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FIRST
DIVISION
SPOUSES
GOMER and G.R. No. 145330
LEONOR
RAMOS,
Petitioners,
Present:
'Davide,
Jr., C.J.,
'
Chairman,
'Quisumbing,
- versus -
Ynares-Santiago,
'Carpio,
and
'Azcuna,
JJ.
SPOUSES
SANTIAGO and
MINDA
HERUELA, and 'Promulgated:
SPOUSES
CHERRY and
RAYMOND
PALLORI,
Respondents.
October 14, 2005
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DECISION
CARPIO, J.:
The Case
Before the Court is a
petition for review
[1]
assailing the Decision
[2]
dated 23 August 2000 and the Order dated 20 September 2000 of the Regional
Trial Court (trial court') of Misamis Oriental, Branch 21, in Civil Case
No. 98-060. The trial court dismissed the plaintiffs' action for recovery of
ownership with damages.
The Antecedent Facts
The spouses Gomer and
Leonor Ramos (spouses Ramos') own a parcel of land, consisting of 1,883 square
meters, covered by Transfer Certificate of Title (TCT') No. 16535 of the
Register of Deeds of Cagayan de Oro City. On 18 February 1980, the spouses
Ramos made an agreement with the spouses Santiago and Minda Heruela (spouses
Heruela')
[3]
covering 306 square meters of the land (land'). According to the spouses
Ramos, the agreement is a contract of conditional sale. The spouses Heruela
allege that the contract is a sale on installment basis.
On 27 January 1998,
the spouses Ramos filed a complaint for Recovery of Ownership with Damages
against the spouses Heruela. The case was docketed as Civil Case No. 98-060.
The spouses Ramos allege that out of the P15,300
[4]
consideration for the sale of the land, the spouses Heruela paid only P4,000.
The last installment that the spouses Heruela paid was on 18 December 1981.
The spouses Ramos assert that the spouses Heruela's unjust refusal to pay the
balance of the purchase price caused the cancellation of the Deed of
Conditional Sale. In June 1982, the spouses Ramos discovered that the spouses
Heruela were already occupying a portion of the land. Cherry and Raymond
Pallori (spouses Pallori'), daughter and son-in-law, respectively, of the
spouses Heruela, erected another house on the land. The spouses Heruela and
the spouses Pallori refused to vacate the land despite demand by the spouses
Ramos.
The spouses Heruela
allege that the contract is a sale on installment basis. They paid P2,000
as down payment and made the following installment payments:
31 March 1980
|
P200
|
|
2 May 1980
|
P400
|
(for April and May 1980)
|
20 June 1980
|
P200
|
(for June 1980)
|
8 October 1980
|
P500
|
(for July, August and part of September 1980)
|
5 March 1981
|
P400
|
(for October and November 1980)
|
18 December 1981
|
P300
|
(for December 1980 and part of January 1981)
|
The spouses Heruela further allege that the 306 square meters specified
in the contract was reduced to 282 square meters because upon subdivision of
the land, 24 square meters became part of the road. The spouses Heruela claim
that in March 1982, they expressed their willingness to pay the balance of P11,300
but the spouses Ramos refused their offer.
The
Ruling of the Trial Court
In its Decision
[5]
dated 23 August 2000, the trial court ruled that the contract is a
sale by installment. The trial court ruled that the spouses Ramos failed to
comply with Section 4 of Republic Act No. 6552 (RA 6552'),
[6]
as follows:
SEC. 4. In case where less than two years of
installments were paid, the seller shall give the buyer a grace period of not
less than sixty days from the date the installment became due. If the buyer
fails to pay the installments due at the expiration of the grace period, the
seller may cancel the contract after thirty days from receipt by the buyer of
the notice of cancellation or the demand for rescission of the contract by a
notarial act.
The dispositive
portion of the Decision reads:
WHEREFORE, the complaint is hereby dismissed and plaintiff[s] are
ordered to execute the corresponding Deed of Sale in favor of defendants after
the latter have paid the remaining balance of Eleven Thousand and Three Hundred
Pesos (P11,300.00).
