FIRST DIVISION
[G.R. No. 129018. November 15, 2001]
CARMELITA LEAÑO, assisted by her husband GREGORIO CUACHON, petitioner,
vs. COURT OF APPEALS and HERMOGENES FERNANDO, respondents.
D E C I S I O N
PARDO, J.:
The Case
The case is a petition for review
on certiorari of the decision[1] of the Court of Appeals affirming that of the
Regional Trial Court, Malolos, Branch 7[2] ordering petitioner Leaño to pay respondent
Hermogenes Fernando the sum of P183,687.70 corresponding to her outstanding
obligations under the contract to sell, with interest and surcharges due
thereon, attorney’s fees and costs.
The Facts
On November 13, 1985, Hermogenes
Fernando, as vendor and Carmelita Leaño, as vendee executed a contract to sell
involving a piece of land, Lot No. 876-B, with an area of 431 square meters,
located at Sto. Cristo, Baliuag, Bulacan.[3]
In the contract, Carmelita Leaño
bound herself to pay Hermogenes Fernando the sum of one hundred seven thousand
and seven hundred and fifty pesos (P107,750.00) as the total purchase
price of the lot. The manner of paying
the total purchase price was as follows:
“The sum of TEN THOUSAND SEVEN HUNDRED SEVENTY FIVE (P10,775.00)
PESOS, shall be paid at the signing of this contract as DOWN PAYMENT, the
balance of NINETY SIX THOUSAND NINE HUNDRED SEVENTY FIVE PESOS (P96,975.00)
shall be paid within a period of TEN (10) years at a monthly amortization of P1,747.30
to begin from December 7, 1985 with interest at eighteen per cent (18%) per
annum based on balances.”[4]
The contract also provided for a
grace period of one month within which to make payments, together with the one
corresponding to the month of grace.
Should the month of grace expire without the installments for both
months having been satisfied, an interest of 18% per annum will be charged on
the unpaid installments.[5]
Should a period of ninety (90)
days elapse from the expiration of the grace period without the overdue and
unpaid installments having been paid with the corresponding interests up to
that date, respondent Fernando, as vendor, was authorized to declare the
contract cancelled and to dispose of the parcel of land, as if the contract had
not been entered into. The payments
made, together with all the improvements made on the premises, shall be
considered as rents paid for the use and occupation of the premises and as
liquidated damages.[6]
After the execution of the
contract, Carmelita Leaño made several payments in lump sum.[7] Thereafter, she constructed a house on the lot valued
at P800,000.00.[8] The last payment that she made was on April 1, 1989.
On September 16, 1991, the trial
court rendered a decision in an ejectment case[9] earlier filed by respondent Fernando ordering
petitioner Leaño to vacate the premises and to pay P250.00 per month by
way of compensation for the use and occupation of the property from May 27,
1991 until she vacated the premises, attorney’s fees and costs of the suit.[10] On August 24, 1993, the trial court issued a writ of
execution which was duly served on petitioner Leaño.
On September 27, 1993, petitioner
Leaño filed with the Regional Trial Court of Malolos, Bulacan a complaint for
specific performance with preliminary injunction.[11] Petitioner Leaño assailed the validity of the
judgment of the municipal trial court[12] for being violative of her right to due process and
for being contrary to the avowed intentions of Republic Act No. 6552 regarding
protection to buyers of lots on installments.
Petitioner Leaño deposited P18,000.00 with the clerk of court,
Regional Trial Court, Bulacan, to cover the balance of the total cost of Lot
876-B.[13]
On November 4, 1993, after
petitioner Leaño posted a cash bond of P50,000.00,[14] the trial court issued a writ of preliminary
injunction[15] to stay the enforcement of the decision of the
municipal trial court.[16]
On February 6, 1995, the trial
court rendered a decision, the dispositive portion of which reads:
“WHEREFORE, judgment is hereby rendered as follows:
“1. The preliminary injunction issued by this court per its order dated November 4, 1993 is hereby made permanent;
“2. Ordering the plaintiff to pay to the defendant the sum of P103,090.70
corresponding to her outstanding obligations under the contract to sell
(Exhibit “A” – Exhibit “B”) consisting of the principal of said obligation together
with the interest and surcharges due thereon as of February 28, 1994, plus
interest thereon at the rate of 18% per annum in accordance with the provision
of said contract to be computed from March 1, 1994, until the same becomes
fully paid;
“3. Ordering the defendant to pay to plaintiff the amount of P10,000
as and by way of attorney’s fees;
“4. Ordering the defendant to pay to plaintiff the costs of the suit in Civil Case No. 1680 aforementioned.
