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[G.R. No. 133879.March 19, 2002]
EQUATORIAL vs. MAYFAIR
EN BANC
Gentlemen:
Quoted hereunder, for your information, is a resolution of this Court dated MAR 19 2002.
G.R. No. 133879(Equatorial Realty Development, Inc. vs. Mayfair Theater, Inc.)
In its Motion for Reconsideration, dated December 18, 2001, petitioner argues that we denied the Petition "on a ground different from that relied upon by the lower court x x x and on a theory not discussed at all by the parties x x x." This is not correct.It should be plain that our Decision dismissed the Petition because of res judicata.True, our reasoning in reaching this conclusion was different form that of the Regional Trial Court (RTC) but it was based on the earlier Decision in the mother case, which barred the present proceedings.There is nothing unusual or strange in affirming a lower court's conclusion anchored on a different reasoning.Early on, in Addison v. Felix, [1] cralaw we have already said so, in these words:
"However, although we are not in agreement with the reasoning found in the decision appealed from, we consider it to be correct in its result."
In our instant Decision, we clearly said that "[u]nder the doctrine of res judicata or bar by prior judgment, a matter that has been adjudicated by a court of competent jurisdiction must be deemed to have been finally and conclusively settled if it arises in any subsequent litigation between the same parties and for the same cause." We added: "Although the court a quo erred when it declared 'void from inception' the Deed of Absolute Sale between Carmelo and petitioner, our foregoing disquisition supports the grant of the Motion to Dismiss on the ground that our prior judgment in GR No. 106063 has already resolved the issue of back rentals." Unquestionably, res judicata or bar by prior judgment was raised as a ground in respondent's Motion to Dismiss and taken up in the court a quo's ruling.We quote again from our Decision: "In short, [the RTC] ruled on the ground raised; namely, bar by final judgment.By granting the Motion, it disposed correctly, even if its legal reason for nullifying the sale was wrong.The correct reasons are given in this Decision."
Very recently, in Republic v. Cocofed, [2] cralaw we emphasized:
����������� "x x x where the issues already raised also rest on other issues not specifically presented, as long as the latter bears relevance and close relation to the former and as long as they arise from matters on record, the Court has the authority to include them in its discussion of the controversy as well as to pass upon them."
As additional ground for reconsideration, petitioner also claims that "there is no factual foundation" for our ruling.Again, this is incorrect.We repeatedly referred to the facts as found by this Court in the mother case.Indeed, as stressed by respondent in its Comment, dated 01 February 2002, this Court cannot avoid references to past proceedings in discussing res judicata.Necessarily, the facts earlier found by the Court in its earlier Decisions come into play as a matter of judicial notice.The parties need not undergo trial anew over matters that are easily obtainable from the records of such earlier cases.Hence, we declared:
����������� "In the mother case, this Court categorically denied the payment of interest, a fruit of ownership.By the same token, rentals, another fruit of ownership, cannot be granted without mocking this Court's en banc Decision, which has long become final."
Our disquisition on petitioner's bad faith is also taken from the mother case.There is no need to present fresh proof on this point.As pointed out in our Decision, since this was "the law of the mother case decided in 1996, it may no longer be changed, because it has long become final and executory."
At bottom, petitioner has not presented substantial or compelling arguments to convince us to modify, alter or reverse our Decision in this case, which was arrived at after thorough and careful deliberations.
WHEREFORE, the Motion for Reconsideration is DENIED with FINALITY.In view of this disposition, the Motion to Set Case for Hearing/Oral Arguments, dated January 30, 2002, is likewise DENIED.
SO ORDERED. (Puno and Vitug, JJ, on official leave; Gutierrez, J, joined by Bellosillo, Kapunan and De Leon, JJ, filed a Separate Opinion.)
SEPARATE OPINION
SANDOVAL-GUTIERREZ, J.:
On November 21, 2001, I stood apart from the rest of my colleagues in denying the instant Petition for Review on Certiorari filed by Equatorial Realty Development, Inc. (Equatorial) against Mayfair Theater, Inc. (Mayfair).Looking back exactly five years ago, i.e., November 21, 1996, this Court promulgated its Decision in G.R. No. 106063 (the "mother case") entitled Equatorial Realty Development, Inc. vs. Mayfair Theater, Inc. 1 Since then, new legitimate issues and legal consequences arose.We cannot simply ignore them now and take shield behind the principle of res judicata.For in reality, these are entirely neoteric matters that demand separate judicial determination.
In my first Dissent, I articulated the various reasons why I could not join the majority.Now, I am taking this second occasion to reiterate them and add a few more arguments, hoping that the majority will have a change of heart and resolve to re-examine its Decision.
