TITO R. LAGAZO, PETITIONER, VS. COURT OF APPEALS AND ALFREDO CABANLIT, RESPONDENTS.

Lagazo versus Court of Appeals

The Case

This is the story of a grandson who claimed a lot by donation from his grandmother, and of the man occupying it who claimed the same lot by purchase. Tito Lagazo sued Alfredo Cabanlit to recover possession of a house and lot in Old Sta. Mesa, Manila, asserting that his grandmother, Catalina Jacob, had donated the property to him while she was in Canada. Cabanlit resisted, saying he had bought the property from Eduardo Español, who in turn had acquired it from the grandmother. The case matters because it settles two questions every civil law student must be able to answer: when is a donation of immovable property perfected, and when is a donation onerous rather than simple. The Supreme Court reminds us that acceptance is indispensable, and that a donee's voluntary payments do not convert a pure act of liberality into an onerous donation.

Procedural History

Lagazo filed a complaint for recovery of possession and damages before the Regional Trial Court of Manila, Branch 30. After trial, the trial court ruled in his favor. It ordered Cabanlit, or anyone claiming rights under him, to surrender possession of the premises, and ordered Cabanlit to pay attorney's fees of 5,000 pesos, with costs against him. Cabanlit's counterclaims were dismissed.

Cabanlit appealed to the Court of Appeals, which reversed the trial court. The appellate court held that there was no showing that Lagazo had accepted the donation, and that a donee's failure to accept, whether in the same deed or in a separate instrument, renders the donation null and void. It also rejected Lagazo's argument that the donation was onerous because he had paid the amortizations, reasoning that the deed imposed no burden, charge, or condition, so his payments were voluntary acts.

Lagazo then came to the Supreme Court through a petition for review under Rule 45 of the Rules of Court, asking that the appellate decision be set aside.

Facts

Catalina Jacob, a widow and the grandmother of Lagazo, was awarded in July 1975 a 60.10 square meter lot forming part of the Monserrat Estate, a public land owned by the City of Manila and distributed for sale to bona fide tenants under its land-for-the-landless program. She constructed a house on the lot. In October 1977, shortly before leaving for Canada, where she became a permanent resident, she executed a special power of attorney in favor of her son-in-law Eduardo Español to execute all documents needed for the final adjudication of her claim. Español failed to accomplish that purpose, so in April 1984 she revoked the authority and executed another power of attorney of the same tenor in favor of Lagazo.

In January 1985, Catalina Jacob executed in Canada a deed of donation over the lot in favor of Lagazo. After the donation, Lagazo checked with the Register of Deeds and learned that the property was in the delinquent list. He paid the installments in arrears and the remaining balance on the lot, and declared the property in the name of Catalina Jacob. In January 1986 he sent a demand letter asking Cabanlit to vacate the premises, and a similar letter was sent by his counsel in September 1986. Cabanlit refused, claiming ownership.

Cabanlit's claim rested on three documents: a deed of absolute sale executed by Catalina Jacob in October 1977 in favor of Español covering the residential house; a deed of assignment over the lot executed by Catalina Jacob in favor of Español in September 1980; and a deed of assignment executed by Español over the lot and house in favor of Cabanlit in October 1982. The trial court found Lagazo's version more credible, noting that the acknowledgment in the deed of assignment showed the assignor did not appear before the notary public, and that Catalina Jacob had not returned to the Philippines since 1977.

Issues

• Whether or not the donation was simple or onerous, considering that the deed imposed no burden but the donee in fact paid the installments in arrears and the remaining balance on the lot.
• Whether or not the donation was validly accepted by the donee, where the deed of donation showed no acceptance and the acceptance was asserted only in an affidavit submitted on appeal.
• Whether or not the supervening transfer of the award and issuance of a certificate of title in the petitioner's name entitle him to the property.
• Whether or not the private respondent may be declared the owner of the property in the same action.

Applicable Provisions

Article 734 of the Civil Code provides:

Article 734. The donation is perfected from the moment the donor knows of the acceptance by the donee.

This fixes the moment of perfection, which the Court uses to test whether the donation ever became complete.