“SO ORDERED.
“Malolos, Bulacan, February 6, 1995.
“(sgd.) DANILO A. MANALASTAS
Judge”[17]
On February 21, 1995, respondent
Fernando filed a motion for reconsideration[18] and the supplement[19] thereto. The
trial court increased the amount of P103,090.70 to P183,687.00 and
ordered petitioner Leaño ordered to pay attorney’s fees.[20]
According to the trial court, the
transaction between the parties was an absolute sale, making petitioner Leaño
the owner of the lot upon actual and constructive delivery thereof. Respondent Fernando, the seller, was
divested of ownership and cannot recover the same unless the contract is
rescinded pursuant to Article 1592 of the Civil Code which requires a judicial
or notarial demand. Since there had
been no rescission, petitioner Leaño, as the owner in possession of the
property, cannot be evicted.
On the issue of delay, the trial
court held:
“While the said contract provides that the whole purchase price is
payable within a ten-year period, yet the same contract clearly specifies that
the purchase price shall be payable in monthly installments for which the
corresponding penalty shall be imposed in case of default. The plaintiff certainly cannot ignore the
binding effect of such stipulation by merely asserting that the ten-year period
for payment of the whole purchase price has not yet lapsed. In other words, the plaintiff has clearly
defaulted in the payment of the amortizations due under the contract as recited
in the statement of account (Exhibit “2”) and she should be liable for the
payment of interest and penalties in accordance with the stipulations in the
contract pertaining thereto.”[21]
The trial court disregarded
petitioner Leaño’s claim that she made a downpayment of P10,000.00, at
the time of the execution of the contract.
The trial court relied on the
statement of account[22] and the summary[23] prepared by respondent Fernando to determine
petitioner Leaño’s liability for the payment of interests and penalties.
The trial court held that the
consignation made by petitioner Leaño in the amount of P18,000.00 did
not produce any legal effect as the same was not done in accordance with
Articles 1176, 1177 and 1178 of the Civil Code.
In time, petitioner Leaño appealed
the decision to the Court of Appeals.[24] On January 22, 1997, Court of Appeals promulgated a
decision affirming that of the Regional Trial Court in toto.[25] On February 11, 1997, petitioner Leaño filed a motion
for reconsideration.[26] On April 17, 1997, the Court of Appeals denied the
motion.[27]
Hence, this petition.[28]
The Issues
The issues to be resolved in this
petition for review are (1) whether the transaction between the parties is an
absolute sale or a conditional sale; (2) whether there was a proper
cancellation of the contract to sell; and (3) whether petitioner was in delay
in the payment of the monthly amortizations.
The Court’s Ruling
Contrary to the findings of the
trial court, the transaction between the parties was a conditional sale not an
absolute sale. The intention of the
parties was to reserve the ownership of the land in the seller until the buyer
has paid the total purchase price.
Consider the following:
First, the contract to sell makes
the sale, cession and conveyance “subject to conditions” set forth in the
contract to sell.[29]
Second, what was transferred was
the possession of the property, not ownership.
The possession is even limited by the following: (1) that the vendee may continue therewith
“as long as the VENDEE complies with all the terms and conditions mentioned,”
and (2) that the buyer may not sell, cede, assign, transfer or mortgage or in
any way encumber any right, interest or equity that she may have or acquire in
and to the said parcel of land nor to lease or to sublease it or give
possession to another person without the written consent of the seller.[30]
Finally, the ownership of the lot
was not transferred to Carmelita Leaño.