Let us look at the case in the proper perspective.
The only point of inquiry raised by the parties before this Court is whether or not a rescissible contract is void at its inception. 2 Ancillary to this is the issue of Equatorial's right to collect back rentals from Mayfair.My stand on the matter is clear.A rescissible contract remains valid and binding upon the parties thereto until the same is rescinded in an appropriate proceeding.In the "mother case," G.R. No. 106063, this Court did not declare the Deed of Absolute Sale between Carmelo and Equatorial void but merely rescissible.Consequently, the contract was, at its inception, valid and naturally, under its provisions, Carmelo validly transferred ownership of the subject property to Equatorial.This is the settled legal effect of a rescissible contract.As owner in the interim, Equatorial has the right to demand from Mayfair the payment of rentals or reasonable compensation corresponding to the period of its (Equatorial's) ownership.Thus, there is no reason for the Regional Trial Court, Branch 8, Manila to dismiss Civil Case No. 97-85141 for sum of money (rentals) filed by Equatorial against Mayfair.
The majority conceded that a recissible contract is valid until annulled.Surprisingly, however, it resolved the case on an entirely alien ground. --- that ownership was not transferred to Equatorial because of Carmelo's failure to effect actual delivery of the subject property.The majority attempted to buttress its Decision by mooring it on G.R. No. 106063 under the pretext of res judicata.But to my mind, it did more harm than good.
My dissent now rests on three grounds.First, G.R. No. 106063, the "mother case," does not operate as a bar to Civil Case No. 97-85141 for sum of money filed by Equatorial against Mayfair, subject of the present petition for review on certiorari.Second, in holding that there was no transfer of ownership between Carmelo and Equatorial, the majority acted on an issue where the parties were not heard.And third, the majority's finding that there was no transfer of ownership between Carmelo and Equatorial runs contrary to this Court's pronouncement in the "mother case" that the contract between them (Deed of Absolute Sale) is rescissible.
I - G.R. No. 106063 does not operate as a bar to Civil Case No. 97-85141.
I Cannot subscribe to the position of the majority that this Court's "prior judgment in G.R. No. 106063 has already resolved the issue of back rentals." 3 I have gone over G.R. No. 106063 very closely and I find nothing therein which embarks on the issue of back rentals.It seems to me that the only basis of the majority in decreeing so is this Court's denial in the said case of Equatorial's claim for payment of interest.Let me quote the following revealing statement from the ponencia of Mr. Justice Artemio V. Panganiban:
In the mother case, this Court categorically denied the payment of interest, fruit of ownership.By the same token, rentals, another fruit of ownership, cannot be granted without mocking this Court's en banc Decision, which has long become final."
With due respect to my colleagues, I cannot fathom how the present denial of Equatorial's claim for back rentals from Mayfair could flow from this Court's denial in the "mother case" of Equatorial's claim for payment of interest. It bears stressing that when this court denied Equatorial's claim for payment of interest, it had in its mind interest not back rentals, otherwise, it could have easily said so.Surely, this Court's denial of Equatorial's claim for interest does not necessarily give rise to the application of res judicata on its claim for payment of back rentals.It must be born in mind that estoppel of judgment does not extend to matters not expressly adjudicated and which can be inferred only by argument or construction from the judgment.In other words, there is no estoppel where anything is left to conjecture as to what necessarily involved and decided. 4 To sustain res judicata on the basis of the hazy connection is to rule by inference and to read from the "mother case" a judicial determination which is not there.This is proscribed by the basic rules on interpretation and construction of a judgment.In construing a judgment, the adjudication should not extend beyond that which the language used fairly warrants, since the purpose and function of construction is to give effect to that which is already latent in the judgment, and the court may not by construction add new provisions to a judgment which were omitted or withheld in the first instance. 5 Thus, if the language used in a judgment is plain and unambiguous there is no room for construction or interpretation, and the effect thereof must be declared in the light of the literal meaning of the language used. 6
It may not be amiss to point out that this Court then knew that Equatorial received rents from Mayfair during the years that the controversy was litigated. 7 Significantly, it did not require Equatorial to return to Mayfair the amount of rentals it had paid.To be sure, such abstention is inconsistent with the theory of the majority that this Court, in the "mother case," intended to deprive Equatorial of its right to collect rentals from Mayfair.
To my mind, the best way to measure the applicability of res judicata is not by way of general statements but by specific reference to its essential requirements.
