ANTONIO R. CORTES (in his G.R. No. 126083
capacity as Administrator of the
estate of Claro S. Cortes),
Petitioner, Present:
Panganiban, C.J.
(Chairperson),
- versus - Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ.
HON. COURT OF APPEALS
and VILLA ESPERANZA Promulgated:
DEVELOPMENT CORPORATION,
Respondents. July 12, 2006
x
----------------------------------------------------------------------------------------
x
YNARES-SANTIAGO, J.:
The instant petition for review seeks
the reversal of the June 13, 1996 Decision[1] of
the Court of Appeals in CA-G.R. CV No. 47856, setting aside the June 24, 1993 Decision[2] of
the Regional Trial Court of Makati, Branch 138, which rescinded the contract of
sale entered into by petitioner Antonio Cortes (Cortes) and private respondent
Villa Esperanza Development Corporation (Corporation).
The antecedents show that for the
purchase price of P3,700,000.00, the Corporation as buyer, and Cortes as
seller, entered into a contract of sale over the lots covered by Transfer
Certificate of Title (TCT) No. 31113-A, TCT No. 31913-A and TCT No. 32013-A,
located at Baclaran, Parañaque, Metro Manila.
On various dates in 1983, the Corporation advanced to Cortes the total
sum of P1,213,000.00. Sometime in
September 1983, the parties executed a deed of absolute sale containing the
following terms:[3]
1. Upon
execution of this instrument, the Vendee shall pay unto the Vendor sum of TWO
MILLION AND TWO HUNDRED THOUSAND (P2,200,000.00) PESOS, Philippine Currency, less
all advances paid by the Vendee to the Vendor in connection with the sale;
2. The
balance of ONE MILLION AND FIVE HUNDRED THOUSAND [P1,500,000.00] PESOS, Phil.
Currency shall be payable within ONE (1) YEAR from date of execution of this
instrument, payment of which shall be secured by an irrevocable standby letter of credit to be issued by any
reputable local banking institution acceptable to the Vendor.
x x x x
4. All expense
for the registration of this document with the Register of Deeds concerned,
including the transfer tax, shall be divided equally between the Vendor and the
Vendee. Payment of the capital gains
shall be exclusively for the account of the Vendor; 5% commission of Marcosa
Sanchez to be deducted upon signing of sale.[4]
Said Deed was retained by Cortes for notarization.
On
In his Answer with counterclaim,[6]
Cortes claimed that the owner’s duplicate copy of the three TCTs were
surrendered to the Corporation and it is the latter which refused to pay in
full the agreed down payment. He added that
portion of the subject property is occupied by his lessee who agreed to vacate
the premises upon payment of disturbance fee.
However, due to the Corporation’s failure to pay in full the sum of
P2,200,000.00, he in turn failed to fully pay the disturbance fee of the lessee
who now refused to pay monthly rentals. He
thus prayed that the Corporation be ordered to pay the outstanding balance plus
interest and in the alternative, to cancel the sale and forfeit the P1,213,000.00
partial down payment, with damages in either case.
On June 24, 1993, the trial court
rendered a decision rescinding the sale and directed Cortes to return to the
Corporation the amount of P1,213,000.00, plus interest. It ruled that pursuant to the contract of the
parties, the Corporation should have fully paid the amount of P2,200,000.00
upon the execution of the contract. It
stressed that such is the law between the parties because the Corporation
failed to present evidence that there was another agreement that modified the
terms of payment as stated in the contract.
And, having failed to pay in full the amount of P2,200,000.00 despite Cortes’
delivery of the Deed of Absolute Sale and the TCTs, rescission of the contract
is proper.
In its motion for reconsideration, the
Corporation contended that the trial court failed to consider their agreement
that it would pay the balance of the down payment when Cortes delivers the
TCTs. The motion was, however, denied by
the trial court holding that the rescission should stand because the
Corporation did not act on the offer of Cortes’ counsel to deliver the TCTs upon
payment of the balance of the down payment.
Thus:
The Court finds no merit in the
[Corporation’s] Motion for Reconsideration.
