G.R. No. 58100. July 31, 1984
PRISCILO SY, PETITIONER, VS. THE HON. COURT OF APPEALS AND JUSTINIANO QUIRINO, RESPONDENTS.
CUEVAS, J.:
on appeal the decision of the defunct Court of First Instance of Cebu
in Civil Case No. R-15972, enÂtitled “Priscilo Sy vs. Justiniano Quirino
– For: Specific Performance and Damages”.
Petitioner Priscilo Sy (then plaintiff) was the registered owner of a
parcel of land together with the improvements thereon, situated in the
municipality of Minglanilla, Province of Cebu, and which is more
particularly described as follows:
“A parcel of land (Lot 4740 of the Talisay-Minglanilla Estate,
GLRC Record No. 3732) situated in the Municipality of Minglanilla.
Province of Cebu, Island of Cebu. Bounded on the N. by Lot 4735, on the
E. by Lot 4739, on the S. by road, and on the W. by road; containing an
area of Eight Thousand Three Hundred Seventy One (8,371) square meters
more or less per technical descripÂtion appearing on covering Transfer
Certificate of Title No. 21283, Registry of Deeds for the Province of
Cebu.”
On June 25, 1973, petitioner obtained a loan from the Development Bank
of the Philippines (which will hereafter be referred to as DBP) in the
amount of P113,200.00, and to secure the payment thereof, petitioner and
his wife executed a Real Estate Mortgage in favor of the DBP on the
aforementioned property.
On January 31, 1976, petitioner and respondent Justiniano Quirino
entered into a lease agreeÂment over the said property for a period of
two (2) years, renewable by mutual consent for another period of two (2)
years.
Meanwhile, petitioner defaulted in the payment of the stipulated
amortizations on his loan with the DBP and the latter as mortgagee, sent
to petitioner on June 29, 1976, a notice of foreclosure. Petitioner
sought a re-structuring of said loan and an extension of payment, both
of which were denied by DBP. Petitioner then turned to respondent
Quirino, the lessee of the mortgaged property, and later negotiated with
him for the sale thereof with assumption of mortgage.
On August 27, 1976, respondent Quirino with the conformity of petitioner
sent a letter to the DBP proposing to assume the mortgage obligations
of petitioner.
On September 10, 1976, petitioner and respondent, with the consent of
their respective spouses, executed a Deed of Sale with Assumption of
Mortgage of the property in question for and in consideration of One
Peso (P1.00). Respondent further agreed to fully assume petitioner’s
obligation with the DBP in the total sum of P153,000.00 subject to the
condition that the sale will be with the prior approval of the DBP and
shall automatically take effect upon approval by said bank. (Exh.
“1-C”)
On November 26, 1976, and by way of approving the Sale with Assumption
of Mortgage, DBP required respondent and his wife to execute a
Supplemental Deed of Sale with Assumption of Mortgage (Exh. “1”). On
December 15, 1976, Transfer Certificate of Title No. 39578 of the land
records of Cebu covering the mortgaged property was issued in the name
of respondent Quirino and his wife.
It further appears that on September 10, 1976, petitioner and respondent
executed a separate docuÂment (not notarized) denominated as Deed of
Option to Re-purchase (Exh. “13”), the pertinent portion of which reads –
“That I, JUSTINIANO QUIRINO, as transferee of the said property,
for and in consideration of the sum of ONE (P1.00) PESO, Philippine
Currency, receipt of which is hereby acknowledged hereby GIVE and GRANT
to Priscilo Sy, of legal age, Filipino; married to Corazon Jimenez, and
with residence and post-office address at the barrio of Lipata,
Municipality of Minglanilla, Province of Cebu, the option to repurchase
the above-described real estate property together with all existing
improvements found therein upon full payment by said Priscilo Sy to me
of a total cash consideration that shall equal the total sum of all the
amounts I shall have paid the Development Bank of the Philippines on
the mortgage obligation I assumed from transferer Priscilo Sy plus
interests on the said amounts at the rate of Twelve (12%) Percent per
annum; it being understood that upon the exercise by him of his option
to repurchase the aforementioned property; Priscilo Sy shall, aside from
fully paying the aforementioned amounts, reimbursed me whatever
expenses I might have incurred in the introduction or construction of
additional permanent improvements on the above-described real estate
property.“That it is hereby stipulated that in the event Priscilo Sy shall
unconditionally allow me or my heirs, successors and assigns adequate
and reasonable time within which to remove and transfer from the
premises all livestocks; equipments, feeds, and personal properties
belonging to me;“That this option to repurchase granted shall be in force for a
term of THREE (3) YEARS from the date of execution of this document and
failure for whatever reason by Priscilo Sy to exercise his option to
reacquire the property within the stipulated period shall automatically
render this Deed of Option to Repurchase without force and effect and
henceforth said Priscilo Sy shall forever be barred from repurchasing
the said property;”
Another document entitled Deed of Occupancy was also executed on the
same date, September 10, 1976, granting petitioner Sy the right to
occupy and use for free for a term of three (3) years the – (a)
residential house of strong materials which plaintiff shall use as
family residence; and (b) one-half of the bodega building of strong
materials which plaintiff may use for storage purposes.
