478 Phil. 477
CALLEJO, SR., J.:
The petitioners obliged themselves to execute a deed of absolute sale over the property in favor of the respondents upon the full payment of the purchase price thereof.
- That upon full payment of the consideration hereof, the SELLER shall execute a Deed of Absolute Sale in favor of the BUYER that the payment of capital gains tax shall be for the account of the SELLER and that documentary stamps, transfer tax, registration expenses for the transfer of title including the notarization and preparation of this Contract and subsequent documents if any are to be executed, real estate taxes from January 1, 1986 and other miscellaneous expenses shall be for the account of the BUYER; the SELLER hereby represents that all association dues has been paid but that subsequent to the execution of this Contract the payment of the same shall devolve upon the BUYER.[6]
Our agreement is as follows:On May 14, 1986, petitioner Orlando Rayos filed respondent Rogelio Miranda’s complaint against the bank with the Regional Trial Court of Makati, docketed as Civil Case No. 13670.[10] In the meantime, the latter paid the third quarterly installment on the PSB loan account amounting to
- You will pay me
P700.00 as filing fee and other miscellaneous expenses which I personally received from you this morning;- Award to you of any amount in terms of moral, exemplary or actual and other forms of damages shall accrue to you in the amount of 70% thereof;
- 30% of the award to you in the concept of No. 2 hereof shall pertain to me as my contingent fee;
- All attorney’s fees that the court shall award to me or by the management of TMBC if they agree to extrajudicially settle shall pertain exclusively to me;
- Execution of judgment expenses shall be for your account;
- Should the case be appealed, my contingent fee shall increase by 10% if the appeal is to the Intermediate Appellate Court on questions of facts and law, and if appealed from there to the Supreme Court, then another 10% shall accrue to me.[9]
WHEREFORE, it is respectfully prayed that judgment be rendered in favor of plaintiff and against defendants, ordering the latter, jointly and severally, as follows:The trial court granted the respondent’s plea for a writ of preliminary attachment on a bond ofPLAINTIFF FURTHER PRAYS for such other remedies and relief as are just or equitable in the premises.[23]
- To pay to plaintiff the sum of
P267,197.33, with legal interest from date of demand, as actual or compensatory damages representing the unreturned price of the land;- To pay to plaintiff the sum of
P500,000.00 as consequential damages;- To pay to plaintiff the sum of
P1,000,000.00 as moral damages;- To pay to plaintiff the sum of
P100,000.00 as exemplary damages by way of example or correction for the public good;- To pay to plaintiff the sum of
P100,000.00 for and as attorney’s fees;- To pay for the costs of suit; and
- That a Writ of Attachment be issued against the properties of defendant Rayos spouses as security for the satisfaction of any judgment that may be recovered.
Petitioner Orlando Rayos filed a complaint on February 1, 1987 against respondent Rogelio Miranda with the Regional Trial Court of Makati, docketed as Civil Case No. 15984 for Specific Performance with Damages for the collection of the amount of
- That plaintiff has no cause of action against defendants Rayos, the latter are willing to deliver the title sought by plaintiff under the terms set out in their letters dated January 3, 5, 17, and 20, hereto marked as Annexes “1,” “1-A,” “1-B” and “1-C;”[28]
WHEREFORE, it is respectfully prayed that judgment be rendered in favor of plaintiff and against defendants, as follows:In the meantime, petitioner Orlando Rayos filed an Amended Complaint in Civil Case No. 15984 impleading his wife and that of respondent Rogelio Miranda as parties to the case. On March 4, 1987, the trial court issued an Order granting the petitioners’ motion in Civil Case No. 15639 for the discharge of the attachment on their property.[30] The court also denied the respondents’ motion for reconsideration of the Order of the court. The respondents, thereafter, filed a petition for review with the Court of Appeals for the nullification of the said Order.PLAINTIFF further prays for such other remedies and relief as are just or equitable in the premises.[29]
- Ordering defendants spouses Orlando A. Rayos and Mercedes T. Rayos to deliver forthwith to plaintiff the Owner’s Duplicate of Transfer Certificate of Title No. 100156, Registry of Deeds for Pasay City;
- Ordering defendants, jointly and severally, to pay to plaintiff the sum of
P1,000,000.00 as moral damages;- Ordering defendants, jointly and severally, to pay to plaintiff the sum of
P867,197.33 as exemplary damages by way of example or correction for the public good;- Ordering defendants, jointly and severally, to pay to plaintiff the sum of
P100,000.00 for and as attorney’s fees;- Ordering defendants, jointly, to pay the costs of suit; and
- Ordering the issuance of a Writ of Attachment against the properties of defendants Rayos spouses as security for the satisfaction of any judgment that may be recovered.
