SATURNINO SONGCUAN, PETITIONER, VS. HON. INTERMEDIATE APPELLATE COURT, MARIANO ALVIAR, BELEN ALVIAR AND LUZ ALVIAR PINLAC, RESPONDENTS.

Victoriano Alviar was the
owner of two parcels of land located at San Fernando, La Union.  On the land stands a building owned by his
son, Mariano, and his wife, Belen.  On September 29, 1966, the Alviars sold these realties to Saturnino Songcuan for P34,026.09.  On October
10, 1966 Songcuan executed an instrument entitled “Deed of Repurchase of Two Parcels of Land and a Residential-Commercial Building” (pp.
5-6, Records [Exhibit]) wherein
he gave the Alviars, or any one of them or
“their respective heirs and assigns, the right and privilege to repurchase
[the realties they had previously sold to him] x x x at the
price of P34,026.09 x x x for, during and within the period of 10 years counted from the
date of execution of [the] instrument” provided that the redemptioner also pays the cost of improvements.

Appearing at the dorsal portion of the instrument below the notarial subscription is an undated additional condition
which reads, to wit:

“P.S. (Additional condition)

“In the event the said Victoriano Alviar, Mariano S. Alviar and Belen F. Alviar or
either of them, exercise or exercises
the right to repurchase the above
described properties and they or either of them become the owner and possessor
of the premises, they shall or either of them be obliged to give me (Saturnino
A. Songcuan) the right of lease and are or is oblige
to execute a lease contract with me for a period of twenty five (25) years from
the time of exercising the right to repurchase the premises, at a monthly
rental of three hundred ninety pesos (P390.00), for the premises actually
occupied by me (Saturnino Songcuan)
at the time of the execution of
this instrument.” (p. 6, Records [Exhibit])

The signatures of the Alviars appear at the bottom of the paragraph.  At the time of the execution of the
instrument, Songcuan, though then already the owner
of the realties, was admittedly actually occupying only one-third portion of
the ground floor of the 3-storey building, apparently having leased the
remaining portion to third
persons.

Sometime in March, 1969 the mentioned building was razed by fire
and Songcuan erected another at his own expense. 
Subsequently, Songcuan had the realties
registered in his name and was issued OCT No. O-1029 sometime
in 1969.

In 1974, the Alviars filed a complaint against Songcuan,
docketed as Civil Case No. 2621, for “Redemption with Consignation”
to compel the defendant to effect the redemption to them of the subject
realties, Victoriano Alviar
having died at this time, he was represented by his heirs. Songcuan
refused to sell back to the Alviars the properties
because the latter was tendering only the price of P34,026.00
whereas Songcuan wanted reimbursement for the cost of
the building he erected and also for the cost of the registration of the
realties.  The Alviars,
on the other hand, claimed that the transactions between them and Songcuan were one of equitable mortgage and, therefore, Songcuan
cannot compel them to pay for the cost of the building he had erected without their permission.

In his Answer, Songcuan prays, in the alternative, that in the event the Alviars be allowed to repurchase the realties the latter be
also compelled to lease the properties to him pursuant to the “P.S.
(Additional Condition)” embodied in the instrument dated October 10, 1966
as above quoted.

On July 29,
1977, the then Court
of First Instance of La Union rendered its decision decreeing the following:

“IN VIEW OF THE FOREGOING, judgment is hereby rendered –

“(a) Declaring that the true and real agreement or
contract of the parties (Exhs, C, D, E & F for
plaintiffs; Exhs. 1, 2, 3 and 4 for the
defendant) on the two parcels of land with the commercial building is that of a
deed of sale with right to repurchase and hereby enjoins the parties to comply
and abide by the terms of their contract;

“(b) Declaring that plaintiffs’ right to repurchase the property as
admitted by the defendant for a period of 10 years from October 10, 1966 to
October 10, 1976, as stipulated in their contracts, have been suspended by the
filing of the complaint on November 22, 1974. 
Said redemption period is suspended during the pendency
of this case.  Plaintiffs-vendor-a-retro
may exercise their right to repurchase the properties within the remaining period
of one (1) year, 10 months and 18 days from the finality of this decision (Ong Chua v. CARR, 53 Phil. 975) or within the period of 30
days from finality of this decision as provided for under Art. 1606 of the New
Civil Code;

“(c) The plaintiffs in exercising
their right to repurchase the properties should pay the defendant the necessary
and useful improvement in putting up the building in the amount of P30,000.00, in addition to the repurchase price of P34,026.09,
and the additional expenses of P1,000.00 for the registration of the land under
Act 496; otherwise, the defendant may retain possession of the parcels of land
and building until reimbursement is fully made;

“(d) No damages, including attorney’s fees and litigation
expensed is awarded to both parties.