As stated in the decision sought to be reconsidered, [Cortes’] counsel
at the pre-trial of this case, proposed that if [the Corporation] completes the
down payment agreed upon and make arrangement for the payment of the balances
of the purchase price, [Cortes] would sign the Deed of Sale and turn over the
certificate of title to the [Corporation]. [The Corporation] did nothing to
comply with its undertaking under the agreement between the parties.
WHEREFORE, in view of the foregoing
considerations, the Motion for Reconsideration is hereby DENIED.
SO ORDERED.[7]
On appeal, the Court of Appeals reversed the decision of the trial court and
directed Cortes to execute a Deed of Absolute Sale conveying the properties and
to deliver the same to the Corporation together with the TCTs, simultaneous
with the Corporation’s payment of the balance of the purchase price of
P2,487,000.00. It found that the parties
agreed that the Corporation will fully pay the balance of the down payment upon
Cortes’ delivery of the three TCTs to the Corporation. The records show that no such delivery was
made, hence, the Corporation was not remiss in the performance of its
obligation and therefore justified in not paying the balance. The decretal portion thereof, provides:
WHEREFORE, premises considered, [the
Corporation’s] appeal is GRANTED. The
decision appealed from is hereby REVERSED and SET ASIDE and a new judgment
rendered ordering [Cortes] to execute a deed of absolute sale conveying to [the
Corporation] the parcels of land subject
of and described in the deed of absolute sale, Exhibit D. Simultaneously with the execution of the deed
of absolute sale and the delivery of the corresponding owner’s duplicate copies
of TCT Nos. 31113-A, 31931-A and 32013-A of the Registry of Deeds for the
Province of Rizal, Metro Manila, District IV, [the Corporation] shall pay [Cortes] the balance of the purchase
price of P2,487,000.00. As agreed upon
in paragraph 4 of the Deed of Absolute Sale, Exhibit D, under terms and
conditions, “All expenses for the registration of this document (the deed of
sale) with the Register of Deeds concerned, including the transfer tax, shall
be divided equally between [Cortes and the Corporation]. Payment of the capital gains shall be
exclusively for the account of the Vendor; 5% commission of Marcosa Sanchez to
be deducted upon signing of sale.” There
is no pronouncement as to costs.
SO ORDERED.[8]
Cortes filed the instant petition praying that the decision of the trial
court rescinding the sale be reinstated.
There is no doubt that the contract of sale in question gave rise to a
reciprocal obligation of the parties.
Reciprocal obligations are those which arise from the same cause, and
which each party is a debtor and a creditor of the other, such that the
obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously, so
that the performance of one is conditioned upon the simultaneous fulfillment of
the other.[9]
Article 1191 of the Civil Code, states:
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.
x x x x
As to when said failure or delay in performance arise, Article 1169 of
the same Code provides that –
ART. 1169
x x x x
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.
(Emphasis supplied)
The issue therefore is whether there is delay in the performance of the
parties’ obligation that would justify the rescission of the contract of sale. To resolve this issue, we must first
determine the true agreement of the parties.
The settled rule is that the decisive factor in evaluating an agreement
is the intention of the parties, as shown not necessarily by the terminology
used in the contract but by their conduct, words, actions and deeds prior to,
during and immediately after executing the agreement. As such, therefore,
documentary and parol evidence may be
submitted and admitted to prove such intention.[10]
In the case at bar, the stipulation in the Deed of Absolute Sale was that
the Corporation shall pay in full the P2,200,000.00 down payment upon execution
of the contract. However, as correctly noted
by the Court of Appeals, the transcript of stenographic notes reveal Cortes’
admission that he agreed that the Corporation’s full payment of the sum of P2,200,000.00
would depend upon his delivery of the TCTs of the three lots. In fact, his main defense in the Answer is
that, he performed what is incumbent upon him by delivering to the Corporation
the TCTs and the carbon duplicate of the Deed of Absolute Sale, but the latter
refused to pay in full the down payment.[11] Pertinent portion of the transcript, reads:
[Q] Now, why did
you deliver these three titles to the plaintiff despite the fact that it has
not been paid in full the agreed down payment?
A Well, the
broker told me that the down payment will be given if I surrender the titles.
Q Do you mean
to say that the plaintiff agreed to pay in full the down payment of
P2,200,000.00 provided you surrender or entrust to the plaintiff the titles?
