Reyes vs Tuparan - digest PDF

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Reyes vs Tuparan

Mila Reyes filed a complaint for Recission of Contract with Damages against Victoria T. Tuparan (Tuparan) before the RTC.In her Complaint, Reyes alleged, among others, that she was the registered owner of a 1,274 square meter residential and commercial lot located in Karuhatan, Valenzuela City, and covered by TCT No. V-4130. Reyes mortgaged the subject real properties to the Farmers Savings Bank and Loan Bank, Inc. (FSL Bank) to secure a loan. Reyes then decided to sell her real properties so she could liquidate her bank loan and finance her businesses. As a gesture of friendship, Tuparan verbally offered to conditionally buy Reyes's real properties. The parties and FSL Bank executed the corresponding Deed of Conditional Sale of Real Properties with Assumption of Mortgage. Due to their close personal friendship and business relationship, Reyes and Tuparan chose not to reduce into writing the other terms of their agreement mentioned in paragraph 11 of the complaint. Tuparan, however, defaulted in the payment of her obligations on their due dates. Instead of paying the amounts due in lump sum on their respective maturity dates, Tuparan paid Reyes in small amounts from time to time. Tuparan countered, among others, that the tripartite agreement erroneously designated by the Reyes as a Deed of Conditional Sale of Real Property with Assumption of Mortgage was actually a pure and absolute contract of sale with a term period. It could not be considered a conditional sale because the acquisition of contractual rights and the performance of the obligation therein did not depend upon a future and uncertain event. Tuparan further averred that she successfully rescued the properties from a definite foreclosure by paying the assumed mortgage plus interest and other finance charges. The RTC handed down its decision finding that Tuparan failed to pay in full the total purchase price of the subject real properties. It stated that the checks and receipts presented by Tuparan refer to her payments of the mortgage obligation with FSL Bank. The RTC also considered the Deed of Conditional Sale of Real Property with Assumption of Mortgage executed by and among the two parties and FSL Bank a contract to sell, and not a contract of sale. The CA rendered its decision affirming with modification the RTC Decision. The CA agreed with the RTC that the contract entered into by the parties is a contract to sell but ruled that the remedy of rescission could not apply because the Tuparan's failure to pay Reyes the balance of the purchase was not a breach of contract, but merely an event that prevented the seller (Reyes) from conveying title to the purchaser (Tuparan).

ISSUE: Whether or not the agreement entered by Reyes and Tuparan is a contract of sale or contract to sell.

RULING: The Supreme Court agrees that the conditional sale is a contract to sell. The title and ownership of the subject properties remains with the petitioner until the respondent fully pays the balance of the purchase price and the assumed mortgage obligation. Without Tuparan's full payment, there can be no breach of contract to speak of because Reyes has no obligation yet to turn over the title. The court agrees that a substantial amount of the purchase price has already been paid. It is only right and just to allow Tuparan to pay the said unpaid balance of the purchase price to Reyes. Granting that a rescission can be permitted under Article 1191, the Court still cannot allow it for the reason that, considering the circumstances, there was only a slight or casual breach in the fulfillment of the obligation. The court considered fulfillment of 20% of the purchase price is not a substantial breach. Unless the parties stipulated it, rescission is allowed only when the breach of the contract is substantial and fundamental to the fulfillment of the obligation. Whether the breach is slight or substantial is largely determined by the attendant circumstance. As for the 6% interest, Reyes failed to substantiate her claim that the Tuparan committed to pay it.

The Supreme Court agrees with the ruling of the lower courts that the subject Deed of Conditional Sale with Assumption of Mortgage entered into by and among the Reyes and Tuparan together with FSL Bank on November 26, 1990 is a contract to sell and not a contract of sale. The title and ownership of the subject properties remains with the Reyes until the Tuparan fully pays the balance of the purchase price and the assumed mortgage obligation. Thereafter, FSL Bank shall then issue the corresponding deed of cancellation of mortgage and the Reyes shall execute the corresponding deed of absolute sale in favor of the Tuparan. Accordingly, Reyes's obligation to sell the subject properties becomes demandable only upon the happening of the positive suspensive condition, which is the Tuparan's full payment of the purchase price. Without Tuparan's full payment, there can be no breach of contract to speak of because Reyes has no obligation yet to turn over the title. Tuparan's failure to pay in full the purchase price is not the breach of contract contemplated under Article 1191 of the New Civil Code but rather just an event that prevents the Reyes from being bound to convey title to the Tuparan. Thus, the Supreme Court fully agrees with the CA when it resolved: "Considering, however, that the Deed of Conditional Sale was not cancelled by Vendor Reyes (Reyes) and that out of the total purchase price of the subject property in the amount of P4,200,000.00, the remaining unpaid balance of Tuparan is only P805,000.00, a substantial amount of the purchase price has already been paid. It is only right and just to allow Tuparan to pay the said unpaid balance of the purchase price to Reyes."

Granting that a rescission can be permitted under Article 1191, the Court still cannot allow it for the reason that, considering the circumstances, there was only a slight or casual breach in the fulfillment of the obligation. Out of the P1,200,000.00 remaining balance, Tuparan paid on several dates the first and second installments of P200,000.00 each. She, however, failed to pay the third and last installment of P800,000.00 due on December 31, 1991. Nevertheless, on August 31, 1992, Tuparan, through counsel, offered to pay the amount of P751,000.00, which was rejected by Reyes for the reason that the actual balance was P805,000.00 excluding the interest charges. Considering that out of the total purchase price of P4,200,000.00, Tuparan has already paid the substantial amount of P3,400,000.00, more or less, leaving an unpaid balance of only P805,000.00, it is right and just to allow her to settle, within a reasonable period of time, the balance of the unpaid purchase price. The Court agrees with the courts below that the Tuparan showed her sincerity and willingness to comply with her obligation when she offered to pay the Reyes the amount of P751,000.00.