On February 8, 1979 or barely five (5) months from the execution of the
Deed of Option to Repurchase, petitioner, thru counsel, advised the
respondent that he (petitioner) has opted to repurchase the property,
pursuant to the right granted him under the Deed of Option to Repurchase
further advising him that the amount of P14,941.76 that respondent had
paid to the DBP was already deposited with his counsel’s office.
On February 22, 1977, petitioner informed respondent that because of his
unjustified refusal to collect the sum of P14,941.76 from his counsel,
he had decided to consign the said amount with the Clerk of Court of the
local CFI.
On February 13, 1977, the Clerk of Court wrote respondent advising him of the consigned amount with her office.
On February 26, 1977, respondent thru counsel wrote to the Clerk of
Court informing her that he and his wife are not willing to accept the
sum of P14,941.76 as repurchase price on the ground that –
a) the exercise of the option is premature because the same must
be exercised only after the expiration of three (3) years from September
10, 1976; andb) the repurchase price of P14,941.76 is grossly inadequate.
Hence, on March 9, 1977, petitioner filed an action for Specific
Performance and Damages against respondent Justiniano Quirino, which
case was dockeÂted as Civil Case No. R-15972 of the Court of First
Instance of Cebu, Branch III.
Answering the complaint, respondent, then defendant, claims that the
Deed of Option to Repurchase is invalid because it was not notarized and
even if it was valid, the right to repurchase can be exercised only
after the three (3) year-period specified in the agreement. Respondent
further claims that the amount of P14,941.76 consigned with the Clerk of
Court as the redemption money was inadequate.
After trial, the trial court rendered judgment, the dispositive portion of which reads –
“WHEREFORE, based on all the foregoing considerations, judgment is
hereby rendered in favor of the defendant and against the plaintiff
ORDERING:“1. The dismissal of the complaint for lack of merit.
“2. Plaintiff to pay defendant: –
a) P15,000.00 as loss of income from an agency of Hub Floral Company of Boston;
b) P20,000.00 as reimburseÂment for salaries of security
Guards from March to December, 1977; and thereafter at P2,000.00 per
month;c) P10,000.00 as reasonable attorney’s fees;
d) P100,000.00 in concept of moral and exemplary damages; and
e) P5,000.00 as reasonable expenses of litigation; and to pay the costs.”
From the aforesaid decision, petitioner appealed to the then Court of
Appeals which docketed the appeal as CA-G.R. No. 64688-R. In a decision
promulgated on February 2, 1981, the said court affirmed in toto the decision of the trial court.
Petitioner now comes to US through the instant petition praying for the
reversal of the assailed decision contending that the Court of Appeals
erred in:
I
Holding that the petitioner can repurchase the property only after three (3) years;
II
Holding that petitioner cannot compel respondent to have the deed of option to repurchase reduced to a public document;
III
Holding that the deed of sale with assumption of mortgage is not
supplemented by the deed of option to repurchase and that the former is
not a necessary part and parcel of the latter;
IV
Holding that the consignation made by petitioner on February 22, 1977 in the sum of P14,941.76 is grossly inaÂdequate;
V
Holding that even if the deed of option to repurchase is valid, the case
would have to be dismissed as being premature as to time and inadequate
as to consideration; and
VI
Denying petitioner’s claim for damages and awarding instead excessive damages to respondent.
all of which assigned errors may be synthesized into the important issues of –
a) When can petitioner exercise his option to repurchase the
property in dispute, is it within three (3) years from the date of the
execution of the deed as contended by petitioner or after three (3)
years as decreed by the lower court; andb) Are the damages awarded in favor of respondent justified.
The particular provision in the Deed of Option to Repurchase states –
“that the option to repurchase shall be in force for a term of three (3)
years from the date of the execution of said deed and failure for
whatever reason, by the vendor to exercise his option to reacquire the
property within the stipulated period shall automatically render the Deed of Option to Repurchase, without force and effect.”
