Republic of the
Supreme Court
DELFIN TAN,
Petitioner, -
versus - ERLINDA C. BENOLIRAO, ANDREW C. BENOLIRAO, ROMANO C. BENOLIRAO, DION C. BENOLIRAO, SPS. REYNALDO TANINGCO and NORMA D. BENOLIRAO, EVELYN T. MONREAL, and ANN KARINA TANINGCO, Respondents. |
G.R. No. 153820
Present:
*QUISUMBING,
J., CARPIO-MORALES, **NACHURA, BRION, and ABAD, JJ. Promulgated: October 16, 2009 |
x--------------------------------------------------------------------------------------
x
|
|
|
|
|
D E C I
S I O N
|
|
|
|
|
|
BRION, J.: |
|
|
|
|
Is an annotation made pursuant to
Section 4, Rule 74 of the Rules of Court (Rules)
on a certificate of title covering real property considered an encumbrance on
the property? We resolve this question in the petition for review on certiorari[1] filed by Delfin Tan (Tan) to assail the decision of the Court of Appeals (CA) in CA-G.R. CV No. 52033[2] and
the decision of the Regional Trial Court (RTC)[3]
that commonly declared the forfeiture of his P200,000.00 down payment as
proper, pursuant to the terms of his contract with the respondents.
THE ANTECEDENTS
The
facts are not disputed. Spouses Lamberto and Erlinda Benolirao and the Spouses Reynaldo and Norma Taningco were the co-owners of a 689-square meter
parcel of land (property) located in
Tagaytay City and covered by Transfer Certificate of Title (TCT) No. 26423. On P1,378,000.00.
The deed stated:
a)
An
initial down-payment of TWO HUNDRED (P200,000.00) THOUSAND PESOS, Philippine
Currency, upon signing of this contract; then the remaining balance of ONE
MILLION ONE HUNDRED SEVENTY EIGHT THOUSAND (P1,178,000.00) PESOS, shall be
payable within a period of one hundred fifty (150) days from date hereof without
interest;
b)
That for
any reason, BUYER fails to pay the remaining balance within above mentioned
period, the BUYER shall have a grace period of sixty (60) days within which to
make the payment, provided that there shall be an interest of 15% per annum on
the balance amount due from the SELLERS;
c)
That
should in case (sic) the BUYER fails to comply with the terms and conditions
within the above stated grace period, then the SELLERS shall have the right to
forfeit the down payment, and to rescind this conditional sale without need of
judicial action;
d)
That in
case, BUYER have complied with the terms and conditions of this contract, then
the SELLERS shall execute and deliver to the BUYER the appropriate Deed of
Absolute Sale;
Pursuant to the Deed of Conditional Sale,
Tan issued and delivered to the co-owners/vendors Metrobank Check No. 904407 for
P200,000.00 as down payment for the property, for which the vendors
issued a corresponding receipt.
On
x x x any liability to credirots (sic), excluded heirs and other persons having right to the property, for a period of two (2) years, with respect only to the share of Erlinda, Andrew, Romano and Dion, all surnamed Benolirao
As stated in the Deed of Conditional
Sale, Tan had until
Tan refused to comply with the
vendors’ demand and instead wrote them a letter (dated
When the vendors refused to refund
the down payment, Tan, through counsel, sent another demand letter to the
vendors on
On
On P689,000.00.
Thereafter, the respondents moved for
the cancellation of the notice of lis
pendens on the ground that it was inappropriate since the case that Tan
filed was a personal action which did not involve either title to, or
possession of, real property. The RTC
issued an order dated
Meanwhile, based on the Deed of
Absolute Sale in his favor, de Guzman registered the property and TCT No. 28104
was issued in his name. Tan then filed a motion to carry over the lis pendens annotation to TCT No. 28104
registered in de Guzman’s name, but the RTC denied the motion.
On
September 8, 1995, after due proceedings, the RTC rendered judgment ruling that
the respondents’ forfeiture of Tan’s down payment was proper in accordance with
the terms and conditions of the contract between the parties.[4] The RTC
ordered Tan to pay the respondents the amount of P30,000.00, plus P1,000.00
per court appearance, as attorney’s fees, and to pay the cost of suit.
