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352 Phil. 1142

FIRST DIVISION

[ G.R. No. 124045, May 21, 1998 ]

SPOUSES VIVENCIO BABASA AND ELENA CANTOS BABASA, PETITIONERS, VS. COURT OF APPEALS, TABANGAO REALTY, INC., AND SHELL GAS PHILIPPINES, INC., RESPONDENTS.

D E C I S I O N

BELLOSILLO, J.:

On 11 April 1981 a contract of “Conditional Sale of Registered Lands” was executed between the spouses Vivencio and Elena Babasa as vendors and Tabangao Realty, Inc. (TABANGAO) as a vendee over three (3) parcels of land, Lots Nos. 17827-A, 17827-B and 17827-C, situated in Brgy. Libjo, Batangas City. Since the certificates of title over the lots were in the name of third persons who had already executed deeds of reconveyance and disclaimer in favor of the BABASAS, it was agreed that the total purchase price of P2,121,920.00 would be paid in the following manner:        P300,000.00 upon signing of the contract, and P1,821,920.00 upon presentation by the BABASAS of transfer certificates of titles in their name, free from all liens and encumbrances, and delivery of registerable documents of sale in favor of TABANGAO within twenty (20) months from the signing of the contract. In the meantime, the retained balance of the purchase price would earn interest at seventeen percent (17%) per annum or P20,648.43 monthly payable to the BABASAS until 31 December 1982. It was expressly stipulated that TABANGAO would have the absolute and unconditional right to take immediate possession of the lots as well as introduce any improvements thereon.

On 18 May 1981 TABANGAO leased the lots to Shell Gas Philippines, Inc., (SHELL), which immediately started the construction thereon of a Liquefied Petroleum Gas Terminal Project, an approved zone export enterprise of the Export Processing Zone. TABANGAO is the real estate arm of SHELL.

The parties substantially complied with the terms of the contract. TABANGAO paid the first installment of P300,000.00 to the BABASAS while the latter delivered actual possession of the lots to the former. In addition, TABANGAO paid P379,625.00 to the tenants of the lots as disturbance compensation and as payment for existing crops as well as P334,700.00 to the owners of the house standing thereon in addition to granting them residential lots with the total area of 2,800 square meters. TABANGAO likewise paid the stipulated monthly interest for the 20 month period amounting to P408,580.80. Meanwhile, the BABASAS filed Civil Case No. 519[1] and Petition No. 373[2] for the transfer of titles of the lots in their name.

However, two (2) days prior to the expiration of the 20-month period, specifically on 31 December 1982, the BABASAS asked TABANGAO for an indefinite extension within which to deliver clean title over the lots. They asked that TABANGAO continue paying monthly interest of P20,648.43 starting January 1983 on the ground that Civil Case no. 519 and Petition No. 373 had not been resolved with finality in their favor. TABANGAO refused the request. In retaliation the BABASAS executed a notarized unilateral rescission dated 28 February 1983 to which TABANGAO responded by reminding the BABASAS that they were the ones who did not comply with their contractual obligation to deliver clean titles within the stipulated 20-month period, hence, had no right to rescind their contract. The BABASAS insisted on the unilateral rescission and demanded the SHELL vacate the lots.

On 19 July 1983 TABANGAO instituted an action for specific performance with damages in the Regional Trial Court of Batangas City to compel the spouses to comply with their obligation to deliver clean titles over the properties.[3] TABANGAO alleged that the BABASAS were already in a position to secure clean certificates of title and execute registerable document of sale since execution of judgment pending appeal had already been granted in their favor in Civil Case No. 519, while an order directing reconstitution of the original copies of TCT Nos. T-32565, T-32566 and T-32567 covering the lots had been issued in Petition No. 373. The BABASAS moved to dismiss the complaint on the ground that their contract with TABANGAO became null and void with the expiration of the 20-month period given them within which to deliver clean certificates of title. SHELL entered the dispute as intervenor praying that its lease over the premises be respected by the BASABAS.