As the land is covered by a torrens title, the act of registration of
the deed of sale was the operative act that could transfer ownership over the
lot.[31] There is not even a deed that could be registered
since the contract provides that the seller will execute such a deed “upon complete
payment by the VENDEE of the total purchase price of the property” with the
stipulated interest.[32]
In a contract to sell real property
on installments, the full payment of the purchase price is a positive
suspensive condition, the failure of which is not considered a breach, casual
or serious, but simply an event that prevented the obligation of the vendor to
convey title from acquiring any obligatory force.[33] The transfer of ownership and title would occur after
full payment of the price.[34]
In the case at bar, petitioner
Leaño’s non-payment of the installments after April 1, 1989, prevented the
obligation of respondent Fernando to convey the property from arising. In fact, it brought into effect the
provision of the contract on cancellation.
Contrary to the findings of the
trial court, Article 1592 of the Civil Code is inapplicable to the case at bar.[35] However, any attempt to cancel the contract to sell
would have to comply with the provisions of Republic Act No. 6552, the “Realty
Installment Buyer Protection Act.”
R. A. No. 6552 recognizes in
conditional sales of all kinds of real estate (industrial, commercial,
residential) the right of the seller to cancel the contract upon non-payment of
an installment by the buyer, which is simply an event that prevents the
obligation of the vendor to convey title from acquiring binding force.[36] The law also provides for the rights of the buyer in
case of cancellation. Thus, Sec. 3 (b)
of the law provides that:
“If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty percent of the total payments made and, after five years of installments, an additional five percent every year but not to exceed ninety percent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.” [Emphasis supplied]
The decision in the ejectment case[37] operated as the notice of cancellation required by Sec.
3(b). As petitioner Leaño was not given
the cash surrender value of the payments that she made, there was still no
actual cancellation of the contract.
Consequently, petitioner Leaño may still reinstate the contract by
updating the account during the grace period and before actual cancellation.[38]
Should petitioner Leaño wish to
reinstate the contract, she would have to update her accounts with respondent
Fernando in accordance with the statement of account[39] which amount was P183,687.00.[40]
On the issue of whether petitioner
Leaño was in delay in paying the amortizations, we rule that while the contract
provided that the total purchase price was payable within a ten-year period,
the same contract specified that the purchase price shall be paid in monthly installments
for which the corresponding penalty shall be imposed in case of default. Petitioner Leaño cannot ignore the provision
on the payment of monthly installments by claiming that the ten-year period
within which to pay has not elapsed.
Article 1169 of the Civil Code
provides that in reciprocal obligations, neither party incurs in delay if the
other does not comply or is not ready to comply in a proper manner with what is
incumbent upon him. From the moment one
of the parties fulfills his obligation, delay by the other begins.
In the case at bar, respondent
Fernando performed his part of the obligation by allowing petitioner Leaño to
continue in possession and use of the property. Clearly, when petitioner Leaño did not pay the monthly amortizations
in accordance with the terms of the contract, she was in delay and liable for
damages.[41] However, we agree with the trial court that the
default committed by petitioner Leaño in respect of the obligation could be
compensated by the interest and surcharges imposed upon her under the contract
in question.[42]
It is a cardinal rule in the
interpretation of contracts that if the terms of a contract are clear and leave
no doubt upon the intention of the contracting parties, the literal meaning of
its stipulation shall control.[43] Thus, as there is no ambiguity in the language of the
contract, there is no room for construction, only compliance.
The Fallo
IN VIEW WHEREOF, we DENY the petition and AFFIRM the
decision of the Court of Appeals[44] in toto.
No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman),
Puno, Kapunan, and Ynares-Santiago, JJ., concur.
[1] In CA-G. R. CV No.
50502, promulgated on January 22, 1997, Petition, Annex “A”, Rollo, pp.
15-27, Minerva P. Gonzaga-Reyes, J., ponente, Ramon U. Mabutas, Jr. and Portia
Alino-Hormachuelos, JJ., concurring.
[2] Decision, Original
Record, Civil Case No. 768-M-93, pp. 146-158.
[3] Exhibit A, Original
Record, Civil Case No. 768-M-93, pp. 105-106.
[4] Exhibit A, Original
Record, Civil Case No. 768-M-93, pp. 105-106, at p. 105.
[5] Exhibit A, Original
Record, Civil Case No. 768-M-93, pp. 105-106, at p. 105.
[6] Exhibit A, Original
Record, Civil Case No. 768-M-93, pp. 105-106.
