G.R. No. 146839, March 23, 2011
ROLANDO T. CATUNGAL, JOSE T. CATUNGAL, JR., CAROLYN T. CATUNGAL AND ERLINDA CATUNGAL-WESSEL, PETITIONERS, VS. ANGEL S. RODRIGUEZ, RESPONDENT.
assailing the following issuances of the Court of Appeals in CA-G.R. CV
No. 40627 consolidated with CA-G.R. SP No. 27565: (a) the August 8,
2000 Decision,[1] which affirmed the Decision[2]
dated May 30, 1992 of the Regional Trial Court (RTC), Branch 27 of
Lapu-lapu City, Cebu in Civil Case No. 2365-L, and (b) the January 30,
2001 Resolution,[3] denying herein petitioners’ motion for reconsideration of the August 8, 2000 Decision.
The relevant factual and procedural antecedents of this case are as follows:
This controversy arose from a Complaint for Damages and Injunction with Preliminary Injunction/Restraining Order[4]
filed on December 10, 1990 by herein respondent Angel S. Rodriguez
(Rodriguez), with the RTC, Branch 27, Lapu-lapu City, Cebu, docketed as
Civil Case No. 2365-L against the spouses Agapita and Jose Catungal (the
spouses Catungal), the parents of petitioners.
In the said
Complaint, it was alleged that Agapita T. Catungal (Agapita) owned a
parcel of land (Lot 10963) with an area of 65,246 square meters, covered
by Original Certificate of Title (OCT) No. 105[5]
in her name situated in the Barrio of Talamban, Cebu City. The said
property was allegedly the exclusive paraphernal property of Agapita.
On April 23, 1990, Agapita, with the consent of her husband Jose, entered into a Contract to Sell[6]
with respondent Rodriguez. Subsequently, the Contract to Sell was
purportedly “upgraded” into a Conditional Deed of Sale dated July 26,
1990 between the same parties. Both the Contract to Sell and the
Conditional Deed of Sale were annotated on the title.
The provisions of the Conditional Deed of Sale pertinent to the present dispute are quoted below:
1. The VENDOR for and in consideration of the sum of TWENTY[-]FIVE MILLION PESOS (£25,000,000.00) payable as follows:
a.
FIVE HUNDRED THOUSAND PESOS (P500,000.00) downpayment upon the signing
of this agreement, receipt of which sum is hereby acknowledged in full
from the VENDEE.b. The balance of TWENTY[-]FOUR MILLION FIVE
HUNDRED THOUSAND PESO’S (P24,500,000.00) shall be payable in five
separate checks, made to the order of JOSE Ch. CATUNGAL, the first check
shall be for FOUR MILLION FIVE HUNDRED THOUSAND PESOS (P4,500,000.00)
and the remaining balance to be paid in four checks in the amounts of
FIVE MILLION PESOS (P5,000,000.00) each after the VENDEE have (sic)’
successfully negotiated, secured and provided a Road Right of Way
consisting of 12 meters in width cutting across Lot 10884 up to the
national road, either by widening the existing Road Right of Way or by
securing a new Road Right of Way of 12 meters in width. If however said
Road Right of Way could not be negotiated, the VENDEE shall give notice
to the VENDOR for them to reassess and solve the problem by taking other
options and should the situation ultimately prove futile, he shall take
steps to rescind or cancel the herein Conditional Deed of Sale.c.
That the access road or Road Right of Way leading to Lot 10963 shall be
the responsibility of the VENDEE to secure and any or all cost relative
to the acquisition thereof shall be borne solely by the VENDEE. He
shall, however, be accorded with enough time necessary for the success
of his endeavor, granting him a free hand in negotiating for the
passage.BY THESE PRESENTS, the VENDOR do hereby agree to sell by
way of herein CONDITIONAL DEED OF SALE to VENDEE, his heirs, successors
and assigns, the real property described in the Original Certificate of
Title No. 105 x x x.x x x x
5. That the VENDEE has the
option to rescind the sale. In the event the VENDEE exercises his option
to rescind the herein Conditional Deed of Sale, the VENDEE shall notify
the VENDOR by way of a written notice relinquishing his rights over the
property. The VENDEE shall then be reimbursed by the VENDOR the sum of
FIVE HUNDRED THOUSAND PESOS (P500,000.00) representing the downpayment,
interest free, payable but contingent upon the event that the VENDOR
shall have been able to sell the property to another party.[8]
In
accordance with the Conditional Deed of Sale, Rodriguez purportedly
secured the necessary surveys and plans and through his efforts, the
properly was reclassified from agricultural land into residential land
which he claimed substantially increased the property’s value. He
likewise alleged that he actively negotiated for the road right of way
as stipulated in the contract.[9]
Rodriguez
further claimed that on August 31, 1990 the spouses Catungal requested
an advance of P5,000,000.00 on the purchase price for personal reasons.
Rodriquez allegedly refused on the ground that the amount was
substantial and was not due under the terms of their agreement. Shortly
after his refusal to pay the advance, he purportedly learned that the
Catungals were offering the property for sale to third parties.[10]
Thereafter, Rodriguez received letters dated October 22, 1990,[11] October 24, 1990[12] and October 29, 1990,[13]
all signed by Jose Catungal who was a lawyer, essentially demanding
that the former make up his mind about buying the land or exercising his
“option” to buy because the spouses Catungal allegedly received other
offers and they needed money to pay for personal obligations and for
investing in other properties/business ventures. Should Rodriguez fail
to exercise his option to buy the land, the Catungals warned that they
would consider the contract cancelled and that they were free to look
for other buyers.
