085 of the Civil Code, the essential requisites of a
contract of mortgage are: (a) that it be constituted to secure the fulfillment of a principal obligation; (b) that the mortgagor be the absolute owner of the thing mortgaged; and (c) that the persons constituting the mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.
All these requirements are present in this case.
FIRST ISSUE: WAS THE REGISTERED MORTGAGE VALID?
As to the first essential requisite of a mortgage, it is undisputed that the mortgage was executed on May 15, 1989 as security for a loan obtained by Oakland from Genato.
As to the second and third requisites, we need to discuss the difference between a contract of sale and a contract to sell.
In a contract of sale, 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 by 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 unless and until the contract is resolved or rescinded; in a contract to sell, title is retained by the vendor until full payment of the price.[8]
In the contract between petitioners and Oakland, aside from the fact that it was denominated as a contract to sell, the intention of Oakland not to transfer ownership to petitioners until full payment of the purchase price was very clear. Acts of ownership over the property were expressly withheld by Oakland from petitioner. All that was granted to them by the “occupancy permit” was the right to possess it.
Specifically, the contract between Oakland and petitioners stated:
xxx xxx xxx
7. That the BUYER/S may be allowed to enter into and take possession of the property upon issuance of Occupancy Permit by the OWNER/DEVELOPER exclusively, although titlehas not yet passed to the BUYER/S, in which case his possession shall be that of a possessor by mere tolerance Lessee, subject to certain restrictions contained in this deed.
13. That the BUYER/S cannot sell, mortgage, cede, transfer, assign or in any manner alienate or dispose of, in whole or in part, the rights acquired by and the obligations imposed on the BUYER/S by virtue of this contract, without the express written consent of the OWNER/DEVELOPER.
xxx xxx xxx
24. That this Contract to Sell shall not in any way [authorize] the BUYER/S to occupy the assigned house and lot to them.[9]
xxx xxx xxx
Clearly, when the property was mortgaged to Genato in May 1989, what was in effect between Oakland and petitioners was a contract to sell, not a contract of sale. Oakland retained absolute ownership over the property.
Ownership is the independent and general power of a person over a thing for purposes recognized by law and within the limits established thereby.[10] According to Art. 428 of the Civil Code, this means that:
The owner has the right to enjoy and dispose of a thing, without other limitations than those established by law.
xxx xxx xxx
Aside from the jus utendi and the jus abutendi [11] inherent in the right to enjoy the thing, the right to dispose, or the jus disponendi, is the power of the owner to alienate,encumber, transform and even destroy the thing owned.[12]
Because Oakland retained all the foregoing rights as owner of the property, it was entitled absolutely to mortgage it to Genato. Hence, the mortgage was valid.
SECOND ISSUE: WAS THE REGISTERED MORTGAGE SUPERIOR TO THE CONTRACT TO SELL?
In their memorandum, petitioners cite our ruling in StateInvestment House, Inc. v. Court of Appeals [13] to the effect that
an unregistered sale is preferred over a registered mortgage over the same property. The citation is misplaced.
This Court in that case explained the rationale behind the rule:
The unrecorded sale between respondents-spouses and SOLID is preferred for the reason that if the original owner xxx had parted with his ownership
of the thing sold then he no longer had ownership and free disposal of that thing as to be able to mortgage it again.
State Investment House is completely inapplicable to the case at bar. A contract of sale and a contract to sell are worlds apart. State Investment House clearly pertained to a contract of sale, not to a contract to sell which was what Oakland and petitioners had. In State Investment House, ownership had passed completely to the buyers and therefore, the former owner no longer had any legal right to mortgage the property, notwithstanding the fact that the new owner-buyers had not registered the sale. In the case before us, Oakland retained absolute ownership over the property under the contract to sell and therefore had every right to mortgage it.
In sum, we rule that Genato’s registered mortgage was superior to petitioner’s contract to sell, subject to any liabilities Oakland may have incurred in favor of petitioners by irresponsibly mortgaging the property to Genato despite its commitments to petitioners under their contract to sell.
THIRD ISSUE: WAS THE MORTGAGE IN GOOD FAITH?
The third issue involves a factual matter which should not be raised in this petition. Only questions of law may be raised in a Rule 45 petition. This Court is not a trier of facts. The resolution of factual issues is the function of the lower courts. We therefore adopt the factual findings of the Court of Appeals and uphold the good faith of the mortgagee Genato.
RELIANCE ON WHAT APPEARS IN THE TITLE
Just as an innocent purchaser for value may rightfully rely on what appears in the certificate of title, a mortgagee has the right to rely on what appears in the title presented to him. In the absence of anything to arouse suspicion, he is under no obligation to look beyond the certificate and investigate the title of the mortgagor appearing on the face of the said certificate. [14]
We agree with the findings and conclusions of the trial court regarding the liabilities of Oakland in its August 16, 1996 decision, as affirmed by the Court of Appeals:
Anent [plaintiffs’] prayer for damages, the Court finds that defendant corporation is liable to return to plaintiffs all the installments/payments made by plaintiffs consisting of the amount of P10,000.00 representing payment for the ‘option to purchase lot’; the amount of P140,000.00 which was the first downpayment; the sum of P20,520.80 representing five monthly amortizations for February, March, April, May and June 1990 and the amount of P3,000.00 representing amortization for November 1990 plus
legal interest from the time of the mortgage up to the time this instant case was filed. Further, considering that defendant corporation wantonly and fraudulently mortgaged the subject property without regard to [plaintiffs’] rights over the same, said defendant should pay plaintiffs moral damages in the reasonable amount of P30,000.00. xxx Furthermore, since defendant [corporation’s] acts have compelled the plaintiffs to litigate and incur expenses to protect their interest, it should likewise be adjudged to pay plaintiffs attorney’s fees of P20,000.00 under Article 2208 paragraph two (2) of the Civil Code.[15]
WHEREFORE, the petition for review is hereby DENIED. The decision of the Court of Appeals reinstating the August 16, 1996 decision of the trial court is hereby AFFIRMED.
