[ G.R. No. 224466 (Formerly UDK-15574).
March 27, 2019 ]
KAREN NUÑEZ* VITO, LYNETTE** NUÑEZ MASINDA, WARREN NUÑEZ, AND
ALDEN*** NUÑEZ, PETITIONERS, VS. NORMA MOISES-PALMA, RESPONDENT.
Deed of Adjudication and Sale / Affidavit Authorizing Release of Mortgage
FACTS:
Petitioners' father, Vicentico Nuñez (Vicentico), was the original owner of Lot No. 2159-A, with
an area of 429 square meters, located in Mambusao, Capiz (subject lot) as evidenced by
Transfer Certificate of Title No. (TCT)T-16612.7
Sometime in May 1992, Vicentico, who was then suffering from diabetes, borrowed
P30,000.00 from Rosita Moises (Rosita) and as security, executed a real estate mortgage over his
property (Lot No. 2159-A). Since Rosita had no money, the funds came from Norma
Moises-Palma (Norma), Rosita's daughter . According to petitioners, the
P30,000.00 loan of Vicentico was subsequently paid as evidenced by an Affidavit
Authorizing Release of Mortgage8 (AARM).9
Upon Vicentico's death on September 27, 1994, the subject lot was transmitted to his heirs,
namely: petitioners Karen Nuñez Vito (Karen), Warren Nuñez (Warren), Lynette Nuñez Macinda
(Lynette), Alden Nuñez (Alden) (collectively, petitioners) and Placida Hisole10 Nuñez (Placida),
Vicentico's surviving spouse.11 Each heir had an undivided 1/5 share in the subject lot equivalent to
85.812 square meters.13
Placida died on August 1, 1997 and her 1/5 share was inherited equally by her heirs. Thus,
petitioners each had a pro indiviso 1/4 share in the subject lot equivalent to 107.25 square meters.14
On June 28, 1995, Norma was able to have all petitioners, except Alden, sign a
Deed of Adjudication and Sale15 (DAS) wherein petitioners purportedly sold to
Norma their respective pro indiviso shares in the subject lot for P50,000.00, but
the DAS reflected P30,000.00 as the consideration in order to reduce the amount to
be paid for capital gains tax and documentary stamp tax. After the execution of the DAS,
Norma immediately took possession of the subject lot.16
Instead of paying cash, Norma executed a Promissory Note17 (PN) on July 1,
1995 in favor of petitioners whereby she obligated herself to pay P50,000.00,
which "amount represents the cost of a parcel of land [Norma] bought from them
described as follows: TITLE NO. T-16612 Lot No 2159-A situated at Poblacion
Tabuc Mambusao, Capiz[,] [containing an area of FOUR HUNDRED TWENTY NINE
(429) SQUARE METERS, more or less"18 on or before July 1, 1998, without
interest.19 Upon prodding of petitioners, Norma executed an Acknowledgment of
Debt20 (AOD) dated February 22, 2007, whereby she admitted that she owed petitioners
P50,000.00, representing the purchase price of the DAS.21
Despite non-payment of the purchase price and the absence of Alden's signature on the
DAS, Norma was able to cause the registration of the document with the Register of Deeds of Capiz
and TCT T-3546022 was issued to her on August 2, 2005.23
On July 10, 2006, Alden instituted a case against respondent for Annulment of Transfer
Certificate of Title No. T-35460, Declaring Deed of Adjudication and Sale Null and
Void, Partition, Reconveyance and Recovery of Possession of a Portion of Land
with Damages24 docketed as Civil Case No. 499 before the MTC. During the pendency of this
case, Alden and Norma entered into a Compromise Agreement (Compromise
Agreement) on September 7, 2006, whereby Alden agreed to respect Norma's
ownership and possession of 85.8 square meters of the subject lot, the share
being claimed by him.25
About a year later, or on August 15, 2007, petitioners Karen, Warren and
Lynette, represented by their brother and attorney-in-fact Alden, filed against
Norma a case for Declaration of Nullity of Deed of Adjudication and Sale,
Cancellation of Transfer Certificate of Title No. T-35460, Recovery of Ownership
and/or Possession of Lot No. 2159-A and Damages26 before the MTC. After trial on
the merits, the MTC, on February 27, 2009 rendered a Decision in favor of petitioners. Norma filed a
Notice of Appeal on April 22, 2009 which was given due course by the MTC. On October 19, 2009,
