GALICANO CALAPATIA, JR., PETITIONER, VS. HACIENDA BENITO, INC., AND THE REGISTER OF DEEDS OF RIZAL, RESPONDENTS.

The case at bar is simple. 
It involves at bottom an attempt to renege on commitments voluntarily
and formally assumed.  Obviously the
attempt may not be countenanced.

The case originated from a contract of sale executed by Hacienda
Benito, Inc. in favor of Maria Paz Santana Tambunting
of two (2) parcels of land designated as Lots Numbered 1 and 2 of Block 6 of
the subdivision plan, located at Victoria Valley Subdivision, Antipolo, Rizal, with areas of
4,457 and 3,956 square meters, and covered by Transfer Certificates of Title Numbered 71862 and 71863, of the
Registry of Deeds of Rizal, respectively.^[1]
The deed stipulated, among other things,^[2]
that –

1) the lots may not be subdivided;

2.) the buyer “shall start and finish
construction of his/her house within three (3) years from the execution of **
(the) agreement; otherwise the ** (latter) shall pay an additional price of
Pesos Three Only (P3.00) per square meter on the original price for the first
year after the aforesaid three (3) year period
of grace has expired, and an additional Pesos Two Only (P2.00) per
square meter on the original price for the second and every succeeding year
thereof until the completion of the house;” and

3.) “(a)ll
the terms, conditions, and stipulations contained in ** (the) Contract ** shall
be understood to be binding to all the heirs, executors, administrators,
assigns and successors-in-interest of both the FIRST PARTY (seller) and the
SECOND PARTY (buyer) **.”

For some reason or other, these stipulations were not registered
in the Property Registry, and not annotated on the titles thereafter issued in
favor of Tambunting, numbered 213679 and 215240.  She subsequently mortgaged the lots to the
Philippine National Bank.

Now, Tambunting failed either to
construct a residential house on the lots within the three-year stipulated
period, or to pay her obligation to the Bank secured by her mortgage of said
lots.  As a result: (1) the PNB caused
the extra-judicial foreclosure of the mortgage, and acquired the lots as the
highest bidder at the foreclosure sale; and (2) the Hacienda Benito sued the
PNB in the Court of First Instance of Rizal for
recovery of the penalty charges (additional price) provided for in the former’s contract with Tambunting
the action being docketed as Case No. 13329.

The case notwithstanding, PNB caused the subdivision of the two
(2) parcels of land in question into four (4) lots.  The PNB also entered into a contract on August 14, 1973 with Galicano A. Calapatia, Jr.
(petitioner herein) binding itself to convey the lots by way of absolute sale to
the latter upon his payment in full of the purchase price of the property.^[3]
Calapatia took possession of the parcels of land and
constructed a residential house thereon, completing it sometime in 1975.

Earlier, while negotiating with PNB for the acquisition of the
lots in question, Calapatia had written to Hacienda
Benito under date of November 18, 1972,^[4]
expressing willingness to assume the payment of the penalty fees prescribed in
its contract with Tambunting, this having been
required of him by the Bank, and in payment thereof, to assign 1,000 square
meters out of the total area of the lots in question.  The offer was accepted by Hacienda Benito, in
a written reply to Calapatia dated December 1, 1972.^[5]

On August 3, 1977,
PNB transferred the lots to Calapatia,^[6]
who obtained in due course titles thereto in his name, numbered 20632, 20633,
20634, and 20635 of the Registry of Deeds of Rizal.  The final deed of sale in Calapatia’s
favor contained a provision
setting out the obligation subject of the exchange of letters between him and
the Hacienda Benito above mentioned, i.e., that he –

“* * assumes the full and sole
responsibility of paying to Hacienda Benito, Inc. and/or to whomsoever the same
may be payable any and all
penalty assessments that are now as well as those that may yet become due in
the future; and renders the VENDOR (PNB)
harmless against any and all claims of whatever nature arising out of such penalty assessments, whether directly or
indirectly, and this undertaking and assumption of the penalty assessments by
the VENDEE shall be deemed part and parcel of the consideration of this Deed of
Absolute Sale.”

About a year later, Calapatia sold one
of the four lots to Horizon Realty, Inc.,^[7]
and five (5) months afterwards, another lot, to the Spouses Dominador
O. Limjuco and Lourdes V. Allarey.^[8]

During all this time, Hacienda Benito continued with its efforts
to procure enforcement of its contractual rights through the courts.  Although its original action, Case No. 13329,
was dismissed without prejudice,^[9]
it shortly instituted another, docketed as Case No. 32459, for the same
purpose,^[10]
and succeeded in obtaining judgment in its favor,^[11]
disposing as follows:

“WHEREFORE, in view of the foregoing considerations and
plaintiff Hacienda Benito, Inc. having failed to establish a cause of action
against defendant Atty. Galicano A. Calapatia, Jr., the complaint herein is ordered dismissed.