SO ORDERED.Panganiban, (Chairman), Sandoval-Gutierrez, Carpio-
Morales and Garcia, JJ., concur.
[G.R. No. 125531. February 12, 1997]
JOVAN LAND, petitioner, vs. COURT OF APPEALS and EUGENIO QUESADA, INC., respondents.
D E C I S I O NHERMOSISIMA, JR. J.:
This is a petition for review on certiorari to reverse and set aside the decision of the Court of Appeals in C.A.-G.R. CV No. 47515.
Petitioner Jovan Land, Inc. is a corporation engaged in the real estate business. Its President and Chairman of the Board of Directors is one Joseph Sy.
Private respondent Eugenio Quesada is the owner of the Q Building located on an 801 sq. m. lot at the corner of Mayhaligue Street and Rizal Avenue, Sta. Cruz, Manila. The property is covered by TCT No. 77796 of the Registry of Deeds of Manila.
Petitioner learned from co-petitioner Consolacion P. Mendoza that private respondent was selling the aforesaid Mayhaligue property. Thus, petitioner through Joseph Sy made a written offer, dated July 27, 1987 for P10.25 million. This first offer was not accepted by Conrado Quesada, the General Manager of private respondent. Joseph Sy sent a second written offer dated July 31, 1989 for the same price but inclusive of an undertaking to pay the documentary stamp tax, transfer tax, registration fees and notarial charges. Check No. 247048, dated July 31, 1989, for one
million pesos drawn against the Philippine Commercial and Industrial Bank (PCIB) was enclosed therewith as earnest money. This second offer, with earnest money, was again rejected by Conrado Quesada. Undaunted, Joseph Sy, on August 10, 1989, sent a third written offer for twelve million pesos with a similar check for one million pesos as earnest money. Annotated on this third letter-offer was the phrase "Received original, 9-4-89" beside which appears the signature of Conrado Quesada.
On the basis of this annotation which petitioner insists is the proof that there already exists a valid, perfected agreement to sell the Mayhaligue property, petitioner filed with the trial court, a complaint for specific performance and collection of sum of money with damages. However, the trial court held that:
"x x x the business encounters between Joseph Sy and Conrado Quesada had not passed the negotiation stage relating to the intended sale by the defendant corporation of the property in question. x x x As the court finds, there is nothing in the record to point that a contract was ever perfected. In fact, there is nothing in writing which is indispensably necessary in order that the perfected contract could be enforced under the Statute of Frauds."[1]
Since the trial court dismissed petitioner's complaint for lack of cause of action, petitioner appealed[2] to respondent Court of Appeals before which it assigned the following errors:
"1. The Court a quo failed to appreciate that there was already a perfected contract of sale between Jovan Land, Inc. and the private respondent];2. The Court a quo erred in its conclusion that there was no implied acceptance of the offer by appellants to appellee [private respondent];3. The Court a quo was in error where it concluded that the contract of sale was unenforceable;4.The Court a quo failed to rule that appellant [petitioner] Mendoza is entitled to her broker's commission."[3]
Respondent court placed petitioner to task on their assignment of errors and concluded that not any of them justifies a reversal of the trial court decision.
We agree.
In the case of Ang Yu Asuncion v. Court of Appeals,[4] we held that:"xxx [A] contract (Art. 1157, Civil Code), x x x is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service xxx. A contract undergoes various stages that include its negotiation or preparation, its perfection and, finally, its consummation. Negotiation covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is concluded xxx. The
perfection of the contract takes place upon the concurrence of the essential elements thereof."Moreover, it is a fundamental principle that before contract of sale can
be valid, the following elements must be present, viz: (a) consent or meeting of the minds; (b) determinate subject matter; (3) price certain in money or its equivalent. Until the contract of sale is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties.
In the case at bench, petitioner, anchors its main argument on the annotation on its third letter-offer of the phrase "Received original, 9-4-89," beside which appears the signature of Conrado Quesada. It also contends that the said annotation is evidence to show that there was already a perfected agreement to sell as respondent can be said to have accepted petitioner's payment in the form of a check which was enclosed in the third letter.
However, as correctly elucidated by the Court of Appeals:"Sy insisted in his testimony that this offer of P12M was accepted by Conrado Quesada but there is nothing written or documentary to show that such offer was accepted by Conrado Quesada. While Sy claimed that the acceptance could be gleaned from the notation in the third written offer, the court is not impressed thereon however because the notation merely states as follows: "Received Original, (S)-Conrado Quesada" and below this signature is "9-4-89". As explained by Conrado Quesada in his testimony what was received by him was the original of the written offer.The court cannot believe that this notation marked as Exhibit D-2 would signify the acceptance of the offer. Neither does it signify, as Sy had testified that the check was duly received on said date. If this were true Sy, who appears to be an intelligent businessman could have easily asked Conrado Quesada to indicate on Exhibit D the alleged fact of acceptance of said check. And better still, Sy could have asked Quesada the acceptance in writing separate of the written offer if indeed there was an agreement as to the price of the proposed sale of the property in question."[5]
Clearly then, a punctilious examination of the receipt reveals that the same can neither be regarded as a contract of sale nor a promise to sell. Such an annotation by Conrado Quesada amounts to neither a written nor an implied acceptance of the offer of Joseph Sy. It is merely a memorandum of the receipt by the former of the latter's offer. The requisites of a valid contract of sale are lacking in said receipt and therefore the "sale" is neither valid nor enforceable.
