THIRD DIVISION
ADALIA FRANCISCO, Petitioner, vs. COURT OF APPEALS , HERBY COMMERCIAL & CONSTRUCTION CORPORATION AND JAIME C. ONG, Respondents.
D E C I S I O N
GONZAGA_REYES, J.:
Assailed in this petition for review on certiorari is the decision of the Court of Appeals affirming the decision rendered by Branch 168 of the Regional Trial Court of Pasig in Civil Case No. 35231 in favor of private respondents.
The controversy before this Court finds its origins in a Land Development and Construction Contract which was entered into on June 23, 1977 by A. Francisco Realty & Development Corporation (AFRDC), of which petitioner Adalia Francisco (Francisco) is the president, and private respondent Herby Commercial & Construction Corporation (HCCC), represented by its President and General Manager private respondent Jaime C. Ong (Ong), pursuant to a housing project of AFRDC at San Jose del Monte, Bulacan, financed by the Government Service Insurance System (GSIS). Under the contract, HCCC agreed to undertake the construction of 35 housing units and the development of 35 hectares of land. The payment of HCCC for its services was on a turn-key basis, that is, HCCC was to be paid on the basis of the completed houses and developed lands delivered to and accepted by AFRDC and the GSIS. To facilitate payment, AFRDC executed a Deed of Assignment in favor of HCCC to enable the latter to collect payments directly from the GSIS. Furthermore, the GSIS and AFRDC put up an Executive Committee Account with the Insular Bank of Asia & America (IBAA) in the amount of P4,000,000.00 from which checks would be issued and co-signed by petitioner Francisco and the GSIS Vice-President Armando Diaz (Diaz).
On February 10, 1978, HCCC filed a complaint with the Regional Trial Court of Quezon City against Francisco, AFRDC and the GSIS for the collection of the unpaid balance under the Land Development and Construction Contract in the amount of P515,493.89 for completed and delivered housing units and land development. However, the parties eventually arrived at an amicable settlement of their differences, which was embodied in a Memorandum Agreement executed by HCCC and AFRDC on July 21, 1978. Under the agreement, the parties stipulated that HCCC had turned over 83 housing units which have been accepted and paid for by the GSIS. The GSIS acknowledged that it still owed HCCC P520,177.50 representing incomplete construction of housing units, incomplete land development and 5% retention, which amount will be discharged when the defects and deficiencies are finally completed by HCCC. It was also provided that HCCC was indebted to AFRDC in the amount of P180,234.91 which the former agreed would be paid out of the proceeds from the 40 housing units still to be turned over by HCCC or from any amount due to HCCC from the GSIS. Consequently, the trial court dismissed the case upon the filing by the parties of a joint motion to dismiss.
Sometime in 1979, after an examination of the records of the GSIS, Ong discovered that Diaz and Francisco had executed and signed seven checks of various dates and amounts, drawn against the IBAA and payable to HCCC for completed and delivered work under the contract. Ong, however, claims that these checks were never delivered to HCCC. Upon inquiry with Diaz, Ong learned that the GSIS gave Francisco custody of the checks since she promised that she would deliver the same to HCCC. Instead, Francisco forged the signature of Ong, without his knowledge or consent, at the dorsal portion of the said checks to make it appear that HCCC had indorsed the checks; Francisco then indorsed the checks for a second time by signing her name at the back of the checks and deposited the checks in her IBAA savings account. IBAA credited Franciscos account with the amount of the checks and the latter withdrew the amount so credited.
On June 7, 1979, Ong filed complaints with the office of the city fiscal of Quezon City, charging Francisco with estafa thru falsification of commercial documents. Francisco denied having forged Ongs signature on the checks, claiming that Ong himself indorsed the seven checks in behalf of HCCC and delivered the same to Francisco in payment of the loans extended by Francisco to HCCC. According to Francisco, she agreed to grant HCCC the loans in the total amount of P585,000.00 and covered by eighteen promissory notes in order to obviate the risk of the non-completion of the project. As a means of repayment, Ong allegedly issued a Certification authorizing Francisco to collect HCCCs receivables from the GSIS. Assistant City Fiscal Ramon M. Gerona gave credence to Franciscos claims and accordingly, dismissed the complaints, which dismissal was affirmed by the Minister of Justice in a resolution issued on June 5, 1981.
The present case was brought by private respondents on November 19, 1979 against Francisco and IBAA for the recovery of P370,475.00, representing the total value of the seven checks, and for damages, attorneys fees, expenses of litigation and costs. After trial on the merits, the trial court rendered its decision in favor of private respondents, the dispositive portion of which provides -
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants INSULAR BANK OF ASIA & AMERICA and ATTY. ADALIA FRANCISCO, to jointly and severally pay the plaintiffs the amount of P370.475.00 plus interest thereon at the rate of 12% per annum from the date of the filing of the complaint until the full amount is paid; moral damages to plaintiff Jaime Ong in the sum of P50,000.00; exemplary damages of P50,000.00; litigation expenses of P5,000.00; and attorneys fees of P50,000.00.
With respect to the cross-claim of the defendant IBAA against its co-defendant Atty. Adalia Francisco, the latter is ordered to reimburse the former for the sums that the Bank shall pay to the plaintiff on the forged checks including the interests paid thereon.
Further, the defendants are ordered to pay the costs.
Based upon the findings of handwriting experts from the National Bureau of Investigation (NBI), the trial court held that Francisco had indeed forged the signature of Ong to make it appear that he had indorsed the checks. Also, the court ruled that there were no loans extended, reasoning that it was unbelievable that HCCC was experiencing financial difficulties so as to compel it to obtain the loans from AFRDC in view of the fact that the GSIS had issued checks in favor of HCCC at about the same time that the alleged advances were made. The trial court stated that it was plausible that Francisco concealed the fact of issuance of the checks from private respondents in order to make it appear as if she were accommodating private respondents, when in truth she was lending HCCC its own money.
With regards to the Memorandum Agreement entered into between AFRDC and HCCC in Civil Case No. Q-24628, the trial court held that the same did not make any mention of the forged checks since private respondents were as of yet unaware of their existence, that fact having been effectively concealed by Francisco, until private respondents acquired knowledge of Franciscos misdeeds in 1979.
IBAA was held liable to private respondents for having honored the checks despite such obvious irregularities as the lack of initials to validate the alterations made on the check, the absence of the signature of a co-signatory in the corporate checks of HCCC and the deposit of the checks on a second indorsement in the savings account of Francisco. However, the trial court allowed IBAA recourse against Francisco, who was ordered to reimburse the IBAA for any sums it shall have to pay to private respondents.
Both Francisco and IBAA appealed the trial courts decision, but the Court of Appeals dismissed IBAAs appeal for its failure to file its brief within the 45-day extension granted by the appellate court. IBAAs motion for reconsideration and petition for review on certiorari filed with this Court were also similarly denied. On November 21, 1989, IBAA and HCCC entered into a Compromise Agreement which was approved by the trial court, wherein HCCC acknowledged receipt of the amount of P370,475.00 in full satisfaction of its claims against IBAA, without prejudice to the right of the latter to pursue its claims against Francisco.
On June 29, 1992, the Court of Appeals affirmed the trial courts ruling, hence this petition for review on certiorari filed by petitioner, assigning the following errors to the appealed decision
1. The respondent Court of Appeals erred in concluding that private respondents did not owe Petitioner the sum covered by the Promissory Notes Exh.2-2-A-2-P (FRANCISCO). Such conclusion was based mainly on conjectures, surmises and speculation contrary to the unrebutted pleadings and evidence presented by petitioner.
2. The respondent Court of Appeals erred in holding that Petitioner falsified the signature of private respondent ONG on the checks in question without any authority therefor which is patently contradictory to the unrebutted pleading and evidence that petitioner was expressly authorized by respondent HERBY thru ONG to collect all receivables of HERBY from GSIS to pay the loans extended to them. (Exhibit 3).
3. That respondent Court of Appeals erred in holding that the seven checks in question were not taken up in the liquidation and reconciliation of all outstanding account between AFRDC and HERBY as acknowledged by the parties in Memorandum Agreement (Exh. 5) is a pure conjecture, surmise and speculation contrary to the unrebutted evidence presented by petitioners. It is an inference made which is manifestly mistaken.
4. The respondent Court of Appeals erred in affirming the decision of the lower court and dismissing the appeal.
The pivotal issue in this case is whether or not Francisco forged the signature of Ong on the seven checks. In this connection, we uphold the lower courts finding that the subject matter of the present case, specifically the seven checks, drawn by GSIS and AFRDC, dated between October to November 1977, in the total amount of P370,475.00 and payable to HCCC, was not included in the Memorandum Agreement executed by HCCC and AFRDC in Civil Case No. Q-24628. As observed by the trial court, aside from there being absolutely no mention of the checks in the said agreement, the amounts represented by said checks could not have been included in the Memorandum Agreement executed in 1978 because private respondents only discovered Franciscos acts of forgery in 1979. The lower courts found that Francisco was able to easily conceal from private respondents even the fact of the issuance of the checks since she was a co-signatory thereof. We also note that Francisco had custody of the checks, as proven by the check vouchers bearing her uncontested signature by which she, in effect, acknowledged having received the checks intended for HCCC. This contradicts Franciscos claims that the checks were issued to Ong who delivered them to Francisco already indorsed.
As regards the forgery, we concur with the lower courts finding that Francisco forged the signature of Ong on the checks to make it appear as if Ong had indorsed said checks and that, after indorsing the checks for a second time by signing her name at the back of the checks, Francisco deposited said checks in her savings account with IBAA. The forgery was satisfactorily established in the trial court upon the strength of the findings of the NBI handwriting expert. Other than petitioners self-serving denials, there is nothing in the records to rebut the NBIs findings. Well-entrenched is the rule that findings of trial courts which are factual in nature, especially when affirmed by the Court of Appeals, deserve to be respected and affirmed by the Supreme Court, provided it is supported by substantial evidence on record, as it is in the case at bench.
Petitioner claims that she was, in any event, authorized to sign Ongs name on the checks by virtue of the Certification executed by Ong in her favor giving her the authority to collect all the receivables of HCCC from the GSIS, including the questioned checks.Petitioners alternative defense must similarly fail. The Negotiable Instruments Law provides that where any person is under obligation to indorse in a representative capacity, he may indorse in such terms as to negative personal liability. An agent, when so signing, should indicate that he is merely signing in behalf of the principal and must disclose the name of his principal; otherwise he shall be held personally liable.Even assuming that Francisco was authorized by HCCC to sign Ongs name, still, Francisco did not indorse the instrument in accordance with law. Instead of signing Ongs name, Francisco should have signed her own name and expressly indicated that she was signing as an agent of HCCC. Thus, the Certification cannot be used by Francisco to validate her act of forgery.
Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same. Due to her forgery of Ongs signature which enabled her to deposit the checks in her own account, Francisco deprived HCCC of the money due it from the GSIS pursuant to the Land Development and Construction Contract. Thus, we affirm respondent courts award of compensatory damages in the amount of P370,475.00, but with a modification as to the interest rate which shall be six percent (6%) per annum, to be computed from the date of the filing of the complaint since the amount of damages was alleged in the complaint; however, the rate of interest shall be twelve percent (12%) per annum from the time the judgment in this case becomes final and executory until its satisfaction and the basis for the computation of this twelve percent (12%) rate of interest shall be the amount of P370,475.00. This is in accordance with the doctrine enunciated in Eastern Shipping Lines, Inc. vs. Court of Appeals, et al., which was reiterated in Philippine National Bank vs. Court of Appeals,Philippine Airlines, Inc. vs. Court of Appeals and in Keng Hua Paper Products Co., Inc. vs. Court of Appeals, which provides that -
1. When an obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
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 six percent (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 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 finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be twelve percent (12%) per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.
We also sustain the award of exemplary damages in the amount of P50,000.00. Under Article 2229 of the Civil Code, exemplary damages are imposed by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. Considering petitioners fraudulent act, we hold that an award of P50,000.00 would be adequate, fair and reasonable. The grant of exemplary damages justifies the award of attorneys fees in the amount of P50,000.00, and the award of P5,000.00 for litigation expenses.
The appellate courts award of P50,000.00 in moral damages is warranted. Under Article 2217 of the Civil Code, moral damages may be granted upon proof of physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury. Ong testitified that he suffered sleepless nights, embarrassment, humiliation and anxiety upon discovering that the checks due his company were forged by petitioner and that petitioner had filed baseless criminal complaints against him before the fiscals office of Quezon City which disrupted HCCCs business operations.
WHEREFORE, we AFFIRM the respondent courts decision promulgated on June 29, 1992, upholding the February 16, 1988 decision of the trial court in favor of private respondents, with the modification that the interest upon the actual damages awarded shall be at six percent (6%) per annum, which interest rate shall be computed from the time of the filing of the complaint on November 19, 1979. However, the interest rate shall be twelve percent (12%) per annum from the time the judgment in this case becomes final and executory and until such amount is fully paid. The basis for computation of the six percent and twelve percent rates of interest shall be the amount of P370,475.00. No pronouncement as to costs.
SO ORDERED.
Melo, (Chairman), Vitug, Panganiban, and Purisima, JJ., concur
G.R. No. 96505 July 1, 1993
LEGASPI OIL CO., INC., petitioner,
vs.
THE COURT OF APPEALS and BERNARD OSERAOS, respondent.
Duran, Lanuzo & Associates for petitioner.
Leovigildo Mijares III for private respondent.
MELO, J.:
The petition for review on certiorari before us seeks to set aside the decision dated March 23, 1990 of the Court of Appeals in CA-G.R. CV No. 05828, penned by the Honorable Justice Abelardo Dayrit with whom Justices Javellana and Kalalo concurred, which dismissed petitioner's complaint for damages (p. 48, Rollo).
Petitioner does not dispute the facts of the case, as found by respondent Court of Appeals. The findings of the respondent Court are thus adopted, to wit:
After trial, the then Court of First Instance (now Regional Trial Court) of Albay in Civil Case No. 5529 rendered a decision holding herein private respondent (then defendant) Oseraos liable for damages in the amount of P48,152.76, attorney's fees (P2,000), and litigation costs.
Oseraos appealed to respondent Court which thereafter rendered a reversal decision on March 23, 1990, ordering the dismissal of the complaint.
Hence, the instant petition for review on certiorari.
The sole issued posed by the petition is whether or not private respondent Oseraos is liable for damages arising from fraud or bad faith in deliberately breaching the contract of sale entered into by the parties.
After a review of the case, we believe and thus hold, that private respondent is guilty of fraud in the performance of his obligation under the sales contract whereunder he bound himself to deliver to petitioner 100 metric tons of copra within twenty (20) days from March 8, 1976. However within the delivery period, Oseraos delivered only 46,334 kilograms of copra to petitioner, leaving an undelivered balance of 53,666 kilograms. Petitioner made repeated demands upon private respondent to comply with his contractual undertaking to deliver the balance of 53,666 kilograms but private respondent elected to ignore the same. In a letter dated October 6, 1976, petitioner made a final demand with a warning that, should private respondent fail to complete delivery of the balance of 53,666 kilograms of copra, petitioner would purchase the balance at the open market and charge the price differential to private respondent. Still private respondent failed to fulfill his contractual obligation to deliver the remaining 53,666 kilograms of copra. On October 22, 1976, since there was still no compliance by private respondent, petitioner exercised its right under the contract and purchased 53,666 kilograms of copra, the undelivered balance, at the open market at the then prevailing price of P168.00 per 100 kilograms, a price differential of P86.00 per 100 kilograms or a total price differential of P46,152.76.
Under the foregoing undisputed circumstances, the actuality of private respondent's fraud cannot be gainsaid. In general, fraud may be defined as the voluntary execution of a wrongful act, or a wilfull omission, knowing and intending the effects which naturally and necessarily arise from such act or omission; the fraud referred to in Article 1170 of the Civil Code of the Philippines is the deliberate and intentional evasion of the normal fulfillment of obligation; it is distinguished from negligence by the presence of deliberate intent, which is lacking in the latter (Tolentino's Civil Code of the Philippines, Vol. IV, p. 110). The conduct of private respondent clearly manifests his deliberate fraudulent intent to evade his contractual obligation for the price of copra had in the meantime more than doubled from P82.00 to P168 per 100 kilograms. Under Article 1170 of the Civil Code of the Philippines, those who in the performance of their obligation are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. Pursuant to said article, private respondent is liable for damages.
The next point of inquiry, therefore, is the amount of damages which private respondent is liable to pay petitioner. As aforementioned, on account of private respondent's deliberate breach of his contractual obligation, petitioner was compelled to buy the balance of 53,666 kilos of copra in the open market at the then prevailing price of P168 per 100 kilograms thereby paying P46,152.76 more than he would have paid had private respondent completed delivery of the copra as agreed upon. Thus, private respondent is liable to pay respondent the amount of P46,152.76 as damages. In case of fraud, bad faith, malice, or wanton attitude, the guilty party is liable for all damages which may be reasonably attributed to the non performance of the obligation (Magat vs. Medialdea, 121 SCRA 418 [1983]). Article 1101 of the old Civil Code, later to be reproduced as Article 1170 of our present Civil Code, was the basis of our decision in an old case, Acme Films, Inc. vs. Theaters Supply Corporation, (63 Phil, 657 [1936]), wherein we held:
SO ORDERED.
Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur
LEGASPI OIL CO., INC., petitioner,
vs.
THE COURT OF APPEALS and BERNARD OSERAOS, respondent.
Duran, Lanuzo & Associates for petitioner.
Leovigildo Mijares III for private respondent.
MELO, J.:
The petition for review on certiorari before us seeks to set aside the decision dated March 23, 1990 of the Court of Appeals in CA-G.R. CV No. 05828, penned by the Honorable Justice Abelardo Dayrit with whom Justices Javellana and Kalalo concurred, which dismissed petitioner's complaint for damages (p. 48, Rollo).
Petitioner does not dispute the facts of the case, as found by respondent Court of Appeals. The findings of the respondent Court are thus adopted, to wit:
From the evidence presented by the plaintiff-appellee [now petitioner Legaspi Oil Company, Inc.], it appears that defendant-appellant [now private respondent Bernard Oseraos] acting through his authorized agents, had several transactions with appellee Legaspi Oil Co. for the sale of copra to the latter. The price at which appellant sells the copra varies from time to time, depending on the prevailing market price when the contract is entered into. One of his authorized agents, Jose Llover, had previous transactions with appellee for the sale and delivery of copra. The records show that he concluded a sale for 70 tons of copra at P95.00 per 100 kilos on May 27, 1975 (Exhibit G-5) and another sale for 30 tons of P102.00 per 100 kilos on September 23, 1975 (Exhibit G-3). Subsequently, on November 6, 1975, another designated agent signed a contract in behalf of appellant for the sale of 100 tons of copra at P79.00 per 100 kilos with the delivery terms of 25 days effective December 15, 1975 (Exhibit G-2). At this point, it must be noted that the price of copra had been fluctuating (going up and down), indicating its unsteady position in the market.
On February 16, 1976, appellant's agent Jose Llover signed contract No. 3804 for the sale of 100 tons of copra at P82.00 per 100 kilos with delivery terms of 20 days effective March 8, 1976 (Exhibit G, for the plaintiff). As compared to appellant's transaction on November 6, 1975, the current price agreed upon is slightly higher than the last contract. In all these contracts though, the selling price had always been stated as "total price" rather than per 100 kilos. However, the parties had understood the same to be per 100 kilos in their previous transactions.
After the period to deliver had lapsed, appellant sold only 46,334 kilos of copra thus leaving a balance of 53,666 kilos as per running account card (Exhibit "F"). Accordingly, demands were made upon appellant to deliver the balance with a final warning embodied in a letter dated October 6, 1976, that failure to deliver will mean cancellation of the contract, the balance to be purchased at open market and the price differential to be charged against appellant. On October 22, 1976, since there was still no compliance, appellee exercised its option under the contract and purchased the undelivered balance from the open market at the prevailing price of P168.00 per 100 kilos, or a price differential of P86.00 per 100 kilos, a net loss of P46,152.76 chargeable against appellant.
(pp. 43-44, Rollo)
On November 3, 1976, petitioner filed a complaint against private respondent for breach of a contract and for damages.After trial, the then Court of First Instance (now Regional Trial Court) of Albay in Civil Case No. 5529 rendered a decision holding herein private respondent (then defendant) Oseraos liable for damages in the amount of P48,152.76, attorney's fees (P2,000), and litigation costs.
Oseraos appealed to respondent Court which thereafter rendered a reversal decision on March 23, 1990, ordering the dismissal of the complaint.
Hence, the instant petition for review on certiorari.
The sole issued posed by the petition is whether or not private respondent Oseraos is liable for damages arising from fraud or bad faith in deliberately breaching the contract of sale entered into by the parties.
After a review of the case, we believe and thus hold, that private respondent is guilty of fraud in the performance of his obligation under the sales contract whereunder he bound himself to deliver to petitioner 100 metric tons of copra within twenty (20) days from March 8, 1976. However within the delivery period, Oseraos delivered only 46,334 kilograms of copra to petitioner, leaving an undelivered balance of 53,666 kilograms. Petitioner made repeated demands upon private respondent to comply with his contractual undertaking to deliver the balance of 53,666 kilograms but private respondent elected to ignore the same. In a letter dated October 6, 1976, petitioner made a final demand with a warning that, should private respondent fail to complete delivery of the balance of 53,666 kilograms of copra, petitioner would purchase the balance at the open market and charge the price differential to private respondent. Still private respondent failed to fulfill his contractual obligation to deliver the remaining 53,666 kilograms of copra. On October 22, 1976, since there was still no compliance by private respondent, petitioner exercised its right under the contract and purchased 53,666 kilograms of copra, the undelivered balance, at the open market at the then prevailing price of P168.00 per 100 kilograms, a price differential of P86.00 per 100 kilograms or a total price differential of P46,152.76.
Under the foregoing undisputed circumstances, the actuality of private respondent's fraud cannot be gainsaid. In general, fraud may be defined as the voluntary execution of a wrongful act, or a wilfull omission, knowing and intending the effects which naturally and necessarily arise from such act or omission; the fraud referred to in Article 1170 of the Civil Code of the Philippines is the deliberate and intentional evasion of the normal fulfillment of obligation; it is distinguished from negligence by the presence of deliberate intent, which is lacking in the latter (Tolentino's Civil Code of the Philippines, Vol. IV, p. 110). The conduct of private respondent clearly manifests his deliberate fraudulent intent to evade his contractual obligation for the price of copra had in the meantime more than doubled from P82.00 to P168 per 100 kilograms. Under Article 1170 of the Civil Code of the Philippines, those who in the performance of their obligation are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. Pursuant to said article, private respondent is liable for damages.
The next point of inquiry, therefore, is the amount of damages which private respondent is liable to pay petitioner. As aforementioned, on account of private respondent's deliberate breach of his contractual obligation, petitioner was compelled to buy the balance of 53,666 kilos of copra in the open market at the then prevailing price of P168 per 100 kilograms thereby paying P46,152.76 more than he would have paid had private respondent completed delivery of the copra as agreed upon. Thus, private respondent is liable to pay respondent the amount of P46,152.76 as damages. In case of fraud, bad faith, malice, or wanton attitude, the guilty party is liable for all damages which may be reasonably attributed to the non performance of the obligation (Magat vs. Medialdea, 121 SCRA 418 [1983]). Article 1101 of the old Civil Code, later to be reproduced as Article 1170 of our present Civil Code, was the basis of our decision in an old case, Acme Films, Inc. vs. Theaters Supply Corporation, (63 Phil, 657 [1936]), wherein we held:
It is not denied that the plaintiff company failed to supply the defendant with the cinematographic films which were the subject matter of the contracts entered into on March 20, 1934 (Exhibits 1 and 2), and two films under the contract of March 24, 1934 (Exhibit 3), one of said films being a serial entitled "Whispering Shadow". Guillermo Garcia Bosque testified that because the plaintiff company had failed to supply said films, the defendants had to resort to the Universal Pictures Corporation and ask for films to replace those which said plaintiff had failed to supply under the contract, having had to pay therefor five per cent more than for those films contracted with said plaintiff Acme Films, Inc., and that the total cost thereof, including the printing of programs, posters paraded through the streets with bands of music to announce the showing of the films which the plaintiff company failed to supply, amount to from P400 to P550. The plaintiff company did not submit evidence to rebut the testimony of said witness and the fact that the estimate of the expenses is approximate does not make said estimate inadmissible. It was incumbent upon the plaintiff company to submit evidence in rebuttal, or at least ascertain the amount of the different items in cross-examination. There being no evidence to the contrary, it is logical to admit that the defendant company spent at least the sum of P400.