“Without pronouncement as to costs.”
(p. 57, Record [Exhibits]

From this decision Songcuan appealed
alleging among others that “[t]he [lower court] erred in refusing to make a
finding as to the appellants’
right to lease the property for 25 years x x x.”

On July 15, 1980
the Court of Appeals, in CA-G.R. No. 62934, affirmed in toto the appealed decision.  With respect to Songcuan’s
alleged right to lease, the appellate court stated that the lower court had already upheld the validity of the
deeds executed by the parties and, therefore, “such pronouncement
regarding appellant’s right to lease the premises for 25 years is
unnecessary.  The condition is already
there in the contract itself which is the law between the parties.”

This decision became final and executory on March 9, 1981, the petition for its review having been
denied in our resolution, in G.R. No. 55196 dated January 26, 1981.

The writ of execution was
issued on April 1, 1981 but was returned unsatisfied because Songcuan refused to accept the manager’s check tendered to
him claiming that it was not legal tender and for the further reason that
the Alviars refused to execute a lease contract in
his favor as embodied in their October 10, 1966 contract. 
An alias writ of execution was issued on June 1,
1981 but also was
not satisfied.

On July 7,
1981, Songcuan filed a complaint with the same Court of First
Instance of La Union for Rescission of Right to Repurchase
which was docketed as Civil Case No. 3213 and which gave rise to this petition.
Songcuan was of the opinion that the Alviars forfeited their right to repurchase the realties
for having failed to redeem them within 30 days from the finality of the
decision in Civil Case No. 2621 contrary to the mandate of Article 1606 of the
Civil Code.

 On July 9, 1981, the trial court in Civil Case No. 2621
issued an order for its Clerk of Court to issue a
Deed of Reconveyance in behalf of Songcuan
and in favor of the Alviars.

On July 11, 1981, Songcuan amended his complaint alleging that rescission
lies for the further reason that the
Alviars failed to execute in his favor a lease
contract citing Article 1191 of the Civil Code, and that if the Deed of Reconveyance had already been executed by the Clerk of
Court it be declared null since the Alviars had
already forfeited their right to redeem the realties.  Songcuan’s amended
complaint further added an alternative prayer that in the event the court
decides to compel him to reconvey the properties the Alviars be also compelled to lease the realties to him for
25 years according to the terms of their contract.

On July 17,
1981, the Clerk of
Court of the Court of First Instance of La Union issued a Deed of Reconveyance transferring ownership of the properties to
the Alviars. 
Possession of the properties, however, was retained by Songcuan as the trial court granted his prayer for a writ
of preliminary injunction in Civil Case No 3213 to enjoin the Alviars from taking possession of the realties.

In their Answer, the Alviars alleged that their tender to Songcuan
of a manager’s check was a valid tender
of payment and that Songcuan is no longer entitled to lease the premises
because the subject matter of the contract was burned in 1969 citing Article
1655 of the Civil Code.

On March
19, 1984 the trial court rendered its decision, the dispositive portion of
which reads, to wit:

“WHEREFORE, judgment is hereby rendered as follows:

“1. That defendants exercised (sic) their right of redemption
within the specific period of one (1) year, ten (10) months and eighteen (18)
days from March 9, 1981 as provided for in the decision of Civil Case No. 2621;

“2. That the Deed of Reconveyance
executed by the Clerk of Court and Ex-Officio Provincial Sheriff dated July 17, 1981 is valid and cannot be
rescinded;

“3. That plaintiff is the lessee of the defendants on the entire
properties mentioned in the Deed of Reconveyance for
a period of twenty-five (25) years to be counted from July 17, 1981 at the
monthly rental of THREE HUNDRED NINETY (P390.00) PESOS;

“4. That the preliminary injunction restraining defendants or any
of their representatives or agents or persons acting on their behalf from
committing acts of dispossession against plaintiff on the premises of this
complaint is now made PERMANENT during the existence of the lease contract, x x x;

“5. That defendants shall maintain the plaintiff in the peaceful
and adequate enjoyment of the lease for the entire duration of the lease;

“6. That defendants shall pay plaintiff the amount of P50,000.00 by way of
attorney’s fees as damages with interest at the legal rate of 12% per
year until fully paid; and

“7. That defendants pay
costs of this suit.