The parties in Civil Case No. 15639 agreed to submit the case for the trial court’s decision on the basis of their pleadings and their respective affidavits. In a Resolution dated July 26, 1988, then Undersecretary of Justice Silvestre Bello III affirmed the Public Prosecutor’s resolution in I.S. No. 87-150.[33]
- The application for the plaintiff to assume the mortgage loan of the defendants Spouses Rayos was not approved, and it was NOT even recommended by the Marketing Group of defendant PSBank for approval by its Top Management, because the credit standing of the plaintiff was found out to be not good;
- The acceptance of the payments made by the plaintiff for three (3) amortizations on the loan of defendants Spouses Rayos was merely allowed upon the insistence of the plaintiff, which payments were duly and accordingly receipted, and said acceptance was in accordance with the terms of the Real Estate Mortgage executed by the defendants Spouses Rayos in favor of the defendant PSBank and is also allowed by law;[32]
WHEREFORE, premises considered, judgment is hereby rendered, as follows:The petitioners appealed the decision to the Court of Appeals contending that:
I. (a) In Civil Case No. 15639, this Court orders plaintiff Rogelio Miranda to refund to spouses Orlando and Mercedes T. Rayos the total sum ofP29,069.45, Rayos paid to PS Bank as the last amortization and as release of mortgage fee, without any interest; and upon receipt of the sum ofP29,069.45 from Rogelio Miranda, Spouses Orlando and Mercedes T. Rayos shall deliver to Rogelio Miranda Transfer Certificate of Title No. 100156 of the Registry of Deeds of Pasay City; and, deliver to Rogelio Miranda the possession of the parcel of land described in the said title;
(b) Dismissing the complaint for damages of Plaintiff Rogelio Miranda against Spouses Orlando and Remedios (sic) T. Rayos, Philippine Savings Bank, Jose Araullo, Cesar I. Valenzuela, Dionisio Hernandez, Nestor E. Valenzuela, Raul T. Totanes, and Belinda Lim, for insufficiency of evidence; while the counterclaims of PS Bank, Jose Araullo, Cesar Valenzuela, Dionisio Hernandez, Nestor E. Valenzuela, Raul Totanes, and Belinda Lim, are likewise dismissed for insufficiency of evidence.
(c) The counterclaims of Spouses Orlando and Mercedes T. Rayos will be treated in Civil Case No. 15984;
II. In Civil Case No. 15984, this Court orders Defendant Rogelio Miranda to pay to Plaintiff Orlando Rayos the sum ofP4,133.19 at 12% interest per annum, from the date of the filing of the complaint on Feb. 11, 1987 until fully paid.
No costs in both cases.
