SECOND DIVISION
GENEROSO V. VILLANUEVA G.R.
No. 157318
and RAUL C. VILLANUEVA, JR.,
Petitioners,
Present:
PUNO, J., Chairperson,
- versus
-
SANDOVAL-GUTIERREZ,
AZCUNA, and
GARCIA, JJ.
ESTATE OF GERARDO L.
GONZAGA/MA. VILLA GONZAGA,
Promulgated:
in her capacity as Administratrix,
Respondents. August 9, 2006
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D E C I S I O N
PUNO, J.:
Before us is a petition for review on certiorari assailing the
Decision dated January 16, 2003[1] of the Court of Appeals in
CA-G.R. CV No. 46865 which affirmed with modification the Decision dated
December 29, 1993[2] of the Regional Trial Court (RTC) of Bacolod City in Civil Case No. 6552. The
The antecedent facts are as follows:
On
KNOW ALL MEN BY THESE PRESENTS:
This Memorandum made and entered into by and
between:
THE ESTATE OF GERARDO L. GONZAGA represented
in the act by its Administratrix, MA. VILLA J.
GONZAGA, Filipino, of legal age, widow and resident of
- a n d -
RAUL VILLANUEVA, JR. and GENEROSO V.
VILLANUEVA, Filipinos, of legal age, married and residents of
W I T N E S S
E T H:
1. WHEREAS,
the FIRST PARTY is the true and lawful owner of a parcel of land,
2. WHEREAS, the aforesaid property is presently mortgaged with the Philippine
National Bank (PNB) as collateral
for a loan;
3. WHEREAS, the aforesaid property is already
subdivided into sub-lots although separate titles for each lot is not yet
issued;
4. WHEREAS, the herein SECOND PARTY agrees to purchase portions of the aforesaid
property equivalent to 3,240 sq. meters which portions are designated as Lots Nos. 28, 29, 30, 31, 32, 33, 34,
35, 36, 37, 38 & 39 in phase 11 of the subdivision plan;
5. WHEREAS, the
SECOND PARTY agrees
to purchase the aforesaid lots at the price of ONE HUNDRED FIFTY (P150.00)
PESOS per sq. meter or for a total
price of FOUR HUNDRED EIGHTY SIX THOUSAND (P486,000.00) PESOS subject to the following conditions:
A.) That the FIRST PARTY shall cause the release
of the aforementioned lots from the Philippine National Bank (PNB) at the
earliest possible time.
B.) That
the SECOND PARTY agrees to pay the amount of P486,000.00 as follows:
P100,000.00 - upon the signing of this
agreement.
P191,600.00 - on or before January 10,
1990.
P194,400.00 - upon the
approval by the
PNB of the release of the
lots.
C.) That it is hereby agreed that the ONE HUNDRED
THOUSAND (P100,000.00) PESOS down payment shall at the same time be
considered as earnest money which shall be forfeited in the event the SECOND
PARTY withdraws from this agreement.
D.) That
upon payment of 60% of the purchase price, the SECOND PARTY may start to
introduce improvements in the area if they so desire.
E.) That
upon the release by the Philippine National Bank (PNB) of the lots subject of
this agreement, the FIRST PARTY shall immediately execute a Deed of
IN WITNESS WHEREOF, the parties have hereunto
set their hands this 15th day of January, 1990 in this City of Bacolod, Philippines. [emphases
added]
As stipulated in the agreement,
petitioners introduced improvements after paying P291,600.00
constituting sixty (60%) percent of the total purchase price of the lots.
Petitioners then requested permission from respondent Administratrix
to use the premises for the next milling season. Respondent refused on the
ground that petitioners cannot use the premises until full payment of the
purchase price. Petitioners informed respondent that their immediate use of the
premises was absolutely necessary and that any delay will cause them substantial
damages. Respondent remained firm in her refusal, and demanded that petitioners
stop using the lots as a transloading station to
service the Victorias Milling Company unless they pay
the full purchase price. In a letter-reply dated
On
Mrs. Ma. Villa J. Gonzaga
Judicial Administratrix
Int. Est. of Gerardo L. Gonzaga
Dear Mrs. Gonzaga:
We
are pleased to inform you that your request for the partial release of securities, particularly the 3,240 sq. m. agricultural land x x x covered by TCT No. T-31113 has been
approved by our Senior Management
Credit Committee I on
1.
The sale be
approved by the Court insofar as
the interest of the estate is concerned;
2.
Payment of two (2) annual amortizations of the
restructured accounts in addition to P50,000.00 to be derived from sale
of lot sought to be released;
3.