There are two concepts of res judicata, one is "bar by prior judgment" and the other is "conclusiveness of judgment." The majority finds the first concept applicable.I do not agree.There is "bar by prior judgment" when, between the first case where the judgment was rendered, and the second case where such judgment is invoked, there is identity of parties, subject matter and cause of action. 8
As may be gleaned from the records, the requisite identity of cause of action is absent.G.R. No. 106063 or the "mother case" originated from a "Complaint for Annulment of Deed of Absolute Sale, Specific Performance, and Damages," filed by Mayfair against Equatorial and Carmelo. Its object was to nullify the contract of sale between Equatorial and Carmelo and to enforce Mayfair's right of first refusal.On the other hand, the present case is for a sum of money filed by Equatorial against Mayfair, the object of which is to recover from Mayfair the rentals corresponding to the period when the owner of the disputed property was Equatorial.This latter case has for its premise this Court's declaration in G.R. No. 106063, the "mother case," that the Deed of Absolute Sale between Carmelo and Equatorial is merely rescissible.Surely, G.R. 106063 could not be a bar to Civil Case No. 97-85141.
Not even the less restricted concept of conclusiveness of judgment can provide solace to the position of the majority.As I have previously intimated, the issue of back rentals was never determined or passed upon in G.R. No. 106063. 9 Under the doctrine of conclusiveness of judgment, which is also known as "preclusion of issues" or collateral estoppel," issues actually and directly resolved in a former suit cannot be again raised in any future case between the same parties involving a different cause of action.Conversely stated, res judicata cannot properly be invoked as to an issue which affirmatively appears not to have been determined by the judgment in the former action. 10 A judgment is not res judicata as to matter that was not actually litigated, decided, or necessarily involved in the action. 11
II - In holding that there was no transfer of ownership between Carmelo and Equatorial, the majority acted on an issue where the parties were not heard.
There is no principle better established that what is not juridically presented cannot be juridically decided. 12 In the light of this principle, I find merit in Equatorial's argument that the majority exceeded its authority when it rule that there was no transfer of ownership between Carmelo and Equatorial because of lack of "actual delivery."
It is indeed surprising that while the majority acquiesced in to Equatorial's position that a rescissible contract is valid until annulled, it nonetheless denied the Petition on an issue not debated upon by the parties.
May I reiterate that the real issue before this Court is whether or not a rescissible contract is void at its inception.The pleadings do not raise the issue of whether there is "actual delivery" of the disputed property.As a matter of fact, the petition involves only pure questions of law bordering on the legal effects of rescission.Therefore, when the majority decided the case on a factual issue not raised or argued by both parties, it acted on a matter where the parties were not heard.It had gone astray into the field of factual conflict, thus its legal pronouncements do not rests on solid grounds.
Jurisprudence, both local and foreign, teaches us that it is imperative for a judgment to conform to, and be supported by, both the pleadings and the proofs, and be in accordance with the theory of the action on which the pleadings are framed and the case was tried.This rule is of universal application, and whether the action or suit is at law, in equity, or under the code, the judgment must be secundum allegata et probata. 13 Simply put, judgments must be responsive to the issues presented in the pleadings or litigated between the parties, and issues not so raised may not be determined. 14
Corollarily, a judgment on issues not made by the pleadings is erroneous, and may be set aside or reversed in a proper proceeding for that purpose.In some cases, courts go further, and hold that judgment based on issues not made by the pleadings or litigated by the parties are coram non judice and void, at least in so far as they go beyond such issues, on the theory that a court has no jurisdiction to pass on questions not submitted to it for decision.
III - The majority's finding that there was no transfer of ownership between Carmelo and Equatorial runs contrary to this Court's pronouncement in G.R. No. 106063 .
Until now, I am deeply bothered in the manner the majority construed G.R. No. 106063, the "mother case." Frankly, I find nothing therein which decrees that no right of ownership was transferred from Carmelo to Equatorial.On the contrary, to my assessment, this Court even declared that Equatorial exercised its right of ownership over the disputed property.Thus, in disposing G.R. No. 106063, it explicitly ordered Equatorial to "execute the deeds and documents necessary to return ownership to Carmelo & Bauermann of the disputed lots."15 Why would this Court order Equatorial to execute the deeds and documents necessary to return ownership to Carmelo if, all along, it believed that ownership remained with Carmelo?Another cue worth citing is this Court's express pronouncement, also in G.R. No. 106063, that Equatorial received rentals from Mayfair during the pendency of the case, thus:
"X x x Equatorial, on the other hand, has received rents and otherwise profited from the use of the property turned over to it by Carmelo.In fact, during all the years that this controversy was being litigated, Mayfair paid rentals regularly to the buyer (Equatorial) who had an inferior right to purchase the property.Mayfair is under no obligation to pay any interests arising from this judgment to either Carmelo or Equatorial." 16
Mr. Justice Teodoro R. Padilla, in his Separate Opinion, made similar observations. 17 And even Mr. Justice Artemio V. Panganiban himself described the sale between Carmelo and Equatorial not only as a "perfected" but also "consummated." 18
Undoubtedly, this Court acknowledge in the "mother case" the transfer of ownership from Carmelo to Equatorial.The language of the Court is explicit and not susceptible of equivocation.I see no reason why we should view the above pronouncement on a different light. Restraint should be exercised in construing a final judgment, lest we commit the sin of substituting the disposition of the writer with that of ours.We must guard ourselves against the danger of reading too much between the lines.
