MANUEL LAPINIG AND LEONCIO CHAVAS, PETITIONERS, VS. THE HONORABLE COURT OF APPEALS AND FRANCISCO V. JORVINA, RESPONDENTS.

Lapinig versus Court of Appeals

The Case

This is a petition for review of a decision of the Court of Appeals, brought by Manuel Lapinig and Leoncio Chavas against the Court of Appeals and Francisco Jorvina. The dispute is over a residential lot in the East Avenue Subdivision in Quezon City, owned by the People's Homesite and Housing Corporation. Jorvina sued to have the lot re-awarded to him; Lapinig and Chavas intervened, claiming the lot had been validly re-awarded to them. The case matters because it fixes the rule that a government corporation which has perfected a contract to sell cannot unilaterally cancel it, and that a re-award made after an investigation that denied the awardee notice and hearing is arbitrary and void.

Procedural History

Jorvina filed a complaint in the Court of First Instance of Rizal, Quezon City, Branch Four, against the People's Homesite and Housing Corporation, praying for re-award of the lot, damages, and attorney's fees. Lapinig and Chavas filed a complaint in intervention, praying that the corporation be ordered to execute the final deed of sale in their favor and that Jorvina pay them damages. After pre-trial, the trial court dismissed Jorvina's complaint, upheld the corporation's authority to cancel his award and re-award the lot to the intervenors, and awarded no damages to anyone. Jorvina appealed, and the Court of Appeals reversed, ordering that the contract in his favor be maintained and specifically performed and his rights to the lot reinstated. Lapinig and Chavas then came to the Supreme Court by petition for review.

Facts

On January 28, 1958, Jorvina filed an application to purchase a lot with the corporation and was awarded Lot 10, Block E-156, paying the required ten percent deposit of 546 pesos and 96 centavos. In November 1962, Mrs. Arsenia Lapinig filed a complaint contesting the award. The corporation's Board of Directors, by Resolution 282 dated January 3, 1963, sustained the award to Jorvina and denied her appeal; the General Manager formally notified Jorvina of this on April 1, 1963.

On March 20, 1964, the corporation and Jorvina executed a Conditional Contract to Sell over the lot, for 5,469 pesos and 60 centavos payable in monthly installments over ten years with six percent interest. Jorvina complied with the terms of payment, and his payments as of February 1966 amounted to 2,490 pesos and 31 centavos.

In April 1965, the Presidential Investigating Committee reinvestigated the award. On November 22, 1965, it recommended cancellation of the award to Jorvina and re-award to Manuel Lapinig and Andronico Alcovendas, pro indiviso. Jorvina was not given notice of this reinvestigation, nor the opportunity to be heard and to adduce his own evidence. The Board approved the recommendation by Resolution 541 dated January 13, 1966. Lapinig and Alcovendas paid the ten percent initial payment, and the corporation refused Jorvina's later remittance. In December 1966, the Board approved the transfer of Alcovendas's one-half undivided portion to Leoncio Chavas. In June 1968, the corporation and Lapinig and Chavas executed a Conditional Contract to Sell, but that document was not signed by the corporation's General Manager.

Issues

• Whether or not the People's Homesite and Housing Corporation could unilaterally cancel the award and the Conditional Contract to Sell in favor of Jorvina and re-award the lot to Lapinig and Chavas.
• Whether or not the reinvestigation by the Presidential Investigating Committee, which led to the cancellation of Jorvina's award, satisfied the requirements of due process.
• Whether or not Lapinig and Chavas had a preferential right to purchase the lot as bona fide occupants.
• Whether or not the Conditional Contract to Sell in favor of Lapinig and Chavas gave rise to any enforceable right.

Applicable Provisions

Article 1315 of the New Civil Code provides:

Article 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law.

This is the provision the Court uses to hold that the corporation, having perfected its contract with Jorvina, could not unilaterally cancel it.

Ruling

On the first issue, the Court held that the Conditional Contract to Sell dated March 20, 1964 was validly entered into, having the essential elements of a perfected contract: consent, subject matter, and cause or consideration. Upon perfection, the parties are bound not only to what is expressly stipulated but also to all consequences in keeping with good faith, usage, and law. Thus the corporation, as a consequence of entering into that contract, may not unilaterally cancel the award in favor of Jorvina nor re-award the property to others. The fact that the corporation is a government corporation does not exempt it from compliance with its contractual obligations. Since Jorvina had made installment payments, there was partial performance; if there was a ground to annul the contract, the corporation should have filed an action for annulment within the prescribed period, which it did not do.

On the second issue, the Court held that the procedure of the Presidential Investigating Committee was arbitrary, oppressive, and inquisitorial. Jorvina was not given notice of the reinvestigation nor the opportunity to be heard and to adduce his evidence. Not even the most basic requisites of due process were met. The new award was therefore arbitrary and violative of Jorvina's property rights.

On the third issue, the Court held that the claim of preferential right as bona fide occupants was without merit. The character of their possession was not clearly established, and there was no claim of possession in good faith, which is the essential ingredient for invoking the government policy of resale to bona fide occupants. The cases of Guardiano versus Encarnacion and the corporation versus Tiongco were not applicable, because in both the actual occupants were expressly found to be possessors in good faith.

On the fourth issue, the Court held that the Conditional Contract to Sell in favor of Lapinig and Chavas was not signed by the General Manager of the corporation. It is therefore no contract at all and gives rise to no enforceable right or demandable obligation.

Doctrine

A contract to sell, once perfected, binds the parties not only to what is expressly stipulated but also to all consequences in keeping with good faith, usage, and law, under Article 1315 of the New Civil Code. A government corporation is not exempt from compliance with its contractual obligations, and it cannot unilaterally cancel a perfected contract; it must sue for annulment within the prescribed period. A re-award made after an investigation that denied the awardee notice and hearing is arbitrary and violates due process. A claim of preferential right as a bona fide occupant requires proof of possession in good faith. A contract not signed by the authorized officer of the corporation is no contract at all.

Disposition

The Supreme Court affirmed the decision of the Court of Appeals, with costs against the petitioners; Jorvina won, and his contract was maintained and specifically performed.

Remember This

A government corporation that has perfected a contract to sell cannot unilaterally cancel it; it must go to court to annul it. Examiners use this case to test the application of Article 1315 and due process in administrative re-awards of public land.