Plaintiffs
are further ordered to pay defendants the sum of P20,000.00, as
Attorney's fees and P10,000.00 as litigation expenses.
SO
ORDERED.
[7]
In an Order
[8]
dated 20 September 2000, the trial court denied the spouses Ramos' motion for
reconsideration.
Hence, this
petition.
The
Issues
The spouses Ramos
raise the following issues:
I.
Whether RA 6552 is applicable to an absolute sale of land;
II.
Whether Articles 1191 and 1592 of the Civil Code are applicable to the
present case;
III.
Whether the spouses Ramos have a right to cancel the sale;
IV.
Whether the spouses Heruela have a right to damages.
[9]
The
Ruling of the Court
The petition is partly
meritorious.
The
Agreement is a Contract to Sell
In its
Decision, the trial court ruled on whether the contract made by the parties is
a conditional sale or a sale on installment. The spouses Ramos' premise is that
since the trial court ruled that the contract is a sale on installment, the
trial court also in effect declared that the sale is an absolute sale. The
spouses Ramos allege that RA 6552 is not applicable to an absolute sale.
Article 1458 of
the Civil Code provides that a contract of sale may be absolute or
conditional. A contract of sale is absolute when title to the property passes
to the vendee upon delivery of the thing sold.
[10]
A deed of sale is absolute when there is no stipulation in the contract that
title to the property remains with the seller until full payment of the
purchase price.
[11]
The sale is also absolute if there is no stipulation giving the vendor the
right to cancel unilaterally the contract the moment the vendee fails to pay
within a fixed period.
[12]
In a conditional sale, as in a contract to sell, ownership remains with the
vendor and does not pass to the vendee until full payment of the purchase
price.
[13]
The full payment of the purchase price partakes of a suspensive condition, and
non-fulfillment of the condition prevents the obligation to sell from arising.
[14]
In this case,
the agreement of the parties is embodied in a one-page, handwritten document.
[15]
The document does not contain the usual terms and conditions of a formal deed
of sale. The original document, elevated to this Court as part of the Records,
is torn in part. Only the words 'LMENT BASIS' is legible on the title. The
names and addresses of the parties and the identity of the property cannot be
ascertained. The agreement only provides for the following terms of the sale:
TERM[S]
OF SALE:
PRICE PER SQM P50.00 X 306 SQM P
15,300.00
DOWN PAYMENT (TWO THOUSAND PESOS) ' 2,000.00
BALANCE PAYABLE AT MINIMUM OF P200.00 P 13,300.00
PER
MONTH UNTIL FULLY PAID ' =======
In
Manuel
v. Rodriguez, et al
.,
[16]
the Court ruled that to be a written contract, all the terms must be in
writing, so that a contract partly in writing and partly oral is in legal
effect an oral contract. The Court reiterated the
Manuel
ruling
in
Alfonso v. Court of Appeals
:
[17]
xxx In Manuel, 'only the price and the terms of
payment were in writing, but the most important matter in the controversy, the
alleged transfer of title was never 'reduced to any written document.[] It
was held that the contract should not be considered as a written but an oral
one; not a sale but a promise to sell; and that 'the absence of a formal deed
of conveyance was a strong indication 'that the parties did not intend
immediate transfer of title, but only a transfer after full payment of the
price. Under these circumstances, the Court ruled Article 1504 of the Civil
Code of 1889 (Art. 1592 of the present Code) to be inapplicable to the contract
in controversy ' a contract to sell or promise to sell ' 'where title remains
with the vendor until fulfillment of a positive suspensive condition, such as
full payment of the price x x [x].
The records
show that the spouses Heruela did not immediately take actual, physical
possession of the land. According to the spouses Ramos, in March 1981, they
allowed the niece of the spouses Heruela to occupy a portion of the land.