Inasmuch as the plaintiff company had failed to comply with a part of its booking contract, and as the defendant company had suffered damages as a result thereof, the former is liable to indemnify the damages caused to the latter, in accordance with the provisions of Article 1101 of the Civil Code.
(at page 663.)
WHEREFORE, the instant petition is hereby GRANTED. The decision of the respondent Court of Appeals in CA-G.R. CV No. 05828 is ANNULLED and SET ASIDE and the decision of the trial court in Civil Case No. 5529 REINSTATED, with costs against private respondent.SO ORDERED.
Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur
G.R. No. 128850 November 20, 1998
ARCHIPELAGO MANAGEMENT AND MARKETING CORPORATION, petitioner,
vs.
COURT OF APPEALS and the HEIRS OF ROSALINA SANTOS-MORALES, namely, EMETERIO MORALES, LYDIA, TRINIDAD, ROGELIO DE LA PAZ and EMMANUEL S. DE LA PAZ, respondents.
vs.
COURT OF APPEALS and the HEIRS OF ROSALINA SANTOS-MORALES, namely, EMETERIO MORALES, LYDIA, TRINIDAD, ROGELIO DE LA PAZ and EMMANUEL S. DE LA PAZ, respondents.
PANGANIBAN, J.:
The issue of whether fraud attended the execution of a contract is factual in nature. Normally, this Court is bound by the appellate court's findings, unless they are contrary to those of the trial court, in which case we may wade into the factual dispute to settle it with finality. However, after meticulously poring over the records and carefully weighing the arguments of the parties, we find no reversible error in the Amended Decision of the Court of Appeals resolving this property dispute between the separate heirs of the first marriages of a widow and a widower who, after the death of their respective first spouses, married each other.
The Case
This is the gist of our ruling on the Petition for Review before us, which seeks to set aside the January 28, 1997 Amended Decision 1 and the April 23, 1997 Resolution 2 of the Court of Appeals 3 in CA-GR CV No. 46014. The Amended Decision granted private respondents' Motion for Reconsideration, 4 viz.:
WHEREFORE, the Decision of this Court dated July 31, 1996 dismissing the complaint is SET ASIDE, and a new one is hereby rendered, REVERSING the appealed Decision of the lower court and declaring the Deed of Absolute Sale dated May 3, 1989 ANNULLED. 5
The April 23, 1997 Resolution, on the other hand, denied petitioner's own Motion for Reconsideration.
This case originated from a Complaint for Annulment of Contract with Damages, filed 6 before the Regional Trial Court (RTC) of Quezon City 7 by Rosalina Santos-Morales, through her daughter Lydia Trinidad, against Petitioner Archipelago Management and Marketing Corporation. Upon the death of Rosalina on October 7, 1992, 8 herein private respondents, in their capacity as heirs, filed an Amended Complaint 9 stating inter alia that they were substituting the deceased as plaintiffs. 10
On April 15, 1994, the Complaint and the Counterclaim 11 were dismissed in the RTC Decision, which was initially affirmed by the Court of Appeals (CA) in its original Decision dated July 31, 1996. 12 Acting on private respondents' Motion for Reconsideration with Motion for New Trial, the appellate court, 13 in its Amended Decision, reversed its previous ruling. Subsequently, as already stated, it also denied petitioner's own plea for reconsideration.
Undaunted, petitioner has brought this appeal for a final ruling on the matter. 14
The Facts
The factual antecedents of the case were identically summarized by the appellate tribunal in both its original and its amended Decisions, as follows:
At the center of the controversy is a parcel of land upon which are erected residential buildings located at No. 58, South Maya Street, Philamlife Homes, Quezon City. Before the controversy, the subject property was owned and titled in the name of Rosalina Santos Morales, covered by TCT No. 255716. The latter had children by first marriage, one of whom is Lydia Trinidad (plaintiff-appellant). When Rosalina was widowed, she married Emeterio Morales, a widower, who also had children by a former marriage, including Narciso Morales, president of Archipelago Management and Marketing Corporation (defendant-appellee). For more than forty (40) years, Rosalina and Emeterio lived together in the subject property, leasing out the building as a retreat house to outside parties.
When several offices in the Quezon City Hall w[ere] razed by fire in 1988, many records, including original certificates of title[,] were reduced to ashes. Consequently, landowners with real properties in Quezon City had to apply for reconstitution of their individual titles. Sometime in August of that year, it is alleged that Emeterio Morales took the owner's duplicate certificate of title over the subject property from Rosalina's designated caretaker, and on the pretext that he was going to apply for reconstitution of title, he was able to convince Rosalina to affix her signature on several documents. One of those documents turned out to be a Deed of Absolute Sale dated May 3, 1989, wherein it was stipulated that Rosalina sold to the defendant-appellee corporation the subject property for One Million Two Hundred Thousand (P1,200,000.00) Pesos. By virtue thereof, a new title was issued in favor of the defendant-appellee corporation.
Meanwhile, Rosalina Morales and her husband, Emeterio, continued to reside in the subject property. She even entered into a 5-year lease contract over the buildings with the siblings of Rodolfo and Nympha Alano, on May 19, 1989. She also continued to pay the yearly realty taxes on said property.
In 1992, Rosalina's daughter, Lydia Trinidad, returned from the United States of America. Lydia inquired about the title to the subject property, and she learned from the Office of the Register of Deeds of Quezon City about the Deed of Absolute Sale between Rosalina and the defendant-appellee corporation.
On July 17, 1992, Rosalina Santos-Morales, represented by Lydia Trinidad, filed an action for annulment of the Deed of Absolute Sale with damages against the defendant corporation. She denied having sold the subject property, allegedly paraphernal, to anybody, much less to the defendant corporation. She further alleged that her signature on the said document was obtained by means of fraud, deceit and insidious machinations on the part of her husband, Emeterio, and her stepson, Narciso Morales, for and in behalf of the defendant corporation. She also denied having received any consideration in the amount of P1,200,000.00. In fact, when she learned of the said transaction, she immediately filed an affidavit of adverse claim before the Register of Deeds of Quezon City. She argued that the fact the she entered into a contract of lease over the subject property even after the Deed of Absolute Sale was supposedly executed is proof that she knew of no sale to the defendant corporation. Consequently, she contended that the said Deed of Absolute Sale was invalid for fraud and vices of consent.
Furthermore, she pointed out that there were irregularities in the execution of the disputed Deed of Absolute Sale. First, the residence certificate cited in the Deed dated May 3, 1989 was issued way back on January 26, 1988 in Malabon, Rizal, when she already had a new one issued on January 26, 1989 in Quezon City. Second, Vicente M. Joyas, who notarized the disputed Deed of Absolute. Sale was not appointed as Notary Public of Manila in 1988 for the term ending on December 31, 1989, per verification from the Office of the Clerk of Court of Manila.
Accordingly, she prayed that the Deed of Absolute Sale be annulled; that Lydia Trinidad be appointed her guardian ad litem; and that the defendant corporation be made to pay P200,000.00 as and for moral damages; P100,000.00 as and for actual and compensatory damages; P150,000.00 as and for attorney's fees and litigation costs.
In its answer, the defendant corporation denied that the subject property was paraphernal, claiming that it was purchased and the improvements thereon constructed using the money of Emeterio Morales, the plaintiff's husband, during the existence of their marriage. It was also contended that the plaintiff, who was at that point physically disabled and senile, could not have known of nor consented to her daughter's filing of the present action, for her (plaintiff) thumbmark could have easily been affixed on the adverse claim and the complaint it self by Lydia Trinidad. The defendant also questioned Lydia Trinidad's authority to file the action when she had not yet been appointed guardian ad litem.
Moreover, the defendant negated the plaintiff's allegation that Emeterio Morales took the certificate of title from the caretaker since the said title was in Rosalina Morales' possession, and he could not have misled her to sign the Deed of Absolute Sale on the pretext that it was only in connection with the application for reconstitution of said title. It was pointed out that at that time, Rosalina Morales was in full possession of her mental faculties and was in fact, a very intelligent and astute woman. To corroborate this allegation, the defendant corporation attached as annexes several motions and a compromise agreement executed by Rosalina Morales in Special Proceeding No. 5010 before the RTC of Pasig, Metro Manila, in the exercise of her duties as administratrix of the sizable estate of her deceased aunt. Thus, there was no truth to the allegation that Rosalina Morales' consent to the sale of the subject property was not given freely and voluntarily, considering that she was mentally and physically aware of everything that was going on around her.
Furthermore, the defendant argued that the alleged irregularity in the residence certificate and the notarization of the document would not in any way affect the validity of the sale since a public instrument [was] not essential to its validity. Insofar as the lease was concerned, Narciso Morales alleged that he tolerated it since he made a commitment to his father and stepmother (the Morales spouses) that they could reside in and enjoy the fruits of the subject property for as long as they lived, out of his love and devotion for them. Thus, the plaintiff had no cause of action and the suit was baseless in fact and in law.
The defendant then prayed that judgment be rendered in its favor, dismissing the complaint and ordering the plaintiff to pay P1,000,000.00 by way of compensatory damages, P500,000.00 as corrective damages; P200,000.00 as and for attorney's fees and costs of suit.
Even before the pre-trial conference could be held, on October 7, 1992, plaintiff Rosalina Santos-Morales passed away. Accordingly, her heirs, namely, Lydia Trinidad, Rogelio de la Paz, Emmanuel de la Paz and Emeterio Morales, as her surviving spouse, were substituted as co-plaintiffs. Emeterio Morales thereafter executed an affidavit wherein he declared that his inclusion as a party-plaintiff was without his consent or authorization. He also deposed that as one of Rosalina Morales' forced heirs, he [was] requesting that the civil case be withdrawn and/or dismissed.
On April 30, 1993, the trial court issued the pre-trial Order limiting the issues to be resolved to the following[:]
I. Whether or not the plaintiff, Rosalina Santos Morales, was of sound mind when the questioned Deed of Absolute Sale was executed on May 3, 1989.
II. Whether or not the consent of Rosalina Santos-Morales, when she affixed her signature on the questioned Deed of Absolute Sale was vitiated by fraud.
III. Whether or not defendant corporation paid the consideration stated in the Deed of Absolute Sale. 15
The Ruling of the Court of Appeals
In its assailed Amended Decision reversing the trial court's judgment, as well as its own earlier pronouncement, the CA ruled that "Rosalina never sold the property in question to defendant, contrary to what the Deed of Absolute Sale dated May 3, 1989 purports to show." 16
The appellate court held that fraud vitiated the consent of Rosalina as indicated by the following circumstances "surrounding the signing of the Deed of Sale": (1) she "was tricked into believing that what she was signing was an application for the reconstitution of the lost [certificate of] title but which was actually a deed of absolute sale of the property in question"; (2) "there was no reason for [her] to sell her house and lot," because "[t]here was no evidence that would hint that the couple was in any economic problem"; (3) the person who notarized the document was not a commissioned notary public; (4) her expired residence certificate appeared on the Deed, although a new one had already been issued to her; (5) there is no substantial proof of payment; and (6) her subsequent acts showed that "she did not know or was not aware" that she signed any deed of sale. 17
The Issue
Petitioner raises this solitary issue:
Whether or not the Court of Appeals committed a reversible error in reversing its original decision and the decision of the Regional Trial Court by annulling the Deed of Absolute Sale on a mere motion for reconsideration which did not raise new and substantial issues. 18
Simply put, the main issue is whether the appellate court committed reversible error in ruling that the signature of Rosalina was fraudulently obtained. However, in discussing and determining the existence of a reversible error, we shall take up all the issues raised by petitioner before the Court of Appeals, as all of them revolve around the core question of fraud. First, we shall tackle a preliminary matter: the propriety of private respondents' Motion for Reconsideration before the CA.
This Court's Ruling
The petition is devoid of merit.
Preliminary Issue:
Motion for Reconsideration
The petitioner submits that the CA should have denied private respondents' Motion for Reconsideration, "as it did not raise new and substantial arguments and issues that would warrant the reversal of its original Decision."
We rule otherwise. Rule 9 of the Revised Internal Rules of the Court of Appeals simply requires that a motion for reconsideration state (1) the material dates and (2) the grounds relied upon by the movant. 19 The appellate tribunal is thus accorded the opportunity to correct a possible error in its decision. 20
Herein private respondents' Motion for Reconsideration (MR) alleged that there was a newly discovered evidence — the holographic will 21 of Rosalina. It is therefore incorrect to say that the arguments in the MR were mere rehashes of those already passed upon by the appellate court.
More important, the following discussion will show that the CA committed no reversible error in granting the Motion for Reconsideration, because the reversal of the original CA Decision was clearly justified.
Main Issue:
Circumstances Showing Fraud
A contract is a meeting of minds between two persons, whereby one is bound to give something or to render some service to the other. 22 A valid contract requires the concurrence of the following essential requisites: (1) consent of the contracting parties, (2) object certain which is the subject matter of the contract, and (3) cause of the obligation which is established. 23 Under Article 1330 of the Civil Code, consent may be vitiated by any of the following: (1) mistake, (2) violence, (3) intimidation, (4) undue influence, and (5) fraud.
As earlier noted, the present case revolves around the question of fraud. There is fraud when one party is induced by the other to enter into a contract, through and solely because of the latter's insidious words or machinations. 24 But not all forms of fraud can vitiate consent. Under Article 1330, fraud refers to dolo causante or causal fraud, in which, prior to or simultaneous with the execution of a contract, one party secures the consent of the other by using deception, without which such consent would not have been given. 25
Because the factual findings of the trial court and the Court of Appeals differed, we undertook a scrutiny of the records, which persuaded us that the assailed Amended Decision should be affirmed and the contested contract annulled. We believe that causal fraud is clearly demonstrated by the following facts which were duly established during the trial.
Certificate of Title
Obtained by Misrepresentation
When Emeterio Morales, father of Narciso Morales, took the owner's duplicate certificate of title of the subject property from Gregorio Baonguis, Rosalina's caretaker, he did not reveal that the property was the subject of a sale. Instead, Emeterio claimed that he needed the owner's duplicate to enable him to follow up Rosalina's application for a reconstitution of the certificate of title, which had been burned during the fire that gutted the Quezon City Hall. This is evident from Baonguis' testimony: 26
Q Where is the title of this property now?
A It was taken, from me by Mr. Emeterio Morales, in 1988, sir.
Q Where did you give it to him?
A In their house at 58 South Maya Street, Philamlife Homes, Quezon City, sir.
Q Did Mr. Morales tell you his purpose why he need[ed] that owner's copy of the title?
A According to him, he need[ed] that owner's copy to facilitate the reconstitution of title. They [would] be the one to follow it up, sir.
Q Did you come to know the result of this reconstitution of this title[?]
A After that, sir, I heard nothing about it anymore.
Worse, when, confronted by Lydia Trinidad (Rosalina's daughter), Emeterio denied that he had ever taken the certificate of title from Baonguis. She testified: 27
Q After learning from Mr. B[a]ong[u]is that the title of the property in question was taken by your stepfather, what did you do?
A I confronted my stepfather and asked for it and he denied.
Q What, more or less, did you ask your stepfather about this thing?
A I asked him about the title and he said he [did] not have it.
Q After learning from your stepfather that he did not have this title, what did you do next?
A I told him that I [was] inquiring from the Register of Deeds.
Irregularities in the
Notarization
Irregularities also impair the notarization of the alleged Deed of Sale. Very glaring is the fact that the Deed carried the expired residence certificate of Rosalina, although a new one had been issued to her at the time. 28 The significance of this detail was correctly appreciated by the Court of Appeals in the following terms:
. . . Furthermore, investigation also revealed that an [a]pplication for [r]econstitution of the original TGT No. 255716, duly signed by Rosalina Santos-Morales, was filed with the Office of the Registry of Deeds of Quezon City on August 8, 1988, and that her Residence Certificate No. 85119801-G issued on January 26, 1988, in Malabon, Rizal, appearing therein [was] the same as that one appearing in the Deed of Absolute Sale dated May 3, 1989, which is an indication of irregularity considering that as early as January 26, 1989, she had already been issued Residence Certificate No. 04022287 in Quezon City, which was even used in the notarization of the Contract of Lease dated May 19, 1989. If it were true that Rosalina Morales personally appeared before Atty. Joyas and herself presented her residence certificate to Atty. Joyas, there is no reason why her 1988 residence certificate should be the one that should appear in the deed of sale, the only possible conclusion being that she never appeared before Atty. Joyas to present her residence certificate to the latter. . . . (Emphasis supplied.)
The conclusion of the Court of Appeals is buttressed by the fact that Atty. Vicente M. Joyas, who notarized the Deed of Absolute Sale, was not a commissioned notary. 29
We have ruled that "while [a] writing may have been accompanied by the most solemn formalities, no instrument is so sacred when tainted with fraud as to place it beyond scrutiny of extrinsic evidence. The evidence overcomes the known presumption fraus est odiosa et non praesumenda." 30 Such rule is especially applicable when the instrument fails to conform to the formalities required by law.
Acts of Ownership Exercised by
Rosalina Even After the Alleged
Execution of the Deed of Sale
Ownership of a property means, among others, the right to enjoy and dispose of it, subject to limitations established by law. 31 The law "recognizes in the owner the right to enjoy and dispose of the thing owned. The right to enjoy includes: the jus utendi or the right to receive from the thing what it produces, and the jus abutendi or the right to consume the thing by its use." Further, "[t]he right to dispose or the jus disponendi, is the power of the owner to alienate, encumber, transform, and even destroy the thing owned." 32
In the present case, even after Rosalina allegedly sold her paraphernal 33 property to herein petitioner, she still performed acts of ownership over the same. Sixteen days after the alleged execution of the Deed of Sale, 34 she entered into a contract of lease 35 with siblings Rodolfo and Nympha as lessees. The lease contract clearly stated that Rosalina was "the absolute owner" of the disputed property. 36 Indeed, she did not even mention petitioner's alleged "interest" over the property when she signed the said contract. This was affirmed on the witness stand by Nympha's husband, Reynaldo Ortiz, who stated that he was unaware of the existence of either Petitioner Corporation or Narciso Morales. 37
Furthermore, Rosalina (and her heirs) continued to possess the disputed property even after the alleged sale. She also paid the real estate taxes and collected rentals from the lessees. In fact, after the alleged execution of the questioned Deed of Sale, she even executed a holographic will bequeathing the property to her husband Emeterio, her caretaker Baonguis and her children by her first husband.
In stark contrast, petitioner never exercised acts of ownership over the property. Indeed, aside from the alleged Deed of Sale, it presented no other evidence of its ownership such as books, records or financial statements. Moreover, it did not pay the real estate taxes even after a new TCT had been issued in its name on May 5, 1989 as a consequence of the registration of the purported Deed. 38 It must also be underscored that Atty. Narciso Morales, president of the petitioner corporation, knew of the subsequent acts of Rosalina, but offered no objection thereto.
Rosalina's Immediate
Disavowal of the Deed of Sale
Upon learning of the existence of the Deed of Absolute Sale, Rosalina immediately denied that she ever signed the said contract. Her reaction was described by her daughter Lydia, who testified thus: 39
Q What did you do with this Deed of Absolute Sale and the title you procured from the Office of the Register of Deeds when you talked to your mother?
A I showed it to my mother and she said: "No I have not sold this." Over and over again, that was her answer.
Q In this Deed of Absolute Sale, marked in evidence as Exhibit "C", it appears that it purports that this property which is the parcel of land covered by TCT No. 255716 from the Register of Deeds of Quezon City, to have been sold by your mother to the defendant corporation in the consideration of P1,200,000;00. Did you mention this to your mother? Did you confront her with this particular portion of the Deed of Absolute Sale?
A Yes, sir.
Q What did she tell you?
A She said, she never sold that. She told me she did not receive any single amount out of that sale.
Thereafter, Rosalina executed an affidavit repudiating the said contract. The following averments in the affidavit are instructive:
1. I am the registered owner of that parcel of land, together with the improvements thereon, located in Philamlife Homes, Quezon City, covered by Transfer Certificate of Title No. 255716 issued by the Register of Deeds of Quezon City, which property is my paraphernal property;
2. Considering my present state of health, I requested my daughter Lydia Santos dela Paz Trinidad, to make the necessary verification with the Office of the Register of Deeds of Quezon regarding said property because my owner's copy of the title was reportedly taken by my husband, Emeterio S. Morales, from my caretaker without my previous authority and consent;
3. Said verification made by my daughter disclosed that on May 5, 1989, [a] Deed of Absolute Sale purporting to have been executed by me in favor of Archipelago Management and Marketing Corporation, covering said property, was presented to the Office of the Register of Deeds of Quezon City;
4. I was very much surprised to learn this because I ha[d] not sold the said property to anybody much less to Archipelago Management and Marketing Corporation;
5. In view of this, I have executed this Affidavit of Adverse Claim for the purpose of requesting the Office of the Register of Deeds of Quezon City and/or the Land Registration Authority not to deliver the reconstituted owner's duplicate of the said TCT No. 255716 except to me or to my duly authorized representative under my written authority.
6. I hereby further request the said Office to hold in abeyance registration of any document affecting the said parcel of land. 40
Eventually, Rosalina filed the present Complaint to annul the contract of sale.
Consideration
for the Sale
There is no conclusive showing that Rosalina ever received any consideration for the alleged sale. Although petitioner argues that private respondents failed to overcome the legal presumption that there was sufficient consideration for the contract, 41 its own evidence fails to provide any factual basis for the presumption.
Indeed, petitioner's version is so outlandish that it defies belief. It asserts that the geriatric Rosalina travelled all the way from her home in Quezon City to Narciso Morales' Greenhills residence where she was given the payment. Afterwards, the parties supposedly went to the Manila City Hall to have the Deed of Sale notarized. Incredibly, petitioner alleges that the payment, which was in cash, was made in Greenhills because Rosalina was afraid of holdups!
Simply stated, petitioner's account is highly implausible. We find more credibility in private respondents' version denying that Rosalina ever sold her property, executed a deed of sale, or received any amount from the petitioner. 42 The fact that Rosalina's bank passbook shows no increase in the deposit on or after the date of the alleged sale 43 supports the cause of the private respondents.
Deceased Not
Guilty of Negligence
Citing Songco v. Sellner, 44 petitioner argues that private respondents cannot invoke fraud, because Rosalina was negligent in signing the Deed of Sale. It contends that Rosalina did not exercise due care when she affixed her signature to the Deed of Absolute Sale without first reading the contents thereof.
The argument is not persuasive. In the first place, Songco does not apply. In that case, a party claimed fraud based on the vendor's exaggerated statement concerning the probable yield of sugar from the cane sold. The Court held that such party should have exercised diligence instead of merely relying on the representation of the vendor. Clearly, the factual setting of Songco is different from that of the present controversy.
In this case, Rosalina was not aware that she ever signed any deed of sale. All she knew was that she had applied for the reconstitution of her title. In fact, her subsequent conduct confirms that she did not sell or intend to sell her property.