Interpreting the aforesaid provision, both the trial court and the Court
of Appeals ruled that petitioner can exercise the option to repurÂchase
only after a period of three (3) years. This is how the lower court
and the Court of Appeals rationalized the said ruling –
“x x x x plaintiff is a college drop-out, having completed second
year commerce not just a simple farmer as he claims. The Court takes
note that the property in litigation is a hog farm and that plaintiff
had previously obtained a Special Piggery Project Loan of P113,200.00
which was ordered foreclosed by the Development Bank of the Philippines
on June 29, 1976 for non-payment. To avoid foreclosure, as he was being
“pressed by the bank” plaintiff sold the property to defendant on
September 10, 1976, under a “Deed of Sale with Assumption of Mortgage”
(Exh. B) which was to be effective upon the approval by the bank which
came through in a ‘Supplemental Deed of Sale’ (Exh. 1) signed by
defendant on November 26, 1976 wherein the Bank imposed new terms and
conÂditions which defendant was able to comply with only on December 10,
1976, for which the title was issued to him, on December 15, 1976 (Exh.
15). Previous to this sale, plaintiff had leased the premises to
defendant on January 30, 1976, for a term of two (2) years renewable for
another two (2) years. Defendant testified that under the lease, he
brought into the piggery, 280 heads of imported hogs and expected to
dispose of them in a period of two (2) to three (3) years but due to
quarantine regulations brought on by the hoof and mouth disease he
needed more time to dispose of his stock.“It would have been against reason for defendant to enter into an
agreement with plaintiff that could terminate his occuÂpancy in December
1976, when his lease would not have expired until January 31, 1978, and
after a renewable (sic) thereof, to January 21, 1980. The reasons
plaintiff gave to defendant that he needed that time (4 years) to find a
place for his family and that if enriched by a ‘sweepstakes prize’ he
would be able to redeem the property, indicated to defendant that
plaintiff could not redeem the property at all.
The Court is satisfied, therefore, that the intention of the parties was
to give plaintiff, a gratuitous right to repurchase the property if he
happened to be so fortunate at the end of three (3) years. Neither
party anticipated or expected or even imagined that this would be done
suddenly two (2) weeks after approval of the Deed of Sale with
Assumption of Mortgage or that the right could be exercised at anytime
thereafter at the will of the plaintiff within the stipulated period of
three (3) years.
If that were so, then plaintiff’s plea for time to find another place
for his family was a lie and defendant was grievously misled by
plaintiff who concealed his intentions. The word ‘term’ employed by
Atty. Mario Delgado to express the desires of the parties is underscored
by the desperate situation of plaintiff and the sympathetic response of
the defendant. The latter’s acceptance and understanding of the
document as described above and in recognition of plaintiff’s right is
not inconsistent with its terms because redemption at the end of three
(3) years still is, ‘within the stipulated period’. Plaintiffs alleged
attempts every week in December 1976 even if credible, before demand, is
outside the contractual intention and agreement of the parties.”[1]
We agree with the aforequoted findings and conclusions of the lower
court which was affirmed on appeal in the now assailed decision of the
then Court of Appeals.
It is a basic and fundamental rule in the interpretation of contract
that if the terms thereof are clear and leave no doubt as to the
intention of the contracting parties, then the literal meaning of the
stipulations shall control but when the words appear contrary to the
evident intention of the parties, the latter shall preÂvail over the
former.[2] In order to judge the intention of the parties, their contemporaneous and subsequent acts shall be principally considered.
Testifying on the facts and circumstances that support the real and true
intent of the parties with respect to the three-year period of
redemption, respondent Quirino stated substanÂtially, as follows –
“We had no agreement; we had no discussion about any repurchase at
the time we submitted the proposal to the Bank on August 27; We did not
have discussion; we did not have any agreement about any repurchase on
10 September when we signed the Deed of Sale. Several days after the
10th plaintiff went to the house of Atty. Delgado and asked him to
prepare a Deed of Repurchase. So when Atty. Delgado came to the farm he
said, “Why don’t we give him the right to repurchase. He wants a
period of four (4) years.[3]“I had no prior knowledge of plaintiff going to Atty. Delgado with
the purpose of asking him to prepare a repuchase agreeÂment; but
sometime on December 1976 Atty. Delgado was at the farm and he asked me:
“Did you not give the plaintiff a copy of the Deed of Sale?” So I
said: “Why?” And he said: “The plaintiff went to his house to ask for a
copy.” So I said: “Why should he want a copy when I just gave him a
copy?” Then he related to me and only on that day did he reÂlate to me
that the plaintiff was the one who went to his house to ask him to
prepare the Deed of Option.[4]“In reply to the statement of Atty. Delgado re plaintiff’s desire
to repurchase, I was agreeable. I had no intention of remaining in Cebu
forever. So I said: “I cannot agree to four (4) years. I said: I am
agreeable to give him time up to three (3) years. So the plaintiff was
then explaining to me that he needed four (4) years in order to find a
place to live with his family, that he even said that if fortune should
smile at him and he wins sweepstakes prize he might be able to redeem
the property.[5]“Concerning the repurchase agreement, plaintiff and I had a talk
with Atty. Delgado, when Atty. Delgado said: “Let us give him the right
to repurchase.” He (plaintiff) was present and that is why he said, to
justify the period of four (4) years, that he wanted that much time to
find a place for his family to live on.[6]“Together with the preparation of the repurchase agreement, Atty.