On appeal, the
CA dismissed the petition and affirmed the ruling of the trial court in toto. Hence, the present petition.
THE ISSUES
Tan argues that the CA erred in
affirming the RTC’s ruling to cancel the lis
pendens annotation on TCT No. 27335. Due to the unauthorized novation of the
agreement, Tan presented before the trial court two alternative remedies in his
complaint – either the rescission of the contract and the return of the down
payment, or the reformation of the contract to adjust the payment period, so
that Tan will pay the remaining balance of the purchase price only after the
lapse of the required two-year encumbrance on the title. Tan posits that the CA erroneously disregarded
the alternative remedy of reformation of contract when it affirmed the removal
of the lis pendens annotation on the
title.
Tan further contends that the CA
erred when it recognized the validity of the forfeiture of the down payment in
favor of the vendors. While admitting that the Deed of Conditional Sale contained
a forfeiture clause, he insists that this clause applies only if the failure to
pay the balance of the purchase price was through his own fault or negligence. In the present case, Tan claims that he was
justified in refusing to pay the balance price since the vendors would not have
been able to comply with their obligation to deliver a “clean” title covering
the property.
Lastly, Tan maintains that the CA
erred in ordering him to pay the respondents P30,000.00, plus P1,000.00
per court appearance as attorney’s fees, since he filed the foregoing action in
good faith, believing that he is in the right.
The
respondents, on the other hand, assert that the petition should be dismissed
for raising pure questions of fact, in contravention of the provisions of Rule
45 of the Rules which provides that only questions of law can be raised in
petitions for review on certiorari.
THE COURT’S RULING
The petition is granted.
No
new issues can be raised in the Memorandum
At
the onset, we note that Tan raised the following additional assignment of
errors in his Memorandum: (a) the CA erred in holding that the petitioner could
seek reformation of the Deed of Conditional Sale only if he paid the balance of
the purchase price and if the vendors refused to execute the deed of absolute
sale; and (b) the CA erred in holding that the petitioner was estopped from
asking for the reformation of the contract or for specific performance.
The Court’s
The raising of additional issues in a memorandum before the Supreme Court is irregular, because said memorandum is supposed to be in support merely of the position taken by the party concerned in his petition, and the raising of new issues amounts to the filing of a petition beyond the reglementary period. The purpose of this rule is to provide all parties to a case a fair opportunity to be heard. No new points of law, theories, issues or arguments may be raised by a party in the Memorandum for the reason that to permit these would be offensive to the basic rules of fair play, justice and due process.[5]
Tan contravened the Court’s explicit instructions by
raising these additional errors. Hence,
we disregard them and focus instead on the issues previously raised in the
petition and properly included in the Memorandum.
Petition raises a question of law
Contrary to the respondents’ claim, the issue raised in the
present petition – defined in the opening paragraph of this Decision – is a
pure question of law. Hence, the
petition and the issue it presents are properly cognizable by this Court.
Lis pendens
annotation not proper in personal actions
Section 14, Rule 13 of the Rules
enumerates the instances when a notice of lis
pendens can be validly annotated on the title to real property:
Sec. 14. Notice of lis pendens.
In an action affecting the title or the right of possession of real property, the plaintiff and the defendant, when affirmative relief is claimed in his answer, may record in the office of the registry of deeds of the province in which the property is situated a notice of the pendency of the action. Said notice shall contain the names of the parties and the object of the action or defense, and a description of the property in that province affected thereby. Only from the time of filing such notice for record shall a purchaser, or encumbrancer of the property affected thereby, be deemed to have constructive notice of the pendency of the action, and only of its pendency against the parties designated by their real names.
The notice of lis pendens hereinabove mentioned may be cancelled only upon order of the court, after proper showing that the notice is for the purpose of molesting the adverse party, or that it is not necessary to protect the rights of the party who caused it to be recorded.