Petitioner maintains that she should have read the documents before signing the same. The peculiar circumstances of this case, however, render that contention unacceptable. While it may be presumed that Rosalina was of sound mind, it is undisputed that she was also quite old. In fact, two years after the alleged execution of the Deed of Sale, according to the testimony of Narciso Morales, 45 Rosalina entered into her "second childhood." Thus, while Rosalina's mind may have been sound when she signed the said contract, it was degenerating and becoming susceptible to surreptitious machinations. Furthermore, it was her husband who asked her to sign the documents, purportedly in connection with her application for a reconstitution of title. She cannot be expected to have exercised the same high degree of vigilance usually observed in ordinary "arm's length" transactions.
All the foregoing circumstances militate against petitioner's cause. Apropos to the present case is the following pronouncement of this Court:
. . . . The statement that fraud cannot be presumed does not mean that the presumption of fraud may not arise, and be legitimately deduced, from circumstantial evidence, but only that it is not to be assumed of a transaction that it is fraudulent, in the absence of proof afforded by intrinsic evidence of unfairness in the transaction itself, or extrinsic facts and circumstances leading to that conclusion. The general rule, therefore, must be understood only as affirming that a contract or conduct apparently honest and lawful must be treated as such until it is shown to be otherwise by either positive or circumstantial evidence. Fraud may be, and often is, proved by or inferred from circumstances, and the circumstances proved may in some cases raise a presumption of its existence. On the other hand it has been held that while fraud may be proved by circumstances or presumed from them, it cannot be demonstrated by construction, and hence must be prove[n] in all cases. 46
Conclusion
After an exhaustive scrutiny of the records of this case, we find no reversible error in the CA's conclusion that fraud attended the execution of the subject Deed.
In reversing its original Decision, the reviewing court ratiocinated:
Considering the above pleadings of the parties, which necessitated a re-review of the facts and issues of the case, it appears that there were certain facts of substance and value which were overlooked that, if considered, would affect the outcome of the case. Thus, the need to render this Amended Decision.
While it is true that Rosalina Morales was of sound mind when she executed the disputed Deed of Absolute Sale, it is likewise true that it does not necessarily follow that no fraud was committed, since, through deceit and certain manipulations, she could be made to erroneously affix her signature to the deed of sale. Again, while it is true that a deed of sale does not have to be notarized to be valid, it is likewise true that consent may be vitiated as shown by the circumstances surrounding the signing of the deed of sale, thereby rendering the sale voidable for lack of consent, . . . 47
The chain of circumstances indubitably shows that Rosalina was "tricked into believing" 48 that what she was signing were papers pertinent to her application for the reconstitution of her burned certificate of title. And the CA correctly observed that ". . . Rosalina Morales' series of acts subsequent to the alleged date of execution of the deed of sale shows that she did not know, and was not aware, of having affixed her signature on a document that turned out later to be a deed of sale . . . ." 49 Petitioner could not have obtained the signature of Rosalina without the help of Emeterio Morales. Thus, the appellate court had reason to rule that "Atty. Narciso Morales, . . ., as president of the defendant corporation, conspiring and confederating with his father, Mr. Emeterio Morales, obtained by means of fraud and deceit the signature of Rosalina Santos-Morales." 50
Taken together, the aforecited circumstances in this case overwhelmingly demonstrate the causal fraud committed in obtaining Rosalina's signature on the Deed of Sale. Rosalina had no intention to part with her property, and as the appellate court ruefully observed, she had no reason to. In fact, her conduct reveals that she had no knowledge at all of the alleged Deed of Sale, and that during her lifetime, she considered herself the absolute owner of the property. Au contraire, petitioner and its president manifested no conduct showing ownership or challenge to her dominion over the subject real estate, even after the alleged execution of the Deed.
In closing, an earlier observation of this Court is aptly reiterated hereunder: 51
"[T]he fertility of man's invention in devising new schemes of fraud is so great that courts have declined to define it, reserving to themselves the liberty to deal with it under whatever form it may present itself." In the case at bar the fraudulent scheme is evidenced by a series of related acts committed one after another, silently, quietly and surreptitiously. Our jurisprudence abounds with cases where fraud had been held to exist but we have found none in which all the circumstances above indicated are present, the circumstances being varied as the men who schemed the fraud in each case.
WHEREFORE, the petition is hereby DENIED for lack of merit. The assailed Decision dated January 28, 1997 and the Resolution dated April 23, 1997, both promulgated by the Court of Appeals in CA-GR No. 46014, are AFFIRMED. Costs against petitioner.
SO ORDERED.
Davide, Jr., Bellosillo, Vitug and Quisumbing, JJ., concur.
G.R. No. 129598 August 15, 2001
PNB MADECOR, petitioner,
vs.
GERARDO C. UY, respondent.
vs.
GERARDO C. UY, respondent.
QUISUMBING,J.:
This is a petition for review on certiorari filed by petitioner PNB Management and Development Corporation (PNB MADECOR) seeking to annul the decision of the Court of Appeals dated February 19, 1997, and its resolution dated June 19, 1997 in CA-G.R. CV No. 49693, affirming the order of the Regional Trial Court of Manila, Branch 38, dated August 21, 1995 in Civil Case No. 95-72685. In said order, the RTC directed the garnishment of the credits and receivables of Pantranco North Express, Inc. (PNEI), also known as Philippine National Express, Inc., in the possession of PNB MADECOR, and if these were insufficient to cover the debt of PNB MADECOR to PNEI, to levy upon the assets of PNB MADECOR.
The facts of this case, culled from the decision of the CA, are as follows:
Guillermo Uy, doing business under the name G.U. Enterprises, assigned to respondent Gerardo Uy his receivables due from Pantranco North Express Inc. (PNEI) amounting to P4,660,558.00. The deed of assignment included sales invoices containing stipulations regarding payment of interest and attorney's fees.
On January 23, 1995, Gerardo Uy filed with the RTC a collection suit with an application for the issuance of a writ of preliminary attachment against PNEI. He sought to collect from PNEI the amount of P8,397,440.00. He alleged that PNEI was guilty of fraud in contracting the obligation sued upon, hence his prayer for a writ of preliminary attachment.
A writ of preliminary attachment was issued on January 26, 1995, commanding the sheriff "to attach the properties of the defendant, real or personal, and/or (of) any person representing the defendant" in such amount as to cover Gerardo Uy's demand.
On January 27, 1995, the sheriff issued a notice of garnishment addressed to the Philippine National Bank (PNB) attaching the "goods, effects, credits, monies and all other personal properties" of PNEI in the possession of the bank, and requesting a reply within five days. PNB MADECOR received a similar notice.
On March 1995, the RTC, through the application of Gerardo Uy, issued a subpoena duces tecum for the production of certain documents in the possession of PNB and PNB MADECOR: (1) from PNB, books of account of PNEI regarding trust account nos. T-8461-I, 8461-II, and T-8565; and (2) from PNB MADECOR, contracts showing PNEI's receivables from the National Real Estate Development Corporation (NAREDECO), now PNB MADECOR, from 1981 up to the period when the documents were requested.
At the hearing in connection with the subpoena, PNB moved to be allowed to submit a position paper on its behalf and/or on behalf of PNB MADECOR. In its position paper dated April 3, 1995, PNB MADECOR alleged that it was the owner of the parcel of land located in Quezon City that was leased to PNEI for use as bus terminal. Moreover, PNB MADECOR claimed:
"2. PNEI has not been paying its rentals from October 1990 to March 24, 1994 — when it (PNEI) vacated the property. As of the latter date, PNB MADECOR's receivables against PNEI amounted to P8,784,227.48, representing accumulated rentals, inclusive of interest;
3. On the other hand, PNB MADECOR has payables to PNEI in the amount of P7,884,000.00 as evidenced by a promissory note executed on October 31, 1982 by then NAREDECO in favor of PNEI;
4. Considering that PNB MADECOR is a creditor of PNEI with respect to the P8,784,227.48 and at the same time its debtor with respect to the P7,884,000.00, PNB MADECOR and PNEI are therefore creditors and debtors of each other; and
5. By force of the law on compensation, both obligations of PNB MADECOR and PNEI are already considered extinguished to the concurrent amount or up to P7,884,000.00 so that PNEI is still obligated to pay PNB MADECOR the amount of P900,227.48. x x x ."
On the other hand, Gerardo Uy filed an omnibus motion controverting PNB MADECOR's claim of compensation. Even if compensation were possible, according to him, PNEI would still have sufficient funds in the hands of PNB MADECOR to fully satisfy his claim. He explained' that:
"The allegation of PNB MADECOR that it owes PNEI only . . . (P7,884,000.00) is not accurate. Apparently, PNB MADECOR only considered the principal amount. In the first place, to be precise, the principal debt amounts to exactly . . . (P7,884,921.10) as clearly indicated in the Promissory Note dated 31 October 1982 . . . In accordance with the stipulations contained in the promissory note, notice of demand was sent by PNEI to PNB MADECOR (then NAREDECO) through a letter dated 28 September 1984 and received by the latter on 1 October 1984 . . . The second paragraph of the subject promissory note states that '[F]ailure to pay the above amount by NAREDECO after due notice has been made by PNEI would entitle PNEI to collect an 18% [interest] per annum from date of notice of demand'. Hence, interest should be computed and start to run from November 1984 until the present in order to come up with the outstanding debt of PNB MADECOR to PNEI. And to be more precise, the outstanding debt of PNB MADECOR to PNEI as of April 1995 amounts to . . . (P75,813,508.26). Hence, even if the alleged debt of PNEI to PNB MADECOR amounting to . . . (P8,784,227.48) shall be compensated and deducted from PNB MADECOR's debt to PNEI, there shall still be a remainder of . . . (P67,029,380.78), largely sufficient enough to cover complainant's claim."
Also in his omnibus motion, he prayed for an order directing that levy be made upon all goods, credits, deposits, and other personal properties of PNEI under the control of PNB MADECOR, to the extent of his demand.
PNB MADECOR opposed his omnibus motion, particularly the claim that its obligation to PNEI earned an interest of 18 percent annually. It argued that PNEI's letter dated September 28, 1984 was not a demand letter but merely a request for the implementation of the arrangement for set-off of receivables between PNEI and PNB, as provided in adacion en pago executed on July 28, 1983.Gerardo Uy again controverted PNB MADECOR's arguments.
Meanwhile, in the main case, the RTC rendered judgment on July 26, 1995 against PNEI. The corresponding writ of execution was issued on August 18, 1995.
As regards the issue between PNEI and PNB MADECOR, the RTC issued the assailed order on August 21, 1995, the decretal portion of which provided:
"WHEREFORE, the Sheriff of this Court is hereby directed to garnish/levy or cause to be garnished/levied the amount stated in the writ of attachment issued by this Court from the credits and receivables/collectibles of PNEI from PNB MADECOR (NAREDECO) and to levy and/or cause to levy upon the assets of the debtor PNB MADECOR should its personal assets be insufficient to cover its debt with PNEI.
Furthermore, Mr. Roger L. Venarosa, Vice-President, Trust Department, Philippine National Bank, and other concerned officials of said bank, is/are hereby directed to submit the books of accounts of Pantranco North Express, Inc./Philippine National Express, Inc. under Trust Account Nos. T-8461-I, T-8461-II, T-8565 with its position paper within five (5) days from notice hereof.
SO ORDERED."
Petitioner appealed said order to the CA which, however, affirmed the RTC in a decision dated February 19, 1997. Petitioner's motion for reconsideration was denied in a resolution dated June 19, 1997.
According to the CA, there could not be any compensation between PNEI's receivables from PNB MADECOR and the latter's obligation to the former because PNB MADECOR's supposed debt to PNEI is the subject of attachment proceedings initiated by a third party, herein respondent Gerardo Uy. This is a controversy that would prevent legal compensation from taking place, per the requirements set forth in Article 1279 of the Civil Code. Moreover, the CA stressed that it was not clear whether, at the time compensation was supposed to have taken place, the rentals being claimed by petitioner were indeed still unpaid. The CA pointed out that petitioner did not present evidence in this regard, apart from a statement of account.
The CA also questioned petitioner's inaction in claiming the unpaid rentals from PNEI, when the latter started defaulting in its payment as early as 1994. This, according to the CA, indicates that the debt was either already settled or not yet demandable and liquidated.
The CA rejected petitioner's contention that Rule 39, Section 43 of the Revised Rules of Court applies to the present case. Said rule sets forth the procedure to follow when a person alleged to have property or to be indebted to a judgment obligor claims an interest in the property or denies the debt. In such a situation, under said Rule the judgment obligee is required to institute a separate action against such person. The CA held that there was no need for a separate action here since petitioner had already become a forced intervenor in the case by virtue of the notice of garnishment served upon it.
Hence, this petition. Petitioner now assigns the following alleged errors for our consideration:
I
THE [COURT OF APPEALS] COMMITTED A CLEAR ERROR IN THE INTERPRETATION OF THE APPLICABLE LAW HEREIN WHEN IT RULED THAT THE REQUISITES FOR LEGAL COMPENSATION AS SET FORTH UNDER ARTICLES 1278 AND 1279 OF THE CIVIL CODE DO NOT CONCUR IN THE CASE AT BAR.
II
THE [COURT OF APPEALS] COMMITTED A CLEAR ERROR IN INTERPRETING THE PROVISIONS OF SECTION 45, RULE 39 OF THE RULES OF COURT, NOW SECTION 43, RULE 39 OF THE REVISED RULES OF COURT, AS AMENDED ON 1 JULY 1997, BY RULING THAT PETITIONER PNB-MADECOR, UPON BEING CITED FOR AND SERVED WITH A NOTICE OF GARNISHMENT BECAME A FORCED INTERVENOR, HENCE, DENYING THE RIGHT OF HEREIN PETITIONER TO VENTILATE ITS POSITION IN A FULL-BLOWN TRIAL AS PROVIDED FOR UNDER SEC. 10, RULE 57, WHICH REMAINS THE SAME RULE UNDER THE REVISED RULES OF COURT AS AMENDED ON 1 JULY 1997.
III
THE [COURT OF APPEALS] COMMITTED AN ERROR IN FINDING THAT A DEMAND WAS MADE BY PANTRANCO NORTH EXPRESS, INC. TO PNB MADECOR FOR THE PAYMENT OF THE PROMISSORY NOTE DATED 31 OCTOBER 1982
After considering these assigned errors carefully insofar as they raise issues of law, we find that the petition lacks merit. We shall now discuss the reasons for our conclusion.
Petitioner admits its indebtedness to PNEI, in the principal sum of P7,884,921.10, per a promissory note dated October 31, 1982 executed by its precursor NAREDECO in favor of PNEI. It also admits that the principal amount should earn an interest of 18 percent per annum under the promissory note, in case NAREDECO fails to pay the principal amount after notice. Petitioner adds that the receivables of PNEI were thereafter conveyed to PNB in payment of PNEI's loan obligation to the latter, in accordance with a dacion en pago agreement executed between PNEI and PNB.
Petitioner, however, maintains that there is nothing now that could be subject of attachment or execution in favor of respondent since compensation had already taken place as between its debt to PNEI and the latter's obligation to it, consistent with Articles 1278, 1279, and 1290 of the Civil Code. Petitioner assails the CA's ratiocination that compensation could not have taken place because the receivables in question were the subject of attachment proceedings commenced by a third party (respondent). This reasoning is contrary to law, according to petitioner.
Petitioner insists that even the Asset Privatization Trust (APT), which now has control over PNEI, recognized the set-off between the subject receivables as indicated in its reply to petitioner's demand for payment of PNEI's unpaid rentals. The APT stated in its letter:
"xxx xxx xxx
While we have long considered the amount of SEVEN MILLION EIGHT HUNDRED EIGHTY FIVE THOUSAND PESOS (P7,885,000.00) which PNEI had earlier transmitted to you as its share in an aborted project as partial payment for PNEI's unpaid rentals in favor of PNB-Madecor, being a creditor like your goodself of PNEI, we are unable to be of assistance to you regarding your claim for the balance thereof. We trust that you will understand our common predicament.
xxx xxx xxx"
Petitioner argues that PNEI's letter dated September 28, 1984 did not contain a demand for payment but only notice of the implementation of thedacion en pago agreement between PNB and PNEI.
Petitioner contends that the CA's statement that PNEI's obligation to petitioner had either been settled or was not yet demandable is highly speculative and conjectural. On the contrary, petitioner asserts that its failure to institute a judicial action against PNEI proved that the receivables of petitioner and PNEI had already been subject to legal compensation.
Petitioner submits that Rule 39, Section 43 of the Revised Rules of Court applies to the present case. It asserts that it stands to lose more than P7 million if not given the opportunity to present its side in a formal proceeding such as that provided under the cited rule. According to petitioner, it was not an original party to this case but only became involved when it was issued a subpoenaduces tecum by the trial court.
For his part, respondent claims that the requisites for legal compensation are not present in this case, contrary to petitioner's assertion. He argues that the better rule should be that compensation cannot take place where one of the obligations sought to be compensated is the subject of a suit between a third party and a party interested in the compensation, as in this case.
Moreover, respondent points out that, while the alleged demand letter sent by PNEI to petitioner was dated September 28, 1984, the unpaid rentals due petitioner from PNEI accrued during the period October 1990 to March 1994, or before petitioner's obligation to PNEI became due. This being so, respondent argues that there can be no compensation since there was as yet no compensable debt in 1984 when PNEI demanded payment from petitioner.
Even granting that there had been compensation, according to respondent, PNEI would still have sufficient funds with petitioner since the PNB MADECOR's obligation to PNEI earned interest.
Respondent echoes the observation of the CA that petitioner failed to file a suit against PNEI at the time when it should have. This failure gave rise to the presumption that PNEI's obligation might have already been settled, waived, or otherwise extinguished, according to him. He contends that petitioner's explanation that it did not sue PNEI because there had been legal compensation is only an afterthought and contrary to logic and reason.
On petitioner's claim that it had been denied due process, respondent avers that he did not have to file a separate action against petitioner since this would only result in multiplicity of suits. Furthermore, he points out that the order of attachment is an interlocutory order that may not be the subject of appeal.
Finally, respondent calls the attention of this Court to the sale by PNB of its shares in PNB MADECOR to the "Dy Group", which in turn assigned its majority interest to the "Atlanta Group". Respondent claims that the Dy Group set aside some P30 million for expenses to be incurred in litigating PNB MADECOR's pending cases, and asks that his "claim over this amount, arising from the instant case,"be given preference in case the PNEI properties already garnished prove insufficient to satisfy his claim.
The first and third errors assigned by petitioner are obviously interrelated and must be resolved together.
Worth stressing, compensation is a mode of extinguishing to the concurrent amount the obligations of persons who in their own right and as principals arereciprocally debtors and creditors of each other. Legal compensation takes place by operation of law when all the requisites are present,as opposed to conventional compensation which takes place when the parties agree to compensate their mutual obligations even in the absence of some requisites.
Legal compensation requires the concurrence of the following conditions:
(1) that each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;
(2) that both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;
(3) that the two debts be due;
(4) that they be liquidated and demandable;
(5) that over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.
Petitioner insists that legal compensation had taken place such that no amount of money belonging to PNEI remains in its hands, and, consequently, there is nothing that could be garnished by respondent.
We find, however, that legal compensation could not have occurred because of the absence of one requisite in this case: that both debts must be due and demandable.
The CA observed:
"Under the terms of the promissory note, failure on the part of NAREDECO (PNB MADECOR) to pay their value of the instrument 'after due notice has been made by PNEI would entitle PNEI to collect an 18% [interest] per annum from date of notice of demand'."
Petitioner makes a similar assertion in its petition, that
"x x x It has been stipulated that the promissory note shall earn an interest of 18% per annum in case NAREDECO, after notice, fails to pay the amount stated therein."
Petitioner's obligation to PNEI appears to be payable on demand, following the above observation made by the CA and the assertion made by petitioner. Petitioner is obligated to pay the amount stated in the promissory note upon receipt of a notice to pay from PNEI. If petitioner fails to pay after such notice, the obligation will earn an interest of 18 percent per annum.
Respondent alleges that PNEI had already demanded payment. The alleged demand letter reads in part:
"We wish to inform you that as of August 31, 1984 your outstanding accounts amounted to P10,376,078.67, inclusive of interest.
In accordance with our previous arrangement, we have conveyed in favor of the Philippine National Bank P7,884,921.10 of said receivables from you. With this conveyance, the unpaid balance of your account will be P2,491,157.57.
To forestall further accrual of interest, we request that you take up with PNB the implementation of said arrangement. x x x."
We agree with petitioner that this letter was not one demanding payment, but one that merely informed petitioner of (1) the conveyance of a certain portion of its obligation to PNEI per adacion en pago arrangement between PNEI and PNB, and (2) the unpaid balance of its obligation after deducting the amount conveyed to PNB. The import of this letter is not that PNEI was demanding payment, but that PNEI was advising petitioner to settle the matter of implementing the earlier arrangement with PNB.
Apart from the aforecited letter, no other demand letter appears on record, nor has any of the parties adverted to another demand letter.
Since petitioner's obligation to PNEI is payable on demand, and there being no demand made, it follows that the obligation is not yet due. Therefore, this obligation may not be subject to compensation for lack of a requisite under the law. Without compensation having taken place, petitioner remains obligated to PNEI to the extent stated in the promissory note. This obligation may undoubtedly be garnished in favor of respondent to satisfy PNEI's judgment debt.
As to respondent's claim that legal compensation could not have taken place due to the existence of a controversy involving one of the mutual obligations, we find this matter no longer controlling. Said controversy was not seasonably communicated to petitioner as required under Article 1279 of the Civil Code.
The controversy,i.e., the action instituted by respondent against PNEI, must have been communicated to PNB MADECOR in due time to prevent compensation from taking place. By "in due time" should be meant the period before legal compensation was supposed to take place, considering that legal compensation operates so long as the requisites concur, even without any conscious intent on the part of the parties. A controversy that is communicated to the parties after that time may no longer undo the compensation that had taken place by force of law, lest the law concerning legal compensation be for naught.
Petitioner had notice of the present controversy when it received the subpoenaduces tecum issued by the trial court. The exact date when petitioner received the subpoena is not on record, but petitioner was allowed to submit a position paper regarding said subpoena per order of the trial court dated March 27, 1995.We assume that petitioner had notice of the pending litigation at least no later than this date. Now, was this date before that period when legal compensation would have occurred, assuming all other requisites to be present?
Clearly, it is not. PNB MADECOR's obligation to PNEI was contracted in 1982 and the alleged demand letter was sent by PNEI to petitioner on September 1984. On the other hand, PNEI's obligation to petitioner, the payment of monthly rentals, accrued during the period October 1990 to March 1994 and a demand to pay was sent in 1993. Assuming the other requisites to be present, legal compensation of the mutual obligations would have taken place on March 1994 at the latest. Obviously, this was before petitioner received notice of the pendency of this litigation in 1995. The controversy communicated to petitioner in 1995 could not have affected the legal compensation that would have taken place in 1994.
As regards respondent's averment that there was as yet no compensable debt when PNEI sent petitioner a demand letter on September 1984, since PNEI was not yet indebted to petitioner at that time, the law does not require that the parties' obligations be incurred at the same time. What the law requires only is that the obligations be due and demandable at the same time.
Coming now to the second assigned error, which we reserved as the last for our discussion, petitioner contends that it did not become a forced intervenor in the present case even after being served with a notice of garnishment. Petitioner argues that the correct procedure would have been for respondent to file a separate action against PNB MADECOR, per Section 43 of Rule 39 of the Rules of Court.21 Petitioner insists it was denied its right to ventilate its claims in a separate, full-blown trial when the courtsa quo ruled that the abovementioned rule was inapplicable to the present case.
On this score, we had occasion to rule as early as 1921 inTayabas Land Co. v. Sharruf ,as follows:
". . . garnishment . . . consists in the citation of some stranger to the litigation, who is debtor to one of the parties to the action. By this means such debtor stranger becomes a forced intervenor; and the court, having acquired jurisdiction over his person by means of the citation, requires him to pay his debt, not to his former creditor, but to the new creditor, who is creditor in the main litigation. It is merely a case of involuntary novation by the substitution of one creditor for another. Upon principle the remedy is a species of attachment or execution for reaching any property pertaining to a judgment debtor which may be found owing to such debtor by a third person."
