1) Power Commercial vs. Court of Appeals | CDCP or PNCC274 scra 597

Ponente: Panganiban, J.:

Doctrine: Obligations; Unilateral rescission of a contract is subject to judicial determination. Contractual stipulations should be interpreted together. Ambiguous ones should be construed to conform to the sense that would result when all the provisions are comprehended jointly. Moreover, doubts should be settled in favor of the greatest reciprocity of interests.Facts: On July 2, 1982, [Mars Construction Enterprises, Inc., [respondent herein] entered into a subcontract/Agreement with x x x Construction & Development Corporation of the Philippines (CDCP) now PNCC [petitioner herein], for the supply of approximately seventy thousand (70,000) cubic meters of aggregates consisting of: micks1. washed sand,2. washed " gravel,3. washed 1-" gravel4. sub-base. On August 7, 1982, [respondent] and CDCP executed Amendment No. 1 increasing the amount of the third party liability coverage from P50,000.00 to P100,000.00.

On November 5, 1982, [respondent] and CDCP executed Amendment No. 2 amending the scope of services, as follows:1. Art. I is hereby amended to read:ARTICLE I SCOPE OF SERVICES'The FIRST PARTY [respondent] shall supply approximately SEVENTY THOUSAND (70,000) cubic meters of concrete aggregates consisting of the following:1. [W]ashed sand app. 17,500 cu. m.2. Washed " gravel app. 17,500 cu. m. Me-sm3. Washed 1 " gravel app. 35,000 cu. m.4. Sub-base 2" minus crusher run Amendment No. 2 also altered Article IV (5.0) of the original Agreement which provided that (t)he first party guarantees to commence delivery within forty five (45) days after signing of the contract and continue delivery until the quantities enumerated x x x [shall] have been delivered to the jobsite stockpile to read as follows:ARTICLE V DELIVERY'The FIRST PARTY [respondent] shall deliver a minimum of SIX THOUSAND (6,000) cubic meters of combined concrete aggregate per month until the entire requirements of the SECOND PARTY [petitioner] to complete the Philphos Project shall have been satisfied. (Underscoring supplied.)BREACH: Actual delivery of aggregates started only in March of 1983, or a delay of eight (8) months of the 45 days stipulated in the Agreement (Agreement, Article IV (5.0); TSN, September 6, 1985, pp. 9-10). There were also non-deliveries between the period June 1983 to January 1984 . Thus [petitioner] was constrained to obtain the necessary materials from other sources, incurring additional costs representing the difference between the agreed price of P140.00 per cubic meter under the Agreement and the pricing of the outside sources. The difference in cost was reimbursed by [respondent] in accordance with the default clause under the Agreement that the Second Party [petitioner] can procure from any other quarry operator x x x (and) should such procurement cost the Second Party more than the agreed price above, the excess [would] be for the account of the First Party x x x' (Article VII, no. 7).

A total of P1.578 M was thusly paid by [respondent] CONTROVERSY: S-l-xThe controversy arose when [petitioner] refused to accept [respondents] delivery of 17,000.00 cubic meters of washed 1-1/2" gravel, saying that it had no more need for the same.

For this, [respondent] claimed the amount of P680,000.00 representing lucrum cessans or unrealized profit with interest at bank rate until fully paid, exemplary damages and attorneys fees.

Petitioner denied that it breached the contract and counter-claimed for the amount of P85,120 as price differential of the procurement cost over the agreed price, plus reimbursement of overpayment of P23,256.80 it had made arising from error in measurement. (Answer, Counterclaim).LOWER COURT:nigellaRendered in favor of plaintiff and against the defendant ordering the defendant to pay plaintiff: a.) the amount of P680,000.00 as lucrum cessans; b.) the amount of P33,387.91 for the outstanding obligation of PNCC in favor of plaintiff (118,518.68 less price differential of P85,120.77); c.) attorneys fees x x x reduced to the reasonable amount of P50,000.00; and as the costs of litigation."Ruling of the Court of Appeals The CA REVERSED and ruled for RESPONDENT that the Contract and its amendments impelled petitioner to accept delivery of the washed 1.5-inch gravel from the respondent. The figures in the "Scope of Services" provision were interpreted to mean the minimum quantities to be delivered to the petitioner. The petitioner received a total of 8,162.43 cubic meters of washed 1.5-inch gravel from the respondent and 9,978.06 cubic meters from other sources.

Hence, the petitioner actually utilized only 18,140.49 cubic meters of aggregates of this specification, which was only about half of the stipulated 35,000 cubic meters. Clearly, it breached the Contract when it refused to accept delivery of the 17,000 cubic meters of washed 1.5-inch gravel from the respondent Because of this breach, the respondent was entitled to lucrum cessans, computed by deducting the production cost from the agreed cost per cubic meter of aggregatesslx The CA denied the petitioners prayer for damages arising from the delays in delivery, because respondent had already compensated or paid for such delays. The appellate court rejected petitioners contention that the respondent committed bad faith by entering into a contract that it was financially incapable of fulfilling, inasmuch as this issue had not been raised before the trial courtIssuesWhether PNCC was compelled to accept the delivery of the 17,000 cubic meters of washed 1-" gravel which is not in accord with law and jurisprudenceWhether the damages award of the amount of P680,000.00 as lucrum cessans is not in accord with law and jurisprudence.Sl-xsc

The Courts RulingThe Petition has no merit. Court favors RESPONDENT.First Issue: Obligation to Accept DeliveryPetitioner contends that it was not under any obligation to accept 17,000 cubic meters of washed 1.5-inch gravel, because the delivery was made after the actual aggregate requirement of the project had already been fully satisfied, and after respondent had defaulted on its contractual undertakings.Interpreting the ContractSl-xm-isPetitioner adds that the respondent had already delivered aggregates, the combined volume of which was about 45 percent over and above that required in Article I, Amendment 2 of the Contract. Hence, the petitioner refused to accept the "excess" delivery in issue.This contention is incorrect. The various stipulations in a contract should be interpreted together. Ambiguous ones should be so construed as to conform to the sense that would result if all the provisions are comprehended jointly.The "Scope of Services" provision in Amendment 2 stipulated the delivery of 70,000 cubic meters of concrete aggregates consisting of approximately 17,500 cubic meters of washed sand, approximately 17,500 cubic meters of washed .75-inch gravel, 35,000 cubic meters of washed 1.5-inch gravel, and "sub-base 2" minus crusher run. Clearly, at least 35,000 of the 70,000 cubic meters of concrete aggregates that the respondent was supposed to deliver to the petitioner should be washed 1.5-inch gravel. The trial court correctly explained: M-issdaBesides, the stipulation would be too burdensome to the respondent if, as petitioner insists, the breakdown of the specified aggregates were interpreted as mere estimates of the project requirements; the respondent would have then been uncertain as to how much it should deliver. Doubts in contracts should be settled in favor of the greatest reciprocity of interestsAccordingly, these figures, as held by the CA, should be deemed the minimum amounts to be procured and delivered. In this way, both parties would know exactly how much to demand from each other to be able to comply with their respective obligations.Provisional Unilateral ResolutionPNCC Project Director H. R. Taylors letter of May 17, 1984 informed the respondent of the final quantities of concrete aggregates to be delivered, with the advice that no other deliveries would be accepted. Hence, the petitioner asserts that, after that advice, it was no longer bound to accept any further deliveries from the respondent. Sd-aad-scWe disagree. Such advice is not a sufficient justification for refusing delivery. The only clause on delivery is Stipulation 2 of Amendment 2, which states that "[t]he FIRST PARTY shall deliver a minimum of SIX THOUSAND (6,000) [c]ubic meters of combined concrete aggregate per month until the entire requirements of the SECOND PARTY to complete the Philphos Project shall have been satisfied." The Contract did not authorize the petitioner to limit, by means of a unilateral advice, the quantity of aggregates that may be delivered. Although there were several occasions when the petitioner advised the respondent on the quality and the quantity of concrete aggregates to be delivered, Mr. Solomon Chu (general manager of respondent) testified that the giving of advice did not become the practice between them.By saying that the quantity specified in the letter was its last order, petitioner unilaterally amended its Contract with the respondent. The act of treating a contract as cancelled or rescinded on account of infractions by the other contracting party is always provisional; that is, contestable and subject to judicial determination.Judicial action is necessary for its rescission in order to afford the other party an opportunity to be heard and to determine if the rescission was proper.When the herein petitioner resolved or rescinded the Agreement without previous court action, it proceeded at its own risk. Only the final judgment of a court will conclusively and finally settle whether such recourse was correct in law.Default as Insubstantial BreachScPetitioner avers that respondent was already in default when the former refused the latter's delivery of 17,000 cubic meters of washed 1.5-inch gravel. Hence, its refusal was justified.We are not persuaded. The contract specifically provided that if the respondent failed to deliver the required aggregates, the petitioner could procure them from other sources so as not to jeopardize the entire construction project. The records reveal that on several occasions, petitioner purchased concrete aggregates from other suppliers.Pursuant to Paragraph 3 of Amendment 2, petitioner imposed penalties for the incremental cost of procuring materials from other sources, which respondent willingly paid in the sum of P1,577,000. Since petitioner was already compensated for respondent's defaults, such defaults cannot be considered as a substantial breach that justified the rescission of the Contract and the refusal to accept the questioned delivery.WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.SO ORDERED.