SO ORDERED.[35]
On July 27, 1998, the Court of Appeals rendered judgment affirming with modification the decision of the RTC, thus:
- THE COURT A QUO COMMITTED A GRAVE ERROR IN NOT FINDING THAT ROGELIO A. MIRANDA COMMITTED A BREACH OF CONTRACT IN NOT PAYING THE FULL CONTINGENT FEE OF 30% IN WRITING IN THE MANILABANK CASE AND BECAUSE OF THAT BREACH, HE CANNOT NOW DEMAND SPECIFIC PERFORMANCE AND THE COURT A QUO SHOULD HAVE LEFT THE PARTIES AS THEY ARE;
- THE COURT A QUO SIMILARLY COMMITTED AN ERROR IN NOT FINDING THAT THE DECISION IN “SEVA VS. ALFREDO BERWIN & CO. & MEDEL” IS APPLICABLE FOUR SQUARE WHEREBY HE WHO BREACHES HIS CONTRACT IS NOT ENTITLED TO SPECIFIC PERFORMANCE;[36]
WHEREFORE, premises considered, the appealed decision of the Regional Trial Court of Makati City, is hereby AFFIRMED, with the modification abovestated.[37]The petitioners filed the instant petition, and ascribed the following errors on the appellate court:
The petitioners assert that the Court of Appeals erred in not finding that the respondents first committed a breach of their contract to sell upon their failure to pay the amount due for the last quarterly installment of their loan from the PSB. The petitioners fault the Court of Appeals for not relying on the resolution of Undersecretary Silvestre Bello III affirming the dismissal of the criminal complaint for estafa in I.S. No. 87-150, as cited by this Court in its decision in Miranda v. Rayos,[39] where it was also held that petitioner Orlando Rayos paid the last quarterly installment because he thought that the respondents would not be able to pay the same. The petitioners argue that they had no other alternative but to pay the last quarterly installment due on their loan with the PSB, considering that they received a demand letter from the bank on November 28, 1986, coupled by its denial of the respondents’ request to assume the payment of the loan. They insist that they did not block the respondents’ payment of the balance of the loan with the bank. The petitioners contend that even if the parties committed a breach of their respective obligations under the contract to sell, it behooved the Court of Appeals to apply Article 1192 of the Civil Code in the instant case, which reads:
- THE COURT OF APPEALS (CA) COMMITTED AN ERROR IN NOT FINDING THAT THE PRIVATE RESPONDENT MIRANDA COMMITTED THE FIRST BREACH FOR FAILURE TO ASSUME THE LOAN THUS HE FAILED TO SURROGATE (sic) HIMSELF TO PSB.
- THE CA COMMITTED AN ERROR IN FINDING THAT PETITIONERS PRE-EMPTED PRIVATE RESPONDENT MIRANDA IN DEPOSITING THE LAST AMORTIZATION WHEN MIRANDA HAD NO LEGAL STANDING WITH PSB DUE TO THE LATTER’S NON-APPROVAL OF THE ASSUMPTION OF THE LOAN.
- THE CA COMMITTED AN ERROR IN FINDING BOTH PARTIES GUILTY OF FIRST VIOLATING THE OBLIGATIONS INCUMBENT UPON THEM EVEN INFERRING THAT PETITIONERS COMMITTED THE BREACH FIRST BUT LATER CONCLUDING THAT THE BREACH WAS COMMITTED BY BOTH PARTIES. IT DID NOT MAKE A CORRECT ASSESSMENT OF WHO ACTUALLY COMMITTED THE FIRST BREACH.
- THE CA COMMITTED AN ERROR IN NOT ALLOWING THE OFFSET IF ITS DECISION STOOD OF THE AMOUNT OF
P4,133.19 PLUS 12% INT. P.A. FROM THE FILING OF THE COMPLAINT (CV 15984), THUS, ENTIRELY DISREGARDING THE DECISION OF THE TRIAL COURT IN SAID CASE ALLOWING ONLY THE DECISION IN CV 15639.- THE CA COMMITTED AN ERROR IN NOT APPLYING THE DECSION (sic) LAID DOWN IN “SEVA VS. ALFRED BERWIN & CO. AND MEDEL” THAT A PERSON HIMSELF AT FAULT CANNOT ENFORCE SPECIFIC PERFORMANCE.[38]
… The power to rescind obligation is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.The petition has no merit.
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.
After due study, the Court finds that there was no basis in fact and law for the appellants to usurp the payment of the last amortization on the mortgage upon the parcel of land it had conveyed to the Mirandas. Even if the appellants wanted to keep their good credit standing, they should not have preempted Miranda in paying the final amortization. There is no sufficient showing that Miranda was in danger of defaulting on the said payment. In fact, it appears that he approached the bank to tender payment, but he was refused by the bank, because he was beaten to the draw, so to speak, by the appellants. Appellants were able to do so because, for some reasons, the Mirandas’ assumption of the mortgage has not been approved by the bank. In doing so, the appellants had unilaterally cancelled the deed of sale with assumption of mortgage, without the consent of the Mirandas. This conduct by the appellants is, to say the least, injudicious as under Article 1308 of the Civil Code, contracts must bind both contracting parties and their validity or compliance cannot be left to the will of one of them.The Court of Appeals erred in so ruling.