Article 746 of the Civil Code provides:

Article 746. Acceptance must be made during the lifetime of the donor and of the donee.

This limits when acceptance may validly be made.

Article 749 of the Civil Code provides:

Article 749. In order that the donation of an immovable may be valid, it must be made in a public instrument, specifying therein the property donated and the value of the charges which the donee must satisfy. The acceptance may be made in the same deed of donation and in a separate public document, but it shall not take effect unless it is done during the lifetime of the donor. If the acceptance is made in a separate instrument, the donor shall be notified thereof in authentic form, and this step shall be noted in both instruments.

This is the formal rule the Court applies to the deed of donation over the lot, and it is the provision the petitioner failed to satisfy.

Ruling

On the first issue, the Court ruled that the donation was simple, not onerous. A simple or pure donation is one whose cause is pure liberality, no strings attached, while an onerous donation is one subject to burdens, charges, or future services equal to or more in value than the thing donated. Under Article 733 of the Civil Code, donations with an onerous cause are governed by the rules on contracts, so the formalities for a simple donation do not apply. The Court held that even conceding that the petitioner's full payment of the purchase price might have been a burden to him, that payment was not imposed by the donor as a condition for the donation. The deed itself stated that the consideration was love and affection and an act of liberality and generosity. The donor had no intention to burden the donee, and the payments were merely the petitioner's voluntary acts, made apparently pursuant to the power of attorney authorizing him to act for his grandmother.

On the second issue, the Court ruled that the donation was not validly accepted. Acceptance by the donee is indispensable, and its absence makes the donation null and void. The deed of donation showed no indication that the petitioner accepted the gift. He presented no instrument of acceptance during trial, despite the private respondent having raised the matter in a supplemental pleading. He submitted an affidavit of acceptance only after the Court of Appeals had ruled, and the Court held this was too late, because matters not raised in the trial court may no longer be raised on appeal. Even granting that acceptance could still be admitted, there was no proof that formal notice of acceptance was received by the donor and noted in both the deed of donation and the separate instrument of acceptance. That last requisite was not fulfilled, so the lot could not be adjudicated to him.

On the third issue, the Court held that the supervening events did not help the petitioner. The City of Manila had granted his request to transfer the award to his name, a deed of sale had been executed, and a certificate of title issued in his name. But the city's resolution granting the request was premised on the validity and perfection of the very deed of donation that the Court had found to have no force and effect and to pass no title, right, or interest. The Court also gave more credence to the sworn testimonies of the parties than to the investigator's report, which had not been subjected to cross-examination.

On the fourth issue, the Court held that the private respondent could not automatically be declared owner. The genuineness of the deeds of assignment on which he relied could not be passed upon because the assignors in both documents were not parties to the case, and elementary norms of fair play and due process bar any disposition affecting their rights. Since the petitioner, who was the plaintiff below, failed to prove with clear and convincing evidence his ownership claim, the parties resume their status quo ante. The complaint should have been dismissed for failure to prove a right superior to that of the private respondent, but without prejudice to any action that Catalina Reyes or Eduardo Español or both may have against him. For the same reason, the petitioner was not entitled to attorney's fees.

Doctrine

A donation of immovable property is perfected only from the moment the donor knows of the acceptance by the donee. Acceptance is indispensable, and its absence makes the donation null and void. Where the acceptance is made in a separate instrument, the donor must be notified thereof in authentic form, and that step must be noted in both the deed of donation and the instrument of acceptance. A donation is onerous only when the deed itself imposes burdens, charges, or future services equal to or more in value than the thing donated. Payments voluntarily made by the donee, not imposed by the donor as a condition, do not convert a pure donation into an onerous one, and the formalities for a simple donation of immovable property must still be complied with.

Disposition

The Supreme Court denied the petition and affirmed the decision of the Court of Appeals, so the private respondent prevailed and the petitioner's complaint for recovery of possession was effectively dismissed, without prejudice to any action by Catalina Reyes or Eduardo Español.

Remember This

Memorize this line: acceptance is indispensable, and its absence makes the donation null and void. Examiners like to use this case to test the distinction between simple and onerous donations, and the formal requirements of Article 749 for the donation of immovables.