2) Romero v ca 250 scra 223,

3.) LEODEGARIO AZARRAGA, plaintiff-appellee, vs.MARIA GAY, defendant-appellant.

Ponente:VILLAMOR, J.:

Facts:

By a public document Exhibit A, dated January 17, 1921, the plaintiff sold two parcels of lands to the defendant for the lump sum of P47,000, payable in installments. The conditions of the payment were: P5,000 at the time of signing the contract P20,000 upon delivery by the vendor to the purchaser of the Torrens title to the first parcel described in the deed of sale P10,000 upon delivery by the vendor to the purchaser of Torrens title to the second parcel; P12,000 one year after the delivery of the Torrens title to the second parcel. The defendant paid P5,000 to the plaintiff when the contract was signed. The plaintiff delivered the Torrens title to the first parcel to the defendant who, pursuant to the agreement, paid him P20,000. In the month of March 1921, Torrens title to the second parcel was issued and forthwith delivered by the plaintiff to the defendant who, however, failed to pay the P10,000 as agreed, neither did she pay the remaining P12,000 one year after having received the Torrens title to the second parcel. The plaintiff here claims the sum of P22,000, with legal interest from the month of April 1921 on the sum of P10,000, and from April 1922 on the sum of P12,000, until full payment of the amounts claimed. The defendant admits that she purchased the two parcels of land referred to by plaintiff, by virtue of the deed of sale Exhibit A, but alleges in defense: (a) That the plaintiff knowing that the second parcels of land he sold had an area of ONLY 60 hectares, by misrepresentation lead the defendant to believe that said second parcel contained 98 hectares, and thus made it appear in the deed of sale and induced the vendee to bind herself to pay the price of P47,000 for the two parcels of land, which he represented contained an area of no less than 200 hectares, to which price the defendant would not have bound herself had she known that the real area of the second parcel was 60 hectares, and, consequently, she said that price reduction was lacking (b) that the defendant, in addition to the amounts acknowledged by the plaintiff, had paid other sums amounting to P4,000; and (c) that the defendants never refused to pay the justly reduced price, but the plaintiff refused to receive the just amount of the debt. And by way of cross-complaint, the defendant prays that she be indemnified in the sum of P15,000 for damages sustained by her by reason of the malicious filing of the instant complaint. The plaintiff, replying to the amended answer, alleges that the contract of sale in question was made only for the lump sum of P47,000, and not at the rate of so much per hectare, and that the defendant's claim for alleged damages has prescribed.

The lower court decided for PLAINTIFF, having minutely analyzed the evidence adduced by the parties held that neither the plaintiff nor the defendant gave any importance to the area of the land in consenting to the contract in question, and that there having been no fraud when the parties agreed to the lump sum for the two parcels of land described in the deed Exhibit A, following article 1471 of the Civil Code, ordered the defendant to pay the plaintiff the sum of P19,300 with legal interest at 8 per cent per annum from April 30, 1921 on the sum of P7,300, and from April 30, 1922, on the sum of P12,000. And finally dismissed the defendant's cross-complaint, without special pronouncement as to costs. A motion for a new trial having been denied, this case was brought up to this court The appellant alleges that the trial court erred in not considering that the plaintiff induced the defendant by deceit, to pay him the stipulated price for the two parcels he sold, stating falsely in the deed of sale that the second of said parcels had an area of 98 hectares when he knew that in reality it only had about 60 hectares more or less, or at least, if such deceit was not practiced that mere that there was a mistake on the part of Maria Gay in believing that said second parcel contained 98 hectares.

ISSUE: Is the defendant justified in not paying the balance and interest because of the fraud and the alleged refusal of payment?

HELD: No. As a question of fact the trial court found from the evidence adduced by the parties, that the plaintiff had not practised any deception in agreeing with the defendant upon the sale of the two parcels of land described in Exhibit A. We concur with the trial court in this conclusion. It appears of record that before the execution of the contract Exhibit A, the defendant went over the plaintiff's land and made her calculations as to the area of said two parcels. But this not all. The plaintiff delivered to the defendant the documents covering the land he was trying to sell.

As to the first parcel there is no question whatever and the defendant's contention is limited solely to the actual area of the second parcel. The defendant had the deed by which the plaintiff acquired the land from the original owner, Crispulo Beramo, in which document it appears that the area of the second parcel is about 70 hectares.

It was the defendant who intrusted the drawing of the deed of sale Exhibit A to her attorney and notary, Hontiveros, and it is to be presumed that both she and the lawyer who drew the document Exhibit A, had read the contents of the document Exhibit 4.

The plaintiff declares that he signed the document between 5 and 7 in the afternoon of that day and he did not pay any attention to the area of the second parcel, probably in the belief that in the drawing of the document the data concerning the area of the land had been taken from the said Exhibit 4.

The defendant testified that she received from the plaintiff a note or piece of paper containing the data to be inserted in the contract Exhibit A. The plaintiff denies this and said note or piece of paper was not presented at the trial. We are of opinion that this testimony of the defendant's is unimportant, because, in reality, if the plaintiff had delivered Exhibit 4 to the defendant, there was no need to deliver to her another note to indicate the area of the second which already appeared in the said Exhibit 4.

If, notwithstanding the fact that it appeared in Exhibit 4 that the area of the second parcel was, approximately, 70 hectares, the defendant, however, stated in said document Exhibit A that said second parcel contained 98 hectares as was admitted by him in his interviews with the plaintiff in the months of April and June, 1924, then she has no right to claim from the plaintiff the shortage in area of the second parcel. Furthermore, there is no evidence of record that the plaintiff made representation to the defendant as to the area of said second parcel, and even if he did make such false representations as are now imputed to him by the defendant, the latter accepted such representations at her own risk and she is the only one responsible for the consequences of her inexcusable credulousness.

In the case of Songco vs. Sellner (37 Phil., 254), the court said:

The law allows considerable latitude to seller's statements, or dealer's talk; and experience teaches that it as exceedingly risky to accept it at its face value.

Assertions concerning the property which is the subject of a contract of sale, or in regard to its qualities and characteristics, are the usual and ordinary means used by sellers to obtain a high price and are always understood as affording to buyers no grund from omitting to make inquires. A man who relies upon such an affirmation made by a person whose interest might so readily prompt him to exaggerate the value of his property does so at his peril, and must take the consequences of his own imprudence.

The defendant had ample opportunity to appraise herself of the condition of the land which she purchased, and the plaintiff did nothing to prevent her from making such investigation as she deemed fit, and as was said in Songco vs. Sellner, supra, when the purchaser proceeds to make investigations by himself, and the vendor does nothing to prevent such investigation from being as complete as the former might wish, the purchaser cannot later allege that the vendor made false representations to him. (National Cash Register Co. vs. Townsend, 137 N. C., 652; 70 L. R. A., 349; Williamson vs. Holt, 147 N. C., 515.)

The same doctrine has been sustained by the courts of the United States in the following cases, among others: Misrepresentation by a vendor of real property with reference to its area are not actionable, where a correct description of the property was given in the deed and recorded chain of title, which the purchaser's agent undertook to investigate and report upon, and the vendor made on effort to prevent a full investigation." (Shappirio vs. Goldberg, 48 Law. ed., 419.)

"One who contracts for the purchase of real estate in reliance on the representations and statements of the vendor as to its character and value, but after he has visited and examined it for himself, and has had the means and opportunity of verifying such statements, cannot avoid the contract on the ground that they were false or exaggerated." (Brown vs. Smith, 109 Fed., 26.)

That the defendant knew that the area of the second parcel was only about 70 hectares is shown by the fact that she received the document Exhibit 4 before the execution of the contract Exhibit A, as also Exhibit E-3 on September 30, 1920; which is the notification of the day for the trial of the application for registration of said parcel, wherein it appears that it had an area of 60 hectares more or less, and by the fact that she received from the plaintiff in the month of June 1924 the copy of the plans of the two parcels, wherein appear their respective areas; and yet, in spite of all this, she did not complain of the difference in the area of said second parcel until the year 1926.

Moreover, the record contains several of the defendant's letters to the plaintiff in the years 1921 to 1925, in which said defendant acknowledges her debt, and confining herself to petitioning for extentions of time within which to make payment for the reasons given therein. But in none of these letters is there any allusion to such lack of area, nor did she complain to the plaintiff of the supposed deceit of which she believes she is a victim. All of which, in our opinion, shows that no such deceit was practiced, as the trial court rightly found.

As to the alleged error to the effect that the trial court failed to order the reduction from the price due on the second parcel as stated in the contract of sale Exhibit A, the proportional price of the area lacking, we are of the opinion that said error has no legal ground.

It appears that by the contract Exhibit A, the parties agreed to the sale of two parcels of land, the first one containing 102 hectares, 67 acres and 32 centares, and the second one containing about 98 hectares, for the lump sum of P47,000 payable partly in cash and partly in installments. Said two parcels are defind by means of the boundaries given in the instrument. Therefore, the case falls within the provision of article 1471 of the Civil Code, which reads as follows:

ART. 1471. In case of the sale of real estate for a lump sum and not at the rate of a specified price for each unit of measure, there shall be no increase or decrease of the price even if the area be found to be more or less than that stated in the contract.