Despite the pendency of the case the BASABAS put up several structures within the area in litigation to impede the movements of persons and vehicles therein, laid claim to twelve (12) heads of cattle belonging to intervenor SHELL and threatened to collect levy from all buyers of liquefied petroleum gas (LPG) for their alleged use of the BABASA estate in their business transactions with intervenor SHELL. As a result, SHELL applied for and was granted on 10 April 1990 a temporary restraining order against the Babasa spouses and anyone acting for and in their behalf upon filing of a P2-million bond.[4]

Eventually, judgment was rendered in favor of TABANGAO and SHELL.[5] The court a quo ruled that the 20-month period stipulated in the contract was never meant to be its term such that upon its expiration the respective obligations of the parties would be extinguished. On the contrary, the expiration thereof merely gave rise to the right of TABANGAO to either rescind the contract or to demand that the BABASAS comply with their contractual obligation to deliver to it clean titles and registerable documents of sale. The notarial rescission executed by the BABASAS was declared void and of no legal effect –

x x x x   

       
  1. The unilateral rescission of contract, dated February 28, 1983, executed by the defendant-spouses is null and void, without any legal force and effect on the agreement dated April 11, 1981, executed between the plaintiff and the defendant-spouses;
  2.    
  3. The lease contract dated, May 18, 1981, executed by the plaintiff in favor of the intervenor is deemed legally binding on the defendant-spouses insofar as it affects the three lots subject of this case;   
  4.    
  5. The defendant-spouses Vivencio Babasa and Elena Cantos are hereby ordered to deliver to the plaintiff Tabangao Realty, Inc., clean transfer certificates of title in their name and execute all the necessary deeds and documents necessary for the Register of Deeds of Batangas City to facilitate the issuance of Transfer Certificates of Title in the name of plaintiff, Tabangao Realty, Inc. In the event the defendant-spouses fail to do so, the Register of Deeds of Batangas City is hereby directed to cancel the present transfer certificates of title over the three lots covered by the Conditional Sale of Registered Lands executed by and between plaintiff, Tabangao Realty, Inc., and the defendant-spouses Vivencio Babasa and Elena Cantos-Babasa on April 11, 1981, upon presentation of credible proof that said defendant-spouses have received full payment for the lots or payment thereof duly consigned to the Court for the amount of the defendant-spouses;
  6.    
  7. Plaintiff Tabangao Realty, Inc., is directed to pay the defendant-spouses Vivencio Babasa and Elena Cantos-Babasa the remaining balance of P1,821,920.00 out of the full purchase price for these three lots enumerated in the agreement dated April 11, 1981 plus interest thereon of 17% per annum or P 20,648.43 a month compounded annually beginning January 1983 until fully paid;    
  8.    
  9. The Order dated April 10, 1990 issued in favor of the intervenor enjoining and restraining defendant-spouses Vivencio Babasa and Elena Cantos-Babasa and/or anyone acting for and in their behalf from putting up any structure on the three lots or interfering in any way in the activities of the intervenor, its employees and agents, is made permanent, and the bond posted by the intervenor cancelled; and,
  10.    
  11. Defendant-spouses Vivencio Babasa and Elena Cantos-Babasa shall pay the costs of this proceeding as well as the premium the intervenor may have paid in the posting of the P2,000,000.00 bond for the issuance of the restraining order of April 10, 1990.[6]

The BABASAS appealed to the Court of Appeals[7] which on 29 February 1996 affirmed the decision of the trial court court rejecting the contention of the BABASAS that the contract of 11 April 1981 was one of lease, not of sale;[8] and described it instead as one of absolute sale though denominated “conditional”. However, compounded interest was ordered paid from 19 July 1983 only, the date of filing of the complaint, not from January 1983 as decreed by the trial court.

The BABASAS now come to us reiterating their contention that the contract of 11 April 1981 was in reality a contract of lease, not for sale; but even assuming that it was indeed a sale, its nature was conditional only, the efficacy of which was extinguished upon the non-happening of the condition, i.e., non-delivery of clean certificates of title and registerable documents of sale in favor of TABANGAO within twenty (20) months from the signing of the contract.