Under the Deed of Conditional Sale of Real Properties with Assumption of Mortgage, Tuparan was bound to pay the Reyes a lump sum of ?1.2 million pesos without interest as part of the purchase price in three (3) fixed installments as follows:

a) P200,000.00 - due January 31, 1991 b) P200,000.00 - due June 30, 1991 c) P800,000.00 - due December 31, 1991

The Supreme Court agrees that the conditional sale is a contract to sell. The title and ownership of the subject properties remains with the petitioner until the respondent fully pays the balance of the purchase price and the assumed mortgage obligation. Without Tuparan's full payment, there can be no breach of contract to speak of because Reyes has no obligation yet to turn over the title. The court agrees that a substantial amount of the purchase price has already been paid. It is only right and just to allow Tuparan to pay the said unpaid balance of the purchase price to Reyes. Granting that a rescission can be permitted under Article 1191, the Court still cannot allow it for the reason that, considering the circumstances, there was only a slight or casual breach in the fulfillment of the obligation. The court considered fulfillment of 20% of the purchase price is not a substantial breach. Unless the parties stipulated it, rescission is allowed only when the breach of the contract is substantial and fundamental to the fulfillment of the obligation. Whether the breach is slight or substantial is largely determined by the attendant circumstance. As for the 6% interest, Reyes failed to substantiate her claim that the Tuparan committed to pay it.

Valencia vs Cabanting Apulino Valencia and his wife Romana allegedly bought a parcel of land, where they built their residential house, from a certain Serapia Raymundo, an heir of Pedro Raymundo the original owner. However, they failed to register the sale or secure a transfer certificate of title in their names. Sometime in December, 1968, a conference was held in the house of Atty. Eduardo Jovellanos to settle the land dispute between Serapia Raymundo (Serapia in short) another heir of Pedro Raymundo, and the Valencia spouses since both were relatives and distant kin of Atty. Jovellanos. Serapia was willing to relinquish ownership If the Valencias could now documents evidencing ownership. Paulino exhibited a deed of sale written in the Ilocano dialect. However, Serapia claimed that the deed covered a different property. Paulino and Serapia were not able to settle their differences. On December 15, 1969 Serapia, assisted by Atty. Arsenio Fer Cabanting, filed a complaint against Paulino for the recovery of possession with damages. The Valencias engaged the services of Atty. Dionisio Antiniw. Atty. Antiniw advised them to present a notarized deed of sale in lieu of the private document written in Ilocano. For this purpose, Paulino gave Atty. Antiniw an amount of P200.00 to pay the person who would falsify the signature of the alleged vendor. On January 22, 1973, the Court of First Instance of Pangasinan, Branch V, rendered a decision in favor of plaintiff, Serapia Raymundo. The lower court expressed the belief that the said document is not authentic. Paulino, thereafter, filed a Petition for Certiorari, under Rule 65, with Preliminary Injunction before the Court of Appeals alleging that the trial court failed to provide a workable solution concerning his house. While the petition was pending, the trial court, on March 9, 1973, issued an order of execution stating that "the decision in this case has already become final and executory". On March 20, 1973, Serapia sold 40 square meters of the litigated lot to Atty. Jovellanos and the remaining portion she sold to her counsel, Atty. Arsenio Fer Cabanting, on April 25, 1973.

ISSUE: Whether or not Atty. Cabanting purchased the subject property in violation of Art. 1491 of the New Civil.

RULING: Under Article 1491 of the New Civil Code The following persons cannot acquire by purchase, even at a public of judicial auction, either in person or through the mediation of another. (5) . . .this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they make take part by virtue of their profession.

Public policy prohibits the transactions in view of the fiduciary relationship involved. It is intended to curtail any undue influence of the lawyer upon his client. Greed may get the better of the sentiments of loyalty and disinterestedness. Any violation of this prohibition would constitute malpractice and is a ground for suspension. (Beltran v. Fernandez, 70 Phil. 248). Art. 1491, prohibiting the sale to the counsel concerned, applies only while the litigation is pending. (Director of Lands v. Adaba, 88 SCRA 513; Hernandez v. Villanueva, 40 Phil. 775). In the case at bar, while it is true that Atty. Arsenio Fer Cabanting purchased the lot after finality of judgment, there was still a pending certiorari proceeding. A thing is said to be in litigation not only if there is some contest or litigation over it in court, but also from the moment that it becomes subject to the judicial action of the judge. (Gan Tingco v. Pabinguit, 35 Phil. 81). Logic dictates, in certiorari proceedings, that the appellate court may either grant or dismiss the petition. Hence, it is not safe to conclude, for purposes under Art. 1491 that the litigation has terminated when the judgment of the trial court become final while a certiorari connected therewith is still in progress. Thus, purchase of the property by Atty. Cabanting in this case constitutes malpractice in violation of Art. 1491 and the Canons of Professional Ethics. Clearly, this malpractice is a ground for suspension....