[7] Exhibits B, B-1,
B-2, B-3, B-4, B-5, B-6, B-7, and B-8, Original Record, Civil Case No.
768-M-93, pp. 100-102.
[8] Petition for Review,
Rollo, pp. 3-13 at p. 5.
[9] Docketed as Civil
Case No. 1680.
[10] Exhibit 4, Original
Record, Civil Case No. 768-M-93, pp. 8-10.
[11] Docketed as Civil
Case No. 768-M-93.
[12] In Civil Case No.
1680.
[13] Annex C, Original Record,
Civil Case No. 768-M-93, p. 12.
[14] Receipt, Original
Record, Civil Case No. 768-M-93, p. 57.
[15] Order, Original
Record, Civil Case No. 768-M-93, pp. 48-49.
[16] In Civil Case No.
1680.
[17] Decision, Original
Record, Civil Case No. 768-M-93, pp. 146-158, at p. 157.
[18] Motion for
Reconsideration, Original Record, Civil Case No. 768-M-93, pp. 160-164.
[19] Supplement to Motion
for Reconsideration, Original Record, Civil Case No. 768-M-93, pp. 166-168.
[20] Order, Original
Record, Civil Case No. 768-M-93, pp. 169-170, at p. 170.
[21] Decision, Original
Record, Civil Case No. 768-M-93, pp. 146-158, at p. 155.
[22] Exhibit 2, Original
Record, Civil Case No. 768-M-93, p. 107.
[23] Exhibit 2-A,
Original Record, Civil Case No. 768-M-93, p. 108.
[24] Docketted as CA-G.
R. CV No. 50202.
[25] Petition, Annex “A”,
Court of Appeals Decision, Rollo, pp. 15-27.
[26] Motion for
Reconsideration, CA Rollo, pp. 88-90.
[27] Resolution, CA Rollo,
p. 95.
[28] Petition, Rollo,
pp. 3-13. On December 1, 1999, we gave
due course to the petition (Rollo, pp. 59-60).
[29] Exhibit A, Original
Record, Civil Case No. 768-M-93, pp. 105-106, at p. 105.
[30] Exhibit A, Original
Record, Civil Case No. 768-M-93, pp. 105-106, at p. 106.
[31] Manuel v.
Rodriguez, et al., 109 Phil. 1, 11 (1960), citing Worcester v. Ocampo,
34 Phil. 646 (1916); Tuason v. Raymundo, 28 Phil. 635 (1914); Buzon v.
Lichauco, 13 Phil. 354 (1909).
[32] Exhibit A, Original
Record, Civil Case No. 768-M-93, pp. 105-106, at p. 106.
[33] Rillo v.
Court of Appeals, 340 Phil. 570, 577 (1997), citing Roque v. Lapuz, 96
SCRA 741 (1980) and Brick-town Development Corporation v. Amor Tierra
Development Corp., 239 SCRA 126 (1994).
[34] Rillo v.
Court of Appeals, 340 Phil. 570, 577 (1997).
[35] Rillo v.
Court of Appeals, 340 Phil. 570, 577 (1997); Spouses Pangilinan v. Court
of Appeals, 345 Phil. 93, 99 (1997); People’s Industrial and Commercial
Corporation v. CA, 346 Phil. 189, 204 (1997); and Valarao v.
Court of Appeals, 363 Phil. 495, 504 (1999).
[36] Rillo v. CA,
340 Phil. 570, 577 (1997), citing Luzon Brokerage Co., Inc. v. Maritima Bldg.
Co., Inc., 86 SCRA 305 (1978).
[37] Petition, Annex “A”,
Court of Appeals Decision, Rollo, pp. 15-27.
[38] Republic Act No.
6552, Section 5.
[39] Exhibit 2, Original
Record, Civil Case No. 768-M-93, p. 107.
[40] Order, Original Record,
Civil Case No. 768-M-93, pp. 169-170, at p. 170.
[41] Article 1170, Civil
Code.
[42] Decision, Original
Record, Civil Case 768-M-93, pp. 146-158, at p. 157.
[43] Palmares v.
Court of Appeals, 351 Phil. 664, 679 (1998), citing Abella v. Court of
Appeals, 327 Phil. 270 (1996).
[44] In CA-G. R. CV No.
50202.