THIRD DIVISION
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SPS.
CORNELIO JOEL I. ORDEN and MARIA NYMPHA V. ORDEN, and REGISTER OF DEEDS OF
Petitioners, - versus - SPS.
ARTURO AUREA and MELODIA C. AUREA, SPS. ERNESTO P. COBILE and SUSANA M. COBILE,
and FRANKLIN M. QUIJANO,
Respondents. |
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G.R. No. 172733 Present: YNARES-SANTIAGO, J. Chairperson. AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and REYES, JJ. Promulgated: August 20, 2008 |
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CHICO-NAZARIO, J.:
Before Us is a Petition for Review on
Certiorari under Rule 45 of the 1997
Rules of Civil Procedure which seeks to set aside the Decision[1] of
the Court of Appeals dated 20 April 2006 in CA-G.R. CV No. 75788 affirming in toto the Decision[2] of
Branch 33 of the Regional Trial Court (RTC) of Dumaguete City in Civil Case No.
12056. The RTC decision ordered petitioners
Sps. Cornelio Joel I. Orden and Maria Nympha V. Orden to return
to respondents-spouses Ernesto Cobile and Susana M. Cobile the amount of P738,596.28 plus
twenty percent interest per annum from the filing of the complaint until fully
paid.
The
antecedents are as follows:
Petitioners
spouses Cornelio Joel I. Orden and Maria Nympha V. Orden are the owners of two
parcels of land located at the
On
That
for and in consideration of the sum of ONE MILLION NINE HUNDRED THOUSAND PESOS
(P1.9M), receipt of which is hereby acknowledged to the satisfaction of
the VENDORS, WE, the spouses CORNELIO JOEL I. ORDEN and MARIA NYMPHA VELARDO
ORDEN, by these present, do hereby SELL, TRANSFER and CONVEY, in a manner,
absolute, and irrevocable, unto and in favor of herein VENDEES, the spouses
ARTURO AUREA and MELODIA C. AUREA, their heirs, successors and assigns, the above-described
two (2) parcels of land, together with the residential house standing thereon,
and declared under Tax Declaration ______, and assessed at ___________.[3]
Simultaneous
with the execution of the Deed of Absolute Sale, respondents-spouses Aurea executed
a Joint Affidavit whereby they declared that the true and real purchasers of
the abovementioned properties described in the Deed of Absolute Sale are
respondents-spouses Ernesto P. Cobile and Susana M. Cobile. The pertinent portions of the affidavit read:
That we are the Vendees in a
document denominated “DEED OF ABSOLUTE SALE” from the Vendors, the spouses
CORNELIO JOEL I. ORDEN and MARIA NYMPHA VELARDO ORDEN, involving two (2)
parcels of land under TCT-27159 (Tax Dec. No. 93-2-04-094) and TCT-27160 (Tax
Dec. No. 93-2-04-095) and a residential house under Tax Dec. No. _____ for the
sum of ONE MILLION NINE HUNDRED THOUSAND PESOS (P1.9M), per Doc. No.
384; Page No. 78, Book No. _____; Series of 1994, dated September _____, 1994 of
Notary Public Atty. Jose G. Hernando, Jr.
That the true and real vendees in
said “DEED OF ABSOLUTE SALE” adverted to above are one ERNESTO P. COBILE and
SUSANA M. COBILE who are both American Citizens and residents of Honolulu,
Hawaii, U.S.A.
We are executing this Joint
Affidavit to prove and show that the real and true purchasers of the
afore-mentioned two (2) parcels of land and the residential house sold by the
spouses CORNELIO JOEL I. ORDEN are one ERNESTO P. COBILE and SUSANA M. COBILE.[4]
Immediately
after the signing of the Deed of Absolute Sale and Joint Affidavit, respondents
Cobile paid petitioners Orden the amount of P384,000.00 as partial
payment of the purchase price of P1,900,000.00 as evidenced by a receipt
signed by petitioners Orden. The receipt
reads:
R
E C E I P T
RECEIVED
from ERNESTO P. COBILE and SUSANA M. COBILE, the sum of THREE HUNDRED EIGHTY
FOUR THOUSAND PESOS (P384,000.00) representing partial payment of the
purchase price re “Deed of Absolute Sale” of two parcels of land and a
residential house located at Sibulan, Negros Oriental,
Respondents
Cobile then executed a document entitled “PROMISSORY” whereby they promised to
pay petitioners Orden the amount of P566,000.00 on or before P950,000.00 to be paid as soon as the titles of the
properties shall have been transferred to them.
Said document reads:
PROMISSORY
WE, ERNESTO P. COBILE and SUSANA M.