In a letter dated November 4, 1990,[14]
Rodriguez registered his objections to what he termed the Catungals’
unwarranted demands in view of the terms of the Conditional Deed of Sale
which allowed him sufficient time to negotiate a road right of way and
granted him, the vendee, the exclusive right to rescind the contract.
Still, on November 15, 1990, Rodriguez purportedly received a letter
dated November 9, 1990[15] from Atty. Catungal, stating that the contract had been cancelled and terminated.
Contending
that the Catungals’ unilateral rescission of the Conditional Deed of
Sale was unjustified, arbitrary and unwarranted, Rodriquez prayed in his
Complaint, that:
1. Upon the filing of this
complaint, a restraining order be issued enjoining defendants [the
spouses Catungal], their employees, agents, representatives or other
persons acting in their behalf from offering the property subject of
this case for sale to third persons; from entertaining offers or
proposals by third persons to purchase the said property; and, in
general, from performing acts in furtherance or implementation of
defendants’ rescission of their Conditional Deed of Sale with plaintiff
[Rodriguez].2. After hearing, a writ of preliminary injunction
be issued upon such reasonable bond as may be fixed by the court
enjoining defendants and other persons acting in their behalf from
performing any of the acts mentioned in the next preceding paragraph.3. After trial, a Decision be rendered:
a) Making the injunction permanent;
b) Condemning defendants to pay to plaintiff, jointly and solidarily:
Actual
damages in the amount of P400,000.00 for their unlawful rescission of
the Agreement and their performance of acts in violation or disregard of
the said Agreement;Moral damages in the amount of P200,000.00;
Exemplary
damages in the amount of P200,000.00; Expenses of litigation and
attorney’s fees in the amount of P100,000.00; and Costs of suit.[16]
On
December 12, 1990, the trial court issued a temporary restraining order
and set the application for a writ of preliminary injunction for
hearing on December 21, 1990 with a directive to the spouses Catungal to
show cause within five days from notice why preliminary injunction
should not be granted. The trial court likewise ordered that summons be
served on them.[17]
Thereafter, the spouses Catungal filed their opposition[18] to the issuance of a writ of preliminary injunction and later filed a motion to dismiss[19]
on the ground of improper venue. According to the Catungals, the
subject property was located in Cebu City and thus, the complaint should
have been filed in Cebu City, not Lapu-lapu City. Rodriguez opposed the
motion to dismiss on the ground that his action was a personal action
as its subject was breach of a contract, the Conditional Deed of Sale,
and not title to, or possession of real property.[20]
In an Order dated January 17, 1991,[21]
the trial court denied the motion to dismiss and ruled that the
complaint involved a personal action, being merely for damages with a
prayer for injunction.
Subsequently, on January 30, 1991, the
trial court ordered the issuance of a writ of preliminary injunction
upon posting by Rodriguez of a bond in the amount of P100,000.00 to
answer for damages that the defendants may sustain by reason of the
injunction.
On February 1, 1991, the spouses Catungal filed their Answer with Counterclaim[22]
alleging that they had the right to rescind the contract in view of (1)
Rodriguez’s failure to negotiate the road right of way despite the
lapse of several months since the signing of the contract, and (2) his
refusal to pay the additional amount of P5,000,000.00 asked by the
Catungals, which to them indicated his lack of funds to purchase the
property. The Catungals likewise contended that Rodriguez did not have
an exclusive right to rescind the contract and that the contract, being
reciprocal, meant both parties had the right to rescind.[23]
The spouses Catungal further claimed that it was Rodriguez who was in
breach of their agreement and guilty of bad faith which justified their
rescission of the contract.[24]
By way of counterclaim, the spouses Catungal prayed for actual and
consequential damages in the form of unearned interests from the balance
(of the purchase price in the amount) of P24,500,000.00, moral and
exemplary damages in the amount of P2,000,000.00, attorney’s fees in the
amount of P200,000.00 and costs of suits and litigation expenses in the
amount of P10,000.00.[25] The spouses Catungal prayed for the dismissal of the complaint and the grant of their counterclaim.
The Catungals amended their Answer twice,[26]
retaining their basic allegations but amplifying their charges of
contractual breach and bad faith on the part of Rodriguez and adding the
argument that in view of Article 1191 of the Civil Code, the power to
rescind reciprocal obligations is granted by the law itself to both
parties and does not need an express stipulation to grant the same to
the injured party. In the Second Amended Answer with Counterclaim, the
spouses Catungal added a prayer for the trial court to order the
Register of Deeds to cancel the annotations of the two contracts at the
back of their OCT.
On October 24, 1991, Rodriguez filed an Amended Complaint,[28]
adding allegations to the effect that the Catungals were guilty of
several misrepresentations which purportedly induced Rodriguez to buy
the property at the price of P25,000,000.00. Among others, it was
alleged that the spouses Catungal misrepresented that their Lot 10963
includes a flat portion of land which later turned out to be a separate
lot (Lot 10986) owned by Teodora Tudtud who sold the same to one Antonio
Pablo. The Catungals also allegedly misrepresented that the road right
of way will only traverse two lots owned by Anatolia Tudtud and her
daughter Sally who were their relatives and who had already agreed to
sell a portion of the said lots for the road right of way at a price of
P550.00 per square meter. However, because of the Catungals’ acts of
offering the property to other buyers who offered to buy the road lots
for P2,500.00 per square meter, the adjacent lot owners were no longer
willing to sell the road lots to Rodriguez at P550.00 per square meter
but were asking for a price of P3,500.00 per square meter. In other
words, instead of assisting Rodriguez in his efforts to negotiate the
road right of way, the spouses Catungal allegedly intentionally and
maliciously defeated Rodriguez’s negotiations for a road right of way in
order to justify rescission of the said contract and enable them to
offer the property to other buyers.