The same rule shall apply when two or more estates are sold for a single price; but, if in addition to a statement of the boundaries, which is indispensable in every conveyance of real estate, the area of the estate should be designated in the contract, the vendor shall be obliged to deliver all that is included with such boundaries, even should it exceed the area specified in the contract; and, should he not be able to do so, he shall suffer a reduction of the price in proportion to what is lacking of the area, unless the contract be annulled by reason of the vendee's refusal to accept anything other than that which was stipulated.

The plaintiff contends that, in accordance with the first paragraph of this article, the defendant has no right to ask for the reduction of price, whatever may be the area of the two parcels of land sold her. On the other hand, the defendant contends that, according to paragraph 2 of the same article of the Civil Code, she has a right to ask for a reduction of the price due on the second parcel, in proportion to the area lacking.

In his comments on the article cited, Manresa says, among other things:. . . if the sale was made for a price per unit of measure or number, the consideration of the contract with respect to the vendee, is the number of such units, or, if you wish, the thing purchased as determined by the stipulated number of units. But if, on the other hand, the sale was made for a lump sum, the consideration of the contract is the object sold, independently of its number or measure, the thing as determined by the stipulated boundaries, which has been called in law a determinate object.

This difference in consideration between the two cases implies a distinct regulation of the obligation to deliver the object, because, for an acquittance delivery must be made in accordance with the agreement of the parties, and the performance of the agreement must show the confirmation in fact, of the consideratin which induces each of the parties to enter into the contract.

From all this, it follows that the provisions of article 1471 concerning the delivery of determinate objects had to be materially different from those governing the delivery of things sold a price per unit of measure or number. Let us examine it, and for the sake of greater clearness, let us expound it as we understand it.

With respect to the delivery of determinate objects two cases may arise, either the determinate object is delivered as stipulated, that is, delivering everything included within the boundaries, inasmuch as it is the entirety thereof that distinguishes the determinate object; or that such entirety is impaired in the delivery by failing to deliver to the purchaser something included within the boundaries. These are the two cases for which the Code has provided although, in our opinion, it has not been sufficiently explicit in expressing the distinction; hence, at first sight, the article seems somewhat difficult to understand.

The first paragraph and the first clause of the second paragraph of article 1471 deal with the first of said cases; that is where everything included within the boundaries as set forth in the contract has been delivered. The Code goes on to consider the case where a definite area or number has been expressed in the contract, and enunciates the rule to be followed when, after delivery, the area included within said boundaries is found not to coincide with the aforesaid content or number.

Said rule may be thus stated: Whether or not the object of sale be one realty for a lump sum, or two or more for a single price also a lump sum, and, consequently, not for so much per unit of measure or number, there shall be no increase or decrease in the price even if the area be found to be more or less than that stated in the contract.

Thus understood the reason for the regulation is clear and no doubts can arise from its application. It is concerned with determinate objects. The consideration of the contract, and the thing to be delivered is a determinate object, and not the number of units it contains. The price is determined with relation to it; hence, its greater or lesser area cannot influence the increase or decrease of the price agreed upon. We have just learned the reason for the regulation, bearing in mind that the Code has rightly considered an object as determinate for the purposes now treated, when it is a single realty as when it is two or more, so long as they are solds for a single price constituting a lump sum and not for a specified amount per unit of measure or number.

We have stated that the second possible case in the delivery of determinate objects is that in which, on account or circumstances of diverse possible origins, everything included within the boundaries is not delivered.

We have indicated about that where everything included within the boundaries is delivered there can be no increase or decrease in price, no matter whether the area be more or less than that given in the contract. From this a very important consequence follows, to wit: That if the vendor is bound to deliver a determinate object, he is bound to deliver all of it, that is, everything within its boundaries, in the contract, and that from the moment he fails to do so, either because he cannot, or because, ignoring the meaning of the contract, he alleges that it contains a greater area than that stipulated, the contract is partially unfulfilled and it is but just the certain actions be available to the vendee for the protection of his right.

The rule in the latter case is found in the second paragraph of article 1471, with the exception of the first clause which refers of the former hypothesis. This rule may be stated as follows: Whether or not the object of the sale be one realty for a lump sum, or two or more for a single price also a lump sum, and, consequently not at the rate of a specified price for each unit of measuring or number, the vendor shall be bound to deliver everything that is included within the boundaries stated, although it may exceed the area or number expressed in the contract; in case he cannot deliver it, the purchaser shall have the right either to reduce the price proportionately to what is lacking of the area or number, or to rescind the contract at his option.

Comprehending the meaning of a sale of a determinate object, it is easily understod how, in cases wherein by virtue of the rule enunciated, the vendor has to deliver a greater area than that expressed in the contract, there is, strictly speaking, no excess of area, inasmuch as one may always properly ask, excess with respect to what? With respect to the area appearing in the deed, it will be answered. But as this area was not taken into account in entering into the contract inasmuch as the parties made neither the amount of the price, nor the efficacy of the contract to depend on the number of its units; since area was written in to fulfill a formal requisite demanded by the present rules upon the drawing of public instruments, but as a condition essential to the contract, which, if it were not true, would not be consummated, it results in the long run, that this detail of the written recital, with respect to which the excess is to be estimated, is so negligible, so inconsistent, so haphazard, and in the vast majority of cases so wide of the mark, that it is impossible to calculate the excess; and considering the nature of a contract of sale of a definite object, it cannot be strictly held that there is any excess at all.

If everything within the stipulated boundaries is not delivered, then the determination object which was the consideration of the contract for the vendee, is not delivered; hence his power to nullify it. However, it might be (and this he alone can say), that although he has not received the object, according to the stipulated terms, it suits him; hence his power to carry the contract into effect with the just decrease in price referred to in the article under comment.

The manner in which the matter covered by this article was Some eminent commentators construe the last part of article 1471 in a different way. To them the phrase "and should he not be able to do so" as applied to the vendor, does not mean as apparently it does "should he not be able to deliver all that is included within the boundaries stated," but this other thing namely, that if by reason of the fact that a less area is included within the boundaries than that expressed in the contract, it is not possible for the vendor to comply therewith according to its literal sense, he must suffer the effects of the nullity of the contract or a reduction of the price proportionately what may be lacking of the area or number. It is added as a ground for this solution that if the vendor fulfills the obligations, as stated in the article, by delivering what is not included with in the boundaries, there can never be any case of proportionate reduction of the price on account of shortage of area, because he does not give less who delivers all that he bound himself to.

According to this opinion, which we believe erroneous, if within the boundaries of the property sold, there is included more area than that expressed in the title deeds, nothing can be claimed by the vendor who losses the value of that excess, but if there is less area, then he loses also because either the price is reduced or the contract is annulled. This theory would be anomalous in case of sale of properties in bulk, but, especially, would work a gross injustice which the legislator never intended.

There is no such thing. So long as the vendor can deliver, and for that reason, delivers all the land included within the boundaries assigned to the property, there can be no claim whatsoever either on his part, although the area may be found to be much greater than what was expressed, nor on the part of the puchaser although that area may be in reality much smaller. But as he sold everything within the boundaries and this is all the purchaser has paid, or must pay for whether much or little, if afterwards it is found that he cannot deliver all, because, for instance, a part, a building, a valley, various pieces of land, a glen, etc., are not his, there is no sale of a determinate object, there is no longer a sale of the object agreed upon, and the solution given by the article is then just and logical: Either the contract is annulled or the price reduced proportionately.

DISPOSITIVE. The judgment appealed from being in accordance with the law, it should be as it is hereby, affirmed with costs against the appellant. So ordered

4) investment and devt v ca 162 scra 636,

Ponente: PANGANIBAN, J.:

ISSUE: Is the seller's failure to eject the lessees from a lot that is the subject of a contract of sale with assumption of mortgage a ground (1) for rescission of such contract and (2) for a return by the mortgagee of the amortization payments made by the buyer who assumed such mortgage?

Petitioner posits an affirmative answer to such question in this petition for review on certiorari of the March 27, 1995 Decision 1 of the Court of Appeals, Eighth Division, in CA-G.R. CV Case No. 32298 upholding the validity of the contract of sale with assumption of mortgage and absolving the mortgagee from the liability of returning the mortgage payments already made.