COBILE, residents of P566,000.00) on or before October 31, 1994, said amount representing the one-half balance
of the purchase price of the sale of two (2) parcels of land and a residential
house located at the Municipality of Sibulan, Negros Oriental, per Doc. No.
384; Page No. 78; Book No. IV; Series of 1994 of Notary Public JOSE G.
HERNANDO, JR., the remaining balance of NINE HUNDRED FIFTY THOUSAND PESOS (P950,000.00)
to be paid as soon as the titles of the properties subject-matter of the sale
shall have been transferred to us.[6]
The Deed of Absolute Sale, Joint Affidavit, receipt for P384,000.00
and the promissory note were all prepared by Atty. Jose G. Hernando, Jr.,
counsel of petitioners Orden. It was the
suggestion and advice of Atty. Hernando that respondents Aurea be indicated as the
vendees in the Deed of Absolute Sale in lieu of respondents Cobile. Atty. Hernando explained that respondents
Cobile, being American citizens, could not own land in the
Respondents Cobile failed to pay the P566,000.00
which was due on or before
On P354,596.28
representing partial payment of the purchase price. The same was evidenced by a receipt executed
by the petitioners Orden which reads:
RECEIPT
RECEIVED from SPS. ERNESTO P. COBILE
and SUSANA M. COBILE, the sum of PESOS: THREE HUNDRED FIFTY FOUR THOUSAND FIVE
HUNDRED NINETY SIX & 28/100 (P354,596.28)
representing partial payment of the purchase price re “Deed of Absolute Sale”
of two (2) parcels of land and a residential house located at Sibulan, Negros
Oriental, per Doc. No. 384; Page No. 78; Book No. IV; Series of 1994 of the
notary public JOSE G. HERMANDO, Jr.
Balance after this payment = P1,161,403.72[8]
Failing
to pay the balance of the purchase price, petitioners Orden wrote respondents
Cobile a letter dated
Please be informed that we have decided to dispose of the property (Lot 1 and 4, Block B of the Consolidation Subdivision Plan, (LRC) Pcs-7321, all located at Barrio Maslog, Sibulan, Negros Oriental, Philippines, entered by Transfer Certificate of Title No. T-27160 and T-272159, respectively) to other [interested] parties, in view of your failure to make good the conditions imposed on the “Deed of Sale” we have executed as vendors, in your favor as vendees, sometime last September 29, 1994.
However, if only to give you a chance to fully consummate our transaction, notice is hereby given upon your goodness to pay us the remaining balance of the aforesaid “Deed of Sale” ten (10) days upon receipt of this letter. Your failure to do so within said period shall be constrained (sic) as your refusal and we then shall proceed to dispose of the property.
Rest assured that you will be reimbursed of the advance payments you made, after the properties shall have been sold and after deductions be made concerning damages, attorney’s fees, etc.[9]
Respondents
Cobile did not make any further payment.
All in all, they paid petitioners Orden P738,596.28 (P384,000.00
+ P354,596.28). Petitioners Orden
did not transfer the titles to the properties to respondents Cobile.
On
On
The complaint, among other things,
asked the trial court to order petitioners Orden and the Register of Deeds of
Negros Oriental for the delivery of the titles to the properties involved in the
names of respondents Cobile; in the alternative, if the titles to the
properties could not be delivered in respondents Cobile’s name, to order
petitioners Orden to pay the whole consideration of the sale plus interest of
20% per annum. The restraining order and
writ of preliminary injunction were sought to restrain petitioners Orden from
selling, transferring, conveying or encumbering the properties involved to
other person during the pendency of the case and to prohibit the Register of
Deeds of Negros Oriental from recording, registering and transferring the
titles to the properties to other persons except to respondents Cobile.
On
On
On
On
In an Order dated
On
During the pre-trial conference, the
parties agreed only on the identities of the parties and of the subject
properties.[20]
On
In a decision dated
ACCORDINGLY, from the foregoing disquisition, judgment is hereby rendered ordering the defendants:
(1)
to return to plaintiffs, spouses Ernesto
Cobile and Susana M. Cobile the amount of SEVEN HUNDRED THIRTY EIGHT THOUSAND
FIVE HUNDRED NINETY-SIX PESOS and TWENTY-EIGHT CENTAVOS (P738,596.28) representing the total amount advanced by the
plaintiffs to defendants; and
(2) to pay plaintiffs interest of the aforecited amount at the rate of Twenty (20%) percent per annum from the filing of the complaint until fully paid.[22]
The
trial court found that petitioners Orden and respondents Cobile entered into a
contract of sale. The contract, it
explained, was subject to the conditions laid down in the promissory note –
that respondents Cobile would pay the amount of P566,000.00 on or before
31 October 1994, and the petitioners Ordens would undertake the transfer of the
titles to the properties in the names of respondents Cobile, after which the
latter would pay the remaining balance of P950,000.00. It said that this was an example of
reciprocal obligations. Since
respondents Cobile already violated the terms of the promissory note when they
failed to pay the total amount of P566,000.00 on the agreed date,
petitioners Orden should have filed for rescission. This, the trial court said, petitioner Orden
failed to do. The letter that
petitioners Orden sent to respondents Cobile -- informing them that should they
fail to comply with the terms and conditions of the promissory note, petitioners
Orden would be constrained to sell the properties to other interested persons
-- was not the rescission envisaged by law.
