SALVADORA G. GARCIA, AND PACIFICO C. GARCIA, PETITIONERS, VS. THE HONORABLE COURT OF APPEALS, MIGUEL SOCCO, AND PURA SOCCO, RESPONDENTS.

In the decision now sought to be reviewed the Court of Appeals
made the following statement of the case:

“On October 14, 1959, the spouses Miguel R. Socco and Pura Verona sold to the
spouses Pacifico Garcia and Salvadora
Garcia a three-story house and lot, situated on Pennsylvania, Malate, Manila, for the price consisting partly in money,
P38,016.57, and partly in another thing, the
assumption by the vendees of the vendors’ mortgage debt of P20,074.13 to the
Development Bank of the Philippines (Exhibit A).  The vendees retained P2,000.00
of the money to answer for the fulfillment of the vendors’ obligation to pay
the registration fee, real estate taxes, documentary stamps and notarial fee.  After
the vendors had fulfilled said obligation, they demanded from the vendees
payment of said amount of P2,000.00 but the vendees
failed or refused to comply with the demand.

“The vendees did not immediately assume the vendors’’ mortgage
debt of P20,074.13 to the Development Bank of the Philippines.  Consequently, on November 13, 1959, the Bank forclosed the mortgage and acquired the mortgaged
property at a public auction on November
17, 1959. About one year later, on October 27, 1960, the spouses Garcia acquired the
property by conditional sale from the Development Bank of the Philippines
(Exhibit 11).

“On April 13, 1960,
the spouses Socco, as plaintiffs, brought this action
against the spouses Garcia for rescission of the contract of sale for failure
on the part of the vendees to perform what was incumbent upon them.  The lower court rendered judgment dismissing
the complaint and ordering the plaintiffs to pay the defendants the sum of P1,000.00 as attorney’s fee. 
From this judg­ment, plaintiffs appealed.”

Upon the foregoing statement the Court of Appeals reversed the
decision of the trial court in favor of the
defendants and rendered its own judgment, as follows:

“. . .  decreeing the rescision of the contract of sale with assumption of
mortgage dated October 14, 1959 and ordering the appellees
to return to the appellants the three-story house and lot object of the
contract together with its civil fruits from date of the contract until its
return, and ordering the appellants to return to the appellees
the sum of P36,016.57, with legal interest at 6% per
annum from said date until its
return.  The appellees
are also ordered to pay the appellants the sum of P15,000.00
as moral damages, and the sum of P33,000.00 as counsel fee.

Costs against the appellees
in both instances.

“After this judgment has become final and executory,
the lower court shall determine from the evidence to be submitted by the
parties the amount of civil fruits which the appellees
are ordered by this judgment to return to the appellants.  The amount so deter­mined shall be included
in the writ of execution.

REVERSED, NEW JUDGMENT
RENDERED.”

Five errors are
attributed by the petitioner to the appellate court, of which we consider the
first one to be decisive, namely, that the “decision is premised on a flagrant misapprehension of
facts overwhelmingly and irrefutably established in the trial court.”  The findings directly impugned on this ground
are: (1) that the vendees (petitioners herein) retained P2,000.00 of the money
(the part of the purchase price payable in cash, amounting to P38,016.57) to answer for the fulfillment of the
vendors’ obligation to pay the registration fee, real estate taxes, documentary
stamps and notarial fee, and refused to pay the said
amount to the vendors (respondents herein); and (2) that the vendees did not
immediately assume the vendors’ mortgage
debt of P20,074.13 to the Development Bank of the Philippines.

The preliminary question
which poses itself in connection with this first assignment of error is whether
this Court may make its own findings of fact independently of those made by the
Court of Appeals.  The general rule
is that the appellate court’s findings
are conclusive, but this rule is not without some recognized exceptions,
such as:

“(1) When the conclusion is a finding grounded entirely on
speculations, surmises or conjectures; (2) when the inference is manifestly
mistaken, absurd or impossible; (3) when there is a grave abuse of discre­tion;
(4) when the judgment is based on a misapprehension of facts; (5) when the find­ings
of fact are conflicting; (6) when the Court of Appeals, in making its findings,
went beyond the issues of the case and the same is contrary to the admissions
of both appellant and appellee.  (Roque
vs. Buan, et al., G. R. No. L-22459,
October 31,
1967; Ramos vs. Pepsi Cola Bottling Co., G. R. No. L-22533, Feb. 9, 1967; Hilario, Jr. vs. City of Manila, G. R. No.
L-19570, Sept. 14, 1967).”