Again, inPerla Compania de Seguros, Inc. v. Ramolete,we declared:
"Through service of the writ of garnishment, the garnishee becomes a "virtual party" to, or a "forced intervenor" in, the case and the trial court thereby acquires jurisdiction to bind him to compliance with all orders and processes of the trial court with a view to the complete satisfaction of the judgment of the court."
Petitioner here became a forced intervenor by virtue of the notice of garnishment served upon him. It could have presented evidence on its behalf. The CA, in fact, noted that petitioner presented a statement of account purportedly showing that PNEI had not yet settled its obligation to petitioner. That petitioner failed to present any more proof of its claim, as observed by the CA, is no longer the fault of the courts.
There is no need for the institution of a separate action under Rule 39, Section 43, contrary to petitioner's claim. This provision contemplates a situation where the person allegedly holding property of (or indebted to) the judgment debtor claims an adverse interest in the property (or denies the debt). In this case, petitioner expressly admits its obligation to PNEI.
WHEREFORE, the petition is DENIED. The assailed decision and resolution of the Court of Appeals are AFFIRMED. Costs against petitioner.
SO ORDERED.
Bellosillo, Mendoza, Buena and De Leon, Jr., JJ ., concur.JACINTO TANGUILIG doing business under the name and style J.M.T. ENGINEERING AND GENERAL MERCHANDISING, Petitioner, vs. COURT OF APPEALS and VICENTE HERCE JR., Respondents.
D E C I S I O N
BELLOSILLO, J.:
This case involves the proper interpretation of the contract entered into between the parties.
Sometime in April 1987 petitioner Jacinto M. Tanguilig doing business under the name and style J. M. T. Engineering and General Merchandising proposed to respondent Vicente Herce Jr. to construct a windmill system for him. After some negotiations they agreed on the construction of the windmill for a consideration of P60,000.00 with a one-year guaranty from the date of completion and acceptance by respondent Herce Jr. of the project. Pursuant to the agreement respondent paid petitioner a down payment of P30,000.00 and an installment payment of P15,000.00, leaving a balance of P15,000.00.
On 14 March 1988, due to the refusal and failure of respondent to pay the balance, petitioner filed a complaint to collect the amount. In his Answer before the trial court respondent denied the claim saying that he had already paid this amount to the San Pedro General Merchandising Inc. (SPGMI) which constructed the deep well to which the windmill system was to be connected. According to respondent, since the deep well formed part of the system the payment he tendered to SPGMI should be credited to his account by petitioner. Moreover, assuming that he owed petitioner a balance of P15,000.00, this should be offset by the defects in the windmill system which caused the structure to collapse after a strong wind hit their place.1
Petitioner denied that the construction of a deep well was included in the agreement to build the windmill system, for the contract price of P60,000.00 was solely for the windmill assembly and its installation, exclusive of other incidental materials needed for the project. He also disowned any obligation to repair or reconstruct the system and insisted that he delivered it in good and working condition to respondent who accepted the same without protest. Besides, its collapse was attributable to a typhoon, a force majeure, which relieved him of any liability.
In finding for plaintiff, the trial court held that the construction of the deep well was not part of the windmill project as evidenced clearly by the letter proposals submitted by petitioner to respondent.2 It noted that "[i]f the intention of the parties is to include the construction of the deep well in the project, the same should be stated in the proposals. In the absence of such an agreement, it could be safely concluded that the construction of the deep well is not a part of the project undertaken by the plaintiff."3 With respect to the repair of the windmill, the trial court found that "there is no clear and convincing proof that the windmill system fell down due to the defect of the construction."4chanroblesvirtuallawlibrary
The Court of Appeals reversed the trial court. It ruled that the construction of the deep well was included in the agreement of the parties because the term "deep well" was mentioned in both proposals. It also gave credence to the testimony of respondent's witness Guillermo Pili, the proprietor of SPGMI which installed the deep well, that petitioner Tanguilig told him that the cost of constructing the deep well would be deducted from the contract price of P60,000.00. Upon these premises the appellate court concluded that respondent's payment of P15,000.00 to SPGMI should be applied to his remaining balance with petitioner thus effectively extinguishing his contractual obligation. However, it rejected petitioner's claim of force majeure and ordered the latter to reconstruct the windmill in accordance with the stipulated one-year guaranty.
His motion for reconsideration having been denied by the Court of Appeals, petitioner now seeks relief from this Court. He raises two issues: firstly, whether the agreement to construct the windmill system included the installation of a deep well and, secondly, whether petitioner is under obligation to reconstruct the windmill after it collapsed.
We reverse the appellate court on the first issue but sustain it on the second.
The preponderance of evidence supports the finding of the trial court that the installation of a deep well was not included in the proposals of petitioner to construct a windmill system for respondent. There were in fact two (2) proposals: one dated 19 May 1987 which pegged the contract price at P87,000.00 (Exh. "1"). This was rejected by respondent. The other was submitted three days later, i.e., on 22 May 1987 which contained more specifications but proposed a lower contract price of P60,000.00 (Exh. "A"). The latter proposal was accepted by respondent and the construction immediately followed. The pertinent portions of the first letter-proposal (Exh. "1") are reproduced hereunder -
In connection with your Windmill System and Installation, we would like to quote to you as follows:
One (1) Set - Windmill suitable for 2 inches diameter deepwell, 2 HP, capacity, 14 feet in diameter, with 20 pieces blade, Tower 40 feet high, including mechanism which is not advisable to operate during extra-intensity wind. Excluding cylinder pump.
UNIT CONTRACT PRICE P87,000.00
The second letter-proposal (Exh. "A") provides as follows:
In connection with your Windmill system Supply of Labor Materials and Installation, operated water pump, we would like to quote to you as follows -
One (1) set - Windmill assembly for 2 inches or 3 inches deep-well pump, 6 Stroke, 14 feet diameter, 1-lot blade materials, 40 feet Tower complete with standard appurtenances up to Cylinder pump, shafting U.S. adjustable International Metal.
One (1) lot - Angle bar, G. I. pipe, Reducer Coupling, Elbow Gate valve, cross Tee coupling.
One (1) lot - Float valve.
One (1) lot - Concreting materials foundation.
F. O. B. Laguna
Contract Price P60,000.00
Notably, nowhere in either proposal is the installation of a deep well mentioned, even remotely. Neither is there an itemization or description of the materials to be used in constructing the deep well. There is absolutely no mention in the two (2) documents that a deep well pump is a component of the proposed windmill system. The contract prices fixed in both proposals cover only the features specifically described therein and no other. While the words "deep well" and "deep well pump" are mentioned in both, these do not indicate that a deep well is part of the windmill system. They merely describe the type of deep well pump for which the proposed windmill would be suitable. As correctly pointed out by petitioner, the words "deep well" preceded by the prepositions "for" and "suitable for" were meant only to convey the idea that the proposed windmill would be appropriate for a deep well pump with a diameter of 2 to 3 inches. For if the real intent of petitioner was to include a deep well in the agreement to construct a windmill, he would have used instead the conjunctions "and" or "with." Since the terms of the instruments are clear and leave no doubt as to their meaning they should not be disturbed.
Moreover, it is a cardinal rule in the interpretation of contracts that the intention of the parties shall be accorded primordial consideration5 and, in case of doubt, their contemporaneous and subsequent acts shall be principally considered.6 An examination of such contemporaneous and subsequent acts of respondent as well as the attendant circumstances does not persuade us to uphold him.
Respondent insists that petitioner verbally agreed that the contract price of P60,000.00 covered the installation of a deep well pump. He contends that since petitioner did not have the capacity to install the pump the latter agreed to have a third party do the work the cost of which was to be deducted from the contract price. To prove his point, he presented Guillermo Pili of SPGMI who declared that petitioner Tanguilig approached him with a letter from respondent Herce Jr. asking him to build a deep well pump as "part of the price/contract which Engineer (Herce) had with Mr. Tanguilig."7chanroblesvirtuallawlibrary
We are disinclined to accept the version of respondent. The claim of Pili that Herce Jr. wrote him a letter is unsubstantiated. The alleged letter was never presented in court by private respondent for reasons known only to him. But granting that this written communication existed, it could not have simply contained a request for Pili to install a deep well; it would have also mentioned the party who would pay for the undertaking. It strains credulity that respondent would keep silent on this matter and leave it all to petitioner Tanguilig to verbally convey to Pili that the deep well was part of the windmill construction and that its payment would come from the contract price of P60,000.00.
We find it also unusual that Pili would readily consent to build a deep well the payment for which would come supposedly from the windmill contract price on the mere representation of petitioner, whom he had never met before, without a written commitment at least from the former. For if indeed the deep well were part of the windmill project, the contract for its installation would have been strictly a matter between petitioner and Pili himself with the former assuming the obligation to pay the price. That it was respondent Herce Jr. himself who paid for the deep well by handing over to Pili the amount of P15,000.00 clearly indicates that the contract for the deep well was not part of the windmill project but a separate agreement between respondent and Pili. Besides, if the price of P60,000.00 included the deep well, the obligation of respondent was to pay the entire amount to petitioner without prejudice to any action that Guillermo Pili or SPGMI may take, if any, against the latter. Significantly, when asked why he tendered payment directly to Pili and not to petitioner, respondent explained, rather lamely, that he did it "because he has (sic) the money, so (he) just paid the money in his possession."8chanroblesvirtuallawlibrary
Can respondent claim that Pili accepted his payment on behalf of petitioner? No. While the law is clear that "payment shall be made to the person in whose favor the obligation has been constituted, or hissuccessor in interest, or any person authorized to receive it,".9 It does not appear from the record that Pili and/or SPGMI was so authorized.
Respondent cannot claim the benefit of the law concerning "payments made by a third person."10 The Civil Code provisions do not apply in the instant case because no creditor-debtor relationship between petitioner and Guillermo Pili and/or SPGMI has been established regarding the construction of the deep well. Specifically, witness Pili did not testify that he entered into a contract with petitioner for the construction of respondent's deep well. If SPGMI was really commissioned by petitioner to construct the deep well, an agreement particularly to this effect should have been entered into.
The contemporaneous and subsequent acts of the parties concerned effectively belie respondent's assertions. These circumstances only show that the construction of the well by SPGMI was for the sole account of respondent and that petitioner merely supervised the installation of the well because the windmill was to be connected to it. There is no legal nor factual basis by which this Court can impose upon petitioner an obligation he did not expressly assume nor ratify.
The second issue is not a novel one. In a long line of cases11 this Court has consistently held that in order for a party to claim exemption from liability by reason of fortuitous event under Art. 1174 of the Civil Code the event should be the sole and proximate cause of the loss or destruction of the object of the contract. In Nakpil vs. Court of Appeals,12 four (4) requisites must concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforeseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and, (d) the debtor must be free from any participation in or aggravation of the injury to the creditor.
Petitioner failed to show that the collapse of the windmill was due solely to a fortuitous event. Interestingly, the evidence does not disclose that there was actually a typhoon on the day the windmill collapsed. Petitioner merely stated that there was a "strong wind." But a strong wind in this case cannot be fortuitous - unforeseeable nor unavoidable. On the contrary, a strong wind should be present in places where windmills are constructed, otherwise the windmills will not turn.
The appellate court correctly observed that "given the newly-constructed windmill system, the same would not have collapsed had there been no inherent defect in it which could only be attributable to the appellee."13 It emphasized that respondent had in his favor the presumption that "things have happened according to the ordinary course of nature and the ordinary habits of life."14 This presumption has not been rebutted by petitioner.
Finally, petitioner's argument that private respondent was already in default in the payment of his outstanding balance of P15,000.00 and hence should bear his own loss, is untenable. 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.15 When the windmill failed to function properly it became incumbent upon petitioner to institute the proper repairs in accordance with the guaranty stated in the contract. Thus, respondent cannot be said to have incurred in delay; instead, it is petitioner who should bear the expenses for the reconstruction of the windmill. Article 1167 of the Civil Code is explicit on this point that if a person obliged to do something fails to do it, the same shall be executed at his cost.
WHEREFORE, the appealed decision is MODIFIED. Respondent VICENTE HERCE JR. is directed to pay petitioner JACINTO M. TANGUILIG the balance of P15,000.00 with interest at the legal rate from the date of the filing of the complaint. In return, petitioner is ordered to "reconstruct subject defective windmill system, in accordance with the one-year guaranty"16and to complete the same within three (3) months from the finality of this decision.
SO ORDERED.
Padilla, (Chairman), Vitug, Kapunan, and Hermosisima, JJ., concur.
G.R. No. 95229 June 9, 1992
CORITO OCAMPO TAYAG, petitioner,
vs.
HON. COURT OF APPEALS and EMILIE DAYRIT CUYUGAN, respondent.
vs.
HON. COURT OF APPEALS and EMILIE DAYRIT CUYUGAN, respondent.
REGALADO, J.:
The instant petition seeks to reverse and set aside the decision 1 of respondent Court of Appeals in CA-G.R. SP No. 20222, entitled "Corito Ocampo Tayag vs. Hon. Norberto C. Ponce, Judge, Regional Trial Court of San Fernando, Pampanga and Emilde Dayrit Cuyugan," promulgated on May 10, 1990, and its resolution denying petitioner's motion for reconsideration. 2 Said decision, now before us for review, dismissed petitioner's Petition for Certiorari and Prohibition with Preliminary Injunction on the ground that the denial of the motion to dismiss Civil Case No. 7938 of the court a quo is an interlocutory order and cannot be the subject of the said special civil action, ordinary appeal in due time being petitioner's remedy.
In said Civil Case No, 7938, herein private respondent, in her capacity as mother and legal guardian of minor Chad D. Cuyugan, filed on April 9, 1987 a complaint denominated "Claim for Inheritance" against herein petitioner as the administratrix of the estate of the late Atty. Ricardo Ocampo. The operative allegations in said complaint are as follows:
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2. Plaintiff is the mother and legal guardian of her minor son, Chad Cuyugan, by the father of the defendant, the late Atty. Ricardo Ocampo; and the defendant is the known administratrix of the real and personal properties left by her deceased father, said Atty. Ocampo, who died intestate in Angeles City on September 28, 1983;
3. Plaintiff has been estranged from her husband, Jose Cuyugan, for several years now and during which time, plaintiff and Atty. Ricardo Ocampo had illicit amorous relationship with each other that, as a consequence thereof, they begot a child who was christened Chad Cuyugan in accordance with the ardent desire and behest of said Atty. Ocampo;
4. Chad, the son of plaintiff by the late Atty. Ricardo Ocampo, who was born in Angeles City on October 5, 1980 bad been sired, showered with exceptional affection, fervent love and care by his putative father for being his only son as can be gleaned from indubitable letters and documents of the late Atty. Ocampo to herein plaintiff, excerpts from some of which are hereunder reproduced;
. . . Keep good keep faith keep Chad and yourself for me alone and for me all the time. As I have now I shall save my heart to you and to Chad.
. . . Please take good care and pray to Sto. Niño for our sake and for the child sake.
. . . Keep him. Take good care of him.
. . . I'm proud that you are his mother. . . I'm proud of him and you. Let me bless him by my name and let me entitle him to all what I am and what I've got.
. . . I have vowed to recognize him and be my heir.
. . . How is CHAD and you . . .
. . . Why should we not start now to own him, jointly against the whole world. After all we love each other and CHAD is the product of our love.
5. The minor, Chad D. Cuyugan, although illegitimate is nevertheless entitled to a share in the intestate estate left by his deceased father, Atty. Ricardo Ocampo as one of the surviving heirs;
6. The deceased Atty. Ricardo Ocampo, at the time of his death was the owner of real and personal property, located in Baguio City, Angeles City and in the Province of Pampanga with approximate value of several millions of pesos;
7. The estate of the late Atty. Ocampo has not as yet been inventoried by the defendant and the inheritance of the surviving heirs including that of said Chad has not likewise been ascertained;
8. The only known surviving heirs of the deceased Atty. Ricardo Ocampo are his children, namely: Corito O. Tayag, Rivina O. Tayag, Evita O. Florendo, Felina Ocampo, and said minor Chad, for and in whose behalf this instant complaint is filed;
9. Plaintiff has no means of livelihood and she only depends on the charity of friends and relatives for the sustenance of her son, Chad, such that it is urgent, necessary and imperative that said child be extended financial support from the estate of his putative father, Atty. Ricardo Ocampo;
10. Several demands, verbal and written, have been made for defendant to grant Chad's lawful inheritance, but despite said demands, defendant failed and refused and still fails and refused and still fails and refuses to satisfy the claim for inheritance against the estate of the late Atty. Ocampo; 3
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Plaintiff thereafter prays, among others, that judgment be rendered ordering defendant to render an inventory and accounting of the real and personal properties left by Atty. Ricardo Ocampo; to determine and deliver the share of the minor child Chad in the estate of the deceased; and to give him support pendente lite.
Petitioner, as defendant therein, filed her answer with counterclaim on June 3, 1987, disputing the material allegations in the complaint. She maintained by way of affirmative defenses, inter alia, that the complaint states no cause of action; that the action is premature; that the suit as barred by prescription; that respondent Cuyugan has no legal and judicial personality to bring the suit; that the lower court was no jurisdiction over the nature of the action; and that there is improper joinder of causes of action. 4
After the hearing of the motion to dismiss on the grounds asserted as affirmative defenses, the trial court issued the following order on October 20, 1987:
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The Court is of the considered opinion that there is a need of further proceedings to adduce evidence on the various claims of the parties so as to hear their respective sides
WHEREFORE, resolution on the preliminary hearing which partakes of the nature of a motion to dismiss requiring additional evidence is in the meantime held in abeyance. The Motion to Dismiss is hereby denied and the case as set for pre-trial . . . 5
With the denial of her motion for reconsideration of said order on November 19, 1987, 6 petitioner filed on December 10, 1987 a petition for certiorari and prohibition before the Court of Appeals, docketed therein as CA-G.R. SP No. 13464, which was granted by the Sixth Division of respondent court on August 2, 1989 and enjoined respondent judge to resolve petitioner's motion praying for the dismissal of the complaint based on the affirmative defenses within ten (10) days from notice thereof. 7
In compliance with said decision of respondent court, the trial court acted on and thereafter denied the motion to dismiss, which had been pleaded in the affirmative defenses in Civil Case No. 7938, in an order dated October 24, 1989, resolving the said motion in the following manner:
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The Court now resolves:
No. 1. The complaint sufficiently shows that a cause of action exists in favor of the plaintiff. A cause of action being the "primary right to redress a wrong" (Marquez vs. Valera, 48 OG 5272), which apparently on the face of the complaint, plaintiff has a right to enforce through this case. Defendant's protestation that there is no sufficient cause of action is therefore untenable.
No. 2. The present action. despite the claim of defendant is not premature. It is exactly filed in order to prove filiation, and then recognition. To go about the step by step procedure outlined by the defendant by filing one action after another is definitely violative of the prohibition against splitting a cause of action.
No. 3. It is not the plaintiff that is now bringing the case before the Court. It is (her) spurious child that she represents as natural guardian that is instituting the action.
No. 4. Prescription has not set in if we consider that a spurious child may file an action for recognition within four years from his attainment of majority (New Civil Code. Art, 285, No. 2). Whether the letters of the putative father, Atty. Ocampo, is evidence, that should be inquired into in a hearing on the merits.
No. 5. Several causes of action may be joined in one complaint as was done in this case. The defendant's claim that there was a misjoinder is untenable.
No. 6. The Court being a court of general jurisdiction, and of special jurisdiction, such as a probate court has capacity to entertain a complaint such as the one now before it.
The nature of the case "CLAIM FOR INHERITANCE" does not control the body of the complaint.
From all the foregoing, the Court finds that the complaint is sufficient' in form and substance and, therefore, the motion to dismiss could not be granted until after trial on the merits in which it should be shown that the allegations of the complaint are unfounded or a special defense to the action exists.
WHEREFORE, the Motion to Dismiss is hereby DENIED. 8
Petitioner's motion for reconsideration of said order was denied by the trial court on January 30, 1990. 9 As a consequence, another petition for certiorari and prohibition with preliminary injunction was filed by petitioner on March 12, 1990 with respondent court, docketed as CA-G.R. SP No. 20222, praying that the orders dated October 24, 1989 and January 30, 1990 of the trial court be annulled and set aside for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction.
On May 10, 1990, as earlier stated, respondent court promulgated its decision dismissing the petition, and likewise denied petitioner's motion for reconsideration in a resolution dated September 5, 1990, hence the present petition for review on certiorari.
In elevating the case before us, petitioner relies on these grounds:
a. The Honorable Respondent Court of Appeals dismissed Petitioner's Petition for Certiorari and Prohibition in UTTER DISREGARD OF APPLICABLE DECISIONS OF THIS HONORABLE COURT providing clear exceptions to the general rule that interlocutory orders may not be elevated by way of the special civil action of certiorari;
b. Respondent Court refused to resolve certain issues raised by Petitioner before the Regional Trial Court and before Respondent Court of Appeals involving QUESTIONS OF SUBSTANCE not theretofore determined by this Honorable Court, such as the interpretation and application of Art. 281 of the Civil Code requiring judicial approval when the recognition of an illegitimate minor child does not take place in a record of birth or in a will: of Art. 175, Par. 2, in relation to Art. 172, Par. 2 of the Family Code, providing for the prescriptive period with respect to the action to establish illegitimate filiation; and of Art. 285 of the Civil Code, providing for the prescriptive period with respect to the action for recognition of a natural child; and
c. Respondent Court has sanctioned a DEPARTURE by the Regional Trial Court from the accepted and usual course of judicial proceedings. 10
Petitioner contends that the action to claim for inheritance filed by herein private respondent in behalf of the minor child, Chad Cuyugan, is premature and the complaint states no cause of action, she submits that the recognition of the minor child, either voluntarily or by judicial action, by the alleged putative father must first be established before the former can invoke his right to succeed and participate in the estate of the latter. Petitioner asseverates that since there is no allegation of such recognition in the complaint denominated as "Claim for Inheritance," then there exists no basis for private respondent's aforesaid claim and, consequently, the complaint should be dismissed.
The instant case is similar to the case of Paulino vs. Paulino, et al., 11 wherein the petitioner, as plaintiff, brought an action against the private respondents, as defendants, to compel them to give her share of inheritance in the estate of the late Marcos Paulino, claiming and alleging, inter alia, that she is the illegitimate child of the deceased; that no proceedings for the settlement of the deceased's estate had been commenced in court; and that the defendants had refused and failed to deliver her share in the estate of the deceased. She accordingly prayed that the defendants therein be ordered to deliver her aforesaid share. The defendants moved for the dismissal of her complaint on the ground that it states no cause of action and that, even if it does, the same is barred by prescription.
The only difference between the aforecited case and the case at bar is that at the time of the filing of the complaint therein, the petitioner in that case had already reached the age of majority, whereas the claimant in the present case is still a minor. In Paulino, we held that an illegitimate child, to be entitled to support and successional rights from the putative or presumed parent, must prove his filiation to the latter. We also said that it is necessary to allege in the complaint that the putative father had acknowledged and recognized the illegitimate child because such acknowledgment is essential to and is the basis of the right to inherit. There being no allegation of such acknowledgment, the action becomes one to compel recognition which cannot be brought after the death of the putative father. The ratio decidendi in Paulino, therefore, is not the absence of a cause of action for failure of the petitioner to allege the fact of acknowledgment in the complaint, but the prescription of the action.
Applying the foregoing principles to the case at bar, although petitioner contends that the complaint filed by herein private respondent merely alleges that the minor Chad Cuyugan is an illegitimate child of the deceased and is actually a claim for inheritance, from the allegations therein the same may be considered as one to compel recognition. Further that the two causes of action, one to compel recognition and the other to claim inheritance, may be joined in one complaint is not new in our jurisprudence.
