PCIC V CA Full Text
PCIC V CA Full Text
PCIC V CA Full Text
PANGANIBAN, J.:
Is the seller's failure to eject the lessees from a lot that is the subject of a contract
of sale with assumption of mortgage a ground (1) for rescission of such contract
and (2) for a return by the mortgagee of the amortization payments made by the
buyer who assumed such mortgage?
Petitioner posits an affirmative answer to such question in this petition for review
on certiorari of the March 27, 1995 Decision 1 of the Court of Appeals, Eighth
Division, in CA-G.R. CV Case No. 32298 upholding the validity of the contract of
sale with assumption of mortgage and absolving the mortgagee from the liability of
returning the mortgage payments already made. 2
The Facts
On June 26, 1979, the parties executed a Deed of Absolute Sale With Assumption
of Mortgage which contained the following terms and conditions: 3
That for and in consideration of the sum of Two Hundred Ninety-Five Thousand
Pesos (P295,000.00) Philippine Currency, to us in hand paid in cash, and which we
hereby acknowledge to be payment in full and received to our entire satisfaction,
by POWER COMMERCIAL AND INDUSTRIAL DEVELOPMENT
CORPORATION, a 100% Filipino Corporation, organized and existing under and
by virtue of Philippine Laws with offices located at 252-C Vito Cruz Extension,
we hereby by these presents SELL, TRANSFER and CONVEY by way of absolute
sale the above described property with all the improvements existing thereon unto
the said Power Commercial and Industrial Development Corporation, its
successors and assigns, free from all liens and encumbrances.
We hereby certify that the aforesaid property is not subject to nor covered by the
provisions of the Land Reform Code - the same having no agricultural lessee
and/or tenant.
We hereby also warrant that we are the lawful and absolute owners of the above
described property, free from any lien and/or encumbrance, and we hereby agree
and warrant to defend its title and peaceful possession thereof in favor of the said
Power Commercial and Industrial Development Corporation, its successors and
assigns, against any claims whatsoever of any and all third persons; subject,
however, to the provisions hereunder provided to wit:
That the above described property is mortgaged to the Philippine National Bank,
Cubao, Branch, Quezon City for the amount of one hundred forty-five thousand
pesos, Philippine, evidenced by document No. 163, found on page No. 34 of Book
No. XV, Series of 1979 of Notary Public Herita
L. Altamirano registered with the Register of Deeds of Pasig (Makati), Rizal . . . ;
That the said Power Commercial and Industrial Development Corporation assumes
to pay in full the entire amount of the said mortgage above described plus interest
and bank charges, to the said mortgagee bank, thus holding the herein vendor free
from all claims by the said bank;
That both parties herein agree to seek and secure the agreement and approval of the
said Philippine National Bank to the herein sale of this property, hereby agreeing
to abide by any and all requirements of the said bank, agreeing that failure to do so
shall give to the bank first lieu (sic) over the herein described property.
On the same date, Mrs. C.D. Constantino, then General Manager of petitioner-
corporation, submitted to PNB said deed with a formal application for assumption
of mortgage. 4
On February 15, 1980, PNB informed respondent spouses that, for petitioner's
failure to submit the papers necessary for approval pursuant to the former's letter
dated January 15, 1980, the application for assumption of mortgage was considered
withdrawn; that the outstanding balance of P145,000.00 was deemed fully due and
demandable; and that said loan was to be paid in full within fifteen (15) days from
notice. 5
Petitioner paid PNB P41,880.45 on June 24, 1980 and P20,283.14 on December
23, 1980, payments which were to be applied to the outstanding loan. On
December 23, 1980, PNB received a letter from petitioner which reads: 6
With regard to the presence of the people who are currently in physical occupancy
of the (l)ot . . . it is our desire as buyers and new owners of this lot to make use of
this lot for our own purpose, which is why it is our desire and intention that all the
people who are currently physically present and in occupation of said lot should be
removed immediately.
It was our understanding that this lot was free and clear of problems of this nature,
and that the previous owner would be responsible for the removal of the people
who were there. Inasmuch as the previous owner has not been able to keep his
commitment, it will be necessary for us to take legal possession of this lot inorder
(sic) to take physical possession.
(T)his refers to the loan granted to Mr. Reynaldo Quiambao which was assumed by
you on June 4, 1979 for P101,500.00. It was last renewed on December 24, 1980 to
mature on June 4, 1981.