The litigation
subject of the notice of lis pendens must
directly involve a specific property which is necessarily affected by the
judgment.[6]
Tan’s
complaint prayed for either the rescission or the reformation of the Deed of
Conditional Sale. While the Deed does
have real property for its object, we find that Tan’s complaint is an in personam action, as Tan asked the
court to compel the respondents to do something – either to rescind the
contract and return the down payment, or to reform the contract by extending
the period given to pay the remaining balance of the purchase price. Either way, Tan wants to enforce his personal
rights against the respondents, not against the property subject of the Deed. As we explained in Domagas v. Jensen:[7]
The settled rule is that the aim and object of an action determine its character. Whether a proceeding is in rem, or in personam, or quasi in rem for that matter, is determined by its nature and purpose, and by these only. A proceeding in personam is a proceeding to enforce personal rights and obligations brought against the person and is based on the jurisdiction of the person, although it may involve his right to, or the exercise of ownership of, specific property, or seek to compel him to control or dispose of it in accordance with the mandate of the court. The purpose of a proceeding in personam is to impose, through the judgment of a court, some responsibility or liability directly upon the person of the defendant. Of this character are suits to compel a defendant to specifically perform some act or actions to fasten a pecuniary liability on him.
Furthermore, as will be explained in
detail below, the contract between the parties was merely a contract to sell
where the vendors retained title and ownership to the property until Tan had
fully paid the purchase price. Since Tan
had no claim of ownership or title to the property yet, he obviously had no right
to ask for the annotation of a lis
pendens notice on the title of
the property.
Contract is a mere contract to sell
A contract is what the law defines it
to be, taking into consideration its essential elements, and not what the
contracting parties call it.[8] Article 1485 of the Civil Code defines a
contract of sale as follows:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
The very essence of a contract of sale is the transfer
of ownership in exchange for a price paid or promised.[9]
In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the property despite delivery thereof to the prospective buyer, binds himself to sell the property exclusively to the prospective buyer upon fulfillment of the condition agreed, i.e., full payment of the purchase price.[10] A contract to sell may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur.[11]
In the present case, the true nature
of the contract is revealed by paragraph D thereof, which states:
x x x
d)
That in
case, BUYER has complied with the terms and conditions of this contract, then
the SELLERS shall execute and deliver to the BUYER the appropriate Deed of
Absolute Sale;
x x x
Jurisprudence has established that where the seller
promises to execute a deed of absolute sale upon the completion by the buyer of
the payment of the price, the contract is only a contract to sell.[12] Thus, while the contract is denominated as a
Deed of Conditional Sale, the presence of the above-quoted provision identifies
the contract as being a mere contract to sell.
A Section 4,
Rule 74 annotation is an encumbrance on the property
While Tan
admits that he refused to pay the balance of the purchase price, he claims that
he had valid reason to do so – the sudden appearance of an annotation on the
title pursuant to Section 4, Rule 74 of the Rules, which Tan considered an
encumbrance on the property.
We find Tan’s
argument meritorious.
The
annotation placed on TCT No. 27335, the new
title issued to reflect the extrajudicial partition of Lamberto Benolirao’s
estate among his heirs, states:
x x x any liability to credirots (sic), excluded heirs and other persons having right to the property, for a period of two (2) years, with respect only to the share of Erlinda, Andrew, Romano and Dion, all surnamed Benolirao [Emphasis supplied.]
This annotation was placed on the title pursuant to Section 4, Rule 74 of the Rules, which reads:
Sec. 4. Liability of distributees and estate. - If
it shall appear at any time within two (2) years after the settlement and
distribution of an estate in accordance with the provisions of either of the
first two sections of this rule, that an heir or other person has been unduly
deprived of his lawful participation in the estate, such heir or such other
person may compel the settlement of the estate in the courts in the manner
hereinafter provided for the purpose of satisfying such lawful participation.
And if within the same time of two (2) years, it shall appear that
there are debts outstanding against the estate which have not been paid, or
that an heir or other person has been unduly deprived of his lawful
participation payable in money, the court having jurisdiction of the estate may,
by order for that purpose, after hearing, settle the amount of such debts or
lawful participation and order how much and in what manner each distributee
shall contribute in the payment thereof, and may issue execution, if
circumstances require, against the bond provided in the preceding section or
against the real estate belonging to the deceased, or both. Such bond and
such real estate shall remain charged with a liability to creditors, heirs, or
other persons for the full period of two (2) years after such distribution,
notwithstanding any transfers of real estate that may have been made. [Emphasis
supplied.]