The rescission made by petitioners Orden was thus open to contest.
The
trial court likewise ruled that the properties subject matter of the case could
not be given to respondents Cobile because the ownership thereof had passed to
Fortunata Adalim-Houthuijzen whom it regarded as an innocent purchaser for
value.
Furthermore,
the trial court declared that respondents Cobile could not demand specific
performance or rescission of contract, for they themselves failed to comply
with the terms and conditions set forth in the promissory note when they failed
to pay the entire balance of one-half (P950,000.00) of the total price
agreed upon.
The
trial court ruled that it could not in conscience grant respondents Cobile’s
prayer that should petitioners Orden fail to deliver the titles in respondents
Cobile’s names, the Ordens be ordered to pay the Cobiles the entire purchase
price plus 20% interest per annum. It
likewise said that neither could petitioners Orden forfeit the P738,596.28
paid by respondents because they had not rescinded the contract of sale between
them either judicially or by notarial act.
On
On
WHEREFORE, in view of the foregoing
premises, judgment is hereby rendered by us AFFIRMING (sic) EN TOTO
the decision dated
The
Court of Appeals justified the return of what had been paid by respondents
Cobile (P738,596.28) on the ground that the deed of sale or promissory note
did not contain any provision regarding forfeiture in case the full purchase
price was not paid. Moreover, it ruled
that petitioners Orden had no just or legal ground to keep the payments made by
respondents Cobile because they failed to transfer the titles of the properties
in the names of respondents Cobile. To
allow petitioners Orden to retain said payments would unjustly enrich them at
the expense of respondents Cobile.
On
On
On
Petitioners
argue that the Court of Appeals erred in holding that the case at bar involves
a perfected contract of sale and that an action for rescission should have been
pursued by them (petitioners).[33] They
claimed that what they entered into with respondents Cobile was a Conditional
Contract of Sale. They added that
although captioned “Deed of Absolute Sale,” the contract is truly one of a
conditional sale, if not a contract to sell real property on installments. The full payment of the purchase price as
laid down in the promissory note is a positive suspensive condition, the
failure of which is not considered a breach, casual or serious, but simply an
event which prevented the obligation of the vendor to convey title from
acquiring any obligatory force.
In
the resolution of this case, what is to be determined is the kind of contract
petitioners Orden and respondents Cobile entered into. Did they enter into a Contract of Sale or a
Contract to Sell?
Both
lower courts ruled that the contract entered into by the parties was a Contract
of Sale. On the other hand, petitioners
Orden insist that they entered into a Contract to Sell.
In
the case at bar, on P566,000.00 on or before P950,000.00 to be paid as soon as the titles to the
properties shall have been transferred to them.
In
order to determine the real nature of the contract entered into by the parties,
all three documents, not merely the Deed of Absolute Sale, should be
considered. The Joint Affidavit of
respondents Aurea and the promissory note signed by respondents Cobile
veritably show that the latter are indeed the true purchasers of the subject
properties. The contents of the
promissory note must be taken into account inasmuch as the true buyer signed
said document.
In
the promissory note, respondents Cobile obligated themselves to do two things:
(1) to pay petitioners Orden the amount of P566,000.00 on or before
October 31, 1994; and (2) to pay the remaining P950,000.00 as soon as
the titles to the properties shall have been transferred to them. From the records of the case, it is without question
that respondents Cobile failed to fulfill what they promised. Having failed to fulfill their first
obligation, petitioners Orden no longer transferred the titles to the
properties to their names. The
non-payment, therefore, by respondents Cobile of the balance of one-half of the
purchase price triggered all subsequent actions of the parties that eventually
led to respondents Cobile filing the complaint for Enforcement of Contract and
Damages with a Prayer for a Writ of Preliminary Attachment, Prohibitory Injunction
and Restraining Order.
It
is clear from the promissory note that the parties agreed to a conditional
sale, the consummation of which is subject to the conditions contained therein
– full payment of the purchase price.