Several circumstances compelled us to go into the record of this
case in order to find out whether or not it falls within the exceptions above
stated: first, the findings of the Court of Appeals are contrary to those of
the trial court; second, said findings are in the nature of conclusions,
without citation of the speci­fic evidences on which they are based; and third,
the facts set forth in the petition as well as in the peti­tioners’ main and
reply briefs, with the corresponding references to the record, are not disputed
by the respondents.  These facts are
necessary for a clear under­standing and proper resolution of the issue of
rescission in this case.

Before the sale of the property in question to the petitioners on
October 14, 1959, the same
had been mortgaged by the respondents twice – first to the Development Bank of
the Philippines (DBP) and second to the General Financing Corporation. On August 5, 1959 the DBP, through its
legal department, started extrajudicial foreclosure proceedings.  So did the General Financing Corpora­tion on October 14, 1959.  The negotiations concerning the sale of the
property to the petitioners were handled by the brokerage firm of Leviste & Co., who had advertised the same in the
“Manila Times.”  When the deed
of sale was executed in their favor on October
14, 1959 the peti­tioners were aware of the existence of the
mortgages, but not of the fact that the
one in favor of the DBP was already under foreclosure.  They were dealing with the real estate
department of that office, which evidently was not coordinating its activities
with the legal depart­ment.

The price of the sale was
P65,000.00.  Of
this amount petitioner Salvadora Garcia paid P18,766.80 to the second mortgagee.  The then outstanding loan obliga­tion with
the DBP was P27,085.56, and to update the same Salvadora Garcia paid, on October 16, 1959, two sums in the name of respondent Miguel Socco – one
of P6,912.21 for the accumulated arrears in his amortizations and the other,
P99.32, as further adjustment of the account. 
These payments brought down the mortgage obligation to P20,074.13, which the petitioners assumed under the terms of
the deed of sale of October 14, 1959, aside from the cash consideration of
P38,016.57 expressly stated on the same instrument.  The breakdown of the price, as made by the
parties before the deed was released to the vendees on October
16, 1959, is as
follows, as set forth in the petitioners brief without any contradiction on the
part of the respondents:

Subtracting this total amount of P52,852.46
from the purchase price of P65,000.00,
the balance was P12,147.54.  This balance
was admittedly paid to the vendors, as respondent Miguel Socco
stipulated with them in open court at the trial, thus:

“Atty. Garcia: The amount of P12,147.54
was received by Mr. Socco himself after we have
computed all that we have paid in his favor and this is the balance due them.

“Atty. Socco: Admitted, sir.”

As far as the real estate department of the DBP was concerned,
everything was apparently in order.  The
mortgage account had been updated and the mortgaged property had been sold,
with the buyers assuming the mortgage indebtedness, although the formal
approval of the sale by the said depart­ment did not come until later, that is,
on May 5, 1960.

Meanwhile the legal department of the DBP, un­informed of the
developments aforesaid, proceeded with the extrajudicial foreclosure it had
started since August 5, 1959,
and on November 17, 1959
caused the property to be sold at public auction and bought it as the highest
bidder.  The sale was registered and the
title to the property was subsequently transferred in the name of the DBP.  The Soccos were
notified of the sale, but of course took no steps to redeem, having already
conveyed the property to the peti­tioners. 
The latter’s justifiable grievance, undenied
by the respondents, is that they were not apprised of the fact that the
property was under foreclosure even while they were buying it and making the
mortgage account up-to-date.  The
foreclosure could indeed have been avoided if only the respondents had informed
them about it.  Anyway, after the
discovery of the rather anomalous situation which had arisen by virtue of the
assumption, on one hand, of the mortgage by the Garcias,
and, on the other hand, the foreclosure of the same mortgage as against the Soccos and the consequent public sale of the property to
the DBP, the Latter, as a practical solution, executed a deed of con­ditional sale in favor of the Garcias,
with the DBP retaining ownership of the property until full payment of the
selling price.