That actual possession of the property was turned over by Carmelo to Equatorial is clear from the fact that the latter received rents from Mayfair.Receiving rentals is an exercise of actual possession.When Mayfair paid its monthly rentals to Equatorial, it recognized the latter's right of ownership over the property.And even if Mayfair did not recognize Equatorial's superior right, the fact remains that Equatorial was then enjoying the fruits of the disputed property.Pertinently, it does not follow that because a transaction is prohibited or illegal, title, as between the parties to the transaction, does not pass from the seller, donor, or transferor to the vendee, donee or transferee. 19
Thus, I cannot abide with the majority's pronouncement that there was no "actual delivery." 20 The fact that Mayfair was just a lessee whose right, at that time, was subordinate to that of Equatorial, the owner.To rule otherwise is to affirm that a lessor, in a contract of sale, cannot transfer ownership of his property, occupied by the lessee, to the buyer because there can be no delivery of such property to the latter.This is contrary to the prevailing law and jurisprudence.Mayfair's alleged "timely objection to the sale and continued actual possession of the property" can never be considered as an "impediment" that may prevent the passing of the property from Carmelo to Equatorial. 21 It must be stressed that in the "mother case," Mayfair's main concern was the recognition of its right of first refusal.Hence, the most that Mayfair could secure from the institution of its suit was to be allowed to exercise its right to buy the property upon rescission of the contract of sale.Not until Mayfair actually exercised what it was allowed to do by this Court in that case, specifically, to buy the disputed property for P11,300,000.00, would it have any right of ownership.
In recapitulation, I am firmly convinced that Equatorial has the right to be paid the monthly rentals corresponding to the period that the contract of sale was in existence, minus the rents already paid.The pronouncement of this Court in Guzman vs. Court of Appeals, 22 is explicit and unequivocal.While Equatorial may have committed bad faith in entering into the contract with Carmelo, it had been equitably punished when this Court declared the contract rescissible in G.R. No. 106063 itself. 23 To utilize the theory of bad faith again is to render a different and erroneous ruling, i.e., that the contract is void from the beginning, not a rescissible one.It will deprive Equatorial of its right to collect rents from Mayfair corresponding to the period during which the contract was valid.Indeed, it will not only be unjust, it will contravene the Civil Code provisions on rescissible contracts, specifically Article 1380 which provides that "Contracts validly agreed upon may be rescinded in the cases established by law." By joining the majority, I may disturb the very nature of a rescissible contract , i.e., a contract valid and binding upon the parties until rescinded in an appropriate judicial proceeding.
In the case at bar, the fact remains that Mayfair occupied the property as a lessee.It derived benefit from such occupation, thus, it should pay the corresponding rentals due.Nemo cum alterius detrimento locupletari potest.No one shall enrich himself at the expense of another. 24 Consequently, Equatorial's claim for payment of rentals should be resolved by the trial court.
WHEREFORE, I vote to GRANT the Motion for Reconsideration.
Very truly yours,
LUZVIMINDA D. PUNO
Clerk of Court����
(Sgd.) MA. LUISA D. VILLARAMA
Asst. Clerk of Court
Endnotes:
[1] cralaw 38 Phil. 404, August 3, 1918.
[2] cralaw GR Nos. 147062-64, December 14, 2001, citing Diamante v. CA, 206 SCRA 52, February 7, 1992.
1 264 SCRA 483 (1996), per Hermosisima, J.; concurred in by Justices Padilla (with Separate Opinion), Regalado, Davide, Bellosillo, Melo, Puno, Kapunan, Mendoza, Francisco, and Panganiban (with Separate Concurring Opinion).Justice Vitug wrote a Dissenting Opinion, joined by Justice Torres, while Justice Romero filed a Concurring and Dissenting Opinion.Chief Justice Narvasa took no part.The Court disposed of the case as follows:
"WHEREFORE, the petition for review of the decision of the Court of Appeals, dated June 23, 1992, in CA-G.R. CV No. 32918, is HEREBY DENIED.The Deed of Absolute Sale between petitioners Equatorial Realty Development, Inc. and Carmelo & Bauermann, Inc. is hereby deemed rescinded; Carmelo & Bauermann is ordered to return to petitioner Equatorial Realty Development the purchase price.The latter is directed to execute the deeds and documents necessary to return ownership to Carmelo & Bauermann of the disputed lots.Carmelo & Bauermann is ordered to allow Mayfair Theater, Inc. to buy the aforesaid lots for P11,300,000.00.