the RTC rendered a Decision setting aside the MTC's Decision on the ground that Alden, who was
merely acting as attorney-in-fact of Karen, Warren and Lynette, was not included as indispensable
party. The RTC ordered the MTC to include Alden as an indispensable party and to conduct further
proceedings on the case.27
Karen, Warren and Lynette, through Alden, and
On February 19, 2010,
Alden, in his own capacity, filed an amended complaint before the
MTC for Declaration of Nullity of Deed of Adjudication and Sale,
Cancellation of Transfer Certificate of Title No. T-35460, Recovery of
Ownership and/or Possession of Lot No. 2159-A and Damages .28 The
allegations of the amended complaint are basically the same as those of the original, except the
addition of Alden as an indispensable party.29 Even up to the filing of the amended complaint,
Norma was not able to pay the consideration of P50,000.00.30
The MTC Ruling
After trial, the MTC rendered on June 8, 2012 a Decision31 in favor of petitioners, the dispositive
portion of which states:
WHEREFORE, preponderance of evidence point in favor of plaintiffs and
against defendant, judgment is hereby rendered:
1.) DECLARING the Deed of Adjudication and Sale dated June 28, 1995 NULL
AND VOID;
2.) ORDERING the CANCELLATION of Transfer Certificate of Title No. T-35460
in the name of defendant Norma Moises Palma and the REINSTATEMENT of
Transfer Certificate of Title No. T-16612 in the name of Vicentico Nuñez married to
Placida Hisole;
3.) DECLARING plaintiffs as the rightful owners of Lot No. 2159-A subject to the
right of defendant Norma Moises Palma with respect to the share of Alden Nuñez in
the total area of 85.8 square meters;
4.) ORDERING defendant to turn over ownership and possession of Lot No.
2159-A to plaintiffs except the share of Alden Nuñez with an area of 85.8 square
meters;
5.) ORDERING defendant Norma Moises Palma to pay plaintiffs the following:
a.) Fifty Thousand (Php50,000.00) pesos as attorney's fees;
b.) Five Thousand (Php5,000.00) pesos as litigation expenses;
c.) Seventy-Five Thousand (Php75,000.00) pesos as moral
damages; and
d.) Fifteen Thousand (Php15,000.00) pesos as exemplary
damages; and
6.) ORDERING defendant to pay the cost of the suit.
SO ORDERED.32
Norma appealed33 the MTC Decision to the RTC.
The RTC Ruling
The RTC in its Decision34 dated December 11, 2012 granted respondent's appeal. The
dispositive portion of the RTC Decision states:
WHEREFORE, premises considered, the decision of the Court a quo is hereby
modified as follows:
1. Ordering the defendant-appellant to pay the plaintiffs except Alden Nuñez, the
amount of P50,000.00 with legal interest rate of 12% starting on April 28, 1995 until
the full amount price is paid;
2. Ordering defendant Norma Moises Palma to pay plaintiffs the following:
a.) Fifty Thousand (P50,000.00) pesos as attorney's fees;
b.) Five Thousand (P5,000.00) pesos as litigation expenses;
c.) Seventy Five Thousand (P75,000.00) pesos as moral
damages; and
d.) Fifteen Thousand (P15,000.00) pesos as exemplary
damages; and
3. Declaring as valid the Deed of Adjudication and Sale , dated June
28, 1995, with judicial notice on the decision based on the
Compromise Agreement rendered by the Municipal Trial Court of
Mambusao in Civil Case No. 499 , dated September 20, 2006, involving the
share of Alden Nuñez with an area of 85.8 square meters.
No pronouncement as to costs.
SO ORDERED.35
Dissatisfied, petitioners filed a petition for review under Rule 42 before the CA.
The CA Ruling
The CA in its Decision36 dated July 31, 2015 affirmed the RTC Decision with modification. The
dispositive portion of the CA Decision states:
WHEREFORE, the Decision dated December 11, 2012 of the RTC, Branch 21,
Mambusao, Capiz in Civil Case No. M-12-0360-07 AP is AFFIRMED with the
following MODIFICATION. The order directing respondent to pay petitioners the
amount of P50,000.00 as consideration for the sale is DELETED. The award of
attorney's fees, litigation expenses, moral damages and exemplary damages is
likewise DELETED. No pronouncement as to costs.