A review of our records show that it has been past due from last maturity with
interest arrearages amounting to P25,826.08 as of February 19, 1982. The last
payment received by us was on December 24, 1980 for P20,283. 14. In order to
place your account in current form, we request you to remit payments to cover
interest, charges, and at least part of the principal.
On March 17, 1982, petitioner filed Civil Case No. 45217 against respondent
spouses for rescission and damages before the Regional Trial Court of Pasig,
Branch 159. Then, in its reply to PNB's letter of February 19, 1982, petitioner
demanded the return of the payments it made on the ground that its assumption of
mortgage was never approved. On May 31, 1983, 8 while this case was pending, the
mortgage was foreclosed. The property was subsequently bought by PNB during
the public auction. Thus, an amended complaint was filed impleading PNB as
party defendant.
On July 12, 1990, the trial court 9 ruled that the failure of respondent spouses to
deliver actual possession to petitioner entitled the latter to rescind the sale, and in
view of such failure and of the denial of the latter's assumption of mortgage, PNB
was obliged to return the payments made by the latter. The dispositive portion of
said decision states: 10
(1) Declaring the rescission of the Deed of Sale with Assumption of Mortgage
executed between plaintiff and defendants Spouses Quiambao, dated June 26,
1979;
No award of other damages and attorney's fees, the same not being warranted
under the facts and circumstances of the case.
The counterclaim of both defendants spouses Quiambao and PNB are dismissed
for lack of merit.
No pronouncement as to costs.
SO ORDERED.
On appeal by respondent-spouses and PNB, Respondent Court of Appeals reversed
the trial court. In the assailed Decision, it held that the deed of sale between
respondent spouses and petitioner did not obligate the former to eject the lessees
from the land in question as a condition of the sale, nor was the occupation thereof
by said lessees a violation of the warranty against eviction. Hence, there was no
substantial breach to justify the rescission of said contract or the return of the
payments made. The dispositive portion of said Decision reads: 11
Issues
Petitioner contends that: (1) there was a substantial breach of the contract between
the parties warranting rescission; and (2) there was a "mistake in payment" made
by petitioner, obligating PNB to return such payments. In its Memorandum, it
specifically assigns the following errors of law on the part of Respondent Court: 12
The alleged "failure" of respondent spouses to eject the lessees from the lot in
question and to deliver actual and physical possession thereof cannot be considered
a substantial breach of a condition for two reasons: first, such "failure" was not
stipulated as a condition - whether resolutory or suspensive - in the contract; and
second, its effects and consequences were not specified either. 13
We hereby also warrant that we are the lawful and absolute owners of the above
described property, free from any lien and/or encumbrance, and we hereby agree
and warrant to defend its title and peaceful possession thereof in favor of the said
Power Commercial and Industrial Development Corporation, its successors and
assigns, against any claims whatsoever of any and all third persons; subject,
however, to the provisions hereunder provided to wit:
If the parties intended to impose on respondent spouses the obligation to eject the
tenants from the lot sold, it should have included in the contract a provision similar
to that referred to in Romero vs. Court of Appeals, 17 where the ejectment of the
occupants of the lot sold by private respondent was the operative act which set into
motion the period of petitioner's compliance with his own obligation, i.e., to pay
the balance of the purchase price. Failure to remove the squatters within the
stipulated period gave the other party the right to either refuse to proceed with the
agreement or to waive that condition of ejectment in consonance with Article 1545
of the Civil Code. In the case cited, the contract specifically stipulated that the
ejectment was a condition to be fulfilled; otherwise, the obligation to pay the
balance would not arise. This is not so in the case at bar.
Absent a stipulation therefor, we cannot say that the parties intended to make its
nonfulfillment a ground for rescission. If they did intend this, their contract should
have expressly stipulated so. In Ang vs. C.A., 18 rescission was sought on the
ground that the petitioners had failed to fulfill their obligation "to remove and
clear" the lot sold, the performance of which would have given rise to the payment
of the consideration by private respondent. Rescission was not allowed, however,
because the breach was not substantial and fundamental to the fulfillment by the
petitioners of the obligation to sell.
As stated, the provision adverted to in the contract pertains to the usual warranty
against eviction, and not to a condition that was not met.
The terms of the contract are so clear as to leave no room for any other
interpretation. 19
Furthermore, petitioner was well aware of the presence of the tenants at the time it
entered into the sales transaction. As testified to by Reynaldo, 20 petitioner's
counsel during the sales negotiation even undertook the job of ejecting the
squatters. In fact, petitioner actually filed suit to eject the occupants. Finally,
petitioner in its letter to PNB of December 23, 1980 admitted that it was the
"buyer(s) and new owner(s) of this lot."