The Facts Petitioner Power Commercial & Industrial Development Corporation, an industrial asbestos manufacturer, needed a bigger office space and warehouse for its products. For this purpose, on January 31, 1979, it entered into a contract of sale with the spouses Reynaldo and Angelita R. Quiambao, herein private respondents. The contract involved a 612-sq. m. parcel of land located at the corner of Bagtican and St. Paul Streets, San Antonio Village, Makati City. The parties agreed that petitioner would pay private respondents P108,000.00 as down payment, and the balance of P295,000.00 upon the execution of the deed of transfer of the title over the property. Further, petitioner assumed, as part of the purchase price, the existing mortgage on the land. In full satisfaction thereof, he paid P79,145.77 to Respondent Philippine National Bank ("PNB" for brevity). On June 1, 1979, respondent spouses mortgaged again said land to PNB to guarantee a loan of P145,000.00, P80,000.00 of which was paid to respondent spouses. Petitioner agreed to assume payment of the loan. On June 26, 1979, the parties executed a Deed of Absolute Sale With Assumption of Mortgage which contained the following terms and conditions: That for and in consideration of the sum (P295,000.00) Philippine Currency, to us in hand paid in cash, and which we hereby acknowledge to be payment in full and received to our entire satisfaction, by POWER COMMERCIAL AND INDUSTRIAL DEVELOPMENT CORPORATION We hereby certify that the aforesaid property is not subject to nor covered by the provisions of the Land Reform Code the same having no agricultural lessee and/or tenant. We hereby also warrant that we are the lawful and absolute owners of the above described property, free from any lien and/or encumbrance, and we hereby agree and warrant to defend its title and peaceful possession thereof in favor of the said Power Commercial and Industrial Development Corporation, its successors and assigns, against any claims whatsoever of any and all third persons; subject, however, to the provisions hereunder provided to wit: That the above described property is mortgaged to the Philippine National Bank, Cubao, Branch, Quezon City for the amount of one hundred forty-five thousand pesos, Philippine, evidenced by document No. 163, found on page No. 34 of Book No. XV, Series of 1979 of Notary Public HeritaL. Altamirano registered with the Register of Deeds of Pasig (Makati), Rizal . . . ; On the same date, Mrs. C.D. Constantino, then General Manager of petitioner-corporation, submitted to PNB said deed with a formal application for assumption of mortgage. On February 15, 1980, PNB informed respondent spouses that, for petitioner's failure to submit the papers necessary for approval pursuant to the former's letter dated January 15, 1980, the application for assumption of mortgage was considered withdrawn; that the outstanding balance of P145,000.00 was deemed fully due and demandable; and that said loan was to be paid in full within fifteen (15) days from notice. Petitioner paid PNB P41,880.45 on June 24, 1980 and P20,283.14 on December 23, 1980, payments which were to be applied to the outstanding loan. On December 23, 1980, PNB received a letter from petitioner which reads:

With regard to the presence of the people who are currently in physical occupancy of the (l)ot . . . it is our desire as buyers and new owners of this lot to make use of this lot for our own purpose, which is why it is our desire and intention that all the people who are currently physically present and in occupation of said lot should be removed immediately.

For this purpose we respectfully request that . . . our assumption of mortgage be given favorable consideration, and that the mortgage and title be transferred to our name so that we may undertake the necessary procedures to make use of this lot ourselves.

It was our understanding that this lot was free and clear of problems of this nature, and that the previous owner would be responsible for the removal of the people who were there. Inasmuch as the previous owner has not been able to keep his commitment, it will be necessary for us to take legal possession of this lot inorder (sic) to take physical possession.PNB writes:

(T)his refers to the loan granted to Mr. Reynaldo Quiambao which was assumed by you on June 4, 1979 for P101,500.00. It was last renewed on December 24, 1980 to mature on June 4, 1981. A review of our records show that it has been past due from last maturity with interest arrearages amounting to P25,826.08 as of February 19, 1982. The last payment received by us was on December 24, 1980 for P20,283. 14. In order to place your account in current form, we request you to remit payments to cover interest, charges, and at least part of the principal.

On March 17, 1982, petitioner filed Civil Case No. 45217 against respondent spouses for rescission and damages before the Regional Trial Court of Pasig, Branch 159. Then, in its reply to PNB's letter of February 19, 1982, petitioner demanded the return of the payments it made on the ground that its assumption of mortgage was never approved.

On May 31, 1983, 8 while this case was pending, the mortgage was foreclosed. The property was subsequently bought by PNB during the public auction.

Thus, an amended complaint was filed impleading PNB as party defendant.

TRIAL COURT: Ruled that the failure of respondent spouses to deliver actual possession to petitioner entitled the latter to rescind the sale, and in view of such failure and of the denial of the latter's assumption of mortgage, PNB was obliged to return the payments made by the latter. COURT OF APPEALS: REVERSED LOWER COURT: In the assailed Decision, it held that the deed of sale between respondent spouses and petitioner did not obligate the former to eject the lessees from the land in question as a condition of the sale, nor was the occupation thereof by said lessees a violation of the warranty against eviction. Hence, there was no substantial breach to justify the rescission of said contract or the return of the payments made.

IssuesPetitioner contends that: (1) there was a substantial breach of the contract between the parties warranting rescission; and (2) there was a "mistake in payment" made by petitioner, obligating PNB to return such payments

DECIDED FOR RESPONDENT. The petition is devoid of merit. It fails to appreciate the difference between a condition and a warranty and the consequences of such distinction.Conspicuous Absence of an Imposed Condition

The alleged "failure" of respondent spouses to eject the lessees from the lot in question and to deliver actual and physical possession thereof cannot be considered a substantial breach of a condition for two reasons: first, such "failure" was not stipulated as a condition whether resolutory or suspensive in the contract; and second, its effects and consequences were not specified either.

The provision adverted to by petitioner does not impose a condition or an obligation to eject the lessees from the lot. The deed of sale provides in part:

We hereby also warrant that we are the lawful and absolute owners of the above described property, free from any lien and/or encumbrance, and we hereby agree and warrant to defend its title and peaceful possession thereof in favor of the said Power Commercial and Industrial Development Corporation, its successors and assigns, against any claims whatsoever of any and all third persons; subject, however, to the provisions hereunder provided to wit:

By his own admission, Anthony Powers, General Manager of petitioner-corporation, did not ask the corporation's lawyers to stipulate in the contract that Respondent Reynaldo was guaranteeing the ejectment of the occupants, because there was already a proviso in said deed of sale that the sellers were guaranteeing the peaceful possession by the buyer of the land in question. 15 Any obscurity in a contract, if the above-quoted provision can be so described, must be construed against the party who caused it. 16 Petitioner itself caused the obscurity because it omitted this alleged condition when its lawyer drafted said contract.

If the parties intended to impose on respondent spouses the obligation to eject the tenants from the lot sold, it should have included in the contract a provision similar to that referred to in Romero vs. Court of Appeals, 17 where the ejectment of the occupants of the lot sold by private respondent was the operative act which set into motion the period of petitioner's compliance with his own obligation, i.e., to pay the balance of the purchase price. Failure to remove the squatters within the stipulated period gave the other party the right to either refuse to proceed with the agreement or to waive that condition of ejectment in consonance with Article 1545 of the Civil Code. In the case cited, the contract specifically stipulated that the ejectment was a condition to be fulfilled; otherwise, the obligation to pay the balance would not arise. This is not so in the case at bar.

Absent a stipulation therefor, we cannot say that the parties intended to make its nonfulfillment a ground for rescission. If they did intend this, their contract should have expressly stipulated so. In Ang vs. C.A., 18 rescission was sought on the ground that the petitioners had failed to fulfill their obligation "to remove and clear" the lot sold, the performance of which would have given rise to the payment of the consideration by private respondent. Rescission was not allowed, however, because the breach was not substantial and fundamental to the fulfillment by the petitioners of the obligation to sell.As stated, the provision adverted to in the contract pertains to the usual warranty against eviction, and not to a condition that was not met.

The terms of the contract are so clear as to leave no room for any other interpretation. 19

Furthermore, petitioner was well aware of the presence of the tenants at the time it entered into the sales transaction. As testified to by Reynaldo, 20 petitioner's counsel during the sales negotiation even undertook the job of ejecting the squatters. In fact, petitioner actually filed suit to eject the occupants. Finally, petitioner in its letter to PNB of December 23, 1980 admitted that it was the "buyer(s) and new owner(s) of this lot.

Effective Symbolic DeliveryThe Court disagrees with petitioner's allegation that the respondent spouses failed to deliver the lot sold. Petitioner asserts that the legal fiction of symbolic delivery yielded to the truth that, at the execution of the deed of sale, transfer of possession of said lot was impossible due to the presence of occupants on the lot sold. We find this misleading.

Although most authorities consider transfer of ownership as the primary purpose of sale, delivery remains an indispensable requisite as our law does not admit the doctrine of transfer of property by mere consent.

. . . (I)n order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that . . . its material delivery could have been made. It is not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to reality the delivery has not been effected.

Considering that the deed of sale between the parties did not stipulate or infer otherwise, delivery was affected through the execution of said deed. The lot sold had been placed under the control of petitioner; thus, the filing of the ejectment suit was subsequently done. It signified that its new owner intended to obtain for itself and to terminate said occupants' actual possession thereof.

Requisites of Breach of Warranty Against Eviction

Obvious to us in the ambivalent stance of petitioner is its failure to establish any breach of the warranty against eviction. Despite its protestation that its acquisition of the lot was to enable it to set up a warehouse for its asbestos products and that failure to deliver actual possession thereof defeated this purpose, still no breach of warranty against eviction can be appreciated because the facts of the case do not show that the requisites for such breach have been satisfied. A breach of this warranty requires the concurrence of the following circumstances:

(1) The purchaser has been deprived of the whole or part of the thing sold;

(2) This eviction is by a final judgment;

(3) The basis thereof is by virtue of a right prior to the sale made by the vendor; and

(4) The vendor has been summoned and made co-defendant in the suit for eviction at the instance of the vendee.