SO ORDERED.37
Petitioners filed a motion for reconsideration38 and pointed to the CA the AARM as proof of
payment of Vicentico's loan. The CA denied the motion for reconsideration.39
Hence, the Petition. To date, Norma has not filed her Comment despite the Resolution40 dated
July 11, 2016 of the Court requiring her to comment on the Petition within 10 days from receipt
thereof; accordingly, she is deemed to have waived her right to do so.
ISSUE:
Will Article 1191 apply?
RULING:
YES, Article 1191 applies.
With respect to reciprocal obligations, rescission or more appropriately resolution is another
remedy pursuant to Article 1191 of the Civil Code, to wit:
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.
The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who
have acquired the thing, in accordance with Articles 1385 and 1388 and the
Mortgage Law.
To recall, reciprocal obligations are those which are created or established at
the same time, out of the same cause, and which result in mutual relationships of
creditor and debtor between the parties; and their outstanding characteristic is
reciprocity arising from identity of cause by virtue of which one obligation is a
correlative of the other.77
Justice Eduardo P. Caguioa78 explained:
x x x A reciprocal obligation has been defined as that where each of the parties
is a promisee of a prestation and promises another in return as a counterpart or
equivalent of the other.79 Article 1191 refers to this kind of obligation. The most
salient feature of this obligation is reciprocity. In order that there be reciprocity, it is
not sufficient that two persons be mutually debtor and creditor of each other; the
reciprocity must be so perfect as to cause both relations to arise from the same
source; each obligation being correlative with the other, it not being possible to
conceive one without the other. x x x80
In a contract of sale, as in the DAS in this case, the obligation of the vendee to
pay the price is a correlative of the obligation of the vendor to deliver the thing
sold.81
Proceeding from the fact that the obligation of one party is the correlative of the obligation of the
other in reciprocal obligations, the Civil Code in the first paragraph of Article 1191 has
established the principle that if one of the parties fails to comply with what is
incumbent upon him, there is a right on the part of the other to rescind (or
"resolve" in accordance with accepted translations of the Spanish Civil Code) the
obligation.82 Since this condition, which is implied as a general rule in
all reciprocal obligations, has the effect of extinguishing rights which
are already acquired or vested, it is resolutory in character, thus a
tacit resolutory condition.83
In the words of Justice Eduardo P. Caguioa, "Article 1191 provides for the implied or tacit
resolutory condition even if there is no corresponding agreement between the parties," unlike in
unilateral obligations where the right to resolve the obligation must always be express.84 He further
opined that although the said Article uses the term "rescind" the same should be understood in the
sense of "resolve"; and distinguished the two terms as follows:
Distinction between resolution and rescission:
x x x Between the two terms, there are several differences: (1) resolution can
only be availed of by a party to the obligation while rescission may be availed of by a
third person (creditor); (2) resolution can be obtained only on the ground of non-
performance by the other party while rescission may be based on fraud, lesion, etc.;
(3) resolution may be refused by the court on valid grounds while rescission may not
be refused by the court if all requisites are present; (4) resolution is a primary
remedy while rescission is subsidiary, available only when there is no other remedy;
and (5) resolution is based on mutuality of the parties while rescission is based on
prejudice or damage suffered.85
To summarize, the remedies of the unpaid seller, after ownership of the real
property not covered by Republic Act No. 655286 or the Maceda Law, has been
vested to the buyer, are:
1. To compel specific performance by filing an action against the buyer for the
agreed purchase price; or
2. To rescind or resolve the contract of sale either judicially or t|y a notarial act;
and
3. In either (1) or (2), to recover damages for the breach of the contract.
Based on the amended complaint, petitioners seek to declare the DAS null and void ab initio and
non-existent since Norma, the vendee, did not pay the purchase price to them
pursuant to the doctrine that where the price which appears in the contract of
sale to have been paid but has in fact not or never been paid, the contract is void ;
and the absence of Alden's signature in the DAS showed that he did not sign the same and it lacked
his consent.87 The DAS being null and void, TCT T-35460 that was issued in the name of Norma
should be cancelled; the ownership of the subject lot should be reconveyed to the heirs of Vicentico;
and possession thereof should be delivered to them.88
Since the cause of action of Alden had been finally and fully settled in the Compromise
Agreement in Civil Case No. 499, he no longer has a cause of action against Norma with
respect to his pro indiviso right in the subject lot.