“The Register of Deeds of Rizal is
ordered to cancel the lis pendis
which plaintiff caused to be annotated at the back of defendant Calapatia’s Transfer Certificate of Title No. N-20632 as Entry No. 40225/T No. 20632 dated January 7, 1979.

“Defendant’s counterclaim is ordered dismissed.

“Without pronouncement
as to costs.”

This judgment was however reversed by the Intermediate Appellate
Court, on appeal taken by Hacienda Benito, Inc. 
Its Decision dated June 27, 1985,^[12]
contained the following dispositive portion:^[13]

“WHEREFORE, WE REVERSE and set aside the appealed judgment and
render another one, ordering defendant-appellee (Calapatia) to execute the deed of conveyance to
plaintiff-appellant (Hacienda Benito, Inc.) over a 1,000 square meter portion
of the property in question in payment of the penalty fees and charges claimed,
or if this is no longer possible, for defendant-appellee
to pay the plaintiff-appellant the reasonable market value thereof as of
December 1, 1972.”

In the appellate proceedings at bar, petitioner Calapatia argues that:

1) Hacienda Benito’s cause of action to collect penalty fees,
which accrued in 1966, had prescribed by the time it filed its complaint in
1979;

2) he is not bound by the provisions of the contract between
Hacienda Benito and Tambunting, there being no privity between him and Tambunting;

3) PNB not being liable for the stipulated penalty fees since it
is prohibited by its charter to construct residential houses on lots acquired
in payment of debts, he (Calapatia) could not, as PNB’s successor in interest, be held liable therefor;

4) penalty fees may not be exacted by Hacienda Benito because it
failed to develop the subdivision fully; and

5) the issue was rendered moot by Calapatia’s
completion of the construction of a residential house even prior to acquiring
title over the lots from PNB, a fact of which the Hacienda Benito was aware.

Calapatia’s contentions are without
merit and are hereby rejected.  Whatever
validity they might otherwise have had, originally, was negated by his
voluntary, written undertaking to assume Tambunting’s
contractual commitments in favor of Hacienda Benito, unconditionally accepted
in writing by the latter — including his offer to convey 1,000 square meters
out of the lots in question, precisely in satisfaction of those commitments —
which undertaking, it must be stressed, he reiterated in his subsequent
contract of sale with the PNB on August 3, 1977 wherein he once more obliged
himself to pay “to Hacienda Benito, Inc. * * any and all penalty
assessments that are now (due) as well as those that may yet become due in the
future **.”

Given these undisputed facts, it is clear that the applicable
period of prescription had not lapsed at the time that Hacienda Benito filed
its second complaint on March 2, 1979,^[14]
after its first had been dismissed without prejudice.  Nor may it be disputed, given these same uncontroverted circumstances, and as a legal proposition,
that Calapatia is legally bound to pay the penalty
charges to Hacienda Benito, not only by virtue of the contract generated by the
concurrence of offer and acceptance between them,^[15]
in accordance with Article 1319 of the Civil Code, but also by the inclusion of
a stipulation pour autrui for
the benefit of Hacienda Benito, Inc. in the subsequent deed of sale between Calapatia and the PNB,^[16]
pursuant to Article 1311 of the same Civil Code.

The period that has elapsed since Calapatia
took an appeal from the judgment of the Intermediate Appellate Court has seen
the great deterioration of the Philippine currency and the extraordinary
appreciation of real estate values.  The
requirement of the appealed decision — that if it is no longer possible for Calapatia to convey a 1,000-square meter portion of the
property in question in payment of the penalty fees and charges claimed, he
should pay Hacienda Benito, Inc.
“the reasonable market value thereof as of December 1, 1972” — would
consequently appear to be no longer reasonable and fair, it being more
equitable to set that value as of the date of this decision.

WHEREFORE, as thus modified, the judgment of the
Intermediate Appellate Court of 1985 is AFFIRMED, with costs against the
petitioner.

SO ORDERED.

Cruz, Gancayco, Griño-Aquino,
and Medialdea,
JJ., concur.

^[1]
The sale was entered into on December
18, 1962

^[2]
Rollo, pp. 37 et seq.; Exh. “A”

^[3]
Id., p. 7

^[4]
Dated November 18, 1972

^[5]
The letter is dated December
1, 1972 (Exh. X)

^[6]
Rollo, p. 41: Exh.
B-2

^[7]
By deed dated April 2, 1978 (Exh.
C)

^[8]
By deed dated Sept. 8, 1978 (Exh.
D)

^[9]
Rollo, p. 50

^[10]
Id., pp. 46, 76. The
second complaint was filed on March 2,
1979.

^[11]
Id., p. 74

^[12]
Written by Quetulio-Losa, J., with whom concurred Gaviola, Jr., Caquioa & Luciano, JJ.

^[13]
Id., p. 81

^[14]
SEE footnote 10, supra

^[15]
SEE footnotes 4 and 5, and related text, supra

^[16]
SEE footnote 6 and corresponding text, supra