Indeed, the spouses Ramos alleged that they only discovered in June 1982 that
the spouses Heruela were already occupying the land. In their answer to the
complaint, the spouses Heruela and the spouses Pallori alleged that their
occupation of the land is lawful because having made partial payments of the
purchase price, 'they already considered themselves owners' of the land.
[18]
Clearly, there was no transfer of title to the spouses Heruela. The spouses
Ramos retained their ownership of the land. This only shows that the parties
did not intend the transfer of ownership until full payment of the purchase
price.
RA
6552 is the Applicable Law
The trial court
did not err in applying RA 6552 to the present case.
Articles 1191
[19]
and 1592
[20]
of the Civil Code are applicable to contracts of sale. In contracts to sell,
RA 6552 applies. In
Rillo v. Court of Appeals
,
[21]
the Court declared:
xxx
Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all
kinds of real estate (industrial, commercial, residential) the right of the
seller to cancel the contract upon non-payment of an installment by the buyer,
which is simply an event that prevents the obligation of the vendor to convey
title from acquiring binding force. It also provides the right of the buyer on
installments in case he defaults in the payment of succeeding installments xxx.
Sections 3 and
4 of RA 6552 provide:
Sec. 3. In all transactions or contracts involving the sale or
financing of real estate on installment payments, including residential
condominium apartments but excluding industrial lots, commercial buildings and
sales to tenants under Republic Act Numbered Thirty-eight hundred forty-four as
amended by Republic Act Numbered Sixty-three hundred eighty-nine, where the
buyer has paid at least two years of installments, the buyer is entitled to the
following rights in case he defaults in the payment of succeeding installments:
(a)
To pay, without additional
interest, the unpaid installments due within the total grace period earned by
him, which is hereby fixed at the rate of one month grace period for every one
year of installment payments made: Provided, That this right shall be
exercised by the buyer only once in every five years of the life of the
contract and its extensions, if any.
(b)
If the contract is cancelled, the
seller shall refund to the buyer the cash surrender value of the payments on
the property equivalent to fifty per cent of the total payments made and, after
five years of installments, an additional five per cent every year but not to
exceed ninety per cent of the total payments made: Provided, That the
actual cancellation of the contract shall take place after thirty days from
receipt by the buyer of the notice of cancellation or the demand for rescission
of the contract by a notarial act and upon full payment of the cash surrender
value to the buyer.
Down payments, deposits or options on the contract
shall be included in the computation of the total number of installments made.
Sec.
4. In case where less than two years of installments were paid, the seller
shall give the buyer a grace period of not less than sixty days from the date
the installment became due. If the buyer fails to pay the installments due at
the expiration of the grace period, the seller may cancel the contract after
thirty days from receipt by the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial act.
In this case,
the spouses Heruela paid less than two years of installments. Thus, Section 4
of RA 6552 applies. However, there was neither a notice of cancellation nor
demand for rescission by notarial act to the spouses Heruela. In
Olympia
Housing, Inc. v. Panasiatic Travel Corp.
,
[22]
the Court ruled that the vendor could go to court to demand judicial rescission
in lieu of a notarial act of rescission. However, an action for reconveyance
is not an action for rescission. The Court explained in
Olympia
:
The action for reconveyance filed by petitioner was
predicated on an assumption that its contract to sell executed in favor of
respondent buyer had been validly cancelled or rescinded. The records would
show that, indeed, no such cancellation took place at any time prior to the
institution of the action for reconveyance. xxx
xxx
xxx
Not only is an action for reconveyance conceptually different from an action
for rescission but that, also, the effects that flow from an affirmative
judgment in either case would be materially dissimilar in various respects.
The judicial resolution of a contract gives rise to mutual restitution which is
not necessarily the situation that can arise in an action for reconveyance.
Additionally, in an action for rescission (also often termed as resolution),
unlike in an action for reconveyance predicated on an extrajudicial rescission
(rescission by notarial act), the Court, instead of decreeing rescission, may
authorize for a just cause the fixing of a period.