As early as 1922, we had occasion to rule thereon in Briz vs. Briz, et
al., 12 wherein we said:
al., 12 wherein we said:
The question whether a person in the position of the present plaintiff can any event maintain a complex action to compel recognition as a natural child and at the same time to obtain ulterior relief in the character of heir, is one which, in the opinion of this court must be answered in the affirmative, provided always that the conditions justifying the joinder of the two distinct causes of action are present in the particular case. In, other words, there is no absolute necessity requiring that the action to compel acknowledgment should have been instituted and prosecuted to a successful conclusion prior to the action in which that same plaintiff seers additional relief in the character of heir. Certainly, there is nothing so peculiar to the action to compel acknowledgment as to require that a rule should be here applied different from that generally applicable in other cases. . .
The conclusion above stated, though not heretofore explicitly formulated by this court, is undoubtedly to some extent supported by our prior decisions. Thus, we have held in numerous cases, and the doctrine must be considered well settled, that a natural child having a right to compel acknowledgment, but who has not been in fact legally acknowledged, may maintain partition proceedings for the division of the inheritance against his co-heirs . . .; and the same person may intervene in proceedings for the distribution of the estate of his deceased natural father, or mother . . . In neither of these situations has it been thought necessary for the plaintiff to show a prior decree compelling acknowledgment. The obvious reason is that in partition suits and distribution proceedings the other persons who might take by inheritance are before the court; and the declaration of heirship is appropriate to such proceedings.
The next question to be resolved is whether the action to compel recognition has prescribed.
Petitioner argues that assuming arguendo that the action is one to compel recognition, private respondent's cause of action has prescribed for the reason that since filiation is sought to be proved by means of a private handwritten instrument signed by the parent concerned, then under paragraph 2, Article 175 of the Family Code, the action to establish filiation of the illegitimate minor child must be brought during the lifetime of the alleged putative father. In the case at bar, considering that the complaint was filed after the death of the alleged parent, the action has prescribed and this is another ground for the dismissal of the complaint. Petitioner theorizes that Article 285 of the Civil Code is not applicable to the case at bar and, instead, paragraph 2, Article 175 of the Family Code should be given retroactive effect. The theory is premised on the supposition that the latter provision of law being merely procedural in nature, no vested rights are created, hence it can be made to apply retroactively.
Article 285 of the Civil Code provides:
Art. 285. The action for the recognition of natural children may be brought only during the lifetime of the presumed parents, except in the following cases:
(1) If the father or mother died during the minority of the child, in which case the latter may file the action before the expiration of four years from the attainment of his majority;
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On the other hand, Article 175 of the Family Code reads:
Art. 175. Illegitimate children may establish their illegitimate filiation in the same way and on the same evidence as legitimate children.
The action must be brought within the same period specified in Article 173, except when the action is based on the second paragraph of Article 172, in which case the action may be brought during the lifetime of the alleged parent.
Under the last-quoted provision of law, therefore, if the action is based on the record of birth of the child, a final judgment, or an admission by the parent of the child's filiation in a public document or in a private handwritten signed instrument, then the action may be brought during the lifetime of the child. However, if the action is based on the open and continuous possession by the child of the status of an illegitimate child, or on other evidence allowed by the Rules of Court and special laws, the view has been expressed that the action must be brought during the lifetime of the alleged parent. 13
Petitioner submits that Article 175 of the Family Code applies in which case the complaint should have been filed during the lifetime of the putative father, failing which the same must be dismissed on the ground of prescription. Private respondent, however, insists that Article 285 of the Civil Code is controlling and, since the alleged parent died during the minority of the child, the action for filiation may be filed within four years from the attainment of majority of the minor child.
Article 256 of the Family Code states that "[t]his Code shall have retroactive effect insofar as it does not prejudice or impair vested or acquired rights in accordance with the Civil Code or other laws." It becomes essential, therefore, to determine whether the right of the minor child to file an action for recognition is a vested right or not.
Under the circumstances obtaining in the case at bar, we hold that the right of action of the minor child bas been vested by the filing of the complaint in court under the regime of the Civil Code and prior to the effectivity of the Family Code. 14 We herein adopt our ruling in the recent case of Republic of the Philippines vs. Court of Appeals, et al. 15 where we held that the fact of filing of the petition already vested in the petitioner her right to file it and to have the same proceed to final adjudication in accordance with the law in force at the time, and such right can no longer be prejudiced or impaired by the enactment of a new law.
Even assuming ex gratia argumenti that the provision of the Family Code in question is procedural in nature, the rule that a statutory change in matters of procedure may affect pending actions and proceedings, unless the language of the act excludes them from its operation, is not so pervasive that it may be used to validate or invalidate proceedings taken before it goes into effective, since procedure must be governed by the law regulating it at the time the question of procedure arises especially where vested rights may be prejudiced. Accordingly, Article 175 of the Family Code finds no proper application to the instant case since it will ineluctably affect adversely a right of private respondent and, consequentially, of the mind child she represents, both of which have been vested with the filing of the complaint in court. The trial court is therefore, correct in applying the provisions of Article 285 of the Civil Code and in holding that private respondent's cause of action has not yet prescribed.
Finally, we conform with the holding of the Court of Appeals that the questioned order of the court below denying the motion to dismiss is interlocutory and cannot be the subject of a petition for certiorari. The exceptions to this rule invoked by petitioner and allegedly obtaining in the case at bar, are obviously not present and may not be relied upon.
WHEREFORE, the petition at bar is DENIED and the assailed decision and resolution of respondent Court of Appeals are hereby AFFIRMED in toto.
SO ORDERED.
Narvasa, C.J., Paras and Padilla, JJ., concur.
Nocon, J., is on leave.
G.R. No. L-69996 December 5, 1994
DR. FERNANDO PERIQUET, JR., petitioner,
vs.
HONORABLE FOURTH CIVIL CASES DIVISION OF THE INTERMEDIATE APPELLATE COURT and the HEIRS OF THE LATE FELIX R. FRANCISCO, respondents.
vs.
HONORABLE FOURTH CIVIL CASES DIVISION OF THE INTERMEDIATE APPELLATE COURT and the HEIRS OF THE LATE FELIX R. FRANCISCO, respondents.
Ledesma, Guytingco, Velasco & Associates and Conrado Ayuyao for petitioner.
Albino B. Achas for private respondents.
Manuel Y. Macias intervenor.
KAPUNAN, J.:
Spouses Fernando Periquet and Petra Francisco were left childless after the death of their only child, Elvira, 1 so they took in a son out of wedlock 2 of Marta Francisco-Reyes, sister of Petra. Though he was not legally adopted, the boy was given the name Fernando Periquet, Jr. and was reared to manhood by the spouses Periquet. He is the petitioner in the instant case.
On March 20, 1966, Fernando Periquet died. He left a will dated March 28, 1940 wherein he named his wife Petra as his universal heir. Accordingly, Petra instituted Special Proceedings No. Q-10004 entitled "In the matter of the Petition to Approve the Will of Fernando Periquet" for probate of his will.
On July 28, 1966, only four (4) months and eighteen (18) days later, Petra died. Thereafter, Special Proceedings No. Q-11074 entitled "In the Matter of the Intestate Estate of Deceased Petra Francisco Vda. de Periquet" was instituted by her nephew, Florentino Zaragoza.
Petra Francisco Vda. de Periquet was survived by the following heirs, namely: Felix Francisco, her brother; Marta Francisco-Reyes, her sister; Josefa and Felix Francisco, children of her deceased brother, Mariano Francisco; and Florentino Zaragoza, Zacarias Zaragoza, Alberta (Betty) Zaragoza-Morgan and Gloria Zaragoza-Nuñez, children of her deceased sister, Josefa Francisco de Zaragoza.
In the meantime, a few days before her death, Petra asked her lawyer to prepare her last will and testament. However, she died before she could sign it. In the said will, Petra left her estate to petitioner, Fernando Periquet, Jr. and provided for certain legacies, to wit: P10,000.00 for Felix Francisco, P10,000.00 for Dolores Periquet, P10,000.00 for Carmen Periquet, P10,000.00 for Belen Periquet de Jesus, and P5,000.00 each for Lydia Periquet and Jose Periquet, Jr.
On August 3, 1966, Felix Francisco executed the following document, viz:
ASSIGNMENT OF HEREDITARY RIGHTS
KNOW ALL MEN BY THESE PRESENTS.
This Instrument made and entered into by and between —
FELIX R. FRANCISCO, Filipino, of legal age, married and residing at Lagao, Gen. Santos, Cotabato, Philippines, hereafter referred to as the ASSIGNOR,
— and —
FERNANDO PERIQUET, JR., Filipino, of legal age, single, and residing at 24 Ilang-ilang, Quezon City, hereinafter referred to as the ASSIGNEE.
W I T N E S S E T H
WHEREAS, the ASSIGNOR is a brother and one of the intestate heirs of the late Petra Francisco Vda. de Periquet who died last July 28, 1966 while a resident of 24 Ilang-ilang, Quezon City;
WHEREAS, the ASSIGNOR knows for a fact that said deceased caused the preparation of a will which she was not able to sign in view of her sudden and untimely death;
WHEREAS, the ASSIGNOR knows for a fact that the said deceased under the Last Will and Testament which she has caused to be prepared but which she was not able to sign, has given, devised and bequeathed to Dr. Fernando Periquet, Jr. her entire estate with the exception of the sum of FIFTY THOUSAND PESOS (P50,000.00) which she has bequeathed as follows:
To Felix Francisco — P10,000.00
To Dolores Periquet — 10,000.00
To Carmen Periquet — 10,000.00
To Belen Periquet de Jesus — 10,000.00
To Lydia Periquet — 5,000.00
To Jose Periquet, Jr. — 5,000.00
—————
Total —P50,000.00
========
To Dolores Periquet — 10,000.00
To Carmen Periquet — 10,000.00
To Belen Periquet de Jesus — 10,000.00
To Lydia Periquet — 5,000.00
To Jose Periquet, Jr. — 5,000.00
—————
Total —P50,000.00
========
WHEREAS, the ASSIGNOR desires to honor, respect and give full effect to the above-mentioned last wishes of the deceased Petra Francisco Vda. de Periquet with regards to the disposition of her estate;
NOW, THEREFORE, for and in consideration of the aforementioned desire of the ASSIGNOR to honor, respect and give full effect to the last wishes of the deceased Petra Francisco Vda. de Periquet as shown in her unsigned last will and testament, the ASSIGNOR has assigned, transferred and conveyed and by these presents do hereby assign, transfer and convey unto the ASSIGNEE all his rights, titles and interests in and to the intestate estate of the late Petra Francisco Vda. de Periquet.
This Deed of Assignment shall retroact as of the date of the death of Petra Francisco Vda. de Periquet.
The ASSIGNEE hereby accepts the above assignment made by the ASSIGNOR.
To give full effect to the above assignment, the ASSIGNOR does hereby nominate, constitute, and appoint the ASSIGNEE as his true and lawful attorney-in-fact, for him and in his name, place and stead, to do and perform the following acts and things, namely: to represent him in any judicial or extrajudicial settlement of the estate of the deceased Petra Francisco Vda. de Periquet; to sign, execute and deliver any and all contracts and documents in connection therewith; to sign and execute any project of partition or extrajudicial partition; to demand, receive, take possession and dispose, under such terms and conditions as he may deem best, of any and all properties and sums of money which are or may be due him from said estate; to endorse notes, checks or drafts payable to him from the said estate; and to do and perform all and every acts and things which may be requisite, necessary or proper to carry out all the above purposes.
IN WITNESS WHEREOF, the parties have signed these presents in Makati, Rizal, Philippines, this 3rd day of August, 1966.
(Sgd.) (Sgd.)
FELIX R. FRANCISCO FERNANDO PERIQUET, JR.
Assignor Assignee.
FELIX R. FRANCISCO FERNANDO PERIQUET, JR.
Assignor Assignee.
SIGNED IN THE PRESENCE OF
(Witness) (Witness) 3
On the same date, Marta Francisco-Reyes executed a Deed of Assignment of Hereditary Rights in favor of Fernando Periquet, Jr. 4 A joint affidavit was likewise executed by them (Marta and Felix) appointing herein petitioner as administrator of the testate estate of Fernando Periquet 5 in lieu of Petra Francisco Vda. de Periquet.
On August 11, 1966, Zacarias Zaragoza and Gloria Zaragoza-Nuñez executed similar deeds assigning their hereditary rights to petitioner. 6 On January 26, 1967, Josefa Francisco and Felix Francisco did the same. 7 Florentino Zaragoza and Alberta "Betty" Zaragoza-Morgan, however, refused to execute deeds of assignment in favor of petitioner.
On December 13, 1969, petitioner entered into a compromise agreement with the Zaragozas and the intervenors, the Periquets, in special Proceedings Nos. Q-10004 and Q-11074. The compromise agreement reads in full:
COMPROMISE AGREEMENT
COME NOW the parties in the above-entitled cases, assisted by their respective counsels and to this Honorable Court, respectfully submit the following Compromise Agreement:
1. That all parties herein hereby acknowledge the validity of the Last Will and Testament of Fernando Periquet dated March 28, 1940 which was admitted to probate by this Honorable Court on May 28, 1966, and that the sole and only testate heir of the late Fernando Periquet at the time of his death on March 20, 1966 was his wife Petra Francisco Vda. de Periquet who died intestate on July 28, 1966;
2. That in consideration of the total sum of P67,500.00 to be paid as hereinafter specified the INTERVENORS herein agree to withdraw their Motion for Intervention and hereby waive any and all claims, rights, interest, participation, actions, causes of actions in or against the estates of Fernando Periquet and Petra Francisco Vda. de Periquet, their heirs, successors in interest, administrators and assigns;
3. That in consideration of the total amount of P67,500.00 to be paid as hereinafter specified, Florentino Zaragoza, Alberta (Betty) Zaragoza Morgan, Zacarias Zaragoza and Gloria Nuñez, (hereinafter referred to as the ZARAGOZAS) hereby assign, transfer and waive in favor of Dr. Fernando Periquet, Jr. all their rights, title, interest, share and participation in and to the intestate estate of Petra Francisco Vda. de Periquet;
4. That the ZARAGOZAS hereby acknowledge the validity of the assignments of hereditary rights in the estate of Petra Francisco Vda. de Periquet executed by Marta Francisco Reyes, Felix R. Francisco, Joseph Francisco, Felix Francisco, Zacarias Zaragoza and Gloria Nuñez (all intestate heirs of Petra Francisco Vda. de Periquet) in favor of Dr. Fernando Periquet, Jr.;
5. That the payment of P67,500.00 to the ZARAGOZAS includes the payment to Zacarias Zaragoza and Gloria Nuñez of the balance due to them under the Deeds of Assignment they have executed in favor of Dr. Fernando Periquet, Jr. dated August 11, 1966 which documents are identified as Doc. No. 299, Page No. 88, Book No. VIII, Series of 1966, and Doc. No. 300, page No. 88, Book No. VIII, Series of 1966, respectively of Notary Public Cirilo Ganzon in and for the City of Iloilo, which amount of P67,500.00 shall be distributed among them as they may agree among themselves;
6. That with the assignments executed by the heirs of Petra Francisco Vda. de Periquet in favor of Dr. Fernando Periquet, Jr. and the payment to the INTERVENORS and the ZARAGOZAS, all the parties herein recognize Dr. Fernando Periquet, Jr. (nephew of the deceased spouses Fernando and Petra) as the sole and only heir of the estates left by Fernando Periquet and Petra Francisco Vda. de Periquet;
7. That the parties herein agree to the appointment of Dr. Fernando Periquet, Jr. as the regular administrator of both the estates of Fernando Periquet and Petra Francisco Vda. de Periquet until the proceedings to settle said estates are finally terminated;
8. That in the event any claim of any kind or whatever nature other than those presently appearing in the records of these cases are presented against the said estates and/or Dr. Fernando Periquet, Jr. in his capacity as administrator or heir thereof, the parties herein agree to contribute to the payment of said claim or claims if and when proved, in the following proportion:
One-Fourth (1/4) By the intervenors (jointly and severally), with the exception of intervenor Aurelio Periquet, Sr.
One-Fourth (1/4) By the ZARAGOZAS (jointly and severally).
One-Half (1/2) by Dr. Fernando Periquet, Jr.
9. That as a security against such claims, the parties herein agree to post surety bonds from a reputable bonding company acceptable to all parties herein, in favor of the estate of Fernando Periquet and Petra Francisco Vda. de Periquet in the following amounts:
FIFTEEN THOUSAND PESOS (P15,000.00) for the ZARAGOZAS.
FIFTEEN THOUSAND PESOS (P15,000.00) for the INTERVENORS, with the exception of intervenor Aurelio Periquet, Sr.
THIRTY THOUSAND PESOS (P30,000.00) (in the form of real property) for Dr. Fernando Periquet, Jr.
which bonds shall be valid and effective for a period of one year from date of approval of this Compromise Agreement;
10. That the final amount of P30,000.00 shall be paid to the Law Office of LEDESMA, GUYTINGCO & ASSOCIATES in full settlement of their services rendered in the settlement of these two estates, of which P25,000.00 shall be paid by the estates upon the approval of this Compromise Agreement and the balance upon the termination of these two cases;
11. That the payment of the sum of P67,500.00 to the INTERVENORS and the same amount to the ZARAGOZAS shall be withdrawn from the funds of the estate of Fernando Periquet deposited with the various banks and paid to said parties or their designated representative upon the approval by this Honorable Court of this Compromise Agreement. The INTERVENORS hereby individually authorize and empower Miss Dolores Periquet to receive and receipt for any and all sums due them under the Compromise Agreement. The ZARAGOZAS likewise hereby individually authorize and empower Mr. Florentino Zaragoza to receive and receipt for any and all sums due them under this Compromise Agreement;
12. That all claims which have not been paid in full per Motion of Special Administrator through his counsel dated May 20, 1969 shall be paid immediately upon approval of this Compromise Agreement;
13. That all residue of the two estates, real and personal, shall be adjudicated, assigned and transferred to the name of Dr. Fernando Periquet, Jr. upon the approval of this Compromise Agreement;
14. That in lieu of a surety bond in the amount of P30,000.00 Dr. Fernando Periquet, Jr. shall be restricted from assigning, transferring or conveying Lot 1, Block 33 comprising of 441 sq. m. and covered by T.C.T. No. 25144, Q.C., which is one of the real properties adjudicated to him under this Compromise Agreement, for a period of twelve months as his portion of the security for any unpaid claim that may appear within the said twelve months' period; the said surety undertaking shall be duly annotated in said title;
15. That in the event any of the heirs who have assigned their hereditary rights to Dr. Fernando Periquet, Jr. successfully repudiates or impugns the validity of the assignment they have executed in favor of the latter, the INTERVENORS and the ZARAGOZAS agree to a proportionate reduction of the amounts due them under this Compromise Agreement or to a proportionate return of the amount received by them.
16. That Intervenor Aurelio Periquet hereby waives, assigns and transfers all and whatever rights, interests and participation which he may have in the estate of Fernando Periquet and Petra Francisco Vda. de Periquet in favor of Dolores Periquet, or which reason, he shall not be liable for any claim of any kind or whatever nature, the same being transferred likewise to his assignee, Dolores Periquet, who hereby assumes the said obligation, if any.
WHEREFORE, it is respectfully prayed that the above Compromise Agreement be approved and the corresponding order/s implementing the same to be issued.
Manila for Quezon City, Philippines, December 13, 1969. 8
Signatories to the compromise agreement were the petitioner, the Zaragozas (Florentino, Zacarias, Alberta and Gloria), the Periquets (Aurelio, Alfonso, Consuelo, Natividad, Marcelina, Francisco, Dolores, Belen and Milagros) and their respective counsels.
On December 20, 1969, the same agreement was approved by the trial court. Another order of even date was issued ordering the adjudication and transfer of the residue of the estate to herein petitioner.
On May 16, 1970, Felix R. Francisco, brother of Petra Francisco Vda. de Periquet, filed the instant action to annul the Assignment of Hereditary Rights he executed in favor of Fernando Periquet, Jr. and to recover his one-fourth (1/4) share in the estate of the late Petra Francisco Vda. de Periquet. The action for annulment was based on "gross misrepresentation and fraud," "grave abuse of confidence," "mistake and undue influence," and "lack of cause and/or consideration" in the execution of the challenged deed of assignment.
On May 8, 1976 the trial court rendered judgment, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered:
1. Declaring valid and binding the assignment of hereditary rights executed by plaintiff in favor of defendant, Exhibit B, but ordering and sentencing defendant to pay plaintiff the amount of P10,000.00 which defendant had promised to give plaintiff in consideration of said assignment;
2. Dismissing the third-party complaint and the different
cross-claims.
cross-claims.
3. There is no pronouncement as to costs.
SO ORDERED. 9
On appeal to the then Intermediate Appellate Court, the said judgment was "modified" to read:
WHEREFORE, judgment is hereby rendered (a) modifying the decision of the Court a quo in the sense that the "Assignment of Hereditary Rights" is hereby annulled or rescinded and appellant completely relieved from the legal effects thereof, (b) declaring and holding appellant FELIX R. FRANCISCO the owner of one-fourth (1/4) of all the estate of Petra Francisco Vda. de Periquet, made up of the residue of the combined estates of the deceased spouses Fernando Periquet and Petra Francisco Vda. de Periquet, which residue must be deemed to include the amounts paid to various others heirs and claimants and to appellee Dr. Fernando Periquet's counsel as well as the remainder of the estate adjudicated to appellee Dr. Fernando Periquet himself in special Proceedings Nos. Q-10004 and
Q-11074 of the Court of First Instance of Rizal, Branch IV sitting in Quezon City, (c) ordering defendant-appellee to pay unto the plaintiff-appellant the sum of P20,000.00 as moral damages, (d) ordering defendant-appellee to pay the sum of P5,000.00 as exemplary damages and P10,000.00 as attorney's fees.
Q-11074 of the Court of First Instance of Rizal, Branch IV sitting in Quezon City, (c) ordering defendant-appellee to pay unto the plaintiff-appellant the sum of P20,000.00 as moral damages, (d) ordering defendant-appellee to pay the sum of P5,000.00 as exemplary damages and P10,000.00 as attorney's fees.
Costs against defendant-appellee.
SO ORDERED. 10
A motion for reconsideration of the above-quoted decision was filed by petitioner Periquet but the same was denied for lack of merit on February 1, 1985, 11 hence, the instant petition for review.
Petitioner Fernando Periquet, Jr. assails the respondent court's decision on the following grounds, to wit:
FIRST ASSIGNMENT OF ERROR
THE RESPONDENT COURT ERRED IN DISREGARDING AND IGNORING THE TRIAL COURT'S STRONG AND SUBSTANTIAL FINDINGS OF FACT THAT NO FRAUD, DECEPTION, GROSS MISREPRESENTATION OF UNDUE INFLUENCE ATTENDED THE EXECUTION AND SIGNING OF THE DEED OF ASSIGNMENT OF HEREDITARY RIGHTS (EXHIBIT B).
SECOND ASSIGNMENT OF ERROR
THE RESPONDENT COURT ERRED IN CONCLUDING THAT THERE WAS ALLEGEDLY NO CAUSE OR CONSIDERATION FOR THE EXECUTION OF THE DEED OF ASSIGNMENT OF HEREDITARY RIGHTS (EXHIBIT B).
THIRD ASSIGNMENT OF ERROR
THE RESPONDENT COURT ERRED IN DISTURBING AND SETTING ASIDE THE ORDERS, DECREES AND PROCEEDINGS TAKEN IN SPECIAL PROCEEDING NOS. Q-10004 AND Q-11074 OF THE THEN COURT OF FIRST INSTANCE OF QUEZON CITY.
FOURTH ASSIGNMENT OF ERROR
THE RESPONDENT COURT ERRED IN ANNULLING OR RESCINDING THE DEED OF ASSIGNMENT OF HEREDITARY RIGHTS AND RELIEVING FELIX R. FRANCISCO COMPLETELY FROM THE LEGAL EFFECTS THEREOF.