Although there was a series of communications through letter-offers and rejections as evident from the facts of this case, still it is undeniable that no written agreement was reached between petitioner and private respondent with regard to the sale of the realty. Hence, the alleged transaction is unenforceable as the requirements under the Statute of Frauds have not
been complied with. Under the said provision, an agreement for the sale of real property or of an interest therein, to be enforceable, must be in writing and subscribed by the party charged or by an agent thereof
Petitioner also asseverates that the failure of Conrado Quesada to return the check for one million pesos, translates to implied acceptance of its third letter-offer. It, however, does not rebut the finding of the trial court that private respondent was returning the check but petitioner refused to accept the same and that when Conrado Quesada subsequently sent it back to petitioner through registered mail, the latter failed to claim its mail from the post office.
Finally, we fittingly apply here the oft-repeated doctrine that the factual findings of the trial court, especially as regards the credibility of witnesses, are conclusive upon this court, unless the case falls under the jurisprudentially established exceptions. But this is a case that tenders no exceptional circumstance; rather, we find the observations of the trial court to be legally sound and valid:
"x x x Joseph Sy's testimony is not impressive because of several inconsistencies herein pointed out. On the matter of earnest money, the same appears to be the idea solely of the [petitioner], assuming that he had intended to bind the [petitioner] corporation. In the written second offer x x x he had stated that the check of P1M had been enclosed (attached) therewith. The same check x x x was again mentioned to be enclosed (attached) in the third written offer under date August 10, 1989 x x x. Sy testified in his direct examination that he had personally given this check to Conrado Quesada. But on cross examination, he reversed himself by saying that the check was given thru his [co-petitioner] Mendoza. Examining the third written offer, it appears that when it was first typewritten, this P11M was noted to have been corrected, and that as per his testimony, Sy had increased it to P12M. This is the reason according to Sy why there was a superimposition of the number '12' over the number '11' to mean P12M as the revised consideration for the sale of the property in question."[6]
Respondent court thus concluded that:"x x x [since] the matter of evaluation of the credibility of witness[es] is addressed to the trial court and unless clearly contrary to the records before Us, the findings of the said court are entitled to great respondent on appeal, x x x it was Joseph Sy's idea to offer the earnest money, and the evidence to show that Joseph Sy accepted the same, is wanting. x x x"[7]
and accordingly affirmed the trial court judgment appealed from.As shown elucidated above, we agree with the findings and conclusions
of the trial court and the respondent court. Neither has petitioner posited any new issues in the instant petition that warrant the further exercise by this court of its review powers.
WHEREFORE, premises considered, this petition is DENIED.
SO ORDERED.Padilla (Chairman), Bellosillo, Vitug, and Kapunan, JJ., concur.
[G.R. No. 126376. November 20, 2003]
SPOUSES BERNARDO BUENAVENTURA and CONSOLACION JOAQUIN, SPOUSES JUANITO EDRA and NORA JOAQUIN, SPOUSES RUFINO VALDOZ and EMMA JOAQUIN, and NATIVIDAD JOAQUIN, petitioners, vs. COURT OF APPEALS, SPOUSES LEONARDO JOAQUIN and FELICIANA LANDRITO, SPOUSES FIDEL JOAQUIN and CONCHITA BERNARDO, SPOUSES TOMAS JOAQUIN and SOLEDAD ALCORAN, SPOUSES ARTEMIO JOAQUIN and SOCORRO ANGELES, SPOUSES ALEXANDER MENDOZA and CLARITA JOAQUIN, SPOUSES TELESFORO CARREON and FELICITAS JOAQUIN, SPOUSES DANILO VALDOZ and FE JOAQUIN, and SPOUSES GAVINO JOAQUIN and LEA ASIS, respondents.
D E C I S I O NCARPIO, J.:
The Case
This is a petition for review on certiorari[1] to annul the Decision[2] dated 26 June 1996 of the Court of Appeals in CA-G.R. CV No. 41996. The Court of Appeals affirmed the Decision[3] dated 18 February 1993 rendered by Branch 65 of the Regional Trial Court of Makati (“trial court”) in Civil Case No. 89-5174. The trial court dismissed the case after it found that the parties executed the Deeds of Sale for valid consideration and that the plaintiffs did not have a cause of action against the defendants.
The Facts
The Court of Appeals summarized the facts of the case as follows:
Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion, Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all surnamed
JOAQUIN. The married Joaquin children are joined in this action by their respective spouses.