Despite requesting the trial court for an extension of time to file an amended Answer,[29] the Catungals did not file an amended Answer and instead filed an Urgent Motion to Dismiss[30]
again invoking the ground of improper venue. In the meantime, for
failure to file an amended Answer within the period allowed, the trial
court set the case for pre-trial on December 20, 1991.
During the
pre-trial held on December 20, 1991, the trial court denied in open
court the Catungals’ Urgent Motion to Dismiss for violation of the rules
and for being repetitious and having been previously denied. However,
Atty. Catungal refused to enter into pre-trial which prompted the trial
court to declare the defendants in default and to set the presentation
of the plaintiffs evidence on February 14, 1992;[32]
On December 23, 1991, the Catungals filed a motion for reconsideration[33]
of the December 20, 1991 Order denying their Urgent Motion to Dismiss
but the trial court denied reconsideration in an Order dated February 3,
1992.[34] Undeterred, the Catungals subsequently filed a Motion to Lift and to Set Aside Order of Default[35] but it was likewise denied for being in violation of the rules and for being not meritorious.[36] On February 28, 1992, the Catungals filed a Petition for Certiorari and Prohibition[37] with the Court of Appeals, questioning the denial of their motion to dismiss and the order of default. This was docketed as CA-G.R. SP No. 27565.
Meanwhile, Rodriguez proceeded to present his evidence before the trial court.
In
a Decision dated May 30, 1992, the trial court ruled in favor of
Rodriguez, finding that: (a) under the contract it was complainant
(Rodriguez) that had the option to rescind the sale; (b) Rodriguez’s
obligation to pay the balance of the purchase price arises only upon
successful negotiation of the road right of way; (c) he proved his
diligent efforts to negotiate the road right of way; (d) the spouses
Catungal were guilty of misrepresentation which defeated Rodriguez’s
efforts to acquire the road right of way; and (e) the Catungals’
rescission of the contract had no basis and was in bad faith. Thus, the
trial court made the injunction permanent, ordered the Catungals to
reduce the purchase price by the amount of acquisition of Lot 10963
which they misrepresented was part of the property sold but was in fact
owned by a third party and ordered them to pay P100,000.00 as damages,
P30,000.00 as attorney’s fees and costs.
The Catungals appealed
the decision to the Court of Appeals, asserting the commission of the
following errors by the trial court in their appellants’ brief8 dated
February 9, 1994:
I
THE COURT A QUO ERRED IN NOT DISMISSING OF (SIC) THE CASE ON THE GROUNDS OF IMPROPER VENUE AND LACK OF JURISDICTION.
II
THE COURT A QUO ERRED IN CONSIDERING THE CASE AS A PERSONAL AND NOT A REAL ACTION.
III
GRANTING
WITHOUT ADMITTING THAT VENUE WAS PROPERLY LAID AND THE CASE IS A
PERSONAL ACTION, THE COURT A QUO ERRED IN DECLARING THE DEFENDANTS IN
DEFAULT DURING THE PRE-TRIAL WHEN AT THAT TIME THE DEFENDANTS HAD
ALREADY FILED THEIR ANSWER TO THE COMPLAINT.IV
THE
COURT A QUO ERRED IN CONSIDERING THE DEFENDANTS AS HAVING LOST THEIR
LEGAL STANDING IN COURT WHEN AT MOST THEY COULD ONLY BE CONSIDERED AS IN
DEFAULT AND STILL ENTITLED TO NOTICES OF ALL FURTHER PROCEEDINGS
ESPECIALLY AFTER THEY HAD FILED THE MOTION TO LIFT THE ORDER OF DEFAULT.V
THE
COURT A QUO ERRED IN ISSUING THE WRIT [OF] PRELIMINARY INJUNCTION
RESTRAINING THE EXERCISE OF ACTS OF OWNERSHIP AND OTHER RIGHTS OVER REAL
PROPERTY OUTSIDE OF THE COURT’S TERRITORIAL JURISDICTION AND INCLUDING
PERSONS WHO WERE NOT BROUGHT UNDER ITS JURISDICTION, THUS THE NULLITY OF
THE WRIT.VI
THE COURT A QUO ERRED IN
NOT RESTRAINING ITSELF MOTU PROP[R]IO FROM CONTINUING WITH THE
PROCEEDINGS IN THE CASE AND IN RENDERING DECISION THEREIN IF ONLY FOR
REASON OF COURTESY AND FAIRNESS BEING MANDATED AS DISPENSER OF FAIR AND
EQUAL JUSTICE TO ALL AND SUNDRY WITHOUT FEAR OR FAVOR IT HAVING BEEN
SERVED EARLIER WITH A COPY OF THE PETITION FOR CERTIORARI QUESTIONING
ITS VENUE AND JURISDICTION IN CA-G.R. NO. SP 27565 IN FACT NOTICES FOR
THE FILING OF COMMENT THERETO HAD ALREADY BEEN SENT OUT BY THE HONORABLE
COURT OF APPEALS, SECOND DIVISION, AND THE COURT A QUO WAS FURNISHED
WITH COPY OF SAID NOTICE.VII
THE COURT A
QUO ERRED IN DECIDING THE CASE IN FAVOR OF THE PLAINTIFF AND AGAINST
THE DEFENDANTS ON THE BASIS OF EVIDENCE WHICH ARE IMAGINARY, FABRICATED,
AND DEVOID OF TRUTH, TO BE STATED IN DETAIL IN THE DISCUSSION OF THIS
PARTICULAR ERROR, AND, THEREFORE, THE DECISION IS REVERSIBLE.[39]
On August 31, 1995, after being granted several extensions, Rodriguez filed his appellee’s brief,[40]
essentially arguing the correctness of the trial court’s Decision
regarding the foregoing issues raised by the Catungals. Subsequently,
the Catungals filed a Reply Brief[41] dated October 16, 1995.