“SO ORDERED.” (pp. 363-386, Records)

Both parties appealed, Songcuan
pressing for rescission while the Alviars disclaiming any obligation to lease the premises to Songcuan.  The Alviars, in the
alternative countered, that if Songcuan was entitled
to lease the premises, the lease should cover only 1/3 of the building.

On June 27, 1986 the Court
of Appeals in AC G.R. CV No. 04325 rendered its
decision (pp. 58-69,
Rollo) modifying that of the trial court’s by
limiting the area Songcuan is entitled to lease to only 1/3 of the building;
declaring the Alviars entitled to a writ of possession with regard the rest of the premises; deleting the award of attorney’s fees and ordering the
parties to each bear the cost of
litigation.

From this decision Songcuan
appealed by certiorari to this Court (G.R. No. 75096).  The principal issue here is the same as that
presented in the lower court and the Court of Appeals, which is, whether or not the Alviars
had forfeited their right to repurchase, or whether the right may be rescinded
under the grounds advanced by Songcuan.  After deliberating on the
arguments raised, this Court rules in the
negative.

We do not find merit in Songcuan
argument that the Alviars had forfeited their right
to repurchase the subject premises for having failed to exercise it within
thirty days from the finality of the decision in Civil Case No. 2621 citing the
third paragraph of Article 1606 of the Civil Code which provides that a
vendor-a-retro may still exercise his right to repurchase “within thirty
days from the time the final judgment was rendered in a civil action on the
basis that the contract was a true sale with right to repurchase.” The
judgment in Civil Case No. 2621 which had become final on March 9, 1981, had
ordained that the running of the period
within which the Alviars could repurchase the
premises had been suspended during the pendency of
the case and they were given the option either to repurchase the premises
within 30-days from the finality of the judgment, as provided by the law, or
within the remaining period of one year, ten months and 18 days therefrom.  It is
axiomatic that a final judgment may no longer be amended and to limit now to
30-days the period within which the Alviars may
repurchase the premises would be an open violation of the rule.  A final judgment is the law between the
parties to a case and controls their relation with respect the controversy there presented.  We thus fully agree with the pronouncement of
the appellate court on this matter that:

“There is no merit in Songcuan’s
claim that the Alviars’ failure to abide by Article
1606 of the New Civil Code foreclosed their right to repurchase.  Indeed, Art. 1606 provides that the
vendors-a-retro may repurchase within 30 days from the finality of the judgment
x x x.  However, it is noted that the final decision
in Case 2621, which became final on March 9, 1981, gave the Alviars
two alternative periods within which to exercise the right to repurchase-either
within 30 days as prescribed in Article 1606, or within 1 year, 10
months and 18 days from March 9, 1981, x x x.  Accordingly,
whichever of the alternative
periods the Alviars may avail of,
would still constitute a valid exercise of their right.” (pp. 64-65, Rollo)

Neither do We agree that the right of
the Alviars to repurchase may be rescinded under
Article 1191 of the Civil Code.  Songcuan asserts that the October 10, 1966 contract he
entered into with the Alviars created a reciprocal
obligation between them- for him to reconvey the
subject premises and for the Alviars to lease the
realties to him- and the refusal of the latter to fulfill their obligation
gives him the right, under Article 1191, to
rescind “the right of [the Alviars] to repurchase” the realities.  The law provides in part:

“Art. 1191.  The power
to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.

“x x x.”