Such terms and conditions that our Legal Dept. may
impose to protect the interest of the Bank.
Please see us for the preparation of the
covering documents. [emphases added]
Very truly yours,
(signed)
CECILIA S. GAYENALO
Asst. Manager
In their letter-reply dated
On
In their Letter dated
The trial court decided the case in favor of respondents. The dispositive portion of the decision reads-
(1) Declaring the Memorandum of Agreement, Exh. “C” rescinded; consequently ownership and possession
of Lots 28 to 39, inclusive, of Phase II of the subdivision plan covered by TCT
No. T-31113 are hereby restored to defendants, and
defendants (sic) are thereby ordered to vacate the premises of said
lots;
(2) Ordering plaintiffs to jointly and
severally pay defendants: P20,000.00 as moral damages; and P15,000.00 as
attorney’s fees;
(3) Ordering defendants to solidarily pay or refund plaintiffs: the sum of P100,000.00 paid by the
latter as down payment on the aforesaid Memorandum of Agreement on December 18,
1989, with legal interest at 6% per annum from said date up to and until the
amount is fully paid or refunded; and another sum of P191,600.00 paid by
the latter to the former in connection with the said Memorandum of Agreement on
January 10, 1990, with the same rate of interest at 6% per annum from said date
up to and until the amount is fully paid or refunded; and
(4) Condemning
plaintiffs to pay the cost of suit.[8]
Petitioners filed a petition for review
before the Court of Appeals. On
Petitioners raise the following issues:
1. Whether x x x respondents failed to comply with their reciprocal
obligation of securing the release of the subject lots from mortgage
indebtedness with the Philippine National Bank.
2. Whether x x x the delivery of the titles corresponding to the twelve
(12) lots subject of the Memorandum of Agreement is a precondition to the
payment by the petitioners of the balance of the consideration.
3. Whether x x x petitioners did incur (sic) delay in the
performance of their reciprocal obligation under the Memorandum of Agreement.
4. Whether x x x there is legal, or even a factual, ground for the
rescission of the Memorandum of Agreement.[10]
We will resolve first the procedural objections raised by the respondents.
Respondents contend that the petition should be dismissed for late
filing, and irregular execution of the affidavit of service attached to the
petition. Respondents allege that the petition was filed late as there was no
evidence to show that petitioners’ motion for extension of time to file the
petition has been granted by the Court. Petitioners allegedly received a copy
of the assailed Court of Appeals’ decision on
Respondents’ contentions
are not meritorious. The records show that petitioners’ motion for 30 days’
extension of time to file the petition for review has been granted in our
Resolution dated
On the merits of the case, we
agree with the petitioners that the Court of Appeals erred in ruling that
respondents had already fulfilled their obligation to cause the release of the
lots from mortgage with the PNB at the time they demanded payment of the
balance of the purchase price. The
finding of the appellate court is refuted by Exh. “3-B” and by the testimonial evidence on record.
A reading of Exhibit “3-B,”[13] which is the PNB’s
letter of approval dated P50,000.00 to be derived from
the sale of the lots sought to be released; and (3) that respondents comply
with such other terms and conditions as the PNB’s
Legal Department may impose. Cecilia S. Gayenalo, the Assistant Manager of PNB Bacolod
City Branch, herself testified that it was in July 1991 that the final release
papers were prepared by the bank because it was only at that time that
respondents complied with the three conditions.[14]
It was therefore premature for respondents to demand payment of the balance of
the purchase price from the petitioners in April 1991 and, failing in that, to
“rescind” the MOA in May 1991.
Moreover, there is no legal basis for the rescission. The remedy of rescission under Art. 1191 of the Civil Code[15] is predicated on a breach of faith by the other party that violates the reciprocity between them.[16] We have held in numerous cases that the remedy does not apply to contracts to sell.[17] We explained the reason in Santos v. Court of Appeals,[18] viz -
x x x [I]n a contract
to sell, title remains with the vendor and does not pass on to the vendee until
the purchase price is paid in full. Thus, in a
contract to sell, the payment of the purchase price is a positive suspensive condition. Failure to pay the price agreed upon
is not a mere breach, casual or serious, but a situation that prevents the
obligation of the vendor to convey title from acquiring an obligatory force. This is entirely different from the situation in a
contract of sale, where non-payment of the price is a negative resolutory condition. The effects in law are not identical.