From
the filing of the appellants’ brief in 1994 up to the filing of the
Reply Brief, the spouses Catungal were represented by appellant Jose
Catungal himself. However, a new counsel for the Catungals, Atty. Jesus
N. Borromeo (Atty. Borromeo), entered his appearance before the Court of
Appeals on September 2, 1997.[42] On the same date, Atty. Borromeo filed a Motion for Leave of Court to File Citation of Authorities[43] and a Citation of Authorities.[44]
This would be followed by Atty. Borromeo’s filing of an Additional
Citation of Authority and Second Additional Citation of Authority both
on November 17, 1997.[45]
During
the pendency of the case with the Court of Appeals, Agapita Catungal
passed away and thus, her husband, Jose, filed on February 17, 1999 a
motion for Agapita’s substitution by her surviving children[46]
On
August 8, 2000, the Court of Appeals rendered a Decision in the
consolidated cases CA-G.R. CV No. 40627 and CA-G.R. SP No. 27565,[47] affirming the trial court’s Decision.
In a Motion for Reconsideration dated August 21, 2000,[48] counsel for the Catungals, Atty. Borromeo, argued for the first time that paragraphs 1(b) and 5[49]
of the Conditional Deed of Sale, whether taken separately or jointly,
violated the principle of mutuality of contracts under Article 1308 of
the Civil Code and thus, said contract was void ab initio. He
adverted to the cases mentioned in his various citations of authorities
to support his argument of nullity of the contract and his position that
this issue may be raised for the first time on appeal.
Meanwhile, a Second Motion for Substitution[50] was filed by Atty. Borromeo in view of the death of Jose Catungal.
In
a Resolution dated January 30, 2001, the Court of Appeals allowed the
substitution of the deceased Agapita and Jose Catungal by their
surviving heirs and denied the motion for reconsideration for lack of
merit
Hence, the heirs of Agapita and Jose Catungal filed on March 2001 the present petition for review,[51]
which essentially argued that the Court of Appeals erred in not finding
that paragraphs 1(b) and/or 5 of the Conditional Deed of Sale, violated
the principle of mutuality of contracts under Article 1308 of the Civil
Code. Thus, said contract was supposedly void ab initio and the
Catungals’ rescission thereof was superfluous.
In his Comment,[52]
Rodriguez highlighted that (a) petitioners were raising new matters
that cannot be passed upon on appeal; (b) the validity of the
Conditional Deed of Sale was already admitted and petitioners cannot be
allowed to change theories on appeal; (c) the questioned paragraphs of
the Conditional Deed of Sale were valid; and (d) petitioners were the
ones who committed fraud and breach of contract and were not entitled to
relief for not having come to court with clean hands.
The Court gave due course to the Petition[53] and the parties filed their respective Memoranda.
The issues to be resolved in, the case at bar can be summed into two questions:
- Are petitioners allowed to raise their theory of nullity of the Conditional Deed of Sale for the first time on appeal?
- Do
paragraphs 1(b) and 5 of the Conditional Deed of Sale violate the
principle of mutuality of contracts under Article 1308 of the Civil
Code?
On petitioners’ change of theory
Petitioners
claimed that the Court of Appeals should have reversed the trial
courts’ Decision on the ground of the alleged nullity of paragraphs 1(b)
and 5 of the Conditional Deed of Sale notwithstanding that the same was
not raised as an error in their appellants’ brief. Citing Catholic Bishop of Balanga v. Court of Appeals,[54] petitioners argued in the Petition that this case falls under the following exceptions:
(3)
Matters not assigned as errors on appeal but consideration of which is
necessary in arriving at a just decision and complete resolution of the
case or to serve the interest of justice or to avoid dispensing
piecemeal justice;(4) Matters not specifically assigned as
errors on appeal but raised in the trial court and are matters of record
having some bearing on the issue submitted which the parties failed to
raise or which the lower court ignored;(5) Matters not assigned as errors on appeal but closely related to an error assigned; and
(6) Matters not assigned as errors but upon which the determination of a question properly assigned is dependent.
We are not persuaded.
This
is not an instance where a party merely failed to assign an issue as an
error in the brief nor failed to argue a material point on appeal that
was raised in the trial court and supported by the record. Neither is
this a case where a party raised an error closely related to, nor
dependent on the resolution of, an error properly assigned in his brief.
This is a situation where a party completely changes his theory of the
case on appeal and abandons his previous assignment of errors in his
brief, which plainly should not be allowed as anathema to due process.
Petitioners
should be reminded that the object of pleadings is to draw the lines of
battle between the litigants and to indicate fairly the nature of the
claims or defenses of both parties.[56] In Philippine National Construction Corporation v. Court of Appeals,[57]
we held that “[w]hen a party adopts a certain theory in the trial
court, he will not be permitted to change his theory on appeal, for to
permit him to do so would not only be unfair to the other party but it
would also be offensive’ to the basic rules of fair play, justice and
due process.”
We have also previously ruled that “courts of
justice have no jurisdiction or power to decide a question not in issue.
Thus, a judgment that goes beyond the issues and purports to adjudicate
something on which the court did not hear the parties, is not only
irregular but also extrajudicial and invalid. The rule rests on the
fundamental tenets of fair play.”[59]
During
the proceedings before the trial court, the spouses Catungal never
claimed that the provisions in the Conditional Deed of Sale, stipulating
that the payment of the balance of the purchase price was contingent
upon the successful negotiation of a road right of way (paragraph 1[b])
and granting Rodriguez the option to rescind (paragraph 5), were void
for allegedly making the fulfillment of the contract dependent solely on
the will of Rodriguez.