A
contract to sell is akin to a conditional sale, in which the efficacy or
obligatory force of the vendor’s obligation to transfer title is subordinated
to the happening of a future and uncertain event, so that if the suspensive
condition does not take place, the parties would stand as if the conditional
obligation had never existed. The
suspensive condition is commonly full payment of the purchase price.[34] One form of conditional sale is what is now
popularly termed as a “Contract to Sell,” in which ownership or title is
retained until the fulfillment of a positive suspensive condition, normally the
payment of the purchase price in the manner agreed upon.[35]
The
distinction between a contract of sale and a contract to sell is well-settled. In a contract
of sale, the title to the property passes to the vendee
upon the delivery of the thing sold; in a contract
to sell, ownership is, by agreement, reserved to the
vendor and is not to pass to the vendee until full payment of the purchase
price. Otherwise stated, in a contract of sale,
the vendor loses ownership over the property and cannot recover it until and
unless the contract is resolved or rescinded; whereas, in a contract to sell, title
is retained by the vendor until full payment of the price. In the latter contract, payment
of the price is a positive suspensive condition, failure of which is not a
breach but an event that prevents the obligation of the vendor to convey title
from becoming effective.[36]
It
is thus clear that in a contract to sell, ownership is retained by the seller
and is not passed to the buyer until full payment of the price.
In
the case at bar, we find that petitioners Orden and respondents Cobile entered
into a contract to sell. The real character of the contract is not the
title given, but the intention of the parties.[37] Although there is a document denominated as
“Deed of Absolute Sale,” and there is no provision therein of reservation of
ownership to the seller, we are persuaded that the true intent of the parties
was to transfer the ownership of the properties only upon the buyer’s full
payment of the purchase price. This is
evident from the promissory note executed by respondents Cobile. It is only upon payment of the full purchase
price that title to the properties shall be transferred to their names. Furthermore, circumstances show ownership
over the properties was never transferred to respondents Cobile. Respondents neither had possession of nor
title to the properties. In fact,
petitioners Orden, per their letter to respondents Cobile, even gave the latter
the chance to pay the balance of the purchase price before they would sell the
properties to other interested persons. From
the foregoing, it is evident that the true agreement of the parties is for the
petitioners Orden to retain ownership over the properties until respondents shall
have fully paid the purchase price.
Respondents Cobile failed to pay the balance
of the purchase price. Such payment is a
positive suspensive condition, failure of which is not a breach, serious or
otherwise, but an event that prevents the obligation of the seller to convey
title from arising.[38] The non-fulfillment by respondents Cobile of
their obligation to pay, which is a suspensive condition for the obligation of
petitioners Orden to sell and deliver the title to the properties, rendered the
contract to sell ineffective and without force and effect.[39] The parties stand as if the conditional
obligation had never existed.[40] Inasmuch
as the suspensive condition did not take place, petitioners Orden cannot be
compelled to transfer ownership of the properties to respondents Cobile.
The
trial court further ruled that petitioners Orden should have filed a case for
rescission or sent a notarial act of rescission to respondents Cobile when they
incurred a delay by failing to pay the balance of the purchase price. Having extra-judicially rescinded their
contract with respondents Cobile, such act, according to the trial court, was
subject to contest.
The
trial court is mistaken. Rescission,
whether judicially or by notarial act, is not required to be done by
petitioners Orden. There can be no rescission
of an obligation that is still non-existing, the suspensive condition not
having happened.[41] In the case before us, there was no contract
to rescind, judicially or by notarial act, because from the moment respondent
Cobile failed to pay on time the correct amount of the balance of the purchase
price, the contract between the parties was deemed ipso facto rescinded.[42] The reason for this is not that petitioners
Orden have the power to rescind such contract, but because their
obligation thereunder did not arise. The
remedy of rescission under Article 1191[43]
of the Civil Code is predicated on a breach of faith by the other party that
violates the reciprocity between them. Such
a remedy does not apply to contracts to sell.[44] Neither does the provision of Article 1592[45]
apply to this case because what said article contemplates is a contract of sale.[46]
In the exercise of the seller’s right
to automatically cancel the contract to sell, at least a written notice must be
sent to the defaulter informing him of the same.[47] The act of petitioners Orden in notifying respondents
Cobile of their intention to sell the properties to other interested persons if
respondents failed to pay the balance of the purchase price was sufficient
notice for the cancellation or resolution of the their contract to sell. Since respondents Cobile failed to fulfill
their obligation even after said notice, petitioners were justified in canceling
their contract (to sell) and selling to a buyer who was willing to pay the full
purchase price. Hence, we sustain petitioners
Orden’s action.