What is clear from the amended complaint is that the remedy of specific performance was not
availed of by petitioners. They do not seek to collect from Norma the purchase price of P50,000.00.
While they have not expressly sought the resolution of the DAS on account of
Norma's nonpayment of the purchase price, such remedy could be implied when
they sought the nullification of Norma's TCT, the reconveyance to them of the
subject lot and the return of the possession to them. When the remedy of
resolution of reciprocal obligations, as in rescission, is sought, "the
obligation to return the things which were the object of the contract,
together with their fruits, and the price with its interests" is created
pursuant to Article 1385 of the Civil Code.
Aside from attorney's fees, litigation expenses, moral damages and exemplary damages, they
also seek from Norma in their amended complaint the "reasonable value of the use of the premises
in the estimated amount of at least P10,000.00 a year, the property in question being a prime
commercial lot," having been deprived thereof.89
As to the ruling of the MTC, it erred when it concluded that the DAS could be
considered as not consummated because no consideration was effected or given
by Norma; and, thus, it is void and non-existent. The sale was partly
consummated on account of the transfer of ownership by the vendors to Norma.
The DAS is not void for lack of consideration, but it has been extinguished by the
happening of the tacit resolutory condition, which is judicial resolution or
rescission of the sale.
Likewise, the RTC erred in ruling that the DAS is valid, notwithstanding the
non-payment of the consideration, because there was delivery pursuant to Article
1477 in relation to Article 1498 of the Civil Code. It further erred when it ordered Norma to
pay the P50,000.00 with interest at the legal rate of 12% per annum starting on June 28, 1995 (DAS'
date of execution) until the full amount is paid.94 The error is because, firstly, the remedy availed of
by the vendors is not specific performance, and secondly, under Article 1592 of the Civil Code, the
court may not grant the buyer a new term when a demand for rescission of the contract has been
made upon him judicially.
The applicability of Article 1592 was discussed by the Court in Cabrera v. Ysaac:95
For the sale of immovable property, the following provision governs its
rescission:
Article 1592. In the sale of immovable property, even though it
may have been stipulated that upon failure to pay the price at the
time agreed upon the rescission of the contract shall of right take
place, the vendee may pay, even after the expiration of the period,
as long as no demand for rescission of the contract has been made
upon him either judicially or by notarial act. After the demand, the
court may not grant him a new term.
This provision contemplates (1) a contract of sale of an immovable property and
(2) a stipulation in the contract that failure to pay the price at the time agreed upon
will cause the rescission of the contract. The vendee or the buyer can still pay even
after the time agreed upon, if the agreement between the parties has these
requisites. This right of the vendee to pay ceases when the vendor or the seller
demands the rescission of the contract judicially or extrajudicially. In case of an
extrajudicial demand to rescind the contract, it should be notarized.
Hence, this provision does not apply if it is not a contract of sale of an
immovable property and merely a contract to sell an immovable property. A contract
to sell is "where the ownership or title is retained by the seller and is not to pass until
the full payment of the price, such payment being a positive suspensive condition
and failure of which is not a breach, casual or serious, but simply an event that
prevented the obligation of the vendor to convey title from acquiring binding
force."96
The Court is mindful of the opinion of Justice J.B.L. Reyes in the consolidated cases of Sing,
Yee & Cuan, Inc. v. Santos, et al.97 and Santos, et al. v. Sing Yee & Cuan, Inc.98 (Sing, Yee &
Cuan, Inc.), viz.:
x x x [I]t is nevertheless clear that a distinction must be made between a
contract of sale in which title passes to the buyer upon delivery of the thing sold and
a contract to sell (or of "exclusive right and privilege to purchase," as in this case)
where by agreement the ownership is reserved in the seller and is not to pass until
the full payment of the purchase price is made. In the first case, nonpayment of the
price is a negative resolutory condition; in the second place, full payment is a