The Court disagrees with petitioner's allegation that the respondent spouses failed
to deliver the lot sold. Petitioner asserts that the legal fiction of symbolic delivery
yielded to the truth that, at the execution of the deed of sale, transfer of possession
of said lot was impossible due to the presence of occupants on the lot sold. We find
this misleading.
The key word is control, not possession, of the land as petitioner would like us to
believe. The Court has consistently held that: 23
. . . (I)n order that this symbolic delivery may produce the effect of tradition, it is
necessary that the vendor shall have had such control over the thing sold that . . .
its material delivery could have been made. It is not enough to confer upon the
purchaser the ownership and the right of possession. The thing sold must be placed
in his control. When there is no impediment whatever to prevent the thing sold
passing into the tenancy of the purchaser by the sole will of the vendor, symbolic
delivery through the execution of a public instrument is sufficient. But if,
notwithstanding the execution of the instrument, the purchaser cannot have the
enjoyment and material tenancy of the thing and make use of it himself or through
another in his name, because such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to reality - the delivery has not
been effected.
Considering that the deed of sale between the parties did not stipulate or infer
otherwise, delivery was effected through the execution of said deed. The lot sold
had been placed under the control of petitioner; thus, the filing of the ejectment suit
was subsequently done. It signified that its new owner intended to obtain for itself
and to terminate said occupants' actual possession thereof. Prior physical delivery
or possession is not legally required and the execution of the deed of sale is
deemed equivalent to delivery. 24 This deed operates as a formal or symbolic
delivery of the property sold and authorizes the buyer to use the document as proof
of ownership. Nothing more is required.
(1) The purchaser has been deprived of the whole or part of the thing sold;
(3) The basis thereof is by virtue of a right prior to the sale made by the vendor;
and
(4) The vendor has been summoned and made co-defendant in the suit for eviction
at the instance of the vendee. 25
In the absence of these requisites, a breach of the warranty against eviction under
Article 1547 cannot be declared.
Petitioner argues in its memorandum that it has not yet ejected the occupants of
said lot, and not that it has been evicted therefrom. As correctly pointed out by
Respondent Court, the presence of lessees does not constitute an encumbrance of
the land, 26 nor does it deprive petitioner of its control thereof.
Because petitioner failed to impugn its integrity, the contract is presumed, under
the law, to be valid and subsisting.
In this case, petitioner was under obligation to pay the amortizations on the
mortgage under the contract of sale and the deed of real estate mortgage. Under the
deed of sale (Exh. "2"), 28 both parties agreed to abide by any and all the
requirements of PNB in connection with the real estate mortgage. Petitioner was
aware that the deed of mortgage (Exh. "C") made it solidarily and, therefore,
primarily 29 liable for the mortgage obligation: 30
(e) The Mortgagor shall neither lease the mortgaged property. . . nor sell or dispose
of the same in any manner, without the written consent of the Mortgagee.
However, if not withstanding this stipulation and during the existence of this
mortgage, the property herein mortgaged, or any portion thereof, is . . . sold, it
shall be the obligation of the Mortgagor to impose as a condition of the sale,
alienation or encumbrance that the vendee, or the party in whose favor the
alienation or encumbrance is to be made, should take the property subject to the
obligation of this mortgage in the same terms and condition under which it is
constituted, it being understood that the Mortgagor is not in any manner relieved of
his obligation to the Mortgagee under this mortgage by such sale, alienation or
encumbrance; on the contrary both the vendor and the vendee, or the party in
whose favor the alienation or encumbrance is made shall be jointly and severally
liable for said mortgage obligations. . . .
Therefore, it cannot be said that it did not have a duty to pay to PNB the
amortization on the mortgage.
Also, petitioner insists that its payment of the amortization was a mistake because
PNB disapproved its assumption of mortgage after it failed to submit the necessary
papers for the approval of such assumption.
But even if petitioner was a third party in regard to the mortgage of the land
purchased, the payment of the loan by petitioner was a condition clearly imposed
by the contract of sale. This fact alone disproves petitioner's insistence that there
was a "mistake" in payment. On the contrary, such payments were necessary to
protect its interest as a "the buyer(s) and new owner(s) of the lot."
All told, respondent Court did not commit any reversible error which would
warrant the reversal of the assailed Decision.
SO ORDERED.