In the absence of these requisites, a breach of the warranty against eviction under Article 1547 cannot be declared.

Petitioner argues in its memorandum that it has not yet ejected the occupants of said lot, and not that it has been evicted therefrom. As correctly pointed out by Respondent Court, the presence of lessees does not constitute an encumbrance of the land, 26 nor does it deprive petitioner of its control thereof.

We note, however, that petitioner's deprivation of ownership and control finally occurred when it failed and/or discontinued paying the amortizations on the mortgage, causing the lot to be foreclosed and sold at public auction. But this deprivation is due to petitioner's fault, and not to any act attributable to the vendor-spouses.

Because petitioner failed to impugn its integrity, the contract is presumed, under the law, to be valid and subsisting.

DISPOSITIVE: All told, respondent Court did not commit any reversible error which would warrant the reversal of the assailed Decision.WHEREFORE, the petition is hereby DENIED, and the assailed Decision is AFFIRMED.SO ORDERED.

5) MARIA LUISA DE LEON ESCALER and ERNESTO ESCALER, CECILIA J. ROXAS and PEDRO ROXAS, petitioners, vs.COURT OF APPEALS, JOSE L. REYNOSO, now deceased, to be substituted by his heirs or legal representatives and AFRICA V. REYNOSO, respondents.Ponente: CUEVAS, J.:

Facts: On March 7, 1958, the spouses Africa V. Reynoso and Jose L, Reynoso sold to petitioners several others, a parcel of land, situated in Antipolo, Rizal with an area of 239,479 square meters The Deed of Sale 1 contained the following covenant against eviction, to wit:

That the VENDOR is the absolute owner of a parcel of land ... the ownership thereof being evidenced by an absolute deed of sale executed in her favor by registered owner ANGELINA C. REYNOSO, ...; That the VENDOR warrants valid title to and ownership of said parcel of land and further, warrant to defend the property herein sold and conveyed, unto the VENDEES, their heirs, and assignees, from any and all claims of any persons whatsoever. On April 21, 1961, the Register of Deeds of Rizal and A. Doronilla Resources Development, Inc. filed Case No. 4252 before the Court of First Instance of Rizal for the cancellation of OCT No. 1526 issued in the name of Angelina C. Reynoso (predecessor-in-interest of private respondents-vendors) on February 26, 1958 under Decree No. 62373, LRC Record No. N-13783, on the ground that the property covered by said title is already previously registered under Transfer Certificate of Title No. 42999 issued in the name of A. Doronilla Development, Inc. Petitioners as vendees filed their opposition to the said petition. On June 10, 1964, an Order was issued in the said case, the dispositive portion of which reads:

IN VIEW OF THE ABOVE CONSIDERATIONS, this Court is constrained to set aside Decree No. 62373 issued in LRC. Rec. No. N-13783 and the Register of Deeds of Rizal is directed to cancel OCT No. 1526 of his office and all Transfer Certificates of Title issued subsequently thereafter to purchaser of said property or portions thereof, the same being null and void, the expenses for such cancellation to be charged to spouses Angelina Reynoso and Floro Reynoso. The owner's duplicates in the possession of the transferees of the property covered by OCT No. 1526 are declared null and void and said transferees are directed to surrender to the Register of Deeds of Rizal, said owner's duplicates for cancellation.

The other reliefs sought for by the party oppositors are denied the same not falling within the jurisdiction of this Court under this proceeding.

On August 31, 1965, herein petitioners, spouses Maria de Leon Escaler and Ernesto Escaler and spouses Cecilia J. Roxas and Pedro Roxas, filed Civil Case No. 9014 before the Court of First Instance of Rizal against their vendors, herein private respondents, spouses Jose L. Reynoso and Africa Reynoso for the recovery of the value of the property sold to them plus damages on the ground that the latter have violated the vendors' "warranty against eviction."

The complaint among others, alleged that the Order issued in Case No. 4252 which cancelled the title of Angelina C. Reynoso and all subsequent Transfer Certificates of Title derived and/or emanating therefrom and which includes the titles of petitioners, is now final, and by reason thereof petitioners lost their right over the property sold; and that in said Case No. 4252, the respondents were summoned and/or given their day in court at the instance of the petitioners. The respondents, as defendants, filed their answer alleging, among others, by way of affirmative defenses that "the cause of action, if any, of plaintiffs against defendants have been fully adjudicated in Case No. 4252 when plaintiffs failed to file a third-party complaint against defendants." 4 On August 18, 1967, petitioners, as plaintiffs, filed a Motion for Summary Judgment, alleging the facts already averred in the complaint, and further alleging that the defendants were summoned and were given their day in court at the instance of plaintiffs in Case No. 4252. In support of their said motion, the plaintiffs attached the affidavit of Atty. Alberto R. Avancea who had represented the plaintiffs in Case No. 4252 and had filed a joint opposition in behalf of all the vendees. TRIAL COURT: judgment was rendered by the trial court, the pertinent portion of which DECIDED FOR PLAINTIFF ESCALERS:Considering the foregoing motion for summary judgment and it appearing that the defendants under a Deed of Absolute Sale (Annex "C") have expressly warranted their valid title and ownership of the said parcel of land and further warranted to defend said property from any and all claims of any persons whomever in favor of plaintiffs; that the said warranties were violated when on June 10, 1964, an Order was promulgated by the Court of First Instance of Rizal in Case No. 4252 Private respondents appealed the aforesaid decision to the then Court of Appeals assigning as sole errorthat the lower court erred in finding that they were summoned and were given their day in court at the instance of petitioners-plaintiffs in Case No. 4252. In reversing the decision of the trial court and dismissing the case, the then Court of Appeals found and so ruled that petitioners Escalers as vendees had not given private respondents-vendors, formal notice of the eviction case as mandated by Arts. 1558 and 1559 of the New Civil Code.

ISSUES:1) Whether the Court of Appeals erred in applying strictly to the instant case the provisions of Articles 1558 and 1559 of the new Civil Code;

2) Whether the decision of the Court of First Instance of Rizal should have been affirmed by the Court of Appeals or at least, the, Court of Appeals should have remanded the case to the trial court, for hearing on the merits.

HELD: AFFIRMS CA. The petition is devoid of merit. Consequently, it must be dismissed.

Article 1548, in relation to Articles 1558. and 1559 of the New Civil Code reads as follows:

Art. 1548, Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act imputable to the vendor, the vendee is deprived of the whole or of a part of the thing purchased.

The vendor shall answer for the eviction even though nothing has been said in the contract on the subject.The contracting parties, however, may increase, diminish, or suppress this legal obligation of the vendor.

Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless he is summoned in the suit for eviction at the instance of the vendee. (emphasis supplied)

Art. 1559. The defendant vendee shall ask, within the time fixed in the Rules of Court for answering the complaint that the vendor be made as co-defendant.

In order that a vendor's liability for eviction may be enforced, the following requisites must concur

a) there must be a final judgment;

b) the purchaser has been deprived of the whole or part of the thing sold;

c) said deprivation was by virtue of a right prior to the sale made by the vendor; and

d) the vendor has been summoned and made co-defendant in the suit for eviction at the instance of the vendee.

In the case at bar, the fourth requisitethat of being summoned in the suit for eviction (Case No. 4252) at the instance of the vendeeis not present.

All that the petitioners did, per their very admission, was to furnish respondents, by registered mail, with a copy of the opposition they (petitioners filed in the eviction suit. Decidedly, this is not the kind of notice prescribed by the aforequoted Articles 1558 and 1559 of the New Civil Code. The term "unless he is summoned in the suit for eviction at the instance of the vendee" means that the respondents as vendor/s should be made parties to the suit at the instance of petitioners-vendees, either by way of asking that the former be made a co-defendant or by the filing of a third-party complaint against said vendors. Nothing of that sort appeared to have been done by the petitioners in the instant case.Separate OpinionsAQUINO, J., dissenting:

In my opinion, it was not possible for Escaler and Roxas to comply strictly with articles 1558 and 1559. The eviction took place, not in an ordinary suit wherein the vendor can be made a co-defendant, but as an incident in the cancellation of title in a land registration proceeding.

In such a case, the furnishing of the vendor with a copy of the opposition was a substantial compliance with articles 1558 and 1559. It was a notice to the vendor. Africa's vendor, Angelina, was first notified of the cancellation proceeding.

At least, Escaler and Roxas complied with article 1481 of the old Civil Code which requires notice to the vendor. It was not the fault of the petitioners that the eviction case assumed the shape of a mere incident in the land registration proceeding and not that of an ordinary contentious civil action. Africa Reynoso could not be made a co- defendant in that incident for cancellation of title, a summary proceeding.

A contrary view would enable Africa Reynoso to enrich herself unjustly at the expense of the petitioners.

Makasiar, C.J., Teehankee, Melencio-Herrera, Alampay, JJ., concur.