[23]
In the present case,
there being no valid rescission of the contract to sell, the action for
reconveyance is premature. Hence, the spouses Heruela have not lost the
statutory grace period within which to pay. The trial court should have fixed
the grace period to sixty days conformably with Section 4 of RA 6552.
The spouses
Heruela are not entirely fault-free. They have been remiss in performing their
obligation. The trial court found that the spouses Heruela offered once to
pay the balance of the purchase price. However, the spouses Heruela did not
consign the payment during the pendency of the case. In the meanwhile, the
spouses Heruela enjoyed the use of the land.
For the breach
of obligation, the court, in its discretion, and applying Article 2209 of the
Civil Code,
[24]
may award interest at the rate of 6% per annum on the amount of damages.
[25]
The spouses Heruela have been enjoying the use of the land since 1982. In
1995, they allowed their daughter and son-in-law, the spouses Pallori, to
construct a house on the land. Under the circumstances, the Court deems it
proper to award interest at 6% per annum on the balance of the purchase price.
The records do
not show when the spouses Ramos made a demand from the spouses Heruela for
payment of the balance of the purchase price. The complaint only alleged that
the spouses Heruela's 'unjust refusal to pay in full the purchase price xxx has
caused the Deed of Conditional Sale to be rescinded, revoked and annulled.
[26]
The complaint did not specify when the spouses Ramos made the demand for
payment. For purposes of computing the legal interest, the reckoning period
should be the filing on 27 January 1998 of the complaint for reconveyance,
which the spouses Ramos erroneously considered an action for rescission of the
contract.
The Court notes
the reduction of the land area from 306 square meters to 282 square meters.
Upon subdivision of the land, 24 square meters became part of the road.
However, Santiago Heruela expressed his willingness to pay for the 306 square
meters agreed upon despite the reduction of the land area.
[27]
Thus, there is no dispute on the amount of the purchase price even with the
reduction of the land area.
On
the Award of Attorney's Fees and Litigation Expenses
The trial court
ordered the spouses Ramos to pay the spouses Heruela and the spouses
Pallori the amount of P20,000 as attorney's fees and P10,000
as litigation expenses. Article 2208
[28]
of the Civil Code provides that subject to certain exceptions, attorney's fees
and expenses of litigation, other than judicial costs, cannot be recovered in
the absence of stipulation. None of the enumerated exceptions applies to this
case. Further, the policy of the law is to put no premium on the right to
litigate.
[29]
Hence, the award of attorney's fees and litigation expenses should be deleted.
WHEREFORE,
we
AFFIRM the Decision dated 23
August 2000 of the Regional Trial Court of Misamis Oriental, Branch 21,
dismissing the complaint for Recovery of Ownership with Damages, with the
following MODIFICATION:
1.
The spouses Heruela shall pay the spouses Ramos P11,300 as
balance of the purchase price plus interest at 6% per annum from 27 January
1998. The spouses Heruela shall pay within 60 days from finality of this
Decision;
2.
Upon payment, the spouses Ramos shall execute a deed of absolute sale of
the land and deliver the certificate of title in favor of the spouses Heruela;
3.
In case of failure to thus pay within 60 days from finality of this
Decision, the spouses Heruela and the spouses Pallori shall immediately vacate
the premises without need of further demand, and the down payment and
installment payments of P4,000 paid by the spouses Heruela shall
constitute rental for the land;
4.
The award of P20,000 as attorney's fees and P10,000 as
litigation expenses in favor of the spouses Heruela and the spouses Pallori is
deleted.
SO ORDERED.
ANTONIO
T. CARPIO
Associate Justice
WE CONCUR:
HILARIO G.
DAVIDE, JR.
Chief Justice
Chairman
LEONARDO A. QUISU
MBI
NG CONSUELO
YNARES-SANTIAGO
Associate Justice ' Associate
Justice
ADOLFO S. AZC
UNA
Associate Justice
CERTIFICATION
Pursuant to
Section 13, Article VIII of the Constitution, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.
HILARIO G. DAVIDE, JR.
'
Chief
Justice