Senator Vicente Francisco discusses
this provision in his book The Revised
Rules of Court in the Philippines,[13]
where he states:
The provision of Section 4, Rule 74
prescribes the procedure to be followed if within two years after an
extrajudicial partition or summary distribution is made, an heir or other
person appears to have been deprived of his lawful participation in the estate,
or some outstanding debts which have not been paid are discovered. When the lawful participation of the heir
is not payable in money, because, for instance, he is entitled to a part of the
real property that has been partitioned, there can be no other procedure than
to cancel the partition so made and make a new division, unless, of course, the heir agrees to be paid the value of his participation with interest.
But in case the lawful participation of the heir consists in his share in
personal property of money left by the decedent, or in case unpaid debts are
discovered within the said period of two years, the procedure is not to cancel
the partition, nor to appoint an administrator to re-assemble the assets, as
was allowed under the old Code, but the court, after hearing, shall fix the
amount of such debts or lawful participation in proportion to or to the extent
of the assets they have respectively received and, if circumstances require, it
may issue execution against the real estate belonging to the decedent, or both.
The present procedure is more expedient and less expensive in that it dispenses
with the appointment of an administrator and does not disturb the possession
enjoyed by the distributees.[14]
[Emphasis supplied.]
An annotation is placed
on new certificates of title issued pursuant to the distribution and partition
of a decedent’s real properties to warn third persons on the possible interests
of excluded heirs or unpaid creditors in these properties. The
annotation, therefore, creates a legal encumbrance or lien on the real property
in favor of the excluded heirs or creditors. Where a buyer purchases the real property despite the annotation, he
must be ready for the possibility that the title could be subject to the rights
of excluded parties. The
cancellation of the sale would be the logical consequence where: (a) the annotation
clearly appears on the title, warning all would-be buyers; (b) the sale
unlawfully interferes with the rights of heirs; and (c) the rightful heirs
bring an action to question the transfer within the two-year period provided by
law.
As we held in Vda. de Francisco v. Carreon:[15]
And Section 4, Rule 74 xxx expressly authorizes the court
to give to every heir his lawful participation in the real estate
“notwithstanding any transfers of such real estate” and to “issue execution”
thereon. All this implies that, when
within the amendatory period the realty has been alienated, the court in
re-dividing it among the heirs has the authority to direct cancellation of such
alienation in the same estate proceedings, whenever it becomes necessary to do
so. To require the institution of a separate action for such annulment
would run counter to the letter of the above rule and the spirit of these
summary settlements. [Emphasis supplied.]
Similarly, in Sps. Domingo v. Roces,[16]
we said:
The
foregoing rule clearly covers transfers of real property to any person,
as long as the deprived heir or creditor vindicates his rights within two years
from the date of the settlement and distribution of estate. Contrary to
petitioners’ contention, the effects of
this provision are not limited to the heirs or original distributees of the
estate properties, but shall affect any transferee of the properties.
[Emphasis supplied.]
Indeed, in David v. Malay,[17] although
the title of the property had already been registered in the name of the third party
buyers, we cancelled the sale and ordered the reconveyance of the property to
the estate of the deceased for proper disposal among his rightful heirs.
By the time Tan’s
obligation to pay the balance of the purchase price arose on May 21, 1993 (on
account of the extensions granted by the respondents), a new certificate of
title covering the property had already been issued on March 26, 1993, which contained the encumbrance on the property; the encumbrance would remain
so attached until the expiration of the two-year period. Clearly, at this time, the vendors could no
longer compel Tan to pay the balance of the purchase since considering they themselves
could not fulfill their obligation to transfer a clean title over the property to
Tan.
Contract to sell is not rescinded
but terminated
What then happens to the
contract?
We have held in numerous cases[18]
that the remedy of rescission under Article 1191 cannot apply
to mere contracts to sell. We explained the reason for this in Santos
v. Court of Appeals,[19] where we said:
[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 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 supplied.]