The cited law is not applicable in this case.  Although the parties are each obligor and obligee of the other,
their corresponding obligation can hardly
be called reciprocal.  In
reciprocal obligations the obligation of one is a resolutory
condition of the obligation of the other, the non-fulfillment of which entitles
the other party to rescind the contract. 
In the case at bar, there are
two separate and distinct obligations, each independent of the other.  The obligation of Songcuan
to reconvey the property is not dependent on the
obligation of the Alviars to lease the premises to
the former.  The obligation of the Alviars is not an essential part of the
contract.  This is evident in the wordings of the “P.S. (Additional Condition)” itself which states
that “in the event [the Alviars] exercised the
right to repurchase x x x and becomes the owner and possessor of the premises, they shall
x x x be obliged to give [Songcuan]
the right of lease and are x x x obliged to execute a
lease contract x x x.”
In other words, the obligation of the Alviars to
lease to Songcuan the subject premises arises only
after the latter had reconveyed
the realties to them.  We quote with approval the following statement of the respondent appellate court:

“For the stipulation imposes on them the
obligation to execute the lease only at such time when the Alviars
or any one among them exercises the right and becomes the possessor of the
properties in question x x x.  Otherwise stated, the obligation to execute
the lease emerges only if the Alviars had already
repurchased and obtained possession of the repurchased properties.” (p.
66, Rollo)

Should the Alviars
fail to lease the subject premises to Songcuan after reconveyance, then the latter’s remedy is not for
rescission but for specific performance, which in fact he asked for in the
alternative and was granted by the trial court and the Court of Appeals.

Thus, the right of the Alviars
to repurchase must be upheld notwithstanding the fact that such right had
not been annotated at the back of Songcuan’s
certificate of title.  The purpose of
annotation is only to serve notice to third persons and not to lend validity or
nullity to an instrument.

The next question to be resolved is how much area Songcuan is entitled to lease.  The trial court,
awarded Songcuan the whole premises, based on the
“P.S. (Additional Condition)” which speaks of “the premises
actually occupied by [Songcuan]” and there was no
evidence presented by the Alviars on the area Songcuan was actually
occupying.  Further, the trial court said
that the right of Songcuan to lease the whole
premises is strengthened by the fact that he became the registered owner of the
realties and hence, has complete dominion over the properties.

We rule, however, that
the P.S. clause refers to the area Songcuan was
actually occupying and not to what he constructively may possess as the owner of the premises at the time of the execution of the October
10, 1966 contract.  Further, as pointed out by private
respondents, there was no need to present any evidence as to the area Songcuan was actually occupying since at the pre-trial conference in the trial
court, Songcuan had admitted that he was occupying only one-third of the
single story Alviar building.

Under the parties’
agreement, Songcuan’s lease was to start from the
time the Alviars exercised their right to repurchase, Songcuan should
therefore be deemed to have become
the Alviars’ lessee on July 17, 1981 and should pay rent in the amount agreed upon from said date.

As regards the deletion
by the respondent court of the award to Songcuan of
attorney’s fees, We fully agree and quote its pronouncement that:

“We find no justification for the exorbitant award in Songcuan’s favor of attorney’s fees of P50,000.00 considered as damages.  Attorney’s fees in concept of damages may be awarded only if the defendant
acted in gross and evident bad faith in refusing plaintiff’s just and
demandable claim. (Art. 2208, New Civil Code). 
In the case at bar, there is no showing that the Alviars
acted in bad faith in refusing Songcuan’s claim to a
25-year lease of the entire premises. 
The stipulation to that effect merely refers to the premises Songcuan was occupying at the execution of the deed on October 10, 1966, which admittedly,
was only 1/3 of the ground floor of the Alviar
building, not the entire building.  x x x.” (p.
68, Rollo)

With respect to G.R. No.
80851, which is a petition to
enjoin the implementation of the writ of possession in favor of the Alviars, there is no need to discuss the issues therein, as
the same has become moot and academic, this Court having pronounced that Songcuan is entitled to lease only one-third of the ground
floor of the subject building, with the Alviars being
entitled to a writ of possession as to the rest.

ACCORDINGLY, the decision under review in G.R. No. 75096
is hereby AFFIRMED, and the petition in G.R. No. 80851 is DISMISSED for having
become moot and academic.

SO ORDERED.

Narvasa, (Chairman), Cruz, Gancayco, and Griño-Aquino, JJ., concur.