On the contrary, with respect to
paragraph 1(b), the Catungals did not aver in the Answer (and its
amended versions) that the payment of the purchase price was subject to
the will of Rodriguez but rather they claimed that paragraph 1(b) in
relation to 1(c) only presupposed a reasonable time be given to
Rodriguez to negotiate the road right of way. However, it was
petitioners’ theory that more than sufficient time had already been
given Rodriguez to negotiate the road right of way. Consequently,
Rodriguez’s refusal/failure to pay the balance of the purchase price,
upon demand, was allegedly indicative of lack of funds and a breach of
the contract on the part of Rodriguez.
Anent paragraph 5 of the
Conditional Deed of Sale, regarding Rodriguez’s option to rescind, it
was petitioners’ theory in the court a quo that notwithstanding
such provision, they retained the right to rescind the contract for
Rodriguez’s breach of the same under Article 1191 of the Civil Code.
Verily,
the first time petitioners raised their theory of the nullity of the
Conditional Deed of Sale in view of the questioned provisions was only
in their Motion for Reconsideration of the Court of Appeals’ Decision,
affirming the trial court’s judgment. The previous filing of various
citations of authorities by Atty. Borromeo and the Court of Appeals’
resolutions noting such citations were of no moment. The citations of
authorities merely listed cases and their main rulings without even any
mention of their relevance to the present case or any prayer for the
Court of Appeals to consider them. In sum, the Court of Appeals did not
err in disregarding the citations of authorities or in denying
petitioners’ motion for reconsideration of the assailed August 8, 2000
Decision in view of the proscription against changing legal theories on
appeal.
Ruling on the questioned provisions of the
Conditional Deed of Sale
Even
assuming for the sake of argument that this Court may overlook the
procedural misstep of petitioners, we still cannot uphold their
belatedly proffered arguments.
At the outset, it should be noted
that what the parties entered into is a Conditional Deed of Sale,
whereby the spouses Catungal agreed to sell and Rodriguez agreed to buy
Lot 10963 conditioned on the payment of a certain price but the payment
of the purchase price was additionally made contingent on the successful
negotiation of a road right of way. It is elementary that “[i]n
conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend upon the
happening of the event which constitutes the condition.”[60]
Petitioners
rely on Article 1308 of the Civil Code to support their conclusion
regarding the claimed nullity of the aforementioned provisions. Article
1308 states that “[t]he contract must bind both contracting parties; its
validity or compliance cannot be left to the will of one of them.”
Article 1182 of the Civil Code, in turn, provides:
Art.
1182. When the fulfillment of the condition depends upon the sole will
of the debtor, the conditional obligation shall be void. If it depends
upon chance or upon the will of a third person, the obligation shall
take effect in conformity with the provisions of this Code.
In
the past, this Court has distinguished between a condition imposed on
the perfection of a contract and a condition imposed merely on the
performance of an obligation. While failure to comply with the first
condition results in the failure of a contract, failure to comply with
the second merely gives the other party the option to either refuse to
proceed with the sale or to waive the condition.[61] This principle is evident in Article 1545 of the Civil Code on sales, which provides in part:
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 x x x.
Paragraph 1(b) of the Conditional Deed
of Sale, stating that respondent shall pay the balance of the purchase
price when he has successfully negotiated and secured a road right of
way, is not a condition on the perfection of the contract nor on the
validity of the entire contract or its compliance as contemplated in
Article 1308. It is a condition imposed only on respondent’s obligation
to pay the remainder of the purchase price. In our view and applying
Article 1182, such a condition is not purely potestative as petitioners
contend. It is not dependent on the sole will of the debtor but also on
the will of third persons who own the adjacent land and from whom the
road right of way shall be negotiated. In a manner of speaking, such a
condition is likewise dependent on chance as there is no guarantee that
respondent and the third party-landowners would come to an agreement
regarding the road right of way. This type of mixed condition is
expressly allowed under Article 1182 of the Civil Code.
Analogous to the present case is Romero v. Court of Appeals,[62]
wherein the Court interpreted the legal effect of a condition in a deed
of sale that the balance of the purchase price would be paid by the
vendee when the vendor has successfully ejected the informal settlers
occupying the property. In Romero, we found that such a condition
did not affect the perfection of the contract but only imposed a
condition on the fulfillment of the obligation to pay the balance of the
purchase price, to wit:
From the moment the contract
is perfected, 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. Under the agreement, private respondent is obligated to evict the
squatters on the property. The ejectment of the squatters is a
condition the operative act of which sets into motion the period of
compliance by petitioner of his own obligation, i.e., to pay the balance
of the purchase price. Private respondent’s failure “to remove the
squatters from the property” within the stipulated period gives
petitioner the right to either refuse to proceed! with the agreement or
waive that condition in consonance with Article 1545 of the Civil Code. This option clearly belongs to petitioner and not to private respondent.We
share the opinion of the appellate court that the undertaking required
of private respondent does not constitute a “potestative condition
dependent solely on his will” that might, otherwise, be void in
accordance with Article 1182 of the Civil Code but a “mixed” condition
“dependent not on the will of the vendor alone but also of third persons
like the squatters and government agencies and personnel concerned.”
We must hasten to add, however, that where the so-called “potestative
condition” is imposed not on the birth of the obligation but on its
fulfillment, only the condition is avoided, leaving unaffected the
obligation itself.[63] (Emphases supplied.)