A Yes, sir.[12]
What further confirmed the agreement to deliver the TCTs is the testimony
of Cortes that the title of the lots will be transferred in the name of the
Corporation upon full payment of the P2,200,000.00 down payment. Thus –
ATTY. ANTARAN
Q Of course,
you have it transferred in the name of the plaintiff, the title?
A Upon full
payment.
x
x x x
ATTY. SARTE
Q When you said
upon full payment, are you referring to the agreed down payment of
P2,200,000.00?
A Yes, sir.[13]
By agreeing to transfer title upon full payment of P2,200,000.00, Cortes’
impliedly agreed to deliver the TCTs to the Corporation in order to effect said
transfer. Hence, the phrase “execution of this
instrument” [14] as appearing in the Deed of Absolute Sale, and
which event would give rise to the Corporation’s obligation to pay in full the
amount of P2,200,000.00, can not be construed as referring solely to the
signing of the deed. The meaning of
“execution” in the instant case is not limited to the signing of a contract but
includes as well the performance or implementation or accomplishment of the parties’
agreement.[15] With the transfer of titles as the
corresponding reciprocal obligation of payment, Cortes’ obligation is not only
to affix his signature in the Deed, but to set into motion the process that
would facilitate the transfer of title of the lots, i.e., to have the
Deed notarized and to surrender the original copy thereof to the Corporation
together with the TCTs.
Having established the true agreement of the parties, the Court must now
determine whether Cortes delivered the TCTs and the original Deed to the
Corporation. The Court of Appeals found
that Cortes never surrendered said documents to the Corporation. Cortes testified that he delivered the same
to Manny Sanchez, the son of the broker, and that Manny told him that her
mother, Marcosa Sanchez, delivered the same to the Corporation.
Q Do you have
any proof to show that you have indeed surrendered these titles to the
plaintiff?
A Yes, sir.
Q I am showing
to you a receipt dated
A That is the
receipt of the real estate broker when she received the titles.
Q On top of the
printed name is Manny Sanchez, there is a signature, do you know who is that
Manny Sanchez?
A That is the
son of the broker.
x
x x x
Q May we know
the full name of the real estate broker?
A Marcosa Sanchez
x x x x
Q Do you know
if the broker or Marcosa Sanchez indeed delivered the titles to the plaintiff?
A That is what [s]he
told me. She gave them to the plaintiff.
x
x x x.[16]
ATTY. ANTARAN
Q Are you
really sure that the title is in the hands of the plaintiff?
x
x x x
Q It is in the
hands of the broker but there is no showing that it is in the hands of the
plaintiff?
A Yes, sir.
COURT
Q How do you
know that it was delivered to the plaintiff by the son of the broker?
A The broker
told me that she delivered the title to the plaintiff.
ATTY. ANTARAN
Q Did she not
show you any receipt that she delivered to [Mr.] Dragon[17]
the title without any receipt?
A I have not
seen any receipt.
Q So,
therefore, you are not sure whether the title has been delivered to the
plaintiff or not. It is only upon the
allegation of the broker?
A Yes, sir.[18]
However, Marcosa Sanchez’s unrebutted testimony is that, she did not
receive the TCTs. She also denied
knowledge of delivery thereof to her son, Manny, thus:
Q The
defendant, Antonio Cortes testified during the hearing on
A I did not
receive the title.
Q He likewise
said that the title was delivered to your son, do you know about that?
A I do not know
anything about that.[19]
What further strengthened the findings of the Court of
Appeals that Cortes did not surrender the subject documents was the offer of Cortes’
counsel at the pre-trial to deliver the TCTs and the Deed of Absolute Sale if the
Corporation will pay the balance of the down payment. Indeed, if the said documents were already in
the hands of the Corporation, there was no need for Cortes’ counsel to make
such offer.
Since Cortes did not perform his obligation to have the Deed notarized
and to surrender the same together with the TCTs, the trial court erred in
concluding that he performed his part in the contract of sale and that it is
the Corporation alone that was remiss in the performance of its
obligation. Actually, both parties were
in delay. Considering that their
obligation was reciprocal, performance thereof must be simultaneous. The mutual inaction of Cortes and the
Corporation therefore gave rise to a compensation morae or default on
the part of both parties because neither has completed their part in their
reciprocal obligation.[20] Cortes is yet to deliver the original copy
of the notarized Deed and the TCTs, while the Corporation is yet to pay in full
the agreed down payment of P2,200,000.00.