6) filinvest credit v ca 178 scra 188

FILINVEST CREDIT CORPORATION vs. COURT OF APPEALSG.R. No. 82508 September 29, 1989

Facts:Spouses Sy Bang were engaged in the sale of gravel produced from crushed rocks and used for construction purposes. In order to increase their production, they looked for a rock crusher which Rizal Consolidated Corporation then had for sale. A brother of Sy Bang, went to inspect the machine at the Rizal Consolidateds plant site. Apparently satisfied with the machine, the private respondents signified their intent to purchase the same.Since he does not have the financing capability, Sy Bang applied for financial assistance from Filinvest Credit Corporation. Filinvest agreed to extend financial aid on the following conditions: (1) that the machinery be purchased in the petitioners name; (2) that it be leased with option to purchase upon the termination of the lease period; and (3) that Sy Bang execute a real estate mortgage as security for the amount advanced by Filinvest. A contract of lease of machinery (with option to purchase) was entered into by the parties whereby they to lease from the petitioner the rock crusher for two years. The contract likewise stipulated that at the end of the two-year period, the machine would be owned by Sy Bang.3 months from the date of delivery, Sy Bang claiming that they had only tested the machine that month, sent a letter-complaint to the petitioner, alleging that contrary to the 20 to 40 tons per hour capacity of the machine as stated in the lease contract, the machine could only process 5 tons of rocks and stones per hour. They then demanded that the petitioner make good the stipulation in the lease contract. Sy Bang stopped payment on the remaining checks they had issued to the petitioner.

As a consequence of the non-payment, Filinvest extrajudicially foreclosed the real estate mortgage.

Issue:WON the real transaction was lease or sale? SALE ON INSTALLMENTS.

Held:The real intention of the parties should prevail. The nomenclature of the agreement cannot change its true essence, i.e., a sale on installments. It is basic that a contract is what the law defines it and the parties intend it to be, not what it is called by the parties. It is apparent here that the intent of the parties to the subject contract is for the so-called rentals to be the installment payments. Upon the completion of the payments, then the rock crusher, subject matter of the contract, would become the property of the private respondents. This form of agreement has been criticized as a lease only in name.

Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in that form, for one reason or another, have frequently resorted to the device of making contracts in the form of leases either with options to the buyer to purchase for a small consideration at the end of term, provided the so-called rent has been duly paid, or with stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such transactions are leases only in name. The so-called rent must necessarily be regarded as payment of the price in installments since the due payment of the agreed amount results, by the terms of bargain, in the transfer of title to the lessee.

Indubitably, the device contract of lease with option to buy is at times resorted to as a means to circumvent Article 1484, particularly paragraph (3) thereof.Through the set-up, the vendor, by retaining ownership over the property in the guise of being the lessor, retains, likewise, the right to repossess the same, without going through the process of foreclosure, in the event the vendee-lessee defaults in the payment of the installments. There arises therefore no need to constitute a chattel mortgage over the movable sold. More important, the vendor, after repossessing the property and, in effect, canceling the contract of sale, gets to keep all the installments-cum-rentals already paid.

Even if there was a contract of sale, Filinvest is still not liable because Sy Bang is presumed to be more knowledgeable, if not experts, on the machinery subject of the contract, they should not therefore be heard now to complain of any alleged deficiency of the said machinery. It was Sy Bang who was negligent, not Filinvest. Further, Sy Bang is precluded to complain because he signed a Waiver of Warranty.