The background facts
having been disposed of the first question is: Did the vendees retain P2,000.00 of the consideration of the sale to them by the Soccos, as stated by the Court of Appeals?  The payments made on account of the said sale
are itemized hereinabove, showing that this particular sum of P2,000.00 was paid by check (Exh. C)
to Leviste & Co., on October 16, 1959.  This is not denied by the respondents; but it
seems that their contention is that the payment should have been made to them
directly.  The uncontroverted
facts, however, support the validity of such payment.  In the first place, Leviste
& Co., was the respondents’ agent who handled the
transaction for them, and to whom in fact all the checks drawn by the
petitioners were delivered.  Secondly, the very deed of sale with assumption of mortgage (Exh. A) recites that the
vendors “hereby acknowledge and confess to have received from the vendees
the sum of 38,016.57,” which according to the computation made by both
parties included the sum of P2,000.00. Thirdly, Atty. Mariano Agoncillo, testi­fying for the respondents, said that it
was he who prepared the deed of sale and that he did not release it to the
vendees “until the full amount due Mr. Socco was
paid.”  Finally, one of the facts
proposed for stipulation by the petitioners and admitted by the respondents is
“that the amount of P12,147.54 was received by
Mr. Socco himself after we have computed all what
we have paid in his favor and that is the balance due him.”

It is quite clear that the conclusion arrived at by the appellate
court with respect to the particular item of P2,000.00 is not only without basis but
contrary to the indubitable evidence in this case – evidence which the
respondents have not even cared to refute. 
Under the cir­cumstances no reliance can be placed on the general rule
that findings of fact of the Court of Appeals are conclu­sive and may no longer
be reviewed.

The second ground on
which the Court of Appeals ordered the rescission of the sale is that the
petitioners failed to assume the mortgage in favor of the DBP.  We are at a loss to see how such a conclusion
was arrived at.  The deed of sale itself
recites that the petitioners assumed “the obligation of paying the
Development Bank of the Philippines the balance of P20,074.13.
. . as if they were the original
mortgagors.”  The said balance was
determined after the petitioners had updated the respondents’ mortgage
obligation by delivering two checks in payment – one for P6,912.21
(Exh. 3) and
the other for P99.32 (Exh. 4).  This fact was even stipulated by the parties
at the trial.  There could hardly have
been any more effective act of compliance by the petitioners with their
obligation to assume the respondents’ mortgage. 
The payments were accepted by the mortgagee, although its formal
approval of the sale and of the transfer of the mortgage did not come until
later, as evidenced
by the letter of the Manager of the Real Estate Department of the DBP to
petitioner Salvadora Garcia, dated May 5, 1960.  (Exh.
10).

The respondents argue that if the petitioners had assumed the
mortgage it would not have been foreclosed and the property would not have been
sold at public auction.  The simple
answer to this argument is that the respondents had ceased to have any interest
in the said property; that they had already transferred it and had received all
that was due them by virtue of such transfer; and that if the mortgage was
foreclosed it was not the respondents but the petitioners who were prejudiced,
since they had to recog­nize the DBP’s title by
virtue of the foreclosure sale, contenting themselves with a subsequent
conditional sale in their favor.

But the respondents say
that the sale caused damage to their good name, for which they claimed and were
awarded by the Court of Appeals moral damages in the sum of P15,000.00 and attorney’s fees in the sum of P3,000.00.  On this point the said court entirely
overlooked the fact that the fore­closure proceeding started months before the
property was even offered to the petitioners and that the respondents did not
inform them about it.  Indeed there was no
reason to foreclose at all.  It came
about simply because the fore­closure was being handled by the legal department
of the DBP while the sale with assumption of mortgage was being handled by the
real estate department; and neither department, incredible as it may seem, was privy to what the other was
doing.  Such was the communication-gap
between the two that notwithstanding
the foreclosure sale on November 17,
1959, whereby the DBP became the owner of the property, it still
approved the assumption of mortgage by the petitioners on May 5, 1960. 
In any event the confusion cannot be attributed to them: it was in their
interest to prevent the same, and they would surely have done so if the
respondents had only informed them of the pendency of
the foreclosure pro­ceeding.  There was
no failure on their part to fulfill their obligation to the petitioners, and no
ground to rescind the contract between them.

Wherefore, the decision of the Court of Appeals is
reversed and set aside, and the judgment
of the Court of First Instance of Manila dated August 5, 1963 is reinstated and affirmed, with costs against the respondents.

Concepcion, C.J., Reyes, J.B.L., Dizon, Zaldivar, Castro,
Fernando, Teehankee, Barredo,
and Villamor, JJ., concur.