SO ORDERED."
2 It may be recalled that Mayfair sought the dismissal of Civil Case No. 97-85141, a Complaint for a Sum of Money (constituting rentals and reasonable compensation) filed by Equatorial against Mayfair, on the ground of res judicata.Allegedly, this Court's Decision in G.R. No. 106063 served as a bar to the aforementioned case.The Regional Trial Court of Manila, Branch 8 granted Mayfair's motion.In dismissing Civil Case No. 97-85141, the trial court was apparently of the impression that a rescissible contract has the same effect as a void contract.In declaring res judicata, it ruled in passing:
"The Supreme Court in the Equatorial case, G.R. No. 106063 has categorically stated that the Deed of Absolute Sale dated July 31, 1978 has been rescinded subjecting the present complaint to res judicata.
In the final analysis, the entry of judgment issued by the Supreme Court and the administrative process of i.e. to execute the deeds and documents necessary to return ownership to x x x,' on the contrary, awards Mayfair the expectant ownership over subject property.The Supreme Court has recognized tenant Mayfair's opportunity in the sale by Carmelo of subject property.This is the spirit and substance of the Supreme Court decision in G.R. No. 106063.Any other interpretation in reopening a final and executory judgment opens the gates to endless litigation." (Order dated March 11, 1998, p. 9)
Unable to accept the trial court's erroneous interpretation that a rescissible contract is void at its inception, Equatorial elevated the case to this Court on a Petition for Review.
3 Resolution, p. 1.
4 50 C.J.S. �717, p. 195.
5 49 C.J.S. � 436 p. 865.The general rules of construction of written instruments have been held to apply to the construction of judgments.
6 Ibid., p. 863.
7 Equatorial Realty Development, Inc. vs. Mayfair Theater, Inc., 264 SCRA 4830, 512 (1996).
8 Sta Lucia and Development, Inc., vs. Cabrigas, G.R. No. 134895, June 19, 2001; Mendiola vs. Court of Appeals, G.R. No. 122807, July 5, 1996, Mangoma vs. Court of Appeals, 241 SCRA 21 (1995).
For a claim of res judicata to prosper, the following requisites must concur: 1) there must be a final judgment or order; 2) the court rendering it must have jurisdiction over the subject matter and the parties; 3) it must be a judgment or order on the merits; and 4) there must be, between the two cases identity of parties, subject matter and causes of action.
9 (G.R. No. 122807.July 5, 1996) Mendiola vs. Court of Appeals.
10 50 C.J.S. � 657, p. 103.
11 50 C.J.S. � 728, p. 216
12 Cooke vs. Cooke, 248 P. 83, 104, 67 Utah 371.
13 49 C.J.S. � 48, p. 110.
14 49 C.J.S. � 50.
15 G.R. No. 106063, p. 512.
16 Ibid.
17 Ibid. , p. 514.
18 His Concurring Opinion in G.R. No. 106063, supra.
19 O'Mara vs. Dettinger, 62 N.Y.S. 2d 825, 271 App. Div. 22; Rosario Creameries, Inc. vs. Cohen, 276 N.Y. 274, 11 N.E. 2d 908, 909; Whitfield vs. United States, 92 U.S. 165, 169, 170, 23 L. Ed 705.
20 Equatorial Realty Development, Inc. vs. Mayfair Theater, Inc., G.R. No. 133879, November 21, 2001, p. 17.
21 Dissenting Opinion, p. 5.
22 177 SCRA 604 (1989).Upon the purchase of the leased property and proper notice by the vendee, the lessee must pay the agreed monthly rentals to the new owner since, by virtue of the sale, the vendee steps into the shoes of the original lessor to whom the lessee bound himself to pay.His belief that the subject property should have been sold to him does not justify the unilateral withholding of rental payments due to the new owner of the property.
23 "Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property in question rescissible.We agree with respondent Appellate Court that the records bear out the fact that Equatorial was aware of the lease contracts because its lawyers had, prior to the sale, studied the said contracts.As such, Equatorial cannot tenably claim to be a purchaser in good faith, and therefore, rescission lies."
24 Santos vs. Court of Appeals, 221 SCRA 42 (1993).
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