Sought to be declared null and void ab initio are certain deeds of sale of real property executed by defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children and the corresponding certificates of title issued in their names, to wit:
1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-256395 executed on 11 July 1978, in favor of defendant Felicitas Joaquin, for a consideration of P6,000.00 (Exh. “C”), pursuant to which TCT No. [36113/T-172] was issued in her name (Exh. “C-1”);
2. Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394 executed on 7 June 1979, in favor of defendant Clarita Joaquin, for a consideration of P1[2],000.00(Exh. “D”), pursuant to which TCT No. S-109772 was issued in her name (Exh. “D-1”);
3 Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394 executed on 12 May 1988, in favor of defendant spouses Fidel Joaquin and Conchita Bernardo, for a consideration of P54,[3]00.00 (Exh. “E”), pursuant to which TCT No. 155329 was issued to them (Exh. “E-1”);
4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394 executed on 12 May 1988, in favor of defendant spouses Artemio Joaquin and Socorro Angeles, for a consideration of P[54,3]00.00 (Exh. “F”), pursuant to which TCT No. 155330 was issued to them (Exh. “F-1”); and
5. Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-256395 executed on 9 September 1988, in favor of Tomas Joaquin, for a consideration ofP20,000.00 (Exh. “G”), pursuant to which TCT No. 157203 was issued in her name (Exh. “G-1”).
[6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-256395 executed on 7 October 1988, in favor of Gavino Joaquin, for a consideration of P25,000.00 (Exh. “K”), pursuant to which TCT No. 157779 was issued in his name (Exh. “K-1”).]
In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title, plaintiffs, in their complaint, aver:
- XX-
The deeds of sale, Annexes “C,” “D,” “E,” “F,” and “G,” [and “K”] are simulated as they are, are NULL AND VOID AB INITIO because –
a) Firstly, there was no actual valid consideration for the deeds of sale xxx over the properties in litis;
b) Secondly, assuming that there was consideration in the sums reflected in the questioned deeds, the properties are more than three-fold times more valuable than the measly sums appearing therein;
c) Thirdly, the deeds of sale do not reflect and express the true intent of the parties (vendors and vendees); and
d) Fourthly, the purported sale of the properties in litis was the result of a deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime.
- XXI -
Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos. 36113/T-172, S-109772, 155329, 155330, 157203 [and 157779] issued by the Registrar of Deeds over the properties inlitis xxx are NULL AND VOID AB INITIO.
Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against them as well as the requisite standing and interest to assail their titles over the properties in litis; (2) that the sales were with sufficient considerations and made by defendants parents voluntarily, in good faith, and with full knowledge of the consequences of their deeds of sale; and (3) that the certificates of title were issued with sufficient factual and legal basis.[4] (Emphasis in the original)
The Ruling of the Trial Court
Before the trial, the trial court ordered the dismissal of the case against defendant spouses Gavino Joaquin and Lea Asis.[5] Instead of filing an Answer with their co-defendants, Gavino Joaquin and Lea Asis filed a Motion to Dismiss.[6] In granting the dismissal to Gavino Joaquin and Lea Asis, the trial court noted that “compulsory heirs have the right to a legitime but such right is contingent since said right commences only from the moment of death of the decedent pursuant to Article 777 of the Civil Code of the Philippines.”[7]
After trial, the trial court ruled in favor of the defendants and dismissed the complaint. The trial court stated:
In the first place, the testimony of the defendants, particularly that of the xxx father will show that the Deeds of Sale were all executed for valuable
consideration. This assertion must prevail over the negative allegation of plaintiffs.
And then there is the argument that plaintiffs do not have a valid cause of action against defendants since there can be no legitime to speak of prior to the death of their parents. The court finds this contention tenable. In determining the legitime, the value of the property left at the death of the testator shall be considered (Art. 908 of the New Civil Code). Hence, the legitime of a compulsory heir is computed as of the time of the death of the decedent. Plaintiffs therefore cannot claim an impairment of their legitime while their parents live.
All the foregoing considered, this case is DISMISSED.
In order to preserve whatever is left of the ties that should bind families together, the counterclaim is likewise DISMISSED.
No costs.
SO ORDERED.[8]
The Ruling of the Court of Appeals
The Court of Appeals affirmed the decision of the trial court. The appellate court ruled:
To the mind of the Court, appellants are skirting the real and decisive issue in this case, which is, whether xxx they have a cause of action against appellees.
Upon this point, there is no question that plaintiffs-appellants, like their defendant brothers and sisters, are compulsory heirs of defendant spouses, Leonardo Joaquin and Feliciana Landrito, who are their parents. However, their right to the properties of their defendant parents, as compulsory heirs, is merely inchoate and vests only upon the latter’s death. While still alive, defendant parents are free to dispose of their properties, provided that such dispositions are not made in fraud of creditors.
Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do they claim to be creditors of their defendant parents. Consequently, they cannot be considered as real parties in interest to assail the validity of said deeds either for gross inadequacy or lack of consideration or for failure to express the true intent of the parties. In point is the ruling of the Supreme Court in Velarde, et al. vs. Paez, et al., 101 SCRA 376, thus:
The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily bound thereby; hence, they have no legal capacity to challenge their validity.
Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by the dispositions made by their defendant parents in favor of their defendant brothers and sisters. But, as correctly held by the court a quo, “the legitime of a compulsory heir is computed as of the time of the death of the decedent. Plaintiffs therefore cannot claim an impairment of their legitime while their parents live.”
With this posture taken by the Court, consideration of the errors assigned by plaintiffs-appellants is inconsequential.
WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against plaintiffs-appellants.
SO ORDERED.[9]
Hence, the instant petition.
Issues
Petitioners assign the following as errors of the Court of Appeals:1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
CONVEYANCE IN QUESTION HAD NO VALID CONSIDERATION.2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT
EVEN ASSUMING THAT THERE WAS A CONSIDERATION, THE SAME IS GROSSLY INADEQUATE.
3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE DO NOT EXPRESS THE TRUE INTENT OF THE PARTIES.
4. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE WAS PART AND PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING THE REST OF THE CHILDREN OF THE SPOUSES LEONARDO JOAQUIN AND FELICIANA LANDRITO OF THEIR INTEREST OVER THE SUBJECT PROPERTIES.
5. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS HAVE A GOOD, SUFFICIENT AND VALID CAUSE OF ACTION AGAINST THE PRIVATE RESPONDENTS.[10]
We find the petition without merit.We will discuss petitioners’ legal interest over the properties subject of
the Deeds of Sale before discussing the issues on the purported lack of consideration and gross inadequacy of the prices of the Deeds of Sale.
Whether Petitioners have a legal interestover the properties subject of the Deeds of Sale
Petitioners’ Complaint betrays their motive for filing this case. In their Complaint, petitioners asserted that the “purported sale of the properties in litis was the result of a deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime.” Petitioners’ strategy was to have the Deeds of Sale declared void so that ownership of the lots would eventually revert to their respondent parents. If their parents die still owning the lots, petitioners and their respondent siblings will then co-own their parents’ estate by hereditary succession.[11]
It is evident from the records that petitioners are interested in the properties subject of the Deeds of Sale, but they have failed to show any legal right to the properties. The trial and appellate courts should have dismissed the action for this reason alone. An action must be prosecuted in the name of the real party-in-interest.[12]
[T]he question as to “real party-in-interest” is whether he is “the party who would be benefitted or injured by the judgment, or the ‘party entitled to the avails of the suit.’”
x x x
In actions for the annulment of contracts, such as this action, the real parties are those who are parties to the agreement or are bound either principally or subsidiarily or are prejudiced in their rights with respect to one of the contracting parties and can show the detriment which would positively result to them from the contract even though they did not intervene in it (Ibañez v. Hongkong & Shanghai Bank, 22 Phil. 572 [1912]) xxx.
These are parties with “a present substantial interest, as distinguished from a mere expectancy or future, contingent, subordinate, or consequential interest…. The phrase ‘present substantial interest’ more concretely is meant such interest of a party in the subject matter of the action as will entitle him, under the substantive law, to recover if the evidence is sufficient, or that he has the legal title to demand and the defendant will be protected in a payment to or recovery by him.”[13]
Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As the appellate court stated, petitioners’ right to their parents’ properties is merely inchoate and vests only upon their parents’
death. While still living, the parents of petitioners are free to dispose of their properties. In their overzealousness to safeguard their future legitime, petitioners forget that theoretically, the sale of the lots to their siblings does not affect the value of their parents’ estate. While the sale of the lots reduced the estate, cash of equivalent value replaced the lots taken from the estate.
Whether the Deeds of Sale are voidfor lack of consideration
Petitioners assert that their respondent siblings did not actually pay the prices stated in the Deeds of Sale to their respondent father. Thus, petitioners ask the court to declare the Deeds of Sale void.
A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a contract of sale becomes a binding and valid contract upon the meeting of the minds as to price. If there is a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of payment, or even the breach of that manner of payment. If the real price is not stated in the contract, then the contract of sale is valid but subject to reformation. If there is no meeting of the minds of the parties as to the price, because the price stipulated in the contract is simulated, then the contract is void.[14] Article 1471 of the Civil Code states that if the price in a contract of sale is simulated, the sale is void.
It is not the act of payment of price that determines the validity of a contract of sale. Payment of the price has nothing to do with the perfection of the contract. Payment of the price goes into the performance of the contract. Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the latter prevents the existence of a valid contract.[15]
Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To prove simulation, petitioners presented Emma Joaquin Valdoz’s testimony stating that their father, respondent Leonardo Joaquin, told her that he would transfer a lot to her through a deed of sale without need for her payment of the purchase price. [16] The trial court did not find the allegation of absolute simulation of price credible. Petitioners’ failure to prove absolute simulation of price is magnified by their lack of knowledge of their respondent siblings’ financial capacity to buy the questioned lots.[17] On the other hand, the Deeds of Sale which petitioners presented as evidence plainly showed the cost of each lot sold. Not only did respondents’ minds meet as to the purchase price, but the real price was also stated in the Deeds of Sale. As of the filing of the complaint, respondent siblings have also fully paid the price to their respondent father.[18]
Whether the Deeds of Sale are voidfor gross inadequacy of price
Petitioners ask that assuming that there is consideration, the same is grossly inadequate as to invalidate the Deeds of Sale.
Articles 1355 of the Civil Code states:
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence. (Emphasis supplied)
Article 1470 of the Civil Code further provides:
Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. (Emphasis supplied)
Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that the price be equal to the exact value of the subject matter of sale. All the respondents believed that they received the commutative value of what they gave. As we stated in Vales v. Villa:[19]
Courts cannot follow one every step of his life and extricate him from bad bargains, protect him from unwise investments, relieve him from one-sided contracts, or annul the effects of foolish acts. Courts cannot constitute themselves guardians of persons who are not legally incompetent. Courts operate not because one person has been defeated or overcome by another, but because he has been defeated or overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable judgment, and lose money by them – indeed, all they have in the world; but not for that alone can the law intervene and restore. There must be, in addition, a violation of the law, the commission of what the law knows as an actionable wrong, before the courts are authorized to lay hold of the situation and remedy it. (Emphasis in the original)
Moreover, the factual findings of the appellate court are conclusive on the parties and carry greater weight when they coincide with the factual findings of the trial court. This Court will not weigh the evidence all over again unless there has been a showing that the findings of the lower court are totally devoid of support or are clearly erroneous so as to constitute serious abuse of discretion.[20] In the instant case, the trial court found that the lots were sold for a valid consideration, and that the defendant children actually paid the purchase price stipulated in their respective Deeds of Sale. Actual payment of the purchase price by the buyer to the seller is a factual finding that is now conclusive upon us.
WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto.
SO ORDERED.
G.R. No. 118114 December 7, 1995
TEODORO ACAP, petitioner, vs.COURT OF APPEALS and EDY DE LOS REYES, respondents.
PADILLA, J.:
This is a petition for review on certiorari of the decision 1 of the Court of Appeals, 2nd Division, in CA-G.R. No. 36177, which affirmed the decision 2 of the Regional Trial Court of Himamaylan, Negros Occidental holding that private respondent Edy de los Reyes had acquired ownership of Lot No. 1130 of the Cadastral Survey of Hinigaran, Negros Occidental based on a document entitled "Declaration of Heirship and Waiver of Rights", and ordering the dispossession of petitioner as leasehold tenant of the land for failure to pay rentals.
The facts of the case are as follows:
The title to Lot No. 1130 of the Cadastral Survey of Hinigaran, Negros Occidental was evidenced by OCT No. R-12179. The lot has an area of 13,720 sq. meters. The title was issued and is registered in the name of spouses Santiago Vasquez and Lorenza Oruma. After both spouses died, their only son Felixberto inherited the lot. In 1975, Felixberto executed a duly notarized document entitled "Declaration of Heirship and Deed of Absolute Sale" in favor of Cosme Pido.
The evidence before the court a quo established that since 1960, petitioner Teodoro Acap had been the tenant of a portion of the said land, covering an area of nine thousand five hundred (9,500) meters. When ownership was transferred in 1975 by Felixberto to Cosme Pido, Acap continued to be the registered tenant thereof and religiously paid his leasehold rentals to Pido and thereafter, upon Pido's death, to his widow Laurenciana.
The controversy began when Pido died intestate and on 27 November 1981, his surviving heirs executed a notarized document denominated as "Declaration of Heirship and Waiver of Rights of Lot No. 1130 Hinigaran Cadastre," wherein they declared; to quote its pertinent portions, that:
. . . Cosme Pido died in the Municipality of Hinigaran, Negros Occidental, he died intestate and without any known debts and obligations which the said parcel of land is (sic) held liable.
That Cosme Pido was survived by his/her legitimate heirs, namely: LAURENCIANA PIDO, wife, ELY, ERVIN, ELMER, and ELECHOR all surnamed PIDO; children;
That invoking the provision of Section 1, Rule 74 of the Rules of Court, the above-mentioned heirs do hereby declare unto [sic] ourselves the only heirs of the late Cosme Pido and that we hereby adjudicate unto ourselves the above-mentioned parcel of land in equal shares.
Now, therefore, We LAURENCIANA 3, ELY, ELMER, ERVIN and ELECHOR all surnamed PIDO, do hereby waive, quitclaim all our rights, interests and participation over the said parcel of land in favor of EDY DE LOS REYES, of legal age, (f)ilipino, married to VIRGINIA DE LOS REYES, and resident of Hinigaran, Negros Occidental, Philippines. . . . 4 (Emphasis supplied)
The document was signed by all of Pido's heirs. Private respondent Edy de los Reyes did not sign said document.
It will be noted that at the time of Cosme Pido's death, title to the property continued to be registered in the name of the Vasquez spouses. Upon obtaining the Declaration of Heirship with Waiver of Rights in his favor, private respondent Edy de los Reyes filed the same with the Registry of Deeds as part of a notice of an adverse claimagainst the original certificate of title.
Thereafter, private respondent sought for petitioner (Acap) to personally inform him that he (Edy) had become the new owner of the land and that the lease rentals thereon should be paid to him. Private respondent further alleged that he and petitioner entered into an oral lease agreement wherein petitioner agreed to pay ten (10) cavans of palay per annum as lease rental. In 1982, petitioner allegedly complied with said obligation. In 1983, however, petitioner refused to pay any further lease rentals on the land, prompting private respondent to seek the assistance of the then Ministry of Agrarian Reform (MAR) in Hinigaran, Negros Occidental. The MAR invited petitioner to a conference scheduled on 13 October 1983. Petitioner did not attend the conference but sent his wife instead to the conference. During the meeting, an officer of the Ministry informed Acap's wife about private respondent's ownership of the said land but she stated that she and her husband (Teodoro) did not recognize private respondent's claim of ownership over the land.
On 28 April 1988, after the lapse of four (4) years, private respondent filed a complaint for recovery of possession and damages against petitioner, alleging in the main that as his leasehold tenant, petitioner refused and failed to pay the agreed annual rental of ten (10) cavans of palay despite repeated demands.
During the trial before the court a quo, petitioner reiterated his refusal to recognize private respondent's ownership over the subject land. He averred that he continues to recognize Cosme Pido as the owner of the said land, and having been a registered tenant therein since 1960, he never reneged on his rental obligations. When Pido died, he continued to pay rentals to Pido's widow. When the latter left for abroad, she instructed him to stay in the landholding and to pay the accumulated rentals upon her demand or return from abroad.
Petitioner further claimed before the trial court that he had no knowledge about any transfer or sale of the lot to private respondent in 1981 and even the following year after Laurenciana's departure for abroad. He denied having entered into a verbal lease tenancy contract with private respondent and that assuming that the said lot was indeed sold to private respondent without his knowledge, R.A. 3844, as amended, grants him the right to redeem the same at a reasonable price. Petitioner also bewailed private respondent's ejectment action as a violation of his right to security of tenure under P.D. 27.