In a contract of sale, the vendor has lost ownership of the thing sold and
cannot recover it, unless the contract of sale is rescinded and set aside. In a
contract to sell, however, the vendor remains the owner for as long as the
vendee has not complied fully with the condition of paying the purchase
price. If the vendor should eject the
vendee for failure to meet the condition precedent, he is enforcing the
contract and not rescinding it. x x x x Article 1592 speaks of
non-payment of the purchase price as a resolutory
condition. It does not apply to a
contract to sell. As to Article 1191, it is subordinated to the provisions of
Article 1592 when applied to sales of immovable property. Neither provision is
applicable [to a contract to sell]. (emphasis
added)
The MOA between petitioners and respondents is a conditional contract to sell. Ownership over the lots is not to pass to the petitioners until full payment of the purchase price. Petitioners’ obligation to pay, in turn, is conditioned upon the release of the lots from mortgage with the PNB to be secured by the respondents. Although there was no express provision regarding reserved ownership until full payment of the purchase price, the intent of the parties in this regard is evident from the provision that a deed of absolute sale shall be executed only when the lots have been released from mortgage and the balance paid by petitioners. Since ownership has not been transferred, no further legal action need have been taken by the respondents, except an action to recover possession in case petitioners refuse to voluntarily surrender the lots.[19]
The records show that the lots were finally released from mortgage in
July 1991. Petitioners have always expressed readiness to pay the balance of
the purchase price once that is achieved. Hence, petitioners should be allowed
to pay the balance now, if they so desire, since it is established that
respondents’ demand for them to pay in April 1991 was premature. However,
petitioners may not demand production by the respondents of the titles to the
lots as a condition for their payment. It was not required under the MOA. The
MOA merely states that petitioners shall pay the balance “upon approval by
the PNB of the release of the lots” from mortgage. Petitioners may not add
further conditions now. Obligations arising from contracts have the force of
law between the contracting parties and should be complied with in good faith.[20]
IN VIEW WHEREOF, the
petition is GRANTED. The assailed Decision dated January 16,
2003 of the Court of Appeals in CA-G.R. CV No. 46865 is REVERSED and SET ASIDE. Petitioners and respondents are restored to
the status quo ante before the execution of the Deed of Rescission dated
May 28, 1991which is declared of no legal effect.
SO ORDERED.
REYNATO S. PUNO
Associate
Justice
WE
CONCUR:
CANCIO C. GARCIA
Associate Justice
I attest that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
REYNATO S. PUNO
Associate Justice
Chairperson
Pursuant to Section 13, Article VIII of the Constitution
and the Division Chairperson’s Attestation, I certify that the conclusions in
the above decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
ARTEMIO
V. PANGANIBAN
[1] Rollo,
pp. 33-42.
[2]
[3] Annex “B,”
[4] Exh. “6,” rollo, pp. 101-102.
[5]
[6] Annex “E” of the petition;
[7] Annex “G,”
[8] Supra note 2.
[9] Supra note 1.
[10] See Memorandum for the
Petitioners, rollo,
pp. 145-146.
[11] SEC. 2. Time for
filing; extension.- The
petition shall be
filed within fifteen (15) days
from notice of the judgment or final order or resolution appealed from, or of
the denial of the petitioner’s motion for new trial or reconsideration filed in
due time after notice of the judgment. On motion duly filed and served, with
full payment of the docket and other lawful fees and the deposit for costs
before the expiration of the reglementary period, the
Supreme Court may for justifiable reasons grant an extension of thirty (30)
days only within which to file the petition.
[12] Rollo,
p. 9.
[13] Supra note 6.
[14] TSN,
[15] Art.
1191. The power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him.
The
injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible.
The
court shall decree the rescission claimed, unless there be just cause authorizing
the fixing of the period. x x x
x
[16] Velarde v. Court
of Appeals, G.R. No.
108346, July 11, 2001, 361 SCRA 56; Uy v. Court of Appeals, G.R. No. 120465,
September 9, 1999, 314 SCRA 69; Romero v. Court of Court of Appeals,
G.R. No. 107207, November 23, 1995, 250 SCRA 223.
[17] Gomez v. Court of
Appeals, G.R. No.
120747, September 21, 2000,
340 SCRA 720; Padilla v. Paredes, G.R.
No. 124874, March 17, 2000, 328 SCRA 434; Valarao
v. Court of Appeals, G.R. No. 130347, March 3, 1999, 304 SCRA 155; Pangilinan v. Court of Appeals, G.R. No.
83588, September 29, 1997, 279 SCRA 590; Rillo
v. Court of Appeals, G.R. No. 125347, June 19, 1997, 274 SCRA 461.
[18] G.R. No. 120820,
[19] See Cesar L. Villanueva, LAW ON
SALES, 492 (2004).
[20] Transfield
Philippines, Inc. v. Luzon Hydro Corporation, G.R. No. 146717,