PERLA SAN LORENZO, PLAINTIFF-APPELLEE, V. SPOUSES NOEL AND LUNINGNING DANAO, DEFENDANTS-APPELLANTS.

San Lorenzo versus Danao

The Case

This is a case about a sale of land for a lump sum price, and about what the buyer may demand when the land actually delivered turns out to be smaller than the area recited in the deed. Perla San Lorenzo, the buyer, sued the spouses Noel and Luningning Danao, the sellers, for specific performance with recovery of possession and ownership with damages, asking that they be compelled to deliver the full five hectares stated in their Deed of Absolute Sale. The sellers answered that they had sold only the southern half of what they believed was a ten hectare property, and that the true area was smaller. The case matters because it draws the line between a sale at a price per unit of measure and a sale for a lump sum, and it tells the Bar candidate which of the two — the stated area or the stated boundaries — controls when the two do not match.

Procedural History

San Lorenzo filed her complaint for specific performance with recovery of possession and ownership with damages before the Regional Trial Court of Masbate City, Branch 46. The trial court rendered judgment in her favor, ordering the spouses Danao to deliver the entire five hectares specified in the Deed of Absolute Sale and to pay her moral and exemplary damages. Aggrieved, the spouses Danao filed a notice of appeal, and the appeal was taken to the Supreme Court pursuant to Rule 41 of the 1997 Rules of Civil Procedure. The Supreme Court reversed and set aside the decision of the trial court.

Facts

On May 30, 2003, the spouses Noel and Luningning Danao purchased a ten hectare parcel of land, covered by Tax Declaration Number 5191, from Jose Zaragoza, Sr. Some three years later, on August 9, 2005, they sold the southern half of that land to Perla San Lorenzo for a fixed sum of sixty thousand pesos. The Deed of Absolute Sale described the object as a portion of cogon land located at Sitio Pajo, Barrio Bangon, Aroroy, Masbate, with an area of five hectares, more or less, bounded on the North by the property of Noel B. Danao, on the East by that of Emilio Rizo, on the South by that of Emiliano Aviso, and on the West by those of Garcenio Cabiles and Edgardo Tugbo. The deed itself stated that the portion is located on the southern half of the land covered by Tax Declaration Number 5191 in the name of Jose Zaragoza, Sr.

San Lorenzo later caused the property to be surveyed and discovered that the parcel actually delivered to her had an area of only 4.1401 hectares. On March 19, 2007, she sent a demand letter to Noel Danao asking for a refund of her overpayment, but the demand went unheeded. On February 28, 2008, she commenced her complaint before the trial court.

In their answer, the spouses Danao asserted that what they sold was the southern half of the ten hectare land originally covered by the tax declaration, and that upon verification the entire property turned out to be less than seven hectares, not ten. They maintained that they could not have sold more than the southern half, since their intention was to retain the northern half for themselves. They stressed that at the time of the sale the original parcel had not yet been surveyed, so there was no way of knowing its correct and accurate area. San Lorenzo, for her part, insisted that the terms of the deed are clear and unambiguous, and that evidence aliunde cannot be introduced to vary them.

Issues

• Whether or not the obligation of the sellers is to deliver the entire five hectares specified in the deed of sale, without considering the actual boundaries of the land sold.
• Whether or not the area actually delivered by the sellers was only 4.1401 hectares.
• Whether or not the trial court erred in awarding moral damages of ten thousand pesos and exemplary damages of five thousand pesos.

Applicable Provisions

Article 1542 of the Civil Code governs the sale of real property for a lump sum, as distinguished from one at the rate of a certain sum for a unit of measure or number, and it provides:

Article 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or less area or number than that stated in the contract. The same rule shall be applied when two or more immovables are sold for a single price; but if, besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall be bound to deliver all that is included within said boundaries, even when it exceeds the area or number specified in the contract; and, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated.

This provision is the very rule the Court applies: because the sale was for a lump sum, the recited area does not fix the price, and what the vendor must deliver is all the land enclosed by the boundaries stated in the deed.

Ruling

On the first issue, the Court held that the trial court erred in ordering the delivery of the entire five hectares. Looking at the Deed of Absolute Sale, the Court found that San Lorenzo purchased, for a lump sum consideration of sixty thousand pesos, a parcel of cogon land containing an area of five hectares, more or less, situated on the southern half of the land covered by the tax declaration, and that the deed further indicated the four boundaries. The parties had therefore agreed to a lump sum purchase price for a predetermined, albeit unsurveyed, area of five hectares, more or less. Under Article 1542, if the area of the determinate thing is set forth in the contract and after delivery the actual area within the boundaries is less than that stipulated, there shall be no decrease in the price. What controls is the entire land included within the boundaries, regardless of whether the real area is greater or smaller than that recited in the deed, and this is especially so when the area is described with the phrase more or less. In case of conflict between the area and the boundaries, the boundaries prevail, following the principle that what really defines a piece of ground is not the area, calculated with more or less certainty, mentioned in its description, but the boundaries therein laid down, as enclosing the land and indicating its limits. The Court added that a deed of sale of land need not disclose the area with mathematical accuracy; what is essential is that its extent is objectively indicated with sufficient precision to enable one to identify it, and an error as to area that is not great or sizable is immaterial.

The Court then recognized the exception. The use of the phrase more or less merely covers a reasonable excess or deficiency, and where the difference between the actual area and that stated in the contract is so great as to cause a substantial error, the contract may be annulled. A discrepancy of ten hectares, as in Del Prado versus Spouses Caballero, is sizable and cannot be dismissed as slight, whereas differences of a fourth of a fraction and of one hectare, as in Esguerra versus Trinidad and Lietz versus Martinez, were deemed inconsequential. Here the deficiency consisted of less than one hectare, more specifically .8599 hectares of the total stated area, so the exception does not apply.

On the second issue, the Court held that the area of five hectares recited in the deed is but an approximation and not an exact measurement, and that it is the area of 4.1401 hectares as determined from the survey plan, which took into account the boundaries of the land, that delineates the scope of the sale. What the spouses Danao are obliged to deliver is all of the actual area of 4.1401 hectares of cogon land included within the boundaries stated in the deed.

On the third issue, since the complaint for specific performance was dismissed for lack of merit, the awards of moral and exemplary damages granted by the trial court could not stand, and the assailed decision was reversed and set aside in its entirety.

Doctrine

In a sale of real estate for a lump sum, and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price although the area be greater or less than that stated in the contract. Where the boundaries are mentioned and the area is designated, the vendor is bound to deliver all that is included within the boundaries, even if this exceeds the area specified, and should he be unable to do so, he suffers a reduction in price in proportion to what is lacking, unless the contract is rescinded because the vendee does not accede to the failure to deliver what was stipulated. In case of conflict between the area and the boundaries, the boundaries prevail, and the phrase more or less covers only a reasonable excess or deficiency. Where the discrepancy is so great as to amount to a substantial error, the contract may be annulled; a deficiency of less than one hectare is not sizable.

Disposition

The appeal was granted, the decision of the trial court was reversed and set aside, and the complaint of Perla San Lorenzo for specific performance with recovery of possession and ownership with damages was dismissed for lack of merit.

Remember This

Memorize the line that in a lump sum sale of land the boundaries control and not the stated area, so that a deficiency of less than one hectare, described as more or less, calls for no reduction in price. Examiners like to use this case to test the distinction between a lump sum sale and a sale at a rate per unit of measure, and to ask when a discrepancy in area is sizable enough to justify annulment or rescission.