We find no merit in the petition. Respondent appellate court has correctly concluded that the allegation of petitioners that the contract of 11 April 1981 is one of lease, not of sale, is simply incredible. First, the contract is replete with terms and stipulations clearly indicative of a contract of sale. Thus, the opening whereas clause states that the parties desire and mutually “agreed on the sale and purchase of the x x x three parcels of land;” the BABASAS were described as the “vendors” while TABANGAO as the “vendee” from the beginning of the contract to its end; the amount of P2,121,920.00 was stated as the purchase price of the lots; TABANGAO, as vendee, was granted absolute and unconditional right to take immediate possession of the premises while the BABASAS, as vendors, warranted such peaceful possession forever; TABANGAO was to shoulder the capital gains tax, and; lastly, the BABASAS were expected to execute a Final Deed of Absolute Sale in favor of TABANGAO necessary for the issuance of transfer certificates of title the moment they were able to secure clean certificates of title in their name. Hence, with all the foregoing, we cannot give credence to the claim of petitioners that subject contract was one of lease simply because the word “ownership” was never mentioned therein. Besides, as correctly pointed out by respondent court, the BABASAS did not object to the terms and stipulations employed in the contract at the time of its execution when they could have easily done so considering that they were then ably assisted by their counsel, Atty. Edgardo M. Carreon, whose legal training negates their pretended ignorance on the matter. Hence, it is too late for petitioners to insist that the contract is not what they intended to be.

But the BABASAS lament that they never intended to sell their ancestral lots but were merely forced to do so when TABANGAO dangled the threat of expropriation by the government (through the Export Processing Zone Authority) in the event voluntary negotiations failed. Although a cause to commiserate with petitioners may be perceived, it is not enough to provide them with an avenue to escape contractual obligations validly entered into. We have already held that contracts are valid even though one of the parties entered into it against his own wish and desire, or even against his better judgment.[9] Besides, a threat of eminent domain proceedings by the government cannot be legally classified as the kind of imminent, serious and wrongful injury to a contracting party as to vitiate his consent.[10] Private landowners ought to realize, and eventually accept, that property rights must yield to the valid exercise by the state of its all-important power of eminent domain.[11]

Finally, petitioners contend that ownership over the three (3) lots was never transferred to TABANGAO and that the contract of 11 April 1981 was rendered lifeless when the 20-month period stipulated therein expired without them being able to deliver clean certificates of title to TABANGAO through no fault of their own. Consequently, their unilateral rescission dated 28 February 1983 should have been upheld as valid.

We disagree. Although denominated “Conditional Sale of Registered Lands,” we hold, as did respondent court, that the contract of 11 April 1981 between petitioners and respondent TABANGAO is one of absolute sale. Aside from the terms and stipulations used therein indicating such kind of sale, there is absolutely no proviso reserving title in the BABASAS until full payment of the purchase price, nor any stipulation giving them the right to unilaterally rescind the contract in case of non-payment. A deed of sale is absolute in nature although denominated a “conditional sale” absent such stipulations.[12] In such cases, ownership of the thing sold passes to the vendee upon the constructive or actual delivery thereof.[13] In the instant case, ownership over Lots Nos. 17827-A, 17827-B, and 17827-C passed to TABANGAO both by constructive and actual delivery. Constructive delivery was accomplished upon the execution of the contract of 11 April 1981 without any reservation of title on the part of the BABASAS while actual delivery was made when TABANGAO took unconditional possession of the lots and leased them to its associate company SHELL which constructed its multi-million peso LPG Project thereon.[14]

We do not agree with petitioners that their contract with TABANGAO lost its efficacy when the 20-month period stipulated therein expired without petitioners being able to deliver clean certificates of title such that TABANGAO may no longer demand performance of their obligation. In Romero v. Court of Appeals[15] and Lim v. Court of Appeals[16] the Court distinguished between a condition imposed on the perfection of a contract and a condition imposed merely on the performance of an obligation. While failure to comply with the first condition results in the failure of a contract, failure to comply with the second merely gives the other party the option to either refuse to proceed with the sale or to waive the condition.[17]