On 20 August 1991, the lower court rendered a decision in favor of private respondent, the dispositive part of which reads:
WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff, Edy de los Reyes, and against the defendant, Teodoro Acap, ordering the following, to wit:
1. Declaring forfeiture of defendant's preferred right to issuance of a Certificate of Land Transfer under Presidential Decree No. 27 and his farmholdings;
2. Ordering the defendant Teodoro Acap to deliver possession of said farm to plaintiff, and;
3. Ordering the defendant to pay P5,000.00 as attorney's fees, the sum of P1,000.00 as expenses of litigation and the amount of P10,000.00 as actual damages. 5
In arriving at the above-mentioned judgment, the trial court stated that the evidence had established that the subject land was "sold" by the heirs of Cosme Pido to private respondent. This is clear from the following disquisitions contained in the trial court's six (6) page decision:
There is no doubt that defendant is a registered tenant of Cosme Pido. However, when the latter died their tenancy relations changed since ownership of said land was passed on to his heirs who, by executing a Deed of Sale, which defendant admitted in his affidavit, likewise passed on their ownership of Lot 1130 to herein plaintiff (private respondent). As owner hereof, plaintiff has the right to demand payment of rental and
the tenant is obligated to pay rentals due from the time demand is made. . . . 6
xxx xxx xxx
Certainly, the sale of the Pido family of Lot 1130 to herein plaintiff does not of itself extinguish the relationship. There was only a change of the personality of the lessor in the person of herein plaintiff Edy de los Reyes who being the purchaser or transferee, assumes the rights and obligations of the former landowner to the tenant Teodoro Acap, herein defendant. 7
Aggrieved, petitioner appealed to the Court of Appeals, imputing error to the lower court when it ruled that private respondent acquired ownership of Lot No. 1130 and that he, as tenant, should pay rentals to private respondent and that failing to pay the same from 1983 to 1987, his right to a certificate of land transfer under P.D. 27 was deemed forfeited.
The Court of Appeals brushed aside petitioner's argument that the Declaration of Heirship and Waiver of Rights (Exhibit "D"), the document relied upon by private respondent to prove his ownership to the lot, was excluded by the lower court in its order dated 27 August 1990. The order indeed noted that the document was not identified by Cosme Pido's heirs and was not registered with the Registry of Deeds of Negros Occidental. According to respondent court, however, since the Declaration of Heirship and Waiver of Rights appears to have been duly notarized, no further proof of its due execution was necessary. Like the trial court, respondent court was also convinced that the said document stands as prima facie proof of appellee's (private respondent's) ownership of the land in dispute.
With respect to its non-registration, respondent court noted that petitioner had actual knowledge of the subjectsale of the land in dispute to private respondent because as early as 1983, he (petitioner) already knew of private respondent's claim over the said land but which he thereafter denied, and that in 1982, he (petitioner) actually paid rent to private respondent. Otherwise stated, respondent court considered this fact of rental payment in 1982 as estoppel on petitioner's part to thereafter refute private respondent's claim of ownership over the said land. Under these circumstances, respondent court ruled that indeed there was deliberate refusal by petitioner to pay rent for a continued period of five years that merited forfeiture of his otherwise preferred right to the issuance of a certificate of land transfer.
In the present petition, petitioner impugns the decision of the Court of Appeals as not in accord with the law and evidence when it rules that private respondent acquired ownership of Lot No. 1130 through the aforementioned Declaration of Heirship and Waiver of Rights.
Hence, the issues to be resolved presently are the following:
1. WHETHER OR NOT THE SUBJECT DECLARATION OF HEIRSHIP AND WAIVER OF RIGHTS IS A RECOGNIZED MODE OF ACQUIRING OWNERSHIP BY PRIVATE RESPONDENT OVER THE LOT IN QUESTION.
2. WHETHER OR NOT THE SAID DOCUMENT CAN BE CONSIDERED A DEED OF SALE IN FAVOR OF PRIVATE RESPONDENT OF THE LOT IN QUESTION.
Petitioner argues that the Regional Trial Court, in its order dated 7 August 1990, explicitly excluded the document marked as Exhibit "D" (Declaration of Heirship, etc.) as private respondent's evidence because it was not registered with the Registry of Deeds and was not identified by anyone of the heirs of Cosme Pido. The Court of Appeals, however, held the same to be admissible, it being a notarized document, hence, a prima facie proof of private respondents' ownership of the lot to which it refers.
Petitioner points out that the Declaration of Heirship and Waiver of Rights is not one of the recognized modes of acquiring ownership under Article 712 of the Civil Code. Neither can the same be considered a deed of sale so as to transfer ownership of the land to private respondent because no consideration is stated in the contract (assuming it is a contract or deed of sale).
Private respondent defends the decision of respondent Court of Appeals as in accord with the evidence and the law. He posits that while it may indeed be true that the trial court excluded his Exhibit "D" which is the Declaration of Heirship and Waiver of Rights as part of his evidence, the trial court declared him nonetheless owner of the subject lot based on other evidence adduced during the trial, namely, the notice of adverse claim (Exhibit "E") duly registered by him with the Registry of Deeds, which contains the questioned Declaration of Heirship and Waiver of Rights as an integral part thereof.
We find the petition impressed with merit.