We now go to the partial payments (P738,596.28)
made by respondents Cobile. We decree
that said amount be returned to respondents Cobile, there being no provision
regarding forfeiture of payments made in any of the documents executed by the
parties. We find such action to be just
and equitable under the premises. If we
rule otherwise, there will be unjust enrichment on the part of petitioners
Orden at the expense of respondents Cobile.
Interest thereon at the rate of 12% per annum shall also be paid from
Lest we forget, the source of all the troubles was respondents
Cobile failure to pay the balance of the purchase price. Consequently they are liable for damages. Under the circumstances obtaining in this
case, we find it equitable and just to award petitioners Orden moral damages
and attorney’s fees in the amounts of P50,000.00 and P20,000.00,
respectively. Their claim for litigation
expenses is denied for failure to present proof in support thereof. Exemplary damages cannot also be awarded
because it was not shown that respondents Cobile acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner.[48]
WHEREFORE, the decision of the Court of
Appeals dated
(1) Petitioners-spouses Cornelio Joel I. Orden and Maria Nympha V. Orden are
ordered to return to respondents-spouses Ernesto P. Cobile and Susana M. Cobile
the amount of P738,596.28, representing the total amount advanced
by the latter to the former, with interest at the rate of 12% per annum from 30
September 1997 until fully paid; and
(2) Respondents-spouses
Ernesto P. Cobile and Susana M. Cobile are ordered to pay moral damages
and attorney’s fees in the amounts of P50,000.00 and P20,000.00,
respectively, to petitioners-spouses Cornelio Joel I.
Orden and Maria Nympha V. Orden.
SO ORDERED.
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MINITA V. CHICO-NAZARIOAssociate Justice |
WE
CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
Associate Justice Associate Justice
RUBEN T. REYES
Associate Justice
ATTESTATION
I attest 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.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson,
Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution, and the Division Chairperson’s Attestation, 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.
REYNATO S. PUNO
Chief Justice
[1] Penned by Associate Justice Isaias P. Dicdican with Associate Justices Ramon M. Bato, Jr. and Apolinario D. Bruselas, Jr., concurring; CA rollo, pp. 87-95.
[2] Records, pp. 266-278.
[3]
[4]
[5]
[6]
[7] The pertinent provisions of the 1987 Philippine Constitution regarding the acquisition of private lands are the following:
Sec. 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.
Sec.
8. Notwithstanding the provisions of
Section 7 of this Article, a natural-born citizen of the
From
the foregoing provisions, it is thus clear that a former natural-born Filipino
citizen may be a transferee of private lands, subject to limitations provided
by law. In the case at bar, Atty.
Hernando should have first verified if the Spouses Cobile were former
natural-born Filipino citizen before concluding that they cannot own lands in
the
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18]
[19]
[20]
[21]
[22]
[23]
[24] CA rollo, pp. 87-95.
[25]
[26] Rollo, pp. 8-14.
[27]
[28]
[29]
[30]
[31]
[32]
[33]
[34] Serrano v. Caguiat, G.R. No. 139173,
[35] Demafelis v. Court of Appeals, G.R. No.
152164,
[36] Torrecampo v. Alindogan, Sr., G.R. No.
156405,
[37] Escueta v. Lim, G.R. No. 137162,
[38] Leaño v. Court of Appeals, 420 Phil.
836, 846 (2001).
[39] Agustin v. Court of Appeals, G.R. No.
84751,
[40] Padilla v. Spouses Paredes, 385 Phil.
128, 140-141 (2000).
[41] Ayala Life Assurance, Inc. v. Ray Burton
Development Corporation, G.R. No. 163075, 23 January 2006, 479 SCRA 462,
470.
[42] Torralba v. Judge De
[43] 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 a
period.
This is understood to be without prejudice to the rights of third persons
who have acquired the thing, in accordance with articles 1385 and 1388 and the
Mortgage Law
[44] Villanueva v. Estate of Gerardo L. Gonzaga,
G.R. No. 157318, 9 August 2006, 498 SCRA 285, 294-295.
[45] Art. 1592. In the
sale of immovable property, even though it may have been stipulated that upon
failure to pay the price at the time agreed upon the rescission of the contract
shall of right take place, the vendee may pay, even after the expiration of the
period, as long as no demand for rescission of the contract has been made upon
him either judicially or by a notarial act. After the demand, the court may not
grant him a new term.
[46] Padilla v. Spouses Paredes, supra note
39 at 142.
[47] Cheng v. Genato, 360 Phil. 891, 906 (1998).
[48] Art. 2233, Civil Code.