We, therefore, hold that the contract to sell was terminated when the
vendors could no longer legally compel Tan to pay the balance of the purchase
price as a result of the legal encumbrance which attached to the title of the
property. Since Tan’s refusal to pay was
due to the supervening event of a legal encumbrance on the property and not
through his own fault or negligence, we find and so
hold that the forfeiture of Tan’s down payment was clearly unwarranted.
Award of Attorney’s fees
As evident
from our previous discussion, Tan had a valid reason for refusing to pay the
balance of the purchase price for the property. Consequently, there is no basis
for the award of attorney’s fees in favor of the respondents.
On the other
hand, we award attorney’s fees in favor of Tan, since he was compelled to
litigate due to the respondents’ refusal to return his down payment despite the
fact that they could no longer comply with their obligation under the contract
to sell, i.e., to convey a clean
title. Given the facts of this case, we find the award of P50,000.00 as
attorney’s fees proper.
Monetary award
is subject to legal interest
Undoubtedly, Tan made a clear and
unequivocal demand on the vendors to return his down payment as early as
our definitive ruling in Eastern
Shipping Lines, Inc. v. Court of Appeals,[20] we
hold that the vendors should return the P200,000.00 down payment to Tan,
subject to the legal interest of 6% per annum computed from
Furthermore,
after a judgment has become final and executory, the rate of legal
interest, whether the obligation was in the form of a loan or forbearance of
money or otherwise, shall be 12% per annum from such finality until its
satisfaction. Accordingly, the principal obligation of P200,000.00 shall
bear 6% interest from the date of first demand or from
WHEREFORE, premises considered, we hereby GRANT the petition and, accordingly, ANNUL and SET ASIDE the P200,000.00
down payment to petitioner Delfin Tan, subject to legal interest of 6% per
annum, computed from P50,000.00 as and by way of attorney’s fees. Once this decision becomes final and
executory, respondents
are ordered to pay interest at 12% per annum on the principal obligation as
well as the attorney’s fees, until full
payment of these amounts. Costs against the respondents.
SO ORDERED.
ARTURO
D. BRION
Associate Justice
WE CONCUR:
Associate Justice
Chairperson
|
CONCHITA CARPIO MORALES Associate
Justice |
ANTONIO EDUARDO B. NACHURA Associate Justice |
ROBERTO A. ABAD
Associate Justice
CERTIFICATION
LEONARDO A. QUISUMBING
Acting Chief Justice
* Designated
Acting Chief Justice effective October
12 to 16, 2009 per Special Order No. 721 dated
** Designated
additional Member of the Second Division effective
[1] Under Rule 45 of the Rules of Court, dated
[2] Penned by Associate Justice Romeo J. Callejo, Sr. (retired member of this Court), with the concurrence of Associate Justice Remedios Salazar-Fernando and Associate Justice Danilo B. Pine; id., pp. 6- 26.
[3] Dated
[4]
[5] Heirs
of Marasigan v. Marasigan, G.R. No. 156078,
[6] Heirs
of Eugenio Lopez, Sr. v. Enriquez, G.R. No. 146262,
[7] G.R. No. 158407,
[8] Quiroga v. Parsons Hardware Co., 38 Phil. 501 (1918).
[9] Schmid
& Oberly, Inc. v. RJL Martinez Fishing Corp., G.R. No. 75198, October
18, 1988, 166 SCRA 493, citing Commissioner
of Internal Revenue v. Constantino, 31 SCRA 779 (1970); Ker & Co., Ltd. v. Lingad, No.
L-20871,
[10] Sps. Ebrada v. Sps. Ramos, G.R. No.
154413,
[11] Sps. Reyes v.
Salvador, et al., G.R. No. 139047, September
11, 2008, citing Coronel v. CA, 263
SCRA 15 (1996).
[12] Philippine National Bank v. Court of Appeals, 330 Phil. 1048 (1996).
[13] Volume V-A (1970 ed.).
[14]
[15] 95 Phil. 237 (1954).
[16] G.R.
No. 147468,
[17] G.R.
No. 132644,
[18] 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.
[19] G.R.
No. 120820,
[20] G.R.
No. 97412,
The Court held:
“2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date of the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount of finally adjudged.”