positive suspensive condition. Being contraries, their effect in law can not be
identical. In the first case, the vendor has lost and can not recover the ownership of
the land sold until and unless the contract of sale is itself resolved and set aside. In
the second case, however, the title remains in the vendor if the vendee does not
comply with the condition precedent of making payment at the time specified in the
contract. Hence, when the seller, because of noncompliance with the suspensive
condition stipulated, seeks to eject the buyer from the land object of the agreement,
said vendor is enforcing the contract and is not resolving the same. That article 1504
[(of the Civil Code of Spain or old Civil Code, now Article 1592 of the new Civil
Code)] refers to nonpayment as a resolutory condition and does not contemplate an
agreement to sell in which title is reserved by the vendor until the vendee has
complied first with conditions specified, is clear from its terms:
"ART. 1504. In the sale of real property, even though it may
have been stipulated that in default of the payment of the price
within the time agreed upon, the resolution of the contract shall take
place ipso jure, the purchaser may pay even after the expiration of
the period, at any time before demand has been made upon him
either by suit or by notarial act. After such demand has been made
the judge cannot grant him further time."99
Based on Justice J.B.L. Reyes' opinion in Sing, Yee & Cuan, Inc. that the non-payment of
the purchase price in a contract of sale is a negative resolutory condition, the
happening or fulfillment thereof will extinguish the obligation or the sale pursuant
to Article 1231 of the Civil Code, which provides that fulfillment of a resolutory
condition is another cause of extinguishment of obligations. Despite its
extinguishment, since the vendor has lost ownership of the land, the contract
must itself be resolved and set aside. It is noted, however, that the resolution of
the sale is the tacit resolutory condition under Article 1191, as discussed above,
which is implied in reciprocal obligations.
Consequently, the Court rules that the sale transaction in the DAS is deemed resolved.
SUPREME COURT DECISION
WHEREFORE, the Petition is hereby GRANTED. The Court of Appeals
(Visayas Station) Decision dated July 31, 2015 and Resolution dated March 15,
2016 in CA-G.R. SP No. 07390 are hereby REVERSED and SET ASIDE. Likewise,
the Decision dated December 11, 2012 of the Regional Trial Court, 6th Judicial
Region, Branch 21, Mambusao, Capiz in Civil Case No. M-12-0360-07 AP is
hereby REVERSED and SET ASIDE. The Decision dated June 8, 2012 of the
Municipal Trial Court, 6th Judicial Region, Mambusao, Capiz in Civil Case No. 515
is REINSTATED and AFFIRMED with MODIFICATION as follows:
WHEREFORE, preponderance of evidence points in favor of plaintiffs and
against defendant, judgment is hereby rendered:
1.) DECLARING the Deed of Adjudication and Sale dated June
28, 1995 RESOLVED in so far as the sale in favor of Norma Moises
Palma is concerned;
2.) ORDERING the proper Register of Deeds
to CANCEL Transfer Certificate of Title No. T-35460 in the name of
defendant Norma Moises Palma and, in lieu thereof, to ISSUE a
new Transfer Certificate of Title in the names of Placida Hisole
Nuñez, Karen Nuñez, Warren Nuñez, Lynette Nuñez and Norma
Moises Palma, as co-owners to the extent of 1/5 pro indiviso each
or 85.8 square meters undivided portion;
3.) DECLARING plaintiffs as the rightful co-owners of Lot No.
2159-A subject to the co-owner's right of defendant Norma Moises
Palma with respect to the share of Alden Nuñez in the total area of
85.8 square meters;
4.) ORDERING defendant Norma Moises Palma to recognize
and respect the rights of ownership and possession of Placida
Hisole Nuñez, Karen Nuñez, Warren Nuñez and Lynette Nuñez as
co-owners of Lot No. 2159-A;
5.) ORDERING defendant Norma Moises Palma to pay plaintiffs
the following:
a.) Ten Thousand (Php10,000.00) pesos per year from 1995 up
to the actual turnover of possession of Lot No. 2159-A to plaintiffs
except the share of Alden Nuñez with an area of 85.8 square
meters;
b.) Fifty Thousand (Php50,000.00) pesos as attorney's fees;
c.) Five Thousand (Php5,000.00) pesos as litigation expenses;
d.) Seventy-Five Thousand (Php75,000.00) pesos as moral
damages; and
e.) Fifteen Thousand (P15,000.00) pesos as exemplary
damages;
with the foregoing amounts bearing legal interest at 6% per
annum from finality of this Decision until full payment; and
6.) ORDERING defendant to pay the cost of the suit.
SO ORDERED.