In the first place, an asserted right or claim to ownership or a real right over a thing arising from a juridical act, however justified, is not per se sufficient to give rise to ownership over the res. That right or title must be completed by fulfilling certain conditions imposed by law. Hence, ownership and real rights are acquired only pursuant to a legal mode or process. While title is the juridical justification, mode is the actual process of acquisition or transfer of ownership over a thing in question. 8
Under Article 712 of the Civil Code, the modes of acquiring ownership are generally classified into two (2) classes, namely, the original mode (i.e., through occupation, acquisitive prescription, law or intellectual creation) and thederivative mode (i.e., through succession mortis causa or tradition as
a result of certain contracts, such as sale, barter, donation, assignment or mutuum).
In the case at bench, the trial court was obviously confused as to the nature and effect of the Declaration of Heirship and Waiver of Rights, equating the same with a contract (deed) of sale. They are not the same.
In a Contract of Sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other party to pay a price certain in money or its equivalent. 9
Upon the other hand, a declaration of heirship and waiver of rights operates as a public instrument when filed with the Registry of Deeds whereby the intestate heirs adjudicate and divide the estate left by the decedent among themselves as they see fit. It is in effect an extrajudicial settlement between the heirs under Rule 74 of the Rules of Court. 10
Hence, there is a marked difference between a sale of hereditary rights and a waiver of hereditary rights. The first presumes the existence of a contract or deed of sale between the parties. 11 The second is, technically speaking, a mode of extinction of ownership where there is an abdication or intentional relinquishment of a known right with knowledge of its existence and intention to relinquish it, in favor of other persons who are co-heirs in the succession. 12 Private respondent, being then a stranger to the succession of Cosme Pido, cannot conclusively claim ownership over the subject lot on the sole basis of the waiver document which neither recites the elements of either a sale, 13 or a donation, 14 or any other derivative mode of acquiring ownership.
Quite surprisingly, both the trial court and public respondent Court of Appeals concluded that a "sale" transpired between Cosme Pido's heirs and private respondent and that petitioner acquired actual knowledge of said sale when he was summoned by the Ministry of Agrarian Reform to discuss private respondent's claim over the lot in question. This conclusion has no basis both in fact and in law.
On record, Exhibit "D", which is the "Declaration of Heirship and Waiver of Rights" was excluded by the trial court in its order dated 27 August 1990 because the document was neither registered with the Registry of Deeds nor identified by the heirs of Cosme Pido. There is no showing that private respondent had the same document attached to or made part of the record. What the trial court admitted was Annex "E", a notice of adverse claim filed with the Registry of Deeds which contained the Declaration of Heirship with Waiver of rights and was annotated at the back of the Original Certificate of Title to the land in question.
A notice of adverse claim, by its nature, does not however prove private respondent's ownership over the tenanted lot. "A notice of adverse claim is nothing but a notice of a claim adverse to the registered owner, the validity
of which is yet to be established in court at some future date, and is no better than a notice of lis pendenswhich is a notice of a case already pending in court." 15
It is to be noted that while the existence of said adverse claim was duly proven, there is no evidence whatsoever that a deed of sale was executed between Cosme Pido's heirs and private respondent transferring the rights of Pido's heirs to the land in favor of private respondent. Private respondent's right or interest therefore in the tenanted lot remains an adverse claim which cannot by itself be sufficient to cancel the OCT to the land and title the same in private respondent's name.
Consequently, while the transaction between Pido's heirs and private respondent may be binding on both parties, the right of petitioner as a registered tenant to the land cannot be perfunctorily forfeited on a mere allegation of private respondent's ownership without the corresponding proof thereof.
Petitioner had been a registered tenant in the subject land since 1960 and religiously paid lease rentals thereon. In his mind, he continued to be the registered tenant of Cosme Pido and his family (after Pido's death), even if in 1982, private respondent allegedly informed petitioner that he had become the new owner of the land.
Under the circumstances, petitioner may have, in good faith, assumed such statement of private respondent to be true and may have in fact delivered 10 cavans of palay as annual rental for 1982 to private respondent. But in 1983, it is clear that petitioner had misgivings over private respondent's claim of ownership over the said land because in the October 1983 MAR conference, his wife Laurenciana categorically denied all of private respondent's allegations. In fact, petitioner even secured a certificate from the MAR dated 9 May 1988 to the effect that he continued to be the registered tenant of Cosme Pido and not of private respondent. The reason is that private respondent never registered the Declaration of Heirship with Waiver of Rights with the Registry of Deeds or with the MAR. Instead, he (private respondent) sought to do indirectly what could not be done directly,i.e., file a notice of adverse claim on the said lot to establish ownership thereover.
It stands to reason, therefore, to hold that there was no unjustified or deliberate refusal by petitioner to pay the lease rentals or amortizations to the landowner/agricultural lessor which, in this case, private respondent failed to establish in his favor by clear and convincing evidence. 16
Consequently, the sanction of forfeiture of his preferred right to be issued a Certificate of Land Transfer under P.D. 27 and to the possession of his farmholdings should not be applied against petitioners, since private respondent has not established a cause of action for recovery of possession against petitioner.
WHEREFORE, premises considered, the Court hereby GRANTS the petition and the decision of the Court of Appeals dated 1 May 1994 which affirmed the decision of the RTC of Himamaylan, Negros Occidental dated 20 August 1991 is hereby SET ASIDE. The private respondent's complaint for recovery of possession and damages against petitioner Acap is hereby DISMISSED for failure to properly state a cause of action, without prejudice to private respondent taking the proper legal steps to establish the legal mode by which he claims to have acquired ownership of the land in question.