This mutual delay of the parties cancels out the effects of default,[21] such that it is as if no one is guilty of
delay.[22]
We find no merit in Cortes’ contention
that the failure of the Corporation to act on the proposed settlement at the
pre-trial must be construed against the latter. Cortes argued that with his counsel’s offer
to surrender the original Deed and the TCTs, the Corporation should have
consigned the balance of the down payment.
This argument would have been correct if Cortes actually surrendered the
Deed and the TCTs to the Corporation.
With such delivery, the Corporation would have been placed in default if
it chose not to pay in full the required down payment. Under Article 1169 of the Civil Code, from
the moment one of the parties fulfills his obligation, delay by the other
begins. Since Cortes did not perform his
part, the provision of the contract requiring the Corporation to pay in full
the down payment never acquired obligatory force. Moreover, the Corporation could not be
faulted for not automatically heeding to the offer of Cortes. For one, its complaint has a prayer for
damages which it may not want to waive by agreeing to the offer of Cortes’
counsel. For another, the previous
representation of Cortes that the TCTs were already delivered to the
Corporation when no such delivery was in fact made, is enough reason for the
Corporation to be more cautious in dealing with him.
The Court of Appeals therefore correctly ordered the parties to perform
their respective obligation in the contract of sale, i.e., for Cortes
to, among others, deliver the necessary documents to the Corporation and for
the latter to pay in full, not only the down payment, but the entire purchase
price. And since the Corporation did
not question the Court of Appeal’s decision and even prayed for its affirmance,
its payment should rightfully consist not only of the amount of P987,000.00,
representing the balance of the P2,200,000.00 down payment, but the total
amount of P2,487,000.00, the remaining balance in the P3,700,000.00 purchase
price.
WHEREFORE, the petition is DENIED and
the June 13, 1996 Decision of the Court of Appeals in CA-G.R. CV No. 47856, is AFFIRMED.
SO ORDERED.
CONSUELO YNARES-SANTIAGO
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson
MA. ALICIA
AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.
Associate Justice
Associate Justice
MINITA V. CHICO-NAZARIO
Associate Justice
CERTIFICATION
Pursuant
to Section 13, Article VIII of the Constitution, it is hereby certified that
the conclusions in the above Decision were reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.
ARTEMIO
V. PANGANIBAN
Chief Justice
[1]
Penned by Associate Justice Eduardo G. Montenegro and concurred in by Associate
Justices Emeterio C. Cui and Jose C. De La Rama; rollo, pp. 33-51.
[2]
Penned by Judge Fernando P. Agdamag; rollo,
pp. 66-68.
[3]
Complaint, records, pp. 1-2.
[4]
Exhibit “D,” records, p. 10.
[5]
Records, pp. 1-4.
[6]
[7]
[8]
[9] Asuncion
v. Evangelista, 375 Phil. 328, 356 (1999), citing Tolentino, Arturo, Commentaries
and Jurisprudence on the Civil Code of the Phil., Vol. IV, 1985 edition, p. 175.
[10] Agas
v. Sabico, G.R. No. 156447,
[11] Rollo, p. 62.
[12]
TSN,
[13]
[14] “1. Upon execution
of this instrument, the Vendee shall pay unto the Vendor sum of TWO MILLION
AND TWO HUNDRED THOUSAND (P2,200,000.00) PESOS, Philippine Currency, less all
advances paid by the Vendee to the Vendor in connection with the sale;
(Emphasis supplied)
[15] Eastern
Assurance & Surety Corporation v. Intermediate Appellate Court, G.R.
No. 69450, November 22, 1988, 179 SCRA 561, 567.
[16]
TSN,
[17]
Mr. Renato Dragon is the President of respondent Corporation and the signatory
to the Deed of Sale. See records, p. 11.
[18]
TSN,
[19]
TSN,
[20]
Paras, Civil Code, Book IV, Fourteenth edition, p. 123.
[21]
Vitug, Compendium of Civil Law and Jurisprudence, 1993 edition, p. 482.
[22]
Paras, supra.