Delgado said: “How about the house?” So I said: “Let him stay in the
house.” So you prepare two docuÂments, one a Deed of Option to
Repurchase and another, a Deed of Occupancy to remain in the premises
for a period of three (3) years and the option was for a period of three
(3) years.[7]“It is not correct what plaintiff said that he had anytime within
three (3) years to repurchase, he wanted the term longer than three
years, and I was not agreeable to a repurchase in two weeks time or one
(1) month’s time because that involves me remaining in the premises,
building the house in the premises, improving the area. So to my mind,
the period was at least three (3) years.[8]“Sometime on 30 January 76, plaintiff and I talked again on this
subject in our farm in the presence of my wife. I told him then that
under our agreement you wait for three (3) years. That period is good
for you as well as for me. So after three (3) years or at the end of
the three (3) years, let us talk about it. I don’t remember his reply
anymore. He left off and a few days after that I went to Manila. When I
got back on 22 Feb. 77, plaintiff’s letter, Exh. “D”, written thru his
counsel, was already in my house.[9]
Clearly then, from the said respondent’s testimony which stand
unrebutted, what petitioner wanted was to exercise the option at the
expiration of four (4) years and what the respondent agreed to was for
petitioner to exercise the opÂtion at the end of three (3) years.
This must be so because at that time, respondent was occupying the
property in question as a lessee of the petitioner for a period of two
(2) years from January 31, 1976, renewable for another period of two (2)
years or up to January 31, 1980. And, as such lessee, respondent had
invested a substantial amount of money in connection with his business
therein, which was the importation of livestock. The evidence on record
shows that in 1976, when the deed of sale and the option to repurchase
were executed respondent had 280 heads of imported hogs which he figured
out he will be able to dispose of only in a period of about three (3)
years. Therefore, respondent could not have agreed to a repurchase
which may be done anytime within three (3) years from the execution of
the deed.
Considering however that three (3) years had already elapsed since
September 10, 1976 (execution of the Deed of Repurchase) the foregoing
discussion is now rendered academic and there is no more any legal
impediment to the exercise of the said right by the herein petitioner.
We now come to the question of damages. The award of P15,000.00 for
loss of income and P20,000.00 as reimbursement for salaries of security
guards should be eliminated. The alleged loss of income is not
recoverable for being speculative. No receipts or any kind of evidence
on the matter was presented to prove the same.[10]
As to the award of moral damages, while We find them to be justly due under the factual milieu,[11] however, We consider the sum of P100,000.00 excessive. The same must therefore be reduced to P10,000.00.
WHEREFORE, in view of the foregoing considerations, the judgment of the
then Court of Appeals (now Intermediate Appellate Court) is MODIFIED by
(1) eliminating the award of P15,000.00 for loss of income; and
P20,000.00 as reimbursement for salaries; and (2) reducing the adjudged
moral damages from P100,000.00 to P10,000.00. Except as thus modified
the appealed decision is hereby AFFIRMED in all respect.
SO ORDERED.
Concepcion, Jr., Guerrero, Abad Santos, and Escolin, JJ., concur.
Makasiar, J., (Chairman,) concurred with the dissent of J. Aquino.
Aquino, J., dissents. The petitioner should be allowed to
repurchase the disputed piggery farm. He exercised his option to
repurchase on February 8, 1977 or within three years from September 10,
1976, the stipulated term. The view that the option could be exercised
after three years is manifestly absurd.
Votes to reverse the decision of the trial court and the Appellate Court
and to grant petitioner’s prayer in his complaint of March 4, 1977.
[1] 193-195, Record on Appeal
[2] Labasan vs. Lacuesta, 86 SCRA 16.
[3] TSN, BUO, p. 26.
[4] Id., p. 27
[5] Id., p. 27-28
[6] Id., p. 28
[7] Id., p. 19
[8] Id., p. 29-40
[9] Id., p. 42-43
[10] G. A. Machineries, Inc. vs. Yaptinchay, 126 SCRA 78; National Power Corporation vs. Court of Appeals, 113 SCRA 556
[11] pp. 201-202, Record on Appeal