7) jm Tuazon v ca 94 scra 413,

J.M. TUASON & CO., INC., petitioner, vs.HON. COURT OF APPEALS, ALFONSO DE LEON and ROSARIO G. DE LEON, respondents.Araneta, Mendoza & Papa for petitioner.Martin B. Laurea for private respondents.DE CASTRO, J.:Appeal by certiorari from the decision of respondent Court of Appeals (CA-G.R. No. 54695-R) affirming with modification the decision of the Court of First Instance of Manila in Civil Case No. 89119, which is an action based on warranty against eviction, and to recover the value of a subdivision lot at the time of eviction, plus damages.The following facts may be regarded as without any dispute:On January 31, 1952, petitioner J.M. Tuason & Co., Inc. executed, in favor of Ricardo de Leon, a contract to sell Lot No. 15, Block 460 of the Sta. Mesa Heights Subdivision containing an area of 1,703.6 square meters with the agreed price of P24.60 per square meter or a total of P41,908.56. At the execution of the contract, Ricardo de Leon paid the down-payment of P4,190.86 and agreed to pay the balance in the monthly installment of P498.63 including the agreed annual interest of 10% (Exhibit A).Meanwhile, on April 10, 1953, petitioner signed a compromise agreement with the Deudors (in another Civil Case No. Q-135, captioned Florencio Deudor, et al. vs. J.M. Tuason, et al.).On July 19, 1965 with the consent of the petitioner, Ricardo de Leon transferred all his rights to the lot in favor of his parents, herein private respondents Alfonso and Rosario de Leon (exhibit B). On the same date, private respondents paid the outstanding balance of the purchase price (Exhibit 1-B). On August 5, 1965 petitioner executed in favor of private respondents the deed of sale over the lot (Exhibit C) and upon its registration, the Register of Deeds issued to the respondents the Transfer Certificate of Title No. 96143 (Exhibit 3; Annex B, Rollo, 39-40).At the time of the execution of the contract to sell, the contracting parties knew that a portion of the lot in question was actually occupied by Ramon Rivera. However, it was their understanding that the latter will be ejected by the petitioner from the premises (Annex B, Id).On May 13, 1958, herein petitioner filed a complaint of ejectment against Ramon Rivera before the Court of First Instance of Rizal (Civil Case No. Q-2989) and later petitioner petitioner Ricardo de Leon and respondents Alfonso and Rosario de Leon as necessary parties. In this Civil Case No. Q-2989, the decision of the lower court, principally based on the compromise agreement executed in another Civil Case No. Q-135 entitled Florencio Deudor, et al. vs. J.M. Tuason, et al. has the following dispositive portion:WHEREFORE, the complaint against the defendant Ramon Rivera is hereby DISMISSSED ordering the plaintiff to enter into an agreement with Ramon Rivera allowing said defendant to purchase 1,050 square meters to land now covered by Lot 15, Block 460 of the Sta. Mesa Heights Subdivision to be priced at the prevailing cost in the year 1958 which is placed by this Court to be P60.00 per square meters; to pay attorney's fees of P3,000.00 to defendant Ramon Rivera, with costs against the plaintiff ... (Emphasis supplied)The Court of Appeals wholly affirmed this decision with costs against plaintiff-appellant J.M. Tuason & Co., Inc. (CA-G.R. No. 38212-R), and denied the motion for reconsideration filed by the other plaintiffs-appellants Alfonso and Rosario de Leon, stating among others: ... We believe, however, that these questions should be properly ventilated in the proper action which the plaintiffs- appellants, the De Leons, may file against the plaintiff-appellant (J.M. Tuason & Co., Inc.) for failure of the latter to deliver to them the possession of the whole of Lot 15, Block 460 of the Sta. Mesa Heights Subdivision ... (Annex E, 4-5).This decision of the Court of Appeals became final and executory in September, 1971 when the De Leons were evicted from the premises in question (Annex E, 6).Pursuing the step as suggested by the Court of Appeals advising herein private respondents to file the proper action the latter instituted on December 5,1972 before the Court of First Instance of Manila, Branch XXIX, Civil Case No. 89119, an action against J.M. Tuason & Co., Inc. to enforce the vendor's warranty against eviction or to recover the value of the land amounting to P315,000.00, plus damages.The lower court decided the case against herein petitioner J.M. & Co., Inc. (defendant below) disposing as follows:WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant:(1) Ordering defendant to pay plaintiffs the sum of TWO HUNDRED TEN THOUSAND (P210,000.00) PESOS representing the value of the 1,050 square meters at P200.00 per square meter, from which the latter were evicted, with legal interest from December 5, 1972, the date of filing of the complaint;(2) Ordering defendant to pay plaintiffs the sum of TWENTY FIVE THOUSAND (P25,000.00) PESOS, by lay of moral damages, TEN THOUSAND (P10,000.00) PESOS, by way of exemplary damages, and FIFTEEN THOUSAND (P15,000.00) PESOS, for and as attorney's fees; and(3) For costs of this suit.This decision of the lower court was appealed to herein respondent Court of Appeals (CA-G.R. No. 54695-R), which on July 2, 1975 affirmed it with the sole modification on the reduction of the awarded moral damages from P25,000.00 to P5,000.00 (Annex B, Rollo, p. 52).Hence, this petition before Us with the prayer that the decision of respondent court be reversed and another rendered, 'dismissing the complaint and ordering respondents De Leons to accept from petitioner J.M. Tuason & Co., Inc. the sum of P60.00 per square meter for the 1,050 square meters which the petitioner was ordered to sell to Ramon Rivera, and to pay petitioner P30,000.00 as attorney's fees plus costs.Petitioner J. M. Tuason & Co., Inc. alleges that dent court erred: (1) in holding that the compromise agreement was the proximate cause of its failure to comply with its contract to self in favor of Ricardo de Leon; (2) in holding that it entered into the compromise agreement without the knowledge and behind the back of Ricardo de Leon and thereafter continued the collection of the installments until the purchase price was fully paid and thus it wilfully committed fraud against him; (3) in not considering that Ricardo de Leon was guilty of bad faith in entering into the contract to sell and therefore he is not entitled to the warranty against eviction; and (4) in granting moral and exemplary damages.The real point in issue is whether respondents De Leon are entitled to the vendor's warranty against eviction and damages.The appellate court, in this action of warranty against eviction, found that petitioner J.M. Tuason & Co., Inc. failed to comply with its obligation to transfer ownership over the lot to the De Leons due to the compromise agreement it entered with the Deudors, and that petitioner is guilty of "wilful deception, intentional forsaking of one to whom defendant was bound in a contract to convey, and worse yet, even at that, after the compromise, defendant still continued to collect installments from buyer ...Contrary to these findings, this Court holds that it was not petitioner's own making that it executed the compromise agreement with the Deudors. This agreement was sanctioned by the court after the Deudors filed an action against petitioner in Civil Case No. Q-135 entitled "Florencio Deudor, et al. vs. J.M. Tuason et al." The prior right of Ramon Rivera to purchase the lot in litigation was based more on his prior occupancy to the same since 1949, about which fact respondents De Leon were informed by petitioner at the time of the execution of the contract to sell. The execution of the compromise agreement merely recognized this prior right, under the condition as stipulated in said agreement, that it was possible to do so.Petitioner claims, without having been contradicted, that it executed the compromise agreement with the Deudors in the honest belief that the lots it already sold. like the lot in question, were excluded from the coverage of the agreement. This claim finds support in paragraph "SEVENTH" of the compromise agreement which reads ... It shall be the joint and solidary obligation of the Deudors to make the buyers of the lots purportedly sold by them recognize the title of the OWNERS over the property purportedly bought by them, and to make them sign, whenever possible, new contracts of purchase for the said property at the current prices and terms specified by the OWNERS in their sales of lots in their subdivision known as Sta. Mesa Heights Subdivision ... " (Annex C, Rollo, p. 55). In fact, in their brief as appellants in CA-G.R. No. 38212-R, private respondents stated that "as correctly pointed out in the brief for plaintiff-appellant, it was not the intention of the signatories of the Compromise Agreement to include within its coverage those parcels of land already sold by plaintiff-appellant (petitioner herein) to third parties," and "We reproduce herein by way of reference the arguments in pp. 1-2 to 39 of plaintiffs- appellants' brief." (See Annex C, Petition, pp. 3-4). Private respondents should not be allowed to turn back from what they stated in their brief in CA-G.R. No. 38212-R, to impute "wilful deception" as the respondent court said in its decision under review.This particular stipulation in the compromise agreement discloses an understanding between the petitioner and the Deudors that the buyers of lots from the Deudors, like Ramon Rivera, may, acquire lots from the subdivision being sold by petitioner and sign new contracts of purchase with the latter 6 whenever possible", or only when said lots have not already been sold to third 'parties. Relying on the above-quoted provision, petitioner believed in good faith that said lot sold to the De Leons would not be adversely affected. Nonetheless, with the inevitable and admitted fact that Ramon Rivera was a prior occupant thereof, petitioner was compelled by judicial fiat in Civil Case No. 2989 of the Court of First Instance of Rizal, to recognize the preferential right of Rivera to rightfully purchase the lot. This fact is not of itself a proof under the circumstance just cited, of bad faith on the part of the petitioner or that it is guilty of committing fraud and deception upon the respondents as the respondent court found. Its good faith in with Ricardo de Leon who was the one branded as a "buyer in bad faith" by the Court of Appeals in its decision affirming of the Court of First Instance of Rizal in CA-G.R. No. No. 38212-R seems beyond question.If petitioner continued the collection of the outstanding monthly after the execution of the compromise agreement on April 10,1953 pursuant to the agreements embodied in the contract to sell (Exhibit A), its act only proved its honest belief that it found no barrier against the enforceability of the contract to sell, the terms of which have the force of law between the parties and must be complied with in good faith (Lazo vs. Republic Surety & Insurance Co., Inc., 311 SCRA 329; Ramos vs. Central Bank of the Philippines, 41 SCRA 565; Enriquez vs. Ramos, 73 SCRA 116; De Cortes vs, Venturanza, 79 SCRA 709). The collection of the monthly installment payments terminated upon the fun payment of the purchase price on July 19, 1965, long before the ejectment case against Ramon Rivera was finally resolved by the appellate court in September, 1971 (Civil Case No. Q-2989; CA-G.R. No. 38212-R). As properly claimed by the petitioner, it had the right to hopefully expect to win the ejectment case. It was not exactly its fault that it lost the case. Private respondents joined in a common cause with it.The subsequent execution of a deed of sale upon the total payment of the purchase price in favor of herein respondents on August 5, 1965 in lieu of the previous contract to sell made in favor of Ricardo de Leon, through which deed of sale the respondents acquired a transfer certificate of title over the questioned lot, is further evidence of the honesty and good faith of petitioner in dealing with private respondents. Petitioner owns vast tracts of land, with the lot in question possibly put an insignificant part in terms of value, and it would be much too difficult to make the serious imputations made to petitioner.In fulfillment of the assurance made to eject the occupant from the lot, petitioner, on May 13, 1958, later joined by Ricardo de Leon and respondents Alfonso and Rosario de Leon, instituted a complaint of ejectment against Ramon Rivera in Civil Case No. Q- 2989. Unfortunately, however, the decision of the lower court dismissing the complaint of ejectment was affirmed by the appellate court in CA-G.R. No. 38212-R, which decision, of the latter upon its finality in September, 1971 resulted in the eviction of herein respondents from the lot. It is meet, at this juncture, to repeat that in its decision, the Court of Appeals branded Ricardo de Leon as a buyer in bad faith.In manifesting its desire to compensate respondents, as disclosed by prayer in the instant petition in the sum of P60.00 per square meter for the 1,050 meters which it was ordered by the courts, in Civil Case No. Q-2989 and CA-G.R. No. 38212-R, to sell to Ramon Rivera, again reveals how fair petitioner would want to be to private respondents, not to defraud them as the respondent court would ascribe such base intent to petitioner, which is by no means not a disreputable but a respectable, corporation.For all the foregoing circumstances, We have no hesitation to give to petitioner the benefit of the doubt of its having acted in good faith, which is always presumed,, without any intention of taking advantage of the other party dealing with it. "Good faith consists in an honest intention to abstain from taking any unconscientious advantage of another. Good faith is an opposite of fraud and of bad faith and its non-existence must be established by competent proof." (Leung Yee vs. Strong Machinery Company, 37 PhiL 645; Cui vs. Henson, 51 Phil. 606, 612; Fule vs. De Legare, 7 SCRA 351).Moreover, at the time of the execution of the contract to sell it is an admitted fact that Ricardo de Leon knew that a third party was occupying a part of the lot subject of the sale. Ricardo de Leon ought to have known that he was buying a property with the distinct possibility of not being able to possess and own the land due to the occupancy of another person on the same. So there had to be an understanding between him and the petitioner for the latter to eject the occupant, something which, by the facts then obtaining and the law relevant thereto, would make the ejectment more speculative than certain. Nonetheless, Ricardo de Leon knowingly assumed the risk when he bought the, land, and was even called a vendee in bad faith by the Court of Appeals in doing so, clearly not an innocent purchaser in good faith. If petitioner that it would eject Ramon Rivera, he did so, not knowing that the compromise agreement would stand on the way, as it had thought, in all good faith, that paragraph 7 of the compromise agreement excluded the lot in question, having been already sold to Ricardo de Leon before the agreement was executed in court.This Court is impelled to declare that private respondents were lacking in good faith for knowing beforehand, at the time of the sale, the presence of an obstacle to their taking over the possession of the land, which, in effect, would amount to eviction from said land, and still they bought the land without first removing that obstacle. (Angelo vs. Pacheco, 56 Phil. 70; Andaya vs. Manansala, 107 Phil 1151).One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith, as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor (Leung Yee vs. Strong Machinery Company, supra; Manancop Jr. vs. Cansino, 1 SCRA 572; Paylago vs. Jarabe, 22-SCRA 1247; Barrios vs. Court of Appeals, 78 SCRA 427; Emphasis supplied).Without being shown to be vendees in good faith, herein respondents are not entitled to the warranty against eviction nor are they On titled to recover damages (Article 1555 of the Civil Code). However, for justice and equity sake, and in consonance with the salutary principle of non-enrichment at another's expense, herein petitioner J.M. Tuason & Co., Inc. should compensate respondents De Leons in the total sum of ONE HUNDRED TWENTY SIX THOUSAND (P126,000.00) PESOS, representing the aggregate value of the 1,050 square meters (which petitioner was judicially ordered to sell to Ramon Rivera at the year 1958 prevailing rate of P60.00 per square meter) at the value of P120.00 per square meter, doubling the price of P60.00 per square meter which amount petitioner voluntarily offered to pay herein respondents following how indemnity for death had been raised from P6,000.00 to P12,060.00 (People vs. Pantoja, 25 SCRA 468, 474 [1968]) based on grounds of equity, due to the reduced purchasing power of the peso, with the legal rate of interest from December 5, 1972, the date respondents filed their complaint, until the said total sum is fully paid.WHEREFORE, the judgment of respondent court is hereby modified by ordering petitioner J.M. Tuason & Co., Inc. to pay the respondents the amount of ONE HUNDRED TWENTY-SIX THOUSAND (Pl26,000.00) PESOS plus the legal rate of interest from December 5, 1972, the date of filing the complaint until the s aid total sum is fully paid. No costs.