From
the provisions of the Conditional Deed of Sale subject matter of this
case, it was the vendee (Rodriguez) that had the obligation to
successfully negotiate and secure the road right of way. However, in the
decision of the trial court, which was affirmed by the Court of
Appeals, it was found that respondent Rodriguez diligently exerted
efforts to secure the road right of way but the spouses Catungal, in bad
faith, contributed to the collapse of the negotiations for said road
right of way. To quote from the trial court’s decision:
It
is therefore apparent that the vendee’s obligations (sic) to pay the
balance of the purchase price arises only when the road-right-of-way to
the property shall have been successfully negotiated, secured and
provided. In other words, the obligation to pay the balance is
conditioned upon the acquisition of the road-right-of-way, in accordance
with paragraph 2 of Article 1181 of the New Civil Code. Accordingly,
“an obligation dependent upon a suspensive condition cannot be demanded
until after the condition takes place because it is only after the
fulfillment of the condition that the obligation arises.” (Javier v[s]
CA 183 SCRA) Exhibits H, D, P, R, T, FF and JJ show that plaintiff [Rodriguez] indeed was diligent in his efforts to negotiate for a road-right-of-way
to the property. The written offers, proposals and follow-up of his
proposals show that plaintiff [Rodriguez] went all out in his efforts to
immediately acquire an access road to the property, even going to the
extent of offering P3,000.00 per square meter for the road lots (Exh. Q)
from the original P550.00 per sq. meter. This Court also notes that defendant (sic) [the Catungals] made misrepresentation in the negotiation they have entered into with plaintiff
[Rodriguez]. (Exhs. F and G) The misrepresentation of defendant (sic)
[the Catungals] as to the third lot (Lot 10986) to be part and parcel of
the subject property [(]Lot 10963) contributed in defeating the
plaintiffs [Rodriguez’s] effort in acquiring the road-right-of-way to
the property. Defendants [the Catungals] cannot now invoke the
non-fulfillment of the condition in the contract as a ground for
rescission when defendants [the Catungals] themselves are guilty of
preventing the fulfillment of such condition.From the
foregoing, this Court is of the considered view that rescission of the
conditional deed of sale by the defendants is without any legal or
factual basis.[64] x x x. (Emphases supplied.)
In all, we see no cogent reason to disturb the foregoing factual findings of the trial court.
Furthermore,
it is evident from the language of paragraph 1(b) that the condition
precedent (for respondent’s obligation to pay the balance of the
purchase price to arise) in itself partly involves an obligation to do, i.e., the undertaking of respondent to negotiate and secure a road right of way at his own expense.[65]
It does not escape our notice as well, that far from disclaiming
paragraph 1(b) as void, it was the Catungals’ contention before the
trial court that said provision should be read in relation to paragraph
1(c) which stated:
c. That the access road or Road Right of Way
leading to Lot 10963 shall be the responsibility of the VENDEE to secure
and any or all cost relative to the acquisition thereof shall be borne
solely by the VENDEE. He shall, however, be accorded with enough time necessary for the success of his endeavor; granting him a free hand in negotiating for the passage.[66] (Emphasis supplied.)
The
Catungals’ interpretation of the foregoing stipulation was that
Rodriguez’s obligation to negotiate and secure a road right of way was
one with a period and that period, i.e., “enough time” to
negotiate, had already lapsed by the time they demanded the payment of
P5,000,000.00 from respondent. Even assuming arguendo that the Catungals
were correct that the respondent’s obligation to negotiate a road right
of way was one with an uncertain period, their rescission of the
Conditional Deed of Sale would still be unwarranted. Based on their own
theory, the Catungals had a remedy under Article 1197 of the Civil Code,
which mandates:
Art. 1197. If the obligation does
not fix a period, but from its nature and the circumstances it can be
inferred that a period was intended, the courts may fix the duration
thereof.The courts shall also fix the duration of the period when it depends upon the will of the debtor.
In
every case, the courts shall determine such period as may under the
circumstances have been probably contemplated by the parties. Once fixed
by the courts, the period cannot be changed by them.
What
the Catungals should have done was to first file an action in court to
fix the period within which Rodriguez should accomplish the successful
negotiation of the road fight of way pursuant to the above quoted
provision. Thus, the Catungals’ demand for Rodriguez to make an
additional payment of P5,000,000.00 was premature and Rodriguez’s
failure to accede to such demand did not justify the rescission of the
contract.
With respect to petitioners’ argument that paragraph 5
of the Conditional Deed of Sale likewise rendered the said contract
void, we find no merit to this theory. Paragraph 5 provides:
5.
That the VENDEE has the option to rescind the sale. In the event the
VENDEE exercises his option to rescind the herein Conditional Deed of
Sale, the VENDEE shall notify the VENDOR by way of a written notice
relinquishing his rights over the property. The VENDEE shall then be
reimbursed by the VENDOR the sum of FIVE HUNDRED THOUSAND PESOS
(£500,000,00) representing the downpayment, interest free, payable but
contingent upon the event that the VENDOR shall have been able to sell
the property to another party.[67]
Petitioners
posited that the above stipulation was the “deadliest” provision in the
Conditional Deed of Sale for violating the principle of mutuality of
contracts since it purportedly rendered the contract subject to the will
of respondent.
We do not agree.
It is petitioners’
strategy to insist that the Court examine the first sentence of
paragraph 5 alone and, resist a correlation of such sentence with other
provisions of the contract. Petitioners’ view, however, ignores a basic
rule in the interpretation of contracts – that the contract should be
taken as a whole.