Just as nobody can be forced to enter into a contract, in the same manner, once a contract is entered into, no party can renounce it unilaterally or without the consent of the other. It is a general principle of law that no one may be permitted to change his mind or disavow and go back upon his own acts, or to proceed contrary thereto, to the prejudice of the other party. In a regime of law and order, repudiation of an agreement validly entered into cannot be made without any ground or reason in law or in fact for such repudiation.
In the same way that the Rayos spouses must respect their contract with the Mirandas for the sale of real property and assumption of mortgage, Rogelio Miranda has to recognize his obligations under his agreement to pay contingent attorney’s fees to Orlando Rayos.[40]
It is difficult to imagine that complainant would be so naïve as to be totally unaware of the provisions of the original contract between the PSB and the spouses Rayos. He is a degree holder (A.B. Pre-Law and B.S.C.) and Acting Municipal Treasurer of Las Piñas. In short, he is not an ordinary layman. As a buyer with a knowledge of law, it was unnatural for him to read the provisions of the real estate mortgage wherein it is provided, among others, that the sale of the property covered by the mortgage does not in any manner relieve the mortgagor of his obligation but that “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.” There is every reason to believe that it was pursuant to the said provision in the real estate mortgage that complainant tried to assume the loan obligation of the Rayoses by filling up and submitted the loan application (page 30, records) sent by Orland Rayos. By signing the loan application and the general information sheet (page 31, records) in connection with said application, complainant showed that he knew that there was a need to formally apply to the bank in order for him to assume the mortgage.Contrary to the ruling of the Court of Appeals, the petitioners did not unilaterally cancel their contract to sell with the respondents when they paid the total amount of
We find respondent spouses’ version that when complainant’s application to assume the mortgage loan was disapproved he begged that he be allowed to pay the quarterly amortization credible, owing to the fact that complainant made the payments for the account of the Rayoses. Hence, complainant knew that since his application to the PSB was not approved, there was no substitution of parties and so he had to pay for the account of respondent spouses as shown by the receipts issued by the PSB.
As for the charge that Rayos paid the last installment to block complainant from getting the title and transferring the same to his name, respondents’ version is more satisfactory and convincing. Respondent Orland Rayos paid the last amortization when it became apparent that complainant would not be able to give the payment on the due date as he was still trying to sell his Lancer car. Even if complainant was able to pay the last installment of the mortgage loan, the title would not be released to him as he knew very well that his application to assume the mortgage was disapproved and he had no personality as far as PSB was concerned.[42]
Construing the contracts together, it is evident that the parties executed a contract to sell and not a contract of sale. The petitioners retained ownership without further remedies by the respondents[46] until the payment of the purchase price of the property in full. Such payment is a positive suspensive condition, failure of which is not really a breach, serious or otherwise, but an event that prevents the obligation of the petitioners to convey title from arising, in accordance with Article 1184 of the Civil Code.[47] In Lacanilao v. Court of Appeals,[48] we held that:
- That upon full payment of the consideration hereof, the SELLER shall execute a Deed of Absolute Sale in favor of the BUYER that the payment of capital gains tax shall be for the account of the SELLER and that documentary stamps, transfer tax, registration expenses for the transfer of title including the notarization and preparation of this Contract and subsequent documents if any are to be executed, real estate taxes from January 1, 1986 and other miscellaneous expenses shall be for the account of the BUYER; the SELLER hereby represents that all association dues has been paid but that subsequent to the execution of this Contract the payment of the same shall devolve upon the BUYER.[45]
It is well established that where the seller promised to execute a deed of absolute sale upon completion of payment of the purchase price by the buyer, the agreement is a contract to sell. In contracts to sell, where ownership is retained by the seller until payment of the price in full, such payment is a positive suspensive condition, failure of which is not really a breach but an event that prevents the obligation of the vendor to convey title in accordance with Article 1184 of the Civil Code.The non-fulfillment by the respondent of his obligation to pay, which is a suspensive condition to the obligation of the petitioners to sell and deliver the title to the property, rendered the contract to sell ineffective and without force and effect.[49] The parties stand as if the conditional obligation had never existed. Article 1191 of the New Civil Code will not apply because it presupposes an obligation already extant.[50] There can be no rescission of an obligation that is still non-existing, the suspensive condition not having happened.[51]