FIFTH ASSIGNMENT OF ERROR
THE TRIAL COURT ERRED IN AWARDING MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES TO FELIX R. FRANCISCO. 12
Meanwhile, on December 28, 1980, private respondent Felix R. Francisco passed away, hence, in a resolution dated September 23, 1985, the court allowed his heirs to be substituted in his stead. In the same resolution, we likewise recognized Manuel Macias, the first counsel of Felix Francisco, as an intervenor in the instant petition.
Petitioner Fernando Periquet, Jr. contends that the execution of the assignment of hereditary rights in his favor by Felix R. Francisco was not tainted with fraud, deception, gross misrepresentation, or undue influence because the latter read the instrument, understood its import and later signed the same freely and voluntarily. There was likewise true and valid consideration in the execution of the instrument.
On his part, Felix R. Francisco alleges that petitioner committed a number of unmistakable acts of fraud. He claims that he was rushed into signing the instrument he never read nor was explained to him. He further contends that petitioner abused the confidence he reposed on him when the latter failed to make good his promise to give him P10,000.00 as consideration for the execution of the deed of assignment.
We sustain the petitioner.
The kind of fraud that will vitiate a contract refers to those insidious words or machinations resorted to by one of the contracting parties to induce the other to enter into a contract which without them he would not have agreed to. 13 It must have a determining influence on the consent of the victim. 14 The will of the victim, in effect, is maliciously vitiated by means of a false appearance of reality. 15
In the case at bench, no such fraud was employed by herein petitioner. Resultantly, the assignment of hereditary rights executed by Felix Francisco in favor of herein petitioner is valid and effective.
Felix Francisco could not be considered to have been deceived into signing the subject deed of assignment for the following reasons, viz:
First, the assignment was executed and signed freely and voluntarily by Felix Francisco in order to honor, respect and give full effect to the last wishes of his deceased sister, Petra. The same was read by him and was further explained by Atty. Diosdado Guytingco. 16 Furthermore, witnesses for petitioner, Antonio Eugenio and Elias Fermin, who also served as witnesses in the execution and signing of the deed of assignment testified to the foregoing. 17 They declared that Felix Francisco was neither forced nor intimidated to sign the assignment of hereditary rights. He did so out of his own free will and volition.
Second, there was valid cause or consideration in the execution of the assignment of hereditary rights. Contrary to the trial court's finding that the amount of P10,000.00 as promised by Dr. Fernando Periquet, Jr. to Felix Francisco is the cause or considereation of the assignment, we find and so rule that it was the generosity or liberality of Felix Francisco that impelled him to execute the questioned instrument. Pure beneficence, not monetary consideration, was the moving force because Felix wanted to respect the wishes of a deceased sibling. Consequently, the award of P10,000.00 to private respondent Felix Francisco as consideration of the assignment of hereditary rights is eliminated, the deed thus executed being merely gratuitous in nature.
Third, the allegation of fraud is an afterthought on the part of the assignor, Felix Francisco who filed the instant case to annul the deed of assignment on the ground of fraud only in 1970, almost four (4) years after he executed the instrument. He initiated the proceedings immediately upon learning from his niece, Gloria Zaragoza that a compromise agreement was reached by the parties in Special Proceedings Nos. Q-10004 and Q-11074 and that they were to receive certain amounts from the settlement. 18 In fact, Felix even admitted in his testimony that he was waiting for the outcome of the cases before filing his own independent action. 19
Clearly, Felix slept on his rights and allowed laches to set in. This is fatal to his case. Laches is failure or neglect, for an unreasonable length of time to do that which by exercising due diligence could or should have been done, earlier; it is negligence or omission to assert a right within a reasonable time warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. 20 He could have intervened in Special Proceedings Nos.
Q-10004 and Q-11074. He did not do so. He cannot feign ignorance of the existence of the said cases as he was actually waiting for their final disposition before asserting his own rights. Neither did he raise fraud nor cry out for the improper execution of the deed of assignment prior to the instant action. He never confronted petitioner about his alleged share in the estate of the deceased in the period between 1966 21 and 1970, 22 thus, raising the incontrovertible conclusion that fraud never attended the execution of the deed of assignment. He decided to holler foul and raise the defense of fraud only upon learning that a compromise agreement was entered into by the petitioner, the
Francisco-Zaragozas, and the Periquets.
Q-10004 and Q-11074. He did not do so. He cannot feign ignorance of the existence of the said cases as he was actually waiting for their final disposition before asserting his own rights. Neither did he raise fraud nor cry out for the improper execution of the deed of assignment prior to the instant action. He never confronted petitioner about his alleged share in the estate of the deceased in the period between 1966 21 and 1970, 22 thus, raising the incontrovertible conclusion that fraud never attended the execution of the deed of assignment. He decided to holler foul and raise the defense of fraud only upon learning that a compromise agreement was entered into by the petitioner, the
Francisco-Zaragozas, and the Periquets.
Moreover, fraud is a question of fact and the circumstances constituting the same must be alleged and proved in the court below. 23 The allegations of fraud, deception, gross misrepresentation, or undue influence were not proved in court, hence, the same must fail. Fraud and other vices of consent must be established by full, clear, and convincing evidence. 24 Therefore, the finding of the trial court as to its existence or non-existence is final and cannot be reviewed save only when the finding is clearly shown to be erroneous. We perceive no error in the trial court's finding that the deed of assignment is not tainted with fraud. We reproduce said finding with approval:
(P)laintiff's evidence which consist solely of his oral testimony and the documentary evidence marked as exhibits, fail miserably to establish the gross misrepresentation, deception, fraud, grave abuse of confidence, mistake and undue influence allegedly employed on him to secure hi consent to and signature on the assignment of hereditary rights.
In the first place, plaintiff had in his deposition indeed given inconsistent statements which cast serious doubts on his credibility. On direct examination, plaintiff declared that he signed the deed of assignment of hereditary rights in the house of the deceased (referring to the deceased Petra Francisco Vda. de Periquet) at Ilang-Ilang (Deposition, Exhibit A,
pp. 13-14). Later plaintiff declared that he signed the document at New Manila, Quezon City (Id., p. 19). He declared that the assignment of hereditary rights was signed at midnight (Id., p. 13). Later on
cross-examination, plaintiff declared that it was daytime when he signed (Id., p. 10). Also on direct examination, plaintiff declared that he did not read the assignment of hereditary rights before or at the time he signed (Id., p. 13). But on cross-examination he declared that he read a portion of the same (Id., pp. 68-69).
pp. 13-14). Later plaintiff declared that he signed the document at New Manila, Quezon City (Id., p. 19). He declared that the assignment of hereditary rights was signed at midnight (Id., p. 13). Later on
cross-examination, plaintiff declared that it was daytime when he signed (Id., p. 10). Also on direct examination, plaintiff declared that he did not read the assignment of hereditary rights before or at the time he signed (Id., p. 13). But on cross-examination he declared that he read a portion of the same (Id., pp. 68-69).
There is ample evidence that plaintiff signed the deed of assignment of hereditary rights freely and voluntarily and was fully aware of the contents, import and meaning of the document. Thus, to the question, "what did Dr. Fernando Periquet, Jr., tell you, if any, before signing this document?," plaintiff's answer was, "He promised me to get the whole amount of P10,000.00 without any consent of his mother, personally, secret between us." (Deposition, Exh. A, p. 18).
The third "Whereas" clause of the deed of assignment of hereditary rights states:
WHEREAS, the ASSIGNOR knows for a fact that the said deceased under the last Will and Testament which she has caused to be prepared but which she was not able to sign, has given, devised and bequeathed to Dr. Fernando Periquet, Jr. her entire estate with the exception of the sum of FIFTY THOUSAND PESOS (P50,000.00) which she has bequeathed as follows:
To Felix Francisco — P10,000.00
To Dolores Periquet — 10,000.00
To Carmen Periquet — 10,000.00
To Belen Periquet de Jesus — 10,000.00
To Lydia Periquet — 5,000.00
To Jose Periquet, Jr. — 5,000.00
—————
P50,000.00
=========
To Dolores Periquet — 10,000.00
To Carmen Periquet — 10,000.00
To Belen Periquet de Jesus — 10,000.00
To Lydia Periquet — 5,000.00
To Jose Periquet, Jr. — 5,000.00
—————
P50,000.00
=========
and the fact is undisputed that defendant Fernando Periquet, Jr., was since he was just a few days old adopted (though not judicially) by the deceased spouses Fernando Periquet and Petra Francisco, and lived with, served and cared for the said spouses for forty-six (46) years up to the time of their demise. Just prior to her death, Petra Francisco Vda. de Periquet caused the preparation of a will leaving her entire estate, with the exception of certain legacies, to defendant, but death supervened and the will was left unsigned.
It must also be noted, and this is also important, that on the same occasion that plaintiff signed the deed of assignment of hereditary rights, Exhibit B, Marta Francisco Reyes also signed a similar assignment of hereditary rights, Exhibit 2-Periquet.
The reason why plaintiff later changed his mind is also disclosed in his testimony on cross-examination. The reason is, "Because when I was sent a telegram by my niece Gloria Zaragoza wherein it is sated that I have a share in the amount of P100,000.00, the telegram is in the possession of the defendant, he did not return it to me anymore after I have shown it to him." (Deposition, Exh. A, p. 42). To a further question on cross-examination, "My question is this Mr. Francisco, if the doctor complied with his promise here and gave you the P10,000.00 you will not complain anymore, is it not?," plaintiff's answer was, "No, I will complain too." To the follow-up question, "Why?," the answer was, "To complete the P100,000.00." The succeeding question was, "Who told you that you deserve P100,000.00?," the answer was, "My niece who received P100,000.00 too, Gloria Zaragoza" (Deposition, Exh. A, p. 81).
Assuming that plaintiff did not know or was not aware of the contents and import of the assignment of hereditary rights, Exhibit B, when he signed the same on the night of August 3, 1966, it is impossible he did not come to know at least the import or the consequences of the same a few days after. The evidence is unrebutted that plaintiff was defendant's go between or intermediary in securing from Zacarias Zaragoza and Gloria Zaragoza-Nuñez the latter's consent and signatures to the assignment of hereditary rights, Exhibits M and I. On this point defendant testified, "I was with Felix Francisco. He was the one who was very instrumental in helping me out on looking where these cousins of mine live and at the same time convince them to sign the assignment of hereditary rights in my favor for he has signed a similar document" (t.s.n. — Rivera, Oct. 23, 1973, pp. 31-32). Plaintiff in fact was with defendant in Iloilo when defendant secured the signatures of Zacarias Zaragoza and Gloria Zaragoza Nuñez to the assignments of hereditary rights, Exhibits H and I, on August 11, 1966 — eight (8) days after plaintiff signed the assignment of hereditary rights, Exh. B. Plaintiff was also with defendant when the latter approached Florentino Zaragoza but Florentino refused to sign
(t.s.n. — Rivera, Oct. 23, 1973, pp. 30-31; 33). The point is, if plaintiff was in truth deceived by defendant, if it were that he had given his consent to and signature on the assignment of hereditary rights, Exhibit B, because of "gross misrepresentation and deception and fraud," "grave abuse of confidence," "mistake and undue influence" employed on him by defendant, he would not have waited until May 16, 1970 — almost four (4) years after he signed Exhibit B, to file this case. At the expense of being repetitious, it is impossible, after helping defendant get the signatures of Zacarias Zaragoza (the last of whom refused) to similar assignment of hereditary rights that plaintiff did not become aware at least from that time of the import and consequence of the assignment of hereditary rights he signed. After the widow Petra Francisco Vda. de Periquet died without having signed the will which she had asked defendant's lawyer to prepare, the deeds of assignment of hereditary rights which plaintiff, among others were asked to sign, was the last resorted (sic) to keep the estate of the deceased spouses in the hands of the defendant. Plaintiff obviously knew of the purpose of the several assignment of hereditary rights and was in fact instrumental in securing the consent and signatures of at least two of the heirs — Zacarias and Gloria — and failed in one — Florentino.
(t.s.n. — Rivera, Oct. 23, 1973, pp. 30-31; 33). The point is, if plaintiff was in truth deceived by defendant, if it were that he had given his consent to and signature on the assignment of hereditary rights, Exhibit B, because of "gross misrepresentation and deception and fraud," "grave abuse of confidence," "mistake and undue influence" employed on him by defendant, he would not have waited until May 16, 1970 — almost four (4) years after he signed Exhibit B, to file this case. At the expense of being repetitious, it is impossible, after helping defendant get the signatures of Zacarias Zaragoza (the last of whom refused) to similar assignment of hereditary rights that plaintiff did not become aware at least from that time of the import and consequence of the assignment of hereditary rights he signed. After the widow Petra Francisco Vda. de Periquet died without having signed the will which she had asked defendant's lawyer to prepare, the deeds of assignment of hereditary rights which plaintiff, among others were asked to sign, was the last resorted (sic) to keep the estate of the deceased spouses in the hands of the defendant. Plaintiff obviously knew of the purpose of the several assignment of hereditary rights and was in fact instrumental in securing the consent and signatures of at least two of the heirs — Zacarias and Gloria — and failed in one — Florentino.
Equally as weighty, the testimonies of the witnesses to the assignment of hereditary rights, Exhibit "E," — Antonio Eugenio and Elias Fermin — are positive and convincing that plaintiff signed Exhibit B freely and voluntarily after reading the same and after being asked by defendant's counsel, Atty. Guytingco, whether he understands the contents of the same. 25 (Emphasis ours).
Finally, we agree with the petitioner that respondent court erred in disturbing the proceedings conducted in Special Proceedings Nos. Q-10004 and Q-11074, and the decrees and orders issued pursuant thereto. It cannot be denied that a compromise agreement was entered into by the parties in that case in order to end the suit already filed in court. The same was approved by the trial court in the order dated December 20, 1969. 26 Well-settled is the rule that a compromise agreement, once approved by the court, cannot and should not be disturbed except for vices of consent or forgery, it being the obvious purpose of such compromise agreement to settle, once and for all, the claims of the parties, and bar all future disputes and controversies thereon. 27 A compromise agreement cannot bind persons who are not parties thereto. 28 Neither would a person not party to a compromise agreement be entitled to enforce the same. 29 Similarly, a person who is not a party to an agreement, as in this case, cannot seek the amendment or modification of the same. Neither can a court of law rule that the compromise agreement be amended and modified pursuant only to the wishes of a person not party to the said agreement.
All told, the assignment of hereditary rights executed by the late Felix R. Francisco in favor of petitioner Dr. Fernando Periquet, Jr. is hereby declared valid and effective.
ACCORDINGLY, the petition is hereby GRANTED and the decision of respondent court is hereby REVERSED and SET ASIDE. The decision of the trial court is AFFIRMED subject to the elimination of the award of P10,000.00 to Felix R. Francisco. Costs against private respondents.
SO ORDERED.
Padilla, Davide, Jr., Bellosillo and Quiason, JJ., concur.
RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs. COURT OF APPEALS and FELIPE LUSTRE, respondents.
D E C I S I O N
KAPUNAN, J.:
A simple telephone call and an ounce-of good faith on the part of petitioner could have prevented the present controversy.
On March 10, 1993, private respondent Atty. Felipe Lustre purchased a Toyota Corolla from Toyota Shaw, Inc. for which he made a down payment of P164,620.00, the balance of the purchase price to be paid in 24 equal monthly installments. Private respondent thus issued 24 postdated checks for the amount of P14,976.00 each. The first was dated April 10, 1991; subsequent checks were dated every 10th day of each succeeding month.
To secure the balance, private respondent executed a promissory note and a contract of chattel mortgage over the vehicle in favor of Toyota Shaw, Inc. The contract of chattel mortgage, in paragraph 11 thereof, provided for an acceleration clause stating that should the mortgagor default in the payment of any installment, the whole amount remaining unpaid shall become due. In addition, the mortgagor shall be liable for 25% of the principal due as liquidated damages.
On March 14, 1991, Toyota Shaw, Inc. assigned all its rights and interests in the chattel mortgage to petitioner Rizal Commercial Banking Corporation (RCBC).
All the checks dated April 10, 1991 to January 10, 1993 were thereafter encashed and debited by RCBC from private respondent's account, except for RCBC Check No. 279805 representing the payment for August 10, 1991, which was unsigned. Previously, the amount represented by RCBC Check No. 279805 was debited from private respondent's account but was later recalled and re-credited to him. Because of the recall, the last two checks, dated February 10, 1993 and March 10, 1993, were no longer presented for payment. This was purportedly in conformity with petitioner bank's procedure that once a client's account was forwarded to its account representative, all remaining checks outstanding as of the date the account was forwarded were no longer presented for payment.
On the theory that respondent defaulted in his payments, the check representing the payment for August 10, 1991 being unsigned, petitioner, in a letter dated January 21, 1993, demanded from private respondent the payment of the balance of the debt, including liquidated damages. The latter refused, prompting petitioner to file an action for replevin and damages before the Pasay City Regional Trial Court (RTC). Private respondent, in his Answer, interposed a counterclaim for damages.
After trial, the RTC rendered a decision disposing of the case as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows:
I. The complaint, for lack of cause of action, is hereby DISMISSED and plaintiff RCBC is hereby ordered,
A. To accept the payment equivalent to the three checks amounting to a total of P44,938.00, without interest
B. To release/cancel the mortgage on the car xxx upon payment of the amount of P44,938.00 without interest.
C. To pay the cost of suit
II. On The Counterclaim
A. Plaintiff RCBC to pay Atty. Lustre the amount of P200,000.00 as moral damages.
B. RCBC to pay P100,000.00 as exemplary damages.
C. RCBC to pay Atty. Obispo P50,000.00 as Attorney's fees. Atty. Lustre is not entitled to any fee for lawyering for himself.
All awards for damages are subject to payment of fees to be assessed by the Clerk of Court, RTC, Pasay City.
SO ORDERED.
On appeal by petitioner, the Court of Appeals affirmed the decision of the RTC, thus:
We xxx concur with the trial court's ruling that the Chattel Mortgage contract being a contract of adhesion that is, one wherein a party, usually a corporation, prepares the stipulations the contract, while the other party merely affixes his signature or his "adhesion" thereto xxx - is to be strictly construed against appellant bank which prepared the form Contract xxx. Hence xxx paragraph 11 of the Chattel Mortgage contract [containing the acceleration clause] should be construed to cover only deliberate and advertent failure on the part of the mortgagor to pay an amortization as it became due in line with the consistent holding of the Supreme Court construing obscurities and ambiguities in the restrictive sense against the drafter thereof xxx in the light of
Article 1377 of the Civil Code.
In the case at bench, plaintiff-appellant's imputation of default to defendant-appellee rested solely on the fact that the 5th check issued by appellee xxx was recalled for lack of signature. However, the check was recalled only after the amount covered thereby had been deducted from defendant-appellee's account, as shown by the testimony of plaintiff's own witness Francisco Bulatao who was in charge of the preparation of the list and trial balances of bank customers xxx. The "default" was therefore not a case of failure to pay, the check being sufficiently funded, and which amount was in fact already debitted [sic] from appellee's account by the appellant bank which subsequently re-credited the amount to defendant-appellee's account for lack of signature. All these actions RCBC did on its own without notifying defendant until sixteen (16) months later when it wrote its demand letter dated January 21, 1993.
Clearly, appellant bank was remiss in the performance of its functions for it could have easily called the defendant's attention to the lack of signature on the check and sent the check to, or summoned, the latter to affix his signature. It is also to be noted that the demand letter contains no explanation as to how defendant-appellee incurred arrearages in the amount of P66,255.70, which is why defendant-appellee made a protest notation thereon.
Notably, all the other checks issued by the appellee dated subsequent to August 10, 1991 and dated earlier than the demand letter, were duly encashed. This fact should have already prompted the appellant bank to review its action relative to the unsigned check. xxx
We take exception to the application by both the trial and appellate courts of Article 1377 of the Civil Code, which states:
The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity.
It bears stressing that a contract of adhesion is just as binding as ordinary contracts. It is true that we have, on occasion, struck down such contracts as void when the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing. Nevertheless, contracts of adhesion are not invalid per se; they are not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent.
While ambiguities in a contract of adhesion are to be construed against the party that prepared the same, this rule applies only if the stipulations in such contract are obscure or ambiguous. If the terms thereof are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control In the latter case, there would be no need for construction.
Here, the terms of paragraph 11 of the Chattel Mortgage Contract are clear. Said paragraph states:
11. In case the MORTGAGOR fails to pay any of the installments, or to pay the interest that may be due as provided in the said promissory note, the whole amount remaining unpaid therein shall immediately become due and payable and the mortgage on the property (ies) herein-above described may be foreclosed by the MORTGAGEE, or the MORTGAGEE may take any other legal action to enforce collection of the obligation hereby secured, and in either case the MORTGAGOR further agrees to pay the MORTGAGEE an additional sum of 25% of the principal due and unpaid, as liquidated damages, which said sum shall become part thereof. The MORTGAGOR hereby waives reimbursement of the amount heretofore paid by him/it to the MORTGAGEE.
The above terms leave no room for construction. All that is required is the application thereof.
Petitioner claims that private respondent's check representing the fifth installment was "not encashed,” such that the installment for August 1991 was not paid. By virtue of paragraph 11 above, petitioner submits that it "was justified in treating the entire balance of the obligation as due and demandable." Despite demand by petitioner, however, private respondent refused to pay the balance of the debt. Petitioner, in sum, imputes delay on the part of private respondent.
We do not subscribe to petitioner's theory.
Article 1170 of the Civil Code states that those who in the performance of their obligations are guilty of delay are liable for damages. The delay in the performance of the obligation, however, must be either malicious or negligent. Thus, assuming that private respondent was guilty of delay in the payment of the value of the unsigned check, private respondent cannot be held liable for damages. There is no imputation, much less evidence, that private respondent acted with malice or negligence in failing to sign the check. Indeed, we agree with the Court of Appeals' finding that such omission was mere "inadvertence" on the part of private respondent. Toyota salesperson Jorge Geronimo testified that he even verified whether private respondent had signed all the checks and in fact returned three or four unsigned checks to him for signing:
Atty. Obispo:
After these receipts were issued, what else did you do about the transaction?
A: During our transaction with Atty. Lustre, I found out when he issued to me the 24 checks, I found out 3 to 4 checks are unsigned and I asked him to sign these checks.
Atty. Obispo:
What did you do?
A: I asked him to sign the checks. After signing the checks, I reviewed again all the documents, after I reviewed all the documents and found out that all are completed and the downpayments was completed, we released to him the car.
Even when the checks, were delivered to petitioner, it did not object to the unsigned check. In view of the lack of malice or negligence on the part of private respondent, petitioner's blind and mechanical invocation of paragraph 11 of the contract of chattel mortgage was unwarranted.
Petitioner’s conduct, in the light of the circumstances of this case, can only be described as mercenary. Petitioner had already debited the value of the unsigned check from private respondent's account only to re-credit it much later to him. Thereafter, petitioner encashed checks subsequently dated, then abruptly refused to encash the last two. More than a year after the date of the unsigned check, petitioner, claiming delay and invoking paragraph 11, demanded from private respondent payment of the value of said check and. that of the last two checks, including liquidated damages. As pointed out by the trial court, this whole controversy could have been avoided if only petitioner bothered to call up private respondent and ask him to sign the check. Good faith not only in compliance with its contractual obligations, but also in observance of the standard in human relations, for every person "to act with justice, give everyone his due, and observe honesty and good faith." behooved the bank to do so.
Failing thus, petitioner is liable for damages caused to private respondent. These include moral damages for the mental anguish, serious anxiety, besmirched reputation, wounded feelings and social humiliation suffered by the latter. The trial court found that private respondent was
[a] client who has shared transactions for over twenty years with a bank xxx. The shabby treatment given the defendant is unpardonable since he was put to shame and embarrassment after the case was filed in Court. He is a lawyer in his own right, married to another member of the bar. He sired children who are all professionals in their chosen field. He is known to the community of golfers with whom he gravitates. Surely, the filing of the case made defendant feel so bad and bothered.