Article 1374 of the Civil Code provides that
“[t]he various stipulations of a contract shall be interpreted together,
attributing to the doubtful ones that sense which may result from all
of them taken jointly.” The same Code further sets down the rule that
“[i]f some stipulation of any contract should admit of several meanings,
it shall be understood as bearing that import which is most adequate to
render it effectual.”[68]
Similarly,
under the Rules of Court it is prescribed that “[i]n the construction
of an instrument where there are several provisions or particulars, such
a construction is, if possible, to be adopted as will give effect to
all”[69] and “for the proper
construction of an instrument, the circumstances under which it was
made, including the situation of the subject thereof and of the parties
to it, may be shown, so that the judge may be placed in the position of
those whose language he is to interpret.”[70]
Bearing
in mind the aforementioned interpretative rules, we find that the first
sentence of paragraph 5 must be taken in relation with the rest of
paragraph 5 and with the other provisions of the Conditional Deed of
Sale.
Reading paragraph 5 in its entirety will show that
Rodriguez’s option to rescind the contract is not absolute as it is
subject to the requirement that there should be written notice to the
vendor and the vendor shall only return Rodriguez’s downpayment of
P500,000.00, without interest, when the vendor shall have been able to
sell the property to another party. That what is stipulated to be
returned is oniy the downpayment of P500,000.00 in the event that
Rodriguez exercises his option to rescind is significant. To recall,
paragraph 1(b) of the contract clearly states that the installments on
the balance of the purchase price shall only be paid upon successful
negotiation and procurement of a road right of way. It is clear from
such provision that the existence of a road right of way is a material
consideration for Rodriguez to purchase the property. Thus, prior to him
being able to procure the road right of way, by express stipulation in
the contract, he is not bound to make additional payments to the
Catungals. It was further stipulated in paragraph 1(b) that: “[i]f
however said road right of way cannot be negotiated, the VENDEE shall
give notice to the VENDOR for them to reassess and solve the problem by
taking other options and should the situation ultimately prove
futile, he [Rodriguez] shall take steps to rescind or [cancel] the
herein Conditional Deed of Sale.” The intention of the parties for
providing subsequently in paragraph 5 that Rodriguez has the option to
rescind the sale is undeniably only limited to the contingency that
Rodriguez shall not be able to secure the road right of way. Indeed, if
the parties intended to give Rodriguez the absolute option to rescind
the sale at any time, the contract would have provided for the return of
all payments made by Rodriguez and not only the downpayment. To our
mind, the reason only the downpayment was stipulated to be returned is
that the vendee’s option to rescind can only be exercised in the event
that no road right of way is secured and, thus, the vendee has not made
any additional payments, other than his downpayment.
In sum, Rodriguez’s option to rescind the contract is not purely potestative but rather also subject to the same mixed condition as his obligation to pay the balance of the purchase price – i.e.,
the negotiation of a road right of way. In the event the condition is
fulfilled (or the negotiation is successful), Rodriguez must pay the
balance of the purchase price. In the event the condition is not
fulfilled (or the negotiation fails), Rodriguez has the choice either
(a) to not proceed with the sale and demand return of his downpayment or
(b) considering that the condition was imposed for his benefit, to
waive the condition and still pay the purchase price despite the lack of
road access. This is the most just interpretation of the parties’
contract that gives effect to all its provisions.
In any event,
even if we assume for the sake of argument that the grant to Rodriguez
of an option to rescind, in the manner provided for in the contract, is
tantamount to a potestative condition, not being a condition affecting
the perfection of the contract, only the said condition would be
considered void and the rest of the contract will remain valid. In Romero,
the Court observed that “where the so-called ‘potestative condition’ is
imposed not on the birth of the obligation but on its fulfillment, only
the condition is avoided, leaving unaffected the obligation itself.”[71]
It
cannot be gainsaid that “contracts have the force of law between the
contracting parties and should be complied with in good faith.'” We have
also previously ruled that “[b]eing the primary law between the
parties, the contract governs the adjudication of their rights and
obligations. A court has no alternative but to enforce the contractual
stipulations in the manner they have been agreed upon and written.'” We
find no merit in petitioners’ contention that their parents were merely
“duped” into accepting the questioned provisions in the Conditional Deed
of Sale. We note that although the contract was between Agapita
Catungal and Rodriguez, Jose Catungal nonetheless signed thereon to
signify his marital consent to the same. We concur with the trial
court’s finding that the spouses Catungals’ claim of being misled into
signing the contract was contrary to human experience and conventional
wisdom since it was Jose Catungal who was a practicing lawyer while
Rodriquez was a non-lawyer.[74]
It can be reasonably presumed that Atty. Catungal and his wife reviewed
the provisions of the contract, understood and accepted its provisions
before they affixed their signatures thereon.
After thorough
review of the records of this case, we have come to the conclusion that
petitioners failed to demonstrate that the Court of Appeals committed
any reversible error in deciding the present controversy. However,
having made the observation that it was desirable for the Catungals to
file a separate action to fix the period for respondent Rodriguez’s
obligation to negotiate a road right of way, the Court finds it
necessary to fix said period in these proceedings. It is but equitable
for us to make a determination of the issue here to obviate further
delay and in line with the judicial policy of avoiding multiplicity of
suits.
If still warranted, Rodriguez is given a period of thirty
(30) days from the finality of this decision to negotiate a road right
of way. In the event no road right of way is secured by Rodriquez at the
end of said period, the parties shall reassess and discuss other
options as stipulated in paragraph 1(b) of the Conditional Deed of Sale
and, for this purpose, they are given a period of thirty (30) days to
agree on a course of action. Should the discussions of the parties prove
futile after the said thirty (30)-day period, immediately upon the
expiration of said period for discussion, Rodriguez may (a) exercise his
option to rescind the contract, subject to the return of his
downpayment, in accordance with the provisions of paragraphs 1(b) and 5
of the Conditional Deed of Sale or (b) waive the road right of way and
pay the balance of the deducted purchase price as determined in the RTC
Decision dated May 30, 1992.