Here, a perfected contract of absolute sale exists between the BABASAS and TABANGAO when they agreed on the sale of a determinate subject matter, i.e., Lots no. 17827-A, 17827-B and 17827-C, and the price certain therefor without any condition or reservation of title on the part of the BABASAS. However, the obligation of TABANGAO as vendee to pay the full amount of the purchase price was made subject to the condition that petitioners first deliver the clean titles over the lots within twenty (20) months from the signing of the contract. If petitioners succeed in delivering the titles within the stipulated 20-month period, they would get P1,821,920.00 representing the entire balance of the purchase price retained by TABANGAO. Otherwise, the deed of sale itself provides that–   

x x x upon the expiration of the 20-month period from the signing of the contract the Vendee is hereby authorized to settle out of the balance retained by the Vendee all legally valid and existing obligations on the properties x x x and whatever balance remaining after said settlement shall be paid to the Vendor.

Clearly then, the BABASAS’ act of unilaterally rescinding their contract with TABANGAO is unwarranted. Even without the abovequoted stipulation in the deed, the failure of petitioners to deliver clean titles within twenty (20) months from the signing of the contract merely gives TABANGAO the option to either refuse to proceed with the sale of to waive the condition in consonance with Art. 1545 of the New Civil Code.[18] Besides, it would be the height of inequity to allow the BABASAS to rescind their contract of sale with TABANGAO by invoking as a ground therefor their own failure to deliver the titles over the lots within the stipulated period.

WHEREFORE , the petition is DENIED. The appealed decision of the Court of Appeals in CA-G.R. CV No. 39554 affirming that of the Regional Trial Court of Batangas City, Br. 4, is AFFIRMED. No Costs.

SO ORDERED.       

Davide, Jr. (Chairman), Vitug, Panganiban, and Quisumbing, JJ., concur.

 


[1] “Babasa v. Lopez, Jr.,” an Action for Declaration of Nullity of Real Estate Mortgage filed with the Regional Trial Court of Batangas City.

[2] “In re: Judicial Reconstitution of TCT Nos. T-32565, T-32566 and T-32567, Batangas City,” filed with the Regional Trial Court of Batangas City.

[3] Docketed as Civil Case No. 2310 of the RTC-Batangas City, Br. 4.

[4] Original Records, Vol. 2, pp. 962-963.

[5] Decision penned by Judge Conrado R. Antona, dated 23 December 1992; Rollo, pp. 56-74.

[6] Id., pp. 71-74.

[7] Docketed as CA-G.R. CV No. 39554.

[8] Decision penned by Justice Jose C. dela Rama with Justices Jaime M. Lantin and Eduardo G. Montenegro concurring; id., pp. 45-55.

[9] Lagunzad v. Soto Vda de Gonzales, No. L-32066, 6 August 1979, 92 SCRA 476; see also Clarin v. Rulona, No. L-30786, 20 February 1984, 127 SCRA 512.

[10] Alarcon v. Kasilag, 40 O.G. Supp. 11, p. 203 [1940], citing Manresa. 

[11] J.M. Tuason & Co., Inc., v. Land Tenure Administration, No. L-21064, 18 February 1970, 31 SCRA 413.

[12] Dignos v. Court of Appeals, G.R. No. 59266, 29 February 1988, 158 SCRA 375, 382; see also Pingol v.Court of Appeals, G.R. No. 102909, 6 September 1993, 226 SCRA 118, 127, and Taguba v. Vda. De De Leon, G.R. No. 59980, 23 October 1984, 132 SCRA 722, 727; Luzon Brokerage Co., Inc. v. Maritime Building Co. Inc., No. L-25885, 16 November 1978, 86 SCRA 305.

[13] Art: 1477, New Civil Code.

[14] See Manuel R. Dulay Enterprises, Inc., v. Court of Appeals, G.R. No. 91889, 27 August 1993, 225 SCRA 678.

[15] G.R. No. 107207, 23 November 1995, 250 SCRA 223.

[16] G.R. No. 118347, 24 October 1996, 263 SCRA 569. 

[17] Lim v. Court of Appeals, supra, at p. 577.

[18] Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the non performance of the condition as a breach of warranty x x x x.

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