To deter others from emulating petitioners callous example, we affirm the award of exemplary damages. As exemplary damages are warranted, so are attorney's fees.
We, however, find excessive the amount of damages awarded by the trial court in favor of private respondent with respect to his counterclaims and, accordingly, reduce the same as follows:
(a) Moral damages - fromP200,000.00 to P100,000.00,
(b) (b)Exemplarydamages – from P100,000.00 to P75,000.00,
(c) (c) Attorney's fees - from P 50,000,00 to P 30,000.00.
WHEREFORE, subject to these modifications, the decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Melo, and Pardo, JJ., concur.
G.R. No. 129018 November 15, 2001
CARMELITA LEAÑO, assisted by her husband GREGORIO CUACHON, petitioner,
vs.
COURT OF APPEALS and HERMOGENES FERNANDO, respondents.
vs.
COURT OF APPEALS and HERMOGENES FERNANDO, respondents.
PARDO, J.:
The Case
The case is a petition for review on certiorari of the decision1 of the Court of Appeals affirming that of the Regional Trial Court, Malolos, Branch 72 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.1âwphi1.nêt
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 case9 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 court12 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 injunction15 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
Judge"17
On February 21, 1995, respondent Fernando filed a motion for reconsideration18 and the supplement19 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 Leaños 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 account22 and the summary23 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 18, 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 in 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 payment 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 case37 operated as the notice of cancellation required by Sec. 3(b). As petitioner Leaño was not given then 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 account39 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.1âwphi1.nêt
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 Appeals44 in toto.
No costs.
SO ORDERED.
Davide, Jr., Puno, Kapunan, and Ynares-Santiago, JJ., concur.
G.R. No. 127695 December 3, 2001
HEIRS OF LUIS BACUS, namely: CLARA RESMA BACUS, ROQUE R. BACUS, SR., SATURNINO R. BACUS, PRISCILA VDA. DE CABANERO, CARMELITA B. SUQUIB, BERNARDITA B. CARDENAS, RAUL R. BACUS, MEDARDO R. BACUS, ANSELMA B. ALBAN, RICARDO R. BACUS, FELICISIMA B. JUDICO, and DOMINICIANA B. TANGAL, petitioners,
vs.
HON. COURT OF APPEALS and SPOUSES FAUSTINO DURAY and VICTORIANA DURAY, respondents.
vs.
HON. COURT OF APPEALS and SPOUSES FAUSTINO DURAY and VICTORIANA DURAY, respondents.
QUISUMBING, J.:
This petition assails the decision dated November 29, 1996, of the Court of Appeals in CA-G.R. CV No. 37566, affirming the decision dated August 3, 1991, of the Regional Trial Court of Cebu City, Branch 6, in Civil Case No. CEB-8935.
The facts, as culled from the records, are as follows:
On June 1, 1984, Luis Bacus leased to private respondent Faustino Duray a parcel of agricultural land in Bulacao, Talisay, Cebu. Designated as Lot No. 3661-A-3-B-2, it had an area of 3,002 square meters, covered by Transfer Certificate of Title No. 48866. The lease was for six years, ending May 31, 1990. The contract contained an option to buy clause. Under said option, the lessee had the exclusive and irrevocable right to buy 2,000 square meters of the property within five years from a year after the effectivity of the contract, at P200 per square meter. That rate shall be proportionately adjusted depending on the peso rate against the US dollar, which at the time of the execution of the contract was fourteen pesos.1
Close to the expiration of the contract, Luis Bacus died on October 10, 1989. Thereafter, on March 15, 1990, the Duray spouses informed Roque Bacus, one of the heirs of Luis Bacus, that they were willing and ready to purchase the property under the option to buy clause. They requested Roque Bacus to prepare the necessary documents, such as a Special Power of Attorney authorizing him to enter into a contract of sale,2 on behalf of his sisters who were then abroad.
On March 30, 1990, due to the refusal of petitioners to sell the property, Faustino Duray's adverse claim was annotated by the Register of Deeds of Cebu, at the back of TCT No. 63269, covering the segregated 2,000 square meter portion of Lot No. 3661-A-3-B-2-A.3
Subsequently, on April 5, 1990, Duray filed a complaint for specific performance against the heirs of Luis Bacus with the Lupon Tagapamayapa of Barangay Bulacao, asking that he be allowed to purchase the lot specifically referred to in the lease contract with option to buy. At the hearing, Duray presented a certification4 from the manager of Standard Chartered Bank, Cebu City, addressed to Luis Bacus, stating that at the request of Mr. Lawrence Glauber, a bank client, arrangements were being made to allow Faustino Duray to borrow funds of approximately P700,000 to enable him to meet his obligations under the contract with Luis Bacus.5
Having failed to reach an agreement before the Lupon, on April 27, 1990, private respondents filed a complaint for specific performance with damages against petitioners before the Regional Trial Court, praying that the latter, (a) execute a deed of sale over the subject property in favor of private respondents; (b) receive the payment of the purchase price; and (c) pay the damages.
On the other hand, petitioners alleged that before Luis Bacus' death, private respondents conveyed to them the former's lack of interest to exercise their option because of insufficiency of funds, but they were surprised to learn of private respondents' demand. In turn, they requested private respondents to pay the purchase price in full but the latter refused. They further alleged that private respondents did not deposit the money as required by the Lupon and instead presented a bank certification which cannot be deemed legal tender.
On October 30, 1990, private respondents manifested in court that they caused the issuance of a cashier's check in the amount of P650,0006 payable to petitioners at anytime upon demand.
On August 3, 1991, the Regional Trial Court ruled in favor of private respondents, the dispositive portion of which reads:
Premises considered, the court finds for the plaintiffs and orders the defendants to specifically perform their obligation in the option to buy and to execute a document of sale over the property covered by Transfer Certificate of Title # T-63269 upon payment by the plaintiffs to them in the amount of Six Hundred Seventy-Five Thousand Six Hundred Seventy-Five (P675,675.00) Pesos within a period of thirty (30) days from the date this decision becomes final.
SO ORDERED.7
Unsatisfied, petitioners appealed to the respondent Court of Appeals which denied the appeal on November 29, 1996, on the ground that the private respondents exercised their option to buy the leased property before the expiration of the contract of lease. It held:
. . . After a careful review of the entire records of this case, we are convinced that the plaintiffs-appellees validly and effectively exercised their option to buy the subject property. As opined by the lower court, "the readiness and preparedness of the plaintiff on his part, is manifested by his cautionary letters, the prepared bank certification long before the date of May 31, 1990, the final day of the option, and his filing of this suit before said date. If the plaintiff-appellee Francisco Duray had no intention to purchase the property, he would not have bothered to write those letters to the defendant-appellants (which were all received by them) and neither would he be interested in having his adverse claim annotated at the back of the T.C.T. of the subject property, two (2) months before the expiration of the lease. Moreover, he even went to the extent of seeking the help of the Lupon Tagapamayapa to compel the defendants-appellants to recognize his right to purchase the property and for them to perform their corresponding obligation.8
xxx xxx xxx
We therefore find no merit in this appeal.
WHEREFORE, the decision appealed from is hereby AFFIRMED.9
Hence, this petition where petitioners aver that the Court of Appeals gravely erred and abused its discretion in:
I. . . . UPHOLDING THE TRIAL COURT'S RULING IN THE SPECIFIC PERFORMANCE CASE BY ORDERING PETITIONERS (DEFENDANTS THEREIN) TO EXECUTE A DOCUMENT OF SALE OVER THE PROPERTY IN QUESTION (WITH TCT NO. T-63269) TO THEM IN THE AMOUNT OF P675,675.00 WITHIN THIRTY (30) DAYS FROM THE DATE THE DECISION BECOMES FINAL;
II. . . . DISREGARDING LEGAL PRINCIPLES, SPECIFIC PROVISIONS OF LAW AND JURISPRUDENCE IN UPHOLDING THE DECISION OF THE TRIAL COURT TO THE EFFECT THAT PRIVATE RESPONDENTS HAD EXERCISED THEIR RIGHT OF OPTION TO BUY ON TIME; THUS THE PRESENTATION OF THE CERTIFICATION OF THE BANK MANAGER OF A BANK DEPOSIT IN THE NAME OF ANOTHER PERSON FOR LOAN TO RESPONDENTS WAS EQUIVALENT TO A VALID TENDER OF PAYMENT AND A SUFFICIENT COMPLAINCE (SIC) OF A CONDITION FOR THE EXERCISE OF THE OPTION TO BUY; AND
III. . . . UPHOLDING THE TRIAL COURT'S RULING THAT THE PRESENTATION OF A CASHER'S (SIC) CHECK BY THE RESPONDENTS IN THE AMOUNT OF P625,000.00 EVEN AFTER THE TERMINATION OF THE TRIAL ON THE MERITS WITH BOTH PARTIES ALREADY HAVING RESTED THEIR CASE, WAS STILL VALID COMPLIANCE OF THE CONDITION FOR THE PRIVATE RESPONDENTS' (PLAINTIFFS THEREIN) EXERCISE OF RIGHT OF OPTION TO BUY AND HAD A FORCE OF VALID AND FULL TENDER OF PAYMENT WITHIN THE AGREED PERIOD.10
Petitioners insist that they cannot be compelled to sell the disputed property by virtue of the nonfulfillment of the obligation under the option contract of the private respondents.
Private respondents first aver that petitioners are unclear if Rule 65 or Rule 45 of the Rules of Court govern their petition, and that petitioners only raised questions of facts which this Court cannot properly entertain in a petition for review. They claim that even assuming that the instant petition is one under Rule 45, the same must be denied for the Court of Appeals has correctly determined that they had validly exercised their option to buy the leased property before the contract expired.
In response, petitioners state that private respondents erred in initially classifying the instant petition as one under Rule 65 of the Rules of Court. They argue that the petition is one under Rule 45 where errors of the Court of Appeals, whether evidentiary or legal in nature, may be reviewed.
We agree with private respondents that in a petition for review under Rule 45, only questions of law may be raised.11 However, a close reading of petitioners' arguments reveal the following legal issues which may properly be entertained in the instant petition:
a) When private respondents opted to buy the property covered by the lease contract with option to buy, were they already required to deliver the money or consign it in court before petitioner executes a deed of transfer?
b) Did private respondents incur in delay when they did not deliver the purchase price or consign it in court on or before the expiration of the contract?
On the first issue, petitioners contend that private respondents failed to comply with their obligation because there was neither actual delivery to them nor consignation in court or with the Municipal, City or Provincial Treasurer of the purchase price before the contract expired. Private respondents' bank certificate stating that arrangements were being made by the bank to release P700,000 as a loan to private respondents cannot be considered as legal tender that may substitute for delivery of payment to petitioners nor was it a consignation.
Obligations under an option to buy are reciprocal obligations.12 The performance of one obligation is conditioned on the simultaneous fulfillment of the other obligation.13 In other words, in an option to buy, the payment of the purchase price by the creditor is contingent upon the execution and delivery of a deed of sale by the debtor. In this case, when private respondents opted to buy the property, their obligation was to advise petitioners of their decision and their readiness to pay the price. They were not yet obliged to make actual payment. Only upon petitioners' actual execution and delivery of the deed of sale were they required to pay. As earlier stated, the latter was contingent upon the former. In Nietes vs. Court of Appeals, 46 SCRA 654 (1972), we held that notice of the creditor's decision to exercise his option to buy need not be coupled with actual payment of the price, so long as this is delivered to the owner of the property upon performance of his part of the agreement. Consequently, since the obligation was not yet due, consignation in court of the purchase price was not yet required.
Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment and it generally requires a prior tender of payment. In instances, where no debt is due and owing, consignation is not proper.14 Therefore, petitioners' contention that private respondents failed to comply with their obligation under the option to buy because they failed to actually deliver the purchase price or consign it in court before the contract expired and before they execute a deed, has no leg to stand on.
Corollary, private respondents did not incur in delay when they did not yet deliver payment nor make a consignation before the expiration of the contract. 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. Only from the moment one of the parties fulfills his obligation, does delay by the other begin.15
In this case, private respondents, as early as March 15, 1990, communicated to petitioners their intention to buy the property and they were at that time undertaking to meet their obligation before the expiration of the contract on May 31, 1990. However, petitioners refused to execute the deed of sale and it was their demand to private respondents to first deliver the money before they would execute the same which prompted private respondents to institute a case for specific performance in the Lupong Tagapamayapa and then in the RTC. On October 30, 1990, after the case had been submitted for decision but before the trial court rendered its decision, private respondents issued a cashier's check in petitioners' favor purportedly to bolster their claim that they were ready to pay the purchase price. The trial court considered this in private respondents' favor and we believe that it rightly did so, because at the time the check was issued, petitioners had not yet executed a deed of sale nor expressed readiness to do so. Accordingly, as there was no compliance yet with what was incumbent upon petitioners under the option to buy, private respondents had not incurred in delay when the cashier's check was issued even after the contract expired.
WHEREFORE, the instant petition is DENIED. The decision dated November 29, 1996 of the Court of Appeals is hereby AFFIRMED.
Costs against petitioners.
SO ORDERED.
Bellosillo, Mendoza and De Leon, Jr., JJ ., concur.
Buena J ., on official leave.
Buena J ., on official leave.
G.R. No. 115117 June 8, 2000
INTEGRATED PACKAGING CORP., petitioner,
vs.
vs.
COURT OF APPEALS and FIL-ANCHOR PAPER CO., INC., respondents.
QUISUMBING, J.:
This is a petition to review the decision of the Court of Appeals rendered on April 20, 1994 reversing the judgment of the Regional Trial Court of Caloocan City in an action for recovery of sum of money filed by private respondent against petitioner. In said decision, the appellate court decreed:
WHEREFORE, in view of all the foregoing, the appealed judgment is hereby REVERSED and SET ASIDE. Appellee [petitioner herein] is hereby ordered to pay appellant [private respondent herein] the sum of P763,101.70, with legal interest thereon, from the date of the filing of the Complaint, until fully paid.
SO ORDERED.1
The RTC judgment reversed by the Court of Appeals had disposed of the complain as follows:
WHEREFORE, judgment is hereby rendered:
Ordering plaintiff [herein private respondent] to pay defendant [herein petitioner] the sum of P27,222.60 as compensatory and actual damages after deducting P763,101.70 (value of materials received by defendant) from P790,324.30 representing compensatory damages as defendant's unrealized profits;
Ordering plaintiff to pay defendant the sum of P100,000.00 as moral damages;
Ordering plaintiff to pay the sum of P30,000.00 for attorney's fees; and to pay the costs of suit.
SO ORDERED.2
The facts, as culled from the records, are as follows:
Petitioner and private respondent executed on May 5, 1978, an order agreement whereby private respondent bound itself to deliver to petitioner 3,450 reams of printing paper, coated, 2 sides basis, 80 lbs., 38" x 23", short grain, worth P1,040,060.00 under the following schedule: May and June 1978 — 450 reams at P290.00/ream; August and September 1978 — 700 reams at P290/ream; January 1979 — 575 reams at P307.20/ream; March 1979 — 575 reams at P307.20/ream; July 1979 — 575 reams at 307.20/ream; and October 1979 — 575 reams at P307.20/ream. In accordance with the standard operating practice of the parties, the materials were to be paid within a minimum of thirty days and maximum of ninety days from delivery.
Later, on June 7, 1978, petitioner entered into a contract with Philippine Appliance Corporation (Philacor) to print three volumes of "Philacor Cultural Books" for delivery on the following dates: Book VI, on or before November 1978; Book VII, on or before November 1979 and; Book VIII, on or before November 1980, with a minimum of 300,000 copies at a price of P10.00 per copy or a total cost of P3,000,000.00.1âwphi1.nêt
As of July 30, 1979, private respondent had delivered to petitioner 1,097 reams of printing paper out of the total 3,450 reams stated in the agreement. Petitioner alleged it wrote private respondent to immediately deliver the balance because further delay would greatly prejudice petitioner. From June 5, 1980 and until July 23, 1981, private respondent delivered again to petitioner various quantities of printing paper amounting to P766,101.70. However, petitioner encountered difficulties paying private respondent said amount. Accordingly, private respondent made a formal demand upon petitioner to settle the outstanding account. On July 23 and 31, 1981 and August 27, 1981, petitioner made partial payments totalling P97,200.00 which was applied to its back accounts covered by delivery invoices dated September 29-30, 1980 and October 1-2, 1980.3
Meanwhile, petitioner entered into an additional printing contract with Philacor. Unfortunately, petitioner failed to fully comply with its contract with Philacor for the printing of books VIII, IX, X and XI. Thus, Philacor demanded compensation from petitioner for the delay and damage it suffered on account of petitioner's failure.
On August 14, 1981, private respondent filed with the Regional Trial Court of Caloocan City a collection suit against petitioner for the sum of P766,101.70, representing the unpaid purchase price of printing paper bought by petitioner on credit.
In its answer, petitioner denied the material allegations of the complaint. By way of counterclaim, petitioner alleged that private respondent was able to deliver only 1,097 reams of printing paper which was short of 2,875 reams, in total disregard of their agreement; that private respondent failed to deliver the balance of the printing paper despite demand therefor, hence, petitioner suffered actual damages and failed to realize expected profits; and that petitioner's complaint was prematurely filed.
After filing its reply and answer to the counterclaim, private respondent moved for admission of its supplemental complaint, which was granted. In said supplemental complaint, private respondent alleged that subsequent to the enumerated purchase invoices in the original complaint, petitioner made additional purchases of printing paper on credit amounting to P94,200.00. Private respondent also averred that petitioner failed and refused to pay its outstanding obligation although it made partial payments in the amount of P97,200.00 which was applied to back accounts, thus, reducing petitioner's indebtedness to P763,101.70.
On July 5, 1990, the trial court rendered judgment declaring that petitioner should pay private respondent the sum of P763,101.70 representing the value of printing paper delivered by private respondent from June 5, 1980 to July 23, 1981. However, the lower court also found petitioner's counterclaim meritorious. It ruled that were it not for the failure or delay of private respondent to deliver printing paper, petitioner could have sold books to Philacor and realized profit of P790,324.30 from the sale. It further ruled that petitioner suffered a dislocation of business on account of loss of contracts and goodwill as a result of private respondent's violation of its obligation, for which the award of moral damages was justified.
On appeal, the respondent Court of Appeals reversed and set aside the judgment of the trial court. The appellate court ordered petitioner to pay private respondent the sum of P763,101.70 representing the amount of unpaid printing paper delivered by private respondent to petitioner, with legal interest thereon from the date of the filing of the complaint until fully paid.4 However, the appellate court deleted the award of P790,324.30 as compensatory damages as well as the award of moral damages and attorney's fees, for lack of factual and legal basis.
Expectedly, petitioner filed this instant petition contending that the appellate court's judgment is based on erroneous conclusions of facts and law. In this recourse, petitioner assigns the following errors:
[I]
THE COURT OF APPEALS ERRED IN CONCLUDING THAT PRIVATE RESPONDENT DID NOT VIOLATE THE ORDER AGREEMENT.
[II]
THE COURT OF APPEALS ERRED IN CONCLUDING THAT RESPONDENT IS NOT LIABLE FOR PETITIONER'S BREACH OF CONTRACT WITH PHILACOR.
[III]
THE COURT OF APPEALS ERRED IN CONCLUDING THAT PETITIONER IS NOT ENTITLED TO DAMAGES AGAINST PRIVATE RESPONDENT. 5
In our view, the crucial issues for resolution in this case are as follows:
(1) Whether or not private respondent violated the order agreement, and;
(2) Whether or not private respondent is liable for petitioner's breach of contract with Philacor.
Petitioner's contention lacks factual and legal basis, hence, bereft of merit.
Petitioner contends, firstly, that private respondent violated the order agreement when the latter failed to deliver the balance of the printing paper on the dates agreed upon.
The transaction between the parties is a contract of sale whereby private respondent (seller) obligates itself to deliver printing paper to petitioner (buyer) which, in turn, binds itself to pay therefor a sum of money or its equivalent (price).6 Both parties concede that the order agreement gives rise to a reciprocal obligations7 such that the obligation of one is dependent upon the obligation of the other. Reciprocal obligations are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other.8 Thus, private respondent undertakes to deliver printing paper of various quantities subject to petitioner's corresponding obligation to pay, on a maximum 90-day credit, for these materials. Note that in the contract, petitioner is not even required to make any deposit, down payment or advance payment, hence, the undertaking of private respondent to deliver the materials is conditional upon payment by petitioner within the prescribed period. Clearly, petitioner did not fulfill its side of the contract as its last payment in August 1981 could cover only materials covered by delivery invoices dated September and October 1980.
There is no dispute that the agreement provides for the delivery of printing paper on different dates and a separate price has been agreed upon for each delivery. It is also admitted that it is the standard practice of the parties that the materials be paid within a minimum period of thirty (30) days and a maximum of ninety (90) days from each delivery.9 Accordingly, the private respondent's suspension of its deliveries to petitioner whenever the latter failed to pay on time, as in this case, is legally justified under the second paragraph of Article 1583 of the Civil Code which provides that:
When there is a contract of sale of goods to be delivered by stated installments, which are to be separately paid for, and the seller makes defective deliveries in respect of one or more installments, or the buyer neglects or refuses without just cause to take delivery of or pay for one or more installments, it depends in each case on the terms of the contract and the circumstances of the case, whether the breach of contract is so material as to justify the injured party in refusing to proceed further and suing for damages for breach of the entire contract, or whether the breach is severable, giving rise to a claim for compensation but not to a right to treat the whole contract as broken. (Emphasis supplied)
In this case, as found a quo petitioner's evidence failed to establish that it had paid for the printing paper covered by the delivery invoices on time. Consequently, private respondent has the right to cease making further delivery, hence the private respondent did not violate the order agreement. On the contrary, it was petitioner which breached the agreement as it failed to pay on time the materials delivered by private respondent. Respondent appellate court correctly ruled that private respondent did not violate the order agreement.
On the second assigned error, petitioner contends that private respondent should be held liable for petitioner's breach of contract with Philacor. This claim is manifestly devoid of merit.
As correctly held by the appellate court, private respondent cannot be held liable under the contracts entered into by petitioner with Philacor. Private respondent is not a party to said agreements. It is also not a contract pour autrui. Aforesaid contracts could not affect third persons like private respondent because of the basic civil law principle of relativity of contracts which provides that contracts can only bind the parties who entered into it, and it cannot favor or prejudice a third person, 10 even if he is aware of such contract and has acted with knowledge thereof. 11
Indeed, the order agreement entered into by petitioner and private respondent has not been shown as having a direct bearing on the contracts of petitioner with Philacor. As pointed out by private respondent and not refuted by petitioner, the paper specified in the order agreement between petitioner and private respondent are markedly different from the paper involved in the contracts of petitioner with Philacor. 12 Furthermore, the demand made by Philacor upon petitioner for the latter to comply with its printing contract is dated February 15, 1984, which is clearly made long after private respondent had filed its complaint on August 14, 1981. This demand relates to contracts with Philacor dated April 12, 1983 and May 13, 1983, which were entered into by petitioner after private respondent filed the instant case.
To recapitulate, private respondent did not violate the order agreement it had with petitioner. Likewise, private respondent could not be held liable for petitioner's breach of contract with Philacor. It follows that there is no basis to hold private respondent liable for damages. Accordingly, the appellate court did not err in deleting the damages awarded by the trial court to petitioner.