8) Santiago land v ca 276 scra 674

SANTIAGO LAND DEVELOPMENT CORPORATION, petitioner, vs. The HONORABLE COURT OF APPEALS and the HEIRS OF NORBERTO J. QUISUMBING, respondents.D E C I S I O NMENDOZA, J.:This is a petition for review on certiorari of the decision of the Court of Appeals, annulling certain orders issued by the Regional Trial Court of Makati, Branch 62 in Civil Case No. 10513, entitled Norberto J. Quisumbing v. Philippine National Bank, to wit:(1) Order, dated March 30, 1990, granting petitioner Santiago Land Development Corporation's motion for intervention and order admitting its answer in intervention;(2) Order, dated March 21, 1991, denying private respondent Quisumbing's motion to quash or disallow interrogatories and(3) Order, dated July 30, 1991, denying Quisumbing's motion for reconsideration.The facts are as follows:Norberto J. Quisumbing brought an action against the Philippine National Bank to enforce an alleged right to redeem certain real properties foreclosed by the Philippine National Bank. Quisumbing brought the suit as assignee of the mortgagor, Komatsu Industries (Phils.), Incorporated.On November 21, 1989, with notice of the pending civil action,[1] petitioner Santiago Land Development Corporation purchased from PNB one of the properties subject of the litigation, situated along Pasong Tamo Extension in Makati, for P90 Million.[2]On December 11, 1989, petitioner SLDC filed a motion to intervene, with its answer in intervention attached, alleging that it was the transferee pendente lite of the property and that any adverse ruling or decision which might be rendered against PNB would necessarily affect it (petitioner).[3] In its attached answer, SLDC, aside from adopting the answer filed by PNB, raised as affirmative defenses the trial court's lack of jurisdiction based on the alleged failure of plaintiff Quisumbing to pay the docket fee and Quisumbing's alleged lack of cause of action against the PNB due to the invalidity of the deed of assignment to him.[4]On February 7, 1990, Quisumbing opposed SLDC's motion for intervention. He argued that SLDC's interest in the subject property was a mere contingency or expectancy, which was dependent on any judgment which might be rendered for or against PNB as transferor. He further argued that the allowance of SLDC's motion would only make the proceedings complicated, expensive and interminable.[5]On March 30, 1990, the lower court issued an order granting petitioner's motion for intervention and admitting its answer in intervention. The court also directed the substitution of heirs in view of Norberto J. Quisumbing's demise and submitted for resolution PNB's motion to dismiss.[6]Petitioner SLDC, as intervenor, then served interrogatories upon private respondents and moved for the production, inspection and copying of certain documents.[7] SLDC wanted to know whether there were documents to show that a consideration had been paid for the assignment of the right of redemption; if so, whether payment was made in cash or by check; and, if it was by check, in what banks the checking accounts were kept and whether the checks were still in its custody or possession.Private respondents filed a motion to quash or disallow the interrogatories, which petitioner opposed. Subsequently, private respondents filed a reply to which petitioner SLDC responded by filing a rejoinder.[8]On March 21, 1991, the trial court denied private respondents' motion to quash or disallow interrogatories and instead granted petitioner SLDC's motion for the production, inspection and copying of certain documents.[9] Private respondents moved for a reconsideration, but their motion was denied by the lower court in its order of July 30, 1991. Private respondents therefore filed a petition for certiorari with the Court of Appeals which rendered the decision, now the subject of this review, setting aside the orders dated March 30, 1990, March 21, 1991, and July 30, 1991 of the trial court.In its petition before the Court, SLDC contends that the Court of Appeals erred thus:[1] THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION, EXCEEDED ITS JURISDICTION AND/OR WAS PATENTLY IN ERROR IN TAKING COGNIZANCE OF AND RULING UPON THE FIRST ISSUE RAISED BY PRIVATE RESPONDENTS IN CA-G.R. SP NO. 25826 WHEN THIS ISSUE WAS NOT EVEN RAISED BY THEM BEFORE THE TRIAL COURT.[2] THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION EXCEEDED ITS JURISDICTION AND/OR WAS PATENTLY IN ERROR IN TAKING COGNIZANCE OF THE PETITION RAISED BY PRIVATE RESPONDENTS IN CA-G.R. SP NO. 25826 SINCE THEY DID NOT RAISE ANY JURISDICTIONAL ERROR THEREIN BUT ONLY RAISED QUESTIONS AS TO PROCEDURAL ORDERS ISSUED BY THE TRIAL COURT IN THE RIGHTFUL EXERCISE OF ITS JURISDICTION AND DISCRETION.[3] EVEN IF THE COURT OF APPEALS WAS AUTHORIZED TO PASS UPON THE PROCEDURAL QUESTION RAISED BY PRIVATE RESPONDENTS IN CA-G.R. SP NO. 25826, IT ERRED IN BARRING THE TRIAL COURT, IN THE SOUND EXERCISE OF ITS SOUND DISCRETION, FROM ALLOWING PETITIONER TO INTERVENE IN ONE OF THE CLASSIC OR RECOGNIZED INSTANCES OF INTERVENTION IN THE CIVIL ACTION UNDER SECTION 2 OF RULE 12 OF THE RULES OF COURT DESPITE COMPLIANCE WITH THE STANDARDS FOR INTERVENTION PRESCRIBED THEREIN.[4] THE COURT OF APPEALS DENIED PETITIONER OF THE RIGHT TO GENUINELY OR EFFECTIVELY DEFEND ITSELF IN THE CIVIL ACTION DESPITE ITS HAVING ACQUIRED A REAL AND SUBSTANTIVE INTEREST IN THE SUBJECT MATTER OF THE CIVIL ACTION.[5] PRIVATE RESPONDENTS FAILED TO OBJECT TO THE INTERROGATORIES IN THE MANNER PRESCRIBED BY THE RULES OF COURT AND THEY WERE THEREFORE BARRED FROM RAISING THEIR OBJECTIONS TO THE INTERROGATORIES.[6] THE TRIAL COURT CORRECTLY DENIED PRIVATE RESPONDENTS' MOTION TO QUASH PETITIONER'S INTERROGATORIES.[10]Petitioner's contentions are without merit.Petitioner's first contention is without basis in fact. The fact is that the issue regarding the propriety of petitioner's motion for intervention was raised by private respondents before the trial court in their opposition to said motion.[11] Moreover, petitioner SLDC is estopped from questioning the appellate court's ruling on this issue since petitioner did not object to its consideration by the court in its comment on the petition filed in that court.[12]Nor is it true that private respondents' petition for certiorari in the Court of Appeals did not raise a jurisdictional question. The petition specifically charged the RTC with gravely abusing its discretion in issuing its questioned orders, in granting petitioner's motion for intervention and in denying private respondents' motion to quash or disallow interrogatories. Clearly, the Court of Appeals correctly took cognizance of the issue regarding the propriety of petitioner SLDC's motion for intervention.This brings us to the main question raised in the third and fourth assignments of errors, namely, whether petitioner, as transferee pendente lite of the property in litigation has a right to intervene.Rule 12, 2 of the Rules of Court provides:Sec. 2. Intervention. A person may, before or during a trial be permitted by the court, in its discretion, to intervene in an action, if he has legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or when he is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof.The question is whether this provision applies to petitioner in view of Rule 3, 20 governing transfers of interest pendente lite such as was alleged in the trial court by petitioner. This provision reads:Sec. 20. Transfer of interest. In case of any transfer of interest, the action may be continued by or against the original party, unless the court upon motion directs the person to whom the interest is transferred to be substituted in the action or joined with the original party.In applying the rule on transfer of interest pendente lite (Rule 3, 20) rather than the rule on intervention (Rule 12, 2), the Court of Appeals stated:While it may be that respondent SLDC has a legal interest in the subject matter of the litigation, its interest as transferee pendente lite is different from that of an intervenor. Section 2 of Rule 12 refers to all other persons or entities whose legal interests stand to be affected by a litigation, but it does not cover a transferee pendente lite because such transferee is already specifically governed by Section 20 of Rule 3. Otherwise, Section 20 of Rule 3 on transferees pendente lite would be rendered ineffectual and useless. Since it specifically covers transferees pendente lite, any such transferee cannot just disregard said provision and instead, opt to participate as an intervenor when it is more convenient for it to do so. Indeed, there has never been a rule, authority or decision holding that a transferee pendente lite has the option to avail of either Rule 3, Section 20 or Rule 12, Section 2.. . . It has been consistently held that a transferee pendente lite stands in exactly the same position as its predecessor-in-interest, that is, the original defendant. . . . However, should the transferee pendente lite choose to participate in the proceedings, it can only do so as a substituted defendant or as a joint party-