WHEREFORE,
the Decision dated August 8, 2000 and the Resolution dated January 30,
2001 of the Court of Appeals in CA-G.R. CV No. 40627 consolidated with
CA-G.R. SP No. 27565 are AFFIRMED with the following MODIFICATION:
If
still warranted, respondent Angel S. Rodriguez is given a period of
thirty (30) days from the finality of this Decision to negotiate a road
right of way. In the event no road right of way is secured by respondent
at the end of said period, the parties shall reassess and discuss other
options as stipulated in paragraph 1(b) of the Conditional Deed of Sale
and, for this purpose, they are given a period of thirty (30) days to
agree on a course of action. Should the discussions of the parties prove
futile after the said thirty (30)-day period, immediately upon the
expiration of said period for discussion, Rodriguez may (a) exercise his
option to rescind the contract, subject to the return of his
downpayment, in accordance with the provisions of paragraphs 1(b) and 5
of the Conditional Deed of Sale or (b) waive the road right of way and
pay the balance of the deducted purchase price as determined in the RTC
Decision dated May 30, 1992.
No pronouncement as to costs.
SO ORDERED.
Corona, C.J., (Chairperson), Velasco, Jr., Del Castillo, and Perez, JJ., concur.
[1] Rollo,
pp. 12-23; penned by Associate Justice Eloy R. BeLlo, Jr. with
Associate Justices Delilah Vidallon-Magtolis and Elvi John S. Asuncion,
concurring.
[2] CA rollo (CA-G.R. CV No. 40627), pp. 72-81.
[3] Rollo, pp. 8-9.
[4] Records, pp. 1-27.
[5] Id. at 12-13.
[6] Id. at 14-16.
[7] Id. at 17-19.
[8]Id. at 17-18.
[9] Id. at 3.
[10] Id.
[11] Id. at 20.
[12] Id. at 21.
[13] Id. at 22,
[14] Id. at 23-26.
[15] Id. at 27.
[16] Id. at 9-10.
[17] Id. at 28,
[18] Id. at 33.
[19] Id. at 37.
[20] Id. at 48-50.
[21] Id. at 45.
[22] Id. at 55-66.
[23] Id. at 57-58; see Paragraphs 6 and 7 of the Answer with Counterclaim.
[24] Id. at 64; see Paragraphs 17, 19 and 36 of the Answer with Counterclaim.
[25] Id. at 66-67.
[26]
Id. at 94-111 and 120-139; the first Amended Answer with Counterclaim
was dated April 4, 1991, the Second Amended Answer with Counterclaim was
dated May 6, 1991.
[27] Id. at 139.
[28] Id. at 195-217.
[29] Id. at 219.
[30]Id. at 253.
[31] Id. at 254.
[32] Id. at 255.
[33] Id. at 256-259.
[34] Id. at 264.
[35] Id. at 267.
[36] Id. at 273.
[37] CA rollo (CA-G.R. SP No. 27565), pp. 1-46.
[38] CA rollo (CA-G.R. CV No. 40627), pp. 26-71 and (CA-G.R. SP No. 27565), pp. 23-114.
[39] Id. at 26-27.
[40] Id. at 259-296.
[41] Id. at 318-336.
[42] Id. at 339.
[43] Id. at 341,
[44] Id. at 342.
[45] Id. at 343-346.
[46] Id. at 349-350.
[47] This is the petition for certiorari
and prohibition previously filed by the Catungals to question the trial
court’s denial of the motion to dismiss and the order of default.
[48] CA rollo (CA-G.R. CV No. 40627), pp. 365-374.
[49] In petitioners’ pleadings, they refer to this as paragraph “f” when it should be paragraph 5 of the Conditional Deed of Sale.
[50] CA rollo (CA-G.R. CV No. 40627), pp. 391-393.
[51] Rollo, pp. 26-40.
[52] Id. at 51-65.
[53] Id. at 80-81.
[54] 332 Phil. 206 (1996).
[55] Id. at 217-218.
[56] Ortega v. Social Security Commission, G.R. No. 176150, June 25, 2008, 555 SCRA 353,370.
[57] 505 Phil. 87(2005).
[58] Id. at 102.
[59] Commissioner of Internal Revenue v. Mirant Pagbilao Corporation, G.R. No. 159593, October 16, 2006, 504 SCRA 484, 495.
[60] Civil Code, Article 1181.
[61] Babasa v. Court of Appeals, 352 Phil. 1142, 1154 (1998).
[62] 320 Phil. 269 (1995).
[63] Id. at 281-282.
[64] CA rollo (CA-G.R. CV No. 40627), pp. 78-79.
[65] Records, p. 17; paragraph 1(b) and (c) of the Conditional Deed of Sale.
[66] Id.
[67] Id. at 18.
[68] Civil Code, Article 1373.
[69] Rules of Court, Rule 130, Section 11.
[70] Id., Section 13.
[71] Romero v. Court of Appeals, supra note 62 at 282.
[72] Civil Code, Article 1159.
[73] Raquel-Sanlos v. Court of Appeals, G.R. Nos. 174986, 175071 and 181415, July 7, 2009, 592 SCRA 169, 194; Felsan Realty & Development Corporation v. Commonwealth of Australia, G.R. No. 169656, October 11, 2007, 535 SCRA 618, 629; Pryce Corporation v. Philippine Amusement and Gaming Corporation, 497 Phil. 490, 503 (2005).
[74] CA rollo (CA-G.R. CV No. 40627), p. 77.