The rule on compensatory damages is well established. True, indemnification for damages comprehends not only the loss suffered, that is to say actual damages (damnum emergens), but also profits which the obligee failed to obtain, referred to as compensatory damages (lucrum cessans). However, to justify a grant of actual or compensatory damages, it is necessary to prove with a reasonable degree of certainty, premised upon competent proof and on the best evidence obtainable by the injured party, the actual amount of loss. 13 In the case at bar, the trial court erroneously concluded that petitioner could have sold books to Philacor at the quoted selling price of P1,850,750.55 and by deducting the production cost of P1,060,426.20, petitioner could have earned profit of P790,324.30. Admittedly, the evidence relied upon by the trial court in arriving at the amount are mere estimates prepared by petitioner. 14 Said evidence is highly speculative and manifestly hypothetical. It could not provide sufficient legal and factual basis for the award of P790,324.30 as compensatory damages representing petitioner's self-serving claim of unrealized profit.
Further, the deletion of the award of moral damages is proper, since private respondent could not be held liable for breach of contract. Moral damages may be awarded when in a breach of contract the defendant acted in bad faith, or was guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligation. 15 Finally, since the award of moral damages is eliminated, so must the award for attorney's fees be also deleted. 16
WHEREFORE, the instant petition is DENIED. The decision of the Court of Appeals is AFFIRMED. Costs against petitioner.
SO ORDERED.1âwphi1.nêt
Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.
G.R. No. 137552 June 16, 2000
ROBERTO Z. LAFORTEZA, GONZALO Z. LAFORTEZA, MICHAEL Z. LAFORTEZA, DENNIS Z. LAFORTEZA, and LEA Z. LAFORTEZA, petitioners,
vs.
ALONZO MACHUCA, respondent.
vs.
ALONZO MACHUCA, respondent.
GONZAGA-REYES, J.:
This Petition for Review on Certiorari seeks the reversal of the Decision of the Court of Appeals 1 in CA G.R. CV No. 147457 entitled "ALONZO MACHUCA versus ROBERTO Z. LAFORTEZA, GONZALO Z. LAFORTEZA, LEA ZULUETA-LAFORTEZA, MICHAEL Z. LAFORTEZA, and DENNIS Z. LAFORTEZA".
The following facts as found by the Court of Appeals are undisputed:
The property involved consists of a house and lot located at No. 7757 Sherwood Street, Marcelo Green Village, Parañaque, Metro Manila, covered by Transfer Certificate of Title (TCT) No. (220656) 8941 of the Registered of Deeds of Parañaque (Exhibit "D", Plaintiff, record, pp. 331-332). The subject property is registered in the name of the late Francisco Q. Laforteza, although it is conjugal in nature (Exhibit "8", Defendants, record pp. 331-386).
On August 2, 1988, defendant Lea Zulueta-Laforteza executed a Special Power of Attorney in favor of defendants Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr., appointing both as her Attorney-in-fact authorizing them jointly to sell the subject property and sign any document for the settlement of the estate of the late Francisco Q. Laforteza (Exh. "A", Plaintiff, record, pp. 323-325).
Likewise on the same day, defendant Michael Z. Laforteza executed a Special Power of Attorney in favor of defendants Roberto Z. Laforteza and Gonzalo Laforteza, Jr., likewise, granting the same authority (Exh. "B", record, pp. 326-328) Both agency instruments contained a provision that in any document or paper to exercise authority granted, the signature of both attorneys- in-fact must be affixed.
On October 27, 1988, defendant Dennis Z. Laforteza executed a Special Power of Attorney in favor of defendant Roberto Z. Laforteza for the purpose of selling the subject property (Exh. "C", Plaintiff, record, pp. 329-330). A year later, on October 30, 1989, Dennis Z. Laforteza executed another Special Power of Attorney in favor of defendants Roberto Z. Laforteza and Gonzalo Laforteza, Jr. naming both attorneys-in-fact for the purpose of selling the subject property and signing any document for the settlement of the estate of the late Francisco Q. Laforteza. The subsequent agency instrument (Exh, "2", record, pp. 371-373) contained similar provisions that both attorneys-in-fact should sign any document or paper executed in the exercise of their authority.1âwphi1.nêt
In the exercise of the above authority, on January 20, 1989, the heirs of the late Francisco Q. Laforteza represented by Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr. entered into a Memorandum of Agreement (Contract to Sell) with the plaintiff 2 over the subject property for the sum of SIX HUNDRED THIRTY THOUSAND PESOS (P630,000.00) payable as follows:
(a) P30,000.00 as earnest money, to be forfeited in favor of the defendants if the sale is not effected due to the fault of the plaintiff;
(b) P600,000.00 upon issuance of the new certificate of title in the name of the late Francisco Q. Laforteza and upon execution of an extra-judicial settlement of the decedent's estate with sale in favor of the plaintiff (Par. 2, Exh. "E", record, pp. 335-336).
Significantly, the fourth paragraph of the Memorandum of Agreement (Contract to Sell) dated January 20, 1989 (Exh. "E", supra.) contained a provision as follows:
. . . . Upon issuance by the proper Court of the new title, the BUYER-LESSEE shall be notified in writing and said BUYER-LESSEE shall have thirty (30) days to produce the balance of P600,000.00 which shall be paid to the SELLER-LESSORS upon the execution of the Extrajudicial Settlement with sale.
On January 20, 1989, plaintiff paid the earnest money of THIRTY THOUSAND PESOS (P30,000.00), plus rentals for the subject property (Exh. "F", Plaintiff, record, p. 339).
On September 18, 1998 3, defendant heirs, through their counsel wrote a letter (Exh. 1, Defendants, record, p. 370) to the plaintiff furnishing the latter a copy of the reconstituted title to the subject property, advising him that he had thirty (3) days to produce the balance of SIX HUNDRED PESOS (sic) (P600,000.00) under the Memorandum of Agreement which plaintiff received on the same date.
On October 18, 1989, plaintiff sent the defendant heirs a letter requesting for an extension of the THIRTY (30) DAYS deadline up to November 15, 1989 within which to produce the balance of SIX HUNDRED THOUSAND PESOS (P600,000.00) (Exh. "G", Plaintiff, record, pp. 341-342). Defendant Roberto Z. Laforteza, assisted by his counsel Atty. Romeo L. Gutierrez, signed his conformity to the plaintiff's letter request (Exh. "G-1 and "G-2", Plaintiff, record, p. 342). The extension, however, does not appear to have been approved by Gonzalo Z. Laforteza, the second attorney-in-fact as his conformity does not appear to have been secured.
On November 15, 1989, plaintiff informed the defendant heirs, through defendant Roberto Z. Laforteza, that he already had the balance of SIX HUNDRED THOUSAND PESOS (P600,000.00) covered by United Coconut Planters Bank Manager's Check No. 000814 dated November 15, 1989 (TSN, August 25, 1992, p. 11; Exhs. "H", record, pp. 343-344; "M", records p. 350; and "N", record, p. 351). However, the defendants, refused to accept the balance (TSN, August 24, 1992, p. 14; Exhs. "M-1", Plaintiff, record, p. 350; and "N-1", Plaintiff, record, p. 351). Defendant Roberto Z. Laforteza had told him that the subject property was no longer for sale (TSN, October 20, 1992, p. 19; Exh. "J", record, p. 347).
On November 20, 1998 4, defendants informed plaintiff that they were canceling the Memorandum of Agreement (Contract to Sell) in view of the plaintiff's failure to comply with his contractual obligations (Exh. "3").
Thereafter, plaintiff reiterated his request to tender payment of the balance of SIX HUNDRED THOUSAND PESOS (P600,000.00). Defendants, however, insisted on the rescission of the Memorandum of Agreement. Thereafter, plaintiff filed the instant action for specific performance. The lower court rendered judgment on July 6, 1994 in favor of the plaintiff, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff Alonzo Machuca and against the defendant heirs of the late Francisco Q. Laforteza, ordering the said defendants.
(a) To accept the balance of P600,000.00 as full payment of the consideration for the purchase of the house and lot located at No. 7757 Sherwood Street, Marcelo Green Village, Parañaque, Metro Manila, covered by Transfer Certificate of Title No. (220656) 8941 of the Registry of Deeds of Rizal Parañaque, Branch;
(b) To execute a registrable deed of absolute sale over the subject property in favor of the plaintiff;
(c) Jointly and severally to pay the plaintiff the sum of P20,000.00 as attorney's fees plus cost of suit.
SO ORDERED. (Rollo, pp. 74-75). 5
Petitioners appealed to the Court of Appeals, which affirmed with modification the decision of the lower court; the dispositive portion of the Decision reads:
WHEREFORE, the questioned decision of the lower court is hereby AFFIRMED with the MODIFICATION that defendant heirs Lea Zulueta-Laforteza, Michael Z. Laforteza, Dennis Z. Laforteza and Roberto Z. Laforteza including Gonzalo Z. Laforteza, Jr. are hereby ordered to pay jointly and severally the sum of FIFTY THOUSAND PESOS (P50,000.00) as moral damages.
SO ORDERED. 6
Motion for Reconsideration was denied but the Decision was modified so as to absolve Gonzalo Z. Laforteza, Jr. from liability for the payment of moral damages. 7 Hence this petition wherein the petitioners raise the following issues:
I. WHETHER THE TRIAL AND APPELLATE COURTS CORRECTLY CONSTRUED THE MEMORANDUM OF AGREEMENT AS IMPOSING RECIPROCAL OBLIGATIONS.
II. WHETHER THE COURTS A QUO CORRECTLY RULED THAT RESCISSION WILL NOT LIE IN THE INSTANT CASE.
III. WHETHER THE RESPONDENT IS UNDER ESTOPPEL FROM RAISING THE ALLEGED DEFECT IN THE SPECIAL POWER OF ATTORNEY DATED 30 OCTOBER 1989 EXECUTED BY DENNIS LAFORTEZA.
IV. SUPPOSING EX GRATIA ARGUMENTI THE MEMORANDUM OF AGREEMENT IMPOSES RECIPROCAL OBLIGATIONS, WHETHER THE PETITIONERS MAY BE COMPELLED TO SELL THE SUBJECT PROPERTY WHEN THE RESPONDENT FAILED TO MAKE A JUDICIAL CONSIGNATION OF THE PURCHASE PRICE?
V. WHETHER THE PETITIONERS ARE IN BAD FAITH SO TO AS MAKE THEM LIABLE FOR MORAL DAMAGES? 8
The petitioners contend that the Memorandum of Agreement is merely a lease agreement with "option to purchase". As it was merely an option, it only gave the respondent a right to purchase the subject property within a limited period without imposing upon them any obligation to purchase it. Since the respondent's tender of payment was made after the lapse of the option agreement, his tender did not give rise to the perfection of a contract of sale.
It is further maintained by the petitioners that the Court of Appeals erred in ruling that rescission of the contract was already out of the question. Rescission implies that a contract of sale was perfected unlike the Memorandum of Agreement in question which as previously stated is allegedly only an option contract.
Petitioner adds that at most, the Memorandum of Agreement (Contract to Sell) is a mere contract to sell, as indicated in its title. The obligation of the petitioners to sell the property to the respondent was conditioned upon the issuance of a new certificate of title and the execution of the extrajudicial partition with sale and payment of the P600,000.00. This is why possession of the subject property was not delivered to the respondent as the owner of the property but only as the lessee thereof. And the failure of the respondent to pay the purchase price in full prevented the petitioners' obligation to convey title from acquiring obligatory force.
Petitioners also allege that assuming for the sake of argument that a contract of sale was indeed perfected, the Court of Appeals still erred in holding that respondent's failure to pay the purchase price of P600,000.00 was only a "slight or casual breach".
The petitioners also claim that the Court of Appeals erred in ruling that they were not ready to comply with their obligation to execute the extrajudicial settlement. The Power of Attorney to execute a Deed of Sale made by Dennis Z. Laforteza was sufficient and necessarily included the power to execute an extrajudicial settlement. At any rate, the respondent is estopped from claiming that the petitioners were not ready to comply with their obligation for he acknowledged the petitioners' ability to do so when he requested for an extension of time within which to pay the purchase price. Had he truly believed that the petitioners were not ready, he would not have needed to ask for said extension.
Finally, the petitioners allege that the respondent's uncorroborated testimony that third persons offered a higher price for the property is hearsay and should not be given any evidentiary weight. Thus, the order of the lower court awarding moral damages was without any legal basis.
The appeal is bereft of merit.
A perusal of the Memorandum Agreement shows that the transaction between the petitioners and the respondent was one of sale and lease. The terms of the agreement read:
1. For and in consideration of the sum of PESOS: SIX HUNDRED THIRTY THOUSAND (P630,000.00) payable in a manner herein below indicated, SELLER-LESSOR hereby agree to sell unto BUYER-LESSEE the property described in the first WHEREAS of this Agreement within six (6) months from the execution date hereof, or upon issuance by the Court of a new owner's certificate of title and the execution of extrajudicial partition with sale of the estate of Francisco Laforteza, whichever is earlier;
2. The above-mentioned sum of PESOS: SIX HUNDRED THIRTY THOUSAND (P630,000.00) shall be paid in the following manner:
P30,000.00 — as earnest money and as consideration for this Agreement, which amount shall be forfeited in favor of SELLER-LESSORS if the sale is not effected because of the fault or option of BUYER-LESSEE;
P600,000.00 — upon the issuance of the new certificate of title in the name of the late Francisco Laforteza and upon the execution of an Extrajudicial Settlement of his estate with sale in favor of BUYER-LESSEE free from lien or any encumbrances.
3. Parties reasonably estimate that the issuance of a new title in place of the lost one, as well as the execution of extrajudicial settlement of estate with sale to herein BUYER-LESSEE will be completed within six (6) months from the execution of this Agreement. It is therefore agreed that during the six months period, BUYER-LESSEE will be leasing the subject property for six months period at the monthly rate of PESOS: THREE THOUSAND FIVE HUNDRED (P3,500.00). Provided however, that if the issuance of new title and the execution of Extrajudicial Partition is completed prior to the expiration of the six months period, BUYER-LESSEE shall only be liable for rentals for the corresponding period commencing from his occupancy of the premises to the execution and completion of the Extrajudicial Settlement of the estate, provided further that if after the expiration of six (6) months, the lost title is not yet replaced and the extra judicial partition is not executed, BUYER-LESSEE shall no longer be required to pay rentals and shall continue to occupy, and use the premises until subject condition is complied by SELLER-LESSOR;
4. It is hereby agreed that within reasonable time from the execution of this Agreement and the payment by BUYER-LESSEE of the amount of P30,000.00 as herein above provided, SELLER-LESSORS shall immediately file the corresponding petition for the issuance of a new title in lieu of the lost one in the proper Courts. Upon issuance by the proper Courts of the new title, the BUYER-LESSEE shall have thirty (30) days to produce the balance of P600,000.00 which shall be paid to the SELLER-LESSORS upon the execution of the Extrajudicial Settlement with sale. 9
A contract of sale is a consensual contract and is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. 10 From that moment the parties may reciprocally demand performance subject to the provisions of the law governing the form of
contracts. 11 The elements of a valid contract of sale under Article 1458 of the Civil Code are (1) consent or meeting of the minds; (2) determinate subject matter and (3) price certain money or its equivalent. 12
contracts. 11 The elements of a valid contract of sale under Article 1458 of the Civil Code are (1) consent or meeting of the minds; (2) determinate subject matter and (3) price certain money or its equivalent. 12
In the case at bench, there was a perfected agreement between the petitioners and the respondent whereby the petitioners obligated themselves to transfer the ownership of and deliver the house and lot located at 7757 Sherwood St., Marcelo Green Village, Parañaque and the respondent to pay the price amounting to six hundred thousand pesos (P600,000.00). All the elements of a contract of sale were thus present. However, the balance of the purchase price was to be paid only upon the issuance of the new certificate of title in lieu of the one in the name of the late Francisco Laforteza and upon the execution of an extrajudicial settlement of his estate. Prior to the issuance of the "reconstituted" title, the respondent was already placed in possession of the house and lot as lessee thereof for six months at a monthly rate of three thousand five hundred pesos (P3,500.00). It was stipulated that should the issuance of the new title and the execution of the extrajudicial settlement be completed prior to expiration of the six-month period, the respondent would be liable only for the rentals pertaining to the period commencing from the date of the execution of the agreement up to the execution of the extrajudicial settlement. It was also expressly stipulated that if after the expiration of the six month period, the lost title was not yet replaced and the extrajudicial partition was not yet executed, the respondent would no longer be required to pay rentals and would continue to occupy and use the premises until the subject condition was complied with the petitioners.
The six-month period during which the respondent would be in possession of the property as lessee, was clearly not a period within which to exercise an option. An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. An option contract is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. 1 An option must be supported by consideration.14 An option contract is governed by the second paragraph of Article 1479 of the Civil Code 15, which reads:
Art. 1479. . . .
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.
In the present case, the six-month period merely delayed the demandability of the contract of sale and did not determine its perfection for after the expiration of the six-month period, there was an absolute obligation on the part of the petitioners and the respondent to comply with the terms of the sale. The parties made a "reasonable estimate" that the reconstitution the lost title of the house and lot would take approximately six months and thus presumed that after six months, both parties would be able to comply with what was reciprocally incumbent upon them. The fact that after the expiration of the six-month period, the respondent would retain possession of the house and lot without need of paying rentals for the use therefor, clearly indicated that the parties contemplated that ownership over the property would already be transferred by that time.
The issuance of the new certificate of title in the name of the late Francisco Laforteza and the execution of an extrajudicial settlement of his estate was not a condition which determined the perfection of the contract of sale. Petitioners' contention that since the condition was not met, they no longer had an obligation to proceed with the sale of the house and lot is unconvincing. The petitioners fail to distinguish between a condition imposed upon the perfection of the contract and a condition imposed on the performance of an obligation. Failure to comply with the first condition results in the failure of a contract, while the failure to comply with the second condition only gives the other party the option either to refuse to proceed with the sale or to waive the condition. Thus, Art. 1545 of the Civil Code states:
Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty.
Where the ownership in the things has not passed, the buyer may treat the fulfillment by the seller of his obligation to deliver the same as described and as warranted expressly or by implication in the contract of sale as a condition of the obligation of the buyer to perform his promise to accept and pay for the thing. 16
In the case at bar, there was already a perfected contract. The condition was imposed only on the performance of the obligations contained therein. Considering however that the title was eventually "reconstituted" and that the petitioners admit their ability to execute the extrajudicial settlement of their father's estate, the respondent had a right to demand fulfillment of the petitioners' obligation to deliver and transfer ownership of the house and lot.
What further militates against petitioners' argument that they did not enter into a contract or sale is the fact that the respondent paid thirty thousand pesos (P30,000.00) as earnest money. Earnest money is something of value to show that the buyer was really in earnest, and given to the seller to bind the bargain.17 Whenever earnest money is given in a contract of sale, it is considered as part of the purchase price and proof of the perfection of the contract. 18
We do not subscribe to the petitioners' view that the Memorandum Agreement was a contract to sell. There is nothing contained in the Memorandum Agreement from which it can reasonably be deduced that the parties intended to enter into a contract to sell, i.e. one whereby the prospective seller would explicitly reserve the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the full payment of the price, such payment being a positive suspensive condition, the failure of which is not considered a breach, casual or serious, but simply an event which prevented the obligation from acquiring any obligatory force. 19 There is clearly no express reservation of title made by the petitioners over the property, or any provision which would impose non-payment of the price as a condition for the contract's entering into force. Although the memorandum agreement was also denominated as a "Contract to Sell", we hold that the parties contemplated a contract of sale. A deed of sale is absolute in nature although denominated a conditional sale in the absence of a stipulation reserving title in the petitioners until full payment of the purchase price. 20 In such cases, ownership of the thing sold passes to the vendee upon actual or constructive delivery thereof. 21 The mere fact that the obligation of the respondent to pay the balance of the purchase price was made subject to the condition that the petitioners first deliver the reconstituted title of the house and lot does not make the contract a contract to sell for such condition is not inconsistent with a contract of sale. 22
The next issue to be addressed is whether the failure of the respondent to pay the balance of the purchase price within the period allowed is fatal to his right to enforce the agreement.
We rule in the negative.
Admittedly, the failure of the respondent to pay the balance of the purchase price was a breach of the contract and was a ground for rescission thereof. The extension of thirty (30) days allegedly granted to the respondent by Roberto Z. Laforteza (assisted by his counsel Attorney Romeo Gutierrez) was correctly found by the Court of Appeals to be ineffective inasmuch as the signature of Gonzalo Z. Laforteza did not appear thereon as required by the Special Powers of Attorney. 2 However, the evidence reveals that after the expiration of the six-month period provided for in the contract, the petitioners were not ready to comply with what was incumbent upon them, i.e. the delivery of the reconstituted title of the house and lot. It was only on September 18, 1989 or nearly eight months after the execution of the Memorandum of Agreement when the petitioners informed the respondent that they already had a copy of the reconstituted title and demanded the payment of the balance of the purchase price. The respondent could not therefore be considered in delay for in reciprocal obligations, neither party incurs in delay if the other party does not comply or is not ready to comply in a proper manner with what was incumbent upon him. 24
Even assuming for the sake of argument that the petitioners were ready to comply with their obligation, we find that rescission of the contract will still not prosper. The rescission of a sale of an immovable property is specifically governed by Article 1592 of the New Civil Code, which reads:
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. 25
It is not disputed that the petitioners did not make a judicial or notarial demand for rescission. The November 20, 1989 letter of the petitioners informing the respondent of the automatic rescission of the agreement did not amount to a demand for rescission, as it was not notarized. 26 It was also made five days after the respondent's attempt to make the payment of the purchase price. This offer to pay prior to the demand for rescission is sufficient to defeat the petitioners' right under article 1592 of the Civil Code. 27 Besides, the Memorandum Agreement between the parties did not contain a clause expressly authorizing the automatic cancellation of the contract without court intervention in the event that the terms thereof were violated. A seller cannot unilaterally and extrajudicially rescind a contract or sale where there is no express stipulation authorizing him to extrajudicially rescind. 28 Neither was there a judicial demand for the rescission thereof. Thus, when the respondent filed his complaint for specific performance, the agreement was still in force inasmuch as the contract was not yet rescinded. At any rate, considering that the six-month period was merely an approximation of the time if would take to reconstitute the lost title and was not a condition imposed on the perfection of the contract and considering further that the delay in payment was only thirty days which was caused by the respondents justified but mistaken belief that an extension to pay was granted to him, we agree with the Court of Appeals that the delay of one month in payment was a mere casual breach that would not entitle the respondents to rescind the contract. Rescission of a contract will not be permitted for a slight or casual breach, but only such substantial and fundamental breach as would defeat the very object of the parties in making the agreemant. 29
Petitioners' insistence that the respondent should have consignated the amount is not determinative of whether respondent's action for specific performance will lie. Petitioners themselves point out that the effect of cansignation is to extinguish the obligation. It releases the debtor from responsibility therefor. 30 The failure of the respondent to consignate the P600,000.00 is not tantamount to a breach of the contract for by the fact of tendering payment, he was willing and able to comply with his obligation.
The Court of Appeals correctly found the petitioners guilty of bad faith and awarded moral damages to the respondent. As found by the said Court, the petitioners refused to comply with, their obligation for the reason that they were offered a higher price therefor and the respondent was even offered P100,000.00 by the petitioners' lawyer, Attorney Gutierrez, to relinquish his rights over the property. The award of moral damages is in accordance with Article 1191 31 of the Civil Code pursuant to Article 2220 which provides that moral damages may be awarded in case of breach of contract where the defendant acted in bad faith. The amount awarded depends on the discretion of the court based on the circumstances of each
case. 32 Under the circumstances, the award given by the Court of Appeals amounting to P50,000.00 appears to us to be fair and reasonable.
case. 32 Under the circumstances, the award given by the Court of Appeals amounting to P50,000.00 appears to us to be fair and reasonable.
ACCORDINGLY, the decision of the Court of Appeals in CA G.R. CV No. 47457 is AFFIRMED and the instant petition is hereby DENIED.
No pronouncement as to costs.
SO ORDERED.1âwphi1.nêt
Melo, Panganiban and Purisima, JJ., concur